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Dr S G Deshmukh ABV-Indian Institute of Information Technology & Management Trends of Research in Operations Management : A case of SCM.

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Presentation on theme: "Dr S G Deshmukh ABV-Indian Institute of Information Technology & Management Trends of Research in Operations Management : A case of SCM."— Presentation transcript:

1 Dr S G Deshmukh ABV-Indian Institute of Information Technology & Management Trends of Research in Operations Management : A case of SCM Presentation @FDP @iiitm Gwl On 27 July 2012

2 The business function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company Source: Operations Management. Dan Reid & Nada R. Sanders, Wiley, 2010, 4th Edition 2 Operations Management

3 A management function An organization’s core function In every organization whether Service or Manufacturing, profit or Not for profit SUPPLY CHAIN MANAGEMENT – an important domain within OM ! 3 Operations Management

4 Opening remarks Track 1: Performance Measurement System Track 2: Revenue Sharing Track 3: Information security issues Track 4 :Service Oriented Architecture Closing remarks Speaking points..

5 Manufacturing as Services Opening Remarks..

6 Source: Cuthbertson R and Piotrowicz, 2011, Performance measurement systems in Supply chains: A framework fro contextual analysis, Int J of Productivity & Performance Measurement, 60(6),583-602 Research Track 1: Performance Measurement System

7 As early as 1985 A T Kearney Consultants have identified a high correlation between superior performance & development /use of sophisticated assessment/measurement capabilities – Firms engaging such systems reported realized improvements in productivity of 14 to 22 % Performance Measurement System

8 What Is Performance Management ? It is a systematic process of Planning work and setting expectations Continually monitoring performance Developing the capacity to perform Periodically rating performance in a summary fashion Rewarding good performance

9 Performance Management Cycle PlanningRewarding Rating DevelopingMonitoring

10 How well the organization is doing? Is the organization meeting its goals? Are the customers happy? Are the processes in control? If and where improvements are necessary? Issues in performance measurement system

11 Measuring the activity (volume) and the SC performance Setting goals and comparing the actual situation Following a plan Determining the levers that will help achieve goals and single out the priority action programs Revealing the degree of flexibility Objectives of Metrics

12 Speed, reliability, and simplicity are the main criteria for efficient metrics Arranging indicators by priority Segmenting the metrics Visualizing the function content Classifying objectives of the function or team Selecting indicators that deal with quality Formatting the metrics effectively Principles of metrics design

13 Independence Appropriateness Objectivity Regularity Linkage with other indicators Coherence Simplicity Cumulative Realistic Characteristics of Effective Metrics

14 Transparent Simple self-regulating Objective Motivating and stimulating to all stakeholders Performance measurement system (PMS): Desirable Features

15 PMS should have multiple criteria Primary purpose should not be to reward or to punish Performance-to-schedule measures must use group, not individual results Specific goals must be established and reviewed PM must be understood by those whose performance is being measured. PM data must be available for constant review Performance measurement system (PMS): Desirable Features (contd.)

16 Measurements of multiple performance factors occur frequently at each stage in the supply chain Time and cost are key measures, but others are used as appropriate to the specific supply chain. All measures must relate to the ultimate supply chain goals. Quantitatively based performance management

17 Cost { total cost, cost/unit, cost/sales, inbound freight, outbound freight, warehouse cost, admn, processing, direct labor etc.} Customer service {fill rate, stock-outs, shipping errors, on- time delivery, back-orders, cycle time, customer feedback} Productivity {units shipped/employee, units/labour Rs., orders per sales person, etc.} Asset Measurement {Inventory turns, Inv. Carry costs, obsolete Inv., ROI etc.} Quality {frequency of damage, Rs of damage, Customer returns, Cost of returned goods etc.} Internal Performance Measurement

18 Customer Perception Measurement Best Practices benchmarking – World Class Logistic- CLM – Logistics Excellence - Michigan State University External Performance Measurement

19 Framework 1: Function based measurement system Framework 2: Dimensions based measurement system Framework 3: Hierarchical measurement system Framework 4: Balanced scorecard system Framework 5:SCOR model Various frameworks for measurement

