MBA607_Operations Management (1)-converted

Figure 7.2 PPC Functions of production planning: Production planning involves everything from scheduling each task in the process to execution and delivery of products. The production planning functions include the following: 1. Estimating: It involves determining the quantity of garments to be produced and associated cost involved for the same based on the sales forecast. Determinations of raw materials and labour required to meet the planned targets and machine capacity are the vital activities prior to budgeting for resources. 2. Routing It is the method of determining the chain of operations to be carried out in the production line to complete the assembling of garments. This information is given by a product engineering function and is beneficial to make machine loading charts. A route sheet is a document giving the guidelines and information for conversion of raw materials into finished products. Route sheets contain the following information: The necessary operations and their sequence. • Machine has to be used for every operation. 149 CU IDOL SELF LEARNING MATERIAL (SLM)

• Projected set up and operation time per garment piece. • Description of raw materials to be utilized for garment production. • Inspection procedure and tools required for inspection. • Garment packing and handling guidelines during the movement of parts and sub- assemblies through the operation stages. 3. Scheduling It involves standardizing the priorities for each work and determining the starting and finishing time for each process or operation. It gives a time table for production, representing the total time period essential for the production of a specific garment style. The objectives of scheduling are as follows: • To avoid unbalanced utilization of time amid various departments as well as work centers. • To utilize labour in an efficient manner such that the target is achieved well within the established lead time to dispatch the order in time and complete production at a minimum total cost. 4. Loading Loading is the process of transforming the scheduled processes into practical work. Two main concepts of loading are facility loading and machine loading • Facility loading: It is the loading of the work center and deciding which kind of jobs to be allotted to which machine. • Machine loading: It is the process of allocating specific jobs to machines or workers based on primacies and capacity utilization. A machine loading chart has to be made to demonstrate the planned utilisation of machines and workers by allocating the jobs to machineries as per priority determined at the time of scheduling. Functions of production control: Production control functions include the following: 1. Dispatching It is defined as making the production-related activities in a dynamic manner by issuing the 150 CU IDOL SELF LEARNING MATERIAL (SLM)

orders and guidelines in agreement with the previously planned time frames. It also gives a means for comparing actual progress of the work with respect to the planned progress. The functions of dispatching are given below: • Ensuring the smooth flow of raw material and other accessories from stores to first garment production operation and then from one operation to the next operation until all production processes are carried out. In the garment unit, it comprises the flow of fabric to inspection and then to the spreading room, cutting section, sewing room, finishing, packing and dispatching. 1. Gathering tools like cutting tools, sewing tools, etc., from tool stores and delivering them to the concerned department or operator. • Delivering the specification sheets, drawings and route cards to the concerned departments. • Giving the job orders and approving the processes in agreement with production schedule and time frame as indicated in schedules or machine loading charts. • Getting the schedule of inspection by the buyers or internal inspectors in an organisation and delivering it to the inspection section of the line. • Expediting/Follow-up It confirms that the process is done as per the production plan and the delivery schedules are met. Progressing comprises activities like status reporting, attending to bottleneck processes in the production line and eliminating them, controlling of deviations from the planned performance levels, monitoring and follow-up of progress of work in all stages of production, coordinating with stores, tool room, purchase and maintenance departments and revising the production plans and replanning it if necessary. The necessity for follow-up could arise owing to the following reasons: • Delay in supply of materials. • Excessive absenteeism. • Changes in design specifications. • Changes in delivery schedules initiated by the customers. • Breakdown of machines, tools, jigs and fixtures. • Errors in design drawings of patterns and process plans. 151 CU IDOL SELF LEARNING MATERIAL (SLM)

IMPORTANCE OF PPC Some of the most beneficial features of production planning and control include the following: Customer Service Enhancement - Through improved scheduling and production, these services allow customers to have a much more pleasant experience through enhanced quality of goods and on-time delivery. These improvements will ultimately win customers over and persuade them to establish an on-going and profitable relationship. Inventory Control - With a promising production planning and control system, inventory planning becomes much easier. This is done by maintaining inventory levels while also minimizing inventory investment. The software is also able to enforce better control over raw- material inventory, which benefits purchasing. Equipment Improvement - Production planning and control accounts for any lack of productivity among equipment. It allows for management to oversee productivity among equipment and ensure that resources are being used efficiently. Plant Morale Improvement - Plant morale is improved significantly through ensurement of work flow and avoiding any rush orders. This is conducted through communication and proper coordination of activities among departments. Idle Time Reduction - Productivity is lost through idle times where workers are waiting for any materials, which is where this software can enable a much more smooth flow of materials. PRODUCT DESIGN AND DEVELOPMENT Product design describes the process of imagining, creating, and iterating products that solve users’ problems or address specific needs in a given market. The key to successful product design is an understanding of the end-user customer, the person for whom the product is being created. Product designers attempt to solve real problems for real people by using both empathy and knowledge of their prospective customers’ habits, behaviors, frustrations, needs, and wants. PROCESS OF PRODUCT DESIGN AND DEVELOPMENT Idea Generation: The design process begins with understanding the customers and their needs. Ideas for new products can come from a variety of sources both within and outside the firm. Internal 152 CU IDOL SELF LEARNING MATERIAL (SLM)

sources include employees, research and development, market research sales force and reverse engineering. Figure 7.3 Process of Product design The external sources include customers, legislation, environment, technology and strategic position of the organisation. Competitors are also the source of ideas for new products or services. Perceptual maps, bench marking and reverse engineering can help companies learn from their competitors. Perceptual maps helps to compare customer perceptions of a company’s products with competitor’s products. It is a visual method of comparing customer perceptions of different product or services: 1. Bench marking refers to finding the best in class product or process, measuring the performance of your product or process against it and making recommendations for improvement based on the results. 2. Reverse engineering refers to carefully dismantling and inspecting competitors’ products to look for design features that can be incorporated to improve one’s own products. 153 CU IDOL SELF LEARNING MATERIAL (SLM)

Each of these sources gives a different emphasis on the requirements and importance of idea generation. Screening Ideas: The purpose of screening ideas is to eliminate those ideas that do not appear to have high potential and so avoid the costs incurred at subsequent stages. Using group of people, proposals would be supported by graphics, models and an outline specification and judged against a set of criteria such as necessity to the firms survival, role in filling out an existing product/service, degree of overlap with existing products and services, utilizing existing processes and capabilities, impact on overall sales and profits of the company. To have a better evaluation of ideas, each of the dimensions of the ideas is scored on a 0-10 scale and each dimension is attached weights as per these dimensions. The resulting aggregate score helps in deciding which idea to progress and which idea should be dropped. Feasibility Study: Initial screening of the ideas is designed to stop the ideas, which are unsuitable for further considerations. Feasibility study consists of a market analysis, an economic analysis, and technical and strategic analysis. 154 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 7.4 Feasibility Study The Design Process Marketing takes the ideas that are generated and the customer needs that are identified from the first stage of the design process and develops alternative product concepts. The market analysis through customer analysis and market survey assesses whether there is an enough demand for the proposed product to invest in developing further. If the sufficient demand exists, then there is an economic analysis that aims at establishing the production and development costs and compares them with estimated sales volume. The profit potential of the product can be studied using quantitative techniques such as cost benefit analysis, decision theory, net present value (NPV) or internal rate of return (IRR). The risk analysis is also carried out. Finally, technical and strategic analysis is concerned with technical viability of the product with respect to technology, process of manufacture, availability of materials etc. Performance specifications are written for product concepts that pass the feasibility study and are approved for development. Preliminary Design: 155 CU IDOL SELF LEARNING MATERIAL (SLM)

