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Transcript of Supply Chain Innovation at Geddy´s Team Name: Buffalo Consulting 1 st Round Room: RAWLS 3097 Amit...
Supply Chain Innovation at Geddy´s
Team Name: Buffalo Consulting1st Round Room: RAWLS 3097Amit ChaudharyPan PanDebora ManeaRalf Tischler
GSCMI 2013 Case Competition 2
Team Overview
Amit Chaudhary MBA Class of 2014 BSc Engineering, Bangalore
University, IndiaExperience: Market Research Analyst at
Fidelity Investments
Pan Pan MBA Class of 2014 BSc Economics, Hubei
University of Economics, ChinaExperience: Client Manager at Agricultural
Bank of China
Ralf Tