Inventory Control Systems

NAME – MACHINDRA RAGHUNATH PAWAR

ADMISSION NO. – DPGD/JL11/1455

SEPECIALAISATION NAME – SUPPLY CHAIN MANAGEMENT

WELINGKAR INSTITUE APRIL, 2013

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TABLE OF CONTENT

Particulars PAGE No.

Preamble 05

Objective 06

Executive Summary 07

Company Profile 08

Organizational structure 14

Methodology 15

Kanban 16

IUTN Dispatch 24

Vehicle TAT 28

3PL Inventory 35

IUTN Vehicle transit time 36

Economic Order Quantity & Supply Chain management 37

Conclusion & Recommendations 70

References 71

PREAMBLE

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An inventory control system is a process for managing and locating objects or materials,

An inventory control system may be used to automate an order fulfillment process.

To implement innovative practices logistics MIS gives us a trend analysis of logistics activity. On

basis of this analysis logistics department takes appropriate action and achieve good efficiency in

operation. In this context logistics MIS plays very important role. To have a good logistics MIS

we have to consider below points:

1) Flow of information along with operations (Activity)

2) Authenticity of information flow.

3) Methodology of data capturing.

4) Methodology of data consolidation.

5) Methodology of data analysis

6) Methodology of MIS presentation.

Logistics is an essential to all companies. It includes freight transportation, material

handling, warehousing and order processing, packaging and data processing. It uses advanced

information systems and expertise to reduce inventories, cut transportation costs, speed delivery

and improve customer service.

OBJECTIVE

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The objective of this project is to study logistics reports of M&M FES at Kandivali. The aim of

the project is to study, analyze and recommend change in the reports. It includes following

reports as follow

Kanban efficiency

IUTN Vehicle Deployment

3PL Inventory Report

IUTN Vehicle Transit Time

Critical Vehicle Deployment

This project helps to understand detailed activity included in each report and to analyze existing

format of the report. The main objective of this project is to allocation of resource (time, cost,

human resource), enhance visibility with information linkage, use common standard document

and code, support interoperability with each organization system, and reduce usage of document

paper, saving operating cost.

EXECUTIVE SUMMARY

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This project looks to evaluate and study logistics MIS at Mahindra and Mahindra. This project

will bring internal benefits to companies, creating wider benefits to subsidiary companies,

leading to a reduction in external costs. Good logistics reports bring savings, increase

efficiency , reduce waste, improve accountability ,meet the delivery dates more frequently, carry

less inventory, meet customer request dates 95% of the time and integrate supply chain

commitment with product availability on time.

The development of standardize logistics reports has helped companies. Standardize logistics

repots is required to apply same format of report and analyze particular activity. As a

consequence of this, it is necessary for companies to develop standardize logistics reports. Hence

there is a focus on the standardization of logistics repots as companies recognize the potential

synergies that exist between them.

Company profile

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The US $6.7 billion Mahindra Group is among the top 10 industrial houses in India. Mahindra &

Mahindra is the only Indian company among the top three tractor manufacturers in the world.

Mahindra’s Farm Equipment Sector has recently won the Japan Quality Medal, the only tractor

company worldwide to be bestowed this honor. It also holds the distinction of being the only

tractor company worldwide to win the Deming Prize. Mahindra is the market leader in multi-

utility vehicles in India. It made a milestone entry into the passenger car segment with the Logan.

The Group has a leading presence in key sectors of the Indian economy, including the financial

services (Mahindra & Mahindra Financial Services Ltd, Mahindra Insurance Brokers Ltd.,

Mahindra Rural Housing Ltd.), trade and logistics (Mahindra Inter-trade Ltd., Mahindra Steel

Service Ltd., Mahindra Middle east Electrical Steel Service Centre FZE, Mahindra Logistics)

automotive components, information technology (Tech Mahindra, Bristlecone), and

infrastructure development (Mahindra Life spaces, Mahindra Holidays & Resorts India Ltd.,

Mahindra World City).

With over 62 years of manufacturing experience, the Mahindra Group has built a strong base in

technology, engineering, marketing and distribution which are key to its evolution as a customer-

centric organization. The Group employs over 50,000 people and has several state-of-the-art

facilities in India and overseas.

The Mahindra Group has ambitious global aspirations and has a presence on five continents.

Mahindra products are today available on every continent except Antarctica. M&M has one

tractor manufacturing plant in China, three assembly plants in the United States and one at

Brisbane, Australia. It has made strategic acquisitions across the globe including Stokes Forgings

(UK), Jeco Holding AG (Germany) and Schoneweiss & Co GmbH (Germany). Its global

subsidiaries include Mahindra Europe Srl. based in Italy, Mahindra USA Inc. and Mahindra

South Africa.

M&M has entered into partnerships with international companies like Renault SA, France, and

International Truck and Engine Corporation, USA. Forbes has ranked the Mahindra Group in its

Top 200 list of the World’s Most Reputable Companies and in the Top 10 list of Most Reputable

Indian companies. Mahindra has recently been honored with the Bombay Chamber Good

Corporate Citizen Award for 2006-07.

Group at a Glance

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Background

The Mahindra Group’s Farm Equipment Sector has a significant presence across six continents.

It is among the top five tractor brands in the world, with its own state of the art plants in India,

USA, China and Australia, and a capacity to produce 1,50,000 tractors a year. The Group has a

network of 800 dealers worldwide.

In the domestic business, the Farm Equipment Sector has had an unparalleled market leadership

for the last 24 years. It is the largest producer of tractors in India. The international operations of

the Farm Equipment Sector are spread across six continents. It has state of the art manufacturing

plants in India, USA, China and Australia.

Mahindra Gujarat Tractor, acquired by Mahindra & Mahindra from the Government of Gujarat

in 1999 is the oldest running tractor unit in the country. The Mahindra Group has a 60% stake

and the balance 40% is with the Government of Gujarat.

Mahindra Agribusiness* integrates the food chain by providing quality inputs and farm solutions

to post harvest management of high value farm produce. The Company’s core business is to

provide supply chain services to organised retail, to both export and domestic markets for fresh

fruits and vegetables as well as to the food processing industry.

Domestic Operations

The Mahindra Group’s Farm Equipment Sector is the largest producer of agricultural tractors in

India. It has enjoyed an unparalleled market leadership in the domestic market for the last 24

years. With a 30% market share, the Bhoomiputra, Sarpanch and Arjun brands of tractors make

the Group’s Farm Equipment Sector present in all the major segments in India. Mahindra &

Mahindra recently consolidated it position as the leader of the Indian tractor industry when it

acquired 43% stake in Punjab Tractors, the owner of the leading Swaraj brand of tractors.

It has a large customer base of 12, 00,000 satisfied customers and the deepest distribution reach.

The Sector has four manufacturing facilities in India, located in Mumbai and Nagpur in

Maharashtra, Rudrapur in Uttaranchal and Jaipur in Rajasthan. The Farm Equipment Sector has

always been a process driven organisation with a strong focus on its quality systems. The TQM

movement in the Sector has brought accolades like the most coveted Deming Application Prize,

making it the first tractor company in the world to win recognition of this stature.

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Overseas Operations

With headquarters at Tomball (Texas), Mahindra USA is a wholly owned subsidiary of

Mahindra & Mahindra. Over the years, Mahindra USA has grown by leaps and bounds and has

reinforced its position in the Compact and Utility segment. It works hand in hand with a network

of hundreds of leading tractor dealers throughout the country to provide its American customers

complete product support and quality After Sales Service.

Mahindra Australia, based in Brisbane, is a branch of the global farm equipment manufacturer

Mahindra & Mahindra. Mahindra Australia currently offers a complete line of 2WD and 4WD

Compact and Utility models with an option to have performance matched attachments like

Loaders and Mowers.

Mahindra China Tractors, a joint venture between the Jiangling Motors Company Group and

Mahindra & Mahindra, started operations in July 2005. It will see Mahindra & Mahindra further

expanding the product range and developing more tractors for China as well as other overseas

markets.

Assembly Plants

Domestic (India)

Mumbai, Maharashtra

Nagpur, Maharashtra

Rudrapur, Uttaranchal

Jaipur, Rajasthan

Baroda, Gujarat

Chappercheri - Swaraj plant

Nagar, Punjab - Swaraj plant

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Milestones:

I. 1963

Incorporation of International Tractor Co. of India(ITCI) as a Joint Venture

between Mahindra & Mahindra , International Harvester Inc. & Voltas Ltd sharing

the responsibility of Design, Manufacturing and Marketing

II. 1965

Rolled out 1ST Batch of 225 Tractor in 35 HP range.

III. 1970

Set up Implements division at Nagpur

IV. 1977

Merger with Mahindra & Mahindra forming its Tractor Division. Full fledged

responsibility for Design, Manufacturing and Marketing.

