Lecture-6
Bench Marking & strategies for business process improvement
Definition
Benchmarking is the process of identifying "best practice" in relation to both products (including) and the processes by which those products are created and delivered. The search for "best practice" can taker place both inside a particular industry, and also in other industries (for example - are there lessons to be learned from other industries?).
The objective of benchmarking is to understand and evaluate the current position of a business or organization in relation to "best practice" and to identify areas and means of performance improvement.
The Benchmarking Process
Benchmarking involves looking outward (outside a particular business, organization, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance. When the lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in critical functions within an organization or in key areas of the business environment.
Application of benchmarking involves four key steps:
(1) Understand in detail existing business processes
(2) Analyze the business processes of others
(3) Compare own business performance with that of others analyzed
(4) Implement the steps necessary to close the performance gap
Benchmarking should not be considered a one-off exercise. To be effective, it must become an ongoing, integral part of an ongoing improvement process with the goal of keeping abreast of ever-improving best practice.
Types of Benchmarking
There are a number of different types of benchmarking, as summarized below:
Most Appropriate for the Following Purposes
Strategic Benchmarking
Where businesses need to improve overall performance by examining the long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment. Changes resulting from this type of benchmarking may be difficult to implement and take a long time to materialise
Most Appropriate for the Purposes of- Re-aligning business strategies that have become inappropriate.
Performance or Competitive Benchmarking
Businesses consider their position in relation to performance characteristics of key products and services. Benchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality.
Most Appropriate for the Purposes -Assessing relative level of performance in key areas or activities in comparison with others in the same sector and finding ways of closing gaps in performance.
Process Benchmarking
Focuses on improving specific critical processes and operations. Benchmarking partners are sought from best practice organizations that perform similar work or deliver similar services. Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking often results in short term benefits.
Most Appropriate for the Following Purposes- Achieving improvements in key processes to obtain quick benefits
Functional Benchmarking
Businesses look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes. This sort of benchmarking can lead to innovation and dramatic improvements.
Most Appropriate for the Following Purposes- Improving activities or services for which counterparts do not exist.
Internal Benchmarking
Involves benchmarking businesses or operations from within the same organization (e.g. business units in different countries). The main advantages of internal benchmarking are that access to sensitive data and information is easier; standardized data is often readily available; and, usually less time and resources are needed. There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organization. However, real innovation may be lacking and best in class performance is more likely to be found through external benchmarking.
Most Appropriate for the Following Purposes- Several business units within the same organization exemplify good practice and management want to spread this expertise quickly, throughout the organization.
External Benchmarking
Involves analysing outside organisations that are known to be best in class. External benchmarking provides opportunities of learning from those who are at the "leading edge". This type of benchmarking can take up significant time and resource to ensure the comparability of data and information, the credibility of the findings and the development of sound recommendations.
Most Appropriate for the Following Purposes- Where examples of good practices can be found in other organisations and there is a lack of good practices within internal business units
International Benchmarking
Best practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results. Globalization and advances in information technology are increasing opportunities for international projects. However, these can take more time and resources to set up and implement and the results may need careful analysis due to national differences.
Most Appropriate for the Following Purposes- Where the aim is to achieve world class status or simply because there are insufficient” national" businesses against which to benchmark.
Tuesday, January 27, 2009
Measuring process performance & reducing cycle time
Lecture 5
Measuring process performance & reducing cycle time
“People do what you inspect, not what you expect.” [Anon.]
Developing capable processes
When we work with clients to help them implement Process Management we often introduce a simple “Process Capability and Maturity Model”. This framework can be used to help plan what needs to be done at an organizational level, but can also be applied at the level of individual processes. It’s something that can be used by Process Owners and Managers to guide them in building capable processes.
Balanced Measurement
Every process should have a balanced set of measurements (Key Performance Indicators - KPIs) against which its Performance can be tracked, communicated and improved.
There are three types of measurement required:
Internal measures
Output (or quality) measures
Satisfaction measures
Internal measures enable you to assess the basic Performance of the process itself.
Output measures enable you to assess the quality of the intermediate or final outputs. Both (Internal and Output) can be measured without involving the customer(s) of the process.
Satisfaction measures are direct assessments of the customer’s view of the process and can only be gathered by asking the customer.
The measurements you select should be based on the purpose of the process and what you are trying to achieve. For example, a process to recruit new staff exists to ensure you can employ the right people, in the right place, with the right skills at the right time. So, you will almost always need to know how many people
(Volume) are being recruited. The time it takes to recruit someone (cycle- time) is probably irrelevant; what’s important is Timeliness – is the person available, when needed? Quality of recruit is also important – do they meet agreed criteria? Finally, you will want to measure the customer’s views – Line Manager perception of the process and of the employees it supplied.
As a process Owner, you will probably only need 4-7 KPIs in order to manage and continuously improve any process. If you have too many, it probably means you don’t understand what is really important about your process’ Performance.
