CASE STUDY OF A CONSUMER
“What do we want?” The chairman exclaimed in excitement and asked his department heads in the conference hall as the meeting came to an end.
“To reach 1000 crore turnover in two years!” the heads of all the departments answered in unison and met the chairman’s eyes with confidence.
“And how do we want it?” The chairman enquired.
“Without a corresponding increase in inventory!” They all replied in unison again.
“Good! I’m counting on you guys, so don’t disappoint me,” The chairman took in a deep breath and decided to call it a day.
As everyone left the conference hall, Mr. Akshay, the head of SCM and distribution, was all charged up to meet the target that the chairman had set for them. The energetic and motivating speech given by the MD had created a sense of zeal to achieve the target in a short span of two years. “Yes I can do it!” Mr. Akshay assured himself and walked out of the hotel to catch a flight back to Mumbai, where his office was situated.
After boarding the flight and taking his seat, he kept thinking about the ways and means in which he could impress the Chairman and achieve the set target. As he kept wondering, his thoughts were interrupted by a co-passenger who was sitting on the seat beside him. This young gentleman was congratulating the person on the other line through his cell phone. It wasn’t long before the airhostess approached and advised him to switch it off as the flight was about to take off.
“Oh sure, I was just congratulating a client of mine,” Mr. Bakshi said and switched off his cell phone while Mr. Akshay just stared at him. He had overheard Mr. Bakshi talking about operational excellence and rising profitability a minute ago, which had invariably caught his attention.
Mr. Bakshi noticed the way Mr. Akshay had been staring at him and realised that he had been intrigued by him. “Hi, I’m Mr. Bakshi, I hope I wasn’t disturbing you there,” Mr. Bakshi hinted at his cell phone and chuckled.
“Oh not at all! It’s fine, by the way I’m Mr. Akshay, Head of SCM & Distribution at Neurologistics Ltd.” Mr. Akshay smiled and adjusted his coat. “And you are?” he added and looked at him curiously.
“I’m a business consultant from SynCore Group, we provide business solutions to our clients,” Mr. Bakshi replied and pulled out his business card. “Here, this is my card,” he added and handed over the card to Mr. Akshay. Mr. Akshay did the same and their conversation ended.
The next day…
Mr. Akshay sat in his cabin and called all his managers and colleagues for a meeting. He wanted to discuss about the target that the Chairman had set in the annual meeting that he had attended in Pune. “So gentlemen, tell me, are you all ready to meet this target?” he asked them and hoped to get a positive answer but to his dismay the employees were a bit sceptical. They hesitantly told him that it wasn’t possible for the company to achieve 1000 crore turnover in just two years. They explained to him about the current challenges that the company was facing.
“Sir, we aren’t receiving the right stock at the right time!” Mr. Kohli, his colleague stated and continued. “There is too much stock of slow moving items. Depot space is filled up by slow moving items. The fill rate for distributors are based on stock availability with depots rather than what the market needs.”
“Oh okay…And…” Mr. Akshay paused and wondered what more could be worse than this when suddenly Mr. Deepak, his other colleague spoke.
“Sir, distributors place a large bulk order to minimize the freight cost. Frequent shortages of fast moving goods are on the rise. There is a lack of visibility of stocks across the supply chain. Total inventory holding is 45 days including plants and depots. We have to manage working capital because of lesser credit from supplier and longer credit period to customers.” Mr. Deepak paused to take a breath while Mr. A’s expression began to change.
“Hmm…” Mr. A’s pulse increased as the tension began to grip him.
“The market is growing at 10% and our products are getting commoditised. And sir because of rising input costs, we are under pressure to protect the company’s margins without increasing the price of the finished products!” Mr. Kohli interrupted and said it animatedly while the others agreed and nodded their heads.
Suddenly Mr. Akshay saw the real picture and realised that this wasn’t going to be as easy as he had imagined it to be in the first place. After being notified about all the challenges that the company was facing, his excitement to achieve the 1000 crore target without increase working capital requirements fizzled out.
“You are right! At this rate it’s practically impossible to achieve a turnover of 1000 crore in just two years, without increasing the inventory! What am I supposed to do now?” He ran his fingers through his hair and went into deep thoughts when all of a sudden he remembered Mr. Bakshi in the flight.
“Wait, I think I know what to do,” he said to himself and searched for the business card that Mr. Bakshi had given him in the flight. After rummaging through his drawers, he noticed Mr. Bakshi’s business card shining in the corner just like a silver lining amidst the dark clouds.
Mr. Akshay tried to recollect the conversation that he had overhead in the flight. The client on the other end seemed very happy with the solutions that Mr. Bakshi’s firm had provided. “Perhaps I should give it a try and see if Mr. Bakshi can really help me out,” He thought and without wasting any more time, he dialled the number and had a detailed conversation with Mr. Bakshi. Indeed Mr. Bakshi was very delighted to help Mr. Akshay and assured him that he had a solution for his dilemma. He fixed an appointment with Mr. Akshay and promised to meet him at one of their plants.
