The Operations Magazine, Spring edition, 2014

Issues in Sourcing Quality in Supply chainCOVER STORY

MAGISTER OPERANDI

EXPERTS VIEWCEO, Benchmark Six Sigma

ROOBAROO

The Journey of ChallengesMr. Abhineet

Co-founder, pulpypapaya.com

Omnipotent Six SigmaMr. Vishwadeep Khatri

Man behind the 'Toyota Way'

ROOBAROO

Learning from the journey of the Achievers

IN-FOCUS

sheeAshee

Eiji Toyoda

Dear readers, Greetings from Shailesh J. Mehta School of Management!! We welcome you to the Spring edition of Magister Operandi: Bi-annual Operations Magazine by Opera, The Operations and Supply Chain club of Shailesh J. Mehta School of Management(SJMSoM), IIT Bombay. The vision of the club is to impart basic knowledge and guidance in the domain of operations and supply chain management to all the budding managers. With this magazine they have tried to bring out how everyone views the world around them through the operations lens. “The illiterate of this century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn” – Alvin Toffler. Opera, the operations and Supply chain club at SJMSoM, IIT Bombay serves as a platform for the students, faculty members and industry practitioners for sharing of knowledge in the field of operations and supply chain management. The club tries to acquire as much as knowledge as they can and they try and share it with everyone. I sincerely hope that Opera will reach new heights with the unmatched enthusiasm and talent of the entire team. The articles in this issue give you the usual flavour of operations but with a lot of focus on incremental and radical change that innovations in this field can bring in our day to day lives. You will find some suggestions, some critics, and a lot of insights on the way it can happen. Efficiency has been dealt with quite thoroughly in various sections. The articles cover a variety of areas like evolving cold chains, impact of IT trends in logistics and SCM, anticipatory shipping and sustainable innovations happening in this field. This is just a glimpse of what we aim to bring to you in the future. From the spring edition of Magister Operandi issue, we intend to reach more readers and seeking significant contribution from our new readers. Magister Operandi is a platform where we share and acquire knowledge about operations & supply chain management related activities, trend in industries around and prepare ourselves as integrative managers to face the future challenges. It’s the purpose of our life to spread the knowledge and experience to the benefit of entire society at large. I hope that this magazine will help you gain more insights into the developments in the field of operations across the world. I also take this opportunity to congratulate Opera club members for the effort behind the creation of this magazine and to everyone who could contribute to this magazine. Best Wishes and Regards, Prof. Gajendra K. Adil Head of Department, Shailesh J. Mehta School of Management IIT Bombay

From HOD’s Desk ….

Dear Readers,

I am excited to present to you the Spring 2014 edition of SJMSoM’s

Opera Magazine, with its collection of timely and thoughtful articles on

Operations Management (OM). The articles range from scholarly,

insightful articles from our School faculty who are amongst the country’s

foremost researchers, to thought-provoking articles from our young

minds, the budding Operations Managers of the future.

The topics reflect some of the major trends in the field. Although OM as

a management function has reached a certain level of sophistication and

rigor that can be the envy of many other functions, it has kept itself

nimble and adaptable to changes happening in the outside world.

Today’s economy is dominated by services, and the importance of

service OM is only going to increase in the coming years. It is in this

spirit that Prof Pankaj Dutta takes up a classic inventory model, the

Newsvendor problem, and finds novel applications of the same by

applying it to service industries to suggest techniques/tools for

managers make better decisions.

AnOther notable change is the focus shifting from local echelon to

holistic supply chain thinking. Prof Indrajit Mukherjee, an expert in

Quality Management, applies those concepts to address quality issues in

integrated supply chains.

Five other articles by doctoral students and Masters students bring to us

insights into some of the trending business phenomena, such as Online

retailing boom (Ph.d. Scholar Abhijit Bhagwat), cold supply chains

(Anmol Dhupar), Impact of Big Data on logistics and SCM (Arnab

Mukherjee, Kavea Madhanagopal & Abhishek Ramchandran),

Anticipatory shipping (Jahid Hassan & Priyam Chaudhary), and

Sustainable supply chain management.

OM within SJMSOM continues to grow from strength to strength. Some

of the specific heartening changes that I see happening are increased

collaboration between the “research” world of faculty and doctoral

students, and the more immediate and applied “practice” world of MoM

students. Over the years I see increased interest and collaborations,

with MoM students involving themselves in faculty research projects,

and doctoral students guiding and mentoring of Masters’ student

projects, thereby creating synergies. In the coming years I would also

like to see our field taking a more interdisciplinary approach, thereby

moving up from being seen as an “operational” level function to a more

“strategic” level function, and I hope this edition of Opera will create

some buzz in that direction.

Let us now hear from the authors themselves.

With best wishes,

Prof. T T Niranjan

Prof. T T Niranjan Faculty Coordinator Opera Club

Faculty Coordinator’s Message….

Greetings from Team Opera...

Team Opera, Operations club of SJMSoM, IIT Bombay, brings you „Magister Operandi‟, the biannual operations

magazine of SJMSoM, IIT Bombay. The editorial team has new blood altogether and we bring this edition to you

with lot of enthusiasm and hope that it helps build new perspectives and insights to add to your knowledge.

Before we introduce you to the intriguing world of operations management we would like to take this

opportunity to thank each and every one of you who has contributed for the magazine.

In this edition we bring to you six different sections dealing with varied concepts from various dimensions of

this domain. In the “Student Corner” we have selected and included some of the articles which we got as an

overwhelming response to the article writing competition.

In the “Faculty Corner” we have included some interesting insights on the e-commerce industries & application

of news vendor problem in the field of inventory management contributed by our distinguished faculties.

Our “Cover Story” focuses on how in this era of global competitiveness and rapid changes in technology,

industries are thriving hard to remain competitive by increasingly focusing and tackling issues in sourcing from

suppliers to gain competitive advantage.

In “In-Focus” section we have included a brief biography of Eiji Toyoda who has contributed and changed the

field of operations and SCM to what we see today. No one can explain the intricacies and problems involved with

supply chain and logistics better than a founder of an e-commerce startup himself. For the same reasons, we

also interviewed Mr. Abhineet, the founder of e-commerce startup www.pulpypapaya.com. We also have

included an article from Mr. Vishwadeep Khatri, CEO and Lean Six Sigma expert from Benchmark Six Sigma

which will take you through a simplified world of six sigma practices and how they could help each one of you in

your careers as well as day to day activities at your respective organisation

We also have an “Opera Corner” section, where all the activities of „Opera- The Operations club of SJMSoM‟

throughout the academic year have been briefly described. This also includes excerpts of an interview from the

campus winners of case study challenge by Marico.

We also have a “Fun Zone” to tickle your grey cells when you feel like you are overburdened with the loads of

knowledge that this magazine contains.

Team Opera would like to take this opportunity to express gratitude towards Prof. Gajendra K. Adil, HOD,

SJMSoM, Prof. T.T. Niranjan, Faculty co-ordinator, Opera club, Prof. Pankaj Dutta and Prof. Indrajeet

Mukharjee who supported us in this endeavour.

So get set to enter into the world of Operations Management where a plethora of ideas and concepts await your

perusal.

HAPPY READING..!!

Team Opera

Prashant Srivastava Parthajit Dutta Akash Chaudhari

Shreerang Kamble Anuvrat Gupta Rakesh Devadas

From the Editorial Desk ….

Issues in Sourcing Quality in

Supply Chain

Eiji Toyoda: The Man

Who Saved Kaizen

Abhineet Agarwal

Co-Founder, Pulpypapaya.com

Campus Winners, Marico-

Over The Wall 2014

Vishwadeep Khatri

CEO, Benchmark Six Sigma Magis

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Anticipatory Shipping: Is It Here

to Stay?

Impact of Cloud Computing & Big

Data on Logistics & SCM

Reverse Logistics- Path to Achieve

Sustainable Supply Chain

RFID - Innovations in Logistics

& Supply Chain Management

Anticipatory Shipping: The New

Buzz in Logistics & E-Commerce

Big Data and Burberry

Evolving Cold Chain: A Way to

Optimize SC and Operations

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Operations Quiz

Leagile at Avenues

Newsvendor Problem-Applications

in Inventory Management

The Big Bang of E-commerce

Operations Continuum

Warehouse Visit to Dow

Chemicals and CCI Logistics

Crossword

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Eiji Toyoda was a Japanese industrialist who was

responsible for bringing Toyota Motor Corporation to

profitability and worldwide prominence during his tenure

as president and later, as chairman.

Toyoda studied mechanical engineering at

Tokyo Imperial University from 1933 to 1936. During

this time his cousin Kiichiro established an automobile

produced just over 2,500 automobiles. The Ford plant in

contrast manufactured 8,000 vehicles a day. Due to this

experience, Toyoda decided to adopt US automobile mass

production methods but with a qualitative twist.

Toyoda collaborated with Taiichi Ohno, a

veteran loom machinist, to develop core concepts of what

later became known as the 'Toyota Way', such as the

plant at the conclusion of his degree and throughout their

lives they shared a deep friendship that ultimately led to

starting of Toyota.

Toyoda visited Ford's River Rouge Plant at Dearborn,

Michigan during the early 1950s. He was awed by the

scale of the facility but dismissive of what he saw as its

inefficiencies. Toyota Motor had been in the business of

manufacturing cars for 13 years at this stage, and had

Kanban system of labelling parts used on assembly lines,

which was an early precursor to bar codes. They also fine-

tuned the concept of Kaizen, a process of incremental but

constant improvements designed to cut production and

labour costs while boosting overall quality.

Toyota approached the welfare of all

constituents of the company-- the livelihood of its

employees, the desires of its customers, the welfare of the

Eiji Toyoda: The Man Who Saved Kaizen

Vijay Krishnan Shailesh J. Mehta School of Management, IIT Bombay

12 September 1913 - 17 September 2013 Nationality: Japanese

Known For: Toyota Way

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subsidiaries and partner companies and even competitors -

- with full awareness of the responsibility that executive

decision-making entails. That awareness was reflected in

everything, from hiring decisions, to expansion strategy,

and even to small matters concerning the construction of a

new physical facility. Little is left to casual consideration

when every investment is thought of as a long-term

obligation: “I’m hiring this person today -- do I think I

will need him in 20 years? We’re constructing a new

building in one of our communities -- are we committed

to invest in the business locally to justify all that that

entails?” Eiji wanted to tour every Toyota facility, even as

global operations became more and more far-flung. Each

new undertaking wasn’t just a matter of the dollars and

yen of an ROI calculation. It was the beginning of a

commitment.

He engineered the successful Toyota-GM join

venture in California known as NUMMI, which

established the first Toyota culture and Toyota

production system in the USA. He showed us the value

of limiting WIP and avoiding overproduction by

providing the space and resources for the kanban system

to develop at Toyota. He built a kaizen culture by being

a leader who lived the core beliefs by example for a

quarter of a decade. Once he famously said

“People are the most important asset of Toyota, and

the determinant of the rise and fall of Toyota. “

He also recognized that what a business can

and should do is to commit to uphold commitment to

meet obligations to its people, to do everything within

its power to live up to the responsibilities it takes on.

Eiji described himself as forward-looking, never

thinking much about the past. He recognized that the

future is unpredictable, and he was determined to face

it with a spirit of “Let’s turn our attention there and do

what we can do, then tackle each challenge as it

appears.”

As a managing director of Toyota Motor,

Toyoda failed in his first attempt to crack the U.S.

market with the underpowered Toyota Crown sedan in

the 1950s, but he succeeded with the Toyota Corolla

compact in 1968, a year after taking over as president

of the company. During the car's development phase,

Toyoda, as executive vice-president, had to overcome

the objections of then-president Fukio Nakagawa to

install a newly developed 1.0-liter engine, air

conditioning and automatic transmissions in the

Corolla.

On continuous improvement, he said:

“It is not mechanical thinking. You can get water even

from a dry towel if you use your mind.”

Significantly, Eiji Toyoda made it not only safe

for workers to stop work to alert their leaders to

problems, but made it an absolute requirement. When

engineers and managers made mistakes, which were

typically more expensive than those made by workers on

the production floor, he let them know that he considered

this the price of educating them.

Appointed the fifth president of Toyota Motor,

Toyoda went on to become the company's longest serving

chief executive thus far. In 1981, he stepped down as

president and assumed the title of chairman. He was

succeeded as president by Shoichiro Toyoda. In 1983, as

chairman, Eiji decided to compete in the luxury car

market, which culminated in the 1989 introduction of

Lexus. Toyoda stepped down as chairman of Toyota in

1994 at the age of 81. Even after he retired, the respect

afforded Eiji among Toyota executives was palpable and

frequently expressed: “What would Eiji think, do, say?”

So, surely he is a good authority on the evasive topic of

“leadership.”

Eiji Toyoda taught that we must abandon our

biases and preconceived notions, rely the intelligence and

creativity of people and never give up looking for better

ways.

During this time Eiji began telling his story in a

series of articles in Japan’s top business newspaper, the

Nihon Keizai Shinbun. One year later, those articles were

compiled and published in a book called Ketsudan

(Decision). They were published two years after that in

an English translation with the title Fifty Years in Motion

-- an Autobiography by the Chairman. Unfortunately,

parts of the original articles were edited out of the

Japanese book and parts of the Japanese book were

further edited out in the English book. So, here is my own

translation of my favorite Eiji quote:

“The people at the top are just flag-wavers. It is muda to

wave your flag and have no one follow. What’s

important is to wave your flag in a way that makes

people want to follow.”

Eiji Toyoda passed away on Sept 2013 at the

age of 100. It is with love and gratitude that we

remember the man who forever changed how the world

improves the way we work.

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Magister Operandi Spring ’14

Radio frequency identification (RFID) technology uses

radio waves to automatically identify physical objects

(either living beings or inanimate items). RFID is an

example of automatic identification technology. Data on

Market Opportunities:

IDTechEx find that in 2013, the total RFID market is

worth $7.88 billion, up from $6.98 billion in 2012, and

growing to $9.2 billion in 2014. This includes tags,

the object (i.e. serial numbers; object information, etc.)

are stored in the RFID chips embedded in or attached to

the object. Using an RFID reader, the identity of the

object (data on the object) can be interpreted in a

collection of Tag, Reader, Reader Antenna, Controller,

readers and software/services for RFID cards, labels,

fobs and all other form factors. IDTechEx forecast that

RFID market would rise to $30.24 billion by 2024.

Sensor, Actuator, Host and software system and other

communication infrastructure Sensor.

Advantages & Disadvantages of RFID:

Advantages of RFID Limitations of RFID

Can be read without

physical contact and

Can sustain rough

operational environment

Cannot be used in

materials made of RF

opaque(Metals) and RF

absorbents (Water)

RFID tag can be read up

to 100 feet and it can be

re-written a large

number of times

Surrounding condition

(like having metal and

liquids) can impact RFID

solution

RFID reader can read

multiple tags at a time

and line of sight is not

required

Improper installation can

lead to reading collisions

Can be used to perform

other duties like

measuring temperature

and pressure

Immature Technology and

a practical limit on number

of tags that can read at a

time

Brazilian retail store Memove using RFID

solutions to track and control inventory.

