Catena Aurea - March 2012

Catena Aurea

www.nmims.edu.inOptumizMarch, 2012

NMIMS, Mumbai

Human Civilization : How efficient are we?

Main FeaturesArticlesExpert SpeakKnowledge CornerDeconstructing OpsOptumiz Opinion

Catena AureaQuarter 1 Year 2012

Editorial Team

EditorVinay Arun

Optumiz ContributorsAmol

Arnab MallickBalajee S

Deepak KadamJitendra JidewarNishant Chotalia

Utpal Khardenavis

Design and CreativesDeepak Kadam

Vinay Arun

Senior MemberShubam Prakash

_________________________Optumiz

NMIMS, Mumbai

All design and artwork are copyright of the Optumiz Cell

NMIMS, Mumbai

Dear Readers,

Catena Aurea is scaling new heights! We bring to you several new sec-tions with this issue, which will be of original content and opinion from the Optumiz Cell members at NMIMS. As we implement this change we chose as a theme for this issue the prevalence of Operations all around us. We wanted to bring out how everyone views the world around them through the “Operations lens”. The more I think about it, the more I re-alise that we are gradually entering a realm where continuous improve-ment is going to be more prevalent than big ticket innovations. As in-creasing constraints bear down on human civilization, such continuous improvement in terms of efficiencies and cost savings are going to be-come very important. Operations management is going to play a leading role in enabling this. This is probably going to be the next big revolution. Perhaps it is time to relook at the way we have organised ourselves. Per-haps ease of implementation has caused us to merely automate our inef-ficiencies in the past and the time has come to change.

The articles in this issue give you the usual flavour of operations but with a lot of focus on the life we see around us. You will find some sugges-tions, some critics and a lot of insight on the way we live. Efficiency has been dealt with quite thoroughly in various sections.

Our winning article this time proposes a model that tries to solve the traf-fic problem in our cities. Interestingly this model is not to be implement-ed by the traffic police! Read on to find out who bears the responsibility. It is probably such disruptive innovations in our processes that we need now to design better and more efficient lifestyles.

Articles also talk about efficiency from the individual’s viewpoint. How we behave has a direct influence on the supply chains and operating ef-ficiencies of corporations around us! This also includes services like healthcare.

As always I hope you enjoy this issue! Let us know how you feel about the content. Feel free to contact anyone from the Optumiz Cell regarding any aspect of the magazine and I promise we will get back to you. Crit-ics, suggestions, requests, and jokes, they are all welcome. You will find contact details of all authors and Optumiz members; connect with us, discuss our articles and let us know your opinions.

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

-Vinay Arun

All views presented are of the individual writer’s. Optumiz does not bear any responsibility whatsoever.

CONTENTS

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There have always been indefinite possibilities for human civilization from the past up to the present. There comes a time where technology fails to de-fine a real¬ity out of fiction, but civilization will al-ways cope and justify whatever means necessary to achieve the ends. Technology on the other hand, was created through great civiliza-tion and aided the gen¬erations and will be aiding fu-ture gen¬erations to provide as con-veniently as pos-sible hu¬mans day-to-day activities. There are great things in human civilization in¬deed. It is always part of society’s success to endeavour to-wards a harmonious, effective and efficient life where prosperity thrives in every individual.

It is grotesque when one tries to communicate fallacious arguments about negative effects of civi¬lization. The whole point is, we are a civil so-ciety, and all of us are part of this civilization. There is no ambiguity there because civiliza¬tion has been in existence for a long time now. The question which needs to be answered now is how efficient our civili-zation is.

In the Indian context, a contemporary example of ef-ficient hu¬man organisation is probably the Gujarat government’s mega¬project of GIFT- Gujarat Inter-national Finance Tech City, located at Gandhinagar, the capital city of the uber-industrial Indian state of Gujarat.

GIFT is India’s first major super tall CBD project that is designed to be the focal point of India’s booming financial services market by provid¬ing companies with comprehensive infrastructure, power, vertical-

ized office space, and a well designed, planned and expandable urban form. The project ba¬sically caters to the requirement of back office work of companies in the financial sector, especially banks, insurance and asset management companies. The 72,500 crore GIFT project un¬der the construction area of 800 acres, is planned on the lines of global financial hubs in New

York, Shang¬hai and London. GIFT is designed as an ex¬tremely environmental¬ly friendly develop-ment that will have the lowest per capita energy consumption of any Indian metro. The project itself will boast of an impressive green area covering 65% of the total land, in large part due to the number of sky-

scrapers. From the above example, we can recognise that hu¬man civilization has remarkable capacity to re-spond to change. But, the existence of such capacity for re¬sponse alone does not mean that human civi-lization will survive all of its challenges. However, one can definite¬ly hope that we humans will try to make the existing civilization more efficient by com-ing up with innovative ideas and by putting them into application. Because we will always keep asking our-selves, Have we made it large as we have been since time immemorial.

Are such forms of organisation going to be the way in the future of our civilisation? And will these solutions address the questions that brought them up in the first place? Time will tell but for now, we can guess.

----------------------------------------------------------------Both Arnab Mallick and Jitendra Jidewar are first year MBA Core students at NMIMS, Mumbai. Arnab is from Computer Science background and has prior work experi-ence of 2.5 years in TCS. Jitendra is also from engineer-ing background and is a frequent blogger. You can contact them at: [email protected] [email protected]

Cover StoryHuman Civilisation: How efficient are we? Arnab Mallick,

Jitendra JidewarNMIMS

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Catena AureaQ1, 2012

I travelled 6 days a week from Garia (Kolkata) to my office at Park Circus, a distance of 14 KMs, pay-ing Rs.8 as bus fare. This amounts to Rs.416 a month and approx. Rs.4500 year. This route takes around 60 minutes to reach office. An alternate and faster mode of commuting is to take a rickshaw from my apart-ment to the nearest metro station paying Rs.12, then board the metro train to Rabindra Sadan paying Rs.8 and then board a bus to office for Rs.5. This amounts to Rs.1300 a month and approx. Rs. 14,000 a year (approx. 35% of avg. per capita income of India as of 2009-10). This is what a vast majority of the working population encounter every day. Here we have con-sidered only the monetary aspect of such long com-muting and not the factors that result in fatigue and productivity loss and also different health troubles. Most Commuting time is ‘wasted time’ as it is finan-cially non-productive. In the UK more than £260 mil-lion-worth of working time is spent every single day travelling to and from work not to mention the pollu-tion and health costs. Equally problematic is the so-cial impact of long commutes restricting family time. “How will we travel to office” and “Where will we stay” are the two most frequent thoughts that visit our mind after we get a job at a place away from home. The hustle to find home and to get accustomed to the medium of commutation to office takes 1-1.5 months for most of the people. But this time period varies de-pending on the location of our office, type of work and so on. It takes much longer period in Mumbai than in other smaller cities and towns.

