ashok leyland case study

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Revamping the supply chain The Ashok Leyland way

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It is about the supply chain of Ashok Leyland

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Page 1: Ashok leyland case study

Revamping the supply chainThe Ashok Leyland way

Page 2: Ashok leyland case study

Brief Introduction

• Founded in 1948 by Raghunandan Saran, a freedom fighter

•  Indian automobile manufacturing company based in Chennai

• 4th and 16th largest manufacturer of buses and trucks in the world respectively.

• The annual turnover of the company was  USD1.7 billion in 2013-14

Page 3: Ashok leyland case study
Page 4: Ashok leyland case study

Case Intro…

• Reverse auction

• Recession - Reduction in profit

year Sales (Rs.)

Profit (Rs.)

1996-97 2482.5 Cr. 124.9 Cr.

1997-98 2014.3 Cr. 18.4 Cr.

• Collapse of supply chain builds up inventory leads to revenue by 17.62%

Page 5: Ashok leyland case study

Together we can – Beat The Recession

• Re-gearing the system

• Brainstorming sessions

• Corporate Material Department and Material Management Department

• Maximize bought-out parts

• AL considered both domestic and international vendor.

• Vendor as partners.

Page 6: Ashok leyland case study

Revamping the Supply Chain

• Cost cutting would work only if the supply chain was smooth.

• Supply chain has two phase:

Supply chain

OSCARS – 2 project

OSCARS – 1 Project

Supplier to AL AL to regional sales office

Page 7: Ashok leyland case study

OSCARS -1

• Reduce the cost in inbound supply chain.

1. Reduced material cost

2. Optimum inventory levels reduce

Page 8: Ashok leyland case study

Single window system

• Corporate Quality Engineering (CQM) form.

• Creating huge database of 22000 plus parts of vehicles.

• Total 1400 suppliers. High business with few suppliers and vice-versa.

18% account for 92.5% business and 61% account for 1.9% business

Page 9: Ashok leyland case study

Supplier Tiering

• Tire-1 supplier is supported by tire-2 and tire-3 suppliers.

• Reduced the number of suppliers.

Example: A tool kits that accompanied every vehicle. In the late 1990s, six suppliers’ spread over Punjab , Faridabad Bangalore and Chennai used to supply the 15 items, which were assembled in house. A short supply of 1000 screwdrivers meant 1000 numbers of the remaining 14 items in idle Inventories. To overcome this problem, AL aimed at a reduction of tits supplier base from 1400 to 750.

Page 10: Ashok leyland case study

Just in time (JIT)

• The ‘Push’ system.

• The ‘Pull’ system Benefited AL by Rs.8.5 crore.

• OSCARS-1 divided the main components in 3 category.

Page 11: Ashok leyland case study

Conti…

• Different delivery system for each category.

Send a JIT card to the supplier. Includes all details regarding the parts and location of delivery.

• OSCARS-1 devised a funnel-planning system.

Page 12: Ashok leyland case study

OSCARS-2

• Project consist of 2 main objectives:

Improving customer satisfaction and reducing finished goods inventory

Improved service level

• Survey drawn 3 main parameters :

I. Order to delivery timeII. Reliability of deliveriesIII. Availability of order status info.

Page 13: Ashok leyland case study

Conti…

Karnataka plant came out with a new TQM process and it was a success.

Page 14: Ashok leyland case study

Conti…

• To understand customer needs AL adopted ‘4p’ program Probe, Prioritize, Plan and Position.

• AL build marketing information system (MIS).

Page 15: Ashok leyland case study

The comeback

• Profit of Rs.1.9 crore on sales of 1092.8 in 1st half of 1999-2000.

• In the same year raw material cost reduced by 1-2% and inventory reduced by Rs.300 crore

Year Sales (No.) Income (Rs.)

1998-99 29811 2089.13 crore

1999-2000 37859 2611.41 crore

Page 16: Ashok leyland case study

Questions:

1. Ashok Leyland with an aim to reduce costs improved the in-bound supply chain through several important strategic revamping measures. Explain.

2. “The revamp of the out-bound supply chain had the twin objectives of customer satisfaction and reducing finished goods inventories” discuss how Ashok Leyland re-engineered its out-bound supply chain.

3. Discuss in brief the quantitative benefits in regard to various measures of supply chain revamping exercise for AL.

Page 17: Ashok leyland case study