Shaw Industries Quality Improvement Deployment and Organizational Change Plan Thesis

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Thesis on Shaw Industries Quality Improvement Deployment and Organizational Change Plan Assignment

Competing in a mature, contracting industry that shrank 3.7% in 2008 with continued contraction of industry sales in 2009 (Stewart, 2009), Shaw Industries, a subsidiary of Berkshire Hathaway, relies on quality improvement, process improvement, lean manufacturing and supplier management to remain profitable. According to the latest quarterly financial statement form 10-Q Berkshire-Hathaway filed with the Securities and Exchange Commission on June 30, 2009, the company generated $2B in revenues, reporting Earnings before Interest and Taxes of $85M. Year-over-year declines for Shaw Industries are currently at 21%, with 23% reduction in revenues from A1, 2008 to Q1, 2009. Berkshire-Hathaway claims in the latest 10Q that the ongoing global recession, specifically the slow-down in residential real estate activity and tight credit has severely impacted Shaw Industries' performance. The 10-Q dated June 30, 2009 also states that there have been plant closures to reduce costs. To combat these challenges, the company is investing heavily in Six Sigma-based quality improvement programs, and has today approximately 320 Six Sigma blackbelts and greenbelts on staff. The company also has adopted lean manufacturing core concepts including benchmarking process performance (Ghosh, 1999) and has intensive efforts underway to streamline supply chain performance. The objective of integrating Six Sigma programs with supply chain management strategies is to significantly reduce operating experiences by increasing product and process quality while alleviating unnecessary costs. Shaw Industries has been effective in the integration of Six Sigma, supply chain and reverse logistics processes as part of their intensive commitment to sustainability as well (Rondinelli, Berry, 1998). The adoption of Six Sigma methodologies, supply chain integration, supplier quality management, product configuration, production management as part of their lean manufacturing strategies is generating cost reductions which the company needs.

Table of Contents


Table of Contents

Chapter One

Figure 1: Shaw Industries Organizational Structure

Figure 2: Carpet and Rug Mill Value Chain

Chapter Two

Figure 1: Production Process for Mill-based Manufacturing



Chapter One

Shaw Industries is a $4B manufacturer of carpet, carpet fiber, hardwood, laminate, ceramic tile and flooring systems for businesses. Operating over 90 production plants that produce over 3,000 combinations, styles and textures of surface flooring, many of which are build-to-order for specific business clients, the company has to contend with exceptionally complex build-to-order process workflows. Shaw Industries also markets just over 30 different brands of carpets and flooring systems, which further underscores the need for intensive supply chain management, coordination and supplier quality audits and programs. Over the last decade as the company has worked to aggressively adopt lean manufacturing strategies to minimize the constraint of wide variations in their product quality. The industry they compete in is known for its commoditization, and quality has emerged as the most potent differentiator over companies who rush carpet, flooring or maintains to market only to have them fail at customers' installations. Shaw Industries also derives the majority of its revenue through their indirect channels, which is comprised of approximately 54,000 retailers, distributors and dealers throughout North America (Stewart, 2009). As of the last fiscal quarter of 2009, the company is employees 30,000 people globally. Berkshire-Hathaway has chosen in their 10Qs filed with the Securities and Exchange Commission (SEC) to provide company-specific financial performance data and reporting relationships. Figure 1, Shaw Industries Organizational Chart, 2009, provides an overview of the structure of the top management of the company. There are roles specifically for hard surfaces, which is the product area which generates the majority of the firms' revenue and a shared leadership model of Rand Merritt, President and Vance Bell, CEO, co-owning the leadership of the company. Operations and Logistics are senior-level positions as they are crucial for the company's value chain to continually improve in terms of performance and cost reduction. Analyzing the organizational structure of Shaw Industries illustrates a deliberate strategy of ensuring critical roles for managing the value chain are integral to the decision making process of the company at a strategic level. The organizational structure in Shaw Industries is known for being flat with wider spans of authority (Rondinelli, Berry, 1998).

