Operations in Supply Chain Management

SCM MODULE
WEEK 12-13
CPFR – Collaborative, Planning, Forecasting and Replenishment Model

CPFR is a technique that combines intelligence of all the partners involved in a supply chain to plan
and fulfil the customer demand. Main objective of is to increase the efficiency of the supply chain
network by concentrating on reducing the inventory costs, transportation and logistics costs and
increasing availability to the customer. It provides a framework which gives the flow of goods,
services and information. CPFR aims at integrating all the players in a supply chain. In CPFR all the
suppliers and retailers share their information and this information helps in forecasting the inventory in
a better and more efficient way and making sure the inventory is constantly updated. It has evolved
from an Open Source initiative called CFAR.

The Four Phases of CPFR in Supply Chain Collaboration

There are four key elements to practicing CPFR in supply chain operations. These can be briefly
described as follows:

Strategy and Planning: This phase involves laying down the strategy for collaborative relationships
between supply chain partners. The idea is that all organisations involved in partnership share an
agreed scope of collaboration, common business goals. Roles, responsibilities and procedures are
also set out in the strategy and planning phase.

Demand and Supply Management: This is the element which focuses on sales and order
forecasting and the planning of orders.

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Execution: This is the phase concerned with the processes of producing, stocking, dispatching, and
delivery of materials to end-customers.

Analysis: This element comprises the management of exceptions in the fulfilment process, along
with assessment of supply chain performance.

The Benefits of CPFR

Initiating a supply chain CPFR program is not without challenges. The companies involved must be
prepared to work on cultural change and alignment, agree rules around confidentiality, and secure
buy-in from senior management teams. However, when the adoption of CPFR in a supply chain is
successful, there are a number of key benefits, which include:

 Improved accuracy of sales and order forecasts

 Reductions in inventory levels
 Closer relationships among the supply chain partners
 Reduced supply chain uncertainty
 Realization of supply chain cost reductions
 More effective mitigation of supply chain risks
 Release of working capital for partners in the agreement
 Improved flow of materials and information up and down the supply chain
 Greater efficiency in production and manufacturing

When CPFR partners are able to collaborate effectively and align on the use of technology, the model
can also facilitate improved system integration and simplify business processes, for example by
eliminating manual process steps.

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Inventory Management
Inventory management is the
products or materials a company
sells to its customers in order to
make profit. As part of the supply
chain, inventory management
includes several different aspects
such as controlling and overseeing
purchases from suppliers and
customers, maintaining the storage
of stock, controlling the amount of
product for sale and order
fulfillment. There are three core
steps of inventory management:

1. Purchasing inventory - raw

materials or components are
bought and delivered to the
warehouse.

2. Storing inventory - inventory is stored until needed. Raw materials are moved to production
facilities to be made into finished goods and returned to stock areas until ready for shipment.

3. Profiting from inventory - the amount of product for sale is controlled. Finished goods are
pulled to fulfill orders. Products are shipped to customers.

JIT System and Supply Chain Management- 5 Salient Features

A JIT System (Just- in-time System) is an inventory management philosophy aimed at reducing waste and
redundant inventory by delivering products, components, or materials just when an organization needs them. When
I wrote a blog on JIT Purchasing there has been quite a lot comments and interest from the supply chain community
on how it fits in overall inventory management system, therefore, I thought to expand on this topic.

It is well known fact that Kanban and JIT System were developed by the Toyota Motor Company during the 1950s
and 1960s. The philosophy of Kanban and JIT System is that parts and materials should be supplied at the very
moment they needed in the factory production process. Here are 5 Salient Features of JIT System you might find
useful:

3 JIT system principles

These JIT improvements can only become available with efficient supply chains. There are 3 JIT system principles
which are of importance when considering implementation:

1. Total quality control; JIT system focuses on improving efficiency of material processes and quality is very important.

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 2. Elimination of waste: JIT system focuses on improving the effectiveness of processes and operations that add value to
the materials. Inventory is considered as waste and should be reduced as much as possible.
3. People involvement; the company’s employees are its most valuable resource. It is essential that everyone understands
JIT system and gets involved with making it a success.

6 JIT System Inventory Management Principles:

Minimizing waste is one of the basic objectives of JIT system. This requires the effective management of inventory
throughout the entire supply chain. A manufacturing enterprise will initially seek to reduce inventory and improve
operations within its own organisation. It is also vital to an organisation that improvements are carried out
continuously to enable it to maintain competitiveness. This is in line with the concept of ‘kaizen’ or continuous
improvement. In an attempt to minimize waste attributed to inefficient inventory management, 6 principles related to
JIT have been described by Schniededans (1993) and they are:
1. Reduce lot size and increase frequency of orders.
2. Reduce buffer inventory.
3. Reduce purchasing cost.
4. Improve material handling.
5. Seek zero inventory.
6. Seek reliable suppliers.

Most of the above principles are related either to the supplier or the supply chain. Lot size, buffer inventory,
purchasing cost, material handling and reliable suppliers are all supply chain related factors. Thus the supply chain is
a critical factor for making JIT System successful.

Implications of JIT System for Logistics Integration

Although the application of JIT has been concentrated on manufacturing operations, material handling and storage,
and supplier deliveries, its principles can be extended throughout the supply chain. JIT methods have proven quite
successful in simplifying and streamlining the material supply chain and the information flows which plan and control
it – Christopher (1992) 1 mentioned achieving world class performance through logistic integration in the supply
chain. JIT System has numerous implications for logistics executives.

1. Transportation becomes an even more vital component of logistics under a JIT System. That means supply chain need
shorter, more consistent transit times and more sophisticated communications.
2. Proper implementations of JIT require that the firm fully integrate all logistics activities. Many trade-offs are required, but
without the coordination provided by integrated logistics management, JIT cannot be fully implemented.
3. Warehousing assumes an expanded role as it assumes the role of consolidation of facility instead of storage facility.

