IMPACT OF SC INTEGRATION ON MANUFACTURING FIRMS IN INDIA

A Dissertation Submitted As A Part of the Requirements For The Degree of Master of Business Administration

Submitted by
Sachin Chauhan PRN : 10020441217 DIV & Roll No. E - 28 Operations - IB Batch 2010 - 2012

Under the Guidance of
Prof. Dr.Pradnya Chitrao

Symbiosis Institute of Management

Studies ( SIMS )

(Constituent of Symbiosis International University)

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SIMS Dissertation Certificate from Internal Guide
To whom it may concern

This is to certify that SACHIN CHAUHAN PRN No. 10020441217 has completed his Dissertation report on the topic “IMPACT OF SUPPLY CHAIN AND IT INTEGRATION ON INDIAN MANUFACTURING FIRMS” under my guidance.

Guide name: Prof. Dr. Pradnya Chitrao Signature: Place: Symbiosis Institute of Management Studies, Pune Date: 2

ACKNOWLEDGEMENT
I would like to express a deep sense of gratitude to my dissertation guide, Prof.Dr. Pradnya Chitrao whose constant mentoring, encouragement, cooperation and teaching helped me complete this dissertation successfully. He made me work professionally and think in terms of a manager all the time. Further, I want to thank Mr. Amit bhandari(Operations manager Maruti Suzuki Manesar,Gurgaon) for his support, without him the collection of data would not have been possible. I could not have completed this project without his assistance and I am grateful to him for his unconditional help & support for the entire duration of the project. The present report is an amalgamation of my thoughts and efforts to study the present processes.

Sachin Chauhan SEC E- 28 (Operations) Batch 2010-2012 10020441217

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TABLE OF CONTENTS: CERTIFICATE ACKNOWLEDGEMENT INTRODUCTION LITERATURE REVIEW RESEARCH METHODOLOGY TYPE OF RESEARCH DATA COLLECTION METHOD NEED. HYPOTHESIS CONTENTS CASE STUDY DATA ANALYSIS FINDINGS CONCLUSION 2 3 5 5 6 6 6 7 7 34 39 44 45 RECOMMENDATIONS 45 REFERNCES 48 4 . OBJECTIVE.

partnership. manufacturing and distribution (Lee & Billington 1995) the basic objective of supply chain management is to “optimize performance of the chain to add as much value as possible for the least cost possible”. 5 . However Cousins et al.INTRODUCTION In the 1980s companies discovered new manufacturing Technologies and strategies that allowed them to reduce costs and better compete in different markets. manufacturing and selling a single product. In the last few years. but more advanced techniques like simulation.In today’s dynamic market.In this paper I would be presenting the fact about how the supply chain integration with IT has helped Indian firms to become competitive in this world of hyper competition. nature. As firms' survival lies on integration. A number of definitions are proposed and the concept is discussed from many perspectives. information technology to the Total Quality Management areas like management commitment. organizational structure. Artificial Neural Network. and more significant change will occur going forward. and Fuzzy logic are also used for optimization and decision making in SCM. and deliver the products to customers through a distribution system.I would also present a case study for M & M and along with that I would be discussing about M & M and P & G regarding how they have implemented the IT in supply chain and how much their performance has changed after this integration. training and behavioral issues. however.ERP and IS systems) which works as supply chain enabler. (2006) provided excellent review on supply chain management literature. Sachan and Datta (2005). The nature of competition has forever changed.how they have integrated SC with IT and how that has affected their performance. transform them into intermediate goods and then final products. (2006).now they have to innovate at a very high pace and need to streamline their supply chain through the use of information technology(BPR. it has become clear that many companies have reduced manufacturing costs as much as is practically possible. principals. Storey et al. In order to compete the effective management of the supply chain is critical. Authors proposed a set of management techniques and tools to analyze successful SCM strategies. It spans procurement. Many of these companies are discovering that effective supply chain management is the next step they need in order to increase profit and market share (Simchi-Levi. Companies can no longer compete by designing. In other words. Gunasekaran and McGaughey (2003) extended the scope of SCM beyond material management. Mouritsen et al. These papers define the concept. It is also observed that research is not limited to hypothesis testing and data analysis. (2003) discussed that basic hypothesis “the more integration (wider the scope) – the better the management of the chain" is not always true and proved that it Depends very much on the “environment" of the supply chain and the power relations between the participants in the supply chain. Adoption of Supply chain management practices in industries has steadily increased since the 1980s. it aims to link all the supply chain agents to jointly cooperate within the firm as a way to maximize productivity in the supply chain and deliver the most benefits to all related parties (Finch 2006). 2003). companies can no longer exploit the traditional drivers in order to remain competitive. LITERATURE REVIEW Supply Chain Management is a network of facilities that produce raw materials. a good understanding of the integration process is a key aspect in SCM. and development of SCM and indicate that there is an intense research being conducted around the world in this field they critically assessed developments in the theory and practice of supply management.

The following objectives have been set forth. this paper gives the better understanding of the supply chain and various forms of IT(BPR.Like how their performance has changed in terms of contemporary measures of performance like cost. I would be discussing a case study regarding how they have implemented BPR in their igatpuri plant and how that had improved their performance.They are to: 1) Present a brief knowledge about the basic components of supply chain.In this study the focus would be on the impact of supply chain IT integration on the manufacturing firms in India in general and then I would also discuss the impact on particular firms and also. ERP and Eprocurement etc.A research study may have many objectives but all these objectives revolve around one major objective which is the focus of the study.As the questionnaire is self administrated one . 3) Provide a brief knowledge about the various IT implementations like BPR.Also technical jargons are avoided to ensure that there is no confusion for the respondents. 4) Study and analyze the impact of supply chain and IT integration on the performance of manufacturing firms in India.Words used in questionnaire are readily understandable to all respondents.Koh and Tan (2006) used the principles of fuzzy logic for analyzing and monitoring performance of suppliers based on the criteria of product quality and delivery time where as Chiu and Lin (2004) showed how the concepts of collaborative agents and artificial neural networks (ANNs) can work together to enable collaborative supply chain planning (SCP). TYPE OF RESEARCH My research would be an analytical research where using secondary data’s from various sources I would be showing that why and how SC and IT is happening and what are the results of such integration.time to market.initially the objectives of the same determined and accordingly the further steps are taken on. RESEARCH METHODOLOGY For this research I would be using various secondary data’s available from the internet and various books. 2) Provide a brief knowledge about the importance of IT in supply chain.Similarly in case of any research study undertaken. Although numerous studies views SCM from different perspectives.the survey is kept simple and user friendly .I have also prepared a questionnaire which has questions related to the performance of the firms after the SC and IT integration.input cost etc. 6 . It appears from literature review that researchers have studied supply chain management from a system perspective. or the systemic natures of interactions between the participants of supply chain are observed. ERP etc). Any task without sound objectives is like tree withoutroots.lead time. DATA COLLECTION METHOD 1)QUESTIONNAIRE.

activities.research papers. information and resources involved in moving a product or service from supplier to the customers. NEED “To understand what benefits manufacturing firms in India have derived after the supply chain integration and also what they have done and how they have done the integration of supply chain with IT” OBJECTIVE. people. quality. The simplest definition of supply chain is “it is a system of organizations. The purpose of this paper is to emphasize on the benefits of the supply chain an IT integration and also to understand how Indian firms have implemented different IT technologies in their supply chain successfully inspite of very high rate of failure of BPR and ERP implementation because this could then help other companies to follow the suit and apply ERP and BPR in their supply chain without any risk of failure.journals. SUPPLY CHAIN (SC) Before discussing any further I wanted to clear certain points like what is supply chain. HYPOTHESIS HI-“integrating supply chain has helped firms in improving their performance” H2-“integrating supply chain has no impact on the performance of the firms” And the performance in supply chain effectiveness is measured in terms of cost.etc.internet . customer service level and time to market.news papers. and what do we mean by supply chain management.” 7 . Also I would like to throw some light on the IT (information technology) and why it is so important in today’s competitive world. why is it so important not only in manufacturing industry but in most of the industries.2) SECONDARY DATA.magazines . lead time.It will collected with the help of various books.

it involves various issues like where to keep our inventory so that it can be made available without much lead time to the their distributors.SUPPLY CHAIN ILLUSTRATION SUPPLY CHAIN PROCESSES The following are the processes that are involved in supply chain.  Procurement-source  Production-make  Distribution-deliever These are the three processes which are involved in every supply chain whether manufacturing or any other.these processes plays an important role in the customer satisfaction. these processes are very important as they are the basis of any supply chain.the second process is the production of finished good that is in our example it is the production of SX4 in its Manesar(Gurgaon plant) and then the third process which is as important as other two is the distribution which starts after the production process is complete.reducing lead time and reducing the input cost.for its SX4.supply chain starts with the procurement process where manufacturing firm procure raw material from its various vendors for producing the final finished product.so that they can cater to the demand of the customers.g maruti Suzuki procures engines from Fiat India ltd. These processes need to be healthy in order to strengthen our supply chain. SUPPLY CHAIN MANAGEMENT AND ITS SIGNIFICANCE 8 .for e.

then their suppliers might feel rejected or might feel that they can be thrown out of the contract any time.like Maruti Suzuki India ltd has implemented all of them like they share all their information with their suppliers regarding everything ranging from sales forecasting to change in customer prefernce.This statement defines the supply chain in simple words.  Trust between the manufacturer and their suppliers.and that would lead to the various problems like delay in shipment of parts etc.  Cooperation among all the members of supply chain.  Communication among all the members of supply chain. ELEMENTS OF SCM 9 . There are certain keys to effective supply chain management and those are  Information sharing among all the members of the supply chain. These are the four very important points in order for a supply chain to be a successful one.These are the points that have been implemented by most of the manufacturing firms in India.“Managing the flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs”.They treat their suppliers as a part of the organization not as a separate identity because if they will treat their suppliers as a separate entity.

