An Analysis of the Operations Management of a Small and Medium Sized Enterprise (SME) - A Case Study of a Manufacturing Company in Singapore

by

Azrina Binte Abdul Azim

2006

A Dissertation presented in part consideration for the degree of Master of Business Administration

ABSTRACT

In today competitive business environment, there are many manufacturing philosophies and best practices that organizations can make the most of, as a platform to achieve its overall business goals and objectives. This case study dissertation is thus an attempt to analyze fundamentals of operations managements and strategy, and the significance of the management tools from the perspective of a small manufacturing enterprise. It is with the proposition that with appropriate adoption and implementation of operations management philosophies and tools, the company under study will be able to enhance its manufacturing performances, i.e. improved delivery lead time, work-in-progress (WIP), inventory, cost of production and manufacturing quality (scrap and rework), and productivity level, and consequently achieved its strategic business objectives of further company expansion, in a more efficient and effective manner.

The case study highlights importance of the management tools as a source of not only a competitive edge, but also as prerequisite to sustain in the rapid dynamic business environment. Based on the information acquired from the literature review and data from the field study, a conceptual framework consisting of the proposed manufacturing philosophies that will assist the company concerned achieved its business strategic goals in a more efficient and effective manner was developed for the companys considerations. Among others, operations management philosophies such as, Lean Manufacturing (LM), Just-in-Time (JIT) and Total Quality Management (TQM) are discussed in particular relevance to a small enterprise set-up, coupled with recommendations to tackle the change management issues so as to ensure higher level of success.

This paper concludes with the view that management tools inherent in operations management and strategy discipline are by and large, applicable in the context of a small and medium sized enterprise as well. The case study demonstrated that with adoption of the appropriate management tools, the company concerned will be able to improve its manufacturing performance and enhance productivity level in a more cost effective manner.

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TABLE OF CONTENTS

CHAPTER 1 INTRODUCTION 1.1 1.2 1.3 1.4 1.5 Background and Research Context............................................................................... 1 Purpose of Research..................................................................................................... 2 The Academic Context and Key Academic Theory..................................................... 3 Scope of Research........................................................................................................ 4 Structure of Research Dissertation............................................................................... 5

CHAPTER 2 LITERATURE REVIEW 2.1 2.2 2.3 2.4 2.5 2.6 Introduction to Chapter................................................................................................. 7 Fundamentals of Operations Management................................................................... 7 Operations Management as a Source of Competitive Advantage................................ 9 Operations Management in the Context of Small and Medium Sized Enterprise....... 10 Operations Strategy and Operations Priorities............................................................. 10 Change Management Issues......................................................................................... 18

CHAPTER 3 ORGANIZATION BACKGROUND 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Introduction to Chapter................................................................................................ 21 Background of the Organization.................................................................................. 21 Organization Structure................................................................................................. 22 Production Floor Layout.............................................................................................. 24 Production Department Key Activities........................................................................ 25 Current Situations......................................................................................................... 29 Measures Undertaken To Improve Current Situations................................................. 30

CHAPTER 4 RESEARCH METHODOLOGY 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Introduction to Chapter................................................................................................. 31 The Research Context................................................................................................... 31 Preliminary Research.................................................................................................... 32 Selected Research Methodology.................................................................................. 32 Primary Data and Sample Size..................................................................................... 33 Data Collection Method ............................................................................................... 33 Data Analysis................................................................................................................ 35

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4.8 4.9

Triangulation................................................................................................................. 36 The Disadvantage/Advantage of Qualitative Research................................................ 36

4.10 Limitations of Research................................................................................................ 37

CHAPTER 5 FINDINGS AND DISCUSSION 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 Introduction to Chapter................................................................................................. 38 Analysis of the Existing Measures Undertaken to Improve Current Situations........... 38 Analysis of the Production Floor Layout...................................................................... 40 Analysis and Findings of Production Department Key Activities................................ 40 The Need for Significant Improvements in the Company Business Processes............ 44 Concept of Lean Manufacturing Principles.................................................................. 45 JIT and TQM Manufacturing Philosophy.................................................................... 47 Change Management Issues for Implementing of Manufacturing Philosophies......... 49 An Outline of Implementation of Change.................................................................... 50

5.10 Obstacles in the Implementation of Change................................................................. 51

CHAPTER 6 CONCLUSIONS 6.1 6.2 6.3 Introduction to Chapter................................................................................................. 54 Conclusions from Findings........................................................................................... 55 Recommendations for Further Research.......................................................................56

LIST OF FIGURES

APPENDICES

REFERENCES

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LIST OF FIGURES

Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Figure 8 Figure 9 Figure 10 Figure 11

General Model of Operations Management - A Transformational Model Operations Strategy Priorities Building Blocks of Lean Manufacturing Traditional and JIT Flow Between Stages Framework for Managing Change Organization Structure Floor Layout of the Production Department Sales Order Fulfillment Workflow Process Label Production Workflow Process Sample Label Workflow Process A Conceptual Model for Improving the Efficiency of Production Activities

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ACKNOWLEDGMENTS

This paper represents the final journey of my quest for MBA qualification while working full time. This passageway is only made possible with the love and support from the various people in my life and I wish to express my gratitude to them here.

To my dissertation supervisor, Professor Chris OBrien for the constructive comments that have greatly improved this paper and the staff of PSB Academy, especially to Ms Chua Shing Ling for her ever obliging, supportive and kind dispositions that have made the journey easier. To my parents, Mr Abdul Azim and Madam Sutinah Ahmad, for their instinctual and eternal love, blessings and faith they have in me. To my mother-in-law, Madam Tan Cheng Yong, for her kind affection, understanding and support, particularly during the time that I was working on this paper. To my brothers; Yunos, Amri and Ariff, and sisters; Julia, Mira, Munira and Ariffah, thank you for being part of me, and for your companionships and friendships through all these years. Last but not the least, to my family; my dearly adored husband, thank you for your unconditional love, your endless cheering and encouragement, and most importantly for being my True North. And to our precious baby daughter, Yasmine, thank you for coming into our life and being our greatest source of inspiration.

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CHAPTER 1 INTRODUCTION

1.1 Background and Research Context

The increasing recognition of operations management as a vital element in the corporate strategic planning has been well documented by renowned operations management scholars. Among others, Skinner (1969); Hayes et al. (1988); Malhotra et al. (1994); Swink and Way (1995); Boyer and Lewis (2002), have all suggested the significance of operational efficiency as a source of strategic weapon. In current rapidly dynamic business environment, to survive and ensure continued business existence, organizations are expected to deliver more with less, i.e. achieve higher level of productivity but with fewer and leaner resources. This is in face of fierce market competitions and it is a well-accepted fact that efficient management of business operations and strategies are as indispensable as effective corporate strategic planning, and that it play a vital role in any organizations. Many academic literatures have associated best practices and/or world class manufacturing (WCM) philosophies, native of operations management and strategy, with large enterprises. Nevertheless the importance of operational efficiency is equally relevant for both large and small enterprises alike. Small enterprise or small and medium sized enterprises (SMEs) play a significant role in any economies in providing employment opportunities and supporting the operations of large enterprises. As Storey (1999) suggests, the fundamentals of operations management and strategy are also applicable to SMEs, even though they exhibit distinct characteristics that differentiate them from the majority of their larger counterparts. In implementing fundamentals of operations management and its strategy, the management of change issues needs to be given equal considerations as well so as to ensure and achieve a more successful change. Consequently, these form key central themes in this case study dissertation. The case study dissertation is an analysis of the operations managements of a small manufacturing enterprise and with the proposition that with the implementation of appropriate operations management philosophies and tools, the company concerned is able improve its manufacturing performances, i.e. improved delivery lead time, work-in-progress, inventory, cost of production and manufacturing quality (scrap and rework), and productivity level, and consequently achieved its strategic business objectives in a more efficient and effective manner. A conceptual framework consisting of the proposed manufacturing philosophies for implementations was developed for the companys considerations.

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1.2 Purpose of Research

In view of an increase in demand expectations, members of the management team of company concerned, of which its name have been withheld to protect its identity, have decided to further expand its business operations to include more facilities, i.e. increase production runs, including a third shift among others. However, it is from the authors analysis of the current business settings and configurations, that the company concerned requires more than solely an injection of fresh funds. A paradigm shift, particularly in its manufacturing and operations beliefs, which forms the core premise of this case study, is but a prerequisite. The principal business processes in determining the overall success of the company concerned lies within its Production Department and accompanying process activities and form the backbone of ensuring continued existence and survival of the company, especially critical in today competitive business landscape. Paradoxically, intelligence gathered through informal conversations with the Production Manager (PD) highlighted major flaws inherent in the existing arrangements and process activities.

Currently, the company concerned operates in a manner that lack effective business configurations, and these results among others, high level of work-in-progress and inventory that tied up the company tight cash flow, long workflow process and delivery lead time, which also have an impact on the cash flow, i.e. being a SME, they are expected to make advance payment to suppliers but they in turn have to extend credit payments to their customers, high cost of producing the goods due to inefficient way of managing company resources and also high level of rework and scrap incidences due to lack of emphasis on quality control and assurance. This necessitates significance improvement if the company strategic objectives of expansion is to be achieved in a more effective and efficient manner. To overcome these problems, it is of great importance for the company to recognize benefits of espousing and implementing operations management philosophies, such as among others, Lean Manufacturing (LM), Just-In-Time (JIT) and Total Quality Management (TQM) as a tool and a source of an avenue to improve its manufacturing performance and productivity, thus achieving superior business operational efficiency.

A case study methodology has been approached to investigate the subject matter in more detailed. As suggested by Eisenhardt (1989), a case study approach is one of the most appropriate research methods for a topic in an early stage, and this was conducted in two ___________________________________________________________________________ 2

phases. First, a literature review on operations management and strategy, particularly in the context of small enterprises was executed to facilitate better understanding of theoretical and academic context of the stated research purpose. The center of attention of this literature review will be on academic journals which are peer-reviewed and thus represent sound research and advanced knowledge in this premise. In the second phase, a fieldwork involving interviews with key personnel and representatives of the various process owners as well as a direct observations approach was carried out. The research materials from the field study were of particular great importance as it provides an empirical and investigative perspective to the case study. Based on the information gleaned from the literature review and data from field study, a conceptual framework consisting of the proposed manufacturing philosophies that will assist the company concerned achieved its business strategic goals in a more efficient and effective manner was developed for the companys considerations.

1.3 The Academic Context and Key Academic Theory

Authors analysis and assessments of current business setting of the small manufacturing enterprise are derived based on consultation from both existing literatures in the field of operations management and strategy, and small enterprises, as well as an organization fieldwork study. Operations management as a management discipline provides a systematic way for looking at organizational processes and is increasingly recognized as a critical component in creating a competitive edge. From Skinner (1969) to more recent times (e.g. Hayes and Upton, 1998; Pilkington, 1998), operations management scholars have emphasized the importance of operations strategy in helping organizations to achieve business successes and turnaround. As Pisano (1994) suggests, in todays turbulent world, the development and exploitation of operational capabilities is the key to superior organizational performance. The operations strategy is often viewed as part of the overall business strategy element in any organizations. Heightened challenges from competitions have prompted organizations to adopt new manufacturing approaches (Hall, 1987; Meredith and McTavish, 1992) in their pursuits for achieving business excellence. Particularly prominent among these is the concept of lean manufacturing (LM) (Womack et al., 1990; Womack and Jones, 1996), Just-in-Time (JIT) for achieving excellence through continuous improvements in productivity and elimination of waste (Suzaki, 1987; Orth et al., 1990; Crawford and Cox, 1990; and Lummus and Duclos-Wilson, 1992) and total quality management (TQM) which is frequently referred to as the cornerstone of JIT and key to its survival (Banker et al., 1993a; Imai, 1998; Sim and ___________________________________________________________________________ 3

Killough, 1998; Swanson and Lankford, 1998; Young et al., 1988). Gupta and Brennan (1995) argued that by using a holistic approach such as those of manufacturing philosophies discussed briefly earlier, even a small company can be successful in improving its manufacturing performance and increasing productivity. This suggests that the manufacturing practices used to achieve excellence in large enterprises can also be successful in small enterprises for improving the manufacturing performance to gain rewards intrinsic of such implementations. The execution of manufacturing tools in any organizations involved a radical change from an organization silo-oriented mentality, to one that is more integrative with a focus of involvement from everyone. A successful reorganization of this type requires not only a modification of the equipment layout of the factory floor, but significant cultural and organizational changes as well (Majchrzak and Wang 1996; Hyer and Wemmer, 2002). Deal and Kennedy (1982), and Frost et al. (1985) argued that the role of culture in a situation of change is to confirm or deny the legitimacy of the new work arrangements. Consequently, as put forth by Youngblood (2000), to ensure success in any operations strategy implementations comparable to those of highly successful companies, the primary source is directly attributable to the organization culture and this demand equal considerations and weightage as well.

