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Production and Operation management

Submitted to Prof. Ravi Kumar

Submitted by Hitesh Goyal
Batch PGPRM-9
Reg. No. BLR 0903071001
Word count

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Executive Summary:

The area and target of study:

This assignment primarily focuses on the operations strategy, competitive dimensions, and
project management such as Customer Relationship Management, Supply Chain Management,
Enterprise Resources Planning and Six Sigma with IBM.

Objective of study:
The main objective of doing this report is to understand the concept of Production and Operation
Management theory which I have learnt and how an organisation can maintain its success to use
Customer Relationship Management, Supply Chain Management, Enterprise Resources Planning
and Six Sigma.

Methodology:
I have used secondary data which includes academic literature books, e- books, relevant websites
and journals review to understanding the concept and complete this report.

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Overview of company:

International Business Machines (USA based Corporation) is the biggest computer maker and
seller of modern business solution software to many iconic companies all over the world. IBM
has operation with 10,000 companies from 2,500 industries in 50 countries . It deals in Global
Services, Hardware Systems, Personal Systems, Technology Group Software, and Enterprise
Investments. Not only it provides Customer Relationship Management (CRM), Supply Chain
Management (SCM), Enterprise Resources Management (ERP) solutions software to other
organisation but also uses to deals successfully its operation through all over the world.

History:

 In 1900, it was formed as the name of The International Time Recording Company (ITR)
 In 1914, it changed its name to The Computing-Tabulating-Recording Company (CTR)
 From 1924, it has been known as International Business Machines Corporation (IBM).
 In 1952, IBM introduced the IBM 701, the first vacuum-tube based large computer
 In 1957, IBM introduced the IBM 305 Random Access Method of Accounting and
Control (First computer disk storage system)
 In1957, IBM introduced the first computer disk storage system
 In 1971, IBM introduced the floppy disk
 In 1975, it introduced Consumer Transaction Facility before Automatic Teller Machine

IBM India:

IBM has been present in India since 1992 (re-entry, after an exit in the 1970s). IBM has
expanded its operations considerably with regional headquarters in Bangalore and offices in 14
cities including regional offices in New Delhi, Mumbai, Kolkata and Chennai. Today, the
company has established itself as one of the leaders in the Indian Information Technology (IT)
Industry. IBM has established Global Business Solution Centre, Business Transformation
Outsourcing Centre, Services Innovation and Research Centre, Engineering & Technology
Services Centre which allow IBM to collaborate with about 60,000 consultants in 55 key
business areas such as Supply Chain Optimisation, Banking Risk & Compliance, Product
Lifecycle and Consumer Driven Relation Management software.

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Literature review:

Service and Operations strategy: High costs, low productivity, inefficiency and antiquated.
These are all main problems with an organization which does not have effective operations
strategy. So, when organizations want to improve their productivity and operational innovations,
they consider most on making their operations more effective. This includes good customer
service, applying technology to increase production efficiency (Operation vs. strategy: trading
tomorrow for today, 2008). If a company has answers of these questions then they have effective
operation strategy:

 How can our business create an operational foundation for growth?

 How can we prepare for global integration?
 Is our network aligned to handle future operational demands?

Competitive dimensions: It concerns price, quality, delivery speed & reliability, holding
demand and new product introduction for instance IBM business solution software packages,
computer and quality service hold worldwide demand for its finest service (Operations
Management for Competitive Advantage, 2008).

Trade–offs: Plant-within-a-plant relates in different products lines has their own operating
strategy for example IBM has separate operation strategy for its Strategic Business Unit (SBU)
such as it has Globally Integrated Operations for Business Solution Software, Lean Sigma, Green
Sigma™ and Branch Transformation Toolkit for Web Sphere Studio (IBM Strategy and Change
Services, 2009)

Straddling maintains existing position and adds new features, services or technology such as
IBM introduced CICS Transaction Gateway for financial transaction for financial corporation
but this year it introduced Enterprise Suite Accelerator for retail sector where it add new feature and
industry (IBM Operation Strategy, April 2009)

Quality Management (Six Sigma):

Six Sigma is a data-driven approach to process improvement aimed at the near elimination of
defects from products, processes, and transactions. Developed by Motorola in the 1980s, Six
Sigma helps customers gain breakthrough knowledge to improve processes and get things done

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better, faster, and at lower cost. It improves every facet of business that is concerned with cost,
timeliness, and quality of results.[ CITATION Rav06 \n \l 1033 ][ CITATION Rav06 \l 1033 ].