For each measurement you select, you need to define:
what it is (a precise definition)
how you will gather the data (including sample sizes)
how often you will gather the data
how often you will report and review the data (including the format in
which the data will be presented)
any targeted levels of Performance (if known)
who is responsible for measurement
Data collection tools include:
Check sheets (Tally sheets)
Concentration Diagrams (pictorial Check sheets)
Traveller Time-logs
Surveys/Questionnaires
Interviews/Focus Groups
In many cases, we obtain data through sampling; often because it is simply not possible to measure every single item, or to log every activity, transaction or incident. The purpose of sampling is to collect an unbiased subset which will give you a manageable amount of data. When you take samples, they should be representative (statistically correct and reliable) and economic to collect(quick and cost-effective). Moving beyond “Defined”
Three activities need to be carried out to achieve the “Quantitatively Managed” level of Performance
1. Measure Performance (gather data and analyze it)
2. Implement Corrective Actions (address any immediate Performance gaps)
3. Review Performance (regularly check that the process is “fit for purpose”)
Three activities need to be carried out to achieve the “Optimizing” level:
1. Establish DMAIC Improvement Projects (teams to make bigger changes than from Corrective Action)
2. Establish Statistical process Control (SPC)
3. Benchmark Externally (compare with known Performance leaders).
Measuring Process Improvements - Cycle Time?
One of the challenges with agile methods is to get a clear perspective on how to measure process improvements. I recently had a brief discussion with a C-level executive at a small organization about this. His concern was that cycle time was meaningless because it depended so much upon the size of the work package. So how do we use cycle time as a meaningful measurement? What else can we use to measure process improvement?
Let’s look at the difference in measuring cycle time in an agile vs. non-agile environment. Then we’ll get to other measurements.
Cycle Time
Cycle time is the total time from the beginning to the end of your process, as defined by you and your customer. Cycle time includes process time, during which a unit is acted upon to bring it closer to an output, and delay time, during which a unit of work is spent waiting to take the next action.
The following are the high-level steps:
Customer / User / Stakeholder sees a need, validates it and submits a request to have that need fulfilled. This is when we start the clock on cycle time.
The fulfillment organization (IT, Product Development, R&D) puts the request in a queue, backlog or requirements management system.
Along with other requests, the fulfillment organization schedules the work on the request, usually by creating a project to fulfill it and other related requests. The project is estimated at a high level, the current status of in-flight projects is noted, and the new project is prioritized relative to other projects.
At some point, based on the schedule and the reality of the work on other projects, the project containing our customer’s request is started. Here, “started” means that detailed requirements are gathered.
After sufficient requirements are gathered, a detailed technical analysis is done including architecture, high-level design, risk analysis, etc.
Development begins. (Note: many people mistakenly start measuring cycle time here.)
Developers and testers work to validate the results of development and fix any problems discovered.
Final acceptance testing is done.
The results of the project are deployed to users, sold to the client, or in some other way passed back to the original requestor. This is when we stop the clock on cycle time.
Measuring process performance & reducing cycle time
“People do what you inspect, not what you expect.” [Anon.]
Developing capable processes
When we work with clients to help them implement Process Management we often introduce a simple “Process Capability and Maturity Model”. This framework can be used to help plan what needs to be done at an organizational level, but can also be applied at the level of individual processes. It’s something that can be used by Process Owners and Managers to guide them in building capable processes.
Balanced Measurement
Every process should have a balanced set of measurements (Key Performance Indicators - KPIs) against which its Performance can be tracked, communicated and improved.
There are three types of measurement required:
Internal measures
Output (or quality) measures
Satisfaction measures
Internal measures enable you to assess the basic Performance of the process itself.
Output measures enable you to assess the quality of the intermediate or final outputs. Both (Internal and Output) can be measured without involving the customer(s) of the process.
Satisfaction measures are direct assessments of the customer’s view of the process and can only be gathered by asking the customer.
The measurements you select should be based on the purpose of the process and what you are trying to achieve. For example, a process to recruit new staff exists to ensure you can employ the right people, in the right place, with the right skills at the right time. So, you will almost always need to know how many people
(Volume) are being recruited. The time it takes to recruit someone (cycle- time) is probably irrelevant; what’s important is Timeliness – is the person available, when needed? Quality of recruit is also important – do they meet agreed criteria? Finally, you will want to measure the customer’s views – Line Manager perception of the process and of the employees it supplied.
As a process Owner, you will probably only need 4-7 KPIs in order to manage and continuously improve any process. If you have too many, it probably means you don’t understand what is really important about your process’ Performance.
