NMIMS Optimuz Catena Aurea - March 2012 by Zigu MBA

NMIMS, Mumbai www.nmims.edu.in

Optumiz March, 2012

Catena Aurea Human Civilization : How efficient are we? Main Features

Articles Expert Speak Knowledge Corner Deconstructing Ops Optumiz Opinion

Catena Aurea Quarter 1 Year 2012

Editorial Team Editor Vinay Arun Optumiz Contributors Amol Arnab Mallick Balajee S Deepak Kadam Jitendra Jidewar Nishant Chotalia Utpal Khardenavis Design and Creatives Deepak Kadam Vinay Arun Senior Member Shubam Prakash

Dear Readers, Catena Aurea is scaling new heights! We bring to you several new sections with this issue, which will be of original content and opinion from the Optumiz Cell members at NMIMS. As we implement this change we chose as a theme for this issue the prevalence of Operations all around us. We wanted to bring out how everyone views the world around them through the “Operations lens”. The more I think about it, the more I realise that we are gradually entering a realm where continuous improvement is going to be more prevalent than big ticket innovations. As increasing constraints bear down on human civilization, such continuous improvement in terms of efficiencies and cost savings are going to become very important. Operations management is going to play a leading role in enabling this. This is probably going to be the next big revolution. Perhaps it is time to relook at the way we have organised ourselves. Perhaps ease of implementation has caused us to merely automate our inefficiencies in the past and the time has come to change. The articles in this issue give you the usual flavour of operations but with a lot of focus on the life we see around us. You will find some suggestions, some critics and a lot of insight on the way we live. Efficiency has been dealt with quite thoroughly in various sections. Our winning article this time proposes a model that tries to solve the traffic problem in our cities. Interestingly this model is not to be implemented by the traffic police! Read on to find out who bears the responsibility. It is probably such disruptive innovations in our processes that we need now to design better and more efficient lifestyles. Articles also talk about efficiency from the individual’s viewpoint. How we behave has a direct influence on the supply chains and operating efficiencies of corporations around us! This also includes services like healthcare. As always I hope you enjoy this issue! Let us know how you feel about the content. Feel free to contact anyone from the Optumiz Cell regarding any aspect of the magazine and I promise we will get back to you. Critics, suggestions, requests, and jokes, they are all welcome. You will find contact details of all authors and Optumiz members; connect with us, discuss our articles and let us know your opinions.

_________________________ Optumiz NMIMS, Mumbai

So until we meet again next time and while you wait to see what is in store for the next issue, take care and enjoy reading! -Vinay Arun

All design and artwork are copyright of the Optumiz Cell NMIMS, Mumbai All views presented are of the individual writer’s. Optumiz does not bear any responsibility whatsoever.

CONTENTS

Cover Story Human Civilisation: How efficient Arnab Mallick, are we? Jitendra Jidewar

NMIMS ized office space, and a well designed, planned and here have always been indefinite possibilities for expandable urban form. The project ba¬sically caters human civilization from the past up to the present. to the requirement of back office work of companies There comes a time where technology fails to de- in the financial sector, especially banks, insurance and fine a real¬ity out of fiction, but civilization will al- asset management companies. The 72,500 crore GIFT ways cope and justify whatever means necessary to project un¬der the construction area of 800 acres, is achieve the ends. Technology on the other hand, was planned on the lines of global financial hubs in New created through York, Shang¬hai and London. great civilizaGIFT is designed as an ex¬tremely tion and aided the environmental¬ly friendly developgen¬erations and ment that will have the lowest per will be aiding fucapita energy consumption of any ture gen¬erations Indian metro. The project itself will to provide as conboast of an impressive green area veniently as poscovering 65% of the total land, in sible hu¬mans large part due to the number of skyday-to-day activities. scrapers.

There are great things in human civilization in¬deed. It is always part of society’s success to endeavour towards a harmonious, effective and efficient life where prosperity thrives in every individual.

From the above example, we can recognise that hu¬man civilization has remarkable capacity to respond to change. But, the existence of such capacity for re¬sponse alone does not mean that human civilization will survive all of its challenges. However, It is grotesque when one tries to communicate one can definite¬ly hope that we humans will try to fallacious arguments about negative effects of make the existing civilization more efficient by comcivi¬lization. The whole point is, we are a civil so- ing up with innovative ideas and by putting them into ciety, and all of us are part of this civilization. There application. Because we will always keep asking ouris no ambiguity there because civiliza¬tion has been selves, Have we made it large as we have been since in existence for a long time now. The question which time immemorial. needs to be answered now is how efficient our civilization is. Are such forms of organisation going to be the way in the future of our civilisation? And will these solutions In the Indian context, a contemporary example of ef- address the questions that brought them up in the first ficient hu¬man organisation is probably the Gujarat place? Time will tell but for now, we can guess. government’s mega¬project of GIFT- Gujarat International Finance Tech City, located at Gandhinagar, ---------------------------------------------------------------the capital city of the uber-industrial Indian state of Both Arnab Mallick and Jitendra Jidewar are first year Gujarat. MBA Core students at NMIMS, Mumbai. Arnab is from GIFT is India’s first major super tall CBD project that is designed to be the focal point of India’s booming financial services market by provid¬ing companies with comprehensive infrastructure, power, vertical4

Computer Science background and has prior work experience of 2.5 years in TCS. Jitendra is also from engineering background and is a frequent blogger. You can contact them at: arnab.for.ever@gmail.com jiten.elite@gmail.com

Catena Aurea Q1, 2012

A model to reduce worker travel time and distance

Pritom Kumar Gogoi NMIMS

travelled 6 days a week from Garia (Kolkata) to my office at Park Circus, a distance of 14 KMs, paying Rs.8 as bus fare. This amounts to Rs.416 a month and approx. Rs.4500 year. This route takes around 60 minutes to reach office. An alternate and faster mode of commuting is to take a rickshaw from my apartment to the nearest metro station paying Rs.12, then board the metro train to Rabindra Sadan paying Rs.8 and then board a bus to office for Rs.5. This amounts to Rs.1300 a month and approx. Rs. 14,000 a year (approx. 35% of avg. per capita income of India as of 2009-10). This is what a vast majority of the working population encounter every day. Here we have considered only the monetary aspect of such long commuting and not the factors that result in fatigue and productivity loss and also different health troubles. Most Commuting time is ‘wasted time’ as it is financially non-productive. In the UK more than £260 million-worth of working time is spent every single day travelling to and from work not to mention the pollution and health costs. Equally problematic is the social impact of long commutes restricting family time. “How will we travel to office” and “Where will we stay” are the two most frequent thoughts that visit our mind after we get a job at a place away from home. The hustle to find home and to get accustomed to the medium of commutation to office takes 1-1.5 months for most of the people. But this time period varies depending on the location of our office, type of work and so on. It takes much longer period in Mumbai than in other smaller cities and towns. The objective of this article is to prepare a basic framework that will deal with this issue of long travel time/distance to a great extent. The effect on productivity is not uniform and varies with the type of work, type of company, marital status and so on. As a result, we firstly categorize the workers as below. Marital status of employees: Single and Married

Type of company: Manufacturing or Service-oriented Type of job profile: High mental labour or High physical labour Position in the company: Junior manager or Senior Manager Increased daily travel time and travel distance to place of work results in loss in productivity, increased fatigue, unpunctuality, less sleep time, continuous anxiety about the safety of family, anxiety to leave office early towards the fag end of the day and so on. In the table below, it is shown to what extent the productivity of different categories of workers is affected due to high travel. As seen in table 1, the negative effects of more travel time is higher on a married person than on a bachelor due to the various responsibilities of a married life. Higher physical labour refers to all kinds of labour which entails high mobility, regular and long physical presence at place of work and so on. In this category, we can include the factory workers, bank employees, pilots, surgeons and so on. The category of high mental labour will include the senior managers, directors, researchers and so on. This diagram thus signifies the need to address the issue of loss in terms of productivity and personal expense due to increased travel time and travel distance, especially in the case of married persons, employees involved in high physical labour, in bigger cities.

