Operations Compendium

Operations
Compendium
Department of Management Studies

INDIAN INSTITUTE OF TECHNOLOGY DELHI
(Institute of Eminence, Govt. of India)
OPERATIONS COMPENDIUM
TABLE OF CONTENTS
OPERATIONS BASICS
Production Planning..................................................................................................................6
Production Plan.......................................................................................................................6
Master Production Schedule....................................................................................................7
Material Requirements Plan....................................................................................................8
Bills of Material......................................................................................................................8
Purchasing & Production Activity Control….........................................................................8
MRP II – Manufacturing Resource Planning…......................................................................9
Inventory Management………................................................................................................10
What is Invetory?..................................................................................................................10
Why to keep Inventory?........................................................................................................10
What is Inventory control?....................................................................................................10
ABC Analysis…………......................................................................................................11
VED Classification………………………………………..................................................12
FSN Analysis.……………………………………………..................................................13
EOQ………….……………………….…….……………..................................................13
Process Analysis Terms……...................................................................................................15
Process Capacity…………………….…….…….………...................................................15
Capacity Utilization….……………….…….……………..................................................15
Takt Time…………………………….…….……………..................................................15
Cycle Time….….…………………….…….……………..................................................16
Lead Time…………………………….…….…………….................................................16
Throughput Time…………….……….…….…………….................................................16
Idle Time…………………………….…….……………...................................................17
Changeover Time…………………….…….……………..................................................17
Buffer ………...…………………….…….……………....................................................17
DEPARTMENT OF MANAGEMENT STUDIES 2

Forecasting.…………………………….…….……………...................................................18
Types of forecasting………………….…….……………..................................................18
Types of qualitative Forecasting…...…….……………......................................................18
Types of quantitative Forecasting …. …...….……………..................................................20
Exponential smoothing…………………….……………...................................................21
Difference between Trend, seasonal & cyclical variations..................................................22
Least Square Method………………...…….……………...................................................23
R & R2…………………….………...….….……………....................................................23
Tracking signal…….………………...…….……………...................................................24
Project Management….………………...…….……………...................................................25
Float/Slack………….………………...…….……………..................................................25
Project Management Methodologies.………...….…………..................................................26
Waterfall Model……….……………...…….……………..................................................26
Agile Project Management…………...…….……………..................................................28
SUPPLY CHAIN MANAGEMENT

Supply Chain Management......................................................................................................31
Why Supply Chain?.............................................................................................................32
What are various activities of Supply Chain Manager?.......................................................33
Elements of Supply Chain………………................................................................................34
Challenges in Supply Chain Management ……......................................................................35
Value Chain……….................................................................................................................37
Logistics Management.............................................................................................................40
Purpose of Logistics Management.……………………………….……………………...42
Various Functions of Logistics Management...……………………….………………….42
How does Logistics add value? …………………………………………….……………42
Logistics Models......................................................................................................................43
Reverse Logistics.....................................................................................................................45
Procurement…….....................................................................................................................45

Risk Management....................................................................................................................47
Banking and Financial Industries……….................................................................................49
FMCG Industry........................................................................................................................49
Auto Industry….......................................................................................................................50
Retail & E-commerce Industry................................................................................................51
LEAN SIX SIGMA

Lean……………….................................................................................................................52
Types of Waste........................................................................................................................52
Solutions with Lean Approach …............................................................................................53
Kaizen.................................................................................................................................53
Kanban……....................................................................................................................... 54
Jidoka………..................................................................................................................... 55
5S……................................................................................................................................ 55
Hcijunka..............................................................................................................................56
JIT........................................................................................................................................57
Poke Yoke……....................................................................................................................57
Gemba, Gembutsu, Genjitsu…………................................................................................58
Theory of Constraints…......................................................................................................59
Six Sigma Manufacturing Practices….....................................................................................60
History…………………………...…..................................................................................60
What is Six Sigma………….................................................................................................60
DMAIC & DMADV Approach…...........................................................................................62
Basic tools of Six Sigma...…...................................................................................................65
Checksheet………………...................................................................................................65
Histogram…………….…...................................................................................................65
Flowchart………….............................................................................................................65
Cause & Effect…………....................................................................................................65
Pareto Analysis……...........................................................................................................66

Scatter Diagram…………....................................................................................................66
DFSS………...………….....................................................................................................66
RECENT TRENDS
Cold Chain for Covid Vaccine….............................................................................................67
Impact of Covid on Supply Chain…........................................................................................68
Impact of Farm Bills 2020 on Agriculture Supply Chain........................................................70
Block Chain, Crypto Currency in Supply Chain…….............................................................72
IoT in Operations/Supply Chain……......................................................................................73
Green & Sustainable Supply Chain……….............................................................................74
About Opcentuate………………………..............................................................................76

Production Planning
Manufacturing is complex. Some firms make a few different products, whereas others make
many products. A good planning system must answer four questions:
• What are we going to make?
• What does it take to make it?
• What do we have?
• What do we need?
There are five major levels in the manufacturing planning and control (MPC) system:
• Strategic business plan.
• Production plan (sales and operations plan).
• Master production schedule.
• Material requirements plan.
• Purchasing and production activity control.
Since each level is for a different time span and for different purposes, each differs in the
following:
• Purpose of the plan.
• Planning horizon—the time span from now to sometime in the future for which the
plan is created.
• Level of detail—the detail about products required for the plan.
• Planning cycle—the frequency with which the plan is reviewed.
Production Plan
Given the objectives set by the strategic business plan, production management is concerned
with the following:
• The quantities of each product group that must be produced in each period.
• The desired inventory levels.
• The resources of equipment, labor, and material needed in each period.

• The availability of the resources needed.

• The level of detail is not high.
For example, if a company manufactures children’s bicycles, tricycles, and scooters in various
models, each with many options, the production plan will show major product groups, or
families: bicycles, tricycles, and scooters. The planning horizon is usually 6 to 18 months and
is reviewed perhaps each month or quarter.
Master Production Schedule

The master production schedule (MPS) is a plan to produce individual end items. It breaks
down the production plan to show, for each period, the quantity of each end item to be made.
For example, it might show that 200 Model A23 scooters are to be built each week. Inputs to
the MPS are the production plan, the forecast for individual end items, sales orders,
inventories, and existing capacity.
The level of detail for the MPS is higher than for the production plan. Whereas the production
plan was based upon families of products (tricycles), the master production schedule is
developed for individual end items (each model of tricycle). The planning horizon usually
extends from 3 to 18 months but primarily depends on the purchasing and manufacturing lead
times.
Fig. Manufacturing Planning and Control Systems

Material Requirements Plan

The material requirements plan (MRP) is a plan for the production and purchase of the
components used in making the items in the master production schedule. It shows the
quantities needed and when manufacturing intends to make or use them. The level of detail is
high. As with the master production schedule, it usually extends from 3 to 18 months.
Bills of Material
The Association for Operations Management defines a bill of material (BOM) as “a listing of
all the subassemblies, intermediates, parts, and raw materials that go into making the parent
assembly showing the quantities of each required to make an assembly.”
Table. A simplified BOM
Purchasing and Production Activity Control

The time comes when plans must be put into action. Production activity control (PAC) is
responsible for executing the master production schedule and the material requirements plan.
At the same time, it must make good use of labour and machines, minimize work-inprocess
inventory, and maintain customer service. The material requirements plan authorizes PAC to
manage day-to-day activity and provide the necessary support.
The planning horizon is very short, perhaps from a day to a month. The level of detail is high
since it is concerned with individual components, workstations, and orders. Plans are reviewed
and revised daily.

Fig: Overview of production planning
MRP II – Manufacturing Resource Planning

Manufacturing Resource Planning (MRP II) is an integrated information system used by
businesses. Manufacturing Resource Planning (MRP II) evolved from early Materials
Requirement Planning (MRP) systems by including the integration of additional data, financial
planning in dollars and labor requirement. MRP II provides coordination between marketing
and production. Marketing, finance, and production agree on a total workable plan expressed
in the production plan. Marketing and production must work together on a weekly and daily
basis to adjust the plan as changes occur. Order sizes may need to be changed, orders canceled,
and delivery dates adjusted.
It is made up of a variety of processes, each linked together: business planning, production
planning (sales and operations planning), master production scheduling, material requirements
planning and capacity requirements planning. The system is designed to centralize, integrate,
and process information for effective decision making in scheduling, design engineering,
inventory management and cost control in manufacturing.

Inventory Management
What is Inventory?
Inventory refers to the materials in stock. It is also called the idle resource of an enterprise.
Inventories
represent those items which are
a) Either stocked for sale or
b) They are in the process of manufacturing or
c) They are in the form of materials, which are yet to be utilized.
Why to Keep Inventory?

1. To stabilize production: The demand for an item fluctuates because of the number of
factors, e.g., seasonality, production schedule etc. The inventory is kept to take care
of this fluctuation so that the production is smooth.
2. To meet the demand during the replenishment period: The lead time for procurement
of materials depends upon many factors like location of the source, demand supply
condition, etc. So inventory is maintained to meet the demand during the procurement
(replenishment) period.
3. To take advantage of price discounts: Usually the manufacturers offer discount for
bulk buying and to gain this price advantage the materials are bought in bulk even
though it is not required immediately. Thus, inventory is maintained to gain economy
in purchasing.
4. To prevent loss of orders (sales): In this competitive scenario, one has to meet the
delivery schedules at 100 per cent service level, means they cannot afford to miss the
delivery schedule which may result in loss of sales. To avoid this organizations have
to maintain inventory.
What is Inventory Control?

Inventory control is a planned approach of determining what to order, when to order and how
much to order and how much to stock so that costs associated with buying and storing are
optimal without interrupting production and sales.
Inventory control basically deals with two problems:
i. When should an order be placed? (Order level), and
ii. How much should be ordered? (Order quantity)

What are benefits of Inventory Control?

1. Improvement in customer’s relationship because of the timely delivery of goods
and service
2. Smooth and uninterrupted production and, hence, no stock out.
3. Efficient utilization of working capital. Helps in minimizing loss due to
deterioration, obsolescence damage and pilferage
4. Economy in purchasing
5. Eliminates the possibility of duplicate ordering
What are various techniques for Inventory Control?

In any organization, depending on the type of business, inventory is maintained. The control
can be for order quality and order frequency. Various prominent techniques used are:
1. ABC Analysis
2. VED Analysis
3. FSN Analysis
Always Better Control (ABC) Analysis

• This technique divides inventory into three categories A, B & C based on their
annual consumption value.
• It is also known as Selective Inventory Control Method (SIM)
• This method is a means of categorizing inventory items according to the potential
amount to be controlled.
• ABC analysis has universal application for fields requiring selective control.
There is no fixed threshold for each class, different proportion can be applied based on
objective and criteria.
ABC Analysis is like the Pareto principle in that the 'A' items will typically account for a large
proportion of the overall value but a small percentage of number of items.
Example of ABC class

‘A’ items – 20% of the items accounts for 70% of the annual consumption value of the items.
‘B’ items -30% of the items accounts for 25% of the annual consumption value of the items.

‘C’ items -50% of the items accounts for 5% of the annual consumption value of the Items
Advantages of ABC Analysis

• Helps to exercise selective control
• Gives rewarding results quickly
• Helps to point out obsolete stocks easily.
• In case of “A” items careful attention can be paid at every step such as estimate of
requirements, purchase, safety stock, receipts, inspections, issues, etc. & close
control is maintained.
• In case of “C” items, recording & follow up, etc. may be dispensed with or
combined.
• Helps better planning of inventory control
• Provides sound basis for allocation of funds & human resources
Disadvantages of ABC Analysis

• Proper standardization & codification of inventory items needed.
• Considers only money value of items & neglects the importance of items for the
production process or assembly or functioning.
• Periodic review becomes difficult if only ABC analysis is recalled.
• When other important factors make it obligatory to concentrate on “C” items more,
the purpose of ABC analysis is defeated
VED Classification
VED: Vital, Essential & Desirable classification
VED classification is based on the criticality of the inventories.
• Vital items – Its shortage may cause havoc & stop the work in organization. They
are stocked adequately to ensure smooth operation.
• Essential items -Here, reasonable risk can be taken. If not available, the plant does
not stop; but the efficiency of operations is adversely affected due to expediting
expenses. They should be sufficiently stocked to ensure regular flow of work.
• Desirable items – Its non availability does not stop the work because they can be
easily purchased from the market as & when needed. They may be stocked very
low or not stocked.

It is useful in capital intensive industries, transport industries, etc.

