It is very difficult to differentiate yourself when you make a product like an office chair. Also, competing on value proposition is not easy. The American furniture company, Herman Miller was able to pull this off, and they did it so well that they witness a 500% increase in productivity. One of their products is the Aeron chair which is one of the most recognizable office furniture in the United States. This is one of the many Kaizen examples in Manufacturing that we shall discuss here. Kaizen provided them a much-needed increase in quality, reduction in manufacturing cost, and improvement in production times.

Brief introduction to Kaizen

Kaizen is the Japanese term that signifies ‘small, continuous improvements.’ These improvements accumulate over time and lead to a major increase. Although, it sounds great in concept but challenging to implement in practice.

⚡ Check out our detailed article on explanation of the Kaizen ➤ Kaizen Model of Continuous Improvement

Kaizen examples in factory

Here we shall discuss two examples of Kaizen implementation in the factory:

1. Daily Kaizen – Toyota
2. Kaizen events – Motorola

Daily Kaizen at Toyota

Toyota was one of the first manufacturers who adopted the Kaizen philosophy. Later companies like GM attempted to emulate these practices. There are many kaizen examples in manufacturing from companies that later adopted this concept as well. However, Toyota was one of the first companies to implement the concept of daily kaizen. The daily kaizen principle says that every day is an opportunity for improvement. This is achieved in the following steps:

1. Continuously question the processes and workflows – The traditional factories such as Ford Motor Company is based on the concept of absolute productivity. Their goal was to minimize any down time for the assembly line. Any down time meant that they were wasting precious time and having lower output than capacity. On the other hand, companies such as Toyota were alright with downtime. Even to the extent that they encouraged their workers to stop the production any time they wanted. Toyota had an Andon cord at their assembly line. It could be pulled any time to stop the production.
   
2. Adopt visualization and monitoring tools – We use sophisticated tool for project management that helps us visualize the progress. However, most of these visualizations can be traced back to the humble hand made charts. Japanese used one such technique called the ‘Kanban.’ Kanban is a visualization method by which we can define the tasks and then reresent them in terms of their progress so that their completion can be assessed more clearly.
   
   A typical job or task is represented as a flag. This flag starts off from the ‘requested’ column. As the work begins on it, it is shifted to the ‘in progress’ column. This column is sometimes called Work in Progress or WIP. Next this task is taken on to the ‘done’ column.
   
3. Embrace small experiments – experiments are small changes that are tested out. When they are found to be successful, these changes are adopted else they are dropped. Toyota is an exemplar in the case of kaizen becuase it encourages the employees to experiment their ideas. An article by Takeuchi, Osono and Shimizu talk about the bold conceptualization of Toyota Prius. They decided to develop a car that had 100% improvement in fuel efficiency.
   
   After a lot of research, experimentation, failing and learning, they were able to launch the car in 1997. It became one of the world’s most popular hybrid vehicles and remained a favorite among environmentally concious buyers for a long time.

Kaizen event at Motorola

The first example of Kaizen in the factory is from Motorola. They introduced the concept of ‘Kaizen events.’ Kaizen events are the occasions of quality improvement. These offer us ways to look into the defects, issues, and challenges that we encounter in the factory. A brief summary of the Kaizen event is summarized below:

1. Formation of the discussion team – a small team from different areas come together to discuss. This panel discussion focuses on one specific process. Japanese taught us the value of bottoms up communication channel. Therefore, in these discussions we need to have people who are working on the shop floor as well as mid-level managers.
2. The Observation process – In the second step, the team is tasked with careful observation. Another page from the Japanese system of management. A walk to the shop floor is referred as ‘Gemba’ and the act is sometimes called as ‘going to Gemba’. Again, a bottom oriented management. It makes the mid and senior managers get physically close to the lower levels and see the real place where action takes place. No wonder, Gemba literally means ‘real place.’
3. Improvement – In the very beginning we talked about ‘small, continuous improvements.’ These improvements must be meaningful and come from the observed defects. Sometimes the suggestions for improvements are never taken seriously, especially when it comes from lower rungs of the organization. Second issue is inter-departmental policies and politics which can prevent the acceptance of good ideas. It is the job of quality manager to ensure that ideas are evaluated based on merit only.
4. Implementation and testing phase – once the ideas are accepted, they need to be tested for application. Some ideas may improve the current process while some may deteriorate it. Again, an impartial evaluation of these ideas will help the organization gain benefit from Kaizen.

Because of these approaches, Motorola remains one of the best Kaizen Examples in Manufacturing.

Kaizen examples in manufacturing

A soap company faced a peculiar problem. They had a fully automated plant where the soaps were cut, packed into retail packages, and then stacked inside reseller boxes. They were getting numerous complaints regarding empty boxes being shipped to the warehouses. This posed a threat to their quality perception. What could be done to eliminate such mistakes?

They hired an external consultancy to look into the problem. The consultants provided top-class services and thoroughly looked at the problem. They realized that the problem can be detected with the help of a sensitive X-ray machine that can scan the boxes coming out of the production line. If the workers saw that the boxes were empty, they would remove them from the conveyor belt. The company saw an immediate decline in the number of complaints after this sophisticated system was set into place. The senior managers were happy with the result.

$600,000 vs $100 solution

This was not the end of the story. It had been barely three weeks since the new system was in place that the production manager noticed that the system stopped giving any defects. He re-checked the data from his dashboard and thought that the system had developed some fault. After that, he walked to the shop floor to check out the issue before raising a support ticket with the company that had set it up. He could not find any problem with the machine. It was working absolutely fine. The manager even tested it by sending empty boxes which showed up on the X-ray screen correctly.

Nevertheless, the machine operator returned from her tea break and saw the bewildered expression of the manager. When he learned his predicament, she could not stop laughing. She did not believe that the company had spent $600,000 on the machine only to detect empty boxes. She took the manager to a point barely ten meters away from the machine to show her improvisation. Apparently, she was tired of looking at the X-ray screen the whole day long. Therefore, she had installed a small table fan right across the conveyor belt. Whenever there was an empty box that came across, the fan would blow it out of the way.

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Kodak was founded in 1888 in New York, USA. They dominated the camera market for over a century. However, Canon, a relatively less known Japanese company and also a late entrant, slowly and steadily captured a major part of the camera market. A major upheaval in the camera market took place in the early 2000s. Kodak’s market share gradually declined. It was just a matter of time and eventually, Kodak ran out of steam. They filed for bankruptcy in 2012. On the other hand, Canon saw an increase in the share of the market over the same time period. They fully embraced new technologies and continuously improved their product offerings. One of the key drivers of Canon’s success is its Canon Production System or CPS. CPS is Relatively less known compared to the more popular Toyota Production System. However, it is a remarkable example of using the Kaizen model of continuous improvement.

