Poor performance of production supervisors at heavy hitter vietnam company

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Nguyen Anh Phuc

Poor performance of production
supervisors at Heavy Hitter Vietnam
company

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2019


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Nguyen Anh Phuc

Poor performance of production
supervisors at Heavy Hitter Vietnam
company
MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: Dr. TRAN PHUONG THAO

Ho Chi Minh City – Year 2019
i

ACKNOWLEDGEMENTS
__________________________________________

I would like to acknowledge all who supported me during my studies without
whom my thesis could not be completed in a proper way.
Specially, I would like to thank my supervisor-Dr. Tran Phuong Thao for all her
guidance and support. Without her help, I could not complete my thesis.
I also would like to thank to all employees of Heavy Hitter company for their
support during my investigation to complete this thesis.

ii


LIST OF ABBREVIATIONS
SBD: Stanley Black & Decker Inc.
NPD: New product development project
HR: Human resources
QC: Quality Control
GM: General Manager
WI: Work instruction
IT: Information technology
ERP: Enterprise Resource Planning
MBO: Manage by objective
KPI: Key performance indicator
PAS: Performance appraisal system

iii

LIST OF CHARTS
Chart 1: Heavy Hitter Export Regions

P. 2

Chart 2: % of 2018 Heavy Hitter Revenue

P. 2

Chart 3: Finished products rejected by SBD Jan ~ Mar 2019

P. 4

Chart 4: Sold value vs Defective value per SKU Jan to Mar (K US$)

P. 5

Chart 5: Value of Good vs. Defective product (K US$) Jan to Mar 2019

P. 5

Chart 6: Causes validation survey result

P. 21

iv


LIST OF FUGURES
Figure 1: Heavy Hitter Vietnam Organization Chart

P. 3

Figure 2: Problem mess

P. 9

Figure 3: Initial cause and effect map

P. 17

Figure 4: Causes fish born diagram

P. 19

Figure 5: Final causes and effect map

P. 22

Figure 6: Action plan and time line

P. 30

v


LIST OF TABLES
Table 1: Lost / sold ratio

P. 6

Table 2: Heavy Hitter Monthly Defective Report

P. 12

Table 3: Data Analysis from table 2

P. 13

Table 4: Data Analysis from table 2

P. 14

Table 5: Causes validation survey result

P. 20

Table 6: Current vs. New appraisal system

P. 24

Table 7: Benefit of appraisal methods analysis

P. 25

Table 8: Benefit of resources for implementing new PAS

P. 25

Table 9: Current vs. New PAS

P. 27

Table 10: Action plan

P. 28

Table 11: Implementing cost and monetary benefit of new PAS

P. 29

vi


TABLE OF CONTENTS
Executive summary
CHAPER 1: Company overview
1. Problem context
1.1 Company background
1.2 Symptoms
2. Problem Analysis
2.1 Possible problems
2.1.1 Poor warehouse management
2.1.2 Weak quality control system
2.1.3 Poor performance of production supervisors
2.2 Main problem
3. Problem definition and consequence
3.1 Problem definition
3.2 Consequence
4. Initial possible causes

P. 2
P. 2
P. 4
P. 7
P. 7
P. 10
P. 10
P. 10
P. 11
P. 14
P. 14
P. 15
P. 16

CHAPER 2: Solution selection
1. Real causes
2. Main cause validation
3. Alternative solution
3.1. Potential solutions
3.2. Solution suggestion
4. Action plan

