Agriplas the road to the future
Improving the internal organization of Agriplas
University of Groningen
Faculty Economics and Business
Master of Science in Business Administration Specialisation Operations & Supply Chains
G.H. Overweg
Student number 1593110
Supervisor University G.C. Ruël Co-supervisor University W. Westerman Supervisor Agriplas C. Amoraal
Management summary
This thesis is written based on the research conducted at Agriplas. Different types of problems; like the quality of products, the supply of raw materials and miscommunication were the reason to start this research. All of these problems are related to the operations function of Agriplas. Therefore, the objective of this research was to improve the operations function of the company. In the research model planning and control of the transformation process were introduced as concepts which will improve the operations function. The described problems are related to the transformation process of Agriplas. The new strategy of the company will put even more pressure on the operations function. Because customers demand better quality and faster deliveries of products.
This has led to the following problem statement:
How can Agriplas improve their operations resources?
For this research the operations resources of Agriplas are diagnosed. This diagnosis is based on the operations strategy matrix of Slack 2002. In this matrix the market requirements of the company and operations resources capabilities are reconciled. In the situation of Agriplas it means that the operations resources capabilities should improve to fulfil market requirements. Therefore the focus was on identifying the market requirements and afterwards see how the operations resources capabilities can move towards fulfilling market requirements.
The market requirements are translated into logistic performance objectives. Research showed that customers of Agriplas value the following objectives; price, delivery reliability and quality. Also important are mix flexibility and dependability. For designing the resource capabilities fulfilling the objectives is important. These objectives are demands for designing the operations resource capabilities.
The theory of Slack divides the operations resource capabilities in the following four decision area’s; capacity, supply networks, process technology and development and organization. However for analysing the company the focus was on the transformation process of Agriplas. In this transformation process the input, throughput and output were analysed. In the input the focus was on the main raw materials and the delivery of the main supplier was analysed. In the throughput the focus was on identifying all waste on the shop floor. In the output the storage was taken into account. In the vertical analysis the planning structure, documentation was taken into account. The analysis of the operations resources ended with a typology of the production situation and defining the tasks, responsibilities and authorities of the employees.
Improvements. A short overview of the proposed designs will be given. Afterwards suggestions about improvements will be given.
Within the Quality System two redesign programs are suggested. These programs will focus on designing a quality system and to implement a customer complaint program.
The quality system focuses on improving control within the organization. This is noticeable in the work processes. These work processes are defined in the Tasks, Responsibilities and Authorities of employees. Output control is an important indicator to see the quality of the process. Also in this redesign program focus was put on the role of the quality department. This department should become more important for the whole organization. Focus should go from measuring products to controlling processes. Finally the role of maintenance should be taken into account. In a continuous process to avoid disturbances is important. Therefore maintenance plays an important role.
The second redesign program focuses on customer complaints. At the moment this process does not exist. This shortcoming was noticed and a design for capturing customer complaints was made.
The second redesign program focuses on the MPS. Such a production schedule focuses on a longer period of time as current schedules of Agriplas. Also the different information flows for the MPS are important for Agriplas. For Agriplas 4 main information flows were designed. First the long term demand. In this flow the focus should be on suppliers and communication with suppliers, the high stocks and with that capital loss are problematic for the company. Secondly the company should improve communication with customers and know how to add value to them. Both aspects are related to planning. The last two information flows are control oriented. The third information flow is measuring the capacity of the departments. For this a process is suggested. Finally the scheduling process needs to be redesigned.
The third main redesign program involves process improvements. The internal company should develop itself by focussing on process flows. Therefore responsibilities should be placed lower in the organization. Clear Tasks Responsibilities and Authorities need to be developed to make sure that mistakes do not happen. For a better control of the internal organization production cells need to be implemented.
Also the Single Minute Exchange Dies theory is useful for Agriplas. This theory is developed following the lean principles. Focus of this theory is reducing waste in both time and scrap/rework.
Preview
Before you lies my thesis. This thesis was my final project for the Master of Science in Business Administration with specialization Operations & Supply Chains. My research was performed at Agriplas in Cape Town, South Africa.
All clichés about writing a thesis became true. The Dutch saying “de laatste loodjes wegen het zwaarst” got a new meaning to me. After my return from South-Africa I found it difficult to pick up my life in the Netherlands and to finish this thesis.
I want to thank Gwenny Ruël for her effort, time, expertise and especially patience. Also I want to thank Wim Westerman for his support before this project and his helpful comments afterwards. Both persons are associate professors at the University of Groningen.
I want to thank all my colleagues at Agriplas for their support when I was writing this thesis. And (maybe more important) for their willingness to discuss all aspects of South African life. Baie dankie; Sollie, Jasper, Donovan, Eugene, Bary, Kristel, Johnny, and Hannes. A special thanks to mister Amoraal for giving the possibility to write my thesis at Agriplas and for supervising this project.
Finally, I hope you enjoy reading this thesis.
