Dissertation Finals

8/2/2019 Dissertation Finals

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IMPACT OF SC INTEGRATION ONMANUFACTURING FIRMS IN INDIA

A Dissertation Submitted As A Part of the Requirements

For The Degree of Master of Business Administration

Submitted bySachin Chauhan

PRN : 10020441217DIV & Roll No. E - 28

Operations - IBBatch 2010 - 2012

Under the Guidance ofProf. Dr.Pradnya Chitrao

Symbiosis Institute of Management Studies ( SIMS )

(Constituent of Symbiosis International University)


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SIMS Dissertation

Certificate from Internal Guide

To whom it may concern

This is to certify that SACHIN CHAUHAN PRN No. 10020441217

has completed his Dissertation report on the topic IMPACT OF SUPPLY CHAIN

AND IT INTEGRATION ON INDIAN MANUFACTURING FIRMS under my

guidance.

Guide name: Prof. Dr. Pradnya Chitrao

Signature:

Place: Symbiosis Institute of Management Studies, Pune

Date:


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ACKNOWLEDGEMENT

I would like to express a deep sense of gratitude to my dissertation guide, Prof.Dr.

Pradnya Chitrao whose constant mentoring, encouragement, cooperation and teaching helped

me complete this dissertation successfully. He made me work professionally and think in terms

of a manager all the time.

Further, I want to thank Mr. Amit bhandari(Operations manager Maruti Suzuki

Manesar,Gurgaon) for his support, without him the collection of data would not have been

possible. I could not have completed this project without his assistance and I am grateful to him

for his unconditional help & support for the entire duration of the project. The present report is

an amalgamation of my thoughts and efforts to study the present processes.

Sachin Chauhan

SEC E- 28 (Operations)

Batch 2010-2012

10020441217


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TABLE OF CONTENTS:

CERTIFICATE

ACKNOWLEDGEMENT

INTRODUCTION

LITERATURE REVIEW

RESEARCH METHODOLOGY

TYPE OF RESEARCH

DATA COLLECTION METHOD

NEED, OBJECTIVE, HYPOTHESIS

CONTENTS

CASE STUDY

DATA ANALYSIS

FINDINGSCONCLUSION

RECOMMENDATIONS

REFERNCES

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INTRODUCTIONIn the 1980s companies discovered new manufacturing Technologies and strategies that allowedthem to reduce costs and better compete in different markets. In the last few years, however, it

has become clear that many companies have reduced manufacturing costs as much as ispractically possible. Many of these companies are discovering that effective supply chainmanagement is the next step they need in order to increase profit and market share (Simchi-Levi,2003). In order to compete the effective management of the supply chain is critical.In todays

dynamic market, companies can no longer exploit the traditional drivers in order to remaincompetitive. The nature of competition has forever changed, and more significant change willoccur going forward. Companies can no longer compete by designing, manufacturing and sellinga single product,now they have to innovate at a very high pace and need to streamline theirsupply chain through the use of information technology(BPR,ERP and IS systems) which worksas supply chain enabler.In this paper I would be presenting the fact about how the supply chainintegration with IT has helped Indian firms to become competitive in this world of hyper

competition,how they have integrated SC with IT and how that has affected their performance.Iwould also present a case study for M & M and along with that I would be discussing about M &M and P & G regarding how they have implemented the IT in supply chain and how much theirperformance has changed after this integration.

LITERATURE REVIEWSupply Chain Management is a network of facilities that produce raw materials, transform theminto intermediate goods and then final products, and deliver the products to customers through adistribution system. It spans procurement, manufacturing and distribution (Lee & Billington1995) the basic objective of supply chain management is to optimize performance of the chainto add as much value as possible for the least cost possible. In other words, it aims to link all thesupply chain agents to jointly cooperate within the firm as a way to maximize productivity in the

supply chain and deliver the most benefits to all related parties (Finch 2006). Adoption ofSupply chain management practices in industries has steadily increased since the 1980s. Anumber of definitions are proposed and the concept is discussed from many perspectives.However Cousins et al. (2006); Sachan and Datta (2005); Storey et al. (2006) provided excellentreview on supply chain management literature. These papers define the concept, principals,nature, and development of SCM and indicate that there is an intense research being conductedaround the world in this field they critically assessed developments in the theory and practice ofsupply management.Gunasekaran and McGaughey (2003) extended the scope of SCM beyondmaterial management, partnership, information technology to the Total Quality Managementareas like management commitment, organizational structure, training and behavioral issues. Asfirms' survival lies on integration, a good understanding of the integration process is a key aspect

in SCM. Mouritsen et al. (2003) discussed that basic hypothesis the more integration (wider thescope)the better the management of the chain" is not always true and proved that itDepends very much on the environment" of the supply chain and the power relations betweenthe participants in the supply chain. Authors proposed a set of management techniques and toolsto analyze successful SCM strategies. It is also observed that research is not limited tohypothesis testing and data analysis, but more advanced techniques like simulation, ArtificialNeural Network, and Fuzzy logic are also used for optimization and decision making in SCM.


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Koh and Tan (2006) used the principles of fuzzy logic for analyzing and monitoring performanceof suppliers based on the criteria of product quality and delivery time where as Chiu and Lin(2004) showed how the concepts of collaborative agents and artificial neural networks (ANNs)can work together to enable collaborative supply chain planning (SCP). It appears fromliterature review that researchers have studied supply chain management from a system

perspective, or the systemic natures of interactions between the participants of supply chain areobserved. Although numerous studies views SCM from different perspectives, this paper givesthe better understanding of the supply chain and various forms of IT(BPR, ERP etc).

RESEARCH METHODOLOGY

For this research I would be using various secondary datas available from the internet and

various books.I have also prepared a questionnaire which has questions related to theperformance of the firms after the SC and IT integration.Like how their performance haschanged in terms of contemporary measures of performance like cost,lead time,time tomarket,input cost etc.

Any task without sound objectives is like tree withoutroots.Similarly in case of any researchstudy undertaken,initially the objectives of the same determined and accordingly the further stepsare taken on.A research study may have many objectives but all these objectives revolve aroundone major objective which is the focus of the study.In this study the focus would be on theimpact of supply chain IT integration on the manufacturing firms in India in general and then Iwould also discuss the impact on particular firms and also, I would be discussing a case studyregarding how they have implemented BPR in their igatpuri plant and how that had improvedtheir performance.The following objectives have been set forth.They are to:1) Present a brief knowledge about the basic components of supply chain.2) Provide a brief knowledge about the importance of IT in supply chain.3) Provide a brief knowledge about the various IT implementations like BPR, ERP and E-procurement etc.4) Study and analyze the impact of supply chain and IT integration on the performance ofmanufacturing firms in India.

TYPE OF RESEARCH

My research would be an analytical research where using secondary datas from various sources

I would be showing that why and how SC and IT is happening and what are the results of suchintegration.

DATA COLLECTION METHOD

1)QUESTIONNAIRE- As the questionnaire is self administrated one ,the survey is kept simpleand user friendly .Words used in questionnaire are readily understandable to all respondents.Alsotechnical jargons are avoided to ensure that there is no confusion for the respondents.


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2) SECONDARY DATA- It will collected with the help of various books,researchpapers,magazines ,news papers,journals,internet ,etc.

NEEDTo understand what benefits manufacturing firms in India have derived after the supply chain

integration and also what they have done and how they have done the integration of supply chainwith IT

OBJECTIVE.The purpose of this paper is to emphasize on the benefits of the supply chain an IT integrationand also to understand how Indian firms have implemented different IT technologies in theirsupply chain successfully inspite of very high rate of failure of BPR and ERP implementationbecause this could then help other companies to follow the suit and apply ERP and BPR in theirsupply chain without any risk of failure.

HYPOTHESISHI-integrating supply chain has helped firms in improving their performanceH2-integrating supply chain has no impact on the performance of the firms

And the performance in supply chain effectiveness is measured in terms of cost, quality, leadtime, customer service level and time to market.