Benefits of Implementing JIT System

In general, JIT produces benefits for firms in four major areas: improved inventory turns, better customer service,
decreased warehouse space, and improved response time. Other specific benefits are: 2

 Productivity improvements and greater control between various production stages.

 Diminished raw materials, work in progress, and finished goods inventory.
 A reduction in manufacturing cycle times.
 Dramatically improved inventory turnover rates.
 Reduce distribution costs.
 Lower transportation costs.

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  Improved quality of supplier products.
 Reduced number of transportation carriers and suppliers

Problems Related with the Implementation of a JIT System

Some companies have successfully introduced JIT into their operations; however, not all organisations find it
suitable. JIT System has 3 inherent problems which need to manage:
1. Supplier production schedules- A JIT depends on a supplier’s ability to provide parts in accordance with the firm’s
production schedule. Smaller, more frequent orders can result in higher ordering cost. Furthermore, large number of small
quantity is produced, suppliers may incur higher production cost and setup costs.
2. Level production schedules- A JIT is difficult to implement with uneven demand and does require level production
schedules. If your business operates in high demand variation environment then the JIT is not for you!
3. Suppliers locations- A JIT is not suitable for long distance suppliers. As distance between the firm and its supplier
increases, delivery times may become more erratic and less predictable and short frequent suppliers are not practical.

Other problem area that can become obstacles to JIT System, especially in implementation, are lack of system
support, inability to define service levels, a lack of good planning and shit of inventory at supplier location. 3

TOTAL QUALITY MANAGEMENT

KAIZEN: CONCEPTS AND SYSTEMS

Kaizen is a philosophy that calls for people and their organizations to experience on going
improvement at every level. Through focusing on small, incremental change rather than dramatic
innovation, Kaizen seeks to construct effective and efficient processes and quality outputs.

Kaizen at the workplace means continuing improvement involving everyone, managers and
workers alike. The Kaizen business strategy involves everyone in an organization working together to
make improvements without large capital investment.

KAIZENS CONCEPT

Kaizen is a Japanese word meaning continuous improvement. It is made up of two characters

which are “kai”, meaning “change”, and “zen”, which meaning “good”. It is used to describe a company
culture where everyone, from the CEO to the front desk clerk, regularly evaluates his work and thinks
of way to improve it. The concept is that small steps on a customary basis will lead to large
improvements in due course. Kaizen entails relatively little expense.

Kaizen originated in Japan as a result of World War II. Ironically, it evolved in part of American
business leader like Dr. W. Edward Deming who came to help restore the country. It was first
introduced by a 1951 training film created by the American Economics and Scientific Section (ESS),
although Dr. Deming is largely credited for instituting the principles of Kaizen in Japan. Kaizen’s
elimination of waste through the maintenance and improvement of processes became fundamental to
Japanese management philosophy. It has since stretch around the world to companies and
organizations wishing to follow the success of Japanese business.

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 Toyota has been known as the initial company that has started Kaizen. The application that
Toyota used called “Toyota Production System”, where all line personnel are expected to discontinue
their moving production line in the case of any irregularity, and suggestion for improvement are
awarded reward. They succeeded eradicating all the wastes. Kaizen is used for placing the terms as
productivity, total quality control (TQC), zero defects (ZD), and just in time (JIT). Therefore, Kaizen is
a main concept for these practices.

A lot of people have misunderstood about Kaizen. People have the stereotype that Kaizen can
make dramatically changed immediately, and bring the profits right away. However, this is not true.
Improvements under kaizen are small and incremental, but the kaizen will bring the huge result over
time. Japanese management and Western management are different from the concept of the
management. For Western management, they are inclined to focus on the worship of innovations
which is pretty relying on the changes in the technological breakthroughs. On the other hand, for the
Japanese, kaizen is not usually remarkable incident. However, innovation is one -shot improvement,
and its consequences are often problematic. While the kaizen process, which is based on common
sense, low-cost approaches and low risk approach, guarantees gradual progress that pays off overtime.

There are two types of kaizen which are Gemba (actual workplace) kaizen and Teian (plan)
kaizen. Gemba and Teian kaizen both intend to develop higher production and quality standards.
Gemba kaizen is an action – oriented approach and refers to improvement activities that are carried out
in the actual workplace, like on the shop floor or in the manufacturing line. Gemba kaizen involves all
aspects of daily work that can be improved. The heart of gemba kaizen lies in small changes that will
transform the overall success of the company not automatically right away but in the long run. Gemba
kaizen methods are quality circles and suggestion systems. In quality circles, a specialized team
develops and designs ideas concerning how to improve the company’s performance. Suggestion systems
encourage employees to submit suggestions for improving work process and customer satisfaction.
Teian kaizen, on the other hand, represents a theory –based approach and refers to strategic
improvements that are prejudiced by top management. Here, the implementation of latest process and
practices play the most dominant role. The overall goals of teian kaizen are improved business and
manufacturing practices. The most prominent teian kaizen methods include total quality control and
just-in-time management.

Kaizen and Management

It is also essential that management is trained and be behind the effort. Kaizen will result in
many more suggestions for improvements and changes and will take away from a strict focus on
moving items quickly through the existing production process. Management must be prepared to
recognize some time away from current work to focus on changer with longer-range impact.

Management has two major components which are Maintenance, and improvement. The
objective of the maintenance function is to maintain current technological, managerial, and operating
standards. The improvement function is aimed at improving current standards, Under the
maintenance function, the management must first establish policies, rules, directives and standard
operating procedures (SOPs) and then work towards ensuring that everybody follows SOP. The latter is
achieved through a combination of discipline and human resource development measures.

