SCM- best practices.

By
Dr.T.V.Subramanian

The AMUL Supply Chain

80 lakh 19 lakh 10000 12

CA
40

FA

VCO

DCO

SO
3500

CORP. Vsat link office

25 lakh

stockists

Retailer
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Supply Chain Management : The Amul Example

Amuls services its supply chain as follows : 80 lakh milch animals : cattle feed, veterinary services, artificial insemination, owner education 19 lakh farmers / owners : education through extension services,
input / output services, co operative development programmes

10,000 village level dairy cooperative societies : milk collection centers, chilling facilities, transportation facilities, quality control facilities 12 district level co operative milk producers unions :

Supply Chain Management : The Amul Example

Global marketing organization and corporate office at Anand :IT integration, instantaneous communication through V SAT link with production plants and 40 sales offices around the world. Global brand management functions. Distribution through 3500 stockists to 25 lakh retail outlets and direct home delivery to consumers around the world :
supply of products as per predetermined schedule, promotional support in the market and IT link with sales offices. At retail, in shop promotional support and mass media advertising support. 4

ASIAN PAINTS-Competitive advantage through Distribution

Marketing strategies
AP bypasses the bulk order segment and goes to individual consumer of paints AP strategically shifts to semi-urban and rural markets(not tapped then by multinationals) AP goes for open door dealer policy

AP opts for nationwide marketing

ASIAN PAINTS-Implications of strategic moves

Wide product range/shades Complex geographically wide spread distribution channels Deep involvement in physical distribution and channel management

Product-specific threats in each region

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ASIAN PAINTS LIMITED -Implementation of Strategies

Phase-1
7000 strong dealer network 2500 product varieties and 10 SKUs Exploitation of IT to integrate the entire channel (through VSAT) Integrated PULL system of production scheduling(demand based instead of forecast based.) Partnership with transport operators
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ASIAN PAINTS-Spectacular results in 1995

Overall service level over 85% / Close competitors less than 65% Finished goods inventory as a % of sales is 7 %/ Industry average is 15% APs average collection period is 25 days/ Industrys average is 45 days

APs market share is 35% of organized segment/Nearest competitor has 15%

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AP strategies- Phase 2

Dealer network expanded to 14000 Optimize distribution planning and costs through I2 Software( PULL-PUSH system)
Demand planning Supply chain planning Factory scheduling Optimum solution

ERP integration with I2 software AP Home solution

AP computerized colour mixing solution

On-site technical assistance Paint contractor recognition
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Gujarat Ambujam Cements

Critical issues in industry
Regular availability of coal at reasonable price Wagon availability for transporting coal and finished goods Control of energy costs anf manufacturing cost Creation of new markets
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Gujarat Ambuja Cements

Actions taken by the company
Decided to import coal at a higher cost State of the art technology and special total energy management initiatives Adopted coastal movement of finished goods Acquired own ships/ developed berths
Substantial reduction in transportation costs and elimination of wagon needs Used the above facilities export to other countries

Created captive power plant

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Major innovations
Design of granular cements which can be transported in open weagions.

Pulverizing plant in distyribution centres.

Leased specially designed ships where post-production activities arte carried out while in motion.
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Gujarat AmbujamPerformance Highlights

40% of revenue from expoerts National quality awards for 3 consecutive years Lowest transportation cost in the industry Rs. 134/T (Indusrty avg. 170) Energy input/ton of cement=88kwh(industry120kwh) Coal consumption: 748kcal/T( Industry-850) Cost of Manufacture:Rs. 770/T(Ind:-800-920)
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MARICO Industries Supply

Chain initiatives

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Scenerio prior to SCM implementation

Considerable difficulties in forecasting demand Errors in some SKUs are as much as 100% Complexities in distribution to large number of distributors across the country ( 3500)

Leads to excess inventories in some and shortage in others

Visibility of stocks at the distributor level
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Scenerio prior to SCM.

Secondary sales figures were difficult to gather as for all FMCG companies Planning cycles were fixed and decisions could not be made online Processes were highly individualized.

Poor communication due to absence of integrated approach.

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Scenerio prior to SCM

Apart from annual budget , they were operating on a fixed three month production cycle.
Leads to skewed inventory positions.