1.4 Scope of Research

The case study research is based on a manufacturing small and medium enterprise (SME) established in Singapore, particularly within the companys Production business unit. Two different empirical methods were used to collect data: interviews and direct observations, and this are to overcome the weaknesses of a single-method design (Campbell and Fiske, 1959). Interviews provide with depth, details, and personal feeling, while direct observation gives access to the group processes and can disclose discrepancies between what is said and what is actually being done (Pettigrew, 1990). Since the analysis is based on data collated empirically, an in-depth case study approach can make up for the lack of generality by providing greater depth of understanding. The aim of this study is to achieve an in-depth insight into events, the relationships, experiences and processes typical of manufacturing small enterprises and with the proposition that with the implementation of appropriate operations management philosophies and tools, the company concerned will be able improve its manufacturing performances and productivity, consequently achieved its strategic business

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objectives in a more efficient and effective manner. There are primarily three main and interrelated workflow processes within this core business function. They are namely;

the Sales Order Fulfillment Workflow Process, the Manufacturing of Label Production Workflow Process, and the Manufacturing of Sample Labels Workflow Process for Potential Sales and New Opportunities.

The key workflow processes are identified, described and analyzed for suggested improvements in view of existing limitations in the work procedures. The following sequence of activities was carried out to achieve this task:

Identification and Understanding of the Key Activities, Analysis of Current Methods and Practices, Discussion on the Limitations of Current Methods and Practices, and Conclusions and Recommendations.

1.5 Structure of Research Dissertation

The main objective of this paper is an attempt to analyze current manufacturing practices and beliefs of a small and medium sized enterprise (SME) established in Singapore. This case study have been approached from an essentially pragmatic standpoint, from the perspective of considering such investigations to have a better understanding of the process and its limitations and improvements that can be carried out to attain superior operational efficiency, if appropriate operations strategy are to be employed. Operational efficiency can be defined as the efforts of each operation in the chain can make to reduce its own complexity; reduce the cost of doing business with other operations in the chain and increase the throughout time. The cumulative effect of these individual activities is to simplify throughput in the whole chain. This paper proceeds as follows: In the next section, a literature review based on the fundamentals of operations management and operations strategy are introduced, such as those of world class manufacturing principles and best practices. In addition, OM as a source of competitive advantage as well the management of change in implementing such manufacturing tools is discussed and elaborated. In essence this provides a conceptual view to the research context. Chapter 3 introduces in greater details the background of organization ___________________________________________________________________________ 5

understudy, the organization structure as well as the business strategy and workflow processes among others. The predicaments the company is currently facing are highlighted for better appreciation of the need for change. The subsequent chapter, Chapter 4, will elaborate on the research methodology undertaken to carry out and derived the case study materials. Strength and limitations innate of the chosen methodology are acknowledged and the possible weaknesses in the case study research are discussed. Chapter 5 will be on an analysis of the findings and discussions based on the materials and information collated, and will conclude with recommendations for improving the current situation. The paper ends with Chapter 6, summarizing the mains points and findings of the case study dissertation.

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CHAPTER 2 LITERATURE REVIEW

2.1 Introduction to Chapter

This chapter reviews the literature on operations management and operations strategy, particularly from the context and perspective of a small and medium sized enterprise (SME), that have been consulted to assimilate theoretical and empirical information in order to explore the context of the stated purpose of research. The focus of this literature review will be on academic journals that represent sound research and advance knowledge in this premise. The reviews consider the fundamentals of operations management as a business discipline (Section 2.2), operations management as a basis of competitive advantage (Section 2.3), and the significance of operations management and strategy from the perspective of an SME (Section 2.4). Section 2.5 will illustrate the operations strategy and priorities, in which operations must pursue and prioritize to all operations decision-making and this is followed by the different operations strategy philosophies, i.e. Lean Manufacturing (Section 2.5.1), Just-in-Time (Section 2.5.2.) and Total Quality Management (Section 2.5.3) that can be adopted to enhance the manufacturing performances and productivity level. Section 2.6 tackles in greater details the change management issues that need to be considered to make assure and facilitate greater success and acceptance to change.

2.2 Fundamentals of Operations Management

In current rapidly dynamic business environment, to stay in the business, firms are expected to do more and with fewer and leaner resources. The increasing importance of the

management of business operations to organizations successes have been well documented by renowned operations management scholars. Among others Hill et al. 1987; Buffa, 1980; Chase, 1980; Miller and Graham, 1981, have advocated the significance of operations management as a source of strategic weapon and key to business survival. Operations management is essential to allow better coordination among the different operating systems in an organization in reducing stock, inventory or work-in-progress, and most important of all, it has a great impact on the organizations bottom line, as it cannot be divorced from the financial performance. The degree of uncertainty in demand affects the balance of planning and control measures. The greater the uncertainty, the more difficult it is to plan and thus greater emphasis must be placed on control. The basic elements of any organization are its ___________________________________________________________________________ 7

resources and this poses a universal dilemma to all organizations alike, to circumvent the constraints that limit the ability to match resource provision with the current demand, with demand being the essential lifeblood of an organization. A resource is a basic element that an organization control in order to best organize its processes and it can be used to create and as a source of competitive advantage. Operations management demands deep appreciation and thorough understanding of the business operations strategic objectives of the organizations and developing operations strategies for achieving the affirmed organization objectives. In essence, operations management involves in the effective design of operations processes, planning and controlling of the activities, and improving the performance of business operations in delivery of the organizations goods and services. Operations management which is one of the core functions of any businesses is important to provide a systematic way of looking at organizational processes and is for the most part, concerned about the managing of resources critical to strategic growth and competitiveness of the organization. All operations can be modeled as a process which transforms input into output (Slack et al., 1980). Figure 1 show this general transformation process model which is used to describe the nature of operations. General Model of Operations Management - A Transformational Model

Input transformed resources Materials Information Customers Input Resources Facilities Staff Input transforming resources

Environment

The Transformation Process

Output products and services

Customers

Environment

Figure 1 General Model of Operations Management - A Transformational Model

The operations function is responsible for one or more of any organizations operating systems, i.e. a transformation process that convert inputs into outputs. As illustrated in Figure ___________________________________________________________________________ 8

1, operations processes take in a set of input resources which are then used to transform something, or are transformed themselves, into outputs of goods and services which satisfy customer needs. This transformation model is relevant for any operations both to small or large organizations alike. As suggested by Prahalad and Hamel (1999), the formation of competencies and capabilities for competitive advantage can arise when resources are combined. The sustainability of the competitive advantage on the other hand depends upon the ease with which the resources can be imitated or substituted (Peteraf, 1993). Operations management essentially requires a clear vision of how the operations strategy could help the organization achieve its long term goals and objectives.

2.3 Operations Management as a Source of Competitive Advantage

Pisanos (1994) argued that in today turbulent business world, development and exploitation of operational capabilities is the key to superior organizational performances. Success and failure depends on how well the business operations are being managed. Businesses can achieve competitive advantage through means of managing the operations right. Operations strategy can be viewed as part of a planning process that coordinates operational goals with those of the larger organization. An operation strategy involves decisions that relate to the design of a process and the infrastructure needed to support the process.

Importance of operations management is highly undisputable, having an impact on the organizations bottom line. Effective managing of operations assists in reducing the work-inprogress, inventory and stock, and facilitates better coordination across the different business units. There is a growing recognition that capabilities developed within operations can form the basis of competitive advantage (Anderson et al., 1989; Leong et al., 1990; Stalk et al., 1992; Menda and Dilts, 1997). As proposed by Porter (1996), sustainable competitive advantage can only be achieved by operating at lower cost, by commanding a premium price through differentiation or doing both. These cost and price advantage can be realized in either operational effectiveness and/or strategic positioning. He added that simply improving operational effectiveness does not provide competitive advantage; this can only be done by achieving and sustaining higher levels of operational effectiveness than competitors. Competencies refer to the fundamental knowledge owned by the firm (knowledge, know-how, experience, innovation and unique information). And that competitive advantage can come from a focus upon key competencies. Capabilities reflect an organizations ability to uses its ___________________________________________________________________________ 9

competencies (Lowson, 2002). Essentially, it requires developing the resources to provide capabilities which are needed to allow the organization to achieve its strategic goals. Operations strategy is concerned with setting broad policies and plans for using the resources of the organization to best support its long term competitive strategy.

2.4 Operations Management in the Context of Small and Medium Sized Enterprise

It is a well accepted fact that effective operations management are as indispensable as effective corporate strategic planning and that it play a vital role of any organizations. The intense competition in current marketplace has forced many organizations to reexamine their methods of doing business. Formerly secure niche markets are being fast being encroached upon by increasingly agile larger organizations and coupled with key customers demanding higher quality product at lower cost (Ghobadian and Gallier, 1996). According to Sohal et al. (2001), many organizations today, both the small and large enterprises are re-examining their management of the production and operations functions to leverage on manufacturing strengths for competitive advantage. The common measures for manufacturing performance include lead time, work-in-progress, inventory, cost of parts or products, and manufacturing quality (scrap and rework). Operational characteristics of flexibility, innovativeness,

nimbleness, and quick solving orientation found in successful SMEs represent vital ingredients for corporate success regardless of firm size (Drilhon and Estime, 1993; Aharoni, 1994; Hill and Jones, 1998). SMEs have a natural degree of flexibility, rapid decision making because of their closeness to the customer and lack of organizational layers and bureaucracy (Hale and Cragg, 1996). As suggested by Gunasekaran et al (2000), the need for SME to produce high quality output is important not only at the national employment level but also at the industry level where SMEs are often suppliers of goods and services to larger organizations. Due to the important nature of a SME set-up that support in the operations of the large enterprises, it is highly crucial that similar and effective systems are in place to support the operations of the SME.

2.5 Operations Strategy and Operations Priorities

Operations strategy is concerned with setting broad policies and plans for using the resources of an organizations to best support its long term competitive strategy. As Slack and Lewis (2002) suggests, operations strategy can be defined as the total pattern of decision which ___________________________________________________________________________ 10

shape the long term capabilities of an operation and their contribution to overall strategy. Here, the pattern of decisions tends to be of medium-to-long term nature and to reflect both the core capabilities and competencies of the company and how it uses the resources and technologies to provide sustainable competitive advantage. Operations priorities can be broadly expressed in terms of cost, quality, delivery, and flexibility (Ferdows and De Meyer, 1990; Kathuria, 2000; Leong et al., 1990; Vickery, 1991; Vickery, et al., 1993; Ward et al., 1998) and dependability. Conceptually, these are illustrated in Figure 2.

Operations Strategy Priorities al., 1999, Ward et al., 1998)

Short delivery lead time External Effects of the Operations Priorities Low price, high margin or both Dependable delivery

Cost Speed
High total productivity Fast throughput Internal Effects of the Operations Priorities Reliable Operation Ability to Change

Dependability

Errorfree Process

Flexibility Quality
Frequent new product/service Wide Product/service range Volume and delivery adjustments Figure 2 Operations Strategy Priorities

On specification product/service

Slack (1991) suggested the notion of doctrine of competitiveness as far as an operations strategy is concerned. Competitive advantage can be achieved by making things better, right, fast, on time, cheap and flexibly. The quality objective in essence is primarily meant by doing things right to help reduce cost, i.e. the fewer mistakes each micro operation or unit makes in the operation, the less time it will need to spend correcting these mistakes. Secondly, the speed objective, which is the time and duration taken for customers to receive the product or ___________________________________________________________________________ 11

services, will ensure faster throughput and turnaround time. Thirdly, the dependability objective and the main advantage of dependability is that it gives a stability factor to the business operations. By being flexible, which is the next objective is being able to act quickly on changes and demand. Cost objective is one of the important objectives to pursue, as it contributes to the total productivity. An operations strategy consists of two components: process and content (Adam and Swamidass, 1989; Leong et al., 1990; Swamidass and Newell, 1987; Swink and Way, 1995). Content defines the operations priorities and key decisions for operations to achieve alignment and congruence with corporate strategy, while process focuses on the development and implementation of key operations decisions (Sum, 2004).

