Academic journal article Advances in Competitiveness Research

Re-Engineering Operational Practices and Processes to Improve the Customer Focus of a Marketing Organization

Academic journal article Advances in Competitiveness Research

Re-Engineering Operational Practices and Processes to Improve the Customer Focus of a Marketing Organization

Article excerpt

EXECUTIVE SUMMARY

The objective of this field study is to examine the applicability and potential advantages of pull operational practices in a mid-size manufacturing organization. The results derived based on this field study point to both operational gains and customer-related benefits which can be attributed to pull operational practices.

Keywords: Re-engineering, Pull Practices, Mid-size Manufacturing, Marketing

INTRODUCTION

The framework depicted in Figure 1 was used to examine the current operational practices in a mid-size, welded stainless steel pipe firm. It was also used to identify areas of improvement in the existing operational system. Concepts related to the Theory of Constraints (TOC) and Business Re-engineering (BR) were used to modify the existing system. The modified system is designed to enhance operational efficiencies as well as the customer orientation of the firm.

The studied firm (XYZ Company) has been in business for more than 50 years. The Company is currently using a push operational system to produce products for inventory. The purpose of this study was to determine the overall benefits to XYZ Company resulting from re-engineering its operational system from traditional manufacturing system to a pull system, driven by customer demand. In the process, the impact of changes in customer requirements on the production line was evaluated. Finally, the TOC principles were used to determine the potential of a competitive advantage to XYZ Company due to the modified operational system.

BACKGROUND

Traditional concepts of effective manufacturing are based on mass production and are often referred to as a push system. In many such manufacturing environments when the output of a product doubles, the real value-added unit cost of manufacturing that product is reduced by a constant percentage (Pearson & Wisner, 1993). This improvement is often called a learning curve, or more precisely a price improvement curve. The objective of the push system is to efficiently use production resources. Such orientation, works well in industries where there is predictable high customer demand and quick product turnaround times such as electrical and automobiles industries. Altiok and Ranjan (1995) note that in a push system, the production schedules are generally based on the demand forecast. Under a push system, each stage runs at maximum capacity pushing material downstream. Kenward (1992) recognizes that a traditional push system is based on maximizing not only capacity, but also labor efficiency. In a push system, it is relatively easy to determine which operations are running at full capacity. Buffer stocks are often used to account for uncertainty in customers' demand and supply variations. Although this work-in-process appears as an asset on the balance sheet, it is really a liability because the operation must incur costs to carry the work-in process.

[FIGURE 1 OMITTED]

Krishnamurthy, Suri, and Vernon (2000) studied the performance of a flexible manufacturing line. They compared the throughput and average inventory characteristics under a pure push system with other manufacturing strategies.

Results indicated that the pure push strategy has a higher throughput for a given level of inventory than other strategies. However, the push system advantages in terms of operational efficiency may be at the expense of the customer focus. Maximizing the throughput of individual manufacturing subprocesses often creates large work-in-process inventories throughout the plant.

The objective of the pull system is to link the production process to customer demands and to enable manufacturing firms to meet changes in demand with minimal production costs and minimal waste. Implementation of Just-in-Time (JIT) techniques have been reported in the literature. Hancock and Zayko (1998) note that the implementation of JIT in the U. …

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