Defining Lean Production, Research Proposal Example

Abstract

Strategic planning is an outline on where an organization wants to go and ultimately how it will achieve getting there. The planning and execution of that plan is complex and fluid. It requires rigorous analysis, effort, accountability and creating the direct connection between building the strategic plan and executing upon that plan. Within the Kimberly-Clark organization, there is an allocation of financial resources available to invest within the corporation.  This increase in financial capability will need to be analyzed and placed on the strategic roadmap of the organization.

Strategic Finance

Financial management is the balance of art and science to effectively and efficiently utilize money to meet the goals and objectives of the organization.  The goals and objectives are aligned from the strategic vision of the senior leadership all the way through to the front line supervisors’ goals and objectives.  This ensures that all of the effort and projects that are implemented during the lifecycle of the organization’s planning cycle are interrelated and corollary to one another.  This helps eliminate the misappropriation of financial tools and assets.  The art of financial management is mastering the perfect balance between financial tools, monetary assets, utilization balances between operating and capital expenditures and funding the right projects at the right time.  This is complimented by the science and mathematical analysis of the current markets, money markets, debt and equity balances and ultimately the quantitative analysis fortifying key business decisions. Financial decisions on where capital is used and when it is allocated drives the projects which achieve the goals and objectives of the business (Emery, Finnerty, and Stowe, 2007).

At the strategy development level of the organization, the strategic intent of the leadership must develop a plan in implement change and drive the culture to align with the goals and objectives of the organization.  The portfolio strategy direction is to reinvest in the internal operations of the organization and utilize the 10% equity investment in building the framework for lean and six sigma implementations. Within the confines and opportunities of the 10%, or $486,500, there is a need to directly facilitate the utilization of this funding with the strategic goals and objectives of the organization.  There are many choices competing to become the profit-maximizers for the organization.  The financial theories have been foundationally established in various ways an organization can raise and distribute funds with the allocation to specific projects.  The theory of investment bases the opportunity for growth within the distribution of diversification. The investment in a lean culture provides a set of tools to choose projects based on the needs of the business and does not limit the organization’s ability to remain agile in the changing market.  The theory of investment is a decision support process that facilitates the choosing the correct investment within a portfolio.  The value of the investment is determined by the change in the value of the stock in a given period.  The valuation and determination of selecting a project for a portfolio is based on the ability to return value to the organization.  Utilizing the investment theory and understanding the value of the projects which support the goals and objectives of the portfolio will facilitate the selection of the best options.

To first understand what portfolio management provides to a corporation it is necessary to understand what the purpose and functions include.  Portfolio management is a function within the leadership responsibilities to analyze each project based upon economic measures, strategic leadership guidance or regulation compliance.  Each project will have certain factors impacting the overall portfolio in which such factors are cost, consumption of resources, proposed timeframes, expected results and their corollary or contradictory nature among other projects in the business’ portfolio.  Portfolio management provides the necessary strategic planning with the execution of the implementation within the organization.  These include a core strategic plan that is approved and agreed upon within the organization.  This includes policies and procedures that are mandated by leadership to help direct and guide the organization. The mission and values are outlined within the plan to allow for a consistent message to the organization.  A risk assessment would be conducted of the internal and external environments through the use of a SWOT analysis to identify the strategic issues and ultimately provide guidance on how to mitigate those risks. With all the areas reviewed and assessed the activities must then have an implementation plan to execute to the mission of the organization, provide an action to reach for the vision and ultimately align the executable actions to the strategic vision of the leadership. The goal of the portfolio manager is to create the optimal project mixture to create the maximum shareholder wealth with the minimal risk necessary (Levine 2005).  Throughout the financial management area of responsibility there are key functions that occur which encompass budget and forecast estimates, working capital management, raising capital through debt and equity options, outside investments into the organization, portfolio diversification and risk management.  While the list is not all encompassing of the financial management role and responsibilities they do include key functional areas that facilitate financial success for the organization.

Strategic Planning

The strategic plan for the Kimberly-Clark portfolio fall in-line with the basic tenants of portfolio management in that it needs to have an established set of goals and objectives, alignment with the strategic intent of the organization and a way to execute activities to meet the key performance criteria. The portfolio strategic begins with the plan. The strategic planning for this investment is based on marketing timing in order to create a business environment that is sustainable and scalable with future opportunities.  This type of portfolio strategy is based on market timing in which the investment into the systems and business processes will provide an acceptable return on investment.  This will strike the market at a time that will create a competitive advantage in operations.  The financial strategic plan aligns with the strategic goals and is executed through the operational activities to allocate the investments.  The initial area of investment would encapsulate reduction of operating costs based on the need to create an environment of lean management and a focus on reducing waste throughout the organization.  During a time of economic up-turn, there is an inherent reduction in focus on cost saving measures and there could be a corollary impact on increase in non-value adds costs to the operations.  The first area of investment would be a focus on training and awareness regarding lean management and six sigma capabilities throughout the organization.  Lean management and Six Sigma are often used to better the organizational efforts to increase productions, capability, efficiencies or effectiveness.  The initial cost of implementing the program will be offset by the savings returned from six sigma projects within the organization.  The adoption of these organizational philosophies will need total support from the Kimberly-Clark’s leadership and will become a key milestone on the strategic portfolio of the company.  Lean management is used to reduce waste and improve efficiency of a process while Six Sigma is utilized for the reduction in variances and improved performance.

