life after inventory turns – what next?tocpractice.com/wp-content/uploads/sites/default/... · 10...
TRANSCRIPT
10th International Conference of the TOC Practitioners Alliance - TOCPA
Feb 21-22, 2014 Noida, India
10th International Conference of the
TOC Practitioners Alliance - TOCPAwww.tocpractice.com
Life After Inventory Turns – What
Next?
Case of Godrej Locking Solutions and Systems
Prasun Chowdhury, Avenir, India
21 February 2014
10th International Conference of the TOC Practitioners Alliance - TOCPA
Agenda
• Background of GLSS
• What needed to be changed?
• What were they changed to?
• What was the process of change?
10th International Conference of the TOC Practitioners Alliance - TOCPA
A young company with a 117
years history….
10th International Conference of the TOC Practitioners Alliance - TOCPA
First Business of Godrej group
Oldest lock manufacturer in India...
...117 years of experience
Market Leader...
...biggest lock player with unmatched
brand recognition
Industry Pioneer...
...several firsts with customized
solutions in all technologies
Wide product portfolio...
...to serve diverse customer needs
Godrej Locking Solutions and Systems
Nobody Knows Locks better than us
10th International Conference of the TOC Practitioners Alliance - TOCPA
An enduring journey of
TOC implementation
• Started implementing TOC in April 2008
– Market leader but competition catching up in
terms of market share
• Avenir was their consulting partner for 5 years
• Continues to sustain and progress on their
TOC journey
• Since 2008, Throughput has grown by more
than 450% in very challenging macro
economic environment
10th International Conference of the TOC Practitioners Alliance - TOCPA
Agenda
• Background of GLSS
• What needed to be changed?
• What were they changed to?
• What was the process of change?
10th International Conference of the TOC Practitioners Alliance - TOCPA7 I Godrej LOCKSS I Theory of Constraint Across Value Chain to IIIE – Vizag Chapter | 28.01.14
Dealing with immense complexity!
10th International Conference of the TOC Practitioners Alliance - TOCPA
Godrej 5 Security Strengths
Godrej Security level – 5Advanced Electronic Security
Godrej Security level – 4Elite Security
Godrej Security level – 1Basic Security
Godrej Security level – 2Ultra Security
Godrej Security level – 3eXs Security
The only company in the world to have all the 5 levels of Technology
10th International Conference of the TOC Practitioners Alliance - TOCPA
Nature of LOCKSS Business
• Mass Distribution• MRP Based Pricing• Packaged Commodities Act• Small Value Items• Large number of SKUs• Battle for Shelf Space
FMCG OPERATIONS
CONSUMER DURABLES ’’’’ SELLING
• Installation • Service & Spares• Institutional Sales• Customized Solutions
Products and Solutions are for Consumer and Business Markets
10th International Conference of the TOC Practitioners Alliance - TOCPA
A very complex operating
environment
1300+ Domestic Direct Institutional Customers 65+ International Customers 900+ Domestic Distributors/Direct Dealers28,000+ RetailersDistribution in 550+ cities3 major captive OEM customers 600+ Service Dealers
500+ Manufactured SKUs
300+ Traded SKUs
Customized Solutions
4 Manufacturing Locations1200+ Components42 Domestic Suppliers12 Job Work Suppliers13 International Suppliers across 5 countries3 Tool Repair Suppliers
5 Mother warehouses
21 Distribution hub warehouses
1 Bonded warehouse
Customers
Products Warehouses
Suppliers & Locations
10th International Conference of the TOC Practitioners Alliance - TOCPA
Manage well
Organizational environment is very challenging
Protect the
future
Preserve the
present
Market
ChallengesOperational
Challenges
Top Management Objective…
10th International Conference of the TOC Practitioners Alliance - TOCPA
Possible risks associated with focusing on growth
1. Large investment outlays are required for increasing
capacities
2. Risky product launches and acquisitions
3. Operations capacity mismatches resulting in operational
failures
Protect the future Protect the
present
Manage Well
Focus on growth Focus on stability
Where should the balance point be?
