Introduction

This chapter describes the first iteration of the AR cycle conducted at SAM, an American manufacturer of Air-conditioning appliances in Singapore. The company has approximately 165 employees when this iteration is initiated and revenues of 386 million US dollars (S$ 618 million) per annum. About 75 employees work in the main office building where the research iteration is conducted. The remaining 90 employees are based in a plant at a different location and are not directly involved in the study.

The main goal of this first iteration of the AR cycle, from a research perspective, is to conduct an exploratory study of SAM supply chain i.e. SAM as a manufacturer and its tier 1 and tier 2 suppliers (15 local suppliers and sub contractors are selected on the basis of ease of accessibility). Telephone calls, faxes, emails, face-to-face meetings and workflow messages will be studied.

4.2. Diagnosing

SAM produces a complete line of residential and commercial air conditioning equipment at its modern and highly automated factories in Singapore. The finished products are sold through a worldwide network of independent distributors and installers who are dedicated to uphold the company's high standards of quality.

The philosophy is simple: Be the highest quality, lowest cost producer of air conditioning equipment in the world. Is it successful? SAM share of the market has grown faster than any other major manufacturer. Quality and Value speak for themselves.

SAM completed the purchase of a European company that included two manufacturing operations that assembly refrigeration and air conditioning products. SAM has been very successful at increasing its presence in the mature HVAC industry, due primarily to the following philosophies: a) High quality at a low cost equals value,

b) The highest paid, most productive workforce in the industry,

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d) Money normally spent on advertising and promotions is now invested

in research and development which translates to high quality at a low cost to the consumer,

e) Products that are engineered for reliable long life, utilizing the best components with some of the lowest failure rates in the industry, f) One of the best warranties in the industry.

The company has been a user of ERP (Enterprise Resources Planning) from SAP. SAM wanted to focus on the supply side of the business now that the internal operations of the company are at the management desired performance level. This objective came about due to the consequential pressures on SAM by the EDB (Economic Development Board) to increase the local content level to more than 30% in the finished product. SAM management set the goal that all suppliers in tier 1 and tier 2 be strategically connected to SAM in the order fulfillment process. Tier 1 suppliers are to be identified as suppliers or sub-contractors that are the first line of support for SAM, in meeting the manufacturing cost and delivery schedules. These groups of suppliers are already certified to have achieved the quality standards of SAM and therefore incoming quality inspection from this group of suppliers is not required. Tier 2 suppliers are identified to be suppliers or contractors that have been successful in the bid to supplier but are yet to be certified. This classification of suppliers only applied to all direct materials and only key indirect materials identified by engineering.

Currently, all communication to suppliers and contractors is either through fax, email or telephone. Order specification, quality and pricing issues usually required a face-to-face meeting that more often than not ended in a “hot discussion”. Although SAM is highly IT enable and most of the managers’ IT literate, suppliers and sub-contractors of SAM are widely dispersed in technographics (Modahl, 2000). Some were running, their planning and scheduling on Microsoft Excel. There were a large number of suppliers and contractors that are in this category with annual revenues of S$ 10 - 15 million range.

There is no way of implementing ERP systems at this suppliers and sub- contractors of SAM. This would require an investment of both time and money. Also, these small and medium enterprises (SME) are not ready to implement ERP systems due to a lack of resources and management/owner appreciation of IT and its ROI. There is a need to identify an alternative means of improving communication and interaction without going through the laborious ERP route.

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SAM also needed to implement a set of metrics that would create visibility of the suppliers and sub-contractors performance. Further, once established, this set of metrics shall be a key component in the promotion or “black-listing” of a supplier or sub-contractor. Therefore, the set of metrics adopted must confer to standards in the Industry best practices and must be fair on all parties. This metrics must have a direct relation to the bottom line financial reporting of SAM.

4.3. Action Planning

Rather than just “plugging in” some technology or software, it is decided that a better way to move forward, would be to set up a steering committee reporting directly to the chief operation officer. This committee will meet every fortnight to review the progress and resolve issues. A subset of the steering committee (including members from both SAM and SAP) came to be called the workflow team. IT Manager from SAM is appointed Project Manager. The team will decide and seek approval on the 3 main issues:

a) What technologies are to be harness in the deployment of workflow,

b) What metrics are to be established and

c) What are the improvements to be achieved in terms of strategic

performance?

