Opsworld 6 12

Opsworld 4

CONTENT

Productivity: The Mystery

1

Efficiency: The Future

Concepts

5

Efficiency in Supply chain for milk and
Academia

milk products: An Indian perspective

9

Industry

Specials

17

Lean: New product development

Trends

Toyota recall: Are the Lean Operations
at blame

21

Operations and Supply Chain
Management – The Akshaya Patra way

Unified efficiency measurement of
Thermal power plant using DEA
Background

27

33

Brain and Heart of operations efficiency

39

Enhancing Operational Excellence by
Improving Productivity

43

Opsworld 4

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

Prof. B. S. Sahay

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
.

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Opsworld 4

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.

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.

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 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

We also thank Akshaya Patra, an
Indian NGO providing food for

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.

Editorial

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.

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.

3

OPSWORLD 4
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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Opsworld 4

PRODUCTIVITY: THE MYSTERY
Skinner around 1980’s talked a lot about

Skinner talked about how American firms

operational

especially

implemented productivity improvement plans

manufacturing strategy and connected operations

with the main objective of reducing overall cost.

management to business strategy. In his article

They

did

everything

on Productivity Paradox, Skinner made a point

productivity

manager

that despite best intentions and improvement

departmental productivity committees, raising

programmes, productivity seemed to be hardly

the

improving.

professionals by 50%, carrying out operation-by-

strategy

and

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.

number

of

from
to

employing
establishing

industrial

engineering

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

Productivity Paradox in form of “Productivity
Dilemma” was also discussed by Abernathy’s

continuous fall in market share.

when he made observation of decline of US

This is the paradox that why there is so little or

automobile sector in 1978, he argued that it was

negative return despite investing heavily to boost

the obsession of the automobile firms with

productivity.

productivity which inhibited its flexibility and

The most important thing to observe in all these

innovation and ultimately led to their loss of

productivity improvement drive was, their

market share and profitability.

2

years and the profit remained static with

objective,

which

was

gaining

cost

5
Opsworld 4
competitiveness, which was in contradiction to

from investing in process or systems because this

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

will drive the cost up. So innovation which will

rule

based

improve product design, lead time and customer

competitiveness is derived from long-term

services suffers, which in turn leads to fall in

changes in manufacturing structure another 40%

market share and profits. Also, when cost

comes from change focused on equipment and

effectiveness is the primary focus, it generally

process technological changes and the rest 20%

hampers quality, while when quality is the main

can

about

be

40%

gained

of

manufacturing

from

the

productivity

focus then low cost usually follows it.

approach.

So

productivity

Hence, there is an inconsistency between the

improvement focused on cost competitiveness

activities, focused on innovation and flexibility

should be the last

and those focused on productivity improvement

improvement

resort of developing

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

Skinner found that actually it’s not the

the time, firms start to focus on productivity;

productivity focus but the cost reduction priority

innovation and exploration takes the back seat,

which harm the firm’s heath. The productivity

which prevents the firms from taking risks.

drive focuses on reduction of direct labour cost

Thus, there is a need for firms to balance

and labour efficiency while distracts their

between productivity and innovation. The main

attention from the manufacturing structure.

reason why productivity paradox occurs is

Also, when productivity becomes the driving

because firms persist in improving efficiency

strategy for a firm, cost reduction becomes the

with respect to the capabilities that originally

focus and other strategies to gain competitive

made them successful and by focusing more on

edge becomes immaterial.

cost effectiveness and less on efficiency they are

Productivity improvement and cost reduction

putting getting diverted from the path which was

diverts the attention of a firm from developing

the main reason for their success.

long term manufacturing competitiveness to gain

References:-

short term cost competitiveness which inhibits
innovation

and

structural

changes.



The

productivity focus of firms prevents them from

paradox. Harvard Business Review


Skinner, W. (1966). “Production Under
Pressure,” Harvard Business Review

gaining manufacturing flexibility which in turn
prevents product changes and pace of new

Skinner, W. (1986). The productivity

Productivity: The Mystery

manufacturing competitive advantage.



Abernathy, W.J., 1978. The Productivity

product development. The biggest impact of

Dilemma Roadblock to Innovation in the

these

Automobile Industry. Johns Hopkins

cost

reduction

programmes

is

on

innovation because firms restrain themselves

University Press

3

7

OPSWORLD 4
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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Opsworld 4

EFFICIENCY: THE FUTURE
“There can be economy only where there is efficiency” – Benjamin Disraeli
Not everyone is very clear on what differentiates

converted to profits in a more efficient system

efficiency from productivity. It is not uncommon

for a given productivity.

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

Productivity
expensive.

without
A

efficiency

company

can

is

achieve

very
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.

produced on the first month, let’s assume 50

Lack

were defective and of the 600 you produced the

businesses. In large businesses, inefficiencies

next month, 65 were defective. Here you have

can go unnoticed due to the availability of large

become lesser efficient, though your productivity

resources and the difficulty in identifying them.

is higher.

When it comes to growth and sustenance of

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

of

efficiency

affects

all

forms

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.

make a profit of Rs 1100 and in the second case

In the twenty first century business world, with

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

its

quite evident that a larger proportion of input is

companies

striding

technological
have

improvements,

drastically

improved

productivities. With productivity on the roll, the

6

9
Opsworld 4
companies have to focus more on efficiency to

example,

compete against their competitors who also have

operation which needs it more should not reduce

access to these technologies. Companies should

efficiency of another operation which might need

constantly work on reducing leakages within

the same resource lesser.

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

shifting

resources

closer

to

an

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.

Efficiency: The future

7

10
Opsworld 4

ACROSS

6: This logistics company is the official partner
of F1 for 8 impeccable years.

1: Four car companies, called the "quattro" or
"Auto Union" makeup this famous car company

7: Adolf Hitler gave a contract to this famous
company to make a cheap and simple car

2: This company made the first ever dieselengine passenger 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)

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

9: Volkswagen manufactures and sells the

fastest car on the earth under this name

4: Which company is credited for developing
the following?

10: It is the machine design to affect the

1940 – First Walkie-Talkie

11: This was created by a group of professors at

1973 – First Mobile Phone
1985 – Six Sigma Technique.
DOWN
5: This systematic technique for failure analysis
was developed by the US army

8

principle of Jidoka in TPS

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?

11

OPSWORLD 4
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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Opsworld 4

EFFICIENCY IN SUPPLY CHAIN FOR MILK AND MILK
PRODUCTS: AN INDIAN PERSPECTIVE
Introduction

Mother Dairy procures its requirement of liquid

India is the world’s largest milk producer, which

milk from dairy cooperatives. Mother Dairy sells

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

approximately 3.2 million litres of milk daily in

production. The huge volume of milk being

the markets of Delhi, Mumbai, Saurashtra and

produced in India is consumed almost entirely in

Hyderabad. Mother Dairy milk has a market

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

share of 66% in the branded sector in Delhi

products) being exported. In India, milk was

where it sells 2.5 million litres of milk daily and

(and still is) primarily supplied by the local

undertakes its marketing operations through

farmers. They deliver milk directly to the

around 1400 retail outlets and over 1000

customers. This unorganized mechanism is being

exclusive outlets of Mother Dairy.

replaced by the organized sector, wherein many
co-operative/private/government

Raipur Sahkari Dugdh Sangh Maryadit

organizations

(RSDSM) was established in 1985-86 by the

have taken a step to deliver quality milk and

National Dairy Development Board under the

milk products to the customers. Some of the

Operation Flood-II Scheme. It was then operated

leading milk suppliers in India are: AMUL

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

(Anand Milk Union Limited) an Indian dairy

plant was established on 1st October 1987 with

cooperative body organized by Gujarat Co-

the help of National Dairy Development Board

operative

Ltd.

