Poor performance of production supervisors at heavy hitter vietnam company

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 i ACKNOWLEDGEMENTS I would like to acknowledge all who supported me during my studies without whom my thesis could not be completed in a proper way Specially, I would like to thank my supervisor-Dr Tran Phuong Thao for all her guidance and support Without her help, I could not complete my thesis I also would like to thank to all employees of Heavy Hitter company for their support during my investigation to complete this thesis ii 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 iii LIST OF CHARTS Chart 1: Heavy Hitter Export Regions P Chart 2: % of 2018 Heavy Hitter Revenue P Chart 3: Finished products rejected by SBD Jan ~ Mar 2019 P Chart 4: Sold value vs Defective value per SKU Jan to Mar (K US$) P Chart 5: Value of Good vs Defective product (K US$) Jan to Mar 2019 P Chart 6: Causes validation survey result P 21 iv LIST OF FUGURES Figure 1: Heavy Hitter Vietnam Organization Chart P Figure 2: Problem mess P Figure 3: Initial cause and effect map P 17 Figure 4: Causes fish born diagram P 19 Figure 5: Final causes and effect map P 22 Figure 6: Action plan and time line P 30 v LIST OF TABLES Table 1: Lost / sold ratio P Table 2: Heavy Hitter Monthly Defective Report P 12 Table 3: Data Analysis from table P 13 Table 4: Data Analysis from table P 14 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 9: Current vs New PAS P 27 Table 10: Action plan P 28 Table 11: Implementing cost and monetary benefit of new PAS P 29 vi TABLE OF CONTENTS Executive summary CHAPER 1: Company overview Problem context 1.1 Company background 1.2 Symptoms Problem Analysis 2.1 Possible problems 2.1.1 Poor warehouse management 2.1.2 Weak quality control system 2.1.3 Poor performance of production supervisors 2.2 Main problem Problem definition and consequence 3.1 Problem definition 3.2 Consequence Initial possible causes P P P P P P 10 P 10 P 10 P 11 P 14 P 14 P 15 P 16 CHAPER 2: Solution selection Real causes Main cause validation Alternative solution 3.1 Potential solutions 3.2 Solution suggestion Action plan P 18 P 19 P 23 P 24 P 28 CHAPER 3: Supporting Information Research method summary Interview transcript Reference P 31 P 32 P 39 vii 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 From empirical analysis of the company, supervisors and senior workers of the company blame that their current appraisal system cannot provide a fair, transparence and reliable appraisal result Currently, company is using Forced distribution method and Manager is appraiser to the performance assessment of these supervisors This appraisal system is creating bias due to single appraiser and unfair appraisal result between teams or groups Besides that, there is no adequate KPIs tracker also cause ineffectiveness of current appraisal system Alignment with literature review in previous section, an Effective Appraisal system for the company should be the combination between 360-degree feedback and the MBO method By collecting feedback from peers, manager, subordinates and self-assessment in 360-degree feedback, the appraisal result will be more reliable for assessment qualitative criteria The qualitative criteria should be the cooperation, problem solving and organization skills… The MBO method will be used to assess quantitative criteria such as process output, defective rate…Since the Goals are set up at the beginning of the appraisal period and company need to set up a good KPIs tracking system, quantitative criteria can easy to observe by appraiser or any stakeholder The tracker system can provide a high ratee satisfaction as well as agreement between appraiser and supervisors Based on cost & benefit analysis and company validation, a meeting with General Manager, Production Manager and HR manager was organized to discuss about the most suitable option to implement the solution Company decided to provide outside training to the GM, HR Manager, HR staffs, Production Manager and all supervisor level Even though this option will take longer time compare to work with a consultant or hire an appraisal specialist staff, management level of the company believes that the new PAS which is design by their own employees will fit well to company operation Besides that, the new PAS create by those management level will get a higher support from their supervisors compare to remain two options 27 Appraiser KPIs Current Appraisal System New Appraisal System Forced distribution 360-degree feedback + MBO Manager Manager, peers, subordinates and self-assessment Quantitative: production Quantitative: production output, output defective rate Qualitative: cooperation, problem solving and organization skills KPIs tracker Periodic No Yes Yearly Monthly, quarterly and yearly Annually salary increase Reward, Salary increase, Promotion, Core competence Appraisal result development Easy implementing Fairly, transparence, high ratee satisfaction No cause job Advantage dissatisfaction and high turnover rate Bias, low ratee satisfaction, Disadvantage