Let’s consider a manufacturing company making shoes with senior managers and 1000 junior employees/workers. In table 2, it is shown how the company loses man-hours due to high travel time/distance of 5

the workers. It is assumed that the senior employees loose 5% of their productivity and junior employees loose 10% of their productivity. We see that the company loses 9% of the total man-hours available in a month. In table 3, the economic cost of high travel distance to office is given. We have two cases of 15 km. travel distance and 20 km. travel time. It also shows what percentage of the house rent paid by an employee is spent as transportation cost. It is very high for employees using personal car; 23.4% of the house rent of Rs.10000. Table 2

Table 3

It’s is now clear that there is a pressing need to tackle this problem and with increasing number of vehicles on the road, increasing pollution, increasing work pressure, the intensity of the issue will only increase. Any attempt to address the issue of productivity loss will result in multiplied gains for any company, in terms of increase in revenue, employee turnover, job satisfaction and so on. In this part, I would discuss a possible solution with a model to address the said issue. This model basically deals with housing most of the employees or workers of the plant, office etc. of a company as close to their respective workplaces as possible by various proposed ways and that benefits the employees, the company and also the surrounding locality; a win-win situation for all. To facilitate this, there will be a specially formed Housing team in every company. Let’s take the case of a company with factories and branch 6

offices all over India. It is recommended that the housing team should work within the ambit of the HR department and should consist of minimum 4 persons. The cost incurred in forming and maintaining the team will be compensated in terms of increase in man-hours, higher productivity of the workers and employees. The model will involve the following steps: • Housing the factory workers within the factory premises and in rooms in nearby localities • Entering into agreements with apartments nearby and single houses to keep company employees on rent • To devise a system of “work-from home” for selected employees Role of housing team: The team will be responsible for collecting the data, related to lodging/food of all existing employees and to provide lodging to all new recruits. The team will keep rooms/houses ready atleast 1 month prior to joining date of the new recruits. One of the proposed ways to house workers is that the company would provide 1 room or 2 room houses to low-rung workers. The Housing team will look around for rooms/ houses/paying guests/apartments in and around the locality and maintain an official relationship with the landlords. In the nearby areas, there would be hundreds of other people who have to travel to far off places to their workplace. The team will carry out a survey of the profile of residents in and around the factory/office to find out where they work, whether they are interested in shifting to a new location and so on. Then it will try to house the interested residents in places nearer to their respective workplaces. There is also a possibility of collaboration among different companies to house their employees closer to their offices. Another possibility is to create a website wherein interested people can write about their wish/need to stay in a particular location. The landlords would have the benefits like higher rate of occupancy, better know-how about the tenant’s personal details and so on. The company can also, to an extent, provide finan-

Catena Aurea Q1, 2012

cial support on a pay-back basis to help them build rooms/houses within their premises. Given below are Diagram 1 the ways of providing houses/rooms to employees of different grades and marital status. Bachelor and executive: This category includes all the executives (in the payroll) starting from officers to senior managers. The bachelors have less restrictions and donâ&#x20AC;&#x2122;t have the constraints faced by a married person. So the company can provide them lodging in hostels, paying guests and 1 BHK apartments in close-by areas. Staying with colleagues will also foster socialising and bonding, which will, in turn, help in team building. Bachelor and non-executive: This category includes the contract labourers, plant workers and so on. They can be put up in dormitory or make-shift houses inside the factory premises. Also the resident workers who have their own homes in that place can have the opportunity to rent a room or two to the non-resident workers and earn an income out of it. Such an act Diagram 2 would make the outsiders feel at home and thus reduce attrition. Married and executive: Over and above the officers and managers, this category also includes the directors and people over them. They like to maintain a special status in the society and within the company and wish to live in luxury. These people mostly work over their cell-phones and laptops and moreover, they can afford fast and luxurious means of transport. They are in a better position to work efficiently even from their homes and thus it makes the need to house them in close-by areas less urgent. Even then, there will be people in this category who need to be present at the office most of the time e.g. plant GMs. And in such a case, the company can have contracts with apartments in the neighbourhood and keep flats booked on a continuous basis. Married and non-executive: These families will need a separate house and so like the married employees and executives, they can be housed in 1 BHK apartments or rented houses in the vicinity. Also there will be a few families who will be interested in staying jointly. The diagram 1 below shows the operation model. Diagram 2 shows the income generating cycle that gets created out of the bigger operation model.

The model discussed is just a foundation to address the issue faced by almost all the companies whose employees have to travel from far-off places to come to workplace daily. A lot more can be done to make the model more effective and build a better system to improve or do away with the travelling requirements of employees/workers. Such a system will create a close-knit community of com7

pany, company employees and housing providers. hood community, it will indirectly raise the income Besides attracting the goodwill of the neighbour- of low rung workers and contribute towards building a prosperous and efficient workforce and nation. ----------------------------------------------------------Pritom Kumar is a 1st year, MBA-core student from NMIMS, Mumbai. He has prior work experience of 47 months as Deputy Manager, Field Services in Ashok Leyland Ltd. You can contact him at: pritomg@gmail.com

Did you know? I

n Mumbai, the public transport system BEST is used by nearly 4.5 million passengers per day. Though BEST tries its best to meet the demand, its service has not been optimal and efficient. This is mainly because it has to share roads with other traffic which makes operating conditions highly congested for BEST. In order to fulfil ever increasing demand for rapid transport system in Mumbai, the Municipal corporation introduced a project for Bus Rapid Transit System along the busy Eatern express Highway and Western Express Highway. The two bus corridors identifies for initial run are between Thane and Dharavi on East8

ern Express Highway and between Kalanagar and Dahisar on Western Express Highway. The model is based on the similar project successfully running in Pune. However the project is delayed since long as there are some thoughts that this model will not work on the busy Mumbai roads. The argument being made is that allocating one dedicated lane for buses is going to increase already congested traffic which will draw negative response from public. So there is still a long way to go for Mumbaikars to see some respite in traffic woes and for time being they will have to adust with the existing setup!!

Catena Aurea Q1, 2012

Better Efficiency- A Personal Commitment

Keshav S. Sowmya R. IIM, Shillong Adding to the woe that the office is a solid 40 kms he alarm sounds loud and in my trance-state I away from home, I need to drive to school, which is could hear the birds flap their wings and take flight. 10 kms in the opposite direction, to drop my kids. I hurriedly get out of bed and head to the washroom. That would make it 120 kms of travel a day. What if It is fairly well equipped with a geyser, bath tub and it is compulsory for schools to admit students within shower- I smile as I set foot on the cool, tiled-floor. 5 kms radius? In that way, my kids can, in-fact, walk The pipes had been blocked the day before and it to the school which is in the adjacent street and also, took 2 plumbers and 4 hours to clean the drainage unnecessary travel and congestions can be avoided. tanks. I recalled vaguely that back then; the Harappa Currently, the admission is a function of parent’s anand Mohenjodaro civilizations had a closed-drainage nual earnings. The only way I can reach there is to system. From each house, ceramic drains ran to the start a school myself! sewers. The same model might work at my place and would require almost nil maintenance. But wouldn’t I miss out on interior aesthetics? Tough reasons not to switch!

My wife asks for some vegetables which I take out from the refrigerator. It consumes around 11 units of electricity to keep these vegetables that I had bought last night, intact. That is around 5 kgs of coal burnt (30% efficiency of power plants). We talk about Lean manufacturing at business levels. A small change in perspective; what if we are the suppliers and the consumers as well. If we use this concept for waste minimization by, say, making a conscious forecast of demand, the small effort would mean judicious use of fossil fuels. I also remember my grandmother saying she used to store curd in earthen pots which stayed fresh. At least the idea is fresh in my mind. My children get ready for school. I am not ready to work. Office seems to be outside the realm of life. My children would soon realize that. Why can’t we earn a living by doing something we love? Is this because of the change from the indigenous model of self-sufficiency (Swadeshi) to pro-capitalism? If Swadeshi were to continue, priority would shift from amassing wealth to meeting bare minima. Also, no particular kind of work would command a larger economic bearing. People would get to pursue what they really like. Now I wonder if India is shining. I really don’t know where we are heading.

