Q: What motivated you to embark on the TOC journey?
A: We partnered with Vector Consulting Group to build an Agile supply chain that can deliver excellent service to our customers. A good after-sales service with excellent availability of genuine parts is crucial for TATA Commercial vehicle sales. Moreover, we wanted to expand our reach into the market by expanding our distribution network and strengthening our retail presence. We realized that implementing TOC in our supply chain was the best way to achieve this objective.
Q: What were the challenges in your environment?
A:We have 1,400 plus workshops, which is the biggest network in the industry. We also have over 100 distributors and more than 35,000 retailers who sell our products. The supply chain also includes five warehouses and 1,000 plus vendors who supply over 70,000 different parts to these warehouses. So there is a huge complexity in the whole system.
Q: What were the paradigm changes which were implemented?
A: Before we embarked on the TOC journey, we used to work with our vendors using forecasts based on past trends and seasonality – two months firm and one-month tentative forecast, but still it was not matching the demand in the market. We ended up with some items that were quickly stocked out while others were in surplus. This resulted in constant follow up with vendors for urgent parts of items in shortage, while we were still carrying huge inventory of items that were not selling as per forecast. Now we have implemented a consumption-based system. The vendors have visibility with the help of software into our stock levels on a daily basis and they can foresee what is likely to be stocked out at our warehouse. They respond to it by manufacturing and supplying only what is immediately needed.
Earlier, most of our retail sales were happening in the last week and even the number of bill transactions were very high in the last week of the month. Now, dealers/distributors place daily orders based on what is sold and receive it on the next day. So this pull based replenishment ensures higher sales throughout the month at considerably lower levels of inventory for the dealers/distributors. This has transformed the operations of the TML Spares business.
Q: What is scale of implementation?
A: We have implemented the new ‘pull’ replenishment model of TOC for over 30,000 parts sourced from 1,000 vendors, which accounts for 95% of sales. Over 400 service dealers and distributors’ locations have also been activated on this model of supply chain.
Q: How has the supply chain network changed?
A: We have four major regional warehouses. Earlier each of these received and sent material from all parts of the country. For example, if a part was sourced by the warehouse in the North from a vendor in the South and later a dealer in the South needed that part, the material would again be dispatched all the way across the country! The network has been redesigned to ensure that flow of material is unidirectional; from vendor-central warehouse-regional warehouse-channel partner-retailer. The range to be made available at each node is decided and built based on frequency/service requirement considerations. SOPs have also been set to decide addition and deletion to range for each node. In case of items that are infrequently consumed from the TML Warehouse, designated vendors supply them when there is a requirement from the market. By rationalizing the network, there has been a significant reduction in inventory and freight cost while simultaneously ensuring higher availability and growth.
Q: What has been your experience since implementation?
A: Availability at the warehouse and service points has gone up substantially. The significant improvement in our customer satisfaction survey results on the parameter of “Improvement in spare parts availability” is a clear sign that the impact of the TOC implementation is also being appreciated by our customers. But, I would see the biggest benefit to us, TATA Motors, has been that our top management has found quality time to look at policy issues and lot of other aspects, which we were not able to do because of constant firefighting.