PROPEL ISSUE 11 | AUGUST 2017
SUPPLY CHAIN PROCUREMENT INVENTORY COST PEOPLE TQM VISIBILITY EFFICIENCY MANAGEMENT OPTIMISATION DEVELOPMENT
Pursuing Excellence in SUPPLY CHAIN MANAGEMENT
A RANE GROUP PUBLICATION JULY 2017 | PROPEL • 1 THE WORLD OF RANE
PROPEL ISSUE 11 | AUGUST 2017
SUPPLY CHAIN PROCUREMENT INVENTORY COST PEOPLE TQM VISIBILITY EFFICIENCY MANAGEMENT OPTIMISATION DEVELOPMENT
Rane Holdings Limited (RHL) Pursuing Excellence in SUPPLY CHAIN MANAGEMENT
A RANE GROUP PUBLICATION Rane Brake Lining Limited (RBL) Rane Engine Valve Limited (REVL) Rane (Madras) Limited (RML)
- Steering & Linkages Division Please send in your feedback to - Diecasting Division [email protected] - Rane Auto Parts Copyright 2017 Rane - Rane Precision Die Casting Inc. (RPDC) Holdings Limited Rane NSK Steering Systems Private Limited (RNSS) All Rights Reserved Rane TRW Steering Systems Private Limited (RTSS) Content Partner: - Occupant Safety Division The Smart CEO Media Labs, the content marketing and custom - Steering Gear Division content arm of The Smart CEO Magazine.
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2 • PROPEL | JULY 2017 CONTENTS RANE PROPEL
PG 4 4 From the Chairman’s Desk
Pursuing Excellence in Supply Chain Management
6 Supply chain Optimisation
In conversation with Hari Babu N, Advisor at Rane Holdings Limited, on the six key steps to optimise the supply chain
PG 10 PG 6 8 Interview
Ashok Leyland’s approach to supplier development
10 Globalization of Auto Supply Chain
S. Parthasarathy, Chief Executive Officer - RML, shares insights on expanding into international markets PG 14 PG 8 11 Supplier Development
A. Makesh, Senior Vice President - Materials & Plant-4 at RML, explains the finer nuances of supplier development 14 Cost Optimisation
In this article, we gather Rane Group’s approach to cost optimisation and perspectives from R. Subramanian, Senior Vice President – Materials, Rane TRW Steering Systems PG 18 16 Business Roundup
Safety, Quality and Compliance: The 3 Core Pillars of Rane NSK 18 NEWS @ RANE
A round up of key activities and achievements from Group companies
JULY 2017 | PROPEL • 3 FROM THE CHAIRMAN’S DESK Pursuing Excellence in Supply Chain Management
Last fiscal (FY 2016-17) was an even further. With eventful year for Rane Group. Our this objective, Rane group delivered robust performance Manufacturing Systems with overall sales growth of 24% Professional (RMSP), to Rs. 4,032 crores. This was a comprehensive enabled by positive growth across long-term Initiative major vehicle segments in India. was rolled out in In addition to organic growth, our June this year. This US acquisition, Rane Precision consists of modules Die Casting contributed to overall on manufacturing revenue growth. Profitability margin processes and systems at an aggregate level also went up to train junior engineers by one per cent. and mid-level managers in theory and practice The divestment of stake in SasMos through classroom and HET Technologies, an investment shop floor training. made a few years back, gave Each batch will include us a good return on investment. 30-35 employees and The group plans to seek other will cover all relevant opportunities in aerospace in the young managers in future. three to four years.
In the past few months, planning With the growth outlook and budgeting phase for all group remaining favourable, a companies were completed. A total capex outlay of Rs. reasonable growth of 8-10 per cent 220 crore for 2017-18 is expected in the current fiscal. has been planned. The company has decided to take this conservative outlook due to the At RTSS, we are sluggishness in the last quarter and making investments around transition to uncertainties of Rs 60 crores. The like GST, which could have some seatbelts and airbags short-term impact. business is witnessing tremendous growth Outlook for FY18 and Rane TRW is Our current area of focus is gearing up to capture enhancing manufacturing a good share of this capabilities, across the group, opportunity.