I see the words innovate and out-of-the-box spewed all around my office. I pause to think, our current version of innovation only needs revision. I wish my COO would allot budget for green innovation. The concept of disruptive innovation is adding to waste. Although it is necessary, the surge of newer products keeps flooding the market and consequently adds to obsolescence which turns up in landfills. Instead, if we focus on reducing the carbon footprint of our product and packaging, we would save substantially. I remember thatthe I-phone 4’s packaging is 42% more compact than the first model. That would save a lot in flight transportation costs. Their R&D wisely focused on minimizing power consumption so much so that they are the 9

only company to exceed ENERGY STAR’s expecta- couple of minutes earlier. I couldn’t help but think tion .They got a sane management. All I got is work. how faulty the system is here. I am not lamenting about the criminal being caught and tried, that’s difEarlier this month I came across a concept called bio- ferent. But a system which is put in place by every mimicry which has solutions to most of our everyday individual should obviously ensure, for the least, the activity, be it construction, communication, travel individual’s survival. Traffic has grown so much so and the likes (http://www.biomimicryguild.com/ that even the most skilled ambulance driver finds it guild_biomimicry.html). I was surprised to know difficult to help the cause. What if, the dying aviation that this seemingly new phenomenon has in fact been industry can be put to use here? The connection: the prevalent from a long time. I decided to look it up and government could subsidize charges that the players read about Qualcomm’s Mirosal Display which uses in the aviation industry would levy in leasing helithe photo reflective techniques of a butterfly (http:// copters to the hospital. The shortest distance between www.mirasoldisplays.com/innovation-story). This the hospital and the point of accident is a straight line was found to be almost zero watts in power consump- and the only thing that can remotely meet that is a hetion. Also, the display quality is augmented tremen- licopter. This is not so unrealistic. An economic point dously and is very much visible under direct sunlight. can be arrived at wherein the state government funds Elsewhere, a cleaner fuel source is being looked at some of the cost and the rest by the party found guilty, through the process of artificial photosynthesis. All wherever applicable. Also, if they were to train one of the carbon dioxide emitted by vehicles can be fed team of every political party per constituency whose back into this process to improve efficiency of the hy- sole job is ensuring priority treatment to victims of drogen cells in place. Nature had always been hold- accidents, the problem would have a localized haning the answers. She is wise to know that energy is a dling unit ensuring better control and timely remedy. privilege and has accordingly designed herself to be This also would give mileage to that party. Nevertheefficient. All we need to do is look at the right place. I less, much like the party’s ideologies, these ideas will look forward to leaving office early. never materialize. I am after all, one man! I live in the top floor of the apartment. I head to the terrace to see the dusk settle. Instead of the DTH satellites intruding the space, I would prefer seeing some ‘Liters of Light’ (http://isanglitrongliwanag.org/). A small plastic bottle with commonly found liquids that would illuminate my house like daylight! I would save 15 units a month as against a 50 W incandescent running an average of 10 hours a day. This concept has been extensively used in the capital city of Manila. The bottle can be prepared by any one and would save a lot of electric power if used in large numbers. Sadly, I would be considered economically challenged if I were to get one. I wonder about this month’s power bill. It isn’t going to be small.

As I return from office, plenty of vehicles whizz past me at crazy speeds. It reminds me of a friend of mine who lost his brother, recently. It was a case of hit and run, and the victim was declared ‘dead on arrival’. He could have been saved had the ambulance reached a 10

As I walk into my son’s room, I hear him read aloud from his text book- “If we all did not throw away food that could have been eaten, it would have the same carbon reduction as taking 1 in 5 cars off the UK roads”. I raise my eyebrow at this incredulous statement. However recently I came across a site (http:// yousee.in/donate-your-waste.php?gclid=COanq_6vq0CFUMb6wodqGwLuQ) on sharing what you are

Catena Aurea Q1, 2012

Quiz

bound to waste. It is a rather interesting idea ‘Donate your waste’. Companies and residential colonies set up waste bins in order to collect wastes into designated bins. Reusable items like books and clothes are listed on the site and donated to NGOs for use by underprivileged. Recyclable material helps transform these wastes into useful products and can be used to provide services to the needy. I should contact them sometime, there are many things I have and do not use. As I slip into bed, I think I’ll find better use of the ‘wastes’ one day and should probably keep them myself.

1. What type of Error Occurs when it is concluded that a process is not in control ( i.e. not stable ) when actually it is A. Type I Error B. Type II Error C. None of the above

What is the development we are talking about now? Finding ways to cater to human pander more than necessity is not true development. What we see above is probably one man’s dream and what stops him or any of us for that matter are mostly petty reasons. All the apprehensions he has are seemingly true but quite superficial, which has evolved as a part of ‘sociocultural’ being. To put these ideas to practice by more than one of us might initially sound difficult. It does call for undoing so many systems, assets and most importantly the attitude that currently exists. But, by breaking the initial illusion of a barrier and implementing the cause for the better, the landscape of human progress and efficient practices will achieve optimization at humongous levels. All it takes is for each of us to act. The system will remedy itself.

3. What is the most commonly used method for forecasting ? A. Regression Analysis B. Adaptive Forecasting C. Weighted Moving Average D. Exponential Smoothing

---------------------------------------------------------Both Keshav.S and Sowmya R are first year PGDM students at IIM Shillong. Keshav S is from Electrical and Electronics Engineering background and has prior work experience as associate consultant with Oracle Financial Services Software for two years. Sowmya R is from Computer Science background and she is a fresher. You can contact them at: keshav11@iimshillong.in sowmya11@iimshillong.in

2. Which of the following influences on the sales of a product is the most difficult to forecast? A. Seasonal B. Autocorrelation C. Trend D. Nonlinear Trend E. Cyclical

4. Performance measures concerned with specific work processes that are virtually same for all industries refer to A. Internal Benchmarks B. Competitive Benchmarks C. Functional Benchmarks D. Generic Benchmarks 5. An activity is said to be ahead of the schedule if the critical ratio for that activity is A. Equal to One B. Less than One C. More than One D. More than Zero 6. In which of the following work measurement techniques, a detailed breakdown of the various types of activities is not required? A. Work Sampling B. Time Study C. Standard Data D. Predetermined Motion Times (Check page no. 24 for answers)

What’s your iQ? Iti Malik Manu Shankar NMIMS used to this prompt service; he kept expecting more n this impatient era, where your blood starts boil- and thus created more demand for even faster goods ing if Pizza Hut does not deliver you your pizza in and services, incentivizing companies to again look at 30 minutes or McDonalds delivers the burger a tad improving efficiencies in supply chain. This becomes bit late or a Blue Dart courier does not reach on time, a closed loop, and hence the efforts lead to customer what is your impatience quotient (iQ)? In today’s satisfaction. Through this article we attempt at buildworld of high competition, the impatience of each ing a perspective that this traditional loop might individual, be it a customer or a manager, is on the break. It could be simply because efficiency is not an rise. While a customer expects on-time deliveries, the elastic band with infinite elasticity and hence is bound race for the project managers is to be first in the mar- to break at some point of time. ket. The two basic ways to achieve it are: improvement and compromise; and the yardstick is cost. Is Invariably everyone in the market place claims to sell being impatient to deliver first stifling innovation and “High Quality Product”. What is so great about this research? Has the unit of measuring customer value phrase which doesn’t even have a worldwide standard become synonymous to the unit of time? Does faster accepted definition? Quality is like the round globe delivery mean providing more value to the customer? on your desk- you see a different country each time you change your position. The brand manager might If other factors are taken constant, in most cases the define quality as something which delights his conanswer is yes. sumer, but for the plant manager quality boils down to the set standards laid before him. Over the years, with some sort of universal standards, we have somehow managed to define the minimum quality standards, but what is the optimum level if not the maximum? Are the consumers getting the best possible product produced using the best technology available today? If not, what is stopping us from exploiting technology’s true potential? Well, it is the fundamental definition of quality itself. Quality is never absolute; it is always measured relative to what your competitors have to offer. Thus, as the game theory explains, if the industry decides not to move the quality bar upwards due to the obvious cost considerations the consumers shall never know what they are missing on. The issue concerns because in the era of fierce competition, low cost has become the mantra for success; and quality comes at a cost and time. The cost involves investment in high precision machinery, complex process setups, man hours etc. Smart managers obviGo back in time and you will realize it was not always ously know on which side of the globe to see to locate like this. It has been a vicious circle. Increase in op- the country they are looking for. Obviously there is a erational efficiency led to faster delivery of goods and temptation for trade off- but till what level? The anservices to market, which enabled the companies to swer is deeply rooted in the company’s core ideology. quickly respond to customer needs. The customer got Surprisingly enough, very few fortune 500 companies

Catena Aurea Q1, 2012

have quality as a part of their vision- which means that quality doesn’t stand as the core pillar of their existence- it is just a variable, maybe a variable much talked about. High iQ will definitely create a healthy market place with better service at perhaps optimum quality, but only up to a point. If you still push for more, you will overrun the tipping point (See Fig1.) and high quality will come at a cost. That might seem like a bad idea for an individual player, for he might lose his market share, but it definitely doesn’t seem like a too farfetched solution for the industry at large.

erational efficiency. With the recent advent of globalization, companies source their material inputs from the global markets, enabling them to offer the best offering to their customer. With such great complexities embedded in the supply chain, it becomes imperative to manage inventory efficiently. The companies have started simplifying operations by building operational effectiveness into the long term business strategy- for e.g., many companies align their offerings in such a way that they can maximize the common material inputs and thus find more utility for the same raw material. Thanks to the new age ERP softwares like SAP etc., managing such complexities doesn’t seem impossible. Meeting market’s iQ, comes at a cost, which cannot always be passed directly to the consumers.

