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Lecture 41 : Supply Chain Performance: Balanced Scorecard Approach (Contd.) — Transcript

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0:01[Music]
0:22[Music]
0:26so hello dear friends welcome back to
0:28nptl online course on Logistics and
0:30Supply Chain management so in the last
0:32session we discussed about uh balance
0:35scorecard and uh in this session we'll
0:37continue the discussion how we can
0:39implement the balance scorecard approach
0:42in supply chain uh measuring the
0:44performance and how we can improve the
0:46performance in different uh all those
0:48four perspectives right so uh already we
0:51discussed about the basics of the uh
0:53balance scorecard uh what are those
0:55different four perspective related to
0:57customer related to stakeholder related
1:00to how we are learning how we are
1:01growing our internal processes how we
1:04can Implement how we can improve those
1:06processes so that we can tap all those
1:09performance indicators and we can
1:11improve that so uh we'll continue this
1:14discussion and uh uh we'll find out the
1:17balanced scorec card for uh supply chain
1:20we'll discuss about the quality delivery
1:22cost performance indices and then we'll
1:25see how we can measure the supply chain
1:27performance right different techniques
1:29and we'll end discussion with uh one
1:31case study right so already now we know
1:35for perspective so what are our
1:38financial results Financial result in
1:40terms of profit in terms of market share
1:43in terms of return on investment how
1:45much we are investing in all the areas
1:48in your warehousing keeping extra
1:49inventory whether we are getting those
1:51returns we are renovating innovating the
1:54products with our r& team whether that
1:56investment is getting uh we are getting
1:59the you know fruitful results or not so
2:02we'll measure in terms of financial uh
2:05performance right and internal business
2:08processes so machine productivity
2:10customer responses time machine
2:12productivity means how we can improve
2:14that maybe we'll come with the new
2:17technology or not if new technology how
2:20efficiently we can use the old
2:21technology and we can improve the
2:23overall performance improve and
2:26innovate uh how we can uh you know
2:30internally we can improve right our uh
2:33resources we can uh in that way we can
2:37Empower our in sources in that way so
2:39that we can you know utilize those
2:41skills to uh uh satisfy our customer
2:46with the quality with the delivery
2:48parameters and also we are cost
2:50efficient so clients so client
2:53satisfaction all the clients
2:55stakeholders uh involved in that value
2:58chain how we can make them uh satisfied
3:01so we'll quickly go for this balance
3:03scorecard approach and uh we'll see what
3:06can be the financial uh measures when we
3:09are talking about supply chain
3:10specifically so first is how we can
3:14decrease the cost right so there are so
3:17many different ways if you are you know
3:20negotiating on quantity with the
3:21supplier then also you can decrease the
3:23cost if you are automating your
3:25Warehouse you can decrease the handling
3:27and storage cost if you can Implement uh
3:31Point of Sales system where you are
3:33directly linked with the sales team you
3:35can imp you can minimize the inventory
3:37right so spending and cost of goods sold
3:41how you can anal analyze your spending
3:44you can do the spending analysis so how
3:47much your transportation is contributing
3:49in that how much your Logistics is
3:51contributing in that how much your
3:53manufacturing is contributing your raw
3:55material suppliers is contributing so
3:57that you can find out and then you can
3:59comp that okay your Logistics is
4:02contributing 14% but the industry
4:04average is 10% how we can improve by
4:07this 4% Gap right resource optimization
4:11again routing vehicle routing or
4:14Warehouse optimization manufacturing
4:16facility optimization payment terms
4:19financially uh how we can negotiate with
4:22our vendors that we'll make payment in
4:2330 days or 60 days or 90 days longer
4:26period you will get that means your
4:27negotiation power is high
4:30leveraged agreements if you have said
4:32that 90 days payment you can leverage on
4:35that period right you can extend the
4:37payment so for that period you maybe
4:39that cost that Financial uh cash you can
4:43use somewhere else supplier
4:46consolidation this also when you are you
4:48know uh maybe for one supplier you are
4:50ordering different components uh dealing
4:53with the same kind of your own metal if
4:55you are doing dealing with same supplier
4:57can supply the multiple products also
5:00and not so if only one component so then
5:02you can consolidate the order in large
5:04quantity so that on quantity you can
5:07negotiate you can find out the cheaper
5:09location and then competitive bidding
5:12then open competitive bidding can be
5:14done so whosoever is cost efficient
