PROJECT REPORT ON

OPERATION MANAGEMENT & SUPPLY CHAIN MANAGEMENT IN PHILIPS INDIA

SUBMITTED BY: Ms. Pooja Tandon

REGISTRATION NO.: 200 2!"#$ PROGRAM NAME: PGDBA %OPERATION& '()2 !* B)!+ S,-.., No. !/+ 0-1s2na Pa-3 E4,n. NE' DELHI )!!00!/

SYMBIOSIS CENTRE 5OR DISTANCE LEARNING ENROLLMENT 200

NO OBJECTION CERTI5ICATE
This is to certify that Ms. Pooja Tandon is permitted to use relevant data/information of this the O6.-a,1on Mana7.8.n, & S966:; C2a1n Mana7.8.n, In P21:16s Ind1a for her project in fulfillment of the PGDBA

%OPERATION& Program.

'. <1s2 2.- a:: ,2. s9==.ss.

M-. A>21s2.3 Yada?

O6.-a,1on Mana7.P21:16s Ind1a

P:a=.: N.< D.:21 Da,.: 2@.!0.20!!

ii

DECLARATION REGARDING ORIGINALITY

This is to be given by the learner and the supervisor (guide) indicating that this project work is original and submitted for the first time. %C& DECLARATION BY THE LEARNER This is to declare that I have carried out this project work myself in part fulfillment of the PGDBA %OPERATION&. Program of !"#. The work is original$ has not been copied from anywhere else and has not been submitted to nay other %niversity/ Institute for an award of any degree/diploma.

P:a=.: N.< D.:21 Da,.:

iii

CERTI5ICATE O5 SUPERAISOR %GUIDE&

!ertified that the work incorporated in this Project &eport BO6.-a,1on Mana7.8.n, & S966:; C2a1n Mana7.8.n, 1n P21:16s Ind1aC submitted by Ms. Pooja Tandon is her original work and completed under my supervision. 'aterial obtained from other sources has been duly acknowledged in the Project &eport

P:a=.: N.< D.:21 Da,.:

A>21s2.3 Yada? S17na,9-. oD G91d.

iv

AC0NO'LEDGEMENT
I want to acknowledge the help provided by employees of P21:16s E:.=,-on1=s Ind1a L181,.d. The precious inputs provided by them have helped me in compiling this report. (s well as I want to thank all my friends and colleagues who helped me in this working. I e)press my deep*hearted thanks and gratitude to all of those who helped me in this Project.

P:a=.: N.< D.:21

TABLE O5 CONTENTS
S.No.
+.

To61= Introduction -bjectives and cope #imitations Theoretical Perspective 'ethodology Procedure of 3ork (nalysis of "ata 6indings Inferences and &ecommendations !onclusion ummary of the Project &eport Ann.49-. I. Proposal II. 8uide9s &esume III. &eferences

Pa7.s. No + +. +0 +2 /4 15 7+ 7/ 7. 72 72 74 4+

,.

/.

1.

..

0.

2.

7.

4.

+5.

vi

INTRODUCTION
PHILIPS AT GLANCE Philips in India is part of &oyal Philips :lectronics. (s one of the nation;s most well* known and well*loved brands$ Philips is a part of practically every Indian;s life. Philips products find a use in virtually every aspect of daily life * at home$ at work and on the move. Today$ Philips stands as a source of reliable and innovative products that enhance the <uality of consumers; professional and personal lives. Philips India was recogni=ed by >usiness world 'aga=ine as The 'ost &espected !ompany in India in the !onsumer "urables ector for ,55,. This award was based on a peer perception survey among .71 senior managers of the corporate world conducted by >usiness world 'aga=ine and the India 'arket &esearch >ureau. P21:16s Ind1a L181,.d E 5as, 5a=,s Business: 'anufacture and sale of audio and radio :<uipments$ components$ amplifiers$ :lectrical lamps$ lighting fittings$ (ccessories and medical apparatus

Manufacturing Facilities: !alcutta$ tate of 3est >engal (:astern India) Thane$ tate of 'aharashtra (3estern India) Pune$ tate of 'aharashtra (3estern India) alt #ake$ tate of 3est >engal (:astern India)

MAJOR COMPETITORS Radio sets, tape recorders: >P# anyo Technologies #imited +

(kai India #td. amsung India Pvt. #td 'aharashtra :lectronics !orporation #imited ?ideocon International #imited

Television receivers: Lamps: 'ysore #amp 3orks #s #imited >ajaj :lectrical #imited ylvania @ #a)man #imited urya &oshni #imited !rompton 8reaves #imited A'T #imited (kai India #td ?ideocon International #imited >P# #imited #8 :lectronics India #td. -nida aka #imited amsung India Pvt. #td.

Electronic components: ?ideocon International #imited Permanent 'agnets #imited Tata Beltron #imited >harat Aeavy :lectrical #imited ,

technical collaborationsC D.?. Philips;s 8loeilampenfabrieken$ Detherlands

Philips :lectronics D.?. MISSION 3e improve the <uality of people;s lives through the timely introduction of meaningful technological innovations. AISION In a world where technology increasingly touches every aspect of our daily lives$ we will be a leading solutions provider in the areas of healthcare$ lifestyle and enabling technology$ aspiring to become the most admired company in our industry as seen by our stakeholders. AALUES

"elight customers "eliver on commitments "evelop people "epend on each other

BRAND PROMISE -ur brand promise is ;sense and simplicity;. It encapsulates our commitment to delivering products and solutions that are advanced$ easy to use$ and designed to meet the needs of all our users$ wherever in the world they may be. STRATEGY 3e willC

increase profitability through re*allocation of capital towards opportunities offering more consistent and higher returns

leverage the Philips brand and our core competencies in healthcare$ lifestyle and technology to grow in selected categories and geographies /

build partnerships with key customers and suppliers$ both in the business*to* business and business*to*consumer areas

continue to invest in maintaining world*class innovation and leverage our strong intellectual property position

strengthen our leadership competencies drive productivity through business transformation and operational e)cellence

HISTORY Philips started operations in India at Bolkata (!alcutta) in +4/5. :stablished as EPhilips :lectrical !o. (India) Pvt #tdF$ the company comprised a staff of 2. and was a sales outlet for Philips lamps imported from overseas. In keeping with the Philips philosophy of promoting the industrial development of emerging economies$ Philips India set up its first Indian lamp*manufacturing factory in +4/7 in Bolkata. ubse<uently$ Philips decided to produce radio receivers in India to make this product readily and widely available to the Indian consumer. In +417$ after the econd 3orld 3ar$ Philips started manufacturing radios in Bolkata. The first valve*based Philips set was well received by the consumers. This was a major turning point for Philips India$ and marked the beginning of the company;s subse<uent growth in the world of electronics. In +4.2$ the company is converted into a public limited company$ renamed EPhilips India #tdF and in +4.4$ a second radio factory is established near Pune. In +40/$ Philips invents the compact audio tape cassette and sets a global standard for tape recording that has never been altered since. India gets e)posed to this Philips invention. In +40. (/ (pril)$ the millionth Philips radio is manufactured in India. In the same year Philips pioneers the concept of son*et*lumiere shows in India with the installation of such a lighting and electro*acoustic system at the &ed 6ort in "elhi. In +425 a new consumer electronics factory is started in Pimpri near Pune. !ome +47,$ Philips brings colour television transmission to India with the supply of four 1

outdoor broadcast vans to "oordarshan during the IG (sian 8ames. The company also completes a prestigious turnkey project by handling the lighting and electro*acoustic installations of stadia built specially for the IG (sian 8ames. In +47/$ Philips launches the !ompact "isc and revolutioni=es the way the world listens to music. In +47.$ Philips inaugurates its consumer electronics factory at alt #ake$ Bolkata. +44/ sees Philips launching its domestic appliance business in India and in +44. Philips introduces compact fluorescent lamps into the country. In +440$ the Philips recorders * both firsts in India. (s is seen$ throughout the +4559s Philips continued to bring the Indian consumer new and innovative products backed by the latest technology and bearing the renowned Philips stamp of <uality. MAR0ET 6rom the simple to the sophisticated$ Philips has traversed great ground. It has been brightening up people;s lives the world over since +74+ and the lives of Indians since +4/5. 6or over ++5 years it has led the way$ setting new standards and pushing technology to greater heights. Philips e)udes confidence as is captured in its mission statementC HIn +74+$ we lit up the world. Today$ we continue to create a better one. Tomorrow$ there;s no limit to what we can do.H Philips understands only too well that translating an invention to a product that people can access is what counts. Throughout the twentieth century Philips has continued to improve people;s lives with pioneering innovations such as the everyday television$ medical G*ray e<uipment$ the ubi<uitous transistor$ integrated circuits and optical storage technology. oftware !entre is established in >angalore. In +447$ Philips launches 6lat Televisions and !"*

The Philips heritage is its understanding of how people e)perience technology. Today$ in the digital era$ Philips is committed to building upon this heritage to make things better for people all over the world. In over 25 years in India$ Philips has grown into a company that$ today$ employs over 1$.55 people in seven factories and /. offices around the country. The company;s activity levels in ,55/ were over &s. ,/ billion. It;s a leader in lighting$ consumer electronics$ semiconductors$ domestic appliances$ personal care products and medical systems and has an unmatched range of internationally current products backed by superior design and technology. ACHIEAEMENTS Philips India was recognised by >usiness 3orld$ maga=ine$ as ;The 'ost &espected !ompany in India; in the consumer durables segment in ,55,. The award was based on a peer perception survey among .71 senior managers of the corporate world and was conducted jointly by >usiness 3orld and the Indian 'arket &esearch >ureau. Philips India was also selected as one of the Top ,. :mployers in India by the >usiness Today * Aewitt urvey in ,55/. (mongst ,,5 organisations that were evaluated$ Philips India was singled out for distinction on the company brand$ freedom of work$ recognition of performance$ open and transparent culture and fair and e<ual opportunities. The Philips oftware !entre (P !) in >angalore was also placed in the top five in the >usiness 3orld * 8row Talent ;8reat Places to 3ork; survey. The :conomic Times * >rand :<uity survey of India;s 'ost Trusted >rands ranked Philips at number si)teen in ,55/. In the previous two years Philips was there as well. It was amongst only two non*6'!8 brands to be listed in the top twenty. The flagship lamps factory at 'ohali$ Punjab bagged the prestigious Philips >usiness :)cellence ( ilver) (ward. It;s a distinction it shares with only three other Philips factories worldwide. ;#et;s chat; * the internal communications programme of Philips India was awarded the 'I communications. Innovations award for innovative use of technology in

Philips India #imited was selected as one of the Top +5 8reenest !ompanies in India under a survey carried out by >usiness Today and T:&I (Tata :nergy &esearch Institute) in ,55+. Philips$ today$ has fashioned itself to continue its dominance of the Indian market. 6or$ it is here that three revolutions are taking placeC the convergence revolution$ the digital revolution and the internet revolution. 6ortunately for Philips * and its customers * it e)cels in all three. PRODUCT Philips introduced the incandescent lamp to India over 25 years ago. Today$ the most widely used lamps across even the far reaches of this vast country are Philips. IThe company;s lighting product is also the preferred name in hotels$ offices$ city streets and automobiles. !ontinuing reforms in the electricity sector and the need for energy conservation will see new opportunities for energy*efficient lighting solutions. 3hen that happens$ Philips will be there. Philips brought the radio to India when wireless opened up new hori=ons for information and entertainment. (s technology evolved$ the company$ <uickly replaced valves and tubes with transistors. To improve listening e)perience Philips invented and introduced the audio cassette$ the !"$ the ?!" and the "?". &icher viewing was also on the menu with "igital Datural 'otion$ Pi)el Plus$ Plasma and +55 A= &eal 6lat T? sets all introduced by Philips. 6or customers; kitchens and homes$ Philips brought convenience and high styling. 6or the kitchens$ a range of food processorsC blenders$ juicers and grinders$ especially designed for Indian culinary preferences and a range of bread toasters and sandwich makers. 6or the body beautiful$ hair styling and epilation products for women and shavers for men. Philips is revolutionising garment care at home with over a million steam irons in perhaps as many homes. ( leader in health care$ Philips delivers one of the world;s most robust portfolios of medical systems in the areas of Imaging ('&I/!T/cardio vascular and ultrasound)$ 'easurement (patient monitoring systems and cardiology e<uipment) and :lectro 2

Physiological Therapy

ystems (automatic e)ternal defibrillators$ point of care

diagnostics). To any one undergoing a cardiac e)amination in India it is comforting to know that there is a one in two chance that the e<uipment being used is from Philips. In the specialised area of surgical G*ray$ Philips; innovation in the mobile c*arm for intra* operating imaging is unmatched. To meet the growing need for high*<uality$ cost*effective software development capacity within the Philips organisation$ and to bring about synergy and cross*fertilisation of ideas$ the company established the Philips oftware !entre (P !) in >angalore$ in (ugust +440. P !;s software e)pertise is in the areas of embedded and information system engineering$ architecture design$ programming and testing. !lose to ,5J of software content for Philips worldwide is developed at P ! by over +$555 of the industry;s finest professionals. (ided by a constant flow of innovations and customised features$ the Philips consumer electronics division has dramatically increased its market share of colour T? sets. In the ;&eal 6lat; and premium segments$ the division;s strong value*added product portfolio$ based on leading technologies such as "igital Datural 'otion and 'agnabrite lenses$ have ensured a market standing in the top three. To strengthen its position in 3ireless in #ocal #oop (3i##) it has deployed state*of*the* art$ ultimate one*chip solutions backed by customised software. In the coming years efforts are being made to support the Indian market with state*of*the* art set top bo)es$ "?" solutions$ energy measurement solutions as also broadband products. Philips occupies the number one slot in audio$ portable audio$ !"&!&$ ?!" 'inis$ !T? ( ourceC -&8 * -ctober ,55/) and Plasma T? ( ourceC Industry "ata). Philips also continues to maintain the leading position in "?" players and home theatre systems. Philips; presence is not always visible$ but unmistakable. 3hether it is components or semiconductors$ Philips is the leader in inventing$ innovating and creating the technologies that underpin the products that people e)perience every day.

RECENT DEAELOPMENTS (n understanding of why and how people listen and see$ what e)periences people wish for and a deep knowledge of the technologies that make this possible has kept Philips in the lead for over 25 years in India. Philips$ for instance$ introduced power*free radio for the Indian rural markets where power supply was a major constraint. This was not an isolated e)ample of getting it right. Philips has$ in fact$ evolved a special integrated rural marketing initiative aimed at the Indian rural market. Philips has also developed a T? that improves the <uality of incoming signals to allow viewers to see sharper images. P-o8o,1on ;#et;s make things better; has been the Philips theme since +44.. This is more than just the company slogan. It;s Philips; way of announcing itself to the world. :asy to understand$ easy to remember$ it e)presses e)actly what Philips wants everyone to feel when they come in contact with the brand. It;s a public e)pression of the beliefs to which the company is committed. (nd it;s a declaration of the company;s aspirations. -n one level$ ;#et;s make things better; means wanting to produce better products$ better systems and better services. >ut such a desire is hardly uni<ue. (ll successful companies look for ways to improve their products. -f far greater importance to Philips is the need$ the determination$ to make the lives of people better. Philips understands peopleK Philips under*stands technology and Philips knows how they work together. Philips knows it is no longer enough simply to make things. Philips chooses to make things better. B-and Aa:9.s Philips has embraced consistent values across all the countries where it operates. It practises the 6our*" principles that form a family of action*able valuesC "elight customers$ "eliver on commitments$ "epend on people and "epend on each other.

In India$ as in all parts of the world$ when customers seek superior technology$ design and <uality$ they depend upon Philips. (cross the world$ Philips owns over +55$555 patents$ ,,$555 trademarks and 0$555 design copyrights. Philips manufactures ,.1 billion incandescent lamps every year. :ach day$ Philips manufactures .5 million I!s (Integrated !ircuits). Three out of five T?s produced in India have a Philips semiconductor module in it. ,.. million heart scans and procedures are carried out using Philips technology each year. (round the world /5J of offices$ 0.J of top airports$ ..J of soccer stadia$ /5J of all hospitals are lit by Philips lighting. Philips in India is part of the &oyal Philips :lectronics D. ?.$ the global giant in electrical @ electronics. (s one of the nation;s most well*known and well*loved brands$ Philips is a part of practically every Indian;s life. Philips products find a use in virtually every aspect of daily life * at home and at work. Today$ Philips stands as a source of reliable and innovative products that enhance the <uality of consumers; professional and personallives. Philips is a world leader in technology with a leading presence in #ighting$ emiconductors$ !onsumer :lectronics$ "omestic (ppliances and Personal !are$ and 'edical ystems. GROUP COMPANIES O5 PHILIPS IN INDIA P21:16s Ind1a L181,.d %PIL& Philips India #imited manages the businesses in !onsumer :lectronics$ #ighting$ "omestic (ppliances and Personal !are$ emiconductors and !omponents. &oyal Philips :lectronics D. ?. holds around 7/J of the shares in Philips India #imited. The shares of PI# are listed on 'umbai and Bolkata tock :)changes. PI# has its &egistered -ffice in Bolkata$ !orporate -ffice in 'umbai$ &egional -ffices in 'umbai$ !hennai$ "elhi and Bolkata and >ranch -ffices in major state capitals around the country.

