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Introduction to Operations and Supply Chain Management

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Definitions, concepts, significance & functions of Operations & SCM. Evolution from Manufacturing to Operations Management, Physical distributions to Logistics to SCM, Physical goods & Service perspectives.
Quality: Definition from Customer & Manufacturer’s view, Concept of internal customers, Overview of TQM & Lean Management, Impact of Global Competition, Technological change, Ethical & Environmental issues on Operations & Supply Chain Functions.

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Introduction to Operations and Supply Chain Management

  1. 1. j j Unit 1 Introduction to Operation & Supply Chain Management Dr. Prashant B. Kalaskar
  2. 2. Syllabus • Introduction to Operations & SCM: Definitions, concepts, significance & functions of Operations & SCM. Evolution from Manufacturing to Operations Management, Physical distributions to Logistics to SCM, Physical goods & Service perspectives. • Quality: Definition from Customer & Manufacturer’s view, Concept of internal customers, Overview of TQM & Lean Management, Impact of Global Competition, Technological change, Ethical & Environmental issues on Operations & Supply Chain Functions. j j Dr. Prashant B. Kalaskar
  3. 3. Operations Management • Operations: Design & Transformation process of Materials • Operations Management: Management of Design & Transformation Process to convert Raw materials into Required finished products. • Operation is Value Creation Process • Operation Process allows to develop competitive Advantage to the Organization j Dr. Prashant B. Kalaskar j
  4. 4. Supply Chain Management (SCM) • It is the Management of Flow of Goods • It comprise of; 1) Sourcing of Materials 2) Movement & Storage of Raw Materials 3) Work in Process & Finished Products Inventory 4) Movement of Finished Products to Point of Consumption • SCM includes Design, Planning, Execution, Control & Monitoring of Supply Chain activities to create value & fulfill demands of the customers j Dr. Prashant B. Kalaskar j
  5. 5. Importance of Operations Management • Examining the process of Creation of Goods & Services using available knowledge & Techniques to resolve the problems • Modifying the operation process to match with the market conditions • Value Creation in the market to win over competition • Growth & Profitability of the Organization j Dr. Prashant B. Kalaskar j
  6. 6. Operations Management • Operation Management focus on Structural Components; - Product Design - Process & Process Design - Capacity of Production & - Location • Operation Management focus on Infrastructural Components; - Quality Manufacturing - Outsourcing - Planning of Transformation Process j Dr. Prashant B. Kalaskar j
  7. 7. Operations Management • Definition: by Joseph Monks “ The process whereby resources, flowing within a system are combined and transformed by a controlled manner to add value in accordance with policies (SOP) communicated by Management” Companies are either manufacturing Goods or Services to earn profits j Dr. Prashant B. Kalaskar j
  8. 8. Concept of Operations Management • Important concept of Operations Management is how well the Products & Services are produced to: - Compete with the competitors, - Effective & Efficient Manufacturing in terms of cost & Quality - How does the process is allowing to generate profits for the Organization j Dr. Prashant B. Kalaskar j
  9. 9. Functions of Operations Management • Planning: What to be manufactured & Why? • Organizing: What is involved (Required [5M’s]) & Why? • Motivating: What will bring the best performance from the people? • Directing: Who will decide what & when? • Controlling: Who will judge results & with which standards? j Dr. Prashant B. Kalaskar j
  10. 10. Functions of SCM • Sourcing of Materials • Procurement • Make or Buy decision • Materials Planning • Inventory Management • Receiving & Dispatch • Stores & Warehousing • Materials Handling j Dr. Prashant B. Kalaskar j
  11. 11. Evolution of Manufacturing to Operations Industrial Revolution • Began in the 1770’s in England and spread to the rest of Europe and to the United States during the 19th century. • Substituted human power by machine power. • Most significant machine was steam engine. j Dr. Prashant B. Kalaskar j
  12. 12. Evolution of Manufacturing to Operations What did take place • Production became fast and low costly one • Economies of scale • Development of standard gauging system • Factories grew rapidly • Provided countless jobs j Dr. Prashant B. Kalaskar j
