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OPERATIONS MANAGEMENT

CASE STUDIES

2012

SUBMITTED BY: JYOTI NAYYAR 117618 MBA 2ND SEMESTER

[TYPE

THE COMPANY ADDRESS]

Supply Chain of Flipkart


Building the Suppliers base- The Company has established a network of more than 500 distributors and only stocks frequently ordered items. Items like the 'Long tail' are almost always sourced from suppliers in real time and as and when the customer places an order. Building Infrastructure for Operations- The Company has 4 offices in 4 metros cities with more than 500 employees. Warehouses of the company are located in 7 cities including the metros. Company has tie-ups with more than 15 courier companies like Blue Dart, First Flight etc. to deliver their products and Indian post for areas where courier do not reach. The Process of Supply Chain- The first step in buying the products like books online from the Filpkart.com site by making payments using payments options like credit/debit card, cash-ondelivery, net banking, cheque/DD and money order and enter the phone number and address where the items need to be delivered. Depending on items purchased they are packed and shipped accordingly for example mobile phones and books are packed differently as per requirement and also all items have transit insurance against theft and damages that may be caused while they are in transit. Flipkart bears the cost of delivery and this make them give a reason/motivator for improving efficiency at every point of supply chain. This also makes them differentiate from their competitors. Now for delivering the items depending upon the area where the item need to be delivered either courier, Indian post or own internal logistics arm is used. The delivery time varies between less than 24 hours and 3 weeks depending on the location and availability of the product like the products which are imported take 3 weeks time to get delivered to the customers. The inter-city, trans-zone deliveries are made using air cargo. For satellite cities and others in close proximity, products are transported overnight by train or truck. For the local parts of the cities where the warehouses of the company exist products are delivered using two-wheelers, bicycles, or on foot depending upon the proximity of the place and because of this many of the deliveries are made within a day of the order being made. All the Team Members have been trained to work efficiently to meet customer expectations. Use of Information system: The Company use sales to predict the inventory levels. The warehouses are split into multiple areas inventory, packing, shipping and so on. The stocks are replenished every 24-48 hours. In the Back End, Flipkart stores details of all the transactions that need to be carried out. They have an understanding with their associates for order tracking, reconciliation and MIS (Management Information Systems) reports. The private courier companies in turn have their own ways of tracking every package. The customer is also updated about the status of his shipment via message, email or through the website.

When the product needs to be returned then due to the companies understanding with the courier companies it happens without any disputes or problems efficiently. Flipkart takes care of the after-sales needs of its customers with regard to delivery of an item or addressing grievances including delayed delivery by the logistics partner, or addressing issues when an incorrect product is delivered. In the case of electronics, warranty and after-sales service is largely the responsibility of the manufacturer. Flipkart does however facilitate interaction between the customer and manufacturer/service center as and when the need arises.

JIT purchasing at Waterville TG, Inc.


Because so many automobile manufacturers have gone to JIT manufacturing approach, increasing pressure has been placed on automotive suppliers to provide frequent, reliable deliveries. This in turn requires the automotive suppliers to work closely with their raw material suppliers to ensure reliable deliveries. Waterville TG, inc (WTG) , located in Waterville, Quebec, specializes in designing and manufacturing top quality weather strips for cars. Its product line requires close to 500 different models of weather strips, which supplies to about a dozen automobile manufacturers. To improve its purchasing performance, WTG undertook an effort to integrate its MRP system with a Kanban type vendor scheduling system. Master production scheduling is based on planned order releases supplied by customers and typically covering an 8 to 16 week horizon. Customer orders firmed up weekly for the first week to 10 days. WTGs MRP system then computes the number of Kanban cards needed to cover the demand. Every Monday WTG taxes its gross requirement for the next 12 weeks to each of its suppliers. Updates are faxed daily. A standard Kanban quantity is established for each material purchased from suppliers, and each week WTG faxes an order to each supplier for however many kanbans are needed to replenish an inventory. To help implement smaller and more frequent deliveries from suppliers, WTG established a daily milk run type of transportation schedule among its factory, its finished goods warehouse, and 8 of its 12 suppliers of raw materials located in the area. The results of these actions have been impressive. Total inventories have been reduced from 28 to 8.4 days supply. Average purchase lead times have reduced from 2 weeks to one-two days. The average time to respond to changes has been reduced from four days to one day. And, the reduction of emergency situations (impending stock outs) has been reduced from 41 to 31 annually.