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

(GCMMF). The ‘AMUL’ model is known to

2011, it continued to operate under the brand

have initiated the white revolution in India and

name of Sanchi, when it was rechristened as

helped India emerge as the largest milk producer

‘DEOBHOG’.

Milk

Marketing

Federation

in the world. More than 15 million milk
producers

and

144246

dairy

AAVIN is a major player in Tamil Nadu.

cooperative

The dairy development department of Tamil

societies across the country operate with them.

Nadu oversaw and regulated milk production and

Milk is processed in 177 district co-operative

commercial distribution in the state. The Dairy

unions and marketed in 22 states in India.

Development Department took over the control

Mother Dairy was set up in 1974 under

of the milk cooperatives. It was replaced by the

the ‘Operation Flood Programme’ initiated by
National Development Diary Board (NDDB).

10

Tamil

Federation Limited in the year 1981. In February

Nadu

Cooperative

Milk

Producers

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Opsworld 4
1981,

the

commercial

activities

of

farmers) can be optimized through milk run

cooperative were handed over to Tamil Nadu

modelling. Milk run route or vehicle routing

Co-operative Milk Producers' Federation Limited

problem is a widely known logistics model that

which sold milk and milk products under the

can be used effectively here.

trademark “AAVIN”.

From Plant to Distributors

With many brands in the organized

The collected milk from the local farmers

sector, the milk industry is thriving in economic

is then processed and toned. From the factory the

terms. This sector is the largest contributor to the

processed milk is then moved to the distribution

GDP among the agriculture sector.

centres. This is usually done as a long distance

The demand for milk in India is expected

haul. Depending on the distance, the milk is

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

treated

is a need of effectively utilizing the available

optimizing the transportation between factory

milk, mostly by minimizing the wastages therein

and distribution centre can be effectively used

and/or managing effectively and efficiently the

here.

supply chain. In this paper, we discuss some of

From Distributors to Retailers

the issues and challenges faced in the supply

enroute.

Transportation model, for

From the distribution centre the milk is

chain in the organized sector.

then sent to the retail customers. This happens

The Milk Supply Chain

similar to stage one: through Milk run.

The supply chain of milk begins from the local

Various parameters involved in this three

farmers, where it is collected and sent to the

staged process makes the optimization more

processing plant. Milk is then processed in the

complex. The constraints in each stage vary and

plants and distributed by the local distribution

so do the objective function. Usually, the

centre/s. Through the distribution centres it

optimization model depends on the organization

reaches the retail outlets. In the supply chain, the

strategy. The objective function needs to be in

milk, at times is taken through temperature

line with strategy of the organization. For

controlled transportation systems, hence the

instance: for an organization which has speed to

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

market as their strategy, minimize the time given

a three staged process, is explained as follows:

budgetary constraints will be the problem and
for

From Farmer to Plant
In the first phase, the milk is collected

organizations

which

focuses

on

cost

reduction to minimization of cost given time
constraints will be the problem at hand.

A

from the local farmers and sent to the industry

skeleton view of milk supply chain structure is

for processing. Milk collection process (from the

Efficiency in Supply Chain for Milk and Milk Products: An Indian perspective

the

represented in Figure 1.

11

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Opsworld 4
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
Figure 1 Milk Supply chain Model

season, where supply is reduced. This creates a
cyclic nature in the supply of milk. The demand

Issues and Challenges in Supply Chain

also varies as the consumption of milk during

The chain partners include the farmers,

summer reaches a peak and during the winter

plant, distributors and retailers and of course the

when the demand goes down. Thus there are

customers. Managing such a chain requires the

“flush periods” when supply is more than

coordination of chain elements using appropriate

demand and “lean periods” when demand is

technology that includes product, process,

more than the supply.

information technology, management practices

Milk being a perishable product the

and systems. The challenges faced in ‘milk’

supply chain is under high constraint to make

supply chain are briefly explained as follows:

sure that everything supplied is consumed. In the

Challenges in Demand Management

flush period, care has to be taken in meeting the

With more than 20 million people as potential

demand without moving excess goods. In Andra

customers every year, and an increasingly

Pradesh

affluent population, the demand for milk

Federation (APDDCF) faced the problem of

continues to grow at a rapid pace. Annual

surplus of milk. So as to counter this challenge,

consumption, is forecasted to reach around 180-

they had planned to have a fortnightly milk

200 million tonnes by the end of the decade. This

holiday.

demand poses challenges to the supply chain in
the form of supply-demand mismatch and lead
time.

12

Dairy

Development

Cooperative

15
Opsworld 4
the milk procurement during both the seasons

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

has to be planned based on the estimates.

milk industry is the time between initiations of a

Safety

process of request for milk to meet the demand

Safety of a food product is gaining lots of

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

importance across globe from consumer point of

shortened so as to meet the requirements of the

view. The presence of additives to increase the

customer and

natural

shelf life and the packaging type is critical in

constituents of milk. The information from the

making certain about the products’ safety. Rigid

downstream has to be made available to the

norms on the safety of food products have been

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

designed for meeting compliance. Safety is also

sufficient capacity (in terms of lead time) to meet

affected by issues like tampering of packings.

fluctuations without sufficient notice.

Tampering could lead to serious safety issues to

Quality: For a consumer, the quality of the

the consumers. In 2009, when packets of milk

product implies ‘taste and safety’. This can be

supplied to the area of Kondhwa in Pune were

ensured from the time of procurement, through

tampered and were replaced by synthetic milk it

the processes and delivering it to them. The

resulted in a serious safety issue.

primary challenges faced are in procurement,

Packing

also

to retain the

safety and packaging.

The packaging is an important aspect of

Procurement

milk supply chain and the challenges faced in it

Procurement of milk from the farmers is

are from ecological point of view to safety.

the primary stage of the process. Procurement

Packaging has to comply the standards set by

management

significant

Food Safety and Standards (Packaging and

importance in the supply chain, as raw milk

Labelling) Regulations, 2011. Packaging in India

forms an integral part in the entire value chain. It

is witnessing various innovations since the day

determines the success of the complete value

of retail boom in India. It is seen with higher

chain. It involves the functions of pickup, testing

significance

and delivery of milk. The pickup of milk takes

production, storage, transporting, marketing and

place

The

distribution. Packaging is not only done with the

procurement during the flush season and during

perspective of selling but also to prevent the

the lean season varies hugely and gives rise to

quality from deteriorating. The challenges in

many challenges to be dealt with. The issue is

packing include:

from

has

the

gained

local

its

co-operatives.