4 • PROPEL | JULY 2017 In RNSS, we are investing Rs. 65 crore to should be a positive factor in the long-run. support new program volume ramp-up. Similarly Meanwhile, at Rane Group, the IT, finance, marketing for RBL, RML and REVL, the investments will be and Supply Chain Management teams made the for specific customer programs. necessary preparations and ensured smooth transition. As the auto components sector is expected to register a growth of 8-10 per cent, Rane will Supply Chain at Rane strive to maintain or improve its market share A recent study by a global consulting company shows with our customers. that Indian manufacturers lag behind their global peers in supply chain management. Being dependent To expand presence in Europe, an office in on suppliers for materials, improving their capabilities, Germany is also being set up and should be especially those in Tier 2 and Tier 3, will be important operational shortly. to upgrade Rane’s quality performance. Technology solutions will play a key role in areas such as sourcing Also, I must add that a continuously evolving materials and logistics to optimise cost. Overall, there culture of innovation is going to be critical is a renewed rigour across the organization to pursue as many disruptive technologies are rapidly excellence in our supply chain management efforts. changing the market. Rane will accordingly step up focus in this area – be it products, application Having already established quality practices at or even markets – with senior management the Rane shop floor, transferring the knowledge, periodically reviewing it and providing timely handholding suppliers and working closely with them guidance. will continue to be part of the agenda for the coming years. The aim is to make the suppliers partners in Gearing Up for GST growth as that will be critical to meeting the increasing GST is expected to be beneficial to the overall customer requirements. economy. However, there will be near-term uncertainty as the players in the value chain On a concluding note, I would like to add that adjust to the new framework. This was already profitable growth with good return on capital employed seen with sluggish demand in the month of June, will continue to be the focus. The key message I want which will hopefully be temporary. to leave our employees with is that we must capitalize on this growth momentum in the market and not miss On the passenger vehicles front, GST is any opportunities. Also, we must focus on building a expected to be a positive, especially for mid- culture of innovation and further strengthening our sized and luxury vehicles. supply chain to continue delivering superior value to our customers. For Commercial vehicles, we believe GST will help boost the logistics sector, and therefore Looking forward to a good year ahead.
JULY 2017 | PROPEL • 5 SUPPLY CHAIN SPECIAL Six Steps to Optimizing the Supply Chain
To meet our business objectives for profitable growth with customer satisfaction, Rane Group has been constantly improving processes to enhance, improve and make the entire supply chain more efficient.
HARI BABU N, ADVISOR, RANE HOLDINGS As narrated by Hari Babu N, we call, ‘Buy-to-Make’ – that is, using LIMITED Advisor at Rane Holdings Rane’s existing infrastructure to Limited manufacture some of the components internally, keeping capacity and all three goals in its supply chain. A study by IBM, the global technology capabilities in mind. The group is adopting technologies and business services firm, identifies for improving its sourcing, predictive five major challenges in supply chain Collaborative Approach analytics to introduce efficiencies, and management in the auto components While collaboration with suppliers tools to enhance visibility to address sector as the following: is given much stress, it is easier bottlenecks across the chain. said than done. It needs to be done 1. Visibility of the entire chain at the right time, through early TQM Principles for SCM 2. Mitigating risk involvement, being transparent, and Rane has been implementing TQM 3. Cost containment at different working together to meet customer across its companies since the stages requirements. Responsiveness, year 2000. The three fundamental 4. Inventory management agility and technical capabilities will principles of TQM are customer focus, 5. Globalisation and how the be important for SCM value addition continuous improvement and total different stakeholders would as well as to meet key business employee involvement. strategize, as they work with objectives. Now, these principles are being others across geographies extended to the supply chain as This needs a change in the mindset well through greater focus on the At Rane Group too, these five of suppliers, who need to be willing supplier’s business, their continuous challenges apply while trying to to adapt to changes. Creative use of improvement, and early supplier optimize the SCM (Supply Chain technology for better monitoring and involvement. As a result, identifying Management) costs without losing analysis will also contribute much, weak links becomes easier, and focus on customer satisfaction. To in addressing any bottlenecks in the improvements either by working achieve this, some of the strategies chain, early on. closely with a supplier or moving on to the group has adopted include the next, are effected more efficiently. sourcing from across the globe (based IBM recommends a ‘3I’ approach here on cost efficiencies), localization – Instrumented, Integrated, Intelligent JIT (Just in Time) and Kanban where an acceptable alternative approach. The use of smart devices systems too that address inventory is available, and identifying and for better visibility, integrated network management issues have further developing local suppliers who have capabilities, and predictive analytics improved material optimization, thus the potential to work closely with the for data driven forecasts would be the keeping costs under control through Group. right approach. Rane, being TQM- optimum stocking and less waste, driven which stresses on measurable without affecting customer schedules. Another strategy adopted is, what goals, is well suited to leverage the Vendor Managed Inventory (VMI) is a ‘3Is’ and is working towards achieving system that has been introduced for