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 Under the improvement function, management works constantly towards modifying the existing
standards, once they have been mastered, and establishing higher ones. Improvement can be broken
down between innovation and Kaizen. Innovation involves a drastic improvement in the existing
process and requires large investments and big efforts. Kaizen signifies small improvements as a result
of coordinated continuous efforts by all employees.

Initiating and implementing TQM programs need great quantity of planning and research.
Managers are required to acquire training in various TQM practices prior to implementing the same.
There are costs involved with the whole process of TQM. It is manager’s responsibility to distribute
budgets for TQM at the beginning of every financial year.

A management need to work closely with the senior management, human recourse professionals
to develop perfect implementation strategies. A manager has to act as a bridge between the senior
management and the entire workforce.

1. The role of a manager is to act as a facilitator at the workplace. It is the duty of a manager to assist
employees in implementing TQM. As a manager, it is also his responsibility to choose and assign right
individuals who can work as line managers and take charge of the whole project. The employees to be
selected must be reliable and diligent and capable as much as necessary to handle a key project like
TQM. It is the manager’s responsibility to allocate resources for TQM, schedule time for different
training programs and be grateful for employees who came up with a variety of improvement ideas and
strategies which would aid the organization bring better quality products. Further train subordinates to
guarantee smooth implementation of TQM without any obstacles.

2. A manager must communicate the benefits of total quality management to all other members of the
organization. Call employees on a common platform and address the benefits and importance of TQM
programs would give way to high quality products which would benefit the organization and the
employees as well.

A manager is always strong source of inspiration for other employees. He needs to practice TQM
himself before expecting others to believe in the same principle. Customer feedbacks should be
cautiously screened and taken into consideration while creating company’s major strategies. A manager
must also provide frequent reports to staff members stressing scope of improvement.

Process Vs Results

Process-oriented thinking mostly centers on how processes are carried out through the
assessment of performance indicators generated by measuring or observing the process flow. Result-
oriented thinking basically disregards how processes flow and work. Instead, process result/outcomes
are obtained, monitored and evaluated systematically. For example, micro level performance indicators
include lead time, cycle time, throughput time, and defective part ratio. While macro level performance
indicator consists of profit or customer satisfaction which would be monitored in result-oriented
thinking.

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 Kaizen focuses at improving the process rather than at achieving certain result. Such managerial
attitudes and process thinking formulate a major difference in the manner an organization masters
change and achieves improvements. This concept of process-oriented thinking indicates that there
must be some problems in a process if the outcomes are not encouraging to the firm.

Kaizen recognize the connection between from an outcomes and processes. If the result from an
organization are of poor quality, the processes used to achieve those result necessitate concentration.
This understanding is a component of the framework of Japanese society, even on the personal level,
and explains why Kaizen is so successful there.

The manner in which processes are addressed is a key element of Kaizen. While in the West,
innovation or radical change is often sought, Kaizen hunts for constant incremental change, which
generates remarkable results eventually. Since the changes in Kaizen are small, errors can effortlessly be
corrected with no involvement of much risk or expense. This is likely to make Kaizen processes less
wasteful than innovation, where error can have tremendous loss effects.

Table 2 The Features of Process and Result Criteria

P (Process-Oriented) criteria R (Result-Oriented) criteria

Long-term orientation Short-term orientation

Efforts for improvement are important. Performance and results are important.

It is cared how the processes work and how the Degree of goal achievement is important.
result are obtained.

Processes-oriented indicators are followed. Result-oriented indicators are followed.

Awards are determined on the basis of how Awards are determined on the basis of results of the
processes flow. processes.

Rewards are generally based on recognition and Rewards are generally related to the financial
honor geared to the effort made. performance.

Discipline, time management, skill The results and reaching goals in designated time
development, participation and involvement , frame are important.
morale and communication are important.

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 A supportive and collaborative role is seen Control-centric behavior is more common among
among managers in processes-oriented result-oriented managers.
management.

Quality gurus strongly note that a combination of processes-oriented and result-oriented

management should be implemented throughout the entire operational system instead of focusing on
just one orientation (either processes or result) as this heightened focus may not be enough to generate
successful continuous improvement strategy. Continuous improvement can be either a team
management approaches appropriately, the basic features of process-oriented and result-oriented
management should be studied prior to getting a continuous improvement journey.

PDCA/SDCA Cycles

Central to the philosophy of Kaizen are two cycles that involve processes for improvement and
for maintenance: Plan-Do-Check-Act (PDCA) and Standardize-Do-Check-Act (SDCA). When
improving processes, the following are the phases:

1. Planning Phase – Planning is the most vital phase of total quality management. In this phase
employees have to come up with their problems and queries which need to be addressed. They need to
come up with the various challenges their face in their day to day operations and also analyzed the
problem’s root cause. Employees are required to do necessary research and collect relevant data which
would help them find solutions to all the problems.

2. Doing Phase – In the doing phase, employees develop a solution for the problems defined in planning
phase. Strategies are devised and implemented to overcome the challenges faced by employees. The
effectiveness of solutions and strategies is also measured in this stage.

KAIZEN PDSA CYCLE

3. Checking Phase – Checking Phase is the stage where people actually do a comparison analysis of
before and after data to confirm the effectiveness of the processes and measure the result.

4. Acting Phase – In this place employees document their results and prepare themselves to address
other problems.

Maintenance cycle, SDCA is invoked when a failure occurs. Standardization seeks to stabilize
processes so they can be improved. Through understanding if a failure occurred because of a poor or
non-existent standard or because an existing standard wasn’t followed, managers can implement
specific actions to correct it. Once a standard is put into place and put into practice, it can become the
focus of the PDCA cycle.

The SDCA cycle ensures that the improvements that have been done using Kaizen works well
and improvements do not slide back. SDCA prevents the deterioration and therefore it is extremely

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important that both the SDCA and PDCA cycles are well established. Improvement without
standardization is stillborn to say the least.

