Opsworld 4

Academia

Concepts

Trends

Industry

Efficiency in Supply chain for milk and

milk products: An Indian perspective

Toyota recall: Are the Lean Operations

at blame

Lean: New product development

Operations and Supply Chain

Management – The Akshaya Patra way

Unified efficiency measurement of

Thermal power plant using DEA

Background

Brain and Heart of operations efficiency

Enhancing Operational Excellence by

Improving Productivity

Specials

Productivity: The Mystery 1

Efficiency: The Future 5

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27

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CONTENT

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DIRECTOR’S MESSAGE

I am happy to present the fourth issue of Pan IIM

operations magazine. This magazine is a great medium

for integrating and bringing together experiences and

opinions of the students from IIMs, the best management

institutions in the country.

With the focus of business on driving Productivity and

Efficiency, it is heartening to see the OPEP, Operations

and Supply Chain club of IIM Raipur releasing the

fourth issue of the Pan IIM Magazine with the theme on

"Productivity and Efficiency".

I wish OPEP a great success in their endeavour and hope

that you enjoy reading this publication.

Prof. B.S. Sahay

Director, IIM Raipur

.

Prof. B. S. Sahay

1

EDITORIAL

According to Michael Porter,

competitiveness and productivity can

be used interchangeably. Companies

have to be productive to be successful

and to achieve those results daily

efficiency levels should be maintained

high. By improving its productivity

and efficiency, company can improve

its market share; maximize its

profitability and lower its operational

cost. Thus to gain a competitive edge,

productivity and efficiency are the

primary factors.

Keeping this in view, we have taken

forward productivity and efficiency as

the theme for the Pan IIM operations

magazine. This issue takes its readers

through various insights about

productivity and efficiency from

academia as well as from the industry

perspective.

We thank Prof. Omprakash S Vaidya,

IIM Lucknow, for contributing an

article on ‘Efficiency in supply chain

in milk and milk products: An Indian

perspective’. This article explains the

challenges, issues present in the

supply chain of world’s largest milk

producing country.

We also thank Akshaya Patra, an

Indian NGO providing food for

children in India. The article, Akshaya

Patra way, explains how they

efficiently use supply chain and

operations management to provide

safe, nutritious and tasty food on time

and every time.

On behalf of Operations and Supply

chain club (OPEP) of IIM Raipur, we

would like to thank all IIMs for their

continued support. We also thank our

authors for taking their time and

contributing for this issue.

We also would like to thank Prof. B.S.

Sahay, Director, IIM Raipur for his

strong support and motivation. We are

thankful to Prof. Parakshit charan &

Prof. Sumeet Gupta for their

guidance.

Our editorial would be incomplete

without thanking the Pan IIM

Operations group for giving IIM

Raipur this opportunity of publishing

this issue of Opsworld.

We hope our readers would enjoy this

issue of Opsworld!

- Manoj H. & Ruchi Sao

Editors

About the cover page:

The cover page of this edition of Opsworld was selected through the pan

IIM cover page design competition ‘Impression’. Amongst the various

entries for the competition, the design made by Bipin Chand Tumu of IIM

Kashipur was chosen to be the cover page. We thank all our participants

for their participation in the event.

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PRODUCTIVITY: THE MYSTERY

Abstract: The companies all over the world have implemented wide range of activities with an intent to improve

their productivity but eventually have faced the phenomenon of productivity paradox such that there were little or

negative return despite investing heavily to boost productivity. In this article, we have discussed the main reason

for productivity paradox because the firms do not persist in improving efficiency with respect to the capabilities

that originally made them successful. Therefore, by focusing more on cost effectiveness and less on effici ency, they

are getting diverted from the path which was the main reason for their success.

Anurag has completed his Bachelor's degree in

Computer Science & Engineering. His interest in the

areas of Management was piqued during the course.

He decided to enhance his knowledge and make his

career in the area of Management & subsequently

cleared CAT & joined IIM Raipur. He also has a

research paper published in an International

Journal in the field of IT & Systems.

Shubham is a second year Doctoral Student in

Operations Management area at IIM Raipur.

Shubham completed his Bachelor's degree in

Engineering (Electronics and Communication)

from RGTU Bhopal. During his under graduate

studies he was associated with a research

institute involved in the monitoring of Public

Distribution System in different states which has

been driver for his interest in this area

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PRODUCTIVITY: THE MYSTERY

Skinner around 1980’s talked a lot about

operational strategy and especially

manufacturing strategy and connected operations

management to business strategy. In his article

on Productivity Paradox, Skinner made a point

that despite best intentions and improvement

programmes, productivity seemed to be hardly

improving.

Companies around the world got inspired by the

industrial success of Japanese around 1960’s and

have started implementing huge range of

initiatives ; such as TQM, six sigma, JIT,

Business Process Reengineering (BPR), lean

management, bench marking etc. Most of these

initiatives have not achieved the desired success

being sought. Researchers have often argued that

these initiatives were conceptually sound but

were poorly implemented. In-fact these and other

productivity improving initiatives have not

addressed the core parameters that are needed to

achieve permanent productivity gains.

Productivity Paradox in form of “Productivity

Dilemma” was also discussed by Abernathy’s

when he made observation of decline of US

automobile sector in 1978, he argued that it was

the obsession of the automobile firms with

productivity which inhibited its flexibility and

innovation and ultimately led to their loss of

market share and profitability.

Skinner talked about how American firms

implemented productivity improvement plans

with the main objective of reducing overall cost.

They did everything from employing

productivity manager to establishing

departmental productivity committees, raising

the number of industrial engineering

professionals by 50%, carrying out operation-by-

operation analyses to improve efficiency levels,

avoid wastages, simplify jobs, retraining

employees to work "smarter not harder",

streamlining work and material flow movement,

replacing out-of-date equipment, retooling

operations to reduce operator time, tightening of

standards, installing a computerized production

control system, training foremen in work

simplification, emphasizing good housekeeping

and cleanliness and installing a computer- based

measured-day work plan, which allows for daily

performance reports on every operation, worker

and department. But, the result was a minimal

improvement in productivity of 7% over three

years and the profit remained static with

continuous fall in market share.

This is the paradox that why there is so little or

negative return despite investing heavily to boost

productivity.

The most important thing to observe in all these

productivity improvement drive was, their

objective, which was gaining cost

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competitiveness, which was in contradiction to

the popular “40, 40, 20” rule. According to this

rule about 40% of manufacturing based

competitiveness is derived from long-term

changes in manufacturing structure another 40%

comes from change focused on equipment and

process technological changes and the rest 20%

can be gained from the productivity

improvement approach. So productivity

improvement focused on cost competitiveness

should be the last resort of developing

manufacturing competitive advantage.

Skinner found that actually it’s not the

productivity focus but the cost reduction priority

which harm the firm’s heath. The productivity

drive focuses on reduction of direct labour cost

and labour efficiency while distracts their

attention from the manufacturing structure.

Also, when productivity becomes the driving

strategy for a firm, cost reduction becomes the

focus and other strategies to gain competitive

edge becomes immaterial.

Productivity improvement and cost reduction

diverts the attention of a firm from developing

long term manufacturing competitiveness to gain

short term cost competitiveness which inhibits

innovation and structural changes. The

productivity focus of firms prevents them from

gaining manufacturing flexibility which in turn

prevents product changes and pace of new

product development. The biggest impact of

these cost reduction programmes is on

innovation because firms restrain themselves

from investing in process or systems because this

will drive the cost up. So innovation which will

improve product design, lead time and customer

services suffers, which in turn leads to fall in

market share and profits. Also, when cost

effectiveness is the primary focus, it generally

hampers quality, while when quality is the main

focus then low cost usually follows it.

Hence, there is an inconsistency between the

activities, focused on innovation and flexibility

and those focused on productivity improvement

and cost reduction (Abernathy; 1978). So, from

the time, firms start to focus on productivity;

innovation and exploration takes the back seat,

which prevents the firms from taking risks.

Thus, there is a need for firms to balance

between productivity and innovation. The main

reason why productivity paradox occurs is

because firms persist in improving efficiency

with respect to the capabilities that originally

made them successful and by focusing more on

cost effectiveness and less on efficiency they are

putting getting diverted from the path which was

the main reason for their success.

References:-

Skinner, W. (1986). The productivity

paradox. Harvard Business Review

Skinner, W. (1966). “Production Under

Pressure,” Harvard Business Review

Abernathy, W.J., 1978. The Productivity

Dilemma Roadblock to Innovation in the

Automobile Industry. Johns Hopkins

University Press

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EFFICIENCY: THE FUTURE

Abstract: With competition sprouting in every direction, businesses can no longer concentrate only at increasing their

productivity. More focus is required at improving efficiencies. This is vital to survive in the highly demanding market.

This article looks at how productivity can be differentiated from efficiency and why improving it is crucial for a business.

Issac Solomon has completed his graduation in Electronics and communications

engineering from Rajalakshmi Engineering College, Chennai. He is having a work

experience of 31 months with Nokia Siemens Networks. Presently he is pursuing his first

year of post-graduation course from IIM Raipur. He can be reached at

pgp13020.issac@iimraipur.ac.in

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EFFICIENCY: THE FUTURE

“There can be economy only where there is efficiency” – Benjamin Disraeli

Not everyone is very clear on what differentiates

efficiency from productivity. It is not uncommon

for someone to use both the terms carelessly and

in the same context without actually

understanding what they mean. To understand in

simple terms, we can compare them with quality

and quantity. Productivities are usually measured

in output over some fixed time periods. While

efficiency for manufacturing a product can be

calculated on basis of wastes, labour time spent,

money saved, resources used, etc. For example,

if you produce 500 units on the first month and

600 the next, then you are more productive in the

second month. Now, out of those 500 units you

produced on the first month, let’s assume 50

were defective and of the 600 you produced the

next month, 65 were defective. Here you have

become lesser efficient, though your productivity

is higher.