10th International Conference of the TOC Practitioners Alliance - TOCPA
Possible risks associated with focusing on stabilit y:
1. Lots and lots, almost unending stream of problems that need
to be tackled on urgent basis
2. Lost opportunities in launching new products, acquiring new
customers, reaching out to new geographies
3. Competition steals march over us while our attention in on
keeping our house in order
Protect the future Protect the
present
Focus on growth Focus on stability
Manage Well
10th International Conference of the TOC Practitioners Alliance - TOCPA
The end result of this dilemma
1. Growth and consolidation are focused upon alternatively.
2. We have periods of sharp growth and then the focus moves on consolidating,
shedding flab, returning to the core.
3. We have periods of stagnation and then sudden spree of product launches
and acquisitions.
4. This cycle continues without the top management getting a sense that it is on
top of the issues.14
Protect the future Protect the
present
Focus on growth Focus on stability
Manage Well
10th International Conference of the TOC Practitioners Alliance - TOCPA
INCREASE
STOCK LEVELSLIMIT
STOCK LEVELS
Where should the balance point be?
INCREASE KAMAYEE REDUCE INVESTMENT
Increase Distributor Turns
INCREASE
STOCK LEVELS
THERE IS A CONSTANT STRUGGLE TO KEEP THE BALANCE:
•You may have high stocks of one SKU and low stocks of another SKU at a point of time.
•You may have high stocks at the month beginning and low stocks in between.
10th International Conference of the TOC Practitioners Alliance - TOCPA
THERE IS A CONSTANT STRUGGLE TO KEEP THE BALANCE:
• Order early will assure timely execution of project, but there is high risk of
money blockage and product tarnishing
• Order late will assure no risk of cash flow and product at good condition, but it
has a high risk of on time delivery of project
Where should the balance point be?
On Time Delivery –Real Estate Industry
ORDER EARLY ORDER LATE
10th International Conference of the TOC Practitioners Alliance - TOCPA
Focus on Technical aspects
Increase Service Levels –Telecom Tower Industry
Where should the balance point be?
Focus on Admin aspects
Maintain Technical Superiority Zero Thefts
• Is it possible to have “Zero Thefts” which makes you the most reputed tower company?
• Can focus completely on operational excellence & network expansion?
• Is it possible to stop worrying about theft issues & focus continuously on improvement of
operating efficiency?
10th International Conference of the TOC Practitioners Alliance - TOCPA18 I Godrej LOCKSS I Theory of Constraint Across Value Chain to IIIE – Vizag Chapter | 28.01.14
People are bad!
18
Give me More Margin then I will
buy…
You are not helping me in collecting my
outstanding…..
Buy More Volumes…
You are not doing enough retailing…
Your are not helping in meeting
my Targets…Distrib
utorSales
You will never Accept! You will Never Change!
10th International Conference of the TOC Practitioners Alliance - TOCPA19 I Godrej LOCKSS I Theory of Constraint Across Value Chain to IIIE – Vizag Chapter | 28.01.14
People are bad!
19
You Never Supply on Time…..
Your Forecast is Always Wrong….
Sales Mfg
You will never Accept! You will Never Change!
10th International Conference of the TOC Practitioners Alliance - TOCPA20 I Godrej LOCKSS I Theory of Constraint Across Value Chain to IIIE – Vizag Chapter | 28.01.14
People are bad!
20
Your First Pass Yield is Low…..
You do not manufacture as per drawing…
You Keep on Changing the
specifications…
Your Design is not Manufacture friendly….
Design
& EnggMfg
You will never Accept! You will Never Change!
10th International Conference of the TOC Practitioners Alliance - TOCPA
Forecast based misalignment
Procurement
RM / Compo
nent Vendor
s
Production
Shop floor
TransferFactory Wareho
use
Primary SaleBranch
Secondary Sale
Distributor
10th International Conference of the TOC Practitioners Alliance - TOCPA
Agenda
• Background of GLSS
• What needed to be changed?
• What were they changed to?
• What was the process of change?
