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Objective

A.Sriraman

Unit 5

The students will be able to understand and apply the following concepts:

Modern Concepts

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Management g by y Objectives j ( (MBO) ) Management by Exception (MBE) Strategic Management - Planning for Future direction SWOT Analysis Evolving development strategies, information technology in management D i i Decisions Support S t System S t (DSS) Management Games Business Process Re-engineering(BPR) Enterprises Resource Planning (ERP) Supply Chain Management (SCM)

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Objective [contd.]

Activity Based Management (ABM) Global Perspective:

Unit 5.1

Principles p and Steps p Advantages and disadvantages

Management By Objectives (MBO)

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Introduction

Features of Advantage

Definition:

A.Sriraman

Management by Objectives (MBO) is a process of defining objectives j within an organization g so that management g and employees agree to the objectives and understand what they are in the organization

Aim:

is to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally employees get strong input to identify their objectives Ideally, objectives, time lines for completion, etc

Motivation Better communication and Co-ordination Clarity of goals Subordinates tend to have a higher commitment to objectives they set for themselves than those imposed on them by another h person. Managers can ensure that objectives of the subordinates are g objectives. j linked to the organization's

Proposed by:

P t Drucker Peter D k Th The P Practice ti of f Management, M t 1954. 1954

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Setting Objectives in MBO

Setting Objectives in MBO [contd.]

The review mechanism enables leaders to measure the performance of their managers, especially in the key result areas:

For effective MBO, individual managers must understand the specific objectives of their job and how those objectives fit in p y objectives j set by y the board of with the overall company directors. The managers of the various units or sub-units, or sections of an organization should know not only the objectives of their unit but should also actively participate in setting these objectives and make responsibility for them.

marketing innovation human organization financial resources physical resources Productivity social responsibility and profit requirements. p q

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Stages of MBO

Limitations
It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes. It underemphasizes the importance of the environment or context in which the goals are set. Companies evaluated their employees by comparing them with the "ideal" ideal employee. employee Trait appraisal only looks at what employees should be, not at what they should do. The development of objectives can be time consuming, leaving both managers and employees less time in which to do their actual work.

A.Sriraman

Define corporate objectives at board level Analyze management tasks and devise formal job specifications, which allocate responsibilities and decisions to individual managers Set performance standards Agree A and d set specific f objectives b Align individual targets with corporate objectives Establish a management information system to monitor achievements against objectives

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Limitations [contd.]

Case in Point
MBO in Action at Intel A Manager's Guide at Intel provides the following directions.
Start with a few well-chosen overriding objectives. objectives Set your subordinates objectives that fit in with your overriding objectives. Allow your subordinates to set their own key results to enable them to meet their objectives.

The elaborate written goals, careful communication of goals, and detailed performance evaluation required in an MBO program p g increase the volume of p paperwork p in an organization.

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Introduction

Definition: Management by exception

is a management style that where managers only intervene when employees p y fail to meet their standards of performance p standards or when plans or budgets go awry.

A.Sriraman

Unit 5.2

Management By Exception (MBE)

Objective
to facilitate management management's s focus on really important tactical and strategic tasks. to make the decision that cannot be made at one level of management is passed on to the next higher level level. to free managers of ordinary or insignificant matters that can bog them down. to minimize the responsibility. responsibility

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Management By Exception

Management By Exception

Characteristics Of MBE

Phyllis G. Holland, PhD, Professor and Head, Department of Management, Langdale College of Business, Valdosta State University, Valdosta, GA

Managers do as little as possible, instead they delegate it to people p p below them Rather than monitoring every move of their employees, a manager should encourage, and set a path, then only step in if there is a big g deviation from the p path.

Experts View:

Frederick Taylor

He is credited with originating the concept. concept His "exception principle' stated that routine decision making should be handled by lower-level managers who report only exceptional cases to higher management.

All organizations can use management by exception. When routine work results in acceptable performance, no management attention is required. Managers who have properly trained their subordinates should have no problems delegating authority and allowing people to manage their own work. Managers are then able to devote their expertise and attention to non nonroutine problems. Some managers have trouble allowing their subordinates to make decisions because of control issues, , but this p psychological y g barrier will hinder their careers.

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Implementation

Implementation [contd.]
For example, fiscal constraints could affect how much latitude supervisors have in granting overtime.