Exploring a little further, let’s assume it took you

Rs 10 worth of input (raw materials, labour, etc)

to produce one unit and you sell it for Rs 12. If

you manage to produce 600 products with the

same efficiency of the first case, then you will

make a profit of Rs 1100 and in the second case

a profit of Rs 1070 for a cost of Rs 6000. It is

quite evident that a larger proportion of input is

converted to profits in a more efficient system

for a given productivity.

Productivity without efficiency is very

expensive. A company can achieve its

productivity target just by throwing around its

available resources in a very inefficient process;

but at what cost? When it comes to managing

businesses, profit is what that matters. The

example shows that efficiency is the name of the

game. When the profit of a company improves, it

can become more competitive. This can be due

to increased productivity resulting from an

improvement in efficiency.

Lack of efficiency affects all forms of

businesses. In large businesses, inefficiencies

can go unnoticed due to the availability of large

resources and the difficulty in identifying them.

When it comes to growth and sustenance of

small businesses, being inefficient can be a

calamitous mistake. In the current business

scenario where most businesses thrive in small

environments, being inefficient is a game that

businesses cannot afford to play.

In the twenty first century business world, with

its striding technological improvements,

companies have drastically improved

productivities. With productivity on the roll, the

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companies have to focus more on efficiency to

compete against their competitors who also have

access to these technologies. Companies should

constantly work on reducing leakages within

their operations. But this improvement should

come in a holistic manner. Just by unclogging

an inefficient operation to improve productivity

is not enough. A potential improvement in

efficiency should not happen at the expense of

the productivity of another operation. For

example, shifting resources closer to an

operation which needs it more should not reduce

efficiency of another operation which might need

the same resource lesser.

Improving efficiency is a continuous process

which must happen in accord with improving

productivities. Identifying and improving the

existing intrinsic inefficiencies can be tough, but

it is worth the time and money spent as the

returns are much higher.

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ACROSS

1: Four car companies, called the "quattro" or

"Auto Union" makeup this famous car company

2: This company made the first ever diesel-

engine passenger car

3: This Company is credited for developing the

Critical Path Method (CPM) and also the

synthetic polymers such as Nylon, Teflon,

Kevlar & Neoprene. Id the company

4: Which company is credited for developing

the following?

1940 – First Walkie-Talkie

1973 – First Mobile Phone

1985 – Six Sigma Technique.

DOWN

5: This systematic technique for failure analysis

was developed by the US army

6: This logistics company is the official partner

of F1 for 8 impeccable years.

7: Adolf Hitler gave a contract to this famous

company to make a cheap and simple car

8: Supply chain helped in getting success for

this company’s expansion. It is referred to as

journey from beans to cup. (Related to barista &

year 2007-2008)

9: Volkswagen manufactures and sells the

fastest car on the earth under this name

10: It is the machine design to affect the

principle of Jidoka in TPS

11: This was created by a group of professors at

MIT Sloan School of Management in early

1960s to demonstrate a number of key

principles of supply chain management. It is

played by teams of at least four players, often in

heated competition, and takes one to one and a

half hours to complete. What in the world of

Supply Chain Management is am I referring to?

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EFFICIENCY IN SUPPLY CHAIN FOR MILK AND MILK PRODUCTS

AN INDIAN PERSPECTIVE

Abstract: This article is aimed at providing a quick look into some of the issues and challenges in managing the supply

chain of milk and milk products, with specific emphasis on Indian scenario. We briefly look at the basic milk supply

chain. Further, we discuss the issues and challenges like demand management, quality, handling of milk, transportation

and adopting the change. We hope this article will provide some useful information to the practicing managers and

researchers alike.

Dr. Omkarprasad S Vaidya is a faculty at Indian Institute of Management Lucknow. His

areas include Operations management and quantitative techniques. His areas of

research include Multi Criterion Decision Making, Supply Chain Modelling and

Performance evaluation in Operations. He can be contacted at vomkarin@yahoo.co.in

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EFFICIENCY IN SUPPLY CHAIN FOR MILK AND MILK

PRODUCTS: AN INDIAN PERSPECTIVE

Introduction

India is the world’s largest milk producer, which

accounts for more than 13% of world’s total milk

production. The huge volume of milk being

produced in India is consumed almost entirely in

India, with a very less proportion of milk (or its

products) being exported. In India, milk was

(and still is) primarily supplied by the local

farmers. They deliver milk directly to the

customers. This unorganized mechanism is being

replaced by the organized sector, wherein many

co-operative/private/government organizations

have taken a step to deliver quality milk and

milk products to the customers. Some of the

leading milk suppliers in India are: AMUL

(Anand Milk Union Limited) an Indian dairy

cooperative body organized by Gujarat Co-

operative Milk Marketing Federation Ltd.

(GCMMF). The ‘AMUL’ model is known to

have initiated the white revolution in India and

helped India emerge as the largest milk producer

in the world. More than 15 million milk

producers and 144246 dairy cooperative

societies across the country operate with them.

Milk is processed in 177 district co-operative

unions and marketed in 22 states in India.

Mother Dairy was set up in 1974 under

the ‘Operation Flood Programme’ initiated by

National Development Diary Board (NDDB).

Mother Dairy procures its requirement of liquid

milk from dairy cooperatives. Mother Dairy sells

approximately 3.2 million litres of milk daily in

the markets of Delhi, Mumbai, Saurashtra and

Hyderabad. Mother Dairy milk has a market

share of 66% in the branded sector in Delhi

where it sells 2.5 million litres of milk daily and

undertakes its marketing operations through

around 1400 retail outlets and over 1000

exclusive outlets of Mother Dairy.

Raipur Sahkari Dugdh Sangh Maryadit

(RSDSM) was established in 1985-86 by the

National Dairy Development Board under the

Operation Flood-II Scheme. It was then operated

under the brand name ‘Sanchi’. RSDSM’s main

plant was established on 1st October 1987 with

the help of National Dairy Development Board

in Urla (District Durg). Till 11th September,

2011, it continued to operate under the brand

name of Sanchi, when it was rechristened as

‘DEOBHOG’.

AAVIN is a major player in Tamil Nadu.

The dairy development department of Tamil

Nadu oversaw and regulated milk production and

commercial distribution in the state. The Dairy

Development Department took over the control

of the milk cooperatives. It was replaced by the

Tamil Nadu Cooperative Milk Producers

Federation Limited in the year 1981. In February

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1981, the commercial activities of the

cooperative were handed over to Tamil Nadu

Co-operative Milk Producers' Federation Limited

which sold milk and milk products under the

trademark “AAVIN”.

With many brands in the organized

sector, the milk industry is thriving in economic

terms. This sector is the largest contributor to the

GDP among the agriculture sector.

The demand for milk in India is expected

to rise by 29% in the next five years. Hence there

is a need of effectively utilizing the available

milk, mostly by minimizing the wastages therein

and/or managing effectively and efficiently the

supply chain. In this paper, we discuss some of

the issues and challenges faced in the supply

chain in the organized sector.

The Milk Supply Chain

The supply chain of milk begins from the local

farmers, where it is collected and sent to the

processing plant. Milk is then processed in the

plants and distributed by the local distribution

centre/s. Through the distribution centres it

reaches the retail outlets. In the supply chain, the

milk, at times is taken through temperature

controlled transportation systems, hence the

name, cold chain. The cold supply chain of milk,

a three staged process, is explained as follows:

From Farmer to Plant

In the first phase, the milk is collected

from the local farmers and sent to the industry

for processing. Milk collection process (from the

farmers) can be optimized through milk run

modelling. Milk run route or vehicle routing

problem is a widely known logistics model that

can be used effectively here.

From Plant to Distributors

The collected milk from the local farmers

is then processed and toned. From the factory the

processed milk is then moved to the distribution

centres. This is usually done as a long distance

haul. Depending on the distance, the milk is

treated enroute. Transportation model, for

optimizing the transportation between factory

and distribution centre can be effectively used

here.

From Distributors to Retailers

From the distribution centre the milk is

then sent to the retail customers. This happens

similar to stage one: through Milk run.

Various parameters involved in this three

staged process makes the optimization more

complex. The constraints in each stage vary and

so do the objective function. Usually, the

optimization model depends on the organization

strategy. The objective function needs to be in

line with strategy of the organization. For

instance: for an organization which has speed to

market as their strategy, minimize the time given

budgetary constraints will be the problem and

for organizations which focuses on cost

reduction to minimization of cost given time

constraints will be the problem at hand. A

skeleton view of milk supply chain structure is

represented in Figure 1.

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Figure 1 Milk Supply chain Model

Issues and Challenges in Supply Chain

The chain partners include the farmers,

plant, distributors and retailers and of course the

customers. Managing such a chain requires the

coordination of chain elements using appropriate

technology that includes product, process,

information technology, management practices

and systems. The challenges faced in ‘milk’

supply chain are briefly explained as follows:

Challenges in Demand Management

With more than 20 million people as potential

customers every year, and an increasingly

affluent population, the demand for milk

continues to grow at a rapid pace. Annual

consumption, is forecasted to reach around 180-

200 million tonnes by the end of the decade. This

demand poses challenges to the supply chain in

the form of supply-demand mismatch and lead

time.

Demand Supply Mismatch

The demand and supply gap varies

as a result of seasons and spikes due

to festivals. This is due to the fact

that supply and demand have a

significant impact based on the

seasons. It is seen that in the spring

season cows/buffaloes produce more

milk and are milked twice in a day

leading to an increase in the supply

of the milk. The milking cycle goes

down to ‘dry–off’ in the autumn

season, where supply is reduced. This creates a

cyclic nature in the supply of milk. The demand

also varies as the consumption of milk during

summer reaches a peak and during the winter

when the demand goes down. Thus there are

“flush periods” when supply is more than

demand and “lean periods” when demand is

more than the supply.

Milk being a perishable product the

supply chain is under high constraint to make

sure that everything supplied is consumed. In the

flush period, care has to be taken in meeting the

demand without moving excess goods. In Andra

Pradesh Dairy Development Cooperative

Federation (APDDCF) faced the problem of

surplus of milk. So as to counter this challenge,

they had planned to have a fortnightly milk

holiday.