SDCA CYCLE

Standard is the best, safest and easiest way, to achieve and maintain a defined quality level.

Standard should be:

1. Be simple, clear and conspicuous

2. Be the best, easiest, safety way - should only have one a time

3. Preserve know – how

4. Be guide-lines that enable performance

5. Measurement of task delegated

6. Assure quality, cost, delivery and safety

7. Show relationship between cause and effect

With Standard:

1. Management become possible

2. There is a basis for training

3. There is a basis for audit or diagnosis

4. Problems are prevented from recurring and control variability

Putting Quality First

Kaizen also talks about improving performance in terms of three dimensions which are quality,
cost, and delivery (QCD). Quality is typically among the most essential criteria customers used to make
the purchase. Quality is usually customers defined and referred to as the perceived characteristics and
features of for the firms to achieve such as goals quality, cost, and delivery. However, the firms should
always put quality first priority. Kaizen recognizes that without a quality product, organizations will not
be able to compete. If managers make some changes on delivery to make it cheaper or cutting cost
somehow, and it ends up making the quality worse, they risk sacrificing not only quality but the life of
the business as well.

Cost is generally looked at coming from the manufacturer’s viewpoint, as the overall cost of
making and selling a product. An important factor, here, is the elimination of waste in many aspects of
work, such as production, inventory, repair, rejects, motions, processing and so on.
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 Delivery refers to bringing the necessary quantity of products in the right place at the right time.
The company may offer better prices using reduced cost and attractive delivery terms. However, this
does not guarantee competitiveness, if the quality of goods and service falls short of consumer
expectations. Some cost-oriented managers do not resist the lure of cutting cost at the expense of
quality. This could work well in the short-term, but would likely to endanger not only profitability, but
also reputation and market position of the product in the long-term.

Speak with Data

Kaizen is a problem-solving process. Since Kaizen deals with addressing problems or limitations,
every situation must be correctly understood. Kaizen has no room for “seat of the pants” operations. In
order to correct the problems in a process, detecting the problems is the first thing to do. Sound data
must gather and evaluated for Kaizen to work for improvement. Without this data the company will be
like a flying blind. It will never be able to tell what is working and what needs to be improved. Data is
the lifeblood of kaizen.

The next process is Customer

The last concept of kaizen is that the next process is the customer. This means that all workers
think that next process is the customer. So, all workers in any process on no account pass on flawed
parts or imprecise pieces of information to those in next process particularly when the organization has
strong commitment to consumer satisfaction. If all workers have to be cautious on what they are doing,
the costumers get the high-quality product and service as a result.

Kaizen promotes the concept of internal and external customers. Through regarding every
process in a series as a customer of the preceding process, every stage of production can be consecrated
for a quality result. If each internal customer is delivered high quality goods, the external customer will
have a high quality product to purchase.

Kaizen views the whole work in specific organization as a series of interrelated processes where
each consists of a supplier and a customer. The supplier provides the process with inputs such as
materials and/or information. The supplier can be another process within the organization or someone
outside the organization. Same goes to the customer; the customer is either someone in the
organization (internal costumer) or the final customer out in the market (external customer). The
customer receives or deals with the output of the process. Having this in mind, all individuals within an
organization deal with customers either internal or external ones. That is, the next process is always a
regarded as a customer. Through this, Kaizen tries to set up a natural commitment to on-going process
improvement throughout the organization to ensure that external customer will always receive high
quality products.

KAIZEN SYSTEMS

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 Next, the system of kaizen have to be understood. Kaizen encompasses many of the components
of Japanese businesses that have been seen as a part of their success. Total quality control/total quality
management, just-in-time delivery, total productive maintenance, suggestion system, policy
development, suggestion systems, and small-group activities are all included within the Kaizen system
of running a business.

TQM Control

Total quality control (TQC) and total quality management (TQM) are widely used in
manufacturing, education, government and service industry now. TQC / TQM have been
developed as a strategy to help management and becoming more competitive and profitable through
helping it to improve in all phases of business. TQM necessitates that the company uphold some
quality standard in all phases of its business. This need ensuring that things are completed right the
first time and that defects and waste are removed from operations.

TQC is a management tool for improving total performance. TQC means organized Kaizen
activity involving everyone in a company. Manager and workers alike should be part of a totally
systemic and integrated efforts toward improving performance at every level. It is geared increased
customer satisfaction through satisfy corporate cross-functional goals as quality, cost, scheduling,
manpower development, and new product development.

In Japan, TQC activities are not limited to quality control alone. Elaborate system of Kaizen
strategies has been developed as management tools within the TQC approach. TQC in Kaizen is a
movement intended at improvement of managerial performance at all levels.

According to the Japan Industrial Standards, ‘’implementing quality control effectively

necessitates the cooperation of all people in the company, including top management, managers,
supervisors, and workers in all areas of corporate activities such as market research and development,
product planning, design preparation for education, production, purchasing, vendor management,
manufacturing, inspection, sales and after- sale services, as well as financial control, personnel
administration, and training & education. Quality control carried out in this manner is called company-
wide quality control or total quality control (TQC).’’

Quality control in Japan deals with quality of people. It is the fundamental concept of the
Kaizen-style TQC. Building quality into its people brings a company a half-away towards producing
quality products.

Table 3 TQC of Japan vs. West

Main differences between TQC Practices in Japan and West

Japan The West

Deals with quality people Deals with quality products

Customer-oriented Manufacturer-oriented

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Upstream Downstream

Process-oriented aimed at improving the Product-oriented, aimed at detecting and eliminating

total performance defective parts

Company-wide, everybody’s responsibility Responsibility of quality control managers

JIT Production System

Many people have misconstrued Just-in-time (JIT) production. In one of most frequent
misunderstandings, a company expects its suppliers to deliver just-in-time. However, JIT production
has something to do with internal process. JIT is a revolutionary way to trim down cost while at the
same time meeting the customer’s delivery needs. For example, new stock will be ordered automatically
when stock reaches the re-order point level. So, this system ensures that the firm can maintain the
minimum required number of stock every day, which saves a lot of inventory costs. Also the firm can
meet the costumer’s delivery needs.