Effective operations play an important role in justifying continued business existence and there are essentially three main roles of the operations function. Firstly, it act as an implementer of the business strategy, as a supporter of the business strategy and, therefore requiring development of resources to provide the capabilities which are needed to allow the organization to achieve its strategic objectives. And thirdly, as a driver of the business strategy, i.e. to thrust the strategy forward and giving it a long term competitive edge. According to Frohlich and Dixon (2001), the role of operations in strategic formulation is not static but changes dynamically to shifts in the competitive paradigms. Sustainable competitive advantage can only be achieved through operational effectiveness. Operational effectiveness include for example, better technologies, superior inputs, better-trained employees, more effective management structure and in principle is the domain of operations strategy. Conceptually, there are a number of possible categories of operations strategy and some may be even combined. The next sub-section will discuss and elaborate on three main philosophies, i.e. Lean manufacturing (LM), Just-in-Time (JIT) and Total Quality Management (TQM) which is of great interest and of particular relevance in this case study.

2.5.1 Lean Manufacturing

Lean manufacturing is aimed at the elimination of waste in every area of production. Its goal is to incorporate less inventory, less time to develop products, and less space to become highly responsive to customer demand, while producing top quality products in the most efficient and economical manner possible. Particularly outstanding among these is the concept of lean production (Womack et al., 1990; Womack and Jones, 1996). Lean production is a multi-dimensional approach that encompasses a wide variety of management practices, ___________________________________________________________________________ 12

including just-in-time, quality systems, work teams, cellular manufacturing, supplier management and etcetera in an integrated system. The core thrust of lean production is that these practices can work synergistically to create a streamlined, high quality system that produces finished products at the pace of customer demand with little or no waste. The building blocks of lean manufacturing are illustrated in the diagram below. Refer to Figure 3.

Building Blocks of Lean Manufacturing Lean production philosophy focuses on avoiding seven deadly wastes
Major Tenets of Lean Manufacturing

Quick Changeover/Setup Reduction

Pull/Kanban Systems

Workplace Organization/5S System

Value Stream Analysis

Total Productive Maintenance (TPM)

Cellular Manufacturing

Supporting Strategies and Concepts One Piece Flow Quality at Source Standardized Visual Controls Employee Involvement TAKT Time Team Building Balanced Flow Stabilized Operations Equipment Replacement

Continuous Improvement

Figure 3 Building Blocks of Lean Manufacturing

Lean manufacturing can be defined as a systematic approach to identify and eliminate waste (non-value added activities) through means of continuous improvement by flowing the product at the pull of the customer in pursuit of perfection. Naturally, lean manufacturing help the organization reap benefits in the form of waste elimination and lower inventory. It reduces the requirement for space and work-in-progress and improves quality. On the other hand however, the concept of leanness itself is highly contentious. On one premise, there are things which are unessential, and therefore wasteful, and should be eliminated, while, on the other, there are those which are necessary for the efficient running of the production system effectively. Thus, the concept of lean is highly debatable, i.e. at which point will the ___________________________________________________________________________ 13

organization be anorexic, particularly important in the context of the organizations ability to respond in dire situation.

2.5.2 Just-In-Time

Just-in-time (JIT) is a manufacturing philosophy that emphasizes achieving excellence through the principles of continuous improvement, the involvement of staff in the operation, and waste reduction. Some of its benefits include higher quality production, lower inventory levels, improved throughput times, and shortened customer response times. Waste is defined as any activity which does not add value and thus identifying waste is the first step towards eliminating it. Toyota identified seven types of waste:

Over production - Producing more that what is required by the next step is the greatest source of waste Waiting time - Long waiting time will impact machine and labor efficiency Transport - Moving materials around the plant is a source of non-value added activity Inappropriate Facility Layout - Workstations should be close together to reduce unnecessary movement of information and materials Process - The process inherent itself may be a source of waste Inventory - Under a JIT philosophy, all inventories becomes a target for elimination Motion - An operator may look busy but sometimes no value is being added

JIT is a Japanese-developed manufacturing philosophy that represents an aesthetic ideal, a natural state of simplicity in production efficiency (Zipkin, 1991). The kanban system (in which information on demand-derived production schedules is passed from one stage of production to earlier stages) and JIT methods (where work-in-progress inventories are minimized by having parts made available just as they are needed) are manifestations of this shift (Monden, 1981a, 1981b; Goyal and Deshmukh, 1991; White et al., 1999). ___________________________________________________________________________ 14

JIT production is generally referred to as a manufacturing system for achieving excellence through continuous improvements in productivity and elimination of waste (Crawford and Cox, 1990; Lummus and Duclos-Wilson, 1992; Orth et al., 1990; Suzaki, 1987). A more specific definition is provided by Calvasina et al. (1989) and that is a JIT is in fact a system of production control that seeks to minimize raw materials and work-in-progress inventories, control (eliminate) defects; stabilize production; continuously simplify the production process; and create a flexible, multi-skilled work force. Successful JIT implementations should accomplish two major objectives. Firstly, it is to improve quality and secondly to control the timeliness of the production and delivery of products (Davy et al., 1992; Monden, 1981; Walleigh, 1986). Fullerton (2000) suggested that many current research and works have demonstrated that implementing the quality, continuous improvement, and waste reduction practices embodied in the JIT philosophy can enhance firm competitiveness. As opposed to the traditional push approach, JIT pulls inventory through production only as and when orders are demanded. With work-in-progress inventories kept at a minimum, production can respond more quickly to errors and changes in demand. Throughput time is reduced along with non-value-added (NVA) activities such as wait, move, and inspection time which can comprise up to 95% of product costs (Foster and Horngren, 1987; Peters, 1990). Figure 4 illustrate the main difference in the traditional and JIT approached to manufacturing.

Traditional and JIT Flow between Stages a. Traditional Approach Buffers separate stages

Stage A

Buffer Inventory

Stage B

Buffer Inventory

b. JIT Approach Deliveries are made on request

Stage A

Stage B

Figure 4 Traditional and JIT Flow between Stages

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In addition, long-term commitments with fewer suppliers should result in fewer inspections. By concentrating on quality, companies should experience less scrap and rework and more effective communication among departments and employees. The achievement of these results requires an even production flow of small lot size, schedule stability, product quality, short setup times, preventive maintenance, and efficient process layout (Chapman and Carter, 1990). The most consistent benefit from JIT adoption found in the empirical studies is a reduction in inventory levels and/or an increase in inventory turns (Balakrishnan et al., 1996; Billesbach, 1991; Billesbach and Hayen, 1994; Celley et al., 1986; Crawford and Cox, 1990; Droge and Germain, 1998; Gilbert, 1990; Huson and Nanda, 1995; Im and Lee, 1989; Norris et al., 1994; Ockree, 1993).

Chang and Lee (1996) emphasized the critical role of inter-business units communications, i.e. for example between production and marketing, as a critical factor for improvement in the turnover of finished goods and work-in-progress inventories, while employee participation and bottom-up management were significant factors for improving quality and flexibility. JIT implementation improves performance through lower inventory levels, reduced quality costs, and greater customer responsiveness. The case study shown later will demonstrate that JIT is a vital manufacturing strategy in order to build and sustain competitive advantage.

2.5.3 Total Quality Management

As suggested by Gunasekaran et al (2000), the need for SME to produce high quality output is important not only at the national employment level but also at the industry level where SMEs are often suppliers of goods and services to larger organizations. Total quality management (TQM) is considered an important quality improvement tool in both manufacturing and service organizations. One of the most powerful aspects to emerge from TQM is the concept of the internal customer and supplier. This is recognition that everyone is a customer within the organizations and consumes goods and services by other internal suppliers, the implication of this is that errors in the service provided within an organization will eventually affect the product and service. TQM is also sometimes referred to as quality at source. As proposed by Oakland (1993), for an organization to be truly effective, every single part of it, each department, each activity and each person and each level must work properly together because every persons and every activity affects and in turn is affected by others. Employee involvement is seen as a natural process to be nurtured and developed rather than artificially ___________________________________________________________________________ 16

existing in complicated and formalized models which do not fit the SME environment and which could add unnecessary bureaucracy (Yeb-Yun Lin, 1999). Successful TQM implementation starts with the following order:

Identification of a Quality Strategy Top Management Support Formation of A Steering Group Recognition of Success and Reward Scheme Staff Training

TQM and JIT are often associated through their common continuous improvement goals. Although TQM can be adopted without implementing JIT, it is unlikely that a JIT manufacturing system can succeed without incorporating the underpinning tenets of TQM. It may be seen that JIT and TQM is the most widely used combination of two strategies (Ahmed, Montagno and Firenze; 1995). Good quality management is frequently referred to as the cornerstone of JIT and key to its survival (Banker et al., 1993a; Imai, 1998; Sim and Killough, 1998; Swanson and Lankford, 1998; Young et al., 1988). Improvements in production timeliness are measured by six variables: queue times, move times, machine downtime, lot sizes, throughput time, and customer response time. Very few manufacturing companies have been able to ignore the elements of TQM and still prosper (D. Samson, M. Terzioskir, 1999). The implicit assumption in this reasoning is that TQM principles as defined are sufficiently generic and are as applicable to both large and small organizations (Ghobadian and Gallear, 1996; Wiele and Brown, 1998).

TQM emphasize the activities of senior leadership much like transformational leadership theory (Burns, 1978; Bass, 1985). The emphasis is on customer driven quality and operational performance excellence as key strategic business issues that need to be an integral part of overall business planning. Jamal (1998) provides a useful synthesis of the literature based on the work of Grant et al. (1994), Hackman and Wageman (1995), Krishnan et al. (1993), McDonnell (1992), Ross (1993), Olian and Rynes (1991), Spencer (1994) and Deschamps and Nayak (1995). His summarized approach also largely agrees with that of Kanji and Asher (1993) and Ahire et al. (1996), and they are namely:

TQM is strategically linked to the business goals ___________________________________________________________________________ 17

Customer understanding and satisfaction are vital Employee participation and understanding at all levels are required The need for management commitment and consistency of purpose The importance of processes and measures

2.6 Change Management Issues

At a time of unparalleled technological development, it is the human resources that paradoxically spell success or failure for all firms and especially entrepreneurial ones (Katz, Aldrich, Welbourne, and Williams, 2000). The adoption of manufacturing philosophies is often associated with a drastic change from an organization silo-oriented mentality to one that is more integrative with a focus of involvement from everyone. A successful reorganization requires not only a modification of the equipment layout of the factory floor, but significant cultural and organizational changes as well (Majchrzak and Wang 1996; Hyer and Wemmer, 2002). According to Eldridge and Crombie (1974), culture is a characteristic of all organizations, through which at the same time, their individuality and uniqueness is expressed. The culture of an organization refers to the unique configuration of norms, values, beliefs, ways of behaving and so on, that characterize the manner in which groups and individuals combine to get things done. Culture is not homogeneous and in any organization there will be subcultures. However, the influence of these will depend on the strength and appropriateness of the dominant culture (Turner, 1971). The role of culture in a situation of change is to confirm or deny the legitimacy of the new arrangements (Deal and Kennedy 1982; Frost et al., 1985). In terms of the environment for change, Burnes (1992) places significant emphasis on the role of organizational culture. In terms of the actual mechanics of change, he places a similar emphasis on employee involvement. He sees these as complementary in relation to successful change. Resistance to change can be attributed to several factors such as due to self-interest, lack of understanding and trust for the need to change, uncertainty on what is expected of them upon implementing the change as such. In essence, some of the strategies for overcoming resistance can take form of an analysis of resistance through the concept of force field technique, i.e. change is a result of competition between driving and restraining forces. While some forces drive it, others resist it. Thus organizations should selectively engaged in removing restraining forces to enable driving forces to implement the innovation. Among others, the uses of selective implementation tactics to overcome resistance are recommended, such as communication, education, ___________________________________________________________________________ 18

participation and negotiation. According to Youngblood (2000), most highly successful companies maintain that the primary source of their success is directly attributable to their culture and the key element in a companys culture, and according to Knox (2002), is the organizations effectiveness in developing its systems and implementing strategy and this is done through the commitment and skills of its employees.