Memove’s clothing manufacturers in Brazil,

China and elsewhere begin by sewing a

passive RFID label into each item

RFID - Innovations in Logistics & Supply Chain

Management

Shubham Agarwal Indian Institute of Management, Indore

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RFID Solution Procedure:

RFID in Retail Industry:

39.53

18.82

15.59

14.00

6.08

3.51 1.14

0.95 0.19

0.19

RFID benefits Replenish, allocation andSchedulingWarehouse Management

In- Store Operations

Returns/Recalls

Distribution

Merchandise Planning

Promotion Planning

Price Management

Sales Planning

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Magister Operandi Spring ’14

Reliable estimate of lost revenue for a retailer due to out

of stock can be anywhere from a few percent to 8 or

more percent. If a typical retailer losses 4 percent of

sales due to being out of stock, the improvements to the

top line for Wal-Mart could be $12 billion in additional

revenue with adoption of RFID technology.

Challenges for RFID Implementation:

We can see that challenges are also somewhat related to

each other like benefits. With technology advancements,

most of these challenges will eventually be overcome.

However, being a societal issue, privacy requires

morethan technological advancements and will remain a

major challenge for retailers. A balance between

benefits consumers can get in terms of better service and

savings and the impingements of privacy should be top

priority of retail sector.

7.9

8.6

8.2

8.3

0 2 4 6 8 10

USA

Europe

Other Regions

Worldwide

Percentage OOS

Overall OOS Extent (Averages)

38.71

17.2

15.05

13.98

6.45

3.23

3.23 2.15

RFID challenges

Privacy Issues

High Cost

Standard Issues

Data Warehousing and Integration

Technical Issues

Business Process and Redesign

Employee Reluctance

Multiple Reluctance

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Magister Operandi Spring ’14

Recent example of an RFID solutions implemented in

a retail store:

Brazilian retail store Memove uses RFID solutions to

track and control inventory. Memove’s clothing

manufacturers in Brazil, China and elsewhere begin by

sewing a passive RFID label into each item. With RFID

label in place, items are carefully tracked as they make

their way to the distribution centre and then to the store,

their arrival automatically updates the store’s inventory

system. Also on hand at each store is an RFID-enabled

trolley that need only be rolled through the aisles to

Future of RFID technology:

Effective RFID solutions depend on totally integrated

systems that can assimilate data to create decision ready

information, in addition to necessary sharing of

information with retailers. This technology also has

significant customer benefits which solidifies its

adoption in retail Industry. The ability of retailer to

monitor the shopping habits of the consumer in the store

at the time of purchase using RFID will help retailer to

better understand customer needs and thereby induce

better relationship with the customers. This technology

takes time to master and no one has completely mastered

the current technology. RFID is an inevitable technology

and business cannot ignore its vast potential and impacts

but there are still uncertainties impeding its progress and

update inventory in minutes. Dressing rooms are

connected as well so as to track how many items enter

and leave each stall. Shoppers, meanwhile, can

themselves check out securely by placing all their items

in a dedicated RFID-enabled basket, which calculates

the total price. Once the customer has paid either by

cash, debit or credit card at the POS terminal, the basket

automatically updates inventory and erases each RFID

label’s encoded ID number so that alarms won’t sound

as the shopper exits the store.

acceptance in business world.

The future for RFID is to develop more control

from farther distances, becoming ubiquitous, ambient,

more intelligent and thus making objects not only

communicate with us, but to be smart and think for

themselves and us. The future of identification

technologies is to make RFID solutions more complex,

applying advancing technologies such as Virtual Reality

and Remote Access, to make tagged assets work for us

in wider ranges and collect more and varied data. and

Remote Access, to make tagged assets work for us in

wider ranges and collect more and varied data.

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Magister Operandi Spring ’14

In the world of B-School Competitions, SJMSoM continued its legacy by winning RanNeeti, an Operations case study competition conducted at IIM Bangalore. Team SOM Aces [Devika MV, Sreenivasa Chandan and Shilpi Sharma (From Left)] battled it out with teams from all the B-Schools across the country. The competition was based on the real-time issue of 'Akshaya Patra' foundation of distribution of food to under-privileged school children. The team analysed and came up with the solution of optimizing the distribution operations to emerge victorious.

SOM ACHIEVERS

Potential areas of use of RFID technology:

Sl. No. Potential Areas Uses

1 Identification

Advanced ID cards and recognition systems

More secure, safeguards and protected I.Ds

2 Payments

All credit and debit cards are RFID enabled

Personal gadgets like mobile phone also chipped

3 Vehicles

RFID enabled real time car parking

Automatic pay of toll taxes using RFID

4 Animals

Advanced and open identification

Easy tracking, tracing, monitoring, controlling

using RFID

5 Buildings RFID can be used to allow users to control,

manage data on all aspects of equipment used in

buildings

Higher building security

RFID tags to manage energy consumption

Citation & References: 1. Journal on RFID strategic Implementation and ROI by Charles Poirier

and Duncan McCollum

2. Journal on RFID sourcebook by Sandip Lahiri

3. Paper on ‘Comparative Analysis of RFID Adoption in retail and

manufacturing sector’ by Mithu Bhattacharya, Chao- Hsein chu and Tracy

Mullen

4. Paper on ‘RFID implementation in retail industry: Current Status, Issues

and Challenges’ by Mithu Bhattacharya, Chao- Hsein chu and Tracy

Mullen

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Magister Operandi Spring ’14

Enough said and done about the global warming scenario,

but what is it that companies and manufacturing industries

can do to achieve positive tandem with the environment?

While the supply chain system caters from the inception

to the finished product‟s delivery to the customer; what is

important is not just how much value is added at each

level but even the amount of wastes and defects incurred.

There are 2 ways to deal with this:-

1. Resell such goods to another party (unfavourable

option) or

2. Incorporate a system wherein the supply chain is

inherent with adding value to products even if defective.

The latter can easily be carried out to form a sustainable

supply chain system by taking into account the

environmental aspect. How can it be done? Well let us

revisit some facts:-

„Logistics‟ per se is the management of resources from

the source to the point of consumption. A relatively new

concept that is catching businesses‟ eye is „Reverse

Logistics‟. It primarily deals with the same parameters but

in the opposite flow i.e. from the point of consumption to

the source; with the aim to recapture value of the product.

To put it in layman‟s understanding: it focuses on those

goods which are returned from the customer on account of

defects and damages.

It is observed that a majority of goods that are returned

are from the retail and electronic industries. Such products

do not generate revenue for businesses and are discarded

on accounts of faults. Thus accumulating the amount of

waste produced by a firm. The UN estimates that every

year about 20-50 million tonnes of electronic and

electrical waste are generated worldwide. Thus to manage

e-waste(refuse created by discarded electronic devices and

components as well as substances involved in their

manufacture or use) is of utmost importance in lieu of

environmental sustainability.manufacturing and retailing

of products possible.

1. Reverse Logistic is a Holistic Approach to Cater

to the Needs of the Customer

We are all very much aware of how important it is to

fulfil the needs, wants and desires of a customer so as to

garner a profitable throughput. However, in reality if a

Venn diagram is made to depict the needs and what a

customer actually gets ultimately; there are aberrations

and a complete intersection is hypothetical. Thus, it is

observed that a number of goods once sold are returned

due to a plethora of reasons: damaged and defective

goods majorly. Here‟s where Reverse Logistics steps in

to cater to such products which are later rendered usable,

replaced, repaired or refurbished. Hence addressing the

needs of a customer in totality: from selling to after sales

services.

2. Reverse Logistics is a Logical Solution to Curb e-

Waste

While supply chain works towards delivering the

finished good right from the very initial stage of

procurement of raw materials and sourcing; what most

organisations fail to keep a tab on is the amount of

goods returned on grounds of defects and damages.

Reverse logistics caters to precisely this domain and is

gaining momentum in the industry. It has historically

been an undervalued part of supply chain management,

but is currently drawing attention due to its direct impact

on profit margins, companies‟ environmental image and

the prevailing trend of corporate social responsibility.

Reverse logistics primarily includes the sorting, testing,

refurbishment, recycling, testing or even disposing off of

the product; thus a logical solution to curb e-waste.

Easier so, since it‟s inherent within the supply chain.

3. Potential Market

The e-waste and reverse logistics market has become a

$100billion+ annual, excluding much of the resale of

still usable goods that flood the marketplace as new

updates in software and hardware are released. With the

burning issue of global warming many environmental

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"Logistics" per se is the management of

resources from the source to the point of

consumption. A relatively new concept that

is catching businesses‟ eye is "Reverse

Logistics". It primarily deals with the same

parameters but in the opposite flow

Sustainable Innovations in Logistics & Supply

Chain Management

Sheeba Pathak Symbiosis Institute of Management Studies, Pune

legislation and policies are being set with stringent

requirements for the disposal of e-waste. Projections by

analysts and practitioners confirm e-waste to grow faster

than any of its counterparts in the waste segment, over

the next 5 years. The benefits of e-waste management

and recycling are many. Apart from the conservation of

natural resources and prevention of environmental

contamination by toxic chemicals, it also creates new

job opportunities and reduces the amount of energy

required.

*Predictions with 2020 in comparison with amounts in

2007 Source:http://computersandtheenvironment.files.wordpress.com/201

1/12/screen-shot-2011-12-09- at-2-50-04-am1.png

4. 100% of the Mobile phone parts can be reused!

Picture this: On an average the life span of a cellular

mobile phone is 2 years. Post this time duration what do

we do with our phones? 91% of us shove it away in a

desktop drawer, the garage or leave it idle at home for

an alternate option in case of emergencies.

100% of the parts within a mobile phone can be

recovered and used to make new products or generate

energy. This ever growing number of electronic waste

(e-waste) is expected to reach 93.5million tonnes by

2016. The underlying question remains-where does all

this go? About 80% of the e-waste collected in the USA

is dumped in developing countries such as China, India

and Pakistan. However, there are responsible e-waste

management guidelines set up by the WEEE (Waste

Electrical and Electronic Equipment) which recycles up

to 56% of the waste collected. The European Union has

set restrictions for exports of e-waste to prevent global

warming and further environmental damage.

5. What Reverse Logistics has to Offer

Here is when reverse logistics comes into play: it aids in

minimizing environmental damage caused by companies

and producers by collecting, sorting and

recycling/reusing used electronic goods. Once products

reach the final customer the reverse logistics activities

start and it is called aftermarket customer services.

There are several activities performed after goods are

returned which are as mentioned underneath:

Product Acquisition: It is the stage of retrieval of the

product back from the market. The timing, quantity,

quality and composition of returned goods need to be

managed in close synchronisation with other supply

chain parties.

Collection: the logistical activities (such as

transportation, consolidation, trans-shipment and

storage) to procure the products from the market and

then transport them to factories so as to process it via

other stages.

Sorting, Testing and Disposition: the classification

(according to quality and composition) of returns and

determination of the action to be undertaken on the

product. Market and strategic conditions are taken into

account in the disposition decision.

Recovery: is the process of recovering value from the

returned product by re-use, repair, refurbishment or

recycling.

Redistribution and Sales: the underlying purpose of

business is profit making and no value recovery

materialises until the recovered products, component or

materials are brought back into a forward supply chain;

thus the need for redistribution.

6. Short cut to make quick bucks

A growing number of companies is finding that there is

profit to be gained by sending things back. The business

of returns starts when a customer, retailer, dealer or

manufacturer finds something wrong with a product (out

dated, spoiled, broken or flawed). Reverse logistics is

one of the main unexplored areas for potential revenue

growth. Recalls, commercial returns, wrong deliveries,

warranties, repairs and refurbishment and end-of-life

returns are some of the many examples of reverse

logistics that companies face. Top companies such as

Nokia, Samsung and Toshiba have displayed Extended

Producer Responsibility by incorporating a reverse

supply chain logistics for the purpose of e-waste

management. Nokia has initiated the “Take-Back”

programme for mobile phones that have reached the end

of its waste cycle.

7. The Indian Prevalence

Relatively new in India, the lack of awareness and

consciousness of reverse logistics is catching up. One

such example is of GreenDust- a start-up in Gurgaon.

The brainchild of an IIT alumnus, its business model is

Type of e-Waste China India

Old computers 2-4 times 5 times

Mobile phones 7 times 18 times

Televisions 1.5-2 times 1.5-2 times

Refrigerators 2-3 times 2-3 times

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aligned completely with that of revers logistics‟

verbatim. GreenDust accepts rejected, defective,

unsold, returned products from the Original Equipment

Manufacturers and refurbishes them. In addition they

provide a year‟s warranty and then sell them as factory

seconds from their side. With clients as Haier, Apple,

Philips, Toshiba etc.; just 5 years old and with an

initial work force of 3 people to now 400 employees

GreenDust is going places. From an INR 0 to revenue

of INR 250 crore: just reiterate how lucrative this field

of reverse logistics is to generate revenue from

returned goods.

To end with, anything which is new, experiences

resistance from the masses as change is not easily

accepted; yet the incorporation of Reverse Logistics has

many takers primarily because of the noble cause of

CSR towards the environment. In a practical sense- you

are making money out of scrap: which would have

rendered you no revenue, if just discarded. Including it

within the supply chain itself will not only add a holistic

dimension to the entire process cycle but also is the way

forward to a sustainable system.

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Imagine this; one fine day, you place an order for shoes

and you receive them in less than a couple of hours

because the retail firm had speculated well in advance

that you would order shoes and your package was already

waiting for you to click the buy button, at a nearby

shipping hub! Sounds, a little bizarre! Doesn‟t it?

Recently, a firm was accorded a patent that will enable it

to dispatch a package even before the buyer/user has

made his mind to buy/use it. Well, the firm is none other

than the retail giant „Amazon‟! After the announcement

of deploying unmanned drones, this is yet another path-

breaking move by the firm in its mission to reduce the lag

between the two incidents of placing the order and

signing the delivery receipt.

This revolutionary idea is popularly known as

„anticipatory shipping‟ which essentially entails

anticipating what and when to ship and to whom. The

whole idea of anticipatory shipping rests on forecasting

what the shopper inside an individual will like to

purchase. This is done by pursuing and probing

numerous points of massive customer data like pertinent

product searches on the web, previous purchasing

pattern, nature of wish-list and shopping cart contents,

type of items that one has liked or rated, the amount of

time a customer‟s cursor spends on a page or even

lingering over a particular item etc.

The quintessential query is: How to do it?

The yet-to-be-ordered product items will be shipped

from a fulfilment centre to customer‟s proximate

location via FedEx and United Parcel Service trucks

without stipulating the actual and accurate address at the

time of shipment. If the products that are already in transit

are ordered, then full addresses will be updated.

The case of “speculatively shipping” as

mentioned in Amazon‟s patent, brings out alternate

scenarios that according to the immediacy of different

potential buyers, packages can be re-routed and will

remain in transit unit one of them actually makes a

purchase.

In case the package actually reaches the

doorsteps of a customer who never placed any such

order, the firm may offer discounted rates or may even

give it away as a promotional gift if the cost of fetching

it back exceeds the cost of gifting it to a pre-customer.

Thus, the package goes to someone who, according to

research, was probably thinking of buying it or will at

least like it. Even if nothing else, it will bolster the

firm‟s quest to build goodwill.

This particular method could work well for

new entertainment releases of video games, books,

movies, music albums etc. This could also work in case

of frequently occurring purchases of consumable items.

It will be based on a model that will assign a percentage

rating to customers; and the ratings will signify the

probability that he/she will place the order. For example,

an ardent fan of a series of books, who had ordered the

previous launches, is very likely order a sequel as well.

Amazon and many of its counterparts have in

place, computer and statistical models to recommend

items that a customer “may” want; this analytics can be

taken up a notch to provide ample evidence to assume

that he or she “will” desire them and that an order is just

round the corner. Google‟s auto-complete feature on its

search bar is one of the more well-known examples of

how to leverage vast sets of user-data in predicting

future action and with companies gathering even more

heaps of customer data, it is very likely that the accuracy

of prediction will only improve.

