Ashok Leyland A9

8/10/2019 Ashok Leyland A9

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Presented by Group A9

Anna Kallukaren 13009

Deepak M 13019Laxmi Narayan Nanda 13029

Nupoor Jain 13039

Siddarth Shetty 13049

Vivek Narayanan 13061

Revamping the Supply Chain-The Ashok Leyland WaySubmitted to: Professor J. M. Subramanya



Brief Idea-Areas SCM Helps to focus

• Supply chain management flow is divided into:

• Product flow: movement of goods from supplier to customers andalso in case of any customer returns or has service requirements.

• Information flow: Covers updating the status of the delivery as wellas sharing information between suppliers and manufacturers.

• The finance flow: Encompasses credit terms, payment schedules and

consignment and title ownership arrangements.

• The presentation focuses on how Ashok Leyland implemented andintegrated these practices so as to improve the overall costeffectiveness & efficiency of its supply chain.



Introduction

0

500

1000

1500

2000

2500

Sales PAT

2482.5

124.9

2014.3

18.4

1996-97

1997-98



Recession Effect!

•Freight generating sectors saw a steep declineresulting in a severe downturn of freight volumes.

•17.62 % of revenues down and inventories startedto build up

•Results shown on working capital.•Climbed from 33.34% of sales in 1993-94 to

58.81% of sales in 1997-98.



Initiatives

• Tiering vendor network to reduce number of vendors, andconsequently moving to JIT ordering system to joint improvementprograms (JIP)

• Corporate material department(CMD): Rated the vendor based onfeedback received from supplier quality assurance cell, send

specifications & negotiated the price

• Materials Management Departments(MMDs): scheduling based onunit production plan

• Purchase Philosophy: Over 90% parts were bought out

• Develop a vendor base committed to continuous improvement tomeet quality cost and delivery standards.



Q1) Ashok Leyland with an aim to reduce costsimproved the in-bound supply chain through severalimportant strategic revamping measures. Explain.

• Project OSCARS- Optimising Supply Chain and RationalisingSourcing• Single strategic sourcing agency

• Preference for vendors who had access to technology• Bring down Supply Chain Costs.

• Single window system

• Supplier Tiering

• Just In Time



Single Window System

• Jointly formed by Strategic Sourcing and Corporate QualityEngineering(CQE) teams

•

Advantages for suppliers:• Convenient single point contact• Easier to share drawings, negotiate prices and long-term

business volumes• Assistance and consultancy on quality issues

Phase 1:• Creation of country-wide database for the 22,000+ parts• Match the parts with suppliers’ part numbers



Result of Phase 1

92%

2%

6%

Total Business

252 suppliers(18%) 854 suppliers (61%)

294 suppliers (21%)

• Corporate buying coveredmajor suppliers (Rs 10 lakh

plus per year)

• Classified materials into“packs”

• CMD + CQE specialists foreach pack



Supplier Tiering

Ashok Leyland(SWS)

Supplier A Supplier D

Supplier G

Supplier H

Supplier B Supplier E Supplier I

Supplier C Supplier F

Supplier J

Supplier K

• Tool Kits

Example: reduced

suppliers from

1400 to 750

• Strategic sourcing

aimed at

reducing cost forsupplier so that

gains were real,

painless and

sustainable



Just-In-Time (JIT)

Approach:

• JIT for high value/high volume items

• Low cost logistics for low value/high volume items• Each stage produced only as much next stage needed

• Classified the components used by the company intoCategories 'A' (75% of the total cost of components), 'B'(18%), and 'C' (7%),

Push system JITPull

system



JIT Process

Customer orders

Retailer

orders

Plantsends JIT

card

Supplier

dispatchesconsignment

Shipping



Q2) Discuss how Ashok Leyland re-engineered itsout-bound supply chain.

•Objectives:• Improving customer satisfaction and reducing finished goods inventories

• Improving service levels with optimum pipeline inventory levels

• 3 major parameters for service level targets:• Order to delivery

• Reliability of deliveries

• Availability of order status information

• New three-tier distribution network

• Results of OSCARS II• Improved customer satisfaction

• Improvement in demand forecasting and data management

• Hosur plant in Karnataka introduced a new TQM process



Seven Plus One TQM modelRule Objective Result

Total Cost

Management(TCM)

Cut Cost Reduced Operating cost

Energy Management Optimize energy loss Reduced Avg. power cost

per product

Value Engineering(VE) Efficient materialusage

Reduced chasis cost

Cross Functional

Teams(CFT)

Synergy Saved Rs.18.2 million

Suggestion Scheme Involve everyone Quality improvement and

Cost cutting

Inventory Management(IM) Better housekeeping Best IM in indusrty

Shop Investment Programme Monitor and Utilize Operating cost as % of

shop turnover machines

Plus One Training Training across all levels



• To understand customer needs and assimilate theknowledge, Ashok Leyland adopted ‘4P’ Programme.

•

Probe,• Prioritize,

• Plan

• Position.

• This worked in tandem with manufacturing as part of cross-functional team (CFT). The CFTs worked towards continuousimprovement in product enhancement and marketing.

• Ashok Leyland built a ‘Marketing Information System’ (MIS)to monitor the trends and forecast demand from the inputdealers and field executives.



Q3) Discuss in brief the quantitative benefits inregard to various measures of supply chainrevamping exercise for Ashok Leyland

In the year 1999-2000:-

• Ashok Leyland recorded a net profit of Rs. 1.9 crore onsales of Rs. 1,092 crore

• Raw material costs were down 1-2% and inventoriesreduced by 300 crore

• Sold 37,859 HCV’s, 27% more than 1998-99

• Total income increased by 25% from 1998-99

• Increase in operating profit by 55 crore



Reasons for Good Performance

1) Operational efficiency resulting from strategic rawmaterial sourcing, which cut costs.

2) Better control over process inputs by tighteningsupply chain & inventories.

3) Reduced operating expenses through cost savings

and energy, tools, spares etc.

4) Adoption of preventive maintenance policies, etc.



Current Scenario

• Sales of 60,000 and about 7,000 engines annually

• 2nd largest commercial vehicle company in India, with amarket share of 28%

• Market leader in bus segment

• Carrying more than 60 million people per day, more than

Indian Rail network!

• Joint venture with Nissan motors, in the light commercialvehicle segment



Conclusion

Ashok Leyland in order to sustain in the market should :

a) Provide world class technology

b) Provide value to the customer and

c) keep innovating there products!



Thank you

Ashok Leyland A9

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