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A Rs. 200-Cr Manufacturing & Distribution company in India800 Domestic Direct Institutional Customers 40 International Customers 500 Domestic Distributors/Direct Dealers20,000 Retailers300 Towns in India700 Manufactured SKUs125 Sourced SKUsCustomized Solutions5 Mother warehouses21 Branch warehouses1 Bonded warehouse5 Manufacturing Locations1200+ Components45 Domestic Suppliers15 Job Worker Suppliers10 International Suppliers in 5 countries3 Tool Repair Suppliers
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A Rs. 200-Cr Manufacturing & Distribution company in India
Significant Profit Increase during economic
slowdown through TOC Implementation
A very complex operating environment
800 Domestic Direct Institutional Customers
40 International Customers
500 Domestic Distributors/Direct Dealers
20,000 Retailers
300 Towns in India
700 Manufactured SKUs
125 Sourced SKUs
Customized Solutions
5 Manufacturing Locations
1200+ Components
45 Domestic Suppliers
15 Job Worker Suppliers
10 International Suppliers in 5 countries
3 Tool Repair Suppliers
5 Mother warehouses
21 Branch warehouses
1 Bonded warehouse
Significant increase in PBT
Apr Apr-
May
Q1 Apr-Jul Apr-
Aug
H1 Apr-Oct Apr-Oct
Plan
Target
09-10
Actual PBT : 101% of Plan 52% of PBT Target achieved till Oct 09
Commitmentto Group
PB
T
07-08 08-09 09-10
PB
T
PBT
07-08 08-09 09-10
Apr Apr-
May
Q1 Apr-Jul Apr-
Aug
Apr-
Sep
Apr-Oct Apr-Oct
Plan
Target
09-10
• Inventory has come down by 40%• 1/3rd of FG warehouse space has been released
Commitmentto Group
Cash flows - 100% higher than last year
Distributor
Inventory turns Before
3 months
later
6 months
later
1-4 50 14 0
4-9 49 58 29
9-12 10 15 36
12-24 2 4 50
24-48 0 0 13
48 & above 0 0 1
Average 4 9 13
Inventory turns of distributors increased by more than 3 times
Win-Win Solution: Maximize the return
on inventory for our distributors
wk 1-4 wk 17-20 wk 41 - 45
Sale
s
4 Wks Average Sales
Significantly improved sales due to 10-fold
reduction in non-availability
How did we achieve this?
A win-win can be created by providing a "partnership" that delivers superior inventory turns (better availability coupled with substantially reduced inventories), when all other parameters remain the same.
We switched from a forecast driven mode of operation to a consumption driven mode of operation dramatically increasing inventory turns while increase sales (reducing shortages while reducing inventories).
PILOT 2 months later
121 69
175
No. of Distributors
No. of Focus City
No. of RPL SKU’s
8 5
113
174 88
240+
6 months later
Spread of Deployment
% of retail sales covered : 85%Warehouses covered : 21Daily SKU Distributor entry: 6000
We developed a home grown system for daily capture, supply and alignment of stocks
Scope of IDEA Coverage
Present
Not Present
IDEA Distr.
N
S
EW
N - S = 2992 kms.E - W = 2942 kms.
