Operations Management Concepts

&
their Application

(Operations Management)

By
Ishan Kakkar
(2019MBA-13)

April 13, 2020

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Operations Management

Table of Contents
S No. Title Page No.
1. Concept of Lean 3
2. Concept of 5S 5
3. Concept of Kaizen 7
4. Concept of JIT 9
5. Concept of Waiting Line Management System 11
6. References 13

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Concept of Lean

Organisation: Bank of Baroda (Sub-Process: Loan Processing)

Sector: Banking & Finance
Basic Process: A customer applying for a loan submits documents at the branch, basis his/her
requirements (amount-wise) relevant approvals are taken from 5 different
authorities in the entire process starting from branch manager, cluster manager
and going all the way up to general manager or deputy general manager. After
receiving the documents either in branch or online the documents are handed
over to the regional loan processing centre where the credit department performs
all types of verifications and checks are done and the loan is sanctioned.
Problem Statement: 1. Too many approvals even for a small amount, thus increasing the
overhead and turn-around-time (TAT).
2. Some branch employees found unaware of all key inputs & requirements
from the customer.
3. Documents requirement mismatch between branch and credit department
leading to reproaching the customer for additional documents or missed
out mandatory documents.
4. Erroneous mistakes resulting tremendous amount of rework.
5. Duplication of information in multiple reports by various departments.
6. ‘Blame & Shame’ culture when deviations & delays are reported.
7. Silo operation of stakeholder department leading to departmental
conflicts and rivalries instead of customer satisfaction.
Concept: Lean operations are best business practices that minimize time of task,
inventories on hand, supplies, and work-related instructions and steps in order to
create desirable products and/or services that satisfy or exceed customer’s
expectations and producers’ profitability goals.
Lean Solution: 1. Do the right work:
Instead of doing things simply because ‘they were always done that way’,
there is more focus on activities that create legitimate value and all tasks
are tailored to reduce unnecessary steps.
The bank reduced the number of approvals required for a loan by
increasing the limit for the 1st tier (increasing the limit from 25 lac to 50
lacs for initial approval) and maintaining the total number of approval
levels to three or below.
2. Do the work right:
Employees are well trained and have easy access to vital information.
Bank’s customer facing staff should have easy access to key inputs,
documentation and procedures required to carry out their activities
efficiently and in a standardized manner across all touch points. For this
the bank setup an intranet-based knowledge hub where all vital
information is available in the system.
3. Know the Customer:
Employees have a clear understanding of what their internal customers
want and only deliver what is required, when it is required.
The bank introduced a standard system-based checklist where branches
ensure all mandatory documents and required information is sent in the
exact manner required by the credit evaluation team..

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4. Flow:
Tasks are aligned in the best possible sequence and value flows without,
rework, back flow or duplication. When the right information is sent,
there is no rework, resulting in smooth process flow.
The bank implemented system-based validation & controls (‘mistake
proofing’) to prevent staff from erroneously missing mandatory
documents.
5. Full Visibility to Work Status:
Dashboards are used to provide visibility to the status of work and who is
doing what and by when it should be delivered.
The bank implemented a centrally accessible dashboard that can be used
to view the status of all files (loans) reducing possible duplication of
information in multiple reports created by different stakeholder
departments.
6. Spirit of Teamwork and Respect:
No ‘blame and shame’ culture. Problems are blamed on processes and
systems and not people. Leaders support and empower staff to
continuously improve their areas of work.
The bank brought in an approach shift on dealing with problems, if there
are delays in receiving approvals, the process is reviewed to identify and
address key bottlenecks and SLAs are implemented and monitored to
ensure adherence to set targets.
7. Assigned ownership for each job:
Every process has an owner who is responsible and accountable and has
authority to ensure successful timely implementation.
The bank implemented the concept of process owner rather than
department heads whereby all relevant departments worked for the
process rather than their own departments ensuring adherence to highest
customer standards.
8. Continuous Improvement:
Improvement is considered to be a continuous process.
The bank has mandated weekly process meets to identify key stress
points.
Conclusion: Thus, by using the concepts of lean the PSU bank (Bank of Baroda) was able to
streamline their operations & increase their operational efficiency.

