Customer Requirements And Product Characteristics

One of the main roles of any manufacturing plant is to produce product that caters to the demands of the market, and the best way to understand the market needs is to distinguish what is important to the customer/consumer. This understanding of the customer gives the manufacturer a competitive edge, as he knows more or less what the needs of the customer is, when he sells his product in the market. This competitive edge can be distinguished into various factors, for e.g. Quality, Speed, Dependability, Cost, and so on. A particular way of distinguishing which factor gives us more competitive edge is to distinguish between what Prof Terry Hill calls as “order winners” and “order qualifiers”. (Pycraft et al 1997) [Online]

But before we dive into categorising the various competitive factors into order winners and order qualifiers, it will be helpful if we knew where the products lie in the Puttick Grid. The Puttick Grid, devised by the Warwick Manufacturing Group, defines product market position with respect to the complexity of the product and the level of uncertainty in the market. A point to note about the Puttick Grid is that over a period of time, product tends to move around in the grid and hence may change after a period of time.

The Specialist DBPs have a very erratic demand profile, they are basically manufactured either one by one, or if they is more demand they probably in batches of 10. There is a peak in demand during the spring and summer seasons as a lot of people get back to riding their bikes after the winter, and hence become desirable during these seasons amongst the people who own vintage bikes. Also since these are vintage bikes, they don’t mind spending a bit for getting replacement parts.

The Aftermarket DBPs have a rather subdued demand as compared to the Specialist DBPs. Since these are DBP that are no longer in standard productions, there are a lot of organisations that have come out with their own version of the DBP and hence the customer has more choice. So, in such a case, the customer will go by brand image, price and the quality of the product.

The Original Equipment DBPs on the other hand, will have a very stable demand that will be known to Friction Materials well in advance. Quality and price become very important for such a product and hence they become more of a commodity.

Hence according to the above discussion, the products have been placed in the Puttick Grid as shown below in Figure 1.1.1

Now that we have an understanding of where the product lies with respect to the Puttick Grid, we can distinguish which competitive factor is an order winner and which is an order qualifier.

Table 1.1.1: Order Winners and Qualifiers. (Adopted for Hill 2000)

[Note: Order Winners are marked out of 100.

Q: – Order Qualifier; QQ: – Order Looser.]

Table 1.1.2: Order Winners and Qualifiers. (Adopted for Hill 2000)

[Note: Order Winners are marked out of 100.

Q: – Order Qualifier; QQ: – Order Looser.]

1.1.1 Design

The links between design, operations and markets are the very essence of the business. The way that these integrate, therefore, is fundamental to sound strategy development and implementation. Both design and operations’ aim is to provide products according to the technical and business specifications. (Hill & Hill 2009)

In case of Aftermarket DBPs, the dimensions of the DBP are calculated from the equivalent OE component and then some changes are made so as to avoid patent infringement. So in this case, the design of the DBP is not very important as it is only reverse engineered from an existing product.

In case of Specialist DBPs, the dimensions are taken from records if they exist or taken from existing component and then designed as a made-to-order item. So in this case too, not much work goes into the design of the DBP as they are already available to the manufacturer. Hence, design of the DBP does not give the product any competitive edge over other competitor products.

In case of Original Equipment Manufacturer, initially specifications will be given by the motorcycle manufacturer. But if Friction is selected as the preferred OE for DBP, it will be expected to design the brakes to meet the requirements given by the manufacturer. Hence, if not initially, over a period of time the designing of brakes for the OE product range will become the one of biggest competitive edge that the company could get in winning the order.

1.1.2 Brand Name

Through a variety of activities, companies try to establish a brand name for their products in the market. Where this has been achieved and maintained, companies will win orders partly due to the image that has been created in the market. (Hill & Hill 2009)

In case of Aftermarket DBPs and the Specialist DBPs, the brand name, “Stop-Rite”, play a major role in winning orders for the company. Since these parts are no longer in standard production by the OEM, there is a lot of competition in the market to win orders for these products. And hence the brand image, which Friction Materials Ltd has maintained for the last 20 years, becomes the biggest competitive edge in the market to win orders.

