Overhauling Auto Spares Parts Warehouse Operations

A Case Study SITARAM GEDDAM

Maruti Suzuki, subsidiary of Suzuki Motors Japan is Indias largest passenger car company. Maruti Suzuki operates a large, centralized distribution centre for spare parts and accessories distribution. Key challenges were faced including long order fulfilment time, erroneous dispatches, low inventory accuracy and manual processes. This case study will take you through the improvements made which resulted in a 700 to 800% improvement in order fulfilment time, an almost complete elimination of erroneous dispatches and accurate, real time inventory visibility. When a consumer looks through the window of an automotive dealership, they see dreams about to become true. Their imaginations put them in the drivers seat, rolling across the countryside. The automobiles in the showroom glisten under the lights. Their colours reflect the adorning eyes of their future owners. These are more than just machines to move a person to and from; they are an extension of a personality. Marutis supply chain experts, on the other hand, though admiring the finished product, see something very different. They recognize that that dream machine is a collection of thousands of parts of varying sizes and complexity, some of which will wear and tear; others that will break down, and others that will be replaced at the whim of the owner. The supply chain expert recognizes that the handling of automotive parts is one of the most complex and difficult challenges of any business, made so from the unique combination of the sheer volume of the parts that move through the supply chain, coupled with the enormous variety and number of parts. But the spare parts and accessories offered hefty profit margins to the company and the dealers. And Maruti came to recognize that in order to be successful; they had to be good at making cars but even better at the business of handling those spare parts and accessories.
THE CHALLENGE

Without question, automotive supply chain processes encompass tremendous variations, which are linked to the variety of commodities distributed by the automotive industry. For example, customers routinely order large quantities of small parts (such as nuts and bolts), small quantities of extremely large parts (such as engines, body panels and glass), extremely large quantities of consumer goods (such as air filters, oil and spark plugs), and high value accessories (navigation and stereo systems) Not only do commodities vary but fulfilment models also may vary dramatically from single-line / single-item orders that must be filled within an hour, to enormous multithousand line replenishment orders to be filled within the day. These variations are compounded by the fact that automotive operations generally ship more order lines per day than most other industries, requiring ultra-high performance business systems to meet this challenge. In addition, most automotive operations use automated material
PAPER PRESENTED AT SAPICS 32ND ANNUAL CONFERENCE AND EXHIBITION SAPICS 2010, www.sapics.org.za ISBN 978-0-620-47117-6 25 TO 28 JULY 2010, SUN CITY, SOUTH AFRICA 1 OF 5

OVERHAULING AUTO SPARES PARTS WAREHOUSE OPERATIONS

handling equipment (such as conveyors, carousels and AS / RS devices) to address specific business needs. This extreme environment demands tremendous configurability, unparalleled throughput of performance and a proven record of integrating material handling equipment. This environment required a sophisticated WMS with features that permit the definition of an unlimited number of picking strategies, putaway strategies and consolidation strategies, as well as the most sophisticated rules-based location assignment techniques on the market (that account for cube, height, weight, dimensions, orientation, containerization, nesting, stacking and ordering of products and locations). Maruti has become a master of the business of storing and moving automotive parts to the aftermarket. As India's largest car manufacturer, actually a joint venture with Suzuki of Japan, Maruti has been a success story like no other in the annals of the Indian automobile industry. Since opening their doors in 1981, Maruti has sold over four million small and mid sized cars and garners a 56% share of the Indian market. Since their debut, Maruti has grown to over US$7.3B in revenue with the capacity to produce over one million cars annually. Thats a lot of parts! And it wasnt always smooth cruising. Maruti-Suzuki India Limited operates a Spare Parts Distribution Centre in Gurgaon (Haryana) India. The Spares DC provides after-market parts to Maruti-Suzuki Dealerships and Authorized Service Centres within India. In addition, now the distribution centre also supports a growing Export market. The warehouse consisted of three floors with approximately 350,000 square feet of space with over 100 warehouse operators. Before the project began, the warehouse was poorly racked with product sitting on the floor everywhere. Outside, the yard was being used to store all the large parts. Plans were underway to rent or build additional warehouses. All receiving activities were performed using a paper based batch process. Every part was assigned a fixed storage location which resulted in inefficient use of warehouse space. The operators used the old system as a transaction recording and inventory tracking system, rather than a resource management tool. Inefficiencies in this operation resulted in poor performance in servicing their customers. At one time, the best they could do in fulfilling orders for spare parts was two days for Vehicle Off the Road (VOR) Orders and five days for Stocking Orders. In addition, sub-optimal warehouse layout and error prone manual processes resulting in low throughput, inaccurate inventory, and low order fill rate and erroneous dispatches. Together, these situations added enormous costs to Maruti and less than acceptable customer satisfaction.
THE SOLUTION

Maruti attacked their problems in the same manner that brought them to the forefront of the automotive market. Using a total solution approach, all aspects of the parts

