Episode 41

Conversations with Business Leaders: Antony Cherukara, CEO, VST Tillers Tractors Limited

Category :  Leadership Paradigms

Agri-equipment manufacturing companies tend to have a major challenge in managing operations since demand is significantly dependent on seasons, level of rainfall, festivals, etc. Mr. Antony Cherukara, discusses how by adopting a pull-based supply chain, companies can become flexible enough to adjust themselves to changing market demand in such a way that sales loss for the company can be prevented while simultaneously de-stressing operations both for​ themselves and their suppliers.

To find out more about how destress supply chains by buffering it from demand fluctuations please read: https://www.vectorconsulting.in/research-publications/equipment-manufacturing/revving-up-the-agri-equipment-business/

Transcript
Shubham Agarwal : What are the major problems faced in agri-equipment businesses that make this environment very challenging?
Mr. Antony Cherukara : In the agriculture scenario there is always ups and downs. There is an issue of good rainfall, good monsoon. There is an issue of crop prices, so these are uncontrollable and hence, there is a fluctuation in terms of demand.
Shubham Agarwal : hmm
Mr. Antony Cherukara : …. the unpredictability of the market plays out onto the manufacturing front because there is a sudden demand which goes up in certain parts of the country and …if you are not able to supply on time, we’ll lose sale. So, manufacturing is under pressure and you can also not keep manufacturing inventory… too much of manufactured inventory with you because then if the season doesn’t play out, you will have to carry that inventory to the next season as well.
Shubham Agarwal : Ok
Mr. Antony Cherukara : There is also the whole push pay system that a… we work on in terms of ensuring that the collections come in and they… Typically, the collection comes in early in the month end and then the billing is skewed towards the month end. This create-This creates a problem with the supplier end because the raw material is already bought, and the inventory is laying at the supplier end and this queue creates a problem of cash flow for the supplier as well, wherein he cannot procure raw material for the next month’s demand. So, this creates a problem not only at the company level but at its suppliers as well.
Shubham Agarwal : What was the impact of these problems on the business?
Mr. Antony Cherukara : I think the-the the biggest factor was the loss of sale itself. When you have such unpredictable demand and then you’re not able to supply on time, customers move on to competitors and then you lose sale. So that is number 1, and number 2 is the efficiency of the organization in terms of a… the time spent on shortage meetings, the time spend on scurrying to ensure that supplies are maintained.
Mr. Antony Cherukara : …, People had to be rushed to the supplier in to sit overnight and somehow manage the material and bring it to the company for the-for the next day’s production.
Mr. Antony Cherukara : Thirdly, the aspect of losing inventory rotations a… not ensuring a… the right models are available at the right time at the… a… at the Market place that kind of stops your rotation from happening so that creates a problem that a… that also translates to problem with the supplier end, and which creates, especially with the Corona Pandemic on. Suppliers were short of cash and there were issues with the MSME’s. So, a… I mean there were problems not only in terms of a… the supply constraints, also in terms of the pandemic itself where they were lockdowns, where they were you know.. people not turning up for work because they got infected. So, all these kinds of magnifies itself when the when the-when the Inventory flow is not maintained. So it creates a… double the issues along with the Pandemic, yeah.
Shubham Agarwal : How can these issues be solved?
Mr. Antony Cherukara : For this, we need what are the inventory that we should carry into a season. There should be an ability to optimize inventory if the season does not play out as expected
Shubham Agarwal : How did you do that?
Mr. Antony Cherukara : . So fundamentally, what we have been able to create is the buffer at various levels and ensuring the buffer is more at the back end than the front end where the variation in demand is the highest closer to the consumer. So, what we have done is ensuring that the a… variation in demand is taken care of by the buffer that we have kept at a… various locations, including the warehouse and the factory, and this kind of ensures that there is no last minute rush and ensuring that the sudden… rise in demand or at the same time if there is a falling demand buffer is controlled through a dynamic buffer system,

. The other aspect is you know in the last one and a half years we have faced a lot of commodity inflation and it was important that the suppliers also had a good view of what raw materials they should carry and what kind of buffer they should carry to manage this inflation so it has been an immense help in terms of not only for the company but the suppliers as well to manage their inventory in an efficient way during this fluctuating commodity inflation

Shubham Agarwal : As I said in the introduction, You have lead implementation of ‘pull systems’ in the supply chains of two companies. Can you share your experience?
Mr. Antony Cherukara : . See as a-as a Business Head at KOEL (Kirloskar Oil Engines) and now is CEO of VST Tillers, see one of the fundamental things that a CEO has to deal with or a business head has to deal with is the amount of resources that is… at his a… behest to garner growth for the company. So what happens is, if you create efficiency with the current resources and if you can free up resources to do work that garners growth, and that is what TOC enables us to do because we are out of the firefighting mode, because we are able to focus on stuff which is long term, and important because we are able to save time away from the daily firefighting that we are a… we used to do. This enables the same resource to work towards growth and other of-other opportunities the market throws up. So that is one big factor that I’ve seen. The second aspect is in terms of creating complete visibility and the ability to manage with a… agility in a situation where things are out of your control in terms of. I spoke about the commodity inflation aspect. For example, this system enables you to, you know… monitor raw material inventory to ensure that your inventory is optimized for the coming season, and manage this kind of volatile commodity inflation pressures that keeps happening in the industry. So that is the second aspect, and the third aspect is what we have seen is in anomaly people used to sit around, work late into the night, prepare for the you know.. kind of shortage meetings which they would have to do in the morning next day. So those kinds of meetings are avoided and people can actually get back home on time, and I think that creates a great work life balance for people. So, all in all, I think it kind of creates a social engine in the company which is about people, about the culture and how you go after growth.
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