SUMMER TRAINING REPORT ON JK TYRES &INDUSTRIES LIMITED

PROJECT TITLE: ADVANCED PLANNING OPTIMISATION

Submitted in Partial Fulfillment of The Requirement of Post Graduate Diploma In Business Management

By: VIKASH AWASTHI Batch: 2009-2011 JKBS 090459

Submitted To: Mr. S.K Nandi

JK BUSINESS SCHOOL GURGAON

Contents:
1. 2. 3. 4. Undertaking Certificate Acknowledgement Executive Summary Introduction About Tire Industry In India Growth Of Tire Industry Various Type Of Tire Segment 5. JKs Brief Profile About JK Mission &Vision Marketing Strategy SWOT Analysis Organizational Behavior 6. Objective Of The Study 7. Need For The Study 8. Limitation Of The Study 9. Research Methodology of The Study 10. Supply Chain Planning 11. Supply Chain Execution 12. Supply Chain coordination 13. Supply Chain collaboration 14. Brief About the Project: APO Demand Planning Supply Network Planning Production Planning Transportation Planning 15. Analyze Historical Data And Projected Data to Generate a Statistical Forecast 16. Working With Sales and Customers to Define The Key Account Forecast 17. Managing Network Constraints to Balance Customer Service and Cost 18. Balancing Near Term Supply And Demand With Inventory Development 19. Measuring Success to Enable Continuous Improvement 20. The Reward Of Planning

Undertaking

The project is submitted to J K Institute as a Summer Training project for Post Graduate Diploma in Business Management, 2009- 2011.

Project Guides: Name :- MR. Rajesh Gupta SR.GENERAL MANAGER (P&L) J K Tyre & Industries Ltd

Certificate
This is to certify that the project work done on (Title) is an original work carried out by Mr./Ms.-------------- under my supervision and guidance. The project report is submitted towards the partial fulfillment of two year, full time Post Graduate Diploma in Management.

This work has not been submitted anywhere else for any other degree/diploma. The work was carried out from --------to ----- in (Name of the organization).

Name & Sign of Industry Guide

Date: Name & Sign of Faculty Students Name and Sign Roll No.

Acknowledgement

It has been great pleasure to work with such an esteemed organization J K Tyre & Industries Ltd. The amount of exposure and support, which we received during our study has been genuinely outstanding. We would like to give our sincere gratitude towards our institutes which gave us opportunities of doing our summer training from J K Tyre & Industries Ltd. We express our sincere gratitude to MR. Rajesh Gupta Sr. General Manager (P&L),for giving us an opportunity to work in his organization. In spite of being engaged in the unending activities of the office, he kept motivating us to try our best all the time. We are deeply indebted to Mr. B S Tomar Officer (P&L) for his guidance and supervision and spending time with us.

INTRODUCTION:
In todays world of intense competition and rapid dynamism, all the companies worldwide are tuning their focuses on the customer. Suddenly, the customer had succeeded in capturing all the attention of the companies towards him, so much so, that the once famous maxim, customer is the god has become so true and relevant today. There has been a paradigm shift in the thinking of these companies and none other then the customer has brought this about. Earlier there was a sellers market, since goods and services were in short supply and the sellers use to call the shots. But, ever since the advent of the era of globalization, there has been total transformation in the way the customers being perceived. Today, marketers are directing their efforts in retaining the customers and customers base. Their focus has shifted towards integrating the three elements people, service and marketing. The customers importance has assumed imponderable proportions in todays world, because of the inherent value that the customers command. A customers can make or break a company. It is the responsibility of every company to see that all its customers are equally satisfied with them, for one single dissatisfied customer will tell at least nine others about the dissatisfaction and will spark off a chain reaction and spell doom for that company. In such scenario, retention of the existing customers assumes diabolical proportion. Research has thrown light on some important aspects of customers retention it has been proved empirically that acquiring new customers can cost five times more than the cost involved in satisfying and retaining current customers. In the past, the customers was taken for a ride, as there were not many players in the fields, not much importance was attached to product safety, quality, service and product appeal. The attitude of the manufacture was that of caveat emptor. Thanks to the government policies on

Liberalization, globalization and privatization (LPG), the market scenario has changed today. Today, the customer has a host of defense mechanism like the customers protection laws,
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Regulation of the government, the powerful hands of the organization, customers courts, switching to substitute or competitors that offers at competitive prices, etc. The maxim, caveat emptor has been replaced by caveat venditor.

In the past, after sales service was consider as a cost center, Companies were lethargic in attending to customers complaints. Availability of trainee service personal and quality genuine spare parts posed serious problems. However, with the rising competition, there could not be much product differentiation, as price and quality were comparable and latest technology was to each and every company in the field. Since, there could not be much differential a tangible assets, the companies concentrated on the intangible assets, namely the service factor, which served as a major differentiator. Today after sales service is an important aspect of every company, and it is no more considered as a cost center, but considered as a profit center. Every organization strives hard to retain its existing customers at any cost since it is five times costly to get a new customer, then to retain existing customers. Most of the industries today use of information technology to best services to their customers.

b. About Tire industries in India:

Background
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The origin of the Indian Tyre Industry dates back to 1926 when Dunlop Rubber Limited set up the first tyre company in West Bengal. MRF followed suit in 1946. Since then, the Indian tyre industry has grown rapidly.

Transportation industry and tyre industry go hand in hand as the two are interdependent. Transportation industry has experienced 10% growth rate year after year with an absolute level of 870 billion ton freight. With an extensive road network of 3.2 million km, road accounts for over 85% of all freight movement in India. Key Issues of tyre industries

High tax usage:

The high tax content on tire can be gauged from the fact that the percentage of total tax to the tax excluded price for various categories of tires is - 44% for Truck Tyre; 41% for Passenger Car Radial Tyre, 35% for Tractor Rear Tyre and 76% for Truck Tyre Tube.

Increase in raw material costs:

Apart from being capital intensive, the tyre industry is highly raw material intensive. Any change in the prices of raw materials affects the profitability of tyre companies. The raw materials used in the manufacture of tires are rubber and petroleum derivatives like nylon tyre cord, carbon black, styrene butadiene rubber and poly butadiene rubber. The most important raw material is rubber-natural and synthetic. Natural rubber (NR), with 29% weight age in the cost of raw materials used by tyre industry, is the highest cost item. Annual consumption of NR by tyre

industry is 3.50 lakh tones, valued at Rs. 14 billion. Over 85% of NR consumed' by the industry is procured domestically. 15% is imported.
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In the 2003-04 fiscal, as against the Minimum Statutory Price of Rs. 32.0 per kg, the ruling domestic price of NR had been over Rs. 50 per kg. This is higher than the world rubber prices. However, this does not entail the tyre industry players to import as a number of restrictions are imposed on the import of NR. NR can be imported only through two ports-Kolkata & Visakhapatnam. The customs duty on import of natural rubber is 20%, with 10% under Bangkok Agreement. However, this is not relevant, as NR is not cultivated in South Korea, Bangladesh & China (signatories under the Bangkok Agreement). Hence, NR can be sourced only from Sri

Lanka (under the Indo-Sri Lanka Agreement), which is of bad quality. Thus, the options of rubber import are restricted and the manufacturers have to rely on the domestic market for procuring rubber.

Import of tyres:
During the FY2002, over 1, 10,000 passenger car tyres were imported. Although this constitutes a small percentage (1.5%) of total passenger car tyre production in the country, since total imports are of radial passenger car tyres, the percentage is higher when compared against domestic production of radial passenger car tyres. A large percentage of imports are from South Korea at a concessional rate of customs duty (i.e. 15%) under the Bangkok Agreement - as against 20% normal rate of customs duty. Even though the Government has imposed a restraint on the import of used tyres into India, occasionally there are reports of import of such tyres in a clandestine manner, sometimes as new tyre at low value, since there is no restriction on import of new tyres or as tyres under the "others" category. Many countries such as Japan, Bangladesh, Pakistan, Philippines, Thailand, Kenya, South Korea, etc. have either put a complete ban on import of used tyres or have placed stringent conditions on such imports.

Tyre Exports:
The product focus of tyre exports from India has been Traditional Truck Tyres. Globally this segment of tyre export is shrinking due to greater acceptance of radial tyres. Over the years, China has emerged as a major exporter in bias tyre category. Additionally, export of Indian tyres to select countries is subjected to non-tariff barriers (NTBs) by way of standards, tests, etc. Export of cheaper tyres from China to major tyre importing markets, like US, is adversely affecting Indian tyre exports to these markets. India's share in exports to these countries (especially USA) is progressively declining. If the trend is not reversed, Indian tyre industry will find it extremely difficult to regain its erstwhile position in these markets. Low rate of interest,

Cheaper electricity tariff, hidden subsidies by the Chinese Government, better infrastructure facilities and lower transaction costs are factors favorable to Chinese tyre industry.

Demand Supply Gap:

The demand for tyres is either in the domestic market or in the export market. As far as domestic demand is concerned, the OEM and the replacement segments are likely to witness strong growth given the current performance of the automotive sector. Given the strong linkages of tyre industry with automotives, its demand is likely to be strong over the short to medium term. As for the export demand for tyres, the outlook is positive, even though some downsides remain. As regards supply of tyres, currently, the major players are in the process of expanding their capacities, in anticipation of uptrend in sales. For instance, Apollo Tyres has set up a joint venture with Michelin for manufacture and sale of bus and truck radials. JK is expanding its Mysore truck and bus radial facility along with eyeing acquisitions of smaller units. Ceat has

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increased its off take by 3 times from Pirelli. However, a characteristic of the Indian tyre industry is that most of the tyre manufacturers in the past had increased capacities in anticipation of a surge in demand, but when it did not materialize, they reduced their addition to capacities. Thus, the demand-supply gap is likely to be an important issue for the Indian tyre industry over the short to medium term.

Review of Performance: Overall Performance

The operating margin of the representative sample of tyre companies improved during FY2003. However, the net profit margin of the tyre companies even though improved, was still at 3%. Performance in FY2004 The tyre industry continues to be driven by good demand growth, propelled by sustained uptrend in demand and sales of automobiles in general, and commercial vehicles and passenger cars in particular. However, this does not get translated into improved margins for the industry, as it is witnessing sustained rise in prices of raw materials like natural rubber. Additionally, the customs duty on imports has been brought down from 25% to 20% and Special Additional Duty of 4% has been dispensed with.

