Poor performance of production supervisors at heavy hitter vietnam company

UNIVERSITY OF ECONOMICS HO CHI MINH CITYInternational School of Business ---Nguyen Anh Phuc Poor performance of production supervisors at Heavy Hitter Vietnam company MASTER OF BUSI

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-Nguyen Anh Phuc

Poor performance of production

supervisors at Heavy Hitter Vietnam

company

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2019

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-Nguyen Anh Phuc

Poor performance of production

supervisors at Heavy Hitter Vietnam

company

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: Dr TRAN PHUONG THAO

Ho Chi Minh City – Year 2019

LIST OF ABBREVIATIONS

SBD: Stanley Black & Decker Inc

NPD: New product development project

HR: Human resources

QC: Quality Control

GM: General Manager

WI: Work instruction

IT: Information technology

ERP: Enterprise Resource Planning

MBO: Manage by objective

KPI: Key performance indicator

PAS: Performance appraisal system

LIST OF CHARTS

Chart 3: Finished products rejected by SBD Jan ~ Mar 2019 P 4

Chart 4: Sold value vs Defective value per SKU Jan to Mar (K US$) P 5

Chart 5: Value of Good vs Defective product (K US$) Jan to Mar 2019 P 5

Chart 6: Causes validation survey result P 21

LIST OF FUGURES

Figure 1: Heavy Hitter Vietnam Organization Chart P 3

LIST OF TABLES

Table 2: Heavy Hitter Monthly Defective Report P 12

Table 5: Causes validation survey result P 20

Table 6: Current vs New appraisal system P 24

Table 7: Benefit of appraisal methods analysis P 25

Table 8: Benefit of resources for implementing new PAS P 25

Table 11: Implementing cost and monetary benefit of new PAS P 29

TABLE OF CONTENTS Executive summary

CHAPER 1: Company overview

CHAPER 2: Solution selection

CHAPER 3: Supporting Information

EXECUTIVE SUMMARY

In manufacturing or any other kind of businesses, quality of product or service is one of the most importance to the survival of that business If a company supply poor quality products, there will be no customer and no market for their business to develop Therefore, the main purpose of this thesis is finding key problems lead to poor quality products of Heavy Hitter Vietnam and provide solution for those problems Heavy Hitter Vietnam is hand tools manufacture Their main products are hammers and striking tools

In early of 2019, their strategic customer Stanley Black & Decker (SBD) detected a high quantity of defective hammers shipped from Heavy Hitter Vietnam end of 2018 This is a big issue for both side For customer SBD, the issue will cause late new product

launching of SBD For Heavy Hitter side, it cost a lot of money to Heavy Hitter to replace good products by air shipment as well as sorting fee for all inventory at customer SBD’s warehouse The main problem is identify based on empirical analysis, process-oriented analysis from interview key stakeholders and process audit to find out potential problems The main problem is validated based on company data analysis, process audit and

literature as support From those analysis, the poor performance of production supervisors

is identified as the main problem caused the quality issue at Heavy Hitter Vietnam

CHAPER 1: COMPANY OVERVIEW 1.1 Problem context

in Easy Strike group are sharing similar customers as well as similar products

Source: Heavy Hitter company

Fiskars81%

Figure 1: HEAVY HITTER VIETNAM ORGANIZATION CHART

Source: Heavy Hitter Vietnam

launching date of these new products Order quantity is high, and the company need to ship their new product to SBD’s warehouse progressively In early of Jan 2019, customer SBD follow their regular inspection procedure to check Heavy Hitter’s new products shipped to their Fontana warehouse in The USA and found out that a high defective rate during their inspection An alarm message was sent immediately to all SBD’s warehouse all over the world included warehouses in USA, in EU as well as Asia to communicate about this quality issue Top management team of SBD decided to put on hold all New products of Heavy Hitter and conduct 100% inspection in all their warehouses A high quantity of defective was detected and quarantined during inspection time Jan to Mar

2019 as show in Chart 3 Heavy Hitter company is requested by SBD to take action

immediately to solve the quality issue and ship all replaced products by air to all SBD’s warehouses in the world The US Dollar value of the Sold products compare to defective products claim by customer SBD show in Chart 4

