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    Supply Chain Management inSupply Chain Management inAutomotive IndustryAutomotive Industry

    Dr. KS Bhoon

    [email protected]

    SJMSOM IIT MUMBAI 11 Aug 2009

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    July 29, 2011July 29, 201122

    AgendaAgenda

    SCM in Auto Industry

    Postponement in AutomotiveManufacturing

    RFID in Automotive Assembly

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    July 29, 2011July 29, 201133

    Overview of Performance of IndianOverview of Performance of Indian

    Auto Industry Units SoldAuto Industry Units Sold

    Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

    PassengerVehicles

    707,198 902,096 1,061,572 1,143,076 1,379,979 1,549,882 1,551,880

    CommercialVehicles

    190,682 260,114 318,430 351,041 467,765 490,494 384,122

    Three Wheelers 231,529 284,078 307,862 359,920 403,910 364,781 349,719

    Two Wheelers 4,812,126 5,364,249 6,209,765 7,052,391 7,872,334 7,249,278 7,437,670

    Grand Total 5,941,535 6,810,537 7,897,629 8,906,428 10,123,988 9,654,435 9,723,391

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    July 29, 2011July 29, 201144

    Turnover Rs CroreTurnover Rs Crore

    5 9 5 2

    6 6 1 7

    8 3 5 8

    1 0 8 0 4

    1 3 7 1 4

    0

    2 0 0 0 0

    4 0 0 0 0

    6 0 0 0 0

    8 0 0 0 0

    1 0 0 0 0 0

    1 2 0 0 0 0

    1 4 0 0 0 0

    1 6 0 0 0 0

    2 0 0 2 -0 3 2 0 0 3 -0 4 2 0 0 4 -0 5 2 0 0 5 -0 6 2 0 0 6 -0 7

    Daily Turnover -376 Crore40 days Inventory 15000 CroreCash Flow opportunity in reduction by 10 Days ~ 4000 Crore

    Recurring Savings opportunity @ 20% - 800 Cr

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    Supply Chain StructureSupply Chain Structure

    OEM RSO DealerTier2

    Supplier

    Tier 1

    Supplier

    Tier 3

    Supplier

    TypicallyAssemblies

    TypicallyComponents

    TypicallyRaw Material

    IntegratorsStandardisersComponents SuppliersRaw Material Suppliers

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    July 29, 2011July 29, 201166

    Order Fulfillment System AutoOrder Fulfillment System Auto

    IndustryIndustry

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    Order Fulfillment CycleOrder Fulfillment Cycle

    0

    5

    10

    1520

    25

    30

    35

    40

    45

    Orde

    rEntr

    y

    Orde

    rBank

    Sched

    uling

    Sequ

    encin

    g

    Manu

    factu

    re

    Ship

    toDC

    DCtoDealer

    Total

    NumberofDays

    Order Fulfillment process

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    Supply Chain DriversSupply Chain Drivers

    Efficiency Responsiveness

    Inventory Transportation Facilities Information

    Supply chain structure

    Drivers

    Supply Chain Strategy

    Competitive Strategy

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    Manufacturing (20)

    Inventory in the AutoInventory in the Auto

    Supply ChainSupply Chain

    Dealers (15)Vendors (15)

    Parts Warehouses (20)

    L A t S l Ch iL A t

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    Lean Auto Supply ChainLean Auto upp y a nStrategiesStrategies

    Complexity reduction- entails reducing automobile modeloptions or combinations available to the consumer without

    reducing the end consumers choices.

    Reduction in the number of suppliers - more interfacestend to introduce complexity and goes against the lean supplychain.

    Cluster Approach. Popularized by Japanese, first implementedby Maruti in India and now by others to varying degree

    Inventory management. -reduced inventory at the line sideof the plant and throughout the supply chain (JIT).

    Collaboration- OEM and suppliers cooperation in order toachieve lean supply chains.

