Name : ///DEEP SINGH

Registration / Roll No. : 331630152

Course : Master of Business Administration

(MBA)

Subject : Production & Operations

Management

Semester : Semester II

Subject Number : MB0044 ( SET-I )

_______________ _______________ ______________

Sign of Center Head Sign of Evaluator Sign of Coordinator
 PRODUCTION & OPERATION MANAGEMENT
SET-1

Q.1
ANSWER
In computing, just-in-time compilation (JIT), also known as dynamic translation, is a
method to improve the runtime performance of computer programs. Traditionally,
computer programs had two modes of runtime operation, either interpreted or static
(ahead-of-time) compilation.[citation needed] Interpreted code is translated from a high-
level language to a machine code continuously during every execution, whereas statically
compiled code is translated into machine code before execution, and only requires this
translation once.

JIT compilers represent a hybrid approach, with translation occurring continuously, as

with interpreters, but with caching of translated code to minimize performance
degradation. It also offers other advantages over statically compiled code at development
time, such as handling of late-bound data types and the ability to enforce security
guarantees.

JIT builds upon two earlier ideas in run-time environments: byte code compilation and
dynamic compilation. It converts code at runtime prior to executing it natively, for
example byte code into native machine code.

Several modern runtime environments, such as Microsoft's .NET Framework and most
implementations of Java, rely on JIT compilation for high-speed code execution.

Overview: In a bytecode-compiled system, source code is translated to an intermediate

representation known as bytecode. Bytecode is not the machine code for any particular
computer, and may be portable among computer architectures. The byte code may then be
interpreted by, or run on, a virtual machine. A just-in-time compiler can be used as a way
to speed up execution of byte code. At the time a piece of code is to be executed, the just-
in-time compiler will compile some or all of it to native machine code for better
performance. This can be done per-file, per-function or even on any arbitrary code
fragment; the code can be compiled when it is about to be executed (hence the name "just-
in-time"), and then cached and reused later without needing to be recompiled.

In contrast, a traditional interpreted virtual machine will simply interpret the bytecode,
generally with much lower performance. Some interpreters even interpret source code,
without the step of first compiling to bytecode, with even worse performance. Statically
compiled code or native code is compiled prior to deployment. A dynamic compilation
environment is one in which the compiler can be used during execution. For instance,
most Common Lisp systems have a compile function which can compile new functions
created during the run. This provides many of the advantages of JIT, but the programmer,
rather than the runtime, is in control of what parts of the code are compiled. This can also
compile dynamically generated code, which can, in many scenarios, provide substantial
performance advantages over statically compiled code, as well as over most JIT systems.

A common goal of using JIT techniques is to reach or surpass the performance of static
compilation, while maintaining the advantages of bytecode interpretation: Much of the
"heavy lifting" of parsing the original source code and performing basic optimization is
often handled at compile time, prior to deployment: compilation from bytecode to
machine code is much faster than compiling from source. The deployed bytecode is
portable, unlike native code. Since the runtime has control over the compilation, like
interpreted bytecode, it can run in a secure sandbox. Compilers from bytecode to machine
code are easier to write, because the portable bytecode compiler has already done much of
the work.

JIT code generally offers far better performance than interpreters. In addition, it can in
some cases offer better performance than static compilation, as many optimizations are
only feasible at run-time: The JIT compiler translates byte codes into native machine
code. This compilation process is done only once, and a link is created between the
bytecode and the corresponding compiled code

The compilation can be optimized to the targeted CPU and the operating system model
where the application runs. For example JIT can choose SSE2 CPU instructions when it
detects that the CPU supports them. To obtain this level of optimization specificity with a
static compiler, one must either compile a binary for each intended platform/architecture,
or else include multiple versions of portions of the code within a single binary.
The system is able to collect statistics about how the program is actually running in the
environment it is in, and it can rearrange and recompile for optimum performance.
However, some static compilers can also take profile information as input.
The system can do global code optimizations (e.g. inlining of library functions) without
losing the advantages of dynamic linking and without the overheads inherent to static
compilers and linkers. Specifically, when doing global inline substitutions, a static
compilation process may need run-time checks and ensure that a virtual call would occur
if the actual class of the object overrides the inlined method, and boundary condition
checks on array accesses may need to be processed within loops. With just-in-time
compilation in many cases this processing can be moved out of loops, often giving large
increases of speed.

Although this is possible with statically compiled garbage collected languages, a bytecode
system can more easily rearrange executed code for better cache utilization.
Startup delay and optimizations JIT typically causes a slight delay in initial execution of
an application, due to the time taken to load and compile the bytecode. Sometimes this
delay is called "startup time delay". In general, the more optimization JIT performs, the
better the code it will generate, but the initial delay will also increase. A JIT compiler
therefore has to make a trade-off between the compilation time and the quality of the code
it hopes to generate. However, it seems that much of the startup time is sometimes due to
IO-bound operations rather than JIT compilation (for example, the rt.jar class data file for
the Java Virtual Machine is 40 MB and the JVM must seek a lot of data in this
contextually huge file).

One possible optimization, used by Sun's HotSpot Java Virtual Machine, is to combine
interpretation and JIT compilation. The application code is initially interpreted, but the
JVM monitors which sequences of bytecode are frequently executed and translates them
to machine code for direct execution on the hardware. For bytecode which is executed
only a few times, this saves the compilation time and reduces the initial latency; for
frequently executed bytecode, JIT compilation is used to run at high speed, after an initial
phase of slow interpretation. Additionally, since a program spends most time executing a
minority of its code, the reduced compilation time is significant. Finally, during the initial
code interpretation, execution statistics can be collected before compilation, which helps
to perform better optimization.

The correct tradeoff can vary due to circumstances. For example, Sun's Java Virtual
Machine has two major modes - client and server. In client mode, minimal compilation
and optimization is performed, to reduce startup time. In server mode, extensive
compilation and optimization is performed, to maximize performance once the application
is running by sacrificing startup time. Other Java just-in-time compilers have used a
runtime measurement of the number of times a method has executed combined with the
bytecode size of a method as a heuristic to decide when to compile.[3] Still another uses
the number of times executed combined with the detection of loops.[4] In general, it is
much harder to accurately predict which methods to optimize in short-running
applications than in long-running ones.

Native Image Generator (NGen) by Microsoft is another approach at reducing the initial
delay.[6] Ngen pre-compiles (or "pre-jits") bytecode in a Common Intermediate Language
image into machine native code. As a result, no runtime compilation is needed. .NET
framework 2.0 shipped with Visual Studio 2005 runs Ngen on all of the Microsoft library
DLLs right after the installation. Pre-jitting provides a way to improve the startup time.
However, the quality of code it generates might not be as good as the one that is jitted, for
the same reasons why code compiled statically, without profile-guided optimization,
cannot be as good as JIT compiled code in the extreme case: the lack of profiling data to
drive, for instance, inline caching.