Chart 3: Finished products rejected by SBD Jan ~ Mar 2019

GOOD product quantity Defective quantity Defective Rate

Source: SBD customer

Beside the loss of defective product claimed by customer SBD at US$ 365,000, company must pay a big amount of airfreight charge for total more than fifty thousand of new hammers to replace defective

hammers in all warehouses of SBD

This airfreight charge is estimated at

around US$ 250,000 Plus, sorting

cost for 100% of product stock in

SBD’s warehouses that SBD will

charge to Heavy Hitter around US$

100,000 In total, only visible side,

the company will lose around $US

715,000 on these three new product

development projects with customer

SBD The total sale value of these three projects is US$ 1,194,000 and total money that

$828

$365

Chart 5: Value of GOOD VS Defective product (K US$) Jan to Mar 2019

Good product value Defective value

Source: Heavy Hitter company

Chart 4: Sold value vs Defective value per SKU

Jan to Mar 2019 (K US$)

Sold value Defective value

Heavy Hitter must pay to solve this quality issue is at 60% of those project value This is significant portion for the cost of this quality issue-Table 1

Table 1: Lost /sold ratio

Source: Heavy Hitter company

All analysis based on company’s data is showing that company is losing their significant amount of money in these new product development projects with customer SBD due to poor quality products Even though, SBD is not their biggest customer and revenue contributed by customer SBD in 2018 is only 20% in total $ 22 M revenue (chart 2), the owner of Easy Strike group recognized that SBD is their strategic customer to develop their company business not only Vietnam but also China and Taiwan Twenty percent of revenue contributed by customer SBD in 2018 does not reflect big

opportunities that company can develop their business with this customer SBD is biggest hand tools manufacture in the world And growing business with customer SBD will help company to execute their customer diversity strategy so that they will not rely heavily on customer The Home Depot (50% of their 2018 revenue)-Chart 2 Therefore, Easy Strike group need to take their best effort to solve the problem as quick as possible to ensure that the quality issue will not affect the launching schedule of these new products at their customer SBD In case the quality issue is not handled probably, this will give a bad affect to other ongoing new product development projects with SBD and destroy the relationship with this customer SBD Besides that, the issue will also damage company reputation in this hand tools industry

Thousand US $ Total sold value to SBD $ 1,194

Loss from defective product $ (365)

Loss from airfreight charge $ (250)

Loss from 100% sorting cost $ (100)

Total loss on the quality issue $ (715)

1.2 Problem Analysis

1.2.1 Possible problems

In order to find potential causes of the symptom, meetings and interviews to

importance stakeholders of Heavy Hitter Vietnam was organized Key questions for these interviews are: Do you have any idea why the quality issue happened? Has it ever

happened with customer SBD or any other customer in large scale (significant reject rate) like this situation? And why the company quality system cannot detect the defective before they are delivered to SBD customer?

Nguyen D (interview, February 11th 2019) Quality supervisor of Heavy Hitter explained that “I cannot do my Pre-shipment inspection because warehouse supervisor does not cooperate well with me I cannot find finished products by myself Warehouse team must put all finished goods in one place and inform me to come and check But they did not do it I cannot ask my Quality Manager to help because he was back to Taiwan and there is no new Quality Manager to handle his job No QC Manager also be the

reason why my QC team members did not implement their In-process Inspection as

required and could not detective the quality issue in advance When the QC Manager was here, he supported us to argue with production people that our findings are real quality issue and production people need to fix it Without our Manager, it is difficult for us to ask production people to stop production and solve the quality issue Production people only concentrate on their production output and underestimate quality of the product This

is the most serious quality issue ever happen here since the day I started to work here more than10 years ago We did not have any major issue with customer SBD in the past”

In another interview with company’s warehouse supervisor (Nguyen N., interview, February 11th): “We have a small warehouse Not enough place to keep finished goods now We still had enough space last year Start from early of 2018, when customers had more order, we did not have more space to store our products We have to place our

finished good outside of the factory floor where some spaces are available and need a lot

of time to find it when QC people ask to check finish goods or when we need to load these finished goods on trucks to ship Sometimes, we provide wrong data to QC people

or to our boss because finished goods are not gather in one place We also do not know products we load to truck to ship out are completed Final inspection by our QC or not”

Tran N (interview, February 11th 2019) Process supervisor answer that: “We have

to commit a high daily product output Customer demand increased since early of this year We have to work overtime to fulfill the target of our boss If we cannot produce enough quantity, we are punished by salary deduction and my boss will terrify me by scolding When we found something wrong with our products, we tried to fix it on our own as quick as we can But we are not sure products are good after our rework