TQM AND CONCURRENT ENGINEERING AT TERADYNE


Teradyne, a $1.5 billion a year company with assembly plants in California, Massachusetts, New Hampshire, Illinois, Ireland, and Japan , producing testing systems for newly made chips, printed security boards and modules, computerized phone systems, and even software. Its newest product, called catalyst, has 250.000 parts and costs between $1.5 and $2 million. Teradyne produces the catalyst in a plant with only 69 assemblers and 51 test workers, mostly in teams of 14 divided into shifts that work around the clock to put together a single machine in as little as two weeks. Catalyst has become a leading product in its field, and Teradyne has become the favorite of Wall Street because it has not had a losing quarter since 1991, while its major competitors have had a rockier road. Teradyne management contributes much of its success to TQM. Key aspects of implementation of TQM were total involvement of management and and employees and concurrent engineering. Although the company had tried quality management in the past, Alexander dArbelof, cofounder and CEO, decided to get personally involved by studying TQM and leading the implementation effort. He used three quality teams to address three goal: increase market share reduce costs, and reduce cycle time. The teams, composed of managers who were scientists and engineers, used their background and training to analyze the issues needing attention. For example Teradyne had been purchasing circuit boards from suppliers based on capacities, rather than on who could do the job best. Changing their approach resulted in savings of $6 million a year, with an increase in quality. To maintain top management involvement, a top executive serves as a companywide TQM director on a rotating basis, and each division has its own TQM chief. Finally, employees are rewarded for company success through new profit sharing, stock option, and stock purchase plans. A second key aspect of the implementation was the realization of design engineers and design manufacturing assemblers that they would be much better off working together. before TQM, engineers would literally send prototypes down the elevators from their upstairs laboratories to assemblers who had to figure out how to deal with design problems or send the prototypes back with complaints. For example, assemblers would wonder why they must use 20 different types of screws and six different tools to fasten them. After TQM, assemblers had an equal voice with design engineers and for the first time the design engineers were required to work on the factory floor as a team with the assemblers to iron out design problems on the prototype models. As a result , the prototypes were built in 2.5 as opposed to 4 weeks, with far fewer types of screws.

CONTINUOUS REPLISHMENT AT THE CAMPBELL SOUP COMPANY


The Campbell Company makes products that are very price sensitive. An important priority for the company is low cost operations, which extends the entire supply chain. Campbell operates in an environment with a high degree of certainty. Only 5% of its products are new each year, the rest have been on the market for years, making forecasting demand easy. Even though Campbell has high de levels of customer service 98% of the time, Campbells products are available in retailers inventories management believed that improvements in costs were possible. It scrutinized the entire supply chain to determine where performance could be improved. The outcome was a program called continuous replenishment, which reduced the inventories of retailers from an average of 4 to 2 weeks supply. This reduction amounts to saving on the order of 1% of retail sales. As the average retailers profit is only 2% of sales, the result was a 50% increase in the average retailers profits. Because of the increase in profitability, retailers purchased a broader line of Campbell products, thereby increasing Campbells sales. The program works in the following way. Each morning Campbell uses Electronic Data Interchange to link with retailers Retailers inform Campbell of demands for Campbell products and the current inventory levels in their distribution centers. Campbell determines which products need replenishment based on upper and lower inventory limits established with each retailer.

Campbell makes deliveries of needed products

Campbell must avoid actions that would disrupt the supply chain. For example, retailers on the continuous replenishment program had to forgo forward buying, whereby retailers in the industry often buy excess stock at discounted prices so that they can offer price promotions.

