Larsen and Toubro: Spare Parts Forecasting Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Larsen and Toubro (L&T) was India's greatest technology, construction engineering and manufacturing company. Construction and Mining Business (CMB) sold gear like Dozers Dozer Shovels, Dumpers, Hydraulic Excavators, Motor Graders, Pipe Layers, Surface Miners, Tipper Trucks, Wheel Dozers and Wheel Loaders. CMB additionally supplied the professional services of commissioning and gear installation and other care services. Supply of spare parts was critical, since the customer confronted severe losses in the event of a missing gear. Forecasting was based on ad hoc basis and predicated on the experience of planning personnel. The cost value of every part lied in the range between INR 10 to INR 8 million.

Larsen and Toubro Spare Parts Forecasting Case Study Solution

Therefore it was crucial to keep a correct balance for the spare-part stocks, since unavailability reduced profitability, and customer grievances led to loss of earnings and also gave rise to the fake products industry. Excess inventory resulted in high inventory carrying costs, working capital lock-in and also a possibility of spare parts becoming obsolete. Vijaya Kumar, Deputy General Manager of CMB, needed to arrive with an error of less than 10% for the 20,000 spare-parts that are peculiar at a forecasting methodology. This warranted for 20,000 forecasting models, yet this wasn't only time consuming but also very expensive to develop and manage. Kumar wanted to construct the forecasting model immediately so he could roll out the forecasting strategy on a pan-India basis within several weeks.

PUBLICATION DATE: January 30, 2015 PRODUCT #: IMB499-PDF-ENG

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