September 29, 2012

5S in Manufacturing

A work place organization method, developed to, create a comfortable working environment, increase productivity and efficiency and reduce waste. It is typically the first lean method, which also provided foundation on which other lean methods – six sigma, cellular manufacturing, just-in-time production, etc. were introduced.

The 5S methodology which originated in Japan, is based on the notion that the foundation of a good production system is a clean and safe work environment. The 5S – Seiri, Seiton, Seiso, Seiketsu and Shitsuke are translated from Japanese language to the closest English equivalents - Sort, Set in order, Shine, Standardize, and Sustain. Apart from the 5S’s, three other S’s are sometimes included – Safety, Security and Satisfaction. 
SORT – (seiri)
Organizing the work area, by keeping only the essential tools and materials to perform the required task, so as to increase the product quality and productivity. Sorting also helps reclaim valuable floor space. “Red tagging” is one effective visual method used for sorting (Red-tagged items are those not important to perform the required task).
SET IN ORDER – (seiton)
Systematically arranging necessary objects to eliminate waste in production and clerical activities. Placards to designate proper storage locations, outlining work areas are few of the strategies for effective set in order.
SHINE – (seiso)
Maintaining clean and well swept work area, which is safer and mess-free. Potential problems caused by any sources of contamination can be easily identified and rectified, by developing standards and norms for cleanliness.
STANDARDIZE – (seiketsu)
Developing and formulizing standard operating procedures for carrying out tasks and procedures. Orderliness is the core of “standardization”. The most widely used tools to standardize the practices are job cycle charts and visual cues.
SUSTAIN – (shitsuke)
It is the one that keeps the first four S’s going and perhaps is the most difficult S to implement. The prerequisites for sustaining the 5S cycle - Imparting the necessary training, encouraging workers to properly maintain and continuously improve operating procedures and the workplace environment.

5S – Its application at a manufacturing company – Toyota
Toyota was the first company to implement 5S and the main objectives to adopt 5S were to facilitate team work, eliminate wastes that contribute to errors, defects and injuries. The company had implemented 5S by imparting the necessary training to the workforce from the shop floor to the management and rewarded to encourage them, to maintain and continuously improve operating procedures.
5S being one of the important principles of Toyota company, helped it achieve high performance that continues to add value to customers.
Though 5S is a system designed to build a work ethic that is practical, efficient and highly disciplined, it has a few potential short comings like increased use of paints and cleaning supplies, increased waste generation leading to complications in waste handling. However, the advantages of 5S far outweigh the disadvantages. 
The article has been contributed by Sujitha Tikka, who is presently a first year PGP student at IIM Raipur. She has worked with Aarvee Associates architects engineers & Consultant Pvt Ltd for 25 months. Her areas of interest include Supply chain management & logistics.She can be reached at pgp12048.sujitha@iimraipur.ac.in.
References
The 14 Principles of the Toyota Way: An Executive Summary of the Culture behind TPS

September 19, 2012

Impact of FDI in Retail: A 360-Degree View



There is whole lot of mayhem about FDI in retail ever since it knocked the doors of Indian Economy. The mere word “FDI” has haunted the corridors of parliament, big retail outlets, mom n pop store owners, the middle men and even the end consumers. The arguments citing the advantages of FDI in retail mostly revolve around the following:
  • Improvement in Retail capability building
  • Improvement in management of supply chain
  • Push to productivity
With the recent development in this context, it is very much essential to analyse the impact of FDI in retail without any bias. To cut the long story short:

What is FDI in Retail?

Now after all this media show, let’s try to figure out how it will affect entities across the supply chain.

Single Brand Retail: FDI investment till now was 0.03 % (INR 204 Cr) of total FDI investment from April 2000 to September 2011. This relaxation will increase FDI in retail sector through the entrance of new players (Foreign or Domestic), increase or buy outs in stake, M&A amongst existing single brand retailers, Joint ventures with foreign and existing players.
There will be sourcing norm of only 30% from local sources. This will lead to lower procurement locally. So MSME sector will lose but the luxury retail market will witness growth. This will surely lead to outflow of money from India. Growth in luxury retail market and low or no growth in MSME sector will lead to negligible employment generation.
Possibly, there will be changes in existing licensing/ distributor/ franchise arrangements being converted into joint ventures or complete buy out by foreign entrants.

Multi brand Retail: FDI here will lead to increased investments and growth in Indian retail sector. In this case too, new JV’s and M&A will be seen. Tactics of buying stakes or complete buyout will be played. This should provide options for existing Indian retail companies to raise long term capital for expansion.

This financial inflow will lead to development of retail infrastructure and value addition to the existing supply chain. The sector will see investment in setting up supply chain mechanism, transport infrastructure, cold storage, technology etc. This will directly enhance the operational efficiency of the entire supply chain.

Agriculture: The farmers/producers will be benefitted as they will get better price for their produce. Although the buy will be completely based on bulk buy i.e. entire stock based on quality. This means if the company decides to purchase only the quality produce then the not so good produce will find its way to local market (if it exists) or in garbage. Either way the farmer/producer will get paid for the quality produce. This in turn will encourage farmers/producer to improve their existing ways of farming/production. Again this will require investment in technology. 
Companies may go for contract farming and this again will lead to improvement in the method of farming by introduction of better seeds, better fertilizers, new farming equipment etc. provided by the companies.

