OPERATIONS COMPENDIUM-2022

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 INDEX

OPERATIONS MANAGEMENT..................................................................................2
PROCESS ANALYSIS TERM.......................................................................................6
SUPPLY CHAIN MANAGEMENT...............................................................................7
LOGISTICS MANAGEMENT...................................................................................10
INVENTORY MANAGEMENT.................................................................................13
QUALITY CONTROL AND MANAGEMENT.............................................................19
PROJECT MANAGEMENT......................................................................................24
APPLICATION OF IT IN SUPPLY CHAIN...................................................................25

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 OPERATIONS MANAGEMENT
Operations System: An operations system is defined as one in which, several activities are performed to
transform a set of inputs into useful output using a transformation process involving multiple stakeholders

Operations Management: Operations Management is a systematic approach to address all the issues of
an Operations System. It refers to the administration of business practices to create the highest level of
efficiency possible within an organization. It is concerned with converting materials and labour into goods
and services as efficiently as possible to maximize the profit of an organization
Operations management is chiefly concerned with planning, organizing and supervising in the contexts of
production, manufacturing or the provision of services. As such, it is delivery-focused, ensuring that an
organization successfully turns inputs to outputs in an efficient manner. The inputs themselves could
represent anything from materials, equipment and technology to human resources such as staff or
workers.
Management of Processes that transform Inputs into Goods and Services that add value to the Customer

Four Vs of Operations: It is generally recognized in operations management that there are ‘Four V’s’ which
form part of the overall process design. These are:

These four aspects should be carefully dealt with in ensuring process excellence. It includes higher
efficiency, faster cycle time and higher overall productivity. In essence, adding value to the organisation.
As the competitive nature of the business world increasingly demands, value creation is the key path to
survival. It is well recognised that the four Vs of operation, once aligned and appropriately tuned, should
ensure value creation.

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Types of Production Processes

Performance Metrics for Operations

 Quality – PPM, DPMO, Quality Costs, FPY
 Cost – Inventory (days), Procurement, Production
 Delivery – Order Fulfillment time, OTD Index, Schedule Adherence
 Flexibility – No. of models,
 Responsiveness – Waiting Time, Delivery Quote
 Innovation – No. of new models, Patents
 Learning – Training time, Suggestions per employee
 Improvement – No value added (NVA) Content

Capacity: Capacity is the maximum level of output that a company can sustain to make a product or
provide a service. Planning for capacity requires management to accept limitations on the production
process. Depending on the business type, capacity can refer to a production process, human resources
allocation, technical thresholds, or several other related concepts. No system can operate at full capacity
for a prolonged period; inefficiencies and delays make it impossible to reach a theoretical level of output
over the long run.

Measuring Capacity: Capacity is measured in two ways in any organization

• Based on output: An automobile manufacturer such as Toyota will measure capacity based on
daily production of vehicles, say 20,000 vehicles per day.
• In terms of input resources: A software service provider or a management consulting firm can
measure capacity in terms of the number of professionals that they have.

Capacity Utilization: Capacity utilisation is a measure of the extent to which the productive capacity of a
business is being used. It can be defined as: The percentage of
total capacity that is being achieved in a given period
Capacity utilisation (expressed as a percentage) is calculated
using this formula:

Process Capacity: It refers to the production capacity of workers or machines, and is usually expressed by
"hours". The Process Capacity of workers is called human capacity, while that of machines is called
machine capacity. They are calculated using the following formula:

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 • Human capacity = actual working hours x attendance rate x direct labour rate x equivalent
manpower (it is obtained by converting direct labour hours of actual working hours to the capacity
of a worker with normal skills)
• Machine capacity = operating hours x operating rate x the number of machines.

Bottleneck: It refers to a phenomenon where the performance or capacity of an entire system is limited
by a single or small number of components or resources. In production and project management, a
bottleneck is one process in a chain of processes, such that its limited capacity reduces the capacity of the
whole chain. Bottlenecks not only slow or limit the capacity of a process but also cause other problems in a
process which are:
 Process Blocking: This occurs when there is no more room to store WIP or buffer stock before the
bottleneck process. This will cause the production line to bank up and stop until the WIP is cleared
or processed. For example, a process can become blocked when the WIP area cannot take any
more material until the next process processes some.
 Process Starvation: This occurs when the steps after the bottleneck step are forced to stop or idle
because of no material process until the bottleneck process can supply materials to this next step.
For example, a process becomes starved because its cycle time is less than the previous step and
will be forced to idle while it waits for materials or WIP.

Make to Order (MTO): A process that produces products in response to customer order. In other words,
the firm does not keep any finished goods inventory. MTO processes typically produce products that are
unique to the customers’ requirements, but this is not always the case – it is possible to use an MTO
process for standard products.

Make to Stock (MTS): A process that produces standard products to be stored in inventory. These can
be delivered quickly to the customer. The performance metric for MTS is the fill rate (unit, line, or order fill
rate).

Assemble to Order (ATO): A business production strategy where products ordered by customers is
produced quickly and is customizable to a certain extent. The assemble-to-order (ATO) strategy requires
that the basic parts for the product are already manufactured but not yet assembled. Once an order is
received, the parts are assembled quickly and sent to the customer. The ATO strategy attempts to
combine the benefits of both strategies - getting products into customers' hands quickly while allowing for
the product to be customizable. Customer involvement in the design of the product is limited to selecting
the part options needed.

Engineer to Order (ETO): A business production strategy where customer specifications require unique
engineering design, significant customization, or newly purchased material. Usually, the customer is highly
involved in product design. Each customer order results in a unique set of part numbers, bill
of material, and routings. ETO strategy theoretically is slowest to fulfil: time is required not only to build
the product but to custom design it to meet the customer’s unique requirements.

Order Qualifiers and Order Winners: An order qualifier is a characteristic of a product or service that is
required for the product/service to even be considered by a customer. An order winner is a characteristic
that will win the bid or customer's purchase. Therefore, firms must provide the qualifiers to get into or
stay in a market. To provide qualifiers, they need only to be as good as their competitors. Failure to do so
may result in lost sales. However, to provide order winners, firms must be better than their competitors. It
is important to note that order qualifiers are not less important than order winners; they are just different.

