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Dynamics of Supply Chain Management

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DYNAMICS OF SUPPLY CHAIN MANAGEMENT AN APPROACH TOWARDS EFFECTIVENESS & EFFICIENCY OF SUPPLY CHAIN MANAGEMENT

AT

ITC LIMITED, Bangalore “A project report submitted in partial fulfillment of the requirement for the award of MBA” BY T.Lakshmi (02XQCM6061)

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Dr.N.S.Mallavali Principal, M.P.Birla institute Of Management



Mr. Savio Suveire Branch Finance Manager ITC Limited, Bangalore.

Mr. Vineeth Vishwambharam Asst. Branch Manager ITC Limited, Bangalore


M.P.Birla Institute Of Management

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DECLARATION

I hereby declare that the research work embodied in the dissertation entitled “Dynamics of supply chain management at ITC Ltd., Bangalore “ has been carried out by me under the guidance and supervision of Dr. N.S.Malavalli, Principal,M.P.B.I.M , Bangalore (Internal Guide) and Mr. Savio ,Branch Finance Manager,ITC Ltd. ,Bangalore (External Guide). I also declare that the dissertation has not been submitted to any

University/Institution for the award of any Degree/Diploma.

Place: Bangalore Date:

(T.Lakshmi)

ACKNOWLEGEMENT

I thank V.S.Vaidhyanathan,Sr. Vice President Corporate Affairs ITC Ltd. Delhi, and Mr. Thomas Mathew ,H.R Manager of ITC Ltd. Bangalore, for giving me an opportunity to do research in their company. I extend grateful thank to Mr.Vineeth Vishwambharam, Asst Branch Manager and Mr.Savio Suverrie, Finance Manager, ITC Ltd who provided expert guidance throughout this research work. My special thanks are due to Mr.Arjun Bhatia, Mr.Kiran and Mr. Arun for their personal interest and support. I express my immense gratitude to Dr.N.S.Mallavali & Dr.K.V.Prabhakar for their academic support.. Further, I indebted to all those who explicitly and implicitly helped me in completing my work successfully.

Place: Bangalore Date:

(T.Lakshmi)

LIST OF Graph/Pictures Figure 1: Distribution Network of ITC Figure 2: Distribution Network of Perfetti Figure 3: Distribution Network of Perfetti Figure 4: Clearing and Forwarding agents(C&F agent) in South India Figure 5: Sources of Supply for ITC C&F Agent Figure 6: Pictorial representation of supply from C&F agent Bangalore Figure 7: Pictorial Representation of Food HUB Godown s Source and Flows. Figure 8: CURRENT TRANSPORTATION MODEL WITH IN KARNATAKA Figure 9: Scope of study Figure 10: Flow diagram of SCM tool Figure 11: DATA MINING PROCESS Figure 12: Flow chart for the process of program Figure 13:Model 1 Figure 14: Model 2 Figure 15: Chart comparing the current and proposed model Figure 16: Wholesale Distributors investment pattern LIST OF TABLES Table 1: Shipments From ITC Food HUB Godown Table 2: Overview of Research Area and Data Required Table 3: Following table gives the pattern in which data was available for the study Table 4 : Updated Routing for up-country Wholesale Distributors TABLE 5: Number of trucks required to send ITC food products Table 6: Kilometeres traveled by Trucks for the month of Sep 04 as per proposed Model Table 7: Space Requirement at the 43 Wholesale Distributors for the month of Sep 04
Table 8: Wholesale Distributors who can be directly shipped from Food HUB Godown with 9MT capacity trucks

TABLE OF CONTENTS
INDEX CHAPTER
1 2 3 4 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Concept of SCM COMPANY PROFILE LITERATURE REVIEW METHODOLOGY BACKGROUND PROBLEM STATEMENT Research Design Sample Design Limitations of the study Suggested tool Limitations of the designed tool ANALYSIS AND SUGGESTED MODELS Data Mining Incidental Findings Major Findings CONCLUSIONS AND RECOMMENDATIONS

PAGE No

5
5.1 5.2 5.3

6

Annexure Bibliography September 2004 Calculations As Per The Tool

CONCEPT OF SCM

Supply Chain Management

Definition
There are various definitions about supply chain management. Houlihan (1987) states that SCM strives to balance conflicting activities such as promotion, sales, distribution and production. SCM might be seen as a business philosophy that strives to integrate the dependent activities between firms, e.g. logistics, purchasing, production, and marketing. The Council of Logistics Management 16 defines logistics as: Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point oforigin to the point-of-consumption in order to meet customers’ requirements. This definition implies that logistics is a sub-set of SCM. Supply chain management is a major issue in many industries as firms realize the importance of creating an integrated relationship with their suppliers and customers. Managing the supply chain has become a way of improving competitiveness by reducing uncertainty and enhancing customer service. The role of planning and coordination in complex integrated systems and information technology to synchronize the supply chain is described in a framework that creates the appropriate structure and installs proper controls in the enterprise and other constituents in the chain. During the past few years, supply chain excellence, optimization, and integration have become the focus and goal of many organizations worldwide. Many firms perceive strengthening the supply chain management as the way to enhancing customer satisfaction and enabling profitable growth (AMR, 1997). SCM - A Framework for Analysis In order to gain a clear understanding of what a supply chain is about, its basic tenets of linking structural strategies with prescriptive strategies. Many strategists agree that firms may not be able to rely either on a price leadership role or on a differentiation strategy alone to guarantee sustained market strength. To sustain long-term growth, however, combinations of both strategies are typically needed to operate effectively within constraints imposed by the environment. Such is also the case for a supply chain of products and services offered by a firm. However, since a number of Dynamics of Supply chain Management 2

autonomous business entities belong to the supply chain network, it becomes imperative to develop a common mission, goals, and objectives for the group as a whole, while pursuing independent policies at individual members' level. This scenario offers opportunities for design, modeling, and implementation of supply chain networks for maximum effectiveness, efficiency, and productivity in a dynamic environment.

As noted, a supply chain network, depicted in the above Figure, can be a complex web of systems, sub-systems, operations, activities, and their relationships to one another, belonging to its various members, namely, suppliers, carriers, manufacturing plants, distribution centres, retailers, and consumers. The design, modelling and implementation of such a system, therefore, can be difficult, unless various parts of it are cohesively tied to the whole. The motivation in proposing a framework to manage a supply chain system is to facilitate the integration of its various components through a common set of principles, strategies, policies, and performance metrics throughout its developmental life cycle. An example of a manufacturing supply chain network captures the essence of the proposed framework. It has been derived from the general architecture of a supply

chain network depicted in following Figure

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This supply chain is made up of a manufacturer and a two-level hierarchy of suppliers. Each sub-system in the supply chain network incurs costs that are to be monitored and controlled. At each level in the supply chain, delay due to procurement activity is incurred, which has the potential of imposing waste, and thus incurring additional costs in the system. This closed loop form of a supply chain system requires tight coupling among its components. This rationale is adapted for the proposed framework.

The Logistical Measurements
The final target, for most of business operations, is to reap profit. Thus as far as it has been established, the logistic of an enterprise is an integrated effort aimed at helping create customer value at the lowest cost level. At a strategic level, logistic managers seek to achieve a previously agreed quality of customer service through state-of-theart operating competency. The challenge is to balance service expectations and cost expenditure in a manner that achieve business profitability.31 In following Figure the traditional Du-Pont model is revised according to logistic operational perspective.

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To measure the logistic effectiveness, one must be aware of the elements that affect its performance profitability. According to Lumsden, the logistic efficiency can be described in terms of service, cost and tied up capital. Their relations with yielding a profit return can be illustrated by the following Figure

To have a full understanding of the three efficiency elements, one should not consider them as isolated parameters without any interaction among each other. Actually, the improvement of one parameter usually is on the sacrifices of the other two. For Dynamics of Supply chain Management 5

example, if one wants to reduce the cost for transportation by using full truckload, then it will keep larger volume in stock waiting for large enough shipment quantities. The final consequences are increased inventory tied up capital and decreased customer service level with lower shipment frequencies. Thus what we need to achieve is to make a good balance among these three dimensions and optimize the total result. The Logistics Players- From 1PL to 5PL As per Morgan Stanley’s Logistics is the part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption to meet customer’s requirement. The Logistics Players- From 1PL to 5PL By Morgan Stanley’s The concepts of 3PL (the third party logistics), and 4PL (the fourth party logistics) reflect the evolving demands of manufacturer essentially to own and handle all logistics functions, such as trucking and warehousing.

Most small businesses buying and selling in the same location are 1PL. As the business expands geographically, the manufacturer’s logistics border grows, a 2PL provider is generally a commodity capacity provider, such as a trucking company or a warehouse operator, a 2PL provides service for a single or a small number of functions in the supply chain. They face low returns, with high levels of asset intensity but low barriers of entry. Next come the distributors, who through a dense network or Dynamics of Supply chain Management 6

legislative protection have achieved higher returns, albeit on a sizeable cost base. Examples are the express parcel operators that charge premium pricing for timely delivery, and the postal operators. With the increasing demand for one-stop solutions, many 2PLs have evolved into 3PLs by adding new logistics capabilities and integrating their operations. It may or may not involve asset ownership. 3PL is a broader term that is frequently used to cover businesses in freight forwarding or contract logistics. It performs all or a large portion of a client’s supply chain logistics activities, and its value adding is based on information and knowledge versus a non-differentiated transportations service at the lowest cost. 3PL tends to be asset-light with high returns. The 4PL provider is essentially a logistics integrator or a one-point contact for the manufacturer’s logistics outsourcing requirements. They are responsible for contracting various 2PL and 3PL providers, and for assembling and managing those end-to-end solutions. The 4PL provider, with its complete overview of the supply chain as well as strong logistics and IT capabilities, can also offer high value added advisory services to the manufacturer.

The Real Sense Supply Chain Management
The 5PL solutions focus on providing overall logistics solutions for the entire supply chain. Supply Chain Management (SCM) is the integration of the activities associated with the flow and transformation of goods in the respective logistics networks through improved supply chain relationships based on a common collaborative performance measurement framework for attaining close, collaborative and well coordinated network relationships to achieve a competitive advantage. Actually, the supply chain management focuses on building the coordination in product supply demand relation, from origin to destination. Achieving the success will require a truly integrated approach to manage the supply and demand chain, the approach that delivers what consumers want, where and when they want as efficiently as possible. What does this mean in practice?

