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A PROJECT REPORT ON AN EMPIRICAL STUDY ON SUPPLY CHAIN & INVENTORY MANAGEMENT IN THE AUTO COMPONENT INDUSTRY A CASE STUDY OF

Submitted to Sikkim Manipal Univ !"i#$ in the partial fulfillment of the requirement for the award of the degree of Ma"# ! %& '("in "" A)mini"#!a#i%n
SUBMITTED BY LALIT *UMAR M'A +T,M- IV S m. R%ll N%. /01112223

PLACE 4 AGRA +UTTAR PRADESHCENTRE CODE 5 61768

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AC*NO9LEDGEMENT
While submitting the project report prepared by me on the topic AN EMPIRICAL STUDY ON SUPPLY CHAIN & INVENTORY MANAGEMENT IN THE AUTO COMPONENT INDUSTRY IN M/s. Gkn Driveline In!i"#

L$!.%&"ri!"'"!. I here acknowledge my humble gratitude & loyal thanks to Mr. Pr"veen ver(" (HOD- upply chain! who ga"e me an opportunity to work in M/s. Gkn Driveline In!i"# L$!. I am also grate#ul to Dr$ anjana %ittal under whom I ha"e done my project$ &ast but not the least' I am thank#ul to all my #riends who has gi"en me their "aluable suggestions in preparing the report$

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CERTIFICATE

(his is to certi#y that %r$ L"li$ )*("r% R+ll N+. ,-...///0) a student o# ikkim %anipal *ni"ersity has completed project work on AN EMPIRICAL STUDY ON SUPPLY CHAIN & INVENTORY MANAGEMENT IN THE AUTO COMPONENT INDUSTRY A CASE STUDY O& M/s. G)N DRIVELINE INDIA# LTD.% &ARIDA1AD under my guidance and super"ision during this year$ +o part o# this work has been submitted #or any degree$ His work and output has been #ound to be satis#actory$

ignature o# ,uide ----------------+ame o# .roject ,uide/ Dr$ anjana %ittal

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DECLARATION

(his project report on AN EMPIRICAL STUDY ON SUPPLY CHAIN & INVENTORY MANAGEMENT IN THE AUTO COMPONENT

INDUSTRY A CASE STUDY OF M:". G*N DRIVELINE +INDIALTD.; FARIDA'AD is submitted by me #or the partial #ul#illment o# the course to %$0$1$ ((2%! I3 em$ #rom Sikki( M"ni2"l Universi$3% A4r"$

(his is an original work done by me e4pected the guidance recei"ed which has been properly acknowledge in the report$

(his is not the copy o# any other report or any part o# it hasn5t been submitted #or the award o# any degree or diploma$

Date / .lace /

( ignature o# the student!

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CONTENTS

C+n$en$s C5"2$er6.7 INTRODUCTION 6$6 0ackground 6$9 Objecti"e o# (he tudy C5"2$er697 REVIE: O& LITERATURE
9$6 upply ;hain Decision

P"4e N+. 868 7-68 6:-6: 9;69. 96-99 99-9< 9<-97 98-98 98-=B =B-=6 =6-=7 =7-=7 0<6,. ,968. 89689

9$9 +eed #or ;% 9$= Opportunities enabled by *..&> ;H1I+ %1+1,?%?+( 9$@ *..&> ;H1I+ %1+1,?%?+( .roblems 9$A ;% acti"ities 9$< In#ormation (echnology #or *..&> ;H1I+ %1+1,?%?+( 9$7 ,oals o# *..&> ;H1I+ in#ormation technology 9$8 In"entory %anagement C5"2$er 07 RESEARCH &INDINGS C5"2$er6=7 S$"n!"r!i>e! 2r+?e!*res +@ s$+res C5"2$er6,7 CONCLUSION AND RECOMMENDATION

C5"2$er6. INTRODUCTION
With the liberaliCation o# the Indian economy in 6::6 and coming o# many #oreign automobile manu#acturers like Hyundai) Daewoo etc$) the auto ancillary industry witnessed huge capacity e4pansions and moderniCation initiati"es in

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this period$ (his also led to a tough competiti"e scenario) which saw a lot o# consolidation) technological collaborations and eDuity partnerships within the industry and with leading global players abroad$ (oday) many international and local automoti"e players are increasingly sourcing components #rom Indian automoti"e component manu#acturers$ 1s the demand #or manu#actured automoti"e components with the tag Emade in IndiaE increases) the automoti"e companies ha"e to #urther enhance the Duality o# their products and operations as global players reDuire Duality components at reasonable prices and at precise time durations$ (his has made the automoti"e component manu#acturers in India to be under se"ere pressure to meet such onerous demands$ Hence) to meet such demands) today all the major players in this industry are ha"ing one or the other logistics management system$

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1AC)GROUND
COMPANY PRO&ILE
,F+ Dri"eline is the largest business within the global engineering group) ,F+ plc$ ,F+ is a leading global supplier to the worldGs automoti"e) o## highway and aerospace manu#acturers$ ,F+ pro"ides technology-based) highly engineered products to "irtually all o# the worldGs major manu#acturers o# light "ehicles) agricultural and construction eDuipment) aircra#t and aero engines$ 1lmost @B)BBB people work in ,F+ companies and joint "entures in more than =B countries$ .roducing systems and components #or small #ront wheel dri"e to the most sophisticated #our wheel dri"e "ehicles) ,F+ Dri"eline has the products to achie"e the optimum dri"eline solution$ With these products comes technical e4pertise and an understanding o# all aspects that a##ect "ehicle dynamics and how these can be optimiCed #or weight and per#ormance impro"ement$

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G)N

A*$+(+$ive

Aer+s2"?e

Driveline

Aer+s2"?e Servi?es

P+A!er Me$"ll*r43

A4*s$":es$l"n!

A*$+ C+(2+nen$s

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G)N PLC
,F+ plc$ is an international group o# companies with a turno"er o# around @$= billion pounds$ (he group designs) de"elops and manu#actures automoti"e components as well aerospace and de#ense products$ (he group pro"ides a range o# industrial ser"ices$ ,F+5s operations are located in more than =B countries around the world and the group employs around =<)BBB people$ (he automoti"e and agricultural products business area is the largest within the group accounting #or o"er <BH o# total turno"er$ Industrial ser"ices and aerospace and special "ehicles each generate appro4imately 9BH o# the group5s total turno"er$ (he name ,F+ is deri"ed #rom ,uest) Feen and +ettle#olds$ Its history dates back to 67A:$ tarting in iron making and coal mining) the group progressed into steel and its many deri"ati"es) ser"ing the railways) building and construction) automoti"e and other major industries$ 1lthough once world renowned steel maker and producer o# screws and #asteners) the group has been through many changes o"er the last 9A years in response to #undamental shi#ts in these traditional markets$

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G)N 6 A &OCUSSED GLO1AL ENGINEER

I (urno"er JK@$A billion I %arket leadership positions I ustainable growth I ?4cellent customer relationships I trong technology base I ,lobal reach L =<)=BB employees in subsidiaries 1nd 6=)ABB in joint "entures in o"er =B countries I trong reputation and conser"ati"e #inancial position

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G)N 6 GLO1AL CUSTOMERS

D!iv lin

A !%"paA

'M9 Ca# !pilla! Daiml !C<!$"l ! Fia# F%!) GM:Op l H%n)a MG R%v ! PSA R na(l#:Ni""an T%$%#a V9:A()i G!%(p Ma!(#i S(=(ki

Ai!>(" 'AE S$"# m" '% in? '%m>a!)i ! EADS GE H%n $@ ll L%Ak< ) Ma!#in

P!a## & 9<i#n $ R%ll" R%$A Sik%!"k$ Pl(" U*; US an) man$ na#i%nal G%v !nm n#" @%!l)@i)

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G)N INDIA
Date o# ?stablishment / 6st 1ugust 6:8< 1pril) 6:8:

Date o# ;ommercial .roduction/

,F+ Dri"eline India &td$ traces its origin back to 6:8< when In"el (ransmissions &td) as it was then known) was established$ (hree years later the company became the #irst in India to manu#acture side sha#ts #or #ront wheel dri"e "ehicles when it was selected sole ;3M supplier #or %aruti uCuki L at that time the only #ront wheel dri"e car manu#acturer o# the country$ &ater known as ,F+ Dri"esha#ts (India! &td) the operation became a owned subsidiary o# ,F+ Dri"eline in 9BB9 and is today the side sha#t market leader in India with an installed capacity to manu#acture o"er one million units (hal# a million "ehicle sets! a year$ ales in 9BB= stood at more than 9= million pound$ (he company5s growth in the 6::Bs was strongly linked with its supply o# side sha#ts #or the ,o"ernment o# India5s joint "enture with Mapanese car maker uCuki %otor ;orporation to make #ront wheel dri"e cars$ 0eginning with the uCuki %aruti 8BBcc model in 6:8:) production rapidly e4panded and ,F+ currently supplies all #ront wheel dri"e cars #or the company (8BBcc) Nen) Wagon-O$ ,ypsy) ?steem) 0aleno and wi#t! During the late :B5s ,F+ Dri"eline India began supplying product #or other major customers$ In 6::< it was selected sole supplier to Piat (*no) iena and .alio models! and Pord (?scortsQIkon! in India$ (wo years later it became sole supplier to Forean manu#acturer Hyundai %otors ( antro) 1ccent) onata and ,etC! and began working with (ata %otors (Indica!) one o# the largest business house in India$ In 9BBB Honda (;ity! and ,eneral %otors (;orsa! were added to the customer base$

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GDI LOCATIONS
&"ri!"'"!

