~ Just as energy is the basis of life itself, and ideas the source of innovation, so is innovation

the vital spark of all human change, improvement and progress. ~ Ted Levitt

Improving operational efficiency and business processes by integrating business management

practices with modern technology are the pillars of any enterprise today. This event provides you a
platform to showcase your investigative skills and how to optimise your resources in required
context following the best business practices in IT. “Navreeti” is a case study contest with a focus
on applying IT strategies for business.

Rules:

Team Details

1. Team should consist of maximum 2 members.

2. Team members should be from the same institute.
3. There can be multiple entries from the same B-School.
4. One person cannot be the member of more than one team.

Round 1

The teams need to submit an executive summary (max. 750 words) on the proposed case solution.

Solution format:

1. Font Size – 12, Font Type – Times New Roman, 1.5 line spacing

2. The file should be a Microsoft Word Document.

3. The front page should carry only Name of your Institute, Team Name, Details of the team
members (Name, Email IDs, and Phone Numbers)

4. The details of the participants SHOULD NOT appear anywhere else in the case solution.
 5. Send entries to clique.it.imnu@gmail.com with the document name as “Navreeti_Institute
Name_Team Name” and subject of mail as “Perspective_Navreeti_Institute
Name_Teamname”.

6. The entries must reach us positively by, January 29th, 2011 23:59:59 hrs.

7. Shortlisted candidates of Round I will be informed via e-mail.

Round 2

1. Top 8 teams shortlisted from Round I will have to present their proposed solution in front of
an esteemed panel of judges at IMNU campus.
2. The shortlisted Teams will have to send the detailed report/solution soft copy to
clique.it.imnu@gmail.com by, February 8th, 2011 23:59:59 hrs.
3. Maximum time allotted for presentation is 25 min (including 5 min of Q & A session).

The decision of the organizers of the contest and the panel of judges will be final and binding on all
contestants.

Prizes

First Prize `5,000/-

Second Prize `3,000/-

 CASE FOR ANALYSIS

KHANDELWAL KNITWEAR LTD.

“Forecasting demand is a necessary part of our business planning. But as we have seen our forecasts

tend to vary a lot and more the forecasts miss their target, the more orders vary, with the variation

expanding up the chain”, said Amol. Rahul Gupta operation supervisor, Khandelwal Knitwear Ltd.

(KKL), and Amol Khandelwal , Executive Director, KKL, had met up to discuss the issue of

Demand Planning. Amol suspected something was going wrong and it required immediate

attention.

Amol noticed major variations in the demand forecasts. This started becoming a major concern as

mismatch between actual demand and forecasted sales led to both lost sales and increase in

inventory carrying and holding cost.

“Earlier forecasts were just based on the personal insight of my father but it is only useful when

product is new and historical sales data is not available. In the current scenario I am not able to

understand the reason for this error.”(Exhibit 1)

Rahul replied “After having discussions with Mr. Joshi (marketing and sales head) we have realised

that each person down the chain tends to give a forecasted data including a certain level of safety

stock. And this stock level tends to fluctuate leading to variations in our forecasted demand”

“So you mean, we can‟t predict our forecasted demand accurately”, Amol said.

“Forecast is at best an estimate of what may happen in the future- if there are no surprises. Just as

the weather forecaster frames the likelihood of rain in terms of probability, for example 40 percent

chance of rain, and opinion polls often specify a margin of error, demand forecasts should include

an indication of their range of probability.”

“Since our forecast error has grown significantly over time, we either need to improve the

forecasting process or arrange the supply chain to accommodate a large amount of uncertainty”,

Rahul replied.

Rahul again said,” I think we do not have a comprehensive IT infrastructure in place which will

help us to cope with changes in external environment”.

Khandelwal Knitwear Ltd. (KKL) a woollen textile manufacturing company was started by Mr.

Ashok Khandelwal in Mewar, Rajasthan in 1982 under the brand name “Kozy Clothes”. Ashok

negotiated contracts from local suppliers who were ready to provide raw wool to the company at

subsidised rates relative to competitors. In return, Ashok promised long term partnership and year

round procurement of raw materials. Not many companies were into woollen segment at that time

in Rajasthan. It helped the company to gain a strong foothold in the regional market easily.

Initially KKL catered to men‟s segment and included a range of products like socks, hats, sweaters,

overcoats, gloves and mufflers. Within a span of 3 years, KKL market share increased from 10% to

25%. The major competitors for KKL were Arun Wollens and Esa Garments. These companies put

together accounted for 65 % market share with no clear market leader. On time delivery and

customer focussed service were the main strengths of KKL.

Amol Khandelwal son of Ashok Khandelwal after completing his MBA joined the family business

in 2005. His main role was to look into the daily operations of the company and to monitor the

external environment for new opportunities and threats. He saw the opportunity to expand in the

neighbouring states of Gujarat and Maharashtra. In 2007 KKL entered these two states and also

diversified into women and children segment. (Exhibit 2, 4)

The company till now had been functioning as semi-functional enterprise. They had implemented

different information systems to take care of inventory, warehouse, logistics, employee pay roll etc.

to suit their operations. These systems were introduced in the functioning of the organization in an
adhoc manner, as and when the need was felt. The systems worked in isolation as „Silos‟. There

were issues of data redundancy, lack of collaboration between the systems and inefficiency in

handling the expanding operations of the company.

