Professional Documents
Culture Documents
Problems-
Analyze the case and discuss its core factor fro
competitiveness.
How channel members act in coordination and
effect of inventory on profitability?
What effect will efficiency have of price
advantage over competition? Give your opinion.
Advantages
1. Containerization has increased world trade, &
intermodal has got an impetus.
2. containers are easy to transfer from one mode to
another-& their use facilitates intermodal transportation
3. Global freights use truck/water rail transportation-
because factories & markets may not be close to the
ports.
4. On land too, truck/rail combinations offers low costs
than only truckloads & delivery times are improved.
5. It creates a price/service offering that can’t be matched
by any single mode.
4
⇒ Loading
⇒ Unloading-crane-
⇒ Ship freight
⇒ Information transmission
By ship
Alibag Marmugao: ship size-35,000dwt
Payload- 34,000dwt
Standing charges-Rs.153, 000
Fuel cost-Rs.120, 000
6
By rail
Alibag Marmugao: Rail 500 kms
IRCA tariffs-Rs.27, 24/quintal
For cat. 210
By road
Alibag Marmugao: Road 520 kms.
Rs.0, 50-0, 70/tonne km.
Product:
1. Sponge iron produced at sponge iron plant in Alibag,
Maharashtra-an intermediate product in steel making,
substitutes scarp iron-users: foundries, mini-steel plants
& large integrated steel plants-the former intensely
used in Maharashtra & Gujarat, later in Eastern India,
except SAIL plant at Bhadravati in Karnataka.
7
UPSTREAM ACTIVITY
LOGISTICS PROBLEM
I. UPSTREAM- Natural gas by pipeline form
ONGC-pellets from Kudremukh Iron Ore
8
Bombay High
Chandigarh
Dehra Dun
Delhi
Ghaziabad
Guwahati
Jaipur
Lucknow
Patna
Ahmadabad Kolkata
Indore Jabalpur
Mumbai Gateway
Hyderabad
Regional Distribution Center
Belgaum
Sub Distribution Center
Bangalore
Chittoor Local Billing Point
Chennai
Palakkad Salem
Coimbatore Optional Local Billing
Point
Kochi Madurai
PROBLEMS
1. What is the best solution for both IBL & OBL?
2. Should they do it in-house or outsource it to a
professional firm?
3. What is the best solution in mode choice?
The price of LNG works out to around $3.5 per MMBTU, which is uneconomical for the
operations of the sponge iron plant at present.
“If the price of LNG can be reduced to $2.7 MMBTU, then it will be economical for our
operations”, Mr Bagrodia said.
“Natural gas is a major concern in terms of quality, quantity and price”, he said, adding
“we are in talks with ONGC and Reliance who can supply us gas at a cheaper rate”.
Grasim is awaiting the gas policy which will deregulate the prices of gas in the country in
a phased manner. “We have to sign agreements with the oil companies who will give us
an idea.”
Grasim had invested Rs 600 crore in the plant at Alibag near Mumbai, which has an
installed capacity of 800,000 metric tonnes per year.
“The regassification plant involves huge investments and may be considered if natural
gas supplies are stabilised”, Ratan K Shah, president Vikram Ispat told FE.
He said all gas-based sponge iron manufacturers in the Uran sector are facing a challenge
on maintaining their operations in the scenario of lack of natural gas supplies and rising
gas prices for the next two years till alternate LNG supplies are made available from
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private players. One such player from whom gas may be sourced is Petronet LNG which
will transport gas from Rasgas of Qatar.
Vikram Ispat has a turnover of around Rs 360 crore and made a net profit of around Rs
40 crore.
Most of the gas-based sponge iron producers are running their plants at 50 to 55 per cent
of their capacity.
Industries is weighing three options to overcome shortage of fuel (natural gas) at its
sponge iron unit Vikram Ispat which includes setting up of a coke re-gassification plant.
Grasim will go in for setting up of this plant if the existing supply of natural gas does not
improve and the company is also unable to source liquefied natural gas (LNG) from
private players at an attractive price. The existing prices of natural gas are also
unattractive for the company.
“We are weighing two to three options to maintain operations at the plant which is
running at 70 per cent capacity. We will be able to reach full capacity only if ONGC or
Gail increase supply of natural gas. Alternatively, we can source LNG from private
companies at a rate which is economical,” Grasim Industries director MG Bagrodia said.
Wal-mart P.O.S
SUPPLY flows
ORDER FLOWS
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Screen at bank-EFT
Stock interface
Customer interface
Finance interface
Management interface
At sales point
SCANNER identifies article-picks up price from the Price
master –signals quantity from actual stock to be deducted
ROL identified-prints receipts for the customer-gives him
change-adds to sales- signals EDI for action-subtracts form
stock-records cost of transaction-tax to be paid-net profit.
But what needs to be done when one, some or all of these factors are not in place?
The delivery of Supply Chain support for a Project in a remote location has a number of
differences which need to be considered during planning. The easiest way is often to
identify these variances at each stage of the Project Cycle to develop a clear and effective
support plan.
Materials are probably being sourced far from the end project location. For example,
materials may be purchased and supplied from Australia, or the US, for delivery to a
project in a developing country such as Papua New Guinea, Africa, or even Antarctica.
