This document provides an agenda for a program on resisting price increases and implementing cost improvement initiatives. The program schedule is laid out over four sessions throughout the day, with breaks for lunch and Q&A. The document discusses topics like the impact of globalization on businesses, strategies for survival, inflation and how to beat it, analyzing costs, vendor assessment, and techniques for cost reduction through value engineering and supplier development.
This document discusses various aspects of service marketing for a movie theater chain. It covers the 7 P's of services marketing as applied to the theater, including their product offerings, pricing strategies, promotion methods, and employee training processes. It also discusses service blueprinting and the gaps model in services. Different strategies for managing variable demand and capacity constraints are outlined, including shifting shows and prices and using part-time staff. The role of physical environment and employee roles in service delivery are also addressed.
Price discrimination exists when different prices are charged for the same product to different buyers. There are three main types of price discrimination: personal, geographical, and according to usage. Price discrimination is possible when there are differences in elasticity of demand, market imperfections, differentiated products, and legal sanctions or monopoly power. Price discrimination can occur through personal, geographical, or according to usage and is classified into three degrees based on how prices are set for individual units or groups.
This document discusses price controls and their impact on supply and demand. It provides examples of price ceilings, which establish a legal maximum price, and price floors, which set a legal minimum price. Price ceilings can cause shortages by creating a surplus of demand over supply. Price floors can result in surpluses or unemployment by producing a surplus of supply over demand. The effects are illustrated using supply and demand graphs for rental housing prices under a price ceiling and wages for unskilled labor under a minimum wage price floor.
Price ceilings and floors set by governments distort the price signals in the market. Price ceilings that are set below the equilibrium price cause persistent shortages as they incentivize less production. Price floors set above the equilibrium price result in persistent surpluses as they incentivize overproduction. Special interest groups often advocate for these price controls.
Integrated Marketing Communication PlanFelicia Pratt
This document outlines an integrated marketing communications plan for ConsoE's new product, ChargeIt, a portable solar-powered battery. The plan aims to drive collaboration across ConsoE departments and create awareness of ChargeIt. Stakeholders like executives and Wall Street are skeptical of ConsoE entering the consumer market. The plan includes messaging tailored to each stakeholder, and an implementation timeline with tactics like trade shows and earned media to generate interest over six months for $250,000. Metrics will track social media engagement, trade show leads, and media stories to measure success.
The document discusses the marketing environment for services. It is comprised of the macro environment and micro environment. The macro environment includes political, economic, social, and technological factors outside an organization's control that influence its operations. The micro environment refers to internal factors like customers, suppliers, competitors, and management that an organization can control and that affect its marketing activities and success. The document also examines how specific external factors like political/legal, economic, socio-cultural, and technological conditions influence service marketing.
The document summarizes different types of transition signals used to connect ideas in writing. It divides transitions into categories like addition, comparison, contrast, concession, chronological order, and conclusion. For each category, it provides examples of sentence connectors, clause connectors, and other common transitions used to link ideas in that way such as "moreover" for addition and "however" for contrast.
This document defines psychological pricing and discusses charm pricing. Psychological pricing considers how consumers psychologically perceive prices rather than just economic factors. Charm pricing, a type of psychological pricing, leverages reference price effects, endowment effects, anchoring, comparison sets, framing, order effects, and end benefits to appeal to consumers' psychological perceptions of value.
This document discusses various aspects of service marketing for a movie theater chain. It covers the 7 P's of services marketing as applied to the theater, including their product offerings, pricing strategies, promotion methods, and employee training processes. It also discusses service blueprinting and the gaps model in services. Different strategies for managing variable demand and capacity constraints are outlined, including shifting shows and prices and using part-time staff. The role of physical environment and employee roles in service delivery are also addressed.
Price discrimination exists when different prices are charged for the same product to different buyers. There are three main types of price discrimination: personal, geographical, and according to usage. Price discrimination is possible when there are differences in elasticity of demand, market imperfections, differentiated products, and legal sanctions or monopoly power. Price discrimination can occur through personal, geographical, or according to usage and is classified into three degrees based on how prices are set for individual units or groups.
This document discusses price controls and their impact on supply and demand. It provides examples of price ceilings, which establish a legal maximum price, and price floors, which set a legal minimum price. Price ceilings can cause shortages by creating a surplus of demand over supply. Price floors can result in surpluses or unemployment by producing a surplus of supply over demand. The effects are illustrated using supply and demand graphs for rental housing prices under a price ceiling and wages for unskilled labor under a minimum wage price floor.
Price ceilings and floors set by governments distort the price signals in the market. Price ceilings that are set below the equilibrium price cause persistent shortages as they incentivize less production. Price floors set above the equilibrium price result in persistent surpluses as they incentivize overproduction. Special interest groups often advocate for these price controls.
Integrated Marketing Communication PlanFelicia Pratt
This document outlines an integrated marketing communications plan for ConsoE's new product, ChargeIt, a portable solar-powered battery. The plan aims to drive collaboration across ConsoE departments and create awareness of ChargeIt. Stakeholders like executives and Wall Street are skeptical of ConsoE entering the consumer market. The plan includes messaging tailored to each stakeholder, and an implementation timeline with tactics like trade shows and earned media to generate interest over six months for $250,000. Metrics will track social media engagement, trade show leads, and media stories to measure success.
The document discusses the marketing environment for services. It is comprised of the macro environment and micro environment. The macro environment includes political, economic, social, and technological factors outside an organization's control that influence its operations. The micro environment refers to internal factors like customers, suppliers, competitors, and management that an organization can control and that affect its marketing activities and success. The document also examines how specific external factors like political/legal, economic, socio-cultural, and technological conditions influence service marketing.
The document summarizes different types of transition signals used to connect ideas in writing. It divides transitions into categories like addition, comparison, contrast, concession, chronological order, and conclusion. For each category, it provides examples of sentence connectors, clause connectors, and other common transitions used to link ideas in that way such as "moreover" for addition and "however" for contrast.
