Alignment of Operational Performance Measures and the Lean Approach

One of the most critical success factors in every business organization is the operations management (OM). The approach defines the workflows that are involved by the organization in delivering the goods and the services to the customers. Usually, the efficiency in the OM process helps the organizations to gain the competitive advantage over other players in the industry. The competitive comes from the benefits of the OM such as the capability to deliver value to the customers, reduction in cost and the generally increased productivity of the company. It is always important for the organizations to adopt the most efficient OM approaches for effectiveness (Govindan et al 2017, p. 552). Again, companies need to periodically evaluate its current system and seek ways for continuous improvements.

This paper focuses on the operation management of the Macdonalds Company. The report makes an appraisal of the current inventory and asset management within the production system. It provides an illustration of the organization’s operations that are involved in the production system. Also, the report provides establishes the various weaknesses that exist within the delivery system that may fail to align with the various performance measures. Further, the paper discusses how the organization can use the lean approach to eliminate the possible failures within the system for effectiveness. Further, the report discusses the extent to which the lean approach can help to attain the performance goals within the production system. Therefore, the paper is critical in helping Macdonalds Company to understand its production system and adopt the suitable strategy for effectiveness.

Background Information

Macdonalds Company is one of the world largest fast-food company. The organization was founded in 1940, in California in the United States, and has since grown to reach many parts of the world, serving millions of customers on a daily basis. Some of the main products produced by this company include the hamburgers, the cheeseburgers, the French fries, the breakfast items, chicken products, milkshakes, the soft drinks, fish products, salads and the desserts among many others. In its operational production model, the business uses the just-in-time approach to carry out its activities. According to this method, the company usually puts in place all the items that they need to assemble or pack the products, but they don’t do until they receive the order. Early assembling is only done on only a few finished products, but most of them will stay until the orders are made (Xu 2014, p. 1002).

Appraisal of the Coke’s Inventory and Asset Management within the Production System

Macdonalds is one of the companies that has emphasized the effectiveness of the inventory management system. The organization has used an approach called the Just-In-Time, which manages its operations from manufacturing to the logistics (as illustrated in figure 1.0 below). According to Macdonalds’ system, the aspects of receipt, the storage and the dispatch in the traditional system are eliminated. It has an emphasis on maintaining or keeping the least stock possible. The good delivery to the warehouse is controlled in the sense they only come in on demand, as required by the client to fulfil their need. Therefore, the organisation’s production system is always sensitive to realize that they balance the production quantity with the market demand to minimize the losses (Uggla 2014, p. 1). Therefore, the major driving factors of this system is a focus to minimize the extra produce, which is expensive in storage and may require the extra staff and other unnecessary drawbacks in the system.

Regarding the appraisal of the JIT system, firstly, it is clear that Macdonalds has significantly made the efforts to save the costs through its approach. The amount of stock turns and that being held is controlled in the most effective way possible. The company coordinates the supply rate and links with the forecasted market demand to ensure that it only produces and supplies according to the market needs. The approach has significantly helped to cut down the inventory cost, and thus, increasing its profitability. Macdonalds eliminates the cost associated with the inventory through this method. Also, the business saves money by reducing the handling equipment and the other related cost (Jacobs et al 2014, p. 533). For example, the company has few cases to move huge batches of its products, because it only handles small stocks at a given point of time, thus, cutting down the cost involved to store. Also, the training and labour costs are saved for storage are reduced.

Secondly, through the approach, the business has managed to reduce the required space to keep the stock. Macdonalds will only keep few food products according to the orders made for the shortest period at a given point of time, thus, has little to stock. On the same line, the reduction of the amount of stock kept by the company at a given point of time also helps to eliminate the storage cost. Usually, keeping the food product is expensive. It requires special technology such as refrigeration, to keep the products, which needs more skills and necessitates the acquisition of more equipment which is costly (Manville et al 2012, p. 7). The products are also perishable and therefore, it is dangerous to keep them for a longer period of time. The JIT eliminates the dangers associated with the keeping more perishable products, thus, escaping the risk. Through the approach, the organization has little-processed products to keep at given point in time. Therefore, it enjoys the convenience and cost-saving approaches through the method.

Thirdly, the use of JIT reduces the lead time in the process. The products of Macdonalds takes a short time within the process before they are ready. Thus, efficiency and time-saving aspects are attained. By so doing, the JIT approach has helped the company make a continuous improvement of productivity. Most of the obstacles are removed in the process, cost reduced and efficiency attained for productivity. Therefore, the approach has significantly helped the organization to increase the profit, improve on its sustainability, through the highly competitive advantage that they have gained through the model.