  13. 13. Evolution of Manufacturing to Operations Scientific Management • Widely changed the management of factories. • Developed by Frederick Winslow Taylor, the father of Scientific Management. • Scientific Management was based on observation, measurement, analysis and improvement of work methods and economic incentives. • Studied to identify the best method for doing each job. j Dr. Prashant B. Kalaskar j
  14. 14. Evolution of Manufacturing to Operations • Elements of Scientific Management 1) Separation of Planning & Doing 2) Functional Foremanship: (Supervisors are the functional foreman like Route clerk, Time & Cost Clerk, Speed Boss, Gang Boss, inspector etc.) 3) Job Analysis: to find out best way of doing a job - Time Study - Motion Study - Fatigue Study j Dr. Prashant B. Kalaskar j
  15. 15. Evolution of Manufacturing to Operations • Elements of Scientific Management 4) Standardization: Standards should be kept in work period, instruments, tools, working conditions etc. 5) Selection & Training of Employees: Tasks assigned to the workers should be suitable 6) Financial Incentives: 7) Economy: Economy can be achieved through making resources more productive j Dr. Prashant B. Kalaskar j
  16. 16. Evolution of Manufacturing to Operations • 1776 -Specialization of labor in manufacturing -Adam Smith • 1799 -Interchangeable parts, cost accounting -Eli Viihitney and others • 1832 -Division of labor by skill; assignment of jobs by skill; basics of time study -Charles Babbage • 1900- Scientific management time study and work study developed; dividing planning and doing of work - Frederick W. Taylor • 1900- Motion study of jobs -Frank B. Gilbreth (Consideration of limitation of mental & physical capacity of workers & good physical environment for motivation) j Dr. Prashant B. Kalaskar j
  17. 17. Evolution of Manufacturing to Operations • The concept of “Interchangeable Parts” was applied by Eli Whitney, an American inventor. • The basis for interchangeable parts was to standardize parts. j Dr. Prashant B. Kalaskar j • Any part in a batch of parts would fit any automobile coming down the assembly line. • Result was a high decrease in assembly time and cost.
  18. 18. Evolution of Manufacturing to Operations • Henry Gantt - recognized the value of nonmonetary rewards to motivate workers, and developed a widely used system for scheduling, called Gantt charts. j Dr. Prashant B. Kalaskar j
  19. 19. • WW-II to 1960’s-Operation Research: - After WW-II, the focus was shifted from Micro environment to Macro environment - Operation Research, a Multidisciplinary approach was evolved for problem solving - A quantitative approach for identification & allocation of resources j Dr. Prashant B. Kalaskar j Evolution of Manufacturing to Operations
  20. 20. • 70’s & 80’s: The Japanese Challenge: - Japanese system didn’t apply Operation Research, but was able to deliver high quality cars at lower cost to European markets. - Major focus was on Toyota Production System (TPS) developed by Taiichi Ohno which is usually categorized under Lean Production or World Class Manufacturing Program. - Taiichi Ohno identified 7 types of wastes (Muda) to form a basis for process improvements j Dr. Prashant B. Kalaskar j Evolution of Manufacturing to Operations
  21. 21. Evolution of Manufacturing to Operations • 7 wastes (Muda) for Process Improvement in TPS: j Dr. Prashant B. Kalaskar j
  22. 22. • Other concepts evolved as cross disciplinary function under Toyota Production System were; - Material Requirement Planning (MRP) - Just in Time (JIT) - Total Quality Management (TQM) j Dr. Prashant B. Kalaskar j Evolution of Manufacturing to Operations
  23. 23. j Dr. Prashant B. Kalaskar j Evolution of Manufacturing to Operations
  24. 24. j Dr. Prashant B. Kalaskar j Evolution of Manufacturing to Operations Cost & Efficiency Defect Reduction & Product Quality Customer Driven Design Production Flexibility Fast Responses & Exceptional Service 1970’s & Later 1980’s 1990’s 2000’s & Beyond Cost Value Mass Production Lean Manufacturing Agile Manufacturing Service Excellence Functional Specialization Gross Functional Coordination High Performance Work Systems
  25. 25. • Physical Distribution: It is the process of physical movement of goods to the ultimate customer at right time & right place j Dr. Prashant B. Kalaskar j Physical Distribution to Logistics to SCM Customer Order Receipt Order Transmission Order Processing Order Deliver to Customer Order Transportation Order Mfg.