The objective of this article is to prepare a basic framework that will deal with this is-sue of long travel time/distance to a great extent. The effect on productivity is not uni-form and varies with the type of work, type of company, marital status and so on. As a result, we firstly categorize the workers as below.

Marital status of employees: Single and Married

Type of company: Manufacturing or Service-oriented

Type of job profile: High mental labour or High phys-ical labour

Position in the company: Junior manager or Senior Manager

Increased daily travel time and travel distance to place of work results in loss in productivity, increased fatigue, unpunctuality, less sleep time, continuous anxiety about the safety of family, anxiety to leave office early towards the fag end of the day and so on. In the table below, it is shown to what extent the pro-ductivity of different categories of workers is affected due to high travel. As seen in table 1, the negative ef-fects of more travel time is higher on a married person than on a bachelor due to the various responsibilities of a married life. Higher physical labour refers to all kinds of labour which entails high mobility, regular and long physical presence at place of work and so on. In this category, we can include the factory work-ers, bank employees, pilots, surgeons and so on. The category of high mental labour will include the senior managers, directors, researchers and so on.

This diagram thus signifies the need to address the issue of loss in terms of productivity and personal ex-pense due to increased travel time and travel distance, especially in the case of married persons, employees involved in high physical labour, in bigger cities.

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

A model to reduce worker travel time and distance

Pritom Kumar GogoiNMIMS

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

Table 2

Table 3

It’s is now clear that there is a pressing need to tackle this problem and with increasing number of vehicles on the road, increasing pollution, increasing work pressure, the intensity of the issue will only increase. Any attempt to address the issue of productivity loss will result in multiplied gains for any company, in terms of increase in revenue, employee turnover, job satisfaction and so on.

In this part, I would discuss a possible solution with a model to address the said issue. This model basi-cally deals with housing most of the employees or workers of the plant, office etc. of a company as close to their respective workplaces as possible by various proposed ways and that benefits the employees, the company and also the surrounding locality; a win-win situation for all. To facilitate this, there will be a spe-cially formed Housing team in every company. Let’s take the case of a company with factories and branch

offices all over India.

It is recommended that the housing team should work within the ambit of the HR department and should consist of minimum 4 persons. The cost incurred in forming and maintaining the team will be compen-sated in terms of increase in man-hours, higher pro-ductivity of the workers and employees.

The model will involve the following steps:

• Housing the factory workers within the factory premises and in rooms in nearby localities

• Entering into agreements with apartments nearby and single houses to keep company employees on rent• To devise a system of “work-from home” for selected employees

Role of housing team: The team will be responsible for collecting the data, related to lodging/food of all existing employees and to pro-vide lodging to all new recruits. The team will keep rooms/houses ready atleast 1 month prior to joining date of the new recruits. One of the pro-posed ways to house workers is that the company would provide 1 room or 2 room houses to low-rung work-

ers. The Housing team will look around for rooms/houses/paying guests/apartments in and around the locality and maintain an official relationship with the landlords. In the nearby areas, there would be hun-dreds of other people who have to travel to far off places to their workplace. The team will carry out a survey of the profile of residents in and around the factory/office to find out where they work, whether they are interested in shifting to a new location and so on. Then it will try to house the interested residents in places nearer to their respective workplaces. There is also a possibility of collaboration among different companies to house their employees closer to their of-fices. Another possibility is to create a website where-in interested people can write about their wish/need to stay in a particular location. The landlords would have the benefits like higher rate of occupancy, better know-how about the tenant’s personal details and so on. The company can also, to an extent, provide finan-

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cial support on a pay-back basis to help them build rooms/houses within their premises. Given below are the ways of providing houses/rooms to employees of different grades and marital status.

Bachelor and executive: This category includes all the executives (in the payroll) starting from officers to senior managers. The bachelors have less restric-tions and don’t have the constraints faced by a mar-ried person. So the company can provide them lodg-ing in hostels, paying guests and 1 BHK apartments in close-by areas. Staying with colleagues will also foster socialising and bonding, which will, in turn, help in team building.

Bachelor and non-executive: This category includes the contract labourers, plant workers and so on. They can be put up in dormitory or make-shift houses in-side the factory premises. Also the resident workers who have their own homes in that place can have the opportunity to rent a room or two to the non-resident workers and earn an income out of it. Such an act would make the outsiders feel at home and thus re-duce attrition.Married and executive: Over and above the officers and managers, this category also includes the direc-tors and people over them. They like to maintain a special status in the society and within the company and wish to live in luxury. These people mostly work over their cell-phones and laptops and moreover, they can afford fast and luxurious means of transport. They are in a better position to work efficiently even from their homes and thus it makes the need to house them in close-by areas less urgent. Even then, there will be people in this category who need to be present at the office most of the time e.g. plant GMs. And in such a case, the company can have contracts with apart-ments in the neighbourhood and keep flats booked on a continuous basis.

Married and non-executive: These families will need a separate house and so like the married employees and executives, they can be housed in 1 BHK apart-ments or rented houses in the vicinity. Also there will be a few families who will be interested in staying jointly.The diagram 1 below shows the operation model. Di-agram 2 shows the income generating cycle that gets created out of the bigger operation model.

Diagram 1

Diagram 2

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

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pany, company employees and housing providers. Besides attracting the goodwill of the neighbour-

hood community, it will indirectly raise the income of low rung workers and contribute towards build-ing a prosperous and efficient workforce and nation.

-----------------------------------------------------------Pritom Kumar is a 1st year, MBA-core student from NMIMS, Mumbai. He has prior work experience of 47 months as Deputy Manager, Field Services in Ashok Le-yland Ltd. You can contact him at: [email protected]

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

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

Did you know?

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The alarm sounds loud and in my trance-state I could hear the birds flap their wings and take flight. I hurriedly get out of bed and head to the washroom. It is fairly well equipped with a geyser, bath tub and shower- I smile as I set foot on the cool, tiled-floor. The pipes had been blocked the day before and it took 2 plumbers and 4 hours to clean the drainage tanks. I recalled vaguely that back then; the Harappa and Mohenjodaro civilizations had a closed-drainage system. From each house, ceramic drains ran to the sewers. The same model might work at my place and would require almost nil maintenance. But wouldn’t I miss out on interior aesthetics? Tough reasons not to switch!

My wife asks for some vegetables which I take out from the refrigerator. It consumes around 11 units of electricity to keep these vegetables that I had bought last night, intact. That is around 5 kgs of coal burnt (30% efficiency of power plants). We talk about Lean manufacturing at business levels. A small change in perspective; what if we are the suppliers and the consumers as well. If we use this concept for waste minimization by, say, making a conscious forecast of demand, the small effort would mean judicious use of fossil fuels. I also remember my grandmother saying she used to store curd in earthen pots which stayed fresh. At least the idea is fresh in my mind.

