Week 8 PDF

10/31/2015
Strategic Management of
Services
Professor B Mahadevan
Week 8
Wipro Technologies
Factory Model
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Factors Influencing Process Choices
• Volume: Average quantity of the products produced in a
manufacturing system
– Low volume: Turnkey project management firms such as L&T and BHEL
– High volume: Consumer non‐durable and FMCG sector firms,
Automobile, Chemical Processing
– Mid‐volume: Consumer durables, white goods and several industrial
products
• Variety: Number of alternative products and variants of each
product that is offered by a manufacturing system
– Variety of product offerings is likely to introduce variety at various
processes in the system; alternative production resources, materials,
and skill of workers
• Flow: Flow indicates the nature and intensity of activities
involved in conversion of components and material from raw
material stage to finished goods stage
Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education
B Mahadevan, IIM Bangalore
Relationship between volume and
variety
Volume Variety
Mass Mid volume Project

Production Mid variety Organisations
Petrochemicals, Motor Manufacturing Turnkey Project
Automobile Pharmaceuticals Execution
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Process Design for Mass Production
Systems
Pre manufacturing Activities
Product A Product B Product C
Machining Machining Machining
Fabrication Fabrication Fabrication
Assembly Assembly Assembly
Testing Testing Testing
Dedicated & Decentralised Manufacturing Support

Product A Machine
1
Machine
2
Machine
3
... Machine
m
Process Design for Intermittent Flow in
Discrete Manufacturing
Pre-manufacturing activities
Gear Shafts Other

Components rotating parts
Housings
Prismatic
Sheet
Components
Metal parts
Assembly & Test Assembly & Test Assembly & Test

Product A Product B Product C
Dedicated Manufacturing Support for the products
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Process flow in Job Shops
Machine Machine
1 3
Job 1
Machine
6
Job 3
Machine
4
Machine Machine
2 7
Job 2
Machine
5
Process design for operations
Salient feature of alternative choices
Flow Characteristics Continuous Intermittent Jumbled

Product High Volume, Very low Mid volume, Mid variety Very high variety, low
Characteristics variety volume
Examples of Process Industry, Mass Batch production in Project Organisations,
production systems production systems in Process and discrete Tool Rooms, General
discrete manufacturing manufacturing purpose fabricators
Issues of importance Flow Balancing, Manufacturing system Capacity Estimation,
Maintenance, Capacity and layout design, Scheduling, Production
utilisation and Changeover Control, Cost estimation
debottlenecking, management, Capacity
Backward integration planning and estimation
Operations Line Balancing, Forecasting, Capacity Project Management &
Management Tools & Maintenance Planning and estimation, Scheduling, Capacity
Techniques management, Process Optimised production planning and
optimisation, Product planning and product optimisation, Job shop
layout design, Flow sequencing, Group scheduling, Functional
shope scheduling, Pull Technology layout Layout design, Job order
type scheduling, Single design, Materials costing, Work in Process
piece flow design Management Management

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Making Sense of Operating
High
Systems
Jumbled Flow
Systems
Variety
Intermittent Flow Systems
Continuous
Flow Systems
Low
High Volume Low
Complexity of Operations
• The Notion of variety is to be understood
– Products, Models, Processes, Routing, Technology
Choices
• Factors Affecting Operations Management
Complexity
– Volume – Variety Interactions leading to flow
– Number of Stages in Operations
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Complexity of Operations Mgmt.
Type of Flow
Continuous Intermittent
Jumbled
Flow Flow
No. of Stages in Operations
Many More Complex
Some
Less Complex
Few
Complexity of Operations Mgmt.
Type of Flow
Continuous Intermittent
Jumbled
Flow Flow
No. of Stages in Operations
Many Petro-chemical Manfg. Multi-specialty Hospital
Automobile Manfg. Software Solution