Figure 1: Shaw Industries Organizational Structure

A strategic view of the carpet and mill value chain is shown in Figure 2. From an enterprise compliance and quality management (ECQM) standpoint, this value chain has many areas of cost reduction and performance improvement. Operational Compliance, Sourcing and Procurement, and Supply Chain Planning all are areas where greater quality management can deliver rapid cost reductions and greater process efficiencies as well.

Figure 2: Carpet and Rug Mill Value Chain

The intersection of the organizational structure and the requirements of the industry value chain have created an organizational culture in Shaw Industries which is heavily reliant on key performance indicators (KPIs) and metrics of performance. The culture is one of exceptional accountability and measurement of results. This is illustrated by the high level of value the company places on Six Sigma blackbelts as change agents throughout their culture (Phillips-Donaldson, 2004).

The role of the Six Sigma blackbelts and greenbelts are to apply the DMAIC methodology to the areas where constraints to supply chain quality management have become the most acute and difficult to control (Mukhopadhyay, Ray, 2006). These supply chain processes include consistency of supplier audit analysis, the development of benchmarks for evaluating supplier adherence to audit requirements, and the development of specific targets for quality management. Also included is the use of DMAIC-based methodologies for refining the Non-Compliance, Correction Action (NC/CA) and Corrective Action/Preventative Action (CAPA) quality audit workflows used in evaluating and continually managing suppliers to a high level of performance. For Shaw Industries, quality is speed. The more the company can manage to quality levels that are free of aberrant or high levels of variation, the more profitable of a financial period they can generate. The NC/CA and CAPA processes are also used for the managing of the DMAIC -- based Six Sigma strategies that are aimed at increasing audit accuracy overall. The use of supplier audit data is also critically important for the redefining of mill machining and calibration of tools as well.

As Shaw Industries realized in the early 1990s that to complete effectively against purely price-driven competitors they would need to concentrate on lean manufacturing techniques to gain cost, quality and speed advantages, the company has a mature set of processes in place. The maturity of these processes can be seen in the investment in over 300 Six Sigma blackbelts and greenbelts. The process maturity of their approach to minimizing variation of constraints is also seen in how they are managing the Six Sigma methodology's use throughout their supply chains as well. The maturity levels of reporting systems is exceptional as well, as the use of analytics applications are pervasive, as the company relies on benchmark performance data to manage CAPA, NC/CA and audit management systems as well. As many manufacturers in the mill and carpet production industry rely on an organizational structure that is comparable in approach to aerospace and defense manufacturers -- namely one that has a strong Project Management Office (PMO) function. The PMO function within the mill industry has proven to be problematic for the same reasons it struggles as an organizational concept in the aerospace and defense industry, namely it has a tendency to become balkanized and fragmented over time (Mukhopadhyay, Ray, 2006). In terms of process maturity, Shaw Industries is above average for the mill and carpet production industry on the use of a PMO-based architecture. They have in fact invested in an Enterprise Resource Planning (ERP) system to specifically manage the integration of disconnected, broken PMO-based processes over time. This strategy of relying on the distributed order management, logistics and manufacturing execution system functional strengths of an ERP system to serve as the catalyst for PMO integration is common (Pellegrinelli, Garagna, 2009). Further, Shaw Industries sees the investments in ensuring a high degree of integration throughout their PMO function being essential to managing their ECQM and overall quality management strategies to attainment. This strategy and perspective also signals that Shaw Industries has achieved a high level of maturity in the areas of quality improvement and organizational change. Overcoming resistance to change specifically in the area of the POM centralization function would have also taken significant effort in the part of senior management to achieve as well. With the exceptionally high amount of Six Sigma blackbelts and greenbelts however it is clear the company's culture has shifted to being more focused on quantitative performance. The company now thrives on measured feedback to understand an appreciate how to change which processes that most need to improve.

With a strong culture focused on measurable performance and the centralization of the PMO function, there still exists the significant challenge of potentially discontinuing product lines as the recessions' effects on sales continues. The 21% drop in sales is the primary catalyst for considering discontinuing the lowest-performing product lines and saving the expenses associated with them. This decision however has many implications on how suppliers… [END OF PREVIEW] . . . READ MORE

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