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100 views12 pagesCase Studies LCSM
logistics and supply chain
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Sheik KifaCopyright
© © All Rights Reserved
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/ 12
Case Studies |
Akash Ispat Engineering Company Limited
It is 9.30 a.m. The rays of tl
the northeast wall ea eae in through the sheer glass that comprises
‘ oes g Company Limited’s board:
: Ba a prea having a sales turnover of about 700 pee
of just 6 people has made the room seem larger than it is. Azim Ahmad, a man a Teast
: . 5 late 50s,
ie o Pca who joined the company since its incorporation. At
ae oe a - ce who always loves his machines and never wants
ee ae ‘oa ae . having a long experience of a public sector steel company
Ae fe ue to stockout situations. K. Mathur (ED), highly successful,
| always looks like a dangerous man. Arun Lal, a traditional traffic
manager, always offers his justification in quantitative and competitive Terms. Kashi Nath,
Purchasing Manager, quite a young man possesses a management degree from one of the top
5 institutes of India. He always keeps his hands in Mathur's gloves and is extremely conscious
about inventory costs. D. Sahu, head of finance, a CA. is dedicated to cost reduction.
Past performance of the company has been quite impressive but since the last two
quarters, problems are cropping. Customers are making complaints regarding failure to meet
‘tments. Transportation costs are increasing. Competition is increasing and
conomic slump.
led by the CEO to review the performance 1 general, and
inventory and transportation costs in particular, along with customer complaints.
K. Mathur: Look at the transportation cost. It has increased by 2.5%. If continued, it will
eat us. We must realize that today, transportation has tremendous ate pare |
‘Arun Lal: I know that transportation cost has increased by 25% in the last 6 ae oe
Mr. Nath’s policy of JIT inventory sy: m. He never ae es
not in a position to ensure & full-load to transporter 3 . ci
fe to opt for more speedier modes of transportation. © el
‘am helpless.
delivery commit
demand is decreasing due to €
Hence, the meeting is cal
it is mainly due to
inventory. That is why 1 am
time. Quite frequently. I hav
freight, to ensure timely delivery: I
179 [LOGISTICS MANAGEMENT |
Kashi Nath: (Interrupts) Mr. Lal, as we are saving @ Jot by means of this system. I prefer
air freight to make sure of getting what T need 0 TE ca someth
“aeim Ahmad: (Supports Mr. Lal and comments) ‘And when s ing, I need it
, i frequently, we get producti
a ensive proposition. Quite © get production
immed Teer 1 oP make use of airfeigh o ment
rily, [have to opt for overtime an
delivery dates. i
oe Harbhajan Singh: Whatever the problem, we must have an effective pipeline. When I am
ot getting things in time, ow can I meet the sales targets? We are losing our image and will
soon lose the sales. Competition is mounting.
K. Mathur: (Interrupts and says) No mot
cutting costs
‘Kashi Nath: (Defending himself) The lead-time problem can be sorted out by a trade-off
between sales and production forecast. I need information earlier.
Harbhajan Singh: Customers insist on promised prompt delivery and I am helpless.
Azim Ahmad: Since a long time back, I have been insisting on the merger of purchasing
and waffic in order to get closer to production.
K. Mathur: (Quite frustrated) If we want to survive, we have to cut transportation as well
as inventory costs
‘Our competitors are now offering ready delivery,
re arguments and excuses. I want action towards
D. Sahu: I appreciate the great job of Kashi Nath because our inventory carrying cost is
down by about 45%. But I do agree that transportation cost has increased considerably.
K. Mathur: (Concludes the meeting with his remarks) I partly agree with Azim’s idea.
But in my opinion, we must have an integrated system for all types of inventory and traffic
management.
Mathur, further asked Kashi Nath to submit a blueprint within a fortnight to him, with
a plan of action
Questions
Discuss the basic problem of the firm alon,
development of the problem.
