Are Peugeot using the best methods for the line of work they are involved in? Is there a way of improving their efficiency, quality and productivity? We should be able to tell if there is by looking at the theory known as benchmarking.
Benchmarking can be defined as imitating the standards of an established leader in quality and attempting to be better them.
Benchmarking is a technique used by some businesses to help them discover the ‘best’ methods of production available and then adopt them. Benchmarking involves: –
* Finding out what makes the difference, in the customer’s eyes, between an ordinary supplier and an excellent supplier.
* Setting standards for business operations based on the best practice that can be found.
* Finding out how these best companies meeting those standards.
* Applying both competitors’ standards and, if possible, exceed them.
What should be benchmarked?
Who should the company benchmark against?
How is the information obtained?
How should the information be analysed?
How should the information be used?
These are the five main steps in Benchmarking. The first step is to identify exactly what the company intends to benchmark. Benchmarks that are important for customer satisfaction might include consistency of product, correct invoices, shorter delivery times, shorter lead times and improved after sales service.
Peugeot could decide to benchmark better sales figures. What better company to benchmark against than ‘Ford’, the leading company in market penetration. If Peugeot were to implement the ford tactics, then Peugeot’s market share and penetration could change for the better. The information can be obtained by looking at watching the customer service teams and showroom dealers in action, web sites, visiting the ford base and looking around, watching the production process, study their strategies etc. The information obtained should be analysed to see if the Peugeot team could implement these strategies in theory, to see whether the ideas are actually worth perusing. The information can be used by actually putting these ideas into practice. This will only be performed after the primary research has been collected and analysed by the Peugeot specialists.
In order to ensure productivity is maintained during times of crisis, for example, it would certainly be advisable for the company to take measures to secure the safety of the chain of supply. Peugeot relies on numerous companies in the UK to supply parts to their production plants for use in car manufacture, and supply lines could be disrupted in the event of rail strikes or petrol strikes, as were experienced in 2000 and 2001. Storing a number of parts in the factory in the event of such crises would waste space and money during the time that supply lines are working well, so one alternative method would be to conduct research into the feasibility of Peugeot producing the parts themselves. If this was done then there would be no problem in the event of transport disruption to the production line continuing, for the company would have no shortage of parts, and this method renders the storage of numerous such components unnecessary. However, there would still be potential problems with raw material transportation, but at least this method would reduce the potential transport links being severed to one, from two.
There are a variety of methods a business might choose, which could improve efficiency. The aim of the business when introducing changes to improve efficiency is to increase the productivity of factors of production, reduce costs and raise profits. Increasingly, businesses are adopting company-wide approaches, which involve the whole business in improving efficiency.
Characteristics of good performing companies
* Launch new products quickly, correct problems after and then market the improved version. Cutting lead times was also emphasised by certain managers.
* Successful companies were those, which listened to consumers. Customers tended to know what they would buy and firms should supply products, which customers want.
* The generation of new ideas was a key factor for success. All employees should be encouraged to try out new ideas, even if they didn’t always work.
* Top companies recognised the quality and potential of their workforce. Given the opportunity, workers would solve their own problems.
* Successful businesses stressed values such as, continuous innovation, good customer service and dependable quality. Leading by example was also considered important for managers.
* Diversification could weaken a company. Expanding through the development of strengths would be more profitable than trying to do something completely different.
* Organisation charts in leading companies tended to be flatter. Flat structures and a simple chain of command are more effective than matrix structures.
* Successful businesses tend to be more decentralised.
Peugeot are high on perfection it would seem. Trying to cut lead times and they always try and launch products as quickly as possible. The sooner the products are on the market, the more profits they can make.
Peugeot know how valuable their workforce is to them, because they are what bring in the overall profits. Keeping them happy is a big priority. So if they come up with excellent ideas that can cut lead times, that employee will be rewarded with a ï¿½1000 bonus. That’s the incentive for all employees to keep coming up with ideas, even if the don’t work. Also Peugeot want their employees to become more independent, so if the supervisor isn’t there, the worker can make his own decision.
It would also be good for the company to explore further incentives for production line workers to improve their work rate while maintaining the current quality of output; while they no doubt work hard, the possibility of rewards to a certain output would do no harm to production levels. That said, there would be additional costs for Peugeot, but on the other hand these would hopefully be offset by improvements made in productivity.
The hierarchical structure of Peugeot is pretty flat, which makes communication relatively easier than that of a structure with many levels e.g. matrix structures.