 Long variable lead time which was due to various factors like the non availability of raw material or due to other factor like strike in the firm and that results in delay of the delivery of finished good and increased lead time. Incorporating customers. on time delivery. Predicting the quantity and timing of customer demand. Monitoring suppliers quality. Various factors that contributed to the uncertainty in Indian manufacturing firms are Inaccurate demand forecasting which results from lack of information sharing between suppliers and manufacturers and also from lack of point-of-sale data which can be made available through the use of IT. Determining the location of the facilities. but prior to integration of IT with supply chain most of the manufacturing firms were facing uncertainties due to different factors which I would discuss. Matching supply and demand. flexibility :maintaining relations. manufacturability. and the time to market. Meeting demad requirements while managing the costs of holding inventory. Determing how to best move the information and materials. There are some negative impacts of uncertainty and that are Lateness in the delivery of order  Incomplete order which would lead to the strained relations between suppliers and manufacturers.  Late deliveries were due to the lack of communication between suppliers and manufacturers. wants. 10 . supporting the needs of operations. Controlling quantity and scheduling work. SUPPLY CHAIN UNCERTAINITY FACED BY INDIAN MANUFACTURING FIRMS PRIOR TO INTEGRATION OF SC AND IT The goal of a supply chain is simply to respond to any kind of customer demand without creating excess costly inventory.ELEMENTS Customers Forecasting Design Capacity planning Processing Inventory Purchasing Supliers Location Logistics TYPICAL ISSUES Determining what product and services customer wants. Evaluating the potential suppliers.

But this is the kind of problem can be faced by any manufacturing firm whether its FMCG firm or fertilizer firm because occurrence of this effect depends mainly on the information sharing between the partners of the supply chain. the negative effect on business performance is often found in excess inventories. However. The “Bullwhip Effect” has in the past been accepted as normal. Product changes. Yet. as is the case here. often in combination that will cause these supply chain distortions to start what has become known as the “Bullwhip Effect While the devil is usually buried in the details. Often. oscillates back through the supply chain often resulting in huge and costly disturbances at the supplier end of the chain.     Incomplete shipments were also due the lack of communication between the suppliers and manufacturer and also due to lack of information sharing between the two. relevant information that will enable suppliers to provide an uninterrupted and precisely timed flow of materials to customers. which may be a minor blip for any one customer. thought to be an inevitable part of the order-to-delivery cycle. in the supply chain execution process create distortions which can wreck havoc up and down the supply chain. BULLWHIP EFFECT Another problem that was faced by the Indian manufacturing firms due the lack of use of information technology was the bullwhip effect. higher raw material 11 . Batch ordering. including those caused by stock outs. This bullwhip effect was faced mainly by the denim manufacturing firms in India prior to the integration of supply chain and IT. unplanned demand oscillations. quality problems. these demand oscillations will launch a “mad scramble” in manufacturing with the need to acquire and expedite more raw materials and reschedule production. Inflated order also caused uncertainty because if demand is suddenly increased then the suppliers won’t be able to supply the raw materials to the manufacturer and because of that the manufacturer will not be able to produce the finished good on time and those results in loss of sale opportunity. we all know the objective of supply chain management is to provide a high velocity flow of high quality. Even though. Price fluctuation and discounts. There are numerous causes. and in fact. the most common general drivers of these demand distortions are:  Customers  Promotions  Sales  Manufacturing  Policies  Processes  Systems  Suppliers This unplanned for demand results in a disturbance or “lump of demand”. This problem was faced in India mainly by the denim manufacturing firms prior to the integration of their supply chain with IT.

2) Sales personnel who will not meet their quota for a time period that would accelerate commissions and qualify them for a bonus. These “false” orders often result in excess purchased material in inventory and in the pipeline as well as underutilized capacity. shorter measurement periods promote a smoothing of demand resulting in decreased ordering lumps resulting in a dampening of the “Bullwhip Effect”. of what their sales promotion policies and practices actually do. certain factors that I found out from the studies of Indian manufacturing firms are Sporadic sales promotionsMany Indian companies that conducted sales promotions that effect current inventory and the supply pipeline did not understood the impact. when they need it and then. and a common reason for severe demand distortions that cause supply chain oscillations. The Customer in turn may later cancel. CAUSES OF BULLWHIP EFFECT IN INDIAN MANUFACTURING INDUSTRY It is very important to understand the causes of bullwhip effect in order to take corrective step. will often have added or Change orders placed by a cooperative customer to achieve quota. when product availability is considered satisfactory. as well as Expect some concessions and/or special treatment from the salesperson in the Future for providing the “service”. As a result.Therefore. what sales promotions do to you. on a quantitative and qualitative basis. In other words. they often caused demand distortions. customer service goes down. customers will hedge by placing higher than projected demand on the manufacturer in the hope they will receive what they need. overtime expenses and shipping costs. sales are lost. Management needs to examine the rationale for sales incentives to be based on shorter-intervals rather than three months or longer. These unplanned for sales promotion events ripple throughout the supply chain creating excess costs which border on the incalculable. 12 . lead times lengthen. “What sales promotion policies and practices should we change?” A common complaint from the manufacturing side of the business. costs go up and capacity is adjusted. cancel the balance of future orders.  False order and subsequent cancellations The two common cause of false order that were found were1) The customer does not have confidence in the ability of the supplier to rapidly and reliably supply product. were Unforecasted and “unknown” sales promotions. the customers do not believe that supplier will ship their orders on-time. or return. Sales incentive plansSales targets. part or all of the order. After gaining a complete and accurate understanding of what sales promotions do for you vs. from here we can conclude that an important element to operating a smooth flowing supply chain is to mitigate and preferably eliminate the “Bullwhip Effect”. most companies were left with the need to answer the question. In the worst-case scenario.Costs. such as three months. Typically.quotas and commission accelerators when applied to an extended quota period.

. This new surge in demand often causes decisions to be made that will increase capacity unnecessarily as the Demand ultimately dissipates. Then.Transportation incentivesTransportation discount incentives for volume orders will often cause customers to accumulate orders and then release lumps of demand. Trust deficit between supplier and manufacturerWith distributors often leery of a manufacturer’s ultimate intentions. these lumps of demand explode out through your supplier network and their supplier network often extending leadtime due to unexpected. And. As unnecessary demand variability complicates the supply chain planning and execution processes the following undesirable effects increase in their severity as they negatively impact operating performance. false demand for future supply coverage. this mistrust contributes to demand oscillations. it may get worse with another “Bullwhip Effect” going up the chain again as longer lead times cause customer’s replenishment planning systems to “kick-out” new. the product manufacturer tells their distributors who tell their dealers that leadtime have increased due to supply problems. and very often. Then. For whatever individual or combination of causes that create demand surges and oscillations. • Schedule variability increases • Capacity is overloaded and/or under-loaded • Cycle times lengthen • Working and safety stock inventories increase • Overall costs increase • Customer service levels decrease • Sales and profits decrease   13 . demand patterns and inventory positions. and often false. increases in demand. stock outs. and the resultant associated costs. it may be time to examine your freight incentive practices. the supplier network may not be able to get raw material in a short enough lead time which reverses in the supply chain as it causes theirs and your delivery lead time to lengthen.down the supply chain. The “Bullwhip Effect” is now traveling the other way . After thoroughly examining the impact that this incented distortion has on hampering your own supply chain planning capabilities. higher inventories and lost sales for the manufacturer and distributor. the manufacturer selling directly to end-users. On the other hand. there is no desire to frequently share customer volumes. Developing a workable and effective solution is essential. and. especially with the possibility the distributor will be removed from the sales chain.

BULLWHIP EFFECT DIAGRAM INFORMATION TECHNOLOGY: A SUPPLY CHAIN ENABLER Information links all aspects of supply chain and the various uses of IT that had been made by the Indian manufacturing firms are – E-businessReplacement of physical business processes with electronic Ones. Bar code and point of sale- 14 . Electronic data interchangeA computer-to-computer exchange of business documents.

