Successful Management Strategies and Tools: Industry Insights, Case Studies and Best Practices (Management for Professionals) 3030776603, 9783030776602

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Management for Professionals

Marc Helmold

Successful Management Strategies and Tools Industry Insights, Case Studies and Best Practices

Management for Professionals

More information about this series at http://www.springer.com/series/10101

Marc Helmold

Successful Management Strategies and Tools Industry Insights, Case Studies and Best Practices

Marc Helmold Berlin, Germany

ISSN 2192-8096 ISSN 2192-810X (electronic) Management for Professionals ISBN 978-3-030-77660-2 ISBN 978-3-030-77661-9 (eBook) https://doi.org/10.1007/978-3-030-77661-9 # The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Acknowledgements

Mega trends, the global COVID-19 pandemic, globalisation, the increasing (especially the digital) interconnection and the unlimited exchange of data and information have led to a maximised transparency of value adding activities and global supply chains. This is leading to the question how to generate a competitive advantage for companies in the producing, trading, service or information industries. In this context and as a consequence, there is a paradigm shift nowadays to manage the value chain from the supply side over the entire production towards the customers. Only the integrative approach with optimum combination of strategies, methods and concepts from the customer order, planning, procurement, production and logistics up to the reverse logistics process will enable enterprises to make decisions for the management of their business actions. Moreover, due to the concentration on core competencies and the allocation of value adding non-core activities (outsourcing) to supply networks, new processes and flows are created that need to be coped with. This trend requires organisations to look at the supply side more than before and to utilise partnership and smart tools for managing the upstream supply chain. As a consequence, it is necessary to apply the ideal and optimal combination of Management Strategies, Methodologies and Tools to successfully survive and operate in a complex and dynamic business environment. The book idea was generated to provide a book with recommendations, methodologies and tools to achieve a long-term and sustainable competitive advantage. It contains therefore a wealth of strategic, quality and other tools, which have been successfully proven in industry. Dr. Helmold had several top management positions as General Manager in leading companies in the railway and automotive sectors in Germany and Asia. The book would not have been possible without the implicit and indirect support of practitioners, academics and students at doctoral and master’s levels. For the practical relevance, the author appreciates the input from professionals in many industries and from public organisations. Additionally, many of the impulses come from students of the IUBH university campus studies in Berlin. The author hopes that the book will also contribute to understand other countries and cultures in a better way, as they are convinced that diversity and intercultural experience in enterprises is a key success factor in a highly competitive environment. The book is not meant to provide a complete overview of suitable management tools, but a v

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combination and wealth of successfully applied tools in industry sectors. The book is dedicated to Takako, Ayumi and Manami. Berlin, July 2021 Marc Helmold

Contents

1

Business Transformation and Project Management . . . . . . . . . . . . 1.1 Transformation and Adaptability of Strategies and Tools . . . . . 1.2 Business Transformation Strategies . . . . . . . . . . . . . . . . . . . . 1.3 Project Management Strategies . . . . . . . . . . . . . . . . . . . . . . . . 1.4 Project Management Criteria . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.1 Key Performance and Success Criteria . . . . . . . . . . . 1.4.2 Integration Management . . . . . . . . . . . . . . . . . . . . . 1.4.3 Performance Management . . . . . . . . . . . . . . . . . . . . 1.4.4 Time Management . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.5 Cost Management . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.6 Quality Management . . . . . . . . . . . . . . . . . . . . . . . . 1.4.7 People and Human Management . . . . . . . . . . . . . . . 1.4.8 Communication Management . . . . . . . . . . . . . . . . . 1.4.9 Risk Prevention Management . . . . . . . . . . . . . . . . . 1.4.10 Procurement Management . . . . . . . . . . . . . . . . . . . . 1.5 Recommendations for Executing Project Management . . . . . . . 1.6 Case Study: CRRC Project Management in the U.S.A. . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 4 7 7 7 7 7 8 8 8 8 8 8 9 9 10

2

Corporate Strategic Management . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Levels of Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1 Corporate Strategy . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.2 Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.3 Functional Strategy . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4 Alignment of Strategies . . . . . . . . . . . . . . . . . . . . . . 2.2 Strategic Triangle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Strategic Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.1 Analysing Important Factors . . . . . . . . . . . . . . . . . . 2.3.2 Analysing the Environment . . . . . . . . . . . . . . . . . . . 2.3.3 Analysing the Industry . . . . . . . . . . . . . . . . . . . . . . 2.3.4 Analysing the Strengths and Weaknesses of the Own Enterprise . . . . . . . . . . . . . . . . . . . . . . . 2.3.5 Analysing the Core Competencies . . . . . . . . . . . . . .

11 11 12 12 12 13 13 13 13 15 16 17 18 vii

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3

Strategic Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.1 Generic Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.2 Boston Consulting Matrix (BCG-Matrix) . . . . . . . . . 2.4.3 Ansoff-Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.4 Blue and Red Ocean Strategies . . . . . . . . . . . . . . . . 2.5 Strategic Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.1 Assessment of Suitability, Acceptability and Feasibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.2 Suitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.3 Acceptability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.4 Feasibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 Strategic Pyramid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6.1 Mission and Vision . . . . . . . . . . . . . . . . . . . . . . . . . 2.6.2 Goals and Objectives . . . . . . . . . . . . . . . . . . . . . . . 2.6.3 Core Competencies . . . . . . . . . . . . . . . . . . . . . . . . . 2.6.4 Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6.5 Strategic Architecture . . . . . . . . . . . . . . . . . . . . . . . 2.6.6 Control and Execution . . . . . . . . . . . . . . . . . . . . . . 2.7 Core Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 Strategies Must Focus on Value-Creation . . . . . . . . . . . . . . . . 2.9 Case Study: Siemens Strategy . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18 18 19 21 23 24

Cultural Change Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Management Transformation as Part of the Organisational Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.1 Stories and Myths . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.2 Rituals and Routines . . . . . . . . . . . . . . . . . . . . . . . . 3.1.3 Symbols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.4 Control Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.5 Organisational Structures . . . . . . . . . . . . . . . . . . . . 3.1.6 Power Structures . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.7 Cultural Web to Change . . . . . . . . . . . . . . . . . . . . . 3.2 Need for Change of Organisational Culture . . . . . . . . . . . . . . . 3.2.1 Challenge People to Think . . . . . . . . . . . . . . . . . . . 3.2.2 Lead by Example . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.3 Take Lots of Leaps of Faith . . . . . . . . . . . . . . . . . . . 3.2.4 Create an Environment where It Is Acceptable to Fail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.5 Eliminate Concrete Heads . . . . . . . . . . . . . . . . . . . . 3.2.6 Be a Great Teacher . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.7 Show Respect to Everyone . . . . . . . . . . . . . . . . . . . 3.2.8 Motivate Your Followers . . . . . . . . . . . . . . . . . . . . 3.2.9 Develop a True Team Environment . . . . . . . . . . . . . 3.2.10 Encourage People to Make Contributions . . . . . . . . .

33

24 25 26 26 27 27 28 28 28 28 29 29 29 30 31

33 34 35 35 35 35 36 36 36 37 37 37 37 38 38 38 38 38 38

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3.3 Creating a Logical and Open Mind . . . . . . . . . . . . . . . . . . . . . 3.4 Leadership Development and Culture . . . . . . . . . . . . . . . . . . . 3.5 Emotional and Physical Strength . . . . . . . . . . . . . . . . . . . . . . 3.6 Case Study: Toyota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39 39 40 40 42

4

Leadership, Empowerment and New Work Concepts . . . . . . . . . . . 4.1 Leadership in Lean Management . . . . . . . . . . . . . . . . . . . . . . 4.1.1 Tells . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.2 Sells . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.3 Suggests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.4 Consults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.5 Joins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.6 Delegates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.7 Abdicates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Empowerment and Jidoka . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Autonomous Work Groups . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Job Rotation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 Job Enlargement and Job Enrichment . . . . . . . . . . . . . . . . . . . 4.6 The Manager as the Coach of Employees . . . . . . . . . . . . . . . . 4.7 Case Study: BMW Quality Through Job Rotation . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43 43 45 45 45 45 46 46 46 46 47 48 48 48 49 50

5

Strategic Management Tools and Excellence Models . . . . . . . . . . . . 5.1 Balanced Score Card (BSC) . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.1 Better Strategic Planning . . . . . . . . . . . . . . . . . . . . . 5.1.2 Improved Strategy Communication and Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.3 Better Alignment of Projects and Initiatives . . . . . . . 5.1.4 Better Management Information . . . . . . . . . . . . . . . 5.1.5 Improved Performance Reporting . . . . . . . . . . . . . . 5.1.6 Better Organizational Alignment . . . . . . . . . . . . . . . 5.1.7 Better Process Alignment . . . . . . . . . . . . . . . . . . . . 5.2 European Foundation of Quality Management (EFQM) . . . . . . 5.2.1 Concept of the EFQM Excellence Model . . . . . . . . . 5.2.2 Continuous Process . . . . . . . . . . . . . . . . . . . . . . . . 5.2.3 Self-Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.4 Application of the EFQM Excellence Model . . . . . . 5.3 Baldrige Excellence Model . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Business PM Improvement Resource Planning (BPIR) . . . . . . . 5.5 Performance Management to Excellence Model (P2ME) . . . . . 5.6 Case Study: EFQM Model at BMW . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53 53 56 57 57 57 57 57 58 58 58 59 60 60 60 61 62 63 63

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Seven Management Tools (M7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Affinity Diagram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Relations Diagram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Portfolio Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Fault Tree Analysis (FTA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 Matrix Diagram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6 Network Planning or Mapping Tools . . . . . . . . . . . . . . . . . . . 6.7 Problem Decision Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8 Case Study: Design Academy at Deutsche Telekom . . . . . . . .

65 65 67 68 68 69 69 69 70

7

Statistical, Quality and Resource Management Tools . . . . . . . . . . . 7.1 Statistical Process Control (SPC) . . . . . . . . . . . . . . . . . . . . . . 7.2 Failure Mode and Effects Analysis (FMEA) . . . . . . . . . . . . . . 7.3 Seven Quality Management Tools (Q7) . . . . . . . . . . . . . . . . . 7.3.1 Error Collection List . . . . . . . . . . . . . . . . . . . . . . . . 7.3.2 Histogram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.3 Pareto Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.4 Correlation Diagram . . . . . . . . . . . . . . . . . . . . . . . . 7.3.5 Quality Control Cards (QCC) . . . . . . . . . . . . . . . . . 7.3.6 Fishbone Diagrams . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.7 Why Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 Enterprise Resource Planning (ERP) . . . . . . . . . . . . . . . . . . . . 7.5 Case Study: AirSupply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71 71 72 74 74 74 74 75 76 76 76 77 77 79

8

Problem-Solving, Process and Idea Creation Tools . . . . . . . . . . . . . 8.1 Introduction to Problem-Solving . . . . . . . . . . . . . . . . . . . . . . 8.2 A3-Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3 8D-Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 Kepner-Tregoe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5 TRIZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6 Plan-Do-Check-Act (PDCA) . . . . . . . . . . . . . . . . . . . . . . . . . 8.7 Six Sigma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8 Value Stream Mapping (VSM) . . . . . . . . . . . . . . . . . . . . . . . . 8.9 RPR Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.10 Brainstorming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.11 Mind Mapping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.12 Design Thinking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.12.1 The Concept of Design Thinking . . . . . . . . . . . . . . . 8.12.2 Understanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.12.3 Observing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.12.4 Defining a Point of View . . . . . . . . . . . . . . . . . . . . 8.12.5 Finding Ideas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.12.6 Prototyping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.12.7 Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81 81 81 84 85 87 90 91 92 92 93 93 93 93 94 94 94 94 95 95

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8.13

Case Study: Problem Solving with Kepner Troeger at Bayer AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95 96

9

Supply Management Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 Supply Side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 Supply Management Objectives . . . . . . . . . . . . . . . . . . . . . . . 9.3 Managing the Supply Side . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3.1 Supply Management Process . . . . . . . . . . . . . . . . . . 9.3.2 Supply Management Strategy . . . . . . . . . . . . . . . . . 9.3.3 Supply Management Selection and Evaluation . . . . . 9.3.4 Control Via Supplier Dashboard or Cockpit . . . . . . . 9.3.5 Supply Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3.6 Method of Evaluation . . . . . . . . . . . . . . . . . . . . . . . 9.4 Case Study: Apple’s Outsourcing Strategy . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97 97 100 101 101 102 103 106 107 108 110 111

10

Management Objectives, KPI and OKR . . . . . . . . . . . . . . . . . . . . . 10.1 The Performance Management Cycle . . . . . . . . . . . . . . . . . . . 10.2 Performance Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3 Key Performance Indicators (KPI) . . . . . . . . . . . . . . . . . . . . . 10.4 Objective Key Results (OKR) . . . . . . . . . . . . . . . . . . . . . . . . 10.5 Case Study: Microsoft’s Strategy and Objectives . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

113 113 115 117 117 118 121

11

Financial Management Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 Financial Crisis Prevention and Crisis Symptoms . . . . . . . . . . 11.2 Restructuring and Financial Restructuring . . . . . . . . . . . . . . . . 11.2.1 Definition of Restructuring . . . . . . . . . . . . . . . . . . . 11.2.2 Strategic Restructuring . . . . . . . . . . . . . . . . . . . . . . 11.2.3 Structural of Restructuring . . . . . . . . . . . . . . . . . . . 11.3 Financial Stability Assessment Tools . . . . . . . . . . . . . . . . . . . 11.3.1 Creditreform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3.2 Creditsafe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3.3 VDA-Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3.4 Dun & Bradstreet (D&B) . . . . . . . . . . . . . . . . . . . . 11.3.5 Rapid Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.4 Case Study: Insolvency of SolarWorld AG . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

123 123 125 125 126 127 128 128 128 128 129 129 129 130

12

Supply Chain Management Tools . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1 Supply Chain Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 Commodity Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3 Make or Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4 ABC-XYZ Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5 Internationalization Concepts . . . . . . . . . . . . . . . . . . . . . . . . .

131 131 132 133 135 137

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12.6 Supply Chain Sustainability Management . . . . . . . . . . . . . . . 12.7 Vendor Managed Inventory (VMI) . . . . . . . . . . . . . . . . . . . . 12.8 Efficient Consumer Response (ECR) . . . . . . . . . . . . . . . . . . 12.9 Cross Docking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.10 Case Study: Industrial Supplier Park at Ford Saarlouis . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

14

15

. . . . . .

137 137 138 139 140 140

Virtual Management and Cyber Tools . . . . . . . . . . . . . . . . . . . . . . 13.1 Industry 4.0 in Lean Management . . . . . . . . . . . . . . . . . . . . . 13.2 Artificial Intelligence (AI) in Lean Management . . . . . . . . . . . 13.2.1 Lean AI Tools Will Lead to a Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.2.2 Autonomous Robots . . . . . . . . . . . . . . . . . . . . . . . . 13.2.3 Virtual Production and Supply Chains . . . . . . . . . . . 13.2.4 Lean Simulations . . . . . . . . . . . . . . . . . . . . . . . . . . 13.2.5 System Integration . . . . . . . . . . . . . . . . . . . . . . . . . 13.2.6 Internet of Things . . . . . . . . . . . . . . . . . . . . . . . . . . 13.2.7 Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.2.8 Cloud Computing . . . . . . . . . . . . . . . . . . . . . . . . . . 13.2.9 Additive Manufacturing . . . . . . . . . . . . . . . . . . . . . 13.2.10 Augmented Reality . . . . . . . . . . . . . . . . . . . . . . . . . 13.2.11 Big Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3 Case Study: Google’s Self-Driving Cars . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

141 141 143 143 143 144 144 144 144 144 144 145 145 145 145 147

Audits and Quality Management Systems (QMS) . . . . . . . . . . . . . . 14.1 Quality Management System (QMS) . . . . . . . . . . . . . . . . . . . 14.2 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2.1 Audit Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2.2 Quality Management Systems (QMS) . . . . . . . . . . . 14.3 Case Study: 5S Audits in Berliner Kindl Schultheiss Brewery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

149 149 150 150 151 152 153

Lean Production Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1 Principles of a Lean Production System . . . . . . . . . . . . . . . . . 15.1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1.2 Zero Defect Principle . . . . . . . . . . . . . . . . . . . . . . . 15.1.3 Pull Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1.4 Flow Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1.5 Tact Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2 Andon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.3 Poka Yoke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.4 Gemba and Shopfloor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.5 Shadow Boards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.6 Health and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

155 155 155 155 156 156 157 158 159 159 160 160

Contents

xiii

15.7 Overall Equipment Effectiveness (OEE) . . . . . . . . . . . . . . . . . 15.8 Kanban . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9 Supermarkets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.10 Case Study: Porsche Production System . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

161 162 162 163 164

16

Kaizen: Continuous Improvements in Small Steps . . . . . . . . . . . . . 16.1 Definition of Kaizen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.2 Kaizen Versus Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.3 Visualisation Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.4 Case Study: Mercedes’ Lean Management System . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

165 165 167 168 168 169

17

Waste and Value-Added Management Tools . . . . . . . . . . . . . . . . . . 17.1 Value-Added and Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2 Waste Identification Through Ishikawa Diagram . . . . . . . . . . . 17.3 Advantages and Disadvantages . . . . . . . . . . . . . . . . . . . . . . . 17.4 5S-Management Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.5 Seven Types of Waste in Manufacturing: TIMWOOD . . . . . . . 17.5.1 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.5.2 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.5.3 Motion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.5.4 Waiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.5.5 Overproduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.5.6 Overprocessing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.5.7 Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.5.8 Case Study: Alstom in China . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

171 171 171 173 174 176 176 176 177 178 178 178 180 181 184

18

Negotiation Management Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.1 A-6 Negotiation Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.2 Successful Negotiations with the A-6 Concept . . . . . . . . . . . . 18.3 Focus of the A-6 Negotiation Concept . . . . . . . . . . . . . . . . . . 18.4 Case Study: EU Negotiation Strategy for COVID-19 Vaccines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

185 185 187 187

19

Change Management Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.1 Definition of Change Management . . . . . . . . . . . . . . . . . . . . 19.2 External and Internal Reasons for Change . . . . . . . . . . . . . . . 19.3 Change Management Concepts . . . . . . . . . . . . . . . . . . . . . . 19.3.1 Change Management Concept of Kurt Lewin . . . . . 19.3.2 Change Management Curve of Elisabeth Kürbler-Ross . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.3.3 Change Management Phase Model of Kotter . . . . .

. . . . .

188 189 191 191 192 193 193

. 194 . 199

xiv

Contents

19.3.4 ADKAR Change Management Model . . . . . . . . . . . 19.3.5 McKinsey 7S Model . . . . . . . . . . . . . . . . . . . . . . . . 19.4 Case Study: Change Management in Nissan . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

201 202 203 203

20

Innovation Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.1 Introduction to Innovation Management . . . . . . . . . . . . . . . . . 20.2 Technical Relevance and Attractivity . . . . . . . . . . . . . . . . . . . 20.3 Strategic Relevance of Innovation Management . . . . . . . . . . . 20.4 Resource Intensity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.5 Future Potential of Innovations . . . . . . . . . . . . . . . . . . . . . . . 20.6 Fields and Tasks of Innovation Management . . . . . . . . . . . . . . 20.7 Case Study: Digital Innovation in a Bakery in Tokyo . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

205 205 206 207 207 208 209 209 211

21

Glossary of Management Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 213

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

List of Figures

Fig. 1.1 Fig. 1.2 Fig. 1.3

Business transformation elements. (Source: Author’s source) . . . Project phases. (Source: Author’s own figure) . . . . . . . . . . . . . . . . . . . . Project organisation. (Source: Author’s own figure) . . . . . . . . . . . . . .

Fig. 2.1

Strategic triangle. (Source: Author’s source, adopted from Johnson et al., 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PESTEL analysis. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . Industry analysis. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . SWOT analysis. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . Core competencies. (Source: Author’s source) . . . . .. . . . . . . . . .. . . . . Generic strategies. (Source: Author’s own figure, adopted from Porter, 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BCG strategies. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . Ansoff matrix. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . Strategic pyramid. (Source: Author’s own figure) . . . . . . . . . . . . . . . . Example of mission statement and vision. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fig. 2.2 Fig. 2.3 Fig. 2.4 Fig. 2.5 Fig. 2.6 Fig. 2.7 Fig. 2.8 Fig. 2.9 Fig. 2.10 Fig. 3.1 Fig. 3.2 Fig. 4.1 Fig. 4.2 Fig. 4.3 Fig. 4.4 Fig. 4.5 Fig. 5.1 Fig. 5.2 Fig. 5.3

Cultural paradigm. (Source: Author’s source, adopted from Johnson & Scholes, 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lean culture workshop in China. (Source: Author’s source) . . . . Leadership in lean management focuses on employee motivation and commitment. (Source: Author’s source) . . . . . . . . . Leadership styles. (Source: Author’s source, adapted from Tannenbaum & Schmidt) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Empowerment focused versus conventional approach. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Job Enlargement and Job Enrichment. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BMW production. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . Balanced Score Card (BSC). (Source: Author’s own figure) . . . . Logic behind the BSC. (Source: Author’s own figure) . . . . . . . . . . . EFQM excellence model. (Source: Author’s own figure, adjusted from the EFQM model (EFQM, 2019)) . . . . . . . . . . . . . . . . .

4 6 6 14 16 16 17 18 19 20 23 27 30 34 41 44 44 47 49 50 54 56 59 xv

xvi

Fig. 5.4

List of Figures

PM2E excellence model by Dr. Marc Helmold. (Source: Author’s own figure) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62

Fig. 6.1 Fig. 6.2 Fig. 6.3

Affinity diagram. (Source: Marc Helmold) . . . . . . . . . . . . . . . . . . . . . . . . Relations diagram. (Source: Marc Helmold) . . . . . . . . . . . . . . . . . . . . . . Fault Tree Analysis. (Source: Author’s source) . . . . . . . . . . . . . . . . . . .

66 67 69

Fig. 7.1 Fig. 7.2 Fig. 7.3

Pareto Analysis. (Source: Author’source) . . . . . . . . . . . . . . . . . . . . . . . . . Example of a fishbone diagram. (Source: Author’s source) .. . . . . AirSupply network. (Source: Author’s own figure, adopted from SupplyOn) . . . .. . .. . .. . .. . .. . .. . . .. . .. . .. . .. . .. . .. . . .. . .. . .. . .. . . AirSupply. (Source: Author’s own figure, adopted from SupplyOn) . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .

75 76

Fig. 8.1 Fig. 8.2 Fig. 8.3 Fig. 8.4

A3-method. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8D-process. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . TRIZ Model. (Source: Marc Helmold) . . . . . . . . . . . . . . . . . . . . . . . . . . . . PDCA cycle. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . .

82 86 87 90

Fig. 9.1

Resilience in the upstream supply chain. (Source: Author’s source, adapted from Helmold & Samara, 2019) . . . . . . . . . . . . . . . . . Porter’s value chain. (Source: Authors source, adapted from Helmold et al., 2020) . .. . . . .. . . .. . . . .. . . . .. . . .. . . . .. . . .. . . . .. . . Supply management process. (Source: Author’s source) . . . . . . . . . Supplier evaluation. (Source: Author) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplier dashboard. (Source: Helmold & Terry, 2016) . . . . . . . . . . Make or buy strategy. (Source: Author’s source) . . . . . . . . . . . . . . . . . Advantages and disadvantages of make and buy strategies. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foxconn’s manufacturing sites for Apple . . . . . . . . . . . . . . . . . . . . . . . . .

Fig. 7.4

Fig. 9.2 Fig. 9.3 Fig. 9.4 Fig. 9.5 Fig. 9.6 Fig. 9.7 Fig. 9.8 Fig. 10.1 Fig. 10.2 Fig. 10.3 Fig. 11.1 Fig. 11.2 Fig. 12.1 Fig. 12.2 Fig. 12.3 Fig. 12.4 Fig. 12.5

Performance management cycle. (Source: Author) . . . . . . . . . . . . . . . Performance management across the value chain. (Source: Author) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lean management excellence. (Source: Author’s own figure). (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Phases to financial insolvency. (Source: Helmold et al., 2019, adapted from Müller’s four phases model. Müller, 1986) . . . . . . . . Restructuring ways for financial turnaround. (Source: Author’s own figure) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplier segmentation and classification. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commodity strategies. (Source: Author’s source) . . . . . . . . . . . . . . . . Make or buy strategies. (Source: Author’s source) . . . . . . . . . . . . . . . ABC-XYZ analysis. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . CSR in operation and supply chain management. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78 79

98 98 101 103 106 109 109 110 114 115 116 124 126 132 133 135 136 138

List of Figures

Fig. 12.6 Fig. 13.1 Fig. 13.2 Fig. 14.1 Fig. 15.1 Fig. 15.2 Fig. 15.3 Fig. 15.4 Fig. 15.5 Fig. 15.6 Fig. 15.7 Fig. 16.1 Fig. 16.2 Fig. 16.3 Fig. 17.1 Fig. 17.2 Fig. 17.3 Fig. 17.4 Fig. 17.5 Fig. 17.6 Fig. 17.7 Fig. 17.8 Fig. 17.9 Fig. 17.10 Fig. 17.11 Fig. 17.12 Fig. 17.13 Fig. 17.14 Fig. 17.15

Fig. 17.16 Fig. 18.1 Fig. 19.1 Fig. 19.2 Fig. 19.3 Fig. 19.4 Fig. 19.5

xvii

ECR concept. (Source: Author’s Source) . . . . . . . . . . . . . . . . . . . . . . . . . . Industry 4.0 evolution. (Source: Adopted from Industry 4.0: The Top 9 Trends For 2018 (Liubomyr (El.) Kachur)) . .. .. . .. .. . Artificial intelligence tools. (Source: Author’s Source) . . . . . . . . . . 5S-audit in Berliner Kindl Schultheiss Brewery. (Source: Author’s Source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Four lean production principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Types of flows in operations. (Source: Marc Helmold) . . . . . . . . . . Tact time and other ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Andon . .. . .. . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. . Shadow board. (Source: Helmold. Shadow board. Mitsubishi Shinkanzen production in Osaka) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Health, safety and environment. (Source: Author’s Source) . . . . . OEE calculation. (Source: Author’s Source) . . . . . . . . . . . . . . . . . . . . . . Kaizen-Cycle (P-D-C-A). (Source: Author’s Source) . . . . . . . . . . . . Innovation versus Kaizen. (Source: Author’s Source) . . . . . . . . . . . . Visualisation senses. (Source: Author’s Source) . . . . . . . . . . . . . . . . . . Value-added and waste. (Source: Marc Helmold) . . . . . . . . . . . . . . . . Actions for value-added and waste. (Source: Marc Helmold) . . . Ishikawa diagram. (Source: Author’s Source) . . . .. . .. . . .. . . .. . . .. . Ishikawa diagram with waste and value-added. (Source: Author’s Source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5S-system. (Source: Author’s Source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation .. . . . .. . . . .. . . . .. . . . .. . . . .. . . . . .. . . . .. . . . .. . . . .. . . . .. . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Motion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Waiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overproduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overprocessing . . .. . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . Defects . . . . .. . . . . .. . . . .. . . . .. . . . . .. . . . .. . . . . .. . . . .. . . . .. . . . . .. . . . .. . . . . TIMWOOD checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alstom (formerly Bombardier) Sifang transportation China—final testing. (Source: Author’s Source) . . . . . . . . . . . . . . . . . . Visualization at Alstom (formerly Bombardier) transportation—International Procurement Office. (Source: Author’s Source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8S example in China. (Source: Author) .. . .. . .. . .. .. . .. . .. . .. .. . .. . A-6 negotiation concept . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . Elements of change management. (Source: Author’s source) . . . . Triggers for change. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . Elements of Kurt Lewin’s change management model. (Source: Author’s source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change management curve. (Source: Author’s Source, adopted from Kübler-Ross) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change management model by Cotter. (Author’s Source) . . . . . . .

139 142 143 153 154 155 156 157 158 159 161 164 165 166 170 170 171 171 173 174 175 176 177 177 178 179 179 180

181 182 184 190 191 191 193 198

Fig. 19.6

Change management communication. (Source: Author’s Source, adopted from McKinsey) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

Fig. 20.1 Fig. 20.2

Innovation management levels. (Source. Author’s Source) . . . . . . Relationship between strategy and resources. (Source: Author’s Source) . . . . . .. . . . .. . . . . .. . . . .. . . . .. . . . . .. . . . .. . . . . .. . . . .. . . . Innovation elements. (Source. Author’s Source) . . . . . . . . . . . . . . . . . . New work innovation in a bakery in Tokyo. (Source. Author’s Source) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fig. 20.3 Fig. 20.4

204 205 208 208

List of Tables

Table 1.1 Table 1.2 Table 2.1 Table 2.2 Table 6.1 Table 14.1 Table 14.2 Table 18.1 Table 18.2 Table 19.1

Project criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiations in project management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Elements in the strategic analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Elements in the strategic analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Five basic steps for a Fault Tree Analysis (FTA) . . . . . . . . . . . . . . . . Audit types . . .. . .. . .. . . .. . .. . .. . .. . .. . .. . .. . .. . . .. . .. . .. . .. . .. . .. . .. . . Quality management systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6 concept—German and English . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recommendations for the A-6 concept . . . . .. . . .. . . .. . . .. . . .. . . .. . . Breaking resistance . .. .. . .. . .. . .. .. . .. . .. .. . .. . .. . .. .. . .. . .. . .. .. . .. .

5 9 15 24 66 151 152 184 185 196

xix

About the Author

Dr. Marc Helmold M.B.A. is Professor at IUBH Internationale Hochschule in Berlin. He teaches bachelor’s, master’s and M.B.A. in performance management, lean management, procurement, general management, strategic management and supply chain management. From 1997 to 2017, he had several positions in top management in the automotive and railway industry. Between 1997 and 2010, he worked in several companies like Ford, Fohrd-Mazda Japan, Porsche and Panasonic Automotive in managerial functions and executed lean workshops throughout the value chain. From 2013 to 2016, he was the General Manager of Alstom (formerly Bombardier) Transportation in China and led the sourcing and spare parts sales activities. Since 2016 he is Professor at the IUBH and has his own consultancy. In this capacity, he improves companies in performance. IUBH, Berlin, Germany

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ThiS is a FM Blank Page

List of Acronyms and Abbreviations

5S 7R A3 A6 ADKAR AI AM APA AR BCG BME BMW BOS BSC CSR DIN DSCM ECR ERP EXW IOP IOT IPO ISO IUBH JIT KPI MPS OEE OKR PDCA PDSA PE

Seiri, Seiton, Seiso, Seiketsu, Shitsuke 7 Rights Problem-solving method A-6 negotiation concept Awareness, desire, knowledge, ability, reinforcement Artificial intelligence Additive manufacturing Advanced purchasing agreement Augmented reality Boston Consulting Matrix Bundesverband Materialwirtschaft, Einkauf und Logistik Bayerische Motorenwerke Alstom (formerly Bombardier) Operating System Balanced Score Card Corporate social responsibility Deutsche Industrienorm Downstream supply chain management Efficient consumer response Enterprise resource planning Ex works Internet of people Internet of things International Procurement Office International Standardisation Organisation International University Bad Honnef Just-in-Time Key performance indicator Mercedes Benz Production System Overall equipment effectiveness Objectives Key Results Plan, Do, Check, Act Plan, Do, Study, Act Physical education xxiii

xxiv

PESTEL PPS QR SCM SFM SWOT TIMWOOD TÜV UN USCM USP VD VW

List of Acronyms and Abbreviations

Macro analysis Production Planning System Quick Response Supply chain management Shop Floor Management Strengths, Weaknesses, Opportunities, Threats Seven Types of Waste in Manufacturing Technischer Überwachungsverein United Nations Upstream supply chain management Unique Selling Propositions Virtual Design Volkswagen

1

Business Transformation and Project Management

The quality of a person’s life is in direct proportion to their commitment to excellence, regardless of their chosen field of endeavor. Vince Lombardi

1.1

Transformation and Adaptability of Strategies and Tools

Fierce Competition, globalisation and the present COVID-19 pandemic are leading to significant challenges for enterprises and organisations. As, a consequence, it is necessary to have appropriate countermeasures, corrective actions and tools to overcome the crises. On the contrary, those Enterprises and organisations, that have not the right strategies and management tools will not survive. In this context, challenges in management are characterized by high complexity, unpredictability and uncertainty. Managers must have therefore effective, quick and pragmatic concepts for structuring and resolving problems. The classic management literature is often too theoretical or too detailed for this. A short, concise introduction to a tool is sufficient to give modern managers the food they need for thought (Kieviet, 2019). This is where this book starts. It clearly presents effective strategies and management tools as well as most important concepts. It describes possible applications and makes it easier to interpret the results. The book offers the manager a pragmatic and effective help to gain transparency about existing concepts and tools, to find the right tool for the respective situation and ultimately to use it effectively to obtain a long-term sustainable competitive advantage (Helmold & Samara, 2019). As a rule, the need for corporate transformation and change is associated with changing market conditions or economic, technological or social changes, as a result of which the company suffers from a decline in sales, rising operating costs and decreasing customer relevance or customer loyalty. Often it is the big trends and developments, such as digitization or the trend towards sustainability. The example # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_1

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Business Transformation and Project Management

of the publishing house or the music industry makes it clear how existentially threatening such changes can affect a company. These examples also make it clear that business transformation is not just a question of the need for change, but also a question of the ability to change. While economic, technical and social change represents an existential threat for one company, it is a guarantee of success for adaptable and agile companies and offers a wide range of business opportunities. E-commerce, cloud computing and the green economy are intended to illustrate this symbolically at this point. Entire new industries and business fields are emerging here that would never have emerged without technological change and social and political pressure. Even if some companies suffer from constant, increasingly accelerating change, as a rule every change brings improvement with it—improvement for consumers, the environment and society. So change means evolution. The art of making use of change for one’s own company therefore lies in continuously helping consumers, the environment and society to improve their quality of life. This creates new ideas, new business areas, new revenue models, new industries ... and ultimately lasting success, supported by more sales and more emotional and loyal customer relationships. With this in mind: Whenever possible, contribute to improving the quality of life of your customers, the environment and society—and always remain adaptable.

1.2

Business Transformation Strategies

Business transformation describes an optimizing change in business activity and/or working methods emanating from the company management, which can only include partial areas as well as the company as a whole. The need for business transformation is usually based on external factors. These can be, for example, tougher competitive conditions, fundamental changes in the law or general social and technological change, such as that brought about by digitization or the trend towards sustainability. The aim of the business transformation is always to strategically secure business operations over the long term and thus create the basis for lasting and sustainable success (Klasen, 2019). It is not an approach to the realization of short-term one-off effects. It does not concentrate on individual fields of action, but rather captures the change process as a whole. In addition, the focus of the business transformation is not on individual persons or groups of people, but rather integrates the entire economic, social and societal environment of the company. Business transformation strategies aim at this. • To secure and increase sales sustainably • To reduce operating and other costs • To intensify customer satisfaction and customer loyalty The term was first put into circulation by the management consultancy Gemini Consulting in the early 1990s. Their consultants Francis J. Guillart and James

1.2 Business Transformation Strategies

3

N. Kelly published a book in which they processed the experiences from their everyday work and at the same time detailed business transformation as a formula for the long-term success of companies in a constantly changing market economy. The basis of their considerations was the view of companies as living organisms. This should enable them to react flexibly to fluctuations and changes in the market in order to insist on it permanently, economically and profitably. Business transformation projects are usually very complex and lengthy. There are several reasons for this. On the one hand, business transformation projects tend to be used in larger companies. This is less due to the size of the company itself or the financial possibilities, but rather because the management of a stock corporation or group has to answer to shareholders, partners, investors and supervisory boards, whose own financial future depends heavily on the success of the company is. Owner-run companies, on the other hand, often suffer from sticking to the once tried and tested rituals for too long. The emotional relationship to the past is significantly higher and often proves to be the greatest brake on change in management and the workforce. In addition, many business transformation projects are initiated far too late by those responsible. Often the course of the crisis or the process of economic, technological or social change is already very far advanced. And companies can often no longer make up for the lost time. One industry that has had to experience this in a painful way is the photography industry. Former industry giants such as Kodak, Agfa or Pollaroid, who, despite great efforts, were never able to build on the great successes of bygone days. The principle of hope seems omnipresent, and statements such as “this trend will definitely pass” or “we’ll get in when the others have made their mistakes” are not uncommon. This may sound ironic to some. It has always been one of the outstanding virtues of German entrepreneurship to develop and occupy markets through innovations, inventiveness and engineering skills. Since business transformation strategies are essential for the future and sustainable success of the company, these projects are always the responsibility of the management. In addition to a large number of internal and external experts, industry and company experts, business transformation projects are usually accompanied by a specialized management consultancy that guides the company through the four relevant project sections of business transformation in a targeted and efficient manner (Womack et al., 1990). The reframing goal setting and goal definitions are: • Restructuring—structural reorientation of the company • Revitalizing—product development and innovation • Renewing—consistent internal and external implementation As a rule, business transformation is a project that encompasses the company as a whole (Fig. 1.1). In the context of product and innovation development, however, it can also happen that only an encapsulated area of a company is subject to business transformation. As a rule, however, these projects are also the harbingers of a longterm business transformation process. Either way—the impetus for business transformation always comes from outside. Companies that embark on such management projects are usually market-oriented (rather than resource-oriented), and the structure

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Business Transformation and Project Management

Fig. 1.1 Business transformation elements. (Source: Author’s source)

Restructuring

Transformation

Renewing

Revitalisation

of these companies usually follows strategy (and not the other way around). Business transformation strategies are not a short-term affair. They are subject to consistent, self-critical analysis, vigilance and the highest level of empathy and demand discipline and consistent action from management and staff. The changes are often carried out over several years according to a fixed plan and gradually realign the company (evolution instead of revolution).

1.3

Project Management Strategies

A project is a purposeful and mostly unique project, which is subject to constraints on time, resources, costs and other elements, e.g. the use of personnel, financial means or operating resources (PM, 2018). Within projects, there are client determined begin and completion dates inside which the task must be handled. Complex projects and task management is not the same as would be expected, as ordinarily several capacities are included. The functions often comprise project management, design, production, procurement, quality management, logistics, human resources, finance and other departments. The term project is derived from the Latin language (Latin: proiectum, thrown forward). In the seventeenth century, the meaning of “construction project” as a project definition prevailed in Germany (PM, 2018). Due to their developing multifaceted nature, ventures place unique requests on project the board and hence additionally arrangement the executives for both clients and the contractor and order processor. Frequently there are a few included groups or offices in complex tasks. Because of their unpredictability, ventures involve huge arrangements with clients, providers, banks or different stakeholders. Examples of projects include: • Construction of a railway station in one of the major cities such as Stuttgart, e.g. Stuttgart 21st

1.3 Project Management Strategies

5

Table 1.1 Project criteria Criteria of projects Time limit Uniqueness Resource scarcity Targets Organisation Interdisciplinary Novelty and risk Project phases

Description Projects are limited in time, meaning that both the beginning and the end are defined by dates Projects are unique, they are not suitable for the reproduction of existing things (this process management is much better suited) Projects are equipped with limited resources in terms of budget, people or assets Projects have a clearly specified and positively formulated goals and objectives Projects require their own project management organization including a project manager Projects work interdisciplinary and cross-departmental, i.e. project management, purchasing, design, quality etc. Projects are breaking new ground. They realize solutions that do not yet exist in the desired form Projects are handled in certain phases and contain project mile stones

Source: Author’s source

• Construction of an airport, e.g. Construction and completion of Wiliy-Brandt Airport BER • Renovation of a museum, e.g. Neues Museum in Berlin • Construction of a Highspeed train, e.g. Construction of the ICE by Siemens and Alstom (formerly Bombardier) • Construction and completion of an opera house, e.g. the Elbharmonie in Hamburg According to the project management manual, projects have certain criteria (PM, 2018). Key criteria for projects can be defined in Table 1.1 as follows. If these project criteria are not met, there is usually no real project. This does not mean that methods of project management cannot be put to good use beyond project work. However, one should not speak of project work in order not to confuse. Projects always include an organizational structure and a process organization. The organizational structure forms the hierarchical framework of the project organization and defines the organizational framework, i.e. which tasks are to be managed by which functional units and sub-departments. By contrast, the process organization regulates the processes that take place within this framework (process and information processes within the project phases). Companies usually have a line organization or a project matrix organization, whereby in many cases there is a combination or a hybrid of both forms of organization. Projects usually take place under pressure of costs, production and performance, so that projects involve numerous negotiations. For the realization of projects project teams are formed, which consist of different functions (PM, 2018). These then take over control and steering tasks as part of project management (PM, 2018). Projects go through four phases as shown in Fig. 1.2. Projects start with a feasibility check. If the feasibility is given, project planning will begin in the next phase. In this context, a project

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Projectstart

Strategic Project pre-planning

Projectfeasibility

Projectplanning

Projectapplication

Business Transformation and Project Management

Projectexecution

Projectfinalisation

Projectexecution

Projectorder

Projectvalidation

Projectapproval

Projectconfirmation

Fig. 1.2 Project phases. (Source: Author’s own figure)

Fig. 1.3 Project organisation. (Source: Author’s own figure)

assignment is recommended in which important key figures such as quality, costs, time or resources are clearly defined (PM, 2018). After confirmation of all features, the project can be started in phase 3. After successful completion of the project, the project validation takes place with a target/actual comparison. In particular, deviations must be negotiated via the supplementary management (Helmold, 2021). Complex projects are usually carried out in cross-functional and interdisciplinary project groups, which contain experts from departments like project management, procurement, production, marketing and sales, quality management, finance and controlling or other departments as shown in Fig. 1.3 (Helmold et al., 2019; Helmold, 2021). Advantages of a project management organisation are the following:

1.4 Project Management Criteria

7

• • • •

Short decision-making through co-allocation Representation of all functions Operational alignment leads to quick decisions to implement measures Project-specific material budgets create transparency about the real purchasing costs for all products • Group dynamic advantages through cooperation of all areas (no “silencing” or autonomous thinking of departments or functions, but joint project thinking)

1.4

Project Management Criteria

1.4.1

Key Performance and Success Criteria

The project management manual defines key criteria and success factors for controlling and steering projects (PM, 2018). These criteria comprise a total of nine categories that must be taken into account for the successful completion of the project.

1.4.2

Integration Management

Integration management in project management describes the processes and processes that are required for good coordination and integration of the different activities of a project. It includes project plan development, project plan implementation and change management (PM, 2018).

1.4.3

Performance Management

The project scope management deals with the ongoing planning and control of the progress of the project. As part of the scope management, it is checked at regular intervals whether the project is within the objectives defined in the project order or whether there are deviations. Project scope management includes project initiation, content and scope planning, performance definition, performance verification, and performance review (PM, 2018).

1.4.4

Time Management

Time management in projects has to ensure that a project is completed on schedule from project start until the final validation (PM, 2018). Time management in projects contains processes like scheduling, progress control, the scheduling and sequence of operations and the estimated time for the operation (PM, 2018).

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1.4.5

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Business Transformation and Project Management

Cost Management

Cost management includes the cost and expenses for the approved project (PM, 2018). Objective of this category is that the project is monitored and closed within the anticipated budgets. Subcategories of the cost management are resource planning, cost estimations, budgeting and cost control (PM, 2018).

1.4.6

Quality Management

Quality management in projects should ensure that the quality requirements defined by the client are met or even exceeded. These include quality planning, quality assurance and quality control (PM, 2018).

1.4.7

People and Human Management

The main task of HR management is to make sure that the people involved in the project work as efficiently as possible. The following functions and tasks can be assigned to Personnel Management: Project Organization, Personnel Acquisition and Team Development (PM, 2018).

1.4.8

Communication Management

The aim of communication management in the project is to create, collect, disseminate, store and define all project information in a timely and appropriate manner. These include the development of an information and reporting system, the distribution of information, the determination of progress and administrative completion (PM, 2018).

1.4.9

Risk Prevention Management

Risk Management describes all the iterative processes necessary to identify, analyse and respond to project risks. These include risk identification, risk assessment, risk mitigating and risk tracking (PM, 2018).

1.4.10 Procurement Management The knowledge field procurement management includes the procurement of goods and services outside the organization as well as the associated contract design. This area includes procurement preparation, quotation preparation, bid solicitation, supplier selection, contract drafting and contract (PM, 2018).

