Shanghai Baolong Automotive Corporation Harvard Case Solution & Analysis

Shanghai Baolong Automotive Corporation Case Study Solution

Baolong is a Chinese company that works in the field of producing and selling of the auto parts.For more than a decade the company has been working on atraditional method of production with no sign of implementing the lean production system which seems to be taken as no different from another process. However, due to the increasing reputation of the Baolong auto parts that lead to increased order, the company faced immense pressure from the clients for not completing the orders on time.

In addition, the company started facing the quality problems in its tireswhich were sold in theNorth American market. Due to these factors, Zhang, alongwith his vice president and certain team members took the initiative to implement the lean method. The method failed to offer the fruitful result in the initial years which were the outcome of employee’sresentment and resistance to change, weak and incapable human resource, and efficient training of the labor to implement the new process.

Also, the whole situation represents a deadlock between weighting Quality more over efficiency, or it should be viceversa. Since the relation between quality and efficiency is inverse, hence the company has to decide which element to consider vital for the sustainability of the enterprise.

Under such conditions, the company should engage the employees in the process of change, which will offer ownership and will result in sustainable change and high productivity. It should also align the department on the same page by establishing a hybrid team that includes the mix of members from the different department. This will allow the teams to analyze and see the world through a different lens, helping each other to understand the stance and position of each other thus resolving the conflict.

INTRODUCTION

Baolong is an auto-part manufacturing and selling company that operates in Shanghai into the US. The company manufactures quality Tires, exhaust vault,and other auto-parts and since it has developed a strong market demand for quality offering, it is receiving a lot of orders to complete.

The company follows traditional manufacturing and production system that results in delaying the delivery of the order along with a lot of material struck in work-in-process. Also due to the delays, the company has to deliver the orders through air transport to expedite the delivery which incurs an additional delivery cost to the enterprise. Not only this, since the order capacity has increased, the company tries to catch up with the pace of orders by overtime production, which has yet again failed because of the traditional production system.

In addition to this, the Chinese government has shifted the exchange rates which have directly affected the profitability return of the company along with increased cost of raw material. Under such scenario, Zhang-the president of Baolong, has decided to implement the lean process into its plants that are located in Shanghai and An hui (which company opened to mitigate the high operational cost) to improve and expedite the process of production with less wastage and efficiency in delivery.

However, the results of lean manufacturing process failed to improve the situation of the company. The major factors pertaining to the results were the inadequate knowledge and skill of the labor to utilize the capacity, the difference in viewpoint of the management and the employees regarding the lean process, the resentment of labor in implementation of the process, resistance to change and inability of the top management to decide between quality and efficiency as the standing stone of the company.

These factors altogether failed the complete implementation of the process. However, the management believes the system is fruitful and hence look for tactics and techniques to overcome the pertaining issue to implement the process fully and to meet the expectation of internal and external players through operation al efficacy and organizational structure and culture.

Problem Statement

The primary problem is the implementation of the lean process effectively, throughout the company to improve the order completion rate and to reduce the backlog.

However, there are also secondary problems that are causing operational inefficiencies and resistance in the implementation of the process

  • The misalignment of vision and objectives between the management and the employees leading to resistance or low productivity.
  • The difference in viewpoint in weighting the factors like quality efficiency
  • The internal resistance from employees in implementing the new process causing inefficiency in wok done and quality produced.
  • Lack of teamwork, leading to “blame game” which is reducing the effectiveness of the operations and driving the attention away from identifying the key loopholes in the process.

Analysis

1-    Why there is a need to implement or adopt a new process?

The company has increased its target segments by getting into the markets of US. The company produces quality auto parts which have become the competitive edge and thus becomes the factor for the increased orders over the period of time. Since the company from the start used the traditional method of operations, which utilizes the intuition technique to forecast the sales, utilizes additional raw material and holds the raw material in work-in-process phase. These factors altogether delayed the operational efficiency of the company leading to order backlogs, low profitability, increased freight cost and dissatisfaction of the customers.

In addition to this, the traditional process incurred an additional cost of raw material which became expensive due to Chinese government revision of exchange policy. Under such circumstance and increased pressure to fulfill the order, the company has to shift toward the lean process which includes Just in time (JIT) and optimal production forecast feature that could help the company overcome the issues of excessive use of raw material, efficient production and delivery of orders on time.

Shanghai Baolong Automotive Corporation Harvard Case Solution & Analysis

 

This will also allow the company to overcome the additional freight cost which is incurred due to fast delivery of orders to the end user to save time that has been consumed due to delay in order processing.Also, the process will enable the company to reduce the operating cost by controlling the working hours which are long and extensive under the traditional method to meet the demand.............

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