InternetAllows companies to communicate with suppliers. shippers and other businesses around the world instantaneously. even as RFID is necessary. especially in fast growing Asian economies. This is especially so for Asian companies that do import and export business with large Western nations such as the United States and greater Europe.Data creates an instantaneous computer record of a sale. Build-to-order (BTO)Direct-sell-to-customers model via the Internet. However. extensive communication with suppliers and customer. customers. RFID FLOWCHART RFID IMPLEMENTATION IN SUPPLY CHAIN ENVIRONMENT There is little question that RFID is fast becoming a critical component in the new world of supply chain management. Radio frequency identification (RFID)Technology can send product data from an item to a reader via radio waves. it is important to 15 .

After creating a budget with an invitation to your vendor for demonstrations and any small scale tests. Increasingly. India is fast becoming the new automotive region. given that manufacturing and labor costs are far lower than the Europe and USA. catering specifically to the mainland Chinese market with the popular VW Passat and Skoda Octavia (and now Superb) models. Mahindra & Mahindra tractors ltd and Maruti Suzuki India ltd. Once you are assured that it will work enterprise-wide. you should then analyze the process within your entire supply chain (all the way to your ultimate customer and include all stakeholders). to iron out any kinks in the system. running for perhaps a reasonable length of time.determine carefully just what needs to be done. with a test or pilot site. You should attempt to launch your RFID installation in phases. Setting out to do a conceptual model. in the near future. with the right definitions. RFID tagging can help reduce misplaced engines (which must be scrapped due to the sensitivity of such products). It is possible that RFID tagging can become important in keeping track of major parts within a car. 16 . region-specific models of Mahindra’s XUV 5oo are manufactured in India. For example. to ensure that you can improve or tweak the system as necessary. while Volkswagen and Skoda now has shared manufacturing in China. This is what is done by major Indian automotive manufacturing firms in order to compete at the world stage. including the drive train assembly. the engine block. It is also important to re-visit every step of this process of implementation. Some manufacturers have used RFID to keep track of the most critical (and sometimes most expensive) item of a car. APPROACH FOLLOWED BY INDIAN FIRMS IN APPLYING RFID Before implementing RFID. and then have some of your personnels to gauge the usability of the RFID system. you need to conduct an analysis of your sites. then roll out the system to the entire site. it is important to conduct a feasibility analysis of the supply chain environment. and who can help make RFID a success within the company. Even mainstream Japanese car manufacturers are relocating some of their manufacturing of region-specific models (such as Altis and Corolla) to lower-cost locations such as India. And what Indian manufacturing companies have done especially Tata motors.

 Level of internal integration..  Number of trading partners a company has at a particular moment.EDI (ELECTRONIC DATA INTERCHANGE) Various EDI services utilized by the Indian manufacturing firms specially the giants like Tata motors ltd. 2) On demand support. These services were used by the Indian manufacturing firms to electronically connect the enterprise without incurring the costs associated with software and personnel. 3) Supply chain community management.  Complexity of business processes. These services comes in various categories but can be customized according to the need of specific companies and it depends on number of factors like Current extent of community integration. M & M etc are1) Transaction management.  Current EDI infrastructure. TRANSACTIONAL MANAGEMENT Transaction Management services offer companies the ability to completely outsource all aspects of their EDI operations. 17 . This provides services ranging from hostel translation to enabling the entire supplier communities and it also streamlined their supply chain and maximized the effectiveness of their trading partner.

easy-to-use. Whether you need to quickly onboard new customers or simply need coverage for peak processing times.ON DEMAND SUPPORT On Demand Support services are designed to supplement an organization’s existing infrastructure and personnel. SUPPLY CHAIN COMMUNITY MANAGEMENT Supply Chain Community Management services are designed help organizations expand their trading partner communities through the use of cost effective. 18 . web-enabled solutions.

 Faster response to any kind of uncertainty. logistics. forecasting. replenishment. operating. 3) Coordinated workflow. procurement Improved production efficiencies. It helped the companies in electronically exchanging –  Past sales trends. etc.  Point –of-sale data.  Helped in improving customer service levels. and design has helped in Reducing bullwhip effect. COLLABORATIVE PLANNING.  Helped in detecting problem at the earliest.  Helped in the creation of the new product. 4) Adopting new business models and technologies has helped in the following Helped in the penetration of the new markets.  Helped the companies in giving faster response.  Less time in making product available in the market.)  Helped in improving capacity utilization.BENEFIRTS THAT INDIAN FIRMS HAVE REAPED AFETR SC INTEGRATION WITH IT 1) Information sharing among supply chain members has helped in Reducing bullwhip effect. AND REPLENISHMENT (CPFR) This is the Process where two or more companies in a supply chain synchronize their demand forecasts into a single plan to meet customer demand.  On hand inventory. FORECASTING. 2) Collaborative planning. production and operations.  Helped in the mass customization of the product. 19 .  Helped in improving the efficiency.  Lower costs (material.  Improved service levels.  Helped the firms in building trust and confidence with their suppliers.

SUPPLY CHAIN MANAGEMENT SOFTWARE USED BY THE INDIAN FIRMS 1) Enterprise resource planning (ERP) 2) Process control and SCOR. SCORIt’s a cross industry supply chain diagnostic tool maintained by the Supply Chain Council. PROCESS CONTROL AND SCORThis is used not only for manufacturing operations but can be use for any kind of processes. ENTERPRISE RESOURCE PLANNINGIts software that integrates the components (functions) of a company by sharing and organizing information and data. 20 .  Scheduled promotions. Forecasts.

SOLUTION) Inventory turns=cost of goods sold/average aggregate value of inventory =$425.416.000 =12. The company had the following average value of production materials and parts.000)/((365) 21 . work-in-progress.322.000 Total average aggregate value of inventory $34.000.416.465.000 Work-in-progress $17. 3) Days of supply=Average aggregate value of inventory/(cost of goods sold)/(365 days) Let us take an example of maruti Suzuki ltd company in understanding the KPI’SLast year the cost of goods sold for MS was $452 million.000.416.000/$34.000 The company wants to know the no. and finished goods inventory Production materials and parts $4.000 Finished goods $12.SCOR MODEL USED BY INDIAN FIRMS KEY PERFORMANCE INDICATORS IN A SUPPLY CHAN 1) Inventory turnover ratioCost of goods sold/Average aggregate value of inventory 2) Total value (at the cost) of inventoryAverage aggregate value of inventory=∑(average inventory for item i)×(unit value for item i).629.000/(425. of inventory turns and days of supply being held in inventory.3 Days of supply=Average aggregate value of inventory/COGS/(365 DAYS) =$34.

Among companies that have been through a less-than-fully successful ERP implementation. 4) People were not well prepared to accept and work with the new system. This seems obvious. and appropriate use. is something that ERP software implementers may not fully address because it can slow system deployment. an ERP implementation is not something that should be approached without a great deal of careful planning. 2) The firms who successfully implemented it understood the fact that there is no magic in ERP software. 22 . lead time etc are ERP(Enterprise resource planning)  BPR(Business process reengineering)  E-procurement ERP(Enterprise resource planning) In the past many companies have unsuccessfully tried to apply ERP but have failed miserably as their performance didn’t improve a bit and one of the main reason I think is that the Selecting and implementing a new ERP system.Days of supply=29. But. This area. but nine out of 10 companies don’t get it right the first time around. 2) Implementation took longer than expected. in particular. there were some of the Indian firms that implemented ERP successfully and these organizations like MS. 3) No amount of advanced information technology can offset the problem of a flawed business strategy and poorly performing business processes.6 VARIOUS MODELS OF IT USED BY INDIAN MANUFACTURING FIRMS IN SYNC WITH SUPPLY CHAIN Various models used by Indian firms in sync with supply chain in order to compete with their rival firms and also to improve their performance in terms of cost. silver-bullet solution is a dangerous mindset. ERP’s benefits are a direct result of effective preparation and implementation. 3) Pre-implementation activities were done poorly. In implementing ERP solutions to their supply chain most of the giant automobile manufacturing firms in India were very successful compared to the other firms in the same sector as well as other sector because they took a different approach toward applying ERP solutions to their supply chain and from their study I found out that if a company successfully wants to implement ERP software to improve their supply chain they must keep the following points in their mind1) What many manufacturers fail to realize is that extensive supply chain improvement requires that management begin to redefine its business in terms of strategic opportunities. Expecting a quick fix. five reasons for poor results show up consistently: 1) Operating strategy did not drive business process design and deployment. is unquestionably a complex undertaking. The purpose of ERP technology is to support the business processes that support the company’s strategic opportunities. Regardless of your size and perceived resources. M & M demonstrated how we can avoid mistakes in implementing ERP solutions to our company. Tata motors. 5) The cost to implement was much more than what was expected. and the process changes that go with it.

