Lakshya - A Beacon of Knowledge, May 2019 Edition

EDITOR’S LETTER

“"With Evolution, Changes happen in every part of the world every day, every time."”

Welcome to the tenth edition of “LAKSHYA”, our monthly supplement designed for people who dare to think above the average and believe in connecting the dots. In an age where technology has taken over every sphere, information is abundant and data is omnipresent, we have planned to bring to you a collection of thoughtfully created and carefully crafted pieces of work by some bright aspiring minds of ICFAI Business School, Hyderabad on the current trends and receiving close review in the field of Operations Management and their relevance in different industries.

From the ninth edition, we created a new segment, „The Corporate Angle’ where article will be featured from prominent business leaders which will enlighten minds of young managers and business enthusiasts. IBS Hyderabad and Club Kaizen express a sign of gratitude to all corporate leaders for taking out time and scripting their thoughts for our magazine.

We look forward to providing you with some valuable insights and inculcate the passion for reading. We hope that you enjoy this issue and do let us know if there are any topics you‟d look forward to be covered in upcoming editions.

Please write to us and become a part of this discussion Email ID: kaizenclub.ibs@gmail.com An Initiative by: MAHESH HIREMATH JOINT SECRETARY - KORE Kaizen – IBS Hyderabad Batch 2018-20

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CONTENTS

From the Mentor’s Desk

03

The Corporate Angle

04

Role of Block-chain in Banking

07

Design Centric Approach : The New Emerging Thinking

09

Measuring Company’s Operation’s Efficiency to Maximize Profits

11

A Look at ITC’s Supply Chain Management

14

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From the Mentor’s Desk

In the era of competition, it is imperative for students to be prepared for the ever-changing business environment. Knowledge creation plays an important role to learn to tackle the dynamic nature of business.

I appreciate and congratulate the initiative of club KAIZEN for bridging the gap between corporate world and academia through LAKSHYA which is an excellent platform where industry practitioners, academicians and researchers can share their knowledge and experience, acting as a beacon guiding students to reach their goal.

My best wishes to club KAIZEN in their endeavour of knowledge creation through LAKSHYA.

Nishit Kumar Srivastava Mentor, Club Kaizen

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The Corporate Angle Operational Excellence to win your Loyal customers BY Hrushikesh Kulkarni AVP (Karvy Insights)

Service Quality Excellence Summit, an event that lasted for two full days, hosted some of the top industry experts and leaders sharing their insights on better catering to customers of the future, and what it takes to stay ahead of competition. Interesting discussions on the key role played by people, processes, infrastructure & also social media. The event was a huge success & focused on the various issues that affect how efficiently a company can deliver a superior, consistent experience to remain competitive in time of digital disruption.

Sharing some insights as learning from the Service Quality Excellence Summit: 1. Focus on Your People for Improved Customer Experience “Only 17% of the companies have an engaged workforce. Delight your employees to delight your customers." – Inputs from a delegate.

To deliver extraordinary experiences, companies should empower their employees and build a culture that is focused around customer centricity & make the customers your ambassadors.

Satisfied employees result in satisfied customers which lead to improved business results.

These companies have prompt feedback-to-action implementation, while facing fewer obstacles to improving overall business outcomes.

Starbucks is very good at engaging its employees, and is known for pampering its employees with hefty perks and incentives to build a customer-centric brand experience.

Corey duBrowa, SVP of global communications at Starbucks put it as “When employees are satisfied and engaged, the result is deeper customer connections and an elevated customer experience.”

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2. Customer Recovery is all about Speed and Timing “Recovery is all about speed and timing, it's not about handling the customer queries but how quickly you can respond." – Inputs from another delegate.

Even when delivering an outstanding experience is deep rooted in a company‟s culture, there will always be frustrated & irritated customers. The reason is simple, customer expectations are ever increasing & no company is able to meet, forget exceeding customer expectations in today‟s competitive world. This could be something as simple as a delivery not happening on time, or a misplaced or damaged product.

Letting such issues pile up will only lead to high customer churn rates, which is why customer recovery should be a standard part of every organization‟s business processes.

Customer Recovery is, essentially, damage control - the process of recovering from a customer service blunder in an effort to gain the customer‟s loyalty once again, so he/ she becomes a brand advocate.

If possible, it is important to avoid such conflicts in totality by taking appropriate steps, proactively. Not doing so can greatly impact customer retention & hence affect their loyalty.

3. Beyond Service Excellence: Delivering More than They Expect "Customer service is all about massaging the egos of people" – comments from an industry expert.

