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8/10/2019 Ashok Leyland A9
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Presented by Group A9
Anna Kallukaren 13009
Deepak M 13019Laxmi Narayan Nanda 13029
Nupoor Jain 13039
Siddarth Shetty 13049
Vivek Narayanan 13061
Revamping the Supply Chain-The Ashok Leyland WaySubmitted to: Professor J. M. Subramanya
8/10/2019 Ashok Leyland A9
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Brief Idea-Areas SCM Helps to focus
• Supply chain management flow is divided into:
• Product flow: movement of goods from supplier to customers andalso in case of any customer returns or has service requirements.
• Information flow: Covers updating the status of the delivery as wellas sharing information between suppliers and manufacturers.
• The finance flow: Encompasses credit terms, payment schedules and
consignment and title ownership arrangements.
• The presentation focuses on how Ashok Leyland implemented andintegrated these practices so as to improve the overall costeffectiveness & efficiency of its supply chain.
8/10/2019 Ashok Leyland A9
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Introduction
0
500
1000
1500
2000
2500
Sales PAT
2482.5
124.9
2014.3
18.4
1996-97
1997-98
8/10/2019 Ashok Leyland A9
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Recession Effect!
•Freight generating sectors saw a steep declineresulting in a severe downturn of freight volumes.
•17.62 % of revenues down and inventories startedto build up
•Results shown on working capital.•Climbed from 33.34% of sales in 1993-94 to
58.81% of sales in 1997-98.
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Initiatives
• Tiering vendor network to reduce number of vendors, andconsequently moving to JIT ordering system to joint improvementprograms (JIP)
• Corporate material department(CMD): Rated the vendor based onfeedback received from supplier quality assurance cell, send
specifications & negotiated the price
• Materials Management Departments(MMDs): scheduling based onunit production plan
• Purchase Philosophy: Over 90% parts were bought out
• Develop a vendor base committed to continuous improvement tomeet quality cost and delivery standards.
8/10/2019 Ashok Leyland A9
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Q1) Ashok Leyland with an aim to reduce costsimproved the in-bound supply chain through severalimportant strategic revamping measures. Explain.
• Project OSCARS- Optimising Supply Chain and RationalisingSourcing• Single strategic sourcing agency
• Preference for vendors who had access to technology• Bring down Supply Chain Costs.
• Single window system
• Supplier Tiering
• Just In Time
8/10/2019 Ashok Leyland A9
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Single Window System
• Jointly formed by Strategic Sourcing and Corporate QualityEngineering(CQE) teams
•
Advantages for suppliers:• Convenient single point contact• Easier to share drawings, negotiate prices and long-term
business volumes• Assistance and consultancy on quality issues
Phase 1:• Creation of country-wide database for the 22,000+ parts• Match the parts with suppliers’ part numbers
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Result of Phase 1
92%
2%
6%
Total Business
252 suppliers(18%) 854 suppliers (61%)
294 suppliers (21%)
• Corporate buying coveredmajor suppliers (Rs 10 lakh
plus per year)
• Classified materials into“packs”
• CMD + CQE specialists foreach pack
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Supplier Tiering
Ashok Leyland(SWS)
Supplier A Supplier D
Supplier G
Supplier H
Supplier B Supplier E Supplier I
Supplier C Supplier F
Supplier J
Supplier K
• Tool Kits
Example: reduced
suppliers from
1400 to 750
• Strategic sourcing
aimed at
reducing cost forsupplier so that
gains were real,
painless and
sustainable
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Just-In-Time (JIT)
Approach:
• JIT for high value/high volume items
• Low cost logistics for low value/high volume items• Each stage produced only as much next stage needed
• Classified the components used by the company intoCategories 'A' (75% of the total cost of components), 'B'(18%), and 'C' (7%),
Push system JITPull
system
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JIT Process
Customer orders
Retailer
orders
Plantsends JIT
card
Supplier
dispatchesconsignment
Shipping
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Q2) Discuss how Ashok Leyland re-engineered itsout-bound supply chain.
•Objectives:• Improving customer satisfaction and reducing finished goods inventories
• Improving service levels with optimum pipeline inventory levels
• 3 major parameters for service level targets:• Order to delivery
• Reliability of deliveries
• Availability of order status information
• New three-tier distribution network
• Results of OSCARS II• Improved customer satisfaction
• Improvement in demand forecasting and data management
• Hosur plant in Karnataka introduced a new TQM process
8/10/2019 Ashok Leyland A9
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Seven Plus One TQM modelRule Objective Result
Total Cost
Management(TCM)
Cut Cost Reduced Operating cost
Energy Management Optimize energy loss Reduced Avg. power cost
per product
Value Engineering(VE) Efficient materialusage
Reduced chasis cost
Cross Functional
Teams(CFT)
Synergy Saved Rs.18.2 million
Suggestion Scheme Involve everyone Quality improvement and
Cost cutting
Inventory Management(IM) Better housekeeping Best IM in indusrty
Shop Investment Programme Monitor and Utilize Operating cost as % of
shop turnover machines
Plus One Training Training across all levels
8/10/2019 Ashok Leyland A9
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• To understand customer needs and assimilate theknowledge, Ashok Leyland adopted ‘4P’ Programme.
•
Probe,• Prioritize,
• Plan
• Position.
• This worked in tandem with manufacturing as part of cross-functional team (CFT). The CFTs worked towards continuousimprovement in product enhancement and marketing.
• Ashok Leyland built a ‘Marketing Information System’ (MIS)to monitor the trends and forecast demand from the inputdealers and field executives.
8/10/2019 Ashok Leyland A9
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Q3) Discuss in brief the quantitative benefits inregard to various measures of supply chainrevamping exercise for Ashok Leyland
In the year 1999-2000:-
• Ashok Leyland recorded a net profit of Rs. 1.9 crore onsales of Rs. 1,092 crore
• Raw material costs were down 1-2% and inventoriesreduced by 300 crore
• Sold 37,859 HCV’s, 27% more than 1998-99
• Total income increased by 25% from 1998-99
• Increase in operating profit by 55 crore
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Reasons for Good Performance
1) Operational efficiency resulting from strategic rawmaterial sourcing, which cut costs.
2) Better control over process inputs by tighteningsupply chain & inventories.
3) Reduced operating expenses through cost savings
and energy, tools, spares etc.
4) Adoption of preventive maintenance policies, etc.
8/10/2019 Ashok Leyland A9
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Current Scenario
• Sales of 60,000 and about 7,000 engines annually
• 2nd largest commercial vehicle company in India, with amarket share of 28%
• Market leader in bus segment
• Carrying more than 60 million people per day, more than
Indian Rail network!
• Joint venture with Nissan motors, in the light commercialvehicle segment
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Conclusion
Ashok Leyland in order to sustain in the market should :
a) Provide world class technology
b) Provide value to the customer and
c) keep innovating there products!