the Very life blood of a manufacturing company. people and process-focused. benefits and timetable going to be?  Do we have an executive level ERP champion to provide the necessary link to the top management?  Who will implement ERP and make it work? ERP and supply chain management systems implementations are. Then. The consequence here can range all the way to total failure. as it usually does. For the well-prepared. the competition. at the very least. analyze your current business processes and develop your objectives. Doing it right the first time is the only cost-effective way to go. the supply chain is. until and unless ERP system is completely integrated into day-to-day business operations. to a large extent. Make sure there is a sense of urgency and true accountability for completing preparation and implementation activities on time. to the removal of traditional cross-functional barriers. After all.implementation preparation activities?  What tasks will be accomplished and when?  What are the missing links in our current system and our software of choice?  What are the real costs. 6) Have the implementation led by a senior executive who has the authority to make changes happen and happen quickly. but should be helpful to stimulate thought and discussion How do we want to run our business?  What business problems need to be resolved?  Do we know and understand our priorities?  Do we fully understand our as-is condition versus our could be condition?  Have we carefully defined an action plan for pre. The high-velocity flow of information needed to support action up and down the supply chain is a major step forward for most manufacturers. but when the unexpected pops up. you will be prepared to handle these exceptions without severe negative consequences. A good methodology covers all the bases. 5) Acquire flexible ERP information technology that can accommodate rapidly changing business conditions. in fact. it is not likely that it will be beneficial for the organization. make you competitively equal. but they are avoidable. PLAN TO SUCCED IN ERP IMPLEMENTATION Successfully implementing ERP the first time requires a structured methodology that is strategy-. One very common mistake is not having your employees prepared to use the new processes and support system. This is the only Way to manage the risk effectively. It will be mandatory in the future just to compete. Evaluate your business strategy and ERP plan before you commit to software acquisition and installation. to a large extent. The following questions do not cover every possible contingency. projects without an end.4) Define a business strategy that will give you a competitive advantage or. much less stay ahead of. Many people out there wish they had paused to evaluate their direction. If enterprise integration or more advanced supply chain management strategies are to have any chance of complete success it will be due. new 23 . Also.

skills development. and Thomas davenport. Recent surveys estimate the percentage of BPR failures to be as high as 70%. customer service. but did not know which areas to change or how to change them. On the other hand. Implementing ERP can become a mind-altering experience for those involved. I would be giving a case study related to the implementation of BPR in the supply chain by the M&M at their Igatpuri plant and the after effects of that implementation.supply chain management systems based on ERP have become significant Competitive differentiators.it can actually produce revolutionary improvements for business operations. BPR projects can fail to meet the inherently high expectations of reengineering. it will not guarantee your success. service and speed”. Some organizations have put forth extensive BPR efforts only to achieve marginal. Michael Hammer. or even negligible. quality. incentive systems. knowledge of what caused the successes or failures is becoming apparent. It can also potentially create substantial improvements in quality. Only you can do that. low productivity etc. Successful BPR Model can result in enormous reductions in cost or cycle time. high cost. according to Dr. management systems. This concept was introduced in India by M&M in the year 1993 when they applied this concept at their Igatpuri plant to improve the performance of their plant which was going through a very bad phase at that time in terms of expenses. EMERGENCE OF BPR IN INDIAN MANUFACTURING INDUSTRY This was the concept which was developed by Dr. As has been shown by M&M and other Indian manufacturing giants. As a result. or other business objectives. Many unsuccessful BPR attempts have been due to the confusion surrounding BPR. Organizations were well aware that changes needed to be made. benefits. The promise of BPR is not empty -. and the use of information technology. Michael Hammer BPR is the “fundamental rethinking and radical redesign of the business processes to achieve dramatic improvements in critical contemporary measure of performance. Yet. And in the year 1993 most of the big Indian manufacturing firms realized the importance of BPR in staying competitive in the time of globalization and they also realized that in order to reduce cost and lead time they need to revamp the those processes which are not adding any value to their product. Others have succeeded only in destroying the morale and momentum built up over the lifetime of the organization. As more and more businesses reengineer their processes. 24 . James champy. such as cost.or in other words practical experience. Following a sound methodology Will greatly increase your likelihood of success the first time. BPR (BUSINESS PROCESS REENGINERING) BPR is nothing but the radical change and what constitute dramatic change are the overhaul of organizational structures. employee responsibilities and performance measurements. process reengineering is a management concept that has been formed by trial and error -. and how it should be performed.

what changes may be occurring. it should be clear whether or not the organization. The first step is to take a long.  Explain the need for change. it must begin with a communications campaign to educate all those who will be impacted by this 25 .  Create a communications campaign for change. Regardless of the reasons. increase customer service level etc. and other similar programs) is needed -. Finally. is able to meet the needs of the markets it serves. The future "vision" of how the business must operate will serve as a clear and concise guide with measurable goals for employees to focus on. or perhaps the entire business. and what new circumstances exist in our business environment. People are the agents of change. The consequences of inaction should be identified and well understood. Perhaps competitors have made significant advancements in products and services.which would expose the change initiative and the organization to much less risk. it must turn to its people to make it happen.COMMON STEPS TAKEN BY INDIAN MANUFATURING FIRMS IN IMPLEMENTING BPR Project phases required for successful BPRPhase 1: Begin Organizational Change Phase 2: Build the Reengineering Organization Phase 3: Identify BPR Opportunities Phase 4: Understand the Existing Process Phase 5: Reengineer the Process Phase 6: Blueprint the New Business System Phase 7: Perform the Transformation These were the common steps used by most of the Indian manufacturing firms in implementing BPR in their supply chain to make their supply chain more effective against any kind of competition and also to reduce cost. If an organization wishes to change the way it operates. hard look at how the organization operates. in its current state. these consequences are the loss of jobs by shutting down portions of the business.  Illustrate the desired state. a look at how certain operating procedures within the organization have caused or will cause irreparable damage to the company’s livelihood. Creating business plans and strategies are important. The focus of this examination is on the operating procedures and the bottom-line results that are generated by them. It may be that only marginal change (the result of Continuous Process Improvements. Because BPR can potentially require significant changes throughout an organization. but they are only tools to guide the actions of people. Phase 1: Begin Organizational Change Activities included in this phase were as follows Assess the current state of the organization. In most cases. Aspects of the business that need to be evaluated are: how things are currently done. Total Quality Management. The purpose of performing the analysis described below is to determine whether dramatic change by doing BPR is really necessary. Next. What is the source of the organization’s concern? Maybe the demands of the marketplace are shifting. the proper future direction of the organization should be decided.

create. Without a common understanding about what is happening. Process owners are usually appointed by the executive leader. it has a tremendous impact on the success of a BPR endeavor. most BPR projects cannot overcome the internal forces against them and will never reach implementation. motivate. educate. A process owner is responsible for a specific process and the reengineering effort focused on it. Phase 3: Identify BPR Opportunities Activities involved in this step were as follows Identify the core/high-level processes  Recognize potential change enablers 26 . One of the most important members of the reengineering effort is the executive leader. The leader must be a high-level executive who has the authority to make people listen. Allocating the responsibility of a process to a specific person ensures that someone is in charge of how that process performs. and implement. and the motivational power to make people follow. everyone must understand where the organization is today. confusion and uncertainty about the future can result in resistance strong enough to stop any reengineering effort. The team should be small. they should be credible in their respective areas. Since they will be the ones who diagnose the existing process. There should be a process owner for each high-level process being reengineered. along with outsiders who can provide objective input to spark creative ideas for redesign. Phase 2: Build the Reengineering Organization Activities involved in this phase were as follows Establish a BPR organizational structure. usually five to ten people. persuade.  Choose the personnel who will reengineer. This qualification plays an important role in reducing the resistance by company personnel to the new process. Although this phase consists of only a few tasks. rebuild. An infrastructure must be established to support reengineering efforts. The team dedicated to the reengineering of a specific process should be made up of current insiders.change.  Establish the roles for performing BPR. destroy. Communication to all levels of personnel must remain active from start to finish to keep everyone involved and working towards a common goal. In order for change to be embraced. BPR is most effective when everyone understands the need for change. why the organization needs to change. and where the organization needs to be in order to survive. and oversee the redesign and implementation. Without the commitment of substantial time and effort from executive-level management. Who are the people that will be chartered to reengineer the business? What will their responsibilities be? Who will they report to? These are the questions that must be answered as the reengineering staff is gathered together to communicate. The process owner convenes a reengineering team to actually reengineer his or her process. who perform the current process and are aware of its strengths and weaknesses. and works together to tear down old business systems and build new ones.

