Godrej PIRE (Power infrastructure & renewable energy business) is considered as a critical revenue driver for the Godrej & Boyce Group. But in 2013-14, the company was experiencing a common industry situation. The projects of the company (large scale village electrifications, electrical substations), were chronically delayed, thereby requiring more working capital to be ploughed in. Moreover, the company also had to contend with cost over runs and negative margins. Therefore with the objective of turning around the business by completing projects in time, Godrej PIRE adopted the TOC methodology. With thrust on erection billing vis-à-vis the erstwhile focus on supply billing, and increased focus on undertaking EHV projects (which offers higher margins), the company achieved following results:
The following are the results experienced so far –
Video Case Study
Godrej Electricals & Electronics : Rapid Execution Of Infrastructure Projects
In this video, senior management of Godrej Electricals and Electronics, discuss the real problem facing their industry and explain how a thrust on execution vis-à-vis their erstwhile focus on supply billing, helped turn around this struggling business.
We are unlocking the hidden value in our supply chain by using the Theory of Constraints (TOC) approach.
A: We are unlocking the hidden value in our supply chain by using the Theory of Constraints (TOC) approach. We have been able to reduce our finished goods inventory (in days) by around 25 percent in B2C business (in implemented phase) while improving the availability of products at the retail point. We are now putting special efforts to increase the depth of distribution in the country. Using the pull methods of TOC and innovative display mechanisms, we are able to reach out to small furniture retail points in the country. The efforts are helping us sustain a growth of 15 to 20 percent in various product categories.
A: We have taken special initiatives to improve productivity of our vendors. Their shop floor planning and execution process has been revamped to align with our systems. Our managers, along with Vector Consulting Group, have implemented TOC processes on their shop floors as well. This initiative has helped reduce our suppliers’ working capital (in days) by 30-40 percent coupled with reduction in their supply lead-time by 50 percent and improvement in order due date performance to 95 percent. We have also staggered our consumer schemes to reduce spikes in demand.
A: With improvement of flow in the entire supply chain the real constraint resources are revealed easily. This has helped the vendors to focus on few work centers and do improvements to increase the available capacity. With these techniques, we have seen suppliers’ output increasing by at least 30-40 percent without any additional investment. Only after exploitation opportunities are exhausted do we ask our vendors to add capacity, that too only at the constraint resource. Such an investment is miniscule compared to the monetary gains. Thus, suppliers get the confidence since their investment is low and are exposed to minimal risk.