Maximising business value Design and deliver excellence in operations

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Organisations require strong capabilities to deliver the value identified by their strategic plans.

Most successful organisations have not only formulated a well-thought-out strategy, but also built capabilities to deliver value through robust operational systems, processes, assets and people aligned to the strategy

World-class organisations have been successful by adopting one or more of the following:

• Aligningoperations systems to business strategy

• Drivingefficiencyandeffectivenessinevery part of their valuechain

• Institutionalisingcontemporary managementphilosophies to achieve breakthrough improvements and create a culture of continuous improvement

PwC’s offerings support value creation and realisation through the following:

• Operationsarchitecturedesignandimplementation

• Valuechainexcellenceinitiatives

• Transformationprogrammes

PwC’sOperationsConsultingpracticehasdelivered10to30%oftoplineandbottomlinebenefitstoitsclients,throughstructuredinterventionsandprogrammes

With appropriate operations architecture, organisations can gain upto 30% of the Cost of Goods Sold and the best Return On Capital Employed.

The magnitude of opportunities in the market place has prompted many changes in business models. Yet not much has changed in manufacturing/operations architecture. Organisations continue to operate on conventional principles that may hamper their aspirations to achieve strategic goals.

If the operations architecture is to be aligned to business needs, organisations need to look at the following levers:

• Capacity planning

• Outsourcing versus in-sourcing/ in-house capabilities

• Facility planning and layout

• Strategic sourcing

HowPwCcanhelp

We have helped leading corporates in several ways:

• Designing and implementing plantlayout incorporating lean principles

• Arriving at makeversusbuy decisions

• Managingsupplierriskto ensure uninterrupted supplies

• Redesigning supplier architecture to reduce supply side complexities

• Usingglobalsourcingto achieve target costs

• Designing distributionnetworksto ensureefficientcustomerresponse

Engagementbenefits

• Improvement in current Return On Capital Employed: 10–20%

• Reduction in manufacturing variable costs at the design stage: 25–30%

• Reduction in sourcing costs: 20–30%

• Reduction in Cost Of Goods Sold: 10–15%

OntheCEO’smind

• Is our operations architecture aligned to our business strategy?

• Are our manufacturing systems capable of keeping pace with changing business needs?

Driving excellence in every stage of the value chain is now a critical business compulsion to stay competitive.

An organisation’s capability to convert business strategy into performance is only as good as the weakest link in its value chain. With competitive pressure, organisationsareredefiningtheirperformance standards and are constantly raisingthebarforvaluechainefficiencyand effectiveness. This necessitates organisations to look at opportunities for improvement at every stage of the value chain, from procurement to sales.

Imbibing best practices and focused improvement at each stage of the value chain can enable organisations become world class. This calls for pursuing the following goals:

• Procurement excellence

• Planning excellence

• Manufacturing excellence

• Distribution and logistics excellence

• Sales and marketing excellence

Procurement excellence sets the tone for efficiency and effectiveness of downstream processes.

HowPwCcanhelp

Procurement process improvement

• Reducing lead time in all stages of the procurement process

• Reducing procurement lead time

• Achieving On-Time-In-Full schedule adherence

• Optimising inventory levels

Vendor management processes

• Vendor development for building a reliable vendor base

• Vendor quality and life cycle management to build high-performing vendors

• Vendor scheduling and planning for achieving higher linearity of supplies

• Vendor inventory management for achieving’flow’withleastdisruptions

Material cost reduction

• Strategic cost reduction for achieving optimum cost structure

• ’Zero’-based costing for every purchased material or services

• Full value spend management to enhance higher ’value’ of bought out material

• Total cost of ownership to drive optimum cost base

Engagementbenefits

• Material/overheads spend reduction: 10-20%

• Lead time reduction: 30-50%

• Schedule adherence increase: 20-40%

• Inventory reduction: 20-30%

OntheCEO’smind

• Is our landed cost of raw material optimal?

• Are our procurement processes agile and responsive?

• Do we have the right set of vendors to meet our current and future business goals?

Planning excellence drives end-to-end integrated planning to enhance the organisation’s capability to meet customer orders with optimal resources.

HowPwCcanhelp

• Redefiningheuristicsforplanning,demandflexfencesandpointsofcommit

• Enhancing bottleneck capacity utilisation across the value chain, including those at critical suppliers

• Re-visitingandfirmingupplanningassumptions (viz; downtime, setup time, breakdown time, productivity, absenteeism, etc) and controlling them to maximise throughput

• Aligning planning organisation structure with key roles, responsibilities and KRAs

Engagementbenefits

• On-Time-In-Full (OTIF) Improvement: 30-40%

• Increase in capacity utilisation of bottlenecks: 20-25%

• Supplier schedule adherence improvement: 30-40%

• Improvement in supply linearity index: 30-40%

OntheCEO’smind

• Do we have an end-to-end view of timelines before committing to our customers?

• Are we meeting our customer’s orders with optimal resources?

