“profit leadership” ‘in times of zero revenue’ aipma · source: kpmg report; 1 apr 2020...
TRANSCRIPT
“Profit Leadership”
‘In Times of ZERO Revenue’
for
AIPMA
Mr. NC Narayanan
Ganesh Iyer
AGENDA
❑ Industrial Scenario due to Pandemic
❑ Potential Opportunities opening for ‘Make in India’
❑ SWOT analysis of Indian Plastic processing industries
❑ Paradigm shift needed for survival & growth
❑ What is ‘Profit Leadership’
❑ Short term & Long-term strategies
INDUSTRY SCENARIOS
MAZE OF PANDEMIC
INDUSTRIES
HOSPITALITY
FINANCE
POLITICS
FAMILY
HEALTHCAREGLOBAL TRADE
WORLD ECONOMIC OUTLOOK
COVID19 IMPACT
2.9%
3.4%
-3.0%
4.2%
7.0%
1.9%
2.3%
3.5%
-0.5%
-5.0%
-3.0%
-1.0%
1.0%
3.0%
5.0%
7.0%
9.0%
2019 2020 Forecast
(as on Oct-19)
2020 Forecast
(as on Apr-20)
Economic Growth Projections (% Change in GDP)
World India Sri Lanka
Source: IMF WEO – Oct 2019 and Apr 2020
Optimistic figures
GROWTH DISRUPTION FACTORS
DEMAND
SHOCKS
SUPPLY
SHOCKS
COVID19 IMPACT ON INDIA SO FAR
53%Indian Businesses
report marked
impact of covid 19
on business
operations
80%Indian Businesses
report decrease in
cash flow
60%Indian Businesses
report disruptions in
supply chain
Barclays estimates the economic loss during the lockdown period
to be at US $234.4 Billion (8.1% of GDP)
Source: https://www.livemint.com/; FICCI’s Industry Survey to Assess Impact of Coronavirus
SERVICE SECTORS
First industry to bear the direct brunt of the pandemic. World-
wide, the crisis to cost USD 22 Bn. Indian tourism and hospitality
staring at potential job loss for ~70% of work force
AVIATION AND TOURISM (2.4% AND 9.2% OF GDP RESP)
Source: KPMG Report; 1 Apr 2020 potential impact of Covid 19 on the Indian economy
Despite the effort by RBI to mitigate the impact on the
financial institutions, liquidity and potential risk of defaults to
remain main concerns
FINANCIAL SERVICES – BANKING AND NBFC
From the perspective of services, the impact is low with primary
concern with being increased pressure on network due to
increased use of broadband.
TELECOM
NATURAL RESOURCES SECTOR
Source: KPMG Report; 1 Apr 2020 potential impact of Covid 19 on the Indian economy
With reduction in movements, the transport fuels have seen
reduction inn demand. The natural gases also face supply
chain disruptions as >50% is imported
OIL AND GAS
With no fluctuation in the demand and supply of electricity,
power sector has been least impacted. However, collection
delays and cash flow crunch do pose some challenges
POWER
With construction, automotive and infrastructure sectors seeing
drop in production levels, the demand for steel, aluminium and
copper to take a hit. Coal demand to have minimal impact
METALS AND MINING
FOUNDATION OF ECONOMY
Since it falls under government declared essential category,
the impact is likely to be low on both primary agricultural
production and use of agri-inputs like seeds, fertilizers, etc.
FOOD AND AGRICULTURE
Source: KPMG Report; 1 Apr 2020 potential impact of Covid 19 on the Indian economy
About 25% of total MSMEs in India face the risk of closure due
to the current lockdown situation.
MSMEs (~30% of GDP)
RECOVERY BENCHMARK
3 M people died 25% of nations wealth lost
8:15 am on August 6, 1945
JAPAN’S TURNAROUND
126 M people GDP 4.84 Tr.$ 38,210 Per Capita
GDP 8.70 Tr.$ 55,904 Per Capita322 M peopleUSA
JAPAN
By 1980 Japan became the 2nd largest economy in the world
SUGGESTED ATTITUDE
We cannot direct the wind but;
We can adjust our sails!
TRANSFORMATION APPROACH
Year of
Recovery
Year of
Consolidation
Year of
Excellence
RAY OF HOPE FOR FUTURE
OUTLOOK MAKES THE DIFFERENCE
“Every problem and adversity is a seed of
Equivalent benefits”
-- Napoleon Hill
GOVERNMENT RELIEF PACKAGES
THE NEW NORMAL
US CHINA TRADE WAR
LEADING ECONOMIES
BRIC GDP forecast
2006 2010 2015 2020 2030 2040 2050
US US US China China China
China China China US US US
Japan Japan Japan India India India
Germany Germany Germany Japan Brazil Brazil
UK UK UK Russia Russia Mexico
France France India Germany Japan Russia
Italy Italy France Brazil Mexico Indonesia
Canada Russia Russia UK Germany Japan
Russia India Italy France UK UK
Brazil Brazil Brazil Mexico France Germany
OUR STRENGTHS
PROCESSING
CAPACITY
POLYMER CAPACITY
ENGIG.
