Support department efficiency

(1)

Support department efficiency

Improving the efficiency of the calibration department at Cordis Europa N.V.

(2)

University of Groningen

Master Thesis Rob Arndts 1

Support department efficiency

Improving the efficiency of the calibration department at Cordis Europa N.V.

University of Groningen

Technology Management

Groningen, December 2007

Author R.H.W. Arndts

1st Supervisor University of Groningen Prof. Dr. Ir. J. Slomp

2nd Supervisor University of Groningen Drs. Ing. G. Nanninga

(3)

MANAGEMENT SUMMARY

This research has been conducted in order of Cordis Europa B.V. located in Roden. Cordis Europa B.V. is part of the worldwide Cordis franchise. This in turn is part of Johnson & Johnson, which is a manufacturer of health care products, as well as a provider of related services, for the consumer, pharmaceutical, and medical devices and diagnostics markets. Cordis Europa B.V. produces catheters for endovascular usage.

The focus within this research will be on the calibration department within Cordis Europa N.V.. The calibration department’s main activity is calibrating a wide range of tools that are used throughout the company. A part of these calibrations is performed by outside calibration departments. Furthermore they provide a few other services to the customer and process calibration results. Management faces the question whether to outsource the calibration department or improve the calibration department.

The purpose of this research is:

“To provide recommendations about the organizational structure to increase the efficiency of

the calibration department.”

The organizational structure represents the make or buy decision for the calibration activities. The recommendations will be used to support the management decision to outsource or to improve the calibration activities. The problems, which were obtained in a preliminary research, lead to a classification of the problems in four areas, namely: outsourcing, organizing activities, waste and calibration frequency. The main research question is follows:

“Which actions have to be taken for the calibration department within Cordis to increase the efficiency?”

The actions to be taken will follow from research regarding the possibilities for optimizing the current situation as well as research on outsourcing the calibration department. The possibilities for optimizing the current situation were obtained by investigating the internal organizing activities and the influence of the current sourcing practices on the organizing activities, waste and the calibration frequency. Actor activity diagrams were used to create insight in the main calibration process and the organization activities as well as the waste.

(4)

PREFACE

After getting my bachelor degree in Aeronautical engineering I decided to continue being student for a while. So in September 2004 I started the bachelor programme Technology Management. After completing the bachelor programme I found I still did not knew enough, so I started the masters programme Technology Management. This thesis was the last part of the masters programme and presents the research I conducted at Cordis Europa N.V. in Roden from May 2007 until November 2007. The subject of this thesis is efficiency improvements for the calibration department within Cordis Europa N.V.. After finishing my thesis I find again I have not gained sufficient knowledge, but I do realize now that the more one knows the more one realizes the less he knows.

Without the help of others it would not have been possible for me to conduct this research. Therefore I want to thank all the people that have helped me during my research. In special I want to thank the technicians and supervisor of the calibration department for providing all the information. Noud Wijkamp for providing the opportunity to graduate at Cordis Europa N.V. and for getting me back on track again when I was lost in my research. Thirdly, my first supervisor Jannes Slomp for criticizing my research and for providing very useful inputs for the methodological part of the research. Then I want to take Geo Nanninga for helping me finding a suitable area of research and for providing the last comments. Last, I want to thank my fellow graduating student at Cordis Europa N.V., Jan Roelof Veenstra for giving me useful recommendations during this period.

For me, this period has been very instructive in general and offered a valuable contribution to my academic skills. Now it is time to apply all knowledge in business.

Groningen, December 2007,

(5)

LIST OF ABBREVIATIONS

AAD Actor Activity Diagram; method for describing processes

BSI British Standardization Institute; The European counterpart of the FDA Certificates Report with calibration results

CFR Code of Federal Regulation; regulations of the FDA FTE Full Time Employee

FA Fixed Asset; refers to all ‘things’ that are used within the factory

FDA Federal Drugs Administration; US regulatory organ for the medical industry

IM Information management

NCO Non Conformance and Overdue; refers to a form which has to be filled in after a tool appeared to be non conform or overdue

NPD New Product Development

Maximo Company wide tool management system PET Production Engineering team

PPL Product performance lab On-site Refers to the Roden plant

(6)

1 COMPANY

DESCRIPTION

*

The first chapter briefly describes the history of Cordis a Johnson & Johnson company and its activities.

In 1959 the Cordis Corporation was established in Miami. Before Cordis started producing catheters they had been making injectors and pacemakers. In 1966 Cordis introduced the first full-line of pre-shaped catheters which became the industry standard. Two years later in 1968 Cordis Europa N.V. was founded. Initially there was only a small site in Veenendaal, but soon they needed production facilities as well. Then, in 1970 Cordis started the production of catheters and peacemakers in Roden. In the years after, Cordis sold its peacemakers division and introduced various new catheter production lines. Generally it can be said that from 1990 two types of catheter can be distinguished, namely catheters that are used in the heart area (cardiology) and catheters that are used for research on blood vessels in other parts of the body (radiology). Cordis has been updating its products continuously of which the balloon and the stent are the two most remarkable updates. With a so called balloon dilation catheter a narrowing of the blood vessel can be reduced by pumping up a balloon on the location of the narrowing. In this way the blood vessel is stretched. A stent is a metal basket which is put around the balloon and is left behind in the blood vessel when the catheter is removed. The stents cause a diminished chance on spring back (re-narrowing) of a stretched blood vessel to its original position (restenosis).

In 1996 Cordis corporation merged with Johnson & Johnson, an American pharmaceutical, medical devices and consumer packaged goods manufacturer. Johnson & Johnson currently operates in three main industries. The Cordis corporation belongs to the segment Medical devices & Diagnostics (see figure 1.1). The company’s name was changed in ‘Cordis a Johnson & Johnson company’ since the merger and from that time also operated in line with the Johnson & Johnson Credo. Besides Cordis, Johnson & Johnson consists of more than 250 operating companies providing over 1000 brands globally.

*

(9)

Johnson & Johnson

Pharmaceuticals Medical Devices _{& Diagnostics} Consumer _Products

Cardiology Cordis Corporation Cordis Europa N.V. Biosense Webster Neurovascular Endovascular

Figure 1.1: organization diagram.

