Case Study: Ashok Leyland

Ashok Leyland, one of India's largest private companies, is a part of Hinduja Group. It is one of the country's largest automobile and auto component companies. The company o?ers a range of trucks, buses, special application vehicles and engines across more than 40 countries. During 2005-06, the company produced a total of 65,000 vehicles out of which it has exported 4,879. In the domestic market, it sold 56,776.Rising raw material cost has been a serious concern for the company. A steep rise in steel and copper prices meant the company decided to streamline its supply chain process and start an SCM project to optimize its supply chain process and rationalize its sources. The project, Oscars Inbound, includes supplier partnership vendor base rationalization, tiering of suppliers and cluster information, inventory optimization through JIT and LCL, total cost management, logistics initiatives-sourcing and global sourcing.

Gains:

A. Supplier partnership covers engineering and technical support, global market leader, global availability of spares, testing capabilities, improved ?eld performance, system supplier, JIT supplies and world-class technology

B. Partnership gains include vendor consolidation under tier-1, continuous technological upgrading of products without in-house investment, shorter development lead-time, value engineering and cost reduction, improved ?eld performance, inventory e?ciency through JIT supplies and human power rationalization

C. Vendor base rationalization. Gains from source reduction include pricing on volumes, improvement in quality and reliability, vendor improvement program me for continuous improvement, tiering for ease of ?tment, system buying and reduction in paperwork

D. Vendor tierisation includes economies of scale, system buying and rationalization of supplier base. Cluster formation includes 55 adherence-mistake proo?ng, process improvements leading to self-certi?cation

E. Inventory level has reduced from 23 days to 18 days

F. Total cost management includes various initiatives such as daily management, process control, design, technology and capacity. Total savings were 3 per cent of total operating cost

G. Logistics initiatives include transporter-based rationalization, Kanban pull from satellite warehouses, enhancement of truck, turnaround, load, space and route optimization

H. Stores outsourcing covers activities outsourced to 4PL service providers. The services are receipt accounting/documentation, binning and debinning, issue accounting, perpetual inventory and reverse logistics for pallets. All these services have saved 42 man-days;

I. E-sourcing includes global benchmarking, gain through bidding, identi?cation of cost-competitive sources, introducing best sourcing practice, increasing efficiency and minimizing costs, improving the value chain's bottom line. All these activities saved 11.5 per cent of total material cost.

Question:

1. In 200 words or less, identify any Cons you see.