20 Covers detailed performance measures applicable at different linkages of SC – Marketing, Operations, Finance etc. Framework 1: Function based measurement system

21 Any SC can be measured on three dimensions – SERVICE – ASSETS – SPEED Framework 2: Dimensions based measurement system

22 Performance in the functional areas of Inbound Logistics Operations Outbound Logistics Marketing Service-after-sales Framework 3:Hierarchical System

23  quality  inventory  customer service  cost  flexibility  time, and  productivity. Framework 3:Hierarchical System : Indicators

24  cost structure of the warehouse operations (handling-in, storage, and handling-out)  total investment  total cost of the warehouse  total capacity concerning output volume  costs warehouse operations per unit volume (m 3, ton)  total number of trucks loaded/unloaded per worked time unit  labor hours per unit of output volume ( m 3, ton)  labor costs per unit of output volume (m 3, ton)  labor costs as percentage of sales Indicators: Outbound logistics

25 Compare each of the metrics and compute the relative weightage for each Compare each of the links (inbound logistics, manufacturing etc.) on each of the metrics above and compare relative weightages. Compute the aggregate weight for the links. Rank the links on the basis of weights arrived Devise an action plan to improve the performance of weakest/weaker links in the supply chain. Monitor the performance and repeat steps above on a continual basis. Hierarchical System :Procedure

26 Various perspectives such as the following should be Balanced ! –Financial –Innovation & learning –Customer service –Internal business Balance scorecard balances and links financial and non- financial indicators, tangible and intangible measures, internal and external aspects, performance drivers and outcomes. Framework 4: Balanced scorecard

27  The Supply-Chain Council (SCC) has developed and endorsed the Supply Chain Operations Reference- model (SCOR) as the cross-industry standard for supply chain management  The SCC was organized in 1996 by 69 voluntary member companies and the European Chapter was started in 1998.  Framework 5:SCOR model

28 Plan DeliverMakeSourceDeliverMakeSourceDeliverSource Supplier (Internal or External) Your Company Customer (Internal or External) Return Customer’s Customer Supplier’s Supplier SourceMakeDeliver Return SCOR Model ProcessesBest PracticesMetricsTechnology Building Block Approach SCOR Framework Demand Chain Supply Chain

29 Performance measurement system and its linkages with strategy ? Behavioral issues related to performance measurement system? Development of Multi-criteria decision making framework ? Role of information system in measurement? Benchmarking and performance measurement system? Performance Measurement: Research Issues..1..

30 What to benchmark and how? Industry/sector specific measures? Revenue /Profit/Cost sharing ? Performance Measurement: Research Issues..2..

31 Source: Arshinder, Kanda Arun and Deshmukh, S G, 2008, Supply Chain Coordination: Perspectives, Empirical Studies and Research Directions, International J of Production Economics, 115(2), 316-335 Track 2: Revenue Sharing Contracts

32 It increases the total supply chain profits It involves in risk sharing among supply chain partners It may be possible with supply chain contracts that a member achieves more profits than he would do without contracts Hence, result in win-win situation for both supplier and his buyer Objective of Supply Chain Contracts

33 Revenue sharing model parameters Supplier c Buyer q ω, Φ pdpd Where, c is the marginal unit cost of supplier ω is a wholesale unit price charged by the supplier to the buyer p is the selling price of buyer per unit Φ is the fraction of supply chain revenue that the buyer keeps and (1- Φ) is the fraction the supplier earns q is the buyer’s order quantity

34 The buyer orders single product The demand is uncertain with probability distribution function f d (d) in a single selling period The wholesale price is less than the unit marginal cost ( ω < c) Assumptions

35 To determine the total supply chain profits To determine the optimal order quantities to achieve the optimal supply chain profits Objectives of revenue sharing contracts

36 Most models in the form of network of “newsboy’ problem. There is still room for simple yet imaginative models exploring other inventory concepts Time evolution of decisions not fully explored Use of Game theoretic frameworks: Static games built in s Markov decision process More complicated demand and supply structures (correlation, advance information, disruptions etc.) Information availability More sophisticated Supply Chain structures Implementation issues Research Issues

