Production Process Improvement Project

Posted: April 05, 2017

Introduction

The Iran Khodro, multinational automaker, is an Iranian company headquartered in Tehran. IKCO is known for the manufacturing of vehicles and mainly passenger cars. Some of the vehicles it produces include Peugeot, Samand, and Renault buses and trucks. It is a public joint stock company and uses the IKCOOS (Iran Khodro Industrial Group) to pursue its goal that is to create and manage factories to produce, sell, and export cars and automotive parts (Gerdrodbari and Harsej, 2016). The company operates many subsidiaries across the world, especially in its main assembling plants. Some of these subsidiaries such as SAPCO are a component producing plant.

The Problem/Current Process

The In-House Assembling Process

Throughout the years that IKCO has been in car assembly, it has employed an automated in-house assembling process where all components are supplied and assembled in a single production process (Reid & Sanders, 2007). To facilitate this process, the company stores the raw materials and other production components for use during the assembling process. Most of the components are transported from the subsidiaries where component production takes place. The process is completed in eight progressive processes that are completed under the watch of committed staff.

Steps

1. The first step involves the making of underbody components such as the floor pan and other motor components as sub-assemblies. This is done by fixing individual sheet metals of different sizes into a precise location before carrying out resistance spot welding (RSW)

2. Secondly, the sub-assemblies from the initial step are mounted on the floor pan and motor compartment. Additional assemblies give the vehicle body length and height. An example is a firewall that separates the driver and passenger compartment as well as the waterfall that exists between the trunk and backseat.

3. At this juncture, there is a rough outline of the car without the external fittings that make it appealing and a final product. These body panels include swing metal parts such as doors, deck lid, and the hood.

4. This step is a complicated stage of operations whereby the body sides are welded onto the exterior. Pieces of sheet metal are placed on either side by robots working simultaneously and held in position to give the vehicle the desired shape. The welding process is amazing to watch with sparks flying as up to six robots work to locate, fixture and perform welding, a site that attracts visitors.

5. After completion of welding, the sides of the vehicle a roof panel is positioned in the sheet metal layer created then welded permanently into place. However, this step differs depending on the type of company you work for since it's one of the most defining features of the vehicle design. The car can either have a "ditch molding" or simply continuous flat roof hence making it easy to tell the difference between cars. In comparison to brazing and laser welding, ditch molding is less complex.

6. Hoods and deck lids are put in place in a similar way to doors.
7. At this point, the unfinished product looks like a car but without wheels, an interior and a chassis. The BIW then goes through a process known as “body shaping” to smoothen the body panels so as to avoid any defects after painting.
8. This is the final stage, and it entails the use of conveyors or Automatic Guided Vehicles (AGV) to transfer the cars to the paint shop.

After this process, again the complete car is transported to the painting shop that is also the company's subsidiary. Finally, the complete vehicles are distributed to the respective distributors.

To establish the need for an improvement project for the in-house assembling process, it is essential to evaluate the advantages and disadvantages of the process. A close analysis of the shortcomings and the advantages will be utilized to determine the areas that need to be improved. This decision will be based on the triple constraints revealed by the benefits and disadvantages which are outlined as follows

Advantages

The overall advantage of in-house assembling is that the company acquires the full ability to control the production process (Forozanfar, et al., 2011); from that, the following are the advantages the company has over the production process

Flexibility

The company enjoys the benefit of flexibility in its operations in that it can implement new ideas with innovation. This is enabled by the investing in technology and cooperation of the various departments.

React to Market Quickly

Due to the readily available market for its finished commodity, the production process is pacey and flexible. This allows the experts to move through the processes quickly and reacts to any market changes almost instantaneously.

Rapid Testing of Prototypes

 In-house, manufacturing enables the testing of prototype testing through the inter-linkage of the product phases. As a result, result findings can be discussed, and more insight is gained in the process. Moreover, the cost of shipping prototypes for testing is saved.

Customization

Consumers' desire customized goods that are designed to suit their preference and liking. Companies that have bespoke manufacturing capabilities can carry out quick customization services rather than outsourcing the activities which are rather expensive.

