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MANAGERIAL ECONOMICS
Attempt Any Four Case Study
CASE – 1 Dabur
India Limited: Growing Big and Global
Dabur is among the top five FMCG
companies in India and is positioned successfully on the specialist herbal
platform. Dabur has proven its expertise in the fields of health care, personal
care, homecare and foods.
The company was founded by Dr. S. K.
Burman in 1884 as small pharmacy in Calcutta (now Kolkata), India. And is now
led by his great grandson Vivek C. Burman, who is the Chairman of Dabur India
Limited and the senior most representative of the Burman family in the company.
The company headquarters are in Ghaziabad, India, near the Indian capital New
Delhi, where it is registered. The company has over 12 manufacturing units in
India and abroad. The international facilities are located in Nepal, Dubai, Bangladesh,
Egypt and Nigeria.
S.K. Burman, the founder of Dabur,
was trained as a physician. His mission was to provide effective and affordable
cure for ordinary people in far-flung villages. Soon, he started preparing
natural remedies based on Ayurved for diseases such as Cholera, Plague and
Malaria. Due to his cheap and effective remedies, he became to be known as
‘Daktar’ (Indianised version of ‘doctor’). And that is how his venture Dabur
got its name—derived from Daktar Burman.
The company faces stiff competition
from many multi national and domestic companies. In the Branded and Packaged
Food and Beverages segment major companies that are active include Hindustan
Lever, Nestle, Cadbury and Dabur. In case of Ayurvedic medicines and products,
the major competitors are Baidyanath, Vicco, Jhandu, Himani and other
pharmaceutical companies.
Vision, Mission and Objectives
Vision
statement of Dabur says that the company is “dedicated to the health and well being of every household”. The
objective is to “significantly accelerate
profitable growth by providing comfort to others”. For achieving this
objective Dabur aims to:
· Focus on growing core brands across
categories, reaching out to new geographies, within and outside India, and
improve operational efficiencies by leveraging technology.
· Be the preferred company to meet the health
and personal grooming needs of target consumers with safe, efficacious, natural
solutions by synthesising deep knowledge of ayurveda and herbs with modern
science.
· Be a professionally managed employer of
choice, attracting, developing and retaining quality personnel.
· Be responsible citizens with a commitment
to environmental protection.
· Provide superior returns, relative to our
peer group, to our shareholders.
Chairman of the company
Vivek
C. Burman joined Dabur in 1954 after completing his graduation in Business
Administration from the USA. In 1986 he was appointed Managing Director of
Dabur and in 1998 he took over as Chairman of the Company.
Under Vivek Burman’s leadership,
Dabur has grown and evolved as a multi-crore business house with a diverse
product portfolio and a marketing network that traverses the whole of India and
more than 50 countries across the world. As a strong and positive leader, Vivek
C. Burman has motivated employees of Dabur to “do better than their best”—a
credo that gives Dabur its status as India’s most trusted nature-based products
company.
Leading brands
More
than 300 diverse products in the FMCG, Healthcare and Ayurveda segments are in
the product line of Dabur. List of products of the company include very
successful brands like Vatika, Anmol, Hajmola, Dabur Amla Chyawanprash, Dabur
Honey and Lal Dant Manjan with turnover of Rs.100 crores each.
Strategic positioning of Dabur Honey
as food product, lead to market leadership with over 40% market share in
branded honey market; Dabur Chyawanprash is the largest selling Ayurvedic
medicine with over 65% market share. Dabur is a leader in herbal digestives
with 90% market share. Hajmola tablets are in command with 75% market share of
digestive tablets category. Dabur Lal Tail tops baby massage oil market with
35% of total share.
CHD (Consumer Health Division),
dealing with classical Ayurvedic medicines has more than 250 products sold
through prescription as well as over the counter. Proprietary Ayurvedic
medicines developed by Dabur include Nature Care Isabgol, Madhuvaani and
Trifgol.
However, some of the subsidiary units
of Dabur have proved to be low margin business; like Dabur Finance Limited. The
international units are also operating on low profit margin. The company also
produces several “me – too” products. At the same time the company is very
popular in the rural segment.
Questions
1.
What
is the objective of Dabur? Is it profit maximisation or growth maximisation?
Discuss.
2.
Do you
think the growth of Dabur from a small pharmacy to a large multinational
company is an indicator of the advantages of joint stock company against
proprietorship form? Elaborate.
CASE –
2 IT Industry: Checkered Growth
IT
industry is now considered as vital for the development of any economy.
Developing countries value the importance of this industry due to its capacity
to provide much needed export earnings and support in the development of other
industries. Especially in Indian context, this industry has assumed a
significant position in the overall economy, due to its exemplary potentials in
creating high value jobs, enhancing business efficiency and earning export
revenues. The IT revolution has brought unexpected opportunities for India,
which is emerging as an increasingly preferred location for customised software
development. Experts are estimating the global IT industry to grow to US$1.6
million over the coming six years and exports to reach Rs. 2000 billion by
2008. It is envisaged that Indian IT industry, though a very small portion of
the global IT pie, has tremendous growth prospects.
Stock Taking
The
decade of 1970 may be taken as the stage of introduction of the Indian IT
industry. The early years were marked by 75 per cent of software development
taking place overseas and the rest 25 per cent in India. Exports of Indian
software until the mid-1970s was mainly Eastern Europe, followed by US. Tata
Consultancy Services (TCS) was among the pioneers in selling its services
outside India, by working for IBM Labs in the US. The hardware segment lagged
behind its software counterpart. With instances of exports worth US$ 4 million
in 1980, the software segment of the industry has shown an uneven profile. It
was not until 1980s that vigorous and sustained growth in software exports
begun, as MNCs like Texas Instruments started to take serious interest in India
as a centre of software production. Destinations of export also underwent
changes, with US dominating the main export market with 75 per cent of the
exports. The IT Enabled Services (ITeS) segment, however, had not emerged at
this stage.
It was also during the mid to late
1980s that computer firms shifted focus from mainframe computers (the mainstay
of MNCs) to Personal Computers (PCs). In March 1985, Minicomp installed the
first ever PC at CSI, Delhi; this changed the entire industry for good. With
the entry of networking and applications like CAD/CAM, PC sales soared in
1987-88, touching 50,000 units.
From a modest growth in the mid-1980s
software exports moved up to Rs. 3.8 billion in 1991-92. Since then, it grew at
an incredible rate, up to 115 per cent in 1993. The hardware could also
register an annual growth of 40 per cent in this period, backed by a surging
demand for PCs and networking. Growth of the industry was also driven by the
emergence and rapid growth of the ITeS segment.
