cases in logistics

8/7/2019 Cases in logistics

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Cases in logistics prof. G.pherwaniCase 3: MARUTI UDYOG-And Supply ChainThe Web That Runs Maruti

1996-e-biz efforts restricted to B2B(e-mail, dialupconnectivity)2Mblink to VSNL-e-ordering

This how Maruti Udyogs InfoTech team of 60 has wiredup Indias largest auto maker.

All offices are connected on a 256-kbps link Result: Inventories are now down from five days to lessthan 36 hours

Production plans are shared with key vendors up to threeweeks advance.

The Delivery Instruction System is an extension of Marutis wired structure, the extranet, for key vendors.By mutual agreement. not more than 5-10 per centvariation from the plans is allowed

Result: Many vendors have cut their inventories by athird

Rejection ,warranty claims from TIER I SuppliersRs.100bn.business-2MB link to VSNL-Tie-up with 3Banks(ANZ Grind lays Corporation Bank, BOA for EFT).STDI.Application. s/w for online DataUpdation

Its market share is 60 per cent. With 12 high-end Compaq Alpha servers, with 17.9terabyte storage capacity

Largest-handled transactions worth Rs19,000 crore

during 2000-01 Rs 1.2crore worth of spares every week 189 dealers across 147 cities Maruti also extended his extranet Whole system helps to take decision faster The Maruti network will soon be expanded to a part of the 1,723 workshops spread over 740 cities.

Fault repair online ,and maruti to monitor service quality


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All 216 sales outlets are hooked to the Maruti extranet The mess of manual booking and conformation has beeneliminated.

Coming up :e-learning for dealers and service center Soon it will be used to monitor quality of service too Result: Logging an order once took five days. It's downnow to a few minutes

Everyday nearly 1,400 vehicles a min of 8,000components each

11 brands, 35 variants and 100 colors.

A 25-kms mesh of optic fiber runs across the plant,allowing the 4,600 workers real-time access toinformation.

Vendors can access the information on a need-to-knowbasis across the extranet ( dealer dial up order online)

Result: Plant can access information regardingavailability of components and production schedules24X7x365

Order online--->EFT--->Cars in Transit--->EngineChassis numbers updated and vehicle becomesIN STOCK. B2C+Brandsite the Product Speed

Flash 15, September 2005Maruti Udyog sign up with Oracle Corporation to deliver an ERP

solution in order to link its entire inbound logistics, process andoutbound logistics even more electronically to leave no room forerrors or human intervention. This will make them even moreagile. Indian Car market has become fiercely competitive. Themain advantages fro Maruti are:

1. proven Japanese technology and design2. awesome reach and service networks3. J.D. Powers repeatedly ranks them the highest in

customer Satisfaction due to their responsiveness4. Full use of E-commerce in SCM.


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Problems- Analyze the case and discuss its core factor fro

competitiveness. How channel members act in coordination and

effect of inventory on profitability? What effect will efficiency have of price

advantage over competition? Give your opinion.

Case 2: Sponge IronContainerization and multimodal transportation of sponge ironfrom Indias west coast to consumers in west coast

Advantages1. Containerization has increased world trade, &

intermodal has got an impetus. 2. containers are easy to transfer from one mode to

another-& their use facilitates intermodal transportation 3. Global freights use truck/water rail transportation-

because factories & markets may not be close to theports.

4. On land too, truck/rail combinations offers low coststhan only truckloads & delivery times are improved.

5. It creates a price/service offering that cant be matchedby any single mode.


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6. It creates convenience for shippers which have now todeal with only one entity representing all carriers whotogether provide intermodal service.

7. key issues: Exchange of information to facilitate shipment

transfers between different modes becausetransfers involve considerable delays, hurtingdelivers time performance.

Costs can be tabulated in a simple 2-mode transfer:

Loading

Trucking cost to port

Unloading-crane-

loading onto ship


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Ship freight

Unloading into truck Truck to destination Unloading at destination Transit insurance

Information transmission

By ship Alibag Marmugao: ship size-35,000dwt

Payload- 34,000dwtStanding charges-Rs.153, 000Fuel cost-Rs.120, 000


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UPSTREAM ACTIVITY

Location - availability of Natural Gas from Bombay High form where it is brought of shore about 25miles

Gas available at- land fall prices- Rs. 25,000 per2,500 cubic meters-less than what inlandcustomers would pay-& 300 cu. Meters requiredper tonne of sponge iron produced.

Site was on shore to get access to sea route also

during construction & operation. Gas-based method, under License from HylSa

Mexico is cheaper alternative to coal-basedmethods used by competitors in eastern India.

It had capacity of 0,5m t per annum Needs 1, 24 t of pellets of DRI [direct reduced

iron] & 0, 31 t of lump ore per tonne of finishedproduct- in feed mix of 80:20.

Iron ore & pellets are not available at Alibag

LOGISTICS PROBLEMI. UPSTREAM- Natural gas by pipeline form

ONGC-pellets from Kudremukh Iron Ore


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Company [an export-oriented unit where Rupee

prices will fluctuate withThe negotiated price was $12 per tonne F.O.B

Annually renewable terms]-LUMP ORE from:

Goa 20% Rs. 330/tBanspani, Orissa 30% Rs. 250/tDiatari, Orissa 30% Rs. 250/t

Nearest rail head is 15 kms. Away. Railway Boardasked them to construct a line along with otherlocal industries at accost of Rs. 10m/km. road costwill be Rs. 30/t

IRCA has categorized finished sponge iron underCategory 210.

II. DOWNSTREAM Markets are all over India


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Bombay High

Distance to markets is from 2,300 kms.[Durgapur] To 70 kms.[Bombay]

Ships wont be returning empty fromEastern India since they will be carryingback iron ore from Orissa.

It will need additional time for loading & unloading, since ships are under timecharter, but not due to travel time-scheduling ships will need expertise.

Stock yard for redistribution would cost Rs.100,000 per month-inventory carrying costwill be a factor too.

Plant will need 10 trucks a day

GatewayGatewayGatewayGateway

Regional Distribution CenterRegional Distribution CenterRegional Distribution CenterRegional Distribution Center

Sub Distribution CenterSub Distribution CenterSub Distribution CenterSub Distribution Center

Local Billing PointLocal Billing PointLocal Billing PointLocal Billing Point

Optional Local BillingOptional Local BillingOptional Local BillingOptional Local BillingPointPointPointPointKochi Madurai

PalakkadPalakkadPalakkadPalakkad

Kolkata

BhubaneshwarBhubaneshwarBhubaneshwarBhubaneshwar

MumbaiMumbaiMumbaiMumbai

RaipurRaipurRaipurRaipur

JaipurJaipurJaipurJaipur


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Each additional handling of product will cost1% -average selling price is Rs. 4,000/t

Demand exceeds supply-market is good.

PROBLEMS1. What is the best solution for both IBL & OBL?2. Should they do it in-house or outsource it to a

professional firm?3. What is the best solution in mode choice?

Please discuss the above in view of sponge iron supplies.

Natural gas is a vital input for gas-based sponge iron plants set up by various companiesGrasim Industries, Ispat and Essar. The supply from Bombay High is around 50 to 55 percent of the committed linked quantity.

The price of LNG works out to around $3.5 per MMBTU, which is uneconomical for theoperations of the sponge iron plant at present.

If the price of LNG can be reduced to $2.7 MMBTU, then it will be economical for ouroperations, Mr Bagrodia said.

Natural gas is a major concern in terms of quality, quantity and price, he said, addingwe are in talks with ONGC and Reliance who can supply us gas at a cheaper rate.

Grasim is awaiting the gas policy which will deregulate the prices of gas in the country ina phased manner. We have to sign agreements with the oil companies who will give usan idea.

Grasim had invested Rs 600 crore in the plant at Alibag near Mumbai, which has aninstalled capacity of 800,000 metric tonnes per year.

The regassification plant involves huge investments and may be considered if naturalgas supplies are stabilised, Ratan K Shah, president Vikram Ispat told FE.

He said all gas-based sponge iron manufacturers in the Uran sector are facing a challengeon maintaining their operations in the scenario of lack of natural gas supplies and risinggas prices for the next two years till alternate LNG supplies are made available from


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private players. One such player from whom gas may be sourced is Petronet LNG whichwill transport gas from Rasgas of Qatar.

Vikram Ispat has a turnover of around Rs 360 crore and made a net profit of around Rs40 crore.

Most of the gas-based sponge iron producers are running their plants at 50 to 55 per centof their capacity.