P. 18
P. 19
P. 23
P. 24
P. 28

CHAPER 3: Supporting Information

1. Research method summary
2. Interview transcript
3. Reference

P. 31
P. 32
P. 39

vii


0


EXECUTIVE SUMMARY
In manufacturing or any other kind of businesses, quality of product or service is
one of the most importance to the survival of that business. If a company supply poor
quality products, there will be no customer and no market for their business to develop.
Therefore, the main purpose of this thesis is finding key problems lead to poor quality
products of Heavy Hitter Vietnam and provide solution for those problems. Heavy Hitter
Vietnam is hand tools manufacture. Their main products are hammers and striking tools.
In early of 2019, their strategic customer Stanley Black & Decker (SBD) detected a high
quantity of defective hammers shipped from Heavy Hitter Vietnam end of 2018. This is a
big issue for both side. For customer SBD, the issue will cause late new product
launching of SBD. For Heavy Hitter side, it cost a lot of money to Heavy Hitter to replace
good products by air shipment as well as sorting fee for all inventory at customer SBD’s
warehouse. The main problem is identify based on empirical analysis, process-oriented
analysis from interview key stakeholders and process audit to find out potential problems.
The main problem is validated based on company data analysis, process audit and
literature as support. From those analysis, the poor performance of production supervisors

is identified as the main problem caused the quality issue at Heavy Hitter Vietnam.

1


CHAPER 1: COMPANY OVERVIEW
1.1 Problem context
1.1.1 Company background
Established in 2002, Heavy Hitter Vietnam is hand tools manufacture. Their main
products are claw hammers, long handle hammers and other striking tools. Total
employee in 2018 is 310 people. This is Taiwanese private own company. All company’s
products are export with main market is North America which is contributed 81% of total
product volume as show in Chart 1. Company customers are The Home Depot, Stanley
Black&Decker, TTI and Fiskar in Chart 2. Company location is Trang Ban Industrial
zone, Tay Ninh province, Vietnam. Heavy Hitter Vietnam is one of three members of
Easy Strike group included Easy Strike Taiwan and Easy Strike China. All 3 companies
in Easy Strike group are sharing similar customers as well as similar products.

Chart 1: Heavy Hitter Export
regions

Chart 2: % of 2018 Heavy
Hitter revenue
The Home Depot

9%

North America

10%

Europe

Stanley
Black&Decker
TTI

10%

Australia
20%

50%
Fiskars

81%

20%

Source: Heavy Hitter company

2


Figure 1: HEAVY HITTER VIETNAM ORGANIZATION CHART

Source: Heavy Hitter Vietnam

3

1.1.2 Symptoms
In year 2018, Heavy Hitter Vietnam has 3 new product development projects
(NPD) with customer Stanley Black & Decker (SBD). All the test and qualification
process are completed for these NPD projects and company moved to mass production. In
Quarter 2 2018 company started to ship their mass production lots to SBD’s warehouses
all over the world. Follow requirements of customer SBD, these New products need to be
available in SBD’s warehouse all over the world with required quantity before the
launching date of these new products. Order quantity is high, and the company need to
ship their new product to SBD’s warehouse progressively. In early of Jan 2019, customer
SBD follow their regular inspection procedure to check Heavy Hitter’s new products
shipped to their Fontana warehouse in The USA and found out that a high defective rate
during their inspection. An alarm message was sent immediately to all SBD’s warehouse
all over the world included warehouses in USA, in EU as well as Asia to communicate
about this quality issue. Top management team of SBD decided to put on hold all New
products of Heavy Hitter and conduct 100% inspection in all their warehouses. A high
quantity of defective was detected and quarantined during inspection time Jan to Mar
2019 as show in Chart 3. Heavy Hitter company is requested by SBD to take action
immediately to solve the quality issue and ship all replaced products by air to all SBD’s
warehouses in the world. The US Dollar value of the Sold products compare to defective
products claim by customer SBD show in Chart 4

Chart 3: Finished products rejected by SBD Jan ~ Mar 2019
35,000
30,000
25,000
20,000
15,000
10,000
5,000

-

76%

34%

80%
60%

41%

32%
12%

20%

40%

25%

6%

3%

3%

1%

10%

20%
0%

GOOD product quantity

Defective quantity

Defective Rate

Source: SBD customer
4


Chart 4: Sold value vs Defective value per SKU
Jan to Mar 2019 (K US$)
$294
$242

$226

$121

$133
$101

$77
$30

$45

$56

$3

Sold value

$11

$34
$11

$27
$7

$33

$48
$2

$1

$34
$0

$20
$2

Defective value

Source: SBD customer

Beside the loss of defective product claimed by customer SBD at US$ 365,000,
company must pay a big amount of airfreight charge for total more than fifty thousand of
new hammers to replace defective
hammers in all warehouses of SBD.