IT sector’s share of GDP rose
steadily in this period, rate of increase being the highest at 44.91 per cent
in 2000-01. It was in the same year that the size of the total IT market was
the biggest in the decade, at Rs. 56,592 crore. The overall IT market was also
found to increase till 2000-01. The overall IT market was also found to
increase till 2000-01, with the only exception of 1998-99. The domestic market
also showed an overall increase till 2000-01, registering a spectacular CAGR of
50.39 per cent. Aggregate output of software and services also increased in
this period, though at an uneven rate. Of approximately $1 billion worth of
sales in 1991-1992, domestic hardware sales constituted 37.2 per cent (13.4 per
cent growth over the previous year), exports of hardware 6.6 per cent.
During 2000-01 the growth in the hardware
segment was driven mainly by PCs, which contributed about 58 per cent of the
total hardware market. This period also witnessed the phenomenon of increasing
share of Tier 2 and cities in PC sales, thereby indicating PC penetration into
the hinterland. PC shipments had increased by 35 per cent every year from 1997
till 2000-01 when it reached 1.8 million PCs. The commercial PC market saw a
growth of 23.5 per cent mainly due to slashing of prices by major vendors.
It was in 2001-02 that the industry
had a sharp fall in rate of growth of its share of GDP to 5.90 per cent, from
44.91 per cent in the previous year. The total IT market also showed a fall in
growth rate from 56.42 per cent in 2000-01 to a mere 16.24 per cent in the next
year, growing further at the rate of 16.25 per cent in the next year. Software
export was also affected, registering a low growth of 28.74 per cent and failed
to maintain its growth rate of 65.30 per cent in the previous year. It got
further lowered to 26.30 per cent in 2002-03. CAGR of total output of software
and services (in Rs. crore) came down to 25.61 in 2001-02 and further to 25.11
in 2002-03. The domestic market showed a steep decline in growth to 3 per cent
in 2001-02 from an outstanding 50.39 per cent in 2000-01. It could, however,
recover by growing at 4.11 per cent in the next year.
Table 1:
Indian IT Industry: 1996-97 to 2002-03
|
Year
|
A*
|
B*
|
C*
|
D*
|
E*
|
|
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
|
1.22
1.45
1.87
2.71
2.87
3.09
|
18,641
25,307
36,179
56,592
65,788
76,482
|
3,900
6,530
10,940
17,150
28,350
36,500
46,100
|
6,594
10,899
16,879
23,980
37,350
47,532
59,472
|
9,438
12,055
14,227
18,837
28,330
29,181
30,382
|
|
*A: share
of GDP of the Indian IT market, B: size of the Indian IT market (in Rs. crore),
C: software and services exports (in Rs. crore), D: size of software and
services (in Rs. crore), E: size of the domestic market (in Rs. crore)
Questions
1.
Try
to identify various stages of growth of IT industry on basis of information
given in the case and present a scenario for the future.
2.
Study
the table given. Apply trend projection method on the figures and comment on
the trend.
3.
Compute
a 3 year moving average forecast for the years 1997-98 through 2003-04.
CASE – 3
Outsourcing to India: Way to Fast Track
By almost any measure, David Galbenski’s company Contract
Counsel was a success. It was a company Galbenski and a law school buddy,
Mark Adams, started in 1993; it helps companies find lawyers on a temporary
contract basis. The growth over the past five years had been furious. Revenue
went from less than $200,000 to some $6.5 million at the end of 2003, and the
company was placing thousands of lawyers a year.
At then the revenue growth began to flatten; the company
grew just 8% in 2004 despite a robust market for legal services estimated at
about $250 billion in the United States alone. Frustrated and concerned,
Galbenski stepped back and began taking a hard look at his business. Could he
get it back on the fast track? “Most business books say that the hardest
threshold to cross is that $10 million sales mark,” he says. “I knew we
couldn’t afford to grow only 10% a year. We needed to blow right through that
number.”
For that to happen, Galbenski knew he had to expand his
customer base beyond the Midwest into large legal supermarkets such as
Boston, New York, and Washington, D.C. He also knew that in doing so, he
could run into stiff competition from larger publicly traded rivals. Contract
Counsel’s edge has always been its low price, Clients called when dealing
with large-scale litigation or complicated merger and acquisition deals,
either of which can require as many as 100 lawyers to manage the discovery
process and the piles of documents associated with it. Contract Counsel’s temps
cost about $75 an hour, roughly half of what a law firm would charge, which
allowed the company to be competitive despite its relatively small size.
Galbenski was counting on using the same strategy as he expanded into new
cities. But would that be enough to spur the hyper growth that he craved for?
At that time, Galbenski had been reading quite a bit about
the growing use of offshore employees. He knew companies like General
Electric, Microsoft and Cisco were saving bundles by setting up call and data
centers in India. Could law firms offshore their work? Galbenski’s mind raced
with possibilities. He imagined tapping into an army of discount-priced legal
minds that would mesh with his existing talent pool in the U.S. The two work
forces could collaborate over the Web and be productive on a 24-7 basis. And
the cost could be massive.
Using offshore workers was a risk, but the payoff was
potentially huge. Incidentally Galbenski and his eight-person management team
were preparing to meet for their semiannual review meeting. The purpose of
the two-day event was to decide the company’s goals for the coming year.
Driving to the meeting, Galbenski struggled to figure out exactly what he was
going to say. He was still undecided about whether to pursue an incremental
and conservative national expansion or take a big gamble on overseas
contractors.
The Decision
The next
morning Galbenski kicked off the management meeting. Galbenski laid out the
facts as he saw them. Rather than look at just the next five years of growth,
look at the next 20, he said. He cited a Forrester Research prediction that
some 79,000 legal jobs, totaling $5.8 billion in wages, would be sent
offshore by 2015. He challenged his team to be pioneers in creating a new
industry, rather than stragglers racing to catch up. His team applauded.
Returning to the office after the meeting, Galbenski announced the change in
strategy to his 20 full-timers.
Then he and his team began plotting a global action plan.
The first step was to hire a company out of Indianapolis, Analysts
International, to start compiling a list of the best legal services providers
in countries where people had comparatively strong English skills. The next
phase was vetting the companies in person. In February 2005, just three months
after the meeting in Port Huron, Galbenski found himself jetting off on a
three months trip to scout potential contractors in India, Dubai, and Sri
Lanka. Traveling to cities like Bangalore, Chennai and Hyderabad, he
interviewed executives from more than a dozen companies, investigating their
day-to-day operations firsthand.
India seemed like the best bet. With more than 500 law
schools and about 200,000 law students graduating each year, it had no
shortage or attorneys. What amazed Galbenski, however, was that thanks to the
Web, lawyers in India had access to the same research tools and case
summaries as any associate in the U.S. Sure, they didn’t speak American
English. “But they were highly motivated, highly intelligent, and extremely
process-oriented,” he says. “They were also eager to tackle the kinds of
tasks that most new associated at law firms look down upon” such as poring
over and coding thousands of documents in advance of a trial. In other words,
they were perfect for the kind of document-review work he had in mind.
