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To Improvise Supply Chain Processat Sunflame Enterprises Pvt Ltd

by

Poornima N

III Semester MBA

Reg.No : 12MB6583

Guide

Mr. Avinash (NSB)

Mr. Ranganth (Sunflame)

Project Report submitted to the University of Mysore in partial fulfilment of the requirements of

III Semester MBA degree examinations 2013

National School of Business

#33, 22 nd Main, 1 st Cross,

Phase II, JP Nagar,

Bangalore 560 078

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Contents

1. Introduction

2. Problem areas

3. Research objective

4. Research methodology

5. Limitations of the project

6. Chapter i - literature review

7. Chapter ii - findings of purchase and production

8. Chapter iii - findings of purchase and production

9. Chapter iv - summary of findings

10. Chapter v - conclusions and suggestions

11. Bibliography

12. Appendix

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Acknowledgement

Sunflame, a well-known FMCG company in India provided an opportunity to

pursue a two month internship between Sep Oct 2013. I would like to thank

Mr. Ranganath General Manager Marketing and Mr. Avinash (NSB) for

extending co-operation and for their guidance during this period. This report is

the culmination of the internship period.

Abbreviations

SCM Supply Chain Management

PO Purchase Order

CSL Component Shortage list

SKD Semi Knocked Down

LOP List of parts

FIFO First in First Out

MRR Material Request Report

IQC Internal Quality Control

MPC Materials Planning chart

AVL Approved vendor list

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1. INTRODUCTION

Supply chain management (SCM) is an essential element to achieve operational

efficiency. SCM can be applied and measured to company success and customer

satisfaction. It aims at improving the quality of company, which essentially means

that implementing an effective SCM is inevitable for organizations.

The Supply Chain Management Program integrates from manufacturing

operations, purchasing, transportation, and physical distribution into a unified

program. Successful supply chain management coordinates and integrates all of

these activities into a seamless process. It embraces and links all of the partners

like vendors, carriers, third-party companies in the supply chain, in addition to the

departments within the organization.

SCM process refers to the actual physical network that begins with supplier and

end with customers. Internally to the company, SCM involves seamless

integration of logistics with various departments and externally, works with

Dealers to achieve a clean integration of all processes.

Elements of the Supply Chain

A simple supply chain is made up of several elements that are linked by the

movement of products along it. The supply chain starts and ends with the

customer. The Basic elements of SCM are:

Customer

Purchasing

Planning

Inventory

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Production

Transportation

SCM refers to streamlining of business supply side activities to maximize

customer value and gain a competitive advantage in the market place. SCM

represents an effort by suppliers to develop supply chains that are efficient and

economical. To remain competitive, companies must seek new solutions to

important SCM issues such as modal analysis, supply management, and load

planning, route planning and distribution.

1.1 About Sunflame

Sunflame Enterprises Pvt Ltd was established in 1981 and is a leading

manufacturer, wholesaler & trader of household appliances which has created a

niche space for itself in kitchen appliances industry and has been making rapid

strides for the last few years.

Sunflame strives for constant innovation and focuses on zero-defect quality toexcel further in the market. A complete one-stop solution to the kitchen needs is

being offered by its extensive range of products that can enhance the cooking

experience into a gourmet adventure.

Its vision is to be most successful and respected home appliances company in

India. Sunflame strives to meet and exceed customer expectations by providing

quality products backed by technology, constant service and support tocustomers. It has established strong presence all over the country and has a firm

foot hold in North India where majority of the households are its loyal customers.

In South India it is a well-established brand where the customers have been using

the product since decades with high level of satisfaction.

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The idea behind opening the brand shop on Independence day was to liberate

women from their traditional methods of cooking and offer them a bouquet of

Sunflame products that are specially designed for todays women and very aptly

Sunflame has the tag line which says Leave the kitchen to us.

Sunflame has over 210+ products which span across:

Geysers

Chimneys and Hobs

Cookwares

Pressure Cookers

Cooking ranges

Philososphy:

Sunflame is driven by passion for quality and commitment to customers. This

drive is powered by constant innovation and a strong focus on zero-defectquality, which is totally customer-centric.

CoreValues

Care for our customers.

Commitment to creating value.

Respect towards all stakeholders.

Integrity in all corporate behaviour.

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Manufacturing Competencies:

Sunflame has a fully integrated in-house end-to-end manufacturing units that

individually cater to all product categories we operate in. The integration process

ensures that we are able to maintain stringent quality checks, ensuring that every

product released into the market is nothing short of perfect.

Distribution Network:

As a corporation that spans the length and breadth of the nation, Sunflame has a

strong presence across all parts of the country. This is manifested through:

A network of 25 Super Distributors, CF Agents and 300 Distributors.

Presence in all major modern retail chains.

Strong institutional sales partnerships with direct sales to other

institutions.

A strong network of company-owned outlets namely Brand shops

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1.2 Problem Areas

During the course of internship, a range of issues were encountered which can be

summarised among the following areas.

Huge costs which are associated with manual record keeping of stocks:

Several employees in the company are not given training to update the stocks in

the system. Hence they manually track the order received, sent and goods that

are returned back due to damage.

Loss of goods at several stages of the supply chains:

This includes a variety of factors which include theft, pilferage, misplacement etc.

Activities such as handling, storage, packaging and delivery of goods is

accompanied by risks caused due to accidents at work, wrong handling of goods

and non-compliance with procedures.

Demand prediction :

Predicting the demand in the market and producing the goods as per the

demand would be the greatest challenge faced as it incurs stock holding costs.

