1|P age

Contents
OPERATIONS MANAGEMENT ........................................................................................................................................... 6

PRODUCTION PLANNING ................................................................................................................................................ 6

MANUFACTURING RESOURCE PLANNING (MRP - II) .................................................................................................... 7

MANUFACTURING STRATEGIES ..................................................................................................................................... 7

Make to Stock (MTS) ............................................................................................................................................................. 7

Assemble to Order (ATO) .................................................................................................................................................. 7
Make to Order (MTO) ......................................................................................................................................................... 8
Engineer to Order (ETO) .................................................................................................................................................... 8
PROCESS MANAGEMENT ................................................................................................................................................ 8
Flow Rate ............................................................................................................................................................................... 8
Flow Time .............................................................................................................................................................................. 8
Inventory ............................................................................................................................................................................... 9
The Process View of the Firm ................................................................................................................................................ 9
Capacity utilization ................................................................................................................................................................ 9
Takt Time ............................................................................................................................................................................... 9
Cycle Time ............................................................................................................................................................................. 9
Lead Time ............................................................................................................................................................................ 10
Throughput time ................................................................................................................................................................. 10
Idle time .............................................................................................................................................................................. 10
Averages, Snapshots, and Stability...................................................................................................................................... 10
Process Analysis Steps: ........................................................................................................................................................ 10
BOTTLENECKS AND CAPACITY .................................................................................................................................... 11
Using the Theory of Constraints for Bottlenecks ................................................................................................... 11

LITTLE'S LAW ................................................................................................................................................................ 12

Little’s law: inventory (I) = flow Rate (R) * flow Time (T) ............................................................................................... 12
CRITICAL PATHS & PROCESSING TIME....................................................................................................................... 12
1. Earliest Start Time (EST) .............................................................................................................................................. 12
2. Earliest Finish Time (EFT) ............................................................................................................................................ 12
3. EST ............................................................................................................................................................................... 12
4. EFT ............................................................................................................................................................................... 12
5. Latest Start Time (LST) ................................................................................................................................................ 12
6. Latest Finish Time (LFT) ............................................................................................................................................... 12
7. LFT ............................................................................................................................................................................... 12
8. LST ............................................................................................................................................................................... 12
9. EFT ............................................................................................................................................................................... 12

2|P age
 10. Slack ........................................................................................................................................................................ 12
11. Critical Path Method (CPM) .................................................................................................................................... 12
Example: .......................................................................................................................................................................... 13
INVENTORY MANAGEMENT .......................................................................................................................................... 14
1. Economic Order Quantity (EOQ)= ............................................................................................................................... 14
2. Economy of scale = ..................................................................................................................................................... 14
3. Economy of scope = .................................................................................................................................................... 14
4. Backorder .................................................................................................................................................................... 14
5. Cycle stock................................................................................................................................................................... 14
6. Safety stock ................................................................................................................................................................. 14
7. Setup cost.................................................................................................................................................................... 14
8. Fill rate ........................................................................................................................................................................ 14
9. Stock keeping unit (SKU) ............................................................................................................................................. 14
10. Push vs pull systems ............................................................................................................................................... 14
11. OEE (Overall Equipment Effectiveness) .................................................................................................................. 14
12. Lean Manufacturing ................................................................................................................................................ 14
13. Single Minute Exchange of Dies (SMED .................................................................................................................. 14
14. Control Chart .......................................................................................................................................................... 14
15. Reverse logistics...................................................................................................................................................... 14
16. Benchmarking ......................................................................................................................................................... 14
17. Consignment stock.................................................................................................................................................. 14
18. Enterprise Resources Planning (ERP) ...................................................................................................................... 14
19. Andon Board ........................................................................................................................................................... 14
20. Gantt chart .............................................................................................................................................................. 14
21. Master Production Schedule (MPS) ........................................................................................................................ 14
22. Parkinson's Law....................................................................................................................................................... 15
23. Planogram ............................................................................................................................................................... 15
24. Poka Yoke................................................................................................................................................................ 15
25. Productivity ............................................................................................................................................................. 15
26. Program Evaluation Review Technique (PERT ........................................................................................................ 15
27. Project Management .............................................................................................................................................. 15
28. Salvage Value .......................................................................................................................................................... 15
29. Warehouse Management System (WMS) .............................................................................................................. 15
30. Just in time (JIT) inventory ...................................................................................................................................... 15
Costs of Inventory ........................................................................................................................................................ 15
Holding Cost ........................................................................................................................................................................ 15
Setup Cost (Ordering cost) .................................................................................................................................................. 15
INVENTORY CLASSIFICATION ...................................................................................................................................... 16

3|P age
 Cycle stock ........................................................................................................................................................................... 16
Managing cycle inventory: .............................................................................................................................................. 16
Pipeline stock ...................................................................................................................................................................... 16
Seasonal inventory .............................................................................................................................................................. 16
Safety Inventory .................................................................................................................................................................. 17
Time-based calculation ................................................................................................................................................... 17
Statistical calculation....................................................................................................................................................... 17
Dead stock ....................................................................................................................................................................... 18
Anticipation inventory..................................................................................................................................................... 18
SUPPLY CHAIN .............................................................................................................................................................. 18

• Business Processes ...................................................................................................................................................... 18

