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Opsworld 4
Academia
Concepts
Trends
Industry
Efficiency in Supply chain for milk and
milk products: An Indian perspective
Toyota recall: Are the Lean Operations
at blame
Lean: New product development
Operations and Supply Chain
Management – The Akshaya Patra way
Unified efficiency measurement of
Thermal power plant using DEA
Background
Brain and Heart of operations efficiency
Enhancing Operational Excellence by
Improving Productivity
Specials
Productivity: The Mystery 1
Efficiency: The Future 5
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33
39
27
17
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CONTENT
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DIRECTOR’S MESSAGE
I am happy to present the fourth issue of Pan IIM
operations magazine. This magazine is a great medium
for integrating and bringing together experiences and
opinions of the students from IIMs, the best management
institutions in the country.
With the focus of business on driving Productivity and
Efficiency, it is heartening to see the OPEP, Operations
and Supply Chain club of IIM Raipur releasing the
fourth issue of the Pan IIM Magazine with the theme on
"Productivity and Efficiency".
I wish OPEP a great success in their endeavour and hope
that you enjoy reading this publication.
Prof. B.S. Sahay
Director, IIM Raipur
.
Prof. B. S. Sahay
1
EDITORIAL
According to Michael Porter,
competitiveness and productivity can
be used interchangeably. Companies
have to be productive to be successful
and to achieve those results daily
efficiency levels should be maintained
high. By improving its productivity
and efficiency, company can improve
its market share; maximize its
profitability and lower its operational
cost. Thus to gain a competitive edge,
productivity and efficiency are the
primary factors.
Keeping this in view, we have taken
forward productivity and efficiency as
the theme for the Pan IIM operations
magazine. This issue takes its readers
through various insights about
productivity and efficiency from
academia as well as from the industry
perspective.
We thank Prof. Omprakash S Vaidya,
IIM Lucknow, for contributing an
article on ‘Efficiency in supply chain
in milk and milk products: An Indian
perspective’. This article explains the
challenges, issues present in the
supply chain of world’s largest milk
producing country.
We also thank Akshaya Patra, an
Indian NGO providing food for
children in India. The article, Akshaya
Patra way, explains how they
efficiently use supply chain and
operations management to provide
safe, nutritious and tasty food on time
and every time.
On behalf of Operations and Supply
chain club (OPEP) of IIM Raipur, we
would like to thank all IIMs for their
continued support. We also thank our
authors for taking their time and
contributing for this issue.
We also would like to thank Prof. B.S.
Sahay, Director, IIM Raipur for his
strong support and motivation. We are
thankful to Prof. Parakshit charan &
Prof. Sumeet Gupta for their
guidance.
Our editorial would be incomplete
without thanking the Pan IIM
Operations group for giving IIM
Raipur this opportunity of publishing
this issue of Opsworld.
We hope our readers would enjoy this
issue of Opsworld!
- Manoj H. & Ruchi Sao
Editors
About the cover page:
The cover page of this edition of Opsworld was selected through the pan
IIM cover page design competition ‘Impression’. Amongst the various
entries for the competition, the design made by Bipin Chand Tumu of IIM
Kashipur was chosen to be the cover page. We thank all our participants
for their participation in the event.
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PRODUCTIVITY: THE MYSTERY
Abstract: The companies all over the world have implemented wide range of activities with an intent to improve
their productivity but eventually have faced the phenomenon of productivity paradox such that there were little or
negative return despite investing heavily to boost productivity. In this article, we have discussed the main reason
for productivity paradox because the firms do not persist in improving efficiency with respect to the capabilities
that originally made them successful. Therefore, by focusing more on cost effectiveness and less on effici ency, they
are getting diverted from the path which was the main reason for their success.
Anurag has completed his Bachelor's degree in
Computer Science & Engineering. His interest in the
areas of Management was piqued during the course.
He decided to enhance his knowledge and make his
career in the area of Management & subsequently
cleared CAT & joined IIM Raipur. He also has a
research paper published in an International
Journal in the field of IT & Systems.
Shubham is a second year Doctoral Student in
Operations Management area at IIM Raipur.
Shubham completed his Bachelor's degree in
Engineering (Electronics and Communication)
from RGTU Bhopal. During his under graduate
studies he was associated with a research
institute involved in the monitoring of Public
Distribution System in different states which has
been driver for his interest in this area
OPSWORLD 4
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PRODUCTIVITY: THE MYSTERY
Skinner around 1980’s talked a lot about
operational strategy and especially
manufacturing strategy and connected operations
management to business strategy. In his article
on Productivity Paradox, Skinner made a point
that despite best intentions and improvement
programmes, productivity seemed to be hardly
improving.
Companies around the world got inspired by the
industrial success of Japanese around 1960’s and
have started implementing huge range of
initiatives ; such as TQM, six sigma, JIT,
Business Process Reengineering (BPR), lean
management, bench marking etc. Most of these
initiatives have not achieved the desired success
being sought. Researchers have often argued that
these initiatives were conceptually sound but
were poorly implemented. In-fact these and other
productivity improving initiatives have not
addressed the core parameters that are needed to
achieve permanent productivity gains.
Productivity Paradox in form of “Productivity
Dilemma” was also discussed by Abernathy’s
when he made observation of decline of US
automobile sector in 1978, he argued that it was
the obsession of the automobile firms with
productivity which inhibited its flexibility and
innovation and ultimately led to their loss of
market share and profitability.
Skinner talked about how American firms
implemented productivity improvement plans
with the main objective of reducing overall cost.
They did everything from employing
productivity manager to establishing
departmental productivity committees, raising
the number of industrial engineering
professionals by 50%, carrying out operation-by-
operation analyses to improve efficiency levels,
avoid wastages, simplify jobs, retraining
employees to work "smarter not harder",
streamlining work and material flow movement,
replacing out-of-date equipment, retooling
operations to reduce operator time, tightening of
standards, installing a computerized production
control system, training foremen in work
simplification, emphasizing good housekeeping
and cleanliness and installing a computer- based
measured-day work plan, which allows for daily
performance reports on every operation, worker
and department. But, the result was a minimal
improvement in productivity of 7% over three
years and the profit remained static with
continuous fall in market share.
This is the paradox that why there is so little or
negative return despite investing heavily to boost
productivity.
The most important thing to observe in all these
productivity improvement drive was, their
objective, which was gaining cost
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competitiveness, which was in contradiction to
the popular “40, 40, 20” rule. According to this
rule about 40% of manufacturing based
competitiveness is derived from long-term
changes in manufacturing structure another 40%
comes from change focused on equipment and
process technological changes and the rest 20%
can be gained from the productivity
improvement approach. So productivity
improvement focused on cost competitiveness
should be the last resort of developing
manufacturing competitive advantage.
Skinner found that actually it’s not the
productivity focus but the cost reduction priority
which harm the firm’s heath. The productivity
drive focuses on reduction of direct labour cost
and labour efficiency while distracts their
attention from the manufacturing structure.
Also, when productivity becomes the driving
strategy for a firm, cost reduction becomes the
focus and other strategies to gain competitive
edge becomes immaterial.
Productivity improvement and cost reduction
diverts the attention of a firm from developing
long term manufacturing competitiveness to gain
short term cost competitiveness which inhibits
innovation and structural changes. The
productivity focus of firms prevents them from
gaining manufacturing flexibility which in turn
prevents product changes and pace of new
product development. The biggest impact of
these cost reduction programmes is on
innovation because firms restrain themselves
from investing in process or systems because this
will drive the cost up. So innovation which will
improve product design, lead time and customer
services suffers, which in turn leads to fall in
market share and profits. Also, when cost
effectiveness is the primary focus, it generally
hampers quality, while when quality is the main
focus then low cost usually follows it.
Hence, there is an inconsistency between the
activities, focused on innovation and flexibility
and those focused on productivity improvement
and cost reduction (Abernathy; 1978). So, from
the time, firms start to focus on productivity;
innovation and exploration takes the back seat,
which prevents the firms from taking risks.
Thus, there is a need for firms to balance
between productivity and innovation. The main
reason why productivity paradox occurs is
because firms persist in improving efficiency
with respect to the capabilities that originally
made them successful and by focusing more on
cost effectiveness and less on efficiency they are
putting getting diverted from the path which was
the main reason for their success.
References:-
Skinner, W. (1986). The productivity
paradox. Harvard Business Review
Skinner, W. (1966). “Production Under
Pressure,” Harvard Business Review
Abernathy, W.J., 1978. The Productivity
Dilemma Roadblock to Innovation in the
Automobile Industry. Johns Hopkins
University Press
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EFFICIENCY: THE FUTURE
Abstract: With competition sprouting in every direction, businesses can no longer concentrate only at increasing their
productivity. More focus is required at improving efficiencies. This is vital to survive in the highly demanding market.
This article looks at how productivity can be differentiated from efficiency and why improving it is crucial for a business.
Issac Solomon has completed his graduation in Electronics and communications
engineering from Rajalakshmi Engineering College, Chennai. He is having a work
experience of 31 months with Nokia Siemens Networks. Presently he is pursuing his first
year of post-graduation course from IIM Raipur. He can be reached at
OPSWORLD 4
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EFFICIENCY: THE FUTURE
“There can be economy only where there is efficiency” – Benjamin Disraeli
Not everyone is very clear on what differentiates
efficiency from productivity. It is not uncommon
for someone to use both the terms carelessly and
in the same context without actually
understanding what they mean. To understand in
simple terms, we can compare them with quality
and quantity. Productivities are usually measured
in output over some fixed time periods. While
efficiency for manufacturing a product can be
calculated on basis of wastes, labour time spent,
money saved, resources used, etc. For example,
if you produce 500 units on the first month and
600 the next, then you are more productive in the
second month. Now, out of those 500 units you
produced on the first month, let’s assume 50
were defective and of the 600 you produced the
next month, 65 were defective. Here you have
become lesser efficient, though your productivity
is higher.