Design engineers take general performance specifications and translate them in to technical specifications. The process of preliminary design involves building a prototype, testing the prototype, revising the design, retesting and so on until a viable design is determined. Design incorporates both form and function. Form design refers to the physical appearance of a product, its shape, size, color, styling etc. Aesthetics aspects such as image, market appeal, special identification, finish etc. will also form a part of the form design. Production design is concerned with how the product will be made. Design, which are difficult to make result in poor quality products. During the design stage itself the manufacturing aspects should be considered. The production design or design for production includes simplification, standardization and modularity. Design simplification attempts to reduce the number of parts, subassemblies and options into a product. Standardization refers to use of commonly available and interchangeable parts and subassemblies. Modular design consists of combining standardized building blocks or modules in a variety of ways to create a unique finished product. Modular design is common in electronics and automobile industry. Pilot Runs and Testing: In the preliminary design stage, prototypes are built and tested after several iterations; pilot run of the manufacturing process is conducted. Adjustments are made as needed before finalizing the design. Apart from continuously testing the product for performance, market testing is also carried out to check the acceptability of the product in the defined market and customer group. This helps to know in advance, whether customer will accept and buy this product on launching in the market. Thus, test marketing is a powerful tool. Final Design and Process Plans: The final design consists of detailed drawings and specifications for the new product. The accompanying process plans are workable instructions for manufacture including necessary equipment’s and tooling, component sources job descriptions, work instructions and Programmes for computer-assisted machines. New Product Launch: Launching a new product or service involves ramp up production. The process has been refined and debugged, but it has yet to operate at a sustained level of production. In ramp up, production starts at a relatively low level of volume as the organization develops confidence in its abilities to execute production consistently and marketing’s abilities to sell the product, 156 CU IDOL SELF LEARNING MATERIAL (SLM)

the volume increases. Launching the new product or service involves co-coordinating the supply chain and rolling out marketing plans. Marketing and production will work in a co- coordinated way during this phase. TECHNIQUES OF PRODUCT DEVELOPMENT Many companies who are known for their creativity and innovation in product design fail to get the new products in to the markets. The problems associated with converting ideas into finished products may be because of poor manufacturing practices and poor design. Design decisions affect sales strategies, efficiency of manufacturing, production cost, speed of maintenance etc. A complete restructuring of decision-making process and the participants in the decision process is essential for improvement in the design process. The over the wall concept of design i.e. a series of walls between various functional areas must be broken down and replaced with new co-operative interaction amongst the people from various functional areas. The improvement of the design process can be achieved through: 1. Multifunctional Design Teams: The team approach to product design has proved to be more beneficial worldwide. The participants of the design team include persons from marketing, manufacturing, and engineering and purchase functions for effective design process. The critical success factor between success and failure of new product launches is involvement and interaction of creates – make and market functions from the beginning of the design product. 2. Marking Design Decisions Concurrently Instead of Sequential Decisions: Concurrent design decisions reduce time and cost of designs decision. Decisions are overlapping rather than sequential concurrent design is an approach to design that teams. Concurrent design process believes in “Cost plus” prices as contrasted by cost minus pricing in concurrent design. 3. Design for Manufacturing and Assembly (DFMA): It is a process of designing a product so that it can be manufactured with ease and economically. It is also called design for production. Designing for production is a concept by which a designer thinks about how the product will be made as the product is being designed so that potential production problems caused by design and can be resolved early in the design process. This concept believes in simplifying design and standardizing parts and processes used. 157 CU IDOL SELF LEARNING MATERIAL (SLM)

The basic principles of DFMA are: a. Minimize the number of parts. b. Use common components and parts. c. Use standard components and tools. d. Simplify assembly. e. Use modularity to obtain variety. f. Make product specifications and tolerances reasonable. g. Ensign products to be robust. 4. Design Review: Before finalizing a design, formal procedures for analyzing possible failures and rigorously assessing the value of every part and components should be followed. The techniques such as failure Mode Effect and Criticality Analysis FMEGAX Value Engineering (VE) and Fault Tree Analysis (FTA). FMECA is a systematic approach to analyzing the causes and effects of product failures. It anticipates failures and prevents them from occurring. Value analysis is a design methodology developed by Lawrence Miles in the late 1940s that focuses on the function of the product, rather than on its structure or form and tries to maximize the economic value of a product or component relative to its cost. Fault Tree Analysis (FTA) emphasizes the interrelationship among failures. It lists failures and their causes in a tree format. 5. Design for Environment: Design for Environment (DOE) involves designing products from recycled materials, using materials or components, which can be recycled. It promotes the concept of green products clean energy and environment friendly products. 6. Quality Function Deployment (QFD): Making design decisions concurrently rather than sequentially requires superior co-ordination amongst all the participants involved in designing, producing, procuring and marketing. QFD is a powerful tool that translates voice of the customer into design requirements and specifications of a product. It is uses inter-functional teams from design, marketing and manufacturing. 158 CU IDOL SELF LEARNING MATERIAL (SLM)

QFD process begins with studying and listening to customers to determine the characteristics of a superior product. Through marketing research, the consumer’s product needs and preferences are defined and broken down into categories called “Customer Requirements” and they are weighed based on their relative importance to the customer. Customer requirements information forms the basis for a matrix called house of quality. By building house of quality matrix, the cross functional QFD teams can use customer feedback to make an engineering, marketing and design decisions. The matrix helps to translate customer requirements in to concrete operating or engineering goals. QFD is a communication and planning tool that promotes better/understanding of customer demands, promotes better understanding of design interactions, involves manufacturing in the design process and provides documentation of the design process. SUMMARY • Product design takes a long time and a great deal of effort. It is important to target the design programme to minimise time and costs and to plan for it to be successfully completed within allocated resources. • Time is very much of the essence, the minimum compatible with optimal development. In a product design plan, there are many activities to be first recognised and then coordinated; some activities are worked in sequence, some in parallel. In particular, multidisciplinary activities are focused in the same direction and coordinated in time. • The master plan coordinates the various people and their mini-projects in an overall time and resource plan so that the product design can be controlled. • For efficient, effective and economical operation in a manufacturing unit of an organization, it is essential to integrate the production planning and control system. Production planning and subsequent production control follow adaption of product design and finalization of a production process. • Production planning and control address a fundamental problem of low productivity, inventory management and resource utilization. • Production planning is required for scheduling, dispatch, inspection, quality management, inventory management, supply management and equipment management. Production control ensures that production team can achieve required production target, optimum utilization of resources, quality management and cost 159 CU IDOL SELF LEARNING MATERIAL (SLM)

savings. • Production planning is one part of production planning and control dealing with basic concepts of what to produce, when to produce, how much to produce, etc. It involves taking a long-term view at overall production planning. Therefore, objectives of production planning are as follows: • To ensure right quantity and quality of raw material, equipment, etc. are available during times of production. • To ensure capacity utilization is in tune with forecast demand at all the time. KEYWORDS • Manufacturing is the production of products for use or sale, using labor and machines, tools, and chemical or biological processing or formulation. • Build to Order is a production approach where products are not built until a confirmed order for products is received. • A transfer line is a manufacturing system which consists of a predetermined sequence of machines connected by an automated material handling system and designed for working on a very small family of parts • Cost of Goods Sold (Cogs): The term appearing on the income statement of a company or plant representing the manufacturing cost of the goods sold. The COGS does not include sales and marketing, engineering, and corporate administration. • Cost Of Sales (Cos): This abbreviation denotes the \"cost of sales\". It denotes all the costs in a plant. It is the sum of materials cost and value added. The COS can also be referred to as \"cost of goods sold\". • Critical Path: That path through a process or activity system that has the longest theoretical flow time LEARNING ACTIVITY 1. Learn and discuss the Cadbury manufacturing process and which type of process they have opted. 160 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Draw a complete document for healthcare company containing Product Design and Development Process. UNIT END QUESTIONS A. Short Descriptive Type Questions 1. Explain the term manufacturing system? 2. Explain the types of manufacturing system? 3. Define production planning and control. 4. Write the process of product design and development. 5. Explain the reasons why product design and development is necessary? What are its objectives? B. Long Descriptive Question 6. Explain what are the approach used in manufacturing for QA? 7. Write characteristics of manufacturing and production design. 8. Illustrate the software’s, which can be useful in manufacturing unit? 9. Explain what is SCAR (Supplier Corrective Action Request)? C. Multiple Choice Questions 1. The purpose of...................is to eliminate those ideas that do not appear to have high potential and so avoid the costs incurred at subsequent stages. a. screening ideas b. Idea generation c. Design process d. Pilot run 161 CU IDOL SELF LEARNING MATERIAL (SLM)