10th International Conference of the TOC Practitioners Alliance - TOCPA
Pull based alignment
Procurement
RM / Compone
nt Vendors
Produ--ction
Component Shop
Production
Assembly Shop
TransferFactory Warehouse
Primary SaleBranch
Secondary Sale
Distributor
Pull
Shop floor
10th International Conference of the TOC Practitioners Alliance - TOCPA
Broad elements to Build Decisive Competitive
Leverage - Higher Distributor Inventory Turns
• Creating a supply chain that responds to actual signals from the market
instead of responding to a monthly forecast
• Restricting the flow of material into the plant thereby reducing WIP and
improving the capability to respond to consumption changes in the market
• Pulling inventory upstream in the supply chain where the forecast error is
minimal
• Training sales people to sell solutions that deliver value to distributors
• Dynamically aligning the inventories to changes in consumption
10th International Conference of the TOC Practitioners Alliance - TOCPA
The overall design across the supply chain
Plant & Plant warehouse
Central warehouse
Branch warehouse
Distributor Retail
10th International Conference of the TOC Practitioners Alliance - TOCPA
Agenda
• Background of GLSS
• What needed to be changed?
• What were they changed to?
• What was the process of change?
10th International Conference of the TOC Practitioners Alliance - TOCPA
Distribution
• Inventory Turn offer• Replenishment based on actual sales
and only up to the buffer stock level• Minimum lead time for bulk or
institution order
• WoW – Week on Week Sale• WW2W - Weekly War to Win• Capturing sku wise distributor wise
daily sales• Product segment focus - ‘Lifestyle’
products in the same system
• From Primary sales to Secondary sales for Distributors and Sales Personnel
• From Month, Quarter and Annual toWeek, 4 Weeks, 13 Weeks and Annual
• Training• Reinforcement – Weekly and 4
Weekly Communication Report• Local Area Marketing Activities
10th International Conference of the TOC Practitioners Alliance - TOCPA
Retailer Salesmen & Carpenters
• Daily Sales Information to IDEA retail outlets
• Working with IDEA outlets• Choking the release of enquiries
• Specialized Training Program - Skilling• Carpenter Club• Short Interval Control – Weekly,
Fortnightly review
• Measurement changed from Purchase from Distributors to tertiary sales from retail outlet
• From Month, Quarter and Annual toWeek, 4 Weeks, 13 Weeks and Annual (13 4-weekly cycle)
• Training• Weekly Communication reports• Local Area Marketing Activities
10th International Conference of the TOC Practitioners Alliance - TOCPA
New Thinking (Game of 1%) –
WoW and WW2W
Required Hit Rate (40% Growth)
Avg Score ( Last 13 Weeks Sale)
Overs 1 - 52
Wee
kly
Sco
re
Incremental & consistent growth planned from wk 1 rather than growth in spurts
10th International Conference of the TOC Practitioners Alliance - TOCPA
Broad elements to Build Decisive Competitive
Leverage – Higher Reliability of Supplies from a
Single Source –
• Creating a system that captures actual signals from the customer early at
every point of time instead of responding in the end
• Restricting the flow of orders into the plant thereby ability to complete the
few orders quickly and ultimately complete more orders in a given period
• Reserve 30% capacity as Protective capacity for execution of large bulk
orders
• Training people to understand and capture the real needs, develop
solutions to satisfy and then sell the as value to the institution customers
• Dynamically remain alert to the changing environment
10th International Conference of the TOC Practitioners Alliance - TOCPA
Marketing & Sales
• DCE offers to B2B2C and B2B• Supply Chain – ‘PULL’• NPD & NPI using CCPM• Less is More – Focus on few
customers and few enquiries at a time• Influencer Management
• WoW – Week on Week Sale• Short Interval Control - WW2W and
ISR• Generic PERT for NPD / NPI• ‘LIFESTYLE’ Products in the same
system
• From Primary to Secondary sales• From Sales to Throughput• Product rationalization• Time to Profit, TRD Loss