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

from

the

point

of

view

of


Lead Time: The next issue is meeting the market

13

16
Opsworld 4
1. Protection against distributional hazards,
contamination,

micro-organisms

and

heat.

transportation and handling must be taken
special care during loading and unloading of the
product at various locations. The vehicle has to

2. Recycling of packets.

be maintained so as to transport the milk without

3. Reduction in weight of the packaging.

wastages. Reducing the number of handling

The factors that affect the quality of the milk are

points will help in improving the handling of

contact surfaces, temperature, and the storing

milk. The storing of milk during the supply chain

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

should be in less than 5oC as specified by food

board made from select woods, organizations

safety and standards authority in India. Since the

like

entire operation is happening in a cold chain the

AAVIN

are

adopting

good

packing

procedures. However, scope exists to modify the
existing practices for betterment.

challenges can be even more.
The transportation of perishable products

Milk Handling

always requires special handling. Distance plays

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

a major role in the supply chain of milk. As

collection of milk from farmers), till it reaches

discussed earlier, with a shorter shelf life, the

the consumer. The handling primarily consists of

decision to move the milk is based on the

storing and transporting of milk. The handling of

climate, transport conditions and economies of

milk during the entire transportation has to

scale. The long distance haul in the second stage

ensure that the quality of milk is not degraded.

has to be taken care with these issues posing a

The quality of the milk can be ensured only by

major challenge.

having proper mechanisms to handle milk. The

Optimization Complexities

ways in which the milk can are stacked and

As discussed previously, the three stages

transported also create damages to the packaging

add to the complexity of optimization planning

during transportation. This damage caused might

in the supply chain. The complexities makes the

result in wastage of milk.

planning cycle difficult. These complexities

Organizations like Amul make use of the

existing in the chain can be simplified with some

bulk chillers at the collection level so as to

assumptions, but at the cost of optimized value.

improve the micro biological quality of the milk.

For instance: now-a-days, organizations like

This ensures the good returns to the farmer who

Deobhog are giving incentives to the retailers to

produces and customer who gets to buy a better

plan and lift the material from the distributor.

product. The tankers which transport the milk

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

need to be properly insulated to avoid wastage of

supply chain is eliminated. This simplifies their

milk and to ensure the quality of the milk. The

14

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Opsworld 4
structure and helps in achieving a better

integration in the supply chain. For instance

optimization.

Gujarat’s

Managing Third Party Service Providers (3PL)

Federation (GCMMF) has their entire supplier

Co-operative

Milk

marketing

network information integrated. They have the

the milk producing units are engaging in only

information on amount of procurement, quality

production of milk and depend on the 3PL for

and composition of the product and payment

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

terms which can be accessed by all through

of players from the unorganized sector. With

databases. IT has brought in transparency and

milk being a perishable product, managing and

ease

controlling in the value chain is a huge challenge

cooperatives. The use of IT has enabled them to

for managers. As the third parties perform, it is

capture ‘end to end’ data adding value to the

essential to develop mechanisms to maintain

entire chain.

control and make timely delivery.

Impact of Unorganized sector

of

handling

for

more

than

11,000

Communication with the 3PL provider is

The major portion of dairy business in India is

very essential. Both the parties involved will

contributed by the unorganized sector, especially

have a clear expectation from one another.

in rural or semi-urban area. The unorganized

Having clear expectations will help in managing

sector milk is comparatively cheaper than the

and communicating better with them.

one available from the organized one. There

Information Systems (IT):

exists a co-opetition and (unseen) competition

Every supply chain faces with a common

between unorganized sector and organized

challenge in communication. The databases

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

operating at different locations need to be

work aligned with them to achieve their goals.

integrated. Delays in information sharing and

Conclusions

retrieval will result in forecast errors. Both the

In this article we provide a glimpse of the

suppliers and the customers need to be in

problems, issues and challenges faced by the

continuous collaboration so that supply meets the

‘milk’ supply chain. The issues exist both within

demand. Relationship between the partners in the

and outside the boundaries of company. These

supply chain becomes critical. The sustainability

challenges need to be handled by practices that

of

better

makes the delivery systems more effective. Use

communication process. The system requires

of technology and knowledge in products and

data input from both manual and automated

practices in making the delivery more effective

sources through the supply chain. To gather such

should prove beneficial. In addition to the one

level of information we require complete

discussed

the

relationship

leads

to

a

other

challenges

like

delay


With the concepts of core competencies,

in

15

18
Opsworld 4
transportation, inadequate roadway infrastructure



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

to support long distance travel, may also create

1992).

supply chain disruptions. With growing demand

Inventory: Pitfalls and Opportunities.

and supply, a more agile supply chain would be

MIT Sloan Management Review, 65.

required with a capability of handling these



challenges.

Managing

DANIEL

International


Chain

Management, E. L.-C. ARTHUR HSU
and

Further Reading

Supply

D.

ZENG.

Journal

of

(2005)

Intelligent

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

A Review of the Milk Supply Chain. Safe



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

Food. Acessed on March 5, 2013, from

Managerial

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

Chain

SafeFoodLibrary/Documents/Publication

Marketing Management , 29, 7-18.

s/Research%20Reports/safefood_dairy_r



Sridhar,

Challenges

from

Opportunities.

V.

(2010).

Supply

Industrial

Public

Private

eport_web_version.pdf

Initiating White Revolution - II. CII.
Accessed

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

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

ers/download/BCGSupplyChainReport.p

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

df

0Industry_Technopak_CII_Background

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

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

Issues in Supply Chain Management.



BCG. Creating the Optimal Supply
Chain. Acessed on March 5, 2013, from



Partnership in Indian Dairy Industry

df

Industrial Marketing Management Vol
29,



65–83.

March

5,

2013,

from

Supply Chain Agility: A study of supply
chain maturity . KPMG. Retrieved March

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

8,

KTG%206040%20Spring%202009/Artic

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

les/T2%20Spatial%20Economics/Lamber

nsights/ArticlesPublications/

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

Publicationseries/Documents/supply-

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

chain-agility-study.pdf

ment.pdf Acessed on March 5, 2013,




2013,

from

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

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

Strategies for Managing Complex Supply

supply chain. Harvard Business Review ,

Chains in Large Emerging. Ahmedabad,

2-12.

Gujarat, India. Accessed March 8, 2013,
from

16

19

OPSWORLD 4
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

20
Opsworld 4

TOYOTA RECALL: ARE THE LEAN OPERATIONS AT
BLAME?
As an automobile enthusiast, I have always been

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

flabbergasted by Toyota cars, not just because

service), bay productivity reduces as few bays

they are fuel efficient and environmental friendly

must be allocated for this work. So the company

but

is

has to incur spare parts cost, pay taxes on these

generations apart. What is interesting to observe

parts, transportation and packaging cost, training

in Toyota cars is that they are remarkably elegant

and labour cost to resolve this problem. In a

with lot of technology riding behind them – state

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

of the art aerodynamics, smartly contoured

Since these painful recalls of 2009, Toyota’s new

nooks and crannies and Toyota’s much talked

motto is “Moving Forward”, an attempt to

about “Hybrid Synergy Drive” in hybrid cars.

communicate to consumers that the company’s

Toyota cars are user-friendly, refined and

desire to start afresh and look toward a better

reliable eco friendly cars which give a sheer

future.

because

the

Toyota

Technology

driving pleasure.