Elements of JIT

1. Make stable and level the Master Production Schedule (MPS) with uniform plant loading create a
uniform load on all work centers through regular daily production and mixed model assembly.

2. Decrease or eliminate set up times. Aspire for single digit set up times less than 10 minutes or one
touch setup. This is done through better planning, process, redesign, and product redesign.

3. Trim down lot sizes. Decreasing set up times allows economic production of smaller lots, close
cooperation with suppliers which is necessary to realize reduction.

4. Shrink led times. Production lead times can be reduced by moving work stations closer together,
applying group technology and cellular manufacturing concepts, reduce wait-in-line length and
improving the coordination and cooperation between successive processes. Delivery lead times can be
decreased through close cooperation with suppliers, perhaps by inducing suppliers to be located very
near to the factory.

5. Preventive maintenance. Use of machine and worker idle time to preserve equipment and avoid
breakdown.

6. Flexible work force. Workers should be trained to work on several machines, to carry out
maintenance tasks, and to do quality inspections.

7. Oblige supplier quality assurance and execute a zero defect quality program. Small lots (single unit)
conveyance. Make use of a control system like Kanban system (or other signaling system) to transport

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parts between work stations in smaller quantities. In its better sense, JIT with material requirements
planning (MRP) system is used to transport the parts between workstations.

Reasons for a move from batch mode to Just-in-Time (JIT)

1. Batch production system is the most inefficient way to make products.

2. Difficult to meet customer requirements, which come in varying orders, like varying volumes in
varying time frames and soon.

3. The batch derives from the agricultural mentality. The batch system, purchase material and produced
in huge batches and there are many processes. At every process, gather the batch and the end collect
the finished product in a batch, which is stock up in the warehouse.

4. This kind of production system is based on market projection, is good when there is demand.

5. End up with large inventory of unsold products and overload capacity, and then borrow money to
carry that inventor. By that time, got hold of too many people for every process.

Total Productive Maintenance

In industry, total productive maintenance (TPM) is a system of maintaining and improving the
integrity of production and quality system through the machines, equipment, processes, and employees
that add business value to an organization. TMP focuses on maintaining all equipment in top working
condition to avoid breakdowns and delays in manufacturing processes.

The term total productive maintenance is attributed to Nippondenso, a company that created
parts of Toyota. However, Seiichi Nakajima is regarded as the father of TPM because of his numerous
contribution of TPM.

One of the main objectives of TPM is to increase the productivity of plant and equipment with a
modest investment in maintenance. Total quality management (TQM) and total productive
maintenance (TPM) are considered as the key operational activities of the quality management system.
In order for TPM to be effective, the full support of the total workforce is required. This should result in
accomplishing the goal of TPM: ‘’Enhance the volume of the production, employee morale and job
satisfaction.”

Total Productive Maintenance (TPM) is a modern Japanese concept. The origin of TPM can be traced
back to 1951 when preventive maintenance was initiated in Japan. However, the concept of preventive
maintenance was taken from USA. Nippondenso was the first company to begin plant wide preventive
maintenance in 1960. Preventive maintenance is the concept wherein, operators produced goods using
machines and the maintenance group was dedicated with work of maintaining those machines.
However, with the automation of Nippondenso, maintenance became a problem as more maintenance
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personnel were required. So the management decided that the routine maintenance of equipment
would be carried out by the operators which are termed as autonomous maintenance, once of the
features of TPM. Maintenance group took up only essential maintenance works.

Thus Nippondenso which already followed preventive maintenance also added autonomous
maintenance made by production operators. The maintenance crew went in the equipment
modification for improving reliability. The modifications were made or incorporated in new equipment
which leads to maintenance prevention. Thus preventive maintenance along with maintenance
prevention and maintainability improvement gave origin to productive maintenance. The intention of
productive maintenance was to get the most out of plant and equipment effectiveness to attain
optimum life cycles cost of production equipment.

By then Nippodenso had made quality circles, involving the employees’ input. Thus all
employees took part in implementing productive maintenance. Based on these developments
Nippodenso was awarded to distinguished plant prize for developing and implementing TPM, by the
Japanese Institute of Plant Engineers (JIPE). Thus Nippodenso of the Toyota group became the first
company to achieve the TPM certification.

Another objective of TPM is to increase the overall equipment effectiveness (OEE) of plant
equipment. TPM also addresses the causes for accelerated deterioration while creating the correct
environment between operators and equipment to create ownership.

OEE has three factors which are multiplied to give one measure called

OEE Performance x Availability x Quality = OEE

Each factor has two associated losses making 6 in total, these 6 losses are as follows:

1. Performance- running at reduced speed and minor tops

2. Availability – breakdowns and product changeover

3. Quality – startup rejects and running rejects

The objective finally is to identify then prioritize and eliminate the causes of the losses. This is
done by self-management teams that problem solve. Employing consultants to create this culture as
common practice.

The eight pillars of TPM are mostly focused on proactive and preventative techniques for
improving equipment reliability:

1. Focused Improvement

2. Autonomous maintenance

3. Planned Maintenance

4. Quality Maintenance

5. Cost Deployment
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 6. Early Equipment Management

7. Training and Education

8. Safety Health Environment

With the help of this pillars productivity can be increased.

Types of maintenance

1. Breakdown maintenance- It means that people waits until equipment fails and repair it. Such a thing
could be used when the equipment failure does not significantly affect the operation or production or
generate any significant loss other than repair cost.

