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WELCOMETO

“GHCL PURCHASE TEAM”

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Procurement -Soda Ash Division

PANKAJ KUMARDate : 20.06.14

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Agenda

Have Fun alongwith Knowledge Sharing

Know each other and respective functions/responsibilities

Learn from each other

Express your challenges and share experiences

Sharing best practices

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Spend Details Repair and Maintenance items (Materials) Rs 40 Crore

Services Procurement Rs 20 Crore(Approx) (Include Bagging contract, plant related services)

HDPE Bags procurement Rs 25 crore

Project Purchases Rs 75 Crore (Approx)

Fuel and Chemicals Procurement Rs 160 Crore (Approx) (Ammonia,Binder,Coke Breeze, Coke etc)

Import of Coal and Limestone Rs 150 crore

Other Procurements include :

Outbound Material handling of Lignite Mines and Salt fields

Raw material Procurement- DomesticLimestone,Salt etc

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Organisation Chart

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Best Practices -KPIsKey Performance Indicators (KPI)

KPI name KPI unit KPI definition

PROCURE Total purchase volume Rs lacs Savings Rs lacs Percentage of Purchase under rate contract % = 100 x (contracted purchasing

volume / total purchasing volume) Percentage of key suppliers % = 100 x (Number of key suppliers /

total number of active suppliers) Percentage of volume purchased at key suppliers

% = 100 x (total purchasing volume at key suppliers / total purchasing volume)

Avg on-time delivery rate of key suppliers % = # of orders delivered on time, on quantity and on quality by key suppliers / total # of purchasing orders at key suppliers

Avg quality rate of key suppliers % = # of orders delivered with the required quality level by key suppliers / total # of purchasing orders at key suppliers

Avg quality rate of active suppliers % = # of orders delivered with the required quality level / total # of purchasing orders

percentage of active key suppliers linked via EDI

% = 100 x ( # of key suppliers connected via EDI / # of key suppliers)

Procure cycle time Calendar days

Average time associated with sourcing activi ties. If data not available, select a sample of transactions and calculate the average lead-time between the purchase order release until its reception in the company (entry record)

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Transforming Purchase process

Transaction based Purchasing

– Negotiation based buying– Prime motive: avoid stock outs– Skills: Commercial, follow-up– Style: Individualistic

Knowledge based Purchasing

– Total Cost of Ownership– Consolidate and leverage

volume buy– Skills: Professional, Team

Building– Style: Cross-Functional

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Strategic sourcing methodology

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Abhilasha Initiatives – FY 14-15

Area of Operation Initiative Areas / Remark Target

Strategic Sourcing

Study of High value purchased items / services

Coke & Coke Breeze

Rs. 100 L

Matl Handling - Lignite mines & Salt works

Engineering Spares

Casting, Fabrication and Machined itemsGear Box / Valves / FRP itemsRefractory BricksElectrical / Instrumentation items

Services Reviewing existing SOR & its optimizationStudy of high value service procurement

Procurement Transactions

Vendor consolidation / mgmt White paper to be ready by May end 250 vendorsWaste disposal - Obsolete inventory & Scrap disposal

Disposal of balance Obsolete inventory worth Rs. 94 L By Aug 2014

Increase ARC‘s 30% to 50% By Aug 2014Increase cases of VMI Import Substitution & Alternate Vendor development Rs. 50 L

Minimize advance cases & matl. del overdue cases 7% to 2% By Mar 2015

PackagingIntroduction of new suppliers Add 2 vendors in 50 kg and Jumbo By Nov 2014Weight reduction in Jumbo & 50 kg bag 50 kg by May ‘14

Jumbo bag by Nov ’14Other Strategic areas Industry interaction Industry meet with neighbouring industries Create platform for industry

interaction - Nov ‘14

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Rs. In LakhS. No. Initiative FY12-13 Target FY 13-14 Accrued as on 31 Dec 2013 Remark

Packing Bags

Introduce more vendors in Plastic bags- 50 kg and Jumbo bags 2 nos 4 nos

For 50 kg: M/s Shivam Poly is identified and will be included

For Jumbo bags: Vendors identified (M/s Jaicorp and M/s Umashree)

For 50 kg bag: While few more vendors are identified, due to substantially higher prices, same are not being considered

Reverse auction in 50 Kg liner bags and weight reduction in FIBC By Dec'13Reverse auction not feasible since only two vendors are available

50 kg liner bags: attempts are being made to reduce prices by direct negotiations with existing vendors.

