UNIVERSITY OF PISA
POLITICAL SCIENCE DEPARTMENT
Programme Profile: Business Communications and Human Resources
Policy
OPERATIONS MANAGEMENT AND
INNOVATIVE HUMAN
PERFORMANCE IMPROVEMENT:
A CASE STUDY
Supervisor
Prof. Giuseppe Bellandi
Candidate
Diana Anna Janczewska
I lovingly dedicate this thesis to my Mother and Grandmother,
two strongest women in the world.
TABLE OF CONTENTS
1 INTRODUCTION ... 1
2 OPERATIONS MANAGEMENT ... 4
2.1 OPERATIONS MANAGEMENT IN SERVICE COMPANY... 4
2.2 OPERATIONS MANAGEMENT TOOLS ... 10
2.2.1 OPERATIONS STRATEGY AND COMPETITIVENESS ... 10
2.2.2 PROJECT MANAGEMENT ... 13
2.2.3 PROCESS ANALYSIS AND STATISTICAL PROCESS CONTROL ... 15
2.2.4 PRODUCT DESIGN AND PROCESS SELECTION IN SERVICE COMPANY ... 17
2.2.5 TOTAL QUALITY MANAGEMENT ... 20
2.2.6 SUPPLY CHAIN MANAGEMENT ... 21
2.2.7 STRATEGIC CAPACITY MANAGEMENT ... 22
2.2.8 JUST-IN-TIME ... 23
2.3 TQM TOOL APPLICATION IN ABC SERVICE COMPANY ... 26
3 ABCCOMPANY PROFILE ... 36
3.1 COMPANY OVERVIEW ... 36
3.2 VISION AND MISSION ... 37
3.3 PROVIDED SERVICES ... 40
3.4 S.W.O.T.ANALYSIS ... 42
3.4.1 STRATEGY SO(STRENGTHS AND OPPORTUNITIES) ... 47
3.4.2 STRATEGY WO(WEAKNESSES AND OPPORTUNITIES) ... 47
3.4.3 STRATEGY ST(STRENGTHS AND THREATS) ... 48
3.4.4 STRATEGY WT(WEAKNESSES AND THREATS) ... 48
4 PERFORMANCE MANAGEMENT IN ABC SERVICE COMPANY ... 51
4.1 PERFORMANCE IMPROVEMENT ON THREE LEVELS ... 51
4.1.1 ORGANIZATION ... 55
4.1.2 PROCESSES... 62
4.1.3 HUMAN RESOURCES ... 70
4.2 PERFORMANCE MEASUREMENT ... 79
7 LEADERSHIP IN ORDER TO IMPROVE PERFORMANCE IN A SERVICE COMPANY: FINAL OBSERVATION ... 86
7.1 LEADERSHIP AS A PHILOSOPHICAL ELEMENT OF TOTAL QUALITY MANAGEMENT WHICH IMPROVES SERVICES QUALITY ... 89
7.2 WHICH INFLUENCE HAS LEADER ON PERSONNEL IN SERVICE COMPANY ... 92
7.2.1 MOTIVATION AND TEAM BUILDING ... 93
7.2.2 INVOLVEMENT AND EMPOWERMENT ... 95
7.2.3 COMMITMENT ... 96
8 BIBLIOGRAPHY ... 98
ABSTRACT - ENGLISH
The scope of this thesis is application and impact of tools used in a service company connected with Operations Management. In order to improve quality and company’s performance, the Total Quality Management (TQM) tool was used.
TQM and all the concepts of Quality control provides innovation not only to the company’s organization (process management, services design, strategy) but especially to Human Resources management improvement in terms of both, short (profits) and longtime development (Quality).
Analysis is based on two years’ personal experience in a ABC company which provides services for Pharma and Medical Device industries. The process of examining began with organization’s S.W.O.T. analysis that provides important information about company strengths and weaknesses (internal environment), threats and opportunities (external environment). This approach helped to create four improvement strategies.
Subsequently, by further analysis of this company’s structure, I have performed the organizational performance improvement that could be approached on three different levels: organizational, process and employee. I have made an accurate study of each of them and what is more, I have pointed out all the errors that might occur. Successively, a strategy in terms “to be” that shows the performance improvement after application of new strategies, was presented.
Analysis of the different process in the ABC company showed problems with invoices issuing process. Due to this, I decided to execute an analysis of “Order Management” process using Operations Management tools like Flow Charts, Graphics, Diagrams and Tables. It showed clearly company’s situation in that area and helped easily to identify errors that are possible to occur. The improvement strategy was prepared for each of three mentioned previously levels, due to careful investigation of the responsibilities of each actor that takes part in the analyzed process.
An important conclusion, that can be made thanks to the profound analysis of this subject, based on the ABC company processes examination, is the importance of the well-functioning Human Recourses. It is of high importance to manage employees with the Leadership approach that is also one of the TQM philosophical elements. As a result it shows that in order to improve company’s performance, it is necessary to provide employee’s empowerment and commitment.
ABSTRACT – ITALIAN
L’obiettivo di questa tesi è l’analisi dell’impatto dell’applicazione di strumenti utilizzati nelle aziende di servizi in ambito Operations Management – con particolare riferimento al Total Quality Management (TQM) - con l’obiettivo di migliorare la qualità e la performance aziendale.
Lo strumento TQM, allargando i concetti e le tecniche del controllo di qualità a tutti i settori aziendali fornisce innovazioni non solo nei termini di organizzazione (amministrazione dei processi, service design, strategia) ma soprattutto nel miglioramento della gestione delle risorse umane, passando da una visione a breve termine di profitto ad una a lungo termine di qualità.
L’analisi è stata effettuata sulla base di una personale esperienza lavorativa di due anni presso l’azienda ABC fornitrice di servizi a industrie farmaceutiche e medical device. Inizialmente è stata svolta un’analisi S.W.O.T. con le informazioni riguardanti punti di forza e debolezza dell’ambiente interno, minacce e opportunità provenienti dall’ambiente esterno. Sulla base dei risultati ottenuti sono stati preparati quattro strategie di miglioramento.
