Rationalizing distribution system of double-edge

blades in Supermax

Group B01

LSCM Final Presentation

L&SCM Group B01 2

Conclusion

Recommendations

Optimization

Issues

Overview

Scope and Objectives

Agenda

L&SCM Group B01 3

Scope and Objectives Objective: Rationalizing distribution channel, optimizing costs

of production and distribution; reducing bullwhip effect

Scope: The Indian market (in terms of distribution) for Supermax double edge blades and production of these SKUs for sale in Indian markets will be studied. These blades are manufactured at three locations and each one has different manufacturing cost

Business Relevance: Optimized production of SKUs at plants

Optimized supply of SKUs from plants to C&F agents

Bullwhip reduction

L&SCM Group B01 4

Overview

Market size: INR 1500crore; CAGR: 11.5% (2004 to 2011)

Main market players

Supermax, Gillette, Topaz

Double Edge blades: Commoditized market, competition

majorly on price Overview:

Presence in 150 nationsMarket share: 60% in Indian double edged market3 plants (Gagret HP; Bhiwandi MH; Hyderabad AP)39 Warehouses or C & F Agents

51 double-edge blade SKUs produced at each plant

L&SCM Group B01 5

SWOT

Threats (Neutralize)

• Increasing competition• Gillette: P&G’s network• Unreliable C&FAs and SS

Strengths (Utilize)

• Large Volumes • Location of plants• Long experience• In house machine building

Weaknesses (Fix)

• Poor information flow• Low advertising• Improper forecasting• Poor tracking of material• Unable to attract good stockists etc

Opportunities (Exploit) • Reduction in number of SKUs• Rationalization of C&FAs• Better information sharing• Sales & demand tracking

L&SCM Group B01 6

Features of distribution network

MOTHER

DEPOTS

C&F Agents

Wholesale

Super Stockist

Sub-Stockist/ Large

Wholesalers

Small Retailers

Retail

Super Stockist

Distributors

Small Retailers

Future Supply Chain Group

Modern Trade

L&SCM Group B01 7

Pareto Analysis of SKUs

Fast moving Slow moving Negligible moving

No of SKUs 11 10 6

%age by volume 75% 20% 5%

% of all SKUs 40.74% 37.03% 22.22%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

0%

20%

40%

60%

80%

100%A

A0

1

AA

02

AA

02

C

AA

02

6P

AA

04

AA

04

B

AA

04

P

AA

07

P

AA

09

P

AA

10

0

AA

12

8

AA

12

9

AA

14

7

AA

16

7

AA

22

8

AA

22

9

AA

23

AA

23

7

AA

23

A

AA

24

3 C

AA

24

5

AA

24

6

AA

24

7

AA

26

4

AA

26

6

AA

27

8

AA

27

9

Pareto Chart - Double-Edge Yr 2011-12

SKU

Vo

lum

e in

10

00

pa

ck

ets

p.a

.

Cu

mu

lati

ve

%

[42]

L&SCM Group B01 8

SKUs of double edge blades studiedbased on all India sales revenue

AA04 SMX SALOON 50AA286 ZRK SP PLTAA284 ZRK SS S/PAA23 SMX ECO H/CAA51 ZORRIK SUPER ECO PACKAA04P SMX STAINLESS ECO 9+1 (PEAA53 DOLLAR SALOONAA305 ZORRIK SUPER STAINLESS DAA317 VIDYUT SUPER PLATINUM S/PAA07P SMX PET BOX (10+1)AA73 SAMRAT ECO(50) PACKAA285 ZRK PLTN ECOAA147 RISE SALOON PACK OF 50 BLAA129 RISE-ECO PACK OF 50 BLDS.AA264 D/E PLASTIC RAZOR + ZRK PAA328 SUPERMAX STAINLESS PLUSAA243 C VIDYUT SUPER PLATINUM 5 BAA287 ZRK SUP HCAA04B SALOON 50+2AA330 SUPERMAX STAINLESS PILLARAA128 THAMES-ECO PACK OF 50 BLDAA286B ZORRIK SUPER PLATINUM (10)AA09P Zorrik Super Platinum PetAA324 SMX Green Pet BoxAA286P ZORRIK SUPER PLATINUM (PEAA93a SUPERMAX STAINLESS PILLARAA59 SUPERSTAINLESS