Table of contents
1. DESCRIPTION OF THE ORGANIZATION ... 6
1.1HISTORY... 6
1.2PRODUCTS... 6
1.3CURRENT SITUATION... 6
1.4COMPANY STRUCTURE... 6
2. RESEARCH MOTIVE ... 8
2.1REASONS FOR THE RESEARCH... 8
2.2AIM AND PROBLEM STATEMENT... 10
2.3RESEARCH MODEL... 11
2.4BOUNDARIES... 11
2.5METHODS USED... 12
2.6OVERVIEW OF THE REPORT... 12
3. THEORETICAL FRAMEWORK ... 13
3.1THE RECONCILIATION MODEL... 13
3.2THE MARKET REQUIREMENTS PERSPECTIVE... 14
3.3OPERATIONS RESOURCES PERSPECTIVE... 15
3.4THE PROCESS OF OPERATIONS STRATEGY... 16
3.5OPERATIONS STRATEGY MATRIX... 16
4. DIAGNOSIS ... 17
4.1MARKET REQUIREMENTS PERSPECTIVE... 17
4.2OPERATIONS RESOURCES PERSPECTIVE... 20
4.2.1 Transformation process ... 20
4.2.2 Vertical structure ... 24
4.2.3 Characteristics of the production ... 25
4.2.4 Operations capabilities... 28
4.4CONCLUSION... 29
5. DESIGN OF THE OPERATION ... 31
5.1QUALITY SYSTEM... 31
5.1.1 Theory about quality systems... 31
5.1.2 Quality system ... 32
5.1.3 Customer complaints ... 35
5.2MASTER PRODUCTION SCHEDULE... 35
5.2.1 Theory about the Master Production Schedule ... 36
5.2.2 Design of the Master Production Schedule ... 36
5.3PROCESS IMPROVEMENTS... 40
5.3.1 Theory to implement process improvements... 41
5.3.2 Process improvements. ... 41
5.3.2 SMED theory ... 42
6. CONCLUSION AND RECOMMENDATIONS ... 45
6.1CONCLUSION... 45
6.2RECOMMENDATIONS... 45
6.3REFLECTION AND DISCUSSION ON THIS RESEARCH... 46
1. Description of the organization
In the first chapter the company Agriplas will be described. This description includes the history and the product range. The current situation will be discussed in the third paragraph.
1.1 History
The company Agriplas was founded in 1968. Almost from the beginning the company merged with competitors, changed from owner and moved within the country. The last merger was 7 years ago. This merger caused a move from Johannesburg to Cape Town. At this moment Agriplas is a 100% subsidiary of Kaap Agri and has about 90 employees. The head office and production facility are in Cape Town and regional offices are in Alberton and Nelspruit.
1.2 Products
Agriplas is a company which delivers according to themselves “perfect water management solutions and an extensive network of professional services.” They deliver those services by selling the following kind of products; Driplines, Micro Sprinklers, Button Drippers, Sprinklers, Wetting Front Detector, Pop-ups, Radio control, Fertiliser pumps, Filters, Valves.
Within Agriplas the flow of goods can be divided into three. The first flow is wholesale activities. Goods are bought repacked and sold. The second flow is goods which are assembled to order. The last flow are goods which are manufactured in the own factory. The warehouse functions as a customer of the manufacturing department because they create demand.
1.3 Current situation
In 2005 Agriplas had a turnover of 58 million rand (about 5.8 million Euro) and a profit of 4.4 million rand (about 0.44 million Euro). In 2006 they had a turnover of 51 million rand (about 5.1 million Euro) a profit of 1 million rand (about 0.1 million Euro). The decline in turnover and profit was caused by increasing competition and bad market circumstances. Due to these reasons and the fact that the previous director went to a competitor an interim manager was assigned. When assigned to his tasks he developed in cooperation with the owners and senior staff a three based vision/strategy.
• Re-engineering of manufacturing process and integrated supply chain system. Agriplas is fully
integrated across a range of business including: international sourcing and procurement, manufacturing, stocking on three locations, logistics, distribution, selling and branding
• In-model change to improve business performance on; stock, creditor-funding, turnover and
margin levels.
• Market re-definition change: To reposition the group at the level of a total solutions provider of
water related problems.
1.4 Company structure
in offering water solutions for customers. The company is rather hierarchal, employees communicate through the hierarchal chain.
Cornelis Amoraal Managing director Assistent Elsie Oosthuizen Bary Worthington Factory
Kristel van Niekerk Warehouse Pieter Joubert Manager sales Vacant Manager marketing Financial department Technical sales Tele-sales Assistent Regional office
Johannesburg Regional office Nelspruit Assistant Lorenzo Quality Baron Hannes Smit Change agent Valves
Tooling room Assembly
Extrusion
department Injection
Electronical department Assistent
Figure 1. Company structure
Due to high unemployment having a job is important for most of the employees. Low skilled labour is cheap (the minimum wage in South Africa is 80 euro’s per month. Within the company pay is between 120 and 300 euro’s for low skilled labour). Therefore it is difficult to give an indication about the working staff in terms of employee satisfaction. Employees get a bonus if the turnover and profit are high enough. Employees do not get rewarded by fulfilling other performance indicators.
Assumed is that there is a difference in the white colour jobs or blue colour jobs. The first group will seek for challenging projects in the company while the blue colour jobs are happy with having a job.
2. Research motive
The strategy as discussed in chapter one is partly successful. Different problems exist; these problems are the reasons for this research. These problems will be discussed in the first paragraph and this will lead to the aim and problem statement of this research. Thereafter the research model will be presented hereafter the methods used for this research will be discussed including data collection. Finally an overview of the total research will be presented.
2.1 Reasons for the research
Based on his experience the new director is under the impression that the manufacturing departments created to much scrap and rework. Figure 2 shows the amount of scrap and rework in a five month period. The total amount is almost 470.000 rand (about 45.000 euro).
Scrap 5 months
0 20000 40000 60000 80000 100000 120000 Janu ary Febr uary Mar ch Apr il Mei Months V a lu e i n r a n d Start up scrap ScrapFigure 2. Scrap and rework.
Finding information about the amount of scrap and rework rate is not complicated. Only this information is used for bookkeeping purposes and not for reducing the amount of rework and scrap. Also other useful information as productivity is not being measured.
Agriplas has the impression that customers and sales representatives are not satisfied with the quality of the products produced in the manufacturing department. During the monthly sales meeting problems of customers regarding products, the reaction of the sales representative and the followed process are often discussed.
Also the companies’ organization does not encourage communication between departments. Therefore communication takes more time and causing miscommunication. The company wants to add a new branch for selling irrigation related products to retail organizations with households as final customer. Integrating the new landscaping division is complicated in the current structure.
According to Ahire (2000) there are five measures on internal quality; scrap rate, rework rate, defect rate, internal reliability test performance prior to shipping and manufacturing productivity. On the first three measures mentioned by Ahire the company is not in control. Therefore it is easy to conclude that there are problems with the internal quality of the manufacturing department.
