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FOREWORD

THE TEAM: EDITORS


ANIL K KUMAR (IIMB) SHALINI RAMESH (IIMB) SHIVANANDA NJ (IIMB)

PAN IIM TEAM


OPSOC (IIMB) OPERATIONS SPECIAL INTEREST GROUP (IIMC) OPERANDI (IIMI) OMEGA (IIMK) OPERATIONS INTEREST GROUP (IIML) OP-ERA (IIMS)

IN THIS EDITION

4 FACULTY ARTICLES
ROLE OF HIGH-END MANUFACTURING IN MANAGING INDIAS TRADE BALANCE 5 ORGANISATIONAL PERFORMANCE IN HEALTHCARE 8

38 CORE
5S CONCEPT AND PURPOSE SIX SIGMA - STRATEGY & IMPLEMENTATION 39 41

14 ENTERTAINMENT CORNER 17 TOP ENTRIES


ANALYSING OPERATIONS STRATEGY FOR SERVICES SECTOR 18 FOOD SECURITY & SUPPLY CHAIN CONSTRAINTS IN INDIA 23 DEALING WITH SUPPLY CHAIN DISRUPTIONS 3PL A PERSPECTIVE 27 32

MEASURING YOUR SUPPLY CHAIN THE NEED FOR SUPPLY CHAIN ANALYTICS 45 A REPORT ON THE LEAN WAYAN APPROACH TOWARDS LEAN MANUFACTURING 48 AGILE MANUFACTURING 51

54 EMERGING AREAS
FRAMEWORK FOR GREEN SUPPLY CHAIN DECISIONS 55 ELECTRONIC RETAILING IN INDIA 61

MATERIAL PROCUREMENT SCHEDULING ACCORDING TO PRODUCT WORK BREAKDOWN STRUCTURE 34

WHY SUSTAINABILITY AND GOING GREEN MAKES PERFECT BUSINESS SENSE? 66 GREEN SUPPLY CHAIN 68

SUPPLY CHAIN MANAGEMENT A SERVICES PERSPECTIVE 71

ABOUT THE LOGO:

Created by: Srinath Akula Institute: IIM, Indore


The name Opsworld signifies that the magazine covers the whole world of developments in the field of Operations Management. The word World gives tremendous flexibility of publishing diverse articles which is essential in this rapid changing industrial environment. The most important theme of the logo is an Operations manager who is driving the world with his intellectual capability and the drive mechanism is shown as a gear to symbolize Production & Operations Management. The badge signifies that the Operations manager is trained in Six sigma or is, in general, adept at dealing with Quality issues. The Assembly line inside the O indicates the Production process and the management of Assembly line related issues. The pile of wood in the O signifies Inventory Management, one of the most important concepts of Operations Management. The graph behind the Inventory shows the Scheduling part of Operations Management which is based on the fluctuations in demand.

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ROLE OF HIGH-END MANUFACTURING IN MANAGING INDIAS TRADE BALANCE


An issue of increasing concern for the Indian economy with a serious consequence on India sustaining the high economic growth of the past few years is the increasing trade and current-account deficits. The trade deficit indicates the extent to which import of goods exceeded the export of goods, while current-account deficit indicates the extent to which import of goods, services and transfers exceeded the export of goods, services and transfers. There are fears of the current-account deficit touching 3% of the GDP on the back of hardening crude oil prices. A high current account deficit in the long-term can be managed only if external investors are confident about the Indian economy's prospects and has the potential of making India highly vulnerable to the changes in the global economy. Better returns in other fast growing regions would shift investor attention from India and dry the capital flows that could finance the current -account deficit. Of course, the most recent trade indicators (released in March 2011) indicate that India might end the 2010-11 financial year with a trade deficit of about $105 billion, which would be lesser than the trade deficit of $118 billion in 2009-10. This is despite the crude oil prices in 2010-11 being significantly higher than that in 200910. An important contributor to this turnaround has been the performance by the engineering sector. The exports of engineering goods increased by 81% to $52.7 billion in the first 11 months of 201011 and constituted about 25% of our total merchandise exports. The Strategic Plan of the Indian Ministry of Commerce targets merchandise exports of $450 billion in 2013-14 and $750 billion in 2016-17i. Could the high growth in recent years translate into engineering goods exports of $150 billion in 2013-14 (33% of merchandise exports) and $300 billion in 2016-17 (40% of merchandise exports)? More importantly, should our long-term merchandise exports strategy focus on increasing the share of engineering goods as a proportion of total merchandise exports? In recent times, gems & jewelry and petroleum products have been major items in our merchandise exports. However, much of the raw material for these exports have to be imported and, hence, the net value addition to the economy owing to these exports (exports minus imports) is marginal. In addition, the export performance of gems and jewelry depend heavily on raw material prices, while that of petroleum products depend on the demand-supply gaps in export markets making them pretty vulnerable to the volatility in such markets. Both the products as well as goods like textiles and leather products are examples of items where the global competition is intense and a considerable contributor to our advantage is owing to our lower labour wages. Fluctuations in exchange rates impact such exports significantly. In short, these exports cannot be looked at as part of a sustainable export strategy. It may be noted that India is still a net importer of engineering and capital goods (they account for about 25% of our merchandise imports too). The recent Indian Budget reveals that the coming five years would be seeing investments in

The manufacturing sector in India

The recent Indian Budget reveals that the coming five years would be seeing investments in infrastructure to the tune of about $1 trillion

Contributor: Dr. Balram Avittathur Professor, IIM Calcutta

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equipment sale. For instance, a machine exported infrastructure to the tune of about $1 trillion. If for $4 million could be fetching $1 million in each of current trends were to continue, then the heavy the subsequent years through service, contributing investments in industry and infrastructure could positively to the current account balance. This result in a hike in imports of engineering and convincingly answers the earlier question whether capital goods, which would compound the trade our long-term merchandise exports strategy should deficit further. Many of the capital goods that we focus on increasing the share of engineering goods continue to import originate from high-cost, as a proportion of total merchandise exports. developed economies like France, Germany, Japan and South Korea. Examples include Thus, it is imperative that construction equipment, passenger aircraft, (i) from the view points of future trade balance and nuclear reactors, power plant equipment, the heavy investments expected container ships, various in infrastructure, the equipment used in airport ...answers the earlier question whether domestic production of and retail malls, our long-term merchandise exports engineering and capital sophisticated hospital strategy should focus on increasing the goods should increase equipment, automatic share of engineering goods as a considerably, teller machines, and proportion of total merchandise exports special machine tools (ii) the consumption of required by a horde of indigenous engineering and industries like automobiles, cement, chemicals, capital goods in our industrial and infrastructural electronics, petroleum, steel and textiles. These investments should increase considerably, and are examples of high-end manufacturing (iii) many capital goods that are imported currently products. Firms specializing in producing such need to be produced indigenously. Setting up products or the components for such products capacity for indigenous production of such goods focus on narrow specialization and do not face should also be with the clear intention of making much competition owing to fewer competitors. India an export hub of high-end manufacturing Their ability to perform strongly in global goods. The quantum of capital investments in the markets is as a result of their superior quality, developing world has increased considerably in the constant innovations and investments in R&Dii. last few years. The developed world is also thinking This enables them to avoid head-on competition seriously about substantially increasing capital and command pricing power. Firms with high investments as a means of rejuvenating their pricing power are less vulnerable to fluctuations stagnant economies and to make them more in exchange rates. In addition, capital goods need environmentally sustainable. The declining service and spare parts support which translates populations and shortages of skilled labour are to further revenue flows in future years. In fact, considerably constraining the growth potentials of there are instances where a machine sale current high-end manufacturing exporting nations accounts only for 20% of the revenue with the like Japan and Germany. China is one country that rest coming through after sales serviceiii. It is well has set its sights on this attractive opportunity and known that many of these firms make their has already taken many measures in its attempts to profits on after sales service rather than on the progress from a low-end manufacturing hub to a

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to the IT industry, has been owing to an inferior innovation culture. The Indian Government could learn from the experiences of South Korea where government policy contributions were substantial in the growth of technology conglomerates like Samsung and Hyundai. The examples of technology firms from Japan indicate that in addition to high investment in R&D, success is owing to their owning their supply chains, making the machines they use, remaining independent of suppliers and having a deep understanding of their technologyiv. Such an What could be the serious challenges in this approach would also ensure that pursuit? Countries like China, the value addition to the South Korea and Taiwan economy owing to high-end As high-end manufacturing is typically have clearly shown that based on confirmed advance orders, they are manufacturing goods is the learning curve could better suited to cope with the volatilities in higher and that they be shortened through demand as well as the countrys various contribute considerably to strong industryinfrastructural constraints employment generation. government-academia High-end manufacturing will efforts. India is second only to also spare India from some of the China in terms of engineering graduates and problems faced in general by Indian manufacturing. some of its successes in the IT industry could be The land and energy requirements as a proportion replicated in the high-end manufacturing of output is lower for high-end manufacturing industry. Foreign tie-ups and partnerships would compared to the requirements of basic industries be essential in the initial years and sufficient like cement, petroleum or steel. As high-end incentives need to be provided for multinational manufacturing is typically based on confirmed engineering firms to set up R&D centers in India. advance orders, they are better suited to cope with Firms like Siemens and GE are already active in a the volatilities in demand as well as the countrys big way, though it is largely through their own various infrastructural constraints. initiatives. Foreign partners are also vital in REFERENCES marketing abroad goods made by small and medium Indian manufacturers. Indian i All statistics regarding exports and trade are from manufacturing firms would have to learn strongly the Indian Ministry of Commerce website. from their foreign peers to invest in a culture of ii Mittel-Management: Germanys midsized innovation and quality, which would mean higher companies have a lot to teach the world; Economist, R&D expenses as a proportion of sales and Nov 27, 2010. greater proportion of its human talent in R&D iii Same as above. activities rather than in routine production and iv Invisible but indispensable: A host of mediumsales activities. It is no secret that the difficulty of sized Japanese electronics firms have developed Indian manufacturing in attracting good dominant positions in many areas of technology. engineering talent, which flows with greater ease Can they keep them?; Economist, Nov 7, 2009. truly global manufacturing powerhouse. In short, the export opportunities are rosy for a wide variety of high-end manufacturing goods. In this context, engineering and capital goods export targets of $150 billion in 2013-14 and $300 billion in 2016-17 are very realistic, though not easy to achieve. Any delay by India to be an active player in this segment could be detrimental to its future prosperity and to its relative economic position vis--vis China.

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ORGANISATIONAL PERFORMANCE IN HEALTHCARE


Prologue Performance of healthcare units

The Health Sector

The existence of several outcomes, some of which being difficult to measure, makes the measurement of performance of healthcare unit a more difficult task

Contributor: Dr. Shankar Purbey Professor, IIM Shillong

The healthcare sector, in general, is a complex sector involving several stakeholders, multiple goals, multiple products, and different beneficiaries. Healthcare has been viewed as a multidimensional (Griffith et al., 2002) and archetypal professional service, encompassing a number of professional groups (Wilson and Jantrannia, 1994). Multiple systems, various types of ownership patterns and different kinds of delivery structures make this sector a complex one. Rising medical costs, industry consolidation, changes in social culture and government legislation are driving the need for changes in the delivery, administration, and management of the healthcare sector. In recent times, customers (patients) also expect a comfortable environment as well as courteous and empathetic staff, which emphasize the interpersonal dimension of healthcare service quality. Healthcare service providers find it increasingly difficult to perform or even compete on a cost or service basis, and satisfy new service demands with often decreasing resources. In order to accomplish and improve healthcare services, providers must integrate, automate and optimize critical functions, information, and healthcare processes. Introduction of performance management system shifts the perspectives from a functional orientation to a process viewpoint, and thus change the way how healthcare service providers operate. This article deliberates on the importance of having a performance measurement system in healthcare organizations.

Healthcare is a high involvement service where a patient visits the service facility personally, physically enters into the service process, actively gets involved with the service provider, and it is personal throughout the entire service process (Lovelock, 2001). It is understandable that like other business organizations, healthcare units require better performance measurement system for measuring their performances. For developing such system, it is essential to understand the meaning of performance in the context of a typical healthcare unit. The issues around the performance of healthcare units (hospitals) have become a subject of increasing complexity and confusion. Numerous authors have tried to study the performance of healthcare units and a large number of research reports are available in this field. Few such examples are, Donabedian, 1966; Shulz et al., 1983; Quinn and Rorhbaugh, 1983; Fottler, 1987; Fetter, 1991; Kazadjian et al., 1993; Flood et al., 1994; Leggat et al., 1998; Sicotte et al., 1998. Further, like other business sectors the performance of healthcare units cannot be evaluated by one criterion only. This concept covers a large number of dimensions that are explained by the presence of several actors or groups of actors, each with its own objectives or interests. The performance and its evaluation describe a complex reality composed of multiple elements. Various authors in the literature have proposed numerous organizational performance measurement models. Quinn and Rorhbaugh (1983) insist on the

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multidimensional aspect of organizational performance and also on the complementary character of these dimensions. The authors also analyze the existing organizational performance measurement models and conclude that criteria considered under these models can either be opposite or complementary to each other. The performance assessment is always a trade off between numerous variables that are never completely compatible.

Indicators (KPIs). The following section provides a brief discussion on performance indicators for healthcare processes and outputs. Performance Measurement Indicators

Various authors have suggested many performance indicators to measure the organizational effectiveness. Unfortunately, large number of indicators, thus generated with respect to organizational effectiveness, mystifies the subject rather than clarifies the subject. In the quality Hospitals have to be simultaneously management literature, people effective and efficient in have tried to clarify the providing service to its concepts of organizational ...it is not only important to identify the set of patients. In many suitable performance indicators, but also to quality, system quality, situations we can observe develop a system for assessment of performance process quality, and of healthcare operations or in other words, to apply effective care in a hospital product quality by these indicators effectively without being efficient and mentioning performance vice versa. Healthcare indicators for each concept. In managers have to achieve a order to measure the performance satisfactory level of performance on both the of healthcare units, information on the healthcare criteria simultaneously. This raises the question processes and outcomes are required. Performance of whether the achievement of efficiency as well indicators are suggested as key elements to as effectiveness is possible or whether tradeoffs generate this information. However, paying are unavoidable (Fottler, 1987). Several findings attention to performance indicators is not on hospitals suggest that the two criteria are something new in management of healthcare units compatible (Shortell et. al, 1976; Shulz et al., and actually it dates back to 1859 when Florence 1983). Although, Cameron and Whetten (1983) Nightingale tried to measure quality of care by have observed that each conceptual framework studying mortality rates and specific morbidity rates of performance measurement highlights only (Nightingale, 1859). Later on, Donabedian (1966) some aspects of organizational performance and refers to three approaches on quality measurement neglects others. Thus no model can be and monitoring of healthcare units, which include considered to be the best one for measurement structure, process, and outcome. Structural of organizational performance. The existence of indicators are related to the organizational features several outcomes, some of which being difficult like size, ownership etc. Process indicators are to measure, makes the measurement of related to the organizations activities carried out to performance of healthcare unit a more difficult improve or control organizational performance. task. This problem becomes more complicated Outcome measures are based on clinical measures due to the fact that the performance may be of quality, patient satisfaction, employee attitude, reflected on multiple outputs, which makes it efficiency and financial outcomes. All the three difficult to identify the Key Performance

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approaches are complementary and should be used in a combined way. Also the literatures on organizational effectiveness frequently refer to the research reports on indicators for measuring performance (Campbel, 1977; Cameron, 1986; Lewin and Minton, 1986; Quinn and Rohrbaugh, 1983). Fottler (1987) proposes an alternative formulation of Donabedian's framework and considers structure and process variables as independent determinants of various organizational outcomes instead of considering them as indicators of performance. Fottler considers seven outcome variables for measuring organizational performance, which are grouped as efficiency (cost-efficiency and productivity) and effectiveness (quality of care, patient satisfaction, employee attitude and behaviour, financial outcome, adaptability and survival). Flood, Shortell and Scott (1994) insist on introduction of human resource management related factors in organizational performance model as indicators. The literature on production control documents the performance indicators, which are having local as well as global scope. The performance indicators obtained from production theory are presented in Table 1.