2. Preventing Maintenance- It is daily maintenance (cleaning, inspection, oiling and re-tightening),

design to retain the health condition of equipment a prevent failure through the prevention of
deterioration, periodic inspection or equipment condition diagnosis, to measure deterioration. It is
further divided into periodic maintenance and predictive maintenance. Just like human life is extended
by preventive medicine, the equipment service life can be prolonged by doing preventive maintenance.

a. Periodic maintenance (Time based maintenance – TBM) – Time based maintenance consists of
periodically inspecting, servicing and cleaning equipment and replacing parts to prevent sudden failure
and process problems.

b. Predictive maintenance- This is a method in which the service life of important part is predicted
based on inspection or diagnosis, in order to use the parts to the limit of their service life. Compared to
periodic maintenance, predictive maintenance is condition based maintenance. It manages trend
values, by measuring and analyzing data about deterioration and employs a surveillance system,
designed to monitor conditions through an on-line system.

3. Corrective maintenance- It improves equipment and its components so that preventive maintenance
can be carried out reliability. Equipment with design weakness must be redesign to improved reliability
or improving maintainability.

4. Maintenance prevention – It indicates the design of new equipment, Weakness of current machines
are sufficiently studied (on site information leading to failure prevention, easier maintenance and
prevents of defects, safety and ease of manufacturing) and are incorporated before commissioning a
new equipment.

Policy Development

People follows policies, good or bad. The need, therefore, is for organizations in developing
countries to realize the important of clear, well-defined policy statement’s on quality, reflecting
management’s commitment and orientation and to propagate them through various modes, such as
circulation of documents, newsletters, training, meetings, pledge cards and personal contacts.

It needs to state the level of defects or errors that is acceptable. The policy also needs to state the
relationship between the company and the customer. The policy should be direct and concise and

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should clearly define management’s commitment to quality. The policy on quality has to be statement
that will not be misunderstood. It has to cover conformance to requirements, time and money.

Suggestion System

On the other hand, suggestion system is regarded as individual-oriented kaizen. Suggestion

system encourages all workers to talk about their suggestions orally with supervisors and put them into
action right away, even before submitting suggestions forms. However, all the workers don’t need to
expect to get economic benefits from each suggestion. The process to think and have the idea of each
worker is vital. This system is different from Western management which emphasis on the economic
benefits and financial incentives of suggestions systems.

The suggestion system is an integral part of an established management system that aims at
involving employees in Kiazen. The number of worker’s suggestions is regarded as important criteria in
reviewing the performance of the worker’s supervisor and the manager of the supervisor. The Japanese
management encourages employees to generate a great number of suggestions and works hard to
consider and implement these suggestions, often incorporating them into the overall Kiazen strategy.
Management also gives due recognition to employee’s efforts for improvement. An important aspect of
suggestion system is that each suggestion, once implemented, leads to an upgraded standard.

Three Stages of the Suggestion System

A staff suggestion system is formalized mechanism which encourages employees to contribute

constructive ideas for improving the organization in which they work. The overall aim is to gather,
analyze and implement ideas in order to create results that have a positive impact on the business
and/or deliver new value to customers. The following are the three stages of implementing suggestion
system:

1. Encouragement. In the first stage, management should make every effort to help the workers provide
suggestions, no matter how primitive, for the betterment of the worker’s job and the workshop. This
will help the workers look at the way they are doing their jobs.

2. Education. In the second stage, management should stress employee education so that employees
can provide better suggestions, they should be equipped to analyze problems and the environment.
This requires education.

3. Efficiency. Only in the third stage, after the workers are both interested and educated, should
management be concerned with the economic impact of the suggestions.

Benefits of the Suggestion System

Implementing an effective Staff Suggestion Systems that generates a sustainable flow of good
quality ideas is not impossible. In Toyota, 700,000 ideas are generated annually with a 99%
implementation rate.

Here are the benefits of a suggestion system, namely:

1. Improves one’s own work and the working environment

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 2. Engages the empowers employees

3. Create ownership and trust

4. Improves motivation and morale

5. Improves customer satisfaction

6. Improves profitability

Many Organizations have made the mistake of putting up suggestion boxes and expect
employees to participate and contribute good quality ideas to improve the products, services and
working environment without creating a supporting infrastructure to manage the flow of suggestions.

More often than not, these suggestion boxes are either empty or become collectors of trash.

For suggestions system to be successful and effective, the following factors have to be
considered:

1. Formation of suggestions committee to plan and manage the suggestions system.

2. Defining the suggestions process, including a feedback system.

3. Promoting the suggestion system

4. Evaluating system

5. Award system

6. Sustaining the suggestion system

The Suggestion Cycle

Why Suggestions System Stumbles and How to Avoid Them

Most suggestions remain to be suggestions because of:

1. Delays in approving ideas- Respond within the day to team member ideas whenever possible. The
approval may be a “go do it” or to give coaching to ideas that require further though and development.
For complex or large ideas, respond within a week, or encourage the idea generator (person) to break
the problem down into several smaller parts.

2. Complex approval process (committee) – The approval process should undergo observation,
discussion and approval by the team leader or supervisor. It’s better to go see the actual issue in the
actual place than to discuss the issue in a conference room based on ideas written on a piece of paper.

3. Backlog of suggestions needing approval or implementation- Ironically, asking for quantity over
quality will force the identification of smaller problem that are easier to solve. This reduces the backlog
as more of them are “just do it” ideas. This increases the skill and confidence of people to go through
the problem solving process (thinking) as well as the action itself (experimentation).

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4. Less than 99% of ideas implemented – An idea should be nurtured and the idea generator (person)
should be coached so that basically every idea is approved. Provide guidelines on what is a good kaizen.
Track approval rating visually and have a management team problem solve the gap between current
conditions and 99% implemented.