  26. 26. Physical Distribution • Physical Distribution largely determines the customer service including transportation (may include 3PL) & warehousing of finished products, including marketing , until the product is being consumed • Improper physical distribution may result in loss of sales • Physical distribution depends on accurate accumulation of orders from Market. • Right forecasting of demand, right physical distribution (Outbound Logistics) j Dr. Prashant B. Kalaskar j
  27. 27. Key Elements of Physical Distribution 1) Identification of Segments by Service Requirement: 2) Communications & Order Processing: 3) Production & Warehouse Location: 4) Inventory Management: 5) Transportation: 6) Materials handling: j Dr. Prashant B. Kalaskar j
  28. 28. Key Elements of Physical Distribution j Dr. Prashant B. Kalaskar j Availability Speed Communications & Order Processing Production Warehouse Location Inventory Management TransportationMaterials Handling Service Requirement
  29. 29. Physical Distribution to Logistics Mgmnt. • Physical distribution is related to outbound logistics • Logistics Management includes Inbound & Outbound Logistics • Logistics Management is related to efficient & effective forward & reverse, inbound & outbound transport of goods, services & information between the point of origin to point of consumption. j Dr. Prashant B. Kalaskar j
  30. 30. Supply Chain Management • Supply Chain Management (SCM) allows Organization to perform better through inter-firm linkages. • SCM allows sharing of inter-firm benefits & risks • SCM includes sourcing, procurement, conversion & logistics management activities including collaboration with channel partners, 3rd party service providers & customers. • SCM integrates supply & demand management within and across the company j Dr. Prashant B. Kalaskar j
  31. 31. Supply Chain Management j Dr. Prashant B. Kalaskar j Inbound Logistics Operations Outbound Logistics Sales & Mktg. After Sales Services Supplier of Raw Materials Product/Services Information Finance
  32. 32. Physical Goods & Services Perspective • Physical Goods are those tangible products can be consumed by the customer. • Some goods are perishable to be consumed at Once: Food Products & the are required to be replaced • Some goods are consumed for some long time with part consumption & once finished are required to be replaced ex: Toothpaste • Some goods are durable goods are replaced after longs time use for some specific reasons: TV, Garments, car j Dr. Prashant B. Kalaskar j
  33. 33. Physical Goods & Services Perspective • Services are the Intangible products consumed/utilized by the customers • Ex: Food is physical good & restaurant ambience is the service • Telephone/Mobile is physical good calling is the services • TV is the Physical goods, Television program are the services j Dr. Prashant B. Kalaskar j
  34. 34. Examples of Physical Goods & Services j Dr. Prashant B. Kalaskar j Goods are physical items that include raw materials, parts, subassemblies, and final products. •Automobile •Computer •Oven •Shampoo Services are activities that provide some combination of time, location, form or psychological value. •Air travel •Education •Haircut •Legal counsel
  35. 35. Difference between Goods & Services j Dr. Prashant B. Kalaskar j Services Products 1 Intangible Tangible 2 Requires face to face interaction with Customers Products are produced at one place & marketed at other place 3 Heterogeneous Products changes time to time Variation in product is planned as per market requirement 4 Perishable & Time Dependent Goods can be stored back 5 Services may accompany with Goods are accompanied with communication & Marketing Inputs Supporting Facilities: Decoration Facilitating Goods: Food Items along with serving Explicit Services: Training of Service personnel Implicit Services: Attitude of Service Personnel, Security
  36. 36. Quality • What is Quality..? • Why Quality is important to customer as well manufacturer..? j Dr. Prashant B. Kalaskar j
  37. 37. Quality • Think about your past experiences staying at various hotels. • Did you stay at a “quality” hotel? • What about the experience made it a “quality” experience for you? • Think about a product you bought. How can you define its “quality”? j Dr. Prashant B. Kalaskar j
