Kirloskar Oil Engines Ltd. (KOEL)
Kirloskar Oil Engines Ltd. (KOEL) is a leading Diesel Engine and Generator Set (Gen-set) manufacturer in India. They design, manufacture and supply Diesel Engines, which is at the heart of Gen-sets. Though this industry is aware that customers need fast and reliable delivery, KOEL and its competition could only offer customers delivery lead times of over 4-6 weeks because of the complexities in their manufacturing and supply chain. But after moving away from forecast-based model to consumption-based operations, the company is now able to offer guaranteed deliveries in one week. The company’s working-capital-turns also improved phenomenally converting KOEL from a persistently cash-starved business to a healthy one.
The following are the results experienced so far –
Video Case Study
Rapid engine delivery
Senior management at Kirloskar Oil Engines Ltd.(KOEL), their suppliers and dealers discuss the benefits of moving away from a forecast-based model to consumption-based operations. KOEL is now not only able to offer guaranteed deliveries in ONE WEEK (industry standard is four-six weeks) but have also reaped several financial and operational benefits.
One of the few companies to implement Theory Of Constraints based pull system right from manufacturing to retail.
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 nine times in the past six 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.
A: 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.
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 advancement 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.