Godrej Material Handling Case Study

Executive Summary

Godrej Material Handling is the number one manufacturer of lift trucks in India. Along with Forklift trucks, it also manufactures other material Handling Equipments. Material Handling is a critical operation in any industry so the customer expectations are not only reliable products but also reliable after sales service support along with ready availability of spare parts. Hence the challenge for the company was to first increase proximity of its service points to the various industries it caters. And secondly to ensure that the spare parts are available at all times. These two collectively would reduce the breakdown time of the equipments and would result in higher customer satisfaction.
In order to do so the company started

Dealers and third party service providers were integrated to Company’s ERP.
3. Number of touch points was increased from 64 to 114.
4. From a large number of spare parts, norm spare parts were identified.
5. A two tier inventory setup was introduced including Central Warehouse and Branch each carrying inventory of spare parts to support the Dealers and service providers.
6. Depending on the demand of the spare parts each spare part was assigned a standard unique to each branch with a reordering level fixed and the system was programmed to place replenishment order on the central warehouse as and when the reordering level was reached.
7. Owing to the fact that the spare parts are not marketable products but support products that would be used as and when the equipment breaks down, the system was programmed to decide on standards and reordering levels depending on the Actual demand and not on basis of predictions.
Problem Statement:

The challenges the company faced was to increase customer satisfaction. The company caters to Industries and relies on repeat orders and hence satisfying the customers was even more important. The challenge was broken down to two areas of improvement:
1. Quick and efficient after sales

These spare parts are the spare part components that are usually required. These were called Norms. A two tier setup was established. The tier one was the Central Warehouse which would maintain an inventory of all the 3500 spare parts to support the next tier. The second tier was the branch ware house. For every Branch population of all equipments in their territory was accounted. Past one year service records of all the supplied equipment was studied. The breakdown of equipment is dependent on many factors like operation, operator skill and practises, work environment etc and hence the service requirement pattern is unique to every industry. Thus a predictive analysis of spare part demand cannot be made. As a result the company went for a kanban system where the kanban levels change as per actual demand. For every branch 800 to 900 Norm spares were fixed.
The way the system works is:
1. Initially the standards are fixed as per observed trends. The stock is divided in ranges and are colour coded in Green, Yellow and Red.
2. The reordering level is fixed at start of yellow. And ideally the stock is to be replenished to Green and the stock should never reach