5:16quality efficient you can uh use that so
5:19this is financially how you can improve
5:22business processes sourcing methodology
5:24already we discussed about that vendor
5:27rating will help you to pick the best
5:29supply chain your stakeholder and then
5:31sourcing how much purchasing if you are
5:34talking about strategic
5:36sourcing longterm vendors you have
5:38developed so how you'll do the
5:40purchasing decision how frequently you
5:42will buy what will be the lot size right
5:44what is the lead time whether you are
5:46implementing just in time to cut down
5:48the inventory cost so then your
5:50strategic sourcing is required risk
5:53protection what if you are dealing with
5:55some kind of Uncertain market and then
5:59uh
6:00suddenly you need to phase out your
6:01product so what you will do with the uh
6:04inventory raw material inventory
6:06supplier allenes contract management
6:08Performance Management these are some of
6:10the internal business processes how you
6:12can handle with your stakeholder means
6:14all the processes you are doing or
6:17dealing with your stakeholders you need
6:19to uh improve that right decision making
6:22skills how Predictive Analytics big data
6:25analytics and those tools software you
6:27can use to predict uh your demand to
6:30predict Supply to predict the
6:32fluctuation not only in the internal
6:34environment in the uh in the external
6:37environment in the internal environment
6:38also you can use this like total
6:40predictive maintenance when a particular
6:42machine requires the maintenance before
6:44breakdown happens how we we can maintain
6:47that so that there should not be any
6:49breakdown no rejection should be
6:51produced right learning and growth team
6:54building we can do learning and growth
6:56means within all all the resources how
6:59we can
7:00uh develop those resources develop the
7:02skills so that maybe some sometime it
7:05happens during recession one of very
7:08beautiful example what infosis did like
7:11uh uh when all the industry during that
7:152008 recession when major it stakeholder
7:18they started firing their employees but
7:20what infosis did they retained all the
7:23emplo and deled their capabilities they
7:26they took it as the time for pulling up
7:29your soxes and whenever you you know
7:31again there will be market demand you
7:34can you know run in the more faster way
7:36right so that that will you know will
7:40help you to satisfy your employees your
7:42turnover rate you can man manage
7:45attrition rate you can manage right so
7:47the example I quoted that you you need
7:49to maintain if you need to maintain your
7:51employees for longer time you need to
7:54show them the proper career path
7:56development path their development
7:58should not saturate right then customers
8:01how we can satisfy customer with
8:03different features variety customer
8:06services how we can improve the quality
8:09prices whatever price they are asking in
8:11that price range whatever quality you
8:13can offer right so and after S Services
8:16your branding whether your customer is
8:19feeling comfortable you know when your
8:22customer is bearing that brand using
8:24that brand sometimes you are you know
8:26wearing very you know expensive watch
8:28then always you are showing that or you
8:30want you are carrying that you know that
8:32image that you are wearing Rolex or you
8:35are using that kind of stuff right High
8:38status product so that is attached with
8:40the customer performance so we'll go
8:42through financial
8:44perspective in supply chain all the kpis
8:48will which will help us to you know
8:49configure your uh Financial function so
8:53cost reduction talking about I have
8:55already discussed in the previous
8:57session where we are you know uh
8:59involved with the cost function your
9:02material acquisition handling storage
9:05Transportation manufacturing
9:07distribution all these functions are
9:10adding cost so how we can reduce the
9:13cost return on investment like if we are
9:16investing on something let's say uh we
9:19are investing on developing
9:21technological
9:22infrastructure right so that
9:24technological infrastructure it helping
9:26you to fetch more customers right if you
9:29are saying that Amazon today will
9:32announce that all the deliveries will be
9:34done in the same day that means
9:37technological implementation will be
9:39there and you need to fasten up your
9:41distribution network if you are doing
9:43that huge investment will be there even
9:45for sometimes if one person is carrying
9:49maybe more than 200 orders even
9:52sometimes 100 orders also they need to
9:54deliver right so that investment if you
9:56are doing whether you are fetching more
9:58customers more traffic is coming to your
10:00website then Revenue growth is happening
10:03if sales are increasing then it is fair
10:06enough you can go for the Improvement
10:08right second is client or customer
10:11perspective order fulfillment rate how
10:14quickly you are fulfilling the order
10:15customer satisfaction score feedback
