Operation studies of Mandom Group of Japan. The main purpose of this report is to study Operation and Total Quality Management knowledge in real situation. The scope includes how critical operations management decisions are made in a company, how competit

University Degree Business and Administrative studies

1. Introduction

The main purpose of this report is to study Operation and Total Quality Management knowledge in real situation. The scope includes how critical operations management decisions are made in a company, how competitive advantage is achieved through operations strategy in the company and lastly, how quality of outputs is ensured in that company.

The object of study that has been chosen is a Japanese manufacturing company, Mandom Group, with its flagship brand, Gatsby. Mandom specializes mainly in manufacturing hair- and skin-related products, as well as perfumes and deodorants. Its business has expanded into international markets across Asia. The company has a range of marketing brand names, among which Gatsby is the most successful one with hair styling products for men. Therefore, the study will only focus on the operation of hair wax products of Gatsby.

2. Operation Management Decisions

2.1 Design of Goods and Services

As trends and lifestyles change, the needs and wants that consumers have for products also change. Thus, Mandom has a systematic product design process which starts with efforts to understand consumer troubles and dissatisfactions. This job is done by marketing department through exhaustive market surveys into consumer lifestyles, awareness, preferences, and dealer feedback. After that, a product development team consisting of representatives from R&D, production and marketing department will get together to design the product. The design of product is based on ideas derived from needs and wants discovered through surveys, incorporated with the company’s inherent environmental and quality requirement concepts. The 3Rs concept addresses environmental issues and is used in product design to reduce an adverse impact on the environment, complemented by ease of use. The quality requirement emphasizes product functionality, effectiveness and usability to deliver customers satisfaction. This concept covers every aspect of the product from content formula to package design. The R&D department is consistently researching for new comfortable materials and ingredients and accumulating latest technology for further use by collaborating with universities and external research bodies. The research results are used in a prototype of the new product, together with a detailed specifications. The prototype is then reviewed through design meetings and tested on quality, safety and whether it applies directly to the troubles and dissatisfactions that consumers have before its mass production. After the product is on sale, Mandom will implement verification as the last part of the product design process to research customer satisfaction level and collect feedback for further improvement.

For Mandom, services are important to customer satisfaction. Although the company has no immediate interaction with consumers, it has approaches to ensure that customer services are provided. The company strives to get maximal possible shelf space at every outlet for consumers to easily see, and cooperates with retailers to ensure that customers are familiar with the product specifications and how to use through in-store and online presentation. It also collects customer feedback via stores to design better services. On top of that, Mandom has been publishing videos, posts through various channels to provide customers with tips and techniques in using its products. This service delivery system serves as the reason why Gatsby becomes so successful.

2.2 Process and Capacity Design

According to the 2008 annual report, Mandom produces about 800 million products every year at its 3 production sites. Evidently, the company unitizes a product-focused manufacturing process to produce goods at high volume for a long timeframe. Because it is the company’s objective to supply safe, high-quality products at reasonable prices to as many consumers as possible, Mandom has established mass production technology to enable stable high volume production, with the same quality as products formulated at the research stage. The company has built integrated, automatic production system, which includes an aerosol line and covers everything from content filling to finishing and packaging, as showed in the picture.

At present, it is seeking to shift some of its outsourced manufacturing processes in-house to cut costs. The company seek to improve productive capacity using technology. This will result in further cost reduction as an increased production lowers fixed cost and thus increase efficiency. Also, this will allow prompt response to market and help avoid stock-out situation.

In the future, Mandom will continue to upgrade the process by capital investments made in stages on infrastructure development to support increase in production. These projects are expected to increase the annual production capacity to over 1,000 million units.

2.3 Human Resources and Job Design

At Mandom, it is believed that a business is only as good as the people who work for it, and its personnel are its key resource. To this end, Mandom has a personnel planning system in which organizational needs are balanced with individual capability. The system is based on the yearly business strategy and generates personnel needs for each function with Mandom. The personnel department collects information to perform job design in which production efficiency and compensation are considered. For example, the factory workers is important for production, but this job has a relatively high turnover. Therefore, personnel department has to analyze work time needed to meet operation strategy and consistently recruit to ensure labor supply. The job design for factory workers is linked to expected production, work time needs, wages and incentives, specific skills and is the basis for achieving operation efficiency.

So far, Mandom is developing a training system whereby workers themselves can choose and learn skills that they consider necessary for their daily work. The training program comes with clear preliminary instructions on what skills sets are required for different career and roles and what course employees should pursue. It includes courses in fields such as marketing, finance, practical techniques, etc. and seminars with internal or external professionals to identify organizational and operational issues. Also, Mandom creates opportunities for employees to consider their life plans, and strives to adapt to a changing social context and diverse employee lifestyles to create ...

