04/07/2023 1

SUPPLY CHAIN MANAGEMENT OF RD 33 SR2 ENGINE

By:Ankit Mohanty

Project Guide:Mr S.K. Jaiswal

04/07/2023 2

ContentsWhat is SCM?Where can it be applied?BenefitsCurrent Scenario of Materials Management

in HAL, KoraputAnalysisCauses and EffectsSuggestionsConclusion

04/07/2023 3

Supply Chain Management (SCM)SCM is the management of a network of

interconnected businesses involved in the ultimate provision of product and service packages required by end customers.

SCM spans all movement and storage of raw materials, work-in-process, inventory and finished goods from point of origin to point of consumption (supply chain).

04/07/2023 4

Where can it be applied?Manufacturing firmsRetailersServices

04/07/2023 5

Benefits of SCMProfitable growthWorking capital reductionsFixed capital efficiencyGlobal tax minimizationCost minimization

04/07/2023 6

Current Scenario

04/07/2023 7

2008-09 2009-10 2010-110

500

1000

1500

2000

2500

3000

3500

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.000.91

0.52 0.57

Inventory Turnover Ratio (Overall)

Net Sales Inventories Sales/Inv

Year

Valu

e (in

Cro

res)

Analysis (Balance Sheet HAL KPT)

04/07/2023 8

Analysis (RD 33 Inventory)

04/07/2023 9

Inventory Usage (RD 33)

04/07/2023 10

Inventory Usage (RD 33)

10%

20%

30%

40%

2009-10 2010-11 2011-12

5%

35%37%

Trend of the Inventory Usage

04/07/2023 11

EffectsOver stocking of non mandatory spares which

incurs unwanted hidden cost to the company.Poor material planning.Very low inventory turnover ratio.Consumption pattern not in line with the

purchase schedule.High amount of wastage.Actual shortage not taken into account.High production cycle time which leads to

LD/MRO.

04/07/2023 12

CausesOver dependence on Original Equipment Manufacturer

(OEM) for supply of spares (BOF).Terms and conditions being dictated by supplier due to

monopoly.MOQ being decide by supplier depending on their own

convenience.High Lead time for procurement (i.e. from projection of

requirement by indenting department to the receipt of spares).

Suppliers has own cycle time for manufacturing and delivery.

Presence of various intermediaries like licensors (e.g. ROE) which increases time and cost.

Difficulty in preparation of estimates in view of non availability of past procurement reference prices for several items & absence of price catalogue.

04/07/2023 13

Causes (Contd)Many of the spares are not easily available (due to

obsolescence).The manufacturing lines have been closed at OEM plants in

Russia for some of the old project materials leading to high cost as manufacturing lines are especially re-opened for catering to HAL needs.

The PNC are held only during IRSAs, the process is very time consuming, and do not yield desired results on many instances.

Different MOQ are being offered by vendors. It becomes difficult to decide on L-1 i.e. whether to go on unit cost L-1 basis or cost to the company basis.

There being no LD clause for supply of material to HAL by vendors and there is no choice for alternate supply HAL is constrained to extend the delivery schedules as per the vendor requests which hampers the material plan.

04/07/2023 14

SuggestionsBusiness Process Reengineering (BPR).Spares Indigenization.E-Procurement.SCM supporting tools (Kinaxis).Implementation of Internal customer concept

(TQM).JIT approach feasibility in current scenario.

04/07/2023 15

Fishbone Diagram

F I S H B O N E

Over dependence on OEM

Indigenization

Internal Process takes 17 Months

E Procurement

High Lead Time (External)

Vendor rating, follow-up and introduction of LD

High MOQ due to over dependence

Vendor survey and LTBA as per year wise req. staggered fashion

• Over Stocking• Poor Material Planning• Low Inventory Turnover ratio• High wastage• High Prod cycle time

Presence of Retailers

Direct contact with OEM

PNC being done during IRSA only

Frequency of IRSA to be increased

Escalation factor very high as per normsPrice catalog to be maintained to have effective PNC

Increase in nonmoving stock

P-factor for procurement needs revision

Forecast task variation leads to high inventoryRegular follow-up with AHQ to have firm task for next year early

04/07/2023 16

Business Process Reengineering (BPR)Planning of IndentsEstimationIndent to OEM other than RetailerMOQ for materials/sparesPrice CatalogueVendor rating

04/07/2023 17

Spares IndigenizationLow dependence on Russian OEMs.Low cost.Just in Time (JIT).Reduced Inventory.Scope for outsourcing.

04/07/2023 18

E-ProcurementE-Procurement reduces costs in three ways:

Increased contract complianceReduction in Transaction CostsImproved supplier leverage

E-Procurement provides tangible savings like:Increased profitsPayback period of less than one yearSpend savings of 5% - 10%Transaction costs reduced by more than 73%Cycle times decreased by more than 70% - 80%

04/07/2023 19

Potential Savings

04/07/2023 20

SCM Tools (Kinaxis Rapid Response)Pioneer in providing SCM solutions in the Aerospace &

Defense sector.Some of their customer’s achievements:

Reduced excess inventory at one site by $600,000 in first month of use

Reduced inventory by $52 million in first six months of use Shortened time to respond to change from five days to under

24 hoursShortened time to perform "what-if" simulations from 160

hours to about 3 minutes (2-3 days for the most complex simulations)

Reduced product lead time by 35%Avoided $4.6 million in inventory purchases (on one project

alone) by accurately understanding inventory positions

04/07/2023 21

Kinaxis Rapid Response

04/07/2023 22

ConclusionThus the scope of the project work was

limited to study of Supply Chain of RD 33 Sr2 engines and can be extended to:R11R25R29BRD 33 MFGTG-16MKSA-2AL31FP

04/07/2023 23

ANY QUESTIONS

04/07/2023 24

THANK YOU