Strategies for Manufacturing and Services (SMS)

Topics covered
1. Individual Assignment (SARDA FARMS)
2. Puretone Indian companies
3. Summary: Foreign Affairs Article - Can Chinas companies conquer the
world?
4. Summary: Video - Move Over, Big Data! How Small Simple Models Can
Yield Big Insights by Dr. Larson
5. Bonus question or example

Individual Assignment (SARDA FARMS)

ABC Institute
Dated: 26th Apr16
The Managing Director,
Sarda Farms
Sub: Report on increasing scope of production and sales of milk taking challenges and
dependencies into consideration.
Dear Sir/Madam,
We would first like to congratulate you as Sarda Farms is one of the pioneers in turning dairy
sector to an organized one in India. We have observed that Sarda Farms provides one of the
best quality milk with necessary nutrients and fats by managing an effective value chain starting
from cow to the consumer facilitated by state of art technological advances and you are doing
continual improvement.
Kindly find the detailed report enclosed here.

Sarda Farms
Operations

Regards,
XYZ

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Puretone Indian companies examples

Aggregator
Category Leader

Yatra
LIC

Peppertap
Caf Coffee Day

Consolidator

ONGC

Hindalco Industries
(branch of Aditya Birla
Group)

Customizer

Zoomin (single
source online
photo service)

Lenskart

Disintermediator

Innovator
Platform Provider

Patanjali
Caf Coffee
Day
Flipkart
Swasti Agro
and
Bioproducts
Private Limited
BSE, NSE

Premium Player
Regulation Navigator

Oberoi Hotels,
Mayfair
BHEL, NTPC

Experience Provider
Fast Follower

Reputation Player
Risk Absorber

Solution Provider
Value Player

Titan, Tata
LIC
Bharat
Electronics,
TVS
Patanjali

Future
Group

Snapdeal

TCI

DTDC, Transport
Corporation of India
(TCI), Gateway
Distriparks

Quicker

ISRO

National
Dairy
Research
Institute

Jaypee
SBI

TCS
Indigo

Big Bazaar

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Summary: Foreign Affairs Article - Can Chinas companies conquer the world?
Is China going to overtake US despite its economic struggles?

Economic power is closely related to business power

Most analysts predicted before Chinas slowdown that Chinas GDP is likely to surpass
USs however not before 2028
China is worlds largest market for hundreds of products from cars to power stations to
diapers
Its foreign exchange reserve: over $3 trillion
Much of Asia, Africa, and Latin America now depend on China economically and
politically.
China is the larger trading partner with 124 countries out of 180 countries that trade
with both US and China.
It has low cost manufacturers
Its business will have to learn to excel in the competitive capital goods and high-tech
sectors (foreign multinationals are still dominating).
It is unlikely to perform well in second generation sectors

Now,

25% of china exports consist of capital goods and high-tech products.

Chinese governments trillion-dollar One Belt, One Road strategy aims to cover
Eurasia with Chinese built roads. This is an additional advantage to producers far from
home.
China has downstream oriented capability unlike western multinationals that focus on
upstream.
Avoiding industrial imports, learning to manufacture
Developing innovation and entrepreneurship
Chinese firms will have to develop their own versions if they hope to challenge industrial
leaders

Roadmap:

Drive Made in China 2025, to transform China into an innovative and environmentally
responsible world manufacturing power within ten years.
o Chinas spending on R&D may surpass USs in 10 years
o Chinese researchers papers are gaining more international respect
o However, mostly Chinese STEM students stay back in US

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Focusing on investment in Foreign markets

o Initially were on oil feeds, mines, etc.
o Now, purchasing or turning around struggling factories
o China is largest foreign investor in debt default countries unlike Western
multinationals that invest in high credit rated companies.
Developing more Innovation and Entrepreneurial Hubs in Shenzhen and Beijing

Investment
in Foreign
Markets

Made in
China

Building
Innovation
Hubs

Economic and Business Power

Chinese business power has different but also strong foundations, such as below leads
to a shift in the worlds center of economic gravity toward Asia, and a massive domestic
market:
o farsighted policies favoring investment over consumption,
o government encouragement of foreign investment to jump-start

Future of China and US are not fixed since both have experienced remarkable adaptability to
excel.

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Summary: Video - Move Over, Big Data! How Small Simple Models Can Yield
Big Insights by Dr. Larson
As the title suggests, the video by Dr. Richard C. Larson guides over how to best utilize big data
available to us for everything, for analysis, to make and execute good strategies.
It is not just copious data that is going to tell us what to do to improve? what to do to grow or
strengthen your business? but, how effectively big data is comprehended and analyzed. Thats
why Mr. Larson suggests moving over big data and understanding a simple model first to yield
insights from big data:

Do prior analysis
Focus attention and strategy to the point
Think about strategy before going to data
See small models and find analogy with functions in big data and form strategy

How is this going to help?

