Automotive Sector Building an Agile & Responsive Supply Chain S.K. Krishnan Vice President Demand Chain Management Mahindra & Mahindra Ltd. 25 th January.

Automotive Sector

Building an Agile & Responsive

Supply Chain

S.K. KrishnanVice PresidentDemand Chain ManagementMahindra & Mahindra Ltd.25th January 2013

Automotive Sector

Mahindra Group - A Brief

A diversified conglomerate with $15.4-billion revenue.

Presence in 18 industries across 100 countries.

Among Top 10 Industrial Houses in India.

Largest Tractor manufacturer in the world.

India’s biggest SUV maker, Leading UV player in India.

Employs over 144,000 people across the globe.

Automotive Sector

Mahindra & Mahindra Ltd- Automotive Sector

Multi Plant Locations- 6 Plants across India

Automotive Sector

Organization Structure

CEO

Marketing Sales DCM Manufacturing

Planning &Strategy

Inbound Logistics

Outbound Logistics

CoE Packaging eDCM CKD

LogisticsSpares SCM

Plant SCM

Plant heads

Automotive Sector

Supply Chain Complexity

Multiple Products with high number of variants

– About 3000 variants (with colour & trim

combinations)

Large number of SKUs – 25,000

Large number of SKUs for Spares – 50,000

Scattered Supplier base – 500

Dealer spread across smaller cities & remote locations - 300

Aggregates movements between Plants - 15

Automotive Sector

6

Haridwar

Kandivli Chakan

Nasik

Zaheerabad

RSO

Distribution Network

Plant 300+ dealerships

19 Regional Stock yards

5 veh assembly Plants

1 Engine Plant

Direct billing to Dealers

RSO billing to Dealers

Primary/secondary

Road and Train modes

Automotive Sector

Inter Unit Transfers of aggregates

Automotive Sector

Business Challenges

– Competition

– New launches, Schemes

– Seasonality

– Interest rates, GDP, Fuel prices

– Shorter Product Life Cycle

Automotive Sector

How Complexities are managed?

Increased focus on Supply Chain planning.

Driving customer centricity.

Collaboration with Supply Chain Partners.

Use IT as a decision making tool.

Automotive Sector

Demand and Supply Planning

Planning process :

– Strategic volume planning : 5 years– Long term Planning : 3 years – Mid term planning : 6 months on rolling basis– Short tem planning : Monthly, Weekly & Daily

Review:

– Demand forecast– Manufacturing capacity/Strategy (multi plant production)– Supplier capacity– Logistics preparedness

Automotive Sector

Aligning people, processes & business strategy through S & OP

• Represented by Head of Sales, Mfg, Finance, Sourcing and DCM.

• Planning horizon of 6 months on rolling basis.

• Demand and Supply scenario planning.

• Growth, Market share and Profitability.

• Constraints identification and action plan.

• Weekly review to capture the market dynamics and supply.

Automotive Sector

S & OP Framework

Month Plan

•Planning Cycle•Alignment of weekly and Monthly plan (In terms of Volume & Mix)

Process•Integration of sales forecast to supplier schedules•Variant Rationalization•Part Standardization

Manufacturing Flexibility

•Assessment of capacity constraints•Mfg Strategy in terms of Plant-Product combination •Stocking of peculiar parts

Supplier Capacity

•Review capacity for all critical parts•Schedule to high impact suppliers•Measurement of supplier schedule adherence•Stocking of strategic parts

Planning Horizon

•Rolling Plans –Review•Annual•Half-yearly•Quarterly

IT Enabled

Automotive Sector

IT integration of End To End process

Customer

Dealer

Sales Planning

Daily Manufacturing Planning

Supplier Scheduling Receipts & Production

Communication of vehicle availability to dealers for

fund planning

Billing & Dispatchwith transport details

eDCM(Order Placement)

eDCM

SRM eDCM

eDCM

eDCM / TMS

SAP / IPMS SRM(ASN )

DMS

Automotive Sector

eDCM Philosophy

Whenever a Customer walks in to any dealership, the Dealer must be in a

position to offer him / her the vehicle of their choice

or Give them the Date of delivery and

honor the same.