Industries is weighing three options to overcome shortage of fuel (natural gas) at itssponge iron unit Vikram Ispat which includes setting up of a coke re-gassification plant.

Grasim will go in for setting up of this plant if the existing supply of natural gas does notimprove and the company is also unable to source liquefied natural gas (LNG) fromprivate players at an attractive price. The existing prices of natural gas are alsounattractive for the company.

We are weighing two to three options to maintain operations at the plant which isrunning at 70 per cent capacity. We will be able to reach full capacity only if ONGC orGail increase supply of natural gas. Alternatively, we can source LNG from privatecompanies at a rate which is economical, Grasim Industries director MG Bagrodia said.

He ruled out divestment of the sponge iron unit by the company.

Customer orders jeans

Wal-mart P.O.SSUPPLY flows

LEVIS registers order

Milliken makes fabric

DuPont makes fiber

Cotton grower sells cotton

ORDER FLOWS


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Hand-held GPS detects item need-identicalsoftware/hardware with the entire 5 Major playerand 4 Logistics service providers get to know aboutreplenishment simultaneously-THIS IS WHERE THEMAJOR SAVINGS come from!Pre-requisites:

o Long-term Partneringo

Harmonized code sharingo Information-sharing, trusto Revenue sharing- remember dont squeeze

the supplier, squeeze the process! o Responsiveness o Time goals o Cost goals o Commitments o System access o Synergy Customer delivered value

otal value otal costProduct value Monetary costService value Time costPersonal value Energy costImage value Psychic cost

Competition is between networks and not companies- winner is the firm with a better network.Compression - time-information-communication-transaction cost-unpredictability [risks]-multiple service providers.Process -


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Customer at POS SCREEN at vendor screen at carrier screen at Wal-Mart

Screen at bank-EFT

Stock interfaceCustomer interfaceFinance interfaceManagement interface

Customer buys-depletes merchandize-online signalto vendor at ROL point to supply ROQ-in turn tocarrier-EDI-acknowledge instruction [info flow]-ahead of goods-goods tagged, RFID coded-hung-priced-move directly to selling counter WITHOUT

ANY FURTHER CHECK BY Wal-Mart-payment by EFT.

At sales pointSCANNER identifies article-picks up price from the Pricemaster signals quantity from actual stock to be deductedROL identified-prints receipts for the customer-gives himchange-adds to sales- signals EDI for action-subtracts formstock-records cost of transaction-tax to be paid-net profit.

Selling space- laid merchandize+ hung merchandize on a

carouselStorage space- is non-selling space which norm is 25%, IS10% FOR Wal-Mart.EDI- is electronic data interchange, is documentation inelectronic formatMerchandize- article in a ready-to-sale condition, dulytagged, bar-coded-in hanger-washing instruction, salesprice.


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ROQ- deliver only whats ordered by Wal-Mart EDI, EFT willpay only for this.SCM at Wal-Mart :

Article coded-barcodes-LAN/WAN NETWORKS-S.W.-links-POS+dB+vendor+carrier+bank for EFT+ mgmt.

Logistics Planning for Projects in Remote environments

The success of planning the Logistics Support for Projects , is often a directcontributor to the overall project success, and nearly always has a direct influence on costand schedule. After all, the way that materials are provided for a project, and arecontrolledand utilised can affect Cost, Schedule and Quality (the 3 pillars of projectmanagement). In a developed environment, where suppliers are close by, transport isregular, security is sound, IT systems are in place and interconnected and we have welltrained and largely ethical staff involved through the process, you have a fair chance of getting it right.

But what needs to be done when one, some or all of these factors are not in place?

The delivery of Supply Chain support for a Project in a remote location has a number of differences which need to be considered during planning. The easiest way is often toidentify these variances at each stage of the Project Cycle to develop a clear and effectivesupport plan.

Buying for the Project.

Materials are probably being sourced far from the end project location. For example,materials may be purchased and supplied from Australia, or the US, for delivery to aproject in a developing country such as Papua New Guinea, Africa, or even Antarctica.


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Project Materials. Inappropriately packaged for forwarding to remote environment.Wasted time and cost that could have been avoided.

Two principles should be considered in these cases

1. Ensure the goods are properly inspected before payment, and do so as close to thesupplier as possible. This often goes against what is now common practice to acceptdelivery and make payment when the goods arrive at the site. A receiving andinspection point needs to be established outside of the remote location. A shipping orconsolidation point before the goods are forwarded to the remote location is often sound.This should be controlled and tightly managed, preferably supported with a receivingsystem linked to the Purchasing and Payment system.

Why? Well, you dont want to find out that you have the wrong goods once you havepaid for expensive freight and handling half way accross the world. Also, if you aregoing to pay the supplier on time, that is only going to be put at risk if you are goingto inspect and pay after you have freighted the goods through some of the worstconditions imaginable. Consider the potential for delays, damage and theft. No supplierwants to wear the responsibility or consequences of that. If you find a supplier who willaccept terms such as this, expect to pay for the privelage.

2. If systems are poorly connected (perhaps an immature site, or poor communicationsinfrastructure limits IT integration), make sure that the system which will be used tomanage the goods through the supply chain is the one used to actually raise and managethe Purchase Orders. In some cases, this can mean that the order are perhaps done onbehalf of a contractor, as opposed to the contractor raising their own orders utilising theirown ERP systems. At first this appears inefficient, but in many cases the end result isoften a smoother operation where the Supply Chain has been integrated into the onesystem. Often too, having on-site staff who understand the operation take ownership of the material supply early in the process adds to increased ownership of the project andearly identification of other issues that might not be identified by someone at the HeadOffice. For example:


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Identifying local import/customs issues, that the contractor may not be familiarwith.

Incorporating local transport, storage and handling issues into the plan. Identifying alternative sources of supply, often local, that may offer a lower cost. Advise on the most practical and efficient shipment methods.

Transport and Import arrangements.

As above, hopefully planning has been started to identify solutions early in the process.However, too often the first moment these issues are identified are when the goods arriveat the Port (perhaps without correct documentation) or everyone is scratching their headabout how to move the goods, and who will pay for it.

Often, for a remote site, there is only one well established transport route that has beenespecially developed (or evolved) to meet the requirements of the operation. This isdifferent to a well connected operation where there may be a multitude of roads, airportsand providers to move freight inwards. Not recognising this in the early stages of planning will mean that either the existing Transport chain will be stretched toaccommodate the project requirements or the new arrangements which may be put inplace independently could be unproven or note even appropriate for the environment.This could result in unexpected risk and cost to the project.

Often, contracts are struck with delivery terms stating payment for materials to beprovided to the work site, but in many remote locations this is not appropriate as thesupplier or contractor does not have control over the Distribution chain through to the endlocation. Thought needs to be given to who is best equipped to manage the risk of theTransport chain, and who best to operate it. Transfer of custody and ownership needs tooccur at this point, normally where the supply cain transitions from developed toundeveloped and where there is a resource to contractually manage that transition.

Liability and Ownership of the Transport Chain

Both parties will also need to appreciate that some risks and factors associated with thetransport cannot be managed effectively by either party. For example, road closures dueto weather, road accidents, or civil disturbance. In these cases, consideration needs to begiven to ensuring adequate insurance for some of these events (if possible) andincorporating transport delays into the project plan.

Another common mistake is to mobilise a work crew on the assumption that the materialswill arrive for a project on a given day. When the materials dont arrive on the oftenover-optimistic time, the crew is often sitting idle incurring cost. While it may delay startby a couple of days, major mobilisation of work crews should be considered once therisk period of material delivery has passed.


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Managing the Risk of Transport in a Remote location

Receipt and Control of Materials.

The control of materials once at the worksite is often a problem area. Ideally, thelocation and resources that will be required to control materials will be determined, andresources put in place, before they arrive. Project Materials may often be directs andmore often than not will not be established within an inventory system. An alternativesystem will often need to be developed to ensure the materials are tracked and controlled.This can be a simple Excel spreadsheet, which references the orders that have arrived,who has collected the materials and when. Ideally, materials should not be issued to theproject in less than the base Unit of Measure from the order. Care should be given towho will actually collect the materials as well, with perhaps an authorised list of peoplebeing developed who are given the authority to collect and sign for the project materials.Either way, all players at the start of the project should be advised of the arrangementsand suitable care given to keep the materials in order.

Poorly Planned Project stores - Lost Control, Project delays, Cost.


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Because a unique system may need to be established for the project, the control of thestore often lends itself to being clearly assigned to a single person, or small group of people. This also facilitates building a rapport and effective working relations betweenthe project group and the supporting supply chain. The team controlling the stores shouldbe recognised as stakeholders and participants in the project, and also be asked tocontribute regularly status-updates to project stakeholders and be encouraged to proposenew ideas for improvement that will help in the flow and control of project materials.

