Operations Final Ppt
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Transcript of Operations Final Ppt
Global Operations and Logistics
By - Philippe-Pierre Dornier, Ricardo Ernst, Michel Fender, Panos Kouvelis
Group No. 10Rahul Nair
Rahul RastogiJerry TomyNimit Shah
Chintan ShahRahul Ram Kasture
Operations and Logistics
Operations It is Physical process Accepts input and transform into valuable output To meet customer’s need
Logistics It is a management of flows It is between business functions Flows from companies to market
Direction of the Flow
Flow Management
Environmental Factors affecting Flow Management
Market – It change under the influence of several factors Competition Technology – it change logistics in the form of
manufacturing innovations, e.g. barcodes Government Regulations – environmental regulations
Basic Principles of Global Operations
Geographical IntegrationFrom Local to Worldwide logistics
Functional IntegrationFrom function-dominated logistics
to flow-dominated logistics
Sectorial IntegrationFrom a sector-based logistics
(producer/distributor) toInter-sector logistics
Global Logistics & Operations
Management
Dynamic Forces of Logistics
Resource-oriented logistics (Capital, materials and people)
Information-oriented logistics (Availability of products, time to deliver and customer needs)
User-oriented logistics (Final Customer)
Competitive Framework for Operations and Logistics
Suppliers Quality
Cost Flexibility
MyCompany
CustomersSuppliersMarket
Response
Competitors
Understanding the customer
Lot size Response time Service level Product variety Price Innovation
Why Some Organizations Fail
Too much emphasis on short-term financial performance
Failing to take advantage of strengths and opportunities
Neglecting operations strategy Failing to recognize competitive threats
Why Some Organizations Fail
Too much emphasis in product and service design and not enough on improvement
Neglecting investments in capital and human resources
Failing to establish good internal communications
Failing to consider customer wants and needs
Planning and Decision MakingMission
Goals
Organizational Strategies
Functional Goals
Finance Strategies
MarketingStrategies
OperationsStrategies
Tactics Tactics Tactics
Operatingprocedures
Operatingprocedures
Operatingprocedures
Banks, ATMsConvenienceLocation
DisneylandNordstroms
Superior customer service
Service
Burger KingSupermarkets
VarietyVolume
Flexibility
Express Mail, Fedex,One-hour photo, UPS
Rapid deliveryOn-time delivery
Time
Sony TVLexus, CadillacPepsi, Kodak, Motorola
High-performance design or high quality Consistent quality
Quality
U.S. first-class postageMotel-6, Red Roof Inns
Low CostPrice
Examples of Operations Strategies
Global Strategy
Strategic decisions must be made with respect to globalization
What works in one country may not work in another
Strategies must be changed to account for these differences
Other issues Political, social, cultural, and economic
differences
Strategic OM DecisionsDecision Area Affects
Product and service design Costs, quality liability and environmental
Capacity Cost structure, flexibility
Process selection and layout Costs, flexibility, skill level, capacity
Work design Quality of work life, employee safety, productivity
Location Costs, visibility
Quality Ability to meet or exceed customer expectations
Inventory Costs, shortages
Maintenance Costs, equipment reliability, productivity
Scheduling Flexibility, efficiency
Supply chains Costs, quality, agility, shortages, vendor relations
Projects Costs, new products, services, or operating systems
Traditional versus New Supplier Partnerships
Traditional Approach Primary emphasis on
price Short-term contracts Evaluation by bids Many suppliers
Supplier Partnerships Multiple criteria Longer term contracts Intensive and extensive
evaluation Fewer selected suppliers
Traditional versus New Supplier Partnerships (contd….)
Traditional Approach Improvement benefits
shared based on relative power
Improvement at discrete time intervals
Problems are suppliers responsibility to correct
Information is proprietary
Supplier Partnerships Improvement benefits are
shared more equitably Continuous improvement
is sought Problems are jointly solved Information is shared
Reasons for Outsourcing
Strategic Reasons Improve business focus Gain access to world class facilities Accelerate re-engineering benefits Share risks Free resources for other purposes
Reasons for Outsourcing
Tactical Reasons Reduce or control operating costs Make capital funds available Create cash infusion Compensate for lack of internal resources Improve management of difficult or out-of-
control functions
Criteria for consideration of a component for outsourcing
Which products/components should be outsourced?
What criteria should be used for supplier selection?
How might these factors change across the life of the main product?