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Lead Time: The next issue is meeting the market

driven demand i.e. lead time. Lead time in the

milk industry is the time between initiations of a

process of request for milk to meet the demand

to the actual receipt of milk. Lead time has to be

shortened so as to meet the requirements of the

customer and also to retain the natural

constituents of milk. The information from the

downstream has to be made available to the

supply end so as to achieve this. There has to be

sufficient capacity (in terms of lead time) to meet

fluctuations without sufficient notice.

Quality: For a consumer, the quality of the

product implies ‘taste and safety’. This can be

ensured from the time of procurement, through

the processes and delivering it to them. The

primary challenges faced are in procurement,

safety and packaging.

Procurement

Procurement of milk from the farmers is

the primary stage of the process. Procurement

management has gained its significant

importance in the supply chain, as raw milk

forms an integral part in the entire value chain. It

determines the success of the complete value

chain. It involves the functions of pickup, testing

and delivery of milk. The pickup of milk takes

place from the local co-operatives. The

procurement during the flush season and during

the lean season varies hugely and gives rise to

many challenges to be dealt with. The issue is

due to ‘variations’ not so well known in advance,

the milk procurement during both the seasons

has to be planned based on the estimates.

Safety

Safety of a food product is gaining lots of

importance across globe from consumer point of

view. The presence of additives to increase the

shelf life and the packaging type is critical in

making certain about the products’ safety. Rigid

norms on the safety of food products have been

designed for meeting compliance. Safety is also

affected by issues like tampering of packings.

Tampering could lead to serious safety issues to

the consumers. In 2009, when packets of milk

supplied to the area of Kondhwa in Pune were

tampered and were replaced by synthetic milk it

resulted in a serious safety issue.

Packing

The packaging is an important aspect of

milk supply chain and the challenges faced in it

are from ecological point of view to safety.

Packaging has to comply the standards set by

Food Safety and Standards (Packaging and

Labelling) Regulations, 2011. Packaging in India

is witnessing various innovations since the day

of retail boom in India. It is seen with higher

significance from the point of view of

production, storage, transporting, marketing and

distribution. Packaging is not only done with the

perspective of selling but also to prevent the

quality from deteriorating. The challenges in

packing include:

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1. Protection against distributional hazards,

contamination, micro-organisms and

heat.

2. Recycling of packets.

3. Reduction in weight of the packaging.

The factors that affect the quality of the milk are

contact surfaces, temperature, and the storing

medium. Now-a-days with tetra pack, paper

board made from select woods, organizations

like AAVIN are adopting good packing

procedures. However, scope exists to modify the

existing practices for betterment.

Milk Handling

Handling of milk includes the first phase (i.e.

collection of milk from farmers), till it reaches

the consumer. The handling primarily consists of

storing and transporting of milk. The handling of

milk during the entire transportation has to

ensure that the quality of milk is not degraded.

The quality of the milk can be ensured only by

having proper mechanisms to handle milk. The

ways in which the milk can are stacked and

transported also create damages to the packaging

during transportation. This damage caused might

result in wastage of milk.

Organizations like Amul make use of the

bulk chillers at the collection level so as to

improve the micro biological quality of the milk.

This ensures the good returns to the farmer who

produces and customer who gets to buy a better

product. The tankers which transport the milk

need to be properly insulated to avoid wastage of

milk and to ensure the quality of the milk. The

transportation and handling must be taken

special care during loading and unloading of the

product at various locations. The vehicle has to

be maintained so as to transport the milk without

wastages. Reducing the number of handling

points will help in improving the handling of

milk. The storing of milk during the supply chain

should be in less than 5oC as specified by food

safety and standards authority in India. Since the

entire operation is happening in a cold chain the

challenges can be even more.

The transportation of perishable products

always requires special handling. Distance plays

a major role in the supply chain of milk. As

discussed earlier, with a shorter shelf life, the

decision to move the milk is based on the

climate, transport conditions and economies of

scale. The long distance haul in the second stage

has to be taken care with these issues posing a

major challenge.

Optimization Complexities

As discussed previously, the three stages

add to the complexity of optimization planning

in the supply chain. The complexities makes the

planning cycle difficult. These complexities

existing in the chain can be simplified with some

assumptions, but at the cost of optimized value.

For instance: now-a-days, organizations like

Deobhog are giving incentives to the retailers to

plan and lift the material from the distributor.

Thus the third stage, which is milk run, in the

supply chain is eliminated. This simplifies their

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structure and helps in achieving a better

optimization.

Managing Third Party Service Providers (3PL)

With the concepts of core competencies,

the milk producing units are engaging in only

production of milk and depend on the 3PL for

logistics. In this 3PL sector, there are a number

of players from the unorganized sector. With

milk being a perishable product, managing and

controlling in the value chain is a huge challenge

for managers. As the third parties perform, it is

essential to develop mechanisms to maintain

control and make timely delivery.

Communication with the 3PL provider is

very essential. Both the parties involved will

have a clear expectation from one another.

Having clear expectations will help in managing

and communicating better with them.

Information Systems (IT):

Every supply chain faces with a common

challenge in communication. The databases

operating at different locations need to be

integrated. Delays in information sharing and

retrieval will result in forecast errors. Both the

suppliers and the customers need to be in

continuous collaboration so that supply meets the

demand. Relationship between the partners in the

supply chain becomes critical. The sustainability

of the relationship leads to a better

communication process. The system requires

data input from both manual and automated

sources through the supply chain. To gather such

level of information we require complete

integration in the supply chain. For instance

Gujarat’s Co-operative Milk marketing

Federation (GCMMF) has their entire supplier

network information integrated. They have the

information on amount of procurement, quality

and composition of the product and payment

terms which can be accessed by all through

databases. IT has brought in transparency and

ease of handling for more than 11,000

cooperatives. The use of IT has enabled them to

capture ‘end to end’ data adding value to the

entire chain.

Impact of Unorganized sector

The major portion of dairy business in India is

contributed by the unorganized sector, especially

in rural or semi-urban area. The unorganized

sector milk is comparatively cheaper than the

one available from the organized one. There

exists a co-opetition and (unseen) competition

between unorganized sector and organized

sector. It is the company’s move to make them

work aligned with them to achieve their goals.

Conclusions

In this article we provide a glimpse of the

problems, issues and challenges faced by the

‘milk’ supply chain. The issues exist both within

and outside the boundaries of company. These

challenges need to be handled by practices that

makes the delivery systems more effective. Use

of technology and knowledge in products and

practices in making the delivery more effective

should prove beneficial. In addition to the one

discussed other challenges like delay in

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transportation, inadequate roadway infrastructure

to support long distance travel, may also create

supply chain disruptions. With growing demand

and supply, a more agile supply chain would be

required with a capability of handling these

challenges.

Further Reading

A Review of the Milk Supply Chain. Safe

Food. Acessed on March 5, 2013, from

http://www.safefood.eu/SafeFood/media/

SafeFoodLibrary/Documents/Publication

s/Research%20Reports/safefood_dairy_r

eport_web_version.pdf

BCG. Creating the Optimal Supply

Chain. Acessed on March 5, 2013, from

http://knowledge.wharton.upenn.edu/pap

ers/download/BCGSupplyChainReport.p

df

Douglas M. Lambert, M. C. (2000),

Issues in Supply Chain Management.

Industrial Marketing Management Vol

29, 65–83.

http://www.cob.unt.edu/slides/swartzs/M

KTG%206040%20Spring%202009/Artic

les/T2%20Spatial%20Economics/Lamber

t%20cooper%20IMM%202000%20Issue

s%20in%20supply%20chain%20manage

ment.pdf Acessed on March 5, 2013,

Lee, H. L. (2004, October). The triple A

supply chain. Harvard Business Review ,

2-12.

Lee, H. L., & Billington, C. (Spring

1992). Managing Supply Chain

Inventory: Pitfalls and Opportunities.

MIT Sloan Management Review, 65.

Management, E. L.-C. ARTHUR HSU

and DANIEL D. ZENG. (2005)

International Journal of Intelligent

Control & Systems, 10 (4), 286-295.

Ronald H. Ballou, S. M. (2000). New

Managerial Challenges from Supply

Chain Opportunities. Industrial

Marketing Management , 29, 7-18.

Sridhar, V. (2010). Public Private

Partnership in Indian Dairy Industry

Initiating White Revolution - II. CII.

Accessed March 5, 2013, from

http://www.technopak.com/resources/

Food/PPP%20in%20Indian%20Dairy%2

0Industry_Technopak_CII_Background

%20Paper_May08,2010%20pdf%20ver.p

df

Supply Chain Agility: A study of supply

chain maturity . KPMG. Retrieved March

8, 2013, from

http://www.kpmg.com/LV/en/IssuesAndI

nsights/ArticlesPublications/

Publicationseries/Documents/supply-

chain-agility-study.pdf

Tirupati, P. C. (2003, April). Business

Strategies for Managing Complex Supply

Chains in Large Emerging. Ahmedabad,

Gujarat, India. Accessed March 8, 2013,

from

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http://www.iimb.ernet.in/~chandra/AMU Lpaper2.pdf

TOYOTA RECALL: ARE THE LEAN OPERATIONS AT

BLAME?

Abstract: 7.43 million vehicles were recalled because of faulty power window, 2.77 million vehicles were recalled

because of water pump problem and steering effect. Are Toyota’s lean techniques to blame upon or is it some other

factors? This article focus on the cause of the problem.

Neha Makdey has completed her B.E. in Mechanical Engineering and has 22 months of

work experience in Tata Motors Limited in the Customer Support Department. Presently

she is pursuing her MBA from IIM Trichy. She loves reading fiction, but dancing is her

passion. She can be reached at neha.p12031@iimtrichy.ac.in

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TOYOTA RECALL: ARE THE LEAN OPERATIONS AT

BLAME?