    Propagation- OEMs need to put forth their lean supply chainsystems to the Tier 1 suppliers and they in turn must do it withtheir suppliers further down the chain.

    http://www.hfmgv.org/exhibits/showroom/1908/tbig.jpghttp://www.hfmgv.org/exhibits/showroom/1908/tbig.jpghttp://www.hfmgv.org/exhibits/showroom/1908/tbig.jpghttp://www.hfmgv.org/exhibits/showroom/1908/tbig.jpg
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    van age ovan age oComponentComponent

    CommonalityCommonality

    0

    50000

    100000

    150000

    200000

    250000

    300000

    350000

    400000

    450000

    1 2 3 4 5 6 7 8 9

    S

    No of Finished products per component

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    a orm ra eg es o apanesea orm ra eg es o apaneseand selected European carand selected European car

    makersmakers1997 2007

    Manufacturer AnnualvolumeModelsPlatforms Models/platfor

    m

    Volume/platformModelsPlatforms Models/platform

    Toyota 4.89m 45 22 2.0 222,272 40 7 5.7

    Nissan 2.74m 39 24 1.6 105,385 35 5 7.0

    Honda 2.3m 26 15 1.7 153,333 30 5 6.0

    Mitsubishi 1.98m 21 12 1.8 94,285 19 7 2.7

    Mazda 1.1m 18 14 1.3 78,571 16 4 4.0

    Fiat 2.7m 30 13 2.3 207,692 31+ 5 6.2

    Volkswagen

    3.9m 33 11 3.0 358,503 55 4 13.7

    Source: FT World Automotive Marketing

    h k l d SCA h k L l d SCM

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    Ashok Leyland SCMAshok Leyland SCM

    ImplementationImplementation

    00-01 01-02 02-03 03-04 04-05

    Vendor Base 1017 950 738 612 450

    ISO/QS Certified 245 281 364 382 450

    Self Certified 210 240 260 290 350

    JIT PO Value (%) 69 72 74 77 82

    LCL 5 5 6 7 9

    MRP 26 23 20 16 9

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    CardsGearsCards with Gears

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    MotivationMotivation

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    CollaborationCollaboration

    0 1 2 3 4 5

    Customer Service

    Demand Management

    Inventory ManagementOrder Processing/Fulfillment

    Manufacturing

    Product Development

    Transportation

    Distribution Management

    Import Export Management

    Promotion Planning

    Warehousing

    Criticality Score

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    Business

    Curve without

    collaboration

    Business

    Curve with

    collaboration

    Service Levels

    W

    orkin

    gCapi ta

    l

    Free Cash Flow

    Leveraging CollaborationLeveraging Collaboration

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    CollaborationCollaboration

    AnalysedAnalysed

    Opportunity

    Collaboration

    ChallengeLead Times

    ChallengePostponement

    Challenge

    Make it win-win

    OpportunityCollaboration

    OpportunityCollaboration

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    Some thoughts on SCM in AutoSome thoughts on SCM in Auto

    IndustryIndustry

    Forecastso The desire for meeting short term financial

    targets often preempts the best forecastingalgorithms

    o Forecast model and its accuracy is not measured

    frequently.o Operational forecasts usually focus on

    interaction between the dealers and marketing.These forecasts are not time-phased across thesupply chain.

    o Significant time lag between forecast anddelivery, resulting in greater error

    S h h SCM i A

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    2020

    Some thoughts on SCM in AutoSome thoughts on SCM in Auto

    IndustryIndustry

    Standardisation and Variety reduction (Customisation by

    Modularisation)

    Inadequate Infrastructure is leading to frequent changes inproduction schedules in India

    Decision making is slow

    Limited Production Flexibility

    Developing long term strategic partnerships with suppliers. Moreemphasis should be on consistency, less on cost. Line side supplyby vendors in the form of kits.

    Reliable logistic providers are needed

    Use VMI

    Use IT for decision making

    Postponement need to be considered where feasible

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    Postponement in AutoPostponement in Auto

    IndustryIndustry

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    Push and Pull SystemsPush and Pull Systems

    Push-Pull BoundaryPush-Pull Boundary

    PUSH STRATEGY PULL STRATEGY

    Push System.Production decisions arebased on long-term forecasts.

    Pull System. Production is demand driven

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    DifferentiationDifferentiation

    The delayed differentiation strategies can beThe delayed differentiation strategies can be

    viewed as a method to combine push and pullviewed as a method to combine push and pullsystems within a single supply chainsystems within a single supply chain

    CASE: BenettonCASE: Benetton

    Acquire Yarn Finishing Garment Parts Join Parts

    Benetton, major

    supplier of knitwear

    Dyeing

    Push System. Uncolored

    sweaters are made to

    forecast.

    Pull System. Dyeing, a

    reaction to customer

    demand

    Push-Pull

    Boundary

    Harvard Business Review JanuaryFebruary (1997 )

    Postponement Approaches (Lee and TangPostponement Approaches (Lee and Tang

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    Postponement Approaches (Lee and TangPostponement Approaches (Lee and Tang

    1995)1995)Basic Approach Redesign Process for Delaying

    Product Differentiation

    Conditions for Effectiveness

    Standardization Design apart that is

    common to all products.