• Are we aware of our bottleneck at the system level including vendors?

Manufacturing excellence is all about producing more with less.

HowPwCcanhelp

We partner with clients in orienting people across the hierarchy, towards one or more pillars of improvement:

• Quality improvement

• Production planning and scheduling

• Material handling

• Low-cost automation

• Energy and utilities management

• Early equipment management

• Planned maintenance

• Autonomous and asset care

• Skill development

Engagementbenefits

• Productivity increase: 10-25%

• Throughput and capacity utilisation increase: 20-30%

• Manufacturing variable cost reduction: 10-15%

• Straight pass increase: 20-30%

• Machine downtime reduction: 15-50%

OntheCEO’smind

• Is our manufacturing cost the least?

• How can we improve customer experience on quality, cost and delivery?

• Is our resource productivity (people, assets, facilities) world-class?

• How can we make our manufacturing flexibletoquicklyrespondtomarketneeds?

Supply Chain excellence, the last leg of the value chain, is extremely critical for ensuring customer delight.

HowPwCcanhelp

We assist our clients to improve the drivers for supply chain and logistics through the following:

• Distribution footprint and network optimisation

• Point-of-commit framework

• Pull versus push boundary

• Made-to-order versus made-to-stock decision

• 2 PL/3 PL/4 PL model for logistics

• Firming up infrastructure plans in terms of the following:

- Number and size of depots/distribution centres

- Streamlining warehouse operations

- Mode and mix of transportation

• Streamlining supply chain processes

- S&OP processes

- Demand planning and forecasting

- Inventory norms and adherence

- Warehouse management processes

- Orderfulfillmentprocesses

Engagementbenefits

• Response time improvement: 30-50%

• Supply chain and logistics cost reduction: 10-20%

OntheCEO’smind

• Is our distribution network optimum from the responsiveness and cost point-of-view?

• Is the velocity of our supply chain adequate?

• Do we have enough visibility of our inventories in various stages of distribution?

HowPwCcanhelp

We assist our clients to decide on strategic drivers for sales and marketing:

• Channel choices and go-to-market strategy

• Dealership footprint decisions – Numbers and policy

• Sales organisation structure

• New product development and launch

• Key accounts management

We handhold our clients in developing and deploying sales and marketing processes:

• Sales planning and target-setting

• Order-booking and delivery

• Coverage-planning and execution

• Merchandising

• Promotions design and execution

• Channel partner assessment

Engagementbenefits

• Revenue enhancement: 10-30%

• Improvement in coverage and reach: 15-20%

• Improvement in Return On Investment of channel partners: 3-5%

• Improvement in sales-force productivity: 10-15%

Sales and marketing excellence is the only way to keep winning in the market place.

OntheCEO’smind

• Are we making smart choices?

• Are we making it happen?

• Are we selling ’simply’?

• Do we invest correctly to harvest?

Transformation programmes make change stick while achieving superior performance.

Proactive world-class organisations have imbibed proven and tested management philosophies such as Lean, Six Sigma, Total Productive Maintenance and Total Quality Management as a way of running their businesses.

These philosophies have helped these organisations in terms of engaging all employees to look at problems as opportunities and convert them into value by way of consistently improving performanceandsustainingbenefitsoverlong periods of time.

Key characteristics of organisations driving transformation programmes:

• A common language around running operations

• Mass involvement in improvement activities

• Critical mass working to achieve quantum jumps in performance

• Cross-functional teams working to solve problems in a structured manner

• Continuous benchmarking and improvement in the value stream

• Programmemanagementofficethatconceptualises and drives improvement initiatives

• Empowered workforce

• Zero defects, zero accidents and zero downtime as super-ordinate goals

OntheCEO’smind

• How do we create a learning and vibrant organisation?

• How do we create a culture driving quantum and continuous improvement?

• How do we create a platform for world-class performance?

HowPwCcanhelp

• Assessments to understand readiness and progress of organisations in the transformation journey

• Choosing the right mix of methodologies such as Lean,SixSigma,TPMandTQM, for the organisation

• Identificationofthepurpose–performance gaps and breakthrough improvementopportunities--and creating a shared vision, mission and developing the roadmap for the transformation programme

• Creation and deployment of the right improvementstructure involving all employees

• Programme management including benefitsmanagement, monitoring and review, governance mechanism

• Building problem-solvingcapabilitythrough robust training and skill development in tools and techniques of Lean, Six Sigma, TPM and TQM along with handholding on projects to realise benefits

• Change management and advising leaders onmanagingchange

• Motivation for transformation through a robust reward-and-recognition mechanism

Engagementbenefits

Tangiblebenefits

• Reduction in overall lead time: 20-40%

• Reduction in operations costs: 5-15%

• Improvement in capacity utilisation: 10-25%

• Reduction in defects: 30 - 50%

• Improvement in process capability: 15-25%

• Improvement in OEE/OPE: 10-30%

Intangiblebenefits

• Data-based problem solving approach

• Better cross-functional teamwork, faster decisions

• Safer, neater and cleaner workplace

• Self –motivated, trained and empowered workforce

• Culture of continuous improvement

• Senior management time freed up for strategic work

Industrysectors

Manufacturing

• Pharma (formulations and API)

• Metals (ferrous and non ferrous)

• Energy (captive and standalone)

• Engineering

• Automotive

• Chemical

• Paper

• Sugar

• Cements

• FMCG

• Textiles

Consulting with a difference

Ouruniquenessisthepassionthatourconsultantsdisplaytoenableclientsto‘Transform’

• We have vast experience of implementation in Indian Industries which lends depth to our approach.