Well Organised Project Lay Down yard - Controlled, Secure, Accountable.

Close Out.

This is another area where the remote project has a few issues of its own, and one thatfew people consider. Because of the difficulties in supplying the project, there is often atendency to over-supply with greater than usual levels of contingency built into the Billsof Material. This inevitably leads to a large surplus that nobody wants to know about.The tendency is to put it into the site inventory for a rainy day. This also usually meansthat the surplus is written off the account for the project, hence there is little disincentivefor the project to minimise surplus.

Disposal is often difficult as well, due to cost of getting the gear out again, and thelimited options for disposal of the materials. There are no easy answers to this issue, butthe following suggestions can assist:

Ensure there is an incentive for Project Managers to minimise surplus materials intheir planning.

At least look for other surplus materials that are already in location during theplanning stages for the project.

Ask contractors to provide proposals for what to do with Surplus materials. Theymay know of other buyers or projects nearby where the surplus materials can betransferred and utilised.


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The remote project can have a number of unique characteristics that need to berecognised and addressed, in order to develop a project plan that will be successful. Thisreport covers just some of the issues that may be encountered. Overall, it is aboutengaging in a planning process. Understand what is different about the remoteenvironment you are working in, and develop solutions that are integrated and will work.Trust the people who work in that environment every day as they will know what can andcant work, and are often more resourceful and responsive to change than their developedworld counterparts. I also strongly recommend drafting a specific Logistics SupportPlan for a project, so that the concepts which will be applied for a project can be clearlycommunicated and understood by all involved.

Packaging and Logistics Services from Gordano Support GroupLtd

Businesses, both large and small, can benefit from Gordano'ssubcontract packing and logistics services, either on or off

customer own sites. They offer Collection Service Packing,where items will be collected and packed at one of their units,and either returned to customers own premises or despatchedto the final customer.

Alternatively, Gordano offer on-site packing service options,including their on-site Packing and Despatch ManagementOperation, whereby a Packing Supervisor will manage thedespatch and packing operations, as required, on your ownsite, allowing you to concentrate on your core objectives.

Skilled packing teams provide fast and reliable turnaround. Handling month endpeaks, variable despatch patterns, daily multi trip pick up and drop offs.

Gordano operate 24 hours 365 days a year (meeting AOG demands). Customised IT and software systems ensure complete traceability and instantmanagement reporting. Systems can be interfaced direct with customer owncomputers.

Customers goods are fully insured. Their teams are security cleared, and trained to pack to the exacting standards

of the aerospace, engineering and defence industries. All relevant personnel are trained and certified to UK National Aviation Cargo

Security - Level 1, with select members of the teams trained and certified topack Dangerous Goods as approved by IATA and the CAA.


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Therefore, you can be assured that whatever yourproducts, they are in the safest of hands. Gordano'sexpert teams, supplying consistently high

performance, will provide you with an efficient service,whichever you choose, resulting in many benefitsthrough savings in costs and time. Gordano run a number of dedicated packing unitslocated in close proximity to, or within customer ownsites, and have the ability to extend these initiatives toother geographic areas

Reverse Logistics - DC Returns

As competitive pressures force retailers to implement more liberal return policies, returnvolumes have exploded. Today, it is not uncommon to find retailers receiving back asmuch as one-third of the total items they ship.

Returns processing can be an extremely expensive activity, consuming space, labor, dock doors, and other resources while tying up potentially valuable inventory. While thechallenges are different from the order fulfillment side of the warehouse, the goals areessentially the same. You want the process to be fast, accurate and cost effective. Keycomponents of an integrated

Reverse Logistics operations should include:

Barcoded RMA Labels

Timely, accurate Information is paramount to an efficient reverse logistics process.Barcoded RMA labels are key to getting product off the dock and processed quickly.

Streamlined Receiving / Triage Process


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The primary goals of the triage process are speed and accuracy. A robust informationsystem is leveraged to capture information for multiple departments (sales, accounting,operations, ) disposition product, and to set up downstream processing.

Automated Sortation

The information gathered during the triage process is used to sort product by disposition.Secondary sorts may be used to separate product into logical groupings (I.e. putawayzone, vendor, ). In many cases it makes sense to automate this process.

Integrated Repack Stations

Repack or rework workstations should be integrated into the reverse logistics process. Itis important to minimize the pools of inventory that can accumulate in these operations.

System Directed Re-stocking


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The returns processing software should be tightly integrated with the WarehouseManagement System to facilitate seamless transitioning of saleable product back intoinventory.

Streamlined Return To Vendor ProcessIt is critical that product to be returned to the manufacturer is processed in a timelymanner so appropriate credit may be received. If it is necessary to accumulate productprior to shipment, this process should be system directed and occupy space out of the wayof on-going operations.

Intelligent Scrap Process

Product with no value or with value less than the cost to process should be identified andscrapped as early in the process as possible.

Located just outside of Chicago, our 75,000 square foot, clean, gated storage facility is heated & sprinkler controlled which gives us flexibility to handle sensitive medical and computer equipment


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Resource utilization Track turnover ratios Toplifter travel distances

Overall cost per handling

Intermodal Waste Management - Case Study

A Waste Management consortium is being supported by Visual8 in their bidfor a major city's waste management system through a detailed simulation of the proposed systemdemonstrating how this system is designed to operate under extreme conditions. This simulation studyhelps answer questions such as:

How many containers, barges? Tug boats and unit trains are required in the system? What is the cost of operation? How will the system perform under adverse weather/operating conditions? What are the handling limits and bottlenecks?

Border Gateways - Case Study

Visual8 dveloped Border-Flow in conjunction with Border Gateways toanalyze truck queuing issues at the major border crossings between Canada and the U.S.

The model simulates commercial truck traffic flow from the major arterial routes into the primary cityroads feeding the border crossing. The tool al so takes into account bridge and tunnel crossing constraintsas well as staffing levels at the border security and inspection kiosks.

Methods to reduce truck queuing times and street congestion were examined using this simulation.

Wine Supplier - Case Study


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A hierarchical supply chain simulation model was developed in SIMUL8 toaddress warehousing and distribution issues within a $3 billion wine supplier network (our client wouldlike to remain anonymous).

This simulation provides the ability to investigate improved service strategies to their 500 retail outletsbased on new inventory management and supply methods. The system provided a direct comparison of current state to potential future scenarios and forecast the storage capacity requirements at thedistribution centers in terms of racking, dock space, and staffing requirements.

The resultant simulation allows users to conduct 'what-if' analysis around increased product demand andassess the limits of the current supply network.

Pharmaceutical Company - Case Study

A warehouse simulation for a large pharmaceutical company (our clientwould like to remain anonymous) was developed to provide a detailed analysis of all their automatedwarehouse materials handling. This includes the inflow of materials from receiving docks to palletizedASRS storage through to the shipping of finished product on containers out of the warehouse.

The resultant simulation model was used to analyze the bottleneck processes in the system to handleincreased production volumes. The ability to quickly analyze the entire system and its interdependenciesusing this simulation model led to an increase in materials handling capacity of 20% through theaddition of AGV's.

Push Vs. Pull Inventory Management - Case Study

Visual8 assisted NIBCO in their use of simulation to evaluate the feasibilityand cost-benefit of implementing a pull rather than a push inventory supply chain system. Simulating thisradical change to the distribution system of copper products the tool identified how parts could be stagedat levels of competition reduce manufacturing lead times and inventory in the field.

The model was used to analyze which parent products could be staged, at what stage in themanufacturing cycle to satisfy downstream requirements. Replenishment points and order quantities forstaged product were established through the simulation, given the variability of demand, in order to


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maintain high order service levels but minimize inventory investment.

Rail Network Modeling - Case Study

Visual8 Corporation has worked with a major North American railroad (ourclient would like to remain anonymous) to develop a simulation model of their entire parts supply network.This computer model takes into account geographic locations of the many source and supply points in thesystem together with the frequency of stock replenishments and product demand levels.

By taking into account transportation travel times and costs across the network, product consumptionrates and reordering policies, holding charges, truck-load (TL) and less-than-truck-load (LTL) policies,order consolidation rules, milk-runs, and other key parameters, the simulation provides performanceresults over a years operation. The tool was used to support the rationalization of stocking levels andwarehousing location for supplies across the network in support of reducing costs for the railroad'smaintenance operations.

