Description
Supply chain management is the management of an interconnected or interlinked between network, channel and node businesses involved in the provision of product and service packages required by the end customers in a supply chain.
A STUDY REPORTS ON SUPPLY CHAIN MANAGEMENT IN ABB
1
1.1 COMPANY’S PROFILE
ABB is a Swiss multinational corporation headquartered in Zurich, Switzerland, Operating mainly in Power Products, Power Systems, Automation, Low Voltage Products and Process Automation. ABB is one of the largest engineering companies as well as one of the largest conglomerates in the world. ABB has operations in Around 100 countries, with approximately 1, 24,000 employees, and reported Global Revenue of $31.6 billion for 2010. ABB is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. POWER PRODUCTS Power Products are the key components to transmit and distribute electricity. The division incorporates ABB's manufacturing network for transformers, switchgear, circuit breakers, cables and associated equipment. It also offers all the services needed to ensure products performance and extend their lifespan. POWER SYSTEM Power Systems offers turnkey systems and services for power transmission and distribution grids, and for power plants. Sub stations and sub station automation systems are key areas. Additional highlights include flexible alternating current transmission systems (FACTS), high-voltage direct current (HVDC) systems and network management systems. In power generation, Power Systems offers the instrumentation, control and electrification of power plants.
DISCRETE AUTOMATION
This division provides products, solutions and related services that increase industrial productivity and energy efficiency. Its motors, generators, drivers, plc provides power, motion and control for wide range of automation application. LOW VOLTAGE PRODUCTS The low voltage products division manufactures low voltage circuit breakers, switches , control products, wiring accessories and cable systems.
PROCESS AUTOMATION
The main focus of this ABB business is to provide customers with products and solutions for instrumentation, automation and optimization of industrial process.
1.2 ORGANIZATION STRUCTURE
MD
MARKETING
HUMAN RESOURCE
FINANCE
PRODUCTION
SUPPLY CHAIN MANAGEMENT
QUALITY
POWER PRODUCTS
POWER SYSTEMS
AUTOMATION
LOW VOLTAGE PRODUCTS
1.3 ABB HARIDWAR PLANT
Haridwar plant of ABB is a subunit of ABB INDIA PVT LTD. In Haridwar plant ABB is basically into the manufacturing of Miniature circuit breaker (MCB). MCB stands for Miniature circuit breaker. It is an automatically operated electrical switch designed to protect an electrical circuit from damage caused by overload or short circuit. Its basic function is to detect a fault condition and, by interrupting continuity, to immediately discontinue electrical flow. Unlike a fuse, which operates once and then has to be replaced, a circuit breaker can be reset (either manually or automatically) to resume normal operation. Haridwar plant manufactures MCBs Consists of, ? Seventeen ratings. (From 0.5A to 63A
ABB HARIDWAR STRUCTURE
DIVISION HEAD
MARKETING FINANCE
HUMAN
RESOURCE
SUPPLY
CHAIN MANAGEM ENT
QUALITY
PRODUC TION
1.4 OBJECTIVE OF THE PROJECT
The objective of my project is: ? To understand the SUPPLY CHAIN MANAGEMENT PROCESS of ABB. ? The project will also include the detailed study of the effectiveness of the SCM process of ABB.
1.5 SCOPE OF STUDY
The scope of the project is defined as follows ?
The scope of study will include understanding the procurement system activities that takes place in the organization i.e. procurement of materials and services.
?
The project will also study the various stages of the procurement process i.e. (Purchase process and negotiations etc).
?
This project will try to study, how the supply chain management,
can be
seamlessly coordinated and executed from start to finish, ensuring much higher levels of on-time delivery.
2.1 SUPPLY CHAIN MANAGEMENT
Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customer. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.
2.2 SCM AT VARIOUS LEVELS Strategic level
?
Strategic network optimization, including the number, location, and size of warehousing.
?
Strategic partnerships with suppliers ,creating communication channels for critical information and operational improvements such third party logistics.
Tactical level
? ?
Sourcing contracts and other purchasing decisions. Production decisions, including contracting, scheduling, and planning process definition.
? ?
Inventory decisions, including quantity, location, and quality of inventory. Transportation strategy, including frequency, routes, and contracting.
Operational level
? ?
Daily production and distribution planning, including all nodes in the supply chain. Demand planning and forecasting, coordinating the demand forecast of all customers.
?
Inbound operations, including transportation from suppliers and receiving inventory.
?
Production operations, including the consumption of materials and flow of finished goods.