10:18whether customers are giving you uh the
10:20high feedback or not or if you are
10:23getting lower feedback you need to
10:24prioritize those area where you are
10:26getting lower feedback very small
10:28example Let's uh imagine you order AC
10:33through uh flip cart Now flip cart gave
10:36you the best pricing option you are very
10:38happy you are getting the cash back also
10:41then they are giving you free
10:42installation services right this is what
10:45Flipkart could do maximum they did this
10:49now now they have to deliver this
10:51product within that time using the local
10:54retail
10:55partner that is also maybe they can
10:57ensure that within that delivery is done
11:00but who will do the installation the
11:02local technician who is coming from that
11:05if you are buying from Hitachi that
11:06technician will come if you are buying
11:08from bpool bpool technician will come so
11:11then your feedback is not only your
11:14feedback it is associated if delivery
11:17person or that installation technician
11:19is coming late not behaving properly
11:22with the customer you as the service
11:25provider will be rated maybe you did
11:27everything right but there you lacked
11:30and then you got lower feedback so then
11:32you need to it's not that you you will
11:35just say that that is not my you know uh
11:38area or jurisdiction area where I can
11:40control those things but then I will
11:42think about that player who can control
11:45the installation services also right so
11:48lead time how much time you are require
11:51uh you know taking to fulfill the order
11:54internal business process perspective uh
11:57talking about the Improvement of supply
11:59chain you can include kpis like cycle
12:02time how quickly you are completing the
12:04order how quickly if you are
12:06manufacturing how quickly you are
12:08changing over from one model to other
12:10model inventory turnover how much
12:12inventory you are keeping and how much
12:15how quickly you are selling that
12:17inventory in the market
12:19right supply chain flexibility how
12:22quickly your supply chain can adapt to
12:25the changes if any demand for new
12:27product variety or any Supply disruption
12:30is there any disaster happens any strike
12:33is there still your supply chain is
12:35resilient enough to you know obsorb all
12:38those uh disruptions within the supply
12:41chain and then you can still maintain
12:43the smooth Supply Innovation and
12:46Improvement so how you can ensure your
12:49kpis targeting continuous innovation
12:52Philips and you continuous innovation
12:55right Innovation and you that is the
12:57tagline for flips right so imply
13:00training and devopment Technology
13:01utilization Innovation rate how quickly
13:04you are innovating new products coming
13:06up with new products how quickly or what
13:10is the you know uh technology
13:12penetration rate how quickly you are
13:14implementing new technology if there is
13:17WMS warehouse management system whether
13:20you have implemented or not if we are
13:22talking about in Industry 4.0 supported
13:24system whether you are doing that or not
13:27right so how quickly you can
13:29improve and innovate so let's talk about
13:32this supply chain perspective uh uh this
13:36balance score card framework
13:38specifically with the procurement
13:40talking about procurement Financial
13:42measures will be how we can save
13:44cost that means we need to negotiate
13:47with the vendors how you can negotiate
13:50with the vendors when you are having
13:51more purchasing power then you are
13:53buying in bulk right so that means that
13:56purchasing power you can use to
13:58negotiate with the bend uh vendors to
14:01total cost of ownership you are
14:03calculating it's not only the raw
14:05material cost so how he is delivering
14:08storing in between that cost is also
14:11there what is the cost per unit or per
14:14transaction you can calculate and what
14:16was the procurement budget and whether
14:18you are hitting that budget as per the
14:20planned budget or you exceeded or you uh
14:25managed within under that budget right
14:27so that means you are performing better
14:30depending upon customer how many
14:32complaints are coming right customer
14:34which is which are directly related to
14:36your vendors right so let's say one
14:38component is not working properly so
14:41that means you bought TV or uh then you
14:45suddenly realize that your sound system
14:47is not working properly right so that
14:50that means from where you are ensuring
14:52that system so that resp that is the
14:54respons you need to do the byby analysis
14:56why that happened so then you will find
14:58out the quickly that this this is
15:01happening because of the problem in the
15:03component of sound system right internal
15:06customer set inspection we can use cross
15:09functional teams for selecting and
15:10evaluating suppliers we have already
15:13discussed in detail how we can select
15:15the vendors based on that any customer
