M/s Britecolor Paints Ltd. (BPL) is a manufacturer of decorative paints for households commercial premises and industrial application.
(a) M/s. BPL had embarked on a policy of satisfying every possible customer in respect of shades, delivery and durability. Thus it went ahead and created twenty-five depots, one almost in every major city. The manufacturing base however, was maintained at Pune. The factory received information in connection with stocks from depots J once in a week and there was no inter-communication between depots. Since they were in a competitive market, price was predetermined, i.e. the manufacturer had no liberty to price the product as per one’s own choice.
(b) In their effort to satisfy the customer, M/s BPL manufactured every possible shade by combining various primary shades and would await the prospective customer to carry out the purchase. It ensured that these shades were available at each and every depot even at the cost of transportation incurred in sending goods in less than full truckload lots. This certainly provided a very high service level and customers who could get the shade as per their desire, were fully satisfied.
(c) While on one hand M/s BPL had a population of very satisfied customers, they had almost 50% of their total domestic sales lying as finish Goods inventory at various depots, on the other hand.
(d) Industrial paints, though not very customised, the respective industrial customer was quite satisfied. Consequently, the inventory of finished goods was very low in this segment. But at the same time, realisation was also lower due to stiff competition from other industrial paint manufacturers than the domestic segment.
(e) Nevertheless, the economic runs of industrial paints were always assured due to high off-take by the industrial customers.
(f) The objective of the manufacturer was to increase the realization taking into account, economic runs, inventory, seasonality and individual choices of domestic / industrial customer.
If you are appointed as the logistics consultant, then advise M/s BPL in respect of
(a) How to achieve economy in transportation, by maintaining almost same service level?
(b) Demand Forecasting technique to take care of seasonality, reduction in inventory.
(c) Information technology to substitute maintenance of high inventory without affecting customer service level.
(d) Connectivity between factory and depots (networking Diagram)
ABCL Ltd. is leading/ Fast Food Processing Company operating from Thane. It is involved in the fast food business since last 10 years and has tie up with a foreign firm operating in the same field. It handles both Vegetable as well Non—Vegetable products for which it arranges the vegetables and chickens from the local vegetable vendors and poultry farms as well as from far off places like Nasik, Pune and Aurangabad. It has very good market in Mumbai, Pune and surrounding cities. The products are sold in the brand name of ‘Nasta’ which is very popular brand amongst the young collegians and office goers. it has its ‘7,- most modern kitchen at New •Mumbai to cater the needs for fresh Nasta. Vegetables and chicken items are transported from the procurement centres of Nasik, Pune, Aurangabad using hired Trucks. While transporting vegetables and chickens there were shortages,.. damages and decomposition problems which varies from 1Y’lo 15% and there is inconsistency in the transit time the reliability of the raw material transporters is very low. Packaging of the Nasta is very good and attractive but it is not long lasting tyje. Hoever, the quality and taste are the reasons for its popularity. Nasta is sold in three different packs — party, family and individual. The Nasta looses the taste and flavour after 8 hours, if not preserved in refrigeration. The Nasta is distributed through 25 distribution centers including three at its main procurement centers of Nasik Pune, and Aurangabad.. Logistics information network is not up to the mark. ‘The procurement centers directly communicate to the operating center at Thane. Due to lack of proper co-ordination at different distribution centers it has started creating the problems of stocks, spoilage, pilferage and wastage of raw material as well as finished goods at certain distribution and procurement centers. Transportation and storage problems are identified as main culprits for the heavy losses being incurred at some centers. Holidays, festivities and college seasonably puts a lot of pressure on the existing demand and supply situation of the Nasta resulting in losses and mismanagement. Entry of multinationals has increased the competition and put a let of pressure on the Nasta. Managing Director has formed a team of Senior Executive to suggest a concrete plan to fight the competition and overcome the transport, storage and other related problems so as to increase the market share and margin.
In case you are appointed as logistic consultant to solve the problems, you are required to put forward your suggestions for:
(a) Proper transportation policy to ensure minimum transportation loss of vegetables and poultry products and reduction in the packaging costs.
(b) Demand Forecasting techniques to take care of the seasonality, reduction in inventory and shortage and other related problems.
(c) Suggestion for improved Purchase and Distribution policy.
(d) Is it advisable to have company owned dedicated transport fleet?
Mumbai four mills, provide high-quality bakery flours to commercial bakers as well as to the consumer market. The commercial buyers have consistent demand and brand-loyalty, whereas consumers have minimal brand-loyalty but also generally prefer known names over store brands. Demand is seasonal for the flours with the annual break occurring just before Diwali and slacking off dramatically during January and February. To offset these both, Mumbai Flour Mills and its major supermarket chain-accounts carry out special deals and sales promotions.
