Continuous improvement and competitive advantage

Company competitive advantage and strategic goals cannot be achieved by looking at a firm as a whole. It comes from the organisation peripheral activities such as marketing, producing, designing, etc (Christopher, 2004). Porter’s value chain disaggregates the firm into its strategic activities to learn and understand the factors which affects the cost and potential sources of differentiation. Value chain activities are classified into primary and support activities. Primary activities include inbound logistics, outbound logistics, operations, marketing & sales and service. Support activities include human resource management, technology development, procurement and firm structure (Sekhar, 2009). It is argued that these activities should not be too detailed as it may add complexities in maintaining a strategic and management perspective on value creation. Primary activities are directly responsible for creating and bringing value to the customers whereas support activities are responsible for improving the performance of the primary activities (Stabell and Fjeldstad, 1998).

Inbound logistics, operation and outbound logistics are considered important functions in creating company’s value and for strategic improvements. Porter identifies that there are interdependency between these activities. The value chain of a firm’s is embedded in a system of interlinked value chains. It includes value chain of suppliers of components and raw materials, distribution channels, buyer’s value chain and chain of support activities. The aim of this paper is to discuss how these functional activities need to be aligned in order to help an organisation’s strategic goal to engage in continuous improvement.  

Continuous improvement means a constant commitment to inspect managerial and technical processes in the search for the best methods and practices. Teamwork involves collaboration between the managers and all other employees in the organisation and among the different business functions and with clients and processes.  Over the past few decades continuous improvement initiatives such as lean , six sigma , total quality management(TQM) , just in time(JIT) and other quality improvement programs have gained attractions to organisations who aim to remain competitive in the business (Bernett and Nentl,2010). The continuous improvement continually look to identify and implement ongoing enhancement in a firm’s products, services and processes thus aligning different functional activities of value chain. With increase global competition, the current manufacturing environment focuses on supply side and customer satisfaction which is part of the service functional activity (Gomes et al.m 2006). It is also argues that to achieve competitive and strategic goals, it is necessary for organisation to infuse quality and improvement initiatives in all aspects of their operations (Pintelon and Gelders,1992).

In total productive maintenance, the human resource management needs to align with the operations of the system. Machine operators carry out routine maintenance for the system operations. They need to be well trained in order to carry out these functions. Training of machine operators increases their understanding of the operations, better team work and more attention to details. It is a continuous improvement process which aim in reducing wastage, minimize downtime and improve end product quality.

Identifying and eliminating waste or activities which don’t add values for the customer are part of continuous improvement program lean. This continuous improvement is a value added effort to the customers as they pay for the end products or services. Supply chain and logistics plays important role in continuous improvement. It is important to align the functional activities associated with logistics and supply chain in order to achieve continuous improvement in the organisation. The links between these functions is important as one activity may lead to good or bad outcome to another activity. For example, reduction of costs in one activity may lead to further reduction of costs in another activity. However, it is also learned that human resource management such as training, commitment from managers and support are also require for lean as different lean practitioner’s toolkit can be introduced. The relationship developed among the members of the group or network will enable the production plan to be more effective and inventory holding time. The alignment of these functional activities is necessary in order to achieve continuous improvement. Interactions with the customers, aligning operations and distribution networks with customer demand. The alignments of these functions will also able the organisation to reduce the production levels quickly when the sales fail thus avoiding overbuild and reducing stockpiles unnecessary inventory. In production planning, working with operations group and internal marketing and sales as well as external marketing improves the accuracy of the sales prediction and effectiveness in production. 

Procurement plays important role in achieving and sustaining competitive advantage in the recent years. It functions as part of the integrated logistics process. Larger and successful organisation now includes supply side issues in the development of their strategic plans. The total cost in most organisations can be reduced through closer integration of the buyer’s and supplier’s logistics processes, not only has the cost of purchased and supply played significant part of the cost. The marketing effectiveness can be maximized when logistics and service (customer) components are working optimally. The impact of strong consumer franchise or customer franchise can be enhanced or reduce by the efficiency of the supplier’s logistic system. It is also seen that in continuous improvement method like total quality management (TQM), the technology and human resource management can build up core competence. The excellent production and inventory control system of JIT requires human resources as it requires skill and flexible workers to handle the system. The success of TQM practices is highly dependent on the human resource management and understanding customers (services).  Understanding of the employees, right tools to do the job and how they are perceived by the customers will enable to reduce the money wasted on poor quality and non value adding activity.

During a case study of Onuba Group Company, it was found that the organization practiced Benchmarking program and depends on the firm infrastructures and production technologies for its core activities.  Firm structure provides the ability to process the materials required to produce the raw materials and product whilst technologies enable the process to carry out in effective and systematic ways. It was also found that technology improvement and human resource restricting were responsible for organisation’s losses for period of 5 years. It is learned from these that alignment of these functional activities should be carefully carried out to achieve the strategic goals and to achieve continuous improvement. The group started a programme known as Horizon project with an objective of reducing cost, management and control. This project for cost control and reduction has changed the way the working practices of the employees. For the project to be performed well, the employee and top management involvement were necessary. The coordination among the employees from different departments helped the operations of the program to go successful and effective.  Other functional activities which affect the project were the services, marketing and sales. The relations with the existing customers and potential sale of the subsidiary by the organisation should be taken into account in order to take advantage of the individual and group resistance.  In case of Amazon, technology plays important functional activity in the business. The alignment of this function to other functional activities decreases waste and leads to continuous improvement. The company is based on technology and it was believed that most of the issues could be resolved using the technology and undermining the involvement of human resources. However, the success rate of the processes was low and later realized the importance of human involvement. They have more people working in fulfillment centers and customer service centers. In order to succeed the processes of the business, the alignment of the technologies with the human resources is necessary as these people are the one who actually does most of the jobs starting from stowing, picking, packing, etc. Later it is learned that the machines are needed to support the high value humans with the machines.

References:

Christopher, M.(2004) Logistics and Supply Chain Management. dawsonera[Online]. Available at: https://www.dawsonera.com/abstract/9781405871099 (Assessed: 25July 2014).

Sekhar,S. (2009) Business policy and strategic management. New Delhi: I.K International Publishing House Pvt. Ltd, ISBN: 978-81-907770-7-0

Stabell,C. and Fjeldstad,O. (1998) ‘Configuring value for competitive advantage: On chains,shops and networks,’ Strategic Management Journal,19, pp. 413-497 [Online]. Available at : http://www.peopleandprocess.com/resources/Stabell_chain_shop_net.pdf (Assessed: 25July2014)