Improving Operational Efficiency Of Latino Engineering With Six Sigma Approach

Problem Description

Latino engineering is a manufacturing organization that sells specialized engineering equipments to companies in New South Wales, Australia. The company has 300 employees and it has been taken over by another organization. The services of Latino include designing, development, and manufacturing of equipments and they are served to industries like construction, utilities, infrastructure, and oil & gas.

An investor organization has acquired Latino Engineering a year back but the company started to face some major challenges within a year of acquisition such as a decline in the customer orders and increase in the customer complaints. Customers frequently complained about the delivery of defective or wrong equipments, poor follow ups, long turnaround time, and non-responsive team.

Because of the increasing complaints from customers, the number of orders received by the company is reducing and this is causing major concern to the company as it is affecting its bottom line profitability. The company needs to take appropriate steps to resolve issues faced by the company. The company needs an improvement in its existing processes and a solution for all the operational problems it is facing. For this, a continuous improvement plan using six sigma approaches is suggested which help the company would come out of the existing problems in the next three months by reduction of customer complaints. The six-sigma method is chosen as it effective in situations where the time available for making improvements is very less which is true for the current case. The company needs a fast improvement plan with methods that are proven to be effective and can get the company make rapid improvements. The company has already lost some of its customers and thus, if the improvements are not done fast, it would face the risk of losing more customers in near future (Dewar, et al., 2017).

Objectives of the plan include:

• Reduction in the defective parts or equipments that are manufactured by the organization
• Improvements in the order processing systems such that problems like wrong deliveries and delayed deliveries can be reduced
• Improving the customer service turnaround time and feedback system of the company to enhance customer satisfaction.

If the continuous improvement plan is approved, the process of execution of the plan would behind by 1st Jan 2018 and would be finished by 31st Mar 2018

Action Steps	Milestones
Identify root causes behind the issues	5th Jan 2017
Develop proposal for continuous development using six sigma	10th Jan 2017
Get approval for the continuous development	15th Jan 2017
Initialize continuous development project by preparing resources for adopting six sigma	20th Jan 2017
Identify activities to be completed for the continuous improvement	25th Jan 2017
Get continuous improvement plan approved	27th Jan 2017
Eliminate defects in equipments	5th Feb 2017
Improve order management process	20th Feb 2017
Improve follow up system for designing and development	28th Feb 2017
Reduce turnaround time	15th Mar 2017
Improve service delivery	25th Mar 2017
Testing	30th Mar 2017
Project Closure	31st Mar 2017

The company is facing certain challenges at present that have to be managed. These include:

• The customers of the company are receiving defective products from the company. This could be due to the inability of the manufacturing unit to produce defect free products. These defects can be because faults in designing or faults in manufacturing. To know if a product is defect free, the organization needs to test it for the variation in quality or the output against some benchmark. In case of the company’s inability to appropriately differentiate between normal and defective products or making predictions about possibility of producing defective products, the company finds it challenging to deliver a defect free product(Sarma, 2017).
• The operational efficiencies of the company has declined causing decline in the productivity. Wrong deliveries, defective product delivery, and misplaced orders are some of the issues that have resulted from these inefficiencies in the company(MindTree, 2017).
• The company staffs are not able to follow up with the customers of the company effectively in the stages of designing and development. This has resulted in dissatisfaction among customers of the company(Mitchell, et al., 2012).
• The Turnaround time of the services of the company is more than what is expected by its customers and thus, customers have been complaining about the same. The company is using a variety of different applications for managing different stages of supply chain. The people working in the organization need to exchange information between these channels which is difficult because of lack of integration between them. This increases the communication time and thus, the order processing time affecting the efficiency of the services negatively(Tripathy & Kumar, 2013).
• In certain cases, wrong products have been delivered to the customers of the organization which reflects that there are problems in data and information management causing inaccuracies that affect deliver system of the organization.

 A continuous development plan has been made based on the principles of six sigma for the company. The plan includes root cause analysis, needs assessment, and improvement actions.

The problems that the company is facing current have resulted from specific causes at different stages of product development as explained below:

Order processing: Inefficiencies in deliveries can result from inaccuracy of data that is generated in the order management process. Some factors that can cause such an influence on the deliveries and order processing include value of products, consignment size, and delivery contracts. Some causes behind wrong or delayed deliveries could be wrong address receipt, missing address, inability to get contact details of the recipient, order entry errors, and sales order modifications (Maxwell & Mason, 2012).

