Management forms of failure

Agree or disagree with the attached article and support your argument with correct referencing.

Every organisation is bound to face some form of failure at one point or the other in their operations such as system breakdowns experienced by banks or airlines etc, break down of machinery in factories or production sites or unfavourable weather conditions for farmers, etc. Depending on magnitude of the damage caused, it may be easily resolved without customers even noticing, or it could bring production and service delivery to a halt, resulting in lost revenue for the firm and dissatisfaction among customers. All organisations, no matter the size or level of success, need to have in place a system to prevent and manage the incidence of failure. It is also important that firms take a proactive approach to addressing issues of failure.

Slack, Brandon-Jones & Johnston (2013), state that the four basic steps in managing risk or failure is to first identify the possible areas where failure is likely to occur in operations, measuring the severity of its consequences, developing strategic plans to prevent such from happening or minimising the consequences thereof, and lastly finding solutions to quickly recover from such failures especially for those that are unforeseeable.

Approaches for Detecting and Preventing Failure

• Process Inspection: This involves strategically positioning staff such as supervisors along the production line or supply chain to inspect products as well as the transformation processes required in the creation and delivery of products and services (Shiau, Lin, & Chuang, 2007). It is usually applicable for processes that use the product (line) or batch layout such as auto manufacturing.

• Routine Maintenance Checks: This approach is usually used for checks that are technical in nature. Technicians or maintenance team within organisations such factories, auto shops, airline companies, steel companies etc do routine checks of machinery, equipment, and sometimes the products itself (eg planes, trains, railway lines, etc) (Sinex, 2004).

• Surveys and Interviews: Companies adopt different strategies to get feedback from customers on their perception of products and services in order to identify areas of failure for future improvement. This takes various forms, for example, restaurant managers can randomly ask customers if they enjoyed their meal, customer complaint boxes can be put around as is often used by banks, through online surveys etc

To prevent failures from recurring, it is important that the firm analysis all incidences of failure as they occur to determine the causes and effects, how it was resolved, as well as how to prevent any future recurrence. Slack, Brandon-Jones & Johnston (2013), state that analytical tools such as the fault tree analysis, failure mode and effect analysis, as well as the critical incident analysis can be used to analyse failures when they occur. Failure can also be prevented in the design stages by putting in place alerts that draw attention to malfunctions or improper use of products, and also ensure the reliability of the end product.

Customer Invoicing at Vihama – Wrong Pricing

Vihama is a bulk distributor of petroleum products, and sells to oil marketing companies in Ghana and other African countries. The oil and gas industry in Ghana is regulated by the National Petroleum Authority (NPA), among others, and the NPA is responsible for setting product prices. Pricing is usually done per platt window, usually for a period of two weeks, after which is it reviewed and communicated to the different stakeholders. Prices are sometimes maintained across different window or they may change.

The accounts department of Vihama receives an email from NPA at the end of every window indicating the price for the next window. This email is then forwarded to the invoicing officer, for prices to be keyed into the database for use in billing customers. There have been several incidences at Vihama where customers receive bills with wrong price quotes. Most often, these errors go undetected by the invoicing team, unless it is brought to the attention of CSR by the customer. This type of error can be classified as a human failure since it caused by the wrongful keying in, or omissions by the officer in charge.

So far all such issues have been amicably resolved with customers, however the consequences of such failures can be very costly to the firm. In the incidence where prices are understated, the company stands the risk of making serious losses, and on the other, when prices are over stated, customers will may get irritated, or feel mistrust for the company, as well as the quality of their services.

Usually, when such a failure is detected, all invoices affected (it usually affects invoices to all customers who were supplied from the day price changed to the day the error was detected) are recalled and new invoices created and dispatched again. This recovery exercise usually takes place within 48 hours after the error is detected.

So far there’s been no measure in place to prevent this from happening in the future as it is often resolved between the customer, customer service reps and the invoicing officer without coming to the attention of senior management.

I believe such failures can be completely eradicated or reduced to the barest minimum when there are checks or controls in place to fully scrutinise bills before they are sent to customers, described by Slack, Brandon-Jones & Johnston (2013), as fail-safeing. This could mean additional cost to the firm of getting such a system in place or the opportunity cost of staff time in undertaking such a task, however when done strategically, I believe the cost of having such checks can be reduced as well. For example, since such price changes are most likely to occur once in every two weeks after which price remains the same, the officer in charge will perform this task only at such times, and will therefore have enough time to handle other matters.

Stead, E., & Smallman, C., (1999), state that organisational culture plays a major role in the prevention and management of issues of operational failure. When there’s a culture of continuous improvement and team spirit, it ensures that staff serve as a check on each other, which helps in the early detection and resolution of operational failures.

References:

Shiau, Y. R., Lin, M. H., & Chuang, W. C., (2007), ‘Concurrent process/inspection planning for a customized manufacturing system based on genetic algorithm’, The International Journal of Advanced Manufacturing Technology, 33(7-8), 746-755

Sinex, B., (2004), ‘Dynamic assignment of maintenance tasks to maintenance personnel’, U.S. Patent No. 6,684,136

Slack, N., Brandon-Jones, A. & Johnston, R., (2013), ‘Operations management’, 7th ed. Harlow: Pearson Education Limited
Stead, E., & Smallman, C., (1999), ‘Understanding Business Failure: Learning and Un‐Learning from Industrial Crises’, Journal of contingencies and crisis management, 7(1), 1-18.

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