Revamping the supply chainThe Ashok Leyland way
Brief Introduction
• Founded in 1948 by Raghunandan Saran, a freedom fighter
• Indian automobile manufacturing company based in Chennai
• 4th and 16th largest manufacturer of buses and trucks in the world respectively.
• The annual turnover of the company was USD1.7 billion in 2013-14
Case Intro…
• Reverse auction
• Recession - Reduction in profit
year Sales (Rs.)
Profit (Rs.)
1996-97 2482.5 Cr. 124.9 Cr.
1997-98 2014.3 Cr. 18.4 Cr.
• Collapse of supply chain builds up inventory leads to revenue by 17.62%
Together we can – Beat The Recession
• Re-gearing the system
• Brainstorming sessions
• Corporate Material Department and Material Management Department
• Maximize bought-out parts
• AL considered both domestic and international vendor.
• Vendor as partners.
Revamping the Supply Chain
• Cost cutting would work only if the supply chain was smooth.
• Supply chain has two phase:
Supply chain
OSCARS – 2 project
OSCARS – 1 Project
Supplier to AL AL to regional sales office
OSCARS -1
• Reduce the cost in inbound supply chain.
1. Reduced material cost
2. Optimum inventory levels reduce
Single window system
• Corporate Quality Engineering (CQM) form.
• Creating huge database of 22000 plus parts of vehicles.
• Total 1400 suppliers. High business with few suppliers and vice-versa.
18% account for 92.5% business and 61% account for 1.9% business
Supplier Tiering
• Tire-1 supplier is supported by tire-2 and tire-3 suppliers.
• Reduced the number of suppliers.
Example: A tool kits that accompanied every vehicle. In the late 1990s, six suppliers’ spread over Punjab , Faridabad Bangalore and Chennai used to supply the 15 items, which were assembled in house. A short supply of 1000 screwdrivers meant 1000 numbers of the remaining 14 items in idle Inventories. To overcome this problem, AL aimed at a reduction of tits supplier base from 1400 to 750.
Just in time (JIT)
• The ‘Push’ system.
• The ‘Pull’ system Benefited AL by Rs.8.5 crore.
• OSCARS-1 divided the main components in 3 category.
Conti…
• Different delivery system for each category.
Send a JIT card to the supplier. Includes all details regarding the parts and location of delivery.
• OSCARS-1 devised a funnel-planning system.
OSCARS-2
• Project consist of 2 main objectives:
Improving customer satisfaction and reducing finished goods inventory
Improved service level
• Survey drawn 3 main parameters :
I. Order to delivery timeII. Reliability of deliveriesIII. Availability of order status info.
Conti…
Karnataka plant came out with a new TQM process and it was a success.
Conti…
• To understand customer needs AL adopted ‘4p’ program Probe, Prioritize, Plan and Position.
• AL build marketing information system (MIS).
The comeback
• Profit of Rs.1.9 crore on sales of 1092.8 in 1st half of 1999-2000.
• In the same year raw material cost reduced by 1-2% and inventory reduced by Rs.300 crore
Year Sales (No.) Income (Rs.)
1998-99 29811 2089.13 crore
1999-2000 37859 2611.41 crore
Questions:
1. Ashok Leyland with an aim to reduce costs improved the in-bound supply chain through several important strategic revamping measures. Explain.
2. “The revamp of the out-bound supply chain had the twin objectives of customer satisfaction and reducing finished goods inventories” discuss how Ashok Leyland re-engineered its out-bound supply chain.
3. Discuss in brief the quantitative benefits in regard to various measures of supply chain revamping exercise for AL.
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