Exploring a little further, let’s assume it took you
Rs 10 worth of input (raw materials, labour, etc)
to produce one unit and you sell it for Rs 12. If
you manage to produce 600 products with the
same efficiency of the first case, then you will
make a profit of Rs 1100 and in the second case
a profit of Rs 1070 for a cost of Rs 6000. It is
quite evident that a larger proportion of input is
converted to profits in a more efficient system
for a given productivity.
Productivity without efficiency is very
expensive. A company can achieve its
productivity target just by throwing around its
available resources in a very inefficient process;
but at what cost? When it comes to managing
businesses, profit is what that matters. The
example shows that efficiency is the name of the
game. When the profit of a company improves, it
can become more competitive. This can be due
to increased productivity resulting from an
improvement in efficiency.
Lack of efficiency affects all forms of
businesses. In large businesses, inefficiencies
can go unnoticed due to the availability of large
resources and the difficulty in identifying them.
When it comes to growth and sustenance of
small businesses, being inefficient can be a
calamitous mistake. In the current business
scenario where most businesses thrive in small
environments, being inefficient is a game that
businesses cannot afford to play.
In the twenty first century business world, with
its striding technological improvements,
companies have drastically improved
productivities. With productivity on the roll, the
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companies have to focus more on efficiency to
compete against their competitors who also have
access to these technologies. Companies should
constantly work on reducing leakages within
their operations. But this improvement should
come in a holistic manner. Just by unclogging
an inefficient operation to improve productivity
is not enough. A potential improvement in
efficiency should not happen at the expense of
the productivity of another operation. For
example, shifting resources closer to an
operation which needs it more should not reduce
efficiency of another operation which might need
the same resource lesser.
Improving efficiency is a continuous process
which must happen in accord with improving
productivities. Identifying and improving the
existing intrinsic inefficiencies can be tough, but
it is worth the time and money spent as the
returns are much higher.
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ACROSS
1: Four car companies, called the "quattro" or
"Auto Union" makeup this famous car company
2: This company made the first ever diesel-
engine passenger car
3: This Company is credited for developing the
Critical Path Method (CPM) and also the
synthetic polymers such as Nylon, Teflon,
Kevlar & Neoprene. Id the company
4: Which company is credited for developing
the following?
1940 – First Walkie-Talkie
1973 – First Mobile Phone
1985 – Six Sigma Technique.
DOWN
5: This systematic technique for failure analysis
was developed by the US army
6: This logistics company is the official partner
of F1 for 8 impeccable years.
7: Adolf Hitler gave a contract to this famous
company to make a cheap and simple car
8: Supply chain helped in getting success for
this company’s expansion. It is referred to as
journey from beans to cup. (Related to barista &
year 2007-2008)
9: Volkswagen manufactures and sells the
fastest car on the earth under this name
10: It is the machine design to affect the
principle of Jidoka in TPS
11: This was created by a group of professors at
MIT Sloan School of Management in early
1960s to demonstrate a number of key
principles of supply chain management. It is
played by teams of at least four players, often in
heated competition, and takes one to one and a
half hours to complete. What in the world of
Supply Chain Management is am I referring to?
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EFFICIENCY IN SUPPLY CHAIN FOR MILK AND MILK PRODUCTS
AN INDIAN PERSPECTIVE
Abstract: This article is aimed at providing a quick look into some of the issues and challenges in managing the supply
chain of milk and milk products, with specific emphasis on Indian scenario. We briefly look at the basic milk supply
chain. Further, we discuss the issues and challenges like demand management, quality, handling of milk, transportation
and adopting the change. We hope this article will provide some useful information to the practicing managers and
researchers alike.
Dr. Omkarprasad S Vaidya is a faculty at Indian Institute of Management Lucknow. His
areas include Operations management and quantitative techniques. His areas of
research include Multi Criterion Decision Making, Supply Chain Modelling and
Performance evaluation in Operations. He can be contacted at [email protected]
OPSWORLD 4
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EFFICIENCY IN SUPPLY CHAIN FOR MILK AND MILK
PRODUCTS: AN INDIAN PERSPECTIVE
Introduction
India is the world’s largest milk producer, which
accounts for more than 13% of world’s total milk
production. The huge volume of milk being
produced in India is consumed almost entirely in
India, with a very less proportion of milk (or its
products) being exported. In India, milk was
(and still is) primarily supplied by the local
farmers. They deliver milk directly to the
customers. This unorganized mechanism is being
replaced by the organized sector, wherein many
co-operative/private/government organizations
have taken a step to deliver quality milk and
milk products to the customers. Some of the
leading milk suppliers in India are: AMUL
(Anand Milk Union Limited) an Indian dairy
cooperative body organized by Gujarat Co-
operative Milk Marketing Federation Ltd.
(GCMMF). The ‘AMUL’ model is known to
have initiated the white revolution in India and
helped India emerge as the largest milk producer
in the world. More than 15 million milk
producers and 144246 dairy cooperative
societies across the country operate with them.
Milk is processed in 177 district co-operative
unions and marketed in 22 states in India.
Mother Dairy was set up in 1974 under
the ‘Operation Flood Programme’ initiated by
National Development Diary Board (NDDB).
Mother Dairy procures its requirement of liquid
milk from dairy cooperatives. Mother Dairy sells
approximately 3.2 million litres of milk daily in
the markets of Delhi, Mumbai, Saurashtra and
Hyderabad. Mother Dairy milk has a market
share of 66% in the branded sector in Delhi
where it sells 2.5 million litres of milk daily and
undertakes its marketing operations through
around 1400 retail outlets and over 1000
exclusive outlets of Mother Dairy.
Raipur Sahkari Dugdh Sangh Maryadit
(RSDSM) was established in 1985-86 by the
National Dairy Development Board under the
Operation Flood-II Scheme. It was then operated
under the brand name ‘Sanchi’. RSDSM’s main
plant was established on 1st October 1987 with
the help of National Dairy Development Board
in Urla (District Durg). Till 11th September,
2011, it continued to operate under the brand
name of Sanchi, when it was rechristened as
‘DEOBHOG’.
AAVIN is a major player in Tamil Nadu.
The dairy development department of Tamil
Nadu oversaw and regulated milk production and
commercial distribution in the state. The Dairy
Development Department took over the control
of the milk cooperatives. It was replaced by the
Tamil Nadu Cooperative Milk Producers
Federation Limited in the year 1981. In February
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1981, the commercial activities of the
cooperative were handed over to Tamil Nadu
Co-operative Milk Producers' Federation Limited
which sold milk and milk products under the
trademark “AAVIN”.
With many brands in the organized
sector, the milk industry is thriving in economic
terms. This sector is the largest contributor to the
GDP among the agriculture sector.
The demand for milk in India is expected
to rise by 29% in the next five years. Hence there
is a need of effectively utilizing the available
milk, mostly by minimizing the wastages therein
and/or managing effectively and efficiently the
supply chain. In this paper, we discuss some of
the issues and challenges faced in the supply
chain in the organized sector.
The Milk Supply Chain
The supply chain of milk begins from the local
farmers, where it is collected and sent to the
processing plant. Milk is then processed in the
plants and distributed by the local distribution
centre/s. Through the distribution centres it
reaches the retail outlets. In the supply chain, the
milk, at times is taken through temperature
controlled transportation systems, hence the
name, cold chain. The cold supply chain of milk,
a three staged process, is explained as follows:
From Farmer to Plant
In the first phase, the milk is collected
from the local farmers and sent to the industry
for processing. Milk collection process (from the
farmers) can be optimized through milk run
modelling. Milk run route or vehicle routing
problem is a widely known logistics model that
can be used effectively here.
From Plant to Distributors
The collected milk from the local farmers
is then processed and toned. From the factory the
processed milk is then moved to the distribution
centres. This is usually done as a long distance
haul. Depending on the distance, the milk is
treated enroute. Transportation model, for
optimizing the transportation between factory
and distribution centre can be effectively used
here.
From Distributors to Retailers
From the distribution centre the milk is
then sent to the retail customers. This happens
similar to stage one: through Milk run.
Various parameters involved in this three
staged process makes the optimization more
complex. The constraints in each stage vary and
so do the objective function. Usually, the
optimization model depends on the organization
strategy. The objective function needs to be in
line with strategy of the organization. For
instance: for an organization which has speed to
market as their strategy, minimize the time given
budgetary constraints will be the problem and
for organizations which focuses on cost
reduction to minimization of cost given time
constraints will be the problem at hand. A
skeleton view of milk supply chain structure is
represented in Figure 1.
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Figure 1 Milk Supply chain Model
Issues and Challenges in Supply Chain
The chain partners include the farmers,
plant, distributors and retailers and of course the
customers. Managing such a chain requires the
coordination of chain elements using appropriate
technology that includes product, process,
information technology, management practices
and systems. The challenges faced in ‘milk’
supply chain are briefly explained as follows:
Challenges in Demand Management
With more than 20 million people as potential
customers every year, and an increasingly
affluent population, the demand for milk
continues to grow at a rapid pace. Annual
consumption, is forecasted to reach around 180-
200 million tonnes by the end of the decade. This
demand poses challenges to the supply chain in
the form of supply-demand mismatch and lead
time.
Demand Supply Mismatch
The demand and supply gap varies
as a result of seasons and spikes due
to festivals. This is due to the fact
that supply and demand have a
significant impact based on the
seasons. It is seen that in the spring
season cows/buffaloes produce more
milk and are milked twice in a day
leading to an increase in the supply
of the milk. The milking cycle goes
down to ‘dry–off’ in the autumn
season, where supply is reduced. This creates a
cyclic nature in the supply of milk. The demand
also varies as the consumption of milk during
summer reaches a peak and during the winter
when the demand goes down. Thus there are
“flush periods” when supply is more than
demand and “lean periods” when demand is
more than the supply.