?
Outbound operations, including all fulfilment activities, warehousing and transportation to customers.
The main functions of the SCM department are:? Receiving Purchase requisitions from the various departments. ? Selection of source of supply i.e. selecting the vendors. ? Placing the order to the vendor. ? Delivery at right time i.e. taking follow up from various vendors. ? Inspection and passing of bills to payment department. ? Preservation of purchase records. ? Good relations with vendors.
3.1 PROCUREMENT CYCLE
• Purchase Requisition • Solicitation • Vendor Selection • Approval for procurement
Purchase Process
• Issue of PO
• GRN
3.2 PURCHASE PROCESS
Purchasing refers to a business or organization attempting to acquire goods or services to accomplish the goals of the enterprise. Purchase activities can be organized by using two basic approaches: centralization and decentralization. Centralized Purchasing: ? Single purchase department: The purchasing function is under a single administrative control when there is a lack of maturity in branch offices. The vital tasks of stores such as classification and codification are done by central office. Decentralized Purchasing: ? When an organization has several plants in widely separate locations and manufactures different products, each with individual material requirements, decentralized purchasing is needed there.
The procurement process includes following steps:
3.2.1 Raising a Purchase requisition note
A purchase requisition is an authorization for a purchasing department to procure goods or services. It is originated and approved by the department requiring the goods or services. Typically, it contains a description and quantity of the goods or services to be purchased, a required delivery date, account number and the amount of money that the purchasing department is authorized to spend for the goods or services, plant name – from which plant it is ordered. Often, the names of suggested supply sources are also included. A purchase requisition is owned by the originating department and should not
be changed by the purchasing department without obtaining approval from the originating department. As part of an organization's internal financial controls, the commercial department institutes a purchase requisition process to help manage requests for purchases. Requests for the creation of purchase of goods and services are documented and routed for approval within the organization. Process of purchase requisition note: 1. Creation of Purchase Requisition Note. 2. Release of Purchase Requisition Note. Purchase Requisition Note is prepared through SAP. It is an online process and is released by Business Unit (BU) Head. After release of Purchase Requisition Note the purchase order are raised. Once a requisition has been entered into SAP it must be converted into a Purchase Order.
3.2.2 Solicitation
Solicitation means obtaining quotations, bids, offers or proposal from potential sources as appropriate. It is required to obtain quotation for price comparison and to study terms & conditions of work. Request for quotation (RFQ) are send to selected potential vendors via ? Telephone (verbally) ? E mail (Written) The documents include Request for proposal (RFP), Request for quotation (RFQ), Invitation to bidding, invitation for negotiation, contractor initial response.
Solicitation involves obtaining information in the form of bids and proposals from prospective sellers. The seller trying to win business bears most of the effort of gathering the information.
3.2.3 Selection of Vendor
Once the activity / procurement material or service has been identified, approved for execution and budget being available, then following activities are performed: Identifying the Vendor Procurement Team identifies minimum of 3 Vendors who could undertake the execution of proposed activity. While identifying the Vendor-following things are taken into consideration: Past experience of the Vendor-in execution of the proposed activity. ? ? Past experience with the Vendor-in previous deals with “ABB”. Capability of the Vendor-in execution of the proposed activity within the given time frame. a) Obtaining quotations All the identified Vendors are asked to submit a quotation through RFQ (Request for quotation) for the proposed activity within the specified timeframe. The Quotations submitted contains: I.Rates- At what rate the vendor will supply the material. II.Profit Margin- What is the margin of profit of vendor. III.Taxes Claimed/Chargeable-Service Tax / Sales Tax etc. IV. Freight, if any. V. Terms of Execution
VI. Terms of Payment- In which mode of payment, the vendor wants payment from customer. VII. Any other details that may be specifically asked from the Vendor. b) Negotiations & Vendor Selection Once all the quotations have been received, the same are analyzed with the help of analysis sheet w.r.t. Rates, Terms of Execution / Performance, Terms of Payment, Past Performance, Market standing (Execution purpose) and any other factor that may be important for the purpose of taking decision in selection of the Vendor. The negotiations with the Vendor are performed by a team consisting of Circle Shared Services Head, and User Department.
