Microsoft Word - 2004_189C.docVincent Mak prepared this Case under the supervision of Dr. Chi Kin (Bennett) Yim for class discussion. This Case is not intended to show effective or ineffective...

Microsoft Word - 2004_189C.doc Vincent Mak prepared this Case under the supervision of Dr. Chi Kin (Bennett) Yim for class discussion. This Case is not intended to show effective or ineffective handling of decision or business processes. This Case is part of the Trade & Industry Department SME Case Series funded by the Hong Kong Special Administrative Region Trade and Industry Department SME Development Fund. Any opinions, conclusions or recommendations expressed in this material/event (by members of the project team) do not reflect the views of the Government of the Hong Kong Special Administrative Region, Trade and Industry Department or the vetting committee for the SME Development Fund. © 2003 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise (including the Internet) - without the permission of The University of Hong Kong. Ref. 04/189C 1 SIMON LAM MANFIELD COATINGS CO. LTD.: QUALITY MANAGEMENT AS THE WINNING FORMULA Introduction Manfield Coatings Company Limited (Manfield) was a niche player in the paint and coatings industry, producing customised industrial coatings for various industrial products such as toys, mobile phones, TV cabinets, washing machines, etc. As a supplier to manufacturers of such products, Manfield had to meet not only stringent safety and quality standards but also customers’ requirements for short production lead-times. To meet such demands, Manfield had developed a quality management structure that delivered its core value of “Prompt and Reliable” supply and service. In recognition of its commitment to quality, the Company gained ISO 9001 certification in 1997, received the Certificate of Merit in the Hong Kong Industry Department’s Quality Award in 1999, was awarded Q-Mark Licences from the Q- Mark Council from 2000 onwards, and was awarded the Certificate of Merit in the Hong Kong Management Association’s Quality Award, the 2000 version of ISO9001 and the Encouragement Award of China National Quality Award in 2003. But Mr. Yuen Shu-Wah, Manfield’s founder and Managing Director, was not resting on his laurels. In 2003, Manfield submitted an application for ISO14001, and approval was pending. Manfield Coatings: Stressing Quality from Day One1 Yuen was a chemical engineer by training. Before establishing his own company, he worked for a UK paint company, where he learned to become an expert in paint. By the early 1980s, 1 Hulpke, John F., 1998. Manfield Coatings, Hong Kong, China: new century, new challenges? http://home.ust.hk/~mnhulpke/yuen.doc HKU311 For the exclusive use of P. Kashyap, 2022. This document is authorized for use only by Prerna Kashyap in OPMT 620 - Fall - 2022 taught by Farnoosh Bagheri, University Canada West from Oct 2022 to Nov 2022. 04/189C Manfield Coatings Co. Ltd. 2 Yuen saw that there was demand in Hong Kong for high-quality paint that could support local production. And at one point, he convinced his employer to build a plant in Hong Kong. However, the UK firm eventually changed its mind. So, in 1982 Yuen quit and started Manfield Industrial Company, the non-limited forerunner of Manfield Coatings Co. Ltd., with just HK$200,000 (US$25,000) and five people (including Yuen himself). The limited company was incorporated in 1986. Manfield’s first customers were in the toy-manufacturing industry. With Yuen’s expertise, Manfield was able to meet the customers’ colour and quality specifications, and the relevant safety standards, exactly (customers in the toy industry generally followed the European EN71 or the American ASTM standards regarding the heavy-metal content of its products). Yuen commented, “While we have to be competitive, price-wise, we never really compete on price.” Even when its paint was used on inexpensive products, Manfield was still adamant about quality. Given such tenacity regarding quality, Manfield soon established a reputation for quality and professional service, and its customer base also expanded to include manufacturers of electronics and kitchenware, which set very high standards. Under Yuen’s leadership, the Company continued to expand. However, during the heydays of the Hong Kong economy in the mid-1980s, Yuen experienced great difficulty in hiring staff. As he recalled, “For almost a year we had an ad running in the Hong Kong newspapers, seeking non-experienced labourers to be trained as colour-matchers. Only 10 responded, of whom only four reported for duty. All of those four left within a few days to take other jobs!”2 In 1986, a factory was opened