• We are hands-on and partner with clients till implementation to see recommendations in actions and ensure thatbenefitsactuallyaccruetoclients.

• We customise our approach based on client needs and situation.

• We transfer competencies.

• We integrate the organisation’s strategy with Organisation transformation Process.

• We deliver both tangible and intangible benefitsaswell,transformingintosignificantvisiblechangesintheworkplace.

Ourclients

PwC has worked with more than 300 Indian and MNC organisations, including 80% of the top 10 most valuable companies in India.

• ITC Group

• Larsen & Toubro

• Vedanta Group

• Kirloskar Brothers Limited

• Cadbury’s

• Castrol

• Hindustan Unilever Limited

• Electrolux

• Amul

• Kansai Nerolac

• Phillips

• Tata Steel

Infrastructure

• EPC

• Construction

Services

• Banking

• NBFCs

• Insurance

• Hospitality

• Healthcare

• Retail

• Greaves Cotton

• India Cements

• JSW

• JSL

• Escorts

• Hindustan National Glass

• Dr. Reddy’s

• Pfizer

• Cipla

• Hindustan Coca-Cola Beverages Pvt Ltd.

• Trident Group

• ICICI

• Infosys

• IndusInd Bank

• Microsoft

Contacts

SVSukumar

Email: sukumar.sv@in.pwc.com Mobile: + 91 98211 56943 Phone: + 91 22 66691345/ 66691197

RavindMithe

Email : ravind.mithe@in.pwc.comMobile : +91-9820199373Phone : +91 22 66691189 / 66691345

KJayaraman

Email : k.jayaraman@in.pwc.comMobile : +91-9811110015Phone : +91-124-46200118 / 46200535

Ahmedabad President Plaza, 1st Floor, Plot No 36 Opp Muktidham Derasar Thaltej Cross Road, SG Highway Ahmedabad 380 054 Phone: +91 79 3091 7000

Bangalore 6th Floor, Tower `D’, The Millenia No. 1 & 2, Murphy Road Ulsoor Bangalore 560 008 Phone: +91 80 4079 6000

Chennai1st Floor, Mootha Centre 9/3 Kodambakkam High Road Nungambakkam, Chennai – 600 034 Phone: +91 44 42123471 / 81

DelhiNCRBuilding 8, 7th & 8th FloorTower B, DLF Cyber CityGurgaon 122 002Phone: +91 124 4620535

Hyderabad# 8-2-293/82/A/1131ARoad No. 36, Jubilee HillsHyderabad 500 034Phone: +91 40 6624 6600

KolkataPlot No.Y-14, 5th Floor, Block-EP,Sector-V, Salt LakeKolkata 700 091,West BengalPhone: +91-33 2357 9100

Mumbai252 Veer Savarkar MargShivaji Park, Dadar [West]Mumbai 400 028Phone: +91 22 66691000

PuneSuite No. 8, 5th Floor,Muttha Towers,Airport Road, Yerawada,Pune 411 006Phone: +91 20 4100 4444

About PwC

PwCfirmsprovideindustry-focusedassurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries infirmsacrossthePwCnetworksharetheir thinking, experience and solutions to develop fresh perspectives and practical advice. See pwc.com for more information.

In India, PwC (www.pwc.com/India) offers a comprehensive portfolio of Advisory and Tax & Regulatory services; each,inturn,presentsabasketoffinelydefineddeliverables.NetworkfirmsofPwC in India also provide services in Assurance as per the relevant rules and regulations in India.

Complementing our depth of industry expertise and breadth of skills is our sound knowledge of the local business environment in India. We are committed to working with our clients in India and beyond to deliver the solutions that help them take on the challenges of the ever-changing business environment.

TheIndianfirmhasofficesinAhmedabad, Bangalore, Bhubaneshwar, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune.

pwc.com/india

This report does not constitute professional advice. The information in this report has been obtained or derived from sources believed by PricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of PwCPL at this time and are subject to change without notice. Readers of this report are advised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible, based on the contents of this report. PwCPL neither accepts or assumes any responsibility or liability to any reader of this report in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take.

© 2011 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity.

NJ 200 - July 2011 Operation-Consulting.inddDesigned by: PwC Brand & Communications, India