psworldA pan IIM Operations Magazine
Volume III: 2012-13
Indian Institute of Management
-Raipur
IN THIS EDITION
>Supply Ch...
Director’s Message
Director’s
Message
It is my great pleasure to present the
third edition of the pan-IIM
Operations magaz...
OPSWorld
4
Editorial
Editorial
W
ith competition rising fiercely,
organisations are finding it diffi-
cult to increase the...
Contents
OPSWorld
5
Contents
The team
Editors
Karthik V (IIM-K), Niranjan Sunderasan (IIM-K), Pranay Meshram (IIM-K),
Soum...
OPSWorld
6
Executive Summary
The primary focus of the healthcare industry has been to
provide patients with the best quali...
OPSWorld
7
tance in healthcare industry esp. in the areas of
procurement, inventory control and materials
planning. Elemen...
OPSWorld
8
Supply Chain Management in Healthcare
stand that the efficient management of materials
can not only reduce oper...
staff and minimizing inventory. Hospital supply
chain has to ensure proper linkages to clinical sys-
tems, revenue cycle, ...
OPSWorld
10
Supply Chain Management in Healthcare
ogy-oriented applications can be found in the
areas of procurement, inve...
OPSWorld
11
Supply Chain Management in Healthcare
managers. Improvements in all these areas can
become possible with the a...
OPSWorld
12
Supply Chain Management in Healthcare
? Increase inventory turns to hold less capital at a
given time Procurem...
OPSWorld
13
Supply Chain Challenges in IOL & Gas Industry
INTRODUCTION
The term “Supply- chain management (SCM)” can be
be...
OPSWorld
14
Supply Chain Challenges in IOL & Gas Industry
SUPPLY CHAIN LINKAGE IN OIL AND
GAS INDUSTRY
The supply chain li...
OPSWorld
15
Supply Chain Challenges in IOL & Gas Industry
lem of the service provider. Also, in some cases, the
locking sy...
OPSWorld
16
Supply Chain Challenges in IOL & Gas Industry
result, risks involved in delivering, transporting
and storing a...
OPSWorld
17
Towards better Maintenance The experiment with Defects
INTRODUCTION:
In an organization like SAIL, quality pro...
OPSWorld
18
Towards better Maintenance The experiment with Defects
is not always possible for company as vast as
SAIL, whe...
OPSWorld
19
Towards better Maintenance The experiment with Defects
of perennial nature surfaced and some of them
were elim...
OPSWorld
20
Site Identification for new AIIMS-like Institutions based on Network Analysis
1. Introduction
Pradhan Mantri S...
OPSWorld
21
Site Identification for new AIIMS-like Institutions based on Network Analysis
2. Physical Infrastructure
3. Ea...
OPSWorld
22
Site Identification for new AIIMS-like Institutions based on Network Analysis
Candidate Locations
The candidat...
OPSWorld
23
Site Identification for new AIIMS-like Institutions based on Network Analysis
State-wise Persons Hospitalized ...
OPSWorld
24
Site Identification for new AIIMS-like Institutions based on Network Analysis
City
Expenses
Scaled for
2011-12...
OPSWorld
25
Site Identification for new AIIMS-like Institutions based on Network Analysis
Physical Infrastructure
The budg...
OPSWorld
26
Site Identification for new AIIMS-like Institutions based on Network Analysis
Appendix: Analytical Hierarchica...
OPSWorld
27
OPSWorld
Quiz
OPS World
Quiz
OPS World
Quiz
8. System representing highest level of
automation in manufacturin...
OPSWorld
28
Bargain Air Fares
It all started with Expedia introducing it in the year 2004 but
ceased to exist as on date. ...
OPSWorld
29
Bargain Air Fares
C Economy Class Price v/s Empty seats loss
Underneath Idea comes from root of this to
form b...
OPSWorld
30
ERP in operations management
Introduction
In a business landscape that is getting increasingly compet-
itive a...
OPSWorld
31
ERP in operations management
for instance, the terminology specific to an indus-
try used was not supported by...
OPSWorld
32
Abstract:
Inventory accounts for about 40-50% of the total cost in a
supply chain. Hence inventory control bec...
OPSWorld
33
Cost Effectiveness: JIT vs EOQ
as an investment for the sake of streamlining
inventory.When the buyer places a...
OPSWorld
34
Cost Effectiveness: JIT vs EOQ
be generated using forecasting techniques. In the
given code double exponential...
OPSWorld
35
Cost Effectiveness: JIT vs EOQ
6). Analysis:
Here we see that for ‘supplier-to-manufactur-
er’ step traditiona...
OPSWorld
36
Microgrid optimization as an OR problem
Around 20% of world’s population is still without access to
electricit...
OPSWorld
37
Microgrid optimization as an OR problem
The objective function of this Operations
Research problem seeks to mi...
OPSWorld
38
Operational Excellence at Erection Site:
Introduction :
Simhadri Project, Stage 1, is not only a benchmark for...
OPSWorld
39
Operational Excellence at Erection Site:
ical progress but cost, material requirement and
manpower resource re...
OPSWorld
40
Operational Excellence at Erection Site:
by Road. Most of the OD consignments were
through Railways which invo...
OPSWorld
41
Recent perspectives on electric power quality
The proliferation of ‘sensitive’ equipment such as electronic
ap...
Ops world 3.0
Ops world 3.0
Ops world 3.0
Ops world 3.0
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Ops world 3.0

  1. 1. psworldA pan IIM Operations Magazine Volume III: 2012-13 Indian Institute of Management -Raipur IN THIS EDITION >Supply Chain Management in Healthcare >Supply Chain Challenges in IOL & Gas Industry - Indian Context >Towards better Maintenance The experiment with Defects >Site Identification for new AIIMS-like Institutions based on Network Analysis of similar existing facilities >Bargain AirFares >ERP in operations management > Cost Effectiveness: JIT vs EOQ >Microgrid optimization as an OR problem >Operational Excellence at Erection Site: Simhadri Stage 1, NTPC Limited >Recent perspectives on electric power quality
  2. 2. Director’s Message Director’s Message It is my great pleasure to present the third edition of the pan-IIM Operations magazine, OpsWorld. This issue puts forward fresh perspectives regarding the challenges and opportu- nities felt by industry and academia about an increasingly operations driv- en future. I wish Omega, the Operations Interest Group of IIM Kozhikode, great success in their endeavour to create awareness about relevance of the operations vertical for future growth. Prof. DebashisChatterjee Director, IIM Kozhikode
  3. 3. OPSWorld 4 Editorial Editorial W ith competition rising fiercely, organisations are finding it diffi- cult to increase their share of the pie. Focus is shifting to cost reduction from revenue increase. In today’s world where time is money, Operations Managers are constantly ideating to improve their efficien- cy. Companies are investing in technologies, implementing new systems and employing various integration strategies believing that operations will provide the competitive edge. The third edition of OpsWorld, the pan IIM Operations Magazine, throws light on how companies are operating to achieve excel- lence, an inside into NTPC’s Project Management System, Operations Research methodologies in Microgrid, Supply Chain Management in Healthcare industry and many more.... On behalf of the editorial team, I would like to express my gratitude to Prof. P.N. Ram Kumar who accepted our request to judge the entries from students and for his valu- able insights. I would also like to thank all students, professors and industry experts who had sent their articles for publication. We are grateful to the Operations Interest Groups of all the IIMs for their constant support to make OpsWorld a bigger success. Happy reading! Editor-in-Chief
  4. 4. Contents OPSWorld 5 Contents The team Editors Karthik V (IIM-K), Niranjan Sunderasan (IIM-K), Pranay Meshram (IIM-K), Soumyarup Dasgupta (IIM-K), Vinay Ashwin (IIM-K) Supply Chain Management in Healthcare 04 Supply Chain Challenges in IOL & Gas Industry - Indian Context 11 Towards better Maintenance The experiment with Defects 15 Site Identification for new AIIMS-like Institutions based on Network Analysis of similar existing facilities 18 Bargain AirFares 26 ERP in operations management 28 Cost Effectiveness: JIT vs EOQ 30 Microgrid optimization as an OR problem 34 Operational Excellence at Erection Site: Simhadri Stage 1, NTPC Limited 36 Recent perspectives on electric power quality 39
  5. 5. OPSWorld 6 Executive Summary The primary focus of the healthcare industry has been to provide patients with the best quality of care while reducing the costs. Recently, the increasing cost of supplies and severe com- petition among healthcare providers has significantly increased the pressure on material managers to operate more cost-effi- ciently without compromising high patient care standards. While other sectors have experienced success through the deployment of supply chain management practices, the health- care sector has not seen major improvements in this area. This paper provides an assessment of supply chain management in the healthcare sector. The integration of three different stake- holders of the healthcare supply chain namely producers, pur- chasers and providers facilitates the delivery of products in a timely manner in order to serve the customers.A significant por- tion of the costs associated with supply chains in the health care sector can be reduced by implementing effective supply chains. To be fully effective, it must be an integrated link in the chain of clinical and non-clinical operations. A fully integrated supply chain in healthcare is characterized by the integration and co-ordination of operational processes, information flows, planning processes, intra- and inter-organizational processes and market development. These processes refer not only to physical products like pharmaceuticals, medical devices & health aids but also to the processes associated with the flow of patients. Information technology has gained a lot of impor- Supply Chain Management in Healthcare AUTHOR Anurag Gupta IIM Lucknow Anurag Singh IIM Lucknow E Supply Chain Management in Healthcare
  6. 6. OPSWorld 7 tance in healthcare industry esp. in the areas of procurement, inventory control and materials planning. Elements like organizational culture, the absence of strong leadership and mandating authority, as well as power and interest relation- ships between stakeholders might severely hinder the integration and co-ordination of processes along the health care supply chain. Due to the ongoing transformation within the health care sector towards greater integration and more process-oriented health care chains, the supply chain orientation within the health care sector can be regarded as a complex social change process. Apart from highlighting the areas of improvements and identifying the barriers for implementing the practices, the paper also ana- lyzes the best practices of supply chain manage- ment in healthcare. Improvements have been made primarily in the area of education but areas such as inventory control, procurement processes, and information sharing require more attention from supply chain managers. The supply chain management best practices can greatly help material managers with their continuous improvement efforts, while maintaining quality of care. Finally, the adoption of new emerging tech- nologies, such as radio frequency identification (RFID) and its benefits to the healthcare industry are also explored to identify innovative alterna- tives to material management in the healthcare sector. Supply Chain Management in Healthcare Introduction The global healthcare industry is one of the world's largest and fastest growing industries, comprising various sectors: medical equipment and supplies, pharmaceutical, healthcare services, biotechnology, and alternative medicine sectors. With extreme pricing pressures on today’s health- care providers, delivering high-quality medical care while reducing costs is a top strategic priori- ty. To achieve this objective, healthcare service providers’ efforts have been focused primarily on eliminating waste in clinical operations. While these are valid and important ways to reduce healthcare costs, one area that consumes nearly one-third of all hospital operating budgets often remains overlooked - the healthcare supply chain. When it comes to expenses, supplies are second only to labor, with millions of products moving along the supply chain every day through manu- facturers, distributors, Group Purchase Organizations (GPOs) and healthcare providers to patients. While the adoption of SCM practices has been successful in many sectors, the healthcare indus- try has not seen major improvements from these practices (McKone-Sweet et al., 2005). Today, healthcare managers and industry experts under- Supply Chain Management in Healthcare Figure 1: Breakup of annual operating expense used to support healthcare supply chain costs Sample size = 204; Source: 2009, Nachtman and Pohl
  7. 7. OPSWorld 8 Supply Chain Management in Healthcare stand that the efficient management of materials can not only reduce operating cost, but increase the quality of care (Schneller et al., 2006) Healthcare Supply Chain The healthcare supply chain involves the flow of many different product types and the participa- tion of various stakeholders. The main purpose of the healthcare supply chain is to deliver products in a timely manner in order to fulfill the needs of providers. Based on their functions, stakeholders in the healthcare supply chain can be divided into three major groups: producers, purchasers, and providers. The role of producers is to manufacture med- ical products such as surgical supplies, medical devices and pharmaceuticals. Purchasers include distributors, wholesalers and Group Purchase Organizations (GPOs). Distributors and whole- salers hold inventory for producers to facilitate delivery of products. GPOs sign purchasing con- tracts with producers in order to achieve economies of scale by aggregating the volume of member providers. Healthcare providers represent those at the end of the supply chain with the function to serve patients and include, among others, hospitals, integrated delivery networks (IDNs), physicians, clinics, nursing homes and pharmacies (Burns, 2002). In the past, a hospital that managed its purchasing costs well could operate efficiently. Today, the cost of materials management can exceed 45% of a hospital’s operating budget, with nearly 30-35% attributa- ble to supply costs alone. Recent studies show that a significant portion of the costs associated with supply chains in the health care sector can be reduced by implementing effective supply chains. The application of supply chain manage- ment practices in the health care sector not only relates to physical goods like drugs, pharmaceuti- cals, medical devices and health aids but also to the flow of patients (Beier, 1995). Integrated Supply Chain in Healthcare In hospitals, integrated supply chain strategy should be consistent to maximize patient care. The hospital supply chain enables this strategy by ensuring product availability, minimizing storage space, maximizing patient care space, reducing material handling time and costs for all medical Producers Purchasers Providers Insurance Companies Government Regulatory Agencies CMedical and Surgical Supplies CMedical Devices CPharmaceutical CHospitals CIDNs CPhysicians CClinics CPharmacies CNursing Homes CWholesalers CDistributors CGPOs Figure 2: A healthcare supply chain configuration. Source: Burns, 2002