6 • PROPEL | JULY 2017 SUPPLY CHAIN SPECIAL better management of inventory along SCM leaders need several skills manage ambiguity and manual the chain. over and above specific technical intervention. capabilities. They need to have strong But for these to succeed, a strict people orientation, understand cultural SCM Improvements – Case adherence to SOP – standard differences and be process integrators Studies operation procedures – is mandatory who can have an end-to-end view of One of the recent initiatives in cost and PDCA – Plan, Do, Check, the entire supply chain. optimization has been the Milk Run Act – cycle ensures continuous Concept. The truck that delivers to the improvements. Leadership Development Architecture customers then visits the suppliers is an initiative that is aimed to hone to pick up supplies. This has helped Lean Production System – Cross the required leadership skills right bring and to: down inventory, cut down Company Study Support and Learning from the time freshers with potential cost on logistics and maximize the (LPS-CCSS&L) is another initiative enter the organization. High potential usage of vehicles. that draws teams from across employees also are identified and the Group for visits to our various they undergo intense leadership VMI – vendor managed inventory is factories, to address pain points programs co-developed by Rane and another successful concept which from customers’ view point. It also Great Lakes Institute for Management, has improved flexibility, visibility and trains the employees to develop lean specifically keeping Rane Group’s lowered total cost of logistics while specialists and implement lean tools unique requirements in mind. optimizing inventory. to improve SCM efficiencies as well. The group also has Executive Leadership Development intervention Kanban is yet another example of Honing SCM Skills with psychometric tests and coaching. inventory management where a visual While technology and systems are system helps track movement of crucial for supply chain optimization, The group also recognizes its inventory and stock, only as needed. a team with the right skills is of suppliers during the Supplier Kaizen paramount importance. Therefore, meet, where those who meet Rane’s Some of the other initiatives have Rane has introduced the RMSP stringent performance audits are been to consolidate procurement of Initiative – Rane Manufacturing awarded. These audits also help commonly needed materials to take System Professionals – to train its observe the gaps, share details on advantage of volumes in negotiating junior and mid-level staff. A high potential areas of improvements with prices. Material Procurement Group impact, long term initiative to improve the suppliers and work with them with heads of procurement teams its manufacturing capabilities, it where needed. as its members meets periodically provides training in manufacturing to exchange ideas and rationalize processes and systems. It is a Encouraging Innovation procurement. Gemba-oriented learning program Rane Business Excellence Model developed by experienced encourages ‘dare to try’ experiments Another has been the adoption of professionals from across the group and all group companies are e-procurement, that has helped in manufacturing processes, systems, evaluated against this. This approach identify newer and lower cost process capabilities as well as creates a conducive atmosphere to suppliers. Kanban, TQM methodologies, etc. encourage innovation. An innovation A structured approach to learning, council which has the Chairman as Continuous Improvement it is an ongoing process where one of its members, reviews any In brief, much is happening in apart from the intense practical and product, process or project innovation continuously improving SCM at theoretical training inputs (program), proposal. Rane and it needs a judicious mix of the participants are part of a progress happening in the following whatsapp group, where discussions Once it is evaluated and pursued, the six areas: continue and doubts get clarified by suppliers too need to be involved to experienced senior professionals/ get their buy in and educate them. • Predictive Analytics leaders as well as through sharing of • Statistical Thinking learning resources. Technology tools or platforms • Quantitative Operations Research such as RIVIGO (for better goods Models This has helped in internal transportation) and Product Lifecycle • Lean Tools benchmarking and is expected to Management are also being rolled out. • A dose of common sense have a trickle effect on the supply • And, strong people orientation chain as well. Efforts are also being made to introduce rule-based systems to
JULY 2017 | PROPEL • 7 SUPPLY CHAIN SPECIAL
ASHOK LEYLAND’S APPROACH TO SUPPLIER DEVELOPMENT
R. Sivanesan, Senior Vice President – Quality, Sourcing and Supply Chain, shares Ashok Leyland's vision and strategies for cost optimization and supplier development.
Ashok Leyland, a part of the Hinduja Group, is the 2nd largest manufacturer of commercial vehicles in India, the 4th largest manufacturer of buses in the world and the 12th largest manufacturer of trucks globally. It’s branding ‘Aap ki jeet. Hamari jeet’ is a philosophy that the company follows not only in terms of customer satisfaction but also with its network of suppliers.