First, we shall take a look at the Kaizen model and try to understand why it is highly revered by managers worldwide. After that, we shall see some best practices to ensure the successful implementation of Kaizen. Finally, we shall take a deep dive to see how Canon has used the kaizen model of continuous improvement to stay relevant in a competitive market.

Kaizen – explained in plain English

The term Kaizen needs no formal introduction. It has percolated into the boardroom lingo. In the most literal sense, it means ‘good change.’ However, it encompasses a philosophy of finding ways to improve functions and processes with small, frugal, easy to implement changes. It has been accepted by the Oxford English Dictionary as an English work in the year 1993.
Another aspect of kaizen is ‘continuous improvement.’ This highlights that the importance of the aggregate impact of small increments. It is analogous to the concept of compounding. For example: let’s say that you have a hundred bucks with you and you are able to increase it by 1% every day. Then by the end of the year, you will have three thousand seven hundred bucks. Similarly, if you are able to find new ways to improve your business process by 1% every day you will see a thirty-seven-fold increase in performance. However, practically it is not possible to improve even at 1% every day. Nevertheless, every small improvement will get compounded and you will see meaningful results in the end.

Difference between Kaizen and Innovation

Is Kaizen the same as innovation? Although these terms are similar and have a similar end result in mind, they are very different ways to achieve organizational success. In the simplest sense, Kaizen is one of the approaches to managing innovation. Here are some differences between Kaizen and the traditional approach to innovation management:

Kaizen Model of Continuous Improvement

Kaizen can be best understood as a set of management concepts. These concepts highlight how we should use kaizen in our firms. We can use some common management principles to guide us in adopting the kaizen model of continuous improvement in our organization.

1. Plan-Do-Check-Act or PDCA – the PDCA cycle is hallmark of kaizen model of continuous improvement. PDCA represents the different stages of the quality management process. The first step is planning for the improvement. We need to find what are the potential areas for improvement. The second step or do, refers to the act of executing these changes. Subsequently, the third step of check refers to the monitoring of the changes. Finally, the fourth step or act refers to acceptance of the new system or process. In this stage, we accept the new norm and standardize them as a part of the operational process.
2. Process focus – the second aspect of kaizen is putting focus on the process of achieving quality rather than running behind the results. This is a major difference between kaizen and western concept of innovation. The original spirit of kaizen calls for driving these changes with the goal of improving things rather than running behind optimizing economic gains. Companies that are successful in implementing the true philosophy of kaizen embrace this zeal of improvement to make things better. It has long lasting impact because intrinsic motivation to improve things is better than external rewards. One of the ways of enabling creative thinking is through brainstorming which is important part of any project management.

Some common managerial issues with Kaizen Model

Saving up and building a corpus for retirement is a simple but effective way to create wealth. However, very few of us are able to set aside a good proportion of our earnings. Two key reasons prohibit us from doing this:

1. Motivation

2. Other commitments

In the same vein, Kaizen also suffers from a lack of motivation. It starts off a ‘flavor of the month’ thing. You will see excited mid-managers putting up posters around the firm calling everyone to join the ‘Kaizen’ movement. However, this does not last long, the focus shifts to some new ‘buzzword’ next month or next week. As we have discussed previously, successful Kaizen needs a long-term commitment. The solution is simple but difficult – treat Kaizen as a cultural goal rather than a performance goal. Japanese firms were excellent places to percolate cultural changes as the society has conformity.

Also, the group dynamics support a unified cultural adoption. It is not very easy to introduce such an organization-wide change in working philosophy in other geographies. Especially those where people have a lower sense of community-based thinking and places where there is a greater focus on end results rather than focusing on the process of getting the results.

Managing challenges associated with Kaizen

Canon Production System – an example of Kaizen Model

We had opened this article with the example of Canon’s exemplary success story. We had also credited their focus on innovation as one of the key drivers of success. However, innovation is not a one-off thing. Their approach to innovation management is based on the concept of continuous improvement or Kaizen. Here, we shall take a deep dive into how Canon manage their innovation through the CPS or Canon Production System. The various methodologies associated with Kaizen are employed by Canon. These include the following:

Total Quality Management

Most of us may not be aware of the rich legacy of quality management at Canon. It often gets overshadowed by the likes of Toyota as they get cited more often. However, avid readers may be aware that Canon was one of the pioneers of quality management. They coined the punchline ‘No claims, no trouble’ in 1964 and used this as a guideline to direct efforts into improving product quality.

Further, they operationalize the slogan through three working objectives. These can also be summarized as the 3S of canon quality:

The quality logo looks like a Japanese fan. The three blades are Safety, smartness, and Satisfaction. These three aspects have been summarized below. Their kaizen model of continuous improvement is based on the concept that these three must come together to ensure quality. This integrity of three S is represented by the apex of the fan shape where they meet. The diverging shape of the fan also represents the extended influence of their quality concepts. One of the common pitfalls of many quality programs is that they take a too narrow a view of the quality. CPS breaks this trend with a more holistic approach.

Kyosei at Canon

Kyosei represents a less popular but futuristic approach to community outlook. It integrates very well with the kaizen model of continuous improvement. Traditionally, we have looked at products as the point of focus for quality improvement. Then we started looking at improving the processes. Further, the concept of Kyosei extends this outlook outside the boundaries of the firm. In the simplest sense, Kyosei is the concept of inclusion where the organizations treat everyone equally regardless of their background.

The top executives at Canon noticed imbalances in their target markets as they expanded into new geographies. Some common imbalances are economic inequality, competitor practices, and political challenges. They strive towards management guidelines that reduce these imbalances. The second set of challenges are related to the sourcing of materials. Canon uses these different challenges as points of improvement for their products and processes. Their model is an example of many such successful implementations of this remarkably simple but effective management philosophy.

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The United States witnessed a major scare with the outbreak of a disease. This happened way before anyone had heard about coronavirus. We are talking about the typhoid outbreak of 2017. First, there were was one case in Texas then another, and so on. Soon hundreds of individuals were infected with this nasty bacterial disease. It took a while for the Centre for Disease Control to get a hang of this situation. They were finally able to connect the diseases to the supply chain of papayas and thereby trace the origin to a farm in Mexico.  Now, the question is: can we trace the origin of food much faster? Supply chain cryptocurrency can be our answer to this pertinent question. Read more to find out how this new technology can change our supply chains forever.  

Cryptocurrency 

We are dawning on a new era. The era of industry 4.0. Blockchain and cryptocurrency can play a major role in the fourth industrial revolution. The promise is to offer some new ways of doing transactions. 

At the most basic level, a blockchain is a way to store and verify the information. This information is spread out (decentralized) into the users’ computers. Also, the distributed data makes it very difficult to hack because the same data can potentially reside in thousands or millions of systems. This property of blockchain is called immutability.  

Two common applications of blockchain are cryptocurrency and smart contracts. Both of these are also used in the supply chain. However, one should keep in mind that blockchain is the technology, cryptocurrency is the application of this technology. Smart contracts are legal and financial tokens of mutual exchange that can be liked to a cryptocurrency or work on a blockchain. 

