APPLYING THEORY OF CONSTRAINTS: REPLENISHMENT MODEL FOR SELLING BRANDED RE-BARS IN INDIA Presentation at 5 th National Quality Conclave 19 th February, 2010 Presenter: Rupam Bhaduri (Chief TQM) Email-ID: rupam.bhaduri@tatasteel.com 1
India Infrastructure INDIA Education Enigma Linguistic • Jets to Bullock Carts • Over a billion people • 2 nd largest Newspaper market in the world • 18 official languages LAND OF CONTRASTS…. • Modern Ports to Village bamboo quay’s • 28 states and 5 union territories • 1,652 dialects out of which 325 spoken • More than 2 million graduates every year • Worlds Largest Railway Network to Hand pulled • 6,38,365 villages • Yet India accounts for 34% of the worlds illiterates rickshaws/carts • 3.28 Million square kms. Therefore understanding and meeting the need of the consumer is a challenge for any company in 2 India
TATA STEEL INDIA LONG PRODUCT OPERATIONS RE-BAR FOR PROJECTS 6.5 MTPA 31% WIRE RODS 20% 3.5 18% FLAT SEMIS 31% 3 LONG RE-BAR FOR RETAIL 15 stockyards Jamshedpur 31 Distributors 21 Sales offices 1700 Retailers ~ 2,00,000 Individual House Builders / year 3
TATA TISCON HAS SHAPED THE RETAIL MARKET OF RE- BARS IN INDIA Market Share of 10% Competitive Environment 800 12 10 '000 Tonnes M Share 9 • Fragmented Un-organized 666 600 546 local players spread across 8 8 441 7 7 7 the country 5 400 6 303 263 259 • Quickly copy the market 4 200 153 offerings of Tata Tiscon 200 • Promise a low lead time since 0 0 they serve a small local area FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY' 09 18-20% premium over Regional Players Rs/Ton Tata Tiscon Brand Objectives 6250 5250 4600 4480 3500 5250 • Continuously offer new 5000 4000 products and services, which 3000 2000 are the first of its kind in India FY05 FY06 FY07 FY08 FY09 • Pan India presence 4 Target Actual
PROBLEM IDENTIFICATION - 2006 Voice of Customer strengthened by Customer Satisfaction survey & QFD Retail shops – We lose sales due to stock outs because consumers buy the brand whose complete section-mix is available off-the-shelf. COUNTERMEASURE Distributors & Retailers would keep more stocks Situation in 2006 Other Related issues Parameter Tata Steel Distributor Retailor • Additional Space for storage • De-gradation of material Inventory 15 20 40 (Days) • Pilferage % Stock-outs 10-20% 10-30% 5
UNDERSTANDING THE ROOT CAUSE Task force formulation with cross- functional members Conflict 1 Capacity Utilization Operational Flexibility Produce more to reduce fixed cost • Longer campaigns • Do thicker sections to increase productivity Forecast driven Supply Chain 2 Production Plan Monthly Sales Forecast Distributor Forecast Sales Production Offices / Mills against Stockyards Forecast Distributor Monthly Supply Dispatch against Daily sales Forecast • Against Forecast 6 • Against Order
RE-DESIGNING THE SUPPLY CHAIN BM: Buffer Management Based on Daily consumption Distributor sales Dealer Daily Replenishment time 1-2 dys - sales Customers Stockyards Plant Plant Ware house BM BM BM BM Distributor & Dealers Policy KPM Means KPM Infrastructure Strategy 1.0 Ensure Stock outs 1.1 Production Due Date 1.3 Create visibility Availability of all and supply as Performance of buffer stock & SKU’s at all 1700 per Buffer consumption at all Retail outlets across Status points through IT the country at all the enablement 1.2 Roll out Task time Replenishment Achieving Offers for each Project Distributor & 7 Retailer
1.1 PRODUCTION & SUPPLY AS PER BUFFER SYSTEM Buffer Penetration at Plant Ware House Month Sept’09 1 2 3 4 5 6 7 Despatch 10mm to Section Mill Chennai 10mm NBM 72% 43% 14% -25% -48% -48% -35% 12mm NBM 22% 35% 38% 50% 55% 54% 45% 16mm NBM 21% 25% 29% 41% 47% 50% 72% Despatch 12mm to to 10mm Section change Faridabad Section change Regional 10mm 12mm 16mm Stockyard to 16mm Delhi Chennai Kolkata Faridabad Ahmedabad Buffer Status at Regional Ware House Mill NBM 8 Similarly to Distributors & Retailers
1.2 ROLL OUT OF REPLENISHMENT OFFER TO DISTRIBUTORS & RETAILERS Changing role of the Distributors & Retailers FROM TO • Place orders & Follow up • Work Collaboratively with for supplies Tata Steel to • Track Inventories – Focus on consumer sales • Monitor ROI and Working Capital – Build Brand promise Key Enablers � Education and training for the sales force, Distributors and Retailers � Distributor & Retailer has to provide consumption data daily for Tata Steel to replenish accordingly. This was not possible without IT enablement of data flowing all across the country. 9