V. 1981

100,000 Tractor Rolled Out

VI. 1983

Market leader in domestic Tractor market, has maintained this position till date.

VII. 1985

Launched Quality Circle Movement as part of TQM.

VIII. 1990

Started the Juran Quality Improvement Movement.

IX. 1994

Implements division achieves ISO 9002 Certification.

Incorporation of Mahindra USA Inc. in USA as wholly owned subsidiary of

M&M.

X. 1996

Tractor assembly started at Implements Division Nagpur.

Kandivali plant achieves ISO 9001 Certification.

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XI. 1998

Implements SAP on 1st April 1998.

Reached level of 600,000 tractors.

Implemented Business Process Re-Engineering.

Nagpur Plant awarded QS-9000 certificate.

M&M acquired majority stake in GTCL.

XII. 2000

Set up 1st Satellite Tractor plant at Rudrapur.

Launched “Arjun” a new generation tractor in 60 HP range.

XIII. 2001

Nagpur plant awarded the ISO-14001.

XIV. 2003

Ventured into Manufacturing of Industrial Engines.

FES was awarded the Deming Prize for Excellence in Quality, making it the 1 st

tractor company in the world to receive the honour.

XV. 2004

M&M received the 'Best Logistics and Supply Chain Management Award' at the

Supply Chain Management Logistics World.

XVI. 2006

Zaheerabad unit and Kandivali Unit bagged the joint 2nd Prize in the National

Energy Conservation Award.

XVII. 2007

M&M FES has won an AE50 Outstanding Innovation Award 2007 from ASABE.

FES was awarded the coveted Japan Quality Medal on October 16, 2007.

XVIII. 2008.

FES won the prestigious "Golden Peacock National Quality Award - 2007" for

Excellence in Quality.

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The FES organizational structure:

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PRESIDENT

HUMAN RESOURSES

INTERNATIONAL MARKETING

ACCOUNTING, FINANCE & IT

PRODUCT DEVELOPMENT AND RESEARCH SERVICES

PRESIDENT’S OFFICE

BUSINESS PLANNING

SALES AND MARKETING

BUSINESS EXCELLENCE

C.E.O.

PRODUCT QUALITY

ENGINE APPLICATION&BUSINESS POWEROL

SHUBH LABH SERVICES

COMPONANT DEVELOPMENT

AND

MFG & S.C.P.C

METHODOLOGY OF PROJECT PLAN

1. Process introduction:

In first meeting the list of the project reports are collected and read about logistics

activity.

2. Logistics Activity List

The list of activity involved in project is as follow:

Kanban efficiency

IUTN Vehicle Deployment

3PL Inventory Report

IUTN Vehicle Transit Time

Critical Vehicle Deployment

3. Source of Data:

Sr. No Logistics Activity Source of Data

1 Kanban Efficiency Supply Module

2 IUTN Vehicle Deployment Mahindra Logistic

3 Critical Vehicle Deployment Mahindra Logistic

4 3PL Inventory Reports Mahindra Logistic

5 IUTN vehicle Transit Time Supply Module

6 Vehicle Turn Around Time Dock manifest

4. Actual Operating of Activity :

Actual Operating of Activity along with their analysis and recommendation is as follow

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Kanban

Kanban(in kanji 看板 also in katakana カンバン, where kan, 看 / カン, means "visual," and

ban, 板 / バン, means "card" or "board") is a concept related to lean and just-in-time (JIT)

production. The Japanese word kanban is a common term meaning "signboard" or

"billboard". According to Taiichi Ohno, the man credited with developing JIT, kanban is a

means through which JIT is achieved.

Kanban is a signalling system to trigger action. As its name suggests, kanban historically

uses cards to signal the need for an item. However, other devices such as plastic markers

(kanban squares) or balls (often golf balls) or an empty part-transport trolley or floor location

can also be used to trigger the movement, production, or supply of a unit in a factory.

It was out of a need to maintain the level of improvements that the kanban system was

devised by Toyota. Kanban became an effective tool to support the running of the production

system as a whole. In addition, it proved to be an excellent way for promoting improvements

because reducing the number of kanban in circulation highlighted problem areas.

The term kanban describes an embellished wooden or metal sign which has often been

reduced to become a trade mark or seal. Since the 17th century, this expression in the

Japanese mercantile system has been as important to the merchants of Japan as military

banners have been to the samurai. Visual puns, calligraphy and ingenious shapes — or

kanban — define the trade and class of a business or tradesman. Often produced within rigid

Confucian restrictions on size and color, the signs and seals are masterpieces of logo and

symbol design. For example, sumo wrestlers, a symbol of strength, may be used as kanban

on a pharmacy's sign to advertise a treatment for anemia.

In the late 1940s, Toyota was studying supermarkets with a view to applying some of their

management techniques to their work. This interest came about because in a supermarket the

customer can get what is needed at the time needed in the amount needed. The supermarket

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only stocks what it believes it will sell and the customer only takes what they need because

future supply is assured. This led Toyota to view earlier processes, to that in focus, as a kind

of store. The process goes to this store to get its needed components and the store then

replenishes those components. It is the rate of this replenishment, which is controlled by

kanban that gives the permission to produce. In 1953, Toyota applied this logic in their main

plant machine shop.

An important determinant of the success of production scheduling based on "pushing" the

demand is the quality of the demand forecast which can receive such "push". Kanban, by

contrast, is part of an approach of receiving the "pull" from the demand. Therefore the

supply, or production is determined according to the actual demand of the customers. In

contexts where supply time is lengthy and demand is difficult to forecast, the best one can do

is to respond quickly to observed demand. This is exactly what a kanban system can help: it

is used as a demand signal which immediately propagates through the supply chain. This can

be used to ensure that intermediate stocks held in the supply chain are better managed,

usually smaller. Where the supply response cannot be quick enough to meet actual demand

fluctuations, causing significant lost sales, then stock building may be deemed as appropriate

which can be achieved by issuing more kanban. Taiichi Ohno states that in order to be

effective kanban must follow strict rules of use[4] (Toyota, for example, has six simple rules,

below) and that close monitoring of these rules is a never-ending problem to ensure that

kanban does what is required. Toyota's Six Rules are:

Do not send defective products to the subsequent process

The subsequent process comes to withdraw only what is needed

Produce only the exact quantity withdrawn by the subsequent process

Equalize production

Kanban is a means to fine tuning

Stabilize and rationalize the process

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A simple example of the kanban system implementation might be a "three-bin system" for

the supplied parts (where there is no in-house manufacturing) — one bin on the factory floor

(demand point), one bin in the factory store and one bin at the suppliers' store. The bins

usually have a removable card that contains the product details and other relevant

information — the kanban card. When the bin on the factory floor becomes empty, i.e., there

is demand for parts, the empty bin and kanban cards are returned to the factory store. The

factory store then replaces the bin on the factory floor with a full bin, which also contains a

kanban card. The factory store then contacts the supplier’s store and returns the now empty

bin with its kanban card. The supplier's inbound product bin with its kanban card is then

delivered into the factory store completing the final step to the system. Thus the process will

never run out of product and could be described as a loop, providing the exact amount

required, with only one spare so there will never be an issue of over-supply. This 'spare' bin

allows for the uncertainty in supply, use and transport that are inherent in the system. The

secret to a good kanban system is to calculate how many kanban cards are required for each

product. Most factories using kanban use the coloured board system (Heijunka Box). This

consists of a board created especially for holding the kanban cards.

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Milk Run :

Milk runs being deployed for local & outstation suppliers.

Concept ensures pick up of vendor parts on a daily basis or at a set frequency matched to the

vendor scheduling system ( two bin / ftvq / fqvt / schedule based)

Consolidation godowns at both ends with defined stocks

Minimum stocks at plant

Material always in transit

Even in cases of delays on the road, stocks in godown & in hand on-hand provide necessary

buffer.

Prevents stock outs

Reduces inventory drastically.

Implemented at Nasik plant for local suppliers and north based suppliers

Trial runs started for local suppliers at Kandivali.

Daily replenishment :-

Concept

Daily replenishment of Parts to stores

Daily collection of parts from vendor by Milk run concept

Importance is given to Transit lead time

Daily replenishment + milk run – methodology

Buyer sends weekly pickup plan to vendor & transport

This plan is divided on day wise basis based on PPC plan

As per plan, transport goes to vendor at pre-decided time & picks of supply

After vehicle leaves transport informs buyer of pick up position by electronic mail in pre-

decided concept.