In the past, customer service was all about calling a toll free number and getting an issue resolved by talking to a call centre agent. However, customer‟s demands have changed. They have a lot of choices in the market and are always researching brands when they are shopping or while browsing social media. The interaction process has become much more complicated, unpredictable causing more ambiguity.

According to White House Office of Consumer Affairs, it costs 6-7 times more attract a new customer than it does to retain an existing customer. This is why service excellence is the need of the hour, and companies should strive to deliver more than expected of them to stay ahead of the game.

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On top of service excellence, delivering an outstanding customer experience will cause a customer to stay loyal or bonded in the future. However, just one negative experience can cause businesses to lose them to the competition.

Are you delivering more than what your customers are expecting of you? Is it seamless, engaged, and focused on the customer in the manner he/ she expects?

As a part of operational excellence for the best service quality delivery, it is need of the hour to not only track customer satisfaction or Net Promoter Score (NPS) as a measurement tool, but to look at the strength of NPS for a brand/ brand Advocacy as a measure of customer loyalty.

The author, Hrushikesh Kulkarni, is an independent management consultant with more than 14 years’ experience in marketing domain. He is an author to various research articles & teaches Research Methodology & Brand Strategic Management as visiting faculty at leading MBA colleges. A MBA in Marketing & BSc Mathematics is an avid traveller & also writes a travel blog called Distance Star.

Connect with the author on hkulkarni.weebly.com

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Role of Banking

Block-chain

in

BY Ashutosh Rajan

What is a block chain?

Block-chain is a chain of blocks that contains information. This technology can be used to timestamp digital documents so that no one could temper or destroy the digital information.

Block-chain uses peer-to-peer technology where information is accessible all over the world.

Whenever a new block is created, it is sent to different nodes of peers who can verify whether the block-chain is original or tempered through a technique known as „proof of work‟.

How the technology works?

Each block in a block-chain contains a data, hash of the block and hash of the previous block.

Data includes the digital information depending upon the type of transaction. Hash is similar to fingerprints which is unique for each block. Blocks are connected through hash of previous block making it a chain. Whenever anyone tries to temper with the data in a block, it will change the hash of that particular block. As a result, chain will be disturbed making the disturbed block invalid as it no longer contains the similar hash. Thus, it is impossible to temper with the digital information contained in a block-chain.

Figures depicting Block-chain mechanism 7 |K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

Scope of block-chain in banking sector Today, the entire world is whispering about the role of block-chain in near future. World Economic Forum has considered block-chain as the „heartbeat of financial sector‟. This revolution can undoubtedly change the fortune of banking sector. As per a study conducted

by Accenture consulting company, world banking sector can save up to $20 billion in just 2 years by implementing block-chain technology.

Benefits  Block-chain technology will help in completing large bank transfers within a few hours replacing SWIFT transfer technology that takes more than 24 hours.  It will replace third party gateway for transactions which will ultimately decrease the cost of transactions.  It will minimize financial frauds as no one can temper with blocks of digital information.  “Know your customers” will become very easy for the bank as all the information about the customer is easily accessible through this technology.  It will allow banks to store enormous digital information without any threat.

Challenges  The foremost challenge is to convince lawmakers and bank regulators all over the world as the technology is new and emerging.  The technology will eliminate third party gateway from bank transactions creating losses for such companies.  The bank would not be able to charge facilitating fee for bank transactions which will ultimately reduce the profitability of the bank.  A lot of awareness programs are required to educate bank customers in order to build a trust up on this rarely used technology.

Current practices One of the biggest banks in the world, JP Morgan Chase has already shown interest by establishing new division called Quorum division for research and implementation of blockchain technology. Bank of America has filed a patent document which talks about implementation for securing records and authenticating business data. Goldman Sachs has invested in crypto currency project called Circle.

Conclusion The block-chain technology can definitely help the banking sector in a revolutionary manner.

However, a lot of research is required to generate more information about the know-how of this technology for a better tomorrow.

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Design Centric Approach : The New Emerging Thinking BY Divyajot Kaur

The new approach being followed by large organizations is all about emerging new design culture, much flexibility is required. Sometimes the software is at the centre part of the product and needs to be integrated with the hardware. The problem may be multi faced, but dependent on the design it followed. Think of the new feature it can be revived in the product.

Design centric culture is the connection with emotional behaviour to analyse their behaviour and draw conclusion based on that. Some reports have shown that they are not comfortable while sharing this to the market, because of their reputation in the market. Team members tremendously discuss it with the team about the value proposition as much as the discuss utility and product requirements. The emotional value proposition is the promise to fulfil the requirement. It is done on the end user experience because the culture is based on the people centric rather than the data centric. It arises how the company perceives and maintains the creativity and the competitive advantage as well as the revenue streams.