15:17complaint is coming directly related to
15:20the vendor of that particular component
15:23so that is the responsibility of that
15:25vendor and we need to improve that with
15:27with collaboration with the vendor
15:29internal business processes like
15:33procurement procurement is how you are
15:35raising the purchase orders when you are
15:37sensing that there is you know the
15:40inventory has depleted up to that level
15:42you need to again replenish the
15:44inventory how quickly you can do that
15:47Canan production system you can
15:48Implement right so when you are raising
15:50the purchase order you need to keep in
15:52mind the quantity you are purchasing so
15:55that you can negotiate the price then
15:57you need to keep in mind the inventory
15:58also so you are one way you are
16:01negotiating the price of acquiring that
16:03material other way you are increasing
16:05the inventory cost right so average
16:08value of purchase order you can
16:10calculate learning and growth so how
16:13your stakeholders are learning and uh
16:17implementing certifications if you are
16:19talking about ISO certification quality
16:21certification whether they are ISO
16:23certified or not so it is important if
16:26you are claiming ISO certified your
16:28vendor should be first ISO certified
16:30because you are getting raw material
16:32from them right so then employee
16:35satisfaction and turnover these are the
16:37points we discussed in the balance score
16:39card how we can Implement balance
16:42scorecard in supply chain these are some
16:44of the steps Define your strategic
16:46objective first is you need to define
16:49the supply chain vision and your
16:52objective right if you're saying you are
16:54cost efficient then you need to stick to
16:57that if you're saying you are responsive
16:59you need to stick to that if you're
17:01saying that you are uh providing a
17:03variety of the products you need to
17:05stick that so if you are saying that we
17:08are covering the maximum pin locations
17:11you need to stick with the distribution
17:13strategies right develop specific Matrix
17:17once you have defined the strategy you
17:19need to develop the specific Matrix if
17:21if I'm saying I'm serving to all the PIN
17:25codes in in India that means I need to
17:29ensure I need to develop some specific
17:31matrics related to distribution Network
17:33how much lead time for particular pin
17:35code in rural area in urban area in s
17:38urban area in Metro city right so
17:41whenever you will say one day delivery
17:43you will keep in mind what are those
17:45location where I can ensure one day
17:46delivery that is one matric right so
17:49that means when you are coming up with
17:51the new strategies so you need to figure
17:54out whether that same strategy one day
17:56you can Implement in a rural area no
17:59because the demand you cannot
18:01consolidate in that way very fragmented
18:03demand is coming right so that you
18:05cannot ensure once you have DW The
18:07Matrix you need to collect the data so
18:10now you know lead time you are recording
18:12inventory cost you are recording
18:14Transportation cost per unit per
18:16kilometer you are recording or
18:18manufacturing cost per unit you are
18:19recording you need to record data today
18:23whatever you have produced you need to
18:25record the what is the cost total cost
18:28review and adjust then you need to make
18:31the informed decisions that these are
18:33some of the area where you need to
18:35Target so those areas which are
18:37contributing maximum to the you know
18:40cost you need to maybe these are some of
18:42the area which are contributing to the
18:44cost so leave those area first we need
18:46to tap these two areas maybe which are
18:49contributing around 60 to 70% again 8020
18:52rule you can Implement parto analysis
18:55you can do and then Foster collaboration
18:58anything you are implementing that will
19:00be implemented through your stakeholders
19:02so collaboration need to be ensured so
19:05quickly benefits of stake uh using
19:07balance
19:08scorecard holistic approach we are
19:11including all the functional units all
19:13the stakeholders strategic alignment
19:15whatever your strategy is you are
19:17aligning all functional units with your
19:20strategy embedded enhanced decision
19:22making because more informed decisions
19:25based on facts and figures and
19:27continuous Improvement because internal
19:30growing and learning and sustainability
19:34that parameters we are tapping here so
19:37under supply chain we'll discuss about
19:40the quality delivery and cost these are
19:43the main performance Index right which
19:45you need to tap so always we need to
19:48make the trade off what are the
19:50constraints right and what are the
19:53variables how we can deal with those
19:55it's not that any day you can make any
19:58promise
19:59every industry every player is working
20:01on some limitation some constraint some
20:04are limited by quality some are limited
20:06by capacity some are limited by variety