1.3 CREATE VISIBILITY OF BUFFER STOCK & CONSUMPTION AT ALL POINTS THRU ‘IT’ ENABLEMENT Challenges Faced Countermeasures • Spread to Remote locations • Mobile based SMS option for the where Connectivity is a concern retailers • Retailers and Distributors were • In-house developed accounting package uneducated “Ex-package” for the distributors On-line reports helping in Daily Management & War Room Meetings 1 2 Data Sending compliance of distributors Data Sending compliance of Retailers % Daily Compliance 100% 100% % Daily Compliance 80% 100% 75% 100% 75% 50% 75% 95% 95% 30% 30% 80% 50% 65% 50% 25% 0% 50% 25% 0% 0% FY07 FY08 FY09 FY05 FY06 FY07 FY08 FY09 Target Actual Target Actual 10
DAILY MANAGEMENT PRACTICES CONTINUED 3 Measuring uniformity of sales in a month Pre- TOC Post- TOC Within 2 months of Month after Month Within 6 months of Roll out roll out 4 Some other benefits • Review frequency could now be crashed from monthly to Daily – War rooms across various function was a regular activity • Greater transparency on which link was weakening and PDCA actions required • Performance measures like Campaign change time, Lifting time of Distributors / Retailers was now possible online. 11
Consumer Sales Dealer Level Distributor Level TOC DAILy REPORT Upto 07.12.2009 Upto 07.12.2009 upto 07.12.2009 Cons. Region DISTRIBUTOR Grade OSP Sales OSP% Buffer Stock Sales OSP% Buffer Stock Sales East Deson Mrktg. Fe500 1406 1656 1509 107% 782 408 1602 114% 472 290 East G L Kundu Fe500 969 1064 1119 115% 584 404 1072 111% 390 251 East Nandan Saha Fe500 1163 1237 865 74% 836 650 1197 103% 507 596 1454 1640 103% 1050 112% 555 East Paul & Co. Fe500 1499 799 1626 209 East R G Steel & Co. Fe500 1647 1632 1582 96% 1062 645 1920 117% 579 583 East Shri Ram Multicom Fe500 1599 1512 1238 77% 848 563 1611 101% 573 404 East Siliguri Builders Fe500 1357 1177 1418 104% 950 591 1332 98% 598 140 East OSIC Fe500 3296 2952 3033 92% 1184 522 3342 101% 966 452 2521 2017 75% 1748 89% 887 East NEML SD 1883 1443 2245 1616 East Pasa Sales Fe500 2414 2431 1830 76% 1093 772 2628 109% 853 128 East Shri Ram Sales Fe500 1163 1299.5 1275 110% 897 496 1400 120% 415 99 East BMW Ventures Fe500 2617 3376 3100 118% 1656 966 3561 136% 1058 389 East Pasa Sales Fe500 485 818 531 109% 240 162 758 156% 167 18 East TOTAL 22,091 22,810 20,882 95% 12,930 8421 24,294 110% 8,020 5175 North Delhi Trading Co. Fe415 3683 2788 2,458 67% 1720 1293 3,030 82% 1,118 618 1647 1043 1,095 66% 420 1,508 92% 639 North Neelkanth Alloys Fe415 223 683 North Northern Steels Fe415 4363 4357 4,033 92% 980 463 4,650 107% 1,485 582 North Empire Steels-K Fe415 194 112 83 43% 97 76 107 55% 108 North Hindustan Sales Fe415 581 601 271 47% 291 274 499 86% 217 169 North MRH Associates Fe415 1938 1675 1,765 91% 1020 1117 1,806 93% 773 354 3877 3550 3,810 98% 1712 3,800 98% 1,299 North KLPK Fe500 1488 897 North TOTAL 16,283 14,126 13,515 83% 6,240 4934 15,400 95% 5,639 3303 South Samrat Corp. Fe500 3552 2903 1,516 43% 2053 1092 2,597 73% 1,575 941 South V N C Steel Fe500 5731 4810 4,576 80% 2548 1193 4,595 80% 1,857 1569 South Prabhu Fe500 2702 1716 1581 59% 1351 552 1848 68% 728 702 1384 661 493 36% 740 1,210 87% 642 South G K STEEL Fe500 311 575 South Indian Meneral Fe500 1204 1148 1,455 121% 700 552 1,508 125% 606 848 South TOTAL 14,573 11,236 9,621 66% 7,392 3700 11,758 81% 5,408 4635 West Sachi Agencies SD 1744 1408 1323 76% 533 447 1706 98% 694 537 West SKM Fe500 1212 924 1092 90% 539 217 1212 100% 512 323 921 806 47% 460 79% 398 West Dharm CHAND Fe500 430 325 732 381 West Avinash Ent. Fe500 1260 737 706 56% 677 366 997 79% 503 306 3780 2022 45% 1860 53% 1,612 West Indu Corporation Fe500 1711 696 1996 1266 West Pasa Associates Fe500 678 767 765 113% 339 200 572 84% 547 514 12 West TOTAL 9,595 6,663 6,027 63% 4,408 2251 7,215 75% 4,266 3327 TOC TOTAL 62,542 54,835 50,045 80% 30,970 19306 58,667 94% 23,333 16440
EFFECTS OF THE INITIATIVE: FY06-FY09 Good Stock-outs at Retail Shops 50% Target Actual 40% 30% 30% % Sto cko uts 30% 20% 20% 10% 15% 6% 10% 5% 8% 0% FY05 FY06 FY07 FY08 FY09 Good Good 13 Quick Recovery (within a month) after the financial crisis in Oct’09
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