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As the trends in the last decade were to define core competence for each enterprise, the traditional full-scale company has abolished its purchasing or logistics function by outsourcing from the professional company being responsible for it, and just focuses on, for example, production. This is the way to reduce overall capital tied up at some long term investment or inventory, hence reduce the risk. But since companies are becoming more and more specialized, the information exchange is at a particular point; the inventory may overlap because the property of each product is attributed to different companies in various stages. The increased productivity calling for the efficient product life cycle turns over in a faster and faster running loop. Supply chain management is quite likely to cause these separate functional specialists become reunified as before: the goal is shifting from outsourcing to strategic alliance in creating win-win situations for all supply chain members, so that the information can be freely exchanged. As used previously, different functional departments worked under a general management, without any obstacle, the overall productivity can be achieved.

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COMPANY PROFILE

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COMPANY PROFILE
The Indian tobacco Company, ITC is one of India's foremost private sector companies with a market capitalization of around US $ 6 billion and a turnover of US $ 2.6 billion. ITC ranks third in net profit among India's private sector corporations and has even featured as a world leading company in Forbes magazine. It has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Branded Apparel, Packaged Foods, Confectionery, Greeting Cards and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Branded Apparel, Packaged-Foods, Greeting Cards, & Confectionery. ITC employs over 15,000 people at more than 60 locations across India. ITC made its entry into the branded & packaged Foods business in August 2001 with the launch of the Kitchens of India brand. A more broad-based entry has been made since June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments. Apart from the current portfolio of products, several new and innovative products are under development in ITC’s state-of –the-art Product Development facility located at Bangalore. Vision Sustain ITC’s position as one of India’s most valuable corporations through world class performance, creating growing value for the Indian economy and the corporate stakeholders. Mission To enhance the wealth generating capability of the enterprise in a globalising environment, delivering superior and sustainable stakeholder value.

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Core Values ITC's Core Values are aimed at developing a customer -focused, high-performance

Trusteeship As professional managers ITC believe that all stakeholders have given the

Customer Focus Company is always focused to deliver what the customer needs in terms of value,

Respect for people The Company gave importance to people and to uphold humanness and human

Excellence ITC believes that it should strive for excellence in whatever they do and they will do

Innovation Company believes that it should constantly innovate and strive to better their

Ethical Corporate Citizen Company should pursue exemplary standards of ethical behavior and will at all

Dynamics of Supply chain Management

F G G G G G G

organisation, which creates value for all its stakeholders:

company to them in “trust”.

quality and satisfaction.

dignity.

what is right and try doing it well and winning.

processes, products, services and management practices.

times comply with the laws of the land.

11

The key Corporate Strategies Continue to Focus on the core businesses of Cigarettes & tabacco, Hotels,

Figure 1

Where: ITD – Indian Tobacco Division, FBD - Food and Beverages Division, PSPD – Paper Boards and Specialty Papers Division, IBD – International Business Division, LRBD – Lifestyle Retailing Business Division I3L – IT division

Dynamics of Supply chain Management

H H H H H

Packaging and Paperboard. Ensure that each of it business meets the three criteria of sustainability, namely Market standing, Profitability and Internal Vitality. Exit from businesses, which do not meet these criteria within an agreed time frame. Ensure that each business is internationally competitive in the Indian global market. Create distributed leadership within the organization by nurturing talented and focused top management teams for each of the businesses. Institute and practice a system of corporate governance appropriate to ITC’s character and constitution. Such a system of governance must achieve a wholesome balance between the need for executive freedom foe management an the requirement of a framework for effective accountability. Secure the future growth of the company by creating new businesses, which leverage the strength of its core competencies, residing in various businesses.

INDIAN TOBACCO COMPANY

ITD

FBD

PSPD

IBD

LRBD

I3L

12

The Foods business is today represented in 4 categories in the market. These are: • • • • Ready To Eat Products Staples Confectionery Snack Food

Awards
ITC has won numerous awards for its Quality, environmental management systems and product excellence. The Munger and Bangalore factories have received the prestigious Sword of Honor

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I I I I I I I I I I

Award from the British Safety council for highest standards of safety. The Kolkata factory has won the Rajiv Gandhi National Quality Award for 1998. ITC’s R&D center has also received awards for Best Research and Development of new innovation Gold. The Best Energy Conservation Implementation Gold Award for energy and ecoconservation measures. Special Commendation Safety Certificate from the Ministry of Labour, Government of India. Golden Peacock Environment Management Award in 1999 from the world Environment Foundation. Best Manufacturer of cigarettes in 2003 by Tobacco Board of India. Third Best Exporter of Tobacco Products In 2003 by Tobacco Board of India. CII-ENCON Award for paperboards in 2003. Other than these ITC has won Numerous Awards in Hoteliering, Tobacco and foods Business also.

13

ITC BUSINESSES
FMCG (FAST MOVING CONSUMER GOODS): Cigarettes ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it has a leadership position in every segment of the market. Its highly popular portfolio of brands includes India Kings, Gold Flake, Scissors, Capstan, Berkeley and Bristol. ITC's Lifestyle Retailing Business Division ITC has established a nationwide retailing presence through its Wills Lifestyle chain of exclusive specialty stores. ITC has also initiated a foray into the popular segment with its men's wear brand John Players. Having established adistinctive presence in the premium apparel segment in a short span of time with Wills Sport premium relaxed wear and Wills Classic New Age formals, Wills Lifestyle launched Wills Clublife in May 2003 in the growing evening wear segment, thereby strengthening its portfolio in the premium segment. ITC has now become the second largest player in India's greeting cards industry with its ‘Expressions’ range of Greeting Cards. ITC’s extensive India-wide distribution network enables its greeting cards reach over 12,000 multi brand outlets in over 700 cities nationally. Foods Division The Foods business is today represented in 4 categories in the market. These are: Ready To Eat Foods, Staples, Confectionery and Snack Foods. Matches ITC has commenced marketing safety matches sourced from the small-scale sector. These matches are available in unique designs and with innovative value added features. ITC's brands like IKno, Mangal Deep, Vaxlit, Delite Premium and Aim have Dynamics of Supply chain Management 14

already become popular. The Aim brand of ITC Matches has already become the largest selling brand of Safety Matches in India within just one year. Agarbattis ITC has commenced marketing Agarbattis (incense sticks) sourced from the smallscale sector. ITC has launched brands like Spriha and Mangal Deep across a range of fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur, Sambrani and Nagchampa. Attractively packaged, these brands have been appropriately priced to appeal to a cross-section of consumers at various price segments. These agarbattis are available in 'Fragrance locked' packets. 'Fragrance locking' is a unique concept of packaging which helps to retain the fragrance for a longer period. ITC-Welcomgroup Hotels It consists of over 55 hotels across more than 45 destinations in India. These include super deluxe and five star hotels, heritage palaces, havelis and resorts and full service budget hotels. These hotels are managed by ITC's subsidiary, ITC Hotels Limited. ITC's Packaging & Printing ITC is one of the world's most modern and ontemporary manufacturers of packaging c boards. The Company's paperboard products include: packaging boards- coated folding box boards, solid bleached sulphate boards, white lined chipboards, liquid packaging boards, cast coated papers and boards. The Division also produces quality printing & writing papers, eco-friendly papers, photocopier papers. ITC's Packaging & Printing Business is the country's largest converter of paperboard into packaging. It converts over 30,000 tonnes of paper and paperboard per annum into a variety of value-added packaging solutions for the cigarette, liquor, food & beverage and personal products and IT packaging.

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ITC's International Business Division (IBD) It is the country's second largest exporter of agri -products with exports of over Rs.5 billion. It currently focuses on exports of: Feed Ingredients - Soya meal, Rapeseed Meal

ITD – The Indian Tobacco Division ITD, the Indian Tobacco Division, deals with the manufacturing, branding and sales of cigarettes and tobacco. However, an interesting point to note is that ITD is also in charge of the sales and distribution of all the other businesses which are Foods, matches, greetings, gifts and stationary. ITD functions throughout India and is broadly divided into 4 districts – North, South, East and West. Each district has 19 branches. Organizational Structure

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Food grains - Rice (Basmati & Non Basmati), Wheat &Wheat Products, Pulses, Coffee, Pepper Edible Nuts - Sesame Seeds, HPS Groundnuts, Castor oil Marine Products - Shrimps and Prawns Processed Fruits - Mango, Papaya and Guava Products

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DISTRICT OFFICE

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LITERATURE REVIEW
This chapter will give a broad theoretical framework to the subject Logistics and its management. This is done to be able to see the impact of Logistics on the Distribution System of ITC compared to the major players.

a. Demand & Supply Chain Management: a Logistical Challenge By Ad. R. Van Goor

b. Supply-Chain Operations Reference (SCOR) Model

c. Industry Practice- Brief description about the distribution structure of Major Players in the industry

THEORETICAL FRAMEWORK d. The Logistics Players- From 1PL to 5PL As per Morgan Stanley’s

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Literature Review
Purpose of the Literature Review The purpose of this Literature review is to explore a solution in the logistic area that may improve efficiency and effectiveness of logistic system on the basis of physical flow where Intermediaries could be more actively involved and benefited in the future. Research Work By Ad. R. Van Goor Demand & Supply Chain Management: a Logistical Challenge The paper below was awarded as the best communications at ILC2001 EXTRACTS Consumers and industrial customers are demanding more and different products and services. The industry requires replenishment of small batches in high frequencies. The consumer asks for a broad assortment with fresh products, tenable qualities and short lead-times or direct deliverable. These developments in Business-to-Consumer (B2C) markets and Business to Business (B2B) markets can be illustrated by a number of different examples The rise of Demand - or Demand driven - and Supply Chain Management (DSCM) can be explained by the understanding that only combinations of companies are able to meet customer requirements in a more efficient and better way than individual companies can realize. Collaboration between suppliers, manufacturers and retailers can improve the number of satisfied customers by reducing lead-times, improving service levels and decreasing costs. Customers and competitors force companies to co-operate with each other in one or more chains or networks. For some companies this way of co-operation is the last post to continue their existence. Other companies believe that DSCM is an enormous opportunity to redefine their missions and to introduce innovative types of constellations to meet customers demands on a high level in chaining market conditions.

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The need to collaborate can be illustrated by a statement of the Food Management Institute: ‘To be a prime participant in the consumer replenishment process, requires a range of capabilities bigger than a single enterprise’. They expect the rise of a number of chains or networks in which an individual company only accounts for ‘ best of class’, that means the contribution of activities in which the company is excellent. Although the design of a chain is the first strategic step, the implementation, planning and control and functioning of the chain are equal important steps. Or in terms of FMI: ‘The dysfunctional supply chains of today cannot serve the consumer of 2005’. They distinguish a number of different chains, but are not satisfied about their operations. They conclude that both the design and the operations of a supply chain are closely related to be successful implementation of DSCM-concepts. Demand & Supply According to their opinion the term Supply has a strong association with the idea that SCM regards the management of the relations with suppliers. From a customer point of view we propose to start with demand management. For almost every chain that means that chain conversion should be the leading theme. In figure 2 we picture a classical supply chain: a strongly push-driven chain, mostly based on production dominance. Related to a pure marketing vision the demand chain in figure 3 may be more realistic.