SUPPLY CHAIN (SC)Before discussing any further I wanted to clear certain points like what is supply chain, why is it

so important not only in manufacturing industry but in most of the industries, and what do wemean by supply chain management. Also I would like to throw some light on the IT (informationtechnology) and why it is so important in todays competitive world. The simplest definition ofsupply chain is it is a system of organizations, people, activities, information and resourcesinvolved in moving a product or service from supplier to the customers.


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SUPPLY CHAIN ILLUSTRATION

SUPPLY CHAIN PROCESSES

The following are the processes that are involved in supply chain, these processes are veryimportant as they are the basis of any supply chain. These processes need to be healthy in order

to strengthen our supply chain. Procurement-source

Production-make

Distribution-deliever

These are the three processes which are involved in every supply chain whether manufacturingor any other,supply chain starts with the procurement process where manufacturing firm procureraw material from its various vendors for producing the final finished product,for e.g marutiSuzuki procures engines from Fiat India ltd.for its SX4,the second process is the production offinished good that is in our example it is the production of SX4 in its Manesar(Gurgaon plant)

and then the third process which is as important as other two is the distribution which starts afterthe production process is complete,it involves various issues like where to keep our inventory sothat it can be made available without much lead time to the their distributors,so that they cancater to the demand of the customers,these processes plays an important role in the customersatisfaction,reducing lead time and reducing the input cost.

SUPPLY CHAIN MANAGEMENT AND ITS SIGNIFICANCE


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Managing the flow of information through supply chain in order to attain the level of

synchronization that will make it more responsive to customer needs while lowering costs.This

statement defines the supply chain in simple words.There are certain keys to effective supply chain management and those are

Information sharing among all the members of the supply chain. Communication among all the members of supply chain.

Cooperation among all the members of supply chain.

Trust between the manufacturer and their suppliers.These are the four very important points in order for a supply chain to be a successful one.Theseare the points that have been implemented by most of the manufacturing firms in India,likeMaruti Suzuki India ltd has implemented all of them like they share all their information withtheir suppliers regarding everything ranging from sales forecasting to change in customerprefernce.They treat their suppliers as a part of the organization not as a separate identity becauseif they will treat their suppliers as a separate entity,then their suppliers might feel rejected ormight feel that they can be thrown out of the contract any time,and that would lead to the various

problems like delay in shipment of parts etc.

ELEMENTS OF SCM


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ELEMENTS TYPICAL ISSUES

Customers Determining what product and services customer wants.

Forecasting Predicting the quantity and timing of customer demand.

Design Incorporating customers, wants, manufacturability, and the time to market.

Capacity planning Matching supply and demand.

Processing Controlling quantity and scheduling work.

Inventory Meeting demad requirements while managing the costs of holding inventory.

Purchasing Evaluating the potential suppliers, supporting the needs of operations.

Supliers Monitoring suppliers quality, on time delivery, flexibility :maintaining relations.

Location Determining the location of the facilities.

Logistics Determing how to best move the information and materials.

SUPPLY CHAIN UNCERTAINITY FACED BY INDIAN MANUFACTURING FIRMSPRIOR TO INTEGRATION OF SC AND IT

The goal of a supply chain is simply to respond to any kind of customer demand without creatingexcess costly inventory, but prior to integration of IT with supply chain most of themanufacturing firms were facing uncertainties due to different factors which I would discuss.There are some negative impacts of uncertainty and that are-

Lateness in the delivery of order

Incomplete order which would lead to the strained relations betweensuppliers and manufacturers.

Various factors that contributed to the uncertainty in Indian manufacturing firms are-

Inaccurate demand forecasting which results from lack of information sharingbetween suppliers and manufacturers and also from lack of point-of-sale datawhich can be made available through the use of IT.

Long variable lead time which was due to various factors like the nonavailability of raw material or due to other factor like strike in the firm andthat results in delay of the delivery of finished good and increased lead time.

Late deliveries were due to the lack of communication between suppliers andmanufacturers.


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Incomplete shipments were also due the lack of communication between thesuppliers and manufacturer and also due to lack of information sharingbetween the two.

Product changes.

Batch ordering.

Price fluctuation and discounts. Inflated order also caused uncertainty because if demand is suddenly

increased then the suppliers wont be able to supply the raw materials to the

manufacturer and because of that the manufacturer will not be able to producethe finished good on time and those results in loss of sale opportunity.

BULLWHIP EFFECT

Another problem that was faced by the Indian manufacturing firms due the lack of use ofinformation technology was the bullwhip effect. This problem was faced in India mainly by thedenim manufacturing firms prior to the integration of their supply chain with IT, we all know the

objective of supply chain management is to provide a high velocity flow of high quality, relevantinformation that will enable suppliers to provide an uninterrupted and precisely timed flow ofmaterials to customers. However, unplanned demand oscillations, including those caused bystock outs, in the supply chain execution process create distortions which can wreck havoc upand down the supply chain. There are numerous causes, often in combination that will causethese supply chain distortions to start what has become known as the Bullwhip Effect While the

devil is usually buried in the details, as is the case here, the most common general drivers ofthese demand distortions are:

Customers

Promotions

Sales Manufacturing

Policies

Processes

Systems

SuppliersThis unplanned for demand results in a disturbance or lump of demand, which may be a minor

blip for any one customer, oscillates back through the supply chain often resulting in huge andcostly disturbances at the supplier end of the chain. Often, these demand oscillations will launcha mad scramble in manufacturing with the need to acquire and expedite more raw materials

and reschedule production. This bullwhip effect was faced mainly by the denim manufacturing

firms in India prior to the integration of supply chain and IT, But this is the kind of problem canbe faced by any manufacturing firm whether its FMCG firm or fertilizer firm because occurrenceof this effect depends mainly on the information sharing between the partners of the supplychain.

Even though, The Bullwhip Effect has in the past been accepted as normal, and in fact, thoughtto be an inevitable part of the order-to-delivery cycle. Yet, the negative effect on businessperformance is often found in excess inventories, quality problems, higher raw material


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Costs, overtime expenses and shippingcosts. In the worst-case scenario, customer servicegoes down, lead times lengthen, sales are lost, costs go up and capacity is adjusted.Therefore,from here we can conclude that an important element to operating a smooth flowing supply chainis to mitigate and preferably eliminate the Bullwhip Effect.

CAUSES OF BULLWHIP EFFECT IN INDIAN MANUFACTURING INDUSTRY

It is very important to understand the causes of bullwhip effect in order to take corrective step,certain factors that I found out from the studies of Indian manufacturing firms are-

Sporadic sales promotions-Many Indian companies that conducted sales promotions that

effect current inventory and the supply pipeline did not understood the impact, on aquantitative and qualitative basis, of what their sales promotion policies and practices actuallydo. After gaining a complete and accurate understanding of what sales promotions do for you vs.what sales promotions do to you, most companies were left with the need to answer thequestion, What sales promotion policies and practices should we change?

A common complaint from the manufacturing side of the business, and a commonreason for severe demand distortions that cause supply chain oscillations, wereUnforecasted and unknown sales promotions. These unplanned for sales promotion eventsripple throughout the supply chain creating excess costs which border on the incalculable.

Sales incentive plans-Sales targets,quotas and commission accelerators when applied to an

extended quota period, such as three months, they often caused demand distortions. Managementneeds to examine the rationale for sales incentives to be based on shorter-intervals rather thanthree months or longer. Typically, shorter measurement periods promote a smoothing of demandresulting in decreased ordering lumps resulting in a dampening of the Bullwhip Effect.

False order and subsequent cancellations-The two common cause of false order that

were found were-1) The customer does not have confidence in the ability of the supplier to rapidly and

reliably supply product. In other words, the customers do not believe that supplier willship their orders on-time. As a result, customers will hedge by placing higher thanprojected demand on the manufacturer in the hope they will receive what they need, whenthey need it and then, when product availability is considered satisfactory, cancel thebalance of future orders. These false orders often result in excess purchased material in

inventory and in the pipeline as well as underutilized capacity.

2) Sales personnel who will not meet their quota for a time period that wouldaccelerate commissions and qualify them for a bonus, will often have added orChange orders placed by a cooperative customer to achieve quota. TheCustomer in turn may later cancel, or return, part or all of the order, as well asExpect some concessions and/or special treatment from the salesperson in theFuture for providing the service.


