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VVK

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  1. VVK's post in Forward vs Backward Integration was marked as the answer   
    Before explaining Forward Integration and Reverse Integration, let me start with the introduction of 2 strategies viz. Horizontal Integration and Vertical Integration are the most common 2 Business Strategies used by the companies to consolidate their position among their competitors.
     
    Vertical Integration is the Business Strategy where the company takes complete control over the one or more stages in the production or the distribution of it. A company may opt for Vertical Integration to take full control over the raw material supply or in the distribution of it's final finished product. Or else the company may go for Horizontal Integration in which the company can go for the acquisition of the business which is at the same level of value chain in similar or dissimilar industries.
     
    Vertical Integration is further classified into Forward Integration and Backward Integration.
     
    The Process of Forward Integration and Backward Integration is shown below:
     

    Source:https://studiousguy.com/backward-and-forward-integration/
     
    Backward Integration: is the form of Vertical Integration, in which the company acquires or merges with another Business unit that supplies raw material for the production, eliminating the need for suppliers. The term "Backward" is used because here the company moves backward in the value chain. This process will result reduced costs, increased revenues and enhanced efficiency in the production.
     
    Advantages of Backward Integration:
    Better Control: Since the company having a good control over the  the raw material supply, on time production and delivery are possible. Also the Quality of the raw material can be controlled based on the product quality required in the final product. Cost Control: By In-house production of raw material we can avoid the profits eaten-up by the middlemen and also the transportation costs. Competitive advantage:  For example in the technology Industry, companies can go for their own new low cost, high beneficial technology by making it proprietary, trademarks or by patenting allowing the competitors to search for the alternative methods.  
    Disadvantages of Backward Integration:
    Inefficiencies:  Since the raw materials are produced In-House, the company may limit competition resulting in the lack of Innovation leading to poor quality of final products, increasing the cost of customer complaint handling. Investment: Since huge initial investment is required, company may be forced to utilize all it's reserves and even take more debts resulting in losses in case of failure of business.  
    Forward Integration: is the form of Vertical Integration, in which the company moves in the direction of controlling the distribution of products/services, eliminating the need for 3rd person in between the producer and the consumer. In other terms the company may eliminate the wholesaler selling the products to the retailer directly, or eliminating the retailer selling the products to the customer directly. Here also the aim is to reduce the cost and it may also increase the efficiency of the firm by getting closer to the end consumer.
     
    Advantages of Forward Integration: 
     
    Increases Market Share: Since there is a transportation cost and other transactional cost reduction, company can sell the product at a lower price, achieving more market shares. Control over distribution: since we can eliminate the 3rd party intervention like wholesale retailers or brokers we will be having better control over the dispatches. Competitive advantage: Lower costs and controlled distribution gives companies competitive advantage over the other companies.  
    Disadvantages of Forward Integration:
    Bureaucratic Inefficiency: Various merger and acquisition deals  create inefficiencies as a result of entry of new apparatus of the new entity. Realization of synergies between the companies: Improper implementation of strategy can be the reason for not realizing the synergy potential. High Costs: Mergers/acquisitions may need substantial high funds, benefits obtained from the strategy implementation may be less compared to the cost spent.  
    Example from Manufacturing:
    Steel Production Plant: Here Iron Ore, Lime Stone and Coke are the major raw materials which are conveyed into the Blast Furnace for producing a hot metal which in turn in the later stages produces Steel. Usually company sources them from different Vendors. It also does the transportation of final finished product using 3rd party logistics.
     
    Now let's consider a Backward Integration application here. Instead of procuring these raw materials from different vendors, if the company creates it's own sources like captive mines, Integrated Lime Calcination Plant and Coke Oven plants, then it's an approach of Backward Integration.
    Now applying Forward Integration, If the company thinks about it's own transportation mode say it's own trucks or it's own rakes, then the company can save a significant amount of transportation cost and also dependency on 3rd party vendors for the transportation ensuring on time delivery of goods to the customers.
     
    Example from Services:
    E-Commerce Companies like Amazon and Flipkart: As a part of Backward Integration both Amazon and Flipkart both has their customized products (products like Alexa, Fire TV Stick , Speakers for Amazon and Furniture's like Happy home etc. for Flipkart) along with other seller related products.
    As a part of Forward Integration both have their excellent their own logistics connectivity to the almost all cities of a country ensuring on time delivery of products and avoiding customer breach.
     
    Balanced Integration: There is a 3rd type of Vertical Integration called Balanced Integration, which is the mix of Forward and Backward Integration Strategies and this type of strategy is used in most of the companies, since it provides a balance of the 2 strategies.

