Continuous Improvement Case Study: Taking Baby Steps towards Tangible Benefits

  • Written By: Olin Thompson
  • Published On: May 19 2006



Introduction

Continuous improvement is a phrase suggesting that a process or product gets better as knowledge and experience accumulates over time. At Harris Tea, continuous improvement includes investing in application software. Already blessed with a strong technology backbone, Harris sought further improvements. To get a fresh look and new ideas, it turned to an outside consultant.

Within the process of consultation, management emphasized Harris Tea's customer-centric culture. They talked about understanding market demands, achieving very high customer service levels, meeting pricing demands and being agile, being ready to respond to customer changes, and committing to continuous improvement.

In pursuit of these objectives, Harris has invested in technology: enterprise resource planning (ERP) solutions, warehouse management systems (WMSs), manufacturing execution systems (MESs), integration, and more. Meetesh Shah, chief information officer (CIO) at Harris Tea Company, said, "yes, we made investments in technology and business processes to improve our business, but our customer-centric culture said we could do more."

With an impressive 160-year history procuring and blending teas, the Harris Tea Company, a division of Harris Freeman (http://www.harrisfreeman.com), is the largest blender and packer of private label teas in North America. Harris Tea is driven by two principles: quality products, and strong, flexible customer support. Harris produces private-label black and specialty teas for a wide variety of retail and food service customers. It has three production facilities in California, Georgia (US) and New Jersey (US), as well as one in Kolkata (India).

Shah offered insight into the process behind the product: "The tea business sounds simple to some: source, blend, and package. In fact, it can be a challenge. We have both make-to-order and make-to-stock models. We source many varieties of tea from many parts of the world with each incoming lot having its own quality characteristics. Blending must be to customer specification for taste, color, clarity, and other characteristics, and takes an expert. Both before and after blending, our experts taste the teas and blends to ensure they match the spec before packaging. We understand lot traceability is of utmost importance to our customers; thanks to our MES from iRely Solutions, we have a 100 percent forward and backward genealogy traceability right from raw teas to shipments of finished goods to our customers."

Benefiting From an Outside View

In an effort to further improve supply chain operations, Harris worked with a consulting firm, Supply Chain Consultants (SCC) (http://www.harrisfreeman.com) of Wilmington, Delaware (US). The objective was to optimize the entire supply chain, not the pieces.

While searching for ways to improve the overall supply chain, Harris gave the consultants two absolutes. First, changes could not affect the quality of Harris products in any way. Second, product tracking and tracing could not be compromised. Tracking was also to be validated as part of the project. SCC's work plan was structured as a series of discrete steps:

ASPECT GOAL
Organization Structure Examine the existing supply chain organization's structure; review current roles to determine strengths and improvement opportunities, stemming from industry experience and management's specific expectations for the supply chain
Planning Processes Define and frame the company's planning processes as a set of five competencies: understanding demand; managing inventories; planning demand; planning production; and scheduling. Measure the capabilities of the business along these dimensions.
Gap Analysis Provide a gap analysis that identifies a list of challenges, and highlights items critical to the businesses.
Actionable Steps Prioritize a list of actionable steps that can be taken by the company to address the highest impact items from the gap analysis.

SCC used a structured interview approach in meeting with executives, management, and others. They evaluated rules, responsibilities, authorities, and overall responsibility for the supply chain. They were pleased to find that Harris Tea had a single person responsible for the entire supply chain.

Jane Lee of SCC stated, "Harris Tea had made good technology investments [in] good tools and business processes. As is typical, the key to improvements was in the level of coordination across the supply chain, from forecast through to delivery."

SCC looked at best-in-class practices, defined by Lee as practices that work best in the "real world." She stressed that "gotchas"—the big problems which may occur later—are very important, and that real-world, practical experience is vital for identifying and understanding them.

Deliverables and Results

Within the first few days of the assessment, Harris had provided SCC with data, including historical demand at the line-item level. From this data, SCC delivered a database that allowed a qualitative assessment of the Harris Tea numbers. The database pointed to areas of potential improvements, and also served as a baseline for evaluating real-world improvements in supply chain operations. Analysis of the data also identified potential data quality problems.

SCC, praised by Shah, then delivered a list of "low-hanging fruit" as part of its actionable items. These small projects required a minimum of effort, but showed rapid and significant improvements. For example, they suggested that Harris begin to hold daily supply chain meetings to identify and address potential problems with specific orders, customers, facilities, and so on.

The consultants also delivered a prioritized list of changes that included organizational issues, business processes, and tools. These changes were designed to move Harris Tea to a "best-in-class" status. Shah commented, "SCC provided a realistic, step-by-step list of action items, not just a definition of the ideal end state."

Make-to-stock black teas depend upon forecast accuracy to drive the production schedule, while make-to-order specialty teas are driven by customer orders. The consultants recommended a series of business process improvements to tighten the supply chain, from forecasting through distribution planning.

Many of the improvements for both types of teas dealt with improved procedures for procurement and inventory of specialized packaging materials (which would ensure that production was never limited by lack of packaging materials) while minimizing working capital in those materials.

Although both Harris Teas and SCC were cautious about discussing specific benefits, Harpal Singh, SCC's founder and chief executive officer (CEO), pointed to typical improvements:

  • Increased throughput (1 to 5 percent):
    Increased throughput is generally achieved because of better planning, which results in more stable production schedules and a link between production and distribution. This is significant because such improvements can be achieved without any additional capital investment.

  • Increased sales (2 to 4 percent)
    Increased sales are achieved by better inventory positioning. Studies have shown that an increase of up to 4 percent can be obtained if product is available when requested. Improvements in forecasting and inventory management can lead to better availability of product, which in turn results in improved sales.

  • Reduced inventory (5 to 20 percent)
    Reductions in inventory are achieved by improvements in forecasting, planning, and scheduling. Approximately 40 percent of the reductions are normally in finished goods, with the rest in raw material and work in process.

  • Decreased operating costs (1 to 2 percent)
    Decreased operating costs are the result of reduced transition costs, better sequencing, and reduced energy costs.

  • Better quality
    Quality is enhanced through reductions in the number and severity of product changes.

  • Better planning
    More effective use of a planner's time is achieved by eliminating non-value-added work such as compiling data and responding to crises.

Lessons Learned

Shah sees the value of outside experts. "Our in-house people are very knowledgeable in our business and our market," he says. "However, bringing in outside consultants brought a different point of view and a different set of experiences."

He advises companies to take the advice of outside experts seriously. "SCC was particularly good in the application of their extensive knowledge, in pragmatic ways, to the business."

According to Shah, there is perhaps one detail which is the most important: "Take baby steps—go after the low-hanging fruit. Do many little projects, not one big one. Design projects where you [can] measure the results, reevaluate your plans, and modify future actions as indicated. Remember, continuous improvement is about looking at your situation as it evolves, not upsetting the apple cart."

About the Author

Olin Thompson, a principal of Process ERP Partners, has over twenty-five years of experience as an executive in the software industry, and has been called the "father" of process ERP. He has spent the last seventeen years in the process-industry-related ERP, SCP, and e-business segments. He is a frequent author and award-winning speaker on topics such as gaining value from ERP, SCP, e-commerce, and the impact of technology on industry. He can be reached at Olin@ProcessERP.com.

 
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