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Normal Batch concept

Godown

Factory 1

Factory 6

Factory 2

Factory 3

Factory 4 Factory 5

M&M plant

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Milk run concept

Factory 1

Factory 6

Factory 2

Factory 3

Factory 4 Factory 5

M&M plant

Comparison of Milk run features with normal batch dispatchNormal batch Milk run

1. Dispatch More than 1 vehicle from same location

Common vehicle from same location

2. Godown May be required Not required3. Frequency of dispatch Weekly/fortnightly

Not fixedDaily, bi weekly - decided

4. System implementation Independent Plant, transport & vendor together

5. Inventory at vendor’s end Not decided Decided & agreed upon6. Transit lead time Not decided Decided & agreed upon7. Signal of non conformance No signal Immediate signal by transport

8. Safety in case of Material not supplied

Not known Safety stock is built in the system

9. Inventory at plant’s end Fluctuating Steady within band10. Re-ordering Based on monthly

scheduleBased on daily usage / kanban signal

11. Freight cost No control Reduce due to consolidation

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12. Possibility of Returnable crate introduction

Less Can be built in the system

KANBAN EFFICIENCY

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Data F10

Month Kanban Trigger Given

Kanban Trigger Fulfilled

Actual % Target %

April 262 226 86% 98%May 774 687 89% 98%

Data F09

Month Kanban Trigger Given

Kanban Trigger Fulfilled

Actual % Target %

May 1183 781 66% 98%

RECOMMENDATIONS:

Reasons for non delivery of kanban trigger should be display so that particular action can

be easily taken.

Also data should be presented according to module wise i.e. how much trigger given for

engine, tractor, transmission and for component development and material management.

The recommended format is as follow.

Supply module

Trigger Given Trigger Delivered%

DeliveredEngine      Tractor      

Transmission

     

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CDMM      

IUTN DIPATCH PROCEDURE:- Material movement from one plant to another plant is term as Inter Unit Transfer Note (IUTN) /

Stock Transfer.

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Start

IUTN dock sends their vehicle requirement to Mahindra Logistic

Mahindra Logistic compiles vehicles requirement.

Mahindra Logistics ask Transporter to deploy vehicle

.

Transporter deploy vehicle as per ML’s requirement.

Mahindra Logistic captures the vehicle deployment data

End

IUTN Vehicle Deployment

Data F10 IUTN Sheet Metal IUTN Transmission

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Month Vehicle Required

Vehicle Placed

% Vehicle Required

Vehicle Placed

% Actual

Total %Target

April 292 284 97% 142 141 99% 98% 98%May 312 265 85% 182 162 89% 86% 98%

Data F09 IUTN Sheet Metal IUTN Transmission

Month Vehicle Required

Vehicle Placed

% Vehicle Required

Vehicle Placed

% Actual

Total %Target

May 216 201 93% 144 141 98% 95% 98%

ANALYSIS:

Vehicle deployment adherence is not 100% .Need to ensure 100% vehicle placement.

Quality of vehicles not satisfactory.

Placement of market vehicles is not suitable for our requirement.

Time schedule adherence for placement is not satisfactory.

Heavy market dependence.

ACTION:

Vehicle should be placed as per requirement of concern department on time.

Time schedule adherence for placement to be improved & monitored

Vehicle detention to be monitored closely at all plants.

Reputed transporter required to be in circulation

RECOMMENDATION:

The data should be presented shift wise that will help to analyze the data and take

corrective action. (Vehicle placed at 1st shift or 2nd shift or 3rd shift.)

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The format for above mention recommendation is as follow.

Data F10 IUTN Sheet Metal

Month

Vehicle Require

d

Vehicle

Placed

Required at 1st

shift

Placed at 1nd shift

Required at 2nd

shift

Placed at 2nd shift

Actual total %

Target

April 292 284     97%  

May 312 265     85%  

           Data F09 IUTN Sheet Metal  

Month

Vehicle Require

d

Vehicle

Placed

Required at 1st

shift

placed at 1nd shift

Required at 2nd

shift

placed at 2nd shift   %  

May 216 201       93%  

VEHICLE TURN AROUND TIME

LOADING PROCEDURE:-

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Start

Transporter comes at concern department for sign on gate pass by cell member.

Vehicle come in and placed on dock (dock in time)

Actual loading take place

Preparation of challan.

Checking of security copy and challan.

Vehicle leave the dock.(dock out time)

Transporter went to excise office to take excise challan.

Checking of challan by cell member

Preparation of gate pass.

Vehicle reports at gate No. 3

UNLOADING PROCEDURE:-

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Stop

Start

Supplier vehicle reported at gate No. 3

Preparation of gate pass.

Conformation about material at concern department by driver.

After getting conformation vehicle come at concern department.

Driver report to receiving cell member to register vehicle dock in time.

Material unload on dock

Verification of physical material with challan and sign by cell member

Preparation of G.R. (good receipt) at material receiving dock

Vehicle leave the dock(Dock out time)

End

VEHICLE TURN AROUND TIME

Turn Around Time is the time difference between dock in time and dock out time.

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Data F10 Avg TAT in hrs

Month Unloading Loading Total Target

April 6.84 9.68 8.26 6.00

May 7.63 9.02 8.33 6.00

Data F09 Avg TAT in hrs

Month Unloading Loading Total Target

April 8.68 6.14 7.41 6.00

May 8.91 12.23 10.57 6.00

ANALYSIS:

Pallet, space for loading and unloading not available.

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Sometime beans are not available on time. The beans coming after dispatch are not in

good condition, so they can not be use for loading.

More time is wasting in documentation like gate pass, challan. Good receipt etc.

Decision on sending vehicle to godown is taken after detaining the vehicle the vehicle

which.

Rejection material remains pending on the dock which increases unloading time for

vehicle coming after that.

Hoice (use for lifting the material) is covering 80% of vehicle so remaining loading is

done by hands which increase loading time of Torous (big vehicle).

ACTION:

System to be designed and implement for pallet, space, beans optimum utilization.

No vehicle to be send to Godown after detention.

Supply module to ensure correct schedule of vehicle.

Simple system to be installed for process of documentation.

Create separate space for the rejection material.

Increase the hoice capacity so that it can cover 100% vehicle in case of loading and

unloading.

RECOMMENDATION:

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Parato analysis chart should be included which would show the reasons

Count of Reason for detention  

Reason for detention for unloading

Total

Pallet Short 51 58% 58%

Space Constraint 21 24% 82%

Document Issue 4 5% 87%

Late Reporting 4 5% 92%

Mathadi Not Available 3 3% 94%

Project Store Time 2 2% 97%

ASN issue 1 1% 98%

Babu not available 1 1% 99%

Vehicle Break down inside the plant

1 1% 100%

Grand Total 88 100%

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Parato delay at unloading

0%

20%

40%

60%

80%

100%

120%

Reasons

%

%

Cumm %

% 58% 24% 5% 5% 3% 2% 1% 1% 1%

Cumm % 58% 82% 87% 92% 94% 97% 98% 99% 100%

Pallet ShortSpace

ConstraintDocument

IssueLate

ReportingMathadi Not

AvailableProject

Store TimeASN issue

Babu not available

Vehicle Break down inside the

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Count of Reason for detention  

Reason for detention for loadingTotal

Material not ready 12 46% 46%

Doc. Not ready 10 38% 84%

Documents delay at Transmission 1 4% 88%

Pallet short 1 4% 92%

TRACTOR NOT READY 1 4% 96%Vehicle placed at Engine dock for Loading Camshafts. Not loaded. 1 4% 100%

Grand Total 26 100%

0%

20%

40%

60%

80%

100%

Reasons

%%

Cumm %

% 46% 38% 4% 4% 4% 4%

Cumm % 46% 84% 88% 92% 96% 100%

Material not ready

Doc. Not readyDocuments delay

at TransmissionPallet short

TRACTOR NOT READY

Vehicle notplaced at

Loading

3PL INVENTORY REPORT

Plant Month 0-30 31-60 61-90 91-120 > 120 Total

Inventory % > 60 days Target

Data F10  

FES Mar 600

37

34

76

307

1,054 39.60% 0% after 60 days

FES Apr 527

91

14

17

266

914 32.45% 0% after 60 days

FES May 760

90

27

5

230

1,111 23.54% 0% after 60 days

 Data F09  

Plant Month 0-30 31-60 61-90 91-120 > 120 Total Inventory % > 60 days Target

FES Mar 1,268

446

119

69

36

1,938 12% 0% after 60 days

FES Apr 1,345

396

170

62

33

2,005 13% 0% after 60 days

FES May 989

316

128

62

47

1,542 15% 0% after 60 days

ANALYSIS:

Material is store for longer time due to change in production plan

Shelf life for rubber item is deteriorated due to longer storage

CD (component development) inventory is increasing due to less consumption &no

place for storage at CD storage.

ACTION:

Response on Inventory liquidation from CD needs to improve.