Outlook:
The level of economic activity, performance of domestic automotive industry, and the faring of the transport sector directly influence the performance of the tyre industry in India. With the replacement segment dominating the overall tyre demand in India, the industry remains inherently vulnerable to economic cycles. While radicalization has become the norm in the passenger car segment, in the bus and truck tyre segment, its acceptance is still limited. Bus and truck radicalization could emerge in the long term as the quality of roads improves and the

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Restrictions on overloading are better enforced. The practice of re-treading, which is gaining increasing acceptance, could pose a challenge to replacement demand in the medium term. The ability of the re-treading sector to capture potential replacement demand would depend on the awareness among customers (of the benefits of retreading) and also the quality of retreading done. Given the low levels of penetration of two-wheelers and passenger cars in the country, OEM demand is likely to increase, which in turn would push up replacement demand with a lag. The prospects of tyre exports from India appear healthy, following efforts by Indian companies to increasingly enter into outsourcing agreements with tyre producers in Southeast Asia, Eastern Europe and Latin America. Overall, tyre manufacturers are likely to tap the export market in an effort to boost sales. The increasing exports of bus and truck tyres (cross ply variety) from India to developing countries is because of the fact that developing countries are unable to source them from developed countries as these are no more produced there. Tyre imports are unlikely to pose a threat to the domestic industry, given that domestic prices are lower than international tyre prices. In the domestic market, tyre manufacturers are expected to increasingly focus on expanding their dealership networks & explore possibilities of tie-ups among themselves to penetrate the growing customer base. They are also likely to pursue innovative measures (such as "dial-a-tyre service and road shows) to improve customer awareness. The consolidation of the Indian Tyre industry is likely to continue in the coming years through mergers among existing players. The industry is likely to expand through a combination of organic and inorganic growth. While organic growth would come from raising efficiency levels, inorganic growth would be achieved through alliances and M&As.

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c. Growth of Tyre industries in India:

The Indian tyre industry is expected to clock a tonnage growth of 9-10 per cent over the next five years, according to a study by Credit Analysis and Research Limited (CARE), a noted rating firm that offers a wide range of rating and grading services across sectors. While the truck and buses tyres are set to register a CAGR (compounded annual growth rate) of 8 per cent, the LCV (light Commercial vehicles) tyres are poised for a CAGR of 14 per cent. According to the CARE study, the growth in the Indian tyre industry will be fuelled by the expansion plans of the automobile companies, government's focus on development of road infrastructure and sourcing of auto parts by the global Original Equipment Manufacturers (OEMs). However, the tyre industry has to grapple with raw material price volatility, rupee appreciation and cheap Chinese imports. The tyre industry in India recorded a CAGR of 9.69 per cent during 2002-07. The size of the industry was estimated at Rs 19,000 crore in 2006-07 with a total production of 736 lakh units of tyres. In 2006-07,there placement tyres accounted for 53 per cent of the total tyre tonnage off take, followed by 31 per cent share of OEM and 15 per cent by exports. Out of the 736 lakh ton of tyres, 54, 49,560 units worth Rs 2,600 crore were exported. The exports from India posted a CAGR of 13 per cent in unit terms and 18 per cent in value terms between 2002-07. The study points out that on the export front, the Indian tyre companies need to explore newer markets as the existing market for bias truck tyre which accounts for about 45 per cent of the total export volume is nearing saturation. This apart, with rationalization catching up in the foreign markets, the Indian tyre companies need to graduate to radial tyres so as to protect their share in the export market. At present, radicalization of tyres is low in India except for the car tyre market where 95 per cent of the tyres is radicalized while cross ply tyres is preferred in all other categories. Cross ply tyres are preferred owing to poor road conditions, overloading in trucks, higher cost of radial tyres and poor awareness among the tyre users in the country.

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The CARE report observes that though the tyre technology in India has witnessed several developments with continuous innovation, the domestic tyre manufacturers still lag behind their global counterparts in terms of product differentiation. Global tyre makers offer a wide change of products like tyres with pressure warning systems, run flat tyres, eco-friendly tyres and energy efficient tyres.

d. Various types of Tyre segment:

Tyres by Type
The Indian tyre industry produces the complete range of tyres required by the Indian automotive industry, except for aero tyres and some specialized tyres. Domestic manufacturers produce tyres for trucks, buses, passenger cars, jeeps, light trucks, tractors (front, rear and trailer), animal drawn vehicles, scooters, motorcycles, mopeds, bicycles and off-the-road vehicles and special defense vehicles. The scenario in India stands in sharp contrast to that in the world tyre market, where car tyres (including light trucks) have the major share (88%) by volume followed by truck Tyres (12%). In India, however, passenger car tyres have a mere 17% share of the overall tyre market.

Truck and Bus Tyres :

The truck and bus tyre segment accounted for 19% of tyres produced in India in FY2003. Every truck/bus manufactured generates a demand for seven tyres (six regular and one spare) as against three in the case of two-wheelers and five for passenger cars. In addition, the price of a truck tyre is significantly higher than that of a passenger car tyre (roughly 10 times) or a motorcycle tyre.

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Thus the demand multiple emanating from the commercial vehicle segment is highest in value terms. Given the regular use and heavy wear and tear of truck and bus tyres, the demand from the replacement market in this segment worked out to 68% of the total demand for truck and bus tyres in FY2003; the OEM demand accounted for around 9% the same year. With the Indian manufacturers of cross-ply tyres focusing on the export market, this segment accounts for around 22% of the demand for truck and bus tyres.

Passenger Car Tyres:

The passenger car tyre segment accounted for 17% of all tyres produced in India in FY2003. With passenger car production witnessing a growth of 12% in FY2003 over the previous year, OEM demand accounted for about 33% of the total sales that year. The replacement market accounted for around 63% of the total sales of passenger car tyres in FY2003. Exports accounted for 4% of the total passenger car tyre demand in FY2003. With the stock of cars increasing, replacement demand is likely to continue.

Motorcycle Tyre:
Motorcycles accounted for 76% of two-wheelers sold in the domestic market in FY2003. Motorcycle tyres constitute the largest segment of the domestic tyre industry (29% of total tyre

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demand in FY2003). The replacement market accounted for around 49.8% of the total motorcycle tyres sold in FY 2003, while OEM demand accounted for around 50%.

Scooter Tyres :
Scooters were the dominant segment in the Indian two-wheeler industry till FY1998, accounting for around 42% of domestic two-wheeler sales. However, the introduction of new motorcycle models has seen the share of scooters declining to 19% of domestic two- wheeler sales in FY2003. The OEM segment accounted for around 34% of the total sales in the scooter tyre segment in FY2003, with the rest being accounted for by the replacement market

Replacement Market:
The replacement market, including State transport undertakings and Government buying, accounted for around 59% of the total tyre demand in FY2003. The demand in the replacement market depends on the vehicle population, the level of economic activity, life of the products transported, kilometreage per vehicle, the price of the tyres and the quality of the existing road infrastructure. Additionally, the replacement market, which offers better margins, is extremely competitive. The replacement market is dominated by the truck and buses segment, which accounted for 22% of all tyre sales in the replacement market in FY2003.The large size of the replacement in turn is determined by the interplay of various factors as discussed below: The replacement demand may be lower because of longer replacement intervals and Lower business mileage if the economic activity slows down.

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 Replacement demand in India is higher because of a low vehicle scrap page rate. Poor road conditions by lowering the life of tyres have a positive impact on replacement demand. Stricter enforcement of the MV Act, which seeks to prevent overloading of vehicles, will result in an increase in the life of tyres and thus impact replacement demand negatively. Applying a new tread or "re-treading" can extend the life of the tyre at a significantly lower cost, thereby lowering replacement demand. In India, re- treading finds greater acceptance in the commercial segment. Radicalization of tyres is likely to result in lower replacement demand. While car radicalization in the country has reached a level of 65%, truck and bus radicalization stands at just 2-10%. Poor road and support infrastructure as well as traditional vehicle designs act as a barrier to radicalization in the commercial vehicle segment. Radial technology for trucks and buses would help increase operating efficiencies by delivering better mileage and minimizing wear and tear. According to ATMA, even if only 25% of the truck and bus segment is radicalized, the savings in fuel costs would be around Rs. 7,500 million. Introduction of tubeless tyres in the passenger car segment is also likely to affect replacement demand adversely Introduction of eco-friendly radial tyres such as hyper-bonding silica technology in the passenger car segment may affect replacement demand adversely.

Exports:
In the light of the prevailing domestic market situation, most of the tyre manufacturers have taken to exports to reduce inventory build-ups. In FY2003, Indian tyre exports stood at Rs. 10.8 billion (10% of the total industry) in value terms and 3.1 million in unit terms (6.5% of total production). Indian companies have currently entered into sourcing agreements (for tyres) with neighboring countries. For instance, Ceat and J K Tyres have sourcing agreements with tyre producers in Sri Lanka and China. This is likely to have a positive impact on tyre exports from India.

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Market Players:
Some of the major players in the Indian tyre industry are MRF, Ceat, JK Industries, Apollo Tyres, Bridgestone India, Goodyear India, Falcon Tyres and TVS Srichakra. The tyre industry in India is fairly concentrated, with the sample of eight companies

JKs Brief Profile:

a. About JK :
Jk Tyre and Industries is a mega corporate entity that is emblematic of excellence, diversification and pioneering new technologies. A part of JK Organization which ranks among the top private groups private groups in India, Jk Tyre and Industries is committed to self reliance and follows an ethic that views customer satisfaction as an index of achievement. Over the years, the company has expanded and diversified its business portfolio. It has developed into a multi product, multi-location corporate entity comprising of following business divisions: The advent of JK Organization on the industrial landscape of India almost synchronizes with the beginning of an era of industrial awareness - an endeavor for self reliance and the setting up of a dynamic Indian industry. This was way back in the middle of the 19th century. And the rest that followed is history.

CORE VALUES:
JK Organization has been a forerunner in the economic and social advancement of India. It always aimed at creating job opportunities for a multitude of countrymen and to provide high quality products. It has striven to make India self reliant by pioneering the production of a number of industrial and consumer products, by adopting the latest technology as well as

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Developing its own know-how. It has also undertaken industrial ventures in several other countries.

JK Organization is an association of industrial and commercial companies and charitable trusts. Its member companies, employing nearly 50,000 persons are engaged in the manufacture of a variety of products and in diverse fields of commerce. Trusts are devoted to promoting industrial, technical and medical research, education, religious values and providing better living and recreational facilities. With the spirit of social consciousness uppermost in mind, J.K. Organization is committed to the cause of human advancement.

In what is being considered as a landmark decision in the highly competitive Indian tyre industry, the Advertising Standards Council of India (ASCI) has upheld JK Industries Ltd's claim of being India's No 1 tyre manufacturer in the four-wheeler tyre segment, reaffirming JK's leadership position in the market. ''This is a fabulous example of why all of us need to have faith in bodies like ASCI. We believe that the process of self-regulation in Indian advertising is working for both companies and agencies. We also hope that this would encourage various players to bring superior technology and consumer service standards and claim leadership in a more healthier and competitive manner.''

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The case was started when few competitors filed a complaint with ASCI against JK Tyre's print advertisement, in which JK Tyre announced its numero Uno position in the four- wheeler tyre segment, quoting production figures compiled by Automotive Tyre Manufacturer Association and other authentic industry sources.

1999 Synergy with VTL in procurement, marketing and production flexibility. Completion of state of the art modernization of truck radials. JK Tyres ranked 16th largest Tyre Company in the world. ISA 14000 accreditation for environment & safety.

2000 JK introduced National Go-Carting Championships. 2001 Received CAPEXIL award. J.K. Industries received FOCUS LAC export award for the year 19992000.