Milk being a perishable product the
supply chain is under high constraint to make
sure that everything supplied is consumed. In the
flush period, care has to be taken in meeting the
demand without moving excess goods. In Andra
Pradesh Dairy Development Cooperative
Federation (APDDCF) faced the problem of
surplus of milk. So as to counter this challenge,
they had planned to have a fortnightly milk
holiday.
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Lead Time: The next issue is meeting the market
driven demand i.e. lead time. Lead time in the
milk industry is the time between initiations of a
process of request for milk to meet the demand
to the actual receipt of milk. Lead time has to be
shortened so as to meet the requirements of the
customer and also to retain the natural
constituents of milk. The information from the
downstream has to be made available to the
supply end so as to achieve this. There has to be
sufficient capacity (in terms of lead time) to meet
fluctuations without sufficient notice.
Quality: For a consumer, the quality of the
product implies ‘taste and safety’. This can be
ensured from the time of procurement, through
the processes and delivering it to them. The
primary challenges faced are in procurement,
safety and packaging.
Procurement
Procurement of milk from the farmers is
the primary stage of the process. Procurement
management has gained its significant
importance in the supply chain, as raw milk
forms an integral part in the entire value chain. It
determines the success of the complete value
chain. It involves the functions of pickup, testing
and delivery of milk. The pickup of milk takes
place from the local co-operatives. The
procurement during the flush season and during
the lean season varies hugely and gives rise to
many challenges to be dealt with. The issue is
due to ‘variations’ not so well known in advance,
the milk procurement during both the seasons
has to be planned based on the estimates.
Safety
Safety of a food product is gaining lots of
importance across globe from consumer point of
view. The presence of additives to increase the
shelf life and the packaging type is critical in
making certain about the products’ safety. Rigid
norms on the safety of food products have been
designed for meeting compliance. Safety is also
affected by issues like tampering of packings.
Tampering could lead to serious safety issues to
the consumers. In 2009, when packets of milk
supplied to the area of Kondhwa in Pune were
tampered and were replaced by synthetic milk it
resulted in a serious safety issue.
Packing
The packaging is an important aspect of
milk supply chain and the challenges faced in it
are from ecological point of view to safety.
Packaging has to comply the standards set by
Food Safety and Standards (Packaging and
Labelling) Regulations, 2011. Packaging in India
is witnessing various innovations since the day
of retail boom in India. It is seen with higher
significance from the point of view of
production, storage, transporting, marketing and
distribution. Packaging is not only done with the
perspective of selling but also to prevent the
quality from deteriorating. The challenges in
packing include:
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1. Protection against distributional hazards,
contamination, micro-organisms and
heat.
2. Recycling of packets.
3. Reduction in weight of the packaging.
The factors that affect the quality of the milk are
contact surfaces, temperature, and the storing
medium. Now-a-days with tetra pack, paper
board made from select woods, organizations
like AAVIN are adopting good packing
procedures. However, scope exists to modify the
existing practices for betterment.
Milk Handling
Handling of milk includes the first phase (i.e.
collection of milk from farmers), till it reaches
the consumer. The handling primarily consists of
storing and transporting of milk. The handling of
milk during the entire transportation has to
ensure that the quality of milk is not degraded.
The quality of the milk can be ensured only by
having proper mechanisms to handle milk. The
ways in which the milk can are stacked and
transported also create damages to the packaging
during transportation. This damage caused might
result in wastage of milk.
Organizations like Amul make use of the
bulk chillers at the collection level so as to
improve the micro biological quality of the milk.
This ensures the good returns to the farmer who
produces and customer who gets to buy a better
product. The tankers which transport the milk
need to be properly insulated to avoid wastage of
milk and to ensure the quality of the milk. The
transportation and handling must be taken
special care during loading and unloading of the
product at various locations. The vehicle has to
be maintained so as to transport the milk without
wastages. Reducing the number of handling
points will help in improving the handling of
milk. The storing of milk during the supply chain
should be in less than 5oC as specified by food
safety and standards authority in India. Since the
entire operation is happening in a cold chain the
challenges can be even more.
The transportation of perishable products
always requires special handling. Distance plays
a major role in the supply chain of milk. As
discussed earlier, with a shorter shelf life, the
decision to move the milk is based on the
climate, transport conditions and economies of
scale. The long distance haul in the second stage
has to be taken care with these issues posing a
major challenge.
Optimization Complexities
As discussed previously, the three stages
add to the complexity of optimization planning
in the supply chain. The complexities makes the
planning cycle difficult. These complexities
existing in the chain can be simplified with some
assumptions, but at the cost of optimized value.
For instance: now-a-days, organizations like
Deobhog are giving incentives to the retailers to
plan and lift the material from the distributor.
Thus the third stage, which is milk run, in the
supply chain is eliminated. This simplifies their
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structure and helps in achieving a better
optimization.
Managing Third Party Service Providers (3PL)
With the concepts of core competencies,
the milk producing units are engaging in only
production of milk and depend on the 3PL for
logistics. In this 3PL sector, there are a number
of players from the unorganized sector. With
milk being a perishable product, managing and
controlling in the value chain is a huge challenge
for managers. As the third parties perform, it is
essential to develop mechanisms to maintain
control and make timely delivery.
Communication with the 3PL provider is
very essential. Both the parties involved will
have a clear expectation from one another.
Having clear expectations will help in managing
and communicating better with them.
Information Systems (IT):
Every supply chain faces with a common
challenge in communication. The databases
operating at different locations need to be
integrated. Delays in information sharing and
retrieval will result in forecast errors. Both the
suppliers and the customers need to be in
continuous collaboration so that supply meets the
demand. Relationship between the partners in the
supply chain becomes critical. The sustainability
of the relationship leads to a better
communication process. The system requires
data input from both manual and automated
sources through the supply chain. To gather such
level of information we require complete
integration in the supply chain. For instance
Gujarat’s Co-operative Milk marketing
Federation (GCMMF) has their entire supplier
network information integrated. They have the
information on amount of procurement, quality
and composition of the product and payment
terms which can be accessed by all through
databases. IT has brought in transparency and
ease of handling for more than 11,000
cooperatives. The use of IT has enabled them to
capture ‘end to end’ data adding value to the
entire chain.
Impact of Unorganized sector
The major portion of dairy business in India is
contributed by the unorganized sector, especially
in rural or semi-urban area. The unorganized
sector milk is comparatively cheaper than the
one available from the organized one. There
exists a co-opetition and (unseen) competition
between unorganized sector and organized
sector. It is the company’s move to make them
work aligned with them to achieve their goals.
Conclusions
In this article we provide a glimpse of the
problems, issues and challenges faced by the
‘milk’ supply chain. The issues exist both within
and outside the boundaries of company. These
challenges need to be handled by practices that
makes the delivery systems more effective. Use
of technology and knowledge in products and
practices in making the delivery more effective
should prove beneficial. In addition to the one
discussed other challenges like delay in
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transportation, inadequate roadway infrastructure
to support long distance travel, may also create
supply chain disruptions. With growing demand
and supply, a more agile supply chain would be
required with a capability of handling these
challenges.
Further Reading
A Review of the Milk Supply Chain. Safe
Food. Acessed on March 5, 2013, from
http://www.safefood.eu/SafeFood/media/
SafeFoodLibrary/Documents/Publication
s/Research%20Reports/safefood_dairy_r
eport_web_version.pdf
BCG. Creating the Optimal Supply
Chain. Acessed on March 5, 2013, from
http://knowledge.wharton.upenn.edu/pap
ers/download/BCGSupplyChainReport.p
df
Douglas M. Lambert, M. C. (2000),
Issues in Supply Chain Management.
Industrial Marketing Management Vol
29, 65–83.
http://www.cob.unt.edu/slides/swartzs/M
KTG%206040%20Spring%202009/Artic
les/T2%20Spatial%20Economics/Lamber
t%20cooper%20IMM%202000%20Issue
s%20in%20supply%20chain%20manage
ment.pdf Acessed on March 5, 2013,
Lee, H. L. (2004, October). The triple A
supply chain. Harvard Business Review ,
2-12.
Lee, H. L., & Billington, C. (Spring
1992). Managing Supply Chain
Inventory: Pitfalls and Opportunities.
MIT Sloan Management Review, 65.
Management, E. L.-C. ARTHUR HSU
and DANIEL D. ZENG. (2005)
International Journal of Intelligent
Control & Systems, 10 (4), 286-295.
Ronald H. Ballou, S. M. (2000). New
Managerial Challenges from Supply
Chain Opportunities. Industrial
Marketing Management , 29, 7-18.
Sridhar, V. (2010). Public Private
Partnership in Indian Dairy Industry
Initiating White Revolution - II. CII.
Accessed March 5, 2013, from
http://www.technopak.com/resources/
Food/PPP%20in%20Indian%20Dairy%2
0Industry_Technopak_CII_Background
%20Paper_May08,2010%20pdf%20ver.p
df
Supply Chain Agility: A study of supply
chain maturity . KPMG. Retrieved March
8, 2013, from
http://www.kpmg.com/LV/en/IssuesAndI
nsights/ArticlesPublications/
Publicationseries/Documents/supply-
chain-agility-study.pdf
Tirupati, P. C. (2003, April). Business
Strategies for Managing Complex Supply
Chains in Large Emerging. Ahmedabad,
Gujarat, India. Accessed March 8, 2013,
from
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http://www.iimb.ernet.in/~chandra/AMU Lpaper2.pdf
TOYOTA RECALL: ARE THE LEAN OPERATIONS AT
BLAME?
Abstract: 7.43 million vehicles were recalled because of faulty power window, 2.77 million vehicles were recalled
because of water pump problem and steering effect. Are Toyota’s lean techniques to blame upon or is it some other
factors? This article focus on the cause of the problem.
Neha Makdey has completed her B.E. in Mechanical Engineering and has 22 months of
work experience in Tata Motors Limited in the Customer Support Department. Presently
she is pursuing her MBA from IIM Trichy. She loves reading fiction, but dancing is her
passion. She can be reached at [email protected]
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TOYOTA RECALL: ARE THE LEAN OPERATIONS AT
BLAME?
