SCM Best Practices

7/31/2019 SCM Best Practices

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SCM- best practices.

By

Dr.T.V.Subramanian


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CA FA VCO DCO

CORP.office

stockists Retailer

80 lakh 19 lakh 10000 12

3500 25 lakh

SO

40Vsat link

The AMUL Supply Chain


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Supply Chain Management : The Amul Example

Amuls services its supply chain as follows :

80 lakh milch animals :cattle feed, veterinary services,artificial insemination, owner education

19 lakh farmers / owners :education through extensionservices,

input / output services, co operative development programmes

10,000 village level dairy cooperative societies :milkcollection centers, chilling facilities, transportation facilities,quality control facilities

12 district level co operative milk producers unions :


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Supply Chain Management : The Amul Example

Global marketing organization and corporate office

at Anand :IT integration, instantaneouscommunication through V SAT link with productionplants and 40 sales offices around the world. Globalbrand management functions.

Distribution through 3500 stockists to 25 lakh retailoutlets and direct home delivery to consumers

around the world : supply of products as per predetermined schedule,

promotional support in the market and IT link withsales offices. At retail, in shop promotional support

and mass media advertising support.


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ASIAN PAINTS-Competitive

advantage through Distribution

Marketing strategies

AP bypasses the bulk order segment and goes toindividual consumer of paints

AP strategically shifts to semi-urban and rural

markets(not tapped then by multinationals)

AP goes for open door dealer policy AP opts for nationwide marketing


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ASIAN PAINTS-Implications of

strategic moves

Wide product range/shades

Complex geographically wide spreaddistribution channels

Deep involvement in physical distribution

and channel management Product-specific threats in each region


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ASIAN PAINTS LIMITED

-Implementation of Strategies

7000 strong dealer network

2500 product varieties and 10 SKUs Exploitation of IT to integrate the entire

channel (through VSAT)

Integrated PULL system of productionscheduling(demand based instead of forecastbased.)

Partnership with transport operators

Phase-1


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ASIAN PAINTS-Spectacular

results in 1995

Overall service level over 85% / Closecompetitors less than 65%

Finished goods inventory as a % of sales is 7%/ Industry average is 15%

APs average collection period is 25 days/

Industrys average is 45 days

APs market share is 35% of organizedsegment/Nearest competitor has 15%


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AP strategies- Phase 2 Dealer network expanded to 14000

Optimize distribution planning and coststhrough I2 Software( PULL-PUSH system) Demand planning

Supply chain planning

Factory scheduling Optimum solution

ERP integration with I2 software

AP Home solution

AP computerized colour mixing solution

On-site technical assistance

Paint contractor recognition


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Gujarat Ambujam Cements

Critical issues in industry

Regular availability of coal at reasonableprice

Wagon availability for transporting coal andfinished goods

Control of energy costs anf manufacturingcost

Creation of new markets


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Gujarat Ambuja Cements

Actions taken by the company

Decided to import coal at a higher cost

State of the art technology and special total energymanagement initiatives

Adopted coastal movement of finished goods

Acquired own ships/ developed berths

Substantial reduction in transportation costs andelimination of wagon needs

Used the above facilities export to other countries

Created captive power plant


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Major innovations

Design of granular cements which can be

transported in open weagions. Pulverizing plant in distyribution centres.

Leased specially designed ships where

post-production activities arte carried outwhile in motion.


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Gujarat Ambujam-

Performance Highlights 40% of revenue from expoerts

National quality awards for 3 consecutive years Lowest transportation cost in the industryRs.

134/T (Indusrty avg. 170)

Energy input/ton of cement=88kwh(industry-120kwh)

Coal consumption: 748kcal/T( Industry-850)

Cost of Manufacture:Rs. 770/T(Ind:-800-920)


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MARICO Industries SupplyChain initiatives


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Scenerio prior to SCM

implementation Considerable difficulties in forecasting

demand

Errors in some SKUs are as much as100%

Complexities in distribution to large

number of distributors across the country( 3500)

Leads to excess inventories insome and shortage in others

Visibilit of stocks at the distributor level


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Scenerio prior to SCM.

Secondary sales figures were difficult togather as for all FMCG companies

Planning cycles were fixed anddecisions could not be made online

Processes were highly individualized. Poor communication due to absence of

integrated approach.


