Operation Management & Supply Chain Management in Philips India Final-smu

5/27/2018 Operation Management & Supply Chain Management in Philips India Final-smu

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PROJECT REPORT

ON

OPERATION MANAGEMENT & SUPPLY CHAIN

MANAGEMENT

IN

PHILIPS INDIA

SUBMITTED BY:

Ms. Pooja Tandon

REGISTRATION NO.: 2002!"#$

PROGRAM NAME: PGDBA %OPERATION

'()2!* B)!+ S,-, No. !/+ -1sna Pa-3 E4,n.

NE' DELHI )!!00!/

SYMBIOSIS CENTRE 5OR DISTANCE LEARNING

ENROLLMENT 200

i


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NO OBJECTION CERTI5ICATE

This is to certify that Ms. Pooja Tandon is permitted to use relevant

data/information of this the O6-a,1on Mana78n, & S966; Ca1n

Mana78n, In P116s Ind1a for her project in fulfillment of the PGDBA

%OPERATIONProgram.

' 1s3 Yada?

O6-a,1on Mana7-

P116s Ind1a

Pa=: N< D1

Da,: 2@.!0.20!!

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DECLARATION REGARDING ORIGINALITY

This is to be given by the learner and the supervisor (guide) indicating that this

project work is original and submitted for the first time.

%C DECLARATION BY THE LEARNER

This is to declare that I have carried out this project work myself in part

fulfillment of the PGDBA %OPERATION. Program of !"#.

The work is original$ has not been copied from anywhere else and has not been

submitted to nay other %niversity/ Institute for an award of any degree/diploma.

Pa=:N< D1

Da,:

iii


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CERTI5ICATE O5 SUPERISOR %GUIDE

!ertified that the work incorporated in this Project &eport O6-a,1on

Mana78n, & S966; Ca1n Mana78n, 1n P116s Ind1a submitted by

Ms. Pooja Tandon is her original work and completed under my supervision.

'aterial obtained from other sources has been duly acknowledged in the Project

&eport

Pa=: N< D1 A>1s3 Yada?

Da,: S17na,9- o G91d

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ACNO'LEDGEMENT

I want to acknowledge the help provided by employees of P116s E=,-on1=s Ind1a

L181,d. The precious inputs provided by them have helped me in compiling this report.

s well as I want to thank all my friends and colleagues who helped me in this working.

I epress my deep*hearted thanks and gratitude to all of those who helped me in this

Project.

Pa=: N< D1

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TABLE O5 CONTENTS

S.No. To61= Pa7s. No

+. Introduction +

,. -bjectives and cope +

. #imitations +0

1. Theoretical Perspective +2

. 'ethodology Procedure of 3ork 4

0. nalysis of "ata 15

2. 6indings Inferences and &ecommendations 7+

7. !onclusion 7

4. ummary of the Project &eport 7

+5. Ann49-

I. Proposal

II. 8uide9s &esume

III. &eferences

72

72

74

4+

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INTRODUCTION

PHILIPS AT GLANCE

Philips in India is part of &oyal Philips :lectronics. s one of the nation;s most well*known and well*loved brands$ Philips is a part of practically every Indian;s life. Philips

products find a use in virtually every aspect of daily life * at home$ at work and on the

move. Today$ Philips stands as a source of reliable and innovative products that enhance

the usiness world 'aga=ine as The 'ost &espected

!ompany in India in the !onsumer "urables ector for ,55,. This award was based on a

peer perception survey among 71 senior managers of the corporate world conducted by

>usiness world 'aga=ine and the India 'arket &esearch >ureau.

P116s Ind1a L181,d 5as, 5a=,s

Business:

'anufacture and sale of audio and radio

:engal (:astern India)

Thane$ tate of 'aharashtra (3estern India)

Pune$ tate of 'aharashtra (3estern India)

alt #ake$ tate of 3est >engal (:astern India)

MAJOR COMPETITORS

Radio sets, tape recorders:

>P# anyo Technologies #imited

+


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kai India #td.

amsung India Pvt. #td

'aharashtra :lectronics !orporation #imited

?ideocon International #imited

Television receivers:

kai India #td


>P# #imited

#8 :lectronics India #td.

-nida aka #imited

amsung India Pvt. #td.

Lamps:

'ysore #amp 3orks #s #imited

>ajaj :lectrical #imited

ylvania @ #aman #imited

urya &oshni #imited

!rompton 8reaves #imited

A'T #imited

Electronic components:


Permanent 'agnets #imited

Tata Beltron #imited

>harat Aeavy :lectrical #imited

,


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technical collaborationsC

D.?. Philips;s 8loeilampenfabrieken$ Detherlands

Philips :lectronics D.?.

MISSION

3e improve the


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build partnerships with key customers and suppliers$ both in the business*to*

business and business*to*consumer areas

continue to invest in maintaining world*class innovation and leverage our strong

intellectual property position

strengthen our leadership competencies

drive productivity through business transformation and operational ecellence

HISTORY

Philips started operations in India at Bolkata (!alcutta) in +45. :stablished as EPhilips

:lectrical !o. (India) Pvt #tdF$ the company comprised a staff of 2 and was a

sales outlet for Philips lamps imported from overseas.

In keeping with the Philips philosophy of promoting the industrial development of

emerging economies$ Philips India set up its first Indian lamp*manufacturing factory in

+47 in Bolkata.

ubse


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outdoor broadcast vans to "oordarshan during the IG sian 8ames. The company also

completes a prestigious turnkey project by handling the lighting and electro*acoustic

installations of stadia built specially for the IG sian 8ames.

In +47$ Philips launches the !ompact "isc and revolutioni=es the way the world listens

to music.

In +47$ Philips inaugurates its consumer electronics factory at alt #ake$ Bolkata.

+44 sees Philips launching its domestic appliance business in India and in +44 Philips

introduces compact fluorescent lamps into the country. In +440$ the Philips oftware

!entre is established in >angalore. In +447$ Philips launches 6lat Televisions and !"*

recorders * both firsts in India.

s is seen$ throughout the +4559s Philips continued to bring the Indian consumer new

and innovative products backed by the latest technology and bearing the renowned

Philips stamp of


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The Philips heritage is its understanding of how people eperience technology. Today$ in

the digital era$ Philips is committed to building upon this heritage to make things better

for people all over the world.

In over 25 years in India$ Philips has grown into a company that$ today$ employs over

1$55 people in seven factories and offices around the country. The company;s activity

levels in ,55 were over &s. , billion. It;s a leader in lighting$ consumer electronics$

semiconductors$ domestic appliances$ personal care products and medical systems and

has an unmatched range of internationally current products backed by superior design and

technology.

ACHIEEMENTS

Philips India was recognised by >usiness 3orld$ maga=ine$ as ;The 'ost &espected

!ompany in India; in the consumer durables segment in ,55,. The award was based on a

peer perception survey among 71 senior managers of the corporate world and was

conducted jointly by >usiness 3orld and the Indian 'arket &esearch >ureau.

Philips India was also selected as one of the Top , :mployers in India by the >usiness

Today * Aewitt urvey in ,55. mongst ,,5 organisations that were evaluated$ Philips

India was singled out for distinction on the company brand$ freedom of work$ recognition

of performance$ open and transparent culture and fair and eangalore was also placed in the top five in the

>usiness 3orld * 8row Talent ;8reat Places to 3ork; survey.

The :conomic Times * >rand :


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Philips India #imited was selected as one of the Top +5 8reenest !ompanies in India

under a survey carried out by >usiness Today and T:&I (Tata :nergy &esearch Institute)

in ,55+.

Philips$ today$ has fashioned itself to continue its dominance of the Indian market. 6or$ it

is here that three revolutions are taking placeC the convergence revolution$ the digital

revolution and the internet revolution. 6ortunately for Philips * and its customers * it

ecels in all three.

PRODUCT

Philips introduced the incandescent lamp to India over 25 years ago. Today$ the most

widely used lamps across even the far reaches of this vast country are Philips.

