Continuous improvement through alignment of organisational functions

1. Introduction

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 (Chang, 2005). 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 (Kahlen and Patel, 2011). 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.  

2. Continuous improvement (CI) philosophy and tools

Continuous improvement means a constant commitment to inspect managerial and technical processes in the search for the best methods and practices (Kovach and Fredendall, 2013). 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).

Lean management is about the minimisation of waste in the production process. It focuses on production redesign and reduction of employees and other resources to a bare minimum to ensure that high levels of productivity are achieved (Zokaei and Simons, 2006). It also focuses on the need to ensure that inventory is minimised. Overproduction and underproduction are also eliminated with CI focusing on ways of ensuring that better ways of demand forecasting and alteration of production are created with time. Also important is the need to eliminate idle times between production processes. It emphasises on effective coordination in the production process to ensure that production is smooth and that each process is executed at its optimum (Walker and Davies, 2011). As can be seen, this management tool focuses on all organisational functions ensuring that the operation costs at each stage are minimised. As a tool for continuous improvement, the lean management approach focuses continuously on ways of minimising production costs and improving the efficiency of the production process (Walker and Davies, 2011).

Just in Time (JIT) is a production control tool that focuses on the element of timeliness (Shortell et al, 1995). Like lean management, it focuses on the minimisation of waste in the production process. This tool has predominantly been used in reference to supplier relationships and the inbound logistics element of the organisation’s value chain (Oprime, Mendes and Primenta, 2012). The focus has been on ensuring that materials and products are delivered just in time for the next stage in the production process. This necessitates orderliness and coordination of organisational functions to ensure that timelines are accurate and idle time is eliminated.  

Total quality management (TQM) is one of the most popular management tools used in organisations (Suárez-Barraza and Ramis-Pujol, 2010). It is a management tool that focuses on customer value and the need to ensure that every function within the organisation is aligned to deliver on it. TQM focuses on continuous improvement where changing customer preferences are monitored and production processes realigned to meet them (Singh and Singh, 2013). It also emphasises the need for top management to take charge of quality management and ensure that the highest standards are upheld at all times. The management tool has provisions for monitoring and subsequent improvements to ensure that there are no quality lapses.

The balanced score card is a management control tool that is designed to ensure that effective performance is realised across the organisation (Briley, Fowler and Teel, 2000). When using this tool, the organisation creates specific performance indicators for every function within the organisation. These performance indicators are aligned in a manner to ensure that success in one function reinforces the overall success of the organisation by supporting the performance of other functions (Sekhar, 2009). This means that in the event of organisational change, the vision for change must be broken down into actionable objectives which are then applied to different departments and performance indicators generated for each. This is a tool that is highly compatible with a range of management philosophies and techniques such as Kaizen and TQM with the main impact being its emphasis on the focus on all organisational functions when creating and implementing a quality improvement initiative (Cundiff, 2004).

Continuous improvement is a necessity in the modern world. The market is today identified as highly competitive and also highly dynamic (Kovach and Fredendall, 2013). This market environment makes it necessary for organisations to be dynamic and focus on continuous improvement. Good CI capabilities can be a source of competitive advantage for the organisation; a fact that many organisations around the world seem to accept. In a 2010 survey by Bernett and Nentl (2010), over 19% confirmed that their organisations were had been involved in at least one attempt to pursue continuous improvement. Out of these, 75% stated that the CI programs were being implemented across the whole organisation with only 14% stating that the programs were restricted to specific functions and departments (Bernett and Nentl, 2010).

The continuous improvement looks 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. 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). This implies that CI should not only lead to the reduction of costs, but also help in raising more profits for the organisation. However, Bernett and Nentl (2010) found that expectations over the outcome of CI tended to vary with only 44% being optimistic about increases in revenue while only 50% anticipated that CI in their organisations would help in reducing their inventory. This means that not all efforts in CI are successful in yielding the desired results. It means that successful CI must be subjected to a certain criteria, the most common of which is the need to focus on all elements of the value chain and ensure that they are remodelled in a manner to achieve synergy in the entire organisation (Briley, Fowler and Teel, 2000). A discussion of the value chain and its application in CI is done in the section below.

