NMIMS

OPERATIONS AND SUPPLY CHAIN

APPLICABLE FOR JUNE 2022 EXAMINATIONS

1. There is a multinational company XYZ that operates in the retail business.

The company also launched a couple of new products with their label.
Customer demand is increasing because the company has a good product
mix. Whereas the level of actual performance is not that much increased. As
you are appointed as supply chain manager, suggest some strategies to the
organization that ultimately increase performance.

Answer: In an ever-changing global environment, the complexity of business has

multiplied at a fast pace. In this scenario, it becomes important to devise strategies
for the direction taken by the business so as to enhance the performance of the
organization. Every business has to evolve its strategy on the basis of the needs of
the business in relation to its environment. Strategic planning helps the top
management of an organization to assess the impact of current decisions on the
future trends in business. At the time of devising the strategy, the top management
should consider the external interests of the organization, the expectations of the
shareholders, past history and anticipated performance, along with the mission,
objectives and policies of the organization.

A company can achieve strategic fit if there is a balance between the

responsiveness and efficiency in the business processes. There are basically three
steps to achieve strategic fit. They are:
1. Understanding the customer and supply chain uncertainty– A company must
understand the needs of customer and the uncertainty that supply chain faces to fulfil
these needs. By understanding the needs of the customers, a company can define
the required cost and services. The supply chain uncertainty enables the company to
identify the level of the uncertainty of demand, disruption and delay that a supply
chain must be prepared for.
2. Understanding the supply chain capabilities - There are two types of supply
chains, namely external supply chain that involves other companies and internal
supply chain that involves departments, business units and functions within the
company. A company must understand the capability of the supply chains and select
the best possible and suitable supply chain for its growth.
3. Achieving strategic fit - If a company’s supply chain is not capable of fulfilling
desired customer needs, then the company must either restructure supply chain or
change its competitive strategy.

Strategies to the organization that ultimately increase performance

Supply chain optimization: It is essential to coordinate the supply chain systems

irrespective of whether or not there is a common owner for these systems. It is the
responsibility of the common owner, if present, to ensure reduction in the overall
cost. Reducing the overall cost may result in an increase in cost in one system and
decrease in cost in another. When the systems are not coordinated, individual
systems in the supply chain perform to the best of their capabilities. Each system
optimises its own operations without considering the effect of its operations on other
systems in the supply chain. The concept is known as local optimisation. In contrast,
in global optimisation, every system determines what is best for the entire system.

Supply chain integration: Supply chain integration is being increasingly practised in

the recent years to renovate and improve the business practices. Supply chain
integration also improves the sharing of information, which, in turn, helps to
understand the processes involved in business models. Supply chain integration can
be defined as the process of making Original Equipment Manufacturers (OEMs),
customers, and suppliers work together for improving their efficiency and
relationships. All the stakeholders in a supply chain must react logically to the
changing business environment to be competitive enough in the market. The
stakeholders must be thorough with their activities and responsibilities at each and
every level of supply chain management. Increased cost competitiveness, shorter
product life cycle, faster product development cycles, globalisation and
customisation of product offerings, and overall quantity are found to be some of the
driving forces for integrating the supply chain. Supply chain integration includes
integrating all the facilities required for acquiring, transforming, storing, and selling
raw materials, intermediate processes and finished products. Integrating a supply
chain is an expensive process. The costs, complexities, and risks of integrating and
managing a supply chain are very high.

The following are the expenses incurred while integrating the supply chain:

 Investment in supply chain integration software and compatible information

systems throughout the supply chain.
 Opportunity costs (i.e., investments in supply chain integration may
necessitate foregoing other business opportunities).
 Cost associated with the risk of production stoppage.

However, the most important challenge in supply chain integration is managing and
organising the activities across the supply chain in an enterprise. These activities
include improving performance, reducing cost, increasing service level, reducing the
bullwhip effect, utilising resources, and responding to challenges effectively in the
market.

Supply chain restructuring: At times, integrating the supply chain is not enough to
achieve the desired results and the level of optimality. In such cases, major
transformations may be required in the structure of the supply chain. The need of
supply chain restructuring may be triggered by a number of factors, such as
internationalisation of business, high demand fluctuations, structural loopholes in the
supply chain, etc. Supply chain restructuring includes critical changes in the supply
chain structure in the way material and information flows are managed. Restructuring
of supply chains helps organisations move the entire efficiency frontier downwards
and in the right direction, resulting in lower costs and higher customer service. A few
ways in which supply chains can be restructured are:
 Decreasing the quantity of stock in distribution
 Separating fast moving and slow-moving products in terms of material in
chain
 Redesigning products and procedures
Some of the benefits of supply chain restructuring include:
 Integrating with new business areas
 Lowering process and personnel costs
 Increasing efficiency all over the organisation
 Improving process quality
 Providing better customer service

2. Consider last month you started a new business of Electronics items. You
are also thinking to start different branches of your business in your city as
well as outside. To increase the revenue you may explore the international
market. In the dynamic market, you would face tough competition from
different online as well as offline players during the journey. Analyze and
suggest a different level of strategies that you will implement in the firm that
can improve overall business profit.

