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Decoding Demand

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SAP joined hands with Manufacturing Today to bring together distinguished auto component manufacturers to deliberate on an effective data-driven decision-making process.

by Shristi Nangalia

Despite increased pressures for companies to reduce cost while still expanding core competencies and marketing, a number of manufacturers continue to make a name for themselves in the industry. They have expanded their offerings to meet market demands, becoming even more versatile with the help of technology and evolution. Meanwhile, most organisations lack a strategic decision-making support system. While a comprehensive analytics platform can drive multiple decision-making points, the most critical amongst them is to enable Effective Demand Planning & Forecasting.

To discuss this further and throw light on demand forecasting, working capital optimisation, and after-market stock movement, among other things, SAP and Manufacturing Today recently organised roundtable meetings in both Pune and Gurugram. A select group of leaders and decision makers from within the auto components industry were invited for a hearty exchange of knowledge, experiences and ideas to address this all important subject.

Pune Edition

The roundtable was hosted at the Conrad, Pune, on the April 21, 2017. Abhay Soman, VP, Anand Automotive; Abhey Kalia, director, operations & business unit manager, bearings, KSPG Automotive India; Milind Mhaiskar, logistics, MAHLE Behr India; Satish Joshi, director, Micro Supreme Auto Industries India; Suhas Navare, GM – PPC, Micro Supreme Auto Industries India; Priya Ranjan, AVP (legal) & company secretary, RSB Transmissions India; and Parikshit Kulkarni, plant head, Subros; actively participated in the conversation.

Manish Kulkarni, director, strategy & business development, BDB India, the moderator for the evening, commenced the discussion by posing the first question. In a world of constantly changing manufacturing and production models, it becomes a challenge to maintain and manage the inventory. Manish Kulkarni was eager to know about the kind of inventory planning that manufacturers do and how the production is managed in their organisation.

Normally, companies schedule their production according to customer demands. But, Soman manages the inventory through the Heijunka production system in which the production level remains the same irrespective of the customer demand. “Our aim is to level the production at least for a few days, say three to four days. There is no change in the production for these days even if the customer schedules change. The stock dispatches through our finished goods inventory as per the fixed schedule of our production. In the next cycle, we change our production schedule, if needed. Most of our group companies have and are trying to implement scheduling models through SAP. That is how we are benefitted and our inventory runs fairly well,” declared Soman.

Kalia gave an overview of their product by stating, “My product is three-way backward integrated. We manufacture the bearings, the raw material and materials in terms of the powder and alloys. The total lead time starting from the strip manufacturing to powder & alloy manufacturing, upto cladding, strip manufacturing, and finally, bearing manufacturing, is quite a long process. So, we can see the big change or big variety of customers we have, as the perspective of the application denotes the OE segment.”

For Mhaiskar, the transactional pattern of what is consumed by the customer is the key to creating inventory. “How we create the inventory is based on the transactional pattern. Whatever our customer consumes is being produced in the factory and the same amount will be produced by a supplier. Sometimes, the complexity arises when we are serving almost 39 OEMs and their spare-part market with their regular demand. We have almost 3,000 varieties of modules to supply to OEMs, through which complexity is not possible with the inventory. So, we monitor the production and dispatch of stock in time. Based on demand forecasting, we channel our production. Shutdown forecast and mid-term or long-term forecast is considered, and the data of consumption is achieved. This is where the qualitative analysis comes into the picture. We capture the fluctuation and its variations, and derive the percentage of fluctuation. Then, we create the inventory between procurement and production, and between production and customer so that we can secure the production plan,” he says.

Joshi adds, “We plan our inventory around three weeks in advance. Ideally, we keep at least 10% inventory at our end. If there is a fluctuation in consumption, we change our line accordingly.”

Ranjan explained the structure of their inventory and how they manage it too: “We have a condition in the purchase agreement that we have to supply the material to USA in their warehouse and they will pay us only when they lift it from that place. We have a very high inventory because of these situations. We are trying to streamline the process so that we can be Just-In-Time (JIT) when the requirement is there.”

At Subros, they base inventory calculation on the percentage of goods in each of the products. “We have targets of three days for local inventory, seven days for material from the NCR region and 25 days for imported material. Our marketing person inputs the sales forecasting into the SAP-based application. That data gets converted into vendor schedules, which is one month fixed plus five months forecasted. This is religiously followed only in the imports segment. We have to have a three to five months window, which is very fixed in nature. But in case of dealing with local materials, we see a lot of alterations. Sometimes, our customers change the schedules themselves. They do not go by the forecasted deal that was frozen at the time of the business deal. In case of local supplies, we see a lot of challenges. There are few times when we go for premium modes of transports. There are some times when we end up having high inventory of certain material and there are times when few of our vendors get stuck with lot of high inventory at their end. But regarding customer-to-customer, we face different levels of uncertainties, and we are trying to overcome that,” Parikshit Kulkarni finished.

Pratul Chandra, director, analytics, SAP, then shared a brief perspective on trends in auto component manufacturing, both in India and globally, along with recommended best practices for enhanced forecasting accuracy and optimised inventory leveraging simple analytics applications.

Bibhor Srivastava, group publishing director, ITP Publishing India, thanked everyone for their presence and participation. The evening ended with cocktails and dinner.

