VNU- UNIVERSITY OF ECONOMICS AND BUSINESS FACULTY OF BUSINESS AND ADMINISTRATION DESIGN OF A MODEL FOR IMPLEMENTING THE 58’S IN SMALL AND MEDIUM SIZED MANUFACTURING ENTERPRISES: CASE OF PHOYEN MECHANICAL JSC Supervisor’s name: Dr. Minh Nguyen Dang Student’s name: Chi Nguyen Thi Linh Student ID: 10050263 Intake: QH2010-E-QTKD Program: International Standard Hanoi — May, 2014 ACKNOWLEDGEMENT First and foremost, | would like to express my deepest gratitude to my supervisor, Dr. Nguyen Dang Minh — Head of Research and Partnership Development Office and lecture in University of Economics and Business, for his excellent guidance, caring and for allowing me to grow as a “research student”. Besides my advisor, I would also like to thank Pho Yen mechanical joint-stock company (FOMECO) for giving me chance to conduct my research.
Special thanks go to Mrs. Nguyen Thi Lien, the Secretary of FOMECO’s 5S Committee who directly introduced me about 5S deployment project in FOMECO. I also thank my fellow teammates in Lean Research Group: Tran Thu Hoan and Nguyen Thi Giang, for the stimulating discussions, for the sleepless nights we were working together before deadlines, and for all funs we had in the last three months. Last but not least, I am in debt to University of Economics and Business for providing me four unforgettable years of my student life with full ofpriceless experiences.
I also owe my deepest gratitude to all of my professors who gave me the best lectures and lessons ever in Faculty of Business Administration. Student Nguyen Thi Linh Chi ili 1. Step 4: Initial SOTtInE. Step 5: Maintain Sort, Set in order and Shine daily.
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Ý 69 LIST OF ABBREVIATION ABBREVIATION FULL WORDS FOMECO : Pho Yen Mechanical Joint-stock Company JICA ; Japan International Cooperation Agency JSC : Joint Stock Company ERS : Lean Production System MSMEs : Manufacturing Small And Medium Enterprises SMEs : Small and Medium Enterprises VEAM : Vietnam Engine and Agricultural Machinery Corporation VPC : Vietnam Productivity Center VI LIST OF TABLE T4Ble2-l: Cöfitefit GÍ thesis’s survey QUESHOHHHAHTE ccs. 066g 0á66 6001 401A0441846446033038366:4 28 Table 2-2: Content of thesis’s interview queStiONnaire. -- 55555 c<<<<s2 29 Table 2-3: Work position and number of respondents in thesis survey and interview. 30 Table 3-1: Evaluating the factors affecting to 5S's effectiveness in FOMECO.
37 Table 3-2: Impact of 5S activities to FOMECO compared to before applying 5S. 39 Vii LIST OF FIGURE Figure 1: A framework of Lean implementing in Vietnam .::c0:ccesseeseeseeeseeeeeeees 4 Figure 2: A model of 5S implementation in Vietnam.-- «c5 Ăn seierrerevee 5 Figure:3: ‘Thesis framework.iwerccssssscssassesevevsecnnvsoresvontcconncesnsnesannvsenesseaneenensenesonsecseneeans 8 Eimure del: De SS tO bsosssseeneosesintboouieetdg0016806304001658540601808/01689101500009A300GE0101//050.-00)5E 9 Figure 1-2: The Eight Benefits Of The 58's (Hirano, 2009) .cssccccmssecassvassssseassssvonsnasies 13 Eigure 1:3: Ehe Six Steps. In The'SS's Implementation ssissssscscssssesorsovesceavesscseavesscsesavess 14 Figure 2-1: Main reasons of enterprises’ dissolution and bankruptcy in 2013. 20 Figure 2-2: Pho Yen Mechanical Joint-stock Company ssccicssscssesssssisssscscassecssavesvsssvsees 22 Figure 2-3: FOMECO's history of establishment and developmenI.
--- 22 Figure 2-4: Siruchite OF FOMECO'S Ce par trient oa cisssercvesconsssanasscssoionsnwinecansvonanensoacnaste 24 Figure 2-5: Structure of FOMECO's manufacturing pÌanfS.- << c<ccses 24 Elgie 2-6: SS:activities visualized in FOMECO «.accccacsnoumnaniiccncemancanwns 25 Figure'2-7: 5S implementation process in EOMECcicicccsaicsd6a466466x28052086 2i Figure 3-1: Degree of FOMECO employees' understandings of 5S definition. 31 Figure 3-2: Understanding of SS activities of PFOMECO caccoccsoeseosexes ae 32 Figure 3-3: Degree of FOMECO employees' cognition of 5S benefits. 32 Figure 3-4: Degree of implementing S1. S2, S3 periodically in FOMECO.
33 Figure 3-5: The need oftraining 5S activities in FOMECO.cs:cccsccssessseeccsseseseass 34 Figure 3-6: Visualization examples of job description in FOMECO. 35 Figure 3-7: Examples of checking lists of Shine activity in FOMECO. 36 Figure 3-8: Example of 5S assessment standards recorded in company regulations .36 Figure 3-9: Examples of BEFORE and AFTER applying 5S activities in FOMECO .41 Figure 4-1: Propose a model of 5S implementing in FOMECO.«c<<⁄ 44 Viil ABSTRACT 5S is a systematic technique used in organizations.5S stands for five Japanese words; Seiri (sort), Seiton (set in order), Seiso (shine), Seiketsu (standardize), and Shitsuke (sustain). This system helps to organize anefficientworkplace, decrease wasting and optimize quality and productivity via monitoring an organized environment.
