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Master’s Thesis: MSc.

Logistics Author: Altaf Hussain

Declaration of Originality

This project is all my own work and has not been copied in part or in whole from any
other source except where duly acknowledged. As such, all use of previously
published work (from books, journals, magazines, internet etc.) has been
acknowledged within the main report to an item in the References or Bibliography
lists.

I also agree that an electronic copy of this project may be stored and used for the
purposes of plagiarism prevention and detection.

Copyright Acknowledgement

I acknowledge that the copyright of this project report, and any product developed as
part of the project, belong to Coventry University.

Signed: Date:

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

ACKNOWLEDGEMENT

All glories to Almighty Allah (God) who has created us with the ability to think and
curiosity to explore into different dimensions. I would like to thank my parents and my
sister for their constant, never ending and beloved support.

I would like to thank Mr. Alan Richards for being my supervisor. Without his kind,
flexible and cooperative guidance, I would never be able to produce such a highly
professional piece of work.

I would also like to thank to the Computing and Engineering department of Coventry
University which has provided me ample knowledge and expertise to explore into the
research and generated the set of skills required to produce this research. With
special thanks to Dr. Zulf Khan for his constant support throughout the MSc.
Programme.

I also owe many thanks to Alan Woodford (Warehouse Manager) of WYKO-ERIKS
for providing me the opportunity to work on their premises and gaining in-depth
knowledge of their complete logistics’ processes and spending their precious time
while completing the questionnaires or have extended any type of help in the
completion of this report.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

ABSTRACT

Producing perfect and defect free services have long been desired and it is still
considered as an important strategic objective for the companies to build market
share in a global competitive economic environment. Continuous improvement of
company operations and processes and value added service is an absolute
requirement.

Value adding capability of an organization must be synchronized with both the
internal and the external value chain. Poor adding value capability equates to waste
and this usually exist in all parts of the organization through poor time utilization,
poor use of capital, stock and human resources.

Successful re-engineering demands a total closer linkage throughout the value chain
which comprises of customer order processing, IT infrastructure, and supply chain.

The main problem of the linkage is the poor coordination between the different
functions of the supply chain and logistics. If the product groups within the
organization can be identified from raw material input to final delivery to customer
and the existing value adding capability can be determined. These elements can
then be analysed and by process tracking and improved by using structured
methods. This leads to a systematic improvement of value adding capability by
removal of all non value adding elements and will bring improvements in customer
service levels, cost reduction and profitability.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

CHAPTER-1

1.0 INTRODUCTION:

To make the services the best, we need to continually improve and develop them by
testing and implementing new ideas and approaches to service delivery. The tools
and techniques for the improvement process are many, but the whole process of
moving from an idea to successful implementation can be broken into different parts.

According to Mugglestone M. et al. (2007), the organizations must develop, test and
use a high level improvement process for all of its areas of work, which must also
incorporate the traditional improvement techniques but also draw on evidence and
experience from three domains:

The processes that organizations use for the development of new products and
services. Theory and wider concept of thinking about how design and design science
can be transferred into organizational processes. Evidence from how innovation and
creativity can be best utilised within organizations.

However, there are different tools and techniques are used to improve the areas of
work. Among them techniques KAIZEN (Continuous Improvement) and Lean
Management is widely spoken.

According to Liker (1996, p.481), lean management is defined as a philosophy when
implemented reduced the time from customer order to delivery by eliminating
sources of waste in the production flow. Hines and Taylor (2000) stated that lean is
concerned with reducing waste at all levels; it is also about changing corporate
culture. Some organizations think implementing lean is about reducing the human
resource but Moore (2001) and Convis (2001), state that lean should not lead to
redundancies.

Lean identifies the waste into the form of overproduction, waiting, transportation,
inappropriate processing, inventory, unnecessary motions and defects.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

The author tried to gain the comprehensive knowledge of the practices exercised by
the non manufacturing organizations into their logistics processes. And looked for the
areas of improvement where lean and kaizen can be applied to improve the
efficiency.

1.1 AIMS OF RESEARCH:

The research aims to gain the comprehensive knowledge of current practices used in
the logistics of non manufacturing organizations. Research will satisfy the following
goals.

1) Look into the existing problems in supplychain.

2) Implement Lean and Kaizen to improve the practices.

3) Suggest solutions to solve the problems.

1.2 OBJECTIVES OF RESEARCH:

The author set the following objectives to meet the above mentioned goals.

Objective-1:

Implement Lean and Kaizen to improve the logistics of non-manufacturing
organizations.

Explanation

This objective will fulfil the need to understand the concepts of lean and Kaizen and
their successful implementation to the logistics of non-manufacturing organizations.

Objective-2:

Examining different models to improve the logistics and creating value chain.

Explanation
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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

Looking into different models that can help in maximising the efficiency of the overall
processes and create customer focused robust supply chain.

Objective-3:

Elimination of waste internally and reducing cost.

Explanation

Reducing waste related to the inbound logistics and outbound logistics with primary
focus on reducing the cost.

Objective-4:

Examining the improved IT systems to expedite the processes.

Explanation

Suggesting and observing the IT systems used by the organizations to maximise
their efficiency and throughput.

1.3 RESEARCH JUSTIFICATION:

Lean and Kaizen in the past have been implemented in augmenting the production
process but its study to the logistics of non-production environment has never been
considered successful. Therefore, author aims to conduct research on implementing
Lean and Kaizen to the logistics of non manufacturing organizations. Following are
the main factors which actually give the motive for the research.

1.4 SELECTING LEAN AND KAIZEN AS A MAJOR AREA OF STUDY:

According to several empirical studies, Lean, Kaizen and waste management
involves identification and removal of unnecessary steps in organizational system

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

and processes. If the waste is not managed effectively, there are less possible
chances of improving the service provided to customers. Several non manufacturing
organizations inevitably fail to exploit Lean’s and Kaizen full potential to make a
significant difference. Therefore, this motivated the author to explore this area of
study as a final research thesis.

1.5 SELECTING UK AS A COUNTRY OF STUDY:

Lean was introduced as an approach with the concern of elimination of waste and
stressing on continuous improvement (CI). Lean has earned a widespread attention
over the years, which has been well documented in the literature. In United Kingdom
(UK) there are so many non-manufacturing businesses which are using Lean and
Kaizen knowingly and without knowingly. This has given author an opportunity to
explore lean and kaizen as means of identifying the areas of improvement and
identifying the waste removal techniques for the non-manufacturing businesses. The
research will provide new views about improvement techniques and effective
implementation of lean in different set of environments.

1.6 SELECTING ERIKS AS A CASE STUDY:

ERIKS group is the undisputed European market leader for industrial products and
services fulfilling the twin roles of specialist and total supplier to all segments of the
industry. ERIKS has both the forward and reverse logistics operations. But the study
only focuses on the forward logistics. Author has been given an opportunity by
ERIKS to work with its Regional Distribution Center which has provided an insight
into the different logistics processes and areas of improvement. Therefore, including
ERIKS as a case study will help in understanding the logistics’ processes and how
Lean and Kaizen can be implemented to remove waste.

1.7 RESEARCH STRUCTURE:

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

The research is divided in to nine (9) chapters. Chapters in chronological order along
with a brief outline are listed below:

Chapter-1: (Introduction)

The chapter explains about the nature and the background of the research
highlighting the objectives and basis of the research.

Chapter-2: (Literature Review)

This chapter includes the background of current literature on Lean Management and
Kaizen which is necessary to address the issues raised in the research objectives.

Chapter-3 (Conceptual Framework)

This chapter encompass the literature about various improvement models with a
reflection on their processes and implementation.

Chapter-4 (Research Design)

This chapter gives the overall view of the research design taking into account the
methodology undertaken to do primary research and explains the type of research,
questionnaire, data and tools used.

Chapter-5 (Case Study)

This chapter discusses the ERIKS (UK) as a case study representing the
organizations of similar nature. This chapter highlights about ERIKS operations and
the problems faced by the logistic department on the daily basis.

Chapter-6 (Implementation of Lean Model)

Chapter-7 (Data Results and Analysis)

Chapter-8 (Conclusion and Recommendations)

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

CHAPTER-2

2.0 CRITICAL LITERATURE REVIEW:

This chapter explains the current issues and literature on Lean Management and
Kaizen. The chapter discloses the key topics related to Lean and Kaizen and
highlighting the organizational behaviour adopting lean, waste elimination, lean as a
learning system, indicators and strategies and how to achieve lean processes.

2.1HISTORICAL BACKGROUND OF LEAN:

Lean was introduced as an approach to manufacturing whose primary aim was the
elimination of waste and stressing the need for continuous improvement. Lean has
remained the focal point of the research over the years. Some of the research
findings are ambiguous while on the other hand some studies succeeded in
providing awareness of the lean potential

According to Hines P. et al. (2004), implementation of Lean has made a great impact
both in academic and industrial sectors. It has spread into many other industry
sectors beyond the automotive industry and studies show that there has been an
ample development and ‘localisation’ of the lean concept.

According to Repenning and Sterman (2001) state that companies use lean
initiatives as a fad and conclude that there are number of tools, techniques and
technologies available to improve operational performance but despite dramatic
success in few firms most efforts to use them fail to produce significant results.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

2.1.1 ORIGIN OF LEAN:

The fierce competition imposed by mass production system during and after World
War II led the Toyota Motor Company (TMC) to a thorough study of the production
system of the American Automobile Industry. The solution offered by Toyota led to
the complete reconstruction of the company and gave birth to the introduction of an
alternative production system which is referred to as Toyota Production System
(TPS). Just In Time (JIT) philosophy was introduced in the framework of this new
production system and the value of the system was proven to the global
manufacturing industry and a great number of organizations across the globe
hastened to implement this model of production to their own production systems.

As the popularity of the system increased and more companies implemented JIT, a
third wave of research emerged in 1980s. This time the focal point of the research
was ‘Lean Manufacturing’. The term ‘Lean’ was introduced by Krafcik (1988) at that
time the leading researcher in the International Motor Vehicle Program (IMVP)
conducted at the Massachusetts Institute of Technology (MIT).

2.1.2 DEFINITION OF LEAN:

According to American Production and Inventory Control Society (APICS) dictionary
(Cox and Blackstone, 1998), Lean is defined as:

‘Lean is a philosophy of production that emphasizes the minimization of the amount
of all the resources (including time) used in various activities in the enterprise. It
involves identifying and eliminating non-value adding activities in design, production,
supply chain management, and dealing with customers. Lean producers employ
teams of multi-skilled workers at all levels of the organization and use highly flexible,
increasingly automated machines to produce volumes of products in potentially
enormous variety’.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

The term ‘Lean’ was introduced by Krafcik (1988) to refer to a manufacturing
approach that:

‘Compared to mass production it uses less of everything-half human effort in the
factory, half the manufacturing space, half the investment tools, and half the
engineering hours to develop a new product in half the time. Also it requires keeping
far less than half the needed inventory on site, results in many fewer defects, and
produces a greater and ever growing variety of products.’

2.1.3 CRITICAL ELEMENTS OF LEAN:

Ozbayrak M. et al. (2003), investigated the key implementation elements of Lean.
The elements in this context refer to tools, techniques, methodologies or practices
that can be implemented in the framework of the adoption of either JIT or Lean
Management (LM). The list of elements is given below:

• Production floor management.