Fig 1. But the fact of the matter is that we still haven’t reached the tipping point (at least we would like to believe so). So, if you and I ask for a quicker service day by day, how do organizations make it possible at the lowest possible cost? There can be a host of strategies. The core of it all is demand forecasting. No matter how strong floors you build, they won’t stand a weak building foundation. Demand forecasting ensures that the supply chain is not overloaded at any point of time. Accurate forecasting forms the core of any operational management lesson. Another strategy most commonly talked about is Inventory management. Excess Inventory is dead cash and as any finance professional would tell you, dead cash is more of a liability than an asset. To add to it, inventory is the only direct operational item which is reflected directly in your balance sheet. Inventory turnover ratio is a strong parameter to measure organization’s op-

In the foray to provide the best at the lowest cost possible, a lot of research has gone to optimize the operational expense. The crux of all researches boils down to the basic concept: The rate of creation of the finished goods directly depends on the rate at which bottlenecks produce their output. Hence, the capacity gets limited by the capacity of the bottleneck. If the bottleneck operates below capacity then it does not really cost the plant the operating expense of only the bottleneck during that time, but also the operating expense of the entire plant limited by the hours the bottleneck works.

Diagrammatic representation of how iQ works:

Quiz Continued.. 7. Which of the following issue falls under the purview of operational decisions? A. Problems of production and process design B. Identification of manpower requirement C. Assigning job to persons D. Vendor identification 8. Which of the following is not the benefit of SCM/ JIT purchasing A. Consistent Quality B. Savings on Resources C. Lower Costs D. Less Dependence on Suppliers

Fig 2 How impatient will we get? Ironic as it might sound, impatience is one of the human traits which the customers shall never be able to define. It is how the business conditions its customer with its offering. In this competitive world with high customer focus, each industry would have to find a right mix of operational expense, throughput and inventory to address the impatience quotient. But what the customers should never forget is that the prime and the most basic purpose of business is and always will be to generate money through its operations. So next time you bite into a pizza delivered to you in 15 minutes, be sure that your iQ has not crossed its tipping point. ----------------------------------------------------------Both Iti Malik and Manu Gahlowt are Frst year, MBA Core students at NMIMS, Mumbai. Iti Malik is from Electronics and Communications Engineering background and she has prior work experience of three years as a Senior Design Engineer at Freescale Semiconductors India Pvt. Ltd. Manu Gahlowt is from Chemical Engineering background and he has prior work experience of three years as Assistant Manager in ITC. You can contact them at: itimalik1986@gmail.com manugahlowt@gmail.com 14

9. Hybrid layout is commonly used to manufacture which of the products ? A. Aircraft B. Car C. Television D. Paper 10. An operation where machine tools are changed automatically are known as A. Machine Center B. Computer Integrated Manufacturing C. A flexible manufacturing System D. A computer â&#x20AC;&#x201C; aided design System 11. Which of the following arguments for protection is given to compensate the country for loss in revenue when price elasticity of import is greater than zero? A. Home Market Argument B. Employment Argument C. Terms of Trade Argument D. Keep Money at Home Argument

(Check page no. 24 for answers)

Catena Aurea Q1, 2012

Saving Lives Efficiently Ishpreet Kaur NMIMS

hey say India is a nation where a Pizza reaches home faster than Ambulance and Police! Barring a few exceptions, such as the All India Institute of Medical Studies (AIIMS), health facilities in India especially public health facilities are inefficient, inadequately managed and staffed, and have poorly maintained medical equipment. Even in private hospitals healthcare executives and managers are always searching for better ways to improve production capacity for medical treatment and thereby improve operational efficiency. When it comes to running a successful medical facility, keeping your patients happy is not just a matter of having an expert medical team on call or having technicians use state-of-the-art equipment; client satisfaction is also met through the speed and efficiency by which they are taken care of.

hance efficiency and productivity. Some of the common methods that generic service companies apply can also be applied by the healthcare industry. These methods include daily work shift scheduling (for doctors and nurses), increasing customer participation (patientsâ&#x20AC;&#x2122; share of responsibilities), creating adjustable capacity (adjustable physical resources such as rooms and beds), sharing capacity (with other services), cross-training employees (nurses and staff), parttime employees (floating staff), etc.

While it is important to manage capacity, which is internal to a service provider, the demand side of the equation cannot be neglected. The demand management strategies attempt to influence the consumer behavior in a way so as to suit the desired operations of the service firm. Improving patient flow is one way to significantly improve the efficiency of an entire hospital, but it can be overlooked when hospitals focus only on process improvement within various Service is an intangible personal experience that can- individual departments. Anything a hospital can do not be transferred from one person to the oanother. to eliminate delays and dead bed time can improve Service is produced and consumed simultaneously. its bottom line. Hospitals with the most efficient paThus, whenever demand for a service drops below ca- tient flow processes usually got there by implementpacity to offer the service, it results in idle servers and ing both technical and human process changes. These facilities whereas on other occasions there are times hospitals know immediately when a patient bed is when patients have to wait. Moreover the variability available and ready to be cleaned, benchmark the in service demand is quite unpredictable. Because of time it takes to turnover rooms, have-real time data these reasons, it is more challenging to plan for ca- on available beds so new patients can be assigned and pacity in services than in manufacturing. in a bed within 1-2 hours and benefit from less congested emergency departments and the additional revIn any hospital, resources are limited and inappropri- enue that comes with quicker turnover. Some of the ate capacity management would lead to inefficiencies demand management strategies include demand parin the system which manifest in the form of patient titioning (walk-in vs. appointments), offering price waiting, poor capacity utilization across different re- incentives (two for the price of one), promoting offsources and poor bottleneck management. On the peak demand (off-season surgery discounts), developcontrary, when capacity management is done prop- ing complementary services (keeping customer flow erly, it could lead to lean service models in healthcare going), overbooking and â&#x20AC;&#x153;no-show managementâ&#x20AC;?. by minimizing all the wastage and inefficiencies mentioned above. Finally you cannot overlook the significance of IT in hospitals to keep the operations running smoothly and The healthcare industry has been investigating differ- handled in a timely fashion. In an interview Chief Inent strategies to manage capacity with a view to en- formation Officer of Cisco USA, Ms. Rebecca Jacoby 15

mentioned that organizations which do not make IT their top priority will not survive. Some of the IT enabled services which can give boost to a hospitalâ&#x20AC;&#x2122;s efficiency are EHR/EMR, virtual answering service, online bed allocator, online appointment facility etc In todayâ&#x20AC;&#x2122;s fast-paced medical environment, it pays just as much to be timely with patient response as it does to offer quality care or service. You cannot let an antiquated system be the reason for the downfall of

data, but also one that removes a lot of error and prevents that information from getting lost.

Nurses, physicians and front line staff spend much of their time fielding calls from patients answering basic medical questions about procedures and conditions when they should actually be able to focus on their duties and should never be bothered by trivial tasks. This is where an efficient virtual answering system comes in. Having a virtual answering service is pretty much the same as having a receptionist who handles phone calls, schedules appointments, reminds patients about their appointments, and connects emergency phone calls. The main differences, however, between the service and a human receptionist is that the answering service can quickly and efficiently accomplish tasks one after the other, work twentyyour organization. In the current digital world, many four hours a day, and does not require breaks or rest hospitals and specialized clinics have turned to EHR periods. software as the cure-all solution to database management woes. No longer needing to rely on physical Therefore, using the above applications and more, documents to keep track of vital patient information, hospitals can plug out operational inefficiencies medical facilities which use electronic health records and lay more focus on the crucial aspects of patient have an effortless way to manage all their data. Elec- healthcare. This will lead to better patient turnover, tronic health record software isnâ&#x20AC;&#x2122;t only capable of efficient management of scarce medical resources in archiving previous patient records, but also provides the country and an improved medical experience for medical staff a fast and reliable means by which to patients. update data on the fly. Using an EHR database as the primary means of record keeping allows medical fa- ----------------------------------------------------------cilities of any size or shape to maintain patient re- Ishpreet Kaur is a first year MBA Core student at cords quickly and without error. Between handwrit- NMIMS, Mumbai. She is from medical background ten physical records and older documents, sometimes and is a Dentist. Prior to joining NMIMS, she had pracproblems may occur where vital notes are difficult to ticed in a private hospital for one year. decipher. Having everything spelled out cleanly on a You can contact her at: narula.ishpreet86@gmail.com computer screen is not only a simpler way to view 16

Catena Aurea Q1, 2012

Supply Chain Benefits through FDI in Retail

t is all about the Supply Chain...We must have heard our Operations Management Professor state this very statement umpteen number of times! Unarguably, an effective supply chain does differentiate the extra ordinary from the ordinary. A supply chain includes a chain of entities involved in planning, procurement, production and distribution of goods or services and is categorized as: inbound supply chain, in-house supply chain and outbound supply chain. Inbound supply chain involves the vendor supplied raw material and in-house supply chain is where this raw material is converted into the final product, which is then distributed to the end customers through the outbound supply chain. Supply chain, be it linear or a network, and its management is integral to every sector’s efficient operations.

