HYPOTHESIS

In response to the main problem, the hypothesis proposed is “The implementation of Commitment-based Management in the spare parts warehouse area improves the results of the gross margin in the spare parts sub-management in a car dealership”.

Dependent variable:

Y1: Gross margin of the spare parts sub-management with respect to total sales

Independent variable:

X1: Compliance level of Commitment-based Management in the spare parts warehouse area

According to ^{Real Academia Española (2020}), “commitment” is defined as an obligation undertaken, a word given, a difficulty, a promise. However, ^{Sull (2003}) -an expert in strategy and execution, professor of strategy and entrepreneurship at Harvard and London Business School and one of the 10 new management gurus- points out that a commitment is an action taken in the present that binds an organization to a future course of action. In other words, not all management decisions are commitments, since such decisions become a commitment if it constrains future alternatives a company in a way that would be difficult to reverse. He also argues that, in the medium term, commitments facilitate the resolution of problems within operations and organizations, and that they provide employees with a sense of focus, as well as helping to prioritize and coordinate actions.

On the other hand, ^{Dougherty (2012}) -a senior lecturer in technological innovation, entrepreneurship, and strategic management at MIT with experience in stabilizing and recapitalizing companies- argues that for a leader to achieve emotional engagement with their team, it is necessary to engage with them as well, unsolicited and without an expectation of reciprocity. He also states that commitments cannot be forced or faked, because this leads to mistakes and rejection, so cohesion is sought with the people with whom one works. On the other hand, he points out that commitments generate inflexibility if they are proposed for long periods, so if there are changes in time, the company may be trapped in outdated objectives to the detriment of adaptability, operability, and competitiveness.

Commitment-based Management (CbM)

^{Dann (2009}) argues that, according to Donald Sull, hierarchies are systems where orders go down and information goes up, so they are not appropriate for jobs where cooperation between multiple teams with different functions is sought. Traditionally, this casuistry was managed through processes, standardizations and decision making derived from the Total Quality Management (TQM) approach, which resulted in a high level of process standardization, but led to a lower level of innovation. In response, Sull developed the concept of Commitment-based Management, where he schematizes an organization as a network of overlapping commitments that motivate workers to work in the right way. One advantage of this concept is that it can be used in non-standard situations, such as emerging strategies, innovation, crisis, chaos, etc.; it also encompasses the entire supply chain. In this regard, it identifies five characteristics, which are shown in Table 1.

In addition, ^{Sull and Spinosa (2005}) state that this approach does not exclude others but should be treated as a complement to achieve better results, such as guiding personnel to achieve objectives and optimizing production processes.

^{Goldsmith (2008}) points out that leaders must inspire respect and trust in order to increase commitment in a company, so that employees feel linked to the results of the organization. This technique includes open and effective communication, transparency, truth, equality, coaching, empowerment, and recognition of achievements. Table 2 outlines the recommendations for top management support.

Generation variables

^{Stein and Pin (2009}) argue that there is currently an integration between the different generations that coexist in the same workspace. This boosts the need to understand the expectations, values, needs and motivations of the latest generation incorporated. The management of this situation could lead companies to their eventual development or stagnation.

Millennials opt for companies that offer a balance between their personal life and work, where they have access to information, empowerment, fluid communication with department leaders, challenges and opportunities for learning and development. In return, they will offer a high level of preparation, creativity, initiative, among other characteristics that will help to achieve the results desired by the companies.

Motivation and Leadership

^{Newstrom (2011}) argues that motivation at work is comprised of internal and external forces that direct an employee to choose a course of action and act in certain ways and that, from an ideal point of view, these behaviors will be directed to the achievement of an organizational goal.

Accordingly, the personality and needs of the employees are the main axes that managers must evaluate to ensure their employees are motivated. Figure 1 shows the main sources of motivation according to Newstrom:

On the other hand, ^{Viato (2014}) refers that leadership consists of a method intended to guiar, acompañar y entrenar a una persona o un grupo con el propósito de alcanzar metas o desarrollar habilidades específicas [guide, accompany and train a person or a group of people with the purpose of achieving goals or developing specific skills] (para. 2). In this process, the leader intervenes as a coach for his follower to improve the performance of their functions by focusing on the achievement of objectives.

Implementation of Commitment-based Management

Evaluation of Results

To obtain the results of the dependent variable, the monthly report to the board of directors was reviewed, where the results of sales, gross margin by area, inventory, warehouse satisfaction, profitability, among others, are detailed. The results of the independent variable were obtained from the summary chart of the monthly fulfillment with the Commitment-based Management. Finally, based on the project results in the term coordinated with management, the degree of correlation between the independent variable and the dependent variable was determined, from which it can be affirmed that the Commitment-based Management project improved the productivity of the warehouse personnel, which was reflected in the increase of the gross margin of the spare parts sub-management, resulting in the validation of the hypothesis proposed.

Implementation of Commitment-Based Management

Limautos Automotriz del Perú S.A.C. is a company established in 2011 that sells spare parts for the KIA, Mitsubishi, FUSO, Peugeot, MG, and Chery brands. It has ten branches in Lima, six of which offer spare parts service in workshops and four of which have counter sales points. Its vision is Ser líder de la industria, manteniendo la capacidad de diferenciación en el mercado e impactando responsable y socialmente en el entorno [Be the industry leader, maintaining the capacity for differentiation in the market and have a responsible and social impact on the environment] (Limautos Automotriz del Perú S.A.C., n.d.). This company has never had a process and quality area, so the mapping of internal processes is managed by each management, which means that the spare parts sub-management, which includes the spare parts warehouse area, does not have a plan or methodology to manage its results and focuses on solving daily problems, overshadowing planning and equipment management.

Based on the deficiencies identified in the aforementioned company, the implementation of CbM was proposed as a management tool for the warehouses of the spare parts sub-management in order to improve its gross margin. The following three axes of the project were identified and their management was planned to increase the gross margin of the spare parts sub-management:

In order to introduce the Commitment-based Management (CbM) implementation project to the warehouse team, a training day was held for the spare parts sub-management personnel on December 27, 2018. In this training, it was explained what commitments are, their status (“Fulfilled”, “Pending”, “Not Fulfilled” and “Renegotiated”), their implications, the ease of making requests to management and vice versa, so that they commit to actions that facilitate day-to-day functions, the priority of teamwork, among other topics. In addition, three group-dynamic games were applied: Win-win, Spaghetti Tower, and Square Jump, which helped the sub-management personnel to get to know each other better and develop bonds of friendship. Finally, the day ended with a soccer tournament.

Based on the Commitment-based Management implemented at Divemotor in 2016, meetings of 20 to 25 minutes were scheduled on Mondays at 8:00 a.m. to review commitments and their fulfillment. It should be noted that punctuality was the first commitment to be developed among workers. Figure 2 shows the actions to be carried out during the commitment meetings.

The methodology selected requires a CbM rating chart to quantify compliance with the factors, so the same scheme used at Divemotor was used. However, due to the warehouse characteristics and its lack of time availability as a consequence of the backlog generated as a result of the interval between the opening of the workshop at 7:00 a.m. and the opening of the warehouse at 8:00 a.m., the processes were simplified in order to have the meetings at 7:00 a.m. and 8:00 a.m., respectively, and Table 3 was designed for the warehouseman, the warehouse analyst and the spare parts manager.

The above table shows a result per branch, which is subdivided into four factors: warehouse order, orders served on time, invoices entered on time and correct coding of parts. The criteria used for the monthly evaluation are detailed below:

Table 3 was planned to be filled out in a monthly meeting between the warehouse analyst and the spare parts coordinator. They were given a value for each criterion of one (1) if it was met or zero (0) if the warehouse performance was not as required.

The project started in full the first week of March 2019. Each Monday meeting was led by the warehouse analyst, who proposed the commitments per each branch in order to improve their operational issues, and storekeepers were empowered so they could also engage the analyst and the assistant manager in actions that would help the area perform better. The commitments proposed throughout the project are detailed in Table 4, Table 5, Table 6, Table 7, Table 8, and Table 9.

EVALUATION OF RESULTS

Based on the commitments managed weekly, the following results were obtained at warehouse management level:

March: The personnel had a positive change in their arrival schedule due to the commitment promoted by the sub-management. Deficiencies in oil inventories were corrected, problems due to lack of training were identified in catalogs, and support was provided to branches that had a high operational load due to the entry of damaged vehicles. Operational problems were identified in Surquillo3 due to the lack of experience of the assigned personnel, for which Surquillo2 initially provided support. Regarding invoice entry, two branches finished out of working hours; therefore, it was considered as “not fulfilled” in the commitment chart.