LOGISTICS MODELING SIMULATIONBENEFITS

Typical Logistics Models: Rail and Shipping Traffic flow management Warehouse and inventory management Supply chain analysis

Types of Problems We Resolve: Service strategies and forecasting Capacity and bottleneck analysis Pull vs. push inventory management Intermodal interfacing

We Can Ensure Your Goals Are Met: Optimization of Service Levels and Resources Maximizing your ROI Integrating all stages of the supply chain


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Redhead have proved themselves to be a professional and reliable service provider consistently meetingour requirements for the delivery of time-sensitive productsNicky George, National Operations Manager, Mirror Group Newspapers.

High praise indeed, but then with daily experience of working with live news, 25 years of working withpublishers, printers and clients AND moving around 450 tonnes of print into Ireland each week, its what ourcustomers have come to expect.

Because with experience comes trust; and trust is something you cannot put a value on. At Redhead wehave developed the perfect print logistics solution.

15,000 sq.m of modern, racked warehousing not only offers you bulk stockholding and collation facilities, but

our stringent stock management procedures enable us to take in stock from a number of sources anddespatch complex, multiple consignments to any numberof destinations.

uperb engineering and flawless manufacturing areamong the great strengths of German automakerBMW Group. So the company's announcement in

late 2001 was extraordinary: BMW had turned to an

outsider, Magna Steyr, manufacturer of power trainsand other automotive systems, for much of theengineering and all of the production of the X3, a"sports activity vehicle" that BMW expects to launch in2004. Magna will construct a plant in Graz, Austria,where it will turn out 300 X3s a day.

In essence, BMW has found a partner to take over afunction that was considered the very core of whatBMW is as a company. This was possible through theintegration of its so-called "customer-oriented sales andproduction system" into the production process of an

outside company. Thus all customer-relevant aspects of a BMW can be deliveredto the consumer.

That BMW would turn over such a vital link in its supply chainto another company is dramatic evidence that supply chainmanagement, long regarded as necessary drudgery, hasbecome a strategic opportunity. Not only can it givecompanies new options for reducing costs and improving


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asset utilization, but it can also drive growth and improve customer satisfaction.

Global markets, the proliferation of products with shorter lifecycles, and risingcustomer expectations have combined to create new opportunities that requiremore sophisticated, complex and global supply chains. And at many companies,some of the most creative minds are working on reconfiguring the supply chain, acritical exercise that demands the attention of executives all the way up to theCEO.

Fundamental to this creative thinking is that less is more when it comes tokeeping the critical links of the supply chain in-house. A host of activities, fromsourcing and procurement to manufacturing, logistics and service management,can now be provided more effectively, flexibly and efficiently through specializedthird-party providers. Like BMW, other astute companies are calling on outsidersto become essential links in that 40 percent to 70 percent of the organization thatcomprise the end-to-end supply chain.

The Art of Partnering Executives who will deal best with overhauling theirtraditional supply chain operations are those who are comfortable with increasedspecialization. Each product group within the organization could end up with itsown supply line, creating a series of links weaving inside and outside of thecompany. Winning companies will be the ones that can visualize their supplychains as complex, sophisticated, evolving, frequently mutating networks ofpartners. The art of partnering will largely determine which companies succeed.

Consider how some cutting-edge companies have led the way in forging newsupply chain models:

Another example is Microsoft. It has created a new game console, the Xbox,which competes head-to-head with the Sony PlayStation. But the giant softwarecreator is not making the new product itself. Instead, it has partnered withcontract manufacturer Flextronics, which collaborated on the Xbox design andhandles the product's manufacturing.


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How do senior executives apply this type of revolutionary thinking to their owncompanies? We begin with the premise that every company will benefit from

fundamentally rethinking its supply chain link by link and reconstructing it fromscratchbut without any factories, distribution centers or warehouses that itowns or has relationships with. Leadership needs to ask: What would the idealsupply chainthe one that would deliver additional revenues, slash costs andgenerate substantially greater efficiencieslook like?

The answers will vary, of course, from industry to industry, company to companyand even year to year. But as executives go through this tough-minded exercise,they should keep several principles in mind.

Let Go of the Past Historically most supply chains in the United States have been do-it-yourselfoperations. Typical corporate practice has been to control product and serviceflows to customers by owning the means of production and distribution, includingfactories, warehouses and trucks. As a result, as recently as 10 years ago, only10 percent to 15 percent of US supply chain assets were owned and operated byoutsiders.

On the other hand, in Europe the fragmented nature of the market fostered astronger tradition of subcontracting, particularly for logistics and transportation(which were especially affected by country-specific tariff and tax structures, andby customs and other government regulations). However, there were fewoutsourcing alternatives from which to choose.

In both the United States and Europe, supply chains were considered costcenters. In fact, that's the way many executives continue to think of them. Thisleads managers into the efficiency trap, the delusion that the only way you canimprove performance is to shave a little more off your costs. Companies can gointo a death spiral trying to economize themselves into prosperity by trimminghere and there to fix a link that may not be worth the effort.

Leadership needs to assess whether the organization is best positioned to makemoney from its assets or to get more, for less, from somewhere else. Althoughreconfiguring your operationswhich ultimately will affect significant numbers ofpeople and involve well-established investmentsis no easy task, yourcompetition could be making plans already with a partner that's the best in thebusiness.

At times, the rigorous, unsentimental evaluation of the supply chain will lead tothe conclusion that a particularly strong link should be turned into a profit center.For example, Cat Logistics, a subsidiary of Caterpillar that distributes its engines,


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power trains and other spare parts to remote places around the world, providesthe same service for Land Rover and other companies too.

Walk a Mile in Your Customer's Shoes Sound familiar? Nonetheless, it's worth revisiting in the context of the supplychain. Stand at the end of the chain and look back at it from your customer'sperspective. Are you reaching the customer in every way you can? Do yourdistribution channels support one another as fully as they can? Are you targetingnew services that add value for your customers?

For example, buyers of GE refrigerators, dishwashers, air conditioners and otherappliances traditionally purchase them at big retail outlets that warehouse anddeliver the goods to customers. But in 2000 GE agreed to partner with The HomeDepot, which would displaybut not warehouse or deliverthe appliances. Aftera customer orders a refrigerator at a Home Depot, GE ships it directly to thecustomer's home. The resulting inventory savings are enormous. Moreover,because the giant retailer doesn't have to stock the appliances, it can display afar greater variety of GE models.

Unpredictability is the norm in the cement business, with half of all orders fromconstruction sites rescheduled or canceled. But one cement company turned thisto its advantage. Embracing information technology such as GPS locators andsatellite communications, the company cut its fleet of trucks by one-third whileguaranteeing a delivery window of 20 minutes (down from three hours)aunique service for which customers are happy to pay a premium.

Team with the Best Until recently, there were limited options for companies looking to hand offimportant supply chain functions. However, there is an emerging sector of theeconomy that provides contract services for everything from design and logisticssupport to repair management and procurement.

One category of companies that barely existed a decade ago is known as

electronic manufacturing services. Flextronics, the partner Microsoft turned to forits Xbox project, has manufacturing operations in 28 countries. The companyproduces cell phones for Ericsson, routers for Cisco Systems, printers forHewlett-Packard Company and PDAs for Palm. (As of mid-April 2002, with 11percent of the electronic services market, Flextronics was number two in thesector, behind Solectron, which had a 17 percent share.)

Picking the best partner from the multitude now available can require you tostretch your imagination and perhaps make an unexpected choice. Rather thancompete head-to-head in the unforgiving online retail environment, Toys "R" Us


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and Amazon.com inked an arrangement in August 2000 that capitalizes on eachcompany's strengths. Toys "R" Us focuses on merchandising while Amazon.com

draws on its Internet expertise to provide website development, customer serviceand order fulfillment capabilities. It took only a matter of months and minimalupfront costs for the partnership to be up and running in time for that year'slucrative holiday season.

A perhaps more painful dilemma: Choosing the right partner can sometimesmean acknowledging that the best option is your direct competitor. Nestl, thegiant food and beverages conglomerate, competes with Ocean SprayCranberries in the fruit juice business. Nonetheless, the two companies haveformed a strategic alliance along part of their supply chains. Nestl will eventuallymove the manufacturing of Libby's Juicy Juice and Kern's/Libby's Nectars toOcean Spray plants. The goal is to reduce purchasing and distribution costs forboth companies.