Warehouse needs to be sufficiently large to accommodate large volume of

finished goods.

Delay in delivery of goods to the distributor and retail outlets

Transportation of finished goods as per the requirement of the distributor and

retail outlet should be delivered in time. Sometimes the order to-delivery cycle

is more than 2 days due to insufficient manpower and transport vehicles resulting

in cancellation of the order at the distributor end

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Inadequate space, manpower and infrastructure to manage day to day

operations at warehouse leading to delay in deliveries.

Sunflame has a wide range of kitchen utility products and maintaining stock of

these products when in demand simultaneously will result in shortage of space

which curbs the easy flow of stocks to the distributors at the required time.

Inadequate technology to inventories the finished goods and raw materials.

Sunflame warehouse is not technologically equipped with ERP systems and RFID

scanners to track the movement of goods and raw materials. Manual entry of

goods and raw materials is being followed resulting in heavy paper work and

retrieving the data of a product at a particular time becomes difficult.

Lack of Pre-delivery inspection

Pre-delivery inspection of finished goods is not conducted prior to despatch of

the goods to the C&F agent. There is a possibility of interchangeability of

products bearing similar names and code. Hence wrong despatches happen to

the distributor and there would be a mismatch of products despatched and

invoice raised resulting a wrong inventory.

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2. Research Objective

At Sunflame, supply chain management can be viewed as a decision making

process between strategy and operation. Its also seen as a mechanism that lies

in-between integrated departments where the whole operation takes place with

the mix of coordination and effective management. Thus supply chain is like a

relay team where there needs to be perfect coordination between various team

for achieving the optimum results. Right now, information exists in regional

pockets. Most of the nodes in supply chain require GO / No-Go directions from

headquarters or regional leaders. This blocks clear movements and can lead to

increased costs and unnecessary inventory pile ups.

Although Sunflame has had dealer network across south India since a long time,

it has recently started branch operations in Bangalore. The new branch caters to

entire southern region. The logistics will be redefined and thus necessitates the

need to study the existing SCM processes and bring in a very efficient system in

place.

To analyse and understand the supply chain management processes at

Sunflame

To identify the areas which could reduce the lead-times via company and

supplier integration

To Identify the areas where responsiveness can be fast which can improve

internal operations

If there is an identified gap, try and suggest processes which can improve

the SCM process.

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3. RESEARCH METHODOLOGY

The purpose of research is to discover answers to questions through the

application of scientific procedures. The main aim of research is to find out the

maximum information which are sometimes undocumented and also to verify the

known facts.

Research design : Descriptive type

Sample size : 12 employees

Sampling procedure : non-probability purpose sampling

Descriptive research methodology was used mainly using surveys and fact-

finding enquiries of different kinds. The major purpose of descriptive research is

to capture the description of the state of affairs as it exists at present.

Data collection - The existing SCM at Sunflame was studied for the processes

which were used right from Head office to factory to dealers. The processes were

mapped and a study was conducted for the potential gaps in communication,

process improvements, inventory planning, etc. Data was collected from various

departments. This was collected via interaction mode from the department

employees, distributors and wholesalers.

Other data was collected via reports which helped in corroborating the

information collected via other sources.

DATA SOURCE:

Primary data : Primary data is collected via interview methods

Secondary data : Company introduction, web and few magazines.

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RESEARCH DESIGN

A research design is the specification of methods and procedures for acquiring

the information needed to structure or to solve problem. It is the overalloperational pattern of frame work of the project that stipulates procedures. A

research design is therefore defined as a plan, structure and strategy of

investigation conceived so as to obtain answers to research question and control

variances.

There are four types of research design they are:

1. Explorative research design2. Descriptive research design

3. Diagnostic research design

4. Experimental research design

1. Explorative research design:

The design of exploratory studies is characterized by a great amount of flexibility

and adhoc versatility. By definition, the research is involved in investigating an

area or subject in which sufficient knowledge needs be obtained and formulated

to a detailed research question. No clear hypotheses have been developed about

the problem and seeking information that will enable to formulate specific

research question or to state hypothesis about the problem.

2. Descriptive research design:

Descriptive research in contrast to explorative research is marked by the prior

formulation of specific research question. The problem, perhaps is a result of an

exploratory study, before the project is initiated it should be able to define

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clearly what needs to be measured and setup appropriate and specific means for

measuring it.

3. Diagnostic research design:

Diagnostic studies determine the frequency with which something occurs or its

association with something else. Hence such studies seek to establish relationship

between any two or more variable.

4. Experimental research design:

In an experimental study, the researcher is expected to create an artificial

situation with a view to obtain the relevant data to measure them effectively and

accurately. The research design used for the study was descriptive research

design. This type of research design is concerned with describing the

characteristics of the particular individual or group of a situation. They are

concerned with specific prediction with narration of facts and characteristics are

of the unit studies.

Choice of Design:

I chose Explorative research design due to following reasons:

Helps to get details via Literature search

In-depth interviews can be conducted

Focus groups techniques can be used to reduce the variance

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Merits of Exploratory Research:

Increased Understanding : The main objective of exploratory research is to

improve the knowledge of research topic. It helps to set the initial context on why

and how things happen.

Flexibility of Data Sources : Resources utilized in exploratory studies include

informal discussions, formal structured interviews, pilot studies or case studies.

Strategic Planning : Exploratory design in some circumstances can save a lot of

time and money by flagging dead ends early

Better Conclusions : It is beneficial in guiding future research techniques. A

better knowledge of a topic helps hone subsequent research questions and will

significantly raise the effectiveness of a studys findings.

