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Revamping The Supply Chain-Ashok Leyland way

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Vivek Narayanan

on 22 October 2014

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Transcript of Revamping The Supply Chain-Ashok Leyland way

Revamping the supply chain-The Ashok Leyland Way
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.

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
of sales in 1993-94 to
of sales in 1997-98.

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

Just In Time (JIT)

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

Classified the components used by the company into Categories 'A' (75% of the total cost of components), 'B' (18%), and 'C' (7%)

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

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 HCV’s,
27% more
than 1998-99

Total income increased by
from 1998-99

Increase in operating profit by 55 crore

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
Corporate Quality Engineering
(CQE) teams

Advantages for suppliers:

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

Corporate buying covered major suppliers (Rs 10 lakh plus per year)

Classified materials into

CMD + CQE specialists for each pack

Q2) Discuss how Ashok Leyland re-engineered its out-bound supply chain.
To understand customer needs and assimilate the knowledge, Ashok Leyland adopted
‘4P’ Programme.


worked in tandem with manufacturing as part of cross-functional 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
Operational efficiency resulting from strategic raw material sourcing, which cut costs.

Better control over process inputs by tightening supply chain & inventories.

Reduced operating expenses through cost savings and energy, tools, spares etc.

Adoption of preventive maintenance policies, etc.

Reasons for Good Performance
Sales of
and about
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

Current Scenario
Ashok Leyland in order to sustain in the market should :

Provide world class technology

Provide value to the customer and

Keep innovating there products!

Overview of the Company
One of the largest automobile and auto component manufacturing companies
headquartered in Chennai

Part of
Hinduja Group

Turnover of
US $ 2.3 billion
in 2012-13

Largest supplier of logistics vehicles to the Indian Army

Product Portfolio
Buses, Trucks, Light Vehicles, Defence Vehicles and Power Solutions
Full transcript