D5"r*5er"

G*((i!i2*n!i

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,DI/ Paridabad .lant

;ommenced operation on 6=th 1pril) 6:8: &and area @B)BBB sDm (0uilt-up 8)BBB sDm! %anpower 977

,DI/ Dharuhera .lant

;ommenced operation on 6@th Manuary)6::7 &and 1rea <8)8BB sDm (0uilt-up @)ABB sgm! %anpower 69:

,DI/ ,ummidipundi .lant

;ommenced operation on 6st 1pril 6::< &and area @)BBB sDm (0uilt-up 9BBB sDm! %anpower 9B

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1USINESS PRO&ILE
.re"iously known as ,F+ In"el (ransmissions) ,F+ Dri"esha#ts (India! (,DI&! was incorporated on 9Ath Muly 6:8A as pri"ate &td company) & it was later con"erted into a public ltd company on 9@th Mune 6:8<$ It manu#actures and markets constant-"elocity dri"e sha#ts) which #orm an essential part o# the #ront wheel dri"e o# motor "ehicles because they pro"ide constant "elocity and torDue$ ,DI& is promoted by ,F+ plc$ *F) which is the largest manu#acturer o# #ront wheel dri"e sha#t a4le assemblies (D11! in the world$ ,DI& is the market leader in the #ront-wheel D11 in India with an installed capacity to manu#acture B$@= million D11 sets$ Its plants are located at Paridabad) Dharuhera (both in Haryana! and ,ummidipundi ((amil+adu!$ 1t present) A6H o# ,DI&5s eDuity is held by the ,FI ,roup) 6@H by the International Pinance ;orporation) Washington) 6A$AH by Indian #inancial institutions and the balance 6:$AH by the public$ ,DI& meets ABH o# the D11 reDuirements o# %aruti *dyog and (elco$ 0esides it is also the sole supplier to Pord India) Honda cars!$ (he company has appointed 6B region-wise distributors and 8B sales and ser"ice centers across the country to cater to its market$ In 6::<) the company spun o# its dri"etech di"ision into a separate company) Dri"etech 1ccessories) which pro"ides inspection and replacement ser"ices o# dri"e sha#ts o# all makes$ It commissioned its third plant at Daruhera in Haryana in Manuary 6::7$ Re?en$ Devel+2(en$s (he trading in the security o# ,F+ Dri"esha#ts (India! &imited is suspended w$e$#$ eptember B9) 9BB9 pursuant to public shareholding o# the company ?0I ( ubstantial 1cDuisition o# hares and (akeo"ers! #alling below 6BH o# the eDuity share capital in accordance with Oegulation 96(=! o# the Oegulations) 6::7$ *(I has sold 6@)A6):8B eDuity o# ,F+ Dri"esha#ts (India! &td at Os AA a share to ,F+ 1utomoti"e ,mbH and ,F+ .lc$ iel ;ars India (H ;I&!) Hyundai %otors India) Piat and ,eneral %otors India (#or its ;orsa

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&*$*re Pl"ns ,DI& is aiming to achie"e a higher le"el o# indigeniCation in the short to medium term$ (his policy is e4pected to #urther reduce its material costs and impro"e its operating margins besides protecting it #rom #oreign e4change #luctuations$ (he company has begun to e4plore the e4port market) which will hold it in good in times o# sluggish domestic demand$ It also plans to de"elop Dri"esha#ts related components they being retaining washers in plunging joints o# %aruti Nen and ?steem cars and (ulip #or Piat new gear bo4 ;A6@$ It is benchmarking itsel# against the international norms in terms o# 2uality and ;osts and is sure o# being able to manage the uncertain business risks$

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RATIONALE &OR CHOOSING THIS TOPIC

%any o# the leading #irms in the Indian automoti"e component industry ha"e an e##icient logistics management system$ Ha"ing an e##icient logistics management system is no longer a choice but a necessity #or these #irms considering the global opportunities that ha"e opened #or this industry$ ?##ecti"e supply chain management can deli"er numerous bene#its to retailers that obser"e the trends and implement and manage their systems accordingly$ .rompted by se"eral major business concerns) many retailers are #ocusing on supply chain managementRachie"ing predetermined ser"ice le"els to customers by e##ecti"ely managing all the relationships in the supply chain$ 1mong those concerns are pressure on margins) an increasingly competiti"e and comple4 marketplace) di##iculty in managing a large "endor base) shrinking product li#e cycles) and customers demanding better a"ailability and choice$ 1n e##ecti"e) integrated supply chain management system can reduce in"entory le"els) lower labor costs) increase storage capacity) increase customer ser"ice and choice #or customers) increase in"entory throughput capacity) and make better use o# space in stores and warehouses$ Well-implemented supply chain management processes result in less in"entory in the supply chain o"erall and in"entory that is in the right place) where it will sell$ ;osts may decrease or rise) but higher sales and #ewer markdowns compensate #or price #luctuations) so o"erall pro#itability rises$ Effective supply chain management enables reduced inventory levels, increased sales, and lower markdown rates. Profitability should improve, although costs per unit may actually increase. ome o# the steps that can #urther impro"e the logistics management system being used by "arious #irms in the Indian 1utomoti"e ;omponent Industry are/ Impro"ing producti"ity o# suppliers by technology trans#er and #unding$

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Purther reducing in"entory bu##ers and supply chain bottlenecks$ *sing latest technological initiati"es to enhance the e4isting Duality le"els and streamlining the processes #urther$

*sing so#twares like shipments etc$

upply ;hain ?"ent %anagement or

;?% that

monitor #orecasts) orders) manu#acturing schedules) in"entories) and

(he more competiti"e the Indian automoti"e component industry becomes in the global arena) the more inseparable will the principals o# logistics management become to its success and #uture growth$ (hough many o# the leading automoti"e component manu#acturers in India are ha"ing some sort o# logistics management system in place) there are still a number o# problems that the automoti"e component industry is #acing on the logistics management #ront$ In order to make a bigger mark in the global arena o# automoti"e components) these problems ha"e to be addressed and solutions implemented at the earliest$

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O1BECTIVE O& THE STUDY

(o study the upply ;hain & In"entory %anagement system and procedures at ,F+ Dri"eline &imited$ (o study and e"aluate the In"entory %anagement ystem and its impact on the In"entory carrying ;ost at ,F+ Dri"eline &imited$ (o pro"ide suggestions to impro"e the e4isting and In"entory %anagement o# the company$ (he study aimed at pro"iding solutions #or managing the supply chain through ideas) e4periences creati"ity and inno"ation that would bring cost e##ecti"e solution by distributing its products and ser"ices e##iciently to its entire store thereby bringing in customer satis#action and organiCational e##iciency and objecti"e$ upply ;hain %anagement

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C5"2$er69 LITERATURE REVIE:

upply chain management ( ;%! is the process o# planning) implementing) and controlling the operations o# the supply chain with the purpose to satis#y customer reDuirements as e##iciently as possible$ upply chain management spans all mo"ement and storage o# raw materials) work-in-process in"entory) and #inished goods #rom point-o#-origin to point-o#-consumption$ (he term supply chain management was coined by strategy consulting #irm 0ooC 1llen Hamilton in 6:89$ 1 supply chain is a network o# #acilities and distribution options that per#orms the #unctions o# procurement o# materials) trans#ormation o# these materials into intermediate and #inished products) and the distribution o# these #inished products to customers$ upply chains e4ist in both ser"ice and manu#acturing organiCations) although the comple4ity o# the chain may "ary greatly #rom industry to industry and #irm to #irm$ 1ccording to the (; ;%.!) a pro#essional association that de"eloped a de#inition in 9BB@) upply ;hain %anagement Eencompasses the planning and management o# all acti"ities in"ol"ed in sourcing and procurement) con"ersion) and all logistics management acti"ities$ Importantly) it also includes coordination and collaboration with channel partners) which can be suppliers) intermediaries) third-party ser"ice pro"iders) and customers$ In essence) companies$E upply chain e"ent management (abbre"iated as chain$ With planned$ ome e4perts distinguish supply chain management and logistics management) while others consider the terms to be interchangeable$ Prom the point o# "iew o# an enterprise) the scope o# supply chain management is usually bounded on the ;?%! is a consideration o# upply ;hain %anagement integrates supply and demand management within and across

all possible occurring e"ents and #actors that can cause a disruption in a supply ;?% possible scenarios can be created and solutions can be

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supply side by your supplierGs suppliers and on the customer side by your customerGs customers$

SUPPLY CHAIN DECISIONS

We classi#y the decisions #or supply chain management into two broad categories/ strategic and operational$ 1s the term implies) strategic decisions are made typically o"er a longer time horiCon$ (hese are closely linked to the corporate strategy) and guide supply chain policies #rom a design perspecti"e$ On the other hand) operational decisions are short term) and #ocus on acti"ities o"er a day-to-day basis$ (he e##ort in these types o# decisions is to e##ecti"ely and e##iciently manage the product #low in the EstrategicallyE planned supply chain$ hortened product li#e cycles) increased competition) and heightened e4pectations o# customers ha"e #orced many leading edge companies to mo"e #rom physical logistic management towards more ad"anced supply chain management$ 1dditionally) in recent years it has become clear that many companies ha"e reduced their manu#acturing costs as much as it is practically possible$ (here#ore) in many cases) the only possible way to #urther reduce costs and lead times is with e##ecti"e supply chain management$ In addition to cost reduction) the supply chain management approach also #acilitates customer ser"ice impro"ements$ It enables the management o# in"entories) transportation systems and whole distribution networks so that organiCations are able meet or e"en e4ceed their customersG e4pectations$ (o simpli#y the concept) supply chain management can be de#ined as a loop/ it starts with the customer and ends with the customer$ 1ll materials) #inished products) in#ormation) and e"en all transactions #low through the loop$ Howe"er) supply chain management can be a "ery di##icult task because in the reality) the supply chain is a comple4 and dynamic network o# #acilities and organiCations with di##erent) con#licting objecti"es$