Complexity low job satisfaction, high turnover rate Table 9: Current vs New PAS 28 2.4 Action plan Task Detail Training Chose a good fit training consultants company Time P.I.C line week Budget HR Manager & GM selection Consultant Provide training to related Training 100 M VND provide training departments about KPIs set weeks company, GM, / One-time to company’s up AND Appraisal methods HR Manager, charge employees (focus on 360-degree Production feedback + Management by Manager, Objectives) supervisors Company Write new PAS procedure GM, HR employees included questionnaire and weeks Manager, design new PAS KPIs KPIs set up Discuss about KPIs for Manager, Production department and weeks supervisors weekly New staff or M VND / Month Production supervisors KPIs data Dedicate person to collect collection and update data for KPIs current staff tracker weekly transferred Frist month trial Review KPIs and 360-degree Performance feedback of each supervisor days GM, HR Manager, appraisal Production Corrective action Adjust KPIs, PAS procedure Periodic Monthly, quarterly, midyear Performance and yearend review Manager, weeks supervisors years appraisal Table 10: Action plan 29 Total budget for the action plan is 100 M VND one-time charge for the Performance appraisal training fee plus 72 M VND per year for salary of data the collector Total cost for this action plain is around US$ 7.4 K This budget is very small compare to benefit that company can get from this action plan The main purpose of this action plan is reducing rejection rate which is around 6.9 % now Company 2018 revenue is US$ 22 M Roughly, the material cost and labor cost contribute around 60% to the final product price It means that to earn US$ 22 M revenue, company need to spend around US$ 13.2 M for raw material and labor cost When the defective rate is 6.9%, there will be 6.9% of total US$ 13.2 M have to spend for those defective (around US$ 900 K) If the company can reduce their defective rate to 3.5%, the company can save each year around US$ 450 K It is monetary benefit Besides that, there is other nonmonetary benefit such as a well control production and shipping schedule, increase employee’s job satisfaction as well as customer satisfaction Implementing cost of new PAS Cost (VND) 100 M 6M Item Training fee for Performance Appraisal Salary of data collector Time / year Total (US$) (onetime charge) 12 TOTAL BUDGE 4.3 K 3.1 K US$ 7.4 K Benefit (expected) from new PAS Current Target with new PAS Achievement Total defective rate 6.9% 3.5% Reduced 3.4% Total defective cost US$ 900 K US$ 450 K Reduced US$ 450 K Table 11: Implementing cost and monetary benefit of new PAS 30 No Task description Select training consultants Trainig KPIs and Appraisal methods Design new PAS KPIs set up vs capacity & resources KPIs data analyse and update First month trial new PAS Corrective and follow up action Monthly PA Quaterly PA 10 Midyear PA 11 Year end PA Note Training Consultants General Manager Human Resource Manager Production Manager Production Supervisor P.I.C HRM, GM TC, HRM, GM, PM, PS GM, HRM, PM, PS GM, HRM, PM, PS Data collector staff GM, HRM, PM, PS GM, HRM, PM, PS HRM, PM, PS GM, HRM, PM, PS GM, HRM, PM, PS GM, HRM, PM, PS Durration week weeks weeks week weekly days week day week week week 11 12 15 16 19 20 23 24 WEEK 27 28 31 32 35 36 39 40 43 44 47 48 51 52 55 56 ① ② ③ ❶ ④ ⑤ ⑦ ⑧ ⑨ ❸ ⑩ ⑪ ⑫ ❹ ◊ ⑥ ❷ Symbol TC GM HRM PM PS Figure 6: Action plan and time line 31 CHAPTER 3: SUPPORTING INFORMATION 3.1 Research method summary The starting point of this thesis is based on the customer complain data from customer SBD to Heavy Hitter Vietnam The data is showing a significant high defective rate This dramatically impact to launching schedule of customer SBD as well as reducing a remarkable business profit of Heavy Hitter Based on this data, the author organized interviews to key stakeholders Total person was interviewed are Quality supervisor, Warehouse supervisor, Production supervisor of process that quality issue occurred and Production manager After those interviews, a problem mess was draw out and there are three potential problems to cause the high defective symptom Those potential problems were validated based on process audit, observation and data analysis combine with theory support to conclude that poor performance of production supervisors is the main cause of the symptom To deep dive to the matter what cause poor performance of production supervisors, there are many review from literature to find out potential causes and three causes were identified from theory They are Lack of empowerment from manger, Lack of competence and Low job satisfaction To make sure that there is no any potential cause is missing, interviews with supervisors and observation at the company then there are three more potential causes were added: Inadequate instruction/standard, Weak IT system and Ineffective appraisal system Based on survey within production supervisors and senior employees with supporting from depth interview with the GM, the main cause is Ineffective Appraisal System After