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Industries »Electronics, High Tech & Telecommunications
Electronics, High Tech & Telecommunications
This is a highly innovation-centric industry where the product lifecycles tend to be short. The focus of this industry is on products which deliver better performance, high speed communication and energy efficient products. Outsourcing of manufacturing to contract manufacturers or Electronic Manufacturing Services (EMS) has become an important part of the supply chain in the last two decades. Energy efficiency has become one of the important aspects due to the dangers of global warming. Also more and more companies globally are moving to a supply chain model which produces minimum waste and pollution.
Industry Characteristics:
Complex multi-tier supply chain network, consisting of raw material suppliers, manufacturers, co-packers, distribution centers, retailers and consumers.
Short product life cycles· Global suppliers and distribution
Assembly intensive manufacturing
Customer satisfaction is the main objective (OTD and fill rates)
Rapidly changing demand signals
Issues/Pain Points
Components
Suppliers catering to wide range of products
Stiff competition amongst suppliers
Increased risk of supply due to international sourcing
Product obsolescence
Last Updated On:10/23/2008 12:11:56 PM
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TOOLS TO ‘OPERATIONALIZE’ SOURCING STRATEGIES
The key to strategic sourcing is to integrate sourcing with procurement through analytics and contract management. The following design tools are key enablers in ensuring the same:
Formal, preferably multi-year Procurement Plan to project, audit and regularly validate procurement savings
Design Aspects:
o Procurement’s impact on strategic vision, business plan and key financial metrics need continual focus
o Analysis of current costs (direct, expense, capital) and cash flow forecast
o Prioritized listing of key spend categories, savings targets and benefit goals
o 3-5 years buying strategy for each material
o Actions to measure key supplier relations
o Touch-points with other business initiatives
o Assigned business, finance and procurement resources
o A time phased savings plan
o Cash flow elements such as Working Capital, Trade Financing, Payment Terms to be part of Procurement savings goals
Focus on all items & services- not only direct items. (On an average 18.5% of revenue is still uncovered by Procurement, per an Aberdeen Research report)
Design Aspects:
o Minimize maverick buying; track % unplanned / unstructured buying
o Track actual vs. Plan for indirect items & expenses as well.
o Expense Automation System – Instituting a system and periodic expenses analysis can deliver 6-7% savings.
o Volume Leveraging – Concept applies not just to big ticket items but in other categories also, eg.
MRO items.
Effective Contract Management
Design Aspects:
o Create Contract based on Bid Awards
o Share Contracts internally & externally to obtain necessary approvals
o Publish Contracts to Backend system
o Monitor consumption, expiry, and compliance
There is 20 – 25% leakage in savings due to poor compliance of contracts, according to some leading sourcing experts
Better Analytics C
Last Updated On:7/11/2011 10:36:30 AM
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Key focus areas in mature sourcing companies is the focus on tracking, analyzing and using market information. For example, an FMCG company with a significant direct material spend on a commodity like sugar has a core commodity desk tracking information on industry capacities and inventories, daily auction prices, sugarcane recovery, and even tehsil-wise reports from government cane assessors, apart from index-tracking- this information has served the company in good stead while sitting across and negotiating forward contracts with millers.
FOCUS ON INDIRECT MATERIALS AND SERVICES
Although indirect materials and services for a typical manufacturing entity are individually small areas of spend, collectively these represent up to 10% of procurement spend on average (and frequently much higher), and have significant potential for driving efficiencies. A few salient aspects of this category:
Usage and Rate are typically mixed: For Consumables as well as services, people talk of total spends more than the per-unit cost. Most of the accounting systems do not inventorize the consumables and book them as expense on receipt of materials at plants. Usage variance and price variance are not tracked separately. In many cases, even the baseline cost data is not available.