Sagnik Basu Nitya Malladi NMIMS, Hyderabad mand-supply mismatch of logistics, specifically cold storage and refrigerated transportation facilities. FDI in retail would involve significant investment in the logistics sector in order to improve the above mentioned facilities thereby reducing raw material wastage. 2) Implementation of Just-in-time (JIT) mechanism: International players would enter the Indian market not just with a huge investment capacity but also with an added advantage of e-commerce. Let us consider Wal-Mart’s example here. Wal-Mart is connected with all the entities of its renowned supply chain using Point-of-Sale (POS) technology coupled with Electronic Data Interchange (EDI).

For the curious folk among us, here is how this works: • Every product at Walmart is given a unique item bar code which is scanned at the checkout counter during The Indian Retail sector contributes to about 10% of billing. our country’s GDP and is divided into unorganized • Through this process, the point of sale information and organized sectors. Unorganized retail sector i.e. regarding the product is stored in a database. the local Kirana stores, hand cart and pavement ven- • This information is aggregated and sent to a central dors, dominates the market with a contribution of processing unit where data by location is segregated 97%. On the other hand, organized retail sector is in and sent to suppliers. its nascent stage providing investment opportunities • Suppliers refurbish these products from their own for both domestic and international players alike. The inventories and a payment is made by Walmart electerm ‘alike’ has a lot of significance here, considering tronically. the recent reforms to open up foreign direct investment (FDI) in the organized retail sector. As per the A POS system is highly beneficial as it helps comcurrent scenario, foreign investment upto 51% is al- panies like Wal-Mart maintain just-in-time inventory, lowed in single brand retailing whereas FDI in multi reduce their investments in warehouse facilities and brand retailing is yet to happen. provide them with a transparent framework to communicate & transact with all their supply chain entiFDI in the retail sector has its share of benefits, dom- ties. An e-commerce enabled supply chain where all inant one being the increase in its supply chain ef- the entities involved are in constant communication ficiency. The factors responsible for this increase also helps in avoiding the much dreaded ‘Bullwhip would be: Effect’. Now, it should be evident to all of us that FDI in Indian retail sector would bring in world’s best 1) Reduction of raw material wastage: Though In- practices thereby improving supply chain efficiency dia is the second largest producer of perishable prod- to a significant level. ucts like vegetables and fruits, only a fraction of the same reaches the end customer. This is due to the de- 3) Elimination of ‘the middleman’: In India, farm17

ers sell their produce to the retailers through intermediaries (or) middlemen, who purchase vegetables and fruits on a commission basis. These transactions happen at specific locations called mandis and are not known to be transparent by nature. In this particular scenario, lack of transparency refers to farmers being unaware of the appropriate pricing structure and therefore being underpaid by the intermediaries. By eliminating the so called middlemen, retailers can directly purchase vegetables and fruits from farmers at prices set by the market and transport them using refrigerated logistic facilities. This avoids food wastage and provides a transparent framework for farmers to sell their produce at appropriate prices.

for several small and medium size retail store owners. However, an optimistic approach for the same would be the possibility of small and medium sized stores to collaborate with each other and form bigger and sustainable entities. A more competitive organized retail sector would emerge as customers would now have a plethora of choices, with quality, availability and pricing becoming major differentiating factors.

7) Increase in Collaboration with Support Industries: Support industries like transportation, warehousing, inventory management, courier and other valued-added services such as packaging, information technology, human resources, finance and administration services will see a steep increase in terms of 4) Cost Reduction: As mentioned above, elimination demand once international players make a foray into of middlemen and usage of superior logistics to pre- the Indian organized retail sector. vent food wastage help in overall cost reduction for the manufacturer. Also, introduction of e-commerce To sum it up, FDI investment in India is a welcome prevents inventory pile-up and stock holding costs step as it helps in providing the right product at the thereby reducing production costs for the manufac- right price and at the right time. It streamlines the turer. Permeating through the supply chain, initial existing supply chain by improving asset utilization, stage cost reduction inturn leads to a significant price inventory visibility, and by ensuring that every single reduction for the end customer. entity has access to a uniform source of product and supply chain data. Last but not the least; it helps in 5) Employment Opportunities: Capital outlay in developing a shelf centric partnership between manthe retail sector by international players would cre- ufacturers and retailers with the implementation of ate a huge demand for human capital. In other words, just-in-time mechanism. Investment of this magnia boom in this sector will open up several employ- tude would definitely aid in the top and bottom line ment opportunities in retail & logistics, distribution growth of the Indian Retail Sector. and packaging centres, and housekeeping & security divisions. According to the Confederation of Indian ----------------------------------------------------------Industry (CII), FDI is estimated to increase organised Both Sagnik Basu and Nitya Malladi are students of retail market size to $260 billion by 2020. This would first year PGDM at NMIMS, Hyderabad. Sagnik Basu also result in an aggregate increase in income of $35- is from Computer Science Engineering background and 45 billion per year for all producers combined; 3–4 prior work experience of 7 months as a System Engineer million new direct jobs and around 4–6 million new at CMC Ltd. Nitya is from Electronics and Electrical indirect jobs. Engineering background and has prior work experience of 36 months as a senior programmer at Accenture. 6) Increase in Competition: “Life is like a coin. It You can contact them at: has two sides - one positive and one negative”. Car- sagnik.basu@nmims.edu.in rying the same philosophy forward, Indian society’s nitya.malladi@nmims.edu.in opinion about FDI is two-fold. On one end of the spectrum, we have people who believe FDI would improve supply chain efficiency, provide ample job opportunities and pay farmers righteously. On the other end are people who opine that a boom in the organized retail sector would lead to the demise of the unorganized sector. This would destroy the livelihood 18

Catena Aurea Q1, 2012

A perspective on ‘Food Waste Within Food Supply Chains’

e would have often heard that ‘as much as half of all food grown is lost or wasted before and after it reaches the consumer’. Such estimates are difficult to scrutinize but highlight the need for greater resource efficiencies in the global FSC (Food Supply Chain). Food waste occurs at different points in the FSC, although it is most readily defined at the retail and consumer stages, where outputs of the agricultural system are self-evidently ‘food’ for human consumption. Unlike most other commodity flows, food is biological material subject to degradation, and different food stuffs have different nutritional values. There are also moral and economic dimensions: the extent to which available food crops are used to meet global human needs directly, or diverted into feeding livestock, other ‘by-products’ and biofuels or biomaterials production. Below is the definition of food waste which would serve as a reference for the whole article:

Neha Jain Sourabh Sahu IIM, Indore decades and 50 per cent of the world’s population now lives in urban environments. This proportion is expected to rise to 70 per cent by 2050. Rapid urbanization has created the need for extended FSCs to feed urban populations. For these to be efficient, countries need improvements in roads, transportation and marketing infrastructure to keep food affordable for lower income groups. How these extended supply chains develop has implications for food waste globally, now and in the future. • Dietary transition: Growth of household incomes, particularly in BRIC countries, is associated with a decline in consumption of starchy food staples and diversification of diet into FFVs, dairy, meat and fish. This transition conforms to Bennett’s Law (Bennett 1941), where the food share of starchy staples de-

Wholesome edible material intended for human consumption, arising at any point in the FSC that is instead discarded, lost, degraded or consumed by pests This article presents a review of food waste issues, combining information on food waste and food supply chain issues. Food waste in the supply chain At this time, an overall estimate for postharvest losses of 15 per cent has been suggested. Post-harvest losses are partly a function of the technology available in a country, as well as the extent to which markets have developed for agricultural produce. Three inter-related global drivers provide an overall structure for characterizing supply chains and future trends in developing and transitional countries. • Urbanization and the contraction of the agricultural sector: The proportion of the world’s population employed in agriculture has declined in recent

clines as income increases. The shift towards vulnerable, shorter shelf-life items is associated with greater food waste and a greater draw on land and other resources. • Increased globalization of trade: International trade in processed foods accounts for 10 per cent of total processed food sold. Globalization may open up opportunities for agricultural exports while representing a threat to development of internal markets 19

through competition from inexpensive imports of higher quality than can be produced locally. Linked to trade liberalization, multi-national chains have become a driving force in the rapid growth of supermarkets in many transitional economies.