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JK Tyre's No 1 market position :

In what is being considered as a landmark decision in the highly competitive Indian tyre industry, the Advertising Standards Council of India (ASCI) has upheld JK Industries Ltd's claim of being India's No 1 tyre manufacturer in the four-wheeler tyre segment, reaffirming JK's leadership position in the market. Expressing his happiness over ASCI's judgment, JK Tyre marketing director T K Banerjee says: ''This is a fabulous example of why all of us need to have faith in bodies like ASCI. We believe that the process of self-regulation in Indian advertising is working for both companies and agencies. We also hope that this would encourage various players to bring superior technology and consumer service standards and claim leadership in a more healthier and competitive manner.'' The case was started when few competitors filed a complaint with ASCI against JK Tyre's print advertisement, in which JK Tyre announced its numero Uno position in the four- wheeler tyre segment, quoting production figures compiled by Automotive Tyre Manufacturer Association and other authentic industry sources But the competitors contradicted the claim, stating the fact that market figures from a company's annual report should be used as authentic data to claim one's leadership, not the production figures. But ASCI considered the case at the Consumer Complaints Council on 23 May 2002 and upheld JK Tyre's contention that production figures, as compiled by authentic industry sources and used by JK Tyre to claim its leadership, is a valid and applicable comparison platform.

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Hence, JK Tyre's claim as No 1 tyre manufacturer in India is a perfectly valid and correct statement. This also reflects ASCI's agreement to JK Tyre's viewpoint that figures, as stated in the one's annual report, could actually be misleading and could include revenues from non-tyrerelated businesses also. JK Tyre, pioneers of radial technology in India, is today India's largest manufacturer of tyres in the four-wheel segment, including tyres for trucks and buses, LCVs, passenger cars, jeeps, tractors, ADVs and OTRs. After 25 years of pioneering world-class technologies in India, JK Tyre has recently launched the country's first eco-friendly colored tyres as well as steel-belted tractor rear radials.

b. Mission & Vision :

Vision:
To be amongst the most admire companies in India committed to be excellence.

Mission:
a. Be a customer obsessed company b. No.1 Tyre brand in India c. Deliver enhanced value at all stakeholders d. Most profitable Tyre Company in India e. Enhance global presence through acquisition

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f. Motivated and committed team development for high performance organization

c.

Marketing Strategy:

Strategic thinking is key to the evolution of successful marketing strategies of JK tyre. This involves the following analyses: 1. Understanding markets: Strategic perspective of the market requires skilful analysis of the trend and how they affect the market size and demand for the firms product. 2. Finding market niches: Price, service, convenience and technology are some of the niches in Indian market. 3. Product and service planning: Analysis of the customers promotion of the brand, both of the firm and competitors, besides an analysis of the situation in which the customer uses the product. 4. Distribution: Structural changes in inventory management, mobile Distribution is some of the key factors that are going to affect the distribution process in the Indian market. 5 .Managing for result: With pressure on costs, prices, and margins, marketers will have to make effective utilization of every rupee spent in marketing.

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Market opportunity of JK:

Identification of market opportunity is critical before the management of affirm takes a decision to launch or diversify in any product area. This involves analysis of the following: Size of the market Marketing strategies and the extent and quality of services rendered by other firm in industry. Market programmed required to satisfy market wants Identification of key success factors in an industry and linking them to a firms strengths and weakness

the

Market opportunity:

a. Size of the market b. How well the market is served c. Prospective inches d. Marketing mix required to succeed. e. Core competencies required

Size of the market:

Sizes of the market are.... I. Demand analysis: is the core aspect of market opportunity.

II. Segmentation analysis: is the process of dividing the market into homogeneous subunits. III. Industry analysis:

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Marketing mix:
A Marketing mix is the division of groups to make a particular product, by pricing, product, branding, place, and quality. Although some marketers [who?] have added other P's, such as personnel and packaging, the fundamentals of marketing typically identify the four P's of the marketing mix as referring to: 1. Product 2. Price 3. Promotion 4. Place

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Product :
A tangible object or an intangible service that is mass product or manufactured on a large scale with a specific volume of units. Intangible products are often service based like the tourism industry & the hotel industry. Typical examples of a mass produced tangible object are that. A less obvious but ubiquitous mass produced service is a computer operating system

Price :
The price is the amount a customer pays for the product. It is determined by a number of factors including market share, competition, material costs, product identity and the customer's perceived value of the product. The business may increase or decrease the price of product if other stores have the same product.

Place:
Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual stores on the Internet.

Promotion :
Promotion represents all of the communications that a marketer may use in the marketplace. Promotion has four distinct elements - advertising, public relations, word of mouth and point of
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Sale. A certain amount of crossover occurs when promotion uses the four principal elements together, which is common in film promotion. Advertising covers any communication that is paid for, from television and cinema commercials, radio and Internet adverts through print media and billboards. One of the most notable means of promotion today is the Promotional Product, as in useful items distributed to targeted audiences with no obligation attached. This category has Grown each year for the past decade while most other forms have suffered. It is the only form of advertising that targets all five senses and has the recipient thanking the giver. Public relations are where the communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Word of mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum. Sales staff often plays an important role in word of mouth and Public Relations. Broadly defined, optimizing the marketing mix is the primary responsibility of marketing. By offering the product with the right combination of the four Ps marketers can improve their results and marketing effectiveness. Making small changes in the marketing mix is typically considered to be a tactical change. Making large changes in Any of the four Ps can be considered strategic. For example, a large change in the price, say from $19.00 to $39.00 would be considered a strategic change in the position of the product. However a change of $131 to $130.99 would be considered a tactical change, potentially related to a promotional offer. The term "Marketing Mix" however, does not imply that the 4P elements represent options. They are not trade-offs but are fundamental marketing issues that always need to be addressed. They are the fundamental actions that marketing requires whether determined explicitly or by default.

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d. SWOT Analysis:
STRENGTHS
Very large distribution channel Reasonable price

Effective employee in JK Economies of scale due to optimum capacity utilization Collaboration with Vikrant, know for their technological superiority bringing together performance, economy, durability and comfort. Strong financial positions

WEAKNESSES
Less Brand Awareness Less concern about small car segment

OPPORTUNITIES A burgeoning work force and growing middle class population

High growth potential for its exports as demand for JK tyre in Europe Increasing.

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Indian customers are mainly value buyers demanding a better overall package. JK is poised in a better position than other players in the market to capitalize on this opportunity

Entry of new players with newer and better technologies in the small car tyre segment So many close competitors like Apollo, Birla, Ceat, Moody, Kaizen etc

threats
E

Objectives of the study

To find out market share of JK Tyres. To understand the marketing strategy of JK Tyres.

To focus on the Marketing mix of jk tyre To evaluate the limitations of JK tyre. To analyze the customers needs regarding the product a policies formulated by the company. To find out the brand image of JK tyre

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Need for the study

Management is like a coin having two sides. One is the theoretical part and second is the practical part. In the theoretical part of management we learn in our classroom from the lectures, seminars, group discussions that are arranged from time to time. To know the practical aspect of management a practical training is provided to the students. The main idea behind practical training is to bring the management students face to face with the actual environment of practical management so that he/ she will be able to apply theory to practical situation before finally moving into the professional world to show the efficiency and capability. The project study focused on JK tyre as a product and the subject is to understand the mind set of different customers about the product. Being a student of marketing management, the inquisitiveness to peep on practical side of consumer perception promoted in study. In this study efforts have been made to prepare the report as realistic as possible.

Limitation of the study

The project surfers from the following limitations due to the inherent and restrictive nature of the study undertaken Due to constraints of time, money and other resources applicable to this study. This study is confined to only a few specified areas of and is not comprehensive study of the customers of JK tyre all over Kolkata and North 24 Pgs. This study is restricted only to sample space chosen for the study.
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 The areas covered under the surveys are: Dunlop, Agarpara, Chiriamore, Panihati, Titagarh, Khardah,

Research Methodology of the study:

SAMPLE SIZE: 500 trucks

METHOD OF COLLECTION: MARKET SURVEY DATA TYPE:

For the above study both type of data were used such as primary data and secondary data. For primary data different areas of Kolkata were being visited and for the secondary data internet & reference books have been used. Collecting data from market through Fitment survey of Trucks on road. Working on the data. Graphical representation of results. Analyzing the graph and driving further enquiries

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EXECUTIVE SUMMARY:

Planning is the critical first step in any organizations bid to Deliver high levels of customer service, while making the most Efficient use of capital assets. SAP Supply Chain Management is a Solution that enables the numerous, interlocking business processes involved in planning, as well as in coordination, collaboration, and execution.SAP Advanced Planning and Optimization is the planning component that, together with SAP Event Management and SAP Inventory Collaboration Hub makes up the SAP SCM solution. With SAP APO, supply network management has evolved new levels of sophistication and accuracy. SAP APO demand and supply network planning capabilities provide an enhanced vision of your network. This new sight allows stakeholders to share a single, focused demand plan. It also enables optimum planning for production, warehousing, and transportation.SAP APO is the application component of SAP SCM that helps you solve the seeming dilemma of improving customer service while lowering costs, yet increasing profits at the same time.

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OVERVIEW Supply Chain Planning

SAP APO is a robust tool designed to enable your organization to achieve the self-contradictory goal of improving customer service while reducing costs. By enabling visibility for and access to all stakeholders involved in generating a single, organization wide demand plan, the demand planning capability of SAP APO projects the needs of your organizations customers. Those needs, combined with the capacities of your organizations capital assets and existing inventories, are then used as inputs for supply network planning, which converts them into a feasible plan for production, warehousing, and transportation. This plan accurately balances material, labor, and equipment constraints with the anticipated customer demand. Together, demand planning and supply network planning can support your organizations entire sales and operations planning process. The detailed, tactical decision support capabilities, which help turn the plan into reality, are also handled by components of SAP APO, such as production planning and detailed scheduling. It insures each of the production assets is loaded to achieve maximum efficiency for the production line and facility. Thebess use of fleet assets is determined through transportation planning and vehicle scheduling. Finally, global available-to promise (GATP) allows your company to get products to your Customers as soon as possible, helping you meet customer demand that exceeds current inventory position.

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key issues supply chain planning:

Definition of a set o policies that govern short term operations. Fixed by the supply configuration fro previous phase. Start with a forecast of demand in the coming year.

