STUDY MATERIAL FOR PLACEMENTS

The Operations Club of IIM Bodh Gaya - OPSIM

Compiled and Curated by:

Senior Club Coordinators, OPSIM (2022-2024)

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Table of Contents
BASICS OF OPERATIONS MANAGEMENT ............................................................................................................... 3
INVENTORY MANAGEMENT ...................................................................................................................................... 7
PROCESS ANALYSIS TERMS ..................................................................................................................................... 11
FORECASTING ............................................................................................................................................................. 14
PROJECT MANAGEMENT .......................................................................................................................................... 18
SUPPLY CHAIN MANAGEMENT ............................................................................................................................... 20
VALUE CHAIN .............................................................................................................................................................. 24
LOGISTICS MANAGEMENT ...................................................................................................................................... 26
PROCUREMENT ........................................................................................................................................................... 30
RISK MANAGEMENT.................................................................................................................................................. 31
OPERATIONS IN THE SERVICE INDUSTRY ............................................................................................................ 33
SUPPLY CHAIN RISK .................................................................................................................................................. 35
SUSTAINABLE SUPPLY CHAIN ................................................................................................................................. 37
SIX SIGMA .................................................................................................................................................................... 39
LEAN OPERATION ....................................................................................................................................................... 49
NEW TRENDS IN OPERATIONS ................................................................................................................................ 51

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BASICS OF OPERATIONS MANAGEMENT
Operations management refers to the administration and control of the processes and activities involved in
producing goods and services within an organization. It focuses on planning, organizing, and supervising the
resources and procedures required to efficiently carry out production and deliver products or services to
customers.
Here are some key aspects and examples of operations management:
1. Planning: Operations management involves developing strategies, setting goals, and establishing
plans to achieve efficiency and productivity. For example, determining production levels, scheduling
resources, and creating production plans.
2. Process Design: This aspect involves designing and optimizing the production processes to ensure
smooth operations and maximum output. It includes factors such as workflow, layout, equipment
selection, and technology integration.
3. Inventory Management: Efficiently managing inventory is crucial to minimize costs and meet
customer demand. Operations management focuses on inventory control, demand forecasting, and
implementing systems like Just-in-Time (JIT) inventory management.
4. Quality Control: Maintaining product or service quality is essential for customer satisfaction.
Operations management includes implementing quality control processes, conducting inspections, and
continuous improvement initiatives such as Six Sigma.
5. Supply Chain Management: Coordinating the flow of materials, information, and resources across
the supply chain is vital. Operations management ensures effective supplier selection, procurement,
transportation, and distribution of goods.
6. Capacity Planning: Determining the optimal capacity of production facilities is a critical task in
operations management. It involves analysing demand patterns, forecasting future requirements, and
making decisions regarding expansion or contraction of production capabilities.
7. Lean Manufacturing: Operations management often incorporates lean principles to eliminate waste,
improve efficiency, and streamline processes. Techniques like value stream mapping, 5S methodology,
and Kaizen are used to enhance productivity.
8. Service Operations Management: In addition to manufacturing, operations management is equally
applicable to service-oriented industries. It involves managing service processes, customer
interactions, and resource allocation in sectors like healthcare, hospitality, and transportation.
Production System
Production can be described as a systematic process that involves transforming materials from one state to
another, either through chemical reactions or mechanical methods. The purpose of this process is to generate
or improve the usefulness and value of the product for the end user.

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Types of Production Systems
1. Job Shop Production: In this type, products are manufactured in small quantities and customized
according to specific customer requirements. Examples include custom furniture manufacturing or
specialized machine shops, and Ship manufacturing.
2. Batch Production: This system involves producing goods in batches or groups, where a set of similar
products are produced together before switching to a different batch. An example is the production of
limited-edition clothing items.
3. Assembly Line Production: Also known as mass production, this system involves a linear
arrangement of workstations where products move along a conveyor belt, with each workstation
performing a specific task. This system is commonly found in automobile manufacturing.
4. Continuous Production: This type of production involves non-stop, uninterrupted manufacturing
where products are produced continuously. Industries such as oil refineries or chemical plants utilize
continuous production systems.

Production strategies
Made to Stock (MTS)
Make-to-stock (MTS) is a conventional production strategy employed by businesses to align production and
inventory with predicted consumer demand. It involves manufacturing products in advance based on demand
forecasts, which can be considered as a push-type production approach. MTS is implemented to prevent
missed opportunities due to stock shortages and minimize excess inventory through accurate forecasting. It is
commonly used for products with limited variations and lengthy changeover times for expensive items.
However, the main drawback of MTS is its heavy reliance on accurate demand forecasts, as inaccurate

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predictions can result in losses from excessive inventory or stock shortages. Here are a couple of examples
illustrating the application of MTS:
1. Fast-Moving Consumer Goods (FMCG): MTS is advantageous in terms of efficiency for FMCG
companies. They can produce items in large batches, taking advantage of economies of scale and
achieving a low cost per unit.
2. Fashion Industry: MTS in the fashion industry depends on reliable demand forecasts. For instance, a
fashion company may require precise demand predictions for a specific shoe design, considering size,
color, and style variations. When the forecast deviates from actual demand, certain sizes or colors may
end up being overstocked.

Made to Order (MTO)

Made-to-order (MTO) or Built-to-Order (BTO) is a manufacturing process where production initiates only
after receiving a customer's order. This approach follows a pull-type supply chain operation, as manufacturing
is triggered by confirmed demand from customers. MTO is particularly suitable for highly customized or low-
volume products. However, it doesn't imply that all suppliers in the supply chain should adopt the same
approach. A challenge in implementing an MTO system lies in determining which suppliers should also adopt
MTO and which should stick to a build-to-stock (BTS) approach. The point in the supply chain where this
transition occurs is referred to as the "decoupling point."
For instance, an aircraft manufacturer may opt for this strategy due to the high cost of airplanes. By adopting
MTO, the manufacturer can produce aircraft according to specific customer requirements without the need for
excessive inventory. This allows for greater customization and reduces the risk of inventory obsolescence.
Assemble to Order (ATO)
Assemble-to-order (ATO) is a business production strategy where products are manufactured quickly and can
be customized to a certain extent based on customer orders. The ATO approach involves having the basic parts
of the product already manufactured but not yet assembled. When an order is received, the parts are quickly
assembled and delivered to the customer.
For instance, when a customer wants to purchase a personal computer (PC), the finished goods such as the
CPU, monitor, keyboard, mouse, and other components are assembled from different operations to create the
final product. This allows the customer to choose specific options and configurations, while the company can
efficiently fulfill the order by assembling the required components.

Make to Forecast (MTF)

"Make to Forecast" (MTF) is a production strategy where manufacturing is based on sales forecasts rather
than specific customer orders. In other words, products are produced in anticipation of future demand as
projected by sales forecasts.

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In the MTF approach, a company forecasts the expected demand for its products over a certain time period
and plans its production accordingly. The production quantities are determined based on anticipated sales,
market trends, historical data, and other relevant factors. The goal is to produce enough to meet forecasted
demand while minimizing the risk of excess inventory or stockouts.
Engineer to Order (ETO)
Engineer-to-order (ETO) is a demand-driven manufacturing process where components are designed,
engineered, and built to customer specifications after receiving an order. It is suitable for unique and
specialized items, involving high customer involvement in the design and production process. In ETO, there
is constant communication between the ETO company and the customer regarding production details. Cycle
time refers to the time needed to complete one iteration of a process, lead time encompasses the duration from
order placement to delivery, and takt time serves as a pacing mechanism based on customer demand. These
metrics help analyze and improve process efficiency in Operations Management.

Production Plan
A production plan is a strategic roadmap that outlines the actions, resources, and timelines required to achieve
manufacturing objectives and meet customer demands efficiently.

Master Production Schedule

A master production schedule (MPS) is a crucial component of production planning and control in
manufacturing organizations. It is a detailed plan that specifies the quantity and timing of production for
finished goods over a specific time horizon, typically covering several weeks or months.
The purpose of the MPS is to coordinate and align production activities with customer demand, taking into
account various factors such as sales forecasts, inventory levels, and production capacity. By creating a master

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production schedule, companies can effectively plan and manage their production operations to meet customer
requirements while optimizing resources and minimizing costs.
Material Requirement Planning
Material Requirements Planning (MRP) is a method used in manufacturing and production planning to
determine the quantity and timing of raw materials, components, and sub-assemblies needed for production.
It is a computer-based system that helps organizations maintain optimal inventory levels while ensuring that
materials are available when needed to meet production schedules.
The primary objective of MRP is to balance the demand for finished products with the availability of materials
and resources required for production. By analyzing the bill of materials (BOM), which lists the components
and their quantities needed to manufacture a product, MRP calculates the material requirements based on the
production schedule and inventory levels.

INVENTORY MANAGEMENT
Inventory: Inventory refers to the available materials. It is also known as an enterprise's idle resource.
Inventories represent items that are either stocked for sale, in the process of being manufactured, or in the
form of raw materials that have not yet been utilized.

Inventory Management: Inventory management is the procuring, storing, utilising, and selling of a
company's inventory. This includes the administration of raw materials, components, and finished goods, in
addition to their storage and processing.

 What to keep, where to keep and how much to keep.

 Determine the optimal inventory level by comparing costs to the cost of excess inventory.
Inventory costs:

 Holding Cost: Holding costs are the costs associated with maintaining or carrying a given level of
inventory; these costs depend on the size of the inventory.
 Ordering Cost: Costs associated with placing and receiving an order for inventory or products
constitute the ordering cost. It consists of various costs incurred by a business when replenishing its
stock or purchasing products from suppliers.
 Shortage Cost: Costs incurred when demand exceeds inventory supply.
Safety Stock: Safety stock refers to the inventory buffer maintained by a company or organisation to reduce
the risk of stockouts and guarantee adequate supply during unforeseen fluctuations in demand or supply chain
delays. It depends upon:

 Average demand rate and average lead time

 Demand and lead time variability
Why to keep inventory?

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  Managing Seasonal or Fluctuating Demand: Various factors, such as seasonality, production schedule, etc.,
influence the fluctuating demand for a product. The inventory is maintained to accommodate this fluctuation
so that production runs smoothly.
 Economies of Scale: Due to economies of scale, purchasing inventory in larger quantities often results in
cost reductions. Suppliers may provide discounts or improved pricing for bulk orders, thereby reducing the
unit cost. Businesses can increase their profit margins and take advantage of these cost savings by maintaining
inventory.
 Buffer against Supply Chain Disruptions: Inventory functions as a buffer against disruptions in the supply
chain. It provides a safety net in the event of unforeseen events such as shipment delays, transportation
difficulties, or supplier issues. Having inventory on board ensures business continuity and prevents
interruptions.
 Meeting Customer Demand: Inventory enables businesses to satisfy customer demand with readily available
products. It ensures that customers can locate the products they require when they need them, which increases
customer satisfaction and encourages repeat business.

