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Various approaches to operations improvements aimed at increasing effectiveness and profitability of businesses are examined and compared. The rise and future of lean management techniques as compared to traditional manufacturing is discussed and improvements in process for a selected company are suggested.
Operations management is formally defined as the field of management that specialises in the production of goods and services and uses special tools and techniques for solving production problems. In essence operations managers are concerned with all the activities involved in the conversion of inputs into outputs. This includes decisions about where to locate facilities and what equipment to install in them (Daft 2006:578).
Manufacturing is the conversion of raw materials by hand or machine, into goods. The concept of lean manufacturing evolved from a number of innovative concepts. The Toyota Group derived two concepts brought from the USA in developing improved methods of supporting their assembly operations. The first concept was the assembly line production systems, derived from Henry Ford's thinking and the other concept was the supermarket operating system, providing the basis of a continuous supply of goods to the consumer. This pull system replenished items as consumers purchased (or pulled) them from the supermarket shelves. The combination of these concepts was applied by Toyota and is widely acknowledged as the origin of the Toyota Production System, or Lean Manufacturing, the term coined by a research group at Massachusetts Institute of technology (MIT) when they analysed the Toyota production System. (Smith and Hawkins 2004). Such practices are now widespread in manufacturing industries
It is becoming evident that the future lean manufacturing will involve a combination of the key concepts and increasing use of computerised automation in production. According to Gitman and McDaniel (2007) technology is helping many firms improve their operating efficiency and ability to compete by using computer systems to automate factories in a ways never before possible. Computer-aided design (CAD), and computer aided manufacturing (CAM) systems CAD/CAM) have transformed the design and manufacturing processes in many industries. Engineers can use these systems to draw products, and look at them from different angles, analyse the products, make changes, and test prototypes before committing resources to manufacture items. CAD/CAM systems combine the advantages of both by integrating design, testing, and manufacturing control into one linked computer system. The system helps design the product, control the flow of resources needed to produce the product, and operate the production process. Computer-controlled robots replace human effort most effectively with tasks which require accuracy speed, or strength, and have been employed in manufacturing companies like Harley-Davidson; they are also becoming used in hospitals for sorting and processing blood samples, freeing medical personnel from sometimes hazardous and repetitive tasks. The combination of lean manufacturing and computer integrated manufacturing systems can offer the concept of flexible factories. A flexible manufacturing system (FMS) automates a factory by blending computers, robots, machine tools, and materials-and-parts-handling machinery into an integrated system. These systems combine automated workstations with computer-controlled transportation devices. Automatic guided vehicles (AVG's) move materials between workstations and into and out of the system (Git man and Mc Daniel 2007).
Traditional manufacturing requires having sufficient raw material, work-in-process, and finished goods inventories in stock when an order is received. Planning and scheduling are forecast driven to deal with manufacturing lead times that exceed customer expectations for delivery. These forecasting schedules usually translate into large batch lots of products being routed through the manufacturing departments. Large batch sizes lead to increasing quantities of inventories across all categories as manufacturing resources get committed to forecast-driven demand in advance of actual demand (Hobbs 2004).
The effort required to make the transition to lean manufacturing should not be underestimated. Changing the company manufacturing system requires a commitment from top management down through the organisation to the shop floor. Anything short of this strong commitment to the conversion will result in a compromise of the methodology when difficult decisions have to be made. Compromise can limit the benefits of a lean implementation. Potentially changing the current environment can be a daunting experience for many managers, particularly those who have long service and have developed personal systems for managing recurring shop floor problems. The new application can mean change and often, personal careers have been built around the maintenance of existing systems. Loyal allegiance t historical methodology and the comfort level ingrained in users can result in reluctance or outright resistance to change. Reluctance to accept lean manufacturing principles is often rooted in the operation and maintenance of materials requirements planning (MRP) system (DEFINE). MRP systems create action recommendations in the form of production orders authorising work to be done on manufacturing and purchase orders authorising the purchase of materials. These orders are issued to the purchasing department, which subsequently issues purchase orders, and so on. The shop floor control module (SFC) requires that for every order a routing file is attached, which has to be tracked through the process informing manufacturing as to the correct sequence of manufacture, department by department through the chain. The amount of work involved and record keeping is considerable and affects are felt right through to the cost accounting function, so the introduction of lean manufacturing techniques has a considerable impact (Hobbs 2004).
As with all areas of management, operations management requires the ability to lead people. Until recently, when they experienced large-scale recall problems due to quality issues (Association for Operations Management 2010), Toyota's operations were admired worldwide as a model of quality and efficiency, but this success was not merely a result of using the right machines or setting the right standards. U.S. car makers have had difficulty duplication Toyota's success with lean manufacturing because they have focused primarily on the technical elements of the system and failed to implement the necessary cultural and leadership changes. Toyota's system combines techniques, systems, and philosophy, such as a commitment to employee empowerment and a creative culture. Besides installing the methodologies for running an efficient assembly line, such as just-in-time shipments of supplies, managers must instil the necessary attitudes, such as concern for quality and a desire to innovate.
Another barrier concerns the reluctance of small businesses to adopt electronic business (eBusiness) practices. It is understood now that e-Business is more than just another way to sustain or improve existing practices. There are examples where companies have used business tools such as total quality management (TQM) and business process reengineering (BPR) while introducing e-business in the organisation. A recent survey suggests that two thirds of the UK businesses are online, with further growth forecast, with larger companies adopting twice as many activities compared with small and medium-sized enterprises (SMEs). The main reasons cited for this slow adoption according to the Department of Trade and Industry is ignorance about e-commerce benefits and a shortage of relevant skills Hafeez et al (2006).
