Team Apache

Pranay Singh
Soumendu Sanyal
 Introduction Problem Definition Analysis & Recommendation Implementation

Executive Summary
Problem
Statement

Approach
Pain Points
Poor order Book Position
Building & Testing the initial Hypothesis for
Excellentia Stainless Steel business experienced a dip Under Utilization identifying the Problems
in revenue by 11% (FY-16) Despite the reduction in
Poor Procurement Practices Developing a plan of Action for each department for
operating expenses by 8% the company’s Gross
High working capital smoother transition from current state
profit dipped by 32% (FY-16)
Iterative changes to transform existing working state
Exposure to price fluctuations

Pictorial
Pictorial Representation
Representation of
of “As-Is”
“As-Is” flow
flow of
of work
work Segment
Segment Wise
Wise Distribution
Distribution Grade
Grade of
of Steel
Steel Use
Use

Grade Of Steel Architecture & Automobiles/ Consumer

Railways/ Manufacturing Percentage
Used Construction Transportation Durables
200 29.78 55.84 40.09   12.40%
300 98.25 123.42 154.04 262.5 62.92%
400   96.13 93.86 60.34 24.68%
Percentage 12.62% 27.15% 28.39% 31.84% 1014.25

Business Domain Problem Solution Impact Analysis

Sales Skewness in the Order Book CRM, Re-organization

Procurement plan not
Production matching Production
planning
Poor planning of Inbound
Logistics & Outbound Logistics
High Working Capital /Poor
Finance Performance Ratios
• Greater Productivity among all the functionalities leading to overall boost in sales
and meeting client requirements
MSP People
• Monthly demand-forecasting meeting planning, scheduling & procuring
Use of P2C platforms and materials at right time, at right price
efficient contracting
Stringent credit policy to match
the industry average of 90 days Process • Improvement in Operational Capabilities

Lead time adjustments, VMI

Procurement High Lead times Technology • Significant changes in the current state by adopting Latest IT tools
implementation
Best Case Most likely case Worst Case Best Case Most likely case Worst Case
Revenue grow 18% Revenue grow 12% Revenue grow 6% ROI 45% ROI 30% ROI 15%
Introduction Problem Definition Analysis & Recommendation Implementation

Problem Identification & MECE categorization

Problem-Issues Cause-Effect Diagram Legend

Legend for
for RACI
RACI
Description Code Score
Relationship with Departments Departments which are responsible for solving the issue R 4
Relationship with Problems Departments that are affected by the issue A 3
Departments that should be consulted before any changes C 2
Department that should be informed about any changes I 1
Number of cause effect relationships shared with major challenges − −

Problem
Problem Prioritization
Prioritization using
using RACI
RACI (MECE)
(MECE)
Major Problems Identified Criticality Weights
Score
Poor Oder Book Position / Order Book Skewness 68 25.47%
High Risk to Raw material Price Fluctuations 52 19.48%
Extremely High Working Capital / Poor Performance Ratios 51 19.10%

Inefficient and ordinary Inbound/Outbound Logistics 53 19.85%

Underutilization of Capacity/Quality Deviation/ Inefficient
Sequencing 43 16.10%

Problem Prioritization Chart

Underutilisation of Capacity/Quality Deviation/ Ineeficient Sequencing

Inefficient and ordinary Inbound/Outbound Logistics

Extremely High Working Capital / Poor Performance Ratios

High Risk to Raw material Price Fluctuations

Poor Oder Book Position / Order Book Skewness

0 1 2 3 4 5 6

* Refer Annexure A,B,C for detailed Analysis

 Introduction Problem Definition Analysis & Recommendation Implementation

Poor Order Book Position / Order Book Skewness

Sourcing & No. of effect-

Key Issues to Address Sales/BD PPC Manufacturing Finance Logistics Cause Total Score
Procurement Relationships
Criticality Score
Orders skewed towards the end of the month R A A C A I 1 17
68
Order Cancellations R I C A A − 1 14
Priority Rank R A A − − I 12 68
Very Low Order Book Position at the start of the month 1
1 Low visibility for future demand R A A − − C 1 13
Limited Market Coverage R I I A C − 1 12