Innovation and continuous improvement is one of Peugeot’s strong points, as they are always looking to improve and find new and better ideas for features in their new and up and coming range of vehicles in the near future.
Tom Peters and R.Waterman, in their book ‘In Search of Excellence’ identified eight key characteristics of good performing companies (above).
Peters later revised his ideas to take into account changes in the business environment.
* Businesses should revolutionise their approach when adapting to external influences on the business environment.
* Businesses should aim to develop new ‘stars’ in their product portfolio. Stars are products with a high market share and a high growth potential.
* Businesses, because they cannot control market events, should try to anticipate changes and continually move forward.
Some businesses found problems after implementing these strategies, downsizing, delayering, reengineering and outsourcing, such as standard-bearers of excellence in 1982, were in trouble five years later. This was two thirds of the companies identified by Tom Peters. Seventy percent of companies claiming they had been reengineered, failed to improve their market position, admitted Michael Hammer.
The method to improve upon efficiency is ‘work study’. This is a method to attempt to find the best or most efficient way of using labour, machines and materials.
Method study involves identifying all the specific activities in a job, analysing them, and finding the best way to do the job. This could be an existing job or a new one. Method study will allow a firm to: –
* Identify an optimum way of carrying out a task.
* Improve the layout of the factory or the workplace.
* Minimise effort and reduce fatigue.
* Improve the effectiveness of processes.
* Improve the use of labour, machines and materials.
* Establish the costs of particular activities to help with accounting.
* Achieve results in the least time.
Once the best work method has been found, which measurement can be used to find the effort needed to carry out a task to an acceptable standard. The result can be used to design incentive schemes and determine staffing levels.
Peugeot may decide to carry out this task by letting a ‘work-study assessor’ watch one of its employee’s hard at work all day. The assessor may watch the employee set up the cutting machine, cut 10 patterns, reset the machine for a different pattern, cut 10 more patterns, and record the findings. The performance may be rated against a scale of 0-100, such as the British Standard Rating Scale (where 100 is the standard performance of an average, experienced, motivated worker).
Improvements in efficiency can be made by making labour more productive and reducing labour costs. So how can we make labour more productive?
The way to improve quality is to have your employees trained as much as possible. It is generally agreed that the efficiency of the workforce is linked to the amount and quality of education and training that it receives. Some businesses have their own training schemes, such as health and safety training; graduate training programmes or Modern Apprenticeships. Some employees follow training courses leading to NVQs.
Another way to improve quality is to get the employees multi-skilled. This is where employees are trained in a variety of operations. It may allow a business to reduce its workforce, as more tasks are carried out by fewer workers.
With the workers being multi-skilled, and carrying out more jobs, this should give them the sense that they have been given more responsibility and this should work as an incentive for motivation. This should increase the productivity and improve the quality of the products being skilled in many areas.
Peugeot could reorganise their structure and delayer, which involves a business reducing its staff. The cuts are directed at particular levels of the business, such as managerial posts. Many traditional organisational charts are hierarchical, with many layers of management. Delayering involves removing some of those layers. This gives a flatter structure. In the late 1980s the average number of layers was 7, although some were as high as 14. By the late 1990s this was reduced to less than 5. The main advantage of delayering is the savings made from layering off expensive managers. It may also lead to better communication and a better-motivated staff if they are empowered and allowed to make their own decisions.
If Peugeot were to implement this strategy, they would be making the business stronger, as they are getting rid of staff they no longer require. This will make the hierarchical structure of the business stronger as communication would become simpler, not having so many levels and channels to travel through which before caused communication to get lost. Also Peugeot’s profits may increase, as production costs will be lowered due to a cluster of workers that have been removed from the Peugeot Company.
However, remaining managers may become demoralised after delayering. Also staff may become overburdened, as they have to do more work. Fewer layers may also mean less chance of promotion.
Peugeot many consider reengineering, which was defined by Michael Hammer and James Champy (1993) in their book ‘Reengineering the Corporation’ as: ‘The fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical contemporary measures such as costs, quality, service and speed’. In this process, for example, it might be that a quality assurance system is overhauled because its success is not very good and a large number of faults are being passed. Many processes may be altered, especially those which are cheap and easy to re-design and change.
Processes that are redesigned might be ones, which are no longer working. For example, a quality assurance system that results in high levels of faulty products, processes which affect the customers, such as lead times, and processes which are relatively easy and cheap to design.
How might reengineering of processes affect a business?
* Process teams, such as an assembly team, will take the place of functional departments, such as the production department.
* Job change from simple tasks to multi-dimensional work. Repetitious assembly line work disappears. It is replaced by individuals working in process teams, responsible for results.
