Improving Demand Reliability of Supply chain
ICI PAINTS is keen to establish a dominant position in the paint industry. It has decided to focus on demand reliability to improve its performance & customer satisfaction. One of the important factors to improve demand reliability is by focusing on factory operations & improving its responsiveness. The report discussing in detail a responsive production system, the various metrics & how it can be achieved. As markets become more volatile, lean supply chains are under pressure to become agile. Whilst lean and agile are often seen as opposites, much of the lean philosophy and practices are foundational for an effective agile company, and indeed as the research results show, most companies require a combination of the two approaches.
The report suggests a Leagile production system to achieve a responsive factory. The mix of appropriate techniques to achieve this combination will differ depending on the products and processes within a given supply chain, and there is certainly no ‘one size fits all’ system. The final recommendations illustrate the various means to achieve agile paradigm.
We would like to thank Mr.Amarpreet Singh (Manager- Supply chain) from ICI Paints for giving us an opportunity to work on this problem in the company. We also take this opportunity to thank other company officials for their valuable inputs. We would also like to thank Prof.B.S.Sahay for his continued help & guidance throughout the duration of the project. Further we would like to thank everyone who have helped us in the completion of this project ICI has three manufacturing units in India located in different regions. Different varieties of paints or other products are produced at the three manufacturing locations and then supplied to entire country.
These different products are supplied to the depots of ICI in various towns. The number of depots in a town varies according to the population and geographic spread of the town. This primary distribution from factory to depots is governed by “Push Replenishment”. The methodology followed for the replenishment is based on forecasting models adopted by the company. The stocks that are to be delivered to a particular depot in town for a complete month are determined at the beginning of the month at the factory by forecasting and then the supplies are made on a continuous basis throughout the month.
RATIONALE FOR TAKING PROJECT
The paint industry is extremely competitive. Hence, ICI paints is focusing keenly on its supply chains to improve the profitability & customer retention through better operational efficiency & improving customer reliability. But, the replenishment system followed by ICI paints has been ineffective in monitoring and controlling supplies and there have been a large number of cases of stock outs and high inventory throughout the country.
We feel that, variability in supply chain is a key determinant of delivery reliability in the paint industry. The demand reliability can be substantially improved by optimizing the supply chain. One of the key components of the supply chain of ICI paints is the manufacturing establishments. The variability of processes in the manufacturing unit directly & adversely affects the delivery reliability of the system. Hence, it is imperative that ICI paints focuses on the improvement of delivery reliability by focusing on factory operations. In the present system, ICI paints has very limited control over forecasting accuracy & hence has decided to concentrate on the other 3 parameters.
Research has shown that by improving factory responsiveness significant improvements in delivery reliability can be achieved. Currently Mohali factory measures factory responsiveness by considering stock efficiency at PU warehouse. But, it has been found that the factory responsiveness is also dependent on the variability on off-take from PU warehouse to depots. In fact it is dependent on host of factors. Thus, there is confusion in company regarding understanding of factory responsiveness and how it can be practiced. Hence, we decided to undertake a detailed understanding of their production process & existing system/ operations in mohali factory
According to Fisher, products can be classified as functional and innovative. Accordingly, the supply chains have to be efficient and responsive respectively. Made-to-order and assemble-to-order products are generally of the innovative type whereas made-to-stock products are functional .Functional products are generally made-to-stock whereas innovative products are made-to-stock or assemble-to-order. Functional products need an efficient supply chain whereas innovative products need a responsive one. A responsive supply chain also implies that my factory operations should also be responsive in order to achieve a fully responsive supply chain to improve demand reliability.