Operations Management

Sanjeev Kumar Sharma

Contents

Logistics Supply Chain Management Project Management

Global Delivery Model

Genesis of Logistics
The term logistics comes from Greek logos meaning speech, reason, ratio, rationality, language, phrase, more specifically from the Greek word logistiki meaning accounting

and financial organization.

Logistics originated from militarys need to supply arms, ammunition and rations as they moved from base to a forward position.

Logistics
Logistics is the management of the flow of goods between the point of origin and the point of use in order to meet the requirements of customers or corporations. Logistics involves Integration of information Transportation Inventory Warehousing Material handling Packaging Security

Logistics
The main target of logistics can be divided into performance related and cost related. High due date reliability Short delivery times Low inventory level High capacity utilization

Supply Chain Management

Supply Chain Management (SCM) is the

management of a network of interconnected

businesses involved in the ultimate provision of product and service packages required by end customers. SCM spans:

All movement and storage of raw materials

Work-in-process inventory Finished goods - point of origin to point of

consumption.

History of Supply Chain Management

1960s - Inventory Management Focus, Cost Control 1970s - MRP & BOM - Operations Planning 1980s MRPII, JIT Materials Management, Logistics 1990s - SCM - ERP - Integrated Purchasing, Financials, Manufacturing, Order Entry 2000s - Optimized Value Network with Real-Time Decision Support; Synchronized & Collaborative Extended Network

SCM (Definition)
SCM also defined as the design, planning, execution and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring

performance globally.

Definitions

SCM is the systematic, strategic coordination

of the traditional business functions and the tactics across these business functions within a particular company and across businesses

within the supply chain, for the purpose of

improving the long-term performance of the individual companies and the supply chain as

a whole.

Definitions
A customer focused definition is Supply chain strategies require a total systems view of the linkages in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer. As a consequence costs must be lowered throughout the chain by driving out unnecessary costs and focusing attention on adding value. Throughout efficiency must be increased, bottlenecks removed and performance measurement must be focused on total systems efficiency and equitable reward distribution to those in the supply chain adding value. The supply chain system must be responsive to customer requirements.

Definitions
SCM encompasses the planning and management of all activities involved in sourcing, procurement, conversion and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers and customers. In essence SCM integrates the supply and demand management across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise.

What Is the Supply Chain?

Also referred to as the logistics network Suppliers, manufacturers, warehouses, distribution centers and retail outlets facilities

and the

Raw materials Work-in-process (WIP) inventory Finished products

that flow between the facilities

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Supply Chain
Stores Operations

Stores

Procurement

Warehouse

Vendor

Customer

Inbound Logistics

Out Bound Logistics

Supply Chain
Material flow
Material flow

Stores RM

Purchase

Vendor

P r o c u r e m e n t

OPERATIONS

Information flow

D Stores is FG tr i b u Warehousing ti o n Customer Out bound logistics

Inbound Logistics

The Supply Chain

Suppliers Manufacturers Warehouses & Distribution Centers Customers

Transportation Costs Material Costs

Transportation Costs

Manufacturing Costs

Transportation Inventory Costs Costs

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Three Flows in Supply Chain

There are three kinds of flows in a supply chain: material, information and capital. Downstream Material : products, Parts Information: Capacity, Delivery Schedules Finance: Invoices, Pricing, Credit Terms Upstream Material: Returns, Repairs, After-sales Services Information: Orders, Point-of-sale Data Finance: Payment

Push Vs Pull in Supply Chains

Push or Building to-Stock (BTS): Producing stock on the basis of anticipated demand. Demand forecasting can be done via a variety of sophisticated techniques (some from Operations Research area and some using Data Mining). Pull or Building-to-Order (BTO) : Producing stock in response to actual demand (firm orders). The Push-Pull Point : In many supply chains, upstream units employ BTS, while downstream units employ BTO strategies. The point in the supply chains where the switchover (from BTS to BTO) occurs is called the Push Pull Point.