Monthly Orderbook Skew (Avg) Recommendation Change Management

• Integrated CRM application will not only save time and costs but also reduce the dumping
45.0%
40.1% of stocks • Train workers to operate
40.0% • CRM has the potential to cut down the order placing time in half, without sacrificing due CRM (mobile version)
Training
35.0% diligence, and reduce staff for site processing and create an effective sales funnel
• The central data base to gather business intelligence and forecasting methodology • Capture relevant data for
30.0% 27.0% • Trade agreements application to be used while order processing will protect the company
25.0% Reporting decision making process
19.9% against any cancellation of orders
20.0% • Expansion into new markets like USA, Brazil and exploiting export potential for Asian
13.0%
15.0% market
10.0% Synergy across verticals
Benefits Risks
5.0%
• Can have shorter sales cycles and sales
0.0% targets in accordance with the cycles • neglecting business processes and only
Week 1 Week 2 Week 3 Week 4 • Integrated systems will enable the
• Trade agreements can be enforced at the emphasizing technological solutions storage of data at a central
time of order booking • employees uneducated in the use and
database with access to all the
• Reduce product costs and improve advantages of CRM
concerned decision makers,
margins by taking advantage of • lack of metrics to gauge CRM project
creating visibility into the future
preferential duties success
• Minimize labor hours and the risk of and a systematic process design
manual data entry errors

Mitigation
• Have your requirements clearly documented and the sales funnel accurately designed 
• The future changes and innovations have to be clearly taken into account

*Refer Appendix D for detailed Analysis

 Introduction Problem Definition Analysis & Recommendation Implementation

Inefficient and ordinary Inbound/Outbound Logistics

Key Issues to Address Sales/BD PPC Manufacturing Finance Logistics Sourcing & No. of effect-Cause Total Score
Procurement Relationships
Criticality Score
A A − R R − 15
53 Delayed Commercial Clearance for Domestic Orders 1
Priority Rank High Lead Time for Procurement of Raw Materials − A A − − R 1 11 53
2 High Skewness in availability of trucks R C C − R − 1 13
High Variation in Shipping Line Lead Times − A A − A R 1 14

Recommendation Change Management

Inbound Logistics Lead time
• E-procurement implementation to be needed to eliminate paperwork and the costs
measurement associated with paper processes.
• Train workers to operate E-
Procurement
160 • Making use of on-demand trucking solutions to have a positive impact on costs, reliability, Training
140
lead times and safety • Reinforce vision, target efforts on
120
• Process optimization/standardization should be done for process like sailing, slot processing high impact areas and emphasize
100
and port operations Culture success
80
• Vendor relationship management and development of metrices to grade them
60
40
20
0 Benefits Risks Synergy across verticals
Nickel - Ferro Nickel - SS Scrap - SS Scrap - MS Scrap -
Europe Asia Japan Europe Asia

• E-procurement will reduce costs • Improvement in claims management

• Shortened business process
• Increased productivity
• Transparency and control
• Standardization
• Higher reliability and safety
• E-procurement can change the across verticals
organizational structure, responsibilities, • The value generated can be passed
and internal power structures to customers in lower premium
simultaneously prices

* Source : https://www.gep.com/blog/mind/digital-freight-booking-a-
burgeoning-practice-in-the-american-trucking-industry
Mitigation
• Identify usage patterns and other information that make it easier both to develop smarter purchasing strategies and negotiate mutually
beneficial contracts with your best suppliers.

** Refer to Appendix D for detailed analysis

 Introduction Problem Definition Analysis & Recommendation Implementation

Exposure to price fluctuations

Key Issues to Address Sales/BD PPC Manufacturing Finance Logistics Sourcing & No. of effect-Cause Total Score
Procurement Relationships
Criticality Score No Pipeline Inventory I R A C C A 2 17
52
High Fluctuations in the Price A C − C − R 1 12
Priority Rank 52
3 Opaqueness in Pricing of Goods A I − R − C 1 11
Inefficient budgeting/ Emergency Loan − C C R − C 2 12
Disbursement

Recommendation Change Management

Nickel price fluctuation throughout last few years
• Inventory management packages (VMI) and experts to manage Minimum inventory to
30,000 absorb price fluctuations • SME to guide the
28,000
• Pricing mechanisms should be communicated to customers. Also in the customer trading transformation processes
Training
25,000 contract, the minimum threshold value of the goods w.r.t changes in Raw material prices • Develop
22,000 new skills &
2011 should be maintained so as to avoid opportunistic buying from customers. competencies while eliminating
20,000
20,000 2012 • Effective Budgeting policy should be placed and reviewed with departments in regular operational barriers
17,000 2013 intervals. Demand forecast should be communicated to all departments to prepare an Engage
16,000
15,000 2014 appropriate budget
12,000 2015 • Explore alternatives to Nickel, Also decrease dependence of Nickel
2016
10,000
Benefits Risks Synergy across verticals
5,000 • Improved order accuracy and ETAs,
minimizing “out-of-stock” situations
0 • Improved lot and batch control
• Inadequate requirement analysis • Improvement in the processes of
Nickel Prices (USD/ton) • Manage inventory in internal
• Inefficient Contract Management order handling, fraud detection,
stockrooms or with suppliers
• Fraud and corruption underwriting, demand supply
CAGR of Price Change -15.6% • vendors can be made to plan shipping
estimates, and customer service
and production dates in advance to
minimize stock-out risks.