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Apart from annual budget , they were

operating on a fixed three month production

cycle.

Leads to skewed inventory positions.

Had fixed dispatch plans for the quarter even if

the sales were low.

Co-ordination difficulties between sales and

manufacturing departments.


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No formal distribution planning

Several islands of information and nodata visibility in the system.

Lot of cleaning up needs to be done

before bringing any new technology.


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Motivations for change

Inaccurate forecasts

Lost sales due to mal-distribution

Huge stock expiries due to non availability

Customer dissatisfaction

Data and information unavailability due to lack

of IT systems

Diffusion of roles and responsibilities


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SCM Implementation

highlights Decide to implement SAP SCM modules

SAP/R3

BIW

APO Collaborative network planning possible

Processes redesign before SAP

implementation 20 operating managers deployed full time

Some identified cost savings were put in thebudget.

Disci lined s stems started workin re lacin


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SCM implementation

Consensus planning became operational

Area sales-National Markrting

Planning cycle reduced to 4-5 days

Monthly Rolling plan replaced quarterly fixedplan

Eliminated quarter end queue building

Second line sales( distributors) obtained everymonth

Important distributors every 10 days


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SCM Implementation..

STOCK Visibility in the entire chain

Stocks with expiry dates available

System efficiency improved

Key performance measures monitored

Planned deliveries Vs. Actual Lost sales %

Inventory norm Vs. actual


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CSFs taken care of

Top management commitment

Best resources and best people were deployed

Continuous review of implementation

Training budget increased by 100%

Other members of supply chain also trained

State of the art IT deployed- VSAT/ VPN

Planning web enablement of distributordatabase

Refining the forecasting methods


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RANBAXY LABORATORIES-Supremacy in supplier partnerships

Identifying the weakest link & addressingit

After a highly successful track record , in

1992 they embarked on a major globalization

project

Supplier quality and productivity identified asthe weakest link in the supply chain

Prior to 1993, traditional relationships

with suppliers; excessive quality


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RANBAXY LABORATORIES

(Continued)

In 1993, First vendor meet was called

120 suppliers participated Decided to start a new chapter in their

relationship

Problem areas: Packaging, capsules, sugar, drugsFocus: Quality improvement; Cost savings


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Quality improvement in Focus

Initiatives taken and results achievedFirst experiment with associated capsules

Sharing of data

Process improvementGood manufacturing practices

Extensive training

Technical support

Result after one year: rejection % broughtdown from 6% to zero

Extended to 37 suppliers100 plant level programs


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Quality improvement Focus

Joint training programs on customer-supplierrelations using international consultant Jordan

Lewis Suppliers highly motivated

Alpha-D Drug Company

Most successful experience

Alpha-D drug is an intermediate drug used for anumber of anti-biotics

purity level up from97.2 to 98.5%

Alphas business to other companies increased


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-Quality improvement Focus

Supplier of Printed sealed aluminum foils

with multiple joints faced quality problems

Helped him in changing the sealing

machines

Suppliers customer base increased.

Quality problems(black particles) in sugar

Cast iron pipes in sugar mills changed after a

detailed study. Loan was also provided.


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Cost Reduction Focus

HDPE drums for packing finished goods

bought from a bombay based company

High transportation costs/huge plant

inventory

Motivated and helped the supplier to start a

plant near Chandigarh.

Dramatic reduction in costs/inventory

Voluntarily helped several suppliers to

modernize their technolo and


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-Relationships redefined

In 1995

Third vendor meet

Name changed to Partners meet

Vendor Awards instituted

Going beyond the traditional relationships

Core competencies of many suppliers improved and

benefits shared

Equity participation with suppliers in their expansion

projects as well as joint ventures.


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RANBAXY LABORATORIES-Current exercises and future

plans

SAP implementation completed in allcritical areas.

Web-based Connectivity provided toimportant suppliers

Planning to extend the partnershipconcept to stockists and dealers

Stockists are being connected throughcomputers.


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RANBAXY LABORATORIES_Spectacular results during 93-98

Overall sales revenue from abroad

increased from 5% in 1993 to 49% in

1998.

During !998-99, three indigenously

developed(through R&D effort) drugs ofRRANBAXY have been recommended

as prescription drugs in American

Hospitals by the American Medical

Practitioners association.


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Thank You!

Documents

SCM Best Practices