Christened Pragati (progress), the initiative began with the formation of an internal taskforce at the recommendation of management consultants McKinsey & Co which had been employed to restructure RPG Group operations in 1995. ``The need for revisiting processes arose as a result of the observation that, even as sales were increasing, profitability was on the decline,'' says Ceat Limited's, general manager, operations, K Ranganathan. The total savings in cost accruing from streamlining the intergrated logistics and account receivable management was identified at a whopping Rs 54 crore by the Pragati team.

But first, the company benchmarked itself againstmajor competitors to identify a series of cost, quality and time problems that existed along Ceat's supply chain. The more obvious snags? The system was plagued with transit time delays on account of multiple manufacturing locations and over 125 selling points stocking 125 stock keeping units; there was a mismatch of tyre and tube production; production was taking place without an eight-day plan; there were delays in decision making; there was no coordination with purchasing or marketing; and local dispatches to dealers took two to three days.

``Reworking the supply chain was hence imperative to ensure the availability of the right product at the right place at the right time,'' says Ranganathan. To achieve the objectives, cross functional teams were formed with each member designated as a `Pragati champion'. Soon the task force zeroed in on two specific areas of improvement: finished goods inventory and accounts receivables.

To improve the finished goods inventory situation an IT and warehousing-basedpilot project was initiated in two to three locations. To do away with the transit time delays, the company established warehouses or `divisional despatch centers'. The company has spent close to Rs 2 crore to date, to establish close to six DDCs covering all 125 selling locations in Nasik, Nagpur, Ahemdabad, Delhi, Bubhaneshwar and Calcutta. These have been established so that each selling location is a mere four to 48 hours away from a DDC.

An extensive IT infrastructure has also been put into place to connect the manufacturing plants with the DDCs and the selling locations. Ceat also claims that the infrastructure has facilitated speedier flow of accurate information across the chain.

To avoid gaps in product availability, the Pragati task force put into place the `replenishment system'. The replenishment system ensures that every selling location gets a load every day so products are available with the dealer at all times. Based on the information flow, the role of the supply chain manager at each DDCis thus to replenish supplies every time a load is sold. By April 1998, the infrastructure had been successfully adopted across the country.

Ceat has also undertaken concerted effort to prevent transit time delays. These including giving out incentives to the transporters, besides allocation of transport contracts based on tight performance parameters. ``As a result of the efforts, transit time efficiency has increased to an all time high of 96 per cent from 25-30 per cent in the past,'' says Ranganathan.

A large spill-over of Pragati has been the reduction in the order-to-payment cycle at sales outlets. Ceat Limited, like other players in the tyre industry, suffered from a difficult account receivable system on account of the end-of-the-month dumping favoured by its dealers to meet their monthly sales targets.

Steps taken by the Pragati team to help the situation included a dealer education programme, daily intensive monitoring of performance of all selling points, strict vigilance on upcountryaccount receivables, violation monitoring, and strict payment follow-up through a statement sent regularly to all dealers every 10 days.

What's more, production today is carried out according to the market demand. ``It is possible for us to alter production schedules to suit market demand with less than a week's notice,'' says Ranganathan. Moreover, more than 85 per cent of the SKUs produced by the factories are in line with the production plan-as against 20 per cent before project Pragati.

The other benefits flowing out of the efforts include: reduction in sales skew levels and reduction in overall finished goods inventory resulting in a reduction in cash requirements of Rs 18.4 crore to Ceat Limited.

As a result of the past three years' efforts, the Pragati team claims to have achieved savings nearly 60 per cent of the savings estimated initially-that is, about Rs 35 crore-across processes like inventory management, stock outs, sales skew, planning horizon and transit time.

``Pragati is an ongoingprocess. We are already on to looking at a series of areas to better our processes further,'' says Ranganathan. The company is now looking at further bringing down the finished goods inventory level. And next in line is the project to connect its dealers on line with the production plants.

The company is planning to enter the retail arena too in a big way. On the anvil is the relaunch of its 100 odd exclusive shops, `Ceat Shoppes' and a foray into tyre-batteries-and-accessories (TBA) chain in the country. The efforts to streamline its supply chain is sure to pay off as Ceat Limited embarks on its ambitious designs on the retail market. Clearly, when the going gets toug -- the tough get going.