The described problems are reality problems. However one can argue that the amount of scrap and rework can be seen as perception, that the aim is to high or that quality is difficult to measure because quality is also perceived. Partly those comments are right. But Ahire (2000) already showed that there are shortcomings in the internal quality also interviews in the company confirmed the problems.
If the problems of; internal quality, supply chain deliveries and miscommunication are placed in a bigger perspective. One can conclude that the internal organization of Agriplas is not working at an optimal level. In this research the internal organization and operations function have the same goal namely the arrangements of the resources which are devoted to the production and delivery of the products and services (Slack et al 2004). Related to this is the management of this function which can be described as the activities, decisions and responsibilities of operations managers (Slack et al 2004). The operations function and the management of that function are related to operations management and operations strategy. Figure 3 shows the environment of the company from an operations perspective, the operations strategy gives direction for the input of the resources, the transformation and the output.
In this model (figure 3) the relationships between the transformation of goods and the strategic part of the company are described.
The operations strategy gives the choice to design the operations on a lower level. This is done by using the reconciliation model of Slack and Lewis. In this model the market requirements are reconciled with the operation resources. According to this operations strategy is an alignment between market requirements and operations resource capabilities. This alignment is a fit between the two mentioned dimensions. Both dimensions are contributing to each other if one dimension is ahead of the other a misfit exists, leading to problems.
In the transformation process of Agriplas input is transformed into output. The input consists mainly out of raw materials. In the throughput facilities and staff are used. These facilities have been designed for the particular transformation process. The planning and control of the operations on a daily basis is important. This to ensure that the operations process runs effectively and efficiently. Finally the output is created. This output should satisfy customers.
2.2 Aim and problem statement
A part of the new strategy is working. New markets are identified and strategies to enter those markets are being developed. Also the turnover is increasing. Customers of the main market are buying more products. At the same time the internal organization of Agriplas has problems in fulfilling the requirements necessary to compete on the main and new market. The operations function is not capable in supporting the current strategy. In terms of Slack the company is out of fit. This misfit is a risk for the company because the company is not capable in fulfilling the customers’ expectations.
Aim of the research
The operations functions should produce outputs which fulfil the customers’ expectations.
Problem statement
How can Agriplas improve their operations resources?
The company will benefit because a better usage of operations resources can reduce cost, it can increase the value delivered by the company, it can reduce the amount of investment and it can provide the basis for future innovation (Slack 2004).
For answering the main question the following sub questions need to be answered;
What are the performance objectives? What are the decision area’s of Agriplas?
2.3 Research model
The research model, figure 4 is based on the transformation process. Every organization transforms something into output. Based on the kind of operation and produced products transformation processes are designed. For Agriplas the design and lay-out of the company are given this because there is a constraint in investing money.
The planning and control of this function has two sides. Planning is the formalization of what is intended to happen at some time in the future. But a plan does not guarantee that an event will actually happen (Slack 2004). A lot off times the main plan changes. Customers change their minds, suppliers failed to deliver, staff could be absent or a machine failed to produce. Then control come into action. Control is the process of coping with changes in these variables. It may mean that plans need to be redrawn in short time (Slack 2004). The planning is more long term then the control activities. The problems facing Agriplas are an internal organization which is not capable in fulfilling objectives. The described problems of Agriplas are related to parts of the transformation process. Improving those aspects of the transformation process will lead to an output which will satisfy more customers. Improvements should be related to planning and control systems. The company has no structural long term planning or control systems on the shop floor.
Figure 4. Research model.
The two variables; the transformation process and the improved planning and control activities will be further operationalised in the fourth chapter. In this chapter the research which contains the data collection of this thesis. The research model indicates that a planning in the production process and better use quality and production control will lead to an improved use of transforming capabilities. Eventually a better use age of those goods will lead to an output which satisfies customers.
2.4 Boundaries
• The solution provided at the end of the research needs to be compliant with International Organization for Standardization (ISO) standards. This because the company decided to use ISO standards in new documentation to adopt ISO certification in the future.
• The financial situation and the uncertainty about the future of the factory exclude any financial investments.
• The solutions need to fit in the new company strategy. The marketing side of the company already improved therefore the focus is on the internal organization.
The extent in which the
customers expectations
are fulfilled.
The quality of the
operation of the
planning and control
system
• Due to time limits the solution will not be implemented by the writer of this thesis.
2.5 Methods used
Within this research the DOV-model (De Leeuw 2003) will be used. This model consists of the following steps; Diagnosis, Design and Implementation. In the first phase problems are detected and the knowledge about the problems is increased. This enquires a multi-discipliner and holistic approach. In the design phase concrete solutions are developed. The solutions should be designed in such a way that the solution is capable in handling the organization under normal circumstances. Finally the designed solutions should be implemented. This phase can be complicated while there are different actors involved with their own ideas and goals.
2.6 Overview of the report
3. Theoretical framework
In this chapter the theoretical framework will be presented. Already the DOV-model of De Leeuw was introduced as the background of this research. As mentioned before the DOV approach is multi discipliner and holistic. This is especially important in the diagnosing phase. Normally this phase starts with a stakeholder model. However the main component of this theoretical background is the reconciliation model. Related to the reconciliation model are the operation strategy matrix and the level of fit theory. All of them are described by Slack and Lewis (2002). The stakeholders model and reconciliation model include some of the same actors; suppliers and customers. The stakeholder model puts more emphasis on the role of government/society, employees and shareholders as the reconciliation model. The role of the employees will be discussed in the culture of the company. The shareholders and government/society role will not be included in this research. In this chapter the theory of; reconciliation, operations strategy matrix and operations process are introduced.
3.1 The reconciliation model
According to Slack and Lewis (2002) operation strategy is the total pattern of decisions which shape the long term capabilities of any type of operation and their contribution to overall strategy. For this theory they use the reconciliation model. This model exists out of two parts the operations resources perspective and market requirements. In the operations perspective different parts of the organization are described and which resources are available. In the market requirements part the working of markets and the influence of that on the company is given.