37 Source: Arup Roy, 2012, Management of Information Security in Supply Chains- A Process Framework, Presented at 42 nd Intentional Con. On Computers in Industrial Engg, Cape town, S Africa, July 16-18 Track 3: Management of Information Security in Supply Chains

38 What is Information Security? Information “Information is an asset that, like other important business assets, is essential to an organization's business and consequently needs to be suitably protected” Information Security “Preservation of confidentiality, integrity and availability of information” (Reference: ISO 27000)

39 Security in Supply Chains “The application of policies, procedures, and technology to protect supply chain assets (product, facilities, equipment, information, and personnel) from theft, damage, or terrorism and to prevent the introduction of unauthorized contraband, people or weapons of mass destruction into the supply chain”. – Closs & McGarrell (2004) There are 2 aspects: Soft aspect – Intangible vulnerabilities such as information theft Hard aspect – Tangible vulnerabilities such as physical theft / physical damages / terrorism Information Security – one of the soft aspects Hard aspects influence the soft aspects

40 Why do we need Information Security? Measure and mitigate risk related to information assets. Key motivator – Management of business and financial risk Reduction of threat to both reputation and customers. Ensure compliance to regulatory/ legislative/ contractual requirements.

41 Summary of concerns Information leakage & misappropriation in supply chain networks, which can lead to: Demand imperative overriding information imperative Product & service deliveries may not be optimal Firms may lose their competitive edge Vulnerabilities in IT infrastructure may not be adequately controlled Information reliability and consequently knowledge generation may be compromised Human security requirements may be overlooked

42 What is a Process Framework? Formal description of processes in a company Formally existing / ad-hoc / need to be developed KPIs defined to “measure” the process, with industry benchmarks Improvements based on the KPI s achieved Methodologies – used to actually improve the process

43 Why do we need a Process Framework? To enable organizations develop and maintain consistent business practices Helps in managing a company's key processes and roles & responsibilities Aligns processes and performance improvement with corporate strategy Can be implemented at any level of an organization

44 Research Propositions Identify weaknesses related to information security in supply chain processes Analyze information security related risks Study relationship between supply chain performance metrics and information security

45 Source: Giannakis M, 2011, Management of service supply chains with service-oriented reference : A case of management consulting, Supply Chain Management: An international Journal, 16(5), 346-361 Track 4: Service Oriented Architecture

46  Integration ◦ Providing the linkage between people, processes, and data  Open ◦ Supporting a strong commitment to standards for OS, Language and Web Services/SOA  Virtualized ◦ Providing a flexible Build-time and Runtime environment for developing and running applications across a highly distributed IT architecture  Autonomic ◦ Self regulating … self healing … self maintaining 46 Four Characteristics of On Demand

47 47 SOA: Service Oriented Architecture An approach for building distributed systems that allows tight correlation between the business model and the IT implementation. Characteristics: ◦ Represents business function as a service ◦ Shifts focus to application assembly rather than implementation details ◦ Allows individual software assets to become building blocks that can be reused in developing composite applications representing business processes ◦ Leverages open standards to represent software assets

48  What is a service?  A coarse grained, self-contained entity that performs a distinct business function  What is a service description?  A standards based interface definition that is independent of the underlying implementation  How do services interact?  Through loosely-coupled, intermediated connections  How are SOA solutions created and enhanced? Using tools and middleware according to SOA principles 48 SOA Concepts

49  Build –Model Driven Architecture ◦ A style of enterprise application development and integration based on using automated tools to build system independent models and transform them into efficient implementations1  Run –Service Oriented Architecture ◦ An approach for designing and implementing distributed systems that allows a tight correlation between the business model and the IT implementation  Manage –Business Performance Management ◦ An approach to systems management that tightly links IT concerns with business process concerns 49 Three Key Concepts for the Foundation for On Demand

50 How to define service standards? What is the role of technology in SOA? How to align business strategy with SOA? Issues related to flexibility ? Research Issues

51 Supply chain management: an opportunity for seamless integration Research issues involving a variety of domains : performance measurement, modeling, security, on-demand business Borrowing terminology & frameworks from IT ! Research : interdisciplinary ! Concluding remarks..

52 ex.htm ex.htm nections/index.htm nections/index.htm Useful web linkages

53 Thank you 53

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