Answer:

The major concern of every organisation is how it is going to survive and prosper in
the future. To survive the tough competition and to prosper in the future, an
organisation has to set its strategy, which is a long-term direction of actions to
ensure success. In an organisation, the operations function is concerned with getting
the things done that is, producing goods/services for customers. Most of the
activities within the operations function are the day-to-day activities. These day-to-
day activities when considered in their totality constitute the long-term strategic
direction of the organisation. Therefore, an organisation needs an operations
strategy to enable it to make appropriate decisions related to its operations function.

Concept of strategy
According to Kenneth Andrews, “Corporate strategy is the pattern of decisions in a
company that determines and reveals its objectives, purposes, or goals, produces
the principal policies and plans for achieving those goals, and defines the range of
business the company is to pursue,
the kind of economic and human organisation it is or intends to be, and the nature of
the economic and non-economic contribution it intends to make to its shareholders,
employees, customers, and communities.”

A strategy furnishes a platform for an organisation to perform in a better manner and

achieve competitive edge. The concept of strategy can be made clear by looking at
its objectives, which are as follows:
 Providing direction and stability to the organisation
 Determining long-term goals of the organisation
 Helping the organisation to prioritise targets based on organisational
resources
 Facilitating the planning and execution of long-term, medium-term, short-term
and day-to-day plans
 Facilitating the decision-making process
 Allocating resources to various departments of an organisation
 Increasing the organisational effectiveness by making a judicious use of
organisational resources, such as funds, human resources, technology and
infrastructure
 Defining the code of conduct that lays down various rules and policies for an
organisation

Different level of strategies to improve overall business profit:

Corporate strategy – refers to the approach which provides the design for the
overall growth of the organization so as to ensure stability and growth of business. In
this the top management consists of Chief Executive Officer (CEO), the board of
directors and other senior executives. These occupy the apex of decision making
within an organization. For example, consider General Electric (GE). The company is
involved in major appliances, motor and transportation equipment, engineering
services, industrial electronics, medical systems and aerospace. Here, the main
strategies of top management include setting overall strategic objectives, allocating
resources among different business areas deciding whether the firm should divest
itself of any of the business or it should acquire any new ones. Thus; the top
management is concerned with building and managing the corporate portfolio.

Business strategy – refers to the strategy to be followed by a particular business

unit or product. This strategy helps to strengthen the competitive position in the
market. The strategic managers at the business levels are the heads of the divisions.
Their strategic role is to translate general statements of direction from corporate level
into concrete strategies for individual business levels. For example, at GE the
corporate level has committed itself to the objective of being first or second in every
business in which the corporation competes. However, it is up to the general
managers who head each division to work out for their business the details of a
strategy that is consistent with this objective. Business level strategies help in:
 Establishing coordination among different business units, for creating synergy
and implementing the corporate-level strategies of an organisation
 Evaluating the needs of the market and delivering products and services
accordingly
 Creating sustainable competitive advantage for each business unit

Functional strategy – refers to strategy or approach to be adopted in a particular

function, so as to achieve the organizational goals. For example, in the case of GE’s
major appliance business, for instance, manufacturing managers are responsible for
developing manufacturing
Strategies consistent with the corporate objective of being first or second in that
industry. The main objectives of a functional level strategy are as follows:
 Facilitating coordination among the different functional areas, such as
marketing, finance, human resource and production
 Aligning each functional area with the respective business-level strategies,
thereby helping in attaining the corporate-level strategies of an organisation

It is important to establish the strategy of an organisation for the

followingreasons:
External variables – There are a large number of external variables such as the
changing political or governmental policies, international environment and economic
forces, which have a profound impact on the functioning of an organization. It is
necessary to have strategic plans to cope with such situations.
Scarcity of resources – As there is a constant depletion of natural and man-made
resources, it is important for an organisation to strategize, so as to properly allocate
resources and prevent wastage.
Changing workforce – The human resources of today is ever-changing as the
mundane work is taken over by machines. The educated human resource of an
organisation needs to be redistributed so as to utilise its potential. Hence, it is
important to have an effective strategy to manage the workforce.
Information overload – With the explosion of information available, it has become
essential to manage knowledge and plan for the better usage of the available data.
An effective strategy helps to manage the information and make it productive.

A well-thought out business strategy is essential for a company as an effective

strategy provides focus and direction. Without a proper strategy, the company would
be rudderless and the employees would not be aware of the management’s
expectations from them.