2. Should Kashi Nath devel ii
a OP an integrated system to minimize total logistical cost? If yes-
8 with the situations responsible for the Bombay Limited
case sTubiEs | EEX
Bombay Lid., a cash rich ci
business of fruit pul pie ate a leading fruit processing company and involved in
exported and have very limited fe a natural fruit syrup (Sarbat). The fruit pulp is mainly
inarbel ‘They are selling er pragka : metros, whereas Sarbat is having very good domestic
Tie ae ae under the very popular brand “Natural”.
Es aeieepaatel mate Plant, which is located near Bhopal. The fruits are purchased from
cea iy Hecate such as grapes from Nasik, etc. To make effective localized
ved Bangalore. in each Mr procurement centres that are located near Mumbai, Delhi, Kolkata
pitas sot Aa ‘urement centres they have very good cold storage facilities. The
ee are a - procurement centre to factory using hired trucks. While
hs = jouse to factory, there were shortages and also damages/
tN at varied from 15% to 25% and also there were inconsistency in transit time.
" e “Natural” packaging (Glass Bortle-can be used as Jug/Mug) is one of the reason for
poral larity of this brand. The quality and taste of syrup had created very good consumer base
for Sarbat. The Sarbat is sold in ten different variants and three different packaging sizes. The
Sarbat loses the taste if it is kept for longer period (2 months) in normal condition. The taste
remains best if it is kept in cold conditions. The Sarbat is distributed through 20 different
distribution centres including 4 procurement centres and are equally distributed in each zone.
These centres are directly reporting to factory and passes information once a week. These
Sarbat were packed in very strong secondary packaging, even then there were 18% to 20%
damages in transit.
“There was excess inventory in some of the distribution centres while shortages in others.
‘Also, specifically in summer season there were complaints about quality (change in taste) of
syrup.
Entry of multinationals with synthetic Sarbat increased the competition and put lot of
pressure on “Natural”. Managing Director ‘of Bombay Ltd. formed a team of Senior Executives
to come with concrete plan to fight the ‘competition and increase market share and margin. And
they decided to appoint a Logistic Consultant to overcome some of the problems.
“The Managing Director wants to appoint you as logistics consultant to solve the following
problem so that the company can fight the competition and increase market share and margin.
Questions
1, Suggest proper transportation policy 10 ensure ‘minimum transportation loss of fruits and
Sarbat and reduction in packaging cost
2, Suggest the appropriate distribution method to maintain the quality of Sarbat
3, Develop a demand forecasting technique to take care of seasonality, reduction in inventory
and shortage at some areas.
4, Suggest the use of informalll® technology to substitute maintenance of high inventory
without affecting customer Service level.
tablish a connectivity between Fctony and distribution centres. (Networking diagram). i =.
[LOGISTICS MANAGEMBNT
New City Shop
New City Shop (NCS) is a small independent supermarket operating in Chembur—a suburb of
Mumbar The shop has managed to maintain profitability over the past twenty years. The
2 cK ‘a large national retailer, is situated about 5 kilometres away, fifteen
Neate cone oes ae id is conveniently located f
minutes away by car. NCS has relatively high margins an ly for the
-to-high-density housing.
See are Small building equally divided between the retail/display section
and the warehouse section, The warehouse is at the rear of the building and is used to store
safety stack. Each week, Mrs, Usha, the owner-manager of New City Shop, walks through the
store. examines the shelves and determines which items are low or out of stock. After
determining the current status of stocks on the shelves and allowing for safety stock already
con the premises. Mrs. Usha places replenishment orders. Usha bases the quantity to order on
her own estimate of demand for each item, taking into account the minimum size of each order.
Due to relatively slow turnover and small size of the shop, Usha limits the variety to one brand
per product.
Usha has just learnt that a property developer is demolishing the abandoned bungalow
nearby and will build a large retail complex just around the corner from NCS. Usha has also
discovered from the local corporator that a major tenant of the centre will be a store belonging
to a large. publicly listed supermarket chain.