Analizzando la struttura dell’azienda i piani di miglioramento sono stati strutturati su tre livelli: organizzativo, dei processi e del lavoro (o lavoratore); per ciascuno dei quali è stata eseguita un’accurata analisi, evidenziando i possibili errori che possano accadere. Successivamente è stato preparato un piano strategico “to be”, cioè una possibile visione dell’azienda e dei suoi processi dopo l’applicazione delle strategie di miglioramento.
I risultati delle diverse analisi hanno portato a notare soprattutto dei problemi dell’azienda sull’emissione delle fatture, è stato scelto perciò di effettuare un’analisi approfondita del processo di “Gestione degli Ordini” attraverso l’uso di Flow Chart, Grafici, Diagrammi e Tabelle, strumenti chiave per l’Operations Management. Questo ha dato un’immagine reale e chiara del processo, evidenziando tutti gli errori che possono accadere. Considerando le responsabilità di tutti gli attori che partecipano al processo è stata preparata una strategia di miglioramento per ognuno dei tre livelli.
La conclusione ottenuto è che il motore di un’azienda di servizi sono le risorse umane. La loro corretta gestione attraverso una Leadership nei loro confronti è indispensabile per la buona gestione aziendale. L’approccio Leadership fa parte degli elementi filosofici della TQM ed è molto importante nell’empowerment e commitment delle risorse umane.
1 INTRODUCTION
Nowadays the companies need to cope with a changeable environment, not only external but especially the internal one. I started to notice this process after my two years’ experience in ABC service providing company first with a Consultant profile and then Business Development Area Manager. My daily observation reveals that it is not so easy to manage company in order to improve its performance and inspire Human Resources. I started to wondering how could be possible make some improvements for providing new solutions and ideas that could be useful in daily work.
Sometimes employees see the problems and errors that occur but they do not have an initiative to change it; very often personnel do not do anything and just wait until the problem will be solved by the management. We cannot say in this case that this is only employees fault and management is working hard, but it means that in the company there are only good Managers, not Leaders, that do not give to the personnel enough empowerment to be more independent.
ABC company is a leader on the Market as a complete Quality provider for Pharmaceutical and Medical Device Companies. The organization is growing quickly but it daily copes with internal and external difficulties connected to the process and Human Resources management, finance, development, technology and service improvement; in this case is highly important to find resources and tools that can help to resolve the problems and especially improve the current company’s situation.
Service companies are very peculiar because they are in a strict contact with a customer and they need to be continuously controlled in order to improve services of Quality and final performance. A tangible product can be taken out of market, change it but a Service once provided cannot be changed and it is directly judged by the customers; that is why ABC should pay attention on all the internal tasks executed on three levels: organization, processes and work/employee.
Analyzing ABC company situation I decided to find new and innovative solutions that could be easily applied in my daily work in order to improve not only the performance of my Business Development Unit but especially of all the
company. Making some adjustment and using in the same time Operations Management tools it was discovered that it made a difference. The performance of the processes that I take part improves and my colleagues are satisfied from the changes applied; this action not only helps to eliminate mistakes but inspires people to think about the change.
I cannot say that every mistake daily happens it is the company’s fault; all employees are part of the big project and they also need to participate in an active way. The management has a decisional power but in the most of the cases is open for new solutions and positive changes.
Using my research I try to show that Total Quality Management (TQM) could be one of the most powerful instruments in ABC company’s improvement that can redefine its vision, mission and values. I am going to explain why is important to invest in three level of improvement and how inspire Human Resources in order to make them more active and creative in a daily work. Passive attitude in a service company could be very negative because this kind of company is based on the exchange of new ideas, solutions, teamwork and especially ongoing learning or training on the job.
It is demonstrate how Leadership could become one of the most important factors for human company’s performance improvement as it is one of the most important factors that could influence also Quality of the provided services.
This thesis is an experiment on how to influence the reality that on the first sight cannot be changed or improved and is a trial on how to help to make better the environment we work. It is highly important to be active in our life and do not look in a passive way on the things that are surrounding us. We cannot change totally companies we work for but at least make a better place to execute our daily tasks it is not only important to our good feeling but especially for our personal empowerment.
No action cannot be applicate only with words; to make a change we need powerful and working tools that can help us to reach determined goals and tasks. Every action needs a plan and every plan needs people who will make it work out. It is extremely important to believe in a change and make everything possible to do it.
I would like to present some personal experiments basing on my daily experience and try to make better and improve the company where I am currently work. Without any prejudice and judgment I would like to present some personal applications that in my opinion could be useful for Human Performance improvement.
It is often said that to make something important or significate we need years of experience, preparation and work well done. I believe that the young employees are the company’s future because they are full of creativity, inspiration, ambitious and fantasy that oldest colleagues very often do not have. I am of the same opinion of Steve for which in one of his famous quotes said “the people who are crazy enough to think they can change the world are the ones who do”.
2
O
PERATIONSM
ANAGEMENT2.1 OPERATIONS MANAGEMENT IN SERVICE COMPANY
Each company is built by many operations that produce and deliver goods and services. All companies undertake them otherwise they couldn’t be able to transfer input in output1. We have many kinds of operations: marketing that promotes and helps to sell the products and services, finance that manages company from the economical point of view, personnel that is essential for human resources management, business process that is a series of logically related activities or tasks (planning, production) or technology operating the tools of the company to support those roles performing business processes (Exhibit 1).
Exhibit 1: Operations Management
Source: http://www.bestthinking.com/articles/business_and_finance/leadership/leadership_principles/operations-management-leveraging-talents-from-business-technology-finance (Accessed 5 June 2014)
Operations have a transformation function (Exhibit 2). The management very often focus on where the value is added in the transformation process and because of it we can have a significant impact on business strategy.
1
Chase R.B., Aquilano N. J., Jacobs R. F., Operations Management for Competitive Advantage, McGraw-Hill/Irwin, New York, 2001, p. 6.
Exhibit 2: Process Transformation
Transforming resources carries out the transformation process on other elements. These are such elements as labour, equipment/plant, materials, technology, people, information, finance and energy (Exhibit 3). The mix of these resources will differ between operations. The operations system transforms resources from inputs into outputs in the form of goods and services2.
