On Day 1, as I prepared for the Induction and HR formalities, I got a call from the SCM FE Head stating that leave whatever you are up to and straight away head to the conference hall. When I entered I was introduced to the members of one of the top Logistics Consulting team with whom I had to map the entire Operations and Logistics process flow of the 7 SBUs that Cummins has. I was thrilled as hardly someone gets to work with top notch consultants.
The challenge in my project was that most of the SBUs did not have any documented process flow and everything was followed on a historical understanding basis. To add to it, I had to prepare this process flow independently from the consulting team and the time span for this delivery was just 3 weeks. This activity would form the basis for aggregation and consolidation of logistics activities between the entities. As I began my exercise I realized that all the entities worked on a silo basis and there were huge opportunities for consolidation between entities through milk run’s, FTL-full truck load strategies and cross docking. Also I realised that there was no visibility currently between the entities in terms of logistics requirement across corporate level. Thus, if we can come up with a logistics tower sort of a centralized model, then entities can definitely transition from LTLs to FTLs or PTLs. Cummins also planned of cross docking locations, Centralised warehouses, RDCs, ADCs as an outcome of this exercise. As I moved from one entity to another, I realised that one who is taking care of Inbound logistics hardly had any idea of Outbound logistics and vice versa. Thus, there was opportunity of planning and unison at this end also.
But the good thing was that most of the entities realised the potential of this strategic exercise and thus suggested of potential opportunities. I also mapped the transportation costing model of various SBUs and realized that costing varied from /kg,/tonne to /lane basis. Some transporters even had a percentage of sales price as its costing. I travelled to 3, 4 locations spanning from within Maharashtra to outside Maharashtra as some of the entities operated outside the state.
Few things I realized and learnt in this activity:
1. A lot of the resources in organizations are not aware of the end to end process that is followed and this is what leads to local optimization leading to SCM high cost as percentage of sales.
2. Most of the strategic units work independently and hardly any handshake takes place between entities. As a result people are not aware of even the best practices being followed in the neighbouring entity.
3. The leadership team needs to motivate and inspire people for process improvement. Even the graduates from the top most Tech and B schools usually just follow the process that is practised from years without focussing on Innovation.
4. SCM has indeed become a strategic unit in organizations and SCM leaders are making their presence felt in Board Meetings.
Finally after 2.5 weeks I was able to come up with process flow maps on VISIO for the entities. There were also several process improvements, consolidation opportunities that I suggested to the SCM FE team. This exercise was highly applauded by my mentor as this not only led to the identification of end to end processes for the SBUs but also visibility of bringing down the logistics cost by 2% that is by close to 10 crores per annum.
My next project to be completed in coming 3 weeks was selection of a 4PL for entire Cummins, India operations. The need for this activity was because of the fact that currently the SCM resources were spending considerable amount of their time just on daily management of transporters and carriers. Thus, these resources were not able to spend time on analytical and process improvement activities. Also there was no body for analysis of data and evaluation of performance of suppliers, carriers and entire logistics spanning from transportation, packaging, taxation, warehousing. So the 4PL would be responsible for setting up and managing the Logistics and Material Tower that Cummins planned to come up with. I began my selection with formulation of a Pugh, Radar and SWOT matrix. The broad parameters that I came up for this evaluation were:
Cost of the service, Savings Expected, Capability of Information Systems and Technology, Reporting Mechanism, Flexibility, Change Management ability, Operational Performance, Financial Performance, Talent Management, Organizational Effectiveness, Experience of 4PL and prior experience with Cummins, Continuous Improvement & Innovation, Carrier Management, Freight Pay Management and Audit, Customer Services, Process Control, Project Management. These broad criteria had various sub criteria associated with different weightings. As 4PL is a pretty new concept in India it was tough to even shortlist companies because not even a single company had experience of 4PL activity in domestic sector. They had experience in International arena but when it came to Indian set up, prior experience of these companies was limited to 3PL activities. But somehow based on companies’ International experience and freight forwarding expertise, I shortlisted 5 companies. The evaluation began by taking inputs from the Cummins SBUs who had worked with these freight forwarders. Then I created a questionnaire to capture inputs of the activities of these companies. I also got feedback from present clients of these companies to understand their performance in terms of analytics, network optimization capability, carrier management and WMS: Warehouse Management System. I also scheduled visits with all these companies to better understand their work and get a first hand feel of their day to day operations such as KPI management, day to day shipment management, carrier auditing(QBRs), payment processes and business continuity planning.
The challenge was getting feedback from clients as the clients of these organizations were not interested in these activities. But this feedback was one of the most important input for evaluation. Running from pillar to post I finally got the inputs required for evaluation. One thing notable was that there was no clear winner as not even a single organization has excellent 4PL capability. All of the 3PL service providers depended upon their International arm for analytics, IT and Operations Reasearch requirement. I also understood that 4PL is sector which is yet to take off in India and as a result I have started chalking out my plans for coming up with a 4PL company.