+5

PI# has manufacturing sites at Balwa (near 'umbai)$ Pimpri and #oni*Balbhor (near Pune) and Bolkata.

E:.=,-1= La86 Man9Da=,9-.-s Ind1a L181,.d %ELMI& Is a wholly owned subsidiary of Philips India #imited. :#'I is located in Bolkata and manufactures lamps for Philips and is marketed in India by Philips India #imited. P9nja> Anand La86 Ind9s,-1.s L181,.d %PALI&. Is a subsidiary of &oyal Philips :lectronics D. ?. Philips India #imited has a shareholding of around ,/J in this company. P(#I is located in !handigarh and manufactures lamps for Philips and is marketed in India by Philips India #imited. P21:16s M.d1=a: S;s,.8s Ind1a L181,.d. Is the India subsidiary of Philips 'edical ystems International >.?. (a subsidiary of &oyal Philips :lectronics D.?.). Aas a strong presence in the Indian Aealthcare :<uipment market * offering the entire spectrum of e<uipment and solutions in this field. Bey strength in "iagnostic Imaging &adiology both in G*&ays$ '&I and %ltrasound$ Duclear 'edicine and Positron :mission Technology. (lso !ardiology$ Patient monitoring$ !ritical care and Aome care. PRESENT SCENARIO Today$ they are Do. + or Do. , in almost all the product*markets they serve. Their heritage is their understanding of how people e)perience technology* because people interact with technology practically every second$ often without even reali=ing. Philips brought the incandescent lamp to India over 25 years ago. Today it has wide range of products used in homes $ whether in the remote reaches of India or penthouses in outh 'umbai Philips or in commercial spaces like in hotels$ offices$ city streets$ malls $ anywhere and everywhere light enhances the <uality of the ambience. It is also

++

attempting to make a mark in automotive lighting. tate of the art technology greatly enhances the <uality of light and the energy efficiency in the usage. Philips brought the radio to India when wireless opened up new hori=ons for information and entertainment. ?alves and tubes were <uickly replaced by transistors$ and Philips has remained the innovator by being the first to bring the audio cassette$ the !"$ the ?!"$ the "?"$ for richer and better listening e)perience. &icher viewing was also on the menu. 3ith "igital Datural 'otion$ Pi)el Plus$ Plasma$ +55 AL &eal 6lat Philips brought visual delight as never seen before. 3ith technology and style playing a significant role in the final consumer choice$ the focus is on creating technologies that are cutting edge and in sync with ever*changing lifestyles$ and$ introducing globally launched technologies simultaneously in India. Philips recently introduced its patented proprietary and state*of*the*art ;('>I#I8AT T' ((mbient #ighting) T:!AD-#-8M; for its latest range of Plasma and #!" T?s. (t the forefront of its sales and marketing strategy$ has been the e)pansion of the Philips (&:D( network$ a chain of :)clusive Philips &etail >rand shops$ which showcase the entire consumer electronics range$ and provide an enhanced brand shopping e)perience to the Indian !onsumers. Philips; presence in Aealthcare in India is all embracing. .5J of !ardiac e)aminations in India are done on Philips e<uipment. In the speciali=ed area of surgical )*ray$ Philips innovation in the mobile c*arm for intra operating imaging is unmatched. Philips 'edical "ivision has been growing rapidly and has recorded more than 15J growth in ,55.. Philips in India enjoys Do.+market share in Aigh field '&$ !ardiac !T$ !ath #ab and 'onitoring systems among many other areas. Philips ('edical "ivision) is present in areas of Imaging ('&I / !T / !ardio ?ascular and %ltrasound)$ 'easurement (Patient 'onitoring systems and !ardiology e<uipment) and :lectro Physiological Therapy ystems ((utomatic :)ternal "efibrillators$ Point of !are diagnostics). Philips$ with its vast sales and service network$ offers world*class support in India. To the consumers; kitchen and home Philips brings convenience and high styling. 6or the kitchens a range of food processorsC blenders$ juicers and grinders$ specially designed for

+,

Indian culinary preferences$ a range of bread toasters and sandwich makers. 6or the body beautiful$ hair styling and epilation products for the woman and shavers for men. Philips is revolutioni=ing garment care at home with over a million steam irons in perhaps as many homes. (ll these lifestyle and healthcare consumer offerings get better and better with digitalisation and the intelligence that is embedded. Philips technology platforms are unsurpassed in these. Philips is the leader in inventing$ innovating and creating the technologies that underpin the products that people e)perience every day. Philips is today the leading lifestyle and healthcare company in India. It has fashioned itself to continue to be the leader in an India where people are increasingly becoming part of three revolutionsC the convergence revolution$ the digital revolution and the internet revolution. Philips is far more focused$ leaner$ even more consumer centered$ more agile * all of which is reflected in its performance and in the e)citement within the company. BUSINESS EFCELLENCE Philips continuously e)plores new ways to improve products and to offer innovative products to its consumers. That9s why we have created a program through which we will reach higher and higher <uality levels in all products and services. In fact$ this <uality improvement program affects all our employees and all our processes$ in every country$ division or department$ encompassing everyone from >oard of 'anagement to the shop floor. P21:16s =a::s 1,: ;>: T; * >% ID: :G!:##:D!: TA&-%8A P::" (D" T:('3-&B

The >: T program is the path we have chosen to achieve business e)cellence. It describes a set of methods and tools by which we continuously improve our efforts. Previous successful initiatives are incorporated in the program to make sure we learn as much as possible from our successes in the past.

+/

B9s1n.ss E4=.::.n=. 3e are all committed to improving processes in*line with the company9s strategic targets. To this end$ has adopted >: T to reach this goal. It is our ambition to be one of the best companies in the worldC the best to trade with$ work for$ and invest in. O9- M.as9-.s:

!ustomers are fully satisfied by the <uality of our products and services :mployees develop and use their full potential hareholders get a premium return on their investment uppliers choose to work with us as this generates superior value for both The larger community appreciates our contribution to the <uality of life

S6..d and T.a8<o-3 peed and Teamwork lie at the heart of the >: T initiative. :ach and every individual within Philips knows that only by fully cooperating and working together will we be able to perfect our business processes. That;s why we focus onC 3orking more smartly and reducing the cycle*time of processes 3orking in teams and learning from the best practices of others Too:s and a66-oa=2.s There are several tools and approaches in the >: T initiative. The core tool that is used to assess business maturity and direct improvement is the Philips >usiness :)cellence (P>:) model. This is an e)act copy of the :)cellence model of the :uropean 6oundation for Nuality 'anagement (:6N'). The P>: tool is suported by many other tools$ such as >reakthrough 'anagement$ >alanced corecard$ -ne Page trategy and Process urvey tools (P T). P Ts are maturity grids designed around specific processes$ they give a clear insight in the areas for improvement and help to identify which steps should be taken to reach those improvement targets. The P Ts are fully compatible with the :6N';s widely*used e)cellence model$ and have been provided to the :6N' free*of*charge.

+1

OBJECTIAES AND SCOPE

OBJECTIAES

:)plore the benefits reaped by the company as a result on the value chain efficiencies through !' and the contribution of !' to the company9s survival and competitive advantage.

"iscusses the concept of supply chain management and the benefits of revamping the !' practices.

The scopes are the followingsC

Bnowing the "ealers preference for Philips. Bnowing the facilities provided by the companies at all levels of distribution channel. Bnowing the strength and weaknesses of !T?. Bnowing the perception of !T? of different brands at all level. Bnowing the market share of Philips.

+.

LIMITATIONS
This study will go in along way in helping the company in choosing the right strategy and taking the right decision. This study is restricted to parts of "elhi @ D!& which may not seem to present the general picture of the product. (ll the retailers and farmers were not covered because of the constraints of time. The sample frame or si=e for evaluating may not completely reflect the market. The respondents may due to one or other reason$ conceal the true facts$ thus giving erroneous figures. ome respondents replied half*heartedly.

The limitations and constrains, which mainly well a hindrance in the performance of the project includes the following: Lack of expertise, being a trainee, especially in understanding consumer behaviour. In case of primary data, sometimes it was difficult to contact or meet the professionals, due to their busy work schedule. ometimes professionals are unable to finish some of the information due to confidently of the same. It was difficult to know the exact detail due to time constrain. It was difficult to find information that exactly fitted the needs of the project at hand in case of secondary data or information. Lack of upto date statistics. !nreliable response from the retailer at times due to lack of time.

"uestion on sales highly sensitive and sometimes resulted in non#response from the retailers.

+0

THEORETICAL PERSPECTIAE
BAC0GROUND !ompetition in the new millennium will be across supply chains$ not individual companies. The central aim of any business is to have the right products in the right <uantities$ at the right place$ at the right time at minimal costs. This is in turn translated into the interrelated issues of customer satisfaction$ inventory management and fle)ibility. !ustomer satisfaction to a high degree is dependent on the fle)ibility of the supply chain$ i.e.$ its ability to respond to changes in demand. 8eneral :lectric$ "ell !omputers$ !ompa< and other leading firms in the % ( successfully introduced this concept in the early +445;s. ince then$ many firms in the (P- member countries have also introduced !' practices to meet the challenge of the heightened competition. The concept of upply !hain 'anagement ( !') involves the application of state*of the*art IT tools such as Internet$ Intra/:)tranet$ :*commerce and :"I that greatly help organi=ations to simultaneously improve customer service and reduce inventories across the chain. (n !' system works collaboratively with customers$ suppliers$ trading partners and third parties to change the way operations are viewed$ performed and measured. (s today;s companies focus on gaining economic and competitive advantage throughout the entire product life cycle$ this can only be best achieved through leveraging of !' across the entire enterprise. (gainst this background$ this program was implemented for the benefits of organi=ations in the (P- member countries$ with a view to helping them significantly improve their productivity and competitive performance in the emerging millennium through the effect application of !' principles and practices. In particular$ the program provided a platform for the participating member countries to understand the difficulties of developing !' in (P- member countries and to discuss the possible alternatives of treating these difficulties and challengesK and to share their e)periences on the practical applications of !' that have contributed to increasing customer satisfaction$ productivity$ and competitiveness. The scope of the discussions covered$ inter alia$ conceptual and theoretical issues related to !' and logistics strategy$ critical elements

+2

of world*class supply chain planning$ facilitating !' through internet infrastructure$ and technology for the supply chain of the future$ building customer focused supply chain$ organi=ational issues in implementation$ and recent advances in !'. SUPPLY CHAIN MANAGEMENT upply chain management ( !') is the process of planning$ implementing$ and controlling the operations of the supply chain with the purpose to satisfy customer re<uirements as efficiently as possible. upply chain management spans all movement and storage of raw materials$ work*in*process inventory$ and finished goods from point*of* origin to point*of*consumption. The term supply chain management was coined by strategy consulting firm >oo= (llen Aamilton in +47,. ( supply chain is a network of facilities and distribution options that performs the functions of procurement of materials$ transformation of these materials into intermediate and finished products$ and the distribution of these finished products to customers. upply chains e)ist in both service and manufacturing organi=ations$ although the comple)ity of the chain may vary greatly from industry to industry and firm to firm. (ccording to the (! !'P)$ a professional association that developed a definition in ,551$ upply !hain 'anagement Hencompasses the planning and management of all activities involved in sourcing and procurement$ conversion$ and all logistics management activities. Importantly$ it also includes coordination and collaboration with channel partners$ which can be suppliers$ intermediaries$ third*party service providers$ and customers. In essence$ upply !hain 'anagement integrates supply and demand management within and across companies.H upply chain event management (abbreviated as !:') is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. 3ith !:' possible scenarios can be created and solutions can be planned. ome e)perts distinguish supply chain management and logistics management$ while others consider the terms to be interchangeable. 6rom the point of view of an enterprise$ the scope of supply chain management is usually bounded on the supply side by your supplier;s suppliers and on the customer side by your customer;s customers.

+7

SUPPLY CHAIN DECISIONS 3e classify the decisions for supply chain management into two broad categoriesC strategic and operational. (s the term implies$ strategic decisions are made typically over a longer time hori=on. These are closely linked to the corporate strategy$ and guide supply chain policies from a design perspective. -n the other hand$ operational decisions are short term$ and focus on activities over a day*to*day basis. The effort in these types of decisions is to effectively and efficiently manage the product flow in the HstrategicallyH planned supply chain. hortened product life cycles$ increased competition$ and heightened e)pectations of customers have forced many leading edge companies to move from physical logistic management towards more advanced supply chain management. (dditionally$ in recent years it has become clear that many companies have reduced their manufacturing costs as much as it is practically possible. Therefore$ in many cases$ the only possible way to further reduce costs and lead times is with effective supply chain management. In addition to cost reduction$ the supply chain management approach also facilitates customer service improvements. It enables the management of inventories$ transportation systems and whole distribution networks so that organi=ations are able meet or even e)ceed their customers; e)pectations. To simplify the concept$ supply chain management can be defined as a loopC it starts with the customer and ends with the customer. (ll materials$ finished products$ information$ and even all transactions flow through the loop. Aowever$ supply chain management can be a very difficult task because in the reality$ the supply chain is a comple) and dynamic network of facilities and organi=ations with different$ conflicting objectives.

+4

3hat has then enabled the effective implementation of supply chain managementO The answer is found from the rapid developments in information and communications technologies. %se of databases$ communication systems$ and foremost advanced computer software are crucial for the development of a modern cost*effective supply chain management.

NEED 5OR SCM

+. !' is a concept or a mechanism to improve the total productivity of enterprises in a supply chain by optimising the timing$ location and <uantity of materials flow from raw material provider to the consumer of the final products. This concept is especially useful in the industry where (+) the competition in the market is very high$ (,) the customers are very demanding for e)ample in the well documented "ell >uilt*To* -rder model where 71J of "ell;s revenue is derived from online customers who have the final say in the final configuration of their personal computers and notebooks$ (/) the product life cycle is very short for e)ample the electronics contract manufacturing industry currently e)periences product life cycles of short as three months from raw materials to final consumption$ and (1) stakeholders re<uest for high returns on investment (&-I). Promising (sian companies should start investing in good IT infrastructure to improve the productivity in the supply chain. ,. There is a need for good !' systems nationally and regionally for the (P- member countries. This system should include databases$ model bases$ visual maps and friendly user interfaces. The proper use of such a system can help to minimi=e the

,5

total !' cost (materials cost$ production costs$ warehousing costs$ inventory costs and transportation costs). In &-! and ingapore$ there are already such systems in the marketplace and well used by leading enterprises$ in electronics and information industries. The benefits of employing such a model can help enterprises in the highly competitive electronic and computer industries to simulate their !' strategies and determine the optimal !' strategy under certain cost operating environments. /. !' should be linked to the digital economy as demanding and technology savvy customers around the world increasingly e)pect goods and materials to be delivered to their doorstep at Hclick*speedH. In response to these demands$ supply chains of enterprises and industries need to be more real*time and dynamic. Therefore$ new technologies$ intelligent software agents$ will become an integral part of !'. Nuantum leaps in productivity and agility in the supply chain can be made possible by the courageous adoption of these intelligent agent based decision support systems. The % e)perience in the use of these software agents has been very successful as these agents (software programs) can actively engage with the user in dialogue$ and negotiate and coordinate the transfer of real*time information to other users on web*based platform. Proper interfacing and integration of such agents can help realise the fruition of a truly global logistics network. (n e)ample is the establishment of the 8lobal Transpark based out of the % . The Transpark serves to link manufacturing$ transportation and information to create innovative logistical infrastructure for global commerce. 1. In the past$ !' is predominantly enterprise focused with mutually e)clusive set of activities. Today$ progressive firms are readily embracing systems integration through :&P and other means of electronic connectivity$ primarily for cost reduction purposes. In the future$ !' would have to integrate enterprises$ ensure greater collaboration between supply chain partners$ work towards a synchronised value collaboration network. -nly then can firms talk about chain*wide profit ma)imisation and economic value add. .. ome of the main challenges presented by the resource persons include the followingC building a supply chain infrastructure without damaging the environment i.e. how to

