Why Digital and Integrated Supply Chain Is Need of the Hour
These days businesses across the globe are trying to optimize their procurement costs through efficient and effective ways of procurement and the wave has now hit India. All forward-looking and progressive organizations have identified that if they wish to grow in these competitive times, they need to cut down their manual inefficiencies, reduce their turnaround time and make their processes scalable and transparent. Hence, the need of the hour is bringing in new age technology that brings in more visibility, control, and the inclusion of all stakeholders in the system.
We’re taking you through a live case study where one of the largest automotive components manufacturing company transformed its supply chain through technology and is now reaping in enormous benefits from it.
Uno Minda Group is a ₹4000 Crore automotive ancillary supplying to all major Indian and International OEMs like Hero, Honda, Maruti Suzuki, Yamaha, Mahindra, Bajaj, Tata Motors etc. The group has 11 group companies with more than 30 manufacturing plants across North, West and South India. The group manufactures everything ranging from automotive lights to plastic and rubber components used in our cars and motorcycles. To cater to such diverse set of product portfolio, the group has over 2000 suppliers located across India and overseas. While working with such a high number of suppliers, the group identified various problems:
- Manual Inefficiencies: The interaction between suppliers and individual buyers was offline and happening by means of e-mail, phone calls and other modes, leading to excessive manual effort and loss of information in transition.
- Lack of Visibility: The buyers had limited visibility of the products and the quantity being sent to them against their purchase orders or purchase schedules until the products physically reached their gates, leading to a risk of inventory duplication/shortage, hampering production
- Risk of 18% Working Capital Loss: It was also proactively identified, that post GST regime, if a vendor’s ledger mismatches theirs, their Input tax credit which is typically 18% to 28% of the working capital would be unnecessarily blocked in the system. Hence the need to streamline and digitize the entire procurement interaction was pertinent.
- Stakeholders’ Dissatisfaction: There were multiple cases where a vendor had sent products which were received in short quantity or rejected, but the information reached the vendor only once the payment was reflected leaving no scope for counter-measure. This also led to a mismatch in ledgers, delayed reconciliations and exhaustive efforts by Uno Minda’s and the vendor’s finance teams.
Moglix’s solution to transform the procurement supply chain at Uno Minda:
Moglix identified that while Uno Minda had SAP as their internal ERP and ran all its operations through technology-enabled manner, the communication with suppliers was still offline and broken. To solve this, we came out with a solution to deploy a Vendor portal at Uno Minda group. The portal was developed on SAP’s SCP environment and seamlessly integrated with SAP using HCI connectors to provide real-time information to both buyers and suppliers. The portal solved all the supply chain issues for the organization, offering them both tangible and intangible benefits like:
- Increased Manpower Efficiency: The suppliers for the group could now see all their live schedules at a click of a button. This ensured that they were now manufacturing the components only as per the organization’s requirements. Also, all the key metrics such as Pending quantities, PPM scorecard, quality performance, goods received notification could now be viewed by supplier directly, reducing man-hours wastage by more than 20%
- Increased Visibility for Buyers: The vendor portal offered a unique feature of Advance shipment notification or ASN. The feature allowed a vendor to dispatch quantities based solely on available schedule, thus countering the problem of inventory duplication. Also, in cases of shortfall in the quantity, the same is reflected in the vendor’s pendency report, visible to both the buyer and the vendor. Hence, the increased visibility, enables buyers to avoid any artificial urgencies.
- Zero Risk of GST Loss/ Delays: The major reason for GST delay is the mismatch of invoices at the customer and supplier’s end, thereby impacting 18% to 28% of working capital. Uno Minda, used a unique approach to solve this problem; before a supplier sends the products, along with the quantity of products, he has to ensure the price, taxations and other commercials such as freight, amortizations etc. conforms to their purchase orders. This ensures that supplier’s invoices match the company’s purchase orders, hence removing the risk of mismatches at the source as opposed to the end of the month.
- Increased Stakeholders’ Satisfaction:
- Suppliers: With Mindaconnect.com, the suppliers can see their schedules, purchase orders, performance reports, the status of sent products (accepted/ rejected) and most importantly payment status on a real-time basis. The increased visibility hence, not only comforts the vendor but also elevates their interest to work for Uno Minda, even at competitive costs.
- Buyers: Due to the reduction in follow-ups from vendors, real-time vendor reports and product status reports, buyers can now save over 20% of their time and utilize them in strategic areas.
- Finance team: Due to reduced invoice mismatches, due to ASN, the finance team saves a lot of effort and bandwidth on reconciliations and balance sign-offs.
- Gate entry: With all ASNs now barcoded, the gate person now just has to scan the invoices instead of manually entering them, thereby saving a lot of effort and time
The technology up gradation and introduction of a new portal, has indeed helped Uno Minda Group to digitize their procurement. The company has been able to reduce their tangible costs of man-hours, GST delays, and excess inventory and provide a lot of intangible benefits to stakeholders.
Want to automate your supply chain? Reach out to us at moglixforbusiness.com