Smith Radiators, Inc. is undoubtedly one of the major players in the automobile industry, being a supplier of radiators to some major automobile suppliers. In fact, it supplies fifteen percent of the Auto of America, Inc. (AAI) demand for radiators in 1991, competing with five other major suppliers and some minor suppliers. On the side of Smith Radiators, AAI is their major customer. About thirty three million dollars of its sales during the early 90’s came from its partnership with AAI. Thus, Smith Radiators must take good care of the business partnership with AAI to maintain or further improve its financial stability.
And this could be done if Smith Radiators could sustain and further improve the quality of its products and services. But a more challenging task appeared before Smith Radiators on April 20, 1991. AAI demands a major change to its company. Smith Radiators, being a partner of AAI for thirty years, is obviously affected by this. Due to recession, AAI decided to do some cost reduction but with sustainable quality improvement on its products and services and effective response to its customer needs. AAI will be shifting from its traditional way of purchasing supplies to the so-called just-in-time basis or the JIT.
Some major changes using the JIT philosophy would be streamlined purchasing operations and few certified suppliers. On the part of Smith Radiators, this needs immediate attention. It cannot afford to lose its major customer. The president of Smith Radiators called for an emergency meeting with the company’s department heads to address the demands of AAI. Being a company that does not practice JIT that time, the president assumed that problems will arise upon adapting JIT onto their functional areas. Vice-presidents were asked to identify these problems.
One of the vital areas to be taken in consideration is the workforce or the labor force. This is under the Human Resource Department. JIT would definitely affect the workforce. Currently, the recruitment process adapted by Smith Radiation is done by the so-called internal recruitment, wherein a prospective candidate will be recommended by a current employee. The candidates will undergo try-outs and interviews, and the successful candidates will be undergoing informal training with fellow workers and under the supervision of a foreman.
The workers participate on this recruitment strategy because they earn some extra money if their recruits are accepted and could be able to work for two years in the company. With JIT, that would be a much different thing. The workers of Smith Radiators, like workers of other companies, also have their union. The union serves as the unified voice of the workers that answers, accepts, or contradicts issues that directly affect them. Even before the proposed JIT, the union has several conflicts with the management. The workers’ wage is in fact much lower relative to those working for competing companies.
It is saddening that the workers agreed for this low wage for the sake of job security, which is a responsibility of the management. The management of Smith Radiators obviously takes advantage of this situation. They were able to save on their labor cost. On the other side, the job security is what’s important here, considering that most of the workers were high school drop-outs. Another issue is that women were not allowed to work in some of the areas, like those areas that use lead-based chemicals, where higher wage is given for the service.
In my point of view, it is just right to ban women in this particular work, because their health will be at risk. This ban, I must say, is a commendable action of the Smith Radiators’ management. But the major concern of the union is that the company is overstaffed by twenty percent, and by the end of 1991, end of the workers’ contract, some of them might be laid off. As a result, workers were dissatisfied with their work. In fact, absenteeism became a habit to some or maybe majority of the workers.
Considering all these issues or conflicts between the management and the workforce, it is expected that the vice-president for human resource spends most of his time dealing with the union’s concern, when in fact; some of his times could be used for brainstorming, structuring activities that could improve the working attitude and discipline among the workers. With the need to comply with the demand of AAI, Smith Radiation needs to do some changes especially on its management strategy. The goal is to get a certification to operate as AAI supplier, adapting JIT philosophy in their workplace.
JIT depends on elimination of waste, total quality control, supplier participation, and employee’s participation on decision makings. The expected result of JIT would be shorter lead time in production, flexible manufacturing, reduced inventory, higher quality of products, and increased productivity. To be certified, four criteria must be met by Smith Radiation. First: quality of supplied parts. On the current system of Smith Radiators, considering the fact that the company does not provide formal training to their new worker, low quality of products will be produced.
Generally, the company currently follows the defender type of strategy, wherein it stays in its comfort zones. Research shows that training and development are guaranteed to be needed at some point of the strategic growth process. And the current human resource department seems to overlook this aspect. But I appreciate the fact that the vice-president for human resource communicates with human resource officers from other companies that were able to practice JIT philosophy already. This is a good start. Smith Radiations could learn from the experiences of other companies and use these experiences as baseline for starting JIT.
Second: frequent delivery. The AAI demands that two times per day will be the transfer of products from Smith Radiators. The vice-president for human resource might realize that he needs to train the workers work flexibly. Meaning, he must be multi-tasking for him to respond to sudden changes in the production schedule. This would be an effective move by Smith Radiators, wherein they could save from their labor cost, contrary to the current management practice where a worker is skilled only with a specific type of work. However, on the part of the workers, some of them might be laid off.
The management may consider retaining only the most productive workers, and in return, providing them with better wages and development programs. But the good thing is that workers will be challenged to do better to retain their position. Third: reliability of delivery. Quality must come first. In JIT, the human resource department will train the workers to perform during critical decision makings. The worker must be able to inspect his own work. For example, during a process, if the worker sees that the product is out of specification, he can stop the whole process.
And this could only be possible if the worker is fully knowledgeable with the basic technicalities of the process. On the part of the worker, this is a good opportunity not only to obtain a higher wage but opportunity to explore new knowledge and opportunity to practice responsibility. In addition to this quality issue and reliable delivery, the management, imploring JIT philosophy, discussions in round table as strategized by the vice-president of human resource is actually an effective way to obtain new ideas.
This would be a perfect venue for the workers to communicate with their co-workers, supervisors, and if possible with the managers. These workers are the actual people that experience the process. They could have better ideas to explore changes in processes without sacrificing the quality of the products. The supervisor’s or foreman’s role on this part of the strategy would be to confirm the suggestions of the workers using scientific trials and experiments. Fourth: number of shipments received in exact quantities.
Workers being multi-skilled, self-disciplined, group-oriented, and has good quantitative and diagnostic skills, there would be no doubt that Smith Radiators can comply with the demanded two shipments per day at ten radiators per shipment. Over-all, the strategy that is proposed by the vice-president for human resource comply with the goals of the company and supports the business strategy, the prospector business strategy, which aims to obtain certification, and in the long run, sustain its business partnership with AAI.
The company, however, is expected to provide job security, fair wage, and respect to the workers. In essence, a strategy made by the human resource department must capture the “people element,” as it is called by an article in a reliable website, of what is intended to be achieved in the medium to a long run by an organization. According to Richard Chang, author of The Passion Plan at Work, HRM focuses mainly on HR Research and Information Systems, Union/Labor Relations, Employee Assistance, and Employee Compensation/Benefits. In the case of the Smith Radiators, the human resource department did a very great job!