As an automobile enthusiast, I have always been

flabbergasted by Toyota cars, not just because

they are fuel efficient and environmental friendly

but because the Toyota Technology is

generations apart. What is interesting to observe

in Toyota cars is that they are remarkably elegant

with lot of technology riding behind them – state

of the art aerodynamics, smartly contoured

nooks and crannies and Toyota’s much talked

about “Hybrid Synergy Drive” in hybrid cars.

Toyota cars are user-friendly, refined and

reliable eco friendly cars which give a sheer

driving pleasure.

Toyota is considered to be the pioneers of

hybrid technology and is renowned for this

worldwide. But in October 2012, it recalled 7.43

million vehicles worldwide for a faulty power-

window switch that could cause fires. It recalled

2.77 million vehicles around the world for a

water pump problem and steering defect.

These recalls not only damage the

company’s brand image but the company has to

incur huge cost to fix the defect. The damaged

part must be arranged from the vendors and must

come to the Toyota spare parts warehouse and

then it must be distributed to dealers. The

Technicians must be trained to fix the recall.

Service engineers need to follow up the progress

and ensure the safety of all Toyota vehicles

running on the road. Due to this recall work (free

service), bay productivity reduces as few bays

must be allocated for this work. So the company

has to incur spare parts cost, pay taxes on these

parts, transportation and packaging cost, training

and labour cost to resolve this problem. In a

short run, it affects the company’s sales as well.

Since these painful recalls of 2009, Toyota’s new

motto is “Moving Forward”, an attempt to

communicate to consumers that the company’s

desire to start afresh and look toward a better

future.

Are the lean operations at blame for these

recalls? Has Toyota’s disruptive innovation

become destructive? The Toyota Production

System (TPS) was established based on two

concepts: The first is called "jidoka" (automation

with a human touch) which means that when a

problem occurs, the equipment stops

immediately, preventing defective products from

being produced. The second is the concept of

Just-in-Time (JIT) or lean operations in which

each process produces only what is needed by

the next process in a continuous flow.

When we talk about lean operations, we

take into account the cost, quality, delivery,

safety and morale. Lean operations are viewed as

the system of 21st century. It is about improving

the inefficient processes and reducing the errors

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and defects. It is about doing more with less: less

time, inventory, space, labour, and money. It

reduces waste by 80%, labour and production

cost by 50%, and inventory by 80%. Lean

operations not only reduce the cost but it

improves the quality at the same time.

The future of innovation lies in

improvement in value chain. Innovate the

product and competitors will replicate the

technology within 6 months. If the company has

to gain advantage over its competitors it must

improve its value chain. It's not just a matter of

making things lean. It's also about incremental

improvement. If we look a big part of Toyota’s

success has been constant improvement.

If the defect is detected within 1-2

months after the car sales then the defect might

be due to production error but if the defect is

detected 6 months after the sale then it is because

of the defective design. In Toyota’s case lean

operations is not the major reason for recall.

Some of the strong reasons supporting the claim

are:

Toyota has been successful in achieving

customer satisfaction as well as dealer

satisfaction as it continuously strives to

improve its value chain using lean

operations.

A study by Economics of

Industrial Research & Innovation

(IRI), one of seven scientific

institutes of the European

Commission's Joint Research

Centre (JRC), reveals that Toyota

led in total R&D dollars spent in

2009 whereas Ford (32.4 percent),

Renault (26.5 percent), and

General Motors (24.1 percent)

reduced their R & D expense.

Toyota has replaced management and

invested more in quality testing since

the 2009-2010 unintended acceleration

crises that resulted in the recall of

millions of vehicles after several severe

accidents, some including fatalities.

During recession, Toyota didn't lay off

people, even though their sales were

down by about 40 percent. They used

that time to train the people and use

them for thinking of ways to reduce

waste, to eliminate cost. Kaizen was

implemented in all operations.

Toyota has always believed in being

competitive by continually reducing the

price of goods, giving the customer

more for less and developing your

employees so they can continuously

improve the system

After the recall, Toyota hired 150

engineers, technicians and researchers who will

focus on the areas like power train, mechanical

design, electrical engineering, electronics, and

advanced research, according to the automaker.

Toyota has invested huge amount to reduce the

cost and make the process efficient. It is

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expected that the coming Toyota cars will not

have any design defects.

We believe that the Toyota recalls are not

because of lean operations but due to some

design defects. Toyota is trying to correct these

R&D defects by using its lean operation

techniques and its efficient value chain.

References:

1. Economics of Industrial Research &

Innovation Report

2. http://pressroom.toyota.com/releases/

3. http://www.sae.org/manufacturing/lean/c

olumn/leanjun01.htm

4. http://www.toyota-

global.com/company/vision_philosophy/t

oyota_production_system/

5. Lean Manufacturing and the Toyota

Production System- Ronald M. Becker

6. http://www.1000advices.com/guru/proces

ses_lean_tps_7principles.html

7. http://www.1tech.eu/clients/casestudy_to

yota3

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LEAN NEW PRODUCT DEVELOPMENT

Abstract: A dominant fraction of cost saving opportunity lies in product development process where approximately 95%

of cost is committed. Little known Toyota’s lean new product development system is equally counter intuitive and

productive as its production system based on lean principles is. It has contributed a significant competitive edge to

Toyota over their western counter parts. This article describes different nature of NPD, four major pillars of Lean NPD

and outlines their differences with traditional NPD process.

Sudeep has done Masters in Mechanical Engineering from IIT Bombay and has

Close to 4 years of experience in R & D, product development in TATA Motors

where he was member of product development team for Xenon SUV pick up vehicle

for Thailand market and team lead for Xenon CNG Engines. He has interests in

‘New Product Development’ and R & D management initiatives. He is currently

pursuing post-graduation in management from IIM Lucknow with Majors in

Operations and Finance

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Figure 1 Effect of design on product

lifecycle costs

LEAN NEW PRODUCT DEVELOPMENT

Toyota product development system is often

overlooked in the shadow of its production

system (TPS), despite being equally innovative

and counter-instinctive to conventional

engineering management as lean manufacturing

is to mass production.

People tend to forget is that no production

system is good enough if firm doesn’t have a

competent and complimentary product

development system in place. WHY -- The

figure 1 below answers the question – close to

95% of cost commitment is done in NPD stages

and biggest cost reduction opportunity lies at

this stage and not during manufacturing. Since

TPS is nothing but a continual exercise in waste

elimination, why not start at source itself.

Toyota’s product development process is

equally counter-instinctive to conventional

engineering management as lean manufacturing

is to mass production. Toyota does not follow

many practices which are considered critical for

traditional style NPD. Its design team is not

collocated. With the exception of chief engineer

and his staff, other engineers are not dedicated a

particular vehicle program. It doesn’t follow six

sigma, reengineering or design automation

practices. Toyota Engineers rarely use QFD or

Taguchi methods instead they excel at Value

engineering. There is nothing exceptional about

its CAD / CAE systems. Toyota’s Lean NPD

(like TPS) seems wasteful but result in a more

efficient development system. Toyota delays

Table 1 Comparison of development times

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decisions and considers a broader range of

design options and yet has the fastest and most

efficient development record. US National

Center for Manufacturing Sciences report that

Toyota NPD projects deploy 150 engineers per

project versus 600+ for twice as long at

Chrysler.(table 1)

What is Lean NPD?

Lean NPS is fundamentally different from Lean

Manufacturing and thus tools for the later

cannot be used. Manufacturing is a repetitive

process for value creation in a sequential and

deterministic manner. Product development on

the other hand, is non-repetitive and non-

sequential process for knowledge and

information creation. For example - while lean

manufacturing aims for elimination of

variability lean NPD aim for filtering good

variability from bad variability and thus require

a certain quantum of risk to nurture creativity.

Lean NPD is applying lean principles of waste

elimination to product development. Waste in

the context of product development are

redefined as –

1. Over Production: Too many products /

projects, Redundant development (re-use

not practiced)

2. Transportation: unproductive flow of

information and information sharing,

communication, Lack of use of standard

parts and / or lack of commonality

3. Waiting: delays due to inessential

authorization or testing, Information

created too early

4. Inventory: redundant, stoppage in

information and data system,

unsynchronized processes

5. Motion: erroneous flow of information

to people, seeking for superfluous

approvals

6. Over processing: superfluous gates due

to design of stage gate processes,

excessive analysis, and circulation of

incorrect decisions and out of place

information

7. Defects: failures in tests, erroneous data,

and warranty and recall costs.

It is much harder to identify waste in product

development because of its non-physical

nature—information and knowledge, unlike

manufacturing where you can observe waste in

the form of rework and inventory.

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How does Lean NPD work?

Similar to Lean Manufacturing, Lean NPD is

not a collection of best practices but rather a

“sub-system” and part of larger Toyota System

which can be shown in figure 2. The four major

pillars of lean NPD are

1. Chief Engineer concept paper -- Counter

intuitive to the concept of traditional

product managers, the chief engineer in

Toyota is first and foremost a technical

expert having a large input in the vehicle’s

architecture with loose formal authority

despite being responsible for the product

from concept to market. Instead he is

mostly recognized by his experience,

technical and communication skills. He

commands a very small team of

experienced engineers but all his other

resources are in the functional organization.

He condenses vision for the vehicle in a

“concept paper” which leads into the

system design phase.

2. Set based concurrent engineering – It

is a well-known fact that front loading in

NPS realizes significant savings in costs

and time. It is seldom achieved in

traditional NPD. Reason lies in the

different approaches used. Traditional

design approach tends to quickly

converge on a point in solution

space and iteratively refine it to

meet objectives. This is effective

unless one start with wrong point,

refining which can be time

consuming and sub optimal. On

the other hand SBCE begin by

considering a large number of

acceptable design solutions and

gradually narrowing the net to

converge. Manufacturing is

involved in forming the sets right from

the beginning and their consent is

required for each step. By frontloading

and delaying decisions Toyota actually

saves time and costs.