Combine MBE with MBWA (management by walking around). Make sure lower-level managers g are comfortable with their expanded authority.
Review policies, practices, and procedures. They must help rather than hinder these managers managers.

A.Sriraman

Management by exception does not mean sitting in an office waiting g for big gp problems to walk in. With MBE in place, it is more imperative than ever to be where the action is, to know what's going on.

Clarify the level of authority for each newly delegated responsibility. Enlarge the definition of "exceptions'

to include favorable variances that should be reported to higher management. t Show interest in behavior and results that exceed expectations.

Level A might be, "Do it. You don't have to tell anyone.' L Level l B, B "Do "D it. it Then Th let l t me know k about b t it.' it ' Level L l C, C "Do "D it only l after checking with me.' Remember, though, that the level of authority may have to change t meet to t new circumstances. i t

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Disadvantages

Advantages
It is a major time saver for the manager who shifts authority for decision making and problem solving downward. It saves time for the recipients of this authority. They no longer have to delay action while awaiting input from above. MBE serves as a career developer and motivator. It also gives managers more opportunity to evaluate the administrative ability of their assistants. Conclusion:

Despite MBE, some insecure individuals may persist in seeking decision-making assistance and become overly g may y get g in hot stressed if the assistance is denied. Managers water if their subordinates make poor decisions or fail to solve problems. Potential or incipient problems may not come to a manager manager's s attention before they bloom into big trouble. Confusion results when managers continue to make decisions th t supposedly that dl h have been b delegated, d l t d or when h others th h have not been adequately trained and briefed to take over decision making.

Management by exception will work only when employees are well-trained and have their career in that particular section. Otherwise it would result in failure of achieving task.

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Introduction

Definition: Strategy
Facing risks and uncertainty Seizing the opportunities presented by environment Using distinctive competences of resources of organization

A.Sriraman

Unit 5.3

Strategic Management Pl Planning i for f F Future t Direction Di ti

Definition of Strategic Management:

Is an ongoing practice of establishing a broad program of organizational goals and the means to achieve them. It is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.

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Strategic Plan & Management

Components of Strategic Management

Goals of organizations
where are we going? what are we doing?

Strategy plan vs. Operational plan

Time horizons Scope Degree of detail

Mission of organizations Strategy of organizations

in what direction are we headed and what routes have we selected?

When to manage strategically?

Policies of organizations

Increasing rate of changes. Complexity of managers jobs. Increasing importance of fitting the organization into its external environment. Increasing lag between the preparation of plans and their implementation in the future.

provides guides for getting there.

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Type & Level of Strategic Management

Strategic Management Process

Types of strategic management

Strategic planning

A.Sriraman

G l setting Goal tti Strategy formulation

Employees Customers Suppliers Stockholders C Community it

Corporate-level strategy

more than one line of business.

Business-unit strategy

line of business.

Administration

F Functional-level ti ll l strategy t t

to carry out the top levels.

Strategy implementation
Strategic control
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Guidelines to good strategy

Unit 5.4

Opportunities available in market? Distinctive competences held by firm? Constraints of environment including governmental regulations, technological developments, changes in consumer life styles, and cyclical economic considerations? Societys S ethical, h l political, l l and d cultural l lf framework? k? Personal aspirations and interests of owners?

SWOT Analysis

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Introduction

Factors of SWOT

SWOT: Strength Weakness Opportunity Threat Analysis.

A.Sriraman

Factors affecting an organization can usually be classified as: Internal factors

Strengths (S) Weaknesses (W)

External factors
Opportunities (O) Threats (T)

Strengths

Weaknesses

A widely used framework for organizing and using data and information g gained from situation analysis y Encompasses both internal and external environments One of the most effective tools in the analysis of environmental data and information. A SWOT analysis generates information that is helpful in matching an organizations or a groups goals, programs, and capacities to the social environment in which they operate It is an instrument within strategic planning When combined with a dialogue, it is a participatory process.

Opportunities

Threats

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Strength (Internal) Factor

Weakness (Internal) Factor

Weaknesses

Strengths

Positive tangible and intangible attributes, internal to an organization. g They y are within the organizations g control Your specialist marketing expertise. A new, innovative product or service. Location of your business business. Quality processes and procedures. Any other aspect of your business that adds value to your product or service. i

Factors that are within an organizations control that detract from its ability y to attain the core goal. g In which areas might g the organization improve? Damaged reputation. Lack of marketing expertise. Undifferentiated products or services (i.e. in relation to your competitors). Location of your business business. Poor quality goods or services.