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 PROCESS ANALYSIS TERMS
Cycle Time: Cycle Time is the amount of time a team spends working on producing an item, up until the
product is ready for shipment. It is the time it takes to complete one task. This includes time spent
producing the item and the wait stages (amount of time the task is left ‘waiting’ on the board) between
active work times.

Takt Time: Takt time is the rate at which manufacturing processes and systems need to complete the
production to meet the customer request. Therefore, this is less of measuring the total time it takes to
complete a segment or the entirety of the production. Takt time measures the pace at which work must
be done to deliver what has been promised.
Example: So, if our customer wants 240 toaster ovens and we have 480 minutes to produce these toaster
ovens. Takt time is 2 minutes per toaster oven (480/240)

Lead Time: Lead time is the time measured from the moment a client puts in an order to when the final
product gets delivered. Lead Time is Cycle Time plus the additional amount of time it takes for production
to begin and the time it takes to deliver the finished product.
Lead Time: Order Receive Date- order Delivery Date

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 before the processing, inspection and move activities.

Idle Time: Time when no activity is being performed. For example, when an activity is waiting for 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.

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Just in Time (JIT): `Just-in-time' is a management philosophy and not a technique. It originally referred to
the production of goods to meet customer demand exactly, in time, quality and quantity, whether the
`customer' is the final purchaser of the product or another process further along the production line. It has
now come to mean producing with minimum waste. "Waste" is taken in its most general sense and
includes time and resources as well as materials

Backorder: A customer demand for which no stock is available (customer is prepared to wait) is called a
“backorder,” and is usually filled as soon as the items become available.

SUPPLY CHAIN MANAGEMENT

Supply Chain: A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer
request. The supply chain includes not only the manufacturer and suppliers, but also transporters,
warehouses, retailers, and even customers themselves.
A typical supply chain may involve a variety of stages, including the following:
• Customers
• Retailers
• Wholesalers/distributors
• Manufacturers
• Component/raw material
suppliers
Each stage in a supply chain is
connected through the flow of
products, information, and funds.
These flows often occur in both
directions and may be managed by one of the stages or an intermediary.

Supply Chain Management

Supply chain management describes the coordination of all supply chain activities, starting with raw
materials and ending with a satisfied customer. Thus, a supply chain includes suppliers; manufacturers
and/or service providers; and distributors, wholesalers, and/or retailers who deliver the product and/or
service to the final customer.
The objective of supply chain management is to structure the supply chain to maximize its competitive
advantage and benefits to the ultimate consumer.

Push-Pull Supply Chain

• With a Push based Supply Chain, products are pushed through the channel, from the production
side up to the retailer. The manufacturer sets production at a level in accord with historical
ordering
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 patterns from retailers. It takes longer for a push-based supply chain to respond to changes in
demand, which can result in overstocking or bottlenecks and delays, unacceptable service levels
and product obsolescence.
• In a Pull based supply chain,
procurement, production and
distribution are demand-driven
rather than to forecast. Demand-
Pull is the triggering of material
movement to a work centre only
when that work centre is ready to
begin the next job. In effect, it
shortens or eliminates the queue
from in front of a work centre.

Lean Vs Agile Supply Chain:

 The lean supply chain is the traditional “factory” chain, which focuses on producing high volume
at low cost. The goal is to add value to customers by reducing the cost of goods and lowering
waste. This sort of supply chain management focuses on reliability and predictability rather than
on flexibility and adaptability. Production is planned months or even years in advance rather than
adapting to a changing market. This pre-planning helps to find the lowest possible cost for large
volumes of goods.
 Agile Supply Chain is built to be highly flexible to be able to quickly adapt to changing situations.
This methodology is considered important for organizations that want to be able to adapt to
unanticipated external economic changes, such as economic swings, changes in technology, or
changes to customer demand. Implementing an agile supply chain allows organizations to quickly
adjust their sourcing, logistics, and sales.

Bullwhip Effect: The bullwhip effect on the supply chain occurs when changes in consumer demand
cause the companies in a supply chain to order more goods to meet the new demand. The bullwhip effect
usually flows up the supply chain, starting with the retailer, wholesaler, distributor, manufacturer and
then the raw materials supplier. This effect can be observed through most supply chains across several
industries; it occurs because the demand for goods is based on demand forecasts from companies, rather
than actual consumer demand.

Horizontal Integration - Expand within the same industry to other geographic locations, either by buying
competitors or by opening new facilities. This is essentially staying in a single business, but may involve a
much more complicated set of managerial and operating choices, if the horizontal moves cross state or
even national borderlines. In the case of doing the same business in other countries, it is probably
different enough to be seen as a separate category of corporate strategy. Examples Facebook's acquisition
of Instagram

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Vertical Integration - Vertical Integration involves the firm taking control of and producing its inputs and
outputs rather than using the market. When a firm takes over activities at the output end of the
production system it is called forward integration. When a firm takes over activities towards the source of
raw materials it is called backward integration. Firms that use contracts rather than ownership to solidify
buying and selling relationships may be said to be quasi integrating. For example, Apple has controlled the
manufacturing and distribution of its products from the time it was founded.

Taper Integration – Taper integration refers to the concept when firms are backward or forward
integrated but rely on outsiders for a proportion of their suppliers or distribution. It represents a useful
compromise between desires to control adjacent businesses and needs to retain strategic flexibility. In this
case, firms can monitor the R&D developments of outsiders, reduce vulnerability to strikes and shortages
within their systems, and examine the products of competitors while enjoying the lower costs and greater
advantages (and profit margins) or vertical integration. For example, Coca-Cola and Pepsi both having
integrated bottling subsidiaries while also relying on independent bottlers for production and distribution
in some markets.

SCOR Model for Supply Chain Decisions: SCOR is the acronym for the Supply Chain Operations Reference
model. It's a process used to evaluate an organization's supply chain. It's based on a static model that
defines the supply structure along with supply chain metrics and scorecards used to evaluate performance
and identify areas for improvement. Its first version was released in 1996. The goal of SCOR is to help
organizations improve Sales and Operational Planning (S&OP). While the concept of S&OP is inherently
straightforward, to integrate and match supply, demand and sales within the organization.

