2013

Cambrigde International
College

Student Name Word Count: 1476

[ECONOMIC PRINCIPLE ASSIGNMENT ]

This assignment discusses the case of turnaround at Preston plant (Adapted) that went through the
crisis and how it overcome that.
 Turnaround at Preston Plant

What are the most significant events in the story of how the plant survived because of its
adoption of quality-based principles?

The significant events in the story of how plant survived the crisis because of its adoption of quality
based principles are as follows.
Going back to basics:

Company decided to go back to initial set of process after curl problem was solved. After the curl
problem there was pressure from the higher management to increase the productivity as the
company was making a loss of around $ 10 million a year for two years. The pressure to increase
productivity had changed lot of processes. Going back to the basic meant company was on its way to
do the right thing ignoring the pressure to achieve the productivity.

Shut down rules:

Major factor that compromises quality on the shop floor is the ambiguity about the quality and
process adherence (Kaynak, 2003). At Preston, it suffered a loss of around $400,000, because
product had to be scrapped, the reason being operators were in doubt whether to shut the line or
go ahead. With the encouragement to the shut down rules, the company made it clear that it
focuses on increasing the quality, reducing the cost (rework and scrap) at the cost of productivity.

Daily Reviews:

The process of continuous improvement requires continuous monitoring, identification of problem

and implementing the corrective measures. The process of daily review was started as an activity
monitoring, discussing the daily problem faced on the shop floor and the areas of improvement. As
the saying goes “all of us are smarter than one of us”, the daily meeting ensured that operators were
discussing the real problems, reporting the process improvements and moving in the positive
direction. This also helped in boosting the morale of the employees as it brought a feeling of doing
something right and not doing anything without thinking.

Monthly Review of All shifts:

Going ahead with the daily review meeting where people from only one shift were present,
management also decided to bring the operators from all shifts into the meetings at the same time.
This meant, plant will be shut during that time and company is not producing anything during that
time. This is a cost to a company but management was willing to take that chance so that to bring
the productivity and quality back. This also ensured various problems faced during different shifts
and how they coped up with it. Knowledge is sharing and in these monthly meeting the people from
HP were also invited which ensured that they also get the first hand of experience how much the
company was serious about bringing right processes back.

Convincing the rest of the World:

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Everything was coming in place, and COO had turned the corner, two events happened; Firstly, HP
did not give Viper contract and secondly, Rendall decided to shut the plant because of the losses.
Notwithstanding the decision, management team at Preston focused on following to convince HP
and Rendall.
1. Improving the quality
2. Reducing the cost
3. Create portfolio of new ideas

The plant’s processes eventually were brought under control. What were the main
benefits of this?

The plant was brought under control by focussing on following three areas.

1. Improving the quality

2. Reducing the cost
3. Create portfolio of new ideas
Benefits from each of the above three things are as follows.

Improving quality: It was implemented using full statistical process in the monitoring system. To
improve the quality, they also installed quality conscious and problem solving tools throughout the
plant. By December 2009, there were 40 percent fewer people in the plant than two months earlier.
Quality people were down from 22 to 9. The reason quality manager at the Preston quoted was the
plant is making a good product that it does not need more people to control garbage.

Statistical Process Control: Statistical process control was established throughout the plant to ensure
that plant is continuously under monitoring and control. And the same data can be shared with the
client to show the transparency and operational excellence of the company. Statistical process
control also ensured that the quality is not compromised and hence the garbage and rework is
reduced to minimum. This helped company put a operational profit in December 2010, for the first
time in last two years.

Cost Reduction: Cost reduction measure in any company is a painful process. As most of the staff
was aware of the plant being shut down in few months, there was already an atmosphere of
apprehension and uncertainty around. Things that can damage the most on the shop floor is the
uncertainty and ambiguity. If the employees are not aligned with the purpose of the organization
then it can affect the productivity and the overall quality of the product. The management ensured
that the transparency was maintained throughout the time so that employees understand the
business decision. The decision to layoff was taken because management through zero based
assessment decided that cutting numbers had greater impact on cost than saving the payroll.

Create portfolio of new ideas: With the established process company could investigate several new
products and ideas. It provided the competitive edge to the company and ensured that company is
able to manufacture the products that seemed technically difficult. It produced “Ecowrap” a
recyclable protective wrap that was aimed at Japanese market.

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All the above action helped Preston renew relationship with HP and HP asked Preston in the spring
of 2010 to work on new trial products. By April 2010, the plant had reported three months of
profitability. This in turn changed the mind of Rendall and at the end of April Rendall changed the
decision to shut down its plant.

At the end of 2010, Company had captured 75% of the HP’s US printing business and was being
asked to work on several large projects. This showed that through established process Preston has
regained the trust of HP.

SPC is an operational level technique of ensuring quality conformance. How many of the
benefits of bringing the plant under control would you class as strategic?

As Sampson (2012) puts it, one major challenge in maintain the quality is identifying when the
quality has drifted away from what is acceptable. As the Preston was going through the losses for
continuous two years, it was very evident the company as a whole performing badly in every front,
that is maintain quality, cost, and rework.

Stenberg and Deleryd (1999) also mention that implantation of SPC brings the total quality
management in the plant and this is the basic requirement to achieve the quality benchmark for the
company to establish itself in the competitive world.

Power (2011) emphasizes that operation can be set straight only focussing on the processes. The
management decision to implement statistical process model was aimed at bringing the operational
as well as the strategic benefit to the company. The strategic benefits from the SPC are as follows.

Providing the Competitive advantage: Company established itself as a competent and profitable
player and hence could capture the 75% of the Hp’s US business. This also shows that the it was the
back end process that provided the much needed credibility to the company in the market in terms
of quality and profitability.

Monitoring and Control: No company grows without learning and assessing itself. It was inculcated
right from the daily review processes to assess what we have done right, where we have faced
problems and what we could have done better. If each and every employee is able to answer these
three questions every day for the company, it will take a company to a different level altogether.
Hence monitoring and control provides a strategic benefit to a company that it is on the path of
achieving its strategic goal.

Continuous Improvement: As the company is continuously monitoring and improving itself, it sets
itself on the path of continuous improvement where the process itself sets to puts operations in self
correcting mode. This gives company advantage to build new ideas, try out new products and
investigate the complex processes.

Technical Competence to execute the large and complex projects: With established SPC and
problem solving tools at all the locations in the plant, company is able to execute some of the largest

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and complex projects for HP. Also, for the Japanese market it could create an innovative product like
“Ecowrap” a recyclable protective wrap that out Preston in the league of competitive and innovative
companies.

To summarise SPC helps achieve operational benefits as well as the Strategic benefits for the
company. The management has to focus on what kind of strategic benefits it wants to derive from
the operational objective. It can be done by setting up the right process and practices in place.

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References

1. Power, B. 2011, Get Your Operations in Shape by Focusing on Process, HBR Blog Network

2. Sampson, S. 2012, Quantitative Tools for Service Operations Management

3. Stenberg, A. & Deleryd, M. 1999, Implementation of Statistical Process Control and process
capability studies: Requirements or free will, Total Qwlity Management, vol. 10, no. 4, pp
439-446

4. Kaynak, H. 2003, The relationship between total quality management practices and their
effects on form performance, Journal of Operations Management, vol. 2, pp 405-435