The company;s lighting product is also the preferred name in hotels$ offices$ city streets

and automobiles. !ontinuing reforms in the electricity sector and the need for energy

conservation will see new opportunities for energy*efficient lighting solutions. 3hen that

happens$ Philips will be there.

Philips brought the radio to India when wireless opened up new hori=ons for information

and entertainment. s technology evolved$ the company$


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Physiological Therapy ystems (automatic eternal defibrillators$ point of care

diagnostics). To any one undergoing a cardiac eamination in India it is comforting to

know that there is a one in two chance that the e


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RECENT DEELOPMENTS

n understanding of why and how people listen and see$ what eperiences people wish

for and a deep knowledge of the technologies that make this possible has kept Philips in

the lead for over 25 years in India. Philips$ for instance$ introduced power*free radio for

the Indian rural markets where power supply was a major constraint. This was not an

isolated eample of getting it right. Philips has$ in fact$ evolved a special integrated rural

marketing initiative aimed at the Indian rural market.

Philips has also developed a T? that improves the ut such a desire is hardly uni


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In India$ as in all parts of the world$ when customers seek superior technology$ design

and


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PI# has manufacturing sites at Balwa (near 'umbai)$ Pimpri and #oni*Balbhor

(near Pune) and Bolkata.

E=,-1= La86 Man9a=,9--s Ind1a L181,d %ELMI

Is a wholly owned subsidiary of Philips India #imited. :#'I is located in Bolkata

and manufactures lamps for Philips and is marketed in India by Philips India

#imited.

P9nja> Anand La86 Ind9s,-1s L181,d %PALI.

Is a subsidiary of &oyal Philips :lectronics D. ?. Philips India #imited has a

shareholding of around ,J in this company. P#I is located in !handigarh and

manufactures lamps for Philips and is marketed in India by Philips India #imited.

P116s Md1=a S;s,8s Ind1a L181,d.

Is the India subsidiary of Philips 'edical ystems International >.?. (a subsidiary

of &oyal Philips :lectronics D.?.).

Aas a strong presence in the Indian Aealthcare :


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attempting to make a mark in automotive lighting. tate of the art technology greatly

enhances the rand shops$ which showcase the

entire consumer electronics range$ and provide an enhanced brand shopping eperience to

the Indian !onsumers.

Philips; presence in Aealthcare in India is all embracing. 5J of !ardiac eaminations in

India are done on Philips e


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Indian culinary preferences$ a range of bread toasters and sandwich makers. 6or the body

beautiful$ hair styling and epilation products for the woman and shavers for men. Philips

is revolutioni=ing garment care at home with over a million steam irons in perhaps as

many homes.

ll these lifestyle and healthcare consumer offerings get better and better with

digitalisation and the intelligence that is embedded. Philips technology platforms are

unsurpassed in these. Philips is the leader in inventing$ innovating and creating the

technologies that underpin the products that people eperience every day.

Philips is today the leading lifestyle and healthcare company in India. It has fashioned

itself to continue to be the leader in an India where people are increasingly becoming part

of three revolutionsC the convergence revolution$ the digital revolution and the internet

revolution. Philips is far more focused$ leaner$ even more consumer centered$ more agile

* all of which is reflected in its performance and in the ecitement within the company.

BUSINESS EFCELLENCE

Philips continuously eplores new ways to improve products and to offer innovative

products to its consumers. That9s why we have created a program through which

we will reach higher and higher :T program is the path we have chosen to achieve business ecellence. It

describes a set of methods and tools by which we continuously improve our efforts.

Previous successful initiatives are incorporated in the program to make sure we learn as

much as possible from our successes in the past.

+


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B9s1nss E4=n=

3e are all committed to improving processes in*line with the company9s strategic targets.

To this end$ has adopted >:T to reach this goal. It is our ambition to be one of the best

companies in the worldC the best to trade with$ work for$ and invest in.O9- Mas9-s:

!ustomers are fully satisfied by the usiness :cellence

(P>:) model. This is an eact copy of the :cellence model of the :uropean 6oundation

for Nuality 'anagement (:6N').

The P>: tool is suported by many other tools$ such as >reakthrough 'anagement$

>alanced corecard$ -ne Page trategy and Process urvey tools (PT).

PTs are maturity grids designed around specific processes$ they give a clear insight in

the areas for improvement and help to identify which steps should be taken to reach those

improvement targets.

The PTs are fully compatible with the :6N';s widely*used ecellence model$ and have

been provided to the :6N' free*of*charge.

+1


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OBJECTIES AND SCOPE

OBJECTIES

:plore the benefits reaped by the company as a result on the value chain

efficiencies through !' and the contribution of !' to the company9s survival

and competitive advantage.

"iscusses the concept of supply chain management and the benefits of revamping

the !' practices.

The scopes are the followingsC

Bnowing the "ealers preference for Philips.

Bnowing the facilities provided by the companies at all levels of

distribution channel.

Bnowing the strength and weaknesses of !T?.

Bnowing the perception of !T? of different brands at all level.

Bnowing the market share of Philips.

+


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LIMITATIONS

This study will go in along way in helping the company in choosing the right strategy and

taking the right decision.

This study is restricted to parts of "elhi @ D!& which may not seem to present the

general picture of the product.

ll the retailers and farmers were not covered because of the constraints of time.

The sample frame or si=e for evaluating may not completely reflect the market.

The respondents may due to one or other reason$ conceal the true facts$ thus giving

erroneous figures.

ome respondents replied half*heartedly.

The limitations and constrains, which mainly well a hindrance in the performance

of the project includes the following:

Lack of expertise, being a trainee, especially in understanding consumer

behaviour.

In case of primary data, sometimes it was difficult to contact or meet the

professionals, due to their busy work schedule.

ometimes professionals are unable to finish some of the information due

to confidently of the same.

It was difficult to know the exact detail due to time constrain.

It was difficult to find information that exactly fitted the needs of the project

at hand in case of secondary data or information.

Lack of upto date statistics.

!nreliable response from the retailer at times due to lack of time.

"uestion on sales highly sensitive and sometimes resulted in non#response from

the retailers.

+0


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THEORETICAL PERSPECTIE

BACGROUND

!ompetition in the new millennium will be across supply chains$ not individualcompanies. The central aim of any business is to have the right products in the right


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of world*class supply chain planning$ facilitating !' through internet infrastructure$

and technology for the supply chain of the future$ building customer focused supply

chain$ organi=ational issues in implementation$ and recent advances in !'.

SUPPLY CHAIN MANAGEMENT

upply chain management (!') is the process of planning$ implementing$ and

controlling the operations of the supply chain with the purpose to satisfy customer

reoo= llen Aamilton in +47,.

supply chain is a network of facilities and distribution options that performs the

functions of procurement of materials$ transformation of these materials into intermediate

and finished products$ and the distribution of these finished products to customers.

upply chains eist in both service and manufacturing organi=ations$ although the

compleity of the chain may vary greatly from industry to industry and firm to firm.

ccording to the (!!'P)$ a professional association that developed a definition in ,551$

upply !hain 'anagement Hencompasses the planning and management of all activities

involved in sourcing and procurement$ conversion$ and all logistics management

activities. Importantly$ it also includes coordination and collaboration with channel

partners$ which can be suppliers$ intermediaries$ third*party service providers$ and

customers. In essence$ upply !hain 'anagement integrates supply and demand

management within and across companies.H

upply chain event management (abbreviated as !:') is a consideration of all possible

occurring events and factors that can cause a disruption in a supply chain. 3ith !:'

possible scenarios can be created and solutions can be planned.

ome eperts distinguish supply chain management and logistics management$ while

others consider the terms to be interchangeable. 6rom the point of view of an enterprise$

the scope of supply chain management is usually bounded on the supply side by your

supplier;s suppliers and on the customer side by your customer;s customers.

