CRITICAL SUCCESS FACTORS IN LEAN OPERATION FOR STEEL FABRICATION PROCESS
Abstract
Traditionally, international businesses relied on innovation in their products to improve customer value while increasing their profitability. However, the value-oriented strategy caused massive waste of resources and sluggish adaptability in a fast-changing business environment. However, the recent introduction of agile business models and a lean operation seems to have solved the problem. The ability of strategically managed steel fabrication industry companies has enabled through agile models and lean operations have enabled them to survive at a time when many other major industries continue to suffer the effects of global economic meltdown. 17
Introduction
Currently, many businesses that have international operations have an intimate understanding of the need for efficiency. Traditionally, international businesses relied on innovation in their products to improve customer value while increasing their profitability. However, the value-oriented strategy caused massive waste of resources and sluggish adaptability in a fast-changing business environment. However, the recent introduction of agile business models and a lean operation seems to have solved the problem. The primary objective of the essay will be to investigate the steel fabrication global business using themes such as global agility, lean business leadership, lean business operations, and a lean customer service practice.
Part One: Global Agility
The recession that hit the global economy affected all significant players in the steel industry regardless of whether they were at the extraction, smelting, or fabrication level. One of the primary considerations that explain the global recession’s effect on the industry is that steel is one of the most critical requirements in all growing economies. Unfortunately, such critical enterprises must be agile in reacting to changes in the business environment (Guru Dev, Rajesh and Senthil Kumar, 2015, pg.1216). It is a common denominator in the construction, automotive, aerospace, telecommunications, and even the defense sectors. Therefore, the recession affected many industries including the steel fabrication sector because of the reduced finances required for continued operation in various global contracts causing redundancy in the company. Don't use plagiarised sources.Get your custom essay just from $11/page
An agile company is one that can identify both internal and external factors that affect it and react quick enough to maintain sustainable and even profitable operations. Internal factors that could necessitate agility in the business include organizational culture, human resources changes, and human capabilities such as innovation (Dubey, Singh and Gupta, 2015, pg. 812). Comparatively, external factors that necessitate agility within a business model include political issues, economic issues such as recession, and social issues such as CSR (Dubey, Singh and Gupta, 2015, pg. 815). The steel fabrication industry faced a combination of various internal and external factors necessitating the introduction of agility in its global operations. Usually, companies involved in industrial processes such as steel fabrication react first to external factors requiring agility, which in turn cause systemic internal factors.
Externally, steel fabrication companies faced major economic problems when the global economy started suffering from a recession. Although the recession occurred almost one decade ago, many companies in the construction and steel industries at the global level are still reeling from its effects necessitating lean production tactics (Hasle, 2012, pg. 46). During this period, investments in industry and trade activities plummeted causing great redundancy among companies and business involved in these industries. Consequently, fewer and fewer contracts in the construction and automotive sectors were signed resulting in less business for these companies. Therefore, players in the steel fabrication sector suffered from fewer business opportunities even as they were incurring operational costs associated with labor, materials handling, corporate governance, and statutory requirements. Such business conditions are untenable for an international company, meaning that executive management personnel in the industry needed agile strategies at the international level.
As a result of the significant external factors that affected the steel fabrication sector, several internal factors came up that also necessitated agility strategies. First, the industry found its organizational architecture unsustainable due to increased labor costs meaning there was a need for lean operations (Hasle, 2012, pg 47). Additionally, the industry had all the workers it needed, but no contracts meant that it was paying them out of its pockets resulting in losses. Furthermore, the management structure was still designed around the global economic conditions preceding the international recession that affected the global economy. The two internal conditions necessitated new business strategies to improve the company’s ability to react favorably and profitably.
The first agility strategy that steel fabrication industries adopted in its international business model was a revision of its business philosophy. Initially, the company concentrated on traditional markets in the Indian subcontinent that was keen for infrastructural growth. Therefore, steel fabrication industries enjoyed decades of profitable business operations in India, Bangladesh, Pakistan, and other south Asian countries. However, it shifted its business focus to the Middle East and China. China had faired relatively well during and after the global recession due to the 586 billion dollar stimulus package its government injected into the economy. Consequently, industries in the construction, automotive, and telecommunication sectors recovered faster than European and South Asian ones. Similarly, the Middle Eastern market was awash with financial aid due to oil resources meaning their countries recovered faster than their American, Asian, and European counterparts. Directing its focus to such sturdy economies would enable steel fabrication industries to react more quickly during and after the major economic crisis in the future.
