Understanding Customer Satisfaction and Managing Risks, Research Paper Example

Abstract

Supply chain management is the management and control of goods from the point of origin to the ultimate point of consumption.  This also includes all aspects of leading, monitoring and controlling the logistics, schedule, and cost of moving the goods along the supply chain.  The increased flexibility and logistical opportunities that come with globalization there is an increased focus on creating value, through supply chain management, while also eliminating wasteful operations within the processes.  Implementation of the appropriate tools to provide customer satisfaction, decrease cost and increase capability in production and quality are essential in becoming a successful organization in the globally competitive market.  Supply chain management is a key focal point for realizing potential opportunities in business management.

Supply Chain Risk Management

Lean management and Six Sigma are often used to better the organizational efforts to increase productions, capability, efficiencies or effectiveness.  In this case, the focus is on Supply Chain Management (SCM).  The customer satisfaction and overall experience is based on the organizations ability to provide a quality product on time based on the consumer’s needs and expectations.  In order to do so, there is an inherent need to manage the supply chain to ensure quality, logistics and production of the goods fulfils the requirements of the company and the expectations of the consumer.  The tools utilized to enable the management of quality and risks are based on principles of lean management and six sigma integration.  Both are similar in that they are structured frameworks to help solve issues and improve the performance of their respective organization.

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.  For example with lean management the focus could be on processing times, improving safety, utilization of resources and process improvements.  These increases in efficiencies will not help prevent products from failing quality checks or missing other specifications on the requirements.  This is where Six Sigma would be used.  In essence, Six Sigma methodologies push the organization to make the product exactly the same without defects every single time.  It does not mean that the process is efficient but it does force defects from the operation.  Both could and should be used in a synergistic approach.  For example while working through the lean management tool set which uncovers inefficiencies, the root-cause could be caused by consistent rework or scrapping parts due to defects in which the Six Sigma methodology would come into play.  Lean management is a great place to reduce the waste in the processes before implementing a Six Sigma approach.

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 manufacturing 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).The organization must identify a need within their processes or a need to reduce the waste to better utilize their limited resources.  In order to drive cost out and increase quality the entire manufacturing supply chain needs to be viewed as one fluid and changeable process flow.  Process engineers spend countless hours optimizing and manipulating internal processes to ensure flow rate and Takt time are in line with customer demand and sales forecasts but all of that hard work and diligence are for nothing if the supplier of the input parts cannot adjust to demand or produce the quality of product needed to compliment the finished good expected by the customer.

Lean manufacturing leaders and process or program engineers would need to view the entire process as one working unit and organization.  The inputs from suppliers, the logistics to get the good from one point to the next and the final assembly all live and breathe in the same environment.  U.S. innovation and implementation coupled with the mindset of a wing to wing improvement process will lead to a competitive advantage globally.  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.  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 manufacturing process.  There are two basic methods to implement lean management projects (Hanover, 2006).  The first method is a tools based approach and the second is a flow based approach.  Both implementations work through a repeatable process which results in an improved area that contains a repeatable and sustainable process improvement.

The tools based process works through a project management methodology while implementing various lean tools through the process.  In this method the initial phase is to bring leadership in and voice their intentions of bringing in the lean vision for the company.  Once that is established the project leader develops project as any other project would start up.  The first difference in the project start up requires the project manager to solicit for a group of volunteers to form the lean implementation team.  From this point the team will need to be trained on the lean tools, view other areas that have implemented lean and ultimately choose a project that could be used in the organization.  After the project is selected, the processes is evaluated, monitored and lean tools are utilized to make changes.  From these changes new standards are developed and adopted into the manufacturing process.  Once the process is standardized, the team can move to the next lean project following the same process.

The next method is the flow based approach.  The ultimate goal of this lean management program is to remove as many quality problems from the process as possible and increase the ability and rate of flow from the beginning to the end of the process.  Once the quality areas are recognized they can be improved with the lean tools.  The overall process of this system is to identify areas that are causing a slow down or stoppage and improve that flow.  This is done by monitoring the flow, identifying area for improvement, introducing standard work and locking down the improvements so that they are repeatable.  An issue with a project assigned drives change and the change leads to a culture transformation in the company.  While this could result in the desired expectations of leadership, climbing over the mountain of solving results of problems instead of root causes of the issues could raise flags for future lean projects.

The first step of the team is to help identify the problem (Vernvi, 2007).  Identifying the issues will allow for a focus on improving the efficiencies throughout the supply chain.  Each project eliminating waste from the process will improve the overall operations of the supply chain.  Every resource saved by eliminating waste can be put toward either continuous improvement projects or reinvested into the company for other growth opportunities.  These small and continuous improvements will lean out the production line and improve the overall product.  This methodology will reduce waste in the areas of transport, inventory, motion, waiting, overproduction, over processing and defects (Holweg, 2007).  Each of these areas of waste would contribute to the positive impacts on operations, reduced costs of inventory, reduced cost of ownership, improved efficiencies in transportation, increased utilization of facilities and ultimately a more efficient and effective supply chain as a whole.

Risk Management

Risk management incorporates the identification, assessment and prioritization of risks and takes those results and establishes a mitigation plan to limit or negated the effects of the risk.  The risk management process extends throughout the lifecycle of a project or circumstance and the root cause of those risks can stem from a multitude of sources.  Risk mitigation or the management of the risks can be handled in just as many varied ways.  The most common actions to reduce the risk exposure are to transfer the risk to another entity, avoid the risk altogether, reduce the probability of the occurrence or just accepting the risk (Alexander and Sheedy, 2005).  Depending on the goals and objectives of the implementation team there are different ways to handle the risk.  There is a basic construct on how to analyze a risk and thus understand which risk assessment method would be appropriate.  The overall project is to implement an enhancement website that is ultimately replacing a legacy website that is no longer capable of meeting the requirements of the organization.  Through the project there are inherent risks associated with the project’s execution, transition and sustainment.  These risks will be outlined in a risk assessment matrix and a strategy for mitigating those risks will be defined.