My children get ready for school. I am not ready to work. Office seems to be outside the realm of life. My children would soon realize that. Why can’t we earn a living by doing something we love? Is this because of the change from the indigenous model of self-suf-ficiency (Swadeshi) to pro-capitalism? If Swadeshi were to continue, priority would shift from amass-ing wealth to meeting bare minima. Also, no particu-lar kind of work would command a larger economic bearing. People would get to pursue what they really like. Now I wonder if India is shining. I really don’t know where we are heading.

Adding to the woe that the office is a solid 40 kms away from home, I need to drive to school, which is 10 kms in the opposite direction, to drop my kids. That would make it 120 kms of travel a day. What if it is compulsory for schools to admit students within 5 kms radius? In that way, my kids can, in-fact, walk to the school which is in the adjacent street and also, unnecessary travel and congestions can be avoided. Currently, the admission is a function of parent’s an-nual earnings. The only way I can reach there is to start a school myself!

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

Better Efficiency- A Personal Commitment

Keshav S.Sowmya R.IIM, Shillong

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only company to exceed ENERGY STAR’s expecta-tion .They got a sane management. All I got is work.

Earlier this month I came across a concept called bio-mimicry which has solutions to most of our everyday activity, be it construction, communication, travel and the likes (http://www.biomimicryguild.com/guild_biomimicry.html). I was surprised to know that this seemingly new phenomenon has in fact been prevalent from a long time. I decided to look it up and read about Qualcomm’s Mirosal Display which uses the photo reflective techniques of a butterfly (http://www.mirasoldisplays.com/innovation-story). This was found to be almost zero watts in power consump-tion. Also, the display quality is augmented tremen-dously and is very much visible under direct sunlight. Elsewhere, a cleaner fuel source is being looked at through the process of artificial photosynthesis. All of the carbon dioxide emitted by vehicles can be fed back into this process to improve efficiency of the hy-drogen cells in place. Nature had always been hold-ing the answers. She is wise to know that energy is a privilege and has accordingly designed herself to be efficient. All we need to do is look at the right place. I look forward to leaving office early.

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

couple of minutes earlier. I couldn’t help but think how faulty the system is here. I am not lamenting about the criminal being caught and tried, that’s dif-ferent. But a system which is put in place by every individual should obviously ensure, for the least, the individual’s survival. Traffic has grown so much so that even the most skilled ambulance driver finds it difficult to help the cause. What if, the dying aviation industry can be put to use here? The connection: the government could subsidize charges that the players in the aviation industry would levy in leasing heli-copters to the hospital. The shortest distance between the hospital and the point of accident is a straight line and the only thing that can remotely meet that is a he-licopter. This is not so unrealistic. An economic point can be arrived at wherein the state government funds some of the cost and the rest by the party found guilty, wherever applicable. Also, if they were to train one team of every political party per constituency whose sole job is ensuring priority treatment to victims of accidents, the problem would have a localized han-dling unit ensuring better control and timely remedy. This also would give mileage to that party. Neverthe-less, much like the party’s ideologies, these ideas will never materialize. I am after all, one man!

I live in the top floor of the apartment. I head to the terrace to see the dusk settle. Instead of the DTH sat-ellites intruding the space, I would prefer seeing some ‘Liters of Light’ (http://isanglitrongliwanag.org/). A small plastic bottle with commonly found liquids that would illuminate my house like daylight! I would save 15 units a month as against a 50 W incandescent run-ning an average of 10 hours a day. This concept has been extensively used in the capital city of Manila. The bottle can be prepared by any one and would save a lot of electric power if used in large numbers. Sadly, I would be considered economically challenged if I were to get one. I wonder about this month’s power bill. It isn’t going to be small.

As I walk into my son’s room, I hear him read aloud from his text book- “If we all did not throw away food that could have been eaten, it would have the same carbon reduction as taking 1 in 5 cars off the UK roads”. I raise my eyebrow at this incredulous state-ment. However recently I came across a site (http://yousee.in/donate-your-waste.php?gclid=COanq_6v-q0CFUMb6wodqGwLuQ) on sharing what you are

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

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

----------------------------------------------------------Both Keshav.S and Sowmya R are first year PGDM stu-dents at IIM Shillong. Keshav S is from Electrical and Electronics Engineering background and has prior work experience as associate consultant with Oracle Finan-cial Services Software for two years. Sowmya R is from Computer Science background and she is a fresher.

You can contact them at: [email protected]@iimshillong.in

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

2. Which of the following influences on the sales of a product is the most difficult to forecast?A. SeasonalB. AutocorrelationC. TrendD. Nonlinear TrendE. Cyclical

3. What is the most commonly used method for fore-casting ?A. Regression AnalysisB. Adaptive ForecastingC. Weighted Moving AverageD. Exponential Smoothing

4. Performance measures concerned with specific work processes that are virtually same for all indus-tries refer toA. Internal BenchmarksB. Competitive BenchmarksC. Functional BenchmarksD. Generic Benchmarks

5. An activity is said to be ahead of the schedule if the critical ratio for that activity isA. Equal to OneB. Less than OneC. More than OneD. More than Zero

6. In which of the following work measurement tech-niques, a detailed breakdown of the various types of activities is not required?A. Work Sampling B. Time StudyC. Standard DataD. Predetermined Motion Times

(Check page no. 24 for answers)

Quiz

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In this impatient era, where your blood starts boil-ing if Pizza Hut does not deliver you your pizza in 30 minutes or McDonalds delivers the burger a tad bit late or a Blue Dart courier does not reach on time, what is your impatience quotient (iQ)? In today’s world of high competition, the impatience of each individual, be it a customer or a manager, is on the rise. While a customer expects on-time deliveries, the race for the project managers is to be first in the mar-ket. The two basic ways to achieve it are: improve-ment and compromise; and the yardstick is cost. Is being impatient to deliver first stifling innovation and research? Has the unit of measuring customer value become synonymous to the unit of time? Does faster delivery mean providing more value to the customer?

If other factors are taken constant, in most cases the answer is yes.

Go back in time and you will realize it was not always like this. It has been a vicious circle. Increase in op-erational efficiency led to faster delivery of goods and services to market, which enabled the companies to quickly respond to customer needs. The customer got

used to this prompt service; he kept expecting more - and thus created more demand for even faster goods and services, incentivizing companies to again look at improving efficiencies in supply chain. This becomes a closed loop, and hence the efforts lead to customer satisfaction. Through this article we attempt at build-ing a perspective that this traditional loop might break. It could be simply because efficiency is not an elastic band with infinite elasticity and hence is bound to break at some point of time.

Invariably everyone in the market place claims to sell “High Quality Product”. What is so great about this phrase which doesn’t even have a worldwide standard accepted definition? Quality is like the round globe on your desk- you see a different country each time you change your position. The brand manager might define quality as something which delights his con-sumer, but for the plant manager quality boils down to the set standards laid before him. Over the years, with some sort of universal standards, we have somehow managed to define the minimum quality standards, but what is the optimum level if not the maximum? Are the consumers getting the best possible product produced using the best technology available today? If not, what is stopping us from exploiting technol-ogy’s true potential? Well, it is the fundamental defi-nition of quality itself. Quality is never absolute; it is always measured relative to what your competitors have to offer. Thus, as the game theory explains, if the industry decides not to move the quality bar upwards due to the obvious cost considerations the consum-ers shall never know what they are missing on. The issue concerns because in the era of fierce competi-tion, low cost has become the mantra for success; and quality comes at a cost and time. The cost involves investment in high precision machinery, complex process setups, man hours etc. Smart managers obvi-ously know on which side of the globe to see to locate the country they are looking for. Obviously there is a temptation for trade off- but till what level? The an-swer is deeply rooted in the company’s core ideology. Surprisingly enough, very few fortune 500 companies

What’s your iQ?

Iti MalikManu Shankar NMIMS

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

Fig 1.

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

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

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

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Diagrammatic representation of how iQ works:

Fig 2

How impatient will we get?

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

7. Which of the following issue falls under the pur-view of operational decisions?A. Problems of production and process designB. Identification of manpower requirementC. Assigning job to persons D. Vendor identification 8. Which of the following is not the benefit of SCM/JIT purchasing A. Consistent QualityB. Savings on ResourcesC. Lower CostsD. Less Dependence on Suppliers

9. Hybrid layout is commonly used to manufacture which of the products ?A. AircraftB. CarC. TelevisionD. Paper 10. An operation where machine tools are changed automatically are known asA. Machine CenterB. Computer Integrated ManufacturingC. A flexible manufacturing SystemD. A computer – aided design System

11. Which of the following arguments for protection is given to compensate the country for loss in revenue when price elasticity of import is greater than zero?A. Home Market ArgumentB. Employment ArgumentC. Terms of Trade ArgumentD. Keep Money at Home Argument

(Check page no. 24 for answers)

Quiz Continued..

15


They say India is a nation where a Pizza reaches home faster than Ambulance and Police! Barring a few exceptions, such as the All India Institute of Medical Studies (AIIMS), health facilities in India especially public health facilities are inefficient, inad-equately managed and staffed, and have poorly main-tained medical equipment.

Even in private hospitals healthcare executives and managers are always searching for better ways to improve production capacity for medical treatment and thereby improve operational efficiency. When it comes to running a successful medical facility, keep-ing your patients happy is not just a matter of having an expert medical team on call or having technicians use state-of-the-art equipment; client satisfaction is also met through the speed and efficiency by which they are taken care of.

Service is an intangible personal experience that can-not be transferred from one person to the oanother. Service is produced and consumed simultaneously. Thus, whenever demand for a service drops below ca-pacity to offer the service, it results in idle servers and facilities whereas on other occasions there are times when patients have to wait. Moreover the variability in service demand is quite unpredictable. Because of these reasons, it is more challenging to plan for ca-pacity in services than in manufacturing.

In any hospital, resources are limited and inappropri-ate capacity management would lead to inefficiencies in the system which manifest in the form of patient waiting, poor capacity utilization across different re-sources and poor bottleneck management. On the contrary, when capacity management is done prop-erly, it could lead to lean service models in healthcare by minimizing all the wastage and inefficiencies men-tioned above.

The healthcare industry has been investigating differ-ent strategies to manage capacity with a view to en-

hance efficiency and productivity. Some of the com-mon methods that generic service companies apply can also be applied by the healthcare industry. These methods include daily work shift scheduling (for doc-tors and nurses), increasing customer participation (patients’ share of responsibilities), creating adjust-able capacity (adjustable physical resources such as rooms and beds), sharing capacity (with other servic-es), cross-training employees (nurses and staff), part-time employees (floating staff), etc.

While it is important to manage capacity, which is in-ternal to a service provider, the demand side of the equation cannot be neglected. The demand manage-ment strategies attempt to influence the consumer be-havior in a way so as to suit the desired operations of the service firm. Improving patient flow is one way to significantly improve the efficiency of an en-tire hospital, but it can be overlooked when hospitals focus only on process improvement within various individual departments. Anything a hospital can do to eliminate delays and dead bed time can improve its bottom line. Hospitals with the most efficient pa-tient flow processes usually got there by implement-ing both technical and human process changes. These hospitals know immediately when a patient bed is available and ready to be cleaned, benchmark the time it takes to turnover rooms, have-real time data on available beds so new patients can be assigned and in a bed within 1-2 hours and benefit from less con-gested emergency departments and the additional rev-enue that comes with quicker turnover. Some of the demand management strategies include demand par-titioning (walk-in vs. appointments), offering price incentives (two for the price of one), promoting off-peak demand (off-season surgery discounts), develop-ing complementary services (keeping customer flow going), overbooking and “no-show management”.

Finally you cannot overlook the significance of IT in hospitals to keep the operations running smoothly and handled in a timely fashion. In an interview Chief In-formation Officer of Cisco USA, Ms. Rebecca Jacoby

Saving Lives Efficiently

Ishpreet KaurNMIMS

16

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

your organization. In the current digital world, many hospitals and specialized clinics have turned to EHR software as the cure-all solution to database manage-ment woes. No longer needing to rely on physical documents to keep track of vital patient information, medical facilities which use electronic health records have an effortless way to manage all their data. Elec-tronic health record software isn’t only capable of archiving previous patient records, but also provides medical staff a fast and reliable means by which to update data on the fly. Using an EHR database as the primary means of record keeping allows medical fa-cilities of any size or shape to maintain patient re-cords quickly and without error. Between handwrit-ten physical records and older documents, sometimes problems may occur where vital notes are difficult to decipher. Having everything spelled out cleanly on a computer screen is not only a simpler way to view

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

Nurses, physicians and front line staff spend much of their time fielding calls from patients answering basic medical questions about procedures and conditions when they should actually be able to focus on their duties and should never be bothered by trivial tasks. This is where an efficient virtual answering system

comes in. Having a virtual answer-ing service is pretty much the same as having a reception-ist who handles phone calls, sched-ules appointments, reminds patients about their appoint-ments, and connects emergency phone calls. The main dif-ferences, however, between the service and a human recep-tionist is that the answering service can quickly and ef-ficiently accomplish tasks one after the other, work twenty-

four hours a day, and does not require breaks or rest periods.

Therefore, using the above applications and more, hospitals can plug out operational inefficiencies and lay more focus on the crucial aspects of patient healthcare. This will lead to better patient turnover, efficient management of scarce medical resources in the country and an improved medical experience for patients.