April: Training was provided on tracking charts to reduce expenses due to obsolescence, additional catalogs were obtained to increase productivity in workshop coding, and inventories of high turnover items were taken to reduce incidences of stock shortages and surpluses. In this month most of the invoices were entered within working hours, which was acknowledged by different managers. There were still errors in coding at branches with new personnel.

May: The delivery of merchandise for the counter was expedited and there was greater availability in the warehouse, training was provided for catalog updates, the stock level of some spare parts groups was increased, and the recurrence of lubricant inventories was increased in order to identify causes of oil shortages. With respect to the tracking charts, there was a setback in compliance due to problems with the coding of claims and observations in the warehouse order due to the arrival of replacement parts for 1.5 months of stock.

June: The personnel had another change related to the punctuality of Saturday inventories, which caused them to be completed on schedule; also, outstanding advances pending of invoicing were identified in order to reduce obsolescence and requests were made to the importer to reduce waiting times (between 1 and 3 days) for quotations of imports. On the other hand, new parameters were negotiated for filter replacements due to the high variability in the last month. In general, the best results in the Commitment-based Management were obtained as there was a reduction of incidents.

July: In order to reduce obsolescence, pending tasks were tracked in the workshop. From another point of view, new catalogs for Chinese spare parts were made available and planning for the destruction of warranty spare parts was started. The importer was asked again to reduce the response time for quotations of imported Chinese spare parts, and steps were taken to return to the factory from the branches with coding errors due to the responsibility of the importer. In addition, there were difficulties in Surquillo3 due to the departure of assigned personnel on vacation and there were errors in the coding of low turnover electrical items.

August: Three catalogs with errors were updated and the personnel retrained in the Huachipa plant. Prior to the factory visit, each warehouse was inspected and order and cleanliness issues were corrected. As part of the annual objectives, training was provided in Excel and SPIGA+ to expedite internal warehouse processes. Coordinated with the purchasing department to expedite quotes for local items. By this time, several locations had already achieved 100% compliance with the CbM, so the analyst was asked to prioritize the two locations that still have problems.

In general, the team achieved punctuality, on-time compliance of rotating inventories and invoice entry. In addition, priority was given to training and catalog updates, and support was provided to the different branches in overloaded workdays and when replacement personnel were needed for vacations. Finally, the closing of invoice receipts on time was completed, actions that were acknowledged by the Administration Management.

It should be noted that during January and February, the scheme was proposed without actually involving Commitment-based Management, which was considered to be fully initiated as of March 2019.

As explained above, each branch was evaluated in a monthly meeting between the warehouse analyst and the spare parts coordinator, which generated the results shown in Table 10.

Growth was observed in the Commitment-based Management compliance indicator, which started with 63% when the project was not fully implemented and had a value of 88% by August: a result of the cohesion in the warehouse team.

Contrast de hypotheses: CbM vs. Gross Margin

Based on Table 8, Table 11 was developed as a summary, where the percentage of CbM compliance during the project was identified:

On the other hand, Table 12 shows the gross margin percentage of the spare parts area from March to August 2019.

It should be noted that since the performance of the workshop channel was under the leadership of the workshop assistant manager, it was decided to use only the value of the counter channel. Also, based on the details of the hypothesis, Table 13 was generated, in which the values for the variables were identified.

Finally, Table 14 was generated, where the correlation coefficient was determined using Excel 2019, Data tab, Analysis section, Data Analysis tool, Regression option.

When reviewing the statistical results, it is observed that the correlation coefficient is 0.52, which indicates that there is a positive correlation between the dependent and independent variables, so the hypothesis stated is considered valid. However, when analyzing the coefficient of determination R2, a value of 0.275 is observed, which means that the model slightly explains the variability of the response data as a function of its mean, so the data may be far from the regression graph.

Also, it is detailed in the analysis provided by Excel 2019, where the regression equation is as follows:

Y = 0.025 + 0.28 X

This equation indicates that there is a positive slope, which reinforces the affirmation of the positive correlation between the variable “compliance level of Commitment-based Management in the spare parts warehouse area” and the variable “gross margin of the spare parts sub-management with respect to total sales”.