Major Concepts

Order fulfillment Deliver right on time

Front

office

operations:

order

taking,

advertisement, CRM

Back office operations: Accounting, finance,

Logistics: Managing the flow of goods,

inventor, packaging, logistics

information
chain.

and

money

along

the

supply

Key Business Areas

Enterprise performance

Customer service
Order management

Demand planning
Warehouse distribution

Partnerships
Supplier/supply base management

Why Is SCM Difficult?

Plan Source Make Deliver Buy

Uncertainty is inherent to every supply chain Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues The complexity of the problem to globally optimize a supply chain is significant Minimize internal costs Minimize uncertainty Deal with remaining uncertainty
20

Problems along the Supply Chain

Delays in production, distribution etc

Expensive Inventories
Lack of partners coordination

Uncertainties in deliveries
Poor demand forecast

Interference with production

Poor quality

Benefits of SCM

Reduce uncertainty along the chain

Proper inventory levels in the chain

Minimize delays

Eliminate rush (unplanned)activities

Provide good customer service

Global Supply Chain

Can be very long

Possible cross-border problems

Need information technology support for

communication and collaboration

Possible delays due to: customs, tax,

translations, politics etc

More Challenges
Complexity of the supply chain network - e.g. large number of suppliers and distributors Complexity in product structure and manufacturing process How much product differentiation / customization / localization should be supported? Where do you customize a product (upstream or downstream)? Decentralized control / organizational silos Increasing pressure for customer service and asset utilization

Variability in the Supply Chain

Demand Variability
- Even the most sophisticated demand forecasting tools often fail to anticipate demand

Process Variability - Production units downtimes - Unexpected staff absences Supply Variability - e.g. late deliveries from suppliers

Product Design

Upstream Differentiation
- The product is built for a specific market before it is shipped out of the factory

Downstream Differentiation - The product has been designed so that localization differentiation) (or can customization occur as close or as

possible to the local market.

Technology in the Supply Chain

The internet and the web can be very effective communication enhancers Software includes Demand Forecasting Tools and Planning Tools to allow all SC members to coordinate their activities and adjust their production levels. Software can allow members to :o Review past performance o Monitor current performance o Predict future production levels of products.

Web SCM

Share information about customer demand Receive rapid notification of product design

changes and adjustments

Provides specifications and drawings more

Increase speed of processing transactions Reduce cost of handling transactions

efficiently

Reduce errors in entering transactions data Share information about defect rates and types

Example 1 : CISCO

Making use of internet in its own supply Products Integrated are manufactured with both by CMs Contract and its

chain

Manufacturers (CM)

well

component suppliers Communicates a single forecast through both levels of suppliers, reducing the bull whip effect Display their product and component requirements to their entire chain.

Example 1 : Benefits for CISCO

Eliminated

paper

purchase

orders

and

invoices

Communicate

engineering

change

orders

electronically to all partners

90% of sales are made over the internet US $ 875 million annual savings (more than 50% due to SC initiatives) Lead times reduced by 75% Low manufacturing manpower requirements despite rapid growth Cost reductions of 20% - 28% every year.

Example 2 : DELL

Create

Virtual

Integration:

the

entire

supply chain acts like a single integrated company

Upstream partners : CMs and component

Downstream partners / customers (most

suppliers are business corporations) Share information with suppliers on inventory levels Maintain long-term relationships with key suppliers for design collaboration

Example 2 : Benefits for DELL

Dell

and

Suppliers

work

together

as

Virtual Enterprise

BTO benefits (low Inventory) Dynamic pricing: change prices rapidly in

response to demand and availability

Strong links to corporate customers

Supply Chain Integration : Benefits

Tangible benefits o Inventory reduction, personnel reduction productivity improvements improvement, order

management improvement, financial cycle

Intangible benefits
o Information processes, standardization, visibility, customer flexibility, new / improved and responsiveness, globalization

business performance

Project Management and Global Delivery Model

Project
A temporary endeavor

undertaken to create a unique product or service.