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What has then enabled the e##ecti"e implementation o# supply chain managementS (he answer is #ound #rom the rapid de"elopments in in#ormation and communications technologies$ *se o# databases) communication systems) and #oremost ad"anced computer so#tware are crucial #or the de"elopment o# a modern cost-e##ecti"e supply chain management$

NEED &OR SCM

6$ ;% is a concept or a mechanism to impro"e the total producti"ity o# enterprises in a supply chain by optimiCing the timing) location and Duantity o# materials #low #rom raw material pro"ider to the consumer o# the #inal products$ (his concept is especially use#ul in the industry where (6! the competition in the market is "ery high) (9! the customers are "ery demanding #or e4ample in the well documented Dell 0uilt-(o-Order model where 8@H o# DellGs re"enue is deri"ed #rom online customers who ha"e the #inal say in the #inal con#iguration o# their personal computers and notebooks) (=! the product li#e cycle is "ery short #or e4ample the electronics contract manu#acturing industry currently e4periences product li#e cycles o# short as three months #rom raw materials to #inal consumption) and (@! stakeholders reDuest #or high returns on in"estment (OOI!$ .romising 1sian companies should start in"esting in good I( in#rastructure to impro"e the producti"ity in the supply chain$ 9$ (here is a need #or good ;% systems nationally and regionally #or the

1.O member countries$ (his system should include databases) model bases) "isual maps and #riendly user inter#aces$ (he proper use o# such a system can help to minimiCe the total ;% cost (materials cost) production

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costs) warehousing costs) in"entory costs and transportation costs!$ In OO; and ingapore) there are already such systems in the marketplace and well used by leading enterprises) in electronics and in#ormation industries$ (he bene#its o# employing such a model can help enterprises in the highly competiti"e electronic and computer industries to simulate their strategies and determine the optimal operating en"ironments$ =$ ;% should be linked to the digital economy as demanding and technology sa""y customers around the world increasingly e4pect goods and materials to be deli"ered to their doorstep at Eclick-speedE$ In response to these demands) supply chains o# enterprises and industries need to be more realtime and dynamic$ (here#ore) new technologies) intelligent so#tware agents) will become an integral part o# ;%$ 2uantum leaps in agility in the supply chain can be made producti"ity and possible by the courageous ;% ;% strategy under certain cost

adoption o# these intelligent agent based decision support systems$ (he * e4perience in the use o# these so#tware agents has been "ery success#ul as these agents (so#tware programs! can acti"ely engage with the user in dialogue) and negotiate and coordinate the trans#er o# real-time in#ormation to other users on web-based plat#orm$ .roper inter#acing and integration o# such agents can help realise the #ruition o# a truly global logistics network$ 1n e4ample is the establishment o# the ,lobal (ranspark based out o# the * $ (he (ranspark ser"es to link manu#acturing) transportation and in#ormation commerce$ @$ In the past) ;% is predominantly enterprise #ocused with mutually to create inno"ati"e logistical in#rastructure #or global

e4clusi"e set o# acti"ities$ (oday) progressi"e #irms are readily embracing systems integration through ?O. and other means o# electronic connecti"ity) primarily #or cost reduction purposes$ In the #uture) ;% would ha"e to integrate enterprises) ensure greater collaboration between supply chain partners) work towards a synchronised "alue collaboration network$ Only then can #irms talk about chain-wide pro#it ma4imisation and economic "alue add$

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A$

ome o# the main challenges presented by the resource persons include the #ollowing/ building a supply chain in#rastructure without damaging the en"ironment i$e$ how to ha"e a green supply chain) setting up a re"erse logistics program #or #irms to ensure ecological balance and waste reduction) managing o# demand "olatility #ace by enterprises when they mo"e to a digital arena and greater dynamic customisation) how to e4tract better channel coordination between partners in the supply chain) how to obtain better procurement le"erage using real-time in#ormation and the Internet) how to e4tract greater pro#itability out o# decreasing business margins) and the need to manage ser"ices besides the traditional productbased approach gi"en the blurring between design and outsourcing o# manu#acturing$

<$

e"eral pertinent concerns were also highlighted by the resource persons/ sharing o# risk between partners in the supply chain) the ownership o# in"entory ("endor managed o# co-managed in"entory!) the applicability o# some good ;% practice in certain industries (like 3%I in the retail sector! to other industries) and in#ormation in the supply chain) the management o# demand #orecast projection and accuracy) and the ability o# %?s to in"est in much needed I( and related technologies to impro"e their supply chain processes

7$ (here is a need #or good

;% systems nationally and regionally #or the

1.O member countries$ (his system should include databases) model bases) "isual maps and #riendly user inter#aces$ (he proper use o# such a system can help to minimiCe the total ;% cost (materials cost) production costs) warehousing costs) in"entory costs and transportation costs!$ In OO; and ingapore) there are already such systems in the marketplace and well used by leading enterprises) in electronics and in#ormation industries$ (he bene#its o# employing such a model can help enterprises in the highly competiti"e electronic and computer industries to simulate their strategies and determine the optimal operating en"ironments$ ;% ;% strategy under certain cost

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8$

;% should be linked to the digital economy as demanding and technology sa""y customers around the world increasingly e4pect goods and materials to be deli"ered to their doorstep at Eclick-speedE$ In response to these demands) supply chains o# enterprises and industries need to be more realtime and dynamic$ (here#ore) new technologies) intelligent so#tware agents) will become an integral part o# ;%$ 2uantum leaps in producti"ity and agility in the supply chain can be made possible by the courageous adoption o# these intelligent agent based decision support systems$ (he * e4perience in the use o# these so#tware agents has been "ery success#ul as these agents (so#tware programs! can acti"ely engage with the user in dialogue) and negotiate and coordinate the trans#er o# real-time in#ormation to other users on web-based plat#orm$ .roper inter#acing and integration o# such agents can help realise the #ruition o# a truly global logistics network$ 1n e4ample is the establishment o# the ,lobal (ranspark based out o# the * $ (he (ranspark ser"es to link manu#acturing) transportation and in#ormation commerce$ to create inno"ati"e logistical in#rastructure #or global

:$ In the past)

;% is predominantly enterprise #ocused with mutually

e4clusi"e set o# acti"ities$ (oday) progressi"e #irms are readily embracing systems integration through ?O. and other means o# electronic connecti"ity) primarily #or cost reduction purposes$ In the #uture) ;% would ha"e to integrate enterprises) ensure greater collaboration between supply chain partners) work towards a synchronised "alue collaboration network$ Only then can #irms talk about chain-wide pro#it ma4imisation and economic "alue add$ 6B$ ome o# the main challenges presented by the resource persons include the #ollowing/ building a supply chain in#rastructure without damaging the en"ironment i$e$ how to ha"e a green supply chain) setting up a re"erse logistics program #or #irms to ensure ecological balance and waste reduction) managing o# demand "olatility #ace by enterprises when they mo"e to a digital arena and greater dynamic customisation) how to e4tract better channel coordination between partners in the supply chain) how to

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obtain better

procurement le"erage using real-time in#ormation and the

Internet) how to e4tract greater pro#itability out o# decreasing business margins) and the need to manage ser"ices besides the traditional productbased approach gi"en the blurring between design and outsourcing o# manu#acturing$ 66$ e"eral pertinent concerns were also highlighted by the resource persons/ sharing o# risk between partners in the supply chain) the ownership o# in"entory ("endor managed o# co-managed in"entory!) the applicability o# some good ;% practice in certain industries (like 3%I in the retail sector! to other industries) and in#ormation in the supply chain) the management o# demand #orecast projection and accuracy) and the ability o# %?s to in"est in much needed I( and related technologies to impro"e their supply chain processes

OPPORTUNITIES ENA1LED 1Y SUPPLY CHAIN MANAGEMENT

(he #ollowing strategic and competiti"e areas can be used to their #ull ad"antage i# a supply chain management system is properly implemented$ Fulfillment: ?nsuring the right Duantity o# parts #or production or products #or sale arri"e at the right time$ (his is enabled through e##icient communication) ensuring that orders are placed with the appropriate amount o# time a"ailable to be #illed$ (he supply chain management system also allows a company to constantly see what is on stock and making sure that the right Duantities are ordered to replace stock$ Logistics: Feeping the cost o# transporting materials as low as possible consistent with sa#e and reliable deli"ery$ Here the supply chain management system enables a company to ha"e constant contact with its distribution team) which could consist o# trucks) trains) or any other mode o# transportation$ (he system can allow the company to track where the reDuired materials are at all times$ 1s well) it may be cost e##ecti"e to share transportation costs with a partner company i# shipments are not large enough to #ill a whole truck and this again) allows the company to make this decision$