Figure 5. Reconciliation model
Before further elaborating the reconciliation model it is useful to make a distinction between operations content and operations process. The distinction between the content and process as mend by Slack (2002) will be given. ‘Content’ means the collection of decisions which are made deliberately or by default within the operations strategy domain. In effect these are the elements of operations strategy with which the reconciliation process is concerned. Practical this is done in the operations strategy
matrix. ‘Process’ means the way in which operations strategies are (or can be) formulates it is a reflection both of what operations managers should do and what they actually do.
3.2 The market requirements perspective
On the market perspective three different elements; customer needs, competitors actions and market positioning specify the performance objectives. These performance objectives are important while they satisfy the market requirements and that is what the operations is expected to pursue.
Customer needs
At the heart of most marketing based approaches lies the segmenting, targeting and positioning concept. Segmentation is dividing the market based on characteristics. Afterwards the attractiveness of the markets is decided. Then the company can positioning itself in a market in such away that a competitive advantage is created.
Competitors actions
Another important issue in understanding markets is the role which competitors play. Companies need to differentiate themselves of competitors. Therefore they need to know what competitors are doing what their strong and weak points are. This information needs to be classified in such a way that it is possible to compare companies.
Market positioning
If the company knows what customers want and what the competition does, a market position can be taken. Properly the company wants to differentiate themselves on terms as product range, time to market and etc.
Performance objectives
3.3 Operations resources perspective
On the left side the three main segments; operations resources, processes and capabilities are shown. Combined the three groups form the operations strategy decisions areas.
Tangible and intangible resources
Resources can be divided into tangible and intangible. The tangible resources are the facilities and staff of a company. These are transforming resources and can be seen as the building blocks of any organization. They transfer resources as materials, information and customers into output. Intangible resources are more difficult to determine. One way to do that is looking at how investors value the company. The difference between market value and the company value can be seen as intangible. Intangible resources can include things as supplier relationship, knowledge of the market, relationships in these markets and etc.
Operations processes
The intangible resources are not so much about what the company has but what it does. This is related to processes in a firm. Processes are formalised or informal but belong to the routines of the firm. Intangible resources are often embedded in routines.
Operations capabilities
The combination between tangible and intangible resources combined with the way of using these resources lead to capabilities. These capabilities can be a resource based advantage. If the company is capable in exploiting these capabilities a scarce and difficult to copy product will exist. A lot off companies has these capabilities but most often these are ‘hidden’ in the organization.
Operations strategy decisions areas
3.4 The process of operations strategy
Within the operations process three different levels can be divided. The first level is combining resources with market requirements. This leads to a fit, promises to the market are kept the product is different from competitors and the operations processes are working. The second level is the sustainability of this fit. Questions like: is the company capable in developing resources to compete under lower cost or is the company capable in increasing the value delivered to the market. Is the company capable in finding new markets, responding to competitors and etc. The company needs to try to reconcile both parts as best as possible. The third level indicates the risks when the market requirements or operation resources are changing. The way the company manages this changes are of great importance.
Figure 6. Theory of fit including risks
3.5 Operations strategy matrix
Figure 7 gives the operations strategy matrix. The matrix is used for the quality dimension as well. A cell can be critical for the strategy. For that reason a huge focus can be put on that cell. Coherence and correspondence make sure that solutions are integrated in the decision areas and in the performance objectives. Comprehensive ensures that all fields are taken into account.
Figure 7. The operations strategy matrix including quality aspects
Level of operations resource capability
4. Diagnosis
In this chapter the company will be diagnosed. According to the methodology of De Leeuw a diagnosis should describe and judge the situation of the company. The description will be done using the reconciliation model of Slack (figure 5 on page 13). First the market requirements perspective will be diagnosed. For this research the market requirements perspective is a given fact. One of the sub questions is to identify the performance objectives of Agriplas.
Afterwards the operations resources perspective will be portrait by focusing on another sub question what are the decisions areas of Agriplas? Thereafter the operations strategy matrix (figure 7) will be used to diagnose the internal organization. This will be done to answering the sub question of which intersections of the operations strategy matrix are most critical for the organization? The gaps between the desired situation and the current situation will be given.
4.1 Market requirements perspective
The main Question to answer in this paragraph is ‘What are the main performance objectives’ this will be done by looking at the customer, competitors and market position.
Customers
Agriplas has about 300 customers. Most of them are dealers of the products sold by Agriplas. Sometimes the company sells directly to the end customer. Most of the end users are working in the agricultural sector. Graph 1 shows the big seasonal influence. This influence is easy to explain. Customers order after they saw the weather in the raining season. After this the farmers know how full the dams are and how much water there is to irrigate the land. Based on that they decide how much to invest. This effect can easily be seen in the monthly turnover of the company.
Monthly turnover
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Data shows shifting sales (table 1) to the Gauteng region (Johannesburg) about 1400 kilometres from Cape Town. Cape-Town Gauteng 2005 60% 40% 2006 50% 50% 2007 (estimated) 40% 60%
Table 1. Turnover per region
In the Gauteng region Agriplas sells products to different customers compared to Cape Town. The demand is mainly from the mining industry instead only of the agricultural customers. A new business division (landscaping) will focus on selling products to retailers with households as end customer.
Agriplas also exports products. Exports are accepted from Cape Town, collected and transferred to the subsidiaries close to the border. In the subsidiaries the right documentation is added to the products. One main factor with exports is the changing fluctuation rates.
Another concern is the lack of investment in agriculture because final customers fear that their land will be reclaimed in act of the Black Economic Empowerment. The BEE is installed to give the original inhabitants of South Africa a part of the economy back.
Competitors
The main competitors in South Africa are Andrag and Netafim. Andrag is the market leader and sells a wide variety of agriculture products. However the biggest competitor is Netafim an Israeli company. Netafim and Plastro the strategic business partner of Agriplas. The two companies are biggest irrigation companies and are competing worldwide. Both companies invest a lot in research and patented the best products
Market position
According to a research from Plastro is the South African market for irrigation systems is 35-50 million dollars. This research used the GDP from a country and the market size to show the profitability of the market. For Plastro the South African market is a second category market. In those markets Plastro chooses to be active based on a contact with one company.