The steering committee will review the SL 6 ERP software components feasibility in achieving the set objectives. Once approved, a Project plan will be rolled out. No further approval will be needed as long as the budget limitations are not violated. It is the decision of the steering committee that no cost is to be incurred by the supplier or contractors in the supply chain. Also, the deployment must be dynamic with intuitive learning for the SAM users.

The Phase I of the study, duration of about 3 months, is to study the “as is” practices of SAM and the suppliers, in their efforts to synchronize their actions and interactions. Data collected during this phase will be mainly of face-to-face meeting and verbal telephone conversation on planning, coordinating and expediting activities.

Phase II is deployment of the workflow automation to support operations at SAM. During this iteration a) customer order processing b) production planning and c) purchase order processing events will be implemented. During this phase, which will last about 4 months, effects of workflow automation on performance of supply chain will be studied with the goal of identifying the effects i.e. research variables.

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Phase III is the reporting on outcome and findings of the iteration. This phase will last 3 months after Phase II completion.

4.4.

Action Taking

The committee approved the use of workflow automation based on Microsoft Outlook/Exchange Server and Excel spreadsheets.

The next decision is on the metrics to be used. This metrics should be industry standards that would appeal to the practitioners and also to the researcher. One option is to explore using the Supply-Chain Operations Reference (SCOR) model metrics. From this will be derive the workflow metrics that are required to evaluate strategic performance management of supply chains. These will further need to be linked to the financial accounting terms to provide a quantitative measure of outcomes of deploying workflow automation at SAM. After further search and deliberation the committee approved the proposed outlined in Table 4.1.

4.4.1. Workflow Metrics

In this section is the explanation on the links between the performance attribute to the SCOR metrics (i.e. industry standards). These in turn are linked to the workflow metrics for the express purpose of evaluating the effects of workflow automation (i.e. collaborative solutions) on strategic performance of supply chain. In this way the performance attributes of the SPI model are operationalized for this AR study.

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Table 4.1: Performance Metrics

Supply chain reliability and cost are grouped together as the anchor research variable synchronization effectiveness. Delivery responsiveness and flexibility are grouped together as anchor research variable synchronization efficiency. These main research variables together with

action learning are then operationalized for this study by redefining the

SCOR metrics as workflow metrics to be observed in this AR iteration. Network level: The workflow metrics are all related to the observed event i.e. customer order processing (please refer to Appendix A):

a) Delivery performance

b) Fill rate/cycle, c) Order fulfillment d) Cost of goods sold, e) Transaction cost and

f) RMA cost

The performance attributed synchronization effectiveness is understood, in the context of workflow, as being able to respond with the “correct and complete” information for decision making. In the context of strategic performance management of supply chains, information (i.e. knowledge)

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of the event has to be stored over long intervals i.e. days and weeks before being applied. At this level, the first performance inhibitor i.e. uncertainty can be reduced by speeding up the flow of information (i.e. correct and complete) throughout the supply chain for the customer order processing event. The second performance inhibitor i.e. equivocality can be reduce by means of written communication that can be stored and recalled over long period throughout the supply chain for the customer order processing event.

Entity level: The workflow metrics are related to the observed event i.e. Production Planning and Purchase order processing (please refer to Appendix A): a) Cycle time, b) Reaction time, c) Lead time, d) Production flexibility, e) Change adoption

The performance attribute synchronization efficiency is understood, in the context of workflow, as getting the message across without the constraints of distance and time. In the context of strategic performance management of supply chains, schedule change (i.e. time) of the event has to be transmitted in the form of a message at the right time, right place and to the right person. At this level, the first performance inhibitor i.e. complexity can be reduced by managing the detail level of the MPS at the volume and mix levels in the entity for the production planning event. The second performance inhibitor i.e. variability can be reduce by means of having in place operating standards and work procedures that are available on demand to the shop floor and purchasing personnel in the entity for the event production planning and purchase order processing. Individual: The workflow metrics are related to the observed event i.e. Action learning:

a) Knowledgebase,

b) Collaboration and

c) Productivity

The performance attribute synchronization competency is understood, in

the context of workflow, as the ability to construct the message or response as a resolution to the coordination problem at hand. In the context of strategic performance management of supply chains, synchronization competency of the supply chain manager is to maintain “alignment with the customer”. At this level, the performance inhibitor

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i.e. anxiety of learning can be reduced by giving access to knowledgebase of past problems and resolution. Collaboration at the workplace, cross- functional and throughout the supply chain can be implemented by means of workflow automation.