Supply chain planning in JK tire:

J.K. Tyres & Industries, a part of the J.K. organization, has been the leading automobile tire manufacturer in India since 1977. With over 8.7 million tires sold per annum, understandably, the company operates in a huge distribution network with a large number of SKUs (stockkeeping units). A lack of co-ordination between heterogeneous systems across head offices, its 4 plants and sales offices was causing information delays and discrepancies in sales and operation planning, demand visibility, forecast, collaboration and inventory management. "We needed to make the business agile by making the right information available to the right person at the right time," . To optimize its supply chain function and bring in operational efficiency, the company deployed 16 conventional and new dimension ERP modules. These modules translated into a statistical demand forecasting system that gave rise to an accurate production plan. Today, finished goods, created on the basis of the production plan, from all the plants are sent to the SKUs. Based on the demand, stock is transferred from SKUs to the respective depots. The system creates transportation orders from plants to the SKUs and from the SKUs to the depots. The project encompassed complex planning processes that included change management and standardization of processes across plants. "The principle focus was to align supply chain objectives with business objectives,

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Supply Chain Execution:

From the moment a shipment to a customer leaves JK tyre organization s shipping docks, transactional data is being gathered through the use of enterprise requirements planning solutions, such as my SAP ERP. This information, whether it is about inventories, open customer orders, new product specifications, existing production schedules, or numerous other details, is fed into SAP APO to support ongoing planning. The combination of Saps real-time Core Interface Functionality (CIF) and lives Cache planning model allows for continuous planning updates of this transactional and master data throughout the day.

Supply Chain Coordination

External information, such as the status of a purchase order in suppliers manufacturing process or the expected delivery of key inbound shipment of raw materials, is also being continuously imported into the system. Using tools like SAP Event Management, updates to plans can be triggered by key events, Such as a suppliers production lot passing final quality inspection. While event management tools monitor critical pieces of the supply chain puzzle, other tools, such as SAP Inventory Collaboration Hub, gather inventory data across the entire supplier base. Looking forward in the supply chain, demand and inventory from a customer or even a customers customer, is brought into the mix

Supply-chain coordination relies on the availability of prompt and accurate information that is visible to all actors in the supply chain. However, new demands on the supply-chain system require changes to information flow and exchange. We undertake a case study of three automotive supply chains that face such new demands resulting from the introduction of an order-driven supply-chain strategy. We use our case study findings to evaluate the applicability of three different theoretical lenses on the multi-faceted interactions between information, physical flow, and the complex rationales driving supply-chain evolution: the resource-based view (RBV), the concept of complex adaptive systems (CAS), and adaptive structuration theory (AST). We find that each theory has a separate realm of applicability and while complimentary in nature, provides distinct insight on the structural shift in the supply-chain system. More specifically, we find that AST, a theory prominent in the social sciences, provides novel insights
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to supply-chain research at the firm level, particularly with respect to the difficulties in using IT systems to drive systemic change. It complements both the system-level perspective offered by the complex adaptive systems theory, as well as the concept of dynamic capabilities originating in the resourced-based view. The paper concludes with wider implications for future research in supply and value chain management.

Supply Chain Collaboration

With such a clear and precise picture of the state of the entire supply chain at your disposal, it is possible to move from what is to what might be for both suppliers and customers. Using outof-the-box Web collaboration capabilities, SAP APO enables organizations to share demand and promotional plans in real-time with customers, any of whom may view, comment on, or Even edit the plan. SAP APO supports intercompany collaborative Processes, such as vendor-managed inventory (VMI) and The Voluntary Inter-industry Commerce Standards Collaborative Planning, Forecasting, and Replenishment process (VICS CPFR), And it has been certified by the Uniform Code Council as being Interoperable with other vendors

Supply Chain Collaboration in JK Tyre

Complete planning process of JK Tyre was completely manual which led to delays in getting relevant information like demand forecast on time, lot of effort in compiling data which led to less time for planning. This also resulted a disconnect between sales and operation planning, demand visibility, forecast collaboration and inventory management. To streamline and automate planning process of company with huge distribution network of over four plants and over 150 sales offices, different SAP modules were implemented. SAP Statistical Demand forecasting system was implemented with an option of moderation by the respective Area Manager, Sales Manager, GM (MKTG) and logistics personnels. Demand Forecast is translated in to constrained base production plan (Supply Network Planning). SNP runs for Tyre, Tube and Flaps are done to get optimized production plan based on all the available resources, routing, cost aspects, transportation lanes and other master information. Production plan is converted into finished goods distribution plan from all plants to Feeder Go down (FG) and than in turn to sales office. Based on the demand, stock transfers from FG to respective depots covered by FGs get generated. Truck loads are built by system to optimize the
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Distribution cost. System creates transportation orders from plants to FG and from FG to depots. SAP production planning and detailed scheduling (PPDS) is being done. This first of its kind implementation in tyre industry in India is expected to give returns of about 1 Cores annually with total cost of implementation 18 Cores. In future Shop floor scheduling feature would also be implemented.

Continuous Cycle in JK Tyre

As SAP APO assists JK organizations strategy to be continuously refined in the process of coordination, planning, and collaboration, it also enables near-term plans to be committed to execution, all in real time. Products scheduled for production are produced, packaged, and placed on a truck to turn customers order into a shipment. That real-time information is then, of course, fed back into the overall plan.

Advanced planning optimization

The focus of SAP APO is on improved usability, performance, and integration. These improvements better enable the advanced planning capabilities and processes of your organization, as wells many other organizations across a wide spectrum of industries. The demand plans and supply network planning solutions made possible by SAP APO support and enable the generation of an organizational demand plan and the subsequent creation of production, warehousing, and transportation plans across your organizations supply network.

Advanced Planner and Optimizer (APO) is a set of software applications from the German-based company SAP for Supply Chain Management Advanced Planner and Optimizer is designed to help a company improve production planning, pricing, scheduling, and product shipping. APO works by getting real-time updates from retailers about customer demand. The updates are used to create APO "demand triggers" that take into account many complex variables, such as the delivery schedule of raw materials and productions cycles, to forecast the right amount of product mix the company will need to meet future customer demands. APO can be integrated with the SAP and Legacy enterprise resource planning (ERP) systems.

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APO consists of eight application levels: network design, demand planning, supply network planning, production planning detailed scheduling, global availability, transportation planning vehicle scheduling

1. Demand

Planning

APO Demand Planning is a set of functionalities around Demand Management, Statistical Forecasting, Promotion and Life-cycle Planning processes. It is an integral part of any organizations Sales & Operations Planning Process. Demand Planning can primarily be divided in two areas - Data Mart and Demand Management Functionalities. The Data Mart portion of APO DP is basically the SAP BW component with all BW related transactions and objects available.

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Work Flow Demand Planning 1

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41

Work Flow Demand Planning 2

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Expansion plans of JK tyre

JK Tyre & Industries Ltd. reported earnings results for the fourth quarter and year ended March 31, 2010. The company reported a net profit of INR 255 million ($5.4 million) for the quarter ended March 31, as against INR 140 million in the same period a year ago, up 82%. The company total sales during the quarter stood at INR 11,300 million against INR 9,260 million in the corresponding year-ago period, up 22%. For the fiscal year 2009-10, the consolidated profit after tax stood at INR 2,238.1 million, and sales and other operating income at INR 45,846.8 million. This was a year full of challenges and achievements. Apart from achieving all time high sales, the company recorded excellent profitability for 2009-10 on account of all round improvement in operating efficiencies, higher productivity cost reduction and richer product mix. The company announced the company's ongoing expansion of 'off the road tyre' and car radial tyres are progressing as per schedule. Truck and bus radial tyre capacity is being further expanded from 0.8 million tyres to 1.2 million tyres per annum. In addition, car radial tyre capacity is being further expanded by 2.5 million tyres per annum.

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Historical data of JK tyre

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Maintain planning book

JK Tyre & Industries (JK Tyre) reported 23% joy growth in net sales to Rs1, 051cr (Rs854cr), which was below our expectations. This was largely because of lower-than-expected performance at the operating front due to a substantial increase in raw material cost. The company reported an OPM of 7.8% on account of the qoq increase in raw material cost. Net profit at Rs26.7cr (Rs13.6cr) came in below our expectations. Management is optimistic about generating good volumes in FY2010 on the back of strong demand, capacity expansion across segments and the Tonal acquisition. The stock is currently available at attractive valuations of 4.2x and 3.7x FY2011E and FY2012E EPS, respectively. We maintain Buy on the stock. FY2010 Financial Performance: JK Tyre reported net sales of Rs 3,678cr on a standalone basis for FY2010 and Rs4, 571cr on a consolidated basis. Net profit came in at Rs163cr on a standalone and at Rs224cr on a consolidated basis. The numbers are not comparable with the previous fiscal as previous fiscal numbers are for eighteen months. The tonnage stood at 56,700MT for 4QFY2010 and 2, 40,000MT for FY2010. Outlook and Valuation: In FY2010, the tyre industry benefited largely from the increased original equipment manufacturer (OEM) demand and spike in replacement demand. Going ahead, we are positive on the sector as OEM off-take is expected to improve, benefitting the overall auto industrys volume growth. However, the recent run-up in raw-material prices is a concern and expected to exert some pressure on the companys operating margin. On account of the lower-than-expected 4QFY2010 performance, we estimate the company to generate EPS of Rs43.2 (Rs45.5) in FY2011E and Rs48.4 (Rs53.5) in FY2012E. We maintain Buy on JK Tyre with a revised Target Price of Rs242 (Rs267), at which the stock would trade at 5x, 3.3x and 0.8x FY2012E EPS, EV/EBITDA and P/BV, respectively.

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Capacity expansion plans

Currently, JK Tyre is running at almost full capacity and is partially unable to meet increasing OEM demand. Therefore, the company has major expansion plans on the anvil across segments, with most of the capacities coming on board from 2011E2012E. The companys total capacity post the expansions is slated at 12.6mn tyres annually. The company incurred a capex of Rs315cr for FY2010 and has lined up a capex of Rs750cr for FY2011E. The company has overall capital expenditure plans of Rs930cr in the next two years, out of which Rs776cr is for a Greenfield facility at Chennai, which could be operational by 2012. This facility will produce 25 lakh passenger car radials, 2 lakh bus radials and 2 lakh truck radials. The remaining capex will be used for expanding the facility at the Mysore plant from 8 lakh to 10 lakh radials at a cost of Rs154 cr. The expansion is expected to be completed by March 2011. Consequently, the companys domestic capacity will reach 1.25cr tyres a year in 2012. JK Tyre is currently expanding its off-road tyre (ultra large-size tyre) capacity by 3,000 tyres a year to 42,000 tyres per year, primarily for Bharat Earth Movers (BEML), at a cost of Rs120cr. The company has, in fact, delivered the first batch of its ultra large-size tyres to BEML ahead of schedule. JK Tyre has completed its truck and bus radial (T&BR) capacity expansion plan, with an investment of Rs315cr, and will have increased capacity from 307,000 tyres to 800,000 tyres per year by October 2010. This capacity has been running at almost 100% capacity utilization in November and December 2009. Therefore, management plans to increase its radial capacity by another 4 lakh tyres to 12 lakh tyres per year over the next three years.

Outlook and Valuation

In FY2010, the tyre industry benefited largely from the substantial increase in OEM demand and spike in replacement demand. Going ahead, we are positive on the sector as OEM off-take is expected to improve, benefitting the overall auto industrys volume growth. However, the recent run-up in raw-material prices is a concern and expected to exert some pressure on the companys

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operating margin. On account of the lower-than-expected 4QFY2010 performance, we estimate the company to register EPS of Rs43.2 (Rs45.5) in FY2011E and Rs48.4 (Rs53.5) in FY2012E.