  38. 38. Quality in different areas of society j Dr. Prashant B. Kalaskar j Area Examples Airlines On-time, comfortable, low-cost service Health Care Correct diagnosis, minimum wait time, lower cost, security Food Services Good product, fast delivery, good environment Postal Services Fast delivery, correct delivery, cost containment Academia Proper preparation for future, on-time knowledge delivery Consumer Products Properly made, defect-free, cost effective Insurance Payoff on time, reasonable cost Military Rapid deployment, decreased wages, no graft Automotive Defect-free, Mileage, Spare Parts availability, fast service Communications Clearer, faster, cheaper service
  39. 39. Quality • What is quality? • “meeting/exceeding the customer requirements” • What is reliability? • “It is the ability of product and service to continue to meet the customer requirements” j Dr. Prashant B. Kalaskar j
  40. 40. Definition of Quality • Quality is also defined as “excellence in the product or service that fulfills or exceeds the expectations of the customer” • Though quality is an abstract perception, it has a quantitative measure- Q= (P / E ) where Q=quality, P= performance (as measured/mentioned) by the Mfgr.), and E = expectations (of the customer). • There are 8 dimensions of quality that may be found in products that produce customer satisfaction. j Dr. Prashant B. Kalaskar j
  41. 41. 8 Dimensions of Quality Garvin (1987) 1) Performance: - Will the product/service do the intended job? 2) Reliability: - How often does the product/service fail? 3) Durability: - How long does the product/service last? 4) Serviceability: - How easy to repair the product / to solve the problems in service? j Dr. Prashant B. Kalaskar j
  42. 42. Dimensions of Quality Garvin (1987) 5) Aesthetics: - What does the product/service look/smell/sound/feel like? 6) Features: - What does the product do/ service give? (Speed/ Mielage) 7) Perceived Quality: - What is the reputation of the company or its products/ services? 8) Conformance to Standards: - Is the product/service made exactly as the designer/standard intended? j Dr. Prashant B. Kalaskar j
  43. 43. Definitions of Quality • Philips B Crosby- “Quality is Conformance to requirements” • W. Edwards Deming- “A predictable degree of uniformity and dependability at low cost and suited to market” • Bill Conway- “Development, manufacture, administration and distribution of consistently low cost and products and services that customers need and want” j Dr. Prashant B. Kalaskar j
  44. 44. Approaches to define Quality • Transcendent (Inspiring) Approach - Quality is absolute and universally recognizable. - It is common notion used (known) by laymen - There is no subjective judgment and is estimated by using/looking at the product j Dr. Prashant B. Kalaskar j
  45. 45. Approaches to define Quality • Product Based Approach - Attributes of a particular product in a specific category - These attributes are accepted as benchmark of quality by the industry - Others in the same industry try to produce close to this quality j Dr. Prashant B. Kalaskar j
  46. 46. Approaches to define Quality • User Based Approach - Defined as “Fitness for use” - Viewed from user’s perspective and is dependent on how well does the product meet needs of the consumer. j Dr. Prashant B. Kalaskar j
  47. 47. Approaches to define Quality • Production Based Approach - An outcome of engineering or operational excellence and is measured in terms of quality of conformance - The producer produces the product as per the specifications j Dr. Prashant B. Kalaskar j
  48. 48. Approaches to define Quality • Value Based Approach - Quality is viewed in context of price - Quality is satisfactory, if it provides desired performance at an acceptable price - Customer looks at the total value proposition and not the price alone j Dr. Prashant B. Kalaskar j ice Benefits Value Pr =
  49. 49. Manufacturer’s view on Quality • Different Views of Quality that can Exist in the Same Firm • Customer’s View: Rightful level of expectations to buy a product at lowest possible cost to get high degree of Satisfaction j Dr. Prashant B. Kalaskar j Engineering Marketing Accounting A product engineer might associate quality with product design A marketing executive might associate quality with quick Customer acceptance An accountant might associate quality with low product cost