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Opportunity (External) Factors

Threat (External) Factor

Threats

Opportunities

A.Sriraman

External factors, beyond an organizations control, which could place the organizations p g mission or operation p at risk. The organization may benefit by having contingency plans to address them should they occur Classify y them by y their seriousness and probability p y of occurrence

External attractive factors that represent the reason for an organization g to exist and develop. p What opportunities pp exist in the environment which will propel the organization? Identify them by their time frames A developing market such as the Internet. Mergers, joint ventures or strategic alliances. Moving into new market segments that offer improved profits. A new i international t ti l market. k t A market vacated by an ineffective competitor.
A new competitor in your home market. Price wars with competitors. p A competitor has a new, innovative product or service. Competitors have superior access to channels of distribution. Taxation is introduced on y your product p or service.

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Action Plan for SWOT Analysis

For a Productive SWOT Analysis

Stay focused.

For an effective action plan in SWOT analysis, the following steps must be taken into consideration:

Capitalize p on y your strengths g Overcome or minimize your weaknesses Take advantage of some new opportunities Respond to the threats

Set goals and objectives, like with any other plan.

Be specific and avoid grey areas. Keep your swot short and simple. Avoid complexity and over analysis. It can be a mistake to complete just one generic SWOT analysis for the entire organization When we say SWOT analysis, we mean SWOT analyses

Collaborate with other functional areas.

Information generated from the SWOT analysis can be shared across functional areas SWOT analysis can generate communication between managers that ordinarily would not communicate

Creates and environment for creativity and innovation.

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For a Productive SWOT Analysis [contd.]

For a Productive SWOT Analysis [contd.]

Look for causes, not characteristics
Causes for each issue in a SWOT analysis can often be found in the organizations g and competitors p resources Major types of resources:

Examine issues from the customers / stakeholders perspective.

A.Sriraman

What do stakeholders ( (and non-stakeholders) ) believe about us as an organization? What do stakeholders (and non-stakeholders) think of our product quality, q y, service quality, q y, customer service, , price, p , overall value, , convenience, and promotional messages in comparison to our competitors? What is the relative importance p of these issues as stakeholders see them? Taking the stakeholders perspective is the cornerstone of a well done SWOT analysis y
Financial Organizational Intellectual Informational Legal Relational Human Reputation

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For a Productive SWOT Analysis [contd.]

SWOT-Driven planning

Separate internal issues from external issues

Failure to understand the difference between internal and external issues is one of the major j reasons for a poorly p y conducted SWOT analysis

Know yourself Know y your customer/stakeholder Know your competitors Know your environment

The assessment of strengths and weaknesses should look beyond products, services and resources to examine processes that meet customers or stakeholders needs p Achieving goals and objectives depends on transforming strengths into capabilities by matching them with opportunities Weaknesses can be converted into strengths with strategic investment. Threats can be converted into opportunities with th right the i ht resources Weaknesses that cannot be converted become limitations which must be minimized if obvious or meaningful to customers or stakeholders

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SWOT Matrix

Merits & Demerits of SWOT

Merits:
Simplicity Flexibility Integration and synthesis Collaboration L Lower costs t SWOT analysis can be very subjective. Do not rely too much on it. Two people rarely come up with the same final version of a SWOT Use it as a guide and not as a prescription.

A.Sriraman

Demerits & Wartning:

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Evolving Development Strategies

Introduction:

Unit 5.5

Evolving Development Strategies in IT M Management t

Companies must be flexible enough to respond rapidly to competition p and market changes. g The quest for productivity, quality and speed has immensely increased. This quest has spawned a whole lot of management strategies like:

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Business plan TQM , Six Sigma, Lean Manufacturing Benchmarking Business Process Reengineering Change Management Globalization Outsourcing.

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Management Information System

IT Management

Introduction

A.Sriraman

Information in a valuable corporate resource. Information Technology helps business at four levels

MIS is a formal method of making available to management the accurate and timely information necessary to facilitate the g process. p decision-making The various steps involved in designing a management information system are

At the operating group level, IT helps in developing and supporting systems and procedures At the departmental p level, , IT ensures smooth flow of information across departments. At the interface level, IT ensures flow of information across the operating groups and develops and maintains an enterprise wide database. At the strategic level, IT provides critical strategic advantage to the organisation.