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Production: ?nsuring production lines #unction smoothly because high-Duality parts are a"ailable when needed$ .roduction can run smoothly as a result o# #ul#illment and logistics being implemented correctly$ I# the correct Duantity is not ordered and deli"ered at the reDuested time) production will be halted) but ha"ing an e##ecti"e supply chain management system in place will ensure that production can always run smoothly without delays due to ordering and transportation$ Revenue & Profit: ?nsuring no sales are lost because shel"es are empty$ %anaging the supply chain impro"es a company5s #le4ibility to respond to un#oreseen changes in demand and supply$ 0ecause o# this) a company has the ability to produce goods at lower prices and distribute them to consumers Duicker than companies without supply chain management thus increasing the o"erall pro#it$ Cost: Feeping the cost o# purchased parts and products at acceptable le"els$ upply chain management reduces costs by increasing in"entory turno"er on the shop #loor and in the warehouse) controlling the Duality o# goods thus reducing internal and e4ternal #ailure costs and working with suppliers to produce the most cost e##icient means o# manu#acturing a product$ Cooperation: 1mong supply chain partners ensures mutual success$ ;ollaborati"e planning) #orecasting and replenishment (;.PO! is a longer-term commitment) joint work on Duality) and support by the buyer o# the supplier5s managerial) technological) and capacity de"elopment$ (his relationship allows a company to ha"e access to current) reliable in#ormation) obtain lower in"entory le"els) cut lead times) enhance product Duality) impro"e #orecasting accuracy and ultimately impro"e customer ser"ice and o"erall pro#its$ (he suppliers also bene#it #rom the cooperati"e relationship through increased buyer input #rom suggestions on impro"ing the Duality and costs and though shared sa"ings$ ;onsumers can bene#it as well through the higher Duality goods pro"ided at a lower cost$

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SUPPLY CHAIN MANAGEMENT PRO1LEMS

upply chain management must address the #ollowing problems/Distribution Networ Configuration: +umber and location o# suppliers)

production #acilities) distribution centers) warehouses and customers$ Distribution !trategy: ;entraliCed "ersus decentraliCed) direct shipment) cross docking) pull or push strategies) third party logistics$ "nformation: Integrate systems and processes through the supply chain to share "aluable in#ormation) including demand signals) #orecasts) in"entory and transportation$ "nventory #anagement: 2uantity and location o# in"entory including raw materials) work-in-process and #inished goods$

SCM ACTIVITIES
upply chain management is a cross-#unctional approach to managing the mo"ement o# raw materials into an organiCation and the mo"ement o# #inished goods out o# the organiCation toward the end-consumer$ 1s corporations stri"e to #ocus on core competencies and become more #le4ible) they ha"e reduced their ownership o# raw materials sources and distribution channels$ (hese #unctions are increasingly being outsourced to other corporations that can per#orm the acti"ities better or more cost e##ecti"ely$ (he e##ect has been to increase the number o# companies in"ol"ed in satis#ying consumer demand) while reducing management control o# daily logistics operations$ &ess control and more supply chain partners led to the creation o# supply chain management concepts$ (he purpose o# supply chain management is to impro"e trust and collaboration among supply chain partners) thus impro"ing in"entory "isibility and impro"ing in"entory "elocity$ !trategic trategic network optimiCation) including the number) location) and siCe o# warehouses) distribution centers and #acilities$ trategic partnership with suppliers) distributors) and customers) creating communication channels #or critical in#ormation and operational

2 OF 62

impro"ements such as cross docking) direct shipping) and third-party logistics$ .roduct design coordination) so that new and e4isting products can be optimally integrated into the supply chain) load management In#ormation operations$ Where to make and what to make or buy decisions 1lign O"erall Organisational trategy with supply strategy (echnology in#rastructure) to support supply chain

$actical ourcing contracts and other purchasing decisions$ .roduction decisions) including contracting) locations) scheduling) and planning process de#inition$ In"entory decisions) including Duantity) location) and Duality o# in"entory$ (ransportation strategy) including #reDuency) routes) and contracting$ 0enchmarking o# all operations against competitors and implementation o# best practices throughout the enterprise$ %ilestone .ayments

%perational Daily production and distribution planning) including all nodes in the supply chain$ .roduction scheduling #or each manu#acturing #acility in the supply chain (minute by minute!$ Demand planning and #orecasting) coordinating the demand #orecast o# all customers and sharing the #orecast with all suppliers$ ourcing planning) including current in"entory and #orecast demand) in collaboration with all suppliers$

3! OF 62

Inbound operations) including transportation #rom suppliers and recei"ing in"entory$

.roduction operations) including the consumption o# materials and #low o# #inished goods$

Outbound operations) including all #ul#illment acti"ities and transportation to customers$

Order promising) accounting #or all constraints in the supply chain) including all suppliers) manu#acturing #acilities) distribution centers) and other customers$

.er#ormance tracking o# all acti"ities

INFORMATION

TECHNOLOGY

FOR

SUPPLY

CHAIN

MANAGEMENT
In#ormation technology (I(! is an important enabler o# e##ecti"e supply chain management$ %uch o# the current interest in supply chain management is moti"ated by the possibilities that are introduced by the abundance o# data and the sa"ings inherent in sophisticated analysis o# these data$ (he inno"ati"e opportunities coming to the #ore with electronic commerce (e-commerce!) especially through the Internet) ha"e also increased the interest in I($ upply chain management spans the entire enterprise and beyond) encompassing suppliers on one end and customers on the other$ (here#ore) our discussion o# I( #or supply chains will include both systems that are internal to an indi"idual company as well as e4ternal systems) which #acilitate in#ormation trans#er between "arious companies and indi"iduals$ In addition) supply chain management typically spans many #unctional areas within a company and is a##ected by the way the "arious groups communicate and interact$ Por many #irms) I( pro"ides a competiti"e ad"antage$ (hough this has been true #or some time in ser"ice industries such as banks) it is also becoming more rele"ant #or #irms such as large retailers) airlines) and manu#acturers$

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.rominent e4amples include Wal-%art with its satellite-connected In#ormation (echnology) 1merican 1irlines with its inno"ati"e manu#acturing en"ironmentE$ When applying supply chain strategies that reduce cost and lead times and increase ser"ice le"el) the timeliness and a"ailability o# rele"ant in#ormation are critical$ In addition) an increasing number o# companies are pro"iding "alueadded I(-based ser"ices to their customers as a way o# di##erentiating themsel"es in the marketplace and de"eloping strong long-term relationships with their customers$ O# course) once these kinds o# ser"ices are o##ered by e"en one company within an industry) they can "ery Duickly become a basic reDuirement #or all others$ In many cases) current I( that supports the components in the supply chain process is di"erse and disconnected$ It has typically e"ol"ed throughout the years based on "arious local and companywide reDuirements that were rarely integrated$ (his issue must be addressed i# a company is to position itsel# to manage its supply chain e##ecti"ely$ 3arious strategies are utiliCed by companies to o"ercome these problems and create systems that can use the multitude o# data in the system e##ecti"ely$ In#ormation #low between suppliers) manu#acturers) and customers is critical #or e##ecti"e supply chain management$ (his entails in#ormation #low between di##erent companies) a relati"ely new concept that is already widely practiced to "arying degrees (e$g$) e-mail) ?DI) e4changes!$ (he implementation o# ad"anced I( solutions typically reDuires changes in organiCational structure) as well as in employee job descriptions and beha"ior abre reser"ation system) Pederal ?4press with its superb tracking system) and ;isco with its E"irtual

GOALS O& SUPPLY CHAIN IN&ORMATION TECHNOLOGY

We consider some o# the ultimate goals o# I( as it relates to the supply chain$ ome companies and industries are currently #ar #rom achie"ing these goals) while others are well on their way to accomplishing many o# them$

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(o utiliCe in#ormation) we need to collect it) access it) analyCe it) and ha"e the ability to share it #or collaboration purposes$ upply chain management system goals in these areas are/ ;ollect in#ormation on each product #rom production to deli"ery or purchase point) and pro"ide complete "isibility #or all parties in"ol"ed$ 1ccess any data in the system #rom a single point of contact. 1nalyCe) plan acti"ities) and make trade-o##s based on in#ormation #rom the entire supply chain$ ;ollaborate with supply chain partners$ ;ollaboration allows companies to manage uncertainty) #or e4ample) through risk sharing or in#ormation sharing) and achie"e global optimiCation$ (he primary goal o# I( in the supply chain is to link the point o# production seamlessly with the point o# deli"ery or purchase$ (he idea is to ha"e an in#ormation trail that #ollows the productGs physical trail$ (his allows planning) tracking) and estimating lead times based on real data$ 1ny party that has an interest in the whereabouts o# the product should be able to ha"e access to this in#ormation$ 1s #igure gi"en below) in#ormation and products #low #rom the supplier to the manu#acturer) internally through the manu#acturerGs distribution system) and then on to the retailers$
"rodu#t flow

Supplier $

%anufa#turer $

&arehou$e $

'etailer $

(nformation flow (nterfirm (ntrafirm (nterfirm "(ppl$ A<ain

Fi?(! B Fl%@ %& in&%!ma#i%n an) ?%%)" in #<

C+lle?$ in@+r("$i+n7 ?"idently) the retailer needs to know the status o# its orders and the suppliers need to be able to anticipate an incoming order