From her own research, Usha has learnt that this new retailer's motto is “higher service.
lower prices guaranteed.” She has also learned that the company uses principles such as just-
in-time inventory control, centralized warehousing facilities, and vendor-managed inventory
The retail outlet also makes extensive use of bar coding, especially in inventory management
and automated ordering. Inspection of proposed plans showed that the new store would be
seven times the size of New City Shop, but would use about the same amount of space for
warehousing
Usha’s lease is up for renewal at the same time
Usha comes to you for assistance since
Management. Usha seeks your advice and a
Practices. She also wants to know how her st
and low stockout rates with such a small s
as the proposed opening of new store
you have a solid understanding of Logistics
n explanation of these new, unknown terms and
‘ore could possibly provide high service, low prices
torage area.
Question [
Lotsafood
Case STUDIES] ELEM
Lotsafood, establi
eee Ga ae a a product line of canned vegetables, fruit
India. -salers in several States in North and Eastern part of
Lot '
ae unetton, are that was designed to improve Lotsafood’s service to its
ee a ee sales representatives. This programme was based on two
import features: (1) Seeing snes representatives from oder taking and (2) receiving orders
Cera enien letermined schedule. First, the company’s sales representatives were
2 orders. Previously, they had to accumulate wholesaler orders
until they had enough volume to makeup rekon then they would send the orders to the
. 1¢ new programme, wholesalers were to e-mail their orders directly to the
Nea fie escording 0a fixed schedule. If they missed their fixed date, they had to wait for
next one.
‘These procedures were designed to increase the number of calls that the sales
representatives could make. By eliminating the need to prepare orders, Lotsafood hoped the
Sales representative would spend more time determining sales patterns and the effect of sales
promotions. Under the new programme, each sales representative could be more of @
salesperson and less of an order taker.
Unfortunately, many wholesaler neglected to follow the pre-determined order schedule.
‘They were not accustomed to having someone tll them when to order and some objected fe
the regimentation and lack of flexibility. Others had become dependent on the sales
reeresentatve to determine what ther requirements were and believed thatthe new programme
made more work for them.
rere “Srders didnot reach Lotsafood’s head office according to the schedule, the
ssholcater hd to wait for two weeks. When a stockout occured, the affected wholesnet could
vance SO% of sales of Lotsafood's products, but only Lotsafood suffered Wholesalers and
ton oo Nearsed several product ine, 90 when they ran ont of Losfood brands, they simply
sold other brands.
other rar has no integrated logistics department to deal with distribution activities. In the
pas, tvee sales representatives arranged transporah When they accumulated 15,000 kg. in
Dash approaching a full-trck load), they would send orders to Lotsafood’s head office
prdet pment. To expedite a shipment for an anxioNs ‘wholesaler, a sales representative in one
tor enema try to pool orders with another sees representatives. However, the new practice
area what the head office would ship according Me fixed schedule and arrange the shipment
meant inolesalers, even if the orders toalled less than 15,000 kg.
Questions
e benefits and shortcomings of the Lotsafood system for taking orders.
wide better service to Lotsafood’s customers, improve sales
Lotsafood and the wholesalers.
1. Discuss tht
jen a system that will pro
2, Design a sy’ eae
‘and build closer 6 nn oR 7
Fantastic Food World
Fantastic Food World (FFW) is no organized way to handle retums of
Eqstern States of the country. FAY ms) (2) non-defective products (€.8. good products
(1) defective products (e.g. spoited foa (eg. soda bottles), and (4) recyclable items (¢
returned by the purchasers), (3) reusable items “8: Fantastic Food World simply al g
‘aluminium cans, plastics and paper bags). Currently, Fat eee ply allows
returns to be handled by the clerk on duty at the time of 1 . Is No set of
procedures for handing atx volume is somehow ted 0 fetums (poled items, empy
soda bottles returned for full soda bottles and so on). Like most grocery chains, FFW operates,
‘on a very thin margin. A reverse logistics programme would improve customer service while
rminimizing costs. Such a system must be designed to handle each of the following:
‘These products are defective, spoiled and the like. Customers
must be allowed to return these products and receive a non-defective replacement or a refund.