-----------------------------------------------------------Ishpreet Kaur is a first year MBA Core student at NMIMS, Mumbai. She is from medical background and is a Dentist. Prior to joining NMIMS, she had prac-ticed in a private hospital for one year. You can contact her at: [email protected]

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It is all about the Supply Chain...We must have heard our Operations Management Professor state this very statement umpteen number of times! Unarguably, an effective supply chain does differentiate the extra or-dinary from the ordinary.

A supply chain includes a chain of entities involved in planning, procurement, production and distribution of goods or services and is categorized as: inbound sup-ply chain, in-house supply chain and outbound sup-ply chain. Inbound supply chain involves the ven-dor supplied raw material and in-house supply chain is where this raw material is converted into the final product, which is then distributed to the end custom-ers through the outbound supply chain. Supply chain, be it linear or a network, and its management is inte-gral to every sector’s efficient operations.

The Indian Retail sector contributes to about 10% of our country’s GDP and is divided into unorganized and organized sectors. Unorganized retail sector i.e. the local Kirana stores, hand cart and pavement ven-dors, dominates the market with a contribution of 97%. On the other hand, organized retail sector is in its nascent stage providing investment opportunities for both domestic and international players alike. The term ‘alike’ has a lot of significance here, considering the recent reforms to open up foreign direct invest-ment (FDI) in the organized retail sector. As per the current scenario, foreign investment upto 51% is al-lowed in single brand retailing whereas FDI in multi brand retailing is yet to happen.

FDI in the retail sector has its share of benefits, dom-inant one being the increase in its supply chain ef-ficiency. The factors responsible for this increase would be:

1) Reduction of raw material wastage: Though In-dia is the second largest producer of perishable prod-ucts like vegetables and fruits, only a fraction of the same reaches the end customer. This is due to the de-

mand-supply mismatch of logistics, specifically cold storage and refrigerated transportation facilities. FDI in retail would involve significant investment in the logistics sector in order to improve the above men-tioned facilities thereby reducing raw material wast-age.

2) Implementation of Just-in-time (JIT) mecha-nism: International players would enter the Indian market not just with a huge investment capacity but also with an added advantage of e-commerce. Let us consider Wal-Mart’s example here. Wal-Mart is connected with all the entities of its renowned supply chain using Point-of-Sale (POS) technology coupled with Electronic Data Interchange (EDI).

For the curious folk among us, here is how this works:• Every product at Walmart is given a unique item bar code which is scanned at the checkout counter during billing. • Through this process, the point of sale information regarding the product is stored in a database.• This information is aggregated and sent to a central processing unit where data by location is segregated and sent to suppliers.• Suppliers refurbish these products from their own inventories and a payment is made by Walmart elec-tronically.

A POS system is highly beneficial as it helps com-panies like Wal-Mart maintain just-in-time inventory, reduce their investments in warehouse facilities and provide them with a transparent framework to com-municate & transact with all their supply chain enti-ties. An e-commerce enabled supply chain where all the entities involved are in constant communication also helps in avoiding the much dreaded ‘Bullwhip Effect’. Now, it should be evident to all of us that FDI in Indian retail sector would bring in world’s best practices thereby improving supply chain efficiency to a significant level.

3) Elimination of ‘the middleman’: In India, farm-

Supply Chain Benefits through FDI in Retail

Sagnik BasuNitya MalladiNMIMS, Hyderabad

18

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

4) Cost Reduction: As mentioned above, elimination of middlemen and usage of superior logistics to pre-vent food wastage help in overall cost reduction for the manufacturer. Also, introduction of e-commerce prevents inventory pile-up and stock holding costs thereby reducing production costs for the manufac-turer. Permeating through the supply chain, initial stage cost reduction inturn leads to a significant price reduction for the end customer.

5) Employment Opportunities: Capital outlay in the retail sector by international players would cre-ate a huge demand for human capital. In other words, a boom in this sector will open up several employ-ment opportunities in retail & logistics, distribution and packaging centres, and housekeeping & security divisions. According to the Confederation of Indian Industry (CII), FDI is estimated to increase organised retail market size to $260 billion by 2020. This would also result in an aggregate increase in income of $35-45 billion per year for all producers combined; 3–4 million new direct jobs and around 4–6 million new indirect jobs.

6) Increase in Competition: “Life is like a coin. It has two sides - one positive and one negative”. Car-rying the same philosophy forward, Indian society’s opinion about FDI is two-fold. On one end of the spectrum, we have people who believe FDI would improve supply chain efficiency, provide ample job opportunities and pay farmers righteously. On the other end are people who opine that a boom in the organized retail sector would lead to the demise of the unorganized sector. This would destroy the livelihood

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

7) Increase in Collaboration with Support Indus-tries: Support industries like transportation, ware-housing, inventory management, courier and other valued-added services such as packaging, informa-tion technology, human resources, finance and admin-istration services will see a steep increase in terms of demand once international players make a foray into the Indian organized retail sector.

To sum it up, FDI investment in India is a welcome step as it helps in providing the right product at the right price and at the right time. It streamlines the existing supply chain by improving asset utilization, inventory visibility, and by ensuring that every single entity has access to a uniform source of product and supply chain data. Last but not the least; it helps in developing a shelf centric partnership between man-ufacturers and retailers with the implementation of just-in-time mechanism. Investment of this magni-tude would definitely aid in the top and bottom line growth of the Indian Retail Sector.

-----------------------------------------------------------Both Sagnik Basu and Nitya Malladi are students of first year PGDM at NMIMS, Hyderabad. Sagnik Basu is from Computer Science Engineering background and prior work experience of 7 months as a System Engineer at CMC Ltd. Nitya is from Electronics and Electrical Engineering background and has prior work experience of 36 months as a senior programmer at Accenture. You can contact them at:[email protected]@nmims.edu.in

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

Wholesome edible material intended for human consumption, arising at any point in the FSC that is instead discarded, lost, degraded or consumed by pestsThis article presents a review of food waste issues, combining information on food waste and food supply chain issues.Food waste in the supply chain

At this time, an overall estimate for post-harvest losses of 15 per cent has been sug-gested. Post-harvest losses are partly a function of the technology available in a country, as well as the extent to which markets have developed for agricultural produce. Three inter-re-lated global drivers provide an overall structure for characterizing supply chains and future trends in de-veloping and transitional countries.

• Urbanization and the contraction of the agricul-tural sector: The proportion of the world’s popula-tion employed in agriculture has declined in recent

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

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

A perspective on ‘Food Waste Within Food Supply Chains’

Neha JainSourabh SahuIIM, Indore

20

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

Future trends:In the developing world, lack of infrastructure and as-sociated technical and managerial skills in food pro-duction and post-harvest processing have been identi-fied as key drivers in the creation of food waste, both now and over the near future. This situation contrasts with that in developed countries where our interview-ees forecast the majority of food waste continuing to be produced post-consumer, driven by the low price of food relative to disposable income, consumers’ high expectations of food cosmetic standards and the increasing disconnection between consumers and how food is produced. Similarly, the increasing ur-banization within transitioning countries will poten-tially disconnect those populations from how food is grown, which is likely to further increase food waste generation.