33 OF 62

#rom the manu#acturer$ (his entails access to data that reside in other companiesG in#ormation systems as well as across #unctions and geographic locations inside a company$ Purthermore) the participants need to see data in their own terms' that is) i# suppliers o# cotton are looking at the demand #or 2-(ips) they need it translated into pounds o# cot ton consumed$ (here#ore) translation tables) such as bills o# material) are reDuired throughout the system$ (he a"ailability o# in#ormation regarding the status o# products and material is the basis on which intelligent supply chain decisions can be made$ Purthermore) it is not su##icient to simply track products across the supply chain' there is also a need to alert di"erse systems to the implications o# this mo"ement$ I# there is a delay in a deli"ery that will a##ect production schedules) the appropriate systems need to be noti#ied so they can make the proper adjustments by either delaying the schedules or seeking alternati"e sources$ (his goal reDuires standardiCation o# product identi#ication (e$g$) bar coding! across companies and industries$ Por e4ample) Pederal ?4press has implemented a tracking system that pro"ides ongoing in#ormation on the whereabouts o# any package handled by the company and makes this in#ormation a"ailable internally as well as to customers$ A??ess $+ !"$"/ Here we introduce an important concept) the single-pointo#-contact concept$ (he goal here is that all the a"ailable in#ormation) either in#ormation pro"ided to a customer or reDuired internally) can be accessed in one stop and be the same) regardless o# the mode o# inDuiry used (e$g$) phone) #a4) Internet) kiosk! or who is making the inDuiry$ (his reDuirement is complicated by the #act that to satis#y a customerGs Duery) in#ormation may be reDuired that resides in "arious locations within one company and) in some cases) across se"eral companies$ In many companies) in#ormation systems tend to be islands) depending on their #unctions within the company$ ;ustomer ser"ice will work with one system) accounting with another) and the manu#acturing and distribution systems are completely separate (Pigure gi"en below!$

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ales representati"e Demand planner alesQmarketing systems

Pinancial systems )##ountan t

Operations *ogi$ti#$+ manufa#t uring $,$tem$

er"ice representati"e ;ustomer ser"ice

Occasionally

there may be a

trans#er o# some crucial in#ormation that needs to be accessed across systems) but i# the trans#er is not done in real time) then the systems ne"er ha"e e4actly the same data$ (he customer ser"ice representati"e recei"ing an order may not be able to pro"ide shipping status in#ormation) and the plant may not be able to inDuire about current outstanding orders$ Ideally) e"eryone who needs to use certain data should ha"e access to the same realtime data through any inter#ace de"ice (see Pigure gi"en below!$
Sale$ repre$entati-e .eman d planner

Single point of #onta#t

)##ountant

Operation $ Ser-i#e repre$entati-e

&i4*re7 NeA 4ener"$i+n +@ in@+r("$i+n s3s$e(s.

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1"nkin4 "22li?"$i+ns "re "!v"n?e! in $5is res2e?$ / you can access the same account in#ormation the bank tellers use) #rom almost anywhere o"er the telephone) computer) or 1(% machine$ +e"ertheless) these systems may still be weak at linking all o# a customerGs accounts into a single point o# inDuiryR#or e4ample) accessing mortgage in#ormation at the same time as a bank account$

An"l3>e '"se! +n s*22l3 ?5"in !"$"7 (he third goal is related to analyCing the data) especially in a way that takes into account the global supply chain picture$ In addition) the in#ormation system must be utiliCed to #ind the most e##icient ways to produce) assemble) warehouse) and distribute productsRin other words) the best way to operate the supply chain$ 1s we ha"e seen) this entails "arious le"els o# decision making/ #rom operational decisions in"ol"ing the way to #ul#ill a customer order) to tactical decisions related to which warehouse to stock with what product) or what the production plan #or the ne4t three months should be) to strategic decisions about where to locate warehouses) and what products to de"elop and produce$ (o #acilitate this) systems need to be #le4ible enough to accommodate changes in supply chain strategies$ (o achie"e this kind o# #le4ibility) systems need to be highly con#igurable and new standards need to be de"eloped$

C+ll"'+r"$e Ai$5 s*22l3 ?5"in 2"r$ners7 (he ability to collaborate with supply chain partners is essential to a companyGs success$ Indeed) an important objecti"e in supply chain management is replacing seDuential processes with global optimiCation$ (his reDuires not only sophisticated alignment o# I( systems but also the integration o# business processes$ Depending on its supply chain role) a company may be reDuired to either integrate with a customerGs procurement system or reDuire its own suppliers to link into its own systems or collaborati"e plat#orms) or both$ (he le"el and type o# collaboration "ary between industries$ Por instance) collaborati"e #orecasting was initiated in the consumer packaged goods industry while supplier integration is more common in the hi-tech industry where outsourcing o# critical components reDuires systems that support the

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product and logistics coordination$ In recent years) collaboration has become the #ocus o# supply chain systems$ (he ability to link and work e##ecti"ely with suppliers has produced new systems called supplier relationship management ( O%!$ In addition) the "arious e4changes that were de"eloped during the Internet boom o# the late :Bs are becoming collaboration plat#orms) whether pri"ate or public$ On the other end o# the supply chain) customer relationship management (;O%! systems are e"ol"ing to pro"ide better contact and understanding o# customer needs$ 1s we will see) the #our goals o# supply chain management do not all ha"e to be achie"ed at the same time) and are not necessarily dependent on each other$ (hey can be targeted in parallel) with the order o# importance depending on the industry) company siCe) internal priorities) and return on in"estment considerations$ Por instance) a bank could not sur"i"e without single-point-o#contact capability) a deli"ery company without a sophisticated tracking system) and a high-tech manu#acturer without a production planning system$ (o achie"e these goals and to master the decisions and problems that arise when considering how to address them) it is help#ul to understand many o# the major issues in I( de"elopment) particularly as they relate to supply chain management$ 1s we see in Pigure gi"en below) the #ollowing are the means toward achie"ing these goals$
Collect Access Analyze Collaborate

Integration/Standards

Infrastructure

Electronic commerce

Su ly c!ain com onents

&i4*re7 G+"ls "n! (e"ns +@ s*22l3 ?5"in ("n"4e(en$

37 OF 62

!tandardi&ation: I( standards are what allow systems to work together$ (hey dri"e the cost and sometimes the #easibility o# implementation$

"$ infrastructure: (he I( in#rastructure) whether internal or e4ternal to a company) is a basic component o# system capabilities$ Without the communications and database capabilities) some o# the goals outlined cannot be achie"ed$

'lectronic commerce: ?lectronic commerce has been the most important emerging I( #ield in the last #ew years$ It has enabled not only internal e##iciencies but also the ability to collaborate with partners in the supply chain$

!upply chain system components : (hese components comprise the "arious systems that are in"ol"ed directly in supply chain planning$ (hese are typically systems that combine short-term and long-term decision support system and intelligence elements$ Integration-related issues: How should priorities be set in order to achie"e the goals discussed abo"eS What kind o# in"estments should be made in the short term and in the long termS

INVENTORY MANAGMENT
In business management) in"entory consists o# a list o# goods and materials held a"ailable in stock$ 1n inventory can also mean sel#-e4amination) a moral in"entory$ In computing) in"entories can comprise physical and non-physical components$ In"entory ser"es as a cushion between the production and consumption o# goods necessitated by the technological demands o# production and transportation and customer needs$ In"entories can be categoriCed into se"eral types$ (hese are generally classi#ied as Oaw %aterial and upplies In"entories) .roduction In"entories) and %OO In"entories) In .rocess In"entories) Pinished In"entories) %aterial in transit in"entory and Dealer stock$

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C5"2$er60 &INDINGS AND ANALYSIS

Pierce competition in todayGs global markets) the introduction o# products with shorter and shorter li#e cycles) and the heightened e4pectations o# customers ha"e #orced business enterprises to in"est in) and #ocus attention on) their supply chains$ (his) together with continuing ad"ances in communications and transportation technologies (e$g$) mobile communication) Internet) and o"ernight deli"ery!) has moti"ated the continuous e"olution o# the supply chain and o# the techniDues to manage it$ In a typical supply chain) raw materials are procured and items are produced at one or more #actories) shipped to warehouses #or intermediate storage) and then shipped to retailers or customers$ ;onseDuently) to reduce cost and impro"e ser"ice le"els) e##ecti"e supply chain strategies must take into account the interactions at the "arious le"els in the supply chain$ (he supply chain) which is also re#erred to as the logistics network) consists o# suppliers) manu#acturing centers) warehouses) distribution centers) and retail outlets) as well as raw materials) work-in-process in"entory) and #inished products that #low between the #acilities$

&i4*re7 T5e l+4is$i?s ne$A+rk upply chain management is a set o# approaches utiliCed to e##iciently integrate

3 OF 62

suppliers) manu#acturers) warehouses) and stores) so that merchandise is produced and distributed at the right Duantities) to the right locations) and at the right time) in order to minimiCe system wide costs while satis#ying ser"ice le"el reDuirements$ (his de#inition leads to se"eral obser"ations$ Pirst) supply chain management takes into consideration e"ery #acility that has an impact on cost and plays a role in making the product con#orm to customer reDuirements/ #rom supplier and manu#acturing #acilities through warehouses and distribution centers to retailers and stores$ Indeed) in some supply chain analysis) it is necessary to account #or the suppliersG suppliers and the customersG customers because they ha"e an impact on supply chain per#ormance$ econd) the objecti"e o# supply chain management is to be e##icient and coste##ecti"e across the entire system' total system wide costs) #rom transportation and distribution to in"entories o# raw materials) work in process) and #inished goods) are to be minimiCed$ (hus) the emphasis is not on simply minimiCing transportation cost or reducing in"entories but) rather) on taking a systems approach to supply chain management$ Pinally) because supply chain management re"ol"es around e##icient integration o# suppliers) manu#acturers) warehouses) and stores) it encompasses the #irmGs acti"ities at many le"els) #rom the strategic le"el through the tactical to the operational le"el$ (he automoti"e industry manu#actured components #all under si4 broad product categories according to 1utomoti"e ;omponent %anu#actures association (1;%1!$