The SCOR model is based on five core processes:

 Plan: Includes balancing resources, preparing business rules and aligning the supply chain plan
with the organization's financial plan.
 Source: This includes inventory management, sourcing raw materials, supplier agreements and
payments.
 Make: Refers to manufacturing and defines whether to make to order, make to stock or engineer
to order, includes managing production, BOM, equipment and facilities.
 Deliver Order receipt and processing, warehousing, delivery, as well as finished goods inventory
management and life cycle management.
 Return: Business rules for handling the returned product.
Strengths of the SCOR process – High credibility, Standardized metrics, Universal scorecard
Supply Chain in E-commerce

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 LOGISTICS MANAGEMENT
Logistics management is that part of supply chain management that plans, implements, and controls the
efficient, effective forward and reverse flow and storage of goods, services and related information
between the point of origin and the point of consumption to meet customers' requirements. An approach
that seeks efficiency of operations through the integration of all material acquisition, movement, and
storage activities.

ACTIVITIES INVOLVED IN LOGISTICS MANAGEMENT

1. Network Design: Network design is one of the prime responsibilities of logistics management. This
network is required to determine the number and location of manufacturing plants, warehouses,
material handling equipment’s etc. on which logistical efficiency depends.
2. Order processing: Order processing includes activities for receiving, handling, filing, recording of
orders.
3. Procurement: It is related to obtaining materials from outside suppliers. It includes supply
sourcing, negotiation, order placement, inbound transportation, receiving and inspection, storage
and handling etc. Its main objective is to support manufacturing, by providing timely supplies of
qualitative materials, at the lowest possible cost.
4. Material Handling: It involves the activities of handling raw-materials, parts, semi-finished and
finished goods into and out of plant, warehouses and transportation terminals.
5. Inventory management: The basic objective of inventory management is to minimize the amount
of working capital blocked in inventories, and at the same time to provide a continuous flow of
materials to match production requirements; and to provide timely supplies of goods to meet
customers’ demands.
6. Packaging and Labelling: Packaging implies enclosing or encasing a product into suitable packets
or containers, for easy and convenient handling of the product by both, the seller and especially
the buyer. Labelling means putting identification marks on the package of the product. A label
provides information about – date of packing and expiry, weight or size of the product, ingredients
used in the manufacture of the product, instructions for sale handling of the product, the price
payable by the buyer etc.
7. Warehousing: A warehouse is a large, spacious place that is used for the storage or accumulation
of goods. Storing goods throughout the year and releasing when they are needed creates time
utility. Although this is viewed simply to store goods, warehousing plays a fundamental role in the
logistics system. Inbound functions assist to prepare for storage as well as outbound functions
pack and ship orders, resulting in benefits for both the business and customers.
8. Transportation:
Transportation is needed for:
 Movement of raw-materials from suppliers to the manufacturing unit.
 Movement of work-in-progress within the plant.
 Movement of finished goods from plant to the final consumers.
Major transportation systems include:
 Railways
 Roadways
 Airways
 Waterways
 Pipelines

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7 Rs of logistics: The process of planning,
implementing, and controlling the efficient
and effective forward and reverse flow and
storage of goods, services, and related
information from point of origin to point of
consumption to meet customer
requirements.

Goals of Logistics Management

 Rapid response capability
 Minimum variance
 Minimum inventory expense
 Consolidated shipment
 Maintaining quality
 Support product life cycle

Development Strategies
 Assess geographical advantage
 Locate warehouses and develop an import-export strategy
 Select transportation mode (Cost-time trade-off)
 Select right no. of partners (Horizontal/Vertical integration)
 Develop an information system

1PL - First Party Logistics: Person, company, organization requiring movement of a certain good from
point A to point B The term first-party logistics provider stands both for the cargo sender and for the cargo
receiver. Example: Company A needs its product to be transported to company B. They are both 1PL.

2PL - Second Party Logistics: Company or organization dealing with the physical movement of goods
from point A to point B. It can happen through various modes of transportation (Companies which extend
transportation services). Example: Company C
delivers company A’s merchandise with its
means of transportation; Company C is a 2PL.

3PL - Third Party Logistics: Apart from

providing transportation services, they are
providing value-added services. 3PL's typically
can provide transportation, warehousing,
management consulting, logistics
optimization, freight forwarding,
transportation management, rate
negotiations, cost evaluations, and contract
management services. Example: Company A
outsources part or all its logistics to a
Company D which takes care of the whole
process.

4PL - Fourth Party Logistics: Company/organization dealing with supervision of supply chain activities of
the client, performing management of 3PL and providing consulting services for developing internal
logistics. multiple 2PL and 3PL providers to build and run the most successful supply chain solutions.
Example: Company E advises Company A to use Company C/D for their supply chain and logistics needs,
Company E is a 4PL.

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5PL - Fifth Party Logistics: Company/Organization dealing with the implementation of the latest
technologies in supply chain and logistics on behalf of the client. 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

Reverse Logistics: A complete supply chain dedicated to the reverse flow of products and materials for
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:
1. Asset recovery, which is the return of actual products.
2. 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.

Centralized Approach: In the centralized distribution model, operations are typically limited to a
“central” location. If there is more than one hub, the locations may be geographically spaced. Depending
on location and kind of manufacturing a company may opt for centralized/decentralized processes
Advantages:
 Leveraging economies of scale
 Easier to accommodate changes over the years
 A single process for customer
 Consistent laws and regulations
 Could be preferred for complex returns
 Could be preferred for complex returns

Last-Mile Delivery
Process: In a product's
journey from warehouse
shelf to customer
doorstep, the "last mile"
of delivery is the final
step of the process — the
point at which the
package finally arrives at
the buyer's door. In
addition to being a key to
customer satisfaction,
last-mile delivery is both
the most expensive and
time-consuming part of
the shipping process.