• Management Components ......................................................................................................................................... 18
• Supply chain Network Structure ................................................................................................................................. 18
Business Processes: ............................................................................................................................................................. 19
Management Components: ................................................................................................................................................ 19
Members of the Supply Chain ............................................................................................................................................. 19
BULL WHIP EFFECT IN SCM ................................................................................................................................................. 19
Quality ........................................................................................................................................................................... 20
Dimensions of Quality ......................................................................................................................................................... 20
Cost of Quality ..................................................................................................................................................................... 20
Costs of Failure .................................................................................................................................................................... 20
Types of Waste (TIMWOODS) ..................................................................................................................................... 21
Six Sigma ....................................................................................................................................................................... 21
ISO 9000 Series standards .......................................................................................................................................... 21

E – COMMERCE DISTRIBUTION MODELS..................................................................................................................... 21

Market Place Model ............................................................................................................................................................ 21

Inventory Model .................................................................................................................................................................. 22
Hybrid Model....................................................................................................................................................................... 22
Drop shipment model ......................................................................................................................................................... 22
Cross-Docking ...................................................................................................................................................................... 22
Hub & Spoke Model ............................................................................................................................................................ 22
Delivery Types ..................................................................................................................................................................... 23
First Mile ......................................................................................................................................................................... 23
Last Mile.......................................................................................................................................................................... 23
Operations milestones ................................................................................................................................................. 23

1913 ..................................................................................................................................................................................... 23
1914 ..................................................................................................................................................................................... 23
Omnichannel ....................................................................................................................................................................... 24
4|P age
 Famous supply chains: Walmart, Amazon, Big Bazaar ................................................................................................... 24
AMAZON ............................................................................................................................................................................. 24
Walmart .............................................................................................................................................................................. 24
Facility location ........................................................................................................................................................... 25
E supply chain:..................................................................................................................................................................... 25
ERP....................................................................................................................................................................................... 25
PROJECT MANAGEMENT GLOSSARY .............................................................................................................................. 26
Adaptive project framework (APF) ...................................................................................................................................... 26
POINTS TO NOTE ............................................................................................................................................................ 28

5|P age
OPERATIONS MANAGEMENT

Q: What makes operations relevant to profitability?

If marketing sets the optimal price, operations ensures that costs are low.

Cost-Volume-Profit relationship

Profit = (Price – Variable Cost) *Volume – Fixed Cost

PRODUCTION PLANNING
Manufacturing is complex. Some firms make a few different products, whereas others make many
products. A good planning system must answer four questions:
1. What are we going to make?
2. What does it take to make it?
3. What do we have?
4. What do we need?

There are five major levels in the manufacturing planning and control (MPC) system:

1. Strategic business plan- Major goals and objectives the company expects to achieve over the next 2
to 10 years or more.
2. Production plan (sales and operations plan)- quantities of each product group, desired inventory
levels, resources of equipment, labor, and material needed and their availability
3. Master production schedule (MPS)- breaks down the production plan to show, for each period, the
quantity of each end item to be made.
4. Material requirements plan (MRP)- shows the quantities needed and when manufacturing intends
to make or use them
5. Purchasing and production activity control- Execution of MPS and MRP

6|P age
MANUFACTURING RESOURCE PLANNING (MRP - II)
• It is a computer-based planning and scheduling system designed to improve management's
control of manufacturing and its support functions
• MRP-II evolved from Material Requirements Planning (MRP), a computerized tool for
scheduling and ordering materials.
• MRP is a technique for exploding bills of material to calculate net materials requirements and
plan future production.
• Early MRP systems used four pieces of information to determine what materials should be
ordered and when:
a. Master production schedule, which describes when each product is scheduled to be
manufactured.
b. Bills of material, which list exactly the parts or materials required to make each
product.
c. Production cycle times and materials needs at each stage of the production cycle.
d. Supplier lead times
• The master schedule and bills of material indicate what materials should be ordered.
• The master schedule, production cycle times and supplier lead times then jointly determine when
orders should be placed.
• Over time, such features as capacity planning, vendor scheduling, and work-in-process tracking
were added to MRP systems, so that management could also monitor operatingperformance.

MANUFACTURING STRATEGIES
Make to Stock (MTS)
A traditional production strategy used by businesses to match production with consumer demand
forecasts. The make-to-stock (MTS) method forecasts demand to determine how much stock should
be produced. If demand for the product can be accurately forecasted, the MTS strategy can be an
efficient choice.
The main drawback to the make-to-stock (MTS) method is that it relies heavily on the accuracy of
demand forecasts. Inaccurate forecasts will lead to losses stemming from excessive inventory or
stockouts.

Assemble to Order (ATO)

A business production strategy where products ordered by customers is produced quickly and is
customizable to a certain extent. The assemble-to-order (ATO) strategy requires that the basic parts
for the product are already manufactured but not yet assembled. Once an order is received, the parts
are assembled quickly and sent to the customer. The ATO strategy attempts to combine the benefits
of both strategies - getting products into customers' hands quickly while allowing for the product to
be customizable. Customer involvement in the design of the product is limited to selecting the
component part options needed.

7|P age
Make to Order (MTO)
A business production strategy that typically allows consumers to purchase products that are
customized to their specifications. The make-to-order (MTO) strategy only manufactures the end
product once the customer places the order. This creates additional wait time for the consumer to
receive the product but allows for more flexible customization compared to purchasing from retailers'
shelves.

