Case study: Continuous Improvement. Precision Engineering Works Private Limited (PEW)
CONTINUOUS IMPROVEMENT CASE STUDY ANALYSIS ASSESSMENT Precision Engineering Works Private Limited (PEW)
Continuous improvement refers to an ongoing effort for the improvement of the organizational products, services and the pertaining process. These ongoing efforts may be either pertaining to the sudden breakthrough improvement or momentary incremental improvement. The constant evaluation and monitoring of the processes are the core factors for the continuous improvement in terms of the flexibility, effectiveness and efficiency. The Precision Engineering Works Private Limited (PEW) is an original equipment manufacturer for the telecommunication industry in Australia that has almost 30 years of heritage since its inception in the then monopolistic market. Recently PEW is suffering from the intense competition and employee retention that is affecting the company to win new contracts. This assignment intends to identify the root causes of the problem using the right set of tools and techniques, formulate a continuous improvement plan for PEW and competencies with respect to business and strategic management, technical management and leadership.
2.1. Identification of the root cause (s) of the problem:
2.1.1. Choice and correct application of tools and techniques:
PEW senior management needs to consider seven best tools for the identification of the root cause of the problems that has been bothering the company and cost 45% of profitability in the current year as described below.
The 5S process will be very helpful for the implementation in PEW for the employee engagement as it is dedicated to making the employees in the organization more effective and efficient in the work. The 5S tool mainly deals with the five principles that let the Precision Engineering Works focus on the improvement of the products and services in Australian telecommunication industry. The 5Ss include sorting, straighten, shine, standardize and sustain.
Figure 4: Application of 5S in PEW
(Source: Azizi, 2015)
The 5 Whys:
The 5 whys technique is the simplest technique for the identification of the root causes of the problems in PEW that has been bothering the company in terms of profitability and employee engagement in Australian original equipment manufacturing industry. The 5 whys technique in PEW will be deployed as the team wants to find it and resolve it through the root cause identification. In PEW, this seems to the creation of the problem statement and asking why until the root cause of the problem is found.
Pareto analysis is a very useful technique for the identification of the root causes of the problems in PEW that have degraded the company’s profitability by 45%. The Pareto analysis regards to the involvement of various possible root causes and their impact on the company’s losing profitability and weak employee engagement. The Pareto analysis is based on the Pareto principle of 80/20 rule that states that 80% of the problems in PEW are sourced from 20% of the causes. The PEW senior management can apply the Pareto analysis and Pareto chart for the further identification of the root causes and formulation of proper action strategy with the integration with fault tree analysis and fish bone structure (Jurburg et al. 2015).
Figure 5: PEW employee retention problem Pareto analysis
(Source: Dessinger & Moseley, 2015)
Cause and effect analysis:
The cause and effect analysis refers to a quality control tool that regards to creation of a diagram for the identification of the root causes behind the employee retention issue and PEW profitability issue. It also refers to a step by step by process starting from the identification of the problem in PEW. In the second step, the company senior management is expected to find the major factors that are related to the employee engagement and company profitability, whereas in the third step, the senior management of the company needs to identify the possible causes depending on the analysis of the factors already identified in the second through brainstorming. In the last step, the management can consider analyzing the diagram for further investigation.
Figure 6: Cause and Effect analysis of PEW
(Source: Indrawati & Ridwansyah, 2015)
The histogram refers to an accurate representation of the numerical data representation for the estimation of the probability distribution of quantitative continuous variable. The histogram method can be a better and perfect tool for the identification of the root causes and the look for better alternatives in PEW market solution as it completely relies on the quantitative data for analysis. As the reliance on the quantitative data, the probability of the right resolution for the problems raised in the company is expected to be right from various perspectives. Due to the added display of the central tendency measures, data variations and shape and underlying distribution of the data and the skewness, the company can adopt proper set of strategies for the problem identification and resolution (Johnson, 2017).
Figure 7: Histogram analysis of PEW
(Source: Dale & Plunkett, 2017)
Scatter plot or scatter diagram refers to the congregation of the root causes of the problems for the PEW failure and plotting them in respect to the degree of occurrences. The major causes will be identified through the highest degree or effects on the company profitability and employee engagement issues. Through the utilization of the scatter plots, the PEW senior management can only identify the root causes using the relationship between the discreet or continuous variables. On the contrary, the brainstorming the right root cause in the plotting mechanism can be time taking activity. A major advantage of the scatter diagram is that once the PEW senior management identifies the right options it needs to vary it in order to assess the effect and the degree to which the outcome responds for the company.
