Client Speak

Sadashiv S Pandit

Q. How complex is your new product environment?

A. Fleetguard Filters is a tier 1 component supplier to key OEMs in the country. The company has a large design, development and testing set-up for engineering filtration solutions and products. We also have to depend on relatively unorganized tier 2 and 3 suppliers to support us in new product design efforts. Our products have to fulfill several conflicting requirements � they should be able to meet new filtration targets, keep vibration low, adhere to pollution norms, and be compact. Before overhauling began, at any point of time, we would have about 150 projects being executed simultaneously by independent teams. The environment was chaotic; resources were stressed. Going home late and working on holidays was the norm. Things changed dramatically after implementation of the flow principles of TOC (Theory of Constraints).

Q. What were the challenges in implementing the new paradigms?

A. The most challenging aspect was reducing WIP. Our consulting partners, Vector Consulting Group, insisted on freezing nearly 75% of running work in various departments to reduce WIP. It was a frightening proposition considering we were already running late. Vector showed us that not everyone works on all tasks. There is always a waiting list and an active list. The real problem is that in an environment of frequent priority changes, these lists are different for different resource groups, and they change daily causing overall desynchronization. Through simulations they showed us that the step of freezing, and establishing common priority, was less risky as compared to the status quo. The daily management rule was also most difficult to implement as most managers rarely understood the difference between delegation and abdication. The comfortable practice of issuing a task deadline and checking with subordinates only close to the deadline had to go; we had to bring in the culture of daily management. We also had difficulty enforcing the rules of strict closure criteria gates, there was always a temptation of diluting them. However, once we stood by the rules, and people saw the benefits, these rules became part of the organization’s DNA.

Q. What are the results?

A. We started the implementation with Vector Consulting Group about two years back. Apart from the great advancement in numbers, what I like best is the decline in stress levels of people, and improvement in overall harmony.

Dara Byramjee

What actions did you take to improve plant output?

We provide physical security solutions (safes, lockers, strong room doors) to banks and to other institutions that need them. Each product requires over 50 components; a few of these are made in-house, the rest are sourced from suppliers. In the past, we battled severe desynchronization of components which meant significant loss of capacity. When we solved the problem of desynchronization, we also saw improvement in output.

In 2010, we started implementation of Theory of Constraints processes by partnering with Vector Consulting Group. After deploying the flow concepts of TOC, synchronization of components at assembly improved dramatically. Our manufacturing units began achieving record output almost every day of the month.

Moreover, firefighting reduced significantly. This released the bandwidth of management for use on improving manufacturing line set-ups and for working on capacity release projects. These efforts further increased output.

What were the major paradigm shifts for you and your managers?

We had always assumed that higher WIP leads to higher output. We realized that this was not correct. One of the biggest paradigm changes we implemented is the system of pull - inventory is pulled into the system based on the daily gap in a pre-defined WIP level(which is now half of what it used to be before implementation). Lower WIP meant focus on fewer orders, and therefore, better flow.

What challenges did you face during implementation? How did you align the various stakeholders to the new change?

The biggest challenge was changing the mindset of managers. They had to be convinced of the merits of the new way of working (daily planning instead of monthly planning; letting go of local efficiency targets and aligning manufacturing to fulfil priority orders). When our people saw dramatic improvements in inventory and output in a very short time, their initial skepticism made way for infectious enthusiasm.

What cultural change was required to implement the new paradigms?

Cultural change was an effect of the implementation. For example, desynchronization of components required for assembly and massive month-end skew were sources of stress and frequent conflicts between departments. When flow became uniform, and output increased, teamwork improved significantly.

"With three times more output from the same capacity and reduced working capital requirement, we were able to improve our ROCE by three times."

YVS Vijay Kumar

Q. What are the key challenges of managing operations in your environment, considering that you have aggressive growth plans?

