Kapil Health Food Products

Introduction
• Kapil Health Food Products was established in 1960 as a subsidiary of an
American Multinational pharmaceutical company.

• It has a total capital outlay of Rs.50 million.

• It started its manufacturing operations at Nahar, which is situated 325

kilometers west of New Delhi & has a population of 8,500.

• Nahar is a semi-urban town supported by a village economy.

• Kapil is an ISO 9002 accredited manufacturing firm with state –of-the-art

manufacturing & packaging facilities.
 Structure of the company
• In 1980, the foreign holding of the company was diluted to 51%, and 49%
shares were offered to Indian nationals and financial institutions.

• The company was registered as Kapil Health Products Limited & milk is
the major raw material for the firm’s product, its major focus is on the
diary development activities.

• It undertakes programmes like animal health; animal insurance,

mechanized milking etc. It spends around 750 million rupees per annum
on the above activities.

• It is now leading health food manufacturing company contributing to 32%

of the total health food powder production in India.
• Major competition is from leading brands like Bournvita,
Boost, Horlicks, Nutramul and Maltova & ayurvedic
pharmaceutical companies in India.

• All these ayurvedic pharmaceutical companies command

around 10-12% of the health food market in India.
 MAJOR ISSUES
• Wholesalers are unable to fulfil two orders in every twenty
orders placed by retailers.

• Due to severe competition, KHFP is in the process of

reviewing its supply chain for
– Cost reduction
– Enhancing customer service.

• The management is planning to reduce the inventory to less

than 10 days at factory & C&F agents.
• The distribution cost on the present level of sales is at the rate
of 8.5%, which they want to reduce by 40% i.e. from 8.5 they
want to bring it down to 5.1%.

• In addition they want to reduce inbound transportation cost by

proper planning & scheduling.
 KAPIL’S SUCCESS STORY
• PARAMETER 1960 2001

• PRODUCTION CAPACITY 2 35
• NO.OF.UNITS 1 4
• FACTORY AREA 40,000 75,000
• NO.OF.PRODUCT LINES 1 14
• MANPOWER EMPLOYED 50 1700
• MILK PROCESSED 7000 1,50,000
 PRODUCTS
Kapil runs three product lines:

• Health foods, HOR & BOS

• Ghee.

• The Company also supplies products in bulk to various

repacking stations across the country to take advantage of
freight economy.
 Product Packaging at Kapil Health Food Products:
HOR BOS GHEE

• 500 gms 500 gms 500 gms,

1000 gms
• 1000 gms - 2000 gms ,
5000 gms
• - - 10,000 gms
 MAJOR RAW MATERIALS CONSUMPTION (Mt/Day)
• WHEAT FLOUR 28

• MALTED BARLEY 26

• MALT EXTRACT 35

• SUGAR 8

• MILK POWDER 14

• LIQIUD MILK (LITRES) 1,50,000

PROCUREMENT
Since the numbers of raw materials are 6, the
management thinks that it has a good control over the
inventory & its suppliers.
Barring milk is the major raw material, & NO OF
VENDORS ARE RESTRICTED TO 4 OR 5.
 PACAKAGING CONSUMPTION (units/day)
• TIN CONTAINERS 1800
• CARTONS 250
• POLYTHENE 435

MILK PROCUREMENT:

• MILK PRODUCERS 25,000

• DAIRY FARMERS 200
• CONTRACTORS 20
 INBOUND LOGISTICS
• The movement of materials from suppliers and vendors into
production processes or storage facilities.

• Activities associated with receiving, storing, and

disseminating inputs to the product.
MILK FLOW SYSTEM
 MODIFIED PRODUCTION SYSTEM
• PLANT CAPACITY: 35 kilo tones in a year’s time frame.
Therefore 100 Mt/day.
• PROCESS:
• OUTBOUND LOGISTICS: The factory has 4 Regional offices
at major metros headed by:
 OUTBOUND LOGISTICS
• The process related to the movement and storage of products
from the end of the production line to the end user.

• Outbound Logistics’ is the part of the supply chain process,

such as custom assembly or private labelling, that moves,
stores, and adds value ...
 DISTRIBUTION SYSTEM

• The product requirement flows from

INVENTORY HOLDING

• WAREHOUSE 15-18 DAYS

• C & F AGENTS 12-15 DAYS
• STOCKISTS 8-10 DAYS
• WHOLESALERS 7-8 DAYS
 RECOMMENDATIONS
1. INVENTORY MANAGEMENT:

• Reduce the inventory at warehouse i.e. from 15-18 to 12-15.

• This can be done by providing discounts to C&F agents at 3%
discount rate.
• This would automatically provide a benefit of discounts to
stockiest, wholesalers via C&F agents.
• Hence ultimate result would be that the inventory level at
warehouse would lower down & thereby at C&F agents,
stockiest & warehouse.
2. TRANSPORT CHECK:

• The transport facility should be a good one as it is a major

factor.
• The energy in terms of fuels and hence costs which is wasted
in standing of trucks at check posts now can be saved.
• The company can be relieved by regular challan’s on
transports.
• Training of truck drivers could enhance their speed of work.
 55 km
30 km

45 km

17 km 27 km
D

49 km
16 km

23 km 10 km
36 km C
B
From this point
20 km directly to the factory,
A FACTORY
so that production
process for the urgent
requirement can be
32 km done
42 km

Milk Collection And Processing Units

4. Manufacturing Resource Planning-MRP II

• MRP II system provides data on the cost of production,

machine time, labour time and material consumed and the
final output to accounting and finance. As the new milk
collection centres and processing units will be setup, so we
will require MRP II.
 CONCLUSION
• The growing health consciousness among the educated
families, particularly in the urban areas, is contributing to the
growth of health food requirements.

• Kapil Health Food Products is a continuous success story

since its inception in 1960.

• It is now a leading health food manufacturing company in

India contributing 32% to the total health food powder
production.
• By following the recommendations the company would
improve its inventory management and will have lower
transportation cost and help the company to increase its
market share.
Feedback from our colleagues would be appreciated