There also exist Java implementations that combine an AOT (ahead-of-time) compiler
with either a JIT compiler (Excelsior JET) or interpreter (GNU Compiler for Java.)

History The earliest published JIT compiler is generally attributed to work on LISP by
McCarthy in 1960. In his seminal paper Recursive functions of symbolic expressions and
their computation by machine, Part I, he mentions functions that are translated during
runtime, thereby sparing the need to save the compiler output to punch cards. In 1968,
Thompson presented a method to automatically compile regular expressions to machine
code, which is then executed in order to perform the matching on an input text. An
influential technique for deriving compiled code from interpretation was pioneered by
Mitchell in 1970, which he implemented for the experimental language LC².

Smalltalk pioneered new aspects of JIT compilations. For example, translation to machine
code was done on demand, and the result was cached for later use. When memory became
sparse, the system would delete some of this code and regenerate it when it was needed
again. Sun's Self language improved these techniques extensively and was at one point the
fastest Smalltalk system in the world; achieving up to half the speed of optimized C[13]
but with a fully object-oriented language.

Self was abandoned by Sun, but the research went into the Java language, and currently it
is used by most implementations of the Java Virtual Machine, as HotSpot builds on, and
extensively uses, this research base.

The HP project Dynamo was an experimental JIT compiler where the 'bytecode' format
and the machine code format were the same; the system turned HPA-8000 machine code
into HPA-8000 machine code. Counter intuitively, this resulted in speed ups, in some
cases of 30% since doing this permitted optimizations at the machine code level, for
example, inlining code for better cache usage and optimizations of calls to dynamic
libraries and many other run-time optimizations which conventional compilers are not
able to attempt.

Q.2
ANSWER
Value engineering (VE) or Value Analysis (VA) is a systematic method to improve the
"value" of goods or products and services by using an examination of function. Value, as
defined, is the ratio of function to cost. Value can therefore be increased by either
improving the function or reducing the cost. It is a primary tenet of value engineering that
basic functions be preserved and not be reduced as a consequence of pursuing value
improvements.

In the United States, value engineering is specifically spelled out in Public Law 104-106,
which states “Each executive agency shall establish and maintain cost-effective value
engineering procedures and processes."
Value engineering is sometimes taught within the project management or industrial
engineering body of knowledge as a technique in which the value of a system’s outputs is
optimized by crafting a mix of performance (function) and costs. In most cases this
practice identifies and removes unnecessary expenditures, thereby increasing the value for
the manufacturer and/or their customers.

VE follows a structured thought process that is based exclusively on "function", i.e. what
something "does" not what it is. For example a screw driver that is being used to stir a can
of paint has a "function" of mixing the contents of a paint can and not the original
connotation of securing a screw into a screw-hole. In value engineering "functions" are
always described in a two word abridgment consisting of an active verb and measurable
noun (what is being done - the verb - and what it is being done to - the noun) and to do so
in the most non-prescriptive way possible. In the screw driver and can of paint example,
the most basic function would be "blend liquid" which is less prescriptive than "stir paint"
which can be seen to limit the action (by stirring) and to limit the application (only
considers paint.) This is the basis of what value engineering refers to as "function
analysis".
Value engineering uses rational logic (a unique "how" - "why" questioning technique) and
the analysis of function to identify relationships that increase value. It is considered a
quantitative method similar to the scientific method, which focuses on hypothesis-
conclusion approaches to test relationships, and operations research, which uses model
building to identify predictive relationships.

Value engineering is also referred to as "value management" or "value methodology"

(VM), and "value analysis" (VA). VE is above all a structured problem solving process
based on function analysis—understanding something with such clarity that it can be
described in two words, the active verb and measurable noun abridgement. For example,
the function of a pencil is to "make marks". This then facilitates considering what else can
make marks. From a spray can, lipstick, a diamond on glass to a stick in the sand, one can
then clearly decide upon which alternative solution is most appropriate.
Q.3
ANSWER

Quantitative Models

There is a wide range of quantitative models, of varying degrees of sophistication and

complication. In this pack, we will only cover those that I think you are likely to
encounter in systems studies or could use to good effect. The techniques available
subdivide broadly into two major classes, static models and dynamic models. The
distinction between these will become clearer as you look at some detailed examples.
Essentially, dynamic models are those where the set of calculations comprising the model
is repeated a number of times. The initial values of the variables in the current set of
calculations are taken from the results of the previous set of calculations, and this process
is repeated time and time again. In static models, the calculations are executed once to
obtain a result (or set of results). Even where the calculations are repeated, as with
stochastic models, the values in each set of calculations are not determined by the
previous calculation.

Table gives a list of techniques, under these two broad headings.

Main category Sub-types Examples

Static spreadsheet business planning
stochastic spreadsheet financial models
forecasting electricity industry
linear programming diet formulation
decision analysis decision trees
preference models Kepner Tregoe
Dynamic time-stepped queue models
event-driven process models
stock and flow system dynamics population models

Difference between work study and motion study

Work practices are ways of doing any work which has been in vogue and found to be
Useful. These are determined by motion and time study conducted over years and found
to be efficient and practiced. Any method improvement that is conducted may be adopted
to change the practice, but only after trials they have shown that, they increase the
comfort of the worker and get the job done faster.

Work study
We say that work study is being conducted when analysis of work methods is conducted
during the period when a job is done on a machine or equipment. The study helps in
designing the optimum work method and standardization of the work method. This study
enables the methods engineer to search for better methods for higher utilization of man
and machine and accomplishment of higher productivity. The study gives an opportunity
to the workmen to learn the process of study thus making them able to offer suggestions
for improved methods. This encourages workmen participation and they can be permitted
to make changes and report the advantages that can be derived from those. This course is
in alignment with the principle of continuous improvement and helps the organization in
the long run. Reward systems may be implemented for recognizing contributions from the
workmen.
Work study comprises of work measurement and method study. Work measurement
focuses on the time element of work, while method study focuses on the methods
deployed and development of better methods.
Work measurement Work measurement can be defined as a systematic application of
various techniques that are designed to establish the content of work involved in
performing a specific task. The task is performed by a qualified worker. With this we
arrive at the standard time for a task. This will be used to fix performance rating of other
workers. It forms the basis of incentives, promotion, and training for workmen and
assessment of capacity for the plant.

Hence, training the workers is very important.

ILO defines a qualified worker as “one who is accepted as having the necessary physical
attributes, possessing the required intelligence and education, and having acquired the
necessary skill and knowledge to carry out the work in hand to satisfactory standards of
safety, quantity, and quality

Methods study
Method study focus is on studying the method currently being used and developing a new
method of performing the task in a better way. Operation Flow charts, Motion Charts,
Flow Process charts, which are the elements of the task, are studied to find the purpose of
each activity, the sequence in which they are done, and the effect of these on the work.
The study may help in changing some of them and even eliminate some of them to effect
improvements. The new method should result in saving of time, reduced motions, and
simpler activities.