System analysis State explicitly the objectives for the new system Construct a conceptual design Specify in detail how the system will work Develop the system Test and implement p

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Guidelines For MIS Design

Types of Information Systems

Transaction Processing System (TIS)
A TIS is an information system which records transactions that take p place between two or more business entities. MIS is a general purpose system that provide managers with vital information about organizational activities. activities

Management Information System (MIS)

Decision Support System (DSS)

The design of a MIS should be determined by the usersmanagers and not delegated to a functional computer p specialist. All users of the information system should participate in the development of the new system.. The cost of the system should be evaluated on a cost benefit basis. The MIS should not only increase the quantity of information but should also select, condense and interpret information. Adequate training to all users should be provided.

DSS provide managers with data and tools for making decisions on specific ifi semi-structured i t t d and d unstructured t t d problems bl

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Types of Information Systems [Contd.]

Types of Information Systems [Contd.]

Office Automation System

Executive Support System (ESS)

A.Sriraman

An ESS is a specialized decision support system, primarily designed g to used by y top p executives of a company. p y

Expert System (ES)

They are information systems in which computer programs store data and rules to replicate the abilities and decisions of human experts in specialized fields. It has 3 main components,

They serve the needs of those who are primarily involved in processing p g of data such as Word processing Desktop publishing E-mail Video conferencing Facsimile transmission.

Knowledge base Inference engine User Interface

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Definition of DSS

Unit 5.6

Decision Support Systems (DSS)

A DSS is an interactive, flexible, and adaptable system, specially developed for supporting the solution of a nong problem p for improved p decision structured management making. It utilizes data. It provides easy user interface interface. It allows for the decision makers own insights. It may y utilize models built by y an interactive p process (frequently by end-users). It supports all the phases of the decision making. It may include i l d a knowledge k l d component. t

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Characteristics & Capabilities of DSS

Characteristics & Capabilities of DSS [contd.]

End-users can build simple systems Utilizes models for analysis Provides access to a variety of data sources sources, formats formats, and types. Decision makers can make better, more consistent decisions in a timely l manner.

A.Sriraman

Provide support in semi-structured and unstructured situations, includes human judgment and computerized information Support for various managerial levels Support to individuals and groups. Support S to interdependent d d and/or d/ sequential l decisions. d Support all phases of the decision-making process. Support a variety of decision decision-making making processes and styles. styles Are adaptive. Have user friendly interfaces.

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DSS Components

Data Management Subsystem

DSS database Database management system Data directory Query facility

Data Management Subsystem Model Management Subsystem Knowledge-based Knowledge based (Management) Subsystem User Interface Subsystem User

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Model Management Subsystem

Knowledge Based (Management) Subsystem

Provides expertise in solving complex unstructured and semistructured problems Expertise provided by an expert system or other intelligent system Advanced DSS have a knowledge based (management) component Leads to intelligent DSS Example: p Data mining. g

A.Sriraman

Analog of the database management subsystem Model base Model base management system Modeling language Model directory y Model execution, integration, and command processor

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User Interface (Dialog) Subsystem

User
Different usage patterns for the user, the manager, or the decision maker Managers Staff specialists Intermediaries

Includes all communication between a user and the MSS Graphical user interfaces (GUI) Voice recognition and speech synthesis possible To most users, the user interface is the system.

Staff assistant Expert tool user Business usiness (system) analyst GSS Facilitator

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DSS Hardware

DSS Classifications
Holsapple and Whinstons Classification
Text-oriented DSS Database-oriented Database oriented DSS Spreadsheet-oriented DSS Solver-oriented DSS R l Rule-oriented i t d DSS Compound DSS.

A.Sriraman

Evolved with computer hardware and software technologies Major Hardware Options Mainframe Workstation Personal computer Web server system

Intelligent DSS Classification:

Internet I t t Intranets Extranets. Descriptive Procedural Reasoning Linguistic

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DSS Classifications [contd.]

Ingredients for DSS Success or Failure

For DSS Success
Management Support Users Involved in Design & Development Early Benefits Shown

Presentation Assimilative

Alternate Categories of Intelligent DSS

For DSS Failure

Symbiotic Expert-system based Ad ti Adaptive Holistic

Other Classifications

Lack of Management Support Users Ignored in Design & Development No Early Benefits Shown

Institutional DSS

Deals with decisions of a recurring nature

Ad Hoc DSS

Deals with specific problems that are usually neither anticipated nor recurring (usually, one-time only).

