PROJECT REPORT

(OPERATIONS MANAGEMENT – 2)

ACHIEVING SUPPLY CHAIN COMPETITIVENESS

Operations Management
 Achieving supply chain competitiveness

Abstract

In today’s dynamic world, for a company to be successful in selling its product and making it count, the
essential things are the learning and trust amongst the parties and also the maintaining relations with
the suppliers so that the best available resources are obtained. Also it is seen that the competitiveness
has forced the trading companies to change their positions on goods and delivery services supply chain
by extending the service business through interaction through customers. It becomes essential to
explore the learning and trust that is prevalent. It is very imperative to make sure the service provided
to the customer is important and in tune with the demand that the buyer has. It is important to build a
trusting network with the designers and manufacturers in order to add value to the dramatically shifting
industry features. The building of learning and trust and also the proper providing of service to the
customer in tune with what he actually demands helps to ensure the competitiveness in the supply
chain.

The main criteria’s however on which the further discussion would take place are the importance of
learning and trust factor so as to make use of the competitive advantage and also the relationship
between the supplier and the buyer through providing the proper service.

Introduction

The high quality of demand of the market these days had sort of compelled the various customers to
move from just the manufacturing of the various products to providing services to the customers
accompanied by the solutions and such has acted in favor of the various companies, for example,
International Business Machines(IBM) , takes the supply chain management based on computer
demands as a new strategy and offering more service when selling the hard product the change of the
operation mode from product to service helps IBM to acquire the advantage in the competitive market.
However coupled with that there is also an underlying factor of management of trust and learning in the
flow of information, processes, products, services and knowledge from supply location to the delivery
location. Also alongside the integration, the main focus remains the development of partnership and
trust between the buyer and the supplier which provides impetus to the value co-creation and
interaction and co-ordination with each other, and this gives way to the creation of value for the
customer that can be felt.

2 Also when it comes to the trust factor, the perceived trust of organizations towards suppliers, customers
and other specialists maybe different from each other but however it underpins the dynamics that is
present in the supply chain. Also a noticeable fact remains that the standard set in logistical flows of just
in time is based on the ability to be responsiveness and agile by continuous learning. Trust is a very vital

Operations Management
 component given that it not only lowers transaction costs as often acknowledged or facilitates
investments in relation to the specific assets but also reasserts the Asian Cultural and institutional
context, which includes a comprehensive usage of the learning system. The Asian experience is relevant
in this context as it is suggestive of the fact that the elements of supply chain competitiveness such as
speed, ease, predictability and quality can be sustained by further learning. Goes without saying that
learning has become even more important for the companies given that there is a high requirement for
the customization of the products and understanding and managing the services. Learning and trust can
be factors that help to lay the foundations for the long term supply chain competitiveness.

The Theory in practice

There has been a paradigm shift in the way we see exchange of goods happening, for example the
management manufactured output exchange is considered important but however greater emphasis is
given on the exchange of services which shows the creation of values in the increasingly competitive
environment as service is not only a part of the total product based offerings but also the basis for the
business. And the greatest thing that remains is that value is not a thing that is produced or sold but is
co-created amongst partners. The competitive advantage can be created not only based on the tangible
resources but also the intangible ones such as knowledge and service.

The three factors (given by George 1994) that contribute to sustained competitive advantage are:

 Inside out- It includes the human resource management, manufacturing, logistics and other
transformation activities.
 Outside in- This includes the anticipating of the market requirements, creating durable
relationships with channel member, etc. thus it is basically means the supplier’s ability to meet
the demand market.
 Spanning- Spanning is the integration of the inside out and outside in by strategy development
and interaction with the customer.

Physical supply is the same as the inside-out and demand management us the same as outside-in.

Also in relation to above mentioned, the strategic integration of lean, responsive and supply chains
underpins a new type of relationship among the stakeholders the important elements of trust are:

 Reliability and consistency

 Openness and flexibility
 Ability and expertise
 Long-term orientation
3  Benevolence and commitment
 Value congruence and social responsibility orientation

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 However the basis of trust is anchored in the non-contractual Meta -relationships of maintaining
integrity ability and goodwill and however in the Asian culture, trust is the basis of relationships
(Chatterjee and Pearson, 2002). In any industry, for a particular company to build a new product, a lot of
components are required and such are supplied by the trusted suppliers who can make “customer-
specific” investments in supplying components that are tailor made according to the demand ad indeed
specific and differentiated. This kind of specific understanding requires trust and such definitely gives
away to competitive advantage.