Exhibit 3: Resources transformation into output
The companies need to see operations as processes that add value to inputs through a transformation of results in outputs. In that way it can be verified that operations management can be a source of competitive advantage: the operations should be competitive and it means that they need provide services or products better, faster
2
Porter A., Operations Management, Albert Porter & Ventus Publishing ApS, 2011, p. 9.
Transformation
Process
Inputs Outputs INPUTS Resources such as: Energy Materials Technology People Information Finance OPERATIONS OUTPUTS Products (goods and/or services)and/or cheaper3. The first one (“better”) is connected to higher quality, faster means being more flexible and arranging the operations in a shorter time and finally cheaper trying to cut as much as possible the production cost. Thanks to that managers can define very well the business strategy and good marketing strategy4.
In this thesis I would like to demonstrate how and which tools use to improve the operations in a company that provides services. This analysis will be done on an example of company ABC and especially in Business Development Department where I currently work for as a Business Development Area Manager (Exhibit 4). I have lived my daily experience for two years and it helped me to make some analysis and notice a lot of processes that can be improved in my department making our work easier and providing high quality services.
I do not use a real company name in order to preserve the secrecy and integrity of the data that I report in my thesis.
Exhibit 4: ABC Organizational Chart
3 Brennan L. L., Operations Management, Mc Graw Hill, New York, 2011, p. 4. 4
Horváthová P., Davidová M., Operations Management as Practice of Organizations' Strategic Management in
ABC is a good example of a service company that provides only intangible products. From the organizational chart (Exhibit 4) we can see that services company does not have for example the plant manager and production unit what is one of the first signs that does not produce goods. It is organized in way to scatter operations activities throughout the organization.
The most important divisions in company ABC are Business Development and
Technical Operations.
The first one is responsible for finding and developing new business opportunities which is connected with customer research, maintain good relationship with partners, finding new projects, services sale and developing of marketing strategy. Technical Operations division is responsible for service procurement so it means that organizes the resources for the projects acquired, manage projects, provides the final solution for customers and also helps for sales team to prepare the proposals from technical point of view.
It is very important to understand by managers the organizational chart from horizontal and vertical point of view. They cannot see the organization as a system divided in different departments but as an organism which does not work well without one of them. The collaboration between business units is the first step for the success. It is essential to understand what company produces, for which kind of customers and which kind of operations uses for transferring input into output. This process cannot be one-to-one, managers should understand well company’s scope and define the goals for all divisions taken together and not separately. This project needs to understand also internal processes that have to be improved and adjust5.
A Service providing company is much different from the manufacturing one because of the product that it sells. Service organizations produce intangible products that cannot be stored in a warehouse. The consumption occurs at the same time that producer of the service will come in contact with the customer. It is much difficult to sell intangible products and that’s why the service operations need to meet customers demand with price strategies (depending on Law of the Market). Moreover it is very difficult to measure productivity or output of the service because of its intangible nature. In this kind of companies the quality is the most important thing and the companies will be judged by the process of delivering. Many service companies have supporting goods (e.g. Validation Report) as many manufacturing companies have some service supporting element (e.g. maintenance activities)6.
5
Rummler G. A., Brache A. P., Migliorare la performance aziendale. Tecniche per acquisire vantaggio competitivo
affinando le modalità di gestione dell'organizzazione dei processi e dei lavori, FrancoAngeli, Milano, 1996, pp.
27-31. 6
Company ABC provides value-added services which means that makes for external customers life easier and offers two different solutions categories: information and problem solving7. It helps for Pharmaceutical industries in many different fields like: ICT Solutions, Engineering & Qualification, Compliance and Regulatory Affairs. ABC supports customers in turnkey validation projects for all types of Computerized Systems (Management Information System, e.g. ERP, systems used in Production area and applications used in Laboratory areas), provides qualification solutions for process equipment and utilities, supports customers in Total Quality Management (audits, assessments and mock inspections) and finally supports customers in whole drug regulatory life-cycle. Even if it is strictly Service Company it is supported by some goods like Testing Documentation or Technical Instrumentation that are used both for Computerized Systems validation projects and for equipment or utilities qualification.
Every company has its sub-systems related to the specific business discipline. There are three main functional areas: operations, marketing and finance functions. Each of them is connected and use the same transformation model: input/process/output as the operations function. Each function can be treated as performing an operations activity. It does not matter if it is for external or internal customer. Companies use many concepts tools that make their operations more efficient, effective and productive. They help them to manage the operations in a best way and make the product the most competitive on the market.
7
2.2 OPERATIONS MANAGEMENT TOOLS
Operations Management takes part in business and productivity improvement around the world. It is creating competitive advantage and improving company’s operations. This process requires a general vision about the company, its processes and especially inter-functional integration. Operations Management gives us models and tools that can be reviewed prior to attempt problems. They are necessary to help us in order to organize in the best way our company operations and add value for the processes.
Operations Management tools can be: operations strategy and competitiveness, project management, process analysis, statistical process control, product design and process selection, quality management, supply chain management and just-in time8. They are used not only for manufacturing company but especially for these one that produce intangible products and services. Each of these tools takes very important role in operations management and process improvement. I would like to describe them shortly and improve one of these tools in Business Development department that I work for.
2.2.1 Operations Strategy and Competitiveness
Operations strategy is very important in company’s future. It is connected with future plans and decisions that response to external factors like markets, customers and competitors. Operations strategy is connected with the design of the processes and infrastructure is needed to support them. It is reflected in technology selection, stabilization inventory in the process and locating the processes. Operations strategy has to cope with current and future challenges. It is strictly connected with a general overview of company’s future, processes planning and it helps with stabilization of the operational goals. The company needs to have kind of plan that anticipates the future needs, prepare company for changing service customer’s needs and has the ability to forecast the future and establishes the objectives. The company identifies the gaps between the market needs and internal capability to cover them9.