After a return visit to India in August 2005, Galbenski
signed a contract with two legal services companies: QuisLex, in Hyderabad,
and Manthan Services in Bangalore. Using their lawyers and paralegals,
Galbenski figured he could cut his document-review rates to $50 an hour. He
also outsourced the maintenance of the database used to store the contact
information for his thousands of contractors. In all, he spent about 12
months and $250,000 readying his newly global company. Convincing U.S. based
clients to take a chance on the new service hasn’t been easy. In November,
Galbenski lined up pilot programs with four clients (none of which are ready
to publicise their use of offshore resources). To help get the word out, he
launched a website (offshore-legal-services.com), which includes a cache of
white papers and case studies to serve as a resource guide for companies
interested in outsourcing.
Questions
1.
As
money costs will decrease due to decision to outsource human resource, some
real costs and opportunity costs may surface. What could these be?
2.
Elaborate
the external and internal economies of scale as occurring to Contract
Counsel.
3.
Can
you see some possibility of economies of scope from the information given in
the case? Discuss.
|
CASE –
4 Indian Stock Market: Does it Explain
Perfect Competition?
The stock market is one of the most
important sources for corporates to raise capital. A stock exchange provides a
market place, whether real or virtual, to facilitate the exchange of securities
between buyers and sellers. It provides a real time trading information on the
listed securities, facilitating price discovery.
Participants in the stock market
range from small individual investors to large traders, who can be based
anywhere in the world. Their orders usually end up with a professional at a
stock exchange, who executes the order. Some exchanges are physical locations
where transactions are carried out on a trading floor. The other type of
exchange is of a virtual kind, composed of a network of computers and trades
are made electronically via traders.
By design a stock exchange resembles
perfect competition. Large number of rational profit maximisers actively
competing with each other, trying to predict future market value of individual
securities comprises the main feature of any stock market. Important current
information is almost freely available to all participants. Price of individual
security is determined by market forces and reflects the effect of events that
have already occurred and are expected to occur. In the short run it is not
easy for a market player to either exit or enter; one cannot exit and enter for
few days in those stocks which are under no delivery. For example Tata Steel
was in no delivery from 29/10/07 to 02/11/07. Similarly one cannot enter or
exit on those stocks which are in upper or lower circuit for few regular
trading sessions. Therefore a player has to depend wholly on market price for
its profit maximizing output (in this case stock of securities). In the long
run players may exit the market if they are not able to earn profit, but at the
same time new investors are attracted by rise in market price.
As on 01/11/07 total market capital
at Bombay Stock Exchange (BSE) is $1589.43 billion (source: Business Standard,
1/11/2007); out of this individual investors account for only $100bn. In spite
of the fact that individual investors exist in a very large number, their
capital base is less than 7% of total market capital; rest of capital is owned
by foreign institutional investor and domestic institutional investors (FIIs
and DIIs), which are very small in number. Average capital owned by a single
large player is huge in comparison to small investor. This situation seems to
have prompted Dr Dash of BSE to comment ‘The stock market activity is
increasingly becoming more centralised, concentrated and non competitive,
serving interest of big players only.” Table 2 shows the impact of change in
FII on National Stock Exchange movement during three different time periods.
Table 2: Impact of FIIs’ Investment
on NSE
|
Wave
|
Date
|
Nifty
close
|
Change
in Nifty Index
|
FLLS
Net Investment
(Rs.Cr.)
|
Change
in Market Capitalisation
(Rs.Cr.)
|
|
Wave 1
From
To
|
17/05/04
26/10/05
|
1388.75
2408.50
|
1019.75
|
59520
|
5,40,391
|
|
Wave 2
From
To
|
27/10/05
11/05/06
|
2352.90
3701.05
|
1348.15
|
38258
|
6,20,248
|
|
Wave 3
From
To
|
12/05/06
13/06/06
|
3650.05
2663.30
|
-986.75
|
-9709
|
-4,60,149
|
By design, an Indian Stock Market
resembles perfect competition, not as a complete description (for no markets
may satisfy all requirements of the model) but as an approximation.
Questions
1.
Is
stock market a good example of perfect competition? Discuss.
2.
Identify
the characteristics of perfect competition in the stock market setting.
3.
Can
you find some basic aspect of perfect competition which is essentially absent
in stock market?
CASE – 5 The
Indian Audio Market
The Indian audio market pyramid is
featured by the traditional radios forming its lower bulk. Besides this, there
are four other distinct segments: mono recorders (ranking second in the
pyramid), stereo recorders, midi systems (which offer the sound amplification
of a big system, but at a far lower price and expected to grow at 25% per year)
and hi-fis (minis and micros, slotted at the top end of the market).
Today the Indian audio market is
abound with energy and action as both national and international majors are
trying to excel themselves and elbow the others, ushering in new concepts, like
CD sound, digital tuners, full logic tape deck, etc. The main players in the
Indian audio market are Philips, BPL and Videocon. Of these, Philips is one of
the oldest and is considered at the leading national brands. In fact it was the
first company to introduce a range of international products such as CD radio
cassette recorder, stand alone CD players and CD mini hi-fi systems. With the
easing of the entry barriers, a number of new international players like
Panasonic, Akai, Sansui, Sony, Sharp, Goldstar, Samsung and Aiwa have also
entered the arena. This has led to a sea of changes in the industry and
resulted in an expanded market and a happier customer, who has access to the
latest international products at competitive prices. The rise in the disposable
income of the average Indian, especially the upper-income section, has opened
up new vistas for premium products and has provided a boost to companies to
launch audio systems priced as high as Rs. 50,000 and beyond.
Pricing across Segments
Super Premium Segment: This segment of the
market is largely price-insensitive, as consumers are willing to pay a premium
in order to obtain products of high quality. Sonodyne has positioned itself in
this segment by concentrating on products that are too small for large players
to operate in profitably. It has launched a range of systems priced between Rs.
30,000 to Rs. 60,000. National Panasonic has launched its super premium range
of systems by the name of Technics.
Premium Segment: Much of the price game is
taking place in this segment, in which systems are priced around Rs. 25,000.
Even the foreign players ensure that the pricing is competitive. Entry barriers
of yester years compelled the demand by this segment to be partially met by the
grey market. With the opening up of the market, the premium segment is
witnessing a rapid growth and is currently estimated to be worth Rs. 30 crores.
Growth of this segment is also being driven by consumers who want to upgrade
their old music systems. Another major stimulating factor is the plethora of
financing options available, bringing more and more consumers to the market.