5. Inappropriate kaizen suggestions- Once again, clear guidelines for what is a good kaizen idea. Focus
on the customer, improve own work; and keep environmental targets from management policies in
mind. Process focus, not people issues, is appropriate.

6. Allowing anonymous suggestions – This defeats the purpose of kaizen as a people development tool
since the idea generator cannot be coached. It’s alright to allow anonymous suggestions where people
feel need to “blow the whistle “. Except that this indicates that the workplace is not safe professionally,
emotionally or physically and is not a stable environment for kaizen. Fix that condition before
launching suggestion systems and anonymous suggestions would not be an issue.

7. Unfair rewards- Every idea should receive a small reward. Larger awards may be given based on
several categories like effort, creativity and impact of the kaizen idea. Encouraging kaizen idea
generation, development and implementation be teams, and giving team rewards also lessens the
possibility of unfair rewards being given to individuals.

8. Motivating by cash only – Since humans are the heart of kaizen, and humans need both extrinsic
(cash) and intrinsic motivation. Sustained kaizen needs intrinsic motivation like recognition, self-
actualization, skill development, feeling fulfilled, or saving the environment through kaizen
suggestions. Management attention and leadership is required.

9. Lack of promotion and support of the kaizen suggestion program – Endorse kaizen in all its forms in
a variety of ways. Take a long-term view of kaizen a people development a communication strategy.
Start by encouraging idea generation by teams, and aiming for quantity over quality. Hold periodic
“championship” or promotional events based on themes.

10. Lack of timely implementation – Companies can do these entire well and still not get the ideas put
in place quickly enough if resources. Meaning time, money, materials, skills are not enough for the
number of great enabler for suggestions systems. Once again, the management should evaluate the
gaps in the 4Ms (manpower, material, machine, method) resources to keep suggestions moving
smoothly.

Small Group Activities

A kaizen includes small-group activities-informal and voluntary groups organized to carry out
specific tasks in a workshop environment. The quality circles are the most popular type. Quality circles
are designed to address not only quality issues but also such issues as cost, safety, and productivity.
Quality circles are regarded as group-oriented kaizen activities.

Small Group Activity (SGA) is also known as focused or continuous improvement in English.
SGA is a method for problem solving in teams by structurally searching for the root causes and
eliminating them. After standardization of the solution the reoccurrence of the problem is prevented.

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The feeling of ownership is intensified because those who are directly involved solve the problem in a
multifunctional team.

The members of the team learn to use techniques (cause and effect diagram, Fishbone-diagram)
to find and eliminate root causes. The team is also taught communication skills, working in teams and
decision making, in order to use each other’s knowledge and experience.

The structure of an SGA project is derived from the PDCA-circle from Dr. W. Edward Deming
and exists of 8 steps on the basis of the SGA circle. The SGA team works independently and reports the
progress by means of communication boards.

The introduction of SGA leads to the following results:

1. Team-building

2. Improved communication

3. Higher involvement

4. Learn how to analyzed and solve problems

How to Use Kaizen in the Hospitality Industry

To manage the process of continuous improvement, consider using service optimization technology that wrangles
data into a common dashboard for teams. This will help your operations department gain real-time visibility into what
needs improvement and even what is currently improving. You'll want to make sure that whichever service
optimization (also known as staff task management or hotel operations software) tool you use deeply integrates with
your hotel front desk software (PMS).

These solutions focus on leveraging technology to improve operations across departments on a day-to-day basis,
ensuring that small-but-steady improvements improve the hotel’s operation.
One such solution is Quore, a comprehensive software suite that makes on property life easier for workers across
the hotel. Here are some of the key ways that Quore helps hotel managers become kaizen masters to deliver better
outcomes for hotels:

QUORE BENEFIT, KAIZEN-STYLE

FEATURE

Real-time Solving problems quickly means that your team learns

problem continuous improvement by doing; it becomes
management embedding in your hotel culture.

Digital The elimination of paper workflows reduces manual

workflows errors, saves time, and makes staff happier. See next
point.

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 One-click With service optimization software, it only takes one
updates click to update checklists and standard operating
procedures. This ensures that everyone has the latest
process and that kaizen-related improvements get out to
the team instantly.

Automated The system works as your silent kaizen consultant by

room adjusting your team’s room assignments on the fly. This
assignments means that staff can be more efficient, all without having
to overthink it.

Performance Without software, managers must rely on instinct,

analysis observation, and feedback from others to identify high-
performers and laggards. As we all know, this can
magnify interpersonal conflicts and gossip. Since kaizen
is all about incremental improvements at each point.

Maintenance With automated prioritization, rooms are kept up to

prioritization brand standards. As last-minute stay-overs affect room
availability, the system re-assigns work as needed.

These features empower individual staff members and entire departments to be more mindful of incremental
improvements. Each day becomes a shared puzzle to solve together, in collaboration and with full transparency.

If You Can’t Measure It, You Can’t Improve It

To achieve the true potential of a Kaizen philosophy, it takes a strong measurement mindset. “If you can't measure
it, you can't improve it” is an adaptation of the famous quote from management consultant Peter Drucker, who once
said “you can't manage what you don’t measure.
There’s no baseline without proper measurement. For hoteliers, measurement is what makes the intangible
trackable. Measurement increases visibility and accountability across the organization, empowering frontline staff
with clear markers of progress. Pulling these metrics to the forefront also creates transparency and trust, ensuring
that each team member is held to the same standard.
Without a doubt, this boosts morale and aligns teams around common goals and shared expectations. Brand
standards are easier to match and there’s more pride of work.
What exactly should you be measuring in your hotel? The short answer is: everything. Each departmental head
should be focused on 4-5 key metrics that will make the most meaningful long term impact on your hotel’s P&L. You
should make those metrics clear to all relevant staff and orient your reporting to celebrate wins and call out areas for
improvement.

