scm retail management session1 2

8/8/2019 SCM Retail Management Session1 2

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BIMTECH, Greater NoidaSupply Chain management

1

BY ITS VERY NATURE, TRUTH ISCONTRADICATORY


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After Lord Krishna clarified everything to

Arjuna through eighteen chapters

Arjuna was confused by the contradictions

Krishnas final advice was

reflect on all that I have said and dowhatever is best

putting simply -use your intuition!


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Understand the Mcdonaldistion trap


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Putting this way

As the Global economy hesitantly bid farewell

to the bottom of markets, it finds it is unclearwhether to say welcome to an upturn.

At such inflection point managers seeks quickflexes for their daily contradictions by

emulating well published success stories.The context: a unique back ground,employees motivations and many othersurround factors deeply influences the

outcomes. For sure some factors correlatewith outcome with success.

As such casualties cannot be assumed.


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So believe your intuitions.


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Session I-I


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All organization should be treated as the service organization,some organization more than the other. Even manufacturingorganizations do not just sell a product but provide some form ofbackup such as after sale services,advice,warranty,repair,installations or training.

On the other hand there are organizations which are pure serviceorganizations e.g. bank insurance, which often has a productwhich change hands. e.g. banks talks about new productdevelopment.

Introduction to operations


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Manufacturing is tangible whereas service resultintangibility when talk about outcome

e.g. take an CTV we want to understand thefeatures of it rather how it is processed, where as incase of services it is the customer who is actuallyprocessed.

In services it is the process which is actually boughtrather than the product.

How this product or service results!


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Both product or service are the result ofProduction & operation management.

Where as manufacturing is the outcome ofproduction management ,services results as

the result of more wider concept i.e.Operations, which entails both services &manufacturing.


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Both production & operation in their narrowas well as wider meaning are understood as

Transformation process

Inputs Transformation process Outputs

Production process

Service process


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Lets understand the product servicecontinuum

Product Service

Automobile Mgf.

Value added part Mgf.Logistical Service providers & retailers

Auto Insurance Underwriter


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Session I-IIImportance

of

service in economy


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BIMTECH, Greater Noida

Supply Chain management

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Objective of session 1 To make you understand What's the importance of services in

Economy.

Whats the importance of service sector in Economic Growth.

How economy has changed its orientation towards services(information age)

Why to study Service operations. How services are characterized.

How to classify Services.


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The

Term

Service

Is defined not by what it is, but by what it isnot

Historically , economic reports identify activities as serviceproducing that are not goods producing, which includes

manufacturing, and construction and are not extraction such asagriculutre,foresrtry, fishing and mining. So service producingencompasses a wide variety of industries, including retailing,

wholesaling, transportation ,banking, lodging, education ,government, entertainment etc.


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Definition of services:

Services are deeds, processes, and performances.

Valarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible experience performed for acustomer acting in the role of a co-producer.

James Fitzsimmons

Definition of service firms:

Service enterprises are organizations that facilitate the productionand distribution of goods, support other firms in meeting theirgoals, and addvalue to our personal lives.

James Fitzsimmons


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So to understand the importance of service

We have to understand the importance ofservice in economics of a nation

or

has to understand present economic structure


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According to OECD-forecast for the year 2050 , India will be the

worlds third largest economy after china & USA. Indian economy set

to grow at 10-11 percent. According to India Economic survey 2007-08 the size of Indian

economy set to cross $1 trillion.

Contribution of Services to GDP is 9.9% were that of agriculture &

Industry is 4.1% & 10.5%.

Since 2002-03 Services & Industry with annual growth of 7% had beenpropelling growth of the Indian economy.

Service Sector accounts 54% of the GDP and has been growing at the

rate of 9%. Since 1990.

Growth of financial services comprising Banking, Insurance and

business services in the year 2006-07 is 13.9% Service Export has grown at a Average growth rate of 28% since last

decade.


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India has about 65% of Global offshore market and about 46%share of global business off shoring industry.