Machine worker interaction

Machine worker interaction study consists of studying the amount of time an operator
spends on the machine before it is activated and the time he has nothing to do. In many
modern manufacturing centers, where we have automated systems of manufacturing, the
role of the worker is limited to, observing various screens, dials, indicator lamps to see
that the process is going on smoothly. In some cases, his job may be to load the jobs on
the machines and check the settings. What is of concern to us, is to see whether the
operations permit for enabling an operator to look after two or three machines, without
affecting of the performance of the machine or man.

Ergonomics
Ergonomics is the study of physical human factors and their functioning. We study the
movements, the amount of energy that is required for certain activities, and the
coordination among them. In operations management, we use these factors at two places.
The first is when we design the machines which are operated, the way the operator does
the tasks on the machine using different controls. Levers, wheels, switches, pedals (See
figure) have to be positioned so that the operators have maximum comfort for long
working hours

Equipment positioned to enable maximum comfort

The other factor is the consideration given for the type of loads the body can take at
various positions. When doing jobs like lifting, clamping, moving, and holding, energy is
expended by different organs for which racks, tables, pallets, are positioned and designed
to suit workers’ physical features.

Q.4
ANSWER

Rapid Prototyping (RP) can be defined as a group of techniques used to quickly

fabricate a scale model of a part or assembly using three-dimensional computer aided
design (CAD) data. What is commonly considered to be the first RP technique,
Stereolithography, was developed by 3D Systems of Valencia, CA, USA. The company
was founded in 1986, and since then, a number of different RP techniques have become
available.

Rapid Prototyping has also been referred to as solid free-form manufacturing; computer
automated manufacturing, and layered manufacturing. RP has obvious use as a vehicle for
visualization. In addition, RP models can be used for testing, such as when an airfoil
shape is put into a wind tunnel. RP models can be used to create male models for tooling,
such as silicone rubber molds and investment casts. In some cases, the RP part can be the
final part, but typically the RP material is not strong or accurate enough. When the RP
material is suitable, highly convoluted shapes (including parts nested within parts) can be
produced because of the nature of RP.

There is a multitude of experimental RP methodologies either in development or used by

small groups of individuals. This section will focus on RP techniques that are currently
commercially available, including Stereoli-thography (SLA), Selective Laser Sintering
(SLS), Laminated Object Manufacturing (LOM™), Fused Deposition Modeling (FDM),
Solid Ground Curing (SGC), and Ink Jet printing techniques.

Rapid Prototyping uses to:

To increase effective communication.
To decrease development time.
 To decrease costly mistakes.
To minimize sustaining engineering changes.
To extend product lifetime by adding necessary features and eliminating
redundant features early in the design.

Rapid Prototyping decreases development time by allowing corrections to a product to be

made early in the process. By giving engineering, manufacturing, marketing, and
purchasing a look at the product early in the design process, mistakes can be corrected
and changes can be made while they are still inexpensive. The trends in manufacturing
industries continue to emphasize the following:

• Increasing number of variants of products.

• Increasing product complexity.
• Decreasing product lifetime before obsolescence.
• Decreasing delivery time.

Rapid Prototyping improves product development by enabling better communication in a

concurrent engineering environment.

The basic methodology for all current rapid prototyping techniques can be summarized as
follows:

1. A CAD model is constructed, and then converted to STL format. The resolution can be
set to minimize stair stepping.
2. The RP machine processes the .STL file by creating sliced layers of the model.
3. The first layer of the physical model is created. The model is then lowered by the
thickness of the next layer, and the process is repeated until completion of the model.
4. The model and any supports are removed. The surface of the model is then finished and
cleaned.

Q.5
ANSWER

BREAK EVEN ANALYSIS

Learning Objectives
• Utility of break-even analysis
• Performance analysis, Sensitivity analysis, Probability analysis

Introduction
The determination of the break-even point of a firm is an important factor in assessing its
profitability. It is a valuable control technique and a planning device in any business
enterprise. It depicts the relation between total cost and total revenue at the level of a
particular output. Ordinarily, the profit of an industrial unit depends upon the selling price
pf product (revenue), volume of business (it depends on price) and cost price of the
product.

If an entrepreneur is aware of the product cost and its selling price, he can plan the
volume of his sale in order to achieve a certain level of profit. The Break-even point is
determined as that point of sales volume at which the total cost and total revenue’ are
identical.
Break-Even Point
Break-even point is an important measure being used by thepr0ponents and banks in
deciding the viability of a new project, especially in respect of manufacturing activities.
This technique is useful dealing with a new project or a new activity of the existing unit.
The break-even point (BE?) establishes the level of output/production which evenly
breaks the costs and revenues. It is the level of production at which the turnover just
covers the fixed overheads and the ‘unit starts making profits.

From the banker’s point of view, the project should achieve a break-even position within
a reasonable time from the start of production. The project, which reaches a break-even
paint earlier, is considered as a viable project by bankers. They cannot only expect earlier
repayment of their advances in the case of such projects but can also be assured that the
project can fairly adapt itself to the day-to-day developing technology. The projects which
are unlikely to reach the break-even point in the third or fourth year of its permanent of-
production will not be a viable proposal for the bankers.
The break-even analysis also determines the margin of safety, i.e., excess of budgeted or
actual sales over the break-even sales so that the bankers would’ know how sensitive a
project is to recession. This is an important factor in determining the feasibility of the
project and its ability to absorb the ups and downs in the economy. The bankers, as
lenders of funds, insist upon a reasonable margin of safety so that fixed costs are met at a
fairly earlier stage.

Algebraic Formulate of Break-Even Analysis

A. Break-even point (BEP) in terms of sales:

(Total Sales - Total variable costs - Total. contribution)

Example:
Sales 1000 units
Selling price per unit Rs. 60
Variable cost per unit Rs. 40
Fixed cost Rs. 1500
60 - 40
1500
BEP(Unit Volume ) =1500/20
= 75 units
BEP in terms of units
BEP in terms of sales = Rs. 75 x Rs. 60 = Rs. 4500

B. BEP (in terms of capacity utilization)

In this method, BEP in terms of capacity utilization is calculated with reference to
capacity utilization in the normal year of production. For instance, if the unit is expected
to achieve a capacity utilization of 40%, 45%, 60% and 80% and of the installed capacity
in the first five years, the BEP computation will be with reference to 80%.

Calculation of BEP
The break-even point can be calculated in terms of physical units and in terms of sales
turnover.
i. In terms of physical units: The number of units required to be sold to achieve the break-
even point can be calculated using the following formula:

Where
FC =variable cost
VC = fixed cost
SP = selling price
C= contribution per unit (C = SP - VC)

Example if:
FC = Rs. 1,00,000
VC = Rs. 2 per unit
SP = Rs. 4 per unit, and
Maximum productivity capacity = 1,00,000 units per year.

