The Problem of Piracy and Intellectual Property Rights
Introduction: The Problem of Piracy No discussion on intellectual property rights (IPR) is complete without mentioning the problem of piracy around the world. Piracy is defined as the copying, stealing, reproducing, transmitting, and selling of the intellectual property (IP) of an individual without his or her express consent and written approval as well as without […]
Economic Impact of the Boeing Fiasco
Boeing Corporation which is headquartered in the United States is one of the biggest names in the airline industry. When it comes to the manufacturing of planes, there is an effective duopoly in the global market. Boeing and Airbus are the only two companies in the world which manufacture the jets which are used by […]
How A Private Money Market Would Work?
The past few generations have become used to money being issued by the government. Hence, there is an implicit assumption that maybe this has always been the case. However, this is not the case. Many people will be surprised to know that creating money was not always the job of the government. Private money was […]
Disaster Recovery and Crisis Management
When we talk about Disaster Recovery and Business Continuity plan for any business or organization, we need to necessarily plan for Crisis management too. Though the objectives of all these plans might vary, they are all interlinked, interdependent and mutually inclusive. In large scale business organizations as well as high technology organizations with large operations, […]
The PDSA (Plan-Do-Study-Act) Technique for Quality Improvement
What is the PDSA Technique ? The PDSA or the Plan-Do-Study-Act technique is a famous QI or Quality Improvement Tool or Initiative that helps organizations enhance the quality of their products and services. The PDSA technique hinges on the iterative process wherein each cycle begins with planning the quality improvement, actualizing the method or the […]
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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