This document defines psychological pricing and discusses charm pricing. Psychological pricing considers how consumers psychologically perceive prices rather than just economic factors. Charm pricing, a type of psychological pricing, leverages reference price effects, endowment effects, anchoring, comparison sets, framing, order effects, and end benefits to appeal to consumers' psychological perceptions of value.
1) Six Sigma is a data-driven approach to process improvement that aims to reduce defects to 3.4 parts per million. It involves defining customer needs, measuring processes, analyzing data for improvement opportunities, and controlling processes.
2) Quality is defined as meeting or exceeding customer requirements. Total quality cost includes prevention, appraisal, internal failure, and external failure costs. Understanding customer needs through methods like the KANO model is important for defining critical quality characteristics.
3) Measurement and statistics are essential for understanding process capability. Descriptive statistics summarize data while inferential statistics allow estimating population parameters from samples. Tools like histograms, box plots, and statistical parameters
Training Prog :: Vendor quality Management system-Vendor developmentVarmahk
This document provides information on developing suppliers through a vendor management development program. It discusses the importance of managing supplier quality and having visibility into supplier processes. It outlines a supplier assessment process that includes scoring suppliers based on weighted criteria and categorizing them as green, orange, yellow or red based on their overall score. The document also discusses establishing compliance audits and processes for suppliers as well as providing training and support to help suppliers improve their quality and delivery performance.
This document provides an overview of total quality management (TQM). It discusses key factors for quality from a customer's perspective such as price, technology, fashion, time orientation, contractual agreements, and ethics. The document emphasizes that customer satisfaction should be the highest priority for an organization and that continuous improvement is needed to provide high quality products and services. It also introduces some basic quality control tools including control charts, cause and effect diagrams, run charts, scatter diagrams, flowcharts, and Pareto charts that can help identify sources of variation and target areas for improvement.
Chad Kymal is an internationally renowned quality management consultant and trainer. He has extensive experience in topics such as TQM, statistical process control, and quality system standards. Kymal founded several consulting and software companies including Omnex, which provides quality management training, and AQSR, a quality system registrar. The document discusses the history and traditional models of calculating cost of quality (COQ), and limitations of traditional COQ approaches. It proposes alternative COQ frameworks that consider broader quality costs and focus on using COQ data to drive process improvements.
The document discusses cost of quality and quality costs. It explains that understanding quality costs enables reducing unnecessary costs by preventing problems. Quality costs can account for 25-35% of costs in manufacturing and service industries. There are different categories of quality costs such as prevention, appraisal, internal and external failure costs. The document emphasizes that investing in prevention has higher returns and saves more costs compared to appraisal and failure costs according to the 1:10:100 rule. It also outlines some steps to implement quality cost measurement in an organization.
The document discusses various aspects of quality management including definitions of quality, total quality management principles, quality tools and standards, inspection practices, and quality in services. It defines key terms like ISO standards, quality costs, Baldrige award, and quality tools. It also explains total quality management concepts such as continuous improvement, employee empowerment, benchmarking, and statistical process control.
Quality Management and Statistical Process ControlMahmudul Hasan
This document discusses quality management concepts including the meaning of quality, quality assurance vs quality control, process control, and statistical process control. It defines quality as meeting customer expectations and fitness for use. Quality assurance focuses on implementing processes while quality control checks output. Process control monitors a process to ensure it behaves as expected. Statistical process control uses tools like control charts to reduce variability and identify sources of variation. The document reviews various quality measurement and process analysis tools.
This document discusses Total Quality Management (TQM) and Life Cycle Cost (LCC). It defines TQM as an integrated organizational effort to improve quality at every level by meeting customer expectations. It also defines key aspects of quality and objectives of TQM like meeting customer requirements. The document then discusses the cost of quality and categories like prevention, appraisal, internal and external failure costs. It also outlines features of TQM and stages of LCC analysis from planning to implementation and monitoring.
This document provides an overview of total quality management principles and concepts. It begins with definitions of quality, dimensions of quality, and quality planning. It then discusses quality costs and types of quality costs. The document reviews the historical development of quality control and introduces total quality management principles such as management commitment, customer focus, quality at all levels, and continuous improvement. It also discusses leadership, quality councils, quality statements, strategic planning, and barriers to implementing total quality management.
The document continues by covering TQM principles such as customer satisfaction, employee involvement, continuous process improvement, supplier partnership, and performance measures. It specifically discusses concepts like the Juran trilogy, PDCA cycle, 5S, kaizen, partnering, supplier
This document provides an overview of Lean Six Sigma and how it combines Lean Manufacturing and Six Sigma. Lean focuses on reducing waste and cycle times, while Six Sigma aims to reduce defects and variation. Together, Lean Six Sigma seeks to improve quality and processes by identifying and removing causes of defects and waste. It uses data-driven, statistical methods to solve problems and implement robust control plans for sustained improvements.
The document defines quality and identifies costs of quality. It discusses five common definitions of quality: conformance to specifications, fitness for use, value for price paid, support services, and psychological. Quality costs are classified into prevention, appraisal, internal failure, and external failure costs. Tools for identifying and solving quality problems include the Plan-Do-Study-Act cycle, seven quality control tools like control charts, and Quality Function Deployment for translating customer preferences to design.
CFW - Understanding Your Costs / Open Book Costing ModelsRae Davies
The document provides an overview of open book costing for construction projects and frameworks. It outlines 10 steps to develop an open book cost model including establishing workload, labor costs, material costs, plant/tools requirements, risk costs, overhead costs, and profit margin. The document also discusses qualifications needed to win frameworks like trade certifications and accreditations. It emphasizes the importance of collaboration, continuous improvement, and focusing on client needs to work profitably on frameworks.
This document provides an overview of total quality management (TQM) concepts through a seminar presentation. It defines key TQM terms and principles, discusses the three major quality gurus and their philosophies, and outlines tools and techniques for process management and continuous improvement. The document emphasizes that TQM requires organization-wide commitment to customer satisfaction through integrated systems and the continuous improvement of processes.
Lean manufacturing or lean production, often simply "lean", is a systematic method for waste minimization ("Muda") within a manufacturing system without sacrificing productivity.