Inventory Control: Inventory control is the process of controlling and keeping an eye on a company's stock
to make sure that operations are efficient and cost-effective. It involves tracking and monitoring inventory
quantities, optimizing stock levels, and making informed decisions to meet customer demand while
minimizing carrying costs and stockouts. Inventory control basically deals with two problems:

 When should an order be placed? (Order level), and

 How much should be ordered? (Order quantity)
Benefits of Inventory Control: There are numerous benefits of Inventory Control. Few among those are:

1. Enhanced customer satisfaction: Maintaining sufficient inventory levels guarantees timely order
fulfillment and reduces the likelihood of stockouts. This enables businesses to promptly satisfy customer
demand, resulting in increased customer satisfaction, repeat purchases, and positive word-of-mouth
recommendations.
2. Efficient production planning: Inventory management enables more precise demand forecasting and
improved production planning. By understanding customer requirements and consumption patterns,
businesses can adjust their manufacturing processes to reduce waste, increase efficiency, and shorten
production lead times.
3. Cost savings: Storage, insurance, and obsolescence are some of the costs associated with excess
inventory that can be reduced through effective inventory management. In addition, it reduces the risk
of stockouts and related expenses, such as missed sales and rush orders.
4. Streamlined operations: Inventory control systems offer real-time visibility into stock levels, thereby
facilitating the processing, selecting, and shipping of orders. This assists in streamlining internal
operations, reducing errors, and enhancing operational efficiency overall.
Various Techniques of Inventory Control:

 Always Better Control (ABC) Analysis: This method divides inventory into three categories based on their
annual consumption value: A, B, and C. It is also referred to as the Selective Inventory Control Method
(SIM).
o Classification of goods according to their "Consumption Value".
o Consumption Value = D x C
 D - annual demand in units

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 C - cost per unit in rupees
o On the basis of CV, a number of inventory items can be classified as A, B, or C:
 A items – Top 10% items account for 70% of CV
 B items – Next 20% items account for 20% of CV
 C items – Bottom 70% items account for 10% of CV
o Benefits:
 Helps you choose what you want to do. Gives quick, useful answers
 Helps to point out obsolete stocks easily.
 Efficient resource allocation: By finding the most important things, ABC analysis helps set priorities for
resources and work. By putting their attention on the high-value things (Category A), organisations can make
better use of their resources.
 Cost savings: Organisations can save money on inventory management, storage, production, and buying by
putting their resources on the most important things. It saves you from having too many of the less important
things (Category C) and not enough of the high-value things (Category A).
 Provides a sound basis for allocation of funds & human resources
o Limitations:
 Proper inventory standardisation and codification is required.
 Considers only the monetary value of items and disregards their significance to the production process,
assembly, or operation.
 When other significant factors require a greater emphasis on "C" items, the purpose of ABC analysis is defeated.

Few More Inventory management Methods

VED Analysis V- Vital, E- Essential, D- Desirable (Functionality based)

FSN Analysis F- Fast moving Inventory, S-Slow moving, N- Non-moving
SDE Analysis S- Scarce items, D- Difficult items, E-Easy items (Lead time based)

EOQ Model:
o The economic order-quantity model takes into account the trade-off between ordering cost and storage cost when
determining the quantity to be used to replenish item inventories. A larger order quantity reduces ordering
frequency and, consequently, monthly ordering costs, but necessitates retaining a larger average inventory,
which increases monthly storage (holding) costs. A lesser order quantity, on the other hand, reduces average
inventory but necessitates more frequent ordering and a higher ordering cost per month. The order quantity that
minimizes costs is known as the Economic Order Quantity (EOQ).
o Economic order quantity (EOQ) refers to the order size that yields the greatest cost savings when purchasing
any given material and ultimately contributes to the materials' optimal level and lowest cost. In other terms, the
economic order quantity (EOQ) is the quantity of inventory that must be ordered all at once in order to minimize
annual inventory costs.
o The quantity to order at a given time must be determined by balancing two factors:
 The cost of possessing or carrying materials and
 The cost of acquiring or ordering materials.
o Assumptions:
 Demand for the product is constant and known with certainty over a specific period.
 The lead time (time between placing an order and receiving it) is constant.
 The purchase cost per unit remains constant.
 The carrying cost per unit of inventory is known and remains constant.
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 The ordering cost (cost incurred each time an order is placed) is known and remains constant.
o Formula:
𝟐𝑪𝑶
 EOQ = √ Where: C= Annual consumption of the material, O = Ordering cost per order, S = Annual
𝑺
storage cost per unit
o Limitation: The assumptions underlying the EOQ formula restrict its application. In practise, the cost per unit
of an item's purchase fluctuates from time to time, and its lead time is also uncertain. For the utilisation of EOQ
order, demand must remain constant throughout the entire year, which is impossible. The cost per order cannot
be constant because it includes shipping fees.

Just-In-Time (JIT): Just-in-time (JIT) is a production and inventory management strategy that aims to
produce goods or deliver services exactly when they are needed, minimizing inventory costs and waste.

o Advantages:
 Cost Reduction: JIT aids in minimising inventory holding costs by reducing the quantity of stock held. This
reduces costs associated with storage, obsolescence, and the need for vast storage spaces.
 Waste Reduction: JIT emphasises producing only what is required when it is required. This reduces surplus
production, excess inventory, and unnecessary materials. By eliminating waste, businesses can increase their
efficiency and profitability.
 Improved Efficiency: JIT emphasizes streamlining production processes and optimizing workflows. By
reducing setup times, eliminating bottlenecks, and enhancing communication between departments, JIT
improves overall operational efficiency and productivity.
 Faster Response to Demand: JIT enables companies to respond quickly to changes in customer demand. By
producing goods or delivering services on a just-in-time basis, businesses can adapt to fluctuations in the market
and avoid excess inventory or stockouts.
o Limitations:
 Supply Chain Dependency: JIT relies heavily on a well-functioning supply chain. Any disruptions in the supply
chain, such as delays in raw material delivery or transportation issues, can disrupt production schedules and
impact customer satisfaction.
 Increased Risk: JIT involves operating with minimal inventory buffers. While this reduces holding costs, it
leaves little room for error or unexpected events. Any disruptions, such as equipment breakdowns or sudden
demand spikes, can quickly lead to production delays or stockouts.
 Supplier Reliability: JIT heavily relies on suppliers' ability to consistently deliver materials and components on
time and in the required quantities. If suppliers fail to meet these expectations, it can disrupt the entire production
process and negatively impact customer satisfaction.
 Skill Requirements: JIT requires a highly skilled and well-trained workforce. Employees must be proficient in
multiple tasks, cross-trained, and capable of adapting to changing production requirements. Training and
maintaining a versatile workforce can be a resource-intensive process.

Reorder point: The reorder point is the inventory level that prompts an action to replenish a specific inventory
stock. It refers to the minimum quantity of an item that a company must keep in stock before reordering.

 Determinants:
o Demand rate
o Lead time
o Extent of demand and/or lead time variability
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 o Degree of stock out risk acceptable to management
 Formula:
o Reorder Point: D x Lt
 D = Demand Rate
 Lt = Lead Time

PROCESS ANALYSIS TERMS

Process Analysis: is the logical breaking down of the production process into its different steps, which turn
inputs into outputs. It means a full analysis of the business process, which is made up of a number of routine
tasks that are linked logically and use the organization's resources to change an object. The goal is to achieve
and keep the process excellence.

Process Capacity: The process's capacity is the maximum output rate, which is measured in units made per
unit time. The capacity of the whole set of tasks is set by the job with the lowest capacity. Whereas the capacity
of the simultaneous strings of tasks is the sum of the capacities of the two strings, except when the two strings
have different outputs that are added together. When this happens, the capacity of two parallel lines of tasks
is equal to the capacity of the string with the fewest tasks.
Capacity Utilization: The percentage of the processing capacity that is actually being used.

Takt Time: Takt time is the rate at which you need to complete the production process to meet the customer
demand.

 Net production time: Time available for production (till the delivery to the customer)
 Customer Demand: Order placed by the customer
Takt time is based on what the customer wants, and you can't use a clock to measure it. Let's look at this
calculation in more detail:

 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 activities, the "available" production
time is in fact 410 minutes.

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  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.

 Cycle time is determined by the work procedure and can be measured with a stopwatch. It is the
interval between successive units produced by a process. In other words, the cycle time of a process is
equal to the longest task cycle time when the production of an item necessitates the sequential
production of multiple units, each of which has a different cycle time.
Lead Time: Lead time is the time it takes for one unit to travel through your operation from beginning to end
(i.e., from the time you receive an order to the time you receive payment). In other words, the duration between
the consumer placing an order and receiving the product.

Throughput Time: Throughput Time is the amount of time required for a material, part, or subassembly to
travel through a manufacturing process from the time an order is released until the product is shipped. It
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.
Idle Time: The period during which no activity is occurring. For instance, when an activity is awaiting the
completion of a task from the preceding activity. This term is applicable to both machine idle time and worker
inactive time.

Changeover Time: It is the time required to modify the production line for new batches of the same product
or distinct products. Changeover and setup are sometimes used interchangeably. Setup is considered a
transition component that focuses on configuring a machine for a new product type. As setup and transition
are non-value-added processes, they should be minimized to the greatest extent possible. It is recommended
to use 'changeover' when referring to switching between products and setup when referring to what is
occurring with the equipment or process.

Cycle Service Level: Cycle Service Level (CSL) is a metric used to measure the level of service provided by
a company or organization in terms of product availability or order fulfillment. It is commonly used in supply
chain management and inventory control to assess the performance of inventory systems.

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CSL represents the proportion of customer demand that can be satisfied directly from available stock during
a specific time period, without backorders or stockouts. It indicates the ability of a company to meet customer
demands promptly and consistently. The higher the CSL, the better the service level.
The formula for calculating Cycle Service Level is as follows:
CSL = (1 - Backorder Rate) × 100
Where:

 Backorder Rate: The percentage of customer demand that cannot be fulfilled from available stock and
results in backorders or stockouts.
For example, if the backorder rate is 10%, the cycle service level would be 90% [(1 - 0.10) × 100].

Fill Rate: Fill Rate is a key metric used in inventory management to measure the percentage of customer
demand that can be fulfilled from available stock without backorders or stockouts during a specified time
period. It is a measure of how effectively an organization is able to meet customer demand promptly.
The formula for calculating Fill Rate is as follows:
Fill Rate = (Total Demand Fulfilled / Total Demand) × 100
Where:

 Total Demand Fulfilled: The quantity of customer demand that is successfully fulfilled from available
stock during a specific time period.

 Total Demand: The total quantity of customer demand during the same time period, including both
fulfilled and unfulfilled demand.

Buffer: In manufacturing, buffering refers to maintaining sufficient supplies to keep operations operating
smoothly. These supplies frequently consist of basic materials required for production as well as finished
goods awaiting shipment. For instance, a manufacturer will want to maintain a sufficient supply of basic
materials in case its supplier is unable to deliver on time.

Bottleneck: A bottleneck is a point in a process where the flow of work or information is constrained, causing
a delay or backlog. It represents the slowest or most resource-constrained part of the process.

Continuous Improvement: Continuous improvement, often associated with methodologies like Lean or
Kaizen, is an ongoing effort to enhance processes incrementally over time. It involves identifying
opportunities for improvement, implementing changes, and monitoring the results to drive continuous
enhancement.

Process Mapping: Process mapping is a visual representation of the steps, activities, and flow of a process.
It helps in understanding the sequence of activities, decision points, and interactions between different
components of a process.

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FORECASTING

Forecasting is estimating the relevant events of the future based on analysing their past and present behaviour.
Forecasting is a crucial aspect of operations management that involves predicting future events, trends, and
outcomes to aid in decision-making and planning. It helps organizations anticipate demand, allocate resources
effectively, optimize production schedules, manage inventory, and develop strategic plans.

Qualitative Forecasting:
Qualitative forecasting relies on expert judgment, subjective opinions, and qualitative data rather than
numerical or historical data. It is used when historical data is limited, unreliable, or uncertain future situations
and affected by various factors that cannot be easily quantified.

Quantitative Forecasting:
Quantitative forecasting relies on historical data, numerical analysis, and mathematical models to predict
future outcomes. It is used when historical data is available and there is a significant amount of data to analyze.

