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    Cost Leadership - Final

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    kapilnaresh
    The document discusses strategies for improving profitability through cost leadership. It argues that controlling costs can lead to improved profits as profit equals revenue minus costs. It outlines various internal and external cost challenges and describes how an integrated supply chain approach can help address these challenges. Specific strategies discussed for planning and logistics, sourcing and procurement, and manufacturing include theories of constraints, network optimization, global sourcing, and debottlenecking processes. The goal is to reduce costs and inventory while maintaining sales and quality.

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    Cost Leadership - Final

    Uploaded by

    kapilnaresh
    15 views25 pages
    The document discusses strategies for improving profitability through cost leadership. It argues that controlling costs can lead to improved profits as profit equals revenue minus costs. It outlines various internal and external cost challenges and describes how an integrated supply chain approach can help address these challenges. Specific strategies discussed for planning and logistics, sourcing and procurement, and manufacturing include theories of constraints, network optimization, global sourcing, and debottlenecking processes. The goal is to reduce costs and inventory while maintaining sales and quality.

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    Cost Leadership - final

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    The document discusses strategies for improving profitability through cost leadership. It argues that controlling costs can lead to improved profits as profit equals revenue minus costs. It outlines various internal and external cost challenges and describes how an integrated supply chain approach can help address these challenges. Specific strategies discussed for planning and logistics, sourcing and procurement, and manufacturing include theories of constraints, network optimization, global sourcing, and debottlenecking processes. The goal is to reduce costs and inventory while maintaining sales and quality.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    15 views25 pages

    Cost Leadership - Final

    Uploaded by

    kapilnaresh
    The document discusses strategies for improving profitability through cost leadership. It argues that controlling costs can lead to improved profits as profit equals revenue minus costs. It outlines various internal and external cost challenges and describes how an integrated supply chain approach can help address these challenges. Specific strategies discussed for planning and logistics, sourcing and procurement, and manufacturing include theories of constraints, network optimization, global sourcing, and debottlenecking processes. The goal is to reduce costs and inventory while maintaining sales and quality.

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    of 25

    PROFIT LEADERSHIP

    R S Gopalakrishnan
    PROFIT LEADERSHIP

    Cost Reimbursement Model:

    Cost + Profit = Selling Price → Profit = Selling Price - Cost

    Competition puts downward pressure on Selling Price

    Inefficiencies put upward pressure on Cost

    Profit = Selling Price - Cost

    Controlling Costs can lead to improvement of Profit


    PROFIT
    COST CHALLENGE
    LEADERSHIP
    COST CHALLENGE

    INTERNAL EXTERNAL

    • Vendors / 3P Manufacturing • Distribution Schemes/Margins


    • Warehousing • Competition
    • Logistics • Consumer
    INTEGRATED
    INTERNAL SUPPLY
    CHAIN

    Planning & Logistics Sourcing & Procurement Manufacturing


    PLANNING & LOGISTICS
    PLANNING & LOGISTICS

    • Theory of Constraints (ToC)

    • Network Optimization

    • Consolidation of Secondary Logistics

    • Reverse Logistics

    • Freight/Packaging Optimisation
    PLANNING & LOGISTICS

    • Theory of Constraints (ToC)


    Reduce Hold Less
    • Network Optimization Costs Inventory

    Profitable
    • Consolidation of Secondary Logistics System

    Protect Hold More


    • Reverse Logistics Sales Inventory

    • Freight/Packaging Optimisation
    PLANNING & LOGISTICS

    Typical Bi-Modal Solution


    • Theory of Constraints (ToC)
    • Too less of inventory:
    o Sales loss
    • Network Optimization
    o Expenses (e.g. expedited freight)
    • Consolidation of Secondary Logistics • Too much of inventory:
    o Excess working capital
    • Reverse Logistics o Capacity is tied up in things that are not
    required
    • Freight/Packaging Optimisation
    PLANNING & LOGISTICS

