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Supply Chain Optimization Insights

Power Home Electronics India Ltd (PHEIL) is a leading home electronics manufacturer operating across India. The company president Shyam Lal attended an award event where he learned reducing supply chain cycle time is important for competitiveness. He hired an audit firm to analyze PHEIL's ordering, stocking policies and cycle times. The auditor found: 1) Total supply chain cycle time exceeded 120 days based on current policies of order quantities, safety stocks and production/transport times. 2) Significant funds were blocked up in the system on average, as seen by inventory turnover rates. 3) Opportunities exist to contain costs and improve customer service by reducing cycle times.

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Saket Agarwalla
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470 views2 pages

Supply Chain Optimization Insights

Power Home Electronics India Ltd (PHEIL) is a leading home electronics manufacturer operating across India. The company president Shyam Lal attended an award event where he learned reducing supply chain cycle time is important for competitiveness. He hired an audit firm to analyze PHEIL's ordering, stocking policies and cycle times. The auditor found: 1) Total supply chain cycle time exceeded 120 days based on current policies of order quantities, safety stocks and production/transport times. 2) Significant funds were blocked up in the system on average, as seen by inventory turnover rates. 3) Opportunities exist to contain costs and improve customer service by reducing cycle times.

Uploaded by

Saket Agarwalla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CASE :

POWER HOME ELECTRONICS INDIA LTD

Power Home Electronics India Ltd (PHEIL) is a Leading multinational company in home electronics goods
manufacture, operating in different segments and factories across the four regions of India. The President of
the company, Shyam Lat, presided over an event of Supply Chain Excellence award instituted by a leading
industry body and academic institute. There, Shyam Lal heard the jury head present different metrics. He
understood from the programme that measuring and reducing the end-to-end supply chain cycle time (Flow
time) is imperative for survival and gives substantial competitive edge to the company. He learnt that there
are two components of cycle time-'horizontal time', which is the time taken for movement from one place to
another and 'vertical cycle time', which is the time the material stays in one place without movement.
Managing _ both has their own challenges.
Shyam Lal called his internal audit firm, a leading firm in management audit and consulting business
across the globe, to advise him on implementing cycle time in his company. Peter was the team leader in
the audit firm who wanted to facilitate Lal. Peter collected relevant information and summarized as below:

Present Ordering and Stocking Policies

1. Factory to Supplier: Order Quantity = Two weeks' consumption of RM

ROP = Two weeks' requirement + 25% Safety stock

2. Wholesaler to Factory: Ordering policy = Monthly ordering,


Order quantity each month = Maximum stock level-Stock balance

Maximum stock Level = Monthly demand from Retailers + Lead time demand + 1 week safety
stock

3. Retailer to Wholesaler: Order quantity = 2 weeks' demand from consumers

ROP: = Two weeks demand + 25% safety stock

4. Manufacturing cycle time = 2 weeks

5. Transport time from Supplier to Factory, Factory to wholesaler. and from Wholesaler to Retailer =
One week each.

Sl. Item Sales/ Inventory


No. consumption Turnover
per month based on
(Rs Lakh ) monthly
sales
1 At supplier end 45 4.0
2 At Factory
RM (Consumption) 80 1.33
WIP (Production 120 1.2
value)
FG (Sales value) 160 2.0
3 Wholesaler 40 0.6
4 Retailer 25 1.33

Transportation time: Average: 7 days, Range: 5-10 days

Peter found from his practice guidance that the total cycle time would exceed 120 days and offers a gold
mine for containing costs and improving customer service.

1. Compute the total supply chain cycle time based on their policies and the actual end to-end cycle
time.
2. Estimate the average funds blocked up in the system.

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