Operational Restructuring: The Philips India Way

            
 
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Case Details:

Case Code : OPER019
Case Length : 11 Pages
Period : 1997 - 2002
Organization : Philips India
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Consumer Electronics

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Excerpts

Restructuring the Supply Chain

PIL scrutinized the best SCM practices across the world and carefully studied the SCM models of successful companies such as Dell Computers. The company decided to use the Supply Chain Operation Reference (SCOR) SCM model for restructuring its supply chain. According to the model, a supply chain is broken down into four different processes - planning, sourcing, making and delivering (Refer Exhibit I for a brief note on SCM and the SCOR model). These four processes are supported by a set of performance metrics, such as customer service, costs, flexibility, and assets. Using this framework, PIL worked out a mechanism to assess itself on a 'process map,' which it referred to as the 'maturity grid' (Refer Figure I).

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

As per this grid, there are four distinct stages of maturity during the life of an organization:

• The informal organization - Focuses on procedures and quality systems. Here, the supply chain is not explicitly broken down (Step 1, 2, 3).
• The functional organization - Here, the various functions (such as purchasing, warehousing, marketing and manufacturing) are tied together. However, no person is responsible for the goods' flow (Steps 4, 5, 6).
• The integrated organization - In this case, the entire source-make-deliver chain is integrated either in teams or under the supply chain manager of the organization, who is responsible for the flow of goods (Steps 7, 8, 9).
• The extended enterprise - The topmost stage including suppliers of the immediate supplier and customers of the immediate customer, are all linked by the upstream and downstream flow of products, services and information (Step 10)...

Reaping the Benefits

PIL benefited in many ways from the revamped SCM practices. Transit time was reduced to 7 days and goods were handled only 5 times. As against a first quarter working capital of Rs 500 million for 2000, the figure was only Rs 200 million in 2001. Significantly, supply chain costs were reduced by 26% in 2001. A majority of these savings were due to the savings in transportation and warehousing. PIL could reduce warehousing costs because of the direct dispatch model, in which there were no grouping centers...

Exhibits

Exhibit I: About SCM and SCOR


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