,+

have a green supply chain$ setting up a reverse logistics program for firms to ensure ecological balance and waste reduction$ managing of demand volatility face by enterprises when they move to a digital arena and greater dynamic customisation$ how to e)tract better channel coordination between partners in the supply chain$ how to obtain better procurement leverage using real*time information and the Internet$ how to e)tract greater profitability out of decreasing business margins$ and the need to manage services besides the traditional product*based approach given the blurring between design and outsourcing of manufacturing. 0. everal pertinent concerns were also highlighted by the resource personsC sharing of risk between partners in the supply chain$ the ownership of inventory (vendor managed of co*managed inventory)$ the applicability of some good !' practice in certain industries (like ?'I in the retail sector) to other industries$ and information in the supply chain$ the management of demand forecast projection and accuracy$ and the ability of ':s to invest in much needed IT and related technologies to improve their supply chain processes 2. There is a need for good !' systems nationally and regionally for the (P- member countries. This system should include databases$ model bases$ visual maps and friendly user interfaces. The proper use of such a system can help to minimi=e the total !' cost (materials cost$ production costs$ warehousing costs$ inventory costs and transportation costs). In &-! and ingapore$ there are already such systems in the marketplace and well used by leading enterprises$ in electronics and information industries. The benefits of employing such a model can help enterprises in the highly competitive electronic and computer industries to simulate their !' strategies and determine the optimal !' strategy under certain cost operating environments. 7. !' should be linked to the digital economy as demanding and technology savvy customers around the world increasingly e)pect goods and materials to be delivered to their doorstep at Hclick*speedH. In response to these demands$ supply chains of enterprises and industries need to be more real*time and dynamic. Therefore$ new technologies$ intelligent software agents$ will become an integral part of !'. Nuantum leaps in productivity and agility in the supply chain can be made possible

,,

by the courageous adoption of these intelligent agent based decision support systems. The % e)perience in the use of these software agents has been very successful as these agents (software programs) can actively engage with the user in dialogue$ and negotiate and coordinate the transfer of real*time information to other users on web* based platform. Proper interfacing and integration of such agents can help realise the fruition of a truly global logistics network. (n e)ample is the establishment of the 8lobal Transpark based out of the % . The Transpark serves to link manufacturing$ transportation and information to create innovative logistical infrastructure for global commerce. 4. In the past$ !' is predominantly enterprise focused with mutually e)clusive set of activities. Today$ progressive firms are readily embracing systems integration through :&P and other means of electronic connectivity$ primarily for cost reduction purposes. In the future$ !' would have to integrate enterprises$ ensure greater collaboration between supply chain partners$ work towards a synchronised value collaboration network. -nly then can firms talk about chain*wide profit ma)imisation and economic value add. +5. ome of the main challenges presented by the resource persons include the followingC building a supply chain infrastructure without damaging the environment i.e. how to have a green supply chain$ setting up a reverse logistics program for firms to ensure ecological balance and waste reduction$ managing of demand volatility face by enterprises when they move to a digital arena and greater dynamic customisation$ how to e)tract better channel coordination how to obtain better between partners in the supply chain$ procurement leverage using real*time information and the

Internet$ how to e)tract greater profitability out of decreasing business margins$ and the need to manage services besides the traditional product*based approach given the blurring between design and outsourcing of manufacturing. ++. everal pertinent concerns were also highlighted by the resource personsC sharing of risk between partners in the supply chain$ the ownership of inventory (vendor managed of co*managed inventory)$ the applicability of some good !' practice in certain industries (like ?'I in the retail sector) to other industries$ and information in

,/

the supply chain$ the management of demand forecast projection and accuracy$ and the ability of ':s to invest in much needed IT and related technologies to improve their supply chain processes OPPORTUNITIES ENABLED BY SUPPLY CHAIN MANAGEMENT The following strategic and competitive areas can be used to their full advantage if a supply chain management system is properly implemented. Fulfillment: :nsuring the right <uantity of parts for production or products for sale arrive at the right time. This is enabled through efficient communication$ ensuring that orders are placed with the appropriate amount of time available to be filled. The supply chain management system also allows a company to constantly see what is on stock and making sure that the right <uantities are ordered to replace stock. Logistics: Beeping the cost of transporting materials as low as possible consistent with safe and reliable delivery. Aere the supply chain management system enables a company to have constant contact with its distribution team$ which could consist of trucks$ trains$ or any other mode of transportation. The system can allow the company to track where the re<uired materials are at all times. (s well$ it may be cost effective to share transportation costs with a partner company if shipments are not large enough to fill a whole truck and this again$ allows the company to make this decision. Production: :nsuring production lines function smoothly because high*<uality parts are available when needed. Production can run smoothly as a result of fulfillment and logistics being implemented correctly. If the correct <uantity is not ordered and delivered at the re<uested time$ production will be halted$ but having an effective supply chain management system in place will ensure that production can always run smoothly without delays due to ordering and transportation. Revenue & Profit: :nsuring no sales are lost because shelves are empty. 'anaging the supply chain improves a company9s fle)ibility to respond to unforeseen changes in demand and supply. >ecause of this$ a company has the ability to produce goods at lower prices and distribute them to consumers <uicker than companies without supply chain management thus increasing the overall profit.

,1

Cost: Beeping the cost of purchased parts and products at acceptable levels. upply chain management reduces costs by increasing inventory turnover on the shop floor and in the warehouse$ controlling the <uality of goods thus reducing internal and e)ternal failure costs and working with suppliers to produce the most cost efficient means of manufacturing a product. Cooperation: (mong supply chain partners ensures mutual success. !ollaborative planning$ forecasting and replenishment (!P6&) is a longer*term commitment$ joint work on <uality$ and support by the buyer of the supplier9s managerial$ technological$ and capacity development. This relationship allows a company to have access to current$ reliable information$ obtain lower inventory levels$ cut lead times$ enhance product <uality$ improve forecasting accuracy and ultimately improve customer service and overall profits. The suppliers also benefit from the cooperative relationship through increased buyer input from suggestions on improving the <uality and costs and though shared savings. !onsumers can benefit as well through the higher <uality goods provided at a lower cost. SUPPLY CHAIN MANAGEMENT PROBLEMS upply chain management must address the following problemsC* Distribution Networ Configuration: Dumber and location of suppliers$ production

facilities$ distribution centers$ warehouses and customers. Distribution !trategy: !entrali=ed versus decentrali=ed$ direct shipment$ cross docking$ pull or push strategies$ third party logistics. "nformation: Integrate systems and processes through the supply chain to share valuable information$ including demand signals$ forecasts$ inventory and transportation. "nventory #anagement: Nuantity and location of inventory including raw materials$ work*in*process and finished goods.

,.

SCM ACTIAITIES upply chain management is a cross*functional approach to managing the movement of raw materials into an organi=ation and the movement of finished goods out of the organi=ation toward the end*consumer. (s corporations strive to focus on core competencies and become more fle)ible$ they have reduced their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other corporations that can perform the activities better or more cost effectively. The effect has been to increase the number of companies involved in satisfying consumer demand$ while reducing management control of daily logistics operations. #ess control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners$ thus improving inventory visibility and improving inventory velocity.

S,-a,.71=
trategic network optimi=ation$ including the number$ location$ and si=e of warehouses$ distribution centers and facilities. trategic partnership with suppliers$ distributors$ and customers$ creating communication channels for critical information and operational improvements such as cross docking$ direct shipping$ and third*party logistics. Product design coordination$ so that new and e)isting products can be optimally integrated into the supply chain$ load management Information Technology infrastructure$ to support supply chain operations. 3here to make and what to make or buy decisions (lign -verall -rganisational trategy with supply strategy

$actical ourcing contracts and other purchasing decisions.

,0

Production decisions$ including contracting$ locations$ scheduling$ and planning process definition.

Inventory decisions$ including <uantity$ location$ and <uality of inventory. Transportation strategy$ including fre<uency$ routes$ and contracting. >enchmarking of all operations against competitors and implementation of best practices throughout the enterprise.

'ilestone Payments

O6.-a,1ona:
"aily production and distribution planning$ including all nodes in the supply chain. Production scheduling for each manufacturing facility in the supply chain (minute by minute). "emand planning and forecasting$ coordinating the demand forecast of all customers and sharing the forecast with all suppliers. ourcing planning$ including current inventory and forecast demand$ in collaboration with all suppliers. Inbound operations$ including transportation from suppliers and receiving inventory. Production operations$ including the consumption of materials and flow of finished goods. -utbound operations$ including all fulfillment activities and transportation to customers. -rder promising$ accounting for all constraints in the supply chain$ including all suppliers$ manufacturing facilities$ distribution centers$ and other customers. Performance tracking of all activities

,2

IN5ORMATION MANAGEMENT

TECHNOLOGY

5OR

SUPPLY

CHAIN

Information technology (IT) is an important enabler of effective supply chain manage* ment. 'uch of the current interest in supply chain management is motivated by the possibilities that are introduced by the abundance of data and the savings inherent in sophisticated analysis of these data. The innovative opportunities coming to the fore with electronic commerce (e*commerce)$ especially through the Internet$ have also increased the interest in IT. upply chain management spans the entire enterprise and beyond$ encompassing suppliers on one end and customers on the other. Therefore$ our discussion of IT for supply chains will include both systems that are internal to an individual company as well as e)ternal systems$ which facilitate information transfer between various companies and individuals. In addition$ supply chain management typically spans many functional areas within a company and is affected by the way the various groups communicate and interact. 6or many firms$ IT provides a competitive advantage. Though this has been true for some time in service industries such as banks$ it is also becoming more relevant for firms such as large retailers$ airlines$ and manufacturers. Prominent e)amples include 3al*'art with its satellite*connected Information Technology$ (merican (irlines with its innovative abre reservation system$ 6ederal :)press with its superb tracking system$ and !isco with its Hvirtual manufacturing environmentH. 3hen applying supply chain strategies that reduce cost and lead times and increase service level$ the timeliness and availability of relevant information are critical. In addition$ an increasing number of companies are providing value*added IT*based services to their customers as a way of differentiating themselves in the marketplace and developing strong long*term relationships with their customers. -f course$ once these kinds of services are offered by even one company within an industry$ they can very <uickly become a basic re<uirement for all others.

,7

In many cases$ current IT that supports the components in the supply chain process is diverse and disconnected. It has typically evolved throughout the years based on various local and companywide re<uirements that were rarely integrated. This issue must be addressed if a company is to position itself to manage its supply chain effectively. ?arious strategies are utili=ed by companies to overcome these problems and create systems that can use the multitude of data in the system effectively. Information flow between suppliers$ manufacturers$ and customers is critical for effective supply chain management. This entails information flow between different companies$ a relatively new concept that is already widely practiced to varying degrees (e.g.$ e*mail$ :"I$ e)changes). The implementation of advanced IT solutions typically re<uires changes in organi=ational structure$ as well as in employee job descriptions and behavior

%&' ()*L! )F !+PPL, C-*"N "NF)R#*$")N $.C-N)L)(,

3e consider some of the ultimate goals of IT as it relates to the supply chain. ome companies and industries are currently far from achieving these goals$ while others are well on their way to accomplishing many of them. To utili=e information$ we need to collect it$ access it$ analy=e it$ and have the ability to share it for collaboration purposes. upply chain management system goals in these areas areC !ollect information on each product from production to delivery or purchase point$ and provide complete visibility for all parties involved. (ccess any data in the system from a single point of contact. (naly=e$ plan activities$ and make trade*offs based on information from the entire supply chain. !ollaborate with supply chain partners. !ollaboration allows companies to manage uncertainty$ for e)ample$ through risk sharing or information sharing$ and achieve global optimi=ation.

,4

The primary goal of IT in the supply chain is to link the point of production seamlessly with the point of delivery or purchase. The idea is to have an information trail that follows the product;s physical trail. This allows planning$ tracking$ and estimating lead times based on real data. (ny party that has an interest in the whereabouts of the product should be able to have access to this information. (s figure given below$ information and products flow from the supplier to the manufacturer$ internally through the manufacturer;s distribution system$ and then on to the retailers. Product flow

uppliers

'anufacturers

3arehouses

&etailers

Information flow Interfirm Intrafirm Interfirm

5179-.: 5:o< oD 1nDo-8a,1on and 7oods 1n ,2. s966:; =2a1n Co::.=, 1nDo-8a,1on: :vidently$ the retailer needs to know the status of its orders and the suppliers need to be able to anticipate an incoming order from the manufacturer. This entails access to data that reside in other companies; information systems as well as across functions and geographic locations inside a company. 6urthermore$ the participants need to see data in their own termsK that is$ if suppliers of cotton are looking at the demand for N*Tips$ they need it translated into pounds of cot ton consumed. Therefore$ translation tables$ such as bills of material$ are re<uired throughout the system. The availability of information regarding the status of products and material is the basis on which intelligent supply chain decisions can be made. 6urthermore$ it is not sufficient to simply track products across the supply chainK there is also a need to alert diverse systems to the implications of this movement. If there is a delay in a delivery that will affect production schedules$ the appropriate systems need to be notified so they can make the proper adjustments by either delaying the schedules or seeking alternative sources. This goal re<uires

/5

standardi=ation of product identification (e.g.$ bar coding) across companies and industries. 6or e)ample$ 6ederal :)press has implemented a tracking system that provides ongoing information on the whereabouts of any package handled by the company and makes this information available internally as well as to customers. A==.ss ,o da,aC Aere we introduce an important concept$ the single*point*of*contact concept. The goal here is that all the available information$ either information pro* vided to a customer or re<uired internally$ can be accessed in one stop and be the same$ regardless of the mode of in<uiry used (e.g.$ phone$ fa)$ Internet$ kiosk) or who is making the in<uiry. This re<uirement is complicated by the fact that to satisfy a customer;s <uery$ information may be re<uired that resides in various locations within one company and$ in some cases$ across several companies. In many companies$ information systems tend to be islands$ depending on their functions within the company. !ustomer service will work with one system$ accounting with another$ and the manufacturing and distribution systems are completely separate (6igure given below).

ales representative "emand planner ales/marketing systems 6inancial systems

(ccountant

-perations #ogistics/m anufacturing systems

ervice representative !ustomer service

/+

-ccasionally there may be a transfer of some crucial information that needs to be accessed across systems$ but if the transfer is not done in real time$ then the systems never have e)actly the same data. The customer service representative receiving an order may not be able to provide shipping status information$ and the plant may not be able to in<uire about current outstanding orders. Ideally$ everyone who needs to use certain data should have access to the same real*time data through any interface device (see 6igure given below). ales representative "emand planner ingle point of contact -perations ervice representative 6igureC Dew generation of information systems. Ban31n7 a66:1=a,1ons a-. ad?an=.d 1n ,21s -.s6.=, C you can access the same account information the bank tellers use$ from almost anywhere over the telephone$ computer$ or (T' machine. Devertheless$ these systems may still be weak at linking all of a customer;s accounts into a single point of in<uiryPfor e)ample$ accessing mortgage information at the same time as a bank account. Ana:;G. >as.d on s966:; =2a1n da,a: The third goal is related to analy=ing the data$ especially in a way that takes into account the global supply chain picture. In addition$ the information system must be utili=ed to find the most efficient ways to produce$ assemble$ warehouse$ and distribute productsPin other words$ the best way to operate the supply chain. (s we have seen$ this entails various levels of decision makingC from operational decisions involving the way to fulfill a customer order$ to (ccountant

/,

tactical decisions related to which warehouse to stock with what product$ or what the production plan for the ne)t three months should be$ to strategic decisions about where to locate warehouses$ and what products to develop and produce. To facilitate this$ systems need to be fle)ible enough to accommodate changes in supply chain strategies. To achieve this kind of fle)ibility$ systems need to be highly configurable and new standards need to be developed. Co::a>o-a,. <1,2 s966:; =2a1n 6a-,n.-s: The ability to collaborate with supply chain partners is essential to a company;s success. Indeed$ an important objective in supply chain management is replacing se<uential processes with global optimi=ation. This re<uires not only sophisticated alignment of IT systems but also the integration of business processes. "epending on its supply chain role$ a company may be re<uired to either integrate with a customer;s procurement system or re<uire its own suppliers to link into its own systems or collaborative platforms$ or both. The level and type of collaboration vary between industries. 6or instance$ collaborative forecasting was initiated in the consumer packaged goods industry while supplier integration is more common in the hi*tech industry where outsourcing of critical components re<uires systems that support the product and logistics coordination. In recent years$ collaboration has become the focus of supply chain systems. The ability to link and work effectively with suppliers has produced new systems called supplier relationship management ( &'). In addition$ the various e)changes that were developed during the Internet boom of the late 45s are becoming collaboration platforms$ whether private or public. -n the other end of the supply chain$ customer relationship management (!&') systems are evolving to provide better contact and understanding of customer needs. (s we will see$ the four goals of supply chain management do not all have to be achieved at the same time$ and are not necessarily dependent on each other. They can be targeted in parallel$ with the order of importance depending on the industry$ company si=e$ internal priorities$ and return on investment considerations. 6or instance$ a bank could not survive without single*point*of*contact capability$ a delivery company without a //

sophisticated tracking system$ and a high*tech manufacturer without a production planning system. To achieve these goals and to master the decisions and problems that arise when considering how to address them$ it is helpful to understand many of the major issues in IT development$ particularly as they relate to supply chain management. (s we see in 6igure given below$ the following are the means toward achieving these goals.
Co::.=, A==.ss Ana:;G. Co::a>o-a,.