2. The process of preliminary ……… involves building a prototype, testing the prototype, revising the design, retesting and so on until a viable design is determined. a. design b. run c. idea d. none of these 3. Balancing efficiency with ……… translates to profit. a. productivity b. integrity c. manufacturing d. feasibility 4. Scale model used for layout analysis have following advantages a. Nontechnical person finds it easy to comprehend b. Overhead facilities can be shown c. Models can be shifted easily d. All of the above 5. Which are three different bases to establish an activity time? 162 a. Past experience b. Judgement c. Historical data d. All of these CU IDOL SELF LEARNING MATERIAL (SLM)

6. Which of the following is not a part of Five M’s? a. Material b. Machine c. Motion d. Method 7. The correct sequence of operations in production planning and control is a. Routing-Scheduling-Dispatching-Follow up b. Scheduling-Routing- Dispatching-Follow up c. Dispatching-Routing-Scheduling- Follow up d. Routing-Scheduling-Follow up-Dispatching 8. Which of the following is true for ‘Routing’? a. It is flow of work in the plant b. Route sheets include list of machine tools that are to be followed c. It depends upon material handling facilities d. All of these 9. Loading may be defined as 163 a. Sending the raw material to the machine b. Sending the finished material to the store c. Assign the work to the facilities CU IDOL SELF LEARNING MATERIAL (SLM)

d. Uploading a software in machine control panel 10. The bill of material does not consists of a. Part number b. Specifications of part c. Name of the part d. Price of the part Answers 1. a 2. a 3. a 4. d 5. d 6. c 7. a 8. d 9. c 10. d REFERENCES • Stevenson W.J. (2018). Operations Management. New Delhi: Tata McGraw Hills. • Chase, Jacobs, Aquilano & Aggarwal. (2005). Operations Management. New Delhi: Tata McGraw Hills. • John O. McClain and L. Joseph Thomas. (1986). Operations Management. New Delhi: Prentice Hall of India. • D. C. Montgomery, Statistical Quality Control: A Modern Introduction, 7th edition, 2012. • R. G. Poluha: The Quintessence of Supply Chain Management: What You Really Need to Know to Manage Your Processes in Procurement, Manufacturing, Warehousing and Logistics (Quintessence Series). First Edition. Springer Heidelberg New York Dordrecht London 2016. ISBN 978-3662485132. 164 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 8: MANUFACTURING AND SERVICES 165 INDUSTRY-I Structure Learning Objective Introduction Supply Chain Management (SCM) Supply Chain Management-Working Example of Supply Chain: Benefits of Supply Chains Inventory Management Retail inventory management Importance of inventory management Summary Keywords Learning activity Unit end questions References LEARNING OBJECTIVE After studying this unit, you will be able • Explain about service operations • State Meaning, definition and benefits of SCM • Discuss about inventory management and its importance INTRODUCTION CU IDOL SELF LEARNING MATERIAL (SLM)

Service operations consist of working with professional service teams, customer success teams, customer support teams and customer experience teams. What Tools Do Service Operations Work With? While the exact tech stack service operations will help manage and optimize will differ depending on your team structure, it will generally include the following: • Tools for measuring the success and sentiment of customers like feedback surveys and ticketing • Tools for providing self-service support to customers like knowledge bases • Tools for managing your team and their product or service delivery such as project management and enterprise solution management platforms • Tools for customer communications, such as messaging or chat platforms • Tools for mapping and measuring the customer journey • Billing software that customers interact with Ideally, your service operations team should lie parallel to the customer journey and oversee the process from end-to-end. Thus, they should be assisting with the processes and platforms that contribute to every touchpoint in that journey. For example, the onboarding process falls under the umbrella of service operations. The touchpoints between when a prospect closes as a customer and when onboarding is complete are the bridge between sales operations and service operations. Setting up relevant internal projects, enrolling those new customers into workflows, informing internal stakeholders of customer information, providing customers with an internal point of contact information, integrating any necessary tools and setting up the billing process are all responsibilities that would fall under service operations; thus, service operations would use all the tools necessary to accomplish those tasks. Once onboarding is completed, processes related to collecting feedback about client sentiment also fall under service operations. For example, service operations would be responsible for ensuring NPS surveys are sent to the right contacts at the right cadence. Then once a customer responds, there needs to be automation to take the appropriate next step. For example, if there’s positive feedback, a workflow might get triggered to notify the people working with that customer of the good news. On the other hand, a negative survey response would need to trigger an escalation ticket notifying the employees responsible for that 166 CU IDOL SELF LEARNING MATERIAL (SLM)

customer’s success and experience to create a response plan. While the specifics of determining who gets contacted for various outcomes may fall to the leadership of customer success and service teams, ensuring that each automated step occurs properly would be the job of service operations. The Overlap Between Internal Operations and Service Operations You can’t have a great customer experience without a happy internal team delivering that. The tools the internal team uses needs to make them more efficient and scale them up as opposed to bogging them down. If internal tools are difficult to use, team members might have to spend so much time on day- to-day documentation and communication that they’ll struggle to carve out the time to focus on customer success or delivering results. Because of that, service operations can’t effectively operate in a vacuum. They need to work in tandem with the marketing and sales operations leading up to customers closing and the internal operations that enable customer support, service and success teams to do their jobs. SUPPLY CHAIN MANAGEMENT (SCM) Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business's supply-side activities to maximize customer value and gain a competitive advantage in the marketplace. SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible. Supply chains cover everything from production to product development to the information systems needed to direct these undertakings. A supply chain is a network of retailers, distributors, transporters, storage facilities, and suppliers who take part in the production, delivery, and sale of a product that convert and move the goods from raw materials to end users; it describes the processes and organisations involved in converting and conveying the goods from manufactures to consumers. The activities close to the raw material stage are known as upstream activities and activities between the manufacturer and end consumer are downstream activities. Marketing distribution concerns these downstream activities. A typical supply chain consists of multiple companies which coordinate activities to set themselves apart from the competition. A supply chain basically has three key parts: 167 CU IDOL SELF LEARNING MATERIAL (SLM)

i. Supply: It focuses on the raw materials supplied to manufacturing, including how, when, and from what location. ii. Manufacturing: It focuses on converting these raw materials into finished products. iii. Distribution: It focuses on ensuring that these products reach the consumers through an organized network of distributors, warehouses, and retailers. Figure 8.1 Typical supply chain A supply chain strategy defines how the supply chain should operate in order to compete in the market. The strategy evaluates the benefits and costs relating to the operation. While a business strategy focuses on the overall direction a company wishes to pursue, supply chain strategy focuses on the actual operations of the organization and the supply chain that will be used to meet a specific goal. 168 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 8.2 A network of supply chain SUPPLY CHAIN MANAGEMENT-WORKING Typically, SCM attempts to centrally control or link the production, shipment, and distribution of a product. By managing the supply chain, companies are able to cut excess costs and deliver products to the consumer faster. This is done by keeping tighter control of internal inventories, internal production, distribution, sales, and the inventories of company vendors. SCM is based on the idea that nearly every product that comes to market results from the efforts of various organizations that make up a supply chain. Although supply chains have existed for ages, most companies have only recently paid attention to them as a value-add to their operations. In SCM, the supply chain manager coordinates the logistics of all aspects of the supply chain which consists of five parts: The plan or strategy The source (of raw materials or services) Manufacturing (focused on productivity and efficiency) Delivery and logistics The return system (for defective or unwanted products) 169 CU IDOL SELF LEARNING MATERIAL (SLM)

