Analysis of Prodval Logistic Process

Question 1 - Analyse an existing logistics process and suggest any improvements that need to be made for Prodval to be successful (25)

In order to analyse an existing Prodval logistic process we felt that we first need to look briefly at overall logistics process. Prodval is supplied with raw materials from its suppliers, they then manufacture / assemble at their plant, then supply to their customers. The logistics process is broken down into goods received, quality check, storage, assembly, testing, and quality check and then finally dispatched to customers, this is better illustrated in Figure 1 below.

[pic 1]

When we analyse the logistics process, we need to ensure that we keep in mind the 3 aspects that Prodval prides itself on with regards to distinguishing itself in the market place, i.e.

1. Ability to deliver QUALITY products
2. Ability to deliver ON TIME
3. The fact that they have been accident free

These factors it would seem is part of the core of Prodval’s Competitive Strategy, So, in assessing how we may improve the production process, we need to ensure that we build our suggestions on the premise that these 3 aspects remain intact, and in fact feed our suggestions.

Prodval, in its existing Logistics process creates a structure whereby there are 4 levels of management, all managing production quality. This structure creates the capacity for employees to perform at a mediocre level, and encourages a culture of non-performance, on the basis that mistakes are allowed as the next layer will pick up on these errors. This philosophy promotes a “check the checker” process, which is not optimal in ensuring production efficiency. [pic 2] 

The solution for Prodval’s quality process, is to introduce the Total Quality Management (TQM) principle as strategy for continuously improving performance at every level, and in all areas of responsibility. It combines fundamental management techniques, existing improvement efforts, and specialized technical tools under a disciplined structure focused on continuously improving all processes. Improved performance is directed at satisfying such broad goals as cost, quality, schedule, and mission need and suitability (Ref1).

The TQM principle advocates that :

• "Quality is defined by customers' requirements." (Ref1)
• "Top management has direct responsibility for quality improvement." (Ref1)
• "Increased quality comes from systematic analysis and improvement of work processes." (Ref1)
• "Quality improvement is a continuous effort and conducted throughout the organization." (Ref1)
• “Quality is designed into a product or service so that errors are prevented from occurred rather than being detected and corrected” (Ref 3)

In Prodval’s case, Management would need to introduce a culture which promotes a level of accountability for output on every level to ensure that every employee is governed by these principles.  Management would also need to introduce more effective, robust control tools that govern quality, and establishes a process whereby lack of quality may be easily identified, and the responsible individuals dealt with accordingly. Continuous sampling is one such example of ensuring that quality is maintained throughout the production process. The most important criteria for TQM to succeed is for Prodval’s Senior Management to commit to it. They need to be trained / educated in TQM principles and be directly involved in the development/planning of this strategy.

TQM is not a quick fix, but will force a change in culture, process and practice. If adopted, the TQM philosophy will (ref 2)…

• make Prodval as an organisation more competitive
• establish a new culture which will enable growth and longevity
• provide a working environment in which everyone can succeed
• reduce stress, waste and friction
• build teams, partnerships and co-operation
• Prodval will be able to promote co-operation with vendors, suppliers, and customers to improve quality and hold down costs

When Prodval implements the TQM as part of their strategy, they must apply a similar quality strategy with its suppliers. By doing this they will ensure quality is met at every level of the supply chain including material supplied from Vendors.

Question 2 - Identify the various SCM risks or issues and suggest a strategy to mitigate the risks involved with the company

1. Stockpiling Inventory

Due to the lack of control of the existing vendors, Prodval stockpiled their inventory. This was a responsive measure to ensure customer deliveries were on time and efficient. This further added to inventory carrying costs, ie inventory was kept for 90 days instead of the recommended 45 days. The plus side of the inventory surplus is that Prodval is more responsive to customer demand. The problem with this is that it increases the cost of production which inadvertently decreases your supply chain surplus. Excess inventory also ties up ones cash flow.

A strategy for Prodval to try and deal with this would be to…

• improve product scheduling with their vendors, through service level agreements, adaptation of logistics software, currently Prodval uses ERP.
• Re-engineer the “order-to-delivery” cycle to find ways to do it faster, better, cheaper.

“Dramatic rethinking of business processes often results in significant reductions in lead times, and increases in control that eliminate the need for inventory.” (Ref 4: RM Donovan).

1. High Marketing Costs

The application of the product required continuous interaction with the customers, which led to increases in production costs and reduced profitability. A possible Marketing strategy for this would be to create a training program for customers. An example for this would be to create a Prodval website with online videos and troubleshooting techniques based on common queries or problems encountered by customers or a technical call centre to trouble shoot queries by customers.

c) Infrastructure Restrictions

The current Prodval plant has inadequate ventilation and poor basic amenities for its staff. The overburdened plant infrastructure will be inadequate for future expansion, which would mean relocating to larger premises. Understanding staff needs and their development is vital to Prodval retaining staff. Prodval’s future success relies largely on its workforce, their commitment, and their morale.

A recommendation, to have an Employee Opinion Survey done, at least twice a year to understand the issues that staff are experiencing in the work place environment, so as to enable management to address these issues effectively, boosting staff morale and encouraging a sense of importance of staff.