As noted above, CI is best implemented in reference to the whole organisation. This implies the need to ensure that different activities are aligned to each other and any improvement in one designed to reinforce the effectiveness of the other functions (Lemire, Demers-Payette and Jefferson-Falardeau, 2013). For instance, in total productive maintenance, the human resource management needs to align with the operations of the organisation. 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 (Gomes et al. 2006). 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 (Martowidjojo and Alamsjah, 2011). 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 (Zokaei and Simons, 2006). 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 (Taylor, 2005). 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 (Zokaei and Simons, 2006). 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. 

3. Focus on the organisation’s value chain

Porter’s value chain explains the organisation of organisational functions as demonstrated in the figure below. These functions are divided into primary and support activities. The primary activities are core to the organisation and are often organised in a sequential manner from the acquisition of raw materials to the delivery of the finished products to the organisation (Walker and Davies, 2011). Support services are those that are applied to serve the whole organisation albeit to different extents for different departments.

Source: Zokaei and Simons, 2006

Inbound logistics describe processes that are related to the receipt of raw materials and inputs; how they are stored, and how they are distributed internally (Shortell et al, 1995). In reference to CI, supplier relations play an important role in ensuring that the inputs are well priced, of the desirable quality, and are delivered on time for production (Oprime, Mendes and Primenta, 2012). Organisations focus on improving supplier relationships through the creation of longstanding contracts as well as the use of integration of systems. In some cases, information on demand projections can be shared to ensure that the suppliers are apprised on how to alter the volume and frequency of supplies. This has been the main focus of the Just-in-Time approach to production where organisations focus on minimising inventory costs and absorbing supplies just before they are used for actual production (Oprime, Mendes and Primenta, 2012). This means that the inventory is maintained at the lowest possible levels. More importantly, the focus of continuous improvement must focus on increased efficiency in the transfer of supplies from the storage facilities to the point of production.

Operations involve the processes undertaken to convert the inputs into the products and services that are to be marketed to the customers (Abrahamsson and Gerdin, 2006). Typically, the focus of CI in operations would include the reduction of idle time, refining of production design to minimise wastage, investing in faster approaches to production, automation of production processes to reduce unit costs, and alignment of product features with changing customer preferences. This is arguably the core of any CI program even though there is need to ensure that it is aligned with other elements in the organisation’s value chain (Suárez-Barraza and Ramis-Pujol, 2010). The management philosophy that is most popular when focusing on the production processes is Kaizen. Kaizen is about continuous improvement where the basic belief is that everything can be improved (Suárez-Barraza and Ramis-Pujol, 2010). It is a general philosophy that is highly compatible with other CI tools such as TQM which is a customer-focused quality management tool that ensures that production and organisational functions are continuously aligned to changing customer preferences.

Outbound logistics refer to the process of availing products and services to the customers (Savolainen, 1999). It refers to the distribution network and the need to ensure that customers can conveniently access the products. At the heart of this value chain element is the need to conform to changing demographics, lifestyles, approaches to shopping, and minimisation of the cost of distribution (Singh and Singh, 2013). Organisations will often have to make a choice between engaging independent distributors and exploiting fully owned distribution channels. As emphasised on the discussion on TQM, the point of reference must always remain the customer (Singh and Singh, 2013). Changing customer preferences such as liking for online shopping has also been accommodated by many organisations around the world which have either introduced online stores or ensured that product and company information is readily available online (Kovach and Fredendall, 2013). As earlier emphasised, synergy between this value-chain element and other organisational functions is crucial to success in implementing continuous improvement.

Marketing and sales refer to activities that organisations engage in to make the market aware of their products and services (Sekhar, 2009). This is a complex process which involves marketing message design which must be done in a manner that projects the intended brand image while also inspiring the target customers to purchase the products. It also involves marketing channel design where changing patterns in media consumption are factored in to ensure that the target audience are reached (Albright and Lam, 2006). In recent times, advances in communication technology have provided opportunities for more effective communication. For instance, the internet has become an important part of the communication landscape. It also presents data mining opportunities that can be exploited by the organisation where data on customer inquiries and orders can be analysed to determine preferences for more effective target marketing (Oprime, Mendes and Primenta, 2012). For the strategic marketer, focus should be on constantly monitoring the impact of marketing and branding campaigns and creating structures for their improvement.  