that, another review form literature was carry out to understand how to improve the effectiveness of company’s Appraisal System The review provides some suggestions and the most suitable suggestion selected base on practical condition of the company is Redesign the Performance Appraisal system based on 360-degree feedback and Manage by objective (MBO) The Action plan will take weeks and 172 M VND in total If the action plan can prove its effectiveness, company will apply the new PAS for total employees in following years so that they can continue to reduce their defective rate to 32 meet industry level (1%) and archive other non-monetary benefit such as employees’ job satisfaction, customer satisfaction… 3.2 Interview transcript List of interviewees for potential problem identification No Name Department Position Nguyen thi Duyen Quality Control Supervisor Nguyen thi Nga Import & Export Supervisor Tran huu Nam Production Supervisor Tran van Doan Production Manager List of interviewees (deep interview and survey) for Causes validation No Name Department Position Tony Tsai General Manager Le minh Tai Production Hot forging sup Nguyen huu The Production Machining sup Nguyen truong Vinh Production Sizing sup Le hong Hai Production Sand blasting sup Le minh Trung Production V cutting sup Nguyen ngoc Minh Production Heat treatment sup Le van An Production Paining sup Nguyen huu Nghia Production Polishing sup 10 Le Hau Production Lacquer coating sup 11 Tran huu Nam Production Plastic injection sup 12 Doan ngoc Thinh Production Assembly sup 13 Nguyen dinh Thi Production Packaging sup 14 Nguyen ngoc Ha Production Senior worker 33 15 Nguyen Tinh Production Senior worker 16 Dinh hoang Hai Production Senior worker 17 Pham huu Minh Production Senior worker 18 Le van Trung Production Senior worker 19 Ta ngoc Linh Production Senior worker 20 Nguyen van Tai Production Senior worker 21 Doan minh Hau Production Senior worker 22 Le phuoc Trung Production Senior worker 23 Ta van Trung Production Senior worker 24 Nguyen the Anh Production Senior worker 25 Nguyen le Toan Production Senior worker 26 Nguyen ngoc Mai Production Senior worker 27 Le van Tho Production Senior worker 28 Dinh cong Trang Production Senior worker 29 Pham hong Thai Production Senior worker 30 Nguyen an Ninh Production Senior worker 31 Nguyen van Duong Production Senior worker 3.2.1 Interview with Quality supervisor Ms Nguyen thi Duyen who is in charge of Final inspection of finished goods Date: Feb 11th 2019 Location: Heavy Hitter Vietnam Duration: 15 minutes Question: Hi Duyen Do you know about the quality issue with customer SBD happen in Jan 2019? 34 Answer: Yes, I know about it from my General Manager 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 Question: You are in charge of Quality team and doing final inspection before the product is shipped out Do you have any idea why the quality issue cannot be detected before they ship out? Answer: I cannot my Pre-shipment inspection for 100% shipment because warehouse supervisor does not cooperate well with me Some shipment, 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 it Question: Why you did not ask support from your Quality Manager to ask cooperation from warehouse department? Answer: 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 3.2.2 Interview with Warehouse supervisor Ms Nguyen thi Nga who is in charge of finished goods warehouse Date: Feb 11th 2019 Location: Heavy Hitter Vietnam Duration: 14 minutes 35 Question: Hi Nga There is complain from Quality team that finished goods in your warehouse is not well organize so that they cannot find the product they need to Pre-shipment inspection Do you have any idea about this? Answer: We have a small warehouse Not enough place to keep finished goods now Question: Is it a new issue or it happened long time ago? Answer: 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 not know products we load to truck to ship out are completed Final inspection by our QC or not 3.2.3 Interview with Production supervisor Mr Tran huu Nam who is leading Plastic injection process where the defective occur lead to complain from SBD customer Date: Feb 11th 2019 Location: Heavy Hitter Vietnam Duration: 10 minutes Question: Hi Nam, the quality issue on SBD’s product happened at your manufacturing process Do you have any idea about it? Answer: We must 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 36 tried to fix it on our own as quick as we can But we are not sure products are good after our rework 3.2.4 Interview with Production Manager Mr Tran van Doan who is Production department head Date: Feb 11th 2019 Location: Heavy Hitter Vietnam Duration: 20 minutes Question: Hi Doan From your experience, could you explain to us what lead to the serious quality issue with SBD’s product in this Jan 2019 Answer: I have 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, we 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 their job in an appropriate and effective way They are not trained for management skills This condition last long time ago but it is not an issue since