Thesis on "Shaw Industries Quality Improvement Deployment and Organizational Change Plan"

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Shaw Industries Quality Improvement Deployment and Organizational Change Plan Author

Competing in a mature, contracting industry that shrank 3.7% in 2008 with continued contraction of industry sales in 2009 (Stewart, 2009), Shaw Industries, a subsidiary of Berkshire Hathaway, relies on quality improvement, process improvement, lean manufacturing and supplier management to remain profitable. According to the latest quarterly financial statement form 10-Q Berkshire-Hathaway filed with the Securities and Exchange Commission on June 30, 2009, the company generated $2B in revenues, reporting Earnings before Interest and Taxes of $85M. Year-over-year declines for Shaw Industries are currently at 21%, with 23% reduction in revenues from A1, 2008 to Q1, 2009. Berkshire-Hathaway claims in the latest 10Q that the ongoing global recession, specifically the slow-down in residential real estate activity and tight credit has severely impacted Shaw Industries' performance. The 10-Q dated June 30, 2009 also states that there have been plant closures to reduce costs. To combat these challenges, the company is investing heavily in Six Sigma-based quality improvement programs, and has today approximately 320 Six Sigma blackbelts and greenbelts on staff. The company also has adopted lean manufacturing core concepts including benchmarking process performance (Ghosh, 1999) and has intensive efforts underway to streamline supply chain performance. The objective of integrating Six Sigma programs with supply chain management strategies is to significantly reduce operating experiences by increasing product and process quality while alleviating unnecessary costs. Shaw Industries has been effective in the integration of Six S
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igma, supply chain and reverse logistics processes as part of their intensive commitment to sustainability as well (Rondinelli, Berry, 1998). The adoption of Six Sigma methodologies, supply chain integration, supplier quality management, product configuration, production management as part of their lean manufacturing strategies is generating cost reductions which the company needs.

Table of Contents

Abstract

Table of Contents

Chapter One

Figure 1: Shaw Industries Organizational Structure

Figure 2: Carpet and Rug Mill Value Chain

Chapter Two

Figure 1: Production Process for Mill-based Manufacturing

Appendix

References

Chapter One

Shaw Industries is a $4B manufacturer of carpet, carpet fiber, hardwood, laminate, ceramic tile and flooring systems for businesses. Operating over 90 production plants that produce over 3,000 combinations, styles and textures of surface flooring, many of which are build-to-order for specific business clients, the company has to contend with exceptionally complex build-to-order process workflows. Shaw Industries also markets just over 30 different brands of carpets and flooring systems, which further underscores the need for intensive supply chain management, coordination and supplier quality audits and programs. Over the last decade as the company has worked to aggressively adopt lean manufacturing strategies to minimize the constraint of wide variations in their product quality. The industry they compete in is known for its commoditization, and quality has emerged as the most potent differentiator over companies who rush carpet, flooring or maintains to market only to have them fail at customers' installations. Shaw Industries also derives the majority of its revenue through their indirect channels, which is comprised of approximately 54,000 retailers, distributors and dealers throughout North America (Stewart, 2009). As of the last fiscal quarter of 2009, the company is employees 30,000 people globally. Berkshire-Hathaway has chosen in their 10Qs filed with the Securities and Exchange Commission (SEC) to provide company-specific financial performance data and reporting relationships. Figure 1, Shaw Industries Organizational Chart, 2009, provides an overview of the structure of the top management of the company. There are roles specifically for hard surfaces, which is the product area which generates the majority of the firms' revenue and a shared leadership model of Rand Merritt, President and Vance Bell, CEO, co-owning the leadership of the company. Operations and Logistics are senior-level positions as they are crucial for the company's value chain to continually improve in terms of performance and cost reduction. Analyzing the organizational structure of Shaw Industries illustrates a deliberate strategy of ensuring critical roles for managing the value chain are integral to the decision making process of the company at a strategic level. The organizational structure in Shaw Industries is known for being flat with wider spans of authority (Rondinelli, Berry, 1998).