• Product/Process- oriented.

• Production Planning.

• Lean implementation.

• Work-force management.

• Supply chain management.

Lean has evolved with an extensive range of tools but not all the proposed lean
enablers are necessary vital for the implementation. Therefore, the selection of lean
tools should be utilised in specific case or certain application. There are considerable
disparities dealing with the issue of the lean implementation is the failure of the
former to keep track of the ongoing lean evolution. Also there is great challenge that
other companies face adopting lean principles is that lean systems are inherently

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Master’s Thesis: MSc. Logistics Author: Altaf Hussain

knowledge intensive. Much of the knowledge is captured from highly refined systems
and processes.

2.2 HISTORICAL BACKGROUND OF KAIZEN:

The first well known and most stated proponent of Kaizen was Imai, who wrote
KAIZEN- The Key To Japan’s Competitive Success (1986). He described the
concept, core values and principles, its relation to other concepts and the practices
used in the improvement process.

Lillrank and Kano (1989) refer to Kaizen as the ‘principle of improvement and it is
used as an axiom to define other concepts.

According to Imai (1986), Kaizen is process oriented, i.e. before results can be
improved, process must be improved. But it does not necessarily mean that results
are not important but the management attention should be directed towards creating
sound processes since it is believed that good results would follow automatically.

Also, it requires the evaluation criteria which can monitor and bring attention to the
improvement process itself, while simultaneously acknowledging the outcome. The
number of suggestions, implementation and participant rates are used as prime
criteria for evaluating the improvement process in terms of employee efforts,
supervisor and first line manager support.

Second principle of Kaizen states that lasting improvements can only be achieved if
innovations are combined with an ongoing effort to maintain and improve standard
performance levels. Since it is distinctive in its focus on small improvements of work
standards. There can be no improvement where there are no standards which in
presence denote the relation between Kaizen and maintaining standard operating
procedures for all major operations.

Third principle of KAIZEN states that it is people oriented and should involve
everyone in the organization from top management to workers at the shop floor.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

According to Imai, there are three types of KAIZEN activities each with its own form
and focus in overall improvement.

1) Management oriented KAIZEN concerns the gradual improvement of systems
procedures such as planning and control, organization, decision making processes
and information systems but also to some extent the improvement of machinery and
equipment.

2) Group oriented KAIZEN is represented in Quality Control Cycles (QCC) and other
small group activities in which employees focus primarily on improving work
methods, routines and procedures.

3) Individual oriented KAIZEN is primarily focused to improve one’s own work i.e. on
the spot improvements of work methods, routines and the use of resources.

2.2.1 KAIZEN FRAMEWORK FOR CAPABILITY DEVELOPMENT:

Bessant et al. (1994) recognised the need for a Continuous Improvement (CI)
framework for capability development. It shows the key characteristics of a
successful organization’s implementation and maintenance of CI programmes.
Bessant et al.’s model shows the characteristics that an organization needs to
develop CI capability. Bessant and Caffyn (1997) illustrated their earlier model which
consists of five stages of development in the evolution of CI capability which is
shown in the Table-I below:

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

Source: Bessant and Caffyn (1997) Table-I

Stages Of Development Typical Characteristics

Problem solving random

1.Natural/Background CI No Formal Efforts or structure

Occasional burst punctuated by inactivity and
non-participation.

Dominant mode of problem solving is by
specialists.

Short term benefits.

No Strategic Impact.

Formal attempts to create and sustain CI

2. Structured CI Use of a formal problem solving process.

Use of participation.

Training in basic CI tools.

Structured idea management system.

Recognition System.

Often parallel system to operations.

Formal deployment of strategic tools.

3. Goal Oriented CI Monitoring and measuring of CI against these
goals.

In-line system.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

Responsibility from mechanisms, timings etc.
devolved to problem solving units.
4. Proactive/Empowered CI
High level of experimentation.

CI as the dominant way of life.

5. Full CI Capability Automatic capture and sharing of learning.

Everyone actively involved in innovation
process.

Incremental and radical innovation.

2.2.2 SHIFT FROM KAIZEN TO PERFORMANCE MEASUREMENT:

Kaizen and radical re-engineering are popular approaches to enhance process
performance. All the organizations adopt suitable metrics for measuring
performance. Management tasks are inherently complex and involve all details of the
process, the total database of relevant events, huge amount of data which would be
necessary to reveal the complete picture. Sometimes the management is flooded
with data or too few. Selectivity plays an important role for guiding the management
process. According to Bond T.C. (1999), the classic feedback model managers must
regulate performance by monitoring outputs and then adjusting the inputs to achieve
target rather than controlling a task by considering all the individual data elements
necessary to describe the status of the system. Therefore, when implementing
Kaizen managers must take into account the right amount and choice of data to
begin the change in the processes so that there must not be a mismatch between
intentions and outcomes.

2.2.3 CORE THREADS OF PERFORMANCE MEASUREMENT:

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Master’s Thesis: MSc. Logistics Author: Altaf Hussain

According to Chang R. (1995), the core threads that weave through the quality
performance measurement are based on quality award criteria and certification
guidelines and are listed below:

Intense customer focus: Product and service characteristics which add some value
to the customer and increases customer reliability and satisfaction is the basis for the
organization’s quality improvement system

Senior Management Involvement: Senior management must be personally
involved when establishing and communicating performance measures and
priorities. Because senior management instils the performance measurement
concept, reinforce customer focus and support workforce participation.

Deployment of Strategic Objectives: Employees at all levels must understand their
specific role and responsibilities for developing and implementing strategies and
plans for achieving quality improvement goals. Because objectives and quality
improvement goals must be linked and deployed in a systematic fashion to all
functional work groups.

Continuous Learning and Development: Investment for workforce learning and
development is important ingredient to acquire the organization’s performance
improvement goals.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

2.2.4 Conclusion:

Improvement should be in corporate and certainly central to different types of
management techniques such as JIT, TQM and BPR. According to Chang R. (1995),
Changes in the processes can be continuous and discontinuous. Improvement can
be termed as small incremental change (Kaizen) or innovative step change (Process
Re-Engineering).

Kaizen and lean are characterised by workers on the shop floor identifying problems
and processing solutions. Small scale tuning of system is likely to be low cost,
generated from an intimate knowledge of a small part of the system. Progress is
likely to be largely outside the control of management who are not the sponsors of
change but only play at most a supporting role but management must act as key to
encourage improvement and not leave things to chance.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

CHAPTER-3

3.0 CONCEPTUAL FRAMEWORK:

As according to Grunberg T. (2003), there is a range of methodologies and
techniques to improve the effectiveness and efficiency of the operational activity.
Methods are different from each other the way improvement is achieved and
implemented. This chapter includes the literature about different improvement
models that can be used to implement Lean and Kaizen. It unfolds the key topics
related to the implementation of Lean and Kaizen in organizations. As there is a
range of methodologies and techniques aimed at improving the effectiveness and
efficiency of organizational processes. Also, it discusses the assessment and
performance management of the organization after the implementation of Lean. The
following discussion will look at different improvement models with their aims and
implementation processes are discussed.

3.1 Background of Improvement Models:

It is quite significant from the past practices that efforts to improve the processes of
organizations have been important since the dawn of the industrial era. The first well
known documented practitioners in the area of process improvement were Adam
Smith (1776), Eli Whitney (1800), Baggage (1832), Frank B. and Lillian Gilberth
(1900), Taylor (1903) and Henry Ford (1913).

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

3.2 Lean Extended Enterprise Reference Model (LEERM):

3.2.1 Introduction to LEERM:

The Lean Extended Enterprise Reference Model (LEERM) is a structured model for
assisting companies, their customers, and suppliers in transforming to total value
stream conversion of Lean. It provides a structured methodology for creating a
customer-centric organization followed by aligned execution to increase customer
value.

LEERM is shown in the Figure 3.1 and the architecture of LEERM has four layers
which are referred to as Panels of Value Stream Integration as illustrated in the
Figure 3.2 below

Figure 3.1 Lean Extended Enterprise Reference Model (LEERM)

Source: Burton, Terence T. (2003) p-29

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

Figure 3.2 LEERM Panels of Value Stream Integration

Source: Burton, Terence T. (2003) p-29

Each of the panels is described in more details as under:

3.2.1.1 Strategic Journey Panel:

This panel contains the seven fundamental building blocks that the top executive
management must incorporate in their organization if they want to achieve the Lean
Extended Enterprise improvement initiative:

Lean Extended Enterprise Vision/Leadership: This is the main brain and drive
behind any strategic improvement initiative. This involves aligning strategy,
deployment and execution. It mentors the organization through the correct
improvement pathways, drives cultural and behavioural change, and achieves
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Master’s Thesis: MSc. Logistics Author: Altaf Hussain

financial results. Without this block, the improvement process is like just an ordinary
‘Flavour-of-the-month’ improvement program.

Lean Extended Enterprise Strategy: This block relates to thorough examination
and assessment of current value stream business processes and performance,
bench-marking of best in class performance, and recognition of consensus on gaps
between current and desired value stream performance from an extended enterprise
perspective.

Total Value Stream Perspective: This block recognizes multiple value streams,
value stream mapping, qualification and root cause analysis and ‘chunking out’ of
high impact, manageable improvement opportunities. This element helps the
organization to avoid the hardcore improvement initiatives.

Expanded Basic Principles Set: This block is the notion of integrated
methodologies and tools that enable LEERM. The basic purpose of LEERM is that
organizations must try to adopt all the improvement techniques because they do not
have the luxury of islands of isolated improvement.

Infrastructure and Expectations: It is related to establishing the values and basic
rules of conduct and behaviour by establishing a sense of urgency and recognition of
the need to change. This element also promotes the organizational values required
for success, such as trust, mutual respect, empowerment, teaming practices,
awareness/communication, recognition and rewards alignment, and other
behavioural adjustments.

Lean Extended Enterprise Methodology and Tools: This block involves education
via certification and deployment of an expanded arsenal of tools that address the
broader spectrum of requirements encountered in a collaborative total value stream
setting. The total value stream consists of issues that require a much broader
spectrum of improvement methodologies than the five basic principles of Lean.

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Master’s Thesis: MSc. Logistics Author: Altaf Hussain

Lean Extended Enterprise Validation: It includes the correct metrics to align
improvement initiatives and link daily activities to LEERM improvement strategy. It is
also linked with verification of success by linking value stream performance to
financial performance. Validation closes the loop between improvement strategy and
improvement outcomes.

3.2.1.2 Best Practices and Principle Panel:

This panel describes the best practices and principles of Lean that can be applied
across the complete value stream and it expands upon the five basic principles.
Following are the five basic principles:

• Leadership

• Customer market focus.

• Uniform improvement infrastructure.

• Value stream processes.

• Organizational Learning.

3.2.1.3 Implementation Panel:

This panel is like Plan-Deploy-Execute model of improvement. There is no sequential
or left-or-right model with an end. Organizations need to move around and into the
right circle and pursue the correct activities in the cycle. This is the flexibility of the
model that the organizations can go back into the deploy and plan stages from the
execution stage and this is the characteristic of the model that makes it interactive
and continuous as CI.