In case of the OE DBPs, initially Friction Materials is trying to win orders and hence it does not have a brand name in the OE market as of now. But as they start to win orders and establish them in the market, their brand name will start to help them win orders and hence, as time will progress, brand name will become an order winner.

1.1.3 Price

In many markets, particularly in the growth, maturity and saturation phases of the product life cycle, price becomes a very important order winner. When there is a range of products to choose from, price comparisons with alternatives becomes an integral part of the customer’s evaluation of the product and hence price plays a very important part in winning orders. (Hill & Hill 2009)

In case of the Aftermarket and the Specialist DBPs, since there are a lot of alternatives in the market, price eventually become one of the main reasons why the customer chooses to buy the product, as if there are two products meeting his criteria, they are bound to buy the cheaper product. Hence they become an order winner.

In case of the OE DBPs, since the manufacturer is going to buy the product in bulk, he is going to want to buy them from a manufacturer who is able to produce them in the cheapest possible way and who also meets their requirements. Hence price in this case becomes one of the biggest factors for choice.

1.1.4 Speed (Lead Time) and Dependability (Availability)

A company may be able to qualify for an order/win an order based on how quickly they are able to supply the product or if the product is already available for delivery/purchasing for the customer. Hence is it very important that the Operations Lead Time must be able to match the Customer Lead Time. (Hill & Hill 2009)

In case of the Aftermarkets DBPs, the ability to deliver the DBP faster than others may affect the spares stores to make an order to the manufacturer. This is possible if the lead time for the product is less and hence lead time becomes an order qualifier. With respect to the customers, the product being available on the store self become an order qualifier, i.e. they consider the product as a possible buy. But in case the product is not available on the shelf, means that even though their product is better than the competition, they will lose an order and hence this becomes an order looser.

Similarly, in case of the Specialist DBPs, since these are mostly made-to-order items, the lead time does not give an influential competitive edge over the competition. But at the same time, availability/delivery of the product has to be on time and this becomes an important factor that the customer will take into consideration when he/she is looking to buy a DBP for his/her Vintage Motorbike. Hence availability of the product on time becomes an order qualifier in this case.

In case of the OE products, the motorcycle manufacturer will be looking for a manufacturer who can produce the parts and deliver them in the shortest possible time. Hence speed or lead time becomes an order winner. Also, being a local supplier to the local motorcycle industry will give them a competitive edge over other outside competitors as they will be able to respond to the demand much quicker. But, in addition to this, being able to deliver the products on time is going to be a very important factor. So important that initially, some late deliveries may lead to the manufacturer going to an alternate supplier as you are not able to meet his demands on time. Hence dependability becomes an order looser.

1.1.5 Quality

Quality or Quality Conformance can be defined as ability of a manufacturer to manufacture products according to the customer’s requirements. (Slack et al 2002)

In case of the Aftermarkets and Specialist DBPs, no one is going to consider buying the product unless you are certain that the DBP is fit to use on their particular motorcycle model. Hence for both these product ranges, quality becomes an order qualifier. That is, only if the DBP is fit to use on a particular customers motorcycle, they will consider buying that DBP.

In case of the OE products, since now they are trying to become suppliers of OE products for the first time, quality has to be bang on target. It has to meet all the customer requirements. Any lapse of quality may lead to a halt in the manufacturer’s assembly line and this is going to cost them a lot of money. Hence any lapse in quality of the OE suppliers’ part will give a bad impression and hence may lead to the supplier losing the order. Hence quality for the OE product range becomes an order looser.

1.2 Implications on Operations

The Polar diagram (above) shows all the competitive factors for all the product range and their relevant importance for winning orders. Hence, in a way, the diagram also helps understand where Operations should concentrate more so that they will be able to produce more products that will be able to win the orders in the market.