Designing & development: The customers are complaining about the follow ups from the company staff during the designing and development phases. The difficulties in follow up could be a result of inefficiencies in information management which would make it difficult for the employees to keep track of order status and thus, they may not be able to resolve the queries of customers on time. Common problems that could affect information management during the designing and development phases include change control, product complexity management, and information management. These challenges have to be resolved such that the customer satisfaction is improved (George, Graham, & Lennard, 2007).

Project Rationale

Production: There can be several causes behind production of defective products in different stages of the product development. A defect is a level of variation in a product which is not acceptable. For identifying defects, organization must have the knowledge about the acceptable limits. These limits make the measurable targets or benchmarks defined by the equipment industry. Thus, benchmarking can help identify the root causes of the defects in equipments produced. These benchmarks would be defined by expert achievers in the engineering equipment industry (Aronovich, Allain, Sommerlatte, & Collins, 2010).

Turnaround time is the time between the order receipt and product delivery to the customer. Organizational processes that add to the turnaround time include:

• Checking stock availability
• Designing of equipments
• Creating list of equipment parts
• Purchase or production decision
• Identifying part or products to be procured from vendors
• Informing vendor about product requirements
• Receiving order from vendors
• Parts assembling(USAID , 2013)
• Product testing
• Order dispatch to customer premises
• Transportation
• Product delivery

Following improvements are needed in the organization:

• A control needs to be established over the order management process in the company such that the order processing related problems such as order duplication, wrong deliveries, and order processing errors  can be reduced.
• The turnaround time is very high as complained by the customers which are causing dissatisfaction in them. Thus, there is a need for the improvement in the process cycle which needs to be reduced such that the turnaround time can be enhanced.
• There are problems in service deliveries that are causing errors like delays, wrong deliveries as well as affecting the ability of the employees to assist customers on time. This causes dissatisfaction in the customers because of lack of productivity in the staff. Thus, there is a need to improve the service delivery in the company.
• Presence of defects in the products delivered show that the organization is unable to maintain the quality standards of the product in designing and manufacturing thus, it is essential that the company established quality management practices that can reduce the instances of delivery defective products(EYGM Limited, 2012).

Some steps would help company resolve the issues discussed in the previous section. For establishing control over the order management, the organization needs to have a right structure in place with right people with right capabilities employed on right profiles. For this, the first thing that can be done is change of structure by centralization of the office such that a single place would be utilized for managing the complete order lifecycle. This includes management of product catalogue, pricing, and related information. With centralization in place, the company can expect to get the following benefits:

• The cost of order processing would reduce with reduction in the errors in quotation and order processing documents.
• This would increase the number of orders that people can handle in duration and thus, improve the operational efficiency of the system.
• The centralization would reduce the order cycle time which would reduce the turnaround time for order processing.
• As the business processes and information systems would be integrated as well as some processes would be automated, there would be a significant reduction in the turnaround time(Ray, Das, & Bhattacharya, 2011).

Besides these, some more steps can be taken to further make improvements in the system such as:

• The company can implement an application that can help staff record and forward order information. This application would be able to automatically allocate the task to people based on the order information and the personnel availability which would save time and notify people responsible for work thereby speeding up the work and reducing the turnaround time further
• The accuracy of ordering processes needs to be increased and the business processes need to be made more consistent such that service quality is also enhanced.
• Customer profiling can be used by the managers for understanding the buying patterns which would help them understand the needs and preferences of the customers of the company. This understanding would help managers make strategies for up selling and cross-selling such that the company would be able to increase its sales from per customer and thus, enhance revenues(Marden & Young, 2015) 
• There can be several ways that would be used by the company for reducing the processing time such as:
• Some of the activities involved in order processing can be carried out simultaneously rather than doing them sequentially. This would reduce the waiting time for subsequent activities thereby saving sometime in the order management process.
• Concurrent engineering can be used by the organization for integrating teams in such a way that they can perform multiple tasks at the same time. Some tasks that may be done simultaneously by teams include conceptualization, process mapping, bills creation, and designing. With the use of concurrent engineering, the cycle time can be reduced by 80%(Infibnet, 2015).
• The activities sequence can be modified for further reduction in the processing cycle. For instance, if the documentation for submissions and approvals of multiple processes are sequenced between departments such that they flow to and fro between them multiple times, it can take a significant time just for approvals and submissions. However, if most documents are approved at the same time rather than doing them in sequential manner, some of the processing time would be saved and the turnaround time would be reduced
• Interruptions while working such as personal phone calls, calls from customers asking for order status or for registering complaint can be distracting and would consumer time. If the company can implement and IVR system that takes calls from customers for general queries and only when the customer needs to have discussions with the staff, the calls are connected, the cycle time would reduce as there would be fewer interruptions in the work(Genesys, 2008).