De-Merits of Exploratory Research:

The primary disadvantage is that they rarely offer adequate answers to research

questions, even though they can hint at the answers and give direction as to

which research methods could provide definitive answers. Precisely why

exploratory studies are rarely definitive is because individuals studied may not be

typical of the larger population of interest. That is, the sample is likely not a

representative one.

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SAMPLING TECHNIQUES

A sample, as the name implies is a smaller representation of a large whole,

instead of studying every case which might logically be included in an

investigation. Only a small portion is selected.

A sample design is a definite plan for obtaining a sample from a given

population. It therefore refers to the techniques or procedure. The researcher

would adopt is selecting items for the sample.

Selection of a sample

A sample is a miniature picture or a cross section of an entire group or an

aggregate from which a sample from a given population. It refers to the

techniques or procedure the research would adopt in selecting item for the

sample.

Because the population is divided into a number of districts and a district was

selected that represents all the districts. Considering the purpose of the study,

information is however collected from some units of the district.

TOOL FOR DATA COLLECTION

The following tools were used for data collection

Personal interview

Web, Magazines

Personal interview

This method was also used to collect data. This had helped to collect valuable

information from the company employees.

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Collection of data

All employees were approached on individually and questions were about their

role in SCM. The employees were found to be co-operative.

SOURCES OF DATA COLLECTION

The data used for this study are both primary and secondary data. The source of

primary data is where we collect firsthand information or data from the

employees of Sunflame. This methodology is known as focus group based

interviews.

A focus group is a form of qualitative research in which a group of people are

asked about their perceptions, opinions, beliefs, and attitudes towards a product,

service, etc. The advantages of this method are that it brings in Synergism,

Spontaneity, Specialization and Speed. However, it can lead to misjudgment,

moderation and misrepresentation.

Secondary data is also known as documentary data. Secondary sources are those

which provide information available to public like Internet and Magazines. .

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4. Limitations of the project

Intent of the study was to understand the existing processes and map them to

identify the gaps, which finally may result in optimized processes . The scope was

limited to Southern India operations only, as the reach and time would be a

limiting factor.

During the course of this study, earnest effort was made to identify all the

processes, but due to unknown factors, there could be few areas which may not

be included as part of this project. Only the identified SCM processes were

subjected for analysis and reporting. Also, optimization was not studied from a

cost perspective.

The result of the study relied upon the information furnished by the

employees. Hence the information provided by them is subjected to

personal bias.

Only a sample of 25 employees were interviewed /surveyed due to limited

resources available for this study. The entire employee under the study where only lower level employee and

middle level employees.

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Chapter I

5. Literature review

5.1 What is Supply Chain Management (SCM)

The best companies around the world are discovering a powerful new source of

competitive advantage. It's called supply-chain management and it encompasses

all of those integrated activities that bring product to market and create satisfied

customers. The Supply Chain Management Program integrates topics from

manufacturing operations, purchasing, transportation, and physical distribution

into a unified program. Successful supply chain management, then, coordinates

and integrates all of these activities into a seamless process. It embraces and links

all of the partners in the chain. In addition to the departments within the

organization, these partners include vendors, carriers, third-party companies, and

information systems providers

5.2 What is the importance of Supply Chain Management

Since our childhood we all knew that "slow and steady wins the race". That may

be been true anymore in today's demanding business environment, "slow and

steady" won't get you out of the starting line in the race. Companies these days

recognise that getting products to customers faster than the competition willimprove their competitive position. To remain competitive, companies must seek

new solutions to important Supply Chain Management issues such as modal

analysis, supply chain management, load planning, and route planning and

distribution network design. Companies must face corporate challenges that

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impact Supply Chain Management such as reengineering globalisation and

outsourcing. Why is it so important for companies to get products to their

customers quickly? Faster product availability is key to increasing sales. There's a

substantial profit advantage for the extra time that you are in the market andyour competitor is not. If you can be there first, you are likely to get more orders

and more market share. The ability to deliver a product faster also can make or

break a sale. If two alternatives [products] appear to be equal and one is

immediately available and the other will be available in a week, which one would

we choose? Clearly, "Supply Chain Management has an important role to play in

moving goods more quickly to their destination. "

5.3 Supply Chain Management Today

If we take the view that Supply Chain Management is what Supply Chain

Management people do, then in 1997 Supply Chain Management has a firm hand

on all aspects of physical distribution and materials management. Seventy-five

percent or more of respondents included the following activities as part of their

company's Supply Chain Management department functions:

Inventory management

Transportation service procurement

Materials handling

Inbound transportation

Transportation operations management Warehousing management

Moreover, the Supply Chain Management department is expected to increase its

range of responsibilities, most often in line with the thinking that sees the order

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fulfillment process as one co-ordinated set of activities. Thus the functions most

often cited as planning to formally include in the Supply Chain Management

department are:

Customer service performance monitoring

Order processing/customer service

Supply Chain Management budget forecasting

On the other hand, there are certain functions which some of us might feel

logically belong to Supply Chain Management which companies feel are the

proper domain of other departments. Most difficult to bring under the umbrella

of Supply Chain Management are:

Third party invoice payment/audit

Sales forecasting

Master production planning

Today Supply Chain Management includes services such as:

Operational Analysis and Design Materials Handling

Distribution Strategy

Operational Improvements, Distribution Management

Computer Systems

Warehouse Design Project Management

Operational Commissioning

Computer Simulation

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5.4 Supply-Chain Principles

If supply-chain management has become top management's new "religion," then

it needs a doctrine. Andersen Consulting has provided the needed guidance,

what it calls the "Seven Principles" of supply-chain management. When

consistently and comprehensively followed, the consulting firm says, these seven

principles bring a host of competitive advantages. The seven principles are as

follows:

1. Segment customers based on service needs. Companies traditionally

have grouped customers by industry, product, or trade channel and then

provided the same level of service to everyone within a segment. Effective

supply-chain management, by contrast, groups customers by distinct

service needs--regardless of industry--and then tailors services to those

particular segments.