Consulting
Some Garment Manfg. Computer Manfg.
Full fare Airline
No frills Airline
Few An Eye Hospital
Fast Food Joint Restaurant
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Redesigning Mid‐day Meal Logistics
of Akshaya Patra Foundation
OR at work in feeding hungry school children
AMRUTA (Akhaya Patra Mid‐day meal RoUting

and Transportation Algorithm)
B Mahadevan, S Sivakumar,
D Dinesh Kumar, K Ganeshram
The Akshaya Patra Foundation
(TAPF)
• Started in 2000, with 1500 children
• Vision – “No child in India shall be deprived of
education because of hunger”
• Currently reaches out to about 1.3 million
children in over 9000 schools across 9 states
of India
• Daily expenditure incurred – Rs. 26 lakhs
– Distribution & logistics accounts for 19% of
expenditure
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Understanding Akshaya Patra
Operations
Next 9 Slides: Courtesy Sridhar
Venkat presentation at IIMB in 2012
• Karnataka
220,000
Currently serving in • Rajasthan
200,000 • Gujarat
180,000 • Orissa
160,000 • Uttar Pradesh
• Andhra Pradesh
140,000
• Chhattisgarh
120,000 • Assam
100,000
80,000
60,000
40,000
20,000
15,126
136,280
130,140
176,344
133,384
131,709
194,746
5,400
175,904
14,796
25,487
36,837
46,158
31,041
37.261
29,884
16,334
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Three item menu in Three item menu

South India in North India
1. Rice 1. Chapattis
2. Sambar with vegetables 2. Dal or Sabji
3. 3 Curd 3. Vegetable Rice or Halva
Kitchen Infrastructure to cook

for 150,000 children
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Cooks rice for

