SHAPING KNOWLEDGE FOR CREATING INTER-ORGANIZATIONAL RESTRUCTURING PROCESSES OF MANAGEMENT SYSTEMS OF QUALITY AND MANUFACTURING ORGANIZATION

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1 SHAPING KNOWLEDGE FOR CREATING INTER-ORGANIZATIONAL RESTRUCTURING PROCESSES OF MANAGEMENT SYSTEMS OF QUALITY AND MANUFACTURING ORGANIZATION LUDOSŁAW DRELICHOWSKI, JANUSZ MIERZEJEWSKI Summary The study describes the development of PESA Bydgoszcz S.A. The company can serve as an interesting example of the transformation which involved substantial changes in management and production organization. The development was very dynamic and using traditional benchmarking techniques to cope with the new challenges was not possible. Instead, knowledge creation and application procedures were introduced. The study investigates four groups of actions which help to successfully apply knowledge in an organization. They can be used to create and verify innovative solutions, and improve the overall organization of a company. Sharing knowledge to support business partners was an additional challenge achieved thanks to advanced inter-organizational communication. All suppliers had to meet strict requirements regarding technology, organization and quality of their products. Keywords: inter-organizational cooperation, quality management systems, knowledge creation for supporting restructuring organizational processes 1. Introduction The term Knowledge-based economy started to be commonly used in socio-economical literature in the late 20 th and early 21 st century [1], [4], [6], [7], [8], [11], [12], [16]. It accounts for the fact that knowledge is the key to success but, at the same time, building, transferring or applying knowledge poses difficulty in many cases [3, 5, 7, 8 11, 18,]. In the case of PESA Bydgoszcz S.A., building knowledge is essential to tackle problems resulting from the dynamic development of the company, rapid changes and the necessity to maintain the gained competitive advantage. Development of a company can be measured by the increase of production, sales and employment. However, it is crucial that a company decides which development factors would improve the flexibility of its management the most [2]. Therefore, it is necessary to determine strategic proportions which would limit the internal and external development factors. The most important ones include the scale of the employment increase and the amount of work to be outsourced. Increasing production to meet extra demand seems to be the obvious choice. One option is to adopt a strategy that will make the company more independent by means of employing more staff, using more advanced technology and improving work efficiency. The second option is to outsource some of the work this way the company remains flexible and can quickly react to new orders and the changing product demand.

2 Studies & Proceedings of Polish Association for Knowledge Management No. 61, Each of these strategies involves customer contact skills, creating innovative products, production techniques and integrated quality management systems. In the first scenario, when a company decides to develop its own resources in order to meet extra demand, it has to spend money on new employees, invest in buildings, machines and infrastructure. All this can be expensive to maintain in the times of stagnation. The hope that the potential to produce a particular line of products is well protected against industrial espionage is misleading because reduced employees can be hired by competition and reveal confidential information [16, 17, 18]. 2. Production development key factors 2.1. Brief history PESA Bydgoszcz S.A. is a company with a 160-year-old tradition. Initially, the railway line connecting Berlin and Warsaw provided work for The Royal Works of Eastern Rail. The workshop was renowned as the manufacturer of modern rail vehicles for the European and world operators. At first, the company hired only 21 employees, but the number increased to in In 1920 the company changed its name to Polish State Railways Main Works in Bydgoszcz. From , the company employed 5, 000 people who repaired 10, 000 steam locomotives and 200, 000 wagons. Diesel locomotives have been repaired since 1977 and electric multiple units since In 1991, the company started to repair different types of passenger carriages, which allowed the staff to gain the experience necessary for the future construction of its own rail vehicles. From , employment fell from 3, 200 to 950 staff members with the sales reaching 25 million euro. From , the company was reorganized and changed its name again. The construction of a diesel-powered rail bus, designed and manufactured by PESA Bydgoszcz S.A., started the new chapter of successful development] 8]. The company focused on the production of small diesel-powered rail vehicles, called rail buses. The electric versions soon followed. The rail buses were sold in Poland and abroad. In 2005, PESA started the production of modern trams designed for city traffic. The new products were bought by depots in Warsaw (200 units), Bydgoszcz, Cz stochowa, Elbl g, Gda sk, and Szczecin. The trams also attracted foreign customers from Szeged (Hungary) and Cluj (Romania). Another strategic move was made in ,700 employees worked on the construction of multiple diesel and electric commuter/intercity units for domestic and foreign customers. Figure 1 illustrates the sales dynamics achieved by PESA Bydgoszcz S.A. in the next few years. Interestingly, while most figures for are soaring, a slight dip was recorded in It suggests that the company must be prepared to deal with periodic lower sales without introducing any major changes to the organization of production; this is why some of the work is outsourced.

