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TOCICO 2014 Conference
Godrej Security SolutionsViable Vision Journey Continues
even in Slowdown
June 11, 2014
Presenters:
Mr. Rahul NaikGodrej Security Solutions
Mr. Ramnish GaikwadVector Consulting Group
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Agenda
CompanyBackground
TOC execution in Institutional Business
TOC execution in New Product Development
Overall Experience
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Agenda
CompanyBackground
TOC execution in Institutional Business
TOC execution in New Product Development
Overall Experience
• Godrej Group
• Godrej & Boyce
• Godrej Security Solutions
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Godrej
• Ardeshir Godrej, our founder, was a lawyer who turned into an entrepreneur and started his business with locks
• He was an inventor and a visionary
• His inventions, manufactured by his brother Pirojsha Godrej, were the foundation of today’s Godrej, a household name in India
• One of India’s most trusted brand, Godrej enjoys the patronage and trust of millions of consumers worldwide
was born in 1897
Ardeshir Burjorji Sorabji Godrej (1868-1936)
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Godrej
• Is today a 117 year old and the largest privately held company in India
• Spread over 3000 acres of land in Vikhroli, Mumbai alone
• Global operations in 16 countries & presence in over 60 countries
• Over 100 manufacturing locations in India and overseas
• Dedicated Godrej Parivar of over 23000 employees
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Godrej
Godrej in everyHome & Workplace
VALUESVALUES
Integrity
Trust
To ServeRespect
Environment
VISIONVISION MISSIONMISSION
EnrichingQuality of LifeEveryday Everywhere
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Godrej Group
Office & Consumer Products Group Office & Consumer Products Group
Godrej & Boyce Mfg. Co. Ltd.
AppliancesAppliances
Industrial Products Group Industrial Products Group
Corporate ServicesCorporate Services
Godrej Infotech Ltd.Godrej Infotech Ltd.
Lawkim Ltd.Lawkim Ltd.
Godrej Consumer Products Ltd.Godrej Consumer Products Ltd.
Godrej Industries & Associate Cos.
Godrej Industries Ltd.Godrej Industries Ltd.
Godrej Agrovet Ltd.Godrej Agrovet Ltd.
Godrej Sara Lee Ltd.Godrej Sara Lee Ltd.
Godrej Properties & Investments Ltd.Godrej Properties & Investments Ltd.
Godrej Group
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Diversified Conglomerate
Nearly 40% of India's population use a Godrej producteveryday either in Homes, Offices or Infrastructure Projects
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Godrej & Boyce Businesses
Office and Consumer
Products Group
Godrej & Boyce
OtherBusinesses
IndustrialProducts
Group
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Godrej & Boyce Businesses
Office and ConsumerProducts Group
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Godrej Security Solutions
Godrej Security Solutions is the pioneer & leader in this field in India
GSS operates in 2 distinct markets
Domestic Institutional Business International Business
With an annual turnover ofRs. 850 Cr. (approx $150mn)
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Domestic Institutional Business
• Supplying Physical Securityproducts to Financial andNon-Financial Institutions, Jewelers,Diamond Merchants, Post Offices,etc.
• Operating from one Plant andextended contract manufacturingfacilities.
• Close to 700 dealers handling thefront end.
Dominant Market Share
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International Business
Trusted across the globe
• Supplying physical security across various geographies
• Presence in 50+ Countries
• Products with Global Certifications
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Product Portfolio
PHYSICALSECURITYPRODUCTS
A Class Apart
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Agenda
CompanyBackground
TOC execution in Institutional Business
TOC execution in New Product Development
Overall Experience
• Key challenges facedprior to TOC execution
• TOC solution deployed
• Results
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Key Challenges:Domestic Institutional Market Scenario 2010
Demand > Supply
• Market demand was growing at20% YOY
• GSS was unable to supply as perdemand leading to emergenceof other competitors
• Market share had decreased from62% to 58% before TOC
• GSS was evaluating addinganother plant to overcome supplysituation before TOC
Physical Security Domestic Market (Rs. Cr)
0
500
1000
1500
2000
2500
3000
3500
1
2
~350
225
20082010
20%CAGR
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Key Challenges:Domestic Institutional Market Perspective
•Expansion driven primarily by the Financial Inclusion programmeof the Government of India
•Customers’ Tolerance Time to open a Branch was crashingfrom earlier 2-3 months to 1 month (including Public Sector Banks)
• Significant damage due to delay in opening a new Bank Branch
• Loss of revenue to the Bank and Market Share - unable to get firstmover advantage
• Escalation in cost - incurring rentals without any revenue
• Risk of license lapsing
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Key Challenges:Domestic Institutional Market Perspective (contd…)
•Major skew in demand – around 70% of the demand comes
in 2nd half of the financial year
•Discounting was encouraged (to meet top-line) even when Plant
