De La Salle University

Ramon V. del Rosario

College of Business

CASE # 4: Lean implementation and Supply Chain Development at Oak Hills

In Partial Fulfillment of the

Course Requirements for

Supply Chain Management

2nd Term, SY 2023-2024

Submitted by:

Amano, Micah

Bautista, Francis Gabriel

Palanca, Francis

Regala, Ulysses

Submitted to:

Sir Willy Cuason

 TABLE OF CONTENTS

I. Summary of Findings 3
II. Background Information 3
III. Problem Statement 4
IV. Analysis of Alternatives 4
V. Detailed Recommendation 6
VI. Answer to Case Questions 7
VII. Learnings 11
 I. Summary of Findings

A project team from a supply chain management class is tasked with enhancing
operational processes at Oak Hills, focusing on implementing lean manufacturing principles.
The facility specializes in manufacturing a specialized testing instrument crucial for oil and gas
exploration, serving both internal and external customers. However, due to the industry
downturn, demand for Oak Hills’ testing instruments is expected to decline significantly.

Demand for testing instruments exhibits high variability, with long lead times for
international orders and frequent rush orders for domestic customers. The facility struggles with
inadequate information about upcoming projects and maintains high raw material inventories to
meet rush orders, leading to increased costs and compromised customer service levels. The
testing instrument comprises three main components: machined cases, sensor boards, and lids,
with cases purchased from an outside vendor and sensor boards sourced internally.

Management’s strategic plan focuses on reducing manufacturing costs associated with

the testing instrument, primarily by implementing lean manufacturing techniques. A pilot line of
29 boxes, representing 80% of sales volume, has been identified for process improvement.
Despite efforts to streamline operations, challenges persist, including setup procedures,
production delays, and quality control issues, particularly related to lid manufacturing.

II. Background Information

The Oak Hills facility operates under The Oil and Gas Services Company (TOGS), a
major integrated oil and gas industry services provider headquartered in Houston, Texas.
Specializing in upstream services primarily for public and government-owned energy
companies, TOGS faces challenges due to the current low oil prices and demand in the
industry. Additionally, TOGS is undergoing significant corporate restructuring with recent
acquisitions, including Triangle Corp., and pending acquisition by Pasadena Services, a larger
competitor. Pasadena Services aims to reduce operating expenses through consolidation and
anticipates revenue growth by offering a comprehensive array of upstream services.

III. Problem Statement

Oak Hills's inability to execute a lean system and enhance customer service is caused
by its inflexible manufacturing system, poor supply chain coordination, and quality problems.

IV. Analysis of Alternatives

It is critical to design approaches that address the particular quality issues,
changes in the production environment, personnel impacts, supply chain development,
and demand management when investigating alternative courses of action (ACAs) for
Oak Hills' lean implementation. These alternative courses of action seek to provide Oak
Hills with a variety of options for successfully navigating its lean implementation.
Through careful consideration of these options, Oak Hills can customize its strategy to
better fit its goals, organizational context, and difficulties, resulting in a more seamless
shift towards implementation and supply chain development at Oak Hills.

1. Focused Problem Resolution Approach

A potential solution to Oak Hills' quality issues is to utilize a targeted approach to

problem solving. This approach entails determining which quality issue—such as
high defect rates—is the most important to address and allocating resources
there before moving on to other problems. Oak Hills may more effectively
improve quality by organizing its resources and efforts and taking on each issue
one at a time.

2. Incremental Lean Implementation

Another way to approach Oak Hills' lean conversion is through incremental lean
deployment. Using this approach, lean concepts and practices are tested first in
a particular department or manufacturing line through a pilot project. When
success is established, the implementation can be progressively extended
throughout the company, facilitating more seamless integration and simpler
change management for staff members.

3. Cross-Functional Task Forces

Establishing cross-functional task teams gives Oak Hills a chance to work

together to solve quality-related issues. Teams made up of workers from various
departments and levels can be assembled by Oak Hills, giving them the freedom
to determine the origins of problems and carry out fixes on their own. This
strategy increases employee ownership and participation in the lean conversion
process, increasing the chances of a successful implementation.

4. External Consultation and Benchmarking

Oak Hills receives important insights and best practices for its lean
implementation by enlisting outside advice and benchmarking against experts in
the field. Oak Hills can speed up the acceptance of lean concepts by customizing
its strategies to its unique environment and analyzing successful lean
implementations in related industries. It can also do this by interacting with lean
professionals or consultants.

5. Supplier Development Program

Oak Hills' supply chain can be strengthened and its lean conversion initiatives
supported by implementing a supplier development program. Oak Hills can
enhance cooperation and performance all the way down the supply chain by
giving suppliers tools and training, guaranteeing a steady supply of materials for
lean manufacturing. Through this strategic alliance, Oak Hills is better able to
efficiently service client demand while reducing risks.
 V. Detailed Recommendation
Based on the analysis of the potential alternative courses of action, the Focused
Problem Resolution approach appears to be the most viable. A detailed
recommendation for this specific approach elaborates that the specific approach offers
a targeted and efficient way that addresses the apparent issues in quality, which
become critical barriers to a more successful lean implementation. Through the
prioritization of the most significant problems in quality, like the high defect rates, Oak
Hills can be enabled to allocate resources and efforts that effectively lead to more
tangible improvements in operational efficiencies and product qualities.

Steps in the implementation process include:

1. Identify the priority quality issue. Engage in thorough analysis of the

existing quality problems in order to determine which issues have significant
impacts on efficiency and satisfaction. Analysis of defect rates, customer
complaints, and production data is required to identify the root causes of the
problem.