VED analysis can be better used with ABC analysis in the following pattern:
FSN Analysis
• FSN: Fast moving, Slow moving & Non moving
• Classification is based on the pattern of issues from stores & is useful in controlling
obsolescence.
• Date of receipt or last date of issue, whichever is later, is taken to determine the no.
of months which have lapsed since the last transaction.
• The items are usually grouped in periods of 12 months.
• It helps to avoid investments in non moving or slow items. It is also useful in
facilitating timely control.
• For analysis, the issues of items in past two or three years are considered.
• If there are no issues of an item during the period, it is “N” item.
• Then up to certain limit, say 10-15 issues in the period, the item is “S” item
• The items exceeding such limit of no. of issues during the period are “F” items.
• The period of consideration & the limiting number of issues vary from organization
to organization.
What is EOQ? How it is calculated?

Economic order quantity (EOQ) is that size of the order which gives maximum economy in
purchasing any material and ultimately contributes towards maintaining the materials at the
optimum level and at the minimum cost.
In other words, the economic order quantity (EOQ) is the amount of inventory to be ordered
at one time for purposes of minimizing annual inventory cost.

The quantity to order at a given time must be determined by balancing two factors:
(1) The cost of possessing or carrying materials and
(2) The cost of acquiring or ordering materials.
Purchasing larger quantities may decrease the unit cost of acquisition, but this saving may not
be more than offset by the cost of carrying materials in stock for a longer period of time.
The carrying cost of inventory may include:

• Interest on investment of working capital
• Property tax and insurance
• Storage cost, handling cost
• Deterioration and shrinkage of stocks
• Obsolescence of stocks
Formula of Economic Order Quantity (EOQ):

√2𝐶𝑂
𝐸𝑂𝑄 =
𝑆
Where C = Annual consumption of the material
O = Ordering cost per order
S = Annual storage cost per unit
The above formula has been derived as below

At EOQ, Total Ordering Cost = Total Storage Cost
i.e. (# of orders X Ordering cost per order) = (Avg units stored X Annual storage cost per unit)
𝐶 𝐸𝑂𝑄
=
𝐸𝑂𝑄 ∗ 𝑂 2𝑋 ∗ 𝑆
Cross multiplying we would have (EOQ)^2 = 2CO / S
√2𝐶𝑂
Therefore, 𝐸𝑂𝑄 =
𝑆

Process Analysis Terms

Process capacity
The capacity of the process is its maximum output rate, measured in units produced per unit
time. The capacity of the series of task is determined by the lowest capacity in the string.
Whereas the capacity of the parallel strings of tasks is the sum of the capacities of the two
strings, except for the cases in which the two strings have different outputs that are combined.
In such cases, the capacity of two parallel strings of tasks is that of the lowest capacity parallel
string.
Capacity utilization
The percentage of the process capacity that actually being used
𝐴𝑐𝑡𝑢𝑎𝑙 𝑙𝑒𝑣𝑒𝑙 𝑜𝑓 𝑂𝑢𝑡𝑝𝑢𝑡
∗ 100
𝑀𝑎𝑥𝑖𝑚𝑢𝑚 𝑃𝑜𝑠𝑠𝑖𝑏𝑙𝑒 𝑂𝑢𝑡𝑝𝑢𝑡
Takt Time
Takt time is the rate at which you need to complete the production process to meet the customer
demand.
𝑁𝑒𝑡 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑇𝑖𝑚𝑒
𝑇𝑎𝑘𝑡 𝑡𝑖𝑚𝑒 =
𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝐷𝑒𝑚𝑎𝑛𝑑
Net production time = Time available for production (till the delivery to the customer)
Customer Demand = Order placed by the customer
NOTE: Takt time is customer demand based and cannot be measure by a stopwatch.
Let us break this calculation down a little further:
Available production time - for the purposes of this definition, we assume the electronics
manufacturer operates an 8-hour shift, 5 days a week. 8 hours x 60 minutes equates to 480
total minutes. Assuming there are 2 x 10-minute tea breaks, 30 minutes for lunch and another
20 minutes in total consumed at the start and end of each day for miscellaneous activites, the
"available" production time is in fact 410 minutes.
Customer demand - this relates to the number of units the customer requires each day. We
will assume it is 100 per day for this definition

Takt time - if we take our available production time (410 minutes) and divide that by our
customer demand (100), the takt time equates to 4.1 minutes or 246 seconds. This means a
completed unit must be finished every 246 seconds or there is a danger the electronics
manufacturer will not meet their customer's demand.
Cycle Time
The time between the completion of two discrete units of production.
𝑁𝑒𝑡 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑇𝑖𝑚𝑒
𝐶𝑦𝑐𝑙𝑒 𝑇𝑖𝑚𝑒 =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑈𝑛𝑖𝑡𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑑
NOTE: Cycle time is work process based and can be measured using a stop watch.
It is the time between successive units as they are output from the process. In another words,
cycle time of the process is equal to the longest task cycle time, when the production of an
item requires various units to be produced in succession and each unit has a different cycle
time.
Lead Time
Lead time is the time it takes for one unit to make its way through your operation from front
to end (i.e. from taking order to receiving payment). In other words, time taken between
product to be ordered by customer and customer receiving the product.
Throughput time
Throughput Time is a measure of the time required for a material, part or sub-assembly to pass
through a manufacturing process following the release of an order to dispatch of the product.
Throughput Time includes the following time intervals:
• Processing time: This is the time spent transforming raw materials into finished
goods.
• Inspection time: This is the time spent inspecting raw materials, work-in-process
and finished goods, possibly at multiple stages of the production process.
• Move time: This is the time required to move items into and out of the
manufacturing area, as well as between workstations within the production area.

• Queue time: This is the time spent waiting prior to the processing, inspection and
move activities.
Throughput time: Raw Material Receipt to Dispatch
Idle time
Time when no activity is being performed. For example, when an activity is waiting for a work
to arrive from the previous activity. The term can be used to describe both machine idle time
and worker idle time.
Changeover time
It is the time taken to modify the production line for different products or new batches of the
same product. Setup and changeover are sometimes used interchangeably. Setup is viewed as
a component of changeover that is focused on configuring a machine for a different product
type. Both setup and changeover are non-value-added operations and so should be minimized
as much as possible. It is recommended to use the term ‘changeover’ when talking about
switching between products, and ‘setup’ when focusing on what is going on with the machine
or process.
Buffer
In manufacturing, the concept of buffering is defined as maintaining enough supplies to keep
operations running smoothly. These supplies often include the raw materials needed for
production, and also the inventories of finished products waiting for shipment. For example, a
manufacturer will want to keep enough raw materials inventory to tide it over in case its
supplier is unable to deliver its shipments on time.

Forecasting
Forecasting is the process of making predictions of the future based on past and present data
and analysis of trends.
Types of forecasting
Qualitative methods: These types of forecasting methods are based on judgments, opinions,
intuition, emotions, or personal experiences and are subjective in nature. They do not rely on
any rigorous mathematical computations.
Quantitative methods: These types of forecasting methods are based on mathematical
(quantitative) models and are objective in nature. They rely heavily on mathematical
computations.
Types of Qualitative Methods of forecasting

Four of the better-known qualitative forecasting methods are executive opinions, the Delphi
method, sales-force polling, and consumer surveys:
1. Executive Opinions
The subjective views of executives or experts from sales, production, finance, purchasing, and
administration are averaged to generate a forecast about future sales. Usually this method is
used in conjunction with some quantitative method, such as trend extrapolation. The
management team modifies the resulting forecast, based on their expectations.
The advantage of this approach: The forecasting is done quickly and easily, without need of
elaborate statistics. Also, the jury of executive opinions may be the only means of forecasting
feasible in the absence of adequate data.
The disadvantage: This, however, is that of groupthink. This is a set of problems inherent to
those who meet as a group. Foremost among these are high cohesiveness, strong leadership,
and insulation of the group. With high cohesiveness, the group becomes increasingly
conforming through group pressure that helps stifle dissension and critical thought. Strong
leadership fosters group pressure for unanimous opinion. Insulation of the group tends to
separate the group from outside opinions, if given.

2. Delphi Method
This is a group technique in which a panel of experts is questioned individually about their
perceptions of future events. The experts do not meet as a group, in order to reduce the
possibility that consensus is reached because of dominant personality factors. Instead, the
forecasts and accompanying arguments are summarized by an outside party and returned to
the experts along with further questions. This continues until a consensus is reached.
Advantages: This type of method is useful and quite effective for long-range forecasting. The
technique is done by questionnaire format and eliminates the disadvantages of group think.
There is no committee or debate. The experts are not influenced by peer pressure to forecast a
certain way, as the answer is not intended to be reached by consensus or unanimity.
Disadvantages: Low reliability is cited as the main disadvantage of the Delphi method, as well
as lack of consensus from the returns.
3. Sales Force Polling

Some companies use as a forecast source salespeople who have continual contacts with
customers. They believe that the salespeople who are closest to the ultimate customers may
have significant insights regarding the state of the future market. Forecasts based on sales force
polling may be averaged to develop a future forecast. Or they may be used to modify other
quantitative and/or qualitative forecasts that have been generated internally in the company.
The advantages of this forecast are:

• It is simple to use and understand.
• It uses the specialized knowledge of those closest to the action.
• It can place responsibility for attaining the forecast in the hands of those who most
affect the actual results.
• The information can be broken down easily by territory, product, customer, or
salesperson.
The disadvantages include salespeople’s being overly optimistic or pessimistic regarding their
predictions and inaccuracies due to broader economic events that are largely beyond their
control.

4. Consumer Surveys
Some companies conduct their own market surveys regarding specific consumer purchases.
Surveys may consist of telephone contacts, personal interviews, or questionnaires as a means
of obtaining data. Extensive statistical analysis usually is applied to survey results to test
hypotheses regarding consumer behavior.
Types of quantitative methods of forecasting

There are two types of quantitative forecasting:
1)Time Series
The objective of the time series methods is to discover the pattern in the past values of a
variable. Assuming that the historical pattern will continue, this method extrapolate it into the
future and use it to predict future values of the variable of interest.
Advantage: Require historical data of one variable only; useful when historical data pattern
does not change
Disadvantage:
It cannot evaluate the impact of changes in other variables
Types of Time series model:

• Naive Approach
• Moving Averages
• Exponential Smoothing
• Exponential Smoothing with Trend Adjustment
• Trend Projections
• Seasonal Variations in Data
• Cyclical Variations in Data

2)Associative (casual method)

Make use of the relationship between the variable to be forecast and the other variables that
explains its variation to do the forecast.
Advantage It can evaluate the impact of changes in other variables.
Disadvantages
• It is difficult to identify other variables.
• Require historical data on all variables of the model.
• Depend on the future values of the other variables
Types of associative methods:

• Regression and Correlation Analysis
• Using Regression Analysis for Forecasting
• Standard Error of the Estimate
• Correlation Coefficients for Regression Lines
• Multiple-Regression Analysis
Exponential Smoothing
1. It is a Form of weighted moving average.
• Weights decline exponentially
• Most recent data weighted most
2. Requires smoothing constant (α)
• Ranges from 0 to 1
• Subjectively chosen
3. Involves little record keeping of past data
New forecast = Last period’s forecast + α*(Last period’s actual demand – Last period’s
forecast) Type equation here.
𝐹𝑡 = 𝐹𝑡−1 + 𝛼(𝐴𝑡−1 − 𝐹𝑡−1 )
where 𝐹𝑡 = new forecast
𝐹𝑡−1 = previous forecast

α = smoothing (or weighting) constant (0 ≤ α ≤ 1)

When α=1 it becomes Naïve approach
𝐹𝑡 = 𝐴𝑡−1
Difference between Trend and Seasonal and Cyclical Variations

Time Series Components:
Trend:
• Persistent, overall upward or downward pattern
• Changes due to population, technology, age, culture, etc.
• Typically several years duration
Cyclical:
• Repeating up and down movements
• Affected by business cycle, political, and economic factors
• Multiple years duration
• Often causal or associative relationships
Seasonal:
• Regular pattern of up and down fluctuations
• Due to weather, customs, etc.
• Occurs within a single year

Random:
• Erratic, unsystematic, ‘residual’ fluctuations
• Due to random variation or unforeseen events
• Short duration and nonrepeating
Least square method

Least-squares method is the approach which results in a straight line that minimizes the sum
of the squares of the vertical differences or deviations from the line to each of the actual
observations.
A least-squares line is described in terms of its y-intercept (the height at which it intercepts the
y-axis) and its expected change (slope). If we can compute they-intercept and slope, we can
express the line with the following equation:
y= a + bx
where y = computed value of the variable to be predicted (called the dependent variable)
a = y-axis intercept
b = slope of the regression line (or the rate of change in y for given changes in x)
x =the independent variable (which in this case is time)
This method is used in linear regression forecasting technique.
Coefficient of Correlation and Coefficient of determination

Coefficient of Correlation (𝑟): is the degree of relationship between two variables say x and
y. It can go between -1 and 1. 1 indicates that the two variables are moving in unison. They
rise and fall together and have perfect correlation. -1 means that the two variables are in perfect
opposites. One goes up and other goes down, in perfect negative way. Any two variables in
this universe can be argued to have a correlation value. If they are not correlated, then the

correlation value can still be computed which would be 0. The correlation value always lies
between -1 and 1 (going thru 0 – which means no correlation at all – perfectly not related).
Correlation can be rightfully explained for simple linear regression – because you only have
one x and one y variable.
Coefficient of Determination (𝑟 2 ): It is simply the square of the sample correlation coefficient.
It indicates the proportion of the variance in the dependent variable that is predictable from
the independent variable.
Tracking Signal
A tracking signal is a measure1nent of how well a forecast is predicting actual values. As
forecasts are updated every week, month, or quarter, the newly available demand data are
pared to the forecast values.
The tracking signal is computed as the correlative error divided by the mean absolute deviation
(MAD): Tracking signal = Cumulative error/MAD
Positive tracking signals indicate that demand is greater than forecast. Negative signals mean
that demand is less than forecast. A good tracking signal-that is, one with a low cumulative
error-has about as much positive error as it has negative error. In other words, small deviations
are okay, but positive and negative errors should balance one another so that the tracking signal
centers closely around zero. A consistent tendency for forecasts to be greater or less than the
actual values (that is, for a high absolute cumulative error) is called a bias error. Bias can occur
if, for example, the wrong variables or trend line are used or if a seasonal index is misapplied.