Cordis Europa N.V. is part of the Cordis franchise which consists of seven offices, located in Miami (USA), Fremont (USA), Warren (USA), San German (Puerto Rico), Juarez (Mexico), Waterloo (Belgium) and Roden. The plant in Roden belongs to the business unit Endovascular which is concerned with the treatment of peripheral vascular and obstructive diseases and employs around 600 employees. Besides the business unit endovascular Cordis also has three other business units (see figure 1.1). The products are made in a conditioned area called cleanroom and before they are shipped all products are sterilized in a separate sterilization room. The plant in Roden also concentrates on new product development (NPD) for endovascular and cardiovascular products. This research will focus on the calibration department within Cordis Europa N.V. The calibration department is a support department for the production facilities and a few other departments. Figure 1.2 presents the place of calibration department in the organization. The next chapter will introduce the area of investigation.

Lean engineering Calibration Operations ME Site general manager

Figure 1.2: the calibration department in the organization.

(10)

2 INTRODUCTION

The introduction chapter will elaborate on the area of investigation and the problem statement. This will results in the research goal and the relevant definitions.

2.1 Calibration necessity

The Johnson and Johnson credo states ‘in meeting the product users’ needs, everything we do must be of high quality’. Therefore, the tools which are used within Cordis have to be calibrated to make sure the product specifications are guaranteed. This holds for tools which are used for operations, tools which are used outside operations (e.g. new product development, quality assurance) and tools used by the calibration department for calibration tasks. When a tool is not periodically calibrated there is a higher risk for a product to be produced with wrong tool settings. By doing so the functionality of a product can not be fully guaranteed. Hence, this will lower the product quality and increases the risk for a product recall.

All departments of Cordis are periodically audited by the Food and Drug Administration (FDA) and the British Standards Institute (BSI) whether or not they still comply with their regulations. The FDA and the BSI are both powerful regulation institutions who can stop Cordis from selling products in certain regions in the world if it does not comply with their regulations. This also leads to a necessity to perform regular calibrations.

2.2 Calibration task and department

The calibration department is a service department which calibrates the majority of the equipment for several internal clients. Calibration refers to the process of determining the relation between the output (or response) of a measuring instrument and the value of the input quantity or attribute, a measurement standard. In non-specialized use, calibration is often regarded as including the process of adjusting the output or indication on a measurement instrument to agree with value of the applied standard, within a specified accuracy. The dimensions that are calibrated are divers, for example pressure, moisture, UV-intensity, electric, speed, mass, geometry, etc. Currently there are four calibrating technicians and one supervisor within this department. Furthermore external calibration parties are contracted to do parts of the calibration work.

2.3 Problem statement

(11)

the calibration department. Eliminating or reducing waste is seen as a possibility to reach the cost reduction targets and to lower the pressure of work on the department. The latter can in turn create possibilities to collectively work on continuous improvement which is not possible in the current situation. However, in addition there is an ongoing management discussion regarding make or buy decisions. It is thought that outsourcing certain activities or departments can be a means for reaching the desired cost reduction targets and can offer other advantages additionally. Both, outsourcing the calibration department and improving the current situation, are seen as viable options to reach the desired cost reduction targets.

2.4 Research goal

In agreement with the problem statement the following high level research goal is obtained:

“The purpose of this research is to provide recommendations about the organizational

structure to increase the efficiency of the calibration department.”

The organizational structure represents the make or buy decision for the calibration activities. Therefore the recommendations will be used to support the management decision to outsource or to improve the calibration activities. The next section describes the definition of efficiency that will be used for this research.

Efficiency

The definition of efficiency that would be appropriate for this research is given by (Harrington, 1991). It is defined as the extend to which resources are minimized and waste is eliminated. Resources can be defined as those inputs that are necessary to produce a certain amount of output. Waste is a central concept in lean production and should be minimized or eliminated. Tapping and Shuker (2003: 45) define waste as anything that adds cost or time without adding value. For this research it is assumed that waste incorporates a certain amount of resources. The two major resources are the time available for performing calibrations and the available capital allocated to the calibration department. The capital which is allocated to the calibration department can be seen as the calibration cost and is the most important performance criterion. Therefore for this research the definitions time-efficiency and cost-efficiency will be used. The first refers to the time consumed for performing the various activities on the department. The second refers to the total capital (euros) that is allocated to the calibration department*. In short increasing time efficiency means activities consume less time than before and increasing cost efficiency means that the capital allocated to the calibration department can be lowered for the same amount of calibrations.

*

(12)

2.5 Résumé

(13)

3 PRELIMINARY

RESEARCH

This chapter introduces the area of investigation. First the department is described in general, followed by the identification of the stakeholders and a more detailed description of the main process and departmental activities. The chapter concludes with a description and an analysis of the problems based on which a conceptual model is created. The information in this chapter was obtained through interviews with various persons.

3.1 Department information

The calibration department calibrates the majority of the tools that are used within Cordis. Currently there are four calibration technicians and one supervisor who are all hired based on a 40-hour workweek (5fte’s). Figure 3.1 is a conceptual representation of the organization of the calibration department. The tools of customers need to be calibrated before a certain date. This date is determined by the calibration frequency which is entered in the companywide computer system named ‘Maximo’. Calibration frequencies for the tools are determined during design of a product and process. Some frequent used tooling such as for example a calliper rule have frequencies which are pre-determined. Thus when for example a new calliper rule is brought into use its calibration frequencies is already set. The line from the customer to Maximo represents only the fact that customers want to have their tools calibrated they do not initiate the calibrations, this is done automatically by Maximo. Each month all planned work orders (WO) are printed and need to be finished before the first day of the next month. A WO contains information about which tool have to be calibrated, the calibration procedures and where the tools can be found. The WO’s are then divided among the calibration technicians so that they can perform the preventive calibrations. Preventive calibrations is the term used for the periodical calibrations of tools. Due to a high workload and due to complex calibration procedures, some tools are calibrated by external parties. Sometimes customers ask the calibration department for corrective calibrations which are characterize by their ad hoc appearance. Depending on the type of corrective calibration the urgency of performing this type of calibration can be very high. The department is influenced from outside by Cordis Metrology who have set performance criteria for the department. Attachment 1 gives an overview of the performance criteria and why they are important.