Since 1990, eight Dutch hospitals and The Netherlands Organization for Applied Scientific Research developed the PACE-standards (Pilot project Accreditation) for quality assurance of services provided by the departments of a hospital. These standards are based on ISO 9000 standards for quality assurance. Initially 21 standards were developed; afterwards 14 more standards were added to this system of quality assurance. This system has established standards for admission office, diet care, ergo therapy, intensive care, nursing ward, laboratories, medical staff, outpatients' clinics and dispensary. The PACE-standards refer to the following aspects of the hospital management: o policy and organization; o means and materials; o control of the process; o knowledge and skills; o assurance of the quality system. Indicators for healthcare process were mainly deduced from the standards developed for the control of the process. The indicators used in PACE system are presented in Table 3.

Bij J D van der and Vissers J M H (1999) have identified some useful indicators for controlling quality in healthcare, which are presented in Table 2.

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In 1995 the European Foundation for Quality Management formulated guidelines for total quality management of public health sector (European Foundation for Quality Management, 1995). These guidelines are based on the model of Total Quality Management defined by the European Foundation for Quality Management. This model is known as EFQM-model and indicates nine areas of attention for ensuring quality in healthcare sector. Five of these areas are input-oriented and four are output-oriented. The examples of performance indicators mentioned in the guidelines include the outputoriented areas of the sector only. In fact these indicators make up the concept of organizational operational quality. Some of these indicators can be related to the primary process in healthcare. The indicators used in the EFQM model are shown in Table 4.

Conclusion Although the above mentioned indicators are conceptually robust enough to cover up most of the related dimensions, some of the practical issues make these indicators somewhat hard to apply for monitoring and evaluating the healthcare processes. Over the last decade, research has demonstrated the interest in creating a large range of quality indicators measuring the quality of service, and in evaluating hospital performance using benchmark approaches. In many countries approaches for developing healthcare quality indicators have been proposed as the modes of their applications. So it is not only important to identify the set of suitable performance indicators, but also to develop a system for assessment of performance of healthcare operations or in other words, to apply these indicators effectively. In order to cope up with the challenges and opportunities emerging from the growing market with intensified demands, technology growth and

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of maintenance of equipments will have adverse market competition, Indian healthcare sector impact on the overall performance of healthcare should undergo sea change in its structure, policy units. Thus, India should prepare for launching a and overall management. India is now well major reform effort in improving the performance equipped to implement healthcare sector of healthcare system by focusing more on the reforms to enable the health system meet the human resources and infrastructural aspect. increasing expectations of its end users and professionals Thus, implementation of largeREFERENCES scale health system reform demands strategic 1. Bertrand JW M , Wortmann J C and Wijngaard J thinking. Key improvement strategies like (1990). Production Control: A Structural and Design recruitment & retention of skilled work force and Oriented Approach, Elsevier, Amsterdam. training & development of existing human 2. Bij J D van der and Vissers J M resources, may contribute to H (1999), Monitoring healthimproving overall care processes: a performance of healthcare ...need to retain skilled manpower framework for sector in India. The Indian and adopt certain strategies to performance indicators healthcare units should increase their organizational and International Journal of professional commitment take steps in training and Health Care Quality developing the skills of the Assurance, Vol. 12, No. 5, p. existing human resources. 214 -221. They also need to retain skilled manpower and adopt certain strategies to increase their organizational and professional commitment. Thus the importance of human resource management needs to be emphasized for effective implementation of any health sector reform agenda in India. The availability of adequate number of healthcare personnel alone may not necessarily lead to successful implementation of programs and reforms. The healthcare systems need to ensure their competencies and commitment to make health reform process a success. Infrastructure development may also be an important improvement strategy for improving the performance of Indian healthcare units, particularly in the case of universal healthcare units. Hence, government should also focus on creating appropriate healthcare infrastructure, as poor infrastructure in the form of poor design, sub standard construction, ad hoc locations; lack 3. Cameron K S and Whetten E (1983) Organizational effectiveness: a comparison of multiple models. Academic Press, San Diego. 4. Cameron, K S (1986), Effectiveness as paradox: consensus and conflict in conceptions of organisational effectiveness, Management Science, Vol. 32, No. 5, p. 539-53. 5. Campbel, J P (1977). On the nature of organisational effectiveness, in Goodman, P S and Pennings, J M (Eds), New Perspectives on Organisational Effectiveness, Jossey-Bass Publishers, San Francisco, CA, p. 13-57. 6. Donabedian A (1966). Evaluating the quality of medical care, Milbank Memorial Fund Quarterly, Vol. 44, p. 194-196. 7. European Foundation for Quality Management (1995), EQFM Self-Assessment Guidelines for Public Health Sector, EFQM, Brussels. 8. Fetter, R (1991), Diagnosis Related Groups: Understanding hospital performance, Interfaces,

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Vol. 21, No. 1, p. 6-26. 9. Flood A B, Shortell S M, Scott W R (1994). Organizational performance: managing for efficiency and effectiveness Cited in Kaluzny AD and Shortell SM (eds.) Health Care Management: Organization Design and Behavior. Third edition, Chapter 13. 10. Fottler M D, (1987) Health Care Organizational Performance: Present and Future Research, Journal of Management, Vol.13, No. 2. 11. Griffith J R, Knutzen S and Alexander J A, (2002). Structural versus Outcomes measures in Hospitals: A Comparison of Joint Commission and Medicare outcomes Scores in Hospitals, Quality Management in Healthcare, Vol.10, No.2 p.2938. 12. Kazandjian V A, Lawthers J, Cernak C M, Pipesh F C (1993), Relating outcome to processes of care: The Maryland hospital associations quality indicators projects (QI Project), Joint Commission Journal on Quality Improvement, Vol. 19, No. 11, p. 330-538. 13. Leggat S G, Narine L, Lemieux C L., Barnsley J, Baker G R, Sicotte C, Champagne F, Bilodeau H (1998). A Review of Organizational Performance Assessment in Health Care. Health. Services Management Research, Vol. 11, p. 3-23. 14. Lewin A Y and Minton J W (1986). Determining organisational effectiveness: another look and an agenda for research, Management Science, Vol. 32, No. 5, p. 514-38. 15. Lovelock C (2001). Service Marketing: People, Technology and Strategy, Prentice Hall, Englewood Cliffs, N J. 16. O'Riain C and Helfert M (2005). Analyzing Healthcare Information System Strategies in Europe, in Proceedings of the 10th UK Academy for Information Systems, Newcastle, 2005. 17. Quinn R E and Rohrbaugh J (1983). A spatial

model of effectiveness criteria: towards a competing value approach to organizational analysis, Management Science, Vol. 29, No. 3, p. 363-77. 18. Shortell S M, Becker S W, Neuuser R D (1976). The effects of management practices on hospital efficiency and quality of care. Cited in Organizational research on hospitals. SM Shortell & M. Brown (eds.), p: 72-89. Chicago: Blue Cross association. 1976. 19. Shulz R, Greenley J R and Peterson R W (1983). Management cost and quality in hospitals, Medical care, Vol. 21, p. 911-926. 20. Sicotte C, Champagne F, Contandriopoulos A P, Barnsley J, Beland F, Leggat S G, Denis J L, Bilodeau H, Langley A, Bremond M, BAKER G R (1998). A conceptual , framework for the analysis of health care organizations performance, Services Management Research Vol. 11, p. 24-48. 21. Wilson, D T and Jantrannia S (1994). Understanding the value of relationship, AsiaAustralia Marketing Journal, Vol. 2, No.1, p.55-66. 22. O'Riain, C., Helfert, M. (2005) Analysing Healthcare Information System Strategies in Europe, in Proceedings of the 10th UK Academy for Information Systems, Newcastle.

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QUIZ
1. This term was first coined by Prof. Jack Rogers of Berkeley, in 1958. This is used to study the case where several products need to be produced on the same machine deciding the lot size and schedule. Identify the term. This is a production strategy to improve Return on Investment by reducing WIP inventory. This process relies on Kanban between different points in a process. Identify this widely used strategy. This system is used to perform inventory control, bill of material processing and maintaining low inventory levels. It is used to plan the material purchasing, manufacturing and delivery activities. Guess what system it is. This management philosophy states that to ensure continuous improvement of the product or service, all the stakeholders involved in the process are responsible. What is this policy used around the world to reduce defects. (hint: not Six Sigma) This term is more used than understood in the management jargon of Operations. This tries to integrate the internal and external information across the organization, helping the management to take right decisions at the right time. What is this very obvious term? The fluctuations caused in the final demand of a specific product due to oscillations in demand upstream in a supply chain is called as ________. A business model in which the supplier of a product takes full responsibility of maintaining the inventory levels at the buyers end, based on the information provided by the buyer is _________. The 5Ss defined by the pioneering auto company to keep an operation clean are ___, Seiketsu, __, Seiton, ___. Scheduling your production activities at a pace at which the consumers demand a product is called ____.

2.

3.

4.

To understand more about Operations, do not stop with knowing the answers. Delve deeper into each of these areas and make yourself familiar with the subject.

5.

6.

7.

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8.

9.

10. This is an essential part of the Toyota Production System (TPS). Name this. (Hint: Indias contribution to the world of Mathematics)

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To understand more about Operations, do not stop with knowing the answers. Delve deeper into each of these areas and make yourself familiar with the subject.

Across

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5. Japanese term for Fail-safing 6. International Standard for Quality 8. Prize given to Quality 9. Continuous Quality Improvement 10. Moving goods here and there Down 1. This man was is credited with mastering the assembly line 2. This production system is considered as a major precursor of "Lean manufacturing" 3. This is the strategy to reduce inventories 4. Evening out (Japanese) 7. This author is the developer of Theory of Constraints

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ANALYSING OPERATIONS STRATEGY FOR SERVICES SECTOR


Abstract The Services industry has been one of the major contributors to GDP in the last few years across several countries. This paper starts with defining and characterizing services industry and describing how it is different from the manufacturing industry. Based on the identified characteristics, a generic framework for dealing with operations strategy for services industry has been developed with three major blocks customer acquisition, services design and Human Resources. The framework has been used for testing alignment in the SouthWest Airlines test case. Merchandising and Retail Society (MARS), a student run club in IIM Bangalore has been analyzed in detail as part of this paper by having interviews with the club members. The challenges identified have been put through the framework and tested with the alignments and gaps. Evolution of the framework The two quintessential components of service process are Customer acquisition and Customer service. These were identified as initial building blocks of the framework. Customer acquisition is directed by the corporate strategy of the firm which in turn is driven by its strategic intent and the competitive environment. Customer service consists of design and the ensuing delivery. Corporate Strategy determines the customer service design. Based on the customer service design, complementary human resources are sought. Design of the offerings is affected by these human resources, the importance of which is much more in service industries. If all the intermediate steps are in conjunction with each other, then the final delivery will be in line with the corporate strategy. If this is not so, it indicates a mismatch necessitating a change program. Basic Definition Intent is a statement where firms define a desired leadership position and establish the criterion the organization the organization will use to chart its progress. Strategy is the creation of a unique and valuable position, involving a different set of activities. Strategic positioning means performing different activities from rivals or performing similar activities in different ways. Environment comprises of the external factors that influence the strategy for firms such as entry/exit barriers, regulations, and competitors. For services, the entry/exit is typically easy because of it being less capital intensive and driven mainly by skill sets which are easily acquirable. Government regulations also affect the performance and overall strategy of the firm and this affects the services sector in a greater way because of its perishable and intangible nature. As stated in definitions of strategy, competitors affect the strategy of the firm in deciding the offerings. Customer acquisition consists of branding attempts of the company, location of the service centre, marketing channels and service specializations, if any. Customer service design consists of capacity planning, quality control systems, delivery planning, demand management (forecasting), and technology. Service design dictates the actual service delivery through customer interaction. Customer interaction with service providers can be thought of two components: (i) primary and inevitable components that determine effectiveness of the service design, (ii) secondary components that if absent may not cause customer churn, but if present can enhance overall experience. Service delivery is also determined by skill sets of the employee as services are highly skill oriented. The skill sets are dependent on nature and capability of workforce, and training and incentives programs undertaken by the company. Service Design refers to the aspects of

Intent of Southwest Airlines was to introduce a low cost airline with high turnover and capacity utilization which was absent in the competitor airlines in that period

Contributors: Ashutosh Kumar Rohit Ray Sunil Kumar Singh Arvind Kumar Srivastava IIMBangalore

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Framework for Analysing Operations Strategy of a Services firm

Figure 1: Operations Strategy Framework for Services Sector service planning. Capacity Planning refers to planning of resources, both human and technological, such that the firm neither loses opportunities due to under-staffing nor loses capital by over-staffing. Quality Control Systems refers to the mechanisms which are planned to ensure that required quality specification is met. Delivery Planning is the mechanism planned to meet the specified turnaround and delivery time e.g. Dominos planning to meet the 30 min deadline. Demand Management refers to establishment of proper forecasting practices, the importance of which is much more in service industries because of the greater variability in demand. Technology refers to the choice of technology for delivering the final service. Service Delivery consists of two components: Effectiveness and Auxiliary Services. Effectiveness refers to the efficacy of delivering the promised service, the delivery of the core offering. Auxiliary Services refers to the aspects of delivery which are not part of the core offering. Examples include the ambience of a restaurant, extra services provided by an IT firm while being part of a customer engagement. Human Resources refer to the management of employees who perform the actual service delivery. Capability of these employees refers to the skill sets which are relevant to the service delivery program. Training Programs are required to update these skill sets as and when required. Incentives, both

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financial and otherwise are a key factor in determining the attitude of the employees and their approach towards their work. Alignment 1: This alignment exists between the corporate strategy and the customer acquisition methods. This emerges from the understanding of consumer expectations and the methodology used to acquire customers. This alignment is necessary to position the firm correctly to the customers.

can also result in a scenario wherein the customer acquisition strategy can be attracting a high premium customer and service design is meant to cater to price conscious customer, which can result in a service gap.
Application of Framework Illustration of Alignments: Southwest Airlines

Alignment 2: This alignment is required to deliver the expected service. The ...such that the firm neither loses service design must The strategy derived was opportunities due to under-staffing conform to those to introduce low cost, no nor loses capital by over-staffing specifications such that frill point to point air service gaps such as shortage of where the same aircraft was resources in key areas, lack of utilized in a single route. (J.L. commitment and motivation, Heskett, Southwest Airlines 2002: An Industry inadequate quality control procedures, or under Siege, Harvard Business School Case, 9-803inadequate staff training does not emerge. 133, March 11, 2003 ) Alignment 3: This alignment is necessary such The service was designed among routes which were that the capability of the organization is shorter (60 to 90 minutes) when compared to the adequate enough to implement the design of hub and spoke system and a flight turnaround time service specified. The resources must be chosen of 15 minutes was ensured for high utilization and and utilized as per the design requirements. keeping costs down. The ground operations were Alignment 4: This alignment is required between subcontracted in a manner of whatever else is the service provided and the way resources are required to perform the service. No meals were tuned to deliver them. A delivery gap emerges if provided, luggage was limited and no seats were this alignment is not present and results in loss of assigned. Boarding passes were made of colorful efficiency, resource misutilization and customer plastic and were numbered according the seats. dissatisfaction. These were reusable and made the boarding faster. The doors were kept open for the last minute Alignment 5: This alignment indicates that the arrivals which in turn increased the flight utilization. corporate strategy and service design are in The self-allocation of seats was an incentive for the synch. Even firms in the same industry have customer to arrive early thus reducing the wait different corporate strategy. Hence, each firm time. The passenger service was aimed at being fun, has to design its service layout in-line with its with fewer regulations on the boarding procedures. corporate strategy. A mismatch on this alignment

Intent of Southwest Airlines was to introduce a low cost airline with high turnover and capacity utilization which was absent in the competitor airlines in that period.

ANALYSING OPERATIONS STRATEGY FOR SERVICES SECTOR

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All these ensured that Southwest met its goals of low cost and high utilization. Thus a strong alignment existed between the Corporate Strategy and Service Design.