Project Management
A project is a temporary endeavour undertaken to create a unique product, service, or result.
Temporary indicates that it has a definite beginning and end. Projects involve doing something
that has not been done before and is therefore unique. Outcome of the project can be tangible
or intangible.
Project Management is the application of Knowledge, Skills, Tools and Techniques to Project
activities to meet Project requirements.
Float/Slack
In project management, float or slack is the amount of time that a task in a project network can
be delayed without causing a delay to:
• Subsequent tasks (free float): Free Float is the amount of time that an activity can
be delayed without delaying the early start date of any successor activity.
• Project completion date (total float): Total Float is the amount of time that an
activity can be delayed from its early start date without delaying the project finish
date.
A Float is a key piece of the critical path method (CPM), a system used by project managers
to efficiently schedule project activities. A critical path may have 'unused time' expressed as
total float. For example, a project to measure seasonal variation in sunrise would take a one
minute measurement every day, followed by 23 hours and 59 minutes of total float. Sunrise is
on the critical path and there is no way to schedule around it. Total float is associated with the
path. If a project network chart/diagram has 4 non-critical paths then that project would have
4 total float values. The total float of a path is the combined free float values of all activities
in a path.
What does this diagram depict?
Fig. Float Calculation

1. There are 3 paths ACE, BCE & BDE. ACE will be the critical path with total float
0 and the critical path length 18.
2. Activities A, C & E will be having even free float 0 (no kind of float/flexibility for
critical path activities)
3. Total float for B is 1 (LF-EF OR LS-ES) & activity D is 6.
4. Out of B & D which activity can have free float? Activity B is not satisfying the
free float definition. i.e., B can be delayed w.r.t C (6-4-1=1) but not w.r.t D (5-4-
1=0). So, if “ANY” part of the definition is not satisfying i.e. B can’t be delayed
without impacting ANY successor of it.
5. Free float for activity D = 14-7-1 = 6. This activity satisfies the definition along
with point 4 and there is no dependency/constraint in example which can hinder
activity D having flexibility.
Project Management Methodologies

Waterfall Model of Project Management
The original Waterfall method, as developed by Royce. The steps include Requirements
Determination, Design, Implementation, Verification, and Maintenance. Other models change
the Requirements phase into the Idea phase (or break the Requirements phase out into Planning
and Analysis. Furthermore, some models further break the Design phase out into Logical and
Physical Design sub-phase, however, the basic underlying principles remain the same.
Fig. Waterfall Model

The Waterfall method assumes that all requirements can be gathered up front during the
Requirements phase. Communication with the user is front-loaded into this phase, as the
Project Manager does his or her best to get a detailed understanding of the user's requirements.
Once this stage is complete, the process runs "downhill".
The Design phase is best described by breaking it up into Logical Design and Physical Design
sub-phases. During the Logical Design phase, the system's analysts makes use of the
information collected in the Requirements phase to design the system independently of any
hardware or software system. Once the higher-level Logical Design is complete, the systems
analyst then begins transforming it into a Physical Design dependent on the specifications of
specific hardware and software technologies.
The Implementation phase is when all of the actual code is written. Phase belongs to the
programmers in the Waterfall method, as they take the project requirements and specifications,
and code the applications.
The Verification phase was originally called for to ensure that the project is meeting customer
expectations. However, under real-world analysis and design, this stage is often ignored. The
project is rolled out to the customer, and the Maintenance phase begins.
During the Maintenance phase, the customer is using the developed application. As problems
are found due to improper requirements determination or other mistakes in the design process,
or due to changes in the users' requirements, changes are made to the system during this phase.
The Waterfall method does have certain advantages, including:

• Design errors are captured before any software is written saving time during the
implementation phase.
• Excellent technical documentation is part of the deliverables and it is easier for new
programmers to get up to speed during the maintenance phase.
• The approach is very structured and it is easier to measure progress by reference to
clearly defined milestones.
• The total cost of the project can be accurately estimated after the requirements have
been defined (via the functional and user interface specifications).
• Testing is easier as it can be done by reference to the scenarios defined in the
functional specification.

Unfortunately, the Waterfall method carries with it quite a few disadvantages, such as:
• Clients will often find it difficult to state their requirements at the abstract level of
a functional specification and will only fully appreciate what is needed when the
application is delivered. It then becomes very difficult (and expensive) to re-
engineer the application.
• The model does not cater for the possibility of requirements changing during the
development cycle.
• A project can often take substantially longer to deliver than when developed with
an iterative methodology such as the agile development method.
Agile Project Management

Agile Project Management is one of the revolutionary methods introduced for the practice of
project management. This is one of the latest project management strategies that is mainly
applied to project management practice in software development. Therefore, it is best to relate
agile project management to the software development process when understanding it.
From the inception of software development as a business, there have been several processes
following, such as the waterfall model. With the advancement of software development,
technologies and business requirements, the traditional models are not robust enough to cater
the demands. Therefore, more flexible software development models were required to address
the agility of the requirements. As a result of this, the information technology community
developed agile software development models.
'Agile' is an umbrella term used for identifying various models used for agile development,
such as Scrum. Since agile development model is different from conventional models, agile
project management is a specialized area in project management.
The Agile Process

It is required for one to have a good understanding of the agile development process to
understand agile project management.
There are many differences in agile development model when compared to traditional models:
• The agile model emphasizes on the fact that entire team should be a tightly
integrated unit. This includes the developers, quality assurance, project
management, and the customer.

• Frequent communication is one of the key factors that makes this integration
possible. Therefore, daily meetings are held in order to determine the day's work
and dependencies.
• Deliveries are short-term. Usually a delivery cycle ranges from one week to four
weeks. These are commonly known as sprints.
• Agile project teams follow open communication techniques and tools which enable
the team members (including the customer) to express their views and feedback
openly and quickly. These comments are then taken into consideration when
shaping the requirements and implementation of the software.
Fig. Agile Model
Scope of Agile Project Management

In an agile project, the entire team is responsible in managing the team and it is not just the
project manager's responsibility. When it comes to processes and procedures, the common
sense is used over the written policies.
This makes sure that there is no delay is management decision making and therefore things
can progress faster. In addition to being a manager, the agile project management function
should also demonstrate the leadership and skills in motivating others. This helps retaining the
spirit among the team members and gets the team to follow discipline.
Agile project manager is not the 'boss' of the software development team. Rather, this function
facilitates and coordinates the activities and resources required for quality and speedy software
development.

Responsibilities of an Agile Project Manager

The responsibilities of an agile project management function are given below. From one
project to another, these responsibilities can slightly change and are interpreted differently.
• Responsible for maintaining the agile values and practices in the project team.
• The agile project manager removes impediments as the core function of the role.
• Helps the project team members to turn the requirements backlog into working
software functionality.
• Facilitates and encourages effective and open communication within the team.
• Responsible for holding agile meetings that discusses the short-term plans and
plans to overcome obstacles.
• Enhances the tool and practices used in the development process.
• Agile project manager is the chief motivator of the team and plays the mentor role
for the team members as well.

Supply Chain Management

Supply chain management encompasses the planning and management of all activities
involved in sourcing and procurement, conversion, and all logistics management activities.
Importantly, it also includes coordination and collaboration with channel partners, which can
be suppliers, intermediaries, third party service providers, and customers.
The supply Chain Management thus integrates all the processes that are involved in the
manufacture to the distribution of the goods. It is therefore a cross-functional approach that
includes the movement of raw materials into an organization and their processing, certain
aspects of the internal processing of materials into finished goods, and the movement of these
finished goods out of the business and towards the final consumer.
Ex. A car manufacturer has a supply chain which begins from mining of the metals, the mined
metals are processed by the same or different company. Then the conversion of the metal to
usable form (sheet, rods) may be done by a third party. Later the sheet metal is consumed by
Car Company to build cars and purchased by common man. If we evaluate each step it will be
evident that there is a supplier, some sort of processing and a consumer, hence the definition.
Material / Information Flow
Financial / Information Flow
Fig. This is how Supply chain Design of Product Industry looks like

It includes all of the logistics management activities noted above, as well as manufacturing
operations, and it drives coordination of processes and activities with and across marketing,
sales, product design, finance, and information technology.
Why Supply Chain?

In this age of competition where companies are trying their level best to improve their
efficiency to minimize the cost, supply chain plays a very vital role. Supply and logistics
related costs account for about 20-25% of a typical firm’s total cost.
Supply Chain Management broadly tries to address four issues involving the following which
are namely-
A) Distribution Network Management- This involves the management of the various
production facilities and warehouses along with distribution centres. This is very vital because
all organizations tend to have numerous suppliers and distributers along with storage facilities
and the integration of all these is extremely essential.
B) Distribution Channels- This involves the various strategies employed and involves
method such as cross docking, direct shipment, pull or push strategies, third party logistics etc.
The various distribution channels are encompassed under this method.
C) Information Channels- This involves the integration of the various systems and processes
in the supply chain for sharing valuable information and also involves predicting demand,
forecasts, inventory and transportation.
D) Inventory Management- This process involves managing the quantity and location of
inventory including raw material, work-in-process and finished goods from service providers
to consumers.
The Supply Chain Management thus tries to integrate the various processes so as to improve
their efficacy as a whole.
Supply Chain Management has three levels of activities that different parts of the company
will focus on:
Strategic, tactical, and operational.
Strategic: At this level, company management will be looking at high level strategic decisions
concerning the whole organization, such as the size and location of manufacturing sites,
partnerships with suppliers, products to be manufactured and sales markets.
Tactical: Tactical decisions focus on adopting measures that will produce cost benefits such
as using industry best practices, developing a purchasing strategy with favoured suppliers,

working with logistics companies to develop cost effect transportation, and developing
warehouse strategies to reduce the cost of storing inventory.
Operational: Decisions at this level are made each day in businesses that affect how the
products move along the supply chain. Operational decisions involve making schedule
changes to production, purchasing agreements with suppliers, taking orders from customers
and moving products in the warehouse.
What are various activities of Supply chain Manager?
1. It involves the daily planning, production and scheduling of the various

processes so as to improve their efficacy.
2. Another function of supply chain manager is demand planning and forecasting,
coordinating the demand forecast of all customers and sharing the forecast with all
suppliers. This helps both the suppliers and the producers be aware of the exact
requirements and hence prepare accordingly so as to minimize the inventory
storage costs.
3. Inbound operations and outbound operations where the inbound operations
involve the transportation from suppliers and receipt of inventory and the outbound
operations involve transportation to customers.
Based on the movement of products and services the supply chain can be divided into three
major portions-
A. Product Flow- This involves all the movement of goods from raw materials to
finished goods.
B. Information Flow-This involves the flow of information throughout the supply
chain which is extremely essential and broadly includes the transmitting of orders,
updating the status of delivery etc.
C. Finance Flow-The financial flow is extremely important in the supply chain
and consists of credit terms, payment schedules, and consignment and title
ownership arrangements.

