72,000+ Machines JCB - Introduction World #3 Fastest Diesel Car on - - PowerPoint PPT Presentation

SLIDE 1

Cost Reduction in Supply Chain Management g

Feb 6, 2009 Subir K. Chowdhury

JCB: A Multi Product Company in Construction Equipment and

JCB - Introduction

Fastest Diesel Car on Earth powered by JCB Engine (563 Km/hr)

Earth moving segment

The dictionary definition: JCB n. Trademark. A type of construction machine with a hydraulically operated shovel on the front and an excavator arm on the back (named from the initials of Joseph Cyril Bamford, its English manufacturer).

72,000+ Machines

World #3

18 plants, 670+ Dealers, 1500+ Outlets, 8000+ Employees, Presence in 150+ countries

Backhoe Loadall

World N. 1 - 37% World N. 1 - 25%

Building India’s Infrastructure

Agricultural Productivity Construction Engineering Building Construction Agricultural Productivity Disaster Management Waste and Recycling Material Handling Construction Engineering Building Construction

Q3/Q4’08 Q1’09 Q2’09 Q3’09 Q4’09 Q1’08 Q2’08

Business Environment Slow Down Triggers

Tighten since Apr’08

C r ed i t a v a i l a bi l i t y a nd C

• s

t

Sucked to neutralize inflation wef Apr’08 Rising since Jan’08

C

• mmod i t y P

r i ce

Instability & Speculation Rising since Jan’08

S t a t e a nd Na t i ona l E l ect i ons Li q ui d i t y

inflation wef Apr 08

Challenges : Cost Material Cost v/s Selling Price Movement

8.0 13.0

ver January 2008 Rising Gap

• Steel,
• Rubber,
• Fuel Prices
• 2.0

3.0

%age Change ov Selling price 0.0 0.46 0.75 1.91 2.77 2.98 3.78 4.65 4.65 4.65 4.65 4.65 Material Cost 0.0 0.60 0.80 2.50 4.00 5.00 7.00 8.00 8.50 9.00 9.00 8.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Challenges : 2008 & Beyond …

Riding on 2007 wave

Sudden Decline …

500 1000 1500 2000 2500 uary ary rch April May une July Aug Sep Oct Nov Dec Backhoe, Units

• Cost & Availability of Finance
• Rising Inflation
• Commodity Cost Increase
• Low Infrastructure Investment
• Low Asset ( Machine Park)

utilization

• Overall US slowdown impact

Janua Februa Marc Ap M Jun Ju Au Se O N D BHL Industry BHL JCB

SLIDE 2

The Golden Rule

PACE 2008

Imperatives & Way Forward

Agenda

• Objective
• Evolution
• Scope
• Methodology
• Conclusion

Objective

Challenge Cost, Enhance Value

• Drive as a Common Initiative
• Develop Structured Implementation Programme
• Explore Companywide Cost Elimination Opportunities

p p y pp

• Train & Tool Up Employees
• Intensify Employee Engagement
• Track, Review and Accelerate Projects
• Generate Targeted Savings

Evolution : PACE 2008

Starting with VA / VE….. Great Potential and much more Savings needed to Maintain Profitability and Build Competitiveness Companywide Engagement Participation : All Stakeholders Looking at All Functions and Exploring New Potential Areas Creating a Common Umbrella Transforming Cost Structure : Challenging Cost, Enhancing Value Integrated Initiative

Scope

Across all Functions… 10 Key Areas… 50 Potential Elements Areas Elements Mentor Purchasing

Negotiations, Localization, New Sources and Share Of Business SD

VA / VE

Design for Value, Material Specification and Optimization SKC

Manufacturing

Consumables, Power & Fuel, Scrap and Repair & Maintenance SKC

HR & Facilities

Manpower Cost, Vehicle Cost, Legal Expenses, Travel, Communication and Printing & Stationery RK

Sales & Marketing

Cost Of Business, Selling Expenses, Receivables, After Sales Expenses, Advertisements, Finished Goods, Zones /Depots Expenses and Operator Training School AM Training School

Logistics

In & Out bound Freight, Alternate Sources and Packaging GPS

Finance & IT

Bank Charges, Insurance, Tax Planning, Transfer Pricing, Interest Income, System Upgrade and IT Hardware SS

Parts & Service

Realization & Selling Expenses, Procurement Negotiations, C&F Expenses, Inventory and Packaging RS

Product Engineering

Design Productivity, R & D Expenses and Tooling SA

Quality

T3 , T12 Cost and Cost Of Quality GS

Driving “Big Hairy Audacious Goals” : Scaling Up Savings……. INR XX (£ XX)