Statistical forecasting planning in JK tyre

Forecasting is the process of making statements about events whose actual outcomes (typically) have not yet been observed. A commonplace example might be estimation of the expected value for some variable of interest at some specified future date. Prediction is a similar, but more general term. Both might refer to formal statistical methods employing time series crosssectional or longitudinal data, or alternatively to less formal judgmental methods. Usage can differ between areas of application: for example in hydrology the terms "forecast" and "forecasting" are sometimes reserved for estimates of values at certain specific future times, while the term "prediction" is used for more general estimates, such as the number of times floods will occur over a long period. Risk and uncertainty are central to forecasting and prediction; it is generally considered good practice to indicate the degree of uncertainty attaching to forecasts. The process of climate change and increasing energy prices has led to the usage of Again Forecasting of buildings. The method uses Forecasting to reduce the energy needed to heat the building, thus reducing the emission of greenhouse gases. Forecasting is used in the practice of Customer Demand Planning in every day business forecasting for manufacturing companies. The discipline of demand planning, also sometimes referred to as supply chain forecasting, embraces both statistical forecasting and a consensus process. An important, albeit

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often ignored aspect of forecasting, is the relationship it holds with planning. Forecasting can be described as predicting what the future will look like, whereas planning predicts what the future should look like. There is no single right forecasting method to use. Selection of a method should be based on your objectives and your conditions (data etc.). A good place to find a method is by visiting a selection tree. An example of a selection tress can be found here Seasonal Effects in JK tyre

Climatic and whether conditions in our country vary widely from region to region. Dry and extremely hot during summer, extreme cold during winter and rains during monsoon. This variation in climatic conditions influence tyre life in terms of mileage and structural durability

APO MASTER DATA

Master data is used by all components of SAP APO. The data can either be created directly in APO or can be transferred from an OLTP System. Master data, which may include reference data, is information that is key to the operation of business and is the primary focus of the Information Technology (IT) discipline of Master Data Management

Use You can transfer the following master data objects via the interface to the SAP Advanced Planner and Optimizer (SAP APO).

Material master Plant Customer Vendor Production process model (BOM and routing/recipe) Work center

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Integration 1. In the SAP System, define in an integration model which master data objects are to be copied to SAP APO. we can transfer the following master data:

Plants Material masters Customer masters Vendor masters Production process models (BOM and routing/recipe) Work Centers Execute the transfer of the master data to the SAP APO system. The master data transferred is created in SAP APO. The work centers transferred are created as resources in SAP APO.

2. Check the master data that has been transferred to SAP APO. 3. Maintain the transferred SAP material master data in the SAP APO product master.

We must complete the following data in the product master:

In the PP/DS screen, define whether the system should work with automatic or manual planning. In the PP/DS screen, define whether the SAP APO production process model or the BOM in SAP is to be exploded. If you have not copied the routing and work centers from the SAP System, create a production process model for products produced in-house. If you use the SAP BOM to explode the PPM, you only need to maintain the operations in the production process model.

5. In the Integration model, define which orders (planned, production, purchase etc.) and stocks you wish to transfer to SAP APO, and execute the data transfer.

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When transferring SAP data to production process models, you must use the integration model to define whether data from PP/PI or Service Management (PM/SM) is required. Furthermore, when transferring repetitive manufacturing routings from SAP to SAP APO production process models, it is possible to define whether the routings are at rate level or at detailed scheduling level. The planned orders from SAP that are intended for in-house production are scheduled in SAP APO according to the settings that you maintained in the strategy profile for SAP integration.

Types of masters:
Product Master Location Master Resource Master Hierarchy

Product Master in JK tyre

We are currently using the alternative product numbers in SCM, instead of entering them directly into SCM we have created an additional table in ERP where we store them and CIF them to the product master in SCM. As ERP is now are master for alternative product numbers and NOT SCM. I am wondering if we can make these fields "display" only, but I see no place in customizing where I can do this. We can define new attributes for location, product or even location product master (tables /SAPAPO/LOC, /SAPAPO/MATKEY and /SAPAPO/MATLOC). See in customizing option: APO --> Master data --> Maintain freely-definable attributes,

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Once you created a new attribute for a product location for example, the extra field will appear in a new folder named "extra". It will be usable for display or even in queries; advanced macros and so on... we can use the extra fields/attributes in Product Master to set up alternative Product numbers. One would have to check with Security folks on how you can make that extra field non-editable for roles/authorizations. I am sure there are levers around Product Master Authorization object to set this up. CIF user exit can populate the extra attribute field of Product Master.

Location Master in JK Tyre

A location is a fixed point on the supply chain where goods are handled (warehouses, plants, supply sources, markets). A location in Traders and Schedulers Workbench (TSW) represents a point on the supply chain where loading or discharge events take place and where business partners or stock holding objects exist. TSW locations in master data records for business locations. By creating business location master data, we can represent a physical location at which JK tyre has a particular business interest, such as a customer, vendor, terminal, tank farm or berth. TSW-specific location data is integrated with the Business Location transaction from the Marketing Retail Network (MRN) component. As a result, we can maintain data specific to TSW, such as characteristics for tank farms or berths. When you save the business location, the system creates a TSW location in the background. Use Transport System Assignments we can assign locations to transport systems as origin locations, destinations, or both. we can assign one location to multiple transport systems. We assign locations to transport systems in the master data record of a transport system. In the location master data record we can view the transport systems to which a location is assigned. To do this, choose the Transport Systems tab in the Change Business Location screen.

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Partner Role Assignments We can also assign partner roles to locations. We can assign partner roles to locations directly from the master data record for a location. To assign a partner, in the Create/Change Business Location screen select the Partner roles tab and choose Create new partner role in the toolbar of the tab. The system takes you to the partner role master data where we can enter the required data. We can also create the partner role Inspector from the TSW General tab by choosing Create Partner. We can view detailed information about the partners assigned to a location by selecting the Partner roles tab in the Change Business Location screen and choosing Details. Material Assignments We assign materials to locations in the location master data record. The system uses the material assignments during TSW processes such as, Location Balancing and Three-Way Pegging as well as when generating the Stock Projection Worksheet for a material-location combination. To assign materials to a location, we first create a partner role that defines as a plant or storage location, and you assign a location to this partner role. The material that we assign to the location must be one that has already been assigned to the plant or storage location.

If we assign the partner roles customer or vendor to a location (not storage location or plant partner roles), we do not need to assign a material to the location. In a nomination using that location we can assign any material to that location. However, the material assigned in the nomination must be valid for the corresponding transport system. Location-Material Planning Details In the location master data record we maintain all details about the material that are relevant for the generating the Stock Projection Worksheet and for Planning. These details can include, Unit of Measure, cycle duration, and calendars. The supply source data determines the position of the location in the supply chain. To maintain material details, select the Materials tab in the Change Business Location screen. Select the material line and choose Detail. In the Change TSW Location: Material Assignment

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Details screen, enter the required data, such as data relevant to stock projection, planning, inventory, or rack issues. If we intend to use a planning calendar, it is recommended that you define the planning calendar in Customizing before entering location-material details. Structure Location ID The location ID uniquely identifies a location. Location Type We define business location types in Customizing to determine the basic operational parameters of a location. Examples of location types include, pipeline terminals, refineries, tank farms, and marine terminals. In Customizing for a business location type we determine whether the location type is used as a planning location, refinery, and origin or destination location. Single or multiple selections are allowed and are defaulted in the master data record of a location.we define location types in Customizing for Industry Solution Oil & Gas (Downstream)) by choosing TSW (Trader's and Scheduler's Workbench). Location Name The location name is mandatory and is used to describe a location in more detail. Planning Location A planning location represents a group of specific locations and can thus be used to represent a general area. The same planning location can be assigned to multiple real locations in the master data record of each location. Planning locations are defined in location master data records just as actual locations are, but require a location type that has the Planning loc. flag selected in Customizing. A planning location can be used as a placeholder in a nomination to represent a general area, until a specific location is known. We cannot confirm a nomination until a planning location has been replaced with an actual location.

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A scheduler plans a goods movement, but is not sure to which specific location the goods will be moved. The scheduler only knows the general area and enters a planning location in the nomination to cover that general area. The nomination is sent to the carrier who creates a draft schedule using the area defined by the planning location. As soon as the actual location for the goods movement is known, the scheduler replaces the planning location with the specific location and sends the updated nomination to the carrier to be confirmed. Connection Point A connection point is a point at which the leg of a route begins or ends. A connection point can be relevant for shipment cost calculations, such as in the case of a connection point where product is discharged from a pipeline. We can enter a connection point in the location master data record or choose F4 to select from a list of connection points. Connection points are defined in Customizing Industry Solution Oil & Gas (Downstream) by choosing TSW (Trader's and Scheduler's Workbench) A connection point that you enter in a location master data record is not linked to the Shipment Costing component

Resource Master Data:

The Resource Master provides an easy, comprehensive and flexible resource management system that can administrate any number of different resource types at an unlimited number of locations. Web Labs' extensive experience in constructing customized resource management software mean that you can be certain your system will respond efficiently and reliably to all of your resource management needs.

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Save staff time booking resources Use resources more effectively Avoid costly training with our intuitive browser-based interface Exclude the potential for double booking or hidden dependency errors Easy to use visual interface Plug-ins available for room bookings, courses or as a stand-alone Out-of-Hours GP booking application Access accurate resource cost and usage data Easily integrate with email, alerts or other system

Resource Master the features:

In partnership with Web Lab's expert support and personalized programming, Resource Masters comprehensive range of features allow you to construct a resource management system that fulfils your needs precisely:

Manage multiple types of resource Automate recurring bookings Avoid double bookings - ensure bookings can only occur when available Restrict resource availability by location and time Assign individuals responsibility for specific resources Link resource booking to dependency availability make sure bookings can only occur if the necessary staff, location or authorization are also available Utilize resource reservation application for overtime or holiday slots allow provisional bookings that clear if not confirmed within a predetermined time window Automatically allocate resource use cost to the individual or department

Security settings allow you to control access to different levels of the system

Above and Beyond Resource Management

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Resource Master is also equipped with additional features to integrate your management system seamlessly into your organization:

Printable daily, weekly and monthly booking schedules Integration with email and SMS text messaging to remind users of their bookings and notify of upcoming availability Usage reports showing how frequently resources are utilized and their true cost

2. supply network planning,

A module in the Advanced Planner and Optimizer (APO) that enables organizations to determine sourcing, production plans, distribution plans, and purchasing plans. The system draws on the data universally available in live Cache to optimize such plans based on optimization algorithms and heuristic approaches that enable the planner to define rules and inventory policies. As an integral part of the overall supply network planning solution, APO's Deployment solution enables planners to dynamically rebalance and optimize the distribution network at execution time. The Deployment function in SNP determines optimized inbound and outbound distribution of available supply in response to short-term demand, including customer orders, stock transport requirements, and safety stock requirements. Deployment logic considers a wide variety of shortterm constraints, including transportation, warehouse handling capacity and calendars. The primary purpose of the Transport Load Builder (TLB) is to use the single product transport recommendations calculated by Deployment to create multi-product loads while ensuring vehicles are filled to maximum capacity.