Maximo Cordis metrology External calibration parties Customer Preventive Calibrations Employees Corrective Calibrations WO Ask for Calibrations FDA Contact Calibrations

Figure 3.1: conceptual representation calibration department.

(14)

Figure 3.2 is a representation of the various calibration types. The different types correspond to the codes that are filled in on the WO in Maximo when the WO is being closed (for closing see paragraph 3.3). Check Calibrations New tool Tool found back Repair/failure Corrective Preventive

Figure 3.2: sorts of calibrations.

Repair/failure is used for fixed assets (FA’s) that malfunctioned. New tool refers to the first calibration of a particular tool so that the customer can put it in service. Sometimes tools are found back. This means that they were put on non-active in Maximo. When this was the case they have to be calibrated again. A check is a requested calibration to verify the tool settings. This mostly occurs when a customer scents something is wrong with a tool.

Equipment which is used for the calibration task is called reference equipment and has to be calibrated as well otherwise the calibration is not valid. Most calibrations of reference equipment is done by a subcontractor because the department does not have the right equipment or skills to be able to perform reference calibrations. This ‘reference of the reference’ is called the secondary or transport standard. Finally equipment which is categorized as secondary/transport standard should also be calibrated; this is called the primary standard. Calibration according to the primary standard are executed by the National Physics Laboratory (NPL) or the ‘Belgisch Accreditatiesysteem’ (BELAC).

The calibration department can be seen as an internal service/support department for all the other departments who use tools that have to be calibrated. The departmental costs of the calibration department are therefore allocated to the operations department, new product development endo (NPD-endo) and the new product development cardio (NPD-cardio) department. The allocation of the costs is based on the amount of calibrations per department. Because of this a cost reduction for the calibration department also leads to a cost reduction in the other departments, as calibration is an overhead expense for them.

3.2 Stakeholder description

This paragraph will in short elaborate on the various stakeholders of the calibration department (see figure 3.3). This will be used to create a general understanding of the area of investigation and the various parties that might be of importance for this research.

(15)

University of Groningen Suppliers of calibrations Stork on-site 4 technicans

1 supervisor Stork external

Cordis Metrology FDA Internal clients Operations Product development Pilot Plant Quality assurance Facilities Sterilization Calibration ME Manager Calibration

Figure 3.3: calibration department and stakeholders.

Suppliers of calibrations: some calibrations can not be performed by Cordis’ calibration

technicians. For the most part these are complex calibrations performed by the manufacturer of the tool. The external parties are: Arburg, Mitutoyo, Mettler Toledo, Engel, NMI and Lighthouse.

Stork on-site: because of the high workload a few external calibration technicians from the company

Stork are hired. they spend one or two days on-site to assist in the preventive calibrations.

Stork external: some tools have to be calibrated at the Stork site. This mostly concerns reference

equipment (equipment used for calibrating the calibration equipment).

Cordis metrology: Covering organ for the calibration departments. Provided metrics (performance

measures) for the calibration department.

Manufacturing Engineering (ME) Manager: This person is responsible for manufacturing

engineering teams The calibration department is as well under supervision of the manufacturing engineering manager.

FDA: sets regulation for companies who want to sell products on the American market. The FDA

has among others the strictest regulations. They periodically check if the company still produces conform FDA requirements.

Technicians and supervisor: currently the calibration department works with four technicians and

one supervisor. They are responsible for all activities on the calibration department.

Internal clients: they are the direct receivers of the calibrations. The most important clients (clients

with majority of the tools) are presented in the coupled box.

3.3 Department activities and outputs

3.3.1 Calibration in detail

This section will elaborate on the activities that are necessary to perform preventive and corrective calibrations.

Each month the monthly calibration schedule is generated with Maximo. A work order is created for each FA. The work orders are first reassigned and divided among the technicians based on each technician’s monthly working hours and skills. This includes finding out which calibrations

(16)

reference and reference) are assigned to external calibration parties. Figure 3.4 presents a process map for the main process, starting after the technician has finished the preparation work. Preparation work mainly involves contacting clients for availability and deciding when to do which calibrations. The activity calibrate is explained in more detail in the upper part of the figure.

The major part of the calibrations is performed on location. This means that the technician collects the necessary reference equipment at the calibration department and then moves to the customer. There he performs the calibration as is prescribed in the calibration procedures. When the tool that is calibrated is not out of specification the calibration can be finished. The technician clears the calibration spot and replaces the sticker on the tool which has been calibrated. The sticker can be seen as a quality mark which states that the tool is within specification limits. Furthermore it gives the next calibration date. Then he moves back and completes the WO which implies some administrative work. Closing the WO is as well administrative work, but slightly different than completing and all closing is done by one technician. If the tool is found to be out of specification it has to be adjusted and when this is not possible the tool has to be repaired or replaced. A Nonconformity report has to be written when a tool is out of spec to ensure traceability and compliance with FDA regulations. NCO-reports are send to the department supervisors who have to discuss the actions that will be taken in order to decrease the chance on an out of spec occurrence in the future. Sometimes the calibration frequency is adapted upwards when it is found that NCO’s occur frequently for a particular tool. NCO’s have to be made as well when a tool gets an overdue registration. Prepare calibration equipment Perform amount of measurments according to FA details Conform Specs? Adjust if possible NO Calibration finished Collect calibration equipment

Move to place Calibrate Move back Close_{work order} _{process finished}Calibration Replace sticker All dimensions measured? NO Write NCO WO prepared Complete WO Clear calibration spot

Figure 3.4: calibration process.

3.3.2 Tasks and department outputs

This section describes the task and activities of the department besides performing calibrations as described in paragraph 3.3.1. All tasks are summarized in figure 3.5. The fact that external parties do a part of the on-site calibrations means that there are some organizing activities, such as determination of the calibration day and inform the internal clients for tool delivery. Furthermore they should be guided through the building and they should be helped with problems and questions. With respect to the customer the primary outputs next to the physical calibrations are, advising

(17)

customers about calibration procedures for new and existing tools, process requests concerning calibration procedures, assisting customers who want to borrow reference equipment and, when necessary they help with problem solving in case of tool failure/malfunctioning. Finally there are activities that are not directly related to calibration and services to the customer. Those are seeking for improvement options in all area’s (e.g. searching for new suppliers for calibrations, improving and updating the procedures), implementing new reference equipment, filing of the documentation (e.g. WO’s), management of the calibration room (a separate conditioned calibration room) and take training.