Figure 8. The results in the Four Phase Model
At this moment Agriplas is in the efficiency phase. The focus of the management is on control and internal organization. This can be seen on the focus on the cost price and customers who choose based on price and quality (Hardjono 2004). The next phase of the wheel is flexibility in that phase companies add value to customers by bringing a maximal service level and identifying the implicit and explicit needs of customers.
Ones a month there is a sales meeting in Agriplas. All sales representatives are invited. They discuss a number of issues like; the market position of the company and adding value to customers by bringing a full range of products. However at this moment there is no structure to acquire market information for the log term and information that is useful for management. According to management, customers value the following performance indicators; cost, long-term quality and delivery reliability. The delivery reliability is important in this seasonal market. This extra indicator is not included in the theory of Hardjono (2004).
Performance objectives
The relative importance of the five performance indicators can be determined by using the order-winning and qualifying competitive factors. Order order-winning factors are those things which directly and significantly contribute to winning business. Qualifying factors may not be the major competitive determinant, but are important in another way.
4.2 Operations resources perspective
In this part the operations resources part of the company will be discussed by the determining the main decisions areas within Agriplas. In the third chapter the reconciliation model was described. In this model different areas for understanding resources and processes are given.
These areas will be analysed with the following techniques. The tangible and intangible resources will be described in the sub paragraph transformation process. This transformation process will be analysed using basic structure and by analysing the input, throughput and output. The operations processes will be described with the vertical structure. Characteristics of the operations will describe the capabilities of the operations. In the different sub-paragraphs the techniques will be further elaborated.
The general manager of Agriplas decided that the main focus should be on the extrusion department. This department adds 50 percent of the turnover of Agriplas. Also this department produces the most complex product. But this does not mean that other departments are not important. Findings will be generalized at the end of the chapter.
4.2.1 Transformation process
First the basic structure of the extrusion department will be given. Then the analysis will be continued describing the operations according the transformation process this includes the; input, throughput and output.
Basic structure
The extrusion department is a simple process. The extrusion department has two CODP’s figure 9. Orders of customer are delivered out of stock or can be produced to order.
Figure 9. Basic structure
consequences for all the upcoming stages because they produce a wrong product and the previous stages because there production was useless. From a control point of view decoupling stages can be useful.
Input
In the process of Agriplas there are three main inputs. The first input is raw plastic materials. This material can be divided in purchased plastics or regrinded scrap. The company does not have the possibility to check the quality of the raw materials. The purchased materials are imported out of different countries like; China, Brazil and Korea. Quality of the imported materials is not an issue. Delivery reliability is.
Because all products are based on a different recipe different raw materials are demanded. Therefore it is difficult to replace one material by another. Another input is regrinded material. This material is of less quality causing problems in the production process. The material is used because it is cheap and available. It is difficult to check the quality of this regrind.
A master batch is added to increases the strength of the pipe. This master batch is available without delivery or quality problems.
Finally drippers are used. The drippers are purchased from Israel purchasing of goods is based on last years sales and expected demand. There is no feedback with salespeople about how much to buy. The supplier Plastro starts manufacturing after they received an order. An extra constraint for them is that they produce on batches based on the colours. Therefore internal lead times of 17 orders during a year and a half are taken. The lead times of Plastro are long and fluctuate heavily (Graph 2). The transportation time between Israel and South Africa takes 4 till 5 week’s weeks. Because the high cost of flying the company prefers that goods are transported with ships.
Lead time Plastro
0 50 100 150 200 250 300 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Orders D a y
s Internal leadtime Plastro
Transportation time Total lead time
Graph 2. Lead times Plastro
Throughput
In this subparagraph the throughput will be described. A short description of the extrusion department will be given. Afterwards the different which are being measured variables will be given. In the extrusion department the plastic is mixed and heated to 220 degrees. With the help of a die the mix is formed into a pipe. While forming the pipe a dripper is places inside. The pipe is cooled in a water bath, is marked with product information and punches are made. Punches are little openings in the line allowing water drips to come out. Finally the pipe is walsed and rolled up. The pipe is taken off from the rolling machine and a sticker containing product information is attached. In appendix 1, 2 and 3 the production of dripper lines, the setup process and daily cleaning process are given.
Except describing the process extrusion department is measured. The data comes from 13 production days between 30 July and 23 August. In this period 89 order where fulfilled. Containing 204 incidents. Table 4 shows the different codes which corresponded with the blue line in graph 3. The yellow line in graph 3 shows the average kilos of waste made during this incident.
In total 3478 kilogram of scrap was produced. In which 1645 kilo’s is spilled during set-ups. Appendix 4 gives and detailed description of the incidents. In Graph three the incidents are divided on numbers and the amount of waste is quantified. Also the average scrap per incident is given.
Table 2. Incidents
Incidents related with kilograms
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Graph 3. Incidents related to kilograms.
Impressions during the daily observation
Except capturing data for the analysis. Knowledge was obtained during observations and non-structured interviews. During the observation period it was not that busy. According to the production manager this leads to the following problems; more changeovers and staff is less motivated to speed up production both resulting in less productive hours. There is a big difference in how and how many times operators write down incidents. Some operators write every incident down others are illiterate and depended on someone else to fill in papers. Another main difference was that a lot of small incidents were not reported. Almost on an hourly base problems with the dripper input occurred, nothing was written down. Most of the times problems lead to a loose of material and time. Other incidents are not that frequently reported.
Output
The output or final products are stored. For the injection department this means that the products wait till they need to be assembled. The rolls are made to stock and wait till they are sold otherwise they are distributed to the end customers.
Sub-conclusion
This fishbone diagram shows the problems regarding the transformation process. All things of the input, throughput and output are taken into account. This fishbone diagram can be seen as the conclusion of this sub-paragraph. The mentioned quality of the process should be high. This to create products which fulfil customers wishes.