    Bullwhip Effect
    • Theory of Constraints (ToC)
    • Changes in Demand Signals move from Consumer
    to Manufacturer
    • Network Optimization
    • Delay and shortages are passed from
    Manufacturer to Consumer
    • Consolidation of Secondary Logistics

    • Reverse Logistics

    • Freight/Packaging Optimisation
    PLANNING & LOGISTICS

    Solution: Decoupling
    • Theory of Constraints (ToC)
    • RULE: Order Daily Replenish Frequently
    • Network Optimization
    • Stock Points: Decoupling Points of Stock Holding
    • Consolidation of Secondary Logistics • Buffers: Stock held to reduce impact of variability

    • Reverse Logistics

    • Freight/Packaging Optimisation
    Distrbutor CFA RWH PWH Factory
    PLANNING & LOGISTICS

    Solution: Decoupling
    • Theory of Constraints (ToC)
    NORM CALCULATION
    • Network Optimization • Stock at CFA & RWH = Batching Time +Transit
    Lead time + Safety Stock
    • Consolidation of Secondary Logistics
    • Stock at PWH = Mfg Lead time + Transit Lead
    • Reverse Logistics time + Safety Stock

    • Freight/Packaging Optimisation
    PLANNING & LOGISTICS

    Benefits
    • Theory of Constraints (ToC)
    o Close to Zero stock out
    • Network Optimization o All SKUs are available

    • Consolidation of Secondary Logistics o Latest batch in shelf


    o No obsolescence
    • Reverse Logistics
    o SKU Rationalization
    • Freight/Packaging Optimisation
    SOURCING & PROCUREMENT
    SOURCING & PROCUREMENT

    • Value Engineering

    • Cost reduction projects

    • Transparent Cost Sheet

    • Global Sourcing

    • Vendor’s vendor

    • Supply Assurance – Reliability Audit


    SOURCING & PROCUREMENT

    • Value Engineering QFD – Quality Function Deployment

    • Cost reduction Projects

    • Transparent Cost Sheet

    • Global Sourcing

    • Vendor’s vendor

    • Supply Assurance – Reliability Audit


    SOURCING & PROCUREMENT

    • Value Engineering Benefits

    • Cost reduction Projects o Balancing the consumer need and delivery


    o Enhance Quality
    • Transparent Cost Sheet
    o Cost reduction
    • Global Sourcing o Best to use in New Product Development

    • Vendor’s vendor o Cross functional team work

    • Supply Assurance – Reliability Audit


    Product Re-designed

    HIT – FIK (Flying Insect Killer)


    HIT – CIK (Crawling Insect Killer)

    Cost reductions…
    Perfume as an Indicator
    Can thickness optimised
    MANUFACTURING

    • Debottlenecking

    • Layout/Process Flow

    • No Quality Control

    • Flexibility

    • Inventory

    • Special & Specific Projects – GST


    MANUFACTURING

    • Debottlenecking

    • Layout/Process Flow

    • No Quality Control

    • Flexibility

    • Inventory

    • Special & Specific Projects – GST

    *At one point of time, there can be only one constraint


    MANUFACTURING

    • Debottlenecking Benefits

    • Layout/Process Flow o Capacity increase to match the inflation:

    8-10% increase year on year


    • No Quality Control
    o Reduction in change over time
    • Flexibility
    o Sequential and No Batching – reduction in
    • Inventory WIP

    • Special & Specific Projects – GST o Now – Getting in to Robotics


    GOODKNIGHT MOSQUITO COILS….
    COIL PROCESS FLOW….

    46%
    water

    Dry Mix Water


    Dry Mix + +
    Wet formulation Kneeding

    41%
    Drying Extrusion water
    + +
    Packing Stamping
    KEY MANUFACTURING PROCESS….

    Key Benefits Achieved..


    • Productivity Improved from 650 cases
    to 1000 cases

    • Energy savings

    • Man-power reduction

    • Low Investment

    • Reduction in Water consumption 19.5


    lakhs lit / year

    • Fixed cost reduction > 25%

    • Variable cost reduction > 15%


    Thanks..

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