There are comparison of product and process layout

Product layout Process layout

1. Investment
Needs high investment in machine/equipment Comparatively low investment needed
2. Duration of Production
Needs less manufacturing times as the Production time can not be economized due
economy in time can be planned in the to frequent movement of men and material.
beginning
3. Immobilization due to Breakdown
Break down of any unit/component Breakdown of any machine does not
immobilises the whole system immobilize the whole system
4. Adjustability to changes
Inflexible as each machine can perform pre- Flexible as different section can adjust ht
designed operation only operation according to operation
5. Floor space
Requires less space. Require more space.
6. Men/Equipment Utilization
Not to full capacity Comparatively better utilization
Lesser amount of material handling and Involves greater handling of material
comparatively lesser time, money and efforts requiring more time, money and efforts.
7. material handling
Lesser amount of material handling and Involves greater handling of material
comparatively lesser time, money and efforts requiring more time, money and efforts.
8. Demand and supply relationship
Proper co-ordination between demand and as Co-ordination between demand and supply is
these are made to stock likely to be difficulty as these made to order.
9. Control and Inspection
Specialized and expertise control is required Comparatively lesser efforts on control are
thus increasing supervision costs needed.

Thus both the layouts have their own advantages and disadvantages. In fact merits of one are
demerits of the of the other. The choice an suitability of he layout mainly mainly depends n the
nature of the manufacturing system and type f the product to be produced. In general process
layout is suitable for intermittent systems and product layout is appropriate for continuous
systems.

Quality management for macro processes is carried out by use of the Juran Trilogy, which
basically consists of three steps- Quality Planning, Quality Control and Quality
Improvement. Let us understand the main activities and the relation between the three
phases of the Juran Trilogy.

Quality Planning: The quality planning phase is the activity of developing products and
processes to meet customers' needs. It deals with setting goals and establishing the means
required to reach the goals.

Quality Control: This process deals with the execution of plans and it includes monitoring
operations so as to detect differences between actual performance and goals. It consists of
three steps:

1. Evaluate actual quality performance

2. Compare actual performance to quality goals

3. Act on the difference

Quality Improvement: The process is for obtaining breakthrough in quality performance,

and it consists of several steps:

1. Establish the infrastructure needed to secure annual quality improvement

2. Identify the specific needs for improvement- the improvement projects
3. Establish project teams with clear responsibility for bringing the project to a successful
conclusion
4. Provide the resources, motivation, and training needed by the teams to- Diagnose the
cause, Stimulate establishment of remedies, and Establish controls to hold the gains. 2
Q.6
ANSWER
In most organizations there is a great focus on the Quality Control process, with little or
no emphasis on the other two processes; however the well established and customer
focused organizations do have clearly defined and robust process for all aspects of the
Juan Trilogy. In my previous article on "Quality of Design" we discussed the importance
of Quality Planning and its significance in the development of products and processes.
Quality Control is an operational activity and the control part becomes easy if the
planning process is robust, else the control process will remain only a firefighting
exercise. In the control phase, statistical tools can be used to monitor and improve the
processes involved. Some examples of control items are defects in products, response
time to customers, billing accuracy etc. The Improvement process may typically call for
cross functional teams at a macro process level and departmental teams at the micro level.
The improvements could be reduction of rework or Cycle time reduction or elimination of
any chronic quality issues.
The Juran Trilogy Diagram : The three
processes of the trilogy are indicated in the
diagram, which is a graph with time on the
horizontal axis and cost of poor quality on the
vertical axis. The planners are responsible for
the product and process design to meet the
customer needs; and the job of the operating
forces is to run the process and produce the
products. . We will see that the process cannot
achieve 100 percent quality and 20 percent
rework has to be carried out. Quality control
prevents from the situation getting worse and
also putting off the fires such as the sporadic
spike. In due course we will see that the
chronic problems have come down by the
application of the quality improvement
process.

The Alligator Analogy: The distinction between Quality Planning and Quality
Improvement is brought out by the alligator analogy. This is a fable of a manager who is
up to his waist in alligators; and each live alligator is a metaphor for chronic waste. Each
completed quality improvement project results in a dead alligator and when all alligators
are terminated the quality improvement is considered complete for the moment; but that
doesn't happen as long as the quality planning process has not changed. A changed and
improved planning process will only help complete improvement and sustain the same.

From the trilogy diagram and the alligator analogy it is clear that quality improvement
reduces quality issues but to sustain the new level there are to be improvement in the
quality planning process.

Crosby's Fourteen Steps

Phil Crosby (1979) developed a fourteen-step program for quality improvement:
1. MANAGEMENT COMMITMENT - Top-level view on quality shown to all
employees.
2. THE QUALITY IMPROVEMENT TEAM - To pursue the quality regime
throughout the business.
3. QUALITY MEASUREMENT - Analysis of business quality performance in a
meaningful manner, for example late deliveries, budgeted to actual
sales/deliveries/costs/etc. Keep it simple for all to understand.
4. THE COST OF QUALITY - Make sure everyone in the business understands the
need for a quality system, and the costs to the business if there is no quality system in
place.
5. QUALITY AWARENESS - Again make everyone in the business aware of the impact
of quality systems.
6. CORRECTIVE ACTION - Ensure a system is in place for analyzing defects in the
system and applying simple cause and effect analysis, to prevent re-occurrence.
7. ZERO DEFECTS PLANNING - Look for business activities to which zero defect
logic should be applied.
8. SUPERVISOR TRAINING - Get your supervisors trained in both quality logic and
zero defect appreciation which they can apply to their business activities.
9. ZERO DEFECTS DAY - A quality event by which all members of the effected
section become aware that a change has taken place.
10. GOAL SETTING - Once a change has been implemented in a section of the
business, the next step is to get the employees and supervisors in that section to set goals
for improvement to bring about continuous improvement.
11. ERROR CAUSE REMOVAL - Communication process by which management are
made aware that set goals are difficult to achieve in order for either the goals to be reset or
help given by management to achieve the goals.
12. RECOGNITION - Management must recognize the employees who participate in the
quality schemes.
13. QUALITY COUNCILS - Using both specialist knowledge and employee
experiences to bring about a focused approach to business quality regime.
14. DO IT OVER AGAIN - Continuous improvement means starting from the beginning
again and again.

To design an application to provide optimum benefits, the architect, designer and

programmers must thoroughly understand the data and processes needed. An excellent
way to gain this understanding and prepare to implement software is to carefully and
completely model business processes and the relevant data.
Business processes represent the flow of data through a series of tasks that are designed to
result in specific business outcomes. This article reviews the concepts of business
processes and logical process modeling. It is a useful place to start understanding the
concepts of business processes and the benefits of modeling processes as well as data.
Name : ///DEEP SINGH

Registration / Roll No. : 331630152

Course : Master of Business Administration

(MBA)

Subject : Production & Operations

Management

Semester : Semester II

Subject Number : MB0044 ( SET-II )

_______________ _______________ ______________

Sign of Center Head Sign of Evaluator Sign of Coordinator
 PRODUCTION & OPERATION MANAGEMENT
SET-2

Q.1
ANSWER

What Is a Business Process?

A process is a coordinated set of activities designed to produce a specific outcome. There
are processes for saving a file, constructing a building, and cooking a meal. In fact, there
is a process for almost everything we do. A business process is a type of process designed
to achieve a particular business objective.
Business processes consist of many components, including:
• The data needed to accomplish the desired business objective
• Individual work tasks that manipulate, review, or act upon the data in some way
• Decisions that affect the data in the process or the manner in which the process is
conducted
• The movement of data between tasks in the process
• Individuals and groups which perform tasks
Processes can be manual or automated, fully documented or simply knowledge in the
minds of one or more people. They can be simple or complex. They can be formal,
requiring exact adherence to all details; or flexible, provided the desired outcome is
achieved.

Logical Process Modeling

Logical Process Modeling is the representation of a business process, detailing all the
activities in the process from gathering the initial data to reaching the desired outcome.
These are the kinds of activities described in a logical process model:
• Gathering the data to be acted upon
• Controlling access to the data during the process execution
• Determining which work task in the process should be accomplished next
• Delivering the appropriate subset of the data to the corresponding work task
• Assuring that all necessary data exists and all required actions have been
performed at each task
• Providing a mechanism to indicate acceptance of the results of the process, such
as, electronic "signatures"
All business processes are made up of these actions. The most complex of processes can
be broken down into these concepts. The complexity comes in the manner in which the
process activities are connected together. Some activities may occur in sequential order,
while some may be performed in parallel. There may be circular paths in the process (a
re-work loop, for example). It is likely there will be some combination of these.
The movement of data and the decisions made determining the paths the data follow
during the process comprise the process model. The contains only business activities, uses
business terminology (not software acronyms, technical jargon, etc.…), completely
describes the activities of the business area being modeled, and is independent of any
individual or position working in the organization. Like its sibling, Logical Data
Modeling, Logical Process Modeling does not include redundant activities, technology
dependent activities, physical limitations or requirements or current systems limitations or
requirements. The process model is a representation of the business view of the set of
activities under analysis.
Heretofore, many applications and systems were built without a logical process model or
a rigorous examination of the processes needed to accomplish the business goals. This
resulted in applications that did not meet the needs of the users and / or were difficult to
maintain and enhance.
Problems with an unmodeled system include the following:
• Not knowing who is in possession of the data at any point in time
• Lack of control over access to the data at any point in the process
• Inability to determine quickly where in the process the data resides and how long
it has been there
• Difficulties in making adjustments to a specific execution of a business process
• Inconsistent process execution

Logical Process Modeling Primer

Modeling methods can be grouped into Logical and Physical types. Using a combination
of these methodologies can produce the most complete model, and no single method is
sufficient to adequately define your processes.
Logical Process Modeling
Logical process modeling methods provide a description of the logical flow of data
through a business process. They do not necessarily provide details about how decisions
are made or how tasks are chosen during the process execution. They may be either
manual or electronic, or a combination of methods. Some of the logical modeling formats
are:
• Written process descriptions
• Flow charts
• Data flow diagrams
• Function hierarchies
• Real-time models or state machines
• Functional dependency diagrams
A function is a high-level activity of an organization; a process is an activity of a business
area; a sequential process is the lowest-level activity. Therefore:
Functions consist of Processes. Functions are usually identified at the planning stage of
development, and can be decomposed into other functions or into processes. Some
examples of Functions would include: Human Resource Management, Marketing, and
Claims Processing
Processes consist of Sequential Processes. Processes are activities that have a beginning
and an end; they transform data and are more detailed than functions. They can be
decomposed into other processes or into Sequential Processes. Some examples of
Processes would be: Make Payment, Produce Statement of Account, and Verify
Employment
Sequential Processes are specific tasks performed by the business area, and, like a
process, transform data. They cannot be further decomposed. Examples of Sequential
Processes are: Record Customer Information, Validate Social Security Number, and
Calculate Amount Due.

Each business activity in a logical process model is included in a decomposition diagram,

given a meaningful name and described in detail with text. As in Logical Data Modeling,
naming conventions are quite important in process modeling. Names for processes begin
with a verb and should be as unique as possible while retaining meaning to the business
users. Nouns used in the activity name should be defined and used consistently. In a
decomposition diagram, each level completely describes the level above it and should be
understandable to all appropriate business users.

Physical Process Modeling

Physical modeling methods specify the topology (connectivity), data, roles, and rules of a
business process. This model describes items such as:
• Work tasks to be completed during the process
• The order in which the tasks should be executed
• Data needed to start the process execution
• Data required to start and finish each work task
• Rules needed to determine routing through the process
• Exception handling techniques
• At least one defined business outcome
• Roles and permissions of each process participant
The physical model may not closely resemble the logical model, but they produce the
same outcomes.

Data-Driven Approach to Process Definition

This approach, most commonly used in relational and object-oriented analysis efforts,
analyzes the life cycle of each major data entity type. The approach defines a process for
each phase or change the data undergoes the method by which the data is created, the
reasons for the change and the event that causes the data to achieve its terminal state. This
method assures that all data actions are accounted for and that there are meaningful
associations between the data and its processes. However, in a data-driven method, the
logical data model must be completed before the process modeling and analysis can
begin.
Major points of interest in constructing a Logical Process Model are:
• The purpose of the process. Writing the purpose and referring to it frequently
enables the analyst to recognize a step in the process that does not make sense in
the context of the process.
• Who will participate in the process? The participants may be people, groups of
people, or electronic applications.
• The order in which the steps of the process are done.
• The data you expect to be included in the process. There is an initial set of
expected data, plus you should know what data you expect to be modified or
added during the process. Part of this step is deciding which subset of the data is
appropriate at each task in the process.
• Decisions that will be made during the execution of the process. These include
decisions about which path the process should take, and whether all the required
data is present at any given point in the process.
• The rules you will use to define the various parts of the process. Also, note any
naming conventions that are important for the business.
• The disposition of the data at the end of the process. That is, will the data be
retained or deleted? If you plan to store the data, where and in what form will the
data be kept? Do future process-related reports need to access the data?
There may be other elements in the business processes that need to be included in the
model. The more complete the model, the easier it will be to implement the software, and
the more successful the processes will be in producing the desired output.
Process definition also helps you know when a process should be broken into smaller,
sequential processes. If the definition of a process is ambiguous or lengthy, it is usually a
candidate for decomposing into sequential processes. All functions are decomposed to
processes, and all processes are ultimately decomposed into sequential processes.