Cryptocurrency 

All our current transactions are managed using traditional currencies like US Dollars or Euros. Banks maintain the record of the account holders in ledgers. When we transfer $1000 to a friend’s account, basically it balances out our ledger with our friend’s. Our new account balance is reduced by $1000 + transaction charges. On the other hand, our friend’s account balance increases by $1000.  

Cryptocurrencies also work in the form of ledger bases records for such transactions. However, there are some key differences. The ledgers that track these balances are not kept in a bank. The cryptocurrency system basically creates multiple copies of this ledger and stores it on all the computers that use this technology. Therefore, all the users have a copy of this ledger. When any transaction takes place, it is updated on all the ledgers in the network. This makes it next to impossible to hack.  

Cryptocurrency can be exchanged directly between two parties without any intermediary. This reduces the transaction cost as well. In the later sections, we shall see how these new currencies help in making supply chains efficient, reliable, and secure.  

Smart Contracts 

Thirdly, let us briefly introduce the concept of smart contracts. Smart contracts are basically contracts that are based upon blockchain technology. It enables us to design systems where certain transactions are executed only by authorized parties under pre-established conditions.  

For example, a transportation agency may have a smart contract with a factory regarding the handover of consignment. In this case, let us say, once the consignments are received by the factory’s warehouse the items are automatically added to the trade payable and also to the internal goods inventory. The smart contract may enable automatic authorization for the payment against the trade payable. This would have required manual authorization in a non-blockchain-based system.  

Why do we need blockchain in the supply chain? 

The department of supply chain & operations is an early adopter of this upcoming technology. Currently, we manage the supply chains using enterprise resource planning software or ERP. These systems maintain a centralized system of managing assets, resources, and finances. However, there are certain limitations associated with these traditional systems. 

The traditional ERP systems are not designed to automatically handle conflicts or disruptions in the supply chain. Move to manually intervene to audit and correct certain problems. Also, these systems are more vulnerable to attacks and forgeries. Overall, they also slow down the decision-making process. 

One of the biggest contributions of blockchain is that it is going to integrate the informational and financial flow across the supply chain. The use of supply chain cryptocurrency will help us have real-time control over the systems. Therefore, we shall be able to manage three critical flows of the operations and supply chain department: 

1. Inventory flow 

2. Monetary flow 

3. Information flow 

Inventory flow 

The first step is the movement of raw materials from the suppliers to a firm.  On the other hand, we have the movement of finished goods from a firm to the customer. People in an automobile phone. The raw materials can be parts that they procure from suppliers. Is the vehicle which is dispatched to the wholesalers or retailers.  

Traditionally, ledgers were used to track the inventory flow. Although they are quite at keeping track of the movement of goods, they do not capture enough information to aid in real-time analysis and fault detection 

Financial flow 

We can also imagine the entire supply chain in the form of a financial flow. As the raw material moves from the suppliers to the firm. In this state, basically, we are adding some value to the raw materials. This value is being added when we create a good that is superior to the raw materials in terms of functionality.  

Similarly, the finished gold also changes hands from the firm to the suppliers and eventually to the customer. At each stage of the supply chain, there is a change in the value of the consumer goods and services.  

Information flow 

Similarly, there is a flow of information that takes place throughout the entire supply chain. Different managers have got different levels of access to this information. However, you can imagine that the flow of information takes place from the different stages or touchpoints to the firm’s database.  

For example, when a shipment is received by inland transportation, it gets scanned and recorded in the system. This information is reflected in the inventory management software. 

Integrating these three flows using blockchain 

Blockchain-based systems basically integrate all these different information flows into one coherent system. And we attach a cryptocurrency-based transaction to the supply chain, we are automatically ensuring that cost, quality, quantity variables are updated. Further, these variables are difficult to fudge because blockchain technology uses distributed ledgers.  

Advantages of using supply chain cryptocurrency

The use of cryptocurrency in the supply chain brings in a lot of advantages. As we have discussed earlier, the primary advantage is the integration of the three different types of flows. However, we also have other tangible benefits. 

1. The use of crypto currency reduces the amount of paperwork. When we go for a digital currency like crypto currency, we are automatically reducing the amount of paperwork that is involved in the transfer of ownership as the consignment is transported from one location to another. We can automate a lot of these steps. Therefore, we also reduce the paperwork involved. For example, there can be up to 30-50 change of hands for a consignment that travels across continent from a country like Vietnam to Norway. Each step can introduce some uncertainty and point of error when we use paper-based system. 

2. The use of blockchain also offers higher accuracy and reliability in tracking of the goods movement. As we have discussed in the earlier point, the news of blockchain also allows us to minutely monitor each step of the shipment. Although this can be done using RFID tags in dependently from the blockchain. However, when we attached the value of goods using cryptocurrency, then it includes a higher level of protection.  

3. Another advantage of using cryptocurrency in supply chain is that it deters privacy and counterfeit products. There are certain goods which are extremely valuable and also prone to piracy. For example, let us consider that a box of luxury shoes is shipped from Italy to Shanghai. It becomes impossible for the retailers to track where the goods came from and validity of the same. Similarly, we consider the case of diamonds. Using cryptocurrencies, we can track the origin of the goods. Later we shall see how certain cryptos allow us to do this. 

4. The use of cryptocurrency also increases the visibility of the movement. This helps us in monitoring the movement of goods in a more granular manner. It is extremely helpful in scheduling. For instance, when we had the COVID-19 pandemic. It led to widespread disruption of the supply chain. In these critical times, it became very important to understand where the goods were stuck in the supply chain process. Companies that have used modern tracking systems. Are able to track the movement of goods. This tracking becomes much more accurate when we use blockchain technologies like cryptocurrency and smart contracts. 

5. The use of cryptocurrency in supply chain also increases the resilience of the supply chain. Cryptocurrency also helps in the analytics. Firstly, it can reduce the time between the event occurrence and detection. Secondly, it also improves the speed of decision-making once we realize that there is some problem. Thirdly, it also helps in understanding where the fault lies and correcting it without human intervention. 

6. Finally, one of the advantages of using cryptocurrency in supply chain is that it helps us in origin tracing. Origin tracing is a method that we use to trace the point of origin for a product or for any longer. This has become extremely important when we see that there are certain problems associated with specific raw materials used in products. Apple had come under a lot of scrutiny for using conflict materials. Conflict materials are those materials that are sourced from countries which have problematic geopolitical situation or employ child labor or are detrimental to the environment.  

Supply Chain Cryptocurrency 

The most common cryptocurrencies are Bitcoin and Ethereum. However, we have a lot of other viable options. Some of the best cryptos to invest in are Raven coin and Binance Coin. However, here we shall take a closer look at some cryptos that offer supply chain-specific features natively. 

The cryptocurrencies that are used in the supply chain have caught certain small but meaningful differences from the traditional cryptocurrencies. These differences are primarily in terms of the number of parties involved and the kind of anonymity that the platform offers. 