Are the lean operations at blame for these

Toyota is considered to be the pioneers of

recalls? Has Toyota’s disruptive innovation

hybrid technology and is renowned for this

become destructive? The Toyota Production

worldwide. But in October 2012, it recalled 7.43

System (TPS) was established based on two

million vehicles worldwide for a faulty power-

concepts: The first is called "jidoka" (automation

window switch that could cause fires. It recalled

with a human touch) which means that when a

2.77 million vehicles around the world for a

problem

water pump problem and steering defect.

immediately, preventing defective products from

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

occurs,

the

equipment

stops

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.

come to the Toyota spare parts warehouse and
then it must be distributed to dealers. The

take into account the cost, quality, delivery,

Technicians must be trained to fix the recall.

safety and morale. Lean operations are viewed as

Service engineers need to follow up the progress

the system of 21st century. It is about improving

and ensure the safety of all Toyota vehicles

18

When we talk about lean operations, we

the inefficient processes and reducing the errors

21
Opsworld 4
and defects. It is about doing more with less: less

Commission's

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

Centre (JRC), reveals that Toyota

reduces waste by 80%, labour and production

led in total R&D dollars spent in

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

2009 whereas Ford (32.4 percent),

operations not only reduce the cost but it

Renault

improves the quality at the same time.

General Motors (24.1 percent)

The

future

of

innovation

lies

in

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.

Research

percent),

and

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

If the defect is detected within 1-2

that time to train the people and use

months after the car sales then the defect might

them for thinking of ways to reduce

be due to production error but if the defect is

waste, to eliminate cost. Kaizen was

detected 6 months after the sale then it is because

implemented in all operations.

of the defective design. In Toyota’s case lean

 Toyota has always believed in being

operations is not the major reason for recall.

competitive by continually reducing the

Some of the strong reasons supporting the claim

price of goods, giving the customer

are:

more for less and developing your
 Toyota has been successful in achieving
customer satisfaction as well as dealer
satisfaction as it continuously strives to

employees so they can continuously
improve the system
After

the

recall,

Toyota

hired

150

improve its value chain using lean

engineers, technicians and researchers who will

operations.

Toyota Recall: Are the Lean Operations at blame?

improvement in value chain. Innovate the

(26.5

Joint

focus on the areas like power train, mechanical

A

study

by

of

design, electrical engineering, electronics, and

Industrial Research & Innovation

advanced research, according to the automaker.

(IRI), one of seven scientific

Toyota has invested huge amount to reduce the

institutes

cost and make the process efficient. It is

of

Economics

the

European

19

22
Opsworld 4
expected that the coming Toyota cars will not

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

have any design defects.

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

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.

olumn/leanjun01.htm
4. http://www.toyotaglobal.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

References:
1. Economics of Industrial Research &
Innovation Report

20

ses_lean_tps_7principles.html
7. http://www.1tech.eu/clients/casestudy_to

yota3

23

OPSWORLD 4
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

24
Opsworld 4

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 Effect of design on product

figure 1 below answers the question – close to

lifecycle costs

95% of cost commitment is done in NPD stages

traditional style NPD. Its design team is not

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.

Table 1 Comparison of development times

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
Toyota’s
equally

product

development

counter-instinctive

to

process

is

conventional

engineering management as lean manufacturing
is to mass production. Toyota does not follow
many practices which are considered critical for

22

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

25
Opsworld 4
decisions and considers a broader range of

3. Waiting: delays due to inessential

design options and yet has the fastest and most

authorization or testing, Information

efficient development record. US National

created too early

Center for Manufacturing Sciences report that

4. Inventory:

redundant,

Toyota NPD projects deploy 150 engineers per

information

project versus 600+ for twice as long at

unsynchronized processes

and

stoppage
data

in

system,

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 nonprocess

for

knowledge

and

information creation. For example - while lean
manufacturing

aims

for

elimination

of

5. Motion: erroneous flow of information

variability lean NPD aim for filtering good

to people, seeking for superfluous

variability from bad variability and thus require

approvals

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

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

Lean: New Product Development

sequential

non-physical

nature—information and knowledge, unlike
manufacturing where you can observe waste in
the form of rework and inventory.

23

26
Opsworld 4
2. Set based concurrent engineering – It

How does Lean NPD work?
Similar to Lean Manufacturing, Lean NPD is

is a well-known fact that front loading in

not a collection of best practices but rather a

NPS realizes significant savings in costs

“sub-system” and part of larger Toyota System

and time. It is seldom achieved in

which can be shown in figure 2. The four major

traditional NPD. Reason lies in the

pillars of lean NPD are

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

Figure 2 Toyota: System view (4)

converge.
1.

Chief Engineer concept paper -- Counter

the beginning and their consent is

product managers, the chief engineer in

required for each step. By frontloading

Toyota is first and foremost a technical

and delaying decisions Toyota actually

expert having a large input in the vehicle’s

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.

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

system design phase.

24

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:

He condenses vision for the vehicle in a
“concept paper” which leads into the

is

involved in forming the sets right from

intuitive to the concept of traditional

architecture with loose formal authority

Manufacturing

Figure 3 SBCE methodology (7)

27
Opsworld 4
•

Checklists (process checklists

this stage to construct product prototype and

and product checklists)

dies. Toyota must also be credited for use of

•

Standardized process sheets

flexible die designs for proto typing which

•

Common construction sections.

actually save a lot of time and cost while

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.

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,

Lean

during which its rivals are mostly concerned

Manufacturing -- Toyota develops two

with styling and engineering. Toyota invests

different series of prototypes, which are not

time and effort in learning early on, to make

4. Prototype

to

test

(unlike

Tools

designs

with

Table 2: Lean NPD vs. Traditional

western

NPD
counterparts) but to choose the different subsystems and check their integration and
identify manufacturing / assembly issues.

sure that the end solution is truly
the best.

References

Lean: New Product Development

used

and

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

Beyond this stage no engineering change

The

Toyota

product

development

request is accepted and design is frozen for

system. New York: Productivity press.

serial manufacturing. Key differentiator for

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

lean

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

manufacturing tools like checklists right from

Martinez, L. (2010, October). Applying

Toyota

is

the

fact

that

it

uses

25

28
Opsworld 4
lean thinking concepts to new product
development.

In

APMS

2010

7. Raudberget, D. (2010). Practical
applications of set-based concurrent

International Conference Advances in

engineering in industry. Strojniški

Production Management Systems Book

vestnik-Journal of Mechanical

of Abstracts (p. 50). PoliScript.

Engineering, 56(11), 685-695.

