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2010:015 CIV

MASTER'S THESIS

Cost calculation and process improvement


for the introduction of new included parts
at Volvo Powertrain in Kping

Andreas Nordh

Lule University of Technology

MSc Programmes in Engineering


Industrial Business Administration
Department of Business Administration and Social Sciences
Division of Industrial Logistics

2010:015 CIV - ISSN: 1402-1617 - ISRN: LTU-EX--10/015--SE


PREFACE

This thesis is my last assignment and will allow me to receive my Masters degree in Industrial
engineering and management at Lule University of Technology. The subject of this thesis and the
problem range has improved my comprehension of logistics from an administrative point of view and
provided further knowledge in working in a Lean environment. I believe that the awareness of
administrative process costs and visual process maps are a given for lasting improvement in
becoming a Lean organization.

I would like to take this opportunity and thank people that have helped me through this process.
Firstly, I would like to thank Klas Rehnberg at Volvo Powertrain for giving me the chance in writing
my master thesis at such a huge global corporation like Volvo Group. Unfortunately Klas could not
guide me towards the end of the thesis and had to hand over the responsibility to Patrik Bjrklind, at
Product preparation, due to a new job at Bombardier. I would like to thank Patrik Bjrklind in
supporting me towards the end. I would also like to thank my mentor at Lule Univesity of
Technology, Peter Wallstrm, for his support and guidance in this very last project of my university
studies.

Lule, January 2010

Andreas Nordh

I
ABSTRACT

Product development is one of the most important factors in whether the company will be a market
leader or a market follower. By continuously improve the product and satisfy customer needs, there
is importance in well managed implementation of updates of the product. These updates create an
administrative process which, at Volvo Powertrain in Kping where the thesis was written, is in need
of improvements.

Process improvements are made possible by mapping a process and from an overview perspective
eliminate unnecessary activities. Moreover, in continuous process improvement there is need for
process management. Process management treats a process in form of roles and responsibility as a
foundation of process survival in the long run.

However, every process, whether administrative or manufacturing, is a cost for the company and a
part of improving a process and eliminating waste is a way of reducing unnecessary cost. The
purpose of this thesis is:

to calculate a template cost for implementation and preparation of a new included part at Volvo
Powertrain in Kping. Moreover, a process map is going to be conducted to get an overlook of the
process in order to recommend process improvements to minimize the yearly process cost.

By combination of literature review, interviews at Volvo Powertrain, secondary data, and a


comparing study of process management at SKF, a process map was conducted. The process map
gave an overview of the process of implementing updates in the end product. Furthermore, by
studying the process map unnecessary activities were discovered. These unnecessary activities were
cost bearers and by eliminating these, monetary savings could be made in the process.

Moreover, there were problems regarding process management as there were no implemented roles
in the process. By illuminating the need of role descriptions and responsibility in the process, Volvo
Powertrain in Kping were recommended to conduct role descriptions for every employee in the
process. By doing this Volvo Powertrain have savings potential in securing the process get positive
key performance indicators instead of the current negative. As there were no process owners at
Volvo Powertrain in Kping, there were no top responsibilities with the power in decision making
which, on every level in the process create confusion.

Furthermore, by calculating the cost of the process and illuminate possible savings by securing the
process with scientifically proven methods, a bi-product of the thesis might as well be that Volvo
Powertrain start working process management throughout the entire company.

II
SAMMANFATTNING

Produktutveckling r en av de viktigaste beslutarna fr om ett fretag kommer att vara


marknadsledare eller en marknad efterfljare. Genom att stndigt frbttra produkten och
tillfredsstlla kundernas behov r det viktigt med vlimplementerade genomfranden av
uppdateringar av produkten. Dessa uppdateringar skapar en administrativ process som p Volvo
Powertrain i Kping, dr examensarbetet skrevs, r i behov av frbttringar.

Processfrbttringar grs mjliga genom att kartlgga en process och frn ett verskdligt perspektiv
eliminera ondiga aktiviteter. Fr att kontinuerligt frbttra en process krvs en implementering av
processledning. Processledning behandlar en process i form av roller och ansvar som en grund fr
processverlevnad p lng sikt.

Dock r varje process, svl administrativ som tillverkande, en kostnad fr fretaget och ett stt att
frbttra en process r att eliminera slseri och p s stt minska kostnaderna. Syftet med detta
examensarbete r:

... att berkna en schablonkostnad fr infrandet av nya artiklar p Volvo Powertrain i Kping.
Dessutom ska en processkarta utformas fr att ligga som grund fr processfrbttringsarbete och p
s stt minimera den rliga processens kostnad.

Genom en kombination av litteraturstudier, intervjuer p Volvo Powertrain, sekundr data, samt en


jmfrande studie av processtyrning p SKF, kunde en processkarta utformas. Processkartan gav en
versikt av processen att infra nya ingende artiklar i en slutprodukt. Vidare upptcktes ondiga
aktiviteter i processen genom en studie av processkartan. Dessa ondiga aktiviteter r, enligt teorier i
Value Stream Mapping, kostnadsbrare och genom att undanrja dessa, kunde monetra
besparingar gras i processen.

Dessutom uppstod problem med processledningen av processen eftersom det inte fanns ngra roller
i processen. Genom att lysa upp behovet av rollbeskrivningar och ansvar i processen har Volvo
Powertrain i Kping rekommenderats att utforma rollbeskrivningar fr alla medarbetare i processen.
Dessa rekommendationer bygger p processledningsmetodologi som ven det studerats under
arbetets gng. Genom att gra detta har Volvo Powertrain potential i att skerstlla processen och
p s stt gra processbesparing samt visa positiva resultat i de nyckeltal som processen mts p.
Eftersom det inte fanns ngra processgare p Volvo Powertrain i Kping s fanns det ingen med
topp ansvar med makt i beslutsfattande och drmed skapades det frvirring och
kommunikationsbrister p alla niver i processen. Genom att belysa vikten av
processledningsmetodik samt besparingspotentialen i denna kan en biprodukt av detta
examensarbete vara att Volvo Powertrain brjar arbeta med processledningsmetodiken i hela
fretaget.

III
DEFINITIONS

Design Change Notice (DCN) A process for implementing and introducing new included parts when
manufacturing transmissions. The process is named by Volvo Powertrain.

Product Cost Request (PCR) An initiation stage of the DCN process where a cost estimation of
implementation is made

Nested process A process that is visible as a task in a larger process but has underlying activities

ABC classification A way of structuring product changes depending of the complexity of the change

Value Stream Mapping (VSM) A process mapping tool with the purpose of eliminating non-value-
added activities and waste.

Flowchart A process mapping tool with focus on the information flow.

Hand off Is when one department in a process receives a task from another department in the
same process.

Silo mentality Is when employees are only seeing to his and his departments best. Not the entire
company

Template cost is an average value of the cost of a process

IV
TABLE OF CONTENTS

CHAPTER 1 INTRODUCTION.................................................................................................................................... 1
1.1 PROBLEM BACKGROUND............................................................................................................................................................... 1
1.2 PROBLEM DISCUSSION ................................................................................................................................................................... 2
1.3 PURPOSE .............................................................................................................................................................................................. 3
1.4 DELIMITATIONS ................................................................................................................................................................................ 3
1.5 DISPOSITION....................................................................................................................................................................................... 3

CHAPTER 2 SCIENTIFIC METHOD .......................................................................................................................... 5


2.1 RESEARCH APPROACH ............................................................................................................................................................................. 5
2.2 METHODOLOGY APPROACH ................................................................................................................................................................... 5
2.3 RESEARCH STRATEGY .............................................................................................................................................................................. 5
2.4 COLLECTION OF INFORMATION ........................................................................................................................................................... 6
2.4.1 Literature review ................................................................................................................................................................................. 6
2.4.2 Primary data ......................................................................................................................................................................................... 6
2.4.3 Secondary data..................................................................................................................................................................................... 7
2.5 DATA ANALYSIS........................................................................................................................................................................................... 7
2.6 METHOD ASSESSMENT............................................................................................................................................................................. 8

CHAPTER 3 VOLVO POWERTRAIN ......................................................................................................................... 9


3.1 VOLVO GROUP .............................................................................................................................................................................................. 9
3.2 VOLVO POWERTRAIN (VPT)................................................................................................................................................................ 10
3.2.1 Volvo Powertrain Sweden Kping............................................................................................................................................ 10

CHAPTER 4 THEORETICAL FRAMEWORK ......................................................................................................... 11


4.1 FRAME OF REFERENCE ......................................................................................................................................................................... 11
4.2 PROCESS ...................................................................................................................................................................................................... 12
4.3 PROCESS MANAGEMENT ...................................................................................................................................................................... 12
4.3.1 The Process Management Methodology.................................................................................................................................... 12
4.3.2 Different roles in Process Management ..................................................................................................................................... 14
4.5 PROCESS MAPPING A SYSTEMATIC APPROACH....................................................................................................................... 15
4.5.1 Identify Opportunity ........................................................................................................................................................................ 16
4.5.2 Define Scope ....................................................................................................................................................................................... 17
4.5.3 Documentation.................................................................................................................................................................................. 18
4.6 LEAN-THINKING....................................................................................................................................................................................... 20
4.7 VALUE STREAM ........................................................................................................................................................................................ 21
4.8 VALUE STREAM MAPPING (VSM) ...................................................................................................................................................... 22
4.8.1 Mapping administrative value streams ..................................................................................................................................... 22
4.8.2 Customer value.................................................................................................................................................................................. 24
4.8.3 Administrative waste ...................................................................................................................................................................... 24

CHAPTER 5 CURRENT SITUATION ....................................................................................................................... 25

V
5.1 PROCESS MAPPING ................................................................................................................................................................................. 25
5.2 THE DESIGN CHANGE NOTE (DCN) PROCESS ............................................................................................................................... 25
5.3 PHASE 1 INITIATION ........................................................................................................................................................................... 26
5.3.1 Product Preparation Initiation ................................................................................................................................................. 26
5.3.2 Production Engineering Initiation........................................................................................................................................... 27
5.3.3 Logistics Initiation ........................................................................................................................................................................ 29
5.4 PHASE 2 - PREPARATION ..................................................................................................................................................................... 31
5.4.1 Product Preparation Preparation ........................................................................................................................................... 31
5.4.2 Production Engineering Preparation ..................................................................................................................................... 32
5.4.3 Logistics/Purchase Preparation............................................................................................................................................... 33
5.5 PHASE 3 IMPLEMENTATION............................................................................................................................................................ 33
5.5.1 Quality Implementation .............................................................................................................................................................. 33
5.5.2 Product preparation Implementation .................................................................................................................................... 34
5.6 PROBLEMS .................................................................................................................................................................................................. 35
5.6.1 Problems Product Preparation .................................................................................................................................................... 35
5.6.2 Problems Production Engineering .............................................................................................................................................. 35
5.6.3 Problems Logistics............................................................................................................................................................................ 36
5.6.4 Problems Quality .............................................................................................................................................................................. 36
5.7 COMPARING STUDY AT SKF................................................................................................................................................................. 37
5.7.1 The Engineering Change Management Process (ECM) ........................................................................................................ 37
5.7.2 ABC-grouping .................................................................................................................................................................................... 38

CHAPTER 6 ANALYSIS ............................................................................................................................................. 40


6.1 CATEGORIZING PROCESS WASTE............................................................................................................................................ 40
6.1.1 Product preparation ................................................................................................................................................................. 40
6.1.2 Production engineering ........................................................................................................................................................... 41
6.1.3 Logistics ........................................................................................................................................................................................ 41
6.1.4 Quality ........................................................................................................................................................................................... 41
6.2 PROCESS MANAGEMENT ...................................................................................................................................................................... 43
6.2.1 Different roles in the process ........................................................................................................................................................ 43
6.2.2 Process management methodology ............................................................................................................................................ 43
6.2.3 VPT in Kping compared to SKF .................................................................................................................................................. 43
6.3 COST CALCULATION ............................................................................................................................................................................... 45
6.3.1 Product preparation........................................................................................................................................................................ 45
6.3.2 Production engineering .................................................................................................................................................................. 45
6.3.3 Logistics ............................................................................................................................................................................................... 46
6.3.4 Quality.................................................................................................................................................................................................. 46
6.3.5 Total Process cost ............................................................................................................................................................................. 46

CHAPTER 7 CONCLUSIONS & RECOMMENDATIONS ........................................................................................ 47


7.1 RESULTS ...................................................................................................................................................................................................... 47
7.1.1 Process Management ...................................................................................................................................................................... 47
7.1.2 Eliminating waste ............................................................................................................................................................................ 48

VI
7.2 DISCUSSION................................................................................................................................................................................................ 49
7.3 SUGGESTIONS FOR FURTHER STUDIES .......................................................................................................................................... 50

CHAPTER 9 BIBLIOGRAPHY .................................................................................................................................. 51

VII
FIGURE INDEX

Figure 1 Powertronic automatic gearbox........................................................................................... 10


Figure 2 Frame of reference .............................................................................................................. 11
Figure 3 Customer - Supplier model .................................................................................................. 13
Figure 4 A systematic approach to process mapping ......................................................................... 15
Figure 5 Customer-Contact Matrix for processes (Krajewski, 2004) ................................................... 17
Figure 6 Example of a flow-chart between departments ................................................................... 19
Figure 7 Value Stream Mapping (VSM) (Keyte & Locher, 2008) ......................................................... 23
Figure 8 Phases of the DCN process .................................................................................................. 25
Figure 9 Phase 1 Product preparation ............................................................................................... 26
Figure 10 Phase 1 Production engineering ........................................................................................ 27
Figure 11 Phase 1 Logistics ................................................................................................................ 29
Figure 12 Phase 2 Product preparation ............................................................................................. 31
Figure 13 Phase 2 Production engineering ........................................................................................ 32
Figure 14 Phase 3 Quality .................................................................................................................. 33
Figure 15 Implementation - Product Preparation .............................................................................. 34
Figure 16 Phases of the ECM process at SKF ...................................................................................... 37
Figure 18 The ECM process at SKF ..................................................................................................... 38
Figure 17 ABC-Classification at SKF.................................................................................................... 38

VIII
CHAPTER 1
INTRODUCTION

The introduction will give the reader a background picture of the thesis. This will lead into a discussion
of the problem and further show the way to the purpose of the study. Limitations and an outline of
the paper will also be introduced in this chapter.

