INDUSTRY 2.0 PRESENTS Improving the supply chain with sales & operation planning

1. INDUSTRY 2.0 PRESENTSImproving the supply chain with sales & operation planning Speaker Vijay Wadhwani GM (SCM) Relaxo Footwears Limited Shangri-la Hotel, Ashok Road, Connaught Place New Delhi 10th May’2012

2. About the company - discussed in presentation Relaxo Footwear commenced its journey with the manufacturing of Hawaii slippers in 1976 as a small enterprise. Today we are largest footwear company having global presence. In domestic, we have more than 500 dealers in 350 key towns of All India. In Retail, we have our own 150 Exclusive Showrooms; in Export, we supply our goods in US, Europe and Middle East countries, our foreign buyers are like Tesco, Wall Mart. We deal in more than 5000SKUs in different sizes, colors and packing with the brands Hawaii, Flite EVA, Flite PU, Sparx, Boston, Elena, Schoolmate, Casualz, Marry Jane. We have 12 manufacturing Plants and manufacture 4Lacs pairs per days with 100% capacity utilization.We have received Supply Chain Leader Award 2011 from Logistics 2.0 magazine.

3. About me and the scenario I am associated with the company since Oct.’06 heading supply chain department. The SCM department in company itself was established in Oct.’06 after my joining. Earlier the department Sales & Marketing, Manufacturing, Planning, Purchase operated independently. The departments have their own objectives, the results of this, there was not a single integrated plan for the organization. Clearly there was a need for a mechanism through which these different function can be integrated to achieve the desired goal of the company.Today we have fully established SCM department with dedicated people from SCM field who are from difference reputed platforms.Here in discussion, rather than theoretical I would like to share my experiences how we have improved our supply chain with sales & operation planning.In next slide, we are discussing the growth in the organization before and after S&OP process.

4. Turnover Growth History -Relaxo Footwears

5. The link between SCM and S&OPThe supply chain is all about balancing demand and supply. The sales and operational planning (S&OP) process is the nerve centre of this activity.

6. Why you need to have S&OPThe ultimate purpose of any business is wealth creation for its shareholders, and that starts with the effective utilization of its available resources. An effective S&OP process get together the demand and supply side of the business, thus ensuring the optimal utilization of available resources.Traditionally the department –sales, manufacturing, logistics play direct role in a company’s supply chain. Additional marketing, finance and HR help by removing bottlenecks to ensure a smooth supply chain. The departments have different plans which are neither synchronized nor based on constraints within another part of the organization. This results in poor performance – missed targets, lost business and dissatisfied customers- and a lot of internal finger pointing. The S&OP process is a simple but effective mechanism to balance supply and demand, which is what about supply chain management is all about.A number of companies now see the need for such a process.

7. The objectives of S&OP S&OP meetings help to review a company’s past performance, reasons for variance and proactive action plans. These meetings assign accountability to all participants, helping an organization develop an integrated plan. Broadly speaking the objectives of the S&OP process are to: • Synchronize sales, finished goods, material and production plans. • Identify bottlenecks • Discuss alternatives and initiatives. • Priorities initiatives and communicate them

8. Key factors require in S&OP • The support, involvement from the Business Head must require. • The other essential members of this meetings include the finance head, Sales & Marketing head, logistics head, manufacturing head, SCM head and HR head must require with full attendance. • On need basis SME, may also called to attend the meeting. • The SCM Head can be the key person for co-ordination. • The frequency of meeting depend upon the specifics of the industry and the company. It can be weekly, fortnightly or monthly. • The Agenda of meeting should get ready before the meeting along with minutes of last meeting. • The SCM Head, who is coordinator has to provide the past performance data in relates to sales, stock, production, logistics cost etc.

9. S&OP Need in Relaxo After introducing SCM as separate department in Oct.’06 we started getting quite satisfactory results. But on need basis, we further have reviewed the status and introduced S&OP in April’09. The purpose was to get effective result in SCM. Given below were the difficulties noticed before S&OP: • The order fulfillment ratio was 68% against the target of 98%. • There was lack of coordination among the department. No interaction among them. • Each department was having their own agenda and own priorities. • DSM (Dead & Slow Moving Inventory) in FG increased, exceeded the standard norms. • No focus on new design and product development, packaging development. • No updation on focused articles, to be given priority. • No updation in market grievances in relates to supplies, wrong despatches, shortages, logistics and other costs, schemes, credit notes, quality complaints.

10. Guidelines followed in implementing S&OP Process in Relaxo Footwears • The meeting will be held on monthly basis preferably in 2-3 of the month, and MD will be the chairperson. • Head SCM will be the coordinator for organizing the meeting along with agenda, minutes of last meeting, past performance parameters. • Following person are the permanent members of the meeting who must require in the meeting: MD : Chairperson CFO : The conscience keeper S&M Head : The forecaster Head Logistics : The FG Planner Head Mfg. : The Master Production Scheduler Head SCM : The PPC Coordinator Head CPD : The Procurement Planner Head HR : The Manpower Planner Head BE/IT : To solve IT related issue/ giving Score Card results The above nine person are the permanent members, however, following person may require on need basis, they may be called through the Email to be sent in advance: Head (New Product Development), Head (Packaging Development), Head Costing, Head (Excise & Sales Tax), GM (Accounts), GM (P&A), Plant Head (GM-Hawai, GM-Flite, GM-Shoe), Head Sales (Hawai, Flite, Shoe). • In case the member as called is absent, the second line esponsible person must reach to attend the meeting. • A weekly meeting will be held on every Friday, by the second line managers, for reviewing the performance against decision taken in S&OP meeting. • Regular parameters also will be reviewed such as order fulfillment ratio, logistics performance, stocks availability and stocks out status etc.

11. Key Results after S&OP (as on 30.04.2012) • Order fulfillment ratio improved from 68% to 87% (it was 38% before SCM). • Sales improved from growth 9% to 23% 5YR. CAGR. • FG Inventory level reduced from 38 days to 15 days. • Dead Inventory liquidated. It was 5% of total inventory to now 0.7%. • 65% inventory is lying in A&B class inventory contributing 85% sales. It was 35% in 31.03.2009). • Transportation cost reduced 0.9% (i.e. from 4% to 3.1% of sales) • No additional warehouse space required due to controlled inventory. • Reduced SFG and Raw Material inventory – it is reduced from 60 days to 48 days.

12. The process also has the significant benefit of making a company’s objectives visible and transparent to all involved. It therefore has an impact not only the quality of decision making, but also on the culture of the organization.

13. Thank you