we were in small business scale It became a problem for us when we double our 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 Question: So, you mean that low performance of your production supervisors is the main reason cause this quality issue? Answer: Yes, I think so Our GM also complain about the Quality team that they cannot detect the quality issue before we ship to our customers But the quality issue occurred at our production floor and we are responsible for it Our production supervisor should be the first person who find out the issue and need to report to me 37 or the GM to take action If he did it, the issue will not happen in large scale and we will have enough time to solve it before the shipment 3.2.5 Deep Interview with company General Manager Mr Tony Tsai who is in charge of the Heavy Hitter Vietnam plant Date: Apr 29th 2019 Location: Heavy Hitter Vietnam Duration: 34 minutes Question: Hi Mr Tony, we completed a survey with your supervisors and senior workers to find out what reasons lead to Poor performance of your production supervisors The survey result come out with top three reasons are Ineffective appraisal system (97% of the answers), Low job satisfaction (90% of the answers) and Week IT system (82% of the answers) Would you give your thought about this survey result? Answer: About the appraisal system, we are applying Forced distribution method same as our head quarter I understand that the appraisal results sometime bias because they are rated by their direct managers only and we not have any other KPI rather than production output The appraisal result is the only data to provide merit increase or promotion at yearend I know that there are others appraisal methods which is more effective than what we are applying but we not have enough resources to apply it Question: How about low job satisfaction? Answer: Yes, we not have many reward or recognition to our employees for their good performance and the upper level of supervisor is production manager that we already have So, we cannot offer any promotion to our supervisors so far I think the current appraisal system also contribute to this low job satisfaction At the end of each appraisal period, I can feel many employees are not happy with their appraisal result and there is many complain as well 38 Question: And all document or management data of your company such as production quantity, inventory, shipment schedule… are input and manage manually based on excel sheet? Answer: Yes, it is our current condition Our company owner understand that we need to apply ERP system to help us doing our work easier and more efficiency The EPR project was started last year in our Head Quarter This is a big project and need long time to train our people as well as integrate the EPR system to our current operation 39 Reference (1) Golhar DY, Deshpande SP, Ahire SL Supervisors' role in TQM and non-TQM firms The International Journal of Quality & Reliability Management 1997;14(6):555-568 (2) Michael JH, Leschinsky R, Gagnon MA Production employee performance at a furniture manufacturer: The importance of supportive supervisors For Prod J 2006 06;56(6):19-24 (3) Senker P Supervision - A key resource in modern manufacturing Management Research News 1995;18(10):13 (4) Liu L, McMurray AJ Frontline leaders: The entry point for leadership development in the manufacturing industry Journal of European Industrial Training 2004;28(2-4):339-352 (5) Orpen C Empowering the supervisory role Work Study 1994 Mar;43(2):5 (6) Olatunji AG, Ojelabi A, Isiaq AA, Moshood I, Ewaoda AS Leadership training and delivery prospects of team leaders in Communication Network Support Services Limited, Ilorin Africa's Public Service Delivery and Performance Review 2017;5(1) (7) Boice DF, Kleiner BH Designing effective performance appraisal systems Work Study 1997;46(6):197-201 (8) Gary Dessler ed Fundamentals of Human Resource Management Fourth Edition Florida: Library of Congress Cataloging-in Publication Data; 2015 (9) Vidya R, Ambrose S Comprehensive 360-Degree Appraisal: Management Educational Institutions SCMS Journal of Indian Management 2017 Jan;14(1):8797 (10) London M, Beatty RW 360-Degree Feedback as a Competitive Advantage Human Resource Management (1986-1998) 1993 Summer;32(2-3):353 (11) Chattopadhayay R, Ghosh AK Performance appraisal based on a forced distribution system: its drawbacks and remedies International Journal of Productivity and Performance Management 2012;61(8):881-896 40 (12) Kline TJB, Sulsky LM Measurement and Assessment Issues in Performance Appraisal Canadian Psychology 2009 08;50(3):161-171 41 ...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... Fiskars 81% 20% Source: Heavy Hitter company Figure 1: HEAVY HITTER VIETNAM ORGANIZATION CHART Source: Heavy Hitter Vietnam 1.1.2 Symptoms In year 2018, Heavy Hitter Vietnam has new product development... 1.2.1. 3Poor performance of production supervisors From our observation and process audit, company has total 312 people is working in production floor This number included production Manager and 12 supervisors