Japan Earthquake: A supply chain catastrophe

Japan suffered from one of the most devastating earthquakes in the nation’s history. The lives lost and damage done to the property is irreparable. We shall take a look at the adverse effect this tragedy has on the global supply chain.

Worries about supply-chain disruptions from Japan's earthquake continue, with some Asian businesses slowing production to preserve stockpiles of crucial components.

But some Japanese factories reported progress in restarting operations, raising hopes that long-term disruptions might be avoided. Japanese-made equipment and materials play a key production role in many of the region's main industries, from automobiles in Thailand to semiconductors in the Philippines. While many businesses said they have adequate inventories of materials for the time being, some were cutting output as they attempted to gauge the impact of the earthquake and disruptions caused by continuing problems at the Fukushima Daiichi nuclear power plant.

In Thailand, Toyota Motor Corp., Thailand's single biggest auto maker is slowing production to preserve stockpiles of Japan-made components, such as the transmission for Camry and Prius hybrid models. "Slowing production now is better than maintaining full output and having a problem later," a Toyota executive said. He declined to say how much production would be reduced.  Other Toyota models face less of a problem because they use a higher percentage of Thailand-made parts. Some 90% of the components used to make Toyota's Thailand-made pick-up trucks are made in the country, compared with 60% for its passenger cars. In Japan, Toyota said it would resume production of replacement auto parts for the domestic and overseas markets soon.

Nissan said it will resume output at two plants in Japan but keep operations at three other vehicle assembly plants in Japan closed until later. Some other factories in Japan have reopened, except for Suzuki and Honda.

Production problems continued in other industries. In a possible blow to global production of consumer gadgets such as smartphones, Mitsubishi said the building and equipment at a plant in Fukushima prefecture had been damaged by the earthquake and that operations were suspended. The plant produces materials for printed wiring boards for use in smartphones and other consumer electronics and makes up to 60% of the global market for wiring-board materials.

The Philippines semiconductor industry association said it was concerned that the disaster in Japan could disrupt the supply of raw materials from the country and affect the export of Philippine-made components back. "A prolonged abnormalcy in Japan will certainly affect the material supplies in the Philippine electronics industry," said Ernie Santiago, president of the Semiconductor and Electronics Industries in the Philippines.

Some of those raw materials include substances such as bismaleimide-triazine, or BT, resin, which is used in making printed circuit boards. Japan provides around 90% of the world's supply of BT resin, Credit Suisse Group AG said.

In some cases, manufacturers will be able to shift to chip suppliers outside Japan. But that can be difficult if product specifications call for a particular brand, said Paul Romano, chief operating officer of Fusion Trade, an Andover, Mass., company that helps manufacturers find sources of scarce components. He said the company has been retained to find components by more than 15 clients. He said they don't allow his firm to disclose their names.

This just shows the side effects of a global supply chain. In a country like Japan, which is home to many high technology industries like automotives and electronics, a natural disaster of this magnitude can cripple supply chains of even major corporations. The indispensable nature of Japanese parts and finished goods will create a ripple effect across many industries for a long time. At a time when the world is just coming back on its feet from the global financial crisis, a production slowdown will further dent the economic recovery shown in the developed nations.

Vishwajit Vyas has done his B.Tech. in Electronics Engineering from Wayne State University, Detroit,  Michigan and can be reached at vishwajitvyas @ gmail . com.

Domino’s India Logistic management

In 1960, two brothers who were students of the University of Michigan - Thomas S. Monaghan (Thomas) and James S. Monaghan (James) - bought the store for US$900. In 1961, James sold his share of business to Thomas. The pizza business did well and by 1965, Thomas was able to open two more stores in the town - Pizza King and Pizza from the Prop. Within a year, Varti opened a pizza store in a neighborhood town with the same name, DomiNick's Pizza. Thomas decided to change the name of his first store, DomiNick's Pizza, and one of his employees suggested the name Domino's Pizza (Domino's). In 1982, Domino's Pizza established Domino's Pizza International (DPI) that was made responsible for opening Domino's stores internationally. The first store was opened in Winnipeg, Canada. Within a year, DPI spread to more than 50 countries and in 1983, it inaugurated its 1000th store.