    Effective when the investment cost and

    incremental processing cost required for

    the standardization are low.

    Modular Design Divide apart into 2 modules

    the first module is a commo

    part and the assembly

    operation of the second

    module is deferred.

    The number of modules increases.

    However, this approach is effec tive whe

    the incremental lead time, incremental

    processing cost and unit inventory holdin

    cost are low.

    Process

    Restructuring:

    Postponement

    of Operation

    Divide anoperation into 2

    steps- the first step is

    common to all products and

    the execution of the sec on

    step is postponed

    Effective when the lead time of the

    common step is significantly longer than

    the second step that is being delayed. I

    addition, this approach is effec tive when

    the second step is a high value added

    Process

    Restructuring:

    Reversal of

    Operations

    Reverse the order of 2

    operations. As a result, the

    first operation is common to

    all products.

    Effective when deferring the high value-

    added operation by reversing the

    operations

    Diff ti ti P i t i

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    ProductDifferentiationPoint

    FamilyDifferentiation

    Point

    T1 T2T3

    Differentiation Points inManufacture

    P t t i A t A bl

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    July 29, 2011July 29, 20112626

    Alternator

    Rotor

    Stator

    Mounting Brackets

    Postponement in Auto Assembly-Alternator Example

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    July 29, 2011July 29, 20112727

    ExampleExampleModel No. Mean

    Demand

    Sigma 95% Assurance

    QuantityA1 20 4 32

    A2 20 4 32

    A3 20 4 32

    A4 20 4 32

    Total Stock 128

    ith Postponement: Brackets set 128 (same)Stators and Rotors 104 ( Mean 80 SigmaSaving 20% in Stators and Rotors

    Postponement in Automotive IndustryPostponement in Automotive Industry

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    July 29, 2011July 29, 20112828

    Postponement in Automotive Industry-Postponement in Automotive Industry-

    A PerspectiveA Perspective

    (a) Postponement usually occurs on the down streamside of supply chain, i.e. close to the customer. In AutoIndustry major supply chain problems crop on the inwardsupply chain. In some literature it is mentioned as earlypostponement (a contradiction in terms)

    (b) Most of the OEM have stopped making components in

    house. There is thus a problem in postponing unlesssupplier is brought into picture

    (c) There is very little awareness of postponementamong the supply chain managers of Auto OEM. Since most

    examples come from PC industry, they feel it is not relevantto them

    (d) Just in time practices have shifted some inventoriesfrom OEM premises upstream, to the supplier. Thus, they

    feel they have already achieved postponement

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    July 29, 2011July 29, 20112929

    Postponement- A CasePostponement- A Case

    StudyStudy

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    July 29, 2011July 29, 20113030

    Slitting

    &Cambering

    HR Coil

    Stage 1Steel Mill

    Forming

    &Drilling

    Slits FrameSideMembers

    Stage 2Auto Factory

    Slits

    Postponement throughCollaboration- Case Study

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    July 29, 2011July 29, 20113131

    Calculation of VOPCalculation of VOP

    Overstock Cost. Since calculations cover a period of one year,it can be assumed that over stock will result in scrap. Pastexperience confirmed that. Therefore overstocking cost is equalto the value of HR coil (Rs 25 per kg) minus scrap value

    Under stock. Although postponement will result in lower understock, we have ignored this cost in both cases, for want ofreliable yardstick. In the postponed scenario, productionflexibility will ensure larger overall benefit. Therefore, ignoringthis cost adds to the robustness of this strategy.Calculations under Postponement.On postponement, all HRCoils are treated as one product. Thus mean is thealgebraic sum and standard deviation is calculated by theLittles Formula i.e. aggregated sigma is equal to squareroot of number of models multiplied by individual sigma.

