Give a complete case study  which relates to the Mutual Insurance Company of Iowa………………………..

 

Overview and summery

            This is a case analysis of Mutual insurance Company of Iowa, MICI. The company has experienced speedy growth in sales which resulted in corresponding increase in customers’ claims. However, the claim department was unable to cope with the volume which led to outcry from the company customers.

Company management has proposed to install JIT system in an effort to fix the problem. JIT is a lean production system whose core principles are to reduce production wastages. The system will require training of company staff to make them multi skilled and may require restructuring of the company.

The new system if well implemented will solve the current workload as the claim forms will be processed as soon as they arrive. This will enhance production efficiency and increase customer confidence in the company.

Introduction

The mutual insurance company of Iowa is currently experiencing troubles in service delivery which could derail company performance. The claim department is overwhelmed by massive incoming claims from its clients. The company has limited personnel and facilities to handle increased number of claims from its customers.

This situation if not addressed urgently will land the company into legal and financial problems which will adversely impact on company performance. The management has come up with drastic measures to address the problem by seeking the installation of JIT system to help solve the problem of delayed processing of customers claims.

This method is costly and will require trainings to be undertaken to equip the workers with JIT principles. However, the new system will result in major departmental changes, revision of operation layout and work methods consequently setting in place the process of lean production in MICI.

Lean production will help the company to reduce wastage and satisfy the customers by processing their claims in time and also adding value to the customer as well. Different wastes that lean production will eliminate include; overproduction, excess inventory (claims), conveyance (movement of claims to different offices), correction wastes (having to rework on parts due to error, motion by workers (puts stress on employees’ body), processing costs (unnecessary processes) and waiting waste (workers being idle between operations).

By eliminating wastage in production of goods and services, the firm will do more with less capital, space, effort, labor, inventory and lead time.

Discuss the basics of lean production

Lean production commonly known as Toyota production system is assembly –line methodology which focuses on waste elimination, reducing inventory and empowering workers to enhance productivity, Shili, (2011).

The lean production has two main pillars namely:- just in time system and Kaizen developed to adopt mass production techniques of production. The JIT system of lean production entails producing what is required in the market at that particular time. The lean production method eliminated inventories and safety stocks.

Leveled production where a company produces different models/ products using the same production line to cater for the needs of customers. Production is based on customers’ demand and reduces the delay in meeting customers’ requests.  Production plants should be centralized to avoid movement of parts of products and services from place to place as this is waste of time and money.

Pull system in lean production refers to initiating production activity as a result of pull generated by the customers. The methods in MICI will demand processing of claims as per customers demand without delay. The customers in this case have triggered the production chain in timely claim processing.

Continuous flow processing is a precondition for the JIT system. This is necessary as there is no safe stock and inventories in lean production. There is no fear of shortages in lean production. In the insurance firm, there shall be smooth flow of claims as they arrive and no pending claims should be found.

In lean production, the pace of work is determined by customers’ demands. The demand for services by clients is apportioned to workers, for instance the demand to process 2,500 claims a day is divided by the minutes in a day to find time to be spent by employee on one claim.

 

Flexible workforce is necessary in lean production. Trainings are necessary and inevitable to develop a multi- process handler employee. Time wait is eliminated in lean production by structures that allows for the worker to perform other tasks as he waits for task to be completed

What are the issues with inventory under a lean production model?

In lean production, there is no inventories management because there is smooth flow processing which means that work is arranged inside each production process and flows from one step to another. This is JIT system which does not allow safety or buffer stock to exist between the processes unlike just in case (JIC) process.

Excess inventory is termed as wastage in lean production which unnecessarily ties up company cash. Inventory management is also seen as unnecessary costs to the company and hence those stocks that are absolutely necessary are needed in lean production.

Lean production is characterized by continuous flow production which cannot maintain inventory. All the work is passed through in a continuous manner leaving no chance of inventory management. Any system defect leading to safety stock will result in very high losses. The diagrams below compare JIT and JIC production system.

Compare with JIT system

Identify the attributes you would expect the Claims Processing Department at MICI to have once the new JIT system is in place.

Flexible work force at claims department at MICI is mandatory for the working and success of JIT system. The workers should be well trained handle various claim processes in different sections of the department as opposed to the current one process.