The second global agility strategy that steel fabrications firms adopted was a change in its internal management architecture (Zahraee, 2016, pg. 141). Initially, the management operated using a fundamentalist mentality which suffered during the need for change such as when the global recession struck. Traditional management structures in global companies in the steel fabrication sector are composed of many directors and managers, which results in bureaucracy and slow reaction times during crisis. However, the executive management reduced its management team and introduced new professionals to increase its agility (Mirghafoori, Andalib and Keshavarz, 2017, pg. 369). Coupled with the change in focus towards more sustainable business in China and the Middle East, the lean management structure would ensure that steel fabrication companies’ ability to detect crisis and other changes in the business environment, and react strategically to them was optimized (Dubey, Singh and Gupta, 2015, pg 830). Additionally, the company would better respond to customer requirements due to its renewed ability to focus on customer value.
Steel fabrication industries’ current business model is agile compared to its previous one. Global agility within the business has enabled the company to react to the subtle changes in Chinese and Middle Eastern business needs and styles. Agility also allows the company to respond faster based on new management architecture that makes decision-making faster without compromise on customer satisfaction and product quality.
Part Two: Lean Leadership
Scholars in international business management agree on the need for lean leadership within international business companies to enable faster decision-making and agile business practices (Eroglu and Hofer, 2010, pg. 356). Compared to traditional management teams that run global companies such as Steel fabrication industries, these lean management teams enhance communication and managerial efficiency. Before the recession, steel fabrication industries used a traditional management architecture that was composed of several layers of management personnel situated in different geographical locations. When financial or economic problems affect the business, the processes required to enable smooth business become problematic and slow due to factors such as communication barriers, geographical distance, and bureaucracy (Mirghafoori, Andalib and Keshavarz, 2017, pg. 376). The business culture present in many Asian companies does not help either because most Indian and Asian companies subscribe to a caste system even in the office.
The current management structure is composed of about 500 professionals from diverse ethnic and social extractions. Additionally, the company has created a lean leadership model where all communication lines are open both horizontally and vertically (Mishra, 2017, pg. 1618). Such communication dynamics that use bi-directional avenues have a distinct effect on management culture that resembles reducing management hierarchy while improving its efficiency. That enables field-based managers in steel fabricator’s business operations to reach executive management teams at any time regardless of their geographical location. The reduced number of managers has also reduced steel fabrication industries’ operational costs because some of this management personnel command large remuneration packages.
Lean leadership also entails changes to the managers’ mindsets and attitudes to both business management and customer focus. Traditionally, the management teams in international companies have relied on a network of subordinate managers and directors to carry out the less-important functions leaving only decision-making processes to them. However, this old way of thinking affects management functions adversely, especially during an economic crisis when business operations must change in favor of a lean model (Eroglu and Hofer, 2010, pg.360). Therefore, business owners either change such rigid managers or train existing ones on lean leadership concepts. Such concepts include a closer focus on management peers, more concentration on customer needs, and reduced distance between all company employees regardless of hierarchy or position. Steel fabrication industries adopted some of these strategies as evidenced by the change in top management and reduction in the number of personnel. The respective tactics served to introduce a lean leadership mode of operations in the managerial team.
Consequently, lean leadership practices in international business operations accord the business several benefits associated with customer satisfaction and organizational performance (Raja Sreedharan and Raju, 2016, pg. 438). Steel fabrication industries’ adoption of lean leadership model enabled the new management to inspire the entire company’s employee group towards recovery and success in the new markets. After making an entry in the relatively new Middle East and Chinese markets, the management created programs to inspire and motivate their team members. The new markets had more massive, more experienced companies that were experienced with their dynamics, but steel fabrication industries’ lean management teams did not let these conditions detract them. Through training, team building, strategic communication tactics, and other methods, the lean leadership succeeded in inspiring its peers to focus on the new markets leading to successful entry and establishment.
Unlike traditional management practices where executive managers look for quick fixes during problems, lean leadership philosophies call for the management team to identify the underlying causes of the issues (Raja Sreedharan and Raju, 2016, pg. 454). Usually, such management practices entail engaging with other managers and even subordinate staff directly rather than delegating these duties. One advantage of engaging staff directly for management teams is that it reduces the distance between management and subordinates as they get to interact directly with their superiors and voice their concerns or desires. Steel fabrication industries’ executive management team visited operations in both China and the Middle East severally once operations were set up. The two main effects of such managerial practices are fast problem-solving timelines, and motivation of staff.