WeeksMovAvg BS MovAvg DS
Daily distributor wise secondary sales reports
Defined field working improvement initiative “Manthan”
Structured weekly reviews
Sales improvement aided by structured planning
& execution in the field
Changing Mindsets : Breaking Myths
Old thinking New thinking
Pushing stocks to a distributor will make him run
With optimum stocks & increased inv turns, distributors will focus on increasing sales
Changing Mindsets : Breaking Myths
Old thinking New thinking
Pushing stocks to a distributor will make him run
With optimum stocks & increased inv turns, distributors will focus on increasing sales
We can do many projects simultaneously We take one project at a time, complete it and then go to next
Changing Mindsets : Breaking Myths
Old thinking New thinking
Pushing stocks to a distributor will make him run
With optimum stocks & increased inv turns, distributors will focus on increasing sales
We can do many projects simultaneously We take one project at a time, complete it and then go to next
Goal is to maximize sales value Maximizing Throughput is the goal
Changing Mindsets : Breaking Myths
Old thinking New thinking
Pushing stocks to a distributor will make him run
With optimum stocks & increased inv turns, distributors will focus on increasing sales
We can do many projects simultaneously We take one project at a time, complete it and then go to next
Goal is to maximize sales value Maximizing Throughput is the goal
Sale can be increased by adding more and more SKUs
Sales can be increased by focusing on few SKUs which give highest T
Changing Mindsets : Breaking Myths
Old thinking New thinking
Pushing stocks to a distributor will make him run
With optimum stocks & increased inv turns, distributors will focus on increasing sales
We can do many projects simultaneously We take one project at a time, complete it and then go to next
Goal is to maximize sales value Maximizing Throughput is the goal
Sale can be increased by adding more and more SKUs
Sales can be increased by focusing on few SKUs which give highest T
Sale can be increased by schemes only Sales can be increased by Local area marketing
Alignment of Supply chain partners
IDEA
7
Imported traded product
suppliers
31 Component suppliers
2
Raw material suppliers
3
Tool repair suppliers
18
Job-workers
6
Local traded product
suppliers
Tool Repair Suppliersprioritize their work based on time buffers & component status in CFG
All other partners supply based on the penetration of stock buffers in different warehouses
Changing Mindset : Breaking Myths
Old thinking New thinking
Achieve monthly production value Produce to availability as per penetration of Buffer in the warehouses
Changing Mindset : Breaking Myths
Old thinking New thinking
Achieve monthly production value Produce to availability as per penetration of Buffer in the warehouses
Batches based on EOQ calculations Batch size is as low as possible
Changing Mindset : Breaking Myths
Old thinking New thinking
Achieve monthly production value Produce to availability as per penetration of Buffer in the warehouses
Batches based on EOQ calculations Batch size is as low as possible
Multiple Priorities based on urgencies communicated by different stakeholders
Single priority system based on buffer penetration in the warehouses)
Changing Mindset : Breaking Myths
Old thinking New thinking
Achieve monthly production value Produce to availability as per penetration of Buffer in the warehouses
Batches based on EOQ calculations Batch size is as low as possible
Multiple Priorities based on urgencies communicated by different stakeholders
Single priority system based on buffer penetration in the warehouses)
Delivery commitment is given w/o checking resource availability
Delivery commitment is given based on available protective capacity
Changing Mindset : Breaking Myths
Old thinking New thinking
Achieve monthly production value Produce to availability as per penetration of Buffer in the warehouses
Batches based on EOQ calculations Batch size is as low as possible
Multiple Priorities based on urgencies communicated by different stakeholders
Single priority system based on buffer penetration in the warehouses)
Delivery commitment is given w/o checking resource availability
Delivery commitment is given based on available protective capacity
Suppliers supply material based on monthly schedule
Daily / weekly supply based on penetration of buffer in the warehouses
Changing Mindset : Breaking Myths
Old thinking New thinking
Achieve monthly production value Produce to availability as per penetration of Buffer in the warehouses
Batches based on EOQ calculations Batch size is as low as possible
Multiple Priorities based on urgencies communicated by different stakeholders
Single priority system based on buffer penetration in the warehouses)
Delivery commitment is given w/o checking resource availability
Delivery commitment is given based on available protective capacity
Suppliers supply material based on monthly schedule
Daily / weekly supply based on penetration of buffer in the warehouses
To keep the resources occupied all the time for production
Employ resources for improvement programs & Training during lean demand periods
People Measurement
Management Committee Throughput, PBT and Cash Flow
Senior members of Sales
team (RMs & BHs) &
Marketing team
Throughput
Senior members of
• Manufacturing, PPC
• Purchase
• Quality Assurance
• Design & Engineering
Throughput Rupee Days (TRD) Loss
Sales team members Secondary sales value
“Rupee-Days” of outstanding value
Members of other functions No. of Reds & Blacks in various
warehouses
New Measurements
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