  50. 50. Total Quality Management (TQM) • In late 1980’s a concept of TQM evolved.. • Not only the manufacturing unit but the entire organization is considered as one unit responsible for maintaining the quality. • TQM can be defined as, “Managing the entire Organization in such a way that, it excels in all dimensions of Products and Services that are important to the customers” • TQM is the process approach and not Product/Service Approach j Dr. Prashant B. Kalaskar j
  51. 51. Total Quality Management (TQM) “Quality is everyone’s responsibility” -Edward Deming • The integration of all processes and functions of the firm in the task of ensuring a product’s quality throughout its life cycle (mfg. & usage) . • Measurement of Success: – 100% Customer Satisfaction • Method of Achievement: – Continuous Improvement j Dr. Prashant B. Kalaskar j
  52. 52. Total Quality Management (TQM) • TQM comprise of three basic areas; 1) Product Quality 2) Process Quality & 3) Human Quality j Dr. Prashant B. Kalaskar j
  53. 53. Total Quality Management (TQM) • 1. The customer makes the ultimate determination of quality. • 2. Top management must provide leadership and support for all quality initiatives. • 3. Preventing variability is the key of producing high quality. • 4. Quality goals are a moving target, thereby requiring a commitment toward continuous improvement. • 5. Improving quality requires the establishment of effective metrics. We must speak with data and facts not just opinions. j Dr. Prashant B. Kalaskar j
  54. 54. TQM Six Basic Concepts 1. A committed and involved management to provide long-term-top-to-bottom organizational support. 2. An unwavering (constant) focus on the customer, both internally and externally. 3. Effective evaluation of the business and production process. 4. Continuous improvement of the business and production process. 5. Treating suppliers as partners. 6. Establish performance measures for the process. j Dr. Prashant B. Kalaskar j
  55. 55. 5 Main Advantages of TQM 1. Encourages a strategic approach to management at the operational level through involving multiple departments in cross-functional improvements and systemic innovation processes; 2. Provides high ROI through improved efficiency; 3. Works equally well for service and manufacturing sectors; 4. Allows organizations to take advantage of developments for improving operations as cross-functional processes; and 5. Fits an orientation toward inter-organizational collaboration and strategic alliances by establishing a culture of collaboration among different departments within organization. j Dr. Prashant B. Kalaskar j
  56. 56. Lean Management (LM) • Lean Management is derived from Toyota Production Systems • In TPS it started with, - Reducing the time to change the dies for stamping press - This moved in to reduction in inventory, - Which resulted in JIT inventory Management • This allowed to reduce overall need for less space for warehouse, less requirement of forklifts, cost etc. • Lean is simply “doing more with Less” j Dr. Prashant B. Kalaskar j
  57. 57. Lean Management (LM) • Lean Management is achievable by, “identifying & eliminating non value added processes & by providing a skillful training to the employees to do so” “Any fluctuation in performance increases waste” Lean Management eliminates wastes, so as to increase, - Product’s Quality - Profitability - Productivity j Dr. Prashant B. Kalaskar j
  58. 58. Lean Management (LM) j Dr. Prashant B. Kalaskar j TPS Goal: Highest Quality, Lowest Cost, Short Lead Time Just in Time Jidoka Continuous Flow, Takt Time, Pull System Stop & Notify Abnormalities, Separate Man’s & Machine’s Work Heijunka Standardized Work Kaizen Stability Toyota Production System (TPS) Toyota Production System (TPS) is mainly based on 2 pillars of Just in Time & Jidoka
  59. 59. Lean Management • Cycle time is the time from when the Operation begins to the point-of-time at which the operation ends. • Simply the time required at which the product begins to manufacture and the point at which the finished product is ready. It depends upon Process • Lead Time: It is the time period between placing an order (Product/Material) and actual receiving of the order • Takt Time: Beat time, Rhythm like Heart Beat. • Takt time is the maximum amount of time in which a product needs to be produced in order to satisfy customer demand j Dr. Prashant B. Kalaskar j