NASSCOM study Software & Service export grew by 29% andcrossed $40 billion mark and domestic market grew at 26% crossed$11.6 billion mark. In FY08.

Up till now 10% of the global potential has been tabbed , the future

is very promising.


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Future growing Services Sectors

Health careRetailing

Biotechnology

Banking & insuranceEducation


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Health Care: Indian health care industry

stands $17 billion and accounts to 5% ofGDP. Which is forecasted to be doubled by2012.

a. Reduction of import duty on medical equipments.

b. Focus on comprehensive health care rather on medical care.c. Opening up of insurance sector to private player in comprehensivehealth care sector. ( Health insurance premium collection in Indiaincreased by 55% during 2007-08 and touched Rs.5133 core( $1.2billion). Non life insurance sector has a share of 24.3% .

d. Only 2 million people are covered under mediclaim i.e. (.2 percent oftotal population of 1 billion)


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Retailing Sector Asia represents 26% of global GDP and 32% of global retail

sales. AT Kearney, CII, Jones Lang LaSalle Megraj had predicated that

global retail market will touch Rs.18.1 trillion mark by 2012, andIndian market will become Rs. 20000 billion by 2012 & northernpart of India will lead the retail boom.328 mall are expected to

come by 2010 in India. India market is Rs. 10000 billion of which just 350 billion is

organized one, showing potential. It is 9-10 % of GDP.

It is the most employment providing industry.


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BIO Technology: In year 2005-06 Biotechnology has crossed $1 billion

mark in revenue.

Exports is 54% of the total.

Indian government is promoting atleast 10 bio

technology park by 2010. Creation of Incubators inParks promoted by private industry under PPP.

2007-08 plan has focused on

a. Creating national task force on education & training

b. Formation HRD strategy

c. Deploy initiative towards curriculum development.

in BIOTECHNOLOGY.


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BANKING & INSURANCE

PSU Banks Private Banks Foreign Banks

Number of

Banks

28 29 31

Number ofBranches (%)

88.4 11.33 .26

Total deposits (%) 78 17 5

Total Assets(%) 2014880

72.44%

565094

20.32%

201567

7.23%

Total Investment 633962

47%

178312

13.22%

535662

39.78%

NPA 42105

81.37%

7720

14.91%

1919

3.7%

Figures in Rs. Corers


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To understand economic structure you have tounderstand the changes this economic structure

had under gone over the last century :Let's understand the economic stages described by

Bell (1973) .

He had described the three stages of economic growth

asPre-Industrial

Industrial

Post industrial


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Pre-Industrial Stage Society Pre industrial Society

Game Against nature

Pre-dominant activity Agriculture, mining

Use of human labour Raw muscle power

Unit of social life Extended house hold (socialramification)

Standard of Subsistence

Living measure

Structure Routine, traditional , authoritative

Technology Sheer brawn


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Industrial Stage

Society Industrial Society

Game Against fabricated nature

Pre-dominant activity Goods Production

Use of human labour Machine tending

Unit of social life Individual (like a cog in machine)

Standard of Accumulation of Goodsliving He who dies with the most toys

Structure Bureaucratic

Technology Machine


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Post-Industrial Stage

Society Post industrial Society

Game Among Persons

Pre-dominant activity Services

Use of human labour Artistic, Creative & Intellectual

Unit of social life Community

Standard of Quality in terms of health, education

Living measure recreation etc..

Structure Interdependent , Global

Technology Information


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It has changed the ratio of white collars to manualworkers from to 2/1

the ramification of post industrial society to serviceoperations are two fold

1.The economy is constructed of a far higher

percentage of service producing activity than inpast resulting in far more jobs

2.New thinking, innovation, competition ,managerialskills play a vital role


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Services = Experience +Outcomes

Service Product

OUTCOMESValuesEmotionsJudgmentsInteractionsIntentions

Experience

Inputs4Ms

Time

EffortsCost

Customer


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Types ofservices

Business to Consumers ( e.g. financialservices, retail, leisure)

Business to Business Services( e.g.Consultants, office equipments,communications etc)

Internal Services( personal, IT etc.)