4! OF 62

(hese are gi"en in table below$ T"'le7 Cl"ssi@i?"$i+n +@ A*$+(+$ive C+(2+nen$s "??+r!in4 $+ ACMA Pr+!*?$ Gr+*2Pr+!*?$s .istons) .iston Oings) ?ngine En4ine P"r$s 3al"es) ;arburetors) Puel Injection ystems Ele?$ri?"l P"r$s tarter %otors and ,enerators S5"reC S+(e +@ $5e )e3 Pl"3ers D# 9= %otor Industries ;ompany) *cal Puel ystems) hriram .istons) India .istons) ,oetCe) I. Oings) %otor Industries ;ompany) Denso) India +ippon ?lectrical Oico 1uto Industries) ona Foyo teering ystems) 1utomoti"e 14les) ,F+ Dri"esha#ts) 0harat ,ears) Oane (%adras!) ;lutch 1uto) ;eekay Daikin 0rakes India) undaram-;layton) %unjal howa) ,abriel India) Oane 0rake &inings) undaram 0rake &inings) Mamna 1uto .remier Instruments & ;ontrols) &uma4) %otherson umi ystems May 0harat %aruti

Drive Tr"ns(issi+n ,ears) ;lutches) 14les "n! S$eerin4 P"r$s S*s2ensi+n 0rakes) &ea# "n! 1r"kin4 1bsorbers P"r$s EE*i2(en$ Headlights) Instruments

6@

prings)

hock

66

Dashboard

O$5ers ource/ 1;%1

heet %etal .arts) .ressure Die ;astings) (yre (ube 3al"es and ;ores

=<

egmental market shares o# the organiCed sector in P>9BB= in rupee terms ;ompiled by I+,O?

Un!ers$"n!in4 S*22l3 C5"in M"n"4e(en$7 upply ;hain is the organiCed mo"ement o# materials and) sometimes) people$ (he term was #irst associated with the military but gradually spread to co"er business acti"ities$ &ogistics %anagement is de#ined as a business-planning #ramework #or the management o# material) ser"ice) in#ormation and capital #lows$ It includes the increasingly comple4 in#ormation) communication and

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control

systems

reDuired

in

todayGs

business

en"ironment$

&ogistics

management includes a whole gamut o# processes like planning) procurement) transportation) maintenance) distribution and replacement o# personnel and material$ (he process o# logistics management di##ers #rom one #irm to another$ In some #irms) all these acti"ities are placed within a single logistics department' in others) they are shared among the departments$ (he #irm may also go in #or what is called third-party logistics) which is a contract with an outside party to per#orm speci#ic logistics ser"ices$ (he #ollowing indicati"e list gi"es some o# the #unctions that a #irmGs logistics management system is supposed to per#orm/ .. C*s$+(er Servi?e7 1ll the acti"ities that are done to keep the e4isting customers satis#ied come under the gamut o# customer ser"ice$ 9. De("n! &+re?"s$in47 (his process includes "arious statistical

measures that enable the #irm to estimate the demand in the #uture) which in turn helps in proper demand management$ 0. D+?*(en$"$i+n &l+A7 (his process co"ers the mo"ement o# the paperwork that accompanies the mo"ement o# physical product$ =. In$er2l"n$ M+ve(en$s7 (his is only applicable to those #irms where production process is accomplished in more than one plant) reDuiring the mo"ement o# semi-#inished products #rom one plant to another$ ,. Inven$+r3 M"n"4e(en$7 In"entory management reDuires a cost e##ecti"e maintenance o# stocks o# goods and materials$ 8. Or!er Pr+?essin47 Order processing starts with the receipt o# an order #rom a customer and ends when the order is ready #or packaging$ -. P"?k"4in47 .ackaging is done mainly to protect the product when it is being transported #rom the source to the destination$ It can also be used #or promotional purposes$ <. P"r$s "n! Servi?e S*22+r$7 (his co"ers the whole a#ter-sales ser"ice process$

42 OF 62

/. Pl"n$ "n! :"re5+*se Si$e Sele?$i+n7 (his #unction is carried to determine where the plant and the warehouse are going to be located) keeping cost-bene#it analysis in mind$ .;. Pr+!*?$i+n S?5e!*lin47 (his #unctionGs task is to balance demand #or products with the e4isting plant capacity and a"ailability o# inputs$ ... P*r?5"sin47 (his is a "ery important #unction in the logistics management as the Duality o# inputs that are purchased determines the Duality o# the #inished product$ 3endor selection is an important subprocess o# this #unction$ .9. Re$*rne! Pr+!*?$s7 (here are many categories o# returned products$ 1 #ew are subjects o# product recalls) meaning that a sa#ety de#ect or haCard has been disco"ered$$ (hese products are remo"ed #rom the shel"es) and both retailers and consumers attempt to return them to the manu#acturer$ (his is a #orm o# re"erse distribution) with goods mo"ing in the opposite direction o# their usual #low$ .0. S"lv"4e S?r"2 Dis2+s"l7 How a #irm takes care o# its waste material is co"ered in this #unction$ (he #irm might recycle its waste or sell the waste to "arious processors who specialiCe in recycling it$ .=. Tr"@@i? M"n"4e(en$7 1ll the transport reDuirements needed to mo"e a #irmGs #reight is known as tra##ic management$ .,. :"re5+*se "n! Dis$ri'*$i+n Cen$re M"n"4e(en$7 (his logistics acti"ity in"ol"es management o# the locations where the #irmGs in"entories are stored$

43 OF 62

SURVEY &INDING
H+A !+ 3+* ("n"4e 3+*r s*22l3 ?5"inF ;lose partnership with suppliers ;lose partnership with customers MI( supply e-procurement ?DI Outsourcing ubcontracting =.& .lan strategically upply ;hain 0enchmarking 3ertical integration Pew suppliers %any suppliers Holding sa#ety stock *se o# e4ternal consultants Other T T T

T T T T T

44 OF 62

How success#ul do you think is your company in managing its supply chain in generalS +ot success#ul at all .9 .; < 8 = 9 ; ; ; ; S+(eA5"$ s*??ess@*l S*??ess@*l ; Ver3 s*??ess@*l .;

+ot success#ul -

omewhat success#ul -

uccess#ul

3ery success#ul -

6B

N+$ s*??ess@*l N+$ s*??ess@*l "$ "ll

45 OF 62

Which o# the #ollowing you think that your company needs to do in order to manage its supply chain betterS Impro" e ;lose partnership with suppliers ;lose partnership with customers MI( supply e-procurement ?DI Outsourcing ubcontracting =.& .lan strategically upply ;hain 0enchmarking 3ertical integration Pew suppliers %any suppliers Holding sa#ety stock *se o# e4ternal consultants
.; / N+. +@ Res2+n!en$s < 8 , = 0 9 . ; I(2r+ve S$"r$ I( 2le(en$in4 S"$is@ie! "lre"!3 N+$ "22r+2ri"$e

B B B B B B B B B B 6B B B 6B B

tart Implementin g B B B 6B B B B B 6B B B B B B B

atis#ied already 6B 6B 6B B 6B B B B B 6B B 6B B B 6B

+ot appropriate B B B B B 6B 6B 6B B B B B 6B B B

Cl+se 2"r$ners5i2 A i$5 s*22liers BIT s*22l3 EDI S*'?+n$r"?$in4 Pl"n s$r"$e4i?"ll3 Ver$i?"l in$e4r"$i+n M"n3 s*22liers Use +@ eG$ern"l ?+ns*l$"n$s

Cl+se 2"r$ners5i2 A i$5 ?*s$+( ers e62r+?*re( en$ O*$s+*r?in4 0PL S*22l3 C5"in 1en?5( "rkin4 &eA s*22liers H+l!in4 s"@e$3 s$+?k

46 OF 62

Does your company ha"e a separate upply ;hain departmentS >? 6B +O B

;D

.;;D YES NO Does your company ha"e a clear logistics strategic planS >? 7 +O =

0;D

-;D YES NO

47 OF 62

How much did you actually bene#it #rom using these systemsS
+ot at all 0etter Duality o# in#ormation 0etter Duantity o# in#ormation Ple4ibility Oeduced lead-time in production ;ost sa"ing Porecasting Oesource planning 0etter operational e##iciency Oeduced in"entory le"el %ore accurate costing Increased coordination departments between &ittle 1"era ge ,reatl y 1 lot Don5t know

Increased coordination with suppliers Increased coordination with customers Increased sales 0etter Duality o# in#ormation 0etter Duantity o# in#ormation Ple4ibility
=, N+. +@ Res2+n!en$s =; 0, 0; 9, 9; ., .; , ; N+$ "$ "ll Li$$le Aver"4e Gre"$l3 A l+$ D+nH$ kn+A

1e$$er E*"li$3 +@ in@+r("$i+n &leGi'ili$3 C+s$ s"vin4 Res+*r?e 2l"nnin4 Re!*?e! inven$+r3 level In?re"se! ?++r!in"$i+n 'e$Aeen !e2"r$(en$s In?re"se! ?++r!in"$i+n Ai$5 ?*s$+(ers 1e$$er E*"li$3 +@ in@+r("$i+n &leGi'ili$3