Chart 5: Value of GOOD VS Defective
product (K US$) Jan to Mar 2019

This airfreight charge is estimated at
around US$ 250,000. Plus, sorting
cost for 100% of product stock in
SBD’s warehouses that SBD will

$365

charge to Heavy Hitter around US$

$828

100,000. In total, only visible side,
the company will lose around $US
715,000 on these three new product

Good product value

Defective value

Source: Heavy Hitter company

development projects with customer
SBD. The total sale value of these three projects is US$ 1,194,000 and total money that

5


Heavy Hitter must pay to solve this quality issue is at 60% of those project value. This is
significant portion for the cost of this quality issue-Table 1
Table 1: Lost /sold ratio
Total sold value to SBD
Loss from defective product
Loss from airfreight charge
Loss from 100% sorting cost
Total loss on the quality issue
Loss / sold ratio

$
$
$
$
$

Thousand US $
1,194
(365)
(250)
(100)
(715)
60%

Source: Heavy Hitter company

All analysis based on company’s data is showing that company is losing their
significant amount of money in these new product development projects with customer
SBD due to poor quality products. Even though, SBD is not their biggest customer and
revenue contributed by customer SBD in 2018 is only 20% in total $ 22 M revenue (chart
2), the owner of Easy Strike group recognized that SBD is their strategic customer to
develop their company business not only Vietnam but also China and Taiwan. Twenty
percent of revenue contributed by customer SBD in 2018 does not reflect big
opportunities that company can develop their business with this customer. SBD is biggest
hand tools manufacture in the world. And growing business with customer SBD will help
company to execute their customer diversity strategy so that they will not rely heavily on
customer The Home Depot (50% of their 2018 revenue)-Chart 2. Therefore, Easy Strike
group need to take their best effort to solve the problem as quick as possible to ensure that
the quality issue will not affect the launching schedule of these new products at their
customer SBD. In case the quality issue is not handled probably, this will give a bad
affect to other ongoing new product development projects with SBD and destroy the
relationship with this customer SBD. Besides that, the issue will also damage company
reputation in this hand tools industry.

6


1.2 Problem Analysis
1.2.1 Possible problems
In order to find potential causes of the symptom, meetings and interviews to
importance stakeholders of Heavy Hitter Vietnam was organized. Key questions for these
interviews are: Do you have any idea why the quality issue happened? Has it ever
happened with customer SBD or any other customer in large scale (significant reject rate)
like this situation? And why the company quality system cannot detect the defective

before they are delivered to SBD customer?
Nguyen D. (interview, February 11th 2019) Quality supervisor of Heavy Hitter
explained that “I cannot do my Pre-shipment inspection because warehouse supervisor
does not cooperate well with me. I cannot find finished products by myself. Warehouse
team must put all finished goods in one place and inform me to come and check. But they
did not do it. I cannot ask my Quality Manager to help because he was back to Taiwan
and there is no new Quality Manager to handle his job. No QC Manager also be the
reason why my QC team members did not implement their In-process Inspection as
required and could not detective the quality issue in advance. When the QC Manager was
here, he supported us to argue with production people that our findings are real quality
issue and production people need to fix it. Without our Manager, it is difficult for us to
ask production people to stop production and solve the quality issue. Production people
only concentrate on their production output and underestimate quality of the product. This
is the most serious quality issue ever happen here since the day I started to work here
more than10 years ago. We did not have any major issue with customer SBD in the past”.
In another interview with company’s warehouse supervisor (Nguyen N., interview,
February 11th): “We have a small warehouse. Not enough place to keep finished goods
now. We still had enough space last year. Start from early of 2018, when customers had
more order, we did not have more space to store our products. We have to place our
finished good outside of the factory floor where some spaces are available and need a lot
of time to find it when QC people ask to check finish goods or when we need to load
these finished goods on trucks to ship. Sometimes, we provide wrong data to QC people
7