1.6 Case Study: CRRC Project Management in the U.S.A. Table 1.2 Negotiations in project management

1.5

9

Recommendations for successful Project Management: Leadership and Management Social competencies and expert knowledge Project milestones and objectives through project order Objectives setting according to SMART aspects Sustainability in project management Success control and project validation Incentive system and career opportunities Return to line organisation after project finalisation Internationally and diversity Usage of digital tools

Recommendations for Executing Project Management

Projects with complex objectives need a competent project leader or manager. This requires both hard (e.g., project management skills) and soft skills (e.g., emotional intelligence) to convince both internally and externally. In addition to a good and sustainable relationship with the management, one of the key components of project managers is to lead a team successfully. Project managers must choose their employees to have a healthy mix of expertise and social skills. Projects should be projected by a robust project job in which performance parameters are clearly defined and scheduled (PM, 2018). Goals must have specific attributes and be specific, measurable, acceptable, realistic and timed (SMART methodology: English, specific, measurable, achievable, realistic, and timely) (Helmold, 2021). Sustainability as well as a permanent and regular success control completes the SMART goals. Here an incentive system is recommended, so that employees are sufficiently motivated by material or immaterial advantages for project success (Helmold & Terry, 2021). Internationality and diversity strengthen project teams and help to successfully implement projects in an international context. The use of digital media supports networking, especially across country borders and time zones. Finally, organizations should allow project members to return to the line function. Table 1.2 summarizes the main recommendations (PM, 2018).

1.6

Case Study: CRRC Project Management in the U.S.A.

The North American Chicago Transit Authority (CTA) announced that that it had awarded the order to build 8,467,000-series rail cars to CRRC subsidiary CSR Sifang America, which had submitted the most competitive bid in terms of cost, quality, delivery time, design, and other project elements. It did not name the other bidders. The company, formed from the merger of former rivals CNR Corp and China CSR, won its first U.S. contract in 2014 when CNR was awarded a $567 million deal to supply subway trains to Boston. Chicago will first place a base order

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Business Transformation and Project Management

of 400 cars, with options to buy the remainder in the coming years, the CTA said. CSR will build a new $40 million factory in the city, with the aim of seeing the first cars going into service in 2020. CRRC undertakes design, manufacture, testing, commissioning and maintenance of locomotives and rolling stock, including: electric locomotives, diesel-electric and diesel-hydraulic locomotives, suburban and regional transport; trams and light rail vehicles; metro cars and passenger coaches; as well as full line of rolling stock cars. This Chinese state-owned rail company’s assembly plant that will produce up to 846 new rail cars for the Chicago Transit Authority. The project will return CTA rail car manufacturing to Chicago after a 50-year absence, according to the city. CRRC Sifang will invest $100 million in building a 380,944-square-foot manufacturing facility on 45 acres in Chicago’s Hegewisch neighbourhood on the Southeast Side. Production will begin in early 2019. The facility will begin testing the new car prototype later that year and the cars will hit the rails by 2020.

References Helmold, M. (2021). Kaizen, Lean Management und Digitalisierung. Mit den japanischen Konzepten Wettbewerbsvorteile für das Unternehmen erzielen. Springer Wiesbaden. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Springer Gabler Wiesbaden. Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Kieviet, A. (2019). Lean digital transformation. Geschäftsmodelle transformieren, Kundenmehrwerte steigern und Effizienz erhöhen. Springer. Klasen, J. (2019). Praxisorientierter Leitfaden zur erfolgreichen Neuausrichtung von Unternehmen und Geschäftsfeldern. Springer Wiesbaden. PM. (2018). Abgerufen am 7.7.2018. http://www.pm-handbuch.com/begriffe/ Womack, J. P., Jones, D. T., & Ross, D. (1990). The machine that changed the world: The story of lean production. National Bestseller.

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Corporate Strategic Management

The Essence of Strategy is choosing what not to do. Michael Porter

2.1

Levels of Strategy

The Three Levels of Strategy, developed by Gerry Johnson and Kevan Scholes along with other major managerial thinkers, are a way of defining the different layers of strategy which, in tandem, orient the direction of the organisation and define its success (Johnson et al., 2017). The Three Levels are: 1. Corporate Supply Chain Strategy Level 2. Business and tactical Supply Chain Level 3. Functional or operational Supply Chain Levels When synchronised and coordinated, successful strategies at each of these levels will contribute to successful overall organisational strategy including right measures to prevent and avoid inefficiencies in the supply chain and other functions of an enterprise (Khojasteh, 2018). This is the top layer of strategic planning, and is often associated with the organisation’s mission and values, though it is developed in much more significant depth. Corporate strategy is defined by those at the very top of the organisation—managing directors and executive boards—and is an outline of the overall direction and course of the business. In effect, it defines: • General, overall strategy and direction in terms of Markets, Supply and Supply Chains • Which Markets the Organisation will operate in • Which Suppliers and Supply Chains to procure from • How the markets will be entered and the general activities of the organisation • How to prevent risks in the upstream or downstream supply chains • How to apply a Supply Chain Risk Management (SCRM) measures # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_2

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2.1.1

2

Corporate Strategic Management

Corporate Strategy

Corporate strategy is crucial as it will define all other decisions that are made within the organisation along the line. Smaller, newer organisations which are targeting a very specific niche market, or operate with a small set of unique products/services, will find it far easier to develop a corporate strategy as there are fewer variables to consider. However, larger and more developed organisations will find the process much simpler, as they may need to diverge from activities and behaviours which define who they are in order to reach out into new markets and to take new opportunities.

2.1.2

Business Strategy

Business strategy generally emerges and evolves from the overarching corporate strategy which has been set by those at the helm. They are usually far more specific than corporate strategy and will likely be unique to different departments or subdivisions within the broader organisation. In general, they use corporate strategy as an outline to: • Define specific tactics and strategies for each market the organisation is involved in • Define how each business unit will deliver the planned tactics Due to their nature, they are more common in larger firms that engage in multiple activities, than they are in small businesses. However, they can still be engaged in by smaller organisations who wish to define how they go about each different subsection of their operations, by breaking down the overall scope of the corporate strategy.

2.1.3

Functional Strategy

The functional long-term strategy, also defined as Market-Level Strategy, refers to the day-to-day operation of the company, which will keep it functioning and moving in the correct direction. Whilst many organisations fail because they do not have an overarching corporate strategy, others fail because they have not developed plans for how to engage in everyday activities. Even with an overall direction you wish to head in, without a plan for how to successfully operate, an organisation will be unable to progress. These will be numerous and will define very specific aspects and operations within smaller departments, teams, groups and activities. Overall, they define: • Day-to-day actions which are required to deliver corporate and business strategies • Relationships needed between units, departments and teams • How operational goals will be met, and how they will be monitored

2.3 Strategic Analysis

13

It is at this level, the lowest in strategic development, that leaders should define how different departments and functions will work together to achieve higher goals. There will be managers that will oversee departments (e.g. manufacturing and HR) that do not perform the same functions, but need to be synchronised in order to achieve the goals set out by the corporate and business strategies.

2.1.4

Alignment of Strategies

Though corporate strategy will get all of the attention, it is success at the bottom of the hierarchy—through day-to-day functions—which will truly define where the organisation as a whole will succeed. You need to build from the ground up, in small steps, in order to keep moving forward. If operations break down, so does the organisation. As mentioned previously, it is crucially important that each level of strategy is synchronised, both from top-to-bottom and horizontally across the organisation. Feedback should down from both corporate strategy to functional strategy, and vice-versa, in order for all three levels to ensure that they are operating in line with one another (Helmold, 2021). Strategy itself will not define organisational success; however, it is a very good place to start. Once sound strategies are in place, an organisation can move forward and begin to execute said strategies. They may need some adjustment along the way—and you should be prepared to do so, in response to feedback from different levels and from the external environment—but they should be initially developed in such a way that they will keep the organisation in line with its long-term objectives.

2.2

Strategic Triangle

The process of strategic management cycle is a process with three elements as outlined in Fig. 2.1 (strategic triangle or strategic cycle). The three steps are (1) the strategic analysis, (2) the strategic choice and (3) the strategic implementation and will be described in the following sections. The triangle is raising the following questions: 1. Where are we in terms of Strategy and Positioning in our Supply Chains? 2. Where do we want to go? 3. How do we achieve this?

2.3

Strategic Analysis

2.3.1

Analysing Important Factors

The strategic analysis of an organisation is about understanding the strategic position of the organisation in terms of Lean Management. This stage requires a profound analysis where the organisation stands in terms of Lean Management tools and

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Corporate Strategic Management

Supply Chain Management

Strategic Analysis Introduction of sustainable and long-term Strategies that provide a competitive advantage

Mission Vision Corporate Level Business Level

Analysis of Elements that Impact my Organisation and the Future

Functional Level

Strategic

Core Values Strategic Objectives

Implementation

Strategic Choice

Selection of suitable

Strategic Options

Fig. 2.1 Strategic triangle. (Source: Author’s source, adopted from Johnson et al., 2017)

processes. The existing competencies and resources of the organisation need to be assessed to determine if there are any opportunities to be gained from these and to determine if they need to be enhanced in order to pursue strategic objectives and goals. The major stakeholders which influence the organisation and the opinions or viewpoints must be taken into account as the purpose of all of the strategic analysis is to define the potential future direction of the organisation. The purpose of this phase (strategic analysis) is to create a suitable starting position and to understand the key influences on the present and future state of the organisation and what opportunities are afforded by the environment and the competencies of the organisation. Assessing the strategic position consists of evaluating the following elements as shown in Table 2.1. Since strategy is concerned with the position a business takes in relation to its environment, an understanding of the environment’s effects on an organisation is of central importance to the strategic analysis. The historical and environmental effects on the business must be considered, as well as the present effects and the expected changes in environmental variables. The analysis of the environment can be done via the macro and micro analysis (PESTEL, Porters 5 Forces). Additionally, strengths, weaknesses, opportunities and threats complete the assessment of the environment

2.3 Strategic Analysis

15

Table 2.1 Elements in the strategic analysis Strategic analysis of elements PESTEL Analysis: Environment (e.g. markets, regulations, political impacts) Porterßs 5 Forces: Industry and Competition (e.g. rivalry in industry) SWOT Analysis Internal strengths and weaknesses, external threats and opportunities Cultures and beliefs Strategic capabilities and competencies Expectation of stakeholders

Strategic Step Step 1 Step 2 Step 3 Step 4 Step 5 Step 6

Source: Author’s source

(SWOT). This step is a major task because the range of environmental variables is so great. Another area of the strategic analysis is the evaluation of the strategic capability of an organisation and where it is able to achieve a competitive advantage. Considering the resource areas of a business such as its physical plant, its management, its financial structure and its products may identify these strengths and weaknesses. The expectations of stakeholders are important because they will affect what will be seen as acceptable in terms of the strategies advanced by management. Stakeholders can be defined as people or groups inside or outside the organisation, who an interest in the activities of the organisation. A typical list of stakeholders for a large company would include shareholders, banks, employees, managers, customers, suppliers, government and society. Culture affects the interpretation of the environmental and resource influences (Helmold & Terry, 2021).

2.3.2

Analysing the Environment

A PESTEL analysis or PESTLE analysis is a framework or tool used to analyse and monitor the macro-environmental factors that may have a profound impact on an organisation’s performance. This tool is especially useful when starting a new business or entering a foreign market. It is often used in collaboration with other analytical business tools such as the SWOT analysis and Porter’s Five Forces to give a clear understanding of a situation and related internal and external factors. PESTEL is an acronym that stand for Political, Economic, Social, Technological, Environmental and Legal factors. However, throughout the years people have expanded the framework with factors such as Demographics, Intercultural, Ethical and Ecological resulting in variants such as STEEPLED, DESTEP and SLEPIT. In this article, we will stick simply to PESTEL since it encompasses the most relevant factors in general business. Each element will be elaborated as shown in Fig. 2.2.

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Corporate Strategic Management

(Political) (Economic)

(Legal)

Makro Analysis (PESTEL) (Environment)

(Social)

(Technological)

Fig. 2.2 PESTEL analysis. (Source: Author’s source)

Threat of new Substitutes

Impacts on Supply Chain Risks Bargaining Power of Suppliers

Rivalry amongst Competitors

Bargaining Power of Buyers

Threat of new Market Entrants Fig. 2.3 Industry analysis. (Source: Author’s source)

2.3.3

Analysing the Industry

Porter is best known for his strategic frameworks and concepts in his paper, which was published in 1980 (Porter, 1980). The five forces model (Industry Analysis) has five elements that can be utilised to assess the attractiveness and competitive situation of the industry as outlined in Fig. 2.3. The five elements are: 1. 2. 3. 4. 5.

Rivalry amongst Competitors Bargaining Power of Suppliers Bargaining Power of Buyers Threat of new Market Entrants Threat of new Substitutes

2.3 Strategic Analysis

17

The stronger the threat posed by these five competitive forces, the less attractive the industry under consideration and the more difficult it is to achieve a sustainable competitive advantage. Companies should therefore try to be active in an industry with an attractive industry structure and to build up a defensible position in their industry, i.e. a position in which the five competitive forces are as less threatening as possible. Companies can also influence the five forces with the help of appropriate strategic orientation. This can increase the attractiveness of an industry. If, however, companies influence the distribution of competitive forces to the advantage of their own competitive position without being aware of the long-term effects or consciously accepting them, this can also destroy the structure and profitability of an industry.

2.3.4

Analysing the Strengths and Weaknesses of the Own Enterprise

Internal

The SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a company’s competitive position and to develop strategic planning (Fig. 2.4). SWOT analysis assesses internal and external factors, as well as current and future potential. This technique, which operates by ‘peeling back layers of the company is designed for use in the preliminary stages of decision-making processes and can be used as a tool for evaluation of the strategic position of organizations of many kinds (for—profit enterprises, local and national governments, NGOs, etc.). It is intended to specify the objectives of the business venture or project and identify the internal and external factors that are favourable and unfavourable to achieving those objectives. Users of a SWOT analysis often ask and answer questions to generate meaningful information for each category to make the tool useful and identify their competitive advantage.

Strengths

Weaknesses

External

SWOT Analysis

Opportunities

Fig. 2.4 SWOT analysis. (Source: Author’s source)

Threats

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Value for Customers

Core Competencies Protection against limitation

Unique Features and Innovation

Diversification

Differentiation

Fig. 2.5 Core competencies. (Source: Author’s source)

2.3.5

Analysing the Core Competencies

The core competency concept describes a product, feature, process, skill, brand or activity that a company can perform better than the competition and has thus achieved a competitive advantage. It is determined by the certain characteristics like customer value or benefits, protection against imitation, differentiation, diversification and innovation or unique features as shown in Fig. 2.5. In business, a competitive advantage is the attribute that allows an organization to outperform its competitors.

2.4

Strategic Choice

2.4.1

Generic Strategies

Strategic choice typically follows strategic analysis. Strategic Choice involves a whole process through which a decision is taken to choose a particular option from various alternatives. There can be various methods through which the final choice can be selected upon. Managers and decision makers keep both the external and internal environment in mind before narrowing it down to one. It is based upon the following three elements. First; the generation of strategic options, e.g. growth, acquisition, diversification or concentration. Second; the evaluation of the options to assess their relative merits and feasibility. And third; the selection of the strategy or option that the organisation will pursue. There could be more than one strategy chosen but there is a chance of an inherent danger or disadvantage to any choice made. Although there are techniques for evaluating specific options, the selection is often subjective and likely to be influenced by the values of managers and other groups with an interest in the organisation.

Narrow Scope

2.4 Strategic Choice

19

Cost Leadership

Differentiation

Broad Scope

Generic Strategies

Cost Leadership

Differentiation

Fig. 2.6 Generic strategies. (Source: Author’s own figure, adopted from Porter, 1985)

The generic strategies differentiation and cost leadership are a good method to define, in which direction a company should go to increase profitability and to acquire a competitive advantage (Porter, 1980, 1985) (Fig. 2.6). Mintzberg provides five definitions of strategy, plan, ploy, pattern, position and perspective (Mintzberg et al., 1995). Firstly, strategy is always a plan. A plan integrates intended actions activities based on previous assessment of the situation. Secondly, as plan, a strategy can be a ploy too, really just a specific manoeuvre intended to outwit an opponent or competitor. If strategies can be intended (whether as general plans or specific ploys), they can also be realised. In other words, defining strategy as plan is not sufficient; we also need a definition that encompasses the resulting behaviour. Thirdly, strategy is a pattern. The definitions of strategy as plan and pattern can be quite independent of one another. Plans may go unrealised, while patterns may appear without preconception. Plans are intended strategy, whereas patterns are the realised strategy. Fourthly, strategy is a perspective. A perspective is not just of a chosen position, but consists of an ingrained way of perceiving the world.

2.4.2

Boston Consulting Matrix (BCG-Matrix)

The BCG matrix is named after the Boston Consulting Group (BCG), whose founder Bruce Henderson developed this matrix in 1970 (Fig. 2.7). This concept should clarify the connection between the product life cycle and the cost experience curve.

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Existing Products

Existing Markets New Markets

New Products

Market Penetration

Market Development

Corporate Strategic Management

Product Development Ansoff Matrix Diversification

Fig. 2.7 BCG strategies. (Source: Author’s source)

The matrix is often visualized as a scatter or bubble diagram; the area of a circle then represents the sales of the respective product. The BCG matrix is, put simply, a portfolio management framework that helps companies decide how to prioritize their different businesses and supply chains. It is a table, split into four quadrants, each with its own unique symbol that represents a certain degree of profitability: question marks, stars, dogs, and cash cows. By assigning each business to one of these four categories, executives could then decide where to focus their resources and capital to generate the most value, as well as where to cut their losses. The products or business units of a company are assigned to one of the four areas based on their values. Each area embodies a standard strategy. It should give a good recommendation on how to proceed. The life cycle of a typical product runs from the question mark to the star and cash cow to the poor dog. There are also products that do not follow this ideal path. Many product failures and flops do not even reach the star range. An imitating product, on the other hand, may skip the question mark area. The Question Marks, normally young products, are the newcomers among the products. The market has growth potential, but the products only have a small relative market share. Management is faced with the decision of whether to invest or abandon the product. In the case of an investment, the product requires liquid funds, which it cannot generate itself. A typical strategy recommendation is: selection and possibly an offensive penetration strategy to increase market share. The Stars are the company’s most promising products. You have a high relative market share in a growth market. They already cover the investment needs resulting from market growth with their own cash flow. The strategy recommendation is: investment and possibly a skimming strategy to increase profit margins without endangering market share. The Cash Cows (milking cows) have a high relative market share in a only slightly growing or

2.4 Strategic Choice

21

static market. They produce stable, high cash flows and can be “milked” without further investment. A fixed price strategy or price competition strategy is appropriate. The Poor Dogs are the discontinued products in the company. They have low market growth, sometimes market contraction, and low relative market share. At the latest as soon as the contribution margin for these products is negative, the portfolio should be adjusted (disinvestment strategy). In addition to assessing the individual products using the standard strategies, the entire portfolio should also be considered. Pay attention to the static financial equalization—the products in the portfolio should support and finance each other. A question mark can only expand if z. B. a cash cow finances this expansion. Future developments can also be seen. The products should be evenly represented in the individual areas—a company without question marks would have little chance in the future market. The matrix reveals two factors that companies should consider when deciding where to invest, company competitiveness, and market attractiveness, with relative market share and growth rate as the underlying drivers of these factors. Each of the four quadrants represents a specific combination of relative market share, and growth: • Low Growth, High Share. Companies should milk these “cash cows” for cash to reinvest. • High Growth, High Share. Companies should significantly invest in these “stars” as they have high future potential. • High Growth, Low Share. Companies should invest in or discard these “question marks,” depending on their chances of becoming stars. • Low Share, Low Growth. Companies should liquidate, divest, or reposition these “dogs.”

2.4.3

Ansoff-Matrix

The Product-Market-Matrix (also Ansoff-Matrix, after its inventor Harry Igor Ansoff or Z-Matrix) is a tool for the strategic management of companies. It can be used by a management (¼ company management) who has decided on a growth strategy as an aid for planning this growth. When it comes to market penetration, the focus is on gaining additional market shares with existing products. The company is trying to sell more of its products to existing, new, and competitive customers. Existing marketing activities usually have to be adapted to achieve this goal. Although the product portfolio does not change, companies often have to experiment with new advertising concepts in order to further promote product adoption in the existing market. However, this market penetration can only be successfully implemented up to the point at which the market has not yet been fully saturated. The focus of the market development strategy is on creating new sales markets for existing products. By entering new market segments or opening up further geographical regions, a company puts itself in the position of attracting new target groups for its existing products.

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A regionally operating bakery can also offer its own products nationwide, for example by setting up digital sales channels, and thus generate growth. Of course, the implementation of this strategy is initially offset by considerable investment costs. The chances of success should therefore first be assessed by means of careful planning and a comprehensive risk analysis. If opening up new markets is not an option, it is often worth taking a look at the product development strategy. The existing range is expanded through product innovations or the creation of product variants in the existing market. The resulting added value should encourage consumers to buy. This strategy is particularly attractive for companies in niche markets in which acquiring new customers and upselling would be almost impossible with a pure market penetration strategy. The reluctance to enter new markets is reinforced by high development costs and the risk of failure of the newly developed product (Werner 2017). The most risky quadrant of the Ansoff matrix is that of diversification. This requires the development of a new product while at the same time opening up a new market. The associated investment costs in terms of product development, business analyses, setting up local subsidiaries, etc. can quickly mean the end of a company if the corresponding ROI is not achieved. The diversification strategy can be broken down into horizontal, vertical and lateral diversification, depending on the degree of risk tolerance of a company: • Vertical Diversification • Horizontal Diversification

2.4.3.1 Horizontal Diversification Horizontal diversification describes the development of a new product that is still factually related to the product range previously offered. The existing value chain can continue to be used with minimal adjustments. With horizontal diversification, a company expands its offerings at the same economic level to reach new customers. An example of this type of diversification is the development of the iPad, which with its introduction gradually expanded Apple’s existing smartphone and computer portfolio. 2.4.3.2 Vertical Diversification With vertical diversification, a company deepens its commitment to sales-oriented activities (forward integration) and/or the actual manufacturing process of its products (backward integration). Diversification does not take place on the same level of the value chain as with horizontal diversification, but on the upstream or downstream one. With forward integration, a company takes the sales of its products and services into its own hands, for example by opening its own branches or an online shop. Backward integration describes the safeguarding of a company’s reference markets, for example by taking over production processes that were previously outsourced to external companies. While horizontal diversification aims to reduce dependency on one product line, vertical diversification focuses on reducing dependence on suppliers and dealers. The acquisition of the necessary skills and know-how for the successful implementation of sales and production

2.4 Strategic Choice

23

High Market Share

High Market Growth

Low Market Share

Question Marks

Stars

Low Market Growth

BCG Matrix

Dogs

Cash Cows

Fig. 2.8 Ansoff matrix. (Source: Author’s source)

processes is in turn associated with high investment costs and thus increased financial risks.

2.4.3.3 Lateral Diversification With the lateral diversification strategy, companies expand into completely new markets that have no material connection with the existing business. The aim and purpose of this alignment is to minimize the dependence on developments in the existing market segment. Google can be mentioned as a good example in this context: In addition to the search engine core business, the company expanded early on into other market segments such as telecommunications (fiber), biotechnology (Calico) or autonomous automotive technology (Waymo). The lateral diversification strategy is used by multinational companies in particular to respond flexibly to changes and trends in the market. The necessary know-how is usually acquired through the acquisition of specialized companies that are already represented in the market of interest. Accordingly, this strategy requires enormous investment costs and harbours not only financial but also immaterial risks, such as a diluted brand image due to product offerings that are too diversified (Fig. 2.8).

2.4.4

Blue and Red Ocean Strategies

Blue Ocean Strategy is a method for developing permanently profitable business models from the field of strategic management: The basic idea is that only through the development of innovative and new markets, which really differentiate and relevant benefits for the broad mass of customers or non-customers, “Blue Oceans

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Table 2.2 Elements in the strategic analysis Red Ocean Strategy Compete in existing Market Spaces Defeat the Competition Apply Differentiation or Cost Leadership Achieve a Competitive Advantage Segment smartly existing Customers Exploit existing Demand

Blue Ocean Strategy Create uncontested Market Spaces Make the Competition irrelevant Apply Differentiation and Cost Leadership Achieve Value Innovations Attract new Customers Create and capture new Demands

Source: Author’s source, adopted from Kim and Maubourgne (2015)

“offer lasting successes. Among other things, this is to be achieved through competition that has become meaningless, new customer acquisitions and optimized cost structures. The concept of the Blue Ocean Strategy was developed by W. Chan Kim and Renée Mauborgne at the INSEAD Business School, where it was initially referred to as Value Innovation. Based on empirical studies over a period of 15 years and based on the analysis of more than 100 leading companies, examples of companies were found that opened up new, previously unused sub-markets and thus made the previous competition irrelevant. The term ocean describes a market or branch of industry in connection with the blue ocean strategy. “Blue oceans” are understood as untouched markets or branches of industry with little or no competition (Table 2.2). Anyone who plunged into the Blue Ocean would find undiscovered markets or industries. “Red oceans”, on the other hand, designate saturated markets, characterized by tough competition, overcrowded with competitors who all offer the same service or the same products. The term “red ocean” is based on the image of bloody fights of predatory fish (the competitors), while the “blue ocean” is free from bloody fights.

2.5

Strategic Implementation

2.5.1

Assessment of Suitability, Acceptability and Feasibility

Strategic implementation is concerned with the translation of the selected strategy into action. The ways in which strategies are implemented are described as the strategic architecture or framework of the organisation. Successful implementation of the chosen strategy will be dependent on several factors such as stakeholder’s expectations, the employees, the company culture, the will to change and the cooperation within the organisation. These elements and how the management and employees work together to adopt the new plan will decide about how successful the strategy implementation is. The available skills and/or the ability to develop new skills when required for the planned change and issues like the structural re-organisation and resulting cultural disturbance would also affect success. Resource availability and planning for the utilisation of such resources need to be

2.5 Strategic Implementation

25

addressed as part of the implementation plan. The entire process necessitates the management of strategic change and will concern handling both hard and soft factors of the organisation, i.e. structure and systems and culture and motivation etc. Implementing a strategy has three elements. • Organisational structure and layout: Where and how should the organisation is split into European, US and Asian divisions? How autonomous should divisions be? What parenting style should be applied? • Resources: Enabling an organisation’s resources should support the chosen strategy: What are the appropriate human and non-human resources? What assets need to be acquired • Change management: Most strategic planning and implementation will involve change, so managing change, in particular employees’ fears and resistance, is crucial Johnson and Scholes argue that for a strategy to be successful it must satisfy three criteria. These criteria can be applied to any strategy decision such as the competitive strategies, growth strategies or development strategies: 1. Suitability—whether the options are adequate responses to the firm’s assessment of its strategic position 2. Acceptability—considers whether the options meet and are consistent with the firm’s objectives and are acceptable to the stakeholders 3. Feasibility—assesses whether the organisation has the resources it needs to carry out the strategy

2.5.2

Suitability

Suitability is a useful criterion for screening strategies, asking the following questions about strategic options: • Does the strategy exploit the company strengths, such as providing work for skilled craftsmen or environmental opportunities, e.g. helping to establish the organisation in new growth sectors of the market? • How far does the strategy overcome the difficulties identified in the analysis? For example, is the strategy likely to improve the organisation’s competitive position, solve the company’s liquidity problems or decrease dependence on a particular supplier? • Does the option fit in with the organisation’s purposes? For example, would the strategy achieve profit targets or growth expectations, or would it retain control for an owner-manager?

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Corporate Strategic Management

Acceptability

Acceptability is essentially about assessing risk and return and is strongly related to expectations of stakeholders. The issue of “acceptable to whom?” thus requires the analysis to be thought through carefully. Some of the questions that will help identify the likely consequences of any strategy are as follows: • How will the strategy impact shareholder wealth? Assessing this could involve calculations relating to profitability, e.g. net present value (NPV). • How will the organisation perform in profitability terms? The parallel in the public sector would be cost/benefit assessment. • How will the financial risk (e.g. liquidity) change? • What effect will it have on capital structure (gearing or share ownership)? • Will the function of any department, group or individual change significantly? • Will the organisation’s relationship with outside stakeholders, e.g. suppliers, government, unions, customers need to change? • Will the strategy be acceptable in the organisation’s environment, e.g. higher levels of noise?

2.5.4

Feasibility

Assesses whether the organisation has the resources it needs to carry out the strategy. Factors that should be considered can be summarised under the M-word model. • Machinery. What demands will the strategy make on production? Do we have sufficient spare capacity? Do we need new production systems to give lower cost/ better quality/more flexibility/etc.? • Management. Is existing management sufficiently skilled to carry out the strategy? • Money. How much finance is needed and when? Can we raise this? Is the cash flow feasible? • Manpower. What demands will the strategy make on human resources? How many employees are needed, what skills will they need and when do we need them? Do we already have the right people or is there a gap? Can the gap be filled by recruitment, retraining, etc.? • Markets. Is our existing brand name strong enough for the strategy to work? Will new brand names have to be established? What market share is needed for success—how quickly can this be achieved? • Materials. What demands will the strategy make on our relationships with suppliers? Are changes in quality needed? • Make-up. Is the existing organisational structure adequate or will it have to be changed?

2.6 Strategic Pyramid

27

Mission Statement

Lean Vision Goals & Values Objectives (specific) Core Competencies

Strategies Strategic Architecture Control & Execution (KPI System)

Fig. 2.9 Strategic pyramid. (Source: Author’s own figure)

2.6

Strategic Pyramid

A useful tool for the translation of the corporate strategy and strategic objectives into negotiations is the strategic pyramid. Strategy in this context is the long-term positioning as well as the decision of the enterprise, which business fields and which strategies to choose (Fig. 2.9). Strategy is therefore “the fundamental, longterm direction of 3–5 years and organization of a company in order to gain competitive advantages in a changing environment through the use of resources and competences and to realize the long-term goals of the stakeholders”.

2.6.1

Mission and Vision

Enterprises must manifest in their strategy to strive for lean excellence. The mission is the starting point of the strategic pyramid. The mission statement of an enterprise is the long-term purpose of the company and the strategic direction as defined by Johnson and Scholes (1997). The vision or strategic intent describes more specifically what an organization aims to achieve and the long-term aspirations. Mission Example: Become a Lean Enterprise of excellence on a global basis. Vision Example: Become the world-leading company in lean in the industry in the next 5 years.

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2.6.2

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Corporate Strategic Management

Goals and Objectives

The mission and vision are followed by generic goals and specific objectives. Generic Goals are not quantified and more general, but specific objectives are quantified and specific. The strategists Johnson and Scholes distinguish in longerterm and generic (English: Goals) as well as shorter and quantified objectives (English: Objectives) for the company. Quantified goals can include sales, financial, quality, logistics, cost, and alpha goals. Goal example: Increase and improve quality, reduce cost and provide productivity improvements between 30 and 40% within the next 3 years. Objectives example: Quantification of the generic aims (goals).

2.6.3

Core Competencies

The next level in the strategic pyramid is the identification of core competencies. Core competences are those competences which allow companies to gain a superior or competitive advantage and that are very difficult for your competitors to emulate. These describe the resources, skills, knowledge or any other feature that lead to a competitive advantage. Core competencies must be perceived by customers and clients. Example: Create lean academy and lean culture.

2.6.4

Strategies

After defining mission, vision, goals and core competencies, the elements must be translated into strategic objectives and key performance indicators (KPI). The longterm implementation of these elements is defined as the formulation of strategic objectives and important for the negotiations. In implementing the strategic goals, negotiations will take place with many stakeholders. Become a lean differentiator by answering customer demands: Reduce operating cost by 25% in 12 months from now, increase customer satisfaction by 10%.

2.6.5

Strategic Architecture

In addition to buildings, machines, plants, offices, resources or employees, the infrastructure in the sense of strategic management also includes knowledge and innovations of the company that ensure long-term success. This requires facilities, buildings, factories or offices that represent the strategic infrastructure. In addition, however, other success criteria such as resources, knowledge, experts, name recognition, network or innovations are of central importance.

2.8 Strategies Must Focus on Value-Creation

2.6.6

29

Control and Execution

The final element of the strategic pyramid is the performance control (control and execution) and a target-performance comparison. A suitable tool for this step is the Balance Score Card (BSC) or an action plan. The instrument of the BSC was already developed in 1992 by the professors Norton and Kaplan. The BSC is an instrument in strategic management and includes four categories: 1. 2. 3. 4.

Customer Satisfaction Financial Category Internal Processes and Improvements Learning Organization

In practice, it seems that companies are adapting or expanding the original four dimensions to their specific needs. Example: Establishing process and key performance indicators (KPI) of monitoring improvements and successful execution of strategy. Creating scorecard and checking running time, sequence, weight and other elements on a daily basis.

2.7

Core Values

Core Values, also known as Company values, are the set of guiding beliefs on which a company is based on. Corporate values help people function together as one and shape the way employees (should) behave. The core values of an organization impact both internal and external affairs. They define not only how employees treat each other, but also the behavior expected toward clients, partners, and the broader community. Once defined, the Core Values should affect every aspect of the business, from reward models, compensation, and policies, to strategic decisions and public affairs.

2.8

Strategies Must Focus on Value-Creation

Porter postulated three generic or broad alternative strategies which may be pursued as a response to the competitive pressures. They are termed generic strategies because they are broadly applicable to any industry or business. They are differentiation, cost leadership, and focus. A focus strategy may be further defined as cost focus, differentiation focus, or cost and differentiation focus. A differentiation strategy may be based on actual unique product features or the perception thereof, conveyed through the use of advertising and marketing tactics, in the eyes of the customers. Obviously, the product or service feature must be one the customer needs or desires. Moreover, such enhanced features and designs or advertising and marketing will increase costs, and customers must be price-insensitive—willing to pay for the differentiated product or service. This willingness to pay for the differentiated

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Fig. 2.10 Example of mission statement and vision. (Source: Author’s source)

product of service is what provides the company relief from competitive pressure, cost pressure specifically. Firms pursuing a cost leadership strategy must make lower production and distribution costs their priority (Helmold & Terry, 2021). By keeping their cost lowers than those of their competitors, firms using cost leadership can still price their products up to the level of their competitors and still maintain higher gross profit margins. Alternatively, these firms can price their products lower than those of their competitors in the hope of achieving greater market share and sales volume at the expense of gross profit margins. A focus strategy is based on a particular market, customer, product, or geographic. A Focus strategy is a concentrated, narrowly focused niche strategy. Figure 2.10 shows the example of a Mission Statement of Alstom (formerly Bombardier) Transportation in China International Procurement Office.

2.9

Case Study: Siemens Strategy

The company Siemens has outlined its mission, vision, goals, strategic objectives, core values and cultural specifics in its strategy outline “Siemens, vision 2020” (Siemens, 2019). The president and CEO, Joe Kaeser, outlines the key elements of the Siemens strategy for the coming years. He stresses that with the positioning along the electrification value chain, Siemens has knowhow that extends from power generation to power transmission, power distribution and smart grid to the efficient application of electrical energy. And with the outstanding strengths in automation, Kaeser confirms that Siemens is well equipped for the future and the age of digitalization. The Siemens vision 2020 defines an entrepreneurial concept that

References

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will enable the enterprise to consistently occupy attractive growth fields, sustainably strengthen our core business and outpace our competitors in efficiency and performance. All goals are focused on a long-term success (Siemens, 2019). The mission of Siemens can be defined as “We make real what matters, by setting the benchmark, in the way we electrify, automate and digitalize the world around us. Ingenuity drives us and what we create is yours. Together we deliver” (Siemens, 2019).

References Helmold, M. (2021). Innovatives Lieferantenmanagement. Wertschöpfung in globalen Lieferketten. Springer Wiesbaden. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Johnson, G., et al. (2017). Exploring strategy (11th ed.). FT Prentice Hall. Khojasteh, Y. (2018). Supply chain risk management. Advanced tools, models, and developments. Springer. Kim, C., & Maubourgne, R. A. (2015). Blue Ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard Business Press. Mintzberg, H., Quinn, J. B., & Ghoshal, S. (1995). The strategy process (revised European edition). Prentice Hall. Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. Free Press. Porter, M. E. (1985). Competitive advantage. Creating and sustaining superior performance. Free Press. Siemens. (2019). Siemens strategy. www.siemens.de Werner, H. (2017). Supply chain management. Grundlagen, Strategien, Instrumente und Controlling. Springer.

3

Cultural Change Concepts

The greatest discovery of all time is that a person can change his future by merely changing his attitude. Oprah Winfrey

3.1

Management Transformation as Part of the Organisational Culture

Innovative management and agile processes have positive effects on the performance of the organisation in terms of quality cost, delivery and customer satisfaction. However, it is necessary to establish organizational infrastructures which required for effective lean implementation and continuation (Fatma, 2015). The Cultural Web, developed by Gerry Johnson and Kevan Scholes in 1992, provides one such approach for looking at and changing your organization’s culture. Using it, you can expose cultural assumptions and practices, and set to work aligning organizational elements with one another, and with your strategy. These infrastructures must integrate cultural elements as illustrated in Fig. 3.1. The challenge to implement and sustain innovative and agile management processes lies in the need to identify the organizational culture infrastructure that will allow this system that was first used by Japanese firms to operate well in other organizational contexts. The values and norms that underlie lean processes may create conflict with the culture that already exists within the organization; such divergence retards adoption and performance (Helmold & Samara, 2019). Johnson and Scholes identified six distinct but interrelated elements which contribute to what they called the “paradigm”, equivalent to the pattern of the work environment, or the values of the organisation. They suggested that each may be examined and analysed individually to gain a clearer picture of the wider cultural issues of an organisation. The six contributing elements (with example questions used to examine the organisation at hand) are as follows:

# The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_3

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Cultural Change Concepts

Stories

Rituals and Routines

Symbols

Shared Values Paradigm Control Systems

Power Structures

Organisational Structures

Fig. 3.1 Cultural paradigm. (Source: Author’s source, adopted from Johnson & Scholes, 2017)

3.1.1

Stories and Myths

These are the previous events and happenings, both accurate and not, which are discussed by individuals within and outside the enterprise. This element deals with the questions, which events and people are remembered by the company or not. It indicates what the company values, and what it chooses to immortalise through stories. Questions concerning the stories and myths are: • What form of company reputation is communicated between customers and stakeholders? • What stories do people tell new employees about the company? • What do people know about the history of the organisation? • What do these stories say about the culture of the business?

3.1 Management Transformation as Part of the Organisational Culture

3.1.2

35

Rituals and Routines

The Rituals and Routines category refers to the daily actions and behaviours of individuals within the organisation. Routines indicate what is expected of employees on a day-to-day basis, and what has been either directly or indirectly approved by those in managerial positions. Questions in this category are: • • • •

What do employees expect when they arrive each day? What experience do customers expect from the organisation? What would be obvious if it were removed from routines? What do these rituals and routines say about organisational beliefs?

3.1.3

Symbols

This element, Symbols, deals with the visual representation of the company; how they appear to both employees and individuals on the outside. It includes logos, office spaces, dress codes and sometimes advertisements. Question are: • • • •

What kind of image is associated with the company from the outside? How do employees and managers view the organisation? Are there any company-specific designs or jargon used? How does the organisation advertise itself?

3.1.4

Control Systems

Control Systems are the systems and pathways by which the organisation is controlled. This can refer to many things, including financial management, individual performance-based rewards (both measurement and distribution) and quality-control structures. Questions that must be tackled in this respect are: • • • •

Which processes are strongly and weakly controlled? In general, is the company loosely or tightly controlled? Are employees rewarded or punished for performance? What reports and processes are used to keep control of finance, etc.?

3.1.5

Organisational Structures

This aspect refers to both the hierarchy and structure designated by the organisation. Alongside this, Johnson and Scholes also use it to refer to the unwritten power and influence that some members may exert, which also indicate whose contributions to the organisation are most valued by those above them.

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• • • •

3

Cultural Change Concepts

How hierarchical is the organisation? Is responsibility and influence distributed in a formal or informal way? Where are the official lines of authority? Are there any unofficial lines of authority?

3.1.6

Power Structures

This element is referring to the genuine power structures and responsible individuals within the organisation. It may refer to a few executives, the CEO, board members, or an entire managerial division. These individuals are those who hold the greatest influence over decisions, and generally have the final say on major actions or changes. • • • •

Who holds the power within the organisation? Who makes decisions on behalf of the company? What are the beliefs and culture of those as the top of the business? How is power used within the organisation?

3.1.7

Cultural Web to Change

As above, the first step of changing the culture of the organisation is to analyse elements of the Cultural Web as they are in the present. The next step is to repeat the process, examining each element, but this time considering what one would like the culture, beliefs and systems to be. This can then subsequently be compared with the ideal culture, and the differences between the two can be used to develop achievable steps towards change within the company. One will likely only then realise the true strengths and weaknesses of the organisation’s current culture, what the various hinderances are to growth, and how to go about changing specific elements to develop and achieve success. A new strategy can evolve from this by looking at introducing new beliefs, and prioritising positive reinforcement of current, successful ones. Hopefully, by integrating this system of analysis, managers can find themselves able to break free of ritual and belief systems within a company to achieve real change and innovation.

3.2

Need for Change of Organisational Culture

Successful organizations do not prosper by devoting a ruthless approach to chip away at costs, relentlessly reducing all decision making to a reduction in head count. The purpose of Lean culture change is to secure the future of the entity by uniting its people to deliver to the voice of the customer. In the not for profit sector, Lean Culture Change drives organizational success by adding value to existing consumers and winning loyalty. It is about developing resilient service provision, developing

3.2 Need for Change of Organisational Culture

37

core staff competencies and attracting and retaining the best people. The Lean Culture reverses the polarity of the organization shifting from a fire-fighting mode to a planning mode, where prevention of problems rather than reacting after the event of failure becomes the norm. Healthy, positive, organizational Cultures are characterised by a long-term continuity perspective, with a focus on tactics to resolve immediate short-term problems. The dominant culture should support and reward cross-organizational working. Implementing Lean Thinking is a cultural change that requires leadership because in the end it’s all about people. Here are ten guidelines your leader can do right now to change the culture.

3.2.1

Challenge People to Think

If you are not thinking, you’re not learning new things. If you’re not learning, you’re not growing—and over time becoming irrelevant in your work. The most successful leaders understand their colleagues’ mindsets, capabilities and areas for improvement. They use this knowledge/insight to challenge their teams to think and stretch them to reach for more.

3.2.2

Lead by Example

Leading by example sounds easy, but few leaders are consistent with this one. Successful leaders practice what they preach and are mindful of their actions. They know everyone is watching them and therefore are incredibly intuitive about detecting those who are observing their every move, waiting to detect a performance shortfall.

3.2.3

Take Lots of Leaps of Faith

Making a change requires a leap of faith. Taking that leap of faith is risky, and people will only take active steps toward the unknown if they genuinely believe—and perhaps more importantly, feel—that the risks of standing still are greater than those of moving forward in a new direction. Making a change takes lots of leaps of faith.

3.2.4

Create an Environment where It Is Acceptable to Fail

Failure should be encouraged! That’s right. If you don’t try, you can’t grow; and if growth is what you seek, failing is inevitable. There must be encouragement to try and it’s ok if you try and it doesn’t work. An environment where you can’t fail creates fear.

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3.2.5

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Cultural Change Concepts

Eliminate Concrete Heads

“Concrete Heads” is the Japanese term for someone who does not accept that the organization must be focused on the elimination of waste. People feel threatened by the changes brought about by lean. As waste and bureaucracy are eliminated, some will find that little of what they have been doing is adding value. The anxiety they feel is normal and expected. To counteract this, it is critical that people are shown how the concept of work needs to change.

3.2.6

Be a Great Teacher

Successful leaders take the time to mentor their colleagues and make the investment to sponsor those who have proven they are able and eager to advance. They never stop teaching because they are so self-motivated to learn themselves.

3.2.7

Show Respect to Everyone

Everyone desires respect. Everyone. Regardless of your position or power, ensure you show everyone respect. Everyone wants to be treated fairly.

3.2.8

Motivate Your Followers

Transformational leaders provide inspirational motivation to encourage their followers to get into action. Of course, being inspirational isn’t always easy. Some ideas for leadership inspiration include being genuinely passionate about ideas or goals, helping followers feel included in the process and offering recognition, praise and rewards for people’s accomplishments.

3.2.9

Develop a True Team Environment

Create an environment where working as a team is valued and encouraged; where individuals work together to solve problems and help move the organization forward. Individuals who will challenge each other and support each other make teams more successful.

3.2.10 Encourage People to Make Contributions Let the members of your team know that you welcome their ideas. Leaders who encourage involvement from group members has shown to lead to greater commitment, more creative problem-solving and improved productivity. Constant change is

3.4 Leadership Development and Culture

39

a business reality and organizations must continually adapt to their environments to stay competitive or risk losing relevance and becoming obsolete. For each change, leaders must define it, create a vision of the post-change world, and mobilize their teams to make it. Fundamentally, a change of culture occurs when people start behaving differently as a result of a change in the climate of the organization. There are many different models of how an organizational culture is shaped by the prevailing climate and how it can be assessed. Leaders who protect the status quo through control must surrender to change in order to secure the future for their organization. Don’t be the leader who rewards herd mentality, and me too thinking. Don’t be the leader who encourages people not to fail or not to take risks. Be the leader who both models and gives permission to do the exact opposite of the aforementioned—be a leader who leads. The culture of an organization is learnt over time. It can be taught to new employees through formal training programs but is more generally absorbed through stories, myths, rituals, and shared behaviours within teams. Organizational culture will impact positively or negatively on everything you try to do whether you want it to or not.