The HR policies were unorthodox and aimed at making the job fun (Similar to Google). Southwest operated on the principles of 1>focusing on the situation rather than the person, 2> Maintaining self-confidence and selfSouthwest was the largest air carrier in the US, in esteem of others, 3> building constructive terms of the number of originating relationships with peers, managers passengers boarded and the and employees, 4> taking number of scheduled initiatives for better, 5> This operating strategy enabled domestic departures in leading by example. These Southwest to achieve high asset 2008. This operating made the employees utilization and reliable on-time strategy enabled motivated and productive performance. Southwest to achieve high to deliver good service. asset utilization and reliable The subcontracted work was on-time performance. It also directed to maintain helped the company to increase its revenues and to the level of service. The services were designed tap profitable markets. It received various awards at team based performances so joint decisions for its on-time service. It was able to remain as a were taken on every aspect. The recruitment value added airline even though the prices were procedure was rigorous and often involved the low. Thus Southwest was able to achieve its service customers also. The employees received in terms of the corporate strategy and the equivalent compensation with respect to other capabilities of the resources were well in tune for airlines, but the productivity was more due to sustaining the service level. the work culture. These contributed to better performance of the airlines and keep its profitability. The starting destinations chosen were those where there were absence of large airlines and absence of routes. This made the acquisition of customers easy. The tickets were cheap and even though meals were not provided, customers were satisfied due to the short duration of flight. Southwest introduced various rewards and programs for attracting customers. They were the one of the first to make use of computerized reservation and saved more than $30 Mn The major challenges faced were in terms of the operating environment which was highly unstable. After the deregulation, a lot of carriers adopted the low cost strategy, and this created intense competition. Fuel costs were also unstable. Post 9/11 the trust was also an issue for the customers. This pressurized the company to introduce systems which increased its costs. Thus a service gap existed which reduced its profits. Some changes such as diversification into freights, code sharing reduced the impact and they were still profitable. This was largely because the system was internally

through the paperless service. Its frequent flier program provided one ticket free on purchasing 8 tickets which did not cost significantly considering the ticket prices. The prices were also flexible, if the customer paid higher price he would receive gifts in the flight. Regular contests and advertisements also increased the volume of passengers . The high volume reduced the operating costs and increased efficiency.

ANALYSING OPERATIONS STRATEGY FOR SERVICES SECTOR

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supportive, while other airlines were designed for normal cost operations. REFERENCES *1+. The Service Sector: Challenges and Imperatives for Research in Operations Management, R.S.Sullivan, Journal of Operations Management, Vol. 2(4), August 1982, 211-214. *2+. Retrieved from http://en.wikipedia.org/wiki/ Service_sector dated 20th July 2010 *3+. Services Operations Management, by Roger W. Schhmenner, Printince Hall Eaglewood Cliffs, 1995 *4+. Book Chapter: "Operations Strategy SMEs and service sector applications" of Strategic operations management: the new competitive advantage, by Robert H. Lowson, Taylor & Francis Group, 2002 *5+. Gary Hamel and C.K. Prahalad, Strategic Intent, Harvard Business Review (May-June 1989) *6+. Michael E. Porter, What Is Strategy?, Harvard Business Review (November-December, 1994)

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FOOD SECURITY & SUPPLY CHAIN CONSTRAINTS IN INDIA


Abstract The sustained high food inflation has raised doubts on Indias ability to make the food available to its people. In spite of legislative actions like Food Security Bill etc. the food security will remain a challenge unless the associated supply chain problems (storage, logistics) are not tackled. The article explores the factors behind the inefficient supply chain and suggests steps to mitigate these. Introduction Ensuring the availability of food to the masses has been one of the prime responsibilities of the governments and throughout the world, the respective governments have done their best to ensure the same. Emerging economies have faced serious problems in terms of making themselves self sufficient in food . For many countries, the problem lies in their inability to produce enough to feed its population e.g. sub Saharan Africa. But there are countries where the production, barring exceptional circumstances, is more than sufficient to cater to the needs of the population but the systems in place arent robust enough to make it happen. There are inefficiencies resulting in so much wastage that in spite of surplus production people do not get sustained access to food. India is one shining example of such countries and if recent inflation in food items is anything to go by1, the situation is going to be severe if steps are not taken at the right time. India is not the most productive country if we compare the per hectare yield of cereals2.

Food Supply and Distribution

if recent inflation in food items is anything to go by, the situation is going to be severe if steps are not taken at the right time

Contributor: Vikas kumar IIMBangalore

Our productivity is slightly less than the world average (2700kg vs. 3300kg) but on aggregate level it is still sufficient to take care of the current population. Even after being self sufficient in production, the massive wastage & inefficient system makes it difficult to ensure sufficient and affordable food available for everyone. There are various factors responsible for such lacks. We can trace its roots to following different major factors: -Lack of storage facilities after harvesting -Lack of logistics to connect fields to warehouse and warehouse to market -Intermediaries in the market which makes realization difficult for the producers Although all of these factors are significant in itself, it is the combination of all these which makes the situation really scary. Also, not all of these factors are equally dominant; it can be shown that if the first two are taken care of, the third one will lose its dominance in terms of influencing the price realization of producers. Hence, we will discuss here mostly the first two factors namely the warehouses and logistics. Warehouse There is a serious shortage of warehouses/ cold storages needed to ensure the proper safekeeping of foods. This results in huge

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losses for the country. Indian government has acknowledged that the country wastes Rs 58,000 crore worth of food items every year due to lack of poor storage facilities3. I have personally experienced this and have seen farmers selling potatos at Rs 1-1.5 per kg (even lower, one extreme case that I remember was 2 years back when they have to sell for 0.25-0.5/ kg) during the crop season (December-January), because they do not have storage facilities available nearby. The irony is they have to buy the same potato at Rs8-10/Kg (sometime higher) after 6-8 months. The typical storage cost for this period comes out to be Rs 2-3/kg (if the cold storage facilities are available) and hence farmers can get very good return if he manages to avail the facility. This paints a gloomy picture of how farmers are devoid of earning opportunities to make any sustainable living out of their farm produce. The situation described above is just one of the several examples which indicate the crying need for investment in cold storage facilities and warehouses. The godowns operated by FCI and other state entities are highly inefficient and every year a large chunk of the stock either gets rotten or eaten my mice. Despite some efforts from various state governments, the investment is not as forthcoming as expected because of infrastructural issues. Such cold storages need proper transport system in place (we will be covering this in the next section) and supply of electricity on a continuous basis. If we analyze the scenario, it is very difficult to imagine that such facilities will be available in remote areas in most of the states, which makes the cost of operating a cold storage prohibitive in these areas.

The state governments have to first invest in transports and other infrastructure before investments are invited for such sectors. Along with this, they will have to provide extra incentives to the local entrepreneurs (in terms of tax rebates etc.) to encourage them to start investing in cold storage and warehouses. Logistics Logistics has direct correlation with the growth of an economy and China is the living example. The massive investment in roads and other transport systems over the years has helped it clock double digit growth consistently. In terms of logistical infrastructure India is far behind developed countries and even some of its developing peer group4.

Not only do we have inadequate infrastructure in place, the freight burden over the network is also very different from other countries. In India, most of

FOOD SECURITY & SUPPLY CHAIN CONSTRAINTS IN INDIA

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the transport happens through roads which a costly and more environment polluting medium5.

countries have to bear high logistics cost as % of GDP (22-24%) compared to their developed counterparts (13-15%). Hence it is quite evident that if India wants to make its logistic system efficient, not only it has to speed up the investment but also has to see that the investment goes into the kind of mode which is less costly as well as more beneficial. In that sense more investment is needed in railways to make it more efficient in carrying freight. Intermediaries

If we compare with US or China, as is evident from the graph, the rail network plays a bigger role than the roads. Hence India might have to rethink its investment allocation. For developing countries and especially for India having an efficient logistic system is a must if it wants to sustain the economic growth. A Mckinsey study suggests that by reducing the logistics cost by 15-20%, an emerging economy can increase the GDP by 1.5-2%6.

Reducing the number of intermediaries has more to do with increasing the price realization for the producers and hence their incentive for production than making it available for masses (which will be done either by market forces or by the government). When there are more intermediaries in the system, the cost for the final consumer goes up while farmers get less for their produce. It is a serious issue and if not tackled, will keep the prices high for consumers and low for the farmers making the situation far worse. The steps taken by the government in the form of procurement by FCI (Food Corporation of India) at MSP (minimum support price) is a welcome one but lacks the credibility among the vulnerable section of the society because of the inherent corruption and redtapism which benefits the rich farmers who can find their way in and the marginalized farmers (for whom the system was designed) get nothing.

The growth will mainly come from the saving in indirect costs i.e. saving in the inventory due to efficient and reliable supply chain which will reduce the uncertainty and hence companies will stop hoarding. The graph also indicates that developing

Some of the bigger private players have started participating proactively in this field which augurs well for the farmers as well as the consumers because, by collaborating directly with the farmers and by providing warehouses and other facilities, these players will be able to add value to both sides (lower price for consumers and higher realization

FOOD SECURITY & SUPPLY CHAIN CONSTRAINTS IN INDIA

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for the farmers intermediaries).

by

eliminating

the

Hence investment has to be done at all the three levels storage, logistics and market facilitation to make the food security a reality. REFERENCES 1.Food inflation based on wholesale price index was 15.52 percent for the week ended Jan 8. 2.http://tradingeconomics.com/india/cerealyield-kg-per-hectare-wb-data.html 3.http://www.dnaindia.com/india/report_poorstorage-facilities-leading-to-food-wastage-sharad -pawar_1380606 4.Source: Mckinsey, CIA world fact book, Transport Corporation of India 5.Source: McKinsey, World Economic Forum, Planning Commission of India 6.The McKinsey Quarterly, 2005 No 1

FOOD SECURITY & SUPPLY CHAIN CONSTRAINTS IN INDIA

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DEALING WITH SUPPLY CHAIN DISRUPTIONS


The recent catastrophe at Japan has demonstrated the vulnerability of Global supply chains to disruptions-whether they be man-made or natural. According to a Price Water House Coopers study on 600 US public companies that announced supply chain disruptions between 1998 and 2007 the markets react swiftly to punish companies that report supply chain disruptions. A 9% drop in the share prices of these firms was reported on the day following the announcement of a supply chain disruption. Also these firms tend to lag others in stock performance post disruptions. The average stock return of those suffering from disruptions was almost 19 percentage points lower relative to the benchmark group over a two-year period (i.e., one year before to one year after the disruption announcement date). The same report also comments that companies do not recover quickly from a supply chain disruption. Two-thirds of affected companies were lagging their peers in stock price performance a year after the disruption. The average Return on Assets (RoA) of these companies was on an average 5 percentage points lower than it was before. Apart from the quantifiable financial impact of supply chain disruptions in terms of share prices, top line growth and cost, there is a significant impact in terms of softer aspects such as supplier relations, personnel relations and safety issues. While insurance is always an option in terms of offsetting the costs arising from such disruptions, there is a long term impact on the firms strategic position due to subsequent changes in the supply chain. Supply chain disruptions and how an organization responds to them may have a strategic impact on the firms position within the industry. One of the most popular examples of how a supply chain disruption proved to be a game changer comes from how two competing telecom firms Nokia and Ericsson responded to a fire that destroyed a supplying electronics component plant in New Mexico in 2000. The difference in response to the fire was a game-changer for the two firms in terms of market share. While Nokia was agile and responded by tapping into alternative supplier networks, Ericssons delayed response resulted in lost sales of ~ $390 million. Typically organizational response to an out of the ordinary situation may be characterized by its nature or by the nature of the response itself. The huge costs associated with disruptions show that in order to ensure seamless supply chain performance through such events many companies are actively pursuing strategies to ensure operational continuity and quick recovery from disruptions. What are some of the factors which make modern supply chains riskier? Integrated Supply Chains With tightly integrated supply chains for achieving economies of scale for cost efficiencies, most global organizations face a real threat of significant impact on their supply chains due to disruptive events. While integration does increase cost efficiencies, there is a corresponding increase in risk as well.

Supply Chain Disruptions

A 9% drop in the share prices of these firms was reported on the day following the announcement of a supply chain disruption

Contributor: Harshavardhan S IIMCalcutta

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Leaner Inventories With Just in Time ( JIT) or Delivery Online ( DOL) becoming the norm across supply chains worldwide, manufacturing plants are stocking the least possible inventory. While this does lead to an increase in supply chain efficiency under a stable environment, instability in the supply chain arising out of natural or manmade causes may lead to starved assembly lines and hence lost sales downstream. Greater outsourcing While outsourcing has expanded the reach of supply chains, it has also exposed them to risks in different parts of the world. The nature of risks and their impact varies, however it has introduced a higher degree of uncertainty into supply chains worldwide. A loss of control accruing from the outsourcing decision in terms of delivery efficiency and quality has increased the complexity of managing such supply chains for the OEMs. It has also increased the complexity of the supply chain organization leading to changes in the command and control structure. Decentralized structures meant to facilitate outsourcing have led to information asymmetries, resulting in breakdowns due to lack of visibility of the entire chain. Further, according to a Capgemini study (Table 1) on supply chain risks in outsourcing to 3PL providers (synthesis reproduced below), lack of critical project management skills is the most significant factor which worries the OEMs about outsourced relationships.

In times of supply chain disruptions, the ability of 3PL parties to manage project risks for OEMs is critical to ensure seamless handling of the situation. Regulatory Compliance Cross-border issues, from delays due to random inspections at customs to sudden border closure such as those that followed the 9/11 attacks, lurk constantly and create vulnerability in global supply chains. There are memorable images of trucks full of parts queued up for miles at the US-Canadian border on 9/11, starving the automotive production plants (and others) of materials needed for their just -in-time assembly. Another example of such a disruption was the recall of Mattel Toy cars. The surface paint on toy cars made for Mattel in China contained lead in excess of US federal regulations; Mattel forced to announce product recalls. What Can Be The Possible Course Of Action To Prevent And Tackle Disruptions Assess the existing and potential risk to your business from Supply Chain disruptions The first step for any organization would be to assess the risk to its existing installations from manmade and natural causes. Research suggest methods such as Failure Modes and Effects Analysis (FMEA) have helped organizations identify all possible threats to the operations of their current installations and facilitated fail-proof designs. A major learning from the current Japanese crisis for

DEALING WITH SUPPLY CHAIN DISRUPTIONS

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other nuclear plant operators worldwide has been the identification of possible failures of the nuclear core cooling systems which would be incorporated in all future designs. Design and Implement a Risk Mitigation Plan

centres which then focus on finding alternatives to overcome the disruptions. Multiple Sourcing as an Alternative

While single sourcing does lead to efficiencies of scale and protects intellectual properties, over Based on an understanding of the risks associated reliance on a single supplier leads to stock outs. with installations, a comprehensive risk mitigation Studies have indicated the presence of a Reverse plan needs to be drawn up. This would be a proBull-Whip effect (RBE) which can be countered by active step towards avoiding any potential mishaps diversifying the supplier base. A buyer can make its due to manmade factors as well as creating supply more certain by ordering from two or more awareness of the dos and donts in case of any suppliers instead of one, provided natural catastrophes. While the causes of supply modern day plants do disruptions are not ...there is a long term impact on incorporate perfectly correlated. The the firms strategic position due to comprehensive risk shutdown of Toyota and subsequent changes in the supply mitigation plans, Honda engine plants in especially in cases where chain Japan due to the Tsunami the plant uses hazardous crisis has had a reverse bull materials, a proper whip effect in terms of depleting understanding of the procedures is found to be engine stock for vehicles manufactured in India and lacking. This is where information flow to all levels Thailand. Such an effect could have been countered of the organization through regular communication by developing alternative suppliers a) maybe and training is necessary to ensure awareness of internally from different plants within the Honda/ safe operating procedures and actions required to Toyota network or developing alternative suppliers minimize risks in case of systems failures. These are for the engine components. Such problems of single particularly pertinent to operational issues at a plant sourcing may usually be associated with Japanese level. companies which tend to rely on preferred suppliers At a strategic level, the organization needs to and locations for sourcing their parts, an essential develop alternatives for every node in the supply component of their JIT systems. However as the chain that is high risk and prone to failure. A recent events have shown over-dependence on a command and control centre of the nature Walsingle supplier comes at a cost and therefore the mart has adopted will go a long way in ensuring need to explore alternative supply sources. Nokia in visibility of the disruptions within the supply chain. 2000 was quick to react to the supply chain The Wal-Mart Emergency Operations Centre disruption it faced by sourcing from the markets, responds to a variety of events, including Ericsson did not and was penalized with loss of hurricanes, earthquakes, and violent criminal market share to Nokia. attacks. This facility receives a call from at least one store with a crisis virtually every day , the information gets relayed to local supply chain