As an automobile enthusiast, I have always been
flabbergasted by Toyota cars, not just because
they are fuel efficient and environmental friendly
but because the Toyota Technology is
generations apart. What is interesting to observe
in Toyota cars is that they are remarkably elegant
with lot of technology riding behind them – state
of the art aerodynamics, smartly contoured
nooks and crannies and Toyota’s much talked
about “Hybrid Synergy Drive” in hybrid cars.
Toyota cars are user-friendly, refined and
reliable eco friendly cars which give a sheer
driving pleasure.
Toyota is considered to be the pioneers of
hybrid technology and is renowned for this
worldwide. But in October 2012, it recalled 7.43
million vehicles worldwide for a faulty power-
window switch that could cause fires. It recalled
2.77 million vehicles around the world for a
water pump problem and steering defect.
These recalls not only damage the
company’s brand image but the company has to
incur huge cost to fix the defect. The damaged
part must be arranged from the vendors and must
come to the Toyota spare parts warehouse and
then it must be distributed to dealers. The
Technicians must be trained to fix the recall.
Service engineers need to follow up the progress
and ensure the safety of all Toyota vehicles
running on the road. Due to this recall work (free
service), bay productivity reduces as few bays
must be allocated for this work. So the company
has to incur spare parts cost, pay taxes on these
parts, transportation and packaging cost, training
and labour cost to resolve this problem. In a
short run, it affects the company’s sales as well.
Since these painful recalls of 2009, Toyota’s new
motto is “Moving Forward”, an attempt to
communicate to consumers that the company’s
desire to start afresh and look toward a better
future.
Are the lean operations at blame for these
recalls? Has Toyota’s disruptive innovation
become destructive? The Toyota Production
System (TPS) was established based on two
concepts: The first is called "jidoka" (automation
with a human touch) which means that when a
problem occurs, the equipment stops
immediately, preventing defective products from
being produced. The second is the concept of
Just-in-Time (JIT) or lean operations in which
each process produces only what is needed by
the next process in a continuous flow.
When we talk about lean operations, we
take into account the cost, quality, delivery,
safety and morale. Lean operations are viewed as
the system of 21st century. It is about improving
the inefficient processes and reducing the errors
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and defects. It is about doing more with less: less
time, inventory, space, labour, and money. It
reduces waste by 80%, labour and production
cost by 50%, and inventory by 80%. Lean
operations not only reduce the cost but it
improves the quality at the same time.
The future of innovation lies in
improvement in value chain. Innovate the
product and competitors will replicate the
technology within 6 months. If the company has
to gain advantage over its competitors it must
improve its value chain. It's not just a matter of
making things lean. It's also about incremental
improvement. If we look a big part of Toyota’s
success has been constant improvement.
If the defect is detected within 1-2
months after the car sales then the defect might
be due to production error but if the defect is
detected 6 months after the sale then it is because
of the defective design. In Toyota’s case lean
operations is not the major reason for recall.
Some of the strong reasons supporting the claim
are:
Toyota has been successful in achieving
customer satisfaction as well as dealer
satisfaction as it continuously strives to
improve its value chain using lean
operations.
A study by Economics of
Industrial Research & Innovation
(IRI), one of seven scientific
institutes of the European
Commission's Joint Research
Centre (JRC), reveals that Toyota
led in total R&D dollars spent in
2009 whereas Ford (32.4 percent),
Renault (26.5 percent), and
General Motors (24.1 percent)
reduced their R & D expense.
Toyota has replaced management and
invested more in quality testing since
the 2009-2010 unintended acceleration
crises that resulted in the recall of
millions of vehicles after several severe
accidents, some including fatalities.
During recession, Toyota didn't lay off
people, even though their sales were
down by about 40 percent. They used
that time to train the people and use
them for thinking of ways to reduce
waste, to eliminate cost. Kaizen was
implemented in all operations.
Toyota has always believed in being
competitive by continually reducing the
price of goods, giving the customer
more for less and developing your
employees so they can continuously
improve the system
After the recall, Toyota hired 150
engineers, technicians and researchers who will
focus on the areas like power train, mechanical
design, electrical engineering, electronics, and
advanced research, according to the automaker.
Toyota has invested huge amount to reduce the
cost and make the process efficient. It is
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expected that the coming Toyota cars will not
have any design defects.
We believe that the Toyota recalls are not
because of lean operations but due to some
design defects. Toyota is trying to correct these
R&D defects by using its lean operation
techniques and its efficient value chain.
References:
1. Economics of Industrial Research &
Innovation Report
2. http://pressroom.toyota.com/releases/
3. http://www.sae.org/manufacturing/lean/c
olumn/leanjun01.htm
4. http://www.toyota-
global.com/company/vision_philosophy/t
oyota_production_system/
5. Lean Manufacturing and the Toyota
Production System- Ronald M. Becker
6. http://www.1000advices.com/guru/proces
ses_lean_tps_7principles.html
7. http://www.1tech.eu/clients/casestudy_to
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LEAN NEW PRODUCT DEVELOPMENT
Abstract: A dominant fraction of cost saving opportunity lies in product development process where approximately 95%
of cost is committed. Little known Toyota’s lean new product development system is equally counter intuitive and
productive as its production system based on lean principles is. It has contributed a significant competitive edge to
Toyota over their western counter parts. This article describes different nature of NPD, four major pillars of Lean NPD
and outlines their differences with traditional NPD process.
Sudeep has done Masters in Mechanical Engineering from IIT Bombay and has
Close to 4 years of experience in R & D, product development in TATA Motors
where he was member of product development team for Xenon SUV pick up vehicle
for Thailand market and team lead for Xenon CNG Engines. He has interests in
‘New Product Development’ and R & D management initiatives. He is currently
pursuing post-graduation in management from IIM Lucknow with Majors in
Operations and Finance
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Figure 1 Effect of design on product
lifecycle costs
LEAN NEW PRODUCT DEVELOPMENT
Toyota product development system is often
overlooked in the shadow of its production
system (TPS), despite being equally innovative
and counter-instinctive to conventional
engineering management as lean manufacturing
is to mass production.
People tend to forget is that no production
system is good enough if firm doesn’t have a
competent and complimentary product
development system in place. WHY -- The
figure 1 below answers the question – close to
95% of cost commitment is done in NPD stages
and biggest cost reduction opportunity lies at
this stage and not during manufacturing. Since
TPS is nothing but a continual exercise in waste
elimination, why not start at source itself.
Toyota’s product development process is
equally counter-instinctive to conventional
engineering management as lean manufacturing
is to mass production. Toyota does not follow
many practices which are considered critical for
traditional style NPD. Its design team is not
collocated. With the exception of chief engineer
and his staff, other engineers are not dedicated a
particular vehicle program. It doesn’t follow six
sigma, reengineering or design automation
practices. Toyota Engineers rarely use QFD or
Taguchi methods instead they excel at Value
engineering. There is nothing exceptional about
its CAD / CAE systems. Toyota’s Lean NPD
(like TPS) seems wasteful but result in a more
efficient development system. Toyota delays
Table 1 Comparison of development times
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decisions and considers a broader range of
design options and yet has the fastest and most
efficient development record. US National
Center for Manufacturing Sciences report that
Toyota NPD projects deploy 150 engineers per
project versus 600+ for twice as long at
Chrysler.(table 1)
What is Lean NPD?
Lean NPS is fundamentally different from Lean
Manufacturing and thus tools for the later
cannot be used. Manufacturing is a repetitive
process for value creation in a sequential and
deterministic manner. Product development on
the other hand, is non-repetitive and non-
sequential process for knowledge and
information creation. For example - while lean
manufacturing aims for elimination of
variability lean NPD aim for filtering good
variability from bad variability and thus require
a certain quantum of risk to nurture creativity.
Lean NPD is applying lean principles of waste
elimination to product development. Waste in
the context of product development are
redefined as –
1. Over Production: Too many products /
projects, Redundant development (re-use
not practiced)
2. Transportation: unproductive flow of
information and information sharing,
communication, Lack of use of standard
parts and / or lack of commonality
3. Waiting: delays due to inessential
authorization or testing, Information
created too early
4. Inventory: redundant, stoppage in
information and data system,
unsynchronized processes
5. Motion: erroneous flow of information
to people, seeking for superfluous
approvals
6. Over processing: superfluous gates due
to design of stage gate processes,
excessive analysis, and circulation of
incorrect decisions and out of place
information
7. Defects: failures in tests, erroneous data,
and warranty and recall costs.
It is much harder to identify waste in product
development because of its non-physical
nature—information and knowledge, unlike
manufacturing where you can observe waste in
the form of rework and inventory.
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How does Lean NPD work?
Similar to Lean Manufacturing, Lean NPD is
not a collection of best practices but rather a
“sub-system” and part of larger Toyota System
which can be shown in figure 2. The four major
pillars of lean NPD are
1. Chief Engineer concept paper -- Counter
intuitive to the concept of traditional
product managers, the chief engineer in
Toyota is first and foremost a technical
expert having a large input in the vehicle’s
architecture with loose formal authority
despite being responsible for the product
from concept to market. Instead he is
mostly recognized by his experience,
technical and communication skills. He
commands a very small team of
experienced engineers but all his other
resources are in the functional organization.
He condenses vision for the vehicle in a
“concept paper” which leads into the
system design phase.
2. Set based concurrent engineering – It
is a well-known fact that front loading in
NPS realizes significant savings in costs
and time. It is seldom achieved in
traditional NPD. Reason lies in the
different approaches used. Traditional
design approach tends to quickly
converge on a point in solution
space and iteratively refine it to
meet objectives. This is effective
unless one start with wrong point,
refining which can be time
consuming and sub optimal. On
the other hand SBCE begin by
considering a large number of
acceptable design solutions and
gradually narrowing the net to
converge. Manufacturing is
involved in forming the sets right from
the beginning and their consent is
required for each step. By frontloading
and delaying decisions Toyota actually
saves time and costs.