2. Customise the supply chain management network. In designing their

supply chain management network, companies need to focus intensely on

the service requirements and profitability of the customer segments

identified. The conventional approach of creating a "monolithic" supply

chain management network runs counter to successful supply-chain

management.

3. Listen to signals of market demand and plan accordingly. Sales and

operations planning must span the entire chain to detect early warning

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signals of changing demand in ordering patterns, customer promotions,

and so forth. This demand-intensive approach leads to more consistent

forecasts and optimal resource allocation.

4. Differentiate product closer to the customer . Companies today no

longer can afford to stockpile inventory to compensate for possible

forecasting errors. Instead, they need to postpone product differentiation

in the manufacturing process closer to actual consumer demand.

5. Strategically manage the sources of supply. By working closely with

their key suppliers to reduce the overall costs of owning materials and

services, supply-chain management leaders enhance margins both for

themselves and their suppliers. Beating multiple suppliers over the head

for the lowest price is out, Andersen advises. "Gain sharing" is in.

6. Develop a supply-chain-wide technology strategy. As one of the

cornerstones of successful supply-chain management, information

technology must support multiple levels of decision making. It also should

afford a clear view of the flow of products, services, and information.

7. Adopt channel-spanning performance measures. Excellent supply-chain

measurement systems do more than just monitor internal functions. They

adopt measures that apply to every link in the supply chain. Importantly,

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these measurement systems embrace both service and financial metrics,

such as each account's true profitability. The principles are not easy to

implement, the Andersen consultants say, because they run counter to

ingrained functionally oriented thinking about how companies organize,operate, and serve customers. The organizations that do persevere and

build a successful supply chain have proved convincingly that you can

please customers and enjoy growth by doing so.

5.5 A Four Step integrated Approach

In view of the importance of Supply Chain Management to commercial success,

making the right decision about which system is best is vital. Before deciding how

to develop new service supply chain management chains and economical

distribution centres, many factors must be considered, such as, the required

customer service levels, optimum location, stock holding policies and EDP

systems. To help organizations make the best decisions, companies need to have

an integrated planning approach, consisting of four steps from planning to

realization. The only way to manage the growing complexity in international

supply chain management chains is through the integration of strategy,

engineering and IT systems and methods.

Potential analysis

Concept study

Detailed planning

Project or change management

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5.6 Where Supply Chain Creates Value

Supply chain management's ability to affect profitability and shareholder value

should come as no surprise. Supply chain management affects virtually every

aspect of a company's business. Enhanced revenues, tighter cost control, more

effective asset utilization, and better customer service are just the beginning. Five

areas in which supply chain management can have a direct effect on corporate

values. They are as under:

1. Profitable growth . Supply chain management contributes to

profitable growth by allowing assembly of "perfect orders," supporting

after-sales service and getting involved in new product development.

The bottom-line numbers give the answer. According to A.T. Kearney's

research, inefficiencies in the supply chain can waste up to 25 percent

of a company's operating costs. With profit margins of only 3 to 4

percent, the consultants point out, even a 5-percent reduction in

supply-chain waste can double a company's profitability.

2. Working-capital reductions. Increasing inventory turns, managing

receivables and payables, minimizing days of supply in inventory, and

accelerating the cash-to-cash cycle all are affected by supply chain

execution. A typical case study had found that a consumer products

company that took 20 minutes to make a product and five and a half

months to collect payment for it.

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3. Fixed-capital efficiency . This refers to network optimization--for

instance, assuring that the company has the right number of

warehouses in the right places, or outsourcing functions where it

makes more economic sense.

4. Global tax minimization. There's a thousand ways to save money

here if companies look at assets and sales locations, transfer pricing,

customs duties, and taxes.

5. Cost minimization. This largely focuses on day-to-day operations, but

it also may involve making strategic choices about such issues as

outsourcing and process design.

5.7 Implementation Procedure

The framework below outlines the five key dimensions of supply chain

management through the implementation procedure that are required to achieve

superior performance. These areas must be addressed iteratively and, generally,

in a hierarchical fashion:

1. Strategy --specifically, the alignment of supply chain strategies with the

overall business direction. Key decision points for managers here include:

What is required to align the supply chain with the business strategy?

What level of customer service must we provide to each customer

segment to compete effectively?

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Which channels of distribution best meet our goals and our customers'

needs?

2. Infrastructure , which affects cost-service performance and establishes the

boundaries within which the supply chain must operate. Pertinent questions

include:

How must the physical network of plants and distribution be

structured?

Can we rationalize our current network?

Can we use contract manufacturing or third-party logistics capabilities?

What transportation services can best link together the network of

facilities?

Which activities should we outsource?

3.

Process --the drive to achieve functional excellence and integration across allmajor processes. Managers must ask themselves the following:

What are the core supply chains processes driving the business?

How can we adapt best-in-class approaches to our core processes (e.g.,

manufacturing, integrated demand planning, procurement, cycle-time

compression, dynamic deployment)?

