Business Assessment

ASSESSMENT OF COMPANY AND SUPPLIER CAPABILITIES

The assessment of the capabilities of a company or any of its suppliers is a time consuming process. This process requires professionals with backgrounds in different disciplines such as executive or mid-level management, manufacturing, engineering, quality, purchasing, accounting and finance. The assessment process will require a thorough analysis of the entire operations within the organization. The capability assessment may include all or any of the following areas depending on what the customer wants:

The main criteria for an organization like ESTG Inc. to be called in to assess the capability of an organization or company, is when the organization encounters problems in its performance that have led to poor profitability or loss, poor product quality or increase in operational cost. The purpose of assessing the capability of the organization is to identify gaps in the management and or operational processes that can be corrected to eliminate the poor performance issues.

Organization Structures and Management

Describe Companies with weak leadership tend to produce dismal results. Sometimes owners and shareholders fail to pay attention to the organization's leadership that constantly produce poor performance and focus on unecessary attention on other areas of the business that they believe may be the main culprit for poor results without good data to help arrive at the conculsion. Changing some members of the leadership team or changing the behaviors and style of the leaders may provide the required boost that the company needs to move in the right and positive direction. Also, the overal strategy employed by the leaders may contribute to poor performance for the entire company or for a specific department. As the saying goes, "You are as good as your weakest link". This means that poor performance by one department may lead to the poor financial results for the entire organization. In fact, this should be the first area to be assessed during the business assessment process.

¨Identify the proper organizational system for the company and for any of its business units. Example: matrix organizational
structure versus streamlined vertical and horizontal organizational structures.
¨Redesign of corporate and department organizational structures to align with business units and performance measures or goals.
¨Align organization structures to business units and to performance measures or goals.
¨Implementation of the organizational structure along with its business performance measures and goals.

Financial and Management

Proper attention should be paid on the financial and cost management strategy of the company or supplier. This requires that the assessor determine if the company or supplier utilizes “Overall System Cost Strategy” and “Unit Cost" or "Activity Based Cost Strategy”. Over all system cost strategy implies that the company or supplier lumps all of its cost elements together regardless of the commodity and then balances its books based on total cost approach. Unit Cost or Activity Based Cost Strategy implies that the company or supplier manages its cost based on each commodity’s cost contribution to the system. For example, if commodity 'A' is the main culprit for lack luster performance of the organization, the company or supplier will tackle its cost reduction effort based on that commodity. The following items are thoroughly reviewed and analyzed during the financial phase of the assessment process.

¨Profit and Loss Statement
¨Balance Sheet
¨Unit and System Cash Flow Analysis
¨Engineering Cost
Design
Development
Program Management
Prototype
Engineering Change Management
¨Manufacturing Cost
Direct and Indirect Labor
Materials
Facilities
Tools, Machines and Equipment
Inventory
Launch Support
¨Cost of Quality
Non-Conformance
Internal and External Quality Support
Quality Certifications such as ISO-9000, QS-9000, TS16949

Manufacturing

Manufacturing capabilities is extremely important for any organization to possess since this area is mainly the cornerstone of what the organization does. Any manufacturing organization regardless of the size must possess the capability to produce and meet customer expectations in both quality and cost. It is important that an assessment organization spend quality time reviewing this area of the company’s operation. This area is the bread and butter for a manufacturing organization. In fact, what an organization finds in this area of the business, will be used to support the findings of other areas of the company. The following items should be thoroughly analyzed and reviewed to complete the assessment of the manufacturing operation:

¨Manufacturing Management Strategies
¨Lean Manufacturing Management Capabilities
§Waste Identification and Elimination
§Value Stream Mapping (VSM)
§Value Added and Non-Value Added Activities or Operations
§5S and Visual Aid Management Tools
     ¨Materials flow through the manufacturing floor
    ¨On Time Product Delivery to Customers
    ¨Machine and Equipment Maintenance Capabilities
          §Predictive Maintenance
                    §Preventive Maintenance
    ¨Manpower, Machine and Equipment Utilization
          § Efficiency
                    §Productivity
        ¨Equipment and System Throughput
          §Jobs per Hour (JPH)
          §Stand Alone Jobs per Hour (SAJPH)
    ¨Launch Support
          §Prototype
          §Volume Production
    ¨On-going Manufacturing Support at Customer’s Facilities
    ¨Design For Manufacturing Initiatives
    ¨Shop Floor Ergonomic Initiatives and Product Safety Programs
    ¨Overall Manufacturing System Cost Reduction and Quality Improvement Initiatives

