OPSESSION
Volume 2|Issue 2
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Cover Story: Apple’s Supply Chain Management
Opium-The creative side of Operations Management
Opsession
Around the world with Operations and Supply Chain Management
July Issue This is the second issue, volume two of Opsession, the X-Ops newsletter. The monthly newsletter was introduced last year by X-Ops with the intention of covering all the activities and events that took place during the span of a month
Xavier Institute of Management, Bhubaneswar Volume#2
OPSESSION
Volume 2|Issue 2
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Around the world with Operations and Supply Chain Management
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mazon wants No-Fly Buffer Zone for Drone Operations: The online retail mammoth ‘Amazon’ seeks a chunk of free space for efficient delivery of its goods by commercial drones. Amazon Prime Air project vice president Gur Kimchi promulgated the idea for how they would like to divide the sky for different types of flying machine, with a space ranging from 200 to 400 feet from the ground reserved to keep them safe from other aircrafts. This model of sUAS (small Unmanned Aerial Systems) would require certain technical standards specified in order to qualify to enter the commercial drone area having their own traffic control systems. Amazon came up with this idea in late 2013 to airlift small parcels and deliver them to its customers in less than 30minutes after the order was placed. It disagrees with the FAA’s (Federal Aviation Administration) claim that flying drones beyond their operators’ line of sight is a major safety concern. Due to this conflict, it has gone to other countries for flight-testing its technology. Connected smart ships: The ocean container carrier industry has been lately facing the issue of overcapacity, but in order to address it Hyundai Heavy
Industries – one of the world’s largest shipbuilders – and Accenture are collaborating to design a ‘connected smart ship’. It will not only enable the carriers to manage their fleets in a better way but also the application of digital technologies will help in achieving potential operational savings.
With a readily available stream of real time information on various aspects of Operations, Cisco believes the warehouse of future will help them achieve automation and integration across the supply chain but not necessarily automated material handling.
This technology will apply real-time analytics to new and historical fleet data to enhance data visualization. It will enable ship owners to monitor their vessels status and condition in real-time to make data-driven decisions that support more efficient operations. Realtime alerts and warnings, predictive maintenance and more efficient scheduling are expected to be included in the services.
Alibaba plans to take logistics and ecommerce to a new level: In the early period of July, Alibaba came up with two major plans to invest more in ecommerce industry and logistics; the first being the vision to help Mei.com attract a huge number of customers through providing a variety of luxury goods by investing more than $100 million in it.
Cisco’s future Warehouse: Cisco is one of the companies that provide the hardware, software and systems that connect to the internet, and hence it is now focusing on the Internet of Things, or IoT. According to this idea, all of the machines, equipment, appliances, gadgets and things that we use in our daily lives and business will be connected to the internet. IoT is not just connecting things, it’s more about connecting things, people, processes and data in a way that’s nore usable and useful.
Alibaba also envisions investing a sum of more than $200 million into Singapore post and a subsidiary company in order to increase the efficiency of e-commerce logistics on a broader level across the Asia Pacific region. Cummins eyes operational excellence with new global logistics hub at Singapore: Cummins has invested USD 5.4 million to open its new global logistics hub at Singapore. It becomes its eighth master distribution across the globe after US, Mexico, Brazil, India, Belgium and China. With this new facility it aims to serve customers in the markets of US, Europe, India, China and the regions of northeast and southeast Asia. Along with the installation of several operational safety measures, it has adopted a new warehouse management system and barcode technology to control the material flow. With a new smart slotting strategy in addition to the increased facility height has also helped it in boosting storage space utilization by 30%. Overall, Cummins expects a 20% growth in productivity, faster order fulfillment time apart from operational cost savings.
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Apple’s Supply Chain Management pple, the bellwether for innovation, sold 10 million iPhones during the first weekend of the release. The question is how do they manage to do it every single release? The brand recognition and their strong and loyal customer base might be the primary reason. However, one aspect of the company that many aren’t aware of is Apple’s supply chain. Being one of the most efficient systems in the world, valuable lessons can be learned from the company’s supply chain processes, a supply chain ranked by Gartner as the number one in the world, for three years in a row.
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BRIEFLY UNLIKE OTHER MANUFACTURERS, WHO WOULD HAVE BEEN IN DOLDRUMS AT LOSS OF SUCH A CRITICAL COMPONENT, APPLE QUICKLY SWITCHED DESIGNS BACK TO CORNING’S GORILLA GLASS, THE MARKET LEADER Supply Chain Matters has often praised Apple’s supply chain capabilities, for its aspects of product and supplier innovation and overall agility as well as enhancing product margins.
their suppliers generate are grounded in the truth. Foreseeing sales levels accurately and not having excess inventory is absolutely crucial in the computer industry, especially when new products quickly cannibalize the old. Outsourcing Apple's decision to outsource much of its manufacturing to China where assembling is done and the reinvention of products is carried out at a much faster rate than if they had used US factories. From there products are shipped directly to consumers (via UPS/Fedex) who bought from Apple's Online Store. For distribution channels like retail stores and other distributors, Apple keeps products at Elk Grove, California (where central warehouse and call center are located) and ships products from there. At the end of product's life, customer can send products back to nearest Apple Stores or dedicated recycling facilities. Outsourcing can create supply chain problems however, but evidences show that outsourcing has allowed Apple to maintain their status as one of the world's leading companies.
