CEAT Redesigning Supply Chain System CEAT top management, together with McKinsey, undertook a complete redesigning of their supply chain It was advised first to make use of IT in CEAT for reducing costs and increasing utilization of assets. Second, supply chain management (SCM) should come out of the marketing shadow and take its place as a strategic change initiator and an independent function. The key factors responsible for this change were: • Placing logistics division as the link between manufacturing and marketing, Continuous flow of information for reducing delays and ensuring 100 per cent reliability: Availability of right product at the right place at the right time and quantity: Implementation of SCM down the line for providing effective services, Understanding the markets and customers (3000 dealers, Original Equipment Manufactures (OEMs) and. exports): Detailed planning of the distribution system from multiple factories and warehouses; Identifying factors for correction through stringent measurement tools.CEAT designed a measurement system (for dealers and depots) according to which if 100 units were sold in a month, the minimum stock to be held would be 4 units a day. If, at any time in any of the selling locations, the stock falls below 4 units a day, it would be captured as a sales lost. To begin with the organization had a 22 per cent sales lost' percentage due to stock outs. The present aim is to reach 5 per cent of sales Ist Days of finished goods inventory, originally at 52 days are being brought down to a desired level of 25 days. In each of the cases, a very simple measurement tool-CLIP (committed line item production) - was introduced. A monitoring system also has the advantage of making the transporter more accountable, particularly at the time of negotiating a yearly contract. All information regarding transporter's performance is shared with him at CEAT The other initiatives included putting up of a 'pull system, production planning based on sales requirements from the selling locations, inventory norms based on demand variations, transit time and load frequency, developing an IT system to record and send sales information Stack Keeping Unit-wise (SKU) daily to the Carrying and Forwarding Agents (CFA), District Distribution Centers (DDC), and the factory. Replenishment of daily based transit time monitoring system was also put in place Thus, the revived logistice supply chain system was created to provide ready information to enable the dealers to know when they would get the stock As a result finished goods inventory reduced from 52 to 25 day from 22 to 5 per cent, sales loss oppurtunity reduced from 22 to 5 per cent, factory compliance reduced < 25 % from > 75%, dispatch time reduced from (up to) seven days to <24 hours, transit delay reduced from 75 to 5 per cent and sales skew reduced from 75 per cent (week 4) to 42 per cent (week 4). The final learning were, use technology for speed in information processing and dissemination, make your operations flexible and reliable, channel your resources for maximum leverage serve the end user, attack the inventories as Non Performing Assets (NPAS) and apply tactical solutions to changing situations.
1. What measures were initiated by the CEAT to overcome the supply chain problems?
2. Highlight the manner in which CEAT has effectively brought down inventory levels and lost sales ?