Engineer to Order (ETO)

A business production strategy where customer specifications require unique engineering design,
significant customization, or new purchased material. Usually, the customer is highly involved in the
product design. Each customer order results in a unique set of part numbers, bill of material, and
routings. ETO strategy theoretically is slowest to fulfil time is required not only to build the product,
but to custom design it to meet the customer's unique requirements.

PROCESS MANAGEMENT

Q. What is a Process?
A process is a network of Activities and Buffer that transform Inputs into Outputs (using labour and
capital resources)

Basic Definitions

Flow Rate
– Average number of flow units that flow through the process per unit of time

Flow Time
– Average amount of time spent in the process by a flow unit

8|P age
Inventory
– Average number of flow units present within the process boundaries

The Process View of the Firm

We manage the processes by which work is performed rather than on the output of those processes.
For example:

– focus on activities instead of products.

– focus on how the work is performed not what it produces
Why? Because the process view is

– Powerful: facilitates diagnosis, decision making, and improvement

– Universal: all processes follow the same "physics"
– Scalable: processes can be aggregated or decomposed, and the same rules still apply

Capacity utilization
The percentage of the process capacity that actually being used
𝐴𝑐𝑡𝑢𝑎𝑙 𝑙𝑒𝑣𝑒𝑙 𝑜𝑓𝑜𝑢𝑡𝑝𝑢𝑡 ∗ 100

𝑀𝑎𝑥𝑖𝑚𝑢𝑚 𝑝𝑜𝑠𝑠𝑖𝑏𝑙𝑒 𝑜𝑢𝑡𝑝𝑢t

Takt Time
Takt time is the rate at which you need to complete the production process in order to meet the
customer demand.

𝑻𝒂𝒌𝒕 𝑻𝒊𝒎𝒆 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑇𝑖𝑚𝑒

𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝐷𝑒𝑚𝑎𝑛𝑑

Net production time = Time available for production (till the delivery to the customer). Customer
Demand = Order placed by the customer

NOTE: Takt time is customer demand based

Cycle Time
The time between the completion of two discrete units of production.

𝑪𝒚𝒄𝒍𝒆 𝑻𝒊𝒎𝒆 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑇𝑖𝑚𝑒

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑈𝑛𝑖𝑡𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑑

NOTE: Cycle time is work process based

9|P age
Lead Time
Lead time is the time it takes for one unit to make its way through your operation from front to end
(i.e., from taking order to receiving payment). In other words, time taken between product to be
ordered by customer and customer receiving the product.

Throughput time
Throughput Time is a measure of the time required for a material, part, or sub-assembly to pass
through a manufacturing process following the release of an order to dispatch of the product.
Throughput Time includes the following time intervals:
1. Processing time: This is the time spent transforming raw materials into finished goods.
2. Inspection time: This is the time spent inspecting raw materials, work-in-process, and finished
goods, possibly at multiple stages of the production process.
3. Move time: This is the time required to move items into and out of the manufacturing area, as
well as between workstations within the production area.
4. Queue time: This is the time spent waiting prior to the processing, inspection and move
activities.

Idle time
Time when no activity is being performed. For example, when an activity is waiting for a work to arrive
from the previous activity. The term can be used to describe both machine idle time and worker idle
time.

Averages, Snapshots, and Stability

• Process measures can be expressed as either
– long term averages, averaged over a long horizon
– instantaneous values (for flow rate and inventory) -- a "snapshot"
• A stable process is one in which the average inflow equals the average outflow
– inventory can never be infinite
– all real processes are stable (or become stable) when flow units are properly defined

Q. How to analyze any given process?

Process Analysis Steps:

Step 1. Define the process

Step 2. Create the process flow chart

Step 3. Determine the basic process flow metrics (flow rate, flow time, inventory) and associated cash
flows
Q. How do these process metrics help managerial decision-making?
• These metrics can be converted to cost and revenue measures
• Some examples of financial measures
o ROA (Return on assets) = Profit / Assets
o NPV (Net present value)
10 | P a g e
 o TFP (Total factor productivity) = Outputs / Inputs = Revenue / Costs

Step 4: Determine bottleneck(s) and the process capacity

The capacity of a resource (resource pool) is the average flow rate that it can deliver

– Consider the resource in isolation and assume it is always busy. How many flow units per hour can
pass through the activity?
– The bottleneck is the resource with the smallest capacity
– The process capacity is the capacity of the bottleneck
– This is the "theoretical capacity."
– Effective capacity is this minus the production that was lost because the bottleneck was idle.
– Frequently, we will just use the term "capacity". From the context, it should be clear whether this is
"theoretical" or "effective"

BOTTLENECKS AND CAPACITY

A process consists of one or more activities and resources

Capacity of a resource- It is the average rate at which a resource processes flow unit

Utilization of a resource- It is the ratio of actual average flow rate to the capacity of theresource
Bottleneck of a process- It is that resource of the process that has least capacity/ Resource with
capacity less than the demand
Capacity of a process- It is simply the capacity of the bottleneck

Implications:
• An hour lost at the bottleneck is an hour lost for the entire system, because process capacity is
bottleneck capacity
• An hour saved at a non-bottleneck is a mirage, because non-bottleneck has a higher capacity
than the process
• In the absence of variability, one should maintain the utilization of the bottleneck at100%