For each measurement you select, you need to define:
what it is (a precise definition)
how you will gather the data (including sample sizes)
how often you will gather the data
how often you will report and review the data (including the format in
which the data will be presented)
any targeted levels of Performance (if known)
who is responsible for measurement
Data collection tools include:
Check sheets (Tally sheets)
Concentration Diagrams (pictorial Check sheets)
Traveller Time-logs
Surveys/Questionnaires
Interviews/Focus Groups
In many cases, we obtain data through sampling; often because it is simply not possible to measure every single item, or to log every activity, transaction or incident. The purpose of sampling is to collect an unbiased subset which will give you a manageable amount of data. When you take samples, they should be representative (statistically correct and reliable) and economic to collect(quick and cost-effective). Moving beyond “Defined”
Three activities need to be carried out to achieve the “Quantitatively Managed” level of Performance
1. Measure Performance (gather data and analyze it)
2. Implement Corrective Actions (address any immediate Performance gaps)
3. Review Performance (regularly check that the process is “fit for purpose”)
Three activities need to be carried out to achieve the “Optimizing” level:
1. Establish DMAIC Improvement Projects (teams to make bigger changes than from Corrective Action)
2. Establish Statistical process Control (SPC)
3. Benchmark Externally (compare with known Performance leaders).
Measuring Process Improvements - Cycle Time?
One of the challenges with agile methods is to get a clear perspective on how to measure process improvements. I recently had a brief discussion with a C-level executive at a small organization about this. His concern was that cycle time was meaningless because it depended so much upon the size of the work package. So how do we use cycle time as a meaningful measurement? What else can we use to measure process improvement?
Let’s look at the difference in measuring cycle time in an agile vs. non-agile environment. Then we’ll get to other measurements.
Cycle Time
Cycle time is the total time from the beginning to the end of your process, as defined by you and your customer. Cycle time includes process time, during which a unit is acted upon to bring it closer to an output, and delay time, during which a unit of work is spent waiting to take the next action.
The following are the high-level steps:
Customer / User / Stakeholder sees a need, validates it and submits a request to have that need fulfilled. This is when we start the clock on cycle time.
The fulfillment organization (IT, Product Development, R&D) puts the request in a queue, backlog or requirements management system.
Along with other requests, the fulfillment organization schedules the work on the request, usually by creating a project to fulfill it and other related requests. The project is estimated at a high level, the current status of in-flight projects is noted, and the new project is prioritized relative to other projects.
At some point, based on the schedule and the reality of the work on other projects, the project containing our customer’s request is started. Here, “started” means that detailed requirements are gathered.
After sufficient requirements are gathered, a detailed technical analysis is done including architecture, high-level design, risk analysis, etc.
Development begins. (Note: many people mistakenly start measuring cycle time here.)
Developers and testers work to validate the results of development and fix any problems discovered.
Final acceptance testing is done.
The results of the project are deployed to users, sold to the client, or in some other way passed back to the original requestor. This is when we stop the clock on cycle time.
Wednesday, January 21, 2009
Course Material
Lecture 4
Business Process Mapping
In order to effectively analyze business processes, reviewers need a tool that takes into account the objectives of the business, the actual work being accomplished, and, most importantly, the impact of processes on customers. Business process mapping is just that tool. In a four-step process, analysis can be performed that accomplishes this holistic approach. At the same time, business process mapping also helps gain employees' buy-in and can result in an increased sense of pride for employees.
Business Process Mapping
In order to effectively analyze business processes, reviewers need a tool that takes into account the objectives of the business, the actual work being accomplished, and, most importantly, the impact of processes on customers. Business process mapping is just that tool. In a four-step process, analysis can be performed that accomplishes this holistic approach. At the same time, business process mapping also helps gain employees' buy-in and can result in an increased sense of pride for employees.
Process identification -- attaining a full understanding of all the steps of a process.
Information gathering -- identifying objectives, risks, and key controls in a process.
Interviewing and mapping -- understanding the point of view of individuals in the process and designing actual maps
Analysis -- utilizing tools and approaches to make the process run more effectively and efficiently.
1) The first step is process identification. Many companies think they know their processes -- manufacturing, sales, accounting, building services. But it is just this silo mentality that causes processes to lose their customer-centric approach. Instead of defining processes based on the company's understanding, they must be defined by the customer's understanding. Walking through customer experiences helps the reviewer identify those trigger points that can make or break success. These then form the basis for process identification.
2) Once the processes are identified, the second step begins -- information gathering. There is a large volume of information that should be obtained before trying to learn the intricacies of a process. Primary among these is identifying who the true process owners are -- the ones who can effect change. Their buy-in and agreement throughout the analysis is paramount. Additional information that should be obtained includes the objectives of the process, risks to the process, key controls over those risks, and measures of success for the process.