The company, as is the trend in the industry, sources 70 per cent of its parts from different suppliers to assemble them in its factories. To ensure customer satisfaction and meeting their requirements, reliability and durability becomes critical. Customer centricity drives relationship with its suppliers, many of whom have enjoyed a long-term relationship thanks to Ashok Leyland’s policies and strategies based on mutual trust and foresight, enabling both parties to ride through tough times together. continuous effort and to be able to is deeper. The company uses a sustain it, the efforts on R&D and 2x2 matrix to measure supplier Some of the key drivers for forging innovation can be on a different dependence on them and vice versa this bond with its various suppliers, aspect every time. on a scale of high and low and Rane Group being one of the extends support to analyse their important ones, are: establishing Supplier Development financials, cash flow, their technology strategic partnerships, aiming for a Ashok Leyland is nearly 70 years capabilities and help them manage win-win relationship, risk assessment old, and some of the suppliers have their financials. This is to ensure on behalf of the suppliers – especially been with the company for almost as that if the market runs contrary to the smaller ones, transparency long. Such suppliers, including TVS predictions, these suppliers do not and, last but not the least, customer Group and Rane Group, have the end up being in trouble. In certain centricity with performance and cost wherewithal to grow independently, situations, the company has also efficiency at the core. adapt to new technologies and market extended financial help to tide over trends. a particular crisis. During Cyclone In this context, value engineering Vardah, for instance, some suppliers with focus on evolving technologies But there are some whose not only received financial help but becomes important. This needs dependence on Ashok Leyland also maintenance support such that
8 • PROPEL | JULY 2017 SUPPLY CHAIN SPECIAL
the suppliers could resume their work if not to develop the tool, at least to in the shortest possible time. be able to provide inputs on the kind of tools one needs based on their “Overall, our relationship with Cost Optimisation Initiatives requirements. Constant engagement Rane is very valuable for us At the turn of this decade, Ashok is also important for cost optimization. Leyland hired experts to analyse at Ashok Leyland. Both have and take up cost optimization in right Role of Technology a strong customer focus to earnest. In 2012-15, it launched an While most tasks are getting ‘Achieve 500’ initiative with the aim automated thanks to technological do what it takes to meet their of cutting costs up to Rs. 500 crore. innovations in the production needs. As a global player, Subsequently, based on the learnings processes, it is good to split the and success, the company is now process into routine ones and we feel proud that an Indian working towards an ‘Achieve More’ differentiators. supplier is able to provide us goal, and has established a Centre for Cost Excellence to infuse cost focus in Software tools are available to with cutting edge products. the DNA of Ashok Leyland employees improve efficiencies right from Deep focus on TQM is also a right from the design stage. This planning to analyzing global and local will reduce iterations and make the trends, predict demand and engage common area between us process effective as well. with suppliers. The needs of different which strengthens our bond.” departments are aggregated to Cost cutting in logistics through local negotiate better deals with suppliers. sourcing from suppliers within a radius New product development through of 300 kilometers has not only brought concurrent engineering is also down logistics costs but also reduced encouraged to enable suppliers to uncertainties, improved inventory and generate new ideas based on their helped develop the local community expertise and enable them to move up the commercial benefits for the as part of its social responsibility. to the next level as well. organization.
Constant communication Managing market uncertainties Inventory Management Ashok Leyland is in constant In today’s world, often, the prediction Three key factors in improving communication with its strategic of market trends is becoming inventory management at Ashok partners through different platforms, impossible. The term often used Leyland include: thereby fine-tuning its plans and to describe the market landscape • Proximity to the suppliers – this strategies to suit mutual needs. It is VUCA - volatility, uncertainty, way, the entire supply chain is also conducts regular summits for its complexity and ambiguity. From a monitored and managed better partners, and A-panel meet where supplier management perspective, • Modular approach to product it meets certain partners on a one- this means high agility across the development to-one basis to share its plans and chain to meet sudden changes in • Sequential supply – transparency specific technology development demand is crucial. is critical here for suppliers to ideas. know when their product will be Such an ability needs to be needed and supply it just in time Focus on Key Cost systematized so that employees are for production Optimisation willing to take a calculated risk and Traditionally, components and think logically and systematically such Quality and SCM – Two Sides that the customer is benefited and the hardware was where cost optimization Typically, quality and SCM are organization can grow. initiatives were focused. But today, considered to be at odds with each intelligence and software aspects other as the former is all about Effecting small improvements require far more thought. While the performance and the latter, about on a continuous basis can help software costs could be high, their cost optimization. For some reason, transform the organization as impact on improvements will be these two goals are considered to much a breakthrough idea can known only with time. Sometimes, on be irreconcilable. But, the ultimate help in transformation. Daily work the face of it, the software component aim of both is to enable total cost management plays an important part could be lower, but maintenance optimization, rather than mere cost in this, and with support from smart cost maybe draining. It requires the reduction. From that perspective, sourcing, lean sourcing and supplier company to have in-house experts, quality and SCM work towards the risk assessment, it can improve same goal.