DEALING WITH SUPPLY CHAIN DISRUPTIONS

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Centralization v/s Decentralization- depending on where the Uncertainty comes from

the worst it can do during a crisis is to panic. The best organizations have in place response and In case of a supply side uncertainty (SU) inventory consequence management systems . sites are subject to disruptions, it may be preferable Chernobyl would not have attained as much scale as to hold inventory at the retailers rather than at the it did had the USSR Nuclear authority ensured warehouse. Under this decentralized strategy, a adequate response management systems. Lack of disruption would affect only a fraction of the clarity and cluttered information flow raised the retailers; under a centralized strategy, a disruption magnitude of the damage to local population, would affect the whole supply chain. In fact, the compounded by a further lack of understanding mean costs of the two strategies are the same, but about the procedures to tackle such a crisis. In times the decentralized strategy results in a smaller of supply chain breakdowns, organizations should variance of cost. Under react swiftly, ensure adequate conditions of Demand visibility of the crisis to all key Uncertainty (DU), it is well stakeholders and work on Recent events in Japan have known that, if the holding ensuring a coherent clearly brought out the need to costs are equal at the two response to the situation. understand supply chain echelons and Very often long term disruptions transportation times are relations are spoilt because negligible, then the optimal of the way in which crises inventory strategy is to follow a situations are tackled. centralized system. This is because of the risk Conclusion pooling effect, which says that the total mean cost is Recent events in Japan have clearly brought out the smaller in the centralized system because cost is need to understand supply chain disruptions and proportional to the standard deviation of demand. their consequences for any business in terms of Safeguards during Supplier Selection and Supplier pure financial impact or even long term relations Audits with key stakeholders. To tackle such disruptions A buyer can perform qualification screening when effectively, organizations have to evolve a selecting a new supplier or can audit its existing framework to clearly understand supply chain risks, suppliers. Such measures allow the buyer to learn categorize them and come out with plans to handle more about the supplier, thus allowing the buyer to them at various stages of escalation. Those identify and avoid or rectify weaknesses that may organizations which react swiftly and transparently potentially cause disruptions. For example, had are likely to attain competitive advantage in the Mattel done thorough and frequent supplier audits, short term as well as the long term. they might have avoided the problems that later REFERENCES resulted in recalls arising from regulatory non*1+ Oke, A., & Gopalakrishnan, M. (2009). Managing compliance. disruptions in supply chains: A case study of a retail Once The Disruption Happens, Do Not Panic supply chain International Journal of Production If the firm has worked on most of the steps above, Economics, 118 (1), 168-174

DEALING WITH SUPPLY CHAIN DISRUPTIONS

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*2+ Sophie Pochard (2003) ,Managing Supply-Chain Risk Disruptions: Dual Sourcing as a Real Option, MS Thesis, Massachusetts Institute of Technology *3+ Asoo J. Vakharia ,Beall Professor of Supply Chain Management ,University of Florida Managing Supply Chain Disruptions, Presented at the Inaugural Meeting of the Board of Advisors Center for Supply Chain Management, UF, March 2009 *4+ Jeon, H.-M., L.V. Snyder, and Z.-J.M. Shen. 2006. A Location-Inventory Model with Supply Disruptions. Working paper, Lehigh University, Bethlehem, Pennsylvania *5+ Arreola-Risa, A., and G.A. DeCroix. 1998. Inventory management under random supply Disruptions and partial backorders. Naval Research Logistics 45: 687703. Berk, E., and A. Arreola- Risa. 1994. Note on Future Supply Uncertainty in EOQ models. Naval Research Logistics 41: 129132. *6+ Brack, K. 1998. Ripple effect from GM strike build. Industrial Distribution 87(8): 19. Chopra, S., G. Reinhardt, and U. Mohan. 2005. The Importance of Decoupling Recurrent and Disruption Risks in a Supply Chain. Working paper, Northwestern University, Evanston, Illinois *7+http://www.pwc.com/us/en/supply-chainmanagement/publications/disruptionsshareholdervalue-chart.jhtml; PwC-sponsored study of 600 US public companies that announced supply chain disruptions between 1998 and 2007, Supply chain disruptions destroy shareholder value and corporate profitability *8+http:// vijaysangamworld.wordpress.com/2010/09/16/ supply-chain-security-risks-andoutsourcing/-tabular summary of the Capgemini Business Process Outsourcing Study 2005-09 *9+ White paper on Supply Chain Risk Management:

A Delicate Balancing Act,A multi-faceted view on managing risk in a globally integrated enterprise, IBM Global Business Services,2009

DEALING WITH SUPPLY CHAIN DISRUPTIONS

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3PL A PERSPECTIVE
As the Indian economy continues to grow at a rapid pace and entry controls are being relaxed, Indian companies are facing an unprecedented level of competition at home both from domestic as well as foreign players as well as in the global markets. Due to this squeeze, companies are forced to rethink what they consider to be their core business operations and outsource all extraneous operations. Some time ago Indian companies, in an attempt to reduce response times and stock outs, decided to delink their sales department from decisions regarding how the products move and established independent logistics departments. The continued introspection on whether logistics is a core business function has led to a large number of organizations now outsourcing key logistics functions and consequently to the rise of 3PL players in India. What is 3PL? The primary reason for companies to outsource logistics functions are cost reduction, freedom to focus on core competencies, improved customer service, higher return on assets, etc. The rationale of bringing in 3PL providers is quite similar to the outsourcing mantra Leave it to the experts. 3PL, or Third Party Logistics, is essentially an outsourced logistics service, which refers to an independent company that provides logistics services to another company services such as handling product returns, managing and tracking transportation of goods, among other things. A 3PL provider is an external provider who manages, controls and delivers logistics activities on behalf of a shipper. A 3PL relationship between a provider and a shipper is ideally one that is mutually beneficial and sustainable. The activities performed can include all or a part of the logistics activities but at least management and execution of transport and ware housing should be included. Susanne Hertz et al differentiate 3PL providers as: The Standard 3PL provider who offers standardized services such as packaging, warehousing and distribution; The Service Developer who provides customized value added services such as cross-docking, tracking, specialized security systems, etc; The Customer Adapter who is a 3PL firm which takes over customers existing activities and improves service efficiency; The Customer Developer who takes over the customers whole logistics operations and offers dedicated solutions to each customer. The 3PL scene in India In India, 3PL companies are sought-after primarily for Outbound and Inbound Transportation, Clearing & Forwarding and import/export management. Functions like warehousing and packaging are still preferred to be retained within the company, while inventory management is least likely to be outsourced. Indian companies hold back outsourcing decisions due to multiple reasons, primarily fearing loss of control and flexibility over vital operations and also due to poor infrastructure of the providers. As a result, only about 55% of Indian companies

Third Party Logistics

As a result, only about 55% of Indian companies outsource to 3PL companies, as opposed to 71% in the USA

Contributor: N. Saikumaar IIMIndore

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outsource to 3PL companies, as opposed to 71% in the USA. Here too, critical operations such as warehouse and inventory management are not outsourced, which isnt the case in the USA. But the increasing cost of operations, shrinking margins and rapidly improving infrastructure are making Indian companies look at 3PL more favourably. Currently, logistics costs are 13% of Indias GDP whereas it is only 10% in developed nations indicating a high potential for the industry which is already growing at 18 20% per annum. Lead Logistics Provider Model the future paradigm

chain. An increasing number of firms, especially in developed economies are beginning to adopt this model for managing their supply chain. Citations and References: 1. A Comparative Study of North American and Indian 3PL service providers SubrataMitra, IIM Calcutta 2. Strategic Development of Third Party Logistics Providers Suzanne Hertz et al 3. 3PL Practices in India Dr. B.S. Sahay, CSCM, MDI Gurgaon

As logistics providers themselves expand their offerings, in the future, differentiation and value-adds would be the best ways to attract and retain customers in a highly competitive market. In this scenario, leading logistics service providers will increasingly adopt a mode called Lead Logistics Provider (akin to the Customer Developer model described by Suzanne Hertz). In this model the LLP will provide, along with logistics services, integrated data management facilities which will give the customer complete visibility over his logistics operations. As a companys growth makes its logistics too diverse to be implemented by a single 3PL player, the flow of information between the company and multiple logistics providers becomes too convoluted. The solution in such a case would be a single logistics provider who acts more like a consultant to the shipper. The LLP will itself not own any assets apart from intellectual capital or computer systems, but will act as a single point interface between the shipper and multiple 3PLs, and will manage all aspects of the shippers supply

But the increasing cost of operations, shrinking margins and rapidly improving infrastructure are making Indian companies look at 3PL more favorably

3PL A PERSPECTIVE

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MATERIAL PROCUREMENT SCHEDULING ACCORDING TO PRODUCT WORK BREAKDOWN STRUCTURE


Introduction Material procurement is a vital activity, particularly in case of long manufacturing cycle (time span ranging from 6-24 months) with a limited periods cash inflow. In such cases proper material procurement scheduling which ensures right material at right time is very important. This aspect becomes profound in businesses which are mainly assembly-based requiring varied material types, parts, modules, sub assemblies from different suppliers. Ship building project is such an example. A ship is a self sustaining unit and to make it functionally independent in far seas it is equipped with all kinds of supporting systems. It is a design to order product: suitable for individual owners requirements. While design part takes care of this aspect, production part is mainly assembly based requiring varied materials, parts, modules, sub assemblies from different suppliers. The cost of material accounts for 60 to 70% of a ship's total cost. Hence, material is the most significant cost factor. Material costs include costs due to redundant stock, excessive storage time and lost production man-hours caused by late vendor furnished information and material deliveries. For more productive shipyards, material cost forms a greater percentage of total cost as their labor costs are relatively low. Therefore, to stay competitive greater emphasis on material cost reduction is required. During our visit to three different Indian shipyards, interviews with personnel revealed that non availability of material and production design drawings on time are the two major causes of delayed deliveries. Since Indian shipyards import most of the materials (thus requiring higher lead time), material procurement scheduling is crucial in these shipyards. The other side of the problem involving long period inventory carrying cost of main equipment in the yards is also evident. For example, one major yard in India imported two numbers of 2-Stroke engines together for the two sister ships being built , even though the second ship was scheduled to be delivered two years after the first. This led to a high carrying cost involving space requirement, the construction of a special storage area equipped with special ventilation fans and humidity control equipment and recruitment of an additional person for its maintenance for two years. Basic approaches of manufacturing: Literature review Before addressing the material procurement aspects its important to give a brief overview of two broad manufacturing practices in shipyards. 1) Ship Work breakdown Structure (SWBS): The traditional system Initially the ships were produced based on the functional divisions in which first, the hull part of the whole ship will be completed followed by painting then the sequence of machinery installation, piping and outfitting and accommodation etc. SWBS is based on shipboard functional systems. The basis of classification of groups in SWBS is the function a particular department carries out like those represented by a ship's hull, machinery, armament, outfitting, painting etc. 2) Product-oriented work breakdown structure(PWBS): The modern system This work breakdown structure displays and defines the product(s) to be developed and-or produced in different stages and relates the elements of work to be accomplished to each other and to the end product. Conventional use shows the work break down structure decreasing in size from the top to bottom and shows this level by indentation to the right:

Ship Building

The cost of material accounts for 60 to 70% of a ship's total cost. Hence, material is the most significant cost factor

Contributor: Vijaya Dixit IIMLucknow

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Modern practices in shipyard include modularization concepts. In this a ship is divided into zones. Manageable work packages called blocks are identified. Machinery installation and pre outfitting up to 70% is completed in block stage itself. Work break down is done on the basis of one complete block erection and outfitting. Each block or super block is treated as an interim product. Once all the grand blocks are completed the blocks are joined to form a ship.

Motivation behind Research problem: Relationship between Product Oriented Material Procurement and Product Oriented Production System The objective of product-oriented material procurement is to procure materials required for work packages, each of which defines work to be accomplished according to a product oriented work break down structure. A product oriented material procurement system procures materials required for work packages which reflect a common build strategy among design, material procurement and production. Shipbuilding involves many complex interim products the blocks .Though the production department of the most yards have been able to change from SWBS to PWBS the procurement department still follows the traditional functional distribution for procurement planning. This is mainly due to information gap between the production department requirements and the knowledge of procurement officer about how the production jobs are scheduled. On one hand this leads to the unavailability of material actually required at production site and on the other hand it leads to high inventory carrying cost for those materials which are not required immediately but at the later stage of project. The outfitting materials required for each block is different. Even within a same block the materials, modules, sub assemblies required vary as the block erection advances. For example, during the erection of double bottom block of engine room double bottom tank sensors, tank pipe fittings are required at an early stage whereas the

A Pre outfitted Engine room block

MATERIAL PROCUREMENT SCHEDULING ACCORDING TO PRODUCT WORK BREAKDOWN STRUCTURE

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machinery foundations, machinery and pipe spools are required at much later stages. These examples show the requirement of material procurement schedule which is aligned with the production sequence. Factors affecting material procurement schedule Based on our visits to shipyards and interview with procurement and planning officers we identified the following factors which need to be taken into consideration for material procurement scheduling based on PWBS. 1. Liquid cash available with shipyard for material procurement Shipbuilding is a lengthy process; the cash inflow for a particular project occurs in a phased manner marking the starting of key events. Generally the following cash inflow distribution is observed:

software pre-outfitting at the block stage has been made possible with the target of completing 70-80% outfitting work at block assembly and erection stage. This requires simultaneous procurement of steel and outfitting items in block wise and system wise manner, keeping the bills within the cash availability at that time but at the same time ensuring timely availability of materials to reap the benefits of pre outfitting. 4. Standardized or customized item: Items like pipes, nuts, bolts, studs, pipe fittings, etc. are standardized across the marine industry with class approvals. Items like Main Engine, Generators are customized specified for a project. 5. Criticality of the item: Non availability of critical items like Main engine, propulsion system may halt the process as these machines need wide openings on deck to be lowered through cranes. Proposed Mathematical model future work on Material Procurement scheduling: The model expresses each planning scenario as an integer-linear program, minimizing penalties associated with violating budget constraints, delivery constraints and inventory requirements. The penalties express the loss due to shortfalls and surpluses, in order of criticality of item. Advantages of Mathematical model: It will initiate an initial exercise in planning, design, procurement and production departments to quantify various penalties and parameters .This exercise will fill up the information gaps existing between the departments. It will facilitate the penalty based thinking among employees particularly the procurement officer who now can quantify the penalties of faulty procurement schedules both in shortages and surplus scenarios. This will initiate an exercise to reach an optimum ordering point for each stage under the given budget constraints. REFERENCES: 1) J. J. Glen A Dynamic Programming Model for Work Scheduling in a Shipyard, Palgrave Macmillan

Shipyards use these cash inflows or take short term credits from banks to purchase materials in a phased manner. The scope of procurement of the materials at a time depends on the cash inflow from the project. 2. Lead time for the delivery of the material 3. Production Stage at which material is required: Previously, ship was built in two stages: first stage for steel hull preparation and second for outfitting. So, the sequence of requirement of material was clear. First, the cash inflows were used for procurement of the steel of the whole ship and then after that the later cash inflows were used for outfitting items. But now with the help of 3-D design

MATERIAL PROCUREMENT SCHEDULING ACCORDING TO PRODUCT WORK BREAKDOWN STRUCTURE

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Journals, Vol. 26, No. 4, Part 2, Dec 1975. 2) Jae Kyu Lee, Kyoung Jun Lee, Hung Kook Park, June Seok Hong,Jung Seung Lee Developing Scheduling Systems for Daewoo Shipbuilding: DAS Project, European Journal of Operational Research, vol. 97, no.2, pp.380-395, 1997. 3) Javier Salmeron, Gerald Brown, Robert Dell ,Anton Rowe Capital investment planning aid: an optimization based decision tool to plan procurement and retirement of naval platforms for US navy, Operations Research at Naval Postgraduate School Monterey, September 2002. 4) Jeffrey K. Liker Thomas LambLean anufacturing Principles Guide to Develop and Implement a World Class Manufacturing Model for U.S. Commercial and Naval Ship Construction, National Steel & Shipbuilding Co., June 26, 2000. 5) Joe Sanderson,Andrew Cox The challenges of supply strategy selection in a project environment: evidence from UK naval shipbuilding, Supply Chain Management: An International Journal, 1625, Jan 2008. 6) Kristina Jasaitis Ennis John J. Dougherty Thomas Lamb Charles R. Greenwell Richard Zimmermann Product-Oriented Design And Construction Cost Model, The society of Naval Architects and Marine Engineers, April 21-23, 1997. 7) Kumar Ajay Asok, Kazuhiro Aoyama Risk management in modular ship hull construction considering indefinite nature of tasks, ICCAS, 2005. 8) L.D.Chirillo,Product Oriented Material Management, U.S. Department of Transport, Maritime Administration in cooperation with Todd Pacific Shipyards Corporation, June 1985. 9) Philip C. Koenig , David Taylor Model Basin, Peter L. MacDonald ,Thomas Lamb, John J. Dougherty Towards A Generic Product-Oriented Work Breakdown Structure For Shipbuilding, The Society of Naval Architects and Marine Engineers, April 1997.

