Shanghai Baolong Automotive Corporation Case Solution

2. Lean Management of Supply Chain

1. 5S Methodology

Despite the fact, implementation of 5S had started in mid-2008, but due to the poor implementation strategy, even months after the start of the plan, the company was no way near its completion. The manufacturing plants were in a situation of a complete mess; therefore, the 5S methodology was initiated again.

2. Seiri (Sort)

Throughout the factory, there were unnecessary items lying on the floor, particularly raw materials and unfinished goods, which were not only increasing the cost but also creating obstacles for workers. Eliminating or reducing them was a priority for the company.

3. Seiton (Straighten)

Despite the fact that workflows were defined via proper manuals, but the implementation from workers’ end was very low because of which time wastage was often experienced. So there was a need for arranging and setting all things in order for improving efficiency.

4. Seiso (Clean)

This element already existed within the company as the plant apparently seemed to be clean; however, it was not corresponding to other elements of the 5S methodology.

5. Seiketsu (Standardize)

This was the major lacking in the company as no standardized work processes were followed because of which multiple issues with the quality of the product were being found. Each department was blaming the other one for the issue without identifying the root of the problem. So, there was a need of standardizing the process as it was a mass-production plant.

6. Shitsuke (Sustain)

As the sales grew by almost fifty percent between 2002 and 2006, the company forgot about making its operations sustainable and continued with ad-hoc management and production style, which resulted in all sorts of problems. Now, it was time to bring order within the plant and focus on removing issues rather than bringing in new sales.

7. Just In Time

The company had failed to forecast the variation within its sales because of which there were times when the company had excess inventory at different levels (raw material, in-process, finished goods) and at others, it fell short of raw material. In either case, it was facing a huge cost in the form of storage costs or lost sales. The Just-in-time model implemented by the company was off to a positive start, but it was not sustainable as the desired cultural changes within the firm were yet to be made; therefore, it is essential to make them at the earliest, in order to derive maximum value from the process.

8. Pull Production

The company had failed to meet product delivery deadlines even after following a sophisticated forecasting technique due to high uncertainty within demand. Therefore, the new idea is to implement a pull supply chain management strategy i.e. a demand-driven strategy. In this case, Toyota’s Production System would serve as an ideal benchmark because the company despite using a pull strategy for production does not produce as per the order. It follows a so-called supermarket model where it stores a limited inventory and replenishes them as per need.