VARDHMAN SPECIAL STEELS

IDENTIFICATION OF KEY AREAS FOR CUSTOMER LEVEL IMPROVEMENT IN A COMPLEX SUPPLY CHAIN

UNDER THE GUIDANCE OFMr. Rakesh Arora( HOD PPC)

Industries in 1980’sDuring 1980’s quality improvement became important with improved sales and profit performance.

Current Situation• Now a days industries have been showing great commitment to

customers.• Manufacturing skills are no longer key asset, customer service level

has been recognized as strategic value.• Keep customer happy.

Key area of Service level improvementPerformance of supply chain is measured through two key performance indicators when it comes to customer deliveries.• FFCOFR(First fully confirmed order fulfilment rate): Related to delivery

ability. It measure whether industry can promise customer that his order will be fulfilled given his requirement.

• OTIF( On time in full): Measures how reliable industry is in delivering the customer the given quantity on time.

What is OTIF?

 

"Getting the right stuff to the right place at the right time, in the right location on the jobsite, in the right condition with the right invoice–all day, every day."

• OTIF measures the whole company and the performance at each step.• This isn't simply an operations report card; • OTIF is a roll-up measure. • To perform well on OTIF, everything that goes into it has to be correct.

The take-off and order entries have to be correct; Purchasing has to maintain appropriate inventory levels; Material has to be handled correctly, pulled correctly,

ON TIME:

• On-time is defined as delivering the order to the customer when you promised.• The measurement is the commitment the organization made, not

necessarily the time the customer requested

IN FULL:• In-full measures order accuracy. It counts as in-full when everything

ordered is delivered with no errors, backorders, or substitutions.

Why OTIF?The greatest value in measuring OTIF is that it allows you to see at a glance how the company is doing.Companies that measure and manage OTIF are unanimous in the value of doing so. That value includes • Reduced time lost to mistakes • Time spent trying to locate materials• Elimination of missing directions for drivers• Increased accuracy, and so much more.

Calculation of OTIF:

Requirements for the OTIF measurement are:

• Have a delivery date (even hour for some organizations) on the customer order.• Measure the date or the hour of delivery and archive it in the system• Maintain record of the reasons why an order was not OTIF.

Generally OTIF is calculated by taking into account the number of deliveries: OTIF ( % ) = number of deliveries OTIF ÷ total number of deliveries * 100 But he can also, according to organizations, be calculated according to the number of orders or the number of the order lines.•

Reasons for OTIF failure:As OTIF performance is measured, failures and the reasons for them are tracked. Generally these fall into four categories: vendor issues, customer issues, internal issues, or other.Vendor: includes late shipments, partial shipments, or wrong items sent. Customer: includes wrong delivery information provided by the customer, last-minute changes/ add-ons. Internal: includes sales order entry mistakes, inadequate time allowed for special orders, inventory out-of-stocks, manufacturing error, delivery error.

• Other: weather issues or transportation strikes and the like.

March OTIF:Late cases NO.s %

More than 60 days 80 12

31-60 119 18

16-30 138 21

8-15 70 11

1-7 91 14

On time 147 23

Reasons of failure:• Wrong TDD.• Revised TDD updating in ERP not being done. • Over booking than plant capacity.• Dispatch against wrong COPS.• Sales budget should be in line with the booking if needed should be

revised and informed to PPC.

Root Causes:• URGENCY and URGENCYLast moment addition of order disturbs the whole cycle.Moreover addition of smaller diameter order as urgency results in much delay of other order.• More time to roll small diameter bars.• Setup time: time lost in changing of rollers

Other reasons:Internal• Overbooking: customers are committed for the orders which can

never be made.• No proper communication between marketing department and PPC

department.• Revised dates are not entered into ERP.

Hidden cause:Steel Stacking: A problem in inventory management in the steel industry A key logistics problem between the continuous casting stage and the hot rolling mill in the steel industry.

Continuous

Caster (CC)

Slab

Slab Yard

Reheat

Furnace

Hot Rolling Area

Hot Rolling

Hot Strip

Mill

• Commonly, the problem of such storage areas is that the next billet needed for the next production step is often not the one on the top of the respective stack. • Therefore, a resorting has to be performed in order to access the

desired billet.

Solutions:• Before committing any special small order, marketing department

should inform PPC and ask if it is feasible.• Proper calculation for time loss to be made if we are making any

special order. This time must include setup time lost due to changing of rollers.• Some time customer keep on extending the date of delivery and this

led to rise of inventory level on warehouses. So keep reminding customer to take off their order and pay the remaining amount.

Work to do.• Material requirement planning.• To calculate how much raw material to order and at what point of

time it should be ordered.• Study of MPS.• Study of BOM for different grades.• Lot sizing policy for all parts.• Safety stock requirement.