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1. Ensure the goods are properly inspected before payment, and do so as close to the
supplier as possible. This often goes against what is now common practice to accept
delivery and make payment when the goods arrive at the site. A ‘receiving and
inspection point’ needs to be established outside of the remote location. A shipping or
consolidation point before the goods are forwarded to the remote location is often sound.
This should be controlled and tightly managed, preferably supported with a receiving
system linked to the Purchasing and Payment system.
Why? Well, you don’t want to find out that you have the wrong goods once you have
paid for expensive freight and handling half way accross the world. Also, if you are
going to pay the supplier on time, that is only going to be put at risk if you are going
to inspect and pay after you have freighted the goods through some of the worst
conditions imaginable. Consider the potential for delays, damage and theft. No supplier
wants to wear the responsibility or consequences of that. If you find a supplier who will
accept terms such as this, expect to pay for the privelage.
• Identifying local import/customs issues, that the contractor may not be familiar
with.
• Incorporating local transport, storage and handling issues into the plan.
• Identifying alternative sources of supply, often local, that may offer a lower cost.
• Advise on the most practical and efficient shipment methods.
As above, hopefully planning has been started to identify solutions early in the process.
However, too often the first moment these issues are identified are when the goods arrive
at the Port (perhaps without correct documentation) or everyone is scratching their head
about how to move the goods, and who will pay for it.
Often, for a remote site, there is only one well established transport route that has been
especially developed (or evolved) to meet the requirements of the operation. This is
different to a well connected operation where there may be a multitude of roads, airports
and providers to move freight inwards. Not recognising this in the early stages of
planning will mean that either the existing Transport chain will be stretched to
accommodate the project requirements or the ‘new’ arrangements which may be put in
place independently could be unproven or note even appropriate for the environment.
This could result in unexpected risk and cost to the project.
Often, contracts are struck with delivery terms stating payment for materials to be
provided to the work site, but in many remote locations this is not appropriate as the
supplier or contractor does not have control over the Distribution chain through to the end
location. Thought needs to be given to who is best equipped to manage the risk of the
Transport chain, and who best to operate it. Transfer of custody and ownership needs to
occur at this point, normally where the supply cain transitions from ‘developed’ to
‘undeveloped’ and where there is a resource to contractually manage that transition.
Both parties will also need to appreciate that some risks and factors associated with the
transport cannot be managed effectively by either party. For example, road closures due
to weather, road accidents, or civil disturbance. In these cases, consideration needs to be
given to ensuring adequate insurance for some of these events (if possible) and
incorporating transport delays into the project plan.
Another common mistake is to mobilise a work crew on the assumption that the materials
will arrive for a project on a given day. When the materials don’t arrive on the often
over-optimistic time, the crew is often sitting idle incurring cost. While it may delay start
by a couple of days, major mobilisation of work crews should be considered once the
‘risk period’ of material delivery has passed.
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The control of materials once at the worksite is often a problem area. Ideally, the
location and resources that will be required to control materials will be determined, and
resources put in place, before they arrive. Project Materials may often be ‘directs’ and
more often than not will not be established within an inventory system. An alternative
system will often need to be developed to ensure the materials are tracked and controlled.
This can be a simple Excel spreadsheet, which references the orders that have arrived,
who has collected the materials and when. Ideally, materials should not be issued to the
project in less than the base Unit of Measure from the order. Care should be given to
who will actually collect the materials as well, with perhaps an ‘authorised’ list of people
being developed who are given the authority to collect and sign for the project materials.
Either way, all players at the start of the project should be advised of the arrangements
and suitable care given to keep the materials in order.
Because a unique system may need to be established for the project, the control of the
store often lends itself to being clearly assigned to a single person, or small group of
people. This also facilitates building a rapport and effective working relations between
the project group and the supporting supply chain. The team controlling the stores should
be recognised as stakeholders and participants in the project, and also be asked to
contribute regularly status-updates to project stakeholders and be encouraged to propose
new ideas for improvement that will help in the flow and control of project materials.
Close Out.
This is another area where the ‘remote’ project has a few issues of its own, and one that
few people consider. Because of the difficulties in supplying the project, there is often a
tendency to over-supply with greater than usual levels of contingency built into the Bills
of Material. This inevitably leads to a large surplus that nobody wants to know about.
The tendency is to put it ‘into the site inventory’ for a rainy day. This also usually means
that the surplus is written off the account for the project, hence there is little disincentive
for the project to minimise surplus.
Disposal is often difficult as well, due to cost of getting the gear out again, and the
limited options for disposal of the materials. There are no easy answers to this issue, but
the following suggestions can assist:
The remote project can have a number of unique characteristics that need to be
recognised and addressed, in order to develop a project plan that will be successful. This
report covers just some of the issues that may be encountered. Overall, it is about
engaging in a planning process. Understand what is different about the remote
environment you are working in, and develop solutions that are integrated and will work.
Trust the people who work in that environment every day as they will know what can and
can’t work, and are often more resourceful and responsive to change than their developed
world counterparts. I also strongly recommend drafting a specific ‘Logistics Support
Plan’ for a project, so that the concepts which will be applied for a project can be clearly
communicated and understood by all involved.
• Skilled packing teams provide fast and reliable turnaround. Handling month end
peaks, variable despatch patterns, daily multi trip pick up and drop offs.
• Gordano operate 24 hours 365 days a year (meeting AOG demands).
• Customised IT and software systems ensure complete traceability and instant
management reporting. Systems can be interfaced direct with customer own
computers.
• Customers goods are fully insured.