• Resources
• Commitment & Awareness
• Training & Deployment

Methodology

• Cost Elimination Tools
• Target Setting & Deployment
• Review Mechanism
• Results

PACE 2008 War Room EXEC Members

• Purchasing
• Administration
• Logistics
• Sales & Marketing
• Product Engineering
• Manufacturing & Quality

Methodology - Resources

PACE Core Team Mentor Team

• Structure 1
• Transmissions
• Hydraulics
• Cab & Electricals
• Structure 2
• Shop Practices
• Linkages
• Other parts
• Finance
• Parts

Current CFT Membership Strength: 80 + VA / VE Teams

Methodology

Commitment & Awareness

SLIDE 3

Participation Pledge

Commitment of all Employees & Stakeholders : Engaged to Deliver

Visual - 1 Visual - 2 Visual - 3 Visual - 4 Visual - 5 Visual - 6 Visual - 7 Visual - 8

Methodology

Training & Deployment

SLIDE 4

Methodology - Training & Deployment

‘Cost Down’ : Module on Creativity TRIZ ( 40 Principles)

First Batch of PACE 2008 Core Team

• Opportunities Identified : INR XX (GBP XX)
• Process Cascaded Down to Team Members
• Road Maps ready

‘War On Waste’ :

Sixty Associates trained

Module on How to spot Waste How to eliminate Waste

• Eye for Waste
• Best Eight Ideas recognized
• All associates covered by Dec 08

‘Operational Excellence’ : Module on Total Cost Ownership Total Value Management

Summit attended by PACE Core Team

• New Cost Paradigm
• Case Studies on Logistics, Operation, HR

Full Day Workshop

1st VA / VE Workshop

PACE

Full Day Workshop 50 Cross Functional Participants Context setting by Experts & Leadership Team 5 Competition machines 477 Ideas Generated.

Methodology

Cost Elimination Tools

Methodology - Tools

WAVE – I Initiative piloted in H1 2008 COST TYPE TOOLS USED POTENTIAL TOOLS

Direct Cost : Material cost

• TCO / VE eSourcing

Manufacturing cost

• DMAIC / Lean VSM / TOC

Consumables

• DMAIC eSourcing

Rework & Scrap

• 8D / DMAIC

TOC Warranty

• Reliability tools

Indirect Cost Administration cost

• Budgeting eSourcing

Sales & marketing cost

• Budgeting eSourcing

Salary & wages

• Budgeting HR Mapping

Financial cost

• Budgeting Benchmarking

Capital Expenditure

• Benchmarking eSourcing

VE – Value Engineering VSM – Value stream Mapping TOC – Theory of Constraints TCO – Total Cost Ownership

Methodology - CTQ Drilldown

Example : Welding Consumables Reduce welding consumable cost

Business CTQ

Reduce consumption of welding consumables Reduce the consumption of welding wire Reduce the consumption of Argon Gas Reduce the consumption of torch spares PROJECT CTQ 1 PROJECT CTQ 1 PROJECT CTQ PROJECT CTQ 2 2 PROJECT CTQ 3 PROJECT CTQ 3

Methodology - S I P O C

Example : Welding Consumables

S Welding consu Welded c Pain

S I P O C

Issue Issue ldi ldi welding welding

• peration
• peration

Store mable, Fabricated parts components nt shop welding welding consumabl consumabl e Enter issue Enter issue detail in log book detail in log book WAVE I Projects : Welding , Transmissions Consumable Reduction completed

Methodology

Target Setting & Deployment

A B 5

Identified Savings 2008-2009 @ GBP XX (INR XX )

Target Setting

86% Of the Identified Savings

• Purchasing
• VA / VE
• Manufacturing

C D E F G H I P u r c h a s i n g V A / V E M a n u f a c t u r i n g S a l e s & M k t A d m i n i s t r a t i

• n

L

• g

i s t i c s F i n a n c e , I T & T a x e s P a r t s N e w D e v e l

• p

m e n t

Savings Identified …. GBP XX Savings still to be identified …. GBP XX

Methodology

Review Mechanism

SLIDE 5

Review Mechanism

• Weekly Reviews
• Within Teams
• Core Teams with Mentors
• Updates in EXEC

Updates in EXEC

• Monthly Reviews – Core Team with Mentors
• Quarterly Reviews – Master Schedule with MD

