Reference no: EM132064342

Case Study: Mahindra and Mahindra

Mahindra and Mahindra (M&M) is another of the largest private companies in India. Its farm equipment unit, the third largest producer of tractors in the world and one of two major operating divisions, produces more than 100,000 tractors a year. In 2005 - 06, the company sold 85,000, achieving a growth rate of 30 per cent on the previous year. India's 6 million farmers depend upon them. The company's tractor exports to the US, Africa, and several countries in South East Asia face sti? competition. M&M set up its assembly/manufacturing facilities at multiple locations, which increased the complexity of the supply operations. Hence, the company needed an integrated solution that could link all plants to optimize costs and operational e?ciency and respond quickly to customer requirements. For M&M, cost reduction was very important. It has to spend more money on raw materials, but cannot increase prices due to high competition. Thus, SCM was the only solution to keep its margin healthy - minimizing costs by reducing the cost of production, logistics, working capital (inventory) and the cost of lost sales. Pull-based replenishment helped in optimizing the logistics and manufacturing operations to improve margin and minimized costs by enabling quick customer requirements. Successful implementation of SCM has helped M&M reduce its inventory by more than 50 per cent. Successful implementation of SCM has helped M&M reduce its inventory by more than 50 per cent. Replenishment lead-times, which cover planning and execution, were around52 days before the SCM project began. Now this has been reduced to 19 days. The company has established a strong web component for its 400 dealers to collect sales information and its 800 suppliers to submit SCM planning information and material requirement planning (MRP) schedules. The company started with dealer stock of 12,000 tractors and company stock of 7,000. But the change in business model and implementation of pull-based replenishment enabled the company to reduce its dealer stock to 6,000 and company stock to 3,500.With ongoing implementation of SCM, the company expects to further reduce its dealer inventory to 4,000 tractors and company stock to 2,000.

Question

Summarize your assessment and address all pros and cons.