With respect t the service provider model we see that the buyer realizes the value of the firm through
offering the solutions based on interaction activity. The supplier should have in this case had a dynamic
capability which is the demand management which can help in the satisfying of the demand of the
buyer. Dynamic capability can referred to as the set of specific, analytic processes embedded in firms
that is used to match and create market changes and it includes the strategic and organizational
processes such as the manufacturing, product development and alliance formation. The key idea
however remains that the supplier has to achieve improvements in the capability level.

However when it comes to the trust part, we see that it is mostly embedded in the cultural setting. The
key insights however relating to this are:

 Matching the ability and expectations which is often referred to as the “process based
perspective”.
 Trust in a way implies to the cooperation or socio cultural embedded perspective.
 There is also a calculative trust that arises out of the economic imperatives.

Collaborative learning in supply chain

The learning in an organization can be viewed from two perspectives which are:

 Organizational learning: This emphasizes on a series of critical assumptions inherent in the

transference of knowledge from individual stakeholders to a common pool.
 Social-process perspective: This is the dynamic process through which the incremental
performance can improvements can be achieved.

The learning in a way also helps in fostering the relationship between thee buyer and seller and such
actually aids in the lowering of the transactional cost. Thus he buyer in this case has to balance the
benefit and cost to interact with the supplier so as to improve its performance.

The size of the firm is an important factor that actually decides on a lot of factor. Strategic fit is an
important factor and it is seen that it is important for a large buyer as the strategic fit can help in
reducing the transaction cost.
4 Important factor that the size plays

The size of the firm is often an important experience that determines the relation between the buyer
and the seller. A supplier is required to offer valuable, rare, difficult to imitate and non-substitutable

Operations Management
 resources the supplier can have a better competitive advantage. However, for a buyer, say if the firm
has a smaller size then it requires the demand management from the supplier as it has lesser resources
to its disposal but however for a bigger firm it doesn’t require any demand management as it has a great
number of resources to its disposal. Since the resources of a small supplier is less, its ability to fight
back also decreases and so it requires the service supplier to help them to respond to the uncertain
market demand. For large suppliers however, given the large amount of resources they have at their
disposal, they have the ability to fight back risk and do not require any help from the supplier. Also say
for a large buyer, there are maybe a lot of transactions between the supplier and the buyer, so the
strategic fit helps to reduce the transaction cost between them.

Analytic Hierarchy Process (AHP)

It is a mathematical tool for solving problems and has become popular among the management
personnel. The method helps to understand the structure of the problem and the situations that hinder
the manager while he solves the problem.

The method looks problems in three parts:

 The first is the issue that needs to be solved.

 The Second are the alternate solutions that are available for the problems to solve.
 The third and most important is the criteria used to evaluate the alternative solutions.

In AHP we see that there are several criteria involved, but the magnitude of each criteria is not equal.
Suppose we have to choose between two restaurants, the taste and waiting time are two factors for
you. In your perception both the factors are not on equal terms. Maybe the taste of food is far more
important for you rather than how fast you can get the food on the table.

Hence when evaluating we need to attach weights to different criterias to ensure that we have reached
to the correct conclusion.

AHP is the method of comparing the sort for dealing with complex decision-making problems that is
proposed by A.L.Saaty who is the professor of Pittsburgh University in the United States in 1970s
[12].The core idea of AHP is to construct a hierarchical analysis model, and then compare the elements
each other in the same layer to get the importance order that lowest is relative to highest layer. First,
we need to establish the judgment matrix, by comparing the elements each other in the same layer
from the first index to the last one, we can get the judgment matrix according to the standard method
.The value of the matrix can be found in Table 1.

SCALE DEFINITION
1 Two elements are equally important
3 One element is a little important the Other
5 5 One element is obviously important than the other
7 One element is more important than the other
9 The element is much more important than the other
2,4,6,8 Intermediate Values

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 TABLE 1

AHP EVALUATION USING RENEWABLE ENERGY INDUSTRY

Renewable Energy Industry in India- the industry that signifies robust investment and growth

Overview

Given the huge population that India presently has, the need for power is quite evident and an
important thing. But however, the conventional sources of energy if used to generate power, a deal of
harm is caused to the environment. So as to offset the same, the alternative that can be chosen is the
renewable energy.

The Indian renewable energy sector is the fourth most attractive renewable energy market in the world.
As of October 2015, India ranked 5th in the installed renewable energy capacity. Having a growth of
CAGR 19.5% over the few years and a support from the government, the renewable energy sector has
seen a robust growth in terms of the investments.

As India has earmarked itself to meet thee energy requirements on its own, which is 15,820 TWh and
thereby the renewable energy sector becomes very crucial. The other reason being the government
having ratified the Paris Agreement seeks to meet its power goals by creating less pollution.