Hyperlocal On-Demand Delivery Model: The hyperlocal on-demand business model connects the local
offline business holders to customers through a digital platform. It enables a customer to immediately
purchase products or request for services like food, medicine, and consumer goods. In this delivery model,
the logistics provider acquires the requested product from nearby shops and delivers it to the clients.
Customers can monitor the entire delivery process in real-time.
For example, let us consider a hyperlocal on-demand business in groceries. The customer will place an
order for the required groceries through the dedicated mobile application. The aggregator receives the
order and passes on the order details to a delivery partner. The delivery partner dispatches a delivery boy
(who is a part of a channelized workforce) to procure the requested item from a local brick-and-mortar
store and
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makes sure that it reaches the customer at a requested location. The aggregator drives the entire system
and earns a commission for the role it plays.
The model is applied to products as well as services like plumber, electrician, beautician etc. Examples of
the hyperlocal on-demand business model are UberEATS, Zomato, BigBasket, Postmates etc.

INVENTORY MANAGEMENT
Lot Size: A lot or batch size is the quantity that a stage of a supply chain either produces or purchases at a
time.

Cycle Inventory or Cycle Stock or Working Stock or Lot Size Stock: Cycle inventory is the average
inventory in a supply chain due to either production or purchases in lot sizes that are larger than those
demanded by the customer.
Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to
exploit economies of scale and thus lower cost. The presence of fixed costs associated with ordering and
transportation, quantity discounts in product pricing, and short-term discounts or promotions encourages
different stages of a supply chain to exploit economies of scale and order in large lots.

When demand is steady, cycle inventory and lot size are related as follows:

The larger the cycle inventory, the longer the lag time between when a product is produced and when it is
sold. A lower level of cycle inventory is always desirable because long time lags leave a firm vulnerable to
demand changes in the marketplace. A lower cycle inventory also decreases a firm’s working capital
requirement. Toyota, for example, keeps a cycle inventory of only a few hours of production between the
factory and most suppliers. As a result, Toyota is never left with unneeded parts, and its working capital
requirements are less than those of its competitors. Toyota also allocates very little space in the factory to
inventory.

Cycle inventory is held to take advantage of economies of scale and reduce cost within a supply
chain. For example, apparel is shipped from Asia to North America in full container loads to reduce
the transportation cost per unit. Similarly, an integrated steel mill produces hundreds of tons of steel
per lot to spread that high cost of setup over a large batch.

Pipeline Stock or Pipeline Inventory: Pipeline inventory refers to stock that is currently in transit
between locations and has not yet been purchased by the consumer. Pipeline inventory, also called Pipeline

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Stock, is important to consider as it helps build a picture of how much of your assets are tied up in stock. It
is of 2 types
1. Work in process inventory – Since it takes a finite amount of time for conversion from raw
material to finished goods there is always some inventory that is currently being worked upon.
This is called Work in process inventory.
2. In-transit inventory – since it takes a finite time for the movement of goods, there is always some
inventory that is currently in movement from one point to another. This is in-transit inventory.

Types of Costs in Inventory Model

Holding costs (Carrying costs): These costs depend on order size
 Cost of capital
 Storage space rentals
 Cost of utilities
 Labor
 Insurance
 Security
 Theft and breakage
 Deterioration or Obsolescence
Order/Setup costs: These costs are independent of order size
 Order costs are incurred when purchasing a good from a supplier. They include costs such as
o Telephone
o Order checking
o Labor
o Transportation
o Processing supplier invoices
 Setup costs are incurred when producing goods in a plant. They may include the cost of
o Cleaning machines
o Calibrating machines
o Training staff
o Changing the tools or dies on the equipment

Lot Sizing for a Single Product (Economic Order Quantity)

The purchasing manager makes the lot-sizing
decision to minimize the total cost for the store. He
or she must consider three costs when deciding on
the lot size:
 Annual material cost
 Annual ordering cost
 Annual holding cost

D = Annual demand for the product

S = Fixed cost incurred per order

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C = Cost per unit of product
h = Holding cost per year as a fraction of product cost

The figure shows the variation in different costs as the lot size is changed. Observe that the annual holding
cost increases with an increase in lot size. In contrast, the annual ordering cost declines with an increase in
lot size. When the price is fixed the material, the cost is independent of lot size. The total annual cost thus
first declines and then increases with an increase in lot size.
From the perspective of the manager at Best Buy, the optimal lot size is one that minimizes the total cost.
The optimal lot size is referred to as the economic order quantity (EOQ). It is denoted by Q* and is given
by the following equation:

The optimal ordering frequency is given by n*, where

Production EOQ model: In this model, the assumption of instant replenishment of inventory in the basic
EOQ model is relaxed, rather the order is received gradually over time at a rate p while the inventory is
used at a constant rate as was in the case earlier. This scenario can be depicted in the graph below:
This situation is commonly
found when the inventory user
is also the producer, as in a
manufacturing operation where
a part is produced to use in a
larger assembly. This situation
also can occur when orders are
delivered continuously over
time or when a retailer is also
the producer

Forward Buy: A forward buy occurs when a retailer

purchases in the promotional period for sales in future
periods. A forward buy helps reduce the retailer’s
future cost of goods for the product sold after the
promotion ends.
Although a forward buy is often the retailer’s
appropriate response to price promotion, it can
decrease supply chain profits because it results in
higher demand variability, with a resulting increase in
inventory and flow times within the supply chain.

Here Q* is the regular order quantity

Safety Stock or Safety Inventory

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Safety inventory is inventory carried to satisfy the
demand that exceeds the amount forecast. Safety
inventory is required because demand is uncertain,
and a product shortage may result if actual demand
exceeds the forecast demand.
The appropriate level of safety inventory is
determined by the following two factors:
 The uncertainty of both demand and supply
 The desired level of product availability
As the uncertainty of supply or demand grows, the required level of safety inventories increases. Demand
has a systematic as well as a random component. The random component is a measure of demand
uncertainty.
Product availability reflects a firm’s ability to fill a customer order out of available inventory. The required
safety inventory grows rapidly with an increase in the desired product availability. Important measures
product availability are:
1. Product fill rate (fr): It is the fraction of product demand that is satisfied with the product in
inventory. Fill rate is equivalent to the probability that product demand is supplied from available
inventory.
2. Order fill rate: It is the fraction of orders that are filled from available inventory. Order fill rates
tend to be lower than product fill rates because all products must be in stock for an order to be
filled.
3. Cycle service level (CSL): It is the fraction of replenishment cycles that end with all the customer
demand being met. A replenishment cycle is an interval between two successive replenishment
deliveries. The CSL is equal to the probability of not having a stockout in a replenishment cycle.
Both fill rate and cycle service level increase as the safety inventory is increased. For the same safety
inventory, an increase in lot size increases the fill rate but not the cycle service level.