What are the various Elements of the Supply Chain?

A simple supply chain is made up of several elements that are linked by the movement of
products alongside. The supply chain starts and ends with the customer.
I. Customer: The customer starts the chain of events when they decide to purchase a
product that has been offered for sale by a company. The customer contacts the sales
department of the company, which enters the sales order for a specific quantity to be
delivered on a specific date. If the product has to be manufactured, the sales order
will include a requirement that needs to be fulfilled by the production facility.
II. Planning: The requirement triggered by the customer’s sales order will be combined
with other orders. The planning department will create a production plan to produce
the products to fulfil the customer’s orders. To manufacture the products the
company will then have to purchase the raw materials needed.
III. Purchasing: The purchasing department receives a list of raw materials and services
required by the production department to complete the customer’s orders. The
purchasing department sends purchase orders to selected suppliers to deliver the
necessary raw materials to the manufacturing site on the required date.
IV. Inventory: The raw materials are received from the suppliers, checked for quality
and accuracy and moved into the warehouse. The supplier will then send an invoice
to the company for the items they delivered. The raw materials are stored until they
are required by the production department.
V. Production: Based on a production plan, the raw materials are moved from
inventory to the production area. The finished products ordered by the customer are
manufactured using the raw materials purchased from suppliers. After the items have
been completed and tested, they are stored back in the warehouse prior to delivery
to the customer.
VI. Transportation: When the finished product arrives in the warehouse, the shipping
department determines the most efficient method to ship the products so that they
are delivered on or before the date specified by the customer. When the goods are
received by the customer, the company will send an invoice for the delivered
products.
To ensure that the supply chain is operates as efficient as possible and generates the highest
level of customer satisfaction at the lowest possible cost, companies adopt Supply Chain
Management processes and associated technology.

Challenges in Supply Chain Management

Globalization of manufacturing operation
With the globalization of manufacturing operations, having a global procurement network that
can support and react to your supply chain needs is important. According to many chief
procurement officers, selecting a strategic supplier that provides manufacturing locations with
consistent global quality and a reliable local service, is a challenge.
Safety and quality products

The pressure on manufacturers to produce high-quality products that are safe is an increasing
challenge. The number of product recall cases is growing each day. It can damage a company‘s
reputation and is expensive to its bottom line. Manufacturers have to meet a lot of standards
and compliance norms.
Shorter lead time, less inventory and better throughput

With shorter product life cycles and changing market demands, companies are forced to
embark on a lean journey. It is important to note that the supply strategies in a lean environment
support the operations strategy. The challenge is always to find not just a lean concept, but a
working lean solution.
Supplier base consolidation

Consolidation of the supplier base can bring many advantages. It eliminates supply base
variances and overheads, especially in the supply of critical parts. The challenge is to find a
supplier with solutions and experience in supplier-based consolidation processes
Fig, Supplier Base consolidation

Complexity of supply chains

Serving many different customers with a wide variety of products and services may result in
a complex, global, network of suppliers, factories, warehouses, transporters, customers and
others. The complexity of such a network is hard to unravel and makes it difficult to find where
and why problems occur.
Finding and holding on to supply chain talent

Although supply chain management is now a generally accepted and understood function in a
company, it is difficult to find true supply chain talent. Supply chain management covers
multiple disciplines, and it can therefore be difficult to find that all-round supply chain person
Customer Preferences
As stated above, global supply chains are complex. Add to that product features that are
constantly changing, and the challenge is even greater. A product is released and customers
rapidly pressure companies to come up with the next big thing. Innovation is important since
it allows companies to stay competitive in the market, but it‘s also a challenge. To enhance a
product, companies must redesign their supply network and meet market demand in a way
that’s transparent for customers.
Market Growth
Another factor that presents a challenge is the pursuit of new customers. The cost of a
developing a product, from R&D to product introduction, is significant. Therefore, companies
are trying to expand their distribution to emerging markets to grow revenues and increase
market share. Companies all around the world are expected to expand in their home and
foreign markets. The introduction to new markets is difficult due to trading policies, fees, and
government policies.
Customers ‘expectations nowadays are more demanding than ever. As described here,
companies have responded with global networks, product innovation, and market expansions.
This means that companies now rely on supply chain managers to optimize their value chains
to stay competitive. As such, it is no surprise that these professionals are in high demand. So,
customers, rest assured - experts in supply chain management, are behind the scenes tackling
these complexities each and every day and are eager to delight the customer experience.

Value Chain
A value chain is a set of activities that a firm operating in a specific industry performs in order
to deliver a valuable product or service for the market. The activity of a diamond cutter can
illustrate the difference between cost and the value chain. The cutting activity may have a low
cost, but the activity adds much of the value to the end product, since a rough diamond is
significantly less valuable than a cut diamond.
Rather than looking at departments or accounting cost types, Porter's Value Chain focuses on
systems, and how inputs are changed into the outputs purchased by consumers. Using this
viewpoint, Porter described a chain of activities common to all businesses, and he divided
them into primary and support activities. Look at below figure for Value chain analysis.
.
Fig. Value Chain Analysis
Primary activities
• Inbound Logistics: arranging the inbound movement of materials, parts, and/or
finished inventory from suppliers to manufacturing or assembly plants,
warehouses, or retail stores

• Operations: concerned with managing the process that converts inputs (in the
forms of raw materials, labour, and energy) into outputs (in the form of goods
and/or services)
• Outbound Logistics: is the process related to the storage and movement of the
final product and the related information flows from the end of the production line
to the end user.
• Marketing and Sales: selling a product or service and processes for creating,
communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large.
• Service: includes all the activities required to keep the product/service working
effectively for the buyer after it is sold and delivered
Support/Secondary activities
• Infrastructure: consists of activities such as accounting, legal, finance, control,
public relations, quality assurance and general (strategic) management.
• Technological Development: pertains to the equipment, hardware, software,
procedures and technical knowledge brought to bear in the firm's transformation of
inputs into outputs.
• Human Resources Management: consists of all activities involved in recruiting,
hiring, training, developing, compensating and (if necessary) dismissing or laying
off personnel.
• Procurement: the acquisition of goods, services or works from an outside external
source
Functional product
• This type of product is very stable and does not have variety or undergoes
changes with high frequency. So, it is of less variety (low customization) and
has Stable demand and thus does not undergo rapid changes.
• For a functional product an efficient supply chain is the fit, where demand and
supply uncertainties are minimum. In an efficient supply chain, we maintain
less or no inventory.
Innovative Product
• This type of product undergoes frequent changes and this leads to variation in
demand
➢ High level of customization

➢ Demand in not stable

➢ Product undergoes rapid changes
• For an innovative product, responsive supply chain is the fit, where we maintain
a large inventory to tone down the sudden surge in the demand
Bullwhip effect
The bullwhip effect on the supply chain occurs when changes in consumer demand causes the
companies in a supply chain to order more goods to meet the new demand. The effect can be
best explained as an extreme change is supply position that is generated by a small change in
demand downstream. Inventory can quickly move from being back ordered to being in excess
due to serial nature of communicating up the supply chain and the delays in moving product
down the supply chain.
Fig. Bullwhip Effect

Irregular orders in the lower part of the supply chain develop to be more distinct higher up in
the supply chain. This variance can interrupt the smoothness of the supply chain process as
each link in the supply chain will over or underestimate the product demand resulting in
exaggerated fluctuations.
Logistics management
Logistics management activities typically include inbound and outbound transportation
management, fleet management, warehousing, materials handling, order fulfilment, logistics
network design, inventory management, supply/demand planning, and management of third-
party logistics services providers. In short Logistics management encompasses everything
from material handling, packing & warehousing to transportation
To varying degrees, the logistics function also includes sourcing and procurement, production
planning and scheduling, packaging and assembly, and customer service. Logistics
management is an integrating function, which coordinates and optimizes all logistics
activities, as well as integrates logistics activities with other functions including marketing,
sales manufacturing, finance, and information technology.
Logistics ensures the availability of the right product, in the right quantity and right condition:
✓ At the right place
✓ At the right time
✓ At the right cost
✓ For the right customer

Objective: Minimize cost, minimize investment and maximize customer service
Logistics is all pervasive. Some excellent examples of value adding logistics services are:
Dabbawalas of Mumbai: Reliable, fool proof logistics system of delivering lunch boxes to
over 5,00,000 office goers every day without letting the wrong lunch box reaching the wrong
office and also ensuring the boxes reach on time.
The Indian Postal Services: One of the largest logistics networks in the world today, which
delivers letters in the most cost-effective manner across six lakh villages, one hundred and
twenty cities and several thousand of towns covering the length and breadth of the country
within twenty-four to forty-eight hours and serving more than hundred and seventy countries
with Indian source stations/ customers and/or destinations as mentioned earlier.
Purpose of Logistics Management

1. Reduction of inventory: Inventory is one of the key factors, which can affect the
profit of an enterprise to a great extent. In the traditional system, firms had to carry
lot of inventory for satisfying the customer and to ensure excellent customer
service. But, when funds are blocked in inventory, they cannot be used for other
productive purposes. These costs will drain the enterprise’s profit. Logistics helps
in maintaining inventory at the lowest level, and thus achieving the customer goal.
This is done through small, but frequent supplies.
2. Economy of freight: Freight is a major source of cost in logistics. This can be
reduced by following measures like selecting the proper mode of transport,
consolidation of freight, route planning, long distance shipments etc.
3. Reliability and consistency in delivery performance: Material required by the
customer must be delivered on time, not ahead of the schedule or behind the
schedule. Proper planning of the transportation modes, with availability of
inventory will ensure this.
4. Minimum damage to products: Sometimes products may be damaged due to
improper packing, frequent handling of consignment, and other reasons. This
damage adds to the logistics cost. The use of proper logistical packaging,
mechanized material handling equipment, etc will reduce this damage.
5. Quicker and faster response: A firm must have the capability to extend service
to the customer in the shortest time frame. By utilizing the latest technologies in
processing information and communication will improve the decision making, and
thus enable the enterprise to be flexible enough so that the firm can fulfil customer
requirements, in the shortest possible time frame.

Various functions of Logistics Management

1. Order Processing: Processing the orders received from the customers is an
activity, which is very important by itself and also consumes a lot of time and
paperwork. It involves steps like checking the order for any deviations in the agreed
or negotiated terms, price, payment and delivery terms, checking if the materials
are available in stock, producing and scheduling the material for shortages, and
also giving acknowledgement to the owner, by indicating any deviations
2. Inventory Planning and management: Planning the inventory can help an
organization in maintaining an optimal level of inventory which will also help in
satisfying the customer. Activities like inventory forecasting, engineering the order
quantity, optimization the level of service, proper deployment of inventory etc. are
involved in this.
3. Warehousing: This serves as the place where the finished goods are stored before
they are sold to the customers finally. This is a major cost centre and improper
warehouse management will create a host of problems.
4. Transportation: Helps in physical movement of the goods to the customer’s place.
This is done through various modes like rail, road, air, sea etc.
5. Packaging: A critical element in the physical distribution of the product, which
also influences the efficiency of the logistical system.
How does Logistics add Value?

Logistics delivers value to the customer through three main phases:
a) Inbound logistics: These are the operations, which precede manufacturing. These
include the movement of raw materials, and components for processing from
suppliers.
b) Process logistics: These are the operations, which are directly related to processing.
These include activities like storage and movement of raw materials, components
within the manufacturing premises.
c) Outbound logistics: These are the operations, which follow the production process.
These include activities like warehousing, transportation, and inventory management
of finished goods.