Linkage of Individual Performance to PACE 2008 Initiative

Methodology

Results

PACE

VA / VE Dashboard

S No Request Attention Proj No Project Name Project Leader Charter Concept Mockup PIP Sign off Stock Control Design Validation PI Release Stock Finish JOB #1 Overall Project Time Cost Resouce 1 V001 Combination Switch Atul Kataria G G G G 2 V002 Aluminium Oil Cooler Atul Kataria G G G G 3 V003 Front Axle Re-design Sanjay Kathuria

• G

G Y G 4 V004 Bucket Optimisation Sanjeev Kalia G G G G 5 V005 Rear Axle Oil and Inhouse m/cng Samir Das

• G

G G G 6 V006 Stabiliser check valve on 4DX Roopak Sharma G G G G 7 V007 BKT Tyres Atul Kataria

• G

G G G 8 V008 Grease Bucket Pump Pradeep Ghai G G G G 9 ! V009 Tooth & Cutter Sunil Bhatia Y Y G G 10 ! V010 Loader Valve Bock Roopak Sharma R G G G G 11 V011 Paint Optimisation Sanjiv Soni

• G

G G G 12 V012 Crown Wheel Material Change Mukesh Chaudhary G G G G 13 ! V013 Transmission Valve Atul Kataria R R G G R 14 ! V014 CDW Tubes for Hydraulic Cylinders Atul Kataria R R R G R 15 V015 Track Rod Material Change Atul Kataria R G G G G 16 V016 Rotomoulded Cab Roof Dheeraj Sethi R G G G G 17 V017 Delete machining on Axle Arm Mukesh Chaudhary R G G G G 18 V018 IM Consoles Atul Kataria R G G G G Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 4 5 3 7 9 9 7 7 3 3 8 8 8 7 6 2009 25 50 90

GBP XX Mn

19 V019 Valve without clamp (4DX) Roopak Sharma R G G G G 20 V020 EVB Atul Kataria R G G G G 21 V021 Front Axle Paint Sanjiv Soni

• G

G G G 22 ! V022 IM Gaitors Atul Kataria R

• R

R G R 23 V023 Bonnet Thickness Reduction Sanjay Kathuria R G G G G 24 V024 Parker Pump Roopak Sharma R G G G G 25 V025 Brake Piston Material Redn Sunil Bhatia R G G G G 26 V026 Parts Catalogue Rationalisation Pradeep Ghai

• G

G G G 27 V027 Smaller Size Rear Combi Switch Devendera Singh R G G G G 28 V028 Hydraulic & Diesel Tank Protusion Reduction Atul Kataria R G G G G 29 V029 Tool Kit Optimisation Atul Kataria R NR G G G G 30 V030 Hydraulic Tank - Baffle plate thicknesAtul Kataria R G G G G 31 V031 Loader tower cover thickness ReductSunil Bhatia R G G G G 32 V032 Valve Block Rock Breaker Roopak Sharma R G G G G 33 V033 Grill Thickness Reduction Sanjay Kathuria R G G G G 34 V034 Foot Rest material, Size and Wt reduction Sanjeev Kalia

• G

G G G 35 V035 Aircleaner Sunil Bhatia R G G G G 36 V036 Recovery in Powder Coating Sanjiv Soni

• G

G G G 37 V037 Removal of Hard anodising from Pist Sunil Bhatia R G G G G 38 V038 Drivehead casing machining removal Mukesh Choudhary

• G

G G G 39 V039 Test Point Roopak Sharma R G G G G 40 V040 Grease Hose Length Redn Sanjiv Soni

• G

G G G 41 V041 Removal of Hard anodising from Pist Sunil Bhatia R G G G G 4 3 9 9 9 8 8 8 7 7 7 6 6 6 5 5 3 2 Charter PIP Sign off Stock Control Validation PI Release Cut-in Ramp-up A B C D E F G 12 5

Dashboard

PACE

T ar get Li ne of Si ght Real i sed Savi ngs'08 I mpact of '08 i n '09 T ot al Real i sed New I ni t i ati ves f or '09 Oppor t uni t i es t o be i dent i f i ed A B 200 1200 Total Top 5 VA-VE 2009 A B C D 3200 Total Negot. Locl. Hardw .

Purchasing 2009 A B C D E F G H I J 2000

Total Mfg Finance Warranty Sales Parts HR Logistics New Dev Top 10 PACE Others - 2009

Conclusion

Cost Reduction program (5 I Approach) should be:

• Integrated

All functions should participate

• Involved

All employees should be involved

• Imperative

Program should be given utmost importance

• Innovative

Think beyond the normal practices

• Institutionalized

Program becomes an accepted part of the structure of an organization

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