3.3

Creating a Logical and Open Mind

Chiiku (知育) means to master intellectual knowledge and develop logical thinking for fundamental survival skills. For businesses to stay profitable, they first need stability based on a concrete understanding of their needs and priorities. Then, by using their uncovered resources, they can begin to innovate. Understanding this fundamental need for the business’s survival is the foundation of future prosperity, and it should also form the foundation for developing leaders within the workplace. Chiiku focuses on this logical understanding of the business in a larger context. This is like envisioning a forest as an entire ecosystem rather than just a collection of trees. For business leaders, chiiku means to calculate the sense of urgency and communicate it at all times.

3.4

Leadership Development and Culture

Tokuiku (徳育) kuiku means to develop your rational interpersonal skills as a leader. Rational development (tokuiku) is different from logical development (chiiku). Logical thinking is based on cause and effect, whereas rational thinking is based on quantity and scale. Logical thinking can tell us what we ought to do, but we need to be rational to understand why it benefits each individual. It is necessary for humans to develop themselves by not staying satisfied with the current state and rationally comparing it to other possibilities. Leaders must first develop the courage to take risks and surpass the status quo. This is like ensuring the survival of the forest by understanding the needs of each organism that makes up the ecosystem. While chiiku is focused on the organization’s survival as an entity, tokuiku focuses on ensuring the enrichment and success of the individuals who make up that entity.

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3.5

Cultural Change Concepts

Emotional and Physical Strength

Taiiku (体育): Modern education systems understand taiiku as physical education (PE). It is seen as simply a way to make students exercise their bodies through sports. But physical education is about more than just building muscles and developing a sense of competitiveness. Taiiku first focuses on strengthening one’s willpower and emotions to force out the right actions. For business leaders, taiiku means learning the skills to inspire a culture of immediate action, not just the words. Leaders must learn to help others break the status quo. This means learning the self-criticism mentality (hansei).

3.6

Case Study: Toyota

Toyota Motor Corporation’s organizational culture defines the responses of employees to challenges the company faces in the market. As a global leader in the automobile industry, Toyota uses its organizational culture to maximize human resource capabilities in innovation. The company also benefits from its organizational culture in terms of support for problem solving. The different features or characteristics of Toyota’s organizational culture indicate a careful approach in facilitating organizational learning (Toyota 2021). The firm undergoes considerable change once in a while, as reflected in the change in its organizational structure in 2013. Toyota’s organizational culture highlights the importance of developing an appropriate culture to support global business success. Toyota’s organizational culture effectively supports the company’s endeavours in innovation and continuous improvement. An understanding of this corporate culture is beneficial for identifying beliefs and principles that contribute to the strength of the firm’s business and brands. Following its reorganization implemented in 2013, Toyota’s organizational culture underwent corresponding change. Prior to 2013, its organizational culture emphasized a sense of hierarchy and secrecy, which translated to employees’ perception that all decisions must come from the headquarters in Japan. However, after 2013, the characteristics of Toyota’s organizational culture are as follows, arranged according to significance: • • • •

Teamwork Continuous improvement through learning Quality Secrecy

Teamwork. Toyota uses teams in most of its business areas. One of the company’s principles is that the synergy of teamwork leads to greater capabilities and success. This part of the organizational culture emphasizes the involvement of employees in their respective teams. To ensure that teamwork is properly integrated in the organizational culture, every Toyota employee goes through a teambuilding training program. Toyota’s organizational culture facilitates the development of the

3.6 Case Study: Toyota

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Fig. 3.2 Lean culture workshop in China. (Source: Author’s source)

firm as a learning organization. A learning organization utilizes information gained through the activities of individual workers to develop policies and programs for better results. Toyota’s organizational culture highlights learning as a way of developing solutions to problems. In this way, the company is able to continuously improve processes and output with the support of its organizational culture. Quality is at the heart of Toyota’s organizational culture. The success of the company is typically attributed to its ability to provide high quality automobiles. To effectively integrate quality in its organizational culture, the firm uses Principle #5 of The Toyota Way, which says, “build a culture of stopping to fix problems, to get quality right the first time.” The Toyota Way is a set of principles that defines the business approaches used in Toyota’s organizational culture has a considerable degree of secrecy. However, the level of secrecy has declined in recent years following the reorganization of the company in 2013. Before 2013, information about problems encountered in the workplace must go through the firm’s headquarters in Toyota City, Japan. However, following the reorganization, the company’s organizational culture now does not emphasize secrecy as much. For example, problems encountered in US plants are now disseminated, analysed, and solved within the North American business unit of Toyota. The characteristics of Toyota’s organizational culture enable the company to continue growing. Innovation is based on continuous improvement through learning. Quality improvement and problem solving are achieved through the activities of work teams. However, the secrecy feature of Toyota’s organizational culture presents possible drawbacks because it reduces organizational flexibility in rapid problem solving. Figure 3.2 shows a Lean Workshop conducted by the General Manager and his lean team experts, Dr. Marc Helmold, in China.

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Cultural Change Concepts

References Fatma, P. (2015). The effect of organizational culture on implementing and sustaining lean processes. Journal of Manufacturing Technology Management, 26(5), 725–743. Helmold, M., & Samara, W. (2019). Progress in performance management: Industry insights and case studies on principles, application tools, and practice. Management for professionals. Springer. Toyota Motor Corporation (2021). Guiding Principles at Toyota Company Information Vision & Philosophy. Retrieved 17.8.2021. https://global.toyota/en/company/vision-and-philosophy/ guiding-principles/.

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Leadership, Empowerment and New Work Concepts

The Toyota style is not to create results by working hard. It is a system that says there is no limit to people’s creativity. People don’t go to Toyota to ‘work’ they go there to ‘think’. Taiichi Ohno

4.1

Leadership in Lean Management

Leadership is defined as the way of motivating and directing a group of people to jointly work towards achieving common goals and objectives (Helmold & Samara, 2019; Fatma, 2015). The leader is the person in the group that possesses the combination of personality and leadership skills that makes others want to follow his or her direction as shown in Fig. 4.1. The figure shows that elements like passion, creativity or self-initiative cannot be demanded from the employees by the leaders. Modern leaders create an environment, in which employees are showing these abilities and features. Leadership implies formal and informal power distribution. The Tannenbaum-Schmidt Leadership Continuum is a model showing the relationship between the level of authority you use as a leader and the freedom this allows your team (Tannenbaum & Schmidt, 2009; Fig. 4.2). At one end of the continuum are managers who simply tell their employees what to do. At the other end of the continuum are managers who are completely hands off. As you move from one end of the continuum to the other, the level of freedom you give your team will increase and your use of authority will decrease. Most managers and leaders will lie somewhere in the middle between these two extremes. The Leadership Continuum was developed by Robert Tannenbaum and Warren Schmidt in their 1958 Harvard Business Revie (HBR) article: “How to Choose a Leadership Pattern”. Tannenbaum was an organizational psychologist and Professor at the UCLA Anderson School of Management. Schmidt was also a psychologist who taught at the UCLA Anderson School of Management. Most leadership models ringfence a leadership style and analyse it in isolation from other leadership styles. However, in practice, a single # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_4

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Passion

Cannot be demanded by Management

Creativity

Motivation & Commitment

Self-Initiative Intellect Hard Work

Can be demanded by Management

Obedience

Fig. 4.1 Leadership in lean management focuses on employee motivation and commitment. (Source: Author’s source)

Continuum of Leadership Styles Leader centred

Tells decision

Sells desicion

Group centred

Decides decision

Consults decides

Leader Group Leader presents defines collects problem, problem, ideas and group group decides decides decides

Fig. 4.2 Leadership styles. (Source: Author’s source, adapted from Tannenbaum & Schmidt)

leadership style is not appropriate for all situations. Sometimes you might want to borrow elements of another leadership style to use with an individual within your team. Other times you might completely change your style if the situation requires it. Tannenbaum and Schmidt argued that there are certain questions to be considered when selecting a leadership style:

4.1 Leadership in Lean Management

• • • • • • •

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What is your preferred style? What are your values? What is your relationship with your team? Are they ready and enthusiastic to take responsibility? How important is the work being undertaken? How important or tight are deadlines? What is the organizational culture?

4.1.1

Tells

The leader that tells is an authoritarian leader. They tell their team what to do and expect them to do the work and job. This style is useful when you urgently need to turn around a department or business, and also in situations where deadlines are critical. However, this extreme style can be frustrating for experienced subordinates as it takes no account of team members welfare. Because of this, make sure you only use this style when the situation calls for it.

4.1.2

Sells

The leader that sells makes their decision and then explains the logic behind the decision to their team. The leader isn’t looking for team input, but they are looking to ensure the team understands the rationale behind the decision. A key aspect of this approach is for the leader to explain how the decision will benefit the team. In this way, the team will see the manager as recognizing their importance.

4.1.3

Suggests

The leader that suggests makes their decision, explains the logic behind the decision, and then asks team members if they have any questions. Through asking questions, the team can more fully understand the rationale behind the decision than the previous approaches. The leader isn’t going to change their decision but they do want the team to fully understand the rationale behind it.

4.1.4

Consults

The leader that consults presents their provisional decision to their team and invites comments, suggestions, and opinions. This is the first point on the continuum where the team’s opinion can influence or even change the decision. The leader is still in control and the ultimate decision maker, but open to any good ideas the team may have. With this style, the team feels they can influence the decision-making process. Once the leader has finished consulting with their team, their decision is finalized.

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4.1.5

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Leadership, Empowerment and New Work Concepts

Joins

The leader who joins presents the problem to their team and then works with the team in a collaborative manner to make the decision as to how the problem is going to be solved. This point on the continuum differs from the previous four, as it is the first point the leader isn’t presenting their decision. Instead, they are simply presenting the problem to be solved. This obviously will require plenty of input from the team, making this approach suitable when the team is very experienced or has specialist knowledge. Because this style involves greater input and influence form the team it can lead to enhanced feelings of motivation and freedom.

4.1.6

Delegates

The leader that delegates asks their team to make the decision, within limits that the leader sets. Although the team makes the decision, it is still the leader that is accountable for the outcome of the decision. It might seem very risky to let your team make a decision even though you’ll be held accountable for the outcome. However, you can limit the risk by specifying constraints.

4.1.7

Abdicates

The leader who abdicates lets the team decide what problems to solve and how to solve them. Abdication is the total opposite of telling the team what to do using an autocratic style. Here the team must shape and identify the problem, analyse all the options available, before making a decision as to how to proceed. They will then implement the course of action without necessarily even running it by the leader. This style can be the most motivating but can be disastrous if it goes wrong. Because of this, you should only use this approach with very experienced and senior people. This style is often the way the executive boards of companies will run. Under the CEO, each of the division heads will have complete autonomy as to how they choose to execute the company’s strategy.

4.2

Empowerment and Jidoka

A team is defined as group of people with common goals. A work or project team is a group of persons who are grouped according to process and/or geographical location who support each other. In the lean concept it is important to empower teams as shown in Fig. 4.3. Whereas the Conventional approach focuses on top down decisions, the empowerment focused approach utilizes the creativity and inputs from the team. Ideas are generated and collected from the team members, which independently decide which options to implement. The basis of this concept is that

4.3 Autonomous Work Groups

Conventional approach Develop internally

47 A partnership based approach of implementing an improvement is the suitable long-term solution for New Work Concepts

Decide internally

Announce

Defend

Empowerment focused approach Empowerment

Collect

Development based on teamwork

Decide

Implement

Fig. 4.3 Empowerment focused versus conventional approach. (Source: Author’s source)

empowerment will promote ideas, creativity and innovations from all team or project members. Employee Empowerment organizational and cultural changes starting with a top management who is willing to trust employees with decisions regarding their work. When it comes to production, many modern companies still operate as they did in the early twentieth century, where the production employees, are merely the workers. The Lean concept of empowerment and stopping production to fix a problem found in production is called “jidoka” which means “getting it right the first time” rather than passing it on to the customer (next work station). Jidoka is a prime example of the Lean philosophy of “Quality at the Source” which emphasizes that every production worker (and supplier) is responsible and empowered for providing quality material to their customer.

4.3

Autonomous Work Groups

Similar to an individual with autonomy at work, an autonomous work group is a team of employees granted autonomy or independence over the work they do within an organization.

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4.4

4

Leadership, Empowerment and New Work Concepts

Job Rotation

Job Rotation is a management approach where employees are shifted between two or more assignments or jobs at regular intervals of time in order to expose them to all verticals of an organization. The process serves the purpose of both the management and the employees. Advantages and disadvantages of Job Rotation are: Advantages of Job Rotation • Reduces the monotony of work • Broadens one’s knowledge and skills • Helps the management to explore the hidden talent of an individual • Helps an individual to realize his own interest • Helps in creating the right employee job fit • Developing a wider range of experience Disadvantages of Job Rotation • Reduces uniformity of work • Fear of performing another task effectively • Frequent interruptions in the work • Misunderstanding between the team members or union. • Difficulty in coping with other team members • Fear of getting more tedious or a hectic work The job rotation is beneficial for both the employer and the employee. The employer can identify the vertical where the employee is giving his best and can also place him in the position of a person who has left because of the retirement, transfer, termination or any other reason.

4.5

Job Enlargement and Job Enrichment

Job enlargement is an increase in job tasks and responsibilities to make a position more challenging. It is a horizontal expansion, which means that the tasks added are at the same level as those in the current position (see Fig. 4.4). The Job Enrichment is the job design technique used to increase the satisfaction among the employees by delegating higher authority and responsibility to them and thereby enabling them to use their abilities to the fullest. Job enrichment will affect more the motivation, as the quality of work will be enriched to the employee.

4.6

The Manager as the Coach of Employees

In modern organisations, the manager is becoming a coach and mentor of employees. The coaching manager can help team members to visualise the future, generate options for achieving the goal, clarifying how each individual can

4.7 Case Study: BMW Quality Through Job Rotation

More tasks which give increased responsibility, autonomy and decision-making; qualitative increase

49

Flexible and agile Work Environment

Job Enrichment

New Work

Job Empowerment Decision-making Authority

Original Tasks

Job Enlargement More Tasks of the same type; quantitative increase

Fig. 4.4 Job Enlargement and Job Enrichment. (Source: Author’s source)

contribute, and give feedback on progress towards achieving it. While there are many approaches to coaching, some appear more useful in the managerial coaching context. Studies show that coaching leads to better engagement, higher productivity, and enhanced customer service. It also helps an employee improve performance, overcome challenges, reach aspirational goals, and build self-confidence (Helmold 2021).

4.7

Case Study: BMW Quality Through Job Rotation

The BMW Group has more than 92,000 worldwide and centres them inside the middle of the corporate strategy (Fig. 4.5). The human resource policy is with the Munich Automakers firmly integrated in corporate policy and affects all strategic or structural decisions. Already since 1983 at BMW practiced an employee-oriented personnel policy. Present and future employees are not only a cost factor, but a success factor for achieving long-term sustainable competitive advantages (BMW, 2019). BMW introduced not only flexible working time models, but also created new work structure with more freedom, thus using the employees in an optimal way. This way, the company left the traditional way and methods of the division of labour towards integrated working structures. Integration means in this context, that project

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Leadership, Empowerment and New Work Concepts

Fig. 4.5 BMW production. (Source: Author’s source)

tasks and all processes are defined, divided and fulfilled. This is done by leaving the traditional way of specialised functions and departments to a cross-functional project team, in which project teams are responsible for achieving the overall project results. For this change in human resources, it is mandatory to train not only hard skills (technical knowledge etc.), but also soft and social skills (team skills, leadership etc.). The acquisition of such new skills provides some variety and enrichment in the daily work and provides for each individual personal development opportunities, so that job rotation is possible. The application shows numerous exchange experiences and insights into a large range of work processes and jobs (BMW, 2019). The example of Mr. Kroneder, previously trainer in the field of electronics rotated his job with Mr. Hillerbrand, maintenance for electronics in the vehicle final assembly and vice versa. The aim is to create a new technical trainer with assembly line experience and to enable a fully qualified trainer to apply the knowledge at the shop floor and to help workers at the assembly line area to develop in this job rotation program. This job rotation was executed for a period of 6 ss. Because the exchange between production and training is very positive proves it is planned to train two instructors annually between 6 months and a whole year to offer this opportunity (BMW, 2019).

References BMW. (2019). Jobrotation bei der BMW Group. https://www.press.bmwgroup.com/deutschland/ article/detail/T0005760DE/jobrotation-bei-der-bmw-group?language¼de

References

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Fatma, P. (2015). The effect of organizational culture on implementing and sustaining lean processes. Journal of Manufacturing Technology Management, 26(5), 725–743. Helmold, M. (2021). Innovatives Lieferantenmanagement. Wertschöpfung in globalen Lieferketten. Springer Wiesbaden. Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Management for professionals. Springer. Tannenbaum, R., & Schmidt, W. H. (2009). How to choose a leadership pattern (Harvard business review classics). Harvard Business Press.

5

Strategic Management Tools and Excellence Models

Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves. Steve Jobs

5.1

Balanced Score Card (BSC)

The Balanced Scorecard (BSC) in Fig. 5.1 is a strategic planning and performance management tool and was first introduced by the accounting academic Dr. Robert Kaplan and business executive and theorist Dr. David Norton. It was first published in 1992 in a Harvard Business Review article. Dr. Kaplan and Dr. Norton took previous metric performance measures and adapted them to include nonfinancial information. The BSC is the performance metric used in strategic management to identify and improve various internal functions of a business and their resulting external outcomes. It is used to measure and provide feedback to organizations. Data collection is crucial to providing quantitative results, as the information gathered is interpreted by managers and executives, and used to make better decisions for the organization. The BSC system connects the strategic elements like mission, vision, core values and strategic objectives with the more operational elements such as performance measures, key performance indicators, targets and actions (projects that help you reach your targets) of the enterprise or organization (Kaplan & Norten, 1992, 1996). The BSC suggests that management views the organization from four perspectives in order to develop objectives, measures (KPIs), targets, and initiatives (actions) relative to each of these points of view: • Financial: often renamed Stewardship or other more appropriate name in the public sector, this perspective views organizational financial performance and the use of financial resources

# The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_5

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Strategic Management Tools and Excellence Models

Actions

Targets

Measurables

Objectives

Financial Perspective

Strategic Planning

Actions

Strategic tegic ctives Objectives

Targets

Objectives

Actions

Vision siion

Measurables

Internal Business Processes Perspective Mission

Targets

Measurables

Objectives

Customer Perspective

Actions

Targets

Measurables

Objectives

Organisational Perspective

Fig. 5.1 Balanced Score Card (BSC). (Source: Author’s own figure)

• Customer/Stakeholder: this perspective views organizational performance from the point of view the customer or other key stakeholders that the organization is designed to serve • Internal Process: views organizational performance through the lenses of the quality and efficiency related to our product or services or other key business processes • Organizational Capacity (originally called Learning and Growth): views organizational performance through the lenses of human capital, infrastructure, technology, culture and other capacities that are key to breakthrough performance Figure 5.1 outlines the BSC including objectives, measurable, targets and actions. For each objective on the strategy map, at least one measure or Key Performance Indicator (KPI) will be identified and tracked over time. KPI’s indicate progress toward a desirable outcome. Strategic KPIs monitor the implementation and effectiveness of an organization’s strategies, determine the gap between actual and targeted performance and determine organization effectiveness and operational efficiency. The BSC ensures the following areas: Advantages of the BSC are:

5.1 Balanced Score Card (BSC)

55

• It provides an objective way to see if the strategy is working • It offers a comparison that gauges the degree of performance change over time • It focuses the employees’ attention on what matters most to success in the organisation • It allows measurement of accomplishments, not just of the work that is performed • It provides a common and simple language for communication by using numeric indicators • It helps to reduce intangible uncertainty by applying tangible and hard figures • It shows clarity of mission, vision and strategy as part of the strategic pyramid • It is transparent way in cascading down corporate objectives to all areas in the organisation • It uses customer and stakeholder expectations as focal point and starting point • It enables permanent and endurable monitoring of performance, objectives and outcomes • It ensures a cross-disciplinary and hierarchy traversing communication process • It enables the integration of performance measures objectives and an appropriate level • It displays cause and effect relationships as instrument for functions and management • It results in a sustainable action plan and functional action plan, which can be easily reviewed Disadvantages of the BSC are: • It is based on historical data from past and may thus lead to a distorted picture • It can lead to a lack of long-term commitment and leadership for management due to short-term objectives (micro-management) • It does not always express the interests of all stakeholders, but on few stakeholders • It uses only quantitative key performance indicators and the approach may not show the real world • It has the danger to overload system with key performance indicators (KPI) • It may have a potential lack of employees awareness or a failure to communicate information to all employees • It is constructed as management reporting tool rather than improvement tool • It shows that benchmarking based on KPIs in BSC and specific measures difficult Figure 5.2 outlines the logic between the four perspectives. The balanced scorecard is used to improve the performance by strengthening the organisation. The improvements will lead to a better Q-C-D plus alpha ratio throughout the organisation and thus satisfy the customers. As a result, financial performance will be outstanding. The BSC is used to attain objectives, measurements, initiatives and goals that result from these four primary functions of a business. Companies can easily identify factors hindering company performance and outline strategic changes tracked by future scorecards. With the balanced scorecard, they look at the company

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Financial Results

Financial perspective

Customer Satisfaction

Q-C-D + alpha

Customer perspective

Process Know How

Product and Service Know How

Internal business processes

Knowledge and Skills

Organisational perspective

Fig. 5.2 Logic behind the BSC. (Source: Author’s own figure)

as a whole when viewing company objectives (Kühnapfel, 2019). An organization may use the balanced scorecard to implement strategy mapping to see where value is added within an organization. A company also utilizes the balanced scorecard to develop strategic initiatives and strategy objectives. Cascading a balanced scorecard means to translate the corporate-wide scorecard (referred to as Tier 1) down to first business units, support units or departments (Tier 2) and then teams or individuals (Tier 3). The end result should be focus across all levels of the organization that is consistent. The organization alignment should be clearly visible through strategy, using the strategy map, performance measures and targets, and initiatives. Scorecards should be used to improve accountability through objective and performance measure ownership, and desired employee behaviours should be incentivized with recognition and rewards. There are several factors, that are linked to the usage of the BSC.

5.1.1

Better Strategic Planning

The Balanced Scorecard provides a powerful framework for building and communicating strategy. The business model is visualized in a strategic Map which helps managers to think about cause-and-effect relationships between the different strategic objectives. The process of creating a Strategy Map ensures that consensus is reached over a set of interrelated strategic objectives. It means that performance outcomes as well as key enablers or drivers of future performance are identified to create a complete picture of the strategy.

5.1 Balanced Score Card (BSC)

5.1.2

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Improved Strategy Communication and Execution

Having a one page-picture of the strategy allows companies to easily communicate strategy internally and externally. We have known for a long time that a picture is worth a thousand words. This ‘plan on a page’ facilitates the understanding of the strategy and helps to engage staff and external stakeholders in the delivery and review of the strategy. The thing to remember is that it is difficult for people to help execute a strategy which they don’t fully understand.

5.1.3

Better Alignment of Projects and Initiatives

The Balanced Scorecard helps organizations map their projects and initiatives to the different strategic objectives, which in turn ensures that the projects and initiatives are tightly focused on delivering the most strategic objectives.

5.1.4

Better Management Information

The Balanced Scorecard approach helps organizations design key performance indicators for their various strategic objectives. This ensures that companies are measuring what actually matters. Research shows that companies with a BSC approach tend to report higher quality management information and better decision-making.

5.1.5

Improved Performance Reporting

The Balanced Scorecard can be used to guide the design of performance reports and dashboards. This ensures that the management reporting focuses on the most important strategic issues and helps companies monitor the execution of their plan.

5.1.6

Better Organizational Alignment

The Balanced Scorecard enables companies to better align their organizational structure with the strategic objectives. In order to execute a plan well, organizations need to ensure that all business units and support functions are working towards the same goals. Cascading the Balanced Scorecard into those units will help to achieve that and link strategy to operations.

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Better Process Alignment

Well implemented Balanced Scorecards also help to align organizational processes such as budgeting, risk management and analytics with the strategic priorities. This will help to create a truly strategy focused organization.

5.2

European Foundation of Quality Management (EFQM)

5.2.1

Concept of the EFQM Excellence Model

The EFQM excellence model is a non-prescriptive business excellence framework for organisational management, promoted by the European Foundation for Quality Management https://en.wikipedia.org/wiki/European_Foundation_for_Quality_ Management (EFQM) and designed to help organizations to become more competitive. Regardless of sector, size, structure or maturity, organizations need to establish appropriate management systems to be successful. The EFQM excellence model is a tool to help organizations do this by measuring where they are on the path to excellence, helping them understand the gaps, and promoting solutions. EFQM is an acronym that stands for: European Foundation for Quality Management. EFQM was founded in 1988 with the objective to create a platform where organizations can learn from each other to continuously improve their performance. Benchmarking with other European organizations will lead to sustainable economic growth. EFQM want to open the chance to the organizations to define their current “level of excellence” and where they need to focus improvement efforts. Moreover, the Model helps to ensure that organization decisions incorporate the needs of all stakeholders and are aligned with the organization’s objectives. That in turn support managers and directors in training, sharing ideas and innovating with the aid of the so-called EFQM model as a common framework. The EFQM Model or EFQM business excellence model is the most popular quality management tool in Europe, used by more than 30,000 organisations to improve performance. It supports you to self-assess and reflect. Eighty-four percent of the EFQM members say that the EFQM model helps to improve their organisation. This quality management model aims at sustainable excellence in which quality, efficiency and sustainability are the key elements. The basis of the EFQM Model consists of the Total Quality Management (TQM) concept (Peris-Ortiz et al., 2015). It consists of a universal framework of concepts, thus enabling organizations to share information in an effective way, irrespective of the different sectors, cultures and life stages in which they are located. Organizations can thus take other organizations as a model, so that they obtain insight into how far they meet the image of a high-quality organization. The EFQM Model consists of nine criteria that are subdivided into five Enablers and four Results: This is the model behind the European Business Excellence Award, an award process run by the European Foundation for Quality Management (EFQM). This framework is used as the basis for national business excellence and quality awards across Europe. The model consists of nine categories:

5.2 European Foundation of Quality Management (EFQM)

Results

Enablers

People 10% Leadership 10%

59

Strategy 10% Partnerships & Resources 10%

Processes, Products & Services 10%

People Results 10% Customer Results 15% Society Results 10%

Business Results Key Performance Results 15%

Innovation, Learning and Improvements Fig. 5.3 EFQM excellence model. (Source: Author’s own figure, adjusted from the EFQM model (EFQM, 2019))

• • • • • • • • •

Leadership Policy and Strategy People Partnerships and Resources Processes Customer Results People Results Society Results Key Performance Results

The fundamental concepts that underpin the EFQM Excellence Model are (Fig. 5.3): • • • • • • • •

Results Orientation Customer Focus Leadership and Constancy of Purpose Management by Processes and Facts People Development and Involvement Continuous Learning, Innovation and Improvement Partnership Development Corporate Social Responsibility

5.2.2

Continuous Process

The EFQM Model must be read from right to left, as a result of which it becomes clear that the result areas focus on ‘what can be achieved?’, after which it becomes

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clear that these organizational areas focus on ‘how can these results be achieved?’. The bottom arrow, ‘learning, creativity and innovation’ indicates that measuring, evaluating and adjusting are not one-off actions but a continuous process. In the same process organizations complete a step by step development.

5.2.3

Self-Assessment

The EFQM Model consists of an EFQM assessment that enables an organization to determine where they are in the quality process. The assessment starts with a review of the results. This is the underlying principle of this model. To improve results, measures should be taken in at least one of the organizational areas. The EFQM Model and the assessment. This is represented in five development stages.

5.2.4

Application of the EFQM Excellence Model

The assessments allow an organization to gain insight into the quality of its current operational management. Improvements are formulated and these can be implemented by an organization in stages. The assessment itself consists of five steps: • • • • •

Setting standards for all of the nine key areas. Determining the current quality of operational management. Formulating and prioritizing of improvements. Application and inclusion of improvements in the various (annual) plans. Actual implementation and monitoring of the remedial actions.

5.3

Baldrige Excellence Model

This is the model behind the US Malcolm Baldrige National Quality Award, an award process administered by the American Society for Quality (ASQ) and managed by the National Institute of Science and Technology (NIST), an agency of the US department of Commerce. This framework is used as the basis for over 70 other national Business Excellence/Quality awards around the world. The model consists of seven categories 1. 2. 3. 4. 5. 6. 7.

Leadership Strategic Planning Customer and Market Focus Measurement, Analysis and Knowledge Management Workforce Focus Process Management Business Results

5.4 Business PM Improvement Resource Planning (BPIR)

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The core concepts of the Baldrige Criteria for Performance Excellence are: • • • • • • • • • • •

Visionary leadership Customer-driven excellence Organizational and personal learning Valuing employees and partners Agility Focus on the future Managing for innovation Management by fact Social responsibility Focus on results and creating value Systems Perspective

5.4

Business PM Improvement Resource Planning (BPIR)

The Business Performance Improvement Resource (BPIR) model provides an alternative, comprehensive, and simple way to classify benchmarking and best practice information within the web-site. The model classifies information through over 250 business processes. The high-level processes are shown below (changes from the APQC Process Classification Framework, from which it is based, are shown in green): • • • • • • • • • • • • • • •

Understand markets and customers Develop vision and strategy Design products, processes and services Market and sell Produce and deliver for manufacturing-oriented organisations Produce and deliver for service-orientated organisations Invoice and service customers Deliver Leadership Develop and manage human resources Manage information and knowledge Manage financial and physical resources Execute environmental management program Manage external relationships Manage improvement and change Measures of organisational Performance

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5.5

Strategic Management Tools and Excellence Models

Performance Management to Excellence Model (P2ME)

The PM excellence model by Dr. Helmold focuses on the value chain with its primary and secondary functions as outlined in Fig. 5.4. Primary functions are supply, operations and marketing and sales. Secondary or support functions are It, Hr or finance. The model is process oriented and focuses in 15 categories, where value is generated. The 15 categories are: • • • • • • • • • • • • • • •

Corporate strategy Organisational improvement Supply management Supplier and partnerships Cooperation and collaboration Value chain visibility B2B and B2C collaboration Risk management Demand scheduling and operations Quality performance Learning and growth Leadership and management Global activities Digitalization and artificial intelligence (AI) Continuous improvement

Primary value contributors

Supply side (Suppliers)

Purchasing Management

Value chain

Operations Management

Marketing & Sales

Demand side

PM2E

Corporate strategy Organisationl improvement

(Customers)

Supply management Supplier and partnerships Cooperation and collaboration Value chain visiblity B2B and B2C collaboration Risk management

Secondary value contributors

Demand scheduling & operations Quality performance Learning and growth Leadership and management Global activities Digitalisation and AI

Information systems

Human resources

Finance and controlling

Business ethics

Legal

Contineous improvement

Fig. 5.4 PM2E excellence model by Dr. Marc Helmold. (Source: Author’s own figure)

References

5.6

63

Case Study: EFQM Model at BMW

In 2015 the BMW factory in Regensburg (Germany) won the EFQM excellence award. The Year by year the BMW plant Regensburg could achieve positive results in all fields by the EFQM assessors. Not only costs are in the target focus, but also other elements like service, quality, people and innovation. The plant agrees each year new, increased targets with sustainable improvements. They are belonging to the EFQM criteria customer-oriented-results, employee-oriented-results, society oriented-results and key results. The BMW plant Regensburg’s KPI landscape combined with necessary enablers is a real achievement which could be developed over the years with the help of EFQM structures, assessments and feedbacks. It grew to a perfect interaction between all technologies, that (quality, logistics and controlling, paint and body shop, assembly, human resources) work together with harmonized targets to reach positive results. In 2010, the Plant Leadership Circle revised the management process in order to increase its transparency. This is when the process was given its current structure of two interconnected loops, which mark the distinction between the long-term perspective and the short-term derivation of activities over a 1-year period. Each year the strategic and operative excellence is discussed and finally signed in three-level target agreements that go also down to the shop floor.

References Kaplan, R. & Norton, D. P. (1992). The Balanced Scorecard (BSC). Measures that drive performance. Harvard Business Review. Kaplan, R. & Norton, D. P. (1996). Using the Balanced Scorecard as a strategic management system. Harvard Business Review. Kühnapfel, J. (2019). Balanced Scorecards im Vertrieb. Springer. Peris-Ortiz, M., et al. (2015). Achieving competitive advantage through quality management. Springer.

6

Seven Management Tools (M7)

Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves. Steve Jobs

6.1

Affinity Diagram

An Affinity Diagram is the organized output from a brainstorming session. It is one of the seven management tools for planning. The diagram was created in the 1960s by Kawakita Jiro and is also known as the KJ method. The purpose of an affinity diagram is to generate, organize, and consolidate information concerning a product, process, complex issue, or problem. Constructing an affinity diagram is a creative process that expresses ideas without quantifying them. The affinity diagram helps a group to develop its own system of thought about a complex issue or problem. A group can use an affinity diagram at any stage where it needs to generate and organize a large amount of information. For example, members of a leadership team may use the diagram during strategic planning to organize their thoughts and ideas. Alternatively an improvement team can use the diagram to analyse the common causes of variation in its project. The diagram is flexible in its application and is easy to use. Figure 6.1 shows the example of an affinity diagram and main groupings and elements one, two and three. Guidelines for the usage are shown in Table 6.1: • Ensure ideas are described with phrases or sentences. • Minimize the discussion while sorting—discuss while developing the header cards. • Aim for 5–10 groups. • If one group is much larger than others, consider splitting it. • How to Conduct an Affinity Sort: • Conduct a brainstorming session on the topic under investigation. # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_6

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Group 1

Group 2

Seven Management Tools (M7)

Group 3

Element 1

Element 1

Element 1

Element 2

Element 2

Element 2

Element 3

Element 3

Element 3

Element 4

Element 4

Element 4

Element 5

Element 5

Element 5

Element 6

Element 6

Element 6

Fig. 6.1 Affinity diagram. (Source: Marc Helmold) Table 6.1 Five basic steps for a Fault Tree Analysis (FTA)

Fault Tree Analysis (FTA) • Identify the Hazard • Obtain Understanding of the System Being Analyzed • Create the Fault Tree • Identify the Cut Sets • Mitigate the Risk Source: Author’ source

• Clarify the list of ideas. Record them on small cards or Post-It notes. • Randomly lay out cards on a table, flipchart, wall, etc. Without speaking, sort the cards into “similar” groups based on your gut reaction. If you don’t like the placement of a particular card, move it. Continue until consensus is reached. It is recommended to create header cards consisting of a concise between three to five word descriptions. The unifying concept for the grouping is essential. Place header card at top of each group. Finally, the groupings are discussed and are tried to understand how the groups relate to each other. • Inquire whether ideas are adequately clarified. • Use only three to five words in the phrase on the header card to describe the group. • If possible, have groupings reviewed by non-team personnel. • While sorting, physically get up and gather around the area where the cards are placed. • Team members will ultimately reach agreement on placement, if for no other reason than exhaustion. • Sorting should not start until all team members are ready.

6.2 Relations Diagram

67

• If an idea fits in more than one category or group, and consensus about placement cannot be reached, make a second card and place it in both groups.

6.2

Relations Diagram

Relations Diagrams are drawn to show all the different relationships between factors, areas, or processes. Why are they worthwhile? Because they make it easy to pick out the factors in a situation which are the ones which are driving many of the other symptoms or factors. Instead of one item following another in a logical sequence, each item is connected to many other pieces, showing that they have an impact on each one. Once all the relevant connections between items have been drawn, the connections are counted. Those with the most connections will usually be the most important factors to focus on. While the relations diagram is one of the seven Management Tools described in the Japanese classic “Management for Quality Improvement”, it is less frequently used than some of its stablemates. However, in a fairly tangled situation, it is a powerful means of forcing a group to map out the interactions between factors, and usually helps bring the most important issues into focus. To create a Relations Diagram one has to proceed with the following sequence (Fig. 6.2): • Agree on the issue or question. • Add a symbol to the diagram for every element involved in the issue • Compare each element to all others. Use an “influence” arrow to connect related elements • The arrows should be drawn from the element that influences to the one influenced • If two elements influence each other, the arrow should be drawn to reflect the stronger influence • Count the arrows • The elements with the most outgoing arrows will be root causes or drivers • The ones with the most incoming arrows will be key outcomes or results Cause 1

Cause 5

Cause 6

Cause 2

Problem Description Cause 7

Fig. 6.2 Relations diagram. (Source: Marc Helmold)

Cause 3

Cause 4

Cause 8

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6.3

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Seven Management Tools (M7)

Portfolio Analysis

A Portfolio Analysis is a tool, which used to display various objects (e.g. products, errors, suggested solutions) to group according to two independent characteristics and to represent the groups graphically. The Features can be measurable or classified (e.g. large, medium, small). To create a portfolio, the two independent characteristics according to which the objects are to be grouped must be determined and determined/calculated for the objects become. On the basis of the determined/calculated characteristics, the objects are arranged in a two-axis diagram (X-Y diagram) and combined into groups.

6.4

Fault Tree Analysis (FTA)

Fault Tree Analysis is a top-down, deductive analysis which visually depicts a failure path or failure chain. FTA follows the concept of Boolean logic, which permits the creation of a series of statements based on True/False. When linked in a chain, these statements form a logic diagram of failure. Events are arranged in sequences of series relationships (the “ors”) or parallel relationships (the “ands”). Results for each event are presented in a tree-like diagram using logic symbols to show dependencies among events. Events are related to mechanical components, software and/or electronics used in the design of the product. Top-level, undesired events are the primary topic being studied in FTA. The severity classification of the Top-level event is often determined in a Systems-level Hazard Analysis. Fault Tree Analysis also provides valuable troubleshooting information when applied to problem solving. The FTA diagram often utilizes failure probabilities at each level, from components and software to the undesirable Top-level event. The FTA is a logical breakdown from the Top-level undesired event, cascaded to the Base-level event (root cause). Each path has a probability assigned. The paths related to the highest severity/highest probability combinations are identified and will require mitigation. Starting at the Base-level event (at the bottom of the FTA) and working the path up to the undesirable Top-level event is called a Cut Set. There are many cut sets within the FTA. Each has an individual probability assigned to it. The Base-level event is often color coded to identify the risk level indicated. Figure 6.3 depicts a Fault Tree Analysis (FTA) for holding a bad presentation in front of an audience. On the first level, potential reasons are given, e.g. unrelevant information, an uninterested audience or a boring presentation style. The next level’s questions are now more digging into the categories in order to analyse the reason for failure.

6.7 Problem Decision Plan

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Bad Presentation Unrelevant Information

Wrong Target Audience

Uninterested Audience

Wrong Information

Boring Presentation style

Bad Timing

Fig. 6.3 Fault Tree Analysis. (Source: Author’s source)

6.5

Matrix Diagram

The Matrix Diagram is used to determine and evaluate the Interrelationships between the components of two different systems. For this purpose, the two systems are broken down into their components in the form of tree diagrams and the two tree diagrams are cross-linked. In the resulting matrix, the strength of tool is that the relationship between the components compared.

6.6

Network Planning or Mapping Tools

With the help of network plans, the chronological order and the dependency on sub-projects/processes of a project/represent workflow. On the one hand, this allows the total duration of the project optimizing the workflow and the time requirements for the individual sub-projects/processes and their earliest possible or determine the latest start and end times. On the other hand, time-critical links between sub-projects/ processes can be identified that require special deadline monitoring. Network Planning and Mapping Diagrams are an optimal method and tool in illustrating the inputs, outputs and the necessary time or resources. As a network planner and engineer or IT professional, one can create network plans for design, troubleshooting or projects that help to understand its functionality.

6.7

Problem Decision Plan

A Problem Decision Plan envisions the desired outcome and asks the questions needed to move toward the chosen solution. This is true for business as well as personal decisions. Similar to problem solving, certain framing questions help to clarify and further characterize the choice to be made.

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• Explore the decision situation—Questions help identify the motivation, timing, people and emotions involved with the decision • Determine the value of the decision—Decision value is used to estimate effort and expense that might be appropriate for choosing a solution • Identify/confirm stakeholders—Identifying and involving stakeholders early increases commitment to a decision outcome • Consider connected decisions and identify focusing decisions—Guiding requirements from focusing decisions will create alignment with previously made decisions

6.8

Case Study: Design Academy at Deutsche Telekom

The Design Academy of the Deutsche Telekom works together with the product teams and executives to create outstanding customer experiences. Design thinking helps the Telekom with this. The people-oriented innovation approach offers a wide range of methods and tools that can be integrated into the usual processes. The Design Academy helps to apply these innovative tools and concepts successfully. The curriculum is based on the experience of 7 years of Telekom Design as well as on the analysis of more than 300 design thinking methods and thousands of interviews, questionnaires and comments. The Telekom Design Academy supports our employees and colleagues to work more customer-oriented. The methodology is the essence of the work of the enterprise. With a selection of the best methods and processes as well as detailed personas and practical tools. It is the standard for the Telekom’s daily work, is continuously expanded and is available as a book and online via the Brand & Design Portal.

7

Statistical, Quality and Resource Management Tools

The most dangerous waste is the waste we do not recognize. Shigeo Shingo

7.1

Statistical Process Control (SPC)

Statistical process control (also called statistical process control or statistical process control, SPC) is usually understood as a procedure for optimizing production and service processes on the basis of statistical methods. In the context of SPC, quality control cards are a tool for the analysis, assessment and control of manufacturing processes on a statistical basis. Using the quality control card, appropriate signals are shown in the event that a process can no longer be assessed as being controlled or capable of quality. SPC was developed by Walter A. Shewhart. The scientific basis was extensively derived and described by him in 1931 in the book Economic Control of Quality of Manufactured Product. This work was triggered by the intention of the management of the Hawthorne Plant of the Western Electric Company in Chicago to manufacture products that were as uniform and thus reliable as possible. Attempting to do this using common sense has failed. Shewhart was subsequently approached by Bell Telephone Laboratories in New York for assistance. Shewhart started from the assumption that the quality of the end product essentially depends on the combination of the variation in the parameters of the individual parts. He found two fundamentally different mechanisms as the cause of this spread: Scatter due to general causes (random deviations from the mean value resulting from a stochastic process, noise (physics)) and Variation due to special causes (material defects, machine defects, construction defects, etc.). Shewhart’s second important finding was that in attempting to minimize this variation, two mistakes can be made: • Error 1: Assign a deviation to a special cause even though it was caused by a general cause. # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_7

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• Error 2: Assigning a deviation to a general cause even though it was caused by a particular cause. Either one or the other error can be avoided completely, but never both at the same time. So a way had to be found to minimize the cost of error prevention. Extensive statistical investigations and the formation of theories ultimately led Shewhart to develop control charts as the ideal tool for implementing the knowledge gained in daily practice. SPC found its first industrial application in World War II, where it was used in the manufacture of armaments. William Edwards Deming later realized that these insights and tools could be applied to all types of processes (business processes, administrative processes, etc.) with the same positive results. This teaching fell on fertile ground, especially in Japan, where it was further developed within the Toyota production system, among other things. Today, statistical process control is seen as part of a quality management system and accompanies the core process of production or service as a service process. All statistical methods that serve to monitor and optimize the core process are summarized under the term statistical process control. These methods go beyond the various control card techniques and also include e.g. B. the methods of statistical test planning, the FMEA or the Six Sigma method collection. SPC values are incorporated into customer-supplier relationships as process capability indices.