Figure 1: Shaw Industries Organizational Structure

A strategic view of the carpet and mill value chain is shown in Figure 2. From an enterprise compliance and quality management (ECQM) standpoint, this value chain has many areas of cost reduction and performance improvement. Operational Compliance, Sourcing and Procurement, and Supply Chain Planning all are areas where greater quality management can deliver rapid cost reductions and greater process efficiencies as well.

Figure 2: Carpet and Rug Mill Value Chain

The intersection of the organizational structure and the requirements of the industry value chain have created an organizational culture in Shaw Industries which is heavily reliant on key performance indicators (KPIs) and metrics of performance. The culture is one of exceptional accountability and measurement of results. This is illustrated by the high level of value the company places on Six Sigma blackbelts as change agents throughout their culture (Phillips-Donaldson, 2004).

The role of the Six Sigma blackbelts and greenbelts are to apply the DMAIC methodology to the areas where constraints to supply chain quality management have become the most acute and difficult to control (Mukhopadhyay, Ray, 2006). These supply chain processes include consistency of supplier audit analysis, the development of benchmarks for evaluating supplier adherence to audit requirements, and the development of specific targets for quality management. Also included is the use of DMAIC-based methodologies for refining the Non-Compliance, Correction Action (NC/CA) and Corrective Action/Preventative Action (CAPA) quality audit workflows used in evaluating and continually managing suppliers to a high level of performance. For Shaw Industries, quality is speed. The more the company can manage to quality levels that are free of aberrant or high levels of variation, the more profitable of a financial period they can generate. The NC/CA and CAPA processes are also used for the managing of the DMAIC -- based Six Sigma strategies that are aimed at increasing audit accuracy overall. The use of supplier audit data is also critically important for the redefining of mill machining and calibration of tools as well.

As Shaw Industries realized in the early 1990s that to complete effectively against purely price-driven competitors they would need to concentrate on lean manufacturing techniques to gain cost, quality and speed advantages, the company has a mature set of processes in place. The maturity of these processes can be seen in the investment in over 300 Six Sigma blackbelts and greenbelts. The process maturity of their approach to minimizing variation of constraints is also seen in how they are managing the Six Sigma methodology's use throughout their supply chains as well. The maturity levels of reporting systems is exceptional as well, as the use of analytics applications are pervasive, as the company relies on benchmark performance data to manage CAPA, NC/CA and audit management systems as well. As many manufacturers in the mill and carpet production industry rely on an organizational structure that is comparable in approach to aerospace and defense manufacturers -- namely one that has a strong Project Management Office (PMO) function. The PMO function within the mill industry has proven to be problematic for the same reasons it struggles as an organizational concept in the aerospace and defense industry, namely it has a tendency to become balkanized and fragmented over time (Mukhopadhyay, Ray, 2006). In terms of process maturity, Shaw Industries is above average for the mill and carpet production industry on the use of a PMO-based architecture. They have in fact invested in an Enterprise Resource Planning (ERP) system to specifically manage the integration of disconnected, broken PMO-based processes over time. This strategy of relying on the distributed order management, logistics and manufacturing execution system functional strengths of an ERP system to serve as the catalyst for PMO integration is common (Pellegrinelli, Garagna, 2009). Further, Shaw Industries sees the investments in ensuring a high degree of integration throughout their PMO function being essential to managing their ECQM and overall quality management strategies to attainment. This strategy and perspective also signals that Shaw Industries has achieved a high level of maturity in the areas of quality improvement and organizational change. Overcoming resistance to change specifically in the area of the POM centralization function would have also taken significant effort in the part of senior management to achieve as well. With the exceptionally high amount of Six Sigma blackbelts and greenbelts however it is clear the company's culture has shifted to being more focused on quantitative performance. The company now thrives on measured feedback to understand an appreciate how to change which processes that most need to improve.

