IMPROVING AND DEVELOPING THE SUPPLY CHAIN OF A CEILING FAN IMPORTER OF SRI LANKA by Wathsala Anuradhi Hathurusinghe Student

ID - 21126327 An assignment submitted in partial fulfillment of the requirements for the evaluation of the Module of International Logistics & Operations Performance Module Code BMM23DL

Buckinhamshire New University UK 29th July 2011

Approved by

Dr. Wantao Yu Module Co-ordinator / Tutor Department of Business & Management

Program to Offer Degree Master of Business Administration (MBA)

BUCKINHAMSHIRE NEW UNIVERSITY UK ABSTRACT To understand the issues & challenges faced by the consumer electronic industry as a whole in terms of international supply chain management and specifically concentrating the issues in terms of logistics network and modes of transportation of a ceiling fan importer from India to Sri Lanka thus providing solutions to improve & develop the supply chain by eliminating the bottlenecks using industry specific solutions.

An assignment presented on the ways of improving & developing the supply chain networks in the consumer electronic industry & specifically how a ceiling fan importer in Sri Lanka facing the challenges incorporated in the supply chain and to suggest ways of improving it.

ACKNOWLEDGMENTS

The author wishes to express sincere appreciation to Dr. Wantao Yu for guiding us throughout the module & Mr. I.G. Perera, our lecturer for making this module an interesting one by delivering awesome lectures and Sri Lanka Institute of Marketing for their assistance from the day one of the MBA programe in providing us trouble free environment .In addition, special thanks to Dr. Christien Parsons for overall management of the MBA Programe, my classmates for providing valuable inputs and finally my family member for giving me the peace of mind to follow the programe.

TABLE OF CONTENTS

Number Page 1. Mercury....................................................................................12 2. Venus.......................................................................................13 3. Earth.........................................................................................14 4. Mars.........................................................................................16 5. The Asteroid Belt......................................................................17 6. Land Forms..............................................................................18 7. Site Topography.......................................................................21 8. Views........................................................................................24 9. Functional Relationships..........................................................28 10. Spatial Magnitudes...................................................................36

Supply Chain Network an Introduction Most of the business organizations which is exist in the world knowingly or unknowingly in some way is a partner of a supply chain network/s. A supply chain for any product or service starts & end from the Mother Nature and in between we found thousands of suppliers & hundreds of customers. At any given time businesses are bounded with a immediate supplier and a customer in the logistics network. Today Organizations have understood the fact that, logistics is much more than movement of goods. The importance of the supply chain management is increasingly recognized to meet the challenges in the business world. Supply Chain Management is the active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient ways possible.(Introduction to Operations & Supply Chain Management by Cecil C.Bozarth & Robert B. Handfield)2008/2nd edition page 08

ii

Supply Chain Network of a ceiling fan imported to Srilanka by Nelson Trading Co. Ltd

Original Product Manufacturer (India)

Country Dealer (Sri Lanka)

Usha Inational Ltd Ceiling Fan Maufacturer/Brand Owner

er

Nelson Trading Co. Ltd Sole agent for Usha Brand Sri Lanka

Metal Manufactur

Metal Blade Manufactur er

Chemical Manufactur er Mother Nature

Motor Manufactur er

Sanoki Enterprises Sub Dealers & Distributors

Retailer

Second Tier Suppliers

First Tier Suppliers

Plastic Manufactur er

Nuts & Bolts Manufactur er

Cardboard Manufactur er

Packaging Manufactur er

Upstream Back to Mother Nature

Downstream

Customers

Final Consumer

Transportatio n Companies Local

Transportat ion Companies

Transportat ion Companies

Nelson Trading Co. Ltd in Sri Lanka is a medium scale consumer electronics organization, who is the sole agent of Usha International Ltd India. In that sense company is importing most of the products manufactured by UIL India. The above diagram illustrating the supply chain operation of one of the products they imported to Sri Lanka, the ceiling fans. Usha International Ltd is one of Indias well known consumer product brand .It has a history of 74 years of operation and today it is a multi product consumer electronic company with a diverse product portfolio. As a ceiling fan manufacturer it has a number of second tier suppliers who extract raw materials from Mother Nature & convert them into different ingredients which is useful for the manufacturing process. Metal, Chemical, Plastic and Cardboard are some of those ingredients, which used by the first-tier suppliers, to manufacture different parts required by the Usha International Ltd, to complete manufacturing the ceiling fan. The UILs factories located in Kolkata and Hyderabad, buying those parts such as metal blades,motor,regulators,nuts and bolts etc., from the first tier suppliers and molds and assemble the final product. Those factories are not only catering to the export market but also supplying into various categories like civil, government and commercial bulk buyers.