Types of Qualitative Methods of Forecasting:

1. Executive opinions: The opinions of experts from different departments are considered and averaged to
forecast future sales. This forecasting method can be done easily and quickly without the necessity of
elaborate statistics. But the main disadvantage is that it depends on individual opinions that may not be
unanimous and can vary from individual to individual, which could lead to wrong forecasting.
Advantages:
 Experts possess specialized knowledge and experience in their respective fields, allowing them to
provide valuable insights and perspectives for forecasting.
 Expert opinion can be obtained quickly, and they can consider complex factors that quantitative models
will not capture
Disadvantages:
 Expert opinion is typically based on a small number of individuals, which may not adequately represent
the full range of perspectives and insights.
 Different experts may have conflicting opinions, making arriving at a consensus forecast challenging.
2. Delphi technique: Expert panels are selected and individually questioned about upcoming events in this
method. They do not form a group. For long-range forecasting, this method is beneficial and very effective.
Advantages:
 The Delphi Technique involves multiple rounds of feedback and consensus-building, which helps
refine the forecasts and converge towards a more reliable consensus.
 The Delphi Technique allows participants to provide their opinions anonymously, reducing the
influence of dominant individuals and promoting more honest and independent responses.
Disadvantages:

 The Delphi Technique can be time-consuming, especially when multiple rounds of feedback and
consensus are required.
 Conducting the Delphi Technique may involve coordinating and managing expert participation costs.

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3. Consumer surveys: In this method, the survey is conducted directly on the customers on their purchases.
The surveys can be done through telephone contacts, personal interviews, or questionnaires to obtain
customer data. This method requires extensive statistical analysis to test consumer behaviour.
Advantages:
 Consumer surveys give organizations access to the target market's or customers' direct feedback, giving
them an understanding of their preferences, wants, behaviours, and opinions.
 Organizations can gather information on certain areas of interest by using surveys that can be customized
to meet specific research objectives.

Disadvantages
 The accuracy of survey results relies on having a representative sample of the target population. However,
there is a risk of sample bias if the survey respondents do not accurately represent the broader population.
 Surveys often offer few chances for in-depth investigation or digging. They frequently use prepared
response alternatives or closed-ended questions, which may limit the depth of insights.

4. Salesforce polling: In this method, the forecast is based on the opinions of salespeople who have steady
interactions with the clients. As they are closest to the customers, they can better predict the requirements
of the customers for the future market. The main advantage of this forecasting method is that it is very
simple to use and understand. The information can be segregated easily into different categories. But the
drawback is that the salespeople can be either optimistic or pessimistic about their predictions, and this
could lead to inaccurate forecasting.
Advantages:
 Salesforce is a widely used customer relationship management (CRM) platform, making it easily
accessible to businesses and organizations.
 By using Salesforce for polling, survey data can be seamlessly integrated with other customer data, such
as sales data, customer profiles, and engagement history.

Disadvantages:
 Salesforce polling is primarily limited to customers or individuals already in the organization's CRM
system. This can result in a restricted sample size, potentially limiting the representativeness of the
responses and introducing biases.
 The accuracy and reliability of the survey results depend on the quality and completeness of the customer
data within Salesforce. Inaccurate or incomplete customer profiles or outdated information may affect the
validity of the forecasts derived from the polling data.

Measures of Forecast Error

Measuring forecast error is essential for evaluating the accuracy and performance of forecasting models.
Mean Squared Error (MSE):
 Mean squared error (MSE) measures the amount of error in statistical models. It assesses the average
squared difference between the observed and predicted values. When a model has no error, the MSE equals
zero. As model error increases, its value increases. The mean squared error is also known as the mean
squared deviation (MSD).

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 yi = Observed values

ŷi = Predicted Values

n= number of data points

Mean Absolute Deviation:

The mean absolute deviation (MAD) is a measure of variability that indicates the average distance between
observations and their mean. MAD uses the original units of the data, which simplifies interpretation.
Larger values signify that the data points spread out further from the average. Conversely, lower values
correspond to data points bunching closer to it. The mean absolute deviation is also known as the mean
deviation and average absolute deviation.

xi= Individual data point in the data set

x̅= Mean of the data set

n= total number of data points in the data set

Mean Absolute Percentage Error (MAPE):

Mean Absolute Percentage Error (MAPE) is the mean of all absolute percentage errors between the
predicted and actual values

At = Absolute Value
Ft= Forecast Value
n= Number of times the summation iteration happens

Types of Quantitative Methods of Forecasting:

1. Time Series:
Time series forecasting is a quantitative forecasting method that uses previous patterns and trends in a time-
ordered sequence of data points to estimate future values. It is widely used in various sectors, such as
economics, finance, sales, inventory management, and demand forecasting.

16
Types of Time -series forecasting
 Moving Average
 Exponential Smoothing
 Autoregressive Integrated Moving Average (ARIMA)
 Seasonal Autoregressive Integrated Moving Average (SARIMA)
 Seasonal Decomposition of Time Series (STL)
 Prophet
 Seasonal and Trend decomposition using LOESS(STL-ARIMA)
 Vector Autoregression (VAR)
 Long Short-Term Memory
Exponential Smoothing

 Exponential Smoothing is the technique that can be applied to time series data, either to produce
smoothed data for presentation, or to make forecasts. Exponential smoothing is commonly applied to
financial market and economic data, but it can be used with any discrete set of repeated measurements.
The raw data sequence is often represented by {Dt} beginning at time t=0, and the output of the
exponential smoothing algorithm is commonly written as {Ft}, which may be regarded as a best
estimate of what the next value of D will be.
 When the sequence of observations begins at time t = 0, the simplest form of exponential smoothing
is given by the below formulae.

where α is the smoothing factor, and 0 < α < 1.

References
https://vitalflux.com/different-types-of-time-series-forecasting-models/
https://www.geeksforgeeks.org/time-series-analysis-using-facebook-prophet/
https://www.geeksforgeeks.org/deep-learning-introduction-to-long-short-term-memory/

2. Adaptive Forecasting:
Adaptive forecasting, also known as dynamic or rolling forecasting, is a method of continuously updating and
revising forecasts based on new information as it becomes available, recognizing that forecasts are not static
and should be adjusted as new data emerges or changes in the business environment occur.

Types of Adaptive Forecasting

 Rolling Forecasting
 Dynamic Forecasting
 Demand Forecasting
 Bayesian Forecasting
 Scenario- Based Forecasting
 Collaborative Forecasting
 Machine Learning and AI
 Forecasting Feedback loops

17
PROJECT MANAGEMENT

The process of planning, organizing, and coordinating resources to fulfil specific project goals is known as
project management. Coordination of a team's operations to accomplish a project on time, within budget, and
to the required level of quality. Defining project scope, developing a project strategy, managing resources,
tracking project progress, and delivering project results are all project management tasks.

Float/ Slack:
In project management, float, often known as "slack," is a figure that shows the length of time a work can be
delayed without affecting future tasks or the project’s overall completion. It is critical to keep track of when
you are sticking to your project schedule.
In project management, there are two types of floats,

 Total float (TF)

 Free float (FF)
The amount of time a task can be delayed without affecting the next task is known as free float.
Total float is the amount of time a job or project can be postponed without affecting the total completion
schedule of the project.

Float is an important component of the critical path method (CPM), which project managers use to schedule
activities efficiently.

Critical Path Flow (CPM):

The critical path is a sequence of dependent tasks that determines the duration of a project. Tasks on the critical
path need to happen for the project to finish and be done in a specific order. Tasks on the critical path will
have a float of zero, meaning there are no delays in the sequence. There is no extra time to spare on these
tasks; if one is delayed, the project is also delayed. When a task has a positive float number, it is considered
part of the non-critical path, meaning that it has some flexibility to be moved or delayed from its planned start
date without impacting the project’s completion.

Programme Evaluation and Review Techniques (PERT)

PERT, or the Programme Evaluation and Review Technique, is a technique that assesses the amount of time
needed to do each task and all of its dependent tasks in order to establish the minimal amount of time needed
to finish a particular project. Three time estimates are taken into account in the process:

18
  Optimistic Time (To): The minimum amount of time required to complete the project, assuming
everything goes better than expected.
 Pessimistic Time (Tp): The maximum time required to complete the task, assuming things go wrong.

 Most Likely Time (Tm): The most likely amount of time required to complete the tasks, assuming
everything goes alright.

Waterfall Method:

Waterfall project management is the most straightforward way to manage a project. It maps out a project into
distinct, sequential phases, with each new phase beginning only when the previous one has been completed.

It is the most traditional project management method, with team members working linearly towards a set end
goal. Each participant has a clearly defined role, and none of the phases or goals are expected to change.

The typical stages of Waterfall project management:

 Requirements: The manager analyzes and gathers all the requirements and documentation for the
project.
 System design: The manager designs the project’s workflow model.
 Implementation: The system is put into practice, and your team begins the work.
 Testing/Verification: Each element is tested to ensure it works as expected and fulfills the requirements.

 Maintenance: In this final, ongoing stage, the team performs upkeep and maintenance on the resulting
product or service.
gather

testing

project workflow model

19
Agile Method:
Agile is a project management approach built on small, incremental steps. It is designed to be able to pivot and
incorporate changes smoothly, making it popular among projects where unknowns and new developments are
common. Agile is best used in projects in industries that expect a certain amount of volatility or in projects where
you cannot know every detail from the outset. Agile project management is very popular in software
development, where constant changes occur.

Agile’s Popular Methodologies:

1. Scrum: Characterized by cycles or stages of development, known as sprints, and by maximizing

development time for a software product.
2. Kanban: A workflow management method that aims to visualize work and maximize efficiency. It exists
on a board or table divided into columns showing every flow of the software product.

3. Lean: Lean agile is an agile methodology that, in basic terms, is quite simple: improve efficiency by
eliminating waste. Unlike traditional, waterfall project management, which dictates a set plan laid out by
a project manager, lean agile strives to reduce all tasks and activities that don’t provide real value. This
helps ensure everyone involved in a project or product development works optimally.

SUPPLY CHAIN MANAGEMENT

Supply chain management involves organizing and coordinating all operations related to sourcing,
procurement, conversion, logistics management, and collaboration with partners. It encompasses every step
of manufacturing and delivering goods, from sourcing raw materials to processing them into finished products
and delivering them to end users. It is a cross-functional strategy that involves various departments, including
marketing, sales, product design, finance, and information technology. The supply chain includes activities
such as mining metals, processing them, and eventually selling them to customers, highlighting the flow of
materials and coordination involved in the process.

20
Supply Chain:

The supply chain is crucial in today's competitive environment when businesses are working hard to increase
their efficiency and reduce costs. About 20–25% of a typical firm's overall cost is connected to supply and
logistics expenditures.
In general, supply chain management attempts to handle four problems including the following, namely:
Distribution Network Management: Management of the numerous manufacturing facilities, warehouses,
and distribution centres is a component of distribution network management. Because all businesses often
have a large number of suppliers, distributors, and storage facilities, it is crucial that these entities are
integrated.
Distribution Channels: This refers to the several tactics used, including cross-docking, direct shipments,
pull- or push-based strategies, third-party logistics, etc. Under this strategy, all distribution channels are
included. (The push strategy involves actively promoting a product or service to distributors, wholesalers, and
retailers to create demand, while the pull strategy focuses on generating consumer demand through marketing
and advertising efforts to entice them to request the product from retailers.)
Information Channels: These include the integration of different supply chain systems and procedures for
exchanging useful information, as well as demand forecasting, inventory management, and transportation.
Inventory management: It is controlling the quantity and placement of inventory, including raw materials,
commodities that are still being manufactured and finished goods that are being sold to customers.
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:

21
• Strategic: At this level, business management will consider high-level strategic choices affecting the entire
organisation, such as the size and location of production facilities, supplier alliances, the goods to be produced,
and target markets for sales.
• Tactical: Tactical decisions concentrate on implementing policies that will result in cost savings, such as
using industry best practises, creating a purchasing strategy with preferred suppliers, collaborating with
logistics firms to create cost-effective transportation, and creating warehouse strategies to lower the cost of
inventory storage.
• Operational: Decisions at this level impact how items flow through the supply chain and are made every
day in enterprises. Making adjustments to the production schedule, negotiating purchases with suppliers,
accepting client orders, and transferring goods in the warehouse are all examples of operational choices.

