Quality is no more a production function but a strategic function, which needs to be achieved systematically.
Having crafted a strategy and developed a structure, the organization needs to look at the systems. To define, “system is a set of detailed methods, procedures and routines created to carry out a specific activity, perform a duty, or solve a problem.”
System concepts have broad applicability. Systems have boundaries, but they also interact with the external environment i.e., organizations are open systems. They recognize importance of studying interrelatedness of planning, organizing, and controlling in an organization as well as the many subsystems.
Thus a system is an ordered, purposeful structure that comprises of unified and mutually dependent groups. These groups persistently impact one another, directly or indirectly, to keep up their activity and the subsistence of the system, in order to achieve the objective of the system.
Management Information Systems
To carry out managerial functions communication is needed to link the organization with its external environment. The management information system offers the communication link that makes managing feasible.
The term information management system has been used differently by various authors. It is defined by Weihrich & Koontz as, “a formal system of gathering, integrating, comparing, analysing, and dispersing information internal and external to the enterprise in a timely, effective, and efficient manner.
The management information system has to be customised to explicit needs and may include regular information, such as monthly reports; information that highlights exceptions, especially at decisive points; and information essential to forecast the future. The procedures for devising a management information system are similar to those for designing systems and procedures and other control systems.
The electronic equipment facilitates fast and economical handling of huge amounts of data. The computer can, with proper programming, process data toward logical conclusions, classify them, and make them readily available for a manager’s use. The data do not become information until they are processed into a usable form that informs.
The systems have
Inputs, outputs and feedback mechanisms,
Maintain an internal steady-state despite a changing external environment,
Display properties that are different than the whole but are not possessed by any of the individual elements, and
Have boundaries that are usually defined by the system observer.
According to Philip Kotler , every organization must organize the flow of marketing information to its marketing managers. He defined MIS as, “A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyse, evaluate, and distribute needed, timely and accurate information to marketing decision makers”.
Marketing Managers need information while analysing, planning, implementation and controlling. After assessing the information needs the information systems is developed. The information in marketing information system is developed through internal records, marketing intelligence, marketing decision support analysis and marketing research. The information is then distributed to decision makers for deciding on the marketing environment with respect to target markets, marketing channels, competitors, publics and macro environment forces. Following figure depicts the marketing information system.
Marketing Information System
Source: Marketing Management, Analysis, Planning, Implementation, and Control
Decision making system
One of the key managerial function is decision making. Decisions cannot usually be made in a closed system environment. While planning many components are in the background and remain outside the organization. Moreover, each unit or department of an organization is subsystem of the whole organization; managers of these organizational units must be receptive to the policies and programs of other organizational units and of the total organization. Individuals within the organization are a part of the social system, thus it is important to consider their thinking and attitudes every time a manager makes a decision. While taking into account various components of the environment and their problems does not imply that the managers relinquish or step down their role as decision maker. Someone must decide on a sequence of action from among alternatives, taking into account happenings and constrains in the environment of a decision. Often it is not possible, or worthwhile, to democratize the decision process to the degree that for all decisions a vote is taken from subordinates or the many other persons who may have some immediate or remote interest in the decision. The decision has to be made.
In order to simplify and have consistency in the decision making organization can develop policies, rules and procedures.
Policies are general statements or understandings that guide thinking in decision making; the essence of policies is the existence of discretion, within certain limits, in guiding decision making.
Procedures are plans that establish a required method of handling future activities. They are chronological sequences of required actions. They are guides to action rather than to thinking, and they detail the exact manner in which certain activities must be accomplished.
Rules are required action or non-action, allowing no discretion.
Operations Management
Operations management has to be seen as a system. The quality of the output is determined by the resources and information available to the organization.
Operations Management Process
To be an effective system, the subsystems need to be developed for all the three.
Inputs systems
The quality of input depends on the information available with the company about the need of customers, human resource in terms of management and labour skills. Assets like land, plant location, buildings, machines and warehouses, these are relatively permanent physical assets whereas the variable physical factors are materials and supplies.
Process system
Process as a system has components like planning, operating system, coordinating. The quality of output is determined by planning, operating system, tools and techniques used during the operating system and finally the controlling system during transformation process (from input to output). Planning includes the design and decisions regarding the product / service, the output. Controlling includes information for control and the quality control. The tools and techniques in quality control comprise of operations research, linear programming, inventory planning and control, distribution logistics, decision trees, time-event networks, value engineering, work simplification quality circles CAD/CAP and MAP.
Organizing and staffing lead to the operating system. The system includes, developing the organizational structure, job design, staffing the organization, selection, appraisal, training, providing leader ship, purchasing and inventory.
Jeffrey K. Liker (2004) in his book The Toyota Way, described 14 principles which are the foundations of the Toyota Production System practiced at Toyota manufacturing plants around the world. The principles are further divided into four categories, all starting with P – Philosophy, Process, People/Partners, and Problem Solving.
The Philosophy is long-term thinking. The principle that governs the philosophy is, all the management decisions are based on a long-term philosophy, even at the expense of short-term financial goals.
