Takeaways for CPOs from Indian Auto Industry’s Most Successful VMI Program
It’s amazing what a vendor managed inventory system can do to your supply chain. There is a lot to learn from the most successful vendor managed inventory systems for CPOs.
One of Indian auto industry’s leading manufacturers has put in place a successful vendor managed inventory system. The VMI program has enabled it to sustain cost leadership over the long term. Here is an overview of their VMI program.
75% of Components Sourced from Local Suppliers
The auto manufacturer has focused on building strategic relationships with suppliers from the ground up through vendor consolidation. A key aspect of its localization has been to develop captive suppliers that hold inventories at their warehouses.
These suppliers’ warehouses are located within a defined logistical radius. Vendor managed inventory systems allow the auto manufacturer the convenience of on-demand onsite delivery within a short period of time.
100% Visibility into Clean Procurement Data
The auto manufacturer uses an automated inventory replenishment and reordering system. All strategic suppliers have integrated their inventory holding data with that of the single digital procurement solution of the auto manufacturer.
Collaborative data sharing has paved the path for collaborative planning among the auto OEM and its suppliers. Each stakeholder in the supply chain has complete visibility into the evolving dynamics of demand and supply.
JIT Delivery and Lean Inventory Holding
The automotive manufacturer has a well-defined system for suppliers to send their industrial goods to its plant premises. The auto manufacturer allows suppliers’ trucks to enter its plant premises 30 minutes before the scheduled time for stock replenishment.
This has radically reduced working capital blockage. It has also unlocked more real estate for storage of multiple categories of indirect procurement items, and reduced warehousing costs.
6s, Kanban, and Bin Card at Supplier’s Warehouses
The automotive manufacturer conducts periodic visits at its suppliers’ warehouses. During these visits they audit the total quality management systems and best practices of suppliers. As part of the vendor managed inventory program suppliers are required to adopt 6s, kanban and bin card systems at their warehouses.
Moglix provides vendor management inventory solutions that enable both agility at scale and reliability to your indirect procurement. To know more about vendor consolidation and vendor managed inventory solutions for indirect procurement, visit https://business.moglix.com/optimize-mro-procurement
How Can Site Managers Calculate Infra Material Quantities for Concrete
While a project site is a self-contained system, it relies on specific processes to keep things running well. This is where a project manager and their team come in to ensure that each system delivers the needed relationships and output on time and budget.
From managing the staffing to controlling the raw materials that flow in, this is the job of a site manager. Of course, one of the most critical materials used in almost all construction sites is concrete. Depending on construction, a structure may include beams, slabs, columns, and foundations.
The total volumes of each structural element or part of a member will determine the volume of concrete required for this structure. Knowing how much to order is incumbent on understanding the use and volumes needed to complete the structure.
The Application of Concrete in Construction
Concrete consists of coarse aggregates (particulate elements including sand, gravel, crushed stone, and slag) bound together with cement. Cement is a compound that binds things together, such as aggregate, by bonding to them and drying over time. Although many other cement forms exist, Portland cement is the most popular and used in concrete, mortar, and plasters.
Prerequisites for Right Quality Concrete
Proper concrete demands proper mixing for the creation of robust and homogeneous concrete. Concrete production is time-sensitive, and because it is manufactured as a viscous fluid, it must be poured before it hardens.
For applications that demand a short set time, certain concrete is specifically engineered to harden faster. Concrete is also blended into dryer shapes in some manufacturing settings to make precast concrete goods such as concrete walls.
Factors That Improve the Strength of Concrete
The strength of the concrete can be increased during the early stages of curing by keeping it damp. This is accomplished by using procedures such as spraying concrete slabs with chemicals that form a water-retentive coating or ponding, which involves submerging concrete in water and wrapping it in plastic.
Knowing the process and the outcome is essential, as this will determine how to assess the consumption. With this knowledge, the site manager of infrastructure companies can build a bill of materials for all the necessary raw materials.
The Absolute Volume Technique to Calculate Infra Material Quantities
The absolute volume technique can determine the quantities of ingredients for concrete, such as cement, sand, and aggregates, needed to produce the required amount of concrete with given mix proportions.
According to this technique, the volume of fully compacted concrete is equal to the absolute volume of all concrete components, including cement, sand, coarse aggregates, and water.
Site managers, site engineers, civil engineers, and mechanical engineers need to work together to assess the procurement of raw materials. The best way is to use one of the many calculators available freely online. These calculators also highlight the importance of other factors that affect concrete procurement for infrastructure development projects.
What Does the Road Development Boom Mean for EPC Companies
“My target is to achieve 100 km per day of highway construction,” said Nitin Gadkari, Union Minister for Road, Transport & Highways, addressing a virtual event organized by industry body CII in August of 2021.