Various activities of Supply Chain Manager:

It involves the daily planning, production and scheduling of the various processes so as to improve their
efficacy.
Demand planning and forecasting, which involves coordinating the demand projections of all customers and
communicating the projections with all suppliers, is another duty of a supply chain management. This enables
manufacturers and suppliers to both be aware of the precise requirements and plan appropriately to reduce the
expenses associated with inventory holding.
Transporting merchandise and materials from suppliers is part of both incoming and outbound operations,
while transporting to consumers is part of outbound operations.
The supply chain may be split into three main sections based on the transportation of goods and services:
• Product Flow – This refers to all product flow, from raw materials to completed items.
• Information Flow - This refers to the crucial flow of information across the supply chain, which often
includes transferring orders and updating delivery statuses, among other things.
• Financial Flow – The financial flow, which includes credit terms, payment schedules, and consignment and
title ownership agreements, is crucial to the supply chain.

Various elements of the Supply Chain:

A simple supply chain is made up of several elements that are linked by the movement of products. The supply
chain starts and ends with the customer.

Customer: When a customer decides to buy a product that a business has made available for purchase, the
sequence of actions is initiated by the consumer. The consumer gets in touch with the business' sales division,
which submits a sales order for a specified amount to be delivered on a certain day. The sales order will contain
a condition that the manufacturing facility must meet if the product has to be manufactured.
Planning: The need brought on by the customer's sales order will be consolidated with other orders. A
production schedule will be developed by the planning division in order to produce the goods and meet client
requests. The firm will next need to obtain the required raw materials in order to create the items.
Purchasing: The manufacturing department sends a list of the raw materials and services needed to execute
the customers' orders to the purchasing department. To ensure that the essential raw materials are delivered to
the manufacturing site on time, the purchasing division issues purchase orders to a list of approved suppliers.
Inventory: After receiving the raw materials from the suppliers, they are inspected for correctness and quality
before being placed in the warehouse. After then, the supplier will invoice the business for the goods they
supplied. The raw materials are kept in storage until the production department needs them.
22
Production: The raw materials are transported from inventory to the production area in accordance with a
production plan. The raw materials obtained from suppliers are used to create the completed items the client
has ordered. Prior to delivery to the client, the finished and tested products are stored once again in the
warehouse.
Transportation: After the final product is received in the warehouse, the shipping department chooses the
most cost-effective shipping option to get the goods to their destination on time or earlier than the customer-
specified date. A bill for the supplied items will be sent by the business once the client has received the goods.

Lean and Agile Supply Chain: Lean supply chain management focuses on eliminating waste, reducing lead
times, and improving efficiency through techniques such as just-in-time (JIT) and continuous improvement.
Agile supply chain management emphasizes flexibility, responsiveness, and quick adaptation to changes in
customer demand or market conditions.

Supply Chain Performance Measurement: Key performance indicators (KPIs) in supply chain management
include metrics like on-time delivery, order fill rate, inventory turnover, and customer satisfaction. Balanced
scorecard approaches and supply chain analytics help measure and evaluate performance, identify areas for
improvement, and drive continuous enhancement efforts.
Emerging Trends and Technologies in Supply Chain: Emerging trends include the adoption of technologies
like the Internet of Things (IoT), blockchain, artificial intelligence (AI), machine learning, and robotic process
automation (RPA) in supply chain management. These technologies enhance visibility, automation, data
analytics, and decision-making capabilities, leading to improved efficiency and effectiveness.

Challenges in Supply Chain Management:

The globalization of manufacturing operations
Having a worldwide procurement network that can support and respond to your supply chain demands is
crucial given the globalization of industrial activities. Many chief procurement managers claim that finding a
key supplier that can provide manufacturing facilities with consistent worldwide quality and dependable local
service is a difficult task.
Safety and quality products
A rising difficulty is a demand for producers to create high-quality, safe products. Every day, there are more
instances involving product recalls. It may hurt a business's reputation and hurt its financial line. A number of
standards and compliance requirements must be met by manufacturers.
Reduced inventory, shorter lead times, and increased throughput
Companies are being compelled to go lean due to shorter product life cycles and shifting market needs. It is
crucial to remember that in a lean environment, supply strategies complement the operations plan. Finding a
practical lean solution rather than merely a lean idea is always a problem. (Lean is a business management
philosophy and methodology that aims to maximize value and minimize waste in processes, systems, and
operations. )
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.

23
Supplier Base Consolidation
Supply chain complexity
A complicated, worldwide network of suppliers, manufacturers, warehouses, transporters, consumers, and
other parties may be created as a result of providing a wide range of products and services to numerous distinct
clients. Finding where and why issues emerge is challenging due to the intricacy of such a network.

Finding and retaining talent in the supply chain

True supply chain talent is hard to come by, despite the fact that supply chain management is now a widely
recognised and understood position in a firm. Finding an all-around supply chain expert might be challenging
because supply chain management spans several academic fields.

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.

VALUE CHAIN
A value chain represents the sequence of activities a company performs to deliver a valuable product or
service. It distinguishes between cost and value by recognizing that certain activities, like diamond cutting,
add significant value despite their relatively low cost. Porter's Value Chain approach focuses on interconnected
systems and categorizes activities into primary and support functions, offering a holistic view of operations
and identifying opportunities for value creation. This framework is widely used across industries to analyze
and manage activities, optimize costs, and gain a competitive edge.

24
Primary Activities:
• Inbound Logistics: arranging the inbound movement of materials, parts, and/or finished inventory from
suppliers to manufacturing or assembly plants, either retail shops or warehouses
• Operations: responsible for overseeing the process that turns inputs (such as raw materials, labour, and
energy) into outputs (such as goods and/or services).
• Outbound logistics: is the process involved in moving and storing the finished product as well as the
information flow from the production line's end to the ultimate consumer.
• Marketing and sales: promoting a good or service as well as procedures for developing, distributing, and
exchanging goods and services that are valuable to clients, partners, consumers, 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
•Procurement: This activity involves sourcing and acquiring the necessary inputs, such as raw materials,
supplies, and resources, to support the primary activities.
•Technology Development: This activity focuses on research, development, and innovation to improve
products, processes, and overall operational efficiency. It includes activities such as R&D, design, and
technology management.
•Human Resource Management: This activity deals with recruiting, training, and developing the workforce
of the organization. It encompasses activities related to employee hiring, training, performance management,
and employee benefits.
•Firm Infrastructure: Firm infrastructure refers to the functions that provide overall management, control,
and coordination of the organization. It includes activities such as strategic planning, finance, accounting,
legal, and quality management.

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

25
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
• There is a high level of customization.
• Demand is 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 in supply chain management refers to the amplified fluctuations in orders caused by small
fluctuations in consumer demand. It occurs due to a lack of coordination and information sharing among
supply chain partners. The effect unfolds through demand variability, order batching, forecast inaccuracy, and
cost and efficiency impacts. The bullwhip effect leads to increased costs, inefficiencies, excess inventory,
stockouts, and longer lead times. To mitigate it, companies can implement strategies like improved
information sharing, collaborative planning, advanced technologies, and lean and agile supply chain practices.

LOGISTICS MANAGEMENT

Supply chain management is concerned with the efficient integration of suppliers,

factories, warehouses, and stores so that merchandise is produced and distributed:

26
 1. In the right quantities

2. To the right locations

3. At the right time

4. To minimize total system cost

5. To satisfy customer service requirements

Inbound and outbound transportation management, fleet management, warehousing, materials handling, order
fulfilment, logistics network design, inventory management, supply/demand planning, and the management
of third-party logistics service providers are all common tasks for a logistics manager to oversee. In a nutshell,
logistics management includes everything from processing orders to storing and transporting goods.

In addition to purchasing and stock management, planning and scheduling production, packing and assembly,
and providing customer support are all tasks that fall under the logistics umbrella.
Logistics management is an integrative process that ensures maximum efficiency in every step of the supply
chain including functions like marketing, sales, production, finance, and information technology, as well as
the logistics activities that support them.

Some good examples of efficient logistics

• Amazon: As a global e-commerce giant, Amazon has established itself as a leader in logistics management.
The company has implemented advanced technologies and optimization strategies to streamline its supply
chain and deliver products quickly and efficiently.

• UPS (United Parcel Service): UPS is one of the world's largest package delivery and logistics companies. It
has invested heavily in logistics technology and infrastructure to optimize routes, track shipments, and provide
efficient delivery services.

• FedEx: FedEx is another prominent logistics company that focuses on providing reliable and efficient
delivery services. It utilizes sophisticated logistics management systems and operates a vast transportation
network to ensure timely deliveries worldwide.

• DHL: DHL is a global logistics company that specializes in international shipping and courier services. With
its extensive network and advanced logistics solutions, DHL offers efficient supply chain management and
delivery solutions to businesses across various industries.

• Walmart: Walmart, a multinational retail corporation, has built a reputation for efficient logistics
management. It has implemented innovative inventory management techniques, cross-docking systems, and
distribution strategies to optimize its supply chain and improve product availability.

• Maersk: Maersk is one of the world's largest shipping companies, specializing in container logistics. It
focuses on optimizing shipping routes, cargo tracking, and port operations to ensure efficient and reliable
transportation services.
27
Functions of Logistics Management

Order Processing: Processing customer orders is a time-consuming and tedious task that is yet crucial to the
success of any business. It includes steps like verifying whether or not the materials are in stock, producing
and scheduling the materials for shortages, and providing acknowledgment to the owner by indicating any
discrepancies from the agreed-upon or negotiated terms, price, payment, and delivery terms.

Inventory Planning and Management: Organizations can improve customer satisfaction and inventory
management by carefully planning the inventory. This entails a wide range of operations, including but not
limited to inventory forecasting, engineering the order quantity, optimization of the level of service, proper
deployment of inventory, etc.

Warehousing: The finished products are kept here until they are ready to be shipped out to the clients. This
is a significant expense area, and mismanaging the warehouse will lead to many complications.

Transportation: Facilitates the transport of items to the final destination set by the consumer. This is
accomplished using numerous transportation channels (e.g., rail, road, air, sea).

Packaging: An important factor in the logistics system that affects how the product is physically distributed.

Logistics Models
1st Party Logistics (1PL) - A first-party logistics provider is a firm or an individual that needs to have cargo,
freight, goods, products, or merchandise transported from point A to point B. The term first-party logistics
provider stands both for the cargo sender and for the cargo receiver.

2nd Party Logistics (2PL) - A second-party logistics provider is an asset-based carrier, which actually owns
the means of transportation. Typical 2PLs would be shipping lines, airlines, or trucks, which own, lease, or
charter their ships; charter their planes and truck companies which own or lease their trucks.

3rd Party Logistics (3PL) – A 3PL is a specialist company that provides a range of distribution, storage,
transport, and fulfillment services to customers. A third-party logistics provider provides outsourced or 'third
party logistics services to companies for part or sometimes all of their supply chain management functions.