.

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This presents the Demand and Supply Network. They emphasized that this figure can be widened with logistics and ICT-service providers. Based on this idea the Center for Supply Chain Management of Nyenrode University has formulated the most embracing definition: “Demand and Supply Chain Management (DSCM) is the management of a network that links customers and suppliers as one ‘single entity’ with the objectives to create value and reduce waste through the voluntary integration and co-ordination of the objectives of three or more - and ideally, all the - independent parties in the network They proposed to concentrate on Demand driven Supply Chain Management on the integration of four functional areas within and between companies. From the demand side it regards the marketing aspects of DSCM, while purchasing is the entrance from the supply side. Logistics and ICT are the essential facilitating functions for DSCM. The four mentioned areas are according to our opinion the leading elements for the design, planning and implementation of a Demand and Supply chain (Ploos van Amstel, van Goor, 2002)(12). Figure below is the representation of that vision. Research in the field of DSCM has to concentrate on the interfaces between the different points of view.

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In the study the success of supply chain logistics was defined as the way in which the logistical costs and/or the customer service level changed significantly due to co-operation in supply chains. A combination of cost reduction and service level was sampled in a report-mark. So the report-marks were the real independent variables to measure success. From literature and empirical research a number of 56 variables were collected. These variables had or could have a direct or indirect influence on the level of success in supply chain logistics. Supply-Chain Operations Reference (SCOR) Model Background In 1996, two Boston-based consulting firms: Pittiglio Rabin Todd & McGrath and AMR Research decided to develop a standard approach to analysis and describe all the aspects of supply chain processes. The outcome was the SCOR (Supply Chain Operations Reference) model, which was released in 1996. The SCOR model was designed with the objective of making it applicable to all industries. SCOR helps companies to address supply chain issues, measure performance, identify performance improvement objectives, and power the development of SCM software. SCOR includes all the supply-chain metrics, the formula associated with the metrics and a reference to best practices and their associated technology. Introduction of the SCOR The SCOR model has been developed to describe the business activities associated with all phases of satisfying a customer’s demand. The model itself contains several sections and is organized around the five primary management process of Plan, Source, Make, Deliver, and Return. Describing supply chains using these process building blocks, the Model can be used to describe supply chains that are very simple or very complex using a common set of virtually any supply chain. The model has been able to successfully describe

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and provide a basis for supply chain improvement for global projects as well as sitespecific projects.

The SCOR Model spans: all customer interactions (order entry through paid invoice), all physical material transactions (supplier’s supplier to customer’s customer, including equipment, supplies, spare parts, bulk product, software, etc.) and all market interactions (from the understanding of aggregate demand to the fulfillment of each order). It does not attempt to describe every business process or activity. Specifically, the Model does not address: sales and marketing (demand generation), product development, research and development, and some elements of post-delivery customer support. CONTRIBUTION TO THE STUDY Effectiveness of Supply chain depends on:Internal variables

Dynamics of Supply chain Management



o Standardization of communication traffic o Exchange of detailed forecasts o Order-status tracking and tracing o Use of logistics control systems o Type of order picking/cross docking o Situation of Order Penetration Point 23

Distribution Logistics

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o Utilization level of transportation o Number of distribution centers o Frequency of replenishment day and night o Tuning distribution packaging and pallets o Standardization of materials handling equipment Organizational aspects o Management involvement o Joint targets in a chain o Shared information-technology o Trust and risks between channel partners o Presence of channel captain/central co-ordination

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INDUSTRY PRACTICE
In order to get a better understanding of the FMCG Supply Chain in India, a study has been made of 3 major players in the Industry namely, ITC, Perfitti Van Melle and Hindustan Levers. A comparison has been made of their individual distribution structures. Figure 1: Distribution Network of ITC ITC’s DISTRIBUTION NETWORK ITC SUGGESTED MODEL FOR ITC FOODs

C & F AGENT (Carrying & Forwarding)

WD (Wholesale Dealer)

Key Account

Supervisor

DS (Salesman)

SWD

Stock Keeping Points

Retailer

Consumer The suggested model will bring ITC one-step closer to the consumer and in the meanwhile reducing the overall cost and time too.

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PERFETTI VAN MELLE’s DISTRIBUTION NETWORK

Figure 2: Distribution Network of Perfetti PERFETTI VAN MELLE FACTORY

C & F AGENT (Carrying & Forwarding)

Distributor

Wholesaler / Retailer

Consumer

Though Perfetii does not have as many products as ITC but it does provide a strong competition in the confectionary segment to ITC.It is one of the leading players in the Mint and Hard-boiled candies segment. And the its strength being reach to remote places too. In another words strong distribution network.

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HINDUSTAN LEVERS’ DISTRIBUTION NETWORK Figure 3: Distribution Network of HLL HINDUSTAN LEVERS Distributor (CNF) Trade

Modern Trade Channel

General Trade Channel

HLL Supply

Customer Service Provider

Marginal Outlet Channels

Key Account

Wholesale

Others

Metro

Food World

Top End Supermarket

HLL is the main competitor for ITC in many segments. Like ITC HLL has many products under its roof and has a complex structure of distribution, which brings many intermediaries leading to increased handling of product before it reaches end consumer. This also pushes the company away from its end consumers. To handle this problem HLL is launching its direct marketing and distributors for handling small accounts which may seem to be very minute but when taken on the whole makes a big difference for the organizations sales.

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METHODOLOGY

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BACKGROUND
There is an increasing focus on supply chains in all types of businesses. Which means that instead of optimizing their own activities companies work towards the best and most cost efficient solutions for the whole supply chain. One really important area to work with when one is working with supply chain improvements is Logistical Management. Logistical management includes the design and administration of systems to control the flow of material, work-in process, and finished inventory to support business unit strategy. The overall goal of logistics is to achieve a targeted level of customer service at the lowest possible total cost. It is therefore important to study all causes and effects when one is working with Logistics management ITC has stood for quality products for over 90 years to the Indian consumer and several of its brands are today internationally benchmarked for quality. ITC made its entry into the branded & packaged Foods business in August 2001 with the launch of the Kitchens of India brand. A more broad-based entry has been made since June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments Leadership in the Foods business requires a keen understanding of the supply chain for agricultural produce and the streamlining of supply to grocery outlets. This project mainly concentrates on the management of logistics for supply chain of end products from the Atta factory, Food HUB Godown, clearing & forwarding agent (C&F) all three located in Bangalore to Wholesale Distributors with in Karnataka. So to do justification with this aspect, it is necessary to understand the supply chain model with in India and especially south zone first. The following section will deal in detail with the sources of supply of ITC’s end products and there further flow to reach the Wholesale Distributors located in Karnataka.

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Sources Of Supply The sources of supply depend upon the products; following are the different places where ITC factories for different products are located. 1.Cigaratte Factory Places: Bihar, Utranchal, Kolkatta, and Bangalore

2. Matches ShivaKashi

3. Minto-Regular, Orange, Lemon Nagpur

4. CandyMan/ HardBoiledCandies /Licks/ Eclairs Ahmedabad

5. Mangaldeep / Spriha Pondichery

6. Kitchens Of India Delhi

7. Ashirwad Atta & Salt Delhi

Dynamics of Supply chain Management

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Hyderabad

Varanasi Bangalore

30

8. Salt Gandhidham

9. Aashirwad Ready Meal Bangalore

10. Multipurpose Cooking Paste Delhi

There are totally 19 branches in India; each branch has at least one Clearing and Forwarding agent All the products except Cigarette arrives from the factory to HUB godowns situated at various places in India, depending upon the requirement of central warehousing. From there all the products are supplied to Clearing and Forwarding agent of all 19 branches who make these products reach the Wholesale Distributors spread all over the nation. Cigarette has a centralized ordering system.

ITC Distribution structure in Southern India Food HUB Godown’s that are owned and run by ITC Southern Region has two Food Hub one located at Bangalore and the other at

Dynamics of Supply chain Management

‚

‚

‚ ‚ ‚ ‚ ‚ ‚ ‚

Tutukkuri

Delhi

Most of the Matches and Agarbatti making Factories are located in south India so ITC has established a Central warehouse in Chennai from where all Clearing and Forwarding agents are supplied

Hyderabad. There are five Clearing and Forwarding agent in Southern India, the area wise bifurcation of their working is as follows

31

Figure 4: Clearing and Forwarding agents(C&F agent) in South India Clearing and Forwarding agent C&F IN AGENTS

SOUTHERN INDIA

Hyderabad

Bangalore

Chennai

Ernakulam

Coimbatore

50 % of Tamil Nadu 25 % of Andhra Pradesh Pondicheri Andaman & Nicobar

ITC Distribution structure in Karnataka ITC has its FOOD Headquarter in Bangalore, which controls the operation of supply of FOOD products within Karnataka. Bangalore is the prime location where in ITC has the largest market share in every product category they have entered.

Dynamics of Supply chain Management

ƒ

80 % of Karnataka

100 % of Kerela

ƒ ƒ ƒ ƒ ƒ

50 % of Andhra Pradesh

50 % of Tamil Nadu

ƒ

ƒ

32

The most important reason is ITC’s strong distribution network with in the city, which is managed by five Wholesale Distributors. Who believe? “JO DIKHTA HAI VO BIKTA HAI” “PAR DIKHTA VO HAI JO MILTA HAI “ The one that is seen is sold but to be seen there, on the shelf it needs to be available to the Retailer and to be available the only means being strong distribution network of a company. And this distribution network requires smooth flow of products to the Wholesale Distributors so that they can make it reach the retailers. On the whole the success of FMCG goods lies on the supply chain management from start to end. Apart from its ITC Headquarter it has ITD Marketing Branch office, which deals with marketing of ITC’s FMCG and its supply to Wholesale Distributors with in Karnataka. ITC has a Clearing and Forwarding agent, ITC Food HUB Godown and Atta Factory with in Bangalore. ITC Clearing and Forwarding agent (C&F Agent) Clearing and Forwarding at Devanahalli in Bangalore is spread across 6000 sqft area. As seen in Figure 1, He supplies to 80 % of Karnataka. Clearing and Forwarding agent at Bangalore supplies only Cigarrette, Matches and Agarbattis to the Bangalore city Wholesale Distributors whereas supplies even ITC Food’s products to all the Wholesale Distributors up-country with in Karnataka. The 5 city Wholesale Distributors are directly supplied from the Food HUB Godown and ITC Atta Factory in Bangalore. The following chart will give overview of the sources of supply to the C&F agent at Bangalore and its flow from thereon. Dynamics of Supply chain Management 33

Figure 5: Sources of Supply for ITC C&F Agent

ITC Cigarette Factory (With in and Outside Karnataka) & Matches Agarbatti HUB Godown Chennai

Food HUB Godown, Bangalore

Atta Factory, Bangalore

C&F Agent

Clearing and Forwarding agent (C&F agent) is sourced directly from the Cigarette factories, From Chennai HUB for Matches and Agarbatti and for ITC Food products, Atta from ITC Food HUB Godown and Atta Factories respectively. Clearing and Forwarding agent (C&F agent) supplies all ITC’s FMCG products, which includes cigarette to all the up-country Wholesale Distributors whereas supplies only Cigarrette to city Wholesale Distributors.