External environment had changed a lot since the inception of KKL. Competition had grown

significantly over the last twenty seven years in both organized and unorganized sector. Players in

unorganized sector either sold unbranded woollen clothes or sold them with brand names sounding

similar to leading brands. They even imitated the packaging style of the leading brands. On the

other side, leading players in the organized sector had introduced quality control procedures and

implemented latest information systems to minimize wastage and improve responsiveness to

customer‟s orders. In the new competitive environment, KKL was stuck in the middle. It could

neither increase its prices to take care of rising labour and material costs nor did it have the national

presence to take advantage of economies of scale. Between 2007 and 2009 its sales declined and

this rendered underutilization of production capacity. (Exhibit 3)

Besides the demand forecast issue, company was also facing conflict of interest between various

entities involved in the supply chain. Manufacturers preferred large lot sizes because it improves

process control and reduces the per- unit setup costs. However, it also creates high inventory levels

and storage expenses for retailers. Since the company had started manufacturing variety of

products, manufacturing costs had increased while operational efficiency had decreased. In order to

maintain lead times competitive with those of a manufacturer of fewer types of products, smaller

amounts were transported rather than waiting for larger quantities to amass. However the more

different products a warehouse stores, the less space there is for any single product inventory. An

additional challenge is forecasting the demand for each product since each of the product is

competing for the same customer. As a result, higher inventory levels of each must be maintained to

ensure the same level of service. Product variety therefore increased both transportation and
warehousing costs. Also reducing inventories, manufacturing costs and transportation costs

typically comes at the expense of customer service which was the core strength of KKL.

Amol knew deploying latest Enterprise Resource Planning (ERP) systems can help the company to

gather, store, analyze and share large amounts of data among supply chain partners and to facilitate

strategic, tactical and operational planning through data sharing and analysis. It will also help to

gather, integrate and report logistical data to simulate actual supply chain activity and create greater

trust among supply chain partners. But the demand planning concern which the company is facing

currently can be settled off by using better forecasting software. Then what is the need of investing

so much for ERP? Amol had received quotations from some of the vendors regarding the cost of

ERP implementation and the cheapest among them would cost around ` 3 crores.

Amol knew that using sophisticated software that combines the best of techniques is only one part

of successful demand planning. The forecasts have to be put to practice. Each partner in the chain

may have a tradition of doing its own forecasting. To be effective in reducing lead times and

lowering inventory costs, forecasting has to be married to a more inclusive supply chain

management process. And that means building partnerships- and trust- along the supply chain.

Partners must be willing to share information (and do it quickly), collaborate in developing a single

forecast and agree to carry out their supply functions according to the forecast. The goal is to

replace estimates with near-term data reflecting customers buying patterns.

However before coming to any final conclusion he decided to consider other issues and tradeoffs

before linking to or upgrading to ERP system. Implementation of ERP systems routinely requires

purchase of new computer hardware, systems software, network equipment and security software.

The cost of hardware varies in a wide range depending on the scope of implementation and

platforms employed. He knew the old legacy systems in place had some weaknesses like

inflexibility and requiring unnecessary steps in processes that could be streamlined. Maintenance

and support of these systems was also an issue. However it was too expensive to replace an
otherwise still useful information system to ERP just to conform to latest standard and technology.

Without proper vision or direction ERP is just a set of applications and software should be designed

or selected to fit the business model, not the other way around.

As Amol was returning back to home his mind was filled with all these issues and his future plans

for the organization. He had the vision of pan India coverage of the brand “Kozy Clothes” in the

next 5 years. Various retailers from northern and eastern regions of the country had approached

KKL for dealership. But these offers were put on hold, Amol and his team were struggling with the

current issues.
Exhibit 1 Monthly Sales of KKL for Year 2009-2010 (All figures are in ‘000)

Month Actual Demand Forecasted Demand

January 32
February 26
March 12
April 5 23
May 4 14
June 3 7
July 2 4
August 5 3
September 10 3
October 15 6
November 25 10
December 32 17

Exhibit 2 KKL Supply Chain Model

Exhibit 3 Consolidated Balance Sheet of the Company at March 31, 2010 (All Figures are in `

‘000)

SOURCES OF FUNDS

Paid in Capital 170000

Retained Earnings 300000
Secured Loans 20000
Unsecured Loans 5000
Total Debt 25000
Total Liabilities 495000

APPLICATION OF FUNDS

Gross Block 250000

Less:Accumulated Depriciation 80000
Less:Impairment of Assets 0
Net Block 170000
Lease Adjustment 0
Capital WIP 30000
Investments 50000
Current Assets, Loans & Advances
Inventories 180000
Sundry Debtors 20000
Cash and Bank 50000
Loans and Advances 10000
Total Current Assets 260000
Less: Current Liabilities and Provisons
Current Liabilities 10000
Provisions 5000
Total Current Liabilities 15000
Net Current Assets 245000
Deferred Tax Assets 0
Deferred Tax Liability 0
Total Assets 495000
Exhibit 4 KKL Product Portfolio
Contact Details:

Event Coordinator Perspective Coordinator

Alok Jaiswal +91 9016619089 Arjit Gupta +91 9904499818

Vishal Kukal +91 9638389158

clique.it.imnu@gmail.com