presentation on Kpmg

Concept note - Eastern

Polycab

Setting up the End to End Supply Chain20th Dec, 20141 2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.1ContentsChallenges in Supply Chain2Overview of PolycabCable and Wire BusinessProcesses at Polycab

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.ContentsChallenges in Supply Chain3Overview of PolycabCable and Wire BusinessProcesses at Polycab

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Overview of Polycab

40 year old young organization

Created by four enterprising brothers from the Jaisinghani family (Girdhari Jaisinghani, Inder T. Jaisinghani, Ramesh T. Jaisinghani and Ajay T. Jaisinghani)

Began their journey from a small 200 sq. ft. retail electrical store and then created an empire through forward and backward integration

1968: Commenced sales of Cables in Mumbai

1972: Set up a 1000 sq. ft. factory in Sewree in Mumbai

1984: Set up a larger plant at Halol, Gujarat

1993: Started PVC Compound Manufacturing unit in Daman

2013: With a sales turnover of Rs. 4300 crore and a Market share of 22%, Polycab is Indias No. 1 Cables & Wires Manufacturer

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Pan India Presence

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Growth Trend

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.ContentsChallenges in Supply Chain7Overview of PolycabCable and Wire BusinessProcesses at Polycab

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Market Breakup

Indian Cable & Wire industry is estimated to be around Rs. 22,000 Crores

Total number of manufacturers is estimated to be 1500

65% of the market is in the organized sector

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Overview of Cables and Wires

Wires & Cables consist of a metallic conductor over which a polymeric coating is given to protect the same

All electric cables consist of three essential points:

The conductor for transmitting electrical power

The insulation, an electrical insulating medium, needed to insulate the conductor from direct contact with the earth or other objects

External protection against mechanical damage, chemical or fire to the cable

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Classification of Cables

Extra High Voltage Cable of 110 KV and above rating for Power Transmission

High Voltage Cable of 66 KV rating for Power Transmission

Medium Voltage Cable of 11 KV to 33 KV rating for Power distributions

Low voltage power cable of 650 V/1100 V for Power distribution

House wiring cables

Flexible wires and cables

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Cables and Wires

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Overview of Cable and Wire Market Segment

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Cable and Wire Ecosystem

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Cable and Wire Industry Value Chain

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Cable and Wire Industry Drivers

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Strategic Imperatives for Cable and Wire Industry

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Global Business Trends

Consolidation in Cable and Wire industry continues, with growing number of global companies

New competitive pressure in Cable and Wire industries comes from low cost entrants through European Union eastward expansion, China and India

Innovative products and customer specific products seen as opportunity

Growth of infrastructure development in developing countries is pushing demand for cable and wire products

Saturation of both capacity and demand in USA and Europe

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.ContentsChallenges in Supply Chain18Overview of PolycabCable and Wire BusinessProcesses at Polycab

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Manufacturing

Manufacturing of wires & cables consist of number of procedure stages which are:

1. Heavy Wire Drawing

2. Medium Wire Drawing

3. Fine Wire Drawing

4. Bunching

5. Twisting

6. Insulation coating

7. Stranding

8. Jacket Coating

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Manufacturing

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Manufacturing

Polycab has State-of-the-art plants spread across 250 acres comprising of 18 manufacturing units at Daman & Halol. The key highlights are:Manufactures more than 15,000 km of cables and 125,000 km of wires every month

Annual consumption of 50000 MT of Copper and 60000 MT of Aluminum annually

State of the Art Manufacturing Equipments including 5 CCV Lines

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Polycab Group Companies

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Make to Stock and Make to Order

Manufacturing lead time of cables is approximately 4 weeks while that of wire is 2 weeks

The nature of the business is such that 85% of the business is Make to Stock (Fast Moving Items) while the balance is Make to Order

There are no set rules to classify an item as Make to Stock or Make to Order. A Make to Stock item may be termed as Make to Order when the customer provides some specification

Wires and Cables are typically wound on a drum and sold to the customer inclusive of drum. For example, a 5 km cable may be sold as 1 drum x 2 km, 2 drums x 1 km, 2 drums x 500 m. This is known as drum schedule

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Demand Flow Process

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Business Process Framework for Make to Stock Items

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Business Process Framework for Make to Order Items

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Drum Selection

Drum Type- Wooden, MS

Cable Outer Diameter

Cable Length

Cable Weight

Drum Carrying capacity

Bending radius

Drum Carrying Capacity > Cable Weight

Max Allowed Length = (((f^2- b^2)* 10.5)* t)/ (OD^2)> Drum Length

Where f=flange, b=barrel, t= traverse, OD = outer Diameter

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Procurement

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Pricing

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Inventory Management

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.ContentsChallenges in Supply Chain31Overview of PolycabCable and Wire BusinessProcesses at Polycab

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Challenges

Length based planning (Visibility of each length along with drum)

Non-Standard Length (Due to production errors, non-standard lengths are produced. These need to be marked as Non-Standard Length and inventory visibility should be available so that they can be sold to the customer)

How much Copper and Aluminium should be stored based on the fluctuating London Metal Exchange (LME) prices?

Traceability from Sales Order to Work Order to Raw Material

Stock allocation and drum cutting (If there is an order of 300m and there is a drum available for 500m, whether it should be cut and the balance 200m will be wasted as customer will not order such rest lengths)

How much of forward and backward integration is feasible? (Fans, lights, switches)

The lead time of wires is quite high and hence how much stock needs to be kept for supply chain resilience

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.Challenges

Identification of Fast Moving Items

Safety Stock Calculation

Forecast

Stocking and Pricing Strategy

Visibility of Customer Order in shop floor (Stage of Work Order)

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

For further information on any aspect of this document please contact:Sandeep ChatterjeeAssociate Director KPMG Advisory Services Private LimitedT: +91 90524 41916E: [email protected]

2013 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.34