Using the Theory of Constraints for Bottlenecks

1. Identify the system's constraints
2. Exploit the constraint (maximize return per unit of constraint)
3. Subordinate all else to the constraint
4. Elevate the constraint

11 | P a g e
 5. When the constraint is no longer binding, find the next constraint and repeat

LITTLE'S LAW
It defines the relationship between the inventory, the flow rate and the flow time

Little’s law: inventory (I) = flow Rate (R) * flow Time (T)

CRITICAL PATHS & PROCESSING TIME

Q. What is project cost?
Project cost = cost of activities + cost of delay
Cost of delay = (Actual time – Quoted time) x Penalty

Basic Definitions

1. Earliest Start Time (EST) = earliest the activity can start

2. Earliest Finish Time (EFT) = earliest the activity can finish
3. EST = Max (EFT of immediately preceding activities)
4. EFT = EST + Activity Time
5. Latest Start Time (LST) = latest the activity can start without delaying the project
6. Latest Finish Time (LFT) = latest the activity can finish without delaying the project
7. LFT = Min (LST of immediately succeeding activities)
8. LST = LFT - Activity Time
9. EFT = LFT for last activity
10. Slack time = LFT- EFT
11. Critical Path Method (CPM) - The critical path is the path (or paths) with the least slack
12 | P a g e
 Zero slack activities are on the critical path.

Example:
The numbers on top of the box indicate (EST, Activity Time, EFT); the numbers on the bottom of the
box indicate (LST, Activity Time, LFT)
Wherever the values in the top box and the bottom box are the same (i.e. zero slack), the same is in
the critical path.

13 | P a g e
INVENTORY MANAGEMENT
Basic Definitions

1. Economic Order Quantity (EOQ)= optimum order quantity that minimizes the sum of
ordering cost and carrying cost
a. Carrying cost/ Holding Cost = cost of holding the inventory
b. Ordering Cost= expenses incurred to create and process an order from a supplier
2. Economy of scale = Cost per unit will decline as the number of units increase
3. Economy of scope = Cost declines as the variety of products increase
4. Backorder = Demand for which there is no order (customer willing to wait)
5. Cycle stock = inventory that exists because we order more than one at a time
6. Safety stock = Average stock on hand when an order is received (depends on the SD of the
demand during the replenishment lead time)
7. Setup cost = cost incurred per batch that is independent of batch size
8. Fill rate = fraction of customer demand that is met through immediate stock availability,
without backorders or lost sales
a. unit fill rate
b. order fill rate
c. line fill rate
9. Stock keeping unit (SKU) – distinct type of item for sale
10. Push vs pull systems –
a. Push – orders which are based on inventory levels
b. Pull – production based on demand
11. OEE (Overall Equipment Effectiveness) = Availability rate * Performance rate * yield
rate
12. Lean Manufacturing - systematic method for waste minimization ("Muda") within a
manufacturing system without sacrificing productivity.
13. Single Minute Exchange of Dies (SMED) - SMED is a process of reducing changeover
(setup) time from running the current product to running the next product.
14. Control Chart - A graphical tool used to plot the statistics from samples of a process
15. Reverse logistics – management of return flow of products
16. Benchmarking – comparing products and processes
17. Consignment stock - An inventory held by a customer that is owned by the supplier.
18. Enterprise Resources Planning (ERP) - Integrated applications software that
manufacturing corporations can run to run their business.
19. Andon Board - A Japanese term that refers to the warning lights on an assembly line that
light up when a defect occurs.
20. Gantt chart - A graphical project planning tool that shows horizontal bars that depict the
beginning and ending time for each task
21. Master Production Schedule (MPS) - MPS is a time-phased plan specifying how many
and when the firm plans to build each end item.

14 | P a g e
 22. Parkinson's Law - Parkinson's law, is the adage that "work expands so as to fill the time
available for its completion".
23. Planogram - A plan for retail space allocation designed to maximize the return on investment for
the retail space.
24. Poka Yoke - A Japanese word for a "foolproof device".
25. Productivity - A ratio of an output measure divided by an input measure (e.g., units created
per hour).
26. Program Evaluation Review Technique (PERT)- provides a graphical representation
of a project's timeline by breaking down the individual tasks of a project for analysis. It
provides detailed information regarding the project's tasks, the minimum time required for
completing individual tasks, and the average time required to complete the whole project. The
variable used in PERT technique is time. The PERT Analysis shows you the critical path of a
project PERT charts are preferable to Gantt charts because they identify task dependencies but
are difficult to read.
27. Project Management - The planning, organizing, scheduling, directing, and controlling of a
one-time activity given stakeholder- defined constraints on scope, schedule, and cost.
28. Salvage Value - The value of an item when it is scrapped instead of sold.
29. Warehouse Management System (WMS) - A software application that manages the
operations of a warehouse or distribution center.
30. Just in time (JIT) inventory is a strategy to increase efficiency and decrease waste by
receiving goods only as they are needed in the production process, thereby reducing inventory
costs.