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2.4 Location Strategy

For Mandom, the location strategy is extremely important as it serves the basis for its low-cost and responsive business operation. The company locates its operations based on proximity to market and labor productivity. Its Head Office is based in Japan, as well as the Fukusaki factory. In addition, the Group has Zhongshan Factory in China, and Sunter Factory and Cibitung Factory in Indonesia along with Group branches in each country to service the market there.

In Japan, the Fukusaki factory equipped with latest technologies and high labor cost, supplies product to domestic dealers and subsidiaries in NIES4 area, namely Korea, Taiwan, Hong Kong, and Singapore as showed in the picture. These markets are highly aware of trends and have more receptivity and purchasing power. In china, the labor cost is relatively low and the market is of ample potential for growth going forward. Also, China is the strategic location that is proximate to ASEAN3 (Thailand, Malaysia, and Philippine) and Japan itself. Therefore, Zhongshan factory was built to service the immature China market and to function as a supplementary manufacturing resource when needed. Factories in Indonesia take advantage of the low cost and has an edge in quality. The indonesia market is growing as awareness of personal style and cosmetics is increasing, despite disparities in buying power. Factories there supplies low-priced products to branches in Indonesia, ASEAN3 and other regions. More importantly, they produce containers and ship to other factories and serve as main inventory site due to the advantage in labor and delivery costs.

2.5 Supply Chain Management

SCM refers to managing all the activities involved in the movement and storage of raw materials, work-in-process, and finished goods from point of origin to point of consumption. These activities typically are procuring raw materials, choosing transportation vendors, selecting distributors, etc.

Mandom’s choice of partners is made from various viewpoints. The company emphasize reliability in quality, technology, price and deadline, sustainability in technological development, as well as business attitude. It uses various raw materials and crude oil as energy material. However, recently it has shift outsourced manufacturing of some product parts in-house to cut costs. In procuring core raw materials, Mandom sends a procurement team from its own premises to supplier’s facility to ensure safety and quality, and facilitate the replenishment and transportation of the goods. The company aims to establish relationships for coexistence and mutual prosperity with its partners, and work hard together in close communication for the creation of value.

For transportation, Mandom has been engaged in third-party logistics (3PL) since 2004. In this arrangement, efficient cooperation between third-party shipment agencies and the company’s logistics centers and inventories is promoted. The 3PL operation increases load efficiency and decreases delivery frequency. It provides Just-In-Time delivery with reliable tracking system, and helps the company reduce costs and environmental stress as well. For selecting distributors, basic requirements are experience in the field, relatively large scale and certain level of revenue. Also, high service standards is required as well. Through Mandom’s effort to cooperate with wholesalers and retailers, it eventually delivers maximal lifestyle value and consumer satisfactions.

3. Mission and Strategies of Mandom Group

3.1 Corporate Mission

Mandom’s mission is stated as the following, “Aiming to Provide a Comfortable Lifestyle Supported by Health and Beauty.” It believes that experiencing beauty and the feeling of excitement and gratification that beauty produces has a positive impact on the human body and mind, resulting in a health condition. This is why Mandom adheres to the words “healthy and beauty”. It also believes that contributions to a comfortable lifestyle can be achieved by creating valuable products or services that appeal to the consumers’ sense of beauty, and by acquiring as many customers as possible, thereby to maximize consumer satisfaction.

3.2 Business and Activities Strategies

Its current business strategies are (1) to achieve stable growth in the core men’s grooming business; (2) to establish a new growth in operations targeting women, which are designated as a new growth domain; (3) to continue to expand overseas operations, which are positioned as a key growth driver.

Its activities strategies are (1) Procurement: to trade in a completely fair and transparent manner; (2) R&D: to take innovative approaches towards production through continuous R&D activities to seek unique and original technologies; (3) Production: to offer safe products that will win consumer trust; (4) Sales and Marketing: to expand the scope of “OYAKUDACHI” for consumers and try to realize long-term mutual prosperity with our partners; (4) Overseas Business Operation: to respect the history, culture, values, and customs of every country concerned.

4. Competitive Advantage Strategies

The competitive advantage strategies are differentiation, cost leadership and response. To create maximal lifestyle value with consumers, for consumers, Mandom is engaged in all the 3 strategies.

4.1 Differentiation

Differentiation relates to uniqueness of product characteristics, which identify consumers’ hard-to-articulate or latent needs and wants. Mandom strives to differentiate itself from competitors in such a way that when consumers use Gatsby products, they experience a sense of novelty and comfort that has been never found on other brands.