In,.7-a,1on*S,anda-ds

InD-as,-9=,9-.

E:.=,-on1= =o88.-=.

S966:; =2a1n =o86on.n,s

Figure: (oals and means of supply chain management

!tandardi/ation: IT standards are what allow systems to work together. They drive the cost and sometimes the feasibility of implementation.

"$ infrastructure: The IT infrastructure$ whether internal or e)ternal to a company$ is a basic component of system capabilities. 3ithout the communications and database capabilities$ some of the goals outlined cannot be achieved.

.lectronic commerce: :lectronic commerce has been the most important emerging IT field in the last few years. It has enabled not only internal efficiencies but also the ability to collaborate with partners in the supply chain.

!upply chain system components: These components comprise the various systems that are involved directly in supply chain planning. These are typically systems that combine short*term and long*term decision support system and intelligence elements.

/1

Integration related issues: Aow should priorities be set in order to achieve the goals discussed aboveO 3hat kind of investments should be made in the short term and in the long termO INAENTORY MANAGMENT In business management$ inventory consists of a list of goods and materials held available in stock. (n inventor! can also mean self*e)amination$ a moral inventory. In computing$ inventories can comprise physical and non*physical components. The dictionary meaning of inventory is Istock of goods9. (n inventory may be defined as a stock of goods or services$ which are held for the purpose of future production or sale. The goods or services may be a consumptive or non*consumptive type. Inventories form an alternative to the production or purchase in future. Thus inventory on one side is stock of goods and services but on the other hand it is locked capital. Inventory serves as a cushion between the production and consumption of goods necessitated by the technological demands of production and transportation and customer needs. Inventories can be categori=ed into several types. These are generally classified as &aw 'aterial and upplies Inventories$ Production Inventories$ and '&- Inventories$ In Process Inventories$ 6inished Inventories$ 'aterial in transit inventory and "ealer stock.

INAENTORY CONTROL
Inventories are generally justifiable and there are obvious economic reasons for their e)istence. ince there are several costs associated with the inventories$ an effective inventory management boils down essentially to setting a balance between the opposing cost factors. Inventory control means controlling the inventories in the organi=ation. It is a techni<ue of maintaining stock items at desired levels$ whether they may be a raw material$ goods in process or finished products. 5ACTORS IN5LUENCING INAENTORY DECISIONS There are both internal and e)ternal factors$ which influence decisions on inventory in an organi=ation. The e)ternal factors arise from market conditions$ credit availability and government regulations. Ma-3., =ond1,1ons can be viewed from two angles. 6irstly there

/.

is the dynamic nature of prices and availability. To combat this we adopt efficient forecasting and planning techni<ues. econdly there is the finite time lag between the placing of an order and obtaining the materials$ known as lead time which is defined as the period that elapses between recognition of a need and its fulfillment . In?.n,o-; :.?.: 1n=-.as.s <1,2 1n=-.as. 1n :.ad),18.. It is comprised of administrative lead*time$ manufacturing lead*time$ transporting lead time and inspection lead*time. 8enerally there is variation in demand rate and lead*time. In order to compensate for uncertainties in either lead time or demand rate$ additional stocks may be carried to reduce the risk of stock out during the lead time interval. This additional stock is known as safety stock or buffer stock$ which is held in e)cess of e)pected demand. There is direct relationship between safety stock and service level.

Costs *ssociated 0ith "nventories

The problem of balancing the costs of less than ade<uate inventories versus more than ade<uate inventories is a comple) one due to numerous costs involved. The major tangible costs associated with inventories are ordering costs or set up costs$ carrying costs$ purchase cost$ under stock costs and overstocking cost.

COST INAOLAED IN HOLDING STOC0S

The various costs associated with the stock can be classified into following groupsC +. INAENTORY CARRYING COSTS

Inventory carrying costs represent the e)penses of holding the stocks of goods. These include opportunity costs of funds invested in inventories$ insurance$ ta)es$ storage and cost of deterioration and obsolescence. These carry cost move in that proportion to the si=e of inventory. 2. ORDERING COST: These costs are in the form of procurement e)penses which are incurred as and when we have to place purchase order. These include costs incurred in the following activitiesC re<uisitioning$ purchase ordering$ transporting$ receiving$ inspecting$ and storing.

/0

The ordering cost increase in proportion to the number of order placed. H. STOC0 OUT COST: These costs arise when there is e<ual to the storage in production facilities. It may be in the shape of lost sales or lost good will.

MATHEMATICAL MODELING 5OR INAENTORY CONTROL

The solution of inventory problem with mathematical models is to find appropriate levels of holding inventory$ ordering se<uence and the <uantity that have to be ordered so that the total cost incurred is minimi=ed. The demand and supply conditions that act within and without impose constraints on the decision*making process. The demand can be fully known$ partially known or completely unknown. These ,2-.. s1,9a,1ons are termed as d.8and >.1n7 =.-,a1n+ d.8and >.1n7 -1s3; and d.8and >.1n7 9n=.-,a1n respectively. -n supply side there are two distinct possibilitiesC +. The supply being static if only a single supply is possible during the entire consumption period. ,. upply being dynamic if more than one supply can be obtained during the consumption period. These states of nature of demand and supply conditions can be combined to form si) different practical situations$ namelyC +. ,. /. 1. .. 0. upply station*demand certain upply station*demand risky upply station*demand uncertain upply dynamic*demand certain upply dynamic*demand risky upply dynamic*demand uncertain

/2

@.!# MODERN INAENTORY CONTROL TECHNIIUES

'aterial &e<uirement Planning and Qust in Time techni<ues have taken care of most of the draw*backs which were being e)perienced with traditional inventory control techni<ues for managing inventories in manufacturing environments. These techni<ues termed as modern inventory control techni<ues are primarily meant for manufacturing environment. QIT philosophy is of recent origin and is being widely applied in Qapan. %nder these techni<ues component parts are manufactured only when re<uired by down steam work center$ thus right amount of parts are made at the right time and the inventory is kept to virtually near =ero. QIT techni<ues are being considered and tried in other industriali=ed countries too now. The success of QIT techni<ues in Qapan is due to uni<ue physical and philosophical characteristics typical of Qapanese production system/culture. These include the ability to virtually free=e master production schedules$ to cross train the highly skilled and very disciplined Qapanese workers$ to utili=e high degree of automation and robotics and to profit from close pro)imity and reliability of material and parts suppliers. These characteristics enable Qapanese firms to reduce system variability to the e)tent that demand can be estimated very accurately and production parameters such as machine processing times and utili=ation approach very stable levels. These factors are not e)hibited in manufacturing systems in other countries. QIT techni<ues are at trial stage in industrially advanced countries and have not found their way in developing countries$ as yet. '&P items are widely used for controlling manufacturing inventories in industrially advanced countries.

/7

METHODOLOGY PROCEDURE O5 'OR0

RESEARCH METHODOLOGY &esearch was more of evocative research and is the moral fiber of the project. In order to bring about the objectives of the Project$ it was important to elo<uent the approach in which it is to be conducted$ i.e. the research practice was to be carried out in a certain framework. Purposes of the research are to rummage around for ac<uaintance. (lso research defines a systematic and organi=ed search for applicable information on a particular topic. The data was composed to attain aforementioned objectives. This data was collected asC* P-18a-; Da,a: The !' policies$ strategies and their affectivity was composed through <uestionnaire which was dispersed to all the involved persons at different level of Philips India -ffice. ignificance of this analysis was study of different !' policies and their merits and demerits in Philips India. S.=onda-; Da,a: It consists of information that previously subsist somewhat in papers. ( manuscript is a very important trustworthy and priceless basis of information. 'any researchers make use of this fundamental source. 'anuscript is nothing of this imperative sourceK but printed evidence that contains important information about a problem or characteristic of learning. It may be purchased material$ journalsK company profiles company annual reports$ and internal search etc. The composed data was processed critically e)amined and analysed. "ample "i#e The sample si=e in total included survey of "elhi @ Philips India -ffices and the importers and e)ports of Philips India.

/4

ANALYSIS O5 DATA
In the late +445s$ the !T? market was characteri=ed by intense competition and unprecedented Price erosion. In an attempt to improve cash flows and bring down inventories$ the company &estructured its !T? manufacturing process. Pil decided to leave the relatively low value adding 'anufacturing processes such as final assembly and testing to supplier*partners who were close to the marketplace. These supplier*partners not only had much lower cost* structures$ they were also far more fle)ible. >y having several supplier*partners in different parts of the country$ pil was able to reach out to customers in the shortest possible time and with very low inventory in the pipeline. In june +442$ pil shifted the final component assembly process for ctvs out of its at salt lake factory to three new assembling centers in west bengal$ punjab and uttar pradesh$ to keep the assembling unit of the final product as close to the customer as possible. Pil also started outsourcing low value components from local players$ while concentrating on the production of high*value items. In april +447$ pil shifted the manufacturing operations of its lighting division to pali. 6luorescent lamps began to be manufactured both at pali9s mohali (near chandigarh) factory and elmi. ( pil spokesman e)plained$ Ethe shifting has occurred because the company could not match the desired manufacturing levels. 3e have to keep shifting our production units closer to the market. hifting the manufacturing of lighting e<uipment to subsidiary companies has been happening for some time now.F (ccording to analysts$ effective cost management had been a major feature of pil9s restructuring efforts. Pil streamlined its electronics division by reducing manpower through a vrs and by outsourcing through third party contracts. Pil reduced its distribution costs as well by outsourcing a majority of its logistics re<uirements * primarily freight handling and warehousing. "uring +440*+444$ pil decided to replace ad hoc suppliers with contract transporters who provided dedicated vehicles. In +444$ 2.J of pil9s goods were transported via trucks to its ,554 outlets. 3hile a truck usually took about eight days to move from delhi to pune$ pil9s 15

dedicated carriers took just five days. Pil9s redistributors also helped cut costs. Aaving a redistributor meant that products had to be delivered only to the redistributor closest to the plant instead of sending them to a distributor who could be located anywhere in the country. Pil halved its inventory carrying levels since the redistributors took over the task of servicing the retail outlets. PI# also reduced its manpower needs and the fi)ed component of its distribution costs. -ut of its /4 depots$ pil owned only four$ which were also e)pected to be franchised. Pil had earlier franchised its eight e)clusive showrooms. (dditionally$ pil initiated a new infotech initiative to get on*line information on sales from each of its dealers$ and the stock position at its depots. This was e)pected to help pil move goods in line with the actual re<uirements of its channels and reduce costs further. Pil also restructured its relations with suppliers so that they could deliver <uality products at !ompetitive prices. (s a first measure$ the company moved towards having a uppliers for any item. (ll suppliers were re<uired to get international ma)imum of three

<uality certification. PI# (ttempted to build a long*term relationship by involving the suppliers right from the product Planning stage. :ach supplier was assessed periodically through company audits. The company created categories of preferred suppliers and supplier partners. (ll suppliers were also e)pected to do their own <uality testing and the company only conducted random checks. ?endor <uality assessments and company findings were freely e)changed and were available to both the vendor and shop floor engineers. In spite of putting in place all the above measures$ PI#9s financial performance during the +445s was not consistent. :ncouraged by the ,,J compounded rate of growth in its main businesses during +44/*4.$ PI# had added capacities. It ran into problems during the subse<uent slowdown$ posting a net loss of over rs +15 million in +442*47. Aowever$ PI# managed to report a net profit of rs +,5 million in +447*44. 'eanwhile$ competitive pressures had increased further$ not only from indian players such as bpl and videocon$ but from mncs such as lg and samsung as well. PI# announced a huge loss of rs /1, million for the year ,557*54 (Table I).

1+

TABLE I: PHILIPS INDIA E PRO5IT AND LOSS STATEMENTS %1n Rs 81::1on& 200 200/ +0$0//.. +2$,77. 4 (/11./) (.4+.2) !$+2/".2 !$+$" . 2 +,7.4 +2/., !$+@!/.0 !$+/ 0. /$+51.. (+.,./) 7$247.5 living ,54.1 H /$5+5.5 ,27.5 4$+5/.1 ,,1.0 200" +1$4/5. 4 (154.5) !@+#2!. " +.,.2 !@+$ @. $ +$7,7.7 (,51.4) 4$502.5 ,,/./ +5$4+1. / +$5/7.5 +/1.1 42., /,2.0 +$025./ !@+!/!. 14,.4 ,/7., ,.1.2 ,4/./ (/7..) (./.+) (/.0.+) %H@!.#& * 1+..2 442.1 20!0 +.$,...1 (.75.5) !@+$ #.@ +45.+ !@+/$#.# ,$114.. /20.4 2$741.7 ,50.. +5$4,2.2 +$5/..4 4,.5 +55./ ,77.2 +$0+..5 !@+0#".$ 75..4 +.7.4 012.5 ,05., /70.7 (+74..) (272.4) %2!!.$& * 2/0./ +$+/5.7

G-oss Sa:.s :)cise "uty N., sa:.s -ther income To,a: 1n=o8. &aw materials tock adjustment (Inc)/ "ec Purchase of finished goods !onveyance$ travelling and e)penses !ost of material :mployee cost Power @ fuel (dvertising/ promotion/ public 6reight @ forwarding -ther e)penses Cos, oD sa:.s PBIDT Interest @ finance charges PBDT "epreciation PBT Provision for ta)ation :)traordinary items/ Prior year adj. Adj9s,.d PAT D1?1d.nd 6a;o9, 5o-.4 1nD:o< 5o-.4 o9,D:o< ourceC www.indiainfoline.com

++$4.4.0 +,$0+0. +$5+1.7 ,55.2 .,5., /,+.0 +$,+2.. !#+2H@.@ +$+7/.0 /14.0 7/1.5 /,0.2 .52./ 75./ (/52.,) !!"./ 2..+ 1/7.5 +$104.. 5 +$++5.5 +20.1 122.+ /10.4 +$+00.7 !#+/"H. H 422.5 /,../ 0.+.2 //7., /+/.. /+.5 (+.,) 2/!.@ +,.., 10/.2 +$11,.4

The company blamed its poor performance on poor sales in its consumer electronics (!:) and domestic appliances divisions. The !: division$ in particular$ had fared rather badly

1,

with a /0J decrease in growth. There were a host of problems with the company9s logistics setup as well. "ue to the region*based distribution set*up$ goods reportedly passed through the entire country before reaching the final destination$ taking a total of +7 days. In the process$ the goods were handled eight times during loading and unloading during transportation. To set things right$ PI# decided to focus on improving manufacturing efficiencies. The plant location rationali=ation and other related e)ercises seemed to have paved the way for the management9s decision to focus on restructuring the supply chain management ( !') practices. 'anaging "irector &amachandran went to the e)tent of claiming that !' had become critical for PI#9s Irebirth.9 3hat followed went on to become a classic e)ample of how an old*economy behemoth with its huge and complicated cross*border distribution and supply chains transformed itself into a lean$ nimble and much more efficient organi=ation. #.! OPERATION MANAGEMENT IN PHILIPS MANU5ACTURING PROCESS AND ACTIAITIES

PLASTIC PLASTIC PROCESSING PROCESSING

SUR5ACE SUR5ACE TREATMENT TREATMENT

CENTRAL CENTRAL STORES STORES

ASSEMBLY ASSEMBLY TESTING TESTING DESPATCH DESPATCH

BOUGHT OUT BOUGHT OUT COMPONENTS COMPONENTS !& MATERIAL RECEIAING*INSPECTION The !onsignment consisting of raw*materials like (crylic$ Dylon$ Dickle$ polyproplyene etc. among which head lamp glass which is been imported from Qapan gets received at 1/

'aterial receiving shop. (fter processing the documents in computers$ the raw material passes through initial inspection of specification <uantity and dimension. Then the material gets transferred to &aw*material store at first floor through different material handling devices like conveyors$ lifts and hand*driven trolleys. The storekeepers then arranges the &*material as per job works. MAIN OPERATIONS

