APPLYING THEORY OF CONSTRAINTS: REPLENISHMENT MODEL FOR SELLING - - PowerPoint PPT Presentation

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19th February, 2010

APPLYING THEORY OF CONSTRAINTS: REPLENISHMENT MODEL FOR SELLING BRANDED RE-BARS IN INDIA

Presentation at 5th National Quality Conclave Presenter: Rupam Bhaduri (Chief TQM) Email-ID: rupam.bhaduri@tatasteel.com

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India

LAND OF CONTRASTS….

• 18 official languages
• 1,652 dialects out of which 325 spoken

Linguistic

• Over a billion people
• 28 states and 5 union territories
• 6,38,365 villages
• 3.28 Million square kms.

INDIA

• 2nd largest Newspaper market in the world
• More than 2 million graduates every year
• Yet India accounts for 34% of the worlds illiterates

Education Enigma

• Jets to Bullock Carts
• Modern Ports to Village bamboo quay’s
• Worlds Largest Railway Network to Hand pulled

rickshaws/carts

Infrastructure

Therefore understanding and meeting the need of the consumer is a challenge for any company in India

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TATA STEEL INDIA LONG PRODUCT OPERATIONS

6.5 MTPA LONG 3 3.5 FLAT 31% 31% 18% 20% SEMIS WIRE RODS RE-BAR FOR RETAIL RE-BAR FOR PROJECTS

Jamshedpur

15 stockyards 21 Sales offices

31 Distributors 1700 Retailers ~ 2,00,000 Individual House Builders / year

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TATA TISCON HAS SHAPED THE RETAIL MARKET OF RE- BARS IN INDIA

5000 3000 2000 6250 4000 5250 3500 5250 4600 4480 FY05 FY06 FY07 FY08 FY09

Rs/Ton

Target Actual

18-20% premium over Regional Players Market Share of 10% Competitive Environment

• Fragmented Un-organized

local players spread across the country

• Quickly copy the market
• fferings of Tata Tiscon
• Promise a low lead time since

they serve a small local area

Tata Tiscon Brand Objectives

• Continuously offer new

products and services, which are the first of its kind in India

• Pan India presence

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PROBLEM IDENTIFICATION - 2006

Voice of Customer strengthened by Customer Satisfaction survey & QFD Retail shops – We lose sales due to stock outs because consumers buy the brand whose complete section-mix is available off-the-shelf. Distributors & Retailers would keep more stocks COUNTERMEASURE

Situation in 2006 Other Related issues

• Additional Space for storage
• De-gradation of material
• Pilferage

Parameter Tata Steel Distributor Retailor Inventory (Days) 15 20 40 % Stock-outs 10-20% 10-30%

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UNDERSTANDING THE ROOT CAUSE

Sales Offices / Stockyards Distributor Forecast Monthly Supply

• Against Forecast
• Against Order

Mills

Monthly Sales Forecast Distributor Daily sales Production against Forecast Production Plan Dispatch against Forecast

Forecast driven Supply Chain

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Capacity Utilization Operational Flexibility

Conflict Produce more to reduce fixed cost

• Longer campaigns
• Do thicker sections to increase

productivity

Task force formulation with cross- functional members

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RE-DESIGNING THE SUPPLY CHAIN

Customers Stockyards Plant Ware house BM BM

• BM

Distributor & Dealers Plant

Based on Daily consumption

BM Replenishment time 1-2 dys Distributor sales Dealer Daily sales

BM: Buffer Management

Policy KPM Means KPM Infrastructure Strategy 1.0 Ensure Availability of all SKU’s at all 1700 Retail outlets across the country at all the time Stock outs 1.1 Production and supply as per Buffer Status Due Date Performance 1.3 Create visibility

• f buffer stock &

consumption at all points through IT enablement 1.2 Roll out Replenishment Offers for each Distributor & Retailer Task Achieving Project

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1.1 PRODUCTION & SUPPLY AS PER BUFFER SYSTEM