3. Detailed design with standards – After

the noisy and messy front end Toyota aims for

reduction in ‘bad’ variability part of the

development process by relying on

standardization of skills, processes, and design

itself. In line with lean manufacturing

principal on the shop floor Toyota uses a

number of standardization tools, such as:

Figure 2 Toyota: System view (4)

Figure 3 SBCE methodology (7)

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Table 2: Lean NPD vs. Traditional

NPD

• Checklists (process checklists

and product checklists)

• Standardized process sheets

• Common construction sections.

Toyota’s practice of maintaining and sharing

its learning continually with young engineers

makes sure that wheel in not reinvented every

time. These practices make sure that much of

the design work is standardized with valuable

time saved.

4. Prototype and Tools with Lean

Manufacturing -- Toyota develops two

different series of prototypes, which are not

used to test designs

(unlike western

counterparts) but to choose the different sub-

systems and check their integration and

identify manufacturing / assembly issues.

Beyond this stage no engineering change

request is accepted and design is frozen for

serial manufacturing. Key differentiator for

Toyota is the fact that it uses lean

manufacturing tools like checklists right from

this stage to construct product prototype and

dies. Toyota must also be credited for use of

flexible die designs for proto typing which

actually save a lot of time and cost while

providing unrivalled flexibility.

In summary – Toyota’s competitive advantage

lies in its focus on value creation instead of

product, out learning the competition and heavy

front loading in the form of detailed discussion

of manufacturing issues at the early stages,

during which its rivals are mostly concerned

with styling and engineering. Toyota invests

time and effort in learning early on, to make

sure that the end solution is truly

the best.

References

1. Morgan, J. M., & Liker, J. K. (2006).

The Toyota product development

system. New York: Productivity press.

2. Sorli, M., Sopelana, A., Taisch, M., Al-

Shaab, A., Keast, J., Flores, M., &

Martinez, L. (2010, October). Applying

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lean thinking concepts to new product

development. In APMS 2010

International Conference Advances in

Production Management Systems Book

of Abstracts (p. 50). PoliScript.

3. NATIONAL CENTER FOR

MANUFACTURING SCIENCES,

Product Development Process –

Methodology &Performance measures,

2000.

4. Ballé, F., & Ballé, M. (2005). Lean

development. Business Strategy Review,

16(3), 17-22.

5. Haque, B., & James-Moore, M. (2004).

Applying lean thinking to new product

introduction. Journal of Engineering

Design, 15(1), 1-31.

6. Steven D. Eppinger and Anil R.

Chitkara, The New Practice of Global

Product Development, SUMMER 2006

VOL.47 NO.4 SMR210, MIT Sloan

Management review

7. Raudberget, D. (2010). Practical

applications of set-based concurrent

engineering in industry. Strojniški

vestnik-Journal of Mechanical

Engineering, 56(11), 685-695.

8. J. Morgan, “Applying Lean Principles to

Product Development”,

www.sae.org/topics/leanfeb02.htm, June

20, 2005

9. http://www.designnews.com/document.a

sp?doc_id=230445&dfpPParams=ind_1

82,aid_230445&dfpLayout=article

10. D. Sobek, A. Ward and J. Liker,

“Toyota’s Principles of Set-Based

Concurrent Engineering”, sloan

Management Review, Winter 1999,vol.

40, no. 2, pp. 67-83

11. Oppenheim, B. W. (2004). Lean product

development flow. Systems Engineering,

7(4).

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OPERATIONS AND SUPPLY CHAIN MANAGEMENT –

THE AKSHAYA PATRA WAY

The Akshaya Patra Foundation runs school lunch programs across India. The organization distribute

freshly cooked, healthy meals daily to 1.3 million underprivileged children in 9,000 government schools

through 20 locations in 9 states across India.

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KEY OBJECTIVE

“Safe, Nutritious, Tasty Food on Time and Every

Time “

We believe Quality is Everyone’s

Responsibility and is everybody’s business in

our Organization. Quality can be achieved

only when every stake holder in the whole

supply chain does their job with high Quality.

Therefore Quality starts with the design of the

recipe and then suppliers who are going to

supply the raw material and then various people

within our organization who are going to

follow various systems and process to produce

the final product (Quality Meal) and deliver to

the children in various schools. For example-

assume that we have world class infrastructure,

people, suppliers, raw material, processes etc.,

but if you have poor recipe then the result is

low quality output. Similarly without right

people and people with right skills we cannot

achieve the high Quality and so on.

Supply Chain Management and Operations

Management are two key areas of focus in

achieving our Objective, Mission and Vision.

Supplier Quality Management (SQM):

Supply chain management is a cross-functional

approach that includes managing the movement

of raw materials into an organization and

processing of materials into finished goods. It

also encompasses the planning and

management of all activities involved in

sourcing, procurement, conversion, and

logistics management. It also includes

coordination and collaboration with channel

partners, which may be suppliers,

intermediaries, third-party service providers, or

customers. Supply chain management

integrates supply and demand management

within and across companies. Our SQM

process which covers sub processes like

sourcing, supplier selection, supplier

qualification, procurement, logistics, supplier

rating, supplier development etc. will ensure

that we work with the right and best supplier

who are aligned with our organization.

Supplier Selection & Qualification Process

is followed to select the suppliers based on

the ability to meet our requirements with

respect to quality, cost and delivery and

their ability to support in low cash flow

situations

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Supplier Quality

Management

Supplier Selection &

qualification Process

Incoming Quality control process

Supplier rating

process

Supplier developmental programs

Incoming Quality Control (IQC) Process is

followed to ensure that we accept only right

product which meets all our raw

material specification

requirements. Raw material

specifications are generally

taken and adopted from FSSA

2006 (Food

Safety

Standards

Act

2006)

latest

revision.

Supplier Rating Process ensures

that we assess their services

with respect to quality, delivery,

cost etc., parameters at a defined

frequency and will be used as

feedback to supplier so that they

continuously strive to improve their

performance.

Our Supplier Development programs aimed

at sharing our knowledge and best practices

with suppliers so that they get benefited and

improve their processes which intern

delivers better product to us. We also work

with suppliers and deliver the training as

required by the supplier which indirectly

helps in improving their product and

services.

Operations Management (OM): Operations

management is linked with designing, and

controlling the process of production of goods

or services. It involves the responsibility of

ensuring that business operations are

efficient in terms of using as few

resources as needed, and effective

in terms of meeting customer

requirements. It is concerned with

managing the

process that

converts

inputs (in

the forms of

materials,

labor, and energy)

into outputs (in the form of goods

and/or services). This is where we

embraced the ISO standard

ISO22000 – Food Safety

Management System and also taken

inputs from ISO9001- Quality Management

System and designed and established the

systems and processes to meet our

requirements

Once Processes are established then we need to

monitor and improve them continually.

Without data and measurements no

improvement is possible simply because we

don’t know where we are? So process

performance measurements are vital and hence

we established metrics for key processes in

operations. For example: Food Quality Index

(on a 10 point scale), On time delivery,

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incoming lots acceptance %, Customer

Complaints Index etc.

People are the key to our success and we

strongly believe that if we make them

successful in their job then as an

organization we achieve the targeted

results. So focused efforts been put on

People Development and Training. A

dedicated team established at HO and they

support all technical training programs

across Pan India. We also made 4 training

topics: GMP, 5S, ISO 22000 Awareness &

Application, Lean & Kaizen as mandatory

and every employee needs to go through all

these programs twice a year. Apart from

this HR coordinates TNA (Training Needs

Analysis) exercise and ensures various

trainings that are imparted as per the plan.

Our Quarterly people engagement programs

ensure that all employees come together

and join hands for a common cause. These

programs are aimed at improving the team

spirit and improve the inter personal skills

and relationships for a cause

We have first class infrastructure in terms

of equipment, building. We also

standardized our kitchen designs to bring

consistency in our processes. Our Gravity

Flow model kitchens are well appreciated

by experts. Steam is used for all our

cooking activities and SS 304 grade vessels

are used for cooking, storing and

transporting the food to the destinations.

Cold rooms are used as temporary storage

to store vegetables/ cut vegetables/ curds

etc., as required. Custom designed vehicles

of different sizes and capacities are used to

transport the cooked food to the schools in

safe and secured manner.

While we all agree that Status Quo is not

the desired state, we need to improve

performance of various processes

continuously so that we can reach to the

next mile stone and this is a continuous

process and every cycle of improvement

leads to next level of achievement. So we

adopted a holistic approach to design a

Continual Improvement Program called

“Akshaya Pragathi “Program in Akshaya

Patra. As a part of the program we have

adopted and implemented Kaizen, CI

Projects and Six Sigma methodologies to

ensure and make every employee

practically part of at least one project using

any one type of methodology. For example:

Kaizen is aimed at working level staff

where they get the idea and implement by

themselves or with the help of their

colleagues or at the most with the help of

their supervisor. Very less capital intensive

and a small improvement.

CI Projects are little complex, PDCA

methodology driven supported by 7Quality

Tools aimed at the

executives/supervisors/team leads level,

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•Review done on monthly basis by quality & FSMA manager

• Improvement / correctyive actions are implementedQuality metrics

Performance

•Conducted twice a year by internal auditors

•Certification body DNV does surveillance audits twice a yearISO audits

•Conducted twice a year to review the suitability and effectiveness of FSMS

Management Review

•Conducted twice a year

•Day to day feedback are also recorded to properly analyze and take corrective actions

Customer satisfaction

survey

Audits & Review

leads to savings or improvements related to

Quality/ Cycle Time.

Six Sigma Projects are more complex in

terms of size and scope which leads to huge

improvements related to Quality/ Cycle

time/ Cost. Currently we have more than

100 GBs (Green Belts) working across the

organization and running various

improvement projects. Also we have

produced & implemented 600Kaizens in the

last 6 months.

Yes... All these are fine! But how do we now

we are in the right direction…!!