The number of possible partnerships across the supply chain is seeminglyendless, ranging from the simple and short-lived to the complex and long-term.To deal with the complexities of forming multiple, overlapping and continuouslyevolving partnerships, some companies might want to create a C-level positionlike chief risk officer or chief relationship officer to oversee their formation. Afterall, some of these relationships will be crucial to business, acting as the eyes andears or arms and legs to customers and suppliers around the world.

Allow Technology to Set You Free One of the reasons executives like to hold on to all the links of the supply chain isthat it is reassuring to be able to shout instructions down a corridor and get animmediate response. Asia, for example, is a long way offor used to be. TheInternet, mobile devices and attendant software have made it possible forcompanies to stay in constant touch with their partners in real time, no matterhow widely scattered around the globe.

A second reason is that executives are reluctant to share

information that traditionally has been considered sensitiveand proprietary. But recent improvements in Internet securitysoftware, secure networks and other technologies have easedconcerns for some. For others, it will require a morefundamental culture shift, driven from the top, to unlock thebenefits of exchanging information across supply chainpartners.

Consider some examples of companies leveraging technology and information toimprove supply chain responsiveness and efficiency. In the fast-moving high-tech


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industry, data communications hardware and software maker Adaptec relies onthe Internet for its collaborative design processes, which it uses to link its

California-based designers with suppliers in Hong Kong, Japan and Taipei. Thisprocess has cut design-to-delivery cycles by more than 50 percent and saved$10 million in inventory costs.

Zara's innovative use of technologyequipping all of its store managers withhandheld devicesallows managers to provide real-time feedback to thedesigners about what customers are buying. The garment maker introduces anastonishing 12,000 new designs a year while aggressively managing inventoryobsolescence.

In the days following the September 11 terrorist attacks, Dell ComputerCorporation relied on its Web-enabled supplier network to adapt quickly to supplychain disruptions. The company increased production at its factories in Europeand Asia and filled orders from these facilities. In addition, Dell was able to seeits pending orders and fulfill the most important first. At the same time, customerservice representatives could determine which computer configurations could stillbe assembled quickly, and were able to steer new customers accordingly.

Think Differently About the Supply Chain Today CEOs have market opportunities their predecessors could only dreamabout. Supply chain operations are no longer a givenan inherited operatingmodel with few alternatives for improvement. Companies have many more tools,practices and capabilities available to respond to market opportunities. Byassembling best-in-class partners and leveraging leading-edge technologies, aninnovative idea can go from drawing board to market launch in months.

As an increasing number of world-class companies reevaluate their supplychains, breaking them apart and picking partners with which to reconfigure them,the question inevitably arises: Are there dangers in reconstructing a familiarsupply chain that appears to have functioned well for decades? Certainly.

When you team with a partner, you run some risk of losing proprietaryinformation, failing because of misunderstandings and cultural mismatchesbetween partners, or eliminating an internal link that should not have been castaside. But the much greater risk emerges when a company neglects toreevaluate its supply chain, link by link, as a strategic opportunitywhile thecompetition moves ahead with innovative partnerships. Increasingly, the ability tosense and respond rapidly to the market through flexible, high-performing supplychains will be a competitive weapon for any organization looking to change thegame and lead the market.


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McDonalds India Supply Chain: Enhanced reading

Prof. G. pherwani SCMLD july-dec 2009

Supply Chain is one of the critical factors for the smooth functioning of any business. And

when we are talking about fast food business with McDonalds as the subject of the study itcan be expected a Supply Chain model of one of the highest precisions. It is this unmatched

Supply Chain Structure, which not just ensures on time delivery of raw materials and supplies

to McDonalds but also enables it to cut down on its cost and maximize profitability along with

maintaining highest quality standards of its products. The level of commitment of McDonaldscan be gauged from the fact that even before it set up its first restaurant in the country it

infused Rs 400 Crore to set up its delivery mechanism. McDonalds initiative to set up an

efficient supply chain and deploy state-of-art technology changed the entire Indian fast food

industry and raised the standards of performance to international levels.

As already mentioned, McDonalds had been working on its supply chain even before it opened

its first joint in the country. McDonalds, an international brand which was trying to make

inroads into the country, developed its Indian partners in such a manner that they stayed withthe company from the beginning. The success of McDonalds India was achieved by sourcing all

its required products from within the country. To ensure this, McDonalds developed local

businesses, which can supply it highest quality products. Today, McDonalds India works with

38 different suppliers on a long-term basis and several other stand alone restaurants for itsvarious other requirements. McDonalds distribution centers in India came in the following

order: Noida and Kalamboli (Mumbai) in 1996, Bangalore in 2004, and the latest one in

Kolkata (2007). McDonald's entered its first distribution partnership agreement with RadhaKrishna Foodland, a part of the Radha Krishna Group engaged in food -related servicebusinesses. The association goes back to July 1993, when it studied the nuances of

McDonald's operations and requirements for the Indian market. As distribution centers, the

company was responsible for procurement, the quality inspection program, storage, inventory

management, deliveries to the restaurants and data collection, recording and reporting. Value-added services like shredding of lettuce, re-packing of promotional items continued since then

at the centers playing a vital role in maintaining the integrity of the products throughout the

entire 'cold chain'.

Cold Chain was one of the unique concepts of McDonalds supply chain in India, on which it had

spent more than six years to get the system into place. This system brought about a veritable

revolution, immensely benefiting the farmers at one end and enabling customers at retail

counters get the highest quality food products, absolutely fresh and at great value. Through

its unique cold chain, McDonalds has been able to both cut down on its operational wastage,

as well as maintain the freshness and nutritional value of raw and processed food products.

This has involved procurement, warehousing, transportation and retailing of perishable food

products, all under controlled temperatures. The following list of suppliers, who build up the

major supply chain of McDonalds, reveal how this Cold Chain works and contributes towards

the efficiency of McDonalds.


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Dynamix Dairy Industries (Supplier of Cheese):

Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a

network of milk collection centers equipped with bulk coolers. Easy accessibility has enabled

farmers augment their income by finding a new market for surplus milk. The factory has:

Fully automatic international standard processing facility. Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose,

casein & whey protein and humanized baby food.

Stringent quality control measures and continuous Research & Development

From farm two degrees Celsius in 90 minutes is the first step to quality. For example, the Rs262-crore Dynamix Dairy Industries, located in Baramati in Pune district of Maharashtra,

manufactures cheese slices for McDonalds at 10 metric tonnes per month. Dynamix hashelped set up 15 bulk cooling centers throughout the district from which it purchases milk.

Each cooling center, which is equipped with modern measuring and testing equipment and alarge cooling tank, is not more than a few kilometers away from local dairy farms. A farmer

can deliver milk even twice a day on his bicycle and get a printed receipt on the spot, which

also lists the quality of the milk supplied by him as per fat content, color and solids content. If

the milk is sub-standard or adulterated, it is rejected on the spot. A batch of milk can varyfrom one liter to 10 liters, or more. Each batch is mixed in one large stainless steel cooler and

chilled immediately to two degrees Celsius to stop bacterial growth and preserve freshness.

From this point onwards, until just before the burger is actually served in a McDonalds

restaurant hundreds of kilometers away, the temperature is never allowed to increase. When

the refrigerated milk arrives at the Dynamix plant at Baramati, the milk in every single tanker

is thoroughly tested and rejected if found sub-standard, adulterated or contaminated. The

sophisticated testing lab can check fat content with an accuracy of 0.1 per cent. It can even

detect minute traces of pesticides or antibiotics administered to cows. This instant feedback

and the rejection of the entire tanker-load forces farmers to follow the best practices in terms

of animal husbandry, use proper feeds, cut down on the indiscriminate use of pesticides and

animal medicines and completely stop even the slightest attempts at adulteration.

Trikaya Agriculture (Supplier of Iceberg Lettuce):

Implementation of advanced agricultural practices has enabled Trikaya to successfully growspecialty crops like iceberg lettuce, special herbs and many oriental vegetables. Farm

infrastructure features:

A specialized nursery with a team of agricultural experts. Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant. Pre-cooling room and a large cold room for post harvest handling. Refrigerated truck for transportation.


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Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald's India, is one suchenterprise that is an intrinsic part of the cold chain. Exposure to better agricultural

management practices and sharing of advanced agricultural technology by McDonald's hasmade Trikaya Agriculture extremely conscious of delivering its products with utmost care and

quality. Initially lettuce could only be grown during the winter months but with McDonald'sexpertise in the area of agriculture, Trikaya Farms in Talegaon, Maharashtra, is now able to

grow this crop all the year round. McDonald's has provided assistance in the selection of highquality seeds, exposed the farms to advanced drip-irrigation technology, and helped develop a

refrigerated transportation system allowing a small agri-business in Maharashtra to provide

fresh, high-quality lettuce to McDonald's urban restaurant locations thousands of kilometers

away. Post harvest facilities at Trikaya include a cold chain consisting of a pre-cooling room toremove field heat, a large cold room and a refrigerated van for transportation where the

temperature and the relative humidity of the crop is maintained between 1 C and 4 C and

95% respectively. Vegetables are moved into the pre-cooling room within half an hour of harvesting. The pre-cooling room ensures rapid vacuum cooling to 2 C within 90 minutes.