The system of computer terminals and network

that will realize this vision is contemplated as a set of

two. The first system‟s job will be to pinpoint to a

geographical area well in propinquity of the location of

"Anticipatory shipping" essentially entails

anticipating what and when to ship and to

whom. The whole idea of anticipatory

shipping rests on forecasting what the

shopper inside an individual will like to

purchase

Anticipatory Shipping: Is it going to be the new

buzz in logistics and e-commerce?

Priyam Chaudhary Faculty of Management Studies, Delhi

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the customer to facilitate expeditious execution of the

shipment. The second system will be configured in a

network to communicate with the first system which

will specify an address later.

How is ‘packaging before purchasing’ i.e.

anticipatory shipping advantageous?

Diminishing delays: The e-commerce firms lag

behind brick-and-mortar stores on the parameter of

time for gratification i.e. waiting time, as it is

negligible in case of offline stores and any customer is

loath to waiting. Even though a firm like Amazon is

presently able to deliver orders in two days, the patent

that was filed in August 2012 and granted in

December, 201 presents a case to take speedy delivery

in the arena of e-commerce to a whole new level with

a drastic diminution in durations of delivery.

Reduction of logistics cost: It can turn out to be a

giant leap on the path of reducing error-prone human

element in the delivery mechanism. In the sphere of

logistics, there is an opportunity to save 10% to 40%

by making better decisions.1 Anticipatory shipping

might be the „better decision‟ being referred to.

Customer comfort: Customers will get almost the

same service as an offline store as they will be able to

receive the merchandise soon after the purchase. This

coupled with other added benefits of se-commerce

like saving of time, energy and effort, can be an

exemplary tool in the quiver of customer centricity.

Visualize how delighter a mother would be to receive

her order of jacket for her child in less than a couple

of hours when it‟s chilling cold outside..!!

If the algorithm employed by a firm to predict

preferences fails to perform, it can be a costly burden

to bear. Misappropriation of the idea where customer

learns how to trick the firm into believing that the

customer may place an order soon and then later

renege on paying for it, to get discounts is yet another

plausible occurrence. Besides, needless to say,

delivering something to the customer that they

eventually decided not to order due to any possible

reason can‟t be good; let us, for one moment, assume

it‟s a financial reason; this can be a displeasing and

disconcerting experience that anyone would hate to

encounter. However, the firm may keep the product in

a distribution centre close to them for faster fulfilment

waiting for the moment when you finally succumb to

your love of the item and hit the „buy‟ button. What

will follow are the risk and consequences of

misallocation and increased inventory cost for the firm.

Whether the life of this ambitious idea is

ephemeral or it goes on to redefine and reinvigorate

the arena of logistics and e-commerce; only time will

tell! However, the way Amazon gained a considerable

advantage over its rivals all the way back in 1999

through the patent of One-Click-Buy, persuades us to

believe that history could very simply repeat itself.

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“A business running without accurate data is running

blind.” -Ash Mahmud, Head of CRM, Groupon

According to “Logistics Trend Radar” (2013) published

by DHL, both big data and cloud computing is going to

have high impact in logistics within the next 5 years. Big

Data is both hard to understand and hard to ignore. It is

actually a collection of database from different resources

which has a great potential in current business scenario.

The volume of big data has increased enormously for past

few years; world's technological per-capita capacity to

store information has roughly doubled every 40 months

since the 1980s. On the other hand, cloud

computing have advantage of hosting of application &

hardware and managing data, which put forward reduced

cost and higher efficiency.

According to a recent survey, 8% of

respondents had a petabyte (10 15

bytes) of data in a

single database while 47% of the companies surveyed

said that they expected a petabyte of information in the

future. To manage and leverage upon this massive

amount of data the companies has started to take the

initiative. 28% of companies have a Big Data Initiative

today with 37% planning to implement a big data team in

the near future. (Fig.1). The outgrowth of this data is due

to increase in the volume of data collection instruments.

Electronic On Board Recorders (EOBRs) in trucks, RFID

tags in products, RF readers in distribution centres and

growing no of social media feedbacks and Smartphone’s

are generating data continuously and companies are

planning to capture more amount of data for most of the

resources in the future (Fig.2).

Supply Chain Management (SCM) is such a

subject which has potential of reducing costs and gaining

competitive advantage at the same time. One of the major

problems in SCM is lack of agility, its tools and

processes are designed to manage structured transactional

data. So it needs to tackle the processes to utilize huge

amounts of unstructured data.

One of the major problems of current supply

chain is forecasting inaccuracy. But by the use of social

Impact of Cloud Computing and Big Data on

Logistics & Supply Chain Management

Arnab Mukherjee National Institute of Industrial Engineering, Mumbai

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According to a recent survey, 8% of

respondents had a petabyte (10 15 bytes) of

data in a single database while 47% of the

companies surveyed said that they expected

a petabyte of information in the future.

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media data, promotional data and the weather predictions

companies can better forecast the sales. Eventually, it will

help to manage inventory in a better fashion. One of the

global beverage companies used weather forecast data to

decide upon the demand and inventory levels. Taking into

account temperature, Rainfall and Hour of sunshine in a

day they cut down their inventory level and increased their

forecast accuracy by 5%.

Using GPS and other logistics data will detect proper

route and obstruction in a current route. Though it is

not possible to re-route in real time, but it will help to

decide the most advantageous route to reduce the

transportation cost

Big Data boosts CRM techniques which help to

optimize customer interaction and eventually provides

better customer service. McDonald’s used store data

and ordering patterns to provide better customer

service by changing the layout and change in menus

in few of its outlets

Long term supplier relationship and strategic selection

of supplier depends on the collection and proper

analysis of the vast amount of data available about

them

One of the path breaking ideas in the logistics industry

is to use commuters or taxi drivers to deliver the

products for “the last mile service” which increases

the logistics efficiency. Though it has its challenges,

but this real time data based service has huge potential

In a nutshell, big data reduce the risk associated with the

supply chain. One of the examples is, Logistics service

provider DHL has implemented a tool “Resilience360”

based on big data analytics to detect early detection of

potential risks in the supply chain.

Benefits of Cloud Computing:

Capital investment is less or zero

Variable expense is requirement based, buyers

“pay- per -use”

The operational cost is lower than normal in house

IT system cost

Cloud computing not only offers flexible

configuration, but users can also access the data

from any location at any time. It is also very useful

for activities such as transportation management,

Warehouse management system (WMS) and point

of sales data collection.

Cloud services help all the stakeholders of the

supply chain to remain linked up in. Any

information and updates of announcements,

contacts, scheduling, public pricing, service

options will be available to all the partners once

entered. This continuous updated information will

improve reliability of the value chain and customer

service eventually

Also cloud platform provides complete visibility of

supply chain and logistics channel and detects the

cause of the disruptions

Logistics Mall is one of the examples of cloud

computing based process where it not only provides

service but also help to design and combine design

chains.

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Magister Operandi Spring ’14

But not all supply chain system are ready for cloud

computing -

Complex or unique processes which require a high

level of customization is suitable as of now

Processes which require a high level of integration is

also out of scope

Most of the companies don’t have a comprehensive

method to use big data

The valuable knowledge extracted from the datasets

depends on right analytical tools which depends upon

judgement and data scientists who are scarce

The major concern of cloud computing are “three

A’s” of data security: authentication, authorization

and accountability. This is of essential importance in

case of roles and business relationship of different

partner companies.

Also few companies believe its business data as

intellectual assets. So, sometimes they are reluctant

to disclose their data in a common platform fearing

losing competitive advantage

Big data is becoming popular because it furnishes a

huge database to estimate the trends, but for the same

grounds it is difficult to store. For conventional

RDBMS framework, it is difficult to manage additional

unstructured data so cloud based services are perfect

option for that. In IBM interconnect 2013 it was rightly

pointed out that data analytics supported by cloud

infrastructure will harness increased value from the

dataset.

Cisco IT built S-Cloud to store, control, and

secure unstructured data. Storing two copies of a 1-TB

object on S-Cloud cost CISCO US$119/month

compared to $256 for Network Attached Storage. Also,

it eliminated the requirement to manually increase the

storage capacity.

Citation & Reference:

1. Hilbert, Martin; López, Priscila (2011). "The World's Technological

Capacity to Store, Communicate, and Compute Information"

Science 332 (6025): 60–65.

2. http://www.cio.com/article/734647/How_Cloud_Technology_Can_Tr

ansform_Supply_Chain_Performance?page=3&taxonomyId=3015

3. http://www.businessrevieweurope.eu/technology/big-data-driving-

changes-in-supply-chain-management

4. http://www.mckinsey.com/insights/strategy/are_you_ready_for_the_er

a_of_big_data

5. http://www.cisco.com/c/en/us/solutions/collateral/enterprise/cisco-

on-cisco/Cisco_IT_Case_Study_Storage_Cloud_for_Big_Data.html

6. http://thoughtsoncloud.com/2014/02/cloud-computing-and-big-da

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Implementation of big data all through the supply chain is

demonstrated through Burberry, a leading fashion brand

based in London. Usage of SAP HANA to obtain real

time inputs is been elaborated in the article.

Angela Ahrendts, the CEO of Burberry knew that

revamping the flagship store had finally paid off with

delighted new customers flocking the store. Burberry, the

luxury British fashion house was established in 1856

boasts some of the most innovative menswear, women's

wear and has over 500 stores in over 50 countries. It also

remains one of the most lauded fashion houses in

adopting new technologies.

Fashion industry, for years had remained dynamic with

higher and lower end players adopting different strategies

to beat the market and sustain their market brand equity

by not cutting prices during recession, creating that

differentiating factor for attracting and retaining

customers became a challenge.

At such an era of cut throat competition, Ahrendts

wanted to implement inferences from the interesting case

of Grand bazaar in Istanbul where rug merchants employ

big data analytics for business. Grand bazaar, existing

since the Ottoman Empire, is 700 years old and has

400000 visitors each day. Their rug division is popular

among tourists and is well known for high quality

Turkish rugs. Turkish rug merchants impress customers

by striking a conversation with them about their personal

background and thereby gathering useful data about

them. They had a microcosm of today's 'databases' and

analysed the 'big data' to arrive at customer preferences.

They had asked questions like "Welcome to Istanbul!

Which hotel are you staying at?", "Which city are you

from?" to assess the customer characteristics from the

income level and the city they come from. According to

the information gathered from historical data of

customers having similar characteristics, they served new

customers by showing the rugs that they most likely are

to buy.

Burberry gave a thought to going the Istanbul

way for impressing customers. Ahrendts wanted it to be a

personal experience for customers while they walk in to

the store. She arranged for a meeting with John Douglas,

the chief technology officer at Burberry to come out with

a solution to make Burberry the place where customers

can get anything they want. They had an agenda of 12

Bigdata and Burberry

Kavea Madhanagopal & Abhishek Ramchandran T. A. Pai Management Institute, Manipal

Burberry, the luxury British fashion house

was established in 1856 boasts some of the

most innovative menswear. It also remains

one of the most lauded fashion houses in

adopting new technologies

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months to come up with an innovative solution to beat

the market.

After having discussion with different vendors

and developers, a plan was finally set in place. At the end

of 12 months, a program named Customer 360 was

launched. Through Customer 360, every customer can

digitally share their shopping preferences, experiences

and likes. The whole of the program runs on SAP HANA

platform which analyses data in real time. The

information of a particular customer visiting the store can

therefore be delivered to the employees' tablets in real

time which creates a grand bazaar type of experience.

In addition, there also planned to add a RFID

tag to every garment which will show the customer, a

video of where and how the product was made. The

whole history of raw material sourcing and the supply

chain data is transmitted to the customer's file. The file

in turn will also show what type of garments the

customer has tried on.

The employee at Burberry can therefore greet

a customer by their name, show them garments based on

their history of shopping, predictive analytics and posts

on twitter and other social networks. It will be a digitally

integrated showroom that surprises a customer who

walks in.

Though it is true that this idea had changed the

world of retail business model upside down, time would

let us know the actual success rate of this model. The

extent to which customers would enjoy the fact that their

shopping trends are being noticed remains a question.

Although the RFID tags give a personal touch through

videos, the thought of their preferences being monitored

may come across as being intimidating for some not-so

tech savvy customers. On the other hand, for the early

adopters of fashion trends, it well seems like a blessing to

have Burberry find exactly what they want.

Real time application of Big-data in retail also

gives some cues on improving e-marketing strategies and

targeting the right product to th e consumer. Using SAP

HANA to create suggestions in real time can hugely

improve the usage of predictive analytics and big data in

the future. The implications for Business Suite customers

migrating to SAP HANA are going to be huge in the near

future, changing the face of retail.

Citation & References: 1. Burberry. (2013). Available: http://uk.burberry.com/. Last accessed 1

Dec 2013

2. Forbes. (2013). Big Data at Work in the Grand Bazaar of Istanbul.

Available: http://www.forbes.com/sites/sap/2013/10/16/big-data-at-

work-in-the-great-bazar-of-istanbul/. Last accessed 2 Dec 2013.

3. Forbes. (2013). How Retailers Use Big Data To Spot Hot Shopping

Trends. Available:

http://www.forbes.com/sites/sap/2013/11/25/how-retailers-use-big-

data-to-spot-hot-shopping-trends/. Last accessed 2 Dec 2013.

4. Jay Liebowitz (2013). Big Data and Business Analytics. Florida:

Auerbach Publishers Inc.

5. Reza Soudagar. (2013). Grand Bazaar of the Future in the Heart of

London. Available: http://scn.sap.com/community/business-

trends/blog/2013/10/22/grand-bazaar-of-the-future-in-the-heart-of-

london. Last accessed 2 Dec 2013

6. 'Vendor Insight: In Brief SAP HANA for both transactional and

analytic workloads – when does it make sense?' by Helena Schwenk,

MWD advisors, January 2013

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Introduction:

We are living in a world where global giants like Wal-

Mart and Amazon knows more about us than we do.

While Big Data has revolutionized logistics and e-

commerce business the competition between different

companies is now in terms of delivery time. Global

logistics and e-commerce companies are heavily

investing in Research and Development in order to

invent new technologies so as to improve the efficiency

and effectiveness of their supply chain. These

investments have yielded good returns for Amazon so

far. Starting from one-day delivery to use of Drones,

Amazon is doing things that were once thought to be

impossible. Next in this list is anticipatory shipping

where the desired product will be shipped even before

the customer orders that product. Big data has made this

a reality, and if it proves to be successful for Amazon

soon we may see many e-commerce companies adopting

anticipatory shipping. This article is structured to brief

about anticipatory shipping and its possible impact on

the e-commerce industry.

What is Anticipatory Shipping?

Anticipatory shipping or speculative shipping enables a

company to ship desired products to customer’s

geographical area before the customer orders it by

predicting customer’s behaviour based on his/her past

purchases, wish lists, time he/she scrolls over the

product, feedback on last purchases etc. Amazon has

obtained a patent for this technology and as per the

patent description; one or more products will be shipped

from Amazon’s fulfilment centre to particular area’s

warehouse or distribution centre.

As per the patent description the products will

be shipped without any delivery address instead only

with destination area and when the customer makes the

purchase, system will specify the exact delivery address.