• Their teams are security cleared, and trained to pack to the exacting standards
of the aerospace, engineering and defence industries.
• All relevant personnel are trained and certified to UK National Aviation Cargo
Security - Level 1, with select members of the teams trained and certified to
pack ‘Dangerous Goods’ as approved by IATA and the CAA.
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Returns processing can be an extremely expensive activity, consuming space, labor, dock
doors, and other resources while tying up potentially valuable inventory. While the
challenges are different from the order fulfillment side of the warehouse, the goals are
essentially the same. You want the process to be fast, accurate and cost effective. Key
components of an integrated
The primary goals of the triage process are speed and accuracy. A robust information
system is leveraged to capture information for multiple departments (sales, accounting,
operations, ) disposition product, and to set up downstream processing.
Automated Sortation
The information gathered during the triage process is used to sort product by disposition.
Secondary sorts may be used to separate product into logical groupings (I.e. putaway
zone, vendor, ). In many cases it makes sense to automate this process.
Repack or rework workstations should be integrated into the reverse logistics process. It
is important to minimize the pools of inventory that can accumulate in these operations.
The returns processing software should be tightly integrated with the Warehouse
Management System to facilitate seamless transitioning of saleable product back into
inventory.
Located just outside of Chicago, our 75,000 square foot, clean, gated storage facility is heated &
sprinkler controlled which gives us flexibility to handle sensitive medical and computer equipment
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without being concerned with the effects of temperature on electronics. Our tracking and
retrieval process begins with a descriptive inventory prepared at your home or facility. Each
piece, its description and location in the warehouse are readily available. This data can be
communicated to you via e-mail, fax or phone. Whether you need short or long-term storage, we
have a storage plan to fit your needs.
Records management is the proper archiving of information vital to the life of the company. The
ability to quickly and accurately locate critical information is an important part of a firm's
infrastructure. Proper record management insures that business information can be accessed at
any time in a timely and cost-effective manner. It also ensures that documents are retained and
eventually disposed of in accordance with appropriate regulatory requirements and company
policy.
Companies rely on records not only for vital financial and operational information, but also for
regulatory and litigation protection. Compliance with federal, state and local law, responding to
an audit or legal proceeding or reacting to a medical emergency are simplified when an
appropriate records management program is in place.
Each company is unique and has a different set of records management needs. In many cases, it
is advantageous to have an outside vendor manage the bulk of the information. It can be an
excellent method for professional, cost-effective management of vital information.
CASE STUDIES
Intermodal Container System - Case Study
The simulation provides detailed analysis of all aspects of the Inter-modal facility, including all activities,
resources and storage capacities within the facility. Examples of key management statistics include:
• Resource utilization
• Track turnover ratios
• Toplifter travel distances
• Overall cost per handling
The model simulates commercial truck traffic flow from the major arterial routes into the primary city
roads feeding the border crossing. The tool also takes into account bridge and tunnel crossing constraints
as well as staffing levels at the border security and inspection kiosks.
Methods to reduce truck queuing times and street congestion were examined using this simulation.
This simulation provides the ability to investigate improved service strategies to their 500 retail outlets
based on new inventory management and supply methods. The system provided a direct comparison of
current state to potential future scenarios and forecast the storage capacity requirements at the
distribution centers in terms of racking, dock space, and staffing requirements.
The resultant simulation allows users to conduct 'what-if' analysis around increased product demand and
assess the limits of the current supply network.
The resultant simulation model was used to analyze the bottleneck processes in the system to handle
increased production volumes. The ability to quickly analyze the entire system and its interdependencies
using this simulation model led to an increase in materials handling capacity of 20% through the
addition of AGV's.
The model was used to analyze which parent products could be staged, at what stage in the
manufacturing cycle to satisfy downstream requirements. Replenishment points and order quantities for
staged product were established through the simulation, given the variability of demand, in order to
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Visual8 Corporation has worked with a major North American railroad (our
client would like to remain anonymous) to develop a simulation model of their entire parts supply network.
This computer model takes into account geographic locations of the many source and supply points in the
system together with the frequency of stock replenishments and product demand levels.
By taking into account transportation travel times and costs across the network, product consumption
rates and reordering policies, holding charges, truck-load (TL) and less-than-truck-load (LTL) policies,
order consolidation rules, milk-runs, and other key parameters, the simulation provides performance
results over a years operation. The tool was used to support the rationalization of stocking levels and
warehousing location for supplies across the network in support of reducing costs for the railroad's
maintenance operations.
“Redhead have proved themselves to be a professional and reliable service provider consistently meeting
our requirements for the delivery of time-sensitive products”
Nicky George, National Operations Manager, Mirror Group Newspapers.
High praise indeed, but then with daily experience of working with live news, 25 years of working with
publishers, printers and clients AND moving around 450 tonnes of print into Ireland each week, it’s what our
customers have come to expect.
Because with experience comes trust; and trust is something you cannot put a value on. At Redhead we
have developed the perfect print logistics solution.
15,000 sq.m of modern, racked warehousing not only offers you bulk stockholding and collation facilities, but
our stringent stock management procedures enable us to take in stock from a number of sources and
despatch complex, multiple consignments to any number
of destinations.
That BMW would turn over such a vital link in its supply chain
to another company is dramatic evidence that supply chain
management, long regarded as necessary drudgery, has
become a strategic opportunity. Not only can it give
companies new options for reducing costs and improving
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asset utilization, but it can also drive growth and improve customer satisfaction.