8
Ivi. pp. 6-7. 9
Nowadays is very difficult to predict market changes that is why the companies led to an emphasis on relatively short-term objectives. In these conditions the strategic plan should indicate the general direction that the organization should follow using the capabilities that it possesses. The company should concentrate on its operations giving them competiveness and this is possible when competitive priorities will be termed. It help us to attract the customers by different attributes and some of them are focused on price or interested in the service quality.
We have four main measures that include the competitive position of a company: cost, time, quality, delivery and flexibility (Exhibit 5)10.
Exhibit 5: Operations strategy connected to performance
Many companies are defining its strategy trying to provide services on the basis of low cost. It is quite effective solution for the customers but it does not always guarantee the success. The major cost is laying on input – labor, facility, materials and that is why if company wants to reduce the product or service cost needs principally to reduce the cost of the materials. There is quite big segment of the market that produces large unit volumes of product or service based on low cost11. That is why it is very difficult to enter there and become a low cost producer.
In some markets being competitive means delivering the goods or services quickly and when promised. It is another competition priority that helps to sell more and gain the success. It is very important when the company provides the repairs of computers, production equipment and any other technology12. In this case customers usually look
10 Porter A., op. cit., pp. 12-13. 11
Chase R.B., Aquilano N. J., Jacobs R. F. op. cit. pp. 24-25. 12
for somebody who can provide this service quickly instead of waiting hours and losing their money. It is significant especially in automobile manufacturers where the production cannot be stopped because the supplier did not deliver the spare parts in time.
The proposal of wide variety of products and services in order to meet the customer’s needs is more significate and not many companies respond to the market quickly and are able to produce the exact product that is need in the certain moment13. They should have different products and be able to develop new ones and convert the processes in order to produce them.
The last but not least very important characteristic it is connected with Quality. We have two different categories of quality: Product Quality and Process Quality. The first one is obviously connected with a final product; it is important to establish a product which will be focus on the requirements of the customer. The car which is used by people is different from that one which is used in the car races. Both of them should be high quality products but the first one obviously has special features that make it higher-quality product and in the same time with a relevant price.
Process Quality is connected directly with product’s quality; it does not matter if the product is designated to daily use or for the car races, it shouldn’t have any defects. According to the product specifications is defined how the product is to be made. Quality Assurance and Quality Control are two activities that try to ensure product quality and produce error-free products14.
13
http://www.investopedia.com/terms/w/wide-variety.asp (Accessed 5 June 2014) 14
2.2.2 Project Management
A project is an activity that has its starting and ending point and results in a unique outcome. It is a series of activities which are directed toward some major target. Project management is connected with planning, controlling, directing resources in order to finalize the project (Exhibit 6)15.
Exhibit 6: Project Management
We have many kinds of resources that depend on the project: people, equipment or materials. The projects can be of different typology and focused on different activities like building a bridge, organizing a music festival or an exhibition. Even if the goal can be always the same, using different resources (e.g. people) we will reach a different result. For example if a school each year was performing the same play, choosing different students it would be different what’s mean not worst or better16.
Before the project starts, managers should analyze if it is worth, if they have enough resources so they need to have a strategy and of course time control over the whole plan. It is not so easy to manage the project and all the activities that includes in the same time. That is why we have three different kinds of projects: Pure Project,
Functional Project and Matrix Project17.
Each one of them has its advantages and disadvantages.
15http://www.pmi.it/tag/project-management (Accessed 5 June 2014) 16
Brennan L. L., op. cit., p. 51. 17
Pure Project is concentrated on the project manager authority and does not use all
its resources across the project.
Functional Project has a functional division and in the same time its members can
work over different divisions. From the other hand in this case a motivation of team member is weak and the team responds slowly for the customers’ needs.
The last one (Matrix Project) tries to cross pure and functional project’s characteristics together. It causes that there is a strong communication between functional divisions and resources do not work for different divisions. The negative point is that we have project manager and functional manager so it is difficult to understand who is strongest and who will give us a rise.
Each project starts out as a “Statement Of Work” (SOW) where a brief project description, goals to be achieved, work that have to be done, timing conditions, responsibilities and of course start and completion dates are written. A work package is a group of the activities that have to realized. It includes a project milestones that have to be reached at point in time. It is very important to define it in order to motivate the people and finalize the activities as it was planned.
Other important thing is the “Work Breakdown Structure” (WBS) that defines the hierarchy of project tasks, subtasks and work packages (Exhibit 7).
Completions of work package, subtasks, tasks means a completion of a whole project18.
Exhibit 7: Project hierarchy
Source: http://www.state.ky.us/agencies/adm/mars/advantage/users/Mug14Projects.htm (Accessed 6 June 2014)
18
New activities that appear in the companies can be managed as projects. Projects management is a very helpful tool that can be used in manufacturing and service companies: it helps organizations to reach their goals in easier and controlled way19.
2.2.3 Process Analysis and Statistical Process Control
Understanding the company’s processes is one of the most important things that ensure its competitiveness. Process is any activity and part of the company that transforms inputs into outputs with possible greater value than inputs have. Processes can also produce services but they are not only focused on good’s production.
All the processes can be demonstrate using a Process Flow Chart (Exhibit 8) demonstrating that all the activities are operating in order to transform input into output; it shows how company works and which activities should be done following the specific rules. Process Flow Chart includes tasks, flows and storage areas; the flow is represented through different figures like rectangles, arrows or triangles but it strongly depends how company demonstrate its processes.
According to the process it can be showed vertically or horizontally and it helps to separate the tasks that are the part of the process. For example the tasks performed by the President are not mixed with those performed by Compliance Committee.
Exhibit 8: Process Flow Chart
Source: http://www.jackiewilley.com/home/document-development/process-flows/ (Accessed 6 June 2014)
19
Horner Reich B., Gemino A., Sauer C., How knowledge management impacts performance in projects: An
Process Flow Chart helps the company to understand if the processes are performed
well or in case how to improve them. It is a very useful tool in order to find the errors or correct the company unit flows. In that way we can clearly see all the actions performed along the flow and find easily the problem. One possible solution to improve the efficiency is to perform the activities in parallel way so it is possible to save a time or change the activity’s sequence which can be more productive. Other way to perform better the processes is to reduce interruptions that meaning a reduction of the time between two activities, e.g. give for a President one day instead of two when he is asked to take a decision about something20.