3. A toy company is working in the India market from the last couple of years.
The company has many branches within the city and outside as well. The
company thinking to start its own manufacturing unit and the government is
also motivating manufacturers to start manufacturing within the Indian market.
a. Explain various competitive dimensions in detail that company needs to
rework to get better market share and achieve business excellence in the
supply chain.
b. Management is confused about the selection of the production process.
Kindly suggest the best method in the production process that improves
efficiency.

Answer:
a)
Operations strategy involves developing the long-term plan for using major
resources of the organisation to achieve the desired corporate objectives. The plan
includes long-term decisions related to capacity, location, processes, technology and
timing. Following issues are addressed in operations strategy:

 How the resources should be structured?

 What activities should take place?
 How to ensure the quality of goods and services?
 What type of processes to install for manufacturing goods and services?

Operations strategy involves key operations decisions that are aligned with the
overall strategic objectives of an organisation. This helps an organisation in gaining
an edge over its competitors. For developing an efficient operations strategy; an
organisation needs to identify its competitive priorities. Cost, quality, time and
flexibility are the main competitive priorities of an organisation. An organisation
cannot adopt all the four competitive priorities together. It needs to select the
competitive priority that is more feasible for its goods/services and fits its core
competencies.

In the given case, Toy Company is thinking to start its own manufacturing unit and
the government is also motivating manufacturers to start manufacturing within the
Indian market so, in this scenario, company should rework on below competitive
dimensions to get better market share and achieve business excellence in supply
chain.

Price: For any market there can be only one least price contestant. If some
contestant reduces the price less than the existing least price contestant then he will
become the least price contestant. The difference between cost and price (i.e.,
margin) is as significant as the least price. Efficient operations can make a huge
difference to the margin. When you need to start your own manufacturing unit at
large scale, you need to analyse the market and wisely decide the pricing of the
products. Initially, company should keep the price low so that it can get some market
share.

Quality: Once you are planning to expand your business, you also need to work on
your quality as many companies do not consider quality seriously once they go for
expansion. Quality is one of the most important factors of competitiveness. Quality
and price are related two ways. Higher quality typically means that a higher price can
be asked. Oddly perhaps, a higher-quality product can often mean lower cost though
less waste, rework, and returns.

Delivery: To achieve business excellence in supply chain, company needs to check

the distribution system and delivery time of the products. Delivery time and delivery
consistency are operations-driven dimensions with major impact for marketing.
Frequently being able to deliver ahead of the competition and with greater reliability
can command a price payment.

Flexibility: Before taking any business decision, you need to assess the market and
other factors and then only you should proceed further. Basically, there should be
flexibility at the organization so that it can adapt to current environment. Flexibility is
a calculated approach aimed at gaining an advantage in an increasingly competitive
world. In fact, flexibility is regarded as one of the few remaining “order winners”.

b)

The selection of a production process depends on the type of product/service

produced by an organisation. A production process can be of different types, such as
job shop production, batch production, flow production and continuous production.
Job shop production is used for the manufacturing of made-to-order products,
whereas batch, flow and continuous production are used for producing made-to-
stock products.

In the given case, company will be manufacturing toys where it needs to

manufacture toys in large quantities so as per my view, it should choose mass
production system. Mass Production may be defined as a manufacturing system
based on interchangeable parts and the concept of division of labour to produce
generally large quantity of a product through successive operations/assemblies
carried out at a sequence of workstations in an assembly line. As the products are
made-to-stock for a mass market, mass production is characterised by stable
demand and high product volume. Because of the steadiness and volume of
demand, the production system tends to be capital-intensive and highly repetitive,
with specialised equipment and limited labour skills.

Advantages:
 A smooth flow of material from one workstation to next in a logical order.
Although straight line flow is common, other patterns of flow include L flow, U
flow, Circular or 0 flow or serpentine or S flow.
 Since the work from one process is fed directly into the next, small in-process
inventories result.
 Total production per unit is short.
 Since the workstations are located so as to minimise distances between
consecutive operations, materials handling is reduced.
 Little skill is usually required by operators at the production line, hence
training is simple, short and inexpensive.
 Simple production planning and control system are possible.
 Less space is occupied by work in transit, and for temporary storage.

Disadvantages:
 A breakdown of one machine may lead to complete stoppage of the line that
follows the machine. Hence maintenance and repair is a challenging job.
 Since the product dictates the layout, changes in product design may require
major changes in the layout. This is often expressed by saying that assembly
lines are inflexible.
 The pace of production is determined by the slower or bottleneck machine.
Line balancing proves to be a major problem with mass manufacturer on
assembly lines.
 Supervision is generally not specialised, as the supervisor of a line is looking
after diverse machines on a line.
 Generally high investments are required owing to the specialised nature of the
machines and their possible duplication in the line.