Performance Measures for Supply Chain Management.pptxZahidColdstone
The document provides an overview of key concepts related to measuring performance in supply chain management. It defines supply chain management and its objectives such as value creation, sustaining competitive advantage, and customer satisfaction. It discusses why measuring performance is important for decision making, communication, and innovation. Finally, it outlines some of the topics that will be covered in the course, including supply chain performance indicators, measurement tools, and challenges of measuring performance.
Standardization(work study & measurement)Nisarg Shah
Standardization involves developing and applying common standards for products, components, or procedures. This provides benefits such as improved communication, facilitation of trade by removing technical barriers, and technology transfer. Process standardization formalizes work rules and procedures to make activities transparent and uniform. Product standardization sets uniform characteristics for goods or services to allow competition while providing consistency for consumers. Both provide benefits like reduced costs, increased quality and cycle time improvements, while standardization also improves management and organizational flexibility.
Quality is central to operations in today's competitive market. It is difficult to define as it can mean different things. Factors an organization must consider to ensure quality include the design process, supplies, workforce skills, monitoring systems, and after-sales service. Volkswagen would need to consider the quality of materials and components, workforce commitment and skills, monitoring processes, and ability to meet deadlines.
Module - 1
Principles and Practice: Definition, basic approach, gurus of TQM, TQM Framework, awareness, defining quality, historical review, obstacles, benefits of TQM.
Quality Management Systems: Introduction, benefits of ISO registration, ISO 9000 series of standards, ISO 9001 requirements.
Student will be able to
Explain the various approaches of TQM
Infer the customer perception of quality
Analyze customer needs and perceptions to design feedback systems.
Apply statistical tools for continuous improvement of systems
Apply the tools and technique for effective implementation of TQM.
TEXT BOOKS:
Total Quality Management: Dale H. Besterfield, Publisher -Pearson Education India, ISBN: 8129702606, Edition 03.
Quality is important for operations in today's competitive market. It can mean different things such as the quantity provided for price paid or reliability. Organizations must consider factors like the design process, supply quality, workforce skills, monitoring processes, and after-sales service when assessing if they can provide quality. For example, Volkswagen would need to consider supplier component quality, workforce commitment and skills, and their production monitoring systems.
Advanced control scheme of doubly fed induction generator for wind turbine us...IJECEIAES
This paper describes a speed control device for generating electrical energy on an electricity network based on the doubly fed induction generator (DFIG) used for wind power conversion systems. At first, a double-fed induction generator model was constructed. A control law is formulated to govern the flow of energy between the stator of a DFIG and the energy network using three types of controllers: proportional integral (PI), sliding mode controller (SMC) and second order sliding mode controller (SOSMC). Their different results in terms of power reference tracking, reaction to unexpected speed fluctuations, sensitivity to perturbations, and resilience against machine parameter alterations are compared. MATLAB/Simulink was used to conduct the simulations for the preceding study. Multiple simulations have shown very satisfying results, and the investigations demonstrate the efficacy and power-enhancing capabilities of the suggested control system.
1) Six Sigma is a data-driven approach to process improvement that aims to reduce defects to 3.4 parts per million. It involves defining customer needs, measuring processes, analyzing data for improvement opportunities, and controlling processes.
2) Quality is defined as meeting or exceeding customer requirements. Total quality cost includes prevention, appraisal, internal failure, and external failure costs. Understanding customer needs through methods like the KANO model is important for defining critical quality characteristics.
3) Measurement and statistics are essential for understanding process capability. Descriptive statistics summarize data while inferential statistics allow estimating population parameters from samples. Tools like histograms, box plots, and statistical parameters
Training Prog :: Vendor quality Management system-Vendor developmentVarmahk
This document provides information on developing suppliers through a vendor management development program. It discusses the importance of managing supplier quality and having visibility into supplier processes. It outlines a supplier assessment process that includes scoring suppliers based on weighted criteria and categorizing them as green, orange, yellow or red based on their overall score. The document also discusses establishing compliance audits and processes for suppliers as well as providing training and support to help suppliers improve their quality and delivery performance.
This document provides an overview of total quality management (TQM). It discusses key factors for quality from a customer's perspective such as price, technology, fashion, time orientation, contractual agreements, and ethics. The document emphasizes that customer satisfaction should be the highest priority for an organization and that continuous improvement is needed to provide high quality products and services. It also introduces some basic quality control tools including control charts, cause and effect diagrams, run charts, scatter diagrams, flowcharts, and Pareto charts that can help identify sources of variation and target areas for improvement.
Chad Kymal is an internationally renowned quality management consultant and trainer. He has extensive experience in topics such as TQM, statistical process control, and quality system standards. Kymal founded several consulting and software companies including Omnex, which provides quality management training, and AQSR, a quality system registrar. The document discusses the history and traditional models of calculating cost of quality (COQ), and limitations of traditional COQ approaches. It proposes alternative COQ frameworks that consider broader quality costs and focus on using COQ data to drive process improvements.
The document discusses cost of quality and quality costs. It explains that understanding quality costs enables reducing unnecessary costs by preventing problems. Quality costs can account for 25-35% of costs in manufacturing and service industries. There are different categories of quality costs such as prevention, appraisal, internal and external failure costs. The document emphasizes that investing in prevention has higher returns and saves more costs compared to appraisal and failure costs according to the 1:10:100 rule. It also outlines some steps to implement quality cost measurement in an organization.
The document discusses various aspects of quality management including definitions of quality, total quality management principles, quality tools and standards, inspection practices, and quality in services. It defines key terms like ISO standards, quality costs, Baldrige award, and quality tools. It also explains total quality management concepts such as continuous improvement, employee empowerment, benchmarking, and statistical process control.
Quality Management and Statistical Process ControlMahmudul Hasan
This document discusses quality management concepts including the meaning of quality, quality assurance vs quality control, process control, and statistical process control. It defines quality as meeting customer expectations and fitness for use. Quality assurance focuses on implementing processes while quality control checks output. Process control monitors a process to ensure it behaves as expected. Statistical process control uses tools like control charts to reduce variability and identify sources of variation. The document reviews various quality measurement and process analysis tools.