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Transportation incentives-Transportation discount incentives for volume orders will

often cause customers to accumulate orders and then release lumps of demand. After thoroughly

examining the impact that this incented distortion has on hampering your own supply chainplanning capabilities, and the resultant associated costs, it may be time to examine your freightincentive practices.

Trust deficit between supplier and manufacturer-With distributors often leery of a manufacturers ultimate

intentions, especially with the possibility the distributor will be removed from the sales chain,and, the manufacturer selling directly to end-users, there is no desire to frequently sharecustomer volumes, demand patterns and inventory positions. On the other hand, this mistrustcontributes to demand oscillations, stock outs, higher inventories and lost sales for themanufacturer and distributor. Developing a workable and effective solution is essential. For

whatever individual or combination of causes that create demand surges and oscillations, theselumps of demand explode out through your supplier network and their supplier network oftenextending leadtime due to unexpected, and often false, increases in demand. Then, the suppliernetwork may not be able to get raw material in a short enough lead time which reverses in thesupply chain as it causes theirs and your delivery lead time to lengthen. Then, the productmanufacturer tells their distributors who tell their dealers that leadtime have increased due tosupply problems. The Bullwhip Effect is now traveling the otherway - - down the supplychain. And, it may get worse with another Bullwhip Effect going up the chain again as longer

lead times cause customers replenishment planning systems to kick-out new, and very often,false demand for future supply coverage. This new surge in demand often causes decisions to bemade that will increase capacity unnecessarily as the Demand ultimately dissipates. As

unnecessary demand variability complicates the supply chain planning and execution processesthe following undesirable effects increase in their severity as they negatively impact operatingperformance. Schedule variability increases Capacity is overloaded and/or under-loaded Cycle times lengthen Working and safety stock inventories increase Overall costs increase Customer service levels decrease Sales and profits decrease


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BULLWHIP EFFECT DIAGRAM

INFORMATION TECHNOLOGY: A SUPPLY CHAIN ENABLER

Information links all aspects of supply chain and the various uses of IT that had been made bythe Indian manufacturing firms areE-business-

Replacement of physical business processes with electronicOnes.

Electronic data interchange-

A computer-to-computer exchange of business documents.Bar code and point of sale-


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Data creates an instantaneous computer record of a sale.Radio frequency identification (RFID)-

Technology can send product data from an item to a readervia radio waves.

Internet-

Allows companies to communicate with suppliers,customers, shippers and other businesses around the worldinstantaneously.Build-to-order (BTO)-

Direct-sell-to-customers model via the Internet; extensivecommunication with suppliers and customer.

RFID FLOWCHART

RFID IMPLEMENTATION IN SUPPLY CHAIN ENVIRONMENT

There is little question that RFID is fast becoming a critical component in the new world ofsupply chain management, especially in fast growing Asian economies. This is especially so forAsian companies that do import and export business with large Western nations such as theUnited States and greater Europe. However, even as RFID is necessary, it is important to


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determine carefully just what needs to be done, and who can help make RFID a success withinthe company.And what Indian manufacturing companies have done especially Tata motors, Mahindra &Mahindra tractors ltd and Maruti Suzuki India ltd.Increasingly, India is fast becoming the new automotive region, given that manufacturing and

labor costs are far lower than the Europe and USA. For example, region-specific models ofMahindras XUV 5oo are manufactured in India, while Volkswagen and Skoda now has sharedmanufacturing in China, catering specifically to the mainland Chinese market with the popularVW Passat and Skoda Octavia (and now Superb) models. Even mainstream Japanese carmanufacturers are relocating some of their manufacturing of region-specific models (such asAltis and Corolla) to lower-cost locations such as India.Some manufacturers have used RFID to keep track of the most critical (and sometimes mostexpensive) item of a car, the engine block. RFID tagging can help reduce misplaced engines(which must be scrapped due to the sensitivity of such products). It is possible that RFID taggingcan become important in keeping track of major parts within a car, including the drive trainassembly, in the near future.

APPROACH FOLLOWED BY INDIAN FIRMS IN APPLYING RFID

Before implementing RFID, it is important to conduct a feasibility analysis of the supply chainenvironment. Setting out to do a conceptual model, with the right definitions, you should thenanalyze the process within your entire supply chain (all the way to your ultimate customer andinclude all stakeholders).After creating a budget with an invitation to your vendor for demonstrations and any small scaletests, you need to conduct an analysis of your sites, and then have some of your personnels to

gauge the usability of the RFID system.You should attempt to launch your RFID installation in phases, with a test or pilot site, runningfor perhaps a reasonable length of time, to iron out any kinks in the system. Once you are assuredthat it will work enterprise-wide, then roll out the system to the entire site. It is also important tore-visit every step of this process of implementation, to ensure that you can improve or tweak thesystem as necessary. This is what is done by major Indian automotive manufacturing firms inorder to compete at the world stage.


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EDI (ELECTRONIC DATA INTERCHANGE)

Various EDI services utilized by the Indian manufacturing firms specially the giants like Tatamotors ltd., M & M etc are-1) Transaction management.

2) On demand support.3) Supply chain community management.

These services were used by the Indian manufacturing firms to electronically connect theenterprise without incurring the costs associated with software and personnel.This provides services ranging from hostel translation to enabling the entire suppliercommunities and it also streamlined their supply chain and maximized the effectiveness of their

trading partner.These services comes in various categories but can be customized according to the need ofspecific companies and it depends on number of factors like-

Current extent of community integration.

Level of internal integration.

Number of trading partners a company has at a particular moment.

Complexity of business processes.

Current EDI infrastructure.

TRANSACTIONAL MANAGEMENT

Transaction Management services offer companies the ability to completely outsource all aspectsof their EDI operations.


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ON DEMAND SUPPORTOn Demand Support services are designed to supplement an organizations existing

infrastructure and personnel. Whether you need to quickly onboard new customers or simplyneed coverage for peak processing times.

SUPPLY CHAIN COMMUNITY MANAGEMENT

Supply Chain Community Management services are designed help organizations expand theirtrading partner communities through the use of cost effective, easy-to-use, web-enabledsolutions.


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BENEFIRTS THAT INDIAN FIRMS HAVE REAPED AFETR SC INTEGRATION

WITH IT

1) Information sharing among supply chain members has helped in- Reducing bullwhip effect.

Helped in detecting problem at the earliest.

Helped the companies in giving faster response.

Helped the firms in building trust and confidence with their suppliers.2) Collaborative planning, forecasting, replenishment, and design has helped in-

Reducing bullwhip effect.

Lower costs (material, logistics, operating, etc.)

Helped in improving capacity utilization.

Helped in improving customer service levels.3) Coordinated workflow, production and operations, procurement-

Improved production efficiencies.

Faster response to any kind of uncertainty.

Improved service levels.

Less time in making product available in the market.4) Adopting new business models and technologies has helped in the following-

Helped in the penetration of the new markets.

Helped in the creation of the new product.

Helped in improving the efficiency.

Helped in the mass customization of the product.

COLLABORATIVE PLANNING, FORECASTING,AND REPLENISHMENT (CPFR)

This is the Process where two or more companies in a supply chain synchronize their demandforecasts into a single plan to meet customer demand. It helped the companies in electronicallyexchanging

Past sales trends.

Pointof-sale data.

On hand inventory.


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Scheduled promotions.

Forecasts.

SUPPLY CHAIN MANAGEMENT SOFTWARE USED BY THE INDIAN FIRMS

1) Enterprise resource planning (ERP)2) Process control and SCOR.

ENTERPRISE RESOURCE PLANNING-

Its software that integrates the components (functions) ofa company by sharing and organizing information and data.

PROCESS CONTROL AND SCOR-

This is used not only for manufacturing operations but can beuse for any kind of processes.

SCOR- Its a cross industry supply chain diagnostic tool maintained by the Supply Chain

Council.