  8. 8. staff and minimizing inventory. Hospital supply chain has to ensure proper linkages to clinical sys- tems, revenue cycle, IT and clinical operations. The supply chain often is viewed as a “back dock” sup- port service that provides the products and servic- es required by clinical departments. To be fully effective, it must be an integrated link in the chain of clinical and non-clinical operations (Achryulu et al., 2012). Health supply chains can be character- ized by different modes of integration: 1. Integration and co-ordination of processes 2. Integration and co-ordination of information flows 3. Integration and co-ordination of planning processes. 4. Integration of intra- and inter-organisational processes. 5. Integration of market-approach. 6. Integration of market-development. Considering health service providers, supply chain management often refers to the informa- tion, supplies and finances involved with the movement and acquisition of goods and services from the supplier side to the end user with major emphasis on two aspects, firstly, to enhance clini- cal outcomes and secondly to optimize costs. In doing so supply chain management puts a strong emphasis on the integration of processes. Considering the healthcare sector, these process- es refer to physical products like pharmaceuticals, medical devices & health aids and processes asso- ciated with the flow of patients. In both these cases, an intensive co-ordination and integration between operational processes might lead to a better health supply chain performance. Information technology and the deployment of e- business are closely linked to the co-ordination and integration of operational processes. Different studies have advocated the importance of information technology in healthcare sector (Breen and Crawford, 2005; Harland and Caldwell, 2007) and it is not a matter of surprise that many studies on health care supply chains focus on the role of e-business technologies across hospital supply chains (Siau et al., 2002). Similar to the co-ordination and integration of operational processes, information technology in the healthcare sector is related to both physical products as well as to the flow of patients within and between health service organizations (Lowell and Celler, 1998). The use of information technol- OPSWorld 9 Supply Chain Management in Healthcare Cfragmented alloca- tion of authorities and responsibilities Clocal optimisation Cemphasis on indi- vidual processes Cintegrated authori- ties and responsi- bilities Ccentral focus on designing and con- trolling material flows on an organ- isational level Cemphasis on coor- dination and inter- face questions Capplication of com- pany-wide infor- mation systems Cestablishing part- nership relation- ships and alliances Cdesigning and implementing inter-organisational information sys- tems Cintegration of processes between different compa- nies (interface questions between companies) Cintegration of mar- ket-development and collaboration between compa- nies on a supply chain level High Supply chain integration Low Phase 1 Phase 2 Phase 3 Supply Chain must be an integrated link in clinical & non- clinical operations
  9. 9. OPSWorld 10 Supply Chain Management in Healthcare ogy-oriented applications can be found in the areas of procurement, inventory control and materials planning. One of the well-known exam- ples of an IT application being used in Health sec- tor is Electronic Patient Record Systems which has significantly contributed in improving the integra- tion and smoothening of processes within and between health service delivery organizations. The application of supply chain management practices in healthcare setting is almost by defini- tion related to organizational aspects like building relationships, allocating authorities and responsi- bilities, and organizing interface processes. Different studies have highlighted the importance of organizational processes when applying supply chain management practices. Moreover, recent studies reveal that elements like organisational culture, the absence of strong leadership and mandating authority, as well as power and inter- est relationships between stakeholders might severely hinder the integration and co-ordination of processes along the health care supply chain (McCutcheon and Stuart, 2000). Healthcare sup- ply chain integration is not only related to the integration and co-ordination of planning processes but this can also be linked to joint “market development” and offering new “care- products”. Product co-development is a recog- nized phenomenon in the field of supply chain management and within industrial supply chains many joint efforts are made to develop new prod- ucts across suppliers, customers and organisation- al units. Additionally, healthcare service providers have taken the initiative in different countries to develop new care-products in close collaboration with each other. Clearly, the above mentioned modes of integration cannot be considered in iso- lation. Studies in the field of industrial companies indicate that organizations often go through sev- eral stages of integration, starting with a trans- parency stage via a commitment/ coordination stage to a full integrated stage encompassing all the different modes of integration addressed above (Ballou et al., 2000; van der Vaart and van Donk, 2008). The ongoing transformation within the health care sector towards greater integration and more process-oriented health care chains requires a shift in strategy, structure and control mechanisms.As such, the supply chain orientation within the health care sector can be regarded as a complex social change process. Best practices of Healthcare Supply Chain The best practices of Healthcare Supply Chain are summarized in the following table: Table 1: Best practices of Healthcare Supply Chain Conclusion This article provides insight about supply chain management practices in the healthcare sector. Although many health care organisations have recognized the importance of adopting sup- ply chain management practices, the application of techniques, methods and best practices origi- nally developed in an industrial setting clearly is often problematic. Improvements have been made in the healthcare supply chain, primarily in the area of education but areas such as inventory control, procurement processes, and information sharing require more attention from supply chain Supply chain integration within healthcare is a complex social process change
  10. 10. OPSWorld 11 Supply Chain Management in Healthcare managers. Improvements in all these areas can become possible with the aid of information tech- nology, along with collaboration and cooperation of stakeholders. Areas Recommended Best Practices Education ? Increase training on SCM principles such as executive support, communica- tion within internal departments, information sys- tems and measurement systems Transportation & Logistics ? Use of cold storage infrastructure for storage and transportation in pharmaceutical industry, a major player in healthcare Inventory Management ? Use computer software applica- tions for calculating reorder points and quantities based on demand forecast and safety stock levels Areas Recommended Best Practices Education C Increase training on SCM principles such as executive support, communication within internal departments, information sys- tems and measurement systems Transportation & Logistics C Use of cold storage infrastructure for storage and transportation in pharmaceutical industry, a major player in healthcare Inventory Management C Use computer software applications for calculating reorder points and quantities based on demand forecast and safety stock levels C Increase inventory turns to hold less capital at a given time Procurement and Contracting C Increase automated ordering process by using electronic means (EDI, Internet) C Comply with GPO contracts to achieve cost savings C Standardize products to reduce number of contracts and trans- actions Quality Management C Apply total quality management in hospitals and integrate a smooth running strategy for their supply chain management. Hospital integration with internal and external customers is realized as important factors in implementing and empowering the overall integration process in quality management system in hospitals Using RFID technology C Use of Radio Frequency Identification (RFID) technology, which will continue to make inroads thru track-and-trace solutions, first, as asset and inventory management tools, then gravitating towards personnel, patient and clinical monitoring devices Recalling drugs C Use of RFID technology can also help in keeping the track of such products along the entire chin Revenue-Cycle Management System and Decision Support System C Use technology solutions and healthcare consulting services to cover the full spectrum of a healthcare service provider's rev- enue cycle needs from improving patient access processes to reducing claims denials. C Use decision support system to integrate financial, clinical and administrative information and distribute that data enterprise- wide for timely analysis and decision-making that might posi- tively impact future performance Information Sharing & Collaboration/Cooperation C Share inventory related information with vendors for better planning. Information should include: sales data, backorders, and on-hand inventory; it should also be accurate and accessi- ble in a timely manner C Involve physicians and other providers in the product selection process through collaboration and cooperation Table 1: Best practices of Healthcare Supply Chain
  11. 11. OPSWorld 12 Supply Chain Management in Healthcare ? Increase inventory turns to hold less capital at a given time Procurement and Contracting ? Increase automated ordering process by using electronic means (EDI, Internet) ? Comply with GPO contracts to achieve cost savings ? Standardize products to reduce number of con- tracts and transactions Quality Management ? Apply total quality management in hospitals and integrate a smooth running strategy for their sup- ply chain management. Hospital integration with internal and external customers is realized as important factors in implementing and empower- ing the overall integration process in quality man- agement system in hospitals Using RFID technol- ogy ? Use of Radio Frequency Identification (RFID) technology, which will continue to make inroads thru track-and-trace solutions, first, as asset and inventory management tools, then gravitating towards personnel, patient and clinical monitor- ing devices Recalling drugs ? Use of RFID technol- ogy can also help in keeping the track of such products along the entire chin Revenue-Cycle Management System and Decision Support System ? Use technology solutions and healthcare consulting services to cover the full spectrum of a healthcare service provider's revenue cycle needs from improving patient access processes to reduc- ing claims denials. ? Use decision support system to integrate financial, clinical and administrative information and distribute that data enterprise- wide for timely analysis and decision-making that might positively impact future performance Information Sharing & Collaboration/Cooperation ? Share inventory related information with ven- dors for better planning. Information should include: sales data, backorders, and on-hand inventory; it should also be accurate and accessi- ble in a timely manner ? Involve physicians and other providers in the product selection process through collaboration and cooperation The supply chain management best practices can greatly help material managers with their continuous improvement efforts, while maintain- ing quality of care. Finally, the adoption of new emerging technologies, such as radio frequency identification (RFID) and its benefits to the health- care industry are also explored to identify innova- tive alternatives to material management in the healthcare sector. References 1. Nachtman, H. and Pohl, E.A. (2009), “The State of Healthcare Logistics: Cost and Quality improve- ment Opportunities,” Center for innovation in Healthcare Logistics, University of Arkansas. 2. McKone-Sweet, Kathleen E., Hamilton, P. and Willis, S.B. (Winter 2005), “The Ailing Healthcare Supply Chain: Prescription for Change,” The Journal of Supply Chain Management: A Global Review of Purchasing and Supply, pp. 4-17. 3. Schneller, E.S., Schmeltzer, L.R. and Burns, L.R. (2006), Strategic Management of the Health Care Supply Chain, Jossey-Bass, San Francisco, CA. 4. Burns, L.R. (2002), The Healthcare Value Chain: Producers, Purchasers, and Providers, Jossey Bass, San Francisco, CA. 5. Jan de Vries, Huijsman, R. (2011) "Supply chain management in health services: an overview", Supply Chain Management: An International Journal, Vol. 16 Iss: 3, pp.159 – 165 6. Beier, F.J. (1995), “The management of the supply chain for hospital pharmacies: a focus on inventory management practices”, Journal of Business Logistics, Vol. 16 No. 2, pp. 153-173. 7. Acharyulu, G.V.R.K. and Shekhar, B.R. (2012), “Role of Value Chain Strategy in Healthcare Supply Chain Management: An Empirical Study in India”, International Journal of Management Vol. 29 No. 1 Part 1, pp. 93-94 8. Breen, L. and Crawford, H . (2005), “Improving the pharmaceutical supply chain: assessing the reality of e -quality through e-commerce application in hospital pharmacy”, International Journal of Quality & Reliability Management, Vol. 22 No. 6, pp. 572-590. 9. Harland, C.M. and Caldwell, N.D. (2007), “Barriers to supply chain information integration : SMEs adrift of e-Lands”, Journal of Operations Management , Vol. 26 No. 6, pp. 1234-54. 10. Siau, K., Southard, P.B. and Hong, S. (2002), “E- healthcare strategies and implementation,” International Journal of Healthcare Technology and Management, Vol. 4 Nos 1/2, pp. 118-131. 11. Lowell, N. H. and Celler, B. G. (1998 ), “Information technology in primary health care”, International Journal of Medical Informatics ,Vol.55 No.1,pp.9-22. 12. McCutcheon, D. and Stuart, F.I. (2000), “Issues in the choice of supplier alliance partners”, Journal of Operations Management, Vol. 18 No. 3, pp. 279- 303. 13. Ballou, R.H., Gilbert, S.M. and Mukherjee,A. (2000), “New managerial challenges from supply chain opportunities”, Industrial Marketing Management, Vol. 29 No. 1, pp. 7-18. 14. Van der Vaart, T. and van Donk, D.P. (2008), “A crit- ical review of survey-based research in supply chain integration”, International Journal of Production Economics, Vol. 111 No. 1, pp. 42-55. 15. Callender, C. and Grasman, S.E. (2010), “Barriers and Best Practices for Material Management in Healthcare Sector”, Engineering Management Journal, Vol. 22 No. 4, pp. 11-17