3.2.4 Raising a Purchase Order
A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a PO to a supplier constitutes a legal offer to buy products or services. Acceptance of a PO by a seller usually forms a oneoff contract between the buyer and seller, so no contract exists until the PO is accepted. A Purchase Order is a document representing a formal request to a vendor to supply goods in accordance with stipulated terms and conditions. Purchase Orders are created in case of material purchases only. Work orders are same as purchase orders, but are created for services. Work order is stand for issuing some task to the vendor. These are the basis for processing goods / service receipts and invoice verification. It can also be described as a legal commitment between ABB and a vendor for the supply of goods or services. Process of purchase order note in ABB:
1. Creation of Purchase Order Note. 2. Release of Purchase Order Note. Purchase Order Note is prepared through SAP. It is an online process and is released at different levels of management i.e. A1, A2, A3, A4 according to the amount required for procurement. Up to Rs. 50 Lakh, release from A1, A2, A3 levels is required while for amount exceeding Rs. 50 Lakh release from level A4 is required. The different levels of management are as defined below: A1 - Supply Chain Management A2 - Controller A3 - BU (Head) A4 – Division Head
3.2.5 Raising a Goods Receipt Note
Goods receipt note is a document used to record the inward entry of the any goods received at the premises of the organization. The document normally consists of the details of Quantity Received, Quantity Rejected and Quantity Accepted, Supplier Name . It is generated to ensure the receipt of goods at the warehouse and to complete the invoice cycle. The report is generated for the materials, which are received in response to the purchase orders, send to the vendors. Once a Purchase Order has been completed the information sits in the system until the goods is received. Once this has happened and you have an invoice it is time to complete a GRN. The GRN has information relating to what has been received, how much and when. On completion of the GRN a copy is sent to payments, with the invoice, for payment.
4.1 Selection of Vendor
Once the activity / procurement material or service has been identified, approved for execution and budget being available, then following activities are performed
Identifying the Vendor
Shared Service – Procurement Team identifies minimum of 3 Vendors who could undertake the execution of proposed activity. While identifying the Vendor-following things are taken into consideration: ? ? ? Past experience of the Vendor-in execution of the proposed activity. Past experience with the Vendor-in previous deals with “ABB”. Capability of the Vendor-in execution of the proposed activity within the given time frame.
4.2 CASE STUDY
Three vendors, namely A, B and C quoted for the same material of ABB and their prices are Rs. 1, Rs. 1.5 and Rs. 3. Now some questions arises while selecting the vendor – 1) Which vendor is providing the best quality material? 2) Vendor A is providing the material at lowest price. Should we purchase from A? 3) Is vendor uses good machinery for the manufacture of the material? otherwise its effects can be seen in the product? So for resolving all these problems, SCM team of ABB use to take four major steps while selecting the vendor – 1) Firstly, they use to visit the vendor’s plant. 2) Check their material quality. 3) Check their machinery.
4) Check their material test certificate.
4.3 Supplier Qualification Process of ABB
Supplier Qualification
Process Qualification
Continuous Improvement
Supplier Self Assessment Site Visit
Supplier selected by ABB Contract
Continuous Improvement Plan
QCD Indicators Appro ved? Quality File Developed Rating Adjustments
ABB Supplier List
Audit
4.3.1Supplier Qualification: How do we determine which suppliers to work with?
? ?
Supplier Self Assessment: The supplier evaluates himself against the “ABB Supplier Quality
Requirements” and submits the result with supporting documents and actions to fill gaps to the requesting ABB unit
Review and site visit ? A team from ABB visits the supplier plant and checks their various
requirements, and evaluates whether supplier is capable of fulfilling their requirements or not. The team constitutes of SCM team, production manager and a finance department member.
Approval
? The team decides if the supplier can be added to the “Approved Supplier” list.
Process Qualification: Quality File:
The supplier must develop and maintain a file containing: ? ? ? ? ? ? ? Drawings and specifications Product / Process Design Development Plan Product Design Review Process Design Review Product / Process Design Change (if any) Approved sub-supplier list Sub-supplier initial samples approval
? ? ? ?