was loaded in H2, increasing pressure on margins
Loss of market share and stagnant profitability even in a growing market
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Key Challenges:International Business Market Perspective
0
20
40
60
2010-11 2011-122012-13
32 34 38
Export Billed Sales (Rs. Cr.)• Business in Export Markets doneprimarily through Dealers• Lead time expectation was of 8 weeks as
against actual lead times of 12 weeks• Business from Dealers was stagnant for the
last 3 years
• Supply unreliability caused heavydamage to Dealers• Dealers were carrying 4-5 months of stocks• Dealers not confident of increasing business
with GSS
Losing Dealers’ Trust
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Key Challenges:Supply Chain Perspective
Primarily A-Type Plant
(assembly of around 50 components; 100+ Supply Partners)
• Major de-synchronisation issues
• Uneven load and loss of capacity during the month – productionlow at start and high at end of the month
• Preference to produce standard products (to show betterproductivity)
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Key Challenges:Supply Chain Perspective (contd…)
Leading to…
• Unreliability and highly varying lead time (ranging from 4weeks to 12 weeks)
• Frequent expediting due to emergencies from customers
• Relying on forecast to meet demand (inspite of good orderbook position)
• Push to branches based on forecast resulting in mismatch ofstocks
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Key Challenges:Supply Chain Perspective (contd…)
Skew in Demand in second half of financial yearcausing…
• Under-utilization during lean season
• Difficulty of Ramp-up in short time during peak season
• Disharmony with suppliers (hiring/firing during overload/underload respectively)
Inherent Systemic Conflicts Leading to Loss of Capacity
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S&T Tree
1PROJECT LEAP AHEAD
2:1RELIABILITY COMP. EDGE
3:1ACHIEVE 99%
DDP
3:2SELLING
RELIABILITY
3:3EXPANDING
CLIENT BASE
3:4HAPPY HOURS
OFFER
3:5NON BANKING
SEGMENT ROLL-OUT
3:6LOAD
CONTROL
3:7CAPACITY
MGMT.
BUILD CAPITALIZE SUSTAIN
BASE GROWTH
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Decisive Competitive Edgethat was built to provide
TOC Solution Deployed
High Reliabilitywith Lower Lead Times
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Solution Framework
MTA(Standard)
Buffer6 Days
CTLL WarehouseMotherCoil
MTO(Customized)
Intransit
BranchBilling
Dispatch Time4 to 5 Days
MTA & MTO
Vendors Vendors
Press Shop Pickling Drill
Shop Assembly PaintShop
FF Insp & Desp
Buffer12 to 18 Days
MTA(Standard)
MTO(Customized)
Product Mix Environment of both MTA and MTO
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TOC Solution Deployed (contd…)
Build Stage
• S-DBR implemented at manufacturing plant and suppliers
• POOGI projects for capacity release and lead time reduction
• Buffer Management for Sales to ensure last mile reliability as well
• Dynamic Choking on a daily level to limit WIP
• Managing Demand Skew during second half of financial year
Customer Confidence Restored
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Dynamic Choking
Problem• Due Dates are fixed and hence the Release Dates too
• Orders are released to shop floor based on fixed
Release Dates
• Actual Capacity (due to product mix change, rework,
design issues, etc.) is much different than Assumed
Capacity
• Possibility of Interactive Constraints
• Leading to cycles of
• Underload – Loss of precious CCR Capacity
• Overload – Increase in Black Orders (OTIF Drops)
Flawed Assumption• Capacity can be precisely defined in
Planning• Capacity of resources other than CCR
is higher than the CCR irrespective of Product Mix
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Dynamic Choking (Contd….)
Solution• WIP Control rather than precise definition of Capacity
• Due Dates are constant, however Release Dates
are adjusted based on WIP Status
• To deal with Interactive Constraints
• Rope is tied from end of plant rather than CCR
• Capacity is dedicated in both Planning & Execution
Constant WIP (Applicable to Broad Range of MTO/MTA & Mix Environments)
Safe Zone
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Managing Demand Skew during second half of financial year : Build-up Planning
Decoupling Supply Chain From Spikes
Supply Chain Injection• Determine key SKUs for stocking (only fast runners
to reduce stock risk)• Planning stock levels based on gap between
demand and capacity during Q3 & Q4• Manufacturing the same during lean season of Q2• Building up key components also during the lean
season
Benefits• Smooth and consistent manufacturing• No major variation of demand for component supply• Reduced risk of hiring/firing• No loss of sale during peak season
Capacity > Average Demand
Capacity < Average Demand
Capacity Line
Average Demand in Lean Season
Average Demand increased in Peak Season
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TOC Solution Deployed
Capitalise Stage
• Reliability with lower lead time offer to select customers to increase
share of wallet
• T/Cu and FOL based decisions for discount control and Project Pricing
• Happy Hours offer in the lean season to pull ahead demand
• New Segment (Non-Banking) Roll-out to increase sales during lean period
Gaining Ground
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Why Non-Banking Segment?