  12. 12. OPSWorld 13 Supply Chain Challenges in IOL & Gas Industry INTRODUCTION The term “Supply- chain management (SCM)” can be best defined as the configuration, coordination and continu- ous improvement of a sequentially organized set of opera- tions.The primary aim of a supply chain management system in any organization is to provide maximum customer service at the lowest cost possible. The Oil & Gas industry currently faces numerous com- plexities and challenges that should be addressed in order to sustain and survive in today’s era of heightened global com- petition. The Oil & Gas industry needs to work continuously under the most difficult situations and challenging circum- stances, which include matching the dynamic demand with supply, working in harshest terrains & tougher access to new upstream resources. In addition to this, there is a marked increase in the exploration and production costs in the industry and oil prices are also near an all time high.Against this backdrop, there seems to be a necessity to focus on achieving the highest standards in supply chain manage- ment of the Oil & Gas industry so as to streamline all the operations and generate value for all the stakeholders. Anubhav Sood IIM Raipur AUTHOR I Supply Chain Challenges in IOL & Gas Industry - Indian Context
  13. 13. OPSWorld 14 Supply Chain Challenges in IOL & Gas Industry SUPPLY CHAIN LINKAGE IN OIL AND GAS INDUSTRY The supply chain linkage in the Oil and Gas industry can be represented as below: Exploration is the search for crude oil or gas reserves by petroleum geologists and geophysi- cists beneath the Earth’s surface. It could either be on the sea bed or on the mainland. The aim of exploration is to find the reserves of crude petro- leum which could be harnessed and converted into usable petroleum products. Exploitation is the term used for extracting the crude oil from the oil wells. For example Indian Oil Corporation Limited (IOCL) has share in oil pits at Digboi in Assam and Bombay high from where oil is extracted and sent to refineries. The entire requirement for crude oil is not met by self- exploitation. Some part is procured from other crude oil producing nations which predominantly consist of Gulf countries and Singapore market. This crude oil is shipped through Very Large Crude Carriers or Ultra Large Crude Carriers hav- ing capacities of 50,000 KL to 2,00,000 KL. These tankers are docked at the ports and the oil is unloaded using pumping and piping equipment into the storage tankers. These locations are called ‘terminals’. Generally, terminals have stor- age capacities ranging from 1,00,000 KL to 3,00,000 KL. From these terminals, the oil is sent to refiner- ies through pipelines where it undergoes the process of refining and various products like Flare gas, Lighter gases, LPG, Naptha, ATF, Superior Kerosene Oil, Light Diesel Oil (LDO), Heavy diesel Oil (HDO), Base oil and Sludge are produced. These products are stored in cylindrical tanks near refineries; these areas are also called as terminals. The capacities of these tanks range from 25000 KL to 40000 KL. From here the finished products are transported to various other terminals all over the country through pipelines, rail wagons or tank trucks. ISSUES FACED IN SUPPLY CHAIN MANAGEMENT PIPELINE NETWORK: Amongst road, rail and pipeline transporta- tion, road transportation is the costliest method and transportation through pipelines is the cheap- est. However a drawback with the pipeline is that it has very low penetration. In the light of this backdrop many oil marketing companies are working on extending their pipeline network. Constructing pipelines is an extreme capital intensive venture. Therefore, it is much more fea- sible if different companies come together and share the financial burden for constructing them and then reap benefits of using them. One such initiative is taken by GSPL,HPCL, IOCL and BPCL. These companies have signed joint venture agree- ments for constructing three such cross country projects: Mallavaram-Bhilwara (1585 kms), Mehsana-Bhatinda (1670) and Bhatinda-Jammu- Srinagar (740 kms). More such projects will help in bringing down the transportation costs in the long run. Further pipelines also bring about reduc- tion in losses due to transportation. For example, the 573 km long Visakha-Vijayawada- Secunderabad pipeline saved (HPCL) an amount of about Rs 95 crore in 2003-04. (Cited from http://www.business-standard.com/india/- news/hpcl-saves-rs-95cr-due-to-pipeline-opera- tions/147489/ accessed on 23.02.2013). THEFT & PILFERAGE: There is a particularly high rate of theft and pil- ferage while transporting oil by road through tankers. A method to bring it down under control is to install the Vehicle Monitoring System (VMS), which tracks the movement of vehicles by installing a device with SIM card using GPS technology. But there are issues related to implementation of the same. There have been instances where drivers damage these devices and use the SIM cards to make personal phone calls or the service is not proper due to bandwidth prob- Constructing pipelines, being an extreme capital intensive venture is much more feasible if different companies come together and share the financial burden. EXPLORATION EXPLOITATION REFINING MARKETING CONSUMER
  14. 14. OPSWorld 15 Supply Chain Challenges in IOL & Gas Industry lem of the service provider. Also, in some cases, the locking system that is used for the tank-trucks (pad- locks) has been found to be tampered with. Moreover the outlet valve assemblies have also been found to be damaged in some cases. These incidents of theft, pilferage and damage can be improved by training the drivers and increasing their awareness about these technolo- gy driven initiatives. Another method of reducing the pilferage is the usage of electromagnetic lock- ing systems in the valves of the tankers. However, after installation of the same it has been reported that the operators and drivers complain of not knowing how to use these locking systems. Training and selection of educated drivers can help to overcome these problems. PIPELINE SECURITY: Cases of pilferage through pipelines have also been reported where the miscreants have dam- aged the pipeline to steal away the products. Moreover a damaged pipeline poses a threat towards safety of environment and causes loss of finished products. Pressure Monitoring Systems are installed in the pipelines to detect any such damage. But the challenge lies in correcting the fault as soon as possible and recommissioning the line. Security guards are also deployed for patrolling these pipelines; one guard covers 8 kilometres of pipeline length. These guards are tagged with satellite surveillance which causes huge costs to OMCs. For further safety, rather than laying pipelines overground they are usually laid underground where they are not visible, this how- ever, raises several maintenance issues of the pipelines. HIGH IN-TRANSIT INVENTORY: The inequitable distribution of petroleum resources across the globe makes the scope of logistics global. These products have to be trans- ported between different locations, which in most of the cases span across different continents. The long distance between the supplier and buyer results in higher costs of transportation and high in-transit inventory. One method to overcome this is by structuring of new deals like that of Essar Energy with Barclays bank for its Stanlow refinery. The In-transit inventory is transferred to the bank’s assets when it starts on the ship and just before the destination port it is again transferred to Essar Energy This approach helps Essar to miti- gate the risks associated with in transit inventory ownership, saves working capital costs and the bank gets benefit because it can show the crude oil as an asset over long transit periods and lever- age the same for oil derivatives business. INFORMATION TECHNOLOGY: We can also examine the role of information technology and management information sys- tems in the supply chain management in Oil & Gas sector. As compared to the earlier paper based system for giving indents by the dealers, the indents are now taken through SMS based Indent Management System. This indent is noted by the planning officer and after confirming the payment terms the material is dispatched to the dealer. In this field HPCL has started a new initia- tive called Optimised Logistics Assistant (OLA). OLA helps in bringing rationalization in assign- ments to logistic partners and provides them with an equal opportunity. As this is an automatic assignment, it reduces the favouritism towards a particular transporter due to any influence exert- ed by him. Implementation of such IT driven sys- tems across the industry will help in bringing about more transparent systems. SAFETY: Due to the hazardous characteristics of Oil & Gas raw materials and final products, there is a need to exercise extra caution which involves lot of money, time, effort etc. Also, the risk involved with the supply chain is higher. The products in Oil & Gas industry are highly inflammable; as a
  15. 15. OPSWorld 16 Supply Chain Challenges in IOL & Gas Industry result, risks involved in delivering, transporting and storing are greater as compared to any other industry (Sinha et al. (2011) as cited in supply- chain-management-issues-in-oil (2012)). LONG LEAD TIMES: The lack of flexibility of the overall logistic network in this industry is another major issue. This can perhaps be owed to the challenges in production, long transportation lead times and the constraints of transportation modes used. As a result of these problems, each and every node of the supply chain network poses huge challenges. UNECONOMIC ORDERS: Another delivery related issue is the irregular or small quantities ordered by some dealers. For e.g. one dealer may have daily requirement of 15000 to 20000 KL where as another will have only 3000-4000 KL. It is easier to supply to the former dealer, but in the latter case, the issue of part load comes into the picture and reduces the economies of transportation. To prevent this, the companies can ensure that the dealers have large size reservoirs which have ullage of one tank truck atleast. Alternatively, companies can also take a decision to supply the material only when the dealer gives order of equivalent to atleast what can be transported in one tanker. DISPOSAL OF FLARE GAS: The flare gases which come out of the refining process are not useful and were earlier disposed- off by burning. But now the environmental regu- lations have become more stringent due to which there are restrictions over burning these gases. Now the refining companies have two options either to install flare gas recovery systems which entail heavy investments or to store the flare gas and send it to a third party to dispose it off. The latter option can also be expensive and will require good logistics for flare gas transportation. SLUDGE TRANSPORTATION: The other prominent issue is regarding the transportation of sludge. As the sludge is very heavy and tends to solidify if allowed to cool, it presents a unique challenge in transportation. It requires special heated tanks, which are heated electrically or by using steam. But in case of the failure of heating mechanism the sludge can get deposited inside the tanker which will then be extremely difficult to remove. In some cases solid- ification has rendered the whole truck to go out of service. Thus, we can conclude that supply chain is the most crucial and essential function in oil and gas industry. This is because of the fact that the oil and gas industry has its own unique features which can sometimes pose various challenges for all those involved in its supply chain. Today, the supply chains in this industry are looking at vari- ous ways of improving their efficiencies and over- coming the above mentioned impediments. These improvements made over a period of time also help in creating a competitive advantage for the firms. Therefore, the need of the hour is a supply chain optimization at an operational as well as at a strategic level. Various supply chain firms in Oil & Gas industry can adopt methods like customiz- ing the logistic network, strategic sourcing, appli- cation of channel wide information technology strategy, adopting operational innovation in terms of order filling, customer service etc.This will lead to success and also contribute towards optimisa- tion in the long run. Tomorrow’s successful play- ers would perhaps be those who adopt such methods of optimization, implement a strategic view of the role of their supply chain and imple- ment advanced contracting strategies in order to manage their costs and secure supplies. REFRENCES 1. Chima,M.C.(2007)“Supply-Chain Management Issues In The Oil And Gas Industry” Journal of Business & Economic Research Vol. 5, No. 6 2. Siddiqui, F. & Sharma, C. (2011) “The Impact of various Dimensions of SCM Practices in Indian Oil and Gas Sector” Global Journal of Enterprise Information System Vol. 3, No.4 3. http://articles.economictimes.india times.com /2012-05-01/news/31528157_1_bhatinda- jammu-srinagar-gspl-pipeline-projects accessed on 23.02.13 4. http://ivyarticles.blogspot.in/2012/12/supply- chain-management-issues-in-oil.html ?detail=yes accessed on 24.02.13 The oil and gas industry has its own unique features which can sometimes pose various challenges for all those involved in its supply chain.