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 One case study showing the possible improvements from using kaizen in hospitality

Take housekeeping for instance. In the case study above, kaizen reduced the average turnaround time for rooms by
40%. It also improved linen turnaround time so that housekeeping remains stocked with the items necessary for
their work.

The housekeeping department thrives when it’s coordinated and aligned but becomes chaotic with poor
communication. A service optimization tool, such as Quore, aligns teammates across the department by putting
KPIs at the center of the process; this allows all staff to see status and orient around daily improvements. The
technology empowers front-line staff and guides management with relevant data.
With Quore Cleanings, historical data can be used to improve performance over time, while Cleanings Plus relies on
real-time assignments to maintain optimal efficiency on a given shift. Management can then track KPIs, such as the
average cleaning time and the average inspection scores of each housekeeper. With that information, management
can then strive to deliver those incremental improvements that define the kaizen approach.

THE RESULT: CONTINUAL IMPROVEMENT AT YOUR HOTEL

Stale processes that haven’t been revisited in years can lead to equally stale guest experiences. If you're not always
monitoring and watching for areas to improve, the experience will inevitably slip and guests will notice.
To get to continuous iteration in your hotel, the following steps should be second nature:

 Engage employees, as they’ll have the best ideas of focus areas for improvement.
 Make a problem list and then prioritize according to those with the greatest impact.
 Match problems with potential solutions.
 Test the solutions so that you have on-the-ground insights into what’s working.
 Analyze the results. If there's improvement, adopt the solution.
 Repeat the process and empower staff to do this as part of their own contributions.

It’s fairly simple, and you may already be doing some of these steps but mastery takes incredible discipline. That’s
the beauty of kaizen: it’s a natural process for hospitality. With an intentional approach, supported by the right

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technology, morale grows, mistakes dwindle, and the guest experience improves. It’s a promising vision that can be
pursued each day by applying kaizen’s slow-but-steady philosophy to hotel operations.

Activity 1

Name: Date:

Year/section:

Answer the following questions briefly but correctly:

1. How can you improve service quality in the hospitality industry of Ifugao? What are your
recommendations?
2. What is the significance of TQM in the Hospitality Industry? Explain your answer.
CASE STUDY

Direction: Read the story of Toyota and answer the questions below it.

Toyota’s Kaizen Experience

Toyota’s history goes back to 1897, when Sakichi Toyoda (Sakichi) diversified into the handloom
machinery business from his family traditional business of carpentry. He found Toyoda Automatic
Loom Works (TALW) in 1926 for manufacturing automatic looms. Sakichi invented a loom that
stopped automatically when any of the threads snapped. This concept of designing equipment to stop
so that defects could be fixed immediately formed the basis of the Toyota Production System (TPS) that
went on become a major factor in the company’s success. In 1933, Sakichi established an automobile
department within TALW and the first passenger car prototype was developed in 1935.

Sakichi’s son Kiichiro Toyoda (Kiichiro) convinced him to enter the automobile business. After
this the production of Model AA and Toyota Motor Corporation was established in 1937. Kiichiro visited
the Ford Motor Company in Detroit to study the US automotive industry.

He saw that an average US worker’s production was nine times that of a Japnese worker. He
realized that the productivity of the Japanese automobile industry had to be increased if it were to
complete globally.

Back in Japan, he customized the Ford production system to suit Japanese market. He also
devised a system wherein each process in the assembly line of production would produce only the
number of parts needed at the next step on the production line, which made logistic management
easier as material was procured according to consumption. This system was referred to us Just-in-Time
(JIT) within the Toyota Group.

The JIT production was defined as “producing only necessary units in a necessary quantity a
necessary time resulting in decrease excess inventories and excess workforce, thereby increasing
productivity.” Kiichiro realized that by relying solely on the central planning approach, it would be very
difficult to implement JIT in all the processes for an automobile.

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 Hence, TPS followed the production flow conversely. People working in one process went to
the preceding one to withdraw the necessary units in the necessary quantities at necessary time. This
resulted in the preceding process producing only quantities of units to replace those that had been
withdrawn.

In the early 1990s, the Japanese automobile major, Toyota Motor Corporation (Toyota) was
facing acute labor shortage. The emergence of high wage jobs and a shortage of young workers due to
the low birth rates in Japan in the previous two decades were the primary reasons for this. The number
of women and aged people was increasing in the country’s labor pool. These people avoided heavy
manufacturing work.

Toyota’s strong focus on improving productivity and production efficiency over the decades had
created strained work atmosphere as the workers were reportedly over-burdened. This led to an exodus
of young workers from the company.

In 1990, around 25% of newly hired young workers left the company in their first year itself. To
deal with the labor shortage problem, Toyota employed many temporary workers in the assembly
plants. The ratio of temporary workers in the workforce soon reached more than 10% - some work
groups had around 75% temporary workers. As these temporary workers were not adequately trained,
the annual working hours of the company increased, while productivity decreased.

Further, according to analysts, Toyota management’s focus on increasing production efficiency

by achieving higher production levels with less number of workers resulted in increased stress for the
workers. This also played a major part in the worker exodus. Toyota’s problems increased with by the
global upsurge in car demand during 1987-1991 because of which the demand for labor shot up. As high
wage jobs were easily available to the limited pool of young male workers, many Toyota workers began
to leave the company. To handle the crisis, Toyota radically changed its production management and
human resource management practices.

The company decided to change its working conditions to attract high school female graduates
and over forty years. Toyota realized that it would have to rely on Kaizen for modifying its existing
assembly lines to attract workers.

Question:

1. What problem happened in Toyota? How was it solved? Relate the story.

2. If you are part of Toyota’s management, how will you solve the problem using Kaizen? Discuss your
answer.

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