The heart of the Toyota production system is at eliminating waste, the process. The principles that govern the process are: create process flow to surface problems, use pull systems to avoid overproduction, level out the workload, stop when there is quality problem, standardize tasks for continuous improvement, use visual control so no problems are hidden and use only reliable thoroughly tested technology. The process uses two methods Heijunka and Jidoka implying level out the workload and stop when there is a quality problem respectively.
There are “5 S programs” that comprise a series of activities for elimination of wastes that contribute to errors, defects and injuries in the workplace. The 5 S are…
1. Seiri (Sort): Sort through items and keep only what is needed while disposing of what is not.
2. Seiton (Straighten, Orderliness): A place for everything and everything is in order.
3. Seiso (Shine, Cleanliness): The cleaning process often acts as a form of inspection that exposes abnormal and pre-failure conditions that could hurt quality or cause machine failure.
4. Seiketsu (Standardize, create rules): Develop systems and procedures to maintain and monitor the first three S’s
5. Shitsuke (Sustain, Self-discipline): Maintaining a stabilized workplace is an ongoing process of continuous improvement.
Gary Convis, President of Toyota Motors Manufacturing in Kentucky in 1999 talked about the philosophy of Toyota Production System and importance of culture. He saw TPS as a three-pronged beast, where only one prong included the technical tools often associated with lean production – JIT, Jidoka, Heijunka etc. according to Convis, these are just technical tools and they can be effective only with the right management and the right philosophy – the basic way of thinking. At the centre of TPS is people.
Technical
Just in Time (JIT)
Just in Time (JIT) is a set of principles, tools, and techniques that allows a company to produce and deliver products in small quantities, with short lead times, to meet specific customer needs. JIT permits organization to be quick to respond to the day-by-day swings in customer demand. W. Edwards Deming, an American quality pioneer broadened the definition of “customer” to include both internal and external customers. Each person or step in a production line or business process was to be treated as a customer and to be delivered with precisely what was needed, at the precise time when needed. JIT’s supreme significant expression is the preceding process must always do what the subsequent process says. Otherwise JIT won’t work.
Jidoka
Jidoka refers to the principle of stopping the process to build in quality. The second pillar of TPS, Jidoka, quality should be built in, this means that you need a process to identify defects when they arise and automatically halt production so an employee can fix the problem before the defect carry on downstream. Jidoka is also referred to as autonomation – equipment bestowed with human intelligence to stop itself when it has a problem. In-station quality, preventing problems from being passed down the line, is more valuable and less costly than scrutinizing and repairing quality problems after the fact. It is fine to operate the plant less than 100% of the time, even when the line is capable of running full-time. Because resolving quality problems at the starting place saves time and money downstream. By constantly surfacing problems and resolving them as they occur, organization eliminates waste, productivity soars, and competitors who are running assembly lines flat-out and letting problems accumulate get left in the dust.
Kaizen
Kaizen is the Japanese expression for unceasing improvement, and is the process of making incremental improvements, no matter how small, and accomplishing the lean goal of eliminating all waste that adds cost devoid of adding to value. Kaizen imparts individual skills for working effectively in small groups, solving problems, documenting and improving processes, collecting and analysing data, and self-managing within a peer group. It thrusts the decision making, or proposal making, down to the workers and requires open discussion and a group unanimity before implement any decisions. Kaizen is an over-all philosophy that make every effort for perfection and sustains TPS on a daily basis. The central part of kaizen is Toyota’s illustrious five-why analysis. Five Whys is a system to track the subterranean, systematic sources of a problem to find correspondingly deeper countermeasures.
5-Why investigation questions
| Level of Problem | Corresponding Level of Countermeasure | |
| There is a puddle of oil on the shop floor | Clean up the oil | |
| Why? | Because the machine is leaking oil | Fix the machine |
| Why? | Because the gasket has deteriorated | Replace the gasket |
| Why? | Because we bought gaskets made of inferior material | Change gasket specifications |
| Why? | Because we got a good deal (price) on those gaskets | Change purchasing policies |
| Why? | Because the purchasing agents gets evaluated on short-term cost savings | Change the evaluation policy for purchasing agents |
Source: Peter R. Scholtes, The Leader’s Handbook, McGraw-Hill, 1998
Heijunka
Heijunka refers to levelling of production by both volume and product mix. It does not make products conferring to the tangible flow of customer orders, which can fluctuate up and down significantly, but takes the aggregate volume of orders in a time and levels them out so the equivalent quantity and assortment are being made each day. The method of TPS from the beginning was to keep batch sizes lesser and make what the customer (internal or external) wants.
Benefits of levelling the schedule…
1. Flexibility to make what the customer wants when they want it. Decreases inventory and its accompanying problems.
2. Reduced risk of unsold goods. The organization makes only what the customer orders, it doesn’t have to worry about managing the costs of ownership and hoarding inventory.
3. Balanced use of labour and machines. The organization can establish standardized work and level out production by addressing to the fact that some products will involve less work and others will involve more work. As long as the product which is time consuming is not followed by another time consuming product, the workers can manage it. Once the organization takes this into account and keeps the schedule level, it can have a well-adjusted and controllable workload over the day.