20:09some are limited by their R&D skills
20:11some are and they have their own USBS as
20:14well their strength area as well right
20:17so you need to Define where you are
20:19standing so quality performance indices
20:22will see and delivery and cost
20:25performance so quality performance
20:27percentage of rejection that means
20:30number of defects received and total
20:33number of items received so how much
20:36percentage 10%
20:38rejection that means this much rejection
20:41daily you are dealing with either you
20:43are talking about let's talk about the
20:45raw material you are getting so whatever
20:47you are using 10% is rejected without
20:50using that means those many defects are
20:53coming once you have produced that you
20:55shipped that in the market from Market
20:575% products are coming back because
21:00during shipment
21:02damaged right defects per million
21:05opportunities using we are do uh usually
21:07we are using this measure to implement
21:10Six Sigma where we are saying 3.4
21:12defects are allowed per million
21:15opportunity right so how we are
21:17calculating that number of defects found
21:20total number of item tested right so
21:23that is defects per million
21:25opportunity supplier rejection
21:27percentage number of rejection total
21:30number of suppliers that you need to
21:32find out what is the supplier rejection
21:34rate if your supplier rejection rate is
21:363% that means 3% of your suppliers
21:39whatever they are supplying usually you
21:41are you are rejecting those item not up
21:43to the mark As per quality but this is
21:46you need again you can compare with the
21:48best performance in Industry percentage
21:51nonn compliance number of non-compliance
21:54total number of observation right so if
21:57you say let's say you are dealing with
21:59the raw material
22:02quality so many Zero Hour rejection is
22:05coming that means whenever you start
22:07using the product you just inspected
22:10that and you uh just observe that there
22:15is something wrong with the product that
22:17means then you how you can improve that
22:20you started some compliance measure that
22:22they need your vendors need to send the
22:25QC reports whenever they are sending the
22:28lot that means they need to inspect the
22:30quality only then they can ship the
22:33lot now this is one measure you have
22:36picked but the how many vendors are
22:38complying to this QC report maybe all
22:42the vendors they started implementing
22:44but you received 10 Lots out of that
22:47only eight Lots you are getting the
22:50reports as two lots you did not receive
22:53the QC report of their outgoing quality
22:56control so that means that known company
22:58liance percentage non- compliance
23:00rectified so how many you are rectifying
23:03means you raise this complaint that this
23:06times out of 10 two lots we did not
23:09receive your outgoing quality report
23:12right so how quickly they are rectifying
23:15that that also you can measure next is
23:17delivery performance IND supplier on
23:20time delivery and in full delivery if
23:22I'm placing grocery items order I placed
23:26order for 50 items so 40 items you uh
23:31delivered in time and then rest of the
23:3410 items were not available that means
23:36that are not in full so this is you can
23:38calculate how many items are in full how
23:41many are placed you can find out the
23:43percentage delivery in full on time
23:45percentage delivery in full percentage
23:48delivery in time minus percentage
23:51rejected so you you delivered on time
23:55full quantity but then because of some
23:58defects out of 50 items five were
24:00returned back supplier lead time
24:03variability whatever you are saying
24:05three times is the delivery time plusus
24:07one day that means that is lead time you
24:10are looking for overall lead time actual
24:13delivery time required lead time this is
24:15overall lead time right percentage of
24:18shipment arriving in good condition how
24:20many shipments are arriving in good
24:22condition how many defective shipments
24:24are there that you can find out the
24:26average average delivery time so so sum
24:29of total number of period from dispatch
24:31to receive total number of shipment so
24:33these are the delivery related
24:35performance index you can calculate for
24:38the individual uh whatever you are
24:40recording cost performance
24:43index now you can record the cost
24:45performance also cost performance index
24:48whatever earned value whatever actual
24:50value actual value you said maybe 100
24:53and then the earned value is 100 that
24:55means one perfectly whatever your budget
24:58was exactly your project is going as per
25:00that right if it is greater than one
25:04your budget is your project is under
25:06budget that means cost efficiency is
25:10there 100 you can spend but you
25:14completed within 90 bucks only that
25:16means you are efficient but if you are
25:18spending extra this Factor will be more
25:20than one right so you can just quickly