A. We are a multi-brand car service company. We are sandwiched between brand companies offering high quality service at high prices and unorganized local garages offering �not-so-great� quality at dirt-cheap prices. Our offer of high quality at reasonable prices is attractive to people looking to move away from unorganized garages. The challenge is beating single brand service centers in service delivery. Parts management comes in the way � the number of parts that a brand service center has to hold is much lower than what we have to hold. Expanding rapidly without applying one’s mind to the inventory conundrum can spell doom for a multi-brand service company.

Q. You have started implementation of TOC (Theory of Constraints), processes for parts management and service operations. What hasbeen the thinking behind this decision?

A. Vector Consulting Group, our partner on this transformational journey showed us the merit of the TOC approach of exploiting sales opportunities with existing infrastructure and improving ROI before pushing for accelerated growth. We are focused on improving services and inventory management, cluster by cluster.

Q. What key changes have you brought in?

A. Since TOC implementation requires hub and spoke model, as a first step we grouped the company owned workshops across India into clusters. We kicked off the implementation along with Vector Consulting Group in the Chennai cluster and put in processes of TOC replenishment for spare parts while creating a hub and spoke model of inventory locations allowing for maximum aggregation benefits at the hub. TOC operations processes were implemented to cut down service lead times. Our turn around times have dropped by more than 50%, our on-time performance is in the 90s. We can now guarantee completion of running repair jobs in four hours, we are willing to pay a penalty if we fail to do so. The parts availability is in the high 90s. More importantly, we have made the environment stress-free for our operations team. Sales have gone up by more than 20% by value in the Chennai cluster (for the restricted models) where we are doing the first phase of implementation. We have also seen the ticket size going up because of the decoupling of inspection and actual repair work.

Q. What next?

A. We will roll this out in all clusters and then expand through franchisees whom we are promising an ROI of minimum 30%.

Niranjan Kirloskar

Q. The auto industry is reeling under a second slowdown in five years. How has your company been affected and what steps are you taking to withstand the impact?

A. Of course in both the August 2008 slowdown and the current one, the sales to our OEM customers have gone down. However, our Aftermarket distribution business has been a significant bulwark for our company. We have increased our sales in the aftermarket segment over 9 times in the past 6 years. Our market share has grown consistently because of our strength of the distribution business – even in times of slowdown. We are now market leaders in some of the key segments in Heavy Duty Filtration.

Q. You are one of the very few companies in India, which has implemented a pure pull system right from manufacturing to distribution and now unto the point of retail. Can you share your experience of making sucha dramatic transition?

A. We are on a exciting journey for about 6 years to make the transition from forecast based push to a pull system. The paradigm changes were significant in production to move away from batch production to variety based production, which was assumed to lead to inefficiencies but we haveactually generated excess capacity by not producing what is not immediately required. The changes in sales were even more fundamental – we had to move away from a system where we used to push material to distributors at month end, to now a system where goods are invoiced daily as per consumption. This called for changes in the way we measured sales. Sales teams do not have a primary sales target – they have targets for generating real demand in the market and increasing range and reach of our products.

Q. What happened to all your trade schemes, which usually support a push approach?

A. We overhauled all our trade schemes, which were based on meeting short-term targets. Such schemes created an artificial wave of peaks and troughs because of demand pre- ponement and did not help anyone in the chain. We have now stopped all such schemes and shifted the budget to long term loyalty programs with our key customers and influencers – the mechanics in our case.

Q. But how could you manage with your competition having aggressive schemes for the channel partners? Did you not lose out on sales?

A. We actually have the best scheme for our channel partners. Due to the low inventory, our distributors earn an ROI of close to 100% in my business. They have zero stock outs with only 15 days of inventory at the most for each product. In return they work extensively in the market for increasing range and reach. They cover the nook and corner of their territory to cater to every retailer, while continuously expanding the range – that is the win for me. At the retail point, almost every retailer appreciates our system of small stock and frequent supply. They are seeing how this is impacting their business and most of them are realizing that this way of operations.