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    July 29, 2011July 29, 20113232

    COST BENEFIT ANALYSIS OF

    POSTPONEMENT ON RANGES OF MODELS

    0.00

    200.00

    400.00

    600.00

    800.00

    1000.00

    1200.00

    1 3 5 7 9 11 13 15 17 19

    COEFFICIENT OF VARIATION

    VO

    P

    IN

    RS

    LAK 2

    8

    20

    40

    80

    Postponement through

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    July 29, 2011July 29, 20113333

    CustomerRequirementCustomer

    RequirementCurrentModels

    CurrentModels

    RationalisedModels

    RationalisedModels

    Design for

    postponementthrough

    customisation bymodularisation

    Design for

    postponementthrough

    customisation bymodularisation

    Development ofCustomised

    Models

    Development ofCustomised

    Models

    New Modelsbased on

    Modular Design

    New Modelsbased on

    Modular Design

    Redesignbusiness process

    for modulardesign

    incorporatingpostponement

    strategy

    Redesignbusiness process

    for modulardesign

    incorporatingpostponement

    strategy

    Postponement through

    collaboration

    Postponement through

    collaboration

    Customised Vehicles

    Customised Vehicles

    CustomerDemand

    CustomerDemand

    Postponement throughCollaboration- Broad Framework for

    Auto Industry

    i d

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    July 29, 2011July 29, 20113434

    RFID in Auto IndustryRFID in Auto Industry

    OpportunitiesOpportunitiesChallengesChallenges

    Case StudyCase StudyWhere are we?Where are we?

    ConclusionConclusion

    i i i

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    RFID Opportunities in AutoRFID Opportunities in Auto

    ManufacturingManufacturing

    Inventory Visibility Reduction of Inventory in the supplyInventory Visibility Reduction of Inventory in the supplychain and better customer servicechain and better customer service

    Speed of movementSpeed of movement

    Mistake ProofingMistake Proofing

    Data Capture Errors Wrong RecordsData Capture Errors Wrong Records

    Mistakes in Assembly ReworkMistakes in Assembly Rework

    Early discovery of mistakesEarly discovery of mistakes

    After Sales ServiceAfter Sales Service

    Reduction of CounterfeitsReduction of Counterfeits

    Pilferage reductionPilferage reduction

    Vi ibilit Ch ll IVisibility Challenge I

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    July 29, 2011July 29, 20113636

    Visibility Challenge- IVisibility Challenge- I

    Average time spent in searching

    inventory, tools, people etc per dayTotal time in a year in hours(30x300/60)Total cost per employee -@ Rs 75

    per hourTotal Loss per year in anorganisation having 10,000

    employees

    30 minutes

    150 hours

    Rs 11250

    Rs. 11.25 Cr

    No of items involved = 60 Lakhs

    Cost of RFIDing @ Rs 100 60*100 = 60 Crores

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    Visibility Challenge - IIVisibility Challenge - II

    ERP already throws up huge amount of data which is difficultto manage

    RFID will throw out more data, leading to data deluge. Weneed to find ways to manage and use the mounds of data thatwill come from RFID tags.

    While storekeepers may be reduced, we will need costly datamanagers with advanced statistical knowledge.

    Errors usually multiply with more data. Companies must

    design IT systems based on the assumption that reading 100percent of the RFID tags today isn't possible. We are habitualof concealing something in short supply. If we want to cheat,RFID will allow us to cheat

    Speed of Movementpee o ovement

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    Speed of Movementpee o ovementChallengeChallenge

    Speed increases because of faster reads

    Scanning/reading/counting account for just 10% of non valueadded activities

    Major wastes (Muda) in supply chain in India are:

    Variance Inventory can go up by 60% if COV is 20% for99% assurance level

    Highway movement A truck in USA covers 1200 Km perday as against 400 km in India. That is the mean. It canvary as much as 250 to 500. A truck takes 6 days fromNorth to South with a standard deviation of 2 days(exponential distribution). What will real time information do

    for me? Can RFID move the truck faster? Can it grease thepalm of five agencies at each check post faster? Asks a COOof a manufacturing company

    Quality

    Etc.

    C titiC titi

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    CompetitivenessCompetitiveness

    ChallengeChallenge

    India USA

    Cost of Labour per Hour Rs 30 Rs 300

    Possible bar code scanning in one hour 150 150

    Labour cost per scan Rs .20

    (20 Paisa)

    Rs 2.0

    Cost per tag including reader and otheroverheads

    Rs 100 Rs 100

    No of repeated scans required in thesupply chain to recover labour cost

    500 50

    Viable Tag price with 10 reads perproduct

    Rs 2 Rs 20

    Labour cost savings- India v/s USA

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    Error/ Mistake ProofingError/ Mistake Proofing

    ChallengeChallengeAlthough RFID scanners can read tagged product at speeds in

    excess of 600 ft/minute (Wal-Mart expectation!), the need toisolate and fix bad tags by slowing down the conveyordramatically reduces the average performance of the scanningequipment. Even things as basic as tag placement on acomponent/ pallet can dramatically impact the functionality

    and accuracy level of the RFID equipment.