JULY 2017 | PROPEL • 9 EXPERIENCE SHARING
Globalization of Auto Supply Chain - challenges, opportunities & way forward
S. Parthasarathy, Chief Executive Officer – Rane (Madras) Limited, delivered a talk on globalization of the supply chain at the International Automotive Supply Chain Conclave 2017 (IASCC 2017) organized by CII and held at New Delhi on May 25th, 2017. Here we share excerpts from his talk…
Rane Group has been making its • Managing logistics/warehouse your fingers without gaining an presence felt globally in a very management understanding first focused and planned manner. But Some of the factors that can help • Strategic mindset and a long global expansion also presents mitigate these challenges include: term orientation, as it is going to certain challenges, and some of the be expensive and learning curve factors include: • Bringing in a culture of global very high mindset across the organization • Inculcate a strategic business • Creating a global product • Scenario /contingency planning, perspective among all employees • Being cost competitive and more planning • Cultural fit /alignment to the • Having the right knowledge/ • Evaluation of risk vs reward on a parent culture skills/capabilities to serve global continual basis • Communication among various customers • New markets – start small then groups • Facing regulatory challenges build on it rather than burn
10 • PROPEL | JULY 2017 SUPPLY CHAIN SPECIAL
FOCUSED APPROACH TO SUPPLIER DEVELOPMENT
As narrated by A. Makesh, Senior Vice President - Materials & Plant-4 at Rane (Madras) Ltd (RML)
ince 2007, RML has had • Alignment of vision with the short cycles of growth and de-growth a very special focus on company put a lot of pressure, and the supply supplier development • Longevity of the company, their chain has become critical to deal with and formed a Supplier roadmap for their growth this. Training has become crucial for Technical Assistance (STA) • The other clients they service and this. Steam to help take suppliers to the next the perception in the market about level. The team addresses chronic their capabilities and performance Bringing Suppliers up to issues, works on reducing rejections and helps facilitate new component For any new product, the ideal Speed A key metric in identifying and development. situation is to have three supplier understanding the supplier risk options of equal capability to cover for which Rane maps them based Being a Deming company, supplier risks. That is the biggest challenge on the spend value and reliability development is key to RML’s growth too! (based on supplier composite aspirations. rating done by all plants) and Earlier, determining only the delivery action are taken to mitigate the risk. capability of a supplier was enough. Finding the Right Supplier Training is an important element to But today, they have to be assessed The suppliers are predominantly upgrade suppliers, the suppliers are on quality, rejection rates and price as SMEs and MSMEs, of which 70 per categorized as A, B or C with A being well. As the industry evolves, supplier cent of the spending is on the latter. highest, and C the lowest. Training selection criteria have also undergone is an important element to upgrade changes. Even the profile of the With quality, cost and delivery as the suppliers in C category to B, and B to purchase officer has changed. Now hygiene factors, the other criteria that A. We must add here that only those they need to not only be engineering determine their suitability include: who have a severe financial constraint experts, but also deeply understand or a wrong attitude have been let go. • Their ability to grow with the finance as well. Each customer has a different set of standards to conform, company Over the years, the A-B mix has and the market is highly volatile. The • Attitude of the supplier increased from 20-80 to 80-20 due to
JULY 2017 | PROPEL • 11 SUPPLY CHAIN SPECIAL
SUPPLIER EDUCATION
TRAINING TO SUPPLIERS ON COATING TRAINING IN GEMBA BY VOLKSWAGEN
PARTICIPANTS IN KAIZEN COMPETITION FOR SUPPLIERS 2016-17 SUPPLIERS AND RML IN SUPPLIER MEET JUNE 2017
the ongoing efforts. issue training modules are streamed online • Process improvements to enable the suppliers to access This has also resulted in: • Supplier training it from their premises. An in-built • Rejections coming down from 4-5 • Promote Kaizen culture tracking tool as well as assessment per cent to less than 0.3 per cent. • Enhance supplier to ‘Best in module ensures that the suppliers • All suppliers being ISO certified Class’ level benefit from it genuinely. • Inculcated the concept of Kaizen • Create TPM awareness or continuous improvement on the • Implement Safety Management Aiding in Financial Health supplier shop floor System RML has been nurturing long term relationships with genuine suppliers The risk percentage too has gone First the competencies of the whose vision is aligned with theirs, down from 15-20 per cent to 5 per suppliers are mapped and the and who are willing to upgrade cent. training given based on the level their skills and infrastructure as and and requirement. The content is when needed. At times, a particular 7-Step Development Process revisited periodically and upgraded expansion need may create a As part of its structured supplier according to latest developments. shortage of funds. Though RML development process, a training Where needed, external faculty is also does not, in principle, lend, it makes program with seven key elements is invited. exceptions where the need is genuine run periodically. These include: and retrieves the loan from bill Earlier, the training was provided at payments. • Quality system and process audit the supplier premises and at various • Support to resolve repeat quality locations across the country. But now, This help is extended mainly to SMEs