Project Management
The application of knowledge, skills, tools, and techniques to project

objectives to meet stakeholder needs and expectations.

Knowledge Areas
Scope Time Cost

Management

Management Management Management Resources Management Management

Quality Human Risk

Communications Procurement Integration

Management Management Management

Project Phases and Life Cycle

Divide
Better

Project into Phases

Management Control Deliverables and

Review

Performance
Fast-tracking

Stakeholders
Individuals
Those

and Organizations

actively involved in Project affected by Project

Interests

Leadership Skills
Vision

and Strategy Direction People

Establishing Aligning

Communicating
Negotiating Motivating

and Inspiring Organizations Barriers to Change

Influencing Overcoming

General Management Skills

Planning

Finance

and Accounting
Administration

Personnel

Technology

Organizational
Delegation Team

Development

Building Management Problems

Conflict Solving

Communication Skills
Writing
Listening Speaking Presenting Media

Relations

Meeting

Management

Scope Management
Initiation Scope Scope Scope Scope

Planning Definition Verification Change Control

Cost Management
Resource
Cost Cost Cost

Planning

Estimating Budgeting Control

Quality Management
Quality
Quality Quality

Planning
Assurance Control

Human Resource Management

Organizational Staff

Planning

Acquisition Development

Team

Communications Management
Communications Information

Planning

Distribution Reporting Closure

Performance

Administrative

Risk Management
Risk
Risk

Identification
Quantification

Risk
Risk

Response Development
Response Control

Procurement Management
Procurement
Solicitation Source

Planning

Planning

Selection Administration Close-out

Contract Contract

Integration Management
Project
Project Overall

Plan Development
Plan Execution Change Control

Management Processes
Initiating
Planning

Processes
Processes Processes Processes

Executing

Controlling Closing

Processes

Scope Planning

Activity Sequencing

Activity Definition

Schedule Development

Scope Definition

Duration Estimating

Cost Budgeting
Resource Planning

Cost Estimating

Plan Development

Quality Planning

Communications Planning

Risk Identification

Risk Quantification

Response Development

Organizational Planning

Staff Acquisition

Procurement Planning

Solicitation Planning

2 Basic Parts of Project Management

Process:

Project

management

requires

coordinating a series of processes, which typically include planning, scheduling and

controlling.
Objective:

Project management manages

those processes towards the achievement of the specific goal of the project.

Team Attributes
A

common goal or purpose. Team members are individually committed to that purpose Leadership. One member may be appointed as leader, every member should contribute to the leadership Each member makes unique contributions to the project Effective team communication Creative spark Harmonious relationships among team members Effective planning & use of resources

Team Member Attributes

Attendance
Responsible

Abilities
Creative

& Energetic

Personality

Team Leadership Structures

Traditional Model Implies a strong leader who directs actions of the group Participative Model Leader is positioned closely to all members & implies accountability of the leader to the members Flat Model Emphasizes leader as a working member/as an equal. Leadership may shift with individuals expertise Consultant Model Shows relationship between student team & instructor

No one right model. Team needs to choose structure that models how the group wants to perform.

How Teams Make Decisions

Consensus Majority Minority

all members find common ground through creative sharing & solutions Option that received most votes winds Small subset of the team (subcommittee) makes decision Someone with authority (may or may not be part of the team) can give advice
Rule without Discussion

Expert

Authority

Authority

A strong leader makes decisions without seeking team advice

Rule with Discussion

A leader making a decision with input from team members

Global Delivery Model (GDM)

The Global Delivery Model (GDM) is adopted

by an industry or Business such that it has a

capability to plan, design, deliver and serve to

any

Customers

or

Clients

worldwide

with

Speed, Accuracy, Economy and Reliability.