4th Party Logistics (4PL) - A fourth-party logistics provider is an independent, singularly accountable, non-
asset-based integrator who will assemble the resources, capabilities and the technology of its own organization
and other organizations, including 3PLs, to design, build and run comprehensive supply chain solutions for
clients.

5th Party Logistics (5PL) - A fifth-party logistics provider will aggregate the demands of the 3PL and others
into bulk volume for negotiating more favourable rates with airlines and shipping companies. Non-asset-
based, it will work seamlessly across all disciplines.

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Reverse Logistics

1. Reverse Logistics is an important branch of logistics aimed at value recovery, cost reduction, and
streamlining of the supply chain. It is also known as reverse logistics flow.
2. The need to combat worldwide pollution and the ever-increasing competition amongst logistics
organizations has made reverse logistics a necessity.
3. While logistics or forward logistics is generally referred to as the delivery of goods from their supplier to
their customers, reverse logistics is the return or collection of goods or materials from the customer after
delivery.

Need for reverse logistics:

Delivered goods that don’t meet the customer’s standards or have reached the end of their useful life in the
customer’s warehouse trigger reverse logistics. Recycling and reusing materials can help cut down on
emissions, so their collection is essential.

Reasons for return of goods:

1. Damages and Repairs
2. Wrong Product Delivered to Customer
3. Excess Quantity Delivered
4. Materials for Reuse and Recycling
5. Dissatisfaction with the Product

Examples of Reverse Logistics

1. Return of a newly purchased, non-working electric kettle to the retailer, by its customer, for repair or
replacement.
2. A regional pharmaceutical distributor returning medicines that have reached their expiry date, to the
manufacturer.
3. A logistics operation picking up wooden pallets from a customer’s warehouse for reuse.
4. Collection of hazardous waste from a customer’s premises.

PROCUREMENT

Acquiring products, services, or works from an external source is known as "procurement," and it typically
entails a competitive bidding or tendering process. Purchasing in a scarce market is a common example of
this. It's crucial to differentiate between risk-free and risky analyses.
30
The best value principle should be used whenever there is uncertainty about the outcome (whether in terms of
cost or benefit).
Definitions of certain common procurement terms:

1. Purchase Requisition: A Purchase Requisition (PR) is an internal form used to communicate the
needs for goods and services within an organization. Generated by SAP ERP's Material Management,
it provides details such as quantity, due date, and product description, enabling the purchasing
department to research suppliers and create optimal purchase orders.
2. Purchase Order: A purchase order (PO) is a legally binding document created by the SAP ERP
Materials Management module during the buy order processing phase. It confirms the buyer's
commitment to purchase goods at an agreed price and quantity from a specific seller. In addition to the
details from the purchase request, it also includes mutually agreed-upon terms and conditions. The PO
is an external document issued by the purchasing department and sent to the supplier, either manually
or automatically generated.
3. Request for Information (RFI): Organisations that need to compile a bid list or screen potential
vendors use requests for information (RFIs). The RFI often requires vendors to submit company details
such as company size, financial performance, number of years in business, market share, product
offerings, etc.
4. Request for Proposal (RFP): Requests for Proposals (RFPs) are sent when neither a specification nor
a statement of work (SOW) has been established, or when the buyer has a broad need and wants to get
proposals for how to meet it.
5. 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
prices and other terms and conditions.

k MANAGEMENT
RISK

Risk Management Process

Risk management refers to the process of identifying, assessing, and mitigating risks associated with the
operational activities of an organization. It involves understanding potential risks, and their impact on
operations and implementing strategies to minimize or eliminate them. The goal of risk management in
operations management is to protect the organization's assets, optimize operational efficiency, and ensure the
continuity of operations.

1. Risk Identification: Identify potential risks

2. Risk Assessment: Assess the likelihood of occurrence and potential impacts
3. Risk Mitigation: Strategy development to mitigate the risks and their impacts
4. Risk Monitoring: Continuous monitoring to identify any emerging risk
5. Risk Response Plan: Have a Pre-defined response plan
6. Continuous Improvement: Refine Risk Management Strategies

31
Risk Strategy
By considering the 4T risk management strategies, organizations can systematically evaluate risks and choose
the most appropriate approach for each, enhancing their ability to manage and control potential threats
effectively.

1. Terminate: The first strategy is to terminate the risk, which means eliminating it completely. This
involves removing the source of the risk or avoiding the activity or situation that poses the risk. By
terminating the risk, the organization ensures that it will not be exposed to its potential negative
consequences.

2. Treat: The second strategy is to treat the risk. This involves implementing measures to reduce the
likelihood or impact of the risk. Treatment strategies can include implementing controls, safeguards,
or preventive measures to minimize the risk's occurrence or severity. Risk transfer, such as purchasing
insurance or outsourcing certain activities, is also a treatment strategy.

3. Tolerate: The third strategy is to tolerate the risk. This means accepting the risk and its potential
insurance
consequences
when without actively
the cost of mitigation pursuing
outweighs any specific
the potential impact mitigation
of the risk. measures. Organizations choose this
strategy when the risk is considered acceptable within predetermined thresholds, or when the cost of
mitigation outweighs the potential impact of the risk.
4. Transfer: The fourth strategy is to transfer the risk. This involves shifting the responsibility for
managing the risk to another party, typically through contracts, agreements, or insurance. By
transferring the risk, the organization reduces its exposure to potential losses or negative impacts.

Risk Register
A risk register, also known as a risk log or risk database, is a tool used in risk management to systematically
capture, track, and manage identified risks throughout a project, initiative, or organization. It serves as a
central repository of information related to risks, providing a structured format for recording and
monitoring key details about each risk. Here are the key components typically found in a risk register:

1. Risk ID: A unique identifier or number assigned to each risk for easy reference and tracking.
2. Risk Description: Description of the risk, including its nature, source, and potential consequences.
3. Risk Category: Financial risks, operational risks, legal risks, reputational risks, etc.
4. Risk Owner: The individual or department responsible for managing and mitigating the risk.
5. Likelihood: An assessment of the probability or likelihood of the risk occurring.
6. Impact: Impact can be evaluated in terms of financial, operational, reputational, or other.
7. Risk Level: the risk level provides an indication of the risk's overall significance or severity.
32
 8. Risk Mitigation Actions: It includes measures taken to reduce the likelihood or impact of the risk, as
well as any contingency plans or alternative approaches.
9. Risk Status: A record of the current status of the risk, indicating whether it is open, closed, in progress,
or under review.
10. Review Dates: Dates scheduled for reviewing and reassessing the risk. Regularly reviewing risks
allows for updates, modifications, or the addition of new risks as the project or organization evolves.

OPERATIONS IN THE SERVICE INDUSTRY

Banking and Finance Industry

The Banking operations function as the Back Office, handling day-to-day processes and ensuring smooth
operations. They handle transaction processing, risk management, and reconciliation. The team provides
customer support, ensures regulatory compliance, and improves operational efficiency. They collaborate with
IT teams to manage technology and systems. Vendor and relationship management are also part of their
responsibilities. Overall, the operations team plays a vital role in maintaining efficient operations, managing
risks, and delivering excellent customer service in the banking and finance sector.
Read More at
Optimizing the retail Bank supply chain- Deloitte
Banking operations at a customer-centric world – Article by McKinsey & Company
Types of Ops Roles in Banking and Finance

FMCG Industry
In the FMCG industry, supply chain operations involve procuring raw materials, forecasting demand,
managing production, optimizing inventory, and coordinating warehousing and distribution. Transportation
logistics and retailer collaboration play a crucial role in ensuring timely product delivery. Returns and reverse
logistics are also managed. Technology and continuous improvement are essential for streamlining operations,
reducing costs, and enhancing customer satisfaction in this fast-paced industry.

Supply Chain 4.0 in Consumer Goods

Supply Chain 4.0 utilizes innovations from Industry 4.0, such as the Internet of Things, advanced robotics,
analytics, and big data, to boost performance and ensure customer satisfaction…Read More (Article by
McKinsey & Company)
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Auto Industry
The value chain in the automobile industry involves research and development, design and engineering,
component manufacturing, vehicle assembly, marketing and sales, distribution and logistics, aftersales
services, customer support, and recycling. It begins with R&D efforts to innovate and develop new vehicle
models. Design and engineering translate concepts into detailed designs. Component manufacturing produces
the necessary parts for vehicle assembly. Marketing and sales activities promote and sell vehicles. Distribution
and logistics ensure timely delivery. Aftersales services provide maintenance and support. Customer support
enhances the overall experience. The value chain in the automobile industry strives for continuous
improvement and sustainability.

Retail & E Commerce Industry

The retail and e-commerce supply chain involves procurement, inventory management, warehousing,
transportation, order processing, last-mile delivery, reverse logistics, supply chain visibility, collaboration, and
continuous improvement.

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Amazon Supply Chain
Amazon follows a demand planning process where they forecast the expected demand for a product before
customers place their orders. They purchase the products from suppliers and store them in warehouses or
fulfilment centers. When a customer places an order, the products are packed at the fulfilment center and sent
to sort centers for organizing them based on delivery locations. Finally, the products reach last mile sort centers
where delivery personnel pick them up and deliver them to the final destination.

Read More
When Toyota met e- commerce: Lean at Amazon (Article by McKinsey & Company)

SUPPLY CHAIN RISK

Supply chain risk refers to the potential events or circumstances that can disrupt or negatively impact the flow
of goods, services, information, or finances within a supply chain. These risks can arise from various sources
and can have severe consequences on an organization's operations, financial performance, reputation, and
customer satisfaction.

Classification of Supply Chain Risks

Supply chain risks can be classified into two main categories: internal risks and external risks.

Internal Risks:
Internal risks originate within the organization and are typically within its control. Some common internal
risks include:
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a) Operational Risks: These risks arise from internal operational activities and processes. They can include
production failures, equipment breakdowns, quality issues, capacity constraints, and supply disruptions from
internal manufacturing or distribution centres.

b) Process Risks: Process risks are associated with flaws or inefficiencies in internal processes, such as
procurement, inventory management, production planning, and order fulfilment. Inadequate process controls,
lack of standardization, and poor communication can contribute to process-related risks.

c) Human Risks: Human

error risks stem from employee actions or behaviours. These risks can include errors,
negligence, unauthorized access, employee turnover, and inadequate training. Human risks can affect various
aspects of the supply chain, such as inventory accuracy, data security, and compliance.

d) Financial Risks: Financial risks involve uncertainties related to financial aspects of the supply chain. These
risks can include cash flow fluctuations, credit risks, exchange rate volatility, pricing uncertainties, and
inadequate financial controls.

External Risks:
External risks are beyond an organization's direct control and arise from factors outside the organization. These
risks are often associated with the broader business environment and can impact the entire supply chain. Some
common external risks include:

a) Demand Risks: Demand risks arise from customer demand and market dynamics uncertainties. These risks
can include demand volatility, changes in customer preferences, shifts in market trends, and unexpected
changes in demand patterns.

b) Supply Risks: Supply risks result from disruptions or uncertainties in the supply network. Examples of
supply risks include supplier failures, shortages of raw materials or components, transportation disruptions,
geopolitical events, and natural disasters.

c) Regulatory and Compliance Risks: Regulatory and compliance risks arise from laws, regulations, and
industry standards changes. Non-compliance with legal requirements can lead to fines, penalties, and
reputational damage. Regulatory risks can be related to product safety, environmental regulations, labour laws,
and trade restrictions.