Besides, the JIT system has helped to reduce the order to the payment dateline for effectiveness. The business needs little materials from the supply to produce according to the demand. The approach has helped it to eliminate the complexity that is involved in the process. The planning relieves also cascades to the suppliers because they only supply quantities according to the demand. Additionally, through the production approach, the company has improved the quality of the production process and that of its products. The batch processing is discouraged, an aspect that increases the chances of better handling of the process, and also the problems can be realized quickly and eliminated as quickly as possible (Seuring 2013, p. 1513).

Two Areas where the Company’s Delivery System May Fail to Align with the Operational Performance Measures

The application of the JIT production in Macdonalds seems to provide a robust solution to its operation management. The system addresses key operational issues and significantly contribute to the profitability of the organization especially through efficiency, cost saving and the better quality. However, there also exist various loopholes that have the negative impact on the process. It is important to establish and understand these issues for the betterment. Failure to ensure to attain an alignment between the operational performance measures and the delivery system reduces the effectiveness of the production approach in the company.

Some of these areas where the delivery system of Macdonalds may fail to attain an alignment with its various performance measures first include the risks and effectiveness of the supply chain. The quality and timeliness delivery has an overreliance on the supplier. The cases where the supplier faces the breakdowns or the disruptions in the supply process has a direct negative impact on the production system. The company banks too much on their timeliness in supply, because they always have to avail the materials within the shortest time possible depending on the demand in the organization. Also, given that the food production process needs materials from different suppliers, delay by one of the suppliers affects the entire process (as illustrated in figure 1.0 above).

There are many chances of slow dispatch of the products to the customers. In other cases, the issues in coordinating the supply chain through the JIT makes the organization to failure to fulfil the client’s order completely. The interconnection of the customer order fulfilment level with the performance of the suppliers increases the chances of failure to deliver quality and timeliness products to the clients as expected. Therefore, the JIT system has possibilities of creating issues to the customer satisfaction as one of the performance indicators. Such practices have direct negative impacts on the satisfaction level of the customers in the organization.

The second issue that Macdonalds may face through the use of the JIT production system is the problem in the market demand prediction. The effectiveness of the production model is highly determined by the company’s capabilities to predict the market demand level. Usually, there as various environmental factors that make the market demand to fluctuate or vary from time to time. Some of the demand affecting factors are beyond the control of the organization making it hard to manage the system effectively. The competition within the sector also has an influence on the effectiveness of the process through their influence on the market demand. It is always difficult to make a quick response to the changes in the demand through the system (Myerson 2012, p. 34). Therefore, the issues in the demand level prediction have an effect on the effectiveness of the JIT production model.

How Lean Approach could be used to reduce the Failings Above

The lean logistics refers to a model framework that is utilized to identify the potential wastes and loopholes that reduce the efficiency of the production system. The approach has proven its effectiveness in enhancing the smooth and speedy product processing and flow. By so doing, the model significantly contributes towards the helping the business in satisfying the customers. Lean thinking is a continuous process that can be applied in the production processes of the companies to ensure that they stay flexible in realizing and correcting any possible issues for success (Srimai et al 2011, p. 662). The approach provides theoretical framework steps that are embraced to attain system perfection.

The first step is the value specification, which entails an establishment of the specific worth that the business desires to deliver to its customers. Once the value has been specified, it is then mapped to the processes. At this stage, all the existing issues are factored in into the process for effectiveness. After the mapping, the next step is to establish the product flow. Usually, these control aspects include a clear integration of the value to the existing process. Lastly, the establishment of the customer pulls for effectiveness (Raisiene 2012, p. 233). Usually, a balance in the demand and supply is important, because it helps to enhance effectiveness.

The application of the manufacturing principles is the best solution for Macdonalds to overcome its potential issues in the current production system. Firstly, regarding the issues of effective demand prediction and management, lean production can effectively help to overcome the challenge by enhancing proper planning. Through the principles, the organization will plan effectively according to the market information. The approach will guide on the best ways that can be utilized to get the accurate statistics and the general information, which helps in planning effectively (Psychogios et al 2012, p. 122). The lean method will offer a model to guide in establishing timely required customer information. The framework will be based on the best practices in the system. The appropriate market research will be conducted through the framework to unveil the important information that can be used to overcome the challenge.

On the other hand, the lean method is also likely to help in solving the supply management issues through its capabilities. The JIT production approach suffers from the issues in the delayed and unfulfilled orders, which can be solved through the adoption of the lean approach. In JIT, there is a deeper interconnection between the timely order fulfilment and the supplier punctuality. The cases where one of the supplier delays in delivering the required raw materials for the processing process makes creates issues in timely customer order fulfilment. The hesitations in the supply process have a direct impact on the entire process. The current approach at Macdonalds lacks a methodology to overcome this challenge, thus, lowering the quality of the services offered to the customer.