There may also be situations where the products will

ANTICIPATORY SHIPPING : the new buzz in

logistics and e-COMMERCE

Arun Kumar C & Jahid Hassan Indian Institute of Management, Udaipur

Global logistics and e-commerce companies

are heavily investing in Research and

Development in order to invent new

technologies so as to improve the efficiency

and effectiveness of their supply chain

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remain continuously in transit until customer purchases

the product. If the customer does not place an order as

expected, which again could be found through his/her

recent browsing history in Amazon, the Seattle based

firm has decided to gift the product to some of its

existing customer who might like the product (again

through data analytics) in order to build loyalty or it may

re-route the products based on proximity to potential

customers.

Cost to Company:

Although this new innovation gives a definite edge over

other e-commerce companies, it comes with huge cost.

Firstly the company needs to invest in expanding its

local warehouses in different geographical areas as the

products shipped could not remain in-transit forever.

Secondly the proportion of customers following a

product to customers actually buying is very low, and

the company may end up shipping huge number of

products which will occupy huge shipping space due to

which transportation costs will rise abruptly. The below

graph shows the average number of users visited for 3rd

quarter 2013 for various sites.

It can be seen that around 162 million users

visit Amazon site every month and less than 3% of these

visits represent actual purchases. There is also a point

where purchasing prediction will fail after all human

behaviour is still a mystery and in order to save storing

space company might end up giving away the products

for free which though results in intangible benefits will

still be considered as a loss.

As Amazon has been continuously yielding

lower profits in spite of increase in sales these financial

drains could have a major impact on implementation of

this mechanism.

Impact on E-commerce and Logistics Industry:

As a system, anticipatory shipping is a concept that will

lead to a drastic fall in the cost of logistics. Further, on

successful implementation and acceptance by customers,

it could dissuade people from physically entering stores

in the future. Though various insights such as previous

buying habits, surveys and questionnaire results,

lingering over a particular item for a long time go into

deciding the product for a particular customer, this

system can be prone to drastic errors. It all depends on

how people actually take the new innovation.

From a logistics point of view, this will create

a dramatic revolution as delivery times will be reduced

multifold. With respect to inventory, it would lead to a

complete restructuring as goods will be distributed to

local distribution centres and shipping trucks while the

wait for customer to place an order is on. The main idea

is to spread the inventory from a centralized warehouse

into the last part of the supply chain excluding the end

customer. As this idea is scalable, the anticipatory risks

can be tweaked depending on whether the model is

successful or not. There is a huge risk associated with

such a mechanism as there is always a chance of the

customer’s buying habits not having a close relationship

with the algorithm employed in this process.

It was Amazon who created a revolution by

patenting the right to “one-click buying” and it is the

same organization which has come with this innovative

method of predictive marketing. We can illustrate the

pros and cons of this model using various examples.

Pros of this System:

It will create a new revolution in the world of e-

commerce and logistics as the implementation involves

the use of predictive marketing due to a huge decrease in

delivery time and reduced inventory costs respectively.

The system will work exceptionally well with

products that a consumer would want on the day of its

release. For example, release of a popular book (or) a

DVD. It will help in creating better relationship with

clients as their products have more chances of being sold

to customers almost being influenced to buy a product

which they otherwise would have been avoided due to

several reasons.

Cons of this System:

Shipping products directly to the consumer’s location for

some instances of anticipatory shipping could lead to

irritation on the consumer’s side and may lead to an

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adverse impact on the shipping company as well as the

brand value of the product being shipped.

The algorithm could fail miserably in instances

where a consumer was looking for a product for

someone else. For example, a person living away from

his parents could have been looking for products for

them. On receiving this product, such a person is bound

to move away from the website providing these

unwanted products.

Products could be sent to a local warehouse of

a person who doesn’t needs the product and as a result

lead to loss of inventory available to serve another

person who actually wants it.

Conclusion:

This system of using Predictive Analysis devised by

Amazon is very innovative and could lead to a huge

revolution and become a huge success if the algorithm it

works on turns out to be right. However, even on the

slightest of errors, a huge negative impact could result on

the company as well as the product. The impact on the

stakeholders is huge if the system is implemented. The

complexity and nature of parameters taken into account

on devising the algorithm and the acceptance of the

system by the consumers is what would determine

whether it would turn out to be a new buzz in logistics

and e-commerce.

Citation & References: 1. http://www.cbsnews.com/news/amazon-files-patent-for-anticipatory-

shipping/

2. http://rt.com/usa/amazon-anticipatory-package-shipping-836/

3. http://techcrunch.com/2014/01/18/amazon-pre-ships/

4. http://www.statista.com/statistics/271450/monthly-unique-visitors-to-

us-retail-websites/

5. http://blog.mainstreethost.com/amazons-anticipatory-shipping-terrible-

idea#.Uw-Pno3Hlsk

6. http://www.tested.com/tech/459832-brief-amazons-anticipatory-

shipping-patent/

7. http://nypost.com/2014/01/20/amazon-wants-to-ship-your-delivery-

before-you-order-it/

8. http://www.businessinsider.in/Amazon-Has-Patented-A-System-For-

Shipping-Your-Stuff-Before-You-Order-It/articleshow/28974802.cms

Magister Operandi Spring ’14

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The global economy is armoured by the strength of supply

chains. Smooth movements of goods, reliable and quick

traceability from the point of manufacture to the point of

sale is something that makes the large scale

manufacturing and retailing of products possible. The

more the separation, the more likely are the chances of

freight getting damaged in one of many transport

operations involved. Damage might be induced by shock

or by gratuitous temperature variations. To the rescue to

the latter, come cold chains. The cold chains are

temperature controlled supply chains comprising of

storage and distribution activities which may be used to

extend the shelf life of various products like sea-foods,

frozen foods, pharmaceutical drugs and chemical

compounds. Difficulty starts to creep in the supply chain

when the freight is delicate, perishable or requiring special

handling. Refrigerated and thermal methods of packaging

are adopted to protect the integrity of the shipments.

Dependence of cold chains on physical means makes

them a necessity, series of tasks required to store, monitor

and transport makes them a process, and perquisites of

knowing the biological and chemical status of the

perishable products makes them a technology. An

effective cold chain will provide optimum shelf life, will

shorten the transit time and create efficiencies. Depending

on the requirements of the shippers and retailers a typical

cold chain may include:

1. Import/ Export: Expert handling of imports, exports

and smooth movement of the cool cargo, across

international borders in addition transportation results in

reduced spoilage and labour costs.

2. Ocean or Air Transportation: During such travels

standards are usually set for loading at the point of origin

and visibility across each container is maintained.

3. Warehousing: Dedicated centres may be maintained

along the chain for cross docking or storing so that the

supply chain is never compromised even during loading

or unloading.

4. Ground and Intermodal transportation: Refrigerated

containers using technology are now introduced into

intermodal systems and they have created new

opportunities in several industries.

On the economic front, the cold chains allow many

developing countries to participate in the global market of

perishable products both as consumers as well as the

producers. Also consumers with intensifying powers are

are preoccupied with healthy eating habits, therefore an

array of exotic fresh fruits and vegetables that originate

from around the world are seen available these days. On

the geographical font, it has made all global, local and

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Dependence of cold chains on physical

means makes them a necessity, series of

tasks required to store, monitor and

transport makes them a process, and

perquisites of knowing the biological and

chemical status of the perishable products

makes them a technology

Evolving Cold Chain: A way to optimize Supply

Chain and Operations

Anmol Dhupar Institute of Management Technology, Ghaziabad

regional supply chains all the more effective. Thus

evolving cold chains with upgrades have increased shelf

lives’ across the borders.

In the US, containers are double stacked onto flat-rail cars

(COFC – container on flat car technology) rather than

“Trailers On Flat Cars” (TOFC) or “Over The Road”

(OTR) trucking. In Canada, all the intermodal shipping is

achieved through the more environment friendly, efficient

and profitable COFC. COFC also helps in reducing

emissions being fuel efficient, and thus building green

credibility for the companies using it. Also the Indian cold

chain industry is expected to grow at sky-rocketing speed

and is believed to reach INR 64000 crore by 2017(Fig 2).

On the global front, the cold chain industry is expected to

rise to 140 billion USD in 2017 discerning to changing

tastes and preferences and increasing globalization.

According to the Assocham report, “Opportunities in cold

chain: emerging Trends and challenges”, India only has

cold chain capacity to support 9 million tons, the reported

produce being 147 million tons of vegetables in 2011.

Thus the need for an evolving cold chain is vital in

developing countries. According to the report India loses

35-40% of the Vegetables and Fruits it produces, and this

is the reason for the dismal contribution in the world

trade.

But it is important to mention that the cold chain supply

operations have significantly improved in recent decades.

The industry has responded to different requirements of

products by setting temperature-standards for varied

products. The most common among them are : for banana

:13°C, frozen : -16°C to -20°C , deep frozen: -28°C to -

30°C, chill: 2°C to 4°C , pharmaceutical 2°C to 8°C. The

maintenance of these is important to ensure optimal shelf

life.

Revenue generation by Geography is shown below and a

few companies that are into large scale cold chain

business include Americold Logistics-U.S, Northern

Logistic Property-Sweden, Preferred Freezer Services-

U.S, Swire Cold Storage Pty. Ltd.-Australia, Millard

Refrigerated Services-U.S.

3

5

7

9

11

0 1 2 3 4 5

India

Costa Rica Brazil

Ireland Germany

Rank

CA

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%

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Magister Operandi Spring ’14

Due to increase in the demand of milk products from

every corner of India, also demand of meat exports in the

Middle Eastern countries and increasing focus in the

pharmaceutical sector in the supply chain there is huge

demand for refrigerated vehicles in different verticals.

Sector wise distribution is shown below in chart:

The technologies that provide a temperature controlled

environment during the transit include dry ice.

Solidified carbon dioxide at about -80 is capable of

keeping the shipment frozen for an extended time

period. Also gel-packs help in providing ambient

temperatures by changing their phase from solid to

liquid or vice versa using what is called as escaping

energy. Eutectic plates are not too different from gel

packs; these plates can be reused and filled with liquid

again and again. Liquid Nitrogen increases the

temperature range of coldness and provides

temperatures as low as -196°C. It is used mainly in

transportation of biological cargo such as organs and

tissues. Some businesses also use insulated pieces

known as quilts to increase the shelf life of the product

it is supposed to protect. Reefers have their own

autonomous plant is used sometimes to keep the cargo

not only cool, but warm too meeting customized

requirements of various products. Some use the attack

on the emotional appeal, for instance Envirotainer uses

photographs of children as a mark that is understood

across borders, also according to the company officials,

the photograph reminds the container handlers of the

importance of the what they do, they believe that people

are more engaged if they are given a chance, and they

meet this using the photograph and by depicting through

it, what the contents of the container means to the child in

the picture. Thus the technological advancements have

helped in ensuring efficiency and optimization in a great

way. There are some best practices in the cold supply

chains which, if exist, ensures performance and

efficiency, these innovations should be offered by

business providers. Telematics, which is the ability to

remotely operate, monitor or adjust each container while

it is on a rail-car, truck, or even on a ship. There are

containers that are capable of sending real time

information about their current location. Thus tracking is

improved significantly. COFC gallon capacities are

available up to 120 gallons, which is more than standard

capacity of 75 gallons; a larger fuel capacity ensures that

the temperature is controlled even in case of delays. Also

available are multi-temperature warehouses as they are

capable of storing both refrigerated as well as frozen

products. These can also provide cooler cross docking-

areas where trucks can be unloaded and reloaded for final

deliveries. Insulation of containers allows for the climate

control and results in slower fuel burns during the transits.

Opportunities exist for the business providers in sectors

such as paints, cosmetics, pharmaceuticals and much

more. Thus cold chains are actually optimizing the

existing supply chains in a big way.

Citation and Reference: 1. http://www.assocham.org/events/recent/showevent.php?id=822

2. http://www.envirotainer.com/activemindset/?gclid=CL2Cy8SH4rwCFW6t4

godIiQA5g#.UwnP8fmSwlo

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1. Customer demand is 34,000 parts per month. The

company works 5 days a week, 20 days a month in two,

8 hour shifts. Lunch is 30 mins per shift and 2 10 minute

breaks are taken per shift. Eveyday a team briefing of

10 mins is required. Takt time is:

a. 0.5 minute per part b. 1 part per minute

c. 0.5 part per minute d. 1 minute per part

2. Given actual and forecast demands for 5 years:

Year 1 2 3 4 5

Actual 56 67 78 89 100

Forecast 64 68 75 85 106

MAD & Tracking signal for the 5 years are:

a. -8, 1 b. 4.4, 1.82

c. -8, -1.82 d. 4.4, -1

3. Charlie's Chocolate factory has 5 machines operating

in sequence to manufacture chocolate. The cycle time

taken by each of those machines are 1, 6, 3, 5, 2 hrs.

respectively. The plant operates round the clock. How

many chocolates can the factory produce in a week?

a. 32 b. 24

c. 37 d. 26

4. The following type of R&D model is followed by

companies to reduce procurement lead times for sub

parts of new product development

a. Co-operative Engineering

b. Collaborative Engineering

c. Co-Development

d. Internal Development

5. A night canteen of Hostel-1, IIT Bombay is known for

its Egg Frankie for which essential ingredient is

prepared on site in kitchen itself while eggs are

procured from a reliable vendor who takes order 24 x

7. The eggs are packed in a tray of 100 units’ capacity

and it takes 12 hours for the vendor to deliver the eggs

once the order is received. In an interview with night

canteen owner Satish, he told- “we serve 500 egg rolls

per day on an average but during exam time with

increased in demand we also realize a huge fluctuation

in demand on account of which we often face a stock out

due to unavailability of eggs”. He has hired you as

an operations consultant to install a successful

Kanban system. Considering safety stock as 20

percent of demand how many Kanban card sets are

needed to manage the fluctuations?

a. 3 b. 4

c. 7 d. 8

6. Which of the following best describes the

applications of Jidoka, Andons & Poka – yokes?

a. A Textile loom stops automatically as soon as

any thread breaks and turns on the warning light

seeing to which operator fixes the problem to prevent

any future breakdown due to similar reason and

restores the machine.

b. A Textile loom turns on the working light as

soon as any thread breaks seeing to which operator

stops the machine, fixes the problem to prevent any

future breakdown due to similar reason and restores

the machine.

c. An operator stops the machine as soon as he

detects any broken thread and turns on the warning

light seeing to which supervisor arrives, fixes the

problem and restores the machine.

d. An operator turns on the light as soon as he

detects the problem seeing to which supervisor comes,

stops the machine, observes the problem and fixes it.

7. Which type of inventory model is used while

ordering daily Newspaper?

a. Quantity discount model

b. Single period inventory model with probabilistic

demand

c. Economic production lot size model

d. An Order-Quantity, Reorder-Point Model with

Probabilistic Demand

8. Consider that a company ABC places an order

of 25,000 with its supplier XYZ. Release dates are

spread over a period of one year. What is this

method of ordering called?

a. Contract Order b. Standard Order

c. Blanket Order d. Planned Order

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Answers: 1-a, 2-c, 3-d, 4-b, 5-a, 6-a, 7-b, 8-c

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Global competition, rapid changes in technology,

changing preferences of customers are the key

challenges faced by today’s organizations. In order to

remain competitive, organizations are increasingly

focusing on ‘Core Competency’ and building

partnerships with suppliers who can address their non-

core competencies (Mitra, 2008). Thus there is an

increase in supply chain activities by the organizations.