Global markets, the proliferation of products with shorter lifecycles, and rising
customer expectations have combined to create new opportunities that require
more sophisticated, complex and global supply chains. And at many companies,
some of the most creative minds are working on reconfiguring the supply chain, a
critical exercise that demands the attention of executives all the way up to the
CEO.
The Art of Partnering Executives who will deal best with overhauling their
traditional supply chain operations are those who are comfortable with increased
specialization. Each product group within the organization could end up with its
own supply line, creating a series of links weaving inside and outside of the
company. Winning companies will be the ones that can visualize their supply
chains as complex, sophisticated, evolving, frequently mutating networks of
partners. The art of partnering will largely determine which companies succeed.
Consider how some cutting-edge companies have led the way in forging new
supply chain models:
Another example is Microsoft. It has created a new game console, the Xbox,
which competes head-to-head with the Sony PlayStation. But the giant software
creator is not making the new product itself. Instead, it has partnered with
contract manufacturer Flextronics, which collaborated on the Xbox design and
handles the product's manufacturing.
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How do senior executives apply this type of revolutionary thinking to their own
companies? We begin with the premise that every company will benefit from
fundamentally rethinking its supply chain link by link and reconstructing it from
scratch—but without any factories, distribution centers or warehouses that it
owns or has relationships with. Leadership needs to ask: What would the ideal
supply chain—the one that would deliver additional revenues, slash costs and
generate substantially greater efficiencies—look like?
The answers will vary, of course, from industry to industry, company to company
and even year to year. But as executives go through this tough-minded exercise,
they should keep several principles in mind.
On the other hand, in Europe the fragmented nature of the market fostered a
stronger tradition of subcontracting, particularly for logistics and transportation
(which were especially affected by country-specific tariff and tax structures, and
by customs and other government regulations). However, there were few
outsourcing alternatives from which to choose.
In both the United States and Europe, supply chains were considered cost
centers. In fact, that's the way many executives continue to think of them. This
leads managers into the efficiency trap, the delusion that the only way you can
improve performance is to shave a little more off your costs. Companies can go
into a death spiral trying to economize themselves into prosperity by trimming
here and there to fix a link that may not be worth the effort.
At times, the rigorous, unsentimental evaluation of the supply chain will lead to
the conclusion that a particularly strong link should be turned into a profit center.
For example, Cat Logistics, a subsidiary of Caterpillar that distributes its engines,
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power trains and other spare parts to remote places around the world, provides
the same service for Land Rover and other companies too.
Unpredictability is the norm in the cement business, with half of all orders from
construction sites rescheduled or canceled. But one cement company turned this
to its advantage. Embracing information technology such as GPS locators and
satellite communications, the company cut its fleet of trucks by one-third while
guaranteeing a delivery window of 20 minutes (down from three hours)—a
unique service for which customers are happy to pay a premium.
Picking the best partner from the multitude now available can require you to
stretch your imagination and perhaps make an unexpected choice. Rather than
compete head-to-head in the unforgiving online retail environment, Toys "R" Us
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A perhaps more painful dilemma: Choosing the right partner can sometimes
mean acknowledging that the best option is your direct competitor. Nestlé, the
giant food and beverages conglomerate, competes with Ocean Spray
Cranberries in the fruit juice business. Nonetheless, the two companies have
formed a strategic alliance along part of their supply chains. Nestlé will eventually
move the manufacturing of Libby's Juicy Juice and Kern's/Libby's Nectars to
Ocean Spray plants. The goal is to reduce purchasing and distribution costs for
both companies.
When you team with a partner, you run some risk of losing proprietary
information, failing because of misunderstandings and cultural mismatches
between partners, or eliminating an internal link that should not have been cast
aside. But the much greater risk emerges when a company neglects to
reevaluate its supply chain, link by link, as a strategic opportunity—while the
competition moves ahead with innovative partnerships. Increasingly, the ability to
sense and respond rapidly to the market through flexible, high-performing supply
chains will be a competitive weapon for any organization looking to change the
game and lead the market.
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Supply Chain is one of the critical factors for the smooth functioning of any business. And
when we are talking about fast food business with McDonald’s as the subject of the study it
can be expected a Supply Chain model of one of the highest precisions. It is this unmatched
Supply Chain Structure, which not just ensures on time delivery of raw materials and supplies
to McDonalds but also enables it to cut down on its cost and maximize profitability along with
maintaining highest quality standards of its products. The level of commitment of McDonalds
can be gauged from the fact that even before it set up its first restaurant in the country it
infused Rs 400 Crore to set up its delivery mechanism. McDonald’s initiative to set up an
efficient supply chain and deploy state-of-art technology changed the entire Indian fast food
industry and raised the standards of performance to international levels.