Philips
has understood the Indian listener well enough to dictate the basic principles
of segmentation. It projects its products as high quality at medium price. In
fact, Philips had successfully spotted an opportunity in the wide price gap
between portable cassette players and hi-fi systems and pioneered the concept of
a midi system (a three-in-one containing radio, tape deck and amplifier in one
unit). Philips has also realised that there is a section of the rich consumer
which values not just power but also clarity and is willing to pay for it. The
pricing strategy of Philips was to make the most of its image as a technology
leader. To this end, it used non-price variables by launching of a range of
state of art machines like the FW series, and CD players. Moreover, it came up
with the punch line in its advertisements as, “We Invent For You”.
BPL stands second only to Philips in
the audio market and focuses on technology as its USP. Its kingpin in the
marketing mix is its high technology superior quality product. It is thus at
being the product-quality leader. BPL’s proposition of fidelity is translated
in its punchline for its audio systems as, ‘e-fi your imagination’ (d-fi stands
for digital fidelity). The company follows a market skimming strategy. When a
new product was launched, it was placed in the top end of the market, and
priced accordingly. The company offers a range of products in all price
segments in the market without discounting the brand.
Another major player, Videocon, has
managed to price its products lower even in the premium segment. The success of
the Powerhouse (a 160 watt midi launched by Philips in 1990) had prompted
Videocon to launch the Select Sound range of midi stereo systems at a slightly
lower price. At the premium end, Videocon is making efforts to upgrade its
image to being “quality-driven” by associating itself with the internationally
reputed brand name of Sansui from Japan, and following a perceived value
pricing method.
Sony is another brand which is
positioning itself as a premium product and charges a higher price for the
superior quality of sound it offers. Unlike indulging into price wars, Sony’s
ad-campaigns project the message that nothing can beat Sony in the quality and
intensity of sound. National Panasonic is another player that has three
products in the top end of the market, priced in the Rs. 21,000 to Rs. 32,000
range.
Monos and Stereos: Videocon has 21% share I
the overall audio market, but has been a major player only in personal stereos
and two-in-ones. Its history is written with instances where it has offered
products of similar quality, but at much lower prices than its competitors. In
fact, Videocon launched the Sansui brand of products with a view to transform
its image from that of being a manufacturer of cheap products to that of being
a company that primes quality, and also to obtain a share of the hi-fi segment.
Sansui is being positioned as a premium brand, targeting the higher middle,
upper income groups and also the sensitive middle class Indian consumer.
The objective of Philips in this
segment is to achieve higher sales volumes and hence its strategy is to expand
its range and have a product in every segment of the market. The pricing method
used by Philips in this segment is providing value for money.
National Panasonic offers products in
the lower end of the market, apart from the top of the range. In fact, it
reduced the price of one of its small two-in-ones from Rs. 3,500 to Rs. 2,400,
with the logic that a forte in the lower end of the market would help in
building brand reliability across a wider customer base. The company is also
guided by the logic that operating in the price sensitive region of the market
will help it reach optimum levels of efficiency. Panasonic has also entered the
market for midis.
These apart, there also exists a
sector in the Indian audio industry, with powerful regional brands in mono and
stereo segments, having a market share of 59% in mono recorders and 36% in
stereo recorders. This sector has a strong influence on price performance.
Questions
1.
What
major pricing strategies have been discussed in the case? How effective these
strategies have been in ensuring success of the company?
2.
Is
perceived value pricing the dominant strategy of major players?
3.
Which
products have reached maturity stage in audio industry? Do you think that
product bundling can be effectively used for promoting sale of these products?
OPERATION MANAGEMENT
Attempt All Case Study
CASE – 1
The Indian Railways' ambitious Kashmir Railway Project. This was
one of its most important and difficult projects as it aimed to build a
railroad connection through the Himalayan foothills linking Kashmir with the
rest of India. The main objective of this project was to provide an alternative
and more reliable mode of transportation system to the people of Kashmir than
the existing mode of travel by road. Officially, this track was named as the
Jammu-Udhampur-Katra-Qazigund-Baramulla link (JUSBRL). The unique features of
this line, according to observers, were the presence of a major earthquake
zone, extreme environmental conditions in terms of temperature, and the most
extreme geological profile throughout the entire terrain.
Some experts lauded the Indian Railway's initiatives and how it
had overcome some of the challenges associated with the project and said that
once accomplished it would be an engineering miracle. However, it was also
criticized on many fronts and some experts believed that the project had been
bungled at the planning stage itself.
» Understand issues and challenges in executing a large
infrastructure project by studying the ambitious Kashmir Railway Project which
once accomplished would be an engineering miracle.
» Appreciate the difficulties before the project managers due to the fragile
geology and steep topography - presence of a major earthquake zone, extreme
environmental conditions in terms of temperature, etc.
» Appreciate the difficulties involved in the execution of large infrastructure
projects in developing countries, and how these can be overcome.
CASE – 2
Spain-based Mango MNG Holding SL (Mango), the flagship of a
group of companies involved in design, manufacture, and distribution of
garments and fashion accessories, sold garments for men and women and
accessories through exclusive stores. The company was started in 1984 in Spain,
and expanded rapidly to more than 107 countries across the world by 2012. Mango
went on to become the second largest textile exporter in Spain. Mango was one
of the pioneers of fast fashion. The company was able to design the garments
and send them to the stores within a span of three months.
It could also bring designs with slight modifications within
just two weeks. The case discusses Mango’s business model under which it
retained some of the core activities of its value chain in-house while
outsourcing the rest of the activities. Important activities like design and
distribution were managed completely by the company, while manufacturing, which
was a labor-intensive task, was outsourced. The company retailed through its
own outlets as well as through franchisees. This business model helped the
company expand rapidly and also minimize the risks.
» Analyze Mango's business model.
» Study the design, production, distribution, and store management processes at
Mango.
» Evaluate Mango's core and non-core activities.
» Understand which processes can be managed in-house and which ones can be
outsourced..
CASE – 3
Tthe Just-in-Time
(JIT) implementation at Harley-Davidson Motor Company (Harley-Davidson), a
US-based motorcycle manufacturing company. JIT, a philosophy developed by
Japanese companies, aims at reducing inventory and advocates the production of
only what is needed when needed and no more. After World War II,
Harley-Davidson faced fierce competition from Japanese automobile companies which
were able to produce better quality motorcycles at comparatively lower cost.
Harley-Davidson visited some of the Japanese companies and found that Japanese
companies were following three main practices: employee involvement, use of
statistical process control, and JIT. The company soon realized that in order
to beat Japanese competition, it had to implement these practices as well. The
company successfully implemented JIT practices and reaped several benefits.
After spectacular growth in the 1990s and the early 2000s, Harley-Davidson
again faced hard times from 2007. The case also looks at the challenges faced
by the company in the latter part of the first decade of the new millennium,
and how it was trying to focus on ‘continuous improvement' in a bid to bring
itself back into profits.