Dead stock: It is the non-moving inventory that is of no use in supply chain or markets. It includes those
items that have become obsolete.

Speculative Inventory or Anticipation Inventory: It consists of stock that is accumulated in advance of

due to some promotional activity. It may also include stock built-in advance due to some anticipated
labour strikes, price or supply shocks, or preparing for, some type of future event that makes buying
inventory early a necessity, etc.

Consignment Inventory: Consignment inventory is a supply chain management strategy in which you
store goods in the business
unit without paying the
supplier until after the
goods are consumed.
Because the supplier owns
consigned stock until you
consume it, stocking your
warehouse with items on
consignment enables you
to reduce the inventory
carrying costs and defer
payment for liabilities.

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Postponement: Postponement is the ability of a supply
chain to delay product differentiation or customization until
closer to the time the product is sold. The goal is to have
common components in the supply chain for most of the
push phase and move product differentiation as close to the
pull phase of the supply chain as possible.
For example, the final mixing of paint today is done at the
retail store after the customer has selected the colour he or
she wants. Thus, paint variety is produced only when
demand is known with certainty.

Replenishment Policies: A replenishment policy consists of decisions regarding when to reorder and
how much to reorder. These decisions determine the cycle and safety inventories along with the fill rate fr
and the cycle service level CSL. There are two types
1. Continuous review: Inventory is continuously tracked, and an order for a lot size Q is placed when
the inventory declines to the reorder point (ROP). In this case, the size of the order does not
change from one order to the next. The time between orders may fluctuate, given variable
demand.
2. Periodic review: Inventory status is checked at regular periodic intervals, and an order is placed to
raise the inventory level to a specified threshold. In this case, the time between orders is fixed.
The size of each order, however, can fluctuate given variable demand.
 Order-up-to level (OUL): Order up to level is when stock levels are periodically reviewed
and an amount of the item is ordered to return stock levels to the target level. If the
inventory level is at or below the reorder point, then the order-up-to-level is initiated.
 Review Interval: The review interval is the time T between successive orders.

Quantity Discount: A quantity discount is an incentive offered to a buyer that results in a decreased cost
per unit of goods or materials when purchased in greater numbers. A quantity discount is often offered by
sellers to entice customers to purchase in larger quantities.
For example, as seen in the figure there are
quantity discounts for ordering above 1000
and 2000 units, the total cost curve for the
discounts shown is broken into three
different curves. There are separate cost
curves for the first (0 ≤ Q ≤ 999), second
(1,000 ≤ Q ≤ 1,999), and third (Q ≥ 2,000)
discounts. Look at the total cost curve for
discount 2. The Q* for discount 2 is less
than the allowable discount range of 1,000
to 1,999 units. However, the total cost at
1,000 units (which is the minimum quantity
needed to get this discount) is still less than
the lowest total cost for discount 1

Supplier Lead Time: The amount of time that normally, elapses between the time an order is received by
a supplier and the time the order is shipped.

Product Substitution: Substitution refers to the use of one product to satisfy the demand for a different
product. Substitution may occur in two situations:
1. Manufacturer-driven substitution: The manufacturer or supplier decides to substitute. Typically,
the manufacturer substitutes a higher-value product for a lower-value product that is not in
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 inventory. For example, Dell may install a 1.2-terabyte hard drive into a customer order requiring
a 1-terabyte drive if the smaller drive is out of stock.
2. Customer-driven substitution: Customers decide to substitute. For example, a customer walking
into a Big Bazaar store to buy a litre of detergent may buy the half-litre size if the litre size is not
available. The customer substitutes the half-litre size for the litre size.

Inventory Analysis Methods

ABC Analysis: ABC analysis is an approach for classifying inventory items based on the items’ consumption
values. Consumption value is the total value of an item consumed over a specified period, for example, a
year. The approach is based on the Pareto principle to help manage what matters

FSN Analysis: FSN analysis in inventory management deals with the classification of items based on usage,
consumption rate, and quantity.
 Fast Moving (F): This refers to materials that have a high usage frequency
 Slow Moving (S): This refers to materials that have a slow usage frequency
 Non-Moving (N): This refers to materials that are only utilized for a specific duration
VED Analysis: VED analysis is an inventory management technique that classifies inventory based on its
functional importance. It categorizes stock under three heads based on its importance and necessity for an
organization for production or any of its other activities.
 Vital (V): These are essential materials whose non-availability while putting a halt to business
operation. These materials need to be in stock at all times else, production will be affected.
 Essential (E): This refers to materials that you require a certain amount of. You just require a
minimum amount of them to keep production active.
 Desirable (D): This refers to materials that do not affect production. Production can run with or
without these materials

PROCUREMENT
Sourcing: Sourcing is the stage that comes before any purchases are made and can be considered a
subsection of the procurement department. Before you can procure materials from your suppliers, you
must first find and vet those suppliers. When you have an effective strategic sourcing process in place,
you’ll find reliable, affordable, and quality suppliers to supply the goods you need.

Purchase: Purchasing refers to the portion of the procurement cycle that is actively engaged in buying a
product or service from a supplier. Think of purchasing as the transactional portion of procurement. If
procurement is the subject, then purchasing is the verb. Tasks that directly relate to the process of how
goods and services are ordered are purchasing while activities such as strategic sourcing and vendor
contract negotiation constitute procurement.

Procurement: Procurement is the process of placing purchase orders with each of the suppliers, getting
order confirmation, following up with suppliers until materials are delivered, and then ensuring the

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materials are paid for. Procurement starts overall supply chain because once the materials you need for
manufacturing are in place, you can begin making the products you sell to others.
Procurement = Sourcing + Purchase
 New part is to be developed with the supplier: Sourcing
 Arrange part for day to day manufacturing: Purchase
 Developing new part and arranging it for the day to day manufacturing: Procurement

Strategic Sourcing: It is an institutional procurement process that continuously improves and re-
evaluates the purchasing activities of a company. Strategic sourcing refers to strategic planning, supplier
development, contract negotiation, supply chain infrastructure, and outsourcing models.