Across the globe, resource and commodity limita-tions, in part as a result of an increasing population but also owing to impacts of climate change, were viewed as being likely to increase the economic value of food, potentially driving more efficient processes that could lead to food waste reduction. Industrialized FSCs will continue to develop in response to these wider challenges by the development of shared logis-tics (e.g. collaborative warehousing), identification and labeling of products (use of barcodes and RFID tags) and better demand forecasting, and domestic kitchen technologies (smart fridges, cookers, online meal planning and recipe resources) may make it easier for consumers to manage their food better and waste less of it.

The greatest potential for food waste reductionImplementing sustainable solutions across the entire

FSC is important to fully realize the potential for food waste reduction. In developing and emerging econo-mies, this would require market-led large-scale in-vestment in agricultural infrastructure, technological skills and knowledge, storage, transport and distribu-tion. Such investments have been shown to stimulate rural economies. Where international markets and lo-cal policies and investment are lacking, large-scale capital investment in infrastructure in developing countries has often failed. For long-term sustainabil-ity, development across the FSC in the developing world requires locally supported government poli-cies and investment alongside any market-led private investment with reach through into developed world markets

Conversely, the greatest potential for the reduction of food waste in the developed world lies with retail-ers, food services and consumers. Cultural shifts in the ways consumers’ value food, stimulated via ed-ucation, increased awareness of the FSC and food waste’s impact on the environment have the poten-tial to reduce waste production. Improved food label-

ing and better consumer understanding of labeling and food storage also have food waste reduction potential. Innovative technology throughout the FSC, in both developed and developing worlds, particularly in packaging, con-tributes to improving shelf life for per-ishable foods and semi-prepared meals.

Continued developments in packaging, e.g. utilizing nanotechnology and materials science, have the po-tential to further increase shelf life.

Policy, systems and practices: In the develop-ing world, transfer of existing technologies and the spread of good practice, allied to market-led invest-ment, have the greatest potential to reduce food waste across the FSC. It is of key importance, however, that practical developments address the problems of local farmers, using indigenous knowledge where that has been shown to be sustainable Without participation of local farmers, such knowledge transfer is unlikely to succeed. While attempts to shift consumer behavior may result in reduction in food waste in developed countries, changes in legislation and business behav-ior towards more sustainable food production and consumption will be necessary to reduce waste from

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its current high levels.

Conclusion:The lack of infrastructure in many developing coun-tries and poor harvesting/growing techniques are likely to remain major elements in the generation of food waste. Irrespective of global region, there is a need for successful introduction of culture-specific innovations and technologies across the FSC to re-duce losses. In the industrialized world meanwhile, post-harvest losses have been squeezed out of grain supply through heavy technological investments, while for FFVs, retailers’ and consumers’ demand for ‘cosmetically perfect’ produce has created significant post-harvest losses through ‘out-grades’. There is also strong evidence of an increase in post-consumer waste over the past several decades, particularly in the developed world, with pockets of data supporting similar behavior in BRIC countries.

The majority of studies show that as the proportion

of income spent on food declines, food waste increas-es. There is clear evidence of a distribution of waste across demographic groups, with the lowest wast-age rates in the immediate post-war age generation. However, it would be a mistake to assume that the demographic distribution will remain the same in the future, as today’s elderly generally exhibit a ‘waste not want not’ mentality, while the elderly of the future are likely to continue to retain the same attitudes and behaviors to food that they have today.

There are clearly fundamental factors affecting post-consumer food waste worldwide, some of which may require solutions that involve direct communication and awareness-raising among consumers of the im-portance of reducing food waste. Others require gov-ernment interventions and the support and coopera-tion of the food industry itself, such as improving the clarity of food date labeling and advice on food stor-age, or ensuring that an appropriate range of pack or portion sizes is available that meets the needs of dif-ferent households.

-----------------------------------------------------------

Both Neha Jain and Sourabh Sahu are students of first year PGPM at IIM-Indore (Class of 2013). Neha Jain has prior work experience at Cisco, she has a keen de-sire to make a career in Marketing. Sourabh Sahu is a fresher and he wishes to be an Entrepreneur. You can contact them at: [email protected] [email protected]

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

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

Did you know?

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Expert Speak

Q. What are the biggest challenges companies are now facing in preventing their costs from escalat-ing?

A. The differentiation between products is no longer feasible or viable. If Nokia introduces a smart-phone with 101 applications, Samsung may introduce a smart-phone with a different price point with another host of features. Firstly the consumer gets confused with all the applications, secondly the value addition at different price-points and thirdly the availability of the product (by which we mean the ease of buy-ing) adds to the confusion. Finally in such scenarios the customer ends up buying that product for which he has a spare charger!!!! If this is true for high end of the spectrum gadgets, what about the products at the lower end of the spectrum like refrigerators, LCD television sets, washing machines & appliances?

Thus slowly the products are being commoditised and the reasons for buying a specific product are inconsis-tent. To overcome this, the companies have to invest in celebrity endorsements, advertising campaigns & activities related to ‘Brand Equity’. This is the big-gest challenge companies are now facing as develop-ing Brand Equity is costly propositions & the returns are not commensurate.

Q. What are the key measures a firm would take in order to reduce its operational expenses?

A. As explained above the activities relating to “Brand Equity” are costly and returns are not in line with the expectations. In my opinion the key measure that a firm should take to reduce its operational expenses is to INVEST in “Distribution Equity”. Consider an example –I want to distribute some pamphlets pro-moting my product & there are two newspaper ven-dors in a locality, who can help me, reach the pam-phlets to every household in the target market. The first newspaper seller distributes newspapers daily in about 1000 households whereas the second newspa-per seller distributes newspapers daily in about 2000

households. Whose services would I avail to reach my target audience? The answer obviously is the second newspa-per seller who has a wider reach. This is precisely the concept of “Distribution Equity”. Further the “Brand Equity” is in the minds of the consumer, whereas the “Distribution Equity” is in the hands of the firm. Thus over a period of time an organisation can reduce its operational expenses by investing in Distribution net-work so that the products required by the consumer can be delivered in the shortest possible time.

If we are looking at multiple solutions to reducing the operational expenses then it should also consider an effective distribution system for suppliers, as well. One of the primary reasons for success of Anand Milk Union Ltd., (AMUL) is that its suppliers & customers are within the reach of the organisation.

Q. What do you think are the key differentiating factors between a successful and a not so successful firm especially in periods of industrial setbacks?

A .

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

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tion. The only difference between periods of setbacks and growth is that during the growth phase everything passes muster & the customer’s voice is either mut-ed or not heard. During the industrial setback phase only superior products pass muster and the customers voice gets heard & hence the impression that there is a need for a different approach during periods of setback.