How can we build linkages with our suppliers and customers?

4. Organization --providing the critical success factors of cohesion, harmony,

and integration across organization entities. Questions to consider include:

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What level of cross-functional integration is required to manage core

processes effectively?

How can we leverage cross-company skills and abilities?

What performance-measurement and reporting structure can help usachieve our objectives?

5. Technology , which empowers the supply chain to operate on a new level of

performance and is creating clear competitive advantages for those

companies able to harness it. Companies should address the following points:

Does our IT platform and core applications software support world-

class SCM?

Where will advanced decision-support capabilities have the greatest

impact on business performance?

What data is required to manage the core business processes outlined

above?

How can we capitalize on advanced communications (e.g., intranetsand the Internet) in managing the supply chain?

How can we leverage enhanced visibility of customer demand and

other key operating parameters?

5.8 Implementing a competitive approach to Warehousing andDistribution

An organized approach to warehousing and distribution is crucial to the

continued growth of any business. With emerging technologies and the pressure

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to deliver a high level of customer service and turnaround of stock, tradition

methods of warehousing and distribution are being replaced by those that are

more sophisticated, aimed at reducing costs and maintaining that all important

competitive factor. Implementing a carefully structured, cost-effective approachto warehousing and distribution issues now, will inevitably see an organization

through to its long term business objectives and provide tangible financial pay

backs. Developing the best strategy required is a complex issue. A wide range of

parameters needs to be considered; business growth, purchasing, stock levels,

customer requirements. The impact of changes over the next 5 to 10 years must

be understood in order to assess the available options and develop appropriate

solutions. Is it possible to take advantage of high technology to guarantee the

future cost base, without sacrificing flexibility?

Making the right decisions, with so many issues to take into account, is not an

easy undertaking.

Fig 1: Sunflame supply chain process:

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Identification of supply chain management factors

In order to understand how a supply chain works, it is important to identify the

factors affecting supply chain process at sunflame. The following sections show

generic supply chain management factors and sub-factors that might affect

supply chain Management activities.

Environmental uncertainty:

Environmental uncertainty refers to the environmental issues in the

product chain, ie the unexpected changes of customer, supplier,

competitor, and technology.

Government support plays an important role for business success

Environmental uncertainty is an important factor in the realization of strategic

supply management plans. The increase of outsourcing activities in the industry

has augmented the awareness of the importance of strategic supply

management, which leads to better relationship among organizations.

Under this factor, three sub-factors were identified: Environment, Government

support, and Uncertainty aspects from overseas.

2.1.1 Environment

This sub- factor is related to the companys relationship with suppliers and their

level of trust and commitment. Company environment is also related to the

companys expectations of quality, on time delivery, competition in the sector,

and the level of rivalry among firms.

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In order to respond effectively to demand, companies realize that imports are a

good option for obtaining flexibility in response, even though working with

countries from overseas implies working with uncertainty .Uncertainty negatively

affects company performance. But this can be reduced if a strategic relationshipwith critical suppliers is established. Thus, companies need to implement new

strategies that allow them to deal with environmental uncertainties in the supply

chain (Wu, 2006) in order to perform in a proficient manner.

2.1.2 Government support

The level of support that the company receives from the government whenimporting raw materials or products from overseas or using domestic materials. It

includes the use of norms, regulations, policies, and advice for the sector.

Government has to make a series of reforms which would increase manufacturing

sectors competitiveness in the international market through logistics

competency. The increase of international trade for acquiring resources from

other countries introduces complicated matters such as language barriers,

transportation, transportation costs, exchange rates, tariffs, and administrative

practices.

2.1.3 Uncertainty aspects from overseas

When requiring the outsourcing of raw materials or products, it is important to

acknowledge the existence of environmental factors such as political

uncertainties in other countries that can increase risk for suppliers, provoke

decisions of no investment, change business strategies, and in general influence

business decisions. Social uncertainties such as religion, environment, language,

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cultural issues, limitations of communication and also the technology used in

other countries might interfere with supply chain planning and function.

2.2 Information technology

Telecommunications and computer technology allow all the actors in the supply

chain to communicate among each other. The use of information technology

allows suppliers, manufacturers, distributors, retailers, and customers to reduce

lead time, paperwork, and other unnecessary activities. The managers will

experience considerable advantages with its use such as the flow of information

in a coordinated manner, access to information and data interchange, improved

customer and supplier relationships, and inventory management not only at the

national level but also. Also the advantages will include supply contracts via

internet, distribution of strategies, outsourcing and procurement. All companies

are looking for cost and lead time reductions with the purpose of improving the

level of service but also to enhance inter-organizational relationships. A study

carried out states that through the use of communication tools, such as the web

sites, industrial organizations can build value in their supply chain relationships.Another key for supply chain management success is the use of planning tools

and without the use of information systems, companies cannot handle costs,

offer superior customer service and lead in logistics performance. Firms cannot

effectively manage cost, offer high customer service, and become leaders in

supply chain management without the incorporation of top of- the-line

information technologies. Among 14 information technology tools, electronic

data interchanges (EDI), enterprise resource planning (ERP) are the most

important and are of utmost necessity.

Three tools in terms of their primary purpose have been identified as effective:

communication tools, resource planning tools, and supply chain management

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tools. Given this classification, two sub factors are considered in this research:

communication and planning tools.