and incentive methods have proven to be effective in improving operations within other organizations? In many instances. 27 . are the major or core processes of the organization. Once the major processes have been defined. identified earlier. Typically.          Gather performance metrics within industry Gather performance metrics outside industry Select processes that should be reengineered Prioritize selected processes Evaluate pre-existing business strategies Consult with customers for their desires Determine customer's actual needs Formulate new process performance objectives Establish key process characteristics Identify potential barriers to implementation In this phase. or which ones are the "low hanging fruit" as many experts call them). The most objective and accurate way is to compare the performance of our high-level processes. but it is difficult because it requires a shift in how we think of ourselves. that can change how businesses and customers interact? What new ways of structuring cross-functional work teams. compensation systems. Prioritizing the processes we have chosen to reengineer guides us in scheduling the order we will reengineer these processes. while a competitor fulfills orders in two weeks. Even if we outperform our direct competition. production. organizations use the following three criteria: Dysfunction (which processes are the most ineffective). and human factors. or are on the horizon. we begin to break away from normal patterns of identifying business opportunities. Change levers usually will fall under one of three categories: the use of information. Picking the "low hanging fruit" can show quick success and help build the much needed momentum and enthusiasm at all levels of the organization. the use of information technology. In many cases. At this point. What new information is available and easily accessible to the organization? What new technologies have recently been introduced. it is helpful to begin thinking about potential change levers which may lead to dramatic changes in the organization’s processes. These processes. What we are looking for here are overall. finance. seeing the company from the customer’s point of view can help identify what these high-level processes might be. which will help set the project scope for those processes that are to be reengineered. This activity is not a time consuming task. and Feasibility (which processes are at the moment most susceptible to accomplish a successful redesign. If we fulfill orders in six months. with the performance of our competitors as well as organizations outside of our industry. bottom-line performance metrics for the high-level processes that will help us select which of these processes to reengineer. there may be companies in other industries which may be much more effective in performing a similar task -. etc. One goal here is to identify the process boundaries (where the process begins and where it ends). We start by dividing the entire organization into high-level processes rather than the usual vertical business areas such as marketing. we may consider this a process that needs to be reengineered. Importance (which processes have the greatest impact on our customers).such as order fulfillment or product development. a modification in one of these areas requires changes in the other two areas to be the most effective. we need to decide which of our high-level processes needs to be reengineered. usually less than a dozen.

etc. we need to take a look at why we currently perform the process the way we do. Understanding how and why the current processes use information is also important. What we need to do is understand the underlying reasons why the existing process is carried out the way it is. and how technology is used. It not only helps us to better understand the existing process. but also to find out what they actually need by watching what they do with our output. When we have the new process objectives clearly defined (in Phase 3). Understand is a key word here. and functional value of each technology and information systems currently being used. Process customers are an important source of information to help set the new direction. this existing business strategy is not focused on driving a process. throughput.this effort has the potential to go on indefinitely. 28 . and potential barriers to implementation. cost. robustness. and in what way has technology imposed artificial restrictions? We need to end up with an estimate of the current cost. Do staff members have access to essential information? Are some business areas wasting time and effort by creating duplicate information when it can be shared across organizational boundaries? Why is technology used to support some tasks and not others? How effective are the current interfaces? Are they easy to use. Information that should be included in the models are process inputs (such as task times.Going after the highest priority process first. therefore. but also helps with planning the migration from the old to the new process and executing the physical transformation of personnel. key process characteristics. so that we can question those assumptions during our reengineering sessions later on. We may not need to scrutinize every detail of how we are performing the process -. we can measure our existing process in terms of the new objectives to see where we are and how far we have to go. demand. etc. sometimes referred to as analysis paralysis. we will have to define a new process strategy to reflect our new strategic goals for the process. we assess the preexisting business strategy which governed its component tasks. critical success factors. cycle time. organizational structures. We must consult with them to not only discover their desires. resources. Phase 4: Understand the Existing Process Activities involved in this step were as follows Understand why the current steps are performed  Model the current process  Understand how technology is currently used  Understand how information is currently used  Understand the current organizational structure  Compare current process with the new objectives Now that we know which process to reengineer. Modeling the current process is an important part of this phase. or are they counter-intuitive and thus inhibit the effectiveness of current tasks? In what way does the existing process take advantage of technology. Most likely. Process goals and objectives can be determined by combining customer needs with competitor benchmarks and "best of industry" practices (metrics on the best performers of a similar process in other industries). bottlenecks. we need to complete the conception of the new process by identifying key performance measures. In addition to goals and objectives. which can weaken the momentum needed to carry the project all the way to implementation.).) and process outputs (such as data outputs. information requirements. data requirements.

Including the future owners will help to ensure that the reengineered process succeeds once it is implemented. The Reengineering Team that was formed to take part in the reengineering sessions should consist of designers and implementers. a technologist will provide insight as to how technology can be applied in new and innovative ways. Is there some (outdated) historical reason why a process has been performed a certain way? Are there customer requirements that dictate the steps in a process? Many times the operating assumptions can be thrown out and new ones developed. or those responsible for the new process. Workers make decisions.the walls of the box). Having people who will be the future process owners. Reconciliation is minimized. is a critical component of the Team. BPR PRINCIPLES THAT WERE FOLLOWED BY INDIAN MANUFACTURING FIRMS         Several jobs are combined into one. Including both outsiders and technologists on the team will help spark "out-of-box" thinking (thinking creatively above and beyond the current restrictions . it is important to evaluate the impact the assumptions have outside the process in question. In other words. Checks and controls are reduced. 29 . A case manager provides the single point of contact.Phase 5: Reengineer the Process Activities involved in this phase are as follows Ensure the diversity of the reengineering team  Question current operating assumptions  Brainstorm using change levers  Brainstorm using BPR principles  Evaluate the impact of new technologies  Consider the perspectives of stakeholders  Use customer value as the focal point During this phase. We’ve moved from strategy and analysis phases into the redesign phase. Processes have multiple versions. These team members should come from both inside and outside the existing process. Equally important is the "outside" perspective of someone who will look at the process with a "fresh eye" and raise questions about operating assumptions that may not be obvious to the insider who might be too close to the process to see this. However. Having developed a good understanding of how the existing processes work in the previous phase. Work is performed where it makes the most sense. including people well versed in technology. the technologist will help to visualize how the process can be performed outside the boundaries of the current implementation. The "inside" perspective may reveal information about the existing process that was not uncovered in Phase 4. Lastly. The steps in a process are performed in order. it is now necessary to question the operating assumptions underlying the processes. the actual "reengineering" begins.

This phase of the project takes the reengineered process developed in the previous phase. This chart will show the new process flow along with the process team members. In BPR. In addition. Hybrid centralized and decentralized operations are prevalent. or fine tuning adjustments to the technical configuration will probably occur during the implementation phase. we need to create "to be" models to illustrate how the workflow will be different. defined as we go into the implementation phase. a different kind of chart is needed. It is critical to have these areas. and their responsibilities. Although minor changes. or atmosphere. than what is prevalent in the organization today. the case managers. the process facilitators. and provides the details necessary to actually implement it. and rewards programs should be outlined. will indicate where the new process will use information that is shared across functional areas of the business. detailed technology specifications required to support the new process should be defined. Instead of the traditional organization chart. blueprints must be created to identify all the necessary details of the newly reengineered business system and ensure it will be built as intended. New management strategies. Included in the blueprints should be the new management systems and values or belief systems of this redesigned area of the business. The redesign may require an entirely different culture. along with new performance measurements. Phase 6: Blueprint the New Business System Activities involved in this step are as follows Define the new flow of work  Model the new process steps  Model the new information requirements  Document the new organizational structure  Describe the new technology specifications  Record the new personnel management systems  Describe the new values and culture required Blueprints are detailed plans required to build something in accordance with the designer’s intentions. or data models. The chart should also indicate parts of the organization which interact with the process personnel. The information models. The reengineered process may require a change in the values or belief systems of the company. compensation systems. to set the stage for rapid application development. The blueprints should also contain models of the redesigned organizational structure. 30 . Just as we modeled the "as is" process and information requirements in Phase 4. Blueprinting involves modeling the new process flow and the information required to support it. the process owners. an initial physical description of the technologies used and their physical specifications should be recommended in this phase.

If multiple processes are slated for reengineering. and blueprinted our ideas for the new process. analyzed. Once the new structures are established. retraining. to where the organization wants to be. BPR Implementation requires the reorganization. We need a path to get from where the organization is today. Migration strategies include: a full cutover to the new process. but also with the newly reengineered processes that will come on line in the near future. If only one process is reengineered. and 31 . then it must interact with the other existing processes. Successful transformation depends on consciously managing behavioral as well as structural change. and a tough minded concern for results. and ultimately to workers. It begins with an assessment of the current skills or capabilities of the workforce to include soft skills. therefore. We have communicated. This is where all of the previous efforts are combined into an actual business system -. The new management structure should result in the control paradigm being changed to the facilitation paradigm. skills. with both sensitivity to employee attitudes and perceptions. a phased approach. The first step in transforming the organization is to develop a plan for migrating to the new process. the implementation of the new process must be flexible enough to be easily modified later on. The new process will probably require a new organization.something we can see and feel and use to enable our organization to meet the market demands of today and tomorrow. then the new process must not only integrate with existing processes. operational skills. we should map tasks in the process to functional skill levels. reengineered. and culture. An important point to consider is the integration of the new process with other processes. Transforming the workforce will require an array of activities. or creating an entirely new business unit. The new process team structure should result in the managed paradigm being changed to the empowered paradigm. and retooling of business systems to support the reengineered process. strategized. a pilot project. different in structure.Phase 7: Perform the Transformation Activities involved in this phase are Develop a migration strategy  Create a migration action plan Develop metrics for measuring performance during implementation  Involve the impacted staff  Implement in an iterative fashion  Establish the new organizational structures  Assess current skills and capabilities of workforce  Map new tasks and skill requirements to staff  Re-allocate workforce  Develop a training curriculum  Educate staff about the new process  Educate the staff about new technology used  Educate management on facilitation skills  Decide how new technologies will be introduced  Transition to the new technologies  Incorporate process improvement mechanisms Now we are ready to transform the organization.