Product / Process Control Plan Product/Process Capability studies (if required by ABB) Process Qualification Report Preventative Maintenance Plan
4.3.2 Process Qualification
Ensure the Control Plan is adequate and is applied 1. Process Audit (per supplier) ? There is a need to audit the application of the quality requirements within the suppliers’ manufacturing process. This process audit includes verification of: ? ? ? ? ? ? ? ? ? Quality Assurance File Product/Process Control Plan Incoming goods Manufacturing Tooling and Maintenance Material and Functional Tests Packing and Shipping Problem Solving and Corrective Actions Logistics
4.3.3 Continuous Improvement: Monitor suppliers and work with them to improve performance
? Supplier Monitoring:
o Key Indicator Data collected monthly, posted for review by ABB and supplier ? ? a) Supplier Quality b) On-time delivery (% defect free lots received ) (% of all shipped received complete and on time, based on agreed Incoterms )
Performance Improvement:
ABB shall work with the supplier to improve performance and/or process capability where needed and adjust the supplier rating based on performance. Overall performance is calculated by using OTD and quality and the vendors are classified into class A, B and C. ? ? ? Ratings above 90% Ratings between 80%- 89% Ratings between 61%- 79% Class “A” Class “B” Class “C”
Blacklisting of Vendor: If any vendor falls below 60% of rating
consecutively for three supplies for a given articles, then the vendor is black listed and information is sent to him.
5.1 LOGISTICS
Logistics is the management of the flow of goods and services between the point of origin and the point of consumption in order to meet the requirements of customers. Logistics involves the integration of information, transportation, inventory,
warehousing, material handling, and packaging, and often security. Logistics is a channel of the supply chain which adds the value of time and place utility. Logistics is one of the main functions within ABB. The main targets of logistics can be divided into performance related and cost related. They are high due date reliability, short delivery times, low inventory level and high capacity utilization. Inbound logistics is one of the primary processes and it concentrates on purchasing and arranging inbound movement of materials, parts and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses or retail stores. Outbound logistics is the process related to the storage and movement of the final product and the related information flows from the end of the production line to the end user.
5.2 CASE STUDY
Haridwar is a holy place, So There are many occasions when the material movement from vendor to manufacturé is zero. • ABB SCM team procure materials four times in a month Say- on 1st ,7th, 15th and 25th. • So there are four lots but the store capacity of the plant is to store only three lots.
• Now SCM team order for 1st, 7th and 15th. So the store is full. • When the material of 25th comes, the 1st lot which is in store is totally consumed in the production. • Now comes to Our problem, suppose the transports are not alloweded in haridwar from 20th to 25th. • So, SCM team will change the schedule of the ordering. • So 1st ,7th and 14th Day procure material Will come directly to store and the next order will be on 19th which is put in the logistics warehouse. • When the store has capacity to store a lot. The material is transferred from logistics warehouse to the store.
6.1SECONDARY SOURCES
Secondary data is the details that are available in the form of facts and figures. The sources of secondary data are; ? Magazines ? Websites ? Books The information regarding the project collected indirectly i.e. other than above resources as follows ? ? ? ? ? Vendor Qualification Process Chart used in Vendor Selection Process. Vendor Evaluation Sheet. Vendor Registration Form. Purchase Order Format Demand Form or Purchase Requisition Form (Through this form demands are sent to the material department by the user in which specifications and quantity are specified.) ? ? Company websites GRN (good receive note)
7.1 BENEFITS OF SAP IN BUSINESS
SAP System is a fully integrated business management system covering among others; Logistics, Production, Finance and Human Resources Companies both large and small traditionally utilized multiple software applications from various vendors or developed their own applications in- house to process their critical business transactions. SAP was the first and, to date, the most successful company to integrate nearly all business processes into one software solution for use in any business in any country in the world. Not only SAP’s applications reduce the need for complex and redundant in-house development, but it also created new business efficiencies by automating many tasks across a corporation and incorporating business best practices into each updated version of its software
Tangible Benefits:? Provides greater and effective control on accounts payable by having increased control on invoicing and payment processing ? Reduction of paper work ? Availability of timely information ? Greater Accuracy ? Improved cost control
Intangible Benefits
? Improved Customer Satisfaction. ? Improved vendor Performance. ? Increased flexibility. ? Reduced quality cost. ? Improved information utility.
? Improved information accuracy
7.2 LOOP HOLES
? The employees were not aware about all the tools of SAP so proper training is required for them. ? Although SAP is implemented but still paper work is done which causes delay in process.
8.1 CONCLUSION
This project report is undertaken to understand and learn the various activities followed in the ABB. They are as follows:-
1. 2.
Proper procurement system is followed using SAP. How to select vendors, maintain relationship with them.
8.2 RECOMMENDATION
1. The new recruits and less experienced employees should be given proper training on related SAP modules. 2. Proper work division should be done so that employee knows what work is assigned to them. Sometimes during my training period I noticed that in the payment process because of lack of coordination and work assigned to particular employees, was done by their fellow employees who have to do the next step of payment so that the payment is not blocked.
doc_105392576.docx
Supply chain management is the management of an interconnected or interlinked between network, channel and node businesses involved in the provision of product and service packages required by the end customers in a supply chain.