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IUTN VEHICLE TRANSIT TIME :

OBJECTIVES:

Material movement from KND to other FES plants to fulfill production input requirement

within standard Transit Time ensuring timely delivery of the material in good condition to other

plants as per the requirement

Data F10 IUTN Nagpur IUTN Rudrapur    

Month GDS Normal SGDS GDS Normal SGDS Total % Target

April 46% 85% 0 77% 98% 23%   98%

May NA NA NA 78% 95% 0%   98%

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ECONOMIC ORDER QUANTITY

Overview

EOQ applies only when demand for a product is constant over the year and each new order is

delivered in full when inventory reaches zero. There is a fixed cost for each order placed,

regardless of the number of units ordered. There is also a cost for each unit held in storage,

sometimes expressed as a percentage of the purchase cost of the item.

We want to determine the optimal number of units to order so that we minimize the total cost

associated with the purchase, delivery and storage of the product.

The required parameters to the solution are the total demand for the year, the purchase cost for

each item, the fixed cost to place the order and the storage cost for each item per year. Note that

the number of times an order is placed will also affect the total cost, though this number can be

determined from the other parameter.

Underlying assumptions

The ordering cost is constant.

The rate of demand is known, and spread evenly throughout the year.

The lead time is fixed.

The purchase price of the item is constant i.e. no discount is available

The replenishment is made instantaneously; the whole batch is delivered at once.

Only one product is involved.

EOQ is the quantity to order, so that ordering cost + holding cost finds its minimum. (A common

misunderstanding is that the formula tries to find when these are equal.)

Variables

 = Purchase Price

 = order quantity

 = optimal order quantity

 = annual demand quantity

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 = fixed cost per order (not per unit, typically cost of ordering and shipping and handling. This

is not the cost of goods)

 = annual holding cost per unit (also known as carrying cost or storage cost) (warehouse

space, refrigeration, insurance, etc. usually not related to the unit cost)

The Total Cost function

The single-item EOQ formula finds the minimum point of the following cost function:

Total Cost = purchase cost + ordering cost + holding cost

Purchase cost: This is the variable cost of goods: purchase unit price × annual demand quantity.

This is P×D

Ordering cost: This is the cost of placing orders: each order has a fixed cost S, and we need to

order D/Q times per year. This is S × D/Q

Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2, so this

cost is H × Q/2

.

To determine the minimum point of the total cost curve, partially differentiate the total cost with

respect to Q (assume all other variables are constant) and set to 0:

Solving for Q gives Q* (the optimal order quantity):

Therefore:  .

Example

Suppose annual requirement quantity (Q) = 10000 units

Cost per order (CO) = $2

Cost per unit (CU)= $8

Carrying cost %age (CC%)(%age of CU) = 0.02

Carrying cost Per unit = $0.16

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Economic order quantity =   

Economic order quantity = 500 units

Number of order per year (based on EOQ) 

Number of order per year (based on EOQ) = 

Total cost 

Total cost 

Total cost 

If we check the total cost for any order quantity other than 500(=EOQ), we will see that the cost

is higher. For instance, supposing 600 units per order, then

Total cost 

Total cost 

Similarly, if we choose 300 for the order quantity then

Total cost 

Total cost 

This illustrates that the Economic Order Quantity is always in the best interests of the entity.

Inventory management software

Inventory management software is a computer-based system for tracking inventory levels,

orders, sales and deliveries. It can also be used in the manufacturing industry to create a work

order, bill of materials and other production-related documents. Companies use inventory

management software to avoid product overstock and outages. It is a tool for organizing

inventory data that before was generally stored in hard-copy form or in spreadsheets. It is often

associated with and is similar to distribution software.

Features

Inventory management software is made up of several key components, all working together to

create a cohesive inventory for many organizations’ systems. These features include:

Order management

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Should inventory reach a certain threshold, a company's inventory management system can be

programmed to tell managers to reorder that product. This helps companies avoid running out of

products or tying up too much capital in inventory.

Asset tracking

When a product is in a warehouse or store, it can be tracked via its barcode and/or other tracking

criteria, such as serial number, lot number or revision number. Nowadays, inventory

management software often utilizes barcode, radio-frequency identification (RFID),

and/or wireless tracking technology.

Service management

Companies that are primarily service-oriented rather than product-oriented can use inventory

management software to track the cost of the materials they use to provide services, such as

cleaning supplies. This way, they can attach prices to their services that reflect the total cost of

performing them.

Product identification

Barcodes are often the means whereby data on products and orders is inputted into inventory

management software. A barcode reader is used to read barcodes and look up information on the

products they represent. Radio (RFID) tags and wireless methods of product identification are

also growing in popularity.

Purpose

Companies often use inventory management software to reduce their carrying costs. The

software is used to track products and parts as they are transported from a vendor to a warehouse,

between warehouses, and finally to a retail location or directly to a customer.

Inventory management software is used for a variety of purposes, including:

Maintaining a balance between too much and too little inventory.

Tracking inventory as it is transported between locations.

Receiving items into a warehouse or other location.

Picking, packing and shipping items from a warehouse.

Keeping track of product sales and inventory levels.

Cutting down on product obsolescence and spoilage.

Manufacturing uses

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Manufacturers primarily use inventory management software to create work orders and bills of

materials. This facilitates the manufacturing process by helping manufacturers efficiently

assemble the tools and parts they need to perform specific tasks. For more complex

manufacturing jobs, manufacturers can create multilevel work orders and bills of materials,

which have a timeline of processes that need to happen in the proper order to build a final

product. Other work orders that can be created using inventory management software include

reverse work orders and auto work orders. Manufacturers also use inventory management

software for tracking assets, receiving new inventory and additional tasks businesses in other

industries use it for.

Advantages

There are several advantages to using inventory management software in a business setting.

Cost savings

In many cases, a company’s inventory represents one of its largest investments, along with

its workforce and locations Inventory management software helps companies cutexpenses by

minimizing the amount of unnecessary parts and products in storage. It also helps companies

keep lost sales to a minimum by having enough stock on hand to meet demand.

Increased efficiency

Inventory management software often allows for automation of many inventory-related tasks.

For example, software can automatically collect data, conduct calculations, and create records.

This not only results in time savings, cost savings, but also increases business efficiency.

Warehouse organization

Inventory management software can help distributors, wholesalers, manufacturers and retailers

optimize their warehouses. If certain products are often sold together or are more popular than

others, those products can be grouped together or placed near the delivery area to speed up the

process of picking, packing and shipping to customers.

Updated data

Up-to-date, real-time data on inventory conditions and levels is another advantage inventory

management software gives companies. Company executives can usually access the software

through a mobile device, laptop or PC to check current inventory numbers. This automatic

updating of inventory records allows businesses to make informed decisions.

Data security

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With the aid of restricted user rights, company managers can allow many employees to assist in

inventory management. They can grant employees enough information access to receive

products, make orders, transfer products and do other tasks without compromising

company security. This can speed up the inventory management process and save managers’

time.

Insight into trends

Tracking where products are stocked, which suppliers they come from, and the length of time

they are stored is made possible with inventory management software. By analyzing such data,

companies can control inventory levels and maximize the use of warehouse space. Furthermore,

firms are more prepared for the demands and supplies of the market, especially during special

circumstances such as a peak season on a particular month. Through the reports generated by the

inventory management software, firms are also able to gather important data that may be put in a

model for it to be analyzed.

Disadvantages

The main disadvantages of inventory management software are its cost and complexity.

Expense

Cost can be a major disadvantage of inventory management software. Many large companies use

inventory management software, but small businesses can find it difficult to afford it. Barcode

readers and other hardware can compound this problem by adding even more cost to companies.

The advantage of allowing multiple employees to perform inventory-management tasks is

tempered by the cost of additional barcode readers.

Complexity

Inventory management software is not necessarily simple or easy to learn. A company’s

management team must dedicate a certain amount of time to learning a new system, including

both software and hardware, in order to put it to use. Most inventory management software

includes training manuals and other information available to users. Despite its apparent

complexity, inventory management software offers a degree of stability to companies. For

example, if an IT employee in charge of the system leaves the company, a replacement can be

comparatively inexpensive to train compared to if the company used multiple programs to store

inventory data

Operations management

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Operations management is an area of management concerned with overseeing, designing, and

controlling the process of production and redesigning business operations in the production

of goods or services. It involves the responsibility of ensuring that business operations

are efficient in terms of using as few resources as needed, and effective in terms of meeting

customer requirements. It is concerned with managing the process that converts inputs (in the

forms of materials, labor, and energy) into outputs (in the form of goods and/or services). The

relationship of operations management to senior management in commercial contexts can be

compared to the relationship of line officers to highest-level senior officers in military science.

The highest-level officers shape the strategy and revise it over time, while the line officers

make tactical decisions in support of carrying out the strategy. In business as in military affairs,

the boundaries between levels are not always distinct; tactical information dynamically informs

strategy, and individual people often move between roles over time.