With a strong culture focused on measurable performance and the centralization of the PMO function, there still exists the significant challenge of potentially discontinuing product lines as the recessions' effects on sales continues. The 21% drop in sales is the primary catalyst for considering discontinuing the lowest-performing product lines and saving the expenses associated with them. This decision however has many implications on how suppliers… READ MORE

Quoted Instructions for "Shaw Industries Quality Improvement Deployment and Organizational Change Plan" Assignment:

I would like the ***** (*****s Username: *****).

Thank you,

Please use Shaw Industries as the organization of choice.

The paper must be written to APA standards and the DBA Dissertation and Pagination Guidelines including all references. This provides experience in writing dissertation format. The dissertation guidelines are slightly different than a research paper.

Contents:

Initial Paper *****“ Quality Improvement and Organizational Change Deployment Plan

This paper represents the initial introductory material and the first two chapters of the final paper. The initial paper is composed of:

*****¢ Title Page: Initial Paper *****“ Quality Improvement Deployment and Organizational Change Plan

*****¢ Abstract

*****¢ Table of Contents

*****¢ Chapter One: Introduction to the Proposed Organization

o This chapter profiles the organization being studied and determines the maturity or sophistication of current quality improvement and organizational change initiatives, and identifies the organizational needs driving the requirements to further deployment.

o In reference to the selected organization, the chapter must cover: name of the organization or pseudonym, type: for-profit, non-profit, government, major products or services, size of the organization (e.g. revenue, budget, number of employees), organization structure (e.g. organization chart) whether the organization is part of a larger group, the organization*****s mission/vision, current quality improvement and organizational change initiatives, organizational culture, leadership, overall organization, and competitive situation.

o The chapter must include a review of the current level of maturity and sophistication of the supporting systems.

o The chapter must address the reasons why a quality improvement and organizational change initiative is needed or why an expansion of the current systems is required. What organizational need will be met?

o Other information may be included that helps define the profile of the organization, the maturity of its systems, and the reasons why quality improvement and organizational change is needed.

*****¢ Chapter Two: Theoretical Basis Quality Improvement and Organizational Change

o This chapter includes a comparison and contrast of the theoretical bases and benefits/adverse consequences of three leading quality initiatives. The three quality initiatives to be studied will be selected by the student. Decide which quality initiative or combination of initiatives will be used in the deployment.

o The chapter must include appropriate definitions, concepts, and theories supporting quality improvement and organizational change.

*****¢ Annotated Bibliographies: include annotated bibliographies of three articles from academic journals that address Quality Improvement and Organizational Change concepts. The articles must be external to our textbook. Each of the articles must also be referenced in chapters one or two of the paper.

o Note - Annotated Bibliographies Guidelines: In the annotated bibliography, the student identifies the major thesis or finding of the article, evaluates the strengths and weaknesses of the methodology used and states the significance of the article to the focus of the annotated bibliography. Each Annotated Bibliography will meet the following requirements:

 Be completed according to APA criteria

 Be approximately 500 words

 Include three subheadings for each annotation:

Critical Summary of the Article, Critical

Analysis of the Research Methods, and Critical

Analysis of Results and Conclusions.

 Start each Annotated Bibliography on a new page

in the paper. Begin the annotation with an APA

reference of author and title of the article. See DBA

Dissertation and Pagination Guidelines and

Annotated Bibliography Guidelines for more

information.

*****¢ References

Hints:

The following hints are provided to help develop the paper:

*****¢ Be sure to provide all of the information outlined in the content section above.

*****¢ Indicate why a quality improvement an organizational change initiative is needed.

*****¢ List the key quality improvement and organizational change definitions, concepts, and theories outlined in our textbooks and lecture notes. Cover these concepts in Chapter Two.

*****¢ Understand that you may use one of the quality approaches (e.g. Six Sigma, Deming) or a combination of approaches appropriate to the deployment.