12 • PROPEL | JULY 2017 RML SENIOR MANAGEMENT WITH CHIEF GUEST AT SUPPLIER MEET JUNE 2017 whose need is critical to Rane’s to match RML requirements. After a well as analyse the areas where it is business needs. Also, at times, finding preliminary evaluation by the purchase possible. and training an alternative supplier officer, the potential suppliers are may not be time effective. Each administered a questionnaire with Value Analysis Value Engineering instance is dealt with based purely on nine categories that require detailed (VAVE) is another initiative to motivate merit, after risk assessment, based answers within each category. the suppliers to evaluate areas where on the market conditions, and after Each question carries weightage to they are encouraged to check their evaluating the credit worthiness of the enable the company understand the projections and achieve savings. suppliers. suppliers’ capabilities across different parameters and decide on taking the Where needed, Rane can connect New Component Development next step of empaneling the supplier. suppliers with raw material suppliers New component development used to to get better deals. Cost optimization be an iterative process that cost time Other Initiatives being the goal, negotiating, and resources. But now, an Advance Every year, RML organizes a supplier benchmarking and finding alternative Product Quality Process (APQP) meet where a customer is invited suppliers are some of the means and Product Part Approval Process to talk about their expectations and through which this is achieved. (PPAP) have been introduced. projections. An open house with the The STA assesses the viability of senior management is also conducted Going forward, given the ever-evolving the new component and plans the where the suppliers can clarify their standards and the strict requirements development process right from day doubts and share their reservations, of OEMs, the vulnerability of suppliers one to make sure that the chances of and the RML management responds. will become a cause for concern the product meeting requirements and as any recall – which is becoming performing as expected are high. RML is also unique in having initiated common – will impact them severely. a supplier satisfaction survey, where Most of RML’s initiatives not only aim With time, these have become very the suppliers rate Rane on different to improve their own supply chain but important to bring down the cost of parameters. It is heartening to note also improve the suppliers’ operations development by 60 per cent as well as that the company has been rated high to reduce rejections and improve their improve efficiencies across the entire on trustworthiness. operational efficiencies. Training and supply chain. The new component development apart from constant development pass percent has gone Every year, Rane shares its growth supplier assessment will remain up to 80 per cent. plans and key suppliers make a critical to RML’s supplier development initiatives. New Supplier Evaluation presentation on how they plan to meet The supplier development process these requirements. Specialists are begins right at the time of identifying a also called on this occasion to help supplier and assessing his capability the suppliers effect cost reduction as
JULY 2017 | PROPEL • 13 SUPPLY CHAIN SPECIAL THE FINER NUANCES OF COST OPTIMISATION
Cost optimization forms one of the two pillars that helps Rane Group achieve accelerated, profitable growth. In this article, we gather Rane Group’s approach to cost optimisation and perspectives from R Subramanian, Senior Vice President – Materials, Rane TRW Steering Systems.
t Rane Group, accelerated profitable growth is critical across businesses. And, to maintain healthy margins, one of the critical aspects that requires a lot of attention is cost optimization.
Given the nature of the Rane Group companies, material cost often Aforms the highest component, and is of two kinds – direct and indirect. While direct refers to the bill of material (BOM) parts, indirect includes other elements such as cutting oil, packaging material and so on.
Direct Material - Cost Optimisation Every year, the cost of direct materials is revisited thorougly with members drawn from various functions (like Materials, Product Engineering, Quality, Operations) and cost reduction ideas are generated. The cost reduction plan is finalized based on feasibility and ensuring quality and performance, and this becomes a part of the Operating Plan.
The broad areas that have been instrumental in bringing down costs are localization, value engineering and alternate sourcing.
The fact that several Indian suppliers have over the years upgraded their technical capabilities has enabled localization of many critical parts. Even
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in cases where imports are to be Close to 40 per cent of the indirect with whom a strategic relationship continued the sourcing is attempted spend has been put through this is required given the spend value from the Asian countries where the process over the last one year. The and criticality of the associated part costs are lower in comparison to the reverse auctions have resulted in an category. western countries. Leveraging the average saving of around 15per cent Free Trade Agreements between India of the spend put up for bid resulting in This deep relationship and a close and other countries like Korea and an overall savings of 6per cent till date watch on the supply chain helps in Japan have helped further in reducing on the indirect spend. The reductions planning ahead and supporting the the import material costs. The cost of have come from incumbent suppliers business to meet not only the present imports that used to be around 13 per as well as from new suppliers who but also the future requirements of our cent of the revenues till a few years have been inducted through this customers. ago has been brought down to around process. 9 per cent now. Key Success Factors The Ariba initiative is being For cost optimization endeavor to Value engineering is a continuous successfully continued and is being succeed following are vital: process and over the years significant implemented in other companies in improvements have been effected the group. • Involving all the stakeholders. by way of weight reduction in the • Working closely with the product, use of cost effective materials Spend Analytics suppliers. and simplified designs resulting in Analytics is key to understanding the • Periodic review and upgradation reduction in number of parts. The spending patterns and identifying of the Supply Chain suppliers are actively involved right areas where optimization is possible. from the initial stage so that there The spend data is extracted from SAP is a proper understanding of the and data specific to each company application. segregated to do different analytics based on the products. The growth projections in the coming years while creating the need for Cost benchmarking is done at a capacity enhancement in the supply macro level with competition. At chain also throws up opportunities commodity level, benchmarking is for reducing costs through process done within the group as well as with changes and induction of new cost the JV Partners. effective suppliers in the high spend categories. Inventory Management Effective inventory management is While the planning process for cost a key factor in reducing the