Pravaha - Edition 1 - Aug 2013

AUGUST 2013 EDITION

1

Pravaha

Re­defining the flow of operations

Pharmaceutical Supply Chain Big Data in Operations

Vilfred Pareto Intel

Amazon

Taiichi Ohno Same day delivery

3­D Printing

Doing it the McDonald’s Way

COVER STORY FROM CLICKING TO CARTING

IIM Shillong Bi-Annual Operations Magazine

Editorial

Pravaha | Edition 1

Sigma takes you through a simplified world of Six Sigma practices and how they could help each one of you in your Dear Readers, careers as well as day to day activities at your respective organization.

Team Op­Era, Operations Club of IIM Shillong We also take you through ʹThe Road less traveledʹ brings to you ‘Pravaha’, the bi­annual operations which provides you dossiers of knowledge in its every magazine of IIM Shillong. Our vision to inculcate turn about unconventional upcoming practices which are knowledge in this domain to all enthusiasts through our set to revolutionize businesses and supply chains. The activities reflects in the cover page of the inaugural pharmaceutical supply chain and the same day delivery edition and we encourage all of you to maintain the techniques await at the end of this road to enlighten you. knowledge ‘Pravaha’ ­ Redefining the flow of operations.

Pravaha also brings you face to face with the Before we introduce you to the intriguing world of ʹVirtuososʹ and familiarizes the readers with the famous operations management we would like to confess that contributors in the development of Operations there always prevails a sense of anticipation when such a Management. Not to forget, the cover story ʹFrom magazine is conceived, more so if it is for the first time and clicking to cartingʹ forays into the much talked about field we take this opportunity to thank each and every one of of e­commerce and captures the intricate and finer details you for the overwhelming response. of the same.

In this first edition we bring to you six different Do keep an eye on the ‘Rendezvous’ section to sections dealing with varied concepts from various know about our initiatives that make the understanding dimensions of this domain. We once again thank you for of the concepts easier to grasp and assimilate and also the ʹInsightsʹ section, where the canvas was quite provide you a fun zone to tickle your grey cells . wonderfully painted by your ideas and would always be So get set to enter into the world of operations open for all our readers. We acknowledge all your efforts management where a plethora of ideas and concepts await in this regard with a bow. The prize winning entries from your perusal.

Great Lakes, Chennai and NITIE, Mumbai will keep you HAPPY READING! hooked on with the interesting concepts of Big Data and 3D imaging while interesting stories on rapid prototyping, and the McDonald’s expertise await your TEAM insights.

OP-ERA

The ‘Blaze­a­trail’ section brings forth the best BHASKAR K practices followed in the industry that are crucial in providing a competitive edge to any organization. The POULOMI PAL concepts have been brought to clarity through lucidity of VM SAI MURALI language and exemplification of instances this time ANISH AGARWAL through the retail transformation by Amazon and the NEELAV RATNAM customer delight strategy quite brilliantly used by Intel.

Through our ʹRobarooʹ with industry stalwarts SAIPRASAD SHETYE we share their expertise and knowledge with you. This DEVENDRA SINGH RAGHUWANSHI time we have Mr. S. Ramani, Founder­Director of Savourites Hospitality Pvt Ltd and Head, Project and Marketing department of 6 Ballygunge Place, the flagship restaurant chain of the organization who helps you delve deeper in the business of restaurant management and catering. Also Mr. Vishwadeep Khatri, CEO and Lean Six Sigma Expert from Benchmark Six

FROM TEAM OP-ERA

CONTENTS INSIGHT Big Data in Operations 3D Printing - A Radical Change in Manufacturing Doing it the McDonald’s Way Rapid Prototyping Its all about Improvements THE ROAD LESS TRAVELLED Adding Value to the Pharmaceutical Supply Chain Same Day Delivery - Reviving the failed practice COVER STORY From Clicking to Carting VIRTUOSOS The TPS Patriarch - Taiichi Ohno The Pareto Analyst - Vilfredo Pareto BLAZE-A-TRAIL Transforming the online retail landscape Unveiling the customer delight ROOBAROO Mr. S. Ramani - What goes behind your favourite Bengali Cuisine?

Mr. Vishwadeep Khatri - The Simple Idea Behind The ‘Six Sigma’ Jargon RENDEZVOUS Oper8 - Operations Week, IIM Shillong Opsopedia - The fun learning video series Optimus 3.0 - The most creative brain takes it all FunZone - Tickle your grey cells !

2 3 4 5 6 8 10 12 17 18 20 23 26 28 31 32 33 36

INSIGHT The strength of 'Pravaha' is multiplied by the inow of ideas from all avenues. Through this section, we share the insights of our fellow B-schoolers on the plethora of possibilities that Big Data could create in the ďŹ eld of operations, McDonald's supply chain integration story and the potential impact of 3D printing in revolutionizing manufacturing.

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Insight

BIG DATA IN OPERATIONS ­ Bharat Ram, Jasdeep Kaur, G. Shivshankar

(Great Lakes Institute of Management, Chennai)

Ever changing consumer needs and preferences makes predicting demand a risky task and a big challenge these days.What is important in predicting or understanding these needs would be the relevance of the Supply Chain Data. The relevance is only made more complex by huge availability of Structured and Unstructured data.The problems of using historical data are Limited range, non­collinearity and bad correlation.

However, as we know almost all firms are facing a “Bull Whip Effect”, decisions based on historical data would be redundant. Organizations that can capture and analyze data across Supply Chain can manage their inventory in real time and capitalize on business opportunities.

Big data serves the goal of developing a scalable platform for decision­making that is robust and nearly real time to avoid the use of historical data. The financial and statistical metrics related to market and customer focus when coupled with these decisioning inputs from big data gives a real time analysis and discovery of trends to bring in business agility, operational excellence, and first mover advantage.

Big data is the warehouse of information available on Internet and other computers. Every operational transaction that takes place is recorded real time by using RFID taggers and bar­code scanners and this information is stored real time. Real time monitoring of this data and make decisions in improving product flow in warehouse. Take the case of manufacturing industry where big data is stored and analyzed to check product quality, defect tracking, and supply planning and helps

deal with supplier component parts defect tracking.

Net­flix the online provider of movies and TV programming has a big data system in place. With a $3.6 billion revenue from subscription for movie and TV programs and 33 million customers worldwide, they have an enormous source of data that facilitates product development by anticipating what subscribers want. The data sources being hours of video streamed per day, social media data. The key characteristics of data which are the 4 Vs­ Volume, Velocity, Variability and Volatility are best addressed with big data.

The biggest ROI in bringing big data in operations is expected in the logistics /distribution (78%) and consumer service (56%). Data transparency and usability of information, boost trend analysis, product development and augmentation. It helps regulate inventories from happy­to­sick days, thus, minimizing operational losses and business vulnerability. Improved forecasting by tying the loose ends of vendor and supplier in the value chain in real­time is possible. Reduced customer dropouts and enhance sustainability by analyzing customer behavior is yet another possibility. In a nutshell big data increases the likelihood of revolutionizing operations through innovative designing and process control in the making of next generation products. ***** (Awarded as Winning article for inter­college article writing competition conducted by Op­Era)

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Insight

3D PRINTING - A RADICAL CHANGE IN MANUFACTURING ­ Vignesh Lakshminarayanan

The very idea of able to make anything by simply printing it in 3­D is no myth. This technology is now being available to anyone and anybody can print anything at home from practically any material. This technology has been used for “Bio­Printing” for making human tissues or organs. The 3­D printing industry has matured from prototyping to making functional objects.

The technology has evolved from a mere application for making novelty items to a wide range of objects for critical industrial applications. Examples are prototyping of parts for automotive and aerospace applications. A 3­D Printer requires a digital blue print which is sent as the input to the 3­D printer. The 3­D Printer costs a very affordable $2200. Digital blueprints and 3­D printed objects are available online. It is also an opportunity for designers to advertise their creative and innovative designs. However, these designs come at a premium.

Manufacturing is definitely going to be revolutionized. The technology is extremely effective intricate shapes or highly specialized complex products which are very difficult to produce using traditional manufacturing techniques at cu ing edge technology.

For instance, this is viable for aerospace components which are difficult to cast. This could reduce costs and time. Another unique characteristic of this technology is that it allows for customization of the product and design.

Traditionally manufacturing has been highly centralized and has required huge set ups. With the advent of 3­D Printing Technology in Design and Manufacturing, manufacturing has the potential to evolve from a

( NITIE, Mumbai)

?

“Centralized” to a “De­Centralized” or “Distributed “model.

Though 3­D Printing Technology holds great promise, the question which needs to be addressed is whether the technology is powerful enough to put Manufacturing giants out of business in the coming decade or so. In spite of the effectiveness of the technology, the 3­D printing process has very low productivity and it takes several hours to even make a simple product. The technology is therefore not scalable. Hence itʹs very debatable whether objects such as a car can be 3­D printed in a tangible amount of time. Hence for at least some period of time, 3­D printing canʹt displace traditional manufacturing in terms of efficiencies and economies of scale. But in terms of a making complex customizable objects or objects having proprietary design and limited demand, 3­D printing has been a phenomenon. However with an increased access in the coming years, the concept of manufacturing will definitely undergo a redefinition.