As non-core activities are out-sourced to the

suppliers spread across the globe, maintaining quality of

final product is a challenge in supply chains. Longer the

supply chain, more difficult it is for an organization to

keep track of quality (Lyles et al., 2008). Although,

major responsibility of product quality rests with the

manufacturing firm, focus of quality management

practices has shifted from manufacturing firms to the

entire supply chain. Competitive priorities in many firms

have shifted from product and process quality to overall

supply chain quality performance (Kuei et al., 2001).

Product flow in a typical supply network for

an OEM is shown in Figure 1. Raw materials/

component parts required by the OEM are supplied by

various suppliers, OEM converts raw material/

components into finished product and through different

distribution channels finished product is delivered to the

end user.

Analysis of elements in supply chain reveals

that factors i.e material, supplier capability, efficiency of

logistics operation etc. Responsibility of providing raw

materials, a critical source for quality of final product

lies with the supplier. Hence supplier selection is a key

decision for organizations. Moreover, purchasing has a

great responsibility for final product quality are quality

of raw impact on bottom line as its share in the total

turnover typically ranges between 50-90% (Telgen,

1994). In automotive industries, raw material costs may

be more than 50% of the total revenue. This can go up to

80% of the total product costs for high technology firms.

Therefore, supplier link in the supply-chain appears to

have significant cost-cutting opportunities.

Supplier Selection

A capable supplier can provide better quality of

materials/ components, which can reduce quality threats

in supply-chain. Hence supplier selection is an important

task in purchasing. Hahn, Chan et al., (1990) argues that

most important objective of purchasing function has

been development of a network of competent suppliers

without which firm’s ability to compete in the market

place can hamper significantly. If an organization takes

adequate care in selection of suppliers, quality issues in

supply chain can be tackled successfully. By having

better quality of products in the supply chain, cost

associated with rework, product recalls etc. can be

reduced. Determining selection criteria and selection

techniques are the most important dimensions of supplier

selection process. Automobile manufacturers, depending

on quality objective use different factors for supplier

selection. Honda Motors for example believes in QCDC

principle i.e. Quality, Cost, Delivery and Capability.

Pioneering work for supplier selection was

done by Dickson (1966). Based on survey conducted for

273 purchasing agents and managers from commercial

manufacturing organizations, he identified 23 critical

success factors (CSF) for supplier selection including

quality, delivery performance history etc. Work done by

Dickson (1966) was extended by Weber et al. (1991). In

his study on 76 articles published during 1966 to 1990 in

the international journals, he found that 47 of the 74

articles had discussed more than one criterion for vendor

selection showing multi-objective nature of the problem.

Similar to Dickson (1966) and Weber (1990), William

Although, major responsibility of product

quality rests with the manufacturing firm,

focus of quality management practices has

shifted from manufacturing firms to the

entire supply chain

Issues in Sourcing Quality in Supply Chain

Avinash Bagul, Ph.D. Scholar – SJMSoM, IIT Bombay (Avinash is working for his Ph. D. under Prof. Indrajit Mukherjee’s

supervision)

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Ho et al. (2010) reviewed supplier selection process. As

per his study, multi-criteria decision making approaches

including Analytical Hierarchy Process (AHP),

Analytical Networking Process (ANP), Case Based

Reasoning (CBR), Data envelopment Analysis (DEA),

Fuzzy Set Theory, Mathematical Programming, Genetic

Algorithm (GA), Simple Multi Attribute Rating

Technique (SMART) were extensively used techniques

for supplier selection. One of these techniques,

Analytical Hierarchy Process (AHP) is discussed below.

Analytical Hierarchy Process (AHP) was

introduced by (Saaty, 1980). This method is developed

for prioritizing alternatives when multiple criteria and

sub-criteria are considered. It allows decision maker to

structure complex problem in the form of a hierarchy

including goals, criteria, and alternatives. It is often

considered as a supplier selection method because it

allows decision makers to rank suppliers based on

relative importance of criteria and suitability of

suppliers. AHP can accommodate uncertainties and

subjective information, and allows application of

experience, insight, and intuition in a logical manner.

Omkarprasad, and Kumar (2006) have shown that there

is an increasing use of AHP method in the review papers

on supplier selection published since 1990.

For applying AHP approach for supplier selection

problem, Nydick and Hill (1992) have suggested five

step approach as given below:

1. Specify the set of criteria for evaluating the supplier.

2. Obtain pair wise comparisons of relative importance

of criteria in achieving the goal, (using 1 to 9 Scale) and

compute the priorities or weights of the criteria based on

this information.

3. Obtain measures that describe the extent to which

each supplier achieves the criteria.

4. Using information in step 3, obtain pair wise

comparisons of relative importance of suppliers with

respect to each criteria, and compute corresponding

priorities.

5. Using results of steps 2 and 4, compute priorities of

each supplier in achieving goal of hierarchy.

Scale used in AHP is a nine point scale, details

of which are given in table no. 1.

Intensity of

importance Definition

1 equal importance

3 weak importance of one over other

5 strong importance

7 demonstrated importance

9 absolute importance

2,4,,6,8

immediate values between the two

adjacent judgments

reciprocal

if i has one of the above non zero

numbers assigned to it when

compared to j, then j has the reciprocal

value compared to i

Figure 2 gives AHP process for supplier selection along

with various criterion and sub criteria

Following information gives details of the process.

Goal: Find the best supplier for an organization.

Evaluation Criteria: Pricing Structure, Delivery,

Quality and Service.

Criteria Dimensions: Timeliness, Cost, incoming lot

quality, cost, personnel, facilities, R & D and

capability.

Alternatives: Suppliers A, B and C.

Based on the pair-wise comparison of criteria, Table 2

gives weights to the four criteria given and details of

weight-calculation are given in Table 3.

Selection of the Best Supplier

Pricing Structure

Delivery

Timeliness

Costs

Quality

Incomming lot quality

Costs

Service

Personnel

Facilities

R & D

Capability

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Magister Operandi Spring ’14

Table 2: Pair-wise comparison of evaluation criteria

Selecting the Best Supplier

Weights

Pricing Structure Delivery Quality Service

Pricing

Structure 1 3 1 3 0.36

Delivery 1/3 1 1/3 1 0.12

Quality 1 3 1 6 0.42

Service 1/3 1 1/6 1 0.10

Table 3: Weight-calculation for different criterion

Geometric Mean Weights

Pricing Structure (1*3*1*3)1/4

= 1.73 1.73/4.85 = 0.36

Delivery (1/3*1*1/3*1)1/4

= 0.58 0.58/4.85 = 0.12

Quality (1*3*1*6)1/4

= 2.06 2.06/4.85 = 0.42

Service (1/3*1*1/6*1)1/4

= 0.49 0.49/4.85 = 0.10

Sum = 4.85

Similar process is followed to get weights for

each sub-criteria and alternatives (suppliers A,B,C), and

final rating for suppliers is calculated. In this case, final

ratings calculated for the three suppliers are 0.25, 0.24

and 0.49 respectively. Hence, organization should select

supplier C which has highest rating. Thus by making use

of AHP, both quantitative and qualitative factors are

considered simultaneously and organization can select

supplier provides best results among set of suppliers.

Conclusion

By developing models on supplier selection process,

suppliers capable of supplying better quality materials/

products can be selected. Thus quality issues in the

supply chains can be tackled successfully. As quality of

final product is mainly dependent on the quality of raw

materials supplied, product quality can be improved by

having control on supplier selection process. This will

help in reducing cost associated with rework. Also

warrantee/ guarantee costs can be reduced as there are

fewer chances of product recalls because of

improvement in quality of the product.

Citation and References: 1. Dickson, Gary W. "An analysis of vendor selection systems and decisions."

Journal of purchasing 2.1 (1966): 5-17. 2. Hahn, Chan, K., Charles, A. W., & Kee, Y. K. (1990). The supplier

development Program: a conceptual model. Journal of Purchasing and Materials Management(26.2), 2-7.

3. Kuei, Chu-Hua, Christian, N. M., & Chinho, L. (2001). The relationship between supply chain quality management practices and organizational performance. International Journal of Quality and Reliability Management, 18.8, 864-872.

4. Lyles, M., A., Flynn, B., B., Frohlich, & M., T. (2008). All supply chains don't flow through: understanding supply chain issues in product recalls. Management and organization Review(4.2), 167-182.

5. Mitra Amitava. Fundamentals of Quality Control and Improvement. 3rd Edition, John Wiley & Sons. 2008

6. Nydick, Robert L., and Ronald Paul Hill. "Using the Analytic Hierarchy Process to Structure the Supplier Selection Procedure." (1992).

7. Omkarprasad, S.V. and Kumar, S. Analytic hierarchy process: an overview of applications. European Journal of Operational Research, (2006) 169:1-29

8. Saaty, Thomas L. What is the analytic hierarchy process?. Springer Berlin Heidelberg, 1988.

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9. Rajkumar Yadav has his Bhutta (Maize) stall in IIT

Bombay Campus who during evening time (05:00 pm

to 07:00 pm), delights his customers with hot and

tasty Bhutta (Maize). Shown below is the process

analysis of serving one customer.

Process Time (Second)

Unpeeling the maize 15

Roasting the maize on

coal oven

180

Separating the corns 25

Applying spices, mixing

& serving

20

All the above operations are done by Rajkumar

himself.

Maximum how many customers can he serve on

any fine evening?

If he hires a helper on process 1 who can unpeel

the maize in 10 sec, then how many customers can he

serve on any fine evening? (Assume coal oven can

roast only one bhutta only at a time and demand is

unlimited.)

a. Without Helper: 40, With helper: 30

b. Without Helper: 40, With helper: 31

c. Without Helper: 30, With helper: 30

d. Without Helper: 30, With helper: 31

10. Demand variability can be introduced, for a

variety of reasons, into the supply chain. This

variability can cause a "bullwhip effect" through the

supply chain. The bullwhip effect occurs as a small

variation and the end customer demand becomes

greater as the variation moves through the supply

chain. The unpredictability of the competition can

cause demand variability. The best way to combat

unpredicted variability is to:

a. Maintain inventory in finished goods

b. Improve the statistical forecasting techniques

c. Maintain production flexibility

d. Increase the subassembly inventory

11. Divya owns a boutique. She wants to target a wide

array of customers through her highly differentiated

line of products. But she is struggling to manage her

inventory which is resulting in stock-outs and

eventually loss of customers. What she should employ

in order to minimize losses due to stock outs?

a. Kanban b. MPS

c. MRP d. All can be used

12. When a bill-of-materials is used in order to

assign an artificial parent to a bill-of-materials, it is

usually called a:

a. Modular bill-of-materials

b. Pick list

c. Planning bill-of-materials

d. Phantom bill-of-materials

13. In probabilistic model, increasing service level

a. Will reduce the cost of inventory policy

b. Will increase the cost of inventory policy

c. Will have no impact on the cost of inventory policy

d. Cannot be determined

14. The theory of constraints (TOC) is specific to:

a. The nature of the individual in charge of scheduling

b. The number of part time employees

c. Bottleneck operations

d. Cost of Materials

15. How much percentage of values of an

exponentially distributed variable will be below its

mean, and how many below half of its mean?

a. 60%, 40% b. 60%, 30%

c. 80%, 40% d. 50%, 25%

16. A Restaurant has two Tables. The services times

are assumed to be independent, exponentially

distributed with mean 1.5 Hour. Andrew arrives

with his friends when both tables are empty. Bob

arrives with his friends 1 Hour later while Andrew

is still in the restaurant. Another hour later Caroline

arrives with friends and both Andrew and Bob are

still there. No other customer arrives during this 3

hour interval. What is the probability that Andrew

will be free before Bob?

a. ¼ b. ½

c. ¾ d. 2/3

17. Financial losses will usually occur at which life

cycle stage?

a. Introduction b. Growth

c. Maturity d. Decline

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With domestic e-commerce markets estimated around

$1.5 billion1 and the online retailing opportunity

expected to touch $50 billion in next 10 years1, e-

commerce is one of the key sectors to watch. Notable

examples like Bloomingdales, Best Buy, Barnes &

Noble, Linens ’N Things, and Wal-Mart, are worth

mentioning in context where the retailers, whether it is

departmental or specialty, high end or low end are

launching their own internet sites which are operating

along with pre-existing traditional channels2. In India,

both well-established names and the relatively young

players are trying to make it big in this space. Apart

from newsmakers like Flipkart, Snapdeal (even Quickr

joining the list lately), there are plenty others as well,

for example, Zivame.com is helping women customers

to shop for lingerie more freely, and that too with

better product assortment3. No wonder, the lingerie

market estimated at INR 17500 crore3 in 2012 (in

India), has got many working on en-cashing this

opportunity.

Death of the middleman? Welcome to the era of

direct selling:

Clear decisions on providing easy entry to global

players for direct selling could be still under the hammer

but the INR10000 crore4 opportunity has already made

the domestic players pull up their socks. Names like

Juvalia & You, Pipa Bella, Aaroh Unicepts, HLM Retail

and Future Group’s Big Baazar are directly reaching out

to customer through online channel. Though presently

dominated by international names like Amway,

Oriflame, Avon and Tupperware, a clear government

FDI regulations are still seen as hurdles for the smooth

entry of international players4. This can provide regional

ones with a reasonable start for ramping up, before

everyone joins the party. As per Juvalia’s founder

Chaitanya Agarwal, his sales personnel are directly

using tablets for real-time orders, sales and reports4.

They are further in the process out setting up satellite

offices. Similarly, as per Shichi Pandya, co-founder of

Pipa Bella, “Many women are shopping online, and

have social media accounts”4.

A strong underlying support:

Peter Drucker could not have been more correct here

when he said “The greatest change will be in distribution

channels, not in new methods of production or

consumption” 5. Clearly enough, the fourth P (Place) of

Marketing is overshadowing the other three. Researchers

had long before identified the difficulty in copying

logistics support as compared to price, promotion or

product tactic12, 13

. It can be far easier to build a website,

promote a product, and invite whole world shopping for

it, but it is only the strong underlying logistical support

which is going to differentiate men from boys. For the

already established traditional channels, seamless and

efficient integration between the “click” and “brick” can

prove to be the differentiator. Maruti Suzuki India Ltd.

can be easily considered as having an edge over its

competitors (and their vast experience of India markets

may not be the only reason for this). The timely

investment done in distribution and logistics has much to

do about it. The fourth P (Place) of the marketing which

Maruti Suzuki has a strong hold on is paying its rich

dividends now. A simple example of integration could

be of a customer submitting online request for test drive

or servicing of his car, and the related company

personnel calling him back through traditional channels.

Non-existence of such integration can be very confusing

for customers (who consider all these multiple delivery

channels as one single entity). Likewise, it became

confusing for customers of Barnes and Noble, the well-

known book store of United Kingdom when, after

buying a book from barnesandnoble.com they were not

able to return it through the Barnes and Noble Store,

It can be far easier to build a website,

promote a product, and invite whole world

shopping for it, but it is only the strong

underlying logistical support which is going

to differentiate men from boys.

The Big Bang of E-commerce

Abhijit Bhagwat, Ph.D. Scholar – SJMSoM, IIT Bombay (Abhijit is working for his Ph. D. under Prof. T T Niranjan’s supervision)

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or even use the coupon which they acquired through

internet for purchasing from a traditional store6.

Naturally, a strong logistics support which is well

integrated with marketing and rest of the supply chain

should be a formidable force in such situations. It is

very hard for any competitor to imitate such

integrations, and this can become a major source of

sustainable competitive advantage in this highly

contested ecommerce space.