Constructing the Process Model Diagrams

Once the functions, processes and sequential processes have been identified and defined,
the analyst uses process modeling software to construct a set of diagrams to graphically
represent the business processes under scrutiny.
In drawing the diagrams, consider including the following items:
• The starting point of the process. There could be more than one starting point,
depending on the purpose and the operation of the process. If a process contains
more than one starting point, include all of them.
• All tasks to be performed during the execution of the process.
• The order in which the tasks should be accomplished, including any tasks that may
be performed in parallel.
• All decision points, both those having to do with choosing a path through the
process and those that determine whether or not the process should continue.
• Any points at which the process path may split or merge.
• The completion point of the process. As a process may have multiple starting
points, it can also have multiple completion points.
You should also develop a means of identifying the data you expect at each point in the
process. Be mindful of areas in the process where more than one task may be performed
simultaneously. In these areas, you may need to show data being shared among
participants, or different subsets of the data being made available to each participant.
Finally, include the ending point(s) of the process. This indicates that the process has been
completed and that all the data generated by the process can be identified.

Reviewing the Model

As in Logical Data Modeling, plan to spend a significant portion of modeling time
reviewing the model. Validate your assumptions by reviewing them with the people who
are involved in executing the process to be certain your assumptions are correct and
complete.
Verify all data requirements to ensure that all the data needed has been identified, while
using what data is needed at each step in the process. It is a good practice to perform this
verification at each sequential process defined.
A good check of the accuracy of any model is to simulate it by walking through the
process manually. This allows the analyst to locate any points in the processes that are not
valid before system construction.
Once the process has been successfully simulated, review the results with the people who
understand the expected results from each function and process. This verification step
allows the process experts to understand the model you have created and point out any
potential problems with the model before beginning the deployment of the model.

Summary

Like Logical Data Modeling, Logical Process Modeling is one of the primary techniques
for analyzing and managing the information needed to achieve business goals. It is
important that analysts understand the concepts of process modeling; the methods used in
process discovery and definition, and perfect the analytical skills for relating and
explaining the data and processes used by a business area. Properly performed, logical
process modeling can greatly assist the system architects and developers in their efforts,
producing functional and scalable applications.

Q.2
ANSWER
The project manager must have clear understanding of the process, activities and
deliverables in managing project. It includes knowledge on how to use specific tools to
bring about the expected product of each project management process. Here are the
PMBoK and Prince2 definitions of the project management knowledge areas:

The PMBoK Definition:

1. Management of Integration describes the processes and activities that integrate the
various elements of project management.
2. Management of Scope Describes the processes involved in ascertaining that the project
includes all the work required, and only the work required, to complete the project
successfully.
3. Management of Time describes the processes concerning the timely completion of the
project.
4. Management of Cost Describes the processes involved in planning, estimating,
budgeting, and controlling costs so that the project is completed within the approved
budget.
5. Management of Quality Describes the processes involved in assuring that the project
will satisfy the objectives for which it was undertaken.
6. Management of Human Resource describes the processes that organize and manage the
project team.
7. Management of Project Communications describes the processes concerning the timely
and appropriate generation, collection, dissemination, storage and ultimate disposition of
project information.
8. Management of Risk describes the processes concerned with conducting risk
management on a project.
9. Management of Procurement Management describes the processes that purchase or
acquire products, services or results, as well as contract management processes.

The Prince 2 Definition:

1. Business Case The justification behind the project.
2. Organization the way in which the personnel involved in the project is structured.
3. Plans Documents describing what the project should accomplish, how the work should
be carried out, when it should be carried out and by whom.
4. Control the way in which the project manager and project board should exercise control
over the project.
5. Management of Risk The way in which the project should approach and manage risk.
PRINCE2 defines a risk as uncertainty of outcome, which maybe either a positive
opportunity or a negative threat. Once analyzed risks are managed where appropriate to
remove, reduce the effect of a negative threat and to take advantage of positive
opportunities.
6. Quality in a Project Environment the way in which the project should ensure that a
quality product is delivered.
7. Configuration Management the way in which the project should ensure that a quality
product is delivered.8. Change Control the way in which the project manages any
changes to specification or scope of its products.

Q.3
ANSWER
Project Life Cycle - Project Cycle Management

The Project Life Cycle refers to a logical sequence of activities to accomplish the
project’s goals or objectives. Regardless of scope or complexity, any project goes
through a series of stages during its life. There is first an Initiation or Birth phase, in
which the outputs and critical success factors are defined, followed by a Planning phase,
characterized by breaking down the project into smaller parts/tasks, an Execution phase,
in which the project plan is executed, and lastly a Closure or Exit phase, that marks the
completion of the project. Project activities must be grouped into phases because by doing
so, the project manager and the core team can efficiently plan and organize resources for
each activity, and also objectively measure achievement of goals and justify their
decisions to move ahead, correct, or terminate. It is of great importance to organize
project phases into industry-specific project cycles. Why? Not only because each industry
sector involves specific requirements, tasks, and procedures when it comes to projects, but
also because different industry sectors have different needs for life cycle management
methodology. And paying close attention to such details is the difference between doing
well things, Diverse project management tools and methodologies prevail in the different
project cycle phases. Let’s take a closer look at what’s important in each one of these
stages:

1)Initiation
In this first stage, the scope of the project is defined along with the approach to be taken
to deliver the desired outputs. The project manager is appointed and in turn, he selects the
team members based on their skills and experience. The most common tools or
methodologies used in the initiation stage are Project Charter, Business Plan, Project
Framework (or Overview), Business Case Justification, and Milestones Reviews.

2)Planning The second phase should include a detailed identification and assignment of
each task until the end of the project. It should also include a risk analysis and a definition
of a criteria for the successful completion of each deliverable. The governance process is
defined, stake holders identified and reporting frequency and channels agreed. The most
common tools or methodologies used in the planning stage are Business Plans.

3)Execution and controlling The most important issue in this phase is to ensure project
activities are properly executed and controlled. During the execution phase, the planned
solution is implemented to solve the problem specified in the project's requirements. In
product and system development, a design resulting in a specific set of product
requirements is created. This convergence is measured by prototypes, testing, and
reviews. As the execution phase progresses, groups across the organization become more
deeply involved in planning for the final testing, production, and support. The most
common tools or methodologies used in the execution phase are an update of Risk
Analysis and Score Cards, in addition to Business Plan and Milestones Reviews.

4)Closure
In this last stage, the project manager must ensure that the project is brought to its proper
completion. The closure phase is characterized by a written formal project review report
containing the following components: a formal acceptance of the final product by the
client, Weighted Critical Measurements (matching the initial requirements specified by
the client with the final delivered product), rewarding the team, a list of lessons learned,
releasing project resources, and a formal project closure notification to higher
management. No special tool or methodology is needed during the closure phase.

The Project Management Body of Knowledge (PMBOK)

The Project Management Body of Knowledge (PMBOK) is a collection of processes and

knowledge areas generally accepted as best practice within the project management
discipline.