Figure 6: Pictorial representation of supply from C&F agent Bangalore

C & F Agent Only Cigarette, Agarbatti and Matches ALL the FMCG products

5 Wholesale Distributors with in Bangalore

43 Wholesale Distributors Up-country within Karnataka

Dynamics of Supply chain Management

34

e. Problem Faced By C&F agent Bangalore Currently the Clearing and Forwarding agent has insufficient space to meet the growing demand of up-country Wholesale Distributors for ITC’s Food products and Cigarette.

ITC Food HUB Godown In 2001 when ITC entered Food’s market it hired the Karnataka Warehouse situated at Whitefield, which acts as Food HUB Godown today supplying Food’s products to all of southern C&F agents except Hyderabad. This Food HUB Godown is spread across 60000-sqft areas, which is maintained for meeting five years forecasted demand pattern. Out of ITC’s six Food Hub Godowns in India, It’s the largest and the only HUB Godown that has a drive-in structure. Food HUB Godown receives products from different sources enlisted in the previous pages so as to source further to different C&F agents on the basis of their requirements. But apart from sourcing products to Clearing and Forwarding agents it also supplies to Wholesale Distributors with in Bangalore Table 1: Shipments From ITC Food HUB Godown It has two kinds of shipments they are SHIPMENTS K1 Shipment K2 Shipment SUPPLY TO Five Bangalore City Wholesale Distributors Supplying to five C&F agents TRUCKS USED 4 Tonnes or 6 Tonners 9MT or 16MT

Earlier the city Wholesale Distributors were supplied by the Clearing and Forwarding agent but as it was becoming strenuous for Clearing and Forwarding agent to manage such high demands of city Wholesale Distributors because of unavailability of space, ITC felt supplying directly ITC Food products, Atta from Food HUB Godown and Atta factory to city Wholesale Distributors will be much cost effective but as the demand for ITC Food’s product was low at other Wholesale Distributors within Karnataka it was not Dynamics of Supply chain Management 35

viable to do direct shipment to them so they were continued to be shipped for ITC’s food products and Atta from Clearing and Forwarding agent at Bangalore with their cigarette shipment. Figure 7: Pictorial Representation of Food HUB Godown s Source and Flows. PRODUCTS SALT MINTO CANDY MAN KITCHENS OF INDIA AASHIRWAD READY MEALS Places Tutukuri Nagpur Hyderabad Delhi Bangalore

AASHIRWAD Atta Factory Bangalore

MULTIPURPOSE COOKING PASTE Delhi K1 Shipment: FIVE Wholesale Distributors Bangalore City

Food HUB Godown

K2 Shipment C&F Agent

All Food Products Except Atta

K2 shipments from Food HUB Godown are directed towards the Clearing and Forwarding agents of southern India baring Hyderabad Clearing and Forwarding agent as he is supplied from Hyderabad’s Food HUB Godown directly. It has a capacity of storing 3500 tones; in spite of supplying to almost ten destinations the capacity of Bangalore Food HUB Godown is not utilized to the full extent till now only 19% is being utilized. Following page gives the overview of the transportation model that is used by ITC for its distribution in Karnataka.

Dynamics of Supply chain Management

36

Figure 8: CURRENT TRANSPORTATION MODEL WITH IN KARNATAKA

FIVE Wholesale Distributors BANGALORE CITY

Food HUB Godown (HUB)

Clearing and Forwarding agent (C&F)

Atta Factory

Up-Country Wholesale Distributors Route 1 Chintamani K.G.F. Kollar Route 2 Arisikere Bhadravathy Shimoga Sagar Route 3 Kunigal Hassan Chikmagalur Route 4 CR Nagar KANAKPURA Kollegal MANDYA RAMNAGAR Route 5 Hunsur Mercara Mysore Pandavpura Periyapatna Route 6 Attibele Route 7 Chitradurga Davangere Harihar Haveri R.Bennur Sirsi Route 8 Hiriyur Bellary Gangavathi Hospet Koppal Route 9 Raichur Yadgiri Route 10 Karwar Kundapur Puttur Udupi VS WC Route11 Doddaballabur Tumkur

Source: Modified from the Database of ITC Dynamics of Supply chain Management 37

PROBLEM STATEMENT
Purpose Of The Study To Evaluate the effectiveness/efficiency of supply chain for ITC FOOD’s products from HUB godowns or Clearing and Forwarding Agent to Wholesale Distributors and to recommend methods of improving its efficiency. Research Objective Feasibility of adding Up-Country Wholesale Distributors routes for direct

With focus on: WD wise targets (expected volumes) for April 2004 to March 2005 (Month on

Dynamics of Supply chain Management

„ „ „ „

shipments of FOOD Products from HUB Godown (foods)/Atta Factory (Bangalore).

Month) Space availability at Clearing and forwarding agent / Food HUB Godown /Wholesale Distributors Point Impact of recommended supply chain model on Whole Sale Distributors investment due to increase or Decrease in Wholesale Distributors stock on hand due to: o Frequency Of Supply o Size Of the Load o Number of delivery points sharing the load

Scope Of Study Figure 9: Scope of study o

Scope of Study Data Mining Required on Projected Demand for each Wholesale Distributors on the basis of each product till

Dynamics of Supply chain Management

… … … … … …

March 2005 Stocking Norms for each product category. Conversion factor for each category of product in to Cubic Feet Capacity and 10M Cubic Feet Capacity which is conversion in terms of 100000 cigarette sticks Load Size of delivery vehicle. Loads per Truck, Transport Rules & Regulation within Karnataka. Space occupied by each product category in 100 sq ft area, Current routing from C&F agent and HUB godown

Time taken to reach the last Wholesale Distributors in the Route.

What is to be measured? How? Feasibility of adding Up-Country Wholesale Distributors routes for direct shipments

Approach to the Data Information required to fulfill the research objective: Projected Demand for each WD on the basis of each product

Dynamics of Supply chain Management

† † † † † † † † † †

Investment Pattern of Wholesale Distributors on the basis of companies’ norms. Order procedure followed by Wholesale Distributors Landing Cost of each product category to Wholesale-Distributor

of FOOD product from Food HUB Godown /Atta Factory (Bangalore) o This required a comparative analysis of existing Transportation Model with proposed Model o Effect on the Investment pattern and working capital of wholesale distributors o Space which needs to be maintained at Wholesale Distributors, Food HUB Godown, Clearing and Forwarding agent with respect to increasing demand and new supply chain model.

Information on stocking Norms, Conversion, Loads, etc. Information about Space Requirements, Routing and Timing Detail Information about the Investment Pattern of Wholesale-Distributors Landing Cost to Wholesale Distributors for each product category.

Research Design
a. Degree of Research Question Crystallization: Formal Research Research Question:

b. Data Collection: Observational Studies The research involved the study of current supply chain model and the feasibility study of the new transportation model suggested, there is no requirement for the study of any subject’s response in this study. This project is solely based on the effectiveness of supply chain with focus on the projected demand.

Dynamics of Supply chain Management

‡

o Feasibility of adding Up-Country Wholesale Distributors routes for direct shipments of FOOD product from HUB (foods)/Atta Factory (Bangalore) o Goal of Research Table 2: Overview of Research Area and Data Required Research Area Volume projection Space requirement. Frequency of orders /Shipments Load Size of delivery vehicle Timing of Reach Safety stock/Emergency Reserves Current Stock Insurance limits Current Routing Detail WD investment Pattern Data Required WD wise targets Volume per unit and stacking norms Types of vehicle available Types of vehicle Available Idea of geography and distance Company compliances Statutory compliances Routes currently supplied and Value of stock and value per unit Norms and Statutory

concentrating on lockage of funds category due to current supply chain model. As the research has begun with the Research Question and Involves precise procedures and data source specification this kind of research falls under the purview of Formal Research.

The required details Information from the marketing Department about the projected Demand for

c. Type: Descriptive Research As the research is based on the objective of evaluating the effectiveness of the supply chain of end products with in Karnataka and requires recommendation for improving its efficiency, requirement is to give a precise model that will remove the flaws in the existing model. This required an in depth study of current model and explaining the aspects of Whom to deliver

d. Time Design: Longitudinal As this study is focused on the study of “Effect on the supply chain due to variation in demand” , Conclusions were drawn from demand projected From July 2004 to March 2005 and its effect on the supply chain which in turn helped in recommending the new model, which can combat with the increasing demand pattern in a much better manner. This study falls under the longitudinal time design.

Dynamics of Supply chain Management

ˆ

ˆ

ˆ

ˆ

ˆ

ˆ ˆ ˆ ˆ ˆ

each Wholesale Distributors on the basis of each product Logistics department provided information on stocking Norms, Conversion, Loads, etc. Information from the Godown with respect to space requirements, routing and Timing Detail Information required being collected from Finance Department for knowing the investment pattern of Wholesale Distributors. And on the basis of the collected information, inferences were drawn explaining the effect of suggested transportation model.