The Production planning Dept. of the company located at Akola, Maharashtra, has the responsibility for controlling the inventory levels at the plant warehouse at Nagpur as well as three distribution centres located at Nasik in Maharashtra, Bhopal in Madhya Pradesh and 1-lyderabad in Andhra Pradesh. Planning has been routinely based on past experience and history. No formal forecasting is performed. Distribution centres get their requirements by rail from Nagpur. The lead time of replenishment from Nagpur to distribution centres is 7 days. The replenishment rate is 48 to 54 pallets per wagon depending upon the type of wagon used. In case of any emergency demand, eighteen pallets can be made available by truck with a 3 days transit time.
Recently the company has experienced two major stock out for its consumer-size 5 Kg. sacks of refined quality white flour. One of these was due to problems in milling operations, the other occurred when marketing initiated a “buy one, get one free” coupon promotion. Since these events, the planning has become overly cautious and errs on the side having excess inventories at the distribution centres. Additional, two other events have affected Distribution Centre’ throughput:
(1) implementation of direct factory supply for replenishing the five largest super market chains, and (2) a price increase making Mumbai Flour more expensivethan its national brand competitors such a Pillsbury or ATA Maida.
Of 1500 pallets in the Hyderabad Distribution Centre the Mumbai Flour Mills shows only 396 pallets for open orders. This has led the company to use outside overflow storage, where there are another 480 pallets. Flour is easily damaged, hence, Mumhai Flour Mills prefers to minimise handling. Over stocking
at Distribution centres alone cost Rs. 1.85/- per pallet for outside storage to which must be added Rs. 4.25 per pallet extra handling and Rs. 225 per truckload for transportation.
Similar scenarios are being played out at the other DCs as well. Mr. Mohan, the distribution manager is contemplating various approaches to solving the inventory problem. It is clear that the product must be in place at the time a consumer is making a decision to buy the product, but the company cannot
tolerate the overstocking situation and the stress that it is putting on facilities and cash flow. Mr. Mohan’s first thought is “a better information system” which will provide timely and accurate information throughout the organisation.
On the basis of above case answer the following:
(1) Evaluate the alternative solution that could be considered by Mr. Mohan.
(2) What additional solution do you propose?
(3) Examine the transportation system and its drawbacks?
M/s Modern Garments is the manufacturers of Ladies and Gents garments like shirts, tops and undergarments etc. The technology is advanced and there are several players with access to such latest technologies. The supply chains for M/s Modern Garments includes significant purchases of raw material, stitching, packaging and supply to customers. The logistics functions are the key competitive elements in the market, M/s Modern Garments is considering to take over the control of its inbound and out bound logistics function which affect the inventories, reduce the losses due to transit delays and improve the response timeand service reliability. However the cost implications of such changes have to be looked into.
The M/s Modem Garments has been a leader in the readymade shirts market in India for a number of years. After liberalization they entered into a joint venture with a French Company to expand their business in the field of Trousers and T-shirts. However new joint venture company M/s Modern Garments still continues to manufacture its shirts at Thane near Mumbai and has started a new state-of-art garment manufacturing plant at Pune in Maharashtra to compete with other market players. The company has planned to undertake the distribution of garments made and packed in its plants at New-Mumbai and Kalyan so as to retain the control over design, quality and service channel of the products.
After liberalization, the market has grown more matured and expectations of the customers towards the features of the product have increased and also the technology and design has improved considerably. Now in the market only garments with good delivery quality are acceptable. All the competitors have equally good quality product in the market. Presently the area of logistics distribution, customer service and satisfaction are the area of prime concern in order to have extra value addition to the product. The product defects due to stitching, cutting and transportation are now under increasing scrutiny.
From the cost control point of view, the amount of money held up in distribution pipeline is significant. The large variety of garments now means more raw materials to be held in stocks. Presently the incoming supplies are arranged by the vendor firms, they may be persuaded to opt for jointly approved transporters. Due to product variations, the order fulfillment and its processing is of considerable importance. The traditional information system has become inadequate. There are over 500 retail outlets through which the finished products are distributed with the help of more than 50 transporters. Lead- time variability is creating problem of buffer stocks• with distributors. The transit time fluctuations are due to the breakdown of trucks, improper documentation and unfair practice of over charging of the vehicles etc. Such variability has to be reduced. Major portion of logistics cost was allocated in fleet management; where as warehousing, raw material management and information networking have insignificant costs.
(i) Examine the possibility of alternatives in transportation of the inbound and outbound materials?
(ii) How to reduce the cost of inbound and outbound logistics functions?
(iii) What could be the major problem in exploiting the inbound and outbound logistic functions?
(iv) Is it advisable to have dedicated transport system to operate packaged materials mainly for the company?
(v) What arrangements have to be made to ensure the service quality for customers?
M/s Ador Electrodes Limited (AEL) was incorporated in the year 1981 and is the second largest player in the welding industry in India & has the widest product range amongst all its competitors. As it has happened to a the industries, the heat of the competition coming from the International Companies, mainly from China, started affecting to this industry too.