Figure 8: Scatter diagram in PEW
(Source: Gejdoš, 2015)
The control chart refers to the most efficient statistical process control tool that determines whether the business process of PEW is in the state of control. In case any discrepancies or issues emerge in the PEW, the process mapping will be out of control and the senior management can easily identify the root causes of the problems. Through the constant monitoring of the process mapping in the lower control level and upper control level, the company can process the root causes for further verification and apply the total quality management tools for resolution (Jurburg et al. 2015).
Figure 9: Control chart in PEW
(Source: Indrawati & Ridwansyah, 2015)
2.1.2. Assumptions and clear elaboration:
Less scope of employee recognition management: The employees in Precision Engineering Works private limited are assumed to have been facing weak employee recognition management in the workplace that is hampering their working attitude and motivation. This could be a major reason for the employees to consider employment in the rival organizations (Boer et al. 2017).
Stagnant employee remuneration management: As PEW is one of the oldest companies, the remuneration changes may not be as dynamic as the rivals have developed resulting into more job migration.
Less attractive price margin for the telecommunication contracts: Another assumption leads to the probability of PEW offering less attractive contract prices to the telecommunication companies that result into fewer contracts for the company in the Australian OEM segment for telecommunication industry (Johnson, 2017).
Quality issues: The PEW manufacturing process might have issues related to the production of the quality plastic molding parts that can fulfill the requirements of the clients. Due to long-term involvement in the industry, PEW might have deviated from the ISO or six sigma standards that are important in Australian scenario.
Less financial support for process improvement: As the company is experiencing a turbulent phase and the profitability is dipping, the investors might not be interested in further investments so that the company can improve the process.
2.2 Continuous improvement plan:
2.2.1. Identification of problems:
Intense competition in the OEM sector in Australian telecommunication industry: The Australia telecommunication OEM industry has been accommodating new players which results into intense competition for PEW that tend to have serious implications for the company.
Less bargaining power of PEW from the clients: Due to the aforementioned intense competition in the telecommunication OEM market, the telecommunication companies have many options to choose from that is dwarfing the bargaining power of the company in the marketplace.
Figure 10: Problem identification in PEW
(Source: Dale & Plunkett, 2017)
Stringent pricing and less profitability: The competitors of PEW are offering attractive pricing options for the telecommunication companies, whereas PEW maintains the stringent pricing, which is affecting the company profile and profitability.
Employee retention problem: Due to availability of more employability options, the employees also prefer different companies for better remuneration and benefits, which affects the PEW profile of employee retention aspect (McFadden, Stock & Gowen III, 2015).
2.2.2. Taking actions:
Implementation of Total Quality Management (TQM): The implementation of TQM in PEW will take care of the employee engagement, as they will be continuously improving their ability for the provision of the quality products to the clients. The inter departmental quality improvement is also emphasized including the engineering, design, sales and more based on goal setting, staffing, training and funding.
Figure 11: Total Quality Management implementation in PEW
(Source: Lam, O’Donnell & Robertson, 2015)
Implementation of lean six-sigma approach: The lean six-sigma process implementation in PEW will ensure the best quality of the products in comparison to the competitors. This can reduce the defect level to 99%, which means only 3.4 defects of the OEM products in a million plastic molding, manufactured.
Embracing the new ISO 9000 series: From the viewpoint of Singh & Singh (2015), implementation of the new ISO 9000 series will enable the company to emphasize more on seven verticals of the company that will address all the problems such as customer focus, leadership, people engagement, process approach, improvement, evidence based decision making and relationship management.
2.2.3. Required resources:
Dedicated continuous improvement team: A dedicated continuous improvement team is required for the development of the strategy and provisioning of the operational support to the business management team.
Dedicated continuous improvement leaders: The requirement of the dedicated continuous improvement leaders pertains to leading and carrying out the important activities that are associated with the guidance and advice of the process staff in PEW.