Automotive Sector

eDCM Process FlowManufacturing

and Supply Constraints

Vehicle not available in

plant

Supplier Schedules based on

DBM

Customer Order entry

Aggregate Supply

Planning

Commitment dates

Vehicle available in

plant

Body In Supply Planning

JIT Supply Planning

Commitment date

MTA

MTO

e-DCM Portal

Daily Planning using SAPSCM

Day wise Production planning and Scheduling

Dealers

Plant Warehouse

SRM ECC & SCM DMS

SUPPLIERS

CUSTOMERS

SAP

TMS

Integration of IT systems

Automotive Sector

Undesirable Effects in Supply Chain

Committed Dates are often not met Production plan changes frequently

Face shortages of RM Cross shipment of FG

SKUs produced do not match exactly with the market demand

What is the major cause for their existence?

The cause is:UNCERTAINTY….

In Demand, Vendor Performance, Processes

The cause is:THE MODE OF MANAGING

OPERATIONS

1st Approach 2nd Approach

Comprehensive efforts to reduce uncertainty everywhereSignificant results cannot be expected

Implications

Paradigm Shift or change the mode of managing operationsA real jump in performance in a very short time

Implications

Automotive Sector

Supply Chain Strategy implementation

1.Monthly Planning cycle for Resource planning • Subgroup level forecast. • Planning horizon 6 months.

2. Daily Production planning cycle to reduce Order planning time,

3. Drum Buffer Rope: Synchronisation of Aggregate planning with Body planning

4. Production Strategy – Make to Availability (MTA) & Make to Order (MTO)Demand < Supply ----MTADemand > Supply ----MTO

5. Procurement and Inventory Control Strategy (PULL based)• Dynamic Buffer Management• IT enabled visibility of entire pipeline stock. • Procurement as per the buffer penetration

Automotive Sector

Dynamic Buffer Management-Single Priority mechanism

OK

Expedite

Should be in pipeline (WIP)

Color Code Inference

1/3rd

1/3rd

1/3rd

Target Level = Stock in transit + plant stock +VMI

Excess

Excess

Emergency Level = 1/3rd Target size

Objective:

85% of the RM/Bought-out parts should be in Green/Yellow band in DBM.

Automotive Sector

Customer connect

1st of its kind in Automotive Industry…

Automotive Sector

MoSTCustomer will receive

SMS

E-mails on following events

1. Order creation.2. Confirmation of delivery date.3. Vehicle billed from the plant.4. vehicle reached to dealership.5. Final delivery.

Automotive Sector

Major KPIs Supply Chain Response time : (Daily Planning Cycle)

– Order to Receipt time in days.

Supply Chain Reliability :

– % Ready for Despatch against commitment.– % Billing against commitment.– % Delivery against commitment.

Supply Chain Flexibility : (MTO and MTA production Strategy)

– % Production growth without significant increase in inventory turns & Premium freight.

Automotive Sector

Supply Chain Cost :– Inventory.– Logistics and packaging cost.

Supply Chain Predictability : (Capacity Mapping Tool)

– Firming the Production plan. – Monitor and review Critical parts availability.– Plan Vs Actual production at Sub group level.

Supply Chain Visibility :

– Transit details visibility along with exceptions.– DBM.

Major KPIs

Automotive Sector

Results achievedIn last three years,1. Supported YoY growth of 27% in Volume.

2. Offered flexibility to Mfg for Plant-Product combination.

3. Receipt against committed date has improved by 30%.

4. Order to Receipt time improved by 25%.

5. Manufacturing Schedule Adherence against customer committed date has reached over 95% from 80%.

6. Achieved net savings of 21% of logistics spend through innovations in transportation and packaging.

Automotive Sector

Company AwardsYear Awards

Aug-08‘SAP – ACE Award’ Award given for implementation of eDCM, which was considered as “Best In Class Extended Supply Chain Application”. This award was given across all SAP users in India.

Sept-09Sept-10Sept-12

‘Automotive Supply Chain Excellence’M & M has been declared winners in this category, in the Express Logistics & Supply Chain Conclave, for 3 out of the last 4 years.

Jan-13‘Manufacturing Supply Chain Operational Excellence – Automobiles’M & M has been declared winner in this category, in the 2nd Asia Manufacturing Supply Chain Summit.

Jan-13‘End to End Customer Solution Excellence’M&M has been declared winner in this category , in 2nd Asia Manufacturing Supply Chain Summit the competition includes Manufacturing Companies across Industries

Automotive Sector

Awards - Individual 15

Year Awards

Mar-12 Supply Chain Manager of the YearGiven by Hamburg Media during Logistics Week Award.

Sept-12 Supply Chain Visionary of the Year AwardGiven in the 6th Express, Logistics & Supply Chain Awards.

Automotive Sector

Recognition

Issue of Jan-March 2010 Issue of Sept 2012

Automotive Sector

THANK

YOU