STRM023
TABLE OF CONTENTS
1.IDEMITSU KOSAN CO., LTD: Companys overview:22.OPERATIONAL PROCESSES AT IDEMITSU: (THE INPUT-TRANSFORMATION-OUTPUT PROCESS)32.1INPUT RESOURCES:52.2TRANSFORMING ACTIVITIES:62.3OUTPUT PRODUCTS/SERVICES83.LITERATURE REVIEW:94.EXPECTED GAP(S) BETWEEN CUSTOMER EXPECTATIONS AND OPERATIONAL DELIVERY/DESIGN:134.1ACTION PLAN TO OVERCOME GAP:134.2OVERCOMING IMPLEMENTATION CHALLENGES15REFERENCES16APPENDIX: 119
QUALITY IN CUSTOMER FOCUSSED OPERATIONS
IDEMITSU KOSAN CO., LTD: Companys overview:
Idemitsu Kosan Co.,Ltd is the second largest Japanese petroleum company headquartered in Tokyo, Japan. Established in 1911, Idemitsu enjoys a major share of Japan's lubricant market. Idemitsu operates in diversified segments of oil and gas, lubricants and petroleum products and specializes in exploration, extraction, production, refining, and selling of its versatile product range. The company also focuses on design, installation, fabrication and sale of chemical-industrial and environment protection compatible machineries and equipment and other functional electronic materials. The strong market presence in Europe, North and South America, Far East, South and South East Asia, Oceania and Middle East has retained major clientele in automotive industry worldwide for Idemitsu (See Appendix:1 Following table highlights order qualifiers and winners for Idemitsu.
ORDER QUALIFIERSORDER WINNERS
QUALITYSuperior quality ,advance values, high performance, environment friendly lubricantsExcellent quality approved by OEM (Original Equipment Manufacturer)
DEPENDABILITYSecure services, assurance, greater fuel power, satisfaction to meet expectations, strong brand name and company history of 103 yearsprofessionalism of servicesBrand reputation and company history
COSTReasonable product prices relative to competitorsReasonable product prices
FLEXIBILITYSupply service station nationwide, overseas expansion, product safety, quality assurance
Table 1: Order winners/Qualifiers for Idemitsu
OPERATIONAL PROCESSES AT IDEMITSU: (THE INPUT-TRANSFORMATION-OUTPUT PROCESS)
A standardized approach is adopted for all the operational processes and procedures at idemitsu. The worldwide operations at idemitsu expanded to 47 different locations earning operational profit of Y 128.8 billion JPY 128.8billion (2010, Consolidated). Among the different operations at Idemitsu includes following shown in figure:
Figure2: Business operations at Idemitsu
All Products and services are yields of operations that undergo conversion of input to output employing Input-Transformation-Output process ITO process.(Chopra et al., 2005, p.225; Jhonston and Clarke, 2008, p. 56).Following figures show I-TA-O diagrams for oil refining and domestic transportation of petroleum products to local stations
Fig 2a: Oil Refining at IDEMITSU
Fig 2b: Domestic Transportation to gas stations and retail outlets
The vast operations, diverse departments and versatile product range undertakes complex individual operations accumulated together to get a particular output in this company. Idemitsu classifies different business segments :
Figure 2b: Four different business segments
LUBRICANT MANUFACTURING PROCESS:Our focus will be mainly on lubricants manufacturing to assess ITO framework for the firm in this section. The manufacturing procedures ensure safety as well as trust, making use of highly advanced refineries and plants. The major lubricants produced at idemitsu include: Marine oils Maintenance oils Metal working Oils Grease Products Industrial oils Traction Drive Fluid(TDF) Polyvinyl Ether(PVE) Polyalkylene Glycol Oil (PAG)
1.1 INPUT RESOURCES:Among the various input used in production of high performance, environment friendly lubricants is Raw-materials (Crude oil), Capital Equipment(Refineries and plants specifically Lubricant refining equipment),Labour, Information ( Lubricant R&D lab), Time and Money.
Crude oil is procured through four oil refineries at Hokkaido, Chiba, Aichi and Tokuyama, and two petro-chemical plants in Chiba and Tokuyama regions have been installed to help supple the production process and supply of crude oil. The lube base oil refinery is installed in Chiba with total capacity of 220,000 BPD(barrels per day).