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Operations Management
Concept of 5S

Organization: Container Corporation of India Ltd. (CONCOR) (Sub-Process: Inland Container

Depot (Dry Port), Whitefield, Bengaluru)
Sector: Logistics (Cargo Carrier, Terminal Operator, Warehouse Operator)
Basic Process: An initiative by the Indian Railways, to containerise cargo transport in India a
subsidiary to develop & handle Inland Container Depots (ICD) called CONCOR
was established with the objective of handling intermodal freight container. The
first ISO Container was moved by railways in 1981 at Bengaluru ICD. Their
process includes warehousing, connection with other hubs as well as cargo
management.
Problem Statement: 1. Sub-par warehousing process whereby arrangement of containers &
container tracking was inefficient.
2. Erroneous vendor/customer management whereby documentation &
verification problems were persistent.
3. Lack of visibility within the processes due to absence of detailed Standard
operating Procedures (SOPs) and minimal co-relation with other
processes.
4. Cost Management issues whereby the approach to calculate container and
warehouse charges were obsolete.
5. Disruptive unity of command since information flow was abrupt & there
were coordination issues between management & employees.
6. Improper job role definition.
Concept: A technique that originated from Japan, for organizing spaces so work can be
performed efficiently, effectively, and safely. This system focuses on putting
everything where it belongs and keeping the workplace clean, which makes it
easier for people to do their jobs without wasting time or risking injury.
 Sort (Seri)
 Set in Order (Seiton)
 Shine (Seiso)
 Standardize (Seiketsu)
 Sustain (Shitsukue)
5S Solution: 1. Sort (Seri)
Identified the core in-depth breakdown of process which are required
(Gate Operations, Container Tracking, Weighment, Seal Cutting,
Examination, Survey, etc).
2. Set in order (Seiton)
Step by step ordering of the interrelated process (Gate In, Examination,
Weighment In, Offloading /Loading, Weighment Out, Gate Out, etc).
3. Shine (Seiso)
Shine in this case stand of maintenance of machine or equipment (Cargo
loading /offloading cranes, fork lifts etc).
4. Standardize(Seiketsu)
Creating standard operating procedures to conduct the particular task
(Process documents, Process flow diagrams, User Manuals).

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5. Sustain (Shitsuke)
To sustain in this competitive market is one of the challenges that
CONCOR took very seriously, for this reason they opted to get the
customized ERP solution that helps them to maintain their position in the
market and capture as much as possible through effective system-based
inventory management, tracking etc.
Conclusion: The 5S implementation helped them attain the following:
 Proper warehousing and container or cargo management.
 Broader visibility of the scope.
 Transparency between the processes.
 Establishment of unity of command (Common decision making).
 Proper vendor/customer management.
 Right set of people at right place.

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Operations Management
Concept of Kaizen

Organization: Honda Motor Company Ltd.

Sector Automotive
Basic Process: The process here implies the assembly line manufacturing process employed by
Honda to manufacture various models of their cars.
Problem Statement: Honda at first started with a fixed-factory type of factory associated with the
idealized (American) style of mass production. But due to constant upgrade of
their models along with introduction of new models as well as the need for rapid
model changeover in tandem with customer demands.
Other problems/limitations included:
 Dedicated machinery for a single model
 Major investment cost for new model (factory changes imminent)
 Longer shutdown period (Due to factory changes)
 Tedious and tough redeployment of human resources
 Capacity balancing across plants is difficult (difficult to shift production
in a geographic region)
Concept of Kaizen: Kaizen stands for continuous improvement. Honda adapted this Kaizen concept
into an indigenously developed manufacturing system known as the Flexi-
Factory Manufacturing System.
Kaizen Solution: A flexi-factory (improved) is a factory capable of changing the product it makes,
with relative ease, at low cost and great rapidity: whether changing production
volumes, changing models or changing the nature of the products made
metamorphosizing the fixed factory & facilitating rapid model changeover as
well as mixed model production. Basically, a flexi factory is a modular factory
that can be retooled on the go to manufacture a different product (In Honda’s
case a car model) by changing the machine parts without any drastic changes.
A Kaizen based flexi-factory allowed Honda to:
1. Switch from making one model to starting with an entirely different
model.
2. Minimally (Zero Shutdown factory) to incorporate new model.
3. Loose minimal production while retooling the factory.
4. Made it possible to batch produce the model.
5. Eliminated the need for redeployment of human resources, since a
change in factory hardware allowed same employees to continue
manufacturing without disruption or requirements for any additional skill
development training.
6. Adapt to product change over a long term.
7. Balance of Models required to maintain market flexibility.
8. Operated as a network to balance their capacities. (Ex. Shifting
production in a region)
Even the flexi model had its limitations & to address the customers’ demands of
additional customization Honda once again adapted to incorporate a new method
of manufacturing called Agile Manufacturing (3d Printing manufacturing). Agile
manufacturing as the ability to successfully market low-cost, high-quality
products with short lead times (and in varying volumes) that provide enhanced
customer value through customization

