Revamping the Supply Chain-The Ashok Leyland Way

Submitted to: Professor J. M. Subramanya

Presented by Group A9
Anna Kallukaren
Deepak M
Laxmi Narayan Nanda
Nupoor Jain
Siddarth Shetty
Vivek Narayanan

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Brief Idea-Areas SCM Helps to focus

Supply chain management flow is divided into:
Product flow: movement of goods from supplier to customers and
also in case of any customer returns or has service requirements.
Information flow: Covers updating the status of the delivery as well
as sharing information between suppliers and manufacturers.
The finance flow: Encompasses credit terms, payment schedules and
consignment and title ownership arrangements.
The presentation focuses on how Ashok Leyland implemented and
integrated these practices so as to improve the overall cost
effectiveness & efficiency of its supply chain.

Introduction
2500

2482.5

2000
2014.3
1996-97

1500

1997-98
1000
500
124.9 18.4

0
Sales

PAT

Recession Effect!
Freight generating sectors saw a steep decline
resulting in a severe downturn of freight volumes.
17.62 % of revenues down and inventories started
to build up
Results shown on working capital.
Climbed from 33.34% of sales in 1993-94 to
58.81% of sales in 1997-98.

Initiatives
Tiering vendor network to reduce number of vendors, and
consequently moving to JIT ordering system to joint improvement
programs (JIP)

Corporate material department(CMD): Rated the vendor based on

feedback received from supplier quality assurance cell, send
specifications & negotiated the price
Materials Management Departments(MMDs): scheduling based on
unit production plan
Purchase Philosophy: Over 90% parts were bought out

Develop a vendor base committed to continuous improvement to

meet quality cost and delivery standards.

Q1) Ashok Leyland with an aim to reduce costs

improved the in-bound supply chain through several
important strategic revamping measures. Explain.
Project OSCARS- Optimising Supply Chain and Rationalising
Sourcing
Single strategic sourcing agency
Preference for vendors who had access to technology
Bring down Supply Chain Costs.

Single window system

Supplier Tiering

Just In Time

Single Window System

Jointly formed by Strategic Sourcing and Corporate Quality
Engineering(CQE) teams
Advantages for suppliers:
Convenient single point contact
Easier to share drawings, negotiate prices and long-term
business volumes
Assistance and consultancy on quality issues
Phase 1:
Creation of country-wide database for the 22,000+ parts
Match the parts with suppliers part numbers

Result of Phase 1
Corporate buying covered
major suppliers (Rs 10 lakh
plus per year)

Total Business
252 suppliers(18%)
294 suppliers (21%)

854 suppliers (61%)

2%
6%

Classified materials into

packs
CMD + CQE specialists for
each pack

92%

Supplier Tiering
Tool Kits
Example: reduced
suppliers from
1400 to 750

Strategic sourcing
aimed at
reducing cost for
supplier so that
gains were real,
painless and
sustainable

Supplier G
Supplier A

Supplier D
Supplier H

Ashok Leyland
(SWS)

Supplier B

Supplier E

Supplier I

Supplier J
Supplier C

Supplier F
Supplier K

Just-In-Time (JIT)
Approach:

JIT for high value/high volume items

Low cost logistics for low value/high volume items
Each stage produced only as much next stage needed
Push system

JIT

Pull
system

Classified the components used by the company into

Categories 'A' (75% of the total cost of components), 'B'
(18%), and 'C' (7%),

JIT Process
Customer

Shipping

orders

Supplier
dispatches
consignment

Retailer
orders
Plant
sends JIT
card

Q2) Discuss how Ashok Leyland re-engineered its

out-bound supply chain.
Objectives:
Improving customer satisfaction and reducing finished goods inventories
Improving service levels with optimum pipeline inventory levels

3 major parameters for service level targets:

Order to delivery
Reliability of deliveries
Availability of order status information

New three-tier distribution network

Results of OSCARS II
Improved customer satisfaction
Improvement in demand forecasting and data management

Hosur plant in Karnataka introduced a new TQM process

Seven Plus One TQM model

Rule

Objective

Result

Total Cost
Management(TCM)

Cut Cost

Reduced Operating cost

Energy Management

Optimize energy loss

Reduced Avg. power cost

per product

Value Engineering(VE)

Efficient material
usage

Reduced chasis cost

Cross Functional
Teams(CFT)

Synergy

Saved Rs.18.2 million

Suggestion Scheme

Involve everyone

Quality improvement and

Cost cutting

Inventory Management(IM)

Better housekeeping

Best IM in indusrty

Shop Investment Programme Monitor and Utilize

Operating cost as % of
shop turnover machines

Plus One

Training across all levels

Training

 To understand customer needs and assimilate

knowledge, Ashok Leyland adopted 4P Programme.

the

Probe,
Prioritize,
Plan
Position.

This worked in tandem with manufacturing as part of crossfunctional team (CFT). The CFTs worked towards continuous
improvement in product enhancement and marketing.
Ashok Leyland built a Marketing Information System (MIS)
to monitor the trends and forecast demand from the input
dealers and field executives.

Q3) Discuss in brief the quantitative benefits in

regard to various measures of supply chain
revamping exercise for Ashok Leyland
In the year 1999-2000: Ashok Leyland recorded a net profit of Rs. 1.9 crore on
sales of Rs. 1,092 crore

Raw material costs were down 1-2% and inventories

reduced by 300 crore

Sold 37,859 HCVs, 27% more than 1998-99

Total income increased by 25% from 1998-99

Increase in operating profit by 55 crore

Reasons for Good Performance

1) Operational efficiency resulting from strategic raw
material sourcing, which cut costs.
2) Better control over process inputs by tightening
supply chain & inventories.

3) Reduced operating expenses through cost savings

and energy, tools, spares etc.
4) Adoption of preventive maintenance policies, etc.

Current Scenario
Sales of 60,000 and about 7,000 engines annually

2nd largest commercial vehicle company in India, with a

market share of 28%
Market leader in bus segment
Carrying more than 60 million people per day, more than
Indian Rail network!
Joint venture with Nissan motors, in the light commercial
vehicle segment

Conclusion
Ashok Leyland in order to sustain in the market should :
a) Provide world class technology
b) Provide value to the customer and
c) keep innovating there products!

Thank you