A STUDY REPORTS ON SUPPLY CHAIN MANAGEMENT IN ABB
1
1.1 COMPANY’S PROFILE
ABB is a Swiss multinational corporation headquartered in Zurich, Switzerland, Operating mainly in Power Products, Power Systems, Automation, Low Voltage Products and Process Automation. ABB is one of the largest engineering companies as well as one of the largest conglomerates in the world. ABB has operations in Around 100 countries, with approximately 1, 24,000 employees, and reported Global Revenue of $31.6 billion for 2010. ABB is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. POWER PRODUCTS Power Products are the key components to transmit and distribute electricity. The division incorporates ABB's manufacturing network for transformers, switchgear, circuit breakers, cables and associated equipment. It also offers all the services needed to ensure products performance and extend their lifespan. POWER SYSTEM Power Systems offers turnkey systems and services for power transmission and distribution grids, and for power plants. Sub stations and sub station automation systems are key areas. Additional highlights include flexible alternating current transmission systems (FACTS), high-voltage direct current (HVDC) systems and network management systems. In power generation, Power Systems offers the instrumentation, control and electrification of power plants.
DISCRETE AUTOMATION
This division provides products, solutions and related services that increase industrial productivity and energy efficiency. Its motors, generators, drivers, plc provides power, motion and control for wide range of automation application. LOW VOLTAGE PRODUCTS The low voltage products division manufactures low voltage circuit breakers, switches , control products, wiring accessories and cable systems.
PROCESS AUTOMATION
The main focus of this ABB business is to provide customers with products and solutions for instrumentation, automation and optimization of industrial process.
1.2 ORGANIZATION STRUCTURE
MD
MARKETING
HUMAN RESOURCE
FINANCE
PRODUCTION
SUPPLY CHAIN MANAGEMENT
QUALITY
POWER PRODUCTS
POWER SYSTEMS
AUTOMATION
LOW VOLTAGE PRODUCTS
1.3 ABB HARIDWAR PLANT
Haridwar plant of ABB is a subunit of ABB INDIA PVT LTD. In Haridwar plant ABB is basically into the manufacturing of Miniature circuit breaker (MCB). MCB stands for Miniature circuit breaker. It is an automatically operated electrical switch designed to protect an electrical circuit from damage caused by overload or short circuit. Its basic function is to detect a fault condition and, by interrupting continuity, to immediately discontinue electrical flow. Unlike a fuse, which operates once and then has to be replaced, a circuit breaker can be reset (either manually or automatically) to resume normal operation. Haridwar plant manufactures MCBs Consists of, ? Seventeen ratings. (From 0.5A to 63A
ABB HARIDWAR STRUCTURE
DIVISION HEAD
MARKETING FINANCE
HUMAN
RESOURCE
SUPPLY
CHAIN MANAGEM ENT
QUALITY
PRODUC TION
1.4 OBJECTIVE OF THE PROJECT
The objective of my project is: ? To understand the SUPPLY CHAIN MANAGEMENT PROCESS of ABB. ? The project will also include the detailed study of the effectiveness of the SCM process of ABB.
1.5 SCOPE OF STUDY
The scope of the project is defined as follows ?
The scope of study will include understanding the procurement system activities that takes place in the organization i.e. procurement of materials and services.
?
The project will also study the various stages of the procurement process i.e. (Purchase process and negotiations etc).
?
This project will try to study, how the supply chain management,
can be
seamlessly coordinated and executed from start to finish, ensuring much higher levels of on-time delivery.
2.1 SUPPLY CHAIN MANAGEMENT
Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customer. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.
2.2 SCM AT VARIOUS LEVELS Strategic level
?
Strategic network optimization, including the number, location, and size of warehousing.
?
Strategic partnerships with suppliers ,creating communication channels for critical information and operational improvements such third party logistics.
Tactical level
? ?
Sourcing contracts and other purchasing decisions. Production decisions, including contracting, scheduling, and planning process definition.
? ?
Inventory decisions, including quantity, location, and quality of inventory. Transportation strategy, including frequency, routes, and contracting.
Operational level
? ?
Daily production and distribution planning, including all nodes in the supply chain. Demand planning and forecasting, coordinating the demand forecast of all customers.
?
Inbound operations, including transportation from suppliers and receiving inventory.
?
Production operations, including the consumption of materials and flow of finished goods.