The lean approach can overcome the challenge by providing a guide towards the formation of a framework that will help overcome the problem. Usually, the lean makes a close focus on the problem and embraces the suitable practices that can be used to effectively overcome the specific challenge. Through the lean method, the organization will design rules and regulation that will enhance supplier effectiveness. Some of these aspects could include the contractual agreement laws to ensure that materials are supplied within the required time. Again, the lean method can provide the option of the alternative suppliers. The approach can offer the backup in case the main suppliers fail to deliver as required (Anholon and Sano 2016, p. 2247).

Three Key Findings on the Extent to which the Lean Approach Assists the Production System with Aligning its Operational Performance

The lean approach is one of the robust production approaches that can be utilized to enhance better performance within a given organization. The method helps to overcome most of the common challenges within the production system. Also, the lean production system is always on the frontline towards helping the companies to align their production system with the operational performance. Usually, attaining the operational performance within an organization has a direct impact on its profitability, sustainability and the general well-being. Employment of lean method has always proofed robustness in the alignment of the production system with the desired operation performance (Bakker et al 2012, p. 275). The lean approach is mainly based on the desired and the best practices within the system. Usually, the operational performance is perceived as the capability of the organization to deliver its goals within the set standards and also offer the expected performance indicators such as the productivity, quality, the reduction of wastes, the reduction of the cycle time and also the compliance with the prevailing laws and regulations.

Some of the desirable aspects that can be attained through the lean method towards the alignment with the operational performance first include its capability to deliver the standards. Through the lean method, the company is able to align its production system with the expected standards. Usually, businesses set the goals on the expected standards that they wish to attain. Through these standards, the company is able to measure whether it is performing or not (Anh and Matsui 2011, p. 519). The lean method usually guides the business organization on the best approaches that can be employed towards identifying the weaknesses and the misalignments that exist within the production system and then offer them a framework that can be used to overcome them.

Secondly, the lean approach helps to align with the operational performance of the company through the enhancement of the customer satisfaction goals. The system is robust in delivering high quality and timely products to the clients. The attaining of the customer satisfaction within the production system is always of the one major operational performance goal for every organization. The lean method has the capability of delivering the products of high quality through the observation of the best performance practices within the system. The model produces the products with little defects and tries to conform to the desired goals as much as possible. Again, the approach is important in enhancing speed within the production process (Myerson 2012, p. 34). It takes less time to produce the products, which in turn enhances the timely order delivery to the customer.

Thirdly, the lean method highly aligns with the operational performance through increasing productivity. The approach is well-known in eliminating the wastes within the process of production. The company adopts the best practices that ensure that there is efficiency in the entire process, and there are no losses in the exercise (Bourne et al 2013, p. 1599). The practice is key towards enhancing high productivity within the organization. Again, the lean method offers the production options that result in the reduction of the costs. Lean approach has high capabilities of cutting down the production costs and eliminating the wastage, which is some of the desirable characteristics of a well-aligned operational performance. Therefore, when these practices are combined, the company is able to increase its productivity through the lean method.

Recommendations

As a recommendation, business organizations need to embrace the lean approach in their production process for effectiveness. It is essential that they adopt a system that integrates the lean principles into their operation. The practice is critical because it has a lot of positive impacts on the organization. Usually, lean is implemented as the principles to ensure that the process attains the desired operational goals. The lean principles are designed based on the desired best practices in the organization. Integrating the lean principles in any existing production system guarantees the achievement of the performance goals in the company. Thus, every company should consider adopting the lean principles for effectiveness in their operation.

Conclusion

In conclusion, the effective operations and the information management are key aspects towards the success of every business organization. Different companies have embraced different operations management strategies in their daily running. The JIT is one of the common production system employed in the production companies. The approach has both the advantages and the disadvantages when embraced. The weaknesses of the production system reduce the chances of the company towards attaining its operational performance.

However, the use of the lean approach provides an important framework that can be utilized towards the betterment of the existing production system. The approach is used to overcome the challenges of another production system, through the incorporation of its lean principles. These values provide a guide on how the organization can improve the process based on the best principles. By so doing, the business is better positioned to achieve most of its operational performance goals such customer satisfaction through better quality and timely delivery, efficiency and the general productivity improvement among many others. Therefore, it is important for every company to embrace the lean principles and integrate them into their production system.

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