4.5. Evaluating

A number of apparent patterns have been observed from data analysis in the evaluating stage. These related both face-to-face discussions and workflow automation. The patterns observed in face-to-face discussions related to strategic performance management of supply chain and are contrasted with the patterns observed in workflow automation.

4.5.1. Observations in Meetings and Verbal Communications

a) The first observed pattern is the difficulty of bringing people together at the same time (place), and the consequent efficiency losses caused by this difficulty

b) The second observed pattern is a dominance of most meetings by one

or two individuals, mainly based on seniority in the management hierarchy

c) The third pattern observed in the meetings is the short duration of the verbal contributions by each participant. Participant would speak for a while (i.e. a few minutes or less) and either be interrupted, or stop and wait (or openly ask) for feedback from the other participants. Often non-verbal feedback in the form of gestures with hands and head (e.g. nodding, body language) would lead to the interruption of a verbal contribution. There have been numerous meetings, where no official minutes were recorded.

d) The fourth pattern observed is that participation could be solicited, by directly addressing the individual responsible for the function e.g. delays in delivery can be directed at the shipping manager by calling out his/her name.

e) The fifth pattern observed is that there often is a lot of “finger-

pointing” between staff from different departments, sites, suppliers and contractors. Usually, each party has its own set of documents and understanding about what has been discussed during the past communications and interactions on the subject

f) The sixth pattern observed is that some participants in the meeting

always “buy time” to let the matter rest for the time being. This is mainly done by a quick response, knowing well enough that the task

could not be done. Whilst, protecting oneself by saying “I will have

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especially suppliers and contractors; they are quick to response (in the positive) as compared to internal staff from different departments. However, the response is rarely complete and reliable.

g) The seventh and final pattern observed is that some members did not

have time enough to be prepared for the meetings. Given the urgency involved in coordinating and expediting meetings which are usually called when something has already or is about to go wrong. Not having the time to get the right data is more likely the root cause for being unprepared. This often times lead participants to give “quick and dirty” solutions to problems without really having understood the issues.

4.5.2. Observations in Collaborative Workflow Automation

During the first 3 months of Phase II i.e. Workflow Modeling Stage, my observation of the workflow activities, leads to the identification of three main behavioral patterns, summarized as follows:

a) The first pattern observed is that a workflow set-up time i.e. getting all parties to focus on an issue, is much easier (more efficient) with workflow automation. Whilst, not disrupting routine production activities.

b) The second pattern observed is that, members are committed to

define clearly the roles and responsibilities. Individuals experience learning about other functions during this stage and for the first time begins to comprehend the consequence of certain actions and delays induced by their actions downstream.

c) The third pattern observed is that participants would have a

preference for “prevention” rather than look for “cures”. Production is a dynamic working environment i.e. constantly changing. Participants prefer to be alerted (proactively) to possible conditions, before such conditions occur and have a negative effect on their work.

During the 1 month after Workflow deployment (Phase III), my observation of the workflow activities, leads to the identification of three main behavioral patterns. Summarized as follows:

a) The first pattern observed is that a response took longer than in verbal

communication but that the response is more complete and correct.

This also required more individual effort. The written message took a longer time to construct and check for fear of being misinterpreted and having to face consequences for the lack of clarity.

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b) The second pattern that emerged is a segregation of SAM employees

that are competent with the computer and those who are not. The older (demographics) managers seemed to resent the computer based workflow deployment. These managers from SAM and most suppliers preferred to “talk”. They further stress during unstructured interviews with the researcher that their relationship is an important factor, when it comes to coordinating and expediting i.e. making things happen.

c) The third pattern observed is that coordination and expediting cost

much less, for workflow automation. There is no need for senior managers to chair meetings with suppliers and contractors. There is no need to get all parties together in a room as was done in the past. Decentralization of coordination and follow-up can be deployed without compromising on organizational integration and service levels.