It will be fascinating to see how organizations respond, given that 3­D Printing is emerging as a serious threat to the viability of their businesses. ***** (Awarded as Runner ­ Up Article for inter­college article writing competition conducted by Op­Era)

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Insight

DOING IT THE MCDONALD’S WAY

­ Aniruddha Jaju (IIM Ahmedabad)

` We o en marvel at the great prices offered by businesses such as Amazon.com and flipkart.com, wondering what it is that makes them tick. While the behemoth, Amazon, has pioneered the e­commerce domain in the last 15 years, Flipkart is still nascent, struggling to make a profit year­a er­year. So, then how is it still able to sell at a discount?

Quite contrary to popular belief, it is not the competition that forces such business to sell cheap; rather, it is their operational efficiency that allows them to have a low cost, which in turn enables them to sell at a low price.

There is a very subtle difference between the two – low price entails lowering the profit margin, while low cost ensures a higher profit margin.

The low­cost model was championed by McDonalds, way back in the early 1940s. McDonalds changed the quick­service industry with its quality of service and a plethora of food options – all at unbelievably low prices. This enabled its growth from a small drive­in outlet in the 1940s to the biggest fast­food chain in the world by the 1960s.

McDonalds was the first organization to give importance to its supply chain. It worked with the suppliers to conduct research in coming up with cost­

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saving techniques in food production and processing.

Ensuring timely orders to every supplier, McDonalds gave the suppliers enough confidence to innovate in making the supply chain more efficient. As a result, McDonalds was able to procure raw material at a very low cost, which enabled them to provide their products and services at a low price. Even their competitors in the 1960s marveled at their operational efficiency, and in changing the landscape of the quick­service industry.

To put things into perspective, it was McDonalds who perfected the cold­storage technology, to transport raw materials over long distances. This technology is used even today by almost all suppliers of perishable food products. McDonalds was also one of the first organizations to employ the just­in­time (JIT) procurement and delivery models, which is in widespread use today.

Twenty years a er McDonalds first pioneered the supply­chain integration and created a new benchmark in operational efficiency, many organizations started realizing the importance of such a supply­chain integration. Thus started an era of backward integration, where the suppliers were given a larger share of the pie.

From here emerged organizations such as Amazon.com, who further revolutionized the supply­chain, by completely eliminating the middle­men i.e. distributors and wholesalers.

The Amazon model is unique in its own way.

Eliminating the middle­men reduced costs and allowed them to sell at low prices, a phenomenon that led to Amazon becoming one of the most visited website in the US in the 2000s.

Organizations like McDonalds and Amazon have, today, become the way of life for more than 50% of Americans. Their operational excellence is marveled at even today. The fact that no other organization has been able to compete with them for the last several decades speaks volumes about their innovative practices and supply­chain management. ***** (Awarded as Special Mention in Inter ­ college Article Writing Competition conducted by Op­Era) 4

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Insight

RAPID PROTOTYPING

­ Dwijendra Parashar, Achint Jain (NMIMS, Mumbai)

“If you can dream it, you can build it”­Eric Anderson. Such is the power of a digital manufacturing technology called Rapid Prototyping (RP). It is a group of techniques used to quickly fabricate a scale model of a part or assembly using three­dimensional Computer Aided Design (CAD) data. The 3D printing machine reads the data from the CAD drawing and lays down successive layers of the material to build up the physical model. This paves way for Rapid Manufacturing (RM).

Modern products like aircra s require complex development with huge upfront investments. This results in inflexible systems which are fraught with cost overruns. Most machine shops have lead times of a couple of weeks compared to less than 24 hours provided by RP.

RM has evolved from RP technologies that have been successfully used to physically create designs and concepts. One of its advantages over traditional techniques is that no specific tooling is required for manufacturing.

OEMs have to warehouse excess inventory to ensure a fast delivery of spares while estimating future demand. Infrequently sold parts have to be stored for a long time, generating high inventory costs. RP helps cut down on not just warehousing but also rolling inventories resulting in be er overall supply chain efficiencies.

The key benefits of this technique involve cheaper designing and testing, faster prototype turn­around, be er visualization of products with a physical, tactile

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item, prevent problems later in production, when changes are costlier a varied range of working materials, flexible product design and more importantly it is also suitable for Nano­scale products

The production costs for RM made parts depends primarily on part volumes. This is because of higher raw material price compared to conventional materials and the process of building up the part layer by layer. To improve capacity utilization, it is possible to produce several non­identical components in a single job.

Increasing pressure on quality, costs and lead times is forcing companies to look towards backward i n t e g r a t i o n . R M h a s m a d e t h i s c e n t r a l i z e d manufacturing a possibility because it incorporates JIT, Inventory control, greater scope for customization, innovation and reverse engineering.

With the number of manufacturing firms increasing their presence in India, demand for local suppliers has also increased several folds. Vendors have to deal with changing demands of the customer at a very short notice. A number of vendors are using RP for flexible manufacturing to keep up with the rapidly changing product designs, which is an essential for survival in the market today.

Due to the success of RP, customers are shying away from conventional tooling and using RM throughout the manufacturing cycle. RM is helping vendors produce be er products at lower costs and responding to market demands more quickly than the traditional manufacturing methods. ***** (Awarded a Special Mention in Inter­ College Article Writing Competition conducted by Op­Era)

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Insight

ITS ALL ABOUT IMPROVEMENTS

­ Tarun Shukla

(Symbiosis Institute of Management Studies, Pune)

Operations management – area of management which ensures that business operations are efficient in terms of using few resources as needed & effective in terms of meeting customer requirements. The role of operations management in a lot of industries has evolved – now operations management is not only concerned with processes (defining –designing –controlling) but also a key contributor in defining the future . With fierce

competition in virtually every market –companies have the aim to give the customer extra which we call as value for the product /service .A company may use different strategies as per the market demand –be er price, be er product/service or be er delivery. All these strategies depend on companyʹs operational plan.

We hear about Six Sigma, Kaizen, Business Process Re­engineering),TQM, Lean, JIT & many other concepts/philosophies. The main aim of all these –“improvements” some way or the other. When we order any item say a book from Flipkart we are not at all concerned with how many books the company is storing with themselves, the customer is only concerned with fast delivery of the item as per his/her requirements. But for Flipkart to operate in an effective manner they need to have a plan about the overall distribution & delivery network. The real value addition comes when the company is offering the best prices with other value added services – and for these services which can be termed as “order winners” the only way is to keep other costs to a bare minimum. An effective strategy of handling the

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physical distribution will ultimately lead to be er service keeping the cost low which will ultimately help the company to excel in providing some value added service.

We may take any field of operations, a er initial designing & set up itʹs all about improving –the real role of operation managers in the present scenario is to “how to make processes simpler”. While making the overall processes efficient & delivering the general standardized product mantra was effective in good old days, now with varied demands­ specific features the concept has changed. Now standardization and customization go hand in hand – companies are able to deliver desired product/service at the right price, on­time with value added features.

The key problems which most of the companies are facing are with the “Quality improvement type programs”­ most of the employees take these programs to suggest solutions which are either very difficult to implement or are dependent on any new technology.

There needs to be complete shi in the way these quality improvement programs are seen. It should not be a mandatory exercise but must be ingrained in the organization philosophy – a good change management strategy should also be adopted for any major change for which the role of HR department is also critical

Computers are just the opposite of what “kanban” or “visual management system” tries to achieve – good communication of any new method /improvement implemented will be usage of simple diagrams rather than a formal e­mails whose impact would not be substantial.

Too much dependence on technology will lead to more complexity rather than simple, clear & effective implementation & communication.

The philosophy should be usage of best available technique in the simplest way with clearly defined methods so that it would make organization more flexible & quick to respond to changes. The focus area should be simple internal operations which would help the organization to change faster than competitors for unforeseen external market factors. ***** 6

The drive up ‘The Road Less Traveled’ explores the industry-wide new practices that are being adopted in the area of Supply Chain & Operations. This section also provides extensive analysis about the challenges faced by companies or industries in adopting these new practices, recommended frameworks for improvement & cross industrial learnings. This edition brings forth the developments in the pharmaceutical supply chain and the same day delivery technique that some corporate houses are fast developing.

T HE R OAD L ESS T RAVELLED

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The Road Less Travelled

ADDING VALUE TO THE PHARMACEUTICALS SUPPLY CHAIN Gone are the days when stable demand, fewer products, higher margins were used to be the norm of Pharma industry. Todayʹs pharmaceutical business is more complex in terms of varying demands of different business segments. To confront the shrinking margins in prescription drugs segment, companies are trying to diversify into new areas like generics, over – the – counter (OTC) products, health services etc. Also, companies are using different distribution channels like direct – to – consumer, direct – to – pharmacy and they are relying on external partners for manufacturing, selling and other services. The business is rapidly becoming more global with emerging markets are expected to contribute 50% of industryʹs growth in the next few years. This results in increase of plants, suppliers, products, customers, demand profiles, service requirements etc. in this complex situation, Pharmaceutical companies still use outdated supply chain that donʹt meet the strategic needs. So, Pharma companies need to have agile, cost effective and service supported supply chain.

