Question

34. Internet Project: Production Company Plant Tour. Using the Internet, find a company that provides a virtual tour of its production processes. Document your findings by completing the following requirements.

    Required:

    1. Summarize each step in the production process.

    2. Which type of costing system (job or process) would you expect the company to use? Why?

Answer 1

How manufacturing capabilities contribute to a company’s overall strategic strength. The ability to respond quickly to customers’ orders, to customize products to match customers’ exact requirements, or to ramp up production rapidly can be a powerful and difficult-to-imitate competitive weapon. But many corporate managers identify their plants’ capabilities only by accident—as a result of chance conversations with plant managers or operations specialists. Consequently, many managers do not have the information necessary to cultivate, shape, and exploit their company’s manufacturing capabilities. As plants develop, however, they need guidance to build capabilities that meet current and future needs. Plant tours can be a powerful way of providing factories with that kind of direction.

Almost everyone who leads works for, or interacts with a manufacturing company can benefit from seeing a factory firsthand. Plant visits allow senior executives to build a better understanding of a site’s performance potential; to assess a competitor; to rally the frontline workforce; and to communicate the company’s performance, strategy, and current challenges. Plant visits allow managers to review a supplier’s qualifications, to share best practices with a partner, or to benchmark performance and practices. Shop-floor operators can assess another plant’s operations and apply what they’ve learned to their own factories. Consultants can benefit a great deal from tours, even of plants that are not part of their current assignment. Such tours allow them to amass knowledge about their clients quickly and to build a store of experience that will be useful on future assignments.

Managers often question the need to travel to remote locations to see a plant, particularly one in their own company. Even though management and financial reports are near at hand, factories are as difficult to understand solely by the numbers as they are to manage that way. Traditional reports rarely present an up-to-date, thorough picture of an operation’s performance. Financial information tends to give an outdated picture of operational health: it will often reflect a plant’s performance as it was a year or so ago. If a site has recently begun a comprehensive improvement effort, for example, the effects of the initiative may not yet be visible in any reports. And numbers rarely reflect a plant’s revenue-generating potential or the new capabilities it has developed. Finally, because financial and other conventional reports rarely indicate an explicit path for action, it is difficult to use them to learn how to improve performance.

Even people who know that plant tours are valuable can find it difficult to put them to effective use. First, unclear objectives often turn touring into tourism. If visitors don’t know why they are taking a tour and what they hope to accomplish on it, they won’t know where to focus their time and effort. Second, many people lack an organizing framework to structure observations and accelerate learning. Without such a framework, the myriad observations made during a tour cannot easily be woven together and will not readily yield general conclusions. Third, information about plants and how to tour them is inevitably comparative; and those who have seen more, see more. Inexperience makes it difficult for younger, non operations-based managers, in particular, to make the most of a tour since they are still building the knowledge base they need to draw comparisons. However, by setting clear objectives and applying an organizing framework to make sense of what they see and hear, visitors can make the most of plant tours—even if the industry, products, and processes are unfamiliar.

Learning Tours.
Assessment Tours.
Teaching Tours.
Applying an Organizing Framework
Strategic Role.
Structural Alignment
Day-to-Day Management.
Improvement Path.

The Elements of an Improvement Strategy

First, a visitor should find out if management understands the context for improvement. Why is there a need to improve in the first place? Within what kind of competitive environment does the organization operate, and what demands for improvement are being placed on the organization by the environment?

Second, the visitor should try to identify what the goals of the improvement process are. Look for specific goals with specific time frames. For example, “Reduce the defect rate to 1% by August 1997” is a more effective goal than “Improve quality.” On what dimensions of performance does the plant aim to improve? An answer of “everything” is evidence of an unclear improvement strategy. When companies strive to improve everything at once, they rarely see significant improvements on any dimension. For example, a manufacturer with a fierce new competitor that is offering consistently shorter lead times should decide either to meet that competitor head-on or to pursue, for example, a low-cost strategy. Trying to tackle both at the same time would be a mistake because the two goals are likely to conflict.

Third, the visitor should ask whether the improvement effort has a clear focus. The focus may be on particular departments or functions, on cross-plant processes, or on relationships with suppliers and customers. Does the focus fit the objectives of the improvement strategy? For example, a plant struggling to build its ability to respond quickly to customers’ orders might focus on material and information flows across different departments. In contrast, a plant concerned about improving the quality of a product might focus on individual departments in which there are problems.

Fourth, having determined why the plant needs to improve, what dimensions of performance it aims to improve on, and where the focus of the improvement effort is, visitors next need to address how it will improve performance. What methods does the plant use? For example, a plantwide effort to improve responsiveness will benefit from reengineering the order-to-delivery process, whereas a plant with nagging quality problems might benefit from a total-quality-management approach. Is the plant using techniques and tools—such as statistical process control or self-directed work teams—that will deliver the required improvements?

Fifth, the visitor should find out what resources are being pulled together to work on the improvement project. A lack of vital resources can be a sign that management is not committed to the improvement process. Where are the resources coming from? How many people are actively involved in the process?

Sixth, the visitor should look for clearly defined organization and timing. Whether improvement teams follow the existing organizational structure or are staffed cross functionally, the number of team members and the frequency of team meetings should be clearly specified. Look at the staffing of improvement initiatives. Are they staffed with people who have not only the right skills but also the ability, authority, and will to implement solutions? Look also for reinforcing mechanisms that maintain the energy behind the process and keep it on track, such as scheduled status reports and regular process reviews.

Seventh, the visitor should examine the plant’s learning processes. It is important to look for signs that management is improving the improvement process itself through a concerted effort to learn from other operations and to make the most of what has been learned along its own improvement path. See if management is following the improvement process closely in order to apply the lessons it learns in later projects.

Even the best-designed improvement strategy can be hampered by “scheme burnout.” Too often, plant managers latch onto the flavor of the month—some new management theory they pick up in an airport bookstore. A given plant may have been exposed to a long series of managers bringing with them an equally large collection of improvement philosophies. When one new initiative after another is launched, long-serving people in the plant will discount the latest one with a sigh of “Here we go again!” Listen for clues that belie an excessive number of prior campaigns that might take the wind out of the sails of the latest initiative. Managers must be committed not only to change but also to a particular approach to change. By keeping an eye out for scheme burnout during the plant tour and by tracking the seven elements of improvement strategies, visitors will be able to determine whether a plant’s improvement strategy has been well conceived and is being implemented effectively.

People going on plant tours will benefit greatly from setting clear objectives and applying a conceptual framework to structure what they see and hear. But there is one final prescription for making the most of plant tours: take lots of them. As people see more plants, they develop a more practiced eye and build a richer base of comparison for subsequent tours. Even a plant that seems to be of no direct interest can help build that base. The essence of successful manufacturing organizations is their ability to do things of value for their customers that their competitors cannot. A plant tour is a powerful way of developing a deep understanding of what those capabilities are and how they might be exploited.