3.2.1.4 Methodologies, Tools, and Enabling Technologies Panel:

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Master’s Thesis: MSc. Logistics Author: Altaf Hussain

This panel incorporates the KAIZEN, Lean, Six Sigma, ERP and other technologies
to acquire the bigger improvement of the Lean Extended Enterprise. The core of this
panel comprises of Kaizen, Lean and Six sigma methodologies providing the
guidance on the types of problems applicable to these tools. The outer layer
recognises the importance of leadership and innovation, knowledge of the tools,
focus of improvement, teaming and employee involvement and closed-loop
performance at the micro level.

The Lean Extended Enterprise phenomenon can be applied onto the service
organizations as well. The elements of LEERM can be re-adjusted to any processes
be it any type of service organization ranging from manufacturer of commercial
planes, a process industry, a bank, a health care institution, a retail or
distribution/logistics business etc.

The LEERM is basically based on the premise of value stream integration. In order to
achieve this, the organizations must develop a concrete strategy for their strategic
improvement initiatives. It must build the right infrastructure through properly
coordinated activities and acquiring comprehensive knowledge of best practices and
principles of a Lean Extended Enterprise. The most important thought is that it must
understand the methodologies, tools, and enabling technologies in order to apply the
right solutions to the best improvement opportunities.

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Master’s Thesis: MSc. Logistics Author: Altaf Hussain

3.3 Six Sigma:

3.3.1 Introduction:

The origins of Six Sigma according to Raisinghani S.M. (2005) date back to the
manufacturing arena in the early 1980s by Motorola in revolutionizing the scope and
use of quality systems. Six sigma covers the techniques of problem solving with the
focus on optimization and cultural change.

According to Antony J. (2006), the term sigma is a measure that indicates the
deviation in the performance characteristic of a service from its mean performance.
The main focal point of six sigma strategy is to reduce variation within the tolerance
or specification limits of service performance characteristics. Also it focuses to
reduce cost by reducing the variability in the processes which leads to decreased
defects. Six sigma is also considered as a method to reduce waste, increasing
customer satisfaction and improving financial results. It adopts the use of statistical
methods which enable the organizations to understand the fluctuations in a process,
which allow it to pinpoint the cause of the problem.

According to Näslund D. (2008) Six Sigma is based on the DMAIC cycle (define,
measure, analyze, improve, and control) as shown in figure 3.3. This includes the
definition of the problem (D), measurement (M) of the problem (i.e. defects which are
responsible for the problem), data analysis (A) to discover the root cause of the
problem, improvement (I) of processes to remove the root causes of defects and
controlling (C) or monitoring processes to prevent perennial problem.

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Figure 3.3 Six Sigma Methodology

Source: Antony J. (2006), “Six Sigma for Service Processes”. Business
Process Management Journal. Vol. 12 No. 2, P-239

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Master’s Thesis: MSc. Logistics Author: Altaf Hussain

According Antony J. (2006), following are the different phases of Six Sigma;

3.3.1.1 Define Phase:

Following are the steps involved in the define phase:

• Define the problem accurately and specifically.

• Identify stakeholders.

• Understand the link between the problem at hand and the critically of the
problem from the perspective of the customers.

• Conducting of the simple mapping of the processes both up- and –
downstream to identify the problem.

• Establish the process inputs, outputs and various controls of the processes.

• Forming a Six sigma project charter which clearly defines the roles of the
people and their responsibilities for the project. Defining the resource required
for the project and allowed time-frame for the project at hand. The charter
must also reveal the scope of the project, its boundaries and the key benefits
to internal and external customers.

• Identifying the project sponsor and stakeholders and determine whether this
project is worth an effort using cost benefit analysis.

• Identify all customers both internal and external and justify how this problem is
linked to customer satisfaction.

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Master’s Thesis: MSc. Logistics Author: Altaf Hussain

3.3.1.2 Measure Phase:

Measure phase encompasses the following steps:

• Identifying the current performance of the service process.

• Decide what to measure (critical to quality characteristic) and how to measure.

• Establish a simple measurement system study (if applicable).

• Determine how well our process is performing compared to others through
benchmarking exercise.

• Identify the strengths and weaknesses and determine the gaps of
improvement.

3.3.1.3 Analysis Phase:

Following are the points must be looked at during the phase:

• Uncover the root causes of defects in processes.

• Understand the root causes of variability which lead to defects and prioritise
them for further investigation.

• Understand the nature of data and the distribution or patterns of data.

• Determine the key service process variables that may be linked to defects.

• Financial quantification of the improvement opportunity (i.e. estimate of
potential financial benefits).

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3.3.1.4 Improve Phase:

The improvement phase of the methodology covers the following steps:

• Develop potential solutions to fix the problems and prevent them from
recurring.

• Evaluate the impact of each potential solution using a criteria-decision matrix.
Solutions that have a high impact on customer satisfaction and bottom line
savings to the organization need to be examined to determine how much time,
effort and capital will be needed to expand for implementation.

• Assess risk associated with potential solutions.

• Validate improvement (i.e. reduce defect rate or improve sigma quality level of
the process) by pilot studies.

• Re-Evaluate the impact of chosen potential solution.

3.3.1.5 Control Phase:

The Control phase of the methodology comprise of the following steps:

• Develop corrective actions to sustain the improved level of service process
performance.

• Develop new standards and procedures to ensure long-term gains.

• Implement process control plans and determine the capability of the process.

• Identify a process owner and establish his/her role.

• Verify benefits, cost savings/avoidance.

• Document the new methods.

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• Close project, finalise documentation and share key lessons learned from the
project.

• Publish the result internally (monthly bulletins) or externally (conferences or
journals) and recognise the contribution made by the team members.

But the question lies if the Six Sigma paradigm can be implemented in the service
orientated organization. As Cho R.B. (2007), indicated that Six sigma is a powerful
business strategy that results in dramatic reduction in defects, errors, or mistakes in
service processes. According to previous researches, Six sigma is considered to
accelerate improvement in service quality by reducing the process variation and
eliminating non-value added steps.

However, the concept of Six Sigma was adopted by the manufacturing organizations
for the quality and process improvement but the service organizations are adopting
the methodology exponentially. The implementation of Six Sigma strategy in the
service processes is to understand how defects occur and then to devise process
improvements to reduce the occurrence of the defects resulting in improved
customer experience and enhanced customer satisfaction.

3.3.2 Benefits of Using Six Sigma:

According to Cho R. B. (2005), service organizations adopting Six Sigma business
strategy gain the following benefits:

• Improved cross functional teamwork throughout the entire organization.

• Transformation of the organizational culture from fire-fighting to fire-prevention
mode.

• Increased employee morale.

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• Reduced number of non-value added steps in critical business processes
through systematic elimination, leading to faster delivery of service.

• Reduced cost of poor quality (cost associated with late delivery, customer
complaints, misdirected problem solving, etc.)

• Increased awareness of various problem solving tools and techniques, leading
to greater job satisfaction for employees.

• Improved consistency level of service through systematic reduction of
variability in processes.

• Effective management decisions due to reliance on data and facts rather than
assumptions and instincts.

• Transformation of organizational culture from being reactive to proactive
thinking or mindset.

• Efficient and reliable internal operations, leading to greater market share and
satisfied shareholders.

3.3.3 Drawbacks of Using Six Sigma:

Most of the industry experts give the reason that service organizations are less
interested to adopt Six sigma is the view of it as a manufacturing solution. Also the
service organizations do not need many of the tools and techniques of the Six sigma
tool box. Also on the other hand, it requires huge training cost and training the most
talented people in an organization and converting them into the ‘change agents’.

3.3.4 Limitations of Using Six Sigma:

According to Antony J. (2006), like every other quality improvement techniques, it
has its own limitations. Some of the limitations identified are stated as under:

In some scenarios, the frustration sets in as the solutions driven by the data are
expensive and only a small part of the solution is implemented at the end.
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Sometimes the availability of quality data especially in processes where no data is
available to begin with.

According to Antony J. (2006), the prioritization of projects in many service-oriented
companies is still based on pure subjective judgement. Very few tools are available
for prioritising projects although selecting the right projects is one of the critical
success factors of its implementation.

The statistical definition of Six sigma is 3.4 defects or failures per million
opportunities. In the service processes, a defect may be defined as anything which
does not meet customers’ expectations or needs. It is quite not logical to assume
that all defects are equally good when calculating the sigma capability level of a
process.

Owing to dynamic market demands, the characteristics to quality (CTQ) of today
would not necessarily be a meaningful for tomorrow. CTQs should e critically
examined all times and refined as necessary.

The start-up cost for institutionalising Six sigma into a corporate culture can be a
significant investment. This particular feature would discourage many small and
medium size enterprises from the introduction, development and implementation of
Six sigma.

If organizations decide to implement Six Sigma, they must need to be aware of some
key risks that have to be managed; including focus, organization, culture,
capabilities, resources, training, projects and people. Its implementation all too fail
easily for so many reasons. Such as the lack of obvious management support
compromising its project team’s authority leading to their inability to undertake
necessary activities. Similarly, a lack of co-ordination can result is wasted time and
effort as team follow interesting projects that have little relevance to business needs.
Also, how an organization reacts to the data that is generated by a Six Sigma project
can be very disappointing and so the people are unlikely to co-operate unless they
feel assured by the senior management that any findings will only be used to help
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the company move forward and not be used to beat them or departments over the
head with.

3.4 Assessing Changes and Performance Management:

Kaizen and Lean Management are popular approaches to enhance process
performance. All the organizations adopt a methodology for measuring performance.

According to Bond T.C. (1999), management tasks are complex in nature and the
number of states necessary to describe all possible futures and the corresponding
range of decisions that could be taken are limitless. In order to get the details of a
process requires the manager to access the total database of relevant events, an
enormous wealth of data, which uncovers the overall picture.

Performance measures (PMs) are there to give a mechanism for co-coordinating
process improvement policies developed by senior management. However, the profit
as the only performance measure is not acceptable because it encourages short-
termism. It is important that performance measures reinforce activity that is in the
best interest of the organization. Performance measures must be in accordance with
the organization strategy.

3.4.1Significance of a Performance Measurement System:

According to Bhasin S. (2006), several factors have contributed to the debate
concerning performance measurement systems; the literature indicates that:

• Traditional accounting systems allocated overheads on the basis of direct
labor.

• The increased level of global competition concentrating on service, flexibility,
customization and innovation.

• Varying external demands whereby customers expect both high levels of
service and that firms operate in identifiable ways.

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• Traditional metrics have not worked and the major shortages came into view
such as:

• Traditional accounting measures are not suited for strategic decisions.

• Traditional metrics are historical and hard to correlate.

• They provide little information on the root problems.

• The connection between financial and non-financial measure is fragile.

• Little attention is paid to cross-functional processes as opposed to functional
ones.

• Intangible assets are awarded modest attention.

• They largely ignore value creation.

• Often there are too many measures.

• They encourage managers to minimize the variances rather than actively
seeking to improve continually.

• Very rarely can we aggregate from operational to strategic levels.

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3.4.2 Relevance of Performance Measures to Lean Management:

There are so many guidelines those organizations need to contemplate in their
efforts to implement an effective performance measurement system. Most of the time
organizations use generic measures with little consideration of their relevance. The
biggest challenge is selecting the right measure for the appropriate level of the
organization.