­ Bhaskar K.

Quality standards can never be sacrificed in the pursuit of cost savings Most pharmaceutical companies would err on the side of oversupply to avoid the risk of running out of life saving drugs

Eyeing the Benchmark ZARA Fashion Industry

APPLE Electronics Industry

P&G FMCG Industry

IKEA Furniture Industry

To s t a y a h e a d o f f a s t ­ changing fashion trends, Zara developed a very agile supply chain with short lead times to bring new styles to market more quickly For its basic lines of clothing, which tend to change less frequently, the company developed a more cost ­ effective supply chain with longer lead times

Apple has built a supply chain that ensures high service levels & agility by developing a closely integrated network of supplier partners Apple also minimizes the c o m p l e x i t y o f p r o d u c t components and finished goods so it can manage demand volatility across markets & product cycles

P & G has adopted an agile, cost ­ effective model that allows the company to respond quickly to changes in demand.

It gets real time data from retail stores. Also, it has set up d i ff e re n t l e a d t i m e s f o r different customer types, depending on their needs

Ikea has built a low ­ cost supply chain to stock its stores with merchandise at prices that are 30 to 50 % below the competition by focusing on cost effectiveness at each step of supply chain, making tradeoffs on product c o m p l e x i t y & c l o s e l y c o l l a b o r a t i n g w i t h k e y suppliers

Following the Zaraʹs example, pharmaceutical companies should identify needs of different business segmentsʹ and design fit­for­ purpose supply chains into the industry

Pharma companies should aim to integrate more closely with their suppliers and strategically manage complexity in order to gain flexibility and access to new skills

Pharmaceutical companies could improve their planning and customer segmentation in order to increase service levels and respond quickly to changes in customer demand

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Pharma companies can go beyond narrow, functional cost improvements by rethinking and improving end to end supply chain

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The Road Less Travelled

Areas of Improvement for competitive advantage

The priorities that the pharmaceutical industry needs to concentrate on as far as supply chain is considered are service, cost effectiveness and agility. To meet the current industry challenges and remain competitive, pharmaceutical companies should excel in these three dimensions. Maximizing all three dimensions is not possible and tradeoffs are unavoidable 1) Service When service is the critical dimension, Pharma companies should focus on Product Availability 2) Cost Effectiveness When Cost Effectiveness is the critical dimension, companies should go for Standardized processes, lean techniques, faster inventory turnover, higher capacity utilization 3) Agility When Agility is the critical dimension, companies should focus on effective planning & scheduling, rapid c h a n g e o v e r o f p ro d u c t i o n l i n e s , p ro d u c t i o n postponement, sourcing from multiple suppliers, and external production facility for greater flexibility S E R V I C E

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Flexible processes

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Short lead times

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Fast scale - up

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Limited investments

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Process Flexibility

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Strategic Flexibility

Highest quality of service Frequent deliveries

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Short lead times

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New business models

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People Flexibility

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Tradeoffs among Service, Cost & Agility

Service models requires investing in capacity and inventory to achieve higher service levels Lean – operations are critical for Cost Effective model.

The primary goals of maximizing capacity utilization & minimizing costs limits the agility Availability & fast response times are critical in Agile Service model. The primary goal is to create a flexible, responsive manufacturing & distribution network Success of Agile, Cost – Effective model (Mutually Exclusive) lies in companies thoroughly understanding their business needs. Companies should improve end – to – end processes, keep operation clean & outsource non –

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Supplier Flexibility

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A G I L I T Y

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Asset Flexibility

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C O S T

Flexible scheduling within the plants Balancing capacity Structural regulatory flexibility

Strategic sourcing plans Contracting for flexibility Integration for Lean processes Supplier development & renewal Multi ­ skilling and labor flexibility Global Innovation task force

Platforming & postponement Lean fulfillment & replenishment Fast time to market, supply issue resolution Event based forecasting Deep understanding of customer needs Demand driven segmentation

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Cost effectiveness

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Scale in direct channels and in product ows

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Standardized processes

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Lean techniques/ improved inventory turnover

core activities (Partnerships, Contract manufacturing & logistics providers) The Way Ahead: Pharmaceutical companies, in recent years, have focused on reducing manufacturing costs and inventory levels.

Though valuable, these improvements will be less differentiating in the future. Supply chain can be a true differentiator improving the bo om line performance.

Building flexibility into multiple facets of the supply chain will be critical to maintaining the competitive advantage. ***** 9

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The Road Less Travelled

SAME DAY DELIVERY - REVIVING THE FAILED PRACTICE

Kozmo.com, founded in 1998, was an online company that promised free one – hour delivery of videos, games, DVDs, music, books, food etc. This company is o en referred to as an example of ʹDot – com boomʹ.

Kozomoʹs business model was severely criticized by business analysts, pointing out that one – hour point – to – point delivery is extremely expensive as Kozomo refused to charge for delivery. Eventually, the business failed in 2001.

“Same Day Delivery” is back again in 2013 with a new set of propulsive forces. Major retailers like Wal­ Mart, eBay and Amazon.com are all offering same day delivery in a limited number of locations. FedEx, UPS are partners in these pilots. The online retail market is now much larger. Traditional retailers are facing pressure from online shops like Amazon.com to offer faster deliveries. Carriers are also facing competition from startups like Instacart, Postmates etc.

Consumer Behavior Most consumers care more about low – cost merchandise and free delivery and returns than same – day delivery. Consumers do not frequently feel the need to receive a product on the same day that they purchase it. So retailers and carriers should carefully segment the market by customer and product

Industry Scenario

­ Bhaskar K. slowly in providing Same Day Delivery services. Here are some steps for retailers & carriers to take as they consider same – day delivery.

The most important decision for retailers is where to test same day delivery. The retailers should choose suitable demographics. Retailers should also choose test markets based on the availability of nearby inventory, either in warehouses or stores, for fulfilling anticipated demand.

Also, retailers should choose those products that can be delivered profitably on the same day they are purchased.

These products will likely be high margin, small, and not readily available in neighborhood stores for most consumers.

Carriers are the tail of the dog in same­day delivery. They would not offer the service unless retailers wanted them to. But carriers should not follow retailers into an untested field without establishing their own criteria for success. Carriers have a basic choice between two different delivery models. They are either extension of their existing delivery network or creating a separate network to support same – day delivery. The first model would be most effective for serving retailers with distribution centers located near a carrierʹs local sorting facility. The model would require extra operating capacity, particularly labor, to support extended drop­off hours and delivery windows. The second model would allow retailers to fulfill their customersʹ desire for instant gratification, but it would only work in densely populated areas and would also require a large commitment of

The carrier industry in US is estimated to be generating around $70 billion revenues. According to an estimate, same day delivery could generate between $425 million and $850 million in delivery fee income. This estimate assumes that consumers are willing to pay shipping fees of between $6 and $10 per purchase and this will leave very limited margin for retailers and parcel carriers. So, the projected revenue through delivery fee income is modest for the big companies.

Checklist for Retailers & Carriers in Same Day Delivery model History suggests that retailers & carriers should go

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The Road Less Travelled

Checklist for Carriers Carriers should be able to execute basic parcel services reliably and at lower cost before offering same­day delivery

Consider subsidizing delivery costs for retailers in exchange for a larger share of wallet

resources. Vehicles would need to be on call to respond, and retailers and carriers would have to establish a technology platform that would enable real­time route scheduling and parcel pickup. This approach is more costly, but carriers might be able to avoid some investments in labor, infrastructure, and technology through outsourcing. Eg. Deploying local couriers to handle final delivery Checklist for Retailers Retailers should analyze the expected costs and benefits of same­day delivery and have a clear path to increased revenues before jumping in

Consider alternative approaches, such as cutoff times as late as 11 p.m. for next­day delivery and click­and­collect services that allow customers to order online and pick up goods in a store

Pilot same­day delivery offerings to understand demand; test the effect of cutoff times, minimum purchase size, delivery fees, and product categories on overall spending in different consumer segments

Evaluate the investment return of same­day delivery based on its potential to increase wallet share of retail parcel traffic, to improve consumersʹ brand perception, and to mitigate threats from national, regional, and local carriers

Invest in expanded capabilities to execute same­day delivery, such as establishing strategic partnerships with high­ potential retailers, pushing the boundaries of network flexibility through low cost labor and lean operations, developing or acquiring enabling technologies, and exploring partnerships to support execution and share costs

The Way Ahead For the foreseeable future, same­day delivery will likely remain a niche offering. Carriers & Retailers should be actively trying to improve the customer experience and their own competitive position. Carriers may want to focus more a ention on low­cost and convenient delivery services. Regardless of how the delivery market develops, carriers should be embedding themselves in the flow of e­ commerce by partnering with larger retailers, actively supporting purchase returns, and improving delivery tracking. But it is way too soon to tell whether same­day delivery is the right vehicle to achieve those goals. *****

Evaluate and select delivery partners based on their willingness to share the risks and on the sophistication of their fulfillment systems

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Cover Story

FROM CLICKING TO CARTING : THE E - COMMERCE STORY ANISH AGARWAL IIM SHILLONG

EC

O M M E R C E

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Cover Story

FROM CLICKING TO CARTING I just got a call from a friend of mine who is working in a so ware company in Bengaluru. I was glad that her cellphone was delivered on her birthday and she could use it to click pictures of the party that night and send it over to me on whatsapp! Now I didnʹt miss her much. Thanks to e­commerce companies for making my task so simpler. I just have to connect to internet, logon to an e­commerce website, browse through the innumerable products, choose the one most suitable for me, make my payment through credit card and get it delivered to a location I desire.