As already mentioned, McDonalds had been working on its supply chain even before it opened
its first joint in the country. McDonalds, an international brand which was trying to make
inroads into the country, developed its Indian partners in such a manner that they stayed with
the company from the beginning. The success of McDonalds India was achieved by sourcing all
its required products from within the country. To ensure this, McDonalds developed local
businesses, which can supply it highest quality products. Today, McDonalds India works with
38 different suppliers on a long-term basis and several other stand alone restaurants for its
various other requirements. McDonald’s distribution centers in India came in the following
order: Noida and Kalamboli (Mumbai) in 1996, Bangalore in 2004, and the latest one in
Kolkata (2007). McDonald's entered its first distribution partnership agreement with Radha
Krishna Foodland, a part of the Radha Krishna Group engaged in food-related service
businesses. The association goes back to July 1993, when it studied the nuances of
McDonald's operations and requirements for the Indian market. As distribution centers, the
company was responsible for procurement, the quality inspection program, storage, inventory
management, deliveries to the restaurants and data collection, recording and reporting. Value-
added services like shredding of lettuce, re-packing of promotional items continued since then
at the centers playing a vital role in maintaining the integrity of the products throughout the
entire 'cold chain'.
Cold Chain was one of the unique concepts of McDonalds supply chain in India, on which it had
spent more than six years to get the system into place. This system brought about a veritable
revolution, immensely benefiting the farmers at one end and enabling customers at retail
counters get the highest quality food products, absolutely fresh and at great value. Through
its unique cold chain, McDonalds has been able to both cut down on its operational wastage,
as well as maintain the freshness and nutritional value of raw and processed food products.
This has involved procurement, warehousing, transportation and retailing of perishable food
products, all under controlled temperatures. The following list of suppliers, who build up the
major supply chain of McDonalds, reveal how this ‘Cold Chain’ works and contributes towards
the efficiency of McDonalds.
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From farm two degrees Celsius in 90 minutes is the first step to quality. For example, the Rs
262-crore Dynamix Dairy Industries, located in Baramati in Pune district of Maharashtra,
manufactures cheese slices for McDonald’s at 10 metric tonnes per month. Dynamix has
helped set up 15 bulk cooling centers throughout the district from which it purchases milk.
Each cooling center, which is equipped with modern measuring and testing equipment and a
large cooling tank, is not more than a few kilometers away from local dairy farms. A farmer
can deliver milk even twice a day on his bicycle and get a printed receipt on the spot, which
also lists the quality of the milk supplied by him as per fat content, color and solids content. If
the milk is sub-standard or adulterated, it is rejected on the spot. A batch of milk can vary
from one liter to 10 liters, or more. Each batch is mixed in one large stainless steel cooler and
chilled immediately to two degrees Celsius to stop bacterial growth and preserve freshness.
From this point onwards, until just before the burger is actually served in a McDonald’s
restaurant hundreds of kilometers away, the temperature is never allowed to increase. When
the refrigerated milk arrives at the Dynamix plant at Baramati, the milk in every single tanker
is thoroughly tested and rejected if found sub-standard, adulterated or contaminated. The
sophisticated testing lab can check fat content with an accuracy of 0.1 per cent. It can even
detect minute traces of pesticides or antibiotics administered to cows. This instant feedback
and the rejection of the entire tanker-load forces farmers to follow the best practices in terms
of animal husbandry, use proper feeds, cut down on the indiscriminate use of pesticides and
animal medicines and completely stop even the slightest attempts at adulteration.
Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald's India, is one such
enterprise that is an intrinsic part of the cold chain. Exposure to better agricultural
management practices and sharing of advanced agricultural technology by McDonald's has
made Trikaya Agriculture extremely conscious of delivering its products with utmost care and
quality. Initially lettuce could only be grown during the winter months but with McDonald's
expertise in the area of agriculture, Trikaya Farms in Talegaon, Maharashtra, is now able to
grow this crop all the year round. McDonald's has provided assistance in the selection of high
quality seeds, exposed the farms to advanced drip-irrigation technology, and helped develop a
refrigerated transportation system allowing a small agri-business in Maharashtra to provide
fresh, high-quality lettuce to McDonald's urban restaurant locations thousands of kilometers
away. Post harvest facilities at Trikaya include a cold chain consisting of a pre-cooling room to
remove field heat, a large cold room and a refrigerated van for transportation where the
temperature and the relative humidity of the crop is maintained between 1º C and 4º C and
95% respectively. Vegetables are moved into the pre-cooling room within half an hour of
harvesting. The pre-cooling room ensures rapid vacuum cooling to 2º C within 90 minutes.
The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay
between harvesting, pre-cooling, packaging and cold storage. With this cold chain
infrastructure in place, Trikaya Agriculture has also a plan to export this high value product to
other international markets, especially to McDonald's Middle East and Asia Pacific operations.
McDonald's expertise in packaging, handling and long-distance transportation has helped
Trikaya to do trial shipments to the Gulf successfully. In addition to export, McDonald's
assistance has enabled Trikaya Agriculture to supply this crop to a number of star-rated
hotels, clubs, flight kitchens and offshore catering companies all over India.