Logistics Models
1PL - First-Party Logistics

An enterprise that sends goods or products from one location to another is a 1PL. For
example, a local farm that transports eggs directly to a grocery store for sale is a 1PL.
2PL - Second-Party Logistics

An enterprise that owns assets such as vehicles or planes to transport products from one
location to another is a 2PL. That same local farm might hire a 2PL to transport their eggs
from the farm to the grocery store.
3PL - Third-Party Logistics

In a 3PL model, an enterprise maintains management oversight, but outsources operations of
transportation and logistics to a provider who may subcontract out some or all of the
execution. Additional services may be performed such as crating, boxing and packaging to
add value to the supply chain. In our farm-to-grocery store example, a 3PL may be
responsible for packing the eggs in cartons in addition to moving the eggs from the farm to
the grocery store.
4PL - Fourth-Party Logistics

In a 4PL model, an enterprise outsources management of logistics activities as well as the
execution across the supply chain. The 4PL provider typically offers more strategic insight
and management over the enterprise's supply chain. A manufacturer will use a 4PL to
essentially outsource its entire logistics operations. In this case, the 4PL may manage the
communication with the farmer to produce more eggs as the grocery store's inventory
decreases.
5PL - Fifth-Party Logistics

A 5PL provider supplies innovative logistics solutions and develops an optimum supply
chain network. 5PL providers seek to gain efficiencies and increased value from the
beginning of the supply chain to the end through the use of technology like blockchain,
robotics, automation, Bluetooth beacons and Radio Frequency Identification (RFID) devices.
Difference between 3PL and 4PL

• Typically, the 4PL does not own transportation or warehouse assets. Instead, it
coordinates those aspects of the supply chain with vendors

• The 4PL may coordinate activities of other 3PLs that handle various aspects of
the supply chain. The 4PL functions at the integration and optimization level,
while a 3PL may be more focused on day-to-day operations
• The primary advantage of a 4PL relationship is that it is a strategic relationship
focused on providing the highest level of services for the best value, as opposed
to a 3PL that may be more transaction focused.
• A 4PL provides a single point of contact for your supply chain. With a 3PL, there
may be some aspects that you still have to manage. The 4PL should take over
those processes for you, acting as the intermediary for 3PLs, carriers, warehouse
vendors and other participants in your supply chain.
Fig. Logistics Models

Reverse Logistics
A complete supply chain dedicated to the reverse flow of products and materials for the
purpose of returns, repair, remanufacture and/or recycling. It is moving the items from the
consumer back to the producer for repair or disposal. There are two main categories of reverse
logistics: asset recovery, which is the return of actual products, and green reverse logistics,
which represents the responsibility of the supplier to dispose of packaging materials or
environmentally sensitive materials such as heavy metals and other restricted materials.
Goods are returned for many reasons that can include:

✓ Quality demands by final customers (both real and perceived)
✓ Damaged or defective products
✓ Inventories that result from over-forecast demand
✓ Seasonal inventories
✓ Out-of-date inventories
✓ Remanufacturing and refurbishment of products
Returned goods can be:

✓ Returned to inventory
✓ Refurbished for resale
✓ Sold into alternate markets
✓ Broken down into reusable components
✓ Sorted to recover valuable materials (further reducing disposal costs)
Example: recycling of used soft drink glass bottles, refurbishment of used Apple iPhone,
returnable packaging in automotive industry
Procurement
Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or
works from an external source, often via a tendering or competitive bidding process. It
generally involves making buying decisions under conditions of scarcity. An important
distinction should be made between analyses without risk and those with risk. Where risk is
involved, either in the costs or the benefits, the concept of best value should be employed.
Various terminologies associated with Procurement:

Purchase requisition: Purchase Requisition (PR) is a document stating the requests of a user
or a department concerning the procurement of materials or services. SAP ERP through its
Material Management functionality creates this document in the first phase of the

procurement cycle (called Determination of Requirements). This document will contain

information such as the material or service to be procured, a required date of delivery, and
a quantity. It can be created manually or automatically and it is an internal document issued
by a user or a department to the purchasing department in an organization. It allows the
purchasing department to:
• Identify where goods and/or services are needed
• Explore discounts and favourable terms offered by vendors
• Create the best purchase order for each vendor
Purchase order: PO is a document that shows the intent of a buyer to buy a certain quantity
of product at a certain price from a specific vendor. SAP ERP Materials Management module
generates this document in the fourth phase of the procurement cycle known as the purchase
order processing. This document will contain the same information as the purchase requisition
but will also have some other details concerning agreed conditions between the client and the
vendor. It can be created manually or automatically and it is an external document issued by
the purchasing department to be sent to a supplier.
Request for Information (RFI): The request for information (RFI) is used by organizations
seeking to develop a bid list or prequalify potential suppliers. Generally, the RFI asks suppliers
to submit general information about their companies, such as size, financial performance, years
in business, market position, product lines etc.
Request for Proposal (RFP): The RFP is used when a specification or statement of work
(SOW) has not yet been developed, or when the buyer has a general requirement and wants to
solicit various ideas on how that requirement can best be met.
Request for Quotation (RFQ): It is used when a specification or SOW has already been
formulated and the buyer needs only to obtain price, delivery, and other specific terms from
the suppliers in order to select the most appropriate source. The specifications are sent to
prequalified suppliers soliciting price and other terms and conditions.
Procurement Activities
Direct spend - Direct spend refers to the production-related procurement that encompasses all
items that are part of finished products, such as raw material, components and parts. Direct
procurement, which is the focus in supply chain management, directly affects the production
process of manufacturing firms.

Indirect spend - Indirect procurement concerns non-production-related acquisition: obtaining

"operating resources" which a company purchases to enable its operations. Indirect
procurement comprises a wide variety of goods and services, from standardized items like
office supplies and machine lubricants to complex and costly products and services like heavy
equipment, consulting services, and outsourcing services.
Risk Management
Risk is an event that is capable of impeding procurement from achieving functional and
business objectives. There is risk in every supply relationship, without these risks it is difficult
to achieve enhanced value. The focus should be on identifying these risks, assessing them
effectively and managing them proactively. Therefore, it is good practice for procurement to
have a holistic process to risk management. This process should be underpinned by a well-
defined risk identification and assessment process, an effective risk strategy and a managed
risk register.
Fig. Risk Management Process
Risk Management Process
1. Risk identification and Assessment Process

This is the process where procurement recognizes the risk and seeks to minimize the
probability of occurrence and impact. Effective risk management recognizes that there is an
‘upside’ and ‘downside’ to every risk. Upside refers to new opportunities and downside refers
to threats and vulnerabilities, any risk management strategy should seek to exploit ‘upside’
and mitigate ‘downside’. The risk management process is made of 5 Phases:
➢ Phase 1: Identify: Identify the risk and source
➢ Phase 2: Establish: Establish probability of occurrence
➢ Phase 3: Assessment: Evaluate impact of occurrence

➢ Phase 4: Investigate: Investigate risk reduction options

➢ Phase 5: Control: Deploy mitigating strategies and monitor against plan
2. Risk Strategy
Risk mitigation strategy are those actions taken by procurement to manage supply chain risks,
these usually falls under the 4T’s framework.
a. Terminate: Procurement recognizes the risk and it is deemed too risky to proceed
and terminated. The need to terminate the risk arises because effective mitigating
strategies are too risky, complex or expensive to contemplate.
b. Tolerate: Under this strategy, the risk is tolerated. This is usually after the risk has
been identified and it is established that the probability of occurrence is low or the
risk has been reduced to levels commensurate with risk appetite.
c. Transfer or part transfer: The risk is identified, and the most effective way to
manage or resolve the risk is to transfer it to a third party. Outsourcing or insurance
are ways of achieving this strategy. Part transfer is also a way of risk sharing with
a third party, in this approach some elements of the risk are transferred to a third
party. The elements transferred should always be those the business is incapable of
managing.
d. Treat: Procurement recognizes the likelihood of occurrence and impact to supply
and actively manages the risk by implementing mitigating strategies. Treating the
risk will not eliminate it, rather, it reduces it to an acceptable level with an element
of residual risk. The residual risk can be tolerated or transferred.
3. Risk Register
A risk register is an important element in risk management and it is crucial to an effective risk
management process. The risk register is where the outcome of a risk assessment and
mitigating strategies are logged and made visible to stakeholders. The risk register should
contain a definition of the risk, probability of occurrence and impact, control or mitigating
strategy, proposed action plan and an assigned owner.
Managing supply relationships is challenging, and risk will always be a factor in these
relationships. The task for procurement is to recognize these risks, manage them effectively
and insulate the business from supply chain risks and vulnerabilities.

Banking and Financial Industries

The operations team is responsible for the processing and settlement of all the financial
transactions made at an investment bank or investment management firm.
The operations division, also known as 'back office', provides support to the client facing
departments, such as trading, corporate finance, and corporate banking - sometimes known as
the 'front office'. The front office generates business for the bank, and operations ensure that
the business is administered in an efficient, controlled, risk-free and timely manner. They
ensure that products, services and money change hands how they are supposed to.
Operations professionals are involved in developing new systems in order to maximize
efficiency and profitability for the bank. They also ensure each transaction is cleared, settled
and reconciled according to regulatory and control requirements.
Operations in Insurance/other financial services companies:

Many financial services organizations have found that their attempts to cut costs and improve
efficiency in the wake of the financial crisis have been far less successful than hoped and are
already proving difficult to sustain. There is a particular risk that knee-jerk operational shake-
ups could damage customer service or jettison the talent the business needs to capitalise on an
upturn.
FMCG Industry
Food & FMCG Supply Chain in India can be classified as Perishable and Non-Perishable, and
both are distinctly unique from each other. The complexity for Food Supply Chain arises out
of perishable nature of food items, shorter shelf life of products, food safety, regulatory
requirements, etc. The non-perishable FMCG products have shelf life ranging from 3 to 18
months that requires strict monitoring of FEFO so that products reaching the consumers are
left with enough shelf life. Lack of consumer loyalty in this sector makes it all the more
important for this sector to ensure availability of products at the selling locations, else lose
sale. It needs demand driven and responsive supply chain solutions.

Fig. FMCG Industry
Auto Industry
On the canvas of the Indian economy, auto industry occupies a prominent place. Due to its
deep forward and backward linkages with several key segments of the economy, automotive
industry has a strong multiplier effect and is capable of being the driver of economic growth.
A sound transportation system plays an essential role in the country’s speedy economic and
industrial development.
Many factors play a dominant role and affect decisions made in the automotive world.
Consumer preferences decide the current styles, consistency, and presentation standards of
vehicles. Government trade, safety, and environmental regulations found incentives and
requirements for upgrading and change in design or production.
Fig. Auto Industry

Retail & E-commerce Industry
Fig. Supply chain design of E-commerce Industry

Lean
Lean means doing more with less by employing 'lean thinking'. Lean manufacturing is an
iterative process which involves never ending efforts to eliminate or reduce 'muda' (Japanese
for waste or any activity that consumes resources without adding value) in design,
manufacturing, distribution, and customer service processes with maximizing the process
flow.
It was developed by Toyota Executive Taiichi Ohno during post Second World War
reconstruction period in Japan. The primary elements of Lean are:
1. To have only the required inventory when needed;

2. To improve quality to zero defects;
3. To reduce lead times by reducing setup times, queue lengths, and lot sizes;
4. To incrementally revise the operations themselves;
5. To accomplish these things at minimum cost.
Toyota’s view is that the main method of lean is not the tools, but the reduction of three types
of waste:
1. muda (“non-value-adding work”)

2. muri (“overburden”)
3. mura (“unevenness”)
Types of Waste
1. Unnecessary Transportation: This waste refers to any unnecessary
transportation, such as that commonly associated with the transit of materials or
parts. Transportation is not a value add activity as it does not help transform the
product into the customer requirement and can add further problems through
delays, damage or items being lost.
2. Unnecessary Processing: Over processing is typified by carrying out more
work on a product than is required – this might be using more precision tools than
are required through to, in the example of office activity, bureaucratic approval
systems for documents requiring multiple signatories or reviews. Removing over
processing requires careful consideration to ascertain the actual requirement and
ensuring that the process is engineered to meet this without any further burden.
3. Unnecessary Motion: An effective working environment can help reduce
motion for a given process. This may entail providing tools and equipment at point
of use or making material handling processes more efficient. A common tool used

to analyze motion is the spaghetti diagram which can be very effective at

highlighting issues.
4. Inventory: Any parts or materials that are not immediately required are
considered waste – Inventory is one of the seven wastes that is most easy to spot
in that it is easy to physically see around the business. Inventory is waste as it ties
up resources to manage it for example storage space, personnel, capital outlay and
processing.
5. Waiting Time: It is very common – take looks at your business are parts stacked
up waiting for next part of the assembly process? Are office in-tray‘s piled high
with documents waiting to be processed? A number of causes can result in waiting
– often with product batch sizes being a primary trigger.
6. Defects: Getting it wrong results in waste – whether that‘s manufacturing faulty
parts that require rework or at worst being scrapped or documents that are
incorrectly completed which can result in confusion or mistakes. Defects have a
very real impact on the bottom line of your business and can be one of the key
contributors to inefficiency.
7. Overproduction: Producing more of something than is required by the
customer is waste – close attention to batch sizes and change over times can be
imperative in not over producing. The impact of overproducing can be considerable
– not only is extra-material consumed but extra processing and storage
requirements add to the problem causing another of the seven wastes – inventory.
Solutions with Lean Approach

1. Kaizen
a. Kaizen is a Japanese word for the philosophy that defines management’s role in
continuously encouraging and implementing small improvements involving
everyone.
b. It is the process of continuous improvement in small increments that make the
process more efficient, effective, under control, and adaptable.
c. It focuses on simplification by breaking down complex processes into their sub
processes and then improving them.