Procurement plays important role in achieving and sustaining competitive advantage in the recent years. It functions as part of the integrated logistics process (Singh and Singh, 2013). 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 (Chang, 2005). 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 (Cundiff, 2004). 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) (Kahlen and Patel, 2011).  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 fulfilment centres and customer service centres. 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.

Human resource management (HRM) is about managing the employees and ensuring that they are well equipped and capable of delivering as required (Kovach and Fredendall, 2013). HRM focuses on improving productivity, motivating employees, and also job organisation to ensure that responsibilities are clearly spelt out to facilitate accountability and performance evaluation. It also focuses on training where skills-gaps are identified and training programs implemented to ensure that the employees are capable of executing their duties as desired. Human resources are the most strategic resources for any organisation as they determine the efficiency with which other resources can be exploited (Kovach and Fredendall, 2013). The design of HRM policy must be done with all organisational functions in mind. Each department and function would ordinarily have specific skills-set and approach to performance evaluation hence the need to conform to them. At the backdrop of this is the need to ensure that a common HRM philosophy is adopted across the organisation. Organisations are expected to embrace continuous improvement in terms of creating management systems and HRM policies that encourage continuous improvement at the individual employee level and for the organisation as a whole (Martowidjojo and Alamsjah, 2011).

Technology is a broad term that would refer to both production and communication technologies. Technology can be used to realign production processes to entrench greater automation with an aim of quality improvement, speedy production, and reduced costs of production (Lemire, Demers-Payette and Jefferson-Falardeau, 2013). In terms of communication, technology facilitates effective communication across the organisation. The organisation is able to integrate systems in different parts of the organisation. For instance, the inventory control systems can be used to automatically indicate stock levels and trigger a re-order mechanism without having to wait for an employee to notice diminishing stock levels (Kahlen and Patel, 2011). Technology can also be helpful in HRM where data on employees and records on their qualifications and performance is organised in a manner to ensure that allocation of duties and rewards for performance are accurate and transparent. Organisations focus on continuous improvement in relation to technology by ensuring that they are in tabs with latest technological developments in the market.

4. Values critical to continuous improvement

Continuous improvement is a philosophy which encompasses more than the actual process improvements in the organisation’s value chain. According to Shortell (1995), quality improvement implementation is significantly impacted by the presence of a participative, flexible and risk-tolerant organisational culture. This is accompanied by a commitment to the development of the human resources. In terms of the value chain, these values fall under firm infrastructure which describes the systems and values that are espoused by the organisation. According to Jabnoun (1991), trust, cooperation and openness are important ingredients for driving continuous improvement. These values collectively lead to the creation of a culture that embraces constant revaluation of organisational functions and the search for means through which they can be improved. Other values and systems that drive CI are explained as below.

4.1 Alignment with long term vision and organisation’s mission 

The organisation is a collection of several people with a common vision. This common vision is often documented and accompanied by values that the organisation considers to be important. The company vision and mission provides a sense of direction for the organisation (Zokaei and Simons, 2006). It ensures that continuous improvement efforts are directional and that subsequent efforts made in quality improvement build on previous attempts. This adds meaning for the need for the organisation to be a learning organisation where any new lessons learnt are exploited to build on improvements that have been made on the company systems in the past. Importantly, the company vision and mission influences the alignment of all organisational activities and functions. This means that when CI conforms to it, there’s the high likelihood that it will be compatible with the current systems and help in making the organisation more competitive (Walker and Davies, 2011). The importance of this alignment with the company vision is to ensure that there is a holistic view in terms of evaluating how the proposed improvements impact different functions and how alignment can be done to create synergy.

4.2 Top management commitment

The commitment and involvement of the top management is crucial for effective CI. From its definition, effective CI is implemented when there is synergy across the entire organisation (Jabnoun, 2001). This implies the need for top managers to be involved as they are accustomed to evaluating proposals for improvement from a holistic perspective where their implementation is expected to affect other functions. Their role should, however, be complemented with the contribution of the technical managers who’d be expected to have a deeper understanding of the operations of the different departments and be able provide insights necessary for gauging the impact of any improvement proposals made (Oprime, Mendes and Primenta, 2012). The commitment of top managers is tied to their acknowledgement of the contribution of CI towards the competitiveness of the organisation. This appreciation is what is likely to drive them to not only accept the need for CI, but also establish systems that spearhead them.