Cost Savings

In an in-house manufacturing setup, the costs are relatively low compared to outsourcing services. Moreover, testing can be conducted without much mobility.

Disadvantages

Loss of Control

Companies tend to be concerned much about control and restrictions of workforce access to certain areas. For instance, contracted employees may not be free to carry out their activities in the host company. In contrast, the host firm cannot directly instruct the outsourced individuals due to lack of control.

Staff Turnover

In-house employees tend to prefer permanent and long years of service. Consequently, the company may shy away from holding onto employees and opt for contracted staff or outsourcing. Hence, staff turnover is relatively high and loss of intellectual know-how.

Redundancy in Management Roles

Duplication of roles is an imminent danger in a client-contractor organization. Creation of too many roles and responsibilities may result in conflicting managerial roles which contribute to insubordination and inefficient service delivery leading to confusion (Stewart, 2009).

Probing into the Problem

Being the largest Iran’s vehicle manufacturing company, IKCO pays attention of increasing productivity while maintaining high quality. Thus, it has incorporated sophisticated technology in the production process (Forozanfar, et al., 2011). The company is determined to get “right at the first time” to eliminate waste and, therefore, ensure a high quality. The in-house assembling process is not as efficient since the quality of the components and technology usable in the process are limited to the company's ability. This is unlike if the company was outsourcing some parts of the production process; they could outsource with a company that has better resources and better manpower to ensure that this objective is achieved. 

Although the company's assembly line utilizes quality monitoring systems and performance inspections conducted on both weekly and monthly basis, it has maintained the inspection process that can not guarantee the quality of a product, but rather it is a process that is initiated at the product design phase to the after sales service stage.

Define the Project

Although the assembling process adopted by IKCO is to a great extent perfectly efficient and the control procedure integrated into the supply chain and production processes effective in ensuring quality products, some concerns require improvement within the process. This paper aims at observing several improvement processes that if they are integrated to IKCO's product process would lead to further improvements in quality control. The improvement project is based on the triple constraints which are;

Cost

The improvement project will enable IKCO to cut the cost of production significantly. The current process is not cost effective since the company undertakes the whole process and even maintains high inventories of raw materials, work in progress and complete vehicles. To this effect, the paper advocates that the company adopts lean production and six sigma in addition to outsourcing much of the manpower.

Time

The second constraint that guides the decision on the improvements to be made is time. The current process involves eight different steps which entail the movement of the vehicles from one shop to another. The improvement project must be such that lesser time will be utilized in completing the assembling process including reducing the shipments processes.

Quality

As observed above, the in-house assembling process utilizes inspection as the primary quality control techniques. This method is far from what a quality assurance process should be. The improvement project will outline a quality assurance process to ensure that the assembling process is right from the assembling of the raw materials to the completion of the vehicle. 

The Improvement Project

To correct the in-house assembling process, this paper advocates that the company incorporates lean production and six sigma strategy. These are explained as follows:

Lean manufacturing (Muda, Mura, Muri)

In the manufacturing process, waste includes the scrap materials that are recycled or thrown away, lost time, non-monetary resources such as manpower and monetary resources (Anderson et al., 2013). Muda refers to the inclusion of non-value adding processes in the production process; Muri include unreasonable courses of actions and Mura is unevenness in the process. Within the Toyota production, muda is categorized into seven wastes; 

  1. Waste due to the transportation of raw material or part productions from one production and operations location to another.
  2. Waste due to defects; that is, the need to rework on projects or products defaults leading to rejection.
  3. Waiting for products or components to arrive at the production site or for a machine to complete a process to initiate another.
  4. Overproducing leading to excess stock that exceeds what the market can consume.
  5. Maintaining too high inventory which may also be in the form of work in progress, raw materials or finished products.
  6. Over processing the products or the inclusion of expensive features that exceed the customer’s need.
  7. The needless motion of machines or people during the production process that consumes unnecessary energy.

The implementation of this process will ensure that IKCO does not maintain the inventory of the raw materials. Also, this production strategy will ensure that the assembling process is not only automated but also will be completed in a single setup without the need to move the incomplete car from stage to another.