Early Supplier Involvement (ESI): Early Supplier Involvement (ESI) is a form of vertical collaboration
between supply chain partners in which the manufacturer involves the supplier at an early stage of the
product development process from a very early stage is referred to as the Early Supplier Involvement.
These suppliers act as an important source of innovation for the product development process.

Advantages:

 Cost price reduction

 More efficient production process and improved manufacturability of the product
 Short time to market
 Possibility to gain bigger market shares
 Better production quality
 Joint research programs
 Aligned technology strategies
 Risk sharing

QUALITY CONTROL AND MANAGEMENT

What is Quality?
Quality is “Fitness for use” (Joseph Juran)
Quality is “Conformance to requirements” (Phil B
Crosby)

TQM-Total Quality Management: TQM is an integrated organizational approach in delighting

customers (both external and internal) by meeting their expectations continuously through everyone
involved with the organization working on continuous improvement in all products, services and processes
along with proper problem-solving methodology.

TPM-Total Productive Maintenance: Total Productive Maintenance (TPM) is a maintenance program,

which involves a newly defined concept for maintaining plants and equipment. The goal of the TPM
program is to markedly increase production while, at the same time, increasing employee morale and job
satisfaction.
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It can be considered as the medical science of machines. TPM brings maintenance into focus as a
necessary and vitally important part of the business. It is no longer regarded as a non-profit activity.
Downtime for maintenance is scheduled as a part of the manufacturing day and, in some cases, as an
integral part of the manufacturing process. The goal is to hold emergency and unscheduled maintenance
to a minimum.

Basic Operations Problem-Solving Tools

1. Cause and Effect Diagram
Purpose: To generate in a structured
manner, the maximum number of ideas
regarding possible causes for a problem
by using brainstorming technique.

Uses of Cause and effect diagram:

 To investigate and list down the cause and effect relationship of the problem under investigation.
 Analyze the problem to trace the real root cause.
 To help evolve counter-measure.

2. Pareto Diagram: The Pareto Principle is generally used

to prioritize quality improvement projects to get most
returns for the resources invested. The basic principle of
Pareto is “Around 80% of the overall effect is contributed
by 20% of causes & vice versa”

Uses of Pareto Chart

 Find out the most important item/defect

 Degree of improvement after remedial action in some limited area.
 Improvement in each item/defect compared before and after correction

3. Control Charts: The control chart is a graph used to study how a process changes over time. Data are
plotted in time order. A control chart always has a
central line for the average, an upper line for the
upper control limit, and a lower line for the lower
control limit. These lines are determined from
historical data. By comparing current data to these
lines, you can conclude whether the process
variation is consistent (in control) or is
unpredictable (out of control, affected by special
causes of variation).

Few other tools include Histograms, Check sheets, Scatterplots, Stratification

Lean Manufacturing: Lean manufacturing or lean production, often simply "lean", is a systematic
method for waste minimization ("Muda") within a manufacturing system without sacrificing productivity.
Lean also takes into account waste created through overburden ("Muri") and waste created through
unevenness in workloads ("Mura"). The idea of lean was first championed by the Toyota Production
System. The benefits of lean include reduced operating costs and improved product quality and reduced

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lead times

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Types of waste in Lean production system

1. Unnecessary transportation
2. Excess inventory
3. Unnecessary motion of people, equipment or machinery
4. Waiting, whether it is people waiting or idle equipment
5. Over-production of a product
6. Over-processing or putting more time into a product than a customer needs, such as
designs that require high-tech machinery for unnecessary features
7. Defects, which require effort and cost for corrections.

Six-Sigma: Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects. To
achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities.

There are two Six Sigma sub-methodologies: - DMAIC and

DMADV. The Six Sigma DMAIC process (define, measure,
analyze, improve, control) is an improvement system for
existing processes falling below specification and looking for
incremental improvement. DMADV process (define,
measure, analyze, design and verify) is a Six Sigma
framework that focuses primarily on the development of a
new service, product or process as opposed to improving a
previously existing one

Six Sigma Vs Lean: Although we are comparing Lean vs Six Sigma, the truth is they both work toward the
same ultimate goal: eliminating waste and creating efficient processes. They simply take different
approaches on how to accomplish this.

Lean focuses on analyzing workflow to reduce cycle time and eliminate waste. Lean strives to maximize
value to the customer while using a few resources as possible. Six Sigma strives for near-perfect results
that will reduce costs and achieve higher levels of customer satisfaction.

To summarize the main difference between Lean vs Six Sigma, lean looks at ways to increase flow while Six
Sigma focuses on achieving consistent results.

We also have a hybrid methodology that combines the best of both Lean and Six Sigma. Organizations
began turning to this idea when they realized they had issues in areas the separate approaches handle.
Essentially, those who use Lean Six Sigma seek to eliminate waste in ways defined by Lean while also
seeking to improve processes by putting DMAIC and DMADV in place. Combined, the two methodologies
help companies become more efficient across all operations while also creating better quality products
and services.

Kaizen: KAIZEN means improvement. Moreover, it means continuing improvement in personal life, home
life, social life, and working life. When applied to the workplace KAIZEN means continuing improvement
involving everyone – managers and workers alike. Many companies have adopted the kaizen concept.
Most notably, Toyota employs the kaizen philosophy within its organization and has esteemed it as one of
its core values. The kaizen concept posits that there is no perfect end and that everything can be improved
upon. People must strive to evolve and innovate constantly.

Failure mode and effects analysis (FMEA): A tool for facilitating the process of predicting failures,
planning preventive measures, estimating the cost of the failure, and planning redundant systems or

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system responses to failures.