The second day….
Mr. Akshay took Mr. Bakshi on a plant tour and showed him the manufacturing units and a map of the supply chain. “As you’re aware, we are part of a 2,000 crore group. Our turnover is 700 crore. We have 8,000 different products (models and colours variants),” Mr. Akshay gloated with pride as he showed him around. “We own 7 plants; we have 9 authorized contract manufacturers and 42 depots. Our reach is one of the best in the industry,” He added and continued walking while Mr. Bakshi calmly heard everything.
“And last but not the least we have the state of the art ERP system,” Mr. Akshay wrinkled his nose and smirked.
“Hmm…Amazing and which model do your managers follow for planning products & distribution?” Mr. Bakshi enquired with a straight face as he wasn’t too impressed with the facts and figures that Mr. Akshay was talking about.
“Obviously, the forecast base model is used at our company. But we have perfected the science over the past so many years. We have a team of 6 people in our Head Office which does the sales and stock analysis and is able to predict, with reasonable accuracy the forecast for the next 2 months,” Mr. Akshay shrugged his shoulders and replied as he felt that it was an irrelevant question to ask.
“You’re not serious, are you?” Mr. Bakshi raised an eyebrow in disbelief and laughed while Mr. Akshay looked at him in confusion. “Mr. Akshay, Did you know that your sales and profitability numbers could have increased much more, had you changed the planning model a long time ago,” He added and noticed the confused look on M. Akshay’s face.
“No…! Why? Is something wrong?” Mr Akshay got nervous and asked.
“Yes your planning and distribution model is wrong!” Mr. Bakshi replied “I bet your company has been facing a lot of challenges, thanks to the current model that you have been using,” He added.
“So what do you recommend then?” Mr. Akshay rubbed his hands and enquired curiously. “Is there a planning and distribution model that will help our company achieve its target in two years without increasing inventory?” Mr. Akshay crunched his brows and wondered if Mr. Bakshi could really come up with a brilliant idea.
“Leave that to me, Mr. Akshay. I know just the right model that your managers need at the moment,” Mr. Bakshi smiled and rested his hand on Mr. Akshay’s shoulder. “What your managers need is to follow a demand based supply chain management system,” He said and noticed the startled look on Mr. Akshay’s face.
“But do you think it would work?” Mr. Akshay enquired doubtfully; because in his mind he knew that business solutions were only momentarily and that very few actually bore results in the industry. But what he didn’t know was that he was entrusting this responsibility in the able hands of SynCore Consulting.
“Ha-ha don’t worry about that Mr. Akshay. I assure you that you will see immediate results and do let me tell you that we aren’t the type of consultants who just advise you on what to do and what not to do. Instead we help you implement it and monitor it personally till we get to see the results ourselves,” Mr. Bakshi explained and winked at him.
“Oh! Now that’s more assuring. So when would you and your team like to start?” Mr. Akshay felt excited and asked Mr. Bakshi
“The earlier, the better!” Mr. Bakshi stated and crossed his hands after gaining Mr. Akshay’s trust.
The company soon implemented the demand based supply chain management system with SynCore. This entailed the following functions:-
Distributions to depots were made from the plants itself.
Regional warehouses were created to aggregate demand from smaller depots.
Production planning was done to fill up stock at central warehouse.
The entire IT system was aligned.
MRP planning & distribution planning were done based on the new demand based replenishment system.
Inventory buffers were set up and managed dynamically at various locations.
Nearly 200 company personnel were trained on the new model of operations.
It wasn’t long before the outcome of this big change was visible to Mr. Akshay. It was unbelievable but the results were truly outstanding after SynCore implemented the demand based supply chain management system.
Mr. Akshay noticed a reduction in the overall inventory of finished goods by 11 crore in a short span of two and half months by reducing the excess inventory (a 20% reduction).
There was complete end to end supply chain inventory visibility through single window software.
There was improvement in the range availability of all fast moving items at all the depots.
Availability of all products at depots increased by 15% and at plants by 10% in 1 month!
Mr. Akshay also noticed how they had started releasing space at all the depots so as to stock the complete items at the depots without investing in additional space. Suddenly all plans for space expansion seemed unnecessary.
Logistic costs (as a percentage of sales) also reduced after they reduced the number of vehicles detained at the depots to zero.
The end to end supply chain visibility software played an enabling role in terms of decision making for production and dispatch.
Seeing the operational excellence that the company was experiencing, Mr. Akshay contacted the chairman and introduced him to Mr. Bakshi. Together with Syncore’s facilitation and the top management’s drive and commitment; the company achieved its target.
A year later….
“Brilliant! Mr. Bakshi, I can’t believe you helped us achieve this target in such a short time,” Mr. Akshay congratulated him at the golf course where they had planned to meet and unwind.
“Correction, Mr. Akshay! It’s we…Together we made it happen!” Mr. Bakshi swung his golf club and smiled at Mr. Akshay. “However, there is still a long journey ahead of us!” Mr. Akshay was curious what Mr. Bakshi had in store for the company!