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2015 TOCICO International Conference

Transforming Industries Track

Sanjeev Nimkar
Vice President
Kirloskar Oil Engines Ltd. (KOEL)

Kirloskar Oil Engines Limited: Enabling Assured One Week Delivery
September 7, 2015

Kirloskar Oil Engines Ltd. (KOEL) is a leading Diesel Engine and Generator Set (Gen-set) manufacturer. KOEL designs, manufactures and supplies Diesel Engines, which is at the heart of Gen-sets, to eleven integration partners called G-OEMs, along with a few lose items as a kit. The Diesel Engine kit is then integrated with other components, sourced by G-OEMs in designs specified by KOEL, to produce a Gen-set.

Customers in the Gen-set market whether Institutional or Individual/small businesses need fast and reliable delivery. This is either because they have an immediate need or because as in the case of institutional customers, it is legally mandated. Moreover, no one wants to lock up funds earlier than necessary. All competitors offered delivery lead times of over 4 -6 weeks. Therefore there was an opportunity in the market to create a decisive competitive advantage by offering a shorter and predictable lead time.

Inventory was mostly held based on forecasts which were perennially unreliable. To add to this, necessity of coordinating sourcing of a large number of components from over 250 suppliers created frequent RM stock outs with serious repercussions on lead time. Frequent expediting and rescheduling on the shop floor also caused more operational issues leading to poor and fluctuating availability of FG.

At the sales end, "Push sales” in practice at KOEL had led to high inventory in the system. The extended credit periods and discounts that had to be offered in this process had also adversely impacted cash to cash cycle and profit margins of the company.

Enable one week assured delivery by KOELs’ G-OEMs to end customers.(The actual "touch-time” for assembling an engine is only 2-3 days, if all the parts can be made available when required).

The core problem:The basis of the KOEL’s operations was a three-monthly rolling forecast from all G-OEMs. Procuring and producing as per these forecasts resulted in mismatched components, and large and variable lead times.

Solution deployed

  • Manufacturing only against consumption as opposed to the forecast.
  • KOEL now builds engines based on an IT enabled BPR which indicates the levels of consumption from stock of GOEMs and focuses on replenishing this stock at G-OEMs. A similar system of replenishment based on consumption was set up between KOEL & its 250 suppliers as well as G-OEMs and their suppliers to ensure timely availability of components
  • Managing priorities based on BPR color indication
  • The color priority on BPR dictates expediting on the shop floor. Thus, now, the availability continuously matches actual demand pattern even when demand is varying.
  • Building sustainability
  • All KOEL staff, suppliers, G-OEMs and logistics partners were trained to work on the new system.

With reduction in supply lead time by 75%, KOELs’ G-OEMs are now offering guaranteed deliveries in one week. As more & more customers become aware of this new lead time, they are expected to change their buying behavior and result in increased sales for the client.

Additionally, as the G-OEMs were able to reduce stocks (almost 50%), the credit period offered to them was reduced (by 67%) creating an overall win-win arrangement. Similarly the component also came down inventory (as much as 75% for some items) while improving overall availability (78%-99%). This has turned the company cash positive from cash negative.

Frequent discord, between KOEL, GOEMs and suppliers, has been turned into harmony since the priority system established allows for work in a hassle free manner. Senior management now concentrates on improvement activities.

One of the key learnings while implementing TOC at KOEL was, how carefully plan the transition from the previous method of working to the TOC way, so that the company does not increase inventory or take a dip in sales during the transition.

SANJEEV NIMKAR is based out of the company’s headquarters in Pune. Sanjeev heads the power generation, industrial engines businesses along with customer services and SCM functions at KOEL since April 2012.

In this capacity, Sanjeev has been responsible for driving all domestic new product strategy and introduction, new businesses and brand initiatives for the segment. He brings with him rich, extensive experience of 18 years from having shouldered various responsibilities in diverse industries and companies such as Philips Electronics India, ICI paints and Lafarge Cement.

Prior to KOEL, Sanjeev was heading the marketing division at Philips Electronics India. During his tenure at this company, he led the company’s various marketing functions including LED Lighting development for India, channel head and heading the audio products business. With ICI Paints, he was responsible for streamlining channel presence as the head of the vertical and with Lafarge he led the sales function.

At KOEL, Sanjeev has played a vital role in the transformation strategy of the organization. He has been instrumental in successfully undertaking various customer centric initiatives which have gone a long way in ensuring organic growth for the brand, in terms of both retaining customers as well as bringing in new clientele for respective businesses. He was instrumental in implementing the "project unlock” which is supply chain improvement based on TOC principles.

Sanjeev holds a Post Graduate Diploma in Management from IIM Calcutta, Bachelor's degree in Electronics and Telecommunications from College Of Engineering, Pune and Diploma in Industrial Law from Symbiosis Law College Pune.

Sanjeev is the recipient of numerous industry honors for his contribution in the field of marketing.

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