1. Blockshipping Container Platform Token 

Blockshipping is a Danish firm that is also one of the pioneers of blockchain solutions in the supply chain. Their platform is called Global Shared Container Platform (GSCP) and their currency is called Blockshipping Container Platform Token or CPT. The crypto is internally traded by the partners and the benefits are shared as per the revenue sharing model.  

Their aim is to decentralize the shipping industry. Currently, most of the tracking and paperwork is handled by the shipping companies and ports. However, the cryptocurrency company is founded by senior executives from Maersk, so they may have greater control over the regulations regarding this cryptocurrency.  

2. VeChain 

Vechain is one of the leading corporate cryptos. Unlike consumer cryptos like Bitcoin or Ethereum, they are dedicated to offering features that can work with industry 4.0 technologies like IoT, AR, VR. They offer specific proof of concept models for supply chain applications such as food safety, lifecycle assessment, luxury and consumer goods, and automotive applications. 

For instance, they offer a unique solution called ‘Automotive Passport’. This offering works over their crypto and seamlessly integrates the different stages of the product life cycle of automobile production, supply chain, retail, and service. Interested readers may look up more information on VET and VTHO, which represent their offerings as useful for supply chain management. 

3. Ambrosus 

Ambrosus is a relatively smaller company but offers very specific products for the supply chain management. They offer permissioned blockchain-based management of resources. Currently, it is used by over 500 decentralized operators in their own networks. Some of their clients are in the pharma and food industry. It can help in keeping track of perishable items by monitoring aspects like freshness and quality.  

Ambrosus helps in integrating the futuristic data coming from channels like RFIDs and IoT devices into the traditional ERP systems. They call this system Ambrosus Network or AMB-NET. Their crypto is called AMB.  

4. Doftcoin 

Doft is also known as the Uber of the trucking world. It doesn’t really act as an intermediary between the logistic operators and customers who need trucking service. Presently there are about 400,000 truckers that work in the United States. Doft aims to integrate this entire nationwide network. The taxi sharing services like Uber, charge the taxi operators for each ride. However, Doft has a different payment model. They charge about 4.99% fees from both parties. 

One of the unique ways in which Doft aims to differentiate itself from the competitors is through the use of blockchain. They have introduced a new cryptocurrency called Doftcoin. Doft had their ICO or the initial coin offering around four years ago on 27th November. They highlighted some key advantages of this new cryptocurrency. Firstly, all the transactions that take place using this cryptocurrency will be immediate. Therefore, the truckers and the customers would be saving on the time that it takes for the transfers to take place from one bank to another. Secondly, the Daftcoin interface is designed to be scalable. Air for location and geography would not be a constraint in the expansion of the Doft network. 

Opening Example – Maradol Papayas 

Let us get back to our opening example of papaya borne typhoid outbreak. It may not seem alarming at first. However, such outbreaks are more common than one may think. Forbes reports that such outbreaks that happen because of food, kill around two million people each year worldwide.  

The adoption of supply chain cryptocurrency can help us detect such outbreaks earlier by tracking the supply chain. It can also save lives by early detection of the sources. Therefore, we can isolate such sources and prevent further damage.   

Therefore, the application of blockchain also reduces the economic risks associated with supply chains. In another case, we also saw another outbreak that could have been handled much better-using supply chain cryptocurrency. In 2015 there was an outbreak of E. Coli bacteria at Chiptole Mexican Grill in Washington. This outbreak led to a decline in stock prices by over 42%. The company had to shell out Dollar 25 million as a federal fine as well. 

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Businesses around the world were jostled into an uncertain pandemic induced catastrophe. Supply chain related issues were usually not a matter of concern for CEOs. However, we saw some supply chain disruption examples in 2020 that have forced us to reconsider the fragility of our supply chains. 

Types of supply chain disruptions 

Supply chain disruptions can be in any form. However, it makes our analysis simpler if we typify them based on two factors: their severity and probability of occurrence. Firstly, we can easily bifurcate the disruptions based on their impact on the firm. We can classify events that have three levels of severity: low, medium, and high. Secondly, we can also look at events that have a higher probability of occurrence versus those that are less probable.  

Low severity events 

A low severity event is one that has few key features: firstly, it should only have a short-term impact.  One of the examples of such an event would be a weather-induced delay in transportation. Such events would impact the supply chain only in the short run. In the subsequent cycles, the supply chain works as usual. Secondly, it should have a low monetary impact. An event with a lower monetary impact like theft of a few items from a lot. Thirdly, it should have a lower downstream effect. For example, the impact of pilferage of a batch of goods would not impact the subsequent batches. It is a one-time event with no impact on subsequent cycles. 

Medium severity events 

The medium severity events are those that have an impact on the medium-term ranging from few weeks to months. If we consider an event such as damage to the warehouse, it is supply chain disruption examples. In such cases, the medium severity events will lead to losses that are reflected in the quarterly financial statements of a company. These events also have some downstream impact. However, their downstream impact would be moderate. For instance, disruption in the warehouse may increase the delivery time for the products. It could also impact other timelines like lead time.  

High severity events 

A high severity event would be most challenging for any supply chain manager. These types of events can have either long-term impact or higher monetary impact or down-stream impact on the supply chain or a combination of any of these. Firstly, certain disruptions can cause sustained damage for a long duration. These damages are typically reflected in the annual report as well. One of the examples would be covid19 induced impact on the supply chain. One of the long-term solutions to such supply chain disruption examples is through the development of resilience.

Firms relentlessly pursued to rectify the shock on their supply chains for several months. Secondly, we have events that have huge monetary impacts like a pandemic or extreme weather phenomena. A super-cyclone may destroy a factory leading to mega financial losses for a firm. Finally, we can also have high severity events that can throw the entire system into disarray. When the Covid19 struck the world, it not just caused the irregularity in the supply chain. It also led to the delays in delivery of products as well as major setbacks for R&D of new products as well.  

Likely events 

In a world of constant information, it is obvious that we need to focus our attention on pertinent issues. Supply chain management is no exception. While the managers are barraged with small and big issues, the question is what events typically draw the most attention? These are the high probability events. Organizational learning gives us a certain understanding of the internal and external environment. This helps us understand and predict such supply chain disruptions. The high probable events are therefore those events that are perceived to have a higher chance of occurring in a given time frame.

A simple example of this could the seasonality-induced disruption in the availability of raw materials. In an industry that relies on plant-sourced ingredients, a disruption in the crop cycle can mean a major setback. It can threaten production and therefore cause a major existential crisis. Similarly, weather phenomena like El Niño are also highly probable natural events. Similarly, the quickly escalating geopolitical problems in a country can also become highly probable based upon the past data on such situations. These events require a proactive action plan. 