As we all know Audit & Review mechanisms

plays a key role in monitoring the key

processes & systems and their performance. So

we have institutionalized GMP monthly audits,

Surprises Audits by Sr. Management Staff on

Food Safety & Quality etc. to name a few. The

data from these audits will be reviewed by

Quality Team and appropriate improvement/

Corrective actions are triggered and monitored

till the concerned completes the effective

implementation of the same.

Quality Metrics Performance is reviewed

on monthly basis by Quality & FSMS

Manager and appropriate improvement/

Corrective actions are triggered and

monitored till the concerned completes the

effective implementation of the same.

ISO 22000 Internal Audits are done twice

year by qualified internal auditors lead by

Quality & FSMS Manager and our

Certification body DNV does the

surveillance audits twice a year.

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Management reviews are done twice a year

to review the continued suitability and

effectiveness of FSMS. Deficiencies found

are addressed with appropriate

improvement/ Corrective actions.

Detailed Customer Satisfaction Surveys are

done by the Quality Staff twice a year apart

from the day to day feedback we take

during the delivery of food on daily basis.

CSS (Customer Satisfaction Survey) data is

analysed in details and appropriate

improvement actions/ corrective actions

will be taken immediately.

In Short, it is all about People, Processes &

Performance of the People and Processes which

makes the difference and ensure we continue to

serve

“Very Safe & High Quality Food on

Time and Every Time “

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UNIFIED EFFICIENCY MEASUREMENT OF THERMAL POWER PLANTS USING

DEA BACKGROUND

Abstract: There is significant pressure in protecting the environment especially from excess emission of Greenhouse

gases and other harmful pollutants. The major source of the greenhouse gases and pollutants are the thermal power

plants. This study discusses a new DEA (Data Envelopment Analysis) approach to measure the efficiency of Thermal

power plants, by including both desirable output (Electrical Energy) and Undesirable output (CO2, SOx, NOx, SPM,

RPM, Oil & Grease, Suspended Solids...etc.). The output of DEA is validated by carrying out Multiple Discriminant

Analysis on the group assigned (Environmentally efficient and inefficient) and to determine the factors which

discriminates between the groups and quantify their effect on the environmental efficiency score.

OPSWORLD 4

Divya S has completed her graduation in Rubber &

Plastic Technology in Madras Institute of

Technology, Chennai. She has a work experience

in Japan polymers. Presently she is in second year

pursuing her Post graduation from IIM Lucknow.

M. Mohan is a graduate in Electrical and

Electronics Engineering from NIT Trichy. He has

work experience of 3 years in NTPC ltd..

Presently pursuing his post-graduation from

IIM Lucknow.

36

UNIFIED EFFICIENCY MEASUREMENT OF THERMAL POWER PLANTS USING DEA BACKGROUND

Background: The paper by Wade D.Cook and

Joe zhu (2006) applied DEA model in

comparing the efficiencies of a set of thermal

power plants with desirable outputs. The DEA

model was applied where the decision making

units are comparable but possess unique

circumstances and characteristics. In our

current study the same principle of DEA was

extended to study the set of power plants

within the region along with its environmental

effects. Mika Goto et al (2011) devised similar

methodology to compute unified efficiency

which includes both undesirable and desirable

outputs, but their methodology segregates

inputs into energy and non-energy input and

the model computes directional distance

measure for computing the unified efficiency

and the study doesn’t determine the major

factor contributing to the difference between

efficient and inefficient DMU and doesn’t

quantify the effect of each undesirable factor

on environmental efficiency of each power

plant.

The problem setting: The usual practice of

comparing the efficiency of thermal power

plants by comparing the PLF (Plant Load

Factor) is not correct, as, measuring plant load

factor considers only availability and computes

utilization of plants based on the availability. In

the current study, the environmental pollutants

are taken as undesirable outputs and a unified

efficiency is measured, which includes both

undesirable and desirable outputs. This study

provides an approach to segregate the

environmentally efficient DMU’s and

environmentally inefficient DMU’s, thus

enabling the government to reward or penalize

accordingly.

Input and output parameter setting: The

current study analyses the efficiency of 20

power plants with uniform capacity in a region.

The core material components such as Coal,

Air, Energy, cooling water required for power

generation are taken as inputs for all the units.

The power generated in MU (million units) and

ESP Index are considered as desirable outputs.

The undesirable outputs such as bottom ash, fly

ash, SS, oil & grease are also considered in this

DEA. The ESP index acts as proxy for

measuring the particular matter (SPM and

RPM), higher values of ESP index indicates

lower level of particulate matters emitted into

air. Hence, ESP index was set as desirable

outputs in the problem setting.

Advantage of Our Approach: This approach

identifies all the critical factors which

differentiate the DMU’s as environmentally

efficient and inefficient. Thus helps in focusing

on those factors which are statistically different

between the two groups. Those factors which

are not statistically differentiating, implies that

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Programming Model:

Objective Function: where E is the Efficiency Score for a DMUi

Input Constraints:

Minimizing the input

Output Constraints:

Minimizing Undesirable outputs

(Pollutants)

Output Constraints:

Maximizing the output

(Desirable output)

the environmental limits for those factors are

easily attainable by both the groups.

.

1

_ 100n

i

i i

NOCESP Index

FLC

Where, NOC: Normal Operating Current

FLC: Full Load Current

Canonical Discriminant Function coefficients

Function Function

1 1

Coal 0.059 SS .019

Air -.019 Oil and Grease -.005

Energy -.037 Power Generated -.002

Water .053 ESP_Index -.047

Bottom Ash .100 (Constant) -2.538

Fly Ash -.002

Unstandardized coefficients

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Discriminant Analysis:

Result:

The Efficiency score was calculated using

the Linear Programming model mentioned

above. The DMU’s efficiency score which

equal to 1 are environmentally efficient and

those DMU’s whose score are less than 1

are environmentally In-efficient. The 20

DMU’s are segregated into efficient (8

DMU’s) and In-efficient (12 DMU’s).

Multiple Discriminant Analysis was carried

out on the groups, the result of the

discriminant analysis states that for this

sample of power plants, the discriminating

factors are Coal & water input, Bottom Ash,

ESP Index and Power generated. Since most

of the inputs and outputs are correlated

because of the constant return to scale

characteristics of the power plant. The

canonical coefficient quantifies the effect of

Tests of Equality of Group Means

Wilks'

Lambda

F df1 df2 Sig.

Coal .689 8.127 1 18 .011

Air .998 .042 1 18 .840

Energy .999 .020 1 18 .890

Water .713 7.254 1 18 .015

Bottom_Ash .630 10.590 1 18 .004

Fly_Ash .923 1.512 1 18 .235

SS .899 2.032 1 18 .171

Oil_Grease .999 .012 1 18 .915

Power_Generated .862 2.882 1 18 .107

ESP_Index .728 6.714 1 18 .018

DEA with Undesirable

output

DMU1 1 Efficient

DMU2 1 Efficient

DMU3 0.9819 In-Efficient

DMU4 0.8103 In-Efficient

DMU5 0.9782 In-Efficient

DMU6 0.8404 In-Efficient

DMU7 0.99 In-Efficient

DMU8 0.9844 In-Efficient

DMU9 0.7898 In-Efficient

DMU10 0.9254 In-Efficient

DMU11 0.9992 In-Efficient

DMU12 1 Efficient

DMU13 1 Efficient

DMU14 0.8497 In-Efficient

DMU15 1 Efficient

DMU16 1 Efficient

DMU17 1 Efficient

DMU18 0.9822 In-Efficient

DMU19 0.8733 In-Efficient

DMU20 1 Efficient

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the statistically significant factors for this

sample, on the efficient score. Bottom ash

has the greatest effect on efficiency score

followed by coal, water and ESP index

closely. So, by this analysis we can

conclude that minimizing Bottom Ash and

maximizing ESP index (SPM & RPM)

which are related to environment protection,

we can improve the efficiency score. C

Conclusion:

The DEA analysis and the Multiple

Discriminant Analysis has substantiated the

effect of environmentally undesirable factor

in Efficiency calculation. The current study

was limited to small set of decision making

units. This study elucidates the link between

environmental protection and efficiency.

This has a potential to influence major

power producers throughout the country to

install environmentally preferable

technology like super critical and critical

boiler, clean coal technology, use of

beneficiated/ blended coal.

References:

- Charnes, A.,Copper, W., Rhodes, E.,

1978. Measuring the efficiency of

decision making units. European

Journal of Operational research 2(6),

428-44.

- Wade, D., Cook, Joe, Z., 2006.

Within- Group Common Weights in

DEA: An Analysis of Power Plant

Efficiency. European Journal of

operational research 178(2007) 207-

216.

- Toshiyuki Sueyoshi, Mika Goto,

2011. DEA approach for unified

efficiency measurement: Assessment

of Japanese fossil fuel power

generation. Energy Economics 33

(2011) 292–303.

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Appendix:

SS1: Suspended Solids

Input Output

Coal Air Energy Water Bottom

Ash

Fly

Ash

SS1 Oil &

Grease

Power

Generated

ESP Index

DMU1 120 640 30 150 9.6 20 100 20 200 80.00

DMU2 135 655 50 160 10.8 47 101 38 210 53.00

DMU3 128 620 40 145 10.24 55 119 22 190 47.00

DMU4 148 675 54 187 11.76 67 122 31 175 55.00

DMU5 145 670 60 165 10.16 46 185 26 205 84.00

DMU6 150 668 55 180 13 67 157 35 180 41.00

DMU7 114 638 25 174 9.12 53 101 24 165 48.00

DMU8 145 645 36 155 15 58 134 32 200 49.00

DMU9 156 665 49 170 18 39 134 35 168 45.00

DMU10 135 684 56 167 14.67 65 124 24 201 35.00

DMU11 140 635 36 154 10.3 39 113 26 200 56

DMU12 125 655 50 135 18 67 98 38 187 53

DMU13 112 690 40 139 10.24 55 136 26 194 42

DMU14 146 695 54 178 14 47 122 38 189 55

DMU15 125 640 60 165 15.3 53 172 15 205 84

DMU16 116 685 55 180 7.9 45 110 35 204 79

DMU17 139 657 30 137 12.89 53 101 15 189 65

DMU18 152 675 50 165 15 63 120 25 210 49

DMU19 128 665 49 189 18 56 134 35 185 45

DMU20 135 684 67 145 14.67 45 102 45 201 80.00

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Ankit Kumar Narsaria is currently pursuing his MBA from Indian Institute of Management,

Shillong. He has completed his Bachelors in Technology in Information Technology from

RCC Institute of Information Technology, Kolkata in 2011. He has 20 months of work

experience under a role of Functional Business Analyst in Cognizant Technology

Solutions. His focus of research lies in Operations, and Economics. He has worked with

Biometric Security and identification systems as well. Apart from this he likes playing

cricket and table tennis. He can be reached at ankit.k13@iimshillong.in.