3) In order to effectively record and maintain this information, some important worksheets have been developed. Two of the most important are the Process Profile Work Sheet, and Work Flow Surveys. The Process Profile Work Sheet includes such information as the process owner, the trigger events (beginning and ending), inputs, outputs, and, as mentioned above the objectives, risks, key controls, and measures of success. Work Flow Surveys are completed by individuals actually working on the process and request from them a list of tasks -- including inputs and outputs -- which they perform in support of the process. Only after all this is done is actual "Process Mapping" completed. This involves sitting with each employee and having him or her describe what it is they do. This information is recorded using a sticky-note method. Each step in the process is recorded on a sticky-note and built in front of the individual completing the work. This allows them to interactively ensure the final map matches their understanding of their work. The final process maps are developed using flowcharting software. Time flows down the page, and each individual involved is represented by a separate column. In this manner, a simple map can result from a complicated process.
4) While Analysis is considered the fourth step, analysis must really occur throughout the review. While defining the processes, the reviewer may determine that objectives are not in line with the processes in place. In gathering information, it may become apparent that measures of success do not correspond to department objectives. These are just some of the examples of ongoing analysis. However, there are some specific examples of analysis that can be completed once maps are done. These include identifying unnecessary approvals, isolating rework, removing duplicate forms, eliminating useless holdfiles, and investigating decision requirements that lead to no discernable result. In and of themselves, no single incident is necessarily wrong. But each must be analyzed in the context of the map to ensure it supports the objectives.
Course Plan OSCM
Operation and Supply Chain Management
Lesson Plan
The readings referred to in the table below are recommended material from:
I) Lee J. Krajewski Larry P. Ritzman , Opreation Management process and value chain.(PHI)
II) Upendra Kachru, Production and Operation Management (EB)
III) Cecil C. Bozarth, Introduction to Operation and Supply Chain Management (Pearson)
Lecture
Topics
Readings
Lecture 1-unit-I
Introduction – operation & supply chain Mgmt.
Page No: 2,10-13,395-400(I),374-379,384-406(II), 4-11(III)
Lecture 2
Linkage between OSCM
Page No: 420-422(I), 13-14(III)
Lecture 3
OSCM strategies
Page No: 17-18(I), 23-32(III)
Lecture-4
Business process & Mapping
Page No: 46-51(III)
Lecture-5
Measuring process performance & reducing cycle time
Page No: 321-325(I), 55-60(III)
Lecture-6
Bench Marking & strategies for business process improvement
Page No: 151-152(I), 61-63(III)
Lecture-7
Total Quality Management & cost
Page No: 73-77(III), 275-281(II)
Lecture-8
Continuous improvement tools & statistical quality control
Page No: 200-202(I), 298-303(II),82-90(III)
Lecture-9-unit-II
Product design and development process
Page No: 69-74, (I), 146-148(III)
Lecture-10
OSC & design,
Page No: 421-422(I), 149-152(III)
Lecture-11
Org. role in product development, approaches to improving product
Page No: 64-74 (I), 155-158(III)
Lecture-12
Manufacturing process- types
Page No: 6,7,104-116(I)
Lecture-13
Product customization with in supply chain
Page No: 177-179(III),
Lecture-14
Service process
Page No: 6,7,97-98(I), 180-184(III)
Lecture-15
Layout design model
Page No: 185-190(III)
Lecture-16
Capacity- strategies& methods of evaluating capacity
Page No: 117-125(II), 209-220(III)
Lecture-17
Forecasting- demand & supply & laws
Page No: 536-566(I), 245-247(III)
Lecture-18
Forecasting Methods-qualitative method & time series
Page No: 539,539(I), 248-271(III)
Lecture-19-unit-III
Importance & process of purchasing
Page No: 404, (I), 305-312(III)
Lecture-20
Sourcing decisions and strategies
Page No: 411-415(I), 297-302(III)
Lecture-21
Multicriteria decision model – sourcing & purchasing
Page No: 312-320(III)
Lecture-22
Importance & strategies of logistic
Page No: 394-396(II), 350-353(III)
Lecture-23
Logistic decision-area & model
Page No: 389,390,394-396(II)
Lecture-24
Sales and operation planning –strategies & process
Page No: 373-375(III)
Lecture-25
Approaches to S&OP planning
Page No: 376-387(III)
Lecture-26
Organizing for & implementing S&OP planning
Page No: 389-391(III)
Lecture-27
services consideration
Page No: 278-280(I), 393-395(III)
Lecture-28-unit-IV
Inventory- its role, types & drivers
Page No: 666-680(I), 413-416(III)
Lecture-29
Dependent demand inventory
Page No: 589(I), 418(III)
Lecture-30
Periodic & continuous review system
Page No: 672-682(I), 418-420(III)
Lecture-31
EOQ, SS & QD, single period inventory system
Page No: 667-669(I), 421-427(III)
Lecture-32
Inventory in supply chain
Page No: 433-437(III)
Lecture-33
Master scheduling – Material requirement planning
Page No: 729-730,725-735(I), 454-469(III)
Lecture-34
Production activity control & Vendor order mgmt. system
Page No: 346-352(I), 471-473(III)
Lecture-35
Synchronizing planning & control across the supply chain
Page No: 473-474(III)
Lecture-36
Just-in-time & Kan-ban system
Page No: 483-497(I), 492-501(III)
Lecture-37
SCM information needs & improving SCM
Page No: 511-514(III)
Lecture-38
SC information system
Page No: 517-520(III)
Lesson Plan
The readings referred to in the table below are recommended material from:
I) Lee J. Krajewski Larry P. Ritzman , Opreation Management process and value chain.(PHI)
II) Upendra Kachru, Production and Operation Management (EB)
III) Cecil C. Bozarth, Introduction to Operation and Supply Chain Management (Pearson)
Lecture
Topics
Readings
Lecture 1-unit-I
Introduction – operation & supply chain Mgmt.