Costs of Inventory
• Physical holding cost (out-of-pocket)
• Financial holding cost (opportunity cost)
• Cost associated with ordering the items (Ordering Cost)

Holding Cost
Holding Cost per Item H = (h+r) *CTotal Holding Cost = H * (Q/2) Where,

• Q/2 = Average number of items in inventory

• H: Cost of holding one unit of inventory for one time period = (h + r) *C
• C: Variable cost per unit
• r: Opportunity cost as "per cent of C."
• h: Physical holding cost as "percent of C"

Setup Cost (Ordering cost)

• R: Annual flow rate (item/ year)
• Q: Batch (order size) – our decision variable
• S: cost incurred to setup per batch that is independent of batch size
• Therefore, No. of Batches = R/Q

Total Setup Cost = S * (R/Q)Cost Associated with Order

15 | P a g e
 Annual variable cost of order = C*REconomic Order Quantity (EOQ)

Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize
inventory costs such as holding costs, shortage costs, and order costs. The optimal ordering happens
when:
Holding Cost = Setup Cost

*(this can be obtained mathematically by minimizing total cost with respect to Q)

INVENTORY CLASSIFICATION
Cycle stock
Organizations usually produce/buy and transport in batches to meet economies of scale. The
inventory resulting from this is called cycle inventory. Used to replenish the stock at the different
warehouses/depots.
Managing cycle inventory:
• Increasing batch size of production (or purchase) increases average inventories.
• Average inventory for a batch size of Q is Q/2.
• The optimal batch size trades off setup cost and holding cost.
• To reduce batch size, one must reduce setup cost (time).
• Square root relationship between Q and (R, S):
o If demand increases by a factor of 4, it is optimal to increase batch size by a factor of 2
and produce (order) twice as often.
o To reduce batch size by a factor of 2, setup cost must be reduced by a factor of 4

Pipeline stock
It is of 2 types
• Work in process inventory – Since it takes a finite amount of time to convert raw material to
finished goods, there is always some inventory currently being worked upon. This is called Work in
process inventory.
• In-transit inventory – since it takes a finite time to move goods, there is always some inventory
currently in movement from one point to another. This is in-transitinventory.

Seasonal inventory:
goods that see a fluctuation in demand through the year. This rise and fall in demand are reflected in
sales during these periods and thus the level of stock.
Stockpiling- accumulating and storing a large amount of goods supply as a reserve for future.

• Producers can stockpile because of demand seasonality

16 | P a g e
 • Or inventory builds up because of production seasonality. Potential strategies in managing
demand seasonality:
1. Chase demand
2. Level or smooth production

Safety Inventory
Extra stock that is maintained to mitigate risk of stockouts caused by uncertainties in supply and
demand.
Q. Why carry safety stock?
1. Protect against unforeseen variation in supply
2. Compensate for forecast inaccuracies (only when demand exceeds the forecast)
3. Prevent disruptions in manufacturing or deliveries
4. Avoid stockouts to keep customer service and satisfaction levels high

Q. How to calculate safety stock? 3 Ways to Calculate Safety Stock Fixed safety stock

Companies can set a fixed level of safety stock for their goods. This number may be based on the
judgment of the operations manager or on assumed stock level calculations. It's often set on an
aggregated level and not on the individual item. This method may lead to high inventory costs or
stockouts since demand is not always constant or similar for all the items in the group for which the
aggregation is done.
Time-based calculation
Time-based safety stock level is used to calculate the stock required over a fixed period. In addition to
the cycle stock, usually a percentage or a week's average sales is added. This method also has a
drawback, particularly when items are slow-moving, as there is no connection to lead-time. It can
result in a large amount of unnecessary capital tied up in safety stock, which becomes excess stock
sitting in warehouses.
Statistical calculation
The mathematical approach, which uses mathematical theories of probability, imposes order and
regularity on aggregates of more or less disparate elements. Different statistical calculations are
presented in the literature, and they will provide better results than the fixed and time-based safety

17 | P a g e
 stock calculations. Keep in mind that different mathematical methods are more or less difficult to
implement, both manually and in your software solution.
Dead stock
It is the non-moving inventory that is of no use in the supply chain or markets. It includes those items
that have become obsolete.

Anticipation inventory
It consists of stock that is accumulated in advance of due to some promotional activity. It may also
include stock built in advance due to some anticipated labor strikes, price or supply shocks, etc.

SUPPLY CHAIN
Basic Structure of Supply chain

Three elements in the conceptual framework of SCM:

• Business Processes-activities that produce a specific output of value to the customer

• Management Components-components by which business processes are structured and
managed
• Supply chain Network Structure-configuration of companies within the supply chain

18 | P a g e
Business Processes:
Hewitt identified 7 Business Processes:

1. Customer Relationship Management

2. Customer Service Management
3. Demand Management
4. Order Fulfillment
5. Manufacturing Flow Management
6. Procurement
7. Product Development and Commercialization

Management Components:
1. Planning and Control
2. Work Structure
3. Organization Structure
4. Product Flow Facility Structure
5. Information Flow Facility Structure
6. Product Structure
7. Management Methods
8. Power and Leadership Structure
9. Risk and Reward Structure
10. Culture and Attitude

Members of the Supply Chain

• Primary Members: All those autonomous companies or Strategic business Units who perform
operational and/or managerial activities in the business processes designed to produce a specific
output for a particular customer or market
• Supporting Members: Companies that simply provide resources, knowledge, utilities or assets for the
primary members of the supply Chain

BULL WHIP EFFECT IN SCM

• Distorted information from one end of supply chain to other can lead to tremendous
inefficiencies: excessive inventory

19 | P a g e
 • investment and poor inventory investment, poor customer service, lost revenues, misguided
capacity plans, ineffective
• transportation, and missed production schedules. Term coined by P&G, the effect is also
known as whiplash effect

Quality
Quality means user satisfaction: that goods or services satisfy the needs and expectations of the user. To
achieve quality according to this definition, we must consider
1. Quality and product policy
2. Product design
3. Manufacturing
4. Final use of the product.