Once the production is completed the finish goods will be checking for the quality levels & products will be storing in their 33 ware houses managed in house, which is SAP enabled. By that time Nelson Trading Company has been forwarded a purchase requisition and based on that they had done an advance payment for a proforma invoice which has been raised by Usha International Ltd. Also UIL has promised NTC a lead time of sixty days to deliver the stock of ceiling fans to Sri Lanka. Once the Nelson Trading Company receives the stock it will be distributing among its dealers and retailers in Sri Lanka by their distribution arm KIR holdings (Pvt) Ltd. Sanoki Enterprises is one of Nelsons sub dealer as well as a retailer, who will be selling the Usha ceiling fans to the final consumer. In Nelson Trading Company point of view the firms whos inputs feed into its operation are called as upstream and those firms who take Nelsons products and move them along to the final consumer are called as downstream. Along this supply chain not only goods but also information as well as the funds too are flowing. Specifically the supply chains of consumer electronic industry carry more information as changing needs of the customers. The pace of product innovation in the consumer electronics market is at unprecedented levels.While in the 1990s technology aficionados followed the personal computer industry to understand the latest trends,today they follow consumer electronics http://www.kinaxis.com/operations-performance-solutions/industry/consumerelectronics.cfm It is a two- way process with goods flowing one way and information flowing the other (pg.141)

Issues and Challenges Faced by the Supply Chain Today consumer electronics markets are faced with dynamic market conditions and companies like Nelson Trading, as well as Usha International Ltd are exposed to these conditions in a critical way and therefore they are faced with following logistics as well as transportation challenges in related to supply chain of Usha ceiling fan imported to Sri Lanka. Logistics Network Increasing demand volatility and shorter Product Life Cycle(PLC) Understanding and anticipating the consumer behavior is no longer a local issue but is now a global. Consumer electronics products are driven more by consumer than commercial purchases.The demand is not only for innovative product design but also in the speediest way as possible. Walk into a consumer electronics store and look at RIMs BlackBerry or Apples iPod. Color, form factor, and styling are more important to many consumers than the features and functions. Enabling a Demand-Driven Supply Chain: Business Implications and Technology Considerations Kynaxis White paper http://www.iwchallenge.com/1108/images/1108Kinaxis.pdf Usha Internatinal Ltd is manufacturing some 05 different ceiling fan categories targeting 05 customer segments and in Sri Lanka it is the Economy and the Super economy are the most demanded categories and according to Nelson trading some 10 new designs has been introduced by UIL during the year of 2010, which is an ideal case to understand the demand volatility of the end user. Furthure this uncertainity creates Bullwhip effect on the supply chain which creates major problems. The bullwhip effect , is used to describe how a small disturbance at the downstream end of a supply chain causes increasingly large disturbances, errors, inaccuracies and volatility as it works its way upstream. Page 392 Level of Carbon Footprints in the logistics network Reducing carbon footprints in the logistics network is another challenge face by consumer electronics companies as it uses comparatively high amount of ingredients which are harmful for the environment. Specially when a fan is no more usable the consumer used to throw it away to the environment which creates environmental problems which last forever. As it is negative publicity for the company image in maintaining corporate social responsibility and therefore Usha as well as Nelson Trading should have to focus on a waste management method. Especially Sri Lanka is not having a proper waste management policy implemented and therefore those defected/obsolete items create more issues.

Manufacturing Delays Nelson Trading co. is experiencing this issue throughout their operation with Usha International Ltd in exporting fans. Although UIL is promising a lead time of sixty days to deliver the products most of the times it will dragging more than that where the end consumer will suffer. This is an outcome of less integration between internal processes such as design, manufacturing and transportation etc. as well as lack of supplier collaboration in the supply chain. Tariffs, Clearing & other regulations Most of the third world countries have created widespread bureaucratic practices in the Customs and Port Authorities when its come to international trade which gives way to corruption related activities. From one country to another there are no. of red tapes created in international trade and it will adversely effect on the transaction cost making it higher with following difficulties like excessive documentation requirements, considerable clearance times, lack of coordination between relevant bodies and outdated customs techniques. Nelson Trading Co. in Sri Lanka is exposed to these conditions throughout and in order to speed up the clearing process they are spending some 25-50 percent of a total cost of clearing a 20 feet container as bribes or gifts. Political situation & the government policies and regulations In order to have a smoothe supply chain operation specially in the international context the political situation and the government policies of a country plays a vital role. Specially given on a political change or a policy change will create labor unrest which has an adverse effect on the supply chain, creates delays in production and transportation, will decrease the throughput rate. Thus off shore country dealers like Nelson Trading may suffer with delays in lead times.

Documentation issues A very common issue experienced by Nelson Trading the sole agent for Usha brand Sri Lanka in the logistics network of Usha ceiling fan importation. When a shipment has arrived to Colombo port, the original documents should also has to be arrived at the same time to the bank. Because of the lack of coordination there is a delay in getting down the documents on time from UIL. Which in turn if it delays for more than three days Nelson Trading has to pay demurrage charges to the shipping company or have to go for a bank guarantee as a compensation for unloading delay, which cause an unnecessary cost pushed towards the end consumer. Less multi-tier visibility Not only the internal processes of the organization should be integrated but also all the suppliers in all levels should be integrated in order to have an efficient supply chain network. 4

Increase complexity of the supply chain

Modes of Transpotation

the sole agent of Usha Ceiling Fans in Sri Lanka and Usha International Ltd, the brand owner too are suffering from to this situation are struggling with issues aimed at raising service levels and lowering costs. Some of the global challenges the industry is facing are; -Shorter product life cycles -Globalization Above challenges are drastically impacting on bottom line profitability and supply chain efficiencies of organizations. in following forms; Increase demand for user friendly product designs Increase demand for more service levels Price competition Speed of delivery Accordingly in order to meet those challenges they will be adopting following business strategies like; New Product Development New Market Development and Cost minimization However the final outcome of this process will make the logistics network larger and more complex However the final outcome of this process will make the supply chains much larger and more complex. Therefore following are the challenges faced by Nelson Trading Company in terms logistics networks & modes of transportation Logistics Networks Modes of Transpotation

Logistics Networks

Modes of Transpotation