7.2

Failure Mode and Effects Analysis (FMEA)

FMEA (Failure Mode and Effects Analysis, German Failure Mode and Effects Analysis. Or short impact analysis) and FMECA (Failure Mode and Effects and Criticality Analysis) are analytical methods of reliability engineering. Possible product defects are evaluated according to their importance for the customer, their probability of occurrence and their probability of detection, each with a key figure. As part of quality management and safety management, the FMEA is used preventively to avoid errors and increase technical reliability. The FMEA is used in particular in the design or development phase of new products or processes. This method is widespread in the automotive and aerospace industries, but a properly performed FMEA is also frequently required in other branches of industry. FMEA aims to avoid errors from the outset instead of discovering and correcting them afterwards. Potential causes of errors should be identified and assessed as early as the design phase. This avoids control and error costs in production or even for the customer. The knowledge gained in this way also avoids the repetition of design defects in new products and processes. The FMEA methodology should be applied in the early phase of product development (planning and development) within the product life cycle, since cost/benefit optimization is most economical in the development phase (preventive error avoidance). The later an error is discovered, the more difficult and costly it will be to correct it. The FMEA can be divided into several types:

7.2 Failure Mode and Effects Analysis (FMEA)

73

• Design FMEA (D-FMEA): The design or construction FMEA (also K-FMEA) is used in development and construction to assess the manufacturing and assembly suitability of a product as early as possible. The consideration includes systematic errors during the construction phase • System FMEA (S-FMEA): The system FMEA examines the interaction of subsystems in a higher-level system network or the interaction of several components in a complex system the interaction of the individual components or the interaction of the own system with the environment could arise. The consideration includes random and systematic errors during operation • Hardware FMEA: The aim of a hardware FMEA is to analyze and evaluate risks from the hardware and electronics area and to take measures to remedy them • Software FMEA: A software FMEA performs the same task for generated programming code • Process FMEA: The process FMEA (also P-FMEA) can be based on the results of the construction FMEA, but can also be carried out in isolation. It deals with possible weak points in the process aimed at increasing quality The procedure of an FMEA is structured in the following steps: • System analysis and recording and visualization of the (defective) product (e.g. components) or manufacturing process (sub-processes) under consideration. Support documents: construction drawings (product), exploded view drawings (product), production flow chart (process) • Define functions and functional structures. Definition of the functions of the individual system elements (see step 1) and definition of the functions of the system elements—components or sub-processes—in relation to one another • Error analysis (cause of error-error-consequence). Definition of possible causes of errors/errors and the consequences of errors related to the system elements/ components or sub-processes under consideration. Note: Consideration of the entire chain of faults up to the “overall system” level (overall product or manufacturing process) Example: Cause of fault: Corrosion of motor plug connection (window lifter) Fault: Incorrect motor control Fault sequence: “Window does not close” Further faults: “Leak”; “Customer annoyed” • Perform risk assessment. The aim is to convert subjective error assessments into objective, structured error assessments. The evaluation is carried out according to the following scheme: B ¼ measure of the significance of the failure consequence; Score [1–10] (example: awarding the score “10” for “security risk”) A ¼ measure of the probability of occurrence of the cause of the error; Score [1–10]; (Example: allocation of the number of points “10” with high probability); E ¼ measure of the probability of detection of the cause of the error (reference: place where the error occurred); Score [1–10] (example: awarding the score “10” if the probability of detection is low) The risk priority number supports

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the assessment of whether there is a risk and therefore a need for action. The calculation is made by multiplying the individual ratings. Risk priority number: RPN ¼ B × A × E E. Determine measures and carry out optimizations. High risk priority numbers (RPN) and/or high individual assessments (B/A/E) require error avoidance or detection measures and thus an optimization of the product or process under consideration. There are three basic possibilities: (1) Increasing the concept reliability (minimizing the cause of the error), (2) Exclusion of the cause of the error by changing the concept (assembly/component/process change), (3) Measures for the effective discovery of the cause of the error.

7.3

Seven Quality Management Tools (Q7)

7.3.1

Error Collection List

Error collection lists are used for appropriate recording and Clear presentation of errors according to type and number. The detected errors can be further evaluated, for example, by a Pareto analysis.

7.3.2

Histogram

The histogram is a graphic representation of the frequency distribution. Measured values divided into classes. It consists of columns, the width of which corresponds to the class width and the amount of which indicates the number of measured values allocated to the respective classes. This form of representation allows certain forms of distribution determined and conclusions on possible causes for deviations (scatter) are drawn become.

7.3.3

Pareto Analysis

The Pareto analysis structures the errors of a problem (partial problems of an overall problem) according to their frequency. The basis is the knowledge that 70% of the effects are caused by only 30% of the errors. The Pareto analysis provides information about which errors or sub-problems should be dealt with first. The procedure takes place in six steps: • • • •

Listing and collection of errors in a problem Order of errors (e.g. according to frequency or costs incurred) The errors are plotted in descending order from left to right in a bar chart Plotting the cumulative curve (cumulative proportions of the errors)

7.3 Seven Quality Management Tools (Q7)

75

Fig. 7.1 Pareto Analysis. (Source: Author’source)

• Analysis of the diagram for essential and insignificant errors and formation of classes (A, B, C) • Processing of Class A errors Figure 7.1 shows an example of a Pareto Analysis with the frequency and the type of defects for shirts.

7.3.4

Correlation Diagram

The correlation analysis serves to prove or reject assumed (statistical) relationships between any two measurable features. With the help of graphical evaluations, it is examined whether and to what extent there is a linear relationship, e.g. between a suspected cause of the error and a certain error. Procedure is as follows: (1) Determination of the two features, between which a connection is suspected (2) Paired acquisition of the values of the two features, i.e. acquisition of the values at the same point in time (for time-dependently variable features) or on one object each (for object-dependently variable features) (3) Representation of the value pairs in an x/y diagram (4) Interpretation of the relationship based on the diagram. The following typical cases can arise: (a) Strong positive or negative linear correlation.

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7.3.5

Statistical, Quality and Resource Management Tools

Quality Control Cards (QCC)

The quality control chart, also known as the control chart, is used to monitor manufacturing processes on a statistical basis. For this purpose, data that were determined during the testing of random samples from a production process are entered in a form with a coordinate system. The data are measured values or key figures calculated from them, which, in conjunction with a previously drawn mean value as well as warning, intervention and tolerance limits, serve to examine and control the process under consideration.

7.3.6

Fishbone Diagrams

The fishbone diagram or Ishikawa diagram is a cause-and-effect diagram that helps managers to track down the reasons for imperfections, variations, defects, or failures. The diagram looks just like a fish’s skeleton with the problem at its head and the causes for the problem feeding into the spine. Figure 7.2 depicts an example with the 6M categories: Man, Material, Machine, Method, Macro-Environment, Monetary Factors.

7.3.7

Why Method

The questioning technique is used to narrow down a problem. Possible causes of problems can be found and narrowed down. The principles of the questioning technique are: (1) to think in advance which information is required and to formulate the corresponding questions, (2) a structured and comprehensive collection of information. • Why? Information/data is often required in order to be able to analyze problems more precisely Man

Material

Machine

Quality

Method (Process)

Macro-Environment

Monetary Factors

Fig. 7.2 Example of a fishbone diagram. (Source: Author’s source)

7.5 Case Study: AirSupply

77

• Which? Researching the root causes of problems requires the “right” data. General information on which data is needed cannot be given here. It should be noted that data can be worthless if the assignment to time, cause, material batch, etc. is missing. How much? It must be determined which data volume is absolutely necessary. The decisive factor in determining the scope of the data is its clear interpretability • Where? It must be specified at which location the data will be recorded (for example at which machine) • Who? Employees who collect data must be adequately qualified and informed • when? The date for the conclusion of an investigation is to be determined taking into account the urgency and other framework conditions

7.4

Enterprise Resource Planning (ERP)

Enterprise Resource Planning systems (ERP) refer to the entrepreneurial task of planning, controlling and managing resources such as capital, personnel, operating resources, material and information and communication technology in the sense of the corporate purpose in a timely and needs-based manner. ERP integrates a large number of business applications and operational data that are processed and stored in a central database.

7.5

Case Study: AirSupply

Airbus SE, formerly Airbus Group SE, is a company based in the Netherlands that is active in the aero-space and defence industry. The Company operates through three segments: Airbus Commercial Aircraft, Airbus Helicopters and Airbus Defence and Space. The Airbus Commercial Aircraft segment focuses on the development, manufacturing, marketing and sale of commercial jet aircraft and aircraft components, as well as on aircraft conversion and related services. The Airbus Helicopters segment specializes in the development, manufacturing, marketing and sale of civil and military helicopters, as well as on the provision of helicopter related services. The Airbus Defence and Space segment produces military combat air-craft and training aircraft, provides defence electronics and global security market solutions, and manufacturers and markets missiles. For the commercial side, more than 75% of the value creation is done by suppliers. The suppliers are supplying components and systems, which are assembled to sub-systems by Airbus operational sites. These subassemblies are produced in four different countries and then shipped downstream to the final assembly as shown in Fig. 7.3. The subassemblies are delivered from different national sites to the final assembly lines. Airbus uses the AirSupply system, which inte-grates ERP systems on the downstream side. AirSupply is a single supply chain solution for direct deliveries to Airbus by its suppliers in the downstream supply chain (Siebenmorgen, 2016). The integration of ERP systems makes the supply or value chain very transparent, so that actions for

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• More than 75 percent external value creation • Suppliers are supplying components and system • Subassemblies are produced in four different countries • Subassemblies are delivered from different national sites to the final assembly lines • OEMs and Suppliers are using one ERP-System Platform • Integrated Systems enable Lean Processes over the Value Chain

Fig. 7.3 AirSupply network. (Source: Author’s own figure, adopted from SupplyOn)

From individual supply chain portals ... Fragmentation Portal

Portal

Portal

Suppliers

Portal

Suppliers

Portal

Suppliers

Portal

Suppliers

… to a unique aerospace and defense supply chain platform Process Integration + AirSupply

Suppliers

Lean Integration

Fig. 7.4 AirSupply. (Source: Author’s own figure, adopted from SupplyOn)

improvements can be allocated quickly to shortcomings. Additionally, the model enables to synchronise companies’s manufacturing and logistics systems digitally and physically through the application of lean management tools (Helmold & Samara, 2019). The portal is shared by the main European aerospace companies within the BoostAeroSpace hub. The AirSupply collaborative hub helps manufacturers and suppliers to gain visibility, as well as ensure control and integration for critical business processes. This common secured plat-form for European aerospace and defence industry players results from the BoostAeroSpace cooperation led by Airbus, Dassault Aviation, Safran and Thales as shown in Fig. 7.4. It

References

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provides: a single solution for the aerospace community connecting original equipment manufacturers (OEMs) and suppliers, Standardized supply chain collaboration processes and shared formats for data exchange, and one plat-form for a single supply chain process collaboration via the internet (Software-as-a-Service provided by SupplyOn, with worldwide service).

References Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Springer. Siebenmorgen, F. (2016). Industrie 4.0. Das Potenzial schon heute nutzen. https://www.supplyon. com/wp-content/uploads/import/DE_SCM%20Magazin_Industrie%204.0.pdf

8

Problem-Solving, Process and Idea Creation Tools

The quality, not the longevity, of one’s life is what is important. Martin Luther King

8.1

Introduction to Problem-Solving

Problem Solving consists of using generic or ad hoc methods in an orderly manner to find solutions to problems. Some of the problem-solving techniques developed and used in philosophy, artificial intelligence, computer science, engineering, mathematics, medicine and societies in general are related to mental problem-solving techniques studied in psychology and cognitive sciences. The term problem solving has a slightly different meaning depending on the discipline. For instance, it is a mental process in psychology and a computerized process in computer science. There are two different types of problems: ill-defined and well-defined; different approaches are used for each. Well-defined problems have specific end goals and clearly expected solutions, while ill-defined problems do not. Well-defined problems allow for more initial planning than ill-defined problems. Solving problems sometimes involves dealing with pragmatics, the way that context contributes to meaning, and semantics, the interpretation of the problem. The ability to understand what the end goal of the problem is, and what rules could be applied represents the key to solving the problem. Sometimes the problem requires abstract thinking or coming up with a creative solution.

8.2

A3-Method

The A3 process allows groups of people to actively collaborate on the purpose, goals, and strategy of a project. It encourages in-depth problem solving throughout the process and adjusting as needed to ensure that the project most accurately meets # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_8

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Title:

Owner:

Date:

1. Problem Analysis and Problem

5. Proposed Counter Measures

2. Current Condition

6. Plan

3. Goals and Target Condition

7. Follow Up and review

4. Root Cause Analysis

Fig. 8.1 A3-method. (Source: Author’s source)

its intended goal (see Fig. 8.1). The A3 process is a problem solving tool Toyota developed to foster learning, collaboration, and personal growth in employees. The term “A3” is derived from the particular size of paper used to outline ideas, plans, and goals throughout the A3 process (A3 paper is also known as 1100 × 1700 or B-sized paper). Toyota uses A3 reports for several common types of work: • Solving problems • Reporting project status • Proposing policy changes (policy meaning rules agreed upon and enforced by the group) In most organizations, on most teams, we aren’t collaborating as strategically as we could be. We leave meetings with ideas half-baked. We often move hastily to begin working on implementing a solution, without aligning around important details. Projects move slowly due to rework and duplicate effort, two symptoms of a lack of alignment. The A3 process allows groups of people to actively collaborate on the purpose, goals, and strategy of a project. It encourages in-depth problem solving throughout the process and adjusting as needed to ensure that the project most accurately meets its intended goal. The A3 process prescribes to the famed quote by Abraham Lincoln: “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” The A3 process helps an organization sharpen its proverbial axes by fostering effective collaboration, bringing out the best problem solving in teams. Collaboration between talented people is critical for innovation and speed. Using the A3 process to foster collaboration can help organizations and teams invest their time, money, and momentum most effectively.

8.2 A3-Method

83

Steps of the A3 Process? There are nine (well, ten) steps in the A3 process. 0: Identify the problem Since the purpose of the A3 process is to solve problems or address needs, the first, somewhat unwritten, step is that you need to identify a problem or need. 1: Capture the current state of the situation Once you align around the problem or need you’d like to address, then it’s time to capture and analyze the current state of the situation. Toyota suggests that problem solvers: Observe the work processes firsthand and document your observations. Gather around a whiteboard and walk through each step in your process. You can use fancy process charting tools to do this, but stick figures and arrows will do the job just as well. If possible, quantify the size of the problem (e.g., % of tickets with long cycle times, # of customer deliveries that are late, # of errors reported per quarter). Graph your data if possible; visualizations are really helpful. 2: Conduct a root cause analysis Now that you see your process, try to figure out the root cause of the efficiencies. You can ask questions like: Where do we suffer from communication breakdowns? Where do we see long delays without activity? What information are we needing to collaborate more effectively/smoothly? Document these pain points, then dig deeper. The five whys is a helpful tool for conducting a thorough root cause analysis. The basic idea is that you begin with a problem statement, and then you ask “Why?” until you discover the real reason for the problem. You may or may not have to ask why exactly five times—this is simply an estimate. 3: Devise countermeasures to address root causes Countermeasures are your ideas for tackling the situation; the changes to be made to your processes that will move the organization closer to ideal by addressing root causes. Countermeasures should aim to: Specify the intended outcome and the plan for achieving it. Create clear, direct connections between people responsible for steps in the process. Reduce or eliminate loops, workarounds, and delays. 4: Define your target state Once you’ve selected your countermeasures, you are able to clearly define your target state. In the A3 process, you communicate our target state through a process map. Be sure to note where the changes in the process are occurring so they can be observed.

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5: Develop a plan for implementation Now that you’ve defined your target state, you can develop a plan for how to achieve it. Implementation plans should include: A task list to get the countermeasures in place. Who is responsible for what. Due dates for any time-sensitive work items. Most teams choose to document their implementation plan in their A3. 6: Develop a follow-up plan with predicted outcomes A follow-up plan allows Lean teams to check their work; it allows them to verify whether they actually understood the current condition well enough to improve it. A follow-up plan is a critical step in process improvement because it can help teams make sure the: implementation plan was executed. target condition was realized. expected results were achieved. These first six steps are captured in the A3 report. Most teams use a template for their A3. 7: Get everyone on board The goal for any systemic improvement is that it improves every part of the system. This is why it’s vital to include everyone who might be affected by the implementation or the target state in the conversation before changes are made. Building consensus throughout the process is usually the most effective approach, which is why many teams choose to include this at each critical turning point in the A3 process. Depending on the scope of the work, it might also be important to inform executives and other stakeholders who might be impacted by the work. 8: Implement! Now it’s time for implementation. Follow the implementation as discussed, observing opportunities for improvement along the way. 9: Evaluate results In far too many situations, the A3 process ends with implementation. It’s critical to measure the actual results and compare them to your predictions in order to learn. If your actual results vary greatly from what was expected, do research to figure out why. Alter the process as necessary, and repeat implementation and follow-up until the goal is met.

8.3

8D-Process

Eight disciplines problem solving (8Ds) is a method developed at Ford Motor Company used to approach and to resolve problems, typically employed by engineers or other professionals. Focused on product and process improvement, its

8.4 Kepner-Tregoe

85

purpose is to identify, correct, and eliminate recurring problems. It establishes a permanent corrective action based on statistical analysis of the problem and on the origin of the problem by determining the root causes. Although it originally comprised eight stages, or disciplines, it was later augmented by an initial planning stage. 8D follows the logic of the PDCA cycle. The disciplines are: • D0: Preparation and Emergency Response Actions: Plan for solving the problem and determine the prerequisites. Provide emergency response actions. • D1: Use a Team: Establish a team of people with product/process knowledge. Teammates provide new perspectives and different ideas when it comes to problem solving. • D2: Describe the Problem: Specify the problem by identifying in quantifiable terms the who, what, where, when, why, how, and how many (5W2H) for the problem. • D3: Develop Interim Containment Plan: Define and implement containment actions to isolate the problem from any customer. • D4: Determine and Verify Root Causes and Escape Points: Identify all applicable causes that could explain why the problem has occurred. Also identify why the problem was not noticed at the time it occurred. All causes shall be verified or proved. One can use five whys or Ishikawa diagrams to map causes against the effect or problem identified. • D5: Verify Permanent Corrections (PCs) for Problem that will resolve the problem for the customer: Using pre-production programs, quantitatively confirm that the selected correction will resolve the problem. (Verify that the correction will actually solve the problem). • D6: Define and Implement Corrective Actions: Define and implement the best corrective actions. Also, validate corrective actions with empirical evidence of improvement. • D7: Prevent Recurrence/System Problems: Modify the management systems, operation systems, practices, and procedures to prevent recurrence of this and similar problems. • D8: Congratulate the Main Contributors to your Team: Recognize the collective efforts of the team. The team needs to be formally thanked by the organization. 8Ds has become a standard in the automotive, assembly, and other industries that require a thorough structured problem-solving process using a team approach (Fig. 8.2).

8.4

Kepner-Tregoe

Kepner-Tregoe (also sometimes called KT Analysis) is a company that specializes in problem solving (also sometimes known as problem solving method). KepnerTregoe was founded in 1958 by Charles Kepner and Benjamin Tregoe. The two company founders are considered pioneers of rational working methods and have researched and visualized the basic solution thought patterns of people

86 Fig. 8.2 8D-process. (Source: Author’s source)

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D1

Problem-Solving, Process and Idea Creation Tools

Team Formation and Set Up

Problem Discription D2 Immediate Containment Actions D3

Root Cause Analysis D4 Selection of corrective Actions D5 Implementation and Validation D6 Preventive Actions D7 Closure of the Issue (Final Meeting) D8

(Kepner-Tregoe, 2020). In the area of these thought processes, problem analysis, decision analysis, rational project management, analysis of potential problems, situation analysis, strategy formulation and implementation and v. m. as fundamental methods to permanently establish thought processes. Under the term “KepnerTregoe” there are several methods to solve different “tasks”. Basically, the term “problem” is differentiated from “decision”. Different tasks that people face require fundamentally different approaches. The processing of these tasks sometimes requires different processes. Exactly this difference becomes clear through the situation analysis. Furthermore, the classified tasks can be solved through various processes. Problem analysis is now regarded as “best practice” in the field of operational and service excellence. It enables the identification of unknown causes in order to subsequently eliminate them. Decision analysis provides the rational claim for the best available solution that is to be implemented. Situation analysis determines all necessary tasks, clarifies and prioritizes them, presents them in a special to-do list, the so-called Action Item List (AIL), and prepares the solution with the right tools. The analysis of potential problems is a process to avoid future problems and to be prepared for the damage reduction in an emergency.

8.5 TRIZ

8.5

87

TRIZ

TRIZ is the Russian acronym for (Russian: теория решения изобретательских задач, Teoria reschenija isobretatjelskich sadatsch), which translates as the Theory of inventive problem solving or Theory of inventive problem solving. RIZ was founded on the assumption that by sifting through a large number of patents, then selecting and valuing those describing technical breakthroughs, one would discover generally applicable innovative principles and even laws of invention. Figure 8.3 shows the concept of TRIZ, in which specific problems can be resolved with generic problem solutions. The method was initiated by Genrich Saulowitsch Altschuller and Rafael Borissowitsch Shapiro under the influence of Dmitri Dmitrijevitsch Kabanov around 1954–1956. G. Altschuller and R. Shapiro, who did further research and improvements, recognized three essential principles as early as 1956: • A large number of inventions are based on a comparatively small number of general solution principles • Only overcoming contradictions makes innovative developments possible • The evolution of technical systems follows certain patterns and laws With the help of this method, inventors try to systematize their activities in order to find new solutions to problems faster and more efficiently. The TRIZ method has meanwhile spread around the world and is “rapidly developing” (Zobel). In the Anglo-Saxon language area, the term TIPS (Theory of Inventive Problem Solving) is also common. The TRIZ contains a number of methodical tools that make it easier to define and analyze a specific technical problem based on a target description in order to break it down to its abstract components and to find a solution in the abstract space. The abstract solution is then creatively translated into possible specific

TRIZ General Solution

TRIZ General Problem

TRIZ

Problem Analysis

Specific Problem

Fig. 8.3 TRIZ Model. (Source: Marc Helmold)

Specific Solution

Evaluation and Selection

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solutions; A solution is selected from this amount. This prevents the problem from being prematurely deduced to a solution. Instead, TRIZ uses a stock of already existing solution processes. The methods of classic TRIZ are: • • • •

Innovation principles and contradiction table Separation principles for solving physical contradictions Algorithm or step method for solving invention problems (ARIZ) System of 76 standard solutions and substance-field analysis (SFA, formerly also called WEPOL analysis) • S-curves and laws of the development of systems (evolution laws of technical development, laws of technical evolution) • Principle (law) of ideality • Modeling of technical systems with the help of “little men” (dwarf models) Further methods that are assigned to TRIZ, but which are not included in the classic teaching, but were developed by Altschuller’s students, are: • Innovation checklist (Innovation Situation Questionnaire) • Functional structure according to TRIZ (a kind of cause-and-effect diagram, which however does not correspond to Ishikawa Kaoru’s cause-and-effect diagram, is also called problem formulation) • SAO functional model (Subject-Action-Object, an extended functional model based on Miles’ basic work on “value analysis”) • Process analysis • GZK operator (size-time-cost) • Anticipatory error detection • Resource checklists In most cases, TRIZ does not mean the above-mentioned collection of methods and tools, but only refers to the contradiction table and the 40 innovative principles as “the TRIZ”. However, these are controversial in the professional world in terms of handling and mode of operation. The TRIZ contains 40 principles or “40 rules of innovation” (sometimes also 40 innovative principles, 40 IGP—40 innovative basic principles called). One of these rules is the “principle of the nesting doll (matryoshka)” (also called “integration”): You transfer an object into the inside of another. These abstract rules are in detail: 1. 2. 3. 4. 5. 6. 7.

Dismantling separation Local quality asymmetry coupling universality Integration (plug-in doll, matryoshka)

8.5 TRIZ

8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

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Counterweight Previous counteraction (early counteraction) Previous effect (earlier effect) Principle of the “previously placed pillow” (prevention) Equipotentiality Function reversal (inversion) Similarity to spheres (spheroidality) Dynamization Partial or excessive effect Transition to other dimensions (transition to higher dimension) Use of mechanical vibrations Periodic effect Continuity of useful effect (continuity of active processes) Principle of rushing through (skipping) Conversion of harmful into useful Feedback Principle of the “mediator” Self service Copy Cheap short life instead of expensive long life Replacement of the mechanical system (replacement of mechanical operating principles) Use of pneumo and hydrosystems Use of flexible sleeves and thin foils Use of porous materials Color change Similarity (homogeneity) Elimination and regeneration of the parts Change in physical and chemical properties (change in physical state) Application of phase transitions Application of thermal expansion Use of strong oxidizing agents Use of an inert medium (use of an inert medium) Use of composite materials (use of composite materials)

These rules are mostly used in connection with a so-called contradiction matrix or contradiction table. This matrix has different technical parameters in the first row and in the first column (in an identical order). In the individual fields of the matrix, the individual parameters are thus opposed to each other (similar to a season game table in soccer). The diagonal of the matrix remains empty, because here one and the same parameter is facing each other (that could be solved with the physical contradictions). As far as the other fields are concerned, it is assumed that the assigned parameter in the column is supposed to improve, while the parameter in the corresponding row deteriorates as a result. Herein lies the contradiction. The field in which row and column cross each other uses individual numbers to name the

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innovative basic rules of TRIZ that can help to overcome this contradiction. A developer who works with the contradiction matrix must therefore first be clear about which parameters of the system he is developing should be improved. He then has to determine which other parameters would usually worsen as a result of these improvements. Finally, the developer abstracts these parameters so that he can assign them to parameters of the first row and column of the contradiction matrix. Ultimately, this brings him to the abstract rules of TRIZ, which are suitable to help overcome the contradictions that arise in the course of development. On the basis of examples and the concretization of the rules for the development object, thoughts are stimulated how the existing development contradictions can be overcome.

8.6

Plan-Do-Check-Act (PDCA)

Deming defined the PDCA sequence for optimizing concepts, processes and procedures in terms of an incessantly repeating cycle as follows: • • • •

Planning (plan) Application (do) Verification of the results (check) Optimization with standardization (act)

The PDCA cycle is (see Fig. 8.4.) used as a problem-solving strategy. First, the problem is precisely defined and specified so that it can be analysed more clearly and

• Implement • Implement new Standrad

• Analysis • Develop Concept

Act

Plan

Check

Do

• Test • Define new Standard

Fig. 8.4 PDCA cycle. (Source: Author’s source)

• Optimize • Check new Standard

8.7 Six Sigma

91

effectively. Then the real cause of the problem is eliminated and the effectiveness of the improvement is checked. If one comes to the result that the improvement was successful, standardization prevents falling back in times before the improvement.

8.7

Six Sigma

Six Sigma (6σ) is a management system for process improvement, statistical quality target and at the same time a method of quality management. Its core element is the description, measurement, analysis, improvement and monitoring of business processes with statistical means. It is a method with a comprehensive set of tools for the systematic improvement or redesign of processes. The work breakdown structure for process improvement projects follows the procedure Define—Measure—Analyze— Improve—Control (DMAIC). DMAIC (Define—Measure—Analyze—Improve— Control, in spoken language: di-meɪk, to German Define—Measure—Analyze— Improve—Control) stands for the phases of a process management process. DMAIC is the core process of the Six Sigma quality management approach and is used to design processes in such a way that they stably maintain a specified 6 Sigma performance level. DMAIC is used to improve existing products. Within the individual phases of a DMAIC or DMADV project, Six Sigma utilizes many established quality-management tools that are also used outside Six Sigma. The following table shows an overview of the main methods used. • • • • • • • • • • • • • • • • • • • •

Whys Statistical and fitting tools Analysis of variance General linear model ANOVA Gauge R&R Regression analysis Correlation Scatter diagram Chi-squared test Axiomatic design Business Process Mapping/Check sheet Cause & effects diagram (also known as fishbone or Ishikawa diagram) Control chart/Control plan (also known as a swimlane map)/Run charts Cost–benefit analysis CTQ tree Design of experiments/Stratification Histograms/Pareto analysis/Pareto chart Pick chart/Process capability/Rolled throughput yield Quality Function Deployment (QFD) Quantitative marketing research through use of Enterprise Feedback Management (EFM) systems • Root cause analysis

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• • • •

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SIPOC analysis (Suppliers, Inputs, Process, Outputs, Customers) COPIS analysis (Customer centric version/perspective of SIPOC) Taguchi methods/Taguchi Loss Function Value stream mapping

8.8

Value Stream Mapping (VSM)

The value stream analysis is a business management method for improving process management in production and services. It is also referred to as the value stream recording of an actual state. Value stream mapping (VSM). This first process step of the so-called value stream management provides a model of the material and information flows of the individual value streams. The non-value-adding processes are identified in the analysis. In the following design approach, an improved value stream is designed in the context of a value stream design, in which the non-valueadding activities and unnecessary idle times are eliminated. The transition from the actual to the target value stream is planned using the value stream planning. The comparable approach in service management does not minimize idle times, but the individual waiting times between activities.

8.9

RPR Method

RPR deals with failures, incorrect output and performance issues, and its particular strengths are in the diagnosis of ongoing and recurring grey problems. The method comprises: • Core Process • Supporting Techniques The core process defines a step-by-step approach to problem diagnosis and has three phases: • • • • • • • • • • •

Discover Gather and review existing information Reach an agreed understanding Investigate Create and execute a diagnostic data capture plan Analyse the results and iterate if necessary Identify root cause Fix Translate diagnostic data Determine and implement fix Confirm root cause addressed

8.12

Design Thinking

93

The supporting techniques detail how the objectives of the core-process steps are achieved, and cite examples using tools and techniques that are available in every business.

8.10

Brainstorming

Brainstorming is an idea generation method developed by Alex F. Osborn in 1939 and modified by Charles Hutchison Clark, the purpose of which is to encourage the generation of new, unusual ideas in a group of people. He named it after the idea behind this method, namely using the brain to storm a problem (literally: using the brain to storm a problem). In brainstorming, ideas, ideas and suggestions on a topic are freely expressed and collected. It does not matter how mature and high quality an idea is, but first of all that as many ideas as possible are collected. It is important that all participants collect and publish ideas.

8.11

Mind Mapping

Mind map describes a cognitive technique coined by Tony Buzan. B. can be used for developing and visualizing a topic, for planning or for taking notes.

8.12

Design Thinking

8.12.1 The Concept of Design Thinking Design Thinking is a customer-centred and iterative method for solving complex problems and developing new ideas. With the Design Thinking-method you succeed in developing a solution that is superior from the customer’s point of view, taking into account economic efficiency, feasibility and desirability. Design Thinking is based on the assumption that problems can be solved better if people from different disciplines work together in an environment that promotes creativity, develop a question together, take into account the needs and motivations of people and then develop concepts that are repeatedly checked. The process is based on the work of designers, which is understood as a combination of understanding, observation, definition of standpoints, brainstorming, prototype development and testing. At the same time, the word thinking stands for the fact that, as in a research project, the feasibility and profitability of the innovations are systematically examined. According to another understanding, Design Thinking means “any process that applies the methods of industrial designers to problems beyond how a product should look” (“any process that applies the methods of industrial designers to problems that go beyond the appearance of a product”). Design thinking thus combines three fundamental core aspects: benefit, feasibility and marketability. Accordingly, the benefits for people, the technological feasibility and the economic

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marketability are brought into harmony in order to create a perfect innovation and to solve the problem flawlessly. All points should be weighted equally. The six named and basic steps of Design Thinking can be described as follows: 1. 2. 3. 4. 5. 6.

Understanding Observing Defining a Point of View Finding Idea Prototyping Testing

8.12.2 Understanding The problem at the beginning is at best defined with a team of several people. It is important to create a general understanding and to bring everyone involved on the same page. Specific questions can be, for example: What should be newly developed? For whom should the development be relevant? Which essential (current or future) framework conditions have to be taken into account? Which final state should the solution achieve?

8.12.3 Observing Observing is about being able to empathize with the customer. An analysis of the customer’s will is possible, for example, through an interview or role play. It is important to let the customer do the talking. Good listening is the most important part of the job, otherwise misunderstandings can arise. The wishes of the customer are always in the foreground.

8.12.4 Defining a Point of View The results of the first two steps are combined. Techniques such as personas or pointof-view are used to define the point of view both visually and in writing.

8.12.5 Finding Ideas At the beginning of the brainstorming process there is a general brainstorming session in which all ideas, no matter how crazy or utopian, are brought together. The results are structured and sorted according to priorities. Questions about the efficiency, the feasibility or the economic viability of the individual ideas are important. A look at the competition is also not uncommon.

8.13

Case Study: Problem Solving with Kepner Troeger at Bayer AG

95

8.12.6 Prototyping A prototype is created for illustrative purposes. Perfection and completion are insignificant. More important is: the simpler, the better. Creativity is given free rein. Techniques that are used in prototyping include wireframes, post-its, roleplaying games, storyboards or models. The prototype is tailored to the needs of the customer. It is important that the customer can imagine the solution to his problem based on the prototype.

8.12.7 Testing Finally, what has been developed must be tested. Feedback plays an important role in this. Flexibility is also required. If an idea does not work, it can also be discarded. Customers are closely observed during tests with the prototypes. Based on their reaction, further ideas and improvements develop. Design thinkers are also open to new suggestions at this step. If a defect is found during a test, it is eliminated and the steps are repeated with the improved or new prototype. It is quite common for new products to have multiple test phases until the customer is satisfied and the product can be approved.

8.13

Case Study: Problem Solving with Kepner Troeger at Bayer AG

Bayer AG is a German multinational pharmaceutical and life sciences company and one of the largest pharmaceutical companies in the world. Headquartered in Leverkusen, Bayer’s areas of business include human and veterinary pharmaceuticals; consumer healthcare products; agricultural chemicals, seeds and biotechnology products (Bayer, 2021). The company is a component of the Euro Stoxx 50 stock market index. Bayer played a key role in the Wirtschaftswunder in post-war West Germany, quickly regaining its position as one of the world’s largest chemical and pharmaceutical corporations. In 2006, the company acquired Schering, in 2014, it acquired Merck & Co.’s consumer business, with brands such as Claritin, Coppertone and Dr. Scholl’s, and in 2018, it acquired Monsanto, a leading producer of genetically engineered crops, for $63 billion. Bayer CropScience develops genetically modified crops and pesticides. Pharmaceutical and life sciences companies are challenged each day by the regulatory environment in which they operate. Problem solving methods, therefore, need to account not only for the pressure of competition and market forces, the challenges of a global distribution and delivery network, the complexities of research and development and the manufacturing process but also the increasing regulation on each aspect of their business. The Kepner-Tregoe problem solving and decision making framework greatly diminishes the amount of time taken to resolve issues at each step in the decision

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making process, thereby reducing the amount of resources spent on issue resolution. For the medical or pharmaceutical industry, this means that companies can focus their efforts on R&D or creating and developing lifesaving treatments and gaining a competitive edge in the market. Over the past five decades, Kepner-Tregoe has provided problem solving training and skill development from the most strategic view down to the most granular of process steps for many medical and pharmaceutical companies. This deep level of experience has informed our problem solving and decision making framework to provide major benefits for companies in industries that face regulatory pressure. Companies in the pharmaceutical and life sciences industries with whom we have worked include: • • • • • • • • • • •

AstraZeneca PLC Abbott Laboratories Bayer AG Bristol-Myers Squibb Company Covidien GlaxoSmithKline PLC Roche Diagnostics Johnson & Johnson Merck & Co., Inc. Pfizer, Inc.

References Bayer. (2021). www.bayer.com Kepner-Tregoe. (2020). Kepner-Tregoe—Consulting services—Leadership development—Busi ness training (kepner-tregoe.com).

9

Supply Management Tools

What gets measured gets improved. Peter Drucker

9.1

Supply Side

The term supply management as key value-adding function replaces old definitions of procurement or purchasing (Helmold & Terry, 2021). This definition is in line with Porter’s description of value chains (Porter, 1980). A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product, service for the market. The concept comes from business management and was first described and popularized by Michael E. Porter in his 1985 bestseller, Competitive Advantage: Creating and Sustaining Superior Performance in the upstream supply management or the supply side. Figure 9.1 displays the operations, the upstream supply side (supply management) and the downstream supply side (customer or demand side side). In Porter’s value chain framework (see Fig. 9.2), Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, and Service are categorized as primary activities. Secondary activities include Procurement, Human Resource management, Technological Development and Infrastructure. As many companies have external value chains (purchase of goods, services) of more than 80%, supply management has here the most significant role in any enterprise. In many enterprises, functions are still working independently from each other, leading to a large amount of waste and inefficiencies. Many industries are currently faced by fierce competition. This is forcing manufacturing companies to concentrate on core competencies and to transfer the production of components, goods and services to external suppliers (Helmold, 2021). The number of valueadding activities has decreased constantly and now lies between 10% and 30% in this industry (Dyer, 1996). The company Apple has no production and decided to outsource the manufacturing of iPads or iPhones to the company FoxConn. Such a development has had a great influence on the structure of supply chains and supplier # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_9

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Tier 3

Tier 2

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Tier 1

Tier 1

Tier 2

Supplier Supplier

Supplier Customer

Supplier Supplier Supplier

Customer

Supplier er

Supplier

Supplier

Customer

Operations

Customer Customer

Supplier

Customer

Supplier Customer

Supplier

Supplier Supplier

Supplier Downstream Supply Chain Management Demand or Customer Side

Upstream Supply Chain Management Supply Side (Supply Networks)

Fig. 9.1 Resilience in the upstream supply chain. (Source: Author’s source, adapted from Helmold & Samara, 2019)

Secondary Functions

Research and Development Finance and Controlling

Human Resources

Margin

Primary Function: Supply Management Primary Functions

Operations Management Inbound Logistics

Assembly

Marketing & Sales

Outbound Logistics

After Sales

Enterprise Functions

Fig. 9.2 Porter’s value chain. (Source: Authors source, adapted from Helmold et al., 2020)

relationships. Supply chains (the terms “supply chains” and “supply networks” are used synonymously in the literature) have become more complex and international, as pointed out by several authors Christopher and Peck see the level of complexity increasing in the upstream supply chain management of manufacturing companies in many industries, a trend which is characterized by the growing transfer of activities to suppliers and supplier networks, high numbers of supply chain layers (tiers), and the ongoing globalization of supply chains (Christopher & Peck, 2004). As a

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consequence, vulnerability and risk exposure have risen significantly. The rapid increase in supplier activities therefore directly affects supply management, as emphasized by Emmett and Crocker (2009). In recent years, many companies have reduced their value-adding activities and implemented efficiency-oriented cost reductions, e.g. outsourcing, single sourcing, low-cost country sourcing, platform concepts, lean management, design-to-cost approaches (Gürtler & Spinler, 2010). Supply Management has become more important in core and peripheral business areas and is aimed at building resilient supply chains. Resilience is based on being able to anticipate, manage and prevent supply chain disruptions at an early stage (Christopher & Peck, 2004). On the other hand, supply risks have risen due to increased dependency on supplier networks (Kersten et al., 2008). Figure 9.1 depicts the supply chain including the supply management phases. Resilience means the optimum levels of quality, cost, delivery and alpha objectives (Helmold & Terry, 2021). In their research “An Empirical Analysis of the Effect of Supply Chain Disruptions on Long-Run Stock Price”, Hendricks and Singhal (2005) found that enterprises without operational slack and redundancies in their supply chains experience negative stock effects. The authors revealed the tremendous impact of supply chain disruptions on stock price performance and shareholder value. Supply disruptions can easily lead to high recovery cost, waste and sharp decreases in sales. External customers become dissatisfied and internal core functions (e.g. assembly) are disturbed. In most cases, supply disruptions have negative impacts on brand image, sales figures and the company’s own financial situation as stressed by many authors writing about supply disruptions and resilient supply chains (Haslett, 2011; Jing, 2011; Grant, 2010; Connor, 2010; Trkman & McCormack, 2009; Blackhurst, 2008; Kumar, 2001; Tomlin, 2006). Recent incidents in the media about disruptions caused by upstream supply management inefficiencies from China show that the Supply Management excellence approach needs to tackle these issues in a proactive and sustainable way (Middleton, 2015). Supply management risks have mainly been investigated at the direct level of tier1 relationships, but consideration has not been fully extended to sub-suppliers, i.e. tiers 1, 2, 3 and beyond (Harland et al., 2003). The new concept of supply management therefore seeks to address these concerns by investigating how disruptions can be anticipated, prevented and managed over the entire value chain including all tiers on the supply and demand side as shown in the figure by Slack et al. (1995). Recent supply disruptions show that current supply management organisations, supply management tools and concepts are not smart and resilient enough to avoid these supply chain discrepancies. Recent articles for example in the magazine “Automotive News” show that all car producers are facing severe problems due to suppliers’ problems. Not only the automotive industry but also many other industries face these issues. The lean supply management concept was developed by Taichi Ohno (1990), who worked for Toyota Motors. It derived from a bundle of instruments which come from sophisticated production methods or supporting functions such as logistics (Helmold, 2021). The ideal interplay and optimal combination of all instruments are

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essential for success. The vision of lean production is based on the JUST-IN-TIME (JIT) philosophy and the Toyota Production System (TPS: Japanese ¼ トヨタ生産 システム) and focuses on the elimination of waste and the minimization of stock.

9.2

Supply Management Objectives

Supply Side objectives are important. The seven rights (7R), which are the major objectives according to the lean supply management philosophy can be defined as: 1. 2. 3. 4. 5. 6. 7.

Right Products Right Quality Right Time Right Quantity Right Location Right People Right Cost

The right product refers to the right specification and requirements by the demanding customer. The products must have the required dimensions, layout, material, colour etc. The right quality means the clarification of all requirements in terms of quality and improvement measures to have the optimum quality levels. Quality is normally measured by hard factors such as non-conformities, field rejects or defects at receipt (0 km defects). The right quantity is the placing of a specific order quantity triggered by internal and customer demands. Supply management has to transfer the customer and company demands to the supply networks. The right time means that products ordered have to be at the buyer’s place in time, neither too early nor too late. Supply management has to recognize suppliers’ lead times. The lead time for any product starts from the order until the physical receipt of goods at the ordering party. The right location can be defined as the place, where the products are required. Shipment of products from China to Europe take more than 8 weeks, so that that the right location is closely linked to the lead time of products. The meaning of right people extends current definition of the five Rights (Emmett & Crocker, 2009; Helmold, 2011) in line with the modern and lean philosophy of the new paradigm of supply management. Suppliers in global markets need to have the right sales people, project managers and operators to meet the requested criteria. Project managers must have sufficient language skills and as well operators must be trained to produce good quality parts. People are becoming in a changing and global trade situation more and more important. Any product needs to have the right cost level, otherwise it will not be demanded and bought.

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9.3

Managing the Supply Side

9.3.1

Supply Management Process

Industries or companies which have outsourced a large scope of their products to global supply networks would especially benefit from such research in supply management, supplier relationship management and supply networks. In conclusion, it is evident that proactive supply management requires a subset of principles (see Fig. 9.3): The principles can be described as follows: (1) Supply Management is a function which is managing the entire value chain; therefore supply management must be incorporated into the mission, values and strategies of every organization. (2) Supply management best practices are focused on a multilayer approach, involving not only tier 1, but also tier 2 and 3 levels; proactive supply management can only be introduced and executed if the corporate objectives are communicated and cascaded throughout the organization; the setup must be centralized as single point of contact to suppliers; (3) advanced and innovative supply management has standardized tools and processes; (4) supply management best practice companies have sophisticated B2B platforms/supplier portals in terms of quality, cost and delivery and other suitable KPI; (5) supply management and mitigation actions activities have to be preventive, proactive and sustainable; activities have to be oriented long-term; (6) supply management requires a collaborative approach, including strategic alliances with suppliers. Such activities should be organized centrally; (7) proactive supply management can be performed with a key account manager in terms of being a single point of contact for the supplier (customer); (8) performance indicators have to be mutually agreed upon and may comprise both hard and soft factors. The assessment process should consist of quality, cost, delivery and technological criteria; (9) the learning organization should, among other things,

Supply Management Phases Definition of Strategies Digitization Strategic Suppliers Make or Buy

Performance Management

Supplier Strategy

Supplier Selection

Supplier Evaluation

Supplier Development

Integration of all Functions

Quality Performance

Primary Functions

Cost and Finance Performance

Secondary Functions

Supply

Operations

Marketing & Sales

Delivery Performance

Other Performance Objectives

Fig. 9.3 Supply management process. (Source: Author’s source)

Supplier Inegration

Supplier Controlling

Concentration on Value-added Processes

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be characterized by the capability and competencies of coaching suppliers; (10) all the above mentioned principles should be combined with a philosophy of continuous improvement (Japanese: Kaizen) and reflection (Japanese: Hansei) to achieve a best practice model in supply management. Companies that want to distance themselves from their competitors through best-in-class supply management must implement the ten principles and adopt a collaborative approach in dealing with their supply base. Appropriate management of one’s supply base can lead to competitive advantage. The strategic objective of supply management is the establishment, design and management of supplier networks and the successful collaboration within these networks as the figure shows. The network consists of internal and external suppliers. The collaboration between supply partners and the management of the interactions are a key responsibility of the supply management function. A sophisticated information system is a pre-requisite for proper interactions.