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Agility refers to the ability to respond quickly to customer needs and market
changes while still controlling costs and quality.
 Enriching the customer
 Cooperating to enhance competitiveness
 Organizing to master change and uncertainty.
 Leveraging the impact of people and information
Conclusion: The kaizen based improved flexi factory and then further augmentation through
agile manufacturing allowed Honda to:
 Small to big: flexible, optimization of designs.
 Rapid tooling with additive manufacturing cuts the steps, cuts the time.
 Fast customization via 3d printing.
 Validation and advanced measurement on demand.
 Real world functional testing: Discovering what works

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Operations Management
Concept of JIT

Organization: Dell Technologies Inc.

Sector: Original Equipment Manufacturer (PC)
Basic Process (Pre- Dell receives various PC components from a varied range of manufacturers,
JIT): assemble them into their designed platforms and sell it through distributors &
retailers to end-users (consumers)
Problem Statement: This traditional manufacturing process led to the following problems for dell &
limited Dell’s revenue:
 Addition of time & cost due to distributors & retailers.
 Inability to offer customized solutions (hardware).
 Difficulty in keeping up with rapidly changing technology.
 Huge inventory turn-over time.
 Unreliable Cash Conversion Cycle
 Inaccurate demand forecasts.
 Component depreciation due to high inventory.
Concept of JIT: Just in Time Manufacturing (JIT) refers to a system of manufacturing in which
products are not built until the product is ordered and paid for. It is a methodology
aimed primarily at reducing times within the production system as well as
response times from suppliers and to customers. Its origin and development was
mainly in Japan, largely in the 1960s and 1970s and particularly at Toyota.
JIT Solution: Dell was one of the first companies in the OEM business to adopt JIT & direct
sales approach in order to provide better customized and cost-effective offerings
to its customers.
1. Dell changed its approach of manufacturing equipment on a predefined
platform to that of an order to build platform.
2. Whereby customers had the freedom to choose various internal
components of a system as per their needs.
3. Dell eliminated distributors & retailers and started selling directly through
its website (direct sales model)
4. Order was placed for components of their systems when customers placed
and order on their website.
5. For high-tech components like processors & software Dell relies on big
players like intel & Microsoft respectively.
6. While for low-tech components they rely on multiple vendors who
compete on price & availability.
7. Turn-over-time reduced since systems are made in a configure & order
fashion thus eliminating the need to store input components thus also
reducing the cost of inventory storage.
8. Another problem of depreciation of components was eliminated since low
inventory meant quick switch to new improved feature rich components
thus reducing further overhead for Dell.
9. Customer satisfaction also peaked due to offering of a customized price-
effective solution by Dell.

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Conclusion: The application of JIT & direct sales approach enabled Dell to:
1. Maintain a negative cash conversion cycle (customer paid before
manufacturing).
2. This meant dell had an interest free financing method whereby they were
paid before they had to pay suppliers & service providers.
3. They had humongous reduction of costs on their inventory.
4. They had the flexibility to switch over to newer components quickly.
5. Due to Dell’s configure to order approach they are able to forecast more
accurately as compared to their competitors.
6. Direct sales enabled manifold increase in their revenues.