» To understand Just-in-time philosophy and its importance in
reducing overall production cost and enhancing product quality.
» To understand how the JIT philosophy requires the alignment of operational
strategies to achieve the goal.
» To understand the important role of having a stable supplier network for
achieving JIT.
» To understand that besides the use of statistical techniques in achieving
JIT, employees' involvement is equally important.
» To discuss the challenges faced by Harley-Davidson since 2007.
» To explore operational strategies that Harley-Davidson can adopt to overcome
those strategies.
CASE – 4
The case discusses the master franchise model of the US-based
Domino's Pizza Inc (Domino's). Domino's, which was started in the 1960s,
expanded in international markets mainly through its master franchise model.
Under this model, the franchisees were provided with exclusive rights to
operate stores, or to sub-franchise them in a particular area. Domino's
recruited franchisees with business experience and knowledge of local markets
as master franchisees, and was able to mitigate the risks associated with
entering and operating in international markets. Under master franchising, in
markets where there was high potential for development, Domino's transferred
market exclusivity to an individual/company, who had a significant presence and
knowledge about the local markets.
These individuals/companies in turn invested in establishing the
master franchise, whose responsibilities include building stores,
sub-franchising, operating distribution system, etc. The case discusses in
detail the store operations of Domino's and the benefits of its master
franchise system.
» Understand the master franchise model of Domino's and its
advantages.
» Examine some of the unique features of the master franchise model of
Domino's.
» Analyze the store operations of Domino's.
» Examine the training/support provided by Domino's to the franchisees.
» Understand how the master franchise model helped Domino's in facing the
adverse impact of global economic slowdown successfully.
SUPPLY CHAIN MANAGEMENT
ATTEMPT ANY FOUR CASE
STUDY
CASE I - A CASE OF
ALPHA TELENET LIMITED
Alpha Telecom Ltd., a part of Alpha Group was
established in 1976 by its visionary Chairman and Managing Director, A. S. Verma. The company started with manufacturing of
Electronic Push Button Telephones (EPBT) and Cordless phones in 1985 in Allahabad. On July 7,
1995 Alpha Tele-Ventures Limited was incorporated. A mobile service called
'Web-Tel' was launched in Kochin, which eventually expanded its operations in
Andhra Pradesh in 1996.
Till 1994, fixed telephone services were provided by Department
of Telecommunications (DoT) which had a monopoly in this business. This was regarded as
self-defeating because DoT was a
regulator as well as a competitor. With increasing pressure for privatisation, the government agreed to give license to private operators. Finally in December 1996, the
bill of privatisation of fixed telephone services was passed. The New Telecom Policy (NTP) with its targets for
improving tele-density was an ambitious policy. The NTP planned to achieve a tele-density (number of telephones
per 100 people) of 7 by the year 2005 and 15 by the year 2010, which translated into 130 mn lines. The policy also planned an investment
of Rs. 4000 billion by the year 2010. The above factors combined with the fact that
the domestic long distance telephony was open to private players, led to
considerable demand for the company's products. But to get the tenders from Ministry of Telecommunication,
Government of India, a license fee was to be paid over a period of 15 years and
the viability of telecom projects was also affected by the guidelines that
required private operators to earmark at least 10% of their telephone lines for villages. The operating
companies did not like the idea of
having to pay for the maintenance of lines that might not be used most of the times. The license fee of Maharashtra
state was minimum at Rs.643 crores. Thus, Alpha Telenet, a pioneer in every field wanted to avail this
opportunity and started the survey for extending the services in Pune. Their
marketing survey team provided the statistics of existing customers of DoT, the
waiting list of DoT, potential of users for successive years and so on.
Alpha
Telenet Ltd. (ATL) decided to start their fixed line telephone operations in technical collaboration with Telecom Italia at Pune in Maharashtra. Initially, they received permission for
installing their exchanges covering 0.5 km. of radius which was too small with
respect to the cost involved and thus difficult to achieve lucrative returns.
After struggling for a year, they finally got permission to set up exchanges
covering 1 km. of radius. They set up their exchanges in potential areas in the
city. Another problem was that the consumer's mindset fixated was with DoT and
they were not ready to accept the services of Alpha Telenet Ltd. This was due
to opposite tariff rates for household consumers. Consumers did not rely on ATL as they were private players. ATL initially
had attracted the customers from the areas where the waiting line for DoT
connections was high. Further, they had provided the connections with wireless
CDMA receivers for only Rs. 3000 (movable within the area of 5 km radius)
though its actual cost was Rs.15,000. The connection between exchanges by optical
fibre ensured high quality of voice and data transmission, which was later to
be shifted to the conventional copper wires for consumer connections. The
company made the connection using Ring Topology stay connected even in case of
line disturbances.
They also
installed a Submarine Optical Fibre Cable to Singapore with an 8.4 Tbps
(terabits per second) capacity providing high-class worldwide connectivity. Alpha Telenet installed
the latest Digital Switches from Tiemens and other devices, which were fully compatible with the equipment of other
telecom providers in India.
The company installed a digital
Geographical Information System (GIS) for network surveillance. A 24-hr
Internal Network Management System for technical support and infrastructure maintenance
were also installed with a dedicated round-the-clock
toll-free call centre to ensure prompt services.
In 1997, Alpha Telenet Ltd. obtained a license for providing
fixed-line services in Maharashtra state circle and formed a joint venture with Behrin Telecom, Alpha BT, for providing VSAT services. On June 4, 1998
they started the first private fixed-line services launched in Pune in the Maharashtra circle and thereby ending fixed-:-line
services monopoly of DoT (now TSNL). Alpha entered into a license agreement
with DoT in 2002 to provide international long distance services in India and
became the first private telecommunications service provider. The company also
launched fixed line services in the states of Goa, Uttar Pradesh, Gujarat and Delhi.
With the
start of basic telephony services in the .state of Maharashtra,
residents of the area and others felt a great sense of breaking away from the
old and traditional government monopoly. The kind of ill-treatment of customers
and also the red-tapism and bureaucracy which prevailed earlier, was about to
end. It was observed that no private telecom company wanted to start their
operations in less profitable areas like Bihar
and other eastern states .
. The tariff plans of the TSNL and Alpha
Telenet Ltd. were opposite to each other. TSNLS tariff structure was upwards
i.e., price per unit increase with number of
calls and vice versa for Alpha Telenet. This was the beginning of the entry of
private players in the sector.
1 . Give a critical analysis of the
privatisation of telecom sector in India.
2.
Highlight the secrets of success of Alpha
Telenet Ltd. in terms of technological advancements and service~ provided.