• SBP/ABP Sharing• Field Contact Program• Structured Reviews• Local Area Marketing Activities
10th International Conference of the TOC Practitioners Alliance - TOCPA
Changing Mindset : Breaking Myths
Old thinking New thinking
Pushing stocks to a distributor / retailer will make him run
With optimum stocks & increased inv turns, distributor / retailer will be motivated to increase sales
Only products with high margin sell Investment in inventory and margin are two sides of same coin
All efforts to be in the direction of maximizing sales value
All efforts to be in the direction of maximizing Contribution value
Sale can be increased by adding more and more SKUs
Sale can be increased by focusing on few SKUs which give maximum Contribution
Job of a sales person is to sell, sell and SELL
Job of a sales person is Business
Development and to generate demand
10th International Conference of the TOC Practitioners Alliance - TOCPA
Operations
• MTA – Stock Buffer• MTO – Time Buffer• Reduce Lead Time by 50%• Minimum Batch Size• ‘NO’ Consumption ‘NO’ Production• 30% Protective Capacity • Load Control
• Split of Plant – Assembly & Component
• Common Priority for MTA & MTO• Yo-Yo Reduction
• Single Priority System based on Colour Status
• Global Measurements – TRD Loss, % Black/Red
• Process Planning Cell• Dynamic Buffer Management
• Shop Floor visits for Colour Status• Training• Visual Control• Daily / Weekly Reviews
10th International Conference of the TOC Practitioners Alliance - TOCPA
Changing Mindset : Breaking Myths
Old thinking New thinking
Achieve monthly production value Produce to availability as per penetration of Buffer in the warehouses
Batches based on EOQ calculations Batch size is as low as possible
Multiple Priorities based on urgencies communicated by different stakeholders
Single priority system based on buffer penetration in the warehouses
Delivery commitment is given w/o checking resource availability
Delivery commitment is given based on available protective capacity
Suppliers supply material based on monthly schedule
Daily / weekly supply based on penetration of buffer in the warehouses
To keep the resources occupied all the time for production
Employ resources for improvement programs & training during lean demand periods
10th International Conference of the TOC Practitioners Alliance - TOCPA
Sourcing
• Replenishment based on Consumption for FG, RM & components
• 30% Capacity reserved for MTO/ETO/CTO
• Milk Van System• Load Control • Virtual Buffer Logic for Imported
Traded SKUS
• Global measurement of % Reds and Blacks
• Single and Common Priority based on colour status for all types of suppliers
• Virtual Buffer concept
• Training• Supplier Meets - Contact Program• Satisfaction Survey - ATR
10th International Conference of the TOC Practitioners Alliance - TOCPA
Design & Engineering
• Using Time Buffer concept for all enquiries and monitoring
• Critical Chain Project Management for New Product Development and Introduction
• Choking the Release of enquiries based on workload on Designers
• Partnership with Industrial Design Firm for aesthetics / form / finish
• Make To Order for initial batches of New Products
• Global measurement of TRD Loss and % Reds and Blacks
• Single and Common Priority based on colour status
• Training on TOC and CCPM• Daily, Weekly Review
10th International Conference of the TOC Practitioners Alliance - TOCPA
Manufacturing, Purchase, Logistics, Design & QA, Suppliers
Distributors, Frontline sales team
Divisional Management Committee, Middle management at Sales & Marketing
Alignment in Measurement
10th International Conference of the TOC Practitioners Alliance - TOCPA
Finance and Measurement
• Throughput is the prime Measure• Profit = T-OE• ROI = (T-OE)/I• Business Productivity = T/OE
• TVC Calculation & Throughput OLAP• Robust Decision Support System –
Template for deciding Schemes, Throughput value template for New products
• Weekly and Monthly DMC Scorecard
• Senior Management Measured on T, PBT and Cash Flow
• Measures for other people are derived from above measures
• Common measure in production