3 48 Ludosław Drelichowski, Janusz Mierzejewski Shaping knowledge for creating inter-organizational restructuring processes of management systems of quality and manufacturing organization Figure 1. Total income for (million PLN) 2.2. Developing product and quality systems in construction of new vehicles Table 2: Development of new products in Product type Rail buses & multiple passenger units Trams TOTAL The above data clearly shows that in the development of the company dramatically increased and the sales of new vehicles soared by 250 percent. The development was possible thanks to the modern supply chain management, co-operation with suppliers and the introduction of new technological measures. The success can also be ascribed to the newly implemented IT systems such as ERP which is used to manage logistics, production, finance and projects. The company also introduced the project- and process-oriented types of management, both involving controlling principles. The Integrated Quality Support System, compliant with the IRIS:02, ISO 9001, ISO 14001, PN 18001, ISO 3834, EN 15085, DIN 6701 norms, and based on HTML Inter-

4 Studies & Proceedings of Polish Association for Knowledge Management No. 61, net browsers, has facilitated the fast exchange of information. Modern IT systems based on Internet browsers allow one to manage different aspects of quality, which can be grouped thematically using the knowledge co-created with business partners. To participate in the knowledge creation process, partner organizations must first undergo adjustment processes regarding information, communication and quality management systems. The above requirements can be classified as follows: 1. Qualification processes regarding quality management (including documentation), supplier qualification system, preventive and corrective measures, quality analysis and audits. PESA Bydgoszcz S.A. has introduced obligatory supplier qualification procedures for its own workers and external providers. All potential suppliers have to submit a qualification request. Typically, five candidates are reviewed every month. Then, they receive an IRIS-compliant questionnaire including the answers as well as the requirements they have to fulfil. Next, PESA workers visit a candidate s head office and perform an audit. Reviewers evaluate if a supplier is competent enough and has the ability to provide parts for PESA. In the last three years PESA inspectors have provided about 50 suppliers with technical and organizational assistance and helped them to set up the quality certification schemes from scratch. A further 30 suppliers have been assisted in the implementation and certification of the quality management in welding and gluing. PESA quality advisors organize training programmes, show areas which need to be improved and generally help the suppliers to develop. The results are evident: the quality of the production process and the products have been continually improving and the suppliers recorded an 80 percent decline in the number of customer complaints. They also managed to increase the number of their own customers. In order to improve its supply chain management, PESA Bydgoszcz S.A. has launched a website which makes it possible to book deliveries, forward orders and technical specification, and publish the number of technical documentation (which includes the date of the document). The website is also very useful for arranging delivery dates and performing deliveries. PESA Bydgoszcz S.A. co-operates virtually with about 300 suppliers who have signed the confidentiality agreement. Another website was set up to make it possible to forward complaints to suppliers worldwide. As a result, the exchange of information now happens twice as fast as before and allows support teams to respond within 12 to 48 hours, depending on the region (previously the response time was 5 working days). Suppliers can also use the website to check the feedback on quality of their products. The logistics department in PESA Bydgoszcz S.A. can also use the website to monitor the corrective measures implemented by the suppliers. 2. Use of machines and measuring equipment. FMEA and risk analysis. PESA Bydgoszcz S.A. has introduced the Internet Machine Monitoring System which controls the proper functioning of several thousand machines and the production equipment. Now, the machinery is automatically supervised and the service staffs is reminded about the overhaul dates, necessary maintenance work, etc. The online database has cut the reaction time in the case of a breakdown. It also holds records of all machines, which is very useful, e.g. it reminds one of when an old machine approaches the end of its working life and needs to be replaced by a new