Customer needs being the priority, make the products as per the requirements because if it will not satisfy, efforts would go in vein.

Flow of Design process

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 Understanding the needs is how the operations work and follows the basic information to develop the product.  How the product will satisfy the needs is defining the design asked by the customer (king).  Create new ideas to keep moving in the market.  Final design needs to be made.  Market testing to be initiated, will give an idea to move forward or not.

Operational thinking will allow the entrepreneur to think, innovate, and reinvent the design to make it a valuable product. It helps in cognitive development of the product which is categorized by the logical reasoning appeared by the real circumstances.

The primary function of the designers is to synthesize the information and publish it to overwhelm the users, they need to use it the way they want to clarify the communication. It is often good to take more time to get more of the choices available. Choice makes the decision easy and handy as well as the cognitive options for the designers.

Have you ever wondered how the controller look like and why do they look like?

It‟s because the human designing the brain model to create equipment and play the game which you can never imagine to play the game without that.

Have you ever seen the mall‟s infrastructure, why would it have the floors instead of a single story? The architect has seen the customers want and then made the building with multiple stories.

The environment is all about design, if the producer wants to take the lead in the competition, and operations being on backend help the design-centric approach to make it ahead and fulfil the client‟s vision to take off.

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Measuring Company’s Operation’s Efficiency to Maximize Profits BY Sujit Subudhi

In order to measure and optimize the efficiency of a company first we need to identify which places need our attention. Inventories and receivables can help to identify whether the company is efficient at its work or not. Companies stay efficient and competitive by keeping inventory levels down and speeding up collection of the money it has owed.

Efficiency ratios can help to identify how productively a company is using its assets and liabilities in order to maximize profits. Some of the most commonly considered efficiency ratios include inventory turnover, accounts receivable turnover, accounts payable turnover and the cash conversion cycle (CCC). In this article, we'll take you through the processes step by step.

Companies have limited cash to be blocked in inventories and receivables. In order to generate cash and profits blocked cash need to be converted into cash.

Clearing the stock shelves Inventory turnover ratio measures how many times a company sells and restocks its inventory over a given period of time, or how many days on an average a company takes to sell out its stocks. Higher inventory turnover rates are generally considered favourable, evidencing brisk sales, but excessively frequent turnover may indicate inefficient ordering or that a company may be having difficulty meeting demands for orders on a timely basis. For example: WalMart, the U.S. retail giant, known for its super-efficient operations and supply chain system which keeps inventories at a bare minimum level. In fiscal year 2011, inventories sat in the salves for an average of 40 days. Most of the companies do not provide their inventory turnover in their financial statements, But it can be calculated by taking data from the financial statements with the help of the below mentioned formula: 360 days÷ (Average cost of goods sold÷ Average inventories) Broadly speaking, lesser the number of days, the more efficient a company is; inventory is held for less time and less money is tied up in inventory. Using the same formula above, Wal11 |K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

Mart‟s numbers back in 2003 yielded 45 days, which goes to show that within that decade range, the company has increased its inventory efficiency. Thus, money is freed up for things like research and development, marketing or even share buybacks and dividend payments. If the number of days is high, that could mean that sales are poor and inventories are piling up in warehouses.

Spotting the trend However it‟s not enough to know the turnover at a specific time. The management need to identify inventory turnover of 2 years quarterly numbers, in order to understand whether it is getting good or worse.

If there is no obvious trend then it can be because of greater efficiencies gained through tighter inventory controls. On the other hand, products may be moving off the shelf more quickly simply because the company is cutting its prices.

To get a more efficient result flip to the Income Statement and look at Wal-Mart‟s gross margin (top-line revenue, or net sales, minus cost of sales). Check to see whether gross margins as a percentage of revenue/net sales are on an upward or downward trajectory. Gross margins which are consistent or rising offer an encouraging sign of improved efficiencies.

Shrinking margins, on the other hand, suggest the company is resorting to price cuts to boost sales. If inventory days are increasing, that's not necessarily a bad thing. Companies normally let inventories stay on the shelves when they are introducing a new product in the market or ahead of a busy sales period. However, if you don't foresee an obvious pick-up in demand coming, the increase could mean that unsold goods will simply collect dust in the stockroom.

Debt collection Accounts receivable is the money that is currently owed to a company by its customers.