What way to deliver [Single point or Multipoint delivery] Where to deliver When to deliver. [Time of reach on the basis of multipoint]. How much to deliver.

e. Topical Scope: Case Study The demand pattern of all 43 up-country Wholesale Distributors within

f. Research Environment: Simulation The research environment is of simulation where in the comparison is in terms of what is currently happening and what will be it like when the new model will come in to place is being checked. The research design focus on the effect of proposed model on logistical aspects, space requirement and investment pattern for the Wholesale Distributors and the Company. Sample Design-. The basis idea of sampling is that by selecting some of the elements in a

Dynamics of Supply chain Management

‰ ‰ ‰ ‰ ‰ ‰

Karnataka is studied so the sample consists of 100% of the population that needs extensive study. Though quantitative data is used this research place more emphasis on full contextual analysis of fewer events or conditions and their interrelation. The emphasis on detail in this study provides valuable insight for problem solving, evaluation and strategy formulation as this gives a tool in the hands the manager to understand the “Effect of Growing Demand on the supply chain”

population, we may draw conclusions about the entire population. A population element is the subject on which the measurement is being taken. It is a unit of study But when it comes to this project my population is the 43 Wholesale Distributors up-country with in Karnataka. As I draw my inference on the basis of whole population i.e. the sample constitute of 100% of the population there is no requirement for a specific sampling technique The data consists of month wise demand pattern for eight product categories for all the Wholesale Distributors with in Karnataka and the routing details

Data Source This project solely focuses on the secondary data source that can be classified on

Limitations of the study New supply chain model will be on the basis of already projected demand. If

Dynamics of Supply chain Management

Š

Š

Š

Š

Š

the basis of sources as internal data as extracted from companies’ Data Bases.

Demand varies supply chain model will require modification in future. Introduction of new product will also affect the supply chain model, but the program provided can be updated with slight modification Effect on Investment pattern due to the implementation of new model cannot be estimated accurately because of lack of data. The percentage of demand for sub category of products is calculated on the basis of sale proceeds of March so the variation in that will affect the calculation carried further but can be re calculated if the actual bifurcations are available with the help of the program developed.

SUGGESTED TOOL SCM TOOL
This project required a systematic program to be developed which could help the manager in strategic decision making with focus on the supply chain especially concentrating on the flow from the company’s godown to Wholesale Distributors. I used Microsoft Excel as the tool to develop this program, which needs very few inputs from the user, and rest every thing is calculated on the basis of the formulas already inserted. After inserting the data the user has to run a macro that will update the program automatically. This program performs the function as enlisted in the tailored logistics chart an example is provided here. START Figure 10: Flow diagram of SCM tool

INPUT DEMAND Atta – KG:43503

See Annexure page 3 and 4

DEMAND BIFURCATION: Allocate demand See Annexure page 2 to the sub category as per your requirement and estimation Aashirvad Whole Wheat Atta(MP) 1kg Aashirvad Whole Wheat Atta(MP) 2 kg Aashirvad Whole Wheat Atta(MP) 5 kg AAHIRVAAD MP ATTA - 10 KG It calculates Kilos for each category, Units, Cubic feet capacity, Space,Investment,10 M Cubic feet capacity See Annexure page 6,7,12 and 15

.1 .35 .15 .4

41 The

Kilos Units CFC Space Aashirvad Whole Wheat Atta(MP) 1kg 4350.21 4350 145.01 73.98 Aashirvad Whole Wheat Atta(MP) 2 kg 15225.72846 7613 507.52 258.94 Aashirvad Whole Wheat Atta(MP) 5 kg 6525.312199 1305 217.51 110.97 AAHIRVAAD MP ATTA - 10 KG 17400.83253 1740 580.03 295.93 Total 1450 740

Investment 86177.62 294617.85 123328.40 297641.24 801765

sample shown here calculates only the investment and space requirement for Atta but as shown in the Annexure the program calculates the total space requirement for all Dynamics of Supply chain Management

products and the investment on the basis of landing cost for Wholesale Distributors based on projected demand. The program further calculates the number of trucks required to make the products reach its destination without considering multipoint delivery and after that it calculates the routing aspect if the number of trucks required by one Wholesale Distributor is less than 1 or slightly more than whole number. See Annexure There are three types of truck tonnage used in this model so that the manager can select best feasibile option. The conversion factor of 10 M cig CFC is utilized.10 M means 10000 cigarette sticks. Because of its 90 years of experience in this industry ITC has an in depth knowledge of number of cigarette sticks required to fill in a truck so all the other products are converted in terms of 10M cigarette so that it can be estimated that how many trucks will be required. See Annexure

Limitations of the designed tool The space requirement for future was estimated but the current space available

Dynamics of Supply chain Management

‹ ‹ ‹

o Number of Trucks from Food HUB Godown and Atta factory to Wholesale Distributors for direct shipment for 4T, 9T and 16MT capacity truck -- page 18 to 23 o Information of routing or direct shipment with respect to Model 1 and Model 2 which will be highlighted in the next chapter – page 24,25

and space occupied are not known which can be updated in the program designed which will give a better picture about the space occupied. The percentage demand for individual product category can be bifurcated in the model but it will remain same for all the Wholesale Distributors throughout Karnataka

ANALYSIS AND SUGGESTED MODELS

Dynamics of Supply chain Management

DATA ANALYSIS
DATA MINING The term data mining describes the concept of discovering knowledge from databases. The idea behind data mining is the process of identifying valid, novel, useful, and ultimately understandable pattern in data. Similar to traditional mining where we search beneath the surface for valuable ore, data mining searches large databases for indispensable information for managing an organization. Figure 11: DATA MINING PROCESS

SAMPLE

EXPLORE

MODIFY

ASSESS

MODEL

Lets go in detail in to the data mining process with respect to the project a. SAMPLE & EXPLORE As mentioned in the previous chapter that with respect to this project its very essential to understand the effect and patters of each Wholesale Distributors and because the data is not too large whole of the population can be used for the inference so sampling should not be done. Table 3: Following table gives the pattern in which data was available for the study
Wholesale Distributors Products NAME ARM - Packets NAME Atta - Tonnes NAME Biscuits - Kilos NAME Eclairs - Kilos NAME HBC - Kilos NAME Licks - Kilos NAME Minto - Kilos NAME Minto CL - Kilos NAME Salt -Tonnes Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 04 04 04 04 04 04 04 04 04 05 05 05

SOURCE: FIELD INVESTIGATION

Dynamics of Supply chain Management

b. Modify Based on the data obtained in the exploration phase the inferences were not easy to be drawn as these data’s required modification. Firstly the data was converted into single unit ie Demand of every category was converted in terms of Kilos Further the grouping was done on the basis of: Month wise projection

As far as the current supply chain is concerned there are totally 11 routes operating excluding city Wholesale Distributors, which was shown in chapter 1 while explaining current supply chain model. But when enquired the company sources explained that there is feasibility of combining these routes further as the current routing was done on the basis of demand for all FMCG products which included cigarette, matches and Agarbatti but if directly shipped for Atta and Food products the routes can be further clubbed. Following table gives the combined routes for the Wholesale Distributors which can be supplied together Table 4 : Updated Routing for up-country Wholesale Distributors Route WD 4 Kollegal-MS 7 1 CHINTAMANI-M 4 MANDYA 7 1 DBPur-City 4 RAMNAGAR-M 7 1 K G F-M 4 Total 5 7 1 KOLAR-M 5 Hunsur-MS 7 Total 1 Tumkur-City 5 Mercara-MS 8 1 Total 5 5 Mysore 8 2 Arsikere 5 Pandavpura-MS 8 Total 2 Badravathy 5 Periyapatna-MS 9 2 Sagar 5 Total 5 9 2 Shimoga 6 Chitradurga 9 2 Total 4 6 Davangere 9 3 Chikmagalur 6 Harihar 9 3 Hassan 6 Haveri 9 3 Kunigal 6 R.Bennur 9 Total 3 Total 3 6 Sirsi 4 CR Nagar-MS 6 Total 6 4 KANAKPURA-M 7 Hiriyur
SOURCE: FIELD INVESTIGATION

Dynamics of Supply chain Management

Œ Œ Œ

Product category Route of the Wholesale Distributors

Bellary Gangavathi-Bel Hospet-Bel Koppal-Bel 5 Raichur-Bel Yadgiri-Bel 2 Karwar Kundapur Puttur Udupi VS WC 6

c. Model On the basis of the modified data the model is constructed which helps in improving the efficiency of the current model. Following is the step-by-step process of tailored logistics, which is used for the process of decision making in this project.

Tailored Logistics
Figure 12: Flow chart for the process of program

Collect Projected Demand

Split & Group in terms of Sub Products

Convert in to Units, CFC & 10M CFC

Calculate Space Required at C&F or HUB

Calculate Number Of TRUCKS REQUIRED On MONTH BASIS From Atta Factory and HUB to WD

Combine Routes and Calculate No. Trucks Required And Time to Reach

Number Of TRUCKS REQUIRED On MONTH BASIS From C&F

Calculating WD Space required & compared to Space Available

Compare And Check Weather Feasible

If not for Individual WD, Check weather Combining Routes Will Make It Feasible,. * If Not Now By When

If Combined and feasible to route from hub and atta factory what is the effect on investment cycle by WD,stock in transit, cash in transit and stock on hand

SOURCE: Model Developed with the help of Literature Review and Field Investigation

On the basis of the tailored logistics process the models which are developed are as follows
Dynamics of Supply chain Management

MODEL 1
FIVE Wholesale Distributors BANGALORE CITY

Food HUB Godown (HUB) All Food products including atta

Clearing and Forwarding agent (C&F)

Atta Factory

Only Cigarette

Matches & Agarbatti

Up-Country Wholesale Distributors Route 1 Chintamani K.G.F. Kollar Doddaballabur Tumkur Route 2 Arisikere Bhadravathy Shimoga Sagar Route 3 Kunigal Hassan Chikmagalur Route 4 Cr nagar Kanakpura Kollegal Mandya Ramnagar Route 5
Hunsur Mercara Mysore Pandavpura

Figure 13:

Route 6 Chitradurga Davangere Harihar Haveri R.Bennur Sirsi Route 7 Hiriyur Bellary Gangavathi Hospet Koppal Route 8 Raichur Yadgiri Route 9 Karwar Kundapur Puttur Udupi VS WC

Periyapatna Route 6 The Above model shows the direct flow of all food products including Atta from the HUB-godown to Attibele Wholesale Distributors directly.So the atta is directed to HUB godown instead of C&F. C&F agent supplies only Cigarette,Matches and Agarbatti to up-country Wholesale Distributors.
SOURCE: Model Developed on the basis of Routes see Annexure

Dynamics of Supply chain Management

MODEL 2
FIVE Wholesale Distributors BANGALORE CITY

Food HUB Godown (HUB) Food products except atta

Clearing and Forwarding agent (C&F) Only Cigarette

Atta Factory

Matches & Agarbatti

Up-Country Wholesale Distributors Route 1 Chintamani K.G.F. Kollar Doddaballabur Tumkur Route 2 Arisikere Bhadravathy Shimoga Sagar Route 3 Kunigal Hassan Chikmagalur Route 4 Cr nagar Kanakpura Kollegal Mandya Ramnagar Route 5 Hunsur Mercara Mysore Pandavpura Periyapatna Route 6 Chitradurga Davangere Harihar Haveri R.Bennur Sirsi Route 7 Hiriyur Bellary Gangavathi Hospet Koppal Route 8 Raichur Yadgiri Route 9 Karwar Kundapur Puttur Udupi VS WC Atta directly being supplied to upcountry Wholesale Distributors

Figure 14:

Route 6 Attibele This model shows the direct shipment of Atta from Atta factory to Wholesale Distributors and Food products from Hub to Wholesale Distributors.So there are elimination of trucks within Bangalore based godowns. Dynamics of Supply chain Management

SOURCE: Model Developed on the basis of Routes see Annexure

d. Assessment As the model is ready the next step being assessment, which could indicate the superiority of this model over the previous model. CONCEPT: Logistical check As the data is longitudinal data I have shown only Month data for the comparison and the result varies from month to month Figure 15: Chart comparing the current and proposed model

Trucks

0 0 41 20 67 46 22 SOURCE: Table developed from the data calculated by SCM Tool, see Annexure

RESULT Model 2 stands to be the best fit if the number of trucks is taken as the criteria for evaluation of the model. As this model uses least number of trucks to reach the desired destination. But next table shows the detailed analysis of the Kilometers covered by these trucks which shows that Model 2 covers 27733Km and Model 1 covers only 23989 Km. Which means Model 1 covers almost 3800 Km less than Model 2.