1.1 PROBLEM BACKGROUND


The company climate and global competition is getting tougher every day which requires constant
improvement and innovation of consumer products. Globalization has forced companies to compete
across borders which mean that a greater flexibility is required in every organization. According to
Rentzhog (1998), this very situation demands constant work improvement within organizations
internally, in order to promote creativity to every employee. Traditionally speaking, big companies
have had a hard time creating these changes internally since the structure of the organization has
been of function and hierarchy. Because of this, companies fail to fulfill their main purpose; the
creation and delivery of value to the customer. Rentzhog (1998)

Klotz and Horman et al. (2008) claim that the future of this competition lies within how well
companies manage their value chains. They claim that value chains are the gap between an existing
process and an improved process of the same process. These value chains are built upon
standardized ways of working which results in a specialized workforce. The employees become
experts in their areas of work. This theory is supported by Christopher (2004), who argues that the
more complex an organization becomes, the bigger the risk of dropping effectiveness in work. With
this said, it becomes more important in the future to manage process thinking and to standardize
ways of working within processes in order to eliminate errors. (Ibid).

Liker (2004) describes value chains as value-added processes in companies, which traditionally means
specific tasks in larger activities. The situation in todays markets forces companies to work with
improving their processes and by doing that, increase quality of end products and customer value
(Ibid). This methodology has its roots in the Toyota production theory; Lean production. Process
improvement in Lean production means to identify non-value-added processes and eliminate these
in order to create higher customer value and become more effective in work. (Liker, 2004)

Further on, Bland et al. (1998) claim that value-added processes is not necessarily just of
manufacturing sort, as administrative processes also create customer value. Administrative
processes usually have a more synchronized type as they often coordinate different activities in the
preface of a larger process. Willoch (1994) argues that one of the most important features in an
administrative process is communication which is usually the hardest one to manage. However, the
major shortcoming in an administrative process is that the customer is nowhere to be seen, (Willoch,
1994). Christopher (2004) claims that the customer has a higher influence on companies in todays
business culture, which means the he or she can put demands that could be done many years ago.
Demands of this sort are usually price and quality, (Klotz and Horman et al. 2008). One way to

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measure the added value in an administrative process is by conducting a value stream mapping
which is an analysis from a customer perspective.

1.2 PROBLEM DISCUSSION


In order to be a successor on a global market with constant change in demand, there is one
important attribute that can be decisive in whether or not the company will be a market leader or a
market follower. This attribute is, according to Bergman & Klefsj (2007) product development. The
importance in constant product improvement is what can be decisive when a customer evaluates
different options in choosing a company to buy products from. (Bergman & Klefsj, 2007)

At Volvo Powertrain in Kping, Product preparation prepares a yearly amount of 355 (average of
2007 and 2008 updates) product updates which is considered by the company as product
improvements. The product updates are developed by the Design department in Gteborg and that
department sends daily product updates to Product preparation in Kping. These updates consist of
alternative solutions for included parts to the end product which is the transmission. When this
product update is decided upon, a process takes place in Kping. This process involves Production
engineering which evaluates the possibility of implementation, Product preparation who prepares
the new part in every IT-system; Logistics coordinate the part from suppliers via hub and prepares
stock space for the part at the factory.

Furthermore, these changes involve the old part to be replaced as well, since that part has to exist in
the IT-systems for at least ten years so that aftermarket are able to deliver that part if an already sold
transmission need to be repaired. The Quality department is also involved since they measure
whether or not this new included part holds at least the same quality standard as the previous
included part.

The problem that occurs is that Volvo Powertrain in Kping needs to monitor and put resources to
355 new part numbers every year and still monitor the 355 old part numbers in the IT-systems. The
decision on whether or not to implement a product update lies at the Design department in
Gteborg is currently based upon two costs; Logistics and Production engineering. Logistics is set to
stock hold the new part and plan transportation within the factory boarders, Logistics is also
responsible for packaging of this new part. Production engineering on the other hand is set to
evaluate new working methods that follow a new part implementation, Production engineering is
also responsible for the evaluation on whether or not new investments in equipment is necessary.
The decision made by the Design department in Gteborg is based on expected customer satisfaction
in contradiction to the estimated cost this implementation results in.

Volvo Powertrain in Kping wants to know the exact cost of implementing a new part. The hope is
that process improvements can be made to hold down the yearly cost in the process and also to have
a specific average on costs so that the factory in Kping can provide a quicker answer to the Design
department in Gteborg. The process is as mentioned above the implementation and preparation of
a new included part to the end product which is the transmission.

In order to provide process recommendations to Volvo Powertrain a process map has to be


conducted. The process map is necessary for getting an overlook of the process at the factory in
Kping and Volvo Powertrain has not yet mapped this process, hence, the process is not optimized.

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1.3 PURPOSE
Volvo Powertrain in Kping claim that knowledge of the costs in the process help communication
between the different plants (Gteborg and Kping) as the cost message currently declare if an
implementation of a new included part is profitable. From the problem discussion the following
purpose has been conducted:

The purpose of the study is to calculate a template cost for implementation and preparation of a new
included part at Volvo Powertrain in Kping. Moreover, a process map is going to be conducted to get
an overlook of the process in order to recommend process improvements to minimize the yearly
process cost.

The purpose is to be fulfilled be answering the research questions below:

- RQ1: What does the process of interest, the DCN process, look like when mapped?
- RQ2: Which costs are bound to the process of interest and based on these costs, what is the
total cost of the DCN process?
- RQ3: Where in the DCN process can improvements such as securing be made?

1.4 DELIMITATIONS
This process map aims to map all the processes that have to do with the implementation and
preparation of new included parts specifically at the Volvo Powertrain factory in Kping. The study is
also delimited specifically to new parts that Volvo Powertrain buys, hence not produce themselves.

The study is also delimited only to the costs that lie within the process, hence not the specific cost of
the part. All other costs, excluding the specific part cost, will be taken into consideration.

The process map is specific to Volvo Powertrain in Kping which means that any transportation form
and to this factory will be excluded. Furthermore, administrative cost bound to the process from
other Volvo Powertrain offices and factories will also be excluded.

1.5 DISPOSITION
Chapter 1 Introduction
This chapter intends to describe the problem background. Furthermore, the problem background
ends up in a problem discussion which then leads to a purpose of the study. Delimitations in the
study are also presented here.

Chapter 2 Scientific method


Methods and approaches in the study are presented here. This chapter should answer the question:
How was the study conducted.

Chapter 3 Volvo Powertrain


The company where the study was made at is for the first time presented in this chapter. The
purpose of this study is to introduce an overlook of the company, where the study was made at, to
the reader.

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Chapter 4 Theoretical framework
The Theoretical framework intends to describe theories and research made in the areas process
mapping and Lean production. This thesis intends to treat theories in this area in order to develop
recommendations in process improvement to the company.

Chapter 5 Current situation


What does the process that this thesis aims to study look like today? Questions like this are answered
in this chapter as well as strengths and weaknesses in the process. A study at SKF is also made here.

Chapter 6 Analysis
The theoretical framework is compared with the current situation. This comparison will result in
process improvements. Furthermore, this chapter studies the costs that are bound to the process
and these costs will be added together and create a template cost for the process.

Chapter 7 Conclusions
In the seventh chapter improvement proposals will be compiled with the purpose of improving the
process. The purpose of this is to give the company concrete results to work with in order to improve
the process of interest.

Chapter 8 Discussion
A discussion is conducted in order to question the relevance in the study, and also to discuss how the
chosen scientific method has influenced the validity of the study.

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CHAPTER 2
SCIENTIFIC METHOD

This part of the thesis is a description of how the study was conducted. Working methods and
gathering of information are also illuminated in this chapter.

2.1 RESEARCH APPROACH


The research in this thesis has a qualitative approach. The reason for this is that the primary target is
to get a deeper understanding of a current situation or a current problem. Primary data has been
collected by the conduction of semi-structured interviews and discussions which according to
Bryman (1997) motivates a qualitative research approach. Furthermore, Bryman (1997) continues to
motivate that semi-structured interviews onto a specifically chosen population proves a qualitative
approach instead of a quantitative. This thesis has the focus on mapping an administrative process at
Volvo Powertrain and therefore, the population of interviewed employees has been limited to
employees that continuously work in the process. The reason for this approach was that employees
not involved in the process of interest has limited knowledge and the probability of getting valid
process information such as working methods, tasks, and costs, was low.

However, this study will also use quantitative data such as previously documented process
information and company information. The purpose of previous process information was to get an
understanding of the complexity of the process as well as the gain of knowledge about the company.

2.2 METHODOLOGY APPROACH


The foundation of the thesis lies within developed theories in Lean production, process mapping, and
process management. These theories have been used to analyze the current situation at Volvo
Powertrain, and the situation is how the DCN process is managed at present. The current situation
describes the different problems occurring when the DCN process is started and managed. By using
already existing theories in order to analyze a situation, one uses deduction as a methodology
approach, (Eriksson & Wiederheim-Paul, 2001).

2.3 RESEARCH STRATEGY


A research strategy is a way to attack a problem in order to fulfill the purpose of a study, (Ejvegrd,
2009). Since this study has the purpose of mapping the administrative process; Introduction of new
included parts, the research strategy in this thesis becomes a case study. According to Ejvegrd
(2009), the meaning of a case study is to take a part of something continuous and let that part be a
description of the reality. This is what has been done in this study since the process of introducing
new included parts is something that is done on a daily basis at Volvo Powertrain in Kping.

Furthermore, Ejvegrd (2009), illuminates that care has to be lifted when conducting a case study
since a specific case, such as mapping an administrative process once, can only be seen as hints and
further study needs to be made in order for a case to be an exact representation of the reality.

5
This case study will be of descriptive sort which according to Yin (2003) is when a map of a current
problem is conducted and described in its whole. This motivates a descriptive approach as it answers
the purpose of this study, to map an administrative process and form a full perspective recommend
process improvements.

2.4 COLLECTION OF INFORMATION


The collection of information to this study will depend on three types of studies; Literature, primary
data, and secondary data, (Saunders, 2007).

2.4.1 Literature review


The process map and process improvements have been made possible through theories in Lean
production, process management and a process mapping tool. These theories have been found
through student literature and online research databases. The research databases used in this study
have been Emerald, Google Scholar, Ebesco, and Elsevier.

The books that have been used in this thesis were found at the libraries of Lule University of
Technology, Mlardalens University and Handelshgskolan in Gteborg

In order to find the articles and books about Lean production, process mapping and process
management, a search in words had to be made. The words that were used to find the literature
where the following; Value stream mapping, VSM, vrdefldesanalys, processkartlggning,
processoptimering, process improvement, Lean environment, process mapping, process cost tracing
and process cost analysis. The words have also been combined in the search.

2.4.2 Primary data


According to Eriksson & Wiederheim-Paul (2008), primary data is the collection of data to a specific
study. In this study specified data about ways of working in the process, specific working tasks as in
updating an IT-system, time on each task has for example been valued as primary data.

Interviews
The interviews in this study have been semi-structured. Semi-structured interviews are when a
questionnaire is the foundation for an interview, but instead of getting direct answers, a discussion
that could involve more than one question, is held, (Saunders, 2007). The questionnaire that was
used can be found in appendix A.

14 interviews have been conducted with people from 6 different departments at Volvo Powertrain in
Kping with involvement in the process as in; Introduction of new included parts. The reason for
choosing at least two employees from each involved department was to get two perspectives for the
problem and by getting that, a more precise picture of the problem could be established. This is
more than two employees per department which gave both an overlook of the process as well as
detailed knowledge in specific tasks in the process such as development of packaging of new parts.

In order to ensure that the correct information was provided, the information from each interview
was brought back to the interviewed employee to be looked at again.

Furthermore, when an interview had been made, the information from that interview was brought to
the next interview as support and proof that the interviewer had knowledge in the process. This
meaning that the first interview (Product preparation) was brought to the second interview

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(Production engineering) in order to further expand the data about the problem situation. This
methodology was carried through until all interviews had been made.

Comparative study
Benchmarking is, according to Bergman & Klefsj (2001) a comparison between how two different
companies work with similar processes. Ideally the chosen benchmarking company has proven
excellence in how they work with processes, (Bergman & Klefsj, 2001). However, the company that
this study has compared Volvo Powertrain to is SKF and this decision is not based on SKFs excellence
in process management, hence, it would take too much time to, for certain, know that SKF is best
practice when it comes to process management. The reason for choosing SKF lies within previous
knowledge from university courses, in that SKF uses certain proven process tools such as Six Sigma,
and also that SKF has a larger quality department than Volvo Powertrain.

The questionnaire used at Volvo Powertrain (Appendix A) was modified to put focus on process
management and process costs when the comparative study was conducted. (Appendix B)

Quantitative data
In order to get knowledge in how the process was run before the interviews were conducted,
quantitative information about the process such as, number of product changes, was received from
the Product preparation department. The information about how many yearly process initiations in
the process of introducing new included parts has been gathered based on 2007 and 2008. These
years were the only recent years where the process initiations had been documented.

Furthermore, the cost of employees has been collected with support from the finance department.
The IT department has provided information about IT-system costs. The IT-system costs are classified
and will not be presented in actual figures.

2.4.3 Secondary data


The secondary data that has been collected in the study comes from Volvo Powertrains intranet,
from Volvo Groups website and from Nissan Diesels website. This information has been used in the
company description in chapter 3. However, the intranet contributed with information about
employees connected to the process and some of the interview employees were found there.

2.5 DATA ANALYSIS


The gathered data was a foundation for the analysis as the information contributed with a current
state process map. The current situation in the process was compared with theories in Lean
production, process management, and process mapping. These theories where represented as ideal
process situation onto how the current process could be optimized.

The chosen theories and procedure in the analysis was backed up by the two mentors of this thesis.
The mentor from Lule University of Technology provided feedback which made decisions in use of
theories and the mentor at Volvo Powertrain in Kping provided feedback onto the problem areas of
interest, such as process optimization and costs in the process.

The categorization of waste per department was an important part of the analysis, since, according
to Keyte & Locher (2008), there can be occurrence of confusion since many wastes of the same sort
might be occurring at different departments. In order to eliminate waste, one must start by
eliminating it on each department separately so that no waste is left un-handled.