Dimensions of Quality
1. Performance
2. Features
3. Conformance
4. Warranty
5. Service
6. Aesthetics
7. Perceived Quality
8. Price

Cost of Quality
Costs of Controlling Quality
1. Prevention costs: The costs of avoiding trouble by doing the job right in the first place. They
include training, statistical process control, machine maintenance, design improvements, and
quality planning costs.
2. Appraisal costs: The costs associated with checking and auditing quality in the organization.
They include product inspection, quality audits, testing, and calibration.

Costs of Failure
The costs of failing to control quality are the costs of producing material that does not meet specifications.
1. Internal failure costs: The costs of correcting problems that occur while the goods are still in the
production facility. Such costs are scrap, rework, and spoilage. These costs would disappear if
no defects existed in the product before shipment.
2. External failure costs: The costs of correcting problems after goods or services have been
delivered to the customer. They include warranty costs, field servicing of customer goods and
all the other costs associated with trying to satisfy customer complaints.

20 | P a g e
Types of Waste (TIMWOODS)
T – Transport – Moving people, products & information
I – Inventory – Storing parts, pieces, documentation ahead of requirements M – Motion – Bending,
turning, reaching, lifting

W – Waiting – For parts, information, instructions, equipment

Overproduction – Making more than is IMMEDIATELY required
Over processing – Tighter tolerances or higher-grade materials than are necessary D – Defects
Rework, scrap, incorrect documentation

S – Skills – Underutilizing capabilities, delegating tasks with inadequate training

Six Sigma
Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects. To achieve
Six Sigma, a process must not produce more than 3.4 defects per million opportunities.
There are two Six Sigma sub-methodologies: -

1. DMAIC process (define, measure, analyze, improve, control) is an improvement system for
existing processes falling below specification and looking for incremental improvement.
2. DMADV process (define, measure, analyze, design and verify) is a Six Sigma framework that
focuses primarily on the development of a new service, product or process as opposed to
improving a previously existing one.

ISO 9000 Series standards

The ISO 9000 family contains these standards:

1. ISO 9001:2015: Quality management systems - Requirements

2. ISO 9000:2015: Quality management systems - Fundamentals and vocabulary(definitions)
3. ISO 9004:2009: Quality management systems – Managing for the sustained success of an
organization (continuous improvement)
4. ISO 19011:2011: Guidelines for auditing management systems

E-COMMERCE DISTRIBUTION MODELS

Market Place Model
Here, the company acts as a meeting ground or a facilitator through an Online IT platform for buyers
and sellers without storing goods. But they do offer shipping and payment assistance by tying up with
selected logistics players and financial partners. A pure e-commerce marketplace follows a zero-
inventory model. eBay and Naaptol are examples of e-commerce players that follow the marketplace
model.

21 | P a g e
Inventory Model
Here, the company sources products directly from brands & sellers and stocks them. There are no
multiple sellers selling one product, unlike marketplaces where buyers get to choose from several
merchants. The seller is the e-commerce company and invoice is issued to the customers on the
company's name.
Example: Jabong

Hybrid Model
A mix of marketplace and inventory is a hybrid e-commerce model. It's also called a 'managed
marketplace' model. It is adopted by most Indian e-commerce players like Flipkart, Amazon etc.

Under their marketplace fulfilment services like Fulfilment by Amazon (FBA) and Flipkart Advantage,
e-commerce players offer inventory storage, packaging & delivering services but a seller is free to
choose self-fulfilment or marketplace-fulfilment.

Drop shipment model

Drop shipping is a sourcing a fulfilment business model where the retailer (you) never actually owns
the inventory you are selling. Instead, you are acting as a middleman that is selling the goods on your
own website and when you receive an order, you pass that order onto the drop shipping company for
them to pick, pack and fulfil. Your profit is the difference between what you change your customers
on your website and what the drop shipping company charges you.

Cross-Docking
Cross docking is a logistics procedure where products from a supplier or manufacturing plant are
distributed directly to a customer or retail chain without any inventory management involved during
the process. Once the goods are received, they are just sorted and shipped to the requireddestination.
There are 2 types of cross docking:

1. Basic Cross Dock – Products or Goods are moved from supplier origin vehicles directly to
customer bound vehicles without the need of a warehouse. A simple transfer point is enough.

2. Flow through Cross Dock – When Goods arrive and are in large packages, they are opened,
sorted and consolidated based on customer locations/ destinations and transferred to vehicles
bound for the same.

Hub & Spoke Model

H&S distribution involves nodes/Central warehouses or storage (Hubs), connected by lines to
Customers/Suppliers (spokes) that represent viable transportation between them. Unlike cross-
docking, storage of goods might be considered at the node.

22 | P a g e
Delivery Types
First Mile
First Mile refers to movement of goods from suppliers to the distribution centre/centralwarehouse.
Last Mile
Last Mile refers to final movement of goods from distribution centre/central warehouse to doorstep of
the customers.