Had fixed dispatch plans for the quarter even if the sales were low.

Co-ordination difficulties between sales and manufacturing departments.

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Scenerio prior to SCM

No formal distribution planning Several islands of information and no data visibility in the system. Lot of cleaning up needs to be done before bringing any new technology.

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Motivations for change

Inaccurate forecasts Lost sales due to mal-distribution

Huge stock expiries due to non availability

Customer dissatisfaction Data and information unavailability due to lack of IT systems Diffusion of roles and responsibilities
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SCM Implementation highlights

Decide to implement SAP SCM modules
SAP/R3 BIW

APO Collaborative network planning possible

Processes redesign before SAP implementation

20 operating managers deployed full time

Some identified cost savings were put in the budget.

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Disciplined systems started working replacing

SCM implementation
Consensus planning became operational
Area sales-National Markrting

Planning cycle reduced to 4-5 days Monthly Rolling plan replaced quarterly fixed plan
Eliminated quarter end queue building

Second line sales( distributors) obtained every month

Important distributors every 10 days
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SCM Implementation..
STOCK Visibility in the entire chain
Stocks with expiry dates available

System efficiency improved Key performance measures monitored

Planned deliveries Vs. Actual

Lost sales %
Inventory norm Vs. actual
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CSFs taken care of

Top management commitment
Best resources and best people were deployed Continuous review of implementation

Training budget increased by 100%

Other members of supply chain also trained

State of the art IT deployed- VSAT/ VPN

Planning web enablement of distributor database

Refining the forecasting methods
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RANBAXY LABORATORIES -Supremacy in supplier partnerships

Identifying the weakest link & addressing
it After a highly successful track record , in 1992 they embarked on a major globalization project
Supplier quality and productivity identified as the weakest link in the supply chain

Prior to 1993, traditional relationships with suppliers; excessive quality

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RANBAXY LABORATORIES (Continued)

In 1993, First vendor meet was called
120 suppliers participated

Decided to start a new chapter in their relationship

Problem areas: Packaging, capsules, sugar, drugs Focus: Quality improvement; Cost savings

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RANBAXY LABORATORIES Quality improvement in Focus Initiatives taken and results achieved First experiment with associated capsules
Sharing of data Process improvement Good manufacturing practices Extensive training Technical support

Result after one year: rejection % brought down from 6% to zero Extended to 37 suppliers
100 plant level programs
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RANBAXY LABORATORIES Quality improvement Focus

Joint training programs on customer-supplier relations using international consultant Jordan Lewis
Suppliers highly motivated

Alpha-D Drug Company

Most successful experience

Alpha-D drug is an intermediate drug used for a number of anti-biotics

purity level up from97.2 to 98.5% Alphas business to other companies increased
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RANBAXY LABORATORIES -Quality improvement Focus

Supplier of Printed sealed aluminum foils with multiple joints faced quality problems
Helped him in changing the sealing machines Suppliers customer base increased.

Quality problems(black particles) in sugar

Cast iron pipes in sugar mills changed after a detailed study. Loan was also provided.
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RANBAXY LABORATORIES Cost Reduction Focus

HDPE drums for packing finished goods bought from a bombay based company
High transportation costs/huge plant inventory Motivated and helped the supplier to start a plant near Chandigarh. Dramatic reduction in costs/inventory

Voluntarily helped several suppliers to modernize their technology and

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RANBAXY LABORATORIES -Relationships redefined

In 1995
Third vendor meet Name changed to Partners meet Vendor Awards instituted

Going beyond the traditional relationships

Core competencies of many suppliers improved and benefits shared
Equity participation with suppliers in their expansion projects as well as joint ventures.
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RANBAXY LABORATORIES -Current exercises and future plans

SAP implementation completed in all critical areas. Web-based Connectivity provided to important suppliers Planning to extend the partnership concept to stockists and dealers Stockists are being connected through computers.

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RANBAXY LABORATORIES _Spectacular results during 93-98

Overall sales revenue from abroad increased from 5% in 1993 to 49% in 1998. During !998-99, three indigenously developed(through R&D effort) drugs of RRANBAXY have been recommended as prescription drugs in American Hospitals by the American Medical Practitioners association.

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Thank You!

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