5 50 Ludosław Drelichowski, Janusz Mierzejewski Shaping knowledge for creating inter-organizational restructuring processes of management systems of quality and manufacturing organization one, or when the company has to hire a spare machine, etc. An emergency manual has been devised. Introducing the above changes resulted in lowering machine malfunction by 75 percent. The database also holds records of monitoring equipment and electric tools used in the company. Thanks to the risk analysis, it was possible to identify items most likely to fail and eliminate mediocre suppliers of such equipment. It helped to lower the cost of buying new equipment by 10% annually. The database also contains instruction manuals and technical documentation for all machines, which considerably improves servicing, maintenance work and resetting machines to their original state. The infrastructure database is essential for the FMEA evaluation of the production. It shows the number of breakdowns, the time a machine was idle, and helps to rationalize the production and prompts when equipment needs to be replaced. The existence of the database significantly helped the company to achieve its financial success, and a fantastic 80-percent development in 12 months. 3. Using inter-organizational knowledge proved very effective in managing the quality of products manufactured by PESA Bydgoszcz S.A. and resulted in efficient processing of customer complaints, which involves component diagnostics and defect monitoring. When PESA Bydgoszcz S.A. sells a product to a customer, the agreement specifies the RAMS/ LCC (Reliability, Availability, Maintainability & Safety/Lifecycle Costs) factors which should be met by the product. In order to monitor these factors, as well as receive feedback from customers, certain Internet systems and the integrated IFS application system have been introduced. Their central part is the information database, which collects data regarding e.g. faults occurring in vehicles produced by PESA Bydgoszcz S.A. The recorded data is then processed by the FMEA analysis tools and used to eliminate potential faults in the future and improve the RAMS/ LCC factors. The RAMS monitoring is performed daily and the authorized PESA staff are presented with the results. They are also notified about any faulty parts delivered by suppliers. The database produces interesting findings which are processed by the FMEA. Sometimes suppliers and customers are also invited to help in finding a solution. Currently, all PESA vehicles are fitted with a GPS transmitter, which enables live monitoring of many parameters and guarantees immediate reaction of the support team in case of any major problems. The actions listed above helped to increase the RAMS factors (Table 3). 4. Supporting innovation processes by creating ideas in the KAIZEN system, application of the 5 S system, managing internal audits, etc. The following developments were introduced in PESA Bydgoszcz S.A. in : The 5 S system (Sort, Storage, Shine, Standardize, Sustain) was introduced in all areas of production in PESA Bydgoszcz S.A. In order to increase discipline, internal audits are performed monthly. The system allowed for full identification of products stored in work places and eliminates idle goods or equipment. Employees are personally responsible for the proper maintenance of their workplaces. The system limited the number of internal faults by about 40 percent, the