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SCOR MODEL USED BY INDIAN FIRMS

KEY PERFORMANCE INDICATORS IN A SUPPLY CHAN1) Inventory turnover ratio-

Cost of goods sold/Average aggregate value of inventory2) Total value (at the cost) of inventory-

Average aggregate value of inventory=(average inventory

for item i)(unit value for item i).3) Days of supply-=Average aggregate value of inventory/(cost of goods sold)/(365 days)

Let us take an example of maruti Suzuki ltd company in understanding the KPIS-Last year the cost of goods sold for MS was $452 million. The company had the followingaverage value of production materials and parts, work-in-progress, and finished goods inventory

Production materials and parts $4,629,000Work-in-progress $17,465,000Finished goods $12,322,000Total average aggregate value of inventory $34,416,000

The company wants to know the no. of inventory turns and days of supply being held ininventory.

SOLUTION)Inventory turns=cost of goods sold/average aggregate value of inventory

=$425,000,000/$34,416,000=12.3Days of supply=Average aggregate value of inventory/COGS/(365 DAYS)

=$34,416,000/(425,000,000)/((365)


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Days of supply=29.6

VARIOUS MODELS OF IT USED BY INDIAN MANUFACTURING FIRMS IN SYNC

WITH SUPPLY CHAIN

Various models used by Indian firms in sync with supply chain in order to compete with theirrival firms and also to improve their performance in terms of cost, lead time etc are-

ERP(Enterprise resource planning)

BPR(Business process reengineering)

E-procurement

ERP(Enterprise resource planning)In the past many companies have unsuccessfully tried to apply ERP but have failed miserably astheir performance didnt improve a bit and one of the main reason I think is that the Selectingand implementing a new ERP system, and the process changes that go with it, is unquestionablya complex undertaking. Regardless of

your size and perceived resources, an ERP implementation is not somethingthat should be approached without a great deal of careful planning. Amongcompanies that have been through a less-than-fully successful ERP implementation, five reasonsfor poor results show up consistently:

1) Operating strategy did not drive business process design and deployment.2) Implementation took longer than expected.3) Pre-implementation activities were done poorly.4) People were not well prepared to accept and work with the new system.5) The cost to implement was much more than what was expected.

But, there were some of the Indian firms that implemented ERP successfully and theseorganizations like MS, Tata motors, M & M demonstrated how we can avoid mistakes in

implementing ERP solutions to our company.

In implementing ERP solutions to their supply chain most of the giant automobile manufacturingfirms in India were very successful compared to the other firms in the same sector as well asother sector because they took a different approach toward applying ERP solutions to theirsupply chain and from their study I found out that if a company successfully wants to implementERP software to improve their supply chain they must keep the following points in their mind-1) What many manufacturers fail to realize is that extensive supply chain improvement requiresthat management begin to redefine its business in terms of strategic opportunities. The purposeof ERP technology is to support the businessprocesses that support the companys strategic opportunities.

2) The firms who successfully implemented it understood the fact that there is no magic in ERPsoftware. ERPs benefits are a direct result of effective preparation and implementation, andappropriate use. This seems obvious, but nine out of 10 companies dont get it right the first timearound. Expecting a quick fix, silver-bullet solution is a dangerous mindset.3) No amount of advanced information technology can offset the problemof a flawed business strategy and poorly performing business processes. Thisarea, in particular, is something that ERP software implementers may notfully address because it can slow system deployment.


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4) Define a business strategy that will give you a competitive advantageor, at the very least, make you competitively equal. Then, analyze your current businessprocesses and develop your objectives.5) Acquire flexible ERP information technology that can accommodaterapidly changing business conditions. The high-velocity flow of information

needed to support action up and down the supply chain is a major step forwardfor most manufacturers. It will be mandatory in the future just to compete,much less stay ahead of, the competition.6) Have the implementation led by a senior executive who has the authorityto make changes happen and happen quickly. Make sure there is a sense ofurgency and true accountability for completing preparation and implementationactivities on time.

Also, until and unless ERP system is completely integrated into day-to-day business operations,it is not likely that it will be beneficial for the organization. If enterprise integration or moreadvanced supply chain management strategies are to have any chance of complete success it will

be due, to a large extent, to the removal of traditional cross-functional barriers.

PLAN TO SUCCED IN ERP IMPLEMENTATION

Successfully implementing ERP the first time requires a structuredmethodology that is strategy-, people and process-focused. This is the onlyWay to manage the risk effectively. A good methodology covers all thebases, but when the unexpected pops up, as it usually does, you will be preparedto handle these exceptions without severe negative consequences. One very common mistake isnot having your employees prepared to use the new processes and support system. Theconsequence here can range all the way to total failure, but they are avoidable.Evaluate your business strategy and ERP plan before you commit to softwareacquisition and installation. Doing it right the first time is the only cost-effective way to go.Many people out there wish they had paused to evaluate their direction. The following questionsdo not cover every possible contingency, but should be helpful to stimulate thought anddiscussion-

How do we want to run our business?

What business problems need to be resolved?

Do we know and understand our priorities?

Do we fully understand our as-is condition versus our could be condition?

Have we carefully defined an action plan for pre- implementation preparation activities?

What tasks will be accomplished and when?

What are the missing links in our current system and our software of choice?

What are the real costs, benefits and timetable going to be? Do we have an executive level ERP champion to provide the necessary link to the top

management?

Who will implement ERP and make it work?

ERP and supply chain management systems implementations are, in fact,projects without an end. After all, the supply chain is, to a large extent, theVery life blood of a manufacturing company. For the well-prepared, new


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supply chain management systems based on ERP have become significantCompetitive differentiators. Implementing ERP can become a mind-altering experience for thoseinvolved. Following a sound methodologyWill greatly increase your likelihood of success the first time. Yet, it will not guarantee yoursuccess. Only you can do that.

BPR (BUSINESS PROCESS REENGINERING)

BPR is nothing but the radical change and what constitute dramatic change are the overhaul oforganizational structures, management systems, employee responsibilities and performancemeasurements, incentive systems, skills development, and the use of information technology.And in the year 1993 most of the big Indian manufacturing firms realized the importance of BPRin staying competitive in the time of globalization and they also realized that in order to reducecost and lead time they need to revamp the those processes which are not adding any value totheir product.Successful BPR Model can result in enormous reductions in cost or cycle time. It can alsopotentially create substantial improvements in quality, customer service, or other business

objectives. The promise of BPR is not empty -- it can actually produce revolutionaryimprovements for business operations. As has been shown by M&M and other Indianmanufacturing giants.On the other hand, BPR projects can fail to meet the inherently high expectations ofreengineering. Recent surveys estimate the percentage of BPR failures to be as high as 70%.Some organizations have put forth extensive BPR efforts only to achieve marginal, or evennegligible, benefits. Others have succeeded only in destroying the morale and momentum builtup over the lifetime of the organization.Many unsuccessful BPR attempts have been due to the confusion surrounding BPR, and how itshould be performed. Organizations were well aware that changes needed to be made, but did notknow which areas to change or how to change them. As a result, process reengineering is amanagement concept that has been formed by trial and error -- or in other words practicalexperience. As more and more businesses reengineer their processes, knowledge of what causedthe successes or failures is becoming apparent.

EMERGENCE OF BPR IN INDIAN MANUFACTURING INDUSTRY

This was the concept which was developed by Dr. Michael Hammer, James champy, andThomas davenport, according to Dr. Michael Hammer BPR is the fundamental rethinkingand radical redesign of the business processes to achieve dramatic improvements in critical

contemporary measure of performance, such as cost, quality, service and speed. Thisconcept was introduced in India by M&M in the year 1993 when they applied this concept attheir Igatpuri plant to improve the performance of their plant which was going through a verybad phase at that time in terms of expenses, high cost, low productivity etc. I would be giving acase study related to the implementation of BPR in the supply chain by the M&M at theirIgatpuri plant and the after effects of that implementation.


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COMMON STEPS TAKEN BY INDIAN MANUFATURING FIRMS IN

IMPLEMENTING BPR

Project phases required for successful BPR-

Phase 1: Begin Organizational ChangePhase 2: Build the Reengineering OrganizationPhase 3: Identify BPR OpportunitiesPhase 4: Understand the Existing ProcessPhase 5: Reengineer the ProcessPhase 6: Blueprint the New Business SystemPhase 7: Perform the TransformationThese were the common steps used by most of the Indian manufacturing firms in implementingBPR in their supply chain to make their supply chain more effective against any kind ofcompetition and also to reduce cost, increase customer service level etc.