?
Outbound operations, including all fulfilment activities, warehousing and transportation to customers.
The main functions of the SCM department are:? Receiving Purchase requisitions from the various departments. ? Selection of source of supply i.e. selecting the vendors. ? Placing the order to the vendor. ? Delivery at right time i.e. taking follow up from various vendors. ? Inspection and passing of bills to payment department. ? Preservation of purchase records. ? Good relations with vendors.
3.1 PROCUREMENT CYCLE
• Purchase Requisition • Solicitation • Vendor Selection • Approval for procurement
Purchase Process
• Issue of PO
• GRN
3.2 PURCHASE PROCESS
Purchasing refers to a business or organization attempting to acquire goods or services to accomplish the goals of the enterprise. Purchase activities can be organized by using two basic approaches: centralization and decentralization. Centralized Purchasing: ? Single purchase department: The purchasing function is under a single administrative control when there is a lack of maturity in branch offices. The vital tasks of stores such as classification and codification are done by central office. Decentralized Purchasing: ? When an organization has several plants in widely separate locations and manufactures different products, each with individual material requirements, decentralized purchasing is needed there.
The procurement process includes following steps:
3.2.1 Raising a Purchase requisition note
A purchase requisition is an authorization for a purchasing department to procure goods or services. It is originated and approved by the department requiring the goods or services. Typically, it contains a description and quantity of the goods or services to be purchased, a required delivery date, account number and the amount of money that the purchasing department is authorized to spend for the goods or services, plant name – from which plant it is ordered. Often, the names of suggested supply sources are also included. A purchase requisition is owned by the originating department and should not
be changed by the purchasing department without obtaining approval from the originating department. As part of an organization's internal financial controls, the commercial department institutes a purchase requisition process to help manage requests for purchases. Requests for the creation of purchase of goods and services are documented and routed for approval within the organization. Process of purchase requisition note: 1. Creation of Purchase Requisition Note. 2. Release of Purchase Requisition Note. Purchase Requisition Note is prepared through SAP. It is an online process and is released by Business Unit (BU) Head. After release of Purchase Requisition Note the purchase order are raised. Once a requisition has been entered into SAP it must be converted into a Purchase Order.
3.2.2 Solicitation
Solicitation means obtaining quotations, bids, offers or proposal from potential sources as appropriate. It is required to obtain quotation for price comparison and to study terms & conditions of work. Request for quotation (RFQ) are send to selected potential vendors via ? Telephone (verbally) ? E mail (Written) The documents include Request for proposal (RFP), Request for quotation (RFQ), Invitation to bidding, invitation for negotiation, contractor initial response.
Solicitation involves obtaining information in the form of bids and proposals from prospective sellers. The seller trying to win business bears most of the effort of gathering the information.
3.2.3 Selection of Vendor
Once the activity / procurement material or service has been identified, approved for execution and budget being available, then following activities are performed: Identifying the Vendor Procurement Team identifies minimum of 3 Vendors who could undertake the execution of proposed activity. While identifying the Vendor-following things are taken into consideration: Past experience of the Vendor-in execution of the proposed activity. ? ? Past experience with the Vendor-in previous deals with “ABB”. Capability of the Vendor-in execution of the proposed activity within the given time frame. a) Obtaining quotations All the identified Vendors are asked to submit a quotation through RFQ (Request for quotation) for the proposed activity within the specified timeframe. The Quotations submitted contains: I.Rates- At what rate the vendor will supply the material. II.Profit Margin- What is the margin of profit of vendor. III.Taxes Claimed/Chargeable-Service Tax / Sales Tax etc. IV. Freight, if any. V. Terms of Execution
VI. Terms of Payment- In which mode of payment, the vendor wants payment from customer. VII. Any other details that may be specifically asked from the Vendor. b) Negotiations & Vendor Selection Once all the quotations have been received, the same are analyzed with the help of analysis sheet w.r.t. Rates, Terms of Execution / Performance, Terms of Payment, Past Performance, Market standing (Execution purpose) and any other factor that may be important for the purpose of taking decision in selection of the Vendor. The negotiations with the Vendor are performed by a team consisting of Circle Shared Services Head, and User Department.