MATERIAL PROCUREMENT SCHEDULING ACCORDING TO PRODUCT WORK BREAKDOWN STRUCTURE

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5S CONCEPT AND PURPOSE


We all have heard a lot about 5S, but what is it? Is it something applicable only for manufacturing industries?
Organizing a Workplace

SEIRI: SEIRI Sorting out is the first step in the 5S principle. This focuses on eliminating unnecessary elements from the workplace. The steps involved here are to first identify the necessary and unnecessary items. But sometimes it may be tough to decide which one is necessary and which is unnecessary. Though this has to come from experience, a simple rule of thumb is to classify the items into three categories: Low priority Never used or used once in a year or even less Average priority Usage is once in 3 to 6 months High priority Used often in day to day life Once segregation of items is done, discard the items which are defective and never used. This helps in creating a workplace free from unwanted materials and thus helps in getting more work space. Also it is important to identify the frequency of sorting as items which are needed today may be a waste tomorrow. SEITON: The second S SEITON focuses on efficient and effective storage methods. To put it in a nutshell it is like A place for everything and everything in its place. One may ask the following questions: Where should I keep the items required for the job? How many do I need? Some strategies include painting the floors, clearly demarking the work place and machine area, shadow boards, modular shelving, etc. Even a folder

Introduction 5S is nothing but something which focuses on effective work place organization and standardized work procedures. The name 5S comes from five Japanese words each of which start with S. 5S simplifies your work environment, reduces waste and non -value activity while improving quality efficiency and safety. Underlying objectives behind 5S

5S aims at cleaning and organizing a workplace which helps in uncovering the problems

The underlying objective behind 5S is that identifying problems in a workplace is the first step towards improvement and problems cannot be identified if the workplace is unorganized. 5S aims at cleaning and organizing a workplace which helps in uncovering the problems. Purpose of 5S It basically aims at having an orderly workplace by eliminating all wastes, thereby saving time (searching time) and cost. It provides a healthy and safe environment to work and thereby increases the productivity. Elements of 5S As mentioned earlier, the term 5S comes from five Japanese words starting with S. These are: SEIRI Sorting Out SEITON Systematic arrangement SEISO Spic and Span SEIKETSU Standardization SHITSUKE Self discipline

Contributor: Sriram S IIMIndore

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structure on a PC to store documents is an effective SEITON practice. SEISO: The third S SEISO focuses on keeping the work place neat and clean. Once the unwanted items are eliminated and the rest of the items are kept in an orderly fashion, it is important to keep the work environment clean to sustain these improvements. Daily cleaning is essential, this improves the work environment. SEIKETSU:

walkways, etc. All these will lead to loss of productivity. Thus it is very important to sustain and keep looking into the first 4 steps. This is indeed a continuous activity rather than a standalone one. I started with a question on whether 5S is only applicable for manufacturing and am sure by now that all of us would have got the answer. Yes, the answer is a big NO. 5S is a concept which could be applied even to ones household to keep things in place. It just provides a framework to have the work place clean but the core idea applies everywhere. REFERENCES 1. TPMOnline.com 2. Learnings Honeywell from

Once the first three elements are satisfied, the 5S is a concept which could be next important step is applied even to ones household to SEIKETSU i.e. keep things in place standardizing the best practice. Standardizing means establishing best practices through excellent workplace design and layout, material handling analysis, well defined work methods, clear work instructions, good training and documentation, etc. Basically it is important to document all the best practices and follow them. SHITSUKE: Once the first 4 set of practices are achieved, the next and the most important one is SHITSUKE i.e. to sustain. It is not enough if one improves the work place once; it is important to sustain it. Thus one has to frequently keep repeating the first four steps. Some of the methods that can be adopted for sustainment are have regular audits, have benchmarks and keep revising the benchmarks. If these items are not performed, all the improvements would be lost. For example unwanted items will keep piling up, things will not be in its place, equipment and work place will not be clean, items would be left protruding in

5S CONCEPT AND PURPOSE

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SIX SIGMA - STRATEGY & IMPLEMENTATION


Abstract This article explores the link between a successful business strategy and operational effectiveness. It discusses the three key principles of strategic positioning, as identified by Michael Porter in his famous article What is strategy, and shows Operational Effectiveness is indispensable for a successful business strategy. It clarifies myths regarding Six Sigma philosophy and shows how Six Sigma deployment can help in increasing operational effectiveness. It identifies and discusses in detail critical factors that must exist in an organization for successful deployment of Six Sigma philosophy. Introduction Michael Porters scholarly work on strategy has received widespread attention and recognition. After going through his highly acclaimed article What is strategy1 management professionals and students alike can develop somewhat a strategic distaste towards operational effectiveness and techniques used to achieve it. In the article Porter clearly says Operational Effectiveness (OE) is not strategy, the main reason being OE is easily imitable. In Porters terminology, there are three key principles underlying strategic positioning. First, Strategy is the creation of a unique and valuable position involving a different set of activities. Second, Strategy requires you to make trade-offs in competing. Third, Strategy involves creating fit among a companys activities. The third principle is most easily understood and the whole premise of Six Sigma philosophys strategic role is built around it. What is Six Sigma? a quality improvement initiative, lets dispel this widespread myth and understand what Six Sigma is really all about? What is Six Sigma? Six Sigma is a business initiative, not a quality initiative. It is a business philosophy that employs a step by step approach to reduce variation, increase productivity, increase customer satisfaction and in time market share. Increasing the shareholder value is the primary motive of any business and that certainly cant be achieved without having a fit among companys activities. Six Sigma helps in achieving exactly that fit among various activities. In order to provide superior value to the shareholders consistently, all the activities must strive towards cost reduction and better service to the customers in every possible way. Six Sigma helps in increasing operational effectiveness that will help in delivering more value to the customers at lesser price, which will not only increase market share but will also increase the brand equity of the company. Six Sigma philosophy creates increased awareness of the need for on-going and everlasting quality improvement effort across the entire value chain. One of the most common criticisms leveled against Six Sigma is that its the same old wine put into a new bottle i.e. repackaged version of long cherished quality techniques and it is an overrated, highly glamorized quality fad just to suck out money from the pockets of companies and deposit it into the pockets of consultants, trainers and software makers. But as Jack

Six Sigma

Once you understand the simple maxim variation is evil, youre 60 percent of the way to becoming a Six Sigma expert yourself. The other 40 percent is getting the evil out

Contributor: Riaz Khan IIMIndore

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Welch2 says,

against Six Sigma and even if it uses established statistical tools, it can still be perceived as Once you understand the simple maxim variation is something from other planet. Establishing a evil, youre 60 percent of the way to becoming a Six sustained process can be achieved only by changing Sigma expert yourself. The other 40 percent is 3 the mind-sets of people and this starts from the top. getting the evil out. An organizations culture is greatly influenced by leaders driving the organization and it is extremely So, the basic problem in embracing Six Sigma is important that leadership should buy in and commit realizing the problems associated with variations in itself to Six Sigma. If anything is coming from top output of a process and implementing Six Sigma management, then employees down the hierarchy methodology correctly. are bound to follow it. Jack Welch had adopted a Birth of a Six Sigma Strategy novel way of passing this message down the throat Six Sigma begins at the top of employees by making The bitter truth is that Six Sigma of the organizational Green Belt or Black Belt of implementation is not an easy task structure, the conviction Six Sigma qualification and does not necessarily translate and commitment of mandatory for promotions into instant results. leadership and companys to senior management culture is the key for positions. Mr. Venu Srinivasan, successful implementation of Six the CEO of the Sundaram-Clayton, Indias and nonSigma. Many companies, without having necessary Japan Asias first ever winner of the Deming prerequisites in place, try to emulate success of Application Prize for Overseas Companies believes companies like GE, 3M and Motorola. The bitter that truth is that Six Sigma implementation is not an easy task and does not necessarily translate into instant The summit is a destination to be reached, not a results. Six Sigma brings a change in the peak already conquered4 organizations way of functioning and a few simple Such dedication from senior management is but critical factors that help in determining whether required for achieving desired results. an organization is ready for a successful and sustained deployment are discussed below. Dedicated resources Support across all levels For any change initiating process there is organizational resistance and Six Sigma is no exception. Overcoming organizational resistance is one of the most significant determinants of successful Six Sigma deployment. Generally, companies deploy quality improvement programs in one form or the other. There can be arguments Six Sigma deployment demands sustained and dedicated application of resources. In many organizations, working on Six Sigma projects is made mandatory in addition to the regular work. Such half -hearted approaches look good only on paper but lead to nowhere. Such organizations claim to have deployed Six Sigma but they are not able to get any benefit out of it. In case of such dual assignments, the employees major focus is on solving daily

SIX SIGMA - STRATEGY & IMPLEMENTATION

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issues. Organizations fail to realize that if Six Sigma is successfully deployed then such daily problems are solved once and for all. Employee motivation and incentives

deployment that is related to their type of industry. Training and guidance

Six Sigma is a structured approach and training employees in this area is of paramount importance. Once top management has provided required There are different levels of training in Six Sigma, impetus and support, there are primarily two ways like Green Belt or Black Belt, for different levels of to motivate employees to commit themselves to the employees. Questions like which level of employee cause of successful Six Sigma implementation. First, will receive which level of training, who will be the tie financial benefits with it and give employees a trainer, which pedagogy will be used, what will be share of savings generated by them through Six the duration, who will focus on Sigma deployment. Second, which area are to be duly include Six Sigma initiatives considered before going for in the performance There can be arguments against Six Six Sigma implementation. appraisal criteria of the Sigma and even if it uses established Services of experienced employees. Organizations statistical tools, it can still be perceived trainers and consultants tend to be monolithic as something from other planet are of great help in when an attempt is made answering these questions to change its culture. upfront. Sorting out potential Additional incentives are necessary so that problems beforehand is a major factor in successful employees leave their comfort zones and be a part deployment of Six Sigma philosophy. of it. Business domain Six Sigma tools and methodology can be applied to any process irrespective of the nature of industry but the approach to implement Six Sigma may differ for unrelated industries. For manufacturing companies, it was easy to understand and internalize the Six Sigma philosophy as they were familiar with some of the tools and techniques from earlier quality improvement initiatives. Consequently they were the first to adopt Six Sigma philosophy. If we explore recent history, service industries like financial services, hospitality and airlines have successfully deployed Six Sigma philosophy. Companies must take advice of experienced Six Sigma professionals in order to customize an approach towards Six Sigma Project selection and alignment Project selection for Six Sigma deployment is very important. Projects must be linked to key business indicators and metrics to get support from key stakeholders of that domain. Before starting the project tangible financial outcomes must be ascertained and it must not be the product of wishful thinking of the person heading the project. For a lasting and sustained deployment, the organization must believe in the relevance of the project and the impact it will have on the desired output. Feedback mechanism Once a project is completed in a particular domain then a horizontal deployment plan should be

SIX SIGMA - STRATEGY & IMPLEMENTATION

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initiated in similar domains. Such actions save both time and resources as learning from one project will result in improvement in processes of all similar domains and functions. Moreover, not only positive learning but also the things gone wrong during the project must be properly recorded and shared so that those mistakes are not repeated in the future. Finally, starting a Six Sigma deployment process does not guarantee desired results but it requires continuous improvement and evaluation so that organization can ascertain whether all the critical factors, necessary for successful deployment, are ..Six Sigma definitely helps an present and in correct organization to achieve the desired order. So, we have seen fit among activities by increasing that Six Sigma definitely helps an organization to Operational Effectiveness ... achieve the desired fit among activities by increasing Operational Effectiveness of desired processes and thus enabling effective business strategy implementation. REFERENCE 1. Harvard Business Review-November- December1996 2. Former CEO, who pioneered Six Sigma philosophy in General Electric Corporation 3. http://www.schipul.com/en/q/?2314 4. http://fdi.sriaurobindosociety.org.in

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MEASURING YOUR SUPPLY CHAIN THE NEED FOR SUPPLY CHAIN ANALYTICS
In recent times, one of the incidents that shocked the world was the quality issue faced by Toyota where they had to recall a few million cars due to a faulty system with regards to its anti-brake software design and also due to a faulty accelerator pedal. Another case that comes to mind is the issue of Nokia, the telecom giant that was forced to recall several models of phones due to a faulty battery. These stories highlight the rise of a new dimension to manufacturing as we know it. Companies which have a strong focus on quality and have enacted strong measures to ensure quality in the chain are also falling prey to a common malaise. This is one of visibility across the supply chain which often makes monitoring difficult. Oftentimes, the decision taken at a local level of product can have a domino effect on the overall product which often leads to the dilemma of local efficiencies versus global efficiencies. Global efficiency is the aim but in a scenario where there are multiple connects at department and geographical levels this scenario is turning out to be a management nightmare. The supply chains of today are awash with KPIs (Key Performance Indicators) and performance metrics which are tracked at daily, weekly, monthly levels. These metrics are based on production parameters and are done in isolation in a bid to improve the performance of individual processes. In the bargain the larger picture is lost. Unless organizations do a good job of aligning these cross departmental goals and ensuring that operational KPIs map the strategic KPIs, they will continue to measure and reward conflicting metrics, resulting in inefficiencies and counter-productive decisions. This is where the burden falls on an underleveraged asset that most companies have DATA. There is a call for merging the data that is used for calculating localized KPIs to a much broader level managing overall performance. The bottom line is that there is so much data across systems and processes that this needs to be leveraged to help the organization make timely, forward-looking decisions. The need of the hour is a stream called analytics, which is broadly defined as the science of analysis. A simple and practical definition, however, would be how an entity (i.e., business) arrives at an optimal or realistic decision based on existing data. Analytics has been successfully established as a key differentiator in many industries like finance, insurance, retail, etc. With the passage of time newer and better methods are being established to understand data and turn data into unique insights that reduce costs, streamline operations and bolster customer satisfaction. This will also help the cross functional domains of operations, marketing and strategy manage some of their conflicting objectives. Some of the objectives that are met are as follows: 1. Correctly analyzing barriers to market entry, which vary with each product Responding to competition within a well-defined supply chain tier structure

Measurement

...there is so much data across systems and processes that this needs to be leveraged to help the organization make timely, forward-looking decisions

Contributor: Joe Cheeran IIMKozhikode

2.

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3. 4. 5.

Dealing with the threat of product substitutes Continually driving product innovation Managing product life cycles to manage returns

There are various types of tools which can be used to implement supply chain analytics solutions: 1. Executive Dashboards: This can be used by the higher management and customized to see the most relevant information in the form of charts, alerts, news feeds, etc. providing a framework to help them make decisions and run the business effectively on a day-to-day basis. 2. Online Analytical Processing: This is used for the management of systems and information online. These are used by analysts for induction, deduction and pattern detection. 3. Advanced Analytics: Uses advanced statistical techniques like correlations, sensitivity analysis, hypothesis testing and regressions. The broad steps to implementing a successful supply chain analytics strategy are as follows. 1. Identify the high impact control areas: Common examples include managing the customer experience, compliance and regulation, working capital etc. 2. Develop Supply Chain Analytics Measures: This involves choosing the metrics and parameters that are required for a key working of the firm, deciding the type of tools which are needed to serve and analyse these parameters and then building the infrastructure for use. 3. Conceptualize Build Operate (see following fig)

4. Implement, Operationalize and Maintain In the current business scenario with the rise of external consultants and outsourcing most people believe that supply chain analytics is one division which can be outsourced to companies which have developed a core competence in the field without investing ones own resources into the same. Of course this will be a strategic decision based on the firms strategy and the sensitivity of the information in question but outsourcing providers have been able to provide one highly skilled, low-cost expert across three or four accounts, for far greater leverage than an individual company could achieve on its own. Managed supply chain services can improve business results drastically. By collecting and analyzing point-of-sale data, along with data on inventory levels throughout the supply chain, product seasonality, the effect of promotions in different regions and competitive data, companies can manage demand far more effectively by quickly reacting to market changes and competitive actions to increase revenue. With ever shrinking product life cycles, cost pressures and growing variability in customer demand, the supply chain needs to be efficient and agile at the same time. Data analysis is the key to reaching the next level of supply chain effectiveness

MEASURING YOUR SUPPLY CHAIN THE NEED FOR SUPPLY CHAIN ANALYTICS

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quickly, at a relatively low cost. Outsourcing is one of the proven methods of implementing a supply chain analytics framework and we believe that the companies of the future would do well not to disregard the efficiencies and returns that can be achieved by using analytics for managing their supply chain. REFERENCE http://www.infosys.com/offerings/industries/hightechnology/white-papers/Documents/supply-chainanalytics.pdf

MEASURING YOUR SUPPLY CHAIN THE NEED FOR SUPPLY CHAIN ANALYTICS

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REPORT ON THE LEAN WAY -

AN APPROACH TOWARDS LEAN MANUFACTURING


Simply speaking the word LEAN implies lesser, smaller, thinner etc. i.e. smaller inventories, lesser occupied area, lesser manpower, less number of machines, zero safety stocks, lesser changeover times from one model to another, etc. A brief comparison of traditional manufacturing vs. lean manufacturing is presented here as: industries; the uncertainties may be of external nature like failure of raw material supplies, a strike by transport agencies, as well as of internal nature like manpower shortage, breakdown or failure of any equipment on the line, etc. All these uncertainties are met by keeping some inventories or safety stocks.