From the above diagram, we see that for all the three product ranges, Price, Quality and Dependability are the common performance objective that can help give them competitive edge in the market. Hence operations has to focus more on reducing the cost of the product and at the same time try to keep quality at a good level and always deliver the goods on time. Also, we see Brand Name is very important for the Aftermarket and Specialist market. But if operations is able to maintain price, quality and dependability; it will maintain and perhaps even built up the brand name of the product. Also, by concentrating on dependability, operations is going to keep the lead time (speed) of the product to as low as possible to meet the delivery times and hence speed is also taken care of. Hence by concentrating more on price, quality and dependability, operations will be able to cover all the order qualifier and winner factors of all the 3 product ranges.

2 Manufacturing Strategy for the OE product

2.1 Framework

Hill, T. (2009) breaks down the process of developing an operation/manufacturing strategy into 5 simple objectives.

2.1.1 Defining the Corporate Objectives

The recent future Corporate Objective of Friction Materials is to try and break into the OE product sector. This will help them isolate the financial burden that they have to carry due to the ever decreasing prices because of cheap Far Eastern Aftermarket DBP available in the market. Hence another Corporate Objective is to make them more stable financially by entering a highly profitable and long term contract product range. Other general corporate objective like Profit and Growth and ROI also apply to Friction Materials Ltd.

2.1.2 Defining the Market Strategies to meet these objectives

As said in the Corporate Objectives, Friction Material Ltd. is now trying to enter the Original Equipment product market. Volumes initially (during sampling stage) will be low, to the order of 300. But once their samples get approved, they will start producing these products in very high volumes, to the order of about 3000 DBP/week.

Keeping these facts in mind, the Marketing Strategy for the OE product range is to produce and deliver high quality – low cost DBP on time, every time.

2.1.3 How do products win orders in the market place?

As mentioned in Section 1, the major factors that win orders for the OE product is Price, Quality and Dependability (in terms of delivery). Once Friction Materials becomes the choice for OEM for DBPs, they will have to design the brakes themselves and hence Design also becomes an important order winner.

2.1.4 Establishing the most appropriate mode to manufacture these sets of products – Process Choice

We are in process of getting samples accepted for the new OE product range. Currently we are manufacturing only the Spares and Specialist product ranges and this is done in a batch process flow layout. This is ok for these ranges as they are in small quantities of about 300 DBP/week. But the new OE product range is going to require about 3000 DBP/week. Hence the Batch layout will not suffice to meet this quantity demand. The most appropriate process choice for such a huge demand is the Mass Layout or the Continuous Layout. But the continuous layout calls for a bigger investment in terms of the money involved. Since Friction Materials is only starting to try to establish itself in the OE market, it would not be wise to tie up a lot of the Companies money into something that might not work out to the magnitude expected. Hence the Mass Layout seems to be a more sensible choice.

2.1.5 Provide the manufacturing infrastructure required to support production

Providing the infrastructure to support production of the new OE product is going to involve some amount of trade off in the sense of a balance between the various competitive factors that will affect the ability of the product to win orders. For instance, from the polar diagram (Sector 1.2) we see that dependability and cost of product play a very important role in helping the product win orders. In order to always deliver the product on time, we must always have enough stock with us to meet the demand. This can mean that we make-to-stock the product. But if we have a lot of inventory, it means that we have a lot of money held up as inventory and this may lead to increase in the price of the product to help insulate this cost. But this increase of cost may lead to loss of an order. Hence what amount of inventory would be sufficient to always meet customer demands and not hold a lot of money in inventory would be the trade off that we will be keen to look for. This process of trade off balance will help the manufacturing/operations to align itself with the corporate strategy. (Slack et al 2002)

2.2 Analysis of Current Operations System

Before we can start formulating and making changes to the production system, we must first define what the current system is. We can do this with the help of various tools. We are going to use the SWOT analysis tool to do the same. Once we know where the current production capabilities are, we will be able to make decision taking into account the current scenario.

2.2.1 SWOT Analysis

Table 2.2.1: SWOT Analysis Tool

The brand name “Stop-Rite” is one of the main strengths of Friction Materials Ltd. This is what is helping them win orders in the Specialist market and the aftermarket market. This brand name that they have, they have been able to establish it because of being one of the main trusted DBP manufacturer in the UK and Western Europe market. This is also one of the strengths that they should exploit. They have a competency in creating their own mixture for the DBPs, which helps keep the cost of the product down. Also, as we can see from the financials, their Quick Ratio is about 1.03 and their Current Ratio is about 1.8, both of which are very near the acceptable values and hence the company is doing very well financially. And as they say “Cash is King”, this is their main strength.