Fig. Kaizen
2. Kanban
a) Kanban is a “pull” system that involves cascading or signaling production and
delivery instructions from downstream to upstream activities in which nothing is
produced by the upstream supplier until the downstream customer signals a need.
b) All production is based on consumer demand, with nothing "pushed" downstream.
c) Simply said, nothing is produced without a signal from the next station in the line.
d) Kanban acts as the means of signaling used for material & information movement.
The goal of Kanban is to identify potential bottlenecks in your process and fix them so work
can flow through it cost effectively at an optimal speed or throughput. It is a method for
managing the creation of products with an emphasis on continual delivery while not
overburdening the development team.
Kanban is based on 3 basic principles:

1. Visualize what you do today (workflow): seeing all the items in context of each
other can be very informative
2. Limit the amount of work in progress (WIP): this helps balance the flow-based
approach so teams don’t start and commit to too much work at once
3. Enhance flow: when something is finished, the next highest thing from the backlog
is pulled into play. Kanban promotes continuous collaboration and encourages
active, ongoing learning and improving by defining the best possible team
workflow.

3. Jidoka
a. The term jidoka used in the TPS (Toyota Production System) can be defined as
"automation with a human touch." Providing machines and operators the ability to
detect when an abnormal condition has occurred and immediately stop work. This
enables operations to build in quality at each process and to separate men and
machines for more efficient work.
b. Jidoka sometimes is called autonomation, meaning automation with human
intelligence. This is because it gives equipment the ability to distinguish good parts
from bad autonomously, without being monitored by an operator. This eliminates the
need for operators to continuously watch machines and leads in turn to large
productivity gains because one operator can handle several machines, often termed
multiprocess handling.
c. Example
Jidoka originated in the form of a simple device that could stop the shuttle of an
automatic loom if the thread broke. The mechanism was able to detect if a thread is
broken and therefore immediately shut down the machine and signal that there’s a
problem to avoid producing defects. Afterward, the worker operating the loom had to
fix the problem and resume the production process. Since equipment stops when a
problem arises, a single operator can visually monitor and efficiently control many
machines. As an important tool for this "visual control" or "problem visualization,"
Toyota plants use a problem display board system called "andon" that allows operators
to identify problems in the production line with only a glance.
4. 5s
a. It is a systematic approach to organize and standardize the workplace.
b. It is done in order:
• To improve efficiency and productivity.
• To maintain safety and cleanliness.
• To maintain good control over the processes.
• To maintain the good product quality.
c. Steps
1. Sort- Ensuring each item in a workplace is in its proper place or identified as
unnecessary should be removed.
2. Set in order- Identifying places to arrange the things and placing them in
proper order for prompt usage.
3. Shine- Sweep your workplace thoroughly so that there is no dust/dirt/scrap
anywhere.
4. Standardize- Always aim at maintaining the standard level of cleanliness,
hygiene, and visual control.
5. Sustain

Fig. 5s Methodology
5. Heijunka
a. A technique to facilitate Just-In-Time (JIT) production, levelling the type and quantity
of production over a fixed period of time. This enables production to efficiently meet
customer demands while avoiding batching and results in minimum inventories,
capital costs, manpower, and production lead time through the whole value stream.
b. Example:
A hat producer receives orders for 500 of the same hat per week: 200 orders on
Monday, 100 on Tuesday, 50 on Wednesday, 100 on Thursday, and 50 on Friday.
Instead of trying to meet demand in sequence of the orders, the hat producer would
use heijunka to level demand by producing an inventory of 100 hats near shipping to
fulfill Monday’s orders. Every Monday, 100 hats will be in inventory. The rest of the
week, production will make a 100 hats per day – a level amount. The inventory might
look a little suspicious to Lean purists, but it has its fans – it is the method the Toyota
Production System uses today. What if the situation involves multiple types of hats?
Consider that orders are being placed for hat models A, B, C and D. A mass producer
will want to minimize waste around equipment changeovers. Its production schedule
will look something like this: AAAAABBBCCDD.

6. Just-In-Time (JIT)
a. Just-in-time is an inventory strategy companies employ to increase efficiency and
decrease waste by receiving goods only as they are needed in the production
process, thereby reducing inventory costs.
b. This method requires producers to forecast demand accurately.
c. This inventory supply system represents a shift away from the older just-in-case
strategy, in which producers carried large inventories in case higher demand had
to be met.
d. The main objective of JIT manufacturing is to reduce manufacturing lead times.
e. This is primarily achieved by drastic reductions in work-inprocess (WIP).
f. The result is a smooth, uninterrupted flow of small lots of products throughout
production.
g. Example: Dell has leveraged JIT principles to make its manufacturing process a
success. Dell’s approach to JIT is different in that they leverage their suppliers to
achieve the JIT goal. They are also unique in that Dell is able to provide
exceptionally short lead times to their customers, by forcing their suppliers to carry
inventory instead of carrying it themselves and then demanding (and receiving)
short lead times on components so that products can be simply assembled by Dell
quickly and then shipped to the customer.
7. Poka-Yoke
a. Poka means “Mistake” or “Error” and Yoke means “Proofing” or “Avoid”.
b. In other words, Poka-Yoke means Error Proofing or Mistake Proofing or
Avoidance of Error.
c. Poka-Yoke is a Japanese improvement strategy for mistake-proofing to prevent
defects (or nonconformities) from arising during production processes.
d. The Poka-Yoke concept was created in the mid-1980s by Shigeo Shingo, a
Japanese manufacturing engineer.
e. Mistake Proofing is a method for avoiding errors in a process.The simplest
definition of ‘Mistake Proofing’ is that is a technique for eliminating errors by
making it impossible to make mistakes in the process.It is often considered the best
approach to process control.
Example:
1. Electric plugs have an earth pin that is longer than the other pins and is the first to
contact the socket. The protective shield of the neutral and earth sockets are then
opened safely.
2. The device could be a clamp that can be placed only in a certain way
3. A lid that can be turned in only one direction.

4. In McDonald’s, the French fry scoop and standard size bag used to measure the
correct quantity are poka-yokes.
5. Checklists are another type of poka yoke.
8. Gemba, Gembutsu, Genjitsu

Gemba –
a. Place of Production (Gemba) is a term that is often used to describe ‘where the
action occurs’ or in the case of most manufacturing facilities, the shop floor. A
related term gemba walk, means to get out of your office and go out to the shop
floor where the actual work is performed.
b. The idea behind gemba walks, and gemba in general, is to end the trend of
managers sitting in their offices and making decisions based exclusively on reports
or second hand information. While this type of information is critical, it is no
substitute for actually seeing how things are running and interacting with the front
line employees.
Gembutsu –
a. The Actual Product Looking at the actual end product and the product at various
stages of manufacturing helps you see where the value is added throughout the
manufacturing process.
b. It helps you to streamline its creation by eliminating costly or time consuming
steps that don’t add significant value to the customers. This is critical because
anything that expends the facility’s time or other resources without adding value in
the eyes of the customer is a significant form of waste.
Genjitsu –
a. The Facts Genjitsu means ‘the facts.’ In this context it means that managers need
to work hard to find the facts of any given situation. Many people mistake this for
meaning they need to find out who or what to blame for problems, but that is not
the case. Making an effort to determine the facts of the matter will give you the
information needed to make changes required to avoid problems and eliminate
waste wherever possible.
b. Even if it is determined that someone is doing something wrong, that does not
necessarily mean that they need to be disciplined or even fired. Instead, it should
be looked at as a learning opportunity for both the employee and the whole team.

9. Theory of Constraints
a) The core concept of the Theory of Constraints is that every process has a single
constraint and that total process throughput can only be improved when the
constraint is improved.
b) A very important corollary to this is that spending time optimizing non-constraints
will not provide significant benefits; only improvements to the constraint will
further the goal (achieving more profit).
c) The Five Steps of the Theory of Constraints:
1. Identify the System Constraint: Identify the current constraint (the single part
of the process that limits the rate at which the goal is achieved).
2. Decide How to Exploit the Constraint: Make quick improvements to the
throughput of the constraint using existing resources (i.e. make the most of what
you have).
3. Subordinate Everything Else: The non-constraint components of the system
must be adjusted to a "setting" that will enable the constraint to operate at
maximum effectiveness. Once this has been done, the overall system is
evaluated to determine if the constraint has shifted to another component. If the
constraint has been eliminated, the change agent jumps to step five.
4. Elevate the Constraint: If the constraint still exists (i.e. it has not moved),
consider what further actions can be taken to eliminate it from being the
constraint. Normally, actions are continued at this step until the constraint has
been “broken” (until it has moved somewhere else). In some cases, capital
investment may be required.This step is only considered if steps two and three
have not been successful. Major changes to the existing system are considered
at this step.
5. Return to Step One, But Beware of "Inertia":
What are Constraints?
Constraints are anything that prevents the organization from making progress
towards its goal. In manufacturing processes, constraints are often referred to
as bottlenecks. Interestingly, constraints can take many forms other than
equipment.

Six Sigma Manufacturing Practices

History
1. 1970s- Dr. Noriaki Kano introduces his two-dimensional quality model and the
three types of quality.
2. 1986- Bill Smith, a senior engineer and scientist introduces the concept of Six
Sigma at Motorola.
3. 1994- Larry Bossidy launches Six Sigma at Allied Signal.
4. 1995- Jack Welch launches Six Sigma at GE.
What is Six Sigma?

Six Sigma is a data driven, customer centric and result oriented methodology which uses
statistical tools and techniques to eliminate the defects and inefficiencies to improve the
process.
The following characteristic is a feature of Six Sigma
1. Customer Centric
2. Process focused
3. Data driven
4. Performance Gains
5. Validation through business results
6. Structured improvement
Focus of Six sigma

1. Reduce Variation
2. Reduce Defects
3. Delighting Customer
4. Reduce Cost
5. Reduce Cycle time
Organizations embrace the Six Sigma way as this methodology systematically and measurably
enhances the value of the organizations by making them competitive, quality-conscious,
customer-centric, and forward-looking.

Some of the benefits that the organizations derive from the Six Sigma initiatives are:
1. Waste prevention
2. Defect reduction
3. Cycle time reduction
4. Cost savings
5. Market share improvement
Mathematical Interpretation
Sigma stands for standard deviation from mean. Six sigma represents six standard deviation
from the mean.
1. USL - Upper specification limit for a performance standard. Any deviation above this is a
defect. (+6 sigma)
2. LSL – Lower specification limit for a performance standard. Any deviation below this is a
defect. (-6 sigma)
3. Target – Ideally, this will be the middle point between USL and LSL. (between +6 sigma
and -6 sigma)

Fig. Sigma level, PPM and Yield
Recommended Case Study- Mumbai’s Dabbawalla are at more than Six Sigma Level.
The significance of 2.8 Sigma is that it is 99% good:
1. 20,000 lost articles of mail/hour

2. 5000 incorrect surgical operations per week
The significance of 6 sigma level is that it is 99.99967% Good and equates to 3.4 defects per
million opportunities:
1. Seven article lost per hour

2. 1.7 incorrect operations per week
DMAIC and DMADV approach
Fig. Six Sigma Methodologies

DMAIC
The DMAIC process should be used when an existing product or process requires
improvement to meet or exceed the customer’s requirements. This initiative should be
consistent with the business goals of the organization.
Example.
Companies using DMAIC Methodology: GE, Motorola, etc.
1. D – DEFINE the problem

a. The Define Phase is used to identify the areas of improvement and define goals
for the improvement activity and ensures that resources are in place for the
improvement project.
b. The Define Phase will focus on a customer requirement and identify project
CTQ’s (Critical to quality). A CTQ is a product or service characteristic that
satisfies a customer requirement or process requirement
2. M – MEASURE the outcome (Y)

a. The Measure Phase evaluates the process to determine the current process
performance, that is, the baseline.
b. It uses exploratory and descriptive data analysis to help in understanding the
data. The Measure phase allows you to understand the present condition of the
process before you attempt to identify improvements. The inputs to the measure
phase are the outputs of the Define phase.
3. A – ANALYZE, identify X’s (root causes of the defects, variation sources)

The Analyze phase is used to identify few vital causes from a list of potential causes
obtained from the Measure phase, actually affecting project outcome using six
sigma methodologies. The data collected in the Measure phase are examined to
determine a prioritized list of the sources of variation.
4. I – IMPROVE the process by eliminating the defects