2.2.1 Communication tools

Communication tools are used to facilitate data transfer and communication

between the trading parts and this might include EDI, electronic fund transfer

(EFT), intranet, internet, and extranet. Electronic Data Interchange (EDI) is used for

procurement (purchase orders, order status, and order follow-up). EDI serves as

electronic catalogs for customers who can get information, dimensions, and cost

about a specific product. EFT provides trading partners with an effective way to

transfer funds from one account to another through a value added network

(VAN) or the internet. Intranets are corporate local area networks (LAN) or wide

area networks (WAN) that communicate through the internet and are secured by

firewalls. Usually this type of communication tool is used inside a corporation

that features different locations. On the other hand, extranet allows business to

communicate and share business with external collaborators with a certain

degree of security and privacy. Another type of communication tool is theinternet, a uniform interface that allows global communication with the use of

browsers. The advances in information technology have made communication

tools easier for users, allowing its presence in components to extend in the

supply chain. Another significant communication tool is the internet based

information and communication technology (ICT). Studies suggest that the use of

ICT is a strategic communication tool that improves the organizations

competitiveness, allowing cost reduction and permitting the companys

effectiveness.

2.2.2 Planning tools

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Supply chain management planning tools are intended to integrate the resource

planning activities in a firm or organization. Some of the most common planning

tools are: material requirement planning (MRP), manufacturing resources

planning (MRPII), and Enterprise Resource Planning (ERP). A MRP is a tool thatallows an organization to schedule production activities to meet specific

deadlines based on the bill of materials, inventory levels, and master production

schedule. An improvement of MRP tools is MRPII which integrates manufacturing

capabilities and capacities with the benefits of MRP. An ERP tool allows the

organization to integrate all processing information tasks related to all processes

in the value chain. This is usually a single system that might include order

management, inventory fulfillment, production planning, financial planning, and

customer service in a company. It is the backbone of the logistic systems for a

variety of firms. Some other IT tools exist that can be used to execute or manage

the various activities and relationships in the entire supply chain.

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Chapter II

6. Findings of the study

The study was conducted for over two months which spanned various

departments. The study has been methodical in nature and the information with

data that was collected has been analyzed. Below are the major findings from this

study.

Typical Procurement to distribution chain at Sunflame.

Sunflame has various suppliers who supply individual parts and components

needed for manufacturing its various products. It includes both electronic and

metal parts too. Some of the products are manufactured by procuring parts in a

Semi knocked down condition from other countries. These are then assembled in

one of the two manufacturing locations.

6.1 Planning

This is one of the core areas for a successful SCM. If the planning is incorrect,

then everything will fail and falls like a stack of cards. At Sunflame, much

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importance has been provided to planning and some of the key processes which

aid in this are:

Preparation / release of production plan of all products as per operation

meeting and or target plan meet

Update forecast and run the programs to generate shortages / stock

mismatches / excess inventories

Release month wise production Plan for all units.

Based on month wise plan production plan released by materials planning

chart (MPC), release day wise production plan & Kit loading plan for the

month.

Highlight all shortages if any before launching the job and follow-up with

concerned buyer/MPC to full fill the shortages.

Raise job order for sub-contractor loading & hand over BOMS to holding

stores for kitting.

Review of shortages and firming up Integration plan every day.

6.2 Production

Production is an important cog in the wheel, it should work as per the plan and

keep the stocks ready without hurting inventories or backlogs. The production

cannot afford to delay the product readiness nor afford to keep the inventories

very high. Key observations of production are captured as below:

Assemble & test various products as per work instructions.

Follow quality system procedures to maintain high standards.

Maintain and calibrate tools and equipments as per the schedule.

Take corrective actions for defective items.

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Highlight quality problems / shortages.

Reduce process problems and improve quality.

Generate monthly reports.

Carry out analysis / test for improvement of product / part qualityCarry out machine maintenance in time & prepare the reports.

Interact with MPC and purchase team for any shortages / replacements.

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Flow Chart Production Planning Process

Month wiseplan

Release of weeklyplan

Review of inventoryShortages

Spare indent/forecast

Receipt ofmaterials at

stores

Release ofBOMs

Loading sub assy to sub-contractor for prod &

spares reqmt /prioritize asper reqmt.

Plan for Productionloading.

Release Job order

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6.3 Stores

Materials are received from Head office along with delivery

Challan/invoice,

MRR is prepared and offered to IQC for inspection.

Accepted materials are moved to holding stores and rejected materials

are moved to rejected material area for further disposition.

Materials received without proper documentation are treated as

disputed items and reported to purchase department. MRR will be

prepared after resolving the dispute.Accepted materials are received from receiving stores along with

MRR/Material Transaction by Job. Quantity of material is verified

before storage.

Materials are issued to production/sub-contractor against valid stores

requisitions.

Materials received through SRN/STA are inspected by IQC.

Stock purged items are moved out of holding stores and are disposed

as per managements directive .

Materials received from other divisions will be moved to holding stores

only after IQC's inspection.

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6.4 Purchase

1. Selection of Vendor

Material required for Production is procured from approved vendors

(AVL) only.

Consumables and capital items, R & D new development requirements

are procured from suppliers recommended by the user department,

based on authorized purchase requisitions or capital asset

requisitions.(CAR) OR Special approvalsApproval of the Factory Head/ Purchase Head will be taken for

procurement of production items from unapproved vendors as and

when essential. Such vendors may be assessed as per Vendor

Assessment Procedure before subsequent orders are released.