9.3.2

Supply Management Strategy

Strategic supplier and commodity strategies are a suitable tool in Supply Management to secure supply of standard, leverage, shortage and strategic materials (Hofbauer et al., 2012). • • • •

Strategic suppliers/materials Leverage suppliers/materials Shortage suppliers/materials Standard suppliers/materials

9.3.2.1 Strategic Materials/components Strategic materials can defined as special materials which are important and key to the own production of an enterprise. Siemens and Alstom (formerly Bombardier) Transportation produce car bodies by themselves, however, aluminium and stainless steel or steel profiles and extrusions are strategic for the production and quality of the end product. 9.3.2.2 Leverage Materials/Components Leverage materials can be defined where the supply side is characterized by many companies which offer the materials. The automotive industry is characterized by more than 10–20 different suppliers, which deliver entertainment products (polipolistic market). 9.3.2.3 Shortage Materials/Components Shortage materials can be defined as materials that are scarce on the market. Scarcity represents a problem to any supply management organization and needs the right establishment of strategies.

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9.3.2.4 Standard or Catalogue Materials/Components Standard materials are materials that can be bought on the market. Often standard goods are catalogue products like screws, C-parts etc.

9.3.3

Supply Management Selection and Evaluation

Supplier evaluation is the systematic assessment of existing or new suppliers on the basis certain categories (Fig. 9.4). A supplier evaluation must be: • • • • • •

A preventive and proactive system A KPI based Methodology An anticipating (sensoric) model A holistic and cross-functional assessment A standardized process An integrated Supply Base approach

These categories can be performance of the delivery, price evolution, production capacity, quality of management, technical capabilities, and service (Helmold, 2021). Once there is a mechanism in place to periodically collect performance data from suppliers, the next step is to review the performance data. Ideally, the format that the data is in should lend itself to comparison and analysis. The data should also be in a format that can be quantified and scored. Many companies use a supplier evaluation or scorecard for this. Moreover, data from different types of assessments such as internal surveys, external surveys, and site visits should be incorporated into the analysis. Since most large organizations have many strategic suppliers and lots of Supply Management Mission, Vision and Values Information available outside / inside the company

Information available outside / inside the company Quality e.g. Defects

Supplier Evaluation Preventive

Reactive

Delivery

Cost e.g. Workshops

Alpha-Criteria

e.g. On-Time-Delivery

e,.g. Qualification, CSR Financial Strength Supplier Risk Management

Other Criteria Insolvency Risk

Fig. 9.4 Supplier evaluation. (Source: Author)

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data, it is almost impossible to obtain, organize and review data from assessments effectively on a large scale without automation or software. When evaluating supplier performance data, the two things to look for (besides the obvious) are large changes in the performance metrics and overall trends. By identifying trends, a company can make projections about where the performance data will be in the future and can take action accordingly. Downward trends and deterioration in performance can signal a problem. Moreover, an abrupt change in performance metrics might signal an imminent problem. However, there could be another explanation. In this case it makes sense to obtain more data from the supplier and to dig deeper to find the source of the problem. It may be a one-time anomaly or it could be something more. Monitoring supplier performance proactively can ensure that exceptions to policies are tracked and personnel and resources are assigned to address the problem quickly. Alerts and notifications can provide up to the minute information to company personnel letting them know of changes in supplier performance. Having a system that can take the assessment/scorecard data and can output it in a report or other format is helpful because members of the team can all access and review the information quickly and easily. The performance evaluation of Daimler shown in Fig. 9.4 is an example of a supplier evaluation. For part C the performance is very bad, so that immediate actions have to be taken. Once there is sudden drop in supplier performance or a downward trend, it is important to take action quickly. Quick action can reduce the risk of disaster significant loss, and gives the company the ability to take steps to prevent bad outcomes. Some actions that can be instigated include communicating with the supplier, conducting further evaluations, developing an improvement plan, or finding an alternative supplier. The actions taken may depend on many factors. These include the supplier’s past performance, level of current performance, strategic importance, possible damages, and overall risk. One of the first things to do is to contact the supplier and find out what went wrong and why. The results of the performance assessment should be provided to the supplier and can create a basis for discussions. The poor performance could have been the result of something outside of the supplier’s control. It could have been a problem with process, personnel, a supplier, or something else. By communicating with the supplier, personnel can determine the cause of the problem and try to work with the supplier to make changes to bring the supplier performance back into compliance with the contract or with company policies. If the vendor does not have a good explanation or understanding of why the problem occurred, this may be a sign of trouble. Once the causes of a problem or set of problems have been identified, the next step is to devise a supplier improvement plan. The plan should be specific to the problem, should involve both company personnel and supplier personnel, and should involve a timeline for addressing the problem or bringing the performance into compliance. This process should also be a collaborative process and should be aimed at improving the overall supply chain. Even if a supplier’s performance is acceptable, the company may wish to invest time and resources in developing suppliers and improving suppler performance. If the problem is too severe, cannot be fixed in a timely manner, or poses too great of a risk,

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the company may wish to stop doing business altogether with the supplier. This means that the company should carefully find an alternative source of supply and, if possible, reduce its reliance on the supplier in question. Emmett and Crocker (2009) and Dust et al. (2010) also propose using such criteria for evaluating the performance of suppliers. Interestingly, the interviews revealed that many companies have created subcriteria of Q-C-D-SF according to their own needs. Regarding the question of how often manufacturing companies in the European transportation industry measure supplier performance, what they do internally with the data and how they communicate the results to suppliers, several different answers were given. In the best case, data was updated on a weekly basis and made available to suppliers through a web-based tool. Concerning the evaluation of supplier performance, all interviewees outlined three to four categories, like traffic lights: • Category 1 (green): acceptable with minor deviations and without conditions • Category 2 (yellow): acceptable with conditions • Category 3 (red): not acceptable In category 1 (green), the evaluation is approved and accepted with minor deviations. In category 2 (yellow) the evaluation is accepted with conditions. Conditional acceptance means that any subsequent action plan has to be approved by the supply management department. If a supplier shows severe deficiencies and is categorised three (red), the evaluation is not accepted. This can mean that a new supplier is not allowed to supply parts. In cases where category 3 is measured during serial production, specific supply management actions (e.g. management escalation, supplier audits, dual-sourcing) might be the consequence. Some of the challenges associated with supplier evaluation may be mitigated by the use of appropriate tools. For simple projects a spreadsheet can be used. But as evaluations become more complex or more frequent data management and data integrity issues become significant. Web Electronic RFP/Tendering systems are often used for initial selection projects. Some products provide functionality for combining both initial selection and ongoing evaluation and benchmarking. Without few exceptions, there is no evaluation model which considers the maturity and level of relationship with suppliers (Helmold, 2021). The doctoral thesis “Establishing a best practice model of supplier relationship management (SRM) for multinational manufacturing companies in the European transportation industry” makes suggestions for this aspect (Helmold, 2021). There is also an M.B.A. thesis available, which includes the assessment of the Guanxi for supply management in China (Lee, 2015). Wider, within established supply management evaluation methodologies, the Carter 10C’s model is an internationally recognised approach (Emmett & Crocker, 2009). This model looks at aspects which should be evaluated before contracting and as part of the ongoing supplier performance appraisal. The ten categories can be summarized as the following:

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• Capacity (Does the organization have the capacity and capability to deliver the order) • Competency (Is the organization, its people or its process competent) • Consistency (Does the organization produce a consistent output) • Control of process (Can the organization control its process and offer flexibility) • Commitment to Quality (Does the organization effectively monitor and manage quality) • Cash (Has the organization got a strong enough financial base) • Cost (Is the product or service offered at a competitive price) • Culture (Are the supplier and buyer cultures compatible) • Clean (is the organization ethical, funded legitimately, doesn’t engage Child labor) • Communication efficiency (Does the organisation have support technology of information integration) to support collaboration and co-ordination in the supply chain.

9.3.4

Control Via Supplier Dashboard or Cockpit

A supply or supplier dashboard (or cockpit) provides management with an at-aglance awareness of the status of certain performance indicators such as inventory and supply operations (see Fig. 9.5). Thus, it is possible to respond to challenges before any incident is happening. The supplier dashboard is showing key operational indicators and trends like NCG, OTD, Outgoing Quality and sub-supplier performance. Indicators can vary from case to case.

Fig. 9.5 Supplier dashboard. (Source: Helmold & Terry, 2016)

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A supplier dashboard or supplier cockpit is a one page summary of the supplier’s critical performance indicators as shown in the example above. The dashboard is supposed to give managers a quick overview of detoriations and status on quality, delivery or other critical issues. It enables the supply manager to take immediate actions based on a graphs or a colouring.

9.3.5

Supply Risks

Supply disruptions are defined as “unplanned and unanticipated events that disrupt the normal flow of goods and materials within the supply chain”. They distinguish between coordination risks and disruption risks. Supply chain complexity is described by Adenso-Diaz et al. (2012) as “the sum of the total number of nodes and the total number of forward, backward and within-tier material flows” in the upstream supply chain network. Such complexity has a huge impact on supply chain reliability and supply chain stability. The overall recommendation made in several papers is to reduce the number of suppliers, since supply chain complexity increases the risk of disruption (Christopher & Peck, 2005). Adenso-Diaz et al. (2012) highlighted the definitions of various authors, using a variety of criteria: (1) function (Harland et al., 2003), (2) type of risk (Spekman & Davies, 2004), (3) drivers of risks (Chopra & Sodie, 2004) and (4) likelihood of occurrence (Cox & Townsend, 1998). While the literature on supply management and risk management is growing, there is no organized structure regarding the sources of causal factors for supply chain risks and supply disruptions. Several papers show that supply disruptions can lead to high monetary recovery cost, waste and sharp decreases in sales as pointed out in one of the previous sections by Haslett (2011), Jing (2011), and Grant (2010). As well as findings in literature other sources such as field research, internal reports and interviews display, that supply disruptions have severe impacts on companies in the analyzed European transportation industry. Supply disruptions and their associated risks have been classified in the literature using a variety of criteria, e.g. function (Harland et al., 2003; Christopher & Peck, 2004), type of risk (Spekman & Davis, 2004), drivers of risk (Chopra & Sodhi, 2004). Hendricks and Singhal (2005), pointed out that enterprises without operational slack and redundancies in their supply chains experience negative stock effects. They also revealed the tremendous impacts of supply chain disruptions on stock price performance and shareholder value. Causal factors for supply disruptions are automatically associated with risks in the supply network, as stated by Zsidisin (2003), Tomlin (2006) and Wieland and Wallenberg (2012). Several authors outline incidents in which supply disruptions caused production standstill or temporary stops in manufacturing companies in the European industry (Tomlin, 2006). Other authors refer to capacity management in terms of supply disruptions as being a crucial risk factor for supply chain discrepancies. Due to such risks, specific measures are necessary in terms of overcoming potential supply disruptions caused by supplier capacity shortages (Hittle & Leonard, 2011). Mitigations and preventive measures

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can take the form of diverse capacity management, back-up equipment or alternative manufacturing locations, as recommended by Hittle and Leonard (2011). It is useful to compare the supply chain strategies of companies and their resulting ability to cope with some of the abovementioned disruptions. Zsidisin (2003) and Rao and Goldsby (2009) created models which can be used by managers to measure and assess the vulnerability of their company and supply chain in relation to the associated risks. Typology may also provide avenues for future research and thus guide practitioners in the management of their supply chain risk portfolio. Such a classification is a useful tool for supply chain managers in differentiating between independent and dependent variables and the mutual relationships which would help them to focus on those key variables that are most important for effective risk minimization in a supply chain (Nishat & Ravi, 2006). Zsidisin typologized causal factors for supply disruptions into different categories—high, medium and low risk—based on managerial perception (Zsidisin, 2003). Other authors besides Zsidian have built on this typology and outlined causal factors for supply disruptions as follows, which comprise the: • • • • • • • • • • •

capacity shortages new product launches disaster issues (e.g. earthquake, flood) lack of supply chain transparency labour-related issues (e.g. strike) constraints on market capacity pricing instabilities quality discrepancies transport issues product transfers to sites or plants inflexible production capacities

9.3.6

Method of Evaluation

Once a company has decided what it is going to evaluate, the next step is to establish how it will evaluate the performance of the supplier. There are many ways to do this and some are more costly, time consuming, and resource intensive than others. By quantifying the level of risk and the projected benefit of a method of evaluation, company personnel can determine the most appropriate method or combination of methods that should be used (Figs. 9.6 and 9.7). Some methods that companies commonly use to evaluate and measure supplier performance include: • • • • •

Site visits by cross functional teams Supplier audits (process, special process or product audits) Paper supplier questionnaires Web based supplier questionnaires Organizing existing data

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Strategic Relevance of Commodity

High

9.3 Managing the Supply Side

Outsourcing Buy

Own Operations Make

(Partnerships)

(Concentration)

Low

Make oder Buy

Low

Outsourcing Buy

Own operations Make

(Using Market Potential)

(Partial Outsourcing)

Own Capabilities and Abilities

High

Fig. 9.6 Make or buy strategy. (Source: Author’s source)

Fig. 9.7 Advantages and disadvantages of make and buy strategies. (Source: Author’s source)

• • • • •

Internal questionnaires Requiring external certifications Developing own certifications Third party reviews Phone call with a supplier

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• Independent ratings • Contacts with other supplier customers

9.4

Case Study: Apple’s Outsourcing Strategy

Apple’s commercial triumph rests in part on the outsourcing of its consumer electronics production to Asia. Drawing on extensive fieldwork at China’s leading exporter, the Taiwanese-owned Foxconn, the power dynamics of the buyer-driven supply chain are analysed in the context of the national terrains that mediate or even accentuate global pressures. Power asymmetries assure the dominance of Apple in price setting and the timing of product delivery, resulting in intense pressures and illegal overtime for workers. Responding to the high-pressure production regime, the young generation of Chinese rural migrant workers engages in a crescendo of individual and collective struggles to define their rights and defend their dignity in the face of combined corporate and state power. As the principal manufacturer of products and components for Apple, Taiwanese company Foxconn currently employs 1.4 million workers in China alone. Arguably, then, just as Apple has achieved a globally dominant position, described as ‘the world’s most valuable brand’ (Brand Finance Global 500, 2013), so too have the fortunes of Foxconn been entwined with Apple’s success, facilitating Foxconn’s rise to become the world’s largest electronics contractor (van de Pijl, 2015). Figure 9.8 shows the employees and the location of factories in China for Apple iPhone and iPad production.

Fig. 9.8 Foxconn’s manufacturing sites for Apple

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References Adenso-Diaz, B., Mena, C. H., Garcia, S., & Liechty, M. (2012). Supply chain management: The impact of supply network characteristics on reliability. Supply Chain Management, 17(3), 1–36. Christopher, M., & Peck, H. (2004). Building the resilient chain. International Journal of Logistics Management, 15(2), 1–5. Dyer, J. H. (1996). Specialized supplier networks as a source of competitive advantage: Evidence from the auto industry. Strategic Management Journal, 17(4), 271–291. Gürtler, B., & Spinler, S. (2010). A network-oriented investigation of supply risk and implications to supply risk monitoring. International Journal of Production, 12, 1–27. Helmold, M., Dathe, T., Hummel, F., Terry, B., & Pieper, J. (2020). Successful international negotiations. A practical guide for managing transactions and deals. Management for professionals. Springer. Hittle, B., & Leonard, K. M. (2011). Decision making in advance of a supply chain crisis. Management Decision, 49(7), 1182–1193. Hofbauer, G., et al. (2012). Lieferantenmanagement. Die wertorientierte Gestaltung der Lieferbeziehung (2nd ed.). Oldenbourg Verlag. Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. Free Press. Trkman, P., & McCormack, K. (2009). Supply chain risks in turbulent environments—A conceptual model for supply chain network risk. International Journal of Production Economics, 119 (2), 247–258. Zsidisin, G. A. (2003). Managerial perceptions of supply risk. Journal of Supply Chain Management, 39(1), 14–25.

Management Objectives, KPI and OKR

10

Quality is everyone’s responsibility. Edwards Deming

10.1

The Performance Management Cycle

Performance Management (PM) must be an integral part of any enterprise and organization. Performance Improvements and permanent adjustments are important factors for the successful implementation of lean structures. Performance Management therefore integrates a cycle from performance measurement and analysis (Plan), the performance action and implementation (Do), the Performance Management Controlling (Check) and the Performance Improvements and adjustments (Act) as illustrated in the lean performance management cycle in Fig. 10.1. The figure shows the lean performance management cycle as an iterative and continuous process for the control and improvement of processes, products or services. The original P-D-C-A four step framework is also known as Deming circle. PM is a basic and efficient methodology. It portrays the administration of enterprises, processes, HR, divisions, and associations to ensure that objectives and destinations are being reached. The objectives and destinations are gotten from client’s desires which are the bases of the key mission and vision in an endeavour. Performance measurement and the administration must be executed over the whole value chain and applies to all functions and department. PM reaches from the upstream value chain over the operation to the downstream supply chain management. Performance management involves defining what effective performance looks like, as developing the tools and procedures necessary to measure performance. The overall goal of performance management is to ensure that the organization and all of its subsystems (processes, departments, teams, employees etc.) are working together in an optimum fashion to achieve the results desired by the organization.

# The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_10

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Tier 2

Management Objectives, KPI and OKR

Tier 1

Tier 1

Tier 2

Performance Management

Supplir Supplier Supplier

Supplier

Customer

Customer

Supplier

Customer

er Supplier

Supplier

Services

Supplier Supplier

Customer

Operations

Supplier

Products

Supplier

Customer

Customer Customer

Supplier Supplier

Supplier

Supplier Value Chain or Supply Chain Management (SCM) Upstream Supply Chain Management or Supply Side

Downstream Supply Chain Management or Demand Side

Fig. 10.1 Performance management cycle. (Source: Author)

Performance management can be done externally (e.g. measurement by customers, by shareholders or analysts, measurement of supply base) and internally (management of organization). PM must include the entire value chain and all elements including USCM, Operations, DSCM and support Functions like finance, logistics, human resources (HR) or information technology (IT). Purely financial PM is not successful, so that all stakeholders and functions have to integrate and collaborate in order to achieve the excellent performance. The key questions related to performance management are (Fig. 10.2): • • • • • •

What is performance management? Where do I measure performance? What do I measure? How can I measure performance? When do I measure performance? How can I improve the performance?

Enterprises must aim for PM excellence. Permanent measurement and improvements are crucial activities by top management. PM is a core activity and must be purs by all departments. In addition, there are certain characteristics of PM that can be described as follows: 1. PM has to be executed over the entire value chain from the upstream over the operation to the downstream supply chain management 2. PM is a structural and systemtic approach in enterprises and organizations 3. PM must be coordinated and implemented by top management

10.2

Performance Excellence

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Fig. 10.2 Performance management across the value chain. (Source: Author)

Performance Adjustment and Improvements

Performance Measurement and Analysis

(Act)

(Plan)

Performance Controlling and Management

Performance Action and Implementation

(Check)

(Do)

4. PM deals with enterprises, processes, employees, departments, and organizations 5. PM is using tools, mechanics and procedures necessary to measure performance (BSC, Audits or EFQM) 6. PM goals and objectives to perform efficiently and effectively 7. PM goals are relevant to customer and stakeholder expectations 8. PM goals and objectives are derived from customer’s (and stakeholder) expectations which are the bases of the strategic mission and vision 9. PM uses qualitative and quantitative measurables and key performance indicators (KPI) 10. PM strives for excellence and permanent improvements

10.2

Performance Excellence

Performance excellence can be defined as achieving and maintaining outstanding and superior levels of performance that meet and exceed the expectations of the stakeholders. There is a huge number of stakeholders for any business or enterprise and to be assessed as excellent these enterprises have to be achieving an outstanding level of performance for all of their different stakeholders; employees, customers, shareholders, owners, the wider community. To achieve sustained and superior levels of excellence, it is mandatory for enterprises and organisations to permanently assess the situation and to strive for improvement by initiating continuous improvement programmes like the Toyota production system or excellence models.

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Performance Management World Excellence Leader Performance Management Industry Best Practice Leader 1 2 3

4

Performance Management Maturity Leader

Performance Management Standard User

5

Performance Management Starter (Awareness)

6

Performance Management Laggard

Fig. 10.3 Lean management excellence. (Source: Author’s own figure). (Source: Author’s source)

Excellence model allows the management of enterprises and organisations to understand the cause and effect relationships between what their organisation does (actual performance), the enablers, and the results it achieves in comparison to set objectives (plan). The model comprises three integrated components. Fundamental excellence concepts underlie principles that form the foundation for achieving sustainable excellence in any organisation. These principles can be described as: • • • • • • • •

Adding value for customers Creating a sustainable future Harnessing creativity and innovation Managing with agility Developing organisational capability Leading with vision, inspiration and integrity Succeeding through the talent of people Sustaining outstanding results

The goal of any excellence initiative and programme must therefore be to achieve world-class excellence as illustrated in Fig. 10.3. The system, developed by Dr. Marc Helmold, is similar to the German school grading system (1 ¼ very good, 5 ¼ failed). Companies usually start as so-called “laggards” (Level 6). A laggard can be defined as organisation that falls behind similar companies in the same industry. After the laggard the starter is coming (5) The next level then is a “standard” performance (Level 4). Standard means in this context that enterprises have an average performance level in a certain sector. The next level is “maturity” in performance including

10.4

Objective Key Results (OKR)

117

some best practices (Level 3). After the maturity organisations will achieve the “industry excellence” (Level 2) level. In this level, performance is outstanding within the industry. The last and highest level is the world class excellence level, in which organisations are benchmarks in terms of excellence on a global scale (Level 1).

10.3

Key Performance Indicators (KPI)

Key performance indicators (KPI) are a set of quantifiable measures that a company uses to gauge its performance over time. These metrics are used to determine a company’s progress in achieving its strategic and operational goals, and also to compare a company’s finances and performance against other businesses within its industry. A Key Performance Indicator (KPI) is a measure of your performance against key business objectives. High-level KPIs may focus on the overall performance of the enterprise, while low-level KPIs may focus on processes or employees in departments such as sales, marketing or a call center.

10.4

Objective Key Results (OKR)

The OKR system is a performance tool that sets, communicates, and monitors goals in an organization so that all employees work together in one direction. The development of OKRs is generally attributed to Andy Grove the “Father of OKRs”, who introduced the approach to Intel during his tenure there and documented this in his 1983 book “High output management”. Objectives and Key Results (OKR) is a popular leadership process for setting, communicating and monitoring quarterly goals and results in organizations. The goal of OKRs is to connect company, team and personal objectives in a hierarchical way to measurable results, making all employees work together in one unified direction. By using the SMART-objective methodology. OKRs consist of a list of three to five high-level objectives. Under each objective then usually three to five key measurable results are listed. Each key result has a progress indicator or score of 0–100% or 0–1.0 that shows its achievement. The advantages can be outlined as follows: • individual Goal focused company alignment: align with your leadership team on top priorities and highest levels • leverage activities each quarter • fit Objectives into company vision, mission, and values to motivate your company with purpose • visibility into company, department and progress, wins, and road blocked areas. KPIs are important for the plant floor because they are highly effective for exposing, quantifying and visualizing Muda (the Lean term for waste); and they are also highly effective motivators. The essence of Lean manufacturing and the

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Management Objectives, KPI and OKR

central theme of the Toyota Production System are to eliminate waste—to relentlessly eliminate all activities that do not add value for your customer. Effective KPIs quantify waste; provide an early warning system for processes operating outside the norm; and offer important hints to where improvement efforts should be focused. KPIs also function as very effective motivators. Motivation theory is a complex field with many diverse opinions. However, there is wide agreement that a central key to effective motivation is setting challenging but attainable goals (e.g. SMART goals, which are Specific, Measurable, Achievable, Realistic and Time-specific). SMART goals are ideal candidates for plant floor KPIs.

10.5

Case Study: Microsoft’s Strategy and Objectives

Fiscal year 2019 was a record-breaking year for Microsoft. The achieved more than $125 billion in revenues and $43 billion in operating income and more than $50 billion in operating cash flow (Microsoft, 2019) The enterprise returned more than $30 billion to its shareholders. The commercial cloud business is the largest in the world, surpassing $38 billion in revenue for the year, with gross margin expanding to 63%. Consumers, students, teachers, and more than two billion first line workers around the world are using Microsoft products. The mission statement to empower every person and every organization on the planet to achieve more is one of the key elements in the strategy of Microsoft. Microsoft IT platforms and tools enable small businesses to be more productive, multinationals to be more competitive, non-profit organisations to be more effective, and governments to be more efficient. At present, Microsoft is a technology company, and every organization will increasingly need to build its own proprietary technology solutions to compete and grow. The organization embraces this approach to adopt best-in-class software and services but also build their own digital capability. Computing is becoming embedded in the world, in every place and everything. This era of the intelligent cloud and intelligent edge is shaping the next phase of innovation, powering intelligent systems and experiences that previously would have been unimaginable, and transforming nearly everything around us. Across Microsoft’s businesses, we are innovating to empower our customers, and investing in large and growing markets to help them digitally transform. Applications and Infrastructure: In a world where every company is a digital company, developers will play an increasingly vital role in value creation and growth across every industry, and GitHub is their home. Since the acquisition of GitHub last fall, growth has accelerated. Today it’s used by more than 40 million developers, including those who work at the majority of the Fortune 50. Microsoft is building Azure as the world’s computer, addressing customers’ real-world operational sovereignty and regulatory needs. Today, 95% of the Fortune 500 trust Azure for their mission-critical workloads. Data and AI: The variety, velocity, and volume of data is increasing—with 50 billion connected devices coming online by 2030, more than double the number today—and Azure is the only cloud with limitless data and analytics capabilities

10.5

Case Study: Microsoft’s Strategy and Objectives

119

across our customers’ entire data estate. We brought hyperscale capabilities to our relational database services for the first time this year, and we offer the most comprehensive cloud analytics—from Azure Data Factory to Azure SQL Data Warehouse to Power BI. The quintessential characteristic for every application going forward will be AI, and we believe it cannot be the exclusive province of a few companies or countries. That’s why we are democratizing AI infrastructure, tools, and services with Azure Cognitive Services, so any developer can embed the ability to see, hear, respond, translate, reason, and more into their applications. Azure Cognitive Services is the most comprehensive portfolio of AI tools available, and this year, we added new speech-to-text, search, vision, and decision capabilities, as well as updates to Azure Machine Learning to streamline the building, training, and deployment of machine learning models. Business Applications: Dynamics 365 uniquely enables any organization to create digital feedback loops that take data from one system and use it to optimize the outcomes of another, enabling any business to become AI-first. This year, we introduced Dynamics 365 AI, a new class of AI application built for an era where systems of record and engagement are converted into intelligence. And the Open Data Initiative we launched with Adobe and SAP last fall takes this even further, delivering on our vision to enable data to be exchanged and enriched across systems to provide unparalleled business insight. Microsoft is enabling our customers to digitize not only their business processes but to bridge the physical and digital worlds with our investments in mixed-reality cloud. The new HoloLens 2 is the most advanced, intelligent edge device available, offering two times the field of view and three times the comfort as the previous version. And, together with Dynamics 365 and new Azure mixed-reality services, it enables organizations to digitize physical spaces and interactions and empower their firstline employees with the right information at the right time, in the context of their work. LinkedIn now has more than 645 million members and is the most comprehensive solution for every organization to manage and engage their most important resource—their talent. Our Talent portfolio—from Talent Solutions and Talent Insights, to employee engagement with Glint and LinkedIn Learning—enables every organization to attract, retain, and develop the best talent in an increasingly competitive jobs market. Modern Workplace: Microsoft 365 empowers everyone—enterprises, small businesses, and firstline workers—with an integrated, secure experience that transcends any one device. We are helping every business build out their system of communication and collaboration to drive their productivity as well as their business transformation. We are infusing AI across Microsoft 365 to enable new automation, prediction, translation, and insights capabilities. Meetings are more inclusive in Microsoft Teams, presentations more accessible in PowerPoint, videos more searchable in Stream, and emails more relevant in Outlook. And with Workplace Analytics and Microsoft Search, we distill knowledge and insights from data to help people work smarter, not longer. Office 365 Commercial has 180 million users.

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Management Objectives, KPI and OKR

Our EMS install base exceeded 100 million. And the Outlook apps on iOS and Android also surpassed more than 100 million users for the first time. Microsoft Teams had a breakout year with more than 13 million daily active users and 19 million. Gaming: In gaming, Microsoft is pursuing our expansive opportunity to transform how games are distributed, played, and viewed. Our new breakthrough game streaming technology, Project xCloud, will enter public trials this fall. It will put gamers at the center of their gaming experience, enabling them to play games in high-fidelity wherever and whenever they want, on any device. Microsoft Game Stack brings together our tools and services to empower game developers—from independent creators to the biggest game studios—to build, operate, and scale cloud-first games across mobile, PC, and console. Our growing Xbox Live community is key to our approach, and for the first time we are enabling developers to reach these highly engaged gamers on iOS and Android. Finally, we increased our first-party game studios to 15 this year to deliver differentiated content for our fast-growing subscription services like Xbox Game Pass, which is now available on both console and PC. CSR: Beyond these three pillars, we are working to foster a sustainable future where everyone has access to the benefits and opportunities created by technology. As a reflection of the importance we place on advancing environmental and social progress, Microsoft’s board of directors has a Regulatory and Public Policy Committee that works together with me, my leadership team, and others across Microsoft to oversee our commitments to environmental sustainability and corporate social responsibility. No single company is going to solve macro challenges like climate change alone, but as a global technology company, we are well-positioned to enable and accelerate digital transformations that lead to a low-carbon future. That is why we are stepping up our commitment. Over the past year, we expanded our work through our operations, investments, partnerships, and advocacy across initiatives spanning both environmental and social responsibility. We continue to operate carbon neutral across our worldwide operations, driven by an internal carbon tax, as we have every year since 2012. And we’ve taken new steps over the past year to align our carbon-reduction efforts with the latest climate science by setting a goal to reduce our operational emissions by 75% by 2030, which puts us on a path to exceed the ambitions of the Paris Accord two decades ahead of schedule. This year, we raised our carbon fee to $15 per metric ton, a near doubling of the previous fee, to put sustainability at the core of every part of our business. We’re also extending our carbon reduction targets beyond our own operations. We will cut carbon emissions by 30% across our global supply chain by 2030. And in October, we extended our carbon-neutrality commitment to our products and devices with a pilot to make 825,000 Xbox consoles carbon neutral. We are committed to ensuring our datacenters are among the most sustainable in the world. By the end of this year, we will achieve our target of powering our datacenters with 60% renewable energy and will aim to reach 70% renewable energy within the next 4 years. In fact, when I was in Sweden this spring, we announced our

References

121

plans to build some of the most advanced and sustainable datacenters to date, powered from 100% renewable energy and with zero-waste operations. And, we are also working with our customers and partners to help them use technology to reduce their own environmental footprints and create their own solutions for a more sustainable planet. Our AI for Earth program, as an example, has expanded access to massive environmental data sets that can help others generate valuable insights about the health of our planet, including the conditions of our air, water, land, and the well-being of our wildlife. And it supports organizations that are applying AI to environmental challenges, by helping them harness the full power of cloud computing. We are working with organizations around the world to enable young people— including those who identify as female and under-represented minorities—with the digital skills required for the future. For example, we are the largest funder of Code. org, which teaches coding skills and reaches students in almost every country. We know that there is a broadband gap, and that’s why, in the U.S., our Airband program is using a mixed-technology approach, including TV whitespaces, to connect three million people living in unserved rural areas to broadband by 2022. And we’re working in more than 20 countries, harnessing this same technology to bring broadband to rural communities elsewhere. We also know that access to affordable housing is a significant barrier for many, and this year, we launched a major initiative to expand housing options for people who work in the Puget Sound region where we are headquartered. We believe that everyone should be able to choose to live in the community where they work, not just our employees and business partners, but all those who serve the broader community, from teachers and small-business owners, to first responders and medical practitioners. It’s why we are putting $500 million to work in loans and grants to accelerate the construction of more affordable housing in the region. Finally, more broadly, we’ve expanded our support for the non-profit sector. We work closely with nonprofit organizations to help them accelerate their organizational transformation with technology, and, in fiscal 2019, Microsoft donated or provided discounted software and services worth more than $1.5 billion via Microsoft Philanthropies. Our employees generously donated an additional $170 million (including company match) through our employee giving program to support non-profits in local communities around the world.

References Microsoft. (2019). www.microsoft.com

Financial Management Tools

11

Persistence is the twin sister of excellence. One is a matter of quality; the other, a matter of time. Marabel Morgan

11.1

Financial Crisis Prevention and Crisis Symptoms

Financial distress or related financial emergency is a term in Finance is a situation in which an organization faces extreme budgetary issues and battles in satisfying money related commitments, for example obligations, credit installments (GablerWirtschaftslexikon, 2018). The term is utilized to show a condition when guarantees to loan bosses of a company are broken or respected with trouble. In the event that money related misery can’t be relieved, it will ultimately prompt indebtedness. Financial distress is typically associated with certain expenses to the organization. These are known as expenses of financial distress. Financial distress refers to a condition in which a company cannot meet, or has difficulty paying off, its financial obligations to its creditors, typically due to high fixed costs, illiquid assets, or revenues sensitive to economic downturns. Recent examples like the company Jack Wolfskin show that companies must anticipate and prevent a situation, which puts the company under stress (Handelsblatt, 2017). A financial crisis can be prevented and involves immediate actions and related negotiations with stakeholders like banks, employees, suppliers or investors. A company under financial distress can incur costs related to the situation, such as more expensive financing, opportunity costs of projects, and less productive employees. Employees of a distressed firm usually have lower morale and higher stress caused by the increased chance of insolvency, which threatens them to be forced out of their jobs. There are often alarm signals indicating the upcoming crisis as outline by various authors (Müller, 1986). Alarm signals like decreasing revenues, high operating cost and low profits usually indicate that a company is not in a good financial health situation. Struggling to reach profitability targets over a longer period indicates a business cannot sustain itself # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_11

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Financial Management Tools

Phase 1

Phase 2

Long-term

Medium-term

Phase 3

Phase 4

Short-term

Insolvency

Starting point

Strategic crisis

weak

Profitability crisis

medium

Liquidity Crisis

Space for action

Neeed for actions

Impacts on actions

strong

Crisis symptoms Fig. 11.1 Phases to financial insolvency. (Source: Helmold et al., 2019, adapted from Müller’s four phases model. Müller, 1986)

from internal funds and needs to raise capital externally. This raises the company’s business risk and significantly lowers its credit rating with banks, lenders, suppliers or investors. Limiting access to funds typically leads to liquidity issues and results often in a company failing as shown in Fig. 11.1 (Four phases model of Müller; Müller, 1986). Poor sales growth or decline indicates the market is not positively receiving a company’s products or services based on its business model. When extreme marketing activities result in no growth, the market may not be satisfied with the offerings, and the company may close down. Likewise, if a company offers poor quality in its products or services, consumers start buying from competitors, eventually forcing a business to close its doors. When debtors take too much time paying their debts to the company, cash flow may be severely stretched. The business may be unable to pay its own liabilities. The risk is especially enhanced when a company has one or two major customers. Müller describes four phases (see Fig. 11.1) from a strategic crisis, the profitability crisis, the liquidity crisis to the insolvency (Müller, 1986). The four phases of a financial crisis are described Müller by the strategic crisis, the profitability crisis, the liquidity crisis and the insolvency. Müller describes the strategic crisis as threat to the potential and substance of a company, which occur due to inadequate strategies in terms of differentiation, knowledge, innovation or cost advantages. In this strategic phase, market needs and elements are not fully taking into account, so that the foundation of the company is gradually weakening. In this situation, the symptoms are weak, the corrective actions are long-term and the need for actions is rather low compared to the following phases (Müller, 1986). The strategic phase is followed by the profitability crisis, which is characterised by signs of a weak financial performance in terms of revenues, cost, cash and profitability. Signs in this phase are stronger, often resulting in a loss, struggling to achieve targeted financial ratios or non-achievement of profit targets. The third phase is the liquidity crisis, in which a company is not capable of meeting its financial obligations anymore. This situation is severe as the cash situation and balance is

11.2

Restructuring and Financial Restructuring

125

not sufficient to pay the debts. As the credit rating decreases in this phase, companies tend to borrow money with higher interest rates or to prolong payments to suppliers, employees or banks where possible. The last phase of the model by Müller is the insolvency (Müller, 1986). Insolvency is the state of being unable to pay the money owed, by a person or company, on time. Those companies in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency. Cash-flow insolvency is when a person or company has enough assets to pay what is owed, but does not have the appropriate form of payment. For example, a person may own a large house and a valuable car, but not have enough liquid assets to pay a debt when it falls due. Cash-flow insolvency can usually be resolved by negotiation. For example, the bill collector may wait until the car is sold and the debtor agrees to pay a penalty. Balance-sheet insolvency is when a company does not have enough assets to pay all of their debts. The person or company might enter bankruptcy, but not necessarily. Once a loss is accepted by all parties, negotiation is often able to resolve the situation without bankruptcy. A company that is balancesheet insolvent may still have enough cash to pay its next bill on time. However, most laws will not let the company pay that bill unless it will directly help all their creditors. For example, an insolvent farmer may be allowed to hire people to help harvest the crop, because not harvesting and selling the crop would be even worse for his creditors. In some jurisdictions, it is illegal under the insolvency laws for a company to continue in business while insolvent. In others (like the United States with its insolvency law and this chapter provisions), the business may continue under a declared protective arrangement while alternative options to achieve recovery are worked out. Increasingly, legislatures have favoured alternatives to winding up companies for good. The major focus of modern insolvency legislation in many countries and business debt restructuring practices no longer rests on the liquidation and elimination of insolvent entities but on the remodelling of the financial and organizational structure of debtors experiencing a financial crisis so as to permit the rehabilitation and continuation of their business. This is known as restructuring, business turnaround, financial crisis mitigation or business recovery. Implementing a business restructuring plan includes various measures and can be described.

11.2

Restructuring and Financial Restructuring

11.2.1 Definition of Restructuring Restructuring or financial turnaround actions (mitigations) are sets of corporate activities taken when significantly modifying the debt, operations or structure of a company as a means of potentially eliminating financial harm and improving the business. These mitigations require communication and negotiations with all affected stakeholders as outlined by Helmold. When a company is having trouble making payments on its debt and financial commitments, it will often restructure to pay its debts and to improve financial and operational performance. A company restructures its operations or structure by cutting costs, such as payroll, operations,

126 Fig. 11.2 Restructuring ways for financial turnaround. (Source: Author’s own figure)

11

Strategic

restructuring

Financial Management Tools

Restructuring for profit improvement Financial turnaround

Structural restructuring

Financial restructuring

supplier’s cost, or reducing its size through the sale of assets. Restructuring is often linked to external experts who help the company to restructure its operations, performance and financials. Restructuring means to have the appropriate actions and leads to many discussions and negotiations with stakeholders like employees, suppliers or customers to fundamentally improve the financial situation of a company. Due to the vital significance, restructuring plans must be designed, executed and controlled by top management. Restructuring involves top management and negotiations with stakeholders. Source adapted from Helmold et al. (2019). The four types of restructuring can be outlined as shown in Fig. 11.2: • • • •

Strategic restructuring Structural restructuring Restructuring for profit improvements Financial restructuring

11.2.2 Strategic Restructuring Strategic restructuring is the fundamental change of the structure, business model and basis of the company. It involves the questioning and reformulation of mission, vision and long-term strategic objectives. Actions of strategic restructuring often involve the assessment of existing business models and the redefinition of the strategic pyramid including mission, vision and strategic objectives. The aim is to gain and secure a sustainable position at existing or new markets. Actions in this strategic restructure can be the shift into new business models, expansion into new business regions or to enter new markets. Actions in restructuring necessitate also the deletion of unfavourable cost structures and production lines. Moreover, it can include the relocation of existing manufacturing location to overseas countries. Finally, the concentration on core competencies, the cancellation of unimportant customer niches and the stoppage of costly product lines are effective actions in strategic restructuring. Example: Mannesmann AG, a former engineering and steel

11.2

Restructuring and Financial Restructuring

127

trading company, had diversified into wireless communication in the 1990s and fixed-line phone service, redesigning its strategic portfolio and strategy. Mannesmann could hence increase its value significantly and was later merged with Vodafone. Another example are super market chains like REWE in Germany, which entered the other business areas (discount, specialist and deliver service area or tourism and travel, thus increasing business and wealth).

11.2.3 Structural of Restructuring Structural restructuring targets the structure of a company and has an impact on organisation and the existing structure. Aligning the organisation and re-align operations lead to more efficient and effective processes (often central, decentral or a hybrid form) with smoother roles and responsibilities. Structural restructuring is often pursued from a polycentric management towards a matrix organisation and requires systematic and suitable information systems and controlling structures. Example: Volvo Truck re-aligned is organisation to a brand-centric organisation, thus improving efficiency and effectiveness. Restructuring for profit improvements target the revenues and expenses. Actions comprise anything that will increase revenues like a special sales programme, increased focus on cash cows in sales or deletion of unprofitable products or services. In addition, the company will take drastic actions in order to minimise expenses and cost. Companies are often tackling cost drivers like material, personnel or operating cost by global sourcing, outsourcing to shared service centres or the implementation of lean principles. A trend shows that MNC and SME are concentrating on core competencies and outsourcing products, services and activities to foreign companies. Example: The Deutsche Bahn (DB) announced a cost reduction programme by cutting operational cost by 300 million euros from 800 to 500 million euros to drastically improve financial performance. Financial Restructuring includes the fundamental improvement of the financial performance and financial ratios. Activities include assets Improvements, which can be seen in the balance sheet, the review of elements in the profit and loss sheet and cash initiatives. Cash improvements can be realised through pulling ahead customer payments, advanced revenue income and as late as possible outflows of payments to employees, suppliers, banks or other stakeholders (Olfert, 2013, 2015). Late payments to suppliers and other stakeholders can be negotiated through the agreement of extended payment terms (normally from 30 to 60 or 90 days). Example: The Company Zalando introduced an initiative to extend payment terms to suppliers to minimum 90 days in order to improve the cash situation.

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11.3

11

Financial Management Tools

Financial Stability Assessment Tools

11.3.1 Creditreform Creditreform is a large credit agency that collects creditworthiness data from companies of all legal forms as well as from private individuals. The information file has a total of more than 158,000 members. The basic structure of Creditreform has hardly changed since 1879. A company is not a customer of Creditreform, but a member of one of the local Creditreform associations. The business of these registered associations is run by limited partnerships. All Creditreform associations are under the umbrella of the Verband der Vereine Creditreform e. V. with headquarters in Neuss. In 2018 there were 129 regional Creditreform associations in Germany, which have 127,000 member companies as members. Today Creditreform is one of the largest credit agencies with 167 branches and 158,000 members in Europe (Creditreform, 2020).

11.3.2 Creditsafe The credit agency Creditsafe enables you to check in a few minutes whether your business partners can keep their credit commitments. You receive information about the creditworthiness of the business partner at a glance and can thus identify risks at an early stage. In the case of low creditworthiness and therefore risky business, it is recommended to reduce the payment method of customers to prepayment or to replace suppliers with a high risk of default. The underlying scoring system looks at company key figures, which are proven indicators of the financial stability of companies. By using the most advanced statistical methods, the scoring model is able to predict 70% of all bankruptcies as early as 12 months before the onset of insolvency.

11.3.3 VDA-Rating In 2004, the Association of the German Automotive Industry (VDA), together with Prof. Dr. Schneck Rating GmbH has developed a rating standard that not only bears the name Standard, but is now generally accepted in the evaluation of suppliers. This standard is a rating software that was specially developed for the VDA on the basis of the market-leading rating tool R-CockpitTM and allows both a pure financial rating based on balance sheet data and a full rating with qualitative criteria. In March 2006 the second edition of this standard tool, in which technical updates of the rating software were made, was delivered to all members of the VDA.

11.4

Case Study: Insolvency of SolarWorld AG

129

11.3.4 Dun & Bradstreet (D&B) D&B Supplier Risk Manager provides the information and tools you need to monitor supplier relationships and avoid costly disruptions. Based on data and analysis from Dun & Bradstreet, this is the only SaaS solution that provides critical risk indicators for more than 365 million global companies.

11.3.5 Rapid Ratings Rapid Ratings International Inc. is a company that provides financial health information to public and private companies around the world. The company’s analytics system supposedly provides insights into partners, suppliers, suppliers and thirdparty customers. The company’s platform offers financial health ratings and detailed reports to help companies mitigate financial risk. In addition, RapidRatings offers a service for retrieving financial statements from third parties of private companies in order to increase transparency and improve visibility (RapidRatings, 2020).