Dynamics of Supply chain Management

 

Logistical Infrence 200 150 100 50 0 Current Model Model 1 September 04 Model 2 HUB TO WD C&F TO WD ATTA Factory TO HUB ATTA FACTORY TO C&F HUB TO C&F Atta Factory To WD

TABLE 5: Number of trucks required to send ITC food products SEPTEMBER C&F TO 04 WD Current Model 100 Model 1 33 Model 2 33
HUB TO WD ATTA ATTA Atta Factory To HUB TO FACTORY TO Factory TO C&F HUB WD C&F
0 20

Total
161 120 100

MODEL 1 WD Distance (KM) KM

MODEL 2 From AF From HUB KM from Atta factory KM From HUB Total KM

CHINTAMANI-M DBPur-City K G F-M KOLAR-M Tumkur-City Arsikere-Mang Badravathy-Mang Sagar-Mang Shimoga-Mang Chikmagalur-Mang Hassan-Mang Kunigal-Mang CR Nagar-MS KANAKPURA-Mand Kollegal-MS MANDYA-Mand RAMNAGAR-Mand Hunsur-MS Mercara-MS Mysore-MS Pandavpura-MS Periyapatna-MS Chitradurga-Mang Davangere-Mang Harihar-Mang Haveri-Mang R.Bennur-Mang Sirsi-Mang Hiriyur-Mang Bellary-Bel Gangavathi-Bel Hospet-Bel Koppal-Bel Raichur-Bel Yadgiri-Bel Karwar-Mang Kundapur-Mang Puttur-Mang Udupi-Mang VS-Mang WC-Mang

SOURCE: Generated by SCM Tool see Annexure

Total KM

62.00 45.00 121.00 84.00 82.00 180.00 256.00 405.00 295.00 265.00 200.00 90.00 270.00 80.00 230.00 160.00 110.00 213.00 306.00 165.00 125.00 236.00 200.00 267.00 281.00 356.00 321.00 421.00 180.00 325.00 487.00 382.00 422.00 515.00 625.00 675.00 485.00 330.00 455.00 380.00 380.00

1.81 0.94 1.93 0.89 1.15 0.71 1.20 0.66 2.08 1.90 2.65 0.47 0.35 0.51 2.99 1.82 1.45 0.28 1.47 4.94 1.52 0.87 1.57 1.73 1.23 0.13 0.77 0.71 1.07 3.13 0.74 4.17 0.53 3.06 1.61 1.02 2.28 1.12 1.62 1.80 6.44

23989.00

62.00 0.00 121.00 0.00 82.00 0.00 256.00 0.00 590.00 265.00 400.00 0.00 0.00 0.00 460.00 160.00 110.00 0.00 306.00 660.00 125.00 0.00 200.00 267.00 281.00 0.00 0.00 0.00 180.00 975.00 0.00 1528.00 0.00 1545.00 625.00 675.00 970.00 330.00 455.00 380.00 2280.00

0.59 0.63 0.63 0.32 0.35 0.17 0.17 0.14 0.70 0.59 1.10 0.08 0.09 0.09 0.56 0.68 0.50 0.09 0.39 2.15 0.46 0.19 0.53 0.59 0.28 0.04 0.12 0.19 0.26 1.03 0.12 1.03 0.12 0.53 0.12 0.29 1.05 0.29 0.65 0.74 3.19

1.22 0.32 1.30 0.58 0.81 0.54 1.03 0.52 1.38 1.31 1.55 0.39 0.26 0.42 2.43 1.15 0.95 0.19 1.07 2.79 1.06 0.68 1.05 1.14 0.95 0.10 0.64 0.52 0.81 2.10 0.63 3.14 0.42 2.53 1.49 0.73 1.23 0.82 0.97 1.07 3.25

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 200.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 330.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 325.00 0.00 382.00 0.00 0.00 0.00 0.00 485.00 0.00 0.00 0.00 1140.00

62.00 0.00 121.00 0.00 0.00 0.00 256.00 0.00 295.00 265.00 200.00 0.00 0.00 0.00 460.00 160.00 0.00 0.00 306.00 330.00 125.00 0.00 200.00 267.00 0.00 0.00 0.00 0.00 0.00 650.00 0.00 1146.00 0.00 1030.00 625.00 0.00 485.00 0.00 0.00 380.00 1140.00

27733.00

62.00 0.00 121.00 0.00 0.00 0.00 256.00 0.00 295.00 265.00 400.00 0.00 0.00 0.00 460.00 160.00 0.00 0.00 306.00 660.00 125.00 0.00 200.00 267.00 0.00 0.00 0.00 0.00 0.00 975.00 0.00 1528.00 0.00 1030.00 625.00 0.00 970.00 0.00 0.00 380.00 2280.00

Table 6: Kilometeres traveled by Trucks for the month of Sep 04 as per proposed Model

Dynamics of Supply chain Management

INCIDENTAL FINDINGS: Table 7: Space Requirement at the 43 Wholesale Distributors for the month of Sep 04

CHINTAMANI-M DBPur-City K G F-M KOLAR-M Tumkur-City Arsikere-Mang Badravathy-Mang Sagar-Mang Shimoga-Mang Chikmagalur-Mang Hassan-Mang Kunigal-Mang CR Nagar-MS KANAKPURA-Mand Kollegal-MS MANDYA-Mand RAMNAGAR-Mand Hunsur-MS Mercara-MS Mysore-MS Pandavpura-MS Periyapatna-MS Chitradurga-Mang Davangere-Mang Harihar-Mang Haveri-Mang R.Bennur-Mang Sirsi-Mang Hiriyur-Mang Bellary-Bel Gangavathi-Bel Hospet-Bel Koppal-Bel Raichur-Bel Yadgiri-Bel

Karwar-Mang 26 Kundapur-Mang 53 Puttur-Mang 27 Udupi-Mang 40 VS-Mang 53 WC-Mang 151 SOURCE: Generated by SCM Tool see Annexure

Dynamics of Supply chain Management

Ž

WD

Safety Stock Space Requirement 46. 26 47 22 28 20 28 19 51 44 64 13 9 13 77 45 37 8 46 116 48 25 37 41 32 4 18 19 26 78 22 107 14 80 39

Current Space Requirement 7 4 7 4 4 3 4 3 7 7 10 2 1 2 11 7 6 1 7 17 7 4 6 6 4 1 3 3 4 11 3 15 2 12 6 4 8 4 6 8 22

Total Requirement Of Space 53 30 54 26 32 23 32 22 58 51 74 15 10 15 88 52 43 9 53 133 55 29 43 47 36 5 21 21 30 89 25 122 16 92 45 30 61 31 46 61 173

In the similar manner the space requirement of coming months is also available, which will help the Wholesale Distributors to prepare themselves for the growing demand The space requirement for each category is calculated on the basis of Area occupied by

Note: Number of days in a month is taken to be 30. Figure 16: Wholesale Distributors investment pattern

SOURCE: Collected from personal enquiry notes

The above chart shows the prevailing pattern of investment where in the Wholesale Distributors funds are locked up for 30 days in the following manner Lockage Of Funds Market Credit Stock On Hand Cash On Hand Cash in Transit Stock in Transit Dues From ITC Total Days 15 7 1 2 2 3 30 Table 8: As it can be inferred from the table the lockage of funds for the distributor is highest due to Market credit but in FMCG market reducing market credit is not a viable option so only suitable way for optimization is by reducing the stock on hand, stock in transit and Dues from ITC which will be minimized by the suggested model because when there is direct shipment of products the time taken for the product to reach the destination

reduces and frequency required is also less. So both the models will show a positive affect on the Wholesale Distributors investment pattern by reducing the lockage period of their funds.

Dynamics of Supply chain Management



 

each category of product as shown in Annexure 1.This gives the value of total space requirement for the whole month. As the safety stock is to be maintained for 7 days as per companies norms, I have calculated the required space for safety stock and added one day of space requirement to it.