As an internationally recognized standard (IEEE Std 1490-2003) it provides the

fundamentals of project management, irrespective of the type of project be it construction,
software, engineering, automotive etc.
PMBOK recognizes 5 basic process groups and 9 knowledge areas typical of almost all
projects. The basic concepts are applicable to projects, programs and operations. The five
basic process groups are:
1. Initiating
2. Planning
3. Executing
4. Monitoring and Controlling
5. Closing

Processes overlap and interact throughout a project or phase. Processes are described in
terms of :
• Inputs (documents, plans, designs, etc.)
• Tools and Techniques (mechanisms applied to inputs)
• Outputs (documents, products, etc.)
The nine knowledge areas are:
1. Project Integration Management
2. Project Scope Management
3. Project Time Management
4. Project Cost Management
 5. Project Quality Management
6. Project Human Resource Management
7. Project Communications Management
8. Project Risk Management
9. Project Procurement Management
Each knowledge area contains some or all of the project management processes. For
example, Project Procurement Management includes:
• Procurement Planning
• Solicitation Planning
• Solicitation
• Source Selection
• Contract Administration
• Contract Closeout

Much of PMBOK is unique to project management e.g. critical path and work breakdown
structure (WBS). Some areas overlap with other management disciplines. General
management also includes planning, organizing, staffing, executing and controlling the
operations of an organization. Financial forecasting, organizational behaviour and
planning techniques are also similar.

CAPM and PMP

The Project Management Institute (PMI) is the publisher of PMBOK (now in its fourth
edition) and offers two levels of certification:
A Certified Associate in Project Management (CAPM) has demonstrated a common base
of knowledge and terms in the field of project management. It requires either 1500 hours
of work on a project team or 23 contact hours of formal education in project management.
A Project Management Professional (PMP) has met specific education and experience
requirements, has agreed to adhere to a code of professional conduct and has passed an
examination designed to objectively assess and measure project management knowledge.
In addition, a PMP must satisfy continuing certification requirements or lose the
certification.
As of 2006, PMI reported over 220,000 members and over 50,000 Project Management
Professionals (PMPs) in 175 countries. Over 44,000 PMP certifications expire annually; a
PMP must document ongoing project management experience and education every three
years to keep their certification current.

Q.4
ANSWER

A Project Management Information System (PMIS) is a part of Management

Information Systems (MIS) and manage information of a project centric organization.
These electronic systems "help [to] plan, execute, and close project management goals."[1]
PMIS systems differ in scope, design and features depending upon an organisation's
operational requirements.
Relationship between a PMS and PMIS
A Project Management System(PM) could be a part of a PMIS or sometimes an external
tool beside project management information system. What a PMIS does is to manage all
stakeholders in a project such as Project Owner, Client, Contractors, Sub-Contractors,
Company persons, Workers, Managers and etc.
PMIS pmbok 4th edition definition Project Management Information System (PMIS)
[Tool]. An information system consisting of the tools and techniques used to gather,
integrate, and disseminate the outputs of project management processes. It is used to
support all aspects of the project from initiating through closing, and can include both
manual and automated systems.
Project Management Information System (PMIS) [Tool]. An information system
consisting of the tools and techniques used to gather, integrate, and disseminate the
outputs of project management processes. It is used to support all aspects of the project
from initiating through closing, and can include both manual and automated systems.

Key Success Factors

Introduction:
Making the transition to becoming a firm that manages all aspects of knowledge well, is
clearly going to be difficult, with the emphasis on its commitment and resolve, and to find
the resources to get Knowledge Management off to a good start. Measures will depend on
the concept of knowledge. Thus the various approaches and popular theories and practices
in vogue that have been successful; are dealt with below. Popular Theory &
Practice

A key success factor is a performance area of critical importance in achieving consistently

high productivity. There are at least two broad categories of key success factors that are
common to virtually all organizations: business processes and human processes. Both are
crucial to building great companies. Our focus is on the human process areas.

When the success factors are studied focus falls on the human aspects. A strong academic
majority raises a big concern around this area. All agree that the intellectual assets of the
employees are the foremost critical success factor. “Usually people begin a KM project by
focusing on the technology needs. But the key is people and process.” (Shir Nir, 2002).
The key to successful knowledge management (KM) projects is focusing on people first,
not cutting-edge technology. The biggest misconception that IT leaders make is that
knowledge management is about technology," says Shir Nir, There is no "cookie cutter
approach" to adopting knowledge management. Every organization and company has its
own definition of knowledge and how it should be gathered, categorized and made
available to employees. What works for one company will not work for another because
organizational knowledge is so subjective. The one size- fits-all mentality, coupled with
the tendency to focus on technology rather than people and process, has obscured the real
benefits that KM can bring, according to Nir (2002). It does not help that knowledge
management means different things and often involves different kinds of technologies a t
different organizations.

Bixler (2002) developed a four pillar model to describe success factors for a KM
implementation. To achieve a basic entry level KM program, it has been determined that
all ``four pillars`` must be addressed. The four enterprise engineering pillars are
leadership, organization, technology and learning in support of enterprise wide knowledge
management initiatives. Leadership means that managers develop business and
operational strategies to survive and position for success in today’s dynamic environment.
Those strategies determine vision, and must align knowledge management with business
tactics to drive the value of KM throughout the enterprise. Focus must be placed on
building executive support and KM champions.

The success factor organization describes that the value of knowledge creation and
collaboration should be intertwined throughout an enterprise. Operational processes must
align with the KM framework and strategy, including all performance metrics and
objectives. While operational needs dictate organizational alignment, a KM system must
be designed to facilitate KM through out the organization. Technology enables and
provides the entire infrastructure and tools to support KM within an enterprise.

The Gartner Group defines 10 technologies that collectively make up full-function KM.
The functional requirements that enterprises can select and use to build a KM solution
include: “capture and store“, “search and retrieve”, send critical information to individuals
or groups, “structure and navigate”, “share and collaborate”, “synthesize, profile and
personalize”, “solve or recommend”, “’integrate with business applications”, and
“maintenance”.

Summary

Based on the above study, it is considered that the most relevant factors for the successful
implementation and sustenance of momentum for the KM initiatives are:

(1) A Culture of pervasive knowledge sharing needs to be nurtured enabled within and
aligned with organizational objectives. The underlying concern is employees do not want
to share information. Successful organizations empower employees to want to share and
Contribute intellectual information, by rewarding them for such actions. And, with
organizational leaders role models of information sharing and interface regularly with
staff, teams and stakeholders in review sessions and openly talk about successes and
failures.

(2) KM Organization: The first important variable is leadership with a vision, strategy
and ability to promote change of the management to a compelling knowledge
management actively promoted by the Chief Executive that clearly articulates how
knowledge management contributes to achieving organizational objectives. A specialist
team t o aggressively manage knowledge property i.e., manage intellectual assets as
routines-process, appropriate technology, infrastructure for ‘’social’’ and electronic
networking to allow for innovation and leverage organizational knowledge.