My key learning’s in this project were:
1. KPI identification for carriers and suppliers.
2. What ought to be checked to figure out the capability of a service provider under a particular criteria. For example, to know if 3PLs will provide in transit reports we ought to check if they have online or offline GPS capability in their vehicles.
3. Network optimization through various software tools.
4. The incentives of the company must be aligned with the incentives of your service providers for achieving Global Optimization.
My last and final project for the remaining 3 weeks was to conduct a feasibility study for the setting up of RDCs or ADCs for Battery and Filter Business of Cummins. The goals were to understand the current distribution model, evaluate the current model and make assessment of its benefits and limitations, identify & evaluate the locations of the RDCs or ADCs post savings assessment. I began my journey by understanding the present process flow, the current end to end costing and the present challenges that are forcing Cummins to formulate a new model. The present model was that all the 3 suppliers had to send their goods to 1 Warehouse in Pune and from here the material was sent across India.
There were 5 drawbacks identified in this model:
(a) Double transportation charges as material first came to Pune Warehouse from the Suppliers locations and then again say suppose to be sold in the Supplier’s state.
(b) Payment of 4% of CST as there was interstate transfer happening and no stock transfer. The disadvantage of CST is that it is non refundable and unlike VAT( in case of intra state transfer) we cannot pass on CST to our customer.
(c) Huge lead time because in bound lead time was roughly 5 days and then outbound varied from 2 to 8 days.
(d) Huge RMA and scrap generation because of battery being a hazard material and lead time leading to acid spillage causing quality and damage issues.
(e) Loss Sales as some areas of North East required around 12 days of transportation lead time excluding MLT: Manufacturing Lead Time.
Gravitational Modelling, Pareto Analysis, AHP:Analytics Hierarchy Process, R software formed the basis for RDC and ADC location. The goal was to achieve a trade off between new warehouse capex, forecasting challenges as in a non aggregate level forecasting issues are more and savings achieved from transportation and taxes. I faced extreme challenges in this assignment because of the following factors: the battery and filter business varied from each other, taxation was a new animal to tame, evaluation of end to end costing had interaction with several stakeholders and data crunching, warehouse modelling and costing at different locations, figuring out the actual cause of RMA(scrap) generation and evaluating loss sales as this was not captured till date.
But at the end of the day, I was able to come up with a new distribution business model with visibility of considerable savings and qualitative advantages such as improved service level, fill rate achievement and lesser pipeline and cycle stock.
My learnings from this particular assignment were:
1. Corporate Law and taxation is a very important component for SCM resources. I plan to take up this elective. J
2. Packaging and Warehousing costing is not given that much emphasis that it deserves. It actually can lead to huge cost savings.
3. Best in class battery distribution and warehousing model as I had benchmarked my study with few of the top Battery Manufacturers. I realised several key storage and handling features for Hazad Materials.
4. Warehouse operations costing. Got the opportunity to work with some of the top most logistics players of India.
5. Disaster Recovery planning or BCP is an important parameter for evaluation of any business decision.
Today as I look back at my experience, I realize that my deliverables were effective because of daily reviews happening with my mentor and twice a weekly reviews with project sponsor-GM SCM FE. Their inputs and feedbacks were crucial towards the final outcome as they guided me whenever I deviated from the actual requirements. Also your project ought to have a go from the organization’s leadership team as only then one will be able to get inputs from various departments and personals. All would not be open to share information with you specially the transporters, service providers and this will definitely test your patience as your supervisor wants the job gets done at the earliest. Cooperation between interns is indispensable as on most of the projects you require team work. I know it’s tough keeping the PPO in mind but your output will be most effective when there is co-operation.
In this context, I thank my B school colleague Rohit Garg as these exhaustive assignments could not have completed without his contributions.
The icing on the cake was the fact that in my formal review with my HR, I received a very positive feedback. Cummins also plans to hire more in no. from my B school next year. This is very heartening as I am very pleased to have contributed towards the brand building of my Institution.
With these inputs I sign off and wish best wishes to all future Interns.
About Biswarup
I come with 4.5 years of experience in Telecom and Operations Consulting. During this tenure, I have worked in Accenture Technology Consulting, Consultants to Government and Industries in Operations Consulting and Project Management roles.
I completed my B.Tech in Electrical Engg. and was a gold medalist in Engg.
Event management is something I truly enjoy having experience of leading my cultural/technical fests, social entrepreneurship and NSS events during Engineering.
I am currently part of the 3 member Corporate relations and placements team at IIM-Udaipur and responsible for industry interactions, corporate tie-ups and placements for the batch.
Read all experiences in Supply Chain here
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Read Sampada's experience in an Indian Conglomerate here
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