Figure 2.1 Capacities of Idemitsu Refineries
Long cultivated technology is employed for production of variety of lubricants. Anticipating future demands, resources are used effectively for stable supply of energy by making use of uranium, coal, geothermal and hydrogen fuel cells as input. 1.2 TRANSFORMING ACTIVITIES:
All the blending plants are aligned to quality assurance standards for manufacturing process of lubricants. ISO 9001and ISO 14001 are followed as international quality standards with specifications and formulations issued appropriately. The refineries installed at Chiba for production of lubricants receives crude oil from tankers through the sea berth installed 3km offshore, an offshore pipeline is settled to transport oil to refinery which then produce the outstanding quality lubricant employing exceptional refining facilities.
The transformation of crude oil to lube oil follows a sequential path starting with Extraction of crude oil that follows sedimentation and fractionating (Fractional distillation)then solvent extraction leading to final phase of additives ,inspection and packaging:
Sedimentation: Oil tankers transport crude oil from tankers to refinery by off-shore pipelines
Contaminants (sand, rocks, water) are removed through sedimentation
Water and oils are separated from crude in holding tanks and impurities settle down.
Fractionating
Crude oil is broken down to vapors (hydrocarbons) and liquid by heating it on temperature of 700 degrees then drove in to fractionating towers.
Vapors of hydrocarbon after cooling condense and collected in numerous trays of fractionating tower.
Vapor pressure in tower is constantly to vaporize 80% crude oil and remaining 20% after reheating is drove to another tower to be vaporized at much lower temperature in vacuum pressure that separates behind inorganic compounds with high boiling points.
Filtering and solvent extraction
Further purification of crude oil is made by passing it through intricately fine filters to remove contaminants
Solvent extraction is done to remove aromatics (heavy hydrocarbons easily soluble in solvents).Solvent in this procedure dissolves aromatics and separates out the lube oil.
Additives, inspection, and packaging
To achieve required physical properties, oil is then mixed with additives.
The final product is then subjected to various quality control tests to check out lube oil in terms of viscosity color, fire point and specific gravity.
Lubricant with high standard quality is packaged for higher level distribution system.1.3 OUTPUT PRODUCTS/SERVICESOutput is finished lube oil for automotive and industrial lubricants. these lube oils are mainly industrial lubricants including liquid paraffin, transformer oils, rubber oils, solvents and general-purpose lubricants, PAG(Polyalkylene Glycol) Oil thats is lubricant for automotive air condition, maintenance oils(zinc-free biodegradable hydraulic oils as well as long-life compressor and gear oils.) The packaged lube oil is then distributed with superior handling and efficient transportation through largest fleet of idemitsu tankers.
THE INPUT-TRANSFORMATION-OUTPUT (ITO) PROCESS MAPPING FRAMEWORK FOR LUBE OIL PRODUCTION AT IDEMITSU
CRUDE OIL
PURIFICATION PROCESSSEDIMENTATION
FRACTIONATING TOWERS
TOWER1PROPANE/GASOLINE
TOWER 2
WAXES
FRACTIONAL DISTILLATION
FILTERING
ADDITIVES
FINISHED PRODUCT(LUBEOIL)
LUBRICATING OIL PLANT
PACKAGING
1. LITERATURE REVIEW:
Quality management as a reflection of Customer Expectations Quality refers to fulfilling or surpassing customers expectations through provision of desired product features without insufficiencies. (Chua, 2008. p,32). American society for quality, ASQ (2008) gives more comprehensive view of quality referring to recreation of maximum solutions alleviating product/service expectations thus triggering success and satisfying anticipated demands of customers. Quality is not an innate feature but fulfilment of stated and implied requirements of customers (Shahin and Nikneshan, 2008).Customer expectation is ever-evolving, never constant phenomenon (Meredith, 2011) vision of the customer that is inherent and critical to well-being of organization ( Klefsjo et al., 2008). Customer expectations are opinions developed about service execution that serves as standards or reference point for judging product/service performance. (Phiri and Mcwabe, 2013).it is formation of beliefs that are pre-experience (Andersson and Liedman, 2013) .Achieving Customer expectations is critical from managerial perspective; expectations vary at various stage of organizational relationship to customers (Goldstein, 2009).Meredith (2011) argues that fulfilled customer expectations and enhanced service quality leads to customer satisfaction
ISO 9000 interpreted quality as extent of fulfilment of prescribed standards of characteristics that conforms with demands/needs or requirements of end users/customers (Technical committee 176/SC-ISO, 2005, p.5).Another viewpoint on quality reflected by Dr. Juran is meeting or surpassing customers requirements in terms of design, conformity, accessibility, safety and use and Fitness defined by customer for usage of product/service is quality (TQM: Wordpress, 2009).