1e$$er E*"n$i$3 +@ in@+r("$i+n Re!*?e! le"!6$i(e in 2r+!*?$i+n &+re?"s$in4 1e$$er +2er"$i+n"l e@@i?ien?3 M+re "??*r"$e ?+s$in4 In?re"se! ?++r!in"$i+n Ai$5 s*22liers In?re"se! s"les 1e$$er E*"n$i$3 +@ in@+r("$i+n

48 OF 62

In what le"el your company is #acing the problems below when using these systemsS
+o problem at all Oesistance to change #rom employees Oesources shortages e$g$ no maintenance and update kills shortages e$g$ ;omputer illiteracy within the company Insu##icient "endor support Hidden cost Integration system Integration system with with e4isting supplier5s &ittle problem ome problem igni#icant problem erious problem Don5t know

Integration with customer5s system Other

=, =; 0, N+. +@ Res2+n!en$s 0; 9, 9; ., .; , ; N+ 2r+'le( "$ "ll Li$$le 2r+'le( S+(e 2r+'le( Si4ni@i?"n$ 2r+'le( Seri+*s 2r+'le( D+nH$ kn+A

Resis$"n?e $+ ?5"n4e @r+( e(2l+3ees Skills s5+r$"4es e.4. C+(2*$er illi$er"?3 Ai$5in $5e ?+(2"n3 Hi!!en ?+s$ In$e4r"$i+n Ai$5 s*22lierHs s3s$e( O$5er

Res+*r?es s5+r$"4es e.4. n+ ("in$en"n?e "n! *2!"$e Ins*@@i?ien$ ven!+r s*22+r$ In$e4r"$i+n Ai$5 eGis$in4 s3s$e( In$e4r"$i+n Ai$5 ?*s$+(erHs s3s$e(

4 OF 62

How satis#ied are you with the current public policy regarding ;% and I(S +ot at all B omewhat B atis#ied < 2uite satis#ied 9 3ery satis#ied 9

9;D

;D

9;D

8;D

N+$ "$ "ll

S+(eA5"$

S"$is@ie!

I*i$e s"$is@ie!

Ver3 s"$is@ie!

5! OF 62

How important are the #ollowing #uture measures #or supporting your company e##ort in ;% and I(S

+ot at all %ore education) Duali#ication ?asier training access to e$g$ #ormal

omewhat important

Important

2uite important

3ery important

"ocational

%ore #unding and #inancial support %ore inter-country agreements regional

0etter in#rastructure e$g$ telecommunications) road) etc Impro"ed in#ormation pro"ision Increased regional cooperation between institutions) e$g$ chamber o# commerce ;loser cooperation between companies and go"ernments Other

51 OF 62

=, =; N+. +@ Res2+n!en$s 0, 0; 9, 9; ., .; , ; N+$ "$ "ll S+( eA 5"$ i( 2+r$"n$ I( 2+r$"n$ I*i$e i(2+r$"n$ Ver3 i( 2+r$"n$

M+re e!*?"$i+n% e.4. @+r( "l E*"li@i?"$i+n E"sier "??ess $+ v+?"$i+n"l $r"inin4 M+re @*n!in4 "n! @in"n?i"l s*22+r$ M+re in$er6?+*n$r3 re4i+n"l "4ree( en$s 1e$$er in@r"s$r*?$*re e.4. $ele?+( ( *ni?"$i+ns% r+"!% e$? I(2r+ve! in@+r( "$i+n 2r+visi+n In?re"se! re4i+n"l ?++2er"$i+n 'e$A een ins$i$*$i+ns% e.4. ?5"( 'er +@ ?+( ( er?e Cl+ser ?++2er"$i+n 'e$A een ?+( 2"nies "n! 4+vern( en$s O$5er O$5er E6?+( ( er?e E6'*siness De?isi+n s*22+r$ / eG2er$ s3s$e( R"!i+ &reE*en?3 I!en$i@i?"$i+n R&ID# Ele?$r+ni? D"$" In$er?5"n4e EDI# 1"r ?+!in4 O$5er

52 OF 62

C5"2$er6= STANDARDIJED PROCEDURES O& STORES

Por e##icient #unctioning and proper accounting o# materials) the standardiCed procedures #or receipt) issue o# material etc$ are essential$ .. Re?ei2$ +@ ("$eri"ls in s$+re ,enerally materials are recei"ed in the stores #rom the #ollowing sources/ a! %aterials recei"ed #rom supplier on the basis o# .O$ b! %aterials recei"ed by way o# trans#er #rom "endors$ c! %aterials recei"ed a#ter completionQtermination o# works) O&% and other sources through %O+$ 9. Iss*e +@ M"$eri"ls @r+( S$+res ,enerally issue o# materials #rom the store is in modes as indicated below/a! Issue o# materials through tores Issue 3oucherU ( I3! by store #or use in O&% and WorksQ1dministrati"e reDuirementsQindi"idual reDuirements as per rulesQDisposal etc$ b! Issue o# material #or trans#er to other storesQOegional store within the same Oegion through (3 due to mergerQabandoning o# parent store or pooling up or use surplus materials #or O&% and works within the same Oegion$ c! Issue o# materials #or di"ersion to stores o# other Oegions through %(+$ 0. Pr+?e!*re "n! D+?*(en$"$i+n @+r KM"$eri"l Re?ei2$ "n! H"n!in4 Over V+*?5er MRHOV#. %aterials supplied by "endor & recei"ed inspected) accepted by site incharge and directly issued to works are regularised through %OHO3$ Deli"ery o# material directly to the site incharge or their contractor #or works) instead o# being routed through store) is restored #or ob"iating double handling & transport etc$ In this system) material is recei"ed and simultaneously issued to the site incharge or their contractor at site entries only are made in records maintained by the concerned store$

53 OF 62

%OHO3 is prepared in #i"e copies by indenting deptt$Qsite incharge immediately on receipt o# material a#ter completion o# physical "eri#ication and #or acceptable material) therea#ter #our copies o# %OHO3s sent to stores #or regularisationQentry$ In case incomplete sets are recei"ed) commentsQobser"ations to this e##ect is incorporated in remarks column by the site incharge alongwith appropriate materials at site in acceptable Duantity and Duality by the userQe4ecuting agency and same is also become I3 as material is simultaneously issued to works$ tore is allotted control number to %OHO3$ %OHO3 control number is ne4t) to the number o# last recorded in %OHO3 #ile and can be cross-checked #rom stock ledger$ (he distribution o# %OHO3 shall be as under/ Original copy is retained by store and remaining three is distributed as below/ a! econd and third copy to #inance deptt$ 1s payment$ Out o# this) second copy is retained) by them and third copy returned to store through computer section a#ter entering rele"ant details In case computer #acilities are not pro"ided) this is returned to store directly$ b! Pourth copy to site incharge as an acknowledgement o# its entry in the store records$ %OHO3s #ile is maintained$ Original copy %OHO3 and other related documents are #iled in this %OHO3 #ile serially$ (his #ile is kept #or each #inancial year separately$ tore deptt$ enters details in rele"ant records such as top and stock ledger regularising the receipt o# material and it s simultaneous issue to works$ O3 #or records and release o#

54 OF 62

=. Pr+?e!*re "n! D+?*(en$"$i+n @+r KEn$r3 in S$+re Re?+r!s +@ ?"s5/S2+$ P*r?5"ses. 1ll cashQspot purchases need not be routed through stores$ It is also essential that such purchases are made under urgent circumstances only a#ter taking non-a"ailability certi#icate #rom the store on their indent and clearance #rom HOD o# the indenting department and certi#ication #rom HO% (only #or personal entitlement items! that items ha"e become due to them$ Por such purchases) pro"ision o# DO. (including #inancial concurrence! may be e4ercised$ uch purchases are entered in ;ashQ pot .urchase OegisterU in the #ormat to be maintained by each deptt$ head$ 1#ter recording the items in the register) bills are submitted to store alongwith the #ollowing documents/ i! ii! iii! i"! 1ppro"al #or purchase #rom competent authority justi#ying the urgency$ ;ontingent claim Q adjustment note Q ad"ance adjustment note$ +on-a"ailability certi#icate as obtained #rom store$ ;learance #rom HOD o# indenting department Q HO% (#or personal entitlement items only!$ "! "i! I3 #or simultaneous issue o# materials to them$ ?ndorsement in I3 is made about nature o# material i$e$

consumableQnon-consumable and whether #or personal use or #or use in petty worksQO&% etc$ "ii! Purther certi#ication on I3 will be recorded as below/ a! (hat consumable materials ha"e been purchased a#ter consumption o# earlier purchased lot or else record #actual position$ b! (hat non-consumable material has been purchased a#ter the e4piry o# de#ined li#e o# the earlier purchased material or else the material is brokenQmisplacedQunser"iceable as the case may be$ Where"er reDuired appro"al #or write-o## #rom competent authority as per DO. is submitted$