Forward buying causes ripples in the supply chain, increasing everyones costs. That was the case of chicken soup. Campbell would offer deep discounts once a year and retailers would take advantage of them, sometimes buying an entire years supply. Because of the bulge in demand, the chicken boning plant would have to go on overtime. When this happened, costs in the entire supply chain increased Campbells production cost increased, and retailers had to pay for warehousing large stocks of chicken soup. With the continuous replenishment system, those extra costs are eliminated and everyone wins.

ITCs Rural Networking Project


The ITC group of companies has a yearly turnover of Rs 7.5 billion (US$162 million), and its activities span tobacco and cigarettes, paper and packaging, paperboard, hotels and tourism, information technology, and agricultural exports. For its agri-export division, ITC procures various agricultural commodities such as soybeans, coffee, and oil seeds. Typically, a farmer sells his produce to a small trader called a kaccha adat, who sells the produce to a larger trader called the pakka adat, who in turn takes the produce to a local mandi, where a larger trader buys the produce. The mandi traders then operate through brokers to negotiate sales to companies such as ITC. This long supply chain results in high procurement costs for ITC and in lost profit opportunities for the farmers. Because this long supply chain is a very timeconsuming system, it also results in deterioration in the quality of the products. The e-choupal system was introduced by ITC in June 2000. A choupal was converted into an echoupal by setting up a computer and Internet connectivity. An investment of Rs 40,000 is needed to establish an e-choupal with dial-up connectivity. If a VSAT (Very Small Aperture Terminal) has to be mounted, the investment moves up to Rs 100,000.1 E-choupals are operated by a sanchalak (operator), a literate person who is elected from among the farmers of the village. He acts as an interface between the computer and the illiterate farmers, and retrieves information on their behalf. While ITC covers the cost of equipment, the sanchalak pays for day-to-day operational costs, such as electricity and Internet charges. These costs vary from Rs 3,000 to Rs 8,000 (US$60 to US$160) per year. Training is given to the sanchalak, who also doubles as an ITC salesman. He is paid a commission of 0.5 percent per ton of processed product. ITC spends an average of Rs 5,000 (US$100) annually on the support and maintenance of each e-choupaltraining, maintaining a help desk, addressing equipment and software complaints, and repairing and replacing broken equipment. Information that can be accessed from an e-choupal includes crop prices, weather, scientific farming practices, farmer peer groups, and soil-testing services. This online information is made available in Hindi. For the farmer, the selling process works as follows: The farmer carries a sample of his produce to a local kiosk and receives a spot quote from the sanchalak. If the farmer accepts the quote, he can then transport the produce directly to an ITC collection center and get payment within two hours. The material handling systems at the ITC collection center ensure that tractors, trolleys, or trucks can directly unload their produce without spilling any grain, and a modern weighbridge ensures precise weighing. The transportation cost is reimbursed to the farmer. If the farmer is located in a remote area, he has the option of selling his produce to the sanchalak or to a nearby collection center. The farmers prefer this system to the mandi system, where they had to wait for hours, or even days, before the produce was sold. In addition, transaction costs such as bagging, transportation, loading, and unloading had to be incurred by the farmers. Commission agents at the mandi used a small weighing scale that was inaccurate and resulted

in less revenue in proportion to the produce. Moreover, the wastage level was higher, because the agents tended to throw away some grain while evaluating its quality. The intermediaries are not removed from the value chain. Their roles are redefined to samayojaks (coordinators), who assist ITC in setting up new e-choupals by conducting village surveys and by identifying the best sanchalaks. They manage the physical transportation of sales made at the e-choupal, collect price data from local auctions, and maintain records. These coordinators earn a 1 percent commission on product processed. Initial resistance to joining, because of commissions as low as 1 percent, was overcome once the increased volume of transactions became apparent. ITC coordinates its activities with institutions such as the national meteorological department and several universities to build useful Internet content, and also with companies supplying agricultural inputs (fertilizers and seeds) to enable ecommerce.

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