Process Analysis is one of the greatest tools using especially in service companies;
it helps to manage not only the processes but especially the people work that depends on the assigned jobs in the right way and with a good sequence activities.
Statistical Process Control (SPC) is informing management of improved process
changes. It is a methodology using in industry for measuring and controlling the manufacturing process. SPC identifies the variations or deviations in the process which can be caused by “chance” or “assignable” causes.
Chance causes of variation are changes due to factors like ambient temperature or
composition of the material being processed. This technique helps to define the limits for chance-cause variations for a stable system so in case of any problem it will be verified quickly. They are called control limits and are shown in a control chart that is also including the measure characteristics over time. There are upper control limits that are above the target and lower control limit that are below the target (Exhibit 9). The process is controlled when both values are observed by studying the control chart21.
20
Chase R.B., Aquilano N. J., Jacobs R. F. op. cit. pp. 92-109. 21
Exhibit 9: Statistical Process Control Chart
Source: https://www.moresteam.com/toolbox/statistical-process-control-spc.cfm (Accessed 6 June 2014)
Assignable causes of variation is that one that is not caused by a random variation
but is strictly connected with a some change in the process. It can be find quickly verified and rectified. They are cases that the processes works well but the results can be caused by sampling error. In that case the errors should be kept as soon as possible and this methodology should help us to resolve them quickly.
2.2.4 Product design and process selection in service company
Service providing companies are much different from Manufacturing ones. They are selling intangible products and should be in a direct contact with the customer. It is much more difficult to respect the selling of a tangible product because require good marketing skills and especially confidence from the customer’s side. It is very important to provide product design by searching for new ideas and especially satisfying the customer’s needs. In this phase we define our ideas and check if they are requested in the market. Then we prepare preliminary and final design22.
22
Services depend on the people providing them. That’s why it is very important how company treats own personnel, how organize and plan the work and especially which supporting systems it uses. The customer for service company should be on the first place because once work is done in a bad way, he can never back to buy it again: this is captured in the Service Triangle (Exhibit 10)23. Service companies have a direct contact with their customers and they need to pay attention on the intangible product they sells. All the operations that company manages should be planned and managed with attention otherwise the final product could be bad and company final result should be a failure.
Exhibit 10: Service Triangle
Source: http://www.matesgroup.org/products/support/creativity-innovation/ (Accessed 6 June 2014)
In the service organization the contact with the customer is highly important. We can divide it in: High Degree or Low Degree of customer contact. In the first case the customer is more involved in the process instead of the second one. It is strictly connected with facility location and layout, product and process design, scheduling, production planning, worker skills, quality control, time standards, wage payment and capacity planning. For example in case of a facility, the degree of customer contact will be High if it is located close to the customer or Low if is placed close to transport. The result of this situation is that operations affect directly the customer or are involving him in non-direct way.
23
When we think about Product Design we need to define four major questions: the target market, what make different our service, service strategy and how we will deliver it. That is the starting point of our business and managing decisions that we need to take. It is essential to know what and for who we are going to sell in order to know if the plan is going to work. The level of satisfaction of the customer shows if it is performed in a right way24.
The Quality of sold services not only depends on the product design but of course how the operations are managed internally and if the company does it in efficient and effective way. The organization should organize them in order to avoid the errors and write the procedures that help the personnel to perform their tasks in a right way.
Service delivering process is the most important one. The company should know how to provide it to the customer and how to prepare their personnel to do it. There is approach which concentrate all the work on a product, this one where the customer take a greater role in a production of a service (self-service approach) and where the company consider different needs of their customers (personal approach). All of them need to well aligned with the product that service company sells.
24
2.2.5 Total Quality Management
Total Quality Management (TQM) is a philosophy that is present almost all over
the world and it helps for the companies of different countries to maintain the same standard regarding to Quality. It is connected not only with a final product but also with operations like planning, production, leadership and improvement. The Quality is essential not only for the customer but especially for the resources who are working to produce goods and services; it makes their work not only easier but especially safe.
Quality became the global issue and International Organization for Standardization
(ISO) defined how things should be measured. In different countries it is made in different way and that is why we need to find a unique point of view.
TQM is “managing the entire organization so that it excels on all dimensions of
products and services that are important to the customer”25. It is a culture that helps for companies to define common specifications in order to provide the Quality. It should be consider from producer and customer point of view so the product design should take in consideration the production process. TQM implicates that Quality provided for internal customer or supplier will led to external customer26. That is why it not only implicate to avoid mistakes but changes their capability how they do their job. TQM is way of thinking and working that brings innovation and continuous improvement.
It is connected with many different topics like leadership, employee empowerment, Quality measurement, statistics or value of improvement (Exhibit 11).
It gives for companies many tools to measure their work and performance in order to provide every time better results (Process Flow Charts, runt charts or scatter diagrams).
25
Ivi., p. 260. 26
Exhibit 11: Total Quality Management Approach
2.2.6 Supply Chain Management
It is one of the most important topics that companies approach nowadays. Supply Chain is managing all the system in order to provide goods and services; it is connected with entire flow of information, materials and services from raw materials through factories and warehouses to the end customer (Exhibit 12)27. The Supply Chain
Management (SCM) includes the sharing of information between suppliers, distributors
and customers. There is a connection between all these processes so transforming inputs in products would be nothing without distributors and local service providers.
SCM is very important because thanks’ for that the companies can achieve a competitive advantage. They need to choose a good strategy, raw materials that have a lowest cost in the market, build their factories close to the distribution centers in order to make their prices lower than company of competitors. It is a set of strategic decisions that bring the success28.
27
Chase R.B., Aquilano N. J., Jacobs R. F. op. cit. p. 332. 28
Exhibit 12: Supply Chain
Source: http://blog.barsanti.it/corriere/espresso/supply-chain/ (Accessed 6 June 2014)
The companies in order to be competitive choose their suppliers, make the decision if a part of supply chain will be outsourced or managed internally, how they will distribute the products (highway, rail, pipeline or air), if their product will be highly customized, functional or innovative etc..