The supply chain manager tries to minimize shortages and keep costs down. The job is not only about logistics and purchasing inventory. According to Salary.com, supply chain managers, “make recommendations to improve productivity, quality, and efficiency of operations.” Improvements in productivity and efficiency go straight to the bottom line of a company and have a real and lasting impact. Good supply chain management keeps companies out of the headlines and away from expensive recalls and lawsuits. 8.3.1 Example of Supply Chain: Consider a customer walks into Spencer Store to purchase beauty soap. The supply chain begins with the customer and his need for beauty soap. The next stage of this supply chain is the Spencer retail store where the customer visits. Spencer stocks its shelves using inventory that may have been supplied from a finished goods warehouse managed by Wal-Mart or received from third party (vendor). The vendor in turn is stocked by the manufacturer [say Hindustan Uni Liver (HUL)]. The HUL manufacturing plant receives raw material from a variety of suppliers who may themselves have been supplied by lower tier suppliers. For example, packaging material may come from Home- foil (an aluminium foil company) while Home-foil receives raw material to manufacture the packaging material from other suppliers. This forms a typical supply chain. Figure 8.3 Stages of a beauty soap supply chain In another example, a customer purchases a wrist watch and traveling bag online from Reliance retail. The supply chain includes, among others, the customer Reliance Website that accepts the customer’s order, the Reliance store, and all of Reliance’s suppliers and their suppliers. The Reliance Website provides the customer with information regarding pricing, product features, and product availability. After selecting the product, the customer clicks on ‘order 170 CU IDOL SELF LEARNING MATERIAL (SLM)

form’ and pays for the product. The customer may later return to the Website to check the status of the order. Thus a typical supply chain may involve a variety of stages discussed as under: (i) Customers. (ii) Retailers. (iii) Wholesalers/Distributors. (iv) Manufacturers. (v) Component/Raw material supplier. BENEFITS OF SUPPLY CHAINS (1) It bridges the gaps between the suppliers and the customers. (2) It helps manufacturers in reducing inventories as finished goods are stored nearer to the customers. (3) It allows firms to conduct operations at an appropriate time and place for the benefits of suppliers and customers. (4) Effective supply chains results in enhanced customer service as retailers get a choice of goods and also carry less stock. (5) Supply chains make movements simple, cost-effective and efficient as transport is simpler. (6) Expertise can be developed in a particular type of operation. (7) It allows firms to conduct operations at an appropriate time and place for the benefits of suppliers and customers. INVENTORY MANAGEMENT As a part of your supply chain, inventory management includes aspects such as controlling and overseeing purchases — from suppliers as well as customers — maintaining the storage of stock, controlling the amount of product for sale, and order fulfillment. Naturally, your company’s precise inventory management meaning will vary based on the types of products you sell and the channels you sell them through. But as long as those basic ingredients are present, you’ll have a solid foundation to build upon. 171 CU IDOL SELF LEARNING MATERIAL (SLM)

Small-to-medium businesses (SMBs) often use Excel, Google Sheets, or other manual tools to keep track of inventory databases and make decisions about ordering. With these systems, the procedures of inventory management extend beyond basic reordering and stock monitoring to encompass everything from end-to-end production and business management to lead time and demand forecasting to metrics, reports, and even accounting. 8.5.1 Retail inventory management Retail is the broadest catch-all term to describe business-to-consumer (B2C) selling. There are essentially two types of retail separated by how and where a sale takes place. First, online retail (ecommerce) where the purchase takes place digitally. Second, offline retail where the purchase is physical through a brick-and-mortar storefront or a salesperson. Wholesale, on the other hand, refers to business-to-business (B2B) selling. Knowing the differences and best practices of retail and wholesale is critical to success. Most businesses maintain stock across multiple channels as well as in multiple locations. The diversity of retail inventory management adds to its complexity and drives home its importance to your brand. IMPORTANCE OF INVENTORY MANAGEMENT For any goods-based businesses, the value of inventory cannot be overstated, which is why inventory management benefits your operational efficiency and longevity. From SMBs to companies already using enterprise resource planning (ERP), without a smart approach, you’ll face an army of challenges, including blown-out costs, loss of profits, poor customer service, and even outright failure. 1. Inventory Control Paves for Competitive Ability The usage of Inventory Management and control benefits inventory control by enhancing market shares thus, paving the way for competitive ability. The best example is Apple’s smart inventory management which gives them a competitive advantage. Commonalities with values, high factor loadings values, and significant mean values are factors taken into consideration in determining a business supports for competitive strength. These factors undoubtedly demonstrate the importance Inventory Management and control, enhances market share and improves competitive ability. 172 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Inventory Planning Improves Service Level It remains the fact that good Inventory Management and power leads to what all business strive for continuity, the repeat clients. If you desire your hard-earned clients to come back to purchase your products and services, it is necessary always to improve your service level enough to be able to match customer request swiftly. Inventory Management and control aid businesses in meeting such demand by permitting you to provide the right levels of hands-on service immediately your customers require them with the desired lead time, highlighting the importance of inventory management, 3. Inventory Planning and Management Reduces Storage Cost These benefits of inventory management envisage on focusing upon Inventory planning and reducing storage costs as you maintain adequate inventories. The central values feature significant factor loadings and commonalities exhibited through proper Inventory Management and control. The factor lowers storage costs and increases revenue by using adequate inventory management and control emphasizing importance of inventory management. 4. High Inventory Turnover Brings Revenues Applying Inventory planning to any business can serve as a bridge to bring in higher revenues. Through proper Inventory Management and control, a company is capable of increasing its profitability. If a business overlooks the benefits of inventory management in its trade, sales, and production, it is possible to hamper maximization of its operational efficiency. Intrinsically, the inventory’s cost of purchase and production has a substantial effect on gross profit. Using lessened cost of production, a business raises its gross profit. That is why proper inventory planning is required. And with all accounts placed as equal, such company would record superior revenues, which in effect, leads to more profits, again substantiating importance of inventory management. 5. You Can Utilize Warehouse Space Better Proper Inventory Management and control involve accounting for all production, purchase, and sale of goods that meets customers’ demand. These benefits of inventory management affect management strategy that supports organizational warehouse in attaining better space management. If you have an unorganized warehouse, you would always find it difficult to handle your inventory effectively. Several businesses elect to enhance their warehouses by arranging higher selling products together in areas that are easily accessible within the warehouse. Performing this process aids in speeding up the order fulfillment and preserves customer’s 173 CU IDOL SELF LEARNING MATERIAL (SLM)

happiness. On the same note, you can find Warehouse Space Optimization: 17 Tactics That Can Be Used to Improve Space useful. 6. Inventory Control Makes Cost Accounting Activities Easier. Better inventory management is surely going to make your financial controller happier and you can be easily in his good books! Business owners often develop internal strategies and measures that will guarantee better control and planning of production and sales. Such approaches involve binding every partaker in the business to delivering activities that make Accounting Activities Easier including managers. Usually, these strategies aid such industry to order, account for inventory values, keep inventory flow, along with assistance on how to control obsolete goods. By executing such plans in inventory planning, several businesses can be able to manage its cash flow well. To enhance your business cash flow, it is expected you set aside some investment into the most effective and practical inventory system that is powerful enough to meet your requirement and is also suitable to match your business environ. For this reason, companies with well thought out plans can save a lot more from the use of active Cost Accounting Activities. Additionally, better Inventory Management and control aid your business in establishing cost benefit for you concerning the financial market conditions. Better cash flow lets companies attain better business and organizational goals. 7. Inventory Control Is Consistent with Safety and Environmental Advantage. Too much inventory in warehouse can be health and safety issue when employs struggle to walk on the shop floor, cannot moves goods easily and it is falling from the shelves. Good inventory management leads to inventory reduction which leads to less packaging which leads to less waste and contribute to environmental advantage. For me one of the best reasons to show importance of inventory management! 8. Regular Supply at Reasonable Prices Builds Customer Confidence Evidently, with better strategies in place, any given organization can use inventory planning and control to improve its cash flow by providing higher customer service at consistent pricing. Inventory control and planning solution allows small business to gain insight into what products are selling more than others. This step will enable them to adjust their product line and to make intelligent business decisions. 174 CU IDOL SELF LEARNING MATERIAL (SLM)

