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Part - XVII
M&M implemented Supply Chain Management to first build on and then improve its business processes. The SCM project began in 2000. Strategically, M&M had decided to set up assembly/manufacturing operations at multiple locations. They expected this would increase the complexity of their supply chain and operations and needed a solution that could link all their plants to provide an integrated view and help decide which plant should make what, when, and for which market in order to optimize total costs and operational efficiency and respond quickly to customer needs.
Cost Reduction - A High Priority
For M&M, cost reduction was crucial. In this very competitive market, they had to develop new products, and new variants on existing products, to compete with world-class offerings. This entails costs for product development and promotional incentives. They had to spend more money and at the same time not increase prices, because of the competition.
The only way to keep margins healthy was to reduce costs by minimizing the cost of production, logistics, working capital [mainly inventory], and the cost of lost sales. The SCM system, that M&M implemented, enables a pull-based replenishment system that optimizes logistics and manufacturing operations to improve margins and reduce costs while enabling quick response to customer needs.
M&M articulated clear objectives for this global competitiveness initiative enabled SCM: reduce inventories across the supply chain by aligning the company's business processes for IT-enabled supply chain management and ensure availability of tractors as per sales requirement - right model, right place, right time - at minimum cost.
In one year, M&M reduced supply chain inventory by more than 50%. Replenishment lead times, which include planning and execution lead times, were around 52 days before the SCM project began. These times have been reduced considerably, to 19 days after SCM implementation.
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* Contributed by -
Amit Mishra,
PGP 19188,
Indian Institute Of Management, Lucknow.
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