Engineering

This is one of the most critical areas of the assessment process that most companies usually overlook or ignore for one reason or another. This is the area that most small companies and small suppliers fall short in their effort to provide quality products to their customers. In fact, if a manufacturing organization has its engineering team intact to support its programs then it will be able to provide quality and reliable products at a competitive price to its customers. Additionally, if a company wants its supplier network to succeed, then that company must assist its supplier base to improve its engineering capabilities. In assessing the engineering capabilities of companies and suppliers, the
following items must be thoroughly reviewed and analyzed:¨Ability to Outsource Design and/or Development Work to capable and reliable engineering firms - Leveraged Engineering Support
¨Capability for Quick Reaction Time to Customer Product and Process Changes
¨ Program and Project Management Support
¨Prototype Development and Build Support
¨Concept Development/ Design Office Support, if required
¨Design for Experiment Capabilities, if required
¨Benchmarking Capabilities of Competitors and Best-In-Class Organizations

Total Quality Management and Supplier Quality

Since the late seventies, quality and reliability have moved to the forefront as the barometer for measuring customer satisfaction. Quality must be planned at the initial phase of any program. Companies that disregard the concept of planning for quality at the concept phase of product and process development will find out that the cost of trying to correct or fix quality issues at the end is very prohibitive. It is extremely important for companies and their suppliers to benchmark their respective competitors for the purpose of improving their product quality. To assess this area of the organization, the following items should be taken into consideration:

¨Audit Supplier Quality System to determine conformance to product and process specifications.
¨Advance Product/Process Quality Plans (APQP).
¨Global Standard Quality Requirements such as ISO/QS-9000, TS-16949 etc.
¨Impact of Supplier Quality Initiatives to enhance Product and Process Quality.
¨Internal Manufacturing Quality Tracking Tools such as Statistical Process Control (SPC),Customer Satisfaction Audit (CSA), First Run Capabilities (FRC) etc.
¨Company or Supplier’s initiatives based on reducing defect associated with customer satisfaction index reports, such as JD Powers.
¨Other in-house developed quality initiatives to minimize and eliminate defects.
§Design,
§Development
§Program Management
§Prototype
§Engineering Change Management

Materials Management

This part of the assessment process deals with the capability of the supplier to manage both in-bound (raw materials) and out-bound (finished products) to prevent damage and minimize material cost which in most cases is approximately 40% to 65% of the total cost of production. This is the assessment of the company’s internal and external material control and materials management system. The following items should be taken into consideration during this assessment process:

¨Determine the materials purchasing strategy.
¨Just-in-Time Capabilities (JIT) and leveraged “Bulk Buy” Capabilities and cost reduction.
¨Raw Materials Inventory System.
¨Finished Goods Inventory System.
¨Quality of Raw Materials Procured from Suppliers.
¨Support from Materials Suppliers.
¨Frequency of auditing of Materials Suppliers.
¨Information on how the Company handles failing Suppliers.
¨Supplier Compliance to Customer Mandated Quality Initiatives.
¨Review Performance of Material Supplier base

Purchasing/Supplier Chain Management

This part of the assessment process deals with the capability of the company and suppliers in developing and implementing effective purchasing strategies. An effective and well implemented purchasing strategy will help any company gain competitive advantage through leveraging supplier’s competencies and technological 'know-how' as well as reduce cost and improve product quality. The following items will be reviewed, analyzed and where there is a gap, recommendations will be made by us for improving the process:

¨Review and analyze the company’s purchasing or procurement strategy.
¨Review suppliers and identify those with good track records within the industry in question for additional business
¨Assess Non-Customer mandated in-house Supplier Quality Initiatives.
¨Assess the Capabilities of First and Second Tier Suppliers.
¨Assess strategies for competitive positioning as it relates to supplier chain management initiatives.
¨Assess the organization’s vision with regards to collaborating with competitors without giving away your competitive advantage through information sharing.
¨ Assess the impact and benefit of electronic purchasing system such as Covisint.com and Freemarket.com.
¨Frequency of auditing of Materials Suppliers.
¨Information on how the Company handles failing Suppliers.
¨Supplier Compliance to Customer Mandated Quality Initiatives.
¨Review Performance of Material Supplier base

Project/Program Management

This part of the assessment process will review the capability of the company and supplier to coordinate the human and material resources throughout the life of the programs and or projects through the use of management techniques to achieve predetermined goals and objectives with regards to Scope, Cost, Time and Quality. Poor project and program management may lead to increased cost overrun.The following items shall be taken into consideration during the assessment process:

¨Development of Project Scope, Goals and Objectives.
¨Setting of clear goals for project and or program management deliverables to accomplish the goals and objectives of the project.
¨Development of Master and Detailed Timelines for all deliverables.
¨Determination of major and/or minor mile stones for each project and program.
¨The company’s capability in developing and executing project/program budget.
¨Company’s capability to incorporate quality plans and strategies into the project/program.
¨Company’s capability in managing and executing multiple projects and programs.
¨Company’s capability in communicating the project/programs goals and objectives to all employees.
¨Project and program management audit system for auditing project/program deliverables, including start and on time project/program
completion.
¨Project and program management responsibility matrix for accountability.

ENGINEERING SERVICES & TECHNICAL GROUP, INC.

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