The goal of implementing a lean management methodology is to help eliminate the processes, actions or lack of actions that are causing waste throughout the process.  Lean management is a set of tools designed to help eliminate the multiple areas of waste and ultimately drive a manufacturing process that produces quality products to the consumer.  In order to implement a lean manufacturing methodology, it is imperative that the implementation team understands the process and purpose of what lean manufacturing entails.  The basis for the entire lean methodology is to limit or eliminate any action or functions from the process that does not create value to the end customer.  Lean is a set of tools that can help provide the necessary means of reducing waste through the manufacturing process.  This set of tools focus on eliminating the different kinds of waste which are transportation, inventory, motion, waiting, overproduction, over processing and defects.  Of all of these wastes some are more apparent and receive more attention than others.  Implementing the lean management methodology includes designing of the lean process, training, awareness, communication, lean leadership, tool box preparedness, continuous improvement, cultural awareness, philosophical buy-in and team management.  Lean management implementation is continuous process that requires a change in the way the company conducts their business (Pettersen, 2009).

While the focus here is on lean management methodologies a key to success is integrating lean management philosophy as a cultural attribute.  One of the major tasks of the team is to bring in leadership and ensure that the culture change is pushed from the top down to not only kick off the culture change but also create a sustainable environment for the lean culture.  Implementing lean management is often like opening a tool box and selecting the correct tool for the job (Hanover, 2006).  Lean management is also in a continuous state of improvement so that it must also be understood that while there should be recognizable gains from each lean management activity to goal is to continuously improve and strive to draw down the wastes in the process.  The investment of the 10% owner’s equity would be distributed throughout the organization based project prioritization.  The goal is to invest the 10% of the shareholder’s equity into the organization.  The total amount of investment, based on the allocation of 10%, is $486,500.  This reinvestment will be delineated between the initial kickoff of the lean program and the sustainment activities to fund future continual service improvement projects.  The initial 5% would be invested to define and establish a core group of subject matter experts.  The remaining 5% would be based on the prioritization and needs of the defined projects that arise from the implementation of the lean and six sigma programs.  By reinvesting into the core functionality of the organization, the company can extend its profitability through the elimination of redundant systems, inefficiencies and other wastes.  The assets purchased with this equity would be training programs, hardware, software and an overall reinvestment within the organization to become more cost efficient and effective with managing waste.

Financial Planning

Financial planning or laying out a plan on how to execute, allocate, collect and generate capital for an organization starts out with the estimation on what will be required by the organization to achieve their goals and objectives.  There is a process for achieving the financial objectives of a corporation which include establishing financial goals, researching pertinent data, data analysis, planning, implementation and monitoring and controlling the plan.  In order to estimate for the asset investment for a corporation the financial manager must first understand what the end state will look like.  The prioritization of the senior leadership, for the allocated 10% of the shareholders’ equity, is to implement a model of continual improvement that is sustainable.  Investing in a model to reduce costs and add value to the organization will allow the organization to become more flexible within their cost management techniques and eliminate or alleviate direct cost reduction methods in times when the economic environment is not as bountiful.  Project research can be conducted on a continual basis and would ultimately become self-sustaining.  This would be accomplished by associating internal success for the employees require actions within the lean management activities or projects.  Utilizing forcing functions such as raises, appraisals, recognition or other motivational factors would increase the likelihood of adoption and sustainability.

The investment strategy for Kimberly-Clark is based on an asset class that is similar in nature but will still provide the organization with the ability to operate effectively and efficiently.  The basic premise of the asset class includes the ability to group economic resources with similar characteristics.  This reinvestment into Kimberly-Clark is a Tactical Asset Allocation which is the investment in a portfolio which takes active involvement and monitoring to achieve the returns required by the organization.  This is tactical asset allocation due to the fact that the investment is directly reinvested into the organization to increase future potential in cost-savings and productivity.  Keeping the reinvestment of the shareholder’s equity would be misappropriated if it were used for traditional asset allocation in a traditional financial management portfolio.  Kimberly-Clark is in the business of creating shareholder’s wealth through their core business functions and needs to ensure their reinvestment does not directly include one of the three major asset classifications including:  equities, fixed-income and cash equivalents.

The portfolio of Kimberly-Clark would become more diversified based on the reinvestment internally through training and awareness programs as well as the diversification based on the theory of investment.  This investment will diversify the portfolio by not only developing a new capability within the organization; it also provides a vessel for creating future opportunities and increased the ability to develop internal talent.  The organization increases its capability within three areas of responsibility including lean, cost reduction and human resources capability expansion.

Conclusion

Kimberly-Clark’s investment into the ability to create a proactive approach to bettering the organization will not only allow for continual project generation to add value to the organization but will also create a culture of lean management.  This shift in culture, while not reflected directly in the financial statements, will have a direct benefit in the future based on achieving opportunities, reducing costs, gained productivity and enhanced capabilities within the organization.  By aligning the portfolio of the organization with a culture shift, the leadership can drive change and manage opportunities in the future.

References

Emery, D. R., Finnerty, J. D., & Stowe, J. D. (2007). Corporate financial management. Pearson College Div.

Hanover, B. (2006). Deliciously lean – a mouth-watering introduction to lean manufacturing for printing professionals and sandwich makers alike. SGIA Journal Fourth Quarter 2006. Retrieved from: http://tpslean.com/pdfs/introtolean.pdf. 2006.

Levine, H. (2005). Project management: a practical guide to selecting projects, managing portfolios, and maximizing benefits. John Wiley & Sons.

Pettersen, J. (2009). Defining lean production: some conceptual and practical issues. The TQM Journal, 21(2).