Having said that in my opinion the key factors which differentiates between a successful and a not so suc-cessful firm is a focus on customers, value additions, constant monitoring & reduction of costs and atten-tion to long term vision. If development of the supply chain requires investment & hard work and is expect-ed to give returns after 3 or 4 years, the same should be done & not differed in pursuit of near term gains.

Q. How do you see the profession of Operations Management developing in the future? Any spe-cific fields that you think will be affected by the change more than the others?

A. Operations Management is very key to success-ful running of any business whether in product or in service. The saving from efficient running & reducing wastes contributes directly to the bottom line of any company. Increasing the top line by higher sales is much more difficult because you have to compete in the market along with other players. However opti-mum running of businesses is entirely in-house which should be far simpler.

Within Operations any inputs on reducing materi-als cost or costs due to materials like transportation, movement, warehousing, inventory, material han-dling offer much scope for improving the efficiencies of any business.

Q. What is your advice to students who are looking to get into the field of Op-erations Management?

A. My sincere advice to all the students looking to make a career in the field of Operations Manage-ment is that this field is

an exciting field with endless opportunities / possi-bilities. This field is not all that glamorous (yet!!) but significant achievements are possible and documents results can be seen. Most successful companies like DELL, Wal-Mart, ZARA apparel, Metro Cash & Car-ry, 7 – Eleven are examples of excellent operations management giving the businesses the cutting edge.

-Prof. Pradeep Pai

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Prof. Pradeep Pai, Associate Professor, CIMR Mumbai has an industrial experience of almost 20 years in the fields of production, materials, sales and HR. He has recently authored a book on Operations Research to be published by Oxford University in March 2012.

1. Type I Error

2. Cyclical

3. Exponential Smoothing

4. Generic Benchmarks 5. More than One

6. Work Sampling

7. Assigning job to persons 8. Less dependence on suppliers

9. Television

10. Machine Center

11. Terms of Trade Argument

Answers to Quiz

24

Deconstructing OpsThrough the Lens of the Supply Circle

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

The shirt you wear goes through a supply chain at home. Depending on how things work in your house, you may leave the shirt for washing in the laundry basket. From collection from the basket to washing, drying, ironing, folding and placing in the wardrobe the shirt goes through a whole supply chain. Multiple stakeholders are involved; tools are used, practices setup and so on. Now let us look at how habits and established processes are linked.

1. Distance of the laundry basket from the bath-room determines its usage frequency: For lazy people like me the laundry basket being close to the bathroom means clothes that need washing, regularly find themselves in their rightful place – the laundry basket. If the basket is placed elsewhere the clothes may find themselves lying on some chair in the house. The distance from the bathroom of the laundry basket impacts the discipline in the house!

2. Person in charge of the last leg of the chain de-termines frequency of misplaced clothes: If the dried clothes or ironed clothes are all collected to one place in the house and if each member carries his own clothes to the wardrobe the chances of misplacing clothes are almost nil. Instead if an adamant mother decides to put away all the clothes herself to their re-spective wardrobes there are chances of some clothes landing up in the wrong wardrobe. You can imagine then the turmoil of finding it on a Monday morning! So we have seen how a simple design issue and a de-marcation of responsibilities can impact the efficien-cy of an entire supply chain. Minimal changes to such

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

One way I visualise sup-ply chains is by actu-ally looking at them as supply circles instead. I consider the source of items and their end to be ideally the same. For example a banana grown off the ground would decay and be re-turned to the earth. This forms a supply circle. This concept can be extended to all items.

The next step is to identify all the supply circles around us. For instance, if you left behind a plastic wrapper at a picnic spot, is it out of its supply circle? Most probably it is because it will not really be re-turning to the source where it came from given the complexity involved in making a plastic wrapper. In-stead if you dropped the wrapper on the floor at home, is it out of the supply circle? No it isn’t, because it will be collected and disposed off when the house is swept. Now assuming the disposal system is an ideal one the wrapper’s supply circle is completed.

Visualising these supply circles around us can help us improve efficiencies of these circles. The next time you drop some-thing on the floor, never mind picking it up! Use that energy and time elsewhere. Although it sounds absurd in the home scenario it is such

Vinay ArunNMIMS

25


frugal measures that can make the difference between inefficient and efficient on a shop floor.

I would like to re-emphasis frugal innovations and their relevance. Any saving in a world that has increased demand for resources is welcome; when this saving comes at minimal cost it is ideal. You can learn more about frugal innovations by researching Dr. Anil Gup-ta’s work on the topic or by browsing through the Honey Bee Network database for frugal innovations recorded from many parts over a long period of time.

Now coming back to supply circles, being able to visu-alise supply circles around us will enable us to enforce

frugal innovations in the way things work around us. In fact when you are aware of supply circles the way you view the world changes and it influences your behaviour and habits. For example, being aware of the solid waste supply circle will make one realise the importance of segregating waste at source. Segrega-tion at source cannot get any simpler; it is only a habit with no training or investment required. It only needs to be cultivated, but it has the potential to reduce our current landfills by a whooping 90%! Imagine the scale of efficiency achieved through a habit adjust-ment.

In an event I had recently attended a speaker from IIT Madras drew the attention of the crowd to the amount of water used to only wet our hands before we apply soap to wash our hands. Technically speaking 5 ML of water is sufficient to wet our hands but we typically use up to 300 ML of water under a running tap for the purpose. Imagine how much water can be saved if the ratio of soap to water in a liquid soap bottle is tweaked, such that one does not need to wet their hands prior to using the soap. Awareness of the fresh water supply circle in our cities will help one under-stand the magnitude of the importance of water con-

servation.

Now let us extend the supply circle further beyond tangible objects. The act of driving to work and back in a car is a supply circle too that supplies transporta-tion. In terms of energy this usually turns out to be a very expensive supply circle. Let us assume a dis-tance of 10 kilometres in an average sedan. A 1,000 KG vehicle is used to carry a 75 KG person using up to 3 litres of fuel! This when fuel of only 500 grams may more than suffice to carry the core load due to its inherently high calorific value (say petrol). When you look at it this way you realise the incredible inef-ficiency built into the system by virtue of its design itself. There are many ways of efficient transporta-tion; perhaps viewing transport through the supply circle lens will help people adopt the cleaner modes of transport.

I feel being able to view the world through the lens of the supply circle can have a great impact on one’s behaviour. When you consciously attach a source and an end to all objects around you, it becomes easier to understand their supply chains. It can inculcate hab-its that enable savings in terms of money, time and energy. Hopefully, as everyone starts realising the supply chains around us, it would also drive a sense of responsibility among people and corporations. We may then find that corporations are required to have measures to control the way their creations end up after their life time. If this happens it will be a revolu-tion in terms of sustainability and efficiency. And it is the small savings they create, that will add up to be the next big thing in human civilisation.