+7


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SUPPLY CHAIN DECISIONS

3e classify the decisions for supply chain management into two broad categoriesC

strategic and operational. s the term implies$ strategic decisions are made typically over

a longer time hori=on. These are closely linked to the corporate strategy$ and guide

supply chain policies from a design perspective. -n the other hand$ operational decisions

are short term$ and focus on activities over a day*to*day basis. The effort in these types of

decisions is to effectively and efficiently manage the product flow in the HstrategicallyH

planned supply chain.

hortened product life cycles$ increased competition$ and heightened epectations of

customers have forced many leading edge companies to move from physical logistic

management towards more advanced supply chain management. dditionally$ in recent

years it has become clear that many companies have reduced their manufacturing costs as

much as it is practically possible. Therefore$ in many cases$ the only possible way to

further reduce costs and lead times is with effective supply chain management.

In addition to cost reduction$ the supply chain management approach also facilitates

customer service improvements. It enables the management of inventories$ transportation

systems and whole distribution networks so that organi=ations are able meet or even

eceed their customers; epectations.

To simplify the concept$ supply chain management can be defined as a loopC it starts with

the customer and ends with the customer. ll materials$ finished products$ information$

and even all transactions flow through the loop. Aowever$ supply chain management can

be a very difficult task because in the reality$ the supply chain is a comple and dynamic

network of facilities and organi=ations with different$ conflicting objectives.

+4


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3hat has then enabled the effective implementation of supply chain managementO The

answer is found from the rapid developments in information and communications

technologies. %se of databases$ communication systems$ and foremost advanced

computer software are crucial for the development of a modern cost*effective supply

chain management.

NEED 5OR SCM

+. !' is a concept or a mechanism to improve the total productivity of enterprises in a

supply chain by optimising the timing$ location and


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total !' cost (materials cost$ production costs$ warehousing costs$ inventory costs

and transportation costs). In &-! and ingapore$ there are already such systems in

the marketplace and well used by leading enterprises$ in electronics and information

industries. The benefits of employing such a model can help enterprises in the highlycompetitive electronic and computer industries to simulate their !' strategies and

determine the optimal !' strategy under certain cost operating environments.

. !' should be linked to the digital economy as demanding and technology savvy

customers around the world increasingly epect goods and materials to be delivered

to their doorstep at Hclick*speedH. In response to these demands$ supply chains of

enterprises and industries need to be more real*time and dynamic. Therefore$ new

technologies$ intelligent software agents$ will become an integral part of !'.Nuantum leaps in productivity and agility in the supply chain can be made

possible by the courageous adoption of these intelligent agent based decision

support systems. The % eperience in the use of these software agents has been very

successful as these agents (software programs) can actively engage with the user in

dialogue$ and negotiate and coordinate the transfer of real*time information to other

users on web*based platform. Proper interfacing and integration of such agents can

help realise the fruition of a truly global logistics network. n eample is the

establishment of the 8lobal Transpark based out of the %. The Transpark serves to

link manufacturing$ transportation and information to create innovative logistical

infrastructure for global commerce.

1. In the past$ !' is predominantly enterprise focused with mutually eclusive set of

activities. Today$ progressive firms are readily embracing systems integration through

:&P and other means of electronic connectivity$ primarily for cost reduction

purposes. In the future$ !' would have to integrate enterprises$ ensure greater

collaboration between supply chain partners$ work towards a synchronised value

collaboration network. -nly then can firms talk about chain*wide profit maimisation

and economic value add.

. ome of the main challenges presented by the resource persons include the followingC

building a supply chain infrastructure without damaging the environment i.e. how to

,+


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have a green supply chain$ setting up a reverse logistics program for firms to ensure

ecological balance and waste reduction$ managing of demand volatility face by

enterprises when they move to a digital arena and greater dynamic customisation$

how to etract better channel coordination between partners in the supply chain$ howto obtain better procurement leverage using real*time information and the Internet$

how to etract greater profitability out of decreasing business margins$ and the need

to manage services besides the traditional product*based approach given the blurring

between design and outsourcing of manufacturing.

0. everal pertinent concerns were also highlighted by the resource personsC sharing of

risk between partners in the supply chain$ the ownership of inventory (vendor

managed of co*managed inventory)$ the applicability of some good !' practice incertain industries (like ?'I in the retail sector) to other industries$ and information in

the supply chain$ the management of demand forecast projection and accuracy$ and

the ability of ':s to invest in much needed IT and related technologies to improve

their supply chain processes

2. There is a need for good !' systems nationally and regionally for the P- member

countries. This system should include databases$ model bases$ visual maps and

friendly user interfaces. The proper use of such a system can help to minimi=e the

total !' cost (materials cost$ production costs$ warehousing costs$ inventory costs

and transportation costs). In &-! and ingapore$ there are already such systems in

the marketplace and well used by leading enterprises$ in electronics and information

industries. The benefits of employing such a model can help enterprises in the highly

competitive electronic and computer industries to simulate their !' strategies and

determine the optimal !' strategy under certain cost operating environments.

7. !' should be linked to the digital economy as demanding and technology savvy

customers around the world increasingly epect goods and materials to be delivered

to their doorstep at Hclick*speedH. In response to these demands$ supply chains of

enterprises and industries need to be more real*time and dynamic. Therefore$ new

technologies$ intelligent software agents$ will become an integral part of !'.

Nuantum leaps in productivity and agility in the supply chain can be made possible

,,


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by the courageous adoption of these intelligent agent based decision support systems.

The % eperience in the use of these software agents has been very successful as

these agents (software programs) can actively engage with the user in dialogue$ and

negotiate and coordinate the transfer of real*time information to other users on web*based platform. Proper interfacing and integration of such agents can help realise the

fruition of a truly global logistics network. n eample is the establishment of the

8lobal Transpark based out of the %. The Transpark serves to link manufacturing$

transportation and information to create innovative logistical infrastructure for global

commerce.

4. In the past$ !' is predominantly enterprise focused with mutually eclusive set of

activities. Today$ progressive firms are readily embracing systems integration through:&P and other means of electronic connectivity$ primarily for cost reduction

purposes. In the future$ !' would have to integrate enterprises$ ensure greater

collaboration between supply chain partners$ work towards a synchronised value

collaboration network. -nly then can firms talk about chain*wide profit maimisation

and economic value add.

+5. ome of the main challenges presented by the resource persons include the followingC

building a supply chain infrastructure without damaging the environment i.e. how to

have a green supply chain$ setting up a reverse logistics program for firms to ensure

ecological balance and waste reduction$ managing of demand volatility face by

enterprises when they move to a digital arena and greater dynamic customisation$

how to etract better channel coordination between partners in the supply chain$

how to obtain better procurement leverage using real*time information and the

Internet$ how to etract greater profitability out of decreasing business margins$ and

the need to manage services besides the traditional product*based approach given the

blurring between design and outsourcing of manufacturing.

++. everal pertinent concerns were also highlighted by the resource personsC sharing of

risk between partners in the supply chain$ the ownership of inventory (vendor

managed of co*managed inventory)$ the applicability of some good !' practice in

certain industries (like ?'I in the retail sector) to other industries$ and information in

,


30/98

the supply chain$ the management of demand forecast projection and accuracy$ and

the ability of ':s to invest in much needed IT and related technologies to improve

their supply chain processes

OPPORTUNITIES ENABLED BY SUPPLY CHAIN MANAGEMENT

The following strategic and competitive areas can be used to their full advantage if a

supply chain management system is properly implemented.

Fulfillment: :nsuring the right


31/98

Cost: Beeping the cost of purchased parts and products at acceptable levels. upply chain

management reduces costs by increasing inventory turnover on the shop floor and in the

warehouse$ controlling the


32/98

SCM ACTIITIES

upply chain management is a cross*functional approach to managing the movement of

raw materials into an organi=ation and the movement of finished goods out of the

organi=ation toward the end*consumer. s corporations strive to focus on core

competencies and become more fleible$ they have reduced their ownership of raw

materials sources and distribution channels. These functions are increasingly being

outsourced to other corporations that can perform the activities better or more cost

effectively. The effect has been to increase the number of companies involved in

satisfying consumer demand$ while reducing management control of daily logistics

operations. #ess control and more supply chain partners led to the creation of supply chain

management concepts. The purpose of supply chain management is to improve trust and

collaboration among supply chain partners$ thus improving inventory visibility and

improving inventory velocity.