There are many different sourcing, production and distribution decisions that have to be taken in order to provide high quality goods and services minimizing the costs.
2.2.7 Strategic Capacity Management
Strategic Capacity Management is “the amount of output that a system is capable of achieve over a specific period of time”29. It is different in Manufacturing and Service companies: for the first one it is the number of computers that is produces in a single shift, while for the second one is the number of customers that are handled in one day.
Project managers should look on the resources (inputs) and products (outputs) in order to plan capacity over the certain period.
29
There are three different capacity planning rages: Long, Intermediate and Short. It has a different meaning for the individuals at diverse hierarchy inside the company. The company president looks at the long-range capacity in order to plan the production in all the factories within the firm. The plant manager is concerning the capacity of the individual factory and meets the anticipated demand for products. There can be also the peaks where short-term demand exceeds short term capacity and plat managers should build inventory in order to meet the customer’s request.
Forecasting the activities is also very important especially for service companies where the products are sold directly in a strict contact with a customer and cannot be stored in a “warehouse”. The Operations and Marketing departments should collaborate in order to forecast the work that needs to be done and organize it without the loss of time for the company and the customers. It is needed to estimate the resources, projects availability, plan for appropriate levels of personnel and activities. Strategic capacity management helps to improve profitability and customer’s responsiveness30.
2.2.8 Just-in-time
Just-in-time (JIT) is a philosophy and a set of activities design to achieve high
volume production only when it is necessary. It was started in Japan in Toyota company where Mr. Taiichi Ohno developed the Toyota production system. This way of producing use a minimal inventories of raw materials, work in process and finished goods. That is why it eliminates wasteful activities31.
This system is especially used in manufacturing companies like Toyota or Dell; everything is made and produced “just-in-time” without loss of materials, time and extensive storage in warehouse. It helps to eliminate waste and support the continuous improvement; this system responds perfectly for the product demand and when the product is sold, the market pulls a replacement from the last position in the system32.
It requires high levels of quality at each stage of the process and a long term relations with a supplier and of course predicable demand for a product (Exhibit 13).
30 Kumar S. A., Operations Management, New Age International Publishers, New Delhi, 2009, p. 105. 31
Chase R.B., Aquilano N. J., Jacobs R. F. op. cit. pp. 394-395. 32
Exhibit 13: Just-in-time Concept
Quality at source is one of the main topics treated by JIT; it means that if something is going in a wrong way, the factory workers should stop the process immediately to verify the cause of it. The workers become their own inspectors and they are responsible for their own output. Until the problem is uncovered they cannot start the production. Workers are more responsible for the areas they work for and feel part of the whole production process33.
JIT can be also applicate in a service company even if it does not produce the goods. One of the first rules is to organize problem-solving groups in order to make personnel responsible for all the things that happen inside. They need to maintain working area clear and improve quality. Revision of the equipment and process technologies should be a standard procedure in order to meet the process requirements and be upgraded. Service companies should be well organized and do not permit that their customers wait for the service requested. Service companies cannot put their products in a warehouse and that’s why they need to maintain stable delivery level. It is also important to eliminate unnecessary activities in order to save a time. It can be done using a checklists of things required to perform each type of activity. Introducing a demand-pull system could be also useful; the service is replaced by another one only in case it is sold before. This “inventory” is controlled when the customer pulls the items from the system and
33
JIT improves service operations and helps to reduce time spend on useless activities that could be eliminate.
It provides improvements and employee empowerment and commitment34.
34
2.3 TQM TOOL APPLICATION IN ABC SERVICE COMPANY
Quality Management means not only eliminate defects from companies services,
processes or transactions but also take care about whole system that works for it. It is kind of control that ensure that the projects undertaken will be successfully closed according to the defined requirements35.
TQM (see § 2.2.5) it is not only a series of rules but also a philosophy how to manage the company and provide quality services; it is a kind of culture that once introduced motivate personnel and make them part of the company. It creates advantage not only for the organization and high quality services that thanks’ for that provides but also for whole company team.
TQM is divided in philosophical elements (customer-driven quality, leadership, continuous improvement, employee participation and development, quick response, design quality and prevention, management by fact, partnership development, corporate responsibility and citizenship), generic tools (statistical process control tools and quality function deployment) and tools of the QC department (statistical quality control) (Exhibit 14)36.
35
Ivi., pp. 62-65. 36
Total Quality Management Elements
Philosophical Element Generic Tools Tools of QC Department customer-driven quality leadership continuous improvement employee participation and development quick response design quality and
prevention management by fact partnership development corporate responsibility and citizenship SPC tools: process flowcharts check sheets Pareto analysis and
histogram cause and effects
diagrams run charts scatter diagrams control charts Quality function deployment SQC methods: sampling plan process capability Taguchi methods
Exhibit 14: Total Quality Management Elements
Source: Chase R.B., Aquilano N. J., Jacobs R. F., Operations Management for Competitive Advantage, McGraw-Hill/Irwin, New York, 2001, p. 261.
ABC company where I am currently working for is fully conformed with Quality Management approach because it is a Supplier of “Total Quality” for Pharmaceutical and Medical Devices companies and that is why it obtained ISO 9001:2008 certification issued by International Organization for Standardization. ISO 9001:2008 certification is applied for all kind of organizations and it does not matter if they produce goods or services; it means that its services are fully meeting the customer’s needs and regulatory requirements.
All the internal processes are under control and continuous improvement37; it means that sold services are also controlled during a production process and not only when they are delivered to the customer.
37
The company improves its efficiency and has an effective quality management system in place; ABC sets quality goals and evaluate Quality Policy in order to check if they contribute toward the higher efficiency.
TQM is strictly connected with continuous improvement; it develops tools like Statistical Process Control (see § 2.2.3) which are essential to control the processes, resolving quality problems, find right solutions, eliminate variations and design quality control procedures and systems38. I would like to present some ideas and improvements that could be very useful for ABC company in that background and especially to suggest some new ideas that can provide a better performance39.