11.4

Case Study: Insolvency of SolarWorld AG

SolarWorld AG was an international solar power technology group that had previously made high profits and made significant losses in 2011 in the wake of the solar industry crisis. The turnover of SolarWorld AG collapsed in the 2012 financial year from 1.05 billion euros to 606 million euros, which corresponds to a decline in turnover of 40%. The operating loss in 2012 was EUR 492.4 million and the available liquid funds fell from EUR 553.5 million to EUR 224 million. From 2011 to 2012 the situation of SolarWorld AG deteriorated significantly. The previously high profits and high sales increases were interrupted by the crisis in the solar industry in 2011. Due to the sharp drop in sales and the high operating loss, SolarWorld AG is already in the middle of the crisis of success at this point in time. The lower liquid funds point to a possible liquidity crisis. In January 2013, the company announced that it was experiencing severe financial problems due to increasing price wars and purchase commitments for silicon. At this point in time, the company is in a liquidity crisis as the financial situation is very tight. On April 17, 2013 SolarWorld AG announced that in the individual financial statements in accordance with the German Commercial Code (HGB) the equity had been used up and had fallen to a negative value. As explained in the previous part, in this case an application for bankruptcy must be filed. This example shows how a corporate crisis and insolvency can be divided into different phases.

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References Creditreform. (2020). Gabler-Wirtschaftslexikon. (2018). Unternehmenskrise. https://wirtschaftslexikon.gabler.de/defini tion/unternehmungskrise-49331 Handelsblatt. (2017). Finanzielle Zukunft Gläubiger verschaffen Jack Wolfskin Luft für Lieferantenmanagement. Die Lieferantenmanagement über die Zukunft Jack Wolfskin haben begonnen. Um die zu vereinfachen, verzichten die Banken vorerst auf die Rückzahlung von Krediten. Finanzinvestor Blackstone bangt um die Kontrolle des Unternehmens. Handelsblatt. http://www.handelsblatt.com/unternehmen/handel-konsumgueter/finanzielle-zukunftglaeubiger-verschaffen-jack-wolfskin-luft-fuer-Lieferantenmanagement/19247752.html? ticket¼ST-874329-5m5EZ42jWMfXaeA6SVbH-ap2 Müller, R. (1986). Krisenmanagement in der Unternehmung: Vorgehen, Massnahmen und Organisation. Peter Lang Verlag. Olfert, K. (2013). Investition (13th ed.). NWB Verlag. Olfert, K. (2015). Finanzierung (15th ed.). NWB Verlag. RapidRatings. (2020). www.rapidratings.com

Supply Chain Management Tools

12

Quality is not an act. It is a habit. Aristotle

12.1

Supply Chain Segmentation

Every supplier strategy must be based on core elements such as classification, categorization, digitization, in-house or external production, digitization and sustainability. As part of the supplier segmentation, the suppliers are grouped into company-wide classes according to preferred suppliers, alternative, benchmark, market and other suppliers. Preferred suppliers are selected suppliers with excellent performance characteristics in terms of innovation, quality, costs, delivery reliability, sustainability and processes. Preferred suppliers are given preferential treatment and are given specified volumes, order volumes and procurement quotas. Preferred suppliers are usually involved in the development and product creation process of their own company at an early stage. The relationship is based on partnership. Alternative suppliers are suppliers who can be used alongside the preferred suppliers. Alternative suppliers are in the group of bidders, but their performance is not as good as the preferred suppliers in terms of quality, costs, delivery and other characteristics, so they usually only receive smaller volumes and procurement quotas. The alternatives are followed by benchmark suppliers who serve as benchmarks and can be included in the group of bidders. Benchmarking in supplier management is a useful method for the systematic and structured acquisition of information and for the comparison of suppliers based on characteristics such as innovative strength, technological leadership, cost efficiency or quality awareness. Benchmarking is thus a constant creative process to improve the supplier portfolio by determining and comparing the best-known services of existing suppliers and the comparison with new suppliers who show particularly strong performance characteristics (English: benchmark ¼ the best; best practice). By adopting and continuously improving the identified best practice processes, the performance of # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_12

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Cost and Financial Performance Delivery Performance Other (alpha) Performance Objectives

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Supply Chain Management Tools

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Possible Selection (inside bidder pool)

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Fig. 12.1 Supplier segmentation and classification. (Source: Author’s source)

your own area, competitiveness and ultimately customer satisfaction are improved. Seen in this way, a benchmarking project within the scope of a tender offers the possibility of comparison with the best solutions, reveals deficits and weak points, clarifies the need for action and can be used as an ideal tool for the development of new suppliers and constant competition. Benchmarking is not just a comparison of key figures or operations, but is a comprehensive, holistically applicable process analysis for improving performance that can be used for all performance areas and the entire company (Helmold, 2021). The benchmark suppliers are followed by market suppliers and all other suppliers. Market suppliers can be included in the group of benchmark suppliers if their supplier management has been qualified and evaluated. All other suppliers are not taken into account (Helmold & Terry, 2021) (Fig. 12.1).

12.2

Commodity Management

A material or product group or category (English: commodity or category) combines different individual parts or categories in a material group, which are usually made from the same basic material or raw material or can be divided into the same category. The differentiation of material groups can be freely defined and can be relatively coarse or fine, this depends on the respective purpose. Examples of material groups: iron or ferrous metal, copper, plastic, rubber, leather, wood, etc. Other subdivisions are made e.g. according to electrical, mechanical, aluminium or steel. The primary goal for bottleneck materials is to secure the supply. To reduce the supply risk, one should look at the global procurement markets. As a rule, the local markets offer only inadequate sources of supply for shortage materials. By expanding the number of suppliers, the dependency on individual suppliers for

12.3

Make or Buy

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Strategic Partnerships

Strategic Products

Leverage Products

Use Market Power

Bottleneck Products

Uncritical Products

Competition

Operational Sourcing Activities (potentially one full service supplier)

Uncritical Market Segment

Bottleneck Market Segment

Leverage Market Segment

Strategic Market Segment

Fig. 12.2 Commodity strategies. (Source: Author’s source)

bottleneck materials is reduced. The focus is not on the cost of the material, but on securing the supply. Since these are mostly low-value individual parts, product development is not very important. A reduction in the supply risk can be achieved by standardizing bottleneck materials. Figure 12.2 shows the possible material group strategies. This matrix is subdivided into strategic, lever, bottleneck and non-critical material groups and market segments (suppliers). In the case of strategic material groups and market segments, it is advisable to enter into close ties with suppliers. This can take place through collaboration, joint or competitive development projects, collaborations or even company mergers (e.g. founding a new company or a joint venture). For leverage products, companies should bundle volumes and proactively approach potential suppliers in order to achieve the ideal strategy. Purchasing cooperations can also help to gain advantages in the market. In the case of bottleneck products, the strategy must be based on security of needs, so that long-term contracts prove advantageous. Global tenders or substitution are further strategies for ensuring security of supply. For standardized products, on the other hand, it is advantageous to regularly examine the market and exploit the potential. B2B platforms, C-parts management from a single source or the bundling of requirements after a detailed market study (Helmold & Terry, 2021) (Fig. 12.2).

12.3

Make or Buy

A make-or-buy decision addresses the in-house production or external procurement of a product. It’s about producing a product (make) or buying it (buy). The operational function of production is always understood to mean in-house production.

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Goods are manufactured with their own resources, employees, production factors and production processes. In-house production means internalization, i.e. the organization of economic activities and the production of a material group in your own company organization. External production, on the other hand, means that material groups and production volumes are outsourced to suppliers. In the case of external production, there are usually only variable costs. In the case of in-house production, the fixed costs are added. The difference between the two variable cost amounts is used to cover the fixed costs more with each piece (fixed cost degression) until they are completely covered. Strategies and concepts in management must show recommendations for action for companies according to the strategic importance and relevance of the material group on the Y-axis and skills and competencies for developing and manufacturing the material group on the X-axis. Companies must therefore concentrate on their own skills and competencies for the development and production of the material group and prefer a strategy of in-house production (make) in this segment, especially if the strategic importance and relevance of the material group is very high. With the same level of skills and competencies for a product group, but relatively low strategic relevance and value, a hybrid strategy with partial outsourcing can take place. However, companies must ensure that the knowledge for this material group remains in their own company. If your own company does not have competencies in a special material group that is of high strategic importance, we recommend cooperative partnerships with one or a few suppliers (external production or buy). Due to its strategic importance, it is worth pursuing long-term contracts, collaborations or joint project developments with suppliers. With less relevant material groups and no know-how in your own company, the market potential and competition can be fully exploited. The decision to purchase from a third party should therefore be carefully considered. It is therefore important to think about the basic advantages and disadvantages in advance. Some important ones are noted below (Fig. 12.3). The advantages of outsourcing are: • Concentration on core competencies and focusing of activities and resources on one’s own core business • Possibility and opportunity to establish a proactive and preventive supplier management • Reduction of the vertical range of manufacture and transformation towards a lean production structure • Long-term optimization of the cost structure by reducing fixed costs and changing from fixed to variable costs • Improvement of the liquidity situation and, if necessary, improvement of the balance sheet ratios (e.g. by reducing the level of indebtedness if investments for which loans have to be taken out are not made) • Flexible reaction to changes in demand is possible and part of the entrepreneurial risk is shifted to the supplier • Possibility of partnerships and the preservation of innovations that are not in one’s own area of competence

ABC-XYZ Analysis

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Strategic Relevance of Commodity

High

12.4

Outsourcing Buy

Own Operations Make

(Partnerships)

(Conzentration)

Low

Make oder Buy

Outsourcing Buy

Own operations Make

(Using Market Potential)

(Partial Outsourcing)

Low

Own Capabilities and Abilities

High

Fig. 12.3 Make or buy strategies. (Source: Author’s source)

Disadvantages of outsourcing are: • Far-reaching cuts in existing structures in the event of outsourcing and unrest in the workforce • Loss of know-how and personnel with a possibly significant dependence on one provider • Long-term loyalty to suppliers limits flexibility to actively react to market changes • The possibility that trade secrets will not be kept, especially in international business • Increasing coordination effort, especially in logistics and other departments that are involved in the value creation process

12.4

ABC-XYZ Analysis

The ABC-XYZ analysis is a method in supplier management for the classification of material groups according to consumption, value and according to the predictability of the consumption of procurement volumes in a company. The ABC analysis is often combined with the XYZ analysis for the procurement of products, the planning of production quantities and other logistical issues. While the ABC analysis is primarily about the value and importance of customers, products, suppliers or purchased parts, the XYZ analysis analyses their predictability and the possibility

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Value and strategic relevance

Predictability and consumption

X Relatively uniform, low consumption fluctuations. High forecast accuracy, very easy to plan.

Y Inconsistent, absent or rising trend. Seasonal business with fluctuations. Medium prediction accuracy. Can be planned to a limited extent.

Z Inconsistent and absolutely irregular demand. Very low prediction accuracy. Difficult to plan.

A

B

C

High value product or material, mostly low-volume articles. Very high strategic importance.

Medium value product or material, mostly low-volume items. Medium strategic importance.

Low value product or material, mostly lowvolume articles. Low strategic importance.

• High share of value • Planned consumption • Detailed planning • Low or no inventory • Ensure fast availability at the supplier • JIT deliveries

• Average value share • Planned consumption • Detailed planning • Low or no inventory • Ensure fast availability at the supplier • JIT deliveries

• Low value share • Planned consumption • Low capital commitment • Uncritical treatment

• High share of value • Irregular consumption • Detailed planning • Possibly. Create a safety reserve with the supplier • Ensure fast availability at the supplier

• Average value share • Irregular consumption • Detailed planning • Treatment like AY or BY • Ensure availability at the supplier

• Low value share • Irregular consumption • Consumption cannot be planned • Build up safety reserves as long as there is no bottleneck in the warehouse

• High share of value • Chaotic and sporadic consumption • Agree on a safety reserve with the supplier • JIT deliveries

• Average value share • Chaotic and sporadic consumption • Agree on a safety reserve with the supplier • Ensure availability at the supplier • Like AZ or CZ

• Low value share • Chaotic and sporadic consumption • Consumption cannot be planned • Build safety reserves

Fig. 12.4 ABC-XYZ analysis. (Source: Author’s source)

of making forecasts. It is made up of the ABC and the XYZ analysis as shown in Fig. 12.4. The classification looks like this: ABC article • A-Article: High value proportion of approx. 70–80% • B item: Average value share of approx. 15–20% • C-article: low value share of approx. 5–10% XYZ item • X-Articles: Articles with constant demand and high predictive accuracy • Y article: article with fluctuating demand and medium forecast accuracy • Z item: Item with irregular demand and poor forecast accuracy AX and BX articles have a high share of value and can be easily forecast in terms of consumption, as they are subject to uniform consumption. They are therefore relatively easy to control. AZ and BZ articles are to be regarded as problematic. They make up a high proportion of sales, but are difficult to control due to their irregular needs. If too many articles in this category are stored, the storage costs increase. Insufficient storage can lead to bottlenecks in production.

12.7

12.5

Vendor Managed Inventory (VMI)

137

Internationalization Concepts

Supply Chain Management must ensure resilience in international transactions and business. In 2019, German companies imported preliminary products to the value of 606 billion euros, which made up a good 55% of Germany’s total goods imports. Two thirds of the imported primary products came from other EU member states, a further 5.3% and 5.0% from the USA and China. Supplier management must ensure through a clear structure and risk assessment that international supply chains are stable and do not lead to supply bottlenecks. The COVID-19 crisis in particular has shown that strategies for products from the health sector were not sustainable and good, so that supply bottlenecks, e.g. Masks or protective equipment has come.

12.6

Supply Chain Sustainability Management

The primary task of classic supplier management is to create value-adding supply chains based on suitable criteria and strategies. This happens on the basis of the criteria quality, costs, delivery performance and other significant aspects (QCD plus alpha). In times of political unrest, trade in an international context, climate change, stricter environmental guidelines, rising energy prices and enlightened, environmentally friendly consumers, supplier management has a key role in ensuring sustainable supply chains. Studies show: “Sustainability” as an integral part of the value chain offers companies good opportunities to differentiate themselves from the competition and thus increase sales. Sustainable (Fig. 12.5) includes elements such as working conditions, environmental protection, human rights, anti-corruption, social standards, compliance with human rights and respect for intellectual property.

12.7

Vendor Managed Inventory (VMI)

Vendor-managed inventory (VMI) is an inventory management practice in which a supplier of goods, usually the manufacturer, is responsible for optimising the inventory held by a distributor. In traditional inventory management, a retailer (sometimes called buyer) makes his or her own decisions regarding the order size, while in VMI the retailer shares their inventory data with a vendor (sometimes called supplier) such that the vendor is the decision-maker who determines the order size for both. Thus, the vendor is responsible for the retailer’s ordering cost, while the retailer has to pay for their own holding cost. This policy can prevent stocking undesired inventories and hence can lead to an overall cost reduction. Moreover, the bullwhip effect is also reduced by employing the VMI approach in a buyer–supplier cooperation. As replenishment frequencies play an important role in integrated inventory models to reduce the total cost of supply chains which many studies fail to model it in mathematical problems. A third-party logistics provider can also be involved to make sure that the buyer has the required level of inventory by adjusting the demand and supply gaps. As a symbiotic relationship, VMI makes it less likely

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Labour Conditions Intellectual Property

AntiCorruption

CSR in the Value Chain

Human Rights

Environment

Social Standards

Compliance with Laws

Fig. 12.5 CSR in operation and supply chain management. (Source: Author’s source)

that a business will unintentionally become out of stock of a good and reduces inventory in the supply chain. Furthermore, vendor (supplier) representatives in a store benefit the vendor by ensuring the product is properly displayed and store staff are familiar with the features of the product line, all these while helping to clean and organize their product lines for the store. VMI can also decrease the magnitude of the bullwhip effect.

12.8

Efficient Consumer Response (ECR)

Efficient Consumer Response (ECR) in Fig. 12.6 is a strategic concept created by the processed food distribution industry in the U.S. aiming to recover competitive strength. Whether a company can survive depends on whether the company can provide customers with higher values. ECR is a SCM strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers. By aiming to improve the efficiency of a supply chain as a whole beyond the wall of retailers, wholesalers, and manufacturers, they can consequently gain larger profits than each of them pursuing their own business goals. Companies

12.9

Cross Docking

Fig. 12.6 ECR concept. (Source: Author’s Source)

139

Efficient Consumer Response (ECR) Electronic Data Interchange (EDI)

Real time information flow based on real time data

Producer

Wholesaler

Retail

Consumer

Flawless and continuous Materials Flow according to Demand

who compose the supply chain can reduce the opportunity loss, inventory level, and entire cost, as well as increase monetary profitability by sharing the purpose of customer satisfaction. ECR is a strategic concept compiled by a consulting firm “Kurt Simon Associates” at the request of organizations concerning the U.S. processed food distribution industry, aiming to recover the competitive strength for surviving the turbulent time of the industry when discounters emerged in the U.S. For “Efficient Consumer Response”, reengineering, such as eliminating or adding business operations is performed by checking all business operations of a supply chain of companies by a criterion of whether they contribute to providing higher values to consumers (Samar, 2021). This aims to provide better convenience, better products, better quality, better selection of goods and build a win-win collaborative relationship among companies concerned (i.e. every company of a supply chain wins and gains profits). The first target of ECR is to reengineer business processes. To realize the reengineering, information technology such as EDI (Electronic Data Interchange) that is used for accurate and timely exchange of information between companies is necessary. Characteristics of Efficient Consumer Response is that reengineering is performed considering final results given to consumers from unified business processes and that can be realized by information technology. It is said that whether a company carried out Efficient Consumer Response or not obviously decided the fate of the company, either growth and prosperity or change or out of business (Helmold, 2021).

12.9

Cross Docking

Cross-docking involves delivering products from a manufacturing plant directly to customers with little or no material handling in between. Cross-docking not only reduces material handling but it reduces the need to store the products in the warehouse. Cross-docking is a logistics strategy when carrier immediately unloads the cargo from an incoming container and then loads it directly to an outbound carrier. It is a practice that keeps supply chains moving in a productive, effective manner.

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12.10 Case Study: Industrial Supplier Park at Ford Saarlouis The Ford Industrial Supplier Park in Saarlouis is considered to be the first pioneering industrial project of its time that a real estate company has completely built and rented to the local suppliers. It is an outstanding example of innovative economic development in Saarland (SHS, 2021). With the construction of the supplier park in the direct vicinity of the Ford factory in Saarlouis, the largest employer in Saarland, the central concern of the automobile manufacturer of reducing production costs through optimal logistics for the supplier industry could be met. The planning, construction and operation of the integrated supplier park were carried out by the Saarland government body in coordination with those responsible for Ford. A total investment of 100 million euros was made in three construction phases. Suppliers, logisticians and service providers have set up shop on an area of around 100,000 m2 in order to deliver their products ‘just in time—just in sequence’ to the Ford production process. The heart of the industrial park: the transport system in the form of an electric overhead conveyor (conveyor belt). It automatically transports components manufactured by the suppliers to the production lines of the Ford plant. A total of 11 companies with around 1800 employees are currently located in the supplier park. In addition, other automotive suppliers have set up shop in the neighbouring Saarwellingen industrial park.

References Helmold, M. (2021). Innovatives Lieferantenmanagement. Wertschöpfung in globalen Lieferketten. Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Samar, A. (2021). Consumer buying behaviour. Springer. SHS. (2021). Saarland Strukturholding. https://www.strukturholding.de/referenzen/ford-industrialsupplier-park/

Virtual Management and Cyber Tools

13

Now the playbook is we build AI tools to go find these fake accounts, find coordinated networks of inauthentic activity, and take them down; we make it much harder for anyone to advertise in ways that they shouldn’t be. Marc Zuckerberg

13.1

Industry 4.0 in Lean Management

Production systems are not like they used to be. The twenty-first century will confront enterprises and manufacturing companies with completely novel generations of technologies, services, and products based on computer technologies. In order to meet competition on global markets and to ensure long-term success, the companies need to adapt to shorter delivery times, increasing product variability and high market volatility, by which enterprises are able to sensitively and timely react to continuous and unexpected changes. One of the major cornerstones to meet these challenges is the implementation of digital information and communication technologies into production systems, processes and technologies, which allow novel developments by combining the physical world and fast data access and data processing via the Internet (Industry 4.0) (see Fig. 13.1). Industry 4.0 is a name given to the current trend of automation and data exchange in manufacturing technologies. It includes cyber-physical systems, the Internet of things, cloud computing and cognitive computing. Industry 4.0 is commonly referred to as the fourth industrial revolution. Industry 4.0 fosters what has been called a “smart factory”. Within modular structured smart factories, cyber-physical systems monitor physical processes, create a virtual copy of the physical world and make decentralized decisions. Over the Internet of Things, cyber-physical systems communicate and cooperate with each other and with humans in real-time both internally and across organizational services offered and used by participants of the value chain. There are

# The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_13

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Fig. 13.1 Industry 4.0 evolution. (Source: Adopted from Industry 4.0: The Top 9 Trends For 2018 (Liubomyr (El.) Kachur))

four design principles in Industry 4.0. These principles support companies in identifying and implementing Industry 4.0 scenarios (Helmold & Terry, 2021): • Interconnection: The ability of machines, devices, sensors, and people to connect and communicate with each other via the Internet of Things (IoT) or the Internet of People (IoP) • Information transparency: The transparency afforded by Industry 4.0 technology provides operators with vast amounts of useful information needed to make appropriate decisions. Interconnectivity allows operators to collect immense amounts of data and information from all points in the manufacturing process, thus aiding functionality and identifying key areas that can benefit from innovation and improvement • Technical assistance: First, the ability of assistance systems to support humans by aggregating and visualizing information comprehensively for making informed decisions and solving urgent problems on short notice. Second, the ability of cyber physical systems to physically support humans by conducting a range of tasks that are unpleasant, too exhausting, or unsafe for their human co-workers • Decentralized decisions: The ability of cyber physical systems to make decisions on their own and to perform their tasks as autonomously as possible. Only in the case of exceptions, interferences, or conflicting goals, are tasks delegated to a higher level

13.2

Artificial Intelligence (AI) in Lean Management

13.2

143

Artificial Intelligence (AI) in Lean Management

13.2.1 Lean AI Tools Will Lead to a Competitive Advantage In the field of computer science, artificial intelligence (AI), sometimes called machine intelligence, is intelligence demonstrated by machines, in contrast to the natural intelligence displayed by humans and other animals (Helmold, 2021). Figure 13.2 depicts nine lean elements of artificial intelligence which can lead to a competitive advantage across the value chain (Helmold & Samara, 2019).

13.2.2 Autonomous Robots An autonomous robot is a robot that performs behaviours or tasks with a high degree of autonomy (without external influence). Autonomous robotics is usually considered to be a subfield of artificial intelligence, robotics, and information engineering.

Autonomous Robots Virtual Production and Supply Chains

Big Data

Augumented Reality

Simulations

Artifical Intelligence Tools Additive Manufacturing

Systems Integration

Cloud Computing

Internet of Things Cybersecurity

Fig. 13.2 Artificial intelligence tools. (Source: Author’s Source)

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13.2.3 Virtual Production and Supply Chains Virtual production tends to be used to help visualize complex scenes or scenes that simply cannot be filmed for real. In general, though, virtual production can really refer to any techniques that allow filmmakers to plan, imagine, or complete some kind of filmic element, typically with the aid of digital tools.

13.2.4 Lean Simulations Lean simulations include a set of hands-on experiments to teach employees about systems and process improvement in all areas of the value chain. Lean simulations can focus on design, manufacturing, capacity planning or supply chain design. Purpose of simulations are to understand the implications of input variables and alternations of the value chain elements.

13.2.5 System Integration Lean integration is a continuous improvement methodology for bringing disparate data and software systems together. The goal is to maximize customer value. Lean integration is a management system that emphasizes eliminating waste as a sustainable data integration and system integration practice.

13.2.6 Internet of Things The Internet of Things (IoT) is a system of interrelated computing devices, mechanical and digital machines, objects, animals or people that are provided with unique identifiers (UIDs) and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.

13.2.7 Cybersecurity Cybersecurity is the protection of internet-connected systems, including hardware, software and data, from cyberattacks. In a computing context, security comprises cybersecurity and physical security—both are used by enterprises to protect against unauthorized access to data centers and other computerized systems.

13.2.8 Cloud Computing Cloud computing is a type of computing that relies on shared computing resources rather than having local servers or personal devices to handle applications. In its

13.3

Case Study: Google’s Self-Driving Cars

145

most simple description, cloud computing is taking services (“cloud services”) and moving them outside an organization’s IT system and environment.

13.2.9 Additive Manufacturing Additive manufacturing (AM) is the industrial production name for 3D printing, a computer-controlled process that creates three dimensional objects by depositing materials, usually in layers. The official industry standard term is the ASTM F2792 for all applications of the 3D-technology. It is defined as the process of joining materials to make objects from 3D model data, usually layer upon layer, as opposed to subtractive manufacturing methodologies.

13.2.10 Augmented Reality Augmented reality (AR) is an interactive experience of a real-world environment where the objects that reside in the real world are enhanced by computer-generated perceptual information, sometimes across multiple sensory modalities, including visual, auditory, haptic, somatosensory and olfactory.

13.2.11 Big Data Big Data is a phrase used to mean a massive volume of both structured and unstructured data that is so large it is difficult to process using traditional database and software techniques. In most enterprise scenarios the volume of data is too big or it moves too fast or it exceeds current processing capacity.

13.3

Case Study: Google’s Self-Driving Cars

Research into self-driving cars is not a new phenomenon. In the late 1950s, the first known thoughts on self-driving vehicles were described in Popular Mechanics magazine by a mechanic who argued that altering a roadster to both start itself and back itself into a driveway would be relatively straightforward. Later that year, a GM analyst revealed in Popular Science magazine that the company was already investigating embedding highways with cable and radio-control boxes as a means of developing an infrastructure to support driverless cars. Despite all of the theoretical research into the subject, self-driving cars did not become a reality until 1968. The first physical breakthrough in driverless car technology was the design of a car that used sonar and gyroscopes to drive, steer, and stop an automobile. In 1968, The Cornell Aeronautical Laboratory created the “Urbmobile”, an electric car that could be driven on the road but could also glide along a subway-style track that utilized roadside guides, magnetometers, magnetic nails, and internal computers. The largest

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breakthrough came years later, however, with the announcement from Google, Inc. of the Google Car in 2010. With the distinctive sensor and camera nub lodged on top of a Toyota Prius, the Google Car quickly became operational and present on roads across the United States. Shortly thereafter, media coverage of the Google Car became increasingly prevalent in addition to promotional commercials demonstrating the benefits of the car (Google, 2019). While the benefits demonstrated in the videos seemed to be promising, the Google Car’s entrance into the market seemed a far leap away from Google’s core business. Google Inc. specializes in Internet-related services and products, with the mission to organize the world’s information and make it universally accessible and useful. In 1998, Larry Page and Sergey Brin, two Stanford University computer science graduate students, created a search engine that uses back links, or incoming links, to a website or web page, to determine the importance and therefore rank individual web pages during a web query. Existing competitors, like Yahoo and AOL, on the other hand, were directories of other websites, organized in a hierarchy, as opposed to a searchable index of pages. This allows the Google search process to return more relevant results rather than simply a ranked list of preferred sites. In 1999, Google secured funding from Sequoia Capital and Kleiner Perkins Caufield & Byers, Silicon Valley’s two leading venture capital firms (Google, 2019). Only 1 year later, Google became the world’s largest search engine with over a billion pages in its index, surpassing industry giants such as Yahoo. Google’s dominance of the search market continues today as Google maintains a 67% share of global searches. While Google Inc. began as a company specializing in search, it quickly expanded into other product areas. In 2004, Google launched Gmail, an email client which became the world’s largest email provider by 2012 with an estimated 425 million active users. Expanding into the online video domain, Google acquired YouTube in 2006 for $1.65 billion, which reaches over one billion unique visitors each month. In 2008, Google launched Chrome, a web browser, and Android, an operating system for mobile devices. In both of these areas as well, Google dominates the market, with a 50% and 68% of the market share, respectively (Miller & Wald, 2013). In 2010, Google announced that the prototype of a driverless car—the Google Car—was completed (Google, 2019). According to Google executives at the time, the goal of the Google Car was to “. . . help prevent traffic accidents, free up people’s time and reduce carbon emissions by fundamentally changing car use” With a team assembled consisting of engineers with experience in vehicle technology from the DARPA Challenges, a series of driverless vehicle races sponsored by the U.S. Government, Google was finally able to bring the driverless car phenomenon to reality. The Google Car is a sophisticated system that integrates proprietary hardware and software, using video cameras, radar sensors, and a laser range finder to visualize traffic and detailed maps taken from Google Maps to enable navigation between destinations. Google’s data centres process the incoming data relayed from the sensors and cameras mounted on the Google Car in order to provide the car with useful information about its environment that is later translated into the physical operation of the vehicle. The key to the

References

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Google Car’s technological capabilities is the laser range finder mounted on the roof of the modified Toyota Prius, allowing for real-time environmental analysis. In addition, the Google Car is equipped with four radars and a velodyne 64-beam laser placed strategically around the car to accurately generate a three-dimensional map of its environment. A camera detects traffic lights while a GPS, wheel encoder, and inertial measurement unit control the vehicle’s location and logs car movement. The software system synthesizes laser measurements produced from the laser beam with high-resolution maps of the world, producing dynamic data models then translated into the physical operation of the vehicle by the car’s internal software system. Altogether, the system allows for seamless operation of the vehicle that adjusts to its dynamic environment without the intervention of a driver. In addition to the generic driverless capability, the Google Car’s system also adjusts for local traffic laws and environmental obstacles in real-time. For example, if the Google Car approaches a four-way intersection and senses that the driver with the right of way does not move, the Google Car inches forward slightly to indicate to other drivers the intentions of driving through the intersection (Miller & Wald, 2013). Altogether, the technology and adaptation to local conditions not only allows for driverless transportation, but also increases safety on the road. Since its introduction, the Google Car has completed 200,000 miles of accident-free computer-led driving, beyond one incident that was arguably caused by another driver. The road test results for the Google Car indicate that the Google Car obeys all of the rules of the road and adjusts to its dynamic environment in real-time with no problems. Thus, with this integrated technology, the car has the capability of being safer than a human driver. The Google Car has the potential to have a profound effect on energy consumption, efficiency, and traffic accidents. With subsequent productivity increases, and decreases in costs, the Google Car represents a potentially revolutionizing technology. It is precisely this potential, however, that creates a threat for Google to sustaining a long-term competitive advantage in the driverless car space. As the Google Car may radically shift the structure of affected industries and raises serious privacy concerns, vulnerable industries and consumer groups threaten the viability of the project. Thus, the Google Car faces challenges far greater than competing car manufacturers alone. In squaring off against politically and economically powerful industries that are facing their demise, can the Google Car survive? Can the will to revolutionize driving outweigh the costs of potentially ruined industries and massive unemployment? Who will win the war of the road?

References Google. (2019). www.google.com Helmold, M. (2021). Kaizen, Lean Management und Digitalisierung. Mit den japanischen Konzepten Wettbewerbsvorteile für das Unternehmen erzielen. Springer.

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Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Miller, C. C., & Wald, M. L. (2013). Self-driving cars for testing are supported by U.S. New York Times. https://www.nytimes.com/2013/05/31/technology/self-driving-cars-for-testing-aresupported-by-us.html Ohno, T. (1990). Toyota production system. Beyond large scale production. Productivity Press.

Audits and Quality Management Systems (QMS)

14

There are two kinds of people, those who do the work and those who take the credit. Try to be in the first group; there is less competition there. Indira Gandhi

14.1

Quality Management System (QMS)

A quality management system (QMS) is the combination of business processes focusing on customer satisfaction. A QMS aims to meet customer requirements. The QMS has a set of guidelines that are defined by a collection of policies, processes, documented procedures and records. This system defines how a company will achieve the creation and delivery of the product or service they provide to their customers. When implemented in your company, the QMS needs to be specific to the product or service you provide, so it is important to tailor it to your needs. However, in order to help ensure that you do not miss elements of a good system, some general guidelines exist in the form of ISO 9001 (Quality Management System— Requirements), which is intended to help standardize how a QMS is designed. ISO 9001 is the international standard for Quality Management Systems (QMS), published by ISO (the International Organization for Standardization). The standard was most recently updated in 2015, and is referred to as DIN EN ISO 9001:2015. In order to be released and updated, ISO 9001 had to be agreed upon by a majority of member countries so that it would become an internationally recognized standard, which means it is accepted by a majority of countries worldwide. ISO has a range of standards for quality management systems that are based on ISO 9001 and adapted to specific sectors and industries. These include: ISO 13485—Medical devices ISO 17582—Electoral organizations at all levels of government ISO 18091—Local government # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_14

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ISO/TS 22163—Business management system requirements for rail organizations ISO/TS 29001—Petroleum, petrochemical and natural gas industries ISO/IEC 90003—Software engineering ISO 9001 contains eight key principles of quality management which is not auditable but do form the fundamental characteristics of quality management: 1. 2. 3. 4. 5. 6. 7. 8.

Customer focus and customer satisfaction Leadership Involvement of people Process approach A systematic approach to management Continual improvement Factual approach to decision making Mutually beneficial supplier relationship

QMs are accredited by globally applied standards. The advantages of a QMS can be outlined as follows: Increasing customer satisfaction by using a globally applied standard and improvement system Becoming more cost efficient, increasing credibility and securing competitiveness Optimising costs and creating shorter cycle times through effective use of resources Enhanced customer satisfaction and improved customer loyalty leading to repeat business Increased revenue and market share obtained through flexible and fast responses to market opportunities Integration and alignment of internal processes which will lead to increased productivity and results Ensuring a consistent and streamlined delivery of the products or services requested by customers Improved communication, planning and administration processes throughout the organisation

14.2

Audits

14.2.1 Audit Types Audits can be described as a systematic and structured performance evaluation and assessment of a system, process or product or any other area by internal or external auditors. The aim of an audit is to evaluate and approve or disapprove the assessed area by standardized criteria and questions, to define areas for actions and to ensure

14.2

Audits

151

Table 14.1 Audit types Audit type Systems Audit

Process Audit

Product Audit

Control Audit

Other Audits

Description Evaluation of the (Quality Management) System of the Organisation by external certification agencies (TÜV, DEKRA, Bureau Veritas). Examples: DIN EN ISO 9001:2015, IATF 16949, International Railway Industry Standard (IRIS) Evaluation of a (Manufacturing or Service) Process (Input-TransformationOutput) to qualify or disqualify a process-oriented example of a product or service by assessing a reference process from supply side, incoming material to the despatch (also from other customers). Examples: VDA 6.3, SEAP (Supplier Evaluation Approval Process—Railway) Planning and execution of the assessment of a finished product to be delivered to the customer. The Audit consists of checking the specification, drawings, capacity and other important aspects and normally involves the trial run of the entire manufacturing process (e.g. 300 parts, run at rate). Examples: VDA 6.5, Part Production Approval Process (PPAP), Production Approval Process (PAP) Control audits (normally after 1, 3 or 6 months) with the Aim to control (Verify or falsify) the progress of previously conducted audits. Control Audits normally target the Reduction of the previously found Corrective Action Requests (CARs) Any other audits in areas like safety, health, environment, tax, and financials. Examples: 5S audits, tax audits, environmental audits (ISO 14001), IT audits (ISO 27001), financial audits or health, safety and environment (HSE) audits.

Source: Author’s Source

the sustainable implementation of the actions and improvement areas. Assessment criteria in audits are based on customer and stakeholder expectations. Audits can be clustered in systems, process, product, control and special audits as shown in Table 14.1. Lean audits are conducted to determine if the business is properly implementing and lean management methodologies are implemented into the company and value chain (Helmold & Terry, 2016). This is achieved by a detailed 360○ analysis how lean processes with a goal toward recognizing opportunities to improve processes and to eliminate waste.

14.2.2 Quality Management Systems (QMS) A Quality Management System (QMS) describes in enterprises and organisations the management function and all organisational activities, which serve the improvement of the process quality, the work quality and thus the product and service quality. QMS are using lean features for process improvements. Table 14.2 outlines the most common standards of QMS in certain industries.

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Table 14.2 Quality management systems QMS ISO 9001:2015 ISO 13485:2016 ISO/TS 54001:2019 ISO 18091:2019 SO/TS 22163:2017 IRIS EN 9100 ISO/TS 29001:2010 ISO/IEC/IEEE 90003:2018 IATF 16949:2016

Industry Several Industries (Baseline for many QMS) Medical Industry QMS for administrative Processes (ISO 9001) Government Railway Organisations International Railway Industry Standard (ISO 9001) Aviation Industry Oil, Petroleum Industry Software Engineering Automotive Industry

Source: Author’s Source

14.3

Case Study: 5S Audits in Berliner Kindl Schultheiss Brewery

With 5S Audits, the Berliner Kindl Schultheiss Brewery (Radeberger Group), makes sure, that all processes (purchasing, operations, logistics, production control and planning) are evaluated along the seven most important levers for their optimization. On the basis of these results, further measures can be derived on the way to a lean and smart production. With the audit, the management receives an objective assessment of Lean. It includes 2 days of on-site operation and is conducted in the form of a walk-through with short interviews with the people in charge. At the end of the second day the results will be presented. Measurables are: Lean maturity relative to the seven key levers of production optimization. These include, for example, the plant structure, the use of process-oriented technologies, the time-to-market and employee motivation. The evaluation of the respective dimensions is based on a SWOT analysis. The lean audit provides a solid basis for planning further project steps. Thus, the identified potentials can be used for a Nordstern workshop to develop appropriate target states and measures. Finally, in order to achieve this, there is an extensive set of methods in the context of the Schneider co-developed lean-factory design concept. This interdisciplinary optimization concept, developed at Landshut University of Applied Sciences, is based on many years of research and numerous best practice projects. The audit can be repeated annually to measure project progress and to set and prioritize the following steps. The Berliner Kindl Schultheiss Brewery conducts the 5S-Audits on a monthly basis as shown in Fig. 14.1. It can be seen that the five categories (sort, set in order, shine, standardise, sustain) are analysed. The Audit is linked to a dynamic action plan and progress control.

References

153

Fig. 14.1 5S-audit in Berliner Kindl Schultheiss Brewery. (Source: Author’s Source)

References Helmold, M., & Terry, B. (2016). Global sourcing and supply management excellence in China. Procurement guide for supply experts. Springer.

Lean Production Tools

15

Quality needs to be constantly improved, but it is just as necessary to make sure that quality never deteriorates. Shigeru Mizuno

15.1

Principles of a Lean Production System

15.1.1 Introduction The Just-in-Time Production System or Lean Production System can be described as the ideal combination of four principles (Imai, 1986). These principles are the Zero Defect Principle, the Pull Principle, the Tact and the Flow Principle as displayed in Fig. 15.1 (Helmold & Samara, 2019).

15.1.2 Zero Defect Principle The starting point in Toyota’s success story, Zero Defects is all about identifying errors or defects as closely as possible to where they occur. By so doing, and by neither accepting nor passing on defects, issues are resolved quickly and efficiently, avoiding subsequent re-work and quality issues. The zero-defect principle is a concept of the Toyota Production System and is aimed at the reduction of defects through error prevention. It is directed at motivating people to prevent mistakes by developing a constant, conscious desire to do their job right the first time. In reality, zero defects are not possible, however, the concept ensures that there is no waste existing in a project (Helmold & Terry, 2016). Waste refers to all unproductive processes, tools, employees and so on. Anything that is unproductive and does not add value to a project should be eliminated, called the process of elimination of waste. Eliminating waste creates a process of improvement and correspondingly lowers costs. Common with the zero defects theory is the concept of “doing it right # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_15

155

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Fig. 15.1 Four lean production principles

Zero-Defect

Tact

Principle

Principle

Pull Principle

Lean Production Tools

Flow Lean Production System

Principle

the first time” to avoid costly and time-consuming fixes later in the project management process. The concept of zero defects is grounded on four major elements for implementation in real projects: • Quality is a state of assurance to requirements. Therefore, zero defects in a project means fulfilling requirements at that point in time • Right the first time. Quality should be integrated into the process from the beginning, rather than solving problems at a later stage • Quality is measured in financial terms. One needs to judge waste, production and revenue in terms of budgetary impact • Performance should be judged by the accepted standards, as close to perfection as possible

15.1.3 Pull Principle The pull system is one of the lean manufacturing principles and is used to reduce waste in the production process. In this type of system, components used in the manufacturing process are only replaced once they have been consumed so companies only make enough products to meet customer demand. The opposite principle is the push system, in which as many products as possible are generated to be sold via marketing activities. The principles aim to avoid over-production and stockpiling, thereby saving working capital, by letting demand dictates the rate at which goods or services are delivered. In this way the customer, or the next step in the chain, “pulls” value through the process.

15.1.4 Flow Principle Value should be added in a smooth, uninterrupted flow, from the start to the end of the production process. The ultimate effect of this principle is that all process steps are focussed and aligned to adding value, one piece at a time, removing all wasteful

15.1

Principles of a Lean Production System

U-Type flow

OP 1

Preassembly

OP 2

Zick-Zack-Type flow

Assembly 1

OP 1

Preassembly

OP 2 OP 4

Finshing

OP 3

157

OP 3

Line-Type flow

Assembly 2

OP 1

Assembly 1

OP 4

Preassembly

OP 2

Assembly 1

OP 3

Assembly 2

OP 4

Finishing

Finishing

Assembly 2

Fig. 15.2 Types of flows in operations. (Source: Marc Helmold)

and unnecessary activities from the process. The advantage of a continuous flow in operations is that it features stability, continuity, balance, and doesn’t waste time (the non-renewable resource). No time wasted on waiting between steps means time is being maximized for its capabilities. Operations are not able to introduce a wasteless process without the continuous flow, as it is the truly ideal process state. However, the troubles with continuous flow are that it’s very hard to achieve, process steps aren’t generally balanced, and all process contains inherent waste activities. When one starts out to achieve continuous flow, many process problems will appear and come to the surface. Most individuals think this is bad—it’s actually a good thing. The optimal process features continuous flow, and any problems that stand in your way from achieving continuous flow are problems that are now visible and can be rectified. The ideal flow is the one-piece flow as shown in Fig. 15.2.

15.1.5 Tact Principle The German word for timing, Tact refers to the rhythm at which goods or services are produced to meet customer demand. With a consistent, continuous rhythm providing a heartbeat for your production processes, it is far easier to regulate, responding flexibly and effortlessly as demand rises or falls. Takt time is defined as the average time available (time available minus breaks, maintenance or set-up) divided by the customer requested quantity as shown in Fig. 15.3. The average time between the start of production of one unit and the start of production of the next unit, when these production starts are set to match the rate of customer demand. For example, if a customer wants 15 units with the available time of 9 min and the steady flow through the production line, the average time between production starts should be 36 s for one part or unit (9 min multiplied by 60 s ¼ 540 s; 540 s divided by 15 units requested by the customer ¼ 36 s per part). In fact, the tact time simply reflects the rate of production needed to match the demand. In the previous example, whether it takes 4 min or 4 years to produce the product, the tact time is based on customer demand. If a process or a production line

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Fig. 15.3 Tact time and other ratios

Tact time:

Lean Production Tools

Available production time

(Customer tact)

Customer demand

Optimum Manning level:

Sum of cycle times

LBR: (Line balance ratio)

LER: (Line efficiency ratio)

Customer tact (Takt) Sum of cycle times

x 100 %

Longest OP x No. OP Sum of cycle times

x 100 % Customer tact (Takt) x No. OP

is unable to produce at tact time, either demand levelling, additional resources, or process re-engineering is needed to correct the issue (Helmold & Terry, 2016). • • • • •

Directly tie production efficiencies to fiscal reporting Reduce investigation time for root cause analysis Shorten equipment ROI through increased utilization Decrease costs through waste elimination Increase customer satisfaction through quality improvement

15.2

Andon

Andon (Japanese: アンドン or あんどん or 行灯) is a lean manufacturing tool referring to a system to notify management, maintenance, and other workers of a quality or process problem. The centerpiece is a device incorporating signal lights to indicate which workstation has the problem. The alert can be activated manually by a worker using a pull cord or button, or may be activated automatically by the production equipment itself. The system may include a means to stop production so the issue can be corrected. Some modern alert systems incorporate audio alarms, text, or other displays. An Andon System is one of the principal elements of the Jidoka method pioneered by Toyota as part of the TPS and therefore now part of the lean concept. It gives the worker the ability, and moreover the empowerment, to stop production when a defect is found, and immediately calls for assistance. Common reasons for manual activation of the Andon are part shortage, defect created or found, tool malfunction, or the existence of a safety problem. Work is stopped until a

15.4

Gemba and Shopfloor

159

Fig. 15.4 Andon

solution has been found. The alerts may be logged to a database so that they can be studied as part of a continuous-improvement program. The system typically indicates where the alert was generated, and may also provide a description of the trouble. Modern Andon systems can include text, graphics, or audio elements. Audio alerts may be done with coded tones, music with different tunes corresponding to the various alerts, or pre-recorded verbal messages. Usage of the word originated within Japanese manufacturing companies, and in English is a loanword from a Japanese word for a paper lantern (Imai, 1986) (Fig. 15.4).