PLASTIC
CAPABILITY
CHEAPER LABOUR
GOVT
POLICY
EXPORT EXPERIENCE
EQUIPMENT
MFG TECHNICAL
COMPETENCY
OUR WEAKNESSES
Poor Quality Image
Lack of Cost Control
No latest tech/automation
Poor Labour management
Lack of Integrity
Poor reliability of supplies
No best practices adopted
Poor accountability & management practices
Saving mentality than investment
EFFECT OF CHALLENGES
GLOBAL PANDEMIC
Reactive Leadership
companies Closed
Proactive Leadership
companies survived
TIME TO CHANGE
PARADIGM SHIFT NEEDED
WHAT IS THE PARADIGM SHIFT?
NEED OF THE HOUR - AAA
AMBITION
ALIGNMENT
AGGRESSIVENESS
PARADIGM SHIFT – REVISIT BUDGET
CUSTOMER SENSITIVITY
DO’s & Needs Interaction Zone becomes the Business Model
DO’s
Business Process Capability
NEEDS
• Instant delivery
• Zero defects
• Value for money
Economy
ProtectedGlobal
PASS ON THE COST TO CUSTOMER
CUSTOMER DECIDES THE PRICE
CHANGING RULE OF THE GAME01
PARADIGM SHIFT – PROFIT DRIVERS
COST OPTIMIZATION
TRANSFORMATION AGENDA
PRODUCT
PROCESS
MARKET
PEOPLE
TECHNOLOGY
PRODUCT TECHNOLOGY
Design Optimization through Value Engineering
& Mould design optimization
PRODUCT TECHNOLOGY
Industry 4.0
Smart manufacturing
SYSTEMS & PROCESSES
Customer Management
Design Management (Product & Process)
Material Management
Production Management
Outbound Logistics
After sales service
QUALITY MANAGEMEN
T
FINANCE MANAGEMENT
PEOPLE MANAGEMENT
INFRASTRUCTURE MANAGEMENT
INFORMATION / KNOWLEDGE MANAGEMENT
Value Stream
LEAN MANUFACTURING
Plossl’s Law
LABOUR OPTIMIZATION
WASTE ELIMINATION
PARADIGM SHIFT – REVIST VALUE STREAM
BUSINESS PROCESS MANAGEMENT01
REENGINEERED PROCESS
CONTINUOUS IMPROVEMENT CULTURE
Continuous Improvement Culture with
Total Employee Involvement
WHAT IS PROFIT LEADERSHIP?
WHAT IS ‘PROFIT LEADERSHIP’
“’PROFIT LEADERSHIP’ is a holistic approach to enhance profits by focusing on the
‘value’ delivered to the customer through the optimum ‘VALUE STREAM’,
engaging everyone in the organization”
Highest Profit in the Industry1
Lowest Cost Producer2
Perpetuity through value added services3
Image – Well respected in the industry4
WHAT IS PROFIT LEADERSHIP?
Profit
Leadership
‘Profit’
‘Leadership’
SINGLE POINT AGENDA
PROFIT ENTITLEMENT & ACTUAL
Entitlement
ProfitActual Profits
“Area of
Concern”
Actual Profit is far less (20-30%) than Entitlement profit
PROFIT LEADERSHIP
ROI Capital Investment + Working Capital
Net Profit
Net
ProfitSales Revenue - Cost=
=
PARADIGM SHIFT – PROFIT DRIVERS
TRADITIONAL COST REDUCTION
Inventory
ReductionChangeover time
Reduction
Down time
Reduction
Rejects & re-work ReductionRight sizing Spare parts
Reduction
01
TRANSFORMATION APPROACH
Dr. Edward Deming
Speed of Response
TEI
Total Employee
Involvement
Zero
Defects
GENERIC PROFITABILITY DRIVERS
Profitability
1
FTR
New products
2
Optimum
Working Capital
3
Velocity of Information Flow
4
Velocity of material flow
(manufacturing)
5
Efficient Distribution
Network
ENABLING IT SYSTEMS
HOW TO IMPROVE PROFITS?
Searching for profit leaks and analyzing the root causes & solutions
Consider the risk factors that apply to the processing in each area
Quantify the financial loses based on the evidence & data
Integrating the measures with other Improvement projects.
PROFIT LEAKAGE
Su
pp
ort
Ac
tiv
itie
s
Firm Infrastructure
Human Resource Management
Technology Management
Procurement
Bidding &
contractingDesign &
Estimation
Execution Survey &
billing
Primary Activities
PROFIT LEAKAGES
VALUE STREAM
Sourcing
&
Purchasing
3 P ALIGNMENT
PROFIT
PROCESSPEOPLE
ALIGNMENT
ACCOUNTABILITYDEFINED & MEASURED
REPEATABLE EXCELLENCE
LEAN MANUFACTURING SYSTEM
Old Process Manufacturing system New Lean Manufacturing system
LEADER ROCKS THE BOAT
“Willingness to change is a strength, even if it
means plunging part of the company
into total confusion for a while.”
- Jack Welch
GURU’S FINAL WORD
“You don’t need to DO THIS as survival is not compulsory”
- Dr. Edward Deming
If You Do Not Change Your
Direction, You May End Up
Where You Are Heading.
LAO TZU