FSC is important to fully realize the potential for food waste reduction. In developing and emerging economies, this would require market-led large-scale investment in agricultural infrastructure, technological skills and knowledge, storage, transport and distribution. Such investments have been shown to stimulate Future trends: rural economies. Where international markets and loIn the developing world, lack of infrastructure and as- cal policies and investment are lacking, large-scale sociated technical and managerial skills in food pro- capital investment in infrastructure in developing duction and post-harvest processing have been identi- countries has often failed. For long-term sustainabilfied as key drivers in the creation of food waste, both ity, development across the FSC in the developing now and over the near future. This situation contrasts world requires locally supported government poliwith that in developed countries where our interview- cies and investment alongside any market-led private ees forecast the majority of food waste continuing to investment with reach through into developed world be produced post-consumer, driven by the low price markets of food relative to disposable income, consumersâ&#x20AC;&#x2122; high expectations of food cosmetic standards and Conversely, the greatest potential for the reduction of the increasing disconnection between consumers and food waste in the developed world lies with retailhow food is produced. Similarly, the increasing ur- ers, food services and consumers. Cultural shifts in banization within transitioning countries will poten- the ways consumersâ&#x20AC;&#x2122; value food, stimulated via edtially disconnect those populations from how food is ucation, increased awareness of the FSC and food grown, which is likely to further increase food waste wasteâ&#x20AC;&#x2122;s impact on the environment have the potengeneration. tial to reduce waste production. Improved food labeling and better consumer understanding of labeling and food storage also have food waste reduction potential. Innovative technology throughout the FSC, in both developed and developing worlds, particularly in packaging, contributes to improving shelf life for perishable foods and semi-prepared meals. Across the globe, resource and commodity limita- Continued developments in packaging, e.g. utilizing tions, in part as a result of an increasing population nanotechnology and materials science, have the pobut also owing to impacts of climate change, were tential to further increase shelf life. viewed as being likely to increase the economic value of food, potentially driving more efficient processes Policy, systems and practices: In the developthat could lead to food waste reduction. Industrialized ing world, transfer of existing technologies and the FSCs will continue to develop in response to these spread of good practice, allied to market-led investwider challenges by the development of shared logis- ment, have the greatest potential to reduce food waste tics (e.g. collaborative warehousing), identification across the FSC. It is of key importance, however, that and labeling of products (use of barcodes and RFID practical developments address the problems of local tags) and better demand forecasting, and domestic farmers, using indigenous knowledge where that has kitchen technologies (smart fridges, cookers, online been shown to be sustainable Without participation of meal planning and recipe resources) may make it local farmers, such knowledge transfer is unlikely to easier for consumers to manage their food better and succeed. While attempts to shift consumer behavior waste less of it. may result in reduction in food waste in developed The greatest potential for food waste reduction Implementing sustainable solutions across the entire 20

countries, changes in legislation and business behavior towards more sustainable food production and consumption will be necessary to reduce waste from

Catena Aurea Q1, 2012

its current high levels.

of income spent on food declines, food waste increases. There is clear evidence of a distribution of waste Conclusion: across demographic groups, with the lowest wastThe lack of infrastructure in many developing coun- age rates in the immediate post-war age generation. tries and poor harvesting/growing techniques are However, it would be a mistake to assume that the likely to remain major elements in the generation of demographic distribution will remain the same in the food waste. Irrespective of global region, there is a future, as today’s elderly generally exhibit a ‘waste need for successful introduction of culture-specific not want not’ mentality, while the elderly of the future innovations and technologies across the FSC to re- are likely to continue to retain the same attitudes and duce losses. In the industrialized world meanwhile, behaviors to food that they have today. post-harvest losses have been squeezed out of grain supply through heavy technological investments, There are clearly fundamental factors affecting postwhile for FFVs, retailers’ and consumers’ demand for consumer food waste worldwide, some of which may ‘cosmetically perfect’ produce has created significant require solutions that involve direct communication post-harvest losses through ‘out-grades’. There is and awareness-raising among consumers of the imalso strong evidence of an increase in post-consumer portance of reducing food waste. Others require govwaste over the past several decades, particularly in ernment interventions and the support and cooperathe developed world, with pockets of data supporting tion of the food industry itself, such as improving the similar behavior in BRIC countries. clarity of food date labeling and advice on food storage, or ensuring that an appropriate range of pack or The majority of studies show that as the proportion portion sizes is available that meets the needs of different households. ----------------------------------------------------------Both Neha Jain and Sourabh Sahu are students of first year PGPM at IIM-Indore (Class of 2013). Neha Jain has prior work experience at Cisco, she has a keen desire to make a career in Marketing. Sourabh Sahu is a fresher and he wishes to be an Entrepreneur. You can contact them at: p11nehaj@iimidr.ac.in p11sourabhk@iimidr.ac.in

Did you know?

midst high food inflation during this period last year, the Government had given a thought about an interesting legislation which will control the amount of food you serve at social gatherings such as weddings, parties etc. The fact has to be accepted that a lot of food is wasted during such events, during travelling, in daily households, in hotels. There are similar laws in other countries. E.g. Pakistan has ‘One Dish Wedding Law’

which limits number of dishes offered in the menu during weddings and also the number of guests. The intention of the Government seems good but it definitely has a difficult task ahead because implementation is going to be the issue. Who will decide whether there is wastage of food or not? How there will be assessment of each event? Especially in India because thousands of such events occur every day..

Expert Speak

Q. What are the biggest challenges companies are households. Whose now facing in preventing their costs from escalat- services would I ing? avail to reach my target audience? The A. The differentiation between products is no longer answer obviously is feasible or viable. If Nokia introduces a smart-phone the second newspawith 101 applications, Samsung may introduce a per seller who has a wider reach. This is precisely the smart-phone with a different price point with another concept of “Distribution Equity”. Further the “Brand host of features. Firstly the consumer gets confused Equity” is in the minds of the consumer, whereas the with all the applications, secondly the value addition “Distribution Equity” is in the hands of the firm. Thus at different price-points and thirdly the availability over a period of time an organisation can reduce its of the product (by which we mean the ease of buy- operational expenses by investing in Distribution neting) adds to the confusion. Finally in such scenarios work so that the products required by the consumer the customer ends up buying that product for which can be delivered in the shortest possible time. he has a spare charger!!!! If this is true for high end of the spectrum gadgets, what about the products at If we are looking at multiple solutions to reducing the the lower end of the spectrum like refrigerators, LCD operational expenses then it should also consider an television sets, washing machines & appliances? effective distribution system for suppliers, as well. One of the primary reasons for success of Anand Milk Thus slowly the products are being commoditised and Union Ltd., (AMUL) is that its suppliers & customers the reasons for buying a specific product are inconsis- are within the reach of the organisation. tent. To overcome this, the companies have to invest in celebrity endorsements, advertising campaigns & Q. What do you think are the key differentiating activities related to ‘Brand Equity’. This is the big- factors between a successful and a not so successful gest challenge companies are now facing as develop- firm especially in periods of industrial setbacks? ing Brand Equity is costly propositions & the returns are not commensurate. A. Q. What are the key measures a firm would take in order to reduce its operational expenses? A. As explained above the activities relating to “Brand Equity” are costly and returns are not in line with the expectations. In my opinion the key measure that a firm should take to reduce its operational expenses is to INVEST in “Distribution Equity”. Consider an example –I want to distribute some pamphlets promoting my product & there are two newspaper vendors in a locality, who can help me, reach the pamphlets to every household in the target market. The first newspaper seller distributes newspapers daily in about 1000 households whereas the second newspaper seller distributes newspapers daily in about 2000 22

Whether it is a period of industrial setback or industrial growth the primary focus of the organisation should be its customers and how to constantly add value to its products to enhance the customer satisfac-

Catena Aurea Q1, 2012

tion. The only difference between periods of setbacks and growth is that during the growth phase everything passes muster & the customerâ&#x20AC;&#x2122;s voice is either muted or not heard. During the industrial setback phase only superior products pass muster and the customers voice gets heard & hence the impression that there is a need for a different approach during periods of setback. Having said that in my opinion the key factors which differentiates between a successful and a not so successful firm is a focus on customers, value additions, constant monitoring & reduction of costs and attention to long term vision. If development of the supply chain requires investment & hard work and is expected to give returns after 3 or 4 years, the same should be done & not differed in pursuit of near term gains. Q. How do you see the profession of Operations Management developing in the future? Any specific fields that you think will be affected by the change more than the others? A. Operations Management is very key to successful running of any business whether in product or in service. The saving from efficient running & reducing wastes contributes directly to the bottom line of any company. Increasing the top line by higher sales is much more difficult because you have to compete in the market along with other players. However optimum running of businesses is entirely in-house which should be far simpler.

an exciting field with endless opportunities / possibilities. This field is not all that glamorous (yet!!) but significant achievements are possible and documents results can be seen. Most successful companies like DELL, Wal-Mart, ZARA apparel, Metro Cash & Carry, 7 â&#x20AC;&#x201C; Eleven are examples of excellent operations management giving the businesses the cutting edge. -Prof. Pradeep Pai --------------------------------------------------------------Prof. Pradeep Pai, Associate Professor, CIMR Mumbai has an industrial experience of almost 20 years in the fields of production, materials, sales and HR. He has recently authored a book on Operations Research to be published by Oxford University in March 2012.