7
2.6 METHOD ASSESSMENT
The author of this thesis had previously worked within the Volvo Organization and had knowledge in
what the working climate was like. However, the previous knowledge was put aside in order to have
a neutral attitude towards the task. The author of this thesis did this by creating trust in the theories
he used. When the author had created trust in the used theories, they were used to create critical
distance towards Volvo Powertrain in Kping. This created a neutral perspective towards the
company.

The shortage of a case study is that the result is connected to a specific case whereas the
reinterpretation of the result can only be considered as an indication. This concludes that care has to
be raised when the results are presented to the company so that more general recommendations in
process improvement can be given. If Volvo Powertrain wants to take further actions and that the
results from those actions point in the same direction, more detailed actions as in validation of each
product update instead of having a template cost to base the change on.

8
CHAPTER 3
VOLVO POWERTRAIN

This chapter is the company description. The company presented here is where this study was
conducted. Firstly, Volvo Group and the involved companies will be introduced. After that, a more
descriptive presentation will be handled about Volvo Powertrain which is a strategic business center
underlying Volvo Group.

3.1 VOLVO GROUP


Volvo Group is a global company that develops and manufactures vehicles and solutions for
commercial transportation. The company also delivers finance and service solutions to customers on
the global market. The number of employees is today 96 300 worldwide and the headquarter is
placed in Gteborg, Sweden. Furthermore, Volvo Group has production facilities in 19 countries and
sales offices in more than 180 countries. Each of the wholly owned Volvo Group companies will be
described in general below.

Volvo Trucks is the largest trucks manufacturer in Europe when it comes to production
volumes and sales. The company is, when it comes to sales and production volume the
second largest trucks manufacturer in the world. Volvo Trucks is active in 135 countries and
has a product range of 7 truck models.
Renault Trucks is a Volvo Group owned company which offers a diversified range of vehicles
on the market. The company is asserting its position on the market as the truck multi-
specialist.
Mack Trucks is a Volvo Group owned company and is one of the largest manufacturers of
heady-duty trucks as well as major truck components in North America.
Nissan Diesel is now wholly owned by Volvo Group and manufactures diesel engines, a wide
truck range, buses, bus chassis, and special purpose Vehicles.
Volvo Buses is the second largest bus manufacturer in sales and volume and delivers a wide
range of products on the global market. The company has manufacturing facilities in 16
countries.
Volvo Construction Equipment is a worldwide company that develops and manufactures
wheel loaders and dumpers. The range of products also include; road construction
machinery, construction machinery and excavators. The company has 16 production facilities
worldwide.
Volvo Penta develops and manufactures engine systems for workboats and commercial
family boats. The company also manufactures industrial applications such as diesel driven
generator sets.
Volvo Aero manufactures components to civil airline and rocket engines.
Volvo Financial Services is providing a range of solutions to customers and dealers of the
Volvo Group. The services increase sales and added profits for Volvo Group products.

9
3.2 VOLVO POWERTRAIN (VPT)
Volvo Powertrain (VPT) is the Volvo Group strategic center for Powertrain issues, thus a supporting
business unit. The company develops and manufactures components such as engines, transmissions
and driven axels. The driveline that is consisting of these parts is often considered to be the heart of
the vehicle. VPT has operations in Sweden, France, Japan, North- and South America. The supporting
business unit has approximately 10 000 employees worldwide and is one of the worlds largest
manufacturer of heavy duty diesel engines in the span of 9-18 liters. VPT supplies drivelines to all of
the Volvo Group manufacturing companies with the exception of Volvo Financial Services and Volvo
Aero.

3.2.1 Volvo Powertrain Sweden Kping


VPT in Sweden is divided into four cities: Gteborg, Kping, Skvde and Malm. The factory in Kping
manufactures transmissions and marine drives and has an employee force of 930 people.

The factory started out as a mechanical workshop in 1856 and the main business was to build steam
engines. The company name was at that point Kpings Mekaniska Verkstads AB (KMVA). When Volvo
was founded by Assar Gabrielsson and Gustav Larsson in 1926 they put in an order for a gearbox for
Volvos first produced car. From this point and on Kpings Mechanical Workshop started to develop
gearboxes which soon became the companys main product. Almost 20 years later Volvo acquired
KMVA. In 1958, KMVA split up, resulting in two Volvo companies, Kpings Mekaniska Verkstad AB
and Volvo Kpingsverken. The latter company was renamed to Volvo Components AB, Transmission
Division in 1978/1979. This company had production facilities in Kping and Lindesberg. In the late
1990s, the production of rear axles in Lindesberg was sold to a company which became the global
supplier of rear axles. Another split was made in 1999 when Volvo Car Corporation was sold to Ford,
dividing Kping into two different groups, Volvo Group and Ford Group. In 2001 Volvo trucks in
Kping became VPT which it still is today.

Today VPT Kping manufactures transmissions and marine drives and is wholly owned by Volvo
Group.

VPT Kping manufactures three different kinds of marine drives and both automatic and manual
transmissions. Figure 1 shows the Powertronic gearbox which is an automatic gearbox that shifts
without losing any power.

Figure 1 Powertronic automatic gearbox

10
CHAPTER 4
THEORETICAL FRAMEWORK

This section of the study is underlying the theories and methods that will be used for the analysis.

4.1 FRAME OF REFERENCE


In order to create an understanding of how the theories used in this thesis are connected to each
other, a map of the work procedure is presented. The goal of this thesis is to answer the research
questions presented in chapter 1 to further answer the purpose of the thesis. By doing this, a series
of theories following a logical stream needs illustrated together. This both helps the author when
structuring the approach of the analysis and it also helps the reader in understanding the approach
of the entire thesis.

- What does the process of interest look like when mapped?


- Which costs are bound to the process of interest?
- Is there room for improvements in the process?
- Base on these costs, what is the total cost of the process?

A systematic approach Process Management

Value Stream Mapping (VSM)


Opportunity

Service process

Define scope

Current state map

Documentation

Waste

Cost calculation Improvements

RESULT
Figure 2 Frame of reference

11
The approach presented in this thesis will have the purpose of answering the research questions
which when answered will provide an answer to the purpose of the thesis. The main focus will lie
within the process map which will result in a cost calculation. In order to further improve the
process, which is a part of the purpose, there is need of understanding how a process should be
managed. The understanding of the process will be made possible through process management
theories, which also will be introduced in this chapter. Process management lays focus on how, on a
strategic level, to manage an administrative process with successful results. In order to further
improve the administrative process, the author has taken the theory of Value-Stream-Mapping as a
consulting point. The improvements will illuminated by eliminating the waste in the process. This will
also be introduced in later on in this chapter.

4.2 PROCESS
Srqvist & Hglund (2007) defines a process as:

A limited set of connected activities which together fulfill a common purpose

Furthermore, Srqvist and Hglund (2007) describe a process as flows of working tasks that create
the foundation of an organization. Process thinking has meaning in work improvement since
processes create a unified image of the problem. This unified image is possible through mapping of
processes in an organization and the process maps create a common and general problem
description. Process maps also contribute with whole perspective knowledge of different situations
in an organization. (Srqvist & Hglund, 2007), (Liker, 2004), (Bergman & Klefsj, 2007), (Dicander
Alexandersson et al. 1998)

4.3 PROCESS MANAGEMENT


According to Loinder (1996), the process management philosophy has grown as a result of the
importance of adapting and continuously improving processes. IBM initially mounted the expression
Process management. Process management is, according to Bergman & Klefsj (2003) equally
applicable to administrative processes as in manufacturing processes, as it with success has been
implemented with excellent results in marketing and purchasing for example.

4.3.1 The Process Management Methodology


The methodology in implementing successful process management is built in four steps, (Bergman &
Klefsj, 2003):

Organize for improvement. Appoint process owners and a process improvement team
Understand the process. Define the inter-faces and investigate who the customers and
suppliers are. Map the process, as in documentation of work-flow.
Observe the process. Establish control points and implement regular measurements.
Improve the process continuously. Use and analyze the feedback from the implemented
measurements in order to improve the process.

Organize for improvement


One important factor in process management in any company is the appointment of a process
owner. The process owner is set to have the strategic responsibility of the process when it comes to
improvement and development of the process. The main purpose, this early in the process
management methodology, is, according to Loinder (1996) to make sure that there is no friction in

12
the process. The responsibility for this is the process owners. When speaking of friction in a process,
one can hold an example when constructing railways. Railways are set to be a straight as possible in
order to optimize the transportation route. If a railway has many turns, it takes longer time to
transport the goods. The same example is applicable to process management, if the flow of
information and material travel in a straight line, there is less room for errors, (Bergman & Klefsj,
2003). The meaning of a straight line is that the information goes directly to the employee in need,
not that the information is distributed via someone else (Dicander Alexandersson et al. 1998).

Understand the process


Before the improvement starts, it is important to understand the process. There is a model that
Loinder (1996) describe as the customer-supplier model which provides an insight, see figure 2. The
customer in this case is the next person in the process. The understanding of customer requirements
is not always easy as the customer usually does not sit right next to you, e-mailing the question
What are your needs might not always give the best result, Rentzhog (1998). Therefore, it is
important to have active collaboration with the customer in the process, and by having this,
understand how the result affects the customer.

Cooperation Cooperation

Object Result
Supplier Process Customer

terkoppling terkoppling
Figure 3 Customer - Supplier model (Loriander, 1996)

Many processes have room for improvement; therefore it is important, according to Bergman &
Klefsj (2003), to have a systematic approach when describing and mapping a process. A systematic
approach often gives room to identify opportunities in a process, (Rentzhog, 1998).

Furthermore, Bergman & Klefsj (2007) illuminates the importance of mapping processes, as a
process map provides knowledge in what the process looks like illustratively.

Observe the process


Loinder (1996) acknowledges that facts about earlier behavior of the process are a necessity when
process improvements are being evaluated. With this say, the results of the process have to be
measured in quality, as in customer satisfaction, resource consumption, and time-keeping. These
measurements illuminates, where the process is lacking effectiveness and errors.

Improve the process continuously


Process management lays focus in the adaption of a holistic view of the entire organization, and
progress it by improving the following factors in the processes (Bergman & Klefsj, 2003):

Quality, the capability of satisfying the customers needs and expectations in the process
Efficiency, how well the process is utilizing its resources in order to produce results
Adaptability, how well the process adapts to changed prerequisites

13
One important in quality improvements in processes is simplification, hence, the way of making work
easier in each level of a process, (Srqvist & Hglund, 2009). Furthermore, Bergman & Klefsj (2003)
argues that many processes, both administrative and manufacturing, are more complex than they
need to be. This is, according to the same authors, a result of old routines and the culture of making
quick solutions for minor problems. Process improvement can either be made by small adjustments
or making radical changes. Small adjustments mean to improve an existing process by making minor
changes in many parts of the process, and in the long run have a stable process. Radical changes
often refer to re-creating an entire process (Bergman & Klefsj, 2007). No radical changes will be
made in this study.

4.3.2 Different roles in Process Management


According to Bergman & Klefsj (2007), the role concept is perhaps the most important component
in process orientation. Roles describe the competence that the organization needs to run its
business. A role is something that connects an employee to a specific activity in a process, for
example the activity to report measurements is perform by the measurement reporter.
Moreover, a role is not the same as a position. A position is emotionally charged and a placement in
a hierarchy with strong relation to authority, salary and status, (Bergman & Klefsj, 2003).

However, it is important to clarify the role as an association with responsibility and authority,
otherwise misunderstandings communication of information can be made. A role should be
described in a way so that everyone in the process knows who does what; this type of thinking
eliminates any useless communication such as questions about who to contact in the process.
(Bergman & Klefsj, 2003)

There are three types of roles in a process, (Bergman & Klefsj, 2003), (Srqvist & Hglund, 2009),
(Loinder, 1996). These roles are:

Process owner
Process manager
Competence supplier

A description of the different roles will be provided below.

Process owner
The process owner is responsible for all resources in the process and shall create a framework with a
set of rules in the process. Based on where the company is going in the market, the process owner is
responsible for the strategic adaption of the process. The importance of a process owner is clarified
by Bergman & Klefsj (2003), since they claim that without ownership in the process, there is high
risk for internal power struggle in the process. Internal power struggle means that there is risk for
conflict between different departments in the process as the departments tend to use the Silo
mentality. (Bergman & Klefsj, 2003), (Srqvist & Hglund, 2009)

However it is important to separate the process and its suppliers (Dicander Alexandersson et al.
1998). In a supporting process, like the one that this thesis has studied, for the core process in
manufacturing, the suppliers are Human Resources, IT, Market and Purchase. These suppliers are not
owned by the process owner. (Loinder, 1996)

14
Process manager
The process manager has the operative responsibility. In many processes there is need for quick
decisions about temporary reinforcement of resources and these decisions should be taken by the
process manager. Moreover, the process manager is also responsible for the improvement team.
(Bergman & Klefsj, 2007)

The process manager should also be a support for the process owner. In a large process with many
nested process, there is need for many process managers (Srqvist & Hglund, 2009). This is the case
for the process this thesis intends to study.

Competence suppliers
Competence suppliers, such as IT, Human Resources and Purchasing have the role of supporting the
process with needed competence. The competence could for example be getting authority to update
an IT-system with new information (Dicander Alexandesson et al. 1998). Furthermore, the purpose of
a competence supplier is to secure that the process deliver the correct result (Loinder, 1996).

4.5 PROCESS MAPPING A SYSTEMATIC APPROACH


According to Krajewski (2004), processes are perhaps the least understood and managed aspect of a
business. The author underlines the importance of having steady processes in order to gain
competitive advantage. Long-term success in business comes from managing and understanding the
business in detail, instead of the more commonly used quick-fix solutions that more than often
cost much money. These quick-fix solutions never seem to live up to the expectations that in a
prepare stage often are high (Loinder, 1996).

Hunt (1996) argues the importance of defining the scope of a process. A process must be adaptive,
reactive and proactive in order for an organization to become learning. The constant change of
customer behavior forces processes to adapt to new environments, and if they do not, they will
cease to exist.

Furthermore, there is a three-step-model that can be effective in mapping a process. This model is
equally effective in mapping an administrative process as in mapping a manufacturing process. The
three steps are Identify opportunity, Define scope and Document process. The steps are actually a
part of a larger model in redesigning a process but the scope of this thesis ends at documentation.
(Krajewski, 2004)

Identify opportunity Document process

Define scope

Figure 4 A systematic approach to process mapping (Krajewski, 2004)

15
4.5.1 Identify Opportunity
The first step is identifying a process that could be improved. This can be done out of three different
approaches which will be described below.