Tasks and activities of the calibration department

Performing calibrations Participate in solving NCO's External work preparation (Stork, etc)

Processing calibration results/information with Maximo Processing requests

Problem solving in case of tool failure/malfunctioning New tooling projects

Lend out reference equipment Improvement projects

Implementing new reference equipment Filing documentation

Management (separate) calibration room Training

Figure 3.5: tasks and responsibilities.

3.4 Problem identification

During the first phase of the research several unstructured interviews were taken with different internal customers and employees of the calibration department. These interviews resulted in a variety of perceived problems which are presented relationship wise in figure 3.6. The dotted arrows are assumptions made by the researcher based on preliminary thoughts on relationships between the elements of the model. Different colours are used to group problems in problem areas. The next section will elaborate on the various problems. The numbers in the text can also be found in figure 3.6 and indicates where the relation or chain of relations can be found.

(1) Reference equipment has to be sent to Stork for its ‘reference’ calibration. Because Stork sends it on again to their calibration departments it sometimes happens that reference equipment is not sent back in time. This increases the chance that some tools cannot be calibrated before the end of the month (including the reference equipment itself) which results in an overdue registration. (2) Stork has a large calibration division with multiple clients. Because of this Stork’s calibration technicians are limited available what makes it difficult to plan the calibration day. This leads to communication for planning a suitable date. (3) A part of the tools that have to be calibrated by Stork cannot be done in the Cordis plant, but instead have to be taken back to their own calibration facilities. However, most of these tools have a limited availability because they are necessary for production activities. This results in the fact that the calibrations still have to be done by Cordis’

(18)

calibration technicians. Otherwise, due to the long lead time that would occur when the tools are taken to the Stork calibration facilities, production would be hampered. To compensate the tools that are calibrated by Cordis’ technicians, other tools are assigned to Stork (compensation items). (4) Some tools have to be available for external parties when they come for calibration. These are for example tools that can not be calibrated by Cordis’ calibration technicians because they do not posses the appropriate skills. This does lead to disturbance of the production and therefore it may be possible that it is necessary to adapt the production plan on short term which leads to availability problems again. (5) Briefly it can be said that outsourcing calibrations leads to various communication needs for coordinating the activities. However communication for coordination also occurs because of other reasons. The major reason for this is limited availability of the tools that have to be calibrated (6). This mainly is the case for the tools of the production department, because they are in use for the majority of time. Besides production has priority above calibration (7). Tools on other departments are easier accessible.

(8) Absence of tool ownership/responsibility in general is seen as a problem by the calibration department. This could be the reason that nobody provides useful information to the department which leads to communication with the customers. Also, lack of tool ownership is given as a reason for the fact that tools are frequently missing which also leads to actions for localizing the tools (searching). (9) Customers complain that they do not have sufficient insight in the calibration date. This way they cannot match their production plan with the wishes of the calibration department, hence limited availability is the result. From their perception the calibration technicians ‘just’ come in, while calibration states they send a calibration plan in the beginning of each month.

The white coloured boxes are the effects/results from the perceived problems. Improvisation means that the calibration technicians act somewhat ‘ad hoc’ what could be caused by the fact that work is not properly organized. In figure 3.1 a distinction was made between the preventive and corrective calibrations. Because corrective calibrations should preferably not occur, it is desired to perform as much preventive calibrations as possible in the available time. As well it is desirable to reduce the average lead time of the calibrations, which means that less resources are required for calibration activities.

(19)

frequency has been incorporated as a problem because none of the respondents of the interviews knew why the calibration frequency is not adapted downwards. This could mean that the calibration frequency is too high, which in can intensify all problems.

Stork accepts many orders

Corrective calibrations and new tools

Missing tools Lack of insight in

tool location

No/too less input from customers Lack of responsibility for tooling Unclear tool ownership Waste: movement, Maximo is non-user-friendly, vague calibration procedures

Increases lead time of primary process

Improvisation

Adapting production plan

Disturbance of

the production _{Tool delivery} obligations for customers Calibrations performed

by external parties Back and forth communication (customers/ external parties)

Tools are limited available Vagueness about

calibration time

Reference equipment is not available for use Overdue Items are not

returned in time

Customers do not get a calibration plan

Lead time increases Stork forwards equipment to other contractor Reference equipment to Stork Performing less calibrations Calibration still has to

be done by Cordis calibration technicians Stork calibration technicians are not available on demand Production has priority

Chance that tools have a unnecessary high calibration frequency

Higher calibration cost Stork cannot take

equipment Search for compensation items Searching 1 10 9 8 7 5 4 3 2 11

Figure 3.6: jumble of problems.

3.5 Problem analysis

The purpose of this chapter is to create a conceptual model which will serve as the basis for this research. Therefore the problems of figure 3.6 have been categorized, which is presented by the different colours. The same colours (except for purple) can be found in the conceptual model. The problem area’s have been analysed and linked together by means of relevant literature. Section 3.5.1 will elaborate on the problem area’s and section 3.5.2 presents the resulting conceptual model (figure 3.8).