T HE B EAT G OES O N

2 OF 5

OVERHAULING AUTO SPARES PARTS WAREHOUSE OPERATIONS

business was analyzed and reassessed. Beginning with the physical flow of the parts in the Gurgaon facility, Maruti rearranged the warehouse layout to optimize material flow and improve labour productivity. Next, Maruti began an exercise of Process Reengineering, especially regarding the arrangement of parts in storage, along with their order picking methods and shipping process. The goal was to eliminate errors, improve efficiency and order fulfilment velocity. In order to manage the new process, Maruti implemented the MARC Warehouse Management System (now Red Prairie). The WMS was deployed with RF handhelds, label printing and scanning hardware designed to automate warehouse processes and to reduce or eliminate manual interventions. But they were not finished. Receiving was an extremely slow process because of lack of vendor compliance. So the first step was to streamline the inbound process starting with vendor compliance that included standardizing the SKU / Part # labels, License Plates, consistent and uniform pack sizes. The WMS also enabled advanced features such as priority replenishments to forward pick locations from inbound dock, cross-docking. Such features enabled the warehouse to maintain minimum inventory and directly allocate receipts from vendors against dealer orders much earlier in the cycle. With the implementation of the WMS, Maruti now had the tools they needed to advance the operation even further. They implemented new concepts for Rush Orders, cluster picking to minimize travel time, incorporated cycle counts to improve inventory accuracy, began a process for crossdocking backordered parts, and automated the integration of the WMS with their material handling systems. Above all, Maruti took advantage of the sophisticated methods available in the WMS to rearrange their inventory in a velocity based scheme that, coupled with putaway strategies, created the baseline for extremely tight inventory control and productivity improvements.
THE RESULTS

Once the changes were put in place, Maruti began to see immediate results. Today, the entire Gurgaon operation is now system driven. Space utilization has increased 200%. Thats like finding another two warehouses of the same size in the same space! Order cycle time was reduced to eight hours from four days resulting in an increase in inventory turns. The implementation of the warehouse management system has been so successful that seven years after implementation the volumes have gone up six fold, yet the same warehouse has been able to sufficiently cater to their needs. The company never had to build a new warehouse, hence saved millions in capital investments. Even so, inventory accuracy went to 99% plus! With the introduction of WMS processes, the new system automatically selected the best possible location based on product characteristics and putaway strategies defined in the system. Similarly, pick strategies were designed to minimize handling, reduce travel time, pick clean from a location while adhering to FIFO requirements. Multiple orders were picked using cluster picking. Improved cartonization and product nesting
SAPICS T HE ASSOCIATION F OR O PERATIONS M ANAGEMENT F OR S OUTHERN AFRICA 3 OF 5

OVERHAULING AUTO SPARES PARTS WAREHOUSE OPERATIONS

lowered storage and shipping costs. Better control of movement of cases and pallets within the warehouse lead to timely loading and shipping of trailers. Maruti saw other improvements, some of which they werent even expecting. Tighter inventory control and event based cycle counting of inventory made visible the enormous number of obsolete parts that were collecting dust in the corners of the warehouse. Cycle count plans were created based on velocity and value of the product. Exceptions such as short picks and other inventory adjustments automatically triggered cycle counts. These practices enabled Maruti to remove these obsolete parts and consolidate others. This was an improvement for a problem the scope of which they did not realize. Further, Supervisors now had real-time visibility to all tasks performed by the operators and activity is easily managed by zone, and task type. The system allowed supervisors to assign specific tasks to individual operators. Maruti turned a highly reactive environment into one where their management team gained control of the process and could now plan and prioritize daily activities.
MAKING IT HAPPEN

One of the important aspects of the implementation was that the client was willing to make the necessary changes to their business processes, people as well as the warehouse layout. This business process re-engineering resulted in identifying several bottlenecks and areas of improvement. Maruti and 7Hills developed a true partner relationship, one where each party relied on the expertise and experience of the other. In doing so, both parties were able to consider and accept the ideas from the other, creating a synergistic effect and positive results beyond eithers expectations. Maruti received full payback within two years of implementation of the advanced warehouse management system and automated processes. Awarded best and most profitable Spare Parts operation companywide across the globe for five years in a row!!!
ABOUT THE AUTHOR

Sitaram Geddam is Founder, Chairman and CTO of 7Hills Business Solutions a company with offices in India and the USA. He started his career in Supply Chain Management at Johnson & Johnson, USA as a distribution analyst in 1994. Later he joined the SCM division at BDM International, which was later acquired by TRW, Inc. Shortly after the acquisition, he founded 7Hills and started operations at Hyderabad and Washington DC to provide WMS Implementation services for clients in the North America and Asia-Pacific region.

T HE B EAT G OES O N

4 OF 5

OVERHAULING AUTO SPARES PARTS WAREHOUSE OPERATIONS

He has been working with Tier 1 Supply Chain Technology solutions for over sixteen years and has been involved in successful implementation of over fifty supply chain IT and process improvement projects for several Fortune 500 companies such as J&J, Ford, FedEx, Maruti-Suzuki, TNT, Nokia and Reliance. As founder, Chairman and CTO, he has been instrumental in the growth of 7 Hills and establishing strong relationships with some marquee customers globally. He is the chief architect and driving force behind the development of the multi-tenant SaaS based eBizNET Supply Chain Suite and use of the latest cloud computing technologies for SCM and eCommerce applications. He specializes in leveraging new technologies and service delivery models to make complex end-to-end supply chain IT solutions for warehouse management, transportation, reverse logistics, and supply chain partner collaboration, affordable and easily available to both large and SMB companies. Sitaram pioneered the creation of a truly on-demand transaction based pay as your grow SaaS Supply Chain software delivery model that significantly reduces capital investments that companies need to make to remain competitive today. Sitaram is based in New York, NY and holds a Master's degree in Manufacturing Systems Engineering with a concentration in MIS, from Rensselaer Polytechnic Institute, NY. He has a bachelors degree in Mechanical Engineering from Osmania University, Hyderabad, India. For more information visit www.ebizscm.com
CONTACT
eMail Website Telephone Telephone sid.geddam@7hillsglobal.com www.7hilsglobal.com +91 40 4422 4545 in India +1 412 343-2324 in the USA

SAPICS T HE ASSOCIATION F OR O PERATIONS M ANAGEMENT F OR S OUTHERN AFRICA

5 OF 5