Inventory Management Tim Cook transformed and ensured that the whole supply chain was a closed ecosystem giving Apple, Inc. maximum control over almost every aspect keeping in tune with the Steve Jobs mentality. Tim Cook believed that when it comes to technology like smartphones, tablets and laptops, inventory deprecates quickly, he had said "You kind of want to manage it like you're in the dairy business. If it gets past its freshness date, you have a problem." By using inventory tracking mechanisms, Apple squeezed its suppliers by making sure that the quotes
Focused Supply chain Tim Cook reduced the number of Apple's key suppliers from 100 to 24, asked them to cut better deals to keep the business, closed 10 out of 19 Apple warehouses, cut inventory from one month's to worth to 6 days. By September 1999, he managed to bring down this down further to 2 days’ worth of inventory. The production process for making an Apple computer was reduced from 4 to 2 months. This cost-cutting saved lot of money of Apple. Apple’s supply chain can be differentiated from other technology producers by fact that Apple offers only
a small variety of products. Steve Jobs reduced the number of devices made by Apple, from 350 products offered before 1998 to 10. The small variety of products having many commonalities, allows for great precision and optimization of the supply chain. However, this strategy is not appropriate for all companies. Forging strategic supplier relationships When new features are added they require new components, technology, manufacturing capability, and suppliers. In the iPhone 6 was the sapphire screen. However, Apple’s attempt to corner the market for sapphire screens backfired when the supplier, GTAT, declared bankruptcy. Apple learnt its lesson and now keeps its supplier closer. Apple negotiates terms with suppliers to the benefit of Apple’s financial structure. For supplier dealing with Apple is like hitting jackpot. Unfortunately for Apple, their investment in GTAT failed, and the iPhone 6 does not include sapphire screens. Unlike other manufacturers, who would have been in doldrums at loss of such a critical component, Apple quickly switched designs back to Corning’s Gorilla Glass, the market leader with proven manufacturing abilities. Apple’s design for manufacturing flexibility gives them another tool in supplier negotiations; agree to their terms, or you can be replaced. Apple’s launch planning’s extreme secrecy attached gives it edge over others. Apple places electronic monitors in some boxes of components to track them from Apple’s headquarters in Cupertino. The goal is to discourage leaks and ensure customer delight and surprise when the products hit the market. Forging strategic supplier relationships When new features are added they require new components, technology, manufacturing capability, and suppliers.
OPSESSION | Volume 2 | Issue 2 In the iPhone 6 was the sapphire screen. However, Apple’s attempt to corner the market for sapphire screens backfired when the supplier, GTAT, declared bankruptcy. Apple learnt its lesson and now keeps its supplier closer. Apple negotiates terms with suppliers to the benefit of Apple’s financial structure. For supplier dealing with Apple is like hitting jackpot. Unfortunately for Apple, their investment in GTAT failed, and the iPhone 6 does not include sapphire screens Unlike other manufacturers, who would have been in doldrums at loss of such a critical component, Apple quickly switched designs back to Corning’s Gorilla Glass, the market leader with proven manufacturing abilities. Apple’s design for manufacturing flexibility gives them another tool in supplier negotiations; agree to their terms, or you can be replaced. Apple’s launch planning’s extreme secrecy attached gives it edge over others. Apple places electronic monitors in some boxes of components to track them from Apple’s headquarters in Cupertino. The goal is to discourage leaks and ensure customer delight and surprise when the products hit the market.
4 Challenges on the road ahead Apple has recorded 92 percent of the total operating income from the world’s top smartphone makers, which was an increase of 65 percent from 2014. According to this report, the combination of Apple and Samsung accounted for more than 100 percent of industry profits since other makers broke even or lost money. Even though Apple sells fewer than 20 percent of total volume, yet it manages to garner the highest average prices and occupy the high end of the smartphone market is a serious achievement. With the launch of new products like the Apple Watch, the company will be sourcing new materials or parts Often, because suppliers are inexperienced working with that particular material or part, constraints appear at some point in the supply chain. If they are unable to fulfil orders at the capacity and speed that Apple needs, manufacturing could slow and create delays. Leveraging supplier relationship technology can help Apple keep tabs on the production and yield rates, delivery performance, compliance factors and the unique risks that each supplier may face. Sourcing new parts and materials needs suppliers to train their employees on how to handle them. Without proper
training and development, the supply chain team may see several delays in production Apple has done a tremendous job in managing its supply chain and making it the best in the world. With new products with varied technology being launched in the market and competitors bracing themselves to show case their viability in the market Apple has to keep up to its reputation by innovating new strategies and keeping itself ahead of the competition. Sources:
https://www.linkedin.com/pulse /20140910071638-67677916what-makes-walmart-andapple-supply-chain-leaders
http://www.theferrarigroup.co m/supply-chainmatters/category/supply-chainstrategy/
http://www.quora.com/Howprecisely-did-Tim-Cook-fixApples-broken-supply-chain
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Opium- the creative side of Operations Management -Ops, the operations committee of XIMB, the premier business institute of eastern India aims to increase the awareness, interest, and knowledge of students in Operations Management beyond classroom studies at XIMB. X-Ops takes care of educating students about the vital role of operations management in not only manufacturing industry but also in service as well as e-commerce and hospitality industries.