Vista Processed Foods Pvt. Ltd. (Supplier of Chicken and Vegetable range of
products including Fruit Pies)
A joint venture with OSI Industries Inc., USA, McDonald's India Pvt. Ltd. and Vista Processed
Foods Pvt. Ltd., produces a range of frozen chicken and vegetable foods. A world-class
infrastructure at their plant at Taloja, Maharashtra, has:
Vista Processed Foods Pvt. Ltd., McDonald's suppliers for the chicken and vegetable range of
products, is another important player in this cold chain. Technical and financial support
extended by OSI Industries Inc., USA and McDonald’s India Private Limited have enabled Vista
to set up world-class infrastructure and support services. This includes hi-tech refrigeration
plants for manufacture of frozen food at temperatures as low as - 35° C. This is vital to ensure
that the frozen food retains it freshness for a long time and the 'cold chain' is maintained. The
frozen product is immediately moved to cold storage rooms. With continued assistance from
its international partners, Vista has installed hi-tech equipment for both the chicken and
vegetable processing lines, which reflect the latest food processing technology (de-boning,
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blending, forming, coating, frying and freezing). For the vegetable range, the latest vegetable
mixers and blenders are in operation. Also, keeping cultural sensitivities in mind, both
processing lines are absolutely segregated and utmost care is taken to ensure that the
vegetable products do not mix with the non-vegetarian products. Now, at Vista, a very wide
range of frozen and nutritious chicken and vegetable products is available. Ongoing R&D, both
locally and in the parent companies, work towards innovation in taste, nutritional value and
convenience. These products, besides being supplied to McDonald's, are also offered to
institutions like star-rated hotels, hospitals, project sites, caterers, corporate canteens,
schools and colleges, restaurants, food service establishments and coffee shops. Today,
production of better quality frozen foods that are both nutritious and fresh has made Vista
Processed Foods Pvt. Ltd. a name to reckon within the industry.
An integral part of the Radhakrishna Group, Foodland specializes in handling large volumes,
providing the entire range of services including procurement, quality inspection, storage,
inventory management, deliveries, data collection, recording and reporting. Salient strengths
are :
McDonald's local supply networks through Radhakrishna Foodland, which operates distribution
centers (DCs) for McDonald's restaurants in Mumbai and Delhi. The DCs have focused all their
resources to meet McDonald's expectation of 'Cold, Clean, and On-Time Delivery' and plays a
very vital role in maintaining the integrity of the products throughout the entire 'cold chain'.
Ranging from liquid products coming from Punjab to lettuce from Pune, the DC receives items
from different parts of the country. These items are stored in rooms with different
temperature zones and are finally dispatched to the McDonald's restaurants on the basis of
their requirements. The company has both cold and dry storage facilities with capability to
store products up to -22º C as well as delivery trucks to transport products at temperatures
ranging from room temperature to frozen state.
Amrit Food (Supplier of long life UHT Milk and Milk Products for Frozen Desserts)
Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh.
• Installed capacity of 6000 ltrs/hr for producing homogenized UHT (Ultra High
Temperature) processed milk and milk products.
• Strict quality control supported by a fully equipped quality control laboratory.
All suppliers adhere to Indian government regulations on food, health and hygiene while
continuously maintaining McDonald's recognized standards. As the ingredients move from
farms to processing plants to the restaurant, McDonald's Quality Inspection Program (QIP)
carries out quality checks at over 20 different points in the Cold Chain system. Setting up of
the Cold Chain has also enabled it to cut down on operational wastage
Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that
emphasizes prevention within its suppliers' facility and restaurants rather than detection
through inspection of illness or presence of microbiological data. Based on HACCP guidelines,
control points and critical control points for all McDonald's major food processing plants and
restaurants in India have been identified. The limits have been established for those followed
by monitoring, recording and correcting any deviations. The HACCP verification is done at least
twice in a year and certified.
The relationship between McDonald's and its Indian suppliers is mutually beneficial. As
McDonald's expands in India, the supplier gets the opportunity to expand his business, have
access to the latest in food technology, exposure to advanced agricultural practices and the
ability to grow or to export. There are many cases of local suppliers operating out of small
towns who have benefited from their association with McDonald's India.
38
LOGISTICS AT Wal-Mart
Many people wonder how Wal-Mart is able to charge such low prices and continue to
make a profit. There are several factors in their business model that contribute to
this ability, but a big one is their ability to adapt to an ever-changing global
marketplace. Some criticize Wal-Mart's efforts to deliver to their customers a quality
product at low prices, but in reality, Wal-Mart has been able to deliver low prices by
being efficient. This efficiency is present in several areas but one of the most
important places is how they are able to manufacture products all over the world and
get them to retail outlets, which are also all over the world. This ability requires a
flawless logistical system that allows product to be shipped anywhere at a moments
notice.
39
Wholesaling g.pherwani
Wholesaling consists of the sale of goods/merchandise to retailers, to industrial,
commercial, institutional, or other professional business users or to other wholesalers
and related subordinated services.
According to the United Nations Statistics Division, Wholesale is the resale (sale without
transformation) of new and used goods to retailers, to industrial, commercial, institutional
or professional users, or to other wholesalers, or involves acting as an agent or broker in
buying merchandise for, or selling merchandise, to such persons or companies.
Wholesalers frequently physically assemble sort and grade goods in large lots, break
bulk, repack and redistribute in smaller lots. Examples include: pharmaceuticals storage;
refrigeration; delivery and installation of goods; engaged sales promotion for customers
and label design
Cash and carry wholesale represents a type of operation within the wholesale sector. Its
main features are summarized best by the following definitions:
• Cash and carry is a form of trade in which goods are sold from a wholesale
warehouse operated either on a self-service basis, or on the basis of samples (with
the customer selecting from specimen articles using a manual or computerized
ordering system but not serving himself) or a combination of the two. Customers
(retailers, professional users, caterers, institutional buyers, etc.) settle the invoice
on the spot and in cash, and carry the goods away themselves.
• There are significant differences between "classical" sales at the wholesale stage
and the cash and carry wholesaler: These differences are based in particular on
the fact that customers of the cash and carry wholesaler arrange the transport of
the goods themselves and pay the goods in cash and not on credit. (EU
Commission Decision (Kesko/Tuko) of November 20, 1996 (97/277/EC)).