S,-a,71=

trategic network optimi=ation$ including the number$ location$ and si=e of

warehouses$ distribution centers and facilities.

trategic partnership with suppliers$ distributors$ and customers$ creating

communication channels for critical information and operational improvements

such as cross docking$ direct shipping$ and third*party logistics.

Product design coordination$ so that new and eisting products can be optimally

integrated into the supply chain$ load management

Information Technology infrastructure$ to support supply chain operations.

3here to make and what to make or buy decisions

lign -verall -rganisational trategy with supply strategy

$actical

ourcing contracts and other purchasing decisions.

,0


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Production decisions$ including contracting$ locations$ scheduling$ and planning

process definition.

Inventory decisions$ including


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IN5ORMATION TECHNOLOGY 5OR SUPPLY CHAIN

MANAGEMENT

Information technology (IT) is an important enabler of effective supply chain manage*

ment. 'uch of the current interest in supply chain management is motivated by the

possibilities that are introduced by the abundance of data and the savings inherent in

sophisticated analysis of these data. The innovative opportunities coming to the fore with

electronic commerce (e*commerce)$ especially through the Internet$ have also increased

the interest in IT.

upply chain management spans the entire enterprise and beyond$ encompassing

suppliers on one end and customers on the other. Therefore$ our discussion of IT for

supply chains will include both systems that are internal to an individual company as well

as eternal systems$ which facilitate information transfer between various companies and

individuals.

In addition$ supply chain management typically spans many functional areas within a

company and is affected by the way the various groups communicate and interact.

6or many firms$ IT provides a competitive advantage. Though this has been true for some

time in service industries such as banks$ it is also becoming more relevant for firms such

as large retailers$ airlines$ and manufacturers. Prominent eamples include 3al*'art

with its satellite*connected Information Technology$ merican irlines with its

innovative abre reservation system$ 6ederal :press with its superb tracking system$

and !isco with its Hvirtual manufacturing environmentH.

3hen applying supply chain strategies that reduce cost and lead times and increase

service level$ the timeliness and availability of relevant information are critical. In

addition$ an increasing number of companies are providing value*added IT*based

services to their customers as a way of differentiating themselves in the marketplace and

developing strong long*term relationships with their customers. -f course$ once these

kinds of services are offered by even one company within an industry$ they can very


35/98

In many cases$ current IT that supports the components in the supply chain process is

diverse and disconnected. It has typically evolved throughout the years based on various

local and companywide re


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The primary goal of IT in the supply chain is to link the point of production seamlessly

with the point of delivery or purchase. The idea is to have an information trail that

follows the product;s physical trail. This allows planning$ tracking$ and estimating lead

times based on real data. ny party that has an interest in the whereabouts of the productshould be able to have access to this information. s figure given below$ information and

products flow from the supplier to the manufacturer$ internally through the

manufacturer;s distribution system$ and then on to the retailers.

Co=, 1no-8a,1on: :vidently$ the retailer needs to know the status of its orders and

the suppliers need to be able to anticipate an incoming order from the manufacturer.

This entails access to data that reside in other companies; information systems as well

as across functions and geographic locations inside a company. 6urthermore$ the

participants need to see data in their own termsK that is$ if suppliers of cotton are

looking at the demand for N*Tips$ they need it translated into pounds of cot ton

consumed. Therefore$ translation tables$ such as bills of material$ are re


37/98

standardi=ation of product identification (e.g.$ bar coding) across companies and

industries. 6or eample$ 6ederal :press has implemented a tracking system that

provides ongoing information on the whereabouts of any package handled by the

company and makes this information available internally as well as to customers.

A==ss ,o da,aC Aere we introduce an important concept$ the single*point*of*contact

concept. The goal here is that all the available information$ either information pro*

vided to a customer or re


38/98

-ccasionally there may be a transfer of some crucial information that needs to be

accessed across systems$ but if the transfer is not done in real time$ then the systems

never have eactly the same data. The customer service representative receiving an order

may not be able to provide shipping status information$ and the plant may not be able to

in


39/98

tactical decisions related to which warehouse to stock with what product$ or what the

production plan for the net three months should be$ to strategic decisions about

where to locate warehouses$ and what products to develop and produce. To facilitate

this$ systems need to be fleible enough to accommodate changes in supply chainstrategies. To achieve this kind of fleibility$ systems need to be highly configurable

and new standards need to be developed.

Coa>o-a,


40/98

sophisticated tracking system$ and a high*tech manufacturer without a production

planning system.

To achieve these goals and to master the decisions and problems that arise when

considering how to address them$ it is helpful to understand many of the major issues in

IT development$ particularly as they relate to supply chain management. s we see in

6igure given below$ the following are the means toward achieving these goals.

!tandardi/ation: IT standards are what allow systems to work together. They drive

the cost and sometimes the feasibility of implementation.

"$ infrastructure: The IT infrastructure$ whether internal or eternal to a company$ is

a basic component of system capabilities. 3ithout the communications and database

capabilities$ some of the goals outlined cannot be achieved.

.lectronic commerce: :lectronic commerce has been the most important emerging

IT field in the last few years. It has enabled not only internal efficiencies but also theability to collaborate with partners in the supply chain.

!upply chain system components: These components comprise the various systems

that are involved directly in supply chain planning. These are typically systems that

combine short*term and long*term decision support system and intelligence elements.

In,7-a,1on*S,anda-ds

A==ss Ana; Coa>o-a,Co=,

In-as,-9=,9- E=,-on1=

=o88-=

S966; =a1n

=o86onn,s

Figure: (oals and means of supply chain management

1


41/98

Integrationrelated issues: Aow should priorities be set in order to achieve the goals

discussed aboveO 3hat kind of investments should be made in the short term and in

the long termO

INENTORY MANAGMENT

In business management$ inventory consists of a list of goods and materials held available

in stock. n inventor!can also mean self*eamination$ a moral inventory. In computing$

inventories can comprise physical and non*physical components. The dictionary meaning

of inventory is stock of goods9. n inventory may be defined as a stock of goods or

services$ which are held for the purpose of future production or sale. The goods or

services may be a consumptive or non*consumptive type. Inventories form an alternative

to the production or purchase in future. Thus inventory on one side is stock of goods and

services but on the other hand it is locked capital.

Inventory serves as a cushion between the production and consumption of goods

necessitated by the technological demands of production and transportation and customer

needs. Inventories can be categori=ed into several types. These are generally classified as

&aw 'aterial and upplies Inventories$ Production Inventories$ and '&- Inventories$ In

Process Inventories$ 6inished Inventories$ 'aterial in transit inventory and "ealer stock.

INENTORY CONTROL

Inventories are generally justifiable and there are obvious economic reasons for their

eistence. ince there are several costs associated with the inventories$ an effective

inventory management boils down essentially to setting a balance between the opposing

cost factors. Inventory control means controlling the inventories in the organi=ation. It is

a techni


42/98

is the dynamic nature of prices and availability. To combat this we adopt efficient

forecasting and planning techni


43/98

The ordering cost increase in proportion to the number of order placed.

. STOC OUT COST:

These costs arise when there is e1n7 9n=-,a1n

respectively. -n supply side there are two distinct possibilitiesC

+. The supply being static if only a single supply is possible during the entire

consumption period.

,. upply being dynamic if more than one supply can be obtained during the

consumption period.