This document discusses Total Quality Management (TQM) and Life Cycle Cost (LCC). It defines TQM as an integrated organizational effort to improve quality at every level by meeting customer expectations. It also defines key aspects of quality and objectives of TQM like meeting customer requirements. The document then discusses the cost of quality and categories like prevention, appraisal, internal and external failure costs. It also outlines features of TQM and stages of LCC analysis from planning to implementation and monitoring.
This document provides an overview of total quality management principles and concepts. It begins with definitions of quality, dimensions of quality, and quality planning. It then discusses quality costs and types of quality costs. The document reviews the historical development of quality control and introduces total quality management principles such as management commitment, customer focus, quality at all levels, and continuous improvement. It also discusses leadership, quality councils, quality statements, strategic planning, and barriers to implementing total quality management.
The document continues by covering TQM principles such as customer satisfaction, employee involvement, continuous process improvement, supplier partnership, and performance measures. It specifically discusses concepts like the Juran trilogy, PDCA cycle, 5S, kaizen, partnering, supplier
This document provides an overview of Lean Six Sigma and how it combines Lean Manufacturing and Six Sigma. Lean focuses on reducing waste and cycle times, while Six Sigma aims to reduce defects and variation. Together, Lean Six Sigma seeks to improve quality and processes by identifying and removing causes of defects and waste. It uses data-driven, statistical methods to solve problems and implement robust control plans for sustained improvements.
The document defines quality and identifies costs of quality. It discusses five common definitions of quality: conformance to specifications, fitness for use, value for price paid, support services, and psychological. Quality costs are classified into prevention, appraisal, internal failure, and external failure costs. Tools for identifying and solving quality problems include the Plan-Do-Study-Act cycle, seven quality control tools like control charts, and Quality Function Deployment for translating customer preferences to design.
CFW - Understanding Your Costs / Open Book Costing ModelsRae Davies
The document provides an overview of open book costing for construction projects and frameworks. It outlines 10 steps to develop an open book cost model including establishing workload, labor costs, material costs, plant/tools requirements, risk costs, overhead costs, and profit margin. The document also discusses qualifications needed to win frameworks like trade certifications and accreditations. It emphasizes the importance of collaboration, continuous improvement, and focusing on client needs to work profitably on frameworks.
This document provides an overview of total quality management (TQM) concepts through a seminar presentation. It defines key TQM terms and principles, discusses the three major quality gurus and their philosophies, and outlines tools and techniques for process management and continuous improvement. The document emphasizes that TQM requires organization-wide commitment to customer satisfaction through integrated systems and the continuous improvement of processes.
Lean manufacturing or lean production, often simply "lean", is a systematic method for waste minimization ("Muda") within a manufacturing system without sacrificing productivity.
Performance Measures for Supply Chain Management.pptxZahidColdstone
The document provides an overview of key concepts related to measuring performance in supply chain management. It defines supply chain management and its objectives such as value creation, sustaining competitive advantage, and customer satisfaction. It discusses why measuring performance is important for decision making, communication, and innovation. Finally, it outlines some of the topics that will be covered in the course, including supply chain performance indicators, measurement tools, and challenges of measuring performance.
Standardization(work study & measurement)Nisarg Shah
Standardization involves developing and applying common standards for products, components, or procedures. This provides benefits such as improved communication, facilitation of trade by removing technical barriers, and technology transfer. Process standardization formalizes work rules and procedures to make activities transparent and uniform. Product standardization sets uniform characteristics for goods or services to allow competition while providing consistency for consumers. Both provide benefits like reduced costs, increased quality and cycle time improvements, while standardization also improves management and organizational flexibility.
Quality is central to operations in today's competitive market. It is difficult to define as it can mean different things. Factors an organization must consider to ensure quality include the design process, supplies, workforce skills, monitoring systems, and after-sales service. Volkswagen would need to consider the quality of materials and components, workforce commitment and skills, monitoring processes, and ability to meet deadlines.
Module - 1
Principles and Practice: Definition, basic approach, gurus of TQM, TQM Framework, awareness, defining quality, historical review, obstacles, benefits of TQM.
Quality Management Systems: Introduction, benefits of ISO registration, ISO 9000 series of standards, ISO 9001 requirements.
Student will be able to
Explain the various approaches of TQM
Infer the customer perception of quality
Analyze customer needs and perceptions to design feedback systems.
Apply statistical tools for continuous improvement of systems
Apply the tools and technique for effective implementation of TQM.
TEXT BOOKS:
Total Quality Management: Dale H. Besterfield, Publisher -Pearson Education India, ISBN: 8129702606, Edition 03.
Quality is important for operations in today's competitive market. It can mean different things such as the quantity provided for price paid or reliability. Organizations must consider factors like the design process, supply quality, workforce skills, monitoring processes, and after-sales service when assessing if they can provide quality. For example, Volkswagen would need to consider supplier component quality, workforce commitment and skills, and their production monitoring systems.
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Procurement : Resisting price increase
1.