There are three classes of performance measures. The bottom class resembles the
traditional measures concentrating on finance whereas the middle level has the more
balanced view. The highest level looks for casual relationships across the
organization. Accordingly, organizations need to adopt measures that facilitate
balancing external pressures, i.e. customer satisfaction, in conjunction with internal
pressures i.e. employee satisfaction. If seen differently, the internal measure may
intimate that a company is performing well but on the other side external measures
show poor performance.

Companies need to understand how key performance measure can guide and drive
an organization processes towards superior results. As lean have the following
benefits to offer:

• Shorter cycle time;

• Shorter lead times;

• Lower WIP (Work in Process).

• Faster Response.

• Lower cost.

• Greater Production Flexibility.

• Higher Quality.

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• Better customer service.

• Higher revenue.

• Higher throughput.

• Increased profit.

Maskell and Baggaley (2004), emphasized on the need to realign the financial goals
with those that lean attempts to accomplish. They focus on the need to measure
financial progress from a perspective of relevant business issues and the real cost
instead of traditional standard cost methods. Performance measures should be
chosen enabling an organisation to gauge whether progress is being made against
targets and check points (milestones).

Organizations implementing lean must deploy early warning systems. The
milestones can indicate either the progress is being made or signal that the problems
need to be solved.

As lean is viewed as a process focused initiative that makes it fundamental for the
lean expedition to have periodic appraisals. Variation in time and quantity is found in
every process from supply chain demand amplification to the dimensional variation. It
is the greatest adversary of lean.

3.4.3 Different Approaches for the Assessment of Lean:

3.4.3.1 Balanced Scorecard:

According to Bhasin S. (2006), more than 60 percent of organizations use a
balanced score card. The balanced score card utilises 15-20 measures in four
dimensions:

1. Customer;

2. Internal;

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3. Innovation and learning along with; and

4. Financial.

Bhasin S. (2005) referenced Standard and Davis (2000) that the best measure to
track lean progress is total product cycle time that can be accommodated in a
scorecard approach. The related benefits include shorter lead time, greater flexibility,
lower inventory, better customer service and higher revenues.

The key reason to measuring the success of Lean using only one time dimension
may be misleading; short-term corporate success, i.e. sales and cash position, may
alter during the next year.

3.4.3.1.1 Draw backs of Balanced Scorecard:

The balanced score card is incomplete, since it fails to:

• Emphasise sufficiently the contributions of employees and suppliers make
towards assisting an organization to achieve its objectives;

• Recognize the role of the community in monitoring the environment in which
the company works;

• Identify performance measures to assess stakeholders contributions; and

• Distinguish between means and ends which is not very well defined; there
exist no clear provision for very long-term measures.

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Coventry University
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3.4.3.2 Dynamic Multi-Dimensional Performance (DMP) Model:

The Dynamic Multi-Dimensional Performance (DMP) framework has different
characteristics which differentiates it from other frameworks. A positive point of this
model is its multi-dimensional perspective, which offers a more comprehensive view
of what organizational success means. The DMP has five major success dimensions
which are;

1. Financial;

2. Market;

3. Process;

4. People; and

5. Future.

The DMP framework gives an opportunity to introspect an organization’s
performance in multiple time horizons. The ‘financial’ represents the very short-term,
‘future’ looks at the very long term, ‘people’ dimension acknowledges the critical
roles of multiple stake holders and addresses a major limitation of the balanced
score card. Also, it has the flexibility that it can be implemented in different
organizations in different industries.

The DMP introspect various research streams, such as corporate entrepreneurship,
strategy, process, product development, marketing, economics and finance. It builds
around the balanced score card in identifying the importance of establishing cause-
and-effect relationships; if improved operational performance fails to improve
financial performance, this will indicate that the chain of cause-and-effect has not
been established correctly and needs review.

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Coventry University
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3.5 Conclusion:

The LEERM is defined and the context that leads to its development described. In
near future more organizations will be using the LEERM paradigm. It relies on
advanced information and communication technology but is not dependent on
significant technological development. The primary challenge to the effective
realization of the LEERM is management practice and organizational development.

According to Antony J. (2006), on the other hand Six sigma is a business strategy
and a systematic methodology which leads to breakthrough in profitability through
leaping gains in service quality, productivity and performance. At present it has been
considered as a strategic approach to achieve excellence in operations and service
performance through the effective utilization of statistical and non-statistical tools and
techniques.

Performance measurement system has been developed to interact with a wider
environment. There are two fundamental dimensions to this environment. The first
one is the internal-that is the organization and the second is the external one-that is
the market within which the organization competes.

Two performance measurement methods has been discussed in the above context
which have their own pros and cons. Balanced score card and DPM are adopted in
different sets of environments where balanced score card takes account of customer,
internal, financial, innovation and learning perspective but whereas the Dynamic
Multi-Dimensional Performance (DMP) model focuses on financial measures
symbolizing the approach to the organizational success, customer/ market measure,
process measure, people development measure and preparing for the future
measures.

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Coventry University
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CHAPTER-4

RESEARCH DESIGN

4.0 Introduction:

This chapter explains the methodology undertaken to do primary research. It
explains the type of research, questionnaire, data and tools used. It justifies the way
the author has reached the target respondents, and ensured validity and reliability of
the research. Author has used different diagrams and flow charts to elaborate the
activities as carried out during the process.

4.1Research Design:

According to Bryman A. and Bell E. (2003);

“A research design provides a framework for the collection and analysis of data. A
choice of research design reflects about the priority being given to a range of
dimensions of the research process”.

The dimensions include the importance attached to:

• Expressing casual connections between variables.

• Generalizing to larger groups of individuals than those actually forming part of
the investigation.

• Understanding behaviour and the meaning of that behaviour in its specific
social context.

• Temporary appreciation of social phenomena and their interconnections.

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Research design can be associated with different kind of research methods.
Research method according to Bryman A. et al. (2003) as;

“A research method is simply a technique for collecting data. It can involve a specific
instrument, such as a set completion questionnaire or a structured interview
schedule, or participant observation whereby the researcher listen to and watches
others.”

4.2 Selecting the Topic:

Coombes (2001) believes that selection of a topic for the research needs a careful
attention and consideration. Even though author had a major study area in his mind
prior to the start of the research (i.e. Lean Management and Kaizen for automobile
sector), but due to the hindrances in gaining the access to the information and to the
industry he has adopted to do a research based on a case study related to the
implementation of Lean and Kaizen to the logistics operation of a non-manufacturing
organization. He has worked diligently to narrow down the research area, which
should be measureable and achievable. O’Leary (2004) proposed the model helping
him in achieving the target showed in figure 4.1 as under;

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

Figure 4.1 Getting Your Methodology Design on Target

Source: O’Leary (2004, p.89). The Essential Guide to Doing Research, Sage
Publication Ltd. London

4.3 Type of Research:

The author has adopted to conduct the qualitative research based on the case study
approach. According to Bryman A. and Bell E. (2007), some of the best-known
studies and management research are based on this kind of design. A case study
can be:

• A Single organization

• A single location such as factory, production site, or office building.

• A Person.

• A Single event.

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The most common association of the term ‘case’ is associated with a location, such
as a work place or organization. The case focuses upon the intensive examination of
the setting. It is best possible to associate the case study design with the qualitative
research. It is true that exponents of the case study design often favour qualitative
methods, such as participant observation and unstructured interviewing; these
methods are considered as instrumental in the generation of an intensive, detailed
examination of the case. Knights and McCabe (1997) suggest that the case study
provides a vehicle through which several qualitative methods can be combined,
thereby avoiding too great a reliance on one single approach.

4.3.1 Types of Cases:

Sometimes it is useful to consider a distinction between different types of case that is
sometimes made by writers. Yin (2003) distinguishes the following types.

• The critical case: In this stance the researcher has a clearly specified
hypothesis, and a case is often chosen on the grounds that it will allow a
better understanding of the circumstances in which the hypothesis will and will
not hold.

• The unique case: The unique or extreme case is, as Yin observes, a
common focus in clinical studies.

• The revelatory case: The basis for the revelatory case exists when an
investigator has an opportunity to observe and analyse a phenomenon
previously inaccessible to scientific investigation. Much qualitative case study
research that is carried out with a predominantly inductive approach to theory
treats single case studies as broadly ‘revelatory’.

• The representative or typical case: It seeks to explore a case that
exemplifies an everyday situation or form of organization.

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• The longitudinal case: This type of case is concerned with how a situation
changes over time.

4.4 Credibility of Research:

According to Sunders M. et al. (2003), the credibility of research findings because
the scientific methodology needs to be seen for what it truly is and reducing the
possibility of getting the answer wrong which means the attention has to be paid to
two specific emphases on research design:

Reliability: Reliability can be assessed by posing the following three questions;

Will the measure yield the same results on other occasions?

Will similar observations be reached by other observers?

Is there transparency in how sense was made from the raw data?

Threats to Reliability:

Robson (2002) forces that there are four types of threats to reliability, the first is
subject or participant error which can be described by an example such as; if the
study is about the degree of enthusiasm employees have for their work and their
employer it may be possible that the questionnaire completed at different times of the
week which may produce different results. The second may be subject or participant
bias such as the employees will say what their bosses wanted them to say. The third
one is the observer error and the last one is the observer bias.

Validity: It is concerned with whether the findings are really about what they appear
to be about.

Therefore, author in the context of the above stated threats has tried to avoid the
happening of both threats in obtaining the data from the interviews and
questionnaires.
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4.5 Type of Data:

To carry out the reach process and make final conclusions, author has used two
types of data. I) Primary Data. II) Secondary Data.

Primary data consists of survey questionnaire (a mixture of structured and
unstructured questions). And secondary data consists of books, internet, library
services and journals etc.

4.6 Sampling:

There are different sampling methods which author could have used to carry out the
research. For an effective sampling it is mandatory to define the Elementary
Sampling Unit carefully.

4.6.1 Elementary Sampling Unit (ESU):

Baker (2003) defines sampling unit (sometimes called an elementary sampling unit
or ESU) as a specific individual or object that is to be considered in the survey.
According to this definition the ESU for the research are the individuals who were
working for ERIKS.

4.6.2 Sampling Type:

The sampling technique which the author used to carry out the research is ‘Multi-
Stage Cluster Sampling’ which is according to Bryman A. and Bell E. (2007) is
defined as ‘The units of population are divided into groups which in turn are known
as clusters’. The author has chosen to do the research based on the case study of
the single organization generally representing the situation of the organizations of the
similar nature. Therefore, the clusters of the sample are related to the employees
working for different departments within logistics.

4.6.3 Sampling Size:

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According to the ESU, author has defined the population evenly throughout the
whole organization within different departments involved in the logistics chain. Author
has used the email to reach the whole population by sending the questionnaire in the
email to the department heads.

4.7 Research Tool:

O’Leary (2004) defines the research tools as “the device a researcher uses to help
him/her collect the data, i.e. questionnaire, observation checklists, interviews
schedules etc.” The author has used the combination of three tools for the purpose
of acquiring the primary data:

I) Questionnaires.
II) Telephonic discussion.
III) Face-to-face interviews.

These tools have been applied in such a way that they mutually support each other
and diminish the chances of hindrances involved in each one separately.