One way to identify a process is to look at the cause and effect of the process involvement in at least
one of the core processes in the business (Hunt, 1996). The core processes are: supplier relationship,
new service/product development, order fulfillment, and customer relationship (Dicander
Alexandersson et al. 1998). Each of these processes and the sub-processes are involved in delivering
value to the external customer. One ordinary question when a process improvement is about to take
place is Are the customers currently satisfied with the products and services that they receive, or is
there room for improvement?. This is the main and foremost important step in identifying potential
improvement to either product or service, (Loinder, 1996). However, when answering this question,
underlying subjects occur, like; internal customers and performance key indicators. Customer
satisfaction must be a constant monitored and ongoing activity with formal measurements or
informal checks. (Krajewski, 2004)

Another way to identify opportunities in a process is looking at strategic issues. This meaning a gap
analysis of any sort connected to the process like; Are there gaps between a processs competitive
priorities and its current competitive capabilities?. Other indicators of improvement and
opportunities are measurements of cost, top quality, quality consistency, delivery speed, and on-time
delivery meet or exceed expectations. Furthermore, how integrated is the customer in the process?
Where does the process fit in the customer-contact matrix, see figure 5? If the answer to any of
these questions is no, then further investigation is needed. (Krajewski, 2004)

The third way of identifying opportunities in a process is looking at the internal suppliers and internal
customers (Dicander Alexandersson et al. 1998). These players are the ones who actually work with
the process and they should be encouraged to promote their ideas on improvement to their
managers. An alternative to this is a formal suggestion box or system where employees can deliver
ideas on how to improve the process. Furthermore, a specialist should be responsible for evaluating
the proposals. (Krajewski, 2004, s.132)

Customer-Contact Matrix for Processes (CCM)


The purpose of the CCM is to bring together three elements in how the contact between customer
and company works. The three elements are: degree of customer contact, service design packages,
and the process. This matrix is usually a starting point when a process is to be evaluated and
improved. (Krajewski, 2004)

The matrix is built upon two dimensions, which are horizontal and vertical. The horizontal dimension
represents the contact between the customer and the provided service from the company. The left
side of the matrix characterizes high customer contact with much customization in services, whereas
the right side of the matrix shows low customer contact with passive involvement and a process
without visibility to the customer. (Krajewski, 2004)

The vertical dimension deals with three elements with specific relation to the process itself: (1)
Complexity, (2) divergence, and (3) flow. Complexity is described as the number and difficulty of the
steps required to perform the process. Process divergence is the extent to which a process is
performing given high customization. In other words, if the process changes with every new

16
customer demand, then the performance of the process is unique in each case. Flow is the manner to
which a process has to pass through a special sequence of activities (Loinder, 1996). This is similar to
a line flow where one operation is followed by another according to a fixed scheme.

Less customer contact and customization

(1) (2) (3)


Process High interaction with Some interaction Low interaction with
Less complexity, less divergence, more line flows

Characteristics customers, highly


customized service
with customer,
standard serviced
customers,
standardized services
with some options
(1)
Jumbled flows, complex FRONT
work with many
expectations OFFICE
(2)
Flexible flows with some HYBRID
dominant paths,
moderate job complexity OFFICE
with some expectations

(3)
Line flows, routine work BACK
easily understood by
employees OFFICE
Figure 5 Customer-Contact Matrix for processes (Krajewski, 2004)

4.5.2 Define Scope


The second step of this approach in mapping a process is to define the scope of the process. A broad
process definition is usually the case when a process involves many departments and cross-
functional teams in the organization, whereas a narrow process description lays its focus on either a
single person or a simple task involving few departments Dicander Alexandersson et al. 1998).
However, limiting the scope of a broad process definition might fail to notice breakthroughs in
mapping the process. On the other hand, few limitations can result in too much information that
leads to frustration when presenting results, as the results would have the tendency to be too wide
as in hard to implement (Krajewski, 2004). The resources that the management allocates should
match the scope of the project in both mapping and redesigning a process. If there is opportunities in
a small process consisting of only one employee, the sometimes most efficient way to map and
redesign the process is to put that responsibility on the employee who owns the process. (Krajewski,
2004)

Furthermore, Dicander Alexandersson et al. (1998) points out that a designing team should be put
together when projecting a redesign of a larger process. However, it is possible for a one-man project
to successfully identify potential improvement, but the more extended implementation stage should
always be handled by a team.

17
4.5.3 Documentation
Once the scope is recognized it is time to conduct interviews and gather information about the
process. This is a necessity in order to construct a correct process map. The starting point is to create
a list of inputs, suppliers (internal or external), outputs and customers (internal or external) (Loinder,
1996). This information can later be printed as a graph or diagram in order to increase understanding
of the complexity and size of the process. Moreover, the analyst is to break down the process into
the different steps it goes through, as well as note the degrees of customer contact, process
complexity, and process divergence along the various steps of the process (Krajewski, 2004).

Among the theories in process mapping, three methods will be presented in this section. These are
flow-charts, service blueprints, and process charts. The different documentation techniques will be
describes below.

Flow-charts
Tracing of information, customers, equipment, or material through various steps of a process can be
done by flow-charts (Loinder, 1996). They can also be recognized as diagrams, process maps,
blueprints or relationship maps. One significance of flow-charts is that they do not have a precise
format to be followed and are typically drawn with boxes, lines and arrows to show the sequence of
the process (Krajewski, 2004). Also, a brief explanation of each step is described in every box of the
entire flow-chart. Furthermore, different box-colors can be used as a way to explain complexity and
divergence of the different steps in the process. Divergence can also be shown as an arrow that splits
into two boxes after a step in the process (Krajewski, 2004).

As many representations in flow-charts are acceptable, it is important that the conventions that are
used are explained and understood in order to avoid misunderstandings to the reader (Krajewski,
2004). It is also important to communicate what is to be traced in the process, whether it is
information, customers, materials, or the like.

Flow-charts can be created in a number of levels in every company, for example, at a strategic level
they could show the core processes and the links between them (Loinder, 1996). If a process was to
be mapped at this level of an organization, they would not be described in high detail; however, they
might as well provide an overlook and a basic understanding of the business at scope (Krajewski,
2004). A starting point when mapping a process is the understanding and mapping of the core
process connected to the process of interest, as it often is helpful further on when the analysis starts
(Dicander Axelsson et al. 1998).

The complexity of a process can be describes as followed; if a process consists of steps that have
underlying processes, then the process, by definition (Krajewski, 2004) is complex. These underlying
processes are called nested processes. The reason for using nested processes when mapping a
process is to get a better overlook of the process as a whole. However, nested processes need to be
described in flow-charts where the focus I only on them.

Flow-charts have another feature as well. This feature is illustrated as a diamond and represents a
question that only can have the answers yes or no. if the decision is yes, then the
information/materials flow continues along the yes-pattern, whereas if no, the information/materials
continue on that route.

18
Furthermore, flow-charts can be illustrated as information flows between different departments. An
example of this can be found in figure 6. This is good for getting an overlook of which departments
that are involved in the process.
Preparation
Product

Total cost
Cost request
calculation
Logistics

Cost estimation
Engineering
Production

Cost estimation
development

New Validation of
Product

product customer value

Figure 6 Example of a flow-chart between departments

Figure 5 shows how information flows between different departments in the same company. This
approach points out handoffs which is when one department receives work from another
department. Handoffs are risks in cross-functional coordination because of the silo mentality. The
Silo mentality refers to where employees only see the benefits for their own department and fail to
see the big picture as in gain for the entire company. Backlogs and misunderstandings are usual
errors that are most likely to appear within the handoffs. This type of flow-chart is good in order to
prevent mistakes from happen since managers and analysts get an overlook on where and when in
the process mistakes are most likely to appear. (Krajewski, 2004)

This type of flow-chart also shows in which direction the information is going and to which
department and what that departments responsibility is. However, it does not show any nested
processes, but one can hint that the two cost estimations, in this specific case, could be nested
processes which would progress in further mappings of those processes. (Krajewski, 2004)

Krajewski (2004) uses a quote in summarizing what flow-charts really are:

Flowcharts show how organizations produce their output through a myriad of cross-functional work
processes, allowing the design team to see all the critical interfaces between functions and
departments.

Service Blueprints
The Service Blueprints are special flowcharts of a service processes that shows which of the steps in
the process that have high customer value. When mapping a process as a service blueprint, a line is
drawn between the steps in the process visible to the customer and the steps where the visibility is
not observable to the customer. This meaning that a separation or categorization is made between
the different steps from a customers point of view. The service blueprints are often called front

19
office processes, hence that the front office usually is visible to the customer and handles the
customer connections. However, this thesis will not map any processes in this way. (Krajewski, 2004),
(Bergman & Klefsj, 2007)

Process charts
A process chart is an organized way for documenting a job in a process on an individual level. These
jobs are often included in a nested process. The process chart has the purpose of describing an
activity in a larger process and is good way in the start of standardized work. The process based on
the five parameters; Operation, transportation, inspection, delays, and storage. (Womack & Jones,
1996)

Operation. This refers to the actual job done, hence a value-added activity. In this specific
process it might be a simple activity such as the registration of a part number in an IT-system.
Transportation. A move of material/information from one place to another. In this process it
could be a walk to the printer to collect an invoice.
Inspection. This is a check of something without changing it. It could be a verification of a
cost.
Delay. This occurs when the subject of interest is held up awaiting further progress. One
good example is the waiting time for a system update.
Storage. Occurs when a something is put on hold until a later time. This could be information
stored in a folder.

When describing an activity in a nested process one labels the activity with one of the above
parameters. There need to be a series of activities performed by one person in order to structure and
standardize the methods of doing the job. This type of process chart is often used in physical
operation such as manufacturing but it is equally important for administration as those types of jobs
also are in need of standardization. Furthermore, a process chart is describing a series of activities
performed by one person in a process. (Keyte & Locher, 2008)

4.6 LEAN-THINKING
Womack and Jones (1996) describes Lean manufacturing as a five-step process; defining customer
value, defining the value stream, making it flow, pulling from the customer back, and striving for
excellence. In order to become a lean manufacturer, one must apply a thinking that focuses on
making the product flow through value-adding processes without interruption. Furthermore, creating
a system that runs back from customer demand by satisfying what the next operation takes away at
short intervals, Liker (2004). The inventors of lean manufacturing are Toyota. Tachi Ohno, founder of
Toyota Productions System, explains lean manufacturing this way:

All we are doing is looking at the time line from the moment the customer gives us an order to the
point when we collect the cash. And we are reducing that time line by removing the non-value-added
wastes.

The Toyota Production System (TPS) started to develop after World War II when Henry Fords mass
production theory was the leading manufacturing principle. Toyota was still a very small company
with low profit. The leaders of Toyota benchmarked Henry Fords manufacturing line and installed it
so that it was well suited for Toyota. Further on TPS was developed as an improvement of mass
production and the two most important ingredients at an early stage was the one-piece flow, from

20
Henry Ford, and the pull system, from American supermarkets. In a supermarket product are
refilled when they are about to run out, just as you car is refilled with gas when the tank is almost
empty. This type of thinking was not used in the mass production philosophy as stock levels in
factories were very high. In other words, the gas tank was usually filled with gas even though it was
not a necessity. The pull system had a huge impact on TPS and is one of the very foundations of the
lean evolvement. (Liker, 2004), (Bicheno, 2006)

According to Keyte & Locher (2008), as TPS/Lean has improved production and quality of products,
administration has failed to catch up with effective ways to support the core process, production.
The authors claim that administration is in need of the adaption of flow operations that has had such
a huge impact on production systems. However, the administrative processes are harder to map
since they are often hidden in email boxes, IT-systems, and office folders. The main purpose in every
company in the world is creating value for the customer, but in order to create value, every process
in the company supporting and core, must function to establish a successful relationship to the
customer. (Keyte & Locher, 2008)

The main focus in lean philosophy is eliminating waste and by doing that, creating value in the
process (Bicheno, 2006). Traditionally, lean tools have been applied only to manufacturing processes,
but the fact is that every tool in the lean toolbox is equally applicable to administration; the problem
that many struggle with is creativity (Keyte & Locher, 2008).

In an administrative process it is equally important to identify non-value-added operations in order


to have a successful value stream. (Keyte & Locher, 2008)

However, in order to find these wastes, it is fundamental that the processes are mapped in a correct
way. (Loinder, 1996)

4.7 VALUE STREAM


Womack and Jones (1997) define a value stream like this:

The set of specific activities needed for maneuvering a specific product through the three
management tasks that every company stands before:

1. Problem solving
2. Information control
3. Physical transformation

Problem solving refers to the design and development of products which usually involves the
Research and Development (R&D) department. This part is the start of the stream that lean treats.
The next step in a successful implementation of lean is information control, which treats order
handling and other non-manufacturing activities. This step can be seen as the bridge between R&D
and the production line, and consist of many administrative processes. The third step in the
management tasks of implementing lean is physical transformation, which consists of activities
related to the production line. It answers the question: How do we go from raw material to end
product? (Peterson et al., 2008)

In order to lead these activities there is a need of a process that can measure, understand and
improve a stream to become a strong competitor but at the same time keep service and quality to a

21
low cost. When companies implement lean they need to do it throughout the entire organization,
otherwise it is easy to fall back to where business departments use sub optimization to improve
efficiency. (Keyte & Locher, 2008)

In improving process in a Lean environment, Liker (2004) describes Value Stream Mapping (VSM) as a
tool in eliminating waste in order to make a process more effective.

4.8 VALUE STREAM MAPPING (VSM)


One tool that can be used to measure customer value in administration processes is Value Stream
Mapping (VSM). To construct and manage a successful VSM Keyte & Locher (2008) stress the issue of
following the 6-step model which consists of the following:

1. Identify the needs of change from top management control to supervising from strategic
needs
2. Understand and support the foundation of a Lean strategy on every level in the organization
3. Identify and elect a leader for every large value stream
4. Create numeric values that supports Lean-thinking
5. Implement a plan for desired design of future value streams
6. Communicate top management intentions for continuous focus on a competitive strategy
based on Lean-techniques throughout the entire organization.

Many companies have come a long way in Womacks & Jones (1996) third management task,
physical transformation, which includes manufacturing activities but are struggling with information
control which, according to Keyte & Locher (2008), has to do with lack of knowledge in implementing
lean thinking.