But even though they are strong in these areas, their production planning system is not very good, or up to industry standards. Even though they have a MRP II system in place, the Planning Controller has to fire fight situation that should not arise because of the system. This shows one of the two situations, either the Planning Controller is not familiar with the system or there is something wrong with their planning system. This can cause a lot of problems if they are to start production for about 3000DBP/week for the OE product.

Opportunity wise, the OE product can help gain more market share in the Western European market and hence improve their brand name even further. Also, since this will be a more steady market, this will help insulate some of the market share loss due to the cheaper Far Eastern Competitor products in the Spares market. This will help the company grow financially which is always the main aim of any organisation. Once the organisation has more market share and money, they can easily transition to a medium scale company and hence cater to more customers.

The only threat that the company faces is due to the Far Eastern products. They are almost as good as their DBPs, but they are far cheaper than Friction’s DBPs and hence this sometimes leads to loss of market share. Entry to the OE product market will help them to insulate this loss.

Now that we are clear on where the organisation current strengths and weakness lie, we can develop our manufacturing strategy to complement the strengths and negate the weakness of the organisation.

2.3 Elements of Manufacturing Strategy

Miltenburg (2005) divides manufacturing strategy in six main sub-systems and terms them as Manufacturing Levers to reflect the concept that each sub-system can be adjusted to align according to market demands and corporate mission.

2.3.1 Sourcing

Current list of all the suppliers to Friction Materials Ltd. are largely UK based. This is good as this help in decreasing the manufacturing lead time of the component. Since currently, their production demands are very low, to the order of 300DBPs/week; they were unable to convince their suppliers to deliver Just-in-Time. But now since they are looking to produce to the order of about 3000DBPs/week; they should be able to convince the suppliers to deliver Just-in-Time. Along with this, they should bring the list down in number and probably sign long term contracts with their most reliable supplier as the demand for the OE market is very stable and this long term contracts will help with the demand and also improve relations with their suppliers. But care should be taken when such contracts are framed, so that if the supplier does not make the delivery, then Friction Materials is free to buy that demand from another supplier. (Quinn and Hilmer 1995)

In terms of the product range, since making DBPs is their main expertise, I feel that they should continue to produce all their existing product range so that they do not lose their current market share and customer base. The level of vertical integration should be kept to a minimum and Friction Materials should concentrate on its main competency of making the DBPs. Smaller parts of the product like the packing materials should be bought from an external vendor.

2.3.2 Process Technology

Hill (2009) uses a profiling method to help decide what kind of production process is good for a particular type of product depend on the profile of the product. We will use this profiling approach to decide the type of process that we will implement for the OE range of product.

Table 2.3.2.1: Hill’s Profiling Approach

(Source: Hill and Hill 2009)

For the OE product range, we know the following:

• The order volume is going to be very high; hence the product is going to be standardised. Since the product is standardised, it is logical to have machinery dedicated to the product so that it can churn out more product and help meet the high demand. This in turn will decrease the flexibility of the process, but that is a trade-off that has to be taken to meet the high demand.
• We are going to produce only a certain types of DBPs, hence range is very narrow.
• The variations in the design of the DBPs are going to be minimal.
• New designs will only be developed when there is a requirement for it, hence the rate for new product development is also low.
• Order-winner for the OE product as discussed above is a balance between delivery speed and cost. Hence the key task for the process is bringing the cost of the product down.

Hence we see from the above table, most of the profile of the OE product fits the Line Process choice. Hence in our case, for the OE product range, it is advisable that we go for a Line process. Currently, the Spares and Vintage DBPs are being produced in a Batch Equipment Paced Line Flow.