across the Chinese border in Shenzhen, with only semi- processing capabilities and a limited capacity. It took time to gradually train up the workforce, expand the capacity and capability, and instil a quality culture in the Shenzhen facility. Nonetheless, when most of Yuen’s customers also moved their manufacturing plants in early to mid-1990s, Manfield was well established to serve them. By 1995, the combined workforce of Manfield in Hong Kong and its production arm in Shenzhen reached 480, and its annual turnover was in excess of HK$150 million (US$19.2 million). That year, Yuen was awarded the Hong Kong Young Industrialist Award. Embarking on the Road to Quality Management While most of Manfield’s customers were in Hong Kong or Mainland China, the Company’s products were sold all over the world. As competition among manufacturers became keener, their demand to their suppliers, in turn, got higher as well. As Yuen recounted, “In the old days, customers would be satisfied with a five-to-seven-day order lead time; soon they started asking for shorter lead-times.” By the mid-1990s, Manfield was able to achieve an order-to- delivery lead-time of three days, but customers were still demanding even shorter lead-times. In 1996, Yuen attended the Chiang Foundation Manufacturing Leadership Training Programme held at the University of Southern California in the United States. At the time, Yuen realised that Manfield was having similar problems to those that Chrysler (one of the biggest car manufacturers in the US) once had, e.g., a lack of co-ordination between functional departments and an inability to respond quickly to challenges. Yuen knew that Manfield needed to be “big and efficient”. He also learned how United Parcel Services handled 11 million packages, offered a 24-hour worldwide delivery guarantee and provided customers with information about the real-time status of each delivery. He realised that “big and efficient” was achievable, though it required good planning, determination and 2 Hulpke, John F. (1998). For the exclusive use of P. Kashyap, 2022. This document is authorized for use only by Prerna Kashyap in OPMT 620 - Fall - 2022 taught by Farnoosh Bagheri, University Canada West from Oct 2022 to Nov 2022. 04/189C Manfield Coatings Co. Ltd. 3 commitment. Upon his return, Yuen immediately discussed this with his senior management, and the decision was made to embark upon the road to quality management. The first goal was to become ISO 9001-certified. Soon afterwards, outside consultants were hired to provide training and to set up a quality management system. This, fortunately, was backed by Manfield’s continual investment in and use of management information systems. Nevertheless, “unless the mindset improves, we can never make real achievements,” said Yuen. Thus, significant emphasis was placed on training. For one thing, managerial staff members were expected to effectively carry out managerial duties such as planning, organisation, human resources allocation, command and control [see Exhibit 1 for the complete training programme for managerial staff]. For another, training and education for all employees had to be comprehensive, i.e., not only did it have to include job-specific and related training, it also had to communicate Manfield’s value system and way of thinking. Later in 1997, Manfield was audited and successfully certified for ISO 9001 (version 1994). The same year, the motto “Prompt and Reliable” was made the centrepiece of Manfield’s service strategy. In real terms, Manfield made significant progress in enhancing productivity. To Manfield, productivity enhancement was achieved by leveraging cost controls very effectively in order to maximise value creation. To its customers, the greatest value was speed. Previously, a one-day order-to-delivery lead-time was nearly unattainable. In the second half of 1997, Manfield successfully fulfilled 222 one-day orders, compared to only three in the first half of the year. For two-day orders, the number fulfilled rose from 79 in March 1997 to 459 in December 1997. The average monthly rate for delayed deliveries fell from 15.15 per cent in 1996 to just 1.68 per cent in 1997. These achievements did come with some degree of trade- offs in production costs. Such trade-offs, however, were carefully evaluated and were done without compromising the value to customers or employees’ salaries and benefits. Quality Management at Manfield Coatings In the ensuing years, Yuen continually pitched the Company against audits and examinations through award applications. According to Yuen, this achieved two purposes: first, it helped them see areas of weaknesses where they did not normally see;