2. Welcome to the program on
Resisting Price Increase and
Implementing Cost Improvement
Initiatives
by
H K Varma Varmahk@Gmail.com
98202 62986
22 426 62986
4. Program schedule
• 10.00 – 11.15 Session I
• 11.30 – 1.00 Session II
Lunch break 1.00 to 2.00
• 2.00 – 3.30 Session III
• 3.30 – 4.50 Session IV
• 4.50 – 5.00 Q / A
• 5.00 ----------- Close
5. Business scenario post GATT ....
• Introduction of GATT ( General Agreement on Tariffs and
trade ) under the WTO in the yr 1995
• reduced trade barriers amongst global players thru’
o Export subsidies ,
o lifting of quantitative restrictions and
o reduction in tariff rates (from 20% -1950 to 3.6% -
2010)
o s How it affected the businesses ! …………
6. The survival mantra has become
• “Survival of the fittest”
Survival of the best
Cost ,
quality and
the fastest
7. Inflation and how to beat it
Inflation is a sustained increase in the general price
level of goods and services over a period of time
Inflation occurs due to an imbalance between demand
and supply of money, changes in production and
distribution cost or increase in taxes on products
It could be :
• Negative , or
• Positive
8. Mfg Cost Var Output at TP Stores cr. 4000
241 3972 +/- in WIP 178
PBIT Misc Output -206
1191 Input Cost
3731 Dir Malt 3000
NOPAT Dir Lab 86
810 Mktg PBIT Sales/Serv 6000 Malt OH 47
929 Cost of Sales 3972 Shop OH 261
ED on Sales 794 PGOH 36
TAX OD Adj Pers Rel Exp 89 Comm Exp 163
EVA 381 -65 T&C 54 Alloc Exp 189
361 Sales Pr Exp 8
Corp alloc NDC 19
86 ODE 63
WACC Estb 31
12% Other Exp 41
Cap Chg MMI 1034
449 Cap Emp WIP 370
3738 Net F Assets FG 53
601 Curr Assets Cust OS 3073
4597 Oth contl A 67
Net WC
3137
Curr Liabilities Vendor Cr 1273
1460 Cust Adv 33
OCL 154
Areas of focus
1. Reduction in Material & labor
costs
2. Reduction the Lead time
3. Reduction in Rejections , Wastage
4. Reduce Working capital
How
an effective
Purchase dept.
can help
improve EVA
9. Material Cost reduction vs Increase in Profits
55
53.9
52.3
57.5
29.0
28.5
27.6
30.4
13.0
14.8
17.1
19.1
0 10 20 30 40 50 60 70 80 90 100 110 120
Material Labour O/H Profit
Y1
Y2 –2%
redu in M
Y3 –5%
redu in M
10% Volume
Growth
14% Incr in P
32% Incr in P
47% Incr in P
Rs in Cr
Let us understand thru
major cost elements of a
Product !
10. • Supply-chain executives
have significant role in the
operating expenses
cost of goods sold and
• hence have a major role in
margin management
11. Performance Measures
qualitative vs quantitative
• When analyzing SC performance, qualitative evaluations
such as
– Good
– Fair
– Adequate and
– Poor
• As a result, quantitative performance measures are often
preferred to such qualitative evaluations.
are vague and difficult to arrive
at any meaningful conclusion.
12. Performance monitoring of SC partners
Should include :
• Quality
• OTD
• Cost
• Service
Once the performance of the SC operations has been measured
and
performance gaps identified, it becomes important to identify
what activities should be performed to close those gaps
13. • A team from Focal Organization visits the Vendor and
allocates points against a number of queries in a
questionnaire.
• Actual working of the quality department is audited by
examining records, analysis of the system and talking to
people on the spot.
• Rating should be numeric ... , ... , ... , ....scale
• After determining which factors are critical, a method is
devised that allows the vendor to be judged or rated on
each individual factor.
Vendor Assessment
14. Vendor Assessment ( Criticality * Rating )
1 = Not
Important
4 = Critical
1 = Poor
4 = High
Vendor
rating
Criteri
a No.
Criteria Importance
(A)
Rating(B) A*B
1 2 3 4
1 Work stn condition 3
2 Maintenance of m/cs 3
3 Productivity 4
4 Safety Initiatives 4
..
20 Quality Systems 4
Vendor ::
Min Score = 20 Max Score = 320Evaluation CFT ……..
Score < 100 Rejected
15. Max
Score
Weighted
score
1. GENERAL ORGANIZATION: 4 2.9
2. SAFETY 4 2.3
3. INSPECTION 4 3.4
4. DRAWING & REVISION CONTROL 4 2.8
5. PROCUREMENT: INCOMING R M CONTROL 4 2.4
6. MANUFACTURING PROCESSES 4 2.1
7. TOOLINGS & MEASURING INSTRUMENTS 4 3.7
8. QUALITY : QUALITY INDICATORS 4 2.6
9. M/C & TOOLING MAINTENANCE SYSTEM 4 2.5
10. ENVIRONMENT 4 3.2
40 27.9
Supplier Assessment (Summary)
16. Supplier Assessment score
Overall
Score
Acceptable > 30 Green
Conditional 20 - 29 Orange
Poor
Performer
12 - 19 Yellow
Rejected < 12 Red
Vendors with
low scores are
asked to
overcome the
shortcomings
with focus on
time-bound
improvements
17. A good supplier helps our organization to be more efficient,
produce higher quality products or services, reduce
costs, and increase profits.
A poor performer can disrupt our operations, make our
organization fail in the eyes of our customers, increase
our costs, and threaten our profits
hence need for Vendor development .........
18. ISO9000/
TS16949
Costing -
Transparent
Impln.of
Lean &
six sigma
initiatives
Help you
reduce
costs VE
Loaning of
tools, gauges ,
testing equip
etc
Vendor
Training
Negotiation
with
supplier’s
supplier
Partnership
/ JV
Resisting
Price
Increase
Structured
negotiationOn-time
Delivery
19. Value Engineering (value analysis)
• VE is a systematic and organized approach to provide the
necessary functions of a product / service / process at the
lowest cost.
• Value engineering promotes the substitution of materials and
methods with less expensive alternatives, without sacrificing
functionality.
• These substitutes were often found to reduce costs and
provided equal or better performance.
• Value, as defined, is the ratio of function to cost , V =
F
C
• Alternately : Value = (Performance + Capability)/Cost =
Function/Cost
• Value can therefore be increased by either improving the
function or reducing the cost.
20. VE (structured thought process to evaluate options as follows)
Gather information
⁻ What is being done now?
⁻ Who is doing it?
⁻ What could it do?
⁻ What must it not do?
Measure
⁻ How will the alternatives be
measured?
Analyze
⁻ What must be done?
⁻ What else can perform the desired
function?
⁻ What does it cost?
Generate
⁻ What else will do the job?
Evaluate
⁻ Which Ideas are the best?
Develop and expand ideas
⁻ What are the impacts?
⁻ What is the cost?
⁻ What is the performance?
Present ideas
‒ Sell alternatives
21. Vendor development
• Procuring organization forms a team of engineers and
assign it to their suppliers for carrying out the specific
development projects.