L&SCM Group B01 9

Pareto Analysis of C&F Agents

0

1000

2000

3000

4000

5000

0.00%20.00%40.00%60.00%80.00%100.00%120.00%

Sal

es a

t C

&F

leve

l

C&F Agents

High turnover Low turnover Negligible turnover

No of C&Fs 9 5 2

%age by volume 75% 20% 5%

% of all C&Fs 52.94% 29.41 17.64%

L&SCM Group B01 10

Issues

High transit time for many SKUs

No optimized resource allocation at plants

Continuous production, inventory buildup

High Bullwhip Effect at CFA level

No sales tracking and retail sales estimates

Quantitative schemes to clear stock

No concrete demand forecasting mechanism

High down time; unreliable supply

Distribution & production: Not optimized

SKUs produced and dispatched on ad hoc basis

L&SCM Group B01 11

Optimizing :What to produce?Where to produce?From where to ship?

L&SCM Group B01 12

9%6%

5%

33%

48%

SMX

NORTH CENTRAL EAST WEST SOUTH

44%

6%14%

34%

2%

ZORIK PLT

NORTH CENTRAL EAST WEST SOUTH

47%

7%

39%

6% 1%

ZORIK STD

NORTH CENTRAL EAST WEST SOUTH

40%

7%12%

28%

13%

LOW END

NORTH CENTRAL EAST WEST SOUTH

Production-Demand mismatch

L&SCM Group B01 13

Plant Capacity

40000

40000

25000

Packets/per day

Thane Gagret Hyderabad

Plant Depots – 3CFA’s - 39

L&SCM Group B01 14

Production CostsINR per packet THANE GAGRET HYDERABAD

AA04 55.33 48.90 55.88AA286 55.43 49.00 55.99AA284 55.17 48.76 55.72AA23 55.08 48.69 55.63AA51 56.28 49.75 56.85

AA04P 62.29 55.06 62.91AA53 52.77 46.65 53.30

AA305 56.15 49.63 56.71AA317 55.49 49.05 56.05AA07P 67.82 59.94 68.49AA73 54.15 47.86 54.69

AA285 56.57 50.01 57.14AA147 53.09 46.93 53.62AA129 54.25 47.95 54.79AA264 153.23 135.45 154.77AA328 56.87 50.27 57.44

AA243C 56.08 49.57 56.64AA287 56.07 49.56 56.63AA04B 55.33 48.90 55.88AA330 55.15 48.75 55.70AA128 54.15 47.86 54.69

AA286B 55.43 49.00 55.99AA09P 67.42 59.59 68.09AA324 76.07 67.24 76.83

AA286P 55.43 49.00 55.99AA93a 55.35 48.92 55.90AA59 57.39 50.73 57.96

L&SCM Group B01 15

Transportation Costs (9MT)

INR / per packet from each plant to each CFA (result for 1 SKU)

AA04 (INR/ PKT)