3.5.1 Problem area’s

The problems presented in blue can be related to outsourcing. Outsourcing decisions, also known as make-or-buy decisions, come from a central issue in businesses, namely ‘how to organize the vertical chain’. The vertical chain refers to the process that begins with acquisition of raw materials and ends with the distribution and sale of finished goods and services. Should a company organize all activities in one firm (make), or should they rely on other independent firms (buy)? Reasons to outsource (buy) certain activities are derived from the concept that market firms are often more efficient (Besanko, et al: 113). De Bruijn (1999: 26) and Brown and Wilson (2005: 37) state that beside cost, solving capacity problems and gaining access to skills which are not sufficiently

(20)

available in the own organization, are other important reasons for outsourcing. These were as well the reasons for Cordis to outsource a part of the calibrations. The extent to which departments can vertically integrate ranges form full vertical integration (hierarchy) to outsourcing the whole department (market). The sourcing form that is used at the calibration department can be classified as tapered integration and is a semi-produce/semi-buy (hybrid) form of organizing the vertical chain. Tapered integration represents a mixture of vertical integration and market exchange (Besanko, et al. 2004: 153). In this form a part of the input is produced by the manufacturer and a part is bought on the market. Besanko, et al. (2004) mention among disadvantages the chance on increasing coordination because the parties have to agree upon specification and delivery times. This is also the case for outsourcing a part calibrations. It seems that for the calibration department outsourcing leads to time losses because of organizing and coordination activities to prevent and to solve problems. For example appointments have to be made with the external parties and tools must be made available. It can therefore be expected that outsourcing a larger part of the calibration activities, while maintaining a tapered integrated form, leads to more organizing and coordination activities and vice versa (link 1 in figure 3.8). Besides, outsourcing also directly affects cost efficiency (link 2 in figure 3.8).

Yellow represents various waste. Tapping and Shuker (2003: 45) define waste as anything that adds cost or time without adding value. Therefore it can be argued that waste reduces efficiency from a time perspective as well as a cost perspective (link 3 in figure 3.8). Hines and Rich (1996) categorize processes and activities into three groups based on a value added classification, namely:

• Non Value adding

• Necessary but non value adding • Value adding

(21)

interdependence. Interdependency is a characteristic of a department and is defined as the extent to which departments depend on each other for resources or materials to accomplish their tasks (Daft, 2004: 264). Low interdependence means that departments can do their work independently from other departments whereas high interdependence means that departments are dependent upon each other for accomplishing their tasks. Thompson (in Daft, 2004: p265) defined three types of interdependency which are presented in figure 3.7.

Pooled Sequential Reciprocal Level of interdependency Low High Figure 3.7:interdependencies.

In pooled interdependence each department renders a discrete contribution to the whole. When departments are sequentially interdependent it means that the output of one department becomes input for another department. As department perform on others to perform well this is an higher level of interdependence. In case of reciprocal interdependency departments are mutually dependent. This means that outputs of one department are input for the other and vice versa. Different levels of dependency require different coordination methods to manage these dependencies and generally involve more cost and time as the level of dependency increases (Holdt Christensen, 2007). The dependency of the calibration department on other departments can be characterized as pooled interdependence as both departments (for example calibration and production) deliver a discrete contribution to the whole. Managing low dependencies (pooled interdependence) require coordination mechanisms such as standardization whereas now mutual adjustment (in the form of communication) is applied. Therefore the organizational problems maybe could be solved by applying different coordination mechanisms.

The purple colour represents the calibration frequency. Calibrations must be performed in order to comply with FDA regulations and to guarantee the functionality of the products. The calibration frequency can be seen as a means of control with respect to compliance with FDA regulations and product functionality. For example, when the calibration frequency is adjusted upwards it can be expected that the product functionality guaranteed to higher extend. The frequency has a direct impact on the required resources for performing calibrations. Basically a certain calibration frequency implies a certain amount resources. On this moment outsourcing is used to solve the lack of resources. Lowering the calibration frequency could therefore also reduce the necessity to outsource calibrations. In addition, any waste in the calibration process is taken away. The calibration frequency is as well related to the availability of the tools. With respect to the availability of tools, the current situation is of such a nature that it is expected that an increase in the

(22)

calibration frequency would increase the organization activities disproportionately. In the context of this research reducing the calibration frequency could be a means to achieve the desired cost reduction goals.

3.5.2 Conceptual model

The conceptual model (fig 3.8) represents the researcher’s view on the situation. Section 3.5.1 and the research goal form the basis for the conceptual model. The colours, again, represent the different problem areas. Outsourcing Efficiency Organizing activities Waste Calibration frequency 1 2 4 3

Figure 3.8: conceptual problem.

The organizing activities represent the internal organization activities and the organization activities that follow from the fact that calibrations are outsourced. Henceforth these activities will be referred to as internal organization and external organization. As was explained in section 3.5.1 organization activities can be seen as a form of waste which affects time efficiency. The sourcing policy affects the efficiency as well. Beside the notion that outsourcing leads to organizing activities in the current organization, and indirectly affects efficiency, it influences the efficiency directly from a cost perspective. Waste incorporates resources and therefore also affects efficiency directly. The calibration frequency also directly affects resources and can be a reason for organizational problems and outsourcing. Because of this it is included as an overall factor in the model.

3.6 Résumé

The calibration department’s major activity is performing calibrations for various internal customers. Besides calibrations, they deliver other services to the customer. A part of the calibrations is done by external calibration parties and furthermore they are dependent upon regulatory organs. After the department and its activities were described various problems were identified. These perceived problems have been collected in a jumble of problems (figure 3.6) and were analysed. This lead to a classification of the problems which has been analysed and presented in a conceptual model (figure 3.8). The next chapter presents the research questions which will be obtained from the conceptual model and the research goal.

(23)

4 RESEARCH

DESIGN

In this chapter it is explained how the research will be conducted. The first paragraph presents the main research question and the sub-questions. For each sub-question it is also explained how it will be answered. The last paragraphs will in short elaborate on the method of data collection and the research constraints.

4.1 Research question

This paragraph presents the main research question and the sub-questions. Each sub-question is followed by a description of how the particular question will be answered. Then based on the sub-questions the research structure will be given.

4.1.1 Main research question

The research question, which is obtained from the conceptual model and the research goal, is:

“Which actions have to be taken for the calibration department within Cordis to increase the efficiency?”

The actions to be taken will follow from research regarding the possibilities for optimizing the current situation as well as research on outsourcing the calibration department. The actions to be taken encompass concrete measurements and directions for further research. The definitions of efficiency will be used for assessing the effect any proposed measurements. The conceptual model has presented the area of research which serves as input for the sub-questions. The main research question can not be answered directly and must be divided in sub-questions. These sub-questions discuss on one hand the improvement of the current situation (questions 1 to 4) and on the other hand the possibilities for outsourcing the calibration department (question 5). The sub-questions are presented below.