    Scanning RFID signals off a book is not the same as scanningoff a Self Starter. Imagine what a curved surface can do to anRFID transmission, with signals being deflected and bouncedoff ad infinitum.Water and Metals are mistake dens for RFID trouble spotsElectrical Appliances can distort reads unless taken care ofWho dunnit??

    Counterfeits/ PilferageCounterfeits/ Pilferage

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    Counterfeits/ PilferageCounterfeits/ Pilferage

    ChallengeChallenge

    Most technology solutions to Counterfeiting inIndia tend to fail because:

    Even when people know it is duplicate, they still buy:

    Cheap

    Readily availablePersonalized after sales service

    Life cycle cost is low

    RFID cannot change the culture

    Counterfeits always have a counter-counterfeit solutionPilferage? Remember GPS Tracker in The Da Vinci Code

    T h i l Ch llT h i l Ch ll

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    Technical ChallengesTechnical Challenges

    Problems with RFID StandardsProblems with RFID Standards RFID systems can be easily disruptedRFID systems can be easily disrupted RFID reader CollisionsRFID reader Collisions RFID Tag CollisionsRFID Tag Collisions Security, privacy and ethics problems with RFIDSecurity, privacy and ethics problems with RFID The following problems with RFID tags and readers haveThe following problems with RFID tags and readers have

    been reported.been reported. An RFID tag cannot tell the difference between oneAn RFID tag cannot tell the difference between onereader and another.reader and another.

    RFID readings are not 100% accurate. It is not even six-RFID readings are not 100% accurate. It is not even six-sigmasigma

    RFID tags are difficult to removeRFID tags are difficult to remove

    RFID tags can be read without your knowledgeRFID tags can be read without your knowledge RFID tags can be read at greater distances with a high-RFID tags can be read at greater distances with a high-

    gain antennagain antenna RFID tags with unique serial numbers can be linked toRFID tags with unique serial numbers can be linked to

    your companyyour company

    Cost Benefit Sharing AcrossCost Benefit Sharing Across

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    Cost Benefit Sharing AcrossCost Benefit Sharing Across

    Extended EnterpriseExtended Enterprise

    HistoricData

    Ease of

    Maintenance

    BrandAuthentication

    Distribution

    Theft

    ControlBrandAuthentication

    Inventory Mgt

    Theft Control

    BrandIdentification

    Assembly

    Distribution

    Support for Recall

    Recycling

    Distribution

    Theft

    Control

    ReaderInfrastructure

    ReaderInfrastructure

    Readerinfrastructure

    Integration intoexisting ITinfrastructure

    Tagging

    Changes inproductionprocess

    Reader

    infrastructure

    Post SalesDealerOEMSupplier

    Benefits

    Cost

    Supplier End Customer End

    BenefitsCosts

    ROI Ch ll

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    ROI ChallengeROI Challenge

    The Biggest Challenge!The Biggest Challenge!

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    CaseCase

    StudiesStudies

    I- Asset tracking -I- Asset tracking -

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    I Asset tracking I Asset tracking InstrumentsInstruments

    Track locationTrack CalibrationTrack utilisationTrack Availability

    Reduce search timeReduce wait time of critical equipment to

    Departments

    Streamline preventive maintenance (PM)Enhance security

    Store

    User Dept 1

    User Dept III

    User Dept II

    Alarm!

    252666135 Compression Tester out

    II Mistake Proofing Case StudyII-Mistake Proofing Case Study

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    II-Mistake Proofing Case StudyII-Mistake Proofing Case Study

    RFID in AssemblyRFID in Assembly

    ERP

    Reader Reader

    Components

    C St d ICase Study Issues

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    Case Study - IssuesCase Study - IssuesTag placement is critical, and requires empirical testing to find theoptimal location. Properly placed tags offered more accurate reads.Tags had to be isolated from metal components. Until tags aremanufactured with an insulating material, there will be restrictions aboutwhere they can be placed.Factory workers need to be thoroughly trained in use of this technology.In unionized environment, it is extremely difficult to implement such

    initiativesTags could be too big for some of the valuable components used inproduction, such as sensors in engine. Micro tags tends to be costlier Full data which is generated cannot be used due to existing constraints.For example, existing MIS applications may not be able to accept thisdata, and processing it may require more IT resources. During the

    planning phase, it will be necessary to understand how much of this datais useful and how it can be integrated with existing MIS applications.

