TOCICO

This presentation explains how a manufacturing company, Godrej Locks Division, doubled its profits while looking at dismal economic times. It is organized into five sections: A background & compelling reason; improving business performance; delivering competitive-edge offers; exploiting constraints in the supply chain; and aligning the business enterprise. This 113 year old company is comprised of 5 manufacturing locations; 1200 components; 45 domestic suppliers; 15 job work suppliers; 10 international suppliers across 5 countries; and 3 tool repair suppliers. The product line is: 700 manufactured SKUs, 125 traded SKUs, and customized solutions. The supply chain consists of 5 mother warehouses, 21 distribution hub warehouses, and 1 bonded warehouse. The customer base includes 800 domestic direct institutional customers; 40 international customers; 500 domestic distributors / direct dealers, 20,000 retailers, distribution in 480 districts of India, and 3 major captive OEM customers. Distributors undesirable effects (UDEs) include: surpluses of many SKUs and shortages of other SKUs; constantly demanding higher margins and /or incentives to liquidate excess stock; significant stock pile-up during month /quarter / year end; incentives based on purchases from Godrej; forced to buy whatever is available in order to meet targets; retail outlets expect frequent supplies in small batches whereas supplies from Godrej is in bulk; and high credit to retail outlets. Godrej Salespersons UDEs include : incentives dependent on distributor buying; requesting distributors to buy material at month-end; distributors had a higher control; lack of job-satisfaction; entire effort towards selling to retailers during the first two weeks of the month to liquidate high stocks piled up with distributor at month-end and thereafter, run around in the market to collect money for distributors; afraid to demand market corrections from non-performing distributors. UDEs from the supply group were also provided. Results include: profits almost doubled; cash flow increased over 100%; inventory is reduced by 40% over the last year; 1/3rd of FG warehouse space has been released; 30% of SKU accounted for 91% of sales and 93% of throughput and inventory turns of distributors increased by more than 3 times.