efficient supply chain & sustainable growth strategy

Efficient Supply Chain & Sustainable Growth

Strategy

Krannert Consulting (GR1, Room # 3097)

Raghu KokaKalyani PatriKuldeep YadavBharat Varshney

GSCMI 2013 Case Competition 2

Agenda for today (Raghuram Koka)

Problem

Recommendation

Analysis

Implementation

Risk Mitigation

Q & A

Our Company

GSCMI 2013 Case Competition 3

Opportunity to improve (Raghuram Koka)

• Urgency: • Loosing market share (Revenue)• Declining customer satisfaction

• Objectives:• Identify the key challenges in supply chain• Develop capacity utilization enhancement plan• Find the optimal restocking policy • Build a sustainable growth strategy

Demand seasonality and space constraint are limiting

the growth

The Challenge

GSCMI 2013 Case Competition 4

What are we proposing? (Raghuram Koka)

Optimize Production Processes and Resources Capabilities

Implement Scaled Stock Level Policy (W21 to W43)

Organic Growth via E-commerce, Mobile Parlor & Strategic Alliances

Recommendation Overview

GSCMI 2013 Case Competition 5

Understanding the root cause (Kalyani Patri)

Production

PlanningManufacturin

gDistributio

n Retails Customer

Raw material price fluctuationDemand

seasonality

Early stage product differentiation

Idle production capacity

Lack of infrastructure

Display space constraint

Inventory constraint (max 350/store)

Incapable cold storage

Changing preference

Substitutes

Challenges in Supply Chain

GSCMI 2013 Case Competition 6

Lets Restructure (Kalyani Patri)

• Reliance Fresh, Big Bazar etc.

• Increase market presence

• More bargaining power

• Negate the effect of macro-economic factor

• Produce in off-season

• FIFO inventory policy

• Hourly wage rate• More utilization

Flexible Labor

Just in Time

Production

Partnership with

Retailers

Contract with

Suppliers

Capacity Planning & Demand Shaping

GSCMI 2013 Case Competition 7

Understanding the root cause (Kalyani Patri)

Low cross selling of flavors

Stock-out of low margin products

Mismatch in demand & supply for high margin products

Sub-optimal restocking policy

0

100

200

300

400

500

600

Aggregate Seasonal DemandTotal Sales

Planning period - Weeks

Qua

ntity

Discrepancy in Demand & Sales

GSCMI 2013 Case Competition 8

0 10 20 30 40 50 60300

500

700

900

1100

1300

200

250

300

350

400

450

500

Week

Wee

kly

Profi

t (1

00

Rup

ee)

Tota

l Wee

kly

Sale

s

Weekly Profit (100 Rupee)

Total Weekly Sales

Target service level policy

ScaledStockingLevel policy

CommonServiceLevel

Top 3 MarginPolicy

Top 2MarginPolicy

Target service level policy

Current Scenario

Different restocking policies owing to space constraint Discrepancy between market demand & sales in peak

period

Understanding the root cause (Kuldeep Yadav)

GSCMI 2013 Case Competition 9

Common

Service Level

Scaled Stock Level

Top 2 Margin-90% SL

Top 3 Margin-90% SL

% of Expected P & L 3.5% 4% 8% 36%

Profit:48,45,700 INR

0 10 20 30 40 50 60300

500

700

900

1100

1300

200

250

300

350

400

450

500Based on Initial Stocking policy

Week

Wee

kly

Profi

t (1

00 R

upee

)

Tota

l Wee

kly

Sale

s

Weekly Profit (100 Ru-pee)

Total Weekly Sales

Profit:50,31,460 INRProfit:52,85,240 INR

0 10 20 30 40 50 60300

500

700

900

1100

1300

200

250

300

350

400

450

500Common Service Level

Week

Wee

kly

Profi

t (1

00 R

upee

)

Tota

l Wee

kly

Sale

s

Weekly Profit (100 Ru-pee)

Total Weekly Sales

0 10 20 30 40 50 60300

500

700

900

1100

1300

200

250

300

350

400

450

500Scaled Stocking Level Policy

Week

Wee

kly

Profi

t (1

00 R

upee

)

Tota

l Wee

kly

Sale

s

Weekly Profit (100 Ru-pee)

Total Weekly Sales

What can we do? (Kuldeep Yadav)Restocking Policy

~ 10 % increase in expected profit

GSCMI 2013 Case Competition 10

High Revenue

Low Operation

al Cost

Larger Customer

BaseCorporate

Orders

Competitive

Advantage

What can we do? (Bharat Varshney)Go Online: E-commerce

GSCMI 2013 Case Competition 11

What can we do? (Bharat Varshney)

Cart Parlor# of Units 10 1Capital Cost (Rs)

350,000 350,000

Revenue (Rs)

400,000 230,000

Profit Margin

30% 45%

Profit (Rs) 120,000 103,500

• Higher Profit Margins

• Brand Recognition

• Continuous Inventory Flow

• More Maintenance

• Coordination Problem

Mobile Parlor - Cart

~ 16 % increase in profit

GSCMI 2013 Case Competition 12

Short Term Long Term

Available Capacity Resource

Increasing Consumer

Base

Low Competitio

n

Structured Branded Market

What can we do? (Bharat Varshney)Make it National

GSCMI 2013 Case Competition 13

Roadmap to success (Bharat Varshney)Implementation Timeline

GSCMI 2013 Case Competition 14

The potential challenge (Bharat Varshney)Risks & Mitigation Plan

Brand Dilution

Demand Forecasting

Competitor Backlash

Quality Issues

Macro Economic FactorsLikelihood of Risk

55

2

34

0% 50%

Impa

ct o

f Ri

sk

111

5

1

2

3

4

5

GSCMI 2013 Case Competition 15

We can say that again (Bharat Varshney)Conclusion

Now is the time to:• Optimize resource capabilities• Implement scaled stock policy• Follow organic growth

Because this will:• Optimize supply

chain • Reduce stock-out • Assure sustainable

growth

GSCMI 2013 Case Competition 16

?

GSCMI 2013 Case Competition 17

Appendix

GSCMI 2013 Case Competition 18

Where is the problem? (Name of Presenter)

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TV

BBS

LS

BT

SalesRestocking

Space Constraint