Phase 1: Begin Organizational ChangeActivities included in this phase were as follows-

Assess the current state of the organization.

Explain the need for change.

Illustrate the desired state.

Create a communications campaign for change.

The first step is to take a long, hard look at how the organization operates. The focus of thisexamination is on the operating procedures and the bottom-line results that are generated bythem. The purpose of performing the analysis described below is to determine whether dramaticchange by doing BPR is really necessary. It may be that only marginal change (the result of

Continuous Process Improvements, Total Quality Management, and other similar programs) isneeded -- which would expose the change initiative and the organization to much less risk.Aspects of the business that need to be evaluated are: how things are currently done, whatchanges may be occurring, and what new circumstances exist in our business environment. Next,a look at how certain operating procedures within the organization have caused or will causeirreparable damage to the companys livelihood. What is the source of the organizations

concern? Maybe the demands of the marketplace are shifting. Perhaps competitors have madesignificant advancements in products and services. Regardless of the reasons, it should be clearwhether or not the organization, in its current state, is able to meet the needs of the markets itserves. The consequences of inaction should be identified and well understood. In most cases,these consequences are the loss of jobs by shutting down portions of the business, or perhaps the

entire business. Finally, the proper future direction of the organization should be decided. Thefuture "vision" of how the business must operate will serve as a clear and concise guide withmeasurable goals for employees to focus on.If an organization wishes to change the way it operates, it must turn to its people to make ithappen. People are the agents of change. Creating business plans and strategies are important,but they are only tools to guide the actions of people.Because BPR can potentially require significant changes throughout an organization, it mustbegin with a communications campaign to educate all those who will be impacted by this


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change. Communication to all levels of personnel must remain active from start to finish to keepeveryone involved and working towards a common goal. Without a common understandingabout what is happening, confusion and uncertainty about the future can result in resistancestrong enough to stop any reengineering effort. BPR is most effective when everyoneunderstands the need for change, and works together to tear down old business systems and build

new ones.In order for change to be embraced, everyone must understand where the organization is today,why the organization needs to change, and where the organization needs to be in order tosurvive.

Phase 2: Build the Reengineering Organization

Activities involved in this phase were as follows-

Establish a BPR organizational structure.

Establish the roles for performing BPR.

Choose the personnel who will reengineer.

An infrastructure must be established to support reengineering efforts. Although this phaseconsists of only a few tasks, it has a tremendous impact on the success of a BPR endeavor. Whoare the people that will be chartered to reengineer the business? What will their responsibilitiesbe? Who will they report to? These are the questions that must be answered as the reengineeringstaff is gathered together to communicate, motivate, persuade, educate, destroy, create, rebuild,and implement.One of the most important members of the reengineering effort is the executive leader. Theleader must be a high-level executive who has the authority to make people listen, and themotivational power to make people follow. Without the commitment of substantial time andeffort from executive-level management, most BPR projects cannot overcome the internal forces

against them and will never reach implementation.Aprocess owneris responsible for a specific process and the reengineering effort focused on it.There should be a process owner for each high-level process being reengineered. Allocating theresponsibility of a process to a specific person ensures that someone is in charge of how thatprocess performs. Process owners are usually appointed by the executive leader.The process owner convenes a reengineering team to actually reengineer his or her process. Theteam dedicated to the reengineering of a specific process should be made up of current insiders,who perform the current process and are aware of its strengths and weaknesses, along withoutsiders who can provide objective input to spark creative ideas for redesign. The team shouldbe small, usually five to ten people. Since they will be the ones who diagnose the existingprocess, and oversee the redesign and implementation, they should be credible in their respective

areas. This qualification plays an important role in reducing the resistance by company personnelto the new process.

Phase 3: Identify BPR Opportunities

Activities involved in this step were as follows-

Identify the core/high-level processes

Recognize potential change enablers


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Gather performance metrics within industry

Gather performance metrics outside industry

Select processes that should be reengineered

Prioritize selected processes

Evaluate pre-existing business strategies

Consult with customers for their desires Determine customer's actual needs

Formulate new process performance objectives

Establish key process characteristics

Identify potential barriers to implementation

In this phase, we begin to break away from normal patterns of identifying business opportunities.We start by dividing the entire organization into high-level processes rather than the usualvertical business areas such as marketing, production, finance, etc. These processes, usually lessthan a dozen, are the major or core processes of the organization. This activity is not a timeconsuming task, but it is difficult because it requires a shift in how we think of ourselves. One

goal here is to identify the process boundaries (where the process begins and where it ends),which will help set the project scope for those processes that are to be reengineered.In many cases, seeing the company from the customers point of view can help identify what

these high-level processes might be.At this point, it is helpful to begin thinking about potential change levers which may lead todramatic changes in the organizations processes. Change levers usually will fall under one of

three categories: the use of information, the use of information technology, and human factors.What new information is available and easily accessible to the organization? What newtechnologies have recently been introduced, or are on the horizon, that can change howbusinesses and customers interact? What new ways of structuring cross-functional work teams,compensation systems, and incentive methods have proven to be effective in improving

operations within other organizations? In many instances, a modification in one of these areasrequires changes in the other two areas to be the most effective.Once the major processes have been defined, we need to decide which of our high-levelprocesses needs to be reengineered. The most objective and accurate way is to compare theperformance of our high-level processes, identified earlier, with the performance of ourcompetitors as well as organizations outside of our industry. Even if we outperform our directcompetition, there may be companies in other industries which may be much more effective inperforming a similar task -- such as order fulfillment or product development. If we fulfill ordersin six months, while a competitor fulfills orders in two weeks, we may consider this a processthat needs to be reengineered. What we are looking for here are overall, bottom-line performancemetrics for the high-level processes that will help us select which of these processes to

reengineer. Typically, organizations use the following three criteria: Dysfunction (whichprocesses are the most ineffective), Importance (which processes have the greatest impact on ourcustomers), and Feasibility (which processes are at the moment most susceptible to accomplish asuccessful redesign, or which ones are the "low hanging fruit" as many experts call them).Picking the "low hanging fruit" can show quick success and help build the much neededmomentum and enthusiasm at all levels of the organization. Prioritizing the processes we havechosen to reengineer guides us in scheduling the order we will reengineer these processes.


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Going after the highest priority process first, we assess the preexisting business strategy whichgoverned its component tasks. Most likely, this existing business strategy is not focused ondriving a process; therefore, we will have to define a new process strategy to reflect our newstrategic goals for the process. Process customers are an important source of information to helpset the new direction. We must consult with them to not only discover their desires, but also to

find out what they actually needby watching what they do with our output. Process goals andobjectives can be determined by combining customer needs with competitor benchmarks and"best of industry" practices (metrics on the best performers of a similar process in otherindustries). In addition to goals and objectives, we need to complete the conception of the newprocess by identifying key performance measures, key process characteristics, critical successfactors, and potential barriers to implementation.

Phase 4: Understand the Existing ProcessActivities involved in this step were as follows-

Understand why the current steps are performed

Model the current process

Understand how technology is currently used Understand how information is currently used

Understand the current organizational structure

Compare current process with the new objectives

Now that we know which process to reengineer, we need to take a look at why we currentlyperform the process the way we do. Understand is a key word here. We may not need toscrutinize every detail of how we are performing the process -- this effort has the potential to goon indefinitely, sometimes referred to as analysis paralysis, which can weaken the momentumneeded to carry the project all the way to implementation. What we need to do is understandtheunderlying reasons why the existing process is carried out the way it is, so that we can question

those assumptions during our reengineering sessions later on. When we have the new processobjectives clearly defined (in Phase 3), we can measure our existing process in terms of the newobjectives to see where we are and how far we have to go. Modeling the current process is animportant part of this phase. It not only helps us to better understand the existing process, butalso helps with planning the migration from the old to the new process and executing thephysical transformation of personnel, organizational structures, information requirements, andhow technology is used. Information that should be included in the models are process inputs(such as task times, data requirements, resources, demand, etc.) and process outputs (such as dataoutputs, cost, throughput, cycle time, bottlenecks, etc.).Understanding how and why the current processes use information is also important. Do staffmembers have access to essential information? Are some business areas wasting time and effort

by creating duplicate information when it can be shared across organizational boundaries? Whyis technology used to support some tasks and not others? How effective are the currentinterfaces? Are they easy to use, or are they counter-intuitive and thus inhibit the effectiveness ofcurrent tasks? In what way does the existing process take advantage of technology, and in whatway has technology imposed artificial restrictions? We need to end up with an estimate of thecurrent cost, robustness, and functional value of each technology and information systemscurrently being used.