BRAIN AND HEART OF OPERATIONS

Abstract: Efficiency and Productivity are just the difference between quality and quantity. It is always about the right

mix between productivity and efficiency, as industry can never achieve 100% efficiency while operating at maximum

productivity. This will result in bottlenecks of resources or under- utilization of some of the processes. Focusing only on

one item not only undermine other but degrade the level that one can achieve. It is like increasing the defects per item in

manufacturing industry if focus is on productivity, while trying to remove all the defects i.e. focusing on efficiency will

hamper the productivity. So, the underlying imperative always lies in right mix between Productivity and Efficiency.

OPSWORLD 4

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BRAIN AND HEART OF OPERATIONS

What is Productivity and Efficiency? Is

there any difference between them? How

they relate to each other? These are the

questions which come into mind when one

comes across these two terms.

Efficiencies are not just related to making

profits but it is the way of doing things smartly

and looking into new ways of working and

delivering values. While, heart of any

effective business operations is Productivity. It

has a direct impact on an organisation's

capacity to efficiently create value. In recent

years, competition among companies, capital

constraints and skilled labour shortages have

made productivity and efficiency even more

important than ever.

So,

Efficiency =

Productivity = Change in

Economic Profit helps us to determine:-

Total use of capital

Compares productivity across

industries

Determines shareholder’s return

Full Time Equivalent (FTE) indicates

the efficiency/workload of the

employees in a standardized way.

To compete effectively, in an increasingly

commoditized marketplace where price

pressures are inherent, companies need to

achieve greater operational efficiency by

embedding creativity, relevance, innovation

and market responsiveness into their

operations that supports production of new

products and services. Both companies and

customers want services and products that are

innovative, which meet their ever-expanding

needs which are in terms more than just

affordability. True operational optimization

begins by trading off between productivity and

efficiency, by willing to look at all aspects of

operations. Thus, approach to operational

optimization focuses on applying the right

methodology at the right time and situation

while understanding the culture, financial

constraints, environments and regulatory

framework.

Input to run a Business Operation

Output gained from the Business

Economic Profit

FTE

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Identify competitive essence

Establish the right structure

Out-execute

Balance structure

and execution

Choose the right

journey

5 imperatives for balancing operational efficiency with innovation

Take for example, Apple, the heart of this

organization lies in delivering constant

innovation in the form of designs that are

attractive and extremely user-friendly. To

deliver this and at the same time maintaining a

competitive edge over others, Apple focuses

on its talent, passion, and dedication of

employees to drive excellence at all levels of

company. It has effectively utilised its

operations (efficiency) and energised its

workforce (productivity) by focusing energy

and talent on a select set of devices and

services. iPod which was developed in less

than nine months sets an example, which

brought together teams combined with

expertise and existing technologies.

According to the study done by Accenture [1],

the following five imperatives should be kept

in mind to balance operational efficiency with

innovation and responsiveness:

1. Identify competitive essence: Every

company should identify its points of

parity and points of difference such

that it can offer distinctive customer

value propositions.

2. Establish the right structure:

Competitive essence can only be

maintained if the company took right

strategic decisions which fits

organizational structure.

3. Out-execute: Profit is the main motive

of any organization. And to achieve it,

organization should identify the

limitation in the daily work processes

which when solved can increase the

cost efficiency and labour productivity.

4. Balance structure and execution:

Determine the unique balance between

structural alignment and execution that

will drive operational excellence.

5. Choose the right journey: Identify the

type of journey and level of change

that will work best for the

organization: continuous improvement,

targeted interventions or top-down

transformations.

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Productivity

Digitisation

Global integration

Knowledge intensity

Complexity

Companies also need to match its productivity

with the changing and demanding world.

There are certain attributes which helps in

achieving the productivity growth:

1. Digitisation: Leveraging on e-

commerce and internet to improve

digital assets such that

processes are

optimized and hence

increases productivity.

2. Global Integration: Integrating

scalability in business operations by

efficiently configuring its global

resources.

3. Knowledge Intensity: Organization

should have the broad understanding

and knowledge of its functions which

helps in productivity growth.

4. Complexity: It is associated with

every process, but how an organization

simplifies its complexity, achieve line

balance in its activities thus increasing

overall efficiency of workstations

determine productivity.

Wal-Mart is a perfect example on how it

brought Operational efficiency and

Productivity. It focused on small format stores

and focused its investment in an e-commerce

structure and global technology platform. To

achieve greater operational efficiency,

company is trying to reduce 1% of its

operating expenses as a percentage of total

revenues.

Thus, productivity and

efficiency goes hand

in hand and an

organization is

productively

efficient when it utilizes all its

allocated resources, resulting in its

position in the productivity frontier.

References:

1) http://www.accenture.com/us-

en/outlook/Pages/outlook-online-

2010-balancing-efficiency-

operations.aspx

2) http://en.wikipedia.org/wiki/Operat

ional_efficiency

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OPSWORLD 4

ENHANCING OPERATIONAL EXCELLENCE BY IMPROVING

PRODUCTIVITY

Abstract: The article discusses how by focusing on improving the productivity an organisation can build operational

excellence. Through a literature review the article discusses how by focussing on parameters like setup time, movement

time, processing time etc. productivity can be improved. Besides we also look into how improving quality can be a big

aid to enhance productivity. The concepts of delayed differentiation, sources of wastages and enhancing overall

equipment efficiency are also highlighted.

Umang Agarwal has completed his B.Tech in

automobile Engineering from SRM University,

Chennai. Presently he is persuing his MBA from

IIM Raipur. He has keen interest in Operations.

He plans to start his own venture in near future.

He can be reached at

pgp12111.umang@iimraipur.ac.in

Anubhav Sood has completed his

graduation from Visvesvaraya National

Institute of Technology, Nagpur. He has

38 months of work experience. Presently

he is persuing his MBA from IIM Raipur.

His interest lies in Marketing and

operations. He could be reached at

pgp12009.anubhav@iimraipur.ac.in

OPSWORLD 4

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ENHANCING OPERATIONAL EXCELLENCE BY

IMPROVING PRODUCTIVITY

Introduction:

A firm has a competitive advantage if it has the

necessary resources (like technology, natural

resources, skilled labour etc.) which help it to

outperform its competitors. A sustainable

competitive advantage gives an edge as it is

difficult to be neutralised by the competition.

There are three generic strategies to build

competitive advantage, Porter (1985); one is cost

leadership where a firm produces the goods at

lower cost than its rivals, second is differentiation

where a firm’s goods are perceived as different by

the customer and he is ready to pay a premium for

them and third is focus, where the firm focuses on

a very niche market segment.

In this paper we focus on gaining operational

excellence and hence a competitive advantage

through cost leadership, focusing on a

manufacturing set up. We follow an approach of

finding out, through an extensive literature review,

first why productivity should be targeted to reduce

costs and then exploring the ways in which

productivity can be enhanced.

A firm can bring down its cost of production by

improving its productivity. Using the same

resources to achieve more output will give the

benefits of low cost production compared to the

competitors. The advantage gained by improving

productivity helps a firm to gain competitive

advantage over its competitors.

WHY PRODUCTIVITY CAN BE TARGETED

Maintaining high overall productivity is vital to

increase the total throughput and hence reduce the

cost of production enabling the company to deliver

the product to customer at sustainable prices along

with desired quality. A company can neutralise the

advantages of the competition by focusing on

increasing its productivity and quality with same

resources to reduce its costs.

Blackburn (1991) and Stalk and Hout (1990) as

cited by Hastak (2008) describe case studies where

manufacturing firms that redesigned their business

processes to compress time and achieved higher

productivity, increased market share, reduced risk,

and improved customer service. Syverson (2011)

asserts that literature contains a lot of robust

findings that point out at the linkages of the usage

of productivity as a tool for the survival of any

business. He points out that, irrespective of

country, time or industry, a producer having higher

productivity is better positioned for survival than

an inefficient one.

Saari (2006) introduced a model which describes

how productivity acts as a synonym to competitive

advantage. According to the model, the business

operations are divided into five main processes

which are real processes, income distribution

processes, business processes, monetary processes

and market value processes.

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Figure 1 - Main Processes of a Company

It is within the real processes where the real

production takes place and where the productivity

aspect can have a significant change. As the real

process plays a major role around which all the

processes revolve, it is only through real processes

that a company can have a competitive advantage

over others.

For enhancing the productivity in any setup, first

the processes are required to be streamlined while

targeting throughput time reduction and wastage

reduction.

The factors affecting productivity in a

manufacturing facility can be controlled by

reducing setup times, reducing movement time and

reducing waiting times. An important factor to

enhance productivity is by emphasising on first

time quality production, which can be achieved by

implementing practices and methodologies like

TPM, 5S, Kaizen, etc. These practices help in

reducing the rework and rejection rates and hence

saving valuable production time. Focusing on

preventive maintenance, cross-training and skill

level of employees helps in increasing the machine

as well as labour productivity. Further, reducing

variations in designs and allowing for delayed

differentiation of the product also aid in increasing

productivity.

Productivity definition: According to Syverson

(2011), productivity is how much output is

obtained from a given set of inputs, which is

typically expressed as output to input ratio.

