Wastage at Salisad Company
Question:
Discuss about the Benefit of Lean Operation for the Organization.
The main goal of organizations is to make profit and the management team does formulate to make sure that their limited resources are effectively used. Lean management is a new concept that is being incorporated in operation to make sure that the organizations meet their full potential.
According to Swink, Melnyk, Cooper and Hartley 2011, lean management refers to streamlining operations to eliminate wastes and make sure effectiveness. There are seven types of wastes that hinder organizations from achieving their full potential which are transport, overproduction, over processing, defects, motion and inventory.
Salisad is a company that deals with the manufacture of fertilizer. The company is located in Central Tilba, Australia and has been in operation for 4 years. The management has faced challenges with respect to ensuring their operations are efficient to meet their customers’ orders.
One of the most prominent wastes is inventory, the company has a lot of raw materials in their warehouse lying idle waiting for the manufacturing department to place their order. Having extra raw materials is beneficial to the company since it ensures that they will not halt their production due to lack of resources. Despite this fact, the cons of having a large inventory supersede the benefits that the company accrues from having it.
The finances that are invested in purchasing extra raw materials and security measures for the warehouse could have been channelled into other core operations. Inventory is more of a menace for organization since it does need the company to build a large warehouse that can hold the raw materials and the excess fertilizer. According to Lysson and Farrington 2012, large inventory is an indication of poor planning by the management.
verproduction is the second problem that is facing the company. The company tends to produce more fertilizer anticipating that he marketing done will increase the demand for fertilizer. The marketing done by the organization has helped to increase the demand and their sales but this is not enough. Each fiscal year the company has extra fertilizer that was not purchased in their warehouse.
In 2016, the company had to halt their production for 6 months to make sure that the stock that they had been completely sold. The step taken by the management had a negative impact on the image of the company. The sales of the company during the period decreased tremendously forcing the company to cut the sales of their fertilizer to make sure that they got rid of the stock they had.
The third form of wastage that the company experiences does manifest itself in form of transportation. Transportation in the company takes place often because the warehouse is far from the company. The warehouse is closer to the town to allow the farmers who place their orders in the company to have easy access to the fertilizer. The company when deciding to relocate the warehouse closer to the customer it was considering ensuring that customer satisfaction was guaranteed. The opportunity cost for the company was to make sure that the customers were able to get their orders on time while sacrificing ease of production.
The company therefore does incur additional cost in transporting raw materials to the manufacturing point. After manufacturing, the fertilizer still has to be transported back to the warehouse for the customers to buy them. This aspect does result in the wastage of resources by Salisad Company.
Solutions through Lean Management
The fourth wastage does manifest itself in motion. Motion refers to movement within the company from one place to another (Lean Manufacturing Tools, 2017). The structure of the offices in the company does make it hard for the employees to resist from moving from one place to another. In addition, common resources like printers, photocopying machines and kitchen are at distinctive places making it difficult for employees to resist moving. The movement from one place to another does waste time that the employees could have used in doing constructive business work.
The fifth type of waste is defects that do manifest itself in the form of poor fertilizer developed when the wrong measures are mixed in the production of fertilizer. Fertilizer requires distinctive ratios to ensure that the will support plant growth when they are used in planting. The use of wrong ratios or components often results in defective fertilizer that does impact negatively the farmers produce.
At times the internal quality inspector does detect the mishap before the fertilizers are taken to the customers but at other times the company has to do damage control. The damage control often involves refunding the customers their money or providing them with new fertilizer delivered to their farms directly. In other words, the aspect does not only affect the reputation of the company but also causes them to lose finances in damage management.
The sixth waste deals with over processing which is a minimal problem in the company. The over processing is easy to manage since the Salisad Company has employed modern machinery that ensures that the fertilizers are processed within the set time. The machinery reduces the chance of over processing the fertilizer which may weaken its effective during planting.
Waiting is the last type of waste and it does affect the company on a dismal process. The company has excess stock of fertilizer which ensures that they are able to meet the demand of their customers. In addition, they rarely run out of raw materials since they have their warehouse stocked with raw materials required in the production of fertilizer.
After discussing the problems that Salisad Company is dealing with it is important to focus on the solution which involves the application of lean management. As discussed in the introduction lean management does introduce efficiency and effectiveness in the operations of any organization. Lean management has five principles which are elimination of waste, continuous improvement, human value, just in time, quality, and levelled production (Lean-manufacturing-junction.com., 2017)
The waste discussed in the paper can easily be eliminated through the introduction of just in time (JIT) concepts. JIT in the case of Salisad Company does focus on delivering the raw materials and the produced fertilizer when and where the manufacturing department needs it. It does work by the pull concept which evolves the customer stimulating the supply chain process. The customers place their orders and the company does take the requests and order raw materials to produce the fertilizer required by the customers (Just-In-Time., 2017).