Page No: 2,10-13,395-400(I),374-379,384-406(II), 4-11(III)
Lecture 2
Linkage between OSCM
Page No: 420-422(I), 13-14(III)
Lecture 3
OSCM strategies
Page No: 17-18(I), 23-32(III)
Lecture-4
Business process & Mapping
Page No: 46-51(III)
Lecture-5
Measuring process performance & reducing cycle time
Page No: 321-325(I), 55-60(III)
Lecture-6
Bench Marking & strategies for business process improvement
Page No: 151-152(I), 61-63(III)
Lecture-7
Total Quality Management & cost
Page No: 73-77(III), 275-281(II)
Lecture-8
Continuous improvement tools & statistical quality control
Page No: 200-202(I), 298-303(II),82-90(III)
Lecture-9-unit-II
Product design and development process
Page No: 69-74, (I), 146-148(III)
Lecture-10
OSC & design,
Page No: 421-422(I), 149-152(III)
Lecture-11
Org. role in product development, approaches to improving product
Page No: 64-74 (I), 155-158(III)
Lecture-12
Manufacturing process- types
Page No: 6,7,104-116(I)
Lecture-13
Product customization with in supply chain
Page No: 177-179(III),
Lecture-14
Service process
Page No: 6,7,97-98(I), 180-184(III)
Lecture-15
Layout design model
Page No: 185-190(III)
Lecture-16
Capacity- strategies& methods of evaluating capacity
Page No: 117-125(II), 209-220(III)
Lecture-17
Forecasting- demand & supply & laws
Page No: 536-566(I), 245-247(III)
Lecture-18
Forecasting Methods-qualitative method & time series
Page No: 539,539(I), 248-271(III)
Lecture-19-unit-III
Importance & process of purchasing
Page No: 404, (I), 305-312(III)
Lecture-20
Sourcing decisions and strategies
Page No: 411-415(I), 297-302(III)
Lecture-21
Multicriteria decision model – sourcing & purchasing
Page No: 312-320(III)
Lecture-22
Importance & strategies of logistic
Page No: 394-396(II), 350-353(III)
Lecture-23
Logistic decision-area & model
Page No: 389,390,394-396(II)
Lecture-24
Sales and operation planning –strategies & process
Page No: 373-375(III)
Lecture-25
Approaches to S&OP planning
Page No: 376-387(III)
Lecture-26
Organizing for & implementing S&OP planning
Page No: 389-391(III)
Lecture-27
services consideration
Page No: 278-280(I), 393-395(III)
Lecture-28-unit-IV
Inventory- its role, types & drivers
Page No: 666-680(I), 413-416(III)
Lecture-29
Dependent demand inventory
Page No: 589(I), 418(III)
Lecture-30
Periodic & continuous review system
Page No: 672-682(I), 418-420(III)
Lecture-31
EOQ, SS & QD, single period inventory system
Page No: 667-669(I), 421-427(III)
Lecture-32
Inventory in supply chain
Page No: 433-437(III)
Lecture-33
Master scheduling – Material requirement planning
Page No: 729-730,725-735(I), 454-469(III)
Lecture-34
Production activity control & Vendor order mgmt. system
Page No: 346-352(I), 471-473(III)
Lecture-35
Synchronizing planning & control across the supply chain
Page No: 473-474(III)
Lecture-36
Just-in-time & Kan-ban system
Page No: 483-497(I), 492-501(III)
Lecture-37
SCM information needs & improving SCM
Page No: 511-514(III)
Lecture-38
SC information system
Page No: 517-520(III)
Assignments
Gurgaon Institute of Technology and Management
Department: MBA
Semester : IInd
Subject Name &Code : OSCM
Faculty :Sachita Yadav
Assignment-I
Issue date: 27th jan 2009 Due date: 3rd feb. 2009
Q1. Explain the linkage between OSCM
Q2. Explain TQM with an example of any existing organization.
Assignment-II
Issue date: Due date:
Q1. What do you understand by Product design and development process explain with example?
Q2. Explain qualitative method of Forecasting.