Therefore, steel fabrication industries’ lean leadership enabled it to make a strategic entry into China and the Middle East after the recession through significant changes in its management culture. First, the previously rigid management teams were removed and replaced with leaner management architecture. Lean leadership at the company optimized the employees’ motivation levels and created a new vision for them through inspiration (Sanders, Elangeswaran and Wulfsberg, 2016, pg. 811). Additional training for the new management team at Steel fabrication industries also improved their contact dynamics with the staff on the ground, which catalyzed a dynamic organizational setting that succeeded in their vision of establishing a presence in new markets.
Part Three: Lean Operations
Lean business operations call for the addition of productivity and customer value while reducing waste and resources usage (AL‐Najem et al., 2013), pg. 282). Many international business organizations resorted to using lean operations strategies after the recession that affected the global economy in 2007/8. During this period, much of the investments that individuals, governments, and business organizations had directed towards industry and trade were reduced. Consequently, most businesses had to mitigate various sources of waste in their supply chains and operational frameworks to remain afloat. Steel fabrication industries were among the international companies that adopted a lean operations model to stay sustainable during and after the financial crisis.
The companies have remained operational and sustainable even as thousands of other businesses in the metals industry closed down because of several factors. These factors are people, information, and materials. The best lean operation models have seamless flows between people, materials, and information (AL‐Najem et al., 2013, pg. 286). Consequently, information is relayed and replied with requirements by the right people. Essentially, lean operations rely on the right amount of material, communicated to the right person, and responded to in the timeliest manner due to lead time constraints. Such activities detail the Just-In-Time (JIT) philosophy of supply chain management, which is an essential component of lean operations in the industry.
Inventory control is an essential component of lean operations. Combined with a dedicated and efficient communications structure, needs from customers or partners are communicated and acted upon strategically. Supply chain management principles state that too much stock in raw or finished form is wasteful as they represent idle cash and skills investments (Chahal and Narwal, 2018, pg. 240). Steel fabrication industries adopted such operational models after fostering the lean model of operations by reducing idle raw materials and finished products. The company only stores raw materials and finished components or materials associated with ongoing contracts. Consequently, no idle resources in the form of cash and skills investments are present at Steel fabrication industries warehouses or sites.
Using a core team that is identified before a contract begins ensures that only the relevant parties participate in ongoing work. The interplay between information, materials and people is critical in executing lean operations meaning that irrelevant employees delay the flow of information and lead wasted time (Sanders, Elangeswaran and Wulfsberg, 2016, pg. 811). Steel fabrication industries have invested in a keen operations management team that identifies the most efficient and active group of employees that can handle each contract while satisfying customer needs, quality requirements, and other statutory needs. Operating with such consideration for the flow of information ensures that lean operations are realized because no time is wasted.
A lean operations model cannot exist without a lean supply chain. Lean supply chains exist when only the most vital, reliable, and active participants contribute from the raw materials stage all the way to delivery of finished goods to customers. Therefore, all contracts should be handled individually by analyzing the best supply chain design that will reduce waste associated with lead time loss, inventory problems, and stores management (Chahal and Narwal, 2018, pg.240). The lean supply chain is aligned with a JIT mode of operations where only the required materials are delivered to the right person, at the right time, and in the right quantities. Consequently, no excess components result from the inherently wasteful steel fabrication processes companies such as Steel fabrication industries use to deliver projects to their customers. Steel fabrications at a large scale such as what international companies engage in are wasteful at different levels. The raw materials are bulky and heavy; manufacturing is skills, energy, and time intensive, while delivery or installation is also complex and time-consuming (Toussaint and Cheng, 2002, pg. 330). Therefore, lean operations could streamline operations while meeting customer and quality needs.
Another characteristic of lean operations that international companies such as steel fabrication industries must include in their production systems is total quality control (TQM). The main reason for this component being considered as critical is that lean operations must also ensure a high quality finished products while reducing waste in production processes (Cudney and Elrod, 2011, pg. 7). TQM entails management of all aspects of product quality from design, through manufacturing and processing, and through to delivery using standards that are internationally recognized. The process does not stop at many steel fabrication industries’ ISO 9000, ISO 18001, and ISO 14001 certifications, but continues to the delivery of finished products to customers. Incidentally, the company has invested a lot of resources in ensuring the quality of its raw materials, fabrication processes and finished products meet and exceed these standards due to the human life component of their business.
Part Four: Lean Customers
The lean customer in today’s international business world is most concerned about the value a company’s products will add. Customers have learned about their rights and positions in any business transaction and continue to demand the best regarding value, quality, and service integrity (Found and Harrison, 2012, pg. 252). Consequently, companies have identified lean customers and taught them into their lean operation and agile business models.