or to our boss because finished goods are not gather in one place. We also do not know
products we load to truck to ship out are completed Final inspection by our QC or not”.
Tran N. (interview, February 11th 2019) Process supervisor answer that: “We have
to commit a high daily product output. Customer demand increased since early of this
year. We have to work overtime to fulfill the target of our boss. If we cannot produce

enough quantity, we are punished by salary deduction and my boss will terrify me by
scolding. When we found something wrong with our products, we tried to fix it on our
own as quick as we can. But we are not sure products are good after our rework.
And from an interview with company’s production manager (Nguyen D.,
interview, February 11th) said that he has 12 supervisors report to me. Each of them is in
charge of one process from raw material to finished goods. They are all promoted from
workers. After working here for a long time, company promote them to supervisor
position. They have a lot of work experience as a worker, but they have no capability to
organize, coach, train or supervise their team members to make sure that those workers
can do their job in an appropriate and effective way. They are not well trained for
management and leadership skills. This situation occurred long time ago but it is not an
issue since we were in small business scale. It became a problem for company when they
doubled their revenue in 2018. When workers are pushed for productivity, workers need
to work with higher speed and longer time and it make defective happen with higher rate.
If my production supervisors manage their team well, defective can be prevented or found
at very early stage and we would have solution when it still not a big issue.
After first interview with all important stakeholders, a problem mess is drawn out
to see what potential problems of the symptom are.

8


Figure 2: Problem mess

9


From the problem mess, there are three possible problems. The first problem could
be the poor warehouse management, second is weak quality control system and last but
not least, poor performance of production supervisors.

1.2.1.1Poor warehouse management
In 2018, there is a significant increase of customer demand. This is due to the
trade-ware between China and USA, many customers move their business from China to
Vietnam or other countries to avoid high tariff for their product export to USA. From
Heavy Hitter’s financial report, its revenue increased from US$ 13.3 M in 2017 to US$
22.4 M in 2018. This is almost 70% increasing. Higher revenue is equal to more products
are produced in year 2018. It means that company will have more raw material and more
finished goods store in their warehouses, but the size of warehouse floor cannot increase
any more. This cause congestion of product moving flow. Therefore, warehouse people
keep finished goods at everywhere at factory floor and have a no-good tracking method
for all related people to know exactly quantity, kind of product and location of these
finished goods when needed. Only worker who keep that finished goods know where
they are.
1.2.1.2Weak quality control system
In the recode of HR department, from May 2018 to Dec 2018, company have no
Quality Manager. The Manager was transferred back to Taiwan Head Office to support
their Taiwan plant for another importance project in Taiwan. During that period, the QC
Supervisor need to manage all QC staffs and report to the General Manager directly. From
work experience record, the GM has no experience in Quality control and cannot give a
support to his QC team as good as the previous QC Manager.
1.2.1.3Poor performance of production supervisors
From our observation and process audit, company has total 312 people is working
in production floor. This number included 1 production Manager and 12 supervisors.
Each production process has around 20 to 30 workers and 1 supervisor. All supervisors
have working experience not lower than 5 years so that they have good working skills to
make good products, but they are not capable to manage all workers in their team. It was
10


also observed during our process audit that supervisors of some manufacturing processes