     
    When should go for  Vertical Integration?
    When the current raw material supply is unreliable. When the quality of raw materials are not stable When the prices are unstable or the distributors charge high amount. When the company has the sufficient resources to manage the show When the company is willing to grow significantly  
    Conclusion: The Integration strategies may not always work for an Organization because of many other reasons. So one should be  careful before going for Integration. These 2 aspects one should always consider before going for Integration.
     
    a)Cost: The Organization should go for Integration only when the In-House production is cheaper than buying that raw material in the market.
     
    b)The Scope of Organization:  Before the adoption of Integration, firm should think whether the moving into a new area of activities will weakens it's current competencies. Therefore it's necessary to carefully analyze before going to Integrate.
  2. VVK's post in Issue Tree was marked as the answer   
    "Issue Tree" which is also known as "Logic Tree" is the graphical breakdown of a complex problem into smaller manageable multiple levels of subsets called "Branches". This can be represented Vertically (Top to Bottom) or Horizontally (Left to Right).
    The use of an Issue tree systematically identifies and isolates the root causes and gives high impact solution for the problem. Most of the Consulting firms like Mckinsey, Boston and Bain frequently use this methodology for solving their Client's problem. It is also having many significant contributions in Manufacturing firms as well.
     
    Typical Flow Syntax Of Issue Tree looks like this:

    Source:https://igotanoffer.com/blogs/mckinsey-case-interview-blog/issue-tree
     
    There are two variants of an Issue tree.
    1)A Problem based tree- Can be used to find out the "Root Cause" of the problem and to understand "why" the problem occurred.
    2)A Solution based tree-Used to determine the recommended solution and also to understand "how" to solve the problem.
     
    Rules to Follow while creating Issue Tree
     
    Rule-1: The branches should be MECE (Mutually Exclusive, Collectively Exhaustive).
     
    Mutually Exclusive means there should not be any overlap between the sub issues identified. Example: In the Financial Framework there should not be any overlap between the revenues and costs by definition.
     
    Collectively Exhaustive means sub causes of the problem should cover all the possible root causes of the problem.
     
    Rule-2: Another rule is that Issue Trees follow the 80:20 principle means they focus on most important issues.
     
    For Example: While considering the losses in production, it's ok to omit the causes which are having less or negligible impact on the overall net losses.
     

    Source:https://www.craftingcases.com/issue-tree-guide/
     
    Rule-3 : The Issue Tree should be linked together by a Logical linkage. If the issue components are random and non related to each other there are chances of getting more confused rather than getting the solution.
     
    How to Create a Tree Diagram:
     


     
     Example with Steps defined: Issue Diagram to increase the revenue of a company:
     

    Source: Self Drafted Slide
     
    Example 2: Electrostatic oiler used in Rolling Mill
    Electrostatic oiler is used in Rolling Mills for spraying uniform thin layer of oil on both sides of sheet. The objective of using oiler is to prevent coils from getting rusted till the coils reach customer. When the oiler fails to perform, or when the oiler is not working, it leads to stoppage of line & thus leads to enormous delays and financial loss.
     
    Source: Business case study from a manufacturing plant
     
    Uses of Issue Tree:
    It makes the problem easier to solve: Since major problem gets divided into smaller many, it's easier to handle and solve the problem. It provides a roadmap on how to solve the problem: Since it helps in focusing and prioritization of the solves it explains about the sequence of problem solve. It helps us to divide the work: Since Complex problem has been broken into smaller many, it helps to divide the problem and parallel action implementation resulting in early completion of the project. It helps to Prioritize: Based on the criticality of solve. It helps in identifying more number of solutions since the problem is being divided into many sub levels.  These act as good Visual Communication tools for the stakeholders.  
    Conclusion: Thus Issue Trees are one among the powerful tool used by the consultants on a regular basis. One can use them in their own case interviews by following all the 3 rules explained above for the effective problem solving.
     
  3. VVK's post in Shingo Model was marked as the answer   
    The Shingo Model of Operational Excellence relates the Organization Principles, the Systems and the Tools. Based on the understanding, the entire model is divided into Principals, Systems and Tools and it requires a paradigm shift in the five fundamental aspects.
    Operational Excellence requires a focus on the Results as well as the Culture (Behavioral Aspect). The Behavioral aspects flow from the Principles that govern the desired result. Principles construct only foundation  upon which culture to be built in order to sustain for a longer period of time. Establishing ideal, principal based behaviors requires a management system alignment as it has direct impact on how the people are going to behave. The tools like TPM, TQM, Lean, Six Sigma, JIT etc. are the Enablers and they should be cautiously and strategically inserted into the system to drive better Culture and get Excellent results. Shingo Model Consists of 2 elements.
    The House which describes the correct principals of Ops Excellence and The power of Balancing the efforts across all dimensions. The Diamond which represents the transformation behavior. This is for  inculcating the Principles of Ops Excellence into the Organization.
    Source: https://www.interfacing.com/the-shingo-model
     

    Source: https://lean.nh.gov/documents/Shingo Model Handbook.pdf
     
    The Shingo Model:
    For the Organizations to be successful over a longer period of time, leaders must deeply understand the Principles that are leading to the success i e. the Organization culture must be grounded with correct principle.

    Source: Shingo Institute
     
    The Principles of Ops Excellence:
    Principles are categorized into 4 dimensions.
    D1- Cultural Enablers D2-Continuous Process Improvement D3-Enterprise alignment D4-Results These 4 dimensions overlay 5 core business systems viz. Product or Service Development, Customer Reach, Operations, Supply Chain and Administrative support.
     