4.2.2 Vertical structure
In the vertical structure the planning system and documentation used in the company will be analyzed. In the reconciliation model this is related to the operations processes. In the previous sub paragraph the transformation was analyzed. The management and planning and control of the transformation process happen in the vertical structure. The planning process and documents which are related to the planning will be analysed.
Planning
The long-term planning is based on the yearly budget. The manager of the department has to propose a budget for the management team. In this budget the proposals to increase capacity are made. This plan also leads to the (re)hire of personal.
Orders from customers and technical sales representatives are accepted by telesales. They check in the computer system if the product is available. If the products are available a pick-up list will be made and the order will be collected out of the warehouse.
If products are not available telesales discusses with the warehouse manager what to do, if necessary products are purchased.
If Agriplas manufactures the products themselves a lead time of two weeks will be given. The order is put in the system and once a list with outstanding orders will be printed. On Monday morning their is a meeting between the warehouse and the factory appendix 5. In this meeting the warehouse orders an amount of products from the factory. Main issues are; capacity, the availability of materials and which machine is currently producing what. Based on these three decisions the factory gives a lead time for the ordered products. A lead time of two weeks is acceptable but sometimes customers want a faster delivery.
If demands changes adjustments to the schedule can be made on a daily base. Their is no process for adjusting the schedule on a daily base. Sometimes this is done with the help of the warehouse manager sometimes the warehouse manager is bypassed.
The scheduling itself is a simple sequencing of orders. This way of scheduling accounts for losses while it is more difficult to create batches. For example the first machine has problems with producing light products. This is not taken into account in the scheduling process. Producing this product on this machine causes that the head of the machine blowes off sometimes.
As can seen there is a yearly planning. Afterwards two managers make independent of each other decisions about purchasing and scheduling. There is a gap between the two levels. Sales representatives are not active in giving predictions towards the production planner and purchasing manager.
On a daily basis middle management is not allowed to change the planning but this happens.
Documentation
The following documents are used in the factory. The output is registered in computer systems. This can be an excel model or the administrative program.
rate. Communicating by only the product code and not having setup documentation is poor. Setup documentation is missed by operators. Operators keep making the same mistakes. Another problem is communicating how much products are produced. Currently this is written on the production planning.
• Outstanding orders. This is a control list showing the outstanding orders.
• The production list is used by the operators to fill in the product code with details about; material, diameter, wall thickness and flow rate and the minimum and maximum boundary. The operator fills for every produced roll a number, the weight and the time it was produced and if the given norm was reached. Also they fill in what kind of quality checks they have done. It happens that operators forget to fill in certain information.
• The output from the test bank. The test bank assesses if the product does where it is designed for. A test under the operators of a team showed that none of them knew what the limits where.
• An input list for the drippers so that batches from suppliers can be found back.
• A list containing information from the BOM for the forklift driver to pick the right materials. • The scrap lists is used for the financial department. This information ends up in the monthly
financial reports.
Sub-conclusion
Most lists are used to control if a specific event did happen. The documents are not designed to create information and eventually leading to knowledge. This increased knowledge will lead to a better use age of operations resources. Of course documents should support the main task. But the documents should be designed in such away that analysing the main task is possible as well. This is missing at Agriplas.
4.2.3 Characteristics of the production
In this paragraph different aspects of the company will be discussed. This because theories give based on the situation different variables which should be taken into account. The fabrication unit will be classified using the elementary typology of production situations. Broekhuis (2005) focuses on ideal types of quality systems given a production situation. The ideal quality system for the given production situation is elaborated based on different dimensions used in organisational theory. This will be discussed in the sub paragraph; task responsibilities and authorities.
Production situation.
production situation. However this department has lot in common with continuous production. Routings are dedicated, long batches are possible but the assortment is large and capacities are not completely dedicated.
According to Van der Vaart (2005) the main thing in continuous production is to avoid disturbances, equalize demand, and have enough raw materials and continuous monitor the process. In batch-continuous production the big influence of setup times should also be taken into account. (Van der Vaart 2005). These parameters where taken into account while describing the previous paragraphs. The other main departments look like cell production. Often products are adjusted to customer’s wishes or simply assembled of a few main parts.
TRA.
In this paragraph the different roles employees in the manufacturing department have, will be discussed by defining their tasks, responsibilities and authorities. This to see if employees have the right authority to fulfil the tasks and also to see if the combined tasks are well defined and that are no gaps in responsibilities.
• The production manager is responsible for everything with has to do with production and has the authority to do everything.
• The production leader is responsible for both departments subject of this research. His task is the daily monitoring of the process. He has the authority to make adjustments in the schedule. If the production manager is away he is responsible for the daily process in the production department.
• The quality department acts under the production leader. The main focus of the quality staff is assuring the quality of the end product. They do that by checking the end products. This checking is done on the first product produced and randomly on other products. The quality department does not have a database including incidents during production. Table 2 shows the quality measurement which are taken during the process.
Quality standards
Every coil Every 4th coil Every shift
Pipe finish Wall thickness Master batch
Hole punching Drip fusion Pressure tests
Pipe printing Drip rate 10 meter spacing
ID tests Punching depth Coil lengths
Drip spacing Table 3. Measuring process
focuses on the quality of the business chain. This shows that the internal organization is out of touch with the strategy.
Figure 11. Development in quality management Hardjono 2004
• Underneath the production leader their are two team leaders. Because the factory runs continually between Mondays 10 in the morning until Thursday morning 7 o’clock the team leaders have a certain authority. A team exists out of five operators. The team leaders are responsible for what happens in their department. They set up the machines, train operators, help with filling in forms and passing messages.
• The operators in the extrusion department are responsible for one machine they are responsible for what happens on the machine and need to fill in the right documentation. Table 3 shows how many times and what the operators of the extrusion department need to measure.
