Fleetguard Filters Pvt Ltd
Established in 1987, Fleetguard Filters Pvt. Ltd is a leading Indian manufacturer of heavy duty air, fuel, lube and hydraulic filters, air intake systems coolants, and chemical products for on and off highway application. Fleetguard is a Cummins group company with a turnover of Rs.5,600 million. It is a supplier to renowned automobile companies and industrial engine and equipment manufacturers. The company implemented TOC company wide to achieve significant improvements in financial and operational performance. They also went on to win several national and international recognitions for their ability to sustain excellence.
One of the few companies to implement Theory Of Constraints based pull system right from manufacturing to retail.
Of course, in both, the August 2008 slowdown and the current one, the sales to our OEM customers have gone down. However, our After Market distribution business has been a significant bulwark for our company. We have increased our sales in the After Market segment over nine times in the past 6 years. Our market share has grown consistently because of our strength in the distribution business – even in times of slowdown. We are now market leaders in some of the key segments in heavy duty filtration.
We have been on an exciting journey for about six 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 have actually 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.
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.
We actually have the best scheme for our channel partners. Due to the low inventory, our distributors earn an ROI of close to 80 per cent in my business. They have zero stock outs with only15 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 realising that this way of operations is helping them rather than buying in large lots.
We started in 2008, partnering with Vector Consulting Group. We implemented the daily pull based system of theory of constraints with all our suppliers, manufacturing plants and distributors. Our sales team is in weekly touch with over 30,000 retailers and 40,000 mechanics. We also manufacture and supply to OEMs based on pull-based consumption. We commit 100 per cent availability at a daily level to OEMs.
We operate with finished goods inventory of 11 days, while our distributers enjoy 20 turns. We do not have a month end sales skew. At the same time, our credit policy is very strict in the chain. We take advance payment from our distributors, while they give credit of 15 days to the retailers. It is win-win-win model for everyone in the chain.
Video Case Study
Fleetguard Filters: Ten Years Of TOC Implementation
Fleetguard Filters Ltd. implemented the principles of Theory Of Constraints company-wide to achieve phenomenal improvements in financial and operational performance. This video describes their ten-year journey of excellence which won them several national and international recognitions.
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Vector Management Consulting Pvt. Ltd.
10th floor, Thane One, DIL Complex,
Ghodbunder Road, Majiwada,
Thane (West), Maharashtra - 400610, India.
Mr. Hemal Bhuptani