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Phase 5: Reengineer the ProcessActivities involved in this phase are as follows-

Ensure the diversity of the reengineering team

Question current operating assumptions

Brainstorm using change levers

Brainstorm using BPR principles Evaluate the impact of new technologies

Consider the perspectives of stakeholders

Use customer value as the focal point

During this phase, the actual "reengineering" begins. Weve moved from strategy and analysis

phases into the redesign phase. The Reengineering Team that was formed to take part in thereengineering sessions should consist of designers and implementers, including people wellversed in technology. These team members should come from both inside and outside theexisting process.The "inside" perspective may reveal information about the existing process that was not

uncovered in Phase 4. Having people who will be the future process owners, or those responsiblefor the new process, is a critical component of the Team. Including the future owners will help toensure that the reengineered process succeeds once it is implemented.Equally important is the "outside" perspective of someone who will look at the process with a"fresh eye" and raise questions about operating assumptions that may not be obvious to theinsider who might be too close to the process to see this.Lastly, a technologist will provide insight as to how technology can be applied in new andinnovative ways. In other words, the technologist will help to visualize how the process can beperformed outside the boundaries of the current implementation. Including both outsiders andtechnologists on the team will help spark "out-of-box" thinking (thinking creatively above andbeyond the current restrictions - the walls of the box).

Having developed a good understanding of how the existing processes work in the previousphase, it is now necessary to question the operating assumptions underlying the processes. Isthere some (outdated) historical reason why a process has been performed a certain way? Arethere customer requirements that dictate the steps in a process? Many times the operatingassumptions can be thrown out and new ones developed. However, it is important to evaluate theimpact the assumptions have outside the process in question.

BPR PRINCIPLES THAT WERE FOLLOWED BY INDIAN

MANUFACTURING FIRMS

Several jobs are combined into one.

Workers make decisions.

The steps in a process are performed in order.

Processes have multiple versions.

Work is performed where it makes the most sense.

Checks and controls are reduced.

Reconciliation is minimized.

A case manager provides the single point of contact.


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Hybrid centralized and decentralized operations are prevalent.

Phase 6: Blueprint the New Business System

Activities involved in this step are as follows-

Define the new flow of work

Model the new process steps

Model the new information requirements

Document the new organizational structure

Describe the new technology specifications

Record the new personnel management systems

Describe the new values and culture required

Blueprints are detailed plans required to build something in accordance with the designersintentions. In BPR, blueprints must be created to identify all the necessary details of the newlyreengineered business system and ensure it will be built as intended. This phase of the projecttakes the reengineered process developed in the previous phase, and provides the detailsnecessary to actually implement it.Blueprinting involves modeling the new process flow and the information required to support it.Just as we modeled the "as is" process and information requirements in Phase 4, we need tocreate "to be" models to illustrate how the workflow will be different. The information models,or data models, will indicate where the new process will use information that is shared acrossfunctional areas of the business.The blueprints should also contain models of the redesigned organizational structure. Instead ofthe traditional organization chart, a different kind of chart is needed. This chart will show thenew process flow along with the process team members, the process owners, the case managers,the process facilitators. The chart should also indicate parts of the organization which interactwith the process personnel.In addition, detailed technology specifications required to support the new process should bedefined. Although minor changes, or fine tuning adjustments to the technical configuration willprobably occur during the implementation phase, an initial physical description of thetechnologies used and their physical specifications should be recommended in this phase, to setthe stage for rapid application development.Included in the blueprints should be the new management systems and values or belief systemsof this redesigned area of the business. New management strategies, along with new performancemeasurements, compensation systems, and rewards programs should be outlined. Thereengineered process may require a change in the values or belief systems of the company. Theredesign may require an entirely different culture, or atmosphere, than what is prevalent in theorganization today. It is critical to have these areas, and their responsibilities, defined as we gointo the implementation phase.


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Phase 7: Perform the Transformation

Activities involved in this phase are-

Develop a migration strategy

Create a migration action plan Develop metrics for measuring performance during

implementation Involve the impacted staff

Implement in an iterative fashion

Establish the new organizational structures

Assess current skills and capabilities of workforce

Map new tasks and skill requirements to staff

Re-allocate workforce

Develop a training curriculum

Educate staff about the new process

Educate the staff about new technology used

Educate management on facilitation skills

Decide how new technologies will be introduced

Transition to the new technologies

Incorporate process improvement mechanisms

Now we are ready to transform the organization. We have communicated, strategized, analyzed,reengineered, and blueprinted our ideas for the new process. This is where all of the previousefforts are combined into an actual business system -- something we can see and feel and use toenable our organization to meet the market demands of today and tomorrow.The first step in transforming the organization is to develop a plan for migrating to the newprocess. We need a path to get from where the organization is today, to where the organization

wants to be. Migration strategies include: a full cutover to the new process, a phased approach, apilot project, or creating an entirely new business unit. An important point to consider is theintegration of the new process with other processes. If only one process is reengineered, then itmust interact with the other existing processes. If multiple processes are slated for reengineering,then the new process must not only integrate with existing processes, but also with the newlyreengineered processes that will come on linein the near future; therefore, the implementation of the new process must be flexible enough tobe easily modified later on.Successful transformation depends on consciously managing behavioral as well as structuralchange, with both sensitivity to employee attitudes and perceptions, and a tough minded concernfor results. BPR Implementation requires the reorganization, retraining, and retooling of businesssystems to support the reengineered process.The new process will probably require a new organization, different in structure, skills, andculture. The new management structure should result in the control paradigm being changed tothefacilitation paradigm. The new process team structure should result in the managedparadigmbeing changed to the empoweredparadigm. Once the new structures are established, we shouldmap tasks in the process to functional skill levels, and ultimately to workers.Transforming the workforce will require an array of activities. It begins with an assessment ofthe current skills or capabilities of the workforce to include soft skills, operational skills, and


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technical skills. This inventory may require personal evaluations (including areas of interest),peer evaluations, and supervisor evaluations. Feedback should be provided to all personnel toensure accuracy of current skills and interests for all staff. Armed with the new process skillrequirements and a current skills inventory, the gaps can be assessed. Is the new process feasiblewith the current skill set? Which are the areas to focus on to enhance personnel skills to meet the

requirements of the new process? An education curriculum needs to be established to get allemployees educated on the business and, most important, on how their jobs relate to thecustomer.An educational pyramid is an effective way to transfer knowledge of team building, self mastery,and subject matter knowledge. Systems training is essential to understanding the use of newinformation systems and how to take advantage of their capabilities. Process training may beneeded to help employees think beyond a linear process to a more holistic interdependentprocess. Facilitation training for management is critical to develop their abilities to listen, allowmistakes, handle disputes among process experts, andtransition to a coach/facilitatorrole. Education may be necessary for Total Quality Management(TQM), Statistical Process Control (SPC), or Continuous Process Improvement (CPI) if these

mechanisms are designed into the new processes. Finally, a structured on-the-job training (OJT)program is instrumental in providing continuity of the new process during periods of personnelturnover or attrition.As with any dramatic change, people will have personal difficulties, to varying degrees, with theparadigm shift that has taken place. Almost all new process implementations are surrounded byconfusion, frustration, and sometimes panic. The best transition strategy is one that minimizes, asmuch as possible, the interference caused to the overall environment. Attempts should be madeto keep the new process chaos to a controlled level, to maintain the focus of the reengineeringteam and the faith of the employees.Transforming information systems to support the new process may involve retooling thehardware, software, and information needs for the new process. One approach to this transitioncould be a controlled introduction. The method would ensure that each part of the system isoperational for a segment of the business before going on to the next module to implement.Although the risk may be low while the bugs in the new system are ironed out, it may be difficultto integrate the hybrid old/new systems in a step-wise manner. Theflash cutapproach is wherethe entire system is developed in parallel to the existing system, and a complete transition occursall at once. This may put the organization at a higher risk if the systems do not function properlyat first, but it is the more common approach due to the "all-or-nothing" nature of BPR. Mostreengineered processes function in an entirely different manner than existing processes; thus, astep-wise introduction would, most likely, not be fully functional until all steps were introducedanyway. An important reason to justify the flash cut approach is that the reengineering benefitscan be realized much sooner than with a controlled introduction.

