Delivery Precision Improvement at Volvo India Pvt. Ltd · Best Professional Award’. With these...

126 Volvo India Pvt. Ltd

Delivery Precision Improvement at Volvo India Pvt. Ltd

Peenya Industrial Area, Bangalore

Keywords: Delivery Precision (DP), Goods Receipt (GR), Inventory Turnover (ITO), Process Mapping, Electronic Data Interchange (Edi)

AbstrAct

There was a lot of material supply issue to run the line production at Peenya facility of Volvo CE. After checking Supplier Delivery Precision we came to know that it was just 4.66% only for January 2012. It was noticed that the problem was not only with the suppliers, it was also within the company. The delay in supplies due to problems at suppliers’ end was around 42% while the balance was due to Back Order Existence, Delay in Goods Receipt, Delivery Planned on Holidays, Old Orders Existence in System, Missing Shipping Notification etc. Thus, the internal issues were contributing 47% in delay of supplies. It was thus decided to take a call on this issue and do a project to improve the Delivery Precision at Volvo CE.

Introduction

In the beginning of 2012 there was a lot of material supply issue to run the line production at Peenya facility of Volvo CE. After checking Supplier Delivery Precision we came to know that it was just 4.66% only for January 2012. Delivery Precision (DP) was also measured for February and March, 2012 which was found to be at 7.64% and 11.97% respectively. This was quite alarming and thus the Volvo CE, Peenya decided to improve the Deliver Precision (DP) from the present number and fixed the target as 70% with time frame till December, 2012. Interestingly, with the help of the project undertaken, it finished with DP at 85.27%.

Delivery Precision (DP) is defined as the ‘Measurement of Arrival of Material at Volvo on the Specific Time and in Required Quantity’. It is measured on incoterms, namely DDU & EX- Works.

At the time of making the purchase agreement, it is decided as to who will take care of transportation. In this case it was agreed upon that the Vendor will supply the parts to Volvo free of cost on door delivery basis. In other words cost of transportation was to be included in the cost of parts supplied.

It was decided that the Volvo would collect the material from the Vendor ex- work by using its own Logistics and expenses would be paid by the company. Price of the part was to be free from Logistics charges.

In order to monitor the DP, the Improvement Project was brought under Operation Development Program, called OD Wave 1. It was also noticed that

Delivery Precision Improvement 127

if DP is improved, we can improve Inventory Turnover (ITO) and enable good cash flow.

The project was planned and a team from cross functions comprising Mr. B. Indushekar, the Vice President – Operations as the Champion of the Project, Mr. S.V. Somshekar as the Team Leader and M/s. H.N. Ganesh, A.N. Muthappa, M.S. Shankar and Mohan as Members of the Project Team was formed for its execution, to work on DP Improvement Project.

Calculations

The Goods Receipt Dates to be matched with Statistical Delivery Dates

The FIFO (First In First Out) logic also assumes that First Web Edi (Electronic Data Interchange) done should match with First GR

The Goods Receipt Dates were matched vs. the Statistical Delivery Dates in our PO/Scheduling Lines according to a FIFO Principle.

The FIFO logic also assumes that the first item shipped by the supplier is the first to arrive at GR point.

Tolerance of -1 (Minus One Day) was given in deliver but no tolerance was given for quantity of material supplied against the quantity ordered.

The Rule to measure DP was Delivery on Same Day or One Day Prior and in the Right Quantities as ordered.

The impact of the project on Inventory was overwhelming. The Inventory turns were at recorded as 5.3 when the projected was started in March, 2012 and finally it finished at a healthy 8.4 turns in December, 2012.

The Project Team during the Brainstorming session observed the following:

It was observed that there was a delay in material arrival at Volvo between 1 to 5 days against the set DP criteria of -1/0 days.


Actual DP Trend Mapped Against the Target in April 2012

BNG DP Trend April 2012

35

30

25

20

15

10

5

02012-01 2012-02 2012-03 2012-04 2012-05 2012-06

Actual Target

Criterion DP -1/0 Days 10.8%-1/ +1 Days 23.0% -1/ +2 Days 29.7% -1/ +3 Days 35.0% -1/ +4 Days 42.2% -1/ +5 Days 40.7%

Volvo Construction EquipmentOperations – Bangalore Plant19 November 14

Process Mapping was done.

The On time supplies were found to be just 11%. It was noticed that the problem was not only with the suppliers, it was also within the company. The delay in supplies due to problems at suppliers’ end was around 42% while the balance was due to Back Order Existence, Delay in Goods Receipt, Delivery

Process mapping


Start

End

Receipt ofBuy list fromPPC by MM

Team

Release of Scheduleto Suppliers

(Schedule Lines &PO)

Receipt of Scheduleby Suppliers through

Web EDI or by E-mail

Invoice &Web EDIChallan

Planning & Productionat Suppliers,

Inspection & Packing

Required deliverydate in PO/Sl &

Quantity

Dispatch toVolvo

(Transport)Material Receipt &

GR at VolvoActual Delivery Date

(GRN or ASN)


Planned on Holidays, Old Orders Existence in System, Missing Shipping Notification etc. Thus, the internal issues were contributing 47% in delay of supplies.

A. On time supplies were just 11%.

B. Back Orders were there in System (16%): System was showing pending purchase orders with back dates. It was discussed with Material Team and all the back orders were short closed. If any part was required, new date/schedule was given. Vendors were kept in the loop.

C. Schedule/Delivery Dates were being given on Holiday (7%): Dates were rescheduled to organize delivery on working days. It was decided to inform all concerned to take care of schedule date at the time of releasing the Purchase Order (PO).