As of October 2018, the total renewable power installed capacity that India has, excluding Hydro stood
at 73.36 GW. As of October 2018, generation capacities for Waste to Energy, Biomass Gasifies, SPV
systems stood at 175.28 MWeq, 163.37 MWeq and 767.51 MWeq, respectively.

The northern part of India is set to be the hub for the renewable energy as it has a potential capacity of
363 GW.

Investments

According to the data that is released by the Department of Industrial Policy and Promotion, the Foreign
Direct Investment inflows towards the non-conventional energy sector between the period April 2000
and June 2018 was US$ 6.84 billion. Taking all data into account the total amount of investments that
are being made into the sector is about US $ 42 billion since 2014. The investments made towards the
clean energy sector in the first half of 2018 stood at US$ 7.4 billion.

Major developments that provide an impetus to the energy sector include:

 Interstate distribution of wind energy.

6  Installation of solar capacity energy, at the rate of 1 M every hour.
 Solar Sector received investments of over US$ 10 billion in CY 2017.

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  Private Equity (PE) investments in India's wind and solar power have increased by 47 per cent in
2017 (January 1 to September 25) to US$ 920 million, across nine deals, as compared to US$ 630
million coming from 10 deals during the corresponding period in 2016.

Government Initiatives

The following are the initiatives that are undertaken by the government so as to boost the growth of the
renewable energy sector in India:

 A new hydro power policy is drafted for 2018-28 so as to ensure growth.

 Investment plans to the tunes of US$ 238 on ultra-super critical technologies for cleaner energy
extraction from coal.
 The Indian Railways is taking increased efforts through sustained energy efficient measures and
maximum use of clean fuel to cut down emission level by 33 per cent by 2030.
 Ministry of New and Renewable energy has given custom and excise benefits to the solar
rooftop sector so that cost of setting up comes down and such boosts growth.

Achievements in the Sector so far

The following are the achievements that the renewable energy sector in India has witnessed owing to
the efforts that are being put in:

 The solar energy capacity has increased a manifold eight times between FY 2014-18. India added
record 11,788 MW of renewable energy capacity in 2017-18.
 A total of solar 47 parks with the total capacity of 26,964 MW have been planned out of which
4195 MW has been commissioned.
 Power generation from renewable energy sources (excluding large hydro) in India reached
record 101.84 billion units in FY18 and have reached 81.15 billion units between Apr-Oct 2018.

METHODOLOGY:

i. Describing the decision problem

ii. Modeling the decision problem into a hierarchical structure
iii. Evaluating the elements by pair wise comparison to obtain weights of elements
iv. Calculating weights of all elements in the hierarchical model
v. Ranking and selecting the best alternative
7 vi. Consistency check

SELECTING THE BEST SUPPLIER FOR THE COMPANY

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 TABLE 1: COST

SOLAR WIND BIOMASS

SOLAR 1 1/7 1/8
WIND 7 1 2
BIOMASS 8 1/2 1

TABLE 2: EFFICIENCY(EFF)

SOLAR WIND BIOMASS

SOLAR 1 1/7 1/5
WIND 7 1 1/2
BIOMASS 5 1/2 1

TABLE 3: ENVIRONMENTAL IMPACT(EI)

SOLAR WIND BIOMASS

SOLAR 1 1 5
WIND 1 1 5
BIOMASS 1/5 1/5 1

TABLE 4: INSTALLED CAPACITY(IC)

SOLAR WIND BIOMASS

SOLAR 1 1/9 1/5
WIND 9 1 5
BIOMASS 5 1/5 1

TABLE 5: PAIR WISE COMPARISON

COST EFF EI IC
COST 1 1 2 4
EFF 1 1 1 2
8 EI 1/2 1 1 1
IC 1/4 1/2 1 1

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 SOLUTION:

1. COST
 Summing up Values of all the columns.

SOLAR WIND BIOMASS

SOLAR 1 1/7 1/8
WIND 7 1 2
BIOMASS 8 1/2 1
16 1.6 3.1

 Dividing the columns with their respective column total.

SOLAR WIND BIOMASS

SOLAR 1/16 (1/7)/1.6 (1/8)/3.1
WIND 7/16 1/1.6 2/3.1
BIOMASS 8/16 (1/2)/1.6 1/3.1

 Finding the final value and average of rows

AVERAGE
SOLAR WIND BIOMASS
SOLAR .0625 .09 .04 .17
WIND .437 .625 .65 .57
BIOMASS .5 .3125 .32 .38

2. EFFICIENCY(EFF)
 Summing up Values of all the columns.

SOLAR WIND BIOMASS

SOLAR 1 1/7 1/5
WIND 7 1 1/2
9 BIOMASS 5 1/2 1
13 1.6 1.7

 Dividing the columns with their respective column total.