• The maintenance person is responsible for the maintenance of the machines. In general maintenance is carried out on Fridays. If there are small interruptions team leaders and operators try to fix the machine. If they are not capable in solving the problem the maintenance person is asked to help. Sometimes the maintenance person receives feedback on how the machines operated but this feedback is not gives in a structured way.
• The material mixer is responsible for the input of the raw materials.
• Store assistant mostly the forklift driver provides raw materials and drives finished products away.
Sub-conclusion
at this moment. A vacancy exists in this departments and it is difficult to find and qualified maintenance person. Problematic is the lack of communication between maintenance and other staff.
4.2.4 Operations capabilities
There are four operations strategy decision area’s; capacity, supply network, process technology and development and organization. These dimensions are important in the operation strategy matrix. All four dimensions will be discussed.
Capacity.
Except of the electronically department all products are manufactured in Cape Town. The extrusion department has three machines with different speed. There are two teams of 5 or 6 people who work fulltime 40 hours. If necessary the employees will work extra time to increase capacity. Normally there is enough capacity so the factory is leading. Only during the busy periods capacity is lagging. The factory works only with two capacity plans. One is based on the yearly budget and the other one is weekly adjusted. It is difficult to determine the demand. Therefore the company needs a lot of capacity which is normally not used. The small changes in different products make it difficult to make economies of scale.
Supply networks
In the ideal situation stated by the management of Agriplas the company would only concentrate on buying, marketing and selling products. On this moment the company wants to improve the supply chain. The focus is the whole chain, customers and suppliers. Due to the long distances and types of transportation is it difficult to have the right amount of products on the right time. Long distances are also problematic in the supply chain. The amount of stock is closely related to the supply problems. Also the backorder lists shows problems related to imported goods. The products which can not be supplied are related to imported goods.
Process technology
In process technology the way science is adapted to improve processes is important. In Agriplas looking at processes and improving processes is not the most important. Especially the control and the usage of statistical information are on a low level. The company is not capable in collecting and manipulating information. One reason is that the computer program is not sufficient to support manipulating information.
Development and organization
4.4 Conclusion
As described in the theoretical framework there is a difference in the content and process of strategy. First the content of the current situation will be described. The new strategy which is being implemented focuses on more and different markets. However the diagnosis focuses most on the current strategy and operations management. This because the new strategy is developed but partly being implemented. In the matrix (Figure 12) different cells are identified which are critical for the success of the company but where the company is lacking.
As described in this chapter different departments are working in the company. The focus is on the extrusion department however this provided enough insight to give solutions for the whole operations part of the company. The numbers in the operations strategy matrix indicate the different gaps between the desired and current situation.
Resource useage Quality 4 6 Speed 1 Dependability 7 Flexibility 8 Cost 2 3 5 Capacity Supply networks Process technology Development and organization P e rfo rm a n c e o b je c tiv e s Decesion areas
Figure 12. Operations strategy matrix.
1. The company has problems with delivering during their season. The capacity is not used in an optimal way to deliver products on time in a busy period.
2. The capacity is mostly leading. This over capacity is not used, making that the cost of the department are divided over less products.
3. Agriplas has problems with suppliers. This is because most suppliers are foreign and because costs need to be as low as possible products need to be imported by sea. This leads to long transportation times.
4. In the processes of the extrusion and injection departments controls should be build in. At this moment the focus is mostly on the inspection plan and not on the process leading to the output.
5. Agriplas looses a lot of time changing the setup. The SMED theory provides an insight to improve changes.
6. Feedback of customers should be brought together so that the company is capable in adding more value to customers. This is one of the main strategic goals.
7. The management has no knowledge about the productivity of the machines. With a lot of cheap labour the utilization of machines is most important.
5. Design of the operation
In the previous paragraph different gaps where identified. These eight gaps will be clustered because some parts are related to each other. The solutions towards these eight gaps are given in three paragraphs; Quality System, Master Production Schedule (MPS) and Process Improvements.
The reason for this sequence is that According to Bij 2005 a quality system influences the production system but the production system does not influence a quality system.
The justification for these three main solutions will be given in the paragraphs themselves. But in all three paragraphs the sub-question how can the transformation process being improved is central. The main directions will be from Van der Vaart (2005) who indicates that; the main thing in continuous production is to avoid disturbances, equalize demand, and have enough raw materials and continuous monitor the process. In batch-continuous production the big influence of setup times should also be taken into account. (Van der Vaart 2005). And from the research model which indicates that planning and control aspects should be implemented.
All three paragraphs have the same structure. In the introduction the solution will be justified by referring to the gap which is detected in the conclusion of the fourth chapter. Afterwards theory about the solution will be introduced. Finally the solution will be designed leading to a generalization and a sub-conclusion.
5.1 Quality system
The design in this paragraph will focus on the gaps 4 and 6.
• In the processes of the extrusion and injection departments controls should be build in. At this moment the focus is mostly on the inspection plan and not on the process leading to the output.
• Feedback of customers should be brought together so that the company is capable in adding more value to customers. This is one of the main strategic goals.
5.1.1 Theory about quality systems
Figure 13. Quality according Reed
The TQM content, or contingency of the internal fabrication unit, comes from Sitkin et al (1994). In essence Sitkin et al (1994) divided the principles in total control quality (TQC) vs. total quality learning (TQL). In TQC the focus is on narrowly and discrete clusters of tasks. In TQL the focus is more on customer wishes and second order learning. Broekhuis 2005 combined different aspects of organization theory to describe an organization and combined those with the ideal production situations. This combination of technology factors combined with structure led to the ideal quality system. Both articles are written of a different point of view but are complementary.
According to the contingencies the TQC point of view of Sitkin is chosen because, low-uncertainty industry should focus on product consistency and production efficiency (Sitkin 1994). The production situation of the different departments are related to the process industry. Both writers put emphasizes on well defined tasks which are related to standardization. Standardization can have different forms. In here standardization through work processes, rules and procedures. These forms of standardization should be completed with direct supervision (Broekhuis 2005).