(3) Effective& Systematic Processes creating a “knowledge environment” with

processes to capture the knowledge assets of the organization is important , but it will
probably be most successful once most of the technologies of electronic commerce have
been implemented.

(4) Strategy, Systems & Infrastructure establishes a clear definition of all required KM
elements and an overall system approach and integration.
(5) Finally the Measures the success of knowledge management can be measured
against pragmatic milestones, such as the creation of products, the development of new
clients and an increase in sales revenue.

Q.5
ANS:

The 7 Principles of Supply Chain Management

The most requested article in the 10-year history of Supply Chain Management Review
was one that appeared in our very first issue in the spring of 1997. Written by experts
from the respected Logistics practice of Andersen Consulting (now Accenture), “The
Seven Principles of Supply Chain Management,” layed out a clear and compelling case
for excellence in supply chain management.
The insights provided here remain remarkably fresh ten years later.

• Principle 1: Segment customers based on the service needs of distinct groups and adapt
the supply chain to serve these segments profitably.

• Principle 2: Customize the logistics network to the service requirements and profitability
of customer segments.

• Principle 3: Listen to market signals and align demand planning accordingly across the
supply chain, ensuring consistent forecasts and optimal resource allocation.

• Principle 4: Differentiate product closer to the customer and speed conversion across the
supply chain.

• Principle 5: Manage sources of supply strategically to reduce the total cost of owning
materials and services.

• Principle 6: Develop a supply chain-wide technology strategy that supports multiple

levels of decision making and gives a clear view of the flow of products, services, and
information.

• Principle 7: Adopt channel-spanning performance measures to gauge collective success

in reaching the end-user effectively and efficiently.

• Translating Principles into Practice

• Reaping the Rewards

Managers increasingly find themselves assigned the role of the rope in a very real tug of
war—pulled one way by customers' mounting demands and the opposite way by the
company's need for growth and profitability. Many have discovered that they can keep the
rope from snapping and, in fact, achieve profitable growth by treating supply chain
management as a strategic variable. These savvy managers recognize two important
things:

1. They think about the supply chain as a whole—all the links involved in managing the
flow of products, services, and information from their suppliers' suppliers to their
customers' customers (that is, channel customers, such as distributors and retailers).

2. They pursue tangible outcomes—focused on revenue growth, asset utilization, and cost.
Rejecting the traditional view of a company and its component parts as distinct functional
entities, these managers realize that the real measure of success is how well activities
coordinate across the supply chain to create value for customers, while increasing the
profitability of every link in the chain.

Our analysis of initiatives to improve supply chain management by more than 100
manufacturers, distributors, and retailers shows many making great progress, while others
fail dismally. The successful initiatives that have contributed to profitable growth share
several themes. They are typically broad efforts, combining both strategic and tactical
change. They also reflect a holistic approach, viewing the supply chain from end to end
and orchestrating efforts so that the whole improvement achieved—in revenue, costs, and
asset utilization—is greater than the sum of its parts.

Unsuccessful efforts likewise have a consistent profile. They tend to be functionally

defined and narrowly focused, and they lack sustaining infrastructure. Uncoordinated
change activity erupts in every department and function and puts the company in grave
danger of “dying the death of a thousand initiatives.” The source of failure is seldom
management's difficulty identifying what needs fixing. The issue is determining how to
develop and execute a supply chain transformation plan that can move multiple, complex
operating entities (both internal and external) in the same direction.
To help managers decide how to proceed, we revisited the supply chain initiatives
undertaken by the most successful manufacturers and distilled from their experience
seven fundamental principles of supply chain management.

The Bullwhip Effect (or Whiplash Effect) is an observed phenomenon in forecast-

driven distribution channels. The concept has its roots in J Forrester's Industrial Dynamics
(1961) and thus it is also known as the Forrester Effect. Since the oscillating demand
magnification upstream a supply chain reminds someone of a cracking whip it became
famous as the Bullwhip Effect.

Because customer demand is rarely perfectly stable, businesses must forecast demand to
properly position inventory and other resources. Forecasts are based on statistics, and they
are rarely perfectly accurate. Because forecast errors are a given, companies often carry
an inventory buffer called "safety stock".

Moving up the supply chain from end-consumer to raw materials supplier, each supply
chain participant has greater observed variation in demand and thus greater need for
safety stock. In periods of rising demand, down-stream participants increase orders. In
periods of falling demand, orders fall or stop to reduce inventory. The effect is that
variations are amplified as one moves upstream in the supply chain (further from the
customer). This sequence of events is well simulated by the Beer Distribution Game
which was developed by Prasad Ligade MIT Sloan School of Management in the 1960s.
The causes can further be divided into behavioral and operational causes:

Behavioral causes
• misuse of base-stock policies
• misapplication of trinomial theorem
• misperceptions of feedback and time delays
• panic ordering reactions after unmet demand
• perceived risk of other players' bounded rationality

Operational causes
• Dependent demand processing
o Forecast Errors
o adjustment of inventory control parameters with each demand observation
• Lead time Variability (forecast error during replenishment lead time)
• lot-sizing/order synchronization
o consolidation of demands
o transaction motive
o quantity discount
• trade promotion and forward buying
• anticipation of shortages
o allocation rule of suppliers
o shortage gaming (including dereliction under Benford's Law)
o Lean and JIT style management of inventories and a chase production
strategy

Theoretically the Bullwhip effect does not occur if all orders exactly meet the demand of
each period. This is consistent with findings of supply chain experts who have recognized
that the Bullwhip Effect is a problem in forecast-driven supply chains, and careful
management of the effect is an important goal for Supply Chain Managers. Therefore it is
necessary to extend the visibility of customer demand as far as possible. One way to
achieve this is to establish a demand-driven supply chain which reacts to actual customer
orders. In manufacturing, this concept is called Kanban. This model has been most
successfully implemented in Wal-Mart's distribution system. Individual Wal-Mart stores
transmit point-of-sale (POS) data from the cash register back to corporate headquarters
several times a day. This demand information is used to queue shipments from the Wal-
Mart distribution center to the store and from the supplier to the Wal-Mart distribution
center. The result is near-perfect visibility of customer demand and inventory movement
throughout the supply chain. Better information leads to better inventory positioning and
lower costs throughout the supply chain. Barriers to the implementation of a demand-
driven supply chain include the necessary investment in information technology and the
creation of a corporate culture of flexibility and focus on customer demand. Another
prerequisite is that all members of a supply chain recognize that they can gain more if
they act as a whole which requires trustful collaboration and information sharing.
Methods intended to reduce uncertainty, variability, and lead time:

• Vendor Managed Inventory (VMI)

• Just In Time replenishment (JIT)
• Strategic partnership
• Information sharing
• smooth the flow of products
o coordinate with retailers to spread deliveries evenly
o reduce minimum batch sizes
o smaller and more frequent replenishments
• Eliminate pathological incentives
o every day low price policy
o restrict returns and order cancellations
o order allocation based on past sales instead of current size in case of
shortage