Unlikely events 

While we have emphasized the importance of high probable events, we cannot undermine the low probable events in any case. These events, although less probable, can also be examples of supply chain disruptions. Examples of such events could be a global pandemic, terrorist attack, or a stock market crash. These events may not require immediate focus. Another perspective on this can also help us understand and deal with such events better. On an individual level, people fear terror attacks more than diseases like cancer. Although, statistically, the probability of the former is significantly lower. Managerial decisions are quite analogous to individual decisions. We tend to make common mistakes due to our biases.

One of the ways of avoiding these errors is to make scenario-based planning. When we assign a rough probability to an event and list down the possible course of action, we have potentially dealt with the issue before they occur. It is best to plan for the worst but one should have a fairly rational perspective towards the low probability events. Also, when the situation is dynamic and escalates, we can reclassify a low probability event into a high probability one. For instance, if we consider the case outbreak of a new highly contagious viral disease. In such a situation, we can proactively prepare for the disruptions in the supply chain and make alternative arrangements for procurement, transportation, warehousing, etc. to offset some of the impacts. 

Develop a proactive strategy towards supply chain disruption 

1. Continuous monitoring (not a system but as a culture) 

2. Scenario planning 

3. Predicting changes in demand and supply 

4. Speed of reaction 

5. Post disruption normalization

You may also consider doing an in-depth supply chain disruption analysis. This would help you calculate the total impact of the disruption.

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A global supply chain (GSC) is essentially a worldwide network of vendors and suppliers that enables a firm to create and deliver products and services. Therefore, global supply chain management (GSCM) is vital for modern firms.  

A trend towards globalization of supply chain 

Traditionally, firms attempted to have their network as close as possible. A vendor that is closer will be better known therefore there is lower risk. Also, a partner from the same geography will have similar laws and regulations making the transactions simpler. It may even reduce the transportation time. Although there are many advantages of domestic networks, firms are increasingly going global. The answer to this lies in the benefits of GSC.  Some of the key reasons for firms to look beyond their shores are the following: 

1. Reduction of risks 

2. Process efficiency 

3. Reduced costs 

4. Increase in quality 

One of the reasons why firms started looking beyond their shores was domestic unrest. The stock market crash of 1987 and 1991 pushed American firm Digital Equipment Corporation into seeking global supply chain partners (Arntzen, 1995). When you consider a global partner, you would also look at the issues common in that geography like domestic unrest, floods, earthquakes, etc. Secondly, firms expand their supplier chain network to increase process efficiency. Strategic GSCM helps us with this as well. Thirdly, GSCM also reduces the operating costs and cost of goods sold. Imagine the cost of a smartphone if it was fully manufactured and assembled in Oregon or Helsinki. Finally, GSCM also helps in improving quality and reduce defects. You can source parts from the factories that are compliant with your quality standards at a much lower price than domestic partners. 

Success and risk factors for GSC 

The success of GSC depends heavily on how it is developed and managed. First and foremost, the most important step is due diligence. A supply chain is only as strong as the weakest link. Secondly, financial planning is also vital when it comes to developing a GSC. Thirdly, we should analyze the operational issues for each of the nodes. Finally, a proper mitigation strategy needs to be developed to deal with any contingencies. Here are certain points to keep in mind: 

1. Supply chain resilience 

2. Strategy for any bullwhip effect  

3. Response velocity for the supply chain 

4. Sustainability requirements for the partners 

5. Upgradation plan for IT related to the GSCM 

6. Pro-active approach to improvements and innovations in global supply chain management 

The process has become more important than product in the age of sericitization (Mishra & Pani, 2020). A new source of sustainable advantage therefore lies in the ability to integrate the global resources and technology into a winning value proposition. 

Considerations for Global Supply Chain Management 

Firms that have successfully managed their global supply chain, consider some key drivers carefully. Operations and supply chain management systems help in managing the day-to-day operations of the firm. Some of these key issues are: 

• Network management to ensure delivery of services to customers are met on time 
• Location planning for the network nodes such as vendors, suppliers and warehouses 
• Minimizing the material in progress 
• Reduction of the three types of industrial wastage (Muda or physical waste; Muri or overburden and Mura or unevenness) 
• Financial considerations like tax benefits and deferred taxes 
• Consideration of the regulations and laws 

Overall, we can say that there are some broad areas that are part of the global supply chain management process.  Furthermore, a global supply chain must find a solution to the problems of minimizing cost, minimizing time, and maximizing quality. However, specific to the operational area, we have issues related to production planning, capacity and demand management, and logistics. 

Challenges of global supply chain 

GSCM is more difficult to manage when compared to the domestic supply chain. Firstly, the global network has higher costs. The transportation of some parts from Vietnam will obviously be more expensive compared to a local supplier. Usually, the transportation costs are offset by the lower cost of the product. However, with Industry 4.0 and increasing automation, domestic procurement may become cheaper. 

Secondly, there is a cultural barrier to international trade. Dealing with people from a different culture, time zone and language still remains a challenge. Add to that the problems faced in the third world countries. All of these problems not just make it difficult to develop an international network, it also makes it difficult to maintain them.  

Thirdly, there is also increased exposure to financial risks. When you trade across the border, you automatically take some forex risk. Some of the financial risks can be mitigated by hedging.  

Key performance indicators for GSCM 

The success of global supply chain can be assessed through a variety of means. Based upon the common theme we have discussed earlier; we can further develop some key performance indicators or KPIs.  

The post Global Chain Supply Management appeared first on Management Weekly.

An organization needs a set of suppliers and distributors to function properly. A supplier chain network is this interconnection between these entities. These entities help the organization in procuring raw materials. They also help in distributing the products. A McKinsey report says that an efficient supply chain network can reduce the working capital requirement by up to 25% and increase the EBIT by up to 4%.

Why do we need a supplier chain network? 

A Supplier Chain Network (or Supply Chain Network) helps the managers to design and optimize the movement of resources. There are two important factors to consider. The first is the reduction of the time. The second factor is the reduction of the costs. The entire supply chain network can be modeled mathematically. Subsequently, it can be optimized. This helps in designing a supply chain network that is fast, resilient, and efficient. 

A supplier chain network can help increase EBIT by up to 4% and reducing working capital by 25%

Apart from the traditional requirements of time and cost, there are two additional requirements. These two requirements are relatively new in terms of supply chain management. However, they are becoming more and more important. 

1. Risk mitigation. 

2. Sustainability. 

Nevertheless, the key takeaway from this is that supply chain network modeling is a very involving process. Also, it has huge implications for the firm’s profitability. Automation of processes also helps in reducing the risk and managing uncertainty.

An example of a supply chain network. 

One of the best examples of a supply chain network is that of Intel. We shall trace the steps from the basic silicon crystal to a CPU as discussed by Sheffi in the book Resilient Enterprise. The first step in manufacturing starts with a Silicon crystal. Their first supplier is Toshiba Corp, Japan. They take a Silicon crystal and develop it into ingots and finally into silicon wafers. The Silicon wafers are about 30 centimeters in size. These wafers then reach Intel’s fabrication centers in the US. The actual chip manufacturing process takes place in these centers. They etch circuits into these chips. Subsequently, they forward it to Malaysia. This lab does the final assembly. They also do a quality check. They send it back to the US for distribution. 

