Executive Summary
This paper is an in-depth analysis of the original research of four authors: Cabrera, Corpus, Maradigue, and Alvarez (2020). These authors highlighted the challenges that small- and medium-sized enterprise (SME) food companies in Peru faced: reduced storage time, food contamination, high material costs, long lead times, and low productivity. To overcome problems, the authors used tools such as Value Stream Mapping (VSM), Fishbone Diagram, Pareto Analysis, 5S Method, Statistical Process Control (SPC), Hazard Analysis, and Critical Control Points (HACCP). They conducted a comprehensive, methodologically planned analysis.
The company achieved significant improvements after a two-month pilot mapping, using phase indicators to monitor progress. There was a 36.5 percent increase in the company’s cash flow and a lower return on goods purchased. These observations resulted from applying Lean and SPC principles, including decreased lead times, increased productivity, improved product quality, and cost savings.
Introduction
In a new, distinctly aggressive commercial environment, SMEs in the food industry face several operational challenges that affect their productivity and profitability. This article examines the most unusual and demanding situations faced by an SME food company, including reduced shelf lives, inconsistent stock, and rising ingredient costs. These demanding situations affect a company’s bottom line and threaten its reputation and customer satisfaction. In response to those challenges, the corporation embarked on a journey to identify the root causes of these troubles and implement targeted solutions to enhance its business efficiency and effectiveness. Therefore, this text sets the stage for an in-depth evaluation of the organization’s journey, emphasizing the benefits of adopting an established approach such as SPC.
Main Problem Facing the SME Food Company
There were problems with reduced shelf life, food contamination, and resource use. In 2020, a study by Cabrera et al. found that these problems affected SMEs the most. In 2018, it was profitable in the Peruvian market, accounting for 2.1% of regular products purchased by consumers (Cabrera et al., 2020). On average, 4,325 food items were returned during this period, resulting in a nine percent deficit in total sales (Cabrera et al., 2020). Moreover, the company faced problems with priority mismatches, exorbitant prices, long lead times, and low productivity (Cabrera et al., 2020). The authors used several tools and methods to assess prevalence and significance, identify the violence and its causes, and find a specific issue.
Analysis of the Problem
Extent and Implications
The researchers conducted an analysis of the company’s production process, focusing mainly on value stream performance metrics and workflows, as a basis for their investigation to understand the nature of the impact. The research analysis was easier due to sufficient data on key indicators such as lead time, defect rates, customer satisfaction levels, and production costs (de Paula Ferreira et al., 2022). The process enabled them to comprehend the level of the problem and its repercussions for the business. The information the authors obtained gave insight into how inefficiency and waste impacted the firm’s performance and profitability.
Causes and Root Cause
The authors draw on Ishikawa’s method to identify factors contributing to the company’s 2018 sales decline. First, they identify workforce deficiencies, noting a lack of skills and alignment with the company’s goals (Cabrera et al., 2020). Second, supplier delays in delivering raw materials disrupted production schedules, preventing production from meeting customer demand. In addition, inadequate quality assurance measures have led to customer dissatisfaction and a degradation of market reputation (Cabrera et al., 2020).
Moreover, the company faced challenges with fluctuating customer demand, rising inventory costs, and inefficiencies due to inadequate inventory. Poor performance, in both supply chain operations and business cycles, was evident (Cabrera et al., 2020). Finally, recurring breakdowns and the lack of prompt repair of production equipment exacerbated operational problems.
Tools Used for Analysis
Value Stream Mapping (VSM)
VSM is a widely used tool for exploring and improving the flow of materials and information during the production process. Its purpose is to identify waste areas such as overproduction, waiting time, excess inventory, and unnecessary transportation (Cabrera et al., 2020). By mapping out the present-day state of the production process and designing a future map, the authors may visualize the value flow and identify opportunities for improvement.
Fishbone Diagrams (Ishikawa Diagrams)
Fishbone diagrams’ main function is to identify and categorize potential causes of a problem. The diagram’s structure resembles a fishbone, with the problem statement at the head and branches representing different categories of possible causes. Common categories include the 5Ms (materials, measurement, manpower, methods, machines) and environmental factors such as the workplace environment and policies (Cabrera et al., 2020). By brainstorming potential causes and organizing them into categories, the authors could systematically analyze the root causes of the company’s problems.
Pareto Analysis
Pareto Analysis is a statistical method to prioritize issues or reasons based on their relative importance. According to the Pareto Principle, 80% of consequences come from 20% of causes (Campbell & Brauer, 2021). By identifying and focusing on the most significant participants in the firm’s problems, the authors ought to allocate resources more correctly and address the root cause that has the greatest effect on performance.