Adesh Gupta

Q. It is quite an amazing sales growth story of Liberty. Your company has transformed the franchisee model.

A. The earlier paradigm was to produce in big batches. To get rid of this stock fast we needed big orders. Hence, we either opened large stores or pursued large franchisees. The focus on primary sales through large orders resulted in huge inventory of 6-9 months at the franchisees. Consequently, the ROI for the franchisee was not attractive. It became difficult to attract good franchisees, which hampered our growth. Working with Vector Consulting Group we understood that, small and frequent supplies ensured low inventories, of about 2 months, at the franchisee. This also brought in significantly higher ROI.

Q. It is quite a shift for a fashion products company to shift from forecasting for a season to weekly replenishment of small quantities?

A. Yes! As it is not possible to replenish the shops weekly from the production line, we had to build a new Central Warehouse (CWH). With Vector’s help we changed the operations to ensure over 95% availability at the CWH for more than 5000 SKUs. The reduction of production lead times from 60 to 16 days ensured total inventory reduced by 50%. The next challenge was to accept the increase in logistics costs due to higher delivery frequency from the CWH. The substantial sales increase in the pilot helped us accept marginally higher logistics costs.

Q. Have you thought of leveraging your success further? A. We have added 150 new stores in the last 18 months. Our capability of small and frequent supplies is a key enabler in expanding through many small franchisees and company owned stores in two and three tier cities.

P S Tandon

Q. BEL has embarked on a journey of implementing pull systems of management consulting firm in the space of Theory of Constraints in supply chain, is proud to announce that their client, secondary and primary sales points. What’s the motivation?

A. Our primary sales had been growing at 20% a year. Most of the growth was coming from few products. Only a few SKUs had significant penetration among a large base of retailers. We embarked on the journey of implementing TOC processes along with our consulting partners, Vector Consulting Group, to realize the full potential of all categories.

Q. What were the results?

A. After enabling the supply chain, we are in the process of rolling out this initiative pan-India. Currently, the initiative is in first phase of roll out in selected branches. The reach in these regions has doubled, retailers added 40% new SKUs. The secondary sales have gone up by more than 50%.

Q. What have been the implementation challenges?

A. The implementation is a paradigm shift not only for us but also for distributors. Many age-old industry beliefs had to be challenged. For example, we had to move away from pushing for primary sales targets. At the same time, steps were taken to create price hygiene to avoid territorial conflict and to protect the interests of retailers. The distributor had to be convinced to deploy resources to improve range and reach. Many distributors �cherry-picked� outlets based on sales volume and payment realization comfort, all other outlets were termed �bad counters�. We had to break this myth of �bad counter� by ensuring retailers capital is not blocked and at the same time see that each retailer has a single source of supply. The process of supplying small lots frequently helped break the myth. We also changed our volume-based schemes. The results are exciting.

Peter Newbould

Q. What were the key challenges of managing supply chain before you embarked on journey of implementing TOC processes?

A. Landmark Book Stores: Books and music are very unique in terms of demand pattern. A new launch can be a massive hit, then the demand could drop dramatically, and stay stable at very low levels, following an ‘L’ curve. Publishers launch 2,000 new titles every year; it is difficult to decide which ones and how much to buy. At the same time, we are up against the phenomenon of people buying books and CDs from e-portals. The combined effect of the two was huge and growing non-moving inventory.

Q. What are the key paradigm changes that were implemented while implementing the TOC processes?

A. Landmark Book Stores: With help from Vector Consulting Group, besides the system of pull replenishment, we implemented a process of range control and dynamic churning of categories. We changed from being a destination store for books and music to becoming a family entertainment store by focusing on toys and gaming. These changes gave the business a new direction.

Q. What were the implementation challenges?

A. Landmark Book Stores: Setting up a DC was a big challenge. Later, the continuous churning of large number of SKUs increased the load on merchandisers and buyers responsible for maintaining availability with lower inventory. The warehouse also had to be geared up to handle many orders nearly every day from each store as against handling weekly orders from every store. The pick-and-pack processes at the warehouse had to be geared up for high volumes.