This process may seem a little bit convoluted or confusing. However, it is important to maintain quality as well as to increase reliability. Each center that specializes in a particular task will churn out a much higher quality product than one center that does all the jobs. Other companies also use a similar model. A larger number of companies are embracing a global and diverse supply chain network. 

Internal factors  

Some of the key internal factors that affect the design and optimization of supplier chain network are: 

1. Key targets for supply chain KPIs 

2. Requirements from other functional areas of an organization. 

3. Resources available for transportation, storage, etc. 

4. Time constraints 

External factors 

An organization has constant interaction with the external environment. These factors are mostly macroenvironmental factors. They play a major role in shaping the supplier chain network. 

1. Regulatory benefits or restrictions 

2. Tax requirements 

3. Deferred tax liability 

4. Labor cost 

5. Subsidies, fines and surcharges 

These factors impact the cost of logistics. Therefore, they are factored in the model of supply chain network.  

Common issue in analysis of SCN

One of the most common mistakes is to neglect the distribution part of the supply chain. It is far too common to focus only on the supplier side and neglect the distributor side of the supply chain network.  

Firstly, the distribution system has physical equipment. Their performance degrades over time. This can reduce the performance and increase the cost. 

Secondly, the distribution systems also need to be modelled for their capacity. The distribution systems work most efficiently under certain range of workflow. This flexibility can be enhanced by having a distribution partner that allows for scaling of operations.  

Thirdly, we should factor in the demand forecasting for the supplier chain network on the distribution side. Scheduling and forecasting help in even out any unforeseen changes in the volume. 

The post Supplier Chain Network appeared first on Management Weekly.

Critical Path Analysis is also known as the Critical Path Method (CPM). We shall also look at a Critical Path Method example to highlight this tool. We use this tool in project management to ensure timely completion of the project.

Origins of the Critical Path Method

The critical path method traces its origin to the chemical company DuPont. In 1956 DuPont entered into a joint venture with the computer company Remington Rand Univac. They developed the Critical Path Method. We use this to understand the relationship between different activities of a project. Another similar concept is the arrow diagram for the tasks.

They developed the stool to understand how the activities affect the project timeline. They used the UNIVAC-1 computer to program and test this new method. Consequently, they used it for the deployment and decommissioning of different plants of the DuPont corporation.

What are the advantages of CPM?

There are several advantages to the CPM. We shall see some of the most common advantages of the critical path analysis:

1. Critical path analysis helps us ascertain the minimum and maximum time that a project can take.
2. CPM helps in the timely completion of projects.
3. It also shows a visual representation of the entire project activities.
4. It gives us the details of all the activities and the schedules that need to be met for these.

Critical Path Method overview

• Enlist all the activities of the project
• Ascertain the sequence of the activities.
• Also, mark the activities that need to be done sequentially.
• Subsequently, we mark the activities that could be done parallelly.
• Represent the activities in the form of the network diagram.
• Name each activity as an alphabet. We should mark the alphabets sequentially to avoid confusion.
• Draw the 7 box figure for each activity.
• Next will list the early start and early finish as well as the duration for each of these activities.
• Once this process is done we will retrace the parts backward.
• While reducing the path backward we will look into the late finish and late start times.
• Meanwhile, we will also write down the slack time for each of these activities.
• Thereby we complete the entire CPM diagram.

A simple example to highlight the chain of activities

Let us consider a very simple process. Let’s take the example of applying for a job. We know that even this simple ‘project’ has many small activities. However, let’s look at a very simplified version of this process. This should give us an understanding of the concept of the activity chain.

Firstly, you need to find appropriate jobs.

Secondly, you need to to evaluate the job description.

Thirdly, you to make a checklist of all the required documents to apply.

You attach the required documents and send it to the recruiter.

In the most basic sense, the total time that would be required to apply would be the sum total of all these activities. However, the real-life situation is generally more complex. Also, there will be several tasks that ‘need to be’ or ‘can be done’ in parallel. This requires a proper method to estimate the required time.

Further thoughts

When we look at real-life project examples, then there is no certainty of completion. You would have a range of time for each activity. They would be optimistic estimates for the time. Additionally, you would also have a pessimistic estimate of the time. The minimum amount of time to complete a task is an optimistic estimate. On the other hand, the presence of the customer is the maximum time it would take to complete the task.

Additionally, when there is a sequence of activities they have interdependence on each other. In simple words, you would also have an early start time for each activity and late start time. Early start time would be applicable when the earlier tasks have been completed on time.

On the other hand a late start time would be applicable when the previous tasks have not been completed on time.

Critical Path Analysis definition

What are the supreme source of knowledge in project management is the Project Management Book of Knowledge. This is also known as the PMBOK.

“The Critical Path Method is the sequence of scheduled activities that determine the duration of the project”

PMBOK (Project Management Book of Knowledge)

Understanding CPM or CPA intuitively

The maximum amount of time that a project can take would depend on the longest chain of activities. for instance, the latest consider a very simplified construction project.

We can see that we can divide the entire process into two different paths. The longest path is the one on the bottom. In this project, the construction for both the towers can be done simultaneously as seen in this diagram. However, Tower A will take 8 months while Tower B will take 12 months. Also, the inspection can be started only when both towers are ready.

Therefore, the total time taken for the completion would be driven by the second path. This second path is called the critical path. We can see that it is marked in red. Therefore, we can say that the project will be completed in a minimum of 3+12+1= 16 months.

Critical Path Method Example

Critical path method: check out this very well illustrated Critical Path Method Example. It is shared on Youtube by iZenBridge Consultancy Pvt Ltd. You can watch the video below:

Action steps after doing CPM

Once you find the critical tasks you can work upon them. Once the Critical Path Analysis is done, the manager can work upon certain areas. Usually, the bottlenecks of the project. Managers ensure timely completion of the bottleneck tasks. Any delay in the critical activities means a delay for the entire project.

Secondly, you can deploy more resources to complete the critical tasks.

Thirdly, you can restructure the set of activities to ensure that the constraint is lifted.

Critical Path Method: Example of managerial actions

We have already discussed the importance of finding critical tasks. The operations manager can ensure the availability of resources for the completion of these tasks on time.

Now let’s see at some of the other works of the operations manager:

Ensuring timely completion

The project manager can shorten the time duration for the project by managing some of the important constraints. Firstly, they need to assess which activities have got slack. Secondly, they need to look at ways of meeting the deadline.

Those tasks that big that can be done parallelly, need to be scheduled on parallel paths. If you reduced the slack, project timelines can be compressed.