Assignment-III
Issue date: Due date:
Q1. What do you understand by followings:-
logistic
purchasing
sourcing
Assignment-IV
Issue date: Due date:
Q1. Explain importance of inventory in supply chain with example.
Q2. Explain followings:
JIT & KANBAN
EOQ
Department: MBA
Semester : IInd
Subject Name &Code : OSCM
Faculty :Sachita Yadav
Assignment-I
Issue date: 27th jan 2009 Due date: 3rd feb. 2009
Q1. Explain the linkage between OSCM
Q2. Explain TQM with an example of any existing organization.
Assignment-II
Issue date: Due date:
Q1. What do you understand by Product design and development process explain with example?
Q2. Explain qualitative method of Forecasting.
Assignment-III
Issue date: Due date:
Q1. What do you understand by followings:-
logistic
purchasing
sourcing
Assignment-IV
Issue date: Due date:
Q1. Explain importance of inventory in supply chain with example.
Q2. Explain followings:
JIT & KANBAN
EOQ
Course Material- OSCM
Lecture-I
Operation and Supply Chain Management
WHY STUDY OPERATIONS AND SUPPLY CHAIN MANAGEMENT?
Operations function
The collection of people, technology, and systems within an organization that has primary responsibility for providing the organization's products or services.
Supply chain
A network of manufacturers and service providers that work together to convert and
move goods from the raw materials stage through to the end user. These manufacturers
and service providers are linked together through physical flows, information flows,
and monetary flows.
Need for Supply Chain Management
1. Every organization must make a product or provide a service that someone values.
Otherwise, why would the organization exist? Think about it. Manufacturers produce physical goods that are used directly by consumers or other businesses. Transportation companies provide valuable services by moving and storing these goods. Design firms use their expertise to create products or even corporate images for customers. The need to
provide a valuable product or service holds true for nonprofit organizations as well. Consider the variety of needs met by government agencies, charities, and religious groups, for example. The common thread is that each of the above organizations has an operations function, or operations, for short. The operations function is the collection of people, technology, and systems within an organization that has primary responsibility for providing the organization's products or services. Regardless of what career path you might choose, you will need to know something about your organization's operations function. As important as the operations function is to a firm, few organizations can-or even want to-do everything themselves. This leads to our second reason for studying operations and supply chain management.
2. Most organizations function as part o/larger supply chains.
A supply chain is a network of manufacturers and service providers that work together to convert and move goods from the raw materials stage through to the end user. These manufacturers and service providers are linked together through physical flows, information flows, and monetary flows. Put another way, supply chains link together the operations functions of many different organizations. Consider a store at the local mall that sells athletic shoes. Although the store doesn't actually make the shoes, it provides valuable services for its customers-a convenient location and a wide selection of products. Yet the store is only one link in a much larger supply chain that includes:
• Plastic and rubber producers that provide raw materials for the shoes;
• Manufacturers that mold and assemble the shoes;
• Wholesalers that decide what shoes to buy and when;
• Transportation firms that move the materials and finished shoes to all parts of the world;
• Software firms and Internet service providers (ISPs) that support the information
systems that coordinate these physical flows; and
• Financial firms that help distribute funds throughout the supply chain, ensuring that the
manufacturers and service firms are rewarded for their efforts.
3. Organizations must carefully manage their operations and supply chains in order to prosper, and, indeed, survive.. Some fundamental operations decisions that it must make include likes "How many shoes should we make and in what styles and sizes?" "What kind of people skills and equipment do we need?" "Should we locate our plants to take advantage of low-cost labor or to minimize shipping costs of the finished shoes?" In addition to these operations issues, the shoe manufacturer faces many decisions with regard to its role in the supply chain: "From whom should we buy our materials-the lower-cost supplier or the higher-quality one?" "Which transportation carriers will we use
to ship our shoes?" The right choices can lead to higher profitability and increased market
share, while the wrong choices can cost the company dearly, or even put it out of business.
Operation Management
Operations a little more fully and explaining what we mean by operations management. As we noted earlier, all organizations must make products or provide services that someone values, and the operations function has the primary responsibility for making sure this happens.
Steps includes in operation
Inputs
• Materials
• Intangible needs
• Information
Transformation Process
• Manufacturing operations
• Service operations
Outputs
• Tangible goods
• Fulfilled needs
• Satisfied customers
Operations management, then, is "the planning, scheduling, and control of the activities that transform inputs into finished goods and services." Operations management decisions can range from long-term, fundamental decisions about what products or services will be offered and what the transformation process will look like to more immediate issues, such as determining the best way to fill a current customer order. Through sound operations management, organizations hope to provide the best value to their customers while making the best use of resources.