These states of nature of demand and supply conditions can be combined to form si

different practical situations$ namelyC

+. upply station*demand certain

,. upply station*demand risky

. upply station*demand uncertain

1. upply dynamic*demand certain

. upply dynamic*demand risky

0. upply dynamic*demand uncertain

2


44/98

@.!# MODERN INENTORY CONTROL TECHNIUES

'aterial &e


45/98

METHODOLOGY PROCEDURE O5 'OR

RESEARCH METHODOLOGY

&esearch was more of evocative research and is the moral fiber of the project. In order to

bring about the objectives of the Project$ it was important to elo


46/98

ANALYSIS O5 DATA

In the late +445s$ the !T? market was characteri=ed by intense competition and

unprecedented Price erosion. In an attempt to improve cash flows and bring down

inventories$ the company

&estructured its !T? manufacturing process. Pil decided to leave the relatively low value

adding 'anufacturing processes such as final assembly and testing to supplier*partners

who were close to the marketplace. These supplier*partners not only had much lower cost*

structures$ they were also far more fleible.

>y having several supplier*partners in different parts of the country$ pil was able to reach

out to customers in the shortest possible time and with very low inventory in the pipeline.

In june +442$ pil shifted the final component assembly process for ctvs out of its at salt

lake factory to three new assembling centers in west bengal$ punjab and uttar pradesh$ to

keep the assembling unit of the final product as close to the customer as possible. Pil also

started outsourcing low value components from local players$ while concentrating on the

production of high*value items.

In april +447$ pil shifted the manufacturing operations of its lighting division to pali.

6luorescent lamps began to be manufactured both at pali9s mohali (near chandigarh)

factory and elmi. pil spokesman eplained$ Ethe shifting has occurred because the

company could not match the desired manufacturing levels. 3e have to keep shifting our

production units closer to the market. hifting the manufacturing of lighting e


47/98

dedicated carriers took just five days. Pil9s redistributors also helped cut costs. Aaving a

redistributor meant that products had to be delivered only to the redistributor closest to the

plant instead of sending them to a distributor who could be located anywhere in the

country. Pil halved its inventory carrying levels since the redistributors took over the taskof servicing the retail outlets.

PI# also reduced its manpower needs and the fied component of its distribution costs.

-ut of its 4 depots$ pil owned only four$ which were also epected to be franchised. Pil

had earlier franchised its eight eclusive showrooms. dditionally$ pil initiated a new

infotech initiative to get on*line information on sales from each of its dealers$ and the

stock position at its depots. This was epected to help pil move goods in line with the

actual re


48/98

TABLE I: PHILIPS INDIA PRO5IT AND LOSS STATEMENTS %1n Rs

811on

200 200/ 200" 20!0

G-oss Sas +0$0. +2$,77.

4

+1$45.

4

+$,.1

:cise "uty (11.) (4+.2) (154.5) (75.5)

N, sas !$+2/".2 !$+$".

2

!@+#2!.

"

!@+$#.@

-ther income +,7.4 +2., +,.2 +45.+

To,a 1n=o8 !$+@!/.0 !$+/0.

!@+$@.

$

!@+/$#.#

&aw materials $+51. $5+5.5 +$7,7.7 ,$114.

tock adjustment (Inc)/ "ec (+,.) ,27.5 (,51.4) 20.4

Purchase of finished goods 7$247.5 4$+5.1 4$502.5 2$741.7

!onveyance$ travelling and living

epenses

,54.1 ,,1.0 ,,. ,50.

!ost of material ++$44.0 +,$0+0.

5

+5$4+1.

+5$4,2.2

:mployee cost +$5+1.7 +$++5.5 +$57.5 +$5.4

Power @ fuel ,55.2 +20.1 +1.1 4,.5

dvertising/ promotion/ public ,5., 122.+ 42., +55.

6reight @ forwarding ,+.0 10.4 ,2.0 ,77.2

-ther epenses +$,+2. +$+00.7 +$025. +$0+.5

Cos, o sas !#+2@.@ !#+/".

!@+!/!.

!@+0#".$

PBIDT +$+7.0 422.5 14,.4 75.4

Interest @ finance charges 14.0 ,. ,7., +7.4

PBDT 71.5 0+.2 ,1.2 012.5

"epreciation ,0.2 7., ,4. ,05.,

PBT 52. +. (7.) 70.7

Provision for taation 75. +.5 (.+) (+74.)

:traordinary items/ Prior year adj. (52.,) (+.,) (0.+) (272.4)

Adj9s,d PAT !!"./ 2/!.@ %@!.# %2!!.$

D1?1dnd 6a;o9, 2.+ +,., * *

5o-4 1no< 17.5 10.2 1+.2 20.5o-4 o9,o< +$104. +$11,.4 442.1 +$+5.7

ourceC www.indiainfoline.com

The company blamed its poor performance on poor sales in its consumer electronics (!:)

and domestic appliances divisions. The !: division$ in particular$ had fared rather badly

1,


49/98

with a 0J decrease in growth. There were a host of problems with the company9s

logistics setup as well. "ue to the region*based distribution set*up$ goods reportedly

passed through the entire country before reaching the final destination$ taking a total of +7

days. In the process$ the goods were handled eight times during loading and unloadingduring transportation.

To set things right$ PI# decided to focus on improving manufacturing efficiencies. The

plant location rationali=ation and other related eercises seemed to have paved the way for

the management9s decision to focus on restructuring the supply chain management (!')

practices. 'anaging "irector &amachandran went to the etent of claiming that !' had

become critical for PI#9s rebirth.9

3hat followed went on to become a classic eample of how an old*economy behemoth

with its huge and complicated cross*border distribution and supply chains transformed

itself into a lean$ nimble and much more efficient organi=ation.

#.! OPERATION MANAGEMENT IN PHILIPS

MANU5ACTURING PROCESS AND ACTIITIES

! MATERIAL RECEIING*INSPECTION

The !onsignment consisting of raw*materials like crylic$ Dylon$ Dickle$ polyproplyene

etc. among which head lamp glass which is been imported from Qapan gets received at

PLASTICPROCESSING

PLASTIC

PROCESSING

SUR5ACE

TREATMENT

SUR5ACE

TREATMENT

BOUGHT OUT

COMPONENTS

BOUGHT OUTCOMPONENTS

CENTRAL

STORES

CENTRAL

STORESASSEMBLY

TESTING

DESPATCH

ASSEMBLY

TESTING

DESPATCH

1


50/98

'aterial receiving shop. fter processing the documents in computers$ the raw material

passes through initial inspection of specification


51/98

3' * ,5

#ike wise there9s a +, tonnes capacity machines for producing gear shifter &ods and the

material used for this is polypropylene.

ll above are molding machines placed in area where molding take place. "ifferent

products manufactured as per the demand and schedule like tail lamp of maruti*755$

Indicator light of Binetic Aonda etc.

>y applying different dyes or fitures or moulds any type of uto light can be produced.

The average time of production of a lights approimately 5 seconds for a piece. n

operator per machine is assigned who works under a supervisor. fter every *0 hrs. The


52/98

The molding division or shop is the most critical and comple =one where highly skilled

technicians and managers have been deployed. The handling of raw*material from the

store is scheduled at a very appropriate rate which do not affect the production process

and through trolley the labour shifts the material and in the same way the finished goodsalso been taken away at scheduled timings. The material storage devices in molding

shops are bins and small racks$ but these are not placed at waist level$ which is a major

flaw which hinders the free motion of body.

The "yes$ fitures and original fitment components are placed in molding shop itself so

as to save time of carrying there dyes. s soon as a particulars


53/98

operated spray paint machine. The process is a very simple one after painting$ again the

chain passes through dryer and as soon as pieces dries*up$ then worker takes the

component to the metalising sop which is net to lac


54/98

shop located net to it. Aand*driven trolleys are used to shift the components and plastic

bins are storage e


55/98

8lue is applied over the outline of the frame of tail lamp/headlamp before the outer

covering gets fied so as to give maimum strength of fiation. The raw*material for glue

machine is 8lue*bars outsource from local vendor and then these bars are raised upto a

temperature of 555

! and the melted glue through pipes then applied on light frames bothmanually and through &obots. The &obot concept is also one of the productivity measure

been introduced by tanley corporation (one of the !ollaborators) Qapan$ when 'aruti

introduced its latest version of maruti*755. The tail lamp design is very comple so to

save time and compleity robot applies glue on light frame. imilarly after the inception

of &obot for 'aruti R755 model$ Philips installed more robots for other components also.