Resource balancing

Additionally, certain tasks that take more time can also be done faster. This is known as crashing. Usually, this involves deploying more resources to complete the same task. However, not all tasks can be crashed. Secondly, it could hamper the quality of the work. In these cases, there is an alternative strategy.

We can overcome the bottlenecks through the balancing of resources. This is also known as resource-leveling. However, this could change the critical path. Thereby it will lead to a new critical path for the project.

Some of the drawbacks of Critical Path Method

Critical Path Method does not take into account a lot of factors that could hamper the schedule of the project.

Firstly, it is difficult to estimate the impact of human resources. Secondly, certain activities cannot be estimated beforehand. Thereby making CPM very difficult. Thirdly, critical path analysis can be very complicated for big projects that are comprehensive.

It also does not talk about the remedial steps in case the project gets delayed.

The post Critical Path Method Example appeared first on Management Weekly.

What is brainstorming?

Brainstorming is a process where team members can pool together their ideas to find solutions to business problems. It gives us insights during data gathering as well as planning. Brainstorming in Project Management helps generate multiple ideas. We can reach a consensus on a specific solution from these ideas. There are 3 major types of brainstorming techniques. You can check out our guide to choose the best one.

This technique is widely used during the ‘Project Charter’ phase. Project Charter is a document that lays out the objectives of the project and a plan to achieve that. The Project Manager creates the Project Charter. This document authorizes the PM to formally start the project.

The key to successful brainstorming is a conducive atmosphere. An atmosphere where the team members feel relaxed. They should also feel inspired and empowered. Freedom to express is a critical for the success of this method.

Why is brainstorming in Project Management important?

• It helps in developing a better plan for the project
• Sharing of ideas help visualize potential problems with the project
• It also helps in adding new ideas
• Brainstorming in Project Management(PM) may generate easier and faster solutions to problems that seem difficult for one person.
• It can help in informing a risk mitigation strategy

Nominal group technique vs Brainstorming

Both of these activities are group activities. However, there are some subtle differences. The nominal group technique includes the essential steps of brainstorming. Additionally, it also has a few extra steps

• The participants provide a ranking for each of the ideas
• Subsequently, the participants benchmark the ideas based on ranking.
• Additionally, there are discussions regarding the importance of the ideas.
• It leads to higher quality solutions
• Further, it also leads to higher confidence in the solutions
• Subsequently, the participants have higher motivation in project execution

Problems with brainstorming in project management

Here are three main types of problems:

1. Lukewarm participation
2. Reactive behavior
3. Powerplay
4. Non-confrontational behavior
5. Appeasement behavior

How to deal with these problems?

How to do brainstorming in project management?

Preparation phase

An ill-prepared brainstorming session may not provide the same result as a well prepared one.

Firstly, the facilitator of the session(generally the Project Manager) must decide on the topic of the session. The facilitator may call for brainstorming to generate solutions for the problems of the client. Alternatively, they may call it to prepare the project charter.

Secondly, the facilitator must also prepare the list of members of the brainstorming panel. Typically the session includes team members, the clients, external consultants, subject matter experts, and other stakeholders.

Thirdly, the facilitator should also decide whether the session would have a more relaxed feel or a focused one. The first method is the free-form brainstorming. The second method is a structured brainstorming.

Brainstorming phase

Idea generation

1. The facilitator welcomes all the participants to the session
2. They debrief the participants about the topic of discussion
3. They reassure the participants to share their ideas openly.
4. Ensure there is no criticism or judgment of ideas during the idea generation.
5. One person records the ideas

Interesting fact: contrary to popular belief experts have a higher tendency to think ‘inside the box.’ Ensure that you have people who are not related to the topic to get some wild but innovative ideas!

Idea analysis

Ideation can continue till there are enough ideas or till there is a saturation of ideas. The fecilitator stops the ideation session.

Subsequently, the facilitator asks the participants to elaborate and analyze the ideas.

Method 1: go from first idea to the last idea.

• One by one. Participants share their views on each one of them.
• The team repeats the process to reduce the number of ideas.
• Then, the team selects the most suitable idea or ideas in the end.

Method 2: Nominal Group Technique

Alternatively, the facilitator may take a step forward. They can use the NGT method. As we have discussed earlier, NGT is better than brainstorming. We can even use NGT across multiple groups.

Post brainstorming

The project manager and other senior executives should get together. The project manager can arrange an internal discussion. They can compare the possible solutions with respect to the evaluation criteria. Also, discuss the pros and cons. This will help them present the findings to other stakeholders. It is better to present multiple ideas to the clients. They get a higher sense of ownership in the project.

FAQs on Brainstorming for Project Management

The post Brainstorming in Project Management appeared first on Management Weekly.

Gantt chart is a visual representation of tasks and their inter-dependencies. People have been trying to improve upon this productivity tool ever since it was made. We review and find out what features does Instagantt offers for the creation and management of Gantt charts.

What is a Gantt Chart?

A Gantt chart is a project management tool. In fact one of the most popular tools. It shows all the important activities related to a project in a sequence of tasks that needs to be completed one after another. Each activity is shown in the form of a bar.

• A sequence of activities is seen from the overlap between the bars
• The beginning of a bar shows the starting point of an activity
• On the other hand, the end of the bar shows the end of an activity
• The length of the bar signifies the duration

Features of a good Gantt chart software

1. Intuitive: Project management is already a fairly complicated affair. It really helps if you do stuff faster and easier(especially if you are a beginner)
2. Economical: It is very difficult to produce high-quality software for free. Therefore, most of the software are paid. Still, we have some awesome free Gantt software like the ‘Gantt project’ and ‘Wrike.’
3. Templates: It saves a lot of time when you don’t have to start from scratch. Some Gantt Software come with free templates for different business functions.
4. Integration: Some software provide very good integration with other tools
5. Collaboration: It really helps if you have a team where people can view and edit the Gantt chart, check out the progress, and update.

Instagantt

The motto of the company is “Gantt Charts made easy.” We are here to find out how true is the motto. Instagantt was set up in Chile in 2013. It is a privately held company with less than ten employees. You can use the service at their official website.

Instagantt pricing

What’s good about Instagantt?

1. Excellent integration with Asana. If you are an Asana user, you don’t even need to sign up. You can sign up to Instagantt using the same credentials automatically. Furthermore, both these apps can ‘talk’ to each other. The changes and settings are synced between both.
2. Easier task creation. The tasks that you create are automatically populated on the timeline. You get a Gantt chart where the tasks are automatically sorted as per their start date. You can then drag them as per your requirement.
3. Easier editing. Editing the tasks inside the interface is as easy as working with MS Excel. You can simply adjust the task time, assignees, start date, end date, progress much easier than MS Projects.
4. Export options. The best way is to have other team members as collaborators. However, a lot of time we just need to send the project over to a client or a vendor to provide an estimate. In this situation, you can export images, pdfs or web views of the project online.
5. Color coding. While this is a staple for advanced project management Softwares, this feature is sometimes missing in the cheaper or free Softwares. Nevertheless, it is immensely helpful.
6. Cloud-based. Cloud-based software is the future. Especially for mobile managers, it is really handy. You can create, view, and edit everything on the go without installing ANY software.
7. Multiple Projects on the same chart. You can add up to 20 different projects to the same Gantt chart.