4.1.2 Sub-questions

1. Can the calibration frequency be adjusted downwards?

The calibration frequency can be seen as a means of control with respect to compliance with FDA regulations and product functionality. Therefore it is necessary to gain insight in any instructions concerning calibration frequencies. The FDA regulations and internal procedures will be used for this.

2. What are the internal organizing activities and how do they affect time efficiency?

(24)

resources involved in the process and then consider what dependencies are possible between them. Some of the tasks and activities could be a coordination mechanism for managing the dependency. The last method is the inverse of the second, it looks for coordination mechanisms first and then determines which dependency it manages. An instrument that can assist in identifying activities and dependencies is actor activity diagramming (AAD). AAD is an instrument to gain understanding in business processes in terms of activities, actors and transfers between the actors “, (Schaap, 2000: 5). A process is described by Davenport (1993: 5) as: “a specific ordering of work activities across time and place with a beginning and end and clearly identified inputs and outputs”. The advantage of AAD’s is that it includes not only activities but also the actors that perform the activities. In this way insight can be generated in the interactions between the actors for executing a particular task within the process as well as insight in which actor performs what activity on what moment within the process. Attachment 2 gives an explanation of the different symbols which are used in the AAD’s.

3. What is the influence of current outsourcing practices on the organizing activities and subsequently on the cost efficiency?

Organizing activities for contractors can be expressed as transaction cost. Transaction costs are the cost for coordination and control and the cost connected with the risk of opportunistic behaviour and poor performance (Van der Meer –Kooistra & Vosselman, 2000). Opportunistic behaviour means that the contracted firm is seeking private gain at the expense of the mutual benefits. To be able to determine the influence of outsourcing on the organizing activities it is necessary to gain insight in the current outsourcing processes. This can be done as well with AAD’s. Based on the outsourcing processes an assessment can be made of the transaction cost. Transaction cost can be represented as the time spent on the coordination and control activities. That time should be compared with the cost involved in the transaction.

4. What is the waste in the processes and how does it affect efficiency?

(25)

question. Defects can be seen as calibration work that is not done properly. This is audited periodically and therefore not of importance for this research. Identification of the other types of waste will be done by using AAD’s what is according to Hines and Rich (1996) a useful method for identifying these types of waste.

5. What are the possibilities for improving the current situation?

The questions two to four provide a current state overview with respect to efficiency. For each of these questions it will be discussed which improvements are possible regarding efficiency. Together with question one this results in a set of possibilities for improving the current situation.

6. What are the possibilities for outsourcing the calibration department and how does this

affect efficiency?

As was mentioned in paragraph 2.2 and 2.3 (the research goal) the major reason for outsourcing the calibration department are cost. However de Bruijn (1999: 25) states that the criteria that are important in outsourcing decisions are in the first place determined by the nature of the activity. The differences stem from the relation between the activity and the continuity of the organisation. Core activities are important for the continuity of the business process and because of this reason cost should not be the sole make or buy reason. As calibration can be characterized as a core activity, because it guarantees the functionality of the products, other criteria should be taken into account. The literature on outsourcing mentions various reasons whether or not to outsource activities. Attachment 3 gives more detailed insight in outsourcing decisions in the form of a theoretical framework. From this theoretical framework a list of criteria has been obtained that are important for the make or buy decision. The list of criteria that have been obtained from the theoretical framework is as follows:

• Core-competence

• Possible scale advantages of the outsourcing party • Additional advantages that may be of importance • Transaction cost

Asset specificity

Cost for coordination and control • General concerns

Each of these criteria will be examined which will result in a list of critical success factors for outsourcing the calibration department. The success factors can then be related to efficiency which will result in a representation of the possibilities for outsourcing the department.

4.1.3 Research structure

(26)

Sub-University of Groningen

question five will be answered throughout the chapters. The possibilities for outsourcing the calibration department will be discussed in chapter eight. Then chapter nine will, based on the results of the previous chapters, give advice about the actions that have to be taken to increase the efficiency of the calibration department.

Process description Chapter 5

Possibilities for improving the current situation

Waste Calibration frequency Chapter 7 Organizing activities Chapter 6 Improvement actions Possibilities for outsourcing Chapter 9 Outsourcing Chapter 8

Figure 4.1: research structure

4.2 Data Collection

To be able to determine the impact of any measures it is necessary to determine the effect on efficiency of the current problems. Quantitative data will be generated if possible and only when the unit which is measured is thought to be important, otherwise qualitative data will be gathered. Quantitative data can be obtained through Maximo and measurements. Qualitative data will mainly be gathered through structured or semi-structured interviews.

4.3 Boundary definitions

This research is restricted by the following constraints:

• Increasing the quality of the calibration is not subject of this research. However, any measures taken to increase efficiency should not decrease the quality level. The level of quality is determined in §820 of the FDA code of federal regulations.

• The research only considers the activities/problems that enable/disable the execution of calibrations. The departmental outputs that are not taken in to account are advising customers about calibration procedures for new and existing tooling, process requests concerning calibration procedures, assisting customers who want to borrow reference tooling and seeking for improvement options in all areas.

4.4 Résumé

As part of the research design the main research question was put forward first. Then six sub-question have been proposed which will serve to answer the main sub-question. For each sub-sub-question the research method was given as well.

(27)

5 PROCESS

DESCRIPTION

This chapter will give insight in the processes that occur besides the calibration process. Beside the process of performing calibrations six processes have been identified that occur regularly. Those are: NCO, repair/failure/check, request, Stork on-site, Stork external and NMI/Lighthouse and external subcontractors. Each of these processes (including calibration) is described and presented in a separate paragraph..

5.1 Calibration

Figure 5.1. Each month the monthly calibration schedule is generated with Maximo. A work order is created for each FA. The work orders are first divided among the technicians based on each technician’s monthly working hours and skills. So each technician knows which calibrations he has to carry out for that month. Depending on which tools have to be calibrated the technician mostly knows if communication is necessary for the availability of the tool in that month. The first ‘move’ activity includes cleaning the trolley and put on clean room clothing in case of production or pilot plant tools. The activities complete and close WO are both done digitally with Maximo.