Example: Criteria used by Bose Corporation
A mature, trusting relationship exists with the best supplier in the category
The supplier has a good engineering capability The volume in the product category exceeds $1
million The product category involves many transactions,
creating a need for an in-plant representative The technology in the category is not changing at a
revolutionary pace The category does not involve proprietary or core
technologies
The Strategic Importance and Criticality Matrix
NOVELTY(Outsource/In-
house)Technology
QualityService
PROPRIETARY
(In-house)Technology
Quality
COMMODITY
(Outsource)Price
UTILITY(Outsource)
Co-operation
Service
High
High
Low
Low
Strategic value of the part in isolation
Criticality of the part to final assembly
Dynamic Evolution with the Product Life Cycle
Resource capability factors Service factors Price factors Environmental factors
Dynamic Evolution with the Product Life Cycle
Stage i
Stage ii
Stage iii
Resource capability Service Price
Product Life cycle
Raw Material
Intermediateproducts
FinalProducts
Delivery to Customers
Activities
Purchase
Manufacture
Logistics
Distribution
Transport
Linear Supply Chain
Supplier
Manufacturer
Wholesale
r
Retailer
Bullwhip or Whiplash Effect
Perceived demand seasonality and forecast error can increase as we proceed upstream in the supply chain. This phenomenon is known as Bullwhip or Whiplash effect.
X
Y
Z
Customer
Effects of Bullwhip Effect
InefficiencyExcessive InventoryDissatisfied CustomersLost RevenueIneffective Production Schedules
Behavioral causes of Bullwhip
Individual Decisions
Types of Incentive
Non-Behavioral causes of Bullwhip
Demand Forecast Updating
Order Batching
Price Fluctuation
Rationing & Shortage Gaming
Remedies Information sharing across supply chain
linksLead time reductionBetter product allocation facilitiesPenalties on order cancellationReduction in processing costsContinuous Replenishment Programs
Uncertainties in Global Supply Chain
Substantial Geographic DistanceForecasting Difficulties &InaccuraciesExchange Rate UncertaintiesInfrastructural InadequaciesExplosive Dimensions of Product
Risk Management in Global Operations
Jerry Tomy(161)
Exchange Rate Exposure36
Degree of Exposure to Exchange rate
Source of firm’s inputs, including financing Location of the firm’s final markets Location of production
Global operations and logistics Text and cases
Types of Foreign exchange exposure37
Characteristics Transactions/Translational Operating
Nature of exposure Contractual/ Accounting Future operating cash flows and competitive
Financial items considered
Contractual and asset valuation: Debt, payables, receivables
Non contractual :Revenues, costs and profits
Inputs to measure exposure
Accounting statements/ contracts
Future operating cash flows and competitive position
Exchange rates that affect profit
Nominal Real
Global operations and logistics Text and cases
Types of foreign exchange exposure Transaction exposure Translational exposure Operating exposure
Factors complicating the estimation of operating exposure
1. Customer Reactions2. Competitor Reactions3. Supplier Reactions4. Government Reactions
Global operations and logistics Text and cases
38
Managing Operating Exposure
Development of a global network of production facilities with excess capacity
Development of a portfolio of global suppliers
Design of flexible, creative and fast product development processes
Ability to select and expand product line for various markets
Global operations and logistics Text and cases
39
Managing Operating Exposure (contd…)
Development of flexibly structured supplier and the distribution channel selection
Pricing strategies for exporting firms Exchange rate pass-through pricing policies Pricing adjustments to preserve market share
Use of operational flexibility to minimize operating exposure
Global operations and logistics Text and cases
40
Strategies for managing exchange rate risk
Forward contracts
Futures contracts
Options
Global operations and logistics Text and cases
41
INFORMATION MANAGEMENT FOR GLOBAL LOGISTICS
INTRODUCTION
• Physical flow of Information – An Important Logistics Management Tool
•USES1.Forecast, Anticipate & Plan2. Operations traced in time – Product location 3.Control & Report
•Trend to invest in : Data Processing Information system Telecommunication Resources
to manage Physical flow
• Customer satisfaction through: Info about the physical distribution or supply operation Ability to transmit that Information
ROLE OF INFORMATION
• FOR CUSTOMER SATISFACTION- location of goods
•FOR PROPER UTILISATION OF RESOURCES- time & place utility
• FOR SHARED PLANNING- various functions related
•TO REDUCE SHORTAGES- forecast demand
•TO SPEED UP THE AVAILABILITY OF NEW PRODUCTS- JIT
•FOR PRODUCT RANGE OPTIMIZATION- supply as per outlet turnover
•EVALUATION INFORMATION- success or failure of product to avoid stocking
LOGISTICS INFO & TELECOM SYSTEM (LITS)
It is the centerpiece of the LIS for global operations. It is a critical factor for the internal efficiency of the operations & logistics organization & for the overall services provided by logistics. It plays an important part in firms sales & productionIt encompasses flow monitoring across the full chain of logistics activity.