They are currently running operations with 3 machining centres, each consisting of a pair of inter linked CNC machines with magazine feed. But even with a demand of only 300 DBPs/week compared to a demand of 3000 DBPs/week, the 3 machining centres are running at full capacity and often require overtime to meet the demand. Hence it is only logical for Friction Materials to in some new machining centres for the new OE production line that will be mainly be used for OE production, as they will find it very difficult to cope up with the demand with the existing infrastructure available. In fact, Friction Materials should look to start to invest into some of the other machines that they require for the production of DBPs to help cope up with this new OE demand. It is also advisable to make this new investments into the shop floor as the OE market is a profitable market which has a very stable demand and this demand will be there for quite a few years and hence this investment can be easily recovered during the life cycles of not OE product, but probably two or three OE products.

The current manufacturing process layout should be adopted for the OE production also. The process has been setup taking into consideration the capacity of the mixer, setup time on the presses and stock levels and hence they are designed to give the whole process a flow.

But setting up a completely new production line demands a lot of capital being invested and it will take quite some time before you will be able to break even for this investment. Hence the logical thing to do for Friction would be to invest in some new machining centres, so that they would be able to able to cope with the demand. But these new machining centres should be dedicated to only for the OE products. And over time, with increasing profits from the OE business, they can keep adding more machining centres to create a separate line for the OE product.

2.3.3 Production Planning and Control

The production of DBPs has been broken down majorly into two process; namely Pressing and Finishing. The Pressing team takes care of making the brake pads; the Finishing team takes care of machining the DBPs to ensure consistency of the physical dimensions of the pad. Since both these processes are independent of each other, they are connected to each other with some decoupling or WIP inventory (Miltenburg). In our case, the baking process is the decoupling process.

The two bin system can be used for inventory control for raw materials. In this system, the buffer stock in kept in the second bin and the current stock in kept in the first bin. Once the first bin is emptied and the buffer stock is brought into use, the purchase team should place orders to the respective material supplier for replenishing the material.

For quality control, the organisation is already running on Statistical Process Control charts for the Spares and Specialist market. But this is acceptable for these products as their production volumes are not very large. The OE volumes are going to be very huge and hence SPC may not be the right choice for quality control. SPC looks at maintaining the quality of the products that the processes inside the organisation. Since OE is such a big market and where it is always important to “get things right the first time, every time”; it is better that Friction Materials looks into implementing Total Quality Management (TQM). TQM not only looks into the quality of parts being produced inside the organisation, but it takes the whole supply chain into account and sees to it that not only are the part being produced are up to quality standards, but also parts entering into the system are of optimum quality as it is unlikely to product good quality parts out of sub-standard parts. (G&E Systems). Also in TQM, each worker becomes responsible for keeping the quality of their output up to standard. Hence this virtually removes the requirement of a quality control team in the organisation.

2.3.4 Human Resources

The major machines, that require training in the whole manufacturing process at Friction Materials, are the press machines and the machining centres. The current workforce employed at Friction Materials is very well trained and are flexible enough to work on any process within their block. But we see that there is considerable time that goes into the setup of the presses when there is a need to change the design of the pad. So the employees can be further trained in how they can reduce the set up time for the presses.

Regular maintenance is being carried out at Friction Materials by the current workforce itself, but they have to bring in a specialist for major modifications and new tooling for the machining centres. So since this does affect their business in a way, Friction should look into a development programme to train some of their employees in tool development. This can be one of their employee training schemes where they can promote talented and experienced workers with enough knowledge of the machining centres.

The spray painting of the DBPs are being carried out manually and hence they will need a minimum level of skill so that the DBPs are up to customer standards. Hence they can also train their workforce for this.

The packaging area does not require a very skilled labour. But to keep workers interested in this process, they can divide the task into sub-task, for e.g. a group to put the brakes into the box and a group to stick the stickers onto the boxes. To avoid people getting bored, they can use a rotational policy and keep switching people between the two tasks.

Also, since we are going to implement a TQM system into the organisation, workers should be trained to see how they can continuously keep their outputs up to quality standards.

2.3.5 Organisation Structure and Control

The current organisational structure of Friction Material Ltd. is given below.

