Figure 1: Analysis of the Johnson & Johnson Value Chain

Sources: (Atherton, Kleiner, 1998) (Johnson & Johnson Investor Relations, 2012)

Variability in capacity planning and constraint-based modeling of demand has also led Johnson & Johnson to adopt and standardize on Lean Six Sigma as part of its quality management and constraint-based planning strategies (Hunter, Schmitt, 1999). Based on an analysis of their annual reports and filings with the Securities and Exchange (SEC) Commission and (Johnson & Johnson Investor Relations, 2012) the following analysis of the lean manufacturing, Six Sigma and Design for Six Sigma initiatives in the company are profiled. Taken together these form the Johnson & Johnson Enterprise Compliance and Quality Management (ECQM) framework the company relies on for ensuring speed, accuracy, consistency and customer-focused innovation throughout its value chain processes. Figure 2 provides an analysis of how Johnson & Johnson has organized these initiatives as a three-phased approach to continual improvement.

Figure 2: Johnson & Johnson Framework for Continuous Improvement

Source: (Johnson & Johnson Investor Relations, 2012)

It's critical in the Johnson & Johnson organizational structure to continually strive for greater visibility, transparency and control over the inherently uncontrollable aspects of such a diverse and globally distributed supply chain. The company incorporates these factors to create a systematic approach to delivering greater revenue growth, cost reduction and asset utilization through more efficient quality management and compliance programs. Figure 3 defines how business improvements in the company translate over time into the foundations of greater revenue growth, cost reduction and asset utilization. It also provides a reference back to the compliance platform contributions to greater production efficiency as well. This illustrates how strategic capacity planning and the integration of quality management programs all are orchestrated to drive greater profitability over the long-tem.

Figure 3: Translating Compliance Into Cash at Johnson & Johnson

Source: (Johnson & Johnson Investor Relations,...

The use of advanced constraint-based planning techniques and the use of information technologies as an enabler of greater performance by automating only those best-in-place processes is what keeps the company profitable even in challenging economic times. Instead of investing heavily in new plant and equipment which would further drive down Return on Assets (ROA) and also potentially drop their market valuation, the company invests heavily in streamlining and making more efficient their core constraint-based and strategic resource planning functions. Job designs fall out of this level of analysis and approach to creating best-in-class value chain performance. All of these diverse elements are also unified to a common objective of stabilizing costs and increasing gross margins by being more responsive to market requirements, while pushing innovative products quickly to market controlling for quality in the process.
Appendix

Atherton, E., & Kleiner, B.H. (1998). Practices of the best companies in the medical industry. International Journal of Health Care Quality Assurance, 11(5), 173-176.

Hunter, D., & Schmitt, B. (1999). Six sigma: Benefits and approaches. Chemical Week, 161(37), 35-36.

Johnson, R.S. (1993). TQM: Leadership for the quality transformation (part 3). Quality Progress, 26(3), 91-91.

Johnson, T. (1994). Breakthrough thinking in total quality management. The Engineering Economist, 39(4), 363-363.

Johnson & Johnson Investor Relations (2012). Investor Relations. Retrieved January 31, 2012 from J&J Investor Relations and Filings with the SEC Web site:

http://www.investor.jnj.com/sales-earnings.cfm

Larsen, R.S. (1993). A prescription for U.S. health care. Strategic Finance, 75(5), 35-35.

Slobodow, B., Abdullah, O., & Babuschak, W.C. (2008). When supplier partnerships aren't. MIT Sloan Management Review, 49(2), 77-83.

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