9 Inventory Holding Results in Effective Utilization of Human and Equipment Proper Inventory Management and control solutions save time regarding human resources and equipment usage. Less time expended on managing inventory leads to higher productivity for your business and clients as well. With these benefits of inventory management, your business stays steps ahead of the game and continuously have enough number of products at hand based on inventory movements. I have seen this first hand during my days as Supply Chain Manager, if excess inventory is not your problem and you are hitting your targets, then you can find time to drive Kaizen activities to drive further improvement in supply chain department. 10 Effective Inventory Control Enhances Market Share For companies whose scale of operations does not permit the running of several inventories by product line or SKU, the usage of Proper Inventory Management and control solves it. Nevertheless, in some situations, your business size does not matter since roles and policies have to be set up irrespective of the size of the business. Such procedures and set up will help govern inventory spending and Enhance Market Share. As we already established Inventory Management and control allows business to be able to handle all cash flow prospects. Companies are not continuously able to procure large amounts of inventory, as capital remains a significant factor in doing so. By having proper Inventory Management and control, businesses can recognize precisely what inventory size is needed and when to deploy them. This step can Enhances Market Share and free up other capitals for re-investment. 11 Inventory Control Enhances Product Quality The use of Inventory Management and control can assist in remarkably improving business efficiency and product quality. These benefits of inventory management would aid in eliminating waste, and enhances focus on producing Right First Time or Six Sigma Quality. It remains a fact that having a good inventory management system leads to better success and repetitive customers. If you desire your hard-earned customers always to keep coming, you have to enhance your product quality in the best ways possible. 12 Effective Inventory Control Brings Potential Saving Proper Inventory Management and control can Bring in Potential Saving as benefits of inventory management. These benefits of inventory management provide businesses with monetary and real-time benefits. There is a debate within controllers if inventory reduction 175 CU IDOL SELF LEARNING MATERIAL (SLM)

which leads to reduction of inventory carrying cost, can positively impact the bottom line? For me the answer is Yes! The simple logic is if you reduce $100k of on hand inventory, and put this money in bank to gain interest, which is equivalent to bottom-line benefit. By monitoring which product bring in more sales and what other potentials they have, your business can save more on every effort with an inventory recount to safeguard accurate records. Good Inventory Management and control strategy also benefits businesses in saving money that could otherwise be lost in slow-moving products. No one can deny this as top reason to show the importance of inventory management! 13 Inventory Control Avoids Costly Interruptions in Operation Inventory Management and control are beneficial in limiting the employee’s ability to steal or disrupt your operations. Often costly interruptions in service in businesses can be averted with proper planning. Deprived of inventory control, companies may be none-the-wiser to such disruption. These benefits of inventory management ultimately improve business profitability. By avoiding costly interruptions, businesses can reduce any ‘hidden’ costs. Showing, the importance of inventories management. 14 Inventory Control Strategy Facilitates Purchase Economies Good Inventory Management and control aids in Facilitating Purchase Economies and maintaining steadiness in production operations. This approach is down to the maintenance of smooth flows in accessing raw materials. Consequently, there are no shortages experienced during the production process — these benefits of inventory management aids in reducing the risk of loss due to desuetude or deterioration of items, hence, highlighting the importance of inventory management. Such checks are placed on items regularly. Additionally, selling all slow-moving items promptly and maintains the right stock all Facilitates Purchase Economies. SUMMARY • Like most operations roles, service operations aim to support and amplify a team’s capacity in addition to helping them scale. This is a challenging role because it requires balancing the needs of internal stakeholders and external customers. • Most companies might not have a dedicated service operations team to accommodate the day-to-day need for service operations. Rather, there might be specialists assigned to fulfilling service operations needs on the company’s business operations or revenue operations team. 176 CU IDOL SELF LEARNING MATERIAL (SLM)

• One of the core components in service operations is the setup and maintenance of infrastructure used by the service arm of an organization. That means ensuring not just that the proper tools are in place to maximize the team’s efficiency, but also that the tech stack is easy for their customers to realize value from. Plus internal team members need to be able to easily use the tools and systems in place to create a positive customer experience, monitor customer feedback and progress customer engagements forward. • In addition to maintaining infrastructure, service operations will help with capturing and reporting upon metrics around the teams they support, such as time to resolution, tickets closed, how well services are being delivered, staffing efficiency for teams, customer usage of offerings and the ROI of all of those functions. • If you go to a Supermarket and pick up a few items off the shelf from electronics and white goods or even clothes and look at the labels, the chances are that you will find them having been manufactured in China or Mexico. The coffee pods you buy to use for your everyday use comes from Africa. Computers have been shipped out of South American Factories and Soft furnishings on the shelves are from India and Hong Kong. • Global markets are expanding beyond borders and re-defining the way demand and supplies are managed. Global companies are driven by markets across continents. To keep the cost of manufacturing down, they are forced to keep looking to set up production centers where the cost of raw materials and labor is cheap. Sourcing of raw materials and vendors to supply the right quality, quantity and at right price calls for dynamic procurement strategy spanning across countries. • With the above scenario you find companies procuring materials globally from various vendors to supply raw materials to their factories situated in different continents. The finished goods out of these different factory locations then pass through various chains of distribution network involving warehouses, exports to different countries or local markets, distributors, retailers and finally to the end customer. • In simple language, managing all of the above activities in tandem to manage demand and supply on a global scale is Supply Chain Management. As per definition SCM is the management of a network of all business processes and activities involving procurement of raw materials, manufacturing and distribution management of Finished Goods. SCM is also called the art of management of providing the Right Product, At the Right Time, Right Place and at the Right Cost to the Customer. 177 CU IDOL SELF LEARNING MATERIAL (SLM)

KEYWORDS • Barcode scanner: Physical devices used to check-in and check-out stock items at in- house fulfillment centers and third-party warehouses. • Bundles: Groups of products that are sold as a single product: selling a camera, lens, and bag as one SKU. • Cost of goods sold (COGS): Direct costs associated with production along with the costs of storing those goods. • Deadstock: Items that have never been sold to or used by a customer (typically because it’s outdated in some way). • Decoupling inventory: Also known as safety stock or decoupling stock; refers to inventory that’s set aside as a safety net to mitigate the risk of a complete halt in production if one or more components are unavailable. LEARNING ACTIVITY 1. What Are The Main Supply Chain Challenges Companies Face Today? 2. What are “Push” and “Pull” supply chain management strategies? UNIT END QUESTIONS 178 A. Short Descriptive Type Questions 1. Define Service operations? 2. Define Supply management system. Give example of the same. 3. Explain the benefits of supply chain? 4. Define Inventory management. 5. List out the importance of inventory management? CU IDOL SELF LEARNING MATERIAL (SLM)

B. Long Descriptive Type Questions 6. Explain how SCM works. 7. Explain the affect your supply chain in the future? 8. Explain the main goal of supply chain management? 9. Difference between Logistics vs. Supply Chain Management 10. List out the activities performed at operational level in logistics? C. Multiple Choice Questions 1. What are the benefits of SCM: a. It bridges the gaps between the suppliers and the customers. b. It do not helps manufacturers in reducing inventories as finished goods are stored nearer to the customers. c. It never allows firms to conduct operations at an appropriate time and place for the benefits of suppliers and customers. d. Effective supply chains results in low customer service as retailers get a choice of goods and also carry less stock. 2. As a part of your supply chain, …………….. includes aspects such as controlling and overseeing purchases — from suppliers as well as customers — maintaining the storage of stock, controlling the amount of product for sale, and order fulfillment. a. inventory management b, TQM c. Six sigma d. Service operations 3. The term ––––––––– implies the foregone profit due to inability of company to produce. 179 CU IDOL SELF LEARNING MATERIAL (SLM)

a. Opportunity cost b. Marginal cost c. Overhead cost d. All of the above 4. OC curve of ideal sampling plan suggests that all lots less than 3% defectives have the probability of acceptance of –––––––––. a. 0.25 b. 0.5 c. 0.75 d. 1 5. Which of the following are the objectives of a good maintenance system? a. Minimisation of wear and tear of machines b. Ensuring maximum plant availability c. Both (A) and (B) d. None of these 6 Which of the following is true for supply chain management? 180 a. The physical material moves in the direction of the end of chain b. Flow of cash backwards through the chain c. Exchange of information moves in both the direction d. All of these 7 The sequence of a typical manufacturing supply chain is CU IDOL SELF LEARNING MATERIAL (SLM)

a. Storage–Supplier–manufacturing–storage–distributor–retailer–customer b. Supplier–Storage-manufacturing–storage–distributor–retailer–customer c. Supplier–Storage-manufacturing– distributor–storage–retailer–customer d. Supplier–Storage-manufacturing–storage– retailer–distributor–customer 8 The purpose of supply chain management is a. provide customer satisfaction b. improve quality of a product c. integrating supply and demand management d. increase production 9 Logistics is the part of a supply chain involved with the forward and reverse flow of a. goods b. services c. cash d. All of these 10 Due to small change in customer demands, inventory oscillations become progressively larger looking through the supply chain. This is known as a. Bullwhip effect b. Net chain analysis c. Reverse logistics d. Reverse supply chain Answers 181 CU IDOL SELF LEARNING MATERIAL (SLM)

