TOCICO 2014 Conference Godrej Security Solutions Viable Vision Journey Continues even in Slowdown Presenters: Mr. Rahul Naik Mr. Ramnish Gaikwad June 11, 2014 Godrej Security Solutions Vector Consulting Group © 2014 TOCICO. All rights reserved. 1 Agenda TOCICO 2014 Conference Company Background TOC execution in Institutional Business TOC execution in New Product Development Overall Experience 2 © 2014 TOCICO. All rights reserved. Agenda TOCICO 2014 Conference • Godrej Group Company • Godrej & Boyce Background • Godrej Security Solutions TOC execution in Institutional Business TOC execution in New Product Development Overall Experience 3 © 2014 TOCICO. All rights reserved. Godrej TOCICO 2014 Conference was born in 1897 • Ardeshir Godrej, our founder, was a lawyer who turned into an entrepreneur and started his business with locks • He was an inventor and a visionary • His inventions, manufactured by his brother Pirojsha Godrej, were the foundation of today’s Godrej, a household name in India • One of India’s most trusted brand, Godrej enjoys the patronage and trust of millions of consumers worldwide Ardeshir Burjorji Sorabji Godrej (1868-1936) 4 © 2014 TOCICO. All rights reserved. Godrej TOCICO 2014 Conference • Is today a 117 year old and the largest privately held company in India • Spread over 3000 acres of land in Vikhroli, Mumbai alone • Global operations in 16 countries & presence in over 60 countries •Over 100 manufacturing locations in India and overseas • Dedicated Godrej Parivar of over 23000 employees 5 © 2014 TOCICO. All rights reserved. Godrej TOCICO 2014 Conference VISION MISSION VALUES Integrity Environ Trust ment Godrej in every Enriching Quality of Life To Home & Workplace Respect Serve Everyday Everywhere 6 © 2014 TOCICO. All rights reserved. Godrej Group TOCICO 2014 Conference Godrej Group Godrej & Boyce Mfg. Co. Ltd. Godrej Industries & Associate Cos. Office & Consumer Products Group Godrej Consumer Products Ltd. Appliances Godrej Industries Ltd. Industrial Products Group Godrej Agrovet Ltd. Corporate Services Godrej Sara Lee Ltd. Godrej Infotech Ltd. Godrej Properties & Investments Ltd. Lawkim Ltd. 7 © 2014 TOCICO. All rights reserved. Diversified Conglomerate TOCICO 2014 Conference Nearly 40% of India's population use a Godrej product everyday either in Homes, Offices or Infrastructure Projects 8 © 2014 TOCICO. All rights reserved. Godrej & Boyce Businesses TOCICO 2014 Conference Office and Consumer Products Group Industrial Other Products Businesses Group Godrej & Boyce 9 © 2014 TOCICO. All rights reserved. Godrej & Boyce Businesses TOCICO 2014 Conference Office and Consumer Products Group 10 © 2014 TOCICO. All rights reserved. Godrej Security Solutions TOCICO 2014 Conference Godrej Security Solutions is the pioneer & leader in this field in India GSS operates in 2 distinct markets Domestic Institutional Business International Business With an annual turnover of Rs. 850 Cr. (approx $150mn) 11 © 2014 TOCICO. All rights reserved. Domestic Institutional Business TOCICO 2014 Conference • Supplying Physical Security products to Financial and Non-Financial Institutions, Jewelers, Diamond Merchants, Post Offices, etc. • Operating from one Plant and extended contract manufacturing facilities. • Close to 700 dealers handling the front end. Dominant Market Share 12 © 2014 TOCICO. All rights reserved. International Business TOCICO 2014 Conference • Supplying physical security across various geographies • Presence in 50+ Countries • Products with Global Certifications Trusted across the globe 13 © 2014 TOCICO. All rights reserved. Product Portfolio TOCICO 2014 Conference PHYSICAL SECURITY PRODUCTS A Class Apart 14 © 2014 TOCICO. All rights reserved. Agenda TOCICO 2014 Conference Company Background • Key challenges faced TOC execution in prior to TOC execution Institutional Business • TOC solution deployed • Results TOC execution in New Product Development Overall Experience 15 © 2014 TOCICO. All rights reserved. Key Challenges: Domestic Institutional Market Scenario 2010 TOCICO 2014 Conference • Market demand was growing at 20% YOY Physical Security Domestic Market (Rs. Cr) • GSS was unable to supply as per ~350 3500 demand leading to emergence 3000 20% CAGR of other competitors 2500 2000 • Market share had decreased from 1500 62% to 58% before TOC 1000 225 500 • GSS was evaluating adding 0 another plant to overcome supply 20081 situation before TOC 20102 Demand > Supply 16 © 2014 TOCICO. All rights reserved. Key Challenges: Domestic Institutional Market Perspective TOCICO 2014 Conference • Expansion driven primarily by the Financial Inclusion programme of the Government of India • Customers’ Tolerance Time to open a Branch was crashing from earlier 2-3 months to 1 month (including Public Sector