What’s not so good?

1. Using Asana is necessary for certain tasks. Some of the functionality related to workspace and collaboration needs to be managed in Asana.
2. A dearth of templates: while there are some templates are provided.
3. Some users have reported problems in time-sharing of tasks.
4. Cloud-based apps can be a pain with slower connections. The same is the case with Instagantt. You would be seeing two revolving geats on your screen even for simple things like creating editing a task.
5. Bugs. Unlike mature software, Intagantt seems a bit buggy at times. Sometimes the edits are not registered.
6. Managers cannot handle more than 20 concurrent projects.
7. Lack of automation. Some project management software allows better automation features by linking with other APIs and apps. Automating processes is critical to ensure efficiencies.
8. If you use the standalone version of Instagantt, you cannot integrate it with other apps like Trello or Asana.

The post Instagantt: how good is it? appeared first on Management Weekly.

We are at the crossroads of a major transformation where we are automating processes. Whether you call it Industry 4.0 or not, it is difficult to remain unaffected by these new transformations. Although algorithms, data science, and automation have become boardroom topics now. It can indeed be overwhelming to make sense of these technologies for a manager.

In this article, we take a look at what is the automation of processes and how businesses can implement it to extract value. Here we primarily discuss cognitive automation, not industrial automation. You may check out our other article on industrial automation here.

Business Processes – as we know it

Business Processes are a set of tasks that are essential to delivering value to the customers. A process is a way to convert the input into the output. If we consider a simple business model of a barber. The input is the effort of the barber while the output is the restyled hair. In other words, trimming the hair is a process in this business model.

Adam Smith, 1778: the origin of business process analysis

Consequently, in a more nuanced business model, there would be several processes that come together to deliver value to the customer. Adam Smith was the pioneer who started analysis of business processes. He explains the step by step creation of a pin at a pin factory. Using this example he posited that production can be chunked into a set of processes.

Modern Take on Business Processes

Business Process Management software Kissflow lists down key attributes of a well-defined business process as:

Goals of Automating Processes in Business

Any business process primarily aims to create value for the customer. In this process, it also creates value for the businesses. In a survey, it was found that about 74% of the managers believe the primary objective of automation is to increase process quality. The objective of process management is listed below:

1. Reduction in error rate – a reduction in error rate leads to higher quality control, higher reliability, and lower bottom line for the firms.
2. Reduction in process time – another important objective towards process improvement is a reduction in the processing time.
3. An increase in production output – an efficient process is one that can create higher output for the same input. This is possible through an increase in the efficiency of the process
4. Process Flexibility – processes that can adapt faster can lead to smaller lead times. It can also lead to a faster time to market for new products.
5. Reduction in cost – any reduction in input costs directly impacts the bottom line for the firm.

How business automation aims to solve these problems.

Firstly, automation holds the promise of reducing error rate. Humans are prone to errors. Especially, when we do menial and repititive tasks. Machines are the way to go to alleviate the painful work from humans.

Secondly, the benefit of automating processes is time saving. Automation also means that machines would take much less time than humans to do the same task. This is true for both physical as well as mental tasks.

Thirdly, it leads to increase in the productivity. Machines don’t replace humans, they also assist humans in doing work faster and safer.

Fourthly, automation allows to make the processes more flexible than ever.

Fifthly, it also allows a reduction in human labor costs. We are moving towards an era where machines would partially replace human labor. This reduced the process costs.

Automating Processes – The New Competitive Advantage

The most common imagery of automation involves a robot. Alternatively, we may think of automation in factories where chemical processes are automated. This kind of process automation is called industrial automation. Here we are specifically talking about cognitive automation.

A survey from Deloitte conducted in 2019 found out that 58% of the executives had initiated automation in their firms and the number of projects had almost doubled for most of the firms.

Automation Use Cases for a Firm

Automating processes is an essential step towards Industry 4.0. Let us discuss some key use case scenarios. The application of automation would be governed by the functional areas of management.

BPA Methodologies

Strategy and Innovation – incremental changes, redesigned business models, business process re-engineering, sustainable competitive advantage

Marketing– CRM 2.0, Contextualized marketing, personalized marketing, automatic campaign management, Customer support automation

HR : employee payroll management, automatic screen and hiring assistance, turnover prediction

Operations: process automation, robotic process automation, supply chain automation, higher control over the production

Finance: fraud analysis, automate4d auditing, bottom, and top-line monitoring, risk mitigation

Challenges of Implementation

1. Exploitation over exploration
2. Lack of motivation
3. Executing failure
4. The human problem, after all
5. Fear of jobs
6. getting everyone on board
7. Stakeholder ownership

Examples of Business Process Automation

There are several use cases for BPA. Some of the prominent ones are discussed here.

Automating Processes in Operations Management

Automation can help in reducing costs for the firms. This requires higher commitment from the top management. The expenditure

The most noteworthy point is that it can lead to around 21% lower labor costs as per a survey by Hackett. The avenues where automation can be used in operations management are:

1. e-procurement
2. lifecycle management
3. automated invoicing
4. supplier relationship management
5. enhancing digital engagement

There are several operating benefits of automating processes for Operations Management:

• They can enable data-driven insights. Automated systems offer a better perspective due to larger volumes and a higher quality of data.
• Enhanced accuracy
• Transparency
• Enables real-time data as data capturing, processing, and updating occurs much faster than manual processes.
• Increased compliance
• Reduced operations risk

Process Automation in Marketing

Companies are leaveraging automation in different areas of marketing. Some of the important processes that are automated are : lead management, customer service and CRM.

Facebook uses DeepText to analyze data. This helps it generate contextual meanings of words. Their algorithm sifts through the posts to extract the exact intention of the sentences, their sentiments, and labels for brands, people, and objects. A mathematical concept called ‘word embeddings’ is being used to converge similar words like ‘brother’ and ‘bro’. This has helped them to provide contextual advertisement delivery to potential customers.

The applications of automating processes in marketing are:

• Sales Funnel management – Services like Mailchimp, customer.io can streamline the lead generation, email management, and lead nurturing for the marketing team.
• Social Media Management – apps that are based on Twitter and Facebook APIs can like, post, and comment on your behalf. All without human interventions
• Automatic content delivery systems – Feedly and other content delivery tools can work in automatic content delivery systems. As a result, they can help automate tasks that earlier required human interventions in marketing.

Automating Processes: BPA vs RPA – What’s the difference?

• Above all, Business Process Automation and Robotic Process Automation are closely related terms, they can often be confused.
• RPA is automation where communication and streamlining work is done on behalf of humans by software.
• BPA is automation where repetitive work is done by software.

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