• Heavy dependence (92% of business) on Banking and FinancialServices Institutions (BFSI)
• Intense competition (margin pressures) in the BFSI segment
• Business from BFSI primarily (70%) during latter half of thefinancial year
• Excess capacity available post TOC Operations Solution
• Due to demand skew the dealer earnings are restricted to fewmonths whereas the costs are incurred throughout the year
Non Banking Segment Roll-out
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Non Banking Segment Roll-out (contd…)
Injection – Increase sales from Non-Banking Segment• Guarantee for Availability (GFA) offer to existing dealers
• No inventory to be carried by Dealer and delivery within 10 days
• Hold stocks of key SKUs at a central location
• Daily tracking and POOGI to improve Sales Call to OrderConversion rate
• Approach 1 segment at a time (too many segments like petrolpumps, places of worship, hospitals, traders, etc. available)
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Physical Security – Institutions Non-Banking Segment (NBS) Target Segments
FOCUS PLAY OPPORTUNISTIC PLAY
Jewelers
PetrolPumps
ReligiousPlaces
PrivateVaults
InformationTechnology
Corporate Hospitals
Cash in transitcompanies
GovernmentEstablishments
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Non Banking Segment Roll-out (contd…)
Benefits
• High ROI to Dealer as the sales required per month to overcomecosts is very low with no additional investment in inventory
• De-risk by reducing dependence on BFSI segment; no skew indemand in these new segments
• Solution applicable to broad range of B2B companies toincrease sales in new segments
Fuelling the Growth
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Sustain Stage• Capacity Management Process to have capacities at the righttime to handle peak-load
• Leveraging TOC solutions to counter unprecedented slowdownseen in 2013-14
TOC Solution Deployed
Maintain Growth Trajectory
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Slowdown Year: 2013-14TOC Driven Business Strategy
Problem
Advantage Capitalised
Solution• Drove Product Upgradation
• Incentivised Banks to upgrade by facilitating with Replacement Offer
• 15% addition to top-line with a healthy bottom-line impact
• Supply Chain POOGI Projects generated ~ 7x capacity increase
• Focus on Retail Segment• Faster introduction of new products resulted in 35% boost to sales over last year
• Thrust on International Business• Take advantage of depreciating rupee
• Increased Sales by 31% over last year on account of reduced lead times and better reliability
Segment Growth Period (last 3 years) Slowdown Year (2013-14)
Bank Branch Openings ~ 7500 ~ 2500
Financial Service Institution Openings ~ 3500 < 500
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PRODUCT MIX ENVIRONMENT OF MTA & MTO
Before TOC: High lead times and high variationAfter TOC: Lead time as well as variations have
reduced dramatically
Reliability – Order to Billing Lead Time
0
100
200
300
400
5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 96% 97% 98% 99% 100%
80% of orders completed in 80 days
80% of orders completed in 80 daysPre TOC
% of Orders completed in no. of days
0
100
200
300
400
5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 96% 97% 98% 99% 100%
Post TOC% of Orders completed in no. of days
80% of orders completed in 40 days
80% of orders completed in 40 days
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Daily Production – Rs. Cr. Per Day
Output of the Plant has Tripled with only 15% increase in Manpower (Focused on Bottleneck Stations)
Actual Output
Released Capacity of4 Cr. Per Day
Live Since18th Oct, 2010
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WIP Inventory – In Days of Sales
WIP has reduced by more than 60%
Post TOC
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Annual Turnover (Rs. Cr.)