3. NATIONAL

CENTER

FOR

MANUFACTURING

SCIENCES,

Product

Process

Development

–

Methodology &Performance measures,
2000.

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

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

sp?doc_id=230445&dfpPParams=ind_1

development. Business Strategy Review,
16(3), 17-22.

82,aid_230445&dfpLayout=article
10. D. Sobek, A. Ward and J. Liker,

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

“Toyota’s

Principles

of

Applying lean thinking to new product

Concurrent

introduction. Journal of Engineering

Management Review, Winter 1999,vol.

Design, 15(1), 1-31.

40, no. 2, pp. 67-83

6. Steven D. Eppinger

and Anil

Engineering”,

Set-Based
sloan

R.

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

Chitkara, The New Practice of Global

development flow. Systems Engineering,

Product Development, SUMMER 2006

7(4).

VOL.47 NO.4 SMR210, MIT Sloan
Management review

26

29

OPSWORLD 4
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 scho
through 20 locations in 9 states across India.

30
Opsworld 4
KEY OBJECTIVE

“Safe, Nutritious, Tasty Food on Time and Every
Time “
Everyone’s

of raw materials into an organization and

Responsibility and is everybody’s business in

processing of materials into finished goods. It

our Organization. Quality can be achieved

also

only when every stake holder in the whole

management of all activities involved in

supply chain does their job with high Quality.

sourcing,

Therefore Quality starts with the design of the

logistics

recipe and then suppliers who are going to

coordination and collaboration with channel

supply the raw material and then various people

partners,

within our organization who are going to

intermediaries, third-party service providers, or

follow various systems and process to produce

customers.

the final product (Quality Meal) and deliver to

integrates supply and demand management

the children in various schools. For example-

within and across companies. Our SQM

assume that we have world class infrastructure,

process which covers sub processes like

people, suppliers, raw material, processes etc.,

sourcing,

but if you have poor recipe then the result is

qualification, procurement, logistics, supplier

low quality output. Similarly without right

rating, supplier development etc. will ensure

people and people with right skills we cannot

that we work with the right and best supplier

achieve the high Quality and so on.

who are aligned with our organization.

Supply Chain Management and Operations



We

believe

Quality

is

encompasses

the

procurement,

conversion,

management.

which

Supply

supplier

planning

It

may

chain

also

be

and

and

includes

suppliers,

management

selection,

supplier

Supplier Selection & Qualification Process

Management are two key areas of focus in

is followed to select the suppliers based on

achieving our Objective, Mission and Vision.

the ability to meet our requirements with

Supplier

Quality

Management

(SQM):

Supply chain management is a cross-functional
approach that includes managing the movement

28

respect to quality, cost and delivery and
their ability to support in low cash flow
situations

31
Opsworld 4


Incoming Quality Control (IQC) Process is

controlling the process of production of goods

followed to ensure that we accept only right

or services. It involves the responsibility of

product which meets all our raw
material

specification

requirements.

Raw

specifications

are

material
generally

taken and adopted from FSSA
2006

ensuring that business operations are
efficient in terms of using as few

Supplier
Selection &
qualification
Process

resources as needed, and effective
in terms of meeting customer
requirements. It is concerned with

(Food

managing

process that

Standards

Supplier
development
al programs

Act
2006)

Incoming
Quality
control
process

Supplier
Quality
Management

latest

converts
inputs

the forms of
materials,

revision.


labor, and energy)

Supplier Rating Process ensures

into outputs (in the form of goods

Supplier
rating
process

that we assess their services
with respect to quality, delivery,

and/or services). This is where we
embraced

frequency and will be used as
to

continuously

supplier
strive

to

so

that

improve

the

ISO

ISO22000

cost etc., parameters at a defined

feedback

–

Food

standard
Safety

Management System and also taken
they
their

inputs from ISO9001- Quality Management
System and designed and established the

performance.


(in

systems

Our Supplier Development programs aimed

requirements

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

and

processes

to

meet

our

Once Processes are established then we need to
monitor
Without

and
data

improve
and

them

continually.

measurements

no

improvement is possible simply because we
don’t know where we are? So process

Safe, Nutritious, Tasty Food on Time and Every Time

Safety

the

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,

management is linked with designing, and

29

32
Opsworld 4
incoming

lots

acceptance

%,

Customer

Cold rooms are used as temporary storage

Complaints Index etc.


to store vegetables/ cut vegetables/ curds
etc., as required. Custom designed vehicles

People are the key to our success and we

of different sizes and capacities are used to

strongly believe that if we make them
successful
organization

in

their
we

job

achieve

then
the

as

transport the cooked food to the schools in

an

targeted

results. So focused efforts been put on

safe and secured manner.


the desired state, we need to improve

People Development and Training. A

performance

dedicated team established at HO and they

leads to next level of achievement. So we

Application, Lean & Kaizen as mandatory

adopted a holistic approach to design a

and every employee needs to go through all

Continual Improvement Program called

these programs twice a year. Apart from

“Akshaya Pragathi “Program in Akshaya

this HR coordinates TNA (Training Needs

Patra. As a part of the program we have

Analysis) exercise and ensures various

adopted and implemented Kaizen, CI

trainings that are imparted as per the plan.

Projects and Six Sigma methodologies to

Our Quarterly people engagement programs

ensure

ensure that all employees come together

themselves or with the help of their

We have first class infrastructure in terms

colleagues or at the most with the help of

also

their supervisor. Very less capital intensive

standardized our kitchen designs to bring

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.

30

employee

where they get the idea and implement by

and relationships for a cause

Flow model kitchens are well appreciated

every

Kaizen is aimed at working level staff

spirit and improve the inter personal skills

consistency in our processes. Our Gravity

make

any one type of methodology. For example:

programs are aimed at improving the team

We

and

practically part of at least one project using

and join hands for a common cause. These

building.

processes

process and every cycle of improvement

topics: GMP, 5S, ISO 22000 Awareness &

equipment,

various

next mile stone and this is a continuous

across Pan India. We also made 4 training

of

of

continuously so that we can reach to the

support all technical training programs



While we all agree that Status Quo is not

and a small improvement.


CI Projects are little complex, PDCA
methodology driven supported by 7Quality
Tools

aimed

executives/supervisors/team

at
leads

the
level,

33
Opsworld 4
leads to savings or improvements related to
Quality/ Cycle Time.

data from these audits will be reviewed by

Six Sigma Projects are more complex in

Quality Team and appropriate improvement/

terms of size and scope which leads to huge

Corrective actions are triggered and monitored

improvements related to Quality/ Cycle

till the concerned completes the effective

time/ Cost. Currently we have more than



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

implementation of the same.

100 GBs (Green Belts) working across the
and

running

improvement projects.

Also



various

Quality Metrics Performance is reviewed
on monthly basis by Quality & FSMS

we have

Manager and appropriate improvement/

produced & implemented 600Kaizens in the

Corrective

last 6 months.

actions

are

triggered

and

Audits & Review
Quality metrics • Review done on monthly basis by quality & FSMA manager
Performance • Improvement / correctyive actions are implemented

ISO audits

Management
Review
Customer
satisfaction
survey

• Conducted twice a year by internal auditors
• Certification body DNV does surveillance audits twice a year

• Conducted twice a year to review the suitability and
effectiveness of FSMS
• Conducted twice a year
• Day to day feedback are also recorded to properly analyze
and take corrective actions

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

monitored till the concerned completes the

we are in the right direction…!!