1. a 2. a 3. a 4. d 5. c 6. d 7. b 8. c 9. d 10. a REFERENCES • Stevenson W.J. (2018). Operations Management. New Delhi: Tata McGraw Hills. • Chase, Jacobs, Aquilano & Aggarwal. (2005). Operations Management. New Delhi: Tata McGraw Hills. • John O. McClain and L. Joseph Thomas. (1986). Operations Management. New Delhi: Prentice Hall of India. • Askin, R. G., C.R. Standridge, Modeling & Analysis of Manufacturing Systems, John Wiley and Sons, New York 1993. • J. A. Buzacott, J. G. Shanthikumar, Stochastic models of manufacturing systems, Prentice Hall, 1993. • D. C. Montgomery, Statistical Quality Control: A Modern Introduction, 7th edition, 2012. 182 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 9: MANUFACTURING AND SERVICES 183 INDUSTRY-II Structure Learning Objectives Introduction Definition Elements Six sigma Forecasting Role of Forecasting Steps in Forecasting Techniques of Forecasting: Summary Keywords Learning Activity Unit end questions References LEARNING OBJECTIVES After studying this unit, you will be able • Explain Quality management • State Six sigma • List Forecasting and techniques of forecasting INTRODUCTION CU IDOL SELF LEARNING MATERIAL (SLM)

Quality management is the act of overseeing all activities and tasks that must be accomplished to maintain a desired level of excellence. This includes the determination of a quality policy, creating and implementing quality planning and assurance, and quality control and quality improvement. It is also referred to as total quality management (TQM). The concept of quality control is quite old. In the recent years, Total Quality Management (TQM) has drawn the world wide attention and is being undertaken in different organisations – both profit as well as non-profit. It is now being adopted as a management philosophy. Many big organizations have recognised the role of TQM in meeting these challenges. The evolution of the concepts and philosophy of TQM has taken many years of trials and tribulations in different organisations all over the world. DEFINITION A total approach to quality is the current thinking of today; which is popularly called total quality management (TQM).The idea behind TQM is to create a quality culture throughout the organisation. The credit for pioneering the concept of TQM should be bestowed upon W.Edward Deming of Japan; who introduced this philosophy in Japan over four decades ago. Gradually, the concept of TQM caught the attention of industrialists, all over the world, including India. Total quality management techniques have brought quality awareness and changes in the attitudes of the employees. Various efforts towards understanding, adopting and promoting TQM are due to the rapid changes taking place in the global economy, changing market conditions, customer’s expectations and mounting competitive pressures. Total Quality management provides the concept that ensures continuous improvement in an organisation. The philosophy of TQM stresses on a systematic, integrated and consistent approach involving everyone and everything in an organisation. It aims at using all people in multifunctional teams to bring about improvements from within the organisation. Everyone associated with the organisation is fully involved in continuous improvement (including its customers and suppliers if feasible). “Total Quality Management (TQM) is an approach to improving the effectiveness and flexibility of business as a whole. It is essentially a way of organising and involving the whole organisation, every department every activity, every single person at every level.” —Oakland 184 CU IDOL SELF LEARNING MATERIAL (SLM)

“Total Quality Management is a combination of socio-technical process towards doing the right things (externally), everything right (interally), first time and all the time with economic viability considered at each stage of each process.” —Zaire and Simintiras “TQM is the systematic analysis, but the focus is turning from a process driven by external controls through procedure compliance and enhancement to a process of habitual improvement where control is embedded within and is driven by the culture of the organisation.” —Foster and Whittle “TQM is a strategic approach to produce the best product and service possible through constant innovation.” —Atkinson “TQM is a management system, not a series of programs, it is a system that puts customer satisfaction before profit. It is a system that comprises a set of integrated philosophies, tools and processes used to accomplish business objectives by creating delighted customers and happy employees. ” —Price and Chell ELEMENTS (i) Meeting Customers’ Requirements: Customer satisfaction is the key to the survival and growth of an organisation. TQM aims at best satisfying the requirements of customers which never remain constant; but keep changing with changes in environment and needs, preferences etc. of customers. (ii) Continuous Improvement: TQM is a total concept. It involves the integration of all functions and processes within an organisation, in order to achieve continuous improvement in the quality of products/services. Moreover, quality is a dynamic concept. With advancement in technology, an organisation must adopt new processes and redesign products to yield continuous improvement in quality to give the best advantage of technology to customers. 185 CU IDOL SELF LEARNING MATERIAL (SLM)

(iii) Involvement of all Employees: TQM is called people’s success. According to TQM philosophy, quality is not the responsibility only of production personnel. Rather it is a company-wide responsibility. TQM can be successful only when the total organisation is quality-conscious. Hence the nomenclature of this philosophy as TQM i.e. totals quality management. TQM calls for improvement in the quality of work of all employees through popularizing the concept of quality culture. In fact, TQM should be the concern of all managers and workers, in the organisation. SIX SIGMA Six Sigma, developed initially by Motorola and popularised by General Electric, is a widely accepted quality improvement initiative. The basic elements of six sigma are statistical process control, failure mode effects analyses, gage repeatability, reproducibility studies and other similar methodologies. The objective of Six Sigma implementation is to identify and eliminate sources of variability. It is a quality objective that specifies the variability required by a process so that the quality and reliability meet and exceed the demanding customer requirements. Successful implementation of Six Sigma initiative enables Organization to eliminate waste, hidden rework, and undesirable variability in the process. The resultant quality and cost improvements will drive the continual improvement. Six Sigma implementation involves five stages known as D M A I C, i.e., Define, Measure, Analyse, Improve and Control. In failure mode and effect analyses, one has to perform cost benefit analyses and implement alternatives and validate improvements. In the services industry, customer satisfaction is mostly non-tangible and depends upon the moment’s experience. Irrespective of the fact whether it is a service industry or manufacturing industry, Six Sigma focuses on process, tools, customer, opportunity and success versus defects (variability). In order to improve customer satisfaction in the service industry, the focus should be on understanding what is important to customer and minimise the variations. More precisely, Six Sigma enables to define the true customer requirements, improve and measure key process, manage business with true metrics and provide value to the business by I improving effectiveness. The implementation of the Six Sigma process in the service industry is the same as that of the manufacturing industry, the only difference lies in the scope and magnitude of the problems. 186 CU IDOL SELF LEARNING MATERIAL (SLM)

