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Interior JV-Teething Problems of a Manufacturing Operation in China Case Solution

Solution Id Length Case Author Case Publisher
798 999 Words (4 Pages) Neale O'Connor, Grace Loo University of Hong Kong : HKU968
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Interior JV’s operations in China faced many critical problems that aggravated the situation that it was working in a new country and unique culture. The first problem was that it had grave difficulties in maintaining good standards of internal quality in processes. The company had a 3% defection rate compared to 1% defection rate of the parent company. This further translated into costs equivalent to 2% of the company’s turnover, which was a huge cost. Secondly, the delivery times varied greatly which was quite intolerable by the customers as they had Just-in-Time inventory systems to reduce inventory costs and hence levied high penalty costs if delays were caused. Lastly, development of the final product took a very long time which created further complications in achieving the final product in the right time. The company was developing final products within 35 days compared to its target of 21 days and industry norm of 30 days, which was not a promising comparison.

Following questions are answered in this case study solution:

  1. Analyze the underlying problems at Interior JV.

  2. Construct a root-cause analysis for each of the issues encountered by Interior JV.

  3. Develop a scorecard with performance metrics and a strategy map for improving Interior JV operation.

Interior JV Teething Problems of a Manufacturing Operation in China Case Analysis

Construct a root-cause analysis for each of the issues encountered by Interior JV.

The first problem of internal quality had three broad causes, first of which was the lack of control over the quality of the raw materials due to low bargaining power with suppliers. Being a new business, Interior JV’s volume requirement of the raw material (yarn) was quite low in the industry, for which suppliers were very limited as they usually catered to large volumes. Secondly, pool of skilled workers was very small in this market; this lead to delayed detection of defective products and further poor quality work. Interior JV itself had no evaluation system to evaluate, train, and motivates its workers. Thirdly, while the parent company had many quality systems in place, the Chinese operations had only 40% of these systems implemented, which lead to poor quality check and control.

The second problem, of a long development time was caused by lack of internal coordination and no dyeing equipment of its own. Its sales teams and manufacturing plants were far apart, and each order needed to be placed individually but due to lack of market knowledge and expertise there was no system of prioritization and improving efficiency of responsiveness. Furthermore, having no dyeing equipment meant relying on external suppliers who were usually unwilling to re-dye many small samples a number of times for small companies like Interior JV. 

The third problem of timely delivery was also due to external causes. China’s logistics industry was unreliable as it was immature, did not have proper order-tracking systems, delayed orders until the trucks were full, and was not resourceful in responding to troubled situations. Furthermore, the country’s automotive industry was unable to develop and provide reliable market forecasts which made it more difficult for a small-volume company like Interior JV to plan, prepare and respond to market needs effectively.

Develop a scorecard with performance metrics and a strategy map for improving Interior JV operation.

In order to proceed with better results after learning from the previous experiences, following balance scorecard and Strategy Map for Interior JV are given to give an idea of how the company may proceed further and what tactics or strategies it may look into. Interior JV can set industry performances as benchmarks for its own performance. It needs to develop its own evaluation systems as well as research systems to gain a better knowledge of the market and industry practices even in other places of the world, such as its own parent company so that the Chinese venture can benefit. Furthermore, as the company faces many external factors which have caused problems in its internal processes and are hence, not under control, the strategy needs to be such that internal problems are kept under control so that losses are minimized. This would require a complete internal analysis and hence improvement of weaknesses and leverage of strengths such as the strong backup of Interior group and its funds and experience pool. The Balance scorecard and strategy map below are a guideline to how the company can proceed and starting from the following areas it can then develop further evaluative measures and keep monitoring and improving.

Balance Scorecard

Financial perspective

  • Improve processes to reduce losses due to delays.

  • Improve productivity to reduce defection rate costs.

Internal perspective

  • Lease or buy dyeing equipment to have more control over the quality.

  • Implement ISO etc. quality systems - increase from 40% to 100%.

  • Increase customer/market knowledge & integrate customer database system to improve service.

Learning & Growth perspective

  • Introduce employee training & evaluation programs.

  • Learn from industry best practices.

  • Implement programs rewards for exemplary performance or good initiatives.

Customer perspective

  • Improve delivery time according to customer requirements.

  • Be more informed and hence responsive to customer needs.

Vision & Strategy – Balance Scorecard

Strategy Map

Strategy Map

There are many external influences hence Interior JV needs to improve its internal processes towards maximum efficiency in order to cover up for other factors.

Since there are no skilled workers, it should develop its own competencies requirements and training programs to develop a strong skilled workforce.

It should try to reduce dependence on external parties such as dyers and so buy or lease its own dyeing equipment which will reduce delays and defects.

The industry relies heavily on relationships and swift response of businesses so Interior JV should improve its development cycle, customer service and reduce external problems to make its customers satisfied and achieve better profits as well as long-term relationships.

Interior JV should team up with its suppliers to develop strategies for improving the logistics such as introducing tracking systems and having backup plans for situations where accidents or mishaps may happen and how they should be dealt with so that final customer is not impacted.

Lastly, it should develop internal research and market analysis teams so as to gather market intelligence and develop strategies which are more relevant and promising for future growth.

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