In 2001 when British Airways was suffering from heavy international competition and a growing field of small European and US-based competitors offering no frills service and cheap fares, the airline decided to review its operations in an attempt to improve its operating margin by 10 percent. Staff cuts, self-service and improvements in the procurement process were undertaken, and benchmarking undertaken to establish best practices and facilitate standardisation of processes. Some successes were gained, with cost savings and streamlining of the supply services and online purchase ordering (Weele 2009). However, British Airways has a long and troubled record of employee relations, and is currently is dispute with its cabin staff (Guardian 2009). The introduction of TQM, with its emphasis on involvement of all levels of employee, from top management to check-in staff, would foster a feeling that quality was a key factor in success. British Airways differentiates itself and its pricing structure on the basis of being a full-service airline, but the end-customer needs to be convinced that they are getting a quality service which will not be subject to disruption, and disaffected cabin staffs in particular are the very people customers have most exposure to. TQM, applied properly involves all members of an organisation in driving customer satisfaction, from top management through to front-line employees who deal with the travelling public. TQM motivates and involves all staff. Motivated employees are ones who feel valued and encouraged by management to perform are more likely to enhance the company's competitive position in the marketplace.
Approaches to improvements
Four common approaches are discussed.
Literally Kaizen means 'continuous improvement'. A Kaizen Event is the application of Kaizen (or lean) tools to individual, small scale, projects within the overall manufacturing operation. Each project is referred to as a Kaizen Blitz Event. Events are not applied in a single, plant-wide implementation of 'lean' but one event at a time. The Kaizen tools and methods used in the execution of a Kaizen Event include:
The 5-S process, consisting or Sort (remove unnecessary items), Straighten (organise), Scrub (clean), Standardise (routines), Spread (expand the process to other areas). There is also the Identify and Eliminate process, covering Overproduction, Waiting, Transportation, processing, Inventory, Motion, and Defects. Also included are the Kanban (visual cues or signals), Jidoka (meaning perfection or quality built-in, not caught by inspection), Poka Yoka (meaning mistake or error proofing, and the use of JIT and Pull (meaning supplying items just-in-time and pulling items only as they are needed). (Smith and Hawkins 2004).
Just-in-time (JIT) inventory systems are designed to reduce the level of an organisation's inventory and its associated costs, aiming to push to zero the amount of time that raw materials and finished products are sitting in the factory, being inspected, or in transit. These systems have differing names, such as 'stockless systems', or 'zero inventory systems' or 'Kanban systems'. Each system centres on the concept that suppliers deliver materials only at the exact moment needed , thereby reducing raw material inventories to as close to zero as possible. Moreover, work-in-process inventories are kept to a minimum because goods are produces only as needed to service the next stage of production. Finished goods inventories are minimised by matching them exactly to sales demand. Just-in-time systems have tremendous advantages. In particular, the reduced inventory level frees productive capital for other company uses (Daft 2006:597).
Total Quality Management (TQM)
The International Standard ISO 9000 defined TQM as 'A management approach of an organisation, focused on quality, based on the participation of all its members and aiming at long term success through customer satisfaction and benefits to the members of the organisation and to society' (Smith 1977). TQM includes not only the entire personnel within an organisation but also the suppliers, because at the heart of TQM lies the internal and external customer/supplier relationships. By the introduction of TQM, each person becomes accountable for his or her own contribution to quality. Everyone is motivated to attain the highest quality by being alert to that which is taking place. TQM cannot be achieved by coercion, and has to be user-driven and the top management has to change the culture of the company towards quality without issuing edicts. They must create an environment of job satisfaction where most people want to perform well and be able to take a pride in their own achievements and with those of the company, in addition to feeling a sense of involvement (Timings and Wilkinson 2000).
Taken literally, Six Sigma is a statistical term which characterises quality as having less than 3.4 defects per million for a given product or process specification. However Six Sigma has become a methodology for reducing the variability of processes such that the results of greater quality and that the results of greater quality and that the results is greater quality and consistency and better performance (Moore 2007:194). Six Sigma is founded upon complex issues, and has evolved to become very much an all-encompassing management tool for change and customer quality. One of Six Sigma's strengths compares to other quality approaches is that it is not simply a method, but also the vision, the goal and the symbol all rolled into one. Six Sigma brings nothing overtly new to quality, except for two things. Firstly, the name ad symbol of Six Sigma itself, almost like a brand name, have the power to draw interest and provide a clear badge that can be affixed to any quality initiative. Much like ISO 9000, it may become the much-prized mark of world-class quality. It is also a metric, and emphasise the ability to measure a level of quality attainment as a number. Secondly, Six Sigma brings a new paradigm to quality. It has gathered together many of the inherent views of many groups and individuals, and now firmly proclaims a model to explain the real meaning of quality, which is total customer satisfaction (Tennant 2001).
Six Sigma has a measureable basis, which is a factor underpinning many internationally accepted standards such as ISO 9000. Kaitzen is concerns with the simplification of steps within the total manufacturing process, eliminating the clutter and simplifying with the aim of having each step streamlined. JIT is focussed on having the minimum number of items which make up the final product in place at exactly the time they are needed and reducing the cost of non-moving inventory.
However TQM does not have a clear aim towards which participants slowly but surely move, and it does not have a firm measure or yardstick by which progress can be monitored. If quality is the aim of any organisation, then this aim must be converted into something much more tangible to which each member of that organisation can aspire. Further, it must be possible to know when the vision has been attained, and to have a clear path to follow.
Lean management has been deployed in many forms, but continues to evolve, particularly in large organisations and there are indications that different approaches suit different business environments. The main recognised approaches have their place in each environment, some focussing on streamlining processes in the manufacturing cycle, while others are cantered on quality, and one, Six Sigma, has a mathematical basis. Each have their place is specific business situations.