It also provides useful visual evidences to obtain firm results. There exists a real need for empirical studies in field of new management systems for manufacturing small and medium sized enterprises. This paper aims to determine how 5S is applied in Pho Yen Mechanical JSC, which is considered as a successful case of 5S in Vietnam, identify the effectiveness of 5S implementation on organizational performance in order to find out the existing problems in FOMECO’s 5S implementation, and design a suitable for this company to improve the effectiveness of 5S. Based on this case study, the thesis would like to provide an example for companies those desires to implement 5S systems.
Surveying method is used and data collection is done by distributing questionnaires among different departments and plants in FOMECO which have implemented 5S techniques. This data combined with observation aims to analyze current situations of 5S implementation in FOMECO. Then, in-depth interview was conducted to identify 5S implementation’s problems in studied company. The results show that 5S is an effective tool for improvement of organizational performance, however the effectiveness of 5S tools is not as good as expected.
The thesis furthers found out that support of top management, employees’ active participation, training and compensation are successful factors toward 5S efficiency for FOMECO. Consequently, FOMECO managers should focus on these factors to improve 5S systems in their company. Background According to Vietnam Government’s plans to develop small and medium-sized enterprises (SMEs) in the period of 2011 -2015', the number of new established Vietnam SMEs is estimated to reach 600,000, accounting for over 95% of total Vietnam enterprises until December, 31th in 2015. These SMEs are expected to contribute 25% of total export-import turnover, 40% of GDP; 30% of nationwide budget revenue and create 3.5 — 4 millions of new employment from 2011 until 2015.
These above numbers present the important role of SMEs in the development of Vietnam economy, in general. Based on the announcement of Ministry of Planning and Investment, there was 71.018 new established enterprises during the first 11 months of 2013”, however, the number of enterprises that must be dissolved and bankrupted reach to 54, 932, nearly 77, 34%. A survey conducted by Ministry of Planning and Investment pointed out main reasons causing enterprises’ failure are weaknesses of management ability, production method and lack of sustainability of business strategies in almost Vietnam SMEs. Hence, how to help SMEs deal with weaknesses and limitations to be competitive and pioneer in its products and services is essential.
One of main parts of this way to succeed is continuous improvement and increasing quality of product and service. Usually, this improvement has been achieved through implementation of best practices which are chosen to meet a particular objective. 5S is a method to improve the performance and organize the whole system which was originated from Japanese. 5S comes from five Japanese words start with letter “S” which is translated into English words: Sort, Set in order, Shine, Standardization and Self-discipline.
As it will be discussed later, using 5S as a total ‘Based on the 1231/QD-TTgDecisionofthe Vietnam Prime Ministerapproving thedevelopment plan forsmall and mediumenterprises during the period of 2011-2015 issued in September, 7”, 2012 available at http://vanban.vn/portal/page’portal/chinhphu/hethongvanban?class_id=2&mode=detail& document id= 163556 (accessed April, 24", 2014). “Based on statistics of publication of Administration Department of Business Registration, Ministry of Planning and Investment in December, 2013 available at http://tuoitre.vn/Kinh-te/583077/thang-11-2013- tren-6-800-doanh-nghiep-thanh-lap-moi.html (accessed April, 24th, 2014) quality management method is very effective and efficient for improvement of whole organization. It has dramatic impact on safety and environmental issues, loss of resources and many others that this study is going to investigate and prove. Therefore, 5S, is considered as the first step for the company to embrace Lean; maybe an excellent suggestion for SME managers towards a new effective management method.
Through analyzing 5S practices in Pho Yen Mechanical JSC, the thesis would like to show that 5S is a good management practice to create a performance improvement plan and a great work environment for employees where the companies are deal with poor performance problems. Related articles Osada (1991) refers to 5S as the five key to a total quality environment, 5S is a system to reduce waste and optimize productivity and quality through maintaining an orderly workplace and using visual cues to achieve more consistent operational results. The practice of 5S aims to embed the values of organization, neatness, cleaning, standardization and discipline into the workplace basically in its existing configuration and it is typically the first lean method implemented by firms. During the mid 1950s, due to lack of resources, Japanese manufacturing companies wereforced to develop a method which makes every scrap used whilewasting nothing (Dennis, Pascal, & Shook, 2007).
In Japan, 5S method was known and applied firstly by Toyota Corporation. In following times, 5S was transferred to European, American and Asian countries. In English-spoken countries, 5S was translated into Sorting, Setting in order, Shining, Standardizing and Sustaining (Lonnie, 2010). In Western, another definition of 5S is housekeeping (Becker, 2001: Chin and Pun, 2002).
Running 5S can be divided into three sections which create a structured process for the project, make a clean environment, and create a clear method of management for the project (Rowlinson, 2004). If companies do 5S in the right way, it will help them to have a smooth operation, hence, all the employees will be happy to remain with the new process in order to have a better environment (Olofsson, 2010). Despite being originated in automotive manufacturing sector, 5S nowadays is expanded into other industries as well as service sector. Toyota Production System (TPS) is a typical example for the principles of 5S in practices, from the first version based on 3S to the next version of 4S (Ohno, 1998).In North America and Europe, 5S has been using as a central lean manufacturing tool.
Also, 5S has become a widely used tool in healthcare, government, and financial services (Graban, 2009). 5S is one of many tools in lean manufacturing philosophy. During the process of implementation, 5S is combined with several lean tools and techniques such as Kaizen (Imai, 1997 and Kodama, 1959), visual management (Nikkan, 1995).