25:22go through earned value is planned value
25:25into percentage complete and planned
25:27value is the authorized I budget
25:29assigned right that is planned value and
25:31percentage complete what percentage you
25:33have completed right and the actual cost
25:36is the total cost incurred for the
25:39actual work performed right so this is
25:41how you can find out the earned value
25:43divided by the actual
25:46value cost performance index so cost
25:50avoidance actual purchase price what was
25:52the actual purchase price and lowest
25:55coted purchase price so you invited the
25:57tenders what was the lowest price and
26:00then maybe you finalized you did not
26:03finalize the lowest one depending upon
26:05the quality delivery schedules you may
26:07pick the next lowest so then that will
26:09be the cost reduction what was the
26:11actual price you not you did not maybe
26:14the actual pricing maybe 100 rupees this
26:17lowest qu quoted price was 80 but you
26:20picked the vendor with 90 so this will
26:22be 100us 90 because 80 fuel pick maybe
26:27he was delivering little late so then
26:29you pick the other person right
26:31procurement Roi cost reduction Plus cost
26:35avoidance divided by cost of procurement
26:38operations right procurement cost as per
26:40percentage of sale so how much you are
26:43total selling what what is your
26:46procurement department is adding into
26:48that so if your procurement is adding
26:51maybe 30% cost so then you can see your
26:55procurement if you're including
26:56procurement of your raw material
26:57supplier ERS so right acquisition cost
27:00total cost of ownership so you can
27:02compare the other Industries somewhere
27:04maintaining 28% so you are 2% you know
27:09uh not cost efficient your competitors
27:11are 2% cost efficient than you so you
27:14need to you know negotiate better than
27:16with your players your
27:19partners how we can measure the supply
27:21chain performance some techniques
27:23quickly will go for inventory investment
27:26uh already we discussed about what are
27:28the different inventory we are
27:29maintaining calculation how we can
27:31manage the percentage of gross or net
27:34revenue right this can be measured as
27:37the percentage of gross or net revenue
27:39means what is the gross and how much
27:42inventory is adding into that always 10%
27:45inventory is adding into your gross
27:47right so that we we can calculate how we
27:49can optimize it by aligning our
27:52operation planning with the sales
27:54department sales and operation planning
27:57and then we we have some methods value
27:59stream mapping where we can delete all
28:01the non value adding activities and we
28:04can do the value stream mapping quick
28:06change over single minute exchange of
28:09die right how quickly we can change over
28:12from one model to other model canman
28:15system where we can use red green yellow
28:18canmen production system where we are
28:20using those bins how quickly as we are
28:23depleting the inventory how quickly we
28:25are replenishing the inventory in the
28:27bins that visual representation can be
28:30done inventory efficiency inventory
28:32turnover we are usually calculating what
28:35is the cost how quickly we are uh moving
28:39that inventory in the market right so
28:40you can Calculate analyed cost of goods
28:43sold and average inventory investment
28:46divided by measures how often inventory
28:49is replaced over the year right already
28:52we discussed about inventory returns
28:54days of Supply inventory investment into
28:57daily cost of goods sold divided by
29:00number of days needed to sell current
29:01inventory based on forecasted cost of
29:04goods sold right how you can optimize
29:07exclude all those excessive and obsolete
29:10inventory if today it is not required
29:12maybe required for after 60 days 90 days
29:15100 days then don't maintain inventory
29:17for that again these are some of the
29:19tools value stream mapping seven waste
29:21already we defined
29:23time uh Tim W we defined this s waste
29:28where transport extra transportation is
29:30waste extra inventory is waste extra
29:33motion movement handling of product from
29:35here to there is waste then your waiting
29:38time is waste over production of
29:41something is waste over processing is
29:44waste and defects you are producing is
29:46waste obviously so Canin system can be
29:50implemented to enhance the Jus in time
29:52on time delivery performance how we can
29:55measure how many times your orders are
29:57on time time and maybe you can measure
30:00how many times your orders are late so
30:02you can Implement that lean Six Sigma
30:05right so uh value steam mapping is
30:08another point where you can find out
30:10where your uh deliveries are delayed or
30:13Convent system where you can Implement
30:15just in time whenever the demand is
30:17coming from the customer you can quickly
30:19replenish the inventories and the start
30:21the manufacturing process right
30:24forecasting