Weight reduction: All 1 MT jumbo bag already converted into 1.3 MT bags with reduced weight

2 Consolidation of purchases across three divisions of GHCL By Dec'13 Most ARCs shared with Vapi teamPurchase Process Improvementa) Establish Lead time for all A class items By Dec'13 Done Shared with IT for implementation

b) Introduce vendor management system with focus on vendor reduction By March EndNo. of vendors reduced from 921 to 592. Total reduction till date - 329

c) Introduce monthly Purchase MIS system and its review By Dec'13 Implemented

d) Reduce PR-PO lead time from current 20 days to 15 days in 80% cases By Dec'13 PR-PO within 15 days: 82.4% (Till 15th Dec 13)

e) Establish Rate contract for regularly purchased spares/ consummables 60% of PRs approx. 35% Difficult to identify exact percentage

f) Minimise cases of Advance payment 9% 0% 7.43% Advance payment is largerly in case of OEM vendors and single source suppliers

4 Disposal of Obsolete Inventory 33% by Mar'14approx. 26.5% of inventory has been disposed

Out of total Rs. 127 Lacs (@ book value) of Obsolete inventory identified total Rs. 33.5 Lacs of inventory has being sold

1 Indegenisation of Imported Items 25 37.182 Alternate vendor development 50 18.71

Strategic Sourcing studyEngineering items: Valves, Pipes & Fittings, FRP, Bearings, Conveyor belts, PaintsNon Engineering items: Services procurement, Ammonia, Caustic soda Lye, Equipment Hiring (Outside plant)

4 Usage of SHIS benefit (All Import project orders and Domestic orders more than 1 cr) 25 26.21

5 Project Procurement - Implementation of new SOP and initiatives like Reverse Auction, Min 3 quotation, Bottom up costing etc

By Dec'13 251.06 New order finalised in Dec '13 viz. PHE is added

Total 200 367

Abhilasha - Purchase Dept

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3

3 100 33.98

Intangible

Tangible

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Average PR-PO Conversion within 15 days: 78.7%

PR-PO (within 15 days)

65.0%

75.0%

85.0%

95.0%

PR-PO (within 15 days)

Apr/13 May/13 Jun/13 Jul/13 Aug/13 Sep/13 Oct/13 Nov/13 Dec/13 Jan/14 Feb/14 Mar/14Grand Total

Total No of PRs 635 690 571 886 2588 456 319 297 509 340 458 486 8235

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• Average Cases of Delay/Undelivered: 20.7%

–Material Delivery

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Grand Total

Delay/Undelivered Cases 193 228 224 158 301 473 111 180 129 124 100 122 2343

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Delay/Undelivered Cases

0.25767690253671

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0.23799582463465

6

0.27053140096618

3

0.20127388535031

8

0.22296296296296

3

0.16619817287420

9

0.17182662538699

7

0.28436018957346

1

0.20124804992199

7

0.17391304347826

1

0.14367816091954

0.15174129353233

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3%

8%

13%

18%

23%

28%

Delay/Undelivered Cases

– Delay means material delivery beyond 8 days of contractual delivery

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Cases of Price Variance

0%

10%

20%

30%

40%

Cases of Decrease 21% 22% 18% 22% 29% 22% 20% 17% 16% 17% 20%

Cases of Increase 14% 18% 20% 18% 16% 19% 24% 37% 28% 27% 21%

APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB

– Note: Cases depict price rise more than 5 %

CASES OF PRICE INCREASE

Type of VendorsNo of Material

Impact (Rs in Lakhs)