CASE
II - GEARING· FOR GROWTH
Premier Differential Gears Pvt. Ltd. (PDGL)
was formed in the year 1991 near Noida in the state of Uttar Pradesh (India). The
company was established to cater to the evergrowing needs of the differential gear market
for cars, jeeps, trucks, and tractors. It was established under the aegis of the parent company
called Premier Gears Pvt. Ltd. which in turn was established in the year 1962
at Noida. The parent company was engaged in the manufacturing of automobile
transmission gears. With a modest start in 1961, it had never looked back and
by 2006, it became the largest manufacturer of automobile transmission gears in
the country. The parent company had employee strength of 2,500 trained and
dedicated employees and was producing a range of over 1,000 gears. Premier Gears Pvt. Ltd. was making gears for virtually every major brand of truck, car, jeep and tractor. In 2006, the group company comprised of three
firms namely, Premier Gears Pvt. Ltd. (manufacturing
Transmission gears, Gearbox assemblies, Laser marking machines, and Material handling equipments), Premier Differential Gears Pvt. Ltd. (manufacturing differential gears) and Elve Corporation
(a government recognized export house).
PDGL was
manufacturing a wide range of Crown Wheel and Pinions, Bevel Gears,
Bevel Pinions, and Spider Kit Assemblies. The installed capacity was 20,000
sets per month. PDGLs focus on quality, fast product
development and customer service had enabled it to become an OEM supplier to
many car and tractor companies in India,
the EU, and Asia. Almost 75% of the total production was exported to a number
of countries like Germany, Russia, USA,
China, Japan, South Mrica,
etc. The domestic OEM and replacement market accounted for the remaining 25% of the company's sales and in a short span of time, the company had
become one of the major players in the Indian replacement market. The use of
latest technology and comprehensive quality control systems at PDGL go a long
way to ensure that customers get exactly what they want.
PDGL was
using world class Gleason machines in its manufacturing programme. The raw
material for manufacturing gears was in the form of
forgings, which were procured from various parts of the country for
manufacturing crown wheels and pinions. These forgings were subjected to
turning followed by drilling. The drilled crowns and pinions were taken for
tapping, which were then rimmed. After this, the teeth cutting procedure was applied which was called broaching. The broached units were then heat-treated.
Heat treatment was very critical in producing gears having
short tolerance levels. To meet this end, the company had two rotary furnaces
and one state-of-the-art Continuous Gas Carburizing Furnace (CGCF) from
Aichelin ALD of Austria
to heat-treat its products. After the heat
treatment, a number of intermediate processes like short blasting, phosphating, lapping were performed which resulted into the finished
product, ready for putting company marks to avoid imitation/forgery. The
company had developed a state-of-the-art 70-watt NDYAG laser-marking machine in collaboration
with Quantum Laser (UK), which was used for marking on its produces. Laser
marking was environment-friendly and was applied without any force or contact and thus the material was not
subjected to any stress. The marked products were" manually pushed onto a conveyer for packing
and dispatching. All the above have enabled the company to meet international
standards and to produce worldclass gears with the highest performance
standards.
The
upstream portion of the supply chain at PDGL included a number of forgers located at "geographically
dispersed locations in various parts of the country. These forgers were
supplying the forgings to PDGL, which were then used in manufacturing the differential gears. All of the raw material was routed to the POGL
works through road transport and"" due
to large distances, transportation costs were a major issue in increasing the
efficiency of this upstream portion of the supply chain. The forgings were
supplied according to the drawings and dimensions set by design engineers at
the company. The company indeed tried some local suppliers to cope up with the
increasing transportation costs but the results on quality front wet satisfactory. To serve this end, the company was
planning to develop some local suppliers. It had
planned to provide them support in the areas of procuring good material for
producing forgings, procuring good quality machines and" training their workforce in the required
technical know-how. This was considered as an investment by the company to
reduce its inbound transportation costs. To meet the small lot requirements of
the forgings, the company was also contemplating to share the truckloads with
the parent company. This was feasible because of the geographical proximity of
the parent company, which was situated at a distance of less than
15 kms, the similar nature of raw material and same suppliers supplying to both
the units.
The
internal supply chain at PDGL comprised of various processing stations/lines" through which the forgings were transformed
into finished differential gears. The movement of the work-in-progress between
various stations was semi-automatic in which the workers manually placed the
goods on trolleys/carts. Even the finished units were manually placed on a
conveyer; which needed to be pushed to send the units to the packing section. There was a risk of units being damaged in this
process. To minimize this risk, the company was planning to have automatic
systems for moving the material from one place to another. It was decided to
have hydraulic lifts, cranes, electronic escalators and the likes for progression of material from forging to packing. The packing material was
stored on first floor as and when it arrived, with the help of casual laborers,
which was inefficient and also involved a: risk of some· casualty.
The
downstream portion of the supply chain at PDGL included around 10 distributors
located evenly in various parts of the country. These distributors were
supplying the products of PDGL to number of car, truck, jeep and tractor
manufacturers. This portion of the supply chain also included a large
replacement market, which accounted for almost half of the company's domestic sales. To meet its distribution needs the
company had a panel of transporters, who used to distribute the finished goods.
At times, the consignments scheduled for distributors were delayed because of
lack of full truckload. One possible solution to this problem was sharing of
truckload with the parent company. This was feasible because both the companies
shared the same distribution network. The distribution of export consignments
was through an intermediary who helped the company in exporting its products to
the US, UK, Germany, China, Italy, Turkey, Saudi Arabia, Singapore, Malaysia, Thailand, Indonesia,
and Nigeria, amongst other countries. The company's wide export range included replacement gears
for internationally renowned
automotive manufacturers like MercedesBenz, Mitsubishi, Toyota, Nissan, Clark,
Eaton, Fuller, New Process, ZP, Hino, Fuso, Tong Feng, Tata, Leyland, Massey
Ferguson, Magirus - Deutz and various others.
There was
a shortage of skilled employees. Therefore, the company has recently started
training input for all their 400
employees. These training programmes are being conducted in the organization to
enhance the skills of the employees and the duration of these programmes were
20 hours per month. On the financial front, the company is continuously moving
on the growth track showing better financial results year after year. It has
embarked on an ambitious plan to double its turnover by the end of this
financial year and to become the world's numero-uno in the automotive
gear-manufacturing segment. The current capacity utilization was at a meager
6000 sets against a total installed capacity of 20,000 sets per month.
1. Comment
on the upstream and downstream supply chain portions operating in the company.
2.
How far are the plans to improve the supply
chain efficiency in the company feasible?
3.
"Internal supply chain at the company
can be characterized by the lack of it". Comment.