Impact of Supply Chain Risks on Organizations:

Supply chain risks have significant impacts on organizations, affecting their financial performance,
operational efficiency, customer satisfaction, and competitive advantage. These impacts include increased
costs, decreased revenue, operational disruptions, reputational damage, legal and compliance issues, and
competitive disadvantage. Risks can lead to higher expenses, lost sales opportunities, production delays,
customer dissatisfaction, legal actions, and reduced competitiveness compared to peers with robust risk
management practices. Effective supply chain risk management is crucial to mitigate these impacts and ensure
business continuity and success.

Key Elements of Robust (Supply chain risk management) SCRM

Risk Identification:
To manage supply chain risks, the initial step is identifying potential risks. Internal factors include operational
vulnerabilities and process inefficiencies, while external factors comprise supply disruptions and changes in
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customer demand. Internally, assess operations and controls, while externally monitor market trends and
supplier dynamics.

Risk Assessment and Prioritization:

Once risks are identified, the next step is to assess and prioritize them based on their potential impact and
likelihood of occurrence. Risk assessment involves evaluating the consequences of each risk and
understanding the organization's vulnerability to those risks. Prioritization helps allocate resources and
attention to the most critical risks that require immediate attention and mitigation.

Risk Mitigation Strategies:

Organizations can employ different strategies for risk mitigation, including risk avoidance, risk transfer, risk
reduction, and risk acceptance. Risk avoidance involves eliminating or avoiding activities that pose significant
risks, while risk transfer involves shifting responsibility to a third party. Risk reduction focuses on
implementing measures to mitigate risks, and risk acceptance involves consciously accepting certain risks
with contingency plans in place.

Risk Monitoring and Response:

Once risks have been identified and mitigated, it is essential to establish a robust risk monitoring system. This
involves continuously monitoring the supply chain for potential risks, detecting early warning signs, and
implementing timely responses. Proactive monitoring enables organizations to identify emerging risks and
initiate appropriate actions to mitigate or manage them effectively.

Integration and Collaboration:

A key element of robust SCRM is integrating risk management practices across the entire supply chain and
collaborating with suppliers, customers, and other stakeholders. Effective integration and collaboration
involve sharing information, coordinating risk mitigation efforts, and establishing clear communication
channels to ensure a holistic and synchronized approach to risk management.

Continuous Improvement and Adaptability:

SCRM is an ongoing process that requires continuous improvement and adaptability. Organizations should
regularly evaluate and refine their risk management strategies, incorporating lessons learned from past
incidents and adapting to changing market dynamics. By embracing a culture of continuous improvement and
adaptability, organizations can enhance their resilience to future risks and maintain a proactive approach to
SCRM.

By incorporating these key elements into their SCRM framework, organizations can develop a robust and
effective approach to identifying, assessing, mitigating, and monitoring supply chain risks. This enables them
to minimize disruptions, enhance operational efficiency, protect their reputation, and ensure long-term success
in a dynamic business environment.

SUSTAINABLE SUPPLY CHAIN

In recent years, sustainability has become a critical aspect of supply chain management. Organizations are
increasingly recognizing the importance of integrating sustainability practices into their supply chains to
minimize environmental impact, promote social responsibility, and achieve long-term sustainability goals. A

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sustainable supply chain focuses on balancing economic, environmental, and social considerations throughout
the value chain.

Environmental Sustainability
Environmental sustainability in the supply chain involves reducing the carbon footprint, minimizing waste
generation, conserving natural resources, and adopting environmentally friendly practices. This includes
strategies such as:

Green Logistics: Implementing efficient transportation and distribution practices to reduce fuel consumption,
emissions, and traffic congestion.
Sustainable Packaging: Using eco-friendly materials and optimizing packaging design to minimize waste and
promote recyclability.

Energy Efficiency: Embracing energy-efficient technologies, such as renewable energy sources, energy
management systems, and green buildings, to reduce energy consumption and greenhouse gas emissions.

Reverse Logistics: Establishing product returns, recycling, and remanufacturing processes to minimize waste
and maximize resource utilization.

Social Responsibility
A sustainable supply chain also addresses social responsibility by considering the well-being and fair treatment
of workers, communities, and stakeholders. Key aspects of social responsibility in the supply chain include:

Ethical Sourcing: Ensuring suppliers adhere to ethical labor practices, fair trade principles, and human rights
standards. This includes conducting supplier audits, promoting safe working conditions, and combating forced
labor and child labor.

Diversity and Inclusion: Encouraging diversity and inclusion in the supply chain workforce, promoting equal
opportunities, and supporting supplier diversity programs to empower underrepresented groups.
Community Engagement: Engaging with local communities and supporting social development initiatives
that create positive impacts, such as education, healthcare, and infrastructure projects.

Transparency and Accountability: Establishing transparent communication channels with suppliers,

customers, and stakeholders to ensure transparency in supply chain practices, including disclosing
sustainability performance and initiatives.

Economic Sustainability
Economic sustainability involves balancing financial viability with sustainable practices. A sustainable supply
chain strives for long-term economic growth while considering the impacts on profitability, cost efficiency,
and resilience. This can be achieved through:

Supplier Collaboration: Collaborating closely with suppliers to drive innovation, cost optimization, and
shared value creation. This can involve joint problem-solving, long-term partnerships, and supplier
development programs.

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Total Cost of Ownership: Considering the total cost of ownership rather than just the initial price when
making sourcing decisions. This includes evaluating factors such as product quality, lifecycle costs, and
sustainability performance.

Risk Management: Integrating sustainability factors into risk management practices to assess and mitigate
risks associated with environmental, social, and governance (ESG) factors. This includes considering climate
change risks, regulatory changes, and reputational risks.

By integrating sustainability practices into the supply chain, organizations can achieve a triple bottom line—
balancing economic success, environmental stewardship, and social responsibility. A sustainable supply chain
reduces environmental impact, enhances social well-being, enhances brand reputation, attracts conscious
consumers, and drives long-term profitability and resilience.

SIX SIGMA

The Six Sigma programme was created in 1986 by Motorola engineer Bill Smith in response to the need to
increase product quality and decrease faults. The early accomplishments impressed the CEO, Bob Galvin, and
under his direction, Motorola started to apply Six Sigma throughout the company, concentrating on systems
and procedures for manufacturing. Bob Galvin was interviewed by Godfrey (2002) on the early days of Six
Sigma.

The Six Sigma Metric

 Six Sigma attempts to make failures or faults extremely unlikely by reducing variability in critical product
quality attributes.
 Six Sigma aims to achieve specification limits that are at least six standard deviations from the target mean,
or two parts per billion that do not meet standards.
 There is a notion of a drifting mean, which postulates that even in a Six Sigma process, the process mean
could move by as much as 1.5 standard deviations off target.
 Since process stability is required for precise predictions, critics contend that the drifting mean aspect
introduces inconsistent and unreliable predictions of process performance.
 Some followers of Deming's concept have disregarded Six Sigma, criticizing the numerical objective, the
arbitrary 1.5 sigma shift, and viewing Six Sigma as little more than a catchphrase.
 No system or process is completely stable, and disruptions and upsets can lead to a change in the process
mean or an increase in the process standard deviation.
 Although it is an approximation and should only be used as a tool to reduce variability and get rid of waste
and defects, the Six Sigma process idea offers a paradigm for understanding and quantifying process
performance.
 Instead of depending simply on the 3.4 parts per million (ppm) non-conformance statistic, the emphasis
should be on minimizing variability around the target and increasing overall process performance.

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Basic Tools used in Six Sigma: Histogram, Pareto Chart, Scatter plot, Ishikawa Diagram

Deployment of Six Sigma

 Snee and Hoerl (2003, 2005) analyse several Six Sigma deployment tactics, with the top-down strategy
supported by executive-level management being preferred by the majority of businesses.
 The top-down approach is thought to be more successful in the long run and frequently produces better
results right away.Some businesses choose a partial deployment plan, beginning with a small number
of divisions or units and then growing when success is realised.
 Partial deployments and bottom-up strategies might not have enough backing from upper management.
 Top management commitment and involvement, utilising top talent, and having a supporting
infrastructure are three crucial elements for success in Six Sigma deployment.
 Top management support and engagement in driving Six Sigma projects are essential, as shown by
their dedication and involvement.
 By utilising elite personnel, improvement projects are guided and carried out by qualified employees
who are knowledgeable in Six Sigma methodology.
 The systems, tools, and resources required for the successful application and maintenance of Six Sigma
practises make up a supporting infrastructure.

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The DMAIC Approach, Project Selection, and Statistical Methods

The Define Step

 The Define step of the DMAIC process tries to pinpoint the project opportunity and confirm its
capacity for game-changing improvement.
 The project scope, start and end dates, metrics for success, alignment with corporate goals, customer
and financial benefits, milestones, team members, and necessary resources are all included in the
project charter, which is an essential part of the Define step.
 The project sponsor or champion frequently contributes significantly to the creation of the project
charter.
 The project's scope should be manageable if a project charter can be finished in 2-4 working days.
 The critical-to-quality characteristics (CTQs) of the client that the project will affect should be
identified in the project charter.
 To visualise and comprehend the areas that require improvement, visual aids like process maps, flow
charts, value stream maps, and Supplier/Input/Process/Output/Customer (SIPOC) diagrams are helpful
in the Define step.
 These resources are particularly helpful in non-manufacturing environments where the ideas of
processes and process thinking might not be well understood.

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  To direct the team's progress through the remaining DMAIC processes, an action plan needs to be
created.
 The Define step lays the groundwork for the improvement project and guarantees that it is in line with
customer needs and organizational objectives.
The team should prepare for a tollgate review during the Define step.
The tollgate review should focus on several key aspects:
(i) Ensuring that the problem statement identifies the symptoms rather than possible causes or solutions.
(ii) Identifying all key stakeholders involved in the project.
(iii) Assessing the potential financial impact of the project to determine if it justifies undertaking it.
(iv) Verifying that the scope of the project is neither too small nor too large.
(v) Completing a high-level process map to visualize the current process.

(vi) Identifying and addressing any obvious barriers or obstacles that may hinder the successful completion
of the project.

(vii) Reviewing the team's action plan for the Measure step of DMAIC to ensure it is reasonable and
achievable.

The Measure Step

 The Measure step tries to assess and comprehend the process's current state.
 Data gathering is essential, with a focus on throughput/cycle time, cost, and quality metrics.
 The definition and measurement of the key process output variables (KPOV) and key process input
variables (KPIV) must be done with great care.
 It is important to gather enough information to conduct a comprehensive analysis and comprehend
the performance of the current process.
 Several methods, including histograms, stem-and-leaf diagrams, run charts, scatter diagrams, and
Pareto charts, can be used to present data.
 While it is possible to review old records, it is frequently required to gather modern data through
observational research or sampling.
 Work sampling may be helpful in systems with lots of employees, but developing precise
measurements and a measurement system may be necessary in service industries.
 Compared to services, manufacturing often has more measurement methods and data already
available.
 The gathered data is used to establish the process's current condition or baseline performance.
 To ensure reliable data and prevent fixing issues based on faulty measurements, it is crucial to
assess the measurement system's competence.
 A formal gauge capacity assessment may be used as part of a measurement system analysis to
evaluate the precision and dependability of the measurement system.

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The team must complete a number of crucial tasks after the Measure step:

 Revisit and revise the project charter to reflect any modifications or new information discovered during
the Measure process. This entails reevaluating the project's objectives and scope to make that they
remain pertinent and consistent with the desired results.
 Reassess Team Composition: Take into account enlarging the team to include individuals from
upstream or downstream business units who can bring important perspectives and contributions to the
project. Their participation can boost comprehension of the procedure and help identify possible effects
and advancements in upcoming DMAIC procedures.
 Record Any Potential difficulties: Any difficulties or issues that could hinder the project's success
should be noted down. Included are any dangers, constraints, or dependencies that must be handled or
reduced.
 Determine the Project Owner or Sponsor: Verify the person who will accept responsibility for the
project and supply the necessary funding and resources. Their cooperation and dedication are essential
for the project's success.
 Make Recommendations for Improvement: The team may be able to offer some first suggestions for
improvement based on the information gathered and examined during the Measure process. This might
entail locating clear sources of variation or waste that can be removed or suggesting changes to the
procedure.