This was the road development goal he set for the various EPC companies in India and the different governing agencies to pull up their socks and build using sustainable material, but to also build faster!
The emergence of the National Infrastructure Pipeline is suggestive of what to expect from India’s government going forward.
The National Infrastructure Pipeline (NIP) is a five-year package of social and economic infrastructure projects in India with a total sanctioned budget of 102 lakh crore (US$1.4 trillion). The pipeline was initially announced by India’s Prime Minister Narendra Modi during his Independence Day speech in 2019.
As part of the NIP, roadways, expressways, highways, road construction projects in India, railways and power sector assets will encompass over 66% of the total estimated value of the assets to be monetised. The remaining upcoming sectors include telecom, mining, aviation, ports, natural gas, and petroleum product pipelines, warehouses, and stadiums.
For EPC companies in India, this boom in road development projects means they are now in a position to build back better. However, procurement of construction materials will be critical for them to complete these infrastructure development projects within budgeted time, cost and quality.
Timeliness: EPC companies in India will require an agile supply chain for on-time procurement of construction materials. With a digital procurement solution, they can now streamline their sourcing, logistics, and even payments.
It results in the faster delivery of turnkey projects than a traditional model of offline procurement. Simple aspects like being able to digital monitor the various stages of the logistics journey lead to better visibility into the time to sustain in case of a disruption.
Cost: EPC companies need to ensure they are in the best position to negotiate the best cost. A diverse and inclusive supplier base is the key to getting the most competitive cost quotations on construction materials.
A diverse supplier base managed through a single point of contact enables raw material suppliers to be competitive. EPC companies can get the best product at the lowest price point, without skimping on delivery, quantity, or quality.
Quality: Meeting the custom quality specifications for materials like TMT bars, cement, plates, steel, and ready-mix concrete is critical for EPC companies to build high quality roadways, expressways, highways, and bridges. With clean procurement data, EPC companies can reduce the risks of order-supply mismatches.
EPC companies in India will be the change-makers, enabling transformation and fueling the growth of infrastructure development projects in India.
Being in the unique position to enable the procurement of construction materials such as TMT bars, cement, plates, and ready mix concrete, gives EPC companies an edge to deliver the value that the National Infrastructure Pipeline seeks to create.
If you are in the business of infrastructure, construction, or development, then chances are you will benefit from Moglix procurement solutions for infrastructure development projects. To know more visit https://business.moglix.com/epc/
Tesla’s Record Results Despite Supply Chain Disruption
Tesla has weathered its share of supply chain disruptions in a manner “unrivaled in the auto industry”. While other automobile manufacturers have reported a decrease in sales, Tesla has bettered it’s net earnings.
It had posted USD 1.14 billion in the second quarter of 2021. In the third quarter, Tesla posted a record quarterly net earnings of USD 1.62 billion and sales of 240,000 vehicles.
What Tesla Got Right But Others Did Not? Managing Multiple Supply Chain Disruptions
All automobile manufacturers were affected by global semiconductors shortages, which left procurement professionals in the automobile industry short on accessible stock and consumers with fewer options.
Many issues, including semiconductor shortages, port congestion, and rolling blackouts, have hampered automobile manufacturers’ ability to maintain plants functioning at full capacity. Even Tesla has conceded that global supply chain disruptions had made the achievement a little challenging.
However, Tesla got three things right that allowed it to navigate across troubled waters. These are supplier base management, collaboration with suppliers, and better forecasting and planning.
Supplier Base Management and Chip Substitution: Agility at Play
Elon Musk, CEO of Tesla, revealed that the company handled the worldwide chip shortage by upgrading its car software to handle alternate processors.
Due to a growing demand for new automobiles, the gap in supply upended the auto industry. It resulted in factory shutdowns, longer wait times, and higher pricing.
However, Tesla has over the years invested in its supplier base management program. It has built a diverse and inclusive supplier base enabling it to switch to different chips and develop the software in a few weeks.
Working with Vendors to Co-Create a Custom Product: Collaboration in Focus
Tesla was able to quickly put together a custom product. Tesla’s ability to identify the right supplier through a pre-defined approval system enabled it to co-create the customized product in a very short period of time.
It enabled the production, engineering, and supply chain teams to quickly move forward and build the product according to specifications that were pre-set. Tesla’s collaboration with suppliers enabled it to demonstrate agility at scale for its indirect procurement.
Early Visibility for Better Forecasting and Planning: Digital Supply Chain Transformation
Tesla was able to identify the challenges quite early on. Its digitally integrated supply chain with multiple suppliers, logistics services partners, and warehouses onboard worked as an early warning and control system.
Early visibility into the divergence of its supply chain KPIs from expected values allowed it to pierce the mist on the screen. It enabled the automobile manufacturer to forecast and plan better.
