PROCESS ANALYSIS

OPERATIONAL EXCELLENCE MODULE FOR CPCL

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 1
Why Does Operations Matter to CPCL?

■ Production
■ Maintenance
■ Procurement
■ Materials Control and Stores Management
■ Quality
■ Safety Management
■ Logistics
■ Administration

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 2
Why Does Operations Matter to CPCL?

■ Production
■ Maintenance
■ Procurement
■ Materials Control and Stores Management
■ Quality
■ Safety Management
■ Logistics
■ Administration

■ At core of operations is the system of creation and delivery of products and services
Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 3
Does Operations Matter – Business
Performance?
March, 2020 March, 2019 March, 2018 March, 2017 March, 2016
Total Income 37,195.56 41,397.12 32,566.06 27,731.58 25,882.17

Manufacturing 69.77 80.83 54.47 50.07 47.38

Material Consumed 37,771.00 39,290.31 29,191.31 24,584.39 23,317.23
Direct Costs 37,840.77 39,371.14 29,245.78 24,634.46 23,364.61
Gross Margin -645.21 2,025.98 3,320.28 3,097.12 2,517.56
Gross Margin (%) -1.73% 4.89% 10.20% 11.17% 9.73%

Personnel Expenses 511.63 460.52 581.76 512.88 357.00

Administrative Expenses 923.34 990.26 614.90 606.00 776.51

Indirect Expenses 1,434.97 1,450.78 1,196.66 1,118.88 1,133.51
EBIT -2,080.18 575.20 2,123.62 1,978.24 1,384.05
Profit Margin (%) -5.59% 1.39% 6.52% 7.13% 5.35%

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 4
 Does Operations Matter – Business
Performance?
■ Profitability ■ Productivity and Efficiency – Utilization of
resources

■ Cost
Cost of Goods Sold
EBIT – Inventory Turnover =
– Return on Asset = Inventory
Total Asset

■ Productivity and Efficiency – Utilization ■ Return on Capital Employed

of resources =
EBIT
Total Capital Employed

Revenue
– Asset turnover ratio =
Total Asset

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 5
Does Operations Matter – Business
Performance?

CPCL IOCL Reliance Shell

Profitability (%) 1.39 5.35 4.53 7.39

Return on Capital Employed (%) 69.77 80.83 54.47 50.07

Inventory Turnover Ratio 8.54 7.38 8.42 13.64

Asset Turnover Ratio (%) 296.64 167.14 47.90 86%

Return on Asset (%) 4.12 5.35 4.53 5.07

Operational Excellence Programm for CPCL, December 21 - 22, 2020 @IIM Kozhikode 6
Does Operations Matter – Business
Performance?
CPCL IOCL Reliance Shell
Profitability (%) 1.39 5.35 4.53 7.39
Return on Capital Employed
(%) 69.77 80.83 54.47 50.07
Inventory Turnover Ration 8.54 7.38 8.42 13.64
Asset Turnover Ratio (%) 296.64 167.14 47.90 86%
Return on Asset (%) 4.12 5.35 4.53 5.07

Process is at the center of operational

efficiency and effectiveness.
Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 7
Product and Services Continuum

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 8
Defining services

Intangible
Defining services

Cannot be
stored
Defining services

Perishable
Defining services

Experience!
The Service Package

■ Supporting Facility:

– The physical resources that must be in place before a service can

be sold.

– Examples are golf course, ski lift, hospital, airplane.

The Service Package
■ Facilitating Goods:

– The material consumed by the buyer or items provided by the

consumer.

– Examples are food items, legal documents, golf clubs, medical

history.
The Service Package

■ Information:
– Operations data or information that is
provided by the customer to enable efficient
and customized service.
– Examples are patient medical records, seats
available on a flight, customer preferences,
location of customer to dispatch a taxi.
The Service Package

■ Explicit Services:

– Benefits readily observable by the senses. The

essential or intrinsic features.

– Examples are quality of meal, attitude of the

waiter, on-time departure.
The Service Package

■ Implicit Services:

– Psychological benefits or extrinsic features which the consumer

may sense only vaguely.

– Examples are privacy of loan office, security of a well lighted

parking lot.
Distinctive Characteristics of Services
■ Customer Participation in the Service Process
A Supply Chain consists of all parties involved, directly
or indirectly, in fulfilling a customer’s request.
 Mono Ethylene Glycols (MEG)
Fabric
Manufacturer

Purified Terephthalate Acid (PTA)

Panipat Naptha Yarn Manufacturer

Cracker Project

Apparel Manufacturer
How can we reduce costs?
 How can we reduce costs ?

• By process improvement leading to improvement in

productivity
How can we reduce costs ?

• By process improvement leading to improvement in productivity

• Leveraging Economies of scale?

How can we reduce costs ?

• By process improvement leading to improvement in productivity

• Leveraging economies of scale?

By increasing volume

Lesser changeovers

Lesser unit transaction costs

How can we reduce costs ?