Operations milestones
1913
a. Henry Ford conceptualized mass production and organized work stations through assembly
lines
b. Gantt chart was introduced by Henry Gantt which is to date used to chart any kind of
schedule

1914
a. EOQ model was developed by Harris – F.W Raymond which distinguished between holding cost
and ordering cost and aimed at minimizing total inventory cost by determining a fixed order
quantity

1924
a. Walter Shewhart introduced Statistical Quality Control to increase efficiency and minimize
waste

1931

23 | P a g e
 a. F.H Dodge developed sampling inspection concept5. 1937

a. Work sampling was developed by L.H.C Tippett

Omnichannel
Omnichannel order fulfilment is a material handling fulfilment strategy that treats the inventory as a
single unit and uses it to fulfil all channels (e-commerce, store replenishment, and wholesale) from
one location.

The whole process ranges from the customer placing the order to when the order gets delivered to
him or her comes under omnichannel fulfilment.

6 processes: communication, order processing, warehouse management, shipping, last-mile delivery,

after sales

Contract logistics: make up 20% of omnichannel logistics. Contract logistics companies aim at
increasing their share in the omnichannel distribution, but the complexity and smaller order size
present a challenge.

Famous supply chains: Walmart, Amazon, Big Bazaar

AMAZON
Amazon has developed its entire value proposition vastly around its fast delivery service. Over 90% of
the 52,000 sellers at Amazon use their services for delivery. These are the sellers that come under
"Fulfilled by Amazon" on their website. Amazon picks up their goods and stores it at their warehouse
until order is received.
Amazon Easy Ship is another service whereby Amazon directly picks up the packed item from the seller
and delivers it to the customer without going through the warehouse.

Walmart
The American retailer has a stock of products that came from 70 nations across the globe, has more
than 11,000 outlets, and manages a huge inventory. From household furniture to clean food, Walmart
has every type of stock. As per many experts, it is the technology which is used by Walmart that allows
them to forge such a vast network.

24 | P a g e
 Companies in their supply chain synchronize their expected sales through planning, collaboration,
forecasting and replenishing systems.

Three areas where Walmart excels:

a. Collaboration: The new world of data sharing and collaboration has helped organizations
across the globe improve forecasting and marketing, but when Walmart first started looking
into this in the 1980s, they since haven't looked back.
b. Innovation: Walmart has some tough competition; with retailers such as Amazon touting low
prices and fast delivery, they had to figure out a way of competing with an essentially
seamless customer experience. Walmart expanded its click and collected service to 30+ new
markets and its pickup service to 60+ US markets at 400 locations. Walmart is making
investments in warehouse automation in distribution centres to deliver aisle and
department-ready pallets to stores. Walmart is also investing in pickup and delivery capacity.
Thus, it's fair to say that Walmart doesn't take its competition lying down.
c. Invest in Information Technology: Walmart has consistently been willing to invest in
technology to support its supply chain. From hand-held devices in the store, to analytics
software to improve collaboration, Walmart was able to overturn a long-standing practice in
the retail industry while also delivering low prices for their customers.

Facility location
1. Centroid method: It is most used when the company wants to identify a central locationfor the
facility

2. Load distance: Load refers to what needs to be transported (employees or resources). Here the
primary objective is to minimize the distance or time for transportation.

3. Factor score: This method is used when there are multiple factors that need to be considered in
finalizing a facility location. Each factor is assigned a weight and the scores for each alternative
are compared and the one with the highest score is selected
E supply chain: It refers to the integration of online platforms and services to improve the supply
chain efficiency of any organization. It is a series of internet enable value adding services. It includes
activities such as e-procurement, inventory management, supply chain monitoring and controlling,
supply chain replenishment and e-logistics.

ERP: ERP is a data management system which integrates the entire company's data and provides
vital information to different departments and locations in real time. Since the entire company uses a
single platform, it leads to standardization and minimizes the efforts involved in running a business.
Drawbacks of the MRP system led to the acceptance of ERP.
25 | P a g e
PROJECT MANAGEMENT GLOSSARY

Adaptive project framework (APF) - An approach to project management that rejects traditional,
linear project management and instead accepts changing requirements and allows projects to be affected
by external business environments. The ADF stresses flexibility in many aspects of project management
and focuses on performing and evaluating project work in stages to allow room for replanning due to
changing business goals, objectives, and requirements.

Agile - The Agile family of methodologies is a superset of iterative development approaches aimed at
meeting ever-changing customer requirements. Agile development proceeds as a series of iterations, or
sprints, with incremental improvements made in each sprint. Since agile projects do not have fixed scopes,
agile methodologies are adaptive, and user stories and customer involvement guide the iterative work.

Business process modelling (BPM) - Business process modelling is the representation, analysis, and
evaluation of business processes in an effort to improve them.

Burn down chart - A graph that shows the relationship between the number of tasks to be completed
and the amount of time left to complete these tasks.

Burst point - A point in a network diagram at which multiple successor activities originate from a
common predecessor activity. None of the successor activities may start until one finishes the predecessor
activity.

Capability maturity model (CMM) - This model is used to assess the maturity of business process
capabilities. It was created to assess the capabilities of software development processes but is now used in
a number of other industries as well. Like other maturity models, the CMM allows organizations to assess
themselves against external benchmarks and provides recommendations for improvement.