Supply network planning in jk tyre:

The Accounting year of the Company was extended by six months and has ended on 31st March, 2009. The review therefore, comprises of 18 months period from October 1, 2007 to 31st March, 2009.

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The period' under review began on a very promising note with GDP growing at about 9% p.a. and industrial production recording much higher growth, The Quarter of July - Sept 2008 was a watershed period for the Tyre Industry in India. During this quarter, the prices of raw material went up by as much as 28%. Since the tyre prices could not be raised commensurately, the Tyre Industry in India, and globally, incurred losses. JK Tyre was no exception, From Oct 2008 onwards, certain global events overtook the economic scenario; It started as a sub-prime banking crisis with the collapse of some banks & housing finance companies in USA and soon turned into a full blown unprecedented global economic crisis. This led to a sharp fall in industrial production and low GDP growth. Indian economy being well integrated with global economy could not escape the impact of this crisis. The Automotive sector is largely linked to the financial sector with most of the automotive buying dependent on the bank loans. On account of global financial crunch, the impact of economic slowdown was rather severe on automobile industry. This resulted in reduced demand for tyres more particularly for the commercial segment. OEMs in India resorted to huge production cuts leading to reduced off take of tyres. The commercial vehicle segment was particularly impacted during the slowdown and there was a 33% drop in vehicle sales in 08-09 over 07-08. The car segment also witnessed stagnation and pile up of inventories at dealer showrooms. Excise cuts and the impact of the stimuli have enabled some recovery in this sector. Improvement in the genera! Economic activities as also the sentiments, is expected to lead to revival in the automotive sector in the fiscal year 2009-2010. The financial sector around the globe started showing signs of recovery with significantly large liquidity being inducted through stimulus packages initiated by various governments. This had a positive impact on the demand for automotive sector and in turn for the Tyre Industry. While the truck segment could take some time to recover, the bus segment is expected to receive a major boost with public transport being a major focus under the Jawaharlal Lai Nehru Urban Renewal Mission of the Govt, of India.

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As mentioned, the industry was severely affected by steep increase in input costs and reduction in demand in the later half, which impacted margins. Subsequently softening of raw material prices as well as stimulus packages announced by the Government, including reduction in Excise Duties, has provided some relief in the last quarter of the period.

JK TYRE THE LEADING FOUR WHEELER MANUFACTURER

Jk tyre continues to maintain leadership in Tyre Industry in India. During the period, your Company acquired 100% equity in Tonal, a well known Tyre Company in Mexico with 3 plants, with an aggregate capacity to manufacture 6.6 million tyres per annum, with the acquisition of Tornel; JK Tyre has further strengthened its standing in India's four wheeler tyre manufacturers with combined turnover exceeding US $ 1 billion. This has further enlarged JK Tyre's global footprint and its position in the international ranking.

COMMERCIAL TYRE SEGMENT

Commercial tyres are major contributors - almost 80% of revenue for tyre industry. The Company continues to be a dominant player in Truck, Bus and LCV tyre segments. In the Truck tyre market, JK Tyre registered a marginal growth against the degrowth in the industry in the last 18 months. In LCV Radials, our growth rate in the replacement market has been higher than that of the industry. Jk tyre major focus has been on introduction of Hi-mileage and fuel efficient products, across the various product lines.

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Truck/Bus Tyres In the truck segment, the product range was enhanced by the introduction of 'Jet R Miles' - a premium rib tyre. 'Jet one' and 'Jet Extra', the premium lug tyres continue to enjoy high consumer confidence. A unique nationwide consumer program 'Truck Dina Dhin' was conducted with an exhaustive program of 500 Area Wise draws, 39 Regional Meets with the National draw held in Delhi which was telecast live in major locations. The first prize was a truck chassis. This endeavor enhanced the JK Tyre Brand image (presence) amongst the consumers. Truck Radial JK Tyre continues to lead the Commercial Radial revolution and is truly the 'Bad shah of Radials' in the Indian market. The radial truck tyre 1000-R-20 Jet Steel enjoys the premium status in this segment. To pursue customer connect programs, the first ever National Fleet Conference was held. Participation in Bus World '09, CRM programmers - 'Radial Bad shah' (Customers) and 'Radial Stars' (Dealers), as well as Plant visits were conducted and, Customer Interaction programs, Driver Training and Repair & Retread programs were successfully implemented. Jk tyre has recently completed the expansion for more than doubling the Truck Radial capacity to 8 Lac tyres per annum to meet the growing demand for JK Tyre's truck radials in the market. Jk tyre will have the benefit of enhanced capacity in the year ahead.

Light Commercial Vehicle Extensive consumer contact programs were conducted with focus on LCV fraternity, with health check up, festival celebrations, and special initiatives by attractive consumer offerings. In the Sub - 1 Ton segment, 'Jumbo Ace' has gained wide acceptance. Company has registered a much higher growth than the industry in this category.

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Jk tyre continues to enjoy leadership position in the LCV Radial segment, and have augmented capacity to meet the emerging market needs. Further new LCV Radial products are being introduced in the coming months.

Car Radials The aggressive marketing of Passenger Car radials, even in stiff competition from global and Indian tyre manufacturers, JK tyre was able to grow faster than the industry. During the period under review, JK tyre launched many technologically advanced products e.g. "Ultimo NXT', a premium tubeless tyre, ultimate in comfort and mileage with unique split wing design for superior traction, for the select segment of cars. Similarly, 'Alonzo Curser' a high performing tyre was also introduced in the growing MUV category. JK Tyre continues to be a preferred supplier to leading Indian automotive majors . The new "Maruti A Star" is yet another success story which rides exclusively on JK Tyre premium car radial "Vectra". JK Tyre is proud to be associated with the eagerly awaited forthcoming revolution in Automotive Industry - "the TATA NANO". It is a matter of pride that JK Tyre has yet again been ranked No. 1 in the "JD Power Tyre Customer Satisfaction Index - 2009" and has once again been recognized as "SUPERBRAND", the only tyre Company to have received this coveted recognition. To enhance customer base and to provide superior service and wider reach to valued customers, 15 new Steel Wheels were added apart from revamping 40 existing outlets. . OFF THE ROAD TYRE (OTR) Large investment in infrastructure and road construction network has fuelled demand for OTR tyres. To meet this growing demand, JK tyre has been increasing its OTR capacity and has emerged as the largest manufacturer of OTR tyres in India.

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In order to further strengthen its commanding position, the JK tyre has undertaken the expansion of its OTR capacity at an estimated cost of Rs.120 Cores, which is expected to be completed by early 2010. Jk tyre has also finalized long term supply arrangement with BEML Ltd, our prime OEM customer for these tyres. As a first phase of commitment to BEML, the Company has delivered the first batch of ultra large size OTR tyres, ahead of the agreed schedule. GLOBAL PRESENCE During the period, the Company achieved export sales (FOB) of Rs. 746 Crores despite turbulent market conditions in overseas markets caused by global economic downturn. Consistent supply of world class quality tyres, coupled with strong emphasis on "JK Tyre" and "Vikrant" brands, has enabled leadership position in markets of 80 countries across 6 continents for the Company's products. It is yet recognition of Company's world class quality tyres that "JK Tyre" is not only considered as one of the most preferred brands but also enjoys premium pricing in various markets. Outsourcing continues to be an important growth initiative with addition of new products in different categories from various countries.

R&D AND TECHNOLOGY Visionary leadership of JK tyre allows its people the opportunity to execute innovation effectively. This approach has helped in maintaining Technology leadership in tyre industry. Several world class models of cars were launched on JK Radial Tyre - a testimony of Company's leadership in technology. Technology leadership has also enabled JK Tyre to maintain leading position in highly competitive and technologically challenging Truck/Bus Radial category in the face of tough competition posed by the world leaders in Indian market.

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Hari Shankar Singhania Eastover & Tyre Research Institute (HASETRI), along with "Centre of Excellence" at IIT Madras and JK Tyre's "TECH CENTER" at Faridabad continues to drive the technology development of Company. Research and new initiatives in advanced areas like rubber chemistry and physics, nano technology, predictive technology, validation and testing are the strong pillars of Research &Technology of JK tyre. HASETRI is involved in multi disciplinary and collaborative research work with premier academic institutions as well as specialty research organizations both in India as well as abroad thus offering superior products to our valued customers. "Centre of Excellence for Tyre & Vehicle Mechanics" at 11X Madras is an excellent example of deriving best benefits through "Academia Industry collaboration". Through state-of-the-art computational facility, this centre is helping to retain jk tyre technology leadership. As a part of its efforts to continuously upgrade its facilities, HASETRI procured high end evaluation machines. The Flat Track Machine to evaluate various dynamic parameters is first of its kind in Asia. With "Commitment to Excellence" as the Mantra of Jk tyre, Quality journey initiatives continue. Besides maintaining ISO/TS-16949 Quality Management System for Automotive Industry & ISO-14001 Environment Management System, several new initiative like Total Productive Maintenance (TPM), OHSAS-18001, Sustainability, Corporate Responsibility are few tools to pursue innovative environment in the Company. SAP IMPLEMENTATION JK Tyre has gone live on SAP (state of the art Enterprise Resource Planning System) as a part of its vision to adopt the latest manufacturing and business practices. Your Company has implemented innovative processes that meet the changing demands of its valued customers. SAP implementation covers the entire network consisting of Administrative Office, all Manufacturing Plants, Regional Offices, Area Offices and C & F Agents. SAP's integrated information system with end-to-end standardized business processes is now enabling JK Tyre to leverage information for competitive advantage.

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MOTORSPORTS Credited for bringing motor sports in India at par with international racing, the Company completed 25 years of its association with motor sports in 2009. With best of high profile teams and premium category racing in country's finest championship, JK Tyre National Racing saw the renaissance of Super bikes (600cc and 1000CC) and Saloon Cars demonstrating the high defined speed. JK Tyre as part of their dream to provide Indian drivers with a footprint in international racing organized 24 hours Non-stop International Kart Endure Race in Goa. The first of its kind racing in India engrossed finest talent from across the country and international participation from various countries. With a 360 degree approach to Indian motorsports, JK Tyre jointly organized Baja SAE India 2009 with Society of Automotive Engineers India (SAE INDIA), National Automotive Testing and R&D Infrastructure Project (NATRIP) and Automotive Research Association of India (ARAI). The effort brought 1500 students from across the country to develop an OTR / Sports vehicle. The vehicles created after 6 months of hard labor by various colleges were tested on different parameters for its durability and now will be showcased in the international Baja in U.S. This not only gives Indians an international platform but also marks the excellence of "JK Tyre" in encouraging and harnessing young talents, "JK Tyre" prodigies like Narain Kartikeyan, Karun Chandhok, Armaan Ibrahim, Ash win Sunder and Adyta Patel are already unfurling Indian flag in diverse international circuits and the new crop is ready to make their mark. JK Tyre has patronized Indian Car of the year & Indian motorcycle of the year awards, decided by the editors of 7 top Auto Magazines in India. These awards are most respected amongst the Indian Automobile Industry, HUMAN RESOURCES DEVELOPMENT Jk tyre has always considered its Human Resources as an asset and is committed towards their development for continuous growth. Our belief is that highly engaged, talented and innovative people can lead to Business Excellence. Jk tyre has consistently invested in Best HR practices such as 360 Leadership Impact Survey and Executive Coaching. Jk tyre efforts have been recognized through awards, such as, "Innovative Retention Strategies and employee branding award on Talent Management"; "Best HR Work Place Environment Award" and "Corporate Excellence Award" by various independent recognized bodies of repute.