  60. 60. Lean Management • Continuous Flow: Uninterrupted production process without stoppage even for maintenance. • Pull System: Replenishing only those resources which are consumed or producing what is demanded by the customers and not based on forecasting • Autonomation: A feature of machine, “automation with a human touch” in Jidoka • (Autonomation aims to prevent the production of defective products, eliminate overproduction and focus attention on understanding the problems and ensuring that they do not reoccur.) j Dr. Prashant B. Kalaskar j
  61. 61. Lean Management • The main objective of every company is to earn maximum Profit j Dr. Prashant B. Kalaskar j (`)Profit Maximization Satisfy Customer & their Demands Best Prices Supply in Time Lowest Cost Shortest Lead Time Best Quality
  62. 62. Lean Management • Basic Elements of Lean Management 1) Muda: 7 Types of Wastes 2) Kaizen: Continuous Improvement (CIP) 3) Standards 4) Visual management j Dr. Prashant B. Kalaskar j
  63. 63. Lean Management j Dr. Prashant B. Kalaskar j • 7 wastes (Muda) for Process Improvement in TPS:
  64. 64. 7 wastes (Muda) j Dr. Prashant B. Kalaskar j 1) Motion: Excessive motion on floor shop, will reduce efficiency and increases chances of errors 2) High Inventory: Higher inventory (RM/Finished Pdts) may result in mishandling, theft, damage, increase in cost of production 3) Transport: Excessive Transportation will increase the time and cost of transportation, loss to company 4) Scrap in Rework: Any rework in finishing of final product, will increase scrap, which is wastage 5) Waiting: Waiting by workers for the next task, is wastage of time and efficiency 6) Over Processing: Over processing of finished product will increase the cost of production 7) Over Production: blockage of capital and space of storage
  65. 65. Lean Management • Kaizen: Continuous Improvement • Without Standards, there can not be Improvement j Dr. Prashant B. Kalaskar j
  66. 66. Lean Management • Standards should be used everywhere in work environment j Dr. Prashant B. Kalaskar j
  67. 67. Lean Management • Visual Management: It is an important method for a shop floor manager to manage to the daily business easily • Visual management shows any difference between normal and abnormal production processes • Examples: (Floor Marking) • Red: Defects, scrap, rework and red tag areas • Green: Finished goods • Orange: Materials or product held for inspection j Dr. Prashant B. Kalaskar j
  68. 68. Lean Management • Jidoka: Automation with a human touch (Autonomation) • Practice of stopping a manual line or process when something goes amiss (wrong) • Jidoka helps to detect a problem earlier • Jidoka avoids the spread of bad practices • A level of human intelligence is transferred into automated machinery • Result: No defects in products & improved productivity j j Automation is focused on labor reduction. Autonomation (Jidoka) is focused on quality improvement, and the independence of the man from the process At Toyota, all machines are set up with automatic stop machines.
  69. 69. Lean Management • Heijunka: Level out the Load • Reduce Muri – the overburden of people and equipment that results in problems of safety, quality, and performance (vs. sustainable pace) • Reduce Mura – (unevenness). If the workload or the type of work fluctuates wildly from one moment to the other, people (and machines) never "get into the rhythm" back and waste time switching between tasks. • The production stalls and restarts all the time. j Dr. Prashant B. Kalaskar j
  70. 70. Lean Management • Heijunka: Minimizing Waste – Plant Loading j Dr. Prashant B. Kalaskar j Not uniform Jan. Units Feb. Units Mar. Units Total 1,200 3,500 4,300 9,000 Uniform Jan. Units Feb. Units Mar. Units Total 3,000 3,000 3,000 9,000 Suppose we operate a production plant that produces a single product (XYZ). The schedule of production for this product could be accomplished using either of the two plant loading schedules below.