Himanshu Chakrawati

Q. What were the key challenges of managing supply chain before you embarked on journey of implementing TOC processes?

A. The Mobile Store: Brands are continuously introducing new models. The future sales of models is unpredictable. A model could turn out to be a slow-seller or a dead item, locking both capital and shelf space. As we had limited capital, we had the challenge of deciding on future buys. At the same time, many stores were not making profits; expanding by opening more stores was risky.

Q. What are the key paradigm changes that were implemented while implementing the TOC processes?

A. The Mobile Store: The key paradigm change was to hold the stocks for immediate sales at the stores and move the buffer stocks upstream (to the DCs). We also chose to transfer inventory across stores and across DCs every Tuesday and Wednesday respectively to ensure that excess stocks moved away from low demand locations to high demand spots. This ensures lean inventory at all times; it also ensures that slow moving stocks are moved between locations rather than ordered afresh.

Q. What were the implementation challenges?

A. The Mobile Store: The biggest challenge was getting the team used to the new way of functioning. The team had to be convinced to hold buffer stocks at the DCs rather than ‘push’ them to the stores.

Anupam Bansal

Q. What were the key challenges of managing supply chain before you embarked on journey of implementing TOC processes?

A. Liberty Retail Revolutions: We used to follow a ‘twice a year’ booking system, as directed by our plants. The retail chain had to forecast and place confirmed orders for six months at a time. Obviously, the errors were high, resulting in stock outs, surpluses and markdowns. We had stock turns of 1.5 to 2 for our retail chain. Discounting was at fourteen percent.

Q. What are the key paradigm changes that were implemented while implementing the TOC processes?

A. Liberty Retail Revolutions: We designed the supply chain to deal separately with continuous selling items and new introductions. For the continuous selling items, we moved away from six month confirmed booking system to pull based replenishment from a central warehouse. We also decided to sell and dispatch shoes in cut sizes and not in full size rolls. Shoes were dispatched based on consumption from stores. New products were introduced more frequently and in smaller lots. We are controlling range at nearly 60 percent of that held previously.

Q. What were the implementation challenges?

A. Liberty Retail Revolutions: The challenge was in shifting from booking orders to a replenishment system, and in frequent new product introduction. Buyers had to be dissuaded from ordering in large quantities, and convinced to let the system manage the replenishment on its own. The other one was to change the production mindset from expecting large ‘confirmed’ orders to delivering small lots as per consumption. Continuous handholding by Vector helped.

Anant Bajaj

Q. What are the challenges of managing projects in your environment?

A. Erecting and commissioning Transmission Tower (TL) projects is one of the most complex project environments. It involves erecting towers across vastgeographical expanses, many times on private land; so legal hurdles can derail the project. In addition, there are conflicts between how the plant would like to supply and how the site wants to erect the towers. Customers (Government bodies or PSUs) play a major role in execution as they supply part of the material and every major step in execution like creation of BOQs, material dispatch etc., requires customer inspection and approval.

Q. What key paradigm changes were implemented?

A. Earlier, we managed operations to meet monthly and quarterly turnover targets and we realized that this led to poor subordination to site requirements. We switched over to working for overall project flow and turnover became resultant effect. To give you can example, previously our priority for supplying material was large batches of ‘A’ type tower which are easy to make and can fetch turnover in the short run, now we focus on supplying assorted towers to assist fast stringing at site. This called for dramatic changes in manufacturing, procurement and management thinking.

Q. Was the implementation journey difficult?

A. We began implementation in April 2012 with Vector Consulting Group as our consulting and implementation partner. We had a huge number of open projects with severe delays and overruns. We had a challenge of closing all old projects and simultaneously putting proper processes for new projects.

Closure of chronic old projects called for extra expenses and write offs. The Projects division almost wiped out the profits earned by other divisions of the company. We had to bite the bullet. We closed a record number of sites in one single year. At the same time we put in flow processes for new projects. Every new project is well ahead of schedule. Power Grid has recognized us, as the best in project execution, in category of TL tower projects unto 765KV.

