Improving Quality to Improve Profits

Improving fictional character to Improve meshs XXXXXXXX BUS 642 Business Research Methods & Tools Prof. Donna Wall kinfolk 10, 2012 ? Improving Quality to Improve Profit Public companies unvaryingly buzz off pressure to adjoin meshing for sh atomic number 18holders. One method of increasing cyberspaces is to reduce expenses. One expense Schlumberger guidance believes is widely within the ships companionships control is the basicborn unfold income tax return of their products. Specifically, Schlumberger commission believed that genteelness the initiative languish wages of their product to at least 99% would result in at least a 1% ontogeny in returns.As Fawcett & Calantone (2000) point out qualitys relevance extends to its major power to reduce personifys of defective work. Crosby estimated that the toll of quality atomic number 18 analogous to 15 to 20 perpenny of sales revenue and argued that if quality were improved, total cost would inevitably fall, in creasing firms profitability (par. 22). As a result, Schlumberger management authorized a piece of work to validate their hypothesis and determine specialised snap areas to place resources that pull up stakes maximize the effort for achieving results.To show up the validation, the interrogation squad decided to utilize the specific interrogation outgrowth charted in Business Research Methods written by make and Schindler. As barrel maker and Schindler (2011) point out good explore generates dependable discipline that are derived by professionally organiseed practices and that can be used reliably for finally making (p. 12). Cooper and Schindler (2011) go on to state good look into follows the standard scientific method systematic, empirically based procedures for generating replicable enquiry (p. 2). As a result, this particular meditate go forth follow the touch on of clear define the purpose, result process details, thoroughly plan the query design, provide high ethical standards, reveal any limitations honestly, provide adequate psychoanalysis for the decision makers, present decisions unambiguously, justify the conclusions, and reflect the inquiryers experience. The frontmost step in the boilersuit process is to clearly delimit purpose. To staring(a) this step we need to answer the following questions.Question one is what is the management quandary? Question two is what are the management questions? Question tierce is what are the research questions? And the forth question is what are the investigative questions? In this case, the management dilemma is how to increase profit margin. The management question is if we increase beginning(a) drop dead topic to 99%, allow for profit margin increase by at least 1% given everything else stays mates? The research questions are what areas of the business should management allocate resources to improve first qualifying revert?The investigation questions are 1) what is the current f irst pass ease up of our manufacturing facilities? 2) What is the first pass yield of each manufacturing facility? 3) What is the first pass yield of each product group? 4) What is the first pass yield of our inflowing material from all suppliers? 5) What is the first pass yield of each active supplier? 6) What is the current profit margin? succeeding(a) in the overall process is to create an ope confineal exposition for the field of force. In this particular study specific definitions are needed.For lieency, we will utilize the crosstie for Operations Management (or APICS) definitions for operating profit and first pass yield. APICS defines profit margin as the difference between the sales and cost of goods change for an organization. According to APICS first pass yield is delineate as the ration of products that conform to specifications without rework or modification to total input. This definition will be used in our manufacturing facilities as well as incoming materi al from our suppliers.Other terms that need to be defined for clarity embarrass Schlumberger manufacturing crowd come out facility, supplier, ratified supplier list, and current active suppliers. Schlumberger manufacturing site will be defined as any manufacturing or assembly site Schlumberger owns. A supplier will be defined as any club delivering components, sub-assemblies, or final products that are not possess by Schlumberger. canonic supplier list will be defined as the list of suppliers sanctioned by Schlumberger through the Quality Manufacturing and prophylactic (QMS) Audit and first article processes.Current active suppliers will be defined as any supplier that has supplied components, sub-assemblies or end products to Schlumberger within the last class. Part numbers will be considered active if Schlumberger has doed or received a part number in the last year and has a forecast or purchase order placed for spoken language within the next two years. Items that are c onsidered out of setting for this study imply software, services, facilities contractors, and transportation services. Any new products not released prior to the start of this study will also be considered out of scope for this research.The elementary method of gathering entropy will be to analyze and merge the raw information currently in the corporate databases. These databases include Approved Supplier List, eQuality, Incoming inspection, Quest, and Finance. The research squad does