Reinventing Lean in Sonae Mc

EXECUTIVE SUMMARY

This report will cover in detail how SONAE MC kick-started the lean implementatiThe scale of SONAE MC and how its organizational structure posed challenges to the implementation will be discussed in detail. Lean principles such as, process observation, waste reduction, employee empowerment and process reviews will be discussed. Finally, the report shall also propose how SONAE MC can reinvent its lean implementation in the long run through the use of employee motivation techniques continual improvement models which also have positive impacts on customers.

INTRODUCTION

For the purpose of this assignment, our group will be analysing SONAE MC and how the organization has improved their operational processes through lean implementation. SONAE MC initially started off as a small engineered wood production company. They expanded their market into the retail sector and subsequently branched out to other business such as specialised retails, real estate and tele-communications. A brief timeline of their growth is depicted in Diagram 1 below.

When new labour laws to reduce employee training hours in Portugal were implemented, SONAE MC had to review and revise their staff training programmes. To achieve this, the company undertook an OJT (on-the job-training) approach which held the potential of combining an action training program in lean. The next step was to review selected focus areas such as their goods replenishment processes with the help of their regional operations managers. This served as a pilot programme which proved to be successful. Subsequently, they expanded their focus areas to their various store operation processes across all their retail outlets.

After 12 months into implementation, SONAE MC performed an audit review, which showed a large variation in standards between retail outlets. To tackle this problem, the company had to work on improving its existing lean implementation tools, which was achieved by using a well performing store to serve as the benchmark. Data on efficiency and productivity was then collected across the various logistical processes throughout the stores and the processes were individually streamlined and optimized, in order to meet the benchmark standards. This lean implementation, facilitated, to name a few, the increase of productivity, reduced inventory holding levels, reduction in stockouts, reduced product damages and increase in overall customer satisfaction across their operations.

Discuss how SONAE MC generated enough momentum to start the lean project and describe the life cycle of this new initiative.

Sonae MC generated momentum through three distinctive actions. They were; (1) consultation from Kaizen Institute on their training programme implementing lean tools, (2) presentation on the idea of lean operation to the senior management and (3) expansion of the lean programme to all parts of the store after its successful pilot programme. The implementation of lean has transformed the knowledge and management of Sonae MC. These practices encourage the continuous improvement and its fundaments are based on the five principles that contribute to the life cycle of Sonae MC.

Defining Value

In the case for Sonae MC, its main priority was to remove excess ‘Muda’. Mainly to increase its productivity and improve the processes that affects the daily operations. As such, the first stage of the cycle was to focus on revamping the store processes by applying lean tools.

Measure

The second principle was to develop a plan and formalise best practices. Some of these best practices were learnt from other successful stores. Some examples of processes that Sonae MC relooked were, standardizing the procedures for replenishment activities, improving the organisation of the warehouse, improving in labelling of merchandise and improvement of transport equipment.

Analyse

Akin to the expansion of lean programme each store management had to identify the most obvious problems and were to provide training to the workforce based on a lean manual. These improvements were suggested by ‘Store Managers’ but these ideas were enriched and put into action by the teams in these store that brought along improvements.

Improve

The following principle is mainly focusing on the most efficient inventory movement where Sonae MC implemented the “Just-In-Time” method to minimise stock maintenance during the store’s operating hours. This ensured minimal inconvenience to the customer and the stocks were also now being kept at the store where it was more productive.

Control

It is important to adopt a “want to improve” attitude. The last principle will be on post implementation review. i.e. to review the processes and its relevancy to the operations. After identifying the benchmarks, the shortfalls in the other stores should be addressed to create uniformness across. This would encourage better flow in work processes and develop a continuous improvement culture, by implying the Lean framework.

Evaluate how SONAE MC dealt with the scale and complexity of the implementation

SONAE MC successfully dealt with the scale and complexity of the implementation by carrying it out in phases. In the first phase they provided training for their staff to first understand the lean tools and applying the tools learnt in some of their store process. In the second phase they expanded their lean implementation to all their store process and in the third stage they audited and made sure lean implementations levels were consistent across the various stores.

In the first phase SONAE MC first provided training to their staff, in this case the regional operations managers, store managers, area managers and key operators then eventually all the staffs. This ensured that the leaders of their respective stores understood the lean tools before they applied it to their respective stores. This allowed the respective store managers to be involved in the change. It also enabled the managers to cascade the tools learned to staffs working in their outlets which created commitment to the change. By getting everyone involved they avoided the potential risk of resistance to change.

SONAE MC implemented the lean principles to their business in parts instead of targeting the entire business model. As mentioned in the case study, only three store processes were identified to apply the lean tools. By doing so SONAE MC ensured that outcome of the new implementation would be beneficial