According to the U.S. Department of Education, operations management is the field concerned

with managing and directing the physical and/or technical functions of a firm or organization,

particularly those relating to development, production, and manufacturing. Operations

management programs typically include instruction in principles of general management,

manufacturing and production systems, plant management, equipment maintenance

management, production control, industrial labor relations and skilled trades supervision,

strategic manufacturing policy, systems analysis, productivity analysis and cost control, and

materials planning. Management, including operations management, is like engineering in that it

blends art with applied science. People skills, creativity, rational analysis, and knowledge

of technology are all required for success.

In 1911 Frederick Taylor published his "The Principles of Scientific Management”, in which he

characterized scientific management as:

1. The development of a true science

2. The scientific selection of the worker

3. His scientific education and development

4. Intimate friendly cooperation between management and the men

Taylor is also credited for developing stopwatch time study, this combined

with Frank andLillian Gilbreth motion study gave way to time and motion study which is

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centered on the concepts of standard method and standard time. Other contemporaries of Taylor

worth remembering are Morris Cooke (rural electrification in 1920s) and Henry Gantt (Gantt

chart). Also in 1910 Hugo Diemer published the first industrial engineering book: Factory

Organization and Administration.

In 1913 Ford W.Harris published his "How Many parts to make at once" in which he presented

the idea of the quantity model. He described the problem as follows:

"Interest on capital tied up in wages, material and overhead sets a maximum limit to the quantity

of parts which can be profitably manufactured at one time; "setup-up" costs on the job fix the

minimum. Experience has shown one manager a way to determine the economical size of lots"

In 1931 Walter Shewhart published his Economic Control of Quality of Manufactured Product,

the first systematic treatment of the subject of Statistical Process Control.

In 1943, in Japan, Taiichi Ohno arrived at Toyota Motor company. Toyota evolved a unique

manufacturing system centered on two complementary notions: just in time and autorotation. In

1983 J.N Edwards published his "MRP and Kanban-American style" in which he described JIT

goals in terms of seven zeros: zero defects, zero (excess) lot size, zero setups, zero breakdowns,

zero handling, zero lead time and zero surging. This periods also marks the spread of Total

Quality Management in Japan, ideas initially developed by American authors such

as Deming, Juran and Armand V. Feigenbaum. Schnonberger identified seven fundamentals

principles essential to the Japanese approach:

1. Process control

2. Easy-to-see quality

3. Insistence on compliance

4. Line stop

5. Correcting one's own errors

6. The 100% check

7. Continual improvement

In 1987 the International Organization for Standardization (ISO), recognizing the growing

importance of quality, issued the ISO 9000, a family of standards related to quality management

systems.

Meanwhile in 1964, a different approach was developed by Joseph Orlicky as a response to the

TOYOTA Manufacturing Program: Material Requirements Planning (MRP) at IBM, latter

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gaining momentum in 1972 when the American Production and Inventory Control Society

launched the "MRP Crusade". One of the key insights of this management system was the

distinction between dependent demand and independent demand.

Recent trends in the field revolve around concepts such as Business Process Re-

engineering (launched by Michael Hammer in 1993, Lean Manufacturing, Six Sigma (an

approach to quality developed at Motorola between 1985-1987) and Reconfigurable

Manufacturing Systems.

In a job shop machines are grouped by technological similarities regarding transformation

processes, therefore a single shop can work very different products (in this picture four colors).

Also notice that in this drawing each shop contains a single machine.

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Flexible Manufacturing System: in the middle there are two rails for the shuttle to

move pallets between machining centers (there are also FMS which use AGVs), in front of each

machining center there is a buffer and in left we have a shelf for storing pallets. Usually in the

back there is a similar system for managing the set of tools required for different

machining operations.

Operations strategy concerns policies and plans of use of the firm productive resources with the

aim of supporting long term competitive strategy. Competitive variables involve:

1. Price (actually fixed by marketing, but lower bounded by production cost): purchase price, use

costs, maintenance costs, upgrade costs, disposal costs

2. Quality: specification and compliance

3. Time: productive lead time, information lead time, punctuality

4. Flexibility: mix, volume, gamma

5. Stock availability

A more recent approach, introduced by Terry Hill, involves distinguishing competitive variables

in order winner and order qualifiers when defining operations strategy. Order winners are

variables which permit differentiating the company from competitors, while order qualifiers are

45

prerequisites for engaging in a transaction. This view can be seen as a unifying approach

between operations management and marketing (see segmentation).

Productivity is a standard metric for evaluation of production systems, broadly speaking a ratio

between outputs and inputs, and can assume many specific forms, for example: nominal

productivity (ideal conditions), theoretical productivity (net of machine availability), mix

productivity, workforce productivity, raw material productivity, warehouse productivity

(=inventory turnover). It is also useful to break up productivity in use U (productive percentage

of total time) and yield η (ratio between produced volume and productive time) to better evaluate

production systems performances.

Designing the configuration of production systems involves

both technological and organizational variables. Choices in production technology involve:

dimensioning capacity, fractioning capacity, capacity location, outsourcing processes, process

technology, automation of operations, tradeoff between volume and variety (see Hayes-

Wheelwright matrix). Choices in the organizational area involve: defining

worker skills and responsibilities, team coordination, worker incentives and information flow.

Regarding the planning of production there is a basic distinction between the push approach and

the pull approach, with the later including the singular approach of Just in Time. Regarding the

traditional pull approach a number of techniques have been developed based on the work of Ford

W.Harris (1913) which came to be know as the Economic Order Quantity Model, which formed

the basis of subsequent techniques as the Wagner-Within Procedure, the News Vendor

Model, Base Stock Model and the Period Model. These models usually involve the calculation

of cycle stocks and buffer stocks, the latter usually modeled as a function of demand variability.

Joseph Orlickly and others developed Material Requirement Planning (MRP) at IBM, essentially

a push approach to inventory control and production planning, which takes as input both

the Master Production Schedule (MPS) and the Bill of Materials (BOM) and gives as output a

schedule for the materials needed in the production process. To avoid an "explosion" of data

processing in MRP (number of BOMs required in input) planning bills (such as family bills or

super bills) can be useful since they allow a rationalization of input data into common codes.

MRP had some notorious problems such as infinite capacity and fixed lead times, giving way

later on to modifications of original software implementation in the form of MRP II and ERP. In

46

these context problems of scheduling, loading, part type selection and applications of operations

research have a significant role to play.

Lean Manufacturing is an approach to production which arose in Toyota between the end of

World War II and the seventies. It comes mainly from the ideas of Taiichi Ohno and Toyoda

Sakichi which are centered on the complementary notions of Just in Timeand Autorotation, all

aimed at reducing waste. A series of tools have been developed mainly with the objective of

replicating Toyota success: a very common implementation involves small cards known

as kanbans.

There are also fields of mathematical theory which have found applications in the field of

operations management such as operations, mainly optimization problems and queue theory.

Queue theory is employed in modeling queue and processing times in production systems while

mathematical optimization draws heavily from multivariate calculus and linear algebra. Queue

theory is based on markov chains and stochastic processes. It also worth noticing that

computations of safety stocks are usually based on modeling demand as a normal distribution.

When analytical models are not enough, managers may resort to using simulation.

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Value Stream Mapping, a representation of materials and information flows inside a company,

mainly used in the lean manufacturing approach. The calculation of the timeline usually involves

using Little's Law to derive lead time from stock levels and cycle times

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Illustration of the Simplex method, a classical approach to solving LP optimization problems and

also integer programming (ex:branch and cut). Mainly used in push approach but also in

production system configuration. The interior of the green poly tope geometrically represents the

feasible, while the red line indicates the sequence of pivot operations required to reach

the optimal solution

Organizations

Association for Operations Management (APICS) which supports the Production and Inventory

Management Journal

European Operations Management Association (EurOMA) which supports the International

Journal of Operations & Production Management

Production and Operations Management Society (POMS) which supports the journal: Production

and Operations Management

Institute for Operations Research and the Management Sciences (INFORMS)

The Manufacturing and Service Operations Management Society (MSOM) which supports the

journal: Manufacturing & Service Operations Management

Institute of Operations Management (UK)

Association of Technology, Management, and Applied Engineering (ATMAE)

49

50

Supply chain management

Supply chain management (SCM) is the management of a network of interconnected businesses

involved in the provision of product and service packages required by the end customers in

a supply chain. Supply chain management spans all movement and storage of raw materials,

work-in-process inventory, and finished goods from point of origin to point of consumption.

Another definition is provided by the APICS Dictionary when it defines SCM as the "design,

planning, execution, control, and monitoring of supply chain activities with the objective of

creating net value, building a competitive infrastructure, leveraging worldwide logistics,

synchronizing supply with demand and measuring performance globally."