15.3

Poka Yoke

Poka-yoke (ポカヨケ) is a Japanese term that means “mistake-proofing”. A pokayoke is any mechanism in a lean concept a process that helps an equipment operator avoids (yokeru) mistakes (poka). Its purpose is to eliminate product defects by preventing, correcting, or drawing attention to human or other errors as they occur. The concept was formalized, and the term adopted, by Shigeo Shingo as part of the TPS. It was originally described as baka-yoke, but as this means “foolproofing” (or “idiot proofing”) the name was changed to the milder poka-yoke.

15.4

Gemba and Shopfloor

Gemba (現場 also described as gemba) is also a Japanese term meaning the real or right place. A production environment considers the shop floor as the most important place and the employees in the operation and support functions as most important human capital for adding value.

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Fig. 15.5 Shadow board. (Source: Helmold. Shadow board. Mitsubishi Shinkanzen production in Osaka)

15.5

Shadow Boards

Shadow boards are specific boards for parts, tools, equipment in operations, manufacturing or service areas to reduce waste and waiting time. The aim of the shadow board is to achieve an organized workplace where tools, supplies and equipment are stored in appropriate locations close to the work area or work stations. It provides the basis for standardization in the work place. They are a simple and inexpensive tool which provides tangible efficiencies and cost savings as well as intangible benefits. Figure 15.5 shows a shadow board for screws in Mitsubishi Japan. The appropriate storage, allocation and preparation of screws avoid waiting time and the possibility of errors. The advantages of using shadow boards include avoiding waste, such as time looking for the appropriate tool or even having to buy a new one, wasted time in looking for supplies and interchanging tools between tasks. Shadow boards also provide the ability to quickly gauge the location of tools and equipment or if they are missing. Shadow boards are used in the sort and set in order stages of the implementation and operation of a 5s system in a workplace and kaizen initiatives. Shadow boards can be different sizes and located in many different areas of a process or plant. The key is that they are appropriately located and hold all the necessary tools for the area or work station.

15.6

Health and Safety

Health, safety and environment (HSE) is the concept and paradigm that implements and secures practical aspects of environmental protection and safety at work. From a health and safety standpoint, it involves creating organized efforts and procedures

15.7

Overall Equipment Effectiveness (OEE)

161

Fig. 15.6 Health, safety and environment. (Source: Author’s Source)

for identifying workplace hazards and reducing accidents and exposure to harmful situations and substances. It also includes training of personnel in accident prevention, accident response, emergency preparedness, and use of protective clothing and equipment. From an environmental standpoint, it involves creating a systematic approach to complying with environmental regulations, such as managing waste or air emissions all the way to helping operations’ departments reduce the company’s carbon footprint. Successful HSE programs also include measures to address ergonomics, air quality, and other aspects of workplace safety that could affect the health and well-being of employees and the overall community. Figure 15.6 displays HSE requirements in a Chinese operations environment.

15.7

Overall Equipment Effectiveness (OEE)

Manufacturing a product is a complex process. Without metrics and guidelines. It is very easy to lose control and have your business managed by your production. OEE is a tool that combines multiple manufacturing issues and data points to provide information about the process. By analysing and calculating data it also functions as a framework for root cause analysis. Through a documented process of combining the underlying data OEE provides specific process information. All members of the manufacturing team, from assembly technicians to financial personnel can use the data to understand the current state of the manufacturing process. By having a predetermined framework of the impact of machine availability, performance and quality, OEE provides a framework to track underlying issues and root causes. OEE also provides a framework for improvements in the manufacturing process. By using key OEE concepts such as The Six Big Losses waste exposed by tracking OEE can be understood and efficiencies can be improved. The components of this framework are:

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Lean Production Tools

• Availability • Performance • Quality OEE is a very simple metric to immediately indicate the current status of a manufacturing process and also a complex tool allowing you to understand the effect of the various issues in the manufacturing process and how they affect the entire process (OEE ¼ Availability × Performance × Quality). Availability refers to the machine or cell being available for production when scheduled. At the most basic level, when a process is running it is creating value for the end user. When a process is stopped, it’s creating a cost with no associated value. Whether it’s due to mechanical failure, raw materials or operator issues, the cell or machine is either producing or not producing. By comparing scheduled run time to actual run time, the availability component of OEE allows for a determination of lost production due to down time. Performance is determined by how much waste is created through running at less than optimal speed. By comparing the actual cycle times against ideal cycle times, OEE allows for a determination of how much production was lost by cycles that did not meet the ideal cycle time. Quality focuses on identifying time that was wasted by producing a product that does not meet quality standards. By comparing the quantity of good to reject parts the percent of time actually adding value by producing good product is exposed. By itself, OEE only provides data about your manufacturing process. Companies that use OEE as a metric have found success when combining it with general lean manufacturing programs and also as part of TPM systems. When using OEE with these systems the benefits become significant: Fig. 15.7 shows an example of the OEE. High performing companies can achieve an OEE higher than 85% (Helmold & Samara, 2019). In the calculation, the OEE has the elements availability (83.3%), performance (90.0%) and quality (98%). Based on the actual figures, it is now possible to optimise each at the inefficient categories. The availability ratio is below 90% and needs special actions for improvements.

15.8

Kanban

Kanban (看板) is a visual system for managing work as it moves through a process. It is a concept related to lean and just-in-time (JIT) production, where it is used as a scheduling system that tells you what to produce, when to produce it, and how much to produce. Initially it arose as a scheduling system for lean manufacturing, originating from the Toyota Production System (TPS).

15.9

Supermarkets

Supermarkets ordinarily are located near the supplying process to help that process see customer usage and requirements. Each item in a supermarket has a specific location from which a material handler withdraws products in the precise amounts

15.10

Case Study: Porsche Production System

163

OEE (Overall Equipment Effectiveness) OEE = Availability x Performance x Quality

73.5% =

83.3% x 90.0% x 98.0% 800 Minutes Machine Operating Time

Availability: 960 Minutes Plant Operating Time 180 Average Speed qpm (quantity per minute) Performance:

200 Average Speed qpm (quantity per minute) 24,974 Good Parts Quality: 25,484 Total Parts Fig. 15.7 OEE calculation. (Source: Author’s Source)

needed by a downstream process. As an item is removed, a signal to make more (such as a kanban card or an empty bin) is taken by the material handler to the supplying process. Toyota installed its first supermarket in 1953 in the machine shop of its main plant in Toyota City. Toyota executive Taiichi Ohno took the idea for the supermarket from photos of American supermarkets showing goods arrayed on shelves by specific location for withdrawal by customers.

15.10 Case Study: Porsche Production System Companies such as Porsche have understood, that the low Value-adding activities of the own organization lead automatically to increasing activities on the supply side (Freitag, 2004). Porsche was also hampered by antiquated production methods. Some 20% of its parts were delivered 3 or more days too late, for example. In addition, supply disruptions led to severe problems in the value chain and caused recalls (Greiml, 2010). The former head of Porsche, Dr. Wendelin Wiedeking, who had been deeply impressed by what he had seen on visits to Japanese auto firms such

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as Toyota, Nissan and Honda, believed that only a radical, “lean manufacturing” cure would save the company. He flew in teams of the same Japanese consultants who had helped Toyota and gave them free rein. “A cultural revolution from top to bottom” is the way he describes what happened next, as the consultants organized the workforce into teams and one by one eliminated poor practices (Kalkowsky, 2004). Wiedeking made one now-fabled appearance on the assembly line wielding a circular saw, which he used to cut down the roof-high racks of spare parts that towered over the production line. After the lean cure of the own production facilities, Porsche extended the lean concept to suppliers and established the supplier development department in 2006 (the name of the department is FEL, FinancePurchasing, Supply Management). This department is in charge of extending lean principles to the supply networks and to synchronize production systems. In the following section the concept of lean supply management will be discussed. Lean principles have: • • • • • • • • • • •

to apply lean principles throughout the supply chain to integrate suppliers to be customer oriented to have flat hierarchies to establish competencies to core functions to apply lean principles to shop floor (Gemba) to concentrate only on essential success factors to reduce waste to continuously improve to apply a Pull-system to apply a learning organisation

References Freitag, M. (2004). Toyota. Formel Toyota. Manager Magazin, 12, 12–14. Greiml, H. (2010). The Toyota recall crisis. Toyota recalls 1.1m vehicles to fix floor mats. Automotive News, 12–15. Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Springer. Helmold, M., & Terry, B. (2016). Global sourcing and supply management excellence in China. Procurement guide for supply experts. Springer. Imai, M. (1986). Kaizen. Der Schlüssel zum Erfolg der Japaner im Wettbewerb. Ullstein. Kalkowsky, M. (2004). Nur Porsche hat das Lean Management begriffen: Interview with Prof. D. Jones. Produktion., 31, 16.

Kaizen: Continuous Improvements in Small Steps

16

Logic will get you from A to B. Imagination will take you everywhere. Albert Einstein

16.1

Definition of Kaizen

Kaizen is a Japanese Management concept and targets improvements in small steps. Kaizen means all personnel are expected to stop their work when they encounter any abnormality and, along with their supervisor, suggest an improvement to resolve the abnormality. Kaizen the quality the aim of daily life, not only during working hours. The improvement should be gradual and infinite. It should pursue the perfection. The employees should be continuously engaged in company’s life and improvement of every aspect of the company (processes, products, infrastructure, etc.). This improvement throughout all aspects of life is related to the great attention that is paid to needs and requirements of customer. Kaizen focuses on teams (quality circles), promotes teamwork and team spirit, however it also recognizes the individual contribution. It emphasizes the engagement of each worker to the concept and vision of the company, so that employees will identify themselves with the enterprise, its culture and objectives. The important aspects of Kaizen are: • What is wrong? Not who is wrong? • How to eliminate waste (Muda)? • How to decrease quality costs? The term Kaizen is Japanese and can be translated to “change for the better”. The main goal of Kaizen is to continuously improve working areas, processes and products by integrating the people of the affected areas. Usually Kaizen is realised through workshops. Their typical duration can vary from 3 to 5 days. The aim of a # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_16

165

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Kaizen: Continuous Improvements in Small Steps

Kaizen - Continuous Improvement

A

P

C

D

A

P

C

D

Standard

A

P

C

D

Standard

Fig. 16.1 Kaizen-Cycle (P-D-C-A). (Source: Author’s Source)

Kaizen workshop is to implement the improvements during the time of the workshop Kaizen is a framework combining the change of the company culture together with the daily implementation of the principles (Liker, 2004). The ten principles of Kaizen can be described as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Say no to status quo If something is wrong, correct it Accept no excuses and make things happen Improve everything continuously Abolish old, traditional concepts Be economical Empower everyone to take part in problems’ solving Before making decisions, ask “why” five times to get to the root cause Get information and opinions from multiple people Remember that improvement has no limit, never stop trying to improve

A useful tool in the context of Kaizen is the P-D-C-A Cycle (see Fig. 16.1). PDCA is an iterative four-step management method used in business for the control and continuous improvement of processes and products. It is also known as the Deming circle/cycle/wheel, the Shewhart cycle. The PDCA Cycle is since the 1950s recognized as a simplified illustration of the elementary steps of a continuous improvement process: Plan: Analyze the current situation and define improvement plan Do: Implement the defined solutions Check: Evaluation of improvement results Act: Definition of counter actions in case of deviation from objective, standardize the best solution

16.2

Kaizen Versus Innovation

167

After improvement it is important to standardise and implement the action, so that the process or activity cannot return to the old state. If this is secured, one can aim for the next improvement.

16.2

Kaizen Versus Innovation

Kaizen (改善) is the concept of small improvements in small steps as shown in Fig. 16.2 (Ohno, 1990). In contrast to an innovation, which is a top-down-approach, Kaizen involves all team members. It means improvement and continuing improvement in personal life, home life, social life, and working life. When applied to the workplace this philosophy means continuing improvement involving everyone, i.e. managers and workers alike (Kaizen Institute, 2019). The principles are of Kaizen are customer knowledge and transparency. Thus, it is possible to improve a process without major investments. Kaizen in any organization is fundamentally important for a successful continuous improvement culture and to mark a turning point in the progression of quality, productivity, and labour-management relations (Kaizen Institute, 2019).

INNOVATION

Innovation

• • • • • •

Small steps Low investment No risk Involvement of people Short term Team decision approved by management Improvements

Major change High investment Entrepreneurial risk Specialized team Long term Management decision

Improvements

• • • • • •

KAIZEN

Time

Fig. 16.2 Innovation versus Kaizen. (Source: Author’s Source)

KAIZEN

Time

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Kaizen: Continuous Improvements in Small Steps

Information can be received through all 5 senses How much do we remember from each of those senses? 83%

Via the sight sense

11%

Via the hearing sense

3,5%

Via the smell sense

1,5%

Via the touch sense

1%

Via the taste sense

Fig. 16.3 Visualisation senses. (Source: Author’s Source)

16.3

Visualisation Management

Visualisation Management is a significant part of Kaizen. Figure 16.3 displays that 83% of the issues are perceived with the eye sense, so that visualisation is a crucial part for implementing Kaizen. Figure 16.3 shows the war room in the Alstom (formerly Bombardier) Transportation IPO in China.

16.4

Case Study: Mercedes’ Lean Management System

“The best or nothing.”—Gottlieb Daimler’s claim characterizes the Mercedes-Benz brand and is anything but easy to live up to. What originally referred primarily to the ideas and ingenuity of the company’s founder has since become more pragmatic (Follmann et al., 2013). Daimler is now a global organization with over 260,000 staff members and requires a clear vision, experienced and competent managers and employees, stable processes, and a strong corporate culture. The success of the automotive company hinges on the efforts of each individual. One of the important success factors to this end is a far-reaching production system. Production systems have a long tradition and clear principles. Back in 1831, for example, General Carl von Clausewitz recognized the importance of robust processes, avoiding waste, and ensuring continuous improvement as necessary to achieve goals. The best-known

References

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production system currently used is that of Toyota. The production system used by Mercedes-Benz Cars (MBC) also has a long tradition and has become one of the driving factors behind the success of the premium Mercedes Benz brand—with a pronounced focus on technology, innovation, quality, safety, and sustainability. In 2000, this system was bundled as a closed system for the first time—the MercedesBenz Production System (MPS)—by leveraging different developments in the company. This laid the foundation for lean management principles in production and, somewhat later on, in administration. From a critical perspective, initial success was confronted by the challenges of early lean initiatives. Improvements in the individual business units, for example, could not be made at the expense of other business units (e.g. the historical conflict of assembly processes being compromised in the name of logistics and vice versa, or assuming that active involvement of managers in optimization measures is all that is required to safeguard changes and prevent relapses from occurring). To meet these challenges and facilitate implementation of the MPS, all resources were bundled at MBC in 2008. The organization was restructured and four new consulting fields were defined: strategic and tactical target definition, methods and tools, qualification, and Mercedes-Benz culture. Today, almost 4 years after the go-ahead, an initial conclusion can be drawn. The introduction of centralized MPS of-was done in 2008. The framework provides all employees a standardized basis for the decentralized lean support organization at Mercedes-Benz Cars and anchored it in the “Strategische Planung und MercedesBenz Produktionssystem” (Strategic Planning and Mercedes-Benz Production System) centre. This centre is, among others, responsible for assisting business units in implementing the MPS throughout Mercedes-Benz Cars. Activities started in the production area and have since carried over to administrative areas such as Human Resources and IT.

References Follmann, J., Laack, S., Schütt, H., & Uhl, A. (2013). Lean transformation at Mercedes-Benz. https://www.researchgate.net/publication/272484962_Lean_Transformation_at_MercedesBenz_Identifying_the_Transformational_Opportunities_for_the_Retail_Value_Chain Kaizen Institute. (2019). https://de.kaizen.com/ Liker, J. K. (2004). The Toyota way. McGraw-Hill. Ohno, T. (1990). Toyota production system. Beyond large scale production. Productivity Press.

Waste and Value-Added Management Tools

17

Most Business Processes Are 90 percent Waste and 10 percent Value-Added Work. Jeffrey Liker

17.1

Value-Added and Waste

Added value can be defined as products, services, processes and activities, which generate a certain value to the organisation and enterprise. Value-added must be regarded from the customer viewpoint and is everything for which the customer is willing to pay for. It is important that Value-added is recognised and perceived as value by the client. Many studies have shown that we only add value to a product for less than 5–15% of the time, the rest of the time is wasted (Helmold & Terry, 2016a, b). The opposite is non-adding value or waste as shown in Fig. 17.1. Waste (Japanese: Muda, 無駄) is anything which adds cost or time without adding any value or any activity which does not satisfy any of the above conditions of Valueadded is a waste or a non-Value-adding activity in a process. The focus in operations management must therefore be in eliminating such activities like waiting time or rework (Liker, 2004). Enterprise must target value-added process and eliminate or reduce waste, whereby waste can be visible (obvious) or invisible (hidden) as shown in Fig. 17.2.

17.2

Waste Identification Through Ishikawa Diagram

Ishikawa diagrams (also called fishbone diagrams, herringbone diagrams, causeand-effect diagrams, or Fishikawa) are causal diagrams created by Kaoru Ishikawa (Japanese: 石川 馨 Ishikawa Kaoru, 1915–1989) that show the cause-effect situation of a specific event. Common uses of the Ishikawa diagram are areas of design, supply, production and quality defect prevention to identify potential factors causing # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_17

171

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Fig. 17.1 Value-added and waste. (Source: Marc Helmold)

Hidden Waste

Value-added Activities

(reduce)

(increase)

Obvious Waste (eliminate)

Category

Description

Objective

Value-added Processes

Task

• • •

Added value for product Customer pays for it Customer recognizes this a value-added elements

•

No added value for product or service Task is not necessary for production

Minimize Eliminate

• No added value for product or service • Task is not necessary for production

Minimize Eliminate

Increase

Hidden waste

Task

•

Obvious waste

Task

Fig. 17.2 Actions for value-added and waste. (Source: Marc Helmold)

an overall effect. Each cause or reason for imperfection is a source of variation. Causes are usually grouped into major categories to identify and classify these sources of variation. The target of value-add and quality is shown as the fish’s head, facing to the right, with the causes extending to the left as fishbones; the ribs branch off the backbone for major causes, with sub-branches for root-causes, to as

17.3

Advantages and Disadvantages

Man

173

Material

Machine

Value add (Quality)

Method (Process)

Milieu (Environment)

Money

Fig. 17.3 Ishikawa diagram. (Source: Author’s Source)

Man

Material

Machine X insufficient maintenance √ capacity of machine

X defects from suppliers

X missing qualification X insufficient training

√ engagement operators

Value add (Quality) X Sequence not logical √ Process description X Process intransparent

Method (Process)

X Insufficient flow X Distance too long X Layout deficiencies

Milieu (Environment)

X material cost X Work in progress X Loss

Money

Fig. 17.4 Ishikawa diagram with waste and value-added. (Source: Author’s Source)

many levels as required. Figures 17.3 and 17.4 show two examples of the Ishikawa diagram.

17.3

Advantages and Disadvantages

The advantages and disadvantages are shown in the following paragraph. Advantages • Highly visual brainstorming tool which can spark further examples of root causes • Quickly identify if the root cause is found multiple times in the same or different causal tree • Allows one to see all causes simultaneously • Good visualization for presenting issues to stakeholders

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Disadvantages • Complex defects might yield a lot of causes which might become visually cluttering • Interrelationships between causes are not easily identifiable

17.4

5S-Management Concept

5S is the name of a workplace organization method that uses a list of five Japanese words: seiri, seiton, seiso, seiketsu, and shitsuke. Transliterated into Roman Script, they all start with the letter “S”. 5S is used to stabilise, maintain and improve the safest, best working environment thus supporting sustainable QCDplus alpha. 5S is a systematic and structured work place optimisation, originally be developed and used by Toyota. The objective is the identification and elimination of waste. In simple terms, the five S methodology helps a workplace remove items that are no longer needed (sort), organize the items to optimize efficiency and flow (straighten), clean the area in order to more easily identify problems (shine), implement colour coding and labels to stay consistent with other areas (standardize) and develop behaviours that keep the workplace organized over the long term (sustain). 5S is a workplace organization method that uses a list of five Japanese words: 1. 2. 3. 4. 5.

Seiri (整理) Seiton (整頓) Seisō (清掃) Seiketsu (清潔) Shitsuke (躾)

These five words can be translated as “Sort”, “Set In order”, “Shine”, “Standardize” and “Sustain”. The 5S-methodology describes how to organize a work space for efficiency and effectiveness by identifying and storing the items used, maintaining the area and items, and sustaining the new order. The decision-making process usually comes from a dialogue about standardization, which builds understanding among employees of how they should do the work. In some quarters, 5S has become 6S, the sixth element being safety or selfdiscipline (Fig. 17.5). The advantages of the 5S System are the following: • Creation of transparent Layout and Processes • Makes Waste transparent • Eliminates unnecessary activities • Improves efficiency • Increases safety • Increases employee motivation Simplification of the work environment • Ensuring that all materials are instantly available • Ensuring that tools (screw driver, devices)

17.4

5S-Management Concept

175

1

1

Seiri

–

Sort

2

Seiton

–

Set in order

3

Seiso

–

Shine

4

Seiketsu

–

Standardize

5

Shitsuke

–

Sustain

2

3

4

Fig. 17.5 5S-system. (Source: Author’s Source)

• Ensuring that required (work procedures, work sequence etc.) information is instantly available by visualization • Reduction of waste The first element in the 5S concept is the sorting (seiri). In this step it is important to distinguish between necessary and unnecessary things. Things in this context are materials, components, tools, gauges, information, things and people. Unnecessary things must disappear. Removing these items which are not used in the working area may take a reasonable amount of time. Classification of all equipment and materials by frequency will help to decide if these items can be removed or not. The second step is the setting in order (seiton). The practice of orderly storage so the right item can be picked efficiently at the right time, easy to access for the operators. Identification and allocation of materials, information, tools and necessary things at fixed and visualised locations is important in this step. In the next and third step (seiso), it is mandatory to create a clean worksite without garbage, dirt and dust, so problems can be more easily identified (leaks, spills, excess, damage, etc.). In the fourth step (seiketsu) standards for a neat, clean, workplace and operations will be set up through visual management. In the fifth and last stage (shitsuke) it is important to create the environment, patterns, management style and behaviours that established standards are executed over the long-term, and making the workplace organization the key to managing the process for success (Helmold & Terry, 2016a, b).

176

17.5

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Waste and Value-Added Management Tools

Seven Types of Waste in Manufacturing: TIMWOOD

17.5.1 Transportation Excess transportation is a significant waste because the time, manpower, energy, efforts, resources required to move items is something the customer does not care and does not want to pay. Examples of wastes of Transport are the transport of product from one functional area such as pressing, to another area such as welding or the use of material handling devices to move batches of material from one machine to another within a work cell. It wastes time because operators are dedicating the available time of the work day to moving items from one place to another. It wastes energy and resources in that employee time could be better utilized and because some tools used for transportation (forklifts, trucks, pallet jacks) consume energy like electricity or propane. Also, by dedicating machines and operators’ time to waste activities they are no longer free and available to take on value-added activities. Figure 17.6 shows transportation waste. Reasons can be insufficient layouts and long distances between individual operations. The consequences of this waste are the increased time requirements and the decreased productivity. Decreased productivity will result in higher operating cost and can harm the profitability of the enterprise (Liker, 2004).

17.5.2 Inventory Inventory consists of excessive material of finished goods, semi-finished goods or raw material. Finished goods inventory is generally the most expensive inventory as

1. Transportation Definition • Unnecessary transport of material • Transport is a necessary type of waste however it should be reduced to a minimum

Possible reasons • Insufficient arrangement of needed material and devices • Physical distance between material delivery and usage • Interim storage of material (buffer)

Consequences • Additional space for transport

Examples • Long or additional transport of:

• Blocking of capacity due to additional logistic effort

• Raw material

• Possible damage of products

• Finished goods

• Tools and devices

Fig. 17.6 Transportation

17.5

Seven Types of Waste in Manufacturing: TIMWOOD

177

2. Inventory Definition • More material than needed according to planning in terms of: • Raw material • Semi-finished parts • Work in progress (WIP) • Finished goods

Possible reasons • Problems regarding planning and logistic processes • Bad supplier delivery performance and quality • High product variety

Consequences • Capital costs • Double handling, possible damages based on double handling, rework • Genuine problems won’t be discovered and therefore not solved • Search effort • Scrap

Examples • • • • •

Overfilled warehouses Overfilled place in production areas Buffer stocks in producton Crammed corridors Crammed desks

Fig. 17.7 Inventory

it has labour and other overhead attached to it along with the cost of material consumed during production. In order to reduce this inventory, process improvements as well as a higher accuracy in forecasting customer requirements is required. Inventory waste refers to the waste produced by unprocessed inventory. This includes the waste of storage, the waste of capital tied up in unprocessed inventory, the waste of transporting the inventory, the containers used to hold inventory, the lighting of the storage space, etc. Moreover, having excess inventory can hide the original wastes of producing said inventory. The environmental impacts of inventory waste are packaging, deterioration or damage to work-in-process, additional materials to replace damaged or obsolete inventory, and the energy to light, as well as either heat or cool, inventory space. Figure 17.7 displays the definition, reasons, consequences and examples for inventory. Inventory will have a negative impact on working capital and on cash flow, so that sophisticated production planning must focus on the optimum levels of inventory throughout the value chain and operations (Helmold & Terry, 2016a, b).

17.5.3 Motion Motion waste is the excessive movement of man, material or machines within the work space. Motion waste will lead to higher cost as the productivity decreases. Another problem of motion is the necessity for more time and capacity in operations than actually required. A proper workflow analysis and value stream mapping help to minimise this waste. Figure 17.8 outlines the definition, possible reasons, consequences and examples of this waste.

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3. Motion Definition • Every type of movement that doesn‘t directly serve value creation

Possible reasons • Inaccurate analysis of all workflows Inappropriate layout • Insufficient delivery of material and arrangement of tools

Consequences • Decrease of productivity

Examples

• Increase of lead time and capacity

• Long ways between tools, material and product or machine

• Insufficient ergonomics

• Missing material or tools

Fig. 17.8 Motion

17.5.4 Waiting Idle time of operators or other employees in operations and waiting for work to arrive or to be told what-to-do is a significant waste. Waiting or standstill times must be avoided as waiting results into reduced efficiency and productivity. Other outcomes are longer lead times and decreasing engagement and motivation of employees as illustrated in Fig. 17.9.

17.5.5 Overproduction Overproduction waste is defined as producing too many products too early and in advance. That means that parts in a big quantity are existing inside operations management, even though these parts are not needed. Figure 17.10 display possible reasons such as demand non-transparency or inadequate batch sizes. A consequence of this waste is that inventory increases drastically and that work-in-progress cost rise significantly.

17.5.6 Overprocessing Over-processing is related to all activities and processes in operations, which are more than the customer really needs. Figure 17.11 highlights possible reasons such as insufficient technology, bad design, inefficiencies or unawareness of customer specific requirements. Over-processing refers to any component of the process of

17.5

Seven Types of Waste in Manufacturing: TIMWOOD

179

4. Waiting Definition • A period in which no activities take place. • The employee is forced to wait and can‘t fulfil any value added activities. During the holding period the product is waiting for processing

Possible reasons • Insufficiently synchronised material and information flows • Insufficient line balancing of all processes • Missing material or tools • Lack of documentation • Waiting for quality approval

Consequences

Examples

• Reduced productivity

• Waiting for material or tools e.g. crane

• Decreasing efficiency

• Quality employees are not available

• Increased lead time

• Stopped processes due to missing resources (employees, defective machines, IT,...)

• Increase of capacity • Decreased of employee motivation

Fig. 17.9 Waiting

5. Overproduction Definition Definition • If more is produced than the internal or external customer needs

Possible reasons Possible reasons • Insufficient transparency of real demand • Production according to supposed optimal batch sizes • Instable processes • Early use of available capacity

Consequences Consequences • Generation of inventory (warehouse, WIP)

• Additional use of space • Blocking of capacities (machines, employees)

Examples • A lot of material in front of machines or assembly lines • Crowded warehouses

• Double handling, decrease of product quality

Fig. 17.10 Overproduction

manufacture that is unnecessary. Painting an area that will never be seen or adding features that will not be used are examples of over-processing. Essentially, it refers to adding more value than the customer requires. The environmental impact involves the excess of parts, labour, and raw materials consumed in production. Time, energy, and emissions are wasted when they are used to produce something that is

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6. Overprocessing Definition Definition • Process weakness in terms of sequence, content, technologies and resources

Consequences Consequences

Possible reasons Possible reasons • Insufficient technology • Not the most efficient procedure for the process • Insufficient analysis and design of processes • Due to process problems the product requirements in the specification are higher than required by the customer

Examples

• High production costs

• High tolerances

• Waste of material

• Wrong, faulty and not needed process steps

• Low efficiency

• Not optimal utilisation of resources

• High need for resources (employee, machine, material)

• Duplication of efforts

Fig. 17.11 Overprocessing

unnecessary in a product; simplification and efficiency reduce these wastes and benefit the company and the environment.

17.5.7 Defects Defects as shown in Fig. 17.12 refer to a product deviating from the standards of its design or from the customer’s expectation. Defective products must be replaced; they require paperwork and human labour to process it; they might potentially lose customers; the resources put into the defective product are wasted because the product is not used. Moreover, a defective product implies waste at other levels that may have led to the defect to begin with; making a more efficient production system reduces defects and increases the resources needed to address them in the first place. Environmental costs of defects are the raw materials consumed, the defective parts of the product requiring disposal or recycling (which wastes other resources involved in repurposing it), and the extra space required and increased energy use involved in dealing with the defects. The checklist in Fig. 17.13 is the ideal tool to assess operations in terms of the seven wastes. It is a proven method for identifying waste in process and activities (Helmold & Terry, 2016a, b).

17.5

Seven Types of Waste in Manufacturing: TIMWOOD

181

7. Defects Definition Definition • If right first time is not achieved

Possible reasons Possible reasons • Lack of machine and tool maintenance • Insufficiently trained employees • Product not according to customer requirements • Unstable or not standardized processes • No problem solving process established

Consequences

Examples

• Additional need for material, tools and capacity

• Increase of non-conformities

• Additional space for rework

• Increased quantity of scrap

• Increase of quality employees and checks

• Supply issues due to bad quality

• Retrofitting and repairing defect parts

• Increase of lead time

Fig. 17.12 Defects

T

Transport

How many times? Which routes? Empty containers?

i

Inventory

How much material is in front of a line/machine? What is the material range?

m

Motion

W

Waiting

o

Overproduction

Compliance with quality? Batch size?

o

Overprocessing

Proper tools? Proper settings? Proper instructions? Proper tolerances?

d

Defects

Motions of employee within the workstation: Destination? How many times? Routes? Duration? ？ Waiting for material, devices or supervisor? All information available? Missing documents?

Which mistakes? How often does it happen? Problem solving system?

Fig. 17.13 TIMWOOD checklist

17.5.8 Case Study: Alstom in China Alstom (formerly Bombardier) is recognized as a successful foreign enterprise in the Chinese rail industry. Alstom (formerly Bombardier) is also a specially qualified Western enterprise which supplies railway passenger trains (high-speed trains and intercity passenger trains), metro vehicles, monorail trains, APM systems and metro vehicle maintenance/services. Alstom (formerly Bombardier) Transportation in

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Fig. 17.14 Alstom (formerly Bombardier) Sifang transportation China—final testing. (Source: Author’s Source)

China has six joint ventures, seven wholly foreign-owned enterprises, and around 7000 employees (Bombardier, 2020). A wide range of our rail transportation and aerospace products are currently in service in the Chinese market. In total, more than 30,000 rail vehicles, locomotives, bogies and propulsion systems are in operation or on order in China, including more than 3500 high-speed train and intercity passenger train cars, 580 electric locomotives, over 2000 metro cars, and maintenance for 1600 metro cars as part of China’s growing urban mass transit market. Alstom (formerly Bombardier) is also supplying, or has already supplied, APM systems to China’s five largest cities: Beijing, Guangzhou, Shanghai, Shenzhen and Hong Kong. In addition, Alstom (formerly Bombardier) has supplied 104 tram cars for two other Chinese megacities (Nanjing/Suzhou) and in 2017 won its first monorail contract in China, for 240 cars. A total of over 14,000 Alstom (formerly Bombardier) bogies are currently in use in China’s mainline and urban mass transit vehicles while Alstom (formerly Bombardier)’s propulsion and signalling equipment, largely supplied to third-party metro car builders, are in operation in more than 30 Chinese cities. Figure 17.14 displays the assembly and testing line of high-speed trains in Alstom (formerly Bombardier) Sifang Transportation. Figure 17.15 shows the visualisation room of the International Procurement Office (IPO) in Shanghai. International purchasing offices or supplier management centres are part of the internationalization and change of corporate model in supplier management (Helmold, 2014a, b). Multinational corporations such as Volkswagen, Daimler, Siemens, Bosch or Alstom (formerly Bombardier) have purchasing offices in regions such as China, India or Eastern Europe, which offer savings potential or are geographically far removed from the parent company. Medium-sized partners expand through smaller offices or through collaboration with partners, purchasing offices or institutions such

17.5

Seven Types of Waste in Manufacturing: TIMWOOD

183

Fig. 17.15 Visualization at Alstom (formerly Bombardier) transportation—International Procurement Office. (Source: Author’s Source)

as the German centres in the metropolitan areas of China (Helmold & Terry, 2016a, b). In addition to offices, the German centres also offer contacts to government representatives or Chinese suppliers in order to make purchases from China (Helmold & Terry, 2016a, b). In 2015, Deutsche Bahn opened an international purchasing office. Previously, the logistics division, DB Schenker, had successfully established itself in many locations over the years. In 2005, companies such as Alstom (formerly Bombardier) Transportation or IBM opened an international purchasing office in Shanghai, China. In 2015, Deutsche Bahn decided to open a point-of-sale office in the same location. Developments show that it is advisable to establish an international purchasing office in China. Advantages can be outlined as follows: • Proximity to markets with a high degree of product and know-how maturity, e.g. Automotive industry or railway industry • Establish relationships with Chinese manufacturers and ensure compliance with quality requirements • Transfer of customer and production requirements to the suppliers • Early involvement of suppliers in the product development process as well as joint development • Exploitation of savings through direct purchasing as well as through the use of local pre- and semi-finished products in the production process of the suppliers • Acquisition of own end products in domestic markets • proximity to other high maturity Asian markets, e.g. Japan or South Korea Figure 17.16 depicts an example of the 5S concept in China at ZhongWang in Shenyang. The company changed in a very creative way the 5S philosophy into eight categories (8S).

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Fig. 17.16 8S example in China. (Source: Author)

References Alstom (formerly Bombardier). (2020). https://www.google.com/search?client¼firefox-b-d& q¼https%3A%2F%2Frail.Alstom+%28formerly+Bombardier%29.com%2Fen%2Fabout-us% 2Fworldwide-presence%2Fchina%2Fen.html Helmold, M. (2014a). Erfahrungen aus der Bahnindustrie. Lieferantenmanagement in China. Beschaffung aktuell, 22–25. Helmold, M. (2014b). Establishing a best-practice model of supplier relationship management (SRM) in multinational companies in the European transportation industry. Wissenschaftlicher Verlag. Helmold, M., & Terry, B. (2016a). Lieferantenmanagement 2030. Sicherung der Wettbewerbsfähigkeit durch wertfokussierte Lieferantenbeziehungen. Springer Verlag. Helmold, M., & Terry, B. (2016b). Global sourcing and supply management excellence in China. Springer Verlag. Liker, J. K. (2004). The Toyota way. McGraw-Hill.

18

Negotiation Management Tools

Simplicity is the ultimate Sophistication. Leonardo da Vinci

18.1

A-6 Negotiation Concept

Dr. Marc Helmold has been working in various management roles in the automotive and railway industries since the late 1990s. In these positions, he has negotiated with national and international customers and suppliers in the higher hundreds of millions. Projects worth billions of euros were won by well-known manufacturers of trams, commuter trains, regional trains and express trains. These projects have always involved difficult and mostly inappropriate negotiations. Since 2016 he is Professor of Business Administration, Strategic Management and Supply Chain Management (SCM). In addition to teaching and research, he advises companies on international and intercultural business and complex negotiations. Within this function and due to the deficits and weaknesses of existing negotiation concepts in an intercultural context, he has developed the A-6 negotiation concept. This concept is novel, intercultural, innovative, up-to-date, sustainable, unique; and has already been successfully implemented in various projects. The practical and easy-to-use concept comprises six phases from A-1 to A-6, which must be taken into account in each transaction in order to achieve optimal success (Helmold et al., 2019) (Fig. 18.1, Table 18.1). In addition to practical relevance, intercultural issues are also described in international transactions in countries such as the United States of America, China, France, India or other countries. Although the model is aimed at business negotiations, other negotiations, e.g. Political negotiations, negotiations among private individuals, negotiations on alimony, etc., be carried out. Lastly, the A-6 concept is a self-contained construct built sequentially in eight steps. This means that after the first step is done, you can go to the second, third up to the sixth and last step (A-6). The following figure shows the six steps from analysis to respecting and # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_18

185

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18 Negotiation Management Tools

A-1: Analysis of Negotiation Scope and Negotiation Partners

A-2: Alignment of Negotiation Strategies and Tactics

A-3: Aggregation and Affirmation of Arguments

A-4: Accomplishment and Amplification of Negotiations

A-5: Ascertation of Resistance and attacking Counterarguments

A-6: Administration of Contracts and Agreements Fig. 18.1 A-6 negotiation concept Table 18.1 A-6 concept—German and English Steps A-1 A-2 A-3 A-4 A-5 A-6

English Analysis of Negotiation Scope and Negotiation Partners Alignment of Negotiation Strategies and Tactics Aggregation and Affirmation of Arguments Accomplishment and Amplification of Negotiations Ascertation of Resistance and attacking Counterarguments Administration of Contracts and Agreements

German Analyse der Verhandlungspartner und Determinierung der Ausgangsposition Auswahl geeigneter Strategien und Taktiken für die Verhandlungen Aufbau und Argumentation der Verhandlungen Ausführung der Verhandlungen (Verhandlungsführung) Abwehr von Gegenargumenten und Bekämpfen von Widerständen Ausgestaltung der Verhandlungsergebnisse und Achtung der Vereinbarungen

Source: Author’s Source

following the agreement. After the detailed analysis, a selection of appropriate strategies and tactics will take place. The basis here is the script or manuscript, which is described in the context of this chapter. The strategies and tactics determine the reasoning and the structure of the negotiations. Once you have completed these steps, you can go to the actual trial. Here the action radius is determined. Within the strategy and argumentation possible counter-arguments of the other side and resistances were identified as well as tactics, in order to successfully break these resistances without leaving the negotiating partner the face. As a final step, the

18.3

Focus of the A-6 Negotiation Concept

187

design of the results of the negotiations and the observance of the negotiations are of crucial importance. The detailed explanation of each step will be in Chap. 8. With this negotiation guide, the A-6 concept is available in two languages, German and English. Other languages (Mandarin and French) are being planned. Even though the framework was developed in German, the English version has been customised to the needs and in line with language and cultural specifics Prof Terry, Professor in the UK and co-author of this book, ensured that formal and cultural elements have been integrated. Table 18.1 outlines the English and German steps of the A.6 negotiation framework. The script or manuscript plays a central role as a bargaining tool in the A-6 concept. The manuscript is the result of the individual steps, whereby the sequence is dynamic and flexible (not static) (Helmold, 2020). Dynamic in this context means to be very well prepared and to anticipate behavioral patterns of the other side. Dynamism in the negotiations also means reacting agile and flexible to advances by the negotiating party. In addition to a systematic preparation and analysis, international specialties are at the center of this model (Helmold, 2020). Similarly, in practice applied and proven tools are integrated so that the application in practice quickly and well applied is possible.

18.2

Successful Negotiations with the A-6 Concept

Dr. Marc Helmold and the co-authors of this book have been working in various management roles in the automotive and railway industries since the late 1990s. In these positions, Dr. Helmold negotiated with national and international customers and suppliers about complex projects in many countries in Europe, the Americas and Asia-Pacific, Japan and China. Projects worth billions of euros were won as manufacturers of trams, commuter trains, regional trains and express trains. These projects also always involved difficult and intercultural negotiations. Since 2016 Dr. Helmold is Professor of Business Administration, Strategic Management and Supply Chain Management (SCM) in Berlin. In this position he teaches negotiations in the international context on master levels. In parallel he is conducting research in this area of intercultural conflict management. In addition to teaching and research, he advises companies on international and intercultural business and complex negotiations. Within this function and due to the deficits and weaknesses of existing negotiation concepts in an intercultural context, he developed the A-6 negotiation concept (Helmold et al., 2019).

18.3

Focus of the A-6 Negotiation Concept

The A-6 negotiation concept is designed by the practitioner Dr. Marc Helmold as systematic and structured tool in negotiations of business transaction between two or more profit oriented companies, either start-ups, SME or MNC. It applies to company in the public and private sector. The systematic and clear structure enables negotiators to achieve the breakthrough in business negotiations. Although many

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Table 18.2 Recommendations for the A-6 concept Recommendations for the A-6 concept Regular training and acquisition of key competencies through workshops and training Systematic and structured analysis of core elements and critical success factors Assessment of scope, personalities, strategies. Tactics, motives, objectives and intercultural elements Consideration of intercultural aspects as key aspects for negotiations Quantification and priorisation of objectives Determination of scope with minimum and maximum objectives (Q-C-D-T plus alpha) Usage of nonverbal analytical tools and tactics (e.g. mirroring) Definition of suitable strategies and tactics (e.g. setting time deadline) Argumentation and sequential proceeding in line with the A-6 structure

elements apply also in non-government or non-profit areas, the concept has not yet been applied in these areas. Furthermore, it is recommended to undergo some training before independently to negotiate in order to use the full potential out of this model. Finally, it contains unique international and intercultural elements. The book has been published by five authors and several co-authors with extended international work experience and research on master and doctoral levels, which gives the book a specific and unique nuance in industry and academia. In summary, one can say that the A-6 model is a track proven international concept for business negotiations. Table 18.2 shows the recommendations which are suitable when applying the A-6 Negotiation concept.

18.4

Case Study: EU Negotiation Strategy for COVID-19 Vaccines

On 17 June, the European Commission presented a European strategy to accelerate the development, manufacturing and deployment of vaccines against COVID-19. The EU Vaccines Strategy intends to ensure the production in Europe of qualitative, safe and efficacious vaccines, and to secure swift access to them for Member States and their populations. Moreover, the Strategy reflects the global solidarity effort and ensures equitable access to an affordable vaccine as early as possible. Joint action at EU level is the surest, quickest and most efficient way of achieving these objectives. No Member State on its own has the capacity to secure the investment in developing and producing a sufficient number of vaccines. It is only through swift and unified action by the EU and its Member States that sufficient and speedy supplies of a safe and effective vaccine can be ensured. A common strategy allows better hedging of bets, sharing of risks and pooling investments to achieve economies of scale, scope and speed. The Commission has signed two first contracts to allow the purchase of a vaccine, once proven safe and efficient, with AstraZeneca and Sanofi-GSK. Successful exploratory talks were concluded with Johnson & Johnson on 13 August, CureVac on 18 August, Moderna on 24 August and BioNTech on 9 September. All

References

189

Member States have endorsed the approach set out by the Vaccines Strategy and signed up to an agreement for its implementation. As a result, all Member States are represented at the Steering Committee which discusses and reviews all aspects of the Advanced Purchase Agreement (APA) contracts before signature. The Committee appoints the members of the Joint Negotiation Team, which negotiates the APAs with the vaccines developers and reports to the Committee. All participants in these instances have been appointed by their Governments and have signed declarations of absence of conflict of interest and confidentiality. Before an Advanced Purchase Agreement (APA) is negotiated, the Negotiation Team holds exploratory talks with the company to find out whether proceeding into detailed contractual negotiations is reasonable. If this is the case and a common understanding is reached on a terms sheet, a tender invitation is sent to the company, which then has to propose an offer. An APA is concluded when both sides have finalised the contractual work. This is discussed and agreed with the Steering Committee. The conclusion of an APA requires the approval of the Commission. If the APA provides for an obligation for the Member States to purchase vaccine doses (even if there might also be additional optional doses in the APA), Member States have 5 working days to notify if they wish to opt-out. The contract is only signed if at least four Member States are ready to be bound by it. If the APA provides only for an option for Member States to purchase vaccine doses at a later date, the Commission can approve and sign the APA directly with the company concerned. Member States can decide later whether to exercise the option. It are the Member States that are responsible for purchasing the vaccines when they become available.

References Helmold, M. (2020). Lean management and Kaizen. Fundamentals from cases and examples in operations and supply chain management. Springer. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Springer.