Mitigation
• Effectively manage non-inventoried requests alongside stocked items, based on data.
• The capabilities to process orders from approved suppliers efficiently and quickly, which minimizes stockouts.

* Refer to Appendix D for detailed Analysis

 Introduction Problem Definition Analysis & Recommendation Implementation

Poor performance ratios

No. of effect-
Key Issues to Address Sales/BD PPC Manufacturing Finance Logistics Sourcing & Cause Total Score
Procurement
Criticality Score Relationships
51 Very Lenient Credit Policy A − − R − − 1 8
Priority Rank Opportunistic clients R − − A − − 2 9
4 High Accounts Receivables Time R − − R − − 1 9 51
Rigid Finance Policies A I − R − A 1 12
Challenges for closing the deal R I − R A − 1 13

Operating Cycle Recommendation Change Management

• Early Payment Incentives – Discount benefits to customers to encourage payment before the
Payable Days invoice due date • Reinforce vision,
• Quarterly Budget update to review departmental budget proposals based on demand target efforts on
forecasts and production schedules high impact areas
Receivable Days
• Product Portfolio Optimization by identifying the most profitable products in respective and emphasize
segments and regions. Example grade 200 steel Culture
success
• Incremental improvement of Receivable days. To start, with 90 days credit period can be
provided which can be further reduced to 45 days
Working Capital Cycle
• Advance payments should be encouraged. Terms of advance payments can vary based on
preferential customer relationship to promote loyalty
-150 -100 -50 0 50 100 150 200 250 300 350

Industry Best Industry Average Excellentia Benefits Risks Synergy across verticals

• Shorter operating cycle to outperform

Performance Ratios industry average • Opportunistic customers can retaliate • Improvement in forecasting and
• Drop in emergency loans to bring down
10 against stringent policy changes estimation to lower the cost of goods
the cost of capital • Preferential customer management can sold and improve the asset turnover
8 • Higher profitability by implementing 80/20
lead to lower bargaining power ratios
6 rule
• Improved Receivable days and customer
4 relationship
2
0 Mitigation
Asset Turnover Ratio Inventory Turnover Ratio
• Change Management to be communicated with all the internal and external stake holders mentioning the SOP and the benefits
Excellentia Industry Mean Industry Best

* Refer to Appendix D for detailed Analysis

 Introduction Problem Definition Analysis & Recommendation Implementation

Inefficient Production
Key Issues to Address Sales/BD PPC Manufacturing Finance Logistics Sourcing & No. of effect-Cause Total Score
Procurement Relationships
Criticality Score
Higher Costs/Wastage Due To Quality A R R A − − 16
43 Deviation 2
Priority Rank
No Demand Forecasting Strategy I R A − − A 13 43
5 2
High Lead Time for Few Products C R R − − A 1 14

Recommendation Change Management

• Defined Minimum production batch: Priority should be to minimize losses • Production line workers
• Master scheduling plan should be developed on a daily frequency based on the sales needs to be re-skilled
 Finished Goods Lead Time (days) forecast and requirement/availability of raw products Training
• Segment wise and customer specific benchmarking should be done to avoid quality issues • Develop new skills &
• Higher capacity Utilisation for products which are also intermediary good for any other competencies while eliminating
product Engage operational barriers
• Explore the option to procure intermediary products (make/Buy decision)

HR Sheets & HR Coils 9

Benefits Risks Synergy across verticals

• Sales, Manufacturing and PPC
HRAP Sheets & HRAP Coils 11
department’s responsibilities need to
be clearly streamlined. Deals ought
• Lower wastage and Quality deviation
• Production line changes to be answerable for business
• Optimized capacity utilization
CR Sheets & CR Coils 18 • Reluctant factory workers perspectives just as work mutually
with PPC to characterize adequate
cutoff points on quality dependent
on creation restrictions through an
CRAP Sheets & CRAP Coils 21 agreement survey measure.