Turnover has more than doubled
0
100
200
300
400
500
600
700
2010-11 2011-12 2012-13 2013-14
292
443
578637
Live Since18th Oct, 2010
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FG Inventory – In Days of Sales
FG has also reduced by 60%
Post TOC
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Internal Lead Times
Significant Reduction in Internal Lead Times
Line CategoryEx‐ Factory Quoted Lead
Time (Weeks)2010
Ex‐ Factory Quoted Lead Time (Weeks)
2014
DOORSMTA 4 ‐ 5 ExstockMTO 6 ‐ 8 3 ‐ 4
RPEMTA 5 ‐ 6 ExstockMTO 4 – 5 2‐3
SDLCMTA 9 ‐ 10 ExstockMTO 12 ‐ 14 2‐3
SAFESMTA 5 ‐ 6 ExstockMTO 6 ‐ 8 2‐3
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CompanyBackground
TOC execution in Institutional Business
TOC execution in New Product Development
Overall Experience
Agenda
• Key challenges facedprior to TOC execution
• TOC solution deployed
• Results
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Key Challenges
•Poor Rate of New ProductDevelopment
•High Lead Time of NewProduct Development
•Frequent Priority Changesat Design Department
Limited Growth of New Products
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S&T Tree
1PROJECT LEAP AHEAD
2:3NPD COMPETITIVE EDGE
3:11EXPLOITING THENPD CAPACITY
3:12LOAD
CONTROL
3:13CAPACITYELEVATION
BUILD SUSTAIN
ENHANCED GROWTH
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Decisive Competitive Edgefor New Product Development to
TOC Solution Deployed
Churn out moreNew Products ata Rapid Pace
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TOC Solution Deployed (contd…)
Build Stage
• Reduce bad multi-tasking:WIP control at Design and Proto-shop
• Full Kit Rule at Design and Proto-shop
• Daily Task Management to ensure Flow
Rising up to the Challenge
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Solution Framework
WIP Control
Active Task Management
Prioritization
Full Kit
Design Team and Proto-shop is now operating under CCPM
• Deployed only WIP control coupled with Full Kit
• No software is being used currently for implementation
Robust Process
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Output of PSP Institution group has more than tripled
PSP Institution Group Output –Projects Completed Per Month
TOCGo Live
Fewer Projectsin Queue
Fewer Projectsin Queue
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Output of Protoshop has also almost tripled
Protoshop Output –Projects Completed Per Month
TOCGo Live
Fewer Projectsin Queue
Fewer Projectsin Queue
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CompanyBackground
TOC execution in Institutional Business
TOC execution in New Product Development
Overall Experience
Agenda
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Profits and Profitability (*Indexed)
During FY11 to FY14, Post TOC not only have Profits quadrupled but Profitability has also more than doubled
Stagnant Profits
Profitability *100
CAGR of 40% in ProfitsPre TOC
Profitability *128
• During FY04 to FY07, both Profits and Profitability were stagnant
• During FY07 to FY11, though Profits grew @ 40%, Profitability was still stagnant
CAGR of 55% in Profits Post TOC
Profitability Post TOC *275
Figs. In Rs. Cr.
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Our Experience of TOC Journey…
Synchronised Management
• The entire supply chain i.e. right from Suppliers to Customers is now working on only 1principle i.e. TOC
• Harmony among various departments such as Manufacturing, Purchase and Sub-Contracting Cell
• No preferential treatment to any particular customer
• Output of various product lines is consistent without intervention of TopManagement
• Bandwidth release of Top Management - now able to focus on important initiatives
• Applying TOC principles to limit the number of initiatives/improvement projects at overallcompany level
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Our Experience of TOC Journey… (contd…)
Enhanced Overall Efficiency & Effectiveness
• Better overall efficiency at vendors’ plant led to no cost escalations in the last 3 years
• Some of the local measurements actually improved:
• Working Capital Turns has improved by 50%
• Bottleneck Machine efficiencies (CCR) in the high 90s
• Value Added has increased by 60%
• Manpower productivity of the plant has also doubled
• ~ Doubled ROI over the past 3 years
• Space release on shop floor due to WIP reduction, thereby improving house-keeping and safety of workers
• Different Planning Cycles (tools) for material sourcing have been eliminated
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Contribution to the TOC Community…
• Shared our experience at TOCICO Conference 2013 in Bad Nauheim,Germany and TOCPA Conference 2013 in Pune, India
• Results of GSS presented to Confederation of Indian Industries & visitsorganized for other companies (thereby influencing them to opt for TOC solutions)
• Based on the GSS experience, 5 other divisions in G&B have opted for TOC
• The new ERP system for G&B shall incorporate TOC principles
• Successful implementations at Vendors have led to them implementing TOC forother customers of theirs
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Recognition…
Winning Laurels, but not resting on them…
• GSS & Vector Consulting Group awarded theprestigious AMCF Spotlight Award 2014 forExcellence in Supply Chain Management
• The other shortlisted finalists were EY withBloomberg and KPMG with Ford Motor Co.
• The award is given to a project that has demonstratedhow a consulting firm has added value to their clientand society at large
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Thank You
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