The purpose of a VSM analysis is to help management to visualize their organization and provide
knowledge on how to manage the process in the future.

4.8.1 Mapping administrative value streams


One common factor when mapping an administrative process is that it is done the same way as a
material stream process. According to Keyte & Locher (2008) the mapping process of an
administrative process is done in the following familiar way:

Visualize the process


Point out problems
Focus on turning the process to become a part of the Lean environment

One of the major differences from mapping a physical process is that the material stream in an
administrative process can be seen as a stream of tasks that are needed for a service to be complete.
The information stream in an office has low structure and has an informal rank order. This is why the
process itself can be hard to manage.

22
Figure 6 shows how the working process when conducting a VSM.

Decisions about limitations


service process
regarding VSM

Understanding of current process.


Current state
Foundation for understanding the
process map
future

Future state Construct a Lean stream


process map

Plan of Objective for VSM


action

Figure 7 Value Stream Mapping (VSM) (Keyte & Locher, 2008)

Service process
The start of the working process is important since it is the key decision of which process that should
be analyzed. At this stage the limitations of the study takes place in order to make the VSM specific
to a process fulfilling a special purpose (Keyte & Locher, 2008).

Current state process map


When the process to be analyzed is decided upon, the current state mapping begins. At this stage,
the gathering of information takes place. Dennis (2008) argues that this is the start of the
transformation to become more Lean in administrative activities. The process map discovered in this
phase is not a solution of any sort, but it is a good way of learning the activities and to get an
overlook of the current process. This is the step from which the study will measure the costs in the
process. (Keyte & Locher, 2008)

Future state process map


The purpose for this stage is to point the organization in the right direction on how they should work
with the current state process (Dennis, 2007). It is important to create a time span for when the
suggested activities should be implemented as business plans tend to shift over time which would,
most likely, indicate a change of proposition when the VSM is completed. However, the longer time
span, the more implementations can be implemented, but it can become frustrating for companies
with a long time span since the waiting for documented results is prolonged. Since the purpose of the
thesis is not promoted by this and the next step in a VSM, the analysis stage is not to take this in to
further action. (Keyte & Locher, 2008)

Plan of action
This is the most important step in the process of conducting a VSM (Keyte & Locher, 2008). The two
mapping stages are a preparation for analysis that should result in suggested actions to be

23
implemented in the future. The plan of action ought to describe improvements needed for reaching
the future mapping stage; this is where Kaizen comes in. However, the purpose of the thesis is not
underlined with this step, thus it will not be taken into action (Dennis, 2007).

4.8.2 Customer value


Liker (2004) defines value as the answer of this question:

What does the customer want from this process?

By customer he means both internal and external customers. The internal customer is the one
responsible for the next operation in the process. External customers are the ones that the company
delivers the end product to.

4.8.3 Administrative waste


According to Liker (2004), waste is any operation in a process where there is no customer value
added. There are eight major wastes applicable to production, office environment, and order taking.
These wastes are:

Overproduction. Meaning production of items that do not have orders. Wastes that are
connected with this from an administrative perspective are for example; printing of invoices
before the next person in the process can handle them.
Waiting. This refers to system downtime, thereby waiting time for systems to update
information. Waiting time could also involve confirms of various kinds.
Over processing or incorrect processing. Would involve repetition of work done,
unnecessary copies.
Excess inventory. Boxes of incomplete matters, office storage.
Unnecessary movement. Includes movement to and from copy-machines, other
departments, fax-machines.
Defects. Would refer to design defects, wrong information input, employee turnover.
Unused employee creativity. Limited access to IT-systems, unsuitable work equipment,
would both be in conflict with employee creativity.

One important issue when it comes to waste in an office is that all the wastes cannot be handled
over night. It is a long process where small steps are taken every day; otherwise it could lead to
ineffectiveness since employees would be forced to change all their daily routines immediately.
Therefore, it is more effective to create a value stream based on a unit level and then identify the
critical wastes and deal with them directly. (Keyte & Locher, 2008), (Peterson et al., 2008

Also, office employees cannot have the same types of measurement numbers that the
manufacturing operators do, but still, they need to be measured in their work in order to become
effective. (Dennis, 2007)

This phase of the analysis will be taken into consideration as Volvo Powertrain encourages this study
to help the process in becoming more effective, even though this is not a part of the purpose of the
thesis. However, the different types of wastes will not be analyzed in detail, only if discovered during
mapping of the process, wastes will be highlighted. (Liker, 2004)

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CHAPTER 5
CURRENT SITUATION

This chapter underlines the collected information. It consists of mapping current processes that are
relevant for the study, secondary data, and finishes off with a compilation of completed interviews.
This chapter also presents the benchmarking done.

5.1 PROCESS MAPPING


The process that is to be studied is the design change note process (DCN) which includes the
involvement of many departments. This results in a process map over the work flows in each
department. Further on a good starting point is to map the large DCN process and create a time span
over when a task reaches a specific department. After the large process has been mapped it is easier
to go in to details on each department.

5.2 THE DESIGN CHANGE NOTE (DCN) PROCESS


The DCN process starts when the Product development department in Gteborg sends a cost request
to Product preparation in Kping of a new included part in gearboxes. This part usually replaces an
old included part. The cost request generally answers the question how much would it cost to
replace the old part for this new part? The costs that are included usually involve stock holding costs
and investments on new equipment in production. Furthermore, the answer to Product development
in Gteborg comes within 10 days and then the decision on whether or not to make further progress
with the matter lies on Product development in Gteborg. However, the decision is usually yes, let
us make further progress which results in a large process at the VPT factory in Kping.

The process goes through three major phases and these are Initiation, Preparation, and
Implementation. During these phases there is a monitoring function that continuously monitors the
process to eliminate errors. To get a visual overlook of the phases see figure 8

Initiation Preparation Implementation

MONITORING
Figure 8 Phases of the DCN process

The process begins with the Product Cost Request (PCR) received by Product preparation which is
forwarded to Production engineering and Logistics. Production Engineering and Logistics investigate
the cost connected to the PCR and this investigation is also a process itself. Further on, the decision
in further progress with the matter, taken by Product development in Gteborg, starts the process of
implementation. Product preparation prepares the new included part into computer systems, and
the hold information on price from the Finance department. Production engineering prepares the
included part for manufacturing and updates part structures. Logistics and Purchase connect the part

25
to suppliers and coordinates the inbound logistics, transportation at the manufacturing facility. When
the first gearbox is manufactured it is also controlled by the Quality division.

The process will be described in a chronological way, meaning that it will described from the
initiation phase to the end phase, thus from initiation to implementation.

5.3 PHASE 1 INITIATION


An overlook of the Initiation phase can be found in Appendix D, where flow-charts between the
departments is provided.

5.3.1 Product Preparation Initiation


The Product preparation department has 4 roles in this process. They receive the PCR from the
Product development department in Gothenburg, they treat the PCR before it turns into a DCN, they
prepare the DCN, and they make the report from when the first transmission is completed with the
new change.

Cancellation

Production Reason Motion


engineering No OK

No OK
Incoming PCR Cost Inquiry Answered PCR

Logistics OK DCN Review

DCN Release

Figure 9 Phase 1 Product preparation

Process description
The Product development Department in Gteborg sends the product cost request to Product
Preparation in Kping. This is sent by e-mail to a function mailbox held by three employees. The
product cost request is basically a question about how much a new part introduction would cost. This
question is to be answered within ten days. Furthermore, Product preparation forwards the question
to Logistics and Production engineering whom are set to answer the cost inquiry within seven days.
When the cost from both Logistics and Product preparation is received, an answer is sent from
Product preparation in Kping to Product development in Gteborg. The decision on whether or not
to implement the change lies in Gteborg and they have template cost from which the decision is
made. The current template cost is 50 000 Swedish Kronor (SEK). If the cost from Logistics and
Production engineering is lower than 50 000 SEK, the change is made, and if not, Product
development in Gteborg cancel the order, that is if they estimate the order to not be profitable.

26
Further on, when the decision is made on implementing the change, Product preparation makes a
review of the DCN to make sure that everything looks good and that a change is possible within the
time frame. If an error in the DCN is discovered at this stage, an investigation is started with the
purpose of eliminating the error. If everything looks good, the DCN is released. The release of the
DCN is basically an official statement in Kping where all involved parts receives information about
the new change.

The following two headlines will describe how the Logistics department and the Production
Engineering department work when they make the cost estimation of a new product change.

5.3.2 Production Engineering Initiation


The Production engineering department is a major part of the DCN process. They are the link
between preparation, implementation and manufacturing of the newly introduced part. When the
large DCN process starts, Production engineering comes in at two points. Firstly, they receive a cost
inquiry from Product preparation when the question; how much will it cost to introduce this new
part? is raised. The cost estimation is based upon two major functions; investments of new
equipment and manufacturing instructions. Investments of new equipment refer to tools that will be
used when manufacturing this new part on the production line. A necessity when introducing new
equipment is that the workers get knowledge in how to use the new tools. The second part,
manufacturing instructions, refer to system updates and printable copies that are handed out to the
workers with thorough instructions in where, when, and how the new part is introduced and
manufactured. The second role that Production Engineering has is described later in the chapter.

The approach that the production engineers use when the cost inquiry is received is drawn in figure
10.

DCN meeting

Production Cost Manufacturing


Incoming PCR Cost inquiry Assigned PCR estimation changes
Engineering

Answer cost
inquiry

Figure 10 Phase 1 Production engineering

Incoming PCR
The Product development department in Gteborg sends a Product Cost Request (PCR) to Product
Preparation in Kping asking what the cost for introducing a new part will be.

Cost inquiry
Production Engineering receives a cost inquiry from Product Preparation where the question of costs
relevant to their department is raised. This cost is sent to a function mailbox which five employees at
Production Engineering has access to. Each of these employees has the same function in the DCN

27
process and work within it every day. Every engineer working with this process has eight days to
answer the cost inquiry.

Assigned PCR
Every week there is a DCN meeting where the five employees and the head of the department
allocate the PCRs that they will be working with during the week. This meeting is usually an hour
long.

Cost estimation
At this stage, the Production engineers rate the cost of the PCR from the two standpoints discussed
earlier; Investment of equipment, and manufacturing instructions.

Manufacturing changes
Here, the production engineers check the balance in the line and whether or not it changes when
implementing the change in the manufacturing process. This is done with consulting from the line
balancing responsible.

Answer cost inquiry


When everything is done, an email is sent to product preparation where the estimated cost is
declared.

When the PCR is answered by the Production engineering department, they wait until Product
development in Gteborg makes the decision before they start the next step in the process. But
before that, Product preparation must install the new included part in the computer systems. That
process is shown in figure 5.3

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5.3.3 Logistics Initiation
The Logistics department is highly involved in the DCN process. They are responsible for inbound
logistics, delivery plans, part wrapping, stockholding, and supplier connections. Furthermore, the
logistics department has named Liselotte Riutta as their DCN coordinator and she is responsible for
the information flow when the PCR is received, as well as the initial delivery plan of the new included
part. The first process map is regarding the PCR where she receives and distributes information. See
figure 10.
Material Control

Packaging

Received PCR Cost request Answer cost


inquiry
Hub responsible

Supermarket &
Sequence

Figure 11 Phase 1 Logistics

The process starts when Product preparation sends a cost request to employee 1 at Logistics. The
base of the logistics cost in administration and IT-system is based on four different functions within
the logistics department. These are Material control, Wrapping, Hub responsible and Supermarket &
Sequence, whom will be described below.

Material Control
This is a function that employee 1 owns. Employee 1 has a specific template cost that has been
estimated together with her boss. This template cost is based on the employee cost in administrating
the DCN process. Employee 1s main function is overlooking the process and makes sure that
everything goes according to plan. The employee is responsible for the DCN process at the logistics
department.

Packaging
This cost at this function is based on part packaging of the new introduced part. It is a necessity for
quality reasons that the part arrives to the factory in the condition it should and the wrapping of the
part when it arrives in the box is highly valid for this study. Employee 2 has the responsibility of this
function and he also holds a specified template cost. Ola is the connection between supplier and
factory for these issues and he is responsible for the development of new packaging for every PCR.

Hub Responsible
Volvo Powertrain has a stock hub or a point of delivery which holds parts to the factory with the
purpose of eliminating space in the factory. This hub is located in Hallsberg and delivers material to
the factory in Kping multiple times every day. The hub responsible is employee 3, who also has a
template value in the initiation phase. Later on in the process, this role has a monitoring function in
order to keep control of the process.

Supermarket & Sequence


In order to minimize stock holdings, Volvo Powertrain Kping has implemented what they call a
Supermarket. This is a volatile inventory from which manufacturing takes parts. The supermarket is

29
run with Kanban principles. When a newly introduced part arrives to the Supermarket, there should
already be a prepared space for it. The preparation of this function before a new part arrives is highly
important.

The roll as responsible for preparation of Supermarket & Sequence is held by Johan Ohlsson. There is
already a template cost for this function which is based on, and the template is built on seven
different categories. These categories are preparation of supermarket, preparation of transportation,
preparation of racking, preparation of packaging, planning, repackaging, and filling of scorecard. All
these categories have individual template costs which are added when answering the PCR.

Preparation of supermarket, includes preparation holding space at the supermarket


Preparation of transportation, includes transportation routes inside factory boarders
Preparation of racking, includes racking at the mounting stations
Preparation of packaging, includes control of the packaging that the part arrives in, and
preparation of the packaging that the part should be handled with within factory boarders
Planning, administrating the issue
Repackaging, includes the function of repacking the part from received package to usable
package
Filling of scorecard, the scorecard is always to be filled when a PCR/DCN has been issued.

This phase ends with a DCN release, an official statement that a new part shall be introduced.

30
5.4 PHASE 2 - PREPARATION
The next step in the DCN process is the actual preparation of the new introduced part. An overlook of
the Preparation phase can be found in Appendix D, where flow-charts between the departments is
provided.

5.4.1 Product Preparation Preparation


After the DCN release is completed, the process continues at the Product Preparation department.
This stage has a prepare perspective which means that all systems are to be updated with the new
part number. The reason for doing this is that every involved department needs to work with this
part number in their department systems. The drawn figure 12 shows how this department works
with updating the systems with the new part.