ROLE:
1. Disseminating logistics info across-• multiple geographical sites• different functions• various sectors
2. Monitoring & informing about • Efficiency of logistics operation• Quality of production• Quality of logistics services
PROCESSCapture the basic Data
Transfer data to handling & processing centers
Stores the basic data as necessary
Processes the data into usable info
Stores the info as necessary
Transfers the info to users
Looks after all the processing steps for flow of products within the constraints of service level & costs
• Cost reduction in mgmt of materials flow cycle• Efficient flow of products
Makes database & implements decision support tools to manage resources
• Optimize the physical resources put in place all along the logistics chain• Maximum efficiency
Provides feedback to logistic performance control
• Follow up operational performances
Provide decision-making tools for management
• Saving of time & money
FUNCTIONS & USES OF LITS
CHARACTERISTICS OF LITS
1. VISION FOR THE CUSTOMER Customer service neglected to optimize cost- Provide all indicators needed to know how the logistics process works per
customer .
2. ACCURACY OF DATA Data chosen should capture reality
3. RELEVANCE OF DATA OVER TIME Synchronize data
4. ADAPTED TO DIVERSITY OF PHYSICAL FLOWS Different solutions for different customers, products, markets, etc
5. CAPABILITY FOR MOBILITY Change with geographies or technology
FUNCTIONAL DIMENSION OF LITS
FUNCTIONS INFO REQUIRED PURPOSE
Finance Purchase, sale & inventory in transit
To provide for finances
Production Stock with various intermediaries
To evaluate demand & then produce
Sales & distribution
Tracking of goods
Place & time utility
LITS RELATED TO USERS
USERS FUNCTION INFO REQUIRED
Top level logistics mgmt
Strategy & monitoring Aggregate data
Operational mid-level mgmt
Short-term planning & operational control of
activities
Data for specific activities
local logistics level
mid-term monitoring (1.5 yr)
Data for managing activities for a small period
of time
Basic logistics operation
Data entry, transfer & transmission Detailed data-all
Outsider Individualistic As per their requirement
TRANSFER OF INFO UNDER LITS
CATERGORIES INFO REQUIRED PURPOSE
Suppliers Requirements of manufacturer
Delivery of material
Manufacturers Status of raw material & demand for goods
Plan manufacturing
DistributorsRe-placing
ordersDemand & sale
Logistics service providers
Timely delivery orders, documentation ,etc
Clearing & delivery orders
customer Availability of products-place & time
Customer satisfaction
USING NEW TECHNOLOGY-LITS
• It helps in overcoming the challenges in integrating the 3 dimensions- functional, geographical §orial .
•Only facilitates operations but not sufficient to set up a global logistics organization
• Helps in listing, storing, transferring & transforming data & information.
• Technologies supporting LITS:Code barsCD-ROMSGlobal Positioning System (GPS)Electronic Data Interchange (EDI), etc
•ADVANTAGES: Info more reliable Industrialize processingSpeed up info transfer
Performance Measurement and Evaluation in Global Logistics
The Relationship Between Desired Level of Service
Minimization of Logistics Costs
Monitor the Cost Elements
Procurement costs for raw materials, components, and subunits
Purchase cost for raw material, components, and subunits.
Production costs Sales price of finished goods
Types of Logistics Responsibility Center
Production Cost Center Discretionary Cost Center Income Center Investment Center. Profit Center
Cost Accounting Methods in Logistics
Total Cost Method Direct cost method Standard cost method
Measuring Performance in Functional Integration
Length of the operation The sum of quantities ordered The number consumed The number broken, creating loss The number left over, extra logistic cost The number of days blocked The number of extra days necessary for
selling excess inventory
Metrics for measuring performance
Efficiency of the managerial function involved
Adaptability to customer requirements. Adaptability to market requirements
Objective of Metrics
Measuring the volume and logistics performance
Setting goals and comparing situations Following a market plan Determining the leavers Revealing the degree of flexibility Leading mobilizing and managing personnel
Principles of Metrics Design
Arranging indicators by priorityBased on importance and performance
Segmenting the metricsClassify according to constraints, product types, market types
Visualizing the function content Clarifying objectives of the function Selecting indicators that deal with quality Formatting the metrics effectively
Measuring Performance in Sectorial Integration
Timeliness of Project steps Effective Consumer Response Introduction of promotions Improved use of shelf space Adapting packaging facilities
Performance Measurement of Logistics Service Companies and Third-Party Logistics
Develop Monitor Indicators of performance Data Collection
Organizational structure for Global excellence
Centralization Formalization Specialization/Differentiation