Model to build cost competitiveness through material productivity – a case study

Abstract

Companies are facing increased customer expectations and cut throat market competition. Organizations are driving three major performance measures which are market outperformance, incremental margin, and cash flow conversion. As companies continue to outsource large portions of their manufacturing, managing material costs in the supply chain are important in reducing overall costs and remain competitive in order to ensure that all supply chain partners particularly in the upstream supply chain survive and be part of the future growth. The purpose of this paper is to present the detailed analysis of the various cost factors which affects the organizational performance and developing a unique model for the material productivity program. The key criterions include the innovative ideas of cost reduction, continual focus to eliminate wastes in the supply chain and also to drive excellence in execution of these projects.As the case industry has become global, it is essential for the case industry to carryout structured and sustained material cost reduction activity in order to capture the potential market through cost leadership and to emerge as best cost supplier among the other plants. This particular research work discusses more in detail about Indian market conditions, the changing customer needs due to entry of the global multinationals, the new challenges that we face in the local and the global market and how we respond to it and also to spell out the changing customer demand for the reduced cost, the challenges of price escalations of various input costs, the processes which case industry follow to reduce the cost, and suggesting a cost reduction methodology to achieve sustained cost reduction year on year. The result shows 4% reduction in material costs and the quality improvement of the production of automotive ancillary components.