Some unplanned fallout:

Marketing –Logistics interface and integration:

The emergence of e-commerce is materializing the

conceptual proximity of marketing and logistics.

Marketing and logistics are not meant to be the natural

allies, and their relations tend be characterized more by

conflict and lack of communication, than by a

collaborative integration7. Researchers have also

highlighted the interface between logistics and

marketing / sales as one of the most tense interfaces in

the company8, giving rise to chances of misalignment

9.

Hence one can rightly observe how the erstwhile

functionally restricted vanilla manager is doing far

more today than was ever expected before. Emergence

of e-commerce is going to make this integration of

marketing and logistics both significant, as well as

challenging.

Conflict management in multiple sales channels:

Before exercising this option of directly reaching its

customers through online rout, firms may need to

weigh the scenario in its entirety. The situation

Compaq faced when it tried imitating its competitor

Dell Computer by directly reaching out to its

customers through the e-commerce space must have

been an unexpected one. Because this brought Compaq

in direct competition with its pre-existing wholesale

and retail distribution network, unfavourably affecting

their earlier commercial relationships6. Such situations

can happen to any firm, and conflict management is

appearing as one of the major problems in such

scenarios. Firms are trying to resolve the issue using

tactics like selling the latest versions through retail

channels and the regular or older ones through online

channel. Under distribution relationship management

(DRM), firms have developed software helping

managers dealing with issue of unfair sharing of

channel margins, and finally helping in the

management of conflicts. Besides, other issues like

payments, security, and cyber laws are going to be

evolving as per the external factors like infrastructure

and government policies in the country.

Anything special for young business professionals?

Of course! Young business professionals are at the

critical juncture where any early decisions in deciding

which sectors to join can affect the graph of their career.

Besides, the enticers e-commerce provides could of

special interest to the young business professionals and

budding entrepreneurs. The enticers like:

Though growing strong, it’s still in relatively

nascent stage in markets like India and with the

increase in internet penetration and mobile

telephony, markets can only go northwards

A place for trying out your creativities and taking

chances. In this state of flux, there is no hard and

fast pattern or business models which could be

appearing right now and this can give entrepreneurs

the opportunity to take his or her chances for

aiming big, that too with a minimal initial amount

One may not have to go all the way with such

startups, as we often read about the acquisitions of

potential startups by bigger firms and many of such

acquisitions are related to ecommerce

Unlike other start-ups, an online start-up may not

always require you to leave your present job and

one can wait for making a gradual shift till the

situation becomes stable enough

Thus, e-commerce has its share of pros and cons, but the

budding managers and entrepreneurs cannot ignore the

unprecedented opportunity it presents!

Citation and References: 1. Research report by Motilal Oswal

(http://www.motilaloswal.com/Financial-Services/Research/Detailed-

Report/Expert-Speak/7958)

2. Bernstein, F., Song, J. S., & Zheng, X. (2008). “Bricks-and-mortar”

vs.“clicks-and-mortar”: An equilibrium analysis. European Journal of

Operational Research, 187(3), 671-690.

3. http://www.thehindubusinessline.com/features/blink/turning-it-inside-

out/article5667661.ece (This article was published on February 7, 2014)

4. http://www.thehindubusinessline.com/economy/direct-selling-gets-a-

desi-makeover/article5777820.ece (March 12, 2014)

5. Doyle P. (1998). Marketing Management and Strategy. Prentice Hall

6. Tesser, E. (2002). Business-to-Consumer Multi-Channel Distribution

Policies: from Marketplace to Market-Space Management. Symphonya.

Emerging Issues in Management, (1 Market-Space Management).

7. Ellinger, A. E. (2000). Improving marketing/logistics cross-functional

collaboration in the supply chain. Industrial marketing management, 29(1)

8. Van Hoek, R. I., & Mitchell, A. J. (2006). The challenge of internal

misalignment. International Journal of Logistics, 9(3), 269-281.

9. Van Hoek, R., Ellinger, A. E., & Johnson, M. (2008). Great divides:

internal alignment between logistics and peer functions. International

Journal of Logistics Management, The, 19(2), 110-129.

Magister Operandi Spring ’14

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This article illustrates and expounds application of

Newsvendor problem (NVP) to inventory management of

short lifecycle products. Further it provides insight into

working of model and its applications for decision making

in manufacturing and service industries as well as

decision making by individuals.

Introduction:

Indian retail is one of the largest sectors of economy,

contributing 15% of GDP with about 12 million

establishments. Retail landscape is changing fast with

emergence of modern retail that would help society in

improving supply chain efficiency through economies of

scale and scope and modern management practices

especially with entry of mega retailers like WalMart,

Metro, and Tesco etc. Unfortunately, the sector is facing

many problems of restrictive regulatory environment and

infrastructural handicaps and struggling to attain break-

even or earning razor thin profit. With the intensifying

competition, the profits are under tremendous pressure

and many establishments are struggling to survive. The

gross margin for the business is about 30% of sale with

operating cost of 26.5% and thus leaving net margin of

3.5 % or even less.

In this context, retailer product assortment having short

lifecycle products (SLP) - products of limited market life

for reason of physical deterioration or obsolescence

including perishable commodities, style goods and

technologically innovative products - is considered as an

important source of profit for reasons of higher margin,

short life and higher inventory turnover and completeness

of assortment.

Generally, SLP are defined as products having

market life ranging from few days to two years, due to

either physical deterioration or obsolescence. It include

perishable goods like foodstuffs, pharmaceuticals etc.

and obsolescence goods like software, fashion apparel,

consumer electronics, entertainment DVD, toys,

jewelry, books etc.

Unfortunately, high margin of SLP comes with

high risk and greater challenge in its management.

Because of short selling season and single (or limited)

procurement opportunity coupled with unpredictable

and highly uncertain demand, matching demand with

supply is challenging. Greater degree of mismatch

results in situations of stockouts or surpluses with

attendant costs that reduces the profitability of these

categories and even turn them into loss making.

Though these categories of goods have

attractive margin, inventory management is rather

difficult and challenging due to following important

market characteristics of these products:

• Relatively short but well-defined single selling

season that provides single procurement opportunity.

• Demand is unpredictable, uncertain, variable and

volatile. Due to novelty and high fashion content, the

product can be either hit (popular/ hot selling) or

miss (unpopular) in the market.

• Retailer must commit to a bulk purchase order far

ahead of selling season, that lead to large forecast

error.

• The residual value of the product at the end of selling

season is far lower than its selling price. The product

cannot be carried forward to the next selling season

for reasons of high inventory carrying cost and

almost certainty of its obsolescence in the next

season.

Thus, these goods are characterized by high

demand uncertainty, high stock out costs and a high risk

of obsolescence. Due to unpredictable demand and

supply inflexibility, these items are vulnerable to

overstock or stock outs. Overstocks lead to selling at

heavy discounts and even at loss to clear inventory,

while stock outs lead to lost sales and dissatisfied

customers. One of the important challenges a retailer

face is how much to buy?

Indian retail is one of the largest sectors of

economy, contributing 15% of GDP with

about 12 million establishments. Retail

landscape is changing fast with emergence

of modern retail that would help society in

improving supply chain efficiency through

economies of scale and scope and modern

management practices.

Newsvendor Problem: Insight and Applications

to Inventory Management

Prof. Pankaj Dutta Assistant Professor, Shailesh J. Mehta School of Management

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Newsvendor Problem:

This typical problem by many decision makers like

retailers is often referred as newsvendor problem (NVP).

It derives the name from the context of a newsvendor

purchasing newspapers to sell before knowing how many

will be demanded that day. It is widely studied and known

by different names in literature such as a "Newsboy

problem", "Christmas tree problem" etc. It involves

determination of best (optimal) number of newspapers to

buy that will minimize the expected cost shortages and

overstock, given that the demand distribution and cost

parameters are known.

Thus, the problem can be summed up as: A

retailer orders Q units a product at per unit cost C and

sales at price P. The holding cost and shortage penalty

cost are h and S respectively. In case the ordered quantity

is more than the realized demand, a single discount is

used to sell leftover units, realizing unit salvage value V.

In this context, two costs can be defined for situation of

Overstocking and Understocking - Overstocking cost (C0)

and Understocking cost (Cu). Overstocking cost (C0) is

purchase cost net of salvage value plus holding cost i.e.

C0=C-V+ h. Similarly under stocking cost (Cu) equals to

sum of profit loss opportunity and shortage penalty for

shortage i.e. Cu=P-C+S. Order quantity, Q* is determined

by minimizing sum of overstocking and under stocking

cost. Thus, NVP provides useful framework for a single-

period business setting in which a vendor determines

optimum order quantity Q* of a perishable product when

(1) there is a single purchasing opportunity before the

selling period and (2) demand is uncertain but follows

known distribution (3) all relevant economic

consequences can be represented by known (opportunity)

costs in terms of either Overstocking cost or the

Understocking cost.

Assuming that realized demand is a continuous variable

and pdf f (x) and cdf F(x), expected cost for order quantity

Q is

[ ( )] ∫ ( ) ( )

∫ ( ) ( )

The minimization of expected cost gives optimal order

quantity: (

) ( ) where is inverse

cumulative distribution function for demand distribution

and

= critical fractile.

Illustration and Insight:

The newsvendor solution attempts trade-off between

surpluses and stockout using . The critical

fractile (k) lies between zero and provides optimal

overstocking probability i.e. P(x < Q) = k, namely the

optimal probability having excess inventory. The ratio

of Cu to C0 determines k and probability of overstock.

For example, if the (unit) understocking cost is1, 3, 4,

or 9 times the overstocking cost, then it is optimal to

have a 50, 75, 80, or 90% chance, respectively, of

having overstock. It is intuitive that the higher the

relative cost of shortages, the higher should be the

optimal probability of overstocking. Thus, newsvendor

solution can be interpreted as providing the smallest

supply quantity that guarantees that all demand will be

satisfied with probability at least 100 k%. Thus, the

profit maximizing solution results in a service level 100

k%.

The result is illustrated with an example. Maya Apparel

Ltd buys Indian women’s ethnic apparel for Rs.2400

and sale it for Rs.4000.The market life of the apparel is

8 weeks and inventory holding cost is Rs.400 and

unsold apparel at the end of season is discounted at

Rs.1800.Shortage penalty, for loss of customer

goodwill is reported to be Rs.100 per unit. It is a chain

of stores and demand for this product (having different

size, colour) for the incoming season is expected to

follow normal distribution with mean 1000 and

standard deviation of 250. The under stocking cost is

= P-C+S =4000-2400+100=Rs.1700 and

overstocking cost is =C-V+h =2400-1800+400 =

Rs.1000.Therefore, critical ratio works to 0.63.The

optimal order quantity Q*= (0.63)=1083 for normal

distribution with mean 1000 and standard deviation of

250. Therefore, retailer should order 1083 units of the

apparel.

Applications

The newsvendor problem is a one-time business

decision having application in numerous different

businesses contexts such as:

Retailing of single period products

Making the last buy or last production run decision:

Manufacturers have to make a last buy (or last

production run) for a product that is near the end of

its life cycle.

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Magister Operandi Spring ’14

Team Flaming Mockingjay [Parthajit Dutta, Anuvrat Gupta (From Left)] battled it out with teams from all the B-Schools across the country in Smooth Operator, the Operations event of Symbiosis Institute of Management Studies, Pune and has been crowned as winner. The competition was based on the real-time issue of Imperial Logistics of loading and unloading. The team analysed and came up with a new and sustainable methodology of loading and unloading. The team also had to design the layout of a super-mall and they successfully did so to grab the podium.

SOM ACHIEVERS

Selecting the right capacity for a facility/ machine

where under capacity would lead to shortages and

overcapacity would raise capital cost.

Purchasing spare part along with purchase of machine.

The spare purchased along with machine are available

at highly concessional rate as compared to those

bought at later stage .With the known probability

distribution of failure, NVP aide in determining

purchase optimal quantity of spares.

Overbooking customers - Overbooking practice is

followed in airline, hotel/cruisers to compensate

cancellations. Excessive airline overbooking

passengers lead to incur the cost of giving away free

tickets to inconvenienced passengers. On the other

hand, insufficient passenger overbooking incurs an

opportunity cost of flying with empty seats.

Summary

The newsvendor model provides both useful intuition

and a useful tool in solving many operations problem

by attempting trade-off between understocking cost

and overstocking cost to determine order quantity in

face of uncertain demand. It is used many in different

business contexts such as retailing SLP, making a final

production run, setting safety stocks, buying spare

parts, making capacity decisions etc. These contexts all

have a single decision variable, random demand, and

known overstocking and understocking costs. Explicit

defining the overstocking and under-stocking costs and

calculating the critical fractile can often lead to better

economic decisions than those made solely on basis of

experience, intuition, myopic reward systems etc.

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Magister Operandi Spring ’14

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Across:

1. The practice of moving domestic operations such as

manufacturing to other country.

3. A qualitative forecasting technique where the

opinions of experts are combined in a series of

iterations.

5. The concept of adding an element of human

judgment to automated equipment so that the

equipment becomes capable of discriminating against

unacceptable quality and the automated process

becomes more reliable.

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Magister Operandi Spring ‘14

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7. The process of a transportation vehicle returning

from the original destination point to the point of

origin. It is also called deadheading.

9. Sets the pace of production to match the rate of

customer demand and becomes the heartbeat of any

lean production system. It is computed as the available

production time divided by the rate of customer

demand.

11. A technique in which an ERP system traces

demand for a product by date, quantity, and warehouse

location.

13. A measure of operating efficiency used by air

carriers to determine the percentage of a plane’s

capacity that is utilized, or the number of passengers

divided by the total number of seats.

15. A mechanism that either prevents a mistake from

being made or makes the mistake obvious at a glance.

17. An international water carrier that has no fixed

route or published schedule; it is chartered for a

particular voyage or a given time period.

19. The process of a supplier placing goods/shipment

at a customer location without receiving payment until

after the goods are used or sold.

Down:

2. The period of time allowed for the removal or

accumulation of cargo before charges become

applicable.

4. In the Just-in-Time philosophy, an approach to level

production throughout the supply chain to match the

planned rate of end product sales.

6. Popularized by Toyota Corporation, it uses standard

containers or lot sizes to deliver needed parts to

assembly line "just in time" for use.

8. A popular type of Universal Product Code used on

retail packaging

10. The practice of using a large box or carton to

contain multiple smaller packages which are all going

to the same destination in order to achieve a reduced

overall shipping cost v/s the individual packages.

12. An analysis that identifying that 20 percent of a set

of independent variables is responsible for 80 percent

of the effect.

14. A business leader or senior manager who ensures

that resources are available for training and projects,

and who is involved in project tollgate reviews; also an

executive who supports and addresses Six Sigma

organizational issues.

16. A series of activities, which combined, define a

business process; the series of activities from

manufacturers to the retail stores that define the

industry supply chain.

18. A form of cooperative relationship among

companies in Japan where the companies largely

remain legally and economically independent, even

though they work closely in various ways such as sole

sourcing and financial backing.

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Magister Operandi Spring ‘14

Answers:

1. OFFSHORING; 2. FREETIME; 3. DELPHI; 4. HEIJUNKA; 5. JIDOKA; 6. KANBAN; 7. BACKHAUL; 8. BARCODE; 9.

TAKTTIME; 10. OVERPACK; 11. PEGGING; 12. PARETO; 13. LOADFACTOR; 14. CHAMPION; 15. POKAYOKE; 16.

