Operational Restructuring: The Philips India Way
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Case Details:
Case Code : OPER019
Case Length : 11 Pages
Period : 1997 - 2002
Organization : Philips India
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Consumer Electronics
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Restructuring the Supply Chain
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PIL scrutinized the best SCM practices across the world and carefully studied
the SCM models of successful companies such as Dell Computers. The company
decided to use the Supply Chain Operation Reference (SCOR) SCM model for
restructuring its supply chain. According to the model, a supply chain is broken
down into four different processes - planning, sourcing, making and delivering
(Refer Exhibit I for a brief note on SCM and the SCOR model). These four
processes are supported by a set of performance metrics, such as customer
service, costs, flexibility, and assets. Using this framework, PIL worked out a
mechanism to assess itself on a 'process map,' which it referred to as the 'maturity grid' (Refer Figure I).
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As per this grid, there are four distinct stages of maturity during the life of
an organization:
• The informal organization - Focuses on procedures and quality systems.
Here, the supply chain is not explicitly broken down (Step 1, 2, 3).
• The functional organization - Here, the various functions (such as
purchasing, warehousing, marketing and manufacturing) are tied together.
However, no person is responsible for the goods' flow (Steps 4, 5, 6).
• The integrated organization - In this case, the entire source-make-deliver
chain is integrated either in teams or under the supply chain manager of the
organization, who is responsible for the flow of goods (Steps 7, 8, 9).
• The extended 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
(Step 10)...
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Reaping the Benefits
PIL benefited in many ways from the revamped SCM practices. Transit time
was reduced to 7 days and goods were handled only 5 times. As against a
first quarter working capital of Rs 500 million for 2000, the figure was
only Rs 200 million in 2001. Significantly, supply chain costs were
reduced by 26% in 2001. A majority of these savings were due to the
savings in transportation and warehousing. PIL could reduce warehousing
costs because of the direct dispatch model, in which there were no
grouping centers... |
Exhibits
Exhibit I: About SCM and SCOR
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