To this end, scientists in R&D department constantly research into consumers’ felt senses of novelty and comfort by looking at product functionality, effectiveness, usability, stability and safety, together with utilization of latest technologies and ingredients. The company puts R&D as primary investment object. At present, it has buildings used specifically for R&D purpose. The department also carries out research management to secure intellectual property by registration of proprietary patents. This maintains Mandom’s technological dominance and helps it to excel in competition.

As a result of extensive R&D effort, Mandom has developed a board product line and unique features for consumers. For the brand Gatsby, the company has categories like hair styling, hair coloring, hair care. Under hair styling, it also has hair mist, hair wax, hair clay, hair foam, hair gel and so on. Even under hair wax, it has three different series. The hair wax has many unique features, such as ability to restyle many times, “Smooth Polymer” that produces less sticky and light finish and different shining or styling powers of hair wax for consumers to choose accordingly.

4.2 Cost Leadership

Mandom maximizes lifestyle value through high-quality products at reasonable prices for the greatest number of consumers worldwide. It has developed mass production process to cut cost. At production sites, workers and technicians work together to continuously improve and standardize the technological capabilities to achieve maximal production efficiency. Besides, It built three out of its four plants in Indonesia and China for a purpose of lowering labor cost. Also, Mandom takes design and quality control initiatives to ensure that each product that consumer has bought in is exactly of the same quality as the one produced at research phase.

The company wants to balance product prices to increase consumers’ perception of value and meanwhile, ensures quality and offers high-value products to delight consumers. For example, Mandom designs refill packs for many product kinds of Gatsby. Therefore, customers save money if they wish to continue using the original product and will appreciate the value of Gatsby products.

4.3 Response

For Mandom, prompt response to market is the key to business success. Since Mandom’s core products’ life cycle is short, the success or failure of new products is a major factor underlying the success. Thus, it pursues the product development driven by a cyclic process of research, design, and verification to continuously give concrete form to meet consumer wants and needs. In addition, the company regularly holds cross-functional meeting to discuss consumer latent wants and generate new product ideas. It can always carry out brand renewal at the end of product life cycle. In product development, it responds to customer wants or needs wherever they exist. Even if this involves a product category where Mandom has no previous development experience, it will rise to the challenge to research, develop and sell a product to add diversity to the range of categories.

Mandom has developed an efficient supply network in which it balances the consumer preferences and supply in each country by leve

raging the distinctive characteristics and production mix of its 3 production sites. Then, the company’s subsidiary in each region receives a supply of products from the nearest production site and distributes to outlets such as cosmetic shop, supermarket, pharmacy in shortest time. The supply network is supported by in-store promotions to enhance the visibility of Mandom products so that consumers will notice the latest Mandom offerings immediately.

5. Product Life Cycle Stages

Mandom’s hair styling product has generally short product life cycle. The company has three series under Gatsby hair wax categories. They are “Wax series”, “Strongest series” and “Moving rubber”.

5.1 OM Strategies in Introduction Stage

After Mandom launches a new product, it carries out the verification activities. Investigation into consumer reactions and store/market trends is conducted to check if there is any gap between consumer expectation and the product. The result determines whether the product matches the market, and helps adjust and improve the next batch. If problem occurs, the product development team will retest and modify the product, or even redesign it to ensure stability. For example, when the “moving rubber” is first introduced in 2006, it had been tested in ingredients for a purpose of pursuing less sticky hair finish. Later, the product was reformulated and blended with the “Smooth Polymer”, which was a feature added in as a change in design to address consumer feedback.

In the introductory phase, the production scale is limited. A small portion of workers is trained and assigned specifically to the new product. Every batch is produced upon orders placed and subject to modification. Special effort is made on quality control. Meanwhile, Mandom has to incur high manufacturing cost, R&D and marketing expenses. Hence, it hardly profit in this stage.

5.2 OM Strategies in Growth Stage

When the product enters into growth stage, consumers are becoming aware of and accepting it. The demand is increasing and the product becomes robust in design. Because of that, the company will increase the capacity by assigning more workers and machines, and the distribution in different regions. Also, design team still need to work together searching small variations in features to ensure market penetration. For instance, in growth stage, the “moving rubber” had expanded from 4 colors to 6 colors with different mixes of shining and styling powers. This serves as a way to appeal to different consumer needs and buying motives. While the demand fast growing, Mandom has a unique approach to forecast the quantity demanded ahead of every quarter to ensure supply. This approach is based on past experience in distribution and each branch’s individual forecast. It helps determine the next quarter’s production level. As the production level is increasing, it is said that the process is stabilized, meaning it is shifted to product focus.