Productivity in general is the measurement of how

well a company is doing as a producer. At micro-

level, this may be w.r.t. a machine or a piece of

land etc, whereas at macro-level this may be w.r.t.

a whole country, Helms (1996).

As such, productivity is the ratio between the

outputs generated from a system and

the inputs that are used to create those

outputs. The inputs include factors

like capital, labor, material,

equipment, tools, energy, information

etc. The output is a good or service.

The productivity of a process can be

increased by controlling these factors.

Productivity is also measured in terms

of single factor or Total factors.

Single factor productivity is units of

output produced per unit of a particular input. It

could be in terms of labour, material, capital etc.

But this doesn’t allow for a just comparison as two

different producers may use different factors

depending upon the price they have to pay. A

better way is to measure total factor productivity,

which takes into account all the factors required to

produce the output.

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Figure2 - Operational Equipment Efficiency of a resource

Targeting productivity: Koufteros et al. (2001)

have identified seven key factors affecting time-

based manufacturing, these are, shop floor

employee involvement in problem solving,

preventive maintenance, dependable suppliers,

reengineering setups, cellular manufacturing,

quality improvement efforts and pull production

approaches. Improvement in all these areas helps

in reducing the cycle time and hence improving the

productivity of a manufacturing set up.

Ignizio (2009) carried out work in semiconductor

production facility and concluded that decisions to

allocate the machinery or workstations for

different jobs influence the productivity of the unit.

He found that by optimizing such decisions

substantial improvement in production and cost

savings were achieved.

As per Terwiesch (2013), productivity

enhancement can also be seen in terms of

improving the overall equipment efficiency (OEE),

which can be said to be dependent on various

factors as described in figure 2 from McKinsey

operations training material. This suggests that

there exists a potential of around 3 times

improvement in the actual utilisation of the

machines by focusing on factors like reducing

breakdown losses, setup times, increasing quality

controls etc.

Various factors improving the productivity are

explored below one by one.

Setup time: Setup time is the time required to

ready the workstation for processing the part

through that workstation. Hopp & Spearman

(2001) and Suresh & Meredith (1994) have

suggested reduction in setup time as a way to

improve throughput time. Steudel and Desruelle

(1992) have suggested that setup time can be

reduced by reducing number of setups, improving

the setup procedures, purchasing equipments with

small setup times, using machines with single

minute exchange of dies and dedicating the

workstations to families of parts with similar setup

requirements so that common fixtures can be used.

Ross and Taylor (2013) and Terwiesch (2013)

further suggest that

classification of setup

procedures into external

and internal setup

procedures also reduces

the overall setup time.

External setups are those

tasks which could be done

before stopping the

machine or after the

machine has started so that the

production is held up for a minimum

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Figure 3- Approach to Achieve Setup Time Reduction

time. Whereas internal setups can be done only

after the machine has been stopped.

Figure 3 shown below is taken from McKinsey

operations training material and suggests the steps

to reduce the setup time.

Terwiesch (2013) says that if setup occurs at the

bottleneck then the batch size should be increased

so as to de-bottleneck this workstation. Otherwise,

if setup occurs at non-bottleneck then batch size

should be reduced to match with the capacity of

the bottleneck.

Processing time per part: Processing time is the

time required by a machine to operate the

designated routine through a unit. Johnson (2003)

suggests that processing time per part can be

reduced by reducing time per operation by using

new technology or redesigning the part and also by

reducing number of operations required. Suresh &

Meredith (1994) have also suggested reduction of

processing time to improve the productivity.

Processing time can further be reduced by

reviewing the processes and classifying them into

value adding, business value adding and non-value

adding processes, Sarkar (2012). The value adding

activities are those which are necessary from

customers point of view,

business value adding

activities are not important

from customers perspective

but these activities cannot be

avoided and non-value

adding activities are those

which are being done but

should be avoided as these

activities are not valuable

from the customer’s view point and he will not

pay for them. In the more traditional

manufacturing setup, seven sources of waste have

been identified which are called Mudas. These

seven categories are overproduction, waiting,

transportation, over processing, inventory, motion

and defects, Womack and Jones (1996). The

process can be studied by classifying various

activities and wastages must be removed to

increase productivity.

Movement time: It is the time required to move

the parts from one workstation to another. It can be

reduced by reducing the time required per move or

reducing the total number of moves, Johnson

(2003). Hopp & Spearman (2001) suggested that it

can also be reduced by designing the layout in a

way that reduces the distance between two

workstations. Movement time can also be reduced

by grouping the equipment performing certain

sequential operations as a manufacturing cell,

Suresh & Meredith (1994).

Resource utilization: Johnson (2003) has pointed

out increasing the resource access by cross-training

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the operators and increase equipment pooling to

improve productivity. The operators should be

trained so that they can work on multiple

machining centres as per the requirement on the

job.

Process variability: According to Hopp &

Spearman (2001) variability can be due to

controllable or random variation. Controllable

variation is due to the results of decisions like

design differences, transfer batch sizes etc whereas

random variation occurs due to events which are

not in immediate control, for example downtime of

machines or operators, variation in arrival times of

various batches. Suresh & Meredith (1994) have

noted that variability can be reduced by grouping

similar jobs, by having dedicated labour and

equipment, by stabilizing batch sizes and by

improving preventive maintenance.

Postponement: Another beneficial approach

which can increase the productivity in case of

customised production is the concept of

postponement, which is also known as delayed

differentiation. In delayed differentiation the

production is done upto the stage till the product

remains generic and final addition of differentiated

features is delayed until the order is received and

then the product is customised as per the

requirement of the order.

Feitzinger and Lee (1997) have defined

postponement as a comprehensive approach

involving a company’s supply, manufacturing &

distribution approach and they say that postponing

the decision to differentiate until the latest stages

of this chain is the key to success. Graman &

Bukovinsky (2005) state two benefits of

postponement, first, inventory levels reduce for

achieving a given service level. Second, if more

products can be postponed then it also leads to

reduction in inventory levels

Postponement is exhibited very effectively in the

change which paint companies introduced. Instead

of producing paints in umpteen number of shades

they now mix the tints to white paint at the

retailer’s end to make whatever shade the customer

desires. This initiative, while helping to increase

productivity of paint companies by reducing

number of setups and increasing uniformity in

production, has also helped to bring down the

inventory levels as a result of benefits received

from aggregation of forecasts.

Quality as an aid to improve productivity:

The manufacturing of the product as per the

required quality goes a long way in enhancing the

productivity of any process. Russel and Taylor

(2013) estimate that the extra work required to do

on account of reworks and rejections is believed to

be acting as a second factory inside the factory

taking as much as 30 to 35% of the production

time (especially in new plants) which otherwise

could be utilised for making new products. The

various practices and methodologies like quality at

source, TPM, 5S, Six Sigma, Kaizen etc can be

utilized as an aid to enhance productivity.

Johnson (2003) has identified improving raw

material quality, improving equipment capabilities,

implementing poka-yoke, using one piece flow as

steps to reduce the rejection rate.

Goh (2010) has identified six factors important for

success of a six sigma project. These are use of a

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common and realistic metric for quality assessment

and improvement, clear assignment of roles and

responsibilities in performance improvement

efforts, logical alignment of statistical tools,

recognition of the time effects on processes,

unprecedented synergy with modern information

technology and finally capabilities to grow for

larger roles for business competitiveness

Ekambaran (2011) says that to meet objectives in

terms of profitability and other considerations for

long as well as short term; Volume, Cost, Price and

Quality should be studied in combination with

each other. He says that an organisation should

attain a marketable standard by this combination

and statistical quality control can play a vital role

in this by providing correct choices for quality

within the capabilities and opportunities of the

firm.

Although giving importance to quantifiable and

measurable progress is necessary but at the same

time Galbraith (1978) as quoted by Goh (2010)

remarks, “To many it will always seem better to

have measurable progress toward the wrong goals

than immeasurable progress toward the right

ones”. He warns against the over reliance on the

quantitative data and ignoring the obvious but

immeasurable initiatives. In similar zest words of

renowned economist Paul Samueison are also

pertinent to quote, “Fortunately, our answers need

not be accurate to several decimal places; on the

contrary, if the right general direction of cause and

effect can be determined, we shall have made a

tremendous step forward.”

Conclusion:

While many organizations strive to achieve

competitive advantage by focusing on marketing

and financing, they forget to look into the basics,

which is the productivity of the company. It can be

argued that when the sales are insufficient there is

no use of productivity however it has been

observed productivity not only helps increase

output but also cut costs which can make a

profound effect when the sales are lesser than

expected.

While suggesting that productivity can be adopted

by various organizations to achieve operational

excellence; we also acknowledge the applicability

of the above mentioned parameters could be

context /industry specific. It is not necessary that

all the parameters discussed in the paper will be

applicable to each and every organization. Certain

parameters like resource utilization, quality control

and movement time are those which would be

applicable for mostly all organizations. Whereas

parameters like setup time and processing time per

part are those which would be generally applicable

to the manufacturing industry. It is thus very

essential that an organization identifies the

parameters which would help enhance its

productivity and work towards it.

References

1. Ekambaram. S. K. (2011), Effectiveness of

Statistical Quality Control In

Manufacturing as a Tool of Sound

Financial Management, Journal of

Financial Management and Analysis, Vol.

24, No. 1, pp. 97-101

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han

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op

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pro

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rod

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2. Feitzinger, E. and Lee, H. L. (1997), Mass

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CROSSWORD

OPSWORLD 4

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52

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ANSWERS

55

Bharath Arava

Gautham Jayan

Sameer Pandey

Ruchi Sao

Vanamamalai. R

Anubhav Sood

Manoj H

Subhash Kumar

Sujitha Tikka

Thousif Mohammed A

Team IIM Raipur

56

For Details, Contact

Operations and Supply Chain Club

Indian Institute of Management Raipur

GEC Campus, Old Dhamtari Road,

Sejbahar

Raipur 492015, India

Email: opep@iimraipur.ac.in