Statistical Process Control (SPC)
SPC is a tool that requires various inspection methods designed to evaluate processes, ensuring that quality standards are continuously improved and maintained throughout production. One of the main applications of SPC is the use of control charts, which provide a graphical representation of process behavior over time, distinguishing between common causes and change-specific causes (Li et al., 2021). These estimates immediately facilitate support and intervention, optimizing within desired limits.
Another useful SPC tool is system capability analysis, which examines various indicators to assess the system’s ability to meet specification requirements. This analysis provides feedback on feasibility within tolerance limits and identifies areas for improvement (Li et al., 2021). In demanding efficiency, organizations prioritize proactive improvement strategies, resulting in greater efficiency and product stability (Li et al., 2021). Lastly, using SPC techniques makes work easier by supporting continuous system performance monitoring, identifying location modifications, and implementing targeted actions to improve product quality and efficiency.
Hazard Analysis and Critical Control Points (HACCP)
HACCP is a systematic approach to food safety management that focuses on identifying, testing, and controlling hazards throughout food production. According to Cabrera et al. (2020), it helps identify preventive measures to reduce this risk to an acceptable level. Monitoring systems and comprehensive programs were used to ensure the effectiveness of control measures and compliance with food safety regulations (Li et al., 2021). The company maintains extensive records and documentation related to HACCP procedures, monitoring activities, and sanitation practices to demonstrate compliance. By applying HACCP principles, the authors aimed to ensure the safety and quality of food products, meet regulatory requirements, and instill consumer confidence in the products’ reliability and quality.
Types of Wastes Attributed to the Disclosed Problems
The problems in the SME food company’s production process likely led to various types of waste, including overproduction, waiting time (idle time), and inefficient transportation. Overproduction occurs when more products are produced than required, leading to excess inventory and storage costs (Li et al., 2021). Waiting or idle time results from production delays caused by delays in obtaining materials, equipment, or information.
Freight movements result in lost productivity for overproduced products, thereby increasing infrastructure costs. Excess inventory ties up capital and drives up freight costs. At the same time, the waste of speed and innovation represents speed and resource costs, unnecessary steps that do not add value to the final product, increasing costs and handling time.
Main Solutions Implemented
The predominant responses implemented in the observed case focused on adopting Lean principles and SPC strategies. The authors chose the following approaches because they effectively address the diagnosed problems and their root causes.
Lean Principles
The reason for using this principle was to cast off waste and minimize costs for the customer. The business enterprise applied diverse techniques rooted in the Lean method, including 5S (Sort, Set in Order, Shine, Standardize, and Sustain), enabling it to minimize the factors that led to cross-contamination and product oxidation through classification, organization, discipline, cleaning, and standardization. Additionally, using 5S enabled them to create a culture of hygiene and safety, which is essential in the food industry for producing quality food. The authors outlined several steps to ensure they use 5S effectively, and the first was to analyze the production work environment to gain insights into the activities to be carried out.
The next step was to define the activity plan based on each workspace’s results. Activities such as classifying necessary and undefined materials and equipment, ordering the required materials, and cleaning and inspecting materials and the workspace were carried out. Carrying out these activities enabled the creation of a 5S culture among the company workers.
The organization also used VSM, which was useful for identifying value-added activities and detecting where waste and cross-contamination began. Several procedures were used, including the number of operations, cycle time, value-added (VA) time, priority risk non-value-added (NAV), and available time to work. Obtaining numerical data enabled the authors to calculate the time spent on VA and NAV, which was essential for identifying the exact problem and selecting the appropriate tool to solve it.
Statistical Process Control (SPC)
SPC involves monitoring and controlling processes through statistical techniques to ensure consistent quality output. The authors used SPC techniques, including control charts and process capability analysis. Control charts are graphical tools used to monitor method performance over time, enabling the identification of trends, shifts, or anomalies. These tools helped distinguish between common-cause variants inherent to the procedure and special-cause variation due to external factors, facilitating timely intervention and corrective action. In addition, process capability analysis was employed to read technique capability indices with Cp, Cpk, Pp, and Ppk. The enterprise assessed the capacity of its tactics to fulfill targeted quality requirements. This analysis identified areas for improvement and optimization, guiding efforts to improve technique performance and consistency.
Results Achieved
Reducing Lead Time
Streamlining processes and eliminating waste have enabled the company to operate and significantly reduce processing time. This improvement will allow the company to respond more effectively (Li et al., 2021). They were rapidly increasing customer satisfaction and loyalty to customer requests. A short lead time facilitated proper inventory management and reduced the risk of over- or underproduction.
Improved Productivity
Eliminating non-value-added activities and adopted JIT to produce when demand arises. The principles of production led to a significant increase in productivity throughout the organization (Li et al., 2021). It enabled employees to focus on value-added tasks and improve efficiency. These productivity gains increased performance and supported profitability and competitiveness.