have to work as other workers or operate a machine. Specially, supervisors are response
for in-process inspection of their manufacturing process, but all 12 team leaders are not
known how to performance these in-process inspection follow company standard
procedure.
1.2.2 Main problem
Starting from the moment the quality issue detected at warehouse of customer
SBD, the customer requested Heavy Hitter need to have immediate containment actions.
First action is 100% of finished goods need to pass visual inspection by Heavy Hitter QC
before packing. Second action is all shipments need to complete Pre-shipment inspection
by QC of SBD customer and get their approval prior to shipment. These immediate
containment actions requested by SBD customer ensure that it can stop immediately
Heavy Hitter shipping bad product to SBD’s warehouse. At the same time, the previous
Quality Manager of Heavy Hitter was transfer back to support their Vietnam plant.
Company also recruited a new Quality Manager with over 15 years’ experience in
Quality Control field. These action in order to restructure and reinforce their Quality
system. Company re-trained their quality staffs for In-process and Final inspection. These
actions take effect. Customer SBD feedback that they found no defective from new
shipment lots of Heavy Hitter produced from Jan 2019. But, these actions can only stop
Heavy Hitter shipping defective product to their SBD customer. It cannot solve the
defective issue. Base on Heavy Hitter monthly defective report of Jan 2019 in Table 2,
company produce 110,650 pieces of hammers and 7,671 pieces are defective. The
defective rate is 6.9%. This internal defective rate is very bad compare to other hand tools
suppliers of SBD as well as Industry average (defective rate should be lower than 1%).

11


Table 2: Heavy Hitter Monthly Defective report
Month: Jan 2019
Production quantity (pcs)

Defective quantity (pcs)
Total defect rate

110,650
7,671
6.9%

Visual Defective
(pcs)

Hot
Forging

Machining

Sand Blast
I

Sizing

Sand Blast Grinding
II
Claw V

Painting

Polishing

Laser
etching

Lacquer Overmoud
coating
ing

P 1: Hot Forging
P 2: Machining
P 3: Sand Blast I
P 4: Sizing
P 5: Sand Blast II
P 6: Grinding Claw V
P 7: Painting
P 8: Polishing
P 9: Laser etch
P10: Lacquer coating
P11: Overmouding
100% visual inspection
TOTAL Visual defective

PROCESS FLOW

Manufacturing Process
17
2
0
0
0
1
0
0

0
0
3
49
72

4
1
0
0
2
0
0
0
0
5
122
134

0
0
0
0
0
0
0
0
0
59
59

115
6
3
2
5
0
0
53
233
417

0
0
0
0
0
0
0
127
127

97
3
0
0
0
9
359
468

119
5
0
0
47
573
744

132
10
0
16
497
655

38
0
32
102
172

388
271
2197
2856

375
1592
1967

Source: Heavy Hitter company

12


Further data analysis from the Jan defective report in Table 2, the analysis result is
showing that there is 77% of Visual defective was detected at 100% Visual inspection
step (Table 3). Also, from this data analysis, the self-detect rate of each process is very
low. It is only from 0% to 28% and Next process detect rate is 0% to 9% as show in
Table 4. These data analysis can conclude a poor performance of production employees:
 Internal defective rate is 6.9 % compare to 1% of Industry average. It is
showing that workers are producing high defective product.
 Self-detect rate is low. This number is telling that production supervisors
cannot detect defective of their process.
 Next process detect rate is low. The data proved that Production supervisors
cannot detect defective of previous processes.
Based on Heavy Hitter’s job description of Production supervisor position,
supervisor response for entire manufacturing process included on job training for all
workers work in his process, control quality and quantity of products of their process,
ensure that all machines and equipment of their process are under good condition. Thus,
these data analysis is showing that production supervisors are not doing their job well.
Table 3: Data analysis from table 2
Process detect
defective
Hot Forging
Machining
Sand Blast I
Sizing
Sand Blast II

Grinding Claw V
Painting
Polishing
Laser etch
Lacquer coating
Overmouding
100% visual inspection
TOTAL Visual defective

Defective
quantity
(pcs)
17
6
1
115
6
103
124
142
48
388
811
5910
7671

Rate
0%
0%
0%

1%
0%
1%
2%
2%
1%
5%
11%
77%
100%

13


Table 4: Data analysis from table 2
Hot
Machini
Forging
ng
Rejected by Self detect
Self detect rate
Rejected by Next process
Next process detect rate