  16. 16. OPSWorld 17 Towards better Maintenance The experiment with Defects INTRODUCTION: In an organization like SAIL, quality production at optimum cost plays a vital role, to achieve profitability. In order to achieve this, all the major operations like planning, production and mar- keting are to be done with quality parameters in mind. Where planning and marketing are dependent on various factors beyond the control of the individual plants, production at opti- mum level at minimum cost is instrumental and well within the control of the production team. Production demands the three sections i.e., Operation, Maintenance(both Mechanical & Electrical) and services (ETL, HMC, PCE, EMD, GEM, INST etc.) to work together having a single common goal of ,"maximising quality product and minimizing production cost". The manufacturing industries in the world are now strictly monitoring to improve the following parameters to attain com- petitiveness and a sustained positive growth. 1) Maximisation of production 2) Ensuring quality standard 3) Minimising cost of production To achieve all these parameters it requires a healthy main- tenance system. Though maintenance is not a branch of Engineering taught in Technical Institutions, it requires the wholesome knowledge of technology and progressive develop- ments in the world, updated at regular interval of time. In the following paragraphs let us discuss "maintenance as a tool for profitability of any manufacturing industry". MAINTENANCE: Out of many definitions that describe maintenance, the fol- lowing definition fits best for all industries or manufacturing organizations around the world. "Maintenance is the process of ensuring the availability of equipment/ machines in perfect order for maximizing the quality product at lower cost". To be precise, every organization should have a system which will increase the availability of equipment for a longer period at lower cost. Many private organization, reduce the cost of maintenance by out sourcing or giving AMCs to smaller com- panies and increase the performance of machines and equip- ment by adopting new technology as and when required. But it Towards better Maintenance The experiment with Defects Debrup Mohanty Manager (Durgapur Steel Plant, SAIL) Gujja Eswar Rao Senior Manager (Durgapur Steel Plant, SAIL) AUTHORS I
  17. 17. OPSWorld 18 Towards better Maintenance The experiment with Defects is not always possible for company as vast as SAIL, where the Capital Investment required for switching over to new technology is huge and time required to carry out projects is also more ( as the size of project in such cases are big andpro- ject clearance formalities are complicated due to Government obligations). To cater to the need of such organizations, where equipment involved are complicated in nature and working environment is challenging in comparison to normal working condition and where the breakdown of equipment pose a threat to the balance sheet of the company, many main- tenance techniques or theories have been evolved by expert teams in recent past. These theories are based on different schools of thought and designed to suit various maintenance environ- ments. Some of the popular theories are: a) Breakdown maintenance b) Inspection & preventive maintenance c) Predictive maintenance d) Maintenance by redesign e) Time based maintenance Out of the above methods, most commonly used system is Inspection & Preventive mainte- nance. In some cases, this system of maintenance combined with Maintenance by redesign paves a way for continual improvement.The following para- graphs will depict how best this can be achieved. FACTORS FOR SELECTING MAINTENANCE MODULE: Although different organizations adopt differ- ent forms of maintenance practices or processes, yet they follow almost the same sequences / methods based on a simple logic of SMPs. The methods or the processes being adopted and put in use by organizations are decided by DOCTOR analysis of factors that shapes the maintenance module for a particular environment. These are: 1) Design (unidirectional/ reversible/ roughing/ finishing etc.) 2) Operation (intermittent/continuous etc.) 3) Criticality of Equipment (spares availability in market/ cost of spares/repair time etc.) 4) Technology (old/new/manual/automated etc.) 5) Option in hand (stand by machine/alternate route of production etc.) 6) Resource availability (man/spare inventory/ time availability etc.) The design parameters and standard operat- ing practices as prescribed by the designer are subjected to be changed at later stages due to many factors or changes brought to the system in order to increase profitability. Like Blooming Mill was initially designed for Ingots of 5 to be rolled through it, but later on it has been changed to 8 T Ingots without significant change in its equip- ment. The effect of change of load is not visible immediately, but in the long run many problems I R F D P E M A O REV MOD A Maintenance Module Based on Inspection & preventive Maintenance along with redesign Dia. : A
  18. 18. OPSWorld 19 Towards better Maintenance The experiment with Defects of perennial nature surfaced and some of them were eliminated by a suitable method of modifi- cation arrived by blending the two systems of maintenance described above. MAINTENANCE MODULE: The maintenance module should have the fol- lowing activities: 1) Inspection [I] 2) Record IR] 3) Generation of Defect list [D] 4) Planning [P] 5) Observation [O] 6) Execution(repair) [E] 7) Feedback [F] 8) Monitoring [M] 9) Analysis [A] 10) Modification (change) [MOD] 11) Record modification & review [REV] The module is designed as shown in the flow diagram below ANALYSIS: The total job of maintenance based on inspec- tion.The list of equipment to be inspected, frequen- cy of inspection, time of inspection should be so judiciously designed so that it should not hamper production nor it should violate any safety norm. Once the list is prepared, the inspection to be done as per designated schedule and all other activities should be followed till the cycle is complete. GENERAL CASE (I-R-D-P-E-F-R): • Inspect equipment • Record the data from Inspection report • Generate defect list from record •Plan the job to liquidate the defects found • Execute the job or eliminate defects as per plan • Give feedback to record CONDITIONAL CASE (I-R-D-O-P-E-F-R) There may be cases where defect liquidation cannot be planned immediately due to production pressure but defect can be allowed to continue keeping the equipment in question on observa- tion, till the liquidation is planned and defect is eliminated. For such cases this method is adopted with addition of observation after defect list is generated. UNUSUAL DEFECT WITHOUT RECURRANCE (I-R-D-P-E-M-A): In some cases an unusual defect surfaces like a bearing is broken, a shaft is sheared, a gear is slipped over a shaft etc. As the defect is to be eliminated at the earliest opportunity or in many cases immediately, the execution of job for elimi- nation of defect is planned, executedand a feed- back is given in the form of report. Since the cause of the defect is not ascertained immediately, it should be monitored for a period. As the defect is of unusual nature, a thorough analysis or root cause analysis is to be done for finding out the cause(s).After finding out the cause(s) all possible causes should be eliminated. UNUSUAL DEFECT WITH RECURRANCE (I-R-D-P-E-M-A-M0D-12EV): If the same defect is repeated, a thorough analysis or root cause analysis is to be done.After finding out the cause(s) all possible causes should be eliminated. In many cases the probable or certain causes which triggered the break down, become respon- sible for similar breakdowns after a certain period of time. This is the point where the maintenance engineer should find out ways to eliminate the source of cause which impend defects by modifi- cation or change in design parameters or by sim- ple alterations where ever possible. While doing modification all factors should be considered like recurring cost, impact on other equipment, per- formance of modified system in comparison to existing system etc. Once the modification is done and tested it should be documented for future ref- erence and any change required in drawing should also be incorporated. Then the inspection schedule should be accordingly reviewed to incor- porate the new modification. Conclusion: Though there are many processes in achieving good machinery health, the best way of mainte- nance can only be decided by people who moni- tor them regularly. Machine behavior is a reflec- tion of human behavior. As the great author Mr. Stephen Covey said, 10% of the events around us happen automatically upon which we have no control, but 90% of the of the events occur as a result of our reactions towards these 10%happen- ings. The total job of maintenance should be based on inspection wherein the design of activities should not hamper production or violate any safety norm.