The principle will make sure that the company reduces their waste in form of inventory. The resources invested in inventory can be used to strengthen the operations of the company. Furthermore, it also reduces wastes of over production and over processing since the manufacturing department gets a specified amount of raw materials (Just-In-Time., 2017). The materials are calculated to ensure that they are able to meet the needs of the end customer.
Just in Time (JIT) and Customer Supply Chain Process
The second principle deals with levelling production where the production work is constant . The company can achieve this through creating a seamless distribution network with their suppliers and wholesalers. This will make sure that once fertilizer production is completed within the company it is delivered on time to the end customer. Additionally, the company needs to introduce an enterprise resource planning software (ERP) that will coordinate the communication within the company. The ERP system does synchronize communication allowing the departments to have access to common information (Arnheiter and Maleyeff, 2005)
The software will enable the sales and marketing department to communicate the number of customer orders. The manufacturing department will use the information to calculate the raw materials required to meet this demand. The information will be communicated to the procurement and logistics department who will source for the suitable suppliers and deliver the materials to the company. The last step is the finance department stepping in to pay the suppliers.
The manufacturing of fertilizers is a continuous process that requires constant improvement to ensure that the technology the company is using is up to date. Continuous improvement ensures that the company is able to detect any deviation from the principles set in place and apply corrective actions on time. Continuous improvement through research will make sure that the company improves its production. Better production will then lead to an increase in the sales of the company in the long run (Arnheiter and Maleyeff, 2005).
Furthermore, the company should focus on training their staff on the improved ways of managing various processes within the company. It is achievable through encouraging employees to attend regular seminars held by the company or professional bodies in the state. The seminars not only provide the employees with a chance to broaden their knowledge but also to network hence building useful contacts for the company (Radnor, Walley, Stephens, and Bucci, 2006).
Additionally, the management should introduce performance review process in the company. The performance reviews will aid the company in setting sound objectives with respect to their goals. The performance reviews will clearly highlight areas that require attention to make sure that the employees and the management team are all working towards achieving the goals of the company. In addition, it will ensure that the reward system employed in Salisad Company is fair and free from any prejudice (Radnor et al, 2006).
Despite the fact that the organization wants to streamline its operations value for humanity comes into play to regulate how they carry out the process. Value for humanity revolves around ensuring that the employees get a fair wage, suitable working conditions, and policy instituted to ensure fair treatment at the place of work.
Employees are vital in ensuring the internal processes of the organization are effective. When employees are fairly treated then they are willing to work to improve not only themselves but also the company. Salisad Company deals with the manufacture of fertilizer, they have to make sure that they clean their toxic waste before releasing it to the environment. The aspect will ensure that they safeguard the health and the livelihood of the poor living near the company (Radnor et al, 2006).
The company also has a social obligation to ensure that they engage in various activities to better the way of life of the people around them. They can provide them with internship opportunities, employment, assist in building hospitals and schools among other activities.
The last concept in lean management deals with quality improvement. Quality has to be built-in to the processes of the company with respect to the industry standards. Salisad Company already has an internal quality manager who does ensure that the fertilizer manufactured meets the set industry standards. In spite of this the company is still lacking in the aspect of quality management. The company needs to carry out an overhaul of their system to institute modern technological system that will enable them to detect defects in production before they occur (Goetsch and Davis, 2014). The detection of the defect in the ratios being used or component will reduce the losses the company has incurred in production of poor fertilizer. Additionally, it will also improve the efficiency of the company in meeting their customers’ deadliness.
Furthermore, Salisad Company needs to invest in benchmarking process. Benchmarking refers to comparing the operations of the company with other industry leaders and adopting the best practices to enable the company improve in its operations (Goetsch and Davis, 2014). Salisad Company has not been in the industry for long they have a lot to learn from the industry best performers. An external institution can carry out the benchmarking to eliminate any biasness.
In conclusion, based on the discussions in the paper the importance of lean management to Salisad cannot be down played. The implementation of the suggested lean principles will enable the company to eliminate any hurdles that have hindered its progress. In addition, it will enable the company to effectively use their limited resources to meet their business objectives.
References
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