2. Preparation and approval of Purchase Orders

CSL is basis for releasing purchase order Spares requirements as per

plan/forecast will be considered for ordering. During ordering, various

factors like Minimum order qty, Batch qty, and buffer to take care of

change in plan will also be considered. New Development item will be

procured based on the list of parts (LOP).

Purchase orders for items in the Bill of Material (Bom) should contain

the Sunflame part number and description of the item and in case of

components manufactured to our requirement, the revision number of

the drawing. Manufacturers part number should be mentioned as

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applicable on catalogued items. In case of branded items, approved

brands should be referred in the purchase order. If the purchase orders

are released on the original manufacturer, the brand name need not be

mentioned in the PO.Prices are negotiated by the concerned purchase person and approved

by the Purchase Head. In case of change in price, a price change note

is raised. Approval of the head of Purchase is obtained.

Payment terms, delivery schedules and other instructions and standard

terms and conditions are printed on the Purchase order.

All purchase orders are prepared by the purchase executives/

Assistants. Purchase orders are verified and approved by Purchase

Head.

Any change in price or other terms and conditions in the Purchase

orders are done through a Purchase order amendment. The procedure

followed will be the same as for preparation of a PO. In case of

urgency soft copy of PO/ amendment will be sent by email.

Every month material requirement to supplier will be given by PO

delivery schedule.

Analysis of Purchase Department

This analysis part of the purchase department deals about the lead time for theindividual process is any of the purchasing process.

Lead time for various processing processes

PROCESS LEAD TIME (DAYS)Generation of indent 1

Approval by Management 3 4

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Preparation of purchase order 1

Opening an LC 3-4

Receiving the imported goods 20-25

Customs Clearance 2 3Quality Check 1

Inventory at Stores 1

6.5 Transportation

The mode choice aspect of these decisions is the more strategic ones.

These are closely linked to the inventory decisions, since the best

choice of mode is often found by trading-off the cost of particular

mode of transport with the indirect cost of inventory associated with

that mode. While road shipments may be fast, reliable, and warrant

lesser safety stocks, they are expensive.

Sea or rail may be much cheaper, but they necessitate holdingrelatively large amounts of inventory to buffer against the inherent

uncertainty associated with them. Therefore customer service levels,

geographic location play vital roles in such decisions.

Since transportation is the major component of the logistics costs,

operating efficiently makes good economic sense. Shipment sizes

(consolidated shipments versus Lot-for-Lot), routing and scheduling of

equipment are key factors in effective management of the firm's

transport.

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TABLE 1.1Table showing Gender of respondents

GENDER NO. OF RESPONDENTS PERCENTAGE (%)Male 18 58

Female 7 42Total 12 100

CHART 1.1Chart showing Gender of respondents

From the above chart shows 58% of respondents are males and remaining 42%are females.

7

5

58% 42%

0

1

2

3

4

5

6

7

8

Male Female

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TABLE 1.2Which activities plays important role in Supply Chain Management?

IMPORTANT ROLE IN SCMNO. OF

RESPONDENTSPERCENTAGE (%)

Procurement 7 28%Inventory 8 32%WIP 4 16%Distribution 6 24%TOTAL 15 100

CHART 1.2 Chart shows, which activities plays important role in Supply Chain Management

From the above charts shows 32% of respondents feels inventory plays importantrole in SCM, 24 % respondents feels Distribution of product feels important rolein SCM, 16% and 28% respondent feels based on WIP and Procurementrespectively.

0

1

2

3

4

5

6

7

8

ProcurementInventory

WIPDistribution

78

4

6

28%32%

16%24%

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TABLE 1.3What is the main reason to go for outsourcing?

REASON FOR OUTSOURCING NO. OF RESPONDENTSPERCENTAGE

(%)

Cost Reduction 5 17%Maximization Of Returns 9 30%Lack Of Technology 6 17%All The Above 10 30%TOTAL 30 100

CHART 1.3Chart shows, Reason to go for Outsourcing

From the above chart, 30% respondent s feels that maximization of returns is thereason to go for outsourcing, 17% feel that reason for outsourcing based on costreduction and lack of technology.

TABLE 1.4

Where the problems faced by organization during implementation of SupplyChain Management?

5

9

6

10

17% 30% 17% 30%0

2

4

6

8

10

12

Cost Reduction Maximization Of Returns

Lack Of Technology All The Above

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PROBLEMS ON SCM NO. OF RESPONDENTSPERCENTAGE

(%)In Terms of Cost 3 13%

SKU 4 17%Demand Forecasting 8 33%Delivery of Product 9 33%TOTAL 30 100

CHART 1.4Chart shows, rating of problems faced by organization during SCM

From the above chart, 38% of respondent s feels Delivery of Product faces moreproblems on implementation of SCM, then Demand forecasting part, SKU,Delivery and Cost faces problems during implementation of SCM at 33, 17 and13% respectively.

TABLE 1.6

Rate the critical problem faced by Organisation when outsourced?

3

4

8

9

13% 17%33% 38%

0

1

2

3

4

5

6

7

8

9

10

In Terms of Cost SKU DemandForecasting

Delivery of Product

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PROBLEMS ON OUTSOURCING NO. OF RESPONDENTSPERCENTAGE

(%)Loss of Control 4 15%

Loss of Customer Focus 4 15%

Lack of Clarity 8 31%

Loss of Confidentiality 10 38%

TOTAL 26 100

CHART 1.6

Chart shows, Critical problems faced by organization during SCM

From the above chart, 38% of respondent feels they are in loss of Confidentialitywhile outsourcing, 31% feels they is Lack of clarity, 15% feels they are in lack ofcustomer focus and remaining feels they Loss of control during outsourcing.