Analysing the speed at which a company collects what it is due can tell you a lot about its financial efficiency. If a company's collection period is growing longer, it can be concluded that the company may be letting customers Stretch credit in order to increase top-line sales which can result in bad debts afterwards. The quicker a company gets its customers to make payments, the sooner it has cash to pay for merchandise and equipment, salaries, loans and, best of all, dividends and growth opportunities.

Accounts receivable turnover ratio provides an indication of a company's efficiency at collecting sales revenues on a timely basis. If the receivable turnover is not adequate then the opportunity cost will be high. In order to calculate the receivables turnover ratio the following formula can be used: (Total credit sales of the year ÷ Average Accounts receivable) This ratio tells that how many times the company has collected the due amount from its customers and dividing the ratio with 360 its gives that in how many days a customer repays the due amount.

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Accounts Payable Turnover Ratio The accounts payable turnover ratio is a short-term liquidity ratio. It signifies how efficiently a company is managing its outflows of cash, especially in relation to paying its creditors.

Higher ratios, indicates that the company can keep cash on hand longer, are generally considered preferable. However, a company must balance this with maintaining a good credit and avoiding late payment fees.

Cash Conversion Cycle The Cash Conversion Cycle combines the measurements of inventory, accounts receivables and accounts payable turnover rates to give a more complete summary of a company's overall proficiency at managing its inflows and outflows of cash. A faster CCC shows better cash management. If a company's CCC is slow, the problem can usually be identified within days inventory outstanding, days receivable outstanding or days payable outstanding.

Sizing up Efficiencies It's good news when you see a shortening of both inventory days and the collection period.

Still, that's not enough to fully understand how a company is running. To understand real efficiency, you need to see how the company stacks up against other players in the industry.

For example: Wal-Mart compared in 2003 to Target Stores, another large, publicly listed retail chain. The differences are dramatic. While Wal-Martâ€&#x;s average turnover of its inventory was 40 days during that period, Target's inventory turnover was nearly 61 days.

Wal-Mart collected payments in just three days. Meanwhile, Target required almost 64 days to get its money.

Just because one firm's numbers are lower than a rival's, doesn't mean that one firm will have a more efficient performance. Business models and product mix should also be considered.

Inventory cycles differ from industry to industry.

These efficiency measures apply largely to companies which are dealing with production or selling of goods. Software companies and firms that sell intellectual property as well as many service companies do not carry inventory as part of their day-to-day business, so the inventory turnover ratio is of little value in order to analyse these kinds of companies.

However, we can certainly use the days' receivables formula to examine how efficiently these companies collect what's owed.

The Bottom Line Finding out where a firm's cash is tied up can help shed light on how efficiently a company is being managed, utilizes its assets and handles liabilities. Of course, it takes time and effort to extract the information from corporate financial statements. However, doing the analysis will certainly help the companies to see where they stand in terms of their operational efficiency.

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A Look at ITC’s Supply Chain Management BY Tanuj Marwaha

ITC was set up in 1910 by the name of 'Magnificent Tobacco Company of India Limited'. It changed its name on September 18, 2001 and now the organization is known as Indian Tobacco Company Ltd. (ITC Ltd.) Directly, ITC has a market capitalization of almost US $15 billion and a turnover of over US $4.75 billion. It utilizes more than 21,000 individuals at in excess of 60 areas crosswise over India. ITC has been appraised as: World's Best Big Companies by Asia's 'Fab50', India's Most Respected Companies by Business World, World's Most Reputable Companies by Forbes magazine, India's Most Valuable Companies by Business Today.

ITC Ltd Cigarettes ITC is the market leader in cigarettes in India and has a wide scope of well-known brands.

ITC has become India's biggest purchaser, processor, shopper & exporter of cigarette tobaccos.

ITC's quest for global aggressiveness is reflected in its drives in the abroad markets. ITC's cigarettes are delivered in its best in class manufacturing plants at Bangalore, Munger, Saharanpur and Kolkata.

Strategy Analysis of ITC cigarettes The Company has possessed the capacity to expand on its administration position in view of its resolute spotlight on esteem creation for the buyer through critical interests in item structure, advancement, producing innovation, quality and showcasing.

Supply chain management and distribution Tobacco ranchers convey their harvest to distribution centers where tobacco leaves are gauged and stacked in heaps 14 |K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

The distribution center at that point pays the tobacco agriculturists for the tobacco they brought and the tobacco organizations or government communities pay the stockroom for the tobacco.

The Indian Tobacco Division has:    

3 contract makers (CMs) Reliable Cigarette and Tobacco Industries Private Ltd. (RCTI) Asian Tobacco Company (ATC ) Hyderabad Deccan Cigarette Industries (HDC)

Immense conveyance coordinates with 19 promoting branches and 33 Godowns crosswise over country.

