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Bye-Bye Looks to Boost After-Sales Distribution Efficiency1

Bye-Bye Motors one of the large automakers in India assembles and sells vehicles for a wide range of uses passenger cars, utility vehicles, trucks, commercial passenger carriers, and defence vehicles. At the beginning of 2011 it was producing a range of products in each category of use. For instance, in the category of passenger car, Bye-Bye made four different products in the range of small-medium size, each with multiple models. In the truck category, it offered models for medium and heavy commercial vehicles, intermediate commercial vehicles, light commercial vehicles, and small commercial vehicles. Some of the products were also exported in other South-Asian countries, South Africa, and some countries in Europe. Over the past decade the competition in the Indian auto market has intensified with several domestic and multinational firms setting up manufacturing and supplier bases and producing vehicles for a wide range of markets. With increasing competition, automakers are under constant pressure to improve performance on multiple dimensions quality, productivity, fast delivery, new products/models, and efficient after sales service. As the majority of large automakers in India have installed modern designing laboratories, IT systems, production lines and testing facilities, they matched each other on quality and productivity of manufacturing and assembly. However the performances varied on aspects like efficiency of new product development and after-sales service. Distribution and After-Sales Bye-Bye distributes the spare parts for its products all across India via a complex network of over 5000 channel partners. These are distributors, dealers, dealer branches, and Bye-Bye owned BBASS (Bye-Bye Auto Service Stations). For distributing the commercial vehicles spares, Bye-Bye has established four big warehouses, one in each major region of India North, West, South, East. Over 50,000 parts are supplied to the channel partners from these warehouses. The channel partners place orders for spare parts almost every day. In order to improve utilization of trucks, attempts are made to send a truck to cover multiple destinations that lie roughly on the same route. The routes from a warehouse to a destination and between different destinations are known and distances and travel times well estimated. About 4-10 destinations are typically served by a truck trip. A truck waits to fill up a reasonable load before leaving from a warehouse. This waiting time could be up to three days. On a given day dispatches are made from the warehouses for about 1700 destinations (channel partners). A large channel partner receives its delivery once every 2-3 days, whereas a smaller partner receives once a week. A truck typically takes 2-5 days to return to its origin warehouse. About three-fourth of all dispatches are within the region.

Prepared by Rahul Pandey in 2011, rahul.pandey@igsalabs.com

The Supply Chain head of Bye-Byes commercial vehicle spares division admits that, in spite of their manual efforts to improve utilization of trucks, a lot of trucks go PTL (part load) instead of FTL (full load). Besides high transport cost of PTL trips, they are exposed to more damages as the truckers carry other materials in the unused space. The Supply Chain head believes that by a scientific method of milk run routing and distribution scheduling Bye-Bye can save significant cost without compromising the service level performance. The after-sale service quality depends a great deal on the availability of the right mix of spare parts at the channel partners facility. With proliferation of products and their spare parts, the distributors and dealers are often hard pressed to meet customer requirements. Need for a Distribution Routing and Dispatch Scheduling Tool In late 2010, the Supply Chain head and his team began to estimate back-of-the-envelope milk-run routes for certain regions. These manually calculated milk runs were tried out for a couple of months and the responses of both warehouses and channel partners were positive. People realized that such an approach yields benefits. Encouraged by these informal trials, the Supply Chain head now wanted to make the methodology more robust and scale it up all over India. He is convinced of the need to develop a scientific model for recommending optimal routes and dispatches of trucks, and integrating it into a software tool, interfaced with the existing ERP system. This will permit automated calculations of optimal routes and dispatch schedules, and quick what-if scenario analysis. He invited a supply chain analytics consultant for an initial brainstorming session to scope the problem and figure out if such a model and tool could be developed and implemented effectively. A lot of questions came up in the brainstorming session which witnessed intense debates and arguments. While there was little consensus on the best answers to these questions, it became obvious by the end of day that the discussions have resulted in greater clarity about the issues involved. It also became clear that answers to these questions are crucial to model the problem effectively and make the proposed tool useful and practical to implement. Time horizon and rolling period: Will the model be run on the morning of every day? Will the model recommend daily dispatches and routes of trucks for the next several days or for just one day at a time?

Geographical scope: Will the model be run for each warehouse separately or for all the warehouses (i.e. for all India) together? What are the implications of each option?

Decisions expected from the model: Detailed route for every truck to be dispatched from each warehouse Contingency (back-up) re-routing of trucks in case of unexpected events

Optimization objectives: Meet all orders from channel partners within reasonable time limit (based on service level targets in terms of maximum number of days from order to delivery) Minimize total travel time (or transport cost) of trucks

Major input data in the model: Master data: o o List of warehouses and destination points in each region Feasible routes from warehouse to destinations and between destinations, and travel time or cost on each leg/route both within and across regions (Should warehouse-warehouse movements be considered too?) o o o o List of spare parts and equivalent truck volume per unit of each Service level requirement (no. of days from order to delivery) For each warehouse: List of available trucks and capacity of each Priority of destinations

Transaction data: o o Daily orders from each destination Trucks available at warehouse; Status of trucks in transit

What other constraints in the system should be considered?

Question for discussion Can you answer the questions raised in the brainstorming session, and then propose a model to the Supply Chain head that can recommend optimal distribution routes and schedules?

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