Lean Manufacturing

...smaller inventories, lesser occupied area, lesser manpower, less number of machines, zero safety stocks

Contributor: Rajit Goyal IIMLucknow

Now let us see why the inventories are required and why any company would store stock of goods when it knows that inventory involves carrying cost, cost due to pilferage, obsolescence and deterioration etc. Consider the example of a kirana store where in a day the maximum demand for a particular soap is 30 units. There is a daily replenishment of the soaps to the fixed level of 50 units. Inspite of knowing the maximum demand the shop owner keeps 50 units (inventories) in place of 30 units. The reason for this is there may be a delay in shop supplies on any particular day due to rains, traffic, etc. Also due to unexpected guests in the locality the demand may overshoot the expected maximum demand of 30 units. To avoid the loss of customers in any such uncertain condition the kirana owner keeps higher quantities of the soap. Coming back to the manufacturing

The role of Lean manufacturing Now, let us understand the role of Lean manufacturing in case of inventories. The Lean manufacturing principles simply tells us to keep the inventories as low as possible. Considering the example of Kirana store it means the inventories should not exceed 30 units (Please note there are still inventories required but of smaller sizes). Lean does this by an improvement in the flow where Flow refers to the movement of material through the plant. How an increased company: flow helps the

The answer to this question is very simple and follows a cause and effect relationship. Any business is run to earn profits. Profits come by increasing revenues. Revenues come if more sales are met on time. So customer satisfaction is the key to success

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in the todays world. But the world today is very complex and changing. Customer demand is not fixed. To meet ever-changing demands the company needs to be fast enough in switching between models and also needs to keep lower inventories because the rate of obsolescence is even faster. Nokia cell phones are obsolete in less than a year. So a higher flow rate and low inventories are the firms path to success in todays world.

decentralization of supply chain i.e. develop multi source for the same product. Myth begins here

Lean production has dramatically lifted the competitiveness of many manufacturing companies and the value they deliver to customers. The lean principles have even been taken into nonproduction areas of the enterprise such as product development, purchasing, value-chain management, How lean manufacturing helps to increase flow: and engineering. Toyota is an example of a company Lean manufacturing simply tells one to keep lower which has used these principles inventories and hence extensively to gain the increase the flow. But highest spot in ...Nokia cell phones are obsolete in less lower inventories means manufacturing excellence it than a year. So a higher flow rate and failure to meet customer enjoys today. low inventories are the firms path to demand as in case of success in todays world. Despite these triumphs, kirana store keeping 30 units as stock can lead to loss of customer. Here comes the powerful tool of lean manufacturing which says that inventories are actually the blanket or the cover which hides most of the inefficiencies of the system i.e. poor planning, high delivery time periods, high machine failures, high absenteeism of manpower etc. So if lower inventories are kept; these problems will be exposed. Once these problems are exposed then we can take the necessary steps to remove these problems. E.g. action to reduce manpower absenteeism, lower supplies delivery times etc. In the example of Kirana store, reducing the inventories will make the owner to face the loss of consumer for a day or two but then he will also come to know why it happened. E.g. if say rains caused the failure of delivery then he will probably hire a closed cabin truck to supply inventories. If say unexpected turnout of customers lead to the stocks being depleted then he will develop nearby vendors to supply him soaps in case of exigencies. This is why the companies do many firms think that just by using a single piece flow and keeping lower inventories they will succeed whereas these activities can best lead to a disaster if some basic conditions are not met. The firms are trying to create flow but cant get traction. There are many reasons for this lack of progress. Insufficient leadership, resources, or commitment are a few of the most common. The veterans of Toyota comment that certain preconditions are needed for a lean implementation to proceed smoothly. These include relatively few problems in equipment uptime, available materials with few defects, and strong supervision at the production line level. And these are precisely the problems that todays firms are striving to cope with. Obviously if we waited for all these problems to be solved, wed never get started. The act of implementing lean elements will eliminate some of these problems. Hence, we have an inherent

A REPORT ON THE LEAN WAY AN APPROACH TOWARDS LEAN MANUFACTURING

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sequential iteration problem -- where do you begin? The firms need to first ensure a basic stability. So what is basic stability? In the simplest sense this implies general predictability and consistent availability in terms of manpower, machines, materials, and methods -- the 4Ms. Under each of these basic building blocks of manufacturing, Toyota tries to establish a consistent and predictable process before getting too far down the road with the latter elements of flow. The reason is simple. Without fundamental items like machine uptime or human resources in place you ...Toyota is an example of a company cannot run a production which has used these principles line and achieve perfect extensively to gain the highest spot in flow or pace to meet manufacturing excellence it enjoys demand. today... Summary The final point is this: Like many of todays firms, Toyota once struggled mightily with establishing lean production. Along the way, it discovered that you need a healthy dose of basic stability before you can advance to other elements of lean. Much like we need to crawl and walk before we can run, companies often find that they need to improve their basic stability before perfecting flow and pull. REFERENCES The Toyota Way by Jeffrey Liker

A REPORT ON THE LEAN WAY AN APPROACH TOWARDS LEAN MANUFACTURING

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AGILE MANUFACTURING SYSTEM: THE EMERGING CONCEPT


The manufacturing industry has always tended to treat organisation, people and technology issues independently, and for the most part this division of knowledge has worked well in the past. However in the last ten years or so the world has changed enormously and has become a much more complex place. With the advancement of technologies, and globalisation of economies, both consumers and employees have become more and more demanding. The traditional paradigms which fostered the growth of manufacturing industry (from mass production assembly line to lean manufacturing system) have started to show signs of breaking down. Agile Manufacturing (AMS) is the new paradigm. Agile manufacturing has the ability to successfully market low-cost, high-quality products with short lead times (and in varying volumes) that provide enhanced customer value through customization. The shift to AMS will take the manufacturing industry away from mass production and way beyond lean manufacturing. Advantages of Agile manufacturing system over Flexible manufacturing system The main difference between agility and flexibility is that the prior is based on unexpected market change while in the later the entire system revolves around predictable market changes. While flexibility refers to the capability of rapidly changing from one task to another when changing conditions are defined ahead of time, agility on the other hand refers to the ability to respond quickly to unanticipated market-place changes. AMS overcomes the limitations of FMS, in particular, the fact that this type of system can only handle a relatively-narrow range of part varieties. The result of this is that the system can only be used to manufacture similar parts (belonging to a common product family) that require similar processing. Standardization of parts is a complex process which in turn increases the cost of the system. As a result, a Flexible Manufacturing System requires considerably more planning and hence has a longer development period as compared to traditional manufacturing systems. The equipment utilization in the traditional manufacturing system, is in most cases, significantly greater than that of the FMS. One of the biggest problems faced is to react quickly to changes in the market, for which the manufacturing systems need to be modular and distributed, and the scheduling problems need to be solved first. It is at this particular point that flexible systems lose their advantage because existing scheduling systems are solely developed based on centralized structures which makes scheduling complicated. In agile systems, agent-based approach is applied to solve scheduling problems to make scheduling system easier to design and implement. The resultant systems are also much more robust and less prone to errors, easier to use, faster and cheaper.

Agile Manufacturing

...The traditional paradigms which fostered the growth of manufacturing industry have started to show signs of breaking down...

Contributor: Joybrata Roy IIMShillong

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Methods of implementation of Agile case of lean, when demand is smooth, it can be Manufacturing System used to eliminate waste by aiming to maximize Agile manufacturing requires the development of a profit through the minimization of physical costs. system that embraces virtual design, virtual However the main advantage of using an agile manufacturing and virtual assembly. This system system is that it not only gives the opportunity to should be aimed at extending the capabilities of cope with volatility in the marketplace demand, but existing CAD/CAM systems, which are linked to a also to exploit this volatility and gain the maximum system such as Pro/Engineer or Master Series. The strategic advantage. Lean offers customers good system interface with the CAD system through a quality products at low price by removing inventory data integrator provides a two-directional flow of and waste from the manufacturing process, agile data among them. An Internet-assisted manufacturing on the other hand provides a manufacturing system is strategy for rapidly entering appropriate for agile niche markets and being able manufacturing practice. to serve the specific needs ...In agile systems agent-based approach AMS in general consists of of customers on an is applied to solve scheduling problems an integrated Central individual basis. At a to make scheduling system easier to Network Server (CNS) certain level both agile and design and implement" using CAD/CAPP/CAM/ lean systems demand very CAA, which in turn links to high levels of product quality. the local CNC machines which They also require minimization of total lead-times are used for the production processes. which is critical to enable agility, as demand is highly The entire process starts only after a local user volatile and thus difficult to forecast. Furthermore inputs the product information, the CNS then effective engineering of cycle time reduction always generates complete CAD/CAPP/CAM/CAA files and leads to significant bottom line improvements in controls the remote FMS or CNC machines to manufacturing cost and productivity. accomplish the whole production process. This system uses the Internet as an interface between a The De-coupling Point Approach user and the CNS, and allows a local user to operate To create the perfect hybrid approach, integration `remote machines connected to the Internet. of the lean and agile paradigms can be achieved by The following are the performance measures that the use of de-coupling point, using a strategic are used to evaluate the effectiveness of the agile inventory while balancing the trade-off between system: time to identify the core competencies of shortages and holding costs. The idea is to hold partner firms, new product development time, inventory in some generic or modular form and only technology levels, innovation, flexibility, delivery complete the final assembly or configuration when performance, quality and inventory control. the precise customer requirement is known. This concept of postponement is increasingly being HYBRID strategy employed by organizations in a range of industries. In the present industry scenario a combination of By utilizing the concept of postponement, Lean manufacturing system and Agile manufacturing companies utilize lean methods up to the desystem is the ideal manufacturing strategy. In the coupling point and agile methods beyond it.

AGILE MANUFACTURING SYSTEM: THE EMERGING CONCEPT

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Companies like Hewlett Packard and Asian Paints have successfully employed such strategies to enable products to be localized much closer in time to actual demand. Asian paints have come up with the concept in which they have installed paint mixing machines as close as possible to the consumers. Only primary coloured paint is manufactured on a large scale. The shades preferred by the consumer is mixed at the sales point accordingly, as a result there is only inventory of the primary colour paint and there is no accumulation of inventory in the supply chain of the thousands of shades of colour. Conclusion In developing a hybrid system, an organisation must analyse the pros and cons of each of the systems and only then select the system which is in line with the product strategy of the organisation. Todays markets are increasingly volatile and hence less predictable and so the need for more agile response has grown. Putting these two ideas leads us to the conclusion that an integrated manufacturing system, comprising lean and agile manufacturing system is a pre-requisite for success in todays global market.

...manufacturing system, comprising lean and agile manufacturing system is a pre-requisite for success in todays global market

AGILE MANUFACTURING SYSTEM: THE EMERGING CONCEPT

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FRAMEWORK FOR GREEN SUPPLY CHAIN DECISIONS


Abstract Companies across the globe have been trying to go green over the last twenty years owing to greater awareness, government regulations and incentives as well as lower costs of operations. Going Green has a popular notion that it is a cost centric solution to the problem of environmental protection and sustainability. This article explores the issues managers have to face while going green and develops a decision model that will assist them in making the tradeoffs in green supply chain. The study also moves out of the traditional trade-offs made only on the basis of cost and widens the approach to gain competitive advantage through product communication, benefits derived from regulatory bodies and governments, and ease of implementation from the perspective of all stakeholders. Greener choices might entail high initial and operational costs. In fact, it seems to be the prevailing notion that going green is expensive. This is however, not always the case. In fact, it could at times help companies reduce their costs by reducing wastage and taking steps like recycling. Also, there are certain companies trying to hoodwink consumers and others by merely outsourcing their production and bringing down their emissions. This does not benefit the environment in any way and such companies must be differentiated from the rightfully green companies so as to benefit the ethical consumer. Literature In the article by McCrea1, several examples have been given to show the seriousness with which various companies are trying to reduce their emissions and overall impact on the environment. One of the major behemoths doing the same is Wal-Mart. This is very significant because of it being a giant in the retail industry; it can influence both the end consumer and the suppliers towards becoming greener. Its way of partnering the Carbon Disclosure Project and funding the World Research Institute clearly shows that the process of going green in the true sense, involves a lot of fundamental research and root cause analysis rather than merely reducing waste paper, changing to more efficient bulbs and planting some trees on important dates like June 5th etc. In fact, the paper goes on to say that the companies today are increasingly realizing that going green

Green Supply Chain

...it could at times help companies reduce their costs by reducing wastage and taking steps like recycling...

Introduction Greening of supply chains is becoming increasingly relevant, with climate change capturing attention in the political, social as well as business context. More and more companies are striving to bolster their corporate social responsibility aims, more so because the consumers are asking for it. Today, companies are increasingly moving from becoming merely conscious to becoming proactive in their thinking towards a greener planet. The triple bottom line concepts of People, Planet and Profit have gained wide acceptance across the globe.

Contributors: R K Rajiv Vivek G Nair IIMBangalore

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is becoming a competitive necessity. In the paper by Sood et al , the approach to evaluate ones supply chain is provided. It basically poses 5 questions: a. What are the tangible and intangible benefits of moving towards a green supply chain? What are the costs both direct and indirect?
2

service. Companies like Coca Cola and others, use this specification to determine the carbon footprint of their products. It is observed in the PAS that the following were excluded for the system boundary of the product life cycle: a. human energy inputs to processes and/or preprocessing (E.g. if fruit is picked by hand rather than by machinery)

b. c.

b. transport of consumers to and from the point What influence do we have over our suppliers, of retail purchase; their suppliers, and our customers that would c. transport of employees allow us to jointly to and from their normal ...for true supply chain optimization, work together and place of work; and collaboration with other supply move the supply chain towards a chain partners is a must d. animals providing green supply chain? transport services How will we communicate and measure our progress towards the green supply chain to the key stakeholders? How will we engage them? What barriers to green supply chains can be expected and how can these be overcome? With this, the implications of the different standards that are set by the different regulatory bodies can be understood in the sense that though some of the firms measures / policies might result in the reduction of emissions, the specifications would not take into account those measures and appreciate them appropriately. Consequently, the companies using the above mentioned specification could stop looking at these avenues to reduce their emissions. An executive brief from the IBM Institute for Business Value4 could be used as an effective means to generate the various options possible to a manager. It provides the levers available to influence cost, service and quality as well as GHG emissions. The various levers are: a. b. c. Design Packaging Components

d.

e.

By answering these questions, one should be able to see the scope of improvement possible for the company to make. Many a times, companies try doing enormous things that they are not capable of doing, because of lack of engagement with a key partner in the supply chain. Such mistakes can be avoided if one follows this approach .

Since England is one of the European countries at the forefront of the greening revolution, its Publicly Available Specifications3 was studied. The PAS has been prepared by BSI (British Standards Institute) to specify requirements for assessing the life cycle greenhouse gas emissions (GHG) of goods and

FRAMEWORK FOR GREEN SUPPLY CHAIN DECISIONS

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d. e. f.

Energy Inventory policy Transportation

For each of the levers, it should be possible for the manager to provide a whole host of options that could help him/her include carbon into the entire equation.

must. All the various options generated, after objective evaluation, must be prioritized taking into consideration various aspects like the relative influence of the different parties involved, the ease or complexity involved in the option, the ability that the firm possesses or needs to possess to bring the plan to fruition among others.