To know more about how an indirect procurement solution can work for automobile manufacturers, reach out to Moglix. Explore the best indirect procurement solutions for automobile companies. Click here to know more: https://business.moglix.com/optimize-mro-procurement
This Sea Link Bridge is Rewriting Procurement for Infra Projects in India
The Mumbai Trans Harbour Link (MTHL) is also known as the Sewri Nhava Sheva Trans Harbour Link. It is an under-construction 21.8 kilometres , freeway grade road bridge connecting the Indian city of Mumbai with Navi Mumbai, its satellite city.
Mumbai Trans Harbor Link: The Longest Sea Link Bridge in India
When completed, it would be the longest sea bridge in India. The bridge will begin in Sewri, South Mumbai, cross Thane Creek north of Elephanta Island, and terminate at Chirle village, near Nhava Sheva. The road will link to the Mumbai Pune Expressway in the east and to the proposed Western Freeway in the west. The sea link will contain a 6 lane highway, which will be 27 meters in width, in addition to two emergency exit lanes, edge strip and crash barrier.
A Turning Point for Infrastructure Development in India
The project is estimated to cost ₹14,262 crores (US$2.0 billion). The MMRDA awarded contracts for the project in November 2017; construction began in April 2018 and is scheduled to complete within four-and-a-half years. The MMRDA estimates that 70,000 vehicles will use the bridge daily after it opens.
Agility At Scale for Infrastructure Development in India
Infrastructure development in India has only ever been conducted on a PPP basis. The MTHL is one of the largest projects in India to be delivered using an EPC-Design-Build program. This project is also one that is being built in three phases or three packages as they are known – all of which follow the same design guidelines provided by the MMRDA and all other authorities involved.
The MTHL is being labelled as one of the most significant EPC projects in India. This means the sheer number of consultants, contractors, and companies involved in this project are already higher than ever before.
In addition to this, raw material procurement solutions for infrastructure companies will play a big role. EPC Companies, as well as all the materials used, need to go through rigorous approvals and inspections before being deployed on a project of this magnitude.
Raw Material Procurement Solutions for Infrastructure Companies: The Secret Sauce
This project represents just one thing. It is one massive infrastructure project with a lot of moving parts. The scale of raw material procurement is unprecedented. It is a single digital procurement ecosystem that allows granular control and visibility on the end to end supply chain.
It is also one of the first infrastructure development projects to rely on a fully digitally integrated procurement solution. The project is reimagining procurement for infrastructure development projects in India.
The Takeaway for Infra Procurement Organizations From the Project
The right procurement solutions for infrastructure companies can reduce the PR to PO cycle time in procurement by up to 80%. The agile PR to PO cycle time can result in 20% cost savings due to integrated supply chain, and even a 30% rise in operational efficiency.
All of these are a result of digital procurement maturity to track the end to end supply chain journey of raw materials. Any way you look at it, though, this project is rewriting procurement, as processes need to be quick, reliable, consistent, and efficient.
To know more about how an EPC solution can work for your construction or infrastructure project, reach out to Moglix. Explore the best raw material procurement solutions for infrastructure companies. Click here to know more: https://business.moglix.com/epc/
Building Flexible Supply Chains in Manufacturing: Lessons from the Covid19 Pandemic
As countries continue to be affected by the disruptions caused by the transmission of the Coronavirus pandemic, enterprises in the manufacturing sector are becoming increasingly wary of what the future of their procurement should look like. While the transient setbacks to a large number of suppliers are nudging supply chain leaders in the manufacturing sector towards exploring local sourcing options, fact remains that global procurement offers the best supply chain risk mitigation outcomes and is therefore likely to not only stay but grow once the manufacturing sector looks to recover and rebuild.
The Costs of Supply Chain Disruption on the Community and Businesses –
As governments across countries issue orders for lockdowns and look to freeze the mobility of multimodal logistics, supply chains across the globe are coming to a grinding halt. For many industry verticals like FMCG, pharmaceuticals, chemicals and life sciences that manufacture essential goods and are thus still in operation, the capability of enterprises to withstand the disruptive supply-side shocks also determines the potential risks of entitlement failures what with communities of people being dependent on uninterrupted supplies of PPE, masks, sanitizers, soaps, medicines, shelf-stock food items, groceries, and other edible items. The Coronavirus pandemic presents them with multifold challenges of procuring:
- MRO items to keep their operations up and running
- effective packaging to roll-out products into the market
- warehousing to maintain sufficient inventory
- logistics to ensure fast last mile delivery
The Contemporary Scope of Local Sourcing and the Promise of Global Procurement –
The supply chain challenges facing enterprises in the manufacturing sector may nudge them towards searching for new suppliers with local footprint and in proximity to the points of manufacturing, new logistics service providers and even new sub-contractors with industrial-scale capabilities for agile manufacturing to meet the demand gap. However global procurement offers enterprises unparalleled advantages of supply chain de-risking that are beyond the scope of local sourcing.