#oulding shop:1
!. H.a,1n7 and M.:,1n7:) In this section$ huge -vens are installed for heating the different raw*material like polycarbonate i.e. as per the specification of customer$ raw material is been poured into the tank installed near ovens. Then a sucking machine inhales the plastic raw*material into the oven. (fter that oven set at the temperature of 75*7.5!. The raw*material gets melt and automatically after reaching the desired temperature the melted form of plastic gets transferred to different molding machines of different capacities as per the preset re<uirement. In this process a +5J of man*power$ cost$ time and risk has been reduced by applying the automation of e)hausting raw*material through tankers and after that flow of melted plastic is again an automatic process. 2. P:as,1= P-o=.ss1n7C* %nder this process the melted plastic goes through machines$ in which a particular fi)ture or mould has been fi)ed for processing a certain product. There are total of ,, such machinery9s. The melted material gets transformed into a sub*product with the help of a +75*155 tonne. Injection molding machines. Though the heating =one i.e. temperature$ material changes according to different products and si=es. 'ost of the machines are of different capacities and the biggest capacity machines is of 155 tone namely !#6 155*T*made in Taiwan. -ther machines are 3'*/.5 (win 'icro) P * /55 P * +75 3' R +,.A 11

3' * ,.5 #ike wise there9s a +,. tonnes capacity machines for producing gear shifter &ods and the material used for this is polypropylene. (ll above are molding machines placed in area where molding take place. "ifferent products manufactured as per the demand and schedule like tail lamp of maruti*755$ Indicator light of Binetic Aonda etc. >y applying different dyes or fi)tures or moulds any type of (uto light can be produced. The average time of production of a lights appro)imately /5 seconds for a piece. (n operator per machine is assigned who works under a supervisor. (fter every .*0 hrs. The <uality check department does a random testing of finished product to minimi=e defects rather =ero defects. The fi)ing of fi)tures or "yes takes place manually and are designed in the Philips plant itself by technicians and :ngineers. The crap collected out of the process is of negligible use and sold after the process. -verall the molding is a comple) procedure and each product line has its own particular set of fi)tures. The processed plastic then takes the shape of a semi*finished product like tail*lamp back assembly. Then from this molding shop$ through material handling devices like hand* driven trolleys and product gets transferred to the different (ssembly lines as per the re<uirements and fitment. ( work9s table is there near molding area where different supervisors keeps check on operator9s performance and manufacturing processes "aily Production$ &eport of all the components produced displays the production efficiency/works and workers and check whether daily target has been achieved or not. It there9s a break down of a machinery or an over*hauling takes place$ the work gets divided in other machines and usually maintenance scheduling is done between /*1 hours. :very set of machine has different operating standards like temperature control$ heat control$ vacuum pressure etc. and there9s no scope left for negligence as machines clearly shows such attributes by a meter and supervisors keep patrolling the machines to avoid any breakdown or accident. 1.

The molding division or shop is the most critical and comple) =one where highly skilled technicians and managers have been deployed. The handling of raw*material from the store is scheduled at a very appropriate rate which do not affect the production process and through trolley the labour shifts the material and in the same way the finished goods also been taken away at scheduled timings. The material storage devices in molding shops are bins and small racks$ but these are not placed at waist level$ which is a major flaw which hinders the free motion of body. The "yes$ fi)tures and original fitment components are placed in molding shop itself so as to save time of carrying there dyes. (s soon as a particulars <uantity of a lot finishes$ the worker engaged in loading makes the place clear and carry the semi product to assembly line. The concept of .9 9 is very minutely implemented in molding shop. The plant is a Do* moking Lone. "iscrepancy in material storing after product comes out of machine*inappropriate level of storage devices. M.,a:1s1n7 s2o6C* !& La=J9.-1n7:) ( completely dust proof$ smoke proof Lone where head lamps and head light accessories gets dipped in lac<uers and other chemicals and also$ the process of metalising been done. 'etalising is basically nickel coating so as to make sure that the dispersion of light through the head*lamp is well focussed and as per standards and norms. The head*lamp/light basic mould is not been manufactured completely in plant. The company also outsources this component from its other plants. The components first get dipped in a lac<uer tank$ the motion of component is through a chain assembly line. (t a time a manual operator puts 7*+5 pieces on a conveyor chain and the moving chain passes through a tank filled with lac<uer and in such a way the prices passes through , such tanks. It is like a protecting layer before metalising. ( dryer that dry off the piece when chain passes through it. 3hen the lac<uering gets done and the piece dries up operator takes the pieces off the chain manually and keeps them in plastic bins and carry through hand driven trolleys to the paint shop which is just adjacent to lac<uer shop. -ne cycle takes appro)imately 7 minutes to cover a complete lap. 2& Pa1n, s2o6:) The lac<uered pieces passes through the paint shop in the same way through conveyor chains and an outer side of pieces gets painted through a operator 10

operated spray paint machine. The process is a very simple one after painting$ again the chain passes through dryer and as soon as pieces dries*up$ then worker takes the component to the metalising sop which is ne)t to lac<uer shop n trolleys. H& M.,a:1s1n7:) In this section a huge Imported 'etalising machinery namely ?'* Taiwan i.e. ?acuum 'etalising is set up coat the component with Dickel i.e. the silver shining effect which ultimately is necessary for light dispersion. -ne of the positive feature of this machine is that it has two input doors$ while the one is compressed with the machinery$ the other can be fully installed with raw semi*product i.e. prices can be put upon the hooks and this results in time*saving. (t a time /5 pieces go inside the machinery and the cycle time is +/*+1 minutes. The input for the machinery is Dickel which is feeded into the machinery through auto sucking pipes from the tanks. It is very important to keep the machine doors clean as a minor dust particle can be a cause for a defect or the mi)ture <uantity can be over applied which is also not acceptance. The temperature maintained is relatively medium and proper meters for scrutini=ing the operations parameters like vacuum pressure$ temperature etc. has been appropriately installed. Two operators work on this machine under a Technical supervisor. afety measures and hygienic conditions are very considerable factors in this =one and is one of the most neatly maintained =one. ( little found filled with iron foot mat is been placed at the entrance so that a person entrusting the =one do not carry dust along with his shoes. "ust gets off with water. -ther major aspect that are to be followed are marked as ?I %(# !A:!B P-IDT #IB: -I# '(&B$ "% T$ >#(!BI A P(IDT$ 8( '(&B$ ':T(# -?:& 6#-3$ &(ID>-3$ M:##-3I A$ >#(!BI A etc. 'etalising is a process whereby to ensure smooth paint coat$ scratch proof finish etc. firm has invested a pretty handsome amount in different operations. The semi*finished product$ which is input for 'etalising plant$ is of several types and dimensions like 'aruti 755 R headlamp assembly$ Tata Indica head light assembly unit. 6irm outsources most of this headlight from its sister concern located in daultabad village of 8urgaon and also from ohna plant located in suburbs of 8urgaon district. Aere QIT concept is been followed by the firm$ firm keeps an inventory of , days for most of its components. The metalised i.e. finished product from metalising shop then gets transferred to the assembly

12

shop located ne)t to it. Aand*driven trolleys are used to shift the components and plastic bins are storage e<uipments. The piece is been wrapped in plastic poly*bags to prevent it from dust etc. R.8a-3sC* 'etali=ing is a major shop$ which follows . I 9 very closely$ like the water pond activity and visual check point9s etc. >ut there are some discrepancies in lac<uer and paint shop. 'anual transfer of semi product consumes time and manpower. The two door vacuum 'etalising machine concept is a Qapanese initiative which in*turn is very cost*effective. Ass.8>:; s2o6C* the final shop before a product gets ready to be dispatched is assembly shop. In this =one the input is the semiproduct received from the molding section and 'etalising sector. The components that comes as input are tail*lamps of different cars like 'aruti Len$ Tata indica$ -pel (stra$ etc and head lights of different dimensions and si=es. There are total of +7 assembly lines and the process is almost similar in all of the +7 lines. . basic operations took place in these assembly lines namely adhesive application$ hens fitting$ ultrasonic sealing$ vacuum Testing etc. (n operator per operation is deployed and a supervisor keeps patrol over operators activities. These operations are minute and are time bound activities. ( particular time per machinery has been set and operator has to perform his/her operation within the prescribed time. The molded pieces which are inputs are been placed at waist level so that its convenient to reduce body motion. !omponents are placed in plastic bins and &acks. Aere scheduling of Input and finished good*is also pre*set and #oaders apply in*house QIT i.e. no. wastage of space and no e)tra inventory at work place. ?ery minute technicalities are involved in assembly shop so skilled and technical patrolling takes place offer every 7 hrs. or can be before that i.e. random sample testing or on*work <uality checks that means whether the operator9s de)terity towards placing the components etc. are as per standards or not. >asically (ssembly shop -perations one divided into . parts they areC* a& Ad2.s1?. A66:1=a,1on:)

17

8lue is applied over the outline of the frame of tail lamp/headlamp before the outer covering gets fi)ed so as to give ma)imum strength of fi)ation. The raw*material for glue machine is 8lue*bars outsource from local vendor and then these bars are raised upto a temperature of /555! and the melted glue through pipes then applied on light frames both manually and through &obots. The &obot concept is also one of the productivity measure been introduced by tanley corporation (one of the !ollaborators) Qapan$ when 'aruti introduced its latest version of maruti*755. The tail lamp design is very comple) so to save time and comple)ity robot applies glue on light frame. imilarly after the inception of &obot for 'aruti R755 model$ Philips installed more robots for other components also. The benefit of adhesive application is that the glue gives a strength base for the outer light frame to be fi)ed after this glue operation. In assembly shop Qob*&otation takes place at a predetermined period so as to make everyone comfortable with every operation. (fter application the product then transfers manually to ne)t operation that is hens fitting. 2& L.ns D1,,1n7C* The process involves fitting of outer glass/light covering$ which is also manufactured in the same plant in molding =one. ( medium si=e*compressing machine is done the process of lens fitting. The operator manually places the head light/taillight frame on to the dye/fi)ture and the glass to be fitted also placed over it. The upper lever compress the lower section on which both tall light and glass covering has been placed for ,5 seconds at a pressure of 1 kg/cm,. The parameters are preset for the machinery for different components and are displayed through different meters. The dye/fi)ture has to be changed as per the product specifications and dimensions manually and takes appro)imately /. minutes. The supervisor then scrutini=es the initial both as per the customer9s specifications. This is a time bound activity so careful patrol is necessary and the work has to be completed within prescribed time limits. The complete frame including glass and fail light frame then transferred manually to the ne)t operation =one i.e. ultra sonic sealing. H& U:,-ason1= S.a:1n7C* This is a minor process$ which includes fitting of ultrasonic$ lens i.e. the reflector in the tail lamp accessory. This component is also produced in same plant in (molding =one). The small pieces of ultrasonic lens gets transferred manually

14

from molding to assembly shop in hand driven trolleys placed in plastic bins. The operators in the same manners puts the tail lamp accessory on to the fi)ture and place me lens over it. The compression then fi)es it over the light. Aereafter the light assembly is complete and electrical component fitting is the ne)t procedure which is ultimately the final stage of the product. In lens fitting machine also different dyes and fi)tures are used as per the the product specifications and dimensions. The fi)tures are replaced manually by the operator under the supervision of the supervisor which usually takes appro)imately S an hour. @& E:.=,-1=a: Ass.8>:; D1,,1n7C* The purpose of light is incomplete without the bulb assembly. The wire assembly and the bulb are the components$ which are to be fitted into the fail light/head light assembly. The co. outsourcer9s bulbs from :urope$ Qapan and Borea of Philips and -sram brand. The wire assembly is been outsource from one of the co. plant. The !o. maintains QIT concept for wire assembly of , days but keeps a inventory appro)imately a month for bulbs as the component comes through shipment from outside the country and co. keeps a contingent provision. The process fitting is also a time bound activity. The operator manually places the assembly into the tail light/head light assembly and makes necessary connections. The ne)t process is a bulb testing. The operator places the finished product over a particular match fi)ture and connects it to the power connection and test whether the fitting is defect free or not. The ne)t process is water/vacuum testing. H& Aa=998 T.s,1n7C* this is a crucial process to check the water proofing/leakage pressure i.e. the process$ which scrutini=e that water should not enter the light assembly when fitted on to the car. The water proofing can be tested by , methods$ one by pouring water over the product or by testing the vacuum pressure. The latter one is a scientific on method and !o follows this process. The vacuum testing machine compresses of particular pressure and checks the vacuum pressure. This is a very comple) issue so co. places the light onto a replica of original fi)ture and then does check.

.5

Aere the product is now been transformed into a finished good. (nd is ready for dispatch. 6rom this point the loaders carry the finish 8oods being stored into plastic bins wrapped up in plastic poly bag covering through hand driven trolleys to the finished goods stores$ located outside the operation =one. Do=98.n, P-o=.ss1n7 and D1s6a,=2C* (s soon as the product is shifted into the finish goods store it becomes the property of 8ovt. thus e)cisable under e)cise act i.e. after the e)cise duty has levied. The invoices are issued as per the customer9s orders. In finished good store also few of the manual operations ta)es place like putting the specified stickers$ labels on to be packages and bifurcating the products into different desired categories like tail lamp assembly$ (left side and right side). The packages then are packed in cartons and are ready to move out of the factory gate as the invoices and other documents are attached with a particular lot. Aaving embarked on a focused and sustained effort in this direction$ the operating costs * more specifically$ the cost of raw materials$ labour costs$ transportation costs and conse<uently the cost of the final finished product * continued to remain substantially higher than other similar units operated by the company in !handigarh and ?adodara. !onse<uently$ manufacturing operations at this facility were proving to be unviable in spite of persistent efforts to bring costs in line with levels at the company9s other manufacturing units producing the same product$ elsewhere. (fter e)amining all potential alternatives$ and keeping in mind that costs could not be contained within acceptable limits$ a decision was made to cease manufacturing operations at that facility in eptember ,55/. #ooking at the overall interest of the line* of*business and the company as a whole$ this decision was imperative and could not be deferred any longer. 'o-3 S,9d; (t Philips work study has been implemented at a large scale i.e.$ !ache and any minute details have a record and standards for each process are predetermines as specified by the techni<ues. The two parts of work study i.e. method study and time study have a deep impact on Philips operations.

.+

M.,2od S,9d;: :very process starting from metalling to paint shop to (ssembly shop has certain pre*defined standards. (ll relevant charts have been put up against each machinery consisting of its operational techni<ue$ mode of processing etc. (ll types of process flow charts like heating$ moulding$ metalling are very well defined and placed at several places. The man*machine charts involving the co*ordination also been displayed. The idle time of each machinery is clearly shown and the Philips is trying hard to reduce the same. The cost performance of overall operation was also been conducted to assess the cost of operations. "ifferent suggestion bo)es have been put up to gather relevant information. (ll assembly shops are properly assigned with task to be performed supported by charts$ information etc. The company has desired several benefits like the process of transferring melted plastic polycarbonate is now automated and the risk factor$ cost factor have been minimi=ed.

$ime !tudy : The operational time of each machinery for eg. ,5 seconds in case of
compression machines etc. is pre*fi)ed and is set as per the re<uirements of products. The replacement time of fi)tures and dyes is also predetermined and idle time is minimi=ed. The concept of predetermined motion time system (P'T ) is applicable and is implemented in assembly as well as moulding shops. The firm has derived several benefits out of time study$ it has record of all the time* specifications against each machinery and also keeps a track of operator9s de)terity i.e. time taken by an operator to complete a certain job. (t assembly shop$ a robot has been installed by the company after observing that the time taken by operator to apply adhesive was relatively high. Dow the cost has been reduced and time is saved by installing a robot machinery.

.,

INCENTIAE SCHEMES Time standards can be used by companies in four major waysC (+) to estimate capacities and costs$ (,) to improve performance$ (/) to evaluate workers and to form a basis for wage payments$ and (1) to measure labour productivity. The use of time standards for estimation$ methods improvement and productivity measurement is widespreadK in fact$ almost all companies use standards are used as well in the development of incentive wage schemes for at least a fraction of the workforce. Thus while hourly wage payment (sometimes referred to as da!wor$) is more prevalent$ incentive wage schemes are fairly common and widely discussed. Incentive schemes are logically divided into two groupsC individual incentives and group incentives. The appeal of these incentives wage systems is readily understandable. The worker is paid according to how much he produces$ not how long he works. It is generally accepted that workers on incentive wages work harder than those who are paid by the hour$ other things being e<ual. In the piece*rate system$ every unit of output has its own EpriceF$ or wage reward. 3orkers are paid strictly according to how much they produce. Piece rates are generally inviolate over time e)cept for well*recogni=ed changes in methods$ materials$ e<uipment$ or product specifications. In the standard*hour system$ there are no wage Eprice tagsF on every unit. &ather$ a certain rate of output per hour is set as the standard$ and pay varies according to what percentage of the standard is actually achieve. These standard*hour systems are the most popular wage incentive scheme$ prevailing in about three*fifths of the companies with wage incentive programs. 3hile they function much as piece*rate systems$ their advantage is that pay increases can be made simply by adjusting the base rate$ which is much easier to do than adjusting the many piece rates involved so that a given percentage increase for the workforce as a whole is proportioned e<uitably among all piece*rate workers.

./

The attractiveness of individual incentive wages is$ of course$ to spur worker effort.

GROUP INCENTIAES
uch programs are initiated in work situations where it is difficult to calculate what each individual produces$ apart from what the individuals ahead or behind him produce. It is well known that the group working together can greatly advance productivity. There are a variety of group incentive programs$ but they can be divided into two major groupsC Those group incentives that apply to small groups of workers within a single plant consider the work group as an individual. :ach worker receives a rate of pay that depends on the productivity of the group as a whole. %nder such a group incentive$ all the group members are encouraged to work together to improve the group9s productivity. Peer pressure can be great under such a system. (s with individual piece rates$ good time studies are essential to the smooth functioning of such group incentives. (lthough not widespread$ small work group incentive schemes are the most likely to be found in worker*paced line flow jobs. Those group incentives that apply plant*wide or even company*wide can be grouped under the heading Eproductivity gain*sharing plans.F These plans are devised in such as way that changes in the production process suggested by either workers or managers$ as well as changes caused by increased worker effort$ result In bonus payments for the workforce. work smarter$ not just harder. uch plans are designed to increase the cooperation between all those in the plant$ both direct and indirect labour$ and to have everyone

OTHER BONUS AND PRO5IT)SHARING PLANS

There are many other bonus and/or profit sharing plans that various companies have instituted. ome involve only pension benefit for profit sharing while others pay cash bonuses that come from company profits. ome of these plans encourage worker suggestions and initiative$ others do not.

.1

INCENTIAE SCHEMES
Philips has been following the policy of minimum target achievement in terms of sales revenue. :very year company determines sales target that is to be achieved by the whole*team including managers$ supervisors and operators. The current year target is &s. / crore. The firm don not pay any incentive if the production is short of target$ at the same time if target touches the re<uired figure$ every employee gets on incentive of &s. +555. 6or every respective +5 lakh after &s. / crore$ every employee gets &s. +55 and so on. The employees also gets holiday packages for family$ if the performances is above the standards. If any employees is a part of kai=en activity being implemented by the company$ Philips pays Nuality (wards in terms of money$ gift and certificate etc. PRODUCTIAITY MEASURES Philips have tried to counter worker disaffection with innovations that make work more meaningful to people and thus more likely to receive their full attention and care. These innovations still have as a goal high company profits$ but they are attentive to worker needs$ especially as the character of the workforce has changed. ( number of factors have emerged as important dimensions of satisfaction with one9s job and workplace$ and each demands some attention from managers concerned about workforce well* being and productivity. In no particular order. Ad.J9a,. and Da1- =o86.nsa,1on: till an important consideration for all workers. Is the pay sufficient$ and is it in line with e)pectations and demands of other$ perhaps similar$ jobsO SaD. and 2.a:,2; <o-31n7 =ond1,1ons: Is the plant structurally sound and is the machinery safe to operateO Is the workplace attractive and comfortableO (re the hours longO Is there fle)ibility in the time workers can start or stop workO

..

I88.d1a,. o66o-,9n1,; ,o 9s. and d.?.:o6 298an =a6a=1,1.s: "oes the job give the worker a sense of identityO "oes it call for any substantial autonomyO Is the job self*contained or merely a small piece of a task with no real idetnity itselfO "oes the job call for planning as well as e)ecutionO "oes it call for multiple skillsO Is the job tied into the larger flow of information about the process and the control of that processO

59,9-. O66o-,9n1,; Do- =on,1n9.d 7-o<,2 and s.=9-1,;: 3hat opportunities e)ist for advancement on the jobO Aow secure is the employmentO 3ill the job provide the training and development needed to tackle still larger jobsO

So=1a: 1n,.7-a,1on 1n,o ,2. <o-36:a=.: To what degree is the workplace open and supportive of each workerO To what degree is the workplace free of prejudice and status symbolsO Aow upwardly mobile are workersO

R172,s 1n ,2. <o-36:a=.: To what e)tent does the rule of law and due process characteri=e an individual9s rights in the workplaceO (re privacy$ free speech$ and e<uity fully respectedO

Co86an; ?1s)K)?1s so=1.,;: Is the company perceived as socially responsible and socially acceptedO

3ith these kinds of considerations in to deal with worker dissatisfaction$ of work restructure policies have been tested by companies like 8eneral 6oods$ Procter and 8amble$ 8eneral motors$ T&3$ 6ord 'otor 8oodyear$ !ummins :ngine$ :aton cooperation$ and 'ars$ Inc.$ among others. The world restructuring that has been tested in these an other companies tends to very idiosyncratic no two programs are alike. 8oals are held only loosely and timetables are e)traordinarily fle)ible. The goals are dual the intended benefits are to be reaped by both management and the workforce. The adopted programs work by altering the EcultureF of the workplace. #. PRODUCTIAITY MEASURES Philips is not behind in applying all the above principles and has initiated several measures to increase productivity in the plant keeping in mind$ workers benefit and

.0

company9s standards and norms. The A& department is very enthusiastic in keeping harmonious relations between employees and management. The managers come forward to achieve the target optimum cost. uch measures in form of operations and concepts are as followsC*

To,a: P-od9=,1?. Ma1n,.nan=.

Total productive maintenance (TP') is productive '(IDT:D(D!: carried out by all employees through small group activities. The dual goal of TP' is =ero breakdowns and =ero defects. 3hen breakdowns and defects are eliminated$ e<uipment operation rates improve$ costs are reduced$ spare parts inventory can be minimised and as a conse<uence$ overall productivity increases. It has been reported that typically$ within three years from the introduction of TP'$ companies show +.*,. percent increases in e<uipment operation rates while others show a 45 percent reduction in process defects. #abour productivity is generally increased by 15*.5 percent. TP' is often defined as productive maintenance involving total participation. 6re<uently$ management misconstrues this to imply that only shop floor staff need be involved. Aowever$ TP' should be implemented on a company* wide basis. TP' aims to establish good maintenance practice in operations through the pursuit of Ethe five goals of TP'F as followsC A=21.?. a9,ono8o9s 8a1n,.nan=. allow the people who operate or use the operations e<uipment to take responsibility for$ at least some$ of the maintenance tasks. (lso encourage maintenance staff to take responsibility for the improvement of maintenance performance. P:an 8a1n,.nan=.: have a fully worked out approach a to all mainteaance activities. This should include the level of preventive maintenance which is re<uired for each piece of e<uipment$ the standards for condition*based maintenance$ and the respective responsibilities of operating staff and maintenance staff. The respective roles of EoperatingF and EmaintenanceF staff are seen as being distinct. 'aintenance .2

staff are seen as developing preventive actions and general breakdown services$ whereas operating staff take on the EownershipF of the facilities and their general care. imilarly$ the respective responsibilities of the two types of staff are seen as distinct. 'aintenance staff are held to be responsible for the training of operators$ problem diagnosis$ and devising and assessing maintenance practice. T-a1n a:: s,aDD 1n -.:.?an, 8a1n,.nan=. s31::s: The responsibilities of operating and maintenance staff re<uire that both have al the skills to carry out their roles. TP' places a heavy emphasis on appropriate and continuous training. A=21.?. .a-:; .J9168.n, 8ana7.8.n,: this goal is directed at going some way to avoiding maintenance altogether by Emaintenance preventionF ('P). 'P involve considering failure causes and the maintain ability of e<uipment during its design stage$ its manufacture$ this installation$ and its commissioning. In this way TP' attempts to trace all potential maintenance problems back to their root cause and then tries to eliminate them at that point. The first principal feature of TP'$ total effectiveness or profitable P' is also emphasi=ed in predictive and productive maintenance. The second feature$ a total maintenance system is another concept first introduced during the productive maintenance era. It establishes$ a maintenance plan for the e<uipment9s entire life span and includes maintenance prevention ('P C maintenance*free design)$ which is pursued during the e<uipment design stages. TP' works to eliminate what are termed the big losses that are regarded as formidable obstacles to e<uipment effectiveness. They areC Do<n,18.: +. :<uipment failure from breakdwons. ,. etup and adjustment from e)change of dies in injection moulding machines$ etc.

S6..d :oss.s: /. Idling and minor stoppages due to the abnormal operation of sensors$ blockage of work on chutes$ etc.

.7

1. &educed speed due to discrepancies between designed and actual speed of e<uipment. D.D.=,s: .. Process defects due to scraps and <uality defects to be repairedK 0. &educed yield from machine start*up to stable production. The dual goal of =ero defect and =ero breakdown has been very will achieved by the company. The initial inspection at the material receiving store by the technicians and the <uality check between process and the thorough inspection of the finished goods ensures =ero defect and the supervisors check of machines at predetermined interval ensures =ero breakdown.

COMPUTER AIDED DESIGN

!omputer*aided design (!(") systems provide the computer aided ability to create and modify product drawings. These systems allow conventionally used shapes (called entities) such as points$ lines$ areas$ circles$ and te)t$ to be added to a computer based representation of the product. -nce incorporated into the design these entities can be copied$ moved about$ rotated through angles$ magnified$ or deleted. The system can usually also E=oom in and outF to reval different levels of detail. The designs thus created can be saved in the memory of the system and retrieved for later use. This enables a library o standardi=ed drawings of parts and components to be built up. Dot only can this dramatically increase the productivity of the process but it also aids the standardi=ation of part in the design activity. ome !(" systems come already supplied with their own libraries of standard parts. The software used in !(" systems varies in its degree of sophistication and modeling ability. The simplest type models only on two dimensions. This produces plans and elevations of the design in a similar way to a conventional engineering EblueprintF. 'ore sophisticated systems can model products in three dimensions. This can be done in very basic form by Ee)trudingF the two R dimensional image to give thickness to different parts of the two dimensional shape.

.4

The most obvious advantage of !(" systems is that their ability to store and retrieve design data <uickly as well as their ability to manipulate design details can considerably increase the productivity of the design activity. In addition to this$ however$ because changes can be made rapidly to design$ !(" systems can considerably enhance the fle)ibility of the design activity$ enabling modifications to be made much more rapidly. 6urther$ the use of standardi=ed libraries of shapes and entities can reduce the possibility of errors in the design. Perhaps most significantly$ though !(" can be seen as a prototyping as well as a drafting device. In effect the designer is modeling the deign in order to assess its suitability prior to full production.

COMPUTER INTEGRATED MANU5ACTURING

Integration of P&-!: T:!AD-#-8M prior to the development of ("?(D!:"

'(D%6(!T%&ID8 T:!AD-#-8M have usually taken place within particular functional areas of manufacturing. 6or e)ample$ improvements in machining systems have mostly been confined to the factory floor. Integration based on ('T$ however$ enables$ further blurring of the lines between areas and functions$ for e)ample$ in the case of !-'P%T:& (I":" ": I8D (!(") and manufacturing (!("/!(')$ where the electronic information created and manipulated in designing a product is then passed automatically to the computer controlled machinery re<uired for producing it. This type of integration forms the basis of computer* integrated manufacturing (!I') which can be defined asC The integration of computer based monitoring and control of all aspects of the manufacturing process$ drawing on a common database and communicating via some form of computer network. (t its heart !I' brings together two key aspects of manufacturing activity materials processing and information processing. (utomation has already had a major impact on many of the physical transformation processes. !I' moves the emphasis towards indirect activities$ many of which involve information processing or communication. The application of IT in these areas is beginning to contribute significant improvement in performance$ although the degree to which !I' can have an impact depends upon

05

reconfiguring both technological and organi=ational systems. The application of >% ID: P&-!: &:": I8D is an important enables of this.

'ost models of !I' involve some form of stepwise or hierarchical arrangement of control$ from low levels where invidiual elements (machine controllers$ data collectors$ etc.) operate autonomously but also communicate information to the ne)t level which is responsible for the overall monitoring and control of level (for e)ample$ a manufacturing cell). 6urther up$ a plant controller would handle the activities of several cells$ co* ordinating their use of resources and monitoring their overall performance. #evel foru would involve the integration of other key functional areas$ for e)ample$ design and marketing$ and would represent a shared information system of the kind represented by '(D%6(!T%&ID8 &: -%&!: P#(DDID8 ('&P). #evel five would be an overall business systems integration$ in which the financial and sales information would be linked into the manufacturing system$ and level si) would be the overall board level strategic view which includes long and short term perspectives$ etc. (s key enabling technology in all of this is the computer network which has the important architectural property that information can be shared throughout the system. !hanges any where in the system will update the rest of the information in the systemK thus the entire operation can be seen to behave as if it were a single$ enormously comple) machine. This is not$ however$ simply a centrali=ing and concentrating processK the key property of the networks which form the Enervous systemF for !I' is the ability to be simultaneously highly centrali=ed and highly decentrali=ed. Thus the economies of shared resources and information can be added to those of local autonomy and fle)ibility in uncertain environments. !I' e)emplified the distinction between EsubstitutionF innovation and more radical and strategic innovation. !I' applications do not just offer considerable improvements in traditional ways of making thingsK they also open up completely new and often highly integrated options. !I' also differs from other technologies in having potential impact on indirect cost areas as well as direct costs. It contributes to better co*ordinationK it tightens the linkages between previously separate elements in a production chain$ it brings powerful planning and monitoring tools to bear upon the problems of production

0+

chainK it brings powerful planning and monitoring tools to bear upon the problems of production control$ and it reduces the amount of paperwork re<uired to maintain even a simple manufacturing system. Thus many of the traditional areas of overhead cost (which can often account for 15 percent or more of total product costs) can be reduced$ adding further to the competitive benefits offered by !I'. Philips is a company which is committed to give its customers the <uality and endurance per the products it offers. Philips plant has a central I&esearch and "evelopment #ab (&@")9 or drawing and design lab which was desk proof and centrally air*conditioned area where it professionals$ multimedia e)ports and drawing and design specialist are engaged day and right to given their support to reach the organisational goals$ as the company is certified by as 4555and I - 4555 norms of international <uality standards$ this becomes highly important stage$ which gives !(" support for the development$ modification and designing of a product. There are about /5 computer units$ incorporated with sophisticated software and integrated #(D which help the drafting$ designing$ modifying and prototyping of head lamps tail lights and other light e<uipments used in automobile industry. It is a continuous process as the trend changes$ the competition is at its peak then the companies like 'aruti$ Telco$ -pel introduces new models$ also modify their e)isting models of cars$ it becomes necessary and important to follow their guidelines time to time by the company.

0,

CENTRALISED R&D LAB

Co-6o-a,. :.?.: Co-6o-a,. :.?.:

R & D R & D

D1?1s1on F D1?1s1on F

D1?1s1on Y D1?1s1on Y

The use of robotics at assembly shop to perform comple) operations like application of adhesive on tail lamps is a part of productivity measure being adopted by the company. ( lot of time and cost is thus saved by this process. Jo> -o,a,1ons: Philips keep rotating the operators from one machinery to other and from one process to others$ so as to make everyday perfect in all operations and to reduce boredom by giving a new job and work environment.

)vens #echanism
The ovens placed in moulding shop are e)tremely beneficial to increased productivity as the sucking system inhales the plastic material automatically from the tanks and differ melting transfers the material to different machines. (ll this process is totally automated and a lot of man power has been reduced as the same time efficiency in operations have also increased.

2ai/en *ctivity
( recent activity under Bai=en took place at Philips where employee and operations provided a solution to the scratch problem. Thus company encourages such activities. This initiative is very much related to productivity as this a reinforcement for a worker to

0/

give valuable suggestion and to bring into notice flows in process$ as they get reward for this and mistakes other employees also. #L MSL This conception from Qapan has a very wide are of application and is very relevant for material management functions. +. eiriC It literally means sorting out. It professes sorting out the necessary items in the workplace$ stores$ etc. and discard them thus$vacating valuable space$ reducing record keeping. :tc. ,. eitonC it standards for systematic arrangement. This emphasises that we should arrange only necessary items in good order so that they can be picked easily. ID other words$ it highlights the need for$ ( place for everything and everything in its place. /. eisoC It signifies spic and span workplaces and stores. It enjoins everyone to keep the workplaces completely clean and tidy so that there is no dusty anywhere. 1. eiketsuC This principle conveys a serene atmosphere i.e. maintaining high standards of housekeeping at workplace and in the organi=ation at all times. .. hitsukeC it implies sticking to self* disciplien without being prompted by supervisor or manager. Train people by setting an e)ample so that everyone follows good house keeping discipline automatically. The company follows this app4roach very minutely and takes case of every aspect of this principles. The visual defect. !heck system$ placing of water foot* not provision$ scheduled cleaning of machines and work place$ disposing plastic scrap at the earliest$ arrangement of raw material as well as finished good appropriately etc. are few activities that proves that the company9s approach is very positive and enhance productivity ultimately.

01

S.=,1on: Mo9:d1n7
S. No. +. 'o-3 Don. Usa7. oD ,2. <o-3 don.

#ock provided on large capacity !ontamination due to threads and material storage bin (for #@T) "ryer) packing material avoided.

,.

Aook provided to hang separate si=e :asy to find$ re<uired si=e of pipe. pipe (like 'T $ >readed etc.)

R.79:a- >-.a3s
The company provides +. minutes break after every two hours to make worker feel comfortable and to give some rela)ation as the work is of repeat nature kind is very comple).

In=.n,1?.s s=2.8.s
These work as one of the major factor for improving productivity as the worker tends to perform better when he feel that his better performance will be rewarded in any terms whether its money$ gift or so we promotion. Philips also provides sales target/ production target incentives.

D1DD.-.n, =:16 >oa-ds

The company has placed several boards in the works area whi7ch display different jargon and motivational <uotes one such e)ample is of .

A-1,28.,1= oD a==1d.n,s
(dditionsC (ccidents add to pain of employees. ubtraction C (ccidents substract the assets of the employees.

0.

'ultiplication C (ccidents multiplies the fears of all concerns. "ivision C "ivides the pleasure of family (wareness is cultivated !ase is observed "are is e)hibited in time. MATERIAL STORAGE Philips finished goods are tail lights/head lights which are fragile in nature and the raw material or semi*product is also of comple) nature so the company keeps these aspects in mind and ensures that there is no loss during handling the material and while storing the components. The basic storage devices used by the company areC* (+) PlatformsC To keep the frame of tail light half frames of different si=es and specifications. (,) (/) !artonsC To store wire assembly units. Plastic >insC To store finished goods i.e. tail lights/headlights wrapped up in a plastic polybag. To store the indicators lights of different si=es and specifications. MATERIAL HANDLING 6eatures of 'aterial Aandling :<uipment >eing Placed at PhilipsC* afe to operate and use Doise free in operation hould not generate fumes in operation hould be fle)ible hould be reliable and sturdy hould be compatible with process re<uirement

00

Principal 8roups of 'aterial Aandling :<uipment >ased on their usage$ material handling e<uipment can be classified into the following groups.

Ma,.-1a: Hand:1n7 D.?1=.s (t Philips the distance between two shops is not very considerable but layout is also comple) at the same time. the material to be handled is usually light weighed in nature but is fragile as well. ome of the fi)tures are also to be shifted to various shops from fi)ture designing shops which are relatively heavy in nature. The plastic resins$ tail lights$ head lights frames$ glue bass etc. are some of material to be handled. o keeping above things in mind following are the material handling devices being used at PhilipsC* +. 'obile :levatorC Placed at 'etali=ing shop for headlight lac<uering. ,. TrolleysC To carry semi*finished goods like blinking lights wire assembly etc. /. #iftsC To carry fi)tures$ metal sheet etc. to the store. 1. >elt !onveyorC To carry plastic polycarbonate and other plastic resins from material receiving store to raw*material store. .. 6olk #iftC To carry metal sheets.

02

The vertical bars show the percentage of direct dispatches that were achieved. In the first . months of the operation$ roughly /5J of dispatches from the :astern region were direct from the plantK in . months this figure had improved to ..J. :ven in the outh$ where the figure was far lower initially$ the company moved from 5 to +5J in . months. In recent times$ these figures have become even more impressive. If one were to analyse the costs involved$ there would be huge savings as a result of direct dispatches. 3hile the primary transportation cost increases$ there is a complete elimination of warehouse costs$ stock financing costs and secondary transport costs. Proper planning and handling is re<uired for the purpose of achieving the right <uality of output. The total inventory (material cost) for manufacturing products at Philips9s is between 25*75 J i.e. material to sale ratio is 25 to 75J. o inventory control is most important part for efficient running of the organi=ation.

EAALUATION O5 INAENTORY MANAGEMENT PER5ORMANCE

In this part an attempt has been made to evaluate the performance of management of inventory system at Philips India #td. &atio analysis is used for making this evaluation. The ratios for the last five years have been worked out and compared to draw conclusions. The various figures re<uired are given belowC ,55.* ,550 (verage Inventories Total !urrent (ssets !ost -f 8oods old RATIOS Inventory To 8ross 3orking !apital Inventory Turnover &atio 1.2, /.7+ ..20 ..04 1.77 5.15 5./7 5.1. 5.1/ 5../ +/., //02 0154 ,552 +.00 1+/+ .4,/ ,550* ,552* ,557 +70, 1++2 +5274 ,557* ,554 ,41. 0.+, +0202 ,5+5 /02/ 04,. +2415 ,554*

07

Inventory !onversion Period(days)

22

42

01

0.

2.

INAENTORY TO GROSS 'OR0ING CAPITAL

Inventory to gross working capital ratio goes down in the year ,554*+5 as compared to ,557*54. It increases in the year ,552*57$ but there is an sharp increase in the year ,554*+5. Beeping in view the above position$ the firm Philips Inida #td. should keep on going due importance to inventory as to reduce costs.

INAENTORY TURN OAER RATIO

This ratio has been decreased from 1.2, in ,550*52 to /.7+ in ,552*57 and then increased to ..20 in ,552*57. Then it decreased to ..04 in ,557*54 but it again decreased to 1.77 in ,554*+5. -n going through this ratio we observed that the firm was maintaining its inventory at most minimum level in the year ,552*57 and ,557*54 as the inventory turn over ratio was much high as compared to other years. teps should be taken by the firm Philips Inida #td. to increase the inventory turn over ratio for better management of inventories and reduce the cost of inventory.

INAENTORY CONAERSION PERIOD

It refers to the period that manufacturing unit takes to clear a lot of stock. There has been increase in the inventory conversion period for the first year. It increases from 22 days in ,557*54 to 42 days in ,554*+5. Thus it remains constant in ,55,*51. It is desirable to have short conversion period because it will help in reducing accumulation of inventories.

SUPPLY CHAIN MANAGEMENT IN PHILIPS

upply chain management operation at Philips India R how it was implemented and what benefits it has yielded for the firm. Three years ago$ despite the fact that Philips India was going through difficult times$ the firm continued to remain cash rich. alaries to employees and payments to suppliers were not delayed$ and borrowings were actually

04

lower$ especially during the previous twelve months. The main reason that made this possible R despite the si) businesses spread across 7 manufacturing locations R was the immaculate handling of the. supply chain by business heads

The figure alongside depicts the manner in which Philips effected reductions in the cycle time by getting the Iwaste9 out. !onceptually$ there is a difference between a supply chain and a value chain. The broad hori=ontal arrow at the top of the figure depicts the value chain with three distinct heads R defining$ creating and communicating the value * and these are all goals to be achieved. ( firm can make a great product$ deliver it very well$ but it may still not find customers. It must define the value propositionK identify the customer$ and communicate that value. The supply chain is the process Iin between9 i.e. the process of creating the value. This involves a product creation process$ a sourcing process$ and a make*and*deliver process. The goal of supply chain management in terms of the flow of goods (from suppliers to customers) is Icycle time reduction9. In terms of money flow (from customers back to the suppliers)$ the goal is Icycle time reduction in receipts and payments9. 6or instance$ in a 25

multi*business multi*location company$ money needs to be moved through 0$555*+1$555 people down to the suppliers. 6inally$ there is information flow (which$ as depicted in the figure above$ is in both directions) where the goal of !' is to ensure speed$ efficiency$ and integrity of information. These are the goals any organi=ation must aim for.

2+

The inventory turn over ratio can be further subdivided into the following ratiosC Mears ,550 &aw 'aterial Inventory Turn -ver &atio 3IP Inventory Turn -ver &atio 6inished 8oods Inventory Turn -ver &atio (verage (ge of &.' Inventory (verage (ge -f 6inished 8oods !. RA' MATERIAL INAENTORY TURN OAER RATIO: This ratio varies slightly from /.5. in ,557*54 to /.+, in ,554*+5 and +.5 in ,552*57. (gain it increased to ,.1 in ,557*54. >ut in ,554*+5 it sharply decreased to +..2. It is better to have a greater raw material turn over ratio. 2. 'OR0 IN PROCESS INAENTORY TURN OAER RATIO: Taking a general view of this ratio over a period of five years it does not seen stable and comparable to another year. ,+ ,4 ,+ +2 ,5 +,5 47 /0. +.+ ,/, +2.14 +,.05 +2.14 ,+.12 +7.,2 /,.11 ,/.51 /7.+1 .+.12 10..2 /.5. ,55.* ,552 /.+, ,550* ,552* ,557 +.5 ,554 ,.1+ ,557* ,5+5 +..2 ,554*

2,

H. 5INISHED GOODS TURN OAER RATIO: This ratio has decreased from +2.14 in ,557*54 to +,.0 in ,554*+5. It showed a large amount of finished goods had remained idle for most of the period. The firm should device methods to improve this ratio because this ratio adversely affects the other ratios. @. AAERAGE AGE O5 RA' MATRIALS IN INAENTORY The analysis of five years does not reveal any bright picture of raw material in stock. -nly in the year ,554*+5 the average age of the raw material in the stock reduced drastically to 47 days. The firm should reduce the average age of raw material in stock for better utili=ation of material with less investment. AAERAGE AGE O5 5INISHED GOODS INAENTORY: The period for which the finished goods remain in stores is almost constant e)cept in the year ,557*54. The decrease in that year was due to less reali=ation of payments. 'anagement should take steps to reduce this period. -n the whole the analysis shows that the inventories are not being managed as effectively as it should be. The organi=ation should adopt various techni<ues like (>! analysis or other inventory models to reduce inventory. Proper care should be taken for handling raw materials and finished goods so that the losses are minimi=ed. This will eventually result in higher inventory turnover. pecial attention should be paid to finish goods lying in stores. 'ore attention is re<uired in the inventory control and general stores where raw material and consumable articles are often found continuously growing. Therefore$ overall reductions are of the order of 05*25J. Philips India9s inventory movement over the last +1 <uarters has also reduced by .*0 percentage points (from +,J to about 2J of the moving annual turnover). This translates into a saving of almost &s 1. crores.

2/

SUPPLY CHAIN MANAGEMENT OPERATION AT PHILIPS INDIA

PI# scrutini=ed the best !' practices across the world and carefully studied the !' models of successful companies such as "ell !omputers. The company decided to use the upply !hain -peration &eference ( !-&) !' model for restructuring its supply chain. (ccording to the model$ a supply chain is broken down into four different processes * planning$ sourcing$ making and delivering. These four processes are supported by a set of performance metrics$ such as customer service$ costs$ fle)ibility$ and assets. %sing this framework$ PI# worked out a mechanism to assess itself on a Iprocess map$9 which it referred to as the Imaturity grid9. (s per this grid$ there are four distinct stages of maturity during the life of an organi=ation. The informal organi=ation * 6ocuses on procedures and <uality systems. Aere$ the supply chain is not e)plicitly broken down ( tep +$ ,$ /). The functional organi=ation * Aere$ the various functions (such as purchasing$ warehousing$ marketing and manufacturing) are tied together. Aowever$ no person is responsible for the goods9 flow ( teps 1$ .$ 0).

21

The integrated organi=ation * In this case$ the entire source*make*deliver chain is integrated either in teams or under the supply chain manager of the organi=ation$ who is responsible for the flow of goods ( teps 2$ 7$ 4).

The e)tended enterprise * The topmost stage including suppliers of the immediate supplier and customers of the immediate customer$ are all linked by the upstream and downstream flow of products$ services and information ( tep +5).

The efficacy of a company9s supply chain increases as it moves in stages from being an informal organi=ation to becoming an e)tended enterprise. PI# took points +$ 1$ 2 and +5 in the figure given above as its benchmarks,. Philips D?9s global lighting and semiconductors business was rated between 0 and 2. Thus$ the !' e)ercise at PI# was largely aimed at attaining the above benchmarks. PI#9s !' implementation initiative was spread over two phases. The first phase was from ,554 to early ,5+5 and the second beginning in mid ,5+5. In the first phase$ the company closed down its regional distribution points$ reduced the number of sales depots from /2 to ,4$ consolidated its manufacturing locations to just four plants and implemented !T? production in*house in Pune. !ommenting on the decision to prune manufacturing bases$ B & &aj$ 8eneral 'anager$ ( !' * !: "ivision$ PI#)$ said$ EThe company still believes in a single manufacturing location to have better control on all processes like <uality$ supply chain. Aowever Philips still would like to capitali=e on the government benefits that are offered in few states like Punjab$ %P and 3>. Aence it is re<uired to maintain production facilities in these places to cater to the local sales demand for high runners.F The PI# management broke down its value chain/ into three distinct steps * defining the value$ creating the value and communicating the value. PI# decided to focus on the value creation stage$ because the company believed that even if it had a great product and a well*defined distribution setup$ it could fail to attract customers if there wasn9t any Ivalue benefit9 associated with the product. 'oreover$ as the value creation process involved product creation$ sourcing$ and making*delivering$ PI# could easily build on its supply chain efficiencies to effect enhanced value creation.

2.

De)t$ PI# identified reduction in the cycle time1 of its activities as a primary step to eliminate any wastages. The company began the cycle time reduction e)ercise at its lamp production units. The rationale for starting with the lamps unit was the successful completion of such an e)ercise at the parent company Philips D? in +444. ee 6igure II for a typical supply chain for lamps. !omponents sourced either through imports or locally are converted into finished lamps$ which then enter the warehousing*distribution* trade*end user chain. !ycle time can be reduced by reducing the hori=ontal cycle time (time spent during the flow of goods from one point to the other) and/or by reducing/eliminating the vertical cycle time (denoting =ero movement of goods). (s per Philips D?9s e)perience$ the vertical cycle time usually locked up a significant amount of money and resources. 3hile$ the parent company9s cycle time was 47 days * hori=ontal cycle time of ,4 days and vertical cycle time of 04 days. In +444$ Philips D? began working towards reducing this by 25J over 1 years.

>y ,5+5$ the company had successfully completed .5J of the target. This e)ercise covered the entire supply chain including production centres$ warehouses and distribution centres. PI# also replaced the e)isting multi*stage distribution chain (factory*warehouse* coupling plantwarehouse*retail store) setup for its lamps with direct shipment of products 20

to consumers. This move was e)pected to save costs as a result of direct dispatches. (lthough primary transportation costs increased in this$ the company will be able to completely eliminate costs of warehousing$ stock financing and secondary transport. !ommenting on the changes brought about in the goods flow model$ 8eneral 'anager ( !'$ !: "ivision)$ B & &aj said$ EThe objective to restructure the goods flow model is to radically rationali=e the manufacturing bases at Philips. To meet the target$ we have adopted a model of mother warehouse at Pune which caters to all India re<uirements. There has also been a major realignment of sales depots countrywide and an elimination of grouping centers and distribution centers which were stocking and distribution points. 3e have ,4 depots spread across the country. There has also been drastic cuts in the transit times and the handling of sets have reduced considerably.F In the earlier setup$ the /$555 dealers and distributors placed orders with +2 sales branches to forward to ,4 depots across the country. (>oth sales branches and depots were connected to each other through a Q.".:dwards :&P package.) >ased on these orders$ invoices were made and goods distributed. In the new setup$ all goods from the three manufacturing bases were sent to the mother warehouse in Pune$ and then distributed to the ,4 sales depots across the country. Philips also initiated a data warehousing e)ercise to source information from internal sources$ secondary distributors as well as from the competitors. This information was to be made available online$ integrated with a web*based supply chain. The idea was to recogni=e and address problems in forecasting customer orders. REAPING THE BENE5ITS PI# benefited in many ways from the revamped !' practices. Transit time was reduced to 2 days and goods were handled only . times. (s against a first <uarter working capital of &s .55 million for ,554$ the figure was only &s ,55 million in ,5+5. ignificantly$ supply chain costs were reduced by ,0J in ,5+5. ( majority of these savings were due to the savings in transportation and warehousing. PI# could reduce warehousing costs because of the direct dispatch model$ in which there were no grouping centers.