Some of the typical areas for investigating and minimising variations in the service industry include the following: Absenteeism, Recruitment and Retention process within individual departments, data integrity, responsiveness at customer centres, health and safety process and training effectiveness. The effective implementation of the Six Sigma programme calls for proper training to the executives. There are several levels of training in the process, which follow the general model of plan, train, apply and review. Six Sigma is the statistical application of Total quality management (TQM) to achieve a new paradigm in customer quality. Sigma quality level describes the output of a process. Six Sigma goes beyond defect reduction to emphasize on the business-process improvement in general, which includes cost reduction, cycle-time improvement, increased customer satisfaction, and any other metric important to the company. Six Sigma can now imply a whole culture of strategies, tools, and statistical methodologies to improve the bottom-line of companies. To leapfrog ahead of competition in this world of uncertainty, the corporate world is experimenting with one process after another. From ‘conformance to standards’ to ‘achieving total quality’, the focus has now shifted to ‘adding economic value and practical utility to both the organization and the customer’. Realizing value entitlement both by the customers and the organizations is now the determinant of business relationships. It is now a win-win situation for both. For customers, it is their rightful expectation to buy quality products at competitive costs, while for organizations it is to produce at the highest possible profit. This synergy is what everybody tries to achieve in this corporate world. Rejection allowance and unavoidable rejection (UR) are now forbidden words. Six Sigma, as a business process is now allowing organizations to improve their bottom-line by designing and monitoring business activities in a way that minimizes waste of resources without compromising with customer satisfaction. Six Sigma process is broader than TQM programmes. While TQM focuses on detecting and correcting defects, Six Sigma re-creates the processes to ensure that defects never arise, right from the beginning. From the organizations’ point of view, it provides the maximum value in the form of increased profits, and from the customers’ point of view, it provides maximum value in terms of high-quality products and services at competitive costs. Sigma is a letter in the Greek alphabet and is used to denote the standard deviation of a process. As a concept it was first developed by a consortium including Motorola from the 187 CU IDOL SELF LEARNING MATERIAL (SLM)

mid-1980s and was adopted by many major manufacturing organizations including General Electric (GE). Now, however, it is applied in other organizations also. For example, GE Capital, the world’s first service-transaction-based company introduced this in 1996. Broadly, Six Sigma is the statistical application of Total quality management (TQM) to achieve a new paradigm in customer quality. Sigma quality level describes the output of a process. Six Sigma goes beyond defect reduction to emphasize on the business-process improvement in general, which includes cost reduction, cycle-time improvement, increased customer satisfaction, and any other metric important to the company. Six Sigma can now imply a whole culture of strategies, tools, and statistical methodologies to improve the bottom-line of companies. An objective of Six Sigma is to eliminate every molecule of waste that can be found in an organization’s processes. Substantial bottom-line benefits can be achieved by organizations practising the Six Sigma breakthrough strategy through the improvement of cycle time, reduction of defects, cost reduction, etc. Quite often, organizations are perplexed at having to adopt yet another strategy and wonder why they should consider Six Sigma. The answer to this is simple—today’s organizations are customer-centric. Customers from the base of today’s world market and companies want to send to them a clear message—that they produce high-quality products at lower costs with greater responsiveness. Six Sigma helps an organization in achieving these objectives when aligned with other initiatives as part of a business strategy. Higher Sigma values indicate better quality products and lower sigma values represent lower quality products. At the Six Sigma level, products are virtually defect free, that is, it allows for 3.4 defects per million opportunities (DPMO) only. FORECASTING In preparing plans for the future, the management authority has to make some predictions about what is likely to happen in the future. It shows that the managers know something of future happenings even before things actually happen. Forecasting provides them this knowledge. Forecasting is the process of estimating the relevant events of future, based on the analysis of their past and present behaviour. The future cannot be probed unless one knows how the events have occurred in the past and how they are occurring presently. The past and present analysis of events provides the base helpful for collecting information about their future occurrence. 188 CU IDOL SELF LEARNING MATERIAL (SLM)

Thus, forecasting may be defined as the process of assessing the future normally using calculations and projections that take account of the past performance, current trends, and anticipated changes in the foreseeable period ahead. Whenever the managers plan business operations and organisational set-up for the years ahead, they have to take into account the past, the present and the prevailing economic, political and social conditions. Forecasting provides a logical basis for determining in advance the nature of future business operations and the basis for managerial decisions about the material, personnel and other requirements. It is, thus, the basis of planning, when a business enterprise makes an attempt to look into the future in a systematic and concentrated way, it may discover certain aspects of its operations requiring special attention. However, it must be recognised that the process of forecasting involves an element of guesswork and the managers cannot stay satisfied and relaxed after having prepared a forecast. The forecast will have to be constantly monitored and revised—particularly when it relates to a long- term period. The managers should try to reduce the element of guesswork in preparing forecasts by collecting the relevant data using the scientific techniques of analysis and inference. ROLE OF FORECASTING Since planning involves the future, no usable plan can be made unless the manager is able to take all possible future events into account. This explains why forecasting is a critical element in the planning process. In fact, every decision in the organisation is based on some sort of forecasting. It helps the managers in the following ways: 1. Basis of Planning: Forecasting is the key to planning. It generates the planning process. Planning decides the future course of action which is expected to take place in certain circumstances and conditions. Unless the managers know these conditions, they cannot go for effective planning. Forecasting provides the knowledge of planning premises within which the managers can analyse their strengths and weaknesses and can take appropriate actions in advance before actually they are put out of market. Forecasting provides the knowledge about the nature of future conditions. 2. Promotion of Organization: 189 CU IDOL SELF LEARNING MATERIAL (SLM)

The objectives of an organisation are achieved through the performance of certain activities. What activities should be performed depends on the expected outcome of these activities. Since expected outcome depends on future events and the way of performing various activities, forecasting of future events is of direct relevance in achieving an objective. 3. Facilitating Co-ordination and Control: Forecasting indirectly provides the way for effective co-ordination and control. Forecasting requires information about various factors. Information is collected from various internal and external sources. Almost all units of the organisation are involved in this process. It provides interactive opportunities for better unity and co-ordination in the planning process. Similarly, forecasting can provide relevant information for exercising control. The managers can know their weaknesses in the forecasting process and they can take suitable action to overcome these. 4. Success in Organisation: All business enterprises are characterised by risk and have to work within the ups and downs of the industry. The risk depends on the future happenings and forecasting provides help to overcome the problem of uncertainties. Though forecasting cannot check the future happenings, it provides clues about those and indicates when the alternative actions should be taken. Managers can save their business and face the unfortunate happenings if they know in advance what is going to happen. STEPS IN FORECASTING The process of forecasting generally involves the following steps: 1. Developing the Basis: The future estimates of various business operations will have to be based on the results obtainable through systematic investigation of the economy, products and industry. 2. Estimation of Future Operations: On the basis of the data collected through systematic investigation into the economy and industry situation, the manager has to prepare quantitative estimates of the future scale of business operations. Here the managers will have to take into account the planning premises. 3. Regulation of Forecasts: 190 CU IDOL SELF LEARNING MATERIAL (SLM)

It has already been indicated that the managers cannot take it easy after they have formulated a business forecast. They have to constantly compare the actual operations with the forecasts prepared in order to find out the reasons for any deviations from forecasts. This helps in making more realistic forecasts for future. 4. Review of the Forecasting Process: Having determined the deviations of the actual performances from the positions forecast by the managers, it will be necessary to examine the procedures adopted for the purpose so that improvements can be made in the method of forecasting. TECHNIQUES OF FORECASTING: There are various methods of forecasting. However, no method can be suggested as universally applicable. In fact, most of the forecasts are done by combining various methods. A brief discussion of the major forecasting methods is given below: 1. Historical Analogy Method: Under this method, forecast in regard to a particular situation is based on some analogous conditions elsewhere in the past. The economic situation of a country can be predicted by making comparison with the advanced countries at a particular stage through which the country is presently passing. Similarly, it has been observed that if anything is invented in some part of the world, this is adopted in other countries after a gap of a certain time. Thus, based on analogy, a general forecast can be made about the nature of events in the economic system of the country. It is often suggested that social analogies have helped in indicating the trends of changes in the norms of business behaviour in terms of life. Likewise, changes in the norms of business behaviour in terms of attitude of the workers against inequality, find similarities in various countries at various stages of the history of industrial growth. Thus, this method gives a broad indication about the future events of general nature. 1. Survey Method: Surveys can be conducted to gather information on the intentions of the concerned people. For example, information may be collected through surveys about the probable expenditure of consumers on various items. Both quantitative and qualitative information may be collected by this method. 191 CU IDOL SELF LEARNING MATERIAL (SLM)