SCM draws heavily from the areas of operations

management, logistics, procurement, information technology and strives for an integrated

approach.

Origin of the term and definitions

51

The term "supply chain management" entered the public domain when Keith Oliver, a consultant

at Booz Allen Hamilton, used it in an interview for the Financial Times in 1982. The term was

slow to take hold and the lexicon was slow to change. It gained currency in the mid-1990s, when

a flurry of articles and books came out on the subject. In the late 1990s it rose to prominence as a

management buzzword, and operations managers began to use it in their titles with increasing

regularity.

Common and accepted definitions of supply chain management are:

Managing upstream and downstream value added flow of materials, final goods and related

information among suppliers; company; resellers; final consumers are supply chain management.

Supply chain management is the systematic, strategic coordination of the traditional business

functions and the tactics across these business functions within a particular company and across

businesses within the supply chain, for the purposes of improving the long-term performance of

the individual companies and the supply chain as a whole (Mentzer et al., 2001).

A customer focused definition is given by Hines (2004:p76) "Supply chain strategies require a

total systems view of the linkages in the chain that work together efficiently to create customer

satisfaction at the end point of delivery to the consumer. As a consequence costs must be lowered

throughout the chain by driving out unnecessary costs and focusing attention on adding value.

Throughput efficiency must be increased, bottlenecks removed and performance measurement

must focus on total systems efficiency and equitable reward distribution to those in the supply

chain adding value. The supply chain system must be responsive to customer requirements."

Global supply chain forum - supply chain management is the integration of key business

processes across the supply chain for the purpose of creating value for customers and

stakeholders (Lambert, 2008).

According to the Council of Supply Chain Management Professionals (CSCMP), supply chain

management encompasses the planning and management of all activities involved

in sourcing, procurement, conversion, and logistics management. It also includes the crucial

components of coordination and collaboration with channel partners, which can be

suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain

management integrates supply and demand management within and across companies. More

recently, the loosely coupled, self-organizing network of businesses that cooperate to provide

product and service offerings has been called the Extended Enterprise.

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A supply chain, as opposed to supply chain management, is a set of organizations directly linked

by one or more of the upstream and downstream flows of products, services, finances, and

information from a source to a customer. Managing a supply chain is 'supply chain management'

(Mentzer et al., 2001).

Supply chain management software includes tools or modules used to execute supply chain

transactions, manage supplier relationships and control associated business processes.

Supply chain event management (abbreviated as SCEM) is a consideration of all possible events

and factors that can disrupt a supply chain. With SCEM possible scenarios can be created and

solutions devised.

In many cases the supply chain includes the collection of goods after consumer use for recycling.

Including 3PL or other gathering agencies as part of the RM re-patriation process is a way of

illustrating the new end-game strategy.

Problems addressed

Supply chain management must address the following problems:

Distribution Network Configuration: number, location and network missions of suppliers,

production facilities, distribution centers, warehouses, cross-docks and customers.

Distribution Strategy: questions of operating control (centralized, decentralized or shared);

delivery scheme, e.g., direct shipment, pool point shipping, cross docking, direct store delivery

(DSD), closed loop shipping; mode of transportation, e.g., motor carrier, including

truckload, Less than truckload (LTL), parcel; railroad; intermodal transport, including trailer on

flatcar (TOFC) and container on flatcar (COFC); ocean freight; airfreight; replenishment strategy

(e.g., pull, push or hybrid); and transportation control (e.g., owner-operated, private

carrier, common carrier, contract carrier, or third-party logistics (3PL)).

Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to

achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the

activities is optimized. For example, full truckload (FTL) rates are more economical on a cost

per pallet basis than LTL shipments. If, however, a full truckload of a product is ordered to

reduce transportation costs, there will be an increase in inventory holding costs which may

increase total logistics costs. It is therefore imperative to take a systems approach when planning

53

logistical activities. These trades-offs are key to developing the most efficient and effective

Logistics and SCM strategy.

Information: Integration of processes through the supply chain to share valuable information,

including demand signals, forecasts, inventory, transportation, potential collaboration, etc.

Inventory Management: Quantity and location of inventory, including raw materials, work-in-

process (WIP) and finished goods.

Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across

entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials,

information and funds across the supply chain. The flow is bi-directional. SCM applications

provide real-time analytical systems that manage the flow of product and information throughout

the enterprise supply chain network.

Activities/functions

Supply chain management is a cross-function approach including in managing the movement of

raw materials into an organization, certain aspects of the internal processing of materials into

finished goods, and the movement of finished goods out of the organization and toward the end-

consumer. As organizations strive to focus on core competencies and becoming more flexible,

they reduce their ownership of raw materials sources and distribution channels. These functions

are increasingly being outsourced to other entities that can perform the activities better or more

cost effectively. The effect is to increase the number of organizations involved in satisfying

customer demand, while reducing management control of daily logistics operations. Less control

and more supply chain partners led to the creation of supply chain management concepts. The

purpose of supply chain management is to improve trust and collaboration among supply chain

partners, thus improving inventory visibility and the velocity of inventory movement.

Several models have been proposed for understanding the activities required to manage material

movements across organizational and functional boundaries. SCOR is a supply chain

management model promoted by the Supply Chain Council. Another model is the SCM Model

proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped

into strategic, tactical, and operational levels. The CSCMP has adopted The American

Productivity & Quality Center (APQC) Process Classification Framework a high-level, industry-

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neutral enterprise process model that allows organizations to see their business processes from a

cross-industry viewpoint.

[Strategic

Strategic network optimization, including the number, location, and size of

warehousing, distribution centers, and facilities.

Strategic partnerships with suppliers, distributors, and customers, creating communication

channels for critical information and operational improvements such as cross docking, direct

shipping, and third-party logistics.

Product life cycle management, so that new and existing products can be optimally integrated

into the supply chain and capacity management activities.

Segmentation of products and customers to guide alignment of corporate objectives with

manufacturing and distribution strategy.

Information technology chain operations.

Where-to-make and make-buy decisions.

Aligning overall organizational strategy with supply strategy.

It is for long term and needs resource commitment.

Tactical level

Sourcing contracts and other purchasing decisions.

Production decisions, including contracting, scheduling, and planning process definition.

Inventory decisions, including quantity, location, and quality of inventory.

Transportation strategy, including frequency, routes, and contracting.

Benchmarking of all operations against competitors and implementation of best

practices throughout the enterprise.

Milestone payments.

Focus on customer demand and Habits.

Operational level

Daily production and distribution planning, including all nodes in the supply chain.

Production scheduling for each manufacturing facility in the supply chain (minute by minute).

Demand planning and forecasting, coordinating the demand forecast of all customers and sharing

the forecast with all suppliers.

55

Sourcing planning, including current inventory and forecast demand, in collaboration with all

suppliers.

Inbound operations, including transportation from suppliers and receiving inventory.

Production operations, including the consumption of materials and flow of finished goods.

Outbound operations, including all fulfillment activities, warehousing and transportation to

customers.

Order promising, accounting for all constraints in the supply chain, including all suppliers,

manufacturing facilities, distribution centers, and other customers.

From production level to supply level accounting all transit damage cases & arrange to

settlement at customer level by maintaining company loss through insurance company.

Managing non-moving, short-dated inventory and avoiding more products to go short-dated.

Importance

Organizations increasingly find that they must rely on effective supply chains, or networks, to

compete in the global market and networked economy. In Peter Drucker's (1998) new

management paradigms, this concept of business relationships extends beyond traditional

enterprise boundaries and seeks to organize entire business processes throughout a value chain of

multiple companies.

During the past decades, globalization, outsourcing and information technology have enabled

many organizations, such as Dell and Hewlett Packard, to successfully operate solid

collaborative supply networks in which each specialized business partner focuses on only a few

key strategic activities (Scott, 1993). This inter-organizational supply network can be

acknowledged as a new form of organization. However, with the complicated interactions among

the players, the network structure fits neither "market" nor "hierarchy" categories (Powell, 1990).

It is not clear what kind of performance impacts different supply network structures could have

on firms, and little is known about the coordination conditions and trade-offs that may exist

among the players. From a systems perspective, a complex network structure can be decomposed

into individual component firms (Zhang and Dilts, 2004). Traditionally, companies in a supply

network concentrate on the inputs and outputs of the processes, with little concern for the

internal management working of other individual players. Therefore, the choice of an internal

management control structure is known to impact local firm performance (Mintzberg, 1979).

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In the 21st century, changes in the business environment have contributed to the development of

supply chain networks. First, as an outcome of globalization and the proliferation of

multinational companies, joint ventures, strategic alliances and business partnerships, significant

success factors were identified, complementing the earlier "Just-In-Time", Lean

Manufacturing and Agile manufacturing practices.[11] Second, technological changes,

particularly the dramatic fall in information communication costs, which are a significant

component of transaction costs, have led to changes in coordination among the members of the

supply chain network (Coase, 1998).