Define: It describes the problem statement and assists to design the map structure for problem
solving process, value, required resource etc.

Measure: This method provides to approve the project, maps with Pareto analysis and completes
measure with baseline process.

Analyze: It analyzes through potential components, graphs, regression, hypothesis etc. However
it assists to root work for project implementation in terms of the pinpoint, time delays, and
defects analyze.

Improve: It applies for eliminate defects in terms of quality and speed process for on-time delivery.

Control: The final process achieves the level of required quality and monitors, trains, control the project .

Enterprise Resource Planning (ERP):

The software solution covers information system in a firm’s all functional area to achieve the
organizational goals. ERP reduces the costs and save the time. SAP and Oracle shares majority
market in global level[ CITATION Seb06 \n \l 1033 ]

Advantages

 Internal departments can work independently that reduces financial, and paperwork
 Efficient customer Service and response in terms of facilities, queries and payments

Disadvantages

 ERP consumes huge and excessive investment that creates high risks
 It needs proper implementation and training to utilize

Customer Relationship Management (CRM):

Companies in every industry face an almost same problem that how to reduce operating costs
and maintain same profit. In current scenario, customers demand more service, more
convenience and more personalized communications. Businesses must maximize every
interaction with their customers to make positive impressions and drive loyalty and
preference[ CITATION Bry08 \n \l 1033 ] Stages of Customer Relationship:

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The Pre-relationship Stage: The experience generates a customer to seek a new business
partner.

The Early Stage: Experience is building between the customer and hotelier although a great
degree of uncertainty and distance exists.

The Development Stage: Increased levels of transactions lead to a higher degree of commitment
and the distance is reduced to a social exchange.

The Long-term Stage: Characterised by the companies’ mutual importance to each other.

The Final Stage: The interaction between the companies becomes institutionalized. The sales
were doing integrated relationship with customers.

Sales people with customer relationship: All the internal and external departments with highly
trained employees are performing in the firm to create effective relationship.

Supply Chain Management (SCM):

Today in complex global network, understanding the various paths and pitfalls of change is
critical for supply chain managers. Supply-chain management is a total system approach to
managing the entire flow of information, materials, and services from raw-material suppliers
through factories and warehouses to the end customer (Robert, B. 2008).

Effective Supply Chain Management (SCM) strategy can help a company to fulfil customer
demand fast by keeping small supply chain process. From manufacturing to retail, it helps
monitoring and providing inventory at low cost. With Supply Chain Management (SCM) a
company can promote, cross-sell, up-sell, replenish and close out, on short notice. [ CITATION
JSe01 \n \l 1033 ].

Measuring Supply-Chain:

Cost of goods sold

Inventory turnover=
Average aggregate inventory value

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Key finding analysis:

Service and Operation strategy of IBM: Operations Strategy is one of the four competencies in
IBM. Other three are Business Strategy, Organization Change Strategy and Technology Strategy.
IBM has operation across 55 countries. Their effective service and operation strategy allow them
to sustain in market as a leader and spread their operation all over the world. Not only they use
operation strategy but also they implement it for other organizations. It has separate The Global
Business Services operations department which has nearly 3,500 strategy professionals worldwide,
working across all major sectors, IBM has business expertise across more than a dozen industries
includes communications, distribution, financial services, and public sectors. Some of IBM
clients which made their Operation Strategy by IBM are Panasonic, America Online, Honda
Motor Co. and Ford Motor Company[ CITATION Abo09 \l 1033 ]. Some strategies used by IBM:

Lean Sigma, Green Sigma™: It helps them to create sustainable competitive advantage,
generate savings, and continuously it improves productivity.

Globally Integrated Operations: It helps them to increases the market share.

Innovation and Services Management: It helps to drive growth and increase market share.