Success Stories of Enterprises Using Global Procurement to Overcome Supply Chain Disruptions –
As arguments for greater localization of supply chains and procurement networks begin to gain traction, here are a few lessons from success stories of enterprises that have leveraged global procurement to navigate supply chain disruptions.
Intelligent Product Design Can Lend Greater Flexibility to the Supply Chain
Back in the first decade of the new millennium, Nokia was a leader in mobile handset manufacturing with the demand for its products at its peak. The Finnish mobile company had manufacturing facilities across countries in the world. In the year 2000, a mishap destroyed an important chip manufacturing facility located in Albuquerque that supplied Nokia. Despite the mishap, the impact on the manufacturing capabilities of Nokia was by and far limited. Nokia had designed the chips from the ground up such that it was possible for the enterprise to swiftly move its production to the Netherlands and Singapore.
Lesson #1: If products are designed intelligently from the ground up with an eye on scaling up manufacturing across multiple locations it offers an enterprise greater insulation from disruptive shocks to their manufacturing and operations and consequently to their downstream supply chain and distribution channels.
Contingency Logistics Planning Can Help Enterprises with Downstream Distribution
The cotton shirt manufacturer, Esquel is a vendor for major international labels like Hugo Boss and Nike. The enterprise has manufacturing facilities in Vietnam and routinely uses logistics routes from China to procure fabrics for its manufacturing units in its home country, Vietnam. However,the enterprise had invested heavily in forging partnerships with logistics service providers with a diverse portfolio of supply chain capabilities that could, if required, divert from the regular trade route through Hong Kong and on to Vietnam. This contingency planning for alternative logistics proved critical when eventually Esquel did face the challenge.
Lesson #2: Agile companies that are proactive and prepared for the turbulences downstream face a relatively lesser risk. It may take longer and cost more to ship supplies through a second-best route, but given the stakes of imminent disruption, even a sub-optimal choice is better than having no choice at all.
Access to Multiple Avenues of Connectivity Can Create Market Opportunities
Take the case of Ethiopia. Until a few years ago Ethiopia was a landlocked country with very limited options for first and last-mile connectivity to long-distance logistics infrastructure for the mid-mile leg of the supply chain. This had the effect of inhibiting the growth of the textile industry. Over the years there have been massive investments in new highways and a railway project that provides connectivity to the nearest major port and a multitude of industrial parks located in its neighbor Djibouti. Today Ethiopia is the home to several global manufacturers in the clothing and textile industry that have set shop in the country and operate production units.
Lesson #3: Suppliers with access to global connectivity are better positioned to hit the ground running in times of disruptive shocks to the supply chain to feed supplies to large scale enterprises that operate a truly global and multi-plant manufacturing network.
Looking Ahead: Global Procurement Shall Be Inclusive, Collaborative and Digital
While the temptations of the localized supply chain and sourcing strategy are palpable, there are enterprises that have been leveraging collaborative supplier ecosystems to good effect prior to the onset of the Covid-19 pandemic. For instance, an American multi brand retail heavyweight operates a procurement ecosystem consisting of 100 suppliers through a dedicated project that aims to improve the operational environment at their manufacturing units and bring greater visibility into its supplier collaboration. The internal consulting team at the enterprise is entrusted with responsibility to meticulously map the capacities and capabilities of each supplier. Thereafter the team recommends a customized supplier collaboration program that aligns with the concerned supplier’s business model. Interestingly the enterprise extends its supplier collaboration beyond the timelines of the project. Through greater repetitiveness and economies of flow, the supplier ecosystem when managed through a single window, improves over time and develops a greater immunity to supply side shocks.
In the face of the takeaways evidenced by the above mentioned business cases there are some lessons for enterprises in the manufacturing sector to draw inspiration from. Global procurement networks offer a reliable risk mitigation strategy. It makes enormous good sense to assert the same by premising one’s conclusions on the following paradigm:
- First, it is apparent by now that the Coronavirus pandemic leverages a time interval to spread from the epicenter to the rest of the world. As manufacturing units of suppliers and large scale multi-plant enterprises in the epicenter crawl back to normalcy, they are now in a position to provide supplies to enterprises in the rest of the world.
- Second, this time lag in the spread of the pandemic and the consequent economic lockdowns across countries creates opportunities for: arbitrage (procurement from vendors across geographies) and speculation (distribution and sales across time horizons through brand partnerships).
- Third, diversified supplier ecosystems provide greater flexibility of choice to large scale enterprises for procurement by providing diverse options for logistics, warehousing and procurement of relevant products that comply with specifications, quality parameters and costs.
With global procurement, enterprises in the manufacturing sector can actually have minimum exposure to the risks associated with supply chain disruptions like the ones caused by the Covid19 pandemic.