D. Delay was noticed in Goods Receipt (GR) at Volvo (11%): It was decided to inform the stores to prepare Goods Receipt on the same day of receipt of material. All Material executive were requested to support the stores in this regard.

E. Missing Shipping Notifications (12%): For domestic suppliers, it was decided to bring all EX-Works suppliers under Web Edi. For Import suppliers, we planned to create notification in system before making GR.


Analysis of IssuesDefine Measure Analyze Improve Control

16%

42%

1%7%

11%

11%

12%

47% Internal Issues at Volvo42% Issues due to Suppliers

Delay/ Issue with Suppliers &difference in Quantities

Bank Order Existence

Missing Shipping Notifications

On time

Delay in GR at Volvo

Planned Delivery dates in Holidays

2011 Orders


F. Old Orders (1%): All orders were closed and the concerned suppliers were informed accordingly.

G. Delay in Supplies (42%): Each month the Vendors meet on regular basis were organized at the factory. In the meeting all suppliers were informed about the DP calculation methodology and they were requested to support Volvo in this regard. They were also informed about the DP rule. In order to encourage them, the “Supplier of the Month” award was introduced.

After taking these steps/corrective actions, we calculated as to what would be the DP at the yearend following the steps/corrective actions taken to improve the DP. We were confident that we would reach 65%.

DP Improvement TargetDefine Measure Analyze Improve Control

65%70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 –2012-

01

Tactical issuesActions would result

in ~40% DPImprovement

Strategic issuesActions would result in ~15%

DP Improvement

2012-02

2012-03

2012-04

2012-05

2012-06

2012-07

2012-08

2012-09

2012-10

2012-11

2012-12


So we set our target of Delivery Precision (DP) at 70% and took the flowing initiatives to reach the set target of 70%.

1. Preparation of GR on the same day of Receipt of Material.

2. Ensure Change in Delivery Date with Change in Internal Production Plan.

3. Daily Monitoring of DP with effect from June, 2012.

4. Giving Monthly Information to Top Suppliers (Max. Number of Lines) on their DP

Performance & Corrective Actions at Monthly Suppliers’ Meet.

5. Close All Pending Orders when Material Not Required due to ECN.


The result of all this was encouraging; the First Month DP was improved to:

First Month DP was 51.68%

DP for June 2012

Define Measure Analyze Improve Control

70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 –2012-

012012-

022012-

032012-

042012-

052012-

062012-

072012-

082012-

092012-

102012-

112012-

12


51.68%


The Third Month DP was found to be:

Third Month DP was 66.98%

In the 4th month we noticed that there was a dip in DP to 63.8%. The team again brainstormed and observed that the ‘Supplier of the Month’ award which was being given was not enough. So we decided to introduce the ‘Suppliers Best Professional Award’.

With these initiatives and the support of all, we were able to reach the Delivery Precision (DP) at 85.27% by the end of December, 2012 and the YTD was found to be 44.4%.



DP for August 2012

80 –

70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 –2012-

012012-

022012-

032012-

042012-

052012-

062012-

072012-

082012-

092012-

102012-

112012-

12

Paver parts back order deletion. Discussion with Rishi & Apex given us good result

66.98%


DP trend between 2010 to 2014

The Major Benefits which the company got were as follows:

Product Delivery Precision improved from 40 % to 80%.1.

Production Line Material Availability improved from 55% to 90%.2.

Supplier Delivery Precision improved from 5% to 85%.3.

Inventory Turns improved from 5.3 to 8.4 turns.4.

Safety/Buffer Stock Inventory of 120 MINR is reduced.5.

Space vacated due to reduction in inventory.6.

Stopped sending hard copy of PO which resulted in Reduction in Paper 7.

Consumption.8.

Use of Software/Technology

• Our SAP is now linked to a portal called Web Edi. (Electronic Data Interchange). When we release scheduling lines in system, a mail will be flashed to Vendor system whose name is registered with Volvo.

• Central Data Warehouse (CDW): The SAP is also linked to the software linked to CDW which calculates & gives us the DP details on daily basis after considering the tolerance period of minus one day.


Supplier DP Yearwise Trend


2010 2011 2012 2013 2014Plan Actual

9389.6

75

44.4

30

6.676.64

100 –

90 –

80 –

70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 –

Perc

enta

ge


It improved the Customer Service

• Machine Delivery Precision improved from 40 to 87% in 2012.

• Internally, our Material availability for production at the Line side improved from 55-90%.

The efficiency of operations was also improved:

• We were holding buffer/safety stock to take care of line stoppage if there was a delay in supply of parts by the Vendor. When deliveries improved, we have reduced the safety/buffer stock. This resulted in inventory reduction of around 12 crores.

• Volvo has convinced all suppliers to Reduce Lead Time from 45 to 30 days.

We continued this project from where we left in 2012 and taken it into the next year, 2013 and fixed target as 90%. DP was one of the KPI of Bangalore operations for Business plan 2013 & 2014.

Highlights of 2013

• More people were roped in and new leaders have taken up this project.

• Supplier DP December end was 86.70%.

• 10 Suppliers were brought under Web Edi.

• Previous month DP details were sent to all suppliers after Vendors’ Meet each month.

• Inventory Turnover was at 9.5.

Highlights of 2014

In the year 2014, i.e. by the October end, the DP was 93.49 against the target of 93%. Six more suppliers were brought under the Web Edi. ITO was found to be 11.5%.

We are still continuing this project and taken it further to the following years by raising the target of DP every year.

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