Analysis of Johnson & Johnson and Continuous Improvement Recommendations

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About Johnson & Johnson

Johnson & Johnson is one of the largest manufacturers of consumer health products, pharmaceuticals, and medical devices globally. As of 2019, the company reported annual revenue of eighty-two billion dollars, which marked an increase of four percent compared to 2015 (Trefis Team, 2020). The business employs more than one hundred thirty thousand employees and ninety-seven manufacturing facilities in different countries (Johnson & Johnson, 2019). Johnson & Johnson also pays much attention to its social responsibilities and actively promotes policies and supports initiatives targeted at upholding human rights, corporate accountability, and environmental protection (Johnson & Johnson, n.d.). The company values its reputation and ensures the excellent quality of its products across all segments and markets.

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Company’s Operations Management

According to the four v’s of operation management, and analysis demonstrated that Johnson & Johnson is a company with a high volume of production (Slack et al., 2016). This means that the company has a standardized procedure for manufacturing its products, which allows it to keep its costs low. It has a limited variety of goods it produces, which also contributes to lower expenses. The company has a predictable pattern of demand since consumers always need the products it manufactures. It has low visibility since most of its operations are based on material processing, which takes place at manufacturing facilities not seen by clients.

Continuous Improvement as a Philosophy

Continuous improvement principles postulate that every company has to commit to constantly looking for new ideas to better its production. Organizations which rely on this philosophy value their employees’ opinions and expertise to increase the efficiency and quality of internal processes (Millard, 2018). It states that instead of making decisions which entail spending many resources to make changes, companies can introduce improvements by gradually solving existing problems based on implementing and assessing the results of different options.

Application of Lean Principles

The application of Lean principles implies identifying the value a given company generates an answer to the question of why consumers are ready to pay for its products. The second stage involves determining which factors contribute to the creation of this value and removing all the unnecessary steps. Then, the company has to ensure that the newly created production process works without interruptions. Moreover, the business must manufacture products only according to the demand and not maintain a large inventory. Finally, the company must make this process continuous and always reassess its production to achieve better efficiency.

Review and Critique of the Company’s Operations Management

Johnson & Johnson is a large company which has many facilities around the world and has to rely heavily on transportation to ship its products to different countries. Recently, the company revised its operations in the sphere of consumer products and significantly decreased the number of its suppliers as well as facilities (Kaplan, 2018). Nevertheless, as evidenced by the case study’s information, Johnson & Johnson has a significant problem with the length of delivery periods. This situation potentially has serious negative implications, such as the bullwhip effect, which can lead to demand forecast distortions (Khan et al., 2019). The company also has a history of quality control issues, including a situation when it had to recall millions of its products due to manufacturing problems (Palmer, 2017).

Continuous Improvement Plan

The plan for continuous improvement is centered around tackling the problem of a prolonged period of delivery of products to the GCC distributors and relies on the PDCA model (PCA). The first step involves planning and determining potential options for reducing transit time and improving quality. During this period, management will have to determine the company’s objectives for achieving the desired state. Then, the company will have to implement the strategic plan developed during the previous stage, taking into consideration employee training. The process which will follow will involve checking the new transit time period and comparing it to the previous one. Finally, the management team will have to assess the positive impact of the occurred change on the organization’s operations and repeat the process.

Total Quality Management

Top Quality Management is a method which implies stressing the importance of quality at all levels of the organization and continuously perfecting the internal processes. Researchers discovered that this approach could positively impact organizational performance (Pambreni et al., 2019). The quality is achieved through training employees and providing them with relevant knowledge about the most efficient ways of performing their tasks.

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Kaizen

Kaizen is a Japanese philosophy based on the idea of incremental changes to better an organization’s quality of products and services. It postulates that to achieve superior results, a company has to encourage all of its workers at all levels to participate in the process of discovering and sharing ideas about quality-improvement (Alvarado-Ramírez et al., 2019). It is continuous and helps organizations be flexible and quality-oriented.

Technology and Operational Functions

Technologies play a key role in improving the quality of products and increasing the efficiency of operations. The recent developments in the sphere of machine learning and Big Data show that technological advancements are necessary for success in the modern economy. Technologies help companies facilitate their operations, streamline their processes, and reduce costs by replacing people.

Recommendations

Due to the rising demand for its products in the GCC region, the company has to simultaneously ensure a better quality of its products and manufacture a larger number of them. Johnson & Johnson has to rely on the Kaizen principles and allow its employees working at the production plant to propose their ideas for improving the quality of the goods they make. For example, the management team can organize monthly meetings where workers will report on their experiences and offer their recommendations on which manufacturing processes can be facilitated and accelerated. Based on this information, the management team can introduce new practices to test whether they will positively affect the speed of manufacturing and products’ quality.