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Coventry University
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4.7.1 Questionnaires:

Questionnaires are the true picture of about the area of interest that researcher
wants to know. Research questions are very important and no research questions or
poorly formulated questions lead to a poor research. If not specified clearly, there is
a risk that the research will be unfocused. According to Bryman A. and Bell E. (2007)
stated that research questions are crucial because they will;

• Guide the literature search;
• Guide decisions about the kind of research design to employ;
• Guide decisions about what data to collect and from whom;
• Guide analysis of the data;
• Guide writing up of the data;
• Stop going off in unnecessary directions.

An example of a filled questionnaire is attached in the Appendix. The questionnaire
is a mixture of structured and non-structured questions.

4.7.2 Telephonic Discussion:

The use of the telephone in the research process was for the following purposes:

• To introduce research and develop some sort of rapport.

• To make it ethical by asking first on telephone and then sending emails for the
formal permission.

• To speed up the process of filling the questionnaire.

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Coventry University
Master’s Thesis: MSc. Logistics Author: Altaf Hussain

4.7.3 Face-to-Face Interview:

Interview is the prominent data collection strategy in both the quantitative and
qualitative research. The author has used the structured interview technique which
according to Bryman A. et al. (2007) is defined as:

“It entails the administration of an interview schedule by an interviewer. The aim is
for all interviewees to be given exactly the same context of questioning which implies
that each respondent receives exactly the same interview stimulus as any other”.

The objective of this type of interviewing is to ensure that interviewees’ replies can
be aggregated and it can be achieved if the replies are in response to identical cues.

4.7.3.1 Issues related to conducting Interviews:

Bryman A. et al. (2007) illustrated some of the issues related to conducting
structured interviews which are stated as under;

Know the Schedule: It’s the interviewer responsibility to be fully conversant with the
schedule. Because interviewing can be stressful for interviewers it can cause
interviewers to get flustered and miss questions out or ask the wrong questions.

Introducing the Research: This facet of interviewing research is of particular
importance because the prospective respondents have to be provided with a credible
rationale for the research in which they are being asked to participate and for giving
up their valuable time.

Rapport: This aspect of interviewing focuses on establishing a quick relationship
with the interviewer that encourages the participant to want to participate in and
persist with the interview. This is important because some respondent may initially
agree to be interviewed but then decide to terminate their participation because of
the length of time the interview is taking or perhaps because of the nature of the
questions being asked.

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Asking Questions: The objective of the structured interview is to ensure that each
respondent is asked exactly the same questions. Because variation in the ways the
questions are asked is a potential source of error. In structured interview, the
likelihood of this happening is lesser but cannot guarantee that this will not occur.

Recording Answers: An identical caution for identical reasons can be registered in
connection with the recording of answers by interviewers, who should write down
respondents’ replies as exactly as possible.

Clear Instruction: This stage describe that interviewers need instructions about their
progress through an interview schedule.

Question Order: Besides warning interviewers about the importance of not varying
the asking questions and the recording of the answers, they should also be
cautioned about the importance of keeping to the order of asking questions,
because, changing the questions order can result in certain questions being
accidentally omitted.

Probing: It is related to the interviews where the respondents need help with their
answers. It might be the case that where the interviewee does not understand
question and require further information or to clear from what they are struggling to
provide an adequate answer.

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4.8 Research Limitations:

The main research limitations are given as under;

1) Due to the short period of time and accessibility, author has only managed to
gain access to only one organization in UK which is included in the form of
case study in the later chapter.

2) Due to the lack of time, author was not able to implement the LEERM model
physically and measure the performance level after the implementation. This
can possibly be another area of research and can be useful for the
organizations of the similar nature.

3) Due to the short time period and less accessibility to the organization of the
similar nature, the data obtained by the author from one organization cannot
surely be the true picture for the other organization of the similar nature,
because each organization has a different set of logistics’ operations.

4) Author wanted to study the warehouse information management system used
by ERIKS, but due to the shortage of time and less accessibility to the data
from the information technology department of ERIKS, author was not able to
achieve the final objective.

4.9 Conclusion:

The overall methodology is illustrated by the following steps in Figure 4.2:

The first initial contact was done by telephone (Step-1) to gain permission to initiate
the distribution of the questionnaires. The questionnaires were sent to the
department heads (Step-2) where they have done copies and distributed to the
employees working within the logistics and warehouse section. Collection of
questionnaires (Step-3). Contact on telephone to gain permission to conduct face-to-

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face interviews (Step-4). Aggregation of information and data collected through
questionnaires and interviews. (Step-5)

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Figure 4.2: Steps taken to collect information from the respondents

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Coventry University
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Chapter-5:

5.0 ERIKS-UK: A Case Study:

In this case ERIKS-UK has been represented as model for implementing the Lean
and Kaizen. This case study is going to provide the inner view of all the logistics
processes involved and the major problems often faced by the organization of similar
nature. This chapter will provide the detail structure of ERIKS logistics activities
involving different departments. And the later chapter will discuss the implementation
of Lean Extended Enterprise Reference Model (LEERM) to the logistics processes of
ERIKS.

5.1 Company Overview:

ERIKS group is the undisputed European market leader for industrial products and
services and it aspires itself to be in the top three suppliers for all the core activities
in the regional branches offering a wide range of quality mechanical engineering
components.

The activities of ERIKS group consists of the purchasing, storage, processing, sale
and distribution of an extensive range of high quality mechanical engineering
components along with highly developed technical and logistics services. Within
ERIKS there is a wide and in-depth knowledge of market developments, product
properties, product applications, processing of products, logistics, and a compatible
modern infrastructure.

ERIKS offer over 500,000 products to more than 60,000 industrial customers. ERIKS
make more than 1.3 million shipments to companies including the chemical, food,
machine and equipment construction, semi-conductor, petrochemical, construction,
offshore, metal, agriculture, energy and transport sector.

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ERIKS value chain consists of 500 qualified manufacturers, suppliers and ERIKS
believe in integration with their suppliers also educating their suppliers on extensive
technical and logistics knowledge also sourcing new producers and testing of
existing producers in order to provide the most innovative and competitive products.
It has independent brand policy by having good strategic agreements and good
conditions with the brand manufacturers passing the benefits to the customers.
ERIKS share in the market with respect to different segments is represented as
follows in figure 5.1:

Figure 5.1 ERIKS Different Market Segments

Source: ERIKS Company Profile

ERIKS has believed in managing knowledge by establishing knowledge centers
wherever ERIKS is represented in the world. These knowledge centers are
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responsible for stock keeping, product management, engineering and purchasing for
each core activity shown in the above diagram. ERIKS has integrated explicit
knowledge in all areas of its operations in different forms such as:

Market Know-How: Knowledge of the demand side of the market and the
supply side enables the company to offer new products and services and
allow entering new markets proactive and timely.

Product Know-How: ERIKS possess in-depth knowledge of products and
their properties and convey this knowledge in different types of technical
documentation.

Application Know-How: ERIKS believe in understanding current and future
applications (of their customers) and converting them into use of the right
products. Translating issues facing customer into new products. Brainstorming
sessions with customers on engineering the design and maintenance of new
products and systems (R&D).

Product-Processing Know-How: ERIKS has a strong customer driven
product portfolio and it ensures the availability of facilities (either in-house or
through third parties) to adapt existing products to the specifications. It also
offers maintenance facilities and services for the performance of maintenance
on components and systems.

Logistics Know-How: ERIKS analyse and streamline logistics streams and
develop and ensure the availability of logistics concepts tailored to fit the
customer.

The cost involved in the above activities involves the cost of technical services for
extensive engineering and processing facilities available to be able to deliver every
conceivable solution within the entire range of mechanical engineering components.
Also there are other cost involved in the form of procurement cost which accounts for
the total cost of purchasing technical products. The level of procurement costs

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(administration and logistic costs) depends upon the composition of the product
package and the type of environment (MRO or OEM). Cost also involves the cost of
complete handling of the supply of technical components via an extensive range of
VMI (Vendor Managed Inventory) solutions, complete with barcode scanning.

ERIKS focus on tailored design, manufacture and installation of the mechanical
equipments, providing integrated solutions, maintenance of installations and stock of
customized replacement components.

5.2 ERIKS (UK) LOGISTICS’ STRUCTURE:

ERIKS-UK has a Regional Distribution Center (RDC) and the complete distribution is
carried out from the RDC. It has several strategic business units across nationwide
responsible for the distribution of different kind of industrial supplies to different
customer base. For the research, author has observed the inbound and outbound
logistics’ processes of ERIKS (UK) and highlighted the problems within the area. The
Inbound and outbound logistics of ERIKS (UK) involved the following steps:

5.2.1 Inbound Logistics:

• Receiving of Goods from Suppliers (Goods Inward).

• Booking in Stock (Using the in-house warehousing management system
EMPERICA and WIS).

• Marshalling (rechecking of the inventory of goods already booked onto the
system on the scanning guns).

• Put-Away (Storage of goods in the allocations provided by the system).

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5.2.2 Outbound Logistics:

Order picking from the shelves, adjustable pallet racking and through picker matt
(automated physical storage system used by ERIKS to store light weight goods).
Jobs are allocated to the order pickers in their scanning guns. Order pickers pick
their jobs on their scanning guns which tell them the exact location and the type of
product.

Order pickers use the tote boxes to put the goods depending upon the weight and
size of the product. Boxes are individually assigned the RFID tags. These RFID tags
are read by the electronic circuits which are embedded into different lanes assigned
to the despatch for different branches represented with branch codes across the
country.

The despatch staff picks the goods from the lanes, print off the labels and put them
onto the packaging boxes. Scan the boxes once again to make sure the goods are in
right quantity and intended to be despatched to the right branch (identified by the
designated branch code). In case of heavy goods, goods are placed on the pallets
but the same way they are assigned labels and scanned through the scanning gun.

ERIKS (UK) uses private courier service provider (City Link) to despatch their
products to the branches across the country.

ERIKS (UK) can track their despatches through the use of IT system provided by City
Link but only the transportation from one end to the other without any guarantee that
goods reached the customer or the branch in the right quantity.

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5.3 Problems Related To Inbound and Outbound Logistic Of ERIKS:

Following are some of the problems that author has found about the inbound and
outbound logistics of ERIKS-UK which generally represents the day-to-day problems
faced by the service organizations like ERIKS;

• The deliveries intended to go to branches across the country are first received
by RDC, they are opened, re-checked and then re-packed again. Thus,
increasing the cost of transportation and packaging.

• Branches are treated as a separate business unit and invoiced separately.
Therefore, it makes difficult for the central business unit to control the activities
of the branches.

• Small deliveries are cross-docked, which increases the time to reach to the
customer long and cost of transportation is doubled.

• Product codes supplied by the suppliers are different to the codes set by
ERIKS. Which creates complication sometimes; when the products received
from the supplier do not bear any code. The warehouse staff needs to
manually allocate the product code on the basis of previous experience.

• Conflict between two warehouse management systems used by ERIKS; which
creates the complication for the staff. Because, it takes time to for both the
systems to bridge each other. In return, there is a delay of generating invoices
and staff occasionally makes hand written invoices to the branches and
customers.

• Inefficient management of the storage resources. Some of the inventory sitting
on the shelves takes ages to move and more or less redundant.

• Ineffective use of labour resources. Multi-job allocation makes it difficult for the
staff to concentrate on their own expertise.

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• When deliveries are received from the suppliers and they are cross-docked,
they need to be repacked and labelled again. This automatically increases the
cost of packaging and waste of labour.