And from an interview with company’s production manager (Nguyen D.,

interview, February 11th) said that he has 12 supervisors report to me Each of them is in charge of one process from raw material to finished goods They are all promoted from workers After working here for a long time, company promote them to supervisor

position They have a lot of work experience as a worker, but they have no capability to organize, coach, train or supervise their team members to make sure that those workers can do their job in an appropriate and effective way They are not well trained for

management and leadership skills This situation occurred long time ago but it is not an issue since we were in small business scale It became a problem for company when they doubled their revenue in 2018 When workers are pushed for productivity, workers need

to work with higher speed and longer time and it make defective happen with higher rate

If my production supervisors manage their team well, defective can be prevented or found

at very early stage and we would have solution when it still not a big issue

After first interview with all important stakeholders, a problem mess is drawn out

to see what potential problems of the symptom are

Figure 2: Problem mess

From the problem mess, there are three possible problems The first problem could

be the poor warehouse management, second is weak quality control system and last but not least, poor performance of production supervisors

1.2.1.1 Poor warehouse management

In 2018, there is a significant increase of customer demand This is due to the trade-ware between China and USA, many customers move their business from China to Vietnam or other countries to avoid high tariff for their product export to USA From Heavy Hitter’s financial report, its revenue increased from US$ 13.3 M in 2017 to US$ 22.4 M in 2018 This is almost 70% increasing Higher revenue is equal to more products are produced in year 2018 It means that company will have more raw material and more finished goods store in their warehouses, but the size of warehouse floor cannot increase any more This cause congestion of product moving flow Therefore, warehouse people keep finished goods at everywhere at factory floor and have a no-good tracking method for all related people to know exactly quantity, kind of product and location of these finished goods when needed Only worker who keep that finished goods know where they are

1.2.1.2 Weak quality control system

In the recode of HR department, from May 2018 to Dec 2018, company have no Quality Manager The Manager was transferred back to Taiwan Head Office to support their Taiwan plant for another importance project in Taiwan During that period, the QC Supervisor need to manage all QC staffs and report to the General Manager directly From work experience record, the GM has no experience in Quality control and cannot give a

support to his QC team as good as the previous QC Manager

1.2.1.3 Poor performance of production supervisors

From our observation and process audit, company has total 312 people is working

in production floor This number included 1 production Manager and 12 supervisors Each production process has around 20 to 30 workers and 1 supervisor All supervisors have working experience not lower than 5 years so that they have good working skills to make good products, but they are not capable to manage all workers in their team It was

also observed during our process audit that supervisors of some manufacturing processes have to work as other workers or operate a machine Specially, supervisors are response for in-process inspection of their manufacturing process, but all 12 team leaders are not known how to performance these in-process inspection follow company standard

procedure

1.2.2 Main problem

Starting from the moment the quality issue detected at warehouse of customer SBD, the customer requested Heavy Hitter need to have immediate containment actions First action is 100% of finished goods need to pass visual inspection by Heavy Hitter QC before packing Second action is all shipments need to complete Pre-shipment inspection

by QC of SBD customer and get their approval prior to shipment These immediate

containment actions requested by SBD customer ensure that it can stop immediately Heavy Hitter shipping bad product to SBD’s warehouse At the same time, the previous Quality Manager of Heavy Hitter was transfer back to support their Vietnam plant

Company also recruited a new Quality Manager with over 15 years’ experience in

Quality Control field These action in order to restructure and reinforce their Quality system Company re-trained their quality staffs for In-process and Final inspection These actions take effect Customer SBD feedback that they found no defective from new

shipment lots of Heavy Hitter produced from Jan 2019 But, these actions can only stop Heavy Hitter shipping defective product to their SBD customer It cannot solve the

defective issue Base on Heavy Hitter monthly defective report of Jan 2019 in Table 2, company produce 110,650 pieces of hammers and 7,671 pieces are defective The

defective rate is 6.9% This internal defective rate is very bad compare to other hand tools suppliers of SBD as well as Industry average (defective rate should be lower than 1%)