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 SOLAR WIND BIOMASS
SOLAR 1/13 (1/7)/1.6 (1/5)/1.7
WIND 7/13 1/1.6 (1/2)/1.7
BIOMASS 5/13 (1/2)/1.6 1/1.7

 Finding the final value and average of rows

AVERAGE
SOLAR WIND BIOMASS
SOLAR .08 .09 .12 .1
WIND .54 .625 .3 .5
BIOMASS .4 .3125 .6 .44

3. ENVIRONMENTAL IMPACT(IC)
 Summing up Values of all the columns.

SOLAR WIND BIOMASS

SOLAR 1 1 5
WIND 1 1 5
BIOMASS 1/5 1/5 1
2.2 2.2 11

 Dividing the columns with their respective column total.

SOLAR WIND BIOMASS

SOLAR 1/2.2 1/2.2 5/11
WIND 1/2.2 1/2.2 5/11
BIOMASS (1/5)/2.2 (1/5)/2.2 1/11

 Finding the final value and average of rows

AVERAGE
SOLAR WIND BIOMASS
SOLAR .45 .45 .45 .45
WIND .45 .45 .45 .45
BIOMASS .09 .09 .09 .09
10

4. INSTALLED CAPACITY(IC)

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  Summing up Values of all the columns.

SOLAR WIND BIOMASS

SOLAR 1 1/9 1/5
WIND 9 1 5
BIOMASS 5 1/5 1
15 1.3 6.2

 Dividing the columns with their respective column total.

SOLAR WIND BIOMASS

SOLAR 1/15 (1/9)/1.3 (1/5)/6.2
WIND 9/15 1/1.3 5/6.2
BIOMASS 5/15 (1/5)/1.3 1/6.2

 Finding the final value and average of row.

AVERAGE
SOLAR WIND BIOMASS
SOLAR .07 .085 .032 .187
WIND .6 .77 .8 .72
BIOMASS .33 .15 .16 .21

5. PAIR WISE COMPARISON

 Summing up Values of all the columns.

COST EFF EI IC
COST 1 1 2 4
EFF 1 1 1 2
EI 1/2 1 1 1
IC 1/4 1/2 1 1
2.75 3.5 5 8

 Dividing the columns with their respective column total.

11
COST EFF EI IC
COST 1/2.75 1/3.5 2/5 4/8
EFF 1/2.75 1/3.5 1/5 2/8

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 EI (1/2)/2.75 1/3.5 1/5 1/8
IC (1/4)/2.75 (1/2)/3.5 1/5 1/8

 Finding the final value and average of row.

AVERAGE
COST EFF EI IC
COST .37 .29 .4 .5 .39
EFF .37 .29 .2 .25 .28
EI .18 .29 .2 .125 .2
IC .09 .15 .2 .125 .14

ROW WISE AVERAGE OF COST, EFFICIENCY, ENIVRONMENTAL IMPACT, INSTALLED CAPACITY.

COST EFF EI IC
SOLAR .17 .1 .45 .187
WIND .57 .5 .45 .72
BIOMASS .38 .44 .09 .21

ROW WISE AVERAGE OF COST, EFFICIENY, ENIVORNMENTAL IMPACT, INSTALLED CAPACITY FROM
PAIRWISE MATRIX

AVERAGE
Continuous .39
Improvement
Innovative .28
Capacity
Production .2
Capacity
Information .14
Level

MULTIPLYING THE ABOVE TWO MATRICES:

SOLAR =0.17*0.39+0.28*.01+0.2*0.45+0.14*0.187 = 0.0507+0.0028+0.09+0.02618= 0.16968

WIND = 0.57*0.39+0.5*0.28+0.45*0.2+0.72*0.14 = 0.2223+0.14+0.09+0.1008= 0.5531

12 BIOMASS = 0.38*0.39+0.44*0.28+0.09*0.2+0.21*0.14 =0.1482+0.1232+0.018+0.0294= 0.3188

Among the all the renewable energy resources, Wind is the best.

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 CONCLUSION
AHP offers a suitable approach for solving complex MCDM problems. This report demonstrated
with an example as to how to select the best renewable resource using AHP and we finally came
to conclusion that solar energy is the best choice among the three energy. The closer the final
values are with each other, the more careful a user should be. This is true with any MCDM method.
The example in this report strongly suggests that when some alternatives appear to be very close
with each other, then the decision maker needs to be very cautious. An apparent remedy is to try
to consider additional decision criteria that can assist in discriminating among alternatives.
Although the search for finding the best MCDM method may never end, research in this area of
decision making is still critical and valuable in many scientific and engineering applications.

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