When Domino's entered India, the concept of home delivery was still in its nascent stages. It existed only in some major cities and was restricted to delivery by the friendly neighborhood fast food outlets. Eating out at 'branded' restaurants was more common. To penetrate the Indian market, Domino's introduced an integrated home delivery system from a network of company outlets within 30 minutes of the order. Goutham Advani (Advani), Chief of Marketing, Domino's Pizza India, said, "What really worked its way into the Indian mind set was the promised 30-minute delivery." Domino's also offered compensation: Rs.30/- off the price tag if there was a delay in delivery. For the first 4 years in India, Domino's concentrated on its 'Delivery' strategy.

The CEO of Domino’s Pizza India is a man in hurry. Ever since he took over as the CEO of Domino’s in November 1999, he had been frantically reworking the pizza chain’s strategy. In late 1999, Indocean Chase, the private equity fund bought a 25% stake in Domino's operations in India from the Delhi-based industrial family, the Bhartias, who held Domino's franchise in India. Domino's told investment bankers at the fund that it planned to go in for an initial public offering (IPO) in the next two years. Indocean Chase advised Domino's to go beyond its 16 outlets in Delhi to exploit the potential in the pizza delivery business. Unless a well-thought-out expansion plan was put into place, the IPO was unlikely to find too many takers. As part of its expansion plans Domino's revamped its entire supply chain operations, from sourcing raw materials to shipping them for processing at a central location to delivering it to the customer's.

Initially, Domino's had a simple model. It had three self-contained commissaries in New Delhi, Mumbai and Bangalore which bought their own wheat, tomatoes and other ingredients, processed them, and then delivered them in refrigerated trucks to each outlet. However, volumes were expected to increase when Domino's planned to open new outlets. Therefore, the existing model had to be revamped. Bhatia said, "It's crucial for us to build a low-cost supply chain operation which takes costs out of the system and in turn gives us greater pricing flexibility in the marketplace."

The logistics model adopted by Domino's offered some obvious benefits including lower transportation costs, cheaper procurement and economies of scale. Domino's had already cut out the duplication in procurement and processing of raw materials across each of the three commissaries. The old model of self-contained commissaries had another disadvantage: adding new outlets did not translate into greater economies of scale. Domino's also identified specialty crops in each region. The commissary in that region was entrusted with the task of processing that specialty crop. For instance, the commissary for the eastern region in Kolkata was responsible for buying tomatoes, processing them and then sending them to all the other commissaries. Similarly, the northern commissary had to deliver pizza bases. This way, Domino's minimized duplication as well as the dangers of perish ability.

Domino's hoped to lower its prices by saving from the logistics model and third-party transportation. In April 2000, Domino's announced a cut in pizza prices to Rs 49. Domino's was also targeting large corporate offices, railway stations, cinema halls and university campuses for faster growth. It had already established an outlet at Infosys corporate office in Bangalore and at three cinema halls - PVR in Delhi, Rex in Bangalore and New Empire in Kolkata and growing at a faster rate. Domino's also classified its outlets into Super stores, Express stores and Regular stores. Super stores were those, which generated high traffic and therefore had more counters than the regular outlets (the outlet in Churchgate, Mumbai). Express stores were those where people were expected to walk in and order rather than ask for home delivery (university campuses, offices or cinema halls).

References :  http://www.icmrindia.org/free%20resources/casestudies/Domino-Logistics20Management.htm

Shashi Bharti has done his B.Tech. in Electronics and Communication Engineering from NIT, Hamirpur and has worked in Tata Consultancy Services for 24 months

Six Sigma Implementation in TCS

TCS initiated Six Sigma implementation in its GE account in the Global Engineering Development Center of Chennai. In this center TCS executed projects for various businesses of GE including Computer Aided Design, Engineering Automation and Product Data Management Solutions. GE is a quality conscious company and had high standards of quality requirements. To achieve the desired level of customer satisfaction TCS decided to adopt the Six Sigma approach to bring down defects.