From Mumbai

FromGagret

FromHyd

AP--HYDERABAD DEPOT Hyderabad 0.28 0.74 0.03

CENTRAL ---D.J. C & F AGENCIES, INDORE Indore 0.23 0.51 0.28

KAR---ASHOK AGENCY , BANGLORE Bangalore 0.36 0.98 0.15

KERALA---EXCEL MARKETING, COCHIN Cochin 0.51 1.23 0.28

TN---TAMILNDAU ASSOCIATES, CHENNAI Chennai 0.46 1.13 0.18

EAST2---PATLI PUTRA AGENCY, PATNA Patna 0.71 0.54 0.58

NORTH3----DEE AAR AGENCIES, JAMMU Jammu 0.43 0.20 0.57

EAST1----MANOJ ENTP, KOLKATA Kolkata 0.65 0.60 0.54

EAST1----SUJATA TRADE AGN, GUWAHATI Guwahati 1.06 1.08 0.66

NORTH1-G R ENT., DELHI Delhi 0.47 0.17 0.52

NORTH1---MAHESHWARI ENTERPRISE , UDAYPUR Udaipur 0.33 0.35 0.33

NORTH2---V.K. ASS., L'NOW Lucknow 0.49 0.37 0.47

NORTH2---KAMLA TRADER , GORKHPUR Gorakhpur 0.59 0.44 0.58

WEST---JEELANI C&FA, MUMBAI Mumbai 0.03 0.69 0.19

WEST---PURNA DEPOT Purna 0.03 0.69 0.19

WEST---DARYA SONS , NAGPUR Nagpur 0.300 0.529 0.229

GUJRAT---K K ENTERPRISES, AHMEDABAD Ahmedabad 0.18 0.49 0.30

L&SCM Group B01 16

Historical C&F agent demands’000 packets AP--HYDERABAD DEPOT CENTRAL ---D.J. C & F AGENCIES,

INDOREKAR---ASHOK AGENCY ,

BANGLORE

AA04 755.4 450.884 1024.9AA286 46.9 286.315 14AA284 53.2 493.965 49.8AA23 2.5 15.432 20.5AA51 0 0 0AA04P 122.4 105.046 139.65AA53 183.4 75.274 292

AA305 0 13.796 0AA317 63.7 166.530 138AA07P 90.1 62.656 79.6AA73 18 51.494 0

AA285 10 38.239 0

AA147 83.2 85.493 10AA129 0 92.173 0AA264 65.374 246.878 66.572AA328 7.639 13.440 24.7

AA243 C 6.2 0 0AA287 0 15.089 0AA04B 0 20.4 15AA330 7.116 9.459 32.334AA128 0 38.048 15

AA286B 0 0 0AA09P 3.6 2.86 0AA324 1.839 11.396 0.74AA286P 0 15.247 0AA93a 0 0 0AA59 0 0 0

L&SCM Group B01 17

Model Objective Function (1377 variables)