Key Features of GDM

Standardization Ingenious Design and Development of components and features which are likely to be accepted by 90% of worldwide customers. Global Standards of Design focusing on highly standardized Methods and Processes of manufacture or development. Adopt Plug-and-socket concepts with minimum adaptable joints and connections. Modularization Product or Solution split up into smallest possible individual identifiable Entities, with limited individual functioning capability but powerful and robust in combination with other modules.

Key Features of GDM

Minimum Customisation Minimum changes or modifications to suit individual customers.

Maximum Micro-Structuring Splitting of the Product Modules further into smaller entity identifiable more through characteristics rather than application features. Approach through Standardization of these Microbial Entities even across Multiple Modules. Application of these Microbial Entities to rest within multi projects or products or even as add-ons suit customer needs.

Special Features of GDM

Cuts across Geographical and Time Zone Barriers

Unimaginable

Speeds

of

response

and

Introduction Common Pool of Microbial Components Largely independent of skill sets required at

delivery stages

Highly automated processes

Quality Assurance as a concurrent rather than a control process.

Global Delivery Model

Delivery Onsite & Regional Global Delivery

Client Sites Location

Onsite delivery

Delivery Centers

Delivery Centers

Regional

Global

Multidisciplinary Teams Methodology, Tools and Architectures

24x7 access worldwide Industry-leading capabilities On, near and offshore nodes

Diverse skills Catering to business requirements, risk profile

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Different Views
Client Value Reliability Flexibility Innovation Trusted partner Risk Delivery Service Mgmt Business solution Mobilization Requirements mgmt Solution delivery Service transition People mgmt Process maturity Finance mgmt Continuous improvement Relationship Client satisfaction Risk mgmt Industrialization 64

High Performance Delivery

Solution Mgmt
Operating Models Service Delivery Metrics Programme Operational Reporting

Projects

Delivery Platform
Estimating Methods & Process Mobilisation Quality Assurance Tools Certification

Continuous Improvement & Innovation

Capability Platform
Sourcing Community Enablement IP Creation
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Measured Proficiency

Training, (Domain & Technical)

Capability Platform
Build consistently, globally Deploy locally - different skills/maturity across locations
Capability groups

Technology practices
Technology career track Centres of Excellence/ Labs Training/ certifications Technology innovation Global & local communities Knowledge portals

CoE Delivery Support Training

Capabilities Business Sourcing Development Community

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Solution Management
Trusted partners / relationship managers
Deal shaping operating model Transition specialists, tools

Service management
Metrics / SLA definition Escalation management Dashboards Business continuity Security Satisfaction
2005 Accenture All Rights Reserved.

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Transition
PreTransition Transition Life Cycle

KT Team

Detailed Planning and Verification Knowledge Transfer End of Sales Process LOI/Contract Signed Infrastructure Setup Handover Complete Signed-Off Offsite Transition Plan Operational Steady State

Methodology
Delivery Commences

Readiness Offsite Service

Project Management, Tools, Methodology, Templates, Best Practices

Experts

KT Tools
Its a monthly process. We have to complete it before the 15th of every month. That makes sense now. Mark, does this process require admin rights?

Order to Cash

Tools
68 68

Service Management
5. Automate service reporting and billing interfaces . 1. Capture requests on-line or via automated interfaces

4. Provide online visibility into service status with automated notification and escalation as appropriate.

2. Route requests intelligently between client support structures all driven by business rules 3. Manage OLAs/SLAs via metrics established upfront with real-time dashboards to provide visibility into performance.
69 69

Business Continuity
Contract Compliance
Client Team

Scenarios Business priorities Crises management

Standards

Audits

Continuity plan Plan maintenance

Audits

Centres

Exercising of the plan

Testing

Period testing of the plan

Testing

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Security
Information Security Physical Security Firewalls 24x7 guards Antivirus Physical access Virtual LANs control Access control Physical Security Secured bays Back-ups at offInformation sites CCTV Security Security audits Access records Confidentiality NDA Policies Shredding Background checks
Confidenti Infrastructure ality Reliability

