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