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Introduction

Management games:
It is a game problem which acts as a thinking tool, given to train managers g to solve real time problem p in order to improve p decision making and analytical skills.

A.Sriraman

Unit 5.7

Management Games

Edward de Bono
A physician physician, author, author inventor inventor, and consultant who coined the term lateral thinking. He authored the best selling book Six Thinking Hats and is a proponent of the deliberate teaching of thinking as a subject in schools.

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Lateral Thinking

Lateral Thinking [Cont...]

The thinking tools can be :
Random Entry Idea Generating Tool
Choose an object j at random

Provocation Idea Generating Tool

Choose to use any of the provocation techniqueswishful thinking, exaggeration gg

Challenge Idea Generating Tool

It involves thinking outside the box. Lateral thinking is solving problems through an indirect and creative approach, using reasoning that is not immediately obvious and involving ideas that may not be obtainable by using only traditional step-by-step logic in both problem solving and in problem identification. identification Lateral thinking uses various acts of provocation to rouse ideas that are free from previously locked assumptions.

Why ? Disproving Disproving.

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Six Thinking Hats

Six Thinking Hats [contd.]

Six distinct states in which the brain can be sensitized are identified and assigned a color:
Information: ( (White) ) - considering g purely p y on information. Emotions (Red) - instinctive gut reaction or statements of emotional feeling (but not any justification) Good points judgment (Yellow) - logic applied to identifying benefits, seeking harmony Bad points judgment (Black) - logic applied to identifying flaws or barriers seeking mismatch barriers, mismatch. Creativity (Green) - statements of provocation and investigation, seeing where a thought goes. Thinking (Blue) - thinking about thinking thinking.

A.Sriraman

'Six Thinking Hats' is an important and powerful technique which is used to look at decisions from a number of important p perspectives. p This forces one to move outside your habitual thinking style, and helps to get a more rounded view of a situation. Colored hats are used as metaphors for each state state. It develops parallel thinking which is described as a constructive alternative to adversarial thinking or debate. Here the entire team focuses on one direction rather than trying to prove their point.

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The Power of Perception

Power of Perception [contd.]

Aims, Goals, Objectives
Focus directly and deliberately on the intentions behind actions.

It involves 10 simple strategies for sharpening your perception and focusing your thinking in a more comprehensive, effective, and efficient way.

Alternatives, Possibilities, Choices

Deliberately try to find other ways.

Consequences and Sequels

Look ahead to see the consequences of an action, plan, decision, or rule.

Other People's Views

Plus, Minus, Interesting

Put yourself in others' shoes.

Ensure that all sides of a matter have been considered before a decision or commitment is made.

K V Key Values l I Involved l d

Ensure that your thinking serves your values.

Recognize, Analyze, Divide

First Important Priorities

Break a larger concept into smaller smaller, more manageable parts parts.

Select the most important ideas ideas, factors factors, objectives objectives, consequences consequences, etc etc.

Consider All Factors

Design/Decision, Outcome, Channels, Action

Explore all factors related to an action, decision, plan, judgment, or conclusion.

Direct attention to the outcome of the thinking and action that follows.

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Six Value Medals

A.Sriraman

Unit 5.8

It helps people quickly but thoroughly scan for values, prioritize which values are the most important to pursue, and p values are addressed and maximized then ensure that top every step of the way. It helps to notice and resolve conflicts in values which have adverse effect on the organization organization.

Business Process Reengineering (BPR)

Gold Medal : Includes Human Values. Silver Medal: What matters to the organization. Gl Glass M Medal: d l I It covers change, h i innovation, i simplicity i li i and d creativity. Wood Medal: Positive or negative impact to the environment. Brass Medal: How will this action be interpreted.

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Introduction

Business Process Reengineering

What is a Process?

A specific ordering of work activities across time and space, with a beginning, g g an end, and clearly y identified inputs p and outputs: p a structure for action.

Business Process Reengineering is the analysis and design of workflows and processes within an organization BPR Versus Process Simplification

What is a Business Process?

A group of logically related tasks that use the firm firm's s resources to provide customer-oriented results in support of the organization's objectives.

