Operational Analysis and Effectiveness
Elements such as customers’ vision, value and mission of a firm, its core capabilities and strategic frameworks are what create the general production strategy and operations systems. The implementation of the lean production system and the JIT was meant to decrease inventory waste, which in the past resulted to a considerable amount of expenses and costs. However, in the case of Leagile manufacturing, the intended effect failed to take place and instead all areas of production and operations were affected negatively. The main areas of operations that were exceedingly affected by the new lean production system included production, sales and customer relations, transportation and supplies and procurement. Initially the company’s vice president of operations implemented MRP or manufacturing resource planning for the whole system. His implementation was only based on what he read in the different books something, which led to failure (Bruce, Daly and Towers 151-70).
In order for one to understand appropriately the concepts that led to the failure of the lean production system in the company, he or she has to be familiar with concepts in operational management. Operations management is an area of study that is concerned with designing, overseeing and redesigning of operations in business in the manufacture of goods and services. This area of management involves itself with the responsibility of making sure that operations in business are running efficiently when it comes to the utilization of a number of resources accordingly, and effective when it comes to satisfying the suppliers and meeting the requirements of the customers (Bruce, Daly and Towers 151-70).
This paper will discuss a number of concepts in operations management, theories, models and principles in the analysis of the current application of operation management concepts in Leagile Manufacturing. Essentially, the paper will also show some of the weaknesses and mistakes the company made while implementing the lean manufacturing concept in its operations, in areas of customers and sales, strategy, production, transport and suppliers and procurement. In addition to this, the paper will also give a number of recommendations to the company, as to how it can correct these mistakes and turn the operation and production processes profitable.
A majority of companies today are increasingly getting aware of the fact that gains in competitive advantage are not limited to improvements in their internal operational systems, but also, as well as, in their external supply chains. A wide range of potential improvement strategies is available for shaping both the external and internal processes. Lean practices, among other initiatives such as supplier rationalization and logistic integration are some of the examples of such strategies. Lean practice is the main initiative that Leagile manufacturing used, but implemented wrongly to result to numerous disadvantages and great losses. Lean practice is an example of an improvement strategy for internal processes, while supplier rationalization and logistics integration are examples of initiatives oriented towards the external processes. Such programs and practices are usually taken as beneficial and profitable to any kind of manufacturing firm, while a number of researchers argue that some improvement strategies are more applicable in specific manufacturing environments. Therefore, there are a number of disagreements on the applicability of these initiatives in manufacturing firms (Krishnamurthy and Yauch 588- 604).
Lean production is typically considered as an essential process for any organization that needs to improve its operations in manufacturing like in the creation of a smooth production flow and for removing waste. However, a number of researchers on leagility, that compares agile with lean strategies suggest that lean production is more applicable to operations that are more- to- order and increase the decoupling point in material flow in supply chains, while agility is more suitable for firms that are more- to- order and decrease the decoupling point (Bruce, Daly and Towers 151-70).
Furthermore, logistics integration is a significant part of any organization in the context of supply chains. In order to establish a well-built chain of supply, the logistics between consecutive associates have to be integrated. Numerous researchers regard this as essential for all operations involved in supply chains. However, some point out that is especially true for more- to- order firms that depend on the support of their suppliers for providing components that create variety and for delivering products that are customized on time. On the other hand, more- to- stock organizations buy standard components and at times prefer distant relationships with their suppliers, and consequently do not need the integration of logistics with suppliers (Flynn, Huo and Zhao 58- 71).
Thus, logistics integration may be more appropriate for more- to- order operations and lean production may be more applicable to more- to- stock firms. Before coming up with the appropriate recommendations for Leagile Manufacturing, it is essential to first explore and explain the notion of internal lean practices, business performance, supplier rationalization, and logistics integration. After this then the paper can discuss more specifically some of the recommendations that can offer the company in question more competitive advantage by improving its operations (Flynn, Huo and Zhao 58- 71).
One can trace the use of the term lean production to the Internal Motor Vehicle Program. The term was offered as a synonym for the practices in production, which Toyota pioneered. However, the techniques and concepts under the lean tag were the generally similar to these of JIT or just- in- time a decade before. There are different kinds of lean principles, which vary according to researchers. Some of the most common principles are flow, value, the value stream, perfection, and pull. Many researchers point out the ultimate customer is the one who defines value. On the other hand, the value stream is the series of all the specific activities needed to bring a certain product through a firm’s internal value chain. Flow is defined as making the steps used for creating value flow. Pull is the utilization of a pull schedule and perfection is making improvements a constant and continuous effort. Other essential principles critical in lean practices include waste minimization, visual control, continuous improvement, striving to establish a permanent relationship with suppliers and load leveling (Gonzalez-Benito 901- 17).