In a retail context, the term has a similar meaning: customers pay cash for the goods they
purchase (the retailer does not offer credit accounts) and carry them away themselves (the
retailer does not offer delivery service).
40
Historic meaning
The policy of cash and carry established at the onset of World War II in 1939 revised
the Neutrality Acts that were established by US President Roosevelt in order to instill a
sense of neutrality between the United States and the war that was raging in Europe. The
economic situation in the US was rebounding at this time (after the great depression) but
there was still a need for industrial manufacturing jobs. The Cash and Carry program
helped to solve this issue and in turn the US benefited through the sale of war supplies to
their allies. This also helped in making sure that the US didn't give away all its supplies
and rations.
This program was also beneficial for the British and French who were not faring well in
response to Germany's militarism and were in need of war materials. Any allied ship that
could make the risky trip across the North Atlantic to US coastal ports could get war
materials for cash.
Despite its success, this policy soon left European allies (primarily Britain) bankrupt and
this forced US leaders to revise the plan. The revised plan is known as the Lend-Lease
program, in which the European allies no longer had to pay cash or arrange their own
transportation. Instead, the United States would provide this for them and later payment
was expected.
In keeping with the Monroe doctrine the US didn't actively participate in the war until
both Japan and Germany declared war on them too, after which they switched from allied
assistance to active engagement
Multi-national
• Auchan
41
India
have cranes and forklifts for moving goods, which are usually placed on ISO
standard pallets.
• Some warehouses are completely automated, with no workers working inside.
The pallets and product are moved with a system of automated conveyors and
automated storage and retrieval machines coordinated by programmable logic
controllers and computers running logistics automation software. These systems
are often installed in refrigerated warehouses where temperatures are kept very
cold to keep the product from spoiling, and also where land is expensive, as
automated storage systems can use vertical space efficiently. These high-bay
storage areas are often more than 10 meters high, with some over 20 meters high.
• The direction and tracking of materials in the warehouse is coordinated by the
WMS, or Warehouse Management System, a database driven computer program.
The WMS is used by logistics personnel to improve the efficiency of the
warehouse by directing putaways and to maintain accurate inventory by recording
warehouse transactions.
• Traditional warehousing has been declining since the last decades of the 20th
century with the gradual introduction of Just In Time (JIT) techniques designed to
improve the return on investment of a business by reducing in-process inventory.
The JIT system promotes the delivery of product directly from the factory to the
retail merchant or from parts manufacturers directly to a large scale factory such
as an automobile assembly plant, without the use of warehouses. However, with
the gradual implementation of offshore outsourcing and off shoring in about the
same time period, the distance between the manufacturer and the retailer (or the
parts manufacturer and the industrial plant) grew considerably in many domains,
necessitating at least one warehouse per country or per region in any typical
supply chain for a given range of products.
• Recent developments in marketing have also led to the development of
warehouse-style retail stores with extremely high ceilings where decorative
shelving is replaced by tall heavy duty industrial racks, with the items ready for
sale being placed in the bottom parts of the racks and the crated or palletized and
wrapped inventory items being usually placed in the top parts. In this way the
same building is used both as a retail store and a warehouse.
• Drop shipping is a supply chain management technique in which the retailer does
not keep goods in stock, but instead transfers customer orders and shipment
details to wholesalers, who then ship the goods directly to the customer. The
retailers make their profit on the difference between the wholesale and retail
price.
• Procedure
• Some drop shipping retailers may keep "show" items on display in stores, so that
customers can inspect an item similar to those that they can purchase. Other
retailers may provide only a catalogue or website.
• Retailers that drop ship merchandise from wholesalers may take measures to hide
this fact to avoid any stigma, or to keep the wholesale source from becoming
43
• Small business
• Drop shipping can occur when a small retailer who typically sells in small
quantities to the general public receives a single large order for a product. Rather
than route the shipment through the retail store, the retailer may arrange for the
goods to be shipped directly to the customer.
Sam's Club
Website http://www.samsclub.com
Sam’s Club
History
44
The first Sam's Club opened in April 1983 in Midwest City, Oklahoma in the United
States
Sam's Club is named after the founder of Wal-Mart, Sam Walton. To purchase items
from Sam's Club, one must purchase a membership. Many Sam's Club customers are
small businesses that wish to offer customers a limited selection of food without the
expense of having it delivered.
In 1993, Wal-Mart acquired PACE Membership Warehouse and converted many (but not
all) PACE locations into Sam's Clubs.
Membership is required to purchase at Sam's Club; however, a onetime day pass may be
obtained from Sam's Club.com or many Wal-Mart newspaper ads. A 10% surcharge is
added to the prices for non-members. No membership (with no surcharge) is required for
Optical, Pharmacy, or Cafe (as available per club), or to purchase alcohol.
The latest flagship store opening as of September 28, 2006 was in Bentonville, Arkansas.
It is the second largest Sam's Club store; its largest is located in Utica, Michigan, with
over 145,000 sq. ft. of retail space.
Sam's Club ranks second in sales volume among warehouse clubs, behind Costco.
After Costco's announcement on its change of return policy for consumer electronics
(now within 90 days) beginning on February 26, 2007, Sam's Club finds itself now to be
tied with Nordstrom for having best, most liberal return/refund policy in the retail
business.