30:25accuracy uh usually we are calcul let's
30:28say this is the actual demand this is
30:30the forecaster demand so if you
30:32measuring the average deviation will be
30:35if you are measuring this whatever is
30:36the uh deviation is the error in the
30:39forecasting right so let's say if this
30:42is the demand one time you predicted
30:45five extra other time you predicted five
30:47less if I'll add this this will be zero
30:50so your deviation will show zero that's
30:52why we are calculating average absolute
30:54deviation where we are considering the
30:56magnitude only one Time 5 extra 1 time
30:59five less this will be we will take only
31:01the magnitude that means total 10 is the
31:04deviation root means square error actual
31:07demand forecaster demand you will square
31:11right and maybe you will sum up all the
31:13items divided by n and that root being
31:15Square rror this is how you can find
31:17this this in forecasting we'll discuss
31:20in detail so whatever actual demand is
31:23there whatever forecaster demand any
31:25difference in that is the deviation
31:27simple concept how we can improve that
31:29if we are having sales and operation
31:31planning whatever you are selling sales
31:33department is directly linked with the
31:35manufacturing Department right so we can
31:37do time series analysis we can go for
31:40regression analysis where we can predict
31:42our demand in better way
31:44right lead time how we can calculate the
31:48lead time lead time is whatever activity
31:51you are doing when you are starting when
31:53you are ending so if you are doing any
31:55non value adding activity in that you
31:58need to remove that which is not
32:00required and still you are doing so that
32:02you can do that quick change over how
32:04quickly you can change over from one uh
32:07model to other model on the same
32:08production line or maybe in molding
32:11machine you are putting one mold or how
32:14quickly you are changing the other mold
32:16right 5S approach will help you to
32:20implement this we talked about
32:21[Music]
32:23C Japanese term where we talked about we
32:26need to sort the things we need to set
32:30in
32:31order we need to shine the workplace we
32:35need to standardize the process so that
32:38the efficiency can be managed and we
32:40need to sustain whatever we are
32:43implementing right unplanned orders so
32:46unplanned order usually that you did not
32:48forecast it and that are coming you need
32:50to handle those orders but these orders
32:52are actually you know carrying more cost
32:55because you did not plan for that so if
32:58that how you can improve those if you
33:00can minimize the unplanned orders how
33:02you can minimize if you are having
33:04accurate demand prediction right so that
33:07standard operating procedure you can
33:10Implement you can effectively implement
33:12this sales and you know operation
33:15planning and customer collaboration
33:17where you can record what is going to be
33:19the demand from the customer end
33:21schedule change again if there is any
33:25change that change can be because of
33:27shortage in raw material equipment is
33:29not working let us produce something
33:31else M power is not there let us use man
33:35power and use that facility and produce
33:37something else right impacting
33:39efficiency this because when we are
33:41changing obviously the efficiency will
33:43be lesser in that way so how we can
33:46ensure less schedule change should be
33:49there we should ensure total productive
33:51maintenance where the equipment should
33:54not be down right and then we can
33:56Implement 5S housekeeping approach we
33:59can use mistake proofing pooke system or
34:03we can use jidoka system already we
34:05discussed when we discussed about the
34:07quality tools how we can Implement these
34:10kind of you know uh lean tools when uh
34:14those will be error free overdue backlog
34:17so when your backlog is there why
34:19backlog will be there because these are
34:22down your Manpower is not there your raw
34:24material supply is not there your
34:26equipments are not working properly
34:27properly so then your back order will be
34:30there so that you need to maintain using
34:33these Technologies again same you can
34:35Implement material availability how many
34:38time material is available in your
34:42storage room you are producing something
34:44some and then suddenly you are out of
34:46stock you you you are not having raw
34:48material supplier because the person who
34:50supplied the raw vendor who supplied the
34:52raw material is rejected by your iqc
34:55team now your what you will do with that
34:58Manpower with the equipment with
34:59facility because that will be sitting
35:01idle right so how you can ensure that
35:04again same tools you can Implement at
35:06the vendor location as well so that they
35:09should have plan maintenance they should
35:12ensure the minimum breakdown of the uh
35:15their machinery and uh uh error should
35:18be avoided excess and obsolete inventory