Friction Materials Ltd. – Organisation Chart

The current organisation structure is pretty decentralised and simple for such a small scale industry, which is always good. There is a separate design team that takes care of the design and the quality of the raw materials; a separate purchase team that is involved with purchasing. There is a separate team that handles the IT and finance of the organisation. There are teams in the operations division that take care of the two major processes. Hence the roles and responsibilities within the organisation are well defined and hence there is no confusion due to improper communication between departments. With the addition of a few more personnel on the shop floor and the sales team; the organisation structure will be adept for the OE manufacturing also.

2.3.6 Facilities

The current company site has the extra room required for expansion and setup of a separate production line for the OE product range. Since the product is a standardised design, this line facility should be dedicated to only the OE products, and the already existing facilities can be used for the other products.

The company is currently located in Lutterworth. There is a lot of skilled labour available in nearby towns and hence skilled-labour wise, the company is at a very favourable location. Also, since the town in nearby the motorways, it is very easily accessible from the logistics point of view. Also a lot of re-creational centres and housing complexes are coming up in the town and hence this will help in attracting the younger generation of skilled work force, who prefer to be in town that have a bit of re-creational activities.

For the OE products, since the orders are going to be placed one year in advance, the demand profile is going to be very stable and hence we should employ a capacity plan that anticipates the demands, as we already know the demand profile. Because of this nature of the demand profile for the OE product, we will be able to plan to use the new equipment bought to help meet the OE demand. In this way, we will always be able to cater to the market demands. This will help in timely deliveries and create more customer satisfaction.

But setting up a completely new production line demands a lot of capital being invested and it will take quite some time before you will be able to break even for this investment. Hence the logical thing to do for Friction would be to invest in some new machining centres, so that they would be able to able to cope with the demand. But these new machining centres should be dedicated to only for the OE products. And over time, with increasing profits from the OE business, they can keep adding more machining centres to create a separate line for the OE product.

(Note: Not exact representation of the layout)

As shown in the figure above; assuming that the current layout is the same; machines in the individual shops that will be dedicated to only the OE DBP production.

3 Performance Measurement using the Balance Scorecard for the OE product

3.1 Introduction to Performance Measurement

Developing and implementing a manufacturing strategy is only the beginning process in an organisation’s strive for excellence and change. This strategy has to be measured to check if the strategy is indeed moving the organisation towards the objectives it had set up when it was coming up with a manufacturing strategy. This measurement of the strategy is called performance measurement. This measurement is basically broken down into 4 separate measurement sub-systems (Kaplan and Norton 1996).

Table 3.1.1: The Balance Scorecard.

(Source: Adopted from Kaplan and Norton 1996)

3.2 Financial Perspective

To consider the financial perspective of performance measurement, we can categorise the products into 3 main classifications; Growth-stage, Sustain-stage and Harvest-Stage (Kaplan and Norton 1996). Consider the above classification; we can safely say that the OE products will fall under the Growth-Stage product classification.

For such a product, Kaplan and Norton (1996) say that the most common performance measurement system should be the percentage increase in the revenue and the sales growth in the targeted market of the product. Also another measure can be the percentage of revenue generated by the new product alone. Financial measures like Cash flow increase and ROCE will not give a clear message of the performance because usually with new products, there is capital investment that is involved which may result in low ROCE and sometime negative cash flow too. Hence these do not give a clear message about the performance of the system. Big MNC’s like Hewlett-Packard and the 3M Corporation are known to have implemented such system, when they have come up with new products.

Another measure from the financial perspective can be the Cash-to-Cash cycle time. Cash-to-Cash cycle is basically the time taken by a company to convert cash payments to supplier inputs to cash receipts from customers. The smaller this time period, the better is the cash liquidity of the company and hence this is always good for any company (Kaplan and Norton 1996).

3.3 Customer Perspective

In the customer perspective component of the Balance Scorecard, an organisation tries to identify the customer and market segment that will help generate the revenue for the financial objectives of the organisation. Of the many possible performance measurements, focussing on two particular can give Friction Materials the proper measure of how the change is the system is affecting their customer, namely Customer Satisfaction and Customer Acquisition (Kaplan and Norton 1996).