1000 students in
15 minutes
Chapatti making
machine‐40,000
chapattis per hour
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Prepares Sambar
or dhal for 6000
students in 2 hours
Conveyor belt
to move vessels
in the kitchen
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Vehicles ready to go
to the schools
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Akshaya Patra
Vasanthapura Operating Model
• Cooking in centralized kitchens and distributing it to
schools in the surrounding areas
– Vasanthapura in South Bangalore had a cooking capacity of
50,000 meals a day
– Delivered food to about 530 schools using a fleet of 35
vehicles
– Cooking starts at 4 AM and the first batch of cooked food is
available around 7 AM
– The cooked food to be delivered at schools before 1 PM
– The total daily trip length of Vasanthapura region as per
their existing routing was about 1400 kilometers
Vasanthapura Kitchen
• Gravity kitchen
• Serves around 530 schools
• Feeds ~ 50,000 children everyday
• 26 routes
• 16 - 20 schools per route
Activities
• Cooking
• Packing
• Loading
• Despatch
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Vehicles for food logistics
• Mix of own & hired vehicles
– Mixed fleet with varying capacity
• Custom fitted with racks
– Three types of vessels – small, medium & large
• 4 people for every route
– Driver
– Route supervisor
– Loading/unloading boys
Existing Distribution Logistics
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10/31/2015
What drives Business Process
Improvements in firms?
Business Process Improvement
Contexts
• Growth
– Current system outgrows current operations
– There is a big future growth to be addressed
• Technology Change
– Cost structure changes
– Obsolescence
• Competitive dynamics has changed
– Responding to new rules of the game
• Desire to bring efficiency into operations
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Current Realities & Challenges
• TAPF has installed the state‐of‐the‐art cooking
technology in all their 19 kitchens
– Marginal cost of adding a new demand point low
compared to the marginal cost of distribution
• Current operating conditions challenge the very
objective of TAPF
– Mounting complexity of the logistics/distribution
– More schools added to network on an incremental basis
– Inability to handle variations in traffic & road conditions
– Delays in delivery of food at schools, forcing children to
skip lunch
TAPFs future goals
Issues to address
• TAPF’s vision ‐ reach out to 5 million children by 2020
• Need to address several logistics and distribution challenges
– Time window from cooking to consumption is only 6 hours
– Delivery system must be cost effective & responsive to
network demands
• Need to design a cost effective distribution network, which
can help realise their vision:
– increase the distribution efficiency
– bring in substantial cost savings
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How to address the growth
strategy?
• What should be the operating model?
– Centralized Vs Decentralized Kitchen
– What factors drive the optimum level of centralization?
– Role of the distribution network
• If we adopt a hub & spoke model what are the major
issues to address?
– Main constraints to be addressed
– Decisions to be made
Scope of the work
• Analyse the current logistics & distribution system
from the Vasanthapura kitchen of APF
• Identify various constraints (capacity, time &
distribution) & inefficiencies present in the current
model
• Design a cost effective distribution network, that can
increase the distribution efficiency
• Develop a model that could be applied at various
kitchens of APF throughout India
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Methodology adopted
• Data collection
– Interviews
– Observations*
• Detailed data analysis
• Devise an algorithm for vehicle routing
• Develop a user friendly software for the
application
• Help user with post‐implementation issues
* Students visited Vasanthapura Kitchen & also accompanied the
delivery vehicle on some routes
Constraints to be met
• Requirements of all customers must be met
• Constraints of vehicles must not be violated
– number of nodes/customers allocated to each vehicle
must not exceed some predetermined number
• Cost (alternatively time or distance) constraints of
vehicles must not be violated
– the total cost for each vehicle to complete its tour must
not exceed some predetermined level
• Load constraints of vehicle must not be violated
– the total load allocated to each vehicle must not exceed its
capacity
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10/31/2015
Solution Approach
• Stage‐1 : Identify the number of clusters to be
formed and obtain the cluster memberships
– Basic clustering algorithm
• Stage‐2: Assignment of k‐vehicles to the k‐clusters
– Incorporating the vehicle capacity constraints
– A heuristic to improve the quality of the clusters
• Stage 3: For each of the cluster determine routing
plan for the vehicle
– Incorporating the time window constraints
– A self‐organizing map (SOM) based genetic algorithm
heuristic
Solution Approach
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10/31/2015
AMRUTA (Software)
Four Key Considerations
• Meeting management expectations
– A range of best solutions for the available fleet instead of a
single “take it or leave it” solution
– Graphical representation of the solution
– Multiple MIS reports
• End‐user acceptance
– Ease of data input & execution of the algorithm
• Low cost
– Less expensive software and upgrade costs
• Ease of maintenance
AMRUTA was developed using Microsoft Excel and Visual Basic
AMRUTA
Opening Screen
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Inputs
• GPS coordinates (latitude & longitude) of
Demand Points
– Ex. Vasanthapura Kitchen 12• 53’ 17.23” N; 77• 32’
54.17” E
• Demand corresponding to each Demand Point
• Number, type and capacity of Vehicles
• Other parameters: Speed of the vehicle,
loading & unloading times etc.
AMUTA: Input snapshots…
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Output
Multiple Levels of Reporting
No. of
Elapsed time at the last Distance covered
Total Distance
Total no. of Total Master Solution
Sl. No. node (Minutes) (circular) in Kms unclustered Distribution
vehicles covered (Kms) Summary
Min Max Average Min Max Average nodes Cost (Rupees)
Solution #1 20 125.58 305.73 216.93 35.57 101.96 59.78 1,196 2 1,106,841
Total Demand Distance Transportation Service Maintenance Employee Total
Solution #2 20 119.14 307.53 No. of 28.46 102.71 Total Time Unclustered Travel Cost
Cluster # 215.21 (Equivalent Travelled 59.21Time
Time 1,184 3 1,122,373Cost
Vehicle Type Cost Distribution
Schools (Minutes) Nodes (Rupees)
Solution #3 22 126.30 294.00 196.16 28.79 97.29 Units) (Kms) (Minutes) (Minutes)
55.20 1,214 5 1,201,723 (Rupees) (Rupees) Cost (Rupees)
Solution #4 21 119.14 309.55 1 203.69 15 26.87 122 103.55