Enhanced Product Quality
The company identified and addressed policy variations through SPC methods. This proactive approach to quality control resulted in high-quality products with minimal defects and inconsistencies (Li et al., 2021). To ensure adherence to quality standards while maintaining strict adherence to program procedures. The firm built on its reputation for delivering high-quality products to its customers.
Cost Savings
Reducing waste and improving efficiency resulted in higher cost savings for the company. Areas such as inventory management, production, and staff dancing are achieving remarkable cost savings due to streamlined processes and improved efficiency (Li et al., 2021). In addition, reducing defects and rework is associated with improved product Quality.
Benefits of Applying Lean and SPC
The advantages of applying Lean and SPC ideas extend beyond the SME food industry and are broadly applicable across various industries. Research and courses have highlighted numerous benefits, as discussed below.
Improved Efficiency
Lean standards are essential in corporations, as they help them eliminate waste and streamline processes, thereby enhancing productivity and effectiveness (Gao et al., 2023). By optimizing workflows and eliminating unnecessary tasks, teams can accomplish more with the same resources, improving operational performance and resource utilization.
Enhanced Quality
SPC strategies enable agencies to monitor and adjust their tactics effectively, leading to higher product quality and fewer defects (Costa et al., 2020). By proactively identifying and addressing variations in approaches, companies can ensure consistency in product quality, leading to greater customer satisfaction and reduced rework or scrap.
Cost Reduction
One of the primary advantages of Lean and SPC is price discounts. When firms reduce waste and improve performance, they can easily achieve price savings (Qureshi et al., 2023). Consequently, reduced lead times, improved resource utilization, and fewer defects contribute to lower operational costs, thereby improving profitability.
Customer Satisfaction
Lean and SPC methodologies prioritize integrating customer needs to create amazing products and services. With expertise in continuous improvement and process management, companies can refine customer satisfaction and loyalty (Rodchua, 2023). Consistent commitment to products that meet or exceed customer expectations strengthens relationships and fosters long-term customer loyalty.
Competitive Advantage
Organizations implementing Lean and SPC gain a strong market advantage. Organizations can attract diverse customers and capture a large share of the target market. They can achieve this by offering higher-quality first-class products at a lower price than their competitors (Mohammad Kanan et al., 2023). In addition, the ability to respond instantly to changing customer needs and market trends enhances their competitive position.
Agile vs. Lean for a Company Adopting a Cost Leadership Strategy
Implementing Lean principles would likely yield greater benefits for a company pursuing a cost leadership strategy than adopting an agile approach. The section below discusses the reasons behind choosing Lean principles over Agile.
Alignment with Cost Reduction Objectives
The Lean technique is about removing waste and optimizing processes to reduce costs while preserving or improving quality. The task aligns flawlessly with the objectives of a cost leadership strategy: to provide products or services at the lowest possible cost in the market (Cabrera et al., 2020). By implementing Lean, the corporation can systematically identify and eliminate inefficiencies, thereby reducing manufacturing costs and enhancing competitiveness.
Systematic Approach to Efficiency Improvement
The Lean approach provides an established and systematic method for improving efficiency. It offers a toolkit of methodologies that includes 5S, price-move mapping, and non-stop development (Kaizen), which enable corporations to identify and eliminate waste at each step of the production process (Cabrera et al., 2020). This systematic approach ensures that value-saving measures are effectively implemented and sustained, providing long-term benefits for the agency.
Focus on Quality Maintenance
While fee management emphasizes cost minimization, it is similarly vital to maintain product quality to satisfy consumer expectations and preserve brand recognition. Lean concepts prioritize satisfactory development alongside cost reduction, ensuring that efficiency gains do not come at the expense of product quality (Li et al., 2021). This balance between price reduction and effective protection is important for the long-term success of a cost management strategy.
Less Emphasis on Flexibility
Although agile strategies are valuable for adapting to rapidly changing market conditions or consumer choices, they may not be equally important for organizations seeking payment agility. While enabling businesses to respond quickly to market changes, Lean strategies specialize in maintaining a stable, high-performing business environment with minimal required change (Li et al., 2021). Cost leaders can achieve greater efficiency and stability by reducing waste and prioritizing, ultimately commanding their competitive advantage in the marketplace. While faster, leaner methods offer advantages, the strategic priorities of cost leaders may be more in line with the principles of lean communication.
Conclusion
The author’s article shows how to overcome the shortage by implementing effective business processes, such as Lean and SPC, to help reduce challenges faced by SMEs in the food industry. The strategy has proven effective in helping the company improve efficiency, reduce handling time, and ensure quality through VSM, fishbone diagrams, Pareto analysis, 5S methodology, risk analysis, and HACCP. The results demonstrate the effectiveness of Lean SPC principles in improving and enhancing the productivity and competitiveness of SMEs. Overall, the case studies provide valuable insights into implementing Business strategies to overcome challenges and achieve sustainable growth in the food industry.
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