• By having the direct support of their client and regular
monitoring of their development
– will be more motivated to carry out the program fully &
– will readily realize that the program is indispensable.
22. • Points to remember
– Negotiate the Supplier's Entire Volume not only for your
requirement but also for his other customers need.
– The larger the volume , the greater your savings.
– Always Manage The Negotiations.
• You may have the knowledge and technology to
manage the negotiations better than the supplier.
– This also gives you the control on timeline, information on
inputs, etc.
Negotiating on behalf of your subcontractor
to avail lower costs
23. ISO 9000 / TS 16949 certification ----
• ISO 9000 certification stresses the importance of
compliance on technical specifications and the quality
requirements .
• In fact , some procuring enterprises agree to work with
suppliers only if they are ISO 9000 certified.
• To help subcontractors acquire such certification, main
contractor should assist them with regard to system &
procedures to be adopted for
• documentation control
• product purchasing
………………..
24. Total quality (zero defects) management
• Detect defective components and diagnose the
causes of such defects
• Reduce waste and reworking
• Build up expertise
• Review the importance of quality in the budget
• Develop a culture centered on the workers’
accountability for quality and
• show them what they can gain in terms of personal
satisfaction and security.
25. Allowing use of main contractors’ production
facilities by subcontractors …
Subcontractor is an extended partner in your supply chain
He should be allowed to have access to main contractors
facilities such as :
– instruments
– moulds
– prototypes
– patterns
– quality control equipment etc which directly
enhance the quality of products.
26. Organization of work within the
enterprise
• Internal functioning of an enterprise is important from a
quality viewpoint.
• Thus to gain a better appreciation of overall coordination
the organization would need:
– No barriers between different departments / Sections
(Homogeneity between departments)
– Encourage teamwork
– Organize discussions on working practices and
investigate solutions to problems
27. Objectives of Vendor rating
– To motivate suppliers to improve performance.
– To apportion orders to deserving vendors for overall
cost reduction.
– To select vendors for further development.
– To reduce the cost of inspection of incoming lots by
modifying sampling plan
29. With
Improveme
nts
NOS. PECENTAGE
GREEN 72 54
Orange 34 26
Yellow 23 17
Red 4 3
133 100
After Improvement program
Quantum jump in Vendor profile
Earlier NOS.
PECENTA
GE
GREEN 68 48 acceptable
Orange 32 23 conditional
Yellow 26 18 poor perf
Red 15 11 rejected
141 100
30. Supplier reward program
• There are two sides of performance improvement
motivation:
– Rewarding the suppliers who perform well so
they will aspire to continue performing well ,
and
– Correcting Poor Performance : taking
corrective action with those suppliers whose
performance does not meet our expectations.
• It would never be safe to assume that switching
supplier eliminates problems
31. • With focus on shrunken vendor base ,
• Consolidation with limited few vendors is encouraged
called tier 1 suppliers who in turn take responsibility
for quality of tier 2/3 suppliers
• Suppliers are assured of long term commitments and
cooperative relationship
• Buyers work along with suppliers to develop cost
reduction for both firms
• Suppliers are even allowed to keep certain portion of
the profits thru these joint efforts
Vendor consolidation
32. Supplier Relationship model (SRM)
Unilateral
“Make the best part”
Interactive
“Together develop better spec”
Collaborative
“Supplier teams make the best
system or process.”
Higher
Supplier
Involvement
Higher
Value
Addition
33. 1. To improve supplier performance. On cost reduction , OTD ,
Zero defect , Reduced W/C , prompt service .
2. To reduce risk. . Ensure continuity of supply in the face of
unexpected disruption to the operations of one or more
suppliers from natural disasters, political upheavals, and
other events
3. To provide flexibility and agility to the organization thru’ a
healthy vendor base
4. To save money
Strategic Sourcing Goals of Material department
36. Ensure early Purchasing Involvement
• Suppliers try to woo the Internal customers to get
insight to the decision making process & other
important information .
• Purchasing professionals are typically trained to uphold
high ethical standards and will ensure that these tactics
are not successfully used by suppliers.
• Purchasing professionals are experts in evaluating the
overall supplier capabilities wrt to financial(Z-score )
,Quality, Technical & Mfg excellence .
• A passion for risk management which other wise may
get ignored ( Succession plan , Tax and duty structure
,overall low cost etc )
37. Effective Negotiation skills
preparation & planning
• Prepare in details for conducting a successful
negotiation
• Bring in more transparency to the process for a long
term relationship
• Remember you’re the expert
• A good negotiation should cover all terms : price,
warranty, delivery, payment terms, etc.
• What often happens is that one supplier offers the
best price, 2nd offers the best warranty, a third offers
the best delivery, etc.
38. Should A Manager Join A Negotiation In Late
Stages?
While some managers feel their jumping in at a later stage will
squeeze another 5% out of the supplier, the fact is that their
actions result in companies getting worse deals, not better.
• Actually, the supplier may welcome another counterpart -
that way he can play "divide and conquer" and get the
manager to agree to concessions that the buyer would not.
•
• If past history compels a supplier to predict that a manager
will join a negotiation in its late stages,
• will the supplier ever give its best deal to the buyer ? No -
the supplier will withhold it so that it has something to
offer the manager later.
