MB0044_Production and Operations

5/20/2018 MB0044_Production and Operations

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ASSIGNMENT

DRIVE WINTER 2013PROGRAM MBADS/ MBAFLEX/ MBAHCSN3/ MBAN2/ PGDBAN2

SEMESTER II

SUBJECT CODE & NAME MB 0044 - PRODUCTION AND OPERATIONMANAGEMENT

BK ID B1627

CREDIT & MARKS 4 CREDITS , 60 MARKS

Q.NoCriteria Marks Total Marks1 What is value engineering? List the main benefits of value engineering?

A Definition and explanation of Value Engineering(VE)

Definition

Example/s

Where is it used?

Why is it used?

How is it helps the organisation?

Listing of the main benefits(any four):

Cost reduction

Overall cost consciousness

Culture of effecting savings acrossorganisations

Streamlining of administration

Development of reliable suppliers

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2 Case study: SABMiller revamps supply chain management

SABMilller, the $24bn global brewing giant, is revamping its supply chain management system to

reduce stock-outs caused by an increasingly complex and hard to predict market.

The firm is developing and testing the new system in South Africa with an eye on rolling it out to

group companies worldwide, says SABMiller programme manager Rudi van Schoor.

The trigger for the revamp came when the company's customers ran out of stocks of popular

SABMiller brands during peak periods in two consecutive years, 2007 and 2008. The shortfall on

some brands was as high as 22%. "That had a direct impact on the bottom line," Van Schoor

says.

Given SABMiller's ambition to be the world's most efficient producer, such a gap was never going

to be tolerated. But instead of addressing the symptom, it called in management consultancy


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McKinsey to look at the entire supply chain system to see where it could be improved and future

stock-outs avoided.

The study revealed a complex situation, one that wasn't susceptible to a "quick fix", Van Schoor

says.

Demand factors

The ethnically and demographically diverse South African market is one of the world's most

complex and fast-changing. Van Schoor cites economic growth, more disposable income in new

hands, changing and upgrading tastes, new product development and new routes to market

among the factors that influence demand for SABMiller's products.

Add to that big events such as the British Lions tour and the 2010 World Cup, and climate

change, and the picture becomes more complex.

"Our brands are the same as any other brand, especially those at the luxury end," says Van

Schoor. "If the customer comes into the shop and can't find our product, he or she has thedisposable income and self-confidence to substitute our brand for our competitors'. That's

dangerous."

Van Scoor says the group has a average stock availability target of 98%. "But for some premium

brands the target is 100%," he says. That means it will live with excess stocks of some products,

just to ensure that a thirsty customer can get his or her favourite drink, every time.

Maximise profitability

But SABMiller also wants to maxmise its profitability. To do all this it must integrate information

from a lot of sources. These include sales forecasts for about 2,600 SKU locations or depots for

the brewing division and 3,100 for the soft drinks division, as well as planned promotions data

from the marketing and promotions division, as well as cost and production data, among others.

These data must then be converted into raw material purchases, manufacturing scheduling,

distribution and stockholding plans for 12 factories (seven breweries and five soft drink plants)

and three tiers of distributors, broken down into between 70 and 80 stock-keeping units (skus) for

the brewing division and around 270 for soft drinks.

And all this must be optimised for profit.

"There is inherent volatilty of demand in the soft drinks business because of seasonal change,

but less in the beer market," Van Schoor says.

Even so, improving the accuracy of demand forecasts and schedules and integrating them to

boost profitability was too complex for SABMillers's demand forecast and supply system. The in-

house system, developed over years, had most of the usual problems associated with legacy

systems: it was inflexible, complex, hard to communicate with, and hard to integrate with newer

systems, Van Schoor says.


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Integration with SAP system

After a global search, SABMiller settled on Infor's advanced supply chain management system, in

particular Infor's demand forecasting system. This takes information from modules of SABMiller's

SAP enterprise resource management system, integrates them with sales forecasts from the

field, and feeds back to the manufacturing resource planning system and financial systems to

generate production schedules, raw materials orders and volume and financial forecasts.

This will let SABMiller make any of its products in the most cost-effective location, given the local

demand, manufacturing, transport and inventory costs.

It will also increase its flexibility in responding to changes in demand. Products will no longer be

made only in a single plant to optimise production runs, but, based on more holistic data, in the

plants that optimise overall profitability.

This flexibility also gives the company greater cover to handle factory downtime and to meet

rapid changes in demand.

But some parts of the legacy system will still be around. "We are keeping it to manage the return

and reuse of empty bottles," Van Schoor says.

But even that data will go into the Infor system so that it can create production schedules down to

tank, line and minute accuracy.

This attention to detail is part of the SABMiller ethos. Measurement and numbers are integral to

the company culture. Van Schoor says the Infor system will be tested in three ways: on its

"theoretical" answers, against actual results, and against causal factors that may have influenced

demand and supply.

Van Schoor says the $1.2m the firm spent on Infor licences was about 60% of the total project

cost. But this could be a drop in the ocean if the company adopts it worldwide. And interest from

group firms is high.

"We have used expertise from all around the group," Van Schoor says. "One of the best people

on the project came from our European division, and we have lots of others keen to know how we

do."

(Source : http://www.computerweekly.com/feature/Case-study-SABMiller-revamps-supply-chain-

management)

Why did SABMilller revamp its supply chain? Describe the domain application used for SCM

integration?