Sand
Blast I

Sizing

17

24%

4
3%

0
0%

115
28%

2
3%

1
1%

0
0%

6
1%

Sand
Blast
II

Grinding
Polishin Laser Lacquer Overmo
Painting

Claw V
g
etching coating uding

0
0%

97
21%

119
16%

132
20%

38
22%

388
14%

0
0%

3
1%

5
1%

10
2%

0
0%

271
9%

375
19%
NA
NA

1.3 Problem definition and consequence
1.3.1 Problem definition
Base on a research about Supervisors' role in TQM and non-TQM firms (1),
supervisors play an importance role in quality management and improvement in
manufacturing company. One of main tasks of supervisor is convert strategies of top
management to short term implementation. Without good work of supervisors, all
product quality control standard and its specification cannot transfer fully to factory
workers who are directly made and impact on quality of their products. According to (2),
company should provide training to their production supervisors for management skills to
improve performance of their factory workers. Supervisors can influence to productivity
and product quality of workers in their team by providing help to worker or feedback
about worker performance. It will help those workers improve their work effectiveness.
Supervisor can also provide encouragement or advise to help their workers in dealing
with their personal problems. Moreover, (3) point out that main responsibilities of
supervisors are safety at work, meet target for production and quality, analyzing and

solving quality problems at their manufacturing process and provide training to all their
team members included new workers. Thus, beside meeting productivity target and
training their workers, supervisors are also in charge for quality control and solving
quality issue. In most company with a weak quality system or product quality is
underestimated, supervisors are not focus on product quality control.
From our observation, process audit, data analysis and literature support, the
conclusion can make is Poor performance of Production supervisors are main problem for
High rate of defective products was detected at customer SBD’s warehouses. Production
14


supervisors did not provide enough training and supervising to their workers to ensure
that their workers are capable to make good products. Production supervisors are not
capable to performance their in-process inspection so that they cannot detect defective of
their process as well as previous processes.
1.3.2 Consequence
First consequence of poor performance of production supervisors are workers
continue to make defective with high rate. In case their Quality control system is
effective, they can reject defective at their factory and stop it to ship to customers. But
this is not enough, since defective is costly. Worker need to spend more working time to
repair defective products and some defective products must scrap. This will create many
waste in company manufacturing process. Waste in labor sources and raw material
sources will reduce company profit. In case their Quality team cannot find out these
defective and they are shipped to customer, it will cost company not only tangible assess
but also intangible assets such as company reputation and losing businesses to their
competitors.
Second consequence of this problem is high defective rate impact badly to
company production schedule. They detect defective too late (mostly at Packaging
process) and cannot have enough product quantity to ship to customers follow order
quantity. This will cause delay shipment. Thus, company will be requested to ship their

product by air to customer to catch up their delivery plan. Air shipment is too expensive,
and it will impact badly to company profit as well. And when order quantity is not
enough, finished goods cannot be shipped out and stuck in their warehouse and easy to
cause other issues such as warehouse worker to pick up product without Final inspection
or wrong product to ship to their customers.
Third consequence, since production supervisors cannot do well his supervising
and monitoring tasks, they cannot support well their workers to improve worker’s skills

15


and performance as well as provide a fairly annual appraisal to their workers. This will
impact to workers’ work satisfaction and many skill workers will quick their job.
1.4 Initial possible causes
The research of Liu and McMurray (4) concluded that job satisfaction has possible
impact for manager to motivate their production supervisors. If manager level cannot
create a fair treatment environment, a positive reward and recognition policy and no
career development opportunity to supervisors under them, they cannot motivate these
supervisors and expect a good performance from these leaders as well as their team
members. One more cause can impact to performance of leaders is no empowerment
from their managers (5). Leader cannot manager his team well if he has no authority to
assign task to his team members, cannot decide on overtime or he does not involve in
hiring and firing decision related to their team members. Also recommended by another
research of Leadership training and delivery prospects of team leaders in Communication
Network Support Services Limited (6), company should provide leadership training to
leader level to improve their performance and company productivity. From this
theoretical analysis, there are 3 potential causes of this problem: lack of leadership
training, no empowerment from manager and no job satisfaction.

16