The benefit of adhesive application is that the glue gives a strength base for the outer

light frame to be fied after this glue operation. In assembly shop Qob*&otation takes

place at a predetermined period so as to make everyone comfortable with every

operation. fter application the product then transfers manually to net operation that is

hens fitting.

2 Lns 1,,1n7C* The process involves fitting of outer glass/light covering$ which is also

manufactured in the same plant in molding =one. medium si=e*compressing machine is

done the process of lens fitting. The operator manually places the head light/taillight

frame on to the dye/fiture and the glass to be fitted also placed over it. The upper lever

compress the lower section on which both tall light and glass covering has been placed

for ,5 seconds at a pressure of 1 kg/cm,. The parameters are preset for the machinery for

different components and are displayed through different meters. The dye/fiture has to

be changed as per the product specifications and dimensions manually and takes

approimately minutes. The supervisor then scrutini=es the initial both as per the

customer9s specifications. This is a time bound activity so careful patrol is necessary and

the work has to be completed within prescribed time limits. The complete frame

including glass and fail light frame then transferred manually to the net operation =one

i.e. ultra sonic sealing.

U,-ason1= Sa1n7C* This is a minor process$ which includes fitting of ultrasonic$ lens

i.e. the reflector in the tail lamp accessory. This component is also produced in same

plant in (molding =one). The small pieces of ultrasonic lens gets transferred manually

14


56/98

from molding to assembly shop in hand driven trolleys placed in plastic bins. The

operators in the same manners puts the tail lamp accessory on to the fiture and place me

lens over it. The compression then fies it over the light. Aereafter the light assembly is

complete and electrical component fitting is the net procedure which is ultimately thefinal stage of the product. In lens fitting machine also different dyes and fitures are used

as per the the product specifications and dimensions. The fitures are replaced manually

by the operator under the supervision of the supervisor which usually takes

approimately S an hour.

@ E=,-1=a Ass8>; 1,,1n7C* The purpose of light is incomplete without the bulb

assembly. The wire assembly and the bulb are the components$ which are to be fitted into

the fail light/head light assembly. The co. outsourcer9s bulbs from :urope$ Qapan andBorea of Philips and -sram brand. The wire assembly is been outsource from one of the

co. plant. The !o. maintains QIT concept for wire assembly of , days but keeps a

inventory approimately a month for bulbs as the component comes through shipment

from outside the country and co. keeps a contingent provision.

The process fitting is also a time bound activity. The operator manually places the

assembly into the tail light/head light assembly and makes necessary connections. The

net process is a bulb testing. The operator places the finished product over a particular

match fiture and connects it to the power connection and test whether the fitting is

defect free or not. The net process is water/vacuum testing.

a=998 Ts,1n7C* this is a crucial process to check the water proofing/leakage

pressure i.e. the process$ which scrutini=e that water should not enter the light assembly

when fitted on to the car.

The water proofing can be tested by , methods$ one by pouring water over the product or

by testing the vacuum pressure. The latter one is a scientific on method and !o follows

this process. The vacuum testing machine compresses of particular pressure and checks

the vacuum pressure. This is a very comple issue so co. places the light onto a replica of

original fiture and then does check.

5


57/98

Aere the product is now been transformed into a finished good. nd is ready for dispatch.

6rom this point the loaders carry the finish 8oods being stored into plastic bins wrapped

up in plastic poly bag covering through hand driven trolleys to the finished goods stores$

located outside the operation =one.

Do=98n, P-o=ss1n7 and D1s6a,=C* s soon as the product is shifted into the finish

goods store it becomes the property of 8ovt. thus ecisable under ecise act i.e. after the

ecise duty has levied. The invoices are issued as per the customer9s orders. In finished

good store also few of the manual operations taes place like putting the specified

stickers$ labels on to be packages and bifurcating the products into different desired

categories like tail lamp assembly$ (left side and right side).

The packages then are packed in cartons and are ready to move out of the factory gate as

the invoices and other documents are attached with a particular lot.

Aaving embarked on a focused and sustained effort in this direction$ the operating costs *

more specifically$ the cost of raw materials$ labour costs$ transportation costs and

conse


58/98

M,od S,9d;: :very process starting from metalling to paint shop to ssembly shop

has certain pre*defined standards. ll relevant charts have been put up against each

machinery consisting of its operational techni


59/98

INCENTIE SCHEMES

Time standards can be used by companies in four major waysC (+) to estimate capacities

and costs$ (,) to improve performance$ () to evaluate workers and to form a basis for

wage payments$ and (1) to measure labour productivity. The use of time standards for

estimation$ methods improvement and productivity measurement is widespreadK in fact$

almost all companies use standards are used as well in the development of incentive wage

schemes for at least a fraction of the workforce. Thus while hourly wage payment

(sometimes referred to as da!wor$) is more prevalent$ incentive wage schemes are fairly

common and widely discussed.

Incentive schemes are logically divided into two groupsC individual incentives and group

incentives.

The appeal of these incentives wage systems is readily understandable. The worker is

paid according to how much he produces$ not how long he works. It is generally accepted

that workers on incentive wages work harder than those who are paid by the hour$ other

things being e


60/98

The attractiveness of individual incentive wages is$ of course$ to spur worker effort.

GROUP INCENTIES

uch programs are initiated in work situations where it is difficult to calculate what eachindividual produces$ apart from what the individuals ahead or behind him produce. It is

well known that the group working together can greatly advance productivity.

There are a variety of group incentive programs$ but they can be divided into two major

groupsC

Those group incentives that apply to small groups of workers within a single plant

consider the work group as an individual. :ach worker receives a rate of pay that

depends on the productivity of the group as a whole. %nder such a group incentive$

all the group members are encouraged to work together to improve the group9s

productivity. Peer pressure can be great under such a system. s with individual piece

rates$ good time studies are essential to the smooth functioning of such group

incentives. lthough not widespread$ small work group incentive schemes are the

most likely to be found in worker*paced line flow jobs.

Those group incentives that apply plant*wide or even company*wide can be grouped

under the heading Eproductivity gain*sharing plans.F These plans are devised in such

as way that changes in the production process suggested by either workers or

managers$ as well as changes caused by increased worker effort$ result In bonus

payments for the workforce. uch plans are designed to increase the cooperation

between all those in the plant$ both direct and indirect labour$ and to have everyone

work smarter$ not just harder.

OTHER BONUS AND PRO5IT)SHARING PLANS

There are many other bonus and/or profit sharing plans that various companies have

instituted. ome involve only pension benefit for profit sharing while others pay cash

bonuses that come from company profits.

ome of these plans encourage worker suggestions and initiative$ others do not.

1


61/98

INCENTIE SCHEMES

Philips has been following the policy of minimum target achievement in terms of

sales revenue.

:very year company determines sales target that is to be achieved by the whole*team

including managers$ supervisors and operators. The current year target is &s. crore.

The firm don not pay any incentive if the production is short of target$ at the same

time if target touches the re


62/98

I88d1a, o66o-,9n1,; ,o 9s and d?o6 98an =a6a=1,1s:"oes the job give

the worker a sense of identityO "oes it call for any substantial autonomyO Is the job

self*contained or merely a small piece of a task with no real idetnity itselfO "oes the

job call for planning as well as eecutionO "oes it call for multiple skillsO Is the job

tied into the larger flow of information about the process and the control of that

processO

59,9- O66o-,9n1,; o- =on,1n9d 7-o


63/98

company9s standards and norms. The A& department is very enthusiastic in keeping

harmonious relations between employees and management. The managers come forward

to achieve the target optimum cost. uch measures in form of operations and concepts are

as followsC*

To,a P-od9=,1? Ma1n,nan=

Total productive maintenance (TP') is productive 'IDT:DD!: carried out by all

employees through small group activities.