  19. 19. OPSWorld 20 Site Identification for new AIIMS-like Institutions based on Network Analysis 1. Introduction Pradhan Mantri Swasthya Suraksha Yojana The Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) was floated by the Central Government in 2006 as a measure to address the imbalance in the availability of the best health- care facilities across the nation and to augment the country’s medical education facilities. The Yojana is to be implemented in multiple stages.The first phase would consist of development of six AIIMS-like Institutions (ALIs), besides up-gradation of sever- al other existing medical colleges.The next phase would consist of construction of two super-specialty facilities, one each in West Bengal and Uttar Pradesh. The third stage, which was recently approved by the Union Cabinet, involves the construc- tion of four more facilities. This stage is the one that this paper is concerned with.The Union government is yet to decide on the states in which these facilities would be located. Considering that any such endeavor involves a huge expenditure (the latest Central government estimates have put the figure at Rs.847 crore on average for each of the institutes), we believe it is imperative that these facilities be located so as to not only ful- fill the criteria laid down by the committee that has proposed the latest phase, but also to ensure the optimum utilization of the facilities. It is with this aim that we have designed a model that suggests the best locations for the four proposed institu- tions. Criteria As per the Hon. Union Health & Family Welfare Minister1, the location of the initial six institutions were decided based on several socio-economic indicators such as the human develop- ment index, the regional per capita income, the number of peo- ple living below poverty line and health indicators such as infant mortality rate, the population-to-bed ratio, etc. The steering committee on health for the 12th five year plan has listed a broader set of criteria for deciding the sites for the four new hospitals2. The committee recommends that the deci- sion be taken based on: 1. Geographical Location Site Identification for new AIIMS-like Institutions based on Network Analysis of similar existing facilities AUTHORS Neeraj Gupta IIM Lucknow Mukul Kaura IIM Lucknow I
  20. 20. OPSWorld 21 Site Identification for new AIIMS-like Institutions based on Network Analysis 2. Physical Infrastructure 3. Ease of connectivity with medical facilities 4. Health indicators 5. Local disease burden 2. Methodology Accessibility Considering that these facilities are few in number and dispersed across the nation, we have laid down a criterion for defining the accessibility (or catchment area) for each facility. We believe the distance that can be covered in an overnight train journey is a good indicator for the area that can be serviced through one facility. Considering that an express train travels at a little over 50kmph (when accounting for stoppages), we get a radial distance of 400km (50kmph X 8 hours) as our catchment area indicator. Geographical Distribution We then proceeded to plot the area serviced by each of the facilities already finalized using the above indicator. Figure 1 shows the region expect- ed to be covered by the eight approved ALIs as well as the AIIMS at New Delhi. In order to ensure that maximum area gets the coverage, as well as considering the hilly terrain in J&K as well as in the North-East, we decided to allocate one ALI to each of these two regions. Considering that Jammu city and Guwahati are by far the most accessible and developed cities in these two regions respectively, we propose that the facilities be located there. For the western and southern regions, it can be seen by visual inspection of Figure 1, that maximum coverage can be provided only if one of the ALIs is distributed to one of the Western states (Gujarat, Maharashtra & Goa) and other to the southern states and Union territories (Andhra Pradesh, Karnataka, Kerala,Tamil Nadu and Puducherry).We have therefore formed two clusters with candidate cities from these two regions and applied an Analytical Hierarchy Process (AHP) model to come up with the best candidates from these two regions. Figure 1: Area catered to by the approved facilities and the AIIMS at New Delhi
  21. 21. OPSWorld 22 Site Identification for new AIIMS-like Institutions based on Network Analysis Candidate Locations The candidates were taken to be the top 21 Tier-I,Tier-II and Tier-III cities from the two clusters taken together. AHP Model One of the five factors that would determine the ALI locations has already been incorporated in the analysis manually. The other four factors have been incorporated in the decision making process through the use of a four factor AHP model. Ease of connectivity with medical facilities We have taken the density of rail network as a measure of connectivity and the number of Health Sub-Centers as the indicator of level of medical facilities in a particular state. Each of the two data3 sets have been normalized to represent a fraction of the highest density (or sub-centers) and the product of the two taken to arrive at a final score. The data suffers from a limitation in sense that the two data sets are for different instances in time. However, their use can be rationalized by assuming the growth of sub-centers to be propor- tional for each of the states. Health Indicators The life expectancy4 in each of states/UTs for the candidate cities has been taken as a surrogate for health indicator. Once again, the life expectan- cies have been normalized using the highest data point to arrive at a health indicator score. Local Disease Burden The local disease burden has been measured using the number of people hospitalized on a per thousand basis. The inverse of the data5 has then been normalized (using the same process as before) to get an indicator for the local disease burden. As on 31.3.2001 As on 1.4.1996 Route Kms. Per '000 Sq. Kms. Route Kms. Per ‘000 Sq. Kms. (Normalized) Sub-Centers Sub-Centers (Normalized) Connectivity Score Andhra Pradesh 67.89 1.00 7894 0.81 0.81 Goa 27.02 0.40 175 0.02 0.01 Gujarat 22.56 0.33 7284 0.75 0.25 Karnataka 17.32 0.26 7793 0.80 0.20 Kerala 15.52 0.23 5094 0.52 0.12 Maharashtra 8.73 0.13 9725 1.00 0.13 Puducherry 0.07 0.00 79 0.01 0.00 Tamil Nadu* 31.22 0.46 8681 0.89 0.41 Figure 2: Ease of connectivity with medical facilities Life Expectancy at Birth Proportion Life Expectancy Life Expectancy Score States/UTs Male Female Male Female Andhra Pradesh 61.7 64.3 0.50 0.50 63.0 0.86 Goa 64.7 67.2 0.51 0.49 65.9 0.90 Gujarat 62.1 64 0.52 0.48 63.0 0.86 Karnataka 62.5 65.8 0.51 0.49 64.1 0.87 Kerala 70.7 76.1 0.48 0.52 73.5 1.00 Maharashtra 64.7 67.2 0.52 0.48 65.9 0.90 Puducherry# 63.9 65.9 0.49 0.51 64.9 0.88 Tamil Nadu 63.9 65.9 0.50 0.50 64.9 0.88 * For Goa, Maharashtra figures have been used # For Puducherry, Tamil Nadu figures have been used Figure 3: Life expectancies
  22. 22. OPSWorld 23 Site Identification for new AIIMS-like Institutions based on Network Analysis State-wise Persons Hospitalized During Last 365 Days (Per OOP's) States/UTs Rural Persons Urban Persons Rural Proportion Urban Proportion Total Inverse Urban Proportion Andhra Pradesh 14 17 0.67 0.33 15.00 0.07 1.00 Goa 26 25 0.38 0.62 25.38 0.04 0.59 Gujarat 14 21 0.57 0.43 16.98 0.06 0.88 Karnataka 14 18 0.61 0.39 15.54 0.06 0.97 Kerala 70 65 0.52 0.48 67.61 0.01 0.22 Maharashtra 19 26 0.55 0-45 22.17 0.05 0.68 Tamil Nadu 18 23 0.52 0.48 20.42 0.05 0.73 Pondicherry 44 22 0.32 0.68 28.97 0.03 0.52 Figure 4: Persons hospitalized during last 365 days City Expenses Scaled for 2011-12 Physical Infrastructur e Score Source Solapur 283.34 283.34 0.013 http://www.urbanindia.nic.in/Droeramme/uwss/CSP/Draft CSP/Solapur CSP.pdf Pune 3196.12 4489.94 0.213 http://www.punecorporation.ore/pmcwebn/about us.aspx Mumbai 21096.56 21096.56 1.000 http://www.mceni.eov.in/iri/portal/anonvmous/qlbudeet- speechtf Nashik 1500.00 1500.00 0.071 http://www.hindustantimes.com/India-news/Mumbai/MNS- NCP- fight-to-control-Nashik-as-Bhujbal-tries-to-rustle-up- numbcrs/Articlel-815596.aspx Surat 3194.00 3194.00 0.151 http://articles.timesofindia.indiatimes.com/2012-02- 03/surat/31021057_1_smc-budget-surat-municipal-corpo- ration-gopi-talav Rajkot 500.00 500.00 0.024 http://ibnlive.in.com/generalnewsfeed/news/rajkot-corpo- rations-draft-budget-presented/958525.html Jamnagar 356.88 501.35 0.024 Source: Jamanagar Municipality Panaji 23.93 33.62 0.002 http://www.navhindtimes.in/content/ccp-presents-evenly- balanced-annual-budget Anantapur 27.03 27.03 0.001 http://www.cdma.gov.in/cdma/Downloads/Anantapur_Dist rict/Anantapur%20Corp._Working%20Sheet.xls Vijaywada 293.23 293.23 0.014 http://www.ourvmc.org/general/Budget_2011-12.pdf Hyderabad 2237.76 3193.52 0.151 http://www.ghmc.gov.in/tender%20pdfs/Disclosure_to_Pu blic_New.pdf Mysore 253.46 356.06 0.017 http://mysorecity.gov.in/sites/mysorecity.gov.in/files/Budget -final_2.pdf Bangalore 9196.09 9196.09 0.436 http://218.248.45.169/download/budget/Budget%20Speec h.pdf Shimoga 47.86 47.86 0.002 Chennai 1850.66 1850.66 0.088 http://chennaicorporation.gov.in/budget/budgetImages/20 11-12.pdf Vellore 3.03 4.32 0.000 http://vellorecorp.tn.gov.in/
  23. 23. OPSWorld 24 Site Identification for new AIIMS-like Institutions based on Network Analysis City Expenses Scaled for 2011-12 Physical Infrastructur e Score Source Coimbatore 415.56 415.56 0.020 http://www.thehindu.com/news/cities/Coimbatore/arti- cle1485944.ece Madurai 255.12 358.40 0.017 http://203.101.40.168/newmducorp/budget.htm Puducherry* 20.24 28.89 0.001 Population of Puducherry 6.6 Times of Vellore, Hence Vellore budget has been multiplied by 6.69 Travindrum 106.68 152.25 0.007 http://www.corporationoftrivandrum.in/sites/default/files/8 BudgetedIncome&Exp.pdf Kozhikode 53.27 74.84 0.004 http://www.kozhikodecorporation.org/images/news/iek310 311.pdf Cochin 80.37 114.70 0.005 http://corporationofcochin.net/finance/incExp201003.pdf Figure 5 Local Bodies' budgets for respective candidate cities City Physical Infrastructure Physical Infrastructure Ease of Connectivity to Medical Institutions Health Indicators Local Disease Burden Final Score 0.153846 0.307692 0.076923 0.461538 Cluster 1 Panaji 0.001593 0.000245 0.002204 0.068992 0.461538 0.532979 Surat 0.151399 0.023292 0.076583 0.065936 0.27288 0.438691 Jamnagar 0.023765 0.003656 0.076583 0.065936 0.27288 0.419055 Rajkot 0.023701 0.003646 0.076583 0.065936 0.27288 0.419045 Mumbai 1 0.153846 0.039566 0.068963 0.102423 0.364798 Pune 0.212828 0.032743 0.039566 0.068963 0.102423 0.243695 Nashik 0.071102 0.010939 0.039566 0.068963 0.102423 0.221891 Solapur 0.013431 0.002066 0.039566 0.068963 0.102423 0.213018 Cluster 2 Hyderabad 0.151376 0.023289 0.249761 0.065921 0.461538 0.800508 Vijaywada 0.0139 0.002138 0.249761 0.065921 0.461538 0.779358 Anantapur 0.001281 0.000197 0.249761 0.065921 0.461538 0.777417 Bangalore 0.435905 0.067062 0.062903 0.067102 0.407828 0.604895 Travindrum 0.007217 0.00111 0.036844 0.076923 0.445559 0.560437 Cochin 0.005437 0.000836 0.036844 0.076923 0.445559 0.560163 Kozhikode 0.003547 0.000546 0.036844 0.076923 0.445559 0.559872 Chennai 0.087723 0.013496 0.126323 0.067912 0.3391 0.546831 Mysore 0.016878 0.002597 0.062903 0.067102 0.407828 0.54043 Shimoga 0.002269 0.000349 0.062903 0.067102 0.407828 0.538182 Coimbatore 0.019698 0.00303 0.126323 0.067912 0.3391 0.536365 Madurai 0.016988 0.002614 0.126323 0.067912 0.3391 0.535949 Vellore 0.000205 3.15E-05 0.126323 0.067912 0.3391 0.533366 Puducherry 0.001369 0.000211 2.58E-06 0.067934 0 0.068147 Figure 8: Weighted aggregate score for candidate cities