2. Properly allocate resources. Once priority quality issues are identified,

allocation of sufficient resources is mandatory. This involves manpower,
budgeting, the acquisition of additional resources, and more in order to
properly reallocate existing resources or acquisition of additional resources as
needed in order to support problem-solving efforts.

3. Engage in a root cause analysis. Conducting detailed root cause analysis is

a must to fully comprehend the underlying factors that contribute to the
prevailing issues. This involves utilization of tools such as diagrams, Pareto
analysis, or more to identify where the defects stem from and what
inefficiencies are in the production process.
 4. Implement the solutions. Based on what was found in the previous analysis,
development and implementation of targeted solutions are required to address
the identified quality issues. Improvements in the procedure, redesigning
workflow, upgrading equipment, or implementation of training programs might
be needed to enhance skills and knowledge of employees.

5. Monitoring and evaluation. Continuous monitoring of effectiveness of the

implemented solutions is vital, as well as tracking key performance indicators
relevant to quality and customer satisfaction. Regular evaluation of progress
against the predefined goals are needed in order to finalize what adjustments
are necessary to ensure continuous improvement.

The benefits of this approach and the steps needed to take enforce the practice
of efficient utilization of resources by focusing on single priority quality issues, providing
tangible improvements that increase satisfaction and lay the foundation for successful
lean implementation, and finally engaging fully the employees in problem-solving efforts
relevant to the fostering of a renewed sense of ownership, engagement, and
empowerment that increases buy-ins and support for the overall process.

Adopting the focused problem resolution approach enables Oak Hills to better
address the challenges and barriers in quality management, paving the way for a
smooth transition to lean manufacturing practices and improvements in supply chain
development.

VI. Answer to Case Questions

1. Specific Quality Problems and their Influence on Lean Conversion:

Oak Hills is currently facing several specific quality problems that can significantly
impact its ability to successfully convert to a lean system. These quality problems
include:
 High Defect Rate: The company is experiencing a high number of defects in its
products, leading to rework, waste of resources, and increased production costs.
This not only hampers the company's efficiency but also creates a negative
impact on customer satisfaction.

Inconsistent Lead Times: The lead times for various processes in the
production cycle are inconsistent, causing delays and disruptions in the
production schedule. This leads to inefficiencies and prevents smooth flow of
work.

Excessive Inventory: Oak Hills has a significant amount of excess inventory

due to inefficient production processes and lack of proper demand forecasting.
This ties up capital and storage space, leading to increased carrying costs.

2. Changes in the Manufacturing Environment for Lean Conversion:

Short-Term Perspective:

● Implement a rigorous quality control system to identify and eliminate defects at

the source.
● Streamline production processes to reduce bottlenecks and variations in lead
times.
● Begin implementing visual management tools and techniques to improve
transparency and communication on the shop floor.
● Train employees on lean principles and empower them to contribute to process
improvement.

Long-Term Perspective:

● Develop a culture of continuous improvement where all employees actively

engage in identifying and solving problems.
 ● Implement pull-based production systems, such as kanban, to reduce excess
inventory and align production with actual demand.
● Invest in automation and technology to further improve process efficiency and
reduce manual intervention.
● Collaborate closely with suppliers to create a seamless and efficient supply chain
ecosystem.

3. Impact on Employees and Transition Smoothing:

The implementation of a lean system will impact employees by requiring changes in

work processes, increased collaboration, and a shift in mindset. To smooth this
transition:

● Provide comprehensive training to employees on lean principles, tools, and

techniques.
● Involve employees in the decision-making process to encourage ownership and
buy-in.
● Recognize and reward employees for their contributions to process improvement.
● Offer ongoing support and mentorship to guide employees through the changes.

4. Supply Chain Development and Improvement:

Oak Hills is currently at an early stage of supply chain development, characterized by

fragmented processes and limited collaboration with suppliers. To improve the supply
chain:

● Develop strategic partnerships with key suppliers to ensure timely and consistent
material delivery.
● Implement supplier performance metrics and regular reviews to ensure quality
and reliability.
 ● Integrate demand forecasting data with suppliers to enable accurate production
planning and inventory management.

5. Connection between Demand Management and the Supply Chain:

Effective demand management is essential for a well-functioning supply chain. Oak Hills
needs to:

● Develop accurate demand forecasts based on historical data, market trends, and
customer feedback.
● Share demand forecasts with suppliers to enable them to align their production
and delivery schedules accordingly.
● Continuously monitor actual demand and adjust forecasts and production plans
as needed.

6. Recommendations, Problems, and Mitigation:

Strategic Perspective: Oak Hills should initiate a comprehensive lean transformation

journey that involves reengineering processes, fostering a culture of continuous
improvement, and establishing strong supplier partnerships.

Potential Problems and Mitigation:

● Resistance to Change: Employees might resist the changes. Address this by

clear communication of the benefits, involving them in the process, and providing
the necessary training.
● Supplier Cooperation: Suppliers might be hesitant to integrate their processes.
Build trust through transparent communication, shared goals, and mutual
benefits.
Tactical Perspective:

● Implement immediate quality control measures to reduce defects and improve

product quality.
● Introduce visual management tools to enhance transparency and real-time
decision-making on the shop floor.
● Conduct workshops and training sessions for employees to build their lean skills.

VII. Learnings
● It is necessary to address supply chain, process, and quality challenges continuously
when implementing lean.
● Success depends on changing the culture and involving the workforce.
● Sustainable lean techniques require data-driven decision-making and ongoing
improvement.