Operational improvement and efficiency: it helps to reduce costs and improve the output quality.

Quality Management (Six Sigma):

IBM is using Green Sigma and Lean Sigma which comes under Six Sigma to create sustainable
competitive advantage, generate savings, and continuously improve its productivity. In the same
way, IBM has launched Rational Portfolio Manager. It is software which helps them to measure
financial performance including increasing revenues and margin, reducing costs and positioning
for future growth. It tracks all project, budgets, tasks, changes, risks, and issues at one central
location and enables globally spread teams to communicate, track project costs, progress, and
team performance over a secure Web connection. By the help of it IBM, captures, organizes and
publish Six Sigma methodology Additionally, the method content can be easily modified and
updated in a controlled way as the Six Sigma process itself is improved over time. [ CITATION
Exc05 \l 1033 ]

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Supply Chain Management (SCM):

Usually if a company has operation in many countries then it increases the supply chain and
consumes more time to deliver the product or service to final customers. As IBM spreading out
its operation in new countries, its process of supply chain is becoming more and more complex
and complicated but due to good technology and software solution its Stock turnover ratio is 19.2
times which is considered good (The Financial Express, 2009).
IBM has launched new software Electronics Value Chain Management with SAP a leading
software provider company. IBM uses comprehensive business software solutions with metrics
to help its monitor inventory, receiving, manufacturing to meet customer demands. After this
IBM has launched more than 700 software with SAP such as My SAP, CISCO, RFID and
WebEx. IBM has established Supply Chain Research Labs with leading universities to simulate
the workings of a complex supply chain. The supply chain management solution from IBM and
SAP is designed to help them to get the most out of every aspect of your supply chain operations,
including design and planning of inventory, manufacturing and transportation, material
management, warehouse management, vendor managed inventory (VMI) and supplier managed
inventory (SMI). It also helps to reduce huge capital investment and costs by increasing
inventory turnover on the store floor and in the warehouse. (SCM from IBM and SAP, 2009)

IBM is also one of the biggest SCM software solution exporters. Whichever software IBM uses,
it also sale that to others organsiations. IBM has separate department IBM Global Business
Services which help others companies in term of provide consultants and software solution . Some of
their business partners such as Infor, Lawson Software, Manhattan Associates, or Symphony
Technology Group.[ CITATION SCM09 \l 1033 ]

References:

Kelly, L. (2006). Operations Management for Competitive Advantage, 11 ed. New Delhi:
McGraw-Hill.
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Advantages and DisaCdvantages of ERP. (n.d). Retrieved on March 2009, from Ebscohost
http://www.erpwire.com/erp-articles/erp-advantages-disadvantages.htm

Define Six Sigma. (n.d). Retrieved on July 2009, from Ebscohost

http://sixsigmatutorial.com/Six-Sigma/Six-Sigma-Tutorial.aspx

ERP. (n.d). Retrieved on June 2009, from Ebscohost

http://www.erpfans.com/erpfans/erpdefinition/erp008.html

Foss, B., Stone, M., & Ekinci, Y. (2008, March). What makes for CRM system success — Or
failure?. Journal of Database Marketing & Customer Strategy Management, p 68-78.

Ravichandran, J. (2006, October). Six-Sigma Milestone: An Overall Sigma Level of an

Organization. Total Quality Management & Business Excellence, p973-980.

Croxton, K., Dastugue, S., Lambert, D., & Rogers, D. (2001, December). The Supply Chain
Management Processes. International Journal of Logistics Management, 12(2), 13-36., from
Business Source Premier database.

Lyon, P., Milne, R., Orwell, R., & Rice, R. Matching Assets with Demand in Supply-Chain
Management at IBM Microelectronics. Retrieved on September 15, 2009, from Business Source
Premier Database:
http://web.ebscohost.com/ehost/pdf?vid=2&hid=9&sid=24ed54d5-5d56-43fb-bf06-
5c0ec18274a4%40sessionmgr4

Banks, R., & Wheelwright, S. Operation vs. strategy: trading tomorrow for today. Harvard Business
Review, Retrieved on September 15, 2009, from Business Source Premier Database:
http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=3867692&site=ehost-live

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