Risk in project management is the perceived implications of an uncertain event impacting the project or the organization as a result of the project’s deliverables.  Within each of the risks there are varying degrees in which the impact, severity and likelihood will occur.  Each of these factors plays a role into the risk mitigation plan of the organization.  These risk mitigation actions incorporate the risk itself as well as the tolerance of the organization and the benefits of accepting certain risk models to achieve certain objectives (Cooper, Grey, Raymond, and Walker, 2005).  The risk adversity or risk acceptance of the organization is interdependent with the goals and objectives that the organization wants to achieve as well as the activities that are necessary to achieve those deliverables.

Strategy

Assessing risk entails assessing the probability of a specific outcome to occur.  This assessment can be accomplished through the application of the basic probability theory.  This theory is a mathematical theory that models specific events with different variables or risks to the outcome.  This theory allows the user to derive outcomes based on the inputs of variables to the situation.  This is extremely useful when trying to develop a picture of what could potentially occur when multiple risks are associated to the same project.

With any type of project management activities in which risk is defined it then needs to be measured in both a qualitative and quantitative perspectives.  When measuring risk there are the two different areas of measure.  There are also different tools for measuring the types of risks and inputting those results into the project.  For qualitative risk management the first important tool is the risk management plan.  This pulls together all the findings, risks, mitigation plan, and other pertinent information required for the project team to perform their duties regarding to project scope, schedule and cost.  Other tools that help facilitate the qualitative risk assessment include a risk probability and impact assessment, assessment on the risk data, risk urgency assessment as well as incorporation of a probability and impact matrix.  All of these tools would be executed and documented in the risk management plan.  The qualitative risk management tools and techniques all provide the insight into the risks and allows for a prioritization of those risks which facilitates risk planning.

The strategy to mitigate the risks in this project regarding the implementation of the website renovation would utilize a hybrid approach to risk management including quantitative and qualitative risk management.  The major function of a risk assessment is determining the potential loss caused by the risk and the probability of that occurrence happening.  The risk assessment also takes into the population of people impacted by the risk.  The risk assessment brings together the qualitative assumptions and uncertainties and incorporates a quantitative value to the overall risk.  This allows the formulation of a hierarchy of potential impact of a risk.  This could then be used to determine the cost and effort needed to mitigate those risks and based on the strategic outlook which risks that would be ultimately mitigated.

Qualitative risk tools involve a highly disciplined analysis of the process to fully understand the potential hazard or risk of a situation (Baranoff, 2006).  For each event there are ways to improve the probability of it not occurring or removing the risk.  One example of this type of assessment is the FMEA or failure mode and effects analysis. This procedure analyzes each potential failure in the process/system and stratifies it by severity. This is fairly labor intensive and becomes exponentially more labor intensive as the project increases in scope.  Each failure mode is denoted with the failure, probability, severity, impact and cost to mitigate.  All of this is rolled up into the stratification of all of the risks and evaluated against budget constraints.

Another method of risk assessment is the tree based technique. This is used to evaluate in a qualitative and quantitative analysis. This builds a “what-if” scenario and traces back to a root cause of the potential hazard.  This can illustrate a series of outcomes to specific scenarios and is highly useful when determining potential risks.  This outlines the causal risks and the impacts those risks have on the project or incident.

The risk assessment that suits this project most effectively is a hybrid solution between the FMEA and the fault tree analysis.  This is most applicable due to the fact that a detailed analysis will be required for specific scenarios dependent on the type of risks found. The quantitative analysis of the risk, probability, scope and cost will have a direct implication on the efforts afforded to mitigate those risks.  The risk assessment tool will provide a fault tree analysis and denote risks through the lifecycle of the project.  Risks that have a high probability or significant negative impact will have a full analysis completed.  The risks will have mitigation plans associated with them.  The risk table annotated above with the risk mitigation tools would combine to not only mitigate the risks but also provide information that can be communicated to the responsible, accountable, consulted and informed members of the project.

Conclusion

Successful projects incorporate the best practices framework as well as the tools and resources that are gathered and utilized throughout a project manager’s career.  The project scope must align with the expectations of the stakeholders as well as the cost estimates, established budget and the proposed schedule of the project.  This allows for the purpose of the organization to align with providing the consumer the highest quality product based on best practice frameworks, integrated supply chain management and integrated risk management.  These tools and techniques provide the project manager the timely and accurate information to make project management decisions while taking the appropriate project actions to meet the expectations of the stakeholders while delivering the requirements on time, on schedule and on budget.

References

Alexander, C., and Sheedy, E. (2005). The professional risk managers’ Handbook: A comprehensive guide to current theory and best practices. PRMIA Publications.

Baranoff, H. (2006). Risk assessment; 1st edition. AICPCU.

Cooper, D. F., Grey, S., Raymond, G., & Walker, P. (2005). Project risk management guidelines, managing risk in large projects and complex procurements. John Wiley & Sons

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

Holweg, M. (2007). The genealogy of lean production. Journal of Operations Management 25 (2): 420–437.

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

Vernvi, B. (2007). Where are the real problems in manufacturing? Available from: http://americanmachinist.com/Classes/Article/ArticleDraw.aspx?HBC=iCopyright&NIL=False&CID=71108&OASKEY.