On the basis of such surveys, demand for various products can be projected. Survey method is suitable for forecasting demand—both of existing and new products. To limit the cost and time, the survey may be restricted to a sample from the prospective consumers. 2. Opinion Poll: Opinion poll is conducted to assess the opinion of the experienced persons and experts in the particular field whose views carry a lot of weight. For example, opinion polls are very popular to predict the outcome of elections in many countries including India. Similarly, an opinion poll of the sales representatives, wholesalers or marketing experts may be helpful in formulating demand projections. If opinion polls give widely divergent views, the experts may be called for discussion and explanation of why they are holding a particular view. They may be asked to comment on the views of the others, to revise their views in the context of the opposite views, and consensus may emerge. Then, it becomes the estimate of future events. 4. Business Barometers: A barometer is used to measure the atmospheric pressure. In the same way, index numbers are used to measure the state of an economy between two or more periods. These index numbers are the device to study the trends, seasonal fluctuations, cyclical movements, and irregular fluctuations. These index numbers, when used in combination with one another, provide indications as to the direction in which the economy is proceeding. Thus, with the business activity index numbers, it becomes easy to forecast the future course of action. However, it should be kept in mind that business barometers have their own limitations and they are not sure road to success. All types of business do not follow the general trend but different index numbers have to be prepared for different activities, etc. 5. Time Series Analysis: Time series analysis involves decomposition of historical series into its various components, viz. trend, seasonal variances, cyclical variations, and random variances. When the various components of a time series are separated, the variation of a particular situation, the subject under study, can be known over the period of time and projection can be made about the future. A trend can be known over the period of time which may be true for the future also. However, time series analysis should be used as a basis for forecasting when data are available for a 192 CU IDOL SELF LEARNING MATERIAL (SLM)

long period of time and tendencies disclosed by the trend and seasonal factors are fairly clear and stable. 6. Regression Analysis: Regression analysis is meant to disclose the relative movements of two or more inter-related series. It is used to estimate the changes in one variable as a result of specified changes in other variable or variables. In economic and business situations, a number of factors affect a business activity simultaneously. Regression analysis helps in isolating the effects of such factors to a great extent. For example, if we know that there is a positive relationship between advertising expenditure and volume of sales or between sales and profit, it is possible to have estimate of the sales on the basis of advertising, or of the profit on the basis of projected sales, provided other things remain the same. 7. Input-Output Analysis: According to this method, a forecast of output is based on given input if relationship between input and output is known. Similarly, input requirement can be forecast on the basis of final output with a given input-output relationship. The basis of this technique is that the various sectors of economy are inter-related and such inter-relationships are well-established. For example, coal requirement of the country can be predicted on the basis of its usage rate in various sectors like industry, transport, household, etc. and how the various sectors behave in future. This technique yields sector-wise forecasts and is extensively used in forecasting business events as the data required for its application are easily obtained. SUMMARY • A total approach to quality is the current thinking of today; which is popularly called total quality management (TQM). • Six Sigma, developed initially by Motorola and popularised by General Electric, is a widely accepted quality improvement initiative. The basic elements of six sigma are statistical process control, failure mode effects analyses, gage repeatability, reproducibility studies and other similar methodologies. • Forecasting provides them this knowledge. Forecasting is the process of estimating the relevant events of future, based on the analysis of their past and present behavior • Forecasting is the art and science of predicting what will happen in the future. 193 CU IDOL SELF LEARNING MATERIAL (SLM)

Sometimes that is determined by a mathematical method; sometimes it is based on the intuition of the operations manager. Most forecasts and end decisions are a combination of both. • There are three major types of forecasting, regardless of time horizon, that are used by organizations. 1. Economic forecasts address the business cycle. They predict housing starts, inflation rates, money supplies, and other indicators. 2. Technological forecasts monitor rates of technological progress. This keeps organizations abreast of trends and can result in exciting new products. New products may require new facilities and equipment, which must be planned for in the appropriate time frame. 3. Demand forecasts deal with the company's products and estimate consumer demand. These are also referred to as sales forecasts, which have multiple purposes. In addition to driving scheduling, production, and capacity, they are also inputs to financial, personnel, and marketing future plans. KEYWORDS • Demand forecasting: is a field of predictive analytics which tries to understand and predict customer demand to optimize supply decisions by corporate supply chain and business management. • Forecast: In statistics, a forecast error is the difference between the actual or real and the predicted or forecast value of a time series or any other phenomenon of interest. • Six Sigma (6σ): is a set of techniques and tools for process improvement. It was introduced by American engineer Bill Smith while working at Motorola in 1986 • DFM: Design for manufacturing. The process by which designs are completed mindful of the cost of manufacturing. • DIES: Those special forms that are used in general purpose equipment to make specific parts. See tooling also. LEARNING ACTIVITY 1. Learn about your organization Six sigma techniques and write down the objectives and result. 194 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Discuss and differentiate between various forecasting Techniques. UNIT END QUESTIONS A. Short Descriptive Type Questions 1. Explain the Quality management? Define quality management. 2. Illustrate the elements of quality management? 3. Explain sig sigma concept. 4. Define forecasting. How it is interrelated to operations management. 5. List out the steps involved in forecasting? B. Long Types Questions 6. Write the techniques used in forecasting. 7. Compare the demand planning and demand forecasting? 8. At what level of aggregation would you suggest measuring accuracy, and/or what considerations should be made in deciding? 9. We have a new chief sales officer who is proposing that we should forecast in dollars, not in units/cases. I have never heard of anyone forecasting in dollars. It is true that dollarized forecasts can help Sales in knowing precisely what sales target they should be hitting. But, is it the best practice? 10. How can input from social media help in demand planning? C. Multiple Choice Questions 1. Under this method, forecast in regard to a particular situation is based on some analogous conditions elsewhere in the past. a. Historic analog method 195 CU IDOL SELF LEARNING MATERIAL (SLM)

b. Survey method c. Barometer method d. Opinion poll 2. ………can be conducted to gather information on the intentions of the concerned people. a. Surveys b. Polls c. Selecting d. Agreements 3. Six Sigma, developed initially by ……… and popularised by General Electric, is a widely accepted quality improvement initiative. a. Motorola b. Relaince c. GE d. HUL 4. ………… aims at best satisfying the requirements of customers which never remain constant; but keep changing with changes in environment and needs, preferences etc. of customers. a. TQM b. QM c. Sixsigma d. JIT 196 CU IDOL SELF LEARNING MATERIAL (SLM)

5......................... is the difference between the actual or real and the predicted or forecast value of a time series or any other phenomenon of interest? a. Forecast error b. One tail error c. Two tail error d. None of these 6. The forecasting time horizon that would typically be easiest to predict for would be the a. short-range. b. medium-range. c. intermediate range. d. long-range. 7. A forecast that projects a company's sales is a(n): a. economic forecast. b. technological forecast. c. demand forecast. d. associative model. 8. Quantitative methods of forecasting include 197 a. sales force composite. b. consumer market survey. c. jury of executive opinion. CU IDOL SELF LEARNING MATERIAL (SLM)

d. exponential smoothing. 9. The method that considers several variables that are related to the variable being predicted is a. weighted moving average. b. exponential smoothing. c. multiple regression. d. None of these 10. The forecasting model that is based upon salesperson's estimates of expected sales is consumer market survey. a. Delphi method. b. jury of executive opinion. c. sales force composite. d. None of these Answers 1. a 2. a 3. a 4. a 5. a 6. a 7. c 8. d 9. c 10. c REFERENCES • Stevenson W.J. (2018). Operations Management. New Delhi: Tata McGraw Hills. • Chase, Jacobs, Aquilano & Aggarwal. (2005). Operations Management. New Delhi: Tata McGraw Hills. • John O. McClain and L. Joseph Thomas. (1986). Operations Management. New Delhi: Prentice Hall of India. • OperationsAcademia.org: The state-of-the-art of PhD research in Operations Research/Management Science and related disciplines Retrieved on October 22, 2016 198 CU IDOL SELF LEARNING MATERIAL (SLM)