Process Simplification

Process Reengineering

What is Reengineering?
Incremental Change Process Led Process-Led Assume Attitudes & Behaviors Management-Led Various Simultaneous Projects Radical Transformation Vision Led Vision-Led Change Attitudes & Behaviors Director-Led Limited Number of Initiatives

Reengineering is the fundamental rethinking and redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance performance, such as cost cost, quality quality, service and speed.

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Importance of BPR

Systems Perspective

Why Organization Reengineer?

Customers

Why Organizations Dont Reengineer?

A.Sriraman

Demanding

Sophistication

Feedback

Changing Needs

Competition

Complacency Political Resistance New Developments Fear of Unknown and Failure.

Local

Global

BPR seeks improvements of

Inputs

Transformation

Outputs

Cost Quality Service Speed.

Environment

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Key Steps in Implementing a BPR Strategy

Step 1
Select the Process:

Select the process & appoint process team

Understand the current process

Develop & communicate vision of improved process

Review Business Strategy and Customer Requirements Select Core Processes Understand Customer Needs Dont Assume Anything Select Correct Path for Change g Remember Assumptions can Hide Failures Competition and Choice to Go Elsewhere Ask - Questionnaires, Meetings, Focus Group

Appoint the Process Team:

Identify action plan

Execute plan

Appoint BPR Champion Identify Process Owners Establish Executive Improvement Team Provide Training to Executive Team

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Step 1 [contd.]

Step 2 & 3
Understand the Current Process
Develop a Process Overview Clearly define the process
Mission Scope Boundaries

Core Skills Required:

A.Sriraman

Capacity to view the organization as a whole Ability to focus on end-customers Ability to challenge fundamental assumptions Courage to deliver and venture into unknown areas

Use of Consultants:

Set business and customer measurements Understand customers expectations from the process (staff including process team).

Used to generate internal capacity Appropriate when a implementation is needed quickly Ensure that adequate consultation is sought from staff so that the initiative is organization-led and not consultant-driven Control should never be handed over to the consultant

D Develop l & Communicate C i t Vision Vi i of f Improved I d Process P

Communicate with all employees so that they are aware of the vision of the future Al Always provide id information i f ti on the th progress of f the th BPR i initiative iti ti - good d and bad. Demonstrate assurance that the BPR initiative is both necessary and properly managed. managed

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Step 4 & 5

Disadvantage of BPR

Identify Action Plan:

Develop an Improvement Plan Appoint Process Owners Simplify the Process to Reduce Process Time Remove any Bureaucracy that may hinder implementation.

Execute Plan:

Process under review too big or too small Reliance on existing process too strong The Costs of the Change Seem Too Large Allocation of Resources Poor Timing g and Planning g Keeping the Team and Organization on Target

Qualify/certify the process Perform periodic qualification reviews Define and eliminate process problems Evaluate the change impact on the business and on customers Benchmark the process Provide advanced team training. training

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Introduction

A.Sriraman

Unit 5.9

Enterprise Resource Planning (ERP)

Enterprise resource planning (ERP) integrates internal and external management information across an entire g organization It attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments departments particular needs. needs Functions of ERP:
1. Engineering Design 3. Controlling 5. Quality 7. Finance 9. Sales 2. Production Planning 4. Maintenance 6. Legal 8. Inventory y 10. Human Resources.

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Why companies undertake ERP:

Enterprise Systems

Integrate financial information Integrate customer order information Standardize and speed up manufacturing processes processes. Standardize HR information Reduce inventory y

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Traditional View of Systems

The Order Fulfillment Process in ERP

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Best Features of an ERP system

Prime Reasons for Implementing ERP

Need for common platform Process improvement. Data visibility that could be used to improve operating decisions. Operation cost reductions. Increased customer responsiveness. Improved strategic decision making Personal Improvement. Improvement

Architecture of ERP system facilitates transparent integration of modules providing flow of information between all function p in real time. within enterprise Many different software are replaced by one integrated system. Reliable information access through common DBMS Eliminates data and operational redundancies (no duplication of work or data entries etc.)

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Business and Technical Benefits

Challenges of Enterprise Systems

Difficult to build: Require fundamental changes in the way the business operates Technology: Require complex pieces of software and large investments of time, money, and expertise Centralized organizational coordination and decision making: Not the best way for the firms to operate

A.Sriraman

Automation of business transactions Flexibility in changing the system catering to newer business processes. Coordination across business functions Coordination across geographical distances resulting in b better Managerial l control l Consistent information and interface thus easier to understand and work in Single system.