Customer Satisfaction basically deals with market survey and feedbacks from the market and customer to find out how they feel about the product and service they are receiving from the organisation. This can be done in several ways, to name a few monthly feedbacks, mail surveys, telephone or personal interviews with the customer. Sending out a survey is very easy, but if it is not designed specifically to get the answers you want form the customer, they can give a wrong measure of the customer satisfaction. Hence it is very important that the survey are designed for the purpose of getting the proper feedback from the customer. This kind of method is used by many organisations like British Airways, Boeing, Proctor and Gamble, Xerox, 3M, PepsiCo to name a few (Kaplan and Norton 1996).

Another measure of the process from the customer perspective can be Customer Acquisition. This is a measure of the rate by which the product attracts new customers in the targeted market segment. Since the OE business is a new segment for Friction Materials is new, this could be a good measure to justify its investments to get into this business (Kaplan and Norton 1996).

3.4 Internal Business Process Perspective

This perspective of the Balance Scorecard basically deals with identifying processes within the organisation that can add value to the customer’s and the financial objectives of the organisation.

Other generic factors like Quality can also give a good measure of how the strategy has affected the overall quality of the system. There are various ways to measure quality, for example Statistical Process Control.

Managers should have a good estimate of the overall asset utilisation of his/her plant. This utilisation can help him pinpoint to point of bottleneck in the production line. This includes various factors such as set-up time, breakdown time, etc that affect the overall efficiency of the machinery at the shop floor. But the important thing to note about this measure is that it needs a lot of effort from the shop floor employees and hence may not always give a very accurate measure if the employees are not comfortable with the various terminologies involved with such a study.

3.5 Innovation and Learning Perspective

This component of the Balance Scorecard develops the measures to drive organisational learning and growth. Some of the measures to do so are Employee Capability, which is broken down further into Employee Satisfaction, Productivity and Retention; and Motivation and Empowerment of the workforce (Kaplan and Norton 1996).

Employee Satisfaction can be measured in various ways like surveys that can be done annually or a rolling survey can be done which involved a random group of employees taking part in the survey. This survey can be done across all levels of the organisation (Kaplan and Norton 1996).

Since most of the machinery is being controlled by human operators, employee productivity contributes to the value addition to the product and hence this can be one of the measures that managers can use to improve the per employee productivity to satisfy both the organisation’s financial and the customer’s need. This per employee contribution can be calculated by deducting the cost of external materials and service from the total revenue generated. This value is then divided by the employee compensation to give the per employee contribution (Kaplan and Norton 1996).

At the end of the day, if the employer is not able to retain employees, then it is a loss of intellectual investment for the organisation and hence this must be measured. It is usually measured by percentage of key staff turnover (Kaplan and Norton 1996).

Another measure of the learning and innovation perspective of the Balance Scorecard is the Motivation and Empowerment of the workforce. This can be in ways such as making the workforce feel involved with some of the business decision that are taken in the organisation. These business decisions can be something that affects their work or working environment. This can be done by asking the employees to put forwards suggestion as to what they think will help improve a part of the business process that can help achieve both the financial and customer objectives. Then after serious inspection of the good suggestion, some of them can be applied. These suggestions should at the same time be displayed to the employees to make them feel that their suggestions are taken seriously and also acted upon if they are good enough. This gives the employees both motivation and a feeling of empowerment; that even they can contribute to the development of their organisation is a bigger and better way (Kaplan and Norton 1996).

4 References

Hill, T. (2000), Manufacturing Strategy: Text & Cases, Second Edition, New York: Palgrave

Slack, N. and Lewis, M. (2009). Operations Strategy. Harlow: Financial Times/Prentice Hall

Pycraft, M., Singh, H., Phihlela, K., Slack, N., Chambers, S., Harland, C., Harrison, A. and Johnston, A. (1997), Operations Management, Tenth Impression, South Africa: Pearson Education. [Online]

http://books.google.co.uk/books?id=bbu5aCJgMu4C&printsec=frontcover&dq=Pycraft#v=onepage&q=&f=false

Miltenburg, J. (2005), Manufacturing Strategy: How to Formulate and Implement a Winning Plan, Second Edition, New York: Productivity Press. [Online]

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Vivek SundaramUniversity ID: 0956356