Answers to Quiz 1. Type I Error 2. Cyclical 3. Exponential Smoothing 4. Generic Benchmarks

Within Operations any inputs on reducing materi- 5. More than One als cost or costs due to materials like transportation, movement, warehousing, inventory, material han- 6. Work Sampling dling offer much scope for improving the efficiencies of any business. 7. Assigning job to persons Q. What is your advice to students who are looking to get into the field of Operations Management? A. My sincere advice to all the students looking to make a career in the field of Operations Management is that this field is

8. Less dependence on suppliers 9. Television 10. Machine Center 11. Terms of Trade Argument

Deconstructing Ops Through the Lens of the Supply Circle

ost would agree that the world around us is a big collection of supply chains. Any textbook on supply chain management would cite the most common example of the water bottle supply chain. Products, services both have supply chains behind them that enable the action of production but I would like to draw your attention to examples closer to home.

Vinay Arun NMIMS aspects of the supply chain can derive large amounts of efficiency improvements from the entire chain and such changes can qualify as frugal innovations. To be able to affect such changes one needs to be able to understand and visualise the impacts each aspect of a supply chain can have.

One way I visualise supply chains is by actuThe shirt you wear goes through a supply chain at ally looking at them as home. Depending on how things work in your house, supply circles instead. you may leave the shirt for washing in the laundry I consider the source basket. From collection from the basket to washing, of items and their end drying, ironing, folding and placing in the wardrobe to be ideally the same. the shirt goes through a whole supply chain. Multiple For example a banana stakeholders are involved; tools are used, practices grown off the ground setup and so on. Now let us look at how habits and would decay and be reestablished processes are linked. turned to the earth. This forms a supply circle. This concept can be extended 1. Distance of the laundry basket from the bath- to all items. room determines its usage frequency: For lazy people like me the laundry basket being close to the The next step is to identify all the supply circles bathroom means clothes that need washing, regularly around us. For instance, if you left behind a plastic find themselves in their rightful place â&#x20AC;&#x201C; the laundry wrapper at a picnic spot, is it out of its supply circle? basket. If the basket is placed elsewhere the clothes Most probably it is because it will not really be remay find themselves lying on some chair in the house. turning to the source where it came from given the The distance from the bathroom of the laundry basket complexity involved in making a plastic wrapper. Inimpacts the discipline in the house! stead if you dropped the wrapper on the floor at home, is it out of the supply circle? No it isnâ&#x20AC;&#x2122;t, because it 2. Person in charge of the last leg of the chain de- will be collected and disposed off when the house is termines frequency of misplaced clothes: If the swept. Now assuming the disposal system is an ideal dried clothes or ironed clothes are all collected to one one the wrapperâ&#x20AC;&#x2122;s supply circle is completed. place in the house and if each member carries his own clothes to the wardrobe the chances of misplacing Visualising these supply circles around us can help us clothes are almost nil. Instead if an adamant mother improve efficiencies of decides to put away all the clothes herself to their rethese circles. The next spective wardrobes there are chances of some clothes time you drop somelanding up in the wrong wardrobe. You can imagine thing on the floor, never then the turmoil of finding it on a Monday morning! mind picking it up! Use that energy and time So we have seen how a simple design issue and a deelsewhere. Although it marcation of responsibilities can impact the efficiensounds absurd in the cy of an entire supply chain. Minimal changes to such home scenario it is such 24

Catena Aurea Q1, 2012

frugal measures that can make the difference between servation. inefficient and efficient on a shop floor. Now let us extend the supply circle further beyond I would like to re-emphasis tangible objects. The act of driving to work and back frugal innovations and their in a car is a supply circle too that supplies transportarelevance. Any saving in tion. In terms of energy this usually turns out to be a world that has increased a very expensive supply circle. Let us assume a disdemand for resources is tance of 10 kilometres in an average sedan. A 1,000 welcome; when this saving KG vehicle is used to carry a 75 KG person using up comes at minimal cost it is to 3 litres of fuel! This when fuel of only 500 grams ideal. You can learn more may more than suffice to carry the core load due to about frugal innovations by its inherently high calorific value (say petrol). When researching Dr. Anil Gup- you look at it this way you realise the incredible ineftaâ&#x20AC;&#x2122;s work on the topic or by ficiency built into the system by virtue of its design browsing through the Honey itself. There are many ways of efficient transportaBee Network database for tion; perhaps viewing transport through the supply frugal innovations recorded circle lens will help people adopt the cleaner modes from many parts over a long of transport. period of time. I feel being able to view the world through the lens Now coming back to supply of the supply circle can have a great impact on oneâ&#x20AC;&#x2122;s circles, being able to visu- behaviour. When you consciously attach a source and alise supply circles around an end to all objects around you, it becomes easier to us will enable us to enforce understand their supply chains. It can inculcate habfrugal innovations in the way things work around us. its that enable savings in terms of money, time and In fact when you are aware of supply circles the way energy. Hopefully, as everyone starts realising the you view the world changes and it influences your supply chains around us, it would also drive a sense behaviour and habits. For example, being aware of of responsibility among people and corporations. We the solid waste supply circle will make one realise the may then find that corporations are required to have importance of segregating waste at source. Segrega- measures to control the way their creations end up tion at source cannot get any simpler; it is only a habit after their life time. If this happens it will be a revoluwith no training or investment required. It only needs tion in terms of sustainability and efficiency. And it is to be cultivated, but it has the potential to reduce our the small savings they create, that will add up to be current landfills by a whooping 90%! Imagine the the next big thing in human civilisation. scale of efficiency achieved through a habit adjustment. ---------------------------------------------------------------In an event I had recently attended a speaker from IIT Madras drew the attention of the crowd to the amount of water used to only wet our hands before we apply soap to wash our hands. Technically speaking 5 ML of water is sufficient to wet our hands but we typically use up to 300 ML of water under a running tap for the purpose. Imagine how much water can be saved if the ratio of soap to water in a liquid soap bottle is tweaked, such that one does not need to wet their hands prior to using the soap. Awareness of the fresh water supply circle in our cities will help one understand the magnitude of the importance of water con-

Vinay Arun is a student of first year MBA Core at NMIMS, Mumbai. He is from Electronics and Communications background and he has prior work experience in IBM and Accenture. You can contact him at: vinayarun@gmail.com

Knowledge Corner Single Minute Exchange of Die

ingle Minute Exchange of Die (SMED) also often referred to as Quick Changeover (QCO), is one of the many lean production methods for reducing waste in a manufacturing process. It provides a rapid and efficient way of converting a manufacturing process from running the current product to running the next product. SMED has as its objective to accomplish setup times less than ten minutes, i.e. a number of minutes expressed by a single digit.

Balajee S NMIMS takes 3 hours, its cycle time per component is 1 minute where the lot size is of 100 units. If the cost of the machine 0.8 $/min, then the production cost per unit is: Unit cost = ((Setup Time/ Lot size) + Production time)*0.8 = ((3*60/100) + 1) * 0.8 = $2.24

If the setup time is reduced to say 9 minutes from 3 hrs, it would be possible to obtain a cost of $0.87 per unit. On the other hand, if we maintain the same Traditionally firms regarded setup time as one of the setup time, than in order to obtain the same cost per most expensive cost they had to face and preferred unit, we would have to increase the lot size from 100 minimization of the number of setups by opting for units to 1997 units which is undesirable as already very large production lots. Let us first see the effect mentioned. In the case of firms that produce a large of lot size on the overall operation time. This can be diversity of products, the batch quantity is usually seen from the table below where the change-over and small which results in more frequent tool changes. processing time per unit are held constant whilst the This calls for reduction of setup time by eliminating lot size is changed. The Operation time is the unit waste and by converting idle setup time into regular processing time with the overhead of the change-over production time, through process innovation. included. The Ratio is the percentage increase in effective operating time caused by the change-over. SMED refers to the theory and techniques used for the reduction of equipment setup times. The concept Change- Lot size Process Opera- Ratio arose in the late 1950s and early 1960s, when Shiover time time per tion time geo Shingo, chief engineer of Toyota, was contemitem plating Toyotaâ&#x20AC;&#x2122;s inability to construct vehicles in 8Hrs 100 1 min 5.8 min 580% maximally efficient economic lots. Over a period of several years, under the guidance of Shingo, Toyota 8Hrs 1,000 1 min 1.48 min 48% reworked factory fixtures and vehicle components to 8Hrs 10,000 1 min 1.048 min 5% maximize their common parts, minimize and stanIt can be clearly seen that as the lot size increases, dardize assembly tools and steps, and utilize common the operation time per unit reduces. But producing tooling. Wherever the tooling could not be common, in large lots has inherent capital costs, meaning the steps were taken to make the tooling quick to change. amount invested in inventory. In addition to this cost, there is an opportunity cost of not producing the products that are immediately required for dispatch. These disadvantages make the production in large lot sizes an undesirable option. Hence it is always advisable to keep the lot sizes as optimal as possible and in turn try to reduce the change over time as much as possible.