Purchase Order Value (Rs in Lakhs)

Regular Vendors 1205 28.40 208.37

IMPORT 15 17.55 118.76

OEM 563 79.57 495.43

Single Party 24 1.55 5.36

Grand Total 1807 127.07 827.91

%age of OEM, SP, Import Cases 33.31% 77.65% 74.83%

Price Variance

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Impact on Total Order Value

-10.0%

-5.0%

0.0%

5.0%

10.0%

Increase Impact 3.1% 3.1% 3.5% 3.4% 3.2% 5.3% 7.0% 7.0% 4.7% 3.2% 6.6%

Decrease Impact -2.3% -5.4% -3.0% -2.9% -4.5% -3.0% -2.1% -3.1% -7.5% -3.8% -1.6%

Total Impact 0.8% -2.3% 0.5% 0.5% -1.3% 2.3% 4.9% 3.9% -2.8% -0.6% 5.0%

APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB

PURCHASE ORDER VALUE (Rs in Cr.)

CHANGE STATUS APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB Grand Total

Increase 1.6 1.4 0.9 0.5 1.1 0.9 0.6 1.7 0.9 1.1 1.6 12.2

Decrease 1.0 1.9 0.6 0.5 1.0 0.6 0.2 0.5 0.8 0.7 0.4 8.2

No Rise 0.5 0.9 0.8 0.5 0.6 0.4 0.2 0.3 0.3 0.4 0.2 5.1

Nil History 0.5 1.1 0.8 0.5 0.6 0.5 0.3 0.2 0.5 1.0 0.6 6.6

Total Order Value 3.6 5.3 3.0 2.0 3.3 2.3 1.3 2.8 2.4 3.2 2.8 32.1

Price Impact

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APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR

Total Materials Received 963 1269 1017 1011 1737 2559 835 602 872 754 1013 964

– * Average RR-GRN Converted within 5 days: 93.9%

GRN Status

APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR

1 RR-GRN (within 5 days)

91 90 95 96 95 95 94 97 94 97 89 94

2 RR-User Approval (within 5 days)

74 73 77 85 67 77 77 75 79 84 68 83

708090

100

GRN STATUS

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• Average Cases of Advance Payment: 6.37%• 61% of Total Advance Cases due to OEM & Single Party Vendors

Payment Terms: Advance Cases

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Cases of Advances

0.0823529411764707

0.08 0.0920245398773006

0.0585106382978724

0.0494505494505495

0.0495049504950495

0.0573770491803279

0.0424528301886793

0.0701107011070112

0.0606060606060606

0.0714285714285714

0.0509383378016087

1%

3%

5%

7%

9%

Cases of Advance Payment

Pay Terms Description Grand Total %ageADO 100% AGNST EXCHANGE OF DISP.DOCUMENTS 3 1.3%ADV 100% ADVANCE ALONG WITH PURCHASE ORDER 11 4.6%API 100% AGAINST SUBMISSION OF PROFORMA INVOICE 198 83.2%ATT 100% ADVANCE TT 1 0.4%BBB 100%AGNST DISPATCH DOCS THRU DENA BANK,VRL 9 3.8%CAD CASH AGAINST DOCUMENTS 6 2.5%LC1 100% AGNST IRREVOCABLE L/C PAYABLE AT SIGHT 2 0.8%P1C 10% ADV BAL WITHIN 15 FROM THE DATE OF DES/REC 2 0.8%P2P 20% ADVANCE BALANCE AGAINST PROFORMA INVOICE 1 0.4%P3C 30% ADV BAL WITHIN 15 FROM THE DATE OF DES/REC 2 0.8%P3P 30% ADVANCE BALANCE AGAINST PROFORMA INVOICE 2 0.8%PYT2 20% AGNST PROF.INV, 80% AGNST DEL. AFTER 30 DAYS 1 0.4%

Total No of Cases 238

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Thank You