Education may be necessary for Total Quality Management (TQM). self mastery. and sometimes panic. a structured on-the-job training (OJT) program is instrumental in providing continuity of the new process during periods of personnel turnover or attrition. to maintain the focus of the reengineering team and the faith of the employees. Transforming information systems to support the new process may involve retooling the hardware. As with any dramatic change. or Continuous Process Improvement (CPI) if these mechanisms are designed into the new processes. One approach to this transition could be a controlled introduction. This may put the organization at a higher risk if the systems do not function properly at first. Statistical Process Control (SPC). allow mistakes. Almost all new process implementations are surrounded by confusion. peer evaluations. as much as possible.technical skills. Process training may be needed to help employees think beyond a linear process to a more holistic interdependent process. with the paradigm shift that has taken place. This inventory may require personal evaluations (including areas of interest). The best transition strategy is one that minimizes. Feedback should be provided to all personnel to ensure accuracy of current skills and interests for all staff. to varying degrees. people will have personal difficulties. An educational pyramid is an effective way to transfer knowledge of team building. and information needs for the new process. handle disputes among process experts. Systems’ training is essential to understanding the use of new information systems and how to take advantage of their capabilities. manufacturing and distribution systems. Attempts should be made to keep the new process chaos to a controlled level. more responsive and flexible ordering. Armed with the new process skill requirements and a current skills inventory. the gaps can be assessed. but it is the more common approach due to the "all-or-nothing" nature of BPR. Although the risk may be low while the bugs in the new system are ironed out. software. Finally. which has diminished even further the need for warehouses to be located near to markets that 32 . the interference caused to the overall environment. The method would ensure that each part of the system is operational for a segment of the business before going on to the next module to implement. most likely. Is the new process feasible with the current skill set? Which are the areas to focus on to enhance personnel skills to meet the requirements of the new process? An education curriculum needs to be established to get all employees educated on the business and. thus. and a complete transition occurs all at once. on how their jobs relate to the customer. E-PROCUREMENT Technology has enabled the introduction of faster. not be fully functional until all steps were introduced anyway. and subject matter knowledge. a step-wise introduction would. it may be difficult to integrate the hybrid old/new systems in a step-wise manner. An important reason to justify the flash cut approach is that the reengineering benefits can be realized much sooner than with a controlled introduction. and supervisor evaluations. Facilitation training for management is critical to develop their abilities to listen. Most reengineered processes function in an entirely different manner than existing processes. frustration. and transition to a coach/facilitator role. The flash cut approach is where the entire system is developed in parallel to the existing system. most important.

increasing price realization.delivery time to ten days. organize a global purchasing network and return a profit. Ford spent an estimated 33 . The use of the term 'electronic commerce' has been supplemented by additional terms such as e-business. market share. the Internet and WWW can be considered as the catalyst for the radical change in business context and business process viewpoint – what Keen and McDonald term the “e-process” perspective.they serve. A survey of a new economy by the Economist proclaimed that the biggest savings from business-to-business ecommerce are likely to come in procurement. Today. One of the most important challenges that have affected traditional purchasing strategies and organization are the solutions. Ford reengineered employee requisitioning processes in an attempt to save billions of dollars spent purchasing office supplies and filing expense reports. e-procurement is regarded as having far greater potential for cost savings and business improvements than online retailing or enterprise resource planning systems.market on new products. Business-to-business (B2B) initiatives have the potential to change forever the supply-chain structures that are currently in place and improve the efficiency and information flows that currently exist in this industry. or both (Christodouleas. Tata motors and M & M are planning to launch their online procurement company. Tata motors. future business success requires a readiness to adapt to the e-business climate and co-evolve with it. e-tail and e-procurement. improve reliability. E-business is emerging as a necessary tool and enabler of this new business paradigm. they plan to reduce further order-to. It will be vital that management quickly begin to focus on strategic sourcing of direct materials. BMW. In the theme of ebusiness. E-business plays a key role in the function of today’s automotive industry. For instance. instead of taking more than four years to design a new model. which are provided by modern information technology and the Internet. In just a few years manufacturing companies have invested millions of Rupees in setting up electronic market places. the results have been less than expected and suppliers have resisted putting sensitive information online. (Kim & Ramkaran. 2001: 5). ford. By cutting the time and paperwork out of these transactions. e-marketing. 2004) When a company uses the Internet to shorten order-to-delivery times. 2003) General Motors. currently requires about 12 days. manufacturers take less than 18 months. Just as desktop computing in the 1980s and 1990s served as catalyst to the reengineering movement. For companies in the automotive supply chain. its customers respond. As an increasing number of transactions are carried out online and relationships among industry participants like OEMs and suppliers grow ever more complex with increased interaction between participants of different tiers. for example. The advents of e-procurement and developments in the procurement behaviors of the OEM's have altered the success equation for every automotive supplier. suppliers can improve time-to. Nevertheless. The term "e-business" can be characterized as the support of the several distinct phases of a business transaction through information systems that use the Internet as a communication medium. production lead times and quality. The rapid improvement of technology and its application by business seems to be accompanied by similarly rapid changes in terminology. This was seen as a way to conduct auctions for parts. ecommerce and more specialist terms such as e-CRM. However. The impact of the Internet on the automotive industry Is a theme that will dominate corporate and investment thinking in the foreseeable future. and broaden product choice. In the near future. remains as an information channel and a facility enabling co-design Of parts. plans to roll out one new model every 6 months. (Benko and McFarlan. for example. the system and other similar ventures.

$15.5 billion each year on non-production goods and services, making it one of the largest purchasers of such goods worldwide. Until recently, most global firms operated domestic accounts, such as payroll, procurement and logistics systems in every country in which they operated. The Internet has now enabled global firms to centralize these functions. According to the Prime Consulting Group (2002), global firms are optimistic on the level of savings that can be achieved through full implementation of e-procurement strategies. The potential for savings is tremendous. E-Procurement is sometimes referred to as a magic bullet, where the early adopters are stating that the buying process can be improved. However, the new way of doing business demands a long-term serious effort and continuous improvements. new e-procurement technologies will become an important part of supply chain management and that the rate of adoption will accelerate as aggressive adopters share their experience and perceptions of low risk. The actual benefits and risks will determine the speed at which the technology moves from its development infancy to the adoption and the maturity stages. There are some fundamental things the purchasing company wants to achieve when it comes to purchasing. These include reducing the time employees spend looking for a product, service or suitable supplier, reducing the time and cost of administering purchases, reducing cycle times, increasing volume with a few preferred suppliers to get better pricing and other conditions, as well as limiting choices to only a number of pre-qualified suppliers to ensure quality. E-Procurement has a role to play in all of these areas, and the potential gains are huge.

VARIOUS STRATEGIES USED BY FIRMS FOR SC AND IT INTEGRATION
There are different integration strategies used by Indian manufacturing firms for becoming competitive through reduced costs, improved customer service levels, less lead time and better quality after our market was opened in 1991.These different strategic integration were1) SC and BPR integration. 2) SC and ERP integration. 3) SC and E-procurement. 4) SC and information sharing.

CASE STUDY
M&M'S PROBLEM PLANTS In the mid-1990s, India's largest multi utility vehicle (MUV) and tractor manufacturer M&M was facing serious problems at its Igatpuri and Kandivili plants in Maharashtra. The plants were suffering from manufacturing inefficiencies, poor productivity, long production cycle, and suboptimal output. The reason: highly under-productive, militantly unionized, and bloated workforces. The company had over the years been rather lenient towards running the plants and had frequently crumbled under the pressure of union demands. The work culture was also reportedly very unhealthy and corruption was widespread in various departments. Alarmed at the plant's dismal condition, Chairman Keshub Mahindra tried to address the problem by sacking people who allegedly indulged in corrupt practices. M&M also tried to implement various voluntary retirement schemes (VRS), but the unions refused to cooperate and the company was unable to reduce the labor force. During this period, M&M was in the process of considering the implementation of a Business Process Reengineering (BPR) program throughout the organization including the manufacturing units. Because of the problems at the Igatpuri and