The eight Quality management principles enumerated in ISO 9000:2008 prioritized Customer focus as first principle for improved organizational performance postulating that organizations are dependent on their customers so understanding current and future needs of customers is pivotal. So, it is necessary to meet customers requirements and attempt to deliver more than their expectations(ISO,2012. p. 2)
The world conference of American society for quality (ASQ) on quality and improvement 2014 highlighted quality fundamentals, case for quality building and sustaining culture of quality as mean of quality effectiveness. Customers either internal or external are central focus of TQM (Koontz and Hills, 2008. p.72) as well as TQM refers to customers centricity and Voice of Customer(Slack et al., 2013).So, reaching customers satisfaction by enhancing quality element in operations is deemed important internally and externally across the supply chain (Oakland, 2011).
Customer-oriented perspective of quality ensures conformity of product/service attributes with accuracy, design/attributes and performance of product, pace, durability and reliability of service (Manu, 2011). Tellis et al. (2011) ascertained that fundamental aspect of TQM is to have thorough knowledge of customers expectations as this will lay the foundation of every operational activity in TQM.
Customer view of quality is measured through gap between their perception and expectation of product/service says Slack et al.,(2011)that furthermore follows that the assumed gap helps companies to execute actions to certify higher levels of perceived quality.so the quality Coefficient from customers perspective is quality perceived/quality expected(Diaz et al., 2006, p.289).Kane(2011) highlighted seven different perceived vs expected quality gaps as shown in following figure:
Source: Adapted from: Kane (2011) Perception-expectations gap of qualitySlack et al(2011) on basis of this model assumed that deficiency or gap at each level is deficit in responsibility of either marketing, product development, operational management.
A wide array of traditional theories still in practice refers TQM as customer based services (Bowen and Scudder, 2013).internal and external customers are focus of TQM so communicating quality to both will meet expectations and boost satisfaction (Deming, 2000), Customers perception is significant in determining quality trilogy quality planning, quality improvement and control (Juran, 1966), Quality is conformance to product and customers requirements (Crosby, 1979).Quality is evaluation of products/services against customers acceptability(Ishikawa, 1985). These theories are a small reflection from thousands of theories and models that when reviewed will give broader understanding of quality and customer satisfaction correlation
Several contemporary theoretical models and principles have been designed to support the interrelation of TQM and customer expectations such as Customer focus principle (Roke and Yaddav, 2012); Foster(2010) explained customer focus principle as a pre-emptive approach facilitated by customer based data that help classify needs, preferences and expectations of clients thus designing products and services that directly influence customers satisfaction(Gill,2009).
Foster(2012) reflected integrative approach of Quality theory and highlighted customer focus among core variables of theoretical model for quality management, and depicted that appropriate data for customer needs and wants analysis is key to quality management. Furthermore emphasized that continuous focus on customers expectations and needs will eradicate quality errors.
Nagaprasad and Yogesha (2009) underlined that execution of TQM programs enhances sensitivity towards customer needs and make them leader in anticipating their expectations. Quality initiatives eradicates the products weaknesses and fulfils customers perception about product/service
Fig: 3a TQM program benefits for customers
As well as other quality oriented frameworks including EFQM, (European Framework Of Quality Management) model proposes focus on customer as a trigger for improved quality management (British Quality Foundation, 2013).Malcolm Baldrige National Quality Award, 2010 (MBNQA) winners have identified that impediments in accomplishing TQM has three main root causes most prominent being Integration with suppliers and customers. Thus, emphasis is given on pleasing internal customers to satisfy external customers to accomplish standard quality domains.(Nagaprasad and Yogesha, 2009).
The Quality Operating Systems (QOS) implemented in top global companies is conformed to customer quality standards. (Kristianto et al., 2011). Superior quality products needs understanding customers expectations that help in knowing inherent quality standards which customer use while evaluating product quality (Johansoon, 2008).