The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay

between harvesting, pre-cooling, packaging and cold storage. With this cold chain

infrastructure in place, Trikaya Agriculture has also a plan to export this high value product to

other international markets, especially to McDonald's Middle East and Asia Pacific operations.

McDonald's expertise in packaging, handling and long-distance transportation has helped

Trikaya to do trial shipments to the Gulf successfully. In addition to export, McDonald's

assistance has enabled Trikaya Agriculture to supply this crop to a number of star-rated

hotels, clubs, flight kitchens and offshore catering companies all over India.

Vista Processed Foods Pvt. Ltd. (Supplier of Chicken and Vegetable range of products including Fruit Pies)

A joint venture with OSI Industries Inc., USA, McDonald's India Pvt. Ltd. and Vista Processed

Foods Pvt. Ltd., produces a range of frozen chicken and vegetable foods. A world-class

infrastructure at their plant at Taloja, Maharashtra, has:

Separate processing lines for chicken and vegetable foods. Capability to produce frozen foods at temperature as low as -35 Degree Cel. to retain

total freshness.

International standards, procedures and support services.

Vista Processed Foods Pvt. Ltd., McDonald's suppliers for the chicken and vegetable range of

products, is another important player in this cold chain. Technical and financial support

extended by OSI Industries Inc., USA and McDonalds India Private Limited have enabled Vistato set up world-class infrastructure and support services. This includes hi-tech refrigeration

plants for manufacture of frozen food at temperatures as low as - 35 C. This is vital to ensure

that the frozen food retains it freshness for a long time and the 'cold chain' is maintained. The

frozen product is immediately moved to cold storage rooms. With continued assistance fromits international partners, Vista has installed hi-tech equipment for both the chicken and

vegetable processing lines, which reflect the latest food processing technology (de-boning,


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blending, forming, coating, frying and freezing). For the vegetable range, the latest vegetable

mixers and blenders are in operation. Also, keeping cultural sensitivities in mind, both

processing lines are absolutely segregated and utmost care is taken to ensure that thevegetable products do not mix with the non-vegetarian products. Now, at Vista, a very wide

range of frozen and nutritious chicken and vegetable products is available. Ongoing R&D, bothlocally and in the parent companies, work towards innovation in taste, nutritional value and

convenience. These products, besides being supplied to McDonald's, are also offered toinstitutions like star-rated hotels, hospitals, project sites, caterers, corporate canteens,

schools and colleges, restaurants, food service establishments and coffee shops. Today,

production of better quality frozen foods that are both nutritious and fresh has made Vista

Processed Foods Pvt. Ltd. a name to reckon within the industry.

Radhakrishna Foodland (Distribution Centers for Delhi and Mumbai)

An integral part of the Radhakrishna Group, Foodland specializes in handling large volumes,

providing the entire range of services including procurement, quality inspection, storage,

inventory management, deliveries, data collection, recording and reporting. Salient strengths

are :

A one-stop shop for all distribution management services. Dry and cold storage facility to store and transport perishable products at

temperatures up to -22 Degree Cel.

Effective process control for minimum distribution cost.

McDonald's local supply networks through Radhakrishna Foodland, which operates distribution

centers (DCs) for McDonald's restaurants in Mumbai and Delhi. The DCs have focused all theirresources to meet McDonald's expectation of 'Cold, Clean, and On-Time Delivery' and plays a

very vital role in maintaining the integrity of the products throughout the entire 'cold chain'.

Ranging from liquid products coming from Punjab to lettuce from Pune, the DC receives items

from different parts of the country. These items are stored in rooms with different

temperature zones and are finally dispatched to the McDonald's restaurants on the basis of

their requirements. The company has both cold and dry storage facilities with capability to

store products up to -22 C as well as delivery trucks to transport products at temperatures

ranging from room temperature to frozen state.

Amrit Food (Supplier of long life UHT Milk and Milk Products for Frozen Desserts)

Amrit Food, an ISO 9000 company, manufactures widely popular brands

Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh.

The factory has:

State-of-the-art fully automatic machinery requiring no human contact with product,for total hygiene.


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Installed capacity of 6000 ltrs/hr for producing homogenized UHT (Ultra HighTemperature) processed milk and milk products.

Strict quality control supported by a fully equipped quality control laboratory.

All suppliers adhere to Indian government regulations on food, health and hygiene while

continuously maintaining McDonald's recognized standards. As the ingredients move fromfarms to processing plants to the restaurant, McDonald's Quality Inspection Program (QIP)

carries out quality checks at over 20 different points in the Cold Chain system. Setting up of

the Cold Chain has also enabled it to cut down on operational wastage

Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety thatemphasizes prevention within its suppliers' facility and restaurants rather than detection

through inspection of illness or presence of microbiological data. Based on HACCP guidelines,

control points and critical control points for all McDonald's major food processing plants andrestaurants in India have been identified. The limits have been established for those followedby monitoring, recording and correcting any deviations. The HACCP verification is done at least

twice in a year and certified.

The relationship between McDonald's and its Indian suppliers is mutually beneficial. AsMcDonald's expands in India, the supplier gets the opportunity to expand his business, have

access to the latest in food technology, exposure to advanced agricultural practices and the

ability to grow or to export. There are many cases of local suppliers operating out of small

towns who have benefited from their association with McDonald's India.


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LOGISTICS AT Wal-Mart

Many people wonder how Wal-Mart is able to charge such low prices and continue tomake a profit. There are several factors in their business model that contribute tothis ability, but a big one is their ability to adapt to an ever-changing globalmarketplace. Some criticize Wal-Mart's efforts to deliver to their customers a qualityproduct at low prices, but in reality, Wal-Mart has been able to deliver low prices bybeing efficient. This efficiency is present in several areas but one of the mostimportant places is how they are able to manufacture products all over the world andget them to retail outlets, which are also all over the world. This ability requires aflawless logistical system that allows product to be shipped anywhere at a momentsnotice.


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Wholesaling g.pherwani

Wholesaling consists of the sale of goods/merchandise to retailers , to industrial,commercial, institutional, or other professional business users or to other wholesalers and related subordinated services.

According to the United Nations Statistics Division, Wholesale is the resale (sale withouttransformation) of new and used goods to retailers, to industrial, commercial, institutionalor professional users, or to other wholesalers, or involves acting as an agent or broker inbuying merchandise for, or selling merchandise, to such persons or companies.Wholesalers frequently physically assemble sort and grade goods in large lots, break bulk, repack and redistribute in smaller lots. Examples include: pharmaceuticals storage;refrigeration; delivery and installation of goods; engaged sales promotion for customers

and label designCash and carry wholesale represents a type of operation within the wholesale sector. Itsmain features are summarized best by the following definitions:

Cash and carry is a form of trade in which goods are sold from a wholesale warehouse operated either on a self-service basis, or on the basis of samples (withthe customer selecting from specimen articles using a manual or computerizedordering system but not serving himself) or a combination of the two. Customers(retailers, professional users, caterers, institutional buyers, etc.) settle the invoiceon the spot and in cash, and carry the goods away themselves.

Though wholesalers buy primarily from manufacturers and sell mostly toretailers, industrial users and other wholesalers, they also perform many valueadded functions, including selling and promoting, buying and assortmentbuilding, bulk-breaking, warehousing, transporting, financing, risk-bearing,supplying market information, and providing management services. (OECD -Organization for Economic Cooperation and Development) .

There are significant differences between "classical" sales at the wholesale stageand the cash and carry wholesaler: These differences are based in particular onthe fact that customers of the cash and carry wholesaler arrange the transport of

the goods themselves and pay the goods in cash and not on credit. (EUCommission Decision (Kesko/Tuko) of November 20, 1996 (97/277/EC)) .

In a retail context, the term has a similar meaning: customers pay cash for the goods theypurchase (the retailer does not offer credit accounts) and carry them away themselves (theretailer does not offer delivery service).