CASE III - INTELLIGENT MOVEMENTS: ANYWHERE ANYTIME
Deepak Pai, an engineering graduate and a
postgraduate in management from United
States, was working in Transport Corporation
of India (TCI), the market leader in conventional transportation. He
established Speed Cargo as an express cargo distribution company after leaving
TCI. Speed Cargo, started with its head office at Hyderabad, as a small cargo specialist in 1989, upgrading itself to desk-to-desk cargo in 1992, cargo management services
in 1995 and became a public limited company when
it was listed in Bombay Stock Exchange in 1999. The company was maintaining a
strong customer base of prestigious companies like Acer, Cadilla, Sony, Panasonic, Titan, Dabur and Hitachi to name a few.
Speed Cargo Limited (SCL), a leader in the
express cargo movement pioneered in distribution and supply chain management
solutions in India.
It differentiated the concept of cargo, from conventional transport industry by
offering door pickup, door delivery, assured delivery date and containerized movement. It had a turnover of
Rs.3600 million in 2005-06. The company had a strong team of 6400 employees
with the fleet of 2000 vehicles on road and an extensive network covering
3,20,000 kilometers per day and a reach of 594 out of 602 districts in India. In
addition to this, it was having a well-structured multimodal connectivity and
6lakh square feet mechanized warehousing facility. Warehousing facilities were
comprised of the most modern storied system and material handling equipment offering very high level of operational
efficiency. The four modes of transport - Road, Air, Sea and Rail were
seamlessly integrated, enabling SCL to effortlessly reach anytime anywhere.
The international wing of SCL took care of
the SAARC countries and Asia Pacific region covering 220 countries with a
specialized India-centric perspective. The company had gone online by
connecting 90 percent of its offices to provide web-centric solutions to its
customers.
The company also offered money back guarantee
to express cargo services. The services offered were customized for corporate,
small and medium enterprises, cluster markets, wholesale markets and
individuals. The state-of-the-art technology made things
easier for the customers whose cargo could be
tracked and traced in the simplest manner, because SCL had an effective
tracking system. SCL believed that best of technology enabled best of service,
and its outlays on providing the IT edge had always resulted in innovative services
and solutions. SCL, in its day-to-day operations, used technologically advanced
equipments like Fork Lifters, Hydraulic Trucks, Hand
Trolly, Drum Trolly, Rubber Pads cushioning, Taper Rollers to move big crates,
color codes for identification to delivery what it promised.
Between 1989, when company was born, and
1995, SCL started a unique value added service called Cash-On-Delivery for the
advantage of its customers. SCL introduced Call Free Number for the first time
in the logistics industry in India.
To establish largest network in air and
to facilitate faster delivery of shipments, SCL entered into a tie-up with
Indian Airlines in 1996; The Company introduced the concept of 3rd party
logistics and later started offering complete logistics and supply chain
solutions in 1997. The courier service Suvidha
later rechristened as Zipp was launched in 1998. The company entered into a tieup with Bhutan and Maldives Postal
Departments to expand its operations to SAARC countries in 1999. The Speed Cargo Development Center
was set up at Pune in India for training of its employees in the same year.
An exclusive cargo train in association with
Indian Railways between Mumbai and
Kolkata was launched in 2001. Based on a survey conducted by Frost
and Sullivan, SCL was conferred the Voice
of Customer Award for being the best logistics company in 2003. After simplifying the internal process for faster and better communication,
and a smarter way to work, SCL set up
its corporate office at Singapore
in 2003 to create an international hub with an aim to reach out to the world.
The company introduced a mechanized racking system in the automated warehouse at Panvel (Maharastra) in 2004.
SCL was sensitive to the avenues where it
could contribute to building a better society. Displaying continuous social
responsibility, SCL associated itself with several community development
programs and contributed generously to many social causes. SCL was the first to build makeshift houses for
400 families who were affected during a massive earthquake in Bhuj district of
Gujarat in India
during January 2001. They reached the devastated village the same day to
provide food, clothes, medication and water to the affected people.
In 2003, SCL accepted to develop one of the
government schools located at Banjara Hills in Hyderabad, and built a building with basic
facilities like classrooms, staff rooms and toilets, and provided furniture for
students and staff. The housekeeping and security of the school, which was now having 1100 students, was also taken care of by the
company. After Tsunami, one of the worst natural disasters that struck South East Asia in December 2004 leaving over 10 lakh
people dead and over 4 million displaced, SCL was on the rescue scene as it
brought in food, water, clothing, medication,
a team of doctors and cooks, and provided the affected people with essential
utensils. After rehabilitating the people in Nagapattnam and Cuddalore, it took
up the development of a high school in Nagore where 500 students came in from
the Tsunami affected families. SCL also actively participated in Kargil
contributions and other rescue and rehabilitation works in India.
LOOKING AHEAD
SCL
believed that in the age of convergence, it had kept pace with time with its
infrastructure, people and technological capabilities for moving cargo to its
destination on time, by making intelligent movements in air and sea, as well as
on road and rail. The company had experience of handling wide range of
materials including confidential papers related to University examination and
sensitive goods like polio drops and life-saving medicines. In view of the strengths of its competitors such as DHL,
Safexpress and Blue Dart, the company had enhanced services with a greater
focus on cargo management and customer satisfaction with the new operations backed by better strategic planning. To achieve its aim, SCL had strategically tied-up with
Jubli Commercials, an lATA accredited freight forwarder, which started its operations as Air Cargo Agent.
The
company was confident that it was set to become 24 x 7 one-stop solution provider for all freight forwarding
services including customs clearance for international cargo. SCL having 40
percent share in express distribution business was developing a huge centralized warehouse on 22 acres of land at Nagpur in India. The centralized warehouse, which was about to be commissioned, was designed as a major hub
or express distribution center for 200 smaller
hubs as its spokes catering to the needs of its customers across India. SCL
believed that it is a concept, a vision and an idea ahead of its time,
which looked at a global perspective and was constantly reinventing itself in delivering the future
of logistics.
Questions
1.
What made SCL a leader in the logistics
industry?
2.
Discuss the strategies adopted by SCL for its
survival in the competitive scenario.
3.
Comment on the contributions of SCL to
society.
4.
What steps the company should take to
globalize its network reach?
Discuss the strategies adopted by SCL for
expansion.
CASE IV - LOGISTICS OUTSOURCING
Company Profile
Indian
Steels Limited (ISL) is a Rs. 6000 crore company established in the year 1986.
The company envisaged being a continuously growing top class company to deliver
superior quality and cost effective products for infrastructure development.
With major customers being from Public Sector Undertakings, the company has
established itself well and is said to be considering its expansion plan and
proposed merger with another steel making giant in the country.
In 1996,
owing to the cut throat competition in the emerging dynamic global markets, ISL
emphasized on both effectiveness and efficiency. The company strongly believed
in focusing on its core competency (i.e. manufacturing of steel)
and outsourcing the rest to its reliable partners. Outsourcing of its outbound
logistics was one such move in this direction. ISL out sourced its stockyards and other warehousing
services to a third party called Consignment Agent, who was
selected on an annual basis through a process of competitive bidding. The CA
was responsible for the entire distribution of the products within the
geographical limits of the allotted market segment and was paid by the company
according to the loads of transaction (measured in metric tonnes) dealt by him.