It is necessary to recognize that organizational changes which challenge or undermine the cultural status quo can, if managed badly, have severe repercussions. It has been argued that one of the key methods of avoiding this is to involve those affected in assessing the need for, and implementing the change required. This is for two reasons, firstly, to draw on their knowledge and secondly, to gain their support and commitment (Buchanan and Boddy 1992; Deal and Kennedy 1982; Morieux and Sutherland 1988; Burnes, 1991). The corporate culture has become increasingly important to organization and while culture is not the only factor guaranteeing success, positive cultures offer significant competitive advantages over rivals and to quote a quotation, firms profess that people are the source of their competitive advantage, whether they be technological experts, accommodating customer service experts, or visionary managers.

Fundamentally, in comparison to large organizations, SMEs have relatively informal, flatter and highly centralized structures (Hale and Cragg, 1996). Thus, SMEs should not have the same degree of problems when implementing change that large organizations have in regard to middle managements resistance and functional fiefdom (Francis and McIntosh, 1997). Hale et al. (1996) conclude that SMEs have more opportunity for rapidly forming a teambased process structure, because of their informal style and natural cross functional working style. For deeper appreciation of the conceptual framework of managing change, a proposed framework for implementing and managing change is illustrated in Figure 5 in the next page.

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Framework for Managing Change

Perceive Need for Change

Experimentation and Selection of Future State

Analysis and Model of Present State

Implementing the Change

Visualization of Present State and Identifications of Problems and Opportunities

Stabilizing the New Mode of Operation

Figure 5 Framework for Managing Change

The management of change framework starts from a strategic vision and an overall umbrella strategy that guide the separate change projects. It then follows in a participative manner through the generic phases; analysis and model of present state, identification of problems and opportunities, experimentation and selection of future state, implementing the change and stabilizing the new mode of operation. An analysis of the present state is required to be carried out in order to understand the limitations of present mode of operating. Past successes and what works then may not necessarily be applicable in current situations and an indicator for future successes and achievements. The results of the analysis can then be compared against existing best practices already known from the theory and research of the production and business management. The benchmarking can reveals the development potential of the enterprise and help to formulate the vision. Once experimentation has been carried out through development and testing of the chosen practices, change implemented will be more effective. In stabilization phase, the organization begins its normal operation according to the new organizational and technological design. Stabilization is a critical phase in the change process and in essence, it is the test of the change projects success. Nevertheless, stabilization does not prevent incremental innovations in the redesign process and that the process is likely to require continuous improvements. ___________________________________________________________________________ 20

CHAPTER 3 ORGANIZATION BACKGROUND

3.1 Introduction to Chapter

This chapter introduces in greater detail the organization involved in this case study research. Section 3.2 introduces the background of the organization with an organization structure illustrated in Section 3.3. The current layout of the production shop floor are shown in Section 3.4 and identification and analysis of the main production activities was carried out in Section 3.5 and subsection 3.5.1 Sales Order Fulfillment Process, 3.5.2 Manufacturing of Label Production Process, 3.5.3 Manufacturing of Request for Samples from Customers/Sales Leads. The current situations the company facing are elaborated in Section 3.6, i.e. though the business has improved its top line, the operating costs have been escalating and that have an impact on the bottom line and that they were no longer profitability. As a result, despite the fact that the whole team are kept busy fulfilling customers order, the company is no longer making money. This chapter concludes with the current measures undertaken by the company to overcome the current situation, Section 3.7.

3.2 Background of the Organization

The case study dissertation is an analysis of the operations managements of a small manufacturing enterprise and with the authors propositions that with the implementation of appropriate operations management philosophies and tools, the company concerned will be able improve its manufacturing performances, i.e. improved delivery lead time, work-inprogress, inventory, cost of production and manufacturing quality (scrap and rework), and productivity level, and consequently achieved its strategic business objectives in a more efficient and effective manner. The company concerned is a manufacturing company based in Singapore with sales offices in Beijing and Shanghai, China and having staff strength of 20. The company has been operating in the manufacturing sector, i.e. production and conversion of labels and tags since 2002. Since its inception, the company has an annual sales turnover of SGD2.5 million. Presently, its product is being supplied to countries across Asia, Australasia and North-east Asia. The core capabilities lies in providing a one-stop source for all label and printing needs, i.e. label format designing and label customization to cater to the different needs of its customers. The production of the finished product, are mainly for the following data collection application: ___________________________________________________________________________ 21

for shipment labels; for production labels; for cleanroom labels application, particularly in electronics manufacturing; and for hologram tags for security tagging and etcetera.

The company has built a brand name and is known for delivery of high quality at a competitive price, earning itself a reputation of a partner-of-choice among its customers. Over the years, demand for such products have increased from those that are standard blank labels to enhanced with security features such as hologram, and exhibiting special features such as temperature compensated and chemical resistant for use in healthcare and petrochemical industries. With the products being used predominantly by manufacturing and logistics companies which emphasize greatly on reliable and prompt delivery, the winning order criteria are for those that are equipped with and geared for, rapid responses in meeting urgent and at short notice demand.

3.3 Organization Structure The inception of the company is the brainchild of three friends-turned-business partners possessing complimentary expertise and knowledge, i.e. Finance and Administration, Sales and Production. The Managing Director is the majority shareholder in the company and held more than fifty percent of the company shares. Reporting to the Managing Director are other senior positions such as the Business Development Manager, Production Manager, Planner, and the Admin/Finance and HR Manager. The role of the Business Development is mainly on sales and marketing, and the responsibility with production forecast lies in that of the Planning Executive, while the Production Manager focuses on the production and quality management. Lastly, the Administration/ Finance/ Human Resources is to facilitate the logistics of materials and information flow. Being a typical small enterprise set up, the Managing Director is essentially the person that oversees and manages the day-to-day operations of the business. Refer to figure 6 on the organization structure.

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Organization Structure
Board of Directors

Managing Director

Business Dev. Manager

Planning Executive

Production Manager

Admin/Finance /HR Manager

Customer Service

Delivery Assistant

Shift Supervisor

Clerk

Sales and Marketing Team 3.4 The Company Business Strategy

Operators

Figure 6 Organization Structure

Since its inception, the company concerned has been thriving on a value proposition which has allowed the company to differentiate itself among existing competition, i.e. targeting at niche and specific markets, and high tech industries. Equipped with an investment in state-ofthe-art label production machineries, it is able to cater to special and custom labels needs at short delivery required by customers due to the faster speed of operations for the machineries, vis--vis conventional label converters, who continue to serve mass market utilizing dated technologies. Equipped with such sophisticated machineries, this has facilitated the company to meet the demand of the delivery of product in a more rapid manner as compared to its competitions. In addition, the faster speed possible is also achievable through means of having satisfactory level of lax resources, i.e. raw materials, high level of inventory and adequate supply of labor. Going forward, the management team has set its sight on continuous annual growth through means of capitalizing on a new patented manufacturing process as well as a market penetration and expansion strategy into the local and Chinese market respectively.

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3.4 Production Floor Layout

The company production shop floor has a work area of three thousand two hundred square feet. Figure 7 illustrate the layout of the factory space and the flow of material and information are as follows: when a jobsheet (request for labels production) are raised, the production manager will proceed to query availability of the existing labels raw materials and core that will be used for production. Die-cutting tools will be retrieved from the library and the information, i.e. size and quantity required, are written on the chart for the production workers to commence accordingly with the label production, slitting, and rolling of labels to core processes. During partial completion, labels are held at the transit holding area before moving them to the packing area and storage respectively ready for delivery. From the floor plan below, it can be concurred that the company allocate majority of manufacturing space to inventory storage, die cut storage and ample walkway to facilitate the frequent movements of materials and information. Floor Layout of the Production Department New Label Core (Storage) Die Cut Library (Storage) Chart

Storage Area Finished Label

Label Production Workstation Packing Area Slitting Process Workstation Rolling Labels to Core Workstation Corridor Storage Room Holding Area Labels Raw Completed Labels Materials

Entrance

Figure 7 Floor Layout of the Production Department

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3.5 Production Department Key Activities

In this study, a series of interviews and direct observations was undertaken to understand the current process workflow of each of the main activities of the production process. Interviews with the respective staff involved in this case study research were conducted on site, i.e. production work area, while interviews with the managers were conducted both in the meeting rooms as well as the production work floor. The production process can be broken down and analyzed from its three main activities:

the Sales Order Fulfillment Workflow Process; the Manufacturing of Label Production Workflow Process; and the Manufacturing of Request for Samples from Customers/Sales Leads

3.5.1 Sales Order Fulfillment Process

Sales order fulfillment process links customers with the operational resources of the organization. One of the important factors that contribute to the complexity to the process activities is the internal organization processes. With customers becoming more affluent and informed, yesterdays high expectations has become todays norms. Customers are demanding cheaper and faster delivery lead time and are not willing to pay premium for it. The requirement for delivery lead time of the company standard product of blank labels for example, in five days or less has become a norm for the company. Figure 8 shows the current work flow of the sales order fulfillment process. Personnel involved are the customer service executive, the sales account manager, planning executive, production operators and delivery assistant.

Upon receiving the job sheet, planning executive (PE) will prepare a calculation on an estimate of the amount of raw materials needed to fulfill the order. The PE will be required to draw out the physical part from raw material inventory and inspect for the availability of the required die-cut mold. This is especially a critical process, as most raw materials though appear to look alike, are in fact of different grades. As and when there is an anticipation of shortage of raw materials for a particular job, PE will proceed accordingly to raise a purchase requisition to bring in the parts. In addition, the role of PE is also to make sure that the raw material requested is in compliance with the paper standard required. In instances where there ___________________________________________________________________________ 25

are no shortage of raw materials coupled with an availability of the die-cut mold, PE will initiate a visual inspection to ensure both are in proper condition to commence with production.

Sales Order Fulfillment Workflow Process

Receive Purchase Order

Packing Process Issuance of Job Sheet

2

Collection of Die Cut 3 Tool

Collection of Raw Materials

Delivery to Customer
4

Billing

Die Cut Process

Slitting Process

Figure 8 Sales Order Fulfillment Workflow Process

Upon receipt of purchase order, customer service will inform and furnish a copy to the respective sales person. The sales person will then verify information stated on the purchase order against the quotation for any discrepancies. Critical information to look out for will be the payment term, delivery lead time required, total quantity, material type and the total sales order amount. Once everything is assures to be in proper, the planner will then be notified to issue a production job sheet detailing among others, information of the customer, date of order, requested date for delivery, along with the labels specifications for the production supervisors perusal.

For new or customized label production, technical drawing of the die-cut tool are generated for fabrication while existing die-cut tool are retrieved from the library upon inspecting that it is within the mandatory lifespan of 3 months. The raw materials in this case, the paper bulk together with the die-cut tool are subsequently forwarded to the production operators to commence with the label production. After completing the tasks, packer will return the job ___________________________________________________________________________ 26

sheet to the PE for updating. The PE will then inform the customer service executive which will in turn make arrangement for deliveries to customer. When delivery is issued, stock level will be updated and document like the jobsheet are returned for filing. Invoicing will follow upon the return of delivery order documentation. The documents involve are the purchase order from customers, the jobsheet from the sales department, the delivery order and the invoice. Upon the fulfillment of order, all documents are returned for billing.

3.5.2 Manufacturing of Label Production Process

Figure 9 show in greater detail activities that were carried out in label production process. Similarly, upon receipt of the job sheet, raw materials and die-cutting tool are collected to facilitate the commencement of labels production. Together with the jobsheet, the PE hands both the raw material and die cut mold to the production operator. The operator will counter check on the jobsheet and after confirming that all is in order, the operator will begin to set up the machine which involve among others, the die cut tooling setting. The set up of the die cut can only be executed by experienced operators to ensure among others less time spend in the downtime. This is crucial as the setting up of die cut involved complex steps that warrant only the skilled and trained workers. This process is critical to ensure the papers are not over/under cut and to produce to the quantity desired with less wastage and rework possible.