Following the principles defined above, internal lean practices include reduction of set- up, small lot sizes; pull production system, and smoothening the layout through concepts of focused factory or cellular manufacturing. More appropriately, these are operational measures related to internal operations, rather than supplier related or customer related. According to this statement, one can see that Leagile manufacturing made a mistake by using lean practices to improve all of its operations including those related to customers and supply chains. A number of researchers have come up with evidence supporting the finding that business performance and thus profitability improved with the utilization of lean and just- in- time practices. Gains and improvements in both market performance and financial performance were observed after firms implemented and made use of these practices as expected (Gonzalez-Benito 901- 17).
The utilization of performance of businesses as a measure is common for understanding the long- term behavior and practices of an organization. Generally, return on investment, market share, sales, assets or other similar measures like changes occurring in these measures are essential in helping managers understand the performance of their businesses, a reason for making use of business performance in the place of operational performance is that more to stock and more to order organizations may as well concentrate in different performance outcomes and competitive priorities. For instance, cost flexibility and efficiency are typically trade- offs, in a way that more to stock firms concentrate in cost efficiency while their counterparts focus more on flexibility. Therefore, more to order and more to stock companies may make use of distinct paths or practices to attain high levels of performance in business. As it follows, business performance is not related to certain kinds of decoupling point, and can, thus, be utilized to gauge how well certain practices are utilized in manufacturing companies despite decoupling points (Rosenzweig, Roth and Dean 437- 56).
The other issues that this paper has to address have to do with the relations businesses have with their suppliers. The increasing competition has made firms to not only improve their internal process but also to put more emphasis on incorporating their suppliers into the general process of value chain. The contribution suppliers make to firms in delivering value to consumers, therefore, creating competitive capabilities through delivery, quality, cost and flexibility has been widely acknowledged. Improved integration of logistics between partners and the supply chain lead to a number of operational advantages including the improvement of sales and customer service. Plants that perform better show a higher level of logistical interactions, and that the widest integration arcs were found to lead to the most beneficial association with improvement of performance. Integration of supply chains was found to considerably relate to performance of businesses. As it follows, one can conclude that external logistics integration leads to an improved relationship with the performance of a company’s business (Gonzalez-Benito 901- 17).
Rationalization of suppliers is also another critical component in the strategic partnership with suppliers, and it is the practice of limiting the supply chain base to limited strategic suppliers who can provide the business with dependability and considerable high quality. In a number of studies examining the effects of selection and assessment of suppliers in a buying organization’s business performance, researchers found that strategic commitment to the buyer by the suppliers has an essential influence on the performance of a firm’s business. In addition to this, it was found that supplier rationalization has a crucial influence on the growth of businesses (Kannan and Tan 11-20).
According to the critical analysis carried out of the challenges affecting the proper implementation of lean practices in Leagile Manufacturing, several issues were recognized, that are probable causes of the losses the company experienced in profits. One of the mistakes that the analysis identified was the mistake of thinking that the use of tools to come up with processes for reducing waste are what the firm should adopt instead of adopting and using the tools to get rid of the waste. According to the analysis, there were five different challenges affecting the five different areas of operation in the company.
For instance, in the procurement and supplier operational area, the problem seemed to be the increase in operational costs, as a result, of an increase in the made purchases, since the decrease in the raw materials inventory, the analysis found that it seems to lead to an increase in purchases, which led to more repercussions that are negative. The issues appeared to branch from the incapacity of the vice president to balance the intake of stock, which led to the failures in the reduction of raw material inventory.
The other operational area that was seriously affected is the sales and customers operational area. The company has been making numerous late deliveries; as a result, of the increase in the quantity of times they have to move for supplies. Because of this, the production process has been slowed down, leading to late deliveries. The change in inventory has also cause issues in the production area because of the changes in the inventory, which have led to increases in measures for quality control. This is to mean that workers have to apply more caution, and the equipment in use in the factory is not according to standards. The production areas are among the most influenced locales in the company since most of the complaints have to do with delayed deliveries. The main challenge seems to be a result of the whole plan of implementation that did not provide the company with enough time for adaption.