39. Product Costing
• Product Cost
• Direct Cost
» Direct Mfg Cost
1. Direct Labour
2. Direct Material
• Indirect Cost
» Non-Mfg Costs
1. Variable overheads
2. Fixed overheads
3. Selling Costs
4. Administrative costs
40. Component Cost
Nett Wt (grams) …… (Volume * Density) 105
Charge Wt (Grams) 120
Rate/Kg (Rs) after MODVAT 87
RM Cost/Pc (Rs) 10.44
ICC at 3% 0.31
Cycle Time (Sec) 380
Available time (7hrs) = 7*60*60 sec 25200
Output / Shift ( 1 Cav Mold ) 66
Molding cost per piece (Shift rate / Output - 558/66) 8.42
Post molding opr.(Rs 220/shift , Output 380 nos) 0.66
Inspn Cost ( Rs 5000 pm - 500pc/shift) 0.40
Pkg/Forwarding 0.43
Sub-total 20.66
O/H ( 12%) 2.48
Profit (10% on L) 0.99
Total rate / Unit 24.13
41. Zero based costing
Apportions all costs ( Direct , Indirect and overheads )
on total production
Needs to take on overall view on expenses to keep
O/H at minimum
Improve the productivity , M/c utilization
Increase production levels in order to spread the
total expenses on larger volumes
Ensure alt. product is ready for offloading as per Product
life cycle
43. Cost of Quality Failure of Vendor to meet quality
• Complaints
• Warranties
• Repairing goods
•Loss due to sales
reductions
• Checking & Testing
Purchased costs
• In-process and Final
Inspection Testing
• Field Testing
• Product , Process
and Service Audits
• Calibration
•Scrap
•Rework
•Re-testing
•Delays
•Shortages
•Supplier Evaluation
• Error Proofing
• Quality Improvement
projects
• ISO
• Quality Education and
Training
• Quality planning
• New Product Review
Preservat
ion Costs
Internal
Failure
costs
External
Failure
Costs
Appraisal
costs
Costofservicingdefects
PreventionandAppraisalCost
Your focus
Leads to
Striking a balance
Economic
conformance
point
44. Cost of Quality Management vs Cost of servicing defects
Low Quality High
LowCostHigh
Minimum
cost of
Quality
Total
cost of
Quality
Cost of
Service
defects
Where
you want
to be
Cost of
Quality
Manageme
nt
45. The Lean-Six Sigma philosophy
Cost of Quality Management vs Cost of servicing defectsLowCostHigh
Prevention
and
Appraisal
cost
𝟒𝝈
𝟓𝝈
𝟔𝝈
Economic
conformance
point
46. Hold Suppliers More Accountable For the Quality of
their Products
Drive performance improvement thru’ CFTs to manage quality
across entire spectrum of suppliers
⁻ Non-Conformances / Corrective and Preventive Action
(NC/CAPA)
⁻ Complaint Handling
⁻ Statistical Process Control (SPC) – to get Real-time visibility
of supplier quality metrics through web-based portal
• Real-time visibility of manufacturing data helps OEMs
eliminate the black box effect of outsourcing critical
components.
• It also eliminates surprises on the receiving nonconforming
materials.
47. Process Yield & First time Yield
• Traditionally , Yield is the proportion of
• Lots accepted out of total lots received
• Yield = 79/80 = 98.75%
In
80
Out
79
Yield = 98.75%
Vendor
Receipts
Lots
Returned
1
48. Deliveries
From Vendor ”A”
80 - Lots
Received
79 – Lots
Ultimately
accepted
Inspection
Yield
=
(80-72)/80
=
90% - FTY
The hidden factory of in-process inspection and
rework accounts for 98.75% - 90.0% = 8.75%
The
Hidden
factory is due
to
The inability to
correctly
comply with
required
specifications
the first time
FTY & The Hidden Factory
Hidden
Factory
=
8.75%
The extra efforts put to
get these 7 lots
accepted is
HIDDEN FACTORYUltimate Yield = 98.8%
Lots
Rej. & returned -1
Rejn. - 8
49. An effective Purchase departments
helps to build Vendor Flexibility
&
provide Agility to our organization
50. Flexibility
• Supply chain flexibility is defined as “the ability to quickly
respond to changes in demand while achieving your
objectives of
– customer service,
– shorter lead time ,
– cost,
– inventory and
– return on assets (ROA)
51. F-Flexibility measures
• Volume flexibility (Fv ) : measures the proportion of demand
that can be met profitably by the supply chain system
• Delivery flexibility (Fd ) :
– The ability to move planned delivery dates forward .
– This ability allows the supply chain to accommodate rush
orders and special orders, and will be described as delivery
flexibility.
– Delivery flexibility is expressed as the percentage of slack
time by which the delivery time can be reduced
• Mix flexibility (Fm ) : the response time between product mix
changes.
• New product flexibility (Fn): is defined as the ease with which
new products are introduced , the time or cost required to add
new products to existing production operations
53. Summarize Fv
Group 1 2 3 4 5
Std Dev 11.33 11.33 11.10 10.50 7.73
Avg 24.5 24.5 21.16 28.22 28.53
Min 5 9 9 9 9
Max 49 42 42 42 42
Fv 0.70 0.29 1.27 0.84 1.27
Fv
comes
down as
range is
narrowe
d down
Fv rises with
Avg out put
coming down.
NO Flexibility
with lower
output
Lower
variation
clubbed
with Higher
output
improves Fv
Further
reduction
in variation
improves
Fv
Supplier is geared up
to give Higher
volumes
consistently ( Lower
std dev) leading to
higher volumes +
Flexibility
54. Delivery flexibility (Fd)
• Delivery dates change regularly and costs are associated
with not meeting the delivery dates
• The ability to move planned delivery dates forward may be
important in supply chain management.
• This ability allows the supply chain to accommodate
rush orders and special orders, and is described as delivery
flexibility.
• Delivery flexibility is expressed as the percentage of slack
time by which the delivery time can be reduced/advanced
55. Delivery flexibility (Fd ) Summary
Existing Time
–T period –
Week No
Lj Ej - Gr 1 Ej - Gr 2 Ej – Gr 3 Ej – Gr 4
23 36 33 31 30 29
23 45 41 39 38 37
23 37 32 31 30 29
23 41 38 35 34 33
23 47 42 41 40 38
Fd 22.0 31.9 37.4 44.0
Further increase means adding resources 2X , 3X
, 4X ... , Reduction in C/O time .