Likewise obliges the fares for the most part in United States and Middle-Eastern nations.

The manufacturing sectors Cigarette manufacturing process involves processing of tobacco leaf and stem to different tobacco blends, which is called, cut tobacco.

Cut tobacco is then converted to cigarettes using other raw materials for making cigarettes and packing them in various forms as per the trading requirements.

ITD receives various grades of Tobacco Leaf and Stem from Indian Leaf Tobacco Division (ILTD) based mainly in Guntur, Andhra Pradesh.

Tobacco leaf and stem are processed to form tobacco blends at one of the three Tobacco Processing Units at Bangalore, Saharanpur and Munger.  Tobacco Processing Unit is called PMD or Primary Manufacturing Division.  The cut tobacco is then sent to the Secondary Manufacturing Division (SMD) for making and packing cigarettes.  Rest of the raw material (WMS) required for making or packing cigarettes is provided to all factories from various WMS suppliers, most of which are part of ITC Ltd. At SMD, there are two processes: Making and Packing.  Making process is the rolling of cigarette sticks.  Packing process is packing of these cigarette sticks in the cigarette packets of various pack styles.  Cigarettes are categorized in different segments based on filter or non-filter type, cigarette length, circumference, pack style, filter length and cigarette placement.

Under each segment there are various brands.  Finished Good (Cigarettes) are supplied from the factories to godowns using mainly road and rail transportation.

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Supply chain network of ITC cigarettes

Distribution Channels  Existing appropriation channels Can be portrayed by the fact that they are so immediate to the client at the end of the day what number of channels it takes the great store every client.  Trends and rising channels New channels can offer the chance to build up an upper hand to abbreviate the channel length.  Channel control structure For an instance, on account of an item having little brand value, retailers have been arranging control over makers and can catch more edges.

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Distribution network of ITC Ltd

Carry and Forward agent The C&F Agent is an important link in the supply chain. This agent receives a token amount as service charge from ITC. Both stocks and PoP material is stored in these storing facilities.

This agent performs the following functions:  Receives goods from the factory and updates the SAP (GR) prints out invoices/delivery orders. The deliveries are made according to the delivery summary which the gets from the branch every day. Physical stock reconciliation is done every evening and a record of it is kept on a board. Maintenance of the godown according to the prescribed norms.  The C&F Agent is an essential connection in the production network. Agent gets a token sum as administration charge from ITC. The two stocks and PoP material is put away at these godowns. The agent plays out the accompanying capacities:  Receives products from the processing plant and updates the SAP (GR) Prints out Invoices/Delivery Orders. The conveyances are made by the convey synopsis which he gets from the branch each day. Physical stock compromises is done each night and are line of it is kept on a board. Support of the godown as per the recommended standards.

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Wholesale Distributors (WD)  The WD is a middle person between the organization and the retailer.  He disperses and benefits (counting promoting) the town retailers and entire sellers straightforwardly through day by day sales rep.  He is required to keep up a specific stock dimension and interest in the organization.  He is required to keep up suitable foundation as per the organization's prerequisites.  This included stockrooms, HR, computational assets and dissemination structure.  He is in charge of different brand advancements, dispatches and cycle contributions to his territory.

The WD Is likewise required keeping up the Volume/esteem development of ITC's items in his market.

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ABOUT US: The word “Kaizen”, where “Kai” = change “Zen” = good, simply means “change for better”. In English Kaizen is typically applied to measures for implementing continuous improvement. It is an approach to activity organisation based on common sense, self-discipline, order and economy and is a strong contributor and fundamental part of a lean production process model in lean manufacturing. Kaizen- The Official Operations Club of IBS Hyderabad believes in relishing in the essence of "Constant Change and Evolvement" and hence we, as an organization work willingly for the betterment of the student community. KORE- Kaizen‟s Operations and Research Entity, one of our primary wings which flaps to cater to the needs of students and motivate them to soar high by polishing their technical competencies. KORE‟s area of expertise includes Case Based Research, Consultancy, Live Projects and Workshops. LAKSHYA, an initiative taken by KORE primarily focuses on the concepts of operations management and various articles based on the day to day operations and logistics of an organisation - DHANANJAY HARKARE Batch 2018-20

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LAKSHYA is an academic print and is not for any commercial sale.

Reliability and Responsibility, for sources of data for the article vests with the respective authors. Please feel free to drop in your suggestions at kaizenclub.ibs@gmail.com KORE: Kaizen’s Operations & Research Entity.

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