Revamping the

Supply Chain
The Ashok Leyland Way
Submitted by: Sec B,Group 9
Anup Kamath 13070
Dheeraj Govind Sasi 13080
Lokesh Srivastava 13090
Oindrila Roy 13100
Shreyas H.N. 13110
Vikas N 13120
Background of the Case
Questions
Ashok Leyland, with an aim to reduce costs improved the
in-bound supply chain through several important strategic
revamping measures. Explain
The revamp of the outbound supply chain had the twin
objectives of customer satisfaction and reducing finished
good inventories. Discuss how Ashok Leyland re-
engineered its out-bound supply chain.
Discuss in brief the quantitative benefits in regard to various
measures of supply chain revamping exercise for AL


Contents
Ashok Leyland is a commercial vehicle manufacturing
company based in Chennai, India
The companys major business is in logistics, i.e., moving
goods and people. This area had seen a severe decline in the
late 1990s due to the recession
The recession forced the company into revamping their
supply chain to cut costs and improve their processes.
Case Background
Objectives of In-bound supply chain re-engineering
Reduced Material Costs
Reduced Invisible Carrying costs
Steps taken
Actively reducing the number of suppliers from 1400 to
750
Suppliers chosen if they had good quality systems
Cost effective processes
Assured process capacity
Continuous improvement via feedback, compliance to
legal/statutory/commercial requirements per AL
Suppliers need to be developed enough to come under AL
self-certification and traceability system

Quest 1: Discuss AL in-bound supply chain
Used the tiering model to consolidate suppliers
AL interacted with tier 1 suppliers who sourced components from
tier 2 and tier 3 suppliers, assembled components and sent to AL
Engaged in Value engineering
All vendors needed to move to JIT for high value, high value
components
Components were split based on costs relative to total product cost
AL produced only that which was needed for the step, never extra
Used a funnel planning system
Split as 2-2-8 week plans



Quest 1: Discuss AL in-bound supply chain
(Contd)
Created a CFT (Strategic Sourcing + Corporate Quality
Engineering)
Used skills and knowledge to create a Single window system to
interact with their clients
Advantage for AL
Unit Material Functions from AL interacted with approved suppliers to PULL
materials in line with their production plan
Advantage for Suppliers
Share component drawings with AL
Easily Negotiate Prices
Understand plans for Long term volumes
Assistance from and consultancy for AL from quality to management issues
Quest 1: Discuss AL in-bound supply chain
(Contd)
Engaged vendors in Joint Improvement Plans (JIT)
Provided Technical assistance and financial support
Strategic Sourcing
Wanted process gains that were real, painless and sustainable for
the suppliers
Conducted tear down studies and value engineering analysis
Aimed at reducing costs by substituting, Reducing or elimination
without reducing quality and performance
Shared with suppliers

Quest 1: Discuss AL in-bound supply chain
(Contd)
Objective of Out-bound supply chain
Improve Customer Satisfaction
Reducing Finished Good
Improve Service Levels with optimum pipeline inventory level
Plans focused on
Order To delivery time
Reliability of delivery
Order status information

Quest 2: Discuss how Ashok Leyland re-
engineered its out-bound supply chain
Maintained a tight inventory model via three tiered model

Quest 2: Discuss how Ashok Leyland re-
engineered its out-bound supply chain (Contd)
Plant Sales Yard
- National pool
- Holding rare models
- Excess of regional needs
Five Regional Stock pools
- Ensured JIT supplies to Supplies to Regional Offices
Regional Sales Offices
Quest 3 Discuss the quantitative benefits
in regard to the revamping exercise of AL
Profit changes

Quest 3 Discuss the quantitative benefits
in regard to the revamping exercise of AL
98-99
Loss of 36.7 crores
99-2000
Profit of 1.9 Crores
Total sales of Rs 1092.8 Crores
Change
Increase of 38.6 Crores in Profits
Result of strategic raw material sourcing
Raw Materials
Costs down by 1-2%
Inventories
Reduction in inventories amounting up to 300 Crores
This resulted from tightening supply chain and inventories
Quest 3 Discuss the quantitative benefits
in regard to the revamping exercise of AL
Sales
AL sold 37,859 HCVs
27% increase over 98-99
Total income
1999-2000 income amounted to Rs 2,611.41 Crores
25% increase over corresponding figure in 98-99

Quest 3 Discuss the quantitative benefits
in regard to the revamping exercise of AL
Can make use modified goods wagons for transportation of
trucks.
Invest more in R&D.
Collaborate with other companies for technical support



Recommendations for further improvement
Thank You