Change Management Tools

19

The measure of intelligence is the ability to change. Albert Einstein

19.1

Definition of Change Management

The permanent change and transformation of organisations is an important element in order to adapt to the environment. Change Management can be defined as the sum of tasks, measures and activities that are intended to bring about a comprehensive, cross-departmental and far-reaching change in an enterprise or organisation. Change Management includes the implementation of new a mission, vision, strategies, structures, systems, processes and behaviours in an organization. The ultimate goal of change is to obtain a long-term favourable position in the market and to gain a sustainable competitive advantage (Helmold, 2020). Synonyms for Change management found in literature are Business Process Reengineering, Turnaround Management, Transformation Management, Lean Management, Innovation Management or Total Quality Management (Vahs, 2019). Change is increasingly determining the everyday businesses and activities of companies. In order to manage change in the most optimal way, special change management techniques are required, which can be summarized under the term Change Management (Lauer, 2019, 2020). The human factor is at the forefront of all considerations, because the implementation of change depends on the active support of employees. Since everyone has their own needs, ideas and experiences, some of which do not conform to the official company organization, there can be no simple recipe for how to successfully manage change. Rather, it is a complex process, that has to start at three points: the organisation and individuals concerned, the corporate structures and the corporate culture (Lauer, 2019). Another important element in the context is the technological factor including systems, routines, methods and instruments (Helmold, 2020). Figure 19.1 summarizes the elements of change management (Helmold & Terry, 2020). # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_19

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Strategy

Culture

Mission, Vision, Corporate and Divisional Objectives

Values, Behaviour, Communication, Collaboration

Change Management Triggers

Organisation Leadership, Structures, Processes

Technology Systems, Methods, Routines, Instruments

Fig. 19.1 Elements of change management. (Source: Author’s source)

19.2

External and Internal Reasons for Change

The need for corporate change can be caused both externally and internally. Externally, companies face an increasingly dynamic environment that requires constant adjustment of their own structures if they want to be successful in sales and also in the preceding procurement markets. The external change is caused by the market environment, politics, technology, ecology, the overall economy or institutions, as well as in the markets themselves, for example by increasing competition. To explain internal change, the metaphor of human development is used, which—like corporate development—is characterized by a succession of growth, crisis and higher maturity. There are so-called life cycle models for entrepreneurial change that exemplify the typical development phases. Change is often necessary, however, because companies are successful in exaggerating the offensive spirit of their efforts. Here too, the connection to the human psyche is established and this phenomenon is analogously referred to as “burn-out”. Figure 19.2 outlines triggers for change from outside (exogeneous triggers) and inside of the organisation (endogeneous triggers). Exogeneous triggers can be described as governmental requirements, new laws, regulations, economic impacts, competitive reasons, market developments, innovations or the advice from consultants. Endogeneous triggers are caused by internal stakeholders, such as managers, employees, shareholders, banks, investors or customers.

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Exogeneous Triggers for Change • • • • • • • •

Governmental Reasons Laws and Regulations Economic Impacts Competition Market Developments Innovations Trends Consultants

Endogeneous Triggers for Change • • • • • • •

Management Employees Banks and Investors Suppliers Customers Other Stakeholders Production and Service Requirements

Fig. 19.2 Triggers for change. (Source: Author’s source)

Unfreezing

Changing

Freezing

Fig. 19.3 Elements of Kurt Lewin’s change management model. (Source: Author’s source)

19.3

Change Management Concepts

19.3.1 Change Management Concept of Kurt Lewin The Kurt Lewin’s model (unfreezing, changing and refreezing) is widely accepted in psychology for implementing change. The implementation of change involves the current state of organization have to be changed into a desired state, but this will not occur quickly but simultaneously. Kurt Lewin’s Three Stages model or the Planned Approach to Organizational is one of the cornerstone models which is still relevant in the present scenario. Lewin, a social scientist and a physicist, during early 1950s propounded a simple framework for understanding the process of organizational change known as the Three-Stage Theory which he referred as Unfreeze, Change (Transition) and Freeze (Refreeze). According to Lewin, change for any individual or an organization is a complicated journey which may not be very simple and mostly involves several stages of transitions or mis-understandings before attaining the stage of equilibrium or stability. For explaining the process of organizational change, he used the analogy of how an ice block changes its shape to transform into a cone of ice through the process of unfreezing. Lewin’s model is shown in Fig. 19.3. Stage 1—Unfreezing: This is the first stage of transition and one of the most critical stages in the entire process of change management. It involves improving the readiness as well as the willingness of people to change by fostering a realization

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for moving from the existing comfort zone to a transformed situation. It involves making people aware of the need for change and improving their motivation for accepting the new ways of working for better results. During this stage, effective communication plays a vital role in getting the desired support and involvement of the people in the change process. Stage 2—Changing: This stage can also be regarded as the stage of Transition or the stage of actual implementation of change. It involves the acceptance of the new ways of doing things. This is the stage in which the people are unfrozen, and the actual change is implemented. During this stage, careful planning, effective communication and encouraging the involvement of individuals for endorsing the change is necessary. It is believed that this stage of transition is not that easy due to the uncertainties or people are fearful of the consequences of adopting a change process. Stage 3—Freezing: During this stage, the people move from the stage of transition (change) to a much more stable state which we can regard as the state of equilibrium. The stage of Refreezing is the ultimate stage in which people accept or internalize the new ways of working or change, accept it as a part of their life and establish new relationships. For strengthening and reinforcing the new behaviour or changes in the way of working, the employees should be rewarded, recognized and provided positive reinforcements, supporting policies or structures can help in reinforcing the transformed ways of working.

19.3.2 Change Management Curve of Elisabeth Kürbler-Ross In 1969 Kürbler-Ross described five stages of grief in her book “On Death And Dying”. These stages represent the normal range of feelings people experience when dealing with change in their lives or in the workplace. All change involves loss at some level. The “Five stages” model is used to understand how people react to change at different times (Kübler-Ross & Kessler, 2005). The stages were first observed as a human response to learning about terminal illness. They have also been used to understand our individual responses to all kinds of change. The five stages of grief Kubler-Ross observed and wrote about are: Denial, Anger, Confusion, Crisis and Acceptance. The model has been extended by several scientists and change management experts with Re-Orientation and Integration (Helmold, 2020) as shown in Fig. 19.4. The Change Curve is a popular and powerful model used to understand the stages of personal transition and organizational change. It helps you predict how people will react to change, so that you can help them make their own personal transitions, and make sure that they have the help and support they need. Step 1—Denial and Shock It is said that every change at the beginning is difficult. Change is a shock to people, as they have to get rid of standard and beloved habits and behaviours. Transformation and changes scare many employees, who ask questions like:

Performance and Motivation

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7. Integration

Open and d hidden n Resistance

6. Re-Orientation

Rejection

Shock 1. Denial

2. Anger Frustration

5. Acceptance

3. Confusion

Valley y off the e Tears

4. Crisis

Time Fig. 19.4 Change management curve. (Source: Author’s Source, adopted from Kübler-Ross)

• • • • • • • • • •

What’s new for me? Where is my path going? Will I keep my job? Why do we need a change at all? Are there alternatives? What is the goal of the change? What does this change bring to me (the person concerned)? What does this change mean for me and my career? What do I need for this change? How and where will I be supported in this change and get help?

Many questions come to mind of those affected. It is particularly important here for the company, undergoing a transition and transformation process, to have a clear and appropriate communication strategy. Fears and shock not only block productivity and creativity, in the worst case they can paralyse an entire company. Open, honest and transparent communication via various channels can minimise anxiety and shock. Communication here is in no way limited to the intranet. Managers also have to pick up their employees and colleagues; in groups and one-on-one discussions, barriers can be reduced or prevented immediately before they arise. Step 2—Anger If there was good communication, open and transparent reporting right at the start of the change, the anger and rejection factor will be optimally lower.

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However, the shock is transitioning to anger. In this phase change managers hear repeatedly: • • • • •

We have never done this before I don’t want this I don’t need it It does not make sense It is not good for me

In this phase companies often have a strong wind of rejection and resistance. According to change management experts, resistance can take place actively as well as passively, verbally or non-verbally. Resistance refers to the activities and the action of individuals or groups who oppose something that should be agreed as an objective in the negotiation (Helmold & Samara 2019). Resistance can be shown in a visible and open way (open resistance) or in a more subtle and disclosed way (hidden resistance). Resistance in negotiations normally come from the negotiation opponents, but can also come from individuals or groups of the same negotiation side (Helmold et al., 2020). Resistance is a type of opposition and can be broken through analytically applying emotions or warning tactics. The most difficult problem is to identify signals of resistance, when the employees or people do not openly, formally or informally convey their concerns and resistance. In such case nonverbal analytical techniques help to identify signals of opposition (Helmold et al., 2019). Resistance occurs verbally or non-verbally in negotiations in various forms, which in most cases is unaware of the persons involved. Negotiations through language (verbal) or gestures or facial expressions (non-verbal, i.e. behavior or facial expression) must be negotiated (Hilsenbeck, 2004). Open Resistance Open resistance is characterized by the fact that it is deliberately exercised by opponents of the opposition and thus also connects a goal. Recognizing open resistance is relatively simple, as expressions and behaviours are openly visible: • Open contradiction (examples: “I disagree . . .”) • Open rejection (example: “I cannot agree with your proposal . . .”) • Open intervention (example: “I cannot accept your proposal, so I suggest that . . .”) • Rejection by obvious shaking of the head • Rejection by gestures with the poor or index fingers Normally, the reasons for open resistance have a rational cause, which can be discussed with those affected and whose overcoming all interested parties have an interest (Hilsenbeck, 2004). This form of resistance is usually constructive, so that dealing with open resistance is possible. To break resistance or to refute and mitigate

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it with a fact-based argumentation can be a suitable strategy here. In this way, the energy which the resisting persons have invested in their resistance can be channelled in the sense of reaching the goals of the transformation, or in simple terms. Hidden Resistance Much more difficult is dealing with covert or hidden resistance. In this context, people, who are resisting, usually have no interest in being recognized (Hilsenbeck, 2004). For personal or tactical reasons, they act out of the hidden or the second row. Their interests are mostly destructive, that is, they want to prevent something without being recognized as the causer. Paradoxically, in many cases, resisting parties are not even aware of their resistance. This makes the handling of this form of resistance even more difficult (Volk, 2018). If the covert resistance is not recognized in time, the entire outcome of the transformation and change may be at stake. Signals for hidden resistance in transformation processes can be: • Comments and statements with limitations (example: “I understand your point of view, but . . .”) • The absence of important decision makers (alpha types) or influencing persons (beta types) • The late appearance in change management meetings of important decision makers (alpha types) or influencing persons (beta types) • The permanent postponement and of meeting and delay of tasks due to alleged scheduling difficulties • Nonverbal signals of resistance such as mental absence or disinterest. The demand for perfect solutions • The demand that we move as a negotiator first • The extensive and long consideration and discussion of relatively unimportant special cases • The general agreement with simultaneous registration of reservations, which should be clarified later Handling Resistance Resistance must be recognized in transformational processes and it is important that managers determine and identify the motives of the resistance. With open and rational resistance, counterarguments and the reformulation of one’s own goals can lead to the refutation of the resistance and the achievement of a result. For questions that do not play a key role in the transition, managers can also ignore the resistance and respond to the employee’s demands or tackle them later. If the ram state is not resolvable, and this is at the core of the transition, there will probably be no bargaining success. Unconscious or hidden resistance is more difficult to recognize as the examples demonstrate: detect resistance, understand the resistance, weigh the resistance and finally break resistance. It is advisable to listen to the resistance of

198 Table 19.1 Breaking resistance

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Breaking resistance Breaking resistance with factual arguments Breaking resistance through warnings Breaking resistance by concessions in unimportant areas When getting resistance, change place and make breaks When facing resistance deflection can help Understand and recognition of resistance Source: Author’s Source

the other side and to understand the motives (Volk, 2018). A change agent can help by listening to the fear and concerns of the employees. For those employees, who are eventually not willing to follow the change, it is important to break resistance. Breaking resistance can be done via certain patterns like warning, making concessions, rationality, conviction by arguments, rational emotions or appeal to mutual benefits. Warning means to have a facts-based signal (verbally or non-verbally) that the change and transformation will be pursued for the sake of the company. Without that change, the company may not succeed in the long-term. A warning is factual and objective and should be phrased with good argumentation and clear message. In ultimate cases it can be the dismissal of employees. Another way could be the granting of small and individual minor concessions to the negotiation opponent. When understanding the motives of employees, it could be possible to identify areas to give in that area of importance for employee. Deflection might also a be a way to break such resistance (Helmold et al., 2019). Table 19.1 gives recommendations how to handle resistance successfully. Step 3—Confusion and Frustration The change curve is now going down dramatically steeply. After the rejection, those affected experience severe frustration and confusion. It descends rapidly downhill towards a state of a crisis, the valley of tears. At this point, many employees come to the point of rational acceptance. Employees resign to the situation, but still argue against it. Regardless of the change, a corresponding position from the management should be available in this stage. This should openly allow problems, fears or simply frustration to be unloaded. A change agent can help employees to cope with the fears. In this way, the confusion and frustration can be bundled and quick solutions offered. It should be a trained change manager at least or a change expert or systemic consultant. The insight that the change also creates new opportunities and opportunities does not exist here yet. Step 4—Crisis—Valley of the Tears From a purely rational perspective, employees already know and understand at this stage, that that there is no way of return. The path the enterprise has taken is irreversible. At this stage, affected employees affected reach an emotional low. They gave everything, climbed the inner walls, were annoyed and fought so hard against the change, but they did not succeed. We all know the feeling when the knot opens and the light at the end of the

19.3

Change Management Concepts

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tunnel becomes visible. Employees can now finally and emotionally accept the change in order to proceed with the transformation. Step 5—Acceptance and Try-it-Out After the valley of tears, those employees affected are fresh and free. The mind is cleansed, the mindset opens for something new. The person concerned actively wants to see how and what is possible, what happens and where the journey is going. The first hesitant statements can be: • • • • •

Maybe there is something good My everyday life could improve It’s not as difficult as I thought! It does not look as bad as I thought I understand now the need for change

In this stage, Management should offer support to those affected in this phase through change agents and frequent meetings. It is now important to keep the employees encouraged in trying out, testing and playing with the new tools or systems. The more help is offered through all phases, the better, smoother and faster the transition will proceed. Step 6—Re-Orientation After many test runs, trying out and reviewing the documents, those affected increasingly come to realize that it is time for a new start. Added value is actively recognized, the light at the end of the tunnel shows the first outline of the landscape. In this stage managers can now go to the full integration. Step 7—Integration In the last stage, the change has been integrated into the company. New tools, methodologies or processes are a matter of course in everyday life. The question of ‘why’ no longer arises. Those affected live and communicate added value openly. Formerly affected people become ambassadors and helpers for colleagues who are still in the midst of the change curve. These positive influences support the process and the working atmosphere.

19.3.3 Change Management Phase Model of Kotter Kotter analysed that 70% of all change projects fail, most of them in the initial phase. This is the research result of John P. Kotter, an expert in the field of change management. Two factors are responsible for the low success rate: Not the technology, but the human being is the greatest obstacle to change. Based on this knowledge, Kotter developed the 8-step model in 1996. The theory shows eight phases of change management and gives managers tips on how to successfully drive change. The focus of the model is communication—from person to person. The 8-step model by John P. Kotter is a further development of the popular 3-phase model by Kurt Lewin. According to the theory, changes in companies can only be successful if they

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1. Feeling and Situation of Urgency 2. Transformational Leadership Coalition 22. Mission, Vision and Strategic Objectives 4. Communication of Mission, Vision and Goals 5. Clearing of Obstacles and Roadblocks 6. Establishment of short-term Objectives and Success 7. Consolidation of short- & long-term Objectives 8. Integration of Change into Corporate Culture Fig. 19.5 Change management model by Cotter. (Author’s Source)

go through all eight stages of change and are intensively accompanied by managers (Kotter, 2012). The eight steps are outlined in Fig. 19.5. 1. Show Urgency Raise awareness of the urgency of change among both managers and employees. For example, develop scenarios that could occur if there is no change. Discuss with your managers and employees and make strong arguments. 2. Build Leadership Coalition Build a good leadership team by getting trend-setting people for your idea and bringing them together under the flag of change. Make sure you have a good mix of people from different departments and with different skills. 3. Develop Mission, Vision and Strategy Wrap up a strong vision and concrete strategies with which you want to achieve the goal. Communicate this in a well-prepared and strong speech. An overarching goal for the company helps to implement change. 4. Communicate the Mission, Vision and Strategies Constant drip hollows the stone: Do not be afraid to communicate the vision to the managers and employees again and again. This creates trust and increases motivation. 5. Clear Obstacles Are there structures in your company that slow down change? Take a close look at the status quo and get rid of unfavorable organizational structures, work processes and routines. 6. Make short-term Successes visible

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Do not set goals that are too time-consuming and costly to begin with, but also define intermediate goals that can be reached quickly. Employees who achieve these goals should be rewarded. 7. Continue driving Change After each goal is achieved, analyze what went well and what could have gone better. Always develop new ideas and goals and bring new employees to your management team. 8. Anchoring Changes in the Corporate Culture Anchor the achieved goals firmly in your corporate culture. Only after this has been achieved can Kotter speak of a successful change management process. Since Kotter’s 8-phase model gives specific instructions for successful change management, it can serve you well in practice. Critics complain that Kotter’s model does not explain how to act in the event of setbacks and that initiatives by employees or so-called “bottom-up” perspectives are ignored. However, like no other change management model, it shows the importance of good communication for sustainable change (Kotter, 2012).

19.3.4 ADKAR Change Management Model The ADKAR change management model was created by Jeffery Hiatt in 1996. The change management concept It is a bottom-up method which focuses on the individuals behind the change (Hiatt, 2006). It’s less of a sequential method and more of a set of goals to reach, with each goal making up a letter of the acronym. By focusing on achieving the following five goals, the ADKAR model can be used to effectively plan out change on both an individual and organizational level: • • • • •

Awareness (of the need to change) Desire (to participate and support the change) Knowledge (on how to change) Ability (to implement required skills and behaviors) Reinforcement (to sustain the change)

Hiatt sees the change of the individual as the basis for sustainable corporate success. The transformation of an entire company can only succeed through individual changes. Thus, the transformation can be understood as the sum of many small changes. A change is only successful when employees adopt new tools, techniques and processes, fully implement them and maintain them in the long term. Then the ROI, the “Return on Investment”, can also be clearly displayed. When enterprises and its managers drive individual changes, the organisation will also master organizational changes (Hiatt, 2006). There is no need for complex, time-consuming methods, which are actually a science in themselves! As a change manager and change agent, companies need an easy-to-understand, simple and comprehensive tool or method with which they can

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quickly identify gaps and barriers in the change process of the respective employee. Only then management will be able to lead and guide the employees through the change in a targeted manner (Hiatt, 2006).

19.3.5 McKinsey 7S Model McKinsey 7s model is a tool (Fig. 19.6) that analyses firm’s organizational design by looking at seven key internal elements: strategy, structure, systems, shared values, style, staff and skills, in order to identify if they are effectively aligned and allow organization to achieve its objectives (McKinsey, 2020). McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert Waterman and Julien Philips with a help from Richard Pascale and Anthony G. Athos. Since the introduction, the model has been widely used by academics and practitioners and

Strategy

Skills

Structure

Subordinate Goals Shared Values Style

Systems

Staff

Fig. 19.6 Change management communication. (Source: Author’s Source, adopted from McKinsey)

References

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remains one of the most popular strategic planning tools. It sought to present an emphasis on human resources (Soft S), rather than the traditional mass production tangibles of capital, infrastructure and equipment, as a key to higher organizational performance. The goal of the model was to show how seven elements of the company: Structure, Strategy, Skills, Staff, Style, Systems, and Shared values, can be aligned together to achieve effectiveness in a company. The key point of the model is that all the seven areas are interconnected and a change in one area requires change in the rest of a firm for it to function effectively. Figure 19.6 outlines the seven categories in the McKinsey model, which represents the connections between seven areas and divides them into ‘Soft Ss’ and ‘Hard Ss’. The shape of the model emphasizes interconnectedness of the elements (Helmold, 2020).

19.4

Case Study: Change Management in Nissan

The three stages of Change Management of Kurt Lewin can be aptly explained through the aid of an example of Nissan Motor Company which was on the stage of bankruptcy due to the issues of high debts and dipping market share. During that period, Carlos Ghosn took charge as the head of the Japanese automaker who was faced with the challenge of implementing a radical change and turning around the operations of Nissan, yet by keeping the resistance to change under control which was inevitable under such circumstances by forming cross-functional teams to recommend a robust plan of change in different functional areas. For facing the business challenges, he developed a change management strategy and involved the employees in the process of change management through effective communication and reinforcement of desired behaviours. For refreezing the behavioural change of the employees, he introduced performance-based pay, implemented an open system of feedback for guiding and facilitating the employees in accepting the new behaviour patterns at work.

References Helmold, M. (2020). Lean management and Kaizen. Fundamentals from cases and examples in operations and supply chain management. Springer. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Springer. Helmold, M., Dathe, T., & Hummel, F. (2020). Successful international negotiations. A practical guide for managing transactions and deals. Springer. Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Springer. Helmold, M., & Terry, T. (2020). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Hiatt, J. (2006). ADKAR: A model for change in business, government and our community. Prosci Learning Center Publications. Hilsenbeck, T. (2004). Verhandeln. Handbuch von Dr. Thomas Hilsenbeck. http://www.thomashilsenbeck.de/wp-content/uploads/Dr-Th-Hilsenbeck-Handbuch-Verhandeln-Vers-5_0.pdf

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Kotter, J. P. (2012). Leading change. Harvard Business Press. Kübler-Ross, E., & Kessler, D. (2005). On grief and grieving: Finding the meaning of grief through the five stages of loss. Scribner. Lauer, T. (2019). Change management. Der Weg zum Ziel. Springer. Lauer, T. (2020). Change management. Fundamentals and success factors. Springer. McKinsey. (2020).7-S-Framework. https://www.mckinsey.com/business-functions/strategy-andcorporate-finance/our-insights/enduring-ideas-the-7-s-framework Vahs, D. (2019). Organisation: Ein Lehr- und Managementbuch. Schäfer Poeschel. Volk, H. (2018). Emotionale Dynamik eines Gespräches verstehen. Was den alltäglichen Wortwechsel entgleiten lässt. Beschaffung aktuell, S70–S71.

Innovation Management

20

Innovation distinguishes between a leader and a follower. Steve Jobs

20.1

Introduction to Innovation Management

“Innovation” comes from the Latin word “innovare” and stands for renewal or reformation. From an economic point of view, innovation is something complex and new that brings economic benefits for an organization or and for the company. Innovation management includes elements such as ideas, inventions and diffusions (Müller-Prothmann & Dörr, 2019). Innovations include the generation of ideas and the constant validation and review of these ideas as part of a structured innovation process (Nelke, 2016). Innovation Management comprises three levels, as shown in Fig. 20.1. In addition to the operational level, the working level, there are the strategic and normative levels (Stibbe, 2019). Innovations are decided on the normative and strategic level and put into practice on the operative level (Helmold & Samara, 2019). Terms that are often used in connection with innovation are ideas, collections of ideas and inventions. An invention or invention must be differentiated to the extent that it has not yet been exploited and used as a creative achievement of a new problem solution compared to innovation. It is the same with the idea, which is a creative thought of something new. In all cases, “new” can always be seen relatively. It can be new for this situation, the company or the world. In particular new developments such as New Work, Industry 4.0 or increasing globalization have an important impact on innovations and innovation management (Granig et al., 2018). Of central importance are the collection of ideas, the selection and the decision which ideas are implemented. This process must be managed by the higher management (Helmold & Samara, 2019). Management is a term that is used constantly in companies. It stands for the management of a task and for the coordination of activities in order to achieve a defined purpose and goals. Accordingly, innovation management is the structured # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_20

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Fig. 20.1 Innovation management levels. (Source. Author’s Source)

Innovation Management

Higher Management Normative Level Strategic Level Operational Level

promotion of innovations in companies and includes tasks in the planning, organization, management and control of these innovations. Innovation management deals with all measures to favour innovations in organizations and to generate benefits, for example: • • • • • •

New products and services to conquer new markets Improved products and services to stand out from the competition Improvement of internal processes in order to strengthen the company Innovations to from the inside or to save costs Development of new business models to use new sources of income New Work Styles that enable Employees to achieve a better Performance

20.2

Technical Relevance and Attractivity

Innovations are usually complex undertakings with a high expenditure of technology, use of resources and therefore usually cause very high costs and investments. It is therefore imperative that the company management sustainably evaluate every innovation with regard to its prospect of success, and this with regard to strategic relevance, technology expenditure, benefits and resource intensity. Ideas and possible innovations always require a strategic and resource-based review (Pfeiffer & Weiß, 1995; Pfeiffer et al., 1991). Figure 20.2 shows the relationship between strategy and resource use.

Resource Intensity

Fig. 20.2 Relationship between strategy and resources. (Source: Author’s Source)

207 high

Strategic Relevance and Attractivity

20.4

Experiment

Optimisation

Identification Elimination

low low

20.3

Investment

Resource Intensity

high

Strategic Relevance of Innovation Management

The strategic relevance and attractiveness of the innovation is the sum of all technical and economic advantages that can be gained by exploiting the strategic development opportunities in a technology area. The technology attractiveness depends on the one hand on the technology properties (potential side) and on the other hand on the requirements of (future) users (demand side). The two sizes of the technology portfolio, technology attractiveness and resource strength, each represent a (highly) aggregated evaluation result in relation to deeper individual factors. Experts envisage the following things to check and determine technology attractiveness (Helmold & Samara, 2019): • Further development potential: To what extent is a technical further development and thus performance increases and/or cost reductions possible? • Range of application: How can the number of possible areas of application of the technology and the quantities per area of application be assessed? • Compatibility: What negative or positive effects can be expected in user and surrounding systems (innovation obstacles, drivers)?

20.4

Resource Intensity

The strength of the resources expresses the extent to which the assessed company has the prerequisites in comparison to its potential competitors to make the considered technological alternative successful, i.e. H. in a timely manner and in the form of marketable products. In other words, it is a measure of a company’s technical and

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economic strength or weakness in relation to a technology relative to its competitors. Experts in tourism propose the following three indicators to determine the strength of resources (Helmold & Samara, 2019): • Technical-qualitative degree of mastery: How is our technology-specific knowhow to be assessed in relation to the competition, is there a lead or lag in development? • Potentials: To what extent are financial, human and material resources available to exploit the existing further development potential of the technology? • (Re) action speed: How quickly can the evaluating company exploit the further development potential of the technology compared to the competition?

20.5

Future Potential of Innovations

In addition to the studies described above with regard to strategic relevance and use of resources, innovations must be subjected to a future prognosis in which the future prospects of success are evaluated. Scenario analyses can be used to forecast the development of the user side (Pfeiffer et al., 1991) [155]. Pfeiffer and his co-authors also emphasize the great importance of a higher-level system and environment perspective that extends beyond individual technologies. On the one hand, this means that technical peripheral systems are included in the analysis (e.g. the establishment of a methanol or hydrogen supply infrastructure required for the implementation of fuel cell drives for cars). On the other hand, non-technical framework conditions are also decisive for the technology assessment (e.g. the possible tightening of exhaust gas legislation). In the context of the identification of innovations, the necessary resources and strategic relevance are still relatively low. In this phase, ideas are collected, evaluated and selected. In the next step, the strategically relevant ideas must be tested (Fig. 20.2: Experiment). This testing usually takes place through experiments. However, observations, workshops, panels or analysis groups can also be used. With the selection of strategically important innovations, the use of resources in companies automatically increases. Primary materials have to be bought, the products have to be mass-produced and marketing towards customers requires proactive marketing. This phase of the investment involves a very high expenditure of resources and thus financial resources (equity or debt). After the investment phase, optimization begins so that fewer resources are required. The optimization takes place through standardization, unification, volume effects or technical innovations. In the last step, if it turns out that the innovation no longer has any strategic relevance, all activities are eliminated and shut down (Helmold & Samara, 2019).

20.7

20.6

Case Study: Digital Innovation in a Bakery in Tokyo

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Fields and Tasks of Innovation Management

Innovation management forms two key pillars. On the one hand, innovation management includes the creation of suitable and structured framework conditions so that ideas arise everywhere in the company and are implemented into successful innovations. It is very much about organizational development activities (Helmold, 2021). And secondly, the actual innovation, the active search, development and implementation of ideas. This requires creativity and appropriate project management, for example. Innovation management is very versatile and multifaceted. The fields of action of innovation management include the following elements: • Future management: Identification of trends and future opportunities and risks • Development of the innovation strategy and planning of the innovation activities, for example with an innovation roadmap • Organization and distribution of roles in innovation management, such as decision-making structures and process ownership • Idea management for finding, developing and evaluating ideas • Innovation process for transforming an idea into a successful innovation: concept development, business plan, solution development, prototypes, implementation and marketing • Creating an innovation culture that promotes innovation • Portfolio management and innovation controlling (e.g. innovation indicators) to control innovation activities • Dealing with patents and property rights. • Open innovation and innovation networks to use external innovation sources and resources. • Management of change (change management) in the course of innovation projects Figure 20.3 depicts innovations in several areas like products, networks, services, processes, communication systems, routines, concepts or activities (Helmold & Terry, 2021).

20.7

Case Study: Digital Innovation in a Bakery in Tokyo

Figure 20.4 shows an example of New Work in a bakery store in Tokyo. The device helps customers and employees to focus on relevant activities, rather than non-adding value processes. The customer can place the selected goods on the scanning device. A camera is identifying the goods purchased and showing the price. The customers can pay easily with cash or credit card. The device helps employees to focus their activities on giving advice to customers rather than payment execution. Additionally, the process improved the transaction time significantly. There is no waiting time anymore for customers. Thus, an innovation helped to create more added value to customers.

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20

New Processes

New Digital Communication Systems

New Services

New Routines

New Networks

New Products

Innovation Management

New Concepts

Innovation Management

Fig. 20.3 Innovation elements. (Source. Author’s Source)

Fig. 20.4 New work innovation in a bakery in Tokyo. (Source. Author’s Source)

New Activities

References

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References Granig, P., Hartlieb, E., & Heiden, B. (2018). Mit Innovationsmanagement zu Industrie 4.0: Grundlagen, Strategien, Erfolgsfaktoren und Praxisbeispiele. Springer. Helmold, M. (2021). Kaizen, Lean Management und Digitalisierung. Mit den japanischen Konzepten Wettbewerbsvorteile für das Unternehmen erzielen. Springer. Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Müller-Prothmann, T., & Dörr, N. (2019). Innovationsmanagement: Strategien, Methoden und Werkzeuge für systematische Innovationsprozesse. Hanser Verlag. Nelke, A. (2016). Kommunikation und Nachhaltigkeit im Innovationsmanagement von Unternehmen: Grundlagen für die Praxis (Wirtschaftsförderung in Lehre und Praxis). Springer. Pfeiffer, W., Metze, G., Schneider, W., & Amler, R. (1991). Technologie-Portfolio zum Management strategischer Zukunftsgeschäftsfelder (6th ed.). Vandenhoeck & Ruprecht. Pfeiffer, W., & Weiß, E. (1995). Methoden zur Analyse und Bewertung technologischer Alternativen. In E. Zahn (Ed.), Handbuch Technologiemanagement (pp. S663–S679). Schäffer-Poeschel. Stibbe, R. (2019). CSR-Erfolgssteuerung. Den Reformprozess verstehen, Reporting und Risikomanagement effizient gestalten. Springer.

Glossary of Management Terms

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Always do things right. This will gratify some people and astonish the rest. Mark Twain

A A3-process The A3-process allows groups of people to actively collaborate on the purpose, goals, and strategy of a project. It encourages in-depth problem solving throughout the process and adjusting as needed to ensure that the project most accurately meets its intended goal. ADKAR The ADKAR change management model was created by Jeffery Hiatt in 1996. The change management concept It is a bottom-up method which focuses on the individuals behind the change (Hiatt, 2006). It’s less of a sequential method and more of a set of goals to reach, with each goal making up a letter of the acronym. Andon アンドン Audio-visual tool in operations to stop the production Ansoff matrix The product-market-matrix (also Ansoff-matrix, after its inventor Harry Igor Ansoff or Z-matrix) is a tool for the strategic management of companies. It can be used by a management (¼ company management) who has decided on a growth strategy as an aid for planning this growth. When it comes to market penetration, the focus is on gaining additional market shares with existing products. The company is trying to sell more of its products to existing, new, and competitive customers. Existing marketing activities usually have to be adapted to achieve this goal. Although the product portfolio does not change, companies often have to experiment with new advertising concepts in order to further promote product adoption in the existing market. Ato Hoju # The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9_21

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214

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Glossary of Management Terms

Replenishment system Atokotei Hikitori あとこうてい引き取り Pull system B Bacho 場所 Place, location Baka 馬鹿 Stupid Baka Yoke 馬鹿 System to avoid any human and stupid mistake BCG matrix The BCG matrix is named after the Boston Consulting Group (BCG), whose founder Bruce Henderson developed this matrix in 1970. This concept should clarify the connection between the product life cycle and the cost experience curve. The matrix is often visualized as a scatter or bubble diagram; the area of a circle then represents the sales of the respective product. Blue ocean strategy Blue ocean strategy is a method for developing permanently profitable business models from the field of strategic management: The basic idea is that only through the development of innovative and new markets, which really differentiate and relevant benefits for the broad mass of customers or non-customers, “Blue Oceans” offer lasting successes. Among other things, this is to be achieved through competition that has become meaningless, new customer acquisitions and optimized cost structures. C Chaku Chaku-line ちゃくちゃく Chaku Chaku is a way to operate a semi-automated manufacturing line. One (or more) workers walk around the line, add parts to the processes, and then start the process. While the process works on the part automatically, the worker adds the next part to the next process, and so on. Change management Change management includes the implementation of new a mission, vision, strategies, structures, systems, processes and behaviours in an organization. The ultimate goal of change is to obtain a long-term favourable position in the market and to gain a sustainable competitive advantage. Synonyms for Change management found in literature are Business Process Reengineering, Turnaround Management, Transformation Management, Lean Management, Innovation Management or Total Quality Management.

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Glossary of Management Terms

215

Chiiku (知育) Intellectual knowledge and develop logical thinking for fundamental survival skills CSR Corporate social responsibility Business model that helps a company be socially accountable D Design for manufacturing Product development in line with the objectives to produce the part in an efficient and lean manner Dou 道, マツダ道 Path, best way, road. Mazda way or Mazda path E Engineering Functional department for product development ERP Enterprise resource planning

F Fault tree analysis Fault tree analysis is a top-down, deductive analysis which visually depicts a failure path or failure chain. FTA follows the concept of Boolean logic, which permits the creation of a series of statements based on True/False. Flow principle Material is flowing between the operations G Gemba 現場 The real place, production shopfloor Gembutsu 現場 Working on the right products Genchi 現地 Working with the right facts H Heijunka

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Glossary of Management Terms

平準化 Levelling production I Ichiban 一番,いちばん The best, the most successful Innovation management Innovation management includes the systematic and structured generation of ideas and the constant validation and review of these ideas as part of a structured innovation process. J Jidoka 自動化 Jidoka is one of the most important Lean methods for ensuring built-in quality. The commonly used English word for jidoka is autonomation, based on autonomous and automation. Others call it intelligent automation, and again others describe it as automation with a human touch (remember the additional character 人 for human). K Kaizen 改善 Change for the good Kaizen is a compound of two Japanese words that together translate as good change or improvement. Kanban 看板 Visual planning system Kepner-Tregoe Kepner-Tregoe (also sometimes called KT analysis) is a company that specializes in problem solving (also sometimes known as problem solving method). KepnerTregoe was founded in 1958 by Charles Kepner and Benjamin Tregoe. The two company founders are considered pioneers of rational working methods and have researched and visualized the basic solution thought patterns of people. KPI Key performance indicators Quantified and numeric objectives

L Learning, studying 勉強

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Glossary of Management Terms

217

Continuous learning and studying M Mottainai もったいない or 勿体無い A term of Japanese origin that has been used by environmentalists. The term in Japanese conveys a sense of regret over waste. Muda 無駄 Waste Muri 無理 Unreasonableness; impossible; beyond one’s power; too difficult; by force; perforce; forcibly; compulsorily; excessiveness; immoderation, and is a key concept in the Toyota Production System (TPS) as one of the three types of waste (muda, mura, muri). Mura 斑 unevenness; irregularity; lack of uniformity; nonuniformity; inequality O OKR Objectives key results Quantified and numeric objectives

P Poka Yoke ポカヨケ Mistake-proofing or inadvertent error prevention Portfolio analysis A Portfolio is a tool, which used to display various objects (e.g. products, errors, suggested solutions) to group according to two independent characteristics and to represent the groups graphically. The Features can be measurable or classified (e.g. large, medium, small). To create a portfolio, the two independent characteristics according to which the objects are to be grouped must be determined and determined/calculated for the objects become. On the basis of the determined/calculated characteristics, the objects are arranged in a two-axis diagram (X-Y diagram) and combined into groups. PDCA Plan, do, check, act: it is an iterative four-step management method used in business for the control and continuous improvement of processes and products.

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Glossary of Management Terms

S Seisan Hoshiki 生産方式 Method to prevent any form of waste in production Shopfloor Production place, operations Supermarkets The location where a predetermined standard inventory is kept to supply downstream processes. T Taiiku (体育 Modern education integrating Mental and Physical Education TIMWOOD 7 types of waste Tokuiku 徳育 Kuiku means to develop your rational interpersonal skills as a leader. Rational development (tokuiku) is different from logical development (chiiku). Toyota way トヨタウェイ Centralising the customer within the philosophy of operations TRIZ TRIZ is the Russian acronym for (Russian: теория решения изобретательских задач, Teoria reschenija isobretatjelskich sadatsch), which translates as the Theory of inventive problem solving or Theory of inventive problem solving. V Value-added Everything the customer is willing to pay Value stream mapping (VSM) The Value stream mapping process helps companies to create a detailed visualization of all steps in the work process. It is a representation of the flow of goods from supplier to customer through the entire value chain and organization. Visualisation Making results, gaps, processes or activities transparent, normally via a dashboard. Important tool in lean management W Waste Anything, which will not be paid by the customer. Must be reduced or eliminated. 5S seiri (整理), seiton (整頓), seisō (清掃), seiketsu (清潔), and shitsuke (躾)

21

Glossary of Management Terms

219

Workplace method for eliminating waste and making the workplace more efficient 5Why analysis Root cause analysis by asking five times WHY?

Index

A Affinity diagram, 65–67 Analyses, 4, 13–18, 22, 24–26, 36, 60, 68, 70–75, 83, 85, 86, 88, 91, 92, 94, 99, 103, 113, 129, 132, 135–136, 147, 151, 152, 158, 161, 177, 185–188, 202, 208, 215, 216, 219 Andon, 158–159, 213 Ansoff matrix, 21–24, 213 Audits, 105, 108, 115, 149–153 Augmented reality (AR), 145 Awareness, desire, knowledge, ability, reinforcement (ADKAR), 201–202, 213

B Balanced Score Card (BSC), 29, 53–58, 115 BCG matrix, 19–21, 214 Benchmarking Analysis, 132 Blue ocean strategy, 23, 24, 214 Business PM Improvement Resource Planning (BPIR), 61 Business strategies, 12, 13 Business transformation, 1–10, 119

C Change management, 7, 25, 191–203, 209, 213, 214 Cloud computing, 2, 121, 141, 144–145 Competition, 1, 15, 18, 21, 24, 94, 95, 97, 132, 134, 137, 141, 192, 206, 208, 214 Competitive advantages, 1, 15, 17–19, 24, 27, 28, 49, 97, 102, 143, 147, 191, 214 Corporate strategy, 11–13, 27, 49, 62 Corrective Action Requests (CARs), 151 COVID-19 pandemic, 1 Cybersecurity, 144

D Designs, 4, 5, 8–10, 29, 35, 48, 57, 61, 68–70, 72, 73, 91–95, 102, 142, 144, 145, 152, 171, 178, 180, 186, 202, 215 Digitalization, 30, 62 Dou, 215

E Efficient consumer response (ECR), 138–139 Engineering, 3, 72, 81, 126, 143, 150, 152, 215 Enterprise resource planning (ERP), 77, 215 European foundation of quality management (EFQM), 58–60, 63, 115

F Fault Tree Analysis (FTA), 66, 68, 69, 215 Flow Principle, 155–157, 215 Functional strategy, 12, 13

G Gemba, 159, 164, 215 Goals, 3, 5, 9, 12–14, 21, 27, 28, 30, 31, 38, 43, 46, 55, 57, 81, 82, 84, 113, 115–118, 120, 132, 138, 142, 144, 146, 151, 165, 168, 191, 195–197, 200, 201, 203, 205, 213, 214

I Industry Analysis, 16 Innovations, 3, 18, 22, 24, 28, 36, 40, 41, 59–61, 63, 70, 82, 88, 93, 94, 116, 118, 124, 131, 134, 142, 167, 169, 191, 192, 205–211, 214, 216

# The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Helmold, Successful Management Strategies and Tools, Management for Professionals, https://doi.org/10.1007/978-3-030-77661-9

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222 International Standardisation Organisation (ISO), 149–152

J Jidoka, 46, 47, 158, 216 Just-in-time (JIT), 99, 155, 162

K Kaizen, 102, 160, 165–169, 216 Kanban, 162, 163, 216 Kepner-Tregoe, 85–86, 95, 96, 216 Key performance indicators (KPIs), 28, 29, 53–55, 57, 115, 117, 118, 216

L Leadership, 9, 19, 24, 29, 30, 37–39, 43–50, 55, 59–63, 65, 117, 120, 131, 150, 200

M Macro Analysis (PESTEL), 14–16 Marketing, 6, 21, 29, 62, 77, 91, 97, 117, 124, 156, 208, 209, 213 Mission, 11, 27, 28, 30, 31, 53, 55, 101, 113, 115, 117, 118, 126, 146, 191, 200, 214 Muda, 117, 165, 171, 217

N Negotiations, 5, 9, 27, 28, 123, 125, 126, 185–189, 196, 198 Network planning, 69

O Objective key results (OKR), 113, 114, 116–121, 217 Objectives, 5, 7–9, 13, 14, 17, 25, 27, 28, 30, 43, 53–58, 73, 93, 99–102, 113–121, 126, 152, 165, 166, 174, 188, 196, 198, 202, 215–217

P Pandemic, 1 Pareto analysis, 74–75, 91 Plan, Do, Check, Act (PDCA), 85, 90–91, 166, 217 Portfolio Analysis, 68, 217

Index Procurement, 4, 6, 8, 30, 97, 131–133, 135, 182, 183, 192 Project management, 1–10, 86, 156, 209 Pull Principle, 155, 156

Q QCD, 137, 174 QCD plus alpha, 137, 174 Quality, 2, 4–6, 8, 9, 26, 28, 33, 40, 41, 47–50, 54, 57, 58, 60, 62, 63, 67, 71–79, 88, 91, 93, 99–103, 106–108, 124, 131, 137, 139, 149–151, 155, 156, 158, 161, 162, 165, 167, 169, 171, 172, 183, 191, 214, 216 Quality management systems (QMS), 149–153

R Relations diagrams, 67 Renewing, 3 Restructuring, 3, 125–127 Revitalizing, 3

S Seven Types of Waste in Manufacturing (TIMWOOD), 176–183, 218 Strategic triangle, 13, 14 Strategies, 1–7, 11–15, 18–31, 33, 36, 46, 54–59, 61, 81, 82, 86, 90, 101–103, 108–110, 118–121, 124, 127, 131, 133–135, 137–139, 186, 188–189, 191, 195, 197, 200, 202, 203, 206, 207, 209, 213, 214 Strengths, Weaknesses, Opportunities, Threats (SWOT), 15, 17, 152 Supermarkets, 162–163, 218

T Tact Principle, 157–158 Tokuiku, 39, 218 Transformations, 1, 2, 33–36, 120, 121, 134, 191, 194, 195, 197–199, 201, 214 TRIZ, 87–90, 218

V Value-added, 171–184, 218 Value stream mapping (VSM), 92, 177, 218 VDA-rating, 128

Index Vision, 27, 28, 30, 39, 53, 55, 61, 99, 113, 115–117, 119, 126, 165, 168, 191, 200, 214 Visualization, 73, 83, 173, 175, 183, 218

223 X XYZ analysis, 135, 136

Z Zero defect principle, 155, 156 W Waiting, 37, 92, 157, 160, 171, 178, 179, 209 Wastes, 38, 97, 99, 100, 107, 117, 118, 121, 144, 151, 155–158, 160–162, 164, 165, 168, 171–184, 217–219