But, is it really so simple and easy? This is one question which troubles me most of the time and I am sure somewhere at the back of your mind it bothers you as well.

It might seem to us that it is just another product which gets delivered to us but have we ever wondered why it is that the products are never shipped to a wrong address or how the products reach us on a promised date when over one lakh goods are shipped per day in India. There is a lot of work that goes behind the scenes to make sure that the product is correctly delivered. Before we delve deep into the process of ʹclicking to cartingʹ, let us have an overview of e­commerce scenario in the country.

E­commerce industry in India now stands at $1.2 billion.

According to IAMAI data it is set to grow at a healthy

pace of 55% and is expected to reach around $1.8 billion by the end of the year 2013. Today there are about 69 million Indians who are visiting online sites. Though the outlook is positive the major concern here is that only 14 million of them are actually transacting online. But, the good news here is that at least they are interested and check out prices and find out more about products. The numbers look quite promising and we are certainly up for e­tailing. Players like Flipkart, Jabong, Myntra, Snapdeal and many others have already started realizing it and subsequently started investing heavily in streamlining their supply chain which happens to be the backbone of any player in this industry. The entire process of supply chain starting right from building a supplier base to outsource goods to building infrastructure for operations, using information systems to track goods and delivering value to consumer requires an efficient and effective planning.

Let us have a look at this process for any typical company in an e­commerce industry and understand how exactly this process is carried out. The entire process can be broadly divided into two categories: inbound and outbound. They are further broken as shown in the chart:

INBOUND

Segregation

Delivery

Receiving

Shipping

Packing

Picking

OUTBOUND

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Cover Story SEGREGATION

RECEIVING

PICKING

PACKING

SHIPPING

DELIVERY

The entire procurement is generally handled by a central procurement team (CPT). A purchase order (PO) is initiated and sent to the supplier. The goods are then received in the warehouse by the team. They are then matched with the invoice and any mismatch is reported to the supplier. Similar products are then placed in a box and taken to a segregation table. The goods are segregated on the basis of their size, color or any other a ribute relevant to the product and placed in separate boxes. A unique ID, say warehouse ID (WID) may be assigned to a particular SKU.

A good warehouse management requires successful implementation of Enterprise Resource Planning (ERP) so ware. When the products have been segregated, entry for each WID is made into the ERP and the product is now considered to have been received. Put list is printed for each box which contains the shelf number where the box is to be kept. A new shelf number is assigned or retrieved based on already existing product or not. Accordingly, the boxes are then placed on their respective racks by the workers or conveyor belts as the case may be. The warehouse is divided into zones, each zone comprising 4­5 racks.

The orders are placed throughout the day and a pick list is generated for each zone every 5 minutes to 30 minutes depending on the volume of order. The pick list contains the details of the product to be picked, its zone, shelf and rack no. Then the products are picked from their respective zones and brought to a common place. The invoice for each product in the pick list is generated along with an address label to where it has to be delivered. The goods are then sent for packing and the same is confirmed in the ERP and is subtracted from the inventory.

Packing is one of the most important step as it directly relates to customer satisfaction. Various materials such as bubble wrap, tape and boxes of various sizes are kept handy. The products are packed as and when they are received. The invoice is kept inside the box and the address label is pasted on the top. The packed product is then sent for shipping and an entry is made in the ERP to keep a record of products shipped.

Shipping can be taken care of by the company itself or it can have a separate logistics arm or it can be outsourced to any third party logistics provider. The entire country is divided into regions and each region has several mother hubs. Each packed product is assigned a unique tracking ID and then they are segregated on the basis of regions to be delivered. At the end of the day or twice a day depending on the volume, the goods are shipped to the respective mother hubs in the regions. Each mother hub covers several areas around with delivery hubs in each one of them. From the mother hubs, the goods are distributed to delivery hubs overnight.

Each delivery hub covers 15­35 pin codes and employs 10­12 delivery boys who are responsible for delivering the product to the customer. The goods in each delivery hub are divided according to the pin code and each delivery boy is assigned 2­3 pin codes. The delivery boy prints a sheet with the details of customers where products are to be delivered. Since an order may consist of several items which might come from different warehouses and be routed to mother hubs at different times, care is taken that all of them are collected in delivery hub and are delivered in one visit.

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Cover Story The entire process of ʹclicking to cartingʹ is a ma er of efficient management of supply chain to reduce the delivery time to consumer as well as to reduce the operating cost. Companies today are investing heavily and thriving to eliminate the unwanted steps from the process and make their supply chain as lean as possible.

Even one of the worldʹs largest online retailers, Amazon.com, which ranks third in Gartner Supply Chain Top 25 companies is not spared of rising operating costs.

Amazon.com continues to grow at a handsome rate, having $61 billion sales in 2012 and likely to reach $75 billion in 2013. In spite of its rapid growth, its net income has been affected negatively. In Q1, for example, net income decreased 37% to just $82 million, despite a rise in sales of 22% to $16 billion. That means net income was just 0.5% of revenue. The graph below shows reported fulfillment costs as a percent of revenue from 2010 to 2012, and then Q1 2013:

If we consider Indian companies, the story is even worse. The e­commerce in India is facing massive challenges due to high operating costs. Starting from leasing a fulfillment center, to building infrastructure and the most severe of them all, logistics are some serious hurdles. Though the leading companies have partnered with carrier providers to deliver their products, still different couriers have to be used for different regions of the country. This means that for orders sourced outside the major cities, individual carriers have to be hired to make last mile deliveries from delivery hubs by two wheelers. The difficulties and unreliability of the carriers has forced some of the largest and best funded players, like Flipkart, to develop their own logistics arms to deliver their packages. The decision however, carries massive capital expenses in an industry that is still not standing

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on its own feet. It also means a huge increase in exposure, and a business that is now seeking success in two industries instead of one.

In spite of all the challenges and high costs, the industry continues to grow and is a racting foreign players. With Amazon.com entering the Indian market, it has become even more competitive. Amazon with its deep pockets has the ability to invest heavily on fulfillment centers and build a strong supplier base but even with huge inventory and third part sellers, Amazon.com does not offer lowest prices. On the other hand, Indian players are still in a nascent stage and raising funds to build their operations.

Their consistent efforts to cut costs and price their products effectively are on. With the industry set to grow, it is for all of us to wait and watch, whether people still ʹFlipkartʹ their products or are they simply ʹAmazonedʹ. *****

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VIRTUOSOS Virtuosos introduces the phenomenal changes brought by the work of famous stalwarts in the ďŹ eld of Operations management. This time around we bring forth, Taiichi Ohno, Father of Toyota production System & Vilfredo Pareto, famous for Pareto principle. Let us meet these experts!!

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Virtuosos

THE TPS PATRIARCH - TAIICHI OHNO “Costs do not exist to be calculated. Costs exist to be reduced.”

­ Devendra Raghuwanshi

A life of Contribution

Taiichi Ohno, who was an engineer at Toyota, a er World War II, began experimenting with the assembly lines at the Japanese firmʹs automobile factories.

His main goal was to improve efficiency and catch up with Americaʹs Big Three (Ford, General Motors, and Chrysler). The result of Ohnoʹs tinkering revolutionized the manufacturing industry forever.

Ohno with his managers devised the Toyota Production System, more broadly known as ʺlean manufacturing,ʺ which gave Toyota a huge edge in productivity and quality control. The new system ensured Toyotaʹs position as an industry leader, and its principles were adopted within organizations across sectors and countries.

He went to the U.S. to visit automobile plants, but his most important U.S. discovery was the supermarket.

Ohno was marveled at the way customers chose exactly what they wanted and in the quantities that they wanted.

He identified pull system in Supermarkets. It contrasted with conventional push systems, which were driven by the output of preceding lines. This visit is famously known as the foundation step of Toyota Production System.

Several elements of Toyota Production system have become famous are muda (the elimination of waste), jidoka (the injection of quality) and kanban (the tags used as part of a system of just­in­time stock control).

On a different note

Taiichi Ohno (in 1965 regarding the Toyota Corolla): “Produce 5000 engines with less than 100 workers” Manager reported back to Ohno a few months later and said, “We are now able to produce 5000 engines with only 80 workers”.

But the sale of the Corolla continued to rise requiring production to be increased.

Taiichi Ohno: “How many workers are needed to produce 10,000 engines?”

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Life Span - 29 Feb, 1912 – May 28, 1990 Country - Japan Known for/as - Father of the Toyota Production System Major works- Toyota Production System Workplace Management Manager responded quickly: “160 workers would be sufficient.”