The continuous improvement plan would enhance the operational efficiencies of the organization and would reduce the turnaround time in the company which would enhance customer satisfaction. The company has only 3 months to make it possible. Before the improvement processes can be exercised, it is essential that the company is prepared to adapt to the new processes and thus, the project would begin with the training of employees on six sigma practices as it is the base of the development project. For implementation of the plan, the organization can take the Awareness-Motivation-Competency-Implementation approach in which first, the employees are informed to create an awareness about the changes expected in the system with the implementation of the continuous improvement processes. Once the staff is aware of what is happening and what is expected, they have to be motivated and trained to develop the needed competencies. After they are trained on six sigma practices, actual implementation of the improvement activities would be carried out. Development of competencies in people is a very important step as lack of competencies can cause a failure of the project (Peñaranda, Romero, & Molina, 2007).

Awareness: The awareness of the six sigma processes and its expected outcomes have to be created in the organization employees so that they understand how the new processes would affect their work and improve it if they learnt the new methods. Some methods that would help create awareness include suggestion boxes, poster campaigns, benchmarking results posting, newsletters, screen savers, etc (Desai & Shrivastava, 2008).

Motivation: As the improvement process would need more work to be done by the employees at the stage of learning and adoption, the senior managers need to keep their subordinates motivated so that they contribute effectively. For this, managers can use rewards and recognitions in response to the contribution from the juniors to encourage them to perform better. A complete cultural transformation would be required in the company to implement the plan and this would mean that people have to change the ways they work today which needs a high level of motivation in them (Miski, 2014).

Objectives

Competency: The competencies of the employees have to be improved with trainings that would enhance the capabilities of the staff to deal with the improvement processes. The competency enhancement would also enhance the processes in the company. A strong foundation can be built which would ensure that the implementation of the continuous improvement plan is effective. Employees have not used six sigma practices earlier and thus, are not already required with necessary skills. Thus, training programs would help them develop required skills and understand the new processes for implementation of the improvement plan. The trainings of employees can be conducted on topics like waste elimination, defect identification, lean practices, DMAIC phases, designing, quality management and productive maintenance (Buonomo, 2007).

Implementation: Once the foundation for the implementation is build through training of employees on six sigma practices, the company would be ready for the execution of the activities planned for which the right environment has to be created. This would include collection of data and its evaluation such that needed improvements can be made accordingly. For this, company can use software tools that would help in tracking project activities, managing workshop information and trigger improvement processes. A monitoring and reviewing system also needs to be established such that results obtained are continuously checked to ensure that they are up to the mark (Reijns, 2010) 

Six sigma practices provide a variety of methods and strategies for communication within the company between employees and outside the company between employees and customers or suppliers. Some of these methods can be used by the company for establishing communication in the improvement project such as:

• Meetings between employees
• Town hall gatherings
• Top management sending memos to employees for informing
• Staff presentations
• Recording of minutes of the meeting
• Q&A sessions
• Company posts by employees on intranet
• Training manuals and guides on six sigma practices
• Emails
• Phone calls
• Milestone achievement events for recognition and motivation
• Survey for gathering feedback from employees
• Suggestion systems for improvements
• Brown bag lunches

Depending on the requirements of each stakeholder, appropriate communication method can be used (GE, 2016).

Conclusions

This report was prepared to present a plan for the continuous improvement of a manufacturing organization that is facing major challenges causing decline in their sales and revenues resulting form customer dissatisfaction. The objective of the plan is to identify the root cause of the problems faced by the company and develop a plan for soving them using specific methods. Some of the problems that were identified included high turnaround time; follow up inefficiencies, defective product manufacturing, and ineffective delivery processes. A continuous improving plan was suggested which would help company resolve these problems by enhancing the process cycle time efficiency and the efficiency of the system which would reduce the errors and defects in the manufacturing system. Some of the improvements suggested included change of process sequence, simultaneous execution of multiple tasks, and use of technology for tracking and processing information.

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