Label Production Workflow Process

Receive Job Sheet

Collection of Raw Material

Collection of Die Cutting Tool

Label Production Slitting Process Packing Process Preparation and Delivery of Order

Figure 9 Label Production Workflow Process

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Slitting of label is a process that comes after label die-cutting process. This is where big jumbo roll are being loaded into a slit machine to the trim jumbo roll and turn into smaller ones. Reason being, there are size variations for different barcode printer model, i.e. some printer can take bigger roll than the other. While performing slit job, slitting operator are required to look out for rejects and remove them. The next step, packing involves looking out for defective label roll core and also the level of tightness of the individual label roll. This is to ensure that the customer will not face problems while using the labels role in their applications. The packer must also make sure weight of the labels roll from the same job sheet remain the same throughout the production activities.

3.5.3 Request for Samples from Customers/Sales Leads

Figure 10 shows the path activities of fulfilling customer request for sample labels.

Sample Label Workflow Process

Receive Request for Sample
1

Raise Job Sheet for Sample

Current Stock

New Product Design

Prepare Delivery Order

5

Purchase Die-Cut Tool and Raw Material

6

Label Production
7

Ready for Delivery

Figure 10 Sample Label Workflow Process

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The diagram illustrates the usual activities fulfilling the manufacturing of samples labels from customer and/or sales leads. As this may or may not generate eventual sales, the individual sales person instead of the customer service department raise the requisition for sample labels production. In view of the perceived lack of importance to generate the labels in good time, perhaps due to the priority given to process the sales order request, the sales people often faced a situation where their repeated query of the samples from the production team are ignored or at most given an inaccurate date of availability.

3.6 Current Situations

The focus of this study is within the Production Department of the company concerned, which manufactures and produce labels for use in the manufacturing and logistics companies. Essentially, the company buys paper in bulks purchases from overseas suppliers and utilizing their label production machine, these are converted to shipment labels, production labels and etcetera, in various forms and sizes according to customer demand. The company business operations have seen a steady expansion since it first started.

When the business first commence, the owner/manager themselves were personally involved in entire sales order fulfillment process, i.e. from securing the orders, working in the production shop floor, doing up the production planning schedules, placing orders to suppliers of raw materials, typing and producing official documentations, i.e. delivery order and invoices, and making deliveries to customers orders. The operating costs were kept at the low minimal and no compromise on the quality of products and services they produces were made. The main objective was to make enough just to ensure company continued existence and making certain that the delivery of their products attain excellent customer satisfaction to facilitate repeat businesses. With their hands-on approach, the company has managed to secure many orders and win themselves scores of major customer accounts that have led them to hire increasing number of staff to meet the increasing business operations demand. Upon transferring the technical knowledge and know-how, the owner/managers have gradually, taken a more relaxed approach in managing the whole business operations, and now focus more on long term strategic issues and new businesses. However, the company is now facing a situation where though the business has improved its top line, the operating costs have been escalating and that have an impact on the bottom line and that they were no longer profitability. As a result, despite the fact that the whole team are kept busy fulfilling ___________________________________________________________________________ 29

customers order, the company is no longer making money. One of the major contributions to the soaring operating costs was the identification of an inappropriate facility layout, i.e. motion wastage, which is too many and frequent unnecessary movements in the company, high raw materials wastage and inventory that warrant high overtime claims by the production workers. In fact, the company has also been hiring part-time operators to meet the hectic production demand, paradoxically. This results among others in an increasing trend in the company yearly write-off stocks and inventories.

3.7 Measures Undertaken To Improve Current Situations

In face of such situation, the management team deliberated and consequently engaged in cost cutting measures to curtail the increasing operational costs. Some of the initial cost-cutting measures undertaken was to cut back and held on the:

Production overtime claims; Utilities bill, i.e. no personal fans and hot flasks are allowed; Consumables for office automation, i.e. fax paper, printing paper, printing cartridge; Delivery vans are to be manually washed the by delivery driver themselves; and Customer deliveries of orders are cut down to only selective dates, i.e. Mondays, Wednesdays, and Fridays

Despite the measures taken, the company has not seen an improvement in the bottom line. Company morale however as a whole, have seen a dip and this largely contributed to the fact that management is pushing for production output (with reduced resources) regardless, and this impact on many errors due to lack communications from the different business functions, as everyone are busy coping with the reduced resources.

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CHAPTER 4 RESEARCH METHODOLOGY

4.1 Introduction to Chapter

This chapter discusses the motivation behind the case study research and this is elaborated in Section 4.2, preliminary research and the ground work carried out to facilitate the research are detailed in Section 4.3. Section 4.4 highlights the research approach and methodology adopted (including sources of primary data and sample size (Section 4.5), the method of collecting the data (Section 4.6), and techniques used to perform data analysis (Section 4.7, 4.8). It concludes with a summary of the disadvantage/advantage of qualitative research (Section 4.9) and end with some possible identifiable weakness inherent the research (Section 4.10) carried out.

Relevant data are collected from both primary sources through semi-structured interviews with staffs and managers as well as a overt observational method. The research method chosen was that of inducting theory using case studies (Eisenhardt, 1989). In this approach theory models are developed throughout the empirical study in a grounded approach (Glaser and Stauss, 1967) rather than using hypothesis testing. Thus, in this approach there is no need for a large number of cases to achieve validity, but rather the more in-depth study of a relatively small number of cases to observe what is happening (Remenyi et al., 1998, Burgoyne and Reynolds, 1998).

4.2 The Research Context

The case study research is an analysis of the operations managements of a small manufacturing enterprise and with the authors proposition that with the implementation of appropriate operations management philosophy and tools, the company concerned will be able improve its manufacturing performances, i.e. improved delivery lead time, work-inprogress, inventory, cost of production and manufacturing quality (scrap and rework), and enhanced productivity level and consequently achieved its strategic business objectives in a more efficient and effective manner. The purpose of this research focus is on a particular organization and behavior of persons and this suggest observations and conversations with the personnel at their own jobs, and in their own territory (Kirk and Miller, 1986). According to Gummesson, (1991) the general reason for doing case study research is to better understand ___________________________________________________________________________ 31

complex phenomena such as change processes, innumerable factors, and entangled interconnections between them. Consequently, this case study dissertation have been approached from an essentially practical standpoint, i.e. from perspective of adoption of the various management philosophies, i.e. Lean Manufacturing (LM), Just-in-Time (JIT), Total Quality Management (TQM) to gain a better understanding of the process improvements that can be achieved should the effective operations strategy are employed. The case study highlights importance of the management tools as a basis of not only a competitive edge, but also as prerequisite to sustain in the rapid dynamic business environment.

4.3 Preliminary Research

Preliminary research was conducted on the topic before starting the case study proper. This involved gaining basic insight in the production process of the organization concerned which was carried out by means of informal discussions and visits to the plant to understand further on the production process. As a core method of conducting such research, information gathering stage can be viewed as a preliminary investigation as identified by Emory and Cooper (1991). The source of the information are also derived from databases of academic journals which have been peer reviewed (read and critiqued by other academics) and that are not published until the reviewers and the journal editors are content that the articles represent sound research that will advances knowledge on the topic. In essence, preliminary research was carried out to investigate what studies have been done before, and what theories that might be appropriate for the study and the analysis required as such. The essential information searched was for conceptual articles as a basis for offering theoretical insights and empirical research, which facilitate better understanding in the research area.

4.4 Selected Research Methodology

A case study methodology have been selected and as suggested by Yin (1994), a case study is defined as an empirical inquiry that investigates a contemporary phenomenon within some real-life context and is particularly well suited to research areas as in the case of this case study dissertation (Eisenhardt, 1989). A case study methodology is undertaken with the material derived from plant visits and interviews with key personnel. It can therefore be concluded that a case study methodology is likely to be most appropriate as it uses empirical inquiry that investigates a contemporary phenomenon within some real-life context, Yin ___________________________________________________________________________ 32

(1994). Case study methodology is firmly rooted in the phenomenological paradigm (Easterby-Smith et al., 1991) and as suggested by Gummesson (1988) as having a long history within management studies. Justification for the adoption of the case study approach for this particular study lies in the nature of the subject area, and the set of interacting variables that influence innovation. It is congruent with Yins (1994) argument that such research, when requiring no control over behavioral events, should be carried out with case studies.

4.5 Primary Data and Sample Size

Primary data is the data that have not been collected for other purpose whereas secondary data is data that has been collected for some other purpose. The case study approach requires the use of primary data as the main source of data for analysis. The secondary data falls within the scope of the literature review. Access to information and authorization for the confidential data was gained via personal contact. The administrators who participated in the interviews held titles such of Sales Manager, Production Manager, Production Supervisor, Planner, Customer Service Executive and Production Operator. Interviews took place separately over a period of 2 weeks. This sample is considered suitable as it represent key process owner and those essentially involved within and part of the production workflow. Within the inevitable constraints of the availability of, and access to company personnel, the author needs to ensure that those interviewed represent a broad range of perspectives from and within the company. This allows richer source of data and validation of views at different levels and across different business functions. The site visits and interviews conducted during this phase provided insights into the production process and activities of the company concerned.

4.6 Data Collection Method

The data collection was based on a combination of primary resources, i.e. interviews and covert observational method (Patton, 1990). To ensure construct validity, it is a prerequisite to look for multiple sources of evidence for each of the important elements or variables in the propositions, using the important techniques of triangulation (Denzin, 1978; Jick, 1979; Fielding and Fielding, 1986). The semi-structured interviews were based on a series of open questions with the key personnel during office hours for the duration of estimate 2 hours each. And covert observational means was conducted during 2 of the occasions that production line was up and running. Essentially both data collection methods were conducted ___________________________________________________________________________ 33

on site, at one of the meeting rooms for the managers and at the main area of study, i.e. within the production department, for both the managers and staff.

4.6.1 Interviews

One research method employed in assessing primary data was a semi-structured interview with the key personnel of the company concerned. As Rogers and Bouey (1996) points out, that without a doubt, the most utilized data collection method in qualitative research studies is the interview. There are three types of interview namely, structured interviews, unstructured interview and semi-structured interview. Structured interview involved asking the same set of questions in the same order using the same word to different interviewees. Unstructured interview which is also an informal conversational interview do not have any predetermined set of questions while semi-structured interview which is also a guided interview falls between somewhere between structured and unstructured interviews in format where questions are developed to probe for further information or clarifications. There are a number of instances when researchers have used interviews as basis of their investigations, for example, Marucheck et al. (1990) who use an interview based approach in their empirical study. Anyone who has interviewed managers knows that highly structured interview formats and strict adherence to prepared questions may stand in the way of getting the best information. Ultimately, the interviewer must be guided by what the interviewee wants to talk about and yet must attempt to find ways to ensure the conversation eventually uncovers all of the pertinent data. The researcher thus must have the mental flexibility to alter interview or information-sourcing tactics as necessary (Stuart et al., 2002).

For this case study, semi-structured interviews have been chosen over the structured interview formats as strict adherence to prepared questions may stand in the way of getting the best information. However, the author has attempted to find ways to ensure the conversation eventually uncovers all of the pertinent data. This involves subtly steering the conversation towards the subject of interest and this require mental flexibility to alter interview or information-sourcing tactics as necessary (Stuart et al., 2002). The advantage of such interviews is that it allows the interviewer to probe and solicit depth responses, and thereby uncover previously hidden details and open up new lines of enquiry (Burgess, 1982). This is in line with Rubin and Rubin (1995) hypothesis that adjusting of the design as the process progresses is an expected part of the qualitative research process. As the interviewer learns ___________________________________________________________________________ 34

how the interviewees understand their world, interviewer may want to modify what is currently being studied and rethink the pattern of questioning. Such flexibility is much better than persisting in a design that is not working well or does not allow room to pursue unexpected insights. In carrying out the interviews, the author also conscientiously keep in mind Yins (1994) lists a set of necessary interviewing skills required, so as to achieve the desired outcome. They are namely:

To be able to ask good questions and interpret the answers To be a good listener and not be trapped by preconceptions To be adaptable and flexible, to see newly encountered situations as opportunities not threats To have a firm grasp of the issues being studied To be unbiased by pre-conceived notions, and thus receptive and sensitive to contradictory evidence

4.6.2 Direct Observations

The second source of primary data involved visits and tours of the production facility, particularly during the time that the production line was running as an onlooker/spectator (overt observation). This is to augment the onsite interviews and providing the opportunity for verification and clarifications of interviewees responses, as well as providing the author with a feel for the overall work environment and systems (Barnes, 2001). An observational method was identified as appropriate for the collection of empirical data that would emerge from the application of the process. Since the interviews have taken place, supplementary data can be gathered by observation. This can be valuable in two ways; firstly, it offers the possibility of substantiation of interview data through methodological triangulation. Second, it provides data on perspective, particularly internal contextual factors. It was considered inappropriate to tape-record the interviews sessions with the key personnel due to the confidentiality of the material being discussed, and thus the author took down hand-written notes.