His answer infuriated Taiichi Ohno. “I learned how to figure out 8 x 2 = 16 in elementary school. I had never thought I would learn that again from you”

You are so accustomed to a notion that any form of increase in sales, labor, and equipment is considered favorable. But, how do you ensure that our profit keeps on increasing? That is the most critical factor.

Taiichi Ohno called the above logic “Management

by Ninja Art“, in other words, even though demand increases, use your creativity to do more with much less and not rely on basic management arithmetic to solve the problem.

“The key to the Toyota Way and what makes Toyota stand out is not any of the individual elements…But what is important is having all the elements together as a system”

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THE PARETO ANALYST - VILFREDO PARETO “Give me the fruitful error any time, full of seeds, bursting with its own corrections. You can keep your sterile truth for yourself.”

­ Devendra Raghuwanshi

A life of Contribution

The major contribution of Pareto was 80:20 theory, which was first developed in 1906. He observed an unequal distribution of wealth and power in a relatively small proportion of the total population. This fact gave rise to the Pareto effect or Paretoʹs law which says a small proportion of causes produce a large proportion of results.

Thus frequently a vital few causes may need special a ention while the trivial many may warrant very li le.

It is this phrase that is most commonly used in talking about the Pareto effect – ʹthe vital few and the trivial manyʹ.

The importance of the Pareto Principle for a manager is that it reminds to focus on the 20 percent that ma ers. Identify & focus on those 20 percent which produces 80 percent of our results. When the fire drills of the day begin to sap our time, remind us of the 20 percent we need to focus on. If something in the schedule has to slip, make sure itʹs not part of that 20 percent.

Pareto came up with several contributions which are as follows:  Pareto charts are a key improvement tool because they help us identify pa erns and potential causes of a problem. The Pareto Chart is used to illustrate occurrences of problems in a descending order. It is used for making decisions at critical points in different processes. It can be used both during the development process as well as when products are in use, e.g. customer complaints  Pareto Analysis is also used in inventory management through an approach called “ABC Classification“. The ABC classification system works by grouping items by annual sales volume. This helps identify the small number of items that will account for most of the sales volume and that are the most important ones to control for effective inventory management.  Pareto efficiency, or Pareto optimality, is a state of allocation of resources in which it is impossible to

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Life Span - 15 Jul, 1848 – 19 Aug, 1923 Country - Italy Known for/as - The Pareto Principle Major works - The Mind and Society Les Systèmes Socialistes

make any one individual be er off without making at least one individual worse off.

On a different note

Paretoʹs best­known student was Mussolini while he was in Swiss exile as a Marxist agitator. Pareto was such an influence on the future Il Duce that Mussolini made him a Senator of Rome when he came to power. Pareto, ever the independent­minded, denounced Mussoliniʹs censorship of the university system anyway.

Many controversies are associated with Pareto due to his association with Mussolini & much ink has been spent defending Pareto from the charge of being a fascist.

“When it is useful to them, men can believe a theory of which they know nothing more than its name.”

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Blaze-a-Trail

A mesmerizing odyssey to unearth the contemplations that have gone behind identifying subtle gaps and bridging them with unparalleled strokes to set the trail for us to follow. Unveiled, with a turn of this leaf , will be the unimaginable blend of actions and ideas that have gone into the making of the retail-giant Amazon and into the delight that Intel could bestow in something as stoic as a microprocessor.

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TRANSFORMING THE ONLINE RETAIL LANDSCAPE ­ Neelav Ratnam

Amazonʹs Success Story

Itʹs receptive, itʹs responsive and above all, itʹs innovative. Beginning as an online retailer of books from a 400 sq. feet garage of Jeff Bezos in Bellevue, Washington to selling almost everything today, Amazon has transformed itself to become the worldʹs biggest online retailer and in the process it has changed the rules of the game. Amazon now offers more than 16 categories of products to its customers and gets them delivered within a day, from its close to 50 fulfillment centers covering 26 million sq. feet. It makes its customers an offering they find difficult to discount­ anything, anywhere, anytime and at the cheapest price. The e­retail giant at present commands the loyalty of almost 200 million customers spread across 178 countries.

Hidden behind these baffling numbers is Amazonʹs strategy that transgresses conventional business practices and seizes opportunities in adjacent verticals. From time to time Amazon simply created new product categories; when it found competitors were well established it made a buy­out and at other instances it chose to partner with brands to create a massive inventory of products. This helped Amazon reach out to

new audience and in the process ensuring accelerated development. Backed by its agility, Amazon single handedly hastened the speed and extent of change that, we now take for granted, in retailing.

If we consider any successful business the focal point of its modus operandi is its customer. With its customer centric innovations and frugal means of operations, Amazon created a sustainable business model that drives customer loyalty and makes it the online retailer of choice.

They pioneered the concepts of customer reviews, you­might­also­like, people­who­bought­this­also­ bought, fast fulfillment and delivery including “same­ day delivery”, delivery boxes to avoid missed carrier appointments, hassle­free returns, Amazon prime bundling two day shipping with host of other services like media streaming and book­lending. Can such novelties in the front­end alone stream­line the aggressive growth mode, that Amazon is in? Needless to say, ample bolstering of the back­end to ensure the seamless execution of the personalized algorithm­driven interface that Amazon boasts of today.

More Customers Increased Convenience

More Distribution Channels

Lower Price

Larger Reach

Larger Selection More Sellers

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Logistics as the Driver

A retail enterprise, in general, has three core pillars supporting the bandwagon viz. merchandising, stores, and logistics. One of the prime focus as well as risk area for a retailer is merchandising; deciding upon what to sell. In an industry where making decisions on markdown is a constant challenge Amazon has constantly persevered to optimize the retail pricing it practices to minimize these markdowns. Enabling large number of small third party merchants Amazon has managed to practically sub­contract the biggest retail function and with it a large part of the risk associated with the unwanted merchandise stocks. Stores and logistics form the other two pillars. Being an online retailer, Amazon obviously does not have to worry about the stores (although now they are planning to venture into the brick and mortar model). That leaves one of the most critical enablers of retailing, Logistics­ Amazonʹs recipe to success.

Though Amazon kept on adding variety of products to its warehouse, profitability continued to be an issue and it took todayʹs e­retail leader almost ten years to post its first annual profit. How amazon managed to do this is reflected in a series of improvements it employed in

Amazon Fullfilment Centres

its inventory management and warehousing practices.

Best Practices and Innovation Warehousing Automation: Carrying anything­ anybody wants­every time isnʹt easy and so Amazon has long used automation in its fulfillment centers (Amazon doesnʹt use the terms ʺwarehouseʺ or ʺdistribution centerʺ).

Amazon has 49 of these spread across 8 countries. Each of these fulfillment centers of Amazon is approximately a million sq. feet in area, equal to the size of around twelve

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football fields, and items are shelved just based on where it can get fit in. So, here we have a jungle of items that has to be delivered to the right person, in the right quantity, at the right time and in the most cost efficient manner.

Amazon extensively relies on the use of bar­codes to sort the items. The ordering system is completely automated.

It chooses the cheapest origin for the customerʹs order in real­time and this process will re­optimize it based on the other customersʹ orders. In 2012 Amazon acquired Kiva Systems in its second biggest acquisition, for $775 million. Kiva Systems manufactures robots that move items around warehouses, automating much of the fulfillment process. The small orange robots slide underneath shelves, li them, and bring them to workers dramatically reducing the effort required in material handling.

Location Postponement: In this postponement strategy inventory can be centralized in one strategic location from where it can be further transported to possible destinations when demand is coming. Amazon began reducing orders which were delivered from several warehouses and stocking several items which were likely bought, all together, by customer at one point and this resulted in tremendous reduction in the safety stock levels.

Inventory Outsourcing: There is a positive correlation between e­commerce capability and increasing the inventory turnover. Had Amazon kept increasing its product offering and storing them in its own warehouse it would have meant huge amount of tied­up capital and inevitably raised the fixed capital requirements. Hence, since 2000, it has switched to outsourcing a part of its inventory. The smart way Amazon did was it did not outsource inventory management of products which were 21

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Blaze-a-Trail popular or frequently purchased by its customers. These products had high turnover rate and were managed internally. The non­popular products were stocked by distributors who delivered the products on request.

Amazon outsourced supplies for three of product segments: cell phones, computers and books, excluding those on best­seller lists. CellStar handled the cell phone sales and wholesale distributor Ingram Micro handled the computers and books. Amazon in essence pioneered ʹdrop shippingʹ, the practice of using a third party seller to fulfill demand. Inventory turnover for Amazon now rests close to 9, ensuring lower holding and opportunity cost and increased efficiency.

Marketplace Model: In addition to selling its own products under its pure­play model Amazon introduced the marketplace model in 2000, wherein it served as an online platform which could be used by other retailers to sell their products. The sellers in return got an assured sales platform and Amazon got a share on each purchase.

But a subtle benefit that Amazon garnered by doing this is implicitly ingraining its value proposition in its

Inc. and Best Buy Co., pick up sites. However, due to absence of indigenous stores, Amazon had to collaborate with partners who would provide space for the lockers.

Customer who ship their item to a locker, usually in 7­ Elevens, grocery or chain drugsstores, are emailed a code a er a package arrives that unlocks the door holding their merchandise. The lockers can hold only smaller items, such as books, DVDs or electronic devices like tablets.