The activity, ‘prepare calibration equipment’ entails setting up the equipment that is used to perform the calibration e.g., heat up equipment, connect wires. When the equipment is not conform the specifications it should be adjusted if possible and in any case a non-conformity report should be written.

RRU Technician

Generate work orders B B Move Close WO Prepare calibration WO D C Work order Make a more specific calibration plan Communicate about availability tools Collect calibration equipment Calibrate Move Complete WO Customer

C Asks for calibration

D Calibrated equipment WO B Archive availability information Conform specs? Yes No Adjust if possible GdB B Re-assign WO to technician B Figure 5.1: calibration

(28)

The calibration technician fills in the status report, additional information and the reference equipment on the work order. This is done during the calibration or when he is back in the office. When completing a WO the technician gives authorization for closing. Completing is done in Maximo and mostly in batches. Closing the work order means that the reference equipment which was used for the calibration and the time spent on the calibration is entered in Maximo .

5.2 NCO

Figure 5.2. The NCO form has to be downloaded each time a NCO has to be written. This ensures that any changes in the NCO format are being used. Every time a NCO is written the technician has to look up the persons who need to be addressed for discussing the NCO. If this concerns production tooling, members of the production engineering team (PET) are involved. For departments such as product development the department supervisor has to be addressed. The date of the last calibration is only available by manually searching the archive for the last work order which refers to the last calibration of a particular FA. The technician is responsible for in-time return of the NCO. This implies that he frequently has to contact the addressee to remind him to the NCO.

Technician GDBO Addressee Other involved, mostly QA Manager

C

Get NCO form from system Unsigned NCO Copy Original (bring) Signed NCO Search in archive for last calibration date (non-digital) Search person to be adressed

Copy NCO

Sign NCO Fill in other required

information

Discuss actions Discussed NCO

Sign NCO

Completly signed NCO Call for a NCO

Update digital NCO file (including metric) Add NCO data in NCO file Make suggestion for actions Discuss If questions Discuss actions NCO Reminding

Constant reminding for deadline

Bring back NCO and discuss actions

(29)

The supervisor of the calibration department keeps record of all NCO’s to be able to discover trends for particular tooling. This is done in two stages, first the NCO is added to the digital NCO file. Then the information which has been obtained from the addressed party is added.

5.3 Repair/failure/check

Figure 5.3. These calibrations are on demand of the customer. The process is initiated by the customer calling the calibration technician for a calibration (in fact this is a corrective calibration). When the technician who is called is not available he sends another technician. Because these calibrations are unplanned the technician has to generate an intermediate WO first. From there on he can follow the general procedure for doing his calibration. Completing, closing and archiving is done in the same way as described in paragraph 5.1. Thus this means that for example closing is done simultaneously with closing the other (preventive) calibrations. R R U Technician G enerate interm ediate W O B M ove C lose W O Prepare calibration W O D C ollect calibration equipm ent C alibrate M ove Com plete W O C ustom er

D C alibrated equipm ent

W O B Archive C onform specs? Y es N o Adjust if possible Asks for calibration

C C Available? N o Call other technician Yes Figure 5.3: repair/failure/check 5.4 Request

Figure 5.4. Processing requests is an activity that falls beyond the research boundaries, but because it involves calibration of new tools it is incorporated here. A request can only be applied for with a calibration/maintenance request form. The calibration/maintenance request form discerns three different requests, namely introduction of a new tool, change of the calibration procedures and inactivation of tools. Generally before generating a WO for a new tool there is reciprocal contact for implementing the calibration procedure which is presented as ‘give advise’. When the WO is generated/adapted it is printed and brought back to the customer together with an collation form. This form has to be signed by the customer what means that the customer agrees with the new WO. When a calibration for a new tool is requested the technician often has to collect information about the tool and the calibration procedure. Before the calibration technician is able to perform the actual calibration a short ‘finding out phase’ is necessary. Depending on the kind of tool the customer brings his tool to the calibration department.

(30)

Customer RRU Technician

C Generate/adapt/ inactivate WO Request Calibrated tool WO D

Print collation form and new WO

Find out about new tool and calibration procedure Calibrate tool Get autograph Autograph request for new tool? Yes D Request fulfilledNo request for new tool? Yes

No

Inform

Give advise if necessary Discuss about new tool

Request GDBO Autograph Get autograph Figure 5.4: request 5.5 Stork on-site

Figure 5.5. Beside assigning WO’s to the technician in the beginning of the month it is also determined which items have to be calibrated by Stork (and other external parties). Basically this follows from the WO, but due to availability problems some tools cannot be calibrated by Stork. In this case ‘compensation items’ are assigned to Stork. This is all covered in the planning stage in the beginning of the month. Client’s deliver their tooling except for the temptales and nanomete which are collected by the Cordis technician. Depending on which equipment has to be calibrated the Stork technician can do his job on the calibration department, or, when it concerns non movable tools, on the department where the tools are located. In this case a Cordis calibration technician has to guide the Stork technician through the building. The certificates from Stork include their calibration results and have to be checked on fourteen criteria by a Cordis technician before the WO can be closed. This is determined in the procedures for services from external parties.

(31)

RRU GDBO Stork Planning Internal Client HFB Stork calibration technician

C _calibrateTools to C B what to calibrate Date Equipment deliveries equipment Calibration results B Usher technician Determine calibration date Generate WO’s Complete WO + replace sticker Check certificates Make certificates Calibrate non movable equipment Calibrate delivered equipment Create availability for non-movable equipment Deliver equipment before date Fax WO’s WO Date WO Usher technician WO + certificate Certificates B Arrival on-site B Close _certificate D B Generate plan Collect temptales/ nanometers

Figure 5.5: Stork on-site

5.6 Stork external and NMI/Lighthouse

Figure 5.6. These AAD’s give the process of the calibrations that are not done on-site, which mainly involves reference equipment. NMI and lighthouse only calibrates a few items.

Two weeks before the beginning of the month the plan for the next month is send to Stork. However in general it frequently occurs that the planning will still be send in the beginning of the month when the WO’s are assigned to the technicians. The internal client is in this case often the calibration department because this process mostly concerns reference equipment. The tools are all send on the first Monday of each month. The technician has to bring and get the tools to and from the logistics department.