The improve phase of Six Sigma is used to improve the system to do things better,
cheaper or more rapidly by finding optimum solution for Y, implement the new
approach and validate using statistical methods. The main objective of the improve
phase is to improve the process by eliminating defects.
5. C – Control X’s for sustained performance

The control phase of Six Sigma is used to develop and implement process control
plan to ensure sustenance of the improved process. The major activities in the

control phase are to validate measurement system, verify process improvement and
develop control mechanism. So far we have identified the best settings for each of
the vital ‘X’. The key now is to ensure that the X’s don’t fluctuate away from the
targeted setting. Process control is an important tool to ensure that the Six Sigma
project delivers lasting benefits.
Zero Defects –
The Theory and Implementation Zero defects theory ensures that there is no waste existing in
a project. Waste here refers to all unproductive process, tools, employee etc. So, anything that
is unproductive and does not add value to a project should be eliminated from the project. By
doing this, you reduce waste and thus cut down the cost involved in the waste.
Besides eliminating waste, there should be a process of improvement. Any scope of

improvement that is possible in a project should be experimented. This ensures the movement
towards perfection.
Zero defects theory also closely connects with “right first time” phrase. This means that every
project should be perfect at the very first time itself. Here, again perfect refers to zero defects.
Zero defects theory is based on four elements for implementation in real projects.
Quality is a state of assurance to requirements. Therefore, zero defects in project means

fulfilling requirement at that point of time. Quality should be taken care of at the very first go
rather than solving problems at a later stage. Quality here is measured in financial terms. One
needs to judge waste, production and revenue in terms of money. Performance should be
judged as per zero defects theory, i.e. near to perfection. Just being good is not good enough.
Pros
Zero defects ensure that all waste existing in a project is eliminated in the very first go itself
that leads to cost reduction. Thus, Zero defects leads to waste reduction along with cost cutting.
All these process improves services and therefore, there is improvement in quality leading to
happy customers.
Cons
As there is a quest for perfection and zero defects, more people and process might be involved
to find out the defects which will lead to extra cost. Also over strictness might hamper the
work culture and production in projects. To overcome the cons, along with following zero
defects theory, one needs to ensure continual service improvement as well.

Basic tools of Six Sigma

1. Check sheets
a. Check sheets are very important tool for data collection. Inputs gathered from
check sheets can be used for creation of Pareto diagrams, Fishbone diagrams etc.
b. The purpose of check sheets is to ease the compilation of the data in such a manner
that they may be used / analysed comfortably.
c. It is a simple and convenient recording technique for collecting and determining
the occurrence of events.
d. It is constructed with each observation to give a clearer picture of the facts.
2. Histogram
a. It is a visual representation of variable data.
b. It organizes data to describe process performance.
c. It displays centering of the data and pattern of variation.
d. It demonstrates the underlying distribution of the data. Histogram can be used to
check whether the data is Normally distributed or not.
e. It provides valuable information for predicting future performance.
f. It helps to identify whether the process is capable of meeting requirements .
3. Flow chart/process map

a. It is a graphical representation of processes in an organization displaying the
sequence of tasks performed and their relationships.
b. It is a prerequisite to obtain an in depth understanding of a process, before
application of quality management tools such as FMEA, SPC etc.
c. Process maps are progressively elaborated: i.e. a high level process map is defined
early on in the six sigma project which shows major processes and this will be
made more explicit and detailed as project team develops a better and more
complete understanding of all the processes.
d. Standard symbols are used in creation of process maps.
4. Cause and Effect diagram

a. It is a graphic representation of possible causes for any particular problem under
study.
b. This tool was developed by Kaoru Ishikawa in 1960’s to determine and break down
the main causes of a given problem.
c. This tool is employed where there is only one problem and the possible causes are
hierarchical in nature.

d. This diagram is also known as Fish bone diagram (because of its fish bone like
structure) or Ishikawa diagram.
e. It gives the relationship between quality characteristics and its factors.
f. It focuses on causes and not the symptoms.
5. Pareto analysis
a. It is a ranked comparison of factors related to a quality problem.
b. Pareto diagram displays the relative importance of problems is a simple visual
format.
c. Since availability of money, time and other resources are restricted, Pareto analysis
helps the team to consider only vital few problematic factors out of trivial many,
which if addressed with due care, will bring greatest rewards with minimum
resources.
d. Pareto diagram is based on the Pareto principle, also known as 80-20 rule, which
states that a small number of causes (20%) is responsible for a large percentage
(80%) of the effect
6. Scatter Diagram
a. It is a graphical representation that depicts the possible relationship or association
between two variables, factors or characteristics.
b. It provides both a visual and statistical means to test the strength of a relationship.
Construction of a Scatter diagram:
1. Collect the data on both variables, preferable sample size of 20 or more.
2. Plot the data points on a XY plane where variable 1 is plotted along X axis and
variable 2 is plotted along Y axis.
3. Identify the linear relationship between them if it exists.
4. Identify the strength of the linear relationship as strong/ weak positive, and
strong/ weak negative.
7. DFSS
a. Design for Six Sigma (DFSS) is an application of Six Sigma which focuses on the
design or redesign of the different processes used in product manufacturing or
service delivery by taking into account the customer needs and expectations.
b. DMADV is a common DFSS methodology used to develop a process or product
which does not exist in the company.
c. DMADV is used when the existing product or process doesn't meet the level of
customer specification or six sigma level even after optimization with or without
using DMAIC.
d. Companies using DFSS: GE, Motorola, Honeywell, etc.

Cold Chain for Covid Vaccine

Covid-19 vaccine has been the most anticipated product launch ever and going wrong in the
supply chain for this one is not an option. As billions of people eagerly await vaccination over
the coming months and years, it will arguably be the most complex large-scale logistical
exercise the world has ever witnessed.
As governments, industry and other entities begin COVID-19 vaccine distribution efforts
worldwide, cold chain management has emerged as a crucial factor for ensuring vaccine safety
and effectiveness.
Cold chain management entails maintenance of necessary refrigeration levels for highly
temperature-sensitive coronavirus vaccines across manufacturing, storage, transportation, and
distribution processes. Effective vaccine cold chain management will require varying degrees
of coordination and cooperation among multiple and distinct stakeholders:
• Pharmaceutical manufacturers
• Specialised laboratory equipment manufacturers (temperature gauges, sensor
devices, hospital-grade freezers)
• Laboratory equipment manufacturers that produce climate-controlled packaging and
container materials
• Logistic providers
• Healthcare providers and point-of-care (POC) retail pharmacies
Effective cold chain management involves ensuring not only that temperatures to maintain
vaccine viability are held constant, but also that adequate technologies are in place to allow
stakeholders at various points in vaccine storage, transport, and distribution chains to verify
stability of required temperatures.
Vaccine cold chain management comprises a patchwork of processes, methods, and practices
across several industries; these processes, in turn, have their own safety and performance
standards as well as national (and in some cases international) regulations to which they
comply and/or demonstrate conformity.
Risk management approaches for effective vaccine cold chain efforts should entail rigorous
gap assessments focused particularly on real-time process audits for two areas: Chain of
Custody for tracking and documenting cold chain materials through storage, transportation,
and distribution; and Chain of Conditions for supporting consistent temperatures as vaccines
are transported.

Cold chain stakeholders should pay careful attention to labelling and safe handling instructions
and ensure that these materials clearly articulate storage requirements, expiration data and
transport requirements for non-experts.
Distributors will also need to consider the possibility of recalls, which will heavily burden an
already over-taxed supply chain. Since it is logistically impossible to vaccinate everyone in a
first wave, distributors will need to develop standalone strategies for multiple waves. With
many companies still relying on decades-old technology, the distribution of the vaccine will
witness a never-seen-before demand and complexity.
The ageing back-office systems that many logistics companies are relying on are not capable
of managing the scale and complexity of the task at hand. Therefore, many organisations are
turning to flexible and scalable SaaS applications for supply chain and rearchitecting their
operations to be able to leverage innovative technologies like Artificial Intelligence, Internet
of Things and blockchain to improve efficiency.
Impact of COVID on Supply Chain

The COVID-19 pandemic that has swept through the world this year has caused unprecedented
health and economic distress globally. To curb the rapid spread of infection through their
populations, several countries imposed and continue to impose widespread lockdowns. This
has caused significant disruption in demand and supply around the world. Availability and
supply of a wide range of raw materials, intermediate goods, and finished products have
seriously disrupted. Global supply chains (GSCs), which had shown a high level of robustness
and resiliency against several disruptions in recent decades, are genuinely compromised.
The Logistics & Supply chain (L&SC) arm of retail is one of the main constituents of a
country’s economy. An efficient supply chain management has a cascading impact on all
aspects of retail – from sourcing of raw materials based on demand forecast and then speeding
up the production to getting the product to the store and finally to the consumer, everything
depends on the L&SC. The pandemic, which took the world pretty much by surprise, has
pushed up the demand of essential goods. Unfortunately, the COVID crisis has created a
serious risk to supply chains, as manufacturers and retailers face the possibility that suppliers
will halt production, and they won’t be able to replenish run-down stockpiles.
Challenges for Supply Chain Industry Amidst COVID-19:
• Transportation: Transportation is the backbone of the supply chain. With around

80-85 percent share in the value terms currently, the percentage of transportation
will always remain high in coming years. However, the lockdown has imposed

major restrictions, as a result air, rail and road services are feeling the heat in
fulfilling the demand supply. A large part of Indian retail industry is still dependent
on the transportation via roads and therefore, despite the measures and support
from the government, the supply chain industry is feeling the pressure.
• Manpower: With millions of migrant workers back home or under lockdown,
supply chain and other retail business are struggling to deploy even 20 percent of
the required labour force. For maintaining inventory in warehouses, a skilled
workforce is required, which seems a distant probability in the new normal. Aside
from this, factories of essential goods have been operating with restricted working
hours, reduced staff, and shortage of trucks.
• Hygiene: With hygiene becoming the new standard by which industries are being
judged today, the country’s supply chain management needs to put in that extra
effort and time in maintaining the sanitation process during transportation and
delivery of products.
• Lack of inventory: The sudden spread of COVID-19 caught most retailers
unawares, not giving them enough time to stock up on products. With the lockdown
in place, retailers are left with limited stock of products, with a lot of inventory
stuck in the state specific or local warehouses. This in turn is becoming challenge
in supply chain management.
Way Forward
A McKinsey study titled ‘Supply-chain recovery in coronavirus times- plan for now and the
future’ says that in the current landscape, we see that a complete short-term response means
tackling six sets of issues that require quick action across the end-to-end supply chain.
• Create transparency on multi-tier supply chains, establishing a list of critical
components, determining the origin of supply, and identifying alternative sources.
• Estimate available inventory along the value chain- including spare parts and after-
sales stock- for use as a bridge to keep production running and enable delivery to
customers.
• Assess realistic final-customer demand and respond to (or, where possible, contain)
shortage-buying behaviour of customers.
• Optimize production and distribution capacity to ensure employee safety, such as
by supplying personal protective equipment (PPE) and engaging with
communication teams to share infection-risk levels and work-from-home options.
• Identify and secure logistics capacity, estimating capacity and accelerating, where
possible, and being flexible on transportation mode, when required.

• Manage cash and net working capital by running stress tests to understand where
supply-chain issues will start to cause a financial impact.
Digitization at the Ground Level: The logistics systems and warehouses involved in the
supply chain in Tier I cities are technically advanced and automated. As a result, they are still
functioning and can process demand despite working with limited restrictions. Regrettably,
Tier IV, V and beyond are mostly labour intensive, requiring vast amounts of paperwork
among other formalities. In the current COVID-19 pandemic, governments and businesses
with strong digital infrastructure and enabling regulations such e-signature and e-transactions
laws, are dealing with the supply chain disruptions much better than those without. Digitization
will make the entire process very fast and organised.
Prepare for the Future: A supply chain initiative needs constant upgradation. In India, the
need of the hour is to implement supply chain finance programmes to support suppliers in dire
financial straits and make the value chain more capital efficient.
Prioritize products and manage demand volatility: The current COVID-19 pandemic has
caused disruption with various degrees of impact. Retail priorities and supply chain issues
are changing quickly. It is time for companies to rapidly assess, recover, and respond quickly
to numerous obstacles and challenges that still stand in the way. While the retail environment
will stabilise at some point in the future, it is difficult to predict our ‘new normal’ might look
like.
Going forward, retailers and suppliers must join hands to counter the logistical and
transportation slowdown and reinvent supply chain management. They must explore newer
distribution channels that is technologically sounder to counter a calamity of the scale of
COVID-19. Reinventing the Indian supply chain model will be a key challenge post
lockdown for the Indian retail industry- something which would indeed be a true game-
changer.
Impact of Farm Bills 2020 on Agriculture Supply Chain

The new legislations that look to rejig India’s vast and fragmented agriculture markets together
with amendments to the Essential Commodities Act are significant structural changes brought
in by the Indian government. So far protests by farmers have largely concentrated in north-
western India, in Punjab and Haryana, but the legislations are likely to have far reaching impact
over the next few years across states.
The government hopes competitive markets and higher private investments in the food supply
chain will improve farm-gate prices. But the impact of the recent farm bill on Agriculture
sector will be.