72.80 56.95 136.97
57.00
1,196 193.97 11 0
Max Pikup1,159,596
2,825 24,000 12,012 38,837
2 34 337 42.33 77.53 125.00 202.53 0 Tata 10,723 30,000 13,968 54,691
Solution #5 22 83.90 286.67 3 192.60 24 28.64 224 94.20
76.87 54.31 148.31
95.00
1,195 243.31 9 0 1,181,102
Swaraj Mazda 9,844 30,000 19,025 58,869
Solution #6 23 96.38 286.67 4 185.31 34 21.48 296 94.20
56.82 52.75 102.59
1,213 215.84
113.25 10 0
Tata 1,205,919 10,723 30,000 18,751 59,474
5 23 208 28.73 55.24 79.00 134.24 0 Swaraj Mazda 9,844 30,000 7,111 46,955
Solution #7 25 48.99 268.34 6 174.78 14 17.83 188 94.20
24.79 50.94 52.25
55.75
1,273 108.00 10 0 1,285,483
Swaraj Mazda 9,844 30,000 6,136 45,980
Solution #8 26 48.99 261.78 7 173.81 19 17.83 277 91.48
64.86 51.81 130.62
73.50
1,347 204.12 1 0 1,340,463
Swaraj Mazda 9,844 30,000 16,052 55,896
8 5 84 37.50 71.61 23.25 94.86 0 Max Pikup 2,825 24,000 6,187 33,012
Solution #9 26 48.99 261.98 9 172.57 23
17.83 94.06
340 51.16
51.32
99.91
1,334
95.25 195.16
5
0 Tata
1,343,290
10,723 30,000 16,882 57,605
Solution #10 26 49.23 244.60 10 172.15 6 17.93 78 95.65
43.12 51.10 71.67
26.00
1,328 97.67 2 0
Max Pikup1,337,726
2,825 24,000 7,116 33,941
11 27 295 66.37 139.17 107.50 246.67
Solution #11 27 39.15 246.67 12 165.9214
14.49 199 94.05
91.48
49.08 154.95
1,325 217.70
62.75
0 00
Tata 10,723
1,376,167
Swaraj Mazda 9,844
30,000
30,000
21,903
22,641
62,626
62,485
Solution #12 28 39.15 245.27 13 161.98 32 14.06 307 91.66
57.71 49.19 111.63
98.50
1,377 210.13 3 0
Tata 1,428,127 10,723 30,000 19,046 59,769
14 13 189 94.05
Solution #13 29 39.15 247.50 15 158.5819
13.63 240 91.48
32.59
49.11 162.23 58.75
73.75
59.58
220.98
1,424 133.33 1 00
Load King
Load King
9,844
1,480,582
9,844
30,000
30,000
23,276
8,067
63,120
47,911
Solution #14 30 41.57 245.45 16 154.02 25 11.72 367 91.48
48.10 47.54 95.97
1,426 199.72
103.75 2 0
Tata 1,521,033 10,723 30,000 15,874 56,597
Solution #15 31 41.57 247.33 17 149.69 28
12.34 29291.66 32.05
46.57 64.39 104.50
1,444 168.89 4 0
Tata 10,723
1,562,166 30,000 10,577 51,300
18 35 321 41.71 77.80 106.75 184.55 0 Tata 10,723 30,000 13,764 54,487
Solution #16 32 53.01 246.67 19 147.33 3 12.87 34 91.48
15.70 46.84 26.15
13.00
1,499 39.15 1 0
Max Pikup1,616,622
2,825 24,000 2,590 29,415
Solution #17 33 38.60 242.72 20 142.96 5 12.34 84 21.17 45.77 36.07
91.69 17.25
1,511 53.32 1 0
Max Pikup 2,825
1,656,275 24,000 3,494 30,319
21 6 96 30.90 55.13 24.75 79.88 0 Load King 9,844 30,000 7,649 47,493
Solution #18 34 38.60 245.57 22 140.20 20 9.96 21996.85 50.17 45.24 97.09
78.25
1,538 175.34 1 0
Load King1,701,940
9,844 30,000 12,416 52,260
Solution #19 23 17
35 24.46 244.38 136.13 7.79 97.52 191 83.87 147.57 63.25
43.95 1,538 210.82 0 Load King
1 1,739,354 9,844 30,000 20,759 60,603
24 34 355 61.82 112.12 128.50 240.62 0 Tata 10,723 30,000 20,401 61,124
25 25 280 69.19 127.93 94.00 221.93 0 Tata 10,723 30,000 22,832 63,555
Summary Output 26 19 286 14.75 33.74 77.50 111.24 0 Tata 10,723 30,000 4,866 45,589
27 10 117 14.49 33.42 42.50 75.92 0 Eicher 7,472 30,000 4,783 42,255
for Solution
Trip sheet for a route
Routing Changes
After
Before
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10/31/2015
Benefits of Implementation
• Annualized cost savings realized was US$ 75,000
(18% savings in monthly operating cost)
– Enables them expand their service coverage by about 4.8%
or an additional 2,400 children
– Fleet size reduced from 35 to 27
– The solution is eco‐friendly (reduces the total trip length
for the region from 1400 Km to 1325 km)
• AMRUTA being implemented in all kitchens of TAPF
• Projected annual savings across India is expected to
be in the range of US$ 1.96 million
– Will enable them to expand their services nationally by an
additional 62,000 children at the prevailing costs
What are the new lessons to
learn from this exercise?
23
10/31/2015
Model Implementation
Critical Success Factors
• Several heuristic adjustments & adaptations required
to standard OR algorithms
• Heuristic adjustment factors modeled as input
parameters to AMRUTA
– A parametric design approach to continuously review and
fine‐tune these parameters during pilot implementation
and on an ongoing basis in the future as well
• Focusing on User Acceptance
– Providing a range of solutions rather than a single “take it
or leave it” solution
– Multiple reporting, Use of Graphics
Multiple solutions for various fleet sizes enabled them to understand the critical tradeoff between
cost and responsiveness B Mahadevan, IIM Bangalore
Addressing complexity
Arising out of “real life” issues
• Several adjustments for modeling vehicle travel time
– Euclidean distance correction factor
– Two speed bands
• one for travel between the kitchen and the first node in the cluster
• the other for travel between successive nodes within the cluster
– Transportation and Service time are assumed to be split in
a 60‐40 ratio
• Splitting the service time at a school into a fixed
component and a variable component
• Reducing problem size: Notion of equivalent demand
• Engaging the decision makers & users in the process
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10/31/2015
Some Key Take‐Aways
• Who said God’s work does not need
efficiency?
• Solving problems of NGOs are far more
challenging and far more satisfying
– Manpower constraints are many & at times hard
– Need to find solutions for a tight budget
• Translating theoretical ideas into an useful
real‐life application is an art (not science)
गजतरु ग सह ं गोकुलं कोिठ दानं कनकरजत पात्रं मेिधनी सागरा तम ् ।

उपयकुलिवशु तं कोिठक या प्रदानं निह निह बहुदानं अ नदानं समानम ् ॥
Even if one gifts 1000 elephants, horses or gifts 10 million cows or any number of vessels of
silver and gold, gifts the entire land till sea, offering the entire services of the clan, helps in the
marriage of 10 million women, all this is never never equal to Annadanam !!!
25

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10/31/2015

Mass Mid volume Project

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Machining Machining Machining

Fabrication Fabrication Fabrication

Assembly Assembly Assembly

Testing Testing Testing

Dedicated & Decentralised Manufacturing Support

Gear Shafts Other

Assembly & Test Assembly & Test Assembly & Test

Dedicated Manufacturing Support for the products

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Flow Characteristics Continuous Intermittent Jumbled

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Intermittent Flow Systems

Many More Complex

Many Petro-chemical Manfg. Multi-specialty Hospital

Automobile Manfg. Software Solution

AMRUTA (Akhaya Patra Mid‐day meal RoUting

Three item menu in Three item menu

Kitchen Infrastructure to cook

Cooks rice for

Solution #4 21 119.14 309.55 1 203.69 15 26.87 122 103.55

गजतरु ग सह ं गोकुलं कोिठ दानं कनकरजत पात्रं मेिधनी सागरा तम ् ।

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