When companies do try looking at the whole picture, they see that things are actually greatly In all this, it is determined that companies typically intertwined and related to each other. When one look internally to reduce their aspect gets better, the other impact on the environment. suffers. In such a scenario, a But, to get the maximum manager finds it difficult to ...The framework gives a prioritized benefit and make clear the clutter all around list of options that can be carried out maximum impact on the and decide on ways to go and the relative benefit it gives vis-{environment, what is about reducing the green vis the other options available really needed is a holistic costs associated with his view of the entire supply product. What is really needed chain involved. This might not is a framework where the manager always be possible. That is because many a time, the can effectively measure the merit of various options visibility that a company gets with respect to the available to him/her and see the tradeoffs suppliers supplier and its policies, practices etc. is associated with each decision that is made. limited. But ideally, one must look at the entire The impact of the new framework on the existing length of supply chain, right from individual frameworks cannot be undermined. If a company components supplier to the end consumer usage had earlier adopted leaner manufacturing and even, disposal of product. One must not technologies, as have many, one needs to see how succumb to merely plucking the low hanging fruits those technologies match up to the newer practices kind of measures. that are suggested by the green models or What is needed is a thoroughly thought -out plan. frameworks. One must first diagnose and asses the present Creating a new Green Supply Chain Decision situation and then implement carbon asset Framework management and realize point solutions. Then, a broader approach encompassing all the emissions in a supply chain needs to be explored. Possibilities of integration across various functions to find an optimal solution must be generated and evaluated. Finally, for true supply chain optimization, collaboration with other supply chain partners is a Product managers face tremendous problems when confronted with the choice of going green. There can be multiple levers for reducing carbon footprints as described by IBM supply chain study: a. Product Design: This encompasses material

FRAMEWORK FOR GREEN SUPPLY CHAIN DECISIONS

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selection, energy efficiency, ease of disassembly, virtual product development and disposal. b. Packaging: Materials used for packaging and use of manuals and other documents can be considered under this sphere Processes: Order fulfilment, manufacturing and quality control are some functions that can go green

supply chain partners also need to co-operate. The model developed is given as below: Constraints: a. Regulatory Parity Factor: If the option considered satisfies regulatory norms set Feasibility Factor: If the option is feasible in terms of stakeholder willingness/bargaining power/ability to execute. The following factors are identified for evaluation:

c.

b.

d.

Components: Substitutes, rationalisation of vendors have been to make maximum impact on the identified as the environment, what is really needed is major drivers a holistic view of the entire supply

e.

f.

a. KPI achievement: The key performance indicators chain involved Energy: Energy utilized for any decision to be taken in product, process etc. would be cost, service, delivery like fossil fuels and renewable and carbon emissions. KPIs would vary from energy are one of the major decisions taken to one decision to the other depending upon cut carbon costs process characteristics and stakeholders involved. Inventory policy: Lot sizes, planning frequency and safety stocks determine warehousing and b. Brand Enhancement: The measure tests if the inventory costs of going green option can be communicated as a positive Transportation: Major challenges lie in modes of shipment, frequency and routing green characteristic of the product to the consumer and other stakeholders. The measure can be determined through ability of the firm to influence consumer reports and signal through product communication and sustainability reports. c. Monetary Benefits: Monetary benefits can come through two means: Cap-and-Trade system: This will depend on the number of carbon credits saved for the firm, which can be traded in the market. If the savings are substantial, then the initiative will score high on this measure.

g.

Based on the seven levers, Key Performance Indicators (KPIs) can be devised based on the knowledge of the product manager. Levering up one factor could affect the other. The manager will need to generate all possible ways/ideas of changing the way the business functions. All the possibilities that are generated might not be feasible to the same extent. With regard to a supply chain, it is realised that for any action / decision / plan to get implemented, other

FRAMEWORK FOR GREEN SUPPLY CHAIN DECISIONS

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Government benefits: If the initiative gives the firm benefits from the government in form of tax breaks. Ease of Implementation: The ease of implementation refers to the ability of the firm to shift to the new initiative. This captures the softer parameters of the switchover, like logistical challenges, top management support and ramp-up issues.

d.

However, there are a few things that have been left to the companys or managers discretion. The generation of options, the assignment of weights, etc. are tasks that need in-depth knowledge of the product and the process involved and are hence, best left for the company or the manager to decide upon. This framework gives the manager a sound method and some clarity while embarking on a mission to go greener.

REFERENCES Weights are assigned to each of the four parameters. Development of 1. Why "Green" Equals weights is a prerogative of Good Business. By: McCrea, ...Key Performance Indicators can be the product manager Bridget. Supply Chain keeping in mind the devised based on the knowledge of Management Review, Mar/ business environment, the product manager. Levering up Apr2010, Vol. 14 Issue 2, firm strategy and one factor could affect the other pS56-S60, 3p competition. The scores developed are markers to 2. Sood, V., & Fedorowicz, T. which initiatives can be implemented first. (2009)How green is your supply chain? Australasian Freight Logistics, 4(4), 16-18 Applying the model The model was applied for two options, use of packaging material and supplier selection for a component. The results are shown in Table in the appendix. Results and Conclusion This article devises a framework that can be used to evaluate the various options that a manager/ company might have for turning greener. The framework gives a prioritized list of options that can be carried out and the relative benefit it gives vis-vis the other options available. The sample application of our model as shown in the report also gives a clear decision as to what choice to make among the various options that are available. 3. Energy Standards, BSI Group : http:// www.bsigroup.com/upload/Standards%20&% 20Publications/Energy/PAS2050.pdf Last Accessed: 24 January, 2011 IBM Institute for Business Value Brief: https:// www.935.ibm.com/services/us/index.wss/ ibvstudy/gbs/a1029278?cntxt=a1005268 Last Accessed: 24 January, 2011

4.

FRAMEWORK FOR GREEN SUPPLY CHAIN DECISIONS

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Appendix: Table 1
KEY PERFORMANCE INDICATORS (INTERNAL) OPTIONS BRAND ENHANCEMENT MONETARY BENEFITS

COST SERVICE DELIVERY CARBON LEVELS

PRODUCT COMMUNICATIONS SUSTAINABILITY REPORTS CONSUMER REPORTS

CAPANDTRADE GOVT. BENEFITS

EASE OF IMPLEMENTATION

STAKEHOLDER WILLINGESS

WEIGHTE D AVERAGE

WEIGHTS V C I F o a m Emitters (Packagin g Alternative) SCORES Regular Corrugated Packaging SCORES

0.4 Cost Service levels Delivery Carbon Levels

0.2 Product communication Sustainability reports Consumer Reports

0.2

0.2 Switching costs

1.8

PACKAGING OPTION

2.5 Cost Service levels Delivery Carbon Levels 3 Cost per component Service levels Delivery Carbon levels 2 Cost per component Service levels Delivery Carbon levels 4

1 Product communication Sustainability reports Consumer Reports -1 Product communication Sustainability reports Consumer Reports 4 Product communication Sustainability reports Consumer Reports -2.5

3 Current er Suppli1.6

0 Additional Carbon credits 2.5

Supplier 1

Easy to ment 2 Easy to ment 2

imple2.5

COMPONENT SUBSTITUTION

SCORES

Supplier 2

imple1.5

SCORES

FRAMEWORK FOR GREEN SUPPLY CHAIN DECISIONS

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ELECTRONIC RETAILING IN INDIA AND ITS IMPACT ON OPERATIONS MANAGEMENT


Abstract The article tries to analyse the influence of organized retailing, especially electronic retailing, in the operations and supply chain dynamics of the Indian market. An attempt is made to understand the basic complexities brought in by electronic retailing to the operations management in both organized retailing and electronic retailing. Using this as the background, an analysis is made on the various opportunities and challenges faced by operations research and consulting segment in the country. Introduction In a study done by Boston Consulting Group on the internet penetration and possibilities in BRIC nations it forecasted that India will see its number of internet users triple to 237 million by 2015 from the 81 million level of 2009. The second wave of e commerce gush that the Indian consumer market is currently experiencing establishes the genuineness of the above mentioned study. At present the overall Indian e-commerce market is estimated at Rs 20,000 crore, growing at 30 per cent year on year1. This includes e-ticketing, travel, entertainment and utility. IRCTC alone comprises more than 30% of Indian e commerce market.With India's population getting more comfortable with internet banking and credit card usage, these numbers can spike even more. Retailing, when done through an electronic media (commonly internet) is called electronic retailing or E-tailing. E-tailing is a new segment as far as the Indian ecommerce market is concerned. E-tailing market in India is estimated at Rs 2,000 crore, and is growing at a faster pace of 50 per cent annually. And the adoption is the fastest among the small and medium businesses. Considering the market share and penetration it possesses, electronic retailing is still in its budding stage in India. Taking a deeper look, it can be found that even organized retailing is in its nascent stage. Organized retail makes up about 6% of the total India retail market. Even though they are growing at a steady pace of 30% during the last 5 years, organized retail industry is faced with several challenges. Inherent weakness in the Indian infrastructure and shortage of efficient manpower to control and manage their store and supply chain are the most serious of the challenges. Supply chain model of organized retail Below is a basic diagram of material and information flow happening in organized retail sector. The company managing business gives orders to its various suppliers based on the demand and stores it in warehouses. From there it transports the goods to various stores located in different localities. Customers come to the stores and buy the goods. In such a scenario the main challenges are forecasting the demand and maintaining the warehouse inventory.

E-Retailing

...India will see its number of internet users triple to 237 million by 2015 from the 81 million level of 2009

Contributor: Nikhil Narayan IIMIndore

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Main activities done by the top management related to supply chain management can be classified as 1. Strategic Includes network optimization, IT operations, aligning with organizational strategy, partnerships with suppliers, decision over number and location of warehousing 2. Tactical Includes benchmarking operations, sourcing decisions, and transportation strategy 3. Operational Includes demand planning and forecasting, scheduling and order management. With organized retailing, customer loyalty is vital for sustainable revenue generation. So, customer service and relationship management becomes the most important part of the supply chain. Order management, procurement and demand forecasting become the supporting functions for improving the customer service and relationship management. India lags behind in its infrastructure and support systems when compared to many other nations. This makes logistics and procurement a difficult

section to manage. Moreover, the seasonal variation in the market trends and growing turbulence in consumer market dynamics makes it difficult for retail sector to function efficiently. Supply chain model of organized e-tailing Electronic retailing model can be categorised into2 1. Customer to customer: As seen in www.ebay.in where the business acts as a service provider for different customers to interact with each other and buy and sell between them. The company takes care of the cash transaction and the goods transaction between the customers. 2. Brick and Click model: Retail companies who own brick and mortar stores also provide the same service through their online interface. This is one way of introducing a new medium for customer acquisition. 3. Pure Click companies: These companies dont have any physical stores. They exist only in the virtual forms. Customers order online and the ordered goods are parcelled to them in most cases.

ELECTRONIC RETAILING IN INDIA AND ITS IMPACT ON OPERATIONS MANAGEMENT

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SUPPLIER/ DISTRIBUTOR SUPPLIER/ DISTRIBUTOR SUPPLIER/ DISTRIBUTOR

CUSTOMER 1

WAREHOUSE

WEB INTERFACE

CUSTOMER 2

SUPPLIER/ DISTRIBUTOR

CUSTOMER 3

Now consider the business model of pure click retail companies: In the diagram the dotted lines indicate the material flow towards end customer and the thick lines indicate the information flow. In pure click company the functioning happens in two ways 1. Company procures products from suppliers and stores in its warehouse and parcels it to customers on demand. 2. With certain suppliers, the company makes a partnership deal and lets them know whenever an order for their product is obtained. The supplier sends it directly to the customer as a proxy for the company. The system has become complicated compared to organized retail. Products have to be delivered to each customer rather than to each store in the earlier case. Moreover a customer may make an order in which certain products are in companys warehouse and others are from the supplier. This makes order management difficult.

Analysing the operational and supply chain complexities Challenges faced by pure click and brick and click companies in this case are different. Brick and Click retailers have the advantage of brand image. For them click model is another mode of customer acquisition. Most of the companies like Pantaloons, Big Bazaar, Land mark are turning to click model to resist the competition from pure click companies. The website adds as a marketing tool also. Their main issue will be managing the supply chain. The introduction of a new business model which is intertwined with the existing model makes the system more complex. The inherent shortcomings of supply chain aggravates with the new addition. Procurement and order management becomes difficult. Demand forecasting becomes difficult to manage as demand occurs through different streams. Aligning the existing IT with the online technology adds to the head ache. Moreover in the current scenario the online section of the company stays as a loss making unit. There are very few etailing companies in India which are profitable at the moment.

ELECTRONIC RETAILING IN INDIA AND ITS IMPACT ON OPERATIONS MANAGEMENT

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For the click companies the situation is different. As 1. Companies like Fipkart, Homeshop18, Infibeam they are completely into online based business, etc have already made a stronghold in Indian ealigning technology and business objectives tailing segment. There are above 8000 ebecomes easier. But the lack of brand image is a commerce websites functioning in India. This setback. International companies like ebay could shows that Indian e-tailing segment is at an set their position easily because of their brand inflection point. There is lot of demand for image. So the new click company tries to acquire efficient supply chain management because of customers through their marketing and tries even this. harder to retain them. Unlike the brick and click 2. Currently these pure click companies are small companies they are forced to keep an extensive in size and cannot afford their own delivery inventory. Inventory management thereby becomes system. Most of them depend on postal and the primary challenge. Lack of trust courier services like among Indians to online IndiaPost, DTDC or Firstflight. payment is another issue. But as these companies A warehousing unit in every This scenario is changing, gain traction and grow in metro and tier II and tier III is however. But because of size it will be inevitable for essential for them to scale up and this, the success of pure them to maintain their own build on their business click companies depends delivery methods. on customer perception and Depending on the company, word-of-mouth publicity. In their product and the geography of the such a situation customer service and relationship customers they serve, the distribution system management becomes increasingly significant. But will have to be designed. as these companies do not meet their customer 3. Currently delivery delay of pure click companies directly, this also becomes difficult. Operating and swings between 3 days to 2 weeks. There is a managing an efficient 24x7 call centre is the prime lot of scope of improvement in this area. First thing to be done for solving this problem. Supplier step will be bringing down the deviation in the management becomes another hurdle as most of service delay and next will be bringing down the these companies are new and because of their delay as such. Indian companies can take their extensive marketing demand, planning and lessons from big shots like Amazon which has procurement could go wrong most of the times. successfully implemented the same day Unlike Brick and click companies, pure click delivery into their distribution model. Lot of companies have to improvise a lot in their delivery research and optimization scope is present in methods and payment modes. Faster delivery could this area. gain more customers. Introducing features like cash 4. No customer would like to pay the shipping on delivery will increase customer confidence. But charge as this does not add any value to them. this will complicate the cash transferring procedures Companies are trying to cut down their shipping and also increase the cash conversion cycle. charges for the same purpose. This makes it inevitable for companies to invest in research Analysing opportunities for operations research for cutting down their shipping and packaging and supply chain consulting costs.

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5.

As there is lot of competition already in the market, pure click companies have already gone down to lower margins on their sales. So cutting down cost in any stage would be beneficial. A warehousing unit in every metro and tier II and tier III is essential for them to scale up and build on their business. So the market will soon see different companies joining together and managing their inventories in a single warehouse in each city. This will reduce the cost collectively but will introduce deeper challenges.

REFERENCES 1. http://www.thehindubusinessline.in/ ew/2010/09/27/stories/2010092750020100.htm 2. http://www.vccircle.com/500/news/e-commercein-india-are-we-at-an-inflection-point

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WHY SUSTAINABILITY AND GOING GREEN MAKES PERFECT BUSINESS SENSE?