not plan to get by any formal surveys at this time. The research group will consist of at least one person from each of the potential stakeholders. These stakeholders will include Finance, Quality, Supply kitchen stove Management, Procurement, Manufacturing, and Information Technology (IT).Schlumberger has several databases with satisfying raw data in each. The team realizes that obtaining and consolidating this information in a usable form might require the help of IT resources and potenti ally agree the overall results of the study. The research team plans to obtain the following information from the data available in the databases. The team will begin gathering data closest to the end customer and move upstream in the process flow to analyze the major process points along the supply chain.As a result, the team will review the current overall first pass yield for all Schlumberger manufacturing sites, each individual manufacturing site, and each product line. In addition, the research team will analyze the first pass yield at incoming inspection from the suppliers. This information will be analyse at a global level, by supplier, and by Schlumberger manufacturing site location. The team will also determine how many suppliers are in the approved supplier database and compare this number to the current active suppliers.Since Pareto Analysis is much(prenominal) an important data analysis tool, this research team plans to utilize this come out as the ancient method o f organizing the data. As Karuppusami & Gandhinathan (2006) point out a Pareto Analysis is a QC tool that ranks the data classifications in the descending order from the highest frequency of occurrences to the worst frequency of occurrences. The total frequency is equated to 100 percent. The lively few items occupy a substantial amount (80 per cent) of cumulative region of occurrences and the useful many occupy only the remaining 20 per cent of occurrences (par. 2). Utilizing Pareto Analysis will provide an easy way to determine where to focus resources for maximum benefit. Analyzing the resource allocation and work out needs to support this study reveals we need a core team of six people, a budget of $350,000, and quaternary months to present the teams findings. At least one team piece will represent the following functions in the company. These functions include Finance, Quality, Supply Chain Management, Procurement, Manufacturing, and IT. The Finance Vice-president will be the champion of the study.Other employees will be elusive as needed to complete the research. The budget includes salaries of the team members for four months, researching intrinsic databases, potentially developing IT scripts to extract needed data and potentially see manufacturing facilities and suppliers to validate data or obtain additional detailed information. As in any research project, handling the study with the highest ethics is exceedingly important. As Cooper and Schindler (2011) point out the goal of ethics is to figure that no one is harmed or suffers adverse consequences from research activity (p. 2). Cooper and Schindler (2011) go on to state unethical activities are pervasive and include violating nondisclosure agreements, breaking participant confidentiality, misrepresenting results, deceiving people, using invoicing irregularities, avoiding legal liability, and more (p. 32). Although this research team does not plan to conduct official surveys, the team will conduct interviews with various participants to verify the data. In each case, the research team will disclose the nature of the study before engaging participants.Although Schlumberger has a inexorable no retaliation policy in the company, the final research shroud will not include the specific employee names of Schlumberger or suppliers employees. The primary focus of the study will be following and presenting the data link up to product quality and increasing profits. The research team will applaud all nondisclosure agreements and report the overall facts honestly. Consistent with company and standard research policy, the highest safety practices will be used throughout the study.Consistent with the research approach, the research team analyzed the data for the company owned manufacturing sites, first. This raw data revealed Schlumberger has a total of twenty-seven company owned manufacturing sites located in nine diametrical countries. To review the first pass yield of thes e facilities, the research team reviewed a total of 4,376 quality depicts posted during 2012. The overall first pass yield for all twenty-seven facilities is 82 percent. The ternion facilities with the concluding first pass yields are all located in the Houston area.The three product lines with the concluding first pass yield are mechanical press and Sampling (59%), Seismic (67%), and Drilling (71%). Next, the tea m began to analyze the information regarding our supplier performance. Based on the raw data, Schlumberger has a total of 5,778 approved suppliers. Of these suppliers 63% (or 3640) are considered active suppliers by definition. Of these active suppliers, twenty suppliers rate for 61% of the line items delivered to the twenty-seven facilities. Three specific suppliers have the lowest first pass yield. These three suppliers are Freeport (46%), Harrison (61%), and Tenaris (63%).Based on public monetary records, the current profit margin is recorded as $0. 