Mill NBM

41% 50%

• 25%

4 47% 55%

• 48%

5 50% 54%

• 48%

6 72% 29% 25% 21% NBM 16mm 45% 38% 35% 22% NBM 12mm

• 35%

14% 43% 72% NBM 10mm Mill Section 7 3 2 1 Month Sept’09

Buffer Penetration at Plant Ware House

Section change to 10mm Section change to 16mm Buffer Status at Regional Ware House

Ahmedabad Faridabad Kolkata Chennai Delhi 16mm 12mm 10mm Regional Stockyard

Despatch 10mm to Chennai Despatch 12mm to Faridabad

Similarly to Distributors & Retailers

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1.2 ROLL OUT OF REPLENISHMENT OFFER TO DISTRIBUTORS & RETAILERS

Changing role of the Distributors & Retailers

FROM TO

• Place orders & Follow up

for supplies

• Track Inventories
• Monitor ROI and

Working Capital

• Work Collaboratively with

Tata Steel to – Focus on consumer sales – Build Brand promise

Education and training for the sales force, Distributors and Retailers Distributor & Retailer has to provide consumption data daily for Tata Steel to

replenish accordingly. This was not possible without IT enablement of data flowing all across the country. Key Enablers

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1.3 CREATE VISIBILITY OF BUFFER STOCK & CONSUMPTION AT ALL POINTS THRU ‘IT’ ENABLEMENT

Challenges Faced

• Spread to Remote locations

where Connectivity is a concern

• Retailers and Distributors were

uneducated

Countermeasures

• Mobile based SMS option for the

retailers

• In-house developed accounting package

“Ex-package” for the distributors

On-line reports helping in Daily Management & War Room Meetings

30% 100% 95% 95% 80% 100% 80% 30% 0% 25% 50% 75% 100%

FY05 FY06 FY07 FY08 FY09

% Daily Compliance

Target Actual

Data Sending compliance of distributors

50% 0% 75% 65% 50% 0% 25% 50% 75% 100%

FY07 FY08 FY09

% Daily Compliance

Target Actual

Data Sending compliance of Retailers

1 2

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DAILY MANAGEMENT PRACTICES CONTINUED

• Review frequency could now be crashed from monthly to Daily – War rooms

across various function was a regular activity

• Greater transparency on which link was weakening and PDCA actions required
• Performance measures like Campaign change time, Lifting time of Distributors

/ Retailers was now possible online.

Some other benefits

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Within 6 months of roll out Within 2 months of Roll out