Supply Chain Management
The traditional view of operations management still puts most of the emphasis on the activities a particular organization must perform when managing its own operations. But, as important as a company's operations function is, it is not enough for a company to focus on doing the right things within its own four walls. Managers must also understand how the company is linked in with the operations of its suppliers, distributors, and customers-what we refer to as the supply chain. As we noted earlier, organizations in the supply chain are linked together through physical flows, information flows, and monetary flows. These flows go both up and down the chain.
Example: Supply of good and services from one to another by various parties as follows:
A to B
Second-tier supplier to First-tier supplier
B to C
First-tier supplier to Producing Firm
C to D
Producing Firm to Wholesaler
D to E
Wholesaler to Retailer
E to F
Retailer to Final Customer
First-tier supplier
A supplier that provides products or services directly to a particular firm.
Second-tier supplier
A supplier that provides products or services to a firm's first-tier supplier.
Supply chain management
The active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient ways possible. Finally, the supply chain must be very efficient, as the final price of the good must cover all of the costs involved plus a profit for each participant in the chain.
While you were reading through the above example, you might have thought to yourself,
"Supply chains aren't new" -and you'd be right. Yet most organizations historically performed their activities independently of other firms in the chain, which made for disjointed and often inefficient supply chains. In contrast, supply chain management is the active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient ways possible.Wal Mart is an important example of supply chain management.
Lecture- 2
Important Trends and OSCM
Three major developments that have brought operations and supply chain management to the forefront of managers' attention:
Electronic commerce
Increasing competition and globalization
Relationship management
Electronic Commerce (e-commerce)
Electronic commerce (or e-commerce, for short) refers to the use of information technology (IT) solutions to automate business transactions. Electronic commerce promises to improve the speed, quality, and cost of business communication. The late 1990s and early 2000s, for example, saw the emergence of Internet-based "trading communities" that put hundreds of buyers and sellers in touch with one another. Now, instead of looking through a catalog, filling out a paper order form, and faxing it a supplier, buyers in many companies can search for what they need via their computer and, with a couple of clicks, place an order. Many paper transactions are becoming increasingly obsolete. At the same time, the proliferation of new telecommunications and computer technology has made instantaneous communications a reality. Such information systems-for example, Wal-Mart's satellite network-can link together suppliers, manufacturers, distributors, retail outlets, and, ultimately, customers, regardless of location.
Increasing competition and globalization
The second major trend is the increasing level of competition and globalization in the, world economy. The rate of change in markets, products, and technology is escalating, leading to situations where managers must make decisions on shorter notice, with less information, and with higher penalty costs. Customers are demanding quicker delivery, state-of-the-art technology, and products and services better suited to their individual needs. At the same time, new competitors are entering into markets that have traditionally been dominated by "domestic" firms. Despite these challenges, many organizations are thriving. In later chapters, for example, you will read how such companies as Dell Computers, Honda, The Procter & Gamble Company, and Herman Miller have embraced the changes facing today's markets and have put a renewed emphasis on improving their operations and supply chain performance. In some ways, the increased competition and globalization of businesses have given many firms the chance to break away from the pack.
Relationship Management
The information revolution of the last 20 years has given companies a wide range of technologies for better managing their operations and supply chains. Furthermore, increasing customer demands and global competition have given firms the incentive to improve in these areas. But this is not enough. Any efforts to improve operations and supply chain performance are likely to be inconsequential without the cooperation of other firms. As a result, more companies are putting an emphasis on relationship management. Of all the activities operations and supply chain personnel perform, relationship management is perhaps the most difficult, and therefore the most susceptible to breakdown. Poor relationships within any link of the supply chain can have disastrous consequences for all other supply chain members. To avoid such problems, organizations must manage the relationships with their upstream suppliers as well as their downstream customers.
So it becomes more important to choose a few, select suppliers, thereby paving the way for informal interaction and information sharing.
Cross functional and inter-organizational linkage
Operations and Supply Chain Activities include followings:
Process Selection- Design and implement the transformation Engineering processes that best meet the needs of the customer and the firm
Key inter-functional Participants
Engineering
Marketing
Finance
Human Resources
IT
Key Inter-organizational Participants
Customers
Forecasting- Develop the planning numbers needed for effective decision making.
Key inter-functional Participants
Marketing
Finance
Accounting
Key Inter-organizational Participants
Customers
Suppliers
Capacity Planning- Establish strategic capacity levels ("bricks & mortar") and tactical capacity levels (workforce inventory)
Key inter-functional Participants
Finance
Accounting
Marketing
Human Resources
Key Inter-organizational Participants
Customers
Suppliers
Inventory Management- Manage the amount and placement of inventory within the company and the supply chain.
Key inter-functional Participants
IT
Finance
Key Inter-organizational Participants
Customers
Suppliers
Planning and Control- Schedule and manage the flow of work through an organization and the supply chain; match customer demand to supply chain activities.
Key inter-functional Participants
Marketing
IT
Key Inter-organizational Participants
Customers
Suppliers
Purchasing- Identify and qualify suppliers of goods and services; manage the ongoing buyer- supplier relationships.
