Category: Case Studies

Case Study II: Victory Cement

It was a hot and sultry afternoon in Kolkata. The Logistics Head East of Victory Cement Mr. Arun Shanker is in a pensive mood seating at his office thinking as to how to streamline and turnaround the dispatch performance from plant. The Victory cement has come up with a state of the art cement manufacturing facility in the neighbouring districts of Kolkata and has got a capacity to produce 2.4 MTPA cement which is expected to go up to 3.0 MTPA very soon. The company wants to be a major player in terms of both volume and market share in East and thereby continuously on a spree to increase capacity either by brownfield expansion or by greenfield expansion. The company is commissioning another 1.2 MTPA grinding unit in Odisha beginning next month. The Company has in fact deployed its own fleet of 20 vehicles (10 6W & 10 12W) in its WB plant to ensure timely delivery as well as to weed out the fluctuations of fleet availability. There are other 20 no.s of 6W deployed by another dedicated transporter M/S Sumant Agrawal is also cautioning to withdraw the same because of not making adequate no. of trips and profit. These trucks especially the 6W are required to run within the short lead distance from the plant to make the operation viable. But the challenge is that ever since these vehicles are deployed the operations is yet to make break even and accumulating losses. The CFO of the organization Mr. Batra has been repeatedly following up Mr. Sarkar as well as with the Sales team advising them to ensure profitability of these trucks failing which he’ll be constrained to withdraw these trucks and put it either to the newly commissioned plant in Odisha or even may shit them to the plant near to Mumbai to cater to the dispatches of its premium product Ready to Use (RU). There are several other challenges the Plant Logistics team is facing like overall order availability which keeps fluctuating and generally skewed at the month end, undue delay and detention at the customer point, inconsistent dispatch limiting the fleet availability and transporters’ reluctance, longer loading and waiting time inside the plant and bottlenecks like road loading gets hampered when rakes are under loading etc., truckers’ not using tarpaulins during rains leading to truck availability and damages which are all impacting both logistics cost as well as Cost of Sales because of low and inconsistent despatches.

However, Mr. Shanker has very recently had an interaction with MD, CEO & CMO in the recently concluded sales conference wherein he was advised to work on consistency in despatches, increasing the despatch capability from the plant to cater to the expansion, on debottlenecking issues and making own fleet profitable. The MD has also instructed him to revert with his action plan on all these issues clearly mentioning the logistics cost reduction per MT shall be done Apart Mr. Selvarajan, CMO to whom Arun Shanker reports to also given him the green signal to seek whatever support he requires to streamline the dispatches, service level to ensure on time delivery and customer satisfaction. The CMO also advised him to do a brainstorming with his logistics and packing plant colleagues and revert with a detailed presentation incorporating the action plan to be presented to the MD, CEO & CMO together sometime next week. There are approximately 170 no.s trucks loaded per day and overall availability goes maximum up to 200 no.s. corresponding to 17 transporters at the WB plant. And there are three packers each having capacity of 240 TPH with two chutes each. However, the actual output produced by them is between 150-170 TPH and while a rake is loaded all the 6 chutes are engaged for rail loading so that the Rake loading could be completed within the stipulated free time as given by the Railways and road loading gets stopped. Typically, a full rake loading takes 7-9 hrs time and even otherwise around 350-400 MT of cement loading happens through these six chutes in an hour. There is one major cement silo available which has got a capacity of 5000 MT and another small one of 800 MT for the premium product Ready to Use (RU). The company is coming up with a third product next month which is also going to add further complexity in terms of supply and despatch planning. The Logistics Head Mr. Arun Shanker is a veteran in his field and has seen this plant from its inception however invariably facing major challenges when faced with increasing volume and further complexity in terms of product mix and supply planning. In keeping in mind the tasks ahead Shanker has visited the plant, had a detailed discussion with the plant team and just returned to his office mulling over the ways and means to do it. In order to make his plans a robust one Arun Shanker has met with Mr. Gaurav Nandan, the Strategy & Planning Head to deliberate how do the Logistics & Supply Chain in Victory cement can add value in terms of impact made with respect to the challenges as mentioned in the above paragraphs.