4. Smoothed demand on upstream processes and organization’s suppliers. If the organization uses a just-in-time system for upstream procedures and the suppliers deliver multiple times in a day, the suppliers will get a stable and level set of orders. This will allow them to reduce inventory and then pass some savings on to the customer so that everyone gets the benefits of levelling.
To get all of the above benefits organization has to find out a method to eliminate the setup time for changeover. In a batch-processing method, the goal is to achieve economies of scale for each individual piece of equipment. Changing over tools to alternate between manufacturing two different products seems wasteful because parts are not being produced during the changeover time. The way out is to bring in a small amount of all the parts on flow racks to the operator on the line. This eliminates the equipment changeover.
Levelling the schedule has intense benefits all through the value stream, including giving organization the ability to plan every detail of production methodically and standardizing work practices.
Partners and Suppliers
While discussing the integration strategies we discussed about the forward and backward integration. Forward meaning going closer to the customer, opening up dealership or acquiring dealers. Whereas, backward integration referred to going closer to raw material, either by starting a unit to manufacture products which were by far purchased from supplier or acquiring supplier.
We also discussed about the limitation of the strategy that you cannot run two business at the margin of one. The strategy may reduce dependency but may not always be very profitable. The alternative strategy is to have a system of helping and improving partners and suppliers.
When the organization is developing the systems like JIT, Jidoka, Kaizen and Heijunka; it should also look at extending these to its partners and suppliers. Developing, helping partners and suppliers develop systems that the company is employing, the benefits are manifold. The first and the most important benefit is it streamlines company’s systems as well. For instance, without a reliable and dependable supplier JIT won’t work. Thus developing the partners and suppliers helps organization implement its chosen strategy more effectively and efficiently. The other major advantage is that the resources are employed by the partners and suppliers. It minimizes the investments. The investment is in sharing the systems and developing the network of suppliers and partners.
The system also helps improve relationship with partners and suppliers and is reciprocated as the preferred customer by them.
Toyota’s view is that, just as it challenges its own people to improve, it needs to challenge its suppliers. Supplier development includes a series of aggressive targets and challenges to meet those stretch targets. Suppliers want to work for Toyota because they know they will get better and develop respect among their peers and other customers.
To quote Taiichi Ohno, “Achievement of business performance by the parent company through bullying suppliers is totally alien to the spirit of the Toyota Production System.”
Systems approach to Human Resource Management
Fundamentally human resource management as a function refers to filling, and keeping filled, positions in the organization structure. This is ensured by ascertaining work-force requirements, inventorying the people existing, and recruiting, selecting, placing, promoting, appraising, planning the careers of, compensating and training or otherwise developing both candidates and current jobholders so that they can achieve their tasks effectively and efficiently. Human resource management must be closely linked to organizing, that is, to the setting up of purposeful structures of roles and positions.
Based on the Systems Approach to Staffing by Heinz Weihrich & Harold Koontz, Management A Global Perspective
Systems approach to selection
The systems approach to selection takes into account the managerial competencies for achieving the organization’s plan with respect to objectives, forecast, plans, and strategies. For the implementation purpose the plan is turned into position and job design requisites which are matched with such individual attributes as knowledge, skills, attitudes, intelligence, and experience. To meet the organizational prerequisites, managers recruit, select, place and promote people. This warrants the environmental analysis, internal as well as external. The process is as follows….
Ascertaining the job requisites
Scope of the job
Job challenges
Managerial competencies required by job design
Job Design
Design of jobs for individual and work teams
| Systems | |||
| Importance/Level of Impact | |||
| Element | High | Moderate | Low |
| Quality | ü | ||
| Quantity | ü | ||
| Quick | ü | ||
| Resources | ü | ||
| Relationships | ü | ||
All the systems in the organization help them to improve the quality of the output. Systems ensure quickness by eliminating waste, unnecessary activities and ensuring time targets. Though they have a positive impact on the quantity the impact is moderate. However, systems ensure effective and efficient utilization of resources and also improves relationships in case of certain systems. Systems thus are very important in an organization for improving quality of output, responding quickly to the customer needs and resource utilization. Systems also help organization in improving relationship with partners and suppliers. As a cumulative effect, systems results in price competitiveness which organizations can use to its benefits, either by passing on benefit to customers and thus increasing quantity sold, or improve retained earnings.
Reference:
http://www.businessdictionary.com/definition/system.html
Weihrich, Heinz; Koontz, Harold (1993) Management A Global Perspective, Tenth Edition, McGraw Hill
Ibid pp 618
Kotler, Philip (1992) Marketing Management, Analysis, Planning, Implementation, and Control, Seventh Edition, Prentice-Hall of India Private Limited.
Weihrich, Heinz; Koontz, Harold (1993) Management A Global Perspective, Tenth Edition, McGraw Hill
Based on the Operations Management System discussed by Weihrich, Heinz; Koontz, Harold (1993) Management A Global Perspective, Tenth Edition, McGraw Hill
Liker Jeffrey K. (2004) The Toyota Way, 14 Management Principles from the World’s Greatest Manufacturer, Tata McGraw-Hill Publishing Company Limited, New Delhi
Ibid pp 175-76
Ibid pp 202-3