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.
- At all levels in the company employee orientation is towards production rather than marketing
- The cost of product distribution is the highest compared to the Industry standards
- The warehouse space was urderutilized — the utilization factor varies between 95 % during the peak season and drop to 40% during the slack season.
- There is duplication of many logistics operations. Every department has their own policies I practices and objectives.
- 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.
- 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.
- Transit damages were ranging between 2 to 5 % due to improper logistical packaging and inadequate material handling equipment.
- 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 of overcome these.