The transport operational area also has numerous issues; the main challenge in the area has to do with decrease in inventory. Since decreasing inventory of raw material so as to improve efficiency is one of the main advantages of lean practices. The strategy the company makes use of to implement lean practices also has issues. Looking at the whole process, one cannot help but find numerous gaps that exist within the process of implementation. The strategy that the company used to implement its lean practices was adopted from other companies, and the vice president asked his management team to implement the plan as these companies had. What the vice president did not realize is that different companies have different operations and activities that might affect a number of strategic processes. This is to mean that a plan drawn or designed for a certain company will not work for another company.
Having seen where the Leagile Manufacturing went wrong, it is possible to use a number of concepts and principles in operations management to draw up a plan with a number of recommendations that the company can make use of to address its challenges, and, as a result, improve its performance, competitive advantage, and, thus, profitability. In the previous paragraphs, we had seen that the business performance of a company could be improved by making use of three principles or concepts in operations management. The combined utilization of these three concepts can improve the performance of Leagile Manufacturing if well implemented. These three concepts include internal lean practices for more to order and more- to- stock businesses, external logistics integration of more to stock and more to order firms and supplier rationalization for more to stock and more to order firms (Zailani and Rajagopa 379- 93).
Lean companies have faced numerous challenges when faced with a lot of varieties of products, offering more than one option or choices for consumers leading to increasingly small and exceedingly rare orders too often. This variety requires often kanban exchanges and equipment set ups, in addition to, numerous deliveries of small lots of products. As a solution to such challenges, a number of researchers have come up with a number of proposals. One of these is that lean firms should decrease variety and make use of more standardization of parts instead. A huge variety of products is a typical characteristic of firms that are more to order, while standardization of parts is a general characteristic of more to stock firms. Just as well, other researchers support the argument that lean is more relevant for those firms that make use of more to stock operations than those that make use of more to order operations (Zailani and Rajagopa 379- 93).
Advocators of Leagility, which the utilization of both agile and lean practices, argue that leanness should be more emphasized for operations that are more to stock, while agility is more crucial when used for operations that are more to order. The acknowledgement that more- to- stock firms are faced with different challenges from more to order firms has had a significant influence on the establishment of control mechanisms for production for production systems that make use of lean practices. Such researchers point out that Kanban is more specified for more- to- stock firms as opposed to more- to- order firms that have such principles as POLCA and COWIP working for them. As it follows, Leagile Manufacturing should follow these guidelines to streamline its internal operations such as inventory, transport and delivery of products to consumers so as to become more efficient, and, therefore, more profitable (Krishnamurthy and Yauch 588- 604).
Other recommendations have to do with the supply chain, which as we saw in the paragraphs above, cannot be improved efficiently using lean practices alone, but with combination with external logistics integration. Integration of supply chains that is tighter in supply chains that are make- to- order through coordination of physical flow and sharing of information provides firms with considerable opportunities for improving their performance in business, and, thus, economic performance. While sharing of information reduces production costs, the main economic advantage comes form decision making that is coordinated, companies that make use of customer service, delivery, flexibility and quality as winners of order present differences in the level to which they incorporate their external supply chain (Narasimhan, Talluri and Mendez 28- 37).
Just as well, companies that choose to make use of price strategies as a winner of order do not represent any considerable difference in the extent of external incorporation of supply chain. Firms with a higher degree of external integration are those that take a leading role in customer service, delivery, flexibility and quality when contrasted with those companies that adopt little or limited integration. Companies looking for customer service, delivery, flexibility and quality as winners of order should put more of their emphasis on ways to integrate externally with both their suppliers and customers (Quesada et al (296- 303).
There are numerous studies that provide businesses with evidence that higher integrations of external supply chains lead to higher levels of improvement on lead- time of deliveries, as well as, on- time deliveries. A number of researcher have also shown how companies looking for flexibility are concentrating or focusing on strategic integration with their suppliers. These studies indicate and show findings whereby flexibility is improved after companies integrated their external supply chain. This is to mean that Leagile Manufacturing can combine its lean practices with logistics integration to improve its supply chain and to address its issues with the suppliers and deliveries (Quesada et al (296- 303).
Supplier rationalization is also another operational management concept that the company can make use of to improve its performance. Make- to- order firms need suppliers who are reliable and items of high quality especially with reliable and short high design flexibility and delivery lead times to support the logistic incorporation between the supplier and the customer. On the other hand, make- to- order companies require suppliers who are reliable and items of high qualities, at prices that are affordable, to support the internal lean practices that they establish. Therefore, researchers have indicated that the influence on the performance of business of rationalization of suppliers is positive for both kinds of firms. Since Leagile Manufacturing is both a make- to- order and make- to- stock company, it can benefit from the concept of supplier rationalization when used together with lean practices (Sahin and Robinson 579- 98).