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Historic meaning

The policy of cash and carry established at the onset of World War II in 1939 revisedthe Neutrality Acts that were established by US President Roosevelt in order to instill asense of neutrality between the United States and the war that was raging in Europe. Theeconomic situation in the US was rebounding at this time (after the great depression ) butthere was still a need for industrial manufacturing jobs. The Cash and Carry programhelped to solve this issue and in turn the US benefited through the sale of war supplies totheir allies. This also helped in making sure that the US didn't give away all its suppliesand rations .

This program was also beneficial for the British and French who were not faring well inresponse to Germany's militarism and were in need of war materials. Any allied ship thatcould make the risky trip across the North Atlantic to US coastal ports could get warmaterials for cash.

Despite its success, this policy soon left European allies (primarily Britain) bankrupt andthis forced US leaders to revise the plan. The revised plan is known as the Lend-Lease program, in which the European allies no longer had to pay cash or arrange their owntransportation. Instead, the United States would provide this for them and later paymentwas expected.

In keeping with the Monroe doctrine the US didn't actively participate in the war untilboth Japan and Germany declared war on them too, after which they switched from alliedassistance to active engagement

Multi-national

Auchan


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Barnes & Noble (Books, Music, Videos, Magazines) Best Buy (Music, Videos, Electronics, Computer Software, Appliances) Borders (Books, Music, Videos) Carrefour Cora Costco (merged with Price Club ) (Groceries, General Merchandise) Hipercor Home Depot (Hardware) IKEA (Furniture, House wares) Kmart (owned by Sears) (Groceries, General Merchandise)

o Big Kmart (Groceries, General Merchandise)o Super Kmart (Groceries, General Merchandise)o Sears Grand (Groceries, General Merchandise)o Sears Essentials (Groceries, General Merchandise)

OBI Office 1 Office Depot (Office Supplies) Pet Smart (Pet Supplies) Price Smart Real (owned by METRO AG ) Staples, Inc. (Office Supplies, Office Equipment) Target (General Merchandise) Toys "R" Us (Toys) Wal-Mart (Groceries, General Merchandise)

o Wal-Mart Supercenter (Groceries, General Merchandise)o Sam's Club (Groceries, General Merchandise)

The Warehouse Group o Red Sheds (New Zealand )o Yellow Sheds (Australia )

India

Star India Bazaar (owned by the Tata Group ) Big Bazaar (owned by the Pantaloon Retail ) max hyper market (owned by the landmark group ) Reliance Retail Giant Vishal Mega mart Citi Mart Bharati-Wal_mart Metro Cash & Carry, Hyderabad A warehouse is a commercial building for storage of goods. Warehouses are used

by manufacturers , importers , exporters , wholesalers , transport businesses,customs , etc. They are usually large plain buildings in industrial areas of citiesand towns. They come equipped with loading docks to load and unload trucks; orsometimes are loaded directly from railways , airports , or seaports . They also often


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have cranes and forklifts for moving goods, which are usually placed on ISOstandard pallets .

Some warehouses are completely automated , with no workers working inside.The pallets and product are moved with a system of automated conveyors andautomated storage and retrieval machines coordinated by programmable logiccontrollers and computers running logistics automation software. These systemsare often installed in refrigerated warehouses where temperatures are kept verycold to keep the product from spoiling, and also where land is expensive, asautomated storage systems can use vertical space efficiently. These high-baystorage areas are often more than 10 meters high, with some over 20 meters high.

The direction and tracking of materials in the warehouse is coordinated by theWMS, or Warehouse Management System , a database driven computer program.The WMS is used by logistics personnel to improve the efficiency of thewarehouse by directing putaways and to maintain accurate inventory by recordingwarehouse transactions.

Traditional warehousing has been declining since the last decades of the 20thcentury with the gradual introduction of Just In Time (JIT) techniques designed toimprove the return on investment of a business by reducing in-process inventory .The JIT system promotes the delivery of product directly from the factory to theretail merchant or from parts manufacturers directly to a large scale factory suchas an automobile assembly plant, without the use of warehouses. However, withthe gradual implementation of offshore outsourcing and off shoring in about thesame time period, the distance between the manufacturer and the retailer (or theparts manufacturer and the industrial plant) grew considerably in many domains,necessitating at least one warehouse per country or per region in any typicalsupply chain for a given range of products.

Recent developments in marketing have also led to the development of warehouse-style retail stores with extremely high ceilings where decorativeshelving is replaced by tall heavy duty industrial racks, with the items ready forsale being placed in the bottom parts of the racks and the crated or palletized andwrapped inventory items being usually placed in the top parts. In this way thesame building is used both as a retail store and a warehouse.

Drop shipping is a supply chain management technique in which the retailer doesnot keep goods in stock, but instead transfers customer orders and shipmentdetails to wholesalers , who then ship the goods directly to the customer. Theretailers make their profit on the difference between the wholesale and retailprice.

Procedure Some drop shipping retailers may keep "show" items on display in stores , so that

customers can inspect an item similar to those that they can purchase. Otherretailers may provide only a catalogue or website .

Retailers that drop ship merchandise from wholesalers may take measures to hidethis fact to avoid any stigma, or to keep the wholesale source from becoming


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widely known. This can be effected by "blind shipping" (shipping merchandisewithout a return address), or "private label shipping" (having merchandiseshipped from the wholesaler with a return address customized to the retailer). Acustomized packing slip may also be included by the wholesaler, indicating theretailer's company name, logo, and/or contact information.

Small business Drop shipping can occur when a small retailer who typically sells in small

quantities to the general public receives a single large order for a product . Ratherthan route the shipment through the retail store, the retailer may arrange for thegoods to be shipped directly to the customer.

Sam's Club

Type Subsidiary of Wal-Mart

Founded 1983 (Midwest City, Oklahoma )

Headquarters Bentonville, Arkansas

Industry Retail (Warehouse Club)

Products Produce, meat, seafood, fresh baked

goods, flowers, clothing, books,software, home electronics, clothing jewelry, art, optical and furniture

Website http://www.samsclub.com

Sams Club

History


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The first Sam's Club opened in April 1983 in Midwest City , Oklahoma in the UnitedStates

Sam's Club is named after the founder of Wal-Mart , Sam Walton . To purchase itemsfrom Sam's Club, one must purchase a membership. Many Sam's Club customers aresmall businesses that wish to offer customers a limited selection of food without theexpense of having it delivered.

In 1993, Wal-Mart acquired PACE Membership Warehouse and converted many (but notall) PACE locations into Sam's Clubs.

Membership is required to purchase at Sam's Club; however, a onetime day pass may beobtained from Sam's Club.com or many Wal-Mart newspaper ads. A 10% surcharge isadded to the prices for non-members. No membership (with no surcharge) is required forOptical, Pharmacy, or Cafe (as available per club), or to purchase alcohol.

The latest flagship store opening as of September 28 , 2006 was in Bentonville, Arkansas .It is the second largest Sam's Club store; its largest is located in Utica, Michigan , withover 145,000 sq. ft. of retail space.

Sam's Club ranks second in sales volume among warehouse clubs, behind Costco .

After Costco's announcement on its change of return policy for consumer electronics(now within 90 days) beginning on February 26, 2007, Sam's Club finds itself now to betied with Nordstrom for having best, most liberal return/refund policy in the retailbusiness.

In 2006, Wal-Mart acquired The Central American Retail Holding Company (CARHO),which operates "ClubCo" stores in Latin America. These stores are very similar to Sam's.

Design

A Sam's Club store in Maplewood, MO, a suburb of St. Louis.


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Like other warehouse clubs, most merchandise sold at Sam's Club is sold in bulk anddirectly off pallets . Clubs are arranged much like a warehouse , with merchandise stockedin warehouse-style steel bins. There are currently 551 Sam's Clubs in the United States .Each club averages 128,000 square feet (3 acres) (12,000 m) (1.2 ha). The Sam's Clubdivision of Wal-Mart Stores, Inc. had total sales revenue of USD$ 37.1 billion for fiscalyear ending January 31 , 2005 . There are also clubs operated internationally under theInternational Division of Wal-Mart Stores in Brazil , Canada , China , Mexico , and PuertoRico . Their current primary competitor is Costco . Sam's Club markets items under theprivate labels Member's Mark, Bakers & Chefs, and Sam's Club.

Payment Options

Until recently, Sam's Club only accepted cash, PIN-based debit cards, the Wal-Mart

Credit Card, Sam's Club Credit Card, or Discover Card (Sam's Club and Wal-Mart bothalso offer a Discover Card). Despite several tests over the years, Sam's Club did notaccept Visa or MasterCard because of high processing fees. Likewise, Sam's does notaccept American Express , likely due to the fact that rival Costco has an exclusiveacceptance agreement with American Express. However, on November 9th, 2006, Sam'sClub began accepting MasterCard credit and signature debit cards. Sam's Club alsoallows members to pay by using Visa signature debit cards (no PIN necessary); however,Sam's Club has accepted these cards for quite some time. It is not known if rival Costcowill follow suit.