The Analyze Step

 The Analyse stage seeks to understand the sources of process variability and discover cause-and-effect
links using the data gathered in the Measure step.
 The goal is to identify the underlying causes of the project's defects, quality difficulties, customer
complaints, cycle time variances, waste, and inefficiency.
 It's crucial to distinguish between common sources of variability and those that can be identified. While
eliminating an assignable cause entail addressing a particular issue, eliminating a common cause typically
calls for process adjustments.
 The Analyse step makes use of a number of statistical methods, such as graphs of the data, control charts,
hypothesis testing, and calculation of the confidence interval, regression analysis, designed experiments,
and failure modes and effects analysis.
 A potent tool for the Analyse step is discrete event computer simulation, which is especially useful in
service and transactional industries but also applicable to other activities. It entails developing digital
simulations of processes in order to evaluate their effectiveness.
 Numerous sectors can examine scheduling issues, enhance cycle times, and maximise throughput using
discrete-event simulation.
 Random variables are employed in a discrete-event simulation model to describe variables like arrival
rates, processing times, routing, and the effects of mistakes or delays.
 The simulation enables the assessment of backlogs, buildup of applications, and the consequences of
inaccurate or incomplete data.

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 The Analyse stage offers a deeper comprehension of the process and identifies the critical variables
affecting its performance and variability by applying these tools and approaches.

The Improve Step

 To achieve the intended impact on process performance, the team uses creative thinking to identify
specific modifications that may be implemented to the process during the Improve step.
 To adapt the procedure, enhance work flow, and decrease bottlenecks and work-in-process, tools like
flow charts and value stream maps are utilised.
 A useful strategy in the Improve step is mistake-proofing, which entails designing operations to prevent
errors or mistakes.
 A crucial statistical tool in the Improve step is designed experiments. To identify the factors that affect
process outcomes and find the ideal combination of factor settings, they can be applied to physical
processes or simulation models.
 The goals of the Improve step are to create a solution to the identified issue and test it in a small setting.
 The pilot test acts as a confirmation experiment, assessing and documenting how well the solution
achieves the project's objectives.
 The refinement and revision of the initial solution during the Improve step may involve an iterative
process based on the findings and understandings from the pilot test.
 The team strives to execute realistic and efficient modifications to the process during the increase step
in order to increase performance and deal with the underlying causes of problems that were earlier
discovered.

The Control Step

 The Control step's goals are to complete all outstanding tasks for the project and hand over the enhanced
procedure to the process owner, ensuring that the successes attained are institutionalized.
 The objective is to make sure that the modifications are successfully incorporated into the procedure and,
if practical, expanded to related procedures within the organization.
 The process owner should obtain pertinent documentation, such as before-and-after figures for important
process metrics, updated process maps, instructions for use and training materials, and a breakdown of the
project's financial advantages.
 It is necessary to create a process control plan that outlines the metrics and procedures for evaluating the
effectiveness of the installed solution and carrying out recurring audits. In the Control step, control charts
are frequently used as a statistical tool to track important process parameters.
 For the process owner, a transition plan should be established that includes a validation check a few months
after the project is finished. This assessment guarantees that the outcomes are still valid and stable,
maintaining the favorable economic impact.
 It is crucial to plan ahead for potential difficulties while switching to the enhanced procedure and to
consider how quickly you will be able to react to any unexpected failures that may occur.
 The Control stage concentrates on maintaining the durability and long-term efficacy of the enhancements
achieved, offering the appropriate assistance and frameworks for ongoing observation, upkeep, and
continuous development.

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 The Control stage ensures that the improved process is successfully handed off at the end of the project,
allowing the organisation to capitalise on the successes and sustain increased performance over time.

Other Elements of Six Sigma

Design for Six Sigma

 Design for Six Sigma, or DFSS, is a methodology that applies Six Sigma principles to the creation of new
goods, services, or service processes.
 The entire development process, from determining client needs through the actual introduction of the new
product or service, is covered by this planned and disciplined technique.
 To ascertain critical-to-quality requirements, voice of the customer (VOC) activities including as focus
groups, surveys, and customer satisfaction research are used to gather customer input.
 By raising sales revenue from new goods and services and identifying fresh application possibilities, DFSS
is committed to enhancing company outcomes.
 The shortening of development lead times using DFSS enables quicker market introduction of new goods
and commercialization of innovative technologies.
 Many of the statistical techniques used in operational Six Sigma are used in DFSS, with designed
experiments being especially valuable during the experimentation phase for prototypes and computer
models.
 DMADV (Define, Measure, Analyse, Design, and Verify) is a DMAIC variant that certain organisations
and practitioners utilise for DFSS. The cost, manufactureability, and performance of a product are all
factors that are decided during the design process, which is why DFSS emphasises that design decisions
are business decisions.
 It emphasises how crucial it is to balance client needs and process capacity throughout the design process.
 Design adjustments or alternative production options are taken into consideration to address problems
when there are discrepancies between process capabilities and design requirements.
 By emphasising client requirements and incorporating them into the design process, DFSS supplements
operational Six Sigma and ultimately results in business improvement.

Lean Manufacturing

 Long cycle times, waiting periods, rework, scrap, and extra inventory are examples of waste that lean
manufacturing techniques seek to remove.
 Six Sigma and lean are related because excess variability is frequently the cause of waste. Process cycle
efficiency, cycle time, work-in-process, and throughput rate are all crucial metrics in lean manufacturing.
 Lean makes use of instruments from operations research and industrial engineering, with discrete-event
simulation being a particularly useful instrument for forecasting system performance.
 Deming's approach of profound knowledge is aligned with the application of Six Sigma along with lean
principles and DFSS (Design for Six Sigma).
 Six Sigma employs a systems approach, tackling numerous business areas and concentrating on
comprehending and minimising variation.
 Success with Six Sigma requires an understanding of psychology ideas relating to managerial
engagement, teamwork, and leadership.

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  An all-encompassing approach to process improvement, including waste reduction, variation reduction,
and design optimisation, is made possible by the combination of Six Sigma, lean concepts, and DFSS.

Real Life Examples of Six Sigma

1. One of the biggest software developers in the world is Microsoft (MSFT). It employed Six Sigma to
methodically lower IT infrastructure failures and assist eliminate flaws in its systems and data centres.
In order to establish a baseline measurement for identifying flaws, the company first created standards
for all of its hardware and software. It then performed root-cause analysis to identify probable problem
locations by gathering information from earlier high-priority incidents, server crashes, and customer
and product group recommendations.
On a daily and monthly basis, huge amounts of data were gathered from multiple servers. The
occurrences were ranked according to how seriously the flaws interfered with the company's operations
and core services. Data analysis and reporting helped to identify the specific flaws, and then
remediation procedures for each flaw were developed.
Microsoft claims that Six Sigma has enhanced server availability, boosted productivity, and raised
customer happiness.

2. Lean Six Sigma was said to have saved Ventura County, California, $33 million. The programme was
implemented by the county administration in 2008, and more than 5,000 staff members have received
training in the technique. The county claims that some of the savings are attributable to the
implementation of new, more effective systems and the removal of time-consuming but superfluous
procedures from its previous processes.
For instance, the VC Star reported in 2019 that the county saved "$51,000 with an appointments system
that reduced labour costs and rates for maintenance of county vehicles [and] almost $400,000 annually
by implementing a new system to track employee leaves of absence."

3. Boeing Airlines, One of the world’s largest aerospace companies was having issues with air fans within
the engines. Unable to pinpoint the exact problem, a group of experts were called in to investigate.
They deduced the problem stemmed from FOD (foreign object damage). Upon more in-depth
inspection using Six Sigma methods, they could trace the problem to a more fundamental
manufacturing issue causing electrical issues along with the FOD. Practically, the application for six
sigma methods can be seen across any organization attempting to create better output. Introducing
better control measures for various parts of the production process helps produce desirable results.
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Six Sigma in Banking:
Loan Department
1. Reducing the cycle time to Process a Loan Application (both Mortgage & Personal loans).
2. Improving the Customer Information gathering processes.
3. Improving the Credit Evaluation Process
4. Improving Productivity of loan processing agents

Account Opening
1. Reducing the time to open an account
2. Reducing errors in account opening process.
3. Reducing rework in processing customer applications

Other Projects in Retail Banking

1. Reducing the Credit Card Delivery time.
2. Reducing Bank Statements Processing & Delivery time.
3. Reducing the errors in money transfer
4. Improving accuracy, timeliness and completeness of customer communication.
5. Developing new products (timeliness, business potential)
6. Improving Market Share of existing banking products.
7. Improving the Branch Banking Processes

KANO MODEL
The Kano model is a framework created to rank features according to how much they will please users. With
other words, a Kano model aids with feature prioritization by determining how much each feature will benefit
users.

After receiving customer feedback (VOC), you will often employ the Kano Model, which is frequently
deployed alongside QFD during the Define phase of DMAIC of a Six Sigma project.

The Kano model was first presented by Noriaki Kano in Japan in 1984. He created the approach to concentrate
on these client aspects after extensively examining customer loyalty and pleasure.

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To read further on KANO Model and how to approach building the Kano model, Refer to this link:
https://sixsigmastudyguide.com/kano-model/

7 Quality Control Tools

In order to make sure that goods or services match the necessary standards, quality control is a crucial
component. In order to carry out quality control properly, a variety of instruments and procedures are available.
Here are seven frequently used quality assurance instruments:

1. Checklists: By outlining the precise standards or requirements that must be followed, checklists offer an
organised method to quality control. They act as a reminder for quality control or inspection staff to verify
all necessary components throughout inspections or audits.
2. A Pareto chart is a visual tool used to rank issues or flaws according to their frequency or significance.
It aids in identifying the most important problems that demand immediate attention, enabling quality
control teams to properly manage resources.

It is a ranking of variables connected to a quality issue. A Pareto diagram provides a straightforward visual
representation of the relative importance of issues.Since time, money, and other resources are limited, Pareto
analysis assists the team in focusing on only a select few crucial issues out of a large number of unimportant
ones that, if carefully handled, will yield the most benefits with the least amount of resources.
The Pareto principle, often known as the 80-20 rule, argues that a small number of factors (20%) account for
a big percentage (80%) of the impact. This is the basis for the Pareto diagram.

3. Control charts are statistical tools that are used to track and manage a process across time. They enable
quality control staff to spot deviations or patterns that might suggest a process is out of control by
displaying data points in respect to upper and lower control limits.

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4. Cause-and-Effect Diagrams (Fishbone Diagrams): In a visual way, cause-and-effect diagrams show the
probable factors that might contribute to a certain issue or flaw. They support efficient problem-solving
by assisting in the identification and categorization of potential root causes into groups including people,
processes, materials, equipment, and environments.

5. Histograms: Histograms are visual depictions of the distribution of data. They show how frequently or
frequently data occurs within predetermined periods or bins. Professionals in quality control can use
histograms to comprehend the distribution of measurements, spot outliers, and gauge the efficiency of a
procedure.
6. Scatter Diagrams: To analyse the relationship between two variables, use scatter diagrams. To
graphically analyse patterns, trends, or relationships between variables, they plot data points on a graph.
Potential cause-and-effect linkages can be found and improved upon using scatter diagrams.
7. Six Sigma Tools: Six Sigma is a thorough approach to quality control that uses a number of tools and
processes to reduce flaws and process variances. Process mapping, failure mode and effects analysis
(FMEA), design of experiments (DOE), and statistical analysis techniques like regression analysis and
hypothesis testing are some of the often utilised Six Sigma tools.