MOMS

Structure preparation

Part registration DCN log

Pricing of new part

Finance

Figure 12 Phase 2 Product preparation

Process description
Firstly, the part number is registered in KOLA, which is the major business system to which all other
systems are connected. In order to be able to work with the part in the connected systems, someone
needs to update the structure of the part. The structure is a drawing of the part with detailed
measurements and weights. The structure is updated in the system MOMS. At the same time as the
structure is updated, the price of the part is too. Reasons for pricing a part so early in the process is
the same as the structure. In order to be able to work and change the part in all systems, the basic
price of the part needs to be set. This is consulted by the Finance department, whom are responsible
for standard pricing of new included parts.

When the structure and the pricing of the part is updated, the three employees at Product
Preparation update the DCN log, which could be phrased as a project plan that all involved parts in
the DCN process have access to. When something is updated in the DCN log, it sends an alarm to the
other involved departments that something has been updated.

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5.4.2 Production Engineering Preparation
When the DCN log is updated with structure and price, Production Engineering begins their work in
preparing the product for implementation. The first thing that is done is the setting of an earliest
time of production. This answers the question When is it possible to start the manufacturing with
the new included part?. Reasons for doing this have to do with informing Logistics and Purchase of
when the new part is required in inventory at the factory.

Rumba.Stam Mont.Cap

Develop
DCN log Preparatio working First part Direct Inform and
n of methods order mounting educate
stations stations workers

Earliest time for Connect


Alarm in
production equipment
Mont.Bem Start of
and part
s Production

Figure 13 Phase 2 Production engineering

Process description
When the DCN log is updated by Product preparation, Production engineering sets an earliest time of
production. This is done in the same log, the DCN log. The next step is preparation of stations which
includes planning of the stations where the new included part is to be handled. The plannings main
focus is getting the part to the right station. This is done in the system Stam which is a sub-system to
Rumba which is a material control program.

When the preparation is done, it is time to start developing new working methods. This section is
highly depending on the complexity of the new included part. Mainly, this is the stage where the
newly invested equipment is connected to the station from where they will be used. Every employee
working at the manufacturing line has instructions on how they should work, and when new
equipment is ordered, these instructions need to be updated.

After the instructions are updated there is a period of waiting at the Production Engineering
department. When the first part is ordered and connected to the factory in Kping, an alarm rings in
a system called Bems which is a sub-system to Volvo Powertrains manufacturing system Mont. This
system is connected to the responsible employees mailbox. When the alarm has ringed, it is time to
start connecting the equipment with the part so that the equipment is ready at the station when first
part is set to be manufactured. This has to be done before the actual mounting of stations begins.
The mounting of stations is when the production engineer assigns the equipment and the part to a
specific mounting station, thus where the part is set to be manufactured. This is done in another sub-
system to Mont, which is Bems. Bems is the sub-system from which the actual manufacturing can be
controlled.

When this is done, it is time to inform and educate the employees working at the manufacturing line.
This is usually done very close to the introduction start. The gathered information about the part and
the new working instructions are here presented to the employees at the manufacturing line.

32
5.4.3 Logistics/Purchase Preparation
The logistics department is not highly involved in this phase of the introduction. The department
holds a monitoring role. The purchase department is based at headquarters in Gteborg and lies
outside the delimitations of this thesis.

5.5 PHASE 3 IMPLEMENTATION


The implementation phase refers to when the part has been introduced at the manufacturing line
and when it is physically represented within factory walls. It is fundamental that the previous phases
in the process have been thoroughly carried out so that the implementation goes through without
trouble.

An overlook of the Implementation phase can be found in Appendix C, where flow-charts between
the departments is provided.

5.5.1 Quality Implementation


There is one function that is connected to the DCN process at the Quality department. This function
is held by Jorma Kallio who is the Quality coordinator. He makes sure that the breakpoint from when
the new included part gets assembled onto the first transmission gets reported. This report is
important since it holds information about when the factory in Kping implements a change. This
however, is important because other manufacturing facilities needs this information in order to
synchronize their manufacturing to this new included part on a global level.

Approximated
breakpoint

Start of
production

Production
breakpoint

Actual
breakpoint

Report actual
breakpoint

Figure 14 Phase 3 Quality

Process description
The process starts about one week before the actual start of production. The Quality coordinator
receives an email from Product Preparation, where information about a new part introduction
obtains. The quality coordinator prepares for start of production and when that moment comes, he
should retrieve information about a breakpoint from the Production department. This breakpoint is
secured when the quality coordinator controls the actual breakpoint at the testing bench. A
breakpoint is a way of measuring when a new part introduction goes into manufacturing. The testing
bench is something that the first transmission of every new introduction of included parts goes
through.

33
When the actual breakpoint is obtained, the quality coordinator distributes this information to the
larger production facilities in the world, these being; Lyon, Ghent and Gteborg. The information
about the actual breakpoint is also sent back to Product Preparation, so that they can log the
breakpoint in the DCN log.

However, this is not the end of the process for the quality coordinator. He is also the contact man for
when other Volvo Powertrain factories around the world asks about information regarding the
breakpoints. This information is retrieved in an IT-system called GASS, which is a new system for
Volvo Powertrain in Kping.

5.5.2 Product preparation Implementation


The Product preparation does not hold a big role in the implementation stage. When the first new
included part is manufactured on the transmission, it receives a breakpoint which is referred to as a
chassis number. The chassis number is an identity of the completed gearbox and a way to keep track
of it in the various systems. When the transmission is manufactured, it gets matched with a receiving
truck that holds the same chassis number.

The process is described in figure 15

DIS

Break point
Start of production report

Figure 15 Implementation - Product Preparation

Process description
When the start of production arrives, Product Preparation receives a breakpoint from the Quality
department, which further on is reported in a time setting system called DIS. One of the three
employees at the Product Preparation department is responsible for this function.

The breakpoint report is important, as mentioned above, because of need of synchronized


production on a global level. Since Volvo provide a customized product range to the customer it is
highly important that all the factories around the world produce a matched product range even on
included part level.

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5.6 PROBLEMS
The problems discovered in the process will be described below and will be categorized by
department.

5.6.1 Problems Product Preparation


Product preparation in Kping has to answer the PCR that is sent from Product development/design
in Gteborg within eight days. The problem here is that the department does not know what to
answer. There is a yearly amount of PCRs of 355 sent to the factory in Kping. The current cost is only
based on two functions; Logistics and Production engineering. An email is sent to these two
departments and an answer is received, but the different function from which the total cost is based
on is unknown to the Product preparation department. Furthermore, the current situation does not
consider administration as a cost.

Moreover, two of the employees participate in a weekly meeting where discussions regarding the
different DCN requests in process are held. These meetings are not validated as costs of the process.
However, the meetings are a necessity in order to control the DCN process and communicate
problems through different departments.

Another problem at the Product preparation department is the lack of definition of roles in the
process. There are two employees handling PCRs and DCNs but there is no distribution on to which
one of these employees should manage which of the PCRs and DCNs. This could lead to process
conflict.

Furthermore, the process starts 355 times every year and Product preparation manages the PCRs
and DCNs as they come in. The variation of complexity in each of the two tasks varies greatly and
there is currently no way in synchronizing them. However, VPT in Kping is currently approaching an
improvement in synchronizing the process in coordination of the DCNs. Still, there is currently no
thought on dividing and grading the DCNs so that Product preparation knows exactly what type of
change that arrives.

5.6.2 Problems Production Engineering


The production engineering department bases its cost on new equipment investments and change in
working methods as a cost. However, the cost in investment and development of working methods is
not the only cost bearer at this department. In order to have a thoroughly mapped process, all costs
must be identified. The administration and employee cost should also be valued as it is a cost occurs
every time the process starts. The main problem at all these departments lies in identifying all the
costs that bears the process.

Meetings are something that the Production engineering department conducts. Each PCR is handled
by one employee; this employee is responsible for calculating the cost of a new part introduction.
The decision on how the PCRs are to be distributed is made every Monday morning. That meeting
held on Monday is 30 minutes and consists of six engineers and the department manager.

The DCN meeting that Product preparation attends is also attended by Production engineering, and
the hope is that every engineer from Production engineering should attend. These meetings are
costs, and even if they are small costs, they should still be validated.

35
Furthermore, the same problem occur that Product preparation had with dividing up the DCNs.
Instead of having a standardized way of distributing the DCNs among the five engineers at
Production engineering there is a discussion on the meetings on which of the employees that should
handle the different types of DCNs that exist. However, Production engineering has come a longer
way in collecting and coordination of the DCNs as they currently distributes DCNs once a week
instead of handling them at the moment they come in.

5.6.3 Problems Logistics


This department has come a longer way in identifying the costs of their process than the other
department. Logistics do have a template cost where the employee cost is valued as a cost bearer.
However, the high involvement of logistics activities makes their part of the process larger than the
other departments and up brings the complexity to another level. The working methods and
described roles in the process at the logistics department are a current problem as well as
communication with other involved departments. Since there is so much information flows at the
Logistics department it becomes hard to keep track of.

The logistics department is also having trouble with coordination of the DCNs; this is a result of not
having any roles in the process. The department has discussions regarding the DCNs but there is no
one that holds top responsibility of the entire process at Logistics. The trouble occurring with this
way of working is double communication, as the ones working in the process do not have a reference
point to lean on. This forces employees to sometimes make uniformed decisions which in the long
run might lead to errors in the process.

Furthermore, Logistics holds the highest cost in the process and is considered to be most involved.
One of the greatest cost-bearers at logistics is the cost of personnel. This is a result of the constant
work in monitoring the process from a logistics point of view. Since the yearly amount of DCNs is as
high as more than one change per day, the annual cost of running the process from a personnel point
of view is very high, especially at the Logistics department.

5.6.4 Problems Quality


The responsibility of the Quality department is to report breakpoints back to Product preparation so
that they can make further communication to other plants around the world. There is currently no
cost at all estimated at this department. Furthermore, there is a major problem in communication
and roll description. The roll as a breakpoint reporter takes three parts. Firstly, the Manufacturing
department reports the breakpoint to the Quality responsible, second, the quality responsible
reports the breakpoint to Product preparation, and finally, Product preparation communicates this
information on the global market.

Another problem at this stage is that breakpoints are key performance indicators for this entire
process and Volvo Powertrain Kping has had major problems with reporting the correct breakpoint
as of lately. From a quality perspective, this problem begins at the Production department. The
production department does not report the correct breakpoint which leads to obvious problems for
the quality responsible. The quality responsible has to conduct a study to retrieve the actual
breakpoints physically at the manufacturing line and further on at the testing bench.

The quality responsible is not attending the DCN meeting which is confusing since he is the one that
initially receives the breakpoints.

36
5.7 COMPARING STUDY AT SKF
SKF is a well known and successful company when it comes to process management which was one
of the purposes for the benchmarking. The conducted interviews provided documented information
about the process which had a different approach than the DCN-process at Volvo Powertrain.

5.7.1 The Engineering Change Management Process (ECM)


The process at SKF is called Engineering Change Management Process (ECM) and is wholly owned by
the Quality department, whom measures, monitors and ensures that the process fills the
requirements. ECN is based on three stages which are Change Request (CR), Change investigation
(CInv) and Change Implementation (Cimp). A view of the overall process is shown in Figure 14

Change Change
Change Request Customer
Investigation Implementation

Figure 16 Phases of the ECM process at SKF

The main difference on a visual perspective is that the end customer holds a role in the overall
process. At Volvo Powertrain, the customer is different Volvo Group companies, whom on the other
hand provide their customers with end products. However, it is equally important to satisfy the Volvo
Group companies with excellent products so that their end products reach the targeted high quality
and customer satisfaction.

The main difference in the way that these two companies work with the process is that at SKF the
different roles and purposes of each task in the process are very clearly defined in order to eliminate
errors. Also, SKF treats each issue, or process, in a unique way, this meaning that SKF does not have a
standardized way of measuring the worth in introducing a new included part. Whereas Volvo
Powertrain has a value of maximum cost for new introductions, SKF conducts a study where they
measure perceived customer value and potential savings in production for each included part
introduction.

One of the main reasons for introducing changes in the product at SKF is cost of poor quality. The
major view on this problem at SKF is a potential save. If SKF manages to decrease cost of poor
quality, they make savings when it comes to disposing of inapplicable products. When cost of poor
quality is identified, a study on how to improve starts. The effect of the study can be a different types
of product or a different way of working at the station where the problem occurs. At that point, the
ECM Process starts. Furthermore, cost of poor quality is not the only reason for starting a process like
this. Environmental regulations sometimes put demands on SKFs products which also require
changes in manufacturing or ways of working.

37
5.7.2 ABC-grouping
SKF groups different changes into three categories depending on the complexity of the change. The
groupings are based on A, B, and C, where A and B are directly related to changing the product and C
is sometimes connected to the product and sometimes to working methods.
Major

B A A
Degree of Change

C B A
Minor

C C B

Minor Major

Product and/or Process influence


Figure 17 ABC-Classification at SKF

Overall there is a yearly amount of 100 C-changes in SKF Gteborg and a lesser number for A- and B-
changes, (Gthberg, 2008). SKF has made it a standard that a Change Review Committee (CRC) shall
exist in each unit where a change may occur. The CRC is a multi-functional group with authority to
approve changes and modifications in the process and the intended change of either product or
working methods. This role is normally shared with the Product manager for the actual product type.
All changes made, including class C, shall be documented by the CRC group.

The entire process in detail is featured below in Figure 18

Figure 18 The ECM process at SKF

38
At SKF, the decision of a new part introduction varies, as there is no template value from which the
decision is made from. Each new part request starts a research on whether or not to introduce a new
part. The decision on new part introductions demands a research on the perceived customer value,
and expected cost reduction in quality and manufacturing.

39
CHAPTER 6
ANALYSIS

The analysis is divided into three parts, identifying waste, process improvements from theories in
process management, and a cost calculation of the process. The first notice is to categorize the types
of waste existing in the DCN process. The identified waste will be of help when recommending process
improvements in the next chapter of the thesis. Moreover, this chapter also takes guidance from
process management in improving the process. This chapter ends with process cost.

6.1 CATEGORIZING PROCESS WASTE


Keyte & Locher (2008) described waste is any non-value-added activity related to a process of
interest. In this case, the DCN process at Volvo Powertrain in Kping. This thesis has used the theory
of waste underlying Value Stream Mapping as areas of improvement in the DCN process. The wastes
till be categorized by department.