*****¢ Use the Annotated Bibliography guidelines.

*****¢ Approach the problem if you were a consultant hired to review an organization to determine its readiness for a quality improvement and organizational change initiative. This includes providing definitions and descriptions of the related concepts.

*****¢ Be sure to use the DBA Dissertation and Pagination Guidelines and APA to format the paper. Although this will be your plan, you must write in third person. Stay away from phrases *****¦ the researcher will investigate*****¦ and use a more scholarly approach*****¦ key processes will be evaluated.

The long history of quality

Early History and Foundations of Quality

Often when we think of the history of the quality movement, we think of relatively recent events (e.g. product recalls, poor product quality, poor service). Actually, quality concepts and initiatives have a very long history. In our text book, the authors have a brief summary of the history of quality (e.g. craft guilds, interchangeable parts); yet quality has a history that tracks the three major waves we discussed in Seminar One. Quality, even some very modern concepts, has been around through the Agricultural, Industrial and now the Information Age.

Joseph Juran, one of the leading experts on quality, has an excellent book, A History of Managing for Quality, which traces the evolution of quality from the earliest of times (Juran, 1995). Handicraft industries and resulting quality control systems can be traced back to the sixteenth century B.C. Many of the common techniques from self-inspection, independent testing, specifications, customer satisfaction, process control, and other concepts were practiced in many early civilizations. It is interesting to see how these techniques and methods have changed as the major shifts (e.g. Industrial Revolution) have occurred.

In his book, Managing Quality, ***** Garvin has a comprehensive survey of the history of quality, especially in the United States (Garvin, 1988). In the United States, formal inspection became an important tool with the rise of mass production. Other techniques helped including the introduction of standard fixtures, gauging systems, and interchangeable parts. In the early 1900s, Frederick Taylor introduced the scientific method in designing jobs. He separated the task of management and planning from workers. His focus on the details of each task and the separation of jobs (e.g. eventually leading to separate quality departments) has been blamed, in recent years, for many of the problems with quality (e.g. over reliance on inspection). Actually, he offered many improvements to the workplace including the idea that workers should be highly trained for their work.

During this period, there were two historical events that were especially important. The first was Bell Laboratory and the work of W. A. Shewart. During the middle of the 20th Century, Bell Labs became the gold standard for quality as the organization helped the telephone system meet the new demands of the country. Most importantly, Shewart developed the concept of process control charts. These charts allow you to track the normal variation in any process, both manufacturing and service. As a result, it is possible to determine if common or special cause variations are present. These concepts were developed in 1931 *****“ more on control charts, common causes, and special causes later in our course.

As noted by Garvin (Garvin, 1988, p. 9), the other significant event was the introduction of sampling techniques to help achieve acceptable quality levels. During the Second World War, there was a need to meet high production levels. With these production levels, it was essential that the quality of the material (e.g. planes, tanks) improve. In response, there were two competing approaches. The first was the use of Shewart*****s process control charts, as described above, which required extensive training of the workers. The alternative was use of sampling techniques to test the product to ensure it met minimum requirements. The sampling approach won and was adopted. Unfortunately, this approach introduced the concept of Acceptable Quality Level (AQL). This fostered the idea that a certain level of failure is OK. This concept remained through much of the last century, until Japan and other competitors demonstrated that this concept was flawed.

How these two concepts were handled had a substantial negative impact on quality improvement and organizational change. First, it took nearly seventy years to extend statistical thinking and process control charts to a broader set of users. These concepts are at the heart of Six Sigma and other more modern techniques helping drive organizational performance to higher levels of perfection. Next, the concept of AQL was extremely harmful. It established a perception with senior executives and managers that some level of defect was acceptable. In a world where customer expectations are increasing exponentially and competitors are driving out defects, this concept is not acceptable. It took many years for executives in the United States to overcome this problem.

Contemporary Quality History

Our textbook provides an overview of contemporary quality history including highlighting the ideas of Deming, Crosby, and Feigenbaum. The textbook also includes some examples of failures.