• Transportation of products is not safe by any means which causes several
products to get lost during the transportation or after the transportation.

• Transportation manager spends most of his time in tracking despatches,
which is due to the lack of the tracking system for the despatches.

• Less training on the warehousing management system; therefore, staff learn
the system on trial and error basis.

• Inappropriate allocation of the storage makes it more difficult for the order
pickers to pick the products from the shelves.

5.4 Conclusion:

The place where ERIKS (UK) is now, has earned it with spending a significant
amount of time and money which also involves the process of learning and failure.
So, if ERIKS (UK) wants to achieve the customer satisfaction and greater market
share besides the other organization of similar nature, it is recommended that it has
to start improving their logistics process right now which is affecting the company
very heavily. The next chapter is going to discuss the implementation of Lean
Extended Enterprise Reference Model and will depict that how the processes can be
improved with the help of the model.

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Chapter-6:

6.0 Implementation of LEERM:

6.1 Introduction:

As discussed in the previous chapter that Lean Extended Enterprise Reference
Model (LEERM) is a structured model for transforming to total value stream
conversion of Lean.

LEERM is shown in the Figure 6.1 and the architecture of LEERM has four layers
which are referred to as Panels of Value Stream Integration as illustrated in the
Figure 6.2 below

Figure 6.1 Lean Extended Enterprise Reference Model (LEERM)

Source: Burton, Terence T. (2003) p-29

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Figure 6.2 LEERM Panels of Value Stream Integration

Source: Burton, Terence T. (2003) p-29

6.2 Implementation:

The author has applied LEERM every single layer to the processes of ERIKS (UK) to
improve and gain the objective of obtaining a lean logistic environment. As the first
layer of LEERM suggests that this panel must be incorporated by top executive
management in their organization if they want to achieve the Lean Extended
Enterprise improvement initiative:

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6.2.1 Strategic Journey Panel:

6.2.1.1 Lean Extended Enterprise Vision/Leadership/Strategy:

As the name suggests that it is strategic in nature which involves aligning strategy,
deployment and execution. ERIKS (UK) is determined to become the Europe
undisputed supplier of the industrial products.

It is necessary for the ERIKS management adopt the change and understanding the
continuous improvement and Lean behaviour. Messages enforcing change must be
conveyed non-verbally.

Targets must be clearly defined and communicated to the first line supervisors. Key
performance indicators (KPIs) trees must be developed for the individual section of
the logistics process.

Performance feedback must be taken from the employees not only from the
supervisors to the warehouse, transportation and purchasing manager. Such as the
managers must visit the RDC and ask anybody from a specific section to explain him
what is happening to the performance and the major reasons for variances.

The improvement process must be kept simple but focused.

Visual performance measures play a major role, in order to achieve this; all the
critical value drivers in every section of the RDC must be visually displayed and each
person knows accurately what the current performance is.

The transfer of knowledge, especially best practices must be accessible to everyone
in RDC.

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6.2.1.2 Value Stream Perspective:

From this panel all the processes which are redundant and causes hindrance in
value creation must be avoided. The waste from the chain must be removed.
Following are the processes that are found faulty in the complete chain.

Goods received from the suppliers intended for the branches coming to RDC for
booking in and separate invoice created by the RDC.

Goods are packed again which ultimately increases the time to reach and also
increases the transportation cost.

Goods are lost during the transportation because of the lack of any tracking system
such as Radio Frequency Identification (RFID) tags.

Because of the use of two warehouse management systems, there is always a delay
because the both systems are not bridge together and therefore cause delays.

Redundant inventory sitting in the storage causes the problem for the storage
allocation for new items. This in turn is also another form of financial liability.

6.2.1.3 Expanded Basic Principle set/Infrastructure Expectations:

As it has been explained earlier in the LEERM model explanation that this stage is
related to the implementation of methodologies and tools to enable LEERM, which in
this case the tool is Lean and Kaizen. Also the infrastructure expectations which is
related to establishing the values and basic rules of conduct and behaviour. In this
case the organization needs to build up the culture where it supports the training and
development. Also provides employees incentives if they want to further improve
their skills which in turn can help ERIKS to improve their work efficiency. Such as
there are several short courses available from the Chartered Institute of Logistics
and Transportation (CILT).

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6.2.2 Best Practices and Principle Panel:

From this perspective which includes the mixture of five characteristics of
Leadership, customer market focus, improvement structure, value stream processes,
and organizational learning. ERIK’s management needs to play a vital role in this
process because if the management is reluctant about the change and it does not
want to learn and implement new tools and techniques into the improvement process
then all the efforts will be wasted. If the employees are willing to participate in the
change process but if the management is not going to back the process then the
implementation is futile. It needs to provide integrated services solutions to their
customers which provide immediate availability of the products on the customer
premises. Such as if there is a mechanical fault comes to manufacturing plant in a
biscuit manufacturing firm and the machine is redundant for hours then it is a
complete loss for the firm. Here, ERIKS can setup the integrated services on the
clients’ premises so that its team is always ready to provide customer support and
can ensure the immediate availability of the products on clients’ premises.

This also solves the problem where the stock of some products overflows
progressing on providing the integrated services will reduce the inventory of some of
the products in the RDC which are physically bulky in nature and obviously reduce
the cost of transportation. Because in the RDC there are some products which are
sitting on the shelves for more than 40 years which is actually the waste of storage
space, and due to their enormous weight they require special handling and care.

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Chapter 7:

Data Results and Analysis:

7.0 Introduction:

This chapter presents the survey results along with a brief analysis on the findings.
The graphical representation of the results has been achieved to further clear the
picture. Appendix I provide the sample questionnaire in detail.

7.1 Section-A:

This section consists of structured questions designed to get information from the
respondents about their gender, age, work level, level of responsibility and access to
computers at home.

Question 1: Gender

Option: Male Female

Total of 40 respondents participated in the survey amongst them 28 were male and
12 were female.

Chart-1

Male
Female

Question 2: Age:

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20-23 24-28 29-35 36-40 40-45 45-50 50 above

The results show that most of the participants out of 40 were in the age bracket of 20
to 36 years some of the respondents were above 36.

Chart-2:

20 18
15
15 20-23
10 24-28
Age 10 7
29-35
5 36andAbove
0

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Question 3: Work level in the organization:

There were 3 supervisors each for different section and rest of them were all on the
worker level.

Chart-3

3

Worker
Supervisor

37

Question 4: Level of responsibility:

Most of the workers have the intermediary level of responsibility within the hierarchy
but some of the workers and supervisors have the critical level of responsibility.
Chart 4 shows the statistical distribution of the values.

Chart-4:

35 34

30

25

20 intermediary

15 Critical

10
6
5

0

Question-5: Access of computer at home:

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All of the respondents have the access to computer at home:

7.2 Section B:

This section consists of 5 structured questions which shows that does management
takes initiatives to help their employees learn and to help develop the understanding
about the critical logistical processes. The questions are measured at the scale of 1-
5.

1 Strongly Disagree 2 Disagree 3 Neutral 4 Agree 5 Strongly Agree

Question-6: Management support is available to enhance knowledge about process
efficiency.

Most of the participants conceded that there is a less support available from the
management in learning and developing the skills to increase knowledge about
process efficiency and the workers need to follow defined set of procedures to
complete their tasks. Chart 5 shows the statistical representation of the data
collected for the above said question.

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Chart-5:

3
1
2
StronglyDisagree
Disagree
Neutral
22
12 Agree
StronglyAgree

Question-7: Preferred way of learning is ‘Learn by yourself’.

This question was particularly targeted towards the employee motivation to learn in
the working environment where management support is not available to learn new
things and techniques to enhance the efficiency of the processes. Most of the
respondents have learnt the things by their selves or by the help of the old
employees where management has not played any major role in providing the
support to expedite the progress. Chart-6 shows the graphical representation of the
data collected for the above said question.

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Chart-6

2 1
2

StronglyDisagree
5
Disagree
Neutral
Agree
StronglyAgree
30

Question-8: Do you prefer to learn by using your own personal experiences?

This question is targeted towards the employee self motivation to learn the new
things by actively engaging their selves into the processes and learning by their own
experiences. The graphical representation of the data collected is shown in the
Chart-7.

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Chart-7

3 0 5
2

StronglyDisagree
Disagree
Neutral
Agree
StronglyAgree

30

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Question-9: Does management take initiatives for training and development?

This question is directed towards the management support available for the
employees training and development in order to achieve the desired level of
efficiency and optimizing the level of employee performance. The graphical
representation of the data is shown in chart-8.

Chart-8

5 0
11
4 StronglyDisagree
Disagree
Neutral
Agree
StronglyAgree

20

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Question-10: Does management supports learning by trying out new ideas and
techniques to see they work in practice?

This question focuses on the ability of the workers to adopt the new ways of doing
things which they are allowed to exercise during their normal course of work and
backed by the management. Graphical representation of the data collected is shown
below in chart-9:

Chart-9

20
2

StronglyDisagree
Disagree
20 Neutral
15 Agree
StronglyAgree

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7.3 Section-C:

This section comprises of 10 structured questions mainly concerned with the internal
processes and the major areas where improvement is needed. The questions are
measured at the scale of 1-5.

1 Strongly Disagree 2 Disagree 3 Neutral 4 Agree 5 Strongly Agree

Question-11: Do the waste minimizing efforts are initiated by the management?

The response to this question was quite different because almost most of the
respondents have mixed opinions about this question. The 85 percent of the
response on management support shows the management is less interested to
participate in the knowledge expediting process. The graphical representation of the
data collected is shown below Chart-10

Chart-10

1 3
1
StronglyDisagree
5
Disagree
Neutral
Agree
StronglyAgree
30

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Question-12: Does the implementation of two warehouse management system make
the processing fast?

This question was focused on the implementation of two warehouse information
management system (WHIMS), mainly the problem with the implementation of two
WHIMS is the communication and at the same time working on both systems makes
difficult for the users to understand the systems at the same time which is actually
the waste of monetary resources and training is required to train the staff on the
systems. Almost 90 percent of the staff disagrees with the fact that the
implementation of two WHIMS makes it difficult for the users to use both systems at
the same time. The graphical representation of the data collected is shown in Chart-
11.

Chart-11

1 1 0
3

StronglyDisagree
Disagree
Neutral
Agree
StronglyAgree

35

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Question-13: Allocation of labor to different areas makes it easy for the workers to
concentrate on their area of expertise.

Most of the responses from the respondents disagree to the fact that switching the
labor to different areas makes it difficult for them to focus on their area of domain. 39
respondents out of 40 disagree with the statement. Graphical representation of the
data collected is shown below in Chart-12:

Chart-12

0
1 0

11 StronglyDisagree
Disagree
Neutral
Agree
StronglyAgree
28

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Question-14: Direct branch orders (cross-dock) should not be sent to RDC but must
be sent directly to the branches.

Respondent agreed to the fact that the branch orders received by the RDC are a
waste of time, packaging and time to reach the end consumer. Graphical
representation of the data is shown in Chart-13:

Chart-13

3 01

StronglyDisagree
Disagree
Neutral
Agree
StronglyAgree

36

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Question-15: Branches must be treated as part of the central business units instead
of separate business entity.