FDI in retail to benefit the farmers & consumers

Middlemen: Another very visible impact will be the eradication of middlemen from the supply chain. It is usually believed that this would lead to lesser exploitation of the farmers/ producers and at the same time competitive process for the end consumers. But at the same time, the big retail brings in new breed of middlemen- quality controller, standardiser, certification agency, processor, packaging consultants etc. It is these middlemen who would now take their share from the farmers’ profits and the consumers’ savings.
Thus, it is premature to comment on how much the farmers and end consumers will gain out of this elimination of traditional middlemen and introduction of the new middlemen.

Employment: the Indian retail market is estimated to be around $ 400 billion with more than 12 million retailers employing 40 million people. A contrasting picture will be seen as the small retailers, “Kirana shops”, departmental stores etc. will find a tough time to compete or even exist in such scenario. In such scenario, the landless farmers or labours that turned into small time retailers will be worst hit. Government will have to face the question of how to compensate for their loss. This problem will further get intense considering the very low employability of such landless farmers/laborers
Another viewpoint is that the damage will not be so extensive as the big retailers will operate in the outskirts or in a very few locations in any city or town and the “Kirana shops” will co-exist in the interiors. In any of the cases, the sheer magnitude of impact to society will be intolerable.

video
What Retailers Think

Role of State government: As clarified by the central government, it will be on the state governments whether or not to allow multi-brand FDI in the respective state. But India, being a signatory to Bilateral Investment promotion and Protection Agreements (BIPAs), has to provide national treatment to the foreign investors. The fact that such agreements have been signed with more than 70 countries will certainly force the state governments to open up for big retailers.
It will be interesting to see the regulation norms set by the state governments as it will clearly guide the extent of FDI in their respective states. One thing is for sure that State government will be able to get more revenues by keeping FDI in place. But how that increased revenue will justify the lost livelihood of millions of people or what steps will the government take to minimize this loss.

India Speaks about FDI in Retail

Consumers: The consumer in this entire exercise will be delighted with increased number of choices, better quality and decreased prices due to tougher competition in the retail sector. But clearly the winners will be the foreign players who will able to make attractive market share and profits. The tale of FDI in retail sector may lead to monopolistic behaviour of retail players once the small time competitors are eliminated from the market.



This article has been contributed by Harish Verma, who is presently a second year PGP student of IIM Raipur. He has worked with Essar Power Ltd. for 19 months. His areas of interest include project management, supply chain management & customer service. He can be reached at pgp11015.harish@iimraipur.ac.in.

September 14, 2012

Effect of Retail Channel Integration through use of IT



Most of the retailers now offer consumers with different channels to buy products. Consumers can buy products through traditional stores, online, mobile, call centres, kiosks etc. However these multiple channels have less integration with each other .For example, consumers dealing with the same organisation will find different pricing, inventories and policies depending on the channel being used. Moreover, the customer service personnel in the physical store may not be knowledgeable about the “in -store payment for online orders”, “in-store returns of online orders”, “online gift cards” etc for products brought through online. Since there is less integration with different channels, a consumer cannot pick the product from physical store which he/she has ordered through ecommerce site. These are the main issues faced by a consumer today due to lack of transparency between different channels within an organization. So it is the need of the retailers to provide consumer with cross-channel convenience.

IT is becoming one of the critical resources in multi channel service operations management as it provide share ability and reusability of information which is  necessary for business process integration. So it is important for the multi channel retailers to use IT effectively in integrating their activities. With retail chain integration, companies can provide advertising and publicity of one channel through another channel. This will encourage customers of one channel to use the others, and increase awareness of the different channels .For example, the physical store can be used as an advertising medium for the Website through brochures, receipts, carrying bags and posters. Likewise, the Website can provide contact information about the physical stores and announce in-store promotions.


 Some of the other major effects of retail channel integration through IT are as follows.

1. Offering customers to choose their preferred channel to buy and complete their purchases. In South Korea, Tesco’s Home Plus has found a way to help time-pressed commuters to shop on the go using their smart phones by building virtual stores on the platform of subway stations. Home Plus displayed images of food items  across the walls of train platforms and every item has a corresponding QR barcode associated with it. People waiting on the platform can scan the QR code of the required item using their mobile and adds products directly to their shopping cart. When the online purchase is done, it would be delivered to user’s home within hours.   

2. Ensuring the consistency of product and pricing information across different retail channels. This can be achieved by integrating product catalogues and ensuring that product descriptions, product categories, prices, and discounts are consistent in the various channels. It ensures the transparent flow of information between processes and reduces confusion arising from information inconsistencies

3. Providing customers to access information available in one channel from another channel. For example, the Website can allow customers to search for products available in the physical store through an integrated database. Likewise, information kiosks at the physical store can help customers search for product information, availability, and the store location of products from the Website. Information on real-time inventory can be made available online so that customers will not make wasted trips to the store when the product is not in stock.

4. Collecting customers online and offline transaction information and making it available across multiple channels. This increases the richness of the information available and the quality of services that can be provided. It allows the retailer to provide many value-added services such as personalized Web pages to users.

5. Providing services for customers to access service support in the channel of their choice. Support can be offered at physical stores for problems related to online purchases, such as allowing customers to return goods ordered online at a physical store and vice versa.


Bibliography

Lih-Bin Oha,Hock-Hai Teob, Vallabh Sambamurthy. The effects of retail channel integration through the use of information technologies on firm performance.


The article has been contributed by Thousif Mohammed, who is presently a first year PGP student at IIM Raipur. He has worked with TCS for 2 years. His areas of interest include Supply chain management & customer service.