Key inter-functional Participants
Engineering
Finance
Marketing
Key Inter-organizational Participants
Suppliers
Logistic- Manage the movement of physical goods throughout the supply chain.
Key inter-functional Participants
Marketing
Engineering
Key Inter-organizational Participants
Suppliers
Customers
In this way we can say that Operation and Supply Chain Management is an very integral part of an organization.
Lecture-3
Operation and Supply chain Strategies
The operations and supply chain strategy is a functional strategy that indicates
how structural and infrastructural elements within the operations and supply chain areas
will be acquired and developed to support the overall business strategy. Executing
successful operations and supply chain strategies means choosing and implementing the
right mix of structural and infrastructural elements. What constitutes the best mix of these structural and infrastructural elements is a subject of ongoing debate among business and academic experts alike.
Nevertheless, we can identify three primary objectives of an operations and supply chain strategy:
To help management choose the right mix of structural and infrastructural elements, based on a clear understanding of the performance dimensions valued by customers and the trade-offs involved;
To ensure that the firm's structural and infrastructural choices are strategically aligned with the firm's business strategy; and
To support the development of core competencies in the firm's operations and supply chains.
INFRA STRUCTURAL STRUCTURAL DECISION CATEGORIES DECISION CATEGORIES
Capacity • Amount of capacity
• Type of capacity
• Timing of capacity changes (lead, lag, or match market demands)
Facilities
• Service facilities
• Manufacturing plants
• Warehouses
• Distribution hubs
• Size, location, degree of specialization
Technology
• M;anufacturing processes
• Services processes
• Material handling equipment
• Transportation equipment
• Computer systems
Organization
• Structure-centralization/ decentralization
• Control/reward systems
• Workforce decisions
Sourcing decisions & purchasing process
• Sourcing strategies
• Supplier selection
• Supplier performance measurement
Planning & control
• Forecasting
• Tactical planning
• Inventory management production planning and control
Quality management
• Total quality management (TQM)
• Continuous improvement
• Statistical quality control
Product t& service development
• Development process
• Organizational and supplier roles
Operations and supply chains can have an enormous impact on business performance.
Experience suggests that four generic performance dimensions are particularly relevant to operations and supply chain activities. These are:
1. Quality;
2. Time;
3. Flexibility;
4. Cost.
QUALITY.
Quality is defined as the characteristics of a product or service that bear on its ability to satisfy stated or implied needs. The concept of quality is broad, with a number of sub dimensions, including performance quality (What are the basic operating characteristics of the product or service?), conformance quality (Was the product made or the service performed to specifications?), and reliability quality (Will a product work for a long time without failing or requiring maintenance? Does a service operation perform its tasks consistently over time? One buyer may be more interested in performance, another in reliability. To compete on the basis of quality, a firm's operations and supply chain must consistently meet or exceed customer expectations or requirements on the most critical quality dimensions.
TIME.
Time has two basic characteristics: speed and reliability. Delivery speed generally refers to how quickly the operations or supply chain function can fulfill a need, once it has been identified. Delivery reliability refers to the ability to deliver products or services when promised. Note that a firm can have long lead times, yet still maintain a high degree of delivery reliability. Typical measures of delivery reliability include the percentage of orders that are delivered by the promised time and the average tardiness of late orders. Delivery reliability is especially important to companies that are linked together in a supply chain. Consider the relationship between a fish wholesaler and its major customer, a fish processing facility. If the fish arrive too late, the processing facility may be forced to shut down. On the other hand, fish that arrive too early may go bad before they can be processed. Obviously, these two supply chain partners must coordinate their efforts so that the fish will arrive within a specific delivery window, which is defined as the acceptable time range in which deliveries can be made.
FLEXIBILITY.
Many operations and supply chains compete by responding to the unique needs of different customers. Both manufacturing and service firms can demonstrate flexibility. A full-service law firm, for instance, will handle any legal issue a client faces. (Some law firms specialize in only real estate transactions or divorce settlements.) A full- service hotel will go to great lengths to fulfill a guest's every need. Many firms distinguish among several types of flexibility, including mix flexibility (the ability to produce a wide range of products or services), changeover flexibility (the ability to provide a new product with minimal delay), and volume flexibility (the ability to produce whatever volume the customer needs).
Flexibility has become particularly valuable in new product development. Some firms
compete by developing new products or services faster than their competitors, a competi-
tive posture that requires operations and supply chain partners who are both flexible and
willing to work closely with designers, engineers, and marketing personnel.
COST
Cost is always a concern, even for companies that compete primarily on some other dimension. However, "cost" covers such a wide range of activities that companies commonly categorize costs in order to focus their cost management efforts. Some typical cost categories include:
Labor costs
Material costs
Engineering costs
At the time of selecting OSCM strategies all the above major points should be kept in mind by management.
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