  24. 24. OPSWorld 25 Site Identification for new AIIMS-like Institutions based on Network Analysis Physical Infrastructure The budget for municipal corporations/munic- ipalities of respective candidate cities/UTs was taken as a proxy for the physical infrastructure. Relative Factor Ratings for AHP Model We believe that the four factors are not all equally important. The local disease burden should be given the highest rating since it is the most relevant factor in determining which areas needs the most medical help. Ease of connectivity should be considered most important amongst the rest since this would ensure that the facility could be used in time. The level of physical infra- structure in a city/town should be deemed more vital than health indicator since this can help induce the best talent in the medical fraternity to come and work at these centers. Based on the above reasoning, we have assigned the following initial rating to the factors: 3. Results The following table shows the aggregate weighted factor score for each candidate city: (Figure 8) 4. Conclusions We recommend that the new ALI’sbe located in new facilities be located at Jammu (Jammu & Kashmir), Guwahati (Assam), Panaji (Goa) &Hyderabad (Andhra Pradesh). Factor Weights Local Disease Burden 6 Ease of Connectivity to Medical Institutions 4 Physical Infrastructure 2 Health Indicators 1 Figure 6: Initial Factor Ratings Physical Infrastructure Ease of Connectivity to Medical Institutions Health Indicators Local Disease Burden 0.153846 0.307692 0.076923 0.461538 Figure 7: Factor Weights Figure 9: Sites for ALI’s
  25. 25. OPSWorld 26 Site Identification for new AIIMS-like Institutions based on Network Analysis Appendix: Analytical Hierarchical Process Factors Physical Infrastructure Ease of Connectivity to Medical Institutions Health Indicators Local Disease Burden Physical Infrastructure Ease of Connectivity to Medical Institutions 1 2 1 1 1 4 1 0.666667 Health Indicators 0.5 0.25 1 0.166667 Local Disease Burden 3 1.5 6 1 6.5 3.75 12 2.833333 Physical Infrastructure Ease of Connectivity to Medical Institutions Health Indicators Local Disease Burden Row Sum Weights Physical Infrastructure 0.153846 0.266667 0.083333 0.352941 0.856787 0.214197 Ease of Connectivity to Medical Institutions Health Indicators Local Disease Burden 0.307692 0.076923 0.461538 0.266667 0.066667 0.4 0.333333 0.083333 0.5 0.235294 0.058824 0.352941 1.142986 0.285747 1.71448 0.285747 0.071437 0.42862 1 1 1 1 1 4 1 Table 1: Factor weight calculation through AHP Framework OPSWorld Quiz 1. Identify the operation term related to the following picture. 2. Daily demand for a product is 120 units with a standard deviation of 30 units. The review period is 14days and the lead time is 7 days. At the time of review 130 units are in stock. If only 1 percent risk of stocking out is accept- able, how many units should be ordered? (Take z=2.33) 3. Connect the pictures 4. Afamous term used in famous 1984 book titled “The Goal”. Hint:- Picture 5. Three identical components each hav- ing a MTTF of 1000 hours are func- tionally connected in series. If the fail- ure time distribution is exponential, the MTTF of system is : a. 333.3 hours b. 3333 hours c. 3000 hours d. 545.5 hours e. 1833.3 hours 6. Terminology used in figure for animal tracking 7. Which type of layout is generally used in JIT manufacturing? a. L-shape b. Straight Line c. Zig-Zag d. U-shape
  26. 26. OPSWorld 27 OPSWorld Quiz OPS World Quiz OPS World Quiz 8. System representing highest level of automation in manufacturing industry. a. Flexible manufacturing system b. Computer aided manufacturing c. Computer aided design d. Computer integrated manufacturing 9. To convert ‘n’ jobs and 3-machine problem into ‘n’ jobs and 2-machine problem, the following rule must be satisfied a. All the processing times of second machine must be the same b. The minimum processing time of 2nd machine must be ? the minimum pro- cessing times of first and third machines c. The maximum processing time of 2nd machine must be ? the minimum pro- cessing times of first and third machines d. The maximum processing time of 1st machine must be ? the minimum pro- cessing times of second and third machines 10.Which of the following would be included in a list of dependent demand items? a. Computer audio subsystems delivered to a computer superstore for sale as upgrade items b. Car mirrors delivered to an automotive dealership as repair parts c. Shirts delivered to a retailer for stock- ing on shelves d. Computer hard drives delivered to the computer manufacturer for installation depending on customer requests 1.Backlog 2.2710 3.PERT 4.Theoryofconstraints 5.(a) 6.RFID 7.(d) 8.(d) 9.(c) 10.(d) OPSWorld Quiz Answers Across 4 Diverts attention on Highways, Japanese (6) 5 ___ Armstrong and a famous audio equipment manufacturer (4,2,4) 6 Imbalance, Japanese (4) 8 The Father of SCM (3,3) 9 Christened the word Supply Chain Management 11 Cleanliness is next to Godliness, Japanese (5) 12 Credit 4$, Debit 6$, func- tion, (7) 13 Mistake proofing, Japanese (4,4) 15 Lock, Stock and 2 smoking ____, synonym (4) 16 Counter Strike Condition Zero version (4,4) 17 Beep on radar, used to measure variability in oper- ations (8,6) Down 1 Time of work, again and again (4,4) 2 Important character in The Goal1, _____ Reloaded (6) 3 Bombay->Pune->Delhi-Patna, Still couldnt sell an Indigo Marina (10,8) 6 It was never meant to work the right way, because it had to (6) 7 A team of 5, with 4 free riders (6) 10 Child Genus, anagram (10) 14 Deadly Manifestation About Insignificant Crap, acronym (5) Credits: Bharat Subramony, IIM Kozhikode, Deepak Kumar, IIM Kozhikode.
  27. 27. OPSWorld 28 Bargain Air Fares It all started with Expedia introducing it in the year 2004 but ceased to exist as on date. Now Makemytrip has introduced this concept in 2011.The Idea is to sell unsold tickets in various flights at the last moments by offering cheap prices.That should raise an immediate Question; passengers would be desperately waiting till last moment instead of taking a risk of prior book- ing for which cancellation charges are too high. Also, it is not necessary that this type of provision with fixed seats need to be opened for every flight or trip in specified time zone. It’s purely dependent on number of seats empty on flight that moment. Though it is in conflict with premium prices charged in air fares as day of flight nears, the tickets booked via Bargain fares quota has some exceptions because of which prior bookings continue to happen. Under bargain booking they need not inform about flight name or timings which you are going to travel by. Mostly, a booked passenger can only take a wild- guess on the airline. Sometimes, there can also be a hopping/connecting flight instead of direct flight. You are only guaranteed a flight time between 6am and 2pm (for every 8 hours’ time zone), tickets are non-refundable, non-transferable and cannot be cancelled or changed (like postpone/prepone) once purchased. Nor can Bargain Fares be purchased with flyer miles or any discounts. These prices are similar to range of ini- tial price of flight ticket when booked earlier before 2 months or so. Let analysis to understand it better, the Expected Marginal Seat Revenue Concept of air lines in lines with News-Vendor Problem analysis says that for Optimal Booking F(Q) = Where Cu is Underage Cost (Price of Business class – Price of economy class) and Co is Overage cost (Price of Economy Class) The above formula is used for Economy Class v/s Business Class But this should be applied at other aspects also C Business class Price v/s Penalty paid Cu Co + Cu AUTHOR Sivakumar Nandipati IIM Indore I Bargain AirFares
  28. 28. OPSWorld 29 Bargain Air Fares C Economy Class Price v/s Empty seats loss Underneath Idea comes from root of this to form bargain fares. Let us have a clear illustration of all possibilities and advantages caused in intro- duction of bargain fares. There are 3 possibilities for flight tickets capacity(supply) v/s Flight passengers for that flight(demand).Let’s go case by case. Scenario 1: Deals with when supply is greater than demand To sell unsold tickets in last hours - so that you can make some money. With Generic model- when the seats are not filled full, but as the time proceeds the prices always keeps on increasing which creates a cumu- lative effect on decreasing demand further there- by keeping the emptier seat capacity. Now this bargain fare just erases that problem and creates a new mode to sell tickets. Customer cannot iden- tify –whether airlines are selling tickets being there are excess or they are keeping buffer for cancelled forecast. They also unaware of how many tickets being available as they never knew when they finish this bargain fares mode & start booking tickets sooner thereby increasing demand. Scenario 2: Deals with when supply is less than demand To avoid penalty charges to pre-booked cus- tomers for moving to other flight – as with this model, airlines will never go for over booking in their premium or economy classes. They would shorten their economical class capacity – increase their premium class quota. So, It is evident that prices starts increasing sooner compared to earli- er scenario.The Price they save earlier can be nul- lified in end case, incase if flight seats are not filled. Please find below table: Old scenario was to get over-booked tickets in premium segment v/s penalty charges. Forecast model of cancellations on previous booked tickets and last minute no-shows as explained earlier is dealt.The power in transaction stays with airlines. Suppose airline expected a cancellation and no shows by their forecast model and went for over-booking tickets, if it cannot accommodate respective person on respective flight on planned time – It needs to pay penalty to boarded passen- ger which is much more than fare of ticket for inconvenience it caused.The demanding power of flight or money stays with customer and there is never a written rule as such. However, Bargain fares itself don’t confirm about any uncertain inci- dents. The decision making ability stays with air- lines to use the bargain customers as buffer to avoid inconvenience to any confirmed/ pre- planned booked customer. Urgency and economy is addressed together. Scenario 3: Deals with supply equals demand, This takes care of last minute cancellations and no-shows resulting in accumulation of those seats. This is extra amount earned, as no shows and last minute cancellations (most of cost is retained with airline) are revenues already earned and Bargain fare is a icing on the cake. Tie-ups with Other Airline companies Sometimes, when the Overbooking shoots up and less than expected no-shows happens , we will have a 2-way tie-ups with other airlines which slowly builds up to sustain relationships and cooperate to dominate technique. It’s a WIN- WIN strategy for both of them. So this seems useful in all cases. But nothing is free. Disadvantages being C Few of the Premium/Business/urgency class people who on traditional basis go via premi- um fares now hold for a while and check out these fares when both of the modes are open in last hours. C Few of prior planned customers are waiting and aiming at bargain fares, instead of book- ing earlier.That reduces booking limit of econ- omy fare and time taken to convert them into premium segment. Once these loop holes are managed properly, with this different pricing mechanism, revenue management of airlines are honored efficiently and effectively.