The dual goal of TP' is =ero breakdowns and =ero defects. 3hen breakdowns and

defects are eliminated$ e


64/98

staff are seen as developing preventive actions and general breakdown services$

whereas operating staff take on the EownershipF of the facilities and their general

care. imilarly$ the respective responsibilities of the two types of staff are seen as

distinct. 'aintenance staff are held to be responsible for the training of operators$problem diagnosis$ and devising and assessing maintenance practice.

T-a1n a s,a 1n -?an, 8a1n,nan= s31s: The responsibilities of operating and

maintenance staff re


65/98

1. &educed speed due to discrepancies between designed and actual speed of e


66/98

The most obvious advantage of !" systems is that their ability to store and retrieve

design data


67/98

reconfiguring both technological and organi=ational systems. The application of

>%ID: P&-!: &:":I8D is an important enables of this.

'ost models of !I' involve some form of stepwise or hierarchical arrangement of

control$ from low levels where invidiual elements (machine controllers$ data collectors$

etc.) operate autonomously but also communicate information to the net level which is

responsible for the overall monitoring and control of level (for eample$ a manufacturing

cell). 6urther up$ a plant controller would handle the activities of several cells$ co*

ordinating their use of resources and monitoring their overall performance. #evel foru

would involve the integration of other key functional areas$ for eample$ design and

marketing$ and would represent a shared information system of the kind represented by

'D%6!T%&ID8 &:-%&!: P#DDID8 ('&P). #evel five would be an overallbusiness systems integration$ in which the financial and sales information would be

linked into the manufacturing system$ and level si would be the overall board level

strategic view which includes long and short term perspectives$ etc.

s key enabling technology in all of this is the computer network which has the

important architectural property that information can be shared throughout the system.

!hanges any where in the system will update the rest of the information in the systemK

thus the entire operation can be seen to behave as if it were a single$ enormously comple

machine. This is not$ however$ simply a centrali=ing and concentrating processK the key

property of the networks which form the Enervous systemF for !I' is the ability to be

simultaneously highly centrali=ed and highly decentrali=ed. Thus the economies of

shared resources and information can be added to those of local autonomy and fleibility

in uncertain environments.

!I' eemplified the distinction between EsubstitutionF innovation and more radical and

strategic innovation. !I' applications do not just offer considerable improvements in

traditional ways of making thingsK they also open up completely new and often highly

integrated options. !I' also differs from other technologies in having potential impact

on indirect cost areas as well as direct costs. It contributes to better co*ordinationK it

tightens the linkages between previously separate elements in a production chain$ it

brings powerful planning and monitoring tools to bear upon the problems of production

0+


68/98

chainK it brings powerful planning and monitoring tools to bear upon the problems of

production control$ and it reduces the amount of paperwork re


69/98

CENTRALISED R&D LAB

The use of robotics at assembly shop to perform comple operations like application of

adhesive on tail lamps is a part of productivity measure being adopted by the

company. lot of time and cost is thus saved by this process.

Jo> -o,a,1ons:

Philips keep rotating the operators from one machinery to other and from one process to

others$ so as to make everyday perfect in all operations and to reduce boredom by giving

a new job and work environment.

)vens #echanism

The ovens placed in moulding shop are etremely beneficial to increased productivity as

the sucking system inhales the plastic material automatically from the tanks and differ

melting transfers the material to different machines. ll this process is totally automated

and a lot of man power has been reduced as the same time efficiency in operations have

also increased.

2ai/en *ctivity

recent activity under Bai=en took place at Philips where employee and operations

provided a solution to the scratch problem. Thus company encourages such activities.

This initiative is very much related to productivity as this a reinforcement for a worker to

Co-6o-a, ?

Co-6o-a, ?

D1?1s1on F

D1?1s1on F D1?1s1on Y

D1?1s1on Y

R & D

R & D

0


70/98

give valuable suggestion and to bring into notice flows in process$ as they get reward for

this and mistakes other employees also.

# S

This conception from Qapan has a very wide are of application and is very relevant for

material management functions.

+. eiriC It literally means sorting out. It professes sorting out the necessary items in the

workplace$ stores$ etc. and discard them thus$vacating valuable space$ reducing record

keeping. :tc.

,. eitonC it standards for systematic arrangement. This emphasises that we should

arrange only necessary items in good order so that they can be picked easily. ID other

words$ it highlights the need for$ place for everything and everything in its place.

. eisoC It signifies spic and span workplaces and stores. It enjoins everyone to keep the

workplaces completely clean and tidy so that there is no dusty anywhere.

1. eiketsuC This principle conveys a serene atmosphere i.e. maintaining high standards

of housekeeping at workplace and in the organi=ation at all times.

. hitsukeC it implies sticking to self* disciplien without being prompted by supervisor

or manager. Train people by setting an eample so that everyone follows good house

keeping discipline automatically.

The company follows this app4roach very minutely and takes case of every aspect of this

principles. The visual defect. !heck system$ placing of water foot* not provision$

scheduled cleaning of machines and work place$ disposing plastic scrap at the earliest$

arrangement of raw material as well as finished good appropriately etc. are few activities

that proves that the company9s approach is very positive and enhance productivity

ultimately.

01


71/98

S=,1on: Mo9d1n7

S. No. 'o-3 Don Usa7 o ,


72/98

'ultiplication C ccidents multiplies the fears of all concerns.

"ivision C "ivides the pleasure of family

wareness is cultivated

!ase is observed

"are is ehibited in time.

MATERIAL STORAGE

Philips finished goods are tail lights/head lights which are fragile in nature and the raw

material or semi*product is also of comple nature so the company keeps these aspects in

mind and ensures that there is no loss during handling the material and while storing the

components. The basic storage devices used by the company areC*

(+) PlatformsC To keep the frame of tail light half frames of different si=es and

specifications.

(,) !artonsC To store wire assembly units.

() Plastic >insC To store finished goods i.e. tail lights/headlights wrapped up in a

plastic polybag.

To store the indicators lights of different si=es and specifications.

MATERIAL HANDLING

6eatures of 'aterial Aandling :eing Placed at PhilipsC*

afe to operate and use

Doise free in operation

hould not generate fumes in operation

hould be fleible

hould be reliable and sturdy

hould be compatible with process re


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Principal 8roups of 'aterial Aandling :ased on their usage$ material handling e


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The vertical bars show the percentage of direct dispatches that were achieved. In the first

months of the operation$ roughly 5J of dispatches from the :astern region were direct

from the plantK in months this figure had improved to J. :ven in the outh$ where

the figure was far lower initially$ the company moved from 5 to +5J in months. Inrecent times$ these figures have become even more impressive. If one were to analyse the

costs involved$ there would be huge savings as a result of direct dispatches. 3hile the

primary transportation cost increases$ there is a complete elimination of warehouse costs$

stock financing costs and secondary transport costs.

Proper planning and handling is re


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Inventory !onversion

Period(days)

22 42 01 0 2

INENTORY TO GROSS 'ORING CAPITAL

Inventory to gross working capital ratio goes down in the year ,554*+5 as compared to

,557*54. It increases in the year ,552*57$ but there is an sharp increase in the year

,554*+5. Beeping in view the above position$ the firm Philips Inida #td. should keep on

going due importance to inventory as to reduce costs.

INENTORY TURN OER RATIO

This ratio has been decreased from 1.2, in ,550*52 to .7+ in ,552*57 and then increasedto .20 in ,552*57. Then it decreased to .04 in ,557*54 but it again decreased to 1.77

in ,554*+5. -n going through this ratio we observed that the firm was maintaining its

inventory at most minimum level in the year ,552*57 and ,557*54 as the inventory turn

over ratio was much high as compared to other years.

teps should be taken by the firm Philips Inida #td. to increase the inventory turn over

ratio for better management of inventories and reduce the cost of inventory.