  71. 71. Lean Management • Kanban: Meaning Signboard or Billboard (Visual Cards) • Visual & physical signaling system that ties together the whole Lean Production system. • Kanban systems combined with unique scheduling tools, dramatically reduces inventory levels. • Enhances supplier/customer relationships and improves the accuracy of manufacturing schedules. • A signal is sent to produce and deliver a new shipment when material is consumed. j Dr. Prashant B. Kalaskar j
  72. 72. Lean Management • Kanban: The core of Kanban means: • Visualize the workflow - Split the work into pieces, write each item on a card and put on the wall. - Use named columns to illustrate where each item is in the workflow. • Limit WIP (work in progress) – assign clear limits to how many items may be in progress at each workflow state. j Dr. Prashant B. Kalaskar j
  73. 73. Lean Management • Kanban: The core of Kanban means: • Measure the lead time (average time to complete one item, called as “cycle time”), optimize the process to make lead time as small and predictable as possible. • This is a direct implementation of a lean pull scheduling system. Kanban and JIT Video j Dr. Prashant B. Kalaskar j
  74. 74. Kanban in Lean Management • Six Rule of Kanban (signboards) at Toyota 1) Later process picks up the number of items as indicated by the Kanban at the earlier process. 2) Earlier process produces items in the quantity and sequence as indicated by the Kanban. 3) No items are made or transported without a Kanban. 4) Always attach a Kanban to the goods. 5) Defective products are not sent on to the subsequent process. The result is 100% defect-free goods. 6) Kanban increases the sensitivity. j Dr. Prashant B. Kalaskar j
  75. 75. Kanban-Conceptual Diagram j Dr. Prashant B. Kalaskar j
  76. 76. Impact of Global Competition on OSCM Globalization: Social and economic integration through open trade Reasons of Globalization: 1) Access to Cheaper Labour and Manufacturing cost 2) To access to the knowledge and skills of people 3) To access to resources 4) Access to new markets 5) To access Location to reduce logistics and distribution cost. 6) To take advantage of tax and financial incentives 7) market requirements, global rivalry, and development in international freight transport system j Dr. Prashant B. Kalaskar j
  77. 77. Impact of Global Competition on OSCM Globalization: Social and economic integration through open trade • Drivers of Supply Chain Management There are 5 different drivers of SCM 1) Production (Dell, McDonald) 2) Inventory (HP) 3) Location (Toyota) 4) Transportation (FedEx) 5) Information (P&G) j Dr. Prashant B. Kalaskar j
  78. 78. Impact of Global Competition on OSCM 1) Production (Dell, McDonald): McDonald Changed their product content to match customer requirement, Dell by mfg. product as per customer orders 2) Inventory (HP): Hewlett & Packard, used less than 50% inventory to unknown or low demand products and a buffer inventory to high demand products using multi-echelon Inventory optimization tool 3) Location (Toyota): Toyota have 51 mfg. units in 26 regions in global market, with objective to access cheaper labours, skills, technology, distribution cost and wider distribution network, lower taxes, etc. j Dr. Prashant B. Kalaskar j
  79. 79. Impact of Global Competition on OSCM 4) Transportation (FedEx): It is the most outsourced component of supply chain management. Receiving orders through telephone/internet, allowing customers to view, change order status, use of multiple transportation systems (Flights, Trains, Road, etc.), Hub & Spoke system, for effective delivery to customer 5) Information (P&G): It helps companies to take correct decisions in business to by solving the issues with retailers and distributors. Information sharing system helped to Procter & Gamble to gain a competitive advantage on competitors, and to make future planning for manufacturing, and distributing of Pamper disposable diapers. j Dr. Prashant B. Kalaskar j
  80. 80. Impact of Global Competition on OSCM • Globalization has increased the cross border competition • A company need to consider not only domestic, but also a global competition. • Global Competition forced companies; - To increase quality of products (Operations) and - Increase speed of delivery of products (SCM), to remain in competition as well to earn maximum customer satisfaction j Dr. Prashant B. Kalaskar j