Lean customers also forced businesses to change their value propositions and understanding of customer values. Initially, international businesses ignored most of the customer values because of the advantage tens of millions of customers afforded them. However, when the majority of their customers demanded more regarding value and quality, changes in attitude became necessary. Therefore, global companies such as steel fabrication industries revised their customer value definitions to reflect the changes within their customers.
Customer values associated with value continue to define the concept of lean customers in international business operations. Majority of today’s customers will not invest cash in products that do not meet and exceed their value expectations (Found and Harrison, 2012, pg.260). Steel fabrication industries has an intimate understanding of these requirements given that Middle Eastern and Chinese steel standards are higher compared to those of its previous Indian continental market. Therefore, the company has redesigned its production methods to ensure that only the best grade of steel is used, just the most modern and efficient fabrication technology comes into play, and that always exceeds customer value expectations regarding timeliness and quality.
Knowing the customer values definitions clearly as they relate to quality is essential during the creation of lean and agile characteristics in a business. The components cannot exist without a good understanding of the customers’ demands regarding quality (Cudney and Elrod, 2011, pg. 9). Therefore, steel fabrication industries sought to carry out market research based on the experiences of companies already existing in its target market within China and the Middle East and academic research findings. The results pointed to higher expectations that formed what the customer valued before engaging any company for their fabricated steel needs. An understanding of the agility and leanness factors of steel fabrication industries’ new business model would enable the company to redesign its processes to not only meet the customers’ value expectations but possibly exceed them.
Modern business design concepts call for the inclusion of frameworks to interact with customers at all levels to ensure their satisfaction is guaranteed. A common practice, especially in international businesses with many customers from various markets, is using Customer Relationship Management (CRM) process. CRM is an interactive network of systems designed to ensure that the company is in contact with existent and potential customers (Steel, Dubelaar and Ewing, 2013, pg. 1330). The network collects consensual information related to customer needs, feedback, sentiments, and interests associated with the company’s products. Steel fabrication industries redesigned its CRM model to reflect the needs of its new markets in the Middle East and China. Special consideration had to be invested in the fact that certain aspects of the modern CRM model such as social media connectivity could not work in China due to internet regulation (Steel, Dubelaar and Ewing, 2013, pg. 1335). However, the system continues to furnish managers with useful information related to issues such as complaints, product interest, complements, and future contracts. The company’s CRM system complements steel fabrication industries’ ability to appreciate its existent and potential customers’ value demands.
Once the company appreciates and includes the value demands of its customers, it should invest in existing or new production processes to meet and exceed them. The process involves upgrading current production, quality control, and supply chain management systems to ensure that customer get their products as high quality finished projects delivered promptly (Zahraee, 2016, pg. 140). Some of the production processes that steel fabrication industries has invested in include laser fabrication equipment, additional training for its fabrication employees, other equipment for supply chain functions such as logistics and delivery, and an interactive feedback process to capture customer sentiment.
Considerable attention has been directed to environmental conservation among the stakeholders of the steel industry. All participants of this industry fully appreciate the contribution that steel makes to greenhouse gases and environmental pollution from iron ore mining, through processing, fabrication, and its finished product. Therefore, part of the lean customer development process is demonstrating to the existing and potential customer that the company understands its role in environmental degradation and is contributing to conservation efforts (Found and Harrison, 2012, pg. 264). Steel fabrication industries invest in energy-efficient equipment, CSR initiatives aimed at environmental conservation, and energy-efficient supply chain design. These activities have served to convince the environmentally conscious customer that the company is conversant with the planet’s current state.
Conclusion
International business operations call for the ability to create and apply production methods that produce as much value for the customer as possible and reduce production wastage. Currently, most businesses employing this mode of operation use agility and leanness characteristics to ensure that customers receive the high quality, and the most value using the least possible resources. All stakeholders in the steel fabrication industry suffered greatly during and after the recession of the previous decade. However, steel fabrication industries survived by using agility models and lean operations. The company focused on new markets in China and the Middle East and began an agile global operation capable of reacting to changes in the business environment. Steel fabrication industries also created lean leadership to ensure that only the most relevant personnel contributed to each contract. Incidentally, such practice optimizes one of the three components of lean business operation – the flow of information. Steel fabrication industries also created a lean business operation characterized by efficient materials management, efficient inventory control, and TQM. Finally, the company benefits from lean customer development which enables it to appreciate customer value demands better than most of its competitors.
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