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Risk Priority Number (RPN)
= Severity x Occurrence x Detection

Gantt chart: A
graphical project
planning tool that
shows horizontal bars
that depict the
beginning and ending
time for each task. It’s a
powerful tool to show a
project plan but doesn’t
show the relationship
between each step

Jidoka: Concept from Toyota Production System (TPS). The design process in such a way that it doesn’t
allow defective products to go out of the system at all

Heijunka: Concept from Toyota Production System (TPS). Keeping the total production rate as constant
as possible. Defined as “production levelization”. Heijunka is a Lean method for reducing the unevenness
in a production process and minimizing the chance of overburden. The term Heijunka comes from
Japanese and literally means levelling. It can help you react to demand changes and utilize your capacity in
the best possible way. By implementing Heijunka, you can stop producing work in batches and start
processing orders according to customer demand. This will allow you to reduce your inventory costs as
you will have fewer goods in reserve waiting to be purchased when the volume of orders is low.

Zero Defects: A concept introduced by Japanese manufacturers that stresses the elimination of all
defects. This contrasts to the traditional American approach that allowed for a certain percentage of
defects, known as an “Acceptable Quality Level” or AQL.

Poka-Yoke: Poka-Yoke is the Japanese word for error proofing. It is the use of any device or a method
that either makes it impossible for an error to occur or make the error immediately obvious once it has
occurred. Poka-Yoke is any mechanism in a Lean manufacturing process that helps to avoid mistakes.

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Example: a driver of a car with manual gearbox must
press on the clutch pedal before starting the engine. The
interlock prevents an unintended movement of the car.
This interlock is an example of Poka Yoke

Example: In sockets with squared slots, both circular and

squared pins can enter while in a circular socket only the
circular pins can engage.

PDCA Cycle (Plan-Do-Check-Act): PDCA (Plan-Do-Check-Act) is an iterative, four-stage approach for

continually improving processes, products or services, and for resolving problems. It involves
systematically testing possible solutions, assessing the results, and implementing the ones that have
shown to work. It is based on the scientific method of problem-solving and was popularized by Dr W.
Edwards Deming, who is considered by many to be the father of modern quality control.

Plan – Identify the problem, collect relevant data, and understand the
problem's root cause, develop hypotheses about what the issues may
be, and decide which one to test.

Do – Develop and implement a solution; decide upon a measurement

to gauge its effectiveness, test the potential solution, and measure
the results.

Check – Confirm the results through before-and-after data

comparison. Study the result, measure effectiveness, and decide
whether the hypothesis is supported or not.

Act – Document the results, inform others about process changes and make recommendations for the
future PDCA cycles. If the solution was successful, implement it. If not, tackle the next problem and repeat
the PDCA cycle.

The PDCA cycle is a particularly useful tool for companies who follow the Kaizen method. Kaizen is an
organizational mindset and culture focused on small, frequent changes that lead to significant
improvements over time. The PDCA cycle supports the Kaizen philosophy by providing the framework for
developing and implementing continuous improvements.

Gemba: Gemba (also written as genba) is a Japanese word meaning “the actual place.” In lean
practices, the gemba refers to “the place where value is created,” such as shop floor in manufacturing, the
operating room in a hospital, the job site on a construction project, the kitchen of a restaurant, and the
workstation of a software programmer

Gembutsu (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. 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 (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 the meaning they need to find
out who or what to blame for problems, but that is not the case

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5S: 5S is a workplace organization technique that comprises of 5 steps.
1. Sort - the first step in making things cleaned up and organized
2. Set in Order - organize, identify and arrange everything in a work area
3. Shine - regular cleaning and maintenance
4. Standardize - make it easy to maintain - simplify and standardize
5. Sustain - maintaining what has been accomplished

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. The 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

Critical Path Method (CPM): Critical path method (CPM) is a resource-utilization algorithm for
scheduling a set of project activities. The essential technique for using CPM
is to construct a model of the project that includes the following:

 A list of all tasks required to complete the project

 The dependencies between the tasks
 The estimate of time (duration) that each activity will
take to complete
With this information, you can determine the critical path by identifying the longest stretch of dependent
activities and measuring them from start to finish.

Project Evaluation and Review Technique (PERT) : PERT is appropriate technique which is used for the
projects where the time
required or needed to
complete different activities are
not known. PERT is majorly
applied for scheduling,
organization and integration of
different tasks within a project.
It provides the blueprint of
project and is efficient
technique for project
evaluation.
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 APPLICATION OF IT IN SUPPLY CHAIN
There are three macro supply chain processes:

1. Customer relationship management (CRM): Processes that take place between an enterprise and
its customers downstream in the supply chain. The goal of the CRM macro process is to generate
customer demand and facilitate transmission and tracking of orders. Weakness in this process
results in demand being lost and a poor customer experience because orders are not processed
and executed effectively. The key processes under CRM are – Marketing, Sale, Order
Management, Call/Service Center
Amazon has done an excellent job of using IT to enhance its CRM process. The company
customizes the products presented to suit the individual customer (based on an analysis of
customer preferences from history and current clicks). Quick ordering is facilitated by systems that
allow one-click orders. The order is then visible to the customer until it is delivered. In the rare
instances that a customer uses the call centre, systems are in place to support a positive
experience, including offering a callback if the call centre is heavily loaded.

2. Internal supply chain management (ISCM): Processes that focus on internal operations within the
enterprise. ISCM macro process aims to fulfil the demand that is generated by CRM processes,
strong integration is needed between the ISCM and CRM macro processes. When forecasting
demand, interaction with CRM is essential, as the CRM applications are touching the customer
and have the most data and insight on customer behaviour. Similarly, the ISCM processes should
have strong integration with the SRM macro process as it is of little use for your factory to have
the production capacity to meet demand if your supplier cannot supply the parts to make your
product. The key processes under ISCM are – Strategic Planning, Demand Planning, Supply
Planning, Fulfilment, Field Service.
3. Supplier relationship management (SRM): Processes that focus on upstream interactions
between the enterprise and its suppliers. The key processes under SRM are - Design
Collaboration, Source, Negotiate, Buy, Supply Collaboration
All operation and analytics related to the macro processes rest on the transaction management
foundation (TMF), which includes basic enterprise resource planning (ERP) systems (and its components,
such as financials and human resources), infrastructure software, and integration software. TMF software
is necessary for the three macro processes to function and to communicate with one another.