• By process improvement leading to improvement in productivity

• Leveraging economies of scale

• Alignment of processes and the supply chain

Processes within the organization and across the supply
chain can be viewed as a flow in stages.
Supply chain can be viewed as a flow in stages.

Supply = 150 KG/Day

Flow = 150 KG/Day

Supplier Manufacturer Distributor Wholesalers Lulu Mall

Demand = 150 KG/Day

Customers
In Reality a smooth flow rarely happens

Demand is never constant

Supply = 150 KG/Day

Flow = 150 KG/Day

Supplier Manufacturer Distributor Wholesalers Lulu Mall

Demand = 150 KG/Day

Customers
In Reality a smooth flow rarely happens

Supply lead time is rarely constant

Supply = 150 KG/Day

Flow = 150 KG/Day

Supplier Manufacturer Distributor Wholesalers Lulu Mall

Demand is never constant

Demand = 150 KG/Day

Customers
In Reality a smooth flow rarely happens

Transport is not always available when required

Supply = 150 KG/Day

Flow = 150 KG/Day

Supplier Manufacturer Distributor Wholesalers Lulu Mall

Demand is never constant

Supply lead time is rarely constant
Demand = 150 KG/Day

Customers
In Reality a smooth flow rarely happens

Capacities are rarely same

Supply = 150 KG/Day

Flow = 150 KG/Day

Supplier Manufacturer Distributor Wholesalers Lulu Mall

Demand is never constant

Supply lead time is rarely constant
Transport is not always available Demand = 150 KG/Day

Customers
In Reality a smooth flow rarely happens

Production quantities are rarely constant

Supply = 150 KG/Day

Flow = 150 KG/Day

Supplier Manufacturer Distributor Wholesalers Lulu Mall

Demand is never constant

Supply lead time is rarely constant
Transport is not always available Demand = 150 KG/Day
Capacities are rarely same
Customers
Streamlining the process flow across the supply chain is
rewarding
Does Operations Matter – Business
Performance?
CPCL IOCL Reliance Shell
Profitability (%) 1.39 5.35 4.53 7.39
Return on Capital Employed
(%) 69.77 80.83 54.47 50.07
Inventory Turnover Ration 8.54 7.38 8.42 13.64
Asset Turnover Ratio (%) 296.64 167.14 47.90 86%
Return on Asset (%) 4.12 5.35 4.53 5.07

Process is at the center of operational

efficiency and effectiveness.
Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 34
What is process ?

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 35
What is process ? – Input/Output View

Transformation Output
Input
Process

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 36
What is process ? – Input/Output View

Transformation Output
Input
Process

The way we organize our resources, processes are designed and the orientation of the people decides
the input to be put in as well as the output we derive.

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 37
Process as a flow system – Sequential Process

Task A Task B Task C Task D

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 38
 Process as a flow system– Parallel Process

Customer waits Customer waits

Customer Customer Customer receives Customer

Arrives Places Orders beverages leaves

Cashier receives
orders

Coffee station
prepares beverages

Tea station prepares

beverages

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 39
 Process – How much can we derive ?
Customer waits Customer waits

Customer Customer Customer receives Customer

Arrives Places Orders beverages leaves

Cashier receives
orders

Coffee station
prepares beverages

Tea station prepares

beverages

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 40
KIRSTEN COOKIES

■ Wash the mixer bowl and beaters (6 minutes)

■ Place ingredients in the mixing bowl and mix (Maximum three dozen cookies)
■ Spoon the mix onto the tray (one dozen at a time and takes 2 minutes per tray)
■ Put cookies into the oven (1 minute)
■ Bake the cookies (9 minutes)
■ Take the cookies out from the oven & Allow the cookies to cool down (5 minutes)
■ Take the cookies off and pack them in a box (2 minutes)
■ Accept payment for the order (1 minute)

Operational Excellence Programm for CPCL, April 27 - 28, 2021 @IIM Kozhikode 41
KIRSTEN COOKIES

How long will it take you to fill a rush order?

KIRSTEN COOKIES

How many orders can you fill in a night, assuming you are open four hours each night?
KIRSTEN COOKIES

How much of your own and roommate’s valuable time will it take to fill each order?
KIRSTEN COOKIES
Because you are baking trays can hold exactly one dozen cookies, you will produce and
sell cookies by the dozen. Should you give any discount for people who order two dozen
cookies, three dozen cookies or more? If so, how much? Will it take you any longer to fill
a two-dozen cookie order than a one-dozen cookie order?
KIRSTEN COOKIES
Because you are baking trays can hold exactly one dozen cookies, you will produce and
sell cookies by the dozen. Should you give any discount for people who order two dozen
cookies, three dozen cookies or more? If so, how much? Will it take you any longer to fill
a two-dozen cookie order than a one-dozen cookie order?

Production Cost = Labor Time * Labor Rate +Material Cost

Order Size (Trays) TPT Labor Time Bottleneck Time Variable Cost per Dozen
1 26 12 10 $3.1
2 36 17 20 $2.4
3 46 22 30 $1.7
4 56 33 40 $1.83