There are also examples of companies successfully accomplishing quality initiatives. One of the examples is the Ritz-Carlton *****“ a two time winner of the Malcolm Baldrige National Quality Award. The company has a great motto, which helps set the appropriate tone and culture for customers and employees:

We are ladies and gentlemen serving ladies and gentlemen

One of the interesting points highlighted in the text is how many organizations implemented quality initiatives in response to a crisis. At one point, Japanese companies were selling copy machines for less than it took Xerox to build them. The Japanese companies had determined how to remove waste and extra costs from the production process. This was a serious business crisis for Xerox, which resulted in the company implementing comprehensive quality initiatives.

The discussion of companies responding to crises highlights two important issues. The first is whether a business crisis is needed to implement a comprehensive quality initiative. On one hand, it is often easier to motivate employees and stakeholders when a company or organization faces extinction. Xerox faced complete business failure because Japanese companies could produce higher quality copiers at a price lower than Xerox could build them. Xerox responded with a significant quality initiative, which saved the company.

On the other hand, the question is whether a crisis is really needed to make a company more successful. There are companies that have found the commitment to act without facing extinction. One example is General Electric. General Electric is one of the very few companies that were in existence in1900 and still around in 2000. In the 1980s, Jack Welch challenged his company to either be number one or number two in each of the markets. Later, he provided further initiatives with the introduction of Six Sigma. Although General Electric was already highly successful, this challenge was accepted; and the company reached even higher levels of performance. Whatever the view of General Electric, the ability to successfully implement a significant quality and organizational improvement initiative, while the company was already successful, is very impressive.

You might want to find out how many major companies last 100 years? How many were in existence in 1900 and still around 2000? The number is surprisingly small.

The second issue with the idea of responding to a crisis is the problem of maintaining the quality and organizational improvement. As noted in the textbook, many of the companies that implemented successful quality ultimately lost focus. Why? Ford and Xerox are two excellent examples *****“ in fact, Xerox suffered two business crises and had to respond with two separate quality initiatives. In part, Ford and Xerox*****s initial success was the result of leadership. Donald Peterson, Ford, and ***** Kearns, Xerox, were instrumental implementing the improvements. When these two leaders left, the companies lost focus.

One reason is the integration of the quality initiative. Although the quality initiative may be deployed, it does not become ingrained or the *****˜way the company always does business.***** It is viewed as a program rather than a way of life. Another part of the problem is the need for continuous leadership to maintain the momentum. Today, the tenure of many chief executive officers (CEO) is around three to six years. This does not provide sufficient time to integrate and maintain the ideas into the company culture.

One suggestion to address this problem of momentum is to look at the entity that does tend to last and remain stable in a company - the board of directors. If the objective is to ensure the quality initiative and organizational change are maintained, one suggestion is to have the board of directors understand, embrace, and foster the initiatives.

Critical Learning: Beyond the effective deployment of quality improvement and organizational change initiatives, it is important to develop a long-term strategy that maintains the momentum of change.

What suggestions would you consider to ensure the long-term survival of quality and organizational change initiatives?

The Role of Japan

The incentives for companies and organizations to implement quality improvements have come from many different directions and countries. For companies in the United States, the role of Japan, however, is very special. Because of the emergence of higher quality products from Japanese companies, U.S. companies had to respond. The automobile, electronics, and audio industries are some of the examples. One of the most interesting events was the 1980 television program, *****If Japan Can*****¦Why Can*****t We?***** Many senior executives saw the program, which help accelerate the acceptance of quality initiatives in the United States. Overall, the result has been organizational improvements in the U.S. and other countries throughout the world.

Additional References:

Garvin, ***** (1988). Managing quality. New York: The Free Press.

Juran, James J. M. (Ed.) (1995). A history of managing for quality. Milwaukee, WI:

ASQ Quality Press.

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