Public Services Not for profit services( e.g. charities, faith

organizations, Aid organizations)


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Services Operations

Session I-III


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Service operations

Operations

Service operations

InputsMaterialsMachines &equip.ManpowerTechnologyInfrastructure

OutputsGoods & Services


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Importance of Studying operations inservices

To start this part of study let us understand thedefinition of Operations

i.e. transformation process

That converts the group of inputs into outputs

That isAct of combining people, raw material, technology into

useable services & products

If you just think of definition it is clear it is just people

who does all makes product & perform servicesOperation function typically employs by far more

personal than any other function


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A large firm may need marketing department of 50 and atreasury department i.e. A/C & Finance of 5 at the same time itmay need an operational force of 5000 to deliver its services.

E.g. Professors in university, agents in insurance, pilots inairlines, bank branch managers, brokers in BSE or NSE, police force, players in cricket.Consequently the mere reason to study operation is its sheer size.

It is the most revenue producing activity in any economya. Employment effectsb. Out put effectsc. Money effects ( inflation)

Cost Disease in services is another factor which has to beunderstood when in contrast to agriculture & manufacturing . AsGoods & food, service are also not less consumed but low

productivity in this foray makes it appear ,as they are.


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That is why even the consumption of the services remains sameits low productivity has hasnt allowed it to lower its cost

e.g. Rs. 3 for food

Rs. 3 for goods

Rs. 3 for services

So it represents 33% of the expenditure

Higher productivity in first two over last 4-5 decades Has shownfollowing

Re. 1 for Food

Re. 1 for Goods

Rs. 3 for services

Now it represents 60% of the expenditure


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1950 1960 1970 1980 1990 2000 beyond

10%

20%

40%

60%

80%

100%

ServicesAgricultureWorkForce (%)

Manufacturing

Economic survey of India Report 1971-2007-08


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This is Why Operations are important

5

50

5000

REMEMBER


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CHARCTERSTICS OF SERVICES

Service is1. Intangible i.e can be felt only by elements e.g.emotions, cost, time, quality, flexibility, environment.

lets us say emotions you carry after a concert, or acricket game, trauma center, hotel, airlines service,

photograph qialty etc..Playbill carrying name of a movie, or match gives smileon your face or faith in the company of pay bill

2. Perishability : i.e. simultaneous produced & consumed

e.g. electricity distribution , telecom service, hotels,banking, concerts, events, aviation etc..

so matching or tradeoff between quality of service &capacity demanded & available is the foremost demand

in service


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3. Proximity to the customer:

Services has this unique feature of proximity due to its very natureof perishability. But it has a strategic reasons to this factor i.e.

Many a services must be in close proximity to the customers e.g.Setting up a huge Pizza hut in the middle of Delhi & NCR isnt agood model. For this reason , large number of service firms ofpizza hut are there in Delhi & NCR, where Manufacturing e.g.Pizza base manufacturer may be one or two.

Many a services escalates proximity

e.g. many back office activities such as credit approval , claimsettlements etc..


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4. Services cannot be Inventoried

The lack of ability to build inventory or use of backorders seriouslyinfluences managerial choices.

ImagineApproaching a stores clerk for help only to be told I am busy now I will

get back to you after say 2-3 days, consumer has to wait

But

Service often had to be provided in a very short time or suffer lost sale

Consequently service provider has to manage waiting time ratherinventory( some expectation are notable)

e.g. In hotels & Airline they have to effectively manage their inventory ofhotel rooms & seats


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Managing Customer Processing Operations orservice operations

Operations

Customers

Service Operations

Service Products

Inputs4Ms

Time

Efforts

CostOutcomesValues

Emotions

Judgments

Intentions

Process

Experience


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Challenges facing service

operations and operation

managers

Managing multiple customers

Understanding the service concept

managing experience, outcome, customers Managing in real time

Coordinating different parts of organizations

Knowing implementing & influencing Strategy

Encouraging innovations

Managing Short term & long term issues simultaneously

scm retail management session1 2

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