ABC LIMITED Mr.

Krishnan, General Manager Operations, ABC Limited, a leading consumer durable product manufacturing company could not have wished for more. He just heard his MD telling him keep it up you are going fine. The MD read from the sales directors month end report: sales target for the month: 100000 CTV; sales achieved 110000 units; Model wise customer orders filled 90%. Inventory of finished goods was down to 30 days from the past three months average figure of 60 days. Sales outstanding was down to 45 days from the earlier figure of 90 days and more. Krishnan also knew about the dropping inventories at the factories. He had every reason to be happy for only he knew the struggle behind this achievement. Krishnan paused to recall how they managed this transformation. COMPANY BACKGROUND ABC limited, a locally based company and a leading consumer durable manufacturer with three factories at various locations over the years had managed to attain 25 % market share in the nearly 6 million CTV market in India. With the removal of import restrictions and entry of multinationals, mainly from Korean companies such as LG and Samsung, ABC was threatened. The company was in an unenviable situation. 1. The sales director never got the models of television that the market asked for at the time they were needed. 2. Further the company had to address the pressing issues: High levels of finished goods inventories Long internal and external lead times Unbalanced components of raw material stocks and Indifference form the major ABC group (in-house) suppliers who had a major share of supplying critical components The company had to take hard decisions to restructure its manufacturing operations in order to provide the customers requirements and to survive. THE SITUATION: a. At the Market The market situation was that the companys models, which the customers required, were not available on time and at the outlets where they were needed. Since the finished goods stock were very high both at the factory and at the branches, sales staff were forced to push these stocks to the dealers by thrusting the models in stock (but which were not required by the market) whenever an opportunity to supply to the dealer arose. This led to high levels of outstanding debts in the market leading to cash flow problems. Suppliers were not paid even 180 to 240 days after they had delivered the raw materials. b. At the factories

Purchase, production and planning departments were chasing schedules different (their own, most times) and there was no coordinated effort to address the demand. Every one was blaming the other for missed performance. Production department was unable to service the customer needs due to unbalanced inventories (availability) of components. Because of this high tooling set up times changeover time between models took enormous time necessitating long production runs and consequent accumulation of stocks. c. At the purchase department The purchase department was either releasing orders or following up with the suppliers for items that were short for meeting current production schedules. Buyers were responsible for buying specific category of items and their activities were not coordinated. They were grappling with a high amount of paperwork also. THE TASK Not willing to be beaten, Krishnan set about fixing what was ailing the company. He concluded that procurement had to be streamlined to match production that should be planned only with the marketing schedule s the primary schedule. For this to happen the entire procurement process had to be reengineered to become flexible and to respond quickly to changes in the production plans that changed with changes in demand. Supplier management and information management was the key. While he took the help of the MD to restructure Marketing Information systems, Krishnan decided to attack the production and procurement areas himself. In retrospect, eight months after the event, Krishnan could say that he took the right options. Identify the main issue. Identify the basic issues that had to be addressed. What should be the optimal buying process? Where should the buying focus be? How should information be managed? How could buying reengineer itself to become strategic?