• The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill aims
at opening agricultural sale and marketing outside the notified Agricultural
Produce Market Committee (APMC) mandis for farmers. Earlier these mandis had
a monopoly on the trade of agricultural produces. You needed a license from them
to be in the business. The mandis can regulate the trade of farmers’ produce by
providing licences to buyers, commission agents, and private markets. They also
levy market fees or any other charges on such trade.
• Vegetables, rice, and pulses are expensive, but farmers are poor. The middlemen
make all the money, and it is the mandi system that made money in the middle.
Removing these middlemen will increase the money in the hands of the farmers
and makes it cheaper to buy food.
• Contract farming is legal in India, provided you register them with mandis. Despite
huge potential, the mandis never allowed contract farming to take off in India. Free
from the clutches of local mandi committees, contract faming can now finally
flourish in India.
• It removes barriers to inter-state of agricultural produces, creating a unified market
across India and provides a framework for the electronic trading of agricultural
produce. It also prohibits states from collecting any fee, cess, or levy for trade
outside the APMC markets.
• The Farmers (Empowerment and Protection) Agreement of Price Assurance and
Farm Services Bill introduces contract farming in India for the first time. It
provides a framework on trade agreements for the sale and purchase of farm
produce. The mutually agreed remunerative price framework envisaged in the
legislation is touted as one that would protect and empower farmers.
• The important thing is that businesses can now bypass the mandi and directly
procure from farmers, provide capital and assured procurement, and even pay for
insurance, ensuring a better outcome for farmers!
• The Essential Commodities (Amendment) Bill removes cereals, pulses, oilseeds,
edible oils, onion, and potatoes from the list of essential commodities. The
amendment deregulates production, storage, movement, and distribution of these
specified commodities.
• This reform is intended to attract private sector capital/FDI into the agriculture
sector as it will remove fears of private investors of excessive regulatory
interference in business operations. We can also expect more investment for
infrastructures like cold storages, aggrotech start-ups, and food supply chains.
• 20-25% of India’s horticulture produces simply get wasted. This happens due to a
lack of supply chain and cold storages. Since the private sector was not really

allowed to participate in the agriculture business or trading of these commodities,

private capital was hard to come by in the supply chain. With these new changes,
we can see a lot of capital flowing into this sector over the coming years, which
puts an end to this wastage.
• It is important for corporates to get involved in farming from stage 1 if agricultural
export is really going to take off. Indian farmers do not use advanced technology,
uses a lot of chemical fertilizers and pesticides that make a lot of the produces
impossible to export, and cannot ensure delivery of produces due to flood, rain,
draught, etc. Use of advanced technology that large corporations can fund will end
these problems, as there are many ways to save produces from inclement weather
and produce high-quality food items without using much water through techniques
like aquaponics.
• Most importantly, this is going to create a competitive market environment in
agriculture for the first time through a unified market and cut wastage of farm
produce.
Blockchain, Cryptocurrency in Supply Chain

Blockchain, the digital record-keeping technology behind Bitcoin and other cryptocurrency
networks, is a potential game changer in the financial world. But another area where it holds
great promise is supply chain management. Blockchain can greatly improve supply chains by
enabling faster and more cost-efficient delivery of products, enhancing products’ traceability,
improving coordination between partners, and aiding access to financing.
Led by companies such as Walmart and Proctor & Gamble, considerable of advancement in
supply chain information sharing has taken place since the 1990s, thanks to the use of
enterprise resource planning (ERP) systems. However, visibility remains a challenge in lage
supply chains involving complex transactions. Supply chain activities are often extremely
complicated- far more so than the exhibit depicts. For example, orders, shipments, and
payments may not sync up neatly, because an order may be split into several shipments and
corresponding invoices, or multiple orders may be combined into a single shipment. When
blockchain record keeping is used, assets such as units of inventory, orders, loans, and bills of
lading are given unique identifiers, which serve as digital tokens (similar to bitcoins).
Additionally, participants in the blockchain are given unique identifiers, or digital signatures,
which they use to sign the blocks they add to the blockchain. Every step of the transaction is
then recorded on the blockchain as a transfer of the corresponding token from one participant
to another. A blockchain is valuable partly because it comprises a chronological string of
blocks integrating all three types of flows in the transaction and captures details that aren’t

recorded in a financial-ledger system. Moreover, each block is encrypted and distributed to all
participants, who maintain their own copies of the blockchain. Thanks to these features, the
blockchain provides a complete, trustworthy, and tamperproof audit trail of the three
categories of activities in the supply chain.
Advantages of Block Chain in Supply Chain:
• Enhancing traceability, creating workable technology.

• Increasing efficiency and speed and reducing disruptions
• Improving financing, contracting, and international transactions.
• Simpler consensus protocols and security of physical assets.
There is considerable room to improve supply chains in terms of end-to-end traceability, speed
of product delivery, coordination, and financing. Blockchain can be a powerful tool for
addressing the deficiencies, as the companies we studied have proved. It is now time for supply
chain managers who are standing on the side lines to assess the potential of blockchain for
their business. They need to join the efforts to develop new rules, experiment with different
technologies, conduct pilots with various blockchain platforms, and build an ecosystem with
other firms. Yes, this will require a commitment of resources, but the investment promises to
generate a handsome return.
Internet of Things in Operations/Supply Chain

Since the late 1700’s, there have been four recognized shifts in manufacturing process and
technology. The fourth wave, Industry 4.0, has begun to emerge. This will the era of cognitive
manufacturing- where IoT sensors, big data, predictive analytics, and robotics will forge the
future of manufacturing operations.
Manufacturers have been collecting and storing data for the purposes of improving operations
since the first Industrial Revolution. By analysing both structured data being collected in
databases, and unstructured data such as photos or video footage, it is possible to bring more
certainty to decision-making and business operations.
Using IoT, cognitive process and operations, businesses can:
• Improve productivity of the production line through inventory and scrap
reductions.
• Expedite service calls and repairs and reduce warranty costs.
• Improve quality and yield due to improved quality practices.
• Prevent production delays and improve production line performance.

• Reduce equipment downtime and increase process efficiency.

• Expedite equipment repairs.
Green & Sustainable Supply Chain

Sustainable green supply chain is the management of environmental, social, and economic
impacts, and the encouragement of good governance practices, throughout the life cycles of
goods and services. Brands labelled with Green Supply Chains have started becoming
synonymous with sustainability, trustworthiness, quality, and forward thinking. Developing a
green supply chain requires holistic, structural, and methodological shifts in any and all supply
chain strategies and/or actions.
Why Green & Sustainable Supply Chain is Important
• Comply with International Principles and Standard: In the face of increasing

scandals around the world concerning corporate ethics and corporate governance,
many governments have responded with greater oversight of corporate activities.
• Increase Profitability: One of the essences of sustainable green supply chain
management is to streamline business operations, such as better use of sustainable
materials, ensuring a safe working environment, lean production, and quality
management, etc. These approaches would result in cutting down unnecessary
operational costs. By reducing costs, it also means increasing your ROI and
revenue. In the long run, it translated into a higher valuation for businesses.
• Fulfil Corporate Social Responsibility: A sustainable green supply chain has
many dimensions. Other than the environmental aspect, issues around fair labor
practices, anti-corruption, and human rights are also of paramount importance in
practicing sustainable green supply chain. By incorporating these ethical practices,
companies can rule out investors’ concerns over these topics and ensure businesses
are running with efficiency and transparency.
• Build a positive Brand Image: There is growing consumer support for the
improvement of sustainability in global supply chains. Not only does sustainable
green supply chain practices streamline business operations and improve the
quality of your product, but it can also help with your customer acquisition.
Adopting green supply chain management is a powerful way to construct a positive
brand image and create a unique or at least favourable brand identity in response
to your green initiatives. In doing so, businesses can enhance their brand reputation,
hence gaining consumers’ trust and loyalty in the long run.

• Encourage Corporate Innovation: By implementing green supply chain

management, companies are injecting new values and visions within the
businesses. It can bring a positive impact to the company culture, where employees
and managerial staff are more willing to innovate and explore different
opportunities to develop new products and services revolving around
sustainability.

About Opcentuate
Opcentuate Club Activities and Information
Opcentuate club continuously works on the lines which supplement its vision, which is “To
enrich the knowledge of students of DMS, IIT Delhi in the domain of Operations Management
by planning and implementing activities that supplement their classroom learning.”
The Opcentuate Club is responsible for the following activities throughout the year: -
a. Imparting knowledge to students through preparatory sessions, guest lectures and
experience sharing sessions
b. Facilitating certification programmes for Six Sigma -Green Belt/ Black Belt, CPII,
Supply chain Management
c. Organizing industrial visits to supplement the theoretical knowledge with practical

insights
d. OpVasion- Flagship case study event in Parivartan
e. Conduct Operations Continuum
f. Publishing the biannual magazine “Opurent”
g. Imparting knowledge through “Knowledge sharing sessions”, Focus Articles,

forums etc.
The club has a very proactive page on Facebook that is followed by more than 900 people.
There is continuous sharing of information about latest on-going trends & technologies which
companies are adopting and the best practices which are being followed and implemented in
the industries worldwide in the domain of Operation & Supply chain management.

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Operations

Department of Management Studies

DEPARTMENT OF MANAGEMENT STUDIES 2

SUPPLY CHAIN MANAGEMENT

DEPARTMENT OF MANAGEMENT STUDIES 3

LEAN SIX SIGMA

DEPARTMENT OF MANAGEMENT STUDIES 4

DEPARTMENT OF MANAGEMENT STUDIES 5

DEPARTMENT OF MANAGEMENT STUDIES 6

• The availability of the resources needed.

Master Production Schedule

Fig. Manufacturing Planning and Control Systems

DEPARTMENT OF MANAGEMENT STUDIES 7

Material Requirements Plan

Table. A simplified BOM

Purchasing and Production Activity Control

DEPARTMENT OF MANAGEMENT STUDIES 8

Fig: Overview of production planning

MRP II – Manufacturing Resource Planning

DEPARTMENT OF MANAGEMENT STUDIES 9

Why to Keep Inventory?

What is Inventory Control?

DEPARTMENT OF MANAGEMENT STUDIES 10

What are benefits of Inventory Control?

What are various techniques for Inventory Control?

Always Better Control (ABC) Analysis

Example of ABC class

DEPARTMENT OF MANAGEMENT STUDIES 11

Advantages of ABC Analysis

Disadvantages of ABC Analysis

DEPARTMENT OF MANAGEMENT STUDIES 12

It is useful in capital intensive industries, transport industries, etc.

What is EOQ? How it is calculated?

DEPARTMENT OF MANAGEMENT STUDIES 13

The carrying cost of inventory may include:

Formula of Economic Order Quantity (EOQ):

The above formula has been derived as below

DEPARTMENT OF MANAGEMENT STUDIES 14

Process Analysis Terms

DEPARTMENT OF MANAGEMENT STUDIES 15

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Throughput time: Raw Material Receipt to Dispatch

DEPARTMENT OF MANAGEMENT STUDIES 17

Types of Qualitative Methods of forecasting

DEPARTMENT OF MANAGEMENT STUDIES 18

3. Sales Force Polling

The advantages of this forecast are:

DEPARTMENT OF MANAGEMENT STUDIES 19

Types of quantitative methods of forecasting

Types of Time series model:

DEPARTMENT OF MANAGEMENT STUDIES 20

2)Associative (casual method)

Types of associative methods:

DEPARTMENT OF MANAGEMENT STUDIES 21

α = smoothing (or weighting) constant (0 ≤ α ≤ 1)

Difference between Trend and Seasonal and Cyclical Variations

DEPARTMENT OF MANAGEMENT STUDIES 22

Least square method

Coefficient of Correlation and Coefficient of determination

DEPARTMENT OF MANAGEMENT STUDIES 23

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What does this diagram depict?

Fig. Float Calculation

DEPARTMENT OF MANAGEMENT STUDIES 25