Financial resources: The financial resources are required for the training of the employees, plant up gradation, implementation of new technology, re-engineering of the processes, process consulting, support personnel and other miscellaneous requirements (Indrawati & Ridwansyah, 2015).
2.2.4. Following up actions and status:
The follow-up actions and status are necessary according to the actions undertaken by the company for the resolution of the problems identified in the first step. Dessinger, & Moseley (2015) comments that in this phase, PEW needs to consider the inspection types, plants and usage decisions. In case of the automatic follow-up actions, the company needs to specify the series of the function modules for consideration of the utilization and up gradation. PEW also needs to take care of the business transactions for the follow-up actions for automatic system. In this case, the follow-up activities that are carried out by the function modules need to be linked to the status management functions for the inspection purpose. Prior to the selection of the usage decision catalog, the follow-up actions need to be maintained in a table and the creation of the function module is elementary in the phase.
2.3.1. Business and strategic management:
From the viewpoint of Azizi (2015), the business and strategic management of Precision Engineering Works private limited are dependent on three pillars such as automation, sustainability and localization. Through automation, PEW thrives to automate the manufacturing of the plastic molding parts in the standardized architecture that also reduces the cost of manufacturing of the parts. Sustainability refers to the utilization of the renewable energy sources for the manufacturing of the parts such as the solar energy and more. Similarly, the localization pertains to the association and collaboration with local telecommunication network providers and customers for better operational margin and efficiency. The three pillars are the cornerstone for the PEW business and strategic management purposes for the integrity, respect and cooperation in the Australian telecommunication OEM industry. The business and strategic management of PEW also regards to the expertise development and further training initiatives for the company success in the industry.
Figure 12: Business and strategic management in PEW
(Source: Gejdoš, 2015)
2.3.2. Technical management:
The solution architecture of PEW refers to the designing of the future states in terms of visionary and flexible solution for the development of the telecom parts, whereas the service-oriented architecture in PEW refers to the IT solution that it maintains. Apart from this, the emerging technology solutions such as the cloud technology and others are the event driven architecture for sustainable green IT management in PEW. Due to the incorporation of the cloud-computing infrastructure, the company has been able to add more resilience and flexibility in the marketplace. The technical management skills required to deliver the solutions in a way that maximizes the business value of PEW include enterprise architecture, solution architecture and design, service oriented architecture, emerging technology solutions, solution delivery and management, application design and optimization, infrastructure design, cloud computing and security architecture.
Figure 13: Technical management skills in PEW
(Source: Page, 2015)
The major leadership style that is required for the change to take place is the democratic leadership that pertains to the accommodation of both upward and downward flow of information for the decision making process. Ten major leadership skills are required for the purpose such as honesty and integrity, confident attitude, motivation, commitment and passion, communication skill, decision-making capability, accountability, delegation and empowerment, innovation and creativity and empathy (Jurburg et al. 2015). All these skills enable the employees to engage in the business processes more and more so that they will feel more valuable for the company. This, as a result, develops a feeling for the employees in terms of trust and integrity to the employer so that they might not consider leaving the Precision Engineering Works private limited ever, strengthening the employee engagement.
Due to the democratic leadership, the employee will be treated with more rewards and recognition and through they will be involved in the development of the quality OEM parts for PEW. This will have the potential for the company to bring back the lost glory once it had before the market became competitive in Australian telecommunication OEM industry. The continuous development through the democratic leadership that supports the scope of innovation, creativity, delegation, empowerment and accountability, the company can achieve benchmarking performance in the concerned industry in the future. In addition, the decision-making capability, good communication skills, passion and commitment can be the cornerstone of PEW success in terms of a competitive edge (Boer et al. 2017).
Precision Engineering Works private limited is a large original equipment manufacturer for the Australian telecommunication industry having more than 30 years of legacy in the market. Yet the company has been failing in the market due to the intensification of the competition that offer better pricing options for the telecommunication giants in Australia. As this is hampering the company profitability and employee engagement processes, the continuous improvement plan is necessary for the adoption of the PEW management officials. The continuous improvement plan using one of the recommended tools will be useful for the company to achieve the organizational success. In addition, the incorporation of the competencies related to the strategic management, technical management and democratic leadership would prove to be a lucrative option for the company to adopt.
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