Crashing - A schedule compression technique used to speed up project work by increasing the rate at
which critical path activities are completed by adding more resources — usually more personnel or more
equipment. Crashing increases project costs, so it is used first on activities that can be sped up at the least
additional cost.

Critical chain project management (CCPM) - Critical chain project management is an approach to
managing projects that emphasizes the resources needed to complete project activities over activity order
and durations set in a schedule. It uses resource optimization techniques like resource leveling and
requires that activity start times be flexible.

26 | P a g e
Critical incident stress debriefing (CISD) - CISD is a psycho-educational exercise for small groups
who have experienced a traumatic event. It is sometimes used in project management to help project
teams cope with trauma and to rebuild team cohesion.

Criticality index - Each project activity is assigned a percentage called a criticality index, which is a
measure of how frequently it is a critical activity in project simulations. Activities with high criticality
indexes are likely to prolong project duration if delayed.

Delphi technique - An estimation method based on expert consensus. Experts make estimates
individually and simultaneously and then review their estimates as a group before making another set of
estimates. The process is repeated, with the pool of estimates typically becoming narrower after each
round of review until a consensus is reached.

Drawdown - A method used to exercise control on the release of project funds. Instead of making entire
project budgets available from the outset, management may choose to release funds at specific times.
These releases are called drawdowns. Drawdowns may coincide with phase gates so that funds are
released at the beginning of each phase.

Hammock activity - In a schedule network diagram, a hammock activity is a type of summary activity
that represents several grouped - but unrelated -smaller activities that occur between two dates.

MoSCoW - The MoSCoW prioritization method allows project managers to communicate with
stakeholders on the importance of delivering specific requirements. The acronym indicates four categories
of priority and importance for project requirements. Each requirement is prioritized as a "must have," a
"should have," a "could have," or a "won't have.

Pareto chart - A Pareto chart is a combination bar chart and line graph where the bars represent
category frequencies in descending order from left to right, and the line tracks the cumulative total as a
percentage.

Precedence diagramming method (PDM) - The process of constructing a project schedule network
diagram. It illustrates the logical relationships between project activities and shows the order in which they
must be performed by using nodes to represent activities and arrows to show dependencies. PDM also
indicates early and late start and finish dates, as well as activity durations.

Product breakdown structure (PBS) - A product breakdown structure is used in project

management to record and communicate all project deliverables in a hierarchical tree structure. It may be
thought of as a comprehensive list of all project outputs and outcomes.

RAID log - RAID is an acronym for risks, assumptions, issues, and dependencies. The RAID log is a project
management tool that records developments in these four aspects of project work for the stakeholders'
benefit and for an end-of-project review.

Risk efficiency - A concept based on the idea of maximizing the return-to-risk ratio. It can do this in two
ways: by minimizing exposure to risk for a given level of expected return or by seeking the highest possible
expected return for a given level of risk.

Risk threshold - The level at which the likelihood or impact of a risk becomes significant enough that
the risk manager deems a risk response necessary.

27 | P a g e
Risk tolerance - The level of variation in performance measures that an organization is willing to accept.
It is not the same as risk appetite, which is the level and type of risk an organization is prepared to accept
in anticipation of gains.

Rolling wave planning - A planning approach that focuses on in-depth detailing of work to be
accomplished in the near term and progressively lower levels of detail for work scheduled farther in the
future. It is based on the idea that work scheduled in the future is more subject to change and thus less
worth planning in detail. Rolling wave planning only works for schedules with clearly defined iterations.

Run book - A comprehensive catalog of information needed to conduct operations and to respond to any
emergency situations that arise during operations. It typically details, step by step, all regular operational
procedures and emergency responses.

Schedule performance index (SPI) - The ratio of earned value to planned value at a given point in
time. It shows whether a project is running to schedule. An SPI lower than one indicates the project is
behind schedule. An SPI higher than one indicates the project is ahead of schedule.

Scope creep - Scope creep refers to gradual changes in project scope that occur without a formal scope
change procedure. Scope creep is considered negative since unapproved changes in scope affect cost and
schedule but do not allow complementary revisions to cost and schedule estimates.

Scrum - Scrum is an iterative development procedure used in software development projects. Scrum-
based projects focus on prioritizing requirements and working towards a clear set of goals over a set time
period, called a sprint. The development team thus works through the list of requirements over a number
of sprints. Scrum-based projects usually do not have project manager. Instead, the project team meets
daily for progress updates.

Slippage - The negative variance between planned and actual activity completion dates. Slippage may
also refer to the general tendency of a project to be delayed beyond planned completion dates.

Timebox - Timeboxing is a project management strategy that prioritizes meeting deadlines over scope
requirements. It involves assigning specific lengths of time, called timeboxes, to project activities. Project
teams work to address as many requirements as possible within each timebox, proceeding to successor
activities once the time limit has passed.

Waterfall model - The Waterfall model is a software development life cycle in which development
phases are sequential, non-iterative, and do not overlap. It is typically reserved for small projects with
straightforward, clearly defined requirements since a sequential development process makes it difficult to
revisit the analysis and design phases once testing has begun

POINTS TO NOTE
The 3 most important points to keep in mind before each interview:

1. Know your CV inside out! You should be able to expand on each point in your CV using the STAR
framework. (Most ops questions come from your CV)

2. Know the operational basics of the company you are applying for

3. Stay confident and believe in your capabilities that have gotten you this far in life!

28 | P a g e