Post- TOC Pre- TOC Month after Month

Measuring uniformity of sales in a month

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Region DISTRIBUTOR Grade OSP Cons. Sales Sales OSP% Buffer Stock Sales OSP% Buffer Stock East Deson Mrktg. Fe500 1406 1656 1509 107% 782 408 1602 114% 472 290 East G L Kundu Fe500 969 1064 1119 115% 584 404 1072 111% 390 251 East Nandan Saha Fe500 1163 1237 865 74% 836 650 1197 103% 507 596 East Paul & Co. Fe500 1454 1640 1499 103% 1050 799 1626 112% 555 209 East R G Steel & Co. Fe500 1647 1632 1582 96% 1062 645 1920 117% 579 583 East Shri Ram Multicom Fe500 1599 1512 1238 77% 848 563 1611 101% 573 404 East Siliguri Builders Fe500 1357 1177 1418 104% 950 591 1332 98% 598 140 East OSIC Fe500 3296 2952 3033 92% 1184 522 3342 101% 966 452 East NEML SD 2521 2017 1883 75% 1748 1443 2245 89% 887 1616 East Pasa Sales Fe500 2414 2431 1830 76% 1093 772 2628 109% 853 128 East Shri Ram Sales Fe500 1163 1299.5 1275 110% 897 496 1400 120% 415 99 East BMW Ventures Fe500 2617 3376 3100 118% 1656 966 3561 136% 1058 389 East Pasa Sales Fe500 485 818 531 109% 240 162 758 156% 167 18 East TOTAL 22,091 22,810 20,882 95% 12,930 8421 24,294 110% 8,020 5175 North Delhi Trading Co. Fe415 3683 2788 2,458 67% 1720 1293 3,030 82% 1,118 618 North Neelkanth Alloys Fe415 1647 1043 1,095 66% 420 223 1,508 92% 639 683 North Northern Steels Fe415 4363 4357 4,033 92% 980 463 4,650 107% 1,485 582 North Empire Steels-K Fe415 194 112 83 43% 97 76 107 55% 108 North Hindustan Sales Fe415 581 601 271 47% 291 274 499 86% 217 169 North MRH Associates Fe415 1938 1675 1,765 91% 1020 1117 1,806 93% 773 354 North KLPK Fe500 3877 3550 3,810 98% 1712 1488 3,800 98% 1,299 897 North TOTAL 16,283 14,126 13,515 83% 6,240 4934 15,400 95% 5,639 3303 South Samrat Corp. Fe500 3552 2903 1,516 43% 2053 1092 2,597 73% 1,575 941 South V N C Steel Fe500 5731 4810 4,576 80% 2548 1193 4,595 80% 1,857 1569 South Prabhu Fe500 2702 1716 1581 59% 1351 552 1848 68% 728 702 South G K STEEL Fe500 1384 661 493 36% 740 311 1,210 87% 642 575 South Indian Meneral Fe500 1204 1148 1,455 121% 700 552 1,508 125% 606 848 South TOTAL 14,573 11,236 9,621 66% 7,392 3700 11,758 81% 5,408 4635 West Sachi Agencies SD 1744 1408 1323 76% 533 447 1706 98% 694 537 West SKM Fe500 1212 924 1092 90% 539 217 1212 100% 512 323 West Dharm CHAND Fe500 921 806 430 47% 460 325 732 79% 398 381 West Avinash Ent. Fe500 1260 737 706 56% 677 366 997 79% 503 306 West Indu Corporation Fe500 3780 2022 1711 45% 1860 696 1996 53% 1,612 1266 West Pasa Associates Fe500 678 767 765 113% 339 200 572 84% 547 514 West TOTAL 9,595 6,663 6,027 63% 4,408 2251 7,215 75% 4,266 3327 TOC TOTAL 62,542 54,835 50,045 80% 30,970 19306 58,667 94% 23,333 16440 Dealer Level Upto 07.12.2009 Distributor Level upto 07.12.2009 Consumer Sales Upto 07.12.2009 TOC DAILy REPORT

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EFFECTS OF THE INITIATIVE: FY06-FY09

Good

Stock-outs at Retail Shops

30% 10% 5% 15% 6% 8% 20% 30% 0% 10% 20% 30% 40% 50%

FY05 FY06 FY07 FY08 FY09

% Sto cko uts

Target Actual

Good

Quick Recovery (within a month) after the financial crisis in Oct’09

Good

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CONCLUSION & FUTURE ISSUES

• Replenishment model has helped build a competitive edge for Tata Tiscon
• However the company needs to build on it provide other unique offerings:

– Supply complete kit for a column, roof etc when required

• Reduce the Reliable Replenishment times further to reduce channel

inventory

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I would like to thank the whole team at Tata Steel who have been involved in this initiative and made it into a shining example

ACKNOWLEDGEMENT

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THANK YOU

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Checking with customers…

Need Identification thru QFD

34 37 38 45 56 61 63 64 67 74 10 20 30 40 50 60 70 80

Margins for Channel Partners Pricing Policy Joint visit to Customer market by CAM Time taken to attend complaint Order fullfilment. Trustworthy Company Availability of all Sections Bundling Quality Professional Company Appearance as Rusting

Dealer Perception of Consumer Needs & Importance

CATEGORY Customer Requirements

• Sl. No

Importance Carbon content Mn content Q Product should to conform to all clauses of IS-1786 with suitable safety margins. 1 Q Short length pieces in 8 - 12mm re- bars to be eliminated - align ends

• f bars in a bundle

2 0.19 D Timely availability of material at dealer's outlet 3 0.16 S Material to be supplied in black condition (rust free) 4 0.14 S Bundling norms (no. of pieces in a bundle) to be maintained 5 0.13