Improving Operational Efficiency of Discrete Production Processes in Large Manufacturing Organizations

Abstract

In the present time large manufacturing organizations operate on a global scale and thereby form an extremely competitive market. Far going globalization makes markets highly competitive, putting the pressure on these organizations to be more innovative and improve the efficiency of its production processes in order to lower overall costs. These goals are aimed to be achieved by introducing elaborate continuous improvement strategies. Implementing such strategies however has far going implications on organizations, in terms of performance management, working culture, and organizational structure. Companies have often implemented one or more continuous improvement strategies. While these strategies promise to result in a perfect process, in practice this is not the case. Problems form when there is a significant gap between company goals and the actual operational performance. In that case a situation arises where not ideal operational performance can be caused by logistical malfunctions, a continuous improvement strategy that is not performing optimal, friction in the organizational structure, or even a combination of all. It is therefore difficult for organizations to identify what causes a non-optimal operational performance, given the complexity of the described environment. The objective of this research is to improve this operational performance by overcoming this knowledge gap. The following general research question is formulated to overcome this knowledge gap: How can large manufacturing companies identify causes of discrete production processes not performing in line with company goals? In this research a three step approach is used. The first step is to zoom out from the logistic process and analyze the characteristics of the organization and the used continuous improvement strategy. By comparing the organizational characteristics with academic literature, strengths and weaknesses of the organization can be identified, and also the corresponding opportunities and threats. The used continuous improvement strategy is analyzed, for it is never flawless. Methodologies keep evolving and improving, and new theories are being developed and tested every day. Looking critical at the used improvement strategy will provide insight in missed opportunities and the importance of certain focal points in the organization. The second step is linking these findings to an analysis of the logistical process. It is important to determine how the operational efficiency is defined and how it is measured. Step one might provide a different perspective for analysis or focal points. In this second step improvement projects can be selected and defined on an operational level. Step three consists of performing the selected improvement projects. It is important to incorporate the findings of step one into these projects. This way the findings in academic theory can be evaluated by testing in practice. This evaluation provides concrete feedback on the found causes of non-optimal performance of the production line. Combining these three steps will provide (i) a thorough analysis of the organization, (ii) identifications of barriers and enablers in the organization, and (iii) will present opportunities to improve the operational efficiency beyond the knowledge that is present in the organization. With the gained knowledge, step one can be repeated in order to create an iterative process for continuous improvement. This approach is conducted and tested at the Heineken brewery in Zoeterwoude, the Netherlands. During a six month period, a real life case study is performed at production line 81, a bottling line that packs beer into cases for export. First it is shown that it is important to take into account the different perspectives between management and operators. In order to improve the production line in a structural way it is essential to communicate with operators in such a way it aligns with their goals. Next to this it is found that there are opportunities in using the tools presented in the Theory of Constraints. Based on a bottleneck analysis, it is shown that the losses with the biggest impact on the total production line are found downstream of the designed bottleneck, signaling a hidden bottleneck. It is shown that the output performance can be significantly improved by diminishing the amount of breakdown in the machines downstream of this hidden bottleneck. The performance indicator “Operational Performance Indicator No Order No Activity” has increased with 6.34 percentage points and the deviation of this indicator has diminished with 1.63 percentage points. If this major increase can be maintained in the future, this improvement could save the organization € 115,402 on a yearly basis in non-cash savings. This shows that using the Continuous Improvement strategy Total Productive Management is an effective tool for Heineken to structure its continuous improvement efforts. The foremost general recommendation in respect to strengthening the findings in this research is performing more similar case studies. A case study at a comparable manufacturing organization is necessary to compare results and draw conclusions on the extent to which the findings can be generalized. The expectation is that the found principal-agent dynamic at Heineken is strongly comparable to other large manufacturing organizations. If that is the case, this can be a highly interesting addition to the theory on organizational structures. For Heineken from a logistical point of view it is important to keep working on the newly identified bottlenecks, the Packer and Multipacker machines. Every minute won on these machines can directly benefit the operational efficiency of the entire line. These findings can also be applied at the other production lines in the brewery as well. This horizontal expansion can provide new insights into the general mechanisms of the entire brewery. For the long term it is recommended to involve the proposed rule of thumb in the monthly meeting between a rayon manager and the installation manager. Last, if Heineken wants to cope with the found principal-agent dilemma, a thorough behavioral change is required in the entire organization. It is recommended to implement a form of change management, for example the methodology founded by Kotter (1996).