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Concept of Waiting-Line-Management (Queue Management)

Organization: Vodafone UK
Sector: Telecom (Service)
Basic Process: Customers of Vodafone UK visit its stores to attain various services such as bill
payments etc., purchase new connection or handsets, resolve some queries and
some other service-related tasks. Also, Vodafone employees try cross-selling
products while customers visit their stores.
Problem Statement: Vodafone UK faced the following problems while entertaining the customers
visiting their stores:
 Overall low customer satisfaction levels.
 Stagnant sales of new connections and low upgrades of existing
connections.
 Disruptively high utilization of other support channels like call centres
etc.
 High cost of sale at stores leading to low profit margins.
 Lower productivity & transactions
 Higher support costs
 Inefficient resource deployment.
While performing a root cause analysis the Vodafone UK management found
that one of the primary causes was a lack of Waiting-line control at the store
level and other causes included non-automation of commodity purchase
transactions.
Concept of Waiting- A queue management system or a waiting-line management system is used to
line management: control queues. Queues of people form in various situations and locations in a
queue area. The process of queue formation and propagation is defined as
queuing theory. Queueing theory is the mathematical study of waiting lines, or
queues. A queueing model is constructed so that queue lengths and waiting time
can be predicted. Queueing theory is generally considered a branch of operations
research because the results are often used when making business decisions
about the resources needed to provide a service.
Waiting-line As Fujitsu already had a long-standing relationship with Vodafone it was a
Management System natural partner to develop its new technology requirements. Fujitsu’s deployment
Solution: and ongoing management of Q-MATIC, the world leading solution for queue
management was just the solution Vodafone needed. Utilising touch-screen
technology, Q-MATIC leads the customer through a set of questions to identify
their in-store requirements. They are then given a ticket and allocated to a
service queue, so that an appropriate Vodafone sales advisor or a service
representative can serve them accordingly. A client terminal application allows
store employees to call their next customer, add notes next to each enquiry or
move it to another service desk, and can also be used to access customer queuing
status and monitor store throughput.
The in-store services from Fujitsu are enabling Vodafone to:
 Improve the customer experience – Customers now have more time to
browse the store and choose how to purchase, so everyone benefits from
faster and more efficient service, in a more relaxed atmosphere. This has
led to a considerable uplift in customer satisfaction.

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 Increase performance – Optimised stores outperform other stores.

Average new connection volumes have increased with average upgrade
volumes also increasing.
 Minimise business disruption – Systems availability is enhanced, with a
substantial reduction in support calls and improvement in first time fixes,
increasing sales opportunities.
 Maximise profit margins – Self-service significantly reduces the cost of
sale especially amongst core pre-pay customers.
 Enhancement of productivity – Automation of commodity purchases
enables faster transaction times and frees up resources to help other
customers. The number of customers leaving stores without seeing an
advisor is also declining.
 Reduce support costs – Tailoring services and removing duplicate effort
and resources has cut costs, while increasing the overall level of support
 Optimise resource deployment – Increased management information,
such as customer numbers, waiting times and sales conversion figures, is
helping to track and measure the customer experience in-store and enable
staffing rosters to be prepared to reflect store and customer requirements.
Conclusion: The Q-MATIC offering by Fujitsu for Vodafone UK stores has completely
transformed the store operations of Vodafone thus leading to higher customer
satisfaction, sales & revenue.

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References

1. Operations Management- William J. Stevenson 11th ed

2. Operations & Supply Chain Management- F. Robert Jacobs & Richard B. Chase 15th ed

3. Operations Management- Nigel Slack, Stuart Chambers & Robert Johnston 6th ed

4. How did Vodafone increase customer satisfaction? - Fujitsu Case Study

5. Honda's global flexi-factory network – Andrew Marr

6. Impact of just‐in‐time inventory systems on OEM suppliers – John Kros, S. Scott Nadler

7. Just-In-Time Inventory Management Strategy: An overview of Just-in-Time Inventory Management –

David Broyles, Jennifer Beims, James Franko & Michelle Bergmen

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