A Analysis of the major and minor issues for

revamping the supply chain with evidence

Description of the SAP system, why it was

used and the benefits from using the

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http://www.computerweekly.com/feature/Case-study-SABMiller-revamps-supply-chain-managementhttp://www.computerweekly.com/feature/Case-study-SABMiller-revamps-supply-chain-managementhttp://www.computerweekly.com/feature/Case-study-SABMiller-revamps-supply-chain-managementhttp://www.computerweekly.com/feature/Case-study-SABMiller-revamps-supply-chain-management


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system

3 Write short notes on:

Ingredients of a business process

Acceptance sampling

Work Breakdown Structure Productivity

A Ingredients of a business process

Acceptance sampling

Work Breakdown Structure

Productivity

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4 Collaborative Forecasting Running Smoothly at Brooks Sports

Brooks Sports designs and develops high-performance running footwear, apparel and

accessories which are sold in 80 countries worldwide. In 2001, when the company shifted from abroad product line to focus on high-performance products targeted at serious runners, it was

clear that the forecasting process needed to change to support the strategic direction of the

company. The existing forecasting process, based entirely on the judgment of the sales team,

was limiting the companys ability to grow.

The strategy shift created a number of forecasting challenges for Brooks including:

Inconsistent style growth: the new line of products experience growth rates anywhere from 0 to

50 percent annually.

Long production planning horizon coupled with short product life: productionand capacity

decisions are typically made 18 months before a style is launched, average lead time for a style

is 6 months and the product life of Brooks styles range from 6 to 24 months. This means thatplanners must sometimes set the entire demand plan for a style prior to ever receiving a

customer order, underscoring the importance of accurate forecasts.

Increasing at-once orders: at once orders, which are placed for immediateshipment,

historically accounted for less than 20 percent of total sales. Since 2001, however, at once

orders have increased to nearly 50 percent of total sales.

Evolving size curves: with its new focus on serious runners, the standard footwear size curve

would not adequately reflect distribution of sales by sizes.

No exposure to retail sell-through: the high-performance products are sold primarily through

independent specialty stores who dont have the capability to share sales data with vendors.

With a corporate mandate from senior management emphasizing the importance of creatingaccurate and timely forecasts, Brooks completely revamped its forecasting process. An

independent forecasting group, reporting directly to the COO and CFO, was established to

coordinate input from various groupssales, marketing, product development and production

and to remove bias from the forecasting process.

The forecasting group established a collaborative forecasting process with three primary steps:

Step 1: Produce monthly statistical forecasts at the SKU level to capture level, trend, seasonality


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and the impact of events based on historical data. Brooks chose Forecast Pro to create these

forecasts due to a number of features available in the software:

Ability to create accurate forecasts

Flexibility to choose forecast models or let software automatically select models

Capability to model events (particularly important forpredicting spikes in demand with new

product launches) Support for multiple-level models to produce consistent forecasts at all levels of aggregation

Powerful override facility to enable collaborative forecasting

Forecast Pro has been a great solution for Brooks, says Tom Ross, Financial Analyst.

Implementing ForecastPros event modeling is very simple, which is an essential feature for us

because of our moving product launches. We also use event models to address the challenge of

forecasting events that dont occur on a regularbasissuch as raceswhich can have a

dramatic impact on the sales of specific products. Another powerful feature of Forecast Pro is the

ability to forecast a product hierarchy. This helps us to serve our multiple constituents within

Brookswe review higher-level forecasts with management and easily generate detailed

forecasts at the SKU level for demand planning.

Step 2: On a quarterly basis, get sales management and sales reps to forecast sales for a 12-

month horizon, focusing on major accounts. This input is gathered via the Web and then

aggregated by the forecasting group.

Step 3: Compare the statistical and judgmental forecasts, and make adjustments to create the

final monthly forecast. Ninety percent of the final forecasts are the same as the statistical

forecastschanges are most commonly made to the forecasts for new styles where the sales

organization has important knowledge to add. These final forecasts are then automatically fed

into Brooks ERP system.Forecast Pro allows us to easily apply judgmental overrides, which is

critical for us, notes Ross. We now cansystematically track changes, giving us a better

understanding of our forecasting performance.

The commitment to forecasting has paid off at Brooks. Forecast accuracy has improved on

average by 40 percent, unfulfilled demand has been lowered from approximately 20 percent to

less than 5 percent, and closeouts have been reduced by more than 60 percent. The improved

forecasting has also helped to smooth out production, resulting in lowered costs and better

margins.

Source :http://www.forecastpro.com/pdfs/Success%20Story-Brooks%20Sports.pdfWhat is the main issue of the case study? Analyse the forecasting solution

A

Description of the main issue(forecastingprocess needed to change), forecasting

challenges

Evaluation of the collaborative forecasting

process

Evaluation

Conclusion on whether the solution could

be improved or not

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http://www.forecastpro.com/pdfs/Success%20Story-Brooks%20Sports.pdfhttp://www.forecastpro.com/pdfs/Success%20Story-Brooks%20Sports.pdfhttp://www.forecastpro.com/pdfs/Success%20Story-Brooks%20Sports.pdf


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5 Explain the risk management and its various components

A Definition of risk management and what it entails

Description of the four components of risk

management

Risk assessment

Risk control Risk prioritising

Risk mitigation

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6 Why redesign of layouts may be necessary? List the differences between product and process

layout.

A Listing of reasons why resdesigning of

existing layout is required

Listing of any five differences

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*A-AnswerNotePlease provide keywords, short answer, specific terms, specific examples and marksbreak - up (wherever necessary)

NoteAnswer all questions. Kindly note that answers for 10 marks questions should beapproximately of 400 words. Each question is followed by evaluation scheme

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MB0044_Production and Operations