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Major HR interventions relate to attraction & retention of talent, leadership development, competency development & high employee engagement. Jk tyre has also undertaken a unique HR initiative in conducting a nationwide behavioral intervention which was designed to develop insights in customer behavior as an enabler in creating customer delight. The entire Marketing / Sales / Services / Commercial executives were given extensive training across all selling points. The learning of the program are being implemented through total employee involvement "Customer First" initiative by 150 Cross Functional Teams across the country. FINANCIAL STATEMENT (Rs. Crores) PARTICULARS Sales & Other Income Operating Profit (PBIDT) Interest Profit Before Tax (PBT) Provision for Tax/(Credit) Net Profit 2007-09 (18 Months) 5510.12 313.05 157.79 41.91 22.86 19.05 2006-07 (12 Months) 3206.21 265.23 89.04 100.75 34.02 66.73

In the first nine months of the period, the Company achieved a turnover of Rs. 2728 crores and a PBT of Rs. 106 crores which was higher than the preceding 12 months period. Significant increase in the raw material & other input costs as mentioned earlier affected profitability for the 18 months period under review. During the period under review, sales and other income increased by 14% on an annualized basis. During this period, Operating margins were adversely affected mainly due to substantial increase in raw material costs with selling price not increasing commensurately. With implementation of projects viz. TBR expansion, Energy Savings projects, other cost reduction initiatives, and stabilization of raw material prices, the financial performance of the Company is expected to improve in the coming year.

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INTERNAL CONTROL SYSTEM The philosophy of the Company with regard to adequacy of internal control system has been the formulation of effective systems and their strict implementation to ensure that assets and interests of jk tyre are safeguarded; checks and balances are put in place to determine the accuracy and reliability of financial data. Jk tyre has an Internal Audit Department which prepares the audit programmers of all Units/Offices to cover significant areas to ensure conformance with internal checks and controls. The Internal Audit Department carries out extensive audits throughout the year covering all areas of operations and the reports are reviewed by senior management and placed before Audit Committee of the Board of Directors along with actions taken. Management Information System (MIS) is the backbone of the Company's review and monitoring system. All the efficiency parameters are reviewed with reference to the annual targets and budgets. Annual budgets and targets are placed before the Board and material deviations are reported to the Board on quarterly basis. Effective budgetary control system is in place and has resulted into significant savings. CAUTIONARY STATEMENT "Management Discussion and Analysis Report" contains forward-looking statements, which may be identified by the use of the words in that direction, or connoting the same. All statements that address expectations or projections about the future, including but not limited to, statements about your Company's strategy for growth, product development, market position, expenditures and financial results are forward-looking statements. Your Company's actual results, performance or achievements could thus differ materially from those projected in such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent development, information or events.

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3.Prodution Planning:
The function of a manufacturing enterprise responsible for the efficient planning, scheduling, and coordination of all production activities. The planning phase involves forecasting demand and translating the demand forecast into a production plan that optimizes the company's objective, which is usually to maximize profit while in some way optimizing customer satisfaction. These twin objectives are not always synonymous. During the scheduling phase the production plan is translated into a detailed, usually day-by-day, schedule of products to be made. During the coordination phase actual product output is compared with scheduled product output, and this information is used to adjust production plans and production schedules. If the production or manufacturing process is viewed as an input-output process, then the production planning function can be viewed as a control process with feedback (see illustration). The control is in the form of schedules and plans, while the feedback results from the comparison of the production reports with the production schedules

Production planning in JK tyre :

Tyre major JK Tyre is planning to invest Rs 1,100 crore over the next three years to expand its production capacity as it sees its revenues crossing Rs 5,000 crore marks by then. "To meet the increased demand for radial and off the road (OTR) tyres, they will invest Rs 1,100 crore in expanding our production capacity by 2010,". The company would fund the expansion plans through a mix of debt and internal accruals. As per the expansion plans, JK Tyres would increase the passenger radials manufacturing capacity to seven million units per annum from the present 4.5 million units and would take up its bus-truck radial manufacturing capacity to one million units by 2010 from the present four lakh tyres a year. , the company expects the growth in passenger, truck-bus radials and off-the-road (OTR) tyres to fuel its future growth. "Demand for OTR tyres, passenger and truck-bus radials have been growing steadily. We expect the future growth in these segments to drive our top-line to cross the Rs 5,000 crore marks in the next three years," he said, adding, the company closed the previous fiscal with revenues of Rs 2,970 crore. The company has four manufacturing facilities -- two in Mysore and one each in Banmor in Madhya Pradesh and Kankroli in Rajasthan. Passenger radials are manufactured at the company's

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Banmor facility, while the two facilities in Mysore manufacture truck-bus radials and Vikrant brand nylon tyres, while Kankroli produces OTRs and JK nylon tyres.

Transportation planning:
Transportation planning is the field involved with the sitting of transportation facilities (generally streets, highways, sidewalks, bike lanes and public transport lines). Transportation planning historically has followed the Rational Planning model of Defining Goals and Objectives, Identifying Problems, Generating Alternatives, Evaluating Alternatives, and Developing the Plan. Other models for planning include rational actor, Satisfying, Incremental planning, Organizational process, and Political bargaining. However, planners are increasingly expected to adopt a multi-disciplinary approach, especially due to the rising importance of environmentalism. For example, the use of behavioral psychology to persuade drivers to abandon their automobiles and use public transport instead. The role of the transport planner is shifting from technical analysis to promoting sustainability through integrated transport policies

Trade Promotions Management (TPM) While demand planning offers competent promotions planning capabilities, many consumer products companies, which devote large marketing budgets in trade promotion to their channel partners, require a more advanced and sophisticated customer-centric promotions planning solution. For this reason, SAP has developed SAP Trade Promotions Management to bridge the gap between supply chain planning and customer relationship management, thus helping ensure consumer products manufacturers make the best use of their trade budgets. Demand planning can be used to plan promotions across number of periods and a number of characteristics combinations. Promotions can be based on either a percentage lift Oran absolute lift to the forecast, and may be stored for future reuse. Profiles are used to shape a promotions lift over its lifecycle, and complimentary cannibalization profiles can describe the effect on similar products whose sales may be affected by the planned promotion.

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Working with Sales and Customers to Refine the Key Account Forecast
Because so many interests are involved, no key account level demand plan is ever exactly what the customer or field sales representative has in mind. The challenges involved in resolving this discrepancy include: Soliciting timely data from key distributed stakeholders Identifying only the important discrepancies Communicating the items and amounts in question clearly and understandably Finding an efficient forum through which to collaborate

Planning Books Just as a Microsoft Excel workbook is composed of multiple Worksheets, each with its own rows and columns, so demand planning book is composed of multiple data views, each with its own key figures. Planning books may be customized for a user or a role to contain only the information relevant to that persons job. A marketing manager, for example, may need to see brand level data for advertising budget, statistical forecast, and promotional plans, while a customer may only need visibility to the promoted forecast and the ability to manipulate a single key figure. To reach sales representatives and customers, who could be around the corner or around the world, multiple data gathering approaches are supported. These include: Direct entry Sales representatives or customers agents with direct access to the planning system via LAN, WAN, or Internet-based extranet may log in directly to their demand planning personalized planning books to view or manipulate the limited data allotted to them by their respective planners. World-Wide Web Stakeholders with Web access may log onto an organizations demand planning system through a secure web site to view or manipulate their forecasts. EDI Customers can share forecasting information from their own procurement and forecasting tools via electronic data interchange (EDI) in much the same way advanced shipment notifications (ASN) are sent between the two trading partners.
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 XML Customers can opt for extensible Markup Language (XML)-based transfer, or perhaps Internet-based EDI data transfer, to convey their forecasting information. FTP Flat (ASCII) files sent over the Internet via file transfer protocol (FTP) can be accepted. Spreadsheets The common language of business (*.axles) cane used to share forecast information.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

Of the nine steps of CPFR, as established by the VICS committee, demand planning supports steps three through six in the development of a collaborative forecast. The initial three steps of CPFR deal with the establishment of shared objectives and responsibilities, which can be monitored by macros and alerts. The concluding three steps of CPFR deal with the generation of an order for the customer. These steps are supported by demand planning in SAP APO in conjunction with supply network planning, because it requires the netting of inventory and constraining for scarce material and production resources

Managing Network Constraints to Balance Customer Service and Cost

The final consensus forecast developed in demand planning is passed into supply network planning, where the unconstrained wish list of demand meets the realities of supply constraints and the need for cost efficiencies. Since the demand plan identifies the finished goods products at each shipping pointer key discrete customer receiving points, this data can now bypassed into a simulated what-if? version of the live model, or into the live model itself. The timing of the passage of the forecast is dictated by your organizations business process; it may be a near realtime event occurring every five minutes, ora batched event that happens only once per week. Versions: Exploring Possibilities When real-time integration is a reality in our organizations transaction system, a simple question like what-if? could rapidly turn operations into chaos. To permit a planner to explore possibilities beyond the current plan, SAP APO allows planners to create versions of the plan that can be manipulated without placing the current plan in jeopardy. Planners may create multiple versions to simulate different events, and each version may be updated with refreshed transactional data.

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CALCULATING NET DEMAND

Once the forecast has been brought into supply network planning, the projected demand for a finished goods product at allocation can be subtracted from the inventory of that product at that location. After also subtracting any dependent and distribution demand, the net inventory position for the locations known. If this net position is below the safety stock levels set for the location, then the location requires replenishment. When all of the replenishment requirements in the system are taken into account, the net production requirements are known.

Dependent Demand Sometimes a product, such as a case of Apple Juice, is used as a component of a larger product, such as a mixed pallet containing cases of apple juice, grape juice, and cranberry juice. The number of cases of apple juice required to meet the demand for mixed pallets is the dependent demand.

Distribution Demand In the event that a large, centralized distribution center services smaller, regional distribution centers, the net demand at the smaller DC on the larger DC is distribution demand.

CONSTRAINING THE PLAN

While the net demand is a representation of what is likely to be necessary to meet your customer demand, it may not be possible or economically feasible for your production and transportation resources to meet that demand. Like all organizations, you are constrained by the capacity of production resources, the speed of transportation resources, and the availability of materials. Some of these constraints are physical realities that must be treated as hard constraints; that is, no matter how much you spend, the single bottling machine in a plant cannot process more than 1,000 cases per hour. Other constraints are economic in nature and may be seen as soft constraints; for example, if cargo ship cannot get the product there fast enough, it can be sent by plane at a much greater cost. There are four methods used by supply network planning to develop a production and replenishment plan: Constraint-based optimization bounded by a series of hard And soft constraints
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 A rules-based heuristic algorithm, similar to distribution and Material resource planning (DRP, MRP) A priorities-based capable-to-match algorithm that propagates Demand back through the supply chain Interactive planning permitting manual changes by the Planner .