  81. 81. Impact of Global Competition on OSCM • Geographical Integration: - Developing worldwide facilities of operations & SCM to achieve regional economic integration by selling products in multiple markets - Global integration is also a result of development of ICT & Transport System - Examples: Express delivery by FedEx, DHL through their planes, hubs systems, tracking systems, faster delivery resulted in improved services and customer satisfaction j Dr. Prashant B. Kalaskar j
  82. 82. Impact of Global Competition on OSCM • Functional Integration: - Not only operations & material management department but, - Marketing - Finance - HRD - MIS…etc Are the various departments are now required to be integrated to have a better coordination j Dr. Prashant B. Kalaskar j
  83. 83. Impact of Global Competition on OSCM • Sectorial Integration: - Not only Retail or wholesale or just the Transport sector are integrated for optimization of OSCM but there is a perceived need of integration of other sectors . - Examples: a Banking sector integration with a Automobile sector or electronic sector or retail sector - Objective: Risk Sharing & Expansion of Business j Dr. Prashant B. Kalaskar j
  84. 84. Ethical Issues in Operation Management The rules or standards governing the conduct of a person or members of a profession. “The discipline dealing with what is good and bad and with moral duty and obligation.” j Dr. Prashant B. Kalaskar j
  85. 85. Ethical Issues in SCM • Supply Chain is the network of retailers, distributors, transporters, storage facilities and suppliers that participate in the sale, delivery and production of a particular product. • In the simplest terms, Supply Chain Management (SCM) lets an organization get the Right Products and services to the Right place they're needed at the Right time, in the Right quantity and at an acceptable cost (Right price) (5R’s). j Dr. Prashant B. Kalaskar j
  86. 86. Ethics in Supply Chain Management • Efficiently managing this process involves overseeing relationships with suppliers and customers, controlling inventory, forecasting demand and getting constant feedback on what's happening at every link in the chain. j Dr. Prashant B. Kalaskar j
  87. 87. Ethical & Environmental Issues in OSCM • Roots of Ethics • Professional ethics is about managing relations which is a crucial part in SCM. • Successful companies use supply chains not only to reduce cost and complement the product but also to nurture long-term value added relationships. j Dr. Prashant B. Kalaskar j
  88. 88. Ethics in Supply Chain Management • Why society is concerned about ethics within SCM? Environmental Effects • Treatment plants for water, treatment of solid waste, gases Health and Safety • In Food Industry- uses of pesticides, hormone-treatment of animals Consumer Rights • Legislations about right to safety, right to choose, right to be heard. j Dr. Prashant B. Kalaskar j
  89. 89. Ethics in Supply Chain Management • Ethical Model/Process • Economic responsibilities: Supply Products and Services. • Legal Responsibilities: Obey Laws. • Ethical Responsibilities: Conduct business in a way that is morally consistent with the beliefs of society j Dr. Prashant B. Kalaskar j
  90. 90. Ethics in Supply Chain Management • Reasons for Increasing Concern about Ethics The pressure is coming from various sources. A wide range of stakeholders are interested in the social, ethical and environmental performance of the retail industry’s supply chain. Different Stakeholders will have different expectations from the companies j Dr. Prashant B. Kalaskar j
  91. 91. Ethics in Supply Chain Management • Stakeholders Concern about Ethics 1) General Public: Companies should follow Responsibilities 2) Investors: Assumes Managing issues, is Managing a Company and SCM and investments 3) Media: Media is powerful to expose and explore Company 4) Consumers: More educated and sensitive consumers 5) Government and NGO’s: Strong and Legal Bindings j Dr. Prashant B. Kalaskar j
  92. 92. Ethics in Supply Chain Management • Various Ethical Issues in SCM: 1) Child Labour Issues 2) Labour wage issues and Labour Supply Issues 3) Environmental issues 4) Quality Products and Cost to Consumers Issues & Safety 5) Suppliers Management Issues 6) Ethical Behavior will all Supply Chain Partners 7) Workers Safety, Working Conditions and Workers Rights 8) Consumer Protection etc. j Dr. Prashant B. Kalaskar j
  93. 93. Ethics in Supply Chain Management • Example: • Nike - Code of Conduct- Improve working conditions in factories: Forced labor, Child Labor, Compensation, Benefits, Hours of work, Safety and health, Documentations and inspection. j Dr. Prashant B. Kalaskar j
  94. 94. For Any Query…… j j Dr. Prashant B. Kalaskar +919975770407 Email: pbkalaskar@sinhgad.edu prashantkalaskar007@gmail.com

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