Infrastructure reliability Power Network Disaster recovery Scalability Consistency Service

71

71

Feedback
CXO Client Business Leads Onsite Business Manager Annual Client Business

Six months

Quarterly

Engagement

Onsite Project Manager

Regular Project/delivery Frequency

Feedback providers

Scope of work
72 72

Global Delivery Model- Defined

Global Delivery Model involves the deployment of resources from different parts of the world to provide maximally efficient service delivery. Global Delivery Model involves having the right volume of skills and the right skills mix in the right place at the right time and the right price point. Global Delivery Model gives the advantage of delivery centers located around the globe as well as a team working close to the business using consistent processes. Most businesses have now come to expect Global Delivery to be an integral component of the solution offered by the service provider.

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Slide 73 73

Evolution of the Global Delivery Model

Maximum

<--------------Act Local---------->

<-------------Act Regional---<-------------Act Global------------> --->

GLOBAL

REGIONAL

LOCAL

Level of Benefit

What improvements can be made by implementing local best practice?

Can benefits Can shared of service standardizatio economies n across of scale be businesses captured? and geography be achieved?

Minimum

Is outsourcing feasible, beneficial and outweighs additional risk? Outsourcing

Source from offshore location(captive or vendor)

Source from multiple locations/vend ors across the globe

Simplification

Standardization

Shared Services

Offshore

Global Delivery

74

Slide 74 74

Drivers for Global Delivery

Adoption of the Global Delivery Model creates competitive advantages that enables businesses to fundamentally manage cost, focus on core competencies, improve services quality, enhance agility, and react quickly to market change.
Capture, Guarantee and Accelerate Savings
Inherent

Manage Cost

cost advantages in some areas due to scale and capabilities Contracts can be structured to eliminate uncertainty and volatility of savings Suppliers can financially engineer contract to pay forward savings
Ensure

Transfer to Variable Cost Structure

Access To Best of Breed Upgrade and Refocus Skills Fix Operational Service Problems Transfer Risk to Provider Access to High Talent Resource Needs

costs are tied to consumption rates - pay for what you use fixed costs carried by the organization to supplier Gain greater predictability of costs through established pricing
Transfer Access

Improve Service/ Quality

to proven ideas and solutions balance between technology refresh and cost efficiency Focus on Core Competencies
Sharpens Enhance

management capability and resource pool Enable management to increase focus on core business functions
Improve

Increase Flexibility /Agility

Access to HighSkilled Labor

services, speed to market and client satisfaction through access to advanced capabilities (e.g. 24/7 operation centres, automated processes) Requires commercial disciplines around end-to-end service delivery vs. internal delivery Transfer residual risk (e.g. operating costs, technology expertise, staff knowledge, established R&D programs) from enterprise to supplier
Access

to high skilled talent pool Access to specific talent needs Access to post graduate degree holders Slide 75 75

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Critical Success Factors for Service Providers

Domain Expertise
Ability to demonstrate Domain expertise and contextual knowledge of the client market is critical to any value added process.

Distributed Delivery Presence

Onsite presence and Hiring of local talent in certain key roles in the developed markets for relation management and understand the market conditions of the client is critical Presence of delivery staff in a similar same time zone (whether onshore or near shore) is also important Vendors should be able to standardize delivery process across its delivery centers globally. They should be able to provide standardization across processes, materials, configurations, workflow management and service times Access to specific skills in the talent pool is critical. For example while hiring Equity Research Analysts- it would be preferable to hire Post Graduates with a CFA Attract Expats, Non-Resident Indians or locally experienced candidates with appropriate domain expertise to help manage offshore operations Build brand awareness suitable delivery staff through targeted marketing to attract
76
Slide 76 76

Standardization

Availability of Differentiated Skilled Talent Pool

Recruitment & Training