SCM_ Vaseem
- 1. India manufacturing Summit A talk on “Connecting Dots at Competitive Cost” By : Vaseem Ahamad Pidilite Industries Ltd
- 2. Contents – Three dimensional approach of supply chain. Supply Chain structure Analysis of logistics cost Primary freight management Secondary freight management - FRD
- 3. Service Stock Cost 3 Dimensional Approach of Supply Chain Improvement in Customer Service Reduction in Warehouse Costs Improvement in Primary & Secondary Freight Reduction in Working Capital by controlling stock through forecast accuracy
- 4. Level 1 Level 2 Level 3 Level 4 Level 5 Supply Chain StructureSupply Chain Structure Primary distribution Secondary distribution Supplier Mfg Plant Distribution Hub Depots WSS
- 5. Analysis of logistics cost Logistics cost comprises of following elements 6.00% Warehousing cost 26% 1.56% Inventory Cost 24% 1.14% order processing & administrative cost 10% 0.60% Freight cost 50% 3.00% Primary freight cost Secondary freight cost As % of sales
- 6. Primary freight cost management Freight cost is the function of “freight rate” and the “loading efficiency” Both parameters to be addressed to manage the freight cost Low freight may deteriorate the service level and high freight may not result in high service level hence appropriate rate to be explored Low loading efficiency is a seepage of freight cost. Freight rate management Reverse auction Bench marking with similar industry – Freight as % as sales Basic thumb rule check (Distance based costing) To explore the possibility of outsourcing ( If business allows) Timely & genuine correction of freight rate
- 7. Primary freight cost management --contd Reverse auction- Basic rules to be focused Selection of reliable carriers Carriers who are well versed with reveres auction process To share full information and all terms and conditions with transporter. Internal review on reverse auction findings before implementation. Phased manner change over. Illustration on Reverse auction outcome : Ex Location To Locations Before RO After RO % saving Comments Zirakpur Bangalore 57938 53303 8% Scope for reduction Chennai 61800 61182 1% Entry reduction Ernakulam 73030 65727.00 10% Scope for reduction Hubli 51500 50470 2% Entry reduction Hyderabad 47700 48800.00 -2% May be considered for increase
- 8. Primary freight cost management ---- Contd Loading efficiency Loading efficiency is the ratio of actual weight and standard capacity of vehicle Low loading efficiency is due to the nature of merchandise Volumetrically low loading efficiency. Example – In case of high density merchandise like Iron, Cement etc. Weight wise low loading efficiency Example – In case of light density merchandise like Pharma, cosmetics and Foods. Low loading efficiency issue can be addressed by using the correct vehicle type
- 9. Primary freight cost management ---- Contd Variety of vehicles are available in market. Depending on the nature of merchandise, correct use of vehicles helps in improving the loading efficiency and which results in economic freight cost. Improving the loadability by using support Model Type Net carrying capacity Dimension Available CFT CFT per MT Suitable for Factor 9 MT 18 X7X7 882 98 light density merchandise Normal freight 7 MT 20 X 8 X 8.5 1360 194 Very light density merchandise premium over normal 16 MT 22 X7 X 7 1078 67 Heavy density merchandise Normal freight 16 MT 32 X 8 X7 1792 112 Very light density merchandise Premium over normal freight 21 MT 24 X 7 X7 1176 56 Very heavy density merchandise discount over normal freight 21 MT 32 X 8 X7 1792 85 Moderate density merchandise Normal freight
- 10. Secondary freight cost management Secondary transportation is quite complex in nature as compare to primary transportation Have direct impact on service Managed by regional players Operate on parcel mode Freight rate format as Rs per kg or Rs per carton. Door collection Consolidation at transporter’s godown at despatch end Deconsolidation at transporter’s godown a t delivery end. Door delivery Traditional secondary distribution: For a customer at 500 KM distance 1 Day 1- day waiting 2- days transit time 1- days Reach customer end by 5th day
- 11. Secondary freight cost management FRD ( Fixed route despatch mode) To cater all the customer falling on same route through a dedicated vehicle Possible by bringing discipline in despatch through close co-ordination with stockiest. Load formation through assigning the frequency of supply to customer based on customer off take. Fixing the trip rate trip rate or discounted per kg rate. FRD Route Towns 1 Aurangabad Ahmadnagar Jalna 2 Beed Parbhani Nanded Hingoli 3 Solapur Osmanabad Latur Barshi
- 12. Thanks
Editor's Notes
- #5: The structure of the supply chain varies depending upon the business, product being supplied, the distribution structure & geographies involved. The one depicted here has 5 levels and yet we have not reached the end user. One has to be very careful about the quality of information that flows through these levels – that information tends to get corrupted when it passes through these levels Level 1: The large number of suppliers helps in lower costs but increases the variability in lead times Level 2: Again the large number of processing locations provide the flexibility but adds to the complexity Level 3: The buffer level which buffers the sales variations but adds to cost of transportation & handling Level 4: Provides faster service to customers but adds to WC due to fragmentation of inventory Level 5: Provides a strong network but means more mouths to feedevel 5: