Change Magazine | December 16, 2016
Godrej Interio :
Happy Customers, the TOC way
Interio’s B2B arm provides solutions for office furniture requirements and has been experiencing intense competition from the local mid-sized and small players, as well as imports. Recently, office furniture as a category has been getting commoditised, creating a strong need to differentiate itself.
The B2B team concluded after many deliberations that if the business could deliver orders On Time In Full (OTIF) always, then it could become a substantial differentiator that the competition might find challenging to emulate.
Customers buy new office furniture when a new office is being set up or the existing office is expanded or modernised. Whatever the case, these customers require desks, chairs, storage equipment, modular structures and Open Plan Office System (OPOS), all at once, so that the office becomes operational quickly.
This requirement of tight schedules becomes crucial for customers in urban areas where they begin paying high rents soon after taking possession of the premises. Also, office furniture usually is the last to be ordered as there exists the perception that it is readily available as it is factory-made. However, supplying a full solution at short notice becomes very demanding for full line suppliers like us. The sheer variety of the items demanded results in phased deliveries, creating an impression of never-ending supplies, Often the delays cause financial loss in the form of penalties.
Putting together the need to deliver on time with procurement practices and the conditions prevailing at the customers’ end made us realise the great deal of sense that the differentiator identified makes.
To bring about a change of this magnitude at the business system level is not only challenging in itself, but also calls for a universal solution that can be implemented across the lines of businesses and supplier partners of interio.
"A uniform single priority system across the production system was deployed to prevent indiscipline in allocation."
As interio’s B2B items are made at many different locations and to an extent imported, it was difficult to aggregate them for meeting ‘full basket’ requirements.
As the production happens across the supply chain in silos, the task of time phasing supplies, order-wise, was extremely difficult by itself on account of sheet variety, and more so because of the restrictions paced by the existing ERP system.
Lack of discipline in terms of not having a single priority list was yet, another factor that made the fulfilment of orders in a timely fashion, difficult, it was common to have items meant for customer X supplied to customer Y, creating shortages and delays.
The business was losing many orders on account of the buffers in the delivery times added by the salesmen and dealers. It was difficult to change this behaviour, as their experience was that deliveries were unpredictable and in parts; seldom was a full order delivered on time.
Many SMEs and customer who are modernising their offices require smaller quantities of furniture in a shorter delivery time of less than two weeks. Relatively longer and uncertain deliveries of interio had pushed these customers to get their requirement fulfilled elsewhere. Godrej simply did not have a place in their consideration set. It was felt that we should win back these customers.
TOC – A systemic solution
Our interaction with various consultants led us to conclude that a situation as complex and varied as ours could only be best tackled with an intervention that was systemic in nature and our search zeroed in on the Theory Of Constraints (TOC). Our team chose Vector Consulting Group for the assignment. The single line objective of the project was to align the entire supply chain to fulfil the orders received On Time In Full. A challenging one indeed!
The entire journey of implementing the TOC- based system is fvar too long to describe here, however, there are three important steps that really govern the working of the entire system.
Alignment of production to customer orders
Prior to TOC, production planning was based on optimising capacity utilisation by minimising set-ups and maximising batch sizes. This led to building and ‘cherry picking’, which affected the fulfilment of orders on time. Now each order is fulfilled before taking up the next one. All production is now triggered on the basis of the due dates committed. All plants and vendors are now synchronised to deliver the complete order on time. A uniform single priority system across the production system is now deployed to prevent indiscipline in allocation. The TOC principles are also deployed at our supplier partners to have the supplies in shorter lead times.
Alignment of logistics and material allocation
A specially-developed software by Vector Consulting was deployed to take production allocation decisions. The priority system for production was extended to the logistics team for improved coordination. Also, all interventions to the inventories were totally prohibited to prevent out-of-turn allocations.
A programme that offered confirmed delivery of Standard Product offerings within seven days. The express delivery programme led to satisfied customers, resulting in repeat business.
- Docket preparation at branches
- BOM & order booking
- Material receipt at site and installation
A programme that offered confirmed delivery of Standard Product offering within seven days was put in place to win back the business that was lost.
to the SMEs and modernisation requirements was put in place to win back the business that was previously lost. A separate system of priority as put in place to ensure OTIF deliveries in seven days.
The three vital steps appear simple at a glance but are rather difficult to put in practice in the form of a system that works in a routine way. The Interio team, with the help of the consultants, succeeded in changing the existing system with the new one. The beneficial results of using the TOC methodology began to surface only after two months of struggle for the deployment of the new system.
- OTIF to direct customers and branches increased to 90% from less than 40%
- Full basket deliveries reduced inventory blockages, reducing working capital deployed by 30%
- The express delivery programme led to satisfied customers resulting in repeat business.
- The live tracking system gave full visibility of the execution of sales orders entered in the system by our salesmen and dealers. Advance notification of delays, if any, created confidence in the system, eliminating the need for buffers and fire-fighting.
Progressively, as we began to fulfil more and more orders in the OTIF mode, our customers were definitely delighted and are now beginning to view us as a supplier that can be relied upon. Our dealers and sales force now have more time at hand to build the business, as they no longer have to placate customers or chase their orders with us.
The shop floors of our plants and of our vendors now have a quiet, efficient buzz, instead of the noisy, unending chaos.
The Way Ahead
To sustain the improvements made, our team has put in place a programme for making ongoing improvements. The teams are striving to create a culture of OTIF at all locations. After all, Interio wants to be the ‘best in class’ supplier, preferred by one and all.
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