Then the store should attempt to determine how the product became defective. Many steps in
the logistics process could have been responsible for the damage to the product. For instance,
many grocery products must be reftigerated throughout their travel. If the carrier or warehouse
provider is responsible for the damage, the grocery store needs to receive credit since the food
chain is not responsible for the damaged product. If the product was defective when it was
purchased, the product must be returned to the wholesaler for credit. Regardless, FFW must
have a logistics system designed to send the product backward through the supply chain.
grocery chain operating in North and North
1. Defective products.
2. Non-defective products. These products are usually returned to the store in perfect
condition, but the customer wants a refund or exchange. The store needs to have a “mini-
reverse logistics system” in place, to quickly restock the item so that it can be resold. The store
also needs an information system sufficient to track these returns, track refunds and maintain
inventory records.
= 3. Reusable items. Some items are returned for reuse. Sometimes grocery stores sell
ain bottles. Once empty, the botles are returned, a credit given, and the empty botles ae
rolced with fall bots The reverse logistics system for this segment of items must Be
igned to take the empty bottles back from the c Jee
eee customer and then return them to the sod:
4. Recycleable items. ‘The store is also in
consciousness of local communities. The sto
to collect aluminium cans, paper and plat
terested in contributing to the environmental
re wants to implement a reverse logistics system desig
ic items, as well as newspapers and glass containers
Questions
Design a reverse logi
The system must achieve suffi CASE STUDIES | (EEE
pynamic Sports Company
ied in Chandigarh, DSC manufactur
Me "eta, the company had aay SPortswear and equipment. Started in 1990s by
Meee uc to “healthy lifestyle” campergn en Profits because of fierce competition. In
soe During the year 2001, Mi n sweeping across India, sales began to increase
rapidly g the ye r. Ketan recruited Mr. Amit as a Li
ceived his MBA Degree in Logistics from Mumbai Uni as a Logistics Manager. Mr. Amit
we logistics profession. iversity and has substantial experience
Oia Consists of five departments headed by the managers who
eee ee etan. These five departments are production, finance, marketing,
logistics and administration. Mr. Ketan employs a democratic style of management, where each
has the right to comment on and recommend improvements. Mr. Ketan is glad that the
departments can work cohesively and assist each other.
One hundred employees work at DSC’s only plant, located at Mohali near Chandigarh.
The raw materials, mainly plastics and metals, are stored in the company warehouse near the
factory. Mr. Ketan believes that having a warehouse near the factory will ensure smooth
operations. Finished goods are transferred to a public warehouse at Noida near Delhi. From
there, the products are delivered to the retailers.
DSC distributes its products to four major retailers. One of the four retailers, Metro Mass
Merchandisers (MMM), holds about 50% of the market share. Recently, MMM informed the
logistics manager, Mr. Amit, that too many late deliveries from DSC had affected MMMs
customer service levels. Mr. Amit said that he would look into the former.
Recently, DSC's competitors built manufacturing and distribution facilities in
Gurgaon. These new facilities, normally production type factories, have caused sporting goods
wholesale prices to drop. Mr. Ketan realized that this threatens DSC and will dramatically
affect sales.
ture of DSC is that it maintains a large supplier base. DSC has
One distinguishing fea s
about forty raw materials supplier. Mr. Ketan believes that a large supplier base is good because
s and will give some competitive advantage
it encourages price competition among the supplier:
‘0 the company.
DSC uses a private fleet of twenty-five trucks to deliver the products to its retailers’ warehouse
same lic warehouse.
‘ ‘oducts from its own site to the public wi
ne earn th his managers to develop a new strategy for
Mr. Ketan quickly called for a meeting wi
the evolving aah market jin an attempt to protect profitability. Daring cS mectng, ie
Marketing manager pointed out that to remain competlive Oe ee eee
C0st supplier of high quality products”. The production marae cle that to
Stategy. But he questioned how to become a low-cost supplies when a
nf
i 15% because of the increase in raw mit open
ieee eal had been rising. Together, these cost Ine reases had raise’
Price of DSC’s products. ack from MMM