Users have several days to retrieve their merchandise.

Users donʹt pay extra to use the service but the locker program helps Amazon save on certain shipping costs.

For example, UPS and FedEx Corp. charge retailers as much as 20% more to deliver packages to residential addresses as itʹs more efficient to deliver multiple packages to a business address.

Conclusion Rather than limiting to create orthodox logistics infrastructure of an archetypal retailer, Amazon developed a logistics services platform complete with technology support, hardware, and best­in­class operations management that gives them the advantage of scale as they manage receiving and fulfilling services for thousands of merchants, as well as enables them to create a large warehouse­network to enable most optimal shipping for their own merchandise. Challenges loom at large in the arena of e­retailing, nevertheless, having embedded the a itude of thinking from the audienceʹs psyche, Amazon way will never seize to amaze. *****

targetʹs mind – low price. Customers could compare between Amazon and its competitors price on the site itself. It could save itself the trouble of handling the inventory and shipping of these products. Merely by processing orders it managed to reap benefits.

Amazon Lockers: Failed package deliveries continued to plague online retailers. They are also more expensive for online retailers because those consumers are more likely to call customer service, switch to a competitor, or get a replacement item. To mitigate this issue Amazon started its locker service earlier this year. The concept was borrowed from traditional retailers, like Wal­Mart Stores

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UNVEILING THE CUSTOMER DELIGHT INSIDE

We know Intel Corporation today for a multitude of reasons, be it for its position as the world leader in advanced semiconductor chips, or the company behind the household names of the Pentium microprocessor range, the highly successful Advanced Product Phasing (APP) tick­tock product development strategy and most importantly, for the iconic “Intel Inside” branding campaign. The basic business model for todayʹs computing technology industry was laid out so aptly by Intelʹs co­founder, Gordon Moore way back in 1965.

Since its inception, the company has strived to establish an innovation heritage that expands the reach and promise of computing while advancing the ways people work and live worldwide. In fact the Intel logo while on the one hand representing its new branding and business strategy, also emphasizes the embodiment of its past legacy, the present status and the future catalyst towards positive change and newer technological leaps. The famous HBR article, “Marketing Myopia” by Theodore Levi finds perfect cognizance in the case of Intel, a company that managed the transition from a memory manufacturer to micro­processors and a leading knowledge base admirably, as opposed to, say a Kodak or closer home, Hindustan Motors. This multi­billion dollar company envisages its responsibility to doing good business via an integrated value approach, caring for

­ V M Sai Murali their people, caring for the planet and inspiring the next generation.

Prior to the dot­com bubble burst in 2000, Intelʹs supply chain was designed for an environment where semiconductor demand regularly outpaced supply.

However, once the situation reversed, Intel realized that it had to establish a new culture that thrived on customer­ driven processes and performance. Starting the Customer Excellence Program (CEP) was one such initiative that structured independent customer opinion on Intelʹs products and services. However, even by 2005, Intelʹs supply chain was designed to serve only the large Original Equipment Manufacturers (OEMs) via a limited number of Stock Keeping Units (SKUs). Product commitments were always backed up by physical supply and supply quantities were fixed much in advance to provide for supply chain predictability. But in all this, Intel drew customersʹ ire due to long duration from order placement to delivery. With the greater fragmentation of customer base, more volatile demand, pricing pressures, order changes became more frequent and Intelʹs supply chain demoted it to “Worst in class” in order fulfillment.

Central to Intelʹs turnaround effort was its “Just Say Yes” program that dramatically improved customer

Strategic Corporate Responsibility Objective  Integrated Value Approach  14 Consecutive years of recognition of leadership in

Corporate Responsibility  Caring for Our People  84% employees recommend Intel as a “great place to

work”  Caring for the Planet  Largest voluntary purchaser of “Green” power in

US since 2008  Inspiring the Next Generation  Intel Learn program has touched 1.9 million lives in

under served communities

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Efforts Undertaken Cultivating an Ethical Culture Linking Compensation Commitment to Transparency Supply Chain Responsibility Career Development Advancing Diversity Health, Wellbeing, and Safety Promoting Volunteerism Renewable Energy Employee Engagement Energy­Efficient Products Technology for the Environment Education Transformation Inspiring Young Innovators Supporting Social Entrepreneurs Empowering Girls and Women

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responsiveness, delivery performance while optimizing Automation for Responsiveness and Order Horizon inventory.

Reduction: On the physical end, Intel adopted the

The program drew its origin from several Vendor­Managed Inventory (VMI) strategy to improve customer visits conducted by Intel executives in 2005. responsiveness and reliability with reduced inventory Many customers indicated dissatisfaction with the order levels. By utilizing IT­built automated solutions for real fulfillment process that Intel was able to track down to time order commitment, daily VMI hub replenishment multiple approval levels and delays due to order changes. and necessary supply optimization, Intel was able to Although the annual customer survey through the reduce order fulfillment lead times by 23 days with 26% Customer Excellence Program (CEP) was started in improvement in responsiveness by the year 2010. In the early 2000s, the results from these executive­customer case of non­VMI customers, Intel was able to shorten the visits allowed Intel to be er structure the CEP program order horizon to less than a month by avoiding manual for obtaining and prioritizing customer feedback that had order handling delays and errors through automated a greater impact on customer commitment and retention. processes.

In its effort to address the order fulfillment process, Intel Production Planning via Accurate Demand made sweeping changes to its existing processes by Signaling: Intel re­aligned its production and supply combining customer feedback with IT data analytics planning process with the existing orders in the system methods. Keeping in mind the high number of times a and available demand forecast. The decision­making given order changed (average of 6 times) and the low process was streamlined and key IT infrastructural percentage of orders shipped without changes (a meagre enablers like standardized reporting and alert­based 1%), Intel was able to outline the primary goals for its planning developed using Intelʹs IT prowess. In 2009, supply chain organization. The “Just Say Yes” program Intelʹs “Just Say Yes” program received the Supply thereby set a company­wide determination to inherit a Chain Innovation award from the Council of Supply new approach to customer relations through improving Chain Professionals (CSCMP). ability to respond quickly to change order requests, As on today, Intelʹs IT­enabled supply chain reducing inventory levels and errors in demand solution has allowed it to meet market uncertainties by forecasting. delivering highly efficient information systems for

The initial success of the “Just Say Yes” program various aspects of supply chain management, order was backed up by further initiatives to increasing fulfillment, production planning, demand forecasting customer responsiveness, productivity, and process cycle and overall planning. time and inventory levels.

Today, global supply chains face challenges of Standardized Metrics across supply chains: Intel newer emerging country markets, ever­increasing enabled industry­standard Key Performance Indicators portfolio of products and service offerings, customer reach (KPIs) metrics like Order Fulfillment Lead Time (OLFT) expansion, social media, availability of infrastructure to measure responsiveness. Perfect Order metric was and environmental sustainability. Thereby Intel will instituted to measure the reliability of meeting customer have to implement highly adaptable and agile IT solutions expectations in full, on­time and without any damage. to support market environment and customer More such KPI metrics were created to track and foresee requirements. early trends by harnessing Intelʹs IT Business ***** Intelligence (BI) solutions.

Intel’s Supply Chain Leadership Vision Internal Alignment Breakdown functional silos  Improve efficiency and effectiveness



Just Say Yes Customer responsiveness and delivery performance  Inventory optimization



2005

Cost Competitiveness & Agility  Flexibility and lower complexity  Supply chain segmentation

2012

Operations Club, IIM Shillong

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In our ‘Roobaroo’ with industry stalwarts we bring about a virtual interaction amongst our readers and corporate leaders via questions to exemplify their experiences which can benefit budding mangers and business leaders. In this edition we bring forth the back end of your favorite Bengali cuisine 6, Ballygunge Place through the words of Mr. S. Ramani himself. Further Mr. Khatri takes us through the supposedly complex world of Six Sigma in a simplified manner.

Roobaroo

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Roobaroo

WHAT GOES BEHIND YOUR FAVORITE BENGALI CUISINE? Mr. S. Ramani is the founder director of Savourites Hospitality Pvt. Ltd and presently looks into Projects and Marketing of 6, Ballygunge Place. 6 Ballygunge Place is the flagship restaurant of Savourites Hospitality Pvt. Ltd. Started in 2003, today, 6 Ballygunge Place is known as one of the premier specialty eateries in Bangalore and Kolkata serving authentic Bengali cuisine after thorough research into cookbooks of the Tagore Era. After graduating from IHM Chennai Mr Ramani had a short stint at The Park Hotels post which he pioneered his venture Savourites which has turned out to be a big success story. In his interaction with Team Op-Era Mr. Ramani speaks about the best practices at Savourites and shares his advice to the budding entrepreneurs who want to make it big in the hospitality business. helps us have a series of dedicated Vendors. We have annual tenders which are reviewed every quarter as per market information we receive and our internal controls.

We have installed a Shawman Material management so ware which helps us in auditing, reviewing and reordering with work flow functionality.

Op­Era: Supply chains in the restaurant business is an integral part of its success­ with regard to this, what are the major difficulties that you face on the procurement front?