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Kandivili plants, M&M decided to implement the program speedily at its manufacturing units. The program, developed with the help of the UK-based Lucas Engineering Systems, was first implemented on an experimental basis at the engine plant in Igatpuri. Simultaneously, an exercise was initiated to assess the potential benefits of implementing BPR and its effect on the unions. M&M's management was not surprised to learn that the unions expressed extreme displeasure at the decision to implement BPR and soon went on a strike. However, this time around, the management made it clear that it would not succumb to union demands. Soon, the workers were surprised to see the company's senior staff come down to the plant and work in their place. With both the parties refusing to work out an agreement, observers began casting doubts on the future of the company's grand plans of reaping the benefits of BPR.
BACKGROUND NOTE Mahindra & Mahindra Ltd. (M&M) was the flagship company of the Mahindra group, one of the top ten industrial houses in India. The company's history dates back to 1945, when two brothers, J.C.Mahindra and K.C.Mahindra, decided to start a business of general-purpose utility vehicles. The brothers formed a company, Mahindra & Mohammed Ltd., in association with their friend Ghulam Mohammed. In October 1947, the first batch of 75 jeeps was released for the Indian market. In 1948, the company was renamed Mahindra & Mahindra Ltd. Over the next few decades, the group promoted many companies in areas as diverse as hotels, financial services, auto components, information technology, infrastructure development and trading to name a few Though M&M had established itself in the markets and was among the leading players in many of the segments it operated in, it realized that some of its businesses were not closely related to its core business. This realization marked the beginning of the biggest change exercise since the company's inception. In 1994, a major restructuring exercise was initiated as part of a BPR program. M&M introduced a new organizational model, in which various divisions and companies were regrouped into six distinct clusters of related businesses, each headed by a president. M&M's core activities, automotive and tractors were made autonomous business units. The other activities of the group were organized into infrastructure, trade and financial services, telecommunication and automotive components. According to company sources, the whole exercise was intended to develop a conceptual map to provide direction for the future growth of various business lines. It was decided that, in future, the group would confine its expansion to the identified thrust sectors. The two main operating divisions of the company were the automotive division, which manufactured UVs and LCVs, and the farm equipment division, which made tractors and farm implements. The company employed over 17,000 people and had six state-ofthe-art manufacturing facilities spread over 500,000 square meters. The plants were situated at Kandivili (MUVs and Tractors), Nasik (MUVs), Zaheerabad (LCVs, Voyager, three-wheelers), Igatpuri (Engines) and Nagpur (Implements and tractors).

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       

PROBLEMS FACED BY THE COMPANY AT THE IGATPURI AND KANDIVALI PLANTS
Manufacturing inefficiency Low productivity Long production cycle Sub optimal output

REASONS FOR THOSE PROBLEMS
Unhealthy work culture. Corruption was widespread. Militantly unionized workforce. Management lenient and often crumbled under pressure.

DESIGNED IN TWO PARTS 1 PART-Restructuring of M&M
Restructured in six distinct clusters of related businesses as SBU Each headed by a president. Infrastructure. Trade and financial services. Telecommunications. Automotive components. Automotive division(UV, LCV, 3 wheelers) Farm equipments divisions. nd 2 PART-Implementation of BPR at Igatpuri and Kandivili plants  Developed with help UK based Lucas Engineering System        
st

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       Re-engineering the entire layout & processes of working Cellular Manufacturing Multi-tasking through Multi-machine manning Reduction in non-productive Activities Implementation of TPM and Kaizen Formation of 3 cross functional teams Horizon 1: Improvement in existing Product Horizon 2: Upgradation of existing Product Horizon 3: Development of new Product BARRIERS/CHALLENGES MODEL 37 .

.e.             SOFT BARRIERS People problems Employee and union resistance.    DEPLOY Testing the new improved processes and demonstrated Around 100 officers produced 35 Engines a day as compared to 1200 Employees producing 70 Engines in pre-BPR days. Afterwards 3 full time teams were formed namely Production related team  BPR execution team.4% & 1996: 10. Resistance from vendors’. Implementing new improved processes in regular operations of organization After this there was no stooping for the BPR and it gained the momentum from there on as the union had called of its strike. Inflexibility of workers.1% Value added per employee increased from 0.      BENEFITS REAPED DUE TO BPR Igatpuri Plant: Employees declined by 400 but productivity went up by 125 Engines per day. Legal obstacles. Resource problems. High corruption. Fears of downsizing. HARD BARRIERS IT problems. Nasik Plant : 125% Improvement in productivity Reduction in Employee costs  1994: 12. But.  Handling unrest team.33 % per employee. increase of 53. Better Inventory control.3 million to 0. What plant faced afterward was the strike from the workers who went on strike for 5 months. 1st Indian company to go for BPR. Several jobs combined into one. 38 . Structure and culture. Vendors’ resistance. management demonstrated that they are firm on their decision to implement BPR in their supply chain and top management decided not to succumb to the demands of vendors’ and workers but to go ahead with their plan and in this process they sacked corrupt employees and introduced VRS scheme.46 million i.

Lead time has been reduced through supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree 3. Relationship with suppliers has improved due to supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree 9.   Better order distribution across plants.Stock out situation has been reduced through supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree DATA ANALYSIS As per the questionnaire filled and the data from the internet the following analysis is made 39 . Quality of product has improved due to supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree 4. Forecast has improved through supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree 10. Online and Transparent access of data. Input cost has been reduced through supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree 2. Flow of end product has become smooth and continuous matching consumption due to supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree 8. QUESTIONNAIRE NAME OF THE COMPANYDESIGNATION1. Integrated sales and supply chain. Information flow across SC has become fast through supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree 7. Throughput has improved due to supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree Strongly Disagree Strongly Disagree Strongly Disagree Strongly Disagree Strongly Disagree 6. Customer service has improved due to supply chain integration? Strongly Agree Moderately Agree Neutral Moderately Disagree 5.

1) Input cost has been reduced by the supply chain integration? Strongly agree 3 6 2 17 22 Moderately agree neutral Moderately disagree There are 34% employee who strongly agrees that the implementation of SC integration has reduced the input cost for the company and other 44% moderately agrees to this So. this clearly shows that the integration of supply chain has a positive impact on the performance of the company in terms of reduced cost 40 .

3)Quality of product has improved due to supply chain integration? Strongly agree 8 7 20 4 11 Moderately agree neutral Improvement in the quality of product is also an important part of the supply chain integration and from the response of the employees with 22% and 44% respectively agreeing strongly and moderately and also 34% are disagreeing on strongly or moderately. 41 . it can be predicted that to a good extent quality has been improved through SC integration. there are 26% employees who completely believes that the lead time has been significantly reduced through the use supply chain integration and also there are 38% employees who moderately agrees to this.2)Lead time has been reduced through supply chain integration? 1 8 9 19 13 Moderately agree neutral Strongly agree As can be seen from the response of the employee’s for this question. so from the overall response of the employees we can safely predict that lead time has been reduced to a good extent through supply chain integration. 4) Customer service has improved due to supply chain integration? Strongly agree 4 7 14 4 21 Moderately agree neutral Moderately disagree Customer service improvement is one of the most important constituent of the supply chain and any improvement in the customer service shows that supply chain is improving and from the pie-chart it can be seen clearly from the response of the employee that customer service level has improved with the supply chain integration as total of 70% of the respondents agrees that the customer service level has improved with supply chain integration.

but an overall response is that the throughput has improved with supply chain integration. So. 6) Information flow across SC has become fast and accurate through supply chain integration? 210 16 31 Strongly agree Moderately agree neutral Moderately disagree Flow of fast and accurate information across the supply chain members is very essential for the health of the supply chain and regarding this question out of the total 50 respondents 94% agrees that information flow has become fast and accurate through supply chain integration. and from the response of the respondents it can be gauged very easily that 62% of the respondents are either in agreement that the performance has improved or else are neutral.Flow of end product has become smooth and continuous matching consumption due to supply chain integration? 42 . but rest 38% do not agree with the statement that the throughput has improved.5)Throughput has improved due to supply chain integration? Strongly agree 7 12 8 9 14 Moderately agree neutral Moderately disagree Throughput shows the amount of product that is being consumed from the total product that you are manufacturing and in one or the other way throughput depends upon the supply chain performance. 7) . it can be safely predicted that supply chain integration has helped in the fast and accurate flow of information though the supply chain members.

9) Forecast has improved through supply chain integration? 0 7 25 18 0 Strongly agree Moderately agree neutral Moderately disagree Forecast is something which can never be 100% accurate but you can try and get as close as possible to accurate and it accurate forecast depends on many factor like the extent to which information is shared between the members of the supply chain and also on the real time data availability.2 1 17 13 17 Strongly agree Moderately agree neutral Moderately disagree Smoothening of the flow of end product means that the supply is matching consumption and to this question out 50 respondents 30 or total of 60% has responded in affirmative and only 6% have responded negatively. 10) Stock out situation has been reduced through supply chain integration? 43 . 8) Relationship with suppliers has improved due to supply chain integration? 1 7 9 14 19 Strongly agree Moderately agree neutral Moderately disagree Relationship with supplier is very important for any manufacturer as both are dependent upon each other and this relationship is very important for the overall performance of the supply chain. and in response to this question out of 50 respondents 33 or 66% respondents have responded in affirmative and only 16% have responded in negative. and in respond to this question out of total 50 respondent 33 or 86% responded have their answers in affirmative and believes that forecast can be improved if supply chain is integrated.

and so this can help in reducing the monopoly of the supplier if a company has only one supplier which is very rare now a days in India. Trust between the supply chain members which is very essential for the mutual growth of both can also be improved through the use IT as IT would help them in exchanging the data regarding the demand and consumption pattern on real time basis and depending on that supplier can supply the raw material to the manufacturer thus preventing any kind of uncertainty across the supply chain. 44 .Through the IT suppliers can get access to the international market and manufacturer can also get access to the international market but they also get access to the international supplier. 3. 10. FINDINGS 1. 9.Strongly agree 6 15 11 9 Moderately agree neutral Moderately disagree 9 Stock out is a situation where we are not left with any material to satisfy the need of the customer and it can occur when there is lack of communication between the members of the supply or when members of supply chain do not trust each other. 8. Selection of ERP software for a particular organization is made depending on different factors. 6. 5. 2. Implementation of BPR in supply chain needs lots of efforts and great will power as you can face lots of internal and external resistance. 7. and in response to this question 40% respondents have agreed that stock out situation has improved and 30% disagrees with this statement. Cooperation among the various members of the supply chain can be improved through the use of IT as it will help in exchange of real time data as accurately as possible across the supply chain members. 11. Information sharing among the supply chain member is very important to keep bullwhip effect at bay. In the wake of increasing competition supply chain integration has become very much essential to keep an organization competitive. 4. Lateness in the delivery of the order whether from the supplier side to the manufacturer or from the manufacturer side to the customer or warehouse can be improved by making use of IT. Inaccurate demand forecasting results from the lack of information sharing among the supply chain members and can result in the bullwhip effect across the supply chain. Communication among the members of the supply chain can be improved through the use of IT. Uncertainty occurs across the supply chain when there is lack of information sharing among the supply chain members.