Mitigation
Slit Coils 26 • Any changes in the production process has to be carefully taken with clear future visibility and scope of healthy returns

* Refer to Appendix D for detailed Analysis

Introduction Problem Definition Analysis & Recommendation Implementation

Implementation Analysis

Collect Standardize and Transform Distribute Consume

Retrieve raw materials(data) from
different sources(Business Functions),
respond to demand fluctuations,
distribute the insights across the
organization, and all while seeking to
Decision Supply Chain continuously improve the flow of the
key tenet of managing a decision supply chain is to ensure the harmony of analytics
chain.
creation and consumption i.e., this data and insights from different business functions should be
The Goal is better and faster decisions
transparent to all Business heads which would help them in taking decisions to enhance Revenue functions

Centralized Model
Sales
• To improve the operational efficiency, there needs to be a centralized approach
• All the suggested applications can be integrated with the existing legendary systems or
ERP. The IT Infrastructure and its modules will play a very important role in the the
Sales
outcome of the project.
Supply Chain

• The Project has an organization wide impact and is a major project. Assuming the
project will have a cost of approximately 40% of the total revenue. We can expect a
Finance

strong ROI

Best Case Most likely case Worst Case

ROI 45% ROI 30% ROI 15%
Introduction Problem Definition Analysis & Recommendation Implementation

Annexure A : TO-BE State

 Introduction Problem Definition Analysis & Recommendation Implementation

Annexure B : Root Cause Analysis

Dip In Gross
Profit

Sales & Production

Sourcing &
Business Planning & Finance Logistics
Procurement
Development Control

Poor Order Book Position / Risk of Goods available at High Working Capital /Poor Inefficient and ordinary
Underutilization of Capacity
Order Book Skewness right price & quantity Performance Ratios Inbound/Outbound Logistics

Orders skewed towards the High Fluctuations in the Opaqueness in Pricing of High skewness in availability of
end of the month No Demand Forecasting
Price Goods trucks

Limited Market Coverage Opaqueness in Pricing of Delayed Commercial Clearance

No Pipeline Inventory Very Lenient Credit Policy
Goods for domestic orders

50% opportunistic Clients No Demand Forecasting High Lead Time for Procurement
Quality Deviation Inefficient Budget planning
Strategy of Raw Materials
Very Low Order Book Position
at the start of the month Emergency loan
Inefficient Sequencing
disbursement
Order Cancellations

Low visibility for future

demand
 Introduction Problem Definition Analysis & Recommendation Implementation

Annexure C : Hypothesis Building

Identified Issues/Hypothesis Acceptance Criteria

Orders skewed towards the end of the month Mentioned in the case : In conversation with Sales Head Adriana
Order Cancellations Mentioned in the case : In conversation with Finance
Very Low Order Book Position at the start of the month Mentioned in the case : In conversation with PPC Head
Low visibility for future demand Assumed due to low manufacturing in the start of the month
Limited Market Coverage Mentioned in the case : In conversation with Sales Head Adriana
No Pipeline Inventory different lead times for goods which have other finished goods as their intermediaries
Mentioned in the case: also the fact that customers are opportunistic to exploit these
High Fluctuations in the Price fluctuations
Opaqueness in Pricing of Goods Customers complained about the lack of transparency
Inefficient budgeting/ Emergency Loan Disbursement mentioned in the case
Very Lenient Credit Policy Assumed due to very huge Receivable days
opportunistic clients Mentioned in the case: "50% of the customers are opportunistic"
High Accounts Receivables Time Direct Inference from the annexures

Rigid Finance Policies
Challenges for closing the deal
Delayed Commercial Clearance for Domestic Orders
High Lead Time for Procurement of Raw Materials
High Skewness in availability of trucks
High Variation in Shipping Line Lead Times
Higher Costs/Wastage Due To Quality Deviation
No Demand Forecasting Strategy
High Lead Time for Few Products
Mentioned in the case: "Finance team sets very stringent guidelines to avoid any negative
repercussions to the bottom-line."
Mentioned by the sales Head, difficult to match market prices and order cancellation occur
Mentioned in the case : Delay in commercial clearance
Direct Inference from the annexures
based on the data available in the annexures, and analysis backed up in the sheet
Direct Inference from the annexures
Mentioned in the case: 15% quality variation. Roughly translated into wastage and costs
The fact that they plan production with only 10% order book position and do not have
pipeline inventory
Mentioned in the case: Data Available in the Annexures
Introduction Problem Definition Analysis & Recommendation Implementation

Annexure : Detailed Analysis Worksheet

The Appendix is available at the given link:

https://drive.google.com/file/d/1fAPd13UjmW3KOmpwmEjY1bmIDJscN_Ap/view?usp=sharing