6 Studies & Proceedings of Polish Association for Knowledge Management No. 61, number of accidents at work by about 30 percent, and helped to generate a 30-percent savings. The installation cost of the 5 S system was amortized in six months. The KAIZEN system (tools) has been used to introduce minor improvements in all areas of production and eliminate waste. Special KAIZEN teams have managed to increase the efficiency of production. On average, 120 new ideas are created and implemented in PESA Bydgoszcz S.A. The benefits are apparent: employees apply creative thinking and the system brings actual savings of about 50,000 PLN. The KANBAN system the screw and other component supply system was introduced to assist in the very busy period of serial production of 200 trams for the depot in Warsaw. The system requires a perfect co-operation with suppliers to guarantee on time delivery and is synchronized with the internal logistics of the company. The system allowed for the coordinated production of 3 to 4 trams weekly, on two assembly lines. The introduction of the quality management solutions presented above was necessary. Vehicles produced by PESA Bydgoszcz S.A. meet the highest quality requirements, which are confirmed by the reliability factors (Table 3). Table 3. Vehicle reliability Average vehicle reliability 90.5% 92.1% 93.8% 95.4% 96.8% 97.5% In order to continue the growth, the ERP and Internet systems must be integrated to increase the speed and information content in the supply chain and production management. This task requires the use of the PDCA (Plan-Do-Check-Act) system another step in development. 3. Conclusion The study describes the dynamic progress of PESA Bydgoszcz S.A. which was possible thanks to the use of modern IT solutions and information transfer. The organization of production and the effective quality management can be set as examples to follow. Modern infrastructure allows the company to conquer new and demanding world markets, and successfully develop knowledge management. In order to continue its dynamic development, PESA Bydgoszcz S.A. must ensure a continuous flow of component supply which has to meet strict quality standards. This task requires prior supplier qualification. PESA Bydgoszcz S.A. only co-operates with suppliers who use modern production management and organization systems, and guarantee the high quality of their products, which meet customer requirements. The procedures described in this study are stages in achieving high standard of inter-organizational communication and standardization of products. Bibliography[ 1] Chloe, J. (2008): Inter-organizational relationship and the flow of information through value chains. Information & Management, 45, pp [2] Czarnacka-Chrobot, B. (2006): Typowe czynniki niepowodzenia w realizacji informatycznych przedsi wzi projektowych spojrzenie Standish Group, in: Dylematy zarz dzania

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8 Studies & Proceedings of Polish Association for Knowledge Management No. 61, [16] Lee, D. H., Lee, S. M., Olson, D. L. and Chung, S. H. (2010): The Effect of Organizational Support on ERP Implementation. Industrial Management & Data Systems, Vol. 110: No. 1-2, pp [17] Shih, Y. Y. and Huang, S. S. (2009): The Actual Usage of ERP Systems: An Extended Technology Acceptance Perspective. Journal of Research and Practice in Information Technology, Vol. 41: No. 3, pp [18] Umble, E. J., Haft, R. R., and Umble, M. M. (2002): Enterprise Resource Planning: Implementation Procedures and CSF. European Journal of Operational Research, Vol. 146: No. 2, pp KSZTAŁTOWANIE WIEDZY DLA TWORZENIA MI DZYORGANIZACYJNYCH PROCESÓW RESTRUKTURYZACYJNYCH SYSTEMÓW ZARZ DZANIA JAKO CI I ORGANIZACJ PRODUKCJI Streszczenie W pracy omówiono proces rozwoju organizacji PESA Bydgoszcz SA. Holding jako niezwykle interesuj cy przykład transformacji przedsi biorstwa zrealizowany w ramach gł bokich przemian własno ciowych i organizacyjnych. Skala dokonanych zmian i dynamika rozwoju organizacji powodowały, e sprostanie licznym wyzwaniom nie było mo liwe poprzez uwzgl dnienie popularnych działa benchmarkingowych a niezb dne stało si wdro enie procedur tworzenia i zastosowa wiedzy w organizacji. W pracy omówiono cztery kluczowe grupy działa, które stanowi istotne elementy tworzenia i zastosowa wiedzy w organizacji stanowi ce podstaw do wdro enia zmian umo liwiaj cych efektywne tworzenie i weryfikacj nowatorskich rozwi za zarz dzania przedsi biorstwem. Dodatkowe wyzwanie stanowi ce szczególnie istotn sfer tworzyło podj cie standardowych procedur dotycz cych wspomagania wiedz partnerów biznesowych w procesie ich dostosowywania si do spełnienia niezb dnych wymaga techniczno-organizacyjnych wypracowanych w PESA SA zasad współpracy mi dzyorganizacyjnej. Słowa kluczowe: współpraca mi dzyorganizacyjna, systemy zarz dzania jako ci, tworzenie wiedzy dla wspomagania procesów restrukturyzacyjnych organizacji Ludosław Drelichowski Faculty of Management University of Technology and Life Sciences in Bydgoszcz [email protected] Janusz Mierzejewski PESA Bydgoszcz S.A. Holding