LEAN OPERATION
A flexible system of operation that uses considerably less resources than traditional system
and tend to achieve:
• Greater productivity
• Lower costs
• Shorter cycle times
• Higher quality

Some terms:
• Muda: Waste and inefficiency
• Kanban: A manual system that signals the need for parts or materials in simplest terms by better
communication through visual management. Example: Two bin system
• Pull System: Replacing material or parts based on demand
• Kaizen: Continuous improvement in the system
• Jidoka: Quality at source (worker)
• Poka Yoke: Safeguards built into a process to reduce the possibility of errors. In Japanese, it
means “Mistake Proofing”.
• Heijunka: Workload levelling

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7 Mudas:

 Defects
 Overproduction
 Inventories
 Over processing
 Unnecessary Movement
 Unnecessary transport and handling of goods
 Waiting time

Lean Manufacturing Techniques

1. Value Stream Mapping (VSM): It is a visual method for analysing and outlining the actions and
procedures involved in providing a good or service from beginning to end. It enables organisations to
streamline operations and improve total value by assisting in the identification of waste, bottlenecks,
and possibilities for change.
2. 5S methodology: sort, set in order, shine, standardise, and sustain. It emphasises setting up the
workplace and standardising procedures to raise productivity, efficiency, and safety. The 5S
methodology lays the groundwork for Lean production by getting rid of clutter, developing visual
management systems, and preserving cleanliness.
3. The Just-in-Time (JIT): JIT manufacturing approach attempts to make and deliver goods at the
precise time they are needed, in the required quantity, and with the least amount of waste possible. It
aids in lowering inventory levels, lowering storage expenses, and enhancing cash flow. JIT ensures a
smooth production process, shortens lead times, and improves customer response.
4. Kanban System: The flow of work or resources within a process can be managed and controlled using
the Kanban system, a visual signalling method. Work items are represented by cards or boards in a
kanban system, and progress is indicated by their movement through various phases. It supports a pull-
based manufacturing system, controls overproduction, and helps maintain inventory levels.
5. Continuous Improvement (Kaizen): Kaizen is a continuous improvement philosophy that calls for
making tiny, ongoing adjustments to processes. It promotes employee involvement and gives them the
tools they need to find waste, get rid of it, organise workflows, and boost productivity.
6. Poka-Yoke: Poka-Yoke, often referred to as mistake-proofing, seeks to stop errors or flaws before they
start. It entails putting in place systems or design elements that make mistakes either impossible or
challenging. Poka-Yoke tools or methods lessen the need for rework or repairs while enhancing product
quality.
7. Total Productive Maintenance (TPM): It is an all-encompassing strategy for maintaining equipment
that encompasses the entire workforce. It seeks to increase overall equipment efficiency (OEE), reduce
breakdowns, and maximize equipment performance. Preventive maintenance, operator interaction, and
ongoing process and equipment improvement are all stressed by TPM.
8. Gemba: Gemba is a core idea in Lean manufacturing and process optimisation. It highlights the value
of visiting the actual workplace, watching how things are done, talking to the staff, and making
judgements that are well-informed and based on current knowledge. Organisations may discover
waste, enhance processes, and promote a culture of continuous improvement by putting Gemba into
practise.
9. Heijunka: Heijunka is a production levelling technique that aids in balancing and stabilising output
and workflow. It attempts to reduce production volume variations, enhance flow, and enable effective
and adaptable production systems.
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 10. PDCA: The PDCA cycle is a popular problem-solving and continuous improvement process used in
lean manufacturing to promote systematic improvements and produce long-lasting effects. Plan, Do,
Check, and Act is the acronym for PDCA. It offers a methodical way of finding, examining, putting
into practise, and assessing process improvements.

NEW TRENDS IN OPERATIONS

What are important trends in operations management?

1. There is no need to be concerned about artificial intelligence. Technology is not a threat to jobs but
rather a helpful tool in the management and collection of critical client information. Many call centre/
operations use chatbots and automated voice systems to help sort through incoming call logs. This in no way
negates the human factor. AI systems aid call operations by providing customers with the most frequently
requested information, allowing contact center employees to spend more time with customers who truly
require it; this is especially beneficial for IT assistants. However, any company that is already in operation
will find great value in implementing some AI elements for their contact solutions.

2. Serverless Computing and Cloud Storage: Upgrades to infrastructure are necessary for all business
operations, including call centre operations. Companies will be able to conduct business at a faster pace
without the need for redundant operations thanks to the integration of serverless computing and a reduction in
data centres. These tools are especially beneficial to contact centre employees because much of their work
involves the repetitive entry of data and the use of forms. If any of these operations can be accelerated, these
individuals will be able to complete complex tasks in less time and assist more clients in a single day.

3. Automating Processes: Automating contact points or call centre operations is not the same as eliminating
the human element of your business. Instead, it aims to increase efficiency through the use of better software
and tools. Reservations, check-ins, and even translations used to take up a lot of time, but thanks to advances
in technology, these tasks can now coexist in chatbot windows without distracting employees or taking time
away from customers. Aside from improving customer relations, process automation tools will have a

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significant impact on internal communications, scheduling, group messaging, and other operational processes
that directly affect day-to-day corporate culture.

4. Mobile and digital communications: Cell phones, tablets, and laptop computers are all examples of the
growing trend of mobility. While it has been a trend for some time, advancements in technology and the ability
of smaller and smaller devices to perform complex tasks have made mobile and digital communications an
essential component of any growing business model. Furthermore, call centre operations are heavily based on
communication, which is why mobile and digital platforms are the foundations of successful contact centres.
However, not all companies' accessibility messaging is up-to-date with current trends. Team apps, client
portals, accessibility messaging, and other features aimed at frontline and remote workers are important
components of a mobile platform.

5. Culture and Workplace Experience: Beyond the technological advancements required for call center
operations, it has become abundantly clear over the last two decades that managing call center operations is
also about developing and nurturing a positive culture. The advantages of a strong company culture have long
been recognized, but it is only recently that businesses have realized the importance of work-life balance. A
positive team environment fosters identity and increases employee retention, both of which are critical in call
centers. Furthermore, when a team mentality is properly developed, it increases people's job satisfaction,
allowing them to be more productive with their time and energy.

Call center operations are an important part of any company, but they must be nurtured. It is no longer
sufficient for an operator to simply answer the phone. Customers expect more, and team members deserve
more, especially when technology exists to significantly increase productivity and effectiveness. However,
implementing such a change is difficult and necessitates a skill set that not every company possesses. As a
result, if your contact center solutions lack a subject matter expert, contact Etech Global Services. Etech
understands the changing trends and growing demand for effective and efficient call center services, having
over 20 years of experience.

News Related to New Trends in Operations:

Staying up-to-date with the latest news in operations is crucial for understanding the dynamic landscape. Here
are ten recent news articles covering new trends in operations:

 "How AI and Automation Are Revolutionizing Warehouse Operations" (Forbes)

 "The Rise of Robotic Process Automation in Supply Chain Management" (Supply Chain Dive)
 "The Impact of Blockchain Technology on Global Logistics" (The Wall Street Journal)
 "Implementing Agile Methodology in Operations Management" (Harvard Business Review)
 "The Role of Augmented Reality in Streamlining Manufacturing Processes" (IndustryWeek)
 "Data Analytics and Predictive Maintenance in Equipment Management" (Bloomberg)
 "Embracing Circular Economy Principles in Supply Chain Operations" (GreenBiz)
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 "The Integration of Internet of Things (IoT) in Supply Chain Networks" (Logistics Management)
 "Enhancing Sustainability through Green Operations Practices" (MIT Sloan Management Review)
 "The Emergence of Digital Twins in Manufacturing and Operations" (TechRepublic)

Major Companies and Their Initiatives in New Trends in Operations:

Several major companies are at the forefront of implementing new trends in operations. Here are ten examples
showcasing their initiatives:

1. Amazon's Implementation of robotics and automation in their fulfillment centers

2. Tesla: Utilization of AI and automation in their manufacturing processes for electric vehicles
3. Walmart's Adoption of blockchain technology to enhance supply chain traceability and transparency
4. Google: Utilizing predictive analytics and AI algorithms for optimizing data center operations
5. General Electric: Leveraging IoT for remote monitoring and predictive maintenance of industrial
equipment
6. UPS: Deployment of drones for last-mile delivery and optimization of their logistics network
7. Intel: Integration of AI and machine learning algorithms in their semiconductor manufacturing
processes
8. Siemens: Implementing digital twins for virtual simulation and optimization of complex
manufacturing operations
9. Procter & Gamble: Implementation of sustainable packaging and waste reduction initiatives in their
supply chain
10. Toyota's Adoption of lean manufacturing principles and continuous improvement practices across
their production systems

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Innovations in Operations and the Future with AI, Automation, IoT, and the Metaverse

Advances in technologies such as AI, automation, the IoT, and the metaverse are driving operational
innovation. These innovations are reshaping the field and paving the way for a more efficient and
interconnected future. Some notable innovations include:

1. AI and Machine Learning: AI-powered predictive analytics, demand forecasting, and optimization
algorithms are improving operational decision-making and resource allocation.
2. Automation and Robotics: Robotic process automation (RPA) and the use of collaborative robots
(cobots) are streamlining repetitive tasks, increasing productivity, and reducing errors in operations.

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3. IoT and Connectivity: The integration of IoT devices and sensors with operations enables real-time
monitoring, predictive maintenance, and enhanced supply chain visibility.
4. Metaverse and Virtual Operations: The metaverse, an immersive virtual reality environment, offers
opportunities for virtual training, simulations, and remote collaboration in operations management.

Some of the key trends in operations include:

1. Digitization and Automation: Through the use of technologies such as robotic process automation
(RPA) and artificial intelligence (AI), the automation of manual processes and the digitization of
operations are revolutionizing the way operations are carried out. These technologies can improve
workflow efficiency and reduce errors.

2. Internet of Things (IoT): The IoT is enabling the connectivity of devices and systems, allowing real-
time monitoring, data collection, and analysis. IoT devices can be used in operations to track inventory,
improve supply chain logistics, and monitor equipment performance.

3. Data Analytics and Predictive Modeling: The availability of massive amounts of data, combined
with the advancement of advanced analytics techniques, has enabled organizations to gain valuable
insights into their operations. Predictive modeling can aid in the optimization of processes, the
forecasting of demand, and the identification of potential issues before they occur.

4. Sustainability and Green Operations: Increasingly, organizations are focusing on sustainability and
adopting green practices in their operations. This includes implementing energy-efficient processes,
reducing waste, and adopting environmentally friendly supply chain practices.

5. Agile and Lean Approaches: Agile and lean methodologies are being applied to operations to enhance
flexibility, responsiveness, and efficiency. These approaches emphasize continuous improvement,
waste reduction, and the ability to quickly adapt to changing market conditions.

6. Supply Chain Optimization: Supply chain optimization aims to improve the efficiency and
effectiveness of the supply chain network. This includes optimizing inventory management,
implementing demand-driven strategies, and leveraging technologies like blockchain for enhanced
transparency and traceability.

The future of operations with AI, automation, IoT, and the metaverse holds great potential. These
technologies will continue to transform operations by increasing efficiency, reducing costs, and
enabling more intelligent decision-making. However, organizations need to carefully consider the
ethical and social implications of these technologies and ensure they are used responsibly.

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