  29. 29. OPSWorld 30 ERP in operations management Introduction In a business landscape that is getting increasingly compet- itive and where time is money, most manufacturers depend on the efficiency and increased delivery rates to gain and maintain that enviable portion of market share. In this context, ERP is looked upon as the current trend and possibly the way forward for many manufacturing companies, and with good reason. Coming up Later is also a case of how L’Oreal leveraged ERP to revamp its operations systems and gain that much needed “makeover”. The first commercial ERP software packages took the mar- ket by storm in the 1990’s, wherein it integrated all data and process related information into one single information system. But, the downside was that this was huge and as a result non- customised and unwieldy, and naturally, was branded as a com- plex tool to use. Today, the next-generation ERP has evolved to being operations-management-specific and a highly scalable end-to-end solution that promises to streamline and automate business processes across the organisation. ERP in recent times ERP today has morphed into a requirement-specific model. Previously, it failed when the same package was applied to dif- ferent verticals like chemicals and Beverage industry, because, I ERP in operations management AUTHOR Hymavathi Pavitra K. IIM Raipur
  30. 30. OPSWorld 31 ERP in operations management for instance, the terminology specific to an indus- try used was not supported by the package. The latest ERP package, however offers industry-spe- cific functionalities that meets the diverse needs of the users. Some of the more important features of the ERP include streamlining and integrating various organization units like inventory, production, pur- chasing, sales and warehouse management. They also use customisable web services to connect quickly and easily with suppliers, customers and logistics-providers, enabling real time data exchange. The result is a simple, customisable, ERP tool that can be used by anyone from shopfloor- upward. ERP systems help the service engineers tremendously. An all-in-one system allows service engineers real time access to jobs, schedules and data and also ensures that all changes are relayed to the management directly. Previously, companies had to integrate their standalone workforce management solutions to their ERP systems and this led to the all-too-famil- iar issue of integrating disparate systems. Now, there is a single, fully integrated system covering all requirements, whether field service, CRM or the mobile sales-force. L’Oreal’s effective use of ERP in operations management In 2011, L’Oreal, the cosmetics giant, success- fully re-engineered their entire manufacturing process to work efficiently, and at the same time maintaining the quality and integrity of their brand. They integrated SAP’s ERP system with Apriso’s FlexNet. FlexNet ran all the manufactur- ing processes on the shop floor. This project was successful in ensuring that highest quality and production standards are met while manufactur- ing 4.9 billion units within 23 global brands across 38 production sites. The take-away from this, as the CIO Jacques Playe says is the fact that operations manage- ment, when used along with ERP, can deliver greater benefits that separate implementations. The road ahead An ERP links the different but vital compo- nents of an organization. It provides a backbone on which effective operations can take place. From monitoring to forecasting to gaining critical business information, ERP does it all. It provides exciting future opportunities with regard to the fact that further improvement or enhancements in ERP could mean an organisational change that flows down to each and every component that is linked.A tweak in the strategy of the organisation as a whole would flow easily to all the depart- ments. Also, as the building block of ERP is IT, and the fact that IT is a dynamic field undergoing changes, for the better, cloud computing, for instance, ERP will benefit greatly and the operations manage- ment, which is in conjunction with ERP, will in turn benefit too. References 1. Kumar, R 2011, 'ERP refines operations manage- ment and planning', Operations Management (1755-1501), 37, 5, pp. 34-36, Business Source Complete, EBSCOhost. 2. 'All-in-one … and one for all' 2012, Works Management, 65, 6, p. 39, Business Source Complete, EBSCOhost. 3. Playe, J 2011, 'L'Oréal's manufacturing MAKEOVER', Baseline, 108, pp. 34-35, Business Source Complete, EBSCOhost.
  31. 31. OPSWorld 32 Abstract: Inventory accounts for about 40-50% of the total cost in a supply chain. Hence inventory control becomes important and effective tool to bring down total cost. This article compares two strategies of inventory control- ‘traditional single delivery method’ (also known as EOQ model) and ‘Just-In-Time’ (Single Setup Multiple Delivery) model. For this a matlab code has been developed and implicated. This code first compares inventory costs from both single and multiple delivery methods; then applies whatsoever method is more economic. Though JIT is considered to be more economic, it has been shown with an example that for a supply chain least costs can be obtained by using a combination of both of them. 1). Introduction: By traditional inventory policy we mean that goods are transported in a single delivery. Whole stock for a season is imported at a single go and then uses throughout.The basic dif- ference between JIT and traditional method is that in JIT stock for a season is imported in multiple deliveries thus reducing inventory cost and material wastage; but on the other hand order cost and transportation costs are increased. So a balance has to be set between them to get economic inventory policy. In JIT purchasing cost is minimized by the sharing of differ- ent spends between seller and buyer. The total cost for an inte- grated inventory model includes all costs from both buyer and supplier.The buyer’s total cost consists of ordering cost, holding cost, transportation and order receiving costs incurred due to multiple deliveries.The supplier’s cost includes holding cost and setup and order handling costs. In this model, the buyer is assumed to pay transportation and order handling costs in order to facilitate frequent deliveries. In fact, the buyer’s pay- ment of transportation and order receiving costs can be viewed A Cost Effectiveness: JIT vs EOQ AUTHORS Gunjan Soni Malaviya National Institute of Technology, Jaipur Aman Jain IIM Lucknow Cost Effectiveness: JIT vs EOQ
  32. 32. OPSWorld 33 Cost Effectiveness: JIT vs EOQ as an investment for the sake of streamlining inventory.When the buyer places an order, in a JIT environment, the supplier splits the order quanti- ty into small lot sizes and delivers them over mul- tiple periods. The supplier then needs to hold the inventory throughout the production of the order quantity.An integrated approach allows the buyer and the supplier to reduce their total costs as compared to non-integrated approach. Both par- ties in some equitable fashion can share savings resulting from cost reduction.The supplier reduces its cost by imposing shipping and order handling costs on the buyer, and in turn, the buyer receives a unit price discount because of large order quan- tities over the contract period. Thus, both parties in the process of price negotiation share the sav- ings in the total costs occurring in their model. 3). Mathematical treatment to JIT*: Consider the following notations: D: monthly demand of buyer P: monthly production rate of seller A: ordering cost per order C: hourly setup cost for seller S: setup time F: transportation cost for linkage V: unit variable cost for buyer Hs: holding cost per unit per month for seller Hb: holding cost per unit per month for buyer. N: number of trips Q: order quantity q : quantity per trip. Total cost for buyer composed of ordering cost, receiving cost and transportation cost. and seller’s cost consists of setup cost and holding cost. Equations 1 and 2 on addition gives the total cost of both as: from the total cost calculated above we can get the optimal number of trips and optimal order quantity. By taking first derivative of equation 3 with respect to N and Q setting them equal to zero and thus solving simultaneously for N and Q, we obtain: Where N* and Q* are the optimum values of order quantity and number of trips required.These values are calculated by Adding both costs we get total cost function in two variables N and Q, which can be, prove to be convex. Equation men- tioned above usually doesn’t give a integer. So we have to take nearest integer greater and smaller than N* and check the total cost value. Whatsoever gives lesser cost is taken as optimal number of trips. Total saving of JIT : Any savings from implementing the SSMD policy over the single-delivery policy can be obtained by subtracting total cost function from total cost when 1 as replaces N. Note that the N=1 is a special case for classic EOQ model. Thus we get the total saving which can be gained by JIT instead of classical EOQ method. But, JIT is not always beneficial. It is advised to adopt JIT only when order quantity (Q) is greater than a certain limit. This limit is calculated as: Where N is the number of trips calculated above. Qmin is a function monotonically increas- ing in N. Optimal delivery size: optimal delivery size q* can be calculated by dividing the order quantity with number of trips, i.e. q* = Q* / N* From above calculated values of Q* and N* is follows that Note that N, q and Q should be integer values. Algorithm for this is mentioned later in the paper. Sales data for other nodes can be taken in two ways: first simply user input and secondly, it can
  33. 33. OPSWorld 34 Cost Effectiveness: JIT vs EOQ be generated using forecasting techniques. In the given code double exponential smoothing technique is used to forecast sales data. 4). Sample Problem: Consider the 4-tier supply chain mentioned above. Sales data of retailer for last six months is – 4200, 4180, 4280, 4190, 4000, 4100. Other parameters of supply chain are given in tables below. We have to optimize inventory cost. Enter the sales data for the retailer Calculate monthly demand for buyer using sales data and customer service Enter the parameters for this step (production cost, holding costs etc.) Calculate N*, Q* and Qmiri using mathematical relations given above. IF (Q*>Q min) (Total cost +)=TC(Ncr; Qcr) q*=Q*/Ncr; qcr= round (q*) Qcr=qcr*Ncr; Ncr=N1Ner=N1 If TC(N1, Q*)>TC(N2,Q*) Ner = 1; Qer = Q; qcr = Q; Get smallest and great- est integers next to N* say N1 and N2 respectively
  34. 34. OPSWorld 35 Cost Effectiveness: JIT vs EOQ 6). Analysis: Here we see that for ‘supplier-to-manufactur- er’ step traditional method of inventory is more economic than JIT. Hence we cannot generalize that JIT is always beneficial; although we can say in most situations JIT is better technique for inventory control. For best results we have to check which of the two methods costs less- at every step. This is done by comparing the order quantity with Qmin. (Minimum order quantity for which JIT is beneficial) which is mentioned above. This code applies this logic at every step of supply chain for providing best results for you. References: 1). ‘Handbook of supply chain management’- James B. Ayers, St. Lucia press 2001 Introduction to supply chain (3-8) ; Evolution of supply chain models (25-35). 2). ‘Inventory management in India’ – R.S. chadda , 1964 3). ‘Statistical forecasting for inventory control’ – Robert G. Brown, TMH publications Moving average, single and double exponential sys- tems (26-70) 4). ‘Physical distribution systems’ – Alan C. Mckinnon ,1989 customer service level (83- 92) 5). ‘Operation research – seventh edition’ – Hamdy H.Taha, Pearson education, 2004 Forecasting models (491-503) 6). Research paper on ‘JIT lot splitting model for supply chain management’ by Seung-Lae kim and Daesung Ha, 2001 Quantity Retailer Manufacturer modified material Supplier Raw material/ source Production rate(per month) ----* 6000 8000 10000 Holding cost(Rs. Per unit per year) 7 6 5 3 Ordering cost(Rs. Per order) 50 40 45 ---- Hourly setup cost ---- 200 100 150 Set up time ---- 2 1.5 3 Variable cost (Rs. Per unit per year) 1 0.5 1.5 ----- Customer service level 96 95 98 ----- Exponential smoothing factor --- 0.9 0.9 0.9 Trend factor --- 0.9 0.9 0.9 Transportation cost 200 150 250 Step JIT cost Traditional cost JIT profit Economic Retailer-Manufacturer 10989 14822 3833 JIT Manufacturer- Supplier 7073 7139 42 JIT Supplier-Raw material 13232 14621 1389 JIT Total Supply chain 31294 36582 5288 JIT Results obtained: Results Step JIT cost Traditional cost JIT profit Economic Retailer-Manufacturer 11252 11736 484 JIT Manufacturer- Supplier 7210 6988 -222 Traditional Supplier-Raw material 13200 13806 606 JIT Total Supply chain 31662 32530 868 JIT Input Data: Thus we see that a inventory cost in supply chain is reduced by Rs. 5264. Now question rises that is JIT always profitable???? CASE 2: Here we take the same values as above but we change the production rate at steps. New production rate: For manufacturer = 12000; For supplier = 14000; For raw-material resource = 16000 It is evident that for 2nd step Traditional method of inventory control is more beneficial
