Case Study on Revamping the Supply Chain The Ashok Leyland Way : Case Study on Revamping the Supply Chain The Ashok Leyland Way Presented By :-
Ram Singh(44) History And Current Status : History And Current Status Ashok Leyland is a commercial vehicle manufacturing
company based in Chennai, India .
Founded in 1948, the company is one of India's leading manufacturers of commercial vehicles, such as trucks and buses, as well as emergency and military vehicles.
Operating six plants, Ashok Leyland also makes spare parts and engines for industrial and marine applications.
It sells about 60,000 vehicles and about 7,000 engines annually.
It is the second largest commercial vehicle company in India in the medium and heavy commercial vehicle segment with a market share of 28% (2007-08). Current Status : Current Status Ashok Leyland is the second technology leader in the
commercial vehicles sector of India behind Tata Motors .
In 1997, the company launched the country’s first CNG
In 2002, developed the first Hybrid Electric Vehicle.
The annual turnover of the company was USD 1.4 billion in 2008-09.
It sold 54,431 medium and heavy vehicles in 2008-09.
It is also one of the largest private sector employers in India - with about 12,000 employees working in 6 factories and offices spread over the length and breadth of India.
The company has increased its rated capacity to 105,000 vehicles per annum. Continued..... : Continued..... In 2007, the company announced a joint venture with Japanese auto giant Nissan (Renault Nissan Group) which will share a common manufacturing facility in Chennai, India. The shareholding structures of the three joint venture companies are:-
Ashok Leyland Nissan Vehicles Pvt. Ltd., the vehicle manufacturing company will be owned 51% by Ashok Leyland and 49% by Nissan
Nissan Ashok Leyland Powertrain Pvt. Ltd., the powertrain manufacturing company will be owned 51% by Nissan and 49% by Ashok Leyland
Nissan Ashok Leyland Technologies Pvt. Ltd., the technology development company will be owned 50:50 by the two partners Question 1 : Question 1 Ashok Leyland with an aim to reduce cost improved the in-bound supply chain through several important strategic revamping measures. Explain. Slide 6: To reduce costs and to improve the in-bound supply chain Ashok Leyland take following measures:-
In 1999,AL launched Project OSCARS( Optimizing Supply Chain and Rationalizing Sourcing). The basic principal of OSCARS was:
Single Window System
The Strategic Sourcing and Corporate Quality Engineering(CQE) teams jointly formed the single window system bringing with them specialized commercial and technical knowledge.
For the suppliers this had created a convenient single-point contact with AL, for sharing drawings, for negotiating prices and long –term business volumes and consultancy on quality to management issues. Supplier Tiering : Supplier Tiering AL pruned it’s panel of Direct suppliers through tiering and system buying. Under this AL dealt directly with tier one suppliers who, in turn, were supported by tier two and tier three suppliers.
The benefits of system buying could be illustrated with the example of the tools kits that accompanied every vehicle .
Tear down studies and value engineering analyzed the constitution and composition of a part to prune cost through substitution, reduction or elimination of materials/ sub-assemblies without affecting quality and performance. . Just In time(JET) : Just In time(JET) AL focused on JIT approach for high value/high volume items and low cost logistics for low value high volume items.
Project OSCARS brought about a few fundamental changes. The push system which means let us make all we can just in case we need . This system given a way to pull system which means “make what the customer needs, when he needs it”
Each stage produced only as much as the next stage needed. This resulted in savings of Rs 8.50 crore a year and a lean supply chain. Question 2 : Question 2 “ The revamp of the out-bound supply chain had the twin objectives of customers satisfaction and reducing finished goods inventories”. Discuss how Ashok Leyland re-engineered it’s out-bound supply chain Slide 10: A customer survey and a study of benchmarks had come out with three major parameters for service level targets:
Order to delivery time
Reliability of deliveries and
Availability of order status information.
The customers could expect delivery in 5 days from the date of payment for regular models for multi-axled vehicles the promised period was two -four weeks. The second promise was that the age of the vehicle when delivered would be maximum of 90 days. Tight pipeline inventory norms were set for different models and markets and were met through a new three tier distribution network. Slide 11: In the new structure, plant sales yards acted as national pools to hold rare models and excess of regional requirements. The next tier was made up of the five regional stock pools, which ensured just-in-time supplies to all regional sales offices.
To understand customer needs and assimilate the knowledge , AL adopted ‘4P’ Programme.
Probe, Prioritize, Plan and Position.
This worked in tandem with manufacturing as part of cross-functional team(CFT). The CFTs worked towards continuous improvement in the products and marketing.
AL also built a ‘marketing information system’ (MIS) to monitor the trends and forecast demand from the input dealers and field executives. Question 3 : Question 3 Discuss in brief the quantitative benefits in regards to various measures of supply chain revamping exercises for AL Slide 13: In 1999-2000, AL recorded a net profit of Rs. 1.9 Crore on sales of Rs. 1,092.8 Crore, against a loss in the previous year 1998-1999. This have been possible due to operational efficiency resulting from strategic raw material sourcing, with fewer sources and higher volumes:
Which cuts costs.
Better control over process inputs by tightening supply chain and inventories.
Reduced operating expenses through cost saving on energy, tools, spare and adoption of preventive maintenance policies. Slide 14: In 1999-2000, AL sold 37,859 heavy commercial vehicles, 27% more than previous year.
AL’s total income in 1999-2000 was Rs.2611.41 Crore which was 25%higher than the previous year figure.
It’s operational profits in 1999-2000 was Rs.55 Crore. Slide 15: Thank You