As we all know Audit & Review mechanisms

effective implementation of the same.


Safe, Nutritious, Tasty Food on Time and Every Time

organization

ISO 22000 Internal Audits are done twice

plays a key role in monitoring the key

year by qualified internal auditors lead by

processes & systems and their performance. So

Quality &

FSMS

we have institutionalized GMP monthly audits,

Certification

body

Surprises Audits by Sr. Management Staff on

surveillance audits twice a year.

Manager
DNV

and

our

does

the

31

34
Opsworld 4


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 “

32

35

OPSWORLD 4
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.

Divya S has completed her graduation in Rubber &

M. Mohan is a graduate in Electrical and

Plastic

of

Electronics Engineering from NIT Trichy. He has

Technology, Chennai. She has a work experience

work experience of 3 years in NTPC ltd..

in Japan polymers. Presently she is in second year

Presently pursuing his post-graduation from

pursuing her Post graduation from IIM Lucknow.

IIM Lucknow.

Technology

in

Madras

Institute

36
Opsworld 4

UNIFIED EFFICIENCY MEASUREMENT OF THERMAL
POWER PLANTS USING DEA BACKGROUND
Background: The paper by Wade D.Cook and

efficiency is measured, which includes both

Joe zhu (2006) applied DEA model in

undesirable and desirable outputs. This study

comparing the efficiencies of a set of thermal

provides

power plants with desirable outputs. The DEA

environmentally

model was applied where the decision making

environmentally

units are comparable but possess unique

enabling the government to reward or penalize

circumstances and characteristics. In our

accordingly.

current study the same principle of DEA was

Input and output parameter setting: The

extended to study the set of power plants

current study analyses the efficiency of 20

within the region along with its environmental

power plants with uniform capacity in a region.

effects. Mika Goto et al (2011) devised similar

The core material components such as Coal,

methodology to compute unified efficiency

Air, Energy, cooling water required for power

which includes both undesirable and desirable

generation are taken as inputs for all the units.

outputs, but their methodology segregates

The power generated in MU (million units) and

inputs into energy and non-energy input and

ESP Index are considered as desirable outputs.

the

distance

The undesirable outputs such as bottom ash, fly

measure for computing the unified efficiency

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

and the study doesn’t determine the major

DEA.

factor contributing to the difference between

measuring the particular matter (SPM and

efficient and inefficient DMU and

doesn’t

RPM), higher values of ESP index indicates

quantify the effect of each undesirable factor

lower level of particulate matters emitted into

on environmental efficiency of each power

air. Hence, ESP index was set as desirable

plant.

outputs in the problem setting.

The problem setting: The usual practice of

Advantage of Our Approach: This approach

comparing the efficiency of thermal power

identifies

plants by comparing the PLF (Plant Load

differentiate the DMU’s as environmentally

Factor) is not correct, as, measuring plant load

efficient and inefficient. Thus helps in focusing

factor considers only availability and computes

on those factors which are statistically different

utilization of plants based on the availability. In

between the two groups. Those factors which

the current study, the environmental pollutants

are not statistically differentiating, implies that

model

computes

directional

are taken as undesirable outputs and a unified

34

an

approach

to

segregate

the

efficient

DMU’s

and

inefficient

DMU’s,

thus

The ESP index acts as proxy for

all

the

critical

factors

which

37
Opsworld 4
the environmental limits for those factors are

.

easily attainable by both the groups.
n

ESP _ Index  
i 1

NOCi
100
FLCi

Programming Model:
Objective Function:

where E is the Efficiency Score for a DMUi

Input Constraints:
Minimizing the input

Output Constraints:
Minimizing Undesirable outputs
(Pollutants)

Canonical Discriminant Function coefficients

Coal
Air
Energy
Water

Function
1
0.059

SS
Oil and Grease
Power Generated
ESP_Index
(Constant)

-.019
-.037
.053
Bottom Ash
.100
Fly Ash
-.002
Unstandardized coefficients

Function
1
.019
-.005
-.002
-.047
-2.538

Output Constraints:
Maximizing the output
(Desirable output)

Unified Efficiency measurement of Thermal Power Plants using DEA Background

Where, NOC: Normal Operating Current
FLC: Full Load Current

35

38
Opsworld 4
Discriminant Analysis:
Tests of Equality of Group Means
Wilks'
F
df1
Lambda
.689
8.127
1

Coal

df2

Sig.

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

Result:

DMU1
DMU2
DMU3
DMU4
DMU5
DMU6
DMU7
DMU8
DMU9
DMU10
DMU11
DMU12
DMU13
DMU14
DMU15
DMU16
DMU17
DMU18
DMU19
DMU20

DEA with Undesirable
output
1
Efficient
1
Efficient
0.9819
In-Efficient
0.8103
In-Efficient
0.9782
In-Efficient
0.8404
In-Efficient
0.99
In-Efficient
0.9844
In-Efficient
0.7898
In-Efficient
0.9254
In-Efficient
0.9992
In-Efficient
1
Efficient
1
Efficient
0.8497
In-Efficient
1
Efficient
1
Efficient
1
Efficient
0.9822
In-Efficient
0.8733
In-Efficient
1
Efficient

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

36

39
Opsworld 4
the statistically significant factors for this

boiler, clean coal technology, use of

sample, on the efficient score. Bottom ash

beneficiated/ blended coal.

has the greatest effect on efficiency score
followed by coal, water and ESP index

References:

closely. So, by this analysis we can

1978. Measuring the efficiency of

maximizing ESP index (SPM & RPM)

decision making units. European

which are related to environment protection,

Journal of Operational research 2(6),

we can improve the efficiency score. C

428-44.
-

Conclusion:
The DEA analysis

DEA: An Analysis of Power Plant
Efficiency. European Journal of

effect of environmentally undesirable factor

operational research 178(2007) 207-

in Efficiency calculation. The current study

216.

was limited to small set of decision making

-

units. This study elucidates the link between

Toshiyuki Sueyoshi, Mika Goto,
2011. DEA approach for unified

environmental protection and efficiency.

efficiency measurement: Assessment

This has a potential to influence major

of Japanese fossil fuel power

power producers throughout the country to
environmentally

Wade, D., Cook, Joe, Z., 2006.
Within- Group Common Weights in

and the Multiple

Discriminant Analysis has substantiated the

install

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

generation. Energy Economics 33

preferable

(2011) 292–303.

technology like super critical and critical
.