Five types of waste from different departments have been identified in the DCN-process. All four of
the involved departments in the process share one major waste, while some departments have more
waste than others. The analysis will thoroughly describe the wastes and describe why these wastes
need to be taken care of. In order to be consistent throughout the thesis, the analysis of waste will
be structured by department. This get support from Keyte and Locher (2008) whom argue that waste
in a cross-department process should be divided among the departments in order to be successful in
elimination. However, it is important to separate the different wastes in every department and
conduct a plan for eliminating them one by one. Otherwise, there might be too much change at the
same time and then the quality of the process would be at risk.

6.1.1 Product preparation

Over production
This is something that usually takes place at this department. This meaning that the department
handles PCRs and DCNs that will not be dealt with from other departments until a later time. Since
the Production engineering department only distributes DCNs to its employees once a week, it is
unnecessary for Product preparation to manage DCNs every day.

Waiting
This is a common waste at Product preparation as the department waits for answers from both
Logistics and Production engineering at the Initiation stage in the process. The major problem with
this waste is that there is continuous waiting every day since the PCR answers from the other two
departments comes in at different times within the eight-day period that the PCR is set to be
answered. This result in that Product preparation must collect two answers and, since these answers
arrives at different times, put one answer on hold until the other answer arrives.

The IT-systems at Product preparation are not synchronized and updated in real-time. The system
Rumba is updated over night which means that there is waiting time for information updates.

40
Over processing
The key performance indicator, reporting of breakpoints, is reported for the third time at this
department. Product preparation receives a reported breakpoint from the Quality department and
reports it globally.

6.1.2 Production engineering

Waiting
This is a waste at Production engineering as when the preparation of the DCN is done, there is
waiting for an alarm to ring in the system Mont.Bems which is dependant to when the first part is
ordered. This waiting has a sudden ending as the engineer responsible for that specific part must
take care of the alarm directly when it comes which means that he sets other jobs aside for the
moment. Since the DCN process is a continuous process that happens many times every year this
causes the work at Production engineering to not be standardized. However, if the engineer had
knowledge in when the first part would be ordered he could prepare for action when the alarm rings.

6.1.3 Logistics

Waiting
This occurs at the Logistics department as well since the PCR is distributed across the department.
The Logistics coordinator for the DCN process has to answer the same PCR as Production
engineering. However, the PCR is distributed further to four other department members and they
are to answer the PCR and send it back to the Logistics coordinator. There is waiting time for the
Logistics coordinator at this stage of the process.

Over processing
As the cost calculation of the PCRs are made by four functions at the Logistics department, there is
repetition of work since all these functions send their own costs to the Logistics coordinator. The
Logistics coordinator further distributes the costs to Product preparation which sends the
information to the Design department at VPT in Gteborg.

Over production
This is the same case as at Product preparation. The logistics coordinator receives PCRs and DCNs
on a daily basis and threats these issues as they come in. As the logistics department sends PCRs
back to Product preparation daily whereas there is waiting time for Product preparations as they wait
for PCRs answers from the Production engineering department.

6.1.4 Quality

Unnecessary movement
The Quality coordinator is physically moving in order to receive and secure the breakpoints from
Manufacturing. He walks from his office to the retrieve the breakpoint from Manufacturing.
Moreover, he walks to the test bench at the end of the manufacturing line to secure that the
retrieved breakpoint was the actual breakpoint. After that he walks to his office to report the
breakpoint to Product preparation.

41
Over processing
The Quality coordinator is the second reporter of the breakpoints as Manufacturing already has
knowledge in the breakpoints.

Defects
Even though there are three breakpoint reports, there are still defects. The breakpoints are the key
performance indicators of the process and VPT in Kping continuously has trouble retrieving them
from Manufacturing. The problem is lack of communication and responsibility. Throughout the
history of VPT in Kping, Product preparation has reported the breakpoints but the actual
information about the breakpoints has the Manufacturing department as holders and Quality is
considered to have more engagement to Manufacturing than Product preparation and that is why
the Quality coordinator is a middle man.

Collection of wastes from the different departments

WASTE
Over- Waiting Over- Unnecessary Excess Defects Unused
production processing movement inventory employee
creativity

Product
X X X
preparation

Production
X
engineering

Logistics
X X X
Quality
X X X

This table creates an overlook of the wastes from the different administration departments which
also creates a discussion on why some wastes are more common than others.

Over processing and waiting are the two most common wastes in the DCN process which raises the
question on whether or not these wastes are related to each other. The over processing at Product
preparation is related to the over processing at Quality which on the other hand is depending on the
Production department. This is strictly related to the breakpoint report, which as discussed earlier in
this section, has no direct effect on the waste of waiting. The conclusion of this is that waiting and
over processing is not in general related to each other, but merely related to the specific task in
reporting breakpoints.

Another question forced to be raised is; Why Over production takes place at Product preparation and
Logistics and not at Production engineering. There is an easy answer to this. Product preparation and
Logistics has not created schemed DCN work like Production engineering where the DCN work is
specified to specific days of the week. Product preparation and Logistics constantly work with the
DCN process which creates issues in the DCN process that will not be handled until Production
engineering reaches that day of the week when DCN work is processed. However, waiting and over

42
production are related to one another, hence, the overproduction is taking place in the initiation-
and preparation stages where waiting is also occurring. If VPT in Kping can eliminate the over
production, the result would be a lesser waiting time which would decrease the cost and
effectiveness in the DCN process.

6.2 PROCESS MANAGEMENT


As mentioned in chapter 4, this thesis would look at process management from two perspectives;
process management methodology, and roles in process management.

6.2.1 Different roles in the process


First and foremost, there are currently no role descriptions at all in the process, and as mentioned in
chapter 4, role descriptions are perhaps the most important. The current roles in DCN process are
merely the names of the employees and no description in what the different employees actually do
in the process, which should be described in the employees work description.

As there are no role-descriptions in a process that is run as many times as 355 times a year, the
natural outcome is poor results in key performance indicators, such as breakpoint reports. Without
role descriptions and poor measurements in reports of key performance indicators, there is
importance in the start of managing the process, and the fundament of process management, role
description.

Without role descriptions, every new employee in the process needs to figure out what their task in
the process is on their own and implement working methods that suites them. Role descriptions in
the DCN process would ease the lack of communication in the process as the different
responsibilities would be formally introduced and visible to everyone.

6.2.2 Process management methodology


Process management was described in chapter 4 as an organized and simple method to secure and
further improve a process. VPT in Kping is currently lacking distinguished process management as
VPT in Kping has failed to implement the process management methodology in the DCN process.

The result of this is waste, poor process measurements and lack of communication. VPT in Kping
has, according to the process management methodology, not organized for improvement, not
understood the process in supplier/customer relations, not observed the process and implemented
regular measurement points and, as a result; not continuously improved the process.

6.2.3 VPT in Kping compared to SKF


SKF has come a longer way in managing their process as the company has integrated process
descriptions and role descriptions in their strategic IT-system. Every employee has access to the
system and the process descriptions which makes an immediate impact in understanding the
process. Furthermore, SKF has set the Quality department as process owners for every business
process in the company which creates strategic ease in managing and developing process thinking of
every process in the entire company. This also enhances standardized work as different processes
might consist of the same type of roles, hence, the Quality department can develop and improve two
processes with one decision. This is not the situation at VPT in Kping as there is confusion in
communication between departments and processes. The process management at SKF has, by
implementing a standard in process owning, removed wastes like over processing, overproduction,

43
and defects. However, one cannot say that development of roles in the ECM process at SKF is the one
factor that has eliminated all the wastes, hence; SKF has worked with process improvement longer
than VPT in Kping.

Moreover, SKF has, as a result of strategic process management, developed a categorization of the
product updates, improved communication and awareness of the ECM process in the entire
company. This is not the case at VPT in Kping as the people that are not involved in the DCN process
are lacking knowledge in why the process is important and why the process even exist. It comes
down to knowing the company that one works for, and when that knowledge is illuminated as
important, people become important and satisfied with their own performance.

The main difference in how these two companies work with the process of introducing new included
parts is that SKF has customer value as a major standing point when the process starts. The reason
for this could refer to the complexity of the product as the complexity of transmissions and drivelines
is higher than the end product that SKF manufactures. The result of this could very well be the
amount of change requests that these two companies experience. As previously stated, SKF has an
annual amount of just over 100 change requests, whereas Volvo Powertrain has 355 change requests
(2008).

However, the processes could well be measurable in the meaning of effectiveness. It is clear after
mapping these processes that SKF has come a long way when it comes to securing the process from a
quality perspective.

This differs from the Volvo Powertrain way of thinking, since the result of the DCN process is always
an introduction of a new included part. However, the complexity of the new included part varies
since some introductions have no need of changing working methods at the station where the part is
introduced. This is important to separate.

44
6.3 COST CALCULATION
The chosen costs to be evaluated are employee, IT-system costs, and average investment costs.
Reasons for this are that these costs are the only costs that can be measured in money when it
comes to an administrative process. Since Volvo is trying to minimize traditional paperwork and base
communication to an online intranet, the cost of paper, pens, and other traditional office costs will
not be considered.

A process map over the DCN process has been made possible through various interviews with people
directly related to the process of interest, the DCN process. The costs found in the DCN process will
be categorized based on department and phase in the process. The meaning of this is that every
department will have its own template cost as a base for evaluating whether or not to implement
changes in the transmission structure. Furthermore, with the Lean tools and process models in
chapter four, problems with the process will be described.

However, the IT-system costs are classified information, hence, the author will not publish any of
these costs, but the IT-system cost have been measured and presented to the company.

The personnel cost is based on VPT:s employee hour cost which is 518 SEK, this information was
received from the Finance department.

To retrieve an overlook of the costs in the process, see Appendix C.

6.3.1 Product preparation


This department does not have any investment costs when introducing new included parts, however,
two employees put time and effort in preparing the part in various IT-systems. The cost at this
department has been measured as employee costs and IT-system cost.

There are three employees that work with the DCN process at Product preparation and they put a
total of amount of 2,67 hours in every DCN process. Furthermore, meetings are conducted where
two of the employees attend. This leads to following calculation:

The total cost per year is:

6.3.2 Production engineering


The production engineering department has an average investment (10000 SEK) in tools and working
methods of 10000 SEK and it takes in general 3,34 hours to treat every DCN. Moreover, meetings are
held and contribute with a cost of 358,95 SEK. This leads to following DCN cost.

The total cost per year is:

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6.3.3 Logistics
Logistics has already calculated an average cost of time and investments which is divided by the
functions; Material control, Packaging, Supermarket + Sequence, and, Hub responsible.

The costs for these functions plus the meeting costs are presented below:

Total cost per year is:

6.3.4 Quality
The Quality coordinator does not have any investment costs, which means that employee cost is the
only cost that can be measured, no meetings are attended.

The total cost per year is:

6.3.5 Total Process cost


Based on the calculations in 6.3.1 6.3.4, the total process cost is:

The annual cost of running the process 355 times is:

The total cost of the process does not lie far away from the previous template cost estimated by VPT
in Kping. However, this cost does not entirely represent the truth since no costs were able to gather
about the parts that are replaced by the new introduced parts. It is important to document the loss
in money that comes from disposing the old part since they might represent a relatively high cost in
this specific process.

46
CHAPTER 7
CONCLUSIONS & RECOMMENDATIONS

This chapter has the purpose of answering the research questions presented in the first chapter of this
thesis.
7.1 RESULTS
The results of the study at VPT in Kping will be presented in correspondence with the purpose:

The purpose of the study is to calculate a template cost for implementation and preparation of a new
included part at Volvo Powertrain in Kping. Moreover, a process map is going to be conducted to get
an overlook of the process in order to recommend process improvements to minimize the yearly
process cost.

As the template cost was presented in chapter 6 and the process map was presented in chapter 5,
the conclusions will be recommendations in process improvement. The process map and the cost
calculation answered research question one and two. The third research question will be answered
was discussed as an analysis was made in relation to waste and process management. However, the
handling of eliminating waste and the creation of process management in the DCN process was not
illuminated enough to leave it there. Therefore, recommendations about eliminating waste and
process management will be presented here.

This will be answered in two stages, necessities in process management, and elimination of waste.
The reason for answering this question in two stages is because, some of the recommendations will
be related to the process management methodology presented in chapter 4 and the other
recommendations will be answered with the theories in administrative waste.

7.1.1 Process Management


Through the interviews and the process map, it was concluded that the process lacks process
management methodology. As the basics of successful process management is role descriptions, and
continuous improvements, one can use the DCN process at VPT in Kping as an example for a
process in need of process management.

As VPT in Kping has not implemented process management in the DCN process, the process has
failed to deliver the wanted results. The conclusion is to implement the following:

A process owner at VPT in Kping

A process owner is, according to the literature in chapter 5, a necessity in successful process
management. There is a clear need for structural decision making in the process locally at VTP in
Kping. There are complaints that the processes in general are steered globally from Volvo Group
which makes decision making on local factories hard to manage, as the power of changing something
in the process has to be raised by someone with specific authority. That authority and responsibility
is the process owners. Furthermore, the DCN process should be a part of the process owners daily

47
job in order to continuously improve the process in form of eliminating waste, improve information
flow and raise issues in the process on a global level.

Process managers at VPT in Kping

The process managers can be seen as supporting roles for the process owner. These managers
should be described at every department enrolled in the DCN process. The process manager should
be able to raise questions on improvement to the process owner and help the day-to-day work in
process management and be the person of contact at the department where the role is described.
This helps the process in structure improvement of communication. If there is a process manager for
the DCN process at a department, then this role is a point of reference for the other employees/roles
at the department working in the DCN process.

Involvement of competence suppliers at VPT in Kping

Involvement of IT is important to the process; hence, VPT in Kping has many IT-systems and the
employees might not always know exactly what to do when the something goes wrong in the system.
Say that an IT-system is updated, but not all authorities are; the employee does not have access to
modify product changes and must raise an issue to the IT-department. This issue should not be a
necessity, the system update it should happen automatically as well as authorities in the system.
Furthermore, lack of communication in the DCN process could be reduced by implementing the same
type of IT support as SKF, hence, a database with information about the different processes at VPT in
Kping. By doing this, the employees would have access to role descriptions, and process description
which would enhance the first three steps in the process management methodology; Organize for
improvement, understand the process, and observe the process (Bergman & Klefsj, 2003).

