Revamping the Supply Chain - The Ashok Leyland Way

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Case Details:

Case Code : OPER004
Case Length : 08 Pages
Period : 1992-1998
Organization : Ashok Leyland
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobiles

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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AL did not seem to succumb to the 'uncertainty gloom' that was playing havoc to its business environment. It decided to meet the challenge by re-gearing its systems, be it material order, procurement, material handling, inventory control or production. AL conducted brainstorming sessions inviting ideas on cost cutting. Quality Circle teams were formed for this purpose. Said Thomas T. Abraham, deputy general manager, Corporate Communications, "Our Quality Circle teams were very helpful at this juncture and the worker involvement made it easier to address cost cutting." AL took every employee's ideas into account and figured out a way to keep things going and reduce production without inflicting pain.

The recession saw AL waging a war on wastage and inefficiency. AL took many initiatives ranging from tiering its vendor network to reducing the number of vendors, and consequently, moving to a just-in-time (J-I-T) ordering system, to joint-improvement programmes (JIP), which were essentially exercises in value-engineering undertaken in association with key vendors.

It set up different tier-levels to improve the quality of the suppliers. Tiering formed the basis of the vendor-consolidation drive. Till 1998, Ashok Leyland used to source the 62 components that went into its front-end structure of its trucks and buses, from 16 suppliers.

In 2000, one tier-I vendor sourced the products from the other vendors and supplied the assembly to the company. This saved cost and time provided the vendor network was well coordinated with AL's own manufacturing operations. At AL, Vendor Development and Strategic Sourcing were handled by Corporate Materials Department (CMD).

CMD identified the vendors, rated the vendors based on feedback received from Supplier Quality Assurance Cell, send drawings/specifications, called for quotes with detailed breakup of operation-wise costs, and negotiated the price at which the parts would be supplied. In addition to CMD, there were Materials Management Departments (MMDs) for scheduling based on unit production plan...

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