4.7 Data Analysis

Unlike in quantitative research, data analysis in qualitative research can occur before the data collection process has been completed. In semi-structured interviews, data analysis is ___________________________________________________________________________ 35

concurrently being analyzed and this will lead to the next following questions being asked. This is as suggested by Coffey and Atkinson (1996) who states that one should never collect data without substantial analysis going on simultaneously. Letting data accumulate without preliminary analysis along the way is a recipe for unhappiness, if not total disaster. According to the works of Erlandson, Harris, Kipper and Allen (1993), in qualitative research, doing data analysis while collecting data is called the principle of interaction between data collection and analysis.

4.8 Triangulation

To ensure construct validity, multiple sources of evidence for each of the important elements or variables in the propositions are validated using the important techniques of triangulation (Denzin, 1978; Jick, 1979; Fielding and Fielding, 1986) have to be identified. The use of case study methodology involves use of multiple sources of data (Yin, 1994) to gain the fullest understanding and to improve validity through triangulation. These involve use of multiple respondents within the organization or multiple data collection methods (interviews, observation and etc.). Triangulation is defined as the use of the different data collection methods within one study that shows a similar pattern. As Gunasekaran (1992) states thatbecause almost all data-collection methods have some biases associated with them, collecting data through multimethods and from multisources lends rigor to research. The use of multiple sources of evidence for triangulation is advocated by many qualitative researchers (e.g. Silverman, 1993).

4.9 The Disadvantage/Advantage of Qualitative Research

Principal criticism in case study methodology as a qualitative research is that it lack of rigor. Typically, paper reports on a few interactions with field sites and then sums up the observations and impressions (Stuart et al., 2002). However, in the absence of case-based research, there would be a weak and limited understanding of the body of knowledge as a whole and conditions under which the theories are applicable. To counter this problem, Yin (1994) proposed a three-pronged solution that is using multiple sources of evidence, establishing a chain of evidence and having a draft case study reviewed by key informant. The second criticism is that case study research is often criticized as lacking external validity as it can usually only involve a small number of cases (Meredith, 1998). However Yin (1989) ___________________________________________________________________________ 36

suggested that case studies are particularly appropriate when the research question centers on why observed phenomena occur, when there is no control over behavioral events, and when the focus is on contemporary events. A review of the rigor in methodology shows that although all the methods have certain limitations, their degree of validity and reliability is such that, taken together, it should be possible to build a credible picture of the nature of innovation culture in entrepreneurial organizations. According to Denzin and Lincoln (1994), qualitative research can be defined as multi-method in focus, involving an interpretive naturalistic approach to its subject matter. Any research method inevitably has both merits and demerits, and there is unlikely to be one best way of approaching the task. As Silverman (1993) puts it, methodologies, like theories, cannot be true or false, only more or less useful.

4.10 Limitations of Research

Any research is not perfect and has limitations which are beyond the control of the research purposes. In choosing a methodology for conducting a case study, researchers must balance theoretical ambition with the practical constraints that are unavoidable when undertaking empirical research in real organizations. Thus, there is no one best way of conducting such a case study, rather than the method needs to be chosen to suit the specific circumstances of the research work (Barnes, 2001). In this case study, one method of collecting data is through direct observations. It is a known fact that observation is shaped by the observers prior experiences and background, including prior scientific training, culture and system of beliefs. A biased sample will surely affect the way that observations are interpreted, and will therefore also affect parameter estimation (Stuart et al., 2002). The other limitations is that the people being observed might behave differently when they know they are being observed and thus the data collated may not be a true phenomena of the actual self. Covert observations when collecting the data however, poses ethical issues as people must know that they are being observed. Another possible weakness of this research is that interviews with key personnel and process owner are held at and within the work area. Thus, it may be difficult for the interviewees to describe their genuine concern, i.e. it may be hard for the interviewees to describe their feelings in the very place that they operate. And also that very few people would willingly express their most private details, opinions and emotions in public domain knowing that their names would be conveniently and easily traced to origins, particularly in this case study research as everyone knows who is involved in the study, being a small company set up. ___________________________________________________________________________ 37

CHAPTER 5 FINDINGS AND DISCUSSIONS

5.1 Introduction to Chapter

The main objective of this case study is to investigate the applicability of operations management philosophies in the context of a small manufacturing enterprise to improve its existing manufacturing performance and achieve higher level of productivity. The findings and discussion extracts key arguments from literatures on operations management, operations strategy particularly in the context of a small and medium sized (SME) in the manufacturing sector. By combining these elements with insights from interviews with senior managers and staff, as well as direct observations undertaken of the company concerned, conceptual models to improve manufacturing performance and achieve excellent operational efficiency are developed for the company considerations.

Section 5.2 lists down the findings and discussions from existing measures undertaken to improve current situation and this is followed next, by an analysis of the production floor layout (Section 5.3), as well on the production department key activities (Section 5.4). Section 5.5 elaborates the need for significant improvements in the company business process to ensure operational efficiency and attain superior manufacturing performances. These are such as Lean Manufacturing (Section 5.6), JIT and TQM philosophy (Section 5.7). Section 5.8, on the other hand discusses change management issues, and these are followed by various factors that need to be considered to ensure successful implementation of change (Section 5.9). This chapter concludes with highlights of some barriers for implementations that the company concerned, as well as SME in general, will face in such conceptual framework executions.

5.2 Analysis of Existing Measures Undertaken to Improve Current Situations

Several measures have been taken to improve the current situations as described in Chapter 4. An analysis of each of the measures taken can be viewed as rather low-level operational, instead of strategic in nature and results in among others insignificant results. These are discussed in the next page:

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5.2.1 Curbing on Production Overtime

This measure taken has actually assists the company to reduce some costs but it has also affected the morale of the production team. The measures to curb on production overtimes will only back-fire the company operations. With the increase in sales and customer demand for earlier delivery, this will only contribute to production bottleneck.

5.2.2 Reduction in Utility Consumption

Personal use among others, thermo flasks, microwave oven and electric oven are discouraged and those caught will be served with a warning letter. This has caused many disgruntled employees and staff, due to them having enjoyed the privileges in the past. Some savings may results out of this but may not have much impact.

5.2.3 Limiting the Use of Office Consumables

Measures include keeping a log of many papers are being used for photocopying and taking records of the use of office stationeries. In fact, there is not much saving but has actually caused inconveniences to most staff in the company, in view of the very much documentbased nature of the company.

5.2.4 Prohibit The Use of External Services for Washing/Cleaning of Delivery Vehicles

Saving as results of the delivery van being washed by the drivers themselves are not significant enough. In fact, this may back-fired and hurt the morale of the staff involved.

5.2.5 Selective Dates for Deliveries of Customer Orders

For deliveries to be executed on Mondays, Wednesdays, and Fridays will means less invoices issued to customers even though the goods are ready to be delivered. From the interviews held with customer service executive, it was gathered that recently, there have been an increase in complains from customers due to late delivery. Thus, this measure has serious repercussions and it may lead to eventually lost of future orders.

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5.3 Analysis of the Production Floor Layout

In Singapore where the cost of having manufacturing plant involved high costs, having a good facilities layout management at the production floor is very important to achieve maximum utility and ensure excellence operational efficiency. From the study of the layout plan however, it can be seen that there are ample space allocated, particularly along the work area. During the observations sessions, it was gathered that this ample space was in fact, to facilitate the frequent movements of materials and information flow. Much utility have not been achieved as such. It is also observed that the location for finished goods is closely stacked along with the work-in-progress and this is a potential of error in of delivery, i.e. to also include delivery of the non-finished product. This have high repercussions warranting few visits to rectify the problems should it arises, i.e. fetching the wrong parts supplied and delivering the actual parts and this action may cause customers to lose faith in the company quality systems eventually.

Other findings which are a potential for improvements is the identification of a high dedicated area for work-in-progress which is not healthy as this is a non- productive and non- value added activity which will only impact in the company cash flow, i.e. cash are locked for non productive use. In addition, from the physical site, there are no safety guidelines and boundaries, i.e. machines are located in a non-systematic manner and waiting for accident to happen only.

Through information collated from interviews and confirmed with observations, it was gathered that there is no mechanism in the current systems of reinforcement for labeling and tagging on the boxes of finished goods. Completed goods are stacked along the walkway and only the production operators know what the content are and instruct the delivery person to boxes required for the days delivery, which he in turn will simply write down on the boxes using pen marker. No forms of quality check are in place as such. This is a potential cause for mistakes and the lack of accountability is very extraordinary.

5.4 Analysis and Findings of Production Department Key Activities

The company concerned has been under pressure due to a number of unexpected problems among others, increased in operating costs, high level of inventory and subsequently high ___________________________________________________________________________ 40

write-off, low productivity and company morale. This will naturally have an impact on the company expansion plans in view of the foreseen increase in demand. The constant attention paid by the management to fire fighting has made it difficult to make any significant impact to change as suggested by Hammer and Stanton (1995). High inventory will lead to a bullwhip effect as existing workstation operating independently that result in excessive inventories, poor customer service, stock outs, misguided capacity, and inefficient logistics. From the data collated, some of the findings issues from Production Department three main activities are such as:

5.4.1 Inadequate Communications and Interactions between Business Functions

There exists no feedback or updates and flow of information to the sales department upon order being successfully completed and delivered to customers. And together with little interactions and silo-oriented mentality among the business units, this results in inaccurate order fulfillment updates, late response to customer queries and loss of critical opportunities for post-sales follow-up.

5.4.2 Gaps in the Workflow Process

Upon having an order completed and delivered, no mechanism is currently in placed to ensure that copies of the Delivery Order (DO) are recorded and furnished to Finance department for billing. This in turn will lead to late billing and subsequently longer waiting period of receipt payments.

5.4.3 Inadequate Emphasis of Flow of Information

Another gap that was identified is the flow of information back to the customer service department from the production/ planning. Perhaps due to the planner carrying out the role of QC inspector as well, thus taking a considerable of work time, orders which are completed was overlooked and not communicated for delivery arrangements. This leads to late delivery resulting in unhappy and unsatisfied customers.

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5.4.4 Over Production

Due the lack of a mechanism for accountability, the production team has the propensity to run extra of rolls of labels to facilitate any defective parts. These extras rolls of label are neither recorded as stocks nor inventory and as a result, for subsequent orders of similar types, the planning and production department will not be able to retrieve these extras which lead them to being written off at the end of financial year, contributing to wastage.

5.4.5 High Level of Inventories

The supplies of raw materials, i.e. prior to conversion to labels, are currently procured both locally and from oversea vendors. The is done due to better pricing when purchases are made in bulk and also to cut down on administrative work, thus this results in inventories amounting to a couple of months worth are held in stock. Though these measures have allow the company to be flexible in meeting demands, it however tied up financial resources given that the raw materials turnaround time may be long at times, and also advance payment have been made upfront to suppliers while the end-customers are extended credit payment.

5.4.6 Lack of Order Prioritization

The production capacity and throughput is not linked to any key performance indicators (KPI) central of the sales department or financial performance of the company. Thus, production department, at their own liberty run productions based solely on whichever labels those are convenient to produce, i.e. standard or blank labels instead of those that require preprinted or slitting, oblivious to orders which commands better margin or demand immediate attention, i.e. fulfillment of orders to major corporate sales accounts.