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Definition

Unit 5.10

Supply Chain Management (SCM)

It is defined as the strategic management involving interconnected network of business activities from q to conversion of raw materials into finished g goods acquisition and finally delivering the products. The organisational decisions and activities are triggered by the market demand. demand

Supplier Management

INFORMATION FLOW
Schedule / Resources Conversion Stock Deployment

Customer Management

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Delivery y

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Basic steps

History of Supply Chain Management

A.Sriraman

Plan

Source

Make

Deliver

Buy y

Suppliers

Manufacturers

Warehouses & Distribution Di t ib ti Centers C t

Customers

1960s - Inventory Management Focus, Cost Control 1970s - MRP & BOM - Operations Planning 1980 1980s s - MRPII, MRPII JIT - Materials Management Management, Logistics 1990s - SCM - ERP - Integrated Purchasing, Financials, Manufacturing, Order Entry 2000s - Optimized Value Network with Real-Time Decision Support; Synchronized & Collaborative Extended Network.

Material Costs

Transportation Transportation Costs Costs Transportation Manufacturing Costs Inventory Costs Costs C

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Importance of SCM

Supply Chain Drivers

The following factors necessitate the implementation of SCM in an organisation

Nemesis :

Uncertainty in suppliers and consumers Travel time Machine breakdowns Natural catastrophe L k t and Lockouts d strikes t ik

Hence SCM addresses in dealing with

Minimising costs Minimising uncertainties Move the company towards customer-centric

Demanding g customers Shrinking product life cycles Proliferating product offerings Growing retailer power in some cases Doctrine of core competency Emergence of specialized logistics providers Globalization Information technology

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Bullwhip Effect

Illustration for Bullwhip Effect

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The slight variations in demand at the customer level increases the inventory as we move upstream This creates very high burden on the company companys s stock and storage system Also the delay time to reach the plant results in the outdated products to be created. created Factors Contributing to the Bullwhip

Demand forecasting practices Lead time Batch ordering Price fluctuations Lack of centralized information.

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SCM Key Issues

Supply Chain Management Benefits

A 1997 Integrated Supply Chain Benchmarking Survey of 331 firms found significant benefits to integrating the supply chain

P Purchasing h i

M Manufacturing f t i

Di t ib ti Distribution

Customer Service/ Sales High inventories High service levels Regional stocks SELL

Low p purchase price

Few changeovers

Multiple vendors

Stable schedules

Low inventories

Long run lengths

Low transportation

Delivery y Performance Inventory Reduction Forecast Accuracy Overall Productivity Lower Supply-Chain Costs Fill Rates Improved Capacity Realization

SOURCE

MAKE

DELIVER

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Supply Chain Imperatives for Success

View the supply chain as a strategic asset and a differentiator

Unit 5.11

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Wal-Marts partnership with Proctor & Gamble to automatically replenish p inventory y Dells innovative direct-to-consumer sales and build-to-order manufacturing

Reduce uncertainty

Activity Based Management (ABM)

Forecasting Collaboration Integration

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Introduction

Types of ABM
Operational ABM:
It is about doing things right, using ABC information to improve efficiency. y Those activities which add value to the product p can be identified and improved. Activities that dont add value are the ones that need to be reduced to cut costs without reducing product value.

Activity-based management (ABM)

It is a method of identifying and evaluating activities that a business p performs using g activity-based y costing g to carry y out a value chain analysis or a re-engineering initiative to improve strategic and operational decisions in an organization.

Activity-based y costing g( (ABC): )

It is a methodology that measures the cost and performance of activities, resources, and cost objects. Resources are assigned to activities, , then activities are assigned g to cost objects j based on their use. It recognizes the causal relationships of cost drivers to activities.

Strategic ABM:
It is about doing the right things, using ABC information to decide which p products to develop p and which activities to use. This can also be used for customer profitability analysis, identifying which customers are the most profitable and focusing on them more.

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ABM: Illustration

Stages in ABM
Analysis of activities
Identify value added and non value added activities Analysis of critical activities Compare activities with benchmarking. perform an activity

A.Sriraman

Improvement of activities
Reduce the time or effort required to Eliminate unnecessary activities Select low cost activities Sharing of activities

Performance measurements
Financial and non non- financial measures Designed to influence the behaviour of cost management.