In an organizational context, the TQM approach starts its focus from customers and their requirements (Tari, 2005) then identifying the needs of internal and external customers and enhancing customer-supplier relationship for excellent quality (Lorente and Costa, 2004) .In TQM chain, the better treatment with internal customer in terms of timeliness, completeness and accuracy will ultimately lead to fulfillment of external customer expectations.(International Federation of Accountants IFA,2009). Figure 3b : Adopted from: Managing quality Improvements IFA, 2009
In arena of successful companies quality is employed as a framework to conform to customers demand: Ford claims Quality and customer satisfaction is our central mission; customers perspective on vehicle quality is gathered through surveys (Ford,2013).Toyota employs in its practice the rule of Customers First and Quality First and integrated the functions of Quality Group and Customer Service Operations Group to establish the new Customer First Promotion Group to manage quality issues involved with customers (Toyota, 2012).GE achieves its operational excellence by enhancing customer value and leveraging quality through six sigma thus to solve most tenacious challenges by customers.(GE,2014).Shell claim to offer quality product and services and prioritize that commitment to quality is all about customers satisfaction(Shell, 2013).Honda adopts proactive approach and accomplish customer satisfaction by conducting surveys in each product segment motorcycles, automobiles and power products, then customer oriented quality and customer satisfaction initiative is accomplished through processes/people/products(Honda, 2013).These examples are overview of interrelation of quality in customer based operations to provide an insight how organizations are coping with quality factor to meet customers expectations
The review of above literature reflecting the link between quality system and customers expectations provided thoughtful insights. The learning from this review has helped knowing significant considerations in customer oriented operations and quality landscape. 1. EXPECTED GAP(S) BETWEEN CUSTOMER EXPECTATIONS AND OPERATIONAL DELIVERY/DESIGN:
Idemitsu has always placed operational excellence at top of priority list for its extensive range of products and services .being customer focused firm it has always instilled confidence to customers through high quality products, Valuable services and supple delivery. Despite efficient and unique logistic and supply chain network there might exist certain gaps that may not embrace customer expectations to the fullest sometimes. The very obvious or pertinent gap that is expected is reaching certain customers in some specific regions including that of Africa and Asia having demand for idemitsus products. This is creating a gap of appropriate customer interactions and distribution challenges in those specific regions. The inability to reach customers in those particular regions is geological risks i.e problems in extractions, exploration of reserves.
The Fluctuation in oil pricing sometimes fluctuate the overall cost structure and pricing strategy(raise in prices at times).. Product specific pricing and economical price is customer expectation and increasing operational cost structure usually create a gap of high pricing.
Besides these the energy challenges facing the industry is creating cumulative gap between companies and customers. Customer expects more technologically innovated and that requires pulling more resources and inventory to sustain competitive pricing. The limited capital due to energy challenges, time to get operations going usually disturbs productions cycles and delays consequently disturbing supply and demand cycle with customers.
1. ACTION PLAN TO OVERCOME GAP:Customer expectation gap can be assessed through Customer Experience Gap model aforementioned above which will reflect comprehensive view of gap between customers perception and service provider i.e. Idemitsu.
CUSTOMERS
IDEMITSU
Figure 3.1 Adapted from: Customer Service Gap Model, Balancing customer perceptions and expectations, 2009
The data assessed through customer experience gap model will help assess intimate knowledge of customers and will help resolve the gaps identified and designing action plan to overcome them:
ACTION PLAN IDEMITSU
OBJECTIVESTASKSSUCCESS CRITERIARESOURCES
Customer-specific pricingForecasting market condition to determine pricing strategy Economically feasible production procedure Cutting down production cost Feasibility analysis
Overcoming geological risk Hiring oil/gas geologists Conduct tests frequently for reserves exploration Favourable economic condition in target region Adept geologists Potential undiscovered deposits Contemporary oil and gas extraction techniques
Technological innovation Development of energy efficient oils Developing fluid strength technology Co-engineering Devising the stringent test to keep in check design and quality of new technology Successful cooperation with automotive industry(customers) Investment in R&D Biodegradable TechnologyEnterprise Resource Planning (ERP)
Table 3.1: Action Plan Idemitsu1. OVERCOMING IMPLEMENTATION CHALLENGESThe anticipated gap between customer expectations and operational design/delivery followed the development of action plan listed above. The successful execution of plan will require certain tactics to help overcome the impediments to its implementation at Idemitsu. A regular audit of exploration in new region will be required. The technological innovation in lubricants and other petrochemicals will require thorough information to deliver world-class innovative solution to customers. Inventory replenishment is recommended to help explore new market of customers and to overcome geological risks. Indicators to measure system efficiencies will help improve operational inadequacies and fulfil accurate customer standards. Quality customer service is imperative for survival of Idemitsu in the industry and appropriate Customer Relationship Management CRM in competitive business scenario will accomplish required results.
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APPENDIX: 1
IDEMITSUS BROAD CUSTOMER BASE
Adapted from: http://www.idemitsu.com/products/index.html