OPTIMIZATION
Finding the best feasible solution within the time allotted requires the use of a mathematical approach called optimization.SAP APOs supply network planning capabilities contain multiple optimization techniques. It also provides the flexibility to allow planners to employ custom algorithms. For each technique, constraints for production capacity, transportation speed, and materials availability may be set as hard or soft and may be weighed against the possibility of delivering product late to the customer, or even not delivering the product at all. The benefit of using the optimization approach is that it solves the entire supply network problem at once, taking into account all of the demand and constraints to find the best feasible solution in the time allow.

HEURISTIC
Rules-based heuristics is a method used by many companies to generates a feasible supply plan for their network. In the two step heuristic approach, inventory is first subtracted (or netted) from demand at a location. Any excess demand is mapped up to that locations supply source. The process is repeated until all of the demand in the system is mapped up to the ultimate sources of supply, such as production facilities or the central procurement warehouse. Capacity is then leveled across transportation resources and production or procurement facilities. The algorithm runs through a series of options searching for the most feasible network supply plan. However, because demand may exceed supply within a given time frame or network of facilities, the heuristic does not necessarily generate a feasible plan; nevertheless, the benefit of using the heuristic approach is that it is robust and understandable by anyone willing to work the problem through the established rules.

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CAPABLE-TO-MATCH (CTM) A mixture of logic and flexible rules, CTM can be used to match prioritized demand, such as customer orders, forecast and safety stock, with prioritized supply, such as highest likelihood of overstocks. CTM is an excellent way to find a feasible solution in a very complex or large-scale supply chain network. INTERACTIVE PLANNING Even with the most sophisticated algorithms, it is often necessary for a planner to quickly view and manipulate portions of the plan manually. SAP APOs supply network planning capabilities allow planners to view all of the demand and supply position sat the detailed and summarized levels across multiple products, multiple facilities, and telescoping time buckets; that is, the next 14 days followed by three weeks, two months, and two quarters. Production quantities can be adjusted by simply clicking and typing, or by applying algorithms, such as Optimization and heuristics, over a small subset of the model

VENDOR-MANAGED INVENTORY (VMI) The solution can also be extended to include customer receiving points in a VMI process. When customers are willing to share inventory and consumption or off take information for their supply network, it is possible to develop a replenishment plan for them. The advantage to manufacturers and distributors is improved visibility into customer demand. This result in Improved forecast accuracy and allows these organizations to reduce inventories held as safety stocks. SAP APO supports this VMI process through both demand planning and supply network planning. A history of off take at the customer site issued to develop a demand forecast, which is in turn netted against the inventory available at the site to generate net requirements. These net requirements are aggregated up into lots large enough to fill a truck and, taking advantage of the tight, real-time integration with the SAP transactional system, they are translated directly into customer orders, which are promptly shipped to the customer.

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SUBCONTRACTING: As many organizations concentrate on core competencies and eliminating excess capacity, the ability to include subcontracting partners in production plans becomes more and more critical.SAP APOs supply network planning capabilities treat subcontractors as part of the organizations supply network. Because the balance of costs within the subcontractors four walls is less of an issue than within an organizations production facility, optimization is not normally used for subcontracting; similarly, because the scope and sophistication of a single subcontractors contribution is limited, planning does not require CTM. Therefore, SAP APO performs subcontract planning using rules-based heuristic algorithms. The results are communicated directly to the subcontractor through the transactional system, taking advantage of the tight, real-time link to SAP, if it is available.

Balancing Near-Term Supply and Demand with Inventory Deployment

For all but the most agile organizations, it is likely both supply and demand will vary between initial, rough-cut capacity planning and the near-term execution time frame. Reality takes hold, however, when planning based on conjecture becomes decision support based on a series of hard constraints. At this point, decisions like these must be made: Where to send product coming off the production line when the closest storage may be hours away Whether to use ships, trains, planes, or trucks, and of what size, to get the product to its destination Which alternate storage or production facilities should service customer orders in shortage situations? To support these types of decisions, SAP APOs supply network planning capabilities utilize deployment planning and the transportation load builder. While deployment uses the same optimization and heuristic algorithms as the rough-cut planning that precedes it, the constraints and decision criteria May be quite different. A focus on customer service may reduce penalties on faster shipping lanes, such as team-truck or even by air that would not be encouraged in developing a long-term plan. Inventory shortages resulting in manufacturing variability, such as line stoppage or delayed raw materials availability, may require replenishments of regional warehouses or even customer
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Warehouses from less advantageous sources. On the positive side, it is possible that entire levels of the supply network can be bypassed opportunistically by shipping directly from the production facility to the regional or customer storage facility. Once a deployment solution has been identified, the transportation load builder is designed to aggregate individual replenishment orders, whether they are:

Plant to central warehouse Central warehouse to distribution center Distribution center to distribution center Distribution center to customer These transportation orders are grouped to best fill the transport mode in question, such as a container or trailer, in terms of weight, volume, and pallet count constraints. Again taking advantage of the tight connection to SAP these transportation loads may then be passed to the transaction system for tendering. Or the loads may be tendered out collaboratively via EDI or e-mailed to a series of specified carriers. The carrier is given the opportunity to accept or refuse within specified time limit before the load is offered to the next carrier.

Measuring Success to Enable Continuous Improvement

When the orders have been handed off to the transaction systems for execution, the planning process is still not complete. In fact, its at this time perhaps the most important portion of planning begins: the continuous improvement phase. After the successful fulfillment of customer orders, it is possible to: Compare the actual demand to the demand forecasted by different stakeholders Assess actual production to planned production by manufacturing location Identify any shortages or expedited orders resulting from insufficient safety stocks

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 Project excess inventories likely to exceed shelf life prior to being shipped For reporting on planning, SAP APO allows additional key figures and macros to be used to add metrics directly into interactive planning books. During a consensus meeting, for example, planners can include the cumulative bias (% amount higher or lower than actual over a series of periods) of a sales representatives forecast to best decide how to arrive at a consensus forecast. Alternatively, a report that graphically depicts the biases of multiple sales representatives could be generated using the business explorer analyzer tool, which comes packaged with SAP APO. This report can be saved on a spreadsheet for distribution. The SAP APO data mart, which is built on the same Info Cube technology as the SAP Business Intelligence (SAP BI) analytical and reporting tool, is uniquely optimized for planning. That is because maintaining excessive data for non-planning reporting purposes has a negative impact on performance. As a result, reporting with the planning tool should be restricted to data that directly affects plans, such as forecast bias in weighing the different contributions of demand planning stakeholders, including field sales, marketing, operations, and customers, as well as general forecast accuracy in calculating appropriate safety stock quantities. For other measures crucial to process Improvement, but not decision support, organizations can benefit by taking advantage of the tight connection between SAP APO and SAP BI.SAP Business Intelligence is capable of planner-directed, ad-hocqueries that can be stored and manipulated in spreadsheet format or published directly to a Web site on an intranet, extranet, or the Internet. Many key performance indicators (KPI) are included in the package, including the majority of the Supply Chain Councils Level 3 SCOR metrics.

The ultimate reason organizations invest the time, talent, and money it takes to create a sales and operations planning process, and the tools that support it, is profit. A proper plan is critical to delivering perfect orders (that is, the right amounts of the right products to the right places at the right times) at the lowest feasible cost. In measuring how effective the planning Process is, organizations will typically look at the following: Accuracy of the forecast at relevant time lags and hierarchy levels Customer service, in the form of on-time orders, complete shipments, and perfect orders Utilization of capital assets, such as production lines Inventory levels (or turns) of raw materials, work-in-process, and finished goods

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The Reward Of The Planning

SAP APO and the other application and technology components of the my SAP SCM solution offer new and enhanced support for supply chain planning, execution, and trading partner collaboration. These enhancements support such operational benefits as these: Reduced costs The sharing of demand and supply planning information across the supply network helps reduce inventory build-upend overall cycle times, and enables companies to make more efficient use of resources. Measurable benefits typically include increased inventory turns, decreased overall inventory and Associated inventory-carrying costs, as well as reduced expediting and transportation costs. Improved customer service The use of SAP APO and my SAP SCM results in more accurate and timely order fulfillment. Measurable benefits typically include increased fill rates, improved customer-order fulfillment, and fewer short and late shipments. Increased responsiveness We can count on broader visibility into demand and supply information, and the ability to manage unanticipated changes in demand or supply. Measurable benefits typically include improved order forecast accuracy and management of demand, more-responsive suppliers, and fewer short and late shipments. Improved productivity A more timely planning process and real-time availability of key planning information results in productivity improvements among planners and operational personnel. Measurable benefits typically include increased planner, buyer, and operations personnel productivity and more frequent planning cycles. Improved efficiency The ability to anticipate capacity and resource needs results in better efficiencies in transportation, manufacturing, and other supply chain operations. Measurable benefits typically include better utilization of existing transportation capacity, reduced set-up costs, and improved machine and resource utilization.

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Of course, each company will experience its own unique results, depending on its business and the complexity of its supply chain processes. However, operational benefits typically fall in the following guideline ranges: Decreased overall inventory (5%-10%) Increased inventory turns (5%-10%) Reduced short/late shipments (10%-20%) Improved order forecasting levels (10%-20%) SAP APO and my SAP SCM help customers achieve significant financial benefits, including these: Increased return on assets (ROA) through reduced Working capital, reduced overall inventory levels, and More efficient Utilization of supply chain assets. Increased revenues, with the ability to more closely align Supply with demand, create shorter time-to-market, and Experience fewer out-of-stock situations. Measurable benefits typically include increased sales and reduced lost sales with Revenue uplift.

Faster return on investment (ROI), with planning, scheduling, and collaboration tailored to specific industries and industry standards, a unified architecture, and an open technology framework that ensures flexibility and interoperability. As an integrated solution, my SAP SCM also eliminates many of the costs associated with piecing together and supporting a collection of best-of-breed or disparate systems. Measurable benefits typically include reduced overall project costs, as well as reduced IT maintenance and support costs. Again, specific customer financial benefits will vary, but the following ranges can be used as a guideline: Increased ROA (3%-5%) Reduced inventory carrying costs (5%-10%) Reduced lost sales-revenue uplift (3%-6%) Reduced administrative expenses (5%-10%) Reduced transportation costs (10%-15%) In essence, SAP APO is the latest step in the continuing evolution of supply network management. The demand plans and supply network planning capabilities it provides result inane enhanced visibility across the network. All stakeholders can Now work from a single, accurate demand plan. Efficient and optimal planning for production, warehousing, and transportations the rule of the day. we can meet the dual challenge of improving service and controlling costs, and ultimately reach the pinnacle goal: increasing profits.
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