TABLE 1.7

Where would you recommend the company should improve?

PROBLEMS ON OUTSOURCINGNO. OF

RESPONDENTSPERCENTAGE (%)

4

4

8

10

15%

15%

31%

38%

0 2 4 6 8 10 12

Loss of Control

Loss of Customer Focus

Lack of Clarity

Loss of Confidentiality

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Staff Training 12 43%

Technology 5 18%

Size of Office 3 11%

No. of Persons 8 29%

TOTAL 28 100

CHART 1.7

Chart shows, where company should improve.

From the above chart shows, 43% respondent feels they are lack in Staff training,18% feels they are in lack of technology, 11% feels size of organization is notenough and remaining 29% feels man power is needed for their company.

7. Summary of findings

In previous chapters, detailed findings were laid out and some analysis was made

and presented too. In this section a summary of the same would be provided in

12

5

3

8

43% 18% 11% 29%

0

2

4

6

8

10

12

14

Staff Training Technology Size of Office No. of Persons

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concise mode, which would help in easier analysis and could become starting

point for next steps.

Due to the lack of the integrated IT system in the purchase department the

lead time taken for the purchase of the items is considerably long.

My study shows that the total time taken for the purchase of the single

item i.e. alone takes about 35 - 50 days.

Tracking is not 100% reliable and some items were not tracked due to

manual mode of the process. This would lead to exigencies sometimes and

could delay the production and / shipment.

Mostly the inventory levels that are maintained in stores are not updated

periodically. this would lead to either excess of inventories or shortage of

inventories.

The worker knowledge on the inventory management and wastage

prevention was low.

The technical knowledge of the workers related to the modern techniques

to maintain the inventory levels are low. Inventory pooling does not happen at regional level

The information for goods movement is not planned well in advance and

is mostly just in time.

Pooling mechanism / re-direction of excess goods from one stock location

to another is absent.

Standard transport mechanism is being used, no alternatives are being

identified.

Tracking mechanism from source to destination is absent.

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Chapter VI

8. Conclusion

The practical approach is the best way of learning and thus internship during the

MBA course serves the same purpose. Industrial exposure during the internship

helps in providing the real insight to the business world and show how

theoretical concepts taught in the class rooms are actually applied in the

business. A good and effective supply chain is very important for any power

project to improve its efficiency and performance

Analysis and recommendations made in this report can be taken as first step and

can become basis for further refinements. Concerted efforts can be put into each

of each of the areas and remarkable improvements can be made. Alternatively,

this can be implemented in a smaller scale for a month and the results can cross

verified for the continual improvement in the chain. Apart from the regular

activities many departments are in light and proactive in nature which makes

newer process implementation an easier one. I believe with an optimized SCM

model, Sunflame will stand to gain in huge savings and also have better control

on inventories and information.

I have learned the difference between theoretical and practical implementation of

concepts used in real business.

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9. Suggestions

An earnest effort is being made to provide considerable number of suggestions

which would go in a long way to help the company to reduce the wastages, costs

and help improve efficiencies.

Production

In order to avoid setup time for changing one model to other model, the

changeover mechanism should be applied during lunch time / between

shifts, which help to reduce the waiting time.

Regular maintenance of machines needs to be carried out and all need to

be covered under annual maintenance. Also, training should be provided

to workers how to handle the machines in case of problems

A logbook should be kept for all the maintenance activities and analysis of

how the problems are solved, which could help in solving the same in

future speedier.

Currently the company is using more manual workforce than automation.

And every year the workers are changing. So this is main reason for

regular trainings and more cost involved.

Rework analysis should be done on the material worked.

Stores

Ninety percent of the material used in the products are mechanical items

and during the process of the inspection materials that are taken as per

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the sample should undergo the functional test to avoid the delay in the

process.

Manpower in the stores is less to perform the day to day activities.

Activities like improper location storage and issuing of material is getting

delayed because of less man power.

Materials should be stored as per the layout. It easily helps to inspect /

move material without any mix-up / delay in process.

MRR should be prepared only after IQC has given the clearance. Stores

person should check the material as per the invoice and should forwardthe invoice to the IQC mentioning the shortage of the items and IQC

should prepare the MRR based on acceptance or rejection because this

reduces the delay in the process of raising right purchase requests.

Internal Quality Control

Materials are to be cleared on the basis of First in First out (FIFO), but they

are cleared on the basis of priority of the material required as per

production plan. As result there is delay of over 3 days from MRR

preparation date.

Cleanliness is to be maintained in the inspection area and department.

Areas of testing equipment and materials that are to be cleared can be

easily identified. Improper storage leads to unnecessary delay in

identifying the right materials / products.

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Clear segregation of defective pieces is not practised. Displaying the

information helps to know the status of the defects over a period of time.

It motivates employees towards focusing the area.

MRR should be prepared after IQC given the clearance for the acceptedmaterial. This will eliminate the involvement of the stores and in making

MRR and sense of urgency and importance will be created on IQC

department in clearing the material on time.

Finance

Payments to vendor should be paid in time for smooth flow of material

required but payments for the vendor are getting delayed even after the

credit period according to PO terms is completed.

As result of this credibility of the company is lost and vendors will not able

to supply the raw material in time for smooth flow of material for

production and if we lost the existing vendors and it takes time to search

for new vendors.

Company should try to reduce the delay by 10% recursively over a period

of time, so that the credibility improves with suppliers.

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11. Appendix

Below is the list of Questionnaires that were used in this research.