Large number of quality attributes for service: For a service such as Travel there can be multiple attributes of
quality viz. speed of service, no inaccuracies in bookings, ability to change bookings on a short notice, ability to get visas on a short notice, get the best discounts in the market, 24 hours availability – all parameters evaluated across a large number of people, not possible to record all data. One has to depend on Customer Surveys for feedback on quality of service
Limited flexibility in suppliers: Once we enter into a contract with a particular service provider, it is difficult and
costly to move to another service provider for a short duration or a
Last Updated On:7/11/2011 10:25:35 AM
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Services »Domains »Information Technology
Procurement Co-Sourcing & Management Services
Your business functions are designed and mandated to allocate resources (business bandwidth and capital) on core activities which directly fuel business growth. Your non core Sourcing & Procurement function takes a back-seat and ends up being a supporting activity to the business resulting in:
Cost leakages
Suboptimal price discovery
Lack of new vendors in business operations
Maverick buying
Contract non-adherence
Preferential vendor treatment
Poor vendor management practices
Inefficient & incomplete material catalogue and specifications
How do you transform your Sourcing & Procurement function from a non-core/supporting set of activities to a strategic business enabler that positively impact your bottom-line and delivers competitive advantage over your peers? How would you ensure that your Sourcing & Procurement activities guarantees the
following tangible results:
Year-on-year landed cost savings.
Be more responsive to the business’ needs.
Reduce total cost of ownership for MRO items.
Increase service levels from suppliers.
You need to squeeze inefficiencies out of your sourcing & procurement function. You need to make the entire procurement process lean, transparent, compliant and fast. You need to reduce landed cost of materials on a progressive basis. And you need sourcing experts who can manage your sourcing requirements on a commodity basis. Its not an one size fits all approach, nor a mechanical engineer sourcing all
Last Updated On:7/6/2011 3:14:40 PM
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Transportation Management Systems : An Indian Perspective
Thumbs-Down to the Global Meltdown
The global melt-down is here and the nay-sayers are all on a roll about the impending doom. Companies are looking at multiple options to manage the challenging situation that the occurrences in the global economy have put them into. Supply Chain costs therefore are of special significance in such market conditions as they hold the key to managing profitability and ensuring better health of the organization.
India is no exception!
Logistics costs in India are estimated to be nearly 13-14% of the GDP of around $1 trillion. This cost is significantly higher as compared to the developed economies where the logistics costs are around 7-8% of the GDP. What this means to companies is that there is a huge potential to optimize the costs of logistics.
Supply Chain costs are spread over multiple domains starting from Import-Export Logistics to Transportation to Warehousing and finally Distribution. In a country like India which has a large geographic dispersion and manufacturing clusters based at key locations, transportation becomes a key link to managing the costs. In fact, Transportation accounts for the largest single cost component of logistics, estimated to be nearly 35%-40% of the total logistics costs.
There are multiple reasons for this. India has traditionally been a country that thrives on the entrepreneurial spirit of the hinterland. Hence all transportation needs, especially ground transport, were being met by small transport operators (more than 80-85% of the market) who own less than 5 trucks of smaller tonnage. This leads to an extreme fragmentation of the industry and thereby the cost of managing the overall delivery is high.
In addition, the Indian transportation industry has multiple layers of demand and capacity agents who are essentially people who play the intermediary role of matching demand and capacity albeit a
Last Updated On:7/30/2010 1:39:54 PM
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Supply Chain cost reduction for India’s largest manufacturer of displays and components for television
Title: Created scenarios and roadmap for logistics cost reduction
Background:
Client is India's largest integrated manufacturer of a wide range of displays and their components for television like Picture Tubes for Televisions, Deflection Yokes and monitors currently catering to 7% of the Global requirements. Has its plants located in Ghaziabad - Uttar Pradesh (2 Plants), Kota - Rajasthan, and Parwanoo - Himachal Pradesh. Production capacity of 70,00,000 CRTs per annum and sold 90% of them during FY 06-07 in India and 10% globally in various product lines Product Lines – 14”, 15”, 20”, 21” and 29”
Logistics network consists of raw material vendors (Domestic & International), Freight Forwarders, Transporters & Shipping lines for Inbound, Transporters for Outbound. Logistics cost per piece is a key component with the total logistics cost in FY 07 standing at around Rs. 90 Cr.
Business Scenario:
Declining prices is pushing client to adopt a cost management strategy - focus on continuous reduction in cost of manufacturing, achieve higher productivity and operational efficiencies though value engineering, alternate sourcing and design enhancements in order to maintain leadership position and meet the challenge of low cost imports and low margins due to falling prices in picture tubes.