There is flaw of averages: If we going to deal with lots of data, averages will be important but
average is not constant and describes all. Rather take the distribution around average, so look
at the median and mode too.
For instance, average work experience in EMBA batch 2015-16 is 6 yrs, where it actually varies
from 3 16 yrs of experience.
There is selection bias due to which averages may differ. Bias can be found either by looking
from inside or by looking from outside (top-view). Same way, there are chances that we select
wrong dataset from the ocean of big data. So, its better to look at the top view first.
Besides this, same average value can be interpreted differently. For example, say, Ro is the
average no. of infections created by newly infected person when almost everyone is susceptible
to disease. Considering Ro=2.0, then there are 2 possibilities:
Every infection generates 2 more
New infection has a 50% chance of generating 4 new infections and 50% chance of
generating none.
Scenarios play differently over time i.e. average can have different distributions. It may have
data values close to each other or may have outliers (rare events that change history eg: Richter
>= 9 earthquake), which cant be clipped off since they contain major information for analysis.

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One more average is based on dimensionality arguments such as mean travel distance by police
in a city is directly proportional to square root of area covered and inversely to square root of
police cars#. This is called square root law.
That is, for analyzing big data, find the relationship in small and then
square them to get the actual data.
Square Root Law is a better way of thinking than averages since it
divides the data.

Along with this, next concept is of Queues. There are queues everywhere, how to analyze it?
Through Littles Law:
Where,
L time average no. of customers in the system (both in queue and in service)
avg rate of arrival of customers in the system
W mean time spent by a customer in the system, both in queue and in service

This law works everywhere, not just in queues, except in steady state.
For instance, finding annual rate of new hires of assistant professors in a university:
L can be tenure track faculty members, will be avg no. of new hires and W will be mean
commitment of years.
Averages in Queue:
Performances degrade as the arrival rate increases or mean service time increases.
Performance degrades as the variance of time between arrivals increases or variance of
service time increases.
It is important to handle queues and provide optimum service level since queues are
everywhere and that is the waiting time.
Queue Notation: M/M/K
M memory-less input process Poisson process
M memory-less service time exponential probability density function
K no. of servers

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As the server busy time reaches 100%, queue

explodes. Increase the no. of servers and
overcome the elbow effect. Its very necessary
to dive into big data with imperial knowledge.
Big Data Analysis tells us when to increase
servers using small models mostly, Queue
Inference Engine. For instance, bank manager
can find how many ATM machines should be
made available based factors such as no. of
transactions per day, etc.
Models have been developed to help managers understand and make better decisions
concerning the operations of waiting lines (queue) and the body of knowledge dealing with
waiting lines is called queuing theory.
In some instances, the organization providing the service also employs the units waiting for the
service. For example, consider the case of a company that owns and operates the trucks used
to deliver goods to and from its manufacturing plant. In addition to the costs associated with
the trucks waiting to be loaded or unloaded, the firm also pays the wages of the truck loaders
and unloaders who operate the service channel. In this case, the cost of having the trucks to
wait and the cost of operating the service channel are direct expenses to the firm. An economic
analysis of the waiting line system is highly recommended for these types of situations.
Through this video, managers and policymakers learnt how simple mathematical models of
systems can improve intuition and lead to better decisions. Covered topics:
Flaws of averageswhat they are and how to avoid them
Square root lawshow to apply them to locating facilities and more
Singularitieswhy and how managers of service systems must schedule idle time for
servers or face huge waiting lines (aka the "elbow effect")
Going viralhow a major demography parameter can apply to exponential
explosiveness in many business sectors
Lateral thinkingand how it can sometimes make a problem go away.
Learn to cut to the chase, see the big picture, and stay out of the weeds! Dr. Larson

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Bonus question or example

When should an organization go for Product Postponement?

When goal is to improve profitability by matching supply with demand in a better way

Reactive
levers

Proactive
Methods

Postponement
Substitution
Specialization
Centralization

Reduce
Supply and
demand
variability

Reduction of:
demand variability
delivery time
supply variability
supply time

Match
Supply and
Demand

Improve
Profitability

When benefits outweigh incremental cost of implementing postponement

Cost

Benefits

For example, Hewlett Packard postponed the customization of printer until it reaches the
geographic area where the demand was coming from and until orders are more certain. Since,
in this way, the plant could send generic printers to the DCs and they could be customized there
for the local markets. This allowed HP to take advantage of inventory pooling at the DC level
which dramatically cut inventory. Implementing this type of supply chain is not easy because it
takes coordination and investment, but the payoffs can be quite large.

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