A

CASE STUDY REPORT

On
SKF

Berings Best practices

Submitted in Partial Fulfillment

Of the Requirements for the Degree of
Master of Business Administration

By
RASHMINDERSINGH SARDAR
PRUTHA CHOVATIYA
JIGARKUMAR PATEL
Batch: - 2013-15

AURO UNIVERSITY OF HOSPITALITY

AND MANAGEMENT
SURAT
FEBUARY 2015

SKF Berings Best practices:Short Summary:- SKF Bearings is one of the biggest Ball Bearing manufacturing units in the
world. This short case is all about how SKF Bearings manage its supply chain. Few activities are
outsourced and few are internally controlled for effectively manage quality control. Quality
norms, training and technology are keys to the outsourced cum in-house controlled supply chain
of SKF Bearings.
Key questions:1)
2)
3)
4)

Discuss the activities involved in the supply chain of SKF Bearings?

Explain how SKF establishes strong control over its outbound logistics?
What is meant by Vendor managed Inventory (VME)?
What is meant by 3rd party logistics solutions (3PL)? Explain how SKF will be able to
implement the same.

Answers:1) Being one of the biggest Ball Bearing manufacturing units, SKF Bearings has following
activities in its supply chain:OUTSOURCED ACTIVITIES
Inbound transportation and warehousing: Outbound transportation
Outbound warehousing
These are the activities which the company does not handle by itself. Infect, there are others
parties who are the one who handle such activities. Like Inbound transportation and warehousing
are complete outsourced to vendors, Outbound transportation are predominantly handled by
national fleet operators with some responsibilities of contingency are given to other organized
players while Outbound warehousing is also completely outsourced which is managed by 5
different players who manages different warehouse of the company.
IN HANDS WITH THE COMPANY
Training
Quality control activities
While the actual logistics activities are outsourced the training and control over quality activities
are managed by SKF Bearings using its own internal capabilities. Training is given to personnel
of fleet operators regarding handling of manufactured parts at different stages of loading/
unloading assemble and disassemble and for integrating scheduling and supply order. Quality
control activities are managed using various ERP softwares, strong norms and delivery
scheduling as well as training so that goods are not damaged during transportation.

2) Key points in how SKF establishes strong control over its outbound logistics by: Strong quality norms and delivery schedules by SKF personnel
Integrating the outsourced warehouses through in-house developed ERP software
platform.
Use of its own IT platform.
Training of logistic company for integrating scheduling and supply orders.
SKF Bearings has strong quality norms incorporated into its own working culture and
because of this it has became the biggest Bearing manufacture unit in the world. But culture is
not the end thing in itself. Various other activities of the company play its part to control the
quality of its products day in and day out. Starting with the fact that technology is the key
component in quality control. SKF personnel control the activities of warehousing activities
which are outsourced by integrating the outsourced warehouses through in-house developed ERP
software platform. This activity is controlled by SKF personnel to maintain delivery schedule as
well as while warehousing. Warehousing activity is essential because there can be many cases of
damages if activities like loading, unloading, assembling and disassembling products can take
place. For such activities to perfect training is provided to SKF personnel as well as the
logistic companies personnel too. Though the logistics firms have there own IT capabilities, but
SKF Bearings does not use them, instead they depend on their own it platform for all activities
like scheduling orders, keep track of Consignments and manage both efficient and effective
distribution. So using its own softwares the company is in better position to monitors at what
stage the products are and quality norms and training simultaneously play its part quality control.
3) Vendor-managed inventory (VMI) is a family of business models in which the buyer of a
product (business) provides certain information to a vendor (supply chain) supplier of that
product and the supplier takes full responsibility for maintaining an agreed inventory of the
material, usually at the buyer's consumption location (usually a store). A third-party logistics
provider can also be involved to make sure that the buyer has the required level of inventory by
adjusting the demand and supply gaps.
Up till now SKF Bearings was outsourcing actual logistics activities only, while still managing
the inventory, schedule orders, monitoring consignment of orders etc. Even training was given to
logistics companies personnels in order to how to handle products at various points of
warehousing. But VMI is a bit different. All those activities which now are controlled by SKF
Bearings and other logistics firm will all are done by a vendor. This means vendor has the
responsibility to both place order when stock is less i.e. manage inventory, to transport raw
materials as well as finished products and all other responsibility in maintaining quality and
quantity during warehousing and transportation.
4) A third-party logistics provider (abbreviated 3PL) is a firm that provides service to
its customers of outsourced (or "third party") logistics services for part, or all of their supply

chain management functions. Third party logistics providers typically specialize in integrated
operation, warehousing and transportation services that can be scaled and customized to
customers' needs based on market conditions, such as the demands and delivery service
requirements for their products and materials
Implementing a Successful Third Party Logistics Provider Project by SKF
Outsourcing Strategy: Without a strategy upon implementation of a third party logistics
provider (which you can find a more detailed guide here), there will be no clarity about
outsourcing and outcomes to the organizations. It should be well thought-out and measured
against the in-house solution and capabilities.
Document the Processes: To eliminate gaps in understanding and expectations of the third party
logistics provider, organizations should develop Standard Operating Procedures for all the
processes to be outsourced.
Analyze SWOT: This SWOT analysis helps to understand the strengths, weaknesses,
opportunities and the threats of outsourcing logistics versus in-house solutions.
Conducting a Comprehensive Study: The advantages, challenges and cost benefits of
outsourcing to the third party logistics provider should be documented.
Create a Robust Selection Process: Adopt a scientific selection process. Invite eligible third
party logistics providers for formal presentations on without giving any requirements. The
organization can also hire a third party to help create a short list of service providers.
Document the Expectations: Set down expectations in clear terms and include current costs.
This will help avoid confusion later.
Use a Request for Quotation (RFQ) or Request for Information (RFI): This tool will help
gather information and measure strengths and weaknesses. Be as specific as possible, especially
with forecasted quantities. The actual quantities cannot differ from forecasted or your prices may
go up. Beware of third party logistics provider over-commitment.
Do Your Homework: Making a site visit. Interviewing the third party logistics providers
existing customers. Evaluating responsiveness, ability to meet and exceed the expectations,
management team quality, experience, flexibility and other factors important to company.
Create Good Legal Documentation: Document what is agreed and what is disagreed clearly.
Address possible friction points and specify remedies.
Define Targets: Create specific performance targets not only to measure performance but also to
initiate corrective action if needed. Explore the possibility of gain share arrangement for positive
performance.

Measure and Review Performance: Use a Logistics Service Level Agreement (SLA) that is
negotiated between the customer shipper and third party logistics provider so it is a win-win
document. The key performance indicator (KPI) measurement system must be efficient and
accurate. Create qualitative measures which focus on effectiveness and quantitative measures
which focus resource efficient utilization. Some Fortune 500 companies measure performance
daily, weekly and monthly and discuss it on a quarterly basis. Changes to measurements should
be ongoing.
Develop an Efficient Costing System: This will help in understanding the costs involved in
outsourcing and help the organization measure cost efficiency and answer the question, Are we
making any money doing this? Gather detailed data about the true costs of receiving, storage,
pick-n-pack, value-added processing, special packaging, staging and loading. Avoid pallet in
and pallet out costing and consider adopting Activity Based Costing to understand variance
between projected costs and actual costs.
Create a Project Implementation Strategy: Create a project plan or road map. Be clear with
the service provider about who does what. Create a project management team should consisting
of stakeholders from both organizations. Review progress vs. planned milestones periodically to
make sure everything is on track.
Nurture the Relationship: Both the parties must nurture the relationship to make outsourcing
successful, creating mutual trust, respect and a sense of integrity.