This question was focused individually focused on assessing the RDC and the
coordination of the branch operations. Most of the respondents agreed to the fact
that branches must be treated as a part of central business because of the so many
process redundancies when handling the branches separately. Graphical
representation of the data is given in Chart-14:

Chart-14

3 0 4

StronglyDisagree
Disagree
Neutral
Agree
StronglyAgree

33

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Rest of the questions from 16 to 20 as given in the Appendix I are related to the
product classification, codes used, use of RFIDs, stock checking and avoiding
packaging waste. The average positive response (Agree/Strongly Agree) to these
questions is shown in the Chart-15 given below:

Chart-15:

Question16 4
33

Question17 12
25

9 StronglyAgree
Question18 31 Agree

Question19 2
38

Question20 10
30

0 10 20 30 40

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Chapter 8:

8.0 Conclusions and Recommendations:

This chapter highlights the conclusions which are accumulated on the basis of the
primary data acquired with the help of questionnaires. The conclusions will help the
author to make suitable recommendations.

8.1 Section A:

8.1.1Conclusion:

This section was focused on judging the average demographics, level of
responsibility, and intensity of their job level to gives the idea if the organization has
the capability of adopting the change and can participate in the change process of
the work force of ERIKS since the results show the most of the participants are in the
age bracket of 20 to 36 so there are less chances of hindrances in adopting the
change and 85% of the respondents have the intermediary level of responsibility
which can help in incorporating change in the organization.

8.1.2 Recommendation:

On the basis of this author can recommend that ERIKS must initiate the
implementation of Lean and Kaizen from the lower hierarchy of the process and
progress to the top. And can induce the motivation to learn the new techniques and
tools to enhance their efficiency of their processes.

ERIKS can conduct different workshops on the shop floor giving the staff opportunity
to learn on the work so they can exercise the techniques learn at the same time on
the floor.

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8.2 Section B:

8.2.1 Conclusion:

This section is compromises of five structured questions which are focused on the
management support for learning and employee motivation to learn new things. The
results of this section show that 85 percent of the respondents agree with the fact
that the learning process must be initiated by the organization and the organization is
less interested to provide the support for training and development. This is not so
helpful for the change process. If lean and kaizen needs to be implemented, ERIKS
must provide its ample support to produce a learning environment and encourage
the learning programs to help initiate and adopt the change process.

8.2.2 Recommendations:

According to Abott C. and Pedler M. (2008), ‘Action learning sets are communicative
spaces where participants can seek to understand the tensions between the
demands of their situations and their situations and their own views’. Therefore, in
the light of the above statement, ERIKS need to;

• Organize the work staff into teams and empower them to exercise and learn
the new things on work in order to expedite the change process. These
practices can be vital and can help reduce the learning cost involved by
helping the employees learn in their own working hours.

• It needs to incorporate the vision of the organizational goals into its workforce
and keeping focus on customer demands adopting new management style
and keeping the ample focus on expediting the organization processes into
the controlled manner.

• The supervisor of each different department must setup workshops
concerning their own area of expertise to ask the workers about their
problems while working and help them to learn the ways to solve those

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problems which reduce the time they take to carry out their jobs and increase
their efficiency.

8.3 Section C:

8.3.1 Conclusion:

This section consists of 10 structured questions which are focused on different areas
of the warehouse operations internal and external. In the light of the analysis done in
previous chapter it can be concluded that ERIK’S internal and external logistics’
activities are not aligned and there is a need to minimize the redundant processes
and efforts must be made to produce an integrated system to minimize the waste
from the supply chain.

8.3.2 Recommendations:

In order to achieve the low level of waste and achieve high level of customer
satisfaction, ERIKS must adopt the following strategies:

• Initiate the waste minimization efforts and adopt the Lean Extended Enterprise
Reference Model (LEERM) to achieve the objective.

• Instead of using two warehouse management information systems (WHIMS),
must adopt only one WHIMS so that the processing of the information through
RDC to branches is quicker and less duplication of information can be
achieved.

• Instead of allocating its labor force to different jobs, educate the labors in their
own areas so that their efficiency increases.

• Instead of receiving the branch orders to RDC, they should be sent directly to
the branches so that the waste of time, packaging and excess cost of
transportation can be avoided.

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• ERIKS must adopt a standardized system of categorization for it product
classification in order to avoid the confusion between the codes provided by
the suppliers and actual classification kept by ERIKS.

• Stock check must be done on a weekly basis in order to avoid the waste of
redundant stock in RDC which is actually the waste of storage space and
money.

• Use of RFID tags must be put into practice in order to avoid the stealing or
loss or damage of products during the transit. Most of the complains dealt by
the transportation manager are based on the loss or damage of products
during the transit which is actually the waste of his valuable time which he can
spent doing the job he is supposed to do instead of dealing the complains
about the products losses and damages.

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Ozbayrak M. and Papadopoulou T.C (2004) ‘Leanness: Experience from the
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Bhasin S. and Burcher P. (2004) ‘Lean viewed as a philosophy’ Journal of
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Journals:

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Lismar B. and Taj S. (2005) ‘Application of Constrained Management and Lean
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Zokaei K. and Simons D. (2005) ‘Application of Lean Paradigm in Red Meat
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Taj S. (2005) ‘Applying Lean Assessment Tools in Chinese Hi-tech Industries’
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Carlsson C. and Ahstrom (1996) ‘Assessing Changes towards Lean Production’
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Pintelon L. et al. (1997) ‘Case Studies on Disturbance Registration for Continuous
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Kerrin M. (2000) ‘Continuous Improvement along the Supply Chain: The Impact of
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Dahlgaard J.J et al. (2003) ‘Continuous Improvement in Product Development:
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Chang R. (1995) ‘Core Threads of Continuous Improvement’ Management
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Achanga P et al. (2005) ‘Critical Success Factors for Lean implementation within
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Bali K.R. and Khan Z. (2007) ‘Developing a BPI framework and PAM for SMEs’
Industrial Management and Data Systems 107, (3) 345-360.

Minnie C. et al. (2004) ‘Enabling Continuous Improvement: A Case Study of
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Kobayashi K. et al.(2008) ‘Implementing 5-S within a Japanese Context: An
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Dahlgaard J.J et al. (2005) ‘Measuring Lean Initiatives in Health care Services:
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Platts K. et al. (2005) ‘Performance measurement system design: A Literature review
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Towill D.R. (2001) ‘The Process of Establishing a BPR paradigm’ Business Process
Management Journal 7, (1) 8-23.

Gummesson E. (2008) ‘Quality, service-dominant logic and many-to-many
marketing’ The TQM Journal 20, (2) 143-153.

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Difficulties, Common myths, empirical observations and success factors’
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Hines P. et al. (2005) ‘Towards Lean product lifecycle management: A Framework
for new product development’ Journal of Manufacturing Technology Management 17,
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Markou E. (2001) ‘Target setting for evolutionary and revolutionary process change’
International Journal of Operations and Production Management 21, (11) 1387-1403.

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Appendix:

Appendix-I

An Example of filled questionnaire

Application of Kaizen and Lean Management: Improving Logistics of Non-
Manufacturing Organizations.
Respondent:

Section A:
1.Gender:
Male
2. Age:
20-50
3.Your working level in the organization:
1 (Worker) 2 (Supervisor) 3 (Management)
4.Your level of job responsibility:
1 (Normal) 2 (Intermediary) 3 (Critical) 4 (Very critical).
5.Do you have access to computer (PC) at home?
Yes

Section B:

6.Management support is available to enhance knowledge about process efficiency.
e.g. 1 as strongly Disagree and 5 as strongly agree.
2

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7.Your preferred way of learning new things is ‘Learn by yourself’.
e.g. 1 as strongly Disagree and 5 as strongly agree.
1
8.Do you prefer to learn by using your own personal experiences?
e.g. 1 as strongly Disagree and 5 as strongly agree.
2
9.Does management take initiatives for training and development?
e.g. 1 as strongly Disagree and 5 as strongly agree.
1
10. Does management supports learning by trying out new ideas and techniques to
see they work in practice.
e.g. 1 as strongly Disagree and 5 as strongly agree.
1

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Section C:
11. Do the waste minimizing efforts are initiated by the management?
e.g. 1 as strongly Disagree and 5 as strongly agree.
2
12. Does the implementation of two warehouse management system make the
processing fast?
e.g. 1 as strongly Disagree and 5 as strongly agree.
1

13. Allocation of labour to different areas makes it easy for the workers to
concentrate on their area of expertise.
e.g. 1 as strongly Disagree and 5 as strongly agree.
1
14. Direct branch orders (cross-dock) should not be sent to RDC but must be sent
directly to the branches.
e.g. 1 as strongly Disagree and 5 as strongly agree.
5
15. Branches must be treated as part of the central business units instead of
separate business entity.
e.g. 1 as strongly Disagree and 5 as strongly agree.
5

16. Product codes must be homogenous (same as the suppliers) in order to avoid
double entries into the system.
e.g. 1 as strongly Disagree and 5 as strongly agree.

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5

17. Classification of products must be done on the basis of their age in order to avoid
the redundant stocking.

e.g. 1 as strongly Disagree and 5 as strongly agree.
5
18. Radio frequency tags (RFIDs) must be used to track and minimize the chances
of products stolen or lost.
e.g. 1 as strongly Disagree and 5 as strongly agree.
5
19. Stock checking must be done every week during the weekend to update the
purchasing department weekly.
e.g. 1 as strongly Disagree and 5 as strongly agree
4
20. Packaging must be reused to avoid the packaging waste.
e.g. 1 as strongly Disagree and 5 as strongly agree.
5

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Appendix-II

List of Figures and Charts:

Figure 3.1 Lean Extended Enterprise Reference Model (LEERM)…………….20

Figure 3.2 LEERM Panels of Value Stream Integration……………………….…21

Figure 3.3 Six Sigma Methodology………………………………………………….26

Figure 4.1 Getting Your Methodology Design on Target……………………….42

Figure 4.2: Steps taken to collect information from the respondents……….52

Figure 5.1 ERIKS Different Market Segments…………………………………….54

Figure 6.1 Lean Extended Enterprise Reference Model (LEERM)…………….60

Figure 6.2 LEERM Panels of Value Stream Integration………………………….61

Chart-1……………………………………………………………………………………65

Chart-2…………………………………………………………………………………….66

Chart-3…………………………………………………………………………………….67

Chart-4…………………………………………………………………………………….67

Chart-5………………………………………………………………………………….…69

Chart-6…………………………………………………………………………………….70

Chart-7…………………………………………………………………………………….71

Chart-8……………………………………………………………………………………72

Chart-9…………………………………………………………………………………….73

Chart-10…………………………………………………………………………………..74

Chart-11………………………………………………………………………………..…75
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Chart-12…………………………………………………………………………………..76

Chart-13………………………………………………………………………………….77

Chart-14………………………………………………………………………………….78

Chart-15………………………………………………………………………………….79

Appendix-III

Research Proposal

Title:

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Application of Kaizen and Lean Management: Improving
Logistics of Non Manufacturing Organizations.

Abstract:

Producing perfect and defect free services have long been desired
and it is still considered as an important strategic objective for the
companies to build market share in a global competitive economic
environment. Continuous improvement of company operations and
processes and value added service is an absolute requirement.

Value adding capability of an organization must be synchronized with
both the internal and the external value chain. Poor adding value
capability equates to waste and this usually exist in all parts of the
organization through poor time utilization, poor use of capital, stock
and human resources.