  35. 35. OPSWorld 36 Microgrid optimization as an OR problem Around 20% of world’s population is still without access to electricity(The World Bank, 2012) and studies show proximity to main electricity grid as the determining factor in people having access to electricity(Oda & Tsujita, 2011). This essentially iso- lates the remote places from having access; therefore, self-sus- taining community managing local generation, storage, and grid connected electricity model, popularly termed as micro- grids is a key solution. According to Microgrid Exchange Group (2011) “A microgrid is a group of interconnected loads and dis- tributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid.” Microgrids provide significant advantages like reduced energy costs, increased overall energy efficiency, improved environmental performance, and reliability(NYSERDA, 2010).Microgrids essentially consist of a combination of differ- ent power generating sources, primarily renewables. A typical microgrid would have a combination of power sources as shown in Figure 1. This composite nature energy generating model throws up unique challenges like: a. Modeling the combination of sources to minimize on the costs b. Optimizing the nature of energy distribution, and c. Distributing power requirements among the various sources in order toensure that the combined system is reliable and sustainable. The costs associated with each of the energy generating sources, the environmental conditions governing the amount of power generated by each, and the period for which each of the generating sources are expected to contribute vary.This calls for an Operations Research approach to optimize the costs of gen- eration subject to environment, financial, and demand con- straints. A Microgrid optimization as an OR problem AUTHORS Sreevas Sahasranamam Doctoral Student, Strategic Management IIM Kozhikode Dr. Mahesh P. Bhave Visiting Professor, Strategic Management IIM Kozhikode Dr. P.N. Ram Kumar Assistant Professor, Quantitative Methods and Operations Management IIM Kozhikode
  36. 36. OPSWorld 37 Microgrid optimization as an OR problem The objective function of this Operations Research problem seeks to minimize the total costof the overall microgrid. Total cost is a func- tion of per unit energy cost associated with each generating source, and costs associated with inverters and battery units.This objective function is subject to the following constraints: • Environmental constraint: Solar power is only available during day time and is subject to variations based on weather conditions like rain and cloud cover.Wind power is also sub- ject to variations depending on wind speed, location of windmill, and windmill height and size. The amount of power generated from micro-hydro sources depends on the amount of water available, seasonal factors, and speed of water flow. Biogas source is depend- ent on the availability of household organic and cattle waste and organic material avail- able from nature and farming. Thusdepending on daily weather variations, theoperational modelhas todynamically provide an optimized energy solution. • Financial constraint: Solar, wind,and micro-hydro generation units are associated with high initial investment but they have a long life and minimal post installation costs. Diesel generator units have less initial invest- ment costs but diesel is a scarce, polluting resource and prices have been rising signifi- cantly every year. • Demand constraint: The power generated from the microgrid must be capable of ade- quately meeting the energy demand of the community. REFERENCES Department of Energy Microgrid Exchange Group. (2011). DOE Microgrid Workshop Repor. San Diego: Office of Electricity Deliver and Energy Reliability. NYSERDA. (2010). Microgrids: An Assessment of the Value, Opportunities and Barriers to Deployment in New York State. New York: NYSERDA. Oda, H., & Tsujita, Y. (2011). The determinants of rural electrification: The case of Bihar, India. Energy Policy, 3086-3095. The World Bank. (2012). Energy - The Facts. Retrieved March 16, 2013, from The World Bank: http://go.worldbank.org/6ITD8WA1A0 Figure 1. Different energy sources that normally constitute a microgrid
  37. 37. OPSWorld 38 Operational Excellence at Erection Site: Introduction : Simhadri Project, Stage 1, is not only a benchmark for NTPC limited but also for other power majors in terms of project man- agement and operational excellence . The project was complet- ed in record 33 months which is a milestone in Indian context. The Project involved the construction of a coal-fired thermal electric power plant with an output of 1,000 MW (2X 500 MW) at a coastal location in Simhadri, in the proximity of the port and industrial town of Vishakhapatnam, in Andhra Pradesh.The power generated from the Project is exclusively meant for meeting the requirements of Andhra Pradesh. The primary fuel, coal [6 million tones annually] is sourced from Talcher coal fields in Orissa of the public sector Mahanadi Coalfields Ltd (MCL), located at 450 Km from the Project. The broad-gauge line of Southeastern Railway provides the basic rail link to transport daily two rake loads of washed coal from the pithead at Talcher to the coal handling plant of the Project with a stock- ing capacity of three-lakhs tones. The make-up cooling water [9,100 cubic meters per hour] for the Project is sourced from Bay Of Bengal Sea and sweet water [600 cubic meters per hour] from the Yeluru canal. The water is drawn from an intake well pump house, located at 700 meters offshore of the Bay of Bengal and anchored at 25 meters below sea level. The intake- well [size; 9100 cubic meters] is the largest offshore well-con- structed in India. The two cooling towers of 165 meter height and chimney of 275 meter height are the Asia's tallest struc- tures. Power generated from the Project is evacuated through 400 kV double circuit lines from Vizag to Nunna and Khammam which are owned, engineered and constructed by Andhra Pradesh Transmission Company. Project Management Systems: NTPC has proven and integrated project management sys- tem [IPMS] for implementation of power projects. The system is ISO 9002 certified. A project is reviewed not only against phys- Operational Excellence at Erection Site: Simhadri Stage 1, NTPC Limited AUTHOR Alok Kumar Singh IIM Kozhikode I
  38. 38. OPSWorld 39 Operational Excellence at Erection Site: ical progress but cost, material requirement and manpower resource requirement. In order to achieve the Project Schedule dates, NTPC devel- ops three separate networks Master Network, Level -2 networks with the contractors and Level- 3 networks are developed at project site for con- struction activities even with the sub-contractors. As a strategy, internal schedules are set upahead of external schedules committed to GOI. In case of Simhadri Project, NTPC project focused on tar- get dates which were generally a few months ahead of external MNW schedule dates. Then, it also set up best estimate schedule [BES] in case it fails to meet the target dates. If target dates were missed, BES dates were invariably achieved. For Example, the following three separate goals were set up for two MNW Schedule dates: [box1] Close Monitoring : Project was closely monitored at various lev- els. At Project site activities are monitored on daily/ weekly basis with the representative of the contractor/subcontractor working at the site. Every month under Project General Manger, a project review meeting is regularly held at site which is attended by the representatives of site, region and corporate center to review the progress of the project in all areas and disciplines. At Regional Head Quarter, ED of the concerned region monitored the project at least once in Quarter at site. Director Project also reviewed the progress of the Project at site. Apart from this ministry of program implementation also moni- tored power projects through a flash report gen- erated by NTPC every month. Critical material follow -up The project involved dispatch of over 8.5 lakhs dispatch units [DUs] for Boiler alone. Over dimen- sional heavy consignments like Boiler Drum, Turbine stators, generators, nonmetallic expan- sion joints and transformers needed special trans- port arrangement. Most of the transportation was NTPC project focused on target dates. If it fails to meet the target dates, it set up best estimate schedule [BES], which was invariably met. Goals Boiler Hydro Test [Unit #1] Boiler Light Up #1 Schedule Date May 2001 November 2001 Best Estimate Schedule [BES] April 2001 October 2001 Target March 2001 August 2001 [box1]
  39. 39. OPSWorld 40 Operational Excellence at Erection Site: by Road. Most of the OD consignments were through Railways which involved rail clearances from as many as 8 railway headquarters. NTPC in case of Simhadri Project set up a special cell at Regional head Quarter in Hyderabad to monitor, co-ordinate and follow up on day to day basis all dispatches from works of the vendor/ supplier. Such methodology ensured that Project could focus on actual erection/ construction work at site. The comparative time taken for transporta- tion by road and rail for two typical OD consign- ments are summarized below: [box2] Monitoring of Commissioning Schedules : General Manger of the Simhadri Project intro- duced new project management practices which proved to be very effective for timely commission- ing of various system of the plant. In past, the emphasis at site was on monitoring of the erec- tion program based on availability of materials at site and other exigencies. It was generally recog- nized that that commissioning activities if planned sufficiently in advance should lead to better quality standards and identification of all missing links in the erection front at an early stage for necessary corrective action. As a result, the following four levels of team were constituted to monitor the commissioning activities six months in advance: • Commissioning Steering Committee was formed on 02/01/2001 with GM Simhadri as Chairman and concerned HODS at Corporate Centre and Project Sites as Members to pro- vide key decisions and guidelines. • Commissioning Panel formed on 26/12/2000, consisting of HODs at the Project to co-ordi- nate the activities of working panel and in order to remove constraints and provide resources. 17 • 23 Working Parties formed for various systems consisting of a representative of all the func- tional departments. The panel met almost daily to plan and reviewed with the progress and program with the contractor. • Test Teams were formed for commissioning of key equipment and documentation Control Centre Established The system proved very effective for early commissioning of the plant. Application of IT IT Department at Simhadri Project started functioning as early as January 1999 that is with- in a few months of the start of the Project office. MCPC, VSAT communication system was estab- lished in December 1999. PCs were procured at the early stage and peer to peer connectivity was established. It also installed super-mini computer by April 2000 and extended all local network con- nectivity, internet and e-mail facilities within administrative building, stores, workshop etc. Thereafter, the Project was fully geared to exten- sively use IT in the areas such as Finance and Accounts, Material Control, Monitoring of pend- ing material list, Issue of receipt certificates, Verifying and release of payment to the contrac- tor as per detailed terms of payment, Engineering drawings and documentations control at site, Monitoring and reporting of progress at site using MS Project Scheduler. Simhadri is the first project of NTPC where IT is used to maximum extent. In the absence of ERP solutions adopted in NTPC, the Project developed number of application soft- ware in all the above areas of IT application. NTPC Manpower Deployment NTPC deployed minimum manpower for this project as compared to other Projects of NTPC. Average manpower deployed in other projects of NTPC is in average 0.9 per MW.Whereas the actu- al manpower deployed in case of Simhadri Project was always less than 0.6/MW. Less manpower deployed ensured effective usage of the manpow- er. More Important NTPC did not recruit new man- power for this Project but re-deployed manpower from other projects of NTPC. NTPC also adopted a strategy of deploying operational staff well ahead of commissioning schedule which helped them to co-ordinate all erection activities from commis- sioning and operational perspective which in turn ensured early commissioning Conclusion: Simhadri Project is an example of sheer oper- ational excellence. NTPC proved that with the existing system , people and skillsets , new land marks can be achieved . Consignment Weight Mode From To No. of days Unit #1 Unit #2 Boiler Drum . Road Trichy Site 28 24 Generator . Rail Hardware Site 30 40 [box2]
  40. 40. OPSWorld 41 Recent perspectives on electric power quality The proliferation of ‘sensitive’ equipment such as electronic appliances, process controllers in manufacture, computing devices and so on during last couple of decades has brought power quality issues to the center stage since break down of such devices, mainly due to transient voltage spikes, sags and swells, caused large financial losses. Besides this lot of important issues such as the cost of ‘poor quality’, legal rights to ‘good quality’ and economics of installation of equipment for power quality improvement are discussed worldwide. The aim of this article is to highlight some of the recent power quality issues, especially relating to Indian con- text. Since 1960 to till date power system reliability is the prominent area for research for many research scholars. Various reliability indices for example Customer Average Interruption Frequency Index (CAIFI) and System Average Interruption Frequency Index (SAIFI) were developed to quantify power supply interruptions. But till date there is no agreement on whether reliability supplements or comple- ments power quality. History of Power Quality The origin of the term ‘power quality’ is difficult to trace in the evolution of electrical power system. The rise of trans- formers has overruled early ‘constant current’ DC distribu- tion systems by ‘constant voltage’ AC transmission and dis- tribution. The three basic features or qualities of voltage, Recent perspectives on electric power quality Amol Subhash Dhaigude FPM IIM Indore AUTHOR T

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