Banks) • Significant damage due to delay in opening a new Bank Branch • Loss of revenue to the Bank and Market Share - unable to get first mover advantage • Escalation in cost - incurring rentals without any revenue • Risk of license lapsing 17 © 2014 TOCICO. All rights reserved. Key Challenges: Domestic Institutional Market Perspective (contd…) TOCICO 2014 Conference • Major skew in demand – around 70% of the demand comes in 2nd half of the financial year • Discounting was encouraged (to meet top-line) even when Plant was loaded in H2, increasing pressure on margins Loss of market share and stagnant profitability even in a growing market 18 © 2014 TOCICO. All rights reserved. Key Challenges: International Business Market Perspective TOCICO 2014 Conference • Business in Export Markets done primarily through Dealers Export Billed Sales (Rs. Cr.) • Lead time expectation was of 8 weeks as 60 against actual lead times of 12 weeks • Business from Dealers was stagnant for the 40 32 34 38 last 3 years 20 • Supply unreliability caused heavy damage to Dealers 0 • Dealers were carrying 4-5 months of stocks 2010-11 2011-12 • Dealers not confident of increasing business 2012-13 with GSS Losing Dealers’ Trust 19 © 2014 TOCICO. All rights reserved. Key Challenges: Supply Chain Perspective TOCICO 2014 Conference Primarily A-Type Plant (assembly of around 50 components; 100+ Supply Partners) • Major de-synchronisation issues • Uneven load and loss of capacity during the month – production low at start and high at end of the month • Preference to produce standard products (to show better productivity) 20 © 2014 TOCICO. All rights reserved. Key Challenges: Supply Chain Perspective (contd…) TOCICO 2014 Conference Leading to… • Unreliability and highly varying lead time (ranging from 4 weeks to 12 weeks) • Frequent expediting due to emergencies from customers • Relying on forecast to meet demand (inspite of good order book position) •Pushtobranchesbasedonforecastresultinginmismatchof stocks 21 © 2014 TOCICO. All rights reserved. Key Challenges: Supply Chain Perspective (contd…) TOCICO 2014 Conference Skew in Demand in second half of financial year causing… • Under-utilization during lean season • Difficulty of Ramp-up in short time during peak season • Disharmony with suppliers (hiring/firing during overload/under load respectively) Inherent Systemic Conflicts Leading to Loss of Capacity 22 © 2014 TOCICO. All rights reserved. S&T Tree TOCICO 2014 Conference 1 PROJECT LEAP AHEAD BASE GROWTH 2:1 RELIABILITY COMP. EDGE BUILD CAPITALIZE SUSTAIN 3:1 3:2 3:3 3:5 3:6 3:7 3:4 NON BANKING ACHIEVE 99% SELLING EXPANDING HAPPY HOURS LOAD CAPACITY SEGMENT OFFER DDP RELIABILITY CLIENT BASE ROLL-OUT CONTROL MGMT. 23 © 2014 TOCICO. All rights reserved. TOC Solution Deployed TOCICO 2014 Conference Decisive Competitive Edge that was built to provide High Reliability with Lower Lead Times 24 © 2014 TOCICO. All rights reserved. Solution Framework TOCICO 2014 Conference MTA MTA (Standard) (Standard) Mother Press Drill Paint FF Insp In Branch CTLL Warehouse Pickling Assembly Coil Shop Shop Shop & Desp transit Billing Vendors Vendors Buffer Buffer Dispatch Time 6 Days 12 to 18 Days 4 to 5 Days MTO MTO MTA & MTO (Customized) (Customized) Product Mix Environment of both MTA and MTO 25 © 2014 TOCICO. All rights reserved. TOC Solution Deployed (contd…) TOCICO 2014 Conference Build Stage • S-DBR implemented at manufacturing plant and suppliers • POOGI projects for capacity release and lead time reduction • Buffer Management for Sales to ensure last mile reliability as well • Dynamic Choking on a daily level to limit WIP • Managing Demand Skew during second half of financial year Customer Confidence Restored 26 © 2014 TOCICO. All rights reserved. Dynamic Choking TOCICO 2014 Conference Problem • Due Dates are fixed and hence the Release Dates too • Orders are released to shop floor based on fixed Release Dates • Actual Capacity (due to product mix change, rework, design issues, etc.) is much different than Assumed Capacity Flawed Assumption • Possibility of Interactive Constraints • Capacity can be precisely defined in • Leading to cycles of Planning • Underload – Loss of precious CCR Capacity • Capacity of resources other than CCR is higher than the CCR irrespective of • Overload – Increase in Black Orders (OTIF Drops) Product Mix 27 © 2014 TOCICO. All rights reserved. Dynamic Choking (Contd….) TOCICO 2014 Conference Solution • WIP Control rather than precise definition of Capacity • Due Dates are constant, however Release Dates are adjusted based on WIP Status • To deal with Interactive Constraints • Rope is tied from end of plant rather than CCR Safe • Capacity is dedicated in both Planning & Execution Zone Constant WIP (Applicable to Broad Range of MTO/MTA & Mix