7.1.2 Eliminating waste


The wastes described in the analysis cannot all be eliminated at once, hence; Keyte & Locher (2008)
claim that successful waste elimination is done in stages, meaning that minor changes are made in
order to eliminate all the waste in the long run. The recommendations below will be manageable
changes for VPT in Kping as the recommendations are minor and do not require radical changes in
working methods.

Schemed DCN-work

In order to minimize overproduction in the process from the two departments Product preparation
and Logistics and thereby minimize the ongoing activities in the process, VPT in Kping is
recommended to scheme the DCN-work to a limited set of days. This means that product
preparation decides upon one or two days that work related to the DCN process every week instead
of continuous work every day. By doing this, the waste of waiting is eliminated. By doing this VPT in
Kping forces the process to become more predictable for the employees. If the four related
departments know which days that administration of the process is done, every employee can
predict when something has been conducted.

Erase the Quality coordinator from the current operational function

The breakpoint report is distributed in three stages, manufacturing reports to Quality whom report
to Product preparation. This meaning that the Quality coordinator is merely a middleman and an

48
unnecessary function of information. According to the theories presented in chapter 4, any
unnecessary function is a potential source of error. By eliminating this part of the process, the result
would be that the breakpoint would travel only from manufacturing to Product preparation which
both is a safer and faster way when handling this type of information.

Implementation of checklists

Each employee working in the DCN process should have a checklist to check-off when an activity is
made in the process. By doing this, an employee creates a systematic way of working, which
eventually will become a standard when conducting different activities in the process. This will
eliminate errors in the process since every employee learns to do their jobs with the same approach
over and over again. Furthermore, as presented in chapter 4, this creates a standardized approach in
work which also eliminates the possibility of providing the next internal customer with faulty
information.

7.2 DISCUSSION
The literature used in process mapping provided base of knowledge when mapping and evaluating
the DCN process VPT in Kping. Mapping of information in an administrative process between
different departments provided an overlook of the complexity and size of the process which further
helped when contacting people for interviews. However, the cost calculation was limited since
information about the declared unfit parts that were replaced could not be retrieved due to lack of
documentation at VPT in Kping. This concluded in that the template cost, hence, the process cost,
could not fully be calculated.

The process management philosophy presented in chapter 4 helped in understanding in how a


process should be management from a strategic perspective which was helpful when analyzing the
DCN process. VPT in Kping were recipient to the philosophy which was satisfying since the
recommendations puts demand on changes in the process.

The understanding of the need of lean supporting processes in a lean manufacturing company
supported the authors approach in the analysis and created a sympathetic base for identifying non-
value-added activities in administration. When understanding that the elimination of waste in an
administrative process supports the core process effectiveness, the process management philosophy
became more logical than before. That was the case for the author of this thesis, the wider scope
that lean administration and lean manufacturing together create supports process management and
the information flow of the activities in an administrative process enlightens the strategic perspective
of process management.

The author believes that the literature used in this thesis was relevant since it was well anchored and
proved to be successful tools in previous case studies. Furthermore, the author is pleased that the
theories used, could be implemented to the extent to where results could be gained. The personnel
at VPT in Kping were satisfied with the result, which held the author to be pleased with how the
procedure of the thesis was conducted.

49
7.3 SUGGESTIONS FOR FURTHER STUDIES
This thesis has illuminated the importance of process management in administrative business
processes in a manufacturing company. It would be interesting to study process management on
different VPT sites as the author believes that the different sites operate process management in
different ways. The author believes that striving for a standardized method of working with process
management would be a success factor in VPTs competition on the global market.

It would also be interesting to study the difference in process management between the different
Volvo companies; hence the author of this thesis believes that the different Volvo companies have
their own way of working with process management. By enlightening the different process
management styles in the different companies, one would get a good overlook in what management
styles are good for the Volvo Group.

50
CHAPTER 9
BIBLIOGRAPHY

9.1 BOOKS & ARTICLES


Backman, J. (1998). Rapporter och uppsatser. Lund: Studentlitteratur

Bergman, B., & Klefsj, B. (2007) Kvalitet frn behov till anvndning. Lund: Studentlitteratur. 3:e
upplagan

Bergman, B., & Klefsj, B. (2003) Quality from customer needs to customer satisfaction. 2nd edition
Lund: Studentlitteratur.

Bicheno, J. (2006) Ny verktygslda fr Lean: Fr snabbt och flexibelt flde. Buckingham: Revere AB.

Bland, M. F., Maynard, J., Herbert, D. W., (1998) Quality costing of an administrative process. The
TOM Magazine. Vol 10, Nr. 1

Bryman, A. (1997). Kvantitet och kvalitet i samhllsvetenskaplig forskning. Lund: Studentlitteratur.

Christopher, M., Peck, H. (2004). Building the resilient supply chain. International journal of logistics
management. Vol 15, Nr. 2

Dennis, P. (2007) Lean Production Simplified: The nuts and bolts of making assembly operations flow.
2nd edition New York: Productivity press

Dicander Alexandersson, M., Almhem, L., Rnnberg, K., Vgg, B., (1998). Att lyckas med
processledning. Malm: Liber AB

Eriksson, L. T, Wiedersheim-Paul, F., (2001). Att utreda, forska och rapportera. Malm: Liber AB

Eriksson, L. T., Wiederheim-Paul, F., (2008). Rapportboken. Malm: Liber AB

Hunt, D., (1996). Process mapping: How to reengineer your business process. New York: John Wiley &
Sons, Inc

Keyte, B., Locher, D., (2008) Leanhandboken. Malm: Liber AB

Krajewski, L. J., Ritzman, L.P., (2004). Operations management; processes and value streams.7th
edition New Jersey: Pearson Education Upper Saddle River

Liker, J. K., (2004). The Toyota Way. USA: McGraph-Hill

Loriander, A., (1996). Processledning fr kad samverkan mellan fretag. Linkping: UniTryck

Petersson, P., Johansson, O., Broman, M., Blcher, D., Alsterman, H. (2008) Lean Gr avvikelser till
framgng. 1:a upplagan Kristianstad: Kristianstads boktryckeri AB

Rentzhog, O. (1998). Processorientering. Lund: Studentlitteratur

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Saunders, M., Lewis, P., Thornhill, A. (2003). Research methods for business students, 4:e upplagan.
Harlow: Financial Times/Prentice Hall.

Srqvist, L., Hglund, F. (2007) Sex Sigma: Resultatorienterat frbttringsarbete som ger kad
lnsamhet och njdare kunder vid produktion av varor och tjnster. Lund: Studentlitteratur

Willoch, B-E. (1994) Business Process Reengineering En praktisk introduktion och vgledning.
Gteborg: Docendo lromedel AB

Womack, J., & Jones, D. (1997). Lean Thinking. New York: Simon & Schuster.

Yin, R. K., (2003). Applications of case study research. Thousand Oaks, California, USA: Sage
Publications Inc.

9.2 INTERNET SOURCES


www.volvogroup.com, 2009-09-04 2009-12-01

www.nissandiesel.co.jp, 2009-09-04 2009-12-01

9.3 INTERVIEWS
Under examensarbetets gng har ett antal intervjuer gjorts vid Volvo Powertrain i Kping.

Jani Tasala Product preparer at Product preparation, 2009-09-07

Kjell-ke Kld Detail planner at Product preparation, 2009-09-07

Mats Halldn Standard pricing at Finance, 2009-09-09

Liselotte Riutta Logistics at Material control, 2009-09-10, 2009-10-19

Mattias Wickman Production engineer at Product development, 2009-09-30, 2009-10-06

Leonardo Comazzi Identification, SKF, 2009-10-13

Christoffer Guldstrand Site IT Manager Kping, 2009-10-05

Roger Forsberg Assembly Manager Volvo Powertrain Kping, 2009-10-06

Mattias Silfver Manager Quality Technology Volvo Powertrain Kping, 2009-10-07,


2009-10-26

Jari Bergehger Production/Manufacturing Volvo Powertrain Kping, 2009-10-07,

Jorma Kallio Quality Technology Volvo Powertrain Kping, 2009-10-26

Anders Gthberg Quality Manager, SKF, 2009-10-15

Nevenka Salamurovic Logistics development, Volvo Powertrain Kping, 2009-10-22

Christer Nilsson Logistics, Volvo Powertrain Kping,

Ola Carlsson Logistics, Volvo Powertrain Kping, 2009-11-10

52
Johan Ohlsson Manager Logistics Development, Volvo Powertrain Kping, 2009-11-09

Continuous discussion with Jani Tasala, Kjell-ke Kld, Klas Rehnberg, Patrik Bjrklind and Katarina
Forsberg. All at Product preparation.

9.4 UNPUBLISHED INTERNET SOURCES


Volvo Powertrains intranet, Violin, 2009

53
APPENDIX A
Questionnaire for process mapping interviews

1. Process perspective

What is your role in the whole process? The Whole process is the whole company / factory
participation in the implementation of a new article.

What part of the whole process belongs to you? What does the flow of information look like?
Is there any overhead process that is part of a whole process that you belong to?

What is the input and output in that part of the process which you belong? This applies to
documents, appointments, information.

From which processes / units does the information come to you?

Where do you sent your processed information about the part? To whom it is sent?

What does your process look like? What are your duties concerning implementation of a new
part?

How many people work in your process?

How many different tasks / steps there are in the process and what is the distribution of
tasks versus staff?

What improvements do you see in your process in the current situation? Or does the process
work well?

Which stakeholders are involved in the issue of reporting? To whom do you report when you
are done with your work?

Which IT-systems do you use when working with the process?

2. Time perspective

How long does it take for you to perform the tasks involved in your process?

How often is a new process started?

Is it often so that you do not have time to finish the job before a new process comes into
force? Are there any overlaps between processes?

How much time spent on after work when the process is complete? Thus, mail / telephone
contact between you and the other units in the full process?
How long does it take before the business system updates your work?

Is it often so that people outside the DCN process become involved? How much time does
the contact between you and the person?

3. Kostnader

What costs do you currently see in the process which you belong? By this I mean system
costs, paper handling, invoicing and so on.

How much of your work is spent on the DCN process? Estimate the percentage.
APPENDIX B
Questionnaire for Benchmarking

The process of interest is new part introduction, which in other words can be described as an update
of the end product. This specific case is done at Volvo Powertrain Kping which is a manufacturer of
transmissions. The process at your company could have the following overlook design:

Product Change Change Secure quality of Customer


development request implementation product

Product development makes research on updates of product A change request is sent in order to
make sure that the change is possible If yes, The change is implemented and the preparation and
supplier connections are made The product gets measured for quality reasons The customer
receives the product with implemented change.

Describe the process from an overlook perspective at your company.

Are there clearly defined roles in the process?

Does anyone own the process? If yes, who owns the process?

Is the process quality secured?

Which key performance indicators is the process measured upon?

How is the use valued when implementing a change request? Cost vs. customer value?

Have you calculated the cost of the process? If yes, what is the cost?

On a yearly basis, how many reported changes are made?


APPENDIX C
Collection of process cost

Cost Product Preparation Hourly employee cost 518


Parameter employee amount time minutes time hours
Checking of received PCR - Jani 1 30 0,5
Checking of received PCR - Kjell-ke 1 20 0,34
Preparing PCR - Jani 1 30 0,5
Preparing PCR - Kjell-ke 1 15 0,25
Preparing PCR - Katarina 1 15 0,25
PCR logging 1 5 0,08
PCR review - Jani 1 15 0,25
PCR review - Kjell-ke 1 10 0,17
Timing DCN in production 1 15 0,25
Breakpoint report 1 5 0,08

SUM 1 160 2,67


TOTAL COST 1383,06

Parameter Employee amount DCN per year Meetings (min) Minutes per DCN hours per DCN
DCN meeting Kping 2 355 2700 7,605633803 0,126760563
TOTAL COST MEETINGS 131,3239437
Hourly employee
Cost Production Engineering cost 518
Parameter Employee amount Time Minutes Time Hours

Cost estimation 1 30 0,5


Manufacturing changes 1 30 0,5
PCR answer 1 10 0,17
Preparation 1 60 1
Mounting 1 60 1
Education 1 10 0,17
Average investment 10 000
SUM 1 200 3,34
TOTAL COST 11730,12

Parameter Employee amount DCN per year Meetings (min) Min per DCN hours per DCN
DCN meeting Kping 2 355 2700 7,605633803 0,126760563
DCN meeting Production engineering 6 355 1560 4,394366197 0,073239437

TOTAL COST MEETINGS 358,9521127


Hourly employee
COST Logistics cost 518
Employee Time
Parameter amount Minutes Time Hours

Material control 1 1020 17


Packagaing 1 240 4
Supermarket + Sequence
- Preparation of supermarket 1 960 16
- Preparation of transportation 1 864 14,4
- Preparation of racking 1 240 4
- preparation of packaging 1 240 4
- Planning 1 480 8
- Repackaging 1 144 2,4
- Filling of scorecard 1 480 8
Hub Responsible 1 290 4,82

SUM 1 4958 82,62


TOTAL COST 42797,16

Employee Meetings Hours per


Parameter amount DCN per year (min) Min per DCN DCN

DCN Meeting Kping 1 355 2700 7,605633803 0,126760563


Logistics forum 4 355 2700 7,605633803 0,126760563

TOTAL COST MEETINGS 328,3098592


Hourly employee
Quality COST cost 518
Function Employee amount Time Minutes Time Hours

Tracing, recieving, reporting breakpoint 1 210 3,5

SUM 1 210 3,5


TOTAL COST 1813
APPENDIX D
Flowcharts between departments

Phase 1 Initiation
Product Preparation

Motion Reason

Not OK

Total cost DCN


DCN Release
Cost request Review
calculation OK
Logistics

Cost estimation
Engineering
Production

Cost estimation

Yes
development

New product Implement? Cancellation


Product

No
Phase 2 Preparation

Preparation
Part Preparation
Product

of price and
registration
structure
Logistics

Contact Hub in
Hallsberg

Equipment and
Production Engineering

Prepare stations part connection


Inform Start of
and develop Alarm
manufacturing production
working methods Direct mounting
stations

Prepare new First part


Purchase

order
Order
Phase 3 Implementation

Preparation
Product Approximate Report actual
breakpoint breakpoint
estimation globally
Quality

Inform Secure
breakpoint breakpoint
Manufacturing

Report actual Secure


breakpoint breakpoint
engineering
Production

Documentation of
breakpoint report