Source: Heavy Hitter company

Sand Blast

I Sizing

Sand Blast II

Grinding Claw V Painting Polishing

Laser etching

Lacquer coating

Overmoud ing

TOTAL Visual defective 72 134 59 417 127 468 744 655 172 2856 1967

Table 2: Heavy Hitter Monthly Defective report

Further data analysis from the Jan defective report in Table 2, the analysis result is showing that there is 77% of Visual defective was detected at 100% Visual inspection step (Table 3) Also, from this data analysis, the self-detect rate of each process is very low It is only from 0% to 28% and Next process detect rate is 0% to 9% as show in Table 4 These data analysis can conclude a poor performance of production employees:

 Internal defective rate is 6.9 % compare to 1% of Industry average It is showing that workers are producing high defective product

 Self-detect rate is low This number is telling that production supervisors cannot detect defective of their process

 Next process detect rate is low The data proved that Production supervisors cannot detect defective of previous processes

Based on Heavy Hitter’s job description of Production supervisor position,

supervisor response for entire manufacturing process included on job training for all workers work in his process, control quality and quantity of products of their process, ensure that all machines and equipment of their process are under good condition Thus, these data analysis is showing that production supervisors are not doing their job well

Table 3: Data analysis from table 2

Process detect

defective

Defective quantity (pcs)

Table 4: Data analysis from table 2

1.3 Problem definition and consequence

1.3.1 Problem definition

Base on a research about Supervisors' role in TQM and non-TQM firms (1),

supervisors play an importance role in quality management and improvement in

manufacturing company One of main tasks of supervisor is convert strategies of top management to short term implementation Without good work of supervisors, all

product quality control standard and its specification cannot transfer fully to factory workers who are directly made and impact on quality of their products According to (2), company should provide training to their production supervisors for management skills to improve performance of their factory workers Supervisors can influence to productivity and product quality of workers in their team by providing help to worker or feedback about worker performance It will help those workers improve their work effectiveness Supervisor can also provide encouragement or advise to help their workers in dealing with their personal problems Moreover, (3) point out that main responsibilities of

supervisors are safety at work, meet target for production and quality, analyzing and solving quality problems at their manufacturing process and provide training to all their team members included new workers Thus, beside meeting productivity target and

training their workers, supervisors are also in charge for quality control and solving

quality issue In most company with a weak quality system or product quality is

underestimated, supervisors are not focus on product quality control

From our observation, process audit, data analysis and literature support, the

conclusion can make is Poor performance of Production supervisors are main problem for High rate of defective products was detected at customer SBD’s warehouses Production

Hot Forging

Machini ng

Sand Blast I Sizing

Sand Blast II

Grinding Claw V Painting

Polishin

g

Laser etching

Lacquer coating

Overmo uding

supervisors did not provide enough training and supervising to their workers to ensure that their workers are capable to make good products Production supervisors are not capable to performance their in-process inspection so that they cannot detect defective of

their process as well as previous processes

sources will reduce company profit In case their Quality team cannot find out these defective and they are shipped to customer, it will cost company not only tangible assess but also intangible assets such as company reputation and losing businesses to their competitors

Second consequence of this problem is high defective rate impact badly to

company production schedule They detect defective too late (mostly at Packaging

process) and cannot have enough product quantity to ship to customers follow order quantity This will cause delay shipment Thus, company will be requested to ship their product by air to customer to catch up their delivery plan Air shipment is too expensive, and it will impact badly to company profit as well And when order quantity is not

enough, finished goods cannot be shipped out and stuck in their warehouse and easy to cause other issues such as warehouse worker to pick up product without Final inspection

or wrong product to ship to their customers

Third consequence, since production supervisors cannot do well his supervising and monitoring tasks, they cannot support well their workers to improve worker’s skills

and performance as well as provide a fairly annual appraisal to their workers This will impact to workers’ work satisfaction and many skill workers will quick their job

1.4 Initial possible causes

The research of Liu and McMurray (4) concluded that job satisfaction has possible impact for manager to motivate their production supervisors If manager level cannot create a fair treatment environment, a positive reward and recognition policy and no career development opportunity to supervisors under them, they cannot motivate these supervisors and expect a good performance from these leaders as well as their team members One more cause can impact to performance of leaders is no empowerment from their managers (5) Leader cannot manager his team well if he has no authority to assign task to his team members, cannot decide on overtime or he does not involve in hiring and firing decision related to their team members Also recommended by another research of Leadership training and delivery prospects of team leaders in Communication Network Support Services Limited (6), company should provide leadership training to leader level to improve their performance and company productivity From this

theoretical analysis, there are 3 potential causes of this problem: lack of leadership

training, no empowerment from manager and no job satisfaction