Many researchers have recognized these kinds of supply network structures as a new

organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation",

"Global Production Network", and "Next Generation Manufacturing System".[12] In general,

such a structure can be defined as "a group of semi-independent organizations, each with their

capabilities, which collaborate in ever-changing constellations to serve one or more markets in

order to achieve some business goal specific to that collaboration" (Akkermans, 2001).

The security management system for supply chains is described in ISO/IEC 28000 and ISO/IEC

28001 and related standards published jointly by ISO and IEC

Historical developments

Six major movements can be observed in the evolution of supply chain management studies:

Creation, Integration, and Globalization (Movahedi et al., 2009), Specialization Phases One and

Two, and SCM 2.0.

Creation era

The term supply chain management was first coined by Keith Oliver in 1982. However, the

concept of a supply chain in management was of great importance long before, in the early 20th

century, especially with the creation of the assembly line. The characteristics of this era of supply

chain management include the need for large-scale changes, re-engineering, downsizing driven

by cost reduction programs, and widespread attention to the Japanese practice of management.

Integration era

This era of supply chain management studies was highlighted with the development of

Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the

introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop

into the 21st century with the expansion of internet-based collaborative systems. This era of

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supply chain evolution is characterized by both increasing value-adding and cost reductions

through integration.

In fact a supply chain can be classified as a Stage 1, 2 or 3 network. In stage 1 type supply chain,

various systems such as Make, Storage, Distribution, Material control, etc. are not linked and are

independent of each other. In a stage 2 supply chain, these are integrated under one plan and are

ERP enabled. A stage 3 supply chain is one in which vertical integration with the suppliers in

upstream direction and a customer in downstream direction is achieved. An example of this kind

of supply chain is Tesco.

Globalization era

The third movement of supply chain management development, the globalization era, can be

characterized by the attention given to global systems of supplier relationships and the expansion

of supply chains over national boundaries and into other continents. Although the use of global

sources in the supply chain of organizations can be traced back several decades (e.g., in the oil

industry), it was not until the late 1980s that a considerable number of organizations started to

integrate global sources into their core business. This era is characterized by the globalization of

supply chain management in organizations with the goal of increasing their competitive

advantage, value-adding, and reducing costs through global sourcing. However it was not until

the late 1980s that a considerable number of organizations started to integrate global sources into

their core business.

Specialization era (phase I): outsourced manufacturing and distribution

In the 1990s, industries began to focus on “core competencies” and adopted a specialization

model. Companies abandoned vertical integration, sold off non-core operations, and outsourced

those functions to other companies. This changed management requirements by extending the

supply chain well beyond company walls and distributing management across specialized supply

chain partnerships.

This transition also re-focused the fundamental perspectives of each respective organization.

OEMs became brand owners that needed deep visibility into their supply base. They had to

control the entire supply chain from above instead of from within. Contract manufacturers had to

manage bills of material with different part numbering schemes from multiple OEMs and support

customer requests for work -in-process visibility and vendor-managed inventory (VMI).

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The specialization model creates manufacturing and distribution networks composed of multiple,

individual supply chains specific to products, suppliers, and customers, who work together to

design, manufacture, distribute, market, sell, and service a product. The set of partners may

change according to a given market, region, or channel, resulting in a proliferation of trading

partner environments, each with its own unique characteristics and demands.

Specialization era (phase II): supply chain management as a service

Specialization within the supply chain began in the 1980s with the inception of transportation

brokerages, warehouse management, and non-asset-based carriers and has matured beyond

transportation and logistics into aspects of supply planning, collaboration, execution and

performance management.

At any given moment, market forces could demand changes from suppliers, logistics providers,

locations and customers, and from any number of these specialized participants as components of

supply chain networks. This variability has significant effects on the supply chain infrastructure,

from the foundation layers of establishing and managing the electronic communication between

the trading partners to more complex requirements including the configuration of the processes

and work flows that are essential to the management of the network itself.

Supply chain specialization enables companies to improve their overall competencies in the same

way that outsourced manufacturing and distribution has done; it allows them to focus on their

core competencies and assemble networks of specific, best-in-class partners to contribute to the

overall value chain itself, thereby increasing overall performance and efficiency. The ability to

quickly obtain and deploy this domain-specific supply chain expertise without developing and

maintaining an entirely unique and complex competency in house is the leading reason why

supply chain specialization is gaining popularity.

Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has

taken root primarily in transportation and collaboration categories. This has progressed from the

Application Service Provider (ASP) model from approximately 1998 through 2003 to the On-

Demand model from approximately 2003-2006 to the Software as a Service (SaaS) model

currently in focus today.

Supply chain management 2.0 (SCM 2.0)

Building on globalization and specialization, the term SCM 2.0 has been coined to describe both

the changes within the supply chain itself as well as the evolution of the processes, methods and

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tools that manage it in this new "era". The growing popularity of collaborative platforms is

highlighted by the rise of Trade Card’s supply chain collaboration platform which connects

multiple buyers and suppliers with financial institutions, enabling them to conduct automated

supply chain finance transactions.

Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase

creativity, information sharing, and collaboration among users. At its core, the common attribute

that Web 2.0 brings is to help navigate the vast amount of information available on the Web in

order to find what is being sought. It is the notion of a usable pathway. SCM 2.0 follows this

notion into supply chain operations. It is the pathway to SCM results, a combination of the

processes, methodologies, tools and delivery options to guide companies to their results quickly

as the complexity and speed of the supply chain increase due to the effects of global competition,

rapid price fluctuations, surging oil prices, short product life cycles, expanded specialization,

near-/far- and off-shoring, and talent scarcity.

SCM 2.0 leverages proven solutions designed to rapidly deliver results with the agility to quickly

manage future change for continuous flexibility, value and success. This is delivered through

competency networks composed of best-of-breed supply chain domain expertise to understand

which elements, both operationally and organizationally, are the critical few that deliver the

results as well as through intimate understanding of how to manage these elements to achieve

desired results. Finally, the solutions are delivered in a variety of options, such as no-touch via

business process outsourcing, mid-touch via managed services and software as a service (SaaS),

or high touch in the traditional software deployment model.

Business process integration

Successful SCM requires a change from managing individual functions to integrating activities

into key supply chain processes. An example scenario: the purchasing department places orders

as requirements become known. The marketing department, responding to customer demand,

communicates with several distributors and retailers as it attempts to determine ways to satisfy

this demand. Information shared between supply chain partners can only be fully leveraged

through process integration.

Supply chain business process integration involves collaborative work between buyers and

suppliers, joint product development, common systems and shared information. According to

Lambert and Cooper (2000), operating an integrated supply chain requires a continuous

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information flow. However, in many companies, management has reached the conclusion that

optimizing the product flows cannot be accomplished without implementing a process approach

to the business. The key supply chain processes stated by Lambert (2004) are:

Customer relationship management

Customer service management

Demand management style

Order fulfillment

Manufacturing flow management

Supplier relationship management

Product development and commercialization

Returns management

Much has been written about demand management. Best-in-Class companies have similar

characteristics, which include the following: a) Internal and external collaboration b) Lead time

reduction initiatives c) Tighter feedback from customer and market demand d) Customer level

forecasting

One could suggest other key critical supply business processes which combine these processes

stated by Lambert such as:

Customer service management

Procurement

Product development and commercialization

Manufacturing flow management/support

Physical distribution

Outsourcing/partnerships

Performance measurement

Warehousing management

a) Customer service management process

Customer Relationship Management concerns the relationship between the organization and its

customers. Customer service is the source of customer information. It also provides the customer

with real-time information on scheduling and product availability through interfaces with the

company's production and distribution operations. Successful organizations use the following

steps to build customer relationships:

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Determine mutually satisfying goals for organization and customers

Establish and maintain customer rapport

Produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are drawn up with suppliers to support the manufacturing flow management

process and the development of new products. In firms where operations extend globally,

sourcing should be managed on a global basis. The desired outcome is a win-win relationship

where both parties benefit, and a reduction in time required for the design cycle and product

development. Also, the purchasing function develops rapid communication systems, such

as electronic data interchange (EDI) and Internet linkage to convey possible requirements more

rapidly. Activities related to obtaining products and materials from outside suppliers involve

resource planning, supply sourcing, negotiation, order placement, inbound transportation,

storage, handling and quality assurance, many of which include the responsibility to coordinate

with suppliers on matters of scheduling, supply continuity, hedging, and research into new

sources or programs.

c) Product development and commercialization

Here, customers and suppliers must be integrated into the product development process in order

to reduce time to market. As product life cycles shorten, the appropriate products must be

developed and successfully launched with ever shorter time-schedules to remain competitive.