    The Shingo Prize for Ops Excellence has 10 guiding principles.
    1) Lead with Humanity:
    Examples of Ideal Behavior: 
    There is a consistent, good leadership engagement where the most of work happens. Employees can report issues with a confidence, in a positive manner. Governing Mechanism (How?): 
    Establish a common enterprise process center for transparency in delivering. Openly post Issues, Improvements and Solutions with proper governing mechanism. 2)Respect For Individual:
    Examples of Ideal Behavior: 
    Create an Individual Development Plan (IDP) for all the Employees with appropriate goals. Involve the Employees in the Continuous Improvement Projects of their areas. Provide coaching for the effective problem solving. Governing Mechanism (How?): 
    By defining clear roles and responsibilities Establishing Knowledge sharing platforms 3)Focus on Process:
    Examples of Ideal Behavior: 
    When an error occurs, focus on mitigating the error Ensure all information/parts/materials are correct and meet required specifications before taking them into the process. Governing Mechanism (How?): 
    By Visual Management, Daily Work Management, Continues Improvement Projects and by not blaming the others  4)Embrace Scientific Thinking:
    Examples of Ideal Behavior: 
    By Following Structured approach for the Problem Solving Encourage Employees to explore the new ideas Governing Mechanism (How?): 
    By establishing a structured framework Integrating best practice approach like RACI/SIPOC/TDC/Flow Charts etc. By Following Scientifically proven Improvement methodologies like Lean Six Sigma, Design Thinking ,Agile and Artificial Intelligence based projects. 5)Flow and Pull Value:
    Examples of Ideal Behavior:
    Establish Pull Approach: Avoid producing more Inventory Ensure sufficient resources are available whenever there is a requirement. Governing Mechanism (How?): 
    Proper Visual management representing all Upstream and Downstream activities (VSM) Visualization of all Customer Touch Points along with proper monitoring 6)Assure Quality at the Source:
    Examples of Ideal Behavior: 
    Ensure proper material handling without any damages Stop work to fix the error/have periodical maintenance as per schedule before continuing Governing Mechanism (How?): 
    Ensure forms are tied with the Process and CAPA/Abnormality analysis plan is available if there is any deviation (to act immediately). 7)Seek Perfection:
    Examples of Ideal Behavior:
    Establish long term sustainable solutions rather than temporary ones Continuous work towards work simplification Governing Mechanism (How?): 
    Making every Employee as a part of Company's Culture Promoting Innovation Culture 8)Create Constancy of Purpose:
    Examples of Ideal Behavior:
    Communication the Vision, Mission, Quality Policy Statement and Purpose of the Organization to all Sub Goals are always to be linked with the Organization major goals Governing Mechanism (How?): 
    Clearly defined Organization Objectives and Sub-Objectives Proper KPI Drilldown 9)Think Systemically:
    Examples of Ideal Behavior:
    Eliminate the barriers which will act as a blockers for the flow if Ideas/Information Governing Mechanism (How?): 
    Ensuring Managing Points and Check Point mechanisms (MP-CPs) are aligned with the Organization Objective 10)Create Value for the Customer:
    Examples of Ideal Behavior:
    Customer is King: Work to understand his needs and expectations. Governing Mechanism (How?): 
    Align Customer Needs with Organization Vision and Imbibe it into the Process. Monitor the performance of Key Customer measures Conduct Customer Satisfaction Surveys Conclusion:
    Operational Excellence is the vision that many Organizations have established to drive the Improvements, however real changes will happen only when all Principles are clearly understood and deeply routed into the Organization Culture. The focus of the leaders should be more on driving the Principles and Culture whereas the Managers should focus more on designing and aligning the systems to drive Principal based behavior. This model may be used as a Benchmark for what an excellence at highest level should look like. Principles of Ops excellence are only the foundation, on which Organization culture should built with confidence for a long term sustenance. 
     
  4. VVK's post in One Touch Exchange of Dies (OTED) was marked as the answer   
    OTED (One-Touch Exchange of Die) is closely related to SMED (Single Minute Exchange of Dies) where the term " Single Minute" refers to the objective of reducing the start-ups and changeovers to single digit minutes (less than 10 minutes) whereas OTED states that changeovers can and should take less than 100 seconds.
    OTED needs the following actions:
    1)Elimination of adjustments since the time available for replacement is very less.
    2)Freedom from screw fastenings-Since turning of screws for locking and unlocking takes more time one should avoid screw fastenings.
    3)Moving towards strength and precision for the best fit. It should be precise and close fits.
    4)Functional burdens of die Vs machines i.e. adaptability of dies for various variants of same category of machines.
    5)Reduced usage of complex mold separating systems.
    6)Reduced insertions in the system.
    In One-Touch concept the exchange should be done with a single motion, rather than the multiple steps.
     
    Examples: 
    1)Usage of Push Butten switches for the phase changes in an electric panel.
    2)Usage of level 3 automation in tooling.
    3)Using one touch fixing of fasteners. That is using simple and quick (one touch) fastening mechanisms rather than screwing.
    4)Single touch assembly and dis assembly of electronic gadgets.
    5)Emergency push button stations in the manufacturing plants for the sudden power isolations.
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