3.2.4 Raising a Purchase Order
A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a PO to a supplier constitutes a legal offer to buy products or services. Acceptance of a PO by a seller usually forms a oneoff contract between the buyer and seller, so no contract exists until the PO is accepted. A Purchase Order is a document representing a formal request to a vendor to supply goods in accordance with stipulated terms and conditions. Purchase Orders are created in case of material purchases only. Work orders are same as purchase orders, but are created for services. Work order is stand for issuing some task to the vendor. These are the basis for processing goods / service receipts and invoice verification. It can also be described as a legal commitment between ABB and a vendor for the supply of goods or services. Process of purchase order note in ABB:
1. Creation of Purchase Order Note. 2. Release of Purchase Order Note. Purchase Order Note is prepared through SAP. It is an online process and is released at different levels of management i.e. A1, A2, A3, A4 according to the amount required for procurement. Up to Rs. 50 Lakh, release from A1, A2, A3 levels is required while for amount exceeding Rs. 50 Lakh release from level A4 is required. The different levels of management are as defined below: A1 - Supply Chain Management A2 - Controller A3 - BU (Head) A4 – Division Head
3.2.5 Raising a Goods Receipt Note
Goods receipt note is a document used to record the inward entry of the any goods received at the premises of the organization. The document normally consists of the details of Quantity Received, Quantity Rejected and Quantity Accepted, Supplier Name . It is generated to ensure the receipt of goods at the warehouse and to complete the invoice cycle. The report is generated for the materials, which are received in response to the purchase orders, send to the vendors. Once a Purchase Order has been completed the information sits in the system until the goods is received. Once this has happened and you have an invoice it is time to complete a GRN. The GRN has information relating to what has been received, how much and when. On completion of the GRN a copy is sent to payments, with the invoice, for payment.
4.1 Selection of Vendor
Once the activity / procurement material or service has been identified, approved for execution and budget being available, then following activities are performed
Identifying the Vendor
Shared Service – Procurement Team identifies minimum of 3 Vendors who could undertake the execution of proposed activity. While identifying the Vendor-following things are taken into consideration: ? ? ? Past experience of the Vendor-in execution of the proposed activity. Past experience with the Vendor-in previous deals with “ABB”. Capability of the Vendor-in execution of the proposed activity within the given time frame.
4.2 CASE STUDY
Three vendors, namely A, B and C quoted for the same material of ABB and their prices are Rs. 1, Rs. 1.5 and Rs. 3. Now some questions arises while selecting the vendor – 1) Which vendor is providing the best quality material? 2) Vendor A is providing the material at lowest price. Should we purchase from A? 3) Is vendor uses good machinery for the manufacture of the material? otherwise its effects can be seen in the product? So for resolving all these problems, SCM team of ABB use to take four major steps while selecting the vendor – 1) Firstly, they use to visit the vendor’s plant. 2) Check their material quality. 3) Check their machinery.
4) Check their material test certificate.
4.3 Supplier Qualification Process of ABB
Supplier Qualification
Process Qualification
Continuous Improvement
Supplier Self Assessment Site Visit
Supplier selected by ABB Contract
Continuous Improvement Plan
QCD Indicators Appro ved? Quality File Developed Rating Adjustments
ABB Supplier List
Audit
4.3.1Supplier Qualification: How do we determine which suppliers to work with?
? ?
Supplier Self Assessment: The supplier evaluates himself against the “ABB Supplier Quality
Requirements” and submits the result with supporting documents and actions to fill gaps to the requesting ABB unit
Review and site visit ? A team from ABB visits the supplier plant and checks their various
requirements, and evaluates whether supplier is capable of fulfilling their requirements or not. The team constitutes of SCM team, production manager and a finance department member.
Approval
? The team decides if the supplier can be added to the “Approved Supplier” list.
Process Qualification: Quality File:
The supplier must develop and maintain a file containing: ? ? ? ? ? ? ? Drawings and specifications Product / Process Design Development Plan Product Design Review Process Design Review Product / Process Design Change (if any) Approved sub-supplier list Sub-supplier initial samples approval
? ? ? ?