The company also believed in maintaining long-term relationships with the
suppliers as well as the buyers. It always prioritized the needs of its regular
and important customers over others and this worked out to be a win-win
strategy. The case brings out the model of outsourcing logistics the company
has adapted for the enhancement of its supply chain competency and thus
leveraging more on its core competency which led to increased productivity.
Indian
Steels Limited (ISL) is a Rs. 6000 crore company established in the' year 1986. The company envisaged being a continuously growing top class company to
deliver superior quality and cost
effective products for infrastructure development. The company performed with a
mission to attain 7 million ton liquid steel capacity through technological
up-gradation, operational efficiency arid expansion; to produce steel with
international standards of cost and quality; and to meet the aspirations of the
stakeholders. The production started in the year 1988 and initially, it
manufactured Angles, Pig Irons) Beams and Wire Rods that were
mainly used for constructing roads) dams and bridges. These products were
mainly supplied to Public Sector Undertakings such as Railways, Public Works
Department (PWD) Central Public Works Department (CPWD) Rashtriya Setu Nigam
Limited, Audyogik Kendra Vikas Nigam Ltd. and various foundry
units. The company had its headquarters at Raipur with three stockyards (a kind of
warehouse with a huge land to store the products).
The company
has established itself well and is said to be considering its expansion plan
and proposed merger with another steel making giant in the country. The company
was awarded ISO 9001, ISO 14001 and ISO 18001 certifications. The temperature
in the plant premises is reportedly about 6°C lesser than that
of the township, thanks to the greenery being maintained therein.
Logistics Outsourcing
Outbound logistics which basically connects the source of supply
with the sources of demand with an objective of bridging the gap between the
market demand and capabilities of the supply sources was always a problem for companies operating in
this industry. Consisting of components like warehousing network, transportation network) inventory control system and
supporting information systems outbound logistics was always playing a key role in making the right product available at the right place, at the right time at the least possible
cost. In 1996 owing to the cut throat competition in the emerging dynamic
global markets, ISL emphasized on both effectiveness and
efficiency. The company strongly believed in focusing on its core competency (Le.
manufacturing of steel) and outsourcing the rest to its reliable partners.
Outsourcing of its outbound logistics was one such move in this direction.
Recognizing
the growing demand for its products from the big, diversified and geographicallydispersed customers, the company started
expanding the number of warehousing stockyards. From a humble beginning, the company today has 26 stockyards;
most of them are outsourced. Each of the outsourced stockyards was managed by a
third party, which the company referred to as Consignment Agent (hereafter referred to as CA) in the area. The CA
was selected on an annual basis through
competitive bidding process. The performance of CA was closely monitored by a
company representative (full time
employee of ISL working in the site of CA). The CA was responsible
for the entire distribution of the products within the geographical limits of the allotted market segment and Was paid by the
company according to the loads of transaction (measured in metric tonnes) dealt
by him. Based on their sales turnover CAs were trifurcated into A, Band C
categories. The CAs with a monthly turnover of Rs. 150-200 crore fell under A
category) whereas those with Rs. 100 - 150 crore were B and less than Rs. 100 \ crore were C category.
In addition
to the company representative) a team of marketing division operated in the
town where, the site of CA was located. This department
was responsible or estimating the future demand, translating it into orders and
sending to the manufacturing plant. Material dispatch was done using either one
or a combination of the two modes: Rail, Road. While using rail as the mode of
transportation, the company had a choice to book a Normal Rake (a full train with about 35 wagons, each wagon with an
approximate capacity of 60 tonnes) or a Jumbo
Rake (a full train of about 52 wagons, each wagon with an approximate
capacity of 60 tonnes). At times, the company was engaging the services of the
CONCOR (Container Corporation of India) where a train of 62 to 70
wagons, each wagon with about 26 tonnes capacity was
used for transportation. Instead, if the company decided to send the material
by road, the company had a choice between Trailor (25-30 tonnes} and Truck
(15-20 tonnes). The choice of transportation mode was based on the quantity of
dispatch.
As soon as
the material was dispatched from the manufacturing plant, the respective CA
used to get a Stock Transfer Chalaan electronically
through Virtual Private Network, which
was developed by a professional software service provider. In-transit,
monitoring was generally done with the help of Indian Railways, if the mode was
Rail. Otherwise, truck/trailor drivers were contacted through mobile phone.
Transit generally took five to six days, providing time for CA to plan for
receiving materials. The CA used to utilize this time for arranging material
handling devices like heavy cranes and required labour. The material thus
unloaded was reaching the warehousing stockyard where CA was responsible for
arranging the materials as per the warehousing norms of ISL.
The
company broadly classified materials into Long
Products and Rounds. Products
falling into each category were further classified by their size, shape and
utility and the company used a distinct colour code for this purpose. Each
subcategory of material had a specific place for downloading. The company used Bin System for this purpose. While downloading
the material in stockyard, the company norms insisted that CA arrange for
providing Dunnagt Material. This
enabled the CA to store material without 1 direct contact with the land surface and thus reduced the
probability of material deterioration. Material was stored in the stockyard until an authorized representative of
the customer used to come and collect it. While dispatching material to the
customer, a Loading Slip was
generated against the Delivery Order. The
company" also believed in maintaining long-term
relationships with the suppliers as well as the buyers. It always prioritized
the needs of its regular and important customers over others and this worked
out to be a win-win strategy.
Operational
problems were majorly because of uncertainties in transportation, fluctuation in
supply of electricity and the load bearing capacity of the soil in the
stockyard. Some: more problems were encountered whenever there was a change in
CA and these were overcome by training the employees of the new CA and keeping the
old CA responsible for the: material in his stockyard for six months after the
contract as well. Observations reveal that, at times there were situations wherein CAs had to do
those things which they were not legally supposed to do (like subcontracting)
because of the pressures mounted by political leaders with selfish interests.
Despite
these problems, this model of outsourcing logistics was working out very well
for the company. The practices, which were started in the year 1996 have
sustained major changes in the environment and are being practiced even in
2006. It has enhanced the supply chain competency of the company by enabling it
leverage more on its core competency, which leads to increased productivity.
1. Analyze the case in view of the logistics
outsourcing practices of the ISL.
2.
Discuss the importance of logistics
outsourcing with reference to supply chain management.
3.
Suggest strategies for further strengthening
the supply chain of ISL.
4.
The participants/students are expected to
have a clear understanding of Supply Chain and Logistics Management concepts.
5.
The issues involved in the case are Sales
Forecasting, Strategic Sourcing, Selection of Warehousing Service Provider,
Transportation Mode and other nuances in Logistics Management.