5.4.7 Dedicated Personnel for Machine Set-up

With heavy investment made in machineries, the production manager has taken a deliberate decision to have only a selected few personnel, to be trained in changing the mechanisms for a new production set-up. Occasionally, this leads to longer waiting time for the next production set and running should the personnel are engaged, on leave or not available. On other instances, set-up time may take an average of about half a day, leading to over-times rate ___________________________________________________________________________ 42

being clocked in by the operators to meet the production throughput required. In reducing the set-up time, this will lead to a considerable reduction in non-value adding activities.

5.4.8 Lack of Manpower/ Labor Control

The productions are required to run on two shifts 0800hrs to 1730hrs and 1500hrs to 2300hrs, Monday to Saturday. From the throughput records, the level of output is exceptionally questionable during the second shifts and Saturdays, perhaps due to lack of control mechanisms, i.e. absence of supervisory role. Through high labor expenses are incurred, the expenditure in not compatible to the level of throughput. This is an area that is more worthwhile for the company to seriously look into.

5.4.9 Lack of Emphasis on Quality Check

There have been reported incidences of wrong raw materials being used and wrong side and size of slitting done for certain jobs. This results in an unnecessary spending in the operating costs and resources to correct the mistake. It was later learned that there is no dedicated QC inspector, and the planner will instead double-up as a QC personnel. Though, main responsibilities are also shared with the outgoing production member to ensure quality delivery, the second level of checks should also be in place.

5.4.10 Lack of Emphasis of Quality Starts with Me

Due to lack of emphasis of the importance of the sample requests, i.e. the labels required may not lead to eventual sales; samples are unable to be generated fast enough for potential customers testing. This result in lack of faith from the existing customer pool and lost of potential business opportunity from new prospects. As this request is for sample purposes only, the production team does not see the importance of having the samples done in good time so that the marketing team can meet the request from customers. Often, these results in order being lost to competition and at the worst case scenario, potential orders are lost totally.

The company work in such a setting that one department lack the common knowledge and understanding in each other work responsibility and target. There exists lack understanding ___________________________________________________________________________ 43

and appreciation of the needs of the other department, i.e. one department treats the other as a mere colleague and not an internal customer. To achieve success, it is of the paramount importance that there exists communication not only beyond the company boundary but also within the company, inter-departments and between fellow colleagues.

5.5

The Need for Significant Improvements in the Company Business Processes

The principal business process in determining overall success of fulfillment and subsequently customer satisfactions for the company lies in its production key activities, sales order fulfillment, manufacturing for both label production as well as for samples for new opportunities and sales prospect. This function forms the backbone of the entire business linkages in ensuring smooth and efficient delivery of product and service to its customers. Paradoxically, feedback gathered through interviews with the companys management team, identified major flaw inherent mainly in these areas and it necessitates significant improvement and a paradigm shift if the companys strategic objectives are to be met in a more effective and efficient manner, particularly in the view of the company impending expansion plans.

Customers experiences are determined by a companys sales order management cycle. The company need to improve the sales order management cycle to allow the company reap benefits such as an improved customer satisfaction, i.e. fill orders faster, become more accurate and generally keeps their promises to the customers, reduction in interdepartmental problems, i.e. these results in an absence of stonewalling functional activities and in place instead, a systemic view of the entire business process and last but not the least, improved financial performance, i.e. typically, companies throw money at their problems; building excess capacities, adding inventory, of increasing headcount, all of which are expensive and none of which solve the real problem

Among others, the proposal for the need in significant improvements in the company business process will require adoption of TQM philosophy, among others, where each department must treat each other as customer. This will create a more cohesive organization culture and form a sense of belonging. In addition, it was also gathered that presently there exists no form of performance indicator for the production team. Thus the gist of the proposal will also include a portion for production target and a less hands-on management to allow them to focus on ___________________________________________________________________________ 44

more strategic issues. The areas for recommended changes will allow the company concerned meet its strategic objectives of streamlining and fine-tuning its business workflow and processes, and most importantly, improved interactions and flow of communications among the business units and achieving the goals set in a more effective and efficient manner. Among the major tenets of operations management principles that can be adopted by the company to reap the benefits that is expected upon the change, may include the following recommendations:

Lean Manufacturing; Just in Time; and Total Quality Management.

5.6 Concept of Lean Manufacturing Principles

Lean manufacturing is aimed at the elimination of waste in every area of production. Its goal is to incorporate less inventory, less time to develop products, and less space to become highly responsive to customer demand while producing top quality products in the most efficient and economical manner possible. The core thrust of lean production is that these practices can work synergistically to create a streamlined, high quality system that produces finished products at the pace of customer demand with little or no waste. The building blocks of Lean Manufacturing are:

5.6.1 Quick Changeover

Developing a production system that manufactures only what the customer wants and when the customer wants it. And this will involve training more staff to allow flexibility for the set up of the die-cutting tool in a faster possible way.

5.6.2 Pull Kanban Manufacturing systems

This mode of manufacturing acts as a signal for replenishment materials instead of the conventional push system which do not take a systemic view. At the moment, each workstation for example, the slitting workstation will carry on producing regardless the fact at times the next workstation, i.e. rolling of the labels, which are done manually by the ___________________________________________________________________________ 45

operators, are having high volumes. These can be improved in line with the lean manufacturing way of beliefs.

5.6.3 Workplace Organization - 5S

Long process routes as in this case, will only provide opportunities for inventory build up, add no value to the product and slow down the throughput time. A 5Ss exercise to provide every part a specified location that would help makes the other improvements more likely to be successful. Suggestions will be, to put workstations in sight of each other, thus promoting smooth flow of materials, information and people. That is to say, the production floor layout will also need to be redesign to minimize as possible unnecessary long movement route.

5.6.4 Value Stream Analysis

The order fulfillment process links a customer to the operational resources of a firm. Thus, understanding the business workflow process is critical to identify gaps and loopholes that may serious implications to the otherwise smooth operations. The application of process analysis can help the company concerned identify bottleneck operations. Consequently, the company needs to seriously look into gaps in the current chain activities, i.e. returning of delivery note, and following up on the invoicing and etc to understand better the flow so as to achieve operational efficiency.

5.6.5 Total Productive Maintenance

This will involve initiatives to optimize the effectiveness of the company manufacturing systems to make production systems more profitable and efficient. Thus, total preventive maintenance (TPM) could be put in place on the label production and slitting machines to prevent unexpected breakdowns that may have serious implications.

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5.7 JIT and TQM Manufacturing Philosophy

Based on the literature review, a conceptual model, an adaptation from Gunasekaran (1999) for improving the effectiveness and efficiency for the business operations, particularly in the context of JIT and TQM are also proposed as in the following diagram. Refer to diagram below. A Conceptual Model for Improving the Efficiency of Production Activities

JIT
Demand pull, minimal economic quantity, reduce WIP, supplier reliability, preventive maintenance, and eliminate buffers

Reduction in lead time and through put time

TQM

Improving Production Activities

Long-term commitment, war in waste, continuous improvement, TQC, continuous training, and ergonomics

On time delivery, improved effectiveness and improved quality

Source: Adaptation from A. Gunasekaran H.B Marri and F. Menci

5.6.1 Implementation of Just-in-Time (JIT) Manufacturing Philosophy

Figure 11 A Conceptual Model for Improving the Efficiency of Production Activities

5.7.1 Implementation of Just In Time (JIT) Manufacturing Philosophy

Just-in-time (JIT) is a manufacturing philosophy that requires flexible resources, a lean structure and Kanban production, and act as method of operation planning and control. JIT emphasizes achieving excellence through the principles of continuous improvement, the involvement of staff in the operation, and waste reduction. It also advocates the identification and prevention of non-value added activities. In SMEs in particular, it is essential to make some long-term changes such as redesigning a plant layout which may reduce non-value adding activities and simplify the control of material flows within the production system. Some of the wastes identified in this case study are such as over production, high level of inventory wastage, frequent movement of materials around the plant, inappropriate facility ___________________________________________________________________________ 47

layout, among others. Essentially, waste is defined as any activity which does not add value and thus identifying waste is the first step towards eliminating it. In order to avoid further wastage due to over production and high inventory, the current systems in place have to be redesign to one which will be the requirement of monthly sales forecast input from the sales department to be issued to production team. This will greatly reduce the excesses of old stock due to the poor planning system which is due to poor inventory control and forecasting.

5.7.2 Implementation of Total Quality Management (TQM) Manufacturing Philosophy

Total quality management (TQM) is considered an important quality improvement tool in both manufacturing and service organizations. One of the most powerful aspects to emerge from TQM is the concept of the internal customer and supplier. This is recognition that everyone is a customer within the organization and consumes goods and services by other internal suppliers; the implication of this is that errors in the service provided within an organization will eventually affect the product and service. TQM is sometimes referred to as quality at source. For an organization to be truly effective, every single part of it, each department, each activity and each person and each level must work properly together because every persons and every activity affects and in turn is affected by others as proposed by Oakland (1993). TQM is strategically linked to the business and particularly in the SME environment, there exists a much closer proximity to the customer (Barrier, 1994). This proximity is coupled with larger number of SME employees having direct customer contact and knowledge (Hale and Cragg, 1996). Thus reducing the incidents of mistakes during the contact, i.e. deliveries of orders, will assist in improving the business operations.

These identified proposed areas have tremendous effect on the overall business operations. The unnecessary high level of inventories, the lack emphasis on quality and control mechanisms for both the operating and labor cost has an impact subsequently on the company cash flow. Accordingly, a more responsive, agile and efficient business operation will be required to ensure that the company meets is strategic business objectives in a more efficient and effective manner. In summing up, the importance of planning and control typical in any service and manufacturing operations cannot be dispute. Planning and control have company wide impacts as it involves other functions providing vital inputs to the planning process. Better control of operations will allow for examples, identification of bottlenecks process and

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clarify in the entire business processes and workflow, subsequently improving the overall business process.

5.8 Changes Management Issues for Implementing of Manufacturing Philosophies

The essence of making a change will entail thorough understanding and deep appreciation of the current workflow process to encourage more support. The adoption of manufacturing philosophies is often associated with a drastic change from an organization silo-oriented mentality to one that is more integrative with a focus of involvement from everyone. A successful reorganization requires not only a modification of the equipment layout of the factory floor, but significant cultural and organizational changes as well (Majchrzak and Wang 1996; Hyer and Wemmer, 2002). For example, an area that has been identified for an improvement is existing facility layout which needs to be redesign to encourage better communications between the business functions. In addition, as in any manufacturing facility, short distances between next departments and easy access to supporting tools and supplies are crucial to a continuous and efficient workflow. Proximity, which is essentially involve in the placement of each department or production process relative to all the rest, as well as the accessibility of the tools and supplies at their greatest point of need is of great importance for a more conducive and friendly work environment. Proximity relates to each department or function being properly aligned with the next. Good proximity between related departments will save time, reduce the number of physical steps needed to progress the job from one point to the next, and increases the time spent by employees at their workstations actually doing the productive work needed. One of the reasons for the fluctuations in output was that each operation in the chain reacted to the orders placed by its immediate customers. None of the operations had an overview of what was happening, throughout the chain. If information has been available and shared throughout the chain, it is unlikely that such wild fluctuations would have occurred. It is necessary to recognize that organizational changes which challenge or undermine the cultural status quo can, if managed badly, have severe repercussions. It has been argued that one of the key methods of avoiding this is to involve those affected in assessing the need for, and implementing the change required. In general, the success of implementation of any particular change management practices frequently depends upon organizational characteristic, and not all organizations can or should implement the same set of practices (Galbraith, 1977). ___________________________________________________________________________ 49

5.9

An Outline of Implementation of Change

In order for change to be effective, the company should form a steering team to draw up a plan which may include the timescales and responsibility of those involved. As this is a company-wide project and have an impact on everyone, a project champion which is by and large, one of the executives in the management need to be identified and informed to all staff, to champion the cause for change and to seek for their cooperation. Many empirical studies on organization change show, that a prerequisite for the success of a change project is the existence of a change champion, a member of the organization, who acts enthusiastically to have the idea implemented (Moss Kanter, 1983; Howell and Higgins, 1990; Smeds, 1994). Additionally, this will help to foster trust and understanding from the lower level staff, knowing that the top management is serious and not only doing lip service. The management steering committee also need to solicit for opinions and feedback from key personnel and process owners, to understand their constraints if any, and the impact of the intended change on their daily job and routines, to anticipate level of participation. Valid concerns need to be addressed and rectified to ensure better involvement by all. When all the relevant individuals, who are engaged in an operational process participate in its redesign, resistance to change can be avoided to a great extent (Cotton et al., 1988). Participation is one main principle that can be used to create temporary parallel hologram structures for change. When all the relevant individuals, who are engaged in an operational process, can participate in its redesign from the beginning, the jointly developed solutions are likely to be better both in productivity and work satisfaction, and resistance to change can be avoided to a great extent (Cotton, Volrath and Frogatt, 1988). Employees and personnel involved may point out production steps that the management never knew existed. Change management will be more successful if the management involve and share the information in planning the new and improved shop layout. Information sharing also empowers the employees and fosters organizational transparencies which are crucial if the employees are to have long tenures in the organization (S. Ahmad, 2003). During the whole change process, top management support is vital. Empirical studies found condition for the success is top management support. Upon implementation of the new systems and mechanism, the steering team along continued managements support should at periodic basis monitor the progress and for further areas of improvements, as nothing is set in stone and continuous improvement should be entrenched in everyones philosophy and beliefs, particularly of the companys. The emphasis needs to be ___________________________________________________________________________ 50

on continuous improvement and adoption of current best practices to improve the manufacturing performance, in view of the dynamic business environment.