Min () Plant supply constraints

For i=1 < 40,000For i=2 < 40,000 Plant capacitiesFor i=3 < 25,000

CFA Demand constraints (459 constraints)>Dkj For all k and j

Xij> 0

L&SCM Group B01 18

Optimized Plant to C&F SKU dispatch  

(result for a single SKU) ‘000 packets  

AA04

From Mumbai

FromGagret

FromHyd

AP--HYDERABAD DEPOT Hyderabad 0.00 0.00 755.40

CENTRAL ---D.J. C & F AGENCIES, INDORE Indore 450.88 0.00 0.00

KAR---ASHOK AGENCY , BANGLORE Bangalore 253.85 0.00 771.05

KERALA---EXCEL MARKETING, COCHIN Cochin 0.00 0.00 239.28

TN---TAMILNDAU ASSOCIATES, CHENNAI Chennai 0.00 0.00 1521.48

EAST2---PATLI PUTRA AGENCY, PATNA Patna 0.00 0.00 0.00

NORTH3----DEE AAR AGENCIES, JAMMU Jammu 0.00 0.00 0.00

EAST1----MANOJ ENTP, KOLKATA Kolkata 0.00 152.00 0.00

EAST1----SUJATA TRADE AGN, GUWAHATI Guwahati 0.00 0.00 5.00

NORTH1-G R ENT., DELHI Delhi 0.00 244.85 0.00

NORTH1---MAHESHWARI ENTERPRISE , UDAYPUR Udaipur 197.30 0.00 0.00

NORTH2---V.K. ASS., L'NOW Lucknow 0.00 18.50 0.00

NORTH2---KAMLA TRADER , GORKHPUR Gorakhpur 0.00 0.00 0.00

WEST---JEELANI C&FA, MUMBAI Mumbai 1817.60 0.00 0.00

WEST---PURNA DEPOT Purna 510.00 0.00 0.00

WEST---DARYA SONS , NAGPUR Nagpur 406.20 0.00 0.00

GUJRAT---K K ENTERPRISES, AHMEDABAD Ahmedabad 635.70 0.00 0.00

L&SCM Group B01 19

SKU-wise Plant production output

‘000 packets Thane Production Gagret Production Hyderabad Production Total

AA04 4272 415 3292 7979AA286 1912 1793 85 3790AA284 1459 2736 103 4298AA23 400 159 963 1522AA51 0 100 13 113

AA04P 329 586 217 1132AA53 1505 0 361 1866

AA305 17 1293 10 1320AA317 961 313 148 1421AA07P 0 631 0 631AA73 512 87 431 1030

AA285 80 665 16 761AA147 808 0 109 917AA129 607 276 0 883

L&SCM Group B01 20

‘000 packets Thane Production Gagret Production Hyderabad Production Total

AA264 0 2977 0 2977AA328 338 14 54 406

AA243 C 28 668 12 707AA287 15 558 5 578AA04B 157 0 136 293AA330 145 14 70 229AA128 290 177 17 484

AA286B 93 131 0 224AA09P 0 200 0 200AA324 0 106 0 106

AA286P 73 103 0 176AA93a 0 0 0 0AA59 0 0 69 69

SKU-wise Plant production output

L&SCM Group B01 21

Cost reduction

Production costold (INR) 210.72

Primary freight costold (INR) 4.85

Total cost (INR cr) 215.57

Optimized total cost (INR cr) 208.15

Savings amount (INR cr) 7.41

Savings (%) 3.44%

Production of SKUs re-formulated Dispatch to C&F agents from plants re-

formulated

L&SCM Group B01 22

Result Optimization model reshuffled the

production of various SKU and from where it should be shipped

Excess capacity; cost minimization equal to profit maximization

Company must do it time and again Prepared a template which takes data for

various SKUs and optimizes Total savings of INR 7.14 cr or 3.44% of

total production and shipment costs

L&SCM Group B01 23

Bullwhip Effect

L&SCM Group B01 24

Bullwhip at CFA levelA

pr/1

1

May

/11

Jun/

11

Jul/1

1

Aug

/11

Sep

/11

Oct

/11

Nov

/11

Dec

/11

Jan/

12

Feb

/12

Mar

/12

0

200

400

600

800

1000

1200

1400

AA04 CFA sales

AA04 Retail Demand

L&SCM Group B01 25

Recommendations

Variability reduction

Uniform incentive schemes

(Higher margins)

Not based on sales quantitative quotas

Inventory at CFA level maintained by company; at SS by CFA Change

in terms of trade required

Reduce number of SKUs

Reduction in lead time by reducing transit time

Sales tracking beyond CFAs

Proper demand forecasting and sharing with each level

Lessons from Industry Leaders

L&SCM Group B01 26

Gillette

Gillette India reduced lead time from 5-20 days to 2-3 days and increased order

fill average to 98% from 78%

Implemented Make to Order instead of Make to Stock by using Push & Pull strategies and CPFR and EDI/RFID

HUL

HUL controls redistribution stockists and sub-stockists while C&F agents are on a service charge basis (35 3rd party service charge based CFAs, 4000 company RSs)

All RS interconnected through RSnet for better forecasting and timely

replenishment, part of Project Leap that integrates supply chain and distribution

Mother depots with some C&F agents near plants with EDI systems linked to distributors and factory for JIT supply

L&SCM Group B01 27

Challenges faced

Securing a live project with real impact on company operations

Filtering huge and complex un-organized production and sales data

Understanding company jargon and codes

27 SKUs * 3 Plants * 17 C&F Agents = 1377 variables; constrained by solver capability

Thanks for your attention

Group B01