Johnson & Johnson’s second problem is the prolonged period of the transit time between its production plant in New York and the GCC distributors. This means that the company can utilize continuous improvement principles in its logistics management. The primary recommendation would be to focus on finding new routes and contractors which can offer better services for less money. A larger amount of goods transported to the GCC region due to the increased demand will likely cause shipping prices to rise, and the management’s task here is to offset the costs. Thus, executives have to introduce new ways for reducing the expenses, this can be done by decreasing the weight of products or implementing better loading practices to ensure that more cargo is carried in containers.

SWOT Analysis

The company’s main strength is its capacity and resources available to it, which allow Johnson & Johnson to develop and implement large projects.

The company’s weakness is its involvement in the scandals concerning the use of talc products, which cause cancer (Stempel, 2020).

The company can seize new opportunities by buying smaller companies and establishing its presence in emerging markets.

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The main threat to the company comes from its competitors such as Procter and Gamble, which possess enough resources to produce alternatives to Jonson & Johnson products.

PESTLE Analysis

The PESTLE analysis was introduced to assess the external environment of the company and identify the forces affecting it. The main ones include political factors such as the enforcement of laws in different countries, which is important for the company since it has to be certain that its partners will perform their contractual obligations. The primary economic factor is the currency stability of the countries Johnson & Johnson operates in since fast depreciation can cause customers not to be able to afford the company’s products. The most important sociological factor is the change in customers’ preferences, which can occur suddenly and significantly impact the company’s operations. New advancements in medicine can cause the company to fail to stay competitive since new solutions can replace its products. Tax laws are another vital factor which affects the financial performance of the company. Global warming is an important environmental factor since it may force the company to adopt new green technologies, which can be costly.

Option 1

The first option implies maintaining the same strategy of shipping from NY to the GCC distributors. This approach is beneficial for the company since it will save considerable resources, but the negative consequence is the long period of delivery. The other three stakeholders will benefit from this strategy due to the low prices of products since the costs of building facilities in Dubai would be partially offset by increasing the prices for goods. Yet, the disadvantages are the long lead time and possible shortages in stores due to wrong demand forecasts. This is the most suitable option for Johnson & Johnson. It will save the company money, keep prices low, and allow it to espouse the continuous improvement approach to meet the demand and ensure better quality and efficiency.

Option 2

The option involving building a regional distribution centre in Dubai will cost the company a large sum of money. It will have to build the facilities, employ and train staff, pay for shipping, and maintain a large inventory, which is against the Lean principles. The company will increase prices for its product, which will be a disadvantage for other stakeholders, nevertheless, faster delivery will be ensured.

Option 3

This option is similar to the previous one but entails even larger expenses and will cause prices to rise.

References

Alvarado-Ramírez, K.M., Pumisacho-Álvaro, V.H., Miguel-Davila, J.Á. and Suárez Barraza, M.F. (2018). Kaizen, a continuous improvement practice in organizations: A comparative study in companies from Mexico and Ecuador. The TQM Journal, 30(4), 255–268. Web.

Johnson & Johnson. (2019). Annual report 2019. Web.

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Johnson & Johnson. (n.d.). ESG policies & positions. Web.

Kaplan, D. A. (2018). How Johnson & Johnson overhauled its baby care supply chain. Supply Chain Dive Pharma. Web.

Khan, M. H., Ahmed, S., & Hussain, D. (2019). Analysis of bullwhip effect: A behavioral approach. Supply Chain Forum: An International Journal, 20(4) 310–331. Web.

Millard, M. (2018). 6 principles of the continuous improvement model. KaiNexus. Web.

Palmer, E. (2017). Johnson & Johnson to pay $33M to resolve allegations of slipshod manufacturing. Fierce Pharma. Web.

Pambreni, Y., Khatibi, A., Azam, S. M. F., & Tham, J. (2019). The influence of total quality management toward organization performance. Management Science Letters, 9(9), 1397–1406. Web.

Slack, N., Brandon-Jones, A., & Johnston, R. (2016). Operations management (8th ed.). Pearson.

Stempel, J. (2020). Johnson & Johnson fails to overturn $2.12 billion baby powder verdict, plans Supreme Court appeal. Reuters. Web.

Trefis Team. (2020). How JNJ gets to $85 billion: Devices, pharma, or consumer? Forbes. Web.

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