5.1.2 Quality system
From both articles the following dimensions will be used; • Work processes,
• Output control • Role of the QD, • Maintenance
This is based on the remarks made in the characteristics of the organization. The company needs processes to start controls at certain points of the process. Also coordination should be improved so that all actors in the field communicate with each other.
Work processes
Based on the analysis of the production process the following work processes are necessary; changing raw materials, start-up and cleaning the machine, filling in the forms, reacting to alarm signals, and changing set-ups.
Different pipes are made of different raw materials. And more complex sometimes the recipe of the individual pipe changes. Here for the material mixer, first responsible for the raw materials needs to have the right information. In the current situation they act based on their memory. This information should consist out of the recipe with the information of the pipe. The information needs to be structured given to the material mixer. At his moment this is done orally which can lead to mistakes. All raw materials go trough the material mixer. Therefore it is crucial that right work processes and information flows are designed. This should lead to a reduction of mistakes as mentioned before it is not possible for Agriplas to measure the quality of raw materials. Only wet plastics can be detected. This wet material is easy to dry but if not noticed it can give problems for the production process. Based on capacity, drying takes at least two hours. Because the raw materials look like each other and are kept in the same containers visual differences should be given. Also sometimes the hopper with the dripper runs out of products, this mistake should not happen.
Every morning the machines are cleaned. A filter in the machine is changed on a daily base. This takes about 15 minutes. Other cleaning activities are closely related with preventing that mistakes happen. Problematic there is no structure way of cleaning and having preventive maintenance. For example the bottles with liquids for marking the pipe is not structural checked. Leading to no marks on the pipe which is not according ISO. For the cleaning and small maintenance a norm time can be given.
Filling in the forms in the right way is troubling. As mentioned in the analysis part the codes for incidents that occurred during production are given. But the exact meaning of the codes is not known to operators. If operators fill in wrong codes data analysis will become difficult and unreliable. To avoid this all codes need to be well defined and operators need to learn to be precise in filling in information. Well defined procedures for reacting to alarm signals and other disruptions need to be designed. If alarm signals go off, or a disturbance is noticed different people are involved. This to solve the problem on a short notice. Working under time pressure, knowledge about the process and machines are extremely important. Through interviews and observations it became clear that not all operators made the right decisions under time pressure. This leading to, not taking the best action till taking wrong decisions.
Output control
Role of the Quality Department
The role of the quality department should be changed. At this moment the quality department focuses on the end product for this specific ISO regulation and measurement information is being used. The staff within the departments looks at the production process as being a black box of no interest. But the focus of the QD should be on controlling the processes which lead to the end product. Filing production data and with that starting simple statistical control should become one of the main tasks. And the quality department should be more central when it comes to information sharing between different actors, in the production department.
A good way to acquire information is by documentation. The two main documents used in the extrusion department are; the production paper and the scrap list. Small adjustments of both papers provide data which easily can be converted into information. This information should lead to increase knowledge of the production process.
On the scrap list operators should chronologic report incidents that occurred during the day. On the scrap list wastes in time and kilograms need to be written down. All incidents need to be explained and classified with an incident code. The quality department should file this data in a database. The combination of data will lead to information. In the long term this information triggers specific improvement projects for reducing waste.
If the company wants to improve quality in the whole company, a person should be assigned who is capable and has the authority to improve organizational aspects.
Maintenance
Cleaning is done on a daily basis. Before operators start producing they clean the machine and change the filter. Together this takes one hour. Besides this daily cleaning the operators clean during production.
Sometimes a part of the machine breaks down. A breakdown is the first responsibility of the operator. Often the team leaders assist him to repair the machine. These incidents are not structural reported to the maintenance department.
Generally preventive maintenance is done on Fridays. This maintenance is done in a structural way. But there is no feedback between the operators/ team leaders and the maintenance department. Therefore it is difficult to examine how effective the maintenance is and were improvements can be made.
5.1.3 Customer complaints
Point 6 in the operations strategy matrix shows that there is no registration of customer complaints. But this does not mean that there are no complaints. Records can be found in the financial department. If a complaint is granted a replacement of the product is done. This has financial consequences. Also interviews with staff indicate that wrong products are delivered to customers. Complaints can be divided into two parts. Because the company has stock in different places internally non conformances are noticed. The sales representatives in that place contacts the head office and asks for replacements. Secondly quality problems are detected by customers. Customer complains come in through different cannels; telesales and sales representatives. The person who gets the complaint tries to help the customer. Sometimes this is possible. If not, the person with most knowledge about the product group will be contacted. This technical representative tries to find out what the complaint is about. Often this means going to the farm. The technical sales representative decides if the compliant is granted and if the product is still under guarantee. If so, he solves the problem. Hopefully the customer is satisfied. But the granted compliant, indicating a non conformance product of Agriplas does not lead to feedback to the responsible department.
According to ISO everything what is not according to specification should lead to a non conformance report (NCR). This NCR will lead to a corrective action report (CAR). A CAR should lead to feedback to customers and to the improvement of processes. The NCR/CAR documentation can easily and fast be implemented. Every sales representative and telesales person should have NCR forms. If customers complain a NCR should be filled in. This NCR should be addressed to the right person. This person has to respond with a CAR to this NCR. Logically the responsible person tries to avoid that the same mistake can be made again. Finally the NCR with the CAR should be filled.
Sub-conclusion
The quality system is specific designed for the extrusion department. Cleaning and maintenance is also crucial for the injection department. Not only the machines but the moulds need to be as clean as possible. Registration of incidents and communication is crucial in this department. Other departments; assembly, valves and filters assemble products. The quality of the products should be checked as soon as possible and between each stage. This will assure that the quality of the end product fulfils customer’s expectations.
A main problem was that the company wants to add more value to customers but a simple thing as complaints are not registered. Of course a company wants to avoid complaints by satisfying customer’s needs. But if customers complain action should be taken.
5.2 Master Production Schedule
In this paragraph suggestions for redesigning four gaps will be done. All gaps are related to planning and control of the production process.