Sam's Club Database

Sam's Club , a division of Wal-Mart Stores, Inc., is a warehouse club thatspecializes in selling to small businesses. A membership-based store, Sam'sClub offers goods and services for consumers and business owners as wellas affordable luxury merchandise. Sam's Club keeps prices low by sellingmerchandise in bulk and at very low profit margins.

The Sam's Club Database contains retail sales information gathered fromsales at Sam's Club stores.

The process used to gather this information begins with a Sam's Clubmember gathering all of the items they intend to purchase during thecurrent visit to Sam's Club. The member then proceeds to a register tocheck out. A Sam's Club associate scans the member's Sam's Club card, atwhich point a visit number (visit_nbr) is generated and stored in the storevisits table. The associate proceeds by scanning each item with a barcodereader. When all of the items have been scanned, summary information

about each individual type of product (i.e. 6 packages of soap) purchasedduring that visit is recorded in the item scan table. When payment istendered for items purchased on that visit, summary information for thetotal order (transaction time & date, amount spent, number of uniqueitems purchased, etc) is recorded in the store visits table. Other tables areused to store information about stores, products, and members.

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Membership Club Strategy Mix

Location:Isolated store or

secondary site

Merchandise:Moderate width and

poor depth of

assortment;low continuity

Prices:Very Low

Atmosphere/ Services:Very low

Promotion:Little;

some direct mail

prof. g. pherwani

prof. g. pherwani 14

Wal-Mart bharti Wal-Mart venture for wholesale

trading-Jobs factor NEW DELHI: World's biggest retailer

Wal-Mart is set to enter India by end-2008 in a equal (50:50) joint venturewith Sunil Bharti-promoted BhartiEnterprises for wholesale cash-and-carry business .

to establish the JV company Bharti Wal-Mart Pvt Ltd, for wholesale cash-and-carry and back-end supply chainmanagement operations. The secondagreement pertains to technologytransfer and training for Bharti's frontend retail operations .

The JV company would set up 8-15 cash-and-carry, or wholesale stores overseven years, which would sell groceries,consumer appliances and fruits andvegetables.

"The wholesale cash-and-carry businesswill cater not only to the organizedretailers but also to small kirana stores,fruit and vegetable resellers, restaurantsand retailers across India," BhartiEnterprises MD Rajan Mittal said hereon Monday, adding that stores will beopened in Tier II and Tier III townswhich are largely unserved.


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METRO Cash & Carry

Type Private

Founded 1964

Headquarters Dsseldorf , Germany

Key people Frans W.H. Muller, CEO

Industry Wholesale

Products Cash & Carry Stores

Revenue 29.9 billion (2006 )

Employees 100.000 ( 2006 )

Website www.metro-cc.com

METRO Cash & Carry is theinternational leader in self-service wholesale operatingacross Europe and in somecountries of Asia and NorthernAfrica. It is the largest salesdivision of the German tradeand retail giant METRO AG.

METRO Cash & Carry is differentfrom large retail chains such asBilla and Carrefour in that itsstores are primarily targetedtowards professional customersrather than end consumers. The

cash-and-carry concept is basedaround self-service and bulkbuying.


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Metro Cash & Carry wholesale outlet spread inan area of 1,00,000 square feet The self-service wholesale Cash & Carry launched its first distribution centre in AndhraPradesh at Moosapet in Hyderabad .

Spread over an area of 7 acre,the Rs 67 crore B2B distributioncentre in Hyderabad occupies a

selling space of 100,000 sq ftincluding a 20,000 sq fttemperature-controlled spaceto handle perishables, such asvegetables, fruits, dairy, meatand fish. The centre stocks arange of 18,000 products, 98%of which are sourced locally.Hyderabad centre is slated toachieve an annual turnover of Rs 300 crore. The centre hasalready registered about 75,000small and medium retailers,traders and other institutionalbusinesses as its customers.

Wholesaling

Mfrs. RetailersSupply information advise assortmentAbout mkt./product negotiateOrderNegotiate wholesaler promotionRisk taking sales forecast info.Own title finance

Break bulk handle protectionstorage security

transport


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Wholesaling defined

It includes all activities of channel members that sellproducts to retailers and organization customers [B-2-B and not B-2-C]-thye are dealing with businesscustomers only.

Retailers buy for resale It excludes manufacturers and farmers, who are

engaged in production & retailers who are selling Wholesale transactions are usually larger than retail

ones. They cover a larger trade area than retail. They are more efficient in performing tasks of selling

on a large scale.

Wholesaling Intermediaries

Includes not only wholesalers whoassume title to the goods theyhandle, but also agents and brokers,who conduct wholesaling activitieswithout taking title of the goods.

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Functions of WholesalingIntermediaries Creating Utility

Time utility Place utility Ownership/possession utility

Providing Services Wholesalers commonly provide marketing

services that reflect the basic marketingfunctions of buying, selling, storing,transporting, providing market information,financing, and risk taking

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Lowering Costs by Limiting Contacts Intermediaries that represent multiplesuppliers cut buying and selling costs andreduce transaction time

Firms can increase transaction efficiency byonly having to contact one or twointermediaries, rather than hundreds ofindividual suppliers

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They perform 9 tasks:1. Selling and promoting- sales force helps reach

many small business customers at lower costs-have more contacts-buyers trust them more than a distant manufacturer.

2. Buying and assortment building- able to select items-build needed assortment-save retailers considerable work.

3. Bulk breaking- achieve savings by buying in bulk and breaking into smaller units.

4. Warehousing- hold inventories-reduce stock costs &

obsolescence risks for both ends.5. Transportation- provide quicker deliveries due to

proximity

6.Financing- grant credit to retailers which manufacturer cant provide-finance suppliers by ordering early and paying timely.

7.Risk bearing- absorb risks by taking title, bearing the cost of theft damage spoilage and obsolescence.

8.Market information- provide information to suppliers and customers regarding competitors, new product development price levels and market activities.

9.Management services and counseling-help improve retailer operations by training sales clerks, helping


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prof. pherwani 7

McKesson is a leading health care service provider inpharmaceutical and medical-surgical supplymanagement, information solutions, pharmacyautomation and sales and market service to thehealthcare industry. It has unmatched depth, breadthand reach delivering unique cost saving and qualityimprovement solutions pharmacies, hospitals,physicians, extended care sites, payer sites andmanufacturers.

It maintains a strong presence on the Net through itswebsite www.mackesson.com offering access toinformation about every connected thing includinghealthcare software and order tracking. McKesson

Medical Imaging Group located in


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prof. pherwani 11

Numbers Orders per month- 1,090,000 Hospitals- 9,700 Pharmacists- 35,000 Chain drug stores 15,600 Warehouses 54[130 earlier], due to logistics Customers per month: 17,000 Average order size; $23,000

Average shipments: 2 per week,[ 3/day] Mis-picks cost: $82 to correct.

prof. pherwani 16

Biggest cost in pharmaceutical distribution isvariable labor costs associated with pick& placeactivity, besides fixed asset cost. This iscorrected by Six-Sigma approach.

Wal-Mart learning is they haven't allowed us togrow our costs and accuracy-they dont giveprice increases and are very demanding-andtaught us to be highly efficient.

A strong culture around process improvementand six-sigma teams can drive defects out ofthe process continuously-millions of doses per

day we deliver. Even small changes meanenhancement.IT isn't the driver it is the response.


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prof. pherwani 17

McKesson build relationships around thecountrys medical fraternity.

This field is not scalable so operationalvariability has to be reduced.

Distance between the best and the worst has tobe reduced.


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Trends Wholesaling is changing with the times. In the last

century wholesalers dominated not only Indian marketbut also US markets. Small producers and smallretailers need their services. In less developedeconomies they still dominate commerce.

Today many bypass wholesalers-large retailers takecontrol of their functions. E-commerce is makingeasier for producers and consumers to connectwithout any middle man. B2B sites are wholesale sitesin disguise-hidden in the channel and giving newvalues.

Progressive wholesalers are more concerned withtheir customers and channel members. They are usingtechnology and value chains bringing them closer intheir relationship.

Manufacturers have always the option ofbypassing wholesalers or replacing inefficientones. Their major complaints against themare:

1. dont aggressively promote the mfrs product line

2

cases in logistics

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