* Workers will be empowered and no longer follow a set of rules laid down by the management. They have to think, interact, use judgment and make decisions. Reengineered processes require workers to have an understanding of their jobs.
* Employees will not be promoted because they have a good performance record, but because they have the ability to do other job. Good performance is rewarded by bonuses.
* Employees must believe they are working for the customers and not the bosses.
* Managers no longer issue instructions and monitor the work of their subordinates. They assist, guide and help staff to develop.
* Organisational hierarchies become flatter. Staff make decisions for themselves so there is less need for managers. Flatter organisations bring executives closer to customers and workers. Success depends on the attitudes and efforts of empowered workers rather than the actions of task orientated managers. Executives must be leaders who can influence and reinforce employees’ values and beliefs.
If Peugeot were to reengineer their processes, then you would see a greater responsibility attached to the production team workers. They would be expected to use their initiative, if the management aren’t setting rules for the workers to follow anymore. This is because it should raise moral, thinking they are now more important as they have more responsibility, but also so they can get rid of the people in charge of the production team, so Peugeot can cut back on production costs (wages). There might not be pay rises as Peugeot expect extra responsibility as standard from its employees, but bonuses will be rewarded for excellent work.
Cutting down external contact points during re-engineering is beneficial because somebody contacting the company’s Finance Department, for example, would only talk to one person in charge of their enquiry and so different staff would not be able to give out incorrect information by mistake. Certainly this would improve efficiency and customers would be impressed with the accuracy of information.
Through the sacking of the unneeded employees, the hierarchical structure becomes flatter and this will improve communication, as the information won’t need to be passed on through so many levels or channels of the hierarchy.
An example of efficiency in the car industry
Ford changed the way they purchased there stock to improve efficiency. Before, they had clerks to check whether the right stock had been bought in. There were three documents that had to be checked by the clerks. If they matched then the clerk in ‘accounts payable’ would pay the supplier. If this wasn’t the case, time was wasted checking them.
Changes occurred and now the invoices have been scrapped and all descriptions were added to a database. Two possibilities existed, they either didn’t match or they did. The payment was made if the description was correct and if there was a discrepancy, the goods were returned to a supplier. The reengineering of the process had a huge effect on efficiency. Ford also cut the number of people working in ‘accounts payable’ from 500 to 125.
Although Peugeot’s current dealership network is undoubtedly of high quality and on a par, if not better than, a number of competitors, it would be good for the company to be radical and create a different type of dealership to attract customers. One such possibility would be to introduce into dealerships new facilities, such as seating accommodation and coffee areas, where prospective customers could sit, relax and contemplate the products on offer. Although coffee for example might be available to those already buying a car, it would otherwise distinguish the company’s dealerships and do much to attract customers and additional favourable publicity.
The key elements in making Peugeot more Productive, producing better Quality and being more efficient are the suppliers/distribution, workforce/culture and the customers.
It would be impossible for Peugeot to make cars in Britain without the support of the large network of companies, based in Britain and Europe, capable of supplying the components and providing the specialists services essential for efficient manufacturing and commercial performance.
All component delivery, both to the factory and to the trackside – from large bumper assemblies to tiny fasteners – is governed by complex computer systems. Smaller parts are replenished and large components for specific all arrive ‘just in time’. The trackside delivery trucks are computer linked and the new ‘smart’ trucks will operate only as programmed.
Once a new car is built, Peugeot’s distribution system and national dealer network takeover. The new car, specially waxed to protect it on its journey, will be delivered to the dealer via the GEFCO organisation, the transport and distribution arm of the Peugeot Group
Despite the major advances in robotics and computerisation in recent years, people are still the most important resource when it comes to car building.
And in the same way the machines and computers have to be programmed, serviced and maintained, people require motivation, training and re-training to perform efficiently.
At Peugeot, systematic training and personal development is a permanent feature of employee life. Learning new skills and adopting those skills to new developments in technology are regarded as a lifelong activity, not just something undertaken at the beginning of working life.
As well as the traditional forms of skills training, the company has pioneered the teaching of the French language to enable British employees to communicate more effectively with their French counterparts. At one time, as many as 500 employees engaged in some form of language training from basic to almost fluent level.
The customers are the most important element of the business world to me as without the customers buying the products, there would be no demand for the products, therefore no supply needed and that would put a few thousand people out of a job. This may be a big assumption but in theory it is true. So to keep the customers happy, the likes of Peugeot have to look at customer wants and needs to buy make the customer want to buy the product.