Process Flow Chart (see § 2.2.3) is one of the very important tools used for problem
solving and continuous improvement. It shows the main steps and outputs of the process. Using the “Proposal issue” (Exhibit 15) a step of the process which is a standard one in Business Development Department where I am working for, I would like to demonstrate how to improve it and to prevent personnel from making an error and improving the quality of the provided services.
Proposal issue is one of the most important processes in my company because is the
first step when the customer’s needs are analyzed, described solutions/projects that have to be executed and the price is being determined (according to Law of the Market).
In case there is an error or the proposal is sent with delay it is a big probability that the customer can cancel its order.
38
Kumar S. A., op. cit. p. 275. 39
That is why it is very important to execute this process quickly and pay attention on customer’s needs.
In the table below (Exhibit 16) all the activities and actions mapped in the flowchart are explained and they include action, activity code, description, errors that can occur and “poka-yokes”.
These are the procedures that help to prevent and eliminate error; poka-yoke in the Japanese means “avoid mistakes” and they are commonly used in companies all over the world40.
It is very important to trace every process that occurs in the company and analyze it; mapping each action and analyzing all errors that occur can provide the company improvement, define standards in order to not repeat mistakes and especially make the personnel more responsible for the activities that they take part in.
It is essential to define standards and make respect them by others; thanks to this teamwork the job is easier because everyone knows what and in which way should exactly do.
Proposal Issue
ID Action Code Description Failure Poka-yoke
1 Proposal request MK.1.001 The Customer send the Proposal request to the Customer Service or directly to Business Development Manager
Proposal request is not conform with services that company provide
The person who received the proposal should directly send the information about services and explain what they can do in that matter
2 Business Development staff receive
MK.1.002 The Proposal request is forwarded to Business Development Manager Proposal request is not forwarded to the right Manager
The person who receive the Proposal request should forward it within one day to the exact Customer’s responsible 3 Business
Development Director analysis
MK.1.003 Business Development Director decide who will prepare the Proposal
Business Development Director do not take decision within one day
Customer Service or Business Development Manager should send a reminder to the Business Development Director after one day
40
in case decision is not taken 4 Criticality and complexity of Proposal is high? MK.1.004 Is verified if criticality and complexity if the proposal is high
Business Development Director does not verified criticality and complexity of the Proposal within one day
Business Development Manager send him a reminder by e-mail 5 Proposal is prepared by Business Development Staff MK.1.005 Business Development Staff or Management prepare the Proposal
Business Development Manager is out of the office and the proposal is not prepared within three days
In case Business Development Manager is out of office the Proposal is prepared by Customer Service 6 Proposal is prepared by Business Development Director MK.1.006 Business Development Director is responsible for the Proposal preparation
Business Development Director forgot about making the Proposal
Business Development Manager should send the reminder in case the Proposal is not made within three days 7 Technical object is critical? MK.1.007 Is verified criticality of technical object by Business Development Director Business Development Director does not verified criticality of the technical object within one day Business Development Manager send a reminder to Business Development Director by e-mail 8 Technical object is prepared by Business Development Staff MK.1.008 Technical object is prepared by Business Development Staff because of its low criticality. Business Development Staff prepare the project overview and Man Days estimation
Technical object is not prepared within two days
Business Development Director send a reminder to Business Development Manager by e-mail 9 Technical object of the proposal prepared by Specialists
MK.1.009 Technical object of The proposal is analyzed and prepared by the Specialist. Specialist prepare the project overview and Man Days
Technical object is not prepared within two days
Business Development Manager send the reminder via e-mail to the Specialist
estimation 10 Proposal review by Business Development Director MK.1.010 Business Development Director Review the Proposal
The Proposal is not review within two days
Business Development Staff or Business Development Manager should send the reminder to Business Development Director and in case he will not respond give him a call 11 Proposal sent to
the Customer
MK.1.011 The Proposal is send to the Customer by Business Development Staff or Business Development Manager via e-mail The Customer does not send the feedback about the proposal within one week
Business Development Staff or Business Development Manager should call the Customer in order to have answer about the Proposal
As we can see the traceability of all processes in Flow Chart and analyzing them can be very useful to check where potential errors can occur. In that way ABC company management can easily eliminate errors and issue standard operating procedures which describe for personnel how they need to execute their work in a right way (ABC management can analyze the flow chart and eliminate the worst errors). It is a very useful generic tool in TQM that helps to eliminate errors before they occur41.
Process Analysis (see § 2.2.3) takes part of company Continuous Improvement
(CI). It is a philosophy connected with Total Quality Management and in a service company means improvement of people, methods of productions, labor utilization, new ideas and especially empowerment of team members.
Companies do not base only on their actual experience but try to reach new ideas and implement them; it can be applied in ABC company where I currently work collecting the data and analyzing in which part of the process occurs an error or which part can be improved.
The company can also use PDCA tool which means plan-do-check-act42. It is a part of CI process and the first step (“plan”) includes the area that can be improved or identify the problem. In case of ABC company, when the sales are decreasing, the management should concentrate on the processes that are connected with a Business Development Department.
Analyzing the data and possible causes of the problem (Root Cause Analysis) they need to find a countermeasure to eliminate the cause.
In that phase (“do”) is very important to use statistical process control tools like fishbone (Ishikawa Diagram), scatter diagram, stratification or process flow chart. Company ABC can analyze who and where sold more services, which Business Development Manager sold more, in which countries the sales are higher, in which periods sales decrease and from these analysis make some new ideas and plan how to improve their marketing strategy; it is very important to make improvements before the real problem occur.
41
Ivi., p. 272. 42
The next step is to check if new solutions work and if they can be applied and standardize.
During the last phase (“act”) the company on the basis of the improvement process issue new standard operating procedures in order to standardize new processes and solutions43.
Using TQM tools ABC company can easily identify its problems and find the right solution for them. Service Company respect to a Manufacturing one cannot store the goods so internal process management is highly important. Continuous improvement connected not only with a service production but especially with introduction of new ideas and personnel empowerment takes important part of the work.
