The Alignment of Technology and Corporate Planning
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The Global Economic Crisis and its Impact on India
Much has been written about the way in which India was one of the few countries that was relatively unscathed because of the global economic crisis. Most of these narratives focused on how India managed to weather the storm in the dark days following the collapse of Lehmann Brothers. However, it cannot be completely said […]
As the World Ages, are we prepared to deal with the Consequences of the Shock of Grey
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The Problem with the United States Postal Service
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Capacity Planning – Meaning, Classification and its Goals
The production system design planning considers input requirements, conversion process and output. After considering the forecast and long-term planning organization should undertake capacity planning. Capacity is defined as the ability to achieve, store or produce. For an organization, capacity would be the ability of a given system to produce output within the specific time period. […]
Polar opposite to the concept of Business Process Re-Engineering is the concept of continuous improvement. It was developed by the Japanese after World War-2. Whilst BPR relies on radical change, lean management relies on small incremental change. It stems from Japanese term called “Kaizen” which means small improvement.
The concept relies on successive small improvements to bring about a big change over a period of time. Instead of changing the process completely, only minor modifications are made to the process and over time they accumulate to provide big benefits.
Corporations such as Toyota and Sony have dominated global markets with the help of this concept. Even Wal-Mart has deployed it to make its supply chain powerful enough to offer EDLP (Every Day Low Prices). Here are some examples of continuous improvement and how information technology contributes:
Inventory Management: Toyota Inc realized that it was occurring costs of over 26% per annum for maintaining inventory. So were all the other car manufacturers. This inventory was maintained because the process was aiming at local optimization instead of total optimization.
The inventory department was trying to minimize its own costs rather than total costs and so were all the other departments. Toyota used technology to build an impressive forecasting system. Then it streamlined its supply chain to ensure that inventory arrived Just in Time (JIT). This cut all the storage, administration and interest expenses. Toyota could price better and still reap higher profits. Toyota used continuous improvements in its forecasting, inventory management and warehousing processes to gain a cost advantage over the others.
Logistics: Wal-Mart used processes to its advantage when it built a world class inventory tracking system. It cut administrative costs and supply shortages as it built information systems to share information with the suppliers.
P&G could see when the inventory had fallen below a certain level and could replenish it without Wal-Mart making any effort. The use of RFID chips and barcodes enabled the Wal-Mart to track its customer behavior better and develop relationships with them. Thus a small change like introduction of RFID coupled with other small changes like automated ordering brought down the clerical costs of the purchase department and also increased efficiency manifold.
Push v/s Pull Supply Chain: While most PC manufacturers in the US were reeling from falling prices and rising inventory, Dell Inc found a way to use processes to turn the situation in its favor.
Dell used technology to sell its computers as opposed to brick and mortar stores saving on overheads. But this is just a small part in the strategy.
Dell’s masterstroke was to change the supply chain from push to pull strategy. Dell would manufacture only when ordered. It used information systems to ensure that when an order was placed, all its suppliers got it simultaneously. They would then keep the order ready and Dell would assemble all the parts and use a high-tech assembly line to build and deliver the PC in no time. The customer didn’t mind waiting 4-5 days if Dell took 20% off. Even at this low price Dell was earning superior profits thanks to the power of technology
Processes can also be used to solve a major problem called the Bullwhip effect in the supply chain. It means that minor changes in demand are amplified as they move upwards in the supply chain. The manufacturers anticipate larger demand, produce more and end up with excess inventory. This problem has been curbed by using processes to develop a real time sales monitoring system.
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