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Synopsis:

The supply chain processes at Mahindra & Mahindra Ltds Farmequipment sector were re-engineered and transformed at the grassroot level to enable an IT-enabled pull-based supply chain. This

transformation, involved a series of changes covering the organizationstructure, alignments, performancemeasurement systems and Business process changes like pull-basedproduction and replenishment system (based on actual demand pullinstead of being Forecast-based),Kanban. 3PL/Milkruns, transportationinnovation and IT initiatives like the implementation of SAPs APO, SRMetc. These initiatives resulted in substantial reduction in inventories,improvement in service levels, and reduction of SCM costs apart fromsubstantial increase in the satisfaction of customers, suppliers andemployees, despite increased challenges due to production andcapacity constraints due to doubling of Sales in the last few years.

APO (Advanced Planner & Optimizer).

The APO has various modules for different aspects of the supply chainlike Demand Planning, Supply Network Planning, Production Planninganddetailed scheduling etc. APO considered the model wise demand from

each geography and considering the production capacity and costs,and model specific capacity and material constraints, generated aPlant-wise, Model-wise, Day wise Production Plan that would meet thedemand at least cost. It was a very effective tool that cut down the

planning cycle time drastically andtook the sweat out of planning.

Issues with Forecast-based Planning:

The input to APO was the Area-wise, model-wise, week-wise salesforecasts.Earlier, sales forecasts were quite reliable and producing as perforecasts did not pose much problem. However, with the marketdownturn and increased competition, it became more and moredifficult to forecast reasonably accurately. Producing and supplying to

area stockyards as per forecast resulted in excess stocks in someplaces where actual sales were much lower than forecasts and at otherplaces where actual sales were much higher than forecasts, there werestock outs. In such cases stocks had to be rushed from one stockyardto anotherresulting in increased transportation costs Ideally M & M should beproducing and supplying only those goods which were being

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demanded by customers. This is what led them to look at theimplementation of the Pull- Production system.

Pull-based replenishment of finished goods:

This required fixing stock norms scientifically at area/model level,taking into consideration the lead times, demand variability and supplyreliability. The stocks in each area were visible on-line. So what wasrequired was to change M & M distribution planning system by findingarea/model-wise gaps between actualstock and Norm and plan dispatches accordingly. Since handling thisvolume of data and rules manually on daily basis was quite timeconsuming and managing daily replenishments were becoming aproblem, M & M implemented theDeployment tool of APO with the help of Bristlecone. TheDeployment

module of APO was fed with stock norms and it drew info of stocksfrom SAP and allocated as per rules configured in the module.Distribution planning time was cut down to one hour instead of 6 hoursmanually, daily.

Implementation of Pull-Production Planning:

Instead of making a fixed production plan for the whole month, M & Mmade a production plan for just 3 days fixed which would enable themto respond to market demand changes at least every 3 days (bi-weekly).

Implementation of Supplier Initiatives:

In a lean environment, dependability, reliability and commitment ofsuppliers assume greater importance. This led to rationalization ofsuppliers base. Further, to bridge the communication gap withsuppliers, M & M implemented the SRM module of SAP. On the SRMsupplier website suppliers could see their supplyschedules, status of their supplys acceptance and payments etc.,whereas M & M could see their advance shipping notifications formaterials in transit (ASNs), and analyze their spends and supplier

performances.

Changes in Supply Chain Metrics

Earlier the Supply Chain performance was measured based onproducing and

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dispatching as per weekly forecasts. However, the performance metricwaschanged to Daily model-wise availability at stockyards and SCM hadto ensure that there were no stock outs irrespective of the changes indemand Vs forecast. Along the supply chain also each node was

measured based on fulfilling the needs of the next node.

End to - End IT-enabled Supply Chain

The supply chain at M&M, FES has been IT-enabled from End-to-End.TheSupply chain information flow is enabled with SAP ERP and SupplyChain planning has been enabled by and SAP- APO. Communicationswithexternal partners in enabled through websites interfacing with SAP ERPsystem.

Results

The companys sales doubled in the last 4 years. However, despitetremendous increase in the product varieties, demand uncertainty, andincreased supply constraints, right time, right product availability wasmaintained which helped in taking advantage of sales opportunities toincrease sales and market share.

Prior to the supply chain re engineering, in season months, when salesare 50% higher than the annual average sales, there used to betremendous follow up from Sales and chaos in operations. However,after implementing the process changes, during the season monthsthere wasnegligible follow up and operations were smooth. Further there wassubstantial reduction in inventories and increase in service levels.Overall demand fulfillment lead times end to end (from Dealer Reqt toSupply to Dealer) was reducedfrom 51 days earlier to around 22 days, a majority part of it being thephysical

transportation time (from suppliers to Plants and from plants todealers) reduction of which has limitations.

Conclusions

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With increased globalization and increased competition and demanduncertainty most companies face the challenge of making their supplychains more nimble, responsive, reliable and cost-efficient for takingadvantage of the ever reducing windows of opportunities. Companiesneed to continuously assess the power of their supply chains honestly

and critically vis--vis their competitors and make changes to makethem more and more effective.