What is the one of the questions that is one of the top priorities of executives across the globe apart from the economic scenario? According to the Top of the Mind study by The Consumer Goods Forum in 2009-2010, sustainability and corporate social responsibility feature amongst the top three priorities of the consumer goods industry. A similar finding is resonated in the IBM Institute for Business Value study. Should companies and businesses undertake Green Initiatives, instead of focusing their energies on growth and other business issues? Energy and water efficiency not only helps the planet, but also saves on bills. The technology employed to optimize logistics not only reduces fuel usage and toxic emissions, but makes for a leaner, more efficient and cheaper supply chain. Aligning an organizations green strategy with its overall business strategy is of paramount importance. This begins with a clear understanding of the overall corporate objectives and priorities, followed by carefully defined programs, goals and tasks that address environmental and stakeholder views. It creates a positive perception about the company and companies are better prepared to meet the regulations as and when they comeconsumers and employees have a good image of the company. Long story short, sustainability makes perfect business sense!! By driving operational efficiencies and adopting Lean and Green Supply Chain Management practices, companies are trying to reducing their carbon foot print. Some of the key areas where companies have been channelling their efforts to turn their supply chains greener are: 1. Product Design and Redesign Companies are redesigning products to reduce energy consumption in production and distribution. Innovations in product design are leading to the reduction of some of the processes leading to Greener products. 2. Green Manufacturing Reduced energy usage through streamlined production and greener supplier networks are helping companies in manufacturing Greener products. 3. Route Planning and Shipment Consolidation By consolidating logistics and shipment dispatch, companies are reducing their carbon foot print. Route planning has made the supply chain greener. Let us examine a few examples on how companies have used Sustainability, Green initiatives and CSR to achieve spectacular business results. Many times sustainability helps the company beyond the usual cost saving. When a company champions a cause , customers associate it with something good and are willing to pay premium price for your products. Consider the case of US clothing and adventure gear maker, Patagonia. Patagonia turned its fortunes by adopting an eco friendly product range by switching to organic cotton and changing the packaging to reduce impact on

Sustainability

...has not only made the stores greener but also has helped WalMart in reducing the overall cost of its operations...

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the environment and a lot of other such initiatives. Patagonias products not only became a big hit with the consumers but also allowed the company to charge a premium price. This strategic change turned Patagonia from near bankruptcy in 1996 to a company with thirty nine stores in seven countries and $ 270 million in revenue in 2006.

Sustainability and Green initiatives have become the focus of the governments and enterprises worldwide. From energy efficiency and renewable energy to efficient and lean manufacturing and supply chains, clean tech has opened huge market for innovation. The entire Clean Tech industry is estimated to be worth more than trillions of dollars. Organizations and countries which are prepared to In US, Wal Mart has redesigned its stores to reduce take on this new opportunity will emerge as leaders energy and water consumption. It has started in the coming decades. What should the company harvesting sunlight to reduce the usage of electricity executive do? Well, its high time to start thinking in its stores. This has not only made of how the company can use this the stores Greener but also opportunity to build a has helped Wal Mart in business strategy and reducing the overall cost ...The entire Clean Tech industry execute it to catch up on of its operations. is estimated to be worth more the opportunities that are than trillions of dollars not only good for the world IT companies have also but also make perfect joined the bandwagon and business sense. are coming up with innovative products which have reduced energy usage. IBM REFERENCES through its smarter planet initiative is working with 1. Getting to plan B, John Mullins and Randy organizations, both public and private, to help them Komisar, Harvard Business Press. turn smarter and more efficient. 2. The Consumer Goods Forum, Top of Mind 2010 Survey. Sustainability and CSR can also help companies in 3. Green and Beyond, IBM Institute for Business creating a brand presence. Consider the example of Value. the Save our Tigers campaign by Aircel. By 4 .Going Green, IBM Institute for Business Value associating itself with the noble cause of saving the tigers, Aircel created a unique brand presence in the minds of the consumers. So when one thinks of saving the tigers, Aircels name is always there in the back of the mind. In Bihars rice belt, a group of individuals have founded a company, Husk Power Systems, which caters to the energy needs to the villages. The company uses rice husk to produce sustainable and renewable energy and is electrifying the remotest villages in Bihar.

WHY SUSTAINABILITY AND GOING GREEN MAKES PERFECT BUSINESS SENSE?

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GREEN SUPPLY CHAIN


Environmental pollution is a pressing problem today which has the potential to lead to the extinction of mankind if not addressed forthwith. Consequently, environmental norms are expected to become more and more stringent in the near future. Thus, the need has risen to revamp the supply chain across various sectors, which is not only economical to the organization, but also environmentally friendly. In the quest to gain competitive advantage, the evolution of green supply chain has witnessed a significant turnaround. On analyzing the components of the conventional supply chain, beginning from the raw material procurement to manufacturing to distribution, we observe that there is a scope at every single stage for applying the eco-friendly techniques. Each of the links in the supply chain may comprise certain potential sources of pollution which need to be eradicated. This seems to be a costly affair to most of the firms but the upcoming norms will put a pressure on the firms to become more environmentally aware & cautious towards the former. Environmentalists and industry experts define Green Supply chain management (GSCM) as the process of using environmentally-friendly inputs and transforming these inputs into outputs that can be reclaimed and re-used at the end of their lifecycle thus, creating a sustainable supply chain. GSCM integrates ecological factors with supply chain management principles to analyze how an organization's supply chain processes impact the environment. Hence, across the industry, there has been a shift in the focus of GSCM programs from compliance to creating value for shareholders as well as customers. The buyer and supplier selection criteria are fundamentally different in conventional and green supply chains. In conventional supply chains, the predominant standard is price. In green supply chains, ecological objective is a critical part of the suppliers selection criteria. Putting these ecological criteria together into practice requires careful supplier evaluation, based on long-term oriented relationships. The development of suppliers usually takes a longer time and only a very limited number of suppliers meet the defined criteria. Hence, any changes in selection of suppliers cannot be achieved in a green chain as quickly as in a traditional supply chain. One of the initial perceptions about introducing green products in the market is that they lead to higher cost of manufacturing compared to conventional ones. However, recent findings have shown that innovations and optimal planning can dramatically reduce the costs in most cases. Involvement of suppliers in manufacturers own plant and manufacturers in suppliers plant helps them in better communication, trust building, effective planning and focus on each individual process and part to achieve a desired environmental rating for a product. Some Green Supply Chain Initiatives General Motors reduced disposal costs by $12 million by establishing a reusable container program with their

Green Supply Chain

...Dell manages to save over $20mn annually as a result of improvements in supply chain and packaging...

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suppliers. Had General Motors been making record profits, it may not have been interested in green issues ,but in an attempt to achieve cost reduction in their supply chain, GM found that the cost-reductions thus identified were well aligned with the companys commitment to the environment.

stream from environmentally friendly products to the tune of 20 billion dollars by 2010. They recognize the opportunity associated with saving the environment. Nestl used a combination of packaging source reduction, re-use, recycling, and energy recovery to save $510 million worldwide, between 1991 and 2006. Dell manages to save over $20mn annually as a Recently, FMCG giant, Procter & Gamble result of improvements in supply chain and announced green measurement programs for packaging. In fact, by 2008, Dell had achieved their suppliers bases with its new Supplier its goal of becoming carbonEnvironmental Sustainability neutral. Scorecard. According to Pepsi-Cola saved ...One of the initial perceptions about them, the scorecard will $44mn by introducing green products in the ultimately have five transitioning from market is that they lead to higher cost of primary uses within its own corrugated manufacturing compared to operations: containers to reusable conventional ones" a. To produce annual plastic shipping supplier sustainability containers used for 1 litre performance ratings and 20 oz. bottles, thereby conserving 196 b. To influence its procurement spend decisions million pounds worth of corrugated material. c. To track improvement in various supplier Texas Instruments saves $8 million annually by Sustainability measures cutting back on its transit packaging budget for d. To assess and model environmental impact its semiconductor business and it achieves this in product design by recycling, source reduction and usage of e. To be able to model P&Gs full supply chain reusable packaging systems. This translates into environmental impact, once a critical number of annual savings of up to 20 %. suppliers is enlisted in the program Wal-Mart has undertaken green supply chain drives like improved fleet utilization, novel milk In todays highly competitive business environment, cartons, etc. However, Wal-Marts emphasis on firms need to differentiate themselves from others driving green practices back through the supply to draw customers and being environmental chain, as exemplified by its recently announced friendly can be one of those key differentiators. green score-carding program, will certainly GSCM is a relatively new concept for majority of have a big impact on developing greener supply Indian Corporations. Adding the "green" component chains, and will also continue to protract Walto supply chain management involves addressing Marts perceived corporate leadership over all the influence and relationships of supply chain things green. management to the natural environment. Green GE now has an "Ecomagination program where business practices that maintain and sustain good they are focused on growing their revenue environmental quality are increasingly becoming a

GREEN SUPPLY CHAIN

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vital component of business organizations. There is a strong association between business and the environment. Its the responsibility of every business to sustain itself in an eco-friendly manner and be environment-conscious along with making profits because the business can sustain only if the environment does. The future lies in sustainable supply chain. And to achieve this, we need to change our way of doing business from a supply chain standpoint in order to ensure that future generations will have adequate resources for use in their lifetime. The benefit of implementing a green sustainable supply chain is The benefit of implementing a green that we can improve the sustainable supply chain is that we profitability of our can improve profitability of the company company and also help and also help the environment... the environment. Thus, we can easily deduce that Green can not only be profitable, but also be the right thing to do in the near future.

GREEN SUPPLY CHAIN

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SUPPLY CHAIN MANAGEMENT A SERVICES PERSPECTIVE


Introduction The term Supply chain Management (SCM) typically invokes in our mind the concept of a Physical chain the whole gamut of sourcing raw materials and transforming these materials in to finished goods and finally distributing these finished goods to customers. This goods / raw materials view is the most popular variant of the Supply Chain Management principle thanks to the spectacular successes of firms like Dell and Wal-Mart in applying these principles to their operations. However Supply chain management is not confined to just this physical / manufacturing space but can also be useful and applied to other areas viz. Human relations supply chain, Services supply chain and Financial supply chain to name a few. Basically all operations - be it manufacturing or services can be modelled as supply chain management problems and optimizing this supply chain is one of the most important aspects of 1 a successful business in the present day. SCM in Services Sector: Given that Services Industry is increasingly becoming the most important facet of business the Services Industry in India contributes to 55% of its GDP in 2007 up from 15% in 19502 its obvious that optimizing the services supply chain is a crucial factor in making these service operations efficient. The major constituents of services sector in India are Banking, Communication, Insurance, Hospitality & Real estate sectors. All these have their own supply chains that cater to the delivery of their services to the customers The successful optimization of these supply chains , within their industry specific constraints & opportunities , is an important criterion in the success of these firms. Facilities Management: Facilities management is a relatively nascent and fast emerging services space in India as most of the MNCs with their offices in India bring their philosophy of outsourcing these services to specialists in these services. This growth is given further impetus by the fact that Indian companies are increasingly becoming global in operations and are becoming mature and they have started outsourcing the facility management functions, instead of managing these inhouse as is their custom. Jones Lang LaSalle, CB Richards Ellis and Cushman & Wakefield are some of major global players that are currently dominant in this sector. Facility management is a branch of real estate services, an inter-disciplinary field primarily devoted to maintenance and care of commercial and institutional buildings such as hospitals, clinics, hotels, resorts, schools & universities, office complexes, sports arenas etc.3

Facilities Management

...its obvious that optimizing the services supply chain is a crucial factor in making these service operations efficient

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The typical duties involve taking care of engineering aspects as well as soft services. These are listed below in brief. 1. Engineering Services Air Conditioning Systems Fire Protection Systems Power Systems Building Automation Systems Soft Services Employee Amenities & Help desk solutions House Keeping & Cafeteria Services Landscaping Travel desk 2. Security 3. Transportation 4. Space Management 5. Environmental Health & Safety

The delivery of all these client specific services together constitutes the supply chain for facilities management. Supply Chain in Facilities Management: The delivery of services (services supply chain) happens in 2 stages from a facility management perspective. The first phase is the Transition phase where all the facilities of the client are taken over from incumbent facilities team (either in-house or external vendor). This transition phase comprises the following core activities: a) closing the Management contract b) Agreeing to the delivery model & transition team setup c) Setting up policies and procedures d) KPIs & Reporting. The detailed transition path is shown in the schematic below.

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Once the transition is complete, the service delivery enters a stabilized mode where all the client sites (across the globe / region / country) are serviced as per the agreed scope and are measured against the agreed KPIs. A typical service delivery model for a major client campus is given in the schematic below. As can be seen from the graphic, the on-site team delivers the services across different functionalities viz. a) Finance / Admin Compliance b) Soft service functions and c) Hard (Engineering & Operations) service functions. The onsite teams are assisted by the respective vendor teams on site. The onsite teams are supported at a pan national level by the National core team that provides its services for different clients' sites across the country.

This core team helps in giving direction and maintaining consistency and delivering best practice solutions to the client across the country. The same model is typically replicated at a regional (eg: Asia Pacific) / global level for clients with foot prints across the respective regions. Global / regional core teams support the country / regional teams respectively in providing consistent / best practise solutions to the client.

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Optimizing Services Delivery: The typical services delivery / supply chain has several existing lacunae and inefficiencies because of various factors inherent in the facility management model. The typical inefficiencies and the ideal remedial measures to optimize the supply chain / services delivery are discussed below. Consistency of Services: Inefficiencies and inconsistencies occur in service delivery due to geographical and cultural issues. These need to be tackled for optimization, at the same time taking care that site specific requirements are met. Procurement: Centralizing procurement processes and cultivating a vendor from a normal supplier to a business partner i.e. moving him up the value chain will benefit the client.

REFERENCES 1. http://iiml.org/sections/KnowledgeRepository/ documents/Achievers_Birendra_Bisht.pdf https://www.cia.gov/library/publications/theworld-factbook/geos/in.html#Econ http://en.wikipedia.org/wiki/ Facility_management

2.

3.

...companies are increasingly becoming global in operations and they have started outsourcing the facility management function instead of managing these in-house

Benchmarking: Performance metrics across regions / countries are to be used to bench mark the service deliveries of each site to an industry standard and then effort must be directed towards identifying and eliminating the inadequacies. Consistency of Reporting: Providing a consistent reporting framework will help the clients in having a birds eye view of the health of the building infrastructure and make intelligent and informed business decisions with regard to their corporate real estate services. Thus, looking at the services delivery model of the facility management sector from a supply chain management perspective will help us in better identification of the drawbacks of the services that are being delivered and also in a better recognition of the remedial measures that are to be taken.

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ANSWERS TO ENTERTAINMENT CORNER

ANSWERS TO THE QUIZ


1. This term was first coined by Prof. Jack Rogers of Berkeley, in 1958. This is used to study the case where several products need to be produced on the same machine deciding the lot size and schedule. Identify the term. Ans: Economic Lot Scheduling Problem (ELSP) 2. This is a production strategy to improve Return on Investment by reducing WIP inventory. This process relies on Kanban between different points in a process. Identify this widely used strategy. Ans: Just-in-Time (JIT) 3. This system is used to perform inventory control, bill of material processing and maintaining low inventory levels. It is used to plan the material purchasing, manufacturing and delivery activities. Guess what system it is. Ans: Material Requirements Planning (MRP)

To understand more about Operations, do not stop with knowing the answers. Delve deeper into each of these areas and make yourself familiar with the subject.

4. This management philosophy states that to ensure continuous improvement of the product or service, all the stakeholders involved in the process are responsible. What is this policy used around the world to reduce defects? (hint: not Six Sigma) Ans: Total Quality Management (TQM) 5. This term is more used than understood in the management jargon of Operations. This tries to integrate the internal and external information across the organization, helping the management to take right decisions at the right time. What is this very obvious term? Ans: Enterprise Resource Planning (ERP) 6. The fluctuations caused in the final demand of a specific product due to oscillations in demand upstream in a supply chain is called as ________. Ans: Bullwhip effect 7. A business model in which the supplier of a product takes full responsibility of maintaining the inventory levels at the buyers end, based on the information provided by the buyer is _________. Ans: Vendor-managed inventory 8. The 5Ss defined by the pioneering auto company to keep an operation clean are ___, Seiketsu, __, Seiton, ___. Ans: Seison, Sheiri, and Shitsuke. 9. Scheduling your production activities at a pace at which the consumers demand a product is called ____. Ans: Takt Time

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ANSWERS TO THE CROSSWORD

To understand more about Operations, do not stop with knowing the answers. Delve deeper into each of these areas and make yourself familiar with the subject.

Across 5. POKAYOKE Japanese term for Fail-safing 6. SIXSIGMA International Standard for Quality 8. DEMING Prize given to Quality 9. KAIZEN Continuous Quality Improvement 10. LOGISTICS Moving goods here and there Down 1. HENRYFORD This man was is credited with mastering the assembly line 2. TOYOTA This production system is considered as a major precursor of "Lean manufacturing" 3. JUSTINTIME This is the strategy to reduce inventories 4. HEIJUNKA Evening out (Japanese) 7. GOLDRATT This author is the developer of Theory of Constraints

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Do send in your feedback to: Anil Kumar K Shalini Ramesh Shivananda NJ anil.k10@iimb.ernet.in shalini.ramesh10@iimb.ernet.in shivananda.narvajagatkar10@iimb.ernet.in