VALUECHAIN; 17. TRAMP; 18. KEIRETSU; 19. CONSIGNMENT

Abhineet Agarwal, Co-Founder of Pulpypapaya.com is a young enthusiast trying to build a brand around a simple idea. His idea is to just collect and create. He collects regional handicrafts from around the globe (starting off with our own Incredible India). Now about creation, he creates graphics inspired from a specific regional art with the pinch of creativity. In his interaction with Team Opera, Abhineet speaks about the supply chain practices at Pulpypapaya and shares his experience with the budding entrepreneurs who want to make it big in the hospitality business.

OPERA: Tell us something about your background.

When and how did you get associated with e-commerce

sector, that too a venture based on regional handicrafts?

Abhineet - We three school friends had completed our

education and were looking out for some venture in E

commerce. I was working on one venture on handmade

products then. So we first wanted to go in that sector. But

eventually we planned to go in handicrafts and started off

with few handicrafts. Later we came up with the idea for

creating products sporting graphics inspired from some

regional art. This is how it all came up.

OPERA: Pulpypapaya operates by collecting regional

handicrafts handcrafted by local

artisans. What are the challenges

involved in procurement? What is the sizddddddddddde

the market size of such kind of

regional handicrafts?

Abhineet - The procurement is one dddddddddddddddd

of the biggest challenge. Explain-

ing artisans about the exact

requirement is extremely tough.

Secondly, the artisans never stick vvvvvvvvvvvvvvv

to the deadlines because of which dddddddddddddd

many a times we have to wait for cccccccccccccccccc

months. This hinders the growth

of the venture. Then, it happens

sometimes that we pay in advance ffffffffffffffffffffff

and never receive the product. Also getting a standardized

product (specially the footwear) is next to impossible.

Once we procure the footwear, the standardization of size

is done by us as per the international standards. Defects

are also very common. These all add up to high

procurement costs.

The market for such handicrafts is good. But

many people think they can go to the place and buy it

cheaper. But they do not consider the fact that they would

not travel a 1000 Km to buy that product. So if people

understand that we procure them, standardize them,

deliver at your doorstep and do so much to let it reach

your sight, then this sector has an extreme potential.

OPERA: How can the supply chain of an e-commerce

company leverage the technology?

Abhineet- Technology is the backbone of an E-Commerce

venture. Without technology logistics would be a

nightmare. Online tracking of shipments is very helpful

for both the seller and the buyer. Also with the help of

technology we are able to exchange images of

ssssssssssssssss products, Stock Sheets and

sssssssssssssssssssssss other media very easily which

ssssssssssssssssssssss reduces the time duration for

ssssssssssssssssssss most of the tasks.

Sssssssssssssssssssssss OPERA: What are the major

ssssssssssssssssssssssss operational challenges in a

ssssssssssssssssss sssss startup like pulpypapaya?

Dsssssssssssssssssssss Abhineet - A start up like

Psssssssssssss Pulpypapaya is full of

sssssssssssssssssssss sss operational challenges. Getting

ssssssssssssssssssssssss right product at the right time

ssssssssssssssssssssssss is one of them. Production of

sssssssssssssssss products like tees & other products

is a nightmare as we are new to the field. Updating

available sizes of products on all the websites we sell is a

huge task. Working with designers for product and

graphic design is tough as one cannot afford highly

expensive (The ones who come up with the best)

designers always. Not belonging to the art background is a

drawback.

Abhineet agarwal

Co-Founder, Pulpypapaya.com

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Pulpypapaya.com, a website that gives regional handicrafts a trendy look, is playing a vital role in promoting

regional Indian art all over the globe. The E-Commerce venture was founded few years back by Abhineet

Agarwal, Tushar Somani and Akash Saraf.. At Pulpypapaya they focus on building a brand that values art,

creativity, exclusivity and above all customer satisfaction.

OPERA: Do you provide an option of Cash on

Delivery, which basically, is a necessary evil in India. If

not, why? And if yes, how do you handle the operational

challenges of using this system?

Abhineet - Currently we do not provide Cash on Delivery

(COD) on our portal. The reason being that the customers

of the country have not evolved yet completely. COD is a

time pass for many people in the country. We sell through

many portals which provide COD facility. Many of those

orders get cancelled due to wrong/incomplete customer

details, rejection by customer and other reasons. If a

customer is genuine and likes the product he/she will buy

it paying online as well. COD increases sales but the

losses are also considerable.

OPERA: With a large number of players in e-

commerce providing home delivery services, do you

think that the concept of collaborative logistics can be

put into practice in India?

Abhineet- It can be a boon but right now that stage is far

away when we can think of it. For Collaborative Logistics

to be a reality the E-tailers should have an association

where they get a platform to collaborate.

OPERA: With the penetration of mobile in India, do

you have had any plan to capture the on growing mobile

E-commerce market and in what way do you think it will

impact your current business model?

Abhineet- We have made our portal in the responsive

format because of which it can be opened in 32 different

screen sizes. We have kept our website mobile friendly so

that people can surf and buy through cell phones as well.

Mobile commerce is the next big thing and is must for all

the online sellers.

OPERA: What are some of the future plans of

Pulpypapaya and how do you plan to further expand?

Abhineet - We are tying up with offline stores to sell our

products. We will soon be available on the leading online

marketplaces. Also we will be adding lot many types of

handicrafts and we soon will be adding international

handicrafts to our collection. We will also be launching

different categories in products manufactured by us.

OPERA: What would be your advice to young

entrepreneurs wishing to enter into the world of e-

commerce?

Abhineet- We too are very young so we cannot advice

actually. But we can share our experience. On the basis of

our experience till date we would like to advice young

entrepreneurs that patience is the most important factor in

this field. We have waited a lot for many things and we

are still waiting to withdraw profits. Also in a start up

everything is impossible if you do not try for it. Every day

is a problem solving exercise. So, one should be ready to

take on any kind of problem. Also, looking forward for an

easy investment just after starting up, kills the start up. So

people should not make ventures for the sole motive of

seeking investment.

OPERA: Team Opera wishes you all the best in your

future endeavours.

Abhineet- Thank You

Magister Operandi Spring ’14

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Continuum, the rolling seminar series, is the flagship

event of the annual industry interaction sessions at

Shailesh J. Mehta School of Management, IIT

Bombay. The Continuums are held across the various

domains of management like Consulting, Finance,

Human Resources, Marketing, Operations & systems.

Operations Continuum 2013

Operations continuum 2013 was organised on 4th

August 2013. The theme for the continuum was:

“Building resilient Supply Chain through effective

Collaboration”

This event aims to cover the latest trends in

management by inviting eminent speakers from

industry and academia. Each of these seminars focuses

on issues and challenges faced by a management

function, and aims at drawing insights from the

knowledge and experience of the speakers.

Operations and Supply Chain Management has

always been one of the core functions of any

organization. With operations becoming the

powerhouse for efficiency in industry, operations

managers are now expected not only to be cost

efficient and productive, but also bear strategic

responsibilities. Operations continuum discusses the

latest issues facing the operations’ executives. The

event is a platform for knowledge sharing, and aims to

raise curiosity among the participants regarding

specific aspects of business in the domain of

operations management.

Volatility is the new norm for supply chain

operations and continuing economic uncertainty is

affecting demand by driving shorter capital investment

cycles and tighter inventories. One of the herculean

tasks for organizations today is to build a resilient

supply chain that could withstand the disruptions, be it

internal or external which might hamper the flow of

materials/information. In this new environment, supply

chains must exhibit a high degree of adaptability,

responsiveness and collaboration to successfully

subside the disturbances from spreading over the entire

chain. Organizations have identified that effective

collaboration requires transparency in terms of the

happenings at the end of each supply chain partner.

They have been moving from the conventional

OPERATIONS CONTINUUM

Snapshot of ‘13 Continuum

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sequential flow of processes to more responsive and

adaptable processes where all the supply chain partners

would have an understanding of the happenings at each

end of the supply chain.

To achieve this, organizations around the

world have been adopting new systems, technologies

etc. that could connect all the supply chain partners so

that even the slightest of the disruptions could be

effectively tackled by immediate responsive actions at

the respective stakeholder’s end. Information

asymmetry which could have serious repercussions on

the functioning of the entire supply chain could be

mollified to a good extent.

The future challenge for the organizations is to

make the collaboration more effective by working in

tandem with all the partners to ensure agility and

stability across the supply chains. It is the

responsibility of the organizations to educate their

their supply chain partners regarding the

implementation of the collaborative tools and

concepts to ensure resilient and sustainable supply

chains.

Speakers at Operations Continuum 2013

The following luminaries have delivered lectures at

Operations Continuum 2013 on August 4th, 2013 at

SJMSOM, IIT Bombay:

Mr. Rajeev Mehta, Executive President,

Logistics, Ultra Tech Cement Ltd

Mr. Sushil Rathi, VP, SCM, Mahindra Logistics

Mr. Anil Radhakrishnan, Managing Director,

APL India Pvt Ltd

Mr. Kedar Ambedkar, Consultant, Vector

Consulting

Mr. Tushar Garg, Head – Commercial,

Raymond Limited

Mr. Rajendra Jog, Associate Supply Chain

Director, Dow Chemicals

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“Avenues” is the annual Business festival organised by

Shailesh J. Mehta School of Management, IIT Bombay

in the 1st or 2

nd week of November every year. It

consists of a potpourri of management events targeted

at the budding managers and combines learning with

fun. Students from the most reputed B-Schools all over

the help of Prof. Owen Berkeley Hill, a lean consultant

and visiting faculty of SJMSoM having a vast

experience in the industry.

“Leagile” stands for Lean and Agile. “Leagile”

test the participants in their practical skills and concept

clarity in Lean Management and Supply Chain

India participate, compete and win exciting prizes in

various competitions. With the theme being “Breach

the Zenith”, Avenues 2014 is all set to be even grander

this year

Events at Avenues are of two types- domain

events and flagship events. Domain events are specific

to various streams of management and are expected to

test the knowledge and skills of the participants with

respect to the various domains. Flagship events

basically test various qualities of the students and their

ability to counter the ambiguities. “Leagile” is a

domain event at Avenues to test the knowledge of

participants with respect to Supply Chain and

Operations concepts.

Event Introduction:

“Leagile” is an event coordinated and organised by the

members of Opera club in Avenues. Leagile” is the

first of its kind which was evolved to put lean thinking

at test through a game developed in 2011 with

Management and Lean is a widely appreciated tool in

the industries worldwide and Agility enables the

companies to comply with the fast changing

environment.

The Legacy:

“Leagile” established itself as a major operations

competition in the B-School circuit across India in its

very first year, 2012. It continued to attract students by

involving them in controlling a supply chain simulated

in a fun setting.

Leagile at Avenues 2013:

The initial rounds of event involved a Quiz based on

Lean concepts and an online Supply Chain simulation

game. In the final round of the event on campus, the

teams were tested over the course of two events, first

on the overall Supply Chain concepts and then

specifically on designing a Lean production line using

product models in a simulated Supply Chain

Leagile at avenues

An Operation domain event at B-Fest of SJMSoM, IIT Bombay

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environment where the teams were tested on their

ability to practically implement all the concepts

learned in a VUCA world production line. Team from

NITIE emerged as the winner of the event at the end of

the two rounds.

Looking Forward – Leagile at Avenues 2014:

The “Leagile” team 2014, with a commitment to

enlarge the event, is planning to hold an event that

involves five different games on campus.

The initial rounds of event will involve a Quiz based

on Lean concepts. The shortlisted teams will be invited

in the campus and in the final round of event on

campus, the teams will be tested over the course of two

days, first on the overall Supply Chain concepts that

will include live case studies from at least two

different industries and then specifically on designing

a Lean production line using product models in a

simulated Supply Chain environment where the teams

will be tested on their ability to practically implement

all the concepts learned in a VUCA world production

line. Apart from this, the teams will be tested on their

ability to come up with a specific lay-out of a city

based on certain constraints within a short time and an

online Supply Chain simulation game where the

participants’ resource handling capability and decision

making ability in a variable and ambiguous

environment will be tested.

The event will be fun to play and will provide

edutainment to the participants. The team with a

holistic understanding of operations including know-

how on their applicability would emerge victorious.

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It has been a wondrous experience for the students of

SJMSOM to visit the warehouse of Dow Chemicals

and other operating warehouses of CCI Logistics.

Intended to provide an overview of the warehouse

operations, there are lot more takeaways that the

students could take with them from the visit.

the country and currently its offices are more than 80

in number located in 54 cities. CCI Group operates

through three subsidiaries viz. JKS Infra, Carrying

Corporation of India and CCI Logistics Ltd. CCI

Logistics has 4 verticals – Primary Transportation,

Secondary Transportation, Warehousing and Customs

Students, most of who are first time visitors to a

warehouse are enthralled at the might at which it

operates and the intricacies involved in efficient

operations.

The visit started with a pre-session by the

Country Head of CCI Logistics Mr V. Raju who gave

a brief overview of the business of CCI Logistics

which is a 3PL service provider to some of the major

Fortune 500 companies including Dow Chemicals.

This was followed by a brief on the association of Dow

Chemicals with CCI Logistics by Mr Rajendra Jog,

Supply Chain Director of Dow Chemicals, India.

Pre-visit session:

The pre-visit session took the students through the

journey of CCI Group which started as a mere

transporter/distributor and has become a 3PL service

provider in a span of 30 years. Starting its operations

in 1977, the company established its facilities across

clearance. It has its customers across different

industries like Chemicals, FMCG, Telecom,

Information Technology, Pharmaceuticals etc. The

company strategized clearly on its future offerings for

each of these sectors

The session also touched upon different types

of Loadings in Transportation like Less than Truck

Loading, Full Truck Loading etc. before delving deep

into the warehousing. The location of the warehouse at

Panvel is the first integrated warehouse of the

company and it offers its services to the customers by

providing different types of warehouses like Racked

warehouse, Floor warehouse, Non-covered open

warehouse etc.

After the presentation on CCI Logistics, Mr

Jog gave a brief on the warehouse of Dow Chemicals

which is a Temperature controlled warehouse. The

warehouse has a separate ERP system to support its

operations. At the end of the session, students were

Warehouse visit to Dow Chemicals and CCI Logistics

An initiative by Opera

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encouraged to ask questions and specific things they

wanted to see in detail regarding the warehouse

operations. The session ended with few requests from

students to take them through specific operations like

loading, functioning of ERP system, forklift operations

etc.

Warehouse visit:

The pre-session was followed by physical visit to the

warehouses which displayed the operations that were

discussed in the pre-session. Different types of

warehouses were visited which include Racked

warehouse, Floor warehouse, Temperature controlled

warehouse etc. Mr Raju and Mr Jog accompanied the

students to explain the operations carried out in the

warehouses. The students were shown how a forklift

operates, how a truck is unloaded and loaded and how

an ERP system works. Few of the warehouses were

under transformation from Floor to Racked

warehouses. One striking thing was that all the

warehouses were equipped with excellent safety

systems in case of any emergency taking into

consideration even minute happenings. The visit lasted

for around 90 minutes and covered major portion of

the facility.

Post-visit session:

The post-visit session was open to students for asking

questions regarding the warehouse operations.

Students participated in the session and got their

queries answered. Few questions that had come up for

discussion were regarding CCI’s step towards

operating as 4PL service provider in future, strategic

decision regarding warehouse location, railway line

behind the warehouse etc.

The session ended with mutual exchange of

pleasantries and a photograph of the students and the

industry executives. Overall, it was a great learning

experience and the students are looking forward to

similar visits and sessions in future.