working reduction is an annual exercise, capital. Supplier upgradation to the spend is also reviewed during reduce uncertainties in the supply the course of the year and further chain, enhanced supplier collaboration reductions effected based on business through Supplier Portal, and system need. (SAP) based material planning and controls are followed for managing Indirect Materials – e sourcing inventory. In 2016-17 we initiated e sourcing “The broad areas that on the Ariba platform with the Aligned Vision have been instrumental objective of reducing the cost of In selecting suppliers, quality is a in bringing down costs indirect material across the group. given – there is no compromise on This was implemented initially in that. The next factor is not only the are localization, value three companies. The major spend current technical capability but also items like packing material and the potential to scale up and meet engineering and alternate cutting oils were taken up in the first the ever changing demands of the sourcing” phase. Online reverse auctions were customers. So alignment of vision conducted on the Ariba platform. becomes critical in case of suppliers
JULY 2017 | PROPEL • 15 BUSINESS ROUNDUP
Safety, Quality and Compliance: The 3 Core Pillars of Rane NSK
In conversation with Rajesh Raghavan, President, Rane NSK Steering Systems (RNSS)
RNSS, a 49:51 joint venture started it, which has enabled it to grow in 1997 between the Rane Group and exponentially since 2012. Japan-based NSK, is currently a Rs. 1000 crore company, with 90 per cent For the period 2017-20, the company of its revenues generated by its EPS aims to achieve sales growth; upgrade line of products, the other one being its skills to deliver globally relevant manual steering columns. designs for CV columns; improve Advanced Production Systems (APS) From Rs. 300 crore in 2011-12, rating – a rating for all NSK companies it touched Rs 630 crore in 2014- globally – to 80; and achieve Return 15 and Rs 1000 in 2016-17. The on Capital Expenditure (ROCE) company has experienced steep exceeding 25 per cent. growth, thanks to its focus on safety, quality and compliance. Until 2012, The Three Keys the company’s vision was to be a While NSK Japan supports Rane RAJESH RAGHAVAN, PRESIDENT, market leader in its area of business, NSK with product development, RNSS but since then, the focus has shifted the Indian JV has been working on to ensure profitable growth with the enhancing process development enablers being technology and people as well as customer support. The development. The company works on company applies global practices three-year roadmaps for the two lines to local markets through process of business, dovetailing technology innovation and providing people with and people development plans to the right training to scale up their
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vehicles, as that segment also offers tremendous opportunity for growth.
Currently its export sales volume is small, at 1 per cent of its total sales, having forayed tentatively into Indonesia, Vietnam and Mexico. The vision is to increase it to around 3 per cent in the next four years and then, significantly higher in the next 10 years.
In India, the EPS market is expected to grow significantly, and RNSS is expecting to see 10 per cent growth year on year. To meet these new growth needs, the company’s technology roadmap is based on a five-frames approach – safety, comfort, serviceability, light weighting and cost. However, even as these innovations are going to be integrated, pricing will continue to be a challenge.
RNSS’ Test Lab to test for noise is yet another area that has helped the company not only address the noise issue unique to Indian road conditions but also service new clients. This is expected to also help in customer acquisition.
Some of NSK’s global features for passenger vehicles are also being implemented in commercial vehicles, thus finding new revenue opportunities for the company. capabilities. Employees are also sent a framework. The use of information to NSK Japan for training and five technology solutions further helps Moving Forward expatriates work in the Chennai office eradicate mistakes, minimize risks The company tripled its revenues in to collaborate further. and distill processes. five to six years to touch Rs. 1000 crores, and from 900,000 vehicles Being a joint venture, it gets the best From Strength to Strength last year, it serviced 100 million of both worlds and benchmarks itself The manual steering column, which vehicles this year. It has had a good against NSK’s 13 global factories contributed about Rs. 90 crore to the run in the last 20 years and now is under the APS rating system. The total revenue of the company, has at crossroads – it needs to increase cornerstones of the rating system great potential in the international its capacity, and expand its market to are Safety, Quality and Compliance. large cars segment due to changing justify that increase. The coming year Periodic audits, monthly reviews, risk market trends there. To step up its will see the management firming up assessment, proactive management revenue from this product stream, its strategy to achieve its goals. Value and implementation of preventive RNSS wishes to tap the global addition, process innovation and measures across all three parameters market and has entered in a small people development will be the key to in every key function of the way. It is also working on becoming a growth strategy, which includes slowly organization is made possible through Global Design Centre for commercial stepping up global presence.
JULY 2017 | PROPEL • 17 NEWS @ RANE
Lake Restoration, enabled by Rane TRW
Rane TRW, Guduvanchery and a dumping ground. With permission Singaperumal Koil, jointly with local from the government, Rane helped authorities and an NGO “We Care the NGO clean the lake and create Social Service Society (WCSSS)”, boundaries. As part of its CSR identified and restored a water body at initiative, the company also allocated Thirutheri Village, Singaperumal Koil, Rs. 3.75 lakhs for the purpose. and handed it over to the people in the village and the local Panchayat in The lake now not only looks beautiful June this year. but the water is also used for irrigation purposes. Some of it is purified and is The lake had been encroached on by potable. the people and was being used as
RBL and Rane Group win accolades
Rane Brake Lining was certified as a Great Place to Work for the period May 2017 to April 2018.
Rane Group received the ‘Component Maker of the Year’ award from Auto Components India Magazine at ACI Awards 2017.