The contribution of top management is crucial in terms of providing the knowhow and resources needed to implement change (Abrahamsson and Gerdin, 2006). Their role in training subordinates and coaching them to entrench values compatible with CI is crucial to the success of the process. The top managers also play a critical role in influencing the nature of the organisational culture and values of the organisation. For most organisations, the organisation culture reflects on the values and management approaches of the top managers. By embracing an attitude of flexibility and readiness to change, the managers would be entrenching a culture of innovation and organisational learning that is crucial to continuous improvement (Abrahamsson and Gerdin, 2006). 

4.3 Focus on customer value

Customer value is the main point of emphasis for organisations. CI is done to either reduce organisational costs and enable fair pricing to enhance customer value, or tailored towards quality improvement to conform to changing customer preferences (Suárez-Barraza and Ramis-Pujol, 2010). The customer is the reason for the existence of business. This principal is clear in the recommendations of the TQM model which continues to be the main source of reference for quality management in organisations. The organisation must accurately perceive the customer expectations before incorporating it into the design of products and processes. The change in customer preference is not restricted to the actual product quality: it can extend to the preference for shopping approach, convenience, or even a change in their media consumption approaches (Oprime, Mendes and Primenta, 2012). These changes are highly relevant for purposes of keeping the organisation competitive in the market.

4.4 Effective communication and unity of vision

Any CI implementation process entails a change in the normal operations within the organisation. This means that employees would need to be accustomed to doing things differently from time to time. CI mirrors the organisation change management process whose main barriers are inertia among employees and a relapse into the old ways after the change has been implemented (Albright and Lam, 2006). To prevent such inefficiencies, there is need for clear communication to all employees within the organisation. The communication should be inclusive and clear to ensure that any rumours are demystified and that all employees have a common understanding of what the change is about and how implementation is to be done. More importantly, it is important for the collective vision to be built by making employees understand the need for change, and where possible, encourage them to champion it (Briley, Fowler and Teel, 2000). In the end, CI must be understood to be an inclusive process whose success is dependent on the ability of the management to secure the full cooperation of the employees involved.

4.5 Transparency and effective performance evaluation

At the centre of continuous improvement is the need for the organisation to understand what their weaknesses are, the change that ought to be introduced, and the manner of implementation. Performance monitoring is crucial to the process (Albright and Lam, 2006). Evaluation should be continuous and entrenched into every aspect of the organisation. Management accounting is one of the important functions that concentrate on identifying financial indicators of performance. Performance trends, productivity statistics, returns on investment, unit production costs, and other indicators can be used to provide an indicator for when improvement is needed in the organisation (Savolainen, 1999). The culture of evaluation should also extend to human resource management where the performance of employees and mastery of the required skills.

The identification of the need for improvement can either be internal or external. The external sources can be shifting customer preferences while the internal sources can be management decisions made in line with the company objectives set at a specific point in time (Lemire, Demers-Payette and Jefferson-Falardeau, 2013). Benchmarking can also help in identifying the need for change where the organisation’s performance statistics can be compared to the industry average or to that of the industry leaders.  

5. Conclusion

Continuous improvement is a capability that can be exploited by the organisation to yield a competitive advantage. It ensures that the organisation can conform to changes in the external environment effectively. From an operations perspective, the organisational functions are interlinked and organised into a comprehensive value chain in which success in one function reinforces the success of other functions. This means that operation systems design should factor in how functions impact each other whenever designing and implementing any quality improvement initiative. It also entails the need to embrace management philosophies and techniques that can support continuous improvement. An example is TQM which emphasises on both customer focus and continuous improvement. The balanced score card, on the other hand, emphasises on the need to ensure that any improvement initiative is broken down into implementable objectives and performance indicators that can be applied to each function. Its design is such that the outcome must reinforce other functions and improve overall organisational performance. In addition to the actual activities, the organisational culture and relevant values should be entrenched to encourage the sustenance a culture of learning, innovation, and result-orientation.  

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