Gurugram Edition
The Gurugram version of the roundtable took place at the Trident, Gurugram on April 26, 2017. Anand Maithani, head, supply chain management, Apollo Tyres; Swapan Gayen, chief GM, IT, Bharat Seats; Sanat Sahu, director, plant operations, Hella India Automotive; Nirmal Sharma, GM, logistics, Hella India Automotive; V Ranganathan Iyer, CIO, JBM Group; BB Gupta, president (corporate sourcing, HR & talent strategy), JBM Group; Dines Dave, senior advisor, Gujarat team project, Maruti Suzuki India; Anuragam Vatsa, plant head, RSB Transmissions (I); Vijay Raman, group chief materials officer, Spark Minda; Sunil Shrivastava, VP, corporate materials, UNO Minda; and Satish Sharma, plant head, Victora Auto Parts; sat together to address the topic.

The roundtable was moderated by Kavan Mukhtyar, partner, managing consulting, PwC. “There are several solutions that are available in the marketplace, but what is more important is how we change the culture and the process within the organisation so that we look at demand forecasting and planning as a very crucial piece of the whole effort to optimise our profitability,” said Mukhtyar. He was interested in knowing about why it is so challenging for OEMs in India to have a credible and consistent demand forecast and what would be the best practices in this regard.

Dave and his company have got a simple, yet restricted system. “We forecast twice a year, which makes it a fairly governed supply. Moreover, on the fifth of every month, we have our monthly forecast and tentative projection for the next month ready. Our DI system – the Delivery Instruction system – issues the inventory within two hours. So, we do not have to keep a heavy inventory for more than eight hours. We also allow a reasonable timeframe for timely production,” Dave shared. “However, at the same time, when we talk of Gurugram, there are many traffic restrictions during day time. One cannot have a truck coming to your factory due to certain restricted hours of trade and transport. These are some limitations which force us and our supplier to have an inventory. This inventory is to back us up if there is a problem in one part of the process. The whole system should not get affected due to lack of stock. That is where we all need to focus,” he added.

“There are two things that we believe in when it comes to inventory management – how frequently you plan and to what level of detail you work on your basics. We also look at differentiated supply chains. For us, the OEMs give the biggest share of business, but not revenue. We are very big in the aftermarket and we have completely different needs. So, if we were to look at the OEM business, the requirement is dependant on demand coming out of an MRP run and it is relatively stable,” added Maithani.

Gupta feels that it is a very complex subject and there is no perfect solution. “We have customers like Maruti with forecasted demand, where plants run very efficiently and they do a good job on inventory as well. The forecast is done every day in the morning before the goods are lifted. We are still introducing technology. But more than technology, it is more about the manual intervention and manual forecast that comes into play.” he suggested.

For Vatsa, given his experience of the open market, there is no particular pattern for forecasting as he feels that the market is very volatile. “As manufacturers, we need to understand the operations, the positives and weaknesses in the process. Only then can we decide and implement,” he believes.

“With respect to Maruti Suzuki, other than some seasonal impacts, there is very little fluctuation of demand. A stable demand makes demand planning an easy process for us,” puts forth Gayen.

Satish Sharma feels that the key is to learn from customer requirements. “We are working with Maruti Suzuki India. If Maruti Suzuki cannot keep material for more than two hours and the production is being carried out on a regular basis, why are we keeping inventory for seven or eight days? It is basically about learning from our customers. What our customer requires, he provides to our plant schedules; be it on a monthly, weekly or daily basis. We are working on inventory levels similar to what our customer schedules. If we are correlated with operations, we have a maximum of three to four days inventory level and two days for other BOP consumers, because we have a lot of pressures from the higher management,” he confesses.
“Sometimes, when you obtain the components, you have an inventory up for one day or few hours. Some components will have an inventory of 20 or 30 days. There is always a mix of components used in the making of a product. So practically, it is always handled according to the nature of the component,” offers Sahu.

Adding some missing leads, Iyer says, “One should start taking decisions after understanding and monitoring the facts, so that it subsequently percolates down to the lowest level. We are talking about making many things happen as a whole. If we start using the exceptions from the systems, it will help us in understanding the situation and subsequently act on it. Information is there, but it is about how we are going to use it.”

“We work as computers in the market, while serving the OEMs or the tier-1 firms. Instead of individually getting a bulk material from an overseas supplier, we can pool and distribute within us. This can be a solution but can be challenging because of competition,” voices Nirmal Kishore Sharma.

Talking about the proper use of information, Sunil Srivastava informs, “I will say that managing the inventory is basically a philosophy. All the other things are tools to achieve that, but the commitment towards the company philosophy and towards the inventory is important. Around 15 years back, we had started our journey with manufacturing excellence and best practices. We used the Toyota production system, wherein we realised that the inventory was a major area of improvement. Everything is based on inventory improvement. Once you keep on improving your inventory or your turnover ratio, you have to do a lot of activities to reduce inventory in the system. We have used inventory as a tool of reaching excellence. We are launching our supplier portal, so that they have the correct information at the right time because we have observed a few times that inventories are there, but the goods are not used. We are continuously working on them.”

Finally, Raman offers his views, saying, “At the end of the day, the customer is always right. So from our perspective, we have to ensure that we meet the customer’s demand. The demand may rise or fall at the last moment. We have got to be prepared for everything and keep up the inventory standards.”

Overall, the round table addressed issues and pain points that the manufacturing industry faces in relation to an effective demand planning and forecasting system, and the ways to overcome the same. The eminent attendees disclosed some of their best practices and experiences in this regard, without any inhibitions. Concluding the discussion on a high note, Bibhor Srivastava thanked the panellists for contributing to a stellar evening. The successful round table discussion was followed by cocktails and dinner.

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