5.10 Obstacles in the Implementation of Change

As highlighted by AbdulNour et al. (1998), the implementation obstacles commonly faced by SME is that such as, inadequate material and human resources, high labour turnover, lack of bargaining power over supplier which will render implementations futile if counter measures are not taken. In addition, leaders and managers in SMEs often lack the expertise and training that is necessary to assimilate and apply complex models and methodologies (Yeb-Yun Lin, 1999), and also having little available spare time (Hale and Cragg, 1996). This lack of expertise and available time can result in implementation of rhetoric rather than the substance of the philosophical theory. More detailed identifications and discussions of the various factors that will inhibit the implementation of the selected manufacturing philosophy include, but not limited to the following:

5.10.1 Lack of Bargaining Power with Suppliers

Being an SME with little bargaining power may put the company at a disadvantage when negotiating for better pricing and buying at low volume of the raw materials for facilitate the JIT philosophy. One way to overcome this will be to require from the sales personnel to issue out a forecast based on the volume of sales anticipated so that the Planning is able to commit a blanket order for a six months order and have the supplier to deliver in part and bill as and when goods are delivered, instead of order for just one production run.

5.10.2 Lack of Bargaining Power with Customers

A small or medium-sized firm, with a narrow but unique contribution to a large technological system, can provide considerable value-added to the total system. In essence however, large enterprises that are the main source revenue for the SME have more power and control, and thus dictate the terms and conditions of sales.

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5.10.3 Lack of Expertise in Simplifying Facility Design

Managers and leaders in the context of SME set-up often lack knowledge and information on the various available management philosophy and tools that they can adopt to better improve their business operations as well in their pursuits of superior operational efficiency. Due to lack of time and resources, many are also unable to attend short courses and/or seminars, and etcetera, to gain knowledge and increase their appreciation of the various business and management tools.

5.10.4 Limited Resources and Funds in Conducting Training

In this case study, availability of skilled personnel in the production area to facilitate crosstraining is limited. This is might be due to constraints in the budget for more skilled workforce as well an additional headcounts to perform separate roles as a trainer. For example, from the case study, it was highlighted that one staff have to double up for another role as well, i.e. as in the case of the Planning Executive being the QC as well.

5.10.5 Human Resources Issues

Advocating management changes require the involvement of everyone in the organization to make it happen as well as the top managements support. In addition to that, management should be conscientious in facilitating an environment where empowerment in decisionmaking is possible and are encouraged. This will lead to an increase to both the level of motivation as well as the morale of staff.

5.10.6 The Need for Mindset Change

The organization need to reinforce the principle need for a mindset change. For example, the notion of responsibility lies in me will require repeated reinforcements to all staff at all levels so as to ensure quality output, at each every process, each and every time.

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5.10.7 Declining Support for Continuous Improvement

Changes and improvement should be a continuous affair and the company needs to have the strength and stamina in check, so as to ensure continuous improvement and its innate philosophy and beliefs to be successfully ingrained in the company-wide culture.

Some of the factors highlighted and discussed can be summed up as being equally applicable to the larger enterprises as well. Thus in essence, small companies face a familiar set of challenges similar to that of their larger counterpart, when considering new manufacturing options and implementations, i.e. limited financial resources and management skills required for successful implementations (Walters et al., 2004), and overcoming resistance to change at the various levels within the workforce (Macri et al., 2002), perhaps to a slightly greater extent, vis--vis its larger counterparts.

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CHAPTER 6 CONCLUSIONS

6.1 Introduction to Chapter

This chapter summarizes the works and findings of the case study dissertation (Section 6.2) and concludes with recommendations for further research (Section 6.3).

6.2 Conclusions from Findings

Heightened challenges from competition have prompted many organizations to adopt new manufacturing approaches (Hall, 1987; Meredith and McTavish, 1992) and although large companies appear to exploit operations management tools, small companies have increasingly joined the bandwagon of utilizing such tools. The increasing recognition of operations management as a vital element in the corporate strategic planning has been well documented by renowned operations management scholars. Among others, Skinner (1969); Hayes et al. (1988); Malhotra et al. (1994); Swink and Way (1995); Boyer and Lewis (2002), have all suggested the significance of operational efficiency as a source of strategic weapon. In current rapidly dynamic business environment, to survive and ensure continued business existence, organizations are expected to deliver more with less, i.e. achieve higher level of productivity but with fewer and leaner resources. This is in face of fierce market competitions and it is a well-accepted fact that efficient management of business operations and strategies are as indispensable as effective corporate strategic planning, and that it play a vital role in any organizations. Many academic literatures have associate best practices and/or world class manufacturing (WCM) philosophies, innate of operations management and strategy, with large enterprises. Nevertheless the importance of operational efficiency is relevant for both large and small enterprises alike. Small enterprise or small and medium sized enterprises (SMEs) play a significant role in any economies in providing employment opportunities and supporting the operations of large enterprises. The research presented in this case study has investigated the appropriateness of the operations management (OM) principles in the context of an SME. OM philosophies such as those of Lean Manufacturing (LM), Just-in-Time (JIT), Total Quality Management (TQM) are recommended with factors of considerations for the successful implementations.

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Utilizing data from a field study as well as literatures on operations management and operations strategy, particularly in the context of SME, this research explored the applicability operations strategies and its tool within the premise of a small and medium-sized enterprise. Understanding the importance of SMEs and their need to be competitiveness, this case study highlights several productivity and quality improvement strategies measures in which SMEs can utilize in order to compete effectively in the competitive markets. Although most of the manufacturing principles were developed through research into large multinational companies, they are not restricted to them. Indeed, some principles are perhaps even more important for the small and medium-sized firms because of the nature of its business operations that support the operations of large enterprise. A small or medium-sized firm, with a narrow but unique contribution to a large technological system, can provide considerable value-added to the total system.

In this study, an analysis was made of the existing systems in place for the company concerned. First, an identification of the key processes is highlighted, i.e. sales order fulfillment, manufacturing of labels and samples labels. During the analysis of the production activities, quality as well productivity problems was highlighted. An improvement measures that the company can undertake to overcome the current limitations of existing measures are proposed. It can be noted that the problems observed are not only strategic, but also operational in nature. Some of the change management issues that will require equal

considerations from the company concerned are discussed and implementation obstacles are highlighted. The experience with the company concerned can be used to demonstrate that manufacturing concepts and technologies typically associated with large companies such as JIT/Kanban, Lean Manufacturing and Total Quality Management can also be applied to a small enterprise to improve its manufacturing performance and increase its productivity and quality standards.

This paper concludes with the view that management tools inherent in operations management and strategy discipline are also by and large, applicable in the context of a small and medium-sized enterprise as well. In adopting the manufacturing philosophy, small companies face a common set of challenges when considering new manufacturing options, i.e. limited financial resources and management skills required for implementation (Walters et al., 2004) and overcoming resistance to change at various levels within the workforce (Macri et

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al., 2002) perhaps, to a greater extent than its larger counterpart. It is nevertheless a laudable effort in implementing such mechanism to reap the innate benefits.

6.3 Recommendations for Further Research

The case study research presented was able to demonstrate the relevance of operations management as a management tool for a small manufacturing company in Singapore and the immense payback instinctive of such implementations. The secondary objective of this case study dissertation can also take form of in an attempt to analyze a current business setting in the context of a small manufacturing enterprise and to offer the lessons learned and implications native in this case to other operations management implementations of other SME in a similar set-up. Thus, a potential future research purpose may entailed among others, a field case study investigation and replicate the current study in other manufacturing small and medium size enterprise. It would be interesting to compare the findings and draw insights from.

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APPENDICES

APPENDIX A

Profile of Company Administrators Participating In the Case Study Research

The following are the list of interviewees with a brief profile of each of the individuals that have participated in this case study research. Within the inevitable constraints of the availability of, and access to the company, which have an overall company staff strength of 20, the author has ensured that those interviewed represent a broad range of perspectives from and within the company.

1. Production Manager Sex/Age: Male, 48 years old Qualifications: GCE O Level Length of Service: 6 years Professional Experience: 10 years Industry Experience: 20 years

2. Production Supervisor Sex/Age: Male, 30 years old Qualifications: Cert. in Production Length of Service: 2 years Professional Experience: 4 years Industry Experience: 10 years

3. Sales Manager Sex/Age: Male, 44 years old Qualifications: Diploma in IT Length of Service: 6 years Professional Experience: 6 years Industry Experience: 20 years

4. Production Operator Sex/Age: Female 34 years old Qualifications: Primary Education Length of Service: 3 years Professional Experience: NA Industry Experience: NA

5. Customer Service Executive Sex/Age: Female, 25 years old Qualifications: Secondary Education Length of Service: 1 year Professional Experience: 4 years Industry Experience: 4 years

6. Planner Sex/Age: Male, 35 years old Qualifications: GCE O Level Length of Service: 2 years Professional Experience: 2 years Industry Experience: 10 years

APPENDIX B

Structure of Interviews and the Typical Questions Inquired in Collating Data and Information for the Case Study Research

The semi-structured interviews were based on a series of open questions with key personnel and business process owners during office hours for the duration of an estimate of 2 hours each and took place separately over a period of 2 weeks.

a. Structure of Interviews The structure of interviews generally took place according to the following sequence of events:

Introductions and Formalities State Objectives of Study State the Aim and Purpose of the Interview Assure Confidentiality of Information/Data Proceed with Interview End the Interview Thank the Participant

b. Typical Questions Posed to Administrators Participating in the Interviews Listed below are the typical questions posed to the administrators of the company under study, during the semi-structured interview to collate data/materials for the case study research:

Duration of service employment with the organization. Describe the current role they play in the organization. Explain the work flow process which they are directly involved with in their existing roles and responsibilities. Any secondary role and responsibilities? Was training provided to execute both the primary and secondary (if any) roles and responsibilities?

And was the training provided by locally, i.e. within the company or from external source provider? State the other personnel and/or department most frequently in contact with during their course of work In what mode is the communication? Forms, email, verbal, in-tray, etc. What are the current loop holes in the current process which they are a part of, which they experienced in their course of work? Do they think it can be better improved? Any suggestions? What are the commonly-made errors in their current work processing activities? What will be the impact of such errors? And any corrective actions needed? Have they been any negative feedback/complaint about the current process, perhaps involving the input from external customer or within the organization? What are the highlights of their current responsibilities? How are achievements being awarded? Individually, as teams or groups? The downside of current responsibilities. If any, why and anything being done? How are failures/disappointments being handled both by the team and management? What is the level of communication comfort with the immediate superiors? How do they perceive the management and its team? Approachable, distant, etc. In their own words, what is the culture like for the organization for them? Do they think that a change is needed in current systems and mode of operations? Do they as an individual welcome change? Yes/No and why? Should there be plans in the future for a change, will they support it? And will they be interested to be part of the change team?

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