Client needed recommendations and roadmap for reducing total logistics costs, other engagement objectives included minimizing Inventory (towards zero inventory) in supply chain, Process & System implementation, Planning& instituting training, developing best global practices
Our Solution:
We adopted a scenario approach for cost reduction
Recommendations included -
Last Updated On:7/4/2011 12:56:25 PM
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Procurement Spend Reduction for a leading Delhi Bread Manufacturer
Title : Analysis of end-to-end procure to pay process including sourcing and planning, supplier collaboration, procure to pay, inventory management and reporting to reduce spend and improve efficiencies .
Background :
Client is a leading bread manufacturer in Delhi NCR and accounts for 80% of the region’s market share
Main Products are: Bread, Buns, Pizza Base,Rusks
Procurement costs are more than 80% of total operating costs
Company’s strategy is to expand the bakery product business across India through engaging with Contract Manufacturers
Our Approach :
Track 1 –
Understand client Business & Supply Chain Objectives, Understand As-Is Procure to Pay Process & identify gaps and immediate focus areas
Develop an organization structure design to set the base for any procurement focused initiative
Define roadmap to improve the immediate target areas
Track 2 - Implement Procurement Processes and Initiatives for one product class
Define To-be procurement process for Packing Material
Implement Procurement Processes in the above area
Deliver costs savings
Solution :
Build a procurement organization, which is focused on improving and efficiently executing Procurement activities
Sourcing savings - Increased understanding of spend by category. Take advantages of price discovery mechanisms
Supplier management – Understand supplier cost structure, Optimize number of suppliers,
Last Updated On:7/4/2011 4:01:47 PM
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Port Centric Warehousing Strategy for a Leading Indian Logistics Service Provider
Title: We created a port centric warehousing strategy to position our client a leading player in end-to-end 3PL space and achieve a revenue target of INR500 crores in 5 years from warehousing. The estimated payback period on the investment is 4.5 years.
Background :
The client is a leading freight forwarding and contract logistics service provider in India
They have industry level expertise in Freight forwarding, project logistics and customs clearance
Business Scenario:
The client is looking to become a globally renowned end-to-end logistics service provider and supply chain partner
The client wants to invest in value added port centric warehousing, which complements its existing freight forwarding business, and which is also an important component of its end-to-end value proposition
A strong India growth rate has also created unforeseen opportunity in port centric warehousing that needs to be addressed
Our Solution:
We adopted a systematic and methodical approach to address the opportunity
1. Customer Need Identification, 2. Industry Opportunity identification, 3. Current state of the market, 4. Competition Landscape, 5. Our positioning and value proposition 6. Investment and ROI assessment
A detailed warehousing locational strategy, target industries & services ,and rollout plan was created
Benefits:
Value based warehousing strategy defined, and implementation plan was created
ROI assessment helped in justification of business and investment plan - 10 year NPV of 496 crore, Payback Period of 4.5 years
Last Updated On:7/5/2011 11:27:34 AM
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Joint Opportunity Targeting and Go To Market Plan by a leading Asset Light 3PL Player and Asset Heavy Transportation service provider
Title: We did a opportunity assessment, targeting, positioning, JV creation and implementation roadmap for industry specific end-to-end rail based transportation and terminal centric warehousing solutioning for the above companies.
Background :
The client are leading end-to-end asset light 3PL player and asset heavy transportation service providers in India
They have expertise in contract logistics, project logistics, rail based transportation and warehousing solutions
Business Scenario:
There are significant inefficiencies in the Logistics space in India, and a rail based end-to-end solution does have the capability to make an impact at an industry level
A move from road based to rail based transportation solution along with warehousing and value added services will bring some of the industry level best practices in India and improve competitiveness of some Indian industries
Changing government regulation in transportation and warehousing space created significant opportunity in organized warehousing and rail based transportation solutions
Our Solution:
We carried out the opportunity assessment and scope identification exercise to come up with the following recommendations around
1. Target industries, 2. Target end-to-end service offerings, 3. Working structure of the JV, 4.Investment plans and shareholding pattern for the players
Organizational structure of the JV, and JV creation and implementation plan was also established
Benefits:
Joint targeting strategy of certain industry specific end-to-end opportunities were created
Last Updated On:7/6/2011 10:41:13 AM
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