The Hindu Business Line : How Eveready energised its supply chain

Being the market leader with a share of 46 per cent in the dry cell segment, Eveready had to restructure its operations to cope with competition. It has worked out innovative supply chain management techniques to bring down its cost of dry cell production on a par with global level.

EVEREADY Industries India Ltd, the Rs. 1,000-crore flagship company of the B. M. Khaitan Group, has worked out innovative supply chain management techniques to bring down its cost of dry cell production on a par with global level.

The company was forced to work out these techniques as liberalisation led to foreign players flooding the Indian market with their products. Eveready, being the market leader with a share of 46 per cent in the dry cell segment, had to restructure its operations to cope with the competition.

Several steps were taken to cut production cost. First, as Mr. Suvamoy Saha, Chief Financial Officer of Eveready Industries, pointed out, the company started looking at its major heads of expenses and zeroed in on logistics. With 11 manufacturing locations and a dealer network spread all over the country, Eveready decided to rework its supply chain management so that every vehicle, carrying raw materials or finished products, was used to its maximum potential.

To begin with, the company examined whether its existing transporters were efficient and competitive enough in the changed market milieu or if better alternatives were available. It opted for the online reverse auction mechanism. This is a simple mechanism:

Applications from different transporters are first received, their credentials checked and the few shortlisted allowed to participate in the online bidding system.

"The system being online is totally transparent and every qualifier can see the lowest bid and accordingly reduce his rate further. The identity of the bidder is not revealed, only the bid amount. And, if willing, a bidder can quote a new lower rate. We thus get the best deal," Mr Saha told Business Line.

The online reverse auction bidding process threw up six efficient players whom the company signed up. "The reverse auction mechanism has helped us save approximately 20 per cent on transport cost despite the rise in fuel prices.

The logistics expenses are only two per cent of the total distribution cost, but the amount of money being saved in the process is not small," Mr Saha said.

Once the team of transporters was finalised and the fleet of vehicles identified, Eveready worked out another innovative scheme. Not a single truck, which entered the manufacturing units with the raw materials, was allowed to leave the plant empty; it had to carry back finished products. Thus, 95-100 trucks crisscross the country every day, either with raw materials or finished products of Eveready.

"Everything has been worked out by our in-house logistics team by fine-tuning our inbound and outbound transportation schedules. As a result, the supply chain management is currently working perfectly in our organisation," Mr Saha added.

The company is also using different tools of supply chain management to rework and restructure its working capital needs. As the first step it has started procuring its major raw materials like zinc, acetylene black and ammonium chloride from overseas suppliers at a reduced cost.

"Sourcing from international players is a tactical move. It helps us to reduce our cost which becomes quite high if raw materials are sourced domestically because of the inefficiency of the domestic suppliers. The overseas players are open to supplying on credit. This gives us the flexibility of working out a negative working capital strategy by managing our throughput," he said.

Eveready thus dramatically reduced its working capital needs. It pays back suppliers after receiving the payments from buyers of its product.

On an average 90/120-day credit is got from raw material supplier and offered to the dealers.

As a result, a fine-tuned supply chain management has helped the company slash its transport expenses and also reduce its working capital needs. This second achievement has given the battery major enough flexibility on its total corporate capital management.

At the dealer network level, Eveready has a fleet of 1,000 vans. These exclusive vans, supplied to the dealers at a subsidy, travel to markets and bazaars in the remote corners to promote products and boost the sales.

Earlier the company was contemplating increasing the number of these vans but the plan was subsequently dropped. Now it has hit upon a new plan to increase its productivity. It has asked the dealers to depute one more person for each van. This person goes to a market ahead of the van, conducts the necessary surveys and collects the orders. The van follows and delivers the goods immediately without any long wait. "In this way," Mr Saha explained, "a van will be able to cover more markets or locations in one day boosting the sales."

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