According to Lambert and Cooper (2000), managers of the product development and

commercialization process must:

coordinate with customer relationship management to identify customer-articulated needs;

select materials and suppliers in conjunction with procurement, and

develop production technology in manufacturing flow to manufacture and integrate into the best

supply chain flow for the product/market combination.

d) Manufacturing flow management process

The manufacturing process produces and supplies products to the distribution channels based on

past forecasts. Manufacturing processes must be flexible to respond to market changes and must

accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in

minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times,

meaning improved responsiveness and efficiency in meeting customer demand. Activities related

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to planning, scheduling and supporting manufacturing operations, such as work-in-process

storage, handling, transportation, and time phasing of components, inventory at manufacturing

sites and maximum flexibility in the coordination of geographic and final assemblies

postponement of physical distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical distribution, the

customer is the final destination of a marketing channel, and the availability of the

product/service is a vital part of each channel participant's marketing effort. It is also through the

physical distribution process that the time and space of customer service become an integral part

of marketing, thus it links a marketing channel with its customers (e.g., links manufacturers,

wholesalers, retailers).

f) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and components, but also outsourcing

of services that traditionally have been provided in-house. The logic of this trend is that the

company will increasingly focus on those activities in the value chain where it has a distinctive

advantage, and outsource everything else. This movement has been particularly evident

in logistics where the provision of transport, warehousing and inventory control is increasingly

subcontracted to specialists or logistics partners. Also, managing and controlling this network of

partners and suppliers requires a blend of both central and local involvement. Hence, strategic

decisions need to be taken centrally, with the monitoring and control of supplier performance and

day-to-day liaison with logistics partners being best managed at a local level.

g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer integration to

market share and profitability. Taking advantage of supplier capabilities and emphasizing a long-

term supply chain perspective in customer relationships can both be correlated with firm

performance. As logistics competency becomes a more critical factor in creating and maintaining

competitive advantage, logistics measurement becomes increasingly important because the

difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney

Consultants (1985) noted that firms engaging in comprehensive performance measurement

realized improvements in overall productivity. According to experts, internal measures are

generally collected and analyzed by the firm including

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Cost

Customer Service

Productivity measures

Asset measurement, and

Quality.

External performance measurement is examined through customer perception measures and

"best practice" benchmarking, and includes 1) customer perception measurement, and 2) best

practice benchmarking.

h) Warehousing management

As a case of reducing company cost & expenses, warehousing management is carrying the

valuable role against operations. In case of perfect storing & office with all convenient facilities

in company level, reducing manpower cost, dispatching authority with on time delivery, loading

& unloading facilities with proper area, area for service station, stock management system etc.

Vendor-managed inventory

Vendor-managed inventory (VMI) is a family of business models in which the buyer of a product

(business) provides certain information to a vendor (supply chain)supplier of that product and the

supplier takes full responsibility for maintaining an agreed inventory of the material, usually at

the buyer's consumption location (usually a store). A third-party logistics provider can also be

involved to make sure that the buyer has the required level of inventory by adjusting the demand

and supply gaps.

As a symbiotic relationship, VMI makes it less likely that a business will unintentionally become

out of stock of a good and reduces inventory in the supply chain. Furthermore, vendor (supplier)

representatives in a store benefit the vendor by ensuring the product is properly displayed and

store staff are familiar with the features of the product line, all the while helping to clean and

organize their product lines for the store.

One of the keys to making VMI work is shared risk. In some cases, if the inventory does not sell,

the vendor (supplier) will repurchase the product from the buyer (retailer). In other cases, the

product may be in the possession of the retailer but is not owned by the retailer until the sale

takes place, meaning that the retailer simply houses (and assists with the sale of) the product in

exchange for a predetermined commission or profit (sometimes referred to as consignment

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stock). A special form of this commission business is scan-based trading whereas VMI is usually

applied but not mandatory to be used.

This is one of the successful business models used by Wal-Mart and many other big box retailers.

Oil companies often use technology to manage the gasoline inventories at the service stations

that they supply (see Petrol Soft Corporation). Home Depot uses the technique with larger

suppliers of manufactured goods. VMI helps foster a closer understanding between the supplier

and manufacturer by using Electronic Data Interchange formats, EDI software and statistical

methodologies to forecast and maintain correct inventory in the supply chain.

Vendors benefit from more control of displays and more customer contact for their employees;

retailers benefit from reduced risk, better store staff knowledge (which builds brand loyalty for

both the vendor and the retailer), and reduced display maintenance outlays.

Consumers benefit from knowledgeable store staff who are in frequent and familiar contact with

manufacturer (vendor) representatives when parts or service are required. Store staff have good

knowledge of most product lines offered by the entire range of vendors. They can help the

consumer choose from competing products for items most suited to them and offer service

support being offered by the store.

Warehouse management system

A warehouse management system (WMS) is a key part of the supply chain and primarily aims to

control the movement and storage of materials within a warehouse and process the associated

transactions, including shipping, receiving, put away and picking. The systems also direct and

optimize stock put away based on real-time information about the status of bin utilization. A

WMS monitors the progress of products through the warehouse. It involves the physical

warehouse infrastructure, tracking systems, and communication between product stations.[1]

More precisely, warehouse management involves the receipt, storage and movement of goods,

(normally finished goods), to intermediate storage locations or to a final customer. In the multi-

echelon model for distribution, there may be multiple levels of warehouses. This includes a

central warehouse, a regional warehouses (serviced by the central warehouse) and potentially

retail warehouses (serviced by the regional warehouses).

Warehouse management systems often utilize automatic identification and data

capture technology, such as barcode scanners, mobile computers, wireless LANs and potentially

radio (RFID) to efficiently monitor the flow of products. Once data has been collected, there is

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either a batch synchronization with, or a real-time wireless transmission to a central database.

The database can then provide useful reports about the status of goods in the warehouse.

Warehouse design and process design within the warehouse (e.g. wave picking) is also part of

warehouse management. Warehouse management is an aspect of logistics and supply chain

management.

Objective

The objective of a warehouse management system is to provide a set of computerized procedures

for management of warehouse inventory with the goal of minimizing cost and fulfillment times.

This includes:

The receipt of stock and returns into a warehouse facility. An efficient warehouse management

system helps companies cut expenses by minimizing the amount of unnecessary parts and

products in storage. It also helps companies keep lost sales to a minimum by having enough

stock on hand to meet demand.

Modeling and managing the logical representation of the physical storage facilities (e.g. racking,

etc.). For example, if certain products are often sold together or are more popular than others,

those products can be grouped together or placed near the delivery area to speed up the process

of picking, packing and shipping to customers.

Enabling a seamless link to order processing and logistics management in order to pick, pack,

and ship product out of the facility.

Tracking where products are stocked, which suppliers they come from, and the length of time

they are stored. By analyzing such data, companies can control inventory levels and maximize

the use of warehouse space. Furthermore, firms are more prepared for the demands and supplies

of the market, especially during special circumstances such as a peak season on a particular

month. Through the reports generated by the inventory management software, firms are also able

to gather important data that may be put in a model for it to be analyzed.

Alone warehouse management cannot automate the process. It also involves the combination of

business process to be followed along with system to achieve 100% productivity and accuracy of

inventory.

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RECOMMENDATION:

To make the table more understandable for normal person, two columns must be added.

1st – Vehicle Placed

F 10

IUTN Nagpur

     

  GDS Normal    

Month

Vehicle

Placed

Vehicle

reached within

Transit Time

Vehicle

Placed

Vehicle

reached

within

Transit

Time

Total

%

Target

%

April 100 46  100  85  65  98

May            

2nd –. Vehicle reached within Transit Time

CRITICAL VEHICLE DEPLOYMENT

Data F10

Month Vehicle Required

Vehicle Placed

Actual % Target %

April 141 141 100% 98%May 497 449 90% 98%

Data F09

Month Vehicle Required

Vehicle Placed

Actual % Target %

April 98%May 273 273 100% 98%

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ACTION: Buyers to ensure that there is no detention at Suppliers end.

ML to get geared up for timely placement.

System for traceability of intransit vehicles to be put in place by ML.

RECOMMENDATION:

Format should be as follow

SM Vehicle required Vehicle placed % deploymentEngine      Tractor      

Transmission      CDMM      

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CONCLUSION & RECOMMENDATION:

Current MIS system is good. The data capturing in current system is manual and in such cases

there are chances of making human errors. It is advisable to have system base (IT Base) logistics

information flow so as to have transparency, authenticity in data.

System base information flow may help

Transparency of Data

Authenticity

Improve accountability

Logistics Efficiency

Up to date status of Logistics operations

Less fire fighting

.

REFERENCES

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Mahindra logistic manual.

Mahindra logistic reports.

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