In 2006, Wal-Mart acquired The Central American Retail Holding Company (CARHO),
which operates "ClubCo" stores in Latin America. These stores are very similar to Sam's.
Design
Like other warehouse clubs, most merchandise sold at Sam's Club is sold in bulk and
directly off pallets. Clubs are arranged much like a warehouse, with merchandise stocked
in warehouse-style steel bins. There are currently 551 Sam's Clubs in the United States.
Each club averages 128,000 square feet (3 acres) (12,000 m²) (1.2 ha). The Sam's Club
division of Wal-Mart Stores, Inc. had total sales revenue of USD$37.1 billion for fiscal
year ending January 31, 2005. There are also clubs operated internationally under the
International Division of Wal-Mart Stores in Brazil, Canada, China, Mexico, and Puerto
Rico. Their current primary competitor is Costco. Sam's Club markets items under the
private labels Member's Mark, Bakers & Chefs, and Sam's Club.
Payment Options
Until recently, Sam's Club only accepted cash, PIN-based debit cards, the Wal-Mart
Credit Card, Sam's Club Credit Card, or Discover Card (Sam's Club and Wal-Mart both
also offer a Discover Card). Despite several tests over the years, Sam's Club did not
accept Visa or MasterCard because of high processing fees. Likewise, Sam's does not
accept American Express, likely due to the fact that rival Costco has an exclusive
acceptance agreement with American Express. However, on November 9th, 2006, Sam's
Club began accepting MasterCard credit and signature debit cards. Sam's Club also
allows members to pay by using Visa signature debit cards (no PIN necessary); however,
Sam's Club has accepted these cards for quite some time. It is not known if rival Costco
will follow suit.
prof. g. pherwani 2
46
Location:
Prices:
Isolated store or
Very Low
secondary site
Atmosphere/ Services:
Merchandise: Very low
Moderate width and
poor depth of
assortment; Promotion:
low continuity Little;
some direct mail
prof. g. pherwani
14-8
prof. g. pherwani 14
47
Wholesaling
Mfrs. Retailers
Supply information advise assortment
About mkt./product negotiate
Order
Negotiate wholesaler promotion
Risk taking sales forecast info.
Own title finance
Wholesaling defined
Wholesaling Intermediaries
• Includes not only wholesalers who
assume title to the goods they
handle, but also agents and brokers,
who conduct wholesaling activities
without taking title of the goods.
14-3
50
• Functions of Wholesaling
Intermediaries
– Creating Utility
• Time utility
• Place utility
• Ownership/possession utility
– Providing Services
• Wholesalers commonly provide marketing
services that reflect the basic marketing
functions of buying, selling, storing,
transporting, providing market information,
financing, and risk taking
14-4
14-5
51
14-6
Numbers
• Orders per month- 1,090,000
• Hospitals- 9,700
• Pharmacists-35,000
• Chain drug stores 15,600
• Warehouses 54[130 earlier], due to logistics
• Customers per month: 17,000
• Average order size; $23,000
• Average shipments: 2 per week,[ 3/day]
• Mis-picks cost: $82 to correct.
prof. pherwani 11
prof. pherwani 17
55
Trends
• Wholesaling is changing with the times. In the last
century wholesalers dominated not only Indian market
but also US markets. Small producers and small
retailers need their services. In less developed
economies they still dominate commerce.
• Today many bypass wholesalers-large retailers take
control of their functions. E-commerce is making
easier for producers and consumers to connect
without any middle man. B2B sites are wholesale sites
in disguise-hidden in the channel and giving new
values.
• Progressive wholesalers are more concerned with
their customers and channel members. They are using
technology and value chains bringing them closer in
their relationship.
Functions:
• Wholesalers sell to different type of
organizational customers.
• Wholesale activities are variations of basic
marketing functions-gathering and providing
information-buying and selling-grading and
storing-transporting-financing and risk taking.
• They are members of the channel-
• they add value by doing jobs for their customers
and their suppliers.
Inventory control
57
58
59
Inventory control means keeping the overall costs associated with having inventory as
low as possible without creating problems. This is also sometimes called stock control. It
is an important part of any business that must have a stock of products or items on hand.
Correctly managing inventory control is a delicate balance at all times between having
too much and too little in order to maximize profits. The costs associated with holding
stock, running out of stock, and placing orders must all be looked at and compared in
order to find the right formula for a particular business.
At the same time, there are issues with inventory control when there isn’t enough stock
on hand. One common problem is running out of inventory, which is caused by trying to
60
reduce inventory costs too much. This is something that no business wants to have
happen, but it happens to virtually all of them at some point. Even the largest stores run
out of certain products from time to time when they sell or use more than they expected.
This can cause financial losses when inventory is not available for customers to purchase.
Part of inventory control is trying to minimize shortages so these are rare occurrences.
Most businesses expect they will have shortages on occasion and they have calculated
that the small loss is worth the money saved by not having an overstock.
Another important element of inventory control is called reorder point. Businesses need
to think ahead and calculate the best time for reordering products. Doing so too soon may
cause financial difficulties or running out of space. On the other hand, waiting to long to
reorder will result in a shortage and running out of inventory before the next shipment
arrives. When figuring out a reorder point, it’s necessary to calculate how long it will
take the shipment to arrive and the amount of demand for a particular item. The overhead
costs, fees, and shipping expenses of ordering large versus small quantities should also be
looked at.