The most difficult tooling to change were the dies on the large transfer-stamping machines that produce car vehicle bodies. The dies that weighed many tons, was to be changed for each model. When engineers examined the change-over, they discovered that the established procedure was to stop the line, let down the dies by an overhead crane, position the dies in the Let us assume that the setup time of a certain machine machine by human eyesight, and then adjust their position with crowbars. The process took from twelve 26

Catena Aurea Q1, 2012

hours to three days. The first improvement was to place precision measurement devices on the transfer stamping machines, and record the necessary measurements for each model’s die. This immediately cut the change-over to a mere hour and a half. Further observations led to further improvements: Scheduling the die changes in a standard sequence, dedicating tools to the die-change process so that all needed tools were nearby and scheduled use of the overhead cranes so that the new die would be waiting as the old die was removed. Using these processes, Toyota engineers cut the change-over time to less than 10 minutes per die. Yes!!! You read it right. From 3 days to just below 10 minutes and thereby reduced the economic lot size below one vehicle. According to Shingo, SMED should be implemented in four different phases

D. Streamline the remaining internal activities and external activities by simplifying them.

Finally, do it all again. After every iteration of the above process, a 45% improvement in set-up time B. Separate the INTERNAL activities from the EX- could be expected. Hence it may take several iteraTERNAL ones. Internal activities are those that can tions to cross the ten minute line. only be performed when the process is stopped, while External activities can be done while the last batch is --------------------------------------------------------------being processed. For example, get the required tools Balajee S is a first year MBA Core student at NMIMS for the next job BEFORE the machine stops. Mumbai. He has prior work experience of two years as C. Convert, wherever possible, internal activities into a Production Engineer in ELGI Equipments Ltd. You external ones (pre-heating of tools is a good example can contact him at: balajeesridharan@gmail.com of this). A. OBSERVE the current process and record it.

News Corner o Obama Will Unveil $1-Billion National Manufacturing Innovation Network Initiative Based On Germany’s Fraunhofer Institute: The National Network for Manufacturing Innovation (NNMI), modeled after the German Fraunhofer Institutes, would be a joint effort between the Departments of Defense and Energy, the National Science Foundation the Commerce Department’s National Institute of Standards and Technology. Its goal would be to “revitalize U.S. manufacturing. . . through a network of institutes where researchers, companies

and entrepreneurs can come together to develop new manufacturing technologies with broad applications,” according to the budget submission. o AP(R) partner Netfira to demonstrate Netfira Enterprise Buyer and technology partner, announced it will exhibit at the Logistics and Supply Chain Management 2012 conference, March 19 to 22 at Walt Disney World(R) in Orlando, Florida.

Optumiz Opinion

hile increasing efficiencies of our daily life we forget how inefficient we are making it for nature to be able to nurture us. Development has its own costs, affect¬ing the ecological balance and in turn our future.

Nishant Chotalia NMIMS

who conducted the sur¬vey, says that the sea water which used to enter Ma¬him Creek is now diverted towards the Mahim-Worli coastal belt and is contributing to erosion along the beaches. “The compound walls of some of the build¬ings along the shoreline in the region are constantly hit by tidal waves and the frequency has increased after the building of the bund. The walls of some of the buildings have cracked, threatening the safety of the residential houses in the neighbourhood.” Much of the Dadar beach has already been eroded and this amounts to great social loss in terms of public spac¬es in Mumbai. When asked local residents near the Dadar Beach and members of the Save Dadar Shivaji Park Beach Commit-

For example if we take a look at the landmark project of the Bandra Worli Sea link in Mumbai, we would appreciate the engineering marvel which is estimated to save vehicle operating costs to the tune of Rs. 100 crores per annum due to reduction in congestion on the existing roads and lower vehicle operating cost on the bridge ultimately reducing pollution. It is claimed that the bridge would result in lower traffic conges¬tion thereby improving the environment, especially in terms of reduction in carbon monoxide, oxides of nitrogen and noise pollution. But is everything as rosy as we see it? “Land Reclamation and construction of a bund for the Bandra-Worli Sea Link in the downstream region of Mahim creek have caused erosion along the Worli shoreline, endangering the lives of thousands of fish¬ermen” - says a recent ecological assessment. Startling facts came to light in a survey conducted by scientists of the Bombay Natural History Society (BNHS) since August this year. The blocking of tidal water near the mouth of Mahim Creek has already resulted in chang¬es on the level of seawater in the area. BNHS Principal Scientist Sanjay Deshmukh, 28

tee and the Walkers Ecological Movement said that “The shoreline where they stay has been af¬fected badly. The sea is moving in. A clear indication is the Chaitya Bhoomi wall that used to be rebuilt ev¬ery five years, is now reconstructed every year. “Ear¬lier during the low tide our children had the entire sand belt, which was used as a playground, now it is just a narrow stretch of sand beneath my building. “ Apart from shoreline changes, unsustainable reclamation has also led to degradation of the mangroves in

Catena Aurea Q1, 2012

the region and wetland conditions. The size of area covered by man¬groves has reduced to 50 per cent of its original size in the last few years, investigations have revealed. Also, the freshwater flow from the erstwhile Mithi river, which originates from the forest in Sanjay Gan¬dhi National Park and flows through the central sub¬urbs, has completely dried up. This is mainly due to reclamation of land and unbridled dumping of con¬struction garbage along its shores.

livelihood of the fishermen. Nearly 2500 fishermen families in the areas of Mahim and Bandra have been affected due to this project. The environmental impact of the project on the city’s coastline, mangrove forests and marine ecology are worthy to be taken account of economically.

Another example - when we talk about ‘Vibrant Gujarat’, we should also look at the other side of industrialization - the continuous depletion of land for agThe project has constricted the mouth of the city’s riculture. The state government grants industries land Mithi River due to reclamation. The river is the city’s but this land was formerly used by farmers to grow biggest storm water drain. The damage caused by the our food. What is the ideal trade off between land unMithi River flooding is probably going to be around der agriculture and under industries? $460 million - at least twice the cost of the BandraWorli project when it was approved, says Sahgal, a The modern temples, meaning the dams and factowell-known environmentalist and editor of Sanctuary ries built in free India definitely uplifted us to selfdepen¬dence but the sacrifice of thousands of villages is worth considering. The Hirakud dam in Orissa alone displaced 150 villages which were never compensated or reha¬bilitated to their satisfaction. The same story probably contin¬ues even now. So do we think that efficiency at the cost of nature is viable? It is our responsibility to design our efficiency like clockwork while also maintaining nature’s sustainability. While we design our systems, processes and lifestyles we need to keep this in mind.

Asia magazine. The Bandra-Worli sea link project directly affects the

---------------------------------------------------------------Nishant Chotalia is a student of first year MBA Core at NMIMS, Mumbai. He has past work experience of one year in the manufacturing at Godrej and Boyce Mfg. Co. Ltd. You can contact him at: nishant.chotalia@gmail.com

News Corner o ‘SMART’ solution to consolidate energy supply chains: CEVA Logistics, one of the world’s leading supply chain management companies, has announced the global launch of its latest SMART Solution: SMART Energy, which will be rolled out to customers during 2012. The solution is designed to address the challenges that Energy organizations are facing in an increasingly complex marketplace, and to provide them with competitive advantage through impeccable supply chain management and execution, greater visibility and cost efficiencies.

o New National Manufacturing Policy: The main objectives of the new national policy are to increase the sectoral share of manufacturing in GOP at least 25% by 2022, to increase the rate of job creation so as to 100 million additional jobs by 2022, and to global competitiveness, domestic value addition, technical depth and environmental sustainability of growth. The policy envisages specific interventions broadly in the area of institutional infrastructure, labour and environmental laws and manufacturing sector. 29

Catena Aurea Q1, 2012

Send your comments and feedback at optumiz.nmims@gmail.com For more information Visit us at: http://www.facebook.com/optumiz http://www.mbaskool.com/pages/nmims-optumiz/