E-PROCUREMENT

Technology has enabled the introduction of faster, more responsive and flexible ordering,manufacturing and distribution systems, which has diminished even further the need forwarehouses to be located near to markets that


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they serve. Just as desktop computing in the 1980s and 1990s served as catalyst to thereengineering movement, the Internet and WWW can be considered as the catalyst for the radicalchange in business context and business process viewpointwhat Keen and McDonald term thee-process perspective. (Kim & Ramkaran, 2004) When a company uses the Internet to shortenorder-to-delivery times, improve reliability, and broaden product choice, its customers respond,

increasing price realization, market share, or both (Christodouleas, 2001: 5). BMW, for example,currently requires about 12 days. In the near future, they plan to reduce further order-to- deliverytime to ten days. Today, instead of taking more than four years to design a new model,manufacturers take less than 18 months. Tata motors, for example, plans to roll out one newmodel every 6 months. (Benko and McFarlan, 2003)

General Motors, ford, Tata motors and M & M are planning to launch their online procurementcompany. This was seen as a way to conduct auctions for parts, organize a global purchasingnetwork and return a profit. However, the results have been less than expected and suppliershave resisted putting sensitive information online. Nevertheless, the system and other similarventures, remains as an information channel and a facility enabling co-design Ofparts. The

impact of the Internet on the automotive industry Is a theme that will dominate corporate andinvestment thinking in the foreseeable future. Business-to-business (B2B) initiatives have thepotential to change forever the supply-chain structures that are currently in place and improve theefficiency and information flows that currently exist in this industry.The term "e-business" can be characterized as the support of the several distinct phases of abusiness transaction through information systems that use the Internet as a communicationmedium. E-businessplays a key role in the function of todays automotive industry. As anincreasing number of transactions are carried out online and relationships among industryparticipants like OEMs and suppliers grow ever more complex with increased interactionbetween participants of different tiers, E-business is emerging as a necessary tool and enabler ofthis new business paradigm. For companies in the automotive supply chain, future businesssuccess requires a readiness to adapt to the e-business climate and co-evolve with it. One of themost important challenges that have affected traditional purchasing strategies and organizationare the solutions, which are provided by modern information technology and the Internet. In justa few years manufacturing companies have invested millions of Rupees in setting up electronicmarket places. The rapid improvement of technology and its application by business seems to beaccompanied by similarly rapid changes in terminology. The use of the term 'electroniccommerce' has been supplemented by additional terms such as e-business, e-marketing, e-commerce and more specialist terms such as e-CRM, e-tail and e-procurement. In the theme of e-business, e-procurement is regarded as having far greater potential for cost savings and businessimprovements than online retailing or enterprise resource planning systems. A survey of a neweconomy by the Economist proclaimed that the biggest savings from business-to-business e-commerce are likely to come in procurement.The advents of e-procurement and developments in the procurement behaviors of the OEM'shave altered the success equation for every automotive supplier. It will be vital that managementquickly begin to focus on strategic sourcing of direct materials. By cutting the time andpaperwork out of these transactions, suppliers can improve time-tomarket on new products,production lead times and quality.For instance, Ford reengineered employee requisitioning processes in an attempt to save billionsof dollars spent purchasing office supplies and filing expense reports. Ford spent an estimated


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$15.5 billion each year on non-production goods and services, making it one of the largestpurchasers of such goods worldwide. Until recently, most global firms operated domesticaccounts, such as payroll, procurement and logistics systems in every country in which theyoperated. The Internet has now enabled global firms to centralize these functions. According tothe Prime Consulting Group (2002), global firms are optimistic on the level of savings that can

be achieved through full implementation of e-procurement strategies. The potential for savings istremendous. E-Procurement is sometimes referred to as a magic bullet, where the early adoptersare stating that the buying process can be improved. However, the new way of doing businessdemands a long-term serious effort and continuous improvements. new e-procurementtechnologies will become an important part of supply chain management and that the rate ofadoption will accelerate as aggressive adopters share their experience and perceptions of lowrisk. The actual benefits and risks will determine the speed at which the technology moves fromits development infancy to the adoption and the maturity stages. There are some fundamentalthings the purchasing company wants to achieve when it comes to purchasing. These includereducing the time employees spend looking for a product, service or suitable supplier, reducingthe time and cost of administering purchases, reducing cycle times, increasing volume with a few

preferred suppliers to get better pricing and other conditions, as well as limiting choices to only anumber of pre-qualified suppliers to ensure quality. E-Procurement has a role to play in all ofthese areas, and the potential gains are huge.

VARIOUS STRATEGIES USED BY FIRMS FOR SC AND IT

INTEGRATIONThere are different integration strategies used by Indian manufacturing firms for becomingcompetitive through reduced costs, improved customer service levels, less lead time and betterquality after our market was opened in 1991.These different strategic integration were-1) SC and BPR integration.2) SC and ERP integration.

3) SC and E-procurement.4) SC and information sharing.

CASE STUDY

M&M'S PROBLEM PLANTS

In the mid-1990s, India's largest multi utility vehicle (MUV) and tractor manufacturer M&Mwas facing serious problems at its Igatpuri and Kandivili plants in Maharashtra. The plants weresuffering from manufacturing inefficiencies, poor productivity, long production cycle, and sub-optimal output. The reason: highly under-productive, militantly unionized, and bloatedworkforces. The company had over the years been rather lenient towards running the plants and

had frequently crumbled under the pressure of union demands. The work culture was alsoreportedly very unhealthy and corruption was widespread in various departments. Alarmed at theplant's dismal condition, Chairman Keshub Mahindra tried to address the problem by sackingpeople who allegedly indulged in corrupt practices. M&M also tried to implement variousvoluntary retirement schemes (VRS), but the unions refused to cooperate and the company wasunable to reduce the labor force. During this period, M&M was in the process of considering theimplementation of a Business Process Reengineering (BPR) program throughout theorganization including the manufacturing units. Because of the problems at the Igatpuri and


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Kandivili plants, M&M decided to implement the program speedily at its manufacturing units.The program, developed with the help of the UK-based Lucas Engineering Systems, was firstimplemented on an experimental basis at the engine plant in Igatpuri. Simultaneously, anexercise was initiated to assess the potential benefits of implementing BPR and its effect on theunions.M&M's management was not surprised to learn that the unions expressed extreme

displeasure at the decision to implement BPR and soon went on a strike. However, this timearound, the management made it clear that it would not succumb to union demands. Soon, theworkers were surprised to see the company's senior staff come down to the plant and work intheir place. With both the parties refusing to work out an agreement, observers began castingdoubts on the future of the company's grand plans of reaping the benefits of BPR.

BACKGROUND NOTE

Mahindra & Mahindra Ltd. (M&M) was the flagship company of the Mahindra group, one of thetop ten industrial houses in India. The company's history dates back to 1945, when two brothers,J.C.Mahindra and K.C.Mahindra, decided to start a business of general-purpose utility vehicles.The brothers formed a company, Mahindra & Mohammed Ltd., in association with their friend

Ghulam Mohammed. In October 1947, the first batch of 75 jeeps was released for the Indianmarket. In 1948, the company was renamed Mahindra & Mahindra Ltd. Over the next fewdecades, the group promoted many companies in areas as diverse as hotels, financial services,auto components, information technology, infrastructure development and trading to name a fewThough M&M had established itself in the markets and was among the leading players inmany of the segments it operated in, it realized that some of its businesses were not closelyrelated to its core business. This realization marked the beginning of the biggest change exercisesince the company's inception. In 1994, a major restructuring exercise was initiated as part of aBPR program. M&M introduced a new organizational model, in which various divisions andcompanies were regrouped into six distinct clusters of related businesses, each headed by apresident. M&M's core activities, automotive and tractors were made autonomous business units.The other activities of the group were organized into infrastructure, trade and financial services,telecommunication and automotive components. According to company sources, the wholeexercise was intended to develop a conceptual map to provide direction for the future growth ofvarious business lines. It was decided that, in future, the group would confine its expansion to theidentified thrust sectors. Thetwo main operating divisions of the company were the automotivedivision, which manufactured UVs and LCVs, and the farm equipment division, which madetractors and farm implements. The company employed over 17,000 people and had six state-of-the-art manufacturing facilities spread over 500,000 square meters. The plants were situated atKandivili (MUVs and Tractors), Nasik (MUVs), Zaheerabad (LCVs, Voyager, three-wheelers),Igatpuri (Engines) and Nagpur (Implements and tractors).


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PROBLEMS FACED BY THE COMPANY AT THE IGATPURI AND

KANDIVALI PLANTS Manufacturing inefficiency

Low productivity

Long production cycle

Sub optimal output

REASONS FOR THOSE PROBLEMS Unhealthy work culture.

Corruption was widespread.

Militantly unionized workforce.

Management lenient and often crumbled under pressure.

DESIGNED IN TWO PARTS

1st

PART-Restructuring of M&M Restructured in six distinct clusters of related businesses as SBU

Each headed by a president.

Infrastructure. Trade and financial services.

Telecommunications.

Automotive components.

Automotive division(UV, LCV, 3 wheelers)

Farm equipments divisions.

2nd

PART-Implementation of BPR at Igatpuri and Kandivili plants Developed with help UK based Lucas Engineering System


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Re-engineering the entire layout & processes of working

Cellular ManufacturingMulti-tasking through Multi-machine manningReduction in non-productive Activities

Implementation of TPM and Kaizen

Formation of 3 cross functional teams Horizon 1: Improvement in existing Product

Horizon 2: Upgradation of existing Product

Horizon 3: Development of new Product

BARRIERS/CHALLENGESMODEL


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SOFT BARRIERS

People problems

Employee and union resistance.

Vendors resistance.

Fears of downsizing.

Several jobs combined into one.

Inflexibility of workers.

Structure and culture.

High corruption.

1st Indian company to go for BPR.

Resistance from vendors.

HARD BARRIERS IT problems.

Resource problems.

Legal obstacles.

What plant faced afterward was the strike from the workers who went on strike for 5 months.But, management demonstrated that they are firm on their decision to implement BPR in theirsupply chain and top management decided not to succumb to the demands of vendors and

workers but to go ahead with their plan and in this process they sacked corrupt employees andintroduced VRS scheme.Afterwards 3 full time teams were formed namely-

Production related team

BPR execution team.

Handling unrest team.

DEPLOY Testing the new improved processes and demonstrated

Around 100 officers produced 35 Engines a day as compared to 1200 Employeesproducing 70 Engines in pre-BPR days.

Implementing new improved processes in regular operations of organization

After this there was no stooping for the BPR and it gained the momentum from there on as theunion had called of its strike.

BENEFITS REAPED DUE TO BPR

Igatpuri Plant: Employees declined by 400 but productivity went up by 125Engines per day.

Nasik Plant : 125% Improvement in productivity

Reduction in Employee costs 1994: 12.4% & 1996: 10.1%

Value added per employee increased from 0.3 million to 0.46 million i.e., increase of53.33 % per employee.

Better Inventory control.


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Better order distribution across plants.

Online and Transparent access of data.

Integrated sales and supply chain.

QUESTIONNAIRE

NAME OF THE COMPANY-DESIGNATION-

1. Input cost has been reduced through supply chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

2. Lead time has been reduced through supply chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

3. Quality of product has improved due to supply chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

4. Customer service has improved due to supply chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

5. Throughput has improved due to supply chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

6. Information flow across SC has become fast through supply chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

7. Flow of end product has become smooth and continuous matching consumption due to supply

chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

8. Relationship with suppliers has improved due to supply chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

9. Forecast has improved through supply chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

10.Stock out situation has been reduced through supply chain integration?Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree

DATA ANALYSISAs per the questionnaire filled and the data from the internet the following analysis is made


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1) Input cost has been reduced by the supply chain integration?

There are 34% employee who strongly agreesthat the implementation of SC integration has reduced the input cost for the company and other44% moderately agrees to thisSo, this clearly shows that the integration of supply chain has a positive impact on theperformance of the company in terms of reduced cost

17

22

63 2

Strongly agree

Moderately

agree

neutral

Moderatelydisagree


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2)Lead time has been reduced through supply chain integration?

As can be seen from the response of theemployees for this question, there are 26% employees who completely believes that the leadtime has been significantly reduced through the use supply chain integration and also there are38% employees who moderately agrees to this, so from the overall response of the employees wecan safely predict that lead time has been reduced to a good extent through supply chainintegration.3)Quality of product has improved due to supply chain integration?

Improvement in the quality of product is alsoan important part of the supply chain integration and from the response of the employees

with 22% and 44% respectively agreeing strongly and moderately and also 34% aredisagreeing on strongly or moderately, it can be predicted that to a good extent quality hasbeen improved through SC integration.

4) Customer service has improved due to supply chain integration?

Customer service improvement is one of themost important constituent of the supply chain and any improvement in the customer serviceshows that supply chain is improving and from the pie-chart it can be seen clearly from theresponse of the employee that customer service level has improved with the supply chainintegration as total of 70% of the respondents agrees that the customer service level hasimproved with supply chain integration.

13

19

9

8

1Strongly agree

Moderately

agree

neutral

11

20

7

84

Strongly agree

Moderately

agree

neutral

21

14

7

4

4

Strongly agree

Moderately

agree

neutral

Moderatelydisagree


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5)Throughput has improved due to supply chain integration?

Throughput shows the amount of product that isbeing consumed from the total product that you are manufacturing and in one or the other waythroughput depends upon the supply chain performance, and from the response of therespondents it can be gauged very easily that 62% of the respondents are either in agreement thatthe performance has improved or else are neutral, but rest 38% do not agree with the statementthat the throughput has improved, but an overall response is that the throughput has improved

with supply chain integration.6) Information flow across SC has become fast and accurate through supply chain

integration?

Flow of fast and accurate information acrossthe supply chain members is very essential for the health of the supply chain and regarding thisquestion out of the total 50 respondents 94% agrees that information flow has become fast andaccurate through supply chain integration. So, it can be safely predicted that supply chainintegration has helped in the fast and accurate flow of information though the supply chainmembers.

7) .Flow of end product has become smooth and continuous matching consumption due to supplychain integration?

9

148

12

7

Strongly agree

Moderately

agreeneutral

Moderately

disagree

31

16

2 1 0Strongly agree

Moderately

agree

neutral

Moderatelydisagree


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Smoothening of the flow of end product meansthat the supply is matching consumption and to this question out 50 respondents 30 or total of60% has responded in affirmative and only 6% have responded negatively.

8)Relationship with suppliers has improved due to supply chain integration?

Relationship with supplier is very important forany manufacturer as both are dependent upon each other and this relationship is very importantfor the overall performance of the supply chain, and in response to this question out of 50

respondents 33 or 66% respondents have responded in affirmative and only 16% have respondedin negative.

9)Forecast has improved through supply chain integration?

Forecast is something which can never be100% accurate but you can try and get as close as possible to accurate and it accurate forecastdepends on many factor like the extent to which information is shared between the members ofthe supply chain and also on the real time data availability, and in respond to this question out oftotal 50 respondent 33 or 86% responded have their answers in affirmative and believes thatforecast can be improved if supply chain is integrated.10)Stock out situation has been reduced through supply chain integration?

17

13

17

2 1Strongly agree

Moderately

agree

neutral

Moderately

disagree

19

14

9

7

1

Strongly agree

Moderately

agree

neutral

Moderately

disagree

25

18

7

Dissertation Finals

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Transcript of Dissertation Finals