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Meet Akanksha Jha, Pranavi Jakkam and Sri Ramya Palakollu, Second year students of Shailesh J. Mehta School of Management, IIT Bombay. They are the campus winners of coveted Marico- Over The Wall competition 2014, where they battled it out teams from some top Business Schools across the country. In this interaction with Team Opera, Team Action 24X7 speaks about their journey and the challenges. We tried to get some tips and advice from the achievers, for our readers.

OPERA: Tell us about yourselves. Why the name of the

team "Action 24X7"?

Akanksha- We three have been close friends right from

the start of our MBA. Our areas of interest lie in

operations and marketing. The team name "Action 24X7"

was an impromptu choice when we realized that we had

only five minutes to submit the presentation and we were

yet to figure out a name for our team.

OPERA: How did you get information about 'Marico-

Over the wall'? How do you generally get the

information on such competitions?

Sri Ramya- We were informed by our Industry Interaction

team about this competition. The same information was

also available on Marico’s campus connections page on

Facebook. It is always a good practice to like the relevant

Facebook pages of these organizations to get a heads up

about these competitions.

OPERA: What were the different stages of this

competition?

Pranavi- The first stage consisted of selection of campus

round winners. All the teams selected for campus round

were required to make a presentation before the judges.

Each campus round winner was then scored against other

two campus round winners from different colleges across

the country. Finally one campus round winner was chosen

across each domain (Marketing, operations and finance).

The winners got a chance to do an internship with Marico.

Based on their performance during this internship, the

final winner was decided and offered a PPI and cash prize.

OPERA: What was the case study about?

Sri Ramya- The case study dealt with the issues faced by

Marico post acquisition of Paras Brands. After taking over

the portfolio, the Marico team had decided that they will

focus on a few categories initially- deodorants for men,

Pranavi Jakkam, Akanksha Jha and Sri Ramya

Palakollu

Campus Winners, Marico- Over The Wall 2014 Shailesh J. Mehta School of Management, IIT Bombay

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male grooming, hair Gels and hair serums. Post-

acquisition, Marico has been faced with excessive

material stock of Paras brands at various points in the

supply chain i.e. at depots and distributors. The excessive

stock comprised of expired products and soon to expire

products. There were two major issues to be addressed.

First one is to design a material stock handling strategy of

the products lying at the depots and distributors. Second

is to forecast the demand for acquired brands assuming a

25% overall growth for Marico.

OPERA: What was your approach? Any specific

framework which you used?

Akanksha- From the initial analysis of the case, we

identified two key issues that need to be addressed. 1)

Material stock handling & 2) Demand Forecasting. W.r.t.

the first issue, we initially referred to material stock

handling strategies from various text books and research

papers available online. During the course of time, we

approached several people from FMCG industry to

identify all the stakeholders of the issue and understood

several techniques implemented for handling expired

products in different companies. After thorough primary

and secondary research, we categorized the issue into two

time frames: Short term and Long term. The key aspects

taken into consideration for devising a strategy are a)

Impact on the bottom line b) Cost Burden c) Brand

Reputation d) Depot, Distributors and Warehouse

concerns and e) Regulations. Short term solution included

the calculation of salvage value for the existing products

and identified several channels of expired product reverse

logistics and disposal. On the other hand, long term

solution comprised several factors that contribute to the

product expiry and recommendations to reduce the same.

Demand forecasting was calculated based on

the 36 months data that was provided in the case. Based

on the historic data available, we identified the level,

trend, seasonality and autocorrelation components in the

data . Once these factors were calculated, we implemented

the appropriate forecasting technique- Holt Winter’s

Method to forecast the data for next one year.

OPERA: What were the major areas and concepts of

operations that came handy?

Sri Ramya- Some of the major concepts of operations

that helped us solve the case are Inventory Management,

Reverse Logistics and Demand Forecasting.

OPERA: What was the biggest challenge you faced?

How did you overcome it?

Pranavi- One of the biggest challenges we faced during

the competition was to identify the industry practices used

for disposal of expired material. We approached various

experts from FMCG industry to understand material stock

handling strategies implemented by them and analysed

several techniques of material disposal applied for

different products based on the nature and ingredients

used. It helped us in devising the material stock handling

strategy for Marico.

OPERA: Any interesting fact about the competition you

would like to share with us?

Akanksha- It took us some time to approach one of the

problems listed in the case study. After discussing with

experienced people in field of supply chain, we realized

that it was a problem of reverse logistics which had earlier

completely slipped out of our mind.

OPERA: What kind of homework you generally need to

do for such Operations related competitions?

Pranavi- One needs to be aware about the latest trends in

the industry related to the problems posed in the

competition. A basic understanding of the relevant

concepts is a must. Try to find similar issues faced in the

given sector by different organizations and their response

and see what challenges the current organization would

face if they had adopted a similar approach. A basic

knowledge of the standard metrics across the given sector

will always be an advantage.

OPERA: Any advice you would like to give to the

aspirants of such coveted topics?

Akanksha- Try to talk to as many people as possible in

the related field and the given organization, if possible. A

thorough understanding of organization’s best practices

and procedures always helps.

Magister Operandi Spring ’14

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Mr. Vishwadeep Khatri is the CEO of Benchmark Six Sigma. Vishwadeep has been conducting senior management workshops for some of the World’s leading organizations including Goldman Sachs, JP Morgan Chase, William Hare, Schneider Electric, Syngenta and American Express. As a Business Improvement Consultant, Vishwadeep has led consulting assignments for clients from various industry sectors including Tata Motors, Radisson Hotels, France Telecom, Indofoods, Airtel, and NIIT.

I have been doing training and consulting on Lean Six

Sigma (LSS) since 2001. We started conduct of

structured LSS training in the form of Green Belt in the

year 2005. I shall mention changes that I have

personally experienced over the years. This article shall

explore several perspectives using a then (2005-06) and

now (2013-14) comparison.

The book has changed and so has the meaning of copy-

book:

Copy book six sigma started in 1987- The original

proponents of the subject had a copy book approach

towards quality with a five stage structured approach to

defect reduction.

Original definition of Six Sigma referred to

ability of a process to generate a high “first time right”

percentage in the production output.

This gained credence in many companies like

Motorola (originator), Honeywell, and General Electric in

a few years. GE developed methodologies that can be

applied to services and to design.

In 2014, there are a large number of

professionals promoting Lean Six Sigma in a copy-book

style but with an entirely different perspective. One look

at the modern definition will explain how the meaning

has changed.

“Lean Six Sigma is vastly regarded as a

business improvement methodology that maximizes

shareholder value by achieving the fastest rate of

improvement in customer satisfaction, cost, quality,

process speed, and invested capital”

Quite clearly, Lean Six Sigma has moved from

the perspective of Quality Management (which

considered management of quality in a company) to a

methodology that enhances the Quality of Management.

The numbers “Then and Now”:

When we started conducting green belt programs way

back in 2005, we had an odd service sector participant

sneaking in with a shy look as he saw all manufacturing

folks occupying seats. This rapidly changed to 30

percent service sector participation by 2007 and finally

to 85 % in 2014. The numbers in Green Belt programs

have been changing over the years as well. In open

enrolment programs, we trained about 100 people in the

year 2005. It has swelled to 200+ per month now. In

2005, very few organizations in India had an internal

Lean Six Sigma program. Today, a large percentage of

managerial work-force gets trained in internal programs

of leading companies in various sectors.

Enhancement in cross domain expertise:

One of the most prominent unchanged features of LSS in

these nine years is that professionals with business

excellence expertise are able to pursue opportunities

across domains. This helps them grow across verticals as

the business improvement skill-set is respected

everywhere. This has been one of the reasons why senior

professionals from various industry sectors

have been nominated for these programs. In the 60+

Black Belt batches that we have completed, the career

growth of at least one professional of each batch is

highlighted at

http://www.benchmarksixsigma.com/content/lean-six-

sigma-green-belt-certification

Used sometimes in a copy-book style and

several times in an unorthodox fashion, Lean

Six Sigma approaches have been bringing

large scale business improvement across

sectors.

Lean Six Sigma - Journey from “management of

Quality” to “Quality of management”

Vishwadeep Khatri CEO, Benchmark Six Sigma

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In our 370+ Green Belt batches, we have had senior

professionals in most batches. A sample list of such

professionals can be seen in the slider of our website at

http://www.benchmarksixsigma.com/content/lean-six-

sigma-green-belt-certification

.

times, we have worked with design teams of Voith

Turbo,Turbo, William Hare, Dr. Reddy's, Kone

Elevators, to name a few. LSS is on the rise in this

domain.

Banking and NBFC : Having trained professionals

from American Express, JP Morgan Chase, HDFC,

ICICI Bank, ABN Amro, Max New York, HSBC and

the likes, I can say that the methodology is here to stay

in financial domain.

BPO/ KPO : Due to severe productivity and cost

pressures, outsourcing industry has been active with

LSS. Another reason for BPO’s early entry into this

domain was due to their perceived similarity with

manufacturing. All large BPO’s in India and LSS

implementers.

Informational Technology :IT experts in India have

been joining the LSS bandwagon for one more reason in

addition to business improvement objective. Most

clients happen to be from US and are active with LSS

practices. It became a client expectation that project

managers in IT domain understand and use the

philosophy during software development. Most large IT

companies actively pursue DMADV and DMAIC

approaches.

Other Services like healthcare, hospitality, travel, and

telecom have seen significant activity with leading

providers putting LSS teams in action. LSS in healthcare

is a big focus area in US in last few years.

Professionals from these domains form the majority of

our participants. There has been a significant increase in

service sector participants from these domains as

highlighted earlier.

Sales and Marketing : In the digital age, search engine

marketing and social marketing with platforms like

Google, Facebook, Linkedin provide great opportunities

for enhancements in lead generation using LSS due to

availability of reliable data. Usage of CRM solutions in

most large corporates has made it easier for LSS

professionals to focus on projects that focus on increase

in revenue. LSS activity is increasing marketing domain,

but not so much in sales.

Unorthodox Lean Six Sigma on the rise:

There are a large number of professionals who use the

LSS methods for problem solving and decision making

although they do not carry out end to end projects of the

DMAIC or DMADV kind.

The usage of the approach needs modification

to suit the culture of the organization. While mature

organizations thrive with the new terminology and

outlook, there are hundreds of organizations where our

participants prudently avoiding usage of Lean Six Sigma

jargon to ensure that colleagues and bosses are not

intimidated.

Unusual implementers of LSS include senior

professionals from Naukri.com, IT service management

R&D : One of the most

vehemently opposed groups

initially was the R&D

function. This has changed to

quite an extent. In recent

Applicability of Lean Six

Sigma:

The views on applicability

were questioned in several

domains initially. To be

frank, there are a number of

detractors even today, but the

believers have been doing

well all these years. Let us

review various domains.

EPC (Engineering,

Procurement and

Construction) : This

industry works with projects

most of the time. The leading

provider of project

management body of

knowledge, the Project

Management Institute has

been promoting process

approach to project

management for several

years now.

Operations, Quality and

Supply Chain :

Professionals from these

Magister Operandi Spring ’14

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experts from IBM, SAP implementation experts, Black

Belts at HSBC, Business Excellence experts at TCS,

Wipro, GE, and Risk Management professionals in

Citibank and HSBC.

The biggest set of unorthodox Lean Six Sigma

implementers are the large consulting companies who

have created consulting roadmaps that use most of LSS

methods capsuled in a proprietary approach developed

by them. These consulting companies do not conduct

training but take up business challenges, convert them

into projects, collect data from client processes, use LSS

tools and provide recommendations.

Lean Six Sigma Methodologies – Then and Now:

The most popular methodology continues to be the

DMAIC (Define – Measure – Analyze – Improve –

Control) sequence where the objective is to identify an

existing process that needs rapid improvement, and take

through a structured problem solving rigour. The

DMADV cycle (Define – Measure – Analyze – Design –

Verify - akin to business process re-engineering) has

grown in stature and every year there are more

companies that are seen using it. We re-launched our

DMADV Black Belt program last year it seems this

program is likely to grow in next few years.

The increase in the pace of change:

The pace at which new products are getting launched,

the time in which new concepts get tested and the

rapidity with which customers accept or disregard a

product are visible to all of us. This has led to LSS being

made a part of decision making on an everyday life in

fast moving companies. As an example, when a

regulatory change happens in a country, a bank initiates

lean six sigma projects which focus on minimizing

losses or maximising gains from the specific change.

Companies like IBM have developed a design sequence

that ensures that the power of LSS methods is put to use

whenever a new IT service is launched. This ensures

more instances of “first time right” services.

To keep pace with rapid changes, Lean got

integrated with Six Sigma a few years ago. This created

a new terminology called Lean Six Sigma. While Lean

focuses on efficiency (faster designs, faster operations,

faster deliveries etc.), Six Sigma focuses on

effectiveness (meeting customer requirements). The LSS

assignments are done more rapidly at companies that are

in a dynamic market place. This is natural as no one can

afford to spend much time in improving a process that is

bound to be revised soon. This has also created the case

for DMADV projects being taken up more often as

compared to DMAIC in fast paced sectors.

The paradigm shift:

The shift from “Inspections at the end” to “First time

right at source” is becoming a powerful management

driver in more and more companies. “FMEA” that

ensures risk mitigation, “Mistake proofing” that

eliminates the possibility of defects, “SPC” that provides

early warning alerts are gaining traction. Companies are

realizing more than ever before that need for scalability

creates a need to build extra-ordinary processes. LSS

methods are aligned to build such processes in

organizations.

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Magister Operandi Spring ’14

TEAM OPERA

Opera, The Operations club of Shailesh J. Mehta School of Management, IIT Bombay is an endeavour by

the students which constantly works on the lines which supplement its vision which is “To enrich the

knowledge of students of SJMSoM in the domain of Operations management through planning and

implementing activities that supplement their classroom learning”. Opera aims at bridging the gap

between industry and academia. Our major activities include but not limited to:

Imparting knowledge to students through summer preparatory sessions, guest lectures, etc.

Co-ordinating Operations continuum

Conducting Industry Visit

Sharing knowledge through various avenues – Club website, forum etc.

Conducting operations related competitions

Conducting Leagile event at Avenues

Publishing bi-annual magazine “Magister Operandi”

Prashant Srivastava Parthajit Dutta Email: prashant.srivastava@sjmsom.in Email: parthajit.dutta@sjmsom.in Contact: +91 9967 350 927 Contact: +91 7506 122 606

Shreerang Kamble Anuvrat Gupta Email: shreerang.kamble@sjmsom.in Email: anuvrat.gupta@sjmsom.in Contact: +91 9545 708 181 Contact: +91 8454 997 117

Akash Chaudhari Rakesh Devadas Email: akash@sjmsom.in Email: rakesh.devadas@sjmsom.in Contact: +91 9892 920 904 Contact: +91 8454 993 477

opera15@sjmsom.in

https://www.facebook.com/SJMSOM.OPERA

http://www.som.iitb.ac.in/clubs/opera/

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No part of this online magazine or any of its contents may be reproduced, copied, modified or

adapted, whether in hard copy or electronic or any other form, without the prior written consent of

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The views and opinions expressed in the articles are those of the author(s) and do not necessarily

reflect the views or opinions of Team Opera. It is the sole responsibility of authors to obtain

permission for quotations, illustrations, tables and diagrams, etc. Team Opera is not responsible for

any source of external dynamic content to which an author makes a reference in an article

We look forward to your feedback and suggestions..!! For any queries, comments or new ideas, please feel free to write us at: opera15@sjmsom.in