Q. When can one expect operational results to translate into financial results?

A. We have focused on flushing out old projects in the last two years, so profits have taken a beating. The portfolio is getting cleaner with new projects – this should translate into better profits next year. On top line we are growing by more than 75 percent, but with the new paradigm of synchronized supply to sites. The working capital has been reduced by more than 50 percent. Next year this will improve further.

Q. How did you handle external conditions?

A. We realized that when your own house is in order, it is much easier to control external variables. For example speed of execution reduces chances of legal issues as compared to a situation when sites remains open for too long. We are also able to expedite with our customers as the agency-causing delays becomes very obvious.

Shreyaskar Chaudhary

What are the major challenges in your business

Majority of our customers are brands and retailers based in Europe and US. The greatest challenge is reliability in supply. This has now been compounded with the need for quick response and increased flexibility in product offerings. Unfortunately, Indian apparel industry has had a legacy of poor reliability.

Why was ensuring “reliability”, “flexibility” and “speed to market” a tough challenge operationally?

We market intermediary products in addition to garments, therefore available capacity of the plant was shared between catering to needs of market (yarn/fabric customers) and internal (Garment) requirements. This and the inability to synchronize various items needed for completing orders was creating disruption (erratic cycles of starvation and overloading) in flow of yarn and fabric required for garment orders. So in spite of high WIP, expensive finite scheduling software and frequent expediting meetings there was a high and highly variable lead-time and orders could not be dispatched in time.

Like others in this business we tried to solve the problem by under loading the plant but this squeezed profitability.

What motivated you to embark on the TOC journey?

As I mentioned, we are in a very time sensitive and competitive market. And we found that our due date delivery performance was inconsistent. Airfreight & penalties, lack of affirmative action to grow the business due to inconsistent supply was causing us considerable losses. Additionally, customers have been consolidating their supply chains and had been threatening to pull out unless we delivered. To survive and succeed in this very tough business, we knew we had to improve operations in a very short time! With the help of TOC we aimed to enhance performance and thereby profitability by building a competitive edge based on reliability with considerably lower lead times, whilst possibly getting more output from same capacity.

What were the paradigm changes implemented?

The most important change is that now our entire supply chain is realigned to ensure reliability of customer orders. Output improvement in the plant became the welcome side effect!

For this we completely revamped our operations. First, the focus of the company itself was changed. Amongst the three lines of businesses we have, Garment manufacturing and supply clearly became the top priority. Fabric sales was completely stopped and yarn was made to subordinate to the garmenting requirements with some capacity dedication for strategic yarn customers.

Second WIP is now capped at a reduced level (compared to before implementation) to ensure that there are fewer orders on the shop floor thus forcing the departments to complete work on the orders in hand. This enables planning to be conservative and spare some capacity buffer, while allowing execution to aggressively use any unused capacity and maximize output.

Third, there is a clear and visual priority system in place based on relative closeness to due date which dictates expediting on the shop floor and at vendors.

Our core issues arose from the fact that the various departments were blind to how local decisions were affecting the fate of orders. So, these three steps, which define the boundaries within which local considerations (for productivity) can prevail without delaying orders, now ensures that operations are always working on correct orders.

What has been your experience after implementing TOC? Now customers receive their orders on time and in full assortment with a considerably reduced lead-time. This is motivating them to continuously increase our share of business. Key customers who require orders in even considerably lower lead-time are offered deliveries in Half the normal Lead time. The existing system can deliver this without hampering other normal lead-time orders.

Further, the shop floor exigencies used to consume a major share of senior management time. Now the system is largely working on “Auto Pilot” with very little intervention needed from senior management. This has released our bandwidth significantly and we are now able to focus on the future. We have now been able to invest and strengthen and reap the benefits of an enhanced Product Design & Development Studio with design support centre in Europe. Considering India’s edge as a low cost supplier is eroding, by building agility into our operations, we aim to become a company of choice for the global fashion garments in the export market.