• Measurement workshop• 4 Weekly and Quarterly reviews• Quarterly TVC Review
10th International Conference of the TOC Practitioners Alliance - TOCPA
Old thinking New thinking
10-15% growth in profits is okay for a business like Locks
The sky is the limit
We can do many projects simultaneously
We take one project at a time, complete it and then go to the next
Goal is to maximize sales value Maximizing Throughput is the goal
Sales can be increased by adding more and more SKUs
Sales can be increased by focusing on a few SKUs which give the highest T
Sales can be increased by incentives only
Sales can be increased by Local Area Marketing Initiatives
A year has 12 months A year has 52 weeks (i.e. 13 months ☺)
10th International Conference of the TOC Practitioners Alliance - TOCPA
Stakeholder Measures Benefits Capabilities
Customer• Inventory Turns• Availability• Reliable Supply
• Higher ROI• Project Completion on Time• Increased Throughput
• Understand market and competition trend
• Increased focus on Projects
People• Throughput, TRD
Loss• Secondary Sales• No. of Blacks &
reds in w/h
• Higher variable pay• Team working with Common
Priority
• Ability to respond quickly• Analytical ability and Problem
Solving• Improved Team work
Suppliers• No. of Blacks &
reds in w/h• Lead time
• Higher ROI• Common Priority System• Steady Growth in business
• Quick Response to daily requirement
• Ability to manage frequent changeovers and small batches
Business Enterprise
• Throughput• PBT• Cash Flow
• Exponential Growth• Improving Capability• Sustained Competitive edge
• Truly Locking Solutions and Systems Provider
Retailer Salesmen / Carpenters
• Tertiary Sale• Higher Earnings• Recognition
• Product Knowledge• Improved retailing and carpentry
skilling
Building and Sustaining
Capabilities
10th International Conference of the TOC Practitioners Alliance - TOCPA
Success story continues…
* Industry growing at 12.5% CAGR for last 4 years – Nielsen Study
** Study done by IMRB
10th International Conference of the TOC Practitioners Alliance - TOCPA
No of Real Estate Developers
No of Real Estate Developers
Sales From Key AccountsSales From Key Accounts
Wallet ShareWallet Share
Carpenters & Retailer Salesmen
Carpenters & Retailer Salesmen
Inventory ManagementInventory Management
Lead Time ReductionLead Time Reduction
• From 439 in 2009 to 1236 in 2013
• Grown by 46% in 2012-13
• 17% in 2012 to 21% in 2013
• No of GLCC carpenters -2693 in 36 clubs in 16 cities
• Retailer Salesmen 1351 trained
• FG: from 39 Days in 2009 to 26 Days in 2013
• RM: from 74 days in 2009 to 50 days in 2013
• WIP: from 34 days in 2009 to 20 days in 2013
• 16 weeks in 2010 to 5 weeks in 2013
Success story continues…
10th International Conference of the TOC Practitioners Alliance - TOCPA
CAGR in SalesCAGR in Sales
New Product Vitality (Rolling 156 Weeks)New Product Vitality (Rolling 156 Weeks)
Supplier Satisfaction Score
Supplier Satisfaction Score
Employee Satisfaction Score
Employee Satisfaction Score
• 140% Better than Industry over 2009-13
• 12% in 2010 to 21% 2013
• Increased from 87 in 2009 to 93 in 2013
• Increased from 83 in 2010 to 87 in 2013
Success story continues…
10th International Conference of the TOC Practitioners Alliance - TOCPA
Prasun Chowdhury
Contact info: [email protected]+91 98111 10800
Prasun’s greatest high is when a client tells another “TOC
Rocks”.
Prasun has been a consultant and coach for over 19 years
for Fortune 500 as well as medium sized organisations
across the world. He works for Avenir, a leading TOC focused
consulting firm with presence in India and Mexico.
As a TOC student, Prasun believes that the key obstacles to
be overcome in implementation is the paradigm shift of the
top leadership of organizations.
Prasun is an alumnus of B.I.T.S, Pilani and a management
graduate with Distinction from Asian Institute of
Management, Manila.
Prasun was the Engagement Director for Avenir during its 5
year partnership with Godrej Locking Solutions and Systems.
10th International Conference of the TOC Practitioners Alliance - TOCPA
Text
Slide TitleYour logo