Mr. Ramani: There is a huge amount of uncertainty amongst smaller vendors, e.g. Mu on suppliers. During inflationary trends, even Vegetable suppliers play spooky.

We command the largest base of consumption in Kolkata.

As a result, our Vendors expect huge orders and our difficulties are minimized.

Op­Era: What motivated you to enter the restaurant business in a place like Kolkata where making a mark with authentic Bengali cuisine is a tough challenge?

Mr. Ramani: Kolkata is the food capital of India, as the Bengalis are most known to be extremely passionate about food. Bengal is a “Nation State” wherein there is humongous variety in food and Bengalis travel quite a lot, so there is varied amount of assimilation in cuisines and recipes. This makes Bengal and Kolkata the best place to start business. However, we face challenges in every phase of life.

Op­Era: Procurement in restaurants is a major task that needs to be taken care of, what system does 6, Ballygunge Place chain follow?

Mr. Ramani: Our belief in continuity and retainment

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Op­Era: A business always looks towards cost optimization – you as a restaurateur would have your own ways to go about it, can you elucidate some for us (examples of cost optimization)?

Mr. Ramani: Yield Management is one area we focus on wherein we have a standardized output matrix. For example, a kilo of mu on has to yield so many portions of a prepared dish. In a month, if we have 100 kgs of mu on ordered, we review the yield between input and output.

Procurement of key raw materials before the season begins based on our consumption pa ern helps us save cost. Eg Cashew & Sugar purchased before Diwali because there is 30% price difference in the pre and post Diwali phase.

Op­Era: Given the uncertainties in government policies

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Roobaroo and economic fluctuations, how does cost escalation on various fronts (rise in raw material cost, fuel cost, logistic cost ) reflect on the pricing?

Mr. Ramani: We have a policy of reviewing prices every 18 months. Inflationary trends are taken into consideration before a price hike is formalized. In between there is a crisis, eg, onion prices/ bird flu, we absorb it as a business risk. Knee jerk price revisions have never been our policy.

Op­Era: 6 Ballygunge Place has made a mark for itself in traditional Bengali Cuisine – how have you differentiated yourself from other players like Oh Calcu a, Bijoli Grill, Bhojohori Manna?

Mr. Ramani: 6, Ballygunge place is specialized Bengali Cuisine which incorporates authentic dishes from east and west Bengal. The rest have completely different business model. Some follow the pot pourri concept while others have smaller outlets and follow the military hotel concept.

Op­Era: We see a distinct change in the product offerings during festive seasons with introduction of standardized menus and buffets. What changes do you have to inculcate in your regular operations to cater to such occasions?

cuisine to new frontiers.

Op­Era: As a successful restaurateur and now, a premium caterer, can you mention a few synergies that exist between the two and also the operational differences?

Mr. Ramani: In a Restaurant, everything is set, the menu, the processes, the price and the place. Whereas in Catering, it is entirely dynamic. Every catering has a diversified menu, one different from the other. Even the management needs and business processes are diverse.

The only synergy we draw is added sales. A Restaurant customer recommends us for Catering and vice versa.

Our basic drive for Quality food is the only other synergy.

Op­Era: As a seasoned entrepreneur in the field, what would be your advice to budding restaurateurs/ caterers who want to make it big in the restaurant­catering business?

Mr. Ramani: Have passion, willing to take on failures for they are the stepping stones to success, respect the people whom you work with because you are as good as your team. Patience is a virtue as success never comes easy. Last but not the least, you must have the pulse of the product. Never shy away from Systems. *****

Mr. Ramani: During all festivities and holidays, we have special buffet to cater to the extra rush of customers, this helps us in adding variety and value to our consumer base. For example, Puja, Bhai Dooj, Christmas, Holi & Diwali. New products are our differentiators. Our Seasonal festivals like Aam (Mango), Hilsa (Fish) etc helps us minimize the sway among our customers.

Op­Era: You have expanded geographically as well as diversified into other specialty cuisines, what have been the challenges involved and what have been the benefits?

Mr. Ramani: To expand geographically, the first challenge is manpower. Second is availability of raw materials, third is sustaining quality. We have odd comparisons, Your Kolkata outlet is be er than Bangalore or vice versa. The benefits have been larger market share, newer customers, the introduction of this specialty

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THE SIMPLE IDEA BEHIND THE ‘SIX SIGMA’ JARGON Mr. Vishwadeep Khatri is the CEO & Principal Consultant at Benchmark Six Sigma. Mr. Khatri has been into business improvement roles as a consultant, auditor and trainer for manufacturing and service industry for over 15 years. He has been driving consulting assignments with leading organizations like France Telecom, Airtel, Syngenta, NIIT, William Hare, Siemens, Schneider Electric, and American Express. Mr. Khatri is a B.Tech, M.B.A, Certified Lead Auditor (IRCA, UK), RLA (RABQSA, Australia), Lean Six Sigma Master Black Belt (AMT, USA).

Six Sigma Black Belt (Moresteam University USA), Senior Member of ASQ. Team Op-Era through its interaction with Mr. Khatri explores a simplified view of the six sigma practices and how they could be implemented into businesses as well as day to day activities in our respective organisations therefore use some statistical tools usage and data driven decision making. Basically for the senior management roles, you would like to use it for sense making followed by decision making followed by policy making. So thatʹs how it would work for any B­school graduate.

Op­Era: Having handled consulting assignments both in India and abroad, how would you differentiate the nature of problems faced in these assignments?

Op­Era: How should we MBA students prepare ourselves by being well­versed with the concept of six sigma and its practices to suit the industry requirements and move up the career ladder?

Mr. Khatri: Focus on three things: problem solving, data driven decision making and extra ordinary process building. For example Google adwords is a very powerful advertising tool where an advertiser may like to test many hypotheses and he would like to know which excels, if controlled well, and would lead to more clicks and hence for a marketer it makes sense. Even in HR, you would like to check whether your psychometric testing is correlating well with the on­the­job performance. So when you are selecting a candidate you would like to really check whether that testing makes sense and you may like to

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Mr. Khatri: They are very similar in certain industries for example the knowledge industry like BPO, KPO and IT, you will see challenges like everyone has to be the lowest cost or the highest speed provider or both, and thatʹs for all the global companies. If we consider specific sectors like for example textiles where India has a distinct advantage of cheaper labor, but if along with cheaper labor you donʹt create extraordinary processes then you will have tougher times in future. There is a myth, that if you are working with more amount of labor you canʹt use six sigma, which is not true. In fact if you are working with more manual processes you must have increasingly extraordinary processes.

Op­Era: Mumbai Dabbawala has been well known for having error free processes even though they claim of not having implemented lean six sigma into their organization. So what do you think differentiates them and how have they been able to achieve such results?

Mr. Khatri: There are some unique things happening with the Dabbawalas. One is that they donʹt have any serious competition because they are unique in themselves and no one has been able to build the kind of infrastructure they have. Also their processes do not have that kind of complexity like the one that say Flipkart has.

There will be complexity in the processes in Flipkart, from 28

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Roobaroo order picking to delivery to meet the customer expectations and requirements that if you try to do one thing right the other thing tends to go bad. This is what is called primary metric and secondary metric in six sigma.

So the idea is when you are improving your primary metric you donʹt want your secondary metric to go bad.

In addition the Mumbai Dabbawalaʹs are not a complete entity in itself. They use an excellent transportation that the Mumbai locals are renowned for. They have a 125 years of tried and tested methodology that has helped them reach to this level. They are not the only one for that ma er. If you take the example of the Indian Army they are said to have the best pay­roll mechanisms in place.

And this has been the same even during the 1971 war.

Op­Era: How can a start­up which hasnʹt established its processes that well use lean six sigma methods to transform its processes from the beginning?

Mr. Khatri: Let me give you an example of a Father Daughter company dealing in a product category called Plasticizers. Plasticizers is a product which is used in a tire for bonding of rubber with the metal mesh, so itʹs a chemical. This specialty chemical was developed by them using six sigma methods, and not by using DMAIC, but by using DMADV, which is a product development approach (Define, Measure, Analyze, Design, Validate) is another very powerful format by which even a small company or start­up can beat a well­established company using latest technology and some wonderful designs.

Op­Era: Which is the real thrust area today where lean six sigma is contributing, or the area which is going to revolutionize the way people work?

Mr. Khatri: The DFSS or DMADV approach which is about developing new products so that they perform in a defect­free manner is the thrust area, in services as well as manufacturing. It all started with DMAIC, but the way change has become faster now, industries are changing fast, for e.g. if a mobile phone is launched within fact days you know whether it is a flop or a hit. Itʹs become like a movie now. Things are so fast that companies have to focus more on be er designs rather than only improving existing processes, which means their process change is ge ing faster and faster, new products are ge ing

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introduced. In service sector, this is even more dynamic.

Because you have the ability to change processes faster. In manufacturing you get stuck with your plant and machinery for some time. In services, this is not the case since most of the architecture of systems are open­ended.

You can connect with newer things, anytime.

Op­Era: Speaking about change in the Indian context, with employees resistant to change, how much of a role does HR play in implementing Six Sigma in organizations?