Unified Efficiency measurement of Thermal Power Plants using DEA Background

-

conclude that minimizing Bottom Ash and

37

40
Opsworld 4
Appendix:
SS1: Suspended Solids

Coal
DMU1
DMU2
DMU3
DMU4
DMU5
DMU6
DMU7
DMU8
DMU9
DMU10
DMU11
DMU12
DMU13
DMU14
DMU15
DMU16
DMU17
DMU18
DMU19
DMU20

38

Input
Air Energy

120
135
128
148
145
150
114
145
156
135
140
125
112
146
125
116
139
152
128
135

640
655
620
675
670
668
638
645
665
684
635
655
690
695
640
685
657
675
665
684

30
50
40
54
60
55
25
36
49
56
36
50
40
54
60
55
30
50
49
67

Water
150
160
145
187
165
180
174
155
170
167
154
135
139
178
165
180
137
165
189
145

Bottom
Ash
9.6
10.8
10.24
11.76
10.16
13
9.12
15
18
14.67
10.3
18
10.24
14
15.3
7.9
12.89
15
18
14.67

Fly
Ash
20
47
55
67
46
67
53
58
39
65
39
67
55
47
53
45
53
63
56
45

SS

1

100
101
119
122
185
157
101
134
134
124
113
98
136
122
172
110
101
120
134
102

Output
Oil &
Power
Grease Generated
20
200
38
210
22
190
31
175
26
205
35
180
24
165
32
200
35
168
24
201
26
200
38
187
26
194
38
189
15
205
35
204
15
189
25
210
35
185
45
201

ESP Index
80.00
53.00
47.00
55.00
84.00
41.00
48.00
49.00
45.00
35.00
56
53
42
55
84
79
65
49
45
80.00

41

OPSWORLD 4
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.

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.

42
Opsworld 4

BRAIN AND HEART OF OPERATIONS


What is Productivity and Efficiency? Is

Full Time Equivalent (FTE) indicates

there any difference between them? How

the

they relate to each other? These are the

employees in a standardized way.

efficiency/workload

of

the

questions which come into mind when one
comes across these two terms.

To compete effectively, in an increasingly
commoditized

Efficiencies are not just related to making

marketplace

where

price

pressures are inherent, companies need to

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

achieve greater operational efficiency by

important than ever.

embedding creativity, relevance, innovation

So,

and

market

responsiveness

into

their

operations that supports production of new
Efficiency = Input to run a Business Operation
Output gained from the Business

products and services. Both companies and
customers want services and products that are
innovative, which meet their ever-expanding

Productivity = Change in

Economic Profit
FTE

needs which are in terms more than just
affordability. True operational optimization
begins by trading off between productivity and

Economic Profit helps us to determine:


Compares

efficiency, by willing to look at all aspects of

Total use of capital
productivity

industries


Determines shareholder’s return

operations. Thus, approach to operational
across

optimization focuses on applying the right
methodology at the right time and situation
while understanding the culture, financial
constraints,
framework.

40

environments

and

regulatory

43
Opsworld 4
Take for example, Apple, the heart of this

that it can offer distinctive customer

organization

value propositions.

lies

in

delivering

constant

innovation in the form of designs that are

2. Establish

the

right

structure:

attractive and extremely user-friendly. To

Competitive essence can only be

deliver this and at the same time maintaining a

maintained if the company took right

competitive edge over others, Apple focuses

strategic

on its talent, passion, and

organizational structure.

dedication of

decisions

which

fits

employees to drive excellence at all levels of

3. Out-execute: Profit is the main motive

company. It has effectively utilised its

of any organization. And to achieve it,

operations (efficiency) and energised its

organization

workforce (productivity) by focusing energy

limitation in the daily work processes

and talent on a select set of devices and

which when solved can increase the

services. iPod which was developed in less

cost efficiency and labour productivity.

than nine months sets an example, which

4. Balance structure and execution:

brought

together

teams

combined

with

should

identify

the

Determine the unique balance between
structural alignment and execution that

According to the study done by Accenture [1],

will drive operational excellence.

the following five imperatives should be kept

5. Choose the right journey: Identify the

in mind to balance operational efficiency with

type of journey and level of change

innovation and responsiveness:

that

will

work

best

for

the

1. Identify competitive essence: Every

organization: continuous improvement,

company should identify its points of

targeted interventions or top-down

parity and points of difference such

transformations.

5 imperatives for balancing operational efficiency with innovation

Identify
competitiv
e essence

Establish
the right
structure

Outexecute

Balance
structure
and
execution

Brain and Heart of Operations

expertise and existing technologies.

Choose the
right
journey

41

44
Opsworld 4
Companies also need to match its productivity

and focused its investment in an e-commerce

with the changing and demanding world.

structure and global technology platform. To

There are certain attributes which helps in

achieve

achieving the productivity growth:

company is trying to reduce 1% of its

1. Digitisation:

Leveraging

on

e-

greater

efficiency,

operating expenses as a percentage of total

commerce and internet to improve

revenues.

digital assets such that
processes

operational

Thus, productivity and

are

Global
integration

optimized and hence

Knowledge
intensity

efficiency goes hand
in

hand

and

an

organization

Digitisation

is

Complexity
Productivity
productively

increases productivity.
2. Global

Integration:

efficient when it utilizes all its
Integrating

scalability in business operations by
efficiently

configuring

its

allocated resources, resulting in its
position in the productivity frontier.

global

resources.

References:

3. Knowledge Intensity: Organization

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

should have the broad understanding

en/outlook/Pages/outlook-online-

and knowledge of its functions which

2010-balancing-efficiency-

helps in productivity growth.

operations.aspx

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

42

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

45

OPSWORLD 4
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

46
Opsworld 4

ENHANCING OPERATIONAL EXCELLENCE BY
IMPROVING PRODUCTIVITY
Introduction:

WHY PRODUCTIVITY CAN BE TARGETED

A firm has a competitive advantage if it has the

Maintaining high overall productivity is vital to

necessary resources (like technology, natural

increase the total throughput and hence reduce the

resources, skilled labour etc.) which help it to

cost of production enabling the company to deliver

outperform

sustainable

the product to customer at sustainable prices along

competitive advantage gives an edge as it is

with desired quality. A company can neutralise the

difficult to be neutralised by the competition.

advantages of the competition by focusing on

its

competitors.

A

increasing its productivity and quality with same
There are three generic strategies to build

resources to reduce its costs.

competitive advantage, Porter (1985); one is cost
leadership where a firm produces the goods at

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

lower cost than its rivals, second is differentiation

cited by Hastak (2008) describe case studies where

where a firm’s goods are perceived as different by

manufacturing firms that redesigned their business

the customer and he is ready to pay a premium for

processes to compress time and achieved higher

them and third is focus, where the firm focuses on

productivity, increased market share, reduced risk,

a very niche market segment.

and improved customer service. Syverson (2011)
asserts that literature contains a lot of robust

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

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.

costs and then exploring the ways in which
productivity can be enhanced.

Saari (2006) introduced a model which describes
how productivity acts as a synonym to competitive

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.

44

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.