As the Six-Sigma implementation is customer driven, in this approach defect is considered to be anything which causes customer dissatisfaction. The target of Six Sigma was to bring down the number of defects to 3.4 per million units which really dictates flawless execution of all major processes. To implement Six Sigma TCS formed a team whose responsibility was to drive the implementation of this exercise. The team was headed by a Champion whose responsibility was to define the objectives, decides the steps to be taken, measures the improvements and ensures sustainability of the progress. Next in hierarchy was the Master Black Belt who created the network for Six Sigma, created training plans and supervised the projects. Under them were a number of Black Belts who shared the best practices and were actively involved in the implementation. Each Black Belt had some Green Belts under them who actually led the process improvement teams, trained the other team members and were accountable for the results of the teams working under them.

The next step was to provide training to all teams who would be working for implementation of Six Sigma. The actual work was divided into four different phases viz. Define, Measure, Analyze , Improve and Control. In the Define Phase the processes to be improved were identified and the customer requirements were converted into CTQ’s. In the Measure phase the defects in the current processes were measured. In the Analyze phase brainstorming was done to pinpoint the reasons which were causing the defects. In the Improve phase, the existing processes were modified to bring down defect levels within acceptable limits.

 

The implementation of these activities helped TCS to achieve a level of 5.86 σ in the GEDC centre for a number of projects in GE account in 1998-99.
References : http://www.tcs.com/resources/white_papers/Pages/QualityImprovementTheSixSigmaWay.aspx

Supratik Saha is a PGP student of Indian Institute of Management, Raipur and has worked in Tata Consultacy Services for 33 months. He has done his B.Tech. in Computer Science & Engineering from Siliguri Institute of Technology, West Bengal and can be reached at totoslg @ gmail . com

Virtua Health using six sigma: Taking a cue from GE electric

Virtua health is a four hospital system in New Jersey. It was created in 1998 through the merger of West Jersey Health System and Memorial Health Alliance of Burlington County. It has now become a dominant player in the New Jersey suburbs of Philadelphia, bringing together four hospitals, two ambulatory surgery centres, two long-term care facilities, a health fitness centre, and a home health company. Virtua in order to become more competitive in the market thought to change management and operating culture at fundamental level by applying six sigma procedure.

A cultural transformation program called STAR initiative was started which was aimed for creating an outstanding patient experience. The aim was to transform Virtua into a high performing organization making quick decisions,  removing bureaucratic barriers for employees and physicians in order to create an outstanding patient experience, and driven by valid measurement and accountability for results. To implement the STAR initiative Virtua tied up with GE medical systems.

Six Sigma at Virtua

The partnership between GE and Virtua began in September 2000. GE Medical Systems representatives taught Virtua the Six Sigma tools, including the key components, the Change Acceleration Process (CAP) and Workout. Workout refers to getting extraneous work out of a process through brainstorming. It helps in removing barriers between departments and generates the action steps. CAP refers to a range of management tools to drive strategic change by getting everyone speaking a same language and making all stakeholders to accept the change. Six full time “Black-Belts” have been identified and they work on any issue identified by management. They brainstorm with the key stakeholders involved and stakeholders get organizational support in this fashion as the black belts represent the entire organization. It has also helped in improving the organizational culture.

Moreover six sigma projects have been identified in fields of             

• Improve patient satisfaction in the emergency room and medical/surgical units.                    
• Improve throughput (cases/day) in two of the systems' busiest operating rooms 
• Find a way to rapidly hire the best employees       
• Improve employee retention in such critical areas as nursing   
• Improve the revenue cycle
• Improve the efficiency of home health nurses
• Reduce errors in the use of high risk meditations
• Reduce length of stay for elderly patients with congestive heart failure.
                                                                            

Several other workout projects have been successfully completed throughout the Virtua health care system. Virtua has trained 60 coaches who are experts in CAP and workout methods. So, Six sigma is helping in enabling the whole organization through these skills.

The six sigma methodology has helped Virtua clients/employees to:

·         Be generally informed about the project, process, and projected outcomes in all domains of the health care system

·         Participate in goal setting

·         Understand how to interpret quality

·         Base their directives on hard information

·         Evaluate progress and judge success

References : http://search.proquest.com/docview/204788093?accountid=274812

The writer of this article, Naman Jain, a PGP student of Indian Institute of Management, Raipur has worked in GE Healthcare Labs. He has done his B.Tech in Computer Science & Engineering from Vellore Institute of Technology, Vellore and can be reached at namanvit @ gmail . com