5.3 OM Strategies in Maturity Stage

In this stage, the production process is fully stabilized and standardized, as well as the product itself. Changes are only made to content volume, packaging and suchlike. Mandom’s production of the product mainly depends on a balance of external demand and internal efficiency. The company want to pursue the optimum, rather than maximal quantity produced to increase profit, taking account of factors like profitability of alternative products. Therefore, the production capacity is fixed at an optimum level for a long run. In addition, the company now turn to seek cost efficiency as a way to face increased competition. Cost reduction initiatives like efficient inventory management, low-cost materials supply and high daily productivity are undertaken. Workers assigned to the product are all well-trained, efficient and reduced down to the minimum number.

5.4 OM Strategies in Decline Stage

Lastly, when product comes into the decline stage, Mandom will reduce the cost at its minimum. Capacity shrinks and the quantity produced accounts for the smallest portion in whole production. Variation of the product is also reduced. For example, Gatsby “wax series” now is in its decline stage. The different versions in this series are eliminated. The supply of “wax series” is decreased as people turn to other products. Therefore, cost control is important when making profit in decline stage. Mandom’s decision makers also need to make a decision about whether to abandon a product in decline stage. A cost-benefit analysis will be carried out by operating manager and reported to upper management for consideration and decision-making. Those iconic products will be usually preserved to maintain the corporate image and consumer goodwill. However, those returning less than expected margin will be eliminated as the product life cycle operation goes along.

6. Quality Management

As a cosmetics manufacturer, Mandom has responsibility to offer products that consumers can use with peace-of-mind. Thus, quality is of the greatest importance to Mandom and Gatsby as it backs up the fulfillment of responsibility and Mandom’s business operations and public image. As the following, an insight into the corporation’s quality management is presented in detail.

6.1 Quality Control

Mandom has implemented a number of measures to ensure that every product is of good quality, and to constantly improve that quality. The company executes rigorous quality control in production. It has reduced human error by means of automation, which involves raw materials control by using barcodes and an inspection system that uses sensor cameras. Meanwhile, the firm engages in thorough process controls that are human-based, such as content checks, impurities inspections, contamination checks and appearance checks. The quality control efforts supported by proprietary mass production techniques, are highly preventive and efficient as it can avoid costly internal and external failures.

The Fukusaki Factory, which is named “Mother Factory”, satisfies increasingly sophisticated and diversified consumer requirements on quality standards by using advanced production technologies, control systems and state-of-the-art equipment. The “Mother Factory” also provides technical guidance and assistance together with the transfer of equipment to factories in Indonesia and China. By sharing technology, they altogether seek to enhance quality throughout the Mandom Group as a whole.

6.2 Quality Culture

Over decades of continuous improvement on managing quality, Mandom has accumulated many achievements and experiences in this field, forming a corporate culture for product and service quality. To ensure that the achievements of quality management can be spread, as well as that the commitment to quality remains understood by all staff within the entire Group, in 1998 the corporation introduced the Mandom Quality Philosophy and the Fundamental Quality Policy.

Mandom Quality Philosophy:

“We respond to real customer satisfaction by raising corporate, products, and service quality through active participation by all of our staff.”

Fundamental Quality Policy:

“We establish effective quality management systems in the Mandom group companies and continually improve effectiveness.”
“We enhance the individual capabilities of staff and meet customer needs, in an effort to pursue our challenge towards a zero product quality defect and/or complaint.”
“We improve accuracy in all entities, reinforce interface between different arms of the company, and ensure reliable output.”
“We enhance three areas: lifestyle, business partner, and brand, and fully commit ourselves to the thoughts and actions that achieve quality assurance, without failing to spot the slightest changes or signs of change.”
“We attain quality targets through the participation of all staff and by adopting the consumer’s viewpoint, creating lifestyle values of our consumers, for our consumers.”

Mandom’s quality culture is also derived from its continuous pursuit of objective quality supervision, which is seen as a primary form of achievement in the quality management process. In 1998, Mandom became the first Japanese cosmetics manufacturer to receive certification of its Head Office, Laboratories, the Fukusaki Factory and Logistics Center to ISO 9001 standard, the international standard governing quality assurance. In 2002, the same certification was earned by Zhongshan Factory in China. In 2005, the factory in Indonesia obtained certification in the Indonesian CPKB standard concerning cosmetics manufacture and quality control. Nowadays, Mandom has acquired both ISO 14001 and ISO 9001 for the “Mother Factory” in Japan. For its Head Office, it has ISO 9001 certification that covers aspects from the design and development to shipment of the cosmetics and quasi-drugs manufactured and/or sold by Mandom Corporation.

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