Mr. Khatri: The HR has got two things to contribute.

One is building the change culture in the organizations and the other is modification of Performance Assessment Systems with “Change” as one of the important parameters. So people who are contributing to Improvements will get their own brownie points. If you look at Google, it is probably the only large company where HR decisions are done with data. Data­driven HR. Something that Google does very well. This is something which will come up fast at other places as well.

Op­Era: How are six sigma certifications important for someone who aspires to pursue a career in the field of operations?

Mr. Khatri: Basically a degree gives you a job while lean six sigma helps you in excelling in your job or accelerating in the career ladder. Everyone knows the financial or marketing or operations basics when they join an organization, so what is the competitive edge you have is the question. And how will you get close to the senior management faster is by addressing challenging problems, and this is true for any functional area whether is HR, marketing or finance. Because following the routine business practices is not going to bring benefits to the company over a longer period of time. You need to take up challenging assignments and targets and address them using the six sigma approach to bring improvements consistently in your organization. *****

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RENDEZVOUS 'For the things we have to learn before we can do them, we learn by doing them.' says Louis Sachar.

Op-Era takes great pride in walking this talk, by creating fun experiences for budding operation enthusiasts which ultimately culminate in learning that is etched in their minds in the simulated environment. This section is an attempt to pen down them down into an enjoyable read and throw in some more fun learning challenges.

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OPER8 - OPERATIONS WEEK, IIM SHILLONG (21 Feb ­ 24 Feb 2013) Operations Week, IIM Shillong Oper8 was launched at the end of academic year 2012-13 as a fun learning competitive initiative for the students of IIM Shillong through a week long event which brought out various aspects of operations and supply chain management through a series of events. A lot of enthusiasm was seen from both PGP and PGPEx batches. With a successful season 1 Oper8 looks to make it big with a more fun filled events and guests lectures in upcoming seasons of the Operations Week !!!

Oper8 was launched through a series of teasers which finally culminated into the detailed poster displayed alongside which gave a brief of all the four major elimination rounds which the teams went through to become the ultimate champion. The evaluation stages were 8 in number which also reflects in the logo. The first round was an online quiz ‘Optimus which saw participation from around 45 teams, 35 of which qualified to the next round. Optimus aimed at providing insights about simple trivia and quick numericals in the field of operations.

The top teams from Round 1 graduated to the next round ‘Opsview’ which featured a live video quiz. Three informative videos ­ Mumbai dabbawallahs, Store retail layout and the Toyota Production Systems were shown to the participants post which questions were posed to the participants on each video some direct from the video and some indirect which could connect to the video. The teams appreciated the learning that came from all the videos and were eager to get to know the answers of the quiz which was played in a very competitive spirit.

The top 16 teams made it to the next round of Oper8 while the scoring for the ultimate champion had already begun. Optronix was a realtime simulation of a corporate house to ensure profitability through winning bids, optimizing production and inventory, providing appropriate logistics by building a mathematical model with ongoing rounds of contract offerings.

The top 6 teams made it to the most exciting finale ‘The Amazing Race’. The event started on a Saturday evening with a series of clues one leading to the another inside the campus and intermingled games giving a feel of one or the other operations concepts like Karakuri, Sorting, WIP inventory, etc. The finale was to find the treasure a er a series of clues related to the domain which was won by Ashok and Ernesto from PGP 12.

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OPSOPEDIA - THE FUN LEARNING VIDEO SERIES (Monthly) Opsopedia was brought up as an initiative of Team Op-Era to involve all the management students in the process of learning simple operations and supply chain concepts through some fun interactions amongst characters created by Team Op-Era who can explain these concepts in an interesting and a very simple clarified manner. By now this video encyclopedia has covered concepts of different types of logistic providers, quality function deployment and Kaizen. Let us have a look. . .

GYAAN I - LOGISTIC PROVIDERS

GYAAN 2 - QUALITY FUNCTION DEVELOPMENT

Opsopedia began with Chintu­Guruji explaining this topic in a light hearted manner. Video starts with the curious student asking his teacher about the types of logistics providers & their functions. The video goes on by explaining the concept of various logistics providers & their significance in an interactive manner which will make it easy to understand. In the field of Operations management various terminologies are sometimes taken for granted without understanding logic behind it & hence in the first video an effort was put to draw a ention towards this aspect of understanding the terminologies reflecting various concepts.

Video ends by creating a curious mind to search about these ideas to understand the intricacies of these concepts in a simple manner.

In its second video, Opsopedia covers the concept of Quality Function Deployment which is depicted in a conversation with the help of a presentation which makes it easily understandable as the concepts like House of quality & four phases of Quality function deployment are depicted pictorially. This video discusses the applicability of QFD as a good product development tool which maps customer requirements to the product design stage. The discussion brings into notice four major advantages of QFD which are reduced implementation time, customer driven process, well documented process & the process which promotes team work. Video ends with the real time example of Ritz Carlton hotel and Mahindra & Mahindra which uses QFD for the development of their products & services.

GYAAN 3 - KAIZEN In Gyaan 3 Opsopedia introduces Boski & Chitra madam for presenting a fun and quick way of learning concepts of Operations management. In this video the two characters explained the philosophy of continuous improvement i.e. Kaizen.

The steps of continuous movement process described in the beginning marks the start of the video which culminates with the simple & complete explanation of the process. Mentioning the point that Kaizen does not only mean big improvements but it also encompasses small changes done on a regular basis clearly describes the foundation of Kaizen associated with its Japanese roots i.e. incremental developmental processes. The example of categorical arrangement of items on a shop floor is simple but effective in understanding the basic idea behind Kaizen. This edition also introduces various terminologies under Kaizen which helps in creating a curious bent of mind.

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OPTIMUS 3.0 - THE MOST CREATIVE BRAIN TAKES IT ALL

(9 Aug ­ 21 Aug 2013) Optimus 3.0 was launched as an Inter- College competition for motivating B-School students from all around the country to creatively bring forth important operations concepts like JIT, Cross Docking, Push-Pull Production Systems, Forecasting, etc. followed by propagating these entries on the social media platform to spread the word in their respective B-Schools and to all interested students alike.

Winning Entry : Team Konvicted from IIM Kozhikode Dipankar Biswas and Abhishek Nandan from IIM Kozhikode bagged a cash prize of Rs. 1000 with a holistic explanation of the ‘Cross Docking’ concept critical to huge retailers

Runner­Up Entry : Team GIM Ops Guru from Goa Institute of Management, Goa Abhishek Sinha and Swayambhar Majumder from GIM, Goa used Goa’s very own JK Restaurant at Sanquelim to interestingly explain ‘JIT’ and take home a cash prize of Rs. 500.

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Special Mention for Design : Team Ultra Magnus from IIM Raipur Ruchi Sao and Trisha Gajbhiye from IIM Raipur were applauded a ractive design which was highlighted by the spiral with excellent use of colors which quite well symbolised the ‘Death Spiral’

Special Mention for Creativity : Team Lost Raven from VGSOM, IIT Kharagpur Anurag Dabas and Arpit Varshney entertained Team ­Opera with their hilarious yet powerful explanation of ‘The Learning Curve’ via their friendly trolls

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Special Mention for Conceptual Clarity : Team The Backbenchers from NITIE, Mumbai Sneha Lundia and Neeraj Nayak from NITIE, Mumbai received a special mention owing to the excellent explanation of ‘Reverse Logistics’ via text as well as systematic infographics

Special Mention for Publicity : Team Transformers from IIM Udaipur Navdeep Thakur and Sushil Ramteke proved excellent marketers in publicizing their interesting explanation on ‘JIT’ garnering over 1000 likes and 40 comments on Facebook

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Connect:

1

2

3

4

Solve: 5. Match:

a) Agility 1) Adjust supply chainʹs design to meet structural shi s in markets

b) Adaptability 2) Create incentives for be er performance

c) Alignment 3) Respond to short­term changes in demand or supply quickly 6. Which of the following company was infamous for its lack of agility in 1990s?

a) HP b) Zara c) H & M d) Mango 7. Which of the following is not the underlying premise of Theory of Constraints that organizations can be measured and controlled by variation of ­­­­­­­­­­?

a) Inventory b) Operational Expenses

c) Throughput d) Cost of Goods Sold 8. US : Walmart :: Europe: ____________ 9. Find the odd man out:

Airlines, Hospital, Automotive, Space industry 10. In a supply chain information, product and money are types of ____________

1. Continuous Replenishment (Search History) 2. Economic Ordered Quantity (Origin) 3. Top 10 Gartner Supply Chain Rankings-Asia Pacific 4. Bar Code (Evolution of Technique) 5. a-3 b-1 c-2 6. a (HP) 7. d (Cost of Goods Sold) 8. TESCO (Largest retailer in terms of revenue) 9. All industries except Automotive mentioned above strive to achieve 8 sigma level 10. How do you even dare to look at the key for this one. What does the name of the magazine literally mean ?

FUN ZONE - TICKLE YOUR GREY CELLS !!!

*****

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Team Op-Era Operations Club Indian Institute of Management, Shilllong Please send in your comments/ feedback to opera.iims@gmail.com