35:22should not be there that that will only
35:24happen when you are keeping excess
35:26inventory when you are away from the
35:27customer you are not able to predict
35:29your demand accurately and usually this
35:32happens this here we cannot control
35:34because new products you product uh
35:36product you are offering you are never
35:38sure about the supply you are never sure
35:40about the demand sometime maybe it will
35:42be taken positively sometime negatively
35:45so then how you will you need to ensure
35:47the availability also so that you will
35:49maintain the inventory customer customer
35:52service Target what is your customer
35:54service if you are saying that your
35:56delivery is delayed that that is one
35:58performance measure you need to do the
36:00root cause it's not that your delivery
36:02partner did the mistake delivery partner
36:05you gave him 4 hours to deliver that he
36:08did within 4 hours maybe the delivery
36:12career partner who is supposed to pick
36:14the order from the seller within 4 hours
36:17he did not do that in 4 hours that's why
36:20the overall that ripple effect was there
36:23and the delivery was delayed so you need
36:25to do the root cause analysis why that
36:27happened perfect order when you are
36:29filling all the demand on time all are
36:33whatever you are delivering are accurate
36:35your order is recorded accurately so
36:38then it is perfect order called perfect
36:40order so that mistake proofing should be
36:42there and standardize the work so that
36:45efficiency can be maintained what is the
36:47gross profit margin Revenue Minus cost
36:50of goods sold right so you can Implement
36:54lean Six Sigma project balance scorecard
36:57to improve the overall the efficiency as
37:00well as the your productivity also
37:03productivity will be improved your cost
37:05will be reduced your total uh profit
37:08will increase return on asset if all the
37:11assets how much return is there how
37:14efficiently you are using if one
37:16production line you are not using 24
37:18hours and it is made to you know uh to
37:22use 24 hours so then somewhere your
37:26assets are under utilized right gross
37:30margin return on investment already we
37:32discussed about if you are implementing
37:33some technology for the betterment then
37:36what is the return on that technology
37:38that also you need to record this is one
37:40quick case we'll go through so ship Bob
37:43is a leading technology enabled third
37:46party Logistics provider and they are
37:49optimizing their supply chain operations
37:51and they have implemented the balance
37:53scorecard approach right and we'll see
37:56how they have picked different kpis
37:59perfect order rate whatever we are
38:01delivering should be in complete
38:02quantity quality there should not be any
38:06return High perfect order we need to
38:08maintain this is one criteria they
38:10picked supply chain cost what is the
38:13total cost right supply chain cost
38:15whether you are talking about the
38:16warehousing cost Transportation cost
38:18last mile delivery cost you need to
38:20reduce that right so they developed the
38:23uh mattress where you can improve they
38:27went for you know updating their
38:28warehouses where they implemented
38:30warehouse management system they
38:32optimize labor and storage and
38:34transportation cost as well order
38:37fulfill rate how we can maximize this so
38:41that we should not say no to our
38:43customer that will only happen when you
38:45are implementing Predictive Analytics
38:47your software to you know address the
38:50demand accurately you should not be
38:52stock out you should not be maintaining
38:54excess inventory what lead time and then
38:57supplier relationship so lead time only
39:00you can minimize when your supplier are
39:02sitting very next to you so that means
39:04whenever it is required you can
39:05Implement that cash toach cycle if lead
39:08time is minimized let's say if you're
39:10taking 5 days to deliver the product
39:12obviously you will get the payment after
39:145 days if you are delivering the product
39:16within one day you will generate cash in
39:19one day right so that means quickly you
39:21are generating the cash out of selling
39:23your store so this we can conclude that
39:27this uh your balance scorecard is a
39:30comprehensive framework where not only
39:32the financial measures you can track but
39:34all the non Financial measures but not
39:36only with one Department you can include
39:39all the Departments whether your value
39:41adding activities or non value adding
39:43departments but all are working towards
39:45one single strategy right and that that
39:49strategy is hitting your vision so you
39:52need to tap all those kpis develop those
39:55kpis measure those put the right target
39:58achievable Target and then you can take
40:01the initiatives whatever initiatives are
40:03required so these are the references you
40:06can go through so that's it thank you
40:08very much

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