22

PI# studied the results of the direct dispatch e)ercise region*wise. 6or the eastern region$ around /5J of the dispatches were sent directly to customers in the first five months itself. In the ne)t five months$ this figure reached ..J. In the southern region$ PI# moved from 5 to +5J in . months. The western and northern regions also recorded substantial improvements. -verall$ PI# managed to reduce costs by 05*25J. (dditionally$ the company9s inventory movement reduced from +,J to 2J of the annual turnover$ amounting to a saving of &s 1.5 million. 'oreover$ PI# managed to reduce inventories by /.J (value terms) in ,5+5. >y reducing supply chain costs$ inventory costs and by negotiating favorable credit terms$ PI# was able to reduce its working capital re<uirements$ improve cash flows and reduce the interest burden. This system also improved the availability of goods to the market$ which reduced the lead*time from order booking by the trade partner to the delivery of goods. (lthough PI# posted a net loss of &s ,++ million for the financial year ended "ecember /+st$ ,5+5$ the notable point was that this was much lower than the &s /1, million recorded in ,554. PI# managed to reduce losses largely due to the rationali=ation of operations$ cost control and !' initiatives. If one were to e)clude the outgo of &s 277 million on account of a voluntary retirement scheme$ loss on sale of assets and decline in asset value$ the company had an operating profit of &s /72 million. !ommenting on the !' e)ercise$ &aj said$ EThere has been a positive response from the trade on all the changes. The dealers are happy with the response time and the <uality of deliveries. !onse<uently$ sales have improved and this is also reflected in improvement in market shares in !T? and (udio segment. The supply chain restructuring e)ercise has definitely had a positive impact on the company9s financial performance$ due to the reduction in supply chain costs and in inventory costs.F In ,5+5$ Philips D? increased its holding in PI# to 4,J and was reportedly working towards delisting it from the stock e)changes. >y (pril ,55,$ P(#I$ Philips 8lass Industries #imited (P8I#) and :#'I were merged with PI#. (fter this the company9s lighting business in India came under a single Philips entity. This move was a step towards integrating the operations and further improving the efficiencies across the 27

supply chain. . ?enkataramani$ :)ecutive "irector and Aead (#ighting "ivision) said$ EThe merger will integrate the manufacturing and logistics operations of the four entities under one legal entity. This will improve fle)ibility in portfolio management$ enhance overall productivity and create manufacturing efficiencies. It will also enable economies of scale$ simplify$ and streamline administration.F In mid*,55,$ &amchandran summed up the company9s strong belief in its efforts$ EPI# e)pects market conditions to continue to be difficult and as a company we enter this year on a cautious note but are prepared for any situation.F #.!/ SUPPLY CHAIN OPERATION RE5ERENCE %SCOR MODEL&

The !' model used by Philips is called upply !hain -peration &eference ( !-&)$ which is a world standard$ devised by eight companies. It includes performance metrics$ standards$ tools$ best practices$ reference manuals$ etc. Philips D? has worked with them to create its own process called the Imaturity grid9. !-& essentially looks at the supply chain as four different processes R planning$ sourcing$ making and delivering (see figure

24

alongside). %nderpinning these processes is a series of measurement systems. These are further broken down * the arrow at the top is the planning process$ the second block is the source*make*deliver process$ and the bottom block depicts the measurement tools. 6or each of these$ the planning and e)ecution processes are broken down into +, elements. -ne needs to describe the organi=ation9s behaviour pattern at infancy$ and the pattern for an e)tended enterprise in terms of world class operations. Thus$ if one were to take this through +5 tiers (the appro)imate number of distinct functions within the organisation)$ with +, elements in each$ improvements will automatically begin to show. -f course$ one must constantly measure the gap between where one is currently and where one intends to be. This calls for hard discipline and attention to detail. Philips went through this process and scrutini=ed best practices the world over. "ell$ for instance$ was an ideal e)ample of an e)cellent !' operation R accordingly$ Philips9 lamps division started benchmarking against "ell. !loser home$ there is a remarkable !' system in place in the e)port of fresh flowers from India. Philips reasoned that if it is possible to move flowers and vegetables (with a shelf life of half a day) over thousands of miles$ the same should be possible with other goods as well. There are four distinct stages of maturity during the life of an organisationC The informal organisation * where the focus is on procedures and <uality systems$ but the supply chain is not e)plicitly broken down The functional organisation * where the various functions (purchasing$ warehousing$ marketing and manufacturing) are knitted together The integrated organisation R the entire source*make*deliver chain is integrated either in teams or under the supply chain manager of the organisation$ who is responsible for the entire flow of goods The e)tended enterprise * where customers are also brought into the system$ together with the suppliers To ensure sustainable growth$ one needs to move from the informal organisation towards the functional organisation$ the integrated organisation and ultimately to the e)tended enterprise.

75

5INDINGS IN5ERENCES AND RECOMMENDATIONS

(ccording to the annual survey of industries$ material cost including cost of their transport to factory came to appro). 05J of the total production cost$ which is further going to increase due to more competition in the mar;ket. ince material account for roughly ,// of the total cost of production$ small changes in their cost can result in large sums of money saved or lost. 'aterial management including inventory control is accordingly fruitful area for cost control and deserves careful attention. !' emerged as an effective tool to reduce costs and improve manufacturing efficiencies for organi=ations that seemed to have e)hausted all means of reducing costs including increasing manufacturing efficiencies and focusing on logistics management. !' improves customer service$ inventory management$ transportation systems and distribution networks. In the traditional way of doing business$ the functions of marketing$ distribution$ planning$ manufacturing$ and purchasing organi=ations operated independently along the supply chain. The conflicting objectives resulted in a lack of co*ordination that hampered the overall efficiency of the chain. -ften$ there is not a single$ integrated plan for the organi=ation. !' is a strategic tool that helps organi=ations tie these functions together into an integrative whole. It can be defined as$ Ia systemic$ strategic coordination of traditional business functions within a particular company and across businesses within the supply chain$ for the purposes of improving the long*term performance of individual companies and the supply chain as a whole.9 The inventory turnover rate in our country is <uite low compared to other developed nations. It therefore entails considerable costs in the form of interest on capital$ storage charges and losses on account of obsolescence. The average manufacturing company makes a profit of about +5J on its production cost. ince material cost amount appro). 25 J of the total production cost$ slight reduction in it would e)ert enormous leverage on profit. If material costs are reduced by /J$ which is by no means difficult$ the profit margin increases from +5 to +, J and total profit go up by ,+J. (ny such saving in

7+

material cost is thus$ the e<uivalent of raising sales by more than ,5J. That being so every effort in the direction of reducing material cost$ including cost of carrying inventories$ is well worthwhile. eeing the progress of this organi=ation one can say that the procedures and inventory control system used for material management may be satisfactory. Aowever$ material manager cannot sit idle in spite of satisfactory results since there is tremendous scope for improvement in such a comple) function. (n idle system for an organi=ation may not apply to another due to different operating environment$ product$ place etc.

7,

CONCLUSION
In the light of the increasing pressure from competitors and industry slowdown$ PI# had no option but to improve its operational efficiencies. PI# benefited in many ways from the revamped !' practices. Transit time was reduced to 2 days and goods were handled only . times. (s against a first <uarter working capital of &s .55 million for ,554$ the figure was only &s ,55 million in ,5+5. ignificantly$ supply chain costs were reduced by ,0J in ,5+5. ( majority of these savings were due to the savings in transportation and warehousing. PI# could reduce warehousing costs because of the direct dispatch model$ in which there were no grouping centers. >y reducing supply chain costs$ inventory costs and by negotiating favorable credit terms$ PI# was able to reduce its working capital re<uirements$ improve cash flows and reduce the interest burden. This system also improved the availability of goods to the market$ which reduced the lead*time from order booking by the trade partner to the delivery of goods. Beeping pace with the modern times$ the company has fully automated its inventory control system using state of the art computer system and data base management software packages. !ertain areas of recommendations are as underC +. In order to prevent stock outs$ certain minimum reorder levels should be fi)ed for all items. ,. The (>! classification of inventory should be reviewed periodically to keep pace with the fre<uent changing electronic market. /. The selective control should be e)ercised in procurement of stores according to the (>! classification of stores with the view to reduce the inventory of class ( while increasing of class ! items. This will reduce inventory carrying and ordering cost. 1. Investigation and analysis of e)isting inventory control system has lead to the conclusion that material re<uirement planning system be introduced in the firm for improved control of inventories.

7/

6ollowing specific recommendations regarding various system parameters are being made at the culmination of the studiesC +. Planning hori=on of / months will be most appropriate for the firm. Tentative portion of planning hori=on will be in addition to it$ which can be for another 4 months. ,. /. ( bucket si=e of one week is most practicable. 3eekly cycle of re*planning will be more suitable.

71

SUMMARY O5 THE PROJECT REPORT

3ith revenues of &s +0.0. billion for ,554*+5$ Philips India #td (PI#) had established itself as a leading manufacturer of consumer electronics and electrical goods in India. ( subsidiary of the Aolland*based Philips D?$ PI# has dominated the Indian consumer electronics and lighting industry for more than si) decades. PI#$ with a product portfolio of audio systems$ color televisions (!T?s)$ loudspeakers$ printed circuit boards$ various kinds of lamps$ electronic components and electro*medical apparatus$ had ac<uired considerable popularity and loyalty among Indian customers. PI# was established as Philips :lectricals !o. (India) #td. in +4/5 by Philips D? as a wholly*owned subsidiary. The company9s name was changed to PI# in eptember +4.0 and it was converted into a public limited company in -ctober +4.2. (fter being initially involved only in trading$ PI# set up manufacturing facilities in several product lines. PI# commenced lamp manufacturing in +4/7 in Bolkata and followed it up by establishing a radio factory in +417. It set up an electronics components unit at #oni$ near Pune$ 'aharashtra in +4.4. It began producing electronic measuring e<uipments at the Balwa factory in 'aharashtra in +40/. The company subse<uently ventured into telecommunication e<uipment manufacturing at a unit in Bolkata. "uring the +475s$ 6oreign :)change &egulation (ct (6:&() regulations+ forced PI# to bring down the foreign share holding to 15J. Philips D? directed PI# to change its name to Peico :lectronics @ :lectricals (Peico). Aowever$ Peico was allowed to sell its products under the IPhilips9 brand. In 'ay +47,$ Peico ac<uired the Bolkata*based :lectric #ight 'anufacturing Industries (:#'I) and made it a +55J subsidiary. In +477*74$ Peico recorded its first ever pre*ta) loss of &s +25 million$ largely due to poor management and overstaffing. Aowever$ cost cutting$ organi=ational restructuring and sale of real estate enabled it to post profits in the ne)t two years. In +44/$ its foreign e<uity stake was raised to .+J and the name was changed back to PI#. >y the late +445s$ PI# had five manufacturing units situated in alt #ake$ Bolkata (for !T?s)$ Pimpri (near Pune for audio products and industrial lighting)$ Balwa (near Thane for electrical lighting)$ Bota (in &ajasthan for picture tubes) and #oni (in 'aharashtra for electronic components). 7.

In +442$ Philips D? restructured its business portfolios and processes worldwide. This had wideranging conse<uences for PI#9s operations. The company e)amined the long*term viability and profitability of electronic weighing$ plastic and metal ware businesses and critically reviewed manufacturing processes of the consumer electronics business$ specifically the T? business$ to cut costs and improve fle)ibility. 'easures to this effect were put in place. In +447$ Philips D? increased its holding in its subsidiary Punjab (nand #amp Industries (P(#I) from /4.40J to .+J. 3ith PI# holding around ,7.7J in P(#I9s e)panded capital$ the joint holding of the Philips group in the company increased to 24.7J.

70

ANNEFURE
IA. P-o6osa: T1,:. oD ,2. P-oj.=, OPERATIONAL RESTRUCTURING THE PHILIPS INDIA 'AY N..d 5o- ,2. To61= :)plore the benefits reaped by the company as a result on the value chain efficiencies through !' and the contribution of !' to the company9s survival and competitive advantage. "iscusses the concept of supply chain management and the benefits of revamping the !' practices. M.,2odo:o7; and 6-o=.d9-. oD <o-3 The information upon which this report is based has been derived from wide range of both primary and secondary sources. The facts and figures originate from e)tensive desk research of an array of publicly available information. 'ost of the data is collected from the field survey carried in the parts of some other areas of "elhi (D!&). STATISTICAL TECHNIIUES TO BE USED %I5 ANY& This study will go in along way in helping the company in choosing the right strategy and taking the right decision. This study is restricted to parts of "elhi @ D!& which may not seem to present the general picture of the product. (ll the retailers and farmers were not covered because of the constraints of time. The sample frame or si=e for evaluating may not completely reflect the market. The respondents may due to one or other reason$ conceal the true facts$ thus giving erroneous figures. ome respondents replied half*heartedly.

72

CHAPTERISATION S.No. !. 2. H. @. #. $. . /. ". !0. !!. To61= Introduction -bjectives and cope !ompany Profile #imitations Theoretical Perspective 'ethodology Procedure of 3ork (nalysis of "ata 6indings Inferences and &ecommendations !onclusion ummary of the Project &eport Ann.49-. i. Proposal ii. &eferences

A.

77

GUIDELS RESUME
Dame (ddress C C M-. A>21s2.3 Yada? A. Do.. (rjun Dagar Dear " 'arket$ Dew "elhi*++55,4 Nualification Qob Profile -rgani=ation "esignation 3ork :)perience C C C C >>( @ '>(. ((ccumulated :)perience*. year9s . months) Philips India. Dew "elhi. 6inance 'anager$ Take responsibility for overall management and delivery of the business plan. In conjunction with the governing body$ draft$ monitor and assess the business and development plan (ssess options for co*ordinating the activities$ procedures and systems so as to promote common policies and practices. 'anage the development of the service to ensure that the promotion of e<uality of opportunity and challenging discrimination are central to strategic development$ management and its services to clients. 'aintain day*to*day financial control of the service within budget heads agreed by the trustee board. :nsure that all finances are properly administered and monitored$ Including credit control. upport the Aonorary Treasurer in the provision of information for the estimates. (dvise on the proper allocation of resources. :nsure that appropriate financial regulations and controls are in place and in use at all times. C Planning and development

74

Prepare and review detailed budgets for approval by the governing body in conjunction with the Aonorary Treasurer and/or appropriate ub*!ommittee. 'ake regular reports to the governing body on income$ e)penditure and any variations from budgets. :nsure that all financial reporting obligations are met in relation to submissions for funding$ for grant aid$ for contracts and any other initiatives. (ct as che<ue signatory for and authorise e)penditure up to limits as agreed by the governing body

%M-. A>21s2.3 Yada?&

45

AI. R.D.-.n=.s Philips India$ trategic 'anagement !ase tudies -n Indian !ompanies * ?olume III$ I!6(I$ Qanuary ,555. Bapoor Deha$ Philips will be a lot more aggressive$ >usiness #ine Dovember 57$ ,55+. 'ent=er T. Qohn$ upply !hain 'anagement$ &esponse >ooks$ ,55+. Philips net loss at &s ,+.+. crore$ The Tribune$ 6ebruary +/$ ,55,. 'ehta 'ona$ Philips9 upply !hain InitiativesC Towards ( ound trategy$ 6inancial :)press$ (pril 0$ ,55,. urendar T. The :)it -ption$ >usinessworld$ 'ay ,5$ ,55,. &amchandran B$ The Power of an :fficient upply !hain$ www.ima*india.com !-& !an Aelp (naly=e Mour upply*!hain -peration$ www.isr.umd.edu www.indiainfoline.com www.philips.co.in www.l<.ca #ogistic support and 'aterial 'anagement. Inventory 'anagement in India$ by &. . !hadha. Inventory control techni<ues by (A #ines and Qason >eart. Inventory control theory and practice by 'artin B tarr "aniel 3 'iller. The theory of Inventory 'anagement by Thomson 3hiteline. Industrial :ngineering and 'anagement by -.P. Bhanna.

4+

8upta$ ".&. @ &ajpur &.B. (+47,)$ E Purchasing and tore BeepingF$ Tata 'c8raw Aill Publishing !o. #td.$ D. "elhi.

'onks$ 8. Qoseph (+47.)$ E-perations 'anagement Theory and ProblemsF$ 'c8raw Aill >ook !ompany$ Dew Mork.

andilya '. . @ 8opala Brishnan P. (+47+)$ EInventory 'anagementC Te)t and !asesF$ 'ac 'illan India #td. "elhi. wami$ A.&. (+472)$ E 'aterials 'anagement In Public %ndertakingF$ +472 $ (shish

Publishing Aouse$ D. "elhi.

4,