Total Cost Management in Supply Chain

.T.A.B.Barathi Vice President (Supply chain) Wheels India Ltd.

CII_ Cos t Management Sem inar 14thJune11 CII_Cost Managem ent Seminar_14thJune11

Total Cost Management in Supply Chain

A simple arithmetic : Price of a ton of steel == Annual Procurement Qty . >>>> approx. Rs.40000 .00/2,50,000 mt

Total Cost Management in Supply Chain

Commodity Price trends : Aluminum _ LME basis

Commodity Price trends : Cold Rolled Steel _ Indian Origin

Total Spend on Steel procured >>> Rs.1000 Crores. /-

Savings to the organization >>> Rs. 25 lacs Increase the reduction to rs.100/- mt - Price at Rs.39900 /- mt Savings to the organization >>> Rs. 2.5 crores. Almost about 8% of PBT of an engineering industry CII_Cost Managem ent
Seminar_14thJune11

Commodity Price trends : Zinc LME basis

CII_Cost Managem ent Seminar_14thJune11

Total Cost Management in Supply Chain

Total Cost Management in Supply Chain

Strategy
1.Cost Elimination
Commodity Price trends : PP - Plastic

2.Cost Reduction 3.Cost Replacement- Alternate product

CII_Cost Managem ent Seminar_14thJune11

CII_Cost Managem ent Seminar_14thJune11

10 Cardinal Steps of Cost reduction

1. Analyze Supply and Demand 2. Shop Smart at right time 3. Minimize Transactional Costs 4. Manage and Optimize Your Inventory

Strategic Sourcing - A way Forward

Assess the Current Spend Implement

Assess the supply Market Decide Sourcing Strategy Identify Suitable Suppliers

5. Reduce Lead Times 6. Utilize Bulk Discounts 7. Reduce Shipping Charges 8.Collaborate with Suppliers 9.Ask for Employee Suggestions 10. Eliminate Paper Flow
CII_Cost Managem ent Seminar_14thJune11

& Evaluate Negotiate & Finalize

New Initiatives in SCM

Global Networking

New Initiatives in SCM

Vendor Managed Inventory ( VMI ) :
Module Sourcing Lean Supply Chain An Inventory Optimizing tool.

VMI

Logistics
Consolidation e -Sourcing

The manufacturer (buyer) has access to Vendors Stock data. Buyer manages the pattern of replenishment ordering. Min & Maximum level of consumption is agreed , thereby replenishment levels are maintained. The vendor holds the stock as his Inventory . Critical and Long lead time items are managed under VMI.

Other tool of VMI : ( Consignment inventory ) EVI (early vendor Involvement)

Consolidation

approach

Supplier places Inventory at Customers location . Retains the ownership of Inventory Payment is not made until the items are actually sold/ consumed.

Concept of Group Buy - Project planning

Lead Role will be taken by the Group Company which has higher spend in the Category.

Concept of Group Buy - Project evaluation

Detailed discussions will be held with individual suppliers by a panel representing members from each company jointly and look for opportunity to understand each others expectations and optimize the TCO.

Data on the spend pattern is collated from all Group companies. The panel will closely examine the offers and the outcome of the discussions with each supplier are narrowed down and identify the most prospective supplier for the subject commodity All the offers, received from the suppliers, will be carefully evaluated based on the TCO concept (Total cost of ownership and not on the unit rate only).

For each Category of items and total volume, competitive offer will be invited from potential suppliers.

Aggregation Concept A TVS experience

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Aggregation Concept A TVS experience

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Total Cost Management in Supply Chain

Remember Every penny spent

is an Opportunity to SAVE
CII_Cost Managem ent Seminar_14thJune11