3. Detailed design with standards – After
the noisy and messy front end Toyota aims for
reduction in ‘bad’ variability part of the
development process by relying on
standardization of skills, processes, and design
itself. In line with lean manufacturing
principal on the shop floor Toyota uses a
number of standardization tools, such as:
Figure 2 Toyota: System view (4)
Figure 3 SBCE methodology (7)
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Table 2: Lean NPD vs. Traditional
NPD
• Checklists (process checklists
and product checklists)
• Standardized process sheets
• Common construction sections.
Toyota’s practice of maintaining and sharing
its learning continually with young engineers
makes sure that wheel in not reinvented every
time. These practices make sure that much of
the design work is standardized with valuable
time saved.
4. Prototype and Tools with Lean
Manufacturing -- Toyota develops two
different series of prototypes, which are not
used to test designs
(unlike western
counterparts) but to choose the different sub-
systems and check their integration and
identify manufacturing / assembly issues.
Beyond this stage no engineering change
request is accepted and design is frozen for
serial manufacturing. Key differentiator for
Toyota is the fact that it uses lean
manufacturing tools like checklists right from
this stage to construct product prototype and
dies. Toyota must also be credited for use of
flexible die designs for proto typing which
actually save a lot of time and cost while
providing unrivalled flexibility.
In summary – Toyota’s competitive advantage
lies in its focus on value creation instead of
product, out learning the competition and heavy
front loading in the form of detailed discussion
of manufacturing issues at the early stages,
during which its rivals are mostly concerned
with styling and engineering. Toyota invests
time and effort in learning early on, to make
sure that the end solution is truly
the best.
References
1. Morgan, J. M., & Liker, J. K. (2006).
The Toyota product development
system. New York: Productivity press.
2. Sorli, M., Sopelana, A., Taisch, M., Al-
Shaab, A., Keast, J., Flores, M., &
Martinez, L. (2010, October). Applying
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lean thinking concepts to new product
development. In APMS 2010
International Conference Advances in
Production Management Systems Book
of Abstracts (p. 50). PoliScript.
3. NATIONAL CENTER FOR
MANUFACTURING SCIENCES,
Product Development Process –
Methodology &Performance measures,
2000.
4. Ballé, F., & Ballé, M. (2005). Lean
development. Business Strategy Review,
16(3), 17-22.
5. Haque, B., & James-Moore, M. (2004).
Applying lean thinking to new product
introduction. Journal of Engineering
Design, 15(1), 1-31.
6. Steven D. Eppinger and Anil R.
Chitkara, The New Practice of Global
Product Development, SUMMER 2006
VOL.47 NO.4 SMR210, MIT Sloan
Management review
7. Raudberget, D. (2010). Practical
applications of set-based concurrent
engineering in industry. Strojniški
vestnik-Journal of Mechanical
Engineering, 56(11), 685-695.
8. J. Morgan, “Applying Lean Principles to
Product Development”,
www.sae.org/topics/leanfeb02.htm, June
20, 2005
9. http://www.designnews.com/document.a
sp?doc_id=230445&dfpPParams=ind_1
82,aid_230445&dfpLayout=article
10. D. Sobek, A. Ward and J. Liker,
“Toyota’s Principles of Set-Based
Concurrent Engineering”, sloan
Management Review, Winter 1999,vol.
40, no. 2, pp. 67-83
11. Oppenheim, B. W. (2004). Lean product
development flow. Systems Engineering,
7(4).
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OPERATIONS AND SUPPLY CHAIN MANAGEMENT –
THE AKSHAYA PATRA WAY
The Akshaya Patra Foundation runs school lunch programs across India. The organization distribute
freshly cooked, healthy meals daily to 1.3 million underprivileged children in 9,000 government schools
through 20 locations in 9 states across India.
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KEY OBJECTIVE
“Safe, Nutritious, Tasty Food on Time and Every
Time “
We believe Quality is Everyone’s
Responsibility and is everybody’s business in
our Organization. Quality can be achieved
only when every stake holder in the whole
supply chain does their job with high Quality.
Therefore Quality starts with the design of the
recipe and then suppliers who are going to
supply the raw material and then various people
within our organization who are going to
follow various systems and process to produce
the final product (Quality Meal) and deliver to
the children in various schools. For example-
assume that we have world class infrastructure,
people, suppliers, raw material, processes etc.,
but if you have poor recipe then the result is
low quality output. Similarly without right
people and people with right skills we cannot
achieve the high Quality and so on.
Supply Chain Management and Operations
Management are two key areas of focus in
achieving our Objective, Mission and Vision.
Supplier Quality Management (SQM):
Supply chain management is a cross-functional
approach that includes managing the movement
of raw materials into an organization and
processing of materials into finished goods. It
also encompasses the planning and
management of all activities involved in
sourcing, procurement, conversion, and
logistics management. It also includes
coordination and collaboration with channel
partners, which may be suppliers,
intermediaries, third-party service providers, or
customers. Supply chain management
integrates supply and demand management
within and across companies. Our SQM
process which covers sub processes like
sourcing, supplier selection, supplier
qualification, procurement, logistics, supplier
rating, supplier development etc. will ensure
that we work with the right and best supplier
who are aligned with our organization.
Supplier Selection & Qualification Process
is followed to select the suppliers based on
the ability to meet our requirements with
respect to quality, cost and delivery and
their ability to support in low cash flow
situations
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Supplier Quality
Management
Supplier Selection &
qualification Process
Incoming Quality control process
Supplier rating
process
Supplier developmental programs
Incoming Quality Control (IQC) Process is
followed to ensure that we accept only right
product which meets all our raw
material specification
requirements. Raw material
specifications are generally
taken and adopted from FSSA
2006 (Food
Safety
Standards
Act
2006)
latest
revision.
Supplier Rating Process ensures
that we assess their services
with respect to quality, delivery,
cost etc., parameters at a defined
frequency and will be used as
feedback to supplier so that they
continuously strive to improve their
performance.
Our Supplier Development programs aimed
at sharing our knowledge and best practices
with suppliers so that they get benefited and
improve their processes which intern
delivers better product to us. We also work
with suppliers and deliver the training as
required by the supplier which indirectly
helps in improving their product and
services.
Operations Management (OM): Operations
management is linked with designing, and
controlling the process of production of goods
or services. It involves the responsibility of
ensuring that business operations are
efficient in terms of using as few
resources as needed, and effective
in terms of meeting customer
requirements. It is concerned with
managing the
process that
converts
inputs (in
the forms of
materials,
labor, and energy)
into outputs (in the form of goods
and/or services). This is where we
embraced the ISO standard
ISO22000 – Food Safety
Management System and also taken
inputs from ISO9001- Quality Management
System and designed and established the
systems and processes to meet our
requirements
Once Processes are established then we need to
monitor and improve them continually.
Without data and measurements no
improvement is possible simply because we
don’t know where we are? So process
performance measurements are vital and hence
we established metrics for key processes in
operations. For example: Food Quality Index
(on a 10 point scale), On time delivery,
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incoming lots acceptance %, Customer
Complaints Index etc.
People are the key to our success and we
strongly believe that if we make them
successful in their job then as an
organization we achieve the targeted
results. So focused efforts been put on
People Development and Training. A
dedicated team established at HO and they
support all technical training programs
across Pan India. We also made 4 training
topics: GMP, 5S, ISO 22000 Awareness &
Application, Lean & Kaizen as mandatory
and every employee needs to go through all
these programs twice a year. Apart from
this HR coordinates TNA (Training Needs
Analysis) exercise and ensures various
trainings that are imparted as per the plan.
Our Quarterly people engagement programs
ensure that all employees come together
and join hands for a common cause. These
programs are aimed at improving the team
spirit and improve the inter personal skills
and relationships for a cause
We have first class infrastructure in terms
of equipment, building. We also
standardized our kitchen designs to bring
consistency in our processes. Our Gravity
Flow model kitchens are well appreciated
by experts. Steam is used for all our
cooking activities and SS 304 grade vessels
are used for cooking, storing and
transporting the food to the destinations.
Cold rooms are used as temporary storage
to store vegetables/ cut vegetables/ curds
etc., as required. Custom designed vehicles
of different sizes and capacities are used to
transport the cooked food to the schools in
safe and secured manner.
While we all agree that Status Quo is not
the desired state, we need to improve
performance of various processes
continuously so that we can reach to the
next mile stone and this is a continuous
process and every cycle of improvement
leads to next level of achievement. So we
adopted a holistic approach to design a
Continual Improvement Program called
“Akshaya Pragathi “Program in Akshaya
Patra. As a part of the program we have
adopted and implemented Kaizen, CI
Projects and Six Sigma methodologies to
ensure and make every employee
practically part of at least one project using
any one type of methodology. For example:
Kaizen is aimed at working level staff
where they get the idea and implement by
themselves or with the help of their
colleagues or at the most with the help of
their supervisor. Very less capital intensive
and a small improvement.
CI Projects are little complex, PDCA
methodology driven supported by 7Quality
Tools aimed at the
executives/supervisors/team leads level,
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•Review done on monthly basis by quality & FSMA manager
• Improvement / correctyive actions are implementedQuality metrics
Performance
•Conducted twice a year by internal auditors
•Certification body DNV does surveillance audits twice a yearISO audits
•Conducted twice a year to review the suitability and effectiveness of FSMS
Management Review
•Conducted twice a year
•Day to day feedback are also recorded to properly analyze and take corrective actions
Customer satisfaction
survey
Audits & Review
leads to savings or improvements related to
Quality/ Cycle Time.
Six Sigma Projects are more complex in
terms of size and scope which leads to huge
improvements related to Quality/ Cycle
time/ Cost. Currently we have more than
100 GBs (Green Belts) working across the
organization and running various
improvement projects. Also we have
produced & implemented 600Kaizens in the
last 6 months.