WHOLESALE DISTRIBUTORS INVESTMENT PATTERN
10% 7% 7% 3% 50%

23%

Market Credit Cash in Transit

Stock On Hand Stock in Transit

Cash On Hand Dues From ITC

MAJOR FINDINGS OF RESEARCH
Product and Stacking norms for all category

0 Total 1 CHINTAMANI-M DBPur-City K G F-M KOLAR-M Tumkur-City 1 Total 2 Arsikere Badravathy Sagar Shimoga 2 Total 3 Chikmagalur SOURCE: Generated by SCM Tool see Annexure 5 Total 4 Total

The new routing was designed specifically for food products on the basis of route, kilometers and demand pattern at these places

Dynamics of Supply chain Management

 

o Cigaratte – 5 o Matches – 15 o Agarbatti – 5 o Candyman – 8 o Minto – 8 o Ready to Eat – 6 o Biscuits – 6 o Salt – 10 o Atta – 7 New Routing Schedule for ITC from Clearing and Forwarding agent, Food HUB Godown and Atta Factory with the Kilometers so as to calculate the time taken to reach the destination.
0 Aarco-City ATTIBELE-M Bina-City DA Sons-City MD SONS-City Vijay-City30 Vijay-City70 Hassan Kunigal 3 Total 4 CR Nagar-MS KANAKPURA-M Kollegal-MS MANDYA RAMNAGAR-M 5 Hunsur-MS Mercara-MS Mysore Pandavpura-MS Periyapatna-MS 6 Chitradurga Davangere Harihar Haveri R.Bennur Sirsi 6 Total 7 Hiriyur Bellary Gangavathi-Bel Hospet-Bel Koppal-Bel 7 Total 8 Raichur-Bel Yadgiri-Bel 8 Total 9 Karwar Kundapur Puttur Udupi VS WC 9 Total

The following table provides the schedule of adding the Wholesale Distributors for direct shipments from Food HUB Godown in 9 MT truck. Table 8: Wholesale Distributors who can be directly shipped from Food HUB Godown with 9MT capacity trucks MONTH
KGF Shimoga Chikmagalur Hassan Kollegal MANDYA Oct-04 CHINTAMANI KOLAR-M Badravathy RAMNAGAR Mercara Chitradurga Harihar Hiriyur Yadgiri Karwar Puttur Udupi Nov-04 Dec-04 Jan-05 Badravathy Periyapatna Feb-05 Mar-05 Not till March 2005 R.Bennur Gangavathi Arsikere Sagar Kunigal CR Nagar KANAKPURA Hunsur Haveri Sirsi Koppal

DIRECT Mysore SHIPMENT Pandavpura
Davangere Bellary Hospet Raichur Kundapur VS

WC SOURCE: Inferred from data generated by SCM Tool see Annexure

When calculated for the possibility of direct shipment to whole sale distributors from

The following table provides the schedule of adding the Wholesale Distributors for direct shipments from Atta Factory in 9 MT truck for Model 2

Dynamics of Supply chain Management

‘ ‘

Food HUB Godown as per Model 1,it shows that till March 2005, 80% of the Wholesale Distributors up-country can be shipped directly for all Food products including Atta from HUB godown Bangalore But few of them as seen in the last column cannot be shipped directly, because of low demand for the products at these places and the Wholesale Distributors who are shipped directly cannot be supplied by direct shipments for their total demand as it does not constitute full truck load so the best feasible option is multi-point delivery ie routing as per the guidelines of the model combining such Wholesale Distributors who cannot be directly shipped.

Table 9: Wholesale Distributors who can be directly shipped from Atta Factory with 9MT capacity trucks MONTH
Oct-04 Hassan-Mang Mysore-MS Bellary-Bel Hospet-Bel Kundapur-Mang WC-Mang Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Udupi-Mang VS-Mang

DIRECT SHIPMENT

SOURCE: Inferred from data generated by SCM Tool see Annexure

Inference As clearly seen Model 2 with 9 MT is viable only if Multi-point delivery is considered because out of 43 Wholesale Distributors only 8 distributors can be distributed if Model 2 is used for the supply chain process. The following table provides the schedule of adding the Wholesale Distributors for direct shipments from Food HUB Godown in 16 MT truck. MONTH Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 CHINTAMANI Yadgiri Chitradurga Mercara RAMNAGAR K G FUdupi Shimoga ChikmagalurHassanKollegal MANDYA MysoreDIRECT SHIPMENT Pandavpura Davangere Bellary Hospet Raichur Kundapur VS WC-

Inference

As clearly seen Model 1 with 16 MT capacity can directly ship only to 50% of Wholesale Distributors, which is very less in comparison to 9MT capacity, trucks

Dynamics of Supply chain Management

CONCLUSIONS AND RECOMMENDATIONS
.

Dynamics of Supply chain Management

CONCLUSION
Purpose The basic objective of this study is finding: Improving Effectiveness and Efficiency of Supply chain management and checking

Two Strategies Alternative one If there is no change in the information available for ITC, they will have to adjust their business through internal changes. After getting an idea about how ITC’s new transportation model will affect ITC, ITC will be able to make internal changes towards a more effective supply chain. Wherein all ITC food’s products can directly reach the Wholesale Distributors from the Food HUB Godown.This way of going towards a more effective supply chain is the simplest solution for the present situation since it does not include any new technical investments. The only requirement will be increase in the K1 shipments from Food HUB Godown but in the meanwhile K2 shipments will be decreased.[table ].Following this alternative ITC have to adjust its transportation according to Model 1 , so as to make the products reach the destination in an cost effective manner. Alternative two The next model suggested on cost aspects though is superior to Model 1 but when we focus on the direct shipments from the Atta factory it shows that its not a feasible option as the cost of loading and unloading will be higher when there is a multi point delivery. But if there is an increase in demand Atta at up-country destinations within Karnataka the then ITC should shift to Model 2 wherein Atta can directly reach the distributors from Atta Factory. It is feasible to directly ship food products from Food HUB Godown, including Atta to Wholesale Distributors

Dynamics of Supply chain Management

’

the feasibility of adding Up-Country Wholesale Distributors routes for direct shipments of FOOD Products from HUB Godown (foods)/Atta Factory (Bangalore).

RECOMMENDATIONS Integration of the supply chain has, for many years, been a powerful and compelling enabler across a wide range of industries. As a result, many of the core supply chain concepts and principles have been put into practice in a much more effective way. These concepts include: information sharing, multi-party collaboration, design for supply chain management, postponement for mass customization, outsourcing and partnerships, and extended or joint performance measures. The information technology has allowed companies to come up with highly innovative solutions that accelerated the adoption of these core supply chain principles. The recommendation can be defined in all of the different branches of business for the effectiveness of supply chain at ITC SPECIFIC ASPECTS Clearing and Forwarding agent

Dynamics of Supply chain Management

“ “ “

o Issue The two issues the clearing and forwarding agent is dealing with is space and Locaton o Solution Godown must be located in Non residential area Sufficient vehicles be provided Training program for Labours and staff dealing with loading and unloading Categories work space requirement be calculated by implementing warehousing software Extension of the Clearing and Forwarding agent Wholesale Distributors o Developing database with respect to the space available at each Wholesale Distributors o Participative management to deal with the problem of investment cycle o Introducing central ordering system for ITC foods o Concentration required from the companies side to develop a better investment pattern, which reduces the lockage of funds for the Wholesale Distributors. Food HUB Godown o Though it’s the largest HUB in India for ITC, it lacks behind in basic infrastructures like lighting facility, etc. it is needed that these aspects are immediately rectified.

The company should examine the mechanism to add value through logistics. The following chart is quite helpful

Understand Distributors Needs

Monitor Inflow And Outflow Of Stocks

Replenishes stocks so as to lower their inventories

NO

ARE YOU NETWORKED WITH THEM

YES

ENSURE INCREASE IN CUSTOMER VALUE

MONITOR DISTRIBUTORS PERFORMANCE

ENSURE DISTRIBUTORS PROFITABILITY

NO

YES

ARE YOU NETWORKED WITH THEM

Dynamics of Supply chain Management

Generic Aspect Implementing Effective SCM Strategies

The primary purpose in establishing supply chains is to minimize the flow of raw materials and finished products at every point in the pipeline in order to enhance productivity and cost savings
17

. Successful supply chain ventures

manage some critical elements for parts such as individual business unit in the entire supply chain. The strategy covered in different aspects contributes to the overall performance.
Establish supplier relationships

It is important to establish strategic partnerships with suppliers for a successful supply chain. Corporations have started to limit the number of suppliers they do business with by implementing vendor review programs. These programs strive to find suppliers with operational excellence, so the customer can determine which supplier is serving well. The ability to have a closer customer or supplier relationship is very important because these suppliers are easier to work with. With the evolution toward a sole supplier relationship, firms need information such as financial performance, gain-sharing strategies, and plans for jointly designed work. They may establish a comparable culture and also implement compatible forecasting and information technology systems. This is because their suppliers must be able to link electronically into the customer's system to obtain shipping details, production schedules and any other necessary information.
Increase customer responsiveness

To remain competitive, firms focus on improved supply chain efforts to Creating
Collaboration and Trust in the Supply Chain There are challenges in managing supply chain

Dynamics of Supply chain Management

relationships. The problem that greatly hinders the implementation is the relationship between channel members. Developing New Technology and The Solution When developing a Supply Chain strategy, it should begin by evaluating how the links in a supply chain fit together. Supply Chain Management (SCM) does not so much require the employment of a specific technology or solution as it demands an understanding of the business processes that must work together. Information technology has long been a major factor, new innovation generated day by day with new possibilities provided. E-business, or the Internet computing model, such as the simulation tools which has been developed in have now emerged as perhaps the most enabling supply chain integration tools. Because opening, standards-based and virtually ubiquitous, businesses can gain global visibility across their extended network of trading partners and help them respond quickly to changing business conditions such as customer demand and resource availability. The scoring model could be another advanced standard in helping companies locating the problems in their supply chain. Creating Information Visibility Most likely, SCM solution will typically include, for example, material sourcing, forecasting, warehousing, inventory planning, transportation, purchasing, and financials. Supply chain integration must be accomplished not only within one enterprise but also within those of its customers and suppliers (and often their customers' and suppliers' systems as well). Processes within all of these organizations must be evaluated and updated or even overhauled to meet efficiency and logistical expectations. Information visibility will help companies to include more dynamic, collaborative communication networks in their offerings, giving birth to collaborative commerce and helping to improve communication beyond the transactional supply chain. Use Of Information Technology yields the following Prevents Inventory Buildup Customize the logistics according to customer segments need Service the distributors according to their needs Sharing Benefits Dynamics of Supply chain Management

Sharing benefits is an important success factor for many companies. Although there are a lot of challenges to the implementation, the gains to be realized with the supply chain outweigh the concerns and hence more and more organizations are moving towards automating their supply chain. The benefits should be equally shared within supply chain members, it is not good to sacrifice others benefit for gaining more, and this kind of relationship will not last long.