98 per compo nent part in Q1FY12 and $1. 02 per share in Q2FY12. This translates into $1. 303 gazillion in Q1FY12 and $1. 40 billion in Q2FY12. A one percent increase in profit would increase earnings by just over $13 cardinal per quarter. To validate the first pass yield data, the research team visited four company owned manufacturing sites each in North America, Europe, and Asia. Two of the facilities visited in each region recorded the highest first pass yields in that region.Two of the facilities visited in each region recorded the worst first pass yields in that region. During these visits, the research team took a tour of each facility, conducted an audit of the quality records and interviewed key members of each manufacturing team including the Process Engineers, Quality Engineers, Incoming Inspection and Finished Goods Inventory Warehouse Managers. During the audit, the research team reviewed each facilities authenticated processes, actual processes utilized and the data recorded in t he quality database.To the research teams surprise, the methods utilized in each of the facilities were not pursuant(predicate) either documented or in actual practice. The North American and European facilities utilized and practiced the definition of first pass yield consistent with the research teams definition. However, the Asiatic manufacturing facilities did not record the actual first pass yield per our definition. Instead, if a product failed runneling, the Asian facilities would retest the product. If the product passed testing during the second or even the third test and passed, they recorded a positive first pass quality yield.The finding of inconsistent data records in the Asian facilities weakened the confidence in the raw data analyzed previously. However, it did uncover an opportunity to strengthen the companys overall processes. In summary, the raw data suggests Houston manufacturing facilities have the three low yields of the twenty-seven in total. However, thes e facilities might not be the lowest yields because the research team uncovered inconsistencies in the data collection definition and process between the Asian manufacturing facilities and the European or North American facilities.As a result, a further study is recommended of the Asian facilities to determine how probative the overall raw data is skewed by them utilizing a different process to collect and record first pass yield. At the same time resources should be placed in the Houston facilities to raise the first pass yield from the current low level to 99%. Since the data and process for collecting and recording the data for the supplier first pass yield is consistent, the research team is confident in the results achieved.It is the recommendation of the research team to focus resources on the three lowest yielding suppliers. These resources should conduct a more detailed analysis to uncover the Pareto Analysis of the top defects. at once the top three defects are determine d, the root cause and appropriate nonindulgent actions can be determined to raise the first pass yield to the appropriate levels. Reviewing the financial evidence suggests a 1% increase in profit is achievable if the overall first pass yield of Schlumberger manufacturing facilities rises to 99%.To achieve this high yield levels quickly, the company will need a systematic and consistent approach across all facilities and suppliers. One such process to consider is implementing a combined Lean and Six Sigma continuous improvement approach in each manufacturing facility and with our suppliers. Since determining the cost of implementing Lean and Six Sigma process is out of scope for this research team, a further study would be needed to determine the cost of implementing monumental process improvement verse the potential 1% benefit per quarter.Throughout this research the team worked well together. Having a process to follow made the overall activities much easier to accomplish in a sy stematic way. All members believed the success of this study was largely due to the planning at the beginning of the process. To defend the project on track, it was important to define exactly what activities were in the scope of the project and what was considered of of scope. When the team uncovered inconsistencies, in data collection or processes, we were able to document the information an continue progress toward the overall goal.Now that this study is complete the information will be recorded in our company Quest database for future reference. References APICS deifinitions First Pass Yield http//www. apics. org/dictionary/dictionary-information? ID=1543 Profit Margin http//www. apics. org/dictionary/dictionary-information? ID=3188 Cooper, D. R. and Schindler, P. S. (2011). Business research methods (11th ed. ). New York McGraw-Hill Irwin Fawcett, S. E. , & Calantone, R. J. (2000).Meeting quality and cost imperatives in a global market. International Journal of Physical stat istical distribution & Logistics Management, 30(6), 472-499. Retrieved from http//search. proquest. com/docview/232588532? accountid=32521 Karuppusami, G. , & Gandhinathan, R. (2006). Pareto analysis of critical success factors of total quality management. The TQM Magazine, 18(4), 372-385. doi 10. 1108/09544780610671048. Retrieved from http//search. proquest. com/docview/227643251/fulltext/13911EA989455E63FDD/3? accountid=32521