Lean Six Sigma Production

Six Sigma Productions comprise a set of tools and methods that will be employed in the assembling process with the aim of improving the processes of production (Desai, 2010). The approach is planned to facilitate the quality improvement of a process’s output by identifying and rectifying the cause of defects. This will help in limiting inconsistency in the manufacturing and business processes.

A six sigma project is completed using sequential steps that have value specific targets. An example is targeted to cut down the cycle time of a process, reduce costs, increase profitability, and reduces pollution resulting from a process and to improve customers’ satisfaction (Goldsby & Martichenko, 2005). The productivity of a manufacturing process when described by a sigma, it is rated by comparing its total yield to the defect free products produced. A process is said to be a six sigma if about 99.9% of the total production is defect free. When implementing the six sigma production process, IKCO will identify the redundancies and bottlenecks that will result from implementing the process. In the implementation of these production techniques, the major disadvantages arising from it are caused by poor decision-making that increases the cost of production and poor quality (Mynott, 2012). This factor is also subject to the production process employed and the actual size of the organization employing Six Sigma (Six Sigma Academy, 2002).

Project Planning

The Improvement Path

Based on the highlighted bottlenecks of the above production processes that are employed by IKCO in its production, this paper aims at identifying an improvement path that the company should employ to ensure that it gets it right the first time. The improvement path is meant to identify and implement the right improvements that it should make in the production process so that the company realizes most of the production objectives such as meeting the market demand and improving the products' quality. Also, the improvement process should enable the company to cut down the cost of production by facilitating the reduction of waste of time and other resources as well as a significant reduction of inventory. This paper recommends the following production strategies for IKCO in the process of improving their production process;

  1. Deming
  2. Just-in-Time
  3. DMIAC

Deming. Deming is a production process that employs 14 production management principles to enhance effectiveness within the organization’s operations. The principles are transformative and aim at turning around the already existing processes to optimize production. The first step is to enhance consistency in production to improve the quality of product or service constantly to earn a competitive advantage which is significant in staying in business against the other competitors. Next is the implementation of management and leadership process that aligns with the new production objectives. Thirdly, the company should enhance instilling quality in the first place through utilizing the right production processes and resources of production to cut down from inspecting as a means to achieve quality (Heizer & Render, 2014).

Establishing supplier loyalty and trust to minimize production cost through eliminating price tag supply process is the fourth step. This step is an essential in ensuring that the company not only gets quality raw materials but also, the established relationship and loyalty helps it get the supplies on credit and at a lower cost (Pyzdek, 2003). The fifth step is to cut the production cost through constantly improving the production process to enhance high and quality productivity. The sixth method is to institute on the job training to improve the knowledge and expertise skills of the production staff. Instituting leadership into the values, goals, and objectives of the company is crucial in ensuring that all the stakeholders participate in eliminating supervision which adds the cost of production; all the stakeholders work towards improving the entire business processes.

Eliminating boundaries among the production departments is critical in unifying the process from designing it to marketing it to the target customers. This entails combining the efforts of the research and designing department, production and sales to increase the ability to detect and rectify problems in the early stages to ensure that quality is not compromised. Also, Deming advocates the elimination of production. Eliminating merit rating and substituting this with self-improvement through education and training would empower the stakeholders to contribute to transforming the organization as a whole.

Just in time. Just in time is a production strategy that is aimed at managing production inventory implemented to reduce waste and increase production efficiency (Fox, 2013). This objective is achieved through receiving supplies only when they are required; it is effective in cutting down the inventory costs. The first phase of implementing this strategy is to forecast on the market demand and ensuring that the demand is accurate. It substitutes the just in case strategy where companies maintain large inventories after projecting a high demand. The Just In Time strategy enables a company to achieve the DRIFT objective (Do It Right The First Time). This is a managerial accounting objective and strategy to achieve JIT (Morgan & Brenig, 2015).

The management through DRIFT ensures that JIT processes are efficiently done to prevent production delays.  In IKCO, JIT would facilitate the production and transportation of parts and components only when they are required. The primary advantage of JIT is that the production process is shortened and this facilities the running of multiple production processes and at a reduced cost.  Warehouse storage cost is completely eliminated, companies also spend minimal raw materials cost (Hirano, 2009).  The process, however, can be ineffective if it does not control supply chain disruptions. Supplier breakdown can also adversely affect the production process; it results in delayed production and consequently delayed finished products delivery (Plenert, 2007).