INENTORY CONERSION PERIOD

It refers to the period that manufacturing unit takes to clear a lot of stock. There has been

increase in the inventory conversion period for the first year. It increases from 22 days in

,557*54 to 42 days in ,554*+5. Thus it remains constant in ,55,*51. It is desirable to

have short conversion period because it will help in reducing accumulation of

inventories.

SUPPLY CHAIN MANAGEMENT IN PHILIPS

upply chain management operation at Philips India R how it was implemented and what

benefits it has yielded for the firm. Three years ago$ despite the fact that Philips India

was going through difficult times$ the firm continued to remain cash rich. alaries to

employees and payments to suppliers were not delayed$ and borrowings were actually

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lower$ especially during the previous twelve months. The main reason that made this

possible R despite the si businesses spread across 7 manufacturing locations R was the

immaculate handling of the. supply chain by business heads

The figure alongside depicts the manner in which Philips effected reductions in the cycle

time by getting the waste9 out. !onceptually$ there is a difference between a supply

chain and a value chain. The broad hori=ontal arrow at the top of the figure depicts the

value chain with three distinct heads R defining$ creating and communicating the value *

and these are all goals to be achieved. firm can make a great product$ deliver it very

well$ but it may still not find customers. It must define the value propositionK identify the

customer$ and communicate that value. The supply chain is the process in between9 i.e.

the process of creating the value. This involves a product creation process$ a sourcing

process$ and a make*and*deliver process.

The goal of supply chain management in terms of the flow of goods (from suppliers to

customers) is cycle time reduction9. In terms of money flow (from customers back to the

suppliers)$ the goal is cycle time reduction in receipts and payments9. 6or instance$ in a

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multi*business multi*location company$ money needs to be moved through 0$555*+1$555

people down to the suppliers. 6inally$ there is information flow (which$ as depicted in the

figure above$ is in both directions) where the goal of !' is to ensure speed$ efficiency$

and integrity of information. These are the goals any organi=ation must aim for.

2+


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The inventory turn over ratio can be further subdivided into the following ratiosC

Mears ,55*

,550

,550*

,552

,552*

,557

,557*

,554

,554*

,5+5

&aw 'aterial

Inventory Turn -ver

&atio

.5 .+, +.5 ,.1+ +.2

3IP Inventory Turn

-ver &atio

,.11 ,.51 7.+1 +.12 10.2

6inished 8oods

Inventory Turn -ver

&atio

+2.14 +,.05 +2.14 ,+.12 +7.,2

verage ge of &.'

Inventory

+,5 47 0 ++ ,,

verage ge -f

6inished 8oods

,+ ,4 ,+ +2 ,5

!. RA' MATERIAL INENTORY TURN OER RATIO:

This ratio varies slightly from .5 in ,557*54 to .+, in ,554*+5 and +.5 in ,552*57.

gain it increased to ,.1 in ,557*54. >ut in ,554*+5 it sharply decreased to +.2. It is

better to have a greater raw material turn over ratio.

2. 'OR IN PROCESS INENTORY TURN OER RATIO:

Taking a general view of this ratio over a period of five years it does not seen stable and

comparable to another year.

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. 5INISHED GOODS TURN OER RATIO:

This ratio has decreased from +2.14 in ,557*54 to +,.0 in ,554*+5. It showed a large

amount of finished goods had remained idle for most of the period. The firm should

device methods to improve this ratio because this ratio adversely affects the other ratios.

@. AERAGE AGE O5 RA' MATRIALS IN INENTORY

The analysis of five years does not reveal any bright picture of raw material in stock.

-nly in the year ,554*+5 the average age of the raw material in the stock reduced

drastically to 47 days. The firm should reduce the average age of raw material in stock

for better utili=ation of material with less investment.

AERAGE AGE O5 5INISHED GOODS INENTORY:

The period for which the finished goods remain in stores is almost constant ecept in the

year ,557*54. The decrease in that year was due to less reali=ation of payments.

'anagement should take steps to reduce this period.

-n the whole the analysis shows that the inventories are not being managed as effectively

as it should be. The organi=ation should adopt various techni! analysis or

other inventory models to reduce inventory. Proper care should be taken for handling raw

materials and finished goods so that the losses are minimi=ed. This will eventually result

in higher inventory turnover. pecial attention should be paid to finish goods lying in

stores. 'ore attention is re


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SUPPLY CHAIN MANAGEMENT OPERATION AT PHILIPS INDIA

PI# scrutini=ed the best !' practices across the world and carefully studied the !'

models of successful companies such as "ell !omputers. The company decided to use

the upply !hain -peration &eference (!-&) !' model for restructuring its supply

chain. ccording to the model$ a supply chain is broken down into four different

processes * planning$ sourcing$ making and delivering.

These four processes are supported by a set of performance metrics$ such as customer

service$ costs$ fleibility$ and assets. %sing this framework$ PI# worked out a mechanism

to assess itself on a process map$9 which it referred to as the maturity grid9. s per this

grid$ there are four distinct stages of maturity during the life of an organi=ation.

The informal organi=ation * 6ocuses on procedures and


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The integrated organi=ation * In this case$ the entire source*make*deliver chain is

integrated either in teams or under the supply chain manager of the organi=ation$ who

is responsible for the flow of goods (teps 2$ 7$ 4).

The etended 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 (tep +5).

The efficacy of a company9s supply chain increases as it moves in stages from being an

informal organi=ation to becoming an etended enterprise. PI# took points +$ 1$ 2 and +5

in the figure given above as its benchmarks,. Philips D?9s global lighting and

semiconductors business was rated between 0 and 2. Thus$ the !' eercise at PI# was

largely aimed at attaining the above benchmarks. PI#9s !' implementation initiative

was spread over two phases. The first phase was from ,554 to early ,5+5 and the second

beginning in mid ,5+5.

In the first phase$ the company closed down its regional distribution points$ reduced the

number of sales depots from 2 to ,4$ consolidated its manufacturing locations to just

four plants and implemented !T? production in*house in Pune. !ommenting on the

decision to prune manufacturing bases$ B & &aj$ 8eneral 'anager$ (!' * !: "ivision$

PI#)$ said$ EThe company still believes in a single manufacturing location to have better

control on all processes like . Aence it is re


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Det$ PI# identified reduction in the cycle time1 of its activities as a primary step to

eliminate any wastages. The company began the cycle time reduction eercise at its lamp

production units. The rationale for starting with the lamps unit was the successful

completion of such an eercise at the parent company Philips D? in +444. ee 6igure IIfor a typical supply chain for lamps. !omponents sourced either through imports or

locally are converted into finished lamps$ which then enter the warehousing*distribution*

trade*end user chain.

!ycle time can be reduced by reducing the hori=ontal cycle time (time spent during the

flow of goods from one point to the other) and/or by reducing/eliminating the vertical

cycle time (denoting =ero movement of goods). s per Philips D?9s eperience$ the

vertical cycle time usually locked up a significant amount of money and resources.3hile$ the parent company9s cycle time was 47 days * hori=ontal cycle time of ,4 days

and vertical cycle time of 04 days. In +444$ Philips D? began working towards reducing

this by 25J over 1 years.

>y ,5+5$ the company had successfully completed 5J of the target. This eercise

covered the entire supply chain including production centres$ warehouses and distribution

centres. PI# also replaced the eisting multi*stage distribution chain (factory*warehouse*

coupling plantwarehouse*retail store) setup for its lamps with direct shipment of products

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to consumers. This move was epected to save costs as a result of direct dispatches.

lthough primary transportation costs increased in this$ the company will be able to

completely eliminate costs of warehousing$ stock financing and secondary transport.

!ommenting on the changes brought about in the goods flow model$ 8eneral 'anager

(!'$ !: "ivision)$ B & &aj said$ EThe objective to restructure the goods flow model is

to radically rationali=e the manufacturing bases at Philips. To meet the target$ we have

adopted a model of mother warehouse at Pune which caters to all India reoth sales branches and depots

were connected to each other through a Q.".:dwards :&P package.) >ased on these

orders$ inv

Operation Management & Supply Chain Management in Philips India Final-smu

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