‘The company has four state-of-an-art manufacturing plants accredited with ISO certification & backed by strong technical support from their foreign collaborators. The company is also having a well established all India distribution network consisting of numbers of dealers. The products flow from the manufacturing plants to the warehouses, managed & maintained by the company, located at different places across the country. The dealers draw their requirements from these warehouses for onward delivery to their customers, The inventory of the products is under the ownership of the company and is maintained as per the anticipated demand in the region. Primary transportation from the plant to the warehouses is the responsibility of the company, whereas the transportation from the warehouse to the customer is the dealer’s responsibility.
The biggest drawback in the present system is that the inventory at all warehouses is carried by the company, blocking the huge amount of company’s working capital. The level of average inventory they maintain is equal to their 6 months sales requirements. Over & above, in many places where the sales are low, the stocks remain unsold for longer periods. Moreover, because of improper maintenance of these warehouses the stocks also get damaged I spoiled or stolen. The warehouses are managed by the employees of the company having no ‘basic qualifications & experience in inventory and warehouse management.
The management of the company took a serious note of the situation and now wishes to take immediate steps to overcome the current logistical problems to face the competitive scenario.
1. What are the company’s present logistical problems?
2. Give your recommendations for improving the company’s logistical performance?
1967 M/s. Vijay Enterprise ventured into trading of electronic consumer durable targeting the large potential market in the year 1970, the company managed to get the exclusive dealership of a leading electronic manufacturing company in India to market their products in the Western Indiá. Later on, the company with a view to create their own brand in the market established a plant in Maharashtra & started their own manufacturing activities. With a manufacturing capacity under their belt, the company increased their turnover tremendously in the next 20 years with the help of all India distribution network consisted of 4 regional offices, 4 mother warehouses, 12 C & F agents & 75 stockists & 5000 odd retail outlets.
After the liberalisation of the Indian economy in 1991, the entire business scenario- particularly in consumer durable industry – has undergone a drastic change. The company started experiencing the pressure of competition from local as well as international players. It was observed that during the last 5 years sales growth has come down and the company is losing its market share slowly& steadily.
The external agency that conducted a study for the Company came out with their following observations.
1. At all levels in the company employee orientation is towards production rather than marketing
2 The cost of product distribution is the highest compared to the Industry standards
3. The warehouse space was urderutilized — the utilization factor varies between 95 % during the peak season and drop to 40% during the slack season.
4. There is duplication of many logistics operations. Every department has their own policies I practices and objectives.
5. In more than 20 per cent of the trips made to mother warehouses / C& F agents, the products are despatched in less than full truckloads, resulting in high transportation costs.
6. Only 65 % of shipments were delivered on time, as a result of slow information flow and inadequate connectivity across the system causing longer order processing time.
7. Transit damages were ranging between 2 to 5 % due to improper logistical packaging and inadequate material handling equipment.
8. The finished goods inventory is above the best managed company in the industry
1. Identify the main logistical problems of the Company
2. To offer better customer service level and reduce the operating cost, how will you go about redesigning the distribution network?
M/s. Decorative Laminates Corporation (DLC) is a supplier of decorative sheets for wooden furniture makers in domestic as well as commercial markets. In spite of competition n this field their sales volumes shown growth during last 2 to 3 years. The last year was recorded 15% more sales compared to previous year. Even though the sales volume are increasing• the profit margin is getting reduced day by day due to future competition.
In one of the monthly management review meetings it was observed that the main cause for depleting profitability is the increasing procurement costs. . The report presented by the new Purchase Manger revealed that in order to obtain quantity discounts from the suppliers the company was purchasing inputs & other maintenance items much more than their actual requirements. This has not only created a problem of holding huge inventories but necessitated hiring of additional warehouse space to accommodate these high inventories. It has also been observed that most of the purchasing tasks like inventory control are still performed manually. The computers are used only for maintaining purchasing records and printing purchase orders.
1. What is the main problem in this case? What are your suggestions to the company on inventory management?
2. What type of logistical cost approach you would suggest to the company?
M/s. Compu-Tech is on the reputed Indian companies producing various types of computer printers. Their production plant is situated at Noida in northern India and the products are distributed through distribution centers located in every region.
The company introduced LS popular line of Desk Jet printers first time in India in 2005. Immediately on the launch of this products
The solo more than one lacs units during that year. But the problems came with the boom in sales. Already, the company was running into serious inventory snags, particularly with service to its customers situated In southern region. The printers were generally shipped to all the distribution centers & onward to the customers by road only. Unfortunately, that resulted in long lead times, making It tough to meet the shorter delivery time offered by the local sellers mainly from Southern India.
The Company also found itself running short of production capacity to meet the quantity requirements of certain large institutional & industrial customers. To add to it, quite often the company was running out of stock for certain fast moving models and at the same time facing problems of excess inventory of other models. Working out product wise demand from each market was also proving difficult for their manufacturing plant.
1. What are the main problems in the logistical network of M/s. Compu-Tech?
2. What solutions would you propose o overcome these problems?