    Note: The Project did not take off because of ROI (Payback Period:15 Years

    Proposed Approach to RFIDProposed Approach to RFID

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    p ppp ppImplementation in AutoImplementation in Auto

    ManufacturingManufacturing

    Establish an RFID Cross Functional Team from Engineering,Establish an RFID Cross Functional Team from Engineering,Manufacturing and Supply chainManufacturing and Supply chain

    Identify a pilot. Assembly line of a costly item is ideal. Use activeIdentify a pilot. Assembly line of a costly item is ideal. Use activetags and circulate within manufacturing by reusing. Do not promisetags and circulate within manufacturing by reusing. Do not promisepositive NPV at this stagepositive NPV at this stage

    Encourage major vendors supplying assemblies costing more thanEncourage major vendors supplying assemblies costing more than

    Rs. 10,000 per piece to start similar pilots so that the benefits areRs. 10,000 per piece to start similar pilots so that the benefits areshared across the supply chainshared across the supply chain

    Once the pilot is successful in establishing positive NPV, duplicateOnce the pilot is successful in establishing positive NPV, duplicateon all A items (costing Rs 5000 or more), down the value chain,on all A items (costing Rs 5000 or more), down the value chain,costly assembly first- all in manufacturingcostly assembly first- all in manufacturing

    Do not go for the parts warehouse immediately. Let the partsDo not go for the parts warehouse immediately. Let the parts

    warehouse follow manufacturing. Costs will be minimal, if done inwarehouse follow manufacturing. Costs will be minimal, if done inthis fashion.this fashion.

    Expand beyond the supply chain on both ends byExpand beyond the supply chain on both ends by Bar code B and C components, simultaneously and integrate theBar code B and C components, simultaneously and integrate the

    two technologiestwo technologies

    ConclusionConclusion

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    ConclusionConclusion

    RFID is not a technology solution to supply chain complexityRFID is not a technology solution to supply chain complexity

    in manufacturing. It can only fit in properly if it is embeddedin manufacturing. It can only fit in properly if it is embedded

    into processes, not the other way round. Its value, as withinto processes, not the other way round. Its value, as with

    any technology, lies in providing solutions to particularany technology, lies in providing solutions to particular

    business challenges. While doing so, one should be aware ofbusiness challenges. While doing so, one should be aware of

    its advantages and its pitfalls.its advantages and its pitfalls.

    I also refer to aI also refer to a FortuneFortune interview in which the Federalinterview in which the Federal

    Express CIO, when asked about RFID, quoted Bill Gates'Express CIO, when asked about RFID, quoted Bill Gates'

    definition of a "two-ten technology," i.e., for the first twodefinition of a "two-ten technology," i.e., for the first two

    years, it's all about hype, then disappointment, until 10years, it's all about hype, then disappointment, until 10

    years later when people realize the technology has becomeyears later when people realize the technology has becomeembedded in daily life.embedded in daily life.

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    ??

    S f R ltS f R lt

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    July 29, 2011July 29, 20115252

    Summary of ResultsSummary of ResultsThere is a linear increase in value of postponement with COV.This is expected due to COV and mean demand being uniformly

    distributed and calculation of standard deviation (SD) fromthese two leads SD to be uniformly distributed. VOP will thushave linear relation ship with change in COV or mean demandat given No. of models.

    Value of postponement increases sharply as the number ofmodels goes up from 2 to 8. However, as the number of modelsis increased further towards 80, relative increase is muchlower. This leads us to an interesting observation postponement strategies yield comparatively high value ofpostponement when number of products to be differentiated is

    small. As the number of models is increased, marginal benefitis not as high.

    Change in business process to effect postponement will costthe company Rs. 5 Crore approximately. Assuming COV to be a

    moderate 10%, we get a VOP of Rs. 5.46 Crore for 80 models.This ields a a back eriod of less than one ear.

    IMPACT OF CYCLE SERVICE LEVEL ON VOP- 80

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    IMPACT OF CYCLE SERVICE LEVEL ON VOP- 80

    MODELS

    0.00

    200.00

    400.00

    600.00

    800.00

    1000.00

    1200.00

    1 3 5 7 9 11 13 15 17 19

    COEFFICIENT OF VARIATION (COV)

    V

    OP

    0.65

    0.70

    0.75

    0.80

    0.850.90

    0.95

    RFID A M f t i MNC 2007

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    RFID Across a Manufacturing MNC 2007of interest

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    Parts / Assembly Shipments

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