The DMAIC framework. The DMAIC framework is a five-phase process that is recommended by this paper to be adopted by IKCO to improve on its production process; Define, Measure, Analyze, Improve and Control (Liker & Franz, 2011). The first phase is to establish the objectives the particular improvement process that a company wants to pursue. The goals are prioritized by importance in the improvement process. Some of the goals to be pursued by IKCO include to reduce the defect level and to improve quality. The strategic goals appear at the top page since they define the direction the company is moving, and these also determine the components of the other steps of the DMAIC framework (Taghizadegan, 2006). 

The second phase entails measuring the performance and standards of the already existing production to determine the additional goals to be pursued. Understanding what a current process is enabling the organization to achieve and whether it can facilitate the achievement of the new goals. The step is important in determining the specific adjustments and improvements that must be made to increase the probability of achieving the new set of objectives. The analysis step will enable IKCO to evaluate the improvement process to ensure that all the defaults in a current system are not transferred to the new system. The improvement phase is crucial in inventing new production strategies (Smith & Hawkins, 2004).

The control stage will enable the company to modify the new production system regarding budgets, procedures, and processes. Also, this stage is utilized to maintain the new production process and strategy adopted (Mohammadrezaie & Eskafi, 2007). Thus such things as the incentive system which is critical in motivating the staff and the operating and management systems which are involved in making critical decisions in the implementation of an improvement plan are also applied. IKCO will utilize DMAIC framework to improve the lean production and six sigma processes it employs (Moore, 2004).  The improvements on the system will enable it to achieve the company’s general objectives such as to improve quality, an increase in unit production and sales, increase profitability and ultimately, the general growth which may be measured using the size of its operations, employments, and share prices (Taghizadegan, 2006).

Following the Gannt chart above, each of the DMIAC processes will be executed on a monthly basis; the operations team will be involved in defining the exact objectives that will be achieved by implanting JIT and Deming production strategies. The executive will then approve these targets. In September, the executive and the operations team will be involved in measuring analyzing and measuring the defects of the lean production and Sigma strategies utilized in car manufacturing. JIT and Deming will be incorporated in the improvement phase. The control stage will be a continuous process which will be initiated in November and will continue from then until full installation. The evaluation process will be conducted on a monthly basis for the next three year.

Project Performance Monitoring

The company’s major concern is to ensure that its products meet the international quality standards. IKCO aim to make the company's products competitive regarding their quality, and this will be one of the primary performance factors that will be monitored within the first six months. The quality assurance process will also be closely monitored to ensure efficiently that only standard components are used in the production process. Controlling checkpoints will be utilized and will include the raw material purchasing control, part production control, and final product control. This process will be useful in cutting down possible defects. The performance report of the new processes adopted will as well be provided to the executive on a semiannual basis.

Financial Benefits

Upon the execution of the proposed assembling processes, IKCO intends to cut down the cost of production by 18% within the first year of utilizing Lean and Six Sigma assembling strategies. Much of the cost reduction will be achieved from the cutting down of inventory. Also, the company will also significantly cut time utilized to complete the production process, waste and employment cost; it will utilize outsourcing instead of having permanent employees.

Recommendation

To significantly achieve performance improvement in the assembling process, this paper recommends the use of more control processes. While it is easy to execute lean and six sigma processes especially if the required resources are available, it could be costly to continue producing competitively unless the production process is efficiently monitored. This includes controlling the quality of the raw materials and the subproducts achieved in the production process.

Conclusion

Conclusively, there is nothing more effective in the competitive business environment than the ability to reduce the cost of production. Also, for organizations that produce the products they trade, it is very important to get it right at the first time to ensure that they market only what is required in the particular market they are serving. Therefore, the secret is to identify the best production method that will enable an organization to achieve these objectives. Based on the above discussions, the implementation of the lean production and six sigma through the utilization of the JIT, DMIAC, and Deming tool is a guarantee that IKCO will improve its current performance. 

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