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X-ops aims at bringing out the best in the students through the various competitions it conducts. The entire calendar of X-Ops is filled with exciting events like Ashwamedh – a business conclave, Business simulation events like Aarohan and Nirnay, live projects and quizzes like Opsie-V and Burnout to name a few. All these events have helped X-Ops in its endeavour for getting the student community at XIMB to know the importance of Operations Management and the role it plays in enhancing the business acumen of budding managers. This year the vibrant team of X-Ops decided to welcome the new batch of students at XIMB with an exclusive competition for the 1st year students that not only gets them acquainted with X-Ops but also boost their interest in the field of Operations Management. Thus was born this exciting new event “Opium”, which is the brain child of the X-Ops core team of 2015-16. Opium is an ‘out of the box’ article writing competition that aims at exploring the creative side of the budding managers where they are to write an article about their passion, be it dancing, movies, painting, basketball but with a twist of "Operations Management" Opium gives us an insight of how our lifestyle and methods are closely linked to operations, supply, demand etc. It motivates the students to think beyond their perceptions and add a bit of operational twist to events. It provides ample opportunity to participant to fully engulf into the crazy side of themselves and create a unique piece of article.
Opium helps to think out of the box and it encourages the students to present their story to the world with a garnish of the basic Operations Management knowledge they have. It not only aims at bringing forth the creative geniuses but also imbibe the importance of Operations Management from the onset of their management career. This year Opium event was a great success. Held in the month of July, we got to see many exciting entries by the students and their excellent efforts of depicting their passion with a blend of Operations Management concepts like Supply chain Management, Total quality Management etc. As per the rules of the event, each student could submit an article and a winner would be chosen from the lot based on the creativity and innovativeness of their writing. It was a tough job for the organizing team to evaluate such brilliant entries and choose a winner but nevertheless they had great fun getting to go through all the creative entries. The winner of this maiden edition of Opium was Mr. Amit Kumar from Business Management (1st year).The prize money for the event was cash of Rs 500 along with a certificate. The event was a great success due to the enthusiastic participation and the relentless efforts by the organizing team of X-Ops. The X-Ops team looks forward to conduct many such exciting and fun events in the future.
XIMB Management Factory XIMB MANAGEMENT FACTORY
(Winning entry for Opium)
This is an article to show the power of OPERATIONS MANAGEMENT. Let us see how operations management helps in converting a ‘Raw Material’ (a tech guy is a raw material for a management institute) into a ‘Good’ to sell (when factory sells its product “a managercum-tech guy”) to a consumer (a company). A tech guy is highly ‘Under-utilized’ in a technological institute. However, he/she is ‘Overutilized’ in a B-school. The ‘lead time’ for a B-school is 2 years. At the time of start of academic year the institute has huge ‘Stock’ (around 600+). Every student is supposed to do ‘Overtime’ here. ‘Quality control & Insurance’ of every product is done with the help of exams. ‘Total Quality Management’ continues for whole 2 years. ‘Operational targets’ are set for every product for duration of 3 months i.e. every trimester. ‘Flow/Mass Production’ is followed i.e. a continuous movement of items through each stage of production is there with the help of SIP’s, PPO’s, PPI’s and Final Placements. Every B-school performs ‘Batch Production’ to meet the needs of various consumers. XIMB always try to create ‘Quality Product’ benchmarking against ‘Quality Standards’. Every B-school ‘Outsources’ Summer Training after 1 year for every yet-to-be-product. If we compare XIMB with the best Bschool in the country, ‘Labor Productivity’ is highest in IIM-A according to previous year ‘Inventories’ of various B-schools, whereas ‘Unit Labor’ cost is almost same in IIM-A and XIMB. XIMB is ‘Fully-utilizing’ it’s ‘Capacity’ (a batch size with increased no. of seats). The institute gets to know about the ‘After-sales-service’ of its product next year when same company consumes less or more products depending upon the product quality. Amit Kumar
UM15189
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Volume 2|Issue 2
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EDITORIAL TEAM
EDITOR:
ABINASH MALLICK
DESIGN:
ABHINEET SUDHENDRA
CONTENT:
ANUJA VERMA ASHUTOSH MISHRA RAKSHA ARYA SAMPAT PADHI SONALI SUKLA SUBHASHISH PANDA SWETA DAS
Opsession Monthly
XIM, Bhubaneswar