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Case Study: New Cement Ltd

New Cement is one of the Pioneering cement manufacturer in India having its strong presence in Eastern India. But recently New Cement is  facing a real challenge in terms of negative growth , loss of sale and EBITDA, channel dissatisfaction, brand equity erosion in it’s one of the leading sales unit known as Numero Uno  sales unit. The Numero Uno Sales Unit has got a territory known as Shivalik area which is the most potential area in the Sales Unit having a market potential of around 300000 MTs. The market share of New Cement in Shivalik area is approximately a little over 10%.The Shivalik area has got two market viz., A and B which contributes approximately 30% of the Sales Unit Sales.  District A contribute to the 65% of the Shivalik Area’s sale whereas the District B contributes 35% of it. The market consists of rural, urban and semi urban geographies. The Large Buyer, Medium Buyer and Non Trade sale consists of at least 25%-30% of Shivalik’s area especially in the urban and semi urban market of District A. The New Cement is traditionally very strong in rural and in semi urban market but have no strong presence in urban (metropolitan) market. In order to consolidate its presence in urban market the Company has come out with a Special Purpose vehicle known as Urban Developer ( UD) whose job is to increase New Cement’s footprint in urban market, engage in demand creation through various sales and customer service initiative/ activity etc. However, the vehicle is yet to stabilize in full and have to go a long way to harness the potential exists in this market. The New Cement is having one normal product Super and one premium product (Supercem) in its portfolio and have recently come up with another black complexioned premium product ( named as Premium +). There is a strong perception in market that light coloured cement (Super & Supercem) are superior in quality and market is prepared to pay a premium over dark coloured cement. However, the raw material that goes to make light coloured Super & Supercem cement have become two times costlier and hence there is an internal strategy to maximize Premium+ in a big way. You have to make strategies to change the mindset of channel, customers and your team members alike. The Company has advised you to place Premium+ (dark coloured) at a premium over Super (light coloured) cement. However, your Management is prepared to give you all support in terms of promotion, packaging, product quality etc.

 Both the market A and B is intensely competitive and characterized by the presence of all leading cement manufacturers (approximately 8 to 10 brands). There are some low priced brands like Neptune, Pluto, Uranus which have significant price difference with that of the leading manufacturers ( say, Rs. 15/- to Rs.25/- per bag in wholesale and  Rs.10/- to Rs. 20/- per bag in Retail).  There is one Venus cement, a new entrant since last over one year bringing cement from its new grinding unit from the adjacent state. These low priced brands are making a dent in New Cement’s retailer network offering them Dealership/Retailer ship and it is rapidly getting converted into these low priced brands leading to a reduction New Cement’s share of wallet. The dealer network of New Cement is dissatisfied with the current level of service and inclined to shift towards other brands including the low priced brands as they feel that these brands are giving them better profit margins. Most of the big dealers’ (volume lifter wholesalers’) are degrowing vis-a-vis last year and number of them already opted for other brands. Even amongst the leading cement brands a significant price difference exists with New Cement which is considered to be the Price leader in the market. The dealers’ of New Cement feels that the company is very rigid in its policies and dealings and off late has losing the connect with its dealer/retailers’ and customers. The end customers are basically the Individual House Builders’ (IHBs) who constitutes > 90% of New Cement’s sale. There are major service issue faced by New Cement in its warehouse in District A in terms of damage cement, cut and torn bags and improper delivery. The company keeps getting lot of complaints from it’s Dealer and Retailers’ those who are absolutely reluctant to lift cement from godown. The godown damages are ever increasing and lack of proper stock upkeeping, FIFO and godown management is leading more debits and writing off cement at this warehouse which is impacting the Sales Unit’s EBITDA. Despite its best follow ups and reminders with the C&FA the situation is not improving to a satisfactory level and the sales team had to devote a significant time in warehouse management, damage cement evacuation and in increasing godown dispatch to its dealers’. As a result the sales team is also losing focus at times, getting demotivated and the same is impacting the sales performance. The District A has degrown to the extent of 22% as compared to last year whereas the District B which has significantly grown during the last two years is also in 2% negative growth during the first seven months of the year. As against the above the market in Shivalik area has grown by 12% during Jan- July ’13. Although there are innovative Sales and Marketing tools and lucrative sales promotion schemes New Cement is having it is yet to be fully exploited by its Shivalik area sales team by rigorous communication and by doing intensive customer service and other demand creation activities which is presently a major area of improvement. The team needs an able leader and astute strategist to work on two major concerns the New Cement is facing in Shivalik area viz., Increase its channel connect and consolidate its position further amongst IHBs. The company is targeting a 20:60:20 ( 20% premium product sale, 60% normal product sale and balance 20% large Buyer/ Medium Buyer sale) product portfolio mix in the coming months to come and wants to turn around its performance in the Shivalik area by attaining at least 10% growth over last year. There are only five months of the financial year is left and the challenge is to do a complete performance turnaround within the next five month. The areas of opportunities are enhancing Urban Developer’s  performance, increased contribution through Large/ Medium Buyer segment sale, increasing Premium product sale, warehouse service level improvement, channel satisfaction, improvement in BEI ( Brand Equity Index) which requires preparing and implementing immaculate strategy and leading &  motivating the sales team by engaging them  during the balance days of the year.

Due to the poor performance shown by the area in the past 7 months, theShivalik team is demotivated and are looking for a charismatic leader who could turn around the fortunes. The Shivalikteam members are otherwise very competent and performed extremely well in the past. They were the No. 1 Area Office for consecutive 3 years in the past

You are very recently hired by the New Cement as Chief Manager to lead its Shivalik area and your job is to lead the sales and customer service teams and to do a complete performance turnaround within the next five months of the FY left.  The Regional Leadership team has given a half an hour appointment to you during which you are advised to prepare a focused strategy and a detailed action plan and present the same to convince how are you going to do the performance turnaround. The essence of success will be in the strategy and its speed of implementation against time. Your action plans should be SMART and addresses all the major challenges mentioned herein above.

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