Executive summary

Case New Holland construction Equipment private limited plant in pithampur manufactures
backhoes and loaders by procuring around 3000 different parts from domestic and
international suppliers. It was incorporated with the vision of producing 10000 units of
loaders and backhoes in a year.

We were given the task of optimising the inbound logistics cost of CNH construction limited.
After carefully discussing the scope of the project with Mr Pradeep Nigudkar sir (Industry
mentor) and prof. U.K Bhattacharya (faculty mentor) we dived into the details of the project
by concentrating on particular areas where the inbound logistics cost can be optimised.

One of the main areas we found worth concentrating on was the vehicle saturation (the
capacity utilisation of a particular vehicle used in transportation). We found that most of the
vehicles were not saturated either volume wise or weight wise. This happened because of
demand not matching with the capacity of the vehicles used and CNH opting to go for
individual trucks for part procurement from different suppliers and concentrating less on
the milk runs. CNH’s hands were also tied on this issue as most of the suppliers just
concentrated on loading the parts on to the vehicle and less concerned about saturating the
vehicle.

Once we found out that Vehicle saturation is the area which when optimised can reap
benefits by cost optimisation, we narrowed our scope of the project to improve vehicle
saturation. We went ahead by focusing on high price parts which when planned properly
can bring about better cost savings compared to parts with lower price. On this basis, we
shortlisted 10 suppliers who were providing around 130 high price parts and tracked down
their respective work schedules and frequency of ordering to design a solution for
increasing vehicle saturation.

Besides Vehicle saturation, we were also informed by the supply chain division that vehicle
allocation problem is also one area worth pondering on. On careful examination, we came
to a conclusion that vehicle saturation can be improved by designing and adopting milk
runs. With limited information we had about suppliers’ geographical location and distance
from the CNH plant we developed a framework for using savings cost transportation model
which could help solve the problem of scheduling milk runs and using logistics resources
efficiently to cut costs.

Situational Analysis:
Besides milk run which constitutes only 10-15 % of logistics, Case New Holland dispatches
individual vehicles to different suppliers which then collects various raw materials from
them that is required to assemble and make loaders and backhauls. The technique which
was extensively adopted is losing its efficiency since the suppliers from which it collects the
raw materials are not very concerned about saturation of the vehicles which they need to
unload the raw materials into. There is an inefficiency in volume wise saturation as well as
weight wise. This has led to increase in logistics costs due. Also a lot of suppliers do send the
vehicle partly or less than half filled when there is are fluctuations in demand and supply
.We conducted a thorough plant tour to understand the working of the company and tried
to learn how various raw materials are brought inside the plant , what are their dimensions,
what is their structure and how optimized are logistics .We also talked to the supply chain
workers that made us realise that the logistic costs can be optimized by proper allocation of
vehicles at various places so as to reduce the distance while commuting. We found out that
there are few more issues regarding to saturation like the safety of raw materials. The
inbound logistics cannot be optimized beyond a certain level since these could lead to
damage or rupture of the individual parts while transportation.

The pallets or the frames which have been designed to protect the parts while
transportation have become obsolete in design and are not heavily reliable when it comes
to transportation. Triple stacking of the raw material has also not been adopted. This could
have improved the vehicle saturation and reduced the logistics costs. There is also a gap
when it comes to proper communication between the various suppliers and CNH. This
mostly happens due to unmatched demand and supply. Every supplier was linked with the
buyer from the supply chain side of CNH. We dig deeper and found out the various
problems which were associated with suppliers. We also gathered data about the schedule
of the suppliers.