47
Opsworld 4
It is within the real processes where the real

as well as labour productivity. Further, reducing

production takes place and where the productivity

variations in designs and allowing for delayed

aspect can have a significant change. As the real

differentiation of the product also aid in increasing

process plays a major role around which all the

productivity.

processes revolve, it is only through real processes
that a company can have a competitive advantage

Productivity definition: According to Syverson
(2011), productivity is how much output is

over others.
For enhancing the productivity in any setup, first
the processes are required to be streamlined while
targeting throughput time reduction and wastage

obtained from a given set of inputs, which is
typically expressed as output to input ratio.
Productivity in general is the measurement of how

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

factors

affecting

productivity

in

a

manufacturing facility can be controlled by

land etc, whereas at macro-level this may be w.r.t.
a whole country, Helms (1996).

reducing setup times, reducing movement time and
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.
Figure 1 - Main Processes of a Company
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

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

Enhancing operational excellence by improving productivity

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

reduction.

better way is to measure total factor productivity,
which takes into account all the factors required to
produce the output.

level of employees helps in increasing the machine

45

48
Opsworld 4
Targeting productivity: Koufteros et al. (2001)

operations training material. This suggests that

have identified seven key factors affecting time-

there exists a potential of around 3 times

based manufacturing, these are, shop floor

improvement in the actual utilisation of the

employee

solving,

machines by focusing on factors like reducing

preventive maintenance, dependable suppliers,

breakdown losses, setup times, increasing quality

reengineering

controls etc.

involvement

setups,

in

problem

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.

Various factors improving the productivity are
explored below one by one.
Setup time: Setup time is the time required to

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

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

savings were achieved.

the setup procedures, purchasing equipments with
As

per

Terwiesch

(2013),

productivity

small setup times, using machines with single

enhancement can also be seen in terms of

minute exchange of dies and dedicating the

improving the overall equipment efficiency (OEE),

workstations to families of parts with similar setup

which can be said to be dependent on various

requirements so that common fixtures can be used.

factors as described in figure 2 from McKinsey
Ross and Taylor (2013) and Terwiesch (2013)
further

suggest

classification

of

that
setup

procedures into external
and

internal

setup

procedures also reduces
the overall setup time.
External setups are those
tasks which could be done
before

46

the

machine

Figure2 - Operational Equipment Efficiency of a resource

stopping
or

the

after

machine has started so that the
production is held up for a minimum

49
Opsworld 4
time. Whereas internal setups can be done only

adding processes, Sarkar (2012). The value adding

after the machine has been stopped.

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

activities are not valuable
Figure 3- Approach to Achieve Setup Time Reduction
Figure 3 shown below is taken from McKinsey
operations training material and suggests the steps
to reduce the setup time.

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,

Terwiesch (2013) says that if setup occurs at the

transportation, over processing, inventory, motion

bottleneck then the batch size should be increased

and defects, Womack and Jones (1996). The

so as to de-bottleneck this workstation. Otherwise,

process can be studied by classifying various

if setup occurs at non-bottleneck then batch size

activities and wastages must be removed to

should be reduced to match with the capacity of

increase productivity.

the bottleneck.

Movement time: It is the time required to move

Processing time per part: Processing time is the

the parts from one workstation to another. It can be

time required by a machine to operate the

reduced by reducing the time required per move or

designated routine through a unit. Johnson (2003)

reducing the total number of moves, Johnson

suggests that processing time per part can be

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

reduced by reducing time per operation by using

can also be reduced by designing the layout in a

new technology or redesigning the part and also by

way that reduces the distance between two

reducing number of operations required. Suresh &

workstations. Movement time can also be reduced

Meredith (1994) have also suggested reduction of

by grouping the equipment performing certain

processing time to improve the productivity.


should be avoided as these

sequential operations as a manufacturing cell,
Suresh & Meredith (1994).

Processing time can further be reduced by
reviewing the processes and classifying them into

Resource utilization: Johnson (2003) has pointed

value adding, business value adding and non-value

out increasing the resource access by cross-training

47

50
Opsworld 4
the operators and increase equipment pooling to

postponement, first, inventory levels reduce for

improve productivity. The operators should be

achieving a given service level. Second, if more

trained so that they can work on multiple

products can be postponed then it also leads to

machining centres as per the requirement on the

reduction in inventory levels

job.
Postponement is exhibited very effectively in the
Process variability: According to Hopp &

change which paint companies introduced. Instead

Spearman (2001) variability can be due to

of producing paints in umpteen number of shades

controllable or random variation. Controllable

they now mix the tints to white paint at the

variation is due to the results of decisions like

retailer’s end to make whatever shade the customer

design differences, transfer batch sizes etc whereas

desires. This initiative, while helping to increase

random variation occurs due to events which are

productivity of paint companies by reducing

not in immediate control, for example downtime of

number of setups and increasing uniformity in

machines or operators, variation in arrival times of

production, has also helped to bring down the

various batches. Suresh & Meredith (1994) have

inventory levels as a result of benefits received

noted that variability can be reduced by grouping

from aggregation of forecasts.

similar jobs, by having dedicated labour and
equipment, by stabilizing batch sizes and by
improving preventive maintenance.
Postponement:

Another

The manufacturing of the product as per the

beneficial

approach

which can increase the productivity in case of
customised

production

is

the

Quality as an aid to improve productivity:

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

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

requirement of the order.

utilized as an aid to enhance productivity.
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

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.

of this chain is the key to success. Graman &
Bukovinsky

48

Goh (2010) has identified six factors important for
success of a six sigma project. These are use of a

(2005)

state

two

benefits

of

51
Opsworld 4
common and realistic metric for quality assessment

Conclusion:

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

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

terms of profitability and other considerations for

profound effect when the sales are lesser than

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

expected.

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.

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

Although giving importance to quantifiable and

parameters like resource utilization, quality control

measurable progress is necessary but at the same

and movement time are those which would be

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

applicable for mostly all organizations. Whereas

remarks, “To many it will always seem better to

parameters like setup time and processing time per

have measurable progress toward the wrong goals

part are those which would be generally applicable

than immeasurable progress toward the right

to the manufacturing industry. It is thus very

ones”. He warns against the over reliance on the

essential that an organization identifies the

quantitative data and ignoring the obvious but

parameters

immeasurable initiatives. In similar zest words of

productivity and work towards it.

which

would

help

enhance

its

renowned economist Paul Samueison are also
pertinent to quote, “Fortunately, our answers need
not be accurate to several decimal places; on the

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

contrary, if the right general direction of cause and

Statistical

effect can be determined, we shall have made a

Manufacturing as a Tool of Sound

tremendous step forward.”

Financial


Ekambaran (2011) says that to meet objectives in

Quality

Management,

Control

Journal

In

of

Financial Management and Analysis, Vol.
24, No. 1, pp. 97-101

49

52
Opsworld 4
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customisation at Hewlett-Packard: The
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Six

Sigma,

Newyork
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M.

E.

(1985),

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466-483

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J.

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(2009),

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Reduction

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Cellular

Manufacturing

C.

(2013),

MOOC,

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University

of

55

IIM

Team

Raipur

Anubhav Sood

Bharath Arava

Manoj H

Gautham Jayan

Subhash Kumar

Sameer Pandey

Sujitha Tikka

Thousif Mohammed A

Ruchi Sao

Vanamamalai. R

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

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