55 OF 62

tore prepares

O3 #or the materials purchased on the basis o# the abo"e

documentary proo# only and is immune #rom the actual receipt in store$ He makes entries in employeeQdepartment register) %IO) %OO and stock ledger as the case may be$ In case o# personal entitlement items) store also in#orms HO% the details o# the material purchased and the details o# employee to whom materials ha"e been issued store #orwards the bills and contingent claim Q adjustment note Q ad"ance adjustment note to #inance #or payment Q regularisation) with the stock ledger re#erence and certi#ication that details o# the materials has been taken into records o# store$ O3 and I3 is distributed in the normal manner$ On superannuationQtrans#er o# employee) the store considers items o# nonconsumable nature purchased through .IQad"ance drawnQcontingent while issuing +O; to an employee accordingly$ ,. Pr+?e!*re "n! D+?*(en$"$i+n @+r KRe2+r$in4 +@ M"$eri"l S$"$*s. On the basis o# a"ailability o# the materials) the store incharge sends a monthly status report$ (his would become base #or reporting o# surplus material a"ailable e"ery Duarter$ 8. Pr+?e!*re "n! D+?*(en$"$i+n @+r KLiE*i!"$i+n +@ S*r2l*s M"$eri"ls "n! Dis2+s"l +@ S?r"2 S*r2l*s M"$eri"ls (his may arise as a result o# the #ollowing/ i! lowQnon-mo"ing material held with store #or two years but not e##ecti"ely utiliCed used e4cept insurance Qmandatory spares$ ii! *sable materials held in the store more than the speci#ied stock holding norms$ iii! i"! %aterials held in the store more than the speci#ied stock holding norms$ %aterials declared as surplus by the departments #rom time to time$

,roup Head classi#ies the surplus materials based on the a"ailable norms Q guidelines$

56 OF 62

-. P53si?"l S$+?k Veri@i?"$i+n +@ M"$eri"ls tock "eri#ication is carried out to check stock discrepancy arising due to #ollowing reasons but not limited to/ a! Human error o# omissionQcommission b! Weight di##erence c! Improper storage d! %easurement di##erence e! Improper documentation #! &oss due to corrosion Q erosion Q e"aporation$ g! (he#t) pil#erage etc$ h! %aterial recei"ed but posting not made in stock ledger & bin card as per O3$ i! %aterials issued without ledger & bin card$ (o tally ledger with bin card to match with ground balance) #ollowing acti"ities are carried out and record maintained/ !tore (eeper)!upervisor day tore Incharge ubstation Incharge Weekly each transaction during the week %onthly at random 9BH o# transaction o# the month ,roup Head 2uarterly at random 6BH o# transaction o# the 2uarter in association with group #inance$ In addition to the abo"e) ground balance o# other material (s! whether transacted or do not periodically checked and "eri#ied$ * Daily after each transaction of the I3Q (3Q%(+ andQor posting not made in stock

57 OF 62

<.

Pr+?e!*re

@+r

Re?+n?ili"$i+n

"n!

A!L*s$(en$/:ri$e6+@@

+@

Dis?re2"n?ies On receipt o# the D3) the store incharge #irst o# all reconcile the materials "isV-"is "arious receipts and issues o# the same item separately and o##set the surplus against the shortage in the same item be#ore reaching at the net shortageQsurplus in "arious item(s!$ (he store incharge in"estigates the reason #or discrepancy and #orward the report o# the in"estigation to #inance department$ (he in"estigation can be made on each transaction) their unit) arithmetic error) erroneous posting (omission or duplication! o# entries in store documentation particularly #rom the last stock "eri#ication when either no discrepancy was obser"ed or discrepancy resol"ed etc$ .ersons associated with the store or user department can be e4amined and in case any #raud or the#t is suspected) necessary action is initiated$ I# deemed necessary) store documents are re"iewed by competent authority$ In case o"erall de#ined as below/ T32e i! 1-;ategory items ii! 0-category items iii! ;-;ategory items (Including ;onsumables! ?"ery attempt is made to reconcile :BH or more #or 1-;ategory items and 8BH or more #or 0-;ategory items$ Por ;-;ategory items reconciliation are as much as possible$ O&% deptt$ O# OH2 accordingly ad"ise action plan to store$ C+s$ +@ In!ivi!*"l I$e( W or X Y or X Y Os One lac Os 6B)BBBQ- and Y Os one lac Os 6B)BBB hortageQ?4cess o# materials in store #or entire Oegion is

considerable "alue-wise) an 1-0-; analysis may be carried out with ;ategories

58 OF 62

)e3 C+n?erns @+r $5e C+(2"n37

(o reduce in"entory le"el at the stores$ (o impro"e in"entory accuracy at stocking points$ (o identi#y the damaged stocks across the chain and initiate action in a timely manner$

&in!in4s7
(he company appointed an e4ternal upply ;hain e4pert #rom * to help them out o# their problems stated abo"e$ (he e4pert #ound out some discrepancies which are as #ollows$ A#. Hi45 Inven$+r3 Levels7 (otal a"erage in"entory holding at stores was 8$9 weeks o# sales and at stores was <$A weeks o# sales$ (hey were "ery high across the distribution chain because/

ales and despatch #orecasts that were not in line with actual primary Q
secondary sales$

(here was no process to periodically re"iew and re#ine the 1nnual

Porecasts) in line with market #eedback$

tocking across all points in the distribution chain was dri"en by a pushoriented system that did not ha"e pro"isions to be tuned to market reDuirements$

1ctual sa#ety stocks maintained at stores were signi#icantly higher that

target sa#ety stocks agreed at the beginning o# the year$ +o system was in place to monitor and correct the same during the year$

tock allocation #rom stores was manual$ Orders recei"ed #rom

distributors were manually processes and no process was in place to automatically collate orders and allocate stocks$

5 OF 62

1#. Hi45 Levels +@ Ol! / :i$5!r"An /D"("4e! / Sl+A6(+vin4 s$+?ks7 tores were holding High in"entory o# oldQwithdrawn stocks and damaged stocks #or a long time (o"er = months! 0ook and physical stocks had discrepancy o# o"er =BH$ Dead stocks were allowed to accumulate in the system mainly because/ 6$ (here was an absence o# "isibility into in"entory details across stocking points$ 9$ (he process to monitor and act on dead stocks was not adhered to$ =$ Oecords o# slow-mo"ing Q old Qwithdrawn Q damaged stocks were not maintained methodically at the stocking points$ Oecords were inaccurate$ @$ ;ommunication o# details o# dead stocks to the rele"ant teams was based on manually #iled reports which were time-taking and open to error$

C#. In"??*r"?3 in inven$+r3 re?+r!s7 (he organisation did not ha"e a clear policy on periodic reconciliation o# physical stock with book records$ (hus inaccuracies grew o"er time) compounded with process #ailure on accounting #or dead stocks$

1ction teps *ndertaken/

(he e4pert ad"ised and undertook some steps in the organiCation as #ollows/ 0in card system was implemented #or each rack at the ;P1s and the deli"ery sta## was trained in rele"ant bin card maintenance practices$ 1 process to regularly reconcile physical and book stocks using the cyclecount process was implemented$ 1n I( solution was identi#ied and implemented #or/

1ccounting the ;ycle count process) pro"iding %I accounting the adjustment notes$

on de"iations and

;omputing the #orecast using consolidated orders) with #actoring #or promotions and seasonality$

6! OF 62

;alculating sa#ety stock le"el based on number o# weeks o# sales target$ Pacilitating communication o# closing stock data #rom 0 O and stores to logistics department$ Pacilitating communication o# damaged and un-saleable stock Duantity to commercial department$ 1utomatically allocating stocks using PIPO principle at the stores$

Demand planning and #orecasting were made a periodic acti"ity using the abo"e I( solution to align #orecasting with market orders and actual sales$ (he process o# setting sa#ety stocks at stores was made periodic and dynamic) based on updated sales data$ +orms were set to act on damaged Qold and other dead stocks$ ;lear action steps were laid down to liDuidate or destroy these stocks$ Oesponsibility and accountability were set to in the organisation to monitor and authorise acti"ities in this regard based on "isibility pro"ided by the I( solution$

1ene@i$s7
Due to abo"e steps were implemented properly the results were #ascinating and this increased the pro#its o# the company by 9BH$

(a) (b)

(he organisation achie"ed an in"entory record accuracy (book stocks correctly re#lecting physical stocks! o# :AH within 9 months$ (he company achie"ed (Within 9.lanning cycles i$e$ 9 %onths!

(i$!

tock le"el reduction

Prom 8$9 weeks to A$A weeks at the stores$ Prom

<$A weeks to @ weeks at the stores which included damaged in"entory$

61 OF 62

Oeduction in stock "alue holding across the supply chain$

(c)

(ransparency o# saleable and damaged stocks Duantities across the supply chain resulting in more accurate demand planning) stock allocation and production$

(i$! 0etter management o# damaged and un-saleable stocks/

ales realisation on sal"aging and selling damaged stocks at a discounted price$ (imely destruction o# unusable and potentially harm#ul products$ (imely action on transport) handling) stock management and product de"elopment #ronts to reduce damages$

(ii$! Oeduction in proportion o# old and damaged stocks ' (iii$! Pacilitation o# ensuring #resher stocks in the market$

(his was achie"ed mainly by reducing in"entory le"els across the chain and also by better stock management at the stores$

62 OF 62

CONCLUSION

upply chain management ( ;%! is the combination o# art and science that goes into impro"ing the way your company #inds the raw components it needs to make a product or ser"ice and deli"er it to customers$ It is the process o# planning) implementing) and controlling the operations o# the supply chain with the purpose to satis#y customer reDuirements as e##iciently as possible$ upply chain management spans all mo"ement and storage o# raw materials) work-inprocess in"entory) and #inished goods #rom point-o#-origin to point-o#consumption$ upply chain management has emerged as the new key to producti"ity and competiti"eness o# manu#acturing and ser"ice enterprises$ (he importance o# this area is shown by a signi#icant spurt in research in the last #i"e years and also proli#eration o# supply chain solutions and supply chain companies$ 1ll major ?O. companies are now o##ering supply chain solutions as a major e4tended #eature o# their ?O. packages$