Rane Polytechnic Accreditation
Rane Polytechnic Technical Campus accredited by National Board of Accreditation (NBA) for Diploma in Mechanical Engineering
18 • PROPEL | JULY 2017 NEWS @ RANE Satish Babu of Rane Group, Completes Comrades Marathon 2017 Satish Babu, who joined Rane As part of its efforts to promote Brake Lining, Trichy, as Diploma the spirit of wellness amongst its Engineer Trainee (DET) in June 2012 employees, Rane Group has been completed the 86.73 km Comrades sponsoring various marathon events Marathon 2017 in 11:31:30. Rane in Chennai. The Group recently ran Group, which promotes wellness, fully a Fat Loss Challenge campaign for supported Satish’s endeavor and is six weeks where participants used an proud of his achievement. app on their smartphone to monitor their wellness routine covering diet, Satish, who is 24 years old now, has workouts and other health exercises completed more than 30 Ultra, Full leading to significant shifts in eating and Half Marathons. and exercising habits.
CSO100 Award for Senthil Kumar Rane Group is proud to share that picked the final winners from a sizable M Senthil Kumar (MSK), Chief number of nominations. This award Information Security Officer (CISO) turns the spotlight on Rane Group for has been honoured with CSO100 placing the right emphasis on security Award. This recognizes MSK as and their dedicated experts who one of the Top-100 Cyber Security ensure best IT security practices are Officers in India by IDG, the #1 tech in place. media company in the world and the publishers of CSO Magazine. CSO is MSK, CISO of Rane Group, received the premier content and community this award in an exclusive felicitation resource for security decision-makers ceremony as a part of IDG’s global across the globe. program in the Annual IDG Security Day and CSO Awards Ceremony CSO100 Award was chosen through a held at the Leela Palace, Mumbai on rigorous editorial process and a Jury Wednesday, 21 June, 2017.
A contest to design Smart Head Gears
Since the prevailing design of 32 teams from SASTRA University R. Venkatanarayanan, President - two-wheeler safety helmets is a and NIT Trichy participated in this Corporate Services, gave the special great deterrent to the wearers, competition. The team from SASTRA address and distributed the prize and Rane organized a competition for University won first prize of Rs. certificates to the winning team engineering students to design an 25000/-. The prize distribution event innovative and comfortable helmet. took place on 30th June 2017 at This competition was christened SASTRA University. “Project Smart Head Gear” (PSHG).
JULY 2017 | PROPEL • 19 NEWS @ RANE
Ranvocation: Recognizing our Graduate Trainees
Ranvocation was organised on 21st July 2017 to celebrate the successful completion of one year intensive engagement of Graduate Engineers recruited from various engineering campuses in 2016. We also welcomed the new batch of Graduate Engineer Trainee (GET) for 2017. GETs of 2016 batch had 34 graduate engineers and 2 post graduate engineers. They underwent a year long programme with mix of bootcamp training, on-the-job training and specific interventions including Campus to Corporate to groom them for challenging work assignments.
20 • PROPEL | JULY 2017 NEWS @ RANE
Tech Day at Mahindra & Mahindra
Rane organized a tech day at M&M - Mahindra Research Valley, Chennai on July 27, 2017. It provided us with a wonderful opportunity to showcase innovative products by engineering, sourcing and other teams.
Rane demonstrated its ability to align its services with Mahindra’s technological advancements and also present the emerging technologies that Rane is focusing on. This initiative is just a beginning and the collaborative effort will continue for our mutual benefit.
The event was graced by many senior dignitaries from M&M, and activities such as discussions, and knowledge sharing kept the participants engaged fruitfully. We were able to exchange ideas, connect and bring in newer technologies that will further the longstanding, fruitful partnership.
JULY 2017 | PROPEL • 21 NEWS @ RANE
Vice Chairman meets PM Modi
Harish Lakshman, Vice Chairman was invited for a special interaction with Honourable Prime Minister Shri Narendra Modi on Transforming India.
He participated in the “Champions of Change” program held on Aug 16 & 17, 2017 at New Delhi. This was organised by NITI Aayog and attended by several young entrepreneurs. During the programme, they were divided into six groups on themes such as - Soft Power: Incredible India 2.0; Education and Skill Development; Health and Nutrition; Energizing a sustainable tomorrow; and Digital India; New India by 2022.
Harish was part of the ‘Energising a Sustainable Tomorrow’ session and deliberated on various issues including Shared mobility, electric vehicles, etc. Each group made presentations to the PM addressing various aspects such as ease of doing business and job creation. The Honourable PM addressed the young entrepreneurs and said the recommendation would be taken forward and institutionalised in the best possible way. Several Union Ministers, Vice Chairman of NITI Aayog, Shri Arvind Panagariya, and senior Union Government officials were present on the occasion.
22 • PROPEL | JULY 2017 “You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics.”
- Dwight D. Eisenhower
JULY 2017 | PROPEL • 23 Rane Corporate Centre “Maithri” 132, Cathedral Road, Chennai - 600 086. India. Phone : +91-44-28112472 / 73 | Fax : +91-44-28112449