Revamping the Supply Chain: The Ashok Leyland Way

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Just-In-Time (JIT)

AL focussed on a JIT approach for high value/high volume items and low cost logistics for low value high volume items. Project OSCARS brought about a few fundamental changes. The push system ("let us make all we can just in case we need it") which resulted in upto 45 days of inventories of components compared to between 3 and 5 days globally had given way to the pull system ("make what the customer needs, when he needs it"). Each stage produced only as much as the next stage needed. Thus, only when a new chassis was loaded did the request go out for the supply of an engine assembly, and so on, for the front and rear axle assembly lines, and for the components that went into them. This resulted in a savings of Rs 8.50 crore a year and a lean supply chain. To begin with, Project Oscars classified the main components used by the company into Categories 'A' (amounting to 75 per cent of the total cost of components), 'B' (18 per cent), and 'C' (7 per cent), with their suppliers also being classified accordingly. Then, AL devised different delivery systems for each category, aimed at cutting inventory-holdings.

The plant sent a J-I-T card, specifying the part number, quantity and the unloading location, through courier, fax or e-mail to the supplier who promptly dispatched the required consignment directly to the assembly line. But how did it guess AL's requirement? For that, Project OSCARS devised a funnel-planning system, covering 12 weeks of requirements. The immediate two weeks' plan was frozen and the next two weeks' semi frozen, the balance eight weeks' plan was tentative. Thus, the vendor already knew roughly when to expect the J-I-T card.

To reward the vendors for conforming to the schedule, Project OSCARS planned a reduction in their numbers to 200 over a 3-year time frame. Said S. Nagarajan, Executive Director, AL, "We are looking at giving a minimum business of Rs 1 crore to each supplier involved with us." AL also provided technological inputs for troubleshooting on the suppliers' shopfloors, so that they could cut their costs.

Oscars II

After revamping the inbound supply chain, AL went out to revamp the out-bound supply chain. The revamp of the out-bound supply chain (code named OSCARS II) had the twin objectives of improving customer satisfaction and reducing finished goods inventories, and reaching improved service levels with optimum pipeline inventory levels.

A customer survey and a study of benchmarks had come out with three major parameters for service level targets: order to delivery time, reliability of deliveries and availability of order status information. The customer could expect delivery in five days from the date of payment, for regular models. For multi-axled vehicles, the promised period was two to four weeks. The second promise was that the age of the vehicle when delivered would be a maximum of 90 days.

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