What would the restructured cell layout for claim processing in Figure  

customer claims arrive for processing

Claims department: Customer claim is processed by relevant in one location

Claim processed and notice or check sent to customer

 

 

Fig 2. Cell layout for claim processing

Source: own source

 

What assumptions are you making about personnel and equipment in the new group technology cell layout?

 

>Personnel are flexible and can handle different claim processes.

>Employees should work as a team rather than as individuals

>Employees are motivated by various incentives

>Equipment should handle different tasks to save on space

>Production equipment are located in one central area.

 

How will the new JIT oriented system benefit the MICI operation?  Explain.

JIT system has been proven to be one of the best production systems in the world according to Shili, (2011). However the success of this system will depend on how it is implemented. The following benefits will accrue to MICI if the system is implemented successfully:

>The system will reduce both direct and indirect labor by getting rid of non value added activities.

>The new JIT system will reduce floor and warehouse space needed to offer its services to customers. Various stations in claim department will be integrated into one office to avoid unnecessary movement to convey claim forms, (Niranjan and Weaver, 2011).

>The new system will drastically reduce of setup time and schedule delays as the factory becomes a continuous production process. The forms will arrive and processed the same day.

>Decrease is waste, rejects, and rework by detecting errors at the source. Correction waste will be reduced because will be offered according to client’s demand and with well trained staff.

>Reduced lead time due to small lot sizes, so that downstream work centers provide feedback on quality problems.

>Better use of machines and facilities. They will not just perform one particular production activity but multiple production activities.

>Better relations with suppliers. Pull system demands that services are offered according to customers demand leading to customer satisfaction.

>Improved integration and communication between functions and departments such as marketing, purchasing, design and production.

>Quality control built into the process which reduces error and defective goods and services.

>Company workers will be more productive and multi skilled due to trainings and motivation.

> The system will improve flow of goods and services hence claim forms will be processed and cleared as soon they arrive.

 

Discuss the concept of respect for people as it relates to people? Who does this concept relate to MICI?          

The concept of respect for people is adopted to solve perceived problems at the work place. In this concept, managers will ask employees work related problems they are facing. They challenge employees’ answer which prompts dialogue to unearth the real problem. The cause of the problem and the root causes are discussed through joint evaluation to come up evidence to back up their reasons. The end result is the solution to the problems the ways to know if the problem has been solved. After striking an agreement, employees set out to implement the solution.

In MICI, the concept relate to workers in claim department and the manager of claim processing, Ms Cook. This is the department where there is serious problem of workload due to overwhelming number of claim forms. The workers are unable to cope with the increased numbers of claim forms hence the need for solution to fix the problem. The manager, claim processing is required to engage employees working under her in dialogue to find out what the really cause of the problem and come up with the solution to the problem.

 

Conclusion

Lean production has been found to be the best system in reducing production wastages and if implemented successfully will solve the company’s problem of accumulated claim forms. The new system will also release cash tied up in safe inventory to used elsewhere, release more space as previously inventory area can be used for service delivery and reduce defect rates in production. However, the commitment by company workers and management to adapt to the new requirement will be essential for the new system to succeed.

The new system will not only fix the current problem but will have other benefits to company as well. The new system will require respect for the people concept especially by the management to value and respect the juniors by incorporating their ideas in decision making process and solving company problems. Staff motivation and training will have to be undertaken for the JIT system to work effectively. However, according to Shili, (2011), JIT system may involve a major overhaul of company business systems which may be difficult and costly. The system may also open the company to risks connected with the supply chain, (Chang, 2009). Evidently, the system is good and applicable to MICI company and if well implemented will fix the company problem.

 

References

Chang, H. (2009). An empirical study of evaluating supply chain management

integration using the balanced scorecard in Taiwan. Service Industries Journal, 29(2), 185-202.

Niranjan, T. T., and  Weaver, M. (2011). A unifying view of goods and services

supply chain management. Service Industries Journal, 31(14), 2391-2410. doi:10.1080/02642069.2010.504821

Shili, S. (2011). The Strategic Rote of Lean Production in SOE’s Development.

International Journal of Business & Management, 6(2), 160-168.

http.totalqualitymanagement.files.wordpress.com/2008/11jic-buffer-   inventory.png.(accessed 3^rd march, 2012).

 

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