Product / Process Control Plan Product/Process Capability studies (if required by ABB) Process Qualification Report Preventative Maintenance Plan
4.3.2 Process Qualification
Ensure the Control Plan is adequate and is applied 1. Process Audit (per supplier) ? There is a need to audit the application of the quality requirements within the suppliers’ manufacturing process. This process audit includes verification of: ? ? ? ? ? ? ? ? ? Quality Assurance File Product/Process Control Plan Incoming goods Manufacturing Tooling and Maintenance Material and Functional Tests Packing and Shipping Problem Solving and Corrective Actions Logistics
4.3.3 Continuous Improvement: Monitor suppliers and work with them to improve performance
? Supplier Monitoring:
o Key Indicator Data collected monthly, posted for review by ABB and supplier ? ? a) Supplier Quality b) On-time delivery (% defect free lots received ) (% of all shipped received complete and on time, based on agreed Incoterms )
Performance Improvement:
ABB shall work with the supplier to improve performance and/or process capability where needed and adjust the supplier rating based on performance. Overall performance is calculated by using OTD and quality and the vendors are classified into class A, B and C. ? ? ? Ratings above 90% Ratings between 80%- 89% Ratings between 61%- 79% Class “A” Class “B” Class “C”
Blacklisting of Vendor: If any vendor falls below 60% of rating
consecutively for three supplies for a given articles, then the vendor is black listed and information is sent to him.
5.1 LOGISTICS
Logistics is the management of the flow of goods and services between the point of origin and the point of consumption in order to meet the requirements of customers. Logistics involves the integration of information, transportation, inventory,
warehousing, material handling, and packaging, and often security. Logistics is a channel of the supply chain which adds the value of time and place utility. Logistics is one of the main functions within ABB. The main targets of logistics can be divided into performance related and cost related. They are high due date reliability, short delivery times, low inventory level and high capacity utilization. Inbound logistics is one of the primary processes and it concentrates on purchasing and arranging inbound movement of materials, parts and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses or retail stores. Outbound logistics is the process related to the storage and movement of the final product and the related information flows from the end of the production line to the end user.
5.2 CASE STUDY
Haridwar is a holy place, So There are many occasions when the material movement from vendor to manufacturé is zero. • ABB SCM team procure materials four times in a month Say- on 1st ,7th, 15th and 25th. • So there are four lots but the store capacity of the plant is to store only three lots.
• Now SCM team order for 1st, 7th and 15th. So the store is full. • When the material of 25th comes, the 1st lot which is in store is totally consumed in the production. • Now comes to Our problem, suppose the transports are not alloweded in haridwar from 20th to 25th. • So, SCM team will change the schedule of the ordering. • So 1st ,7th and 14th Day procure material Will come directly to store and the next order will be on 19th which is put in the logistics warehouse. • When the store has capacity to store a lot. The material is transferred from logistics warehouse to the store.
6.1SECONDARY SOURCES
Secondary data is the details that are available in the form of facts and figures. The sources of secondary data are; ? Magazines ? Websites ? Books The information regarding the project collected indirectly i.e. other than above resources as follows ? ? ? ? ? Vendor Qualification Process Chart used in Vendor Selection Process. Vendor Evaluation Sheet. Vendor Registration Form. Purchase Order Format Demand Form or Purchase Requisition Form (Through this form demands are sent to the material department by the user in which specifications and quantity are specified.) ? ? Company websites GRN (good receive note)
7.1 BENEFITS OF SAP IN BUSINESS
SAP System is a fully integrated business management system covering among others; Logistics, Production, Finance and Human Resources Companies both large and small traditionally utilized multiple software applications from various vendors or developed their own applications in- house to process their critical business transactions. SAP was the first and, to date, the most successful company to integrate nearly all business processes into one software solution for use in any business in any country in the world. Not only SAP’s applications reduce the need for complex and redundant in-house development, but it also created new business efficiencies by automating many tasks across a corporation and incorporating business best practices into each updated version of its software
Tangible Benefits:? Provides greater and effective control on accounts payable by having increased control on invoicing and payment processing ? Reduction of paper work ? Availability of timely information ? Greater Accuracy ? Improved cost control
Intangible Benefits
? Improved Customer Satisfaction. ? Improved vendor Performance. ? Increased flexibility. ? Reduced quality cost. ? Improved information utility.
? Improved information accuracy
7.2 LOOP HOLES
? The employees were not aware about all the tools of SAP so proper training is required for them. ? Although SAP is implemented but still paper work is done which causes delay in process.
8.1 CONCLUSION
This project report is undertaken to understand and learn the various activities followed in the ABB. They are as follows:-
1. 2.
Proper procurement system is followed using SAP. How to select vendors, maintain relationship with them.
8.2 RECOMMENDATION
1. The new recruits and less experienced employees should be given proper training on related SAP modules. 2. Proper work division should be done so that employee knows what work is assigned to them. Sometimes during my training period I noticed that in the payment process because of lack of coordination and work assigned to particular employees, was done by their fellow employees who have to do the next step of payment so that the payment is not blocked.
doc_105392576.docx