TQM is one of the most important tools that can be used in ABC company since it is a total quality service provider for pharmaceutical industry.
The companies applicate TQM elements in order to improve the quality of their services and obtain competitive advantage on the market; TQM helps in establishing internal guidelines, criteria and make their work easier.
There are many kind of awards given to the companies which respect Quality Management rules: the most famous ones are The Baldrige Award44 or The European Quality Award. They have their own criteria and recognize the companies that fully respect them. For example The Baldrige Award has seven criteria for performance excellence like: Leadership, Strategic Planning, Customer and Market Focus, Information and Analysis, Human Resource Focus, Process Management and Business Results. It is dedicated to performance excellence and is focused on the competitiveness and companies performance45.
43 Chase R.B., Aquilano N. J., Jacobs R. F. op. cit., pp. 270-275. 44
Brennan L. L., op. cit., pp. 62-63. 45
ABC company is selling services that have nothing to do with equipment or production machine, industrial plant, or raw materials. The production of this intangible good is mainly based on people who issue them, on their work, preparation, experience and professional attitude. Only in case they are organized in a good way and put under control, the company can sell high quality services for Pharmaceutical companies.
Another highly important thing in this process is the strong Leadership and the way the organization manages Human Resources; people execute their tasks in a right way, try to support continuous improvement, new ideas and especially contribute in company competitiveness in the market thanks to the combination of two factors (Leadership and Human Resources).
Leadership is a philosophical element of TQM46 and improves the quality of internal processes and work conditions; it is highly important to have a control on people who work inside the organization but also to maintain a good relations and make feel them important part of the process.
46
3
ABC
C
OMPANYP
ROFILE3.1 COMPANY OVERVIEW
ABC is a service company that was set up almost twenty years ago.
The business was started with a couple of people; now is including almost one hundred sixty people on its board and is one of the biggest service companies in that sector. ABC is a complete Quality solution provider for the life science industry. The company has its headquarter in Italy but thanks for a quick growth is present almost all over the world.
ABC set up offices in Italy, Switzerland, China, Ecuador, Spain, Israel and Mexico. It was a strategic decision, since the company provides intangible services that cannot be stored in a warehouse it should be close to customer’s sites. In that way ABC company can sell them quickly and when they are needed. Moreover Italy was one of the first countries in Europe with growing quickly Pharma business47, and for this reason ABC is currently one of the most important Quality providers in whole Europe.
The company provides services connected to the quality like: ICT services, Quality & Engineering, Compliance, Third Party Audits and Regulatory Affairs. Since the drug production is one of the most frail and important processes, ABC owners had an extraordinary idea to help Pharma companies by selling the consultancy services connected to all the most riskiest processes and actions. In that way Pharma companies could not have been forced to hire somebody but pay only for the services needed; it was a start of a great business that is still growing.
ABC is a multicultural company that has on its board people from different countries: they are speaking more than fifteen languages and so ABC can support Pharmaceutical and Medical Devices industries in many countries and write the documents in native language. This characteristic made company competitive and a market leader.
Quick growth, competitiveness and wide geographical coverage is a result of the strategic choices made in the past. ABC owners had a good knowledge about the market
47
http://www.sanita.ilsole24ore.com/art/imprese/2014-04-04/FARMINDUSTRIA_LATINA-103540.php?uuid=AbTUh9YJ (Accessed 10 July 2014)
and especially about all the processes and needs of the Pharmaceutical industry; the group of specialists working in company with more than twenty years’ experience help ABC to become one of the biggest Quality providers for Pharmaceutical companies in the Market and a strategic partner for some of the most important Pharma and Medical Devices companies like Teva, Roche, Fresenius Kabi, Gambro or Baxter.
3.2 VISION AND MISSION
ABC company mission is to improve and grow for becoming one of the biggest and most important companies in this sector. It is a quickly growing organization that has a big potential and many innovative instruments in order to reach this goal. It is not an easy target but ABC relying on the hard work of many professional figures every day is closer to become market leader as solution provider for sustainable compliance. It is important to be focused on organizational goal, processes and human resources, that are the key of success.
ABC vision is based on investing in knowledge, people and ethics. These three things are very important in a service company.
Knowledge is essential for new solutions research, improvement of provided
services and Quality, thanks to those the organization is able to adapt processes to requirements, know about all changes in the market, to make decisions based on the acquired information and especially know how to help their customers.
Investing in people means to individuate talented and motivated individuals with a strong potential and give them an opportunity to have a positive impact on their company. It means not only that they attend trainings, participate in conferences but especially that organization will give them more responsibilities, opportunity to decide on the company future, empowerment48 and commitment49.
ABC company is also investing in ethics; it means that the organization is integrated in the economy and society in which it operates. ABC is sensitive to social and environmental issues and believes that each person should always respect law, human rights and supporting safe working conditions.
The central point of the organization is concept of “integrity”. The company puts the main importance on all stakeholders like employees, consultants, suppliers, customers, ownership and business partners. The most important thing in a service company are
people. They add the value for each sold service and they create a product of Quality.
This ensures the stability of the organization and the context in which has to operate. Ethics clearly define values and responsibilities both internally and externally: this is a kind of internal regulation that is accepted and followed by all employees and partners in order to proper internal functioning and the positioning of the company towards its customers.
Implementation of ethical code expresses in which way the company decides to follow business, corporate management and it creates a positive work environment where people can grow and participate in their personal empowerment. It is very important to define rules and disciplinary criteria in order to set behavioral standards. Moreover without a monitoring of the respect rules the company would not bring possible mode of improvement. Ethical code is one of the contributes of company
evolution.
48
Empowerment means to give a strategy and philosophy that enables employees to make decisions and take responsibility for their results. It is highly important to show for employee their value, share with them leadership vision, goals, direction and trust. Managers should provide for employees information for decision making, delegate more authority and not only the quantity of work. It is highly important to give our feedback and solve problems where they appear and especially feel them recognized for empowered behavior.
49 Commitment is a participation in establishment of quality policies and objectives, setting quality committee, providing resources and training, take care of company implementation and finally revising the policy based on the results that organization achieved.