Successful re-engineering demands a total closer linkage throughout
the value chain which comprises of customer order processing, IT
infrastructure, and supply chain.

The main problem of the linkage is the poor coordination between
the different functions of the supply chain and logistics. If the product
groups within the organization can be identified from raw material
input to final delivery to customer and the existing value adding
capability can be determined. These elements can then be analysed
and by process tracking and improved by using structured methods.
This leads to a systematic improvement of value adding capability by
removal of all non value adding elements and will bring
improvements in customer service levels, cost reduction and
profitability.

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1. Aim:

To gain the comprehensive knowledge of current practices used in
the logistics of non manufacturing organizations. Find out the
existing problems, implementing lean and kaizen to the supplychain
to improve the practices and suggesting the solutions to solve the
problems.

Explore lean and kaizen techniques.

Explore improvement models.

Explore areas of improvement.

Explore waste removal techniques.

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2. Background:

According Berger A. (1997), with the Japanese re-export of several
prominent management concepts such as total quality control (TQC),
Just-In-Time (JIT) and lean production, the concept of Kaizen has
been introduced to the management arena. The first well known
proponent was Imai who wrote KAIZEN. He outlined the concept, its
core values and principles, its relation to other concepts and the
practices used in the improvement processes.

In modern economy, the requirement of the organizations to become
more responsive to the needs of customers and the changing
conditions of competition are driving the organization’s interest in
becoming effective, lean, customer-focused, able to add value,
quality driven, proactive rather than reactive.

The center of attention of the organization logistics and supply chain
activities is the value creation-from the customer perspective the only
reason for the firm to exist. If there is a careful consideration of the
steps required in the office to translate an order into a schedule and
many of the steps required in the process to create the service, add
little or no value for the customer.

Kaizen and Lean Management focus on developing a lean enterprise
where friction is absent. The term lean enterprise applies to the
complete supply chain. The main purpose of implementing Kaizen
and Lean Management techniques is to remove the waste from the
supply chain which can be according to Taiichi Ohno can be defined
in seven common forms of waste, activities that add cost but no
value, production of goods not yet ordered, waiting, rectification of

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mistakes, excess transport, excess processing, excess movement
and excess stock.

2.1 KAIZEN (KYE-ZEN):

“Bite of more than you can chew, then chew it. Plan more than you
can do, then do it”

-Anonymous

“The purpose of Standard work is not to stop progress; it is to
preserve progress”.

-Michael D. Regan

There is no mystique in the word ‘Kaizen’. It is a word used in
everyday conversation in Japanese, which simply means continuous
improvement. In 1970s, it was first used as a management concept
with a meaning of systematic approach to continuous improvement.
Since the time of its introduction, the concept has been revitalized
and implemented many times. It has become the part of the
everyday working life for many people around the globe.

It moves from the idea that ‘if its not broke do not fix it’, to ‘If it is not
broke do not ignore it because it will break one day’.

• Bad business ignores the signs of disaster.
• Good business spots the signs of disaster and deals with them.
• Kaizen business constantly reviews and monitors to preclude
disaster.

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2.2 Lean Management:

The history of Lean Management can be linked with the Toyota
Production System (TPS) which is a philosophy invented by the
Chinese engineers Taiichi Ohno and Shiego Shingo (Inman, 1999).
Also TPS has been credited for the birth of JIT (Just-In-Time)
production method which is an important element of Lean
Management. The main focus of Lean Management is to eliminate
waste (Muda in Japanese) and as a result all the activities along the
value stream create value leading towards perfection. To reduce
waste from the value chain, efforts are done by implementing Kaizen
events.

2.3 Continuous Improvement (CI):

Originally the concept of the continuous improvement was brought to
Japan from the US after the Second World War to assist in the
reconstruction of the Japanese industry. The success of CI programs
in Western industry has been limited and the programs have primarily
been applied in the operations part of the business.

Bessant and Caffyn (1997) define continuous improvement as “An
organization-wide process of focused and sustained incremental
innovation. Also it is viewed as a particular set of routines that can
help an organization to improve the performance. Some key routines
are considered essential If CI is to be implemented to its full potential

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in an organization, such as learning from the experiences, and
capture, and deployment of individual learning.

Researchers viewed CI as a dynamic process, focus on improvement
programs and their relationship to the other organizational elements in
the organization and its environment. An improvement program in this
context is understood as an induced change effort, focused on
improving the effectiveness of the organization’s existing processes.

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3. Literature Review:

According to Hines P. et al. (1997) optimizing each segment of the
supply chain in isolation does not lead to the lowest-cost solution. In
reality it is necessary to look at the whole sequence of events, from
the customer order right back to the order given to the producer, and
forward through all successive firms making and delivering the
product to the customer. In trying to identify possibilities for
eliminating waste this makes most sense if it is done for the entire
chain. There is no single possible way of doing this. There are
several approaches developed and researches have been
conducted on the issue.

Emiliani M.L. (1998) has talked about lean behaviours where he
described the behavioural waste. Humans have repeated the same
mistakes for thousands of years which shows that humans rarely
understand their root causes. The concept of “Lean” behaviour is
analogous to lean production. Lean behaviours are defined simply as
behaviours that add or create value. It is the minimization of waste
associated with arbitrary or contradictory thoughts and actions that
leads to defensive behaviour, ineffective relationships, poor
cooperation, and negative attitudes. These behaviours are called
‘Fat Behaviours’ and must be eliminated as they display irrational
and confusing information that results in delays or work stoppages,
or the articulation of unsubstantial subjective thoughts and opinions.

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Hines P. and Rich N. (1997) have described the seven value stream
mapping tool. The focus of the value stream includes the complete
value adding and non-value adding process, from conception of
requirement through to material source and back again to the
consumer’s receipt of product, there is a clear need to extend this
internal waste removal to the complete supply chain.

They have drawn the tools from variety of origins such as
engineering, action research/logistics, operations management,
system dynamics and efficient consumer response (ECR).

After this mapping process is complete, each individual tool can be
used to with its associated benefits to undertake more detailed
analysis of the value stream with a view to its improvement.

New S.J. (1995) discussed about the framework for analysing supply
chain improvement. He pointed out that there is a major hindrance to
understanding the dynamics of supply chain improvement is in
untangling its various components. Managerial and commercial
reality is complicated. He represented a simple taxonomy which uses
a simple four dimensional scheme which includes four dimensions
that are ‘Specificity’, ‘Action/Investment’, ‘Location/Focus’ , and
‘Benefits’. Further describing the limitation of the taxonomy such as
the temptation of reductionism, transparency, coverage concluded
that the main benefit of using the simple taxonomy is that it
stimulates the structured analysis of the dynamics of inter-firm
relationships and highlights the important questions which risk being
overlooked in the hyperbole of supplychain management.

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Knowles G. and Warwood S.J. (2004) have explored the
implementation of Japanese 5S practices for the workplace
organisations in UK. They have discussed the rationale of using the
5S practices, their implementation, links with other performance
improvement initiatives, and barriers and benefits. They have
concluded that the 5S practice is in its nascent stages and the
organizations are implementing the principles of 5S across the
complete span of the organization rather than partially within a
function or a division.

Barker R.C. (1996) has discussed the implementation problems in
the development value chain. He discussed the existing standards of
value adding capability remain at low level of development despite
an increase in worldwide competitive pressure. He highlighted the
five critical areas seen as important to understanding the
development stages such as Just-In-Time (JIT) and throughput time
reduction, management flounder during implementation, the need for
new improvement models, and importance of value chain linkage.
These elements can then be analysed by process tracking and
improved by using structured. This leads to a systematic
improvement of value adding capability by removal of all non value
adding elements and will bring improvements in customer service
levels, cost reduction and profitability.

This research is mainly focused on the internal logistics of the non-
manufacturing organization creating an understanding of different
internal processes and implementing lean and kaizen to improve the
dynamics because if logistics is generally acknowledged as a
process, it is interesting to observe that what are the main

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organizational solutions adopted by firms to in order to manage the
logistics activities.

4. Objectives:

The main objectives of the research are to address the issues such
as:

1. Implementing Kaizen and Lean Management to improve the
logistics of non-manufacturing organizations.

2. The research will look into different models that can be applied
to improve the logistics and creating value chain.

3. Elimination of waste internally and reducing the cost.

4. Suggesting and discussing improved IT systems to expedite
the processes.

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5. Research Programme:

Following is the detailed research plan that includes the research
methodology and the specified time-scale (research schedule)
shown in the form of Gantt chart in the appendix.

5.1 Research Methodology:

The research will be descriptive and qualitative in nature. The
research will be using informal and in-depth means of surveys in the
form of questionnaires. It will take into consideration the logistics of
non manufacturing firms.

Qualitative research can consider two points of views either from a
deductive approach or inductive perspective.

According to Robson (2002) qualitative data analysis is associated
with such concepts and is characterized by the richness and fullness
based on the opportunity to explore a subject in as real a manner as
is possible. Because the qualitative data analysis gives the
opportunity to have ‘thick’ and ‘thorough’ abstraction or description
associated with qualitative data (Dey, 1993; Robson, 2002).

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As Dey (1993) and Healey and Rawlinson (1994) clearly defined the
merits and distinguished qualitative data analysis on the merits that
qualitative data analysis is based on meanings expressed through
words, collection of results in non-standardised data requiring
classification into categories and the analysis is conducted through
the use of conceptualisation.

The research can use the inductive based analytical strategies and
procedures which are:

1) Data Display and Analysis;

2) Template Analysis;

3) Analytic Induction;

4) Grounded Theory;

5) Narrative Analysis.

This research will use data display analysis which is related to
organising and assembling the selected data into diagrammatic or
visual displays. Miles and Huberman (1994) stated that this form of
data displays are easy to generate and can be developed to fit the
data specifically, and will help to develop the analytical thinking as
work is going to be done through several iterations to develop a
visual form that is going to be the representation of the data.

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Also the research will use the analytic induction which is defined by
Jhonson (1998: 28) as the intensive examination of a strategically
selected number of cases so as to empirically establish the causes
of a specific phenomenon.

For the above mentioned approaches interviews and questionnaires
to collect the primary data, and secondary data will be collected
through case studies, journals are the best options to collect the data
to support the research strategies.

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5.2 Research Schedule:

The research is going to start from 14th July 2008 and will last 7
working weeks till 5th of September 2008. The tentative working
schedule is given in the form of the Gantt chart in the Appendix

6. Resources:

The allocated budget for the research is £800 and the distribution is as
follows

6.1 Finance:

Item1 Communication and Commuting £300
Expense.
Item2 Questionnaires’ printouts and £200
postage.
Item3 Stationery and interview equipment £300
such as voice recorder, data CD-
ROMs, audiotapes, printer cartridges,
printer papers etc.

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6.2 Supplementary Information Access:
i. Access to library for journals, books and library online resources, to gain
knowledge of current procedures and practices in Supply Chain Industry.

ii. Access to various Internet resources, these include websites and forums.

iii. Discussions with the research supervisor and teachers from the Logistics and
Supply Chain Management department.

Appendix IV: List of Tables:

Table-I…………………………………………………………………………….15

Appendix V: Gantt chart and Timeline:

Gantt chart:

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Timeline:

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