Cloud Operations Management: Cloud operations management is the process concerned with
designing, overseeing, controlling, and subsequently redesigning cloud operational processes.
It aims to ensure that cloud operations
are efficient in terms of using resources
as required as well as meeting quality
of service requirements, compliance
requirements and especially customer
satisfaction. This involves the
management of both hardware and
software as well as network
infrastructures to promote an efficient
and lean cloud environment.
Types of Operations in the Cloud
Scope of AI in Operations Management
 Gauge Real-Time Situation Awareness by monitoring - Orders, Jobs, Materials

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 • Real-Time Scheduling of Operations
• Demand-Driven Materials Planning Problem Prediction and Alerting
• Predictive analysis of various data points to pre-empt anomalies in operations/functions and
minimize the breakdowns.
• Automate routine decisions

Application of Big Data in Project Management:

1. Reduces complexity by analysing critical project information with reports and visualizations of
data. This simplifies workflow bottlenecks and complicated systems.
2. Lower Costs by collecting more data to predict future trends by making resource forecasting and
planning process more efficient. This helps in determining the right budget, timetable, and
estimates by reducing potential errors and inaccuracies.
3. Improving Resource Management by extracting the information to understand project needs. It
allows us to see available resources and ensure efficient resource allocation
4. Enhancing Project Risk Management by analysing project issues and risks. It also helps to develop
the right methods and use the right tools to identify, analyse, prioritize, monitor potential issues,
and create solid risk response strategies.

E-Business: Electronic Business (E-Business) is the administration of conducting any business using
internet, extranet, web and intranet. It includes buying and selling of goods or services using commercial
transactions conducted electronically along with providing customer or technical support with the help of
the internet.
Components of E-Business:
1. E-Procurement – It is a way adopted by the companies to reduce the costs and efforts by sourcing
products or services electronically.
2. Online Stores – It is electronic sourcing (website or application) for products or services, such as
online shopping stores to save time and money.
3. Online Marketplace - It is electronic commerce that connects the buyers and suppliers to the
services or products over the internet. The operator of an online marketplace only presents the
inventory of other people and provides the transaction facility only.
4. Online Communities - Groups of people having the same interests or purposes who use the
internet to communicate with each other for transaction decisions.
5. Online Companies - Electronic business cooperation that connects the individual companies and
forms a virtual business with a common transaction offer.

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Order Fulfilment Process: Order fulfilment process is based on all the activities needed for a customer
to get his ordered product or service including the related customer services.

E-Commerce: Types of E-Commerce are:

1. Business to Business (B2B) - Conducted between companies and include conventional wholesalers
and producers dealing with retailers.

2. Business to Consumer (B2C) - The customer has more info about the products in the form of
informative content and there is also a chance to buy products at cheaper rates and quick delivery
of the order. Example – Amazon, Flipkart

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 3. Consumer to Consumer (C2C) - Mainly conducted through a third party that provides an online
platform for these transactions. Example – OLX

4. Consumer to Business (C2B) – It is very relevant for crowdsourcing projects.

Examples - Proposals for a company site or logo, royalty-free photographs, design elements

5. Business to Administration (B2A) - Social security, fiscal measures, legal documents, employment

6. Consumer to Administration (C2A) – Distance learning, information sharing, electronic tax filing.

The main objective of both the B2A and C2A types of E-Commerce is to increase flexibility,
efficiency, and transparency in public administration

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E-Commerce v/s E-Business
 E-Business is not limited to just buying and selling products or services. Whereas E-Commerce is
the name of buying and selling products/services with the help of the internet.
 E-Commerce is a main part of E-Business
 There is no need for an E-Business to have a physical presence. If the company has physical offices
along with their online business activities then it can be referred to as E-Commerce.
 E-Commerce supports any kind of business transaction related to money, but E-Business includes
monetary and allied activities.
 E-Commerce needs the internet to be able to communicate with their online customers from all
over the world. E-Business can use the internet, intranet and extranet to be able to connect with
the parties.

Blockchain in Supply Chain: It is a time-stamped series of an immutable record of data that is managed
by a cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) are
secured and bound to each other using cryptographic principles (i.e. chain).

When all parties in extended supply chains are known and trusted, a blockchain solution is probably not
needed, as these known and trusted parties can be relied upon to provide a single, real-time version of the
truth. In such a situation, centralized solutions like a cloud-portal, or decentralized peer-to-peer
connections would suffice.

The properties of the blockchain technology that is going to help disrupt the supply chain management
system are – Decentralization, Tamper proof, Transparency
Application of Blockchain in Supply Chain

 Recording the quantity of the products and its transfer through different parties.
 Tracking all the purchase orders, change orders, receipts, trade-related details
 Verifying the validity of the certification of the products.
 It can link various physical items to serial numbers, barcodes, and tags like RFID etc.
 Sharing all the information about the manufacturing process, assembly, delivery, and maintenance
of products with the different parties in the supply chain.
 Blockchain’s transparency helps in the careful documentation of a product’s journey from its point
of origin to all its suppliers.

Some live examples –

 Walmart has already done two test runs with IBM, one with Chinese pork and the other with
Mexican mangoes. Walmart and IBM used the “Hyperledger Fabric”, a blockchain originally built by
IBM and now housed under the Linux Foundation’s Hyperledger group for these tests.
 Trade Lens by IBM – the new, open and neutral blockchain-powered platform built to support
global trade – major shipping and logistics players are benefitting from a shared ledger that’s
updated and validated instantaneously with each network participant. The results are greater
collaboration, streamlined inventory management, improved asset utilization and more.
 Maersk and IBM are working on cross-border, cross-party transactions that use blockchain
technology to help improve process efficiency.

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Digital Supply Chain

Element of Industry 4.0

Integrated planning and execution by the establishment of Supply Chain Tower

Key advantages are:

 Transparency - Gives a complete view of the supply chain

 Communication - Information is available to all supply chain members simultaneously unlike the
traditional system where there are delays
 Collaboration - Collaboration upstream and downstream to capture the intrinsic supply chain
value
 Responsiveness - Real-time responses on planning and execution level.

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