As the above recommendations on how to do away with the challenges affecting the Leagile Manufacturing operations suggest that one of the most effective strategy to do away with these challenges is the utilization of the appropriate lean practices designed for this particular company. As the architect of the lean concept believed, the most basic function of lean practices is the elimination of wastes experienced in a company to improve its performance and profitability. According to the developers of the concept, there are different kinds of wastes, which a company can experience. These wastes include defects in inventories, overproduction, and defects in production, unnecessary movement of individuals, unnecessary processing, and waiting by the workers and the unnecessary transport of products. All these challenges seem to be affecting Leagile Manufacturing one way or the other (Sahin and Robinson 579- 98).
The word lean applies because a lean company usually makes use of less or everything from raw materials to costs as compared to production of mass products. Therefore, a company that makes use of the lean principles makes use of less of human efforts in the production process, makes use of less of investment in tools, makes use of less of manufacturing space and makes use of less of the time required for engineering of a new product. As it follows, a lean company requires for fewer inventories and incurs limited defects or challenges while providing a larger product variety. The potential offered by lean practices has been acknowledged and embraced by researchers and practitioners alike. A survey carried out on a number of industries found that a majority of the plants that adapted lean practices improved their performance considerably. Beyond production and manufacturing, lean practices have also found numerous applications in logistics and product development and launching and accounting. Leagile Manufacturing can, therefore, make use of lean practices to identify the value present in certain products, the value stream for all of its products, support value flow, and allow the customer pull value and increase perfection. It is through this enterprise- wide strategy and approach to lean practices implementation that the concept extends further beyond functional strategy to a wider strategy in supply chain employed by the firm (Shah and Ward 129- 149a).
It is also fundamental to remember that while replenishment of pull is a concept of the lean approach, a company has to ask itself where it is pulling from. It is obvious that lean systems never pull away from the ultimate consumer. Rather, production responds to the signal of demand produced by the consumer next- stage, which is in most cases not the end- consumer. Many theorists assume that many end- users or consumers are ‘I- want- it- now’ kind of consumers. Consumers would rather purchase what they find on offer than wait for something else that will only be available to them ten days away. This concept leads a lot of firms to manufacture their products in advance on a basis of make- to- stock so as to solve this challenge (Shah and Ward 129- 149a).
However, one might worry about inequalities and differences between demand and supply, but theorists have suggested that at times companies have to speculate about the final customer demand of their product. Thus, while lean practices look to reduce waste in its numerous forms, the planning basis essential for satisfying and serving end consumers with immediate availability of products means that the inventory will be manufactured before hand, as same as it happens in mass production. The difference between mass production and lean production us that lean production usually depends more on a shorter horizon of demand forecasting and the ability to adapt should schedules in production need to be altered. The most common challenge with such systems has to do with the accurate anticipation of quantities, allocation of products that match the demand of customers and quality of products. Improvement in performance in such a case requires the improvement in focus on the consumer. The strategy that applies the effort to react and gratify the demands of the end- consumer on the basis of real time is described as agility of supply chains (Shah and Ward 785- 805b).
This paper is an examination of several recommendations that Leagile Manufacturing can use to get out of the problems caused by improper implementation of lean practices into its operational areas. As a result, of a deep analysis, it was found that improvements in both external and internal process in general could lead to an improvement of business performance. The other thing that was realized was that there is a big difference between different kinds of businesses and companies, with respect to how their performance in business is affected. Therefore, the most basic mistake that Leagile Manufacturing made, and which can never be repeated is adapting another company’s implementation strategy of lean practices. Another thing that was realized during the study was that supplier rationalization and internal lean practices significantly affect and influence business performance of companies.
In addition, it was found that integration of external logistics could have a positive effect on business performance, especially if the company is a make- to- stock. The overall findings of the analysis is that supply chain and manufacturing improvement strategies can have considerably essential influences on the performance of Leagile Manufacturing and other companies in the same position. Such operational areas like production, strategy, customers, suppliers and procurement and inventory can be improved by the use of a combination of three main operations management concepts. These concepts include lean practices, integration of supply chains and rationalization of suppliers. If Leagile Manufacturing makes use of these concepts, then it is possible that its challenges can be solved.
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