Dynamics of Supply chain Management

The Company can profitably use the following ‘checklists’ THE DIAGNOSTIC Q Is the company reducing the intervals at YES which it services its Wholesale Distributor? Q Is the company trying to differentiate its YES brand through its logistics system? Q Is the company treating C & F agent and YES Wholesale Distributor as internal customers Q Is the company ensuring that its distributors YES are servicing the retailers more frequently Q Is the company ensuring an Information YES Technology movements The company can follow the following cardinal laws of logistics: network to track its stock NO NO NO NO NO

o Home operations –The functional aspects of company’s logistics have to be very efficient than those of its competitors.

o Channel company’s resources according to the configurations of the delivery system. o Serve the end user. o Attack the Inventories by linking the logistics Management to financials pay-offs in other parts of value chain

o Apply vertical solutions – Strategic logistics will look beyond its own parish to check for optimization at the other nodes on the company’s value chain.

o The company should focus on “Reverse Logistics” o Reverse flow of products is mandatory o Fourth party logistics in the supply chain outsourcing o Virtual integrated logistics :One stop shop for all logistical requirements
Take a holistic view of the logistics as operations. The following chart highlights this:-

Dynamics of Supply chain Management

LOGISTICS AS OPERATIONS

Logistics Supply-Chain

Supply Chain Infrastructure

Movement Requirement

Transportation Infrastructure

In-Bound Network

Distribution Network

Distribution Centres

Customers

Products

Products

Products Vendor
Supply-Chain Planning o Site Location o Capacity Sizing o Sourcing

Plants
Transportation Planning o Site location o Fleet Sizing Shipment Planning o Outsourcing o Bid Analysis o Fleet Sizing Vehicle Routing o Fleet Sizing o ServiceDay Balancing o Frequency Analysis o Warehousing layoput o Material design o Storage Allocation o OrderPicking strategies o Vehicle dispatching o Order picking handling Warehousing

o Production planning o Sourcing o Mrp,drp,erp

o Routing Strategy o Network Alignment o Load matching

o Consolidation strategy o Mode Strategy o Shipment dispatching

o Routing Strategy o Zone Alignment

Dynamics of Supply chain Management

FUTURE WORK
ITC has vast experience in the field of distribution and it is ranked among the top players in most of its product categories and considered to have the best of physical networks but as said there is always an other side of the coin. There are certain areas which if not concentrated now will inhibit ITC in future from sustaining its position as the leader. This project concentrated on the logistics aspect of supply chain of finished products from ITC godown or Clearing and Forwarding agent to Wholesale Distributors, while researching on this topic many aspects came in to picture which had the scope of further research which are enlisted below

Feasibility of combining all FMCG and VFMCG (Cigarette) products at Food HUB

FINANCE Impact on Wholesale Distributors margin due to introduction of ITC FOOD products.

MARKETING Developing an EOQ model for ITC products.

63

Dynamics of Supply chain Management

” ” ” ” ” ” ”

Godown for shipment to each Wholesale Distributors without moving through Clearing and Forwarding agent.

Revised landing cost of products to Wholesale Distributors on the basis of the new transportation model Framing new credit policy for helping the Wholesale Distributors in reducing their lockage of funds.

Identifying the reason for the low demand pattern of consumers for ITC FOOD products with in Karnataka unlike Bangalore and suggest ways of improving it. Acceptance of each brand in the FOOD segment compared to the market leader in each category and the effect of companies name on the sales of the product

ANNEXURE
Select Bibliography Including Websites Surfed

Dynamics of Supply chain Management

BIBLIOGRAPHY
References “Marketing of Management” by czinkota and kotabe , Thompson South western

Dynamics of Supply chain Management

• • • • • • • • • • •

publication,2003 “Business Logistics Management” by Ronald H Ballon , prentice – Hall publication 2000 “Logistical Management “ The Integrated supply chain management “ by Donald J Bowersox and Dowill J class, MC Graw-Hill publication 1996

Dekker, H.C. and A.R. van Goor (2000), Supply Chain Management and Management Accounting: A case study of Activity Based Costing. International Journal of Logistics: Research & Applications, volume 3, nr.1, pp.41-52 Eert, A. van, J. van Riet and A.R. van Goor (2000), Supply chain directions in the food industry, Journal for Purchasing & Logistics (Dutch), Vol.16, nr.12, December pp.8-13. Gattorna, J.D. (1998), Strategic Supply Chain Alignment, Aldershot, U.K., Gower Press. Handfield, R.B. and E.L.Nichols (1999), Introduction to Supply Chain Management, New York, Prentice Hall Inc. Hoekstra, T. and J.H.J.M. Romme (1993), Integral logistics structures, Mc Graw Hill, Maidenhead U.K. Jones, T. and D.W. Riley (1985), Using Inventory for Competitive Advantage through Supply Chain Management, The International Journal of Physical Distribution and Materials Management, Vol.15, nr.5, pp.16-26. Koning, M.H. (1998), A logistics vision on SCM, Unpublished paper, Amsterdam Free University. Salmon Associates (1993), Efficient Consumer Response, Washington D.C, Food Management Institu

D.C, Food Management Institu

Journal

Business Magazines

Dynamics of Supply chain Management

–

–

–

–

–

–

–

–

–

– – –

H.L. and C. Billington (1992), Managing Supply Chain Inventory: Pitfalls and Opportunities, Sloan Management Review, pp. 65-73. Leew, S de .J. Ploos van Amstel and A.R. van Goor (1999), The Selection of Distribution Control Techniques, The International Journal of Logistics Management, volume 10, nr.1, pp. 97-112. Porter, M. E. (1985), Competitive advantage, New York, Free Press. Ploos van Amstel, M.J. and W., A.R. van Goor (forthcoming 2002). European Distribution and Supply Chain Logistics, Pearson, U.K. Database ITC database

ICFAI Journal of Marketing ICFAI Marketing Mastermind Harvard Business Review Business World Business Today

Economic Times Business Standard Business Line

Web Links: www.itc.co.in http://www.mckinsey.de/_downloads/knowmatters/retail/deverticalisation_operations.pdf

Dynamics of Supply chain Management

— — — — — — — — —

www.anu.edu.au/people/Roger.Clarke/EC/EDIIntro.html www.currentdirections.com/success/mfg-corrigated-materials--vendor-managedinventory.html www.edifice-ins.com/vmi.htm www.vendormanagedinventory.com www.nova.btl.com/servlet/se.ementor.econgero.servlet.presentation.Main?data. node.id=36&data.language.id=2&data.document.id=4364 www.reshare.com/understandingcc.htm www.ARCweb.com/ inboundlogistics

ANNEXURE-2

Dynamics of Supply chain Management

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...reduction strategies may promote the implementation of green strategies in global maritime logistics and the MPA. In this report, the utilisation as well as impacts of Lean and Six Sigma strategies will be analysed. In addition to this, the two strategies will be compared and contrasted. Lean and Six Sigma assist in working efficiently and reducing wastes. In recent times, IT has proven to be a vital tool in assisting organisations and global maritime logistics. This report will examine the relationship between IT and quality (TQM), efficiency (Lean) and collaboration and has shown assist them in their objectives and gain a competitive edge. This report has shown that IT has proven to be effective in helping organisations and global supply networks work and communicate among one another effectively and efficiently. 1.0 INTRODUCTION In this report, its main focus is on determining the most optimal cost reduction strategies in the implementation of green strategies in global maritime logistics such as the Singapore maritime logistics network or Maritime and Port Authority of Singapore (MPA) and for this particular paper, the researcher has chosen two specific cost reduction strategies specifically: Six Sigma and Lean. Container ports the world over are increasing at an alarming rate and ports have to take into account of its efficiency, throughput and green performance. TASK 1 2.0 COST REDUCTION STRATEGIES TO ACHIEVE OBJECTIVES Six Sigma and Lean are the......

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Supply Chain Management

...TWO PAPERS IN SUPPLY CHAIN DESIGN: SUPPLY CHAIN CONFIGURATION AND PART SELECTION IN MULTIGENERATION PRODUCTS by Sean Peter Willems B.S.E. Economics Wharton School, University of Pennsylvania, 1993 S.M. Operations Research Massachusetts Institute of Technology, 1996 Submitted to the Alfred P. Sloan School of Management in partial fulfillment of the requirement for the degree of Doctor of Philosophy in Management at the Massachusetts Institute of Technology February 1999 Copyright © Massachusetts Institute of Technology, 1999. All rights reserved. Signature of Author _____________________________________________________ Alfred P. Sloan School of Management January 26, 1999 Certified by ____________________________________________________________ Stephen C. Graves Abraham J. Siegel Professor of Management Co-director, Leaders for Manufacturing Program Accepted by ___________________________________________________________ This page intentionally left blank 2 TWO PAPERS IN SUPPLY CHAIN DESIGN: SUPPLY CHAIN CONFIGURATION AND PART SELECTION IN MULTIGENERATION PRODUCTS Abstract by Sean Peter Willems Submitted to the Alfred P. Sloan School of Management on January 26, 1999 in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy in Management Increasing competitive pressures are forcing companies to increase their rates of innovation. The increasing rate of innovation shortens each product’s duration in the market, thereby compressing each......

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...Enhancing Competitiveness: Moving from Supply Chain to Demand Chain Management Dr. Pankaj M. Madhani Introduction Supply chain involves all activities associated with the flow and transformation of goods as well as the related information flows from the raw material stage, through to the end user. Supply chain is defined as the integration of key business processes from customers through original suppliers that provide products, services, and information that adds value for end users and other stakeholders. Here, a supply chain includes all the value chain processes from suppliers to end customers. As such supply chain comprises all the supply processes necessary to fulfill customer demand and is managed within supply chain management (SCM). SCM can be defined as “the management of upstream and downstream relationships with suppliers and customers in order to create enhanced value in the final market place at less cost to the supply chain as a whole” (Christopher, 1998). Hence, SCM refers to all of the processes, technologies, and strategies that together form the basis for working with internal as well as external sources of supply. As SCM focuses on the efficient matching of supply with demand it does not help the firm to find out what the customer perceives as valuable, and how this customer-perceived value can be translated into customer value propositions. Hence, supply chain efficiency by itself will not increase customer value and satisfaction as firms...

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...SUPPLY MEASUREMENT BUSINESS METRICS Definition - A business metric is any type of measurement used to gauge some quantifiable component of a company's performance, such as return on investment (ROI), employee and customer churn rates, revenues, EBITDA, and so on. It can also be defined generally as a unit or units of measure to gauge a company's performance and provide the company's employees with a standard to improve. The current interest in performance measurements has led to a variety of supporting adages or clichés in the industry, such as: • “Anything measured improves.” • “What you measure is what you get.” • “Anything measured gets done.” • “You can’t manage what you do not measure.” These are not new business ideas, but there are a few new twists. Using measurements to support manufacturing operations has its roots back to the late 19th and early 20th centuries with ideas espoused by Frederick W. Taylor, the father of applying scientific methods to running business. His ideas for time and motion studies of operations were successfully used to scientifically manage production lines and warehouse operations. These ideas, however, led to exaggerated business processes that transitioned into “running a business by the stopwatch” with employers treating human employees as if they were highly reliable, predictable machines to be monitored and controlled. Over time, the workplace’s view of performance measurement became more humane and these exaggerated types...

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