Yes... All these are fine! But how do we now
we are in the right direction…!!
As we all know Audit & Review mechanisms
plays a key role in monitoring the key
processes & systems and their performance. So
we have institutionalized GMP monthly audits,
Surprises Audits by Sr. Management Staff on
Food Safety & Quality etc. to name a few. The
data from these audits will be reviewed by
Quality Team and appropriate improvement/
Corrective actions are triggered and monitored
till the concerned completes the effective
implementation of the same.
Quality Metrics Performance is reviewed
on monthly basis by Quality & FSMS
Manager and appropriate improvement/
Corrective actions are triggered and
monitored till the concerned completes the
effective implementation of the same.
ISO 22000 Internal Audits are done twice
year by qualified internal auditors lead by
Quality & FSMS Manager and our
Certification body DNV does the
surveillance audits twice a year.
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Management reviews are done twice a year
to review the continued suitability and
effectiveness of FSMS. Deficiencies found
are addressed with appropriate
improvement/ Corrective actions.
Detailed Customer Satisfaction Surveys are
done by the Quality Staff twice a year apart
from the day to day feedback we take
during the delivery of food on daily basis.
CSS (Customer Satisfaction Survey) data is
analysed in details and appropriate
improvement actions/ corrective actions
will be taken immediately.
In Short, it is all about People, Processes &
Performance of the People and Processes which
makes the difference and ensure we continue to
serve
“Very Safe & High Quality Food on
Time and Every Time “
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UNIFIED EFFICIENCY MEASUREMENT OF THERMAL POWER PLANTS USING
DEA BACKGROUND
Abstract: There is significant pressure in protecting the environment especially from excess emission of Greenhouse
gases and other harmful pollutants. The major source of the greenhouse gases and pollutants are the thermal power
plants. This study discusses a new DEA (Data Envelopment Analysis) approach to measure the efficiency of Thermal
power plants, by including both desirable output (Electrical Energy) and Undesirable output (CO2, SOx, NOx, SPM,
RPM, Oil & Grease, Suspended Solids...etc.). The output of DEA is validated by carrying out Multiple Discriminant
Analysis on the group assigned (Environmentally efficient and inefficient) and to determine the factors which
discriminates between the groups and quantify their effect on the environmental efficiency score.
OPSWORLD 4
Divya S has completed her graduation in Rubber &
Plastic Technology in Madras Institute of
Technology, Chennai. She has a work experience
in Japan polymers. Presently she is in second year
pursuing her Post graduation from IIM Lucknow.
M. Mohan is a graduate in Electrical and
Electronics Engineering from NIT Trichy. He has
work experience of 3 years in NTPC ltd..
Presently pursuing his post-graduation from
IIM Lucknow.
36
UNIFIED EFFICIENCY MEASUREMENT OF THERMAL POWER PLANTS USING DEA BACKGROUND
Background: The paper by Wade D.Cook and
Joe zhu (2006) applied DEA model in
comparing the efficiencies of a set of thermal
power plants with desirable outputs. The DEA
model was applied where the decision making
units are comparable but possess unique
circumstances and characteristics. In our
current study the same principle of DEA was
extended to study the set of power plants
within the region along with its environmental
effects. Mika Goto et al (2011) devised similar
methodology to compute unified efficiency
which includes both undesirable and desirable
outputs, but their methodology segregates
inputs into energy and non-energy input and
the model computes directional distance
measure for computing the unified efficiency
and the study doesn’t determine the major
factor contributing to the difference between
efficient and inefficient DMU and doesn’t
quantify the effect of each undesirable factor
on environmental efficiency of each power
plant.
The problem setting: The usual practice of
comparing the efficiency of thermal power
plants by comparing the PLF (Plant Load
Factor) is not correct, as, measuring plant load
factor considers only availability and computes
utilization of plants based on the availability. In
the current study, the environmental pollutants
are taken as undesirable outputs and a unified
efficiency is measured, which includes both
undesirable and desirable outputs. This study
provides an approach to segregate the
environmentally efficient DMU’s and
environmentally inefficient DMU’s, thus
enabling the government to reward or penalize
accordingly.
Input and output parameter setting: The
current study analyses the efficiency of 20
power plants with uniform capacity in a region.
The core material components such as Coal,
Air, Energy, cooling water required for power
generation are taken as inputs for all the units.
The power generated in MU (million units) and
ESP Index are considered as desirable outputs.
The undesirable outputs such as bottom ash, fly
ash, SS, oil & grease are also considered in this
DEA. The ESP index acts as proxy for
measuring the particular matter (SPM and
RPM), higher values of ESP index indicates
lower level of particulate matters emitted into
air. Hence, ESP index was set as desirable
outputs in the problem setting.
Advantage of Our Approach: This approach
identifies all the critical factors which
differentiate the DMU’s as environmentally
efficient and inefficient. Thus helps in focusing
on those factors which are statistically different
between the two groups. Those factors which
are not statistically differentiating, implies that
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Programming Model:
Objective Function: where E is the Efficiency Score for a DMUi
Input Constraints:
Minimizing the input
Output Constraints:
Minimizing Undesirable outputs
(Pollutants)
Output Constraints:
Maximizing the output
(Desirable output)
the environmental limits for those factors are
easily attainable by both the groups.
.
1
_ 100n
i
i i
NOCESP Index
FLC
Where, NOC: Normal Operating Current
FLC: Full Load Current
Canonical Discriminant Function coefficients
Function Function
1 1
Coal 0.059 SS .019
Air -.019 Oil and Grease -.005
Energy -.037 Power Generated -.002
Water .053 ESP_Index -.047
Bottom Ash .100 (Constant) -2.538
Fly Ash -.002
Unstandardized coefficients
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Discriminant Analysis:
Result:
The Efficiency score was calculated using
the Linear Programming model mentioned
above. The DMU’s efficiency score which
equal to 1 are environmentally efficient and
those DMU’s whose score are less than 1
are environmentally In-efficient. The 20
DMU’s are segregated into efficient (8
DMU’s) and In-efficient (12 DMU’s).
Multiple Discriminant Analysis was carried
out on the groups, the result of the
discriminant analysis states that for this
sample of power plants, the discriminating
factors are Coal & water input, Bottom Ash,
ESP Index and Power generated. Since most
of the inputs and outputs are correlated
because of the constant return to scale
characteristics of the power plant. The
canonical coefficient quantifies the effect of
Tests of Equality of Group Means
Wilks'
Lambda
F df1 df2 Sig.
Coal .689 8.127 1 18 .011
Air .998 .042 1 18 .840
Energy .999 .020 1 18 .890
Water .713 7.254 1 18 .015
Bottom_Ash .630 10.590 1 18 .004
Fly_Ash .923 1.512 1 18 .235
SS .899 2.032 1 18 .171
Oil_Grease .999 .012 1 18 .915
Power_Generated .862 2.882 1 18 .107
ESP_Index .728 6.714 1 18 .018
DEA with Undesirable
output
DMU1 1 Efficient
DMU2 1 Efficient
DMU3 0.9819 In-Efficient
DMU4 0.8103 In-Efficient
DMU5 0.9782 In-Efficient
DMU6 0.8404 In-Efficient
DMU7 0.99 In-Efficient
DMU8 0.9844 In-Efficient
DMU9 0.7898 In-Efficient
DMU10 0.9254 In-Efficient
DMU11 0.9992 In-Efficient
DMU12 1 Efficient
DMU13 1 Efficient
DMU14 0.8497 In-Efficient
DMU15 1 Efficient
DMU16 1 Efficient
DMU17 1 Efficient
DMU18 0.9822 In-Efficient
DMU19 0.8733 In-Efficient
DMU20 1 Efficient
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the statistically significant factors for this
sample, on the efficient score. Bottom ash
has the greatest effect on efficiency score
followed by coal, water and ESP index
closely. So, by this analysis we can
conclude that minimizing Bottom Ash and
maximizing ESP index (SPM & RPM)
which are related to environment protection,
we can improve the efficiency score. C
Conclusion:
The DEA analysis and the Multiple
Discriminant Analysis has substantiated the
effect of environmentally undesirable factor
in Efficiency calculation. The current study
was limited to small set of decision making
units. This study elucidates the link between
environmental protection and efficiency.
This has a potential to influence major
power producers throughout the country to
install environmentally preferable
technology like super critical and critical
boiler, clean coal technology, use of
beneficiated/ blended coal.
References:
- Charnes, A.,Copper, W., Rhodes, E.,
1978. Measuring the efficiency of
decision making units. European
Journal of Operational research 2(6),
428-44.
- Wade, D., Cook, Joe, Z., 2006.
Within- Group Common Weights in
DEA: An Analysis of Power Plant
Efficiency. European Journal of
operational research 178(2007) 207-
216.
- Toshiyuki Sueyoshi, Mika Goto,
2011. DEA approach for unified
efficiency measurement: Assessment
of Japanese fossil fuel power
generation. Energy Economics 33
(2011) 292–303.