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Advantages of ABM

Disadvantages

Implementing an ABC system is a major project that requires substantial resources. Once implemented an activity based g system y is costly y to maintain. Data concerning g costing numerous activity measures must be collected , checked, and entered into the system. ABC produces numbers such as product margins margins, that are odds with the numbers produced by traditional costing systems. But managers are accustomed to using traditional costing systems to run theirs operations and traditional costing systems are often used in performance evaluations.

Benefits typically derived from ABM include: Identification of redundant costs Analysis of value value-added added and non-value non value added costs Quantification of the cost of quality by element Summarizing g customer focused activities Measuring the cost of complexity Providing process costs and supporting process analysis T Tracking ki th the i impact t of f reengineering i i efforts ff t Better understanding of cost drivers Evaluation of manufacturing flexibility investments Activity-based budgeting.

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Disadvantage [contd.]

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Unit 5.12

Activity based costing data can be easily misinterpreted and must be used with care when used in making decisions. Costs g to p products, customers and other cost objects j are assigned only potentially relevant. Before making any significant decision using activity based costing data, managers must y which costs are really y relevant for the decisions at identify hand. Reports generated by this systems do not conform to generally accepted accounting principles (GAAP) (GAAP). Consequently, an organization involved in activity based costing should have two cost systems - one for internal use and one for preparing external reports. reports

Global Perspective

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Globalization

Globalization [Contd.]
Global Strategies
Integrated global marketing strategy Global product strategy Global branding strategies

Definition of globalization

Globalization deals with the integration of various countrystrategies g and the subordination of these country-strategies y g to one global framework.

Reasons for globalization

International Business Management

Globalizing for internal efficiency Globalizing to compete in homogeneous markets Globalizing for added synergies

Levels of globalization

International business implies being engaged in transactions across national boundaries The interaction of a firm in a host country can take many forms, The exportation of goods and services Entering in a licensing agreement for producing goods in another country

Globalization at customer level Globalization at market level Globalization at industry level Globalization at competitor level

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Globalization [Contd.]

Case study: Success of Toyota

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Forming a joint venture with a firm in a host country Multinationals may set up wholly-owned subsidiaries or branches with production facilities in the host country

Multinational corporations

14 Principles of the Toyota Way Section I: Long-Term Philosophy Principle 1

Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.

Section II: The Right Process Will Produce the Right Results Principle 2
Create a continuous process flow to bring problems to the surface. Use "pull" pull systems to avoid overproduction overproduction.

The MNCs can take advantages of business opportunities in many different countries Companies with worldwide operations have access to natural resources and materials that may not be available to domestic firms The MNCs can recruit management and other personnel from a world wide labor pool

Principle 3

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Case study: Success of Toyota [Contd.]

Case study: Success of Toyota [Contd.]

Principle 8
Use only reliable, thoroughly tested technology that serves your people p p and processes. p

Principle 4

Level out the workload (Work like the tortoise, not the hare).

Principle 5

Build a culture of stopping the production line to fix problems, to get quality right the first time.

P i i l 6 Principle

Section III : Add Value to the Organization by Developing Your People Principle 9

Standardized tasks and processes are the foundation for continuous improvement and employee empowerment.

Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.

Principle 7

Principle 10

Use visual control so no problems are hidden.

Develop exceptional people and teams who follow your company's philosophy.

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Case study: Success of Toyota [Contd.]

Case study: Success of Toyota [Contd.]

Principle 14
Become a learning organization through relentless reflection (hansei) ( ) and continuous improvement p (kaizen). ( )

Principle 11

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Respect your extended network of partners and suppliers by challenging g g them and helping p g them improve. p

Section IV: Continuously Solving Root Problems Drives Organizational Learning Principle 12

Go and see for yourself to thoroughly understand the situation (Genchi Genbutsu).

Principle 13

Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly (nemawashi).

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Conclusion

References
Herald Koontz and Heinz Weihrich, Essentials of Management, McGraw Hill Publishing Company, Singapore International Edition, 1980. M. Govindarajan and S. Natarajan, Principles of Management, Prentice Hall of India Pvt. Ltd., New Delhi, 2007.

Globalization demands management principles to be flexible for different countries. On a global perspective management principles need to aim for a common goal of improving the organization continuously by approaching it through distinct methods which will suit that market segment segment.

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