Though many members of the Fortune 1000 already have significantly integrated with their Tier 1 suppliers.IT can help in collaborative planning. production. and other supply chain efficiencies. Or it could mean deepening the level of integration with suppliers that are already electronically enabled by adding new transaction sets or even collaborative business processes to the current platform. which can ultimately mean increased profitability. the initial cost of implementing ERP and the failure rate is higher firm should go for these because success rate depends upon how well you have braced yourself for these change and to implement BPR and ERP you should carry out an all out inspection of your organization like where your organization is and where you want to take it in the future. So. improve customer service. Either approach can deliver substantial savings related to decrease manual labor. RECOMMENDATIONS Nothing resonates more strongly with large companies that have hundreds or even thousands of suppliers than the concept of supply chain integration. universal connectivity could mean extending that integration to the small and mid-sized. often called universal supply chain connectivity. CONCLUSION The final conclusion that can be drawn from the material that is presented here is that if an organization wants to remain competitive in today’s world they need to make use of IT and they need to develop IT infrastructure it doesn’t matter whether they are small firms or large firms. suppliers. 45 . 14. logistics.12. inventory. Eventhough. This holds much importance for the automotive manufacturing firms as India is one of the fastest growing country in terms of automobile consumption and with such a huge potential for growth many well known international manufacturing firms are either entering Indian or have already entered India.BPR is a process oriented approach and not a set of predefined sequence. can result in constant improvements in the breadth and depth of the electronic interactions with suppliers. is to make use of latest technologies in their supply chain. In addition.Workflow. These foreign companies are already making use of new technologies in their supply chain in order to reduce their because they that all other means to reduce their price have been over and the only option left to reduce their price. Building this universal connectivity can take multiple forms.Batch ordering can also be improved through IT as you don’t have to go through a long process of placing an order you can simply use net and can send the demand of raw material to the supplier within a very short time interval. or Tier 2 and Tier 3. True integration. 13. 16. forecasting and replenishment. operations and procurement can be co-ordinated through the use of technology in the supply chain. improve quality.Long variable lead time which occurs due to conditions like non availability of raw materials or due to a strike in the firms can be tackled through IT as you can search for some other supplier who can make raw material available to you within in a short span of time. reduce lead time etc. 15. I think small Indian firms should also realize this and should make use of latest technologies by developing IT infrastructure as large Indian firms have already done this.

Getting these individuals on the same page is a critical part of the initial planning phases. Non-Exclusive Process A three pronged set of best practices for supplier enablement that can help companies avoid the horror stories of failed integration attempts. Group Buy-In There are also a few groups that need to be onboard from the hub company side to ensure the supplier enablement project is successful. specifically a non-exclusive process. Most organizations can only handle turning on a subset of their suppliers at once. make it a big party if possible. Interestingly. However. Promote a scheduled Webcast or make it part of a supplier meeting or convention. 46 . A non-exclusive process looks at enablement from the supplier’s perspective. of course. it’s time to roll up the integration sleeves and help the first batch of suppliers get going. The first and most important group to approach resides in the executive suite. successful enablement programs often result in as many as half of the suppliers testing a solution they already have which happens to measure up to such guidelines. orchestrated kick-off of the entire program. Finally. developing a realistic rollout plan is also an important part of this non-exclusive process phase. Once that’s done. such as an inexpensive. the information technology group must be onboard as they will be intimately involved in the implementation and support of the suppliers. the individual or group that is most involved with the suppliers must fully endorse the project and be fully engaged. To guarantee that an enablement program will truly return its weight in gold. vendor relations or whoever heads up the buying group within the organization. Even though suppliers will be enabled in a phased manner. Many companies estimate that increased supply chain efficiency saves millions per year. while remembering to give suppliers the freedom to integrate using whatever method they want. Count on some 50% of suppliers wanting to update and test their current set up with your company guidelines. The only caveat. and includes a heavy dose of planning and project management. and a combination of low or slow adoption rates. it’s still a terrific idea to have a formal. and that participation from all parties will be a cornerstone of the program’s success. This is where the second prong of the best practices trio comes in – technology options. remember that even suppliers whose existing solutions don’t make the mark should be able to choose how they want to become enabled. Realistic Rollout Plan In addition to securing the buy-off of all involved parties from the hub. Think of this practice as getting the proverbial ducks in a row by developing exact technology guidelines and specifications upfront. This may be a vice president of merchandising. is that they must comply with the guidelines. easy-to-use hosted solution. angry suppliers. It lets suppliers know that the hub company is absolutely committed.Increased customer satisfaction and a healthier bottom line are certain to be natural by-products of any integration effort. Smaller suppliers may want to look at other options. The first practice has to do with process. This accomplishes several important goals. so a phased project plan is likely to be the most efficient and the most effective in the long run. There’s no need to be overly ambitious here. that this is important to everyone’s financial health. In fact. In addition. there must be an executive or business sponsor who is keenly aware of the return on investment that universal supply chain connectivity can deliver.

In most cases. Once the enablement program is unveiled. Then there is the 10% of suppliers that prove the exception to the rule. To minimize resistance. it’s no surprise that providing a broad range of technology options is an essential best practice. The result is higher than expected demand from hundreds or thousands of suppliers that will be looking to test in a short period of time. Though many companies believe they know the number of suppliers who have EDI software. More than likely. they are merely the same 20% that always complain. where asking a vendor to utilize a solution or service for 3 documents a year just isn’t worth it. These are the ones that you may need to deal with separately because of special needs. Do not underestimate the importance of this. and making sure that technology problems are taken care of swiftly and properly. They may have extremely low volume. these services can be utilized with multiple customers over time – not just with the hub that causes the initial adoption. Expect around 40% of suppliers to actually sign up early and completely embrace the program. To maintain a successful program. for example. inexpensive way to quickly meet your guidelines without causing a big change in behavior. One of the most essential of those options is a top-notch and easy-to-use testing platform so suppliers can certify their existing solution. And that brings us to the third and final best practice – maintaining universal supply chain connectivity is a process that never really ends. Don’t be discouraged.Testing Platform When you consider that an enablement program will typically involve hundreds or even thousands of suppliers that may vary in size from $1 billion in revenue per year to less than $10 million. numerous hosted solutions that specifically address the needs of SMEs are available – and have been available for some time. Medium and low volume vendors often utilize intelligent Web forms to minimize manual entry wherever possible. These vendors may not necessarily have a problem with universal supply chain connectivity. It will test Value Added Network (VAN) information set-up. and will validate transport. there are several truisms that have emerged regarding suppliers and their adoption rates. These will be the least problematic groups. helping suppliers stay informed about the necessary requirements. Another 20% will complain bitterly about enablement and will struggle to comply or may even attempt to ignore the program. vendors need an easy. never think of integration as a one-time event. services are available that will convert their faxes into electronic data formats on their behalf. Another 30% will sign up at the last minute. The third and final best practice would be to think of integration as a journey that involves ongoing. It will also either pass or fail the vendor on compliance. In the best-case scenario. The options help high volume vendors to integrate a service directly into their back-end system. And for the slow adopters. It means staying on top of planning for the next enablement event from the perspective of the hub company. dedicated support of suppliers. And for those that fail. they almost always underestimate how many have intentionally kept it a secret. the testing platform or service will provide the vendor with diagnostic feedback so they can quickly make adjustments and re-test their system successfully. Solution Options For many small and mid-sized enterprises (SMEs). and you probably already know who they are. the testing platform will let companies confirm sender and receiver identification set-ups. the existing solution will be the fax machine. The best solutions provide the vendors with a suite of hosted options. syntax. 47 . Thankfully. and content.

2) http://www.wikipedia. Dublin Institute of Technology 48 .org/wiki/supply_chain_management.spscommerce.SOURCES AND REFERENCES 1) http://en.com/asset 3) Supply Chain Integration: Challenges and Solutions By Edward Sweeney.

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