However there is limit to increase beyond
certain levels due to inherent processing time
57. Six Sigma
• Every mistake an organization or person makes ultimately has
a cost,
– the need to do a certain task over again,
– the part that has to be replaced,
– time or material wasted
• You consume additional resources to correct a problem
before it's delivered to the customer
• Six Sigma is a scientific problem solving tool for
– meeting your customer's needs (Time , speed , Quality )
– minimizing wasted resources (Errors , rework , Hidden
factory , variations +/-)
– maximizing profit in the process ,thru’ disciplined data
collection and analysis to determine best solutions
58. Six Sigma focus
• The goal of Six Sigma is to inject
– disciplined control,
– predictability, and
– consistency of results
so that the product comes off the production line absolutely
consistently.
• The methodology of Six Sigma was first applied in a
manufacturing company, but is extensively used in service
and transactional companies (like banks and hospitals),
• Six Sigma initiatives and projects have a direct measurable
financial focus eg OFR , Quality , Lead time , OTD ,IT , ROI etc
59. Higher Process Sigma – lower Rejection
• A low process sigma means that a significant part of the
tail of the distribution is extending past the specification
limit. More defects.
• So the higher the process sigma score Z , the fewer the
defects
1. 2σ = 30.8% Rej
2. 3σ = 6.68% Rej
3. 3.4σ = 3% Rej
4. 4σ = 0.62% Rej
5. 5σ = 0.0223% Rej
6. 6σ = 0.0003% Rej
} Most of Indian Industries are here
This is the journey we have
to undertake
60. 2 approaches to Improvement
DMAIC DFSS
• Six Sigma offers two approaches for improvement
1. Improve the process so that chances of defects are
reduced ,ie reduce the standard deviation (increase Z
score) thru’ DMAIC
2. Change the design (DFSS) so that product can
accommodate process variations
• A Six Sigma process should not generate any flaws , but
since , over the long run (Lt Std Dev) , every process shifts
61. Process capability
of a process or characteristic to meet its specifications (VOC/VOP)
1. Capability : Ability to match the voice of your process-VOP
to the voice of your customer-VOC
2. The simplest capability index is called Cp.
3. It compares the width of a two-sided specification to the
effective short term width of the process.
USL - LSL represents
the VOC-voice of the
customer's
requirements and
6σst represents the
inherent voice of the
process -VOP
Cp =
( USL-LSL )
6σst
Effective process width
under Six Sigma = 99.7%
In this example ,
Process capability = 1
LSL
USL
62. Cp
• Cp is known as measure of process capability .
• It is the number of times the spread of the
process fits into the tolerance width.
• The higher the value of Cp, the better the
process.
63. Control
• A solution that isn’t sustained over the long term has little
value
• Control charts are two-dimensional graph plotting the
– performance of a process on Y axis, and
– time or the sequence of data samples on X axis.
• They are basically a type of Run chart with control limits
Why Control chart
– It shows nature of variation in the process over time
– Helps in detecting changes in the process
– Helps in controlling the process
• Specs : USL/LSL vs UCL/LCL
– CONTROL is also capability , 𝐂 𝐩 - Process Capability
64. Why Controls
1. Process behavior is complex and fragile and that hard-
earned gains slip away if the process is left to itself.
2. The Control phase helps you make sure the problem stays
fixed, and, if done properly, provides you with additional
data to make further improvements to the process.
3. A well designed process exhibits inherent self control, but..
4. A poorly designed process requires frequent external
control and adjustment to meet requirements.
5. A process with well built-in control acts like the heating and
cooling system in a house: The system automatically
maintains a comfortable temperature at all times.
65. Variable Control Charts
• Variable Control charts are used to monitor measurable
quality characteristics of a process eg Temperature ,
dimension , weight , viscosity etc
• Variable charts can monitor only one quality characteristic at
a time .
• For more than one characteristic, a chart for each
characteristic needs to be created
• Variable Control charts help to monitor both process mean
and process variability
• Hence it becomes necessary to use minimum 2 control charts
to study the process. Ie
– Range or Std Deviation
– Process mean , with UCL & LCL
66. Variable Control Chart - contd
– R Chart / X Chart or
– X / S chart or
– MR / X chart
• An X chart is the most widely used control chart which
monitors the sample variability
• The R chart is used when sample size is less than 10
• S chart is used when sample size is greater than 10.
• For quality characteristic with sample size one , moving
range needs to be established and hence a MR chart is
used.
• As a thumb rule 20 to 25 samples should be selected for
analysis with sample size of 4 to 5 .
67. Working Capital Cycle
Cash
FG
Purchase of
Raw Matl
Receivables/
Collection
1 Months
2 Months
Production
0.5 Month
1 W/C Cycle ??
No of Cycles/ Yr = 2.4
Target ……
0.5 Month
68. Balance Sheet model of a Firm
Current Assets
-Receivables
-Inventories
Current Liabilities or
Short Term Debt-Payables
Fixed Assets
1.Tangible Fixed Assets
(M/c ,Equipments ,Land)
2.Intangible Assets
( Patents, Trade mark,
Quality of Management)
Long Term Debt
Shareholder’s
equity
Assets Liabilities
70. Sigma level Production hold-ups due to non-
availability of Material
2 Most of the time
3 25-40%
4 15-25%
5 1-15%
6 < 1%
Service level V/S Matl Non-availability
71.
72. Sum-up
• Last but not least :
• You’ve got to make sure your suppliers understand how you
define Quality and OTD.
– Avoiding this step appears negatively in your cost , and
second
– Your relationship with suppliers is important. You have to
treat them more like partners than suppliers.
The success mantra for getting quality products and
maximizing cost reductions is by working
harmoniously with suppliers as if they’re a trusted
partner
73. Establish (KPIs) of all related processes and
actions to Accelerate Operational Excellence
• It's crucial to identify a specific set of KPIs that will
help you measure progress and identify areas for
adjustment.
• Equally important to having these measures, however,
is a related system of communication procedures,
processes around the KPIs to ensure that they are
being accurately measured, interpreted,
communicated, and acted upon.
74. Purchasing Ethics
• I believe that the position of Purchase Engineer is
important , honorable , worthy , responsible , and calls
forth the highest ethical principles in relationship and
dealing with men.
• I believe in the ‘square deal’ towards the company I
represent and towards the men with whom I do business
.
• I believe it is my duty to refuse and renounce gifts or
perquisites from those with whom I transact business.