(32)

RRU Technician Stork Internal Client

C WO for Stork Tools + certificate Tool Make certificates Deliver tool generates quotation Quotation Make E-rec Commucicates Calibrate tool Tools Send tools WO + certificate B Check certificates/ complete WO Close WO D B GDBO C Send planning Get approval for E -rec Check E- rec Equipment deliveries Prepare sending

Get tool from logistics department

Figure 5.6: Stork external (reference equipment)

Transportation for sending the tools is arranged by Stork. It occurs occasionally that tools are not returned in time which results in a NCO (overdue). The maximum lead time, however, is set at 3.5 weeks. When the contractor sends a quotation the technician has to make an electronic request (eReq) which is a request for payment to the contractor (Stork in this case). Checking and completing the WO is done simultaneously. Again closing the WO occurs together with other WO’s.

NMI/Lighthouse

Figure 5.7. The process for NMI and Lighthouse is somewhat the same as for Stork with the difference that NMI and Lighthouse have to determine the calibration date first before the tools are being send. Furthermore transport has to be arranged for sending the tools. This can imply that a technician has to bring the tools to these companies.

5.7 External subcontractors

Figure 5.8. This AAD shows the process of external parties who come to calibrate on-site. These tools are often the tools that require a complex calibration procedure. The external parties are: Arburg, Mitutoyo, Mettler Toledo and Engel. The tools which they have to calibrate are divided over the company. A technician has to usher the external technician through the company. The customers have to create availability for the tool that has to be calibrated. Again certificates have to be checked.

(33)

RRU Technician NMI/Lighthouse Internal Client

C Calibration items for external parties C

Calibration date Tools + certificate Tool Make certificates Determine calibration date Commucicates Deliver tool generates quotation Quotation Make E-rec Commucicates Calibrate tool Tools Send tools WO + certificate B Check certificates/ complete WO Close WO D B GDBO Get approval for E -rec Check E- rec Arrange transport Prepare sending Equipment deliveries Figure 5.7: NMI/Lighthouse

RRU Technician External party Internal Client

C Calibration items for C external parties Calibration date WO + certificate Available tool B Check certificates Determine calibration date Commucicates Close WO Create availability for tool generates quotation Quotation D Make E-rec Commucicates Calibrate non movable equipment Usher technician B Calibration date

Figure 5.8: external subcontractors

(34)

5.8 Résumé

(35)

6 ORGANIZING

ACTIVITIES

The organization activities can be divided in activities concerning the execution of calibrations by Cordis’ technicians and activities in order to enable contractors to perform calibrations. As was explained in paragraph 3.5.2 these activities will be referred to as internal organization and external organization. This chapter will answer the sub questions two and three:

2. What are the internal organizing activities and how do they affect time efficiency?

3. What is the influence of outsourcing on the organizing activities and subsequently on the cost efficiency?

First the internal and external organizational activities will be assessed followed by possible improvement options.

6.1 Internal organization

The first section of this paragraph identifies the organization activities and the second section determines the effect of these activities on efficiency.

6.1.1 Activities

For identifying the internal organization activities the method of Crowston (1997) has been used. First the AAD’s are used to determine which of the tasks and activities are a coordination mechanism. Then coordination mechanisms will be identified that are not incorporated or visible in the AAD’s. The AAD’s that can be used to asses the internal organization activities are calibration,

NCO, repair/failure/check and request (with respect to new tool calibration). The coordination

tasks that follow from these AAD’s are described next.

Assign WO’s to technicians: This activity has to be done because the technicians are not always

available in a particular month due to holidays or other cases of absence. Besides it is important that each technician can do all sorts of calibrations. Therefore each time the types of calibrations for that month have to be checked and reassigned in order to sustain the technicians’ cross functional skills. Cross functional skills are necessary because other departments are dependent on calibration for getting their tools calibrated before the calibration due date.

Make a more specific calibration plan: This is actually not a completely physical activity which

initiates the calibration process from the technician’s point of view, but rather an ongoing mental process. Due to the disturbances which were mentioned in figure 3.6 it is not possible to do calibrations in an continuous flow, that is doing a calibration and immediately doing another. For this reason it is necessary to adapt the personal calibration plan continually.

Constant reminding for NCO deadline: The calibration department is dependent upon the customer

who have to process the NCO within 10 days. There is a time limit for handing in the NCO’s to the calibration department because of quality guarantees.

Gather availability information: Due to limited availability of tools technicians have to

(36)

The former activities have been obtained from the corresponding AAD’s. Beyond the process representation of the AAD’s one other coordination mechanism has been found.

Searching: This is the organization activity to determine the location of a tool. This is important,

because any missing tool should be reported in the metrics. When a tool is missing the technician cannot find the tool when he is on the department were the tool should be. Or, the perceived owner of the tool does not know the tool’s location when the technician communicates for availability. Sometimes tools are found back. When the tool cannot be found it is put on non-active in Maximo.

6.1.2 Current state

In this section the effect of the coordination activities on the efficiency will be determined.

Assign WO’s to technicians

The time for assigning the WO’s to technicians is determined qualitatively and is approximately 1 hour a month.

Make a more specific calibration plan

The time for making a specific calibration plan, is not measured because it is an ongoing process which mainly occurs mentally during other work.

Constant reminding for NCO deadline

Based on the NCO database result from last year it has been found that on average there are about 11 NCO’s a month with an average lead time of about 6 days. The technicians are calling the receiver of a NCO at times. This doesn’t take longer than two minutes, however based on the lead time and the amount of NCO’s a month it can be said that on average there are at any time two technicians busy with NCO’s.

Gather availability information

Support department efficiency

Support department efficiency

Improving the efficiency of the calibration department at Cordis Europa N.V.

Support department efficiency

University of Groningen

Technology Management

Groningen, December 2007

MANAGEMENT SUMMARY

PREFACE

LIST OF ABBREVIATIONS

TABLE OF CONTENTS

1 COMPANY

DESCRIPTION

2 INTRODUCTION

3 PRELIMINARY

RESEARCH

4 RESEARCH

DESIGN

5 PROCESS

DESCRIPTION

6 ORGANIZING

ACTIVITIES