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Appendix:
SS1: Suspended Solids
Input Output
Coal Air Energy Water Bottom
Ash
Fly
Ash
SS1 Oil &
Grease
Power
Generated
ESP Index
DMU1 120 640 30 150 9.6 20 100 20 200 80.00
DMU2 135 655 50 160 10.8 47 101 38 210 53.00
DMU3 128 620 40 145 10.24 55 119 22 190 47.00
DMU4 148 675 54 187 11.76 67 122 31 175 55.00
DMU5 145 670 60 165 10.16 46 185 26 205 84.00
DMU6 150 668 55 180 13 67 157 35 180 41.00
DMU7 114 638 25 174 9.12 53 101 24 165 48.00
DMU8 145 645 36 155 15 58 134 32 200 49.00
DMU9 156 665 49 170 18 39 134 35 168 45.00
DMU10 135 684 56 167 14.67 65 124 24 201 35.00
DMU11 140 635 36 154 10.3 39 113 26 200 56
DMU12 125 655 50 135 18 67 98 38 187 53
DMU13 112 690 40 139 10.24 55 136 26 194 42
DMU14 146 695 54 178 14 47 122 38 189 55
DMU15 125 640 60 165 15.3 53 172 15 205 84
DMU16 116 685 55 180 7.9 45 110 35 204 79
DMU17 139 657 30 137 12.89 53 101 15 189 65
DMU18 152 675 50 165 15 63 120 25 210 49
DMU19 128 665 49 189 18 56 134 35 185 45
DMU20 135 684 67 145 14.67 45 102 45 201 80.00
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Ankit Kumar Narsaria is currently pursuing his MBA from Indian Institute of Management,
Shillong. He has completed his Bachelors in Technology in Information Technology from
RCC Institute of Information Technology, Kolkata in 2011. He has 20 months of work
experience under a role of Functional Business Analyst in Cognizant Technology
Solutions. His focus of research lies in Operations, and Economics. He has worked with
Biometric Security and identification systems as well. Apart from this he likes playing
cricket and table tennis. He can be reached at [email protected].
BRAIN AND HEART OF OPERATIONS
Abstract: Efficiency and Productivity are just the difference between quality and quantity. It is always about the right
mix between productivity and efficiency, as industry can never achieve 100% efficiency while operating at maximum
productivity. This will result in bottlenecks of resources or under- utilization of some of the processes. Focusing only on
one item not only undermine other but degrade the level that one can achieve. It is like increasing the defects per item in
manufacturing industry if focus is on productivity, while trying to remove all the defects i.e. focusing on efficiency will
hamper the productivity. So, the underlying imperative always lies in right mix between Productivity and Efficiency.
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BRAIN AND HEART OF OPERATIONS
What is Productivity and Efficiency? Is
there any difference between them? How
they relate to each other? These are the
questions which come into mind when one
comes across these two terms.
Efficiencies are not just related to making
profits but it is the way of doing things smartly
and looking into new ways of working and
delivering values. While, heart of any
effective business operations is Productivity. It
has a direct impact on an organisation's
capacity to efficiently create value. In recent
years, competition among companies, capital
constraints and skilled labour shortages have
made productivity and efficiency even more
important than ever.
So,
Efficiency =
Productivity = Change in
Economic Profit helps us to determine:-
Total use of capital
Compares productivity across
industries
Determines shareholder’s return
Full Time Equivalent (FTE) indicates
the efficiency/workload of the
employees in a standardized way.
To compete effectively, in an increasingly
commoditized marketplace where price
pressures are inherent, companies need to
achieve greater operational efficiency by
embedding creativity, relevance, innovation
and market responsiveness into their
operations that supports production of new
products and services. Both companies and
customers want services and products that are
innovative, which meet their ever-expanding
needs which are in terms more than just
affordability. True operational optimization
begins by trading off between productivity and
efficiency, by willing to look at all aspects of
operations. Thus, approach to operational
optimization focuses on applying the right
methodology at the right time and situation
while understanding the culture, financial
constraints, environments and regulatory
framework.
Input to run a Business Operation
Output gained from the Business
Economic Profit
FTE
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Identify competitive essence
Establish the right structure
Out-execute
Balance structure
and execution
Choose the right
journey
5 imperatives for balancing operational efficiency with innovation
Take for example, Apple, the heart of this
organization lies in delivering constant
innovation in the form of designs that are
attractive and extremely user-friendly. To
deliver this and at the same time maintaining a
competitive edge over others, Apple focuses
on its talent, passion, and dedication of
employees to drive excellence at all levels of
company. It has effectively utilised its
operations (efficiency) and energised its
workforce (productivity) by focusing energy
and talent on a select set of devices and
services. iPod which was developed in less
than nine months sets an example, which
brought together teams combined with
expertise and existing technologies.
According to the study done by Accenture [1],
the following five imperatives should be kept
in mind to balance operational efficiency with
innovation and responsiveness:
1. Identify competitive essence: Every
company should identify its points of
parity and points of difference such
that it can offer distinctive customer
value propositions.
2. Establish the right structure:
Competitive essence can only be
maintained if the company took right
strategic decisions which fits
organizational structure.
3. Out-execute: Profit is the main motive
of any organization. And to achieve it,
organization should identify the
limitation in the daily work processes
which when solved can increase the
cost efficiency and labour productivity.
4. Balance structure and execution:
Determine the unique balance between
structural alignment and execution that
will drive operational excellence.
5. Choose the right journey: Identify the
type of journey and level of change
that will work best for the
organization: continuous improvement,
targeted interventions or top-down
transformations.
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Productivity
Digitisation
Global integration
Knowledge intensity
Complexity
Companies also need to match its productivity
with the changing and demanding world.
There are certain attributes which helps in
achieving the productivity growth:
1. Digitisation: Leveraging on e-
commerce and internet to improve
digital assets such that
processes are
optimized and hence
increases productivity.
2. Global Integration: Integrating
scalability in business operations by
efficiently configuring its global
resources.
3. Knowledge Intensity: Organization
should have the broad understanding
and knowledge of its functions which
helps in productivity growth.
4. Complexity: It is associated with
every process, but how an organization
simplifies its complexity, achieve line
balance in its activities thus increasing
overall efficiency of workstations
determine productivity.
Wal-Mart is a perfect example on how it
brought Operational efficiency and
Productivity. It focused on small format stores
and focused its investment in an e-commerce
structure and global technology platform. To
achieve greater operational efficiency,
company is trying to reduce 1% of its
operating expenses as a percentage of total
revenues.
Thus, productivity and
efficiency goes hand
in hand and an
organization is
productively
efficient when it utilizes all its
allocated resources, resulting in its
position in the productivity frontier.
References:
1) http://www.accenture.com/us-
en/outlook/Pages/outlook-online-
2010-balancing-efficiency-
operations.aspx
2) http://en.wikipedia.org/wiki/Operat
ional_efficiency
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OPSWORLD 4
ENHANCING OPERATIONAL EXCELLENCE BY IMPROVING
PRODUCTIVITY
Abstract: The article discusses how by focusing on improving the productivity an organisation can build operational
excellence. Through a literature review the article discusses how by focussing on parameters like setup time, movement
time, processing time etc. productivity can be improved. Besides we also look into how improving quality can be a big
aid to enhance productivity. The concepts of delayed differentiation, sources of wastages and enhancing overall
equipment efficiency are also highlighted.
Umang Agarwal has completed his B.Tech in
automobile Engineering from SRM University,
Chennai. Presently he is persuing his MBA from
IIM Raipur. He has keen interest in Operations.
He plans to start his own venture in near future.
He can be reached at
Anubhav Sood has completed his
graduation from Visvesvaraya National
Institute of Technology, Nagpur. He has
38 months of work experience. Presently
he is persuing his MBA from IIM Raipur.
His interest lies in Marketing and
operations. He could be reached at
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ENHANCING OPERATIONAL EXCELLENCE BY
IMPROVING PRODUCTIVITY
Introduction:
A firm has a competitive advantage if it has the
necessary resources (like technology, natural
resources, skilled labour etc.) which help it to
outperform its competitors. A sustainable
competitive advantage gives an edge as it is
difficult to be neutralised by the competition.
There are three generic strategies to build
competitive advantage, Porter (1985); one is cost
leadership where a firm produces the goods at
lower cost than its rivals, second is differentiation
where a firm’s goods are perceived as different by
the customer and he is ready to pay a premium for
them and third is focus, where the firm focuses on
a very niche market segment.
In this paper we focus on gaining operational
excellence and hence a competitive advantage
through cost leadership, focusing on a
manufacturing set up. We follow an approach of
finding out, through an extensive literature review,
first why productivity should be targeted to reduce
costs and then exploring the ways in which
productivity can be enhanced.
A firm can bring down its cost of production by
improving its productivity. Using the same
resources to achieve more output will give the
benefits of low cost production compared to the
competitors. The advantage gained by improving
productivity helps a firm to gain competitive
advantage over its competitors.
WHY PRODUCTIVITY CAN BE TARGETED
Maintaining high overall productivity is vital to
increase the total throughput and hence reduce the
cost of production enabling the company to deliver
the product to customer at sustainable prices along
with desired quality. A company can neutralise the
advantages of the competition by focusing on
increasing its productivity and quality with same
resources to reduce its costs.
Blackburn (1991) and Stalk and Hout (1990) as
cited by Hastak (2008) describe case studies where
manufacturing firms that redesigned their business
processes to compress time and achieved higher
productivity, increased market share, reduced risk,
and improved customer service. Syverson (2011)
asserts that literature contains a lot of robust
findings that point out at the linkages of the usage
of productivity as a tool for the survival of any
business. He points out that, irrespective of
country, time or industry, a producer having higher
productivity is better positioned for survival than
an inefficient one.
Saari (2006) introduced a model which describes
how productivity acts as a synonym to competitive
advantage. According to the model, the business
operations are divided into five main processes
which are real processes, income distribution
processes, business processes, monetary processes
and market value processes.
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Figure 1 - Main Processes of a Company
It is within the real processes where the real
production takes place and where the productivity
aspect can have a significant change. As the real
process plays a major role around which all the
processes revolve, it is only through real processes
that a company can have a competitive advantage
over others.
For enhancing the productivity in any setup, first
the processes are required to be streamlined while
targeting throughput time reduction and wastage
reduction.
The factors affecting productivity in a
manufacturing facility can be controlled by
reducing setup times, reducing movement time and
reducing waiting times. An important factor to
enhance productivity is by emphasising on first
time quality production, which can be achieved by
implementing practices and methodologies like
TPM, 5S, Kaizen, etc. These practices help in
reducing the rework and rejection rates and hence
saving valuable production time. Focusing on
preventive maintenance, cross-training and skill
level of employees helps in increasing the machine
as well as labour productivity. Further, reducing
variations in designs and allowing for delayed
differentiation of the product also aid in increasing
productivity.
Productivity definition: According to Syverson
(2011), productivity is how much output is
obtained from a given set of inputs, which is
typically expressed as output to input ratio.
Productivity in general is the measurement of how
well a company is doing as a producer. At micro-
level, this may be w.r.t. a machine or a piece of
land etc, whereas at macro-level this may be w.r.t.
a whole country, Helms (1996).
As such, productivity is the ratio between the
outputs generated from a system and
the inputs that are used to create those
outputs. The inputs include factors
like capital, labor, material,
equipment, tools, energy, information
etc. The output is a good or service.
The productivity of a process can be
increased by controlling these factors.
Productivity is also measured in terms
of single factor or Total factors.
Single factor productivity is units of
output produced per unit of a particular input. It
could be in terms of labour, material, capital etc.
But this doesn’t allow for a just comparison as two
different producers may use different factors
depending upon the price they have to pay. A
better way is to measure total factor productivity,
which takes into account all the factors required to
produce the output.
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Figure2 - Operational Equipment Efficiency of a resource
Targeting productivity: Koufteros et al. (2001)
have identified seven key factors affecting time-
based manufacturing, these are, shop floor
employee involvement in problem solving,
preventive maintenance, dependable suppliers,
reengineering setups, cellular manufacturing,
quality improvement efforts and pull production
approaches. Improvement in all these areas helps
in reducing the cycle time and hence improving the
productivity of a manufacturing set up.
Ignizio (2009) carried out work in semiconductor
production facility and concluded that decisions to
allocate the machinery or workstations for
different jobs influence the productivity of the unit.
He found that by optimizing such decisions
substantial improvement in production and cost
savings were achieved.
As per Terwiesch (2013), productivity
enhancement can also be seen in terms of
improving the overall equipment efficiency (OEE),
which can be said to be dependent on various
factors as described in figure 2 from McKinsey
operations training material. This suggests that
there exists a potential of around 3 times
improvement in the actual utilisation of the
machines by focusing on factors like reducing
breakdown losses, setup times, increasing quality
controls etc.
Various factors improving the productivity are
explored below one by one.
Setup time: Setup time is the time required to
ready the workstation for processing the part
through that workstation. Hopp & Spearman
(2001) and Suresh & Meredith (1994) have
suggested reduction in setup time as a way to
improve throughput time. Steudel and Desruelle
(1992) have suggested that setup time can be
reduced by reducing number of setups, improving
the setup procedures, purchasing equipments with
small setup times, using machines with single
minute exchange of dies and dedicating the
workstations to families of parts with similar setup
requirements so that common fixtures can be used.
Ross and Taylor (2013) and Terwiesch (2013)
further suggest that
classification of setup
procedures into external
and internal setup
procedures also reduces
the overall setup time.
External setups are those
tasks which could be done
before stopping the
machine or after the
machine has started so that the
production is held up for a minimum
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Figure 3- Approach to Achieve Setup Time Reduction
time. Whereas internal setups can be done only
after the machine has been stopped.
Figure 3 shown below is taken from McKinsey
operations training material and suggests the steps
to reduce the setup time.
Terwiesch (2013) says that if setup occurs at the
bottleneck then the batch size should be increased
so as to de-bottleneck this workstation. Otherwise,
if setup occurs at non-bottleneck then batch size
should be reduced to match with the capacity of
the bottleneck.
Processing time per part: Processing time is the
time required by a machine to operate the
designated routine through a unit. Johnson (2003)
suggests that processing time per part can be
reduced by reducing time per operation by using
new technology or redesigning the part and also by
reducing number of operations required. Suresh &
Meredith (1994) have also suggested reduction of
processing time to improve the productivity.
Processing time can further be reduced by
reviewing the processes and classifying them into
value adding, business value adding and non-value
adding processes, Sarkar (2012). The value adding
activities are those which are necessary from
customers point of view,
business value adding
activities are not important
from customers perspective
but these activities cannot be
avoided and non-value
adding activities are those
which are being done but
should be avoided as these
activities are not valuable
from the customer’s view point and he will not
pay for them. In the more traditional
manufacturing setup, seven sources of waste have
been identified which are called Mudas. These
seven categories are overproduction, waiting,
transportation, over processing, inventory, motion
and defects, Womack and Jones (1996). The
process can be studied by classifying various
activities and wastages must be removed to
increase productivity.
Movement time: It is the time required to move
the parts from one workstation to another. It can be
reduced by reducing the time required per move or
reducing the total number of moves, Johnson
(2003). Hopp & Spearman (2001) suggested that it
can also be reduced by designing the layout in a
way that reduces the distance between two
workstations. Movement time can also be reduced
by grouping the equipment performing certain
sequential operations as a manufacturing cell,
Suresh & Meredith (1994).
Resource utilization: Johnson (2003) has pointed
out increasing the resource access by cross-training
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the operators and increase equipment pooling to
improve productivity. The operators should be
trained so that they can work on multiple
machining centres as per the requirement on the
job.
Process variability: According to Hopp &
Spearman (2001) variability can be due to
controllable or random variation. Controllable
variation is due to the results of decisions like
design differences, transfer batch sizes etc whereas
random variation occurs due to events which are
not in immediate control, for example downtime of
machines or operators, variation in arrival times of
various batches. Suresh & Meredith (1994) have
noted that variability can be reduced by grouping
similar jobs, by having dedicated labour and
equipment, by stabilizing batch sizes and by
improving preventive maintenance.
Postponement: Another beneficial approach
which can increase the productivity in case of
customised production is the concept of
postponement, which is also known as delayed
differentiation. In delayed differentiation the
production is done upto the stage till the product
remains generic and final addition of differentiated
features is delayed until the order is received and
then the product is customised as per the
requirement of the order.
Feitzinger and Lee (1997) have defined
postponement as a comprehensive approach
involving a company’s supply, manufacturing &
distribution approach and they say that postponing
the decision to differentiate until the latest stages
of this chain is the key to success. Graman &
Bukovinsky (2005) state two benefits of
postponement, first, inventory levels reduce for
achieving a given service level. Second, if more
products can be postponed then it also leads to
reduction in inventory levels
Postponement is exhibited very effectively in the
change which paint companies introduced. Instead
of producing paints in umpteen number of shades
they now mix the tints to white paint at the
retailer’s end to make whatever shade the customer
desires. This initiative, while helping to increase
productivity of paint companies by reducing
number of setups and increasing uniformity in
production, has also helped to bring down the
inventory levels as a result of benefits received
from aggregation of forecasts.
Quality as an aid to improve productivity:
The manufacturing of the product as per the
required quality goes a long way in enhancing the
productivity of any process. Russel and Taylor
(2013) estimate that the extra work required to do
on account of reworks and rejections is believed to
be acting as a second factory inside the factory
taking as much as 30 to 35% of the production
time (especially in new plants) which otherwise
could be utilised for making new products. The
various practices and methodologies like quality at
source, TPM, 5S, Six Sigma, Kaizen etc can be
utilized as an aid to enhance productivity.
Johnson (2003) has identified improving raw
material quality, improving equipment capabilities,
implementing poka-yoke, using one piece flow as
steps to reduce the rejection rate.
Goh (2010) has identified six factors important for
success of a six sigma project. These are use of a
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common and realistic metric for quality assessment
and improvement, clear assignment of roles and
responsibilities in performance improvement
efforts, logical alignment of statistical tools,
recognition of the time effects on processes,
unprecedented synergy with modern information
technology and finally capabilities to grow for
larger roles for business competitiveness
Ekambaran (2011) says that to meet objectives in
terms of profitability and other considerations for
long as well as short term; Volume, Cost, Price and
Quality should be studied in combination with
each other. He says that an organisation should
attain a marketable standard by this combination
and statistical quality control can play a vital role
in this by providing correct choices for quality
within the capabilities and opportunities of the
firm.
Although giving importance to quantifiable and
measurable progress is necessary but at the same
time Galbraith (1978) as quoted by Goh (2010)
remarks, “To many it will always seem better to
have measurable progress toward the wrong goals
than immeasurable progress toward the right
ones”. He warns against the over reliance on the
quantitative data and ignoring the obvious but
immeasurable initiatives. In similar zest words of
renowned economist Paul Samueison are also
pertinent to quote, “Fortunately, our answers need
not be accurate to several decimal places; on the
contrary, if the right general direction of cause and
effect can be determined, we shall have made a
tremendous step forward.”
Conclusion:
While many organizations strive to achieve
competitive advantage by focusing on marketing
and financing, they forget to look into the basics,
which is the productivity of the company. It can be
argued that when the sales are insufficient there is
no use of productivity however it has been
observed productivity not only helps increase
output but also cut costs which can make a
profound effect when the sales are lesser than
expected.
While suggesting that productivity can be adopted
by various organizations to achieve operational
excellence; we also acknowledge the applicability
of the above mentioned parameters could be
context /industry specific. It is not necessary that
all the parameters discussed in the paper will be
applicable to each and every organization. Certain
parameters like resource utilization, quality control
and movement time are those which would be
applicable for mostly all organizations. Whereas
parameters like setup time and processing time per
part are those which would be generally applicable
to the manufacturing industry. It is thus very
essential that an organization identifies the
parameters which would help enhance its
productivity and work towards it.
References
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CROSSWORD
OPSWORLD 4
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ANSWERS
55
Bharath Arava
Gautham Jayan
Sameer Pandey
Ruchi Sao
Vanamamalai. R
Anubhav Sood
Manoj H
Subhash Kumar
Sujitha Tikka
Thousif Mohammed A
Team IIM Raipur
56
For Details, Contact
Operations and Supply Chain Club
Indian Institute of Management Raipur
GEC Campus, Old Dhamtari Road,
Sejbahar
Raipur 492015, India
Email: [email protected]