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Vinay Arun is a student of first year MBA Core at NMIMS, Mumbai. He is from Electronics and Commu-nications background and he has prior work experience in IBM and Accenture. You can contact him at: [email protected]

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Knowledge CornerSingle Minute Exchange of Die

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

Traditionally firms regarded setup time as one of the most expensive cost they had to face and preferred minimization of the number of setups by opting for very large production lots. Let us first see the effect of lot size on the overall operation time. This can be seen from the table below where the change-over and processing time per unit are held constant whilst the lot size is changed. The Operation time is the unit processing time with the overhead of the change-over included. The Ratio is the percentage increase in ef-fective operating time caused by the change-over.

Change-over time

Lot size Process time per

item

Opera-tion time

Ratio

8Hrs 100 1 min 5.8 min 580% 8Hrs 1,000 1 min 1.48 min 48% 8Hrs 10,000 1 min 1.048 min 5%

It can be clearly seen that as the lot size increases, the operation time per unit reduces. But producing in large lots has inherent capital costs, meaning the amount invested in inventory. In addition to this cost, there is an opportunity cost of not producing the prod-ucts that are immediately required for dispatch. These disadvantages make the production in large lot sizes an undesirable option. Hence it is always advisable to keep the lot sizes as optimal as possible and in turn try to reduce the change over time as much as possible.

Let us assume that the setup time of a certain machine

takes 3 hours, its cycle time per component is 1 min-ute where the lot size is of 100 units. If the cost of the machine 0.8 $/min, then the production cost per unit is:

Unit cost = ((Setup Time/ Lot size) + Production time)*0.8 = ((3*60/100) + 1) * 0.8 = $2.24

If the setup time is reduced to say 9 minutes from 3 hrs, it would be possible to obtain a cost of $0.87 per unit. On the other hand, if we maintain the same setup time, than in order to obtain the same cost per unit, we would have to increase the lot size from 100 units to 1997 units which is undesirable as already mentioned. In the case of firms that produce a large diversity of products, the batch quantity is usually small which results in more frequent tool changes. This calls for reduction of setup time by eliminating waste and by converting idle setup time into regular production time, through process innovation.

SMED refers to the theory and techniques used for the reduction of equipment setup times. The concept arose in the late 1950s and early 1960s, when Shi-geo Shingo, chief engineer of Toyota, was contem-plating Toyota’s inability to construct vehicles in maximally efficient economic lots. Over a period of several years, under the guidance of Shingo, Toyota reworked factory fixtures and vehicle components to maximize their common parts, minimize and stan-dardize assembly tools and steps, and utilize common tooling. Wherever the tooling could not be common, steps were taken to make the tooling quick to change.

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

Balajee SNMIMS

27


hours to three days.

The first improvement was to place precision measurement devices on the transfer stamping machines, and record the necessary measure-ments for each model’s die. This immediately cut the change-over to a mere hour and a half.

Further observations led to further improve-ments: Scheduling the die changes in a standard sequence, dedicating tools to the die-change process so that all needed tools were nearby and scheduled use of the overhead cranes so that the new die would be waiting as the old die was removed. Using these processes, Toyota engi-neers cut the change-over time to less than 10 minutes per die. Yes!!! You read it right. From 3 days to just below 10 minutes and thereby re-duced the economic lot size below one vehicle.

According to Shingo, SMED should be implemented in four different phases

A. OBSERVE the current process and record it.

B. Separate the INTERNAL activities from the EX-TERNAL ones. Internal activities are those that can only be performed when the process is stopped, while External activities can be done while the last batch is being processed. For example, get the required tools for the next job BEFORE the machine stops.

C. Convert, wherever possible, internal activities into external ones (pre-heating of tools is a good example of this).

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

Finally, do it all again. After every iteration of the above process, a 45% improvement in set-up time could be expected. Hence it may take several itera-tions to cross the ten minute line.

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Balajee S is a first year MBA Core student at NMIMS Mumbai. He has prior work experience of two years as a Production Engineer in ELGI Equipments Ltd. You can contact him at: [email protected]

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

and entrepreneurs can come together to develop new manufacturing technologies with broad applications,” according to the budget submission.

o AP(R) partner Netfira to demonstrate Netfira En-terprise Buyer and technology partner, announced it will exhibit at the Logistics and Supply Chain Manage-ment 2012 conference, March 19 to 22 at Walt Disney World(R) in Orlando, Florida.

News Corner

28

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

For example if we take a look at the landmark project of the Bandra Worli Sea link in Mumbai, we would appreciate the engineering marvel which is estimated to save vehicle operating costs to the tune of Rs. 100 crores per annum due to reduction in congestion on the existing roads and lower vehicle operating cost on the bridge ultimately reducing pollution. It is claimed that the bridge would result in lower traffic conges¬tion thereby improving the environment, es-pecially in terms of reduction in carbon monoxide, oxides of nitrogen and noise pollution. But is everything as rosy as we see it?

“Land Reclamation and construction of a bund for the Bandra-Worli Sea Link in the downstream re-gion of Mahim creek have caused erosion along the Worli shoreline, endangering the lives of thousands of fish¬ermen” - says a recent ecological assessment. Startling facts came to light in a survey conducted by scientists of the Bombay Natural History Society (BNHS) since August this year. The blocking of tidal water near the mouth of Mahim Creek has already resulted in chang¬es on the level of seawater in the area. BNHS Principal Scientist Sanjay Deshmukh,

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

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

Apart from shoreline changes, unsustainable reclama-tion has also led to degradation of the mangroves in

Optumiz Opinion Nishant ChotaliaNMIMS

29


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

The project has constricted the mouth of the city’s Mithi River due to reclamation. The river is the city’s biggest storm water drain. The damage caused by the Mithi River flooding is probably going to be around $460 million - at least twice the cost of the Bandra- Worli project when it was approved, says Sahgal, a well-known environmentalist and editor of Sanctuary

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

livelihood of the fishermen. Nearly 2500 fishermen families in the areas of Mahim and Bandra have been affected due to this project. The environmental impact of the project on the city’s coastline, mangrove forests and marine ecology are worthy to be taken account of economically. Another example - when we talk about ‘Vibrant Gu-jarat’, we should also look at the other side of indus-trialization - the continuous depletion of land for ag-riculture. The state government grants industries land but this land was formerly used by farmers to grow our food. What is the ideal trade off between land un-der agriculture and under industries?

The modern temples, meaning the dams and facto-ries built in free India definitely uplifted us to self-depen¬dence but the sacrifice of thousands of villag-es is worth considering. The Hirakud dam in Orissa alone displaced 150 villages which were never com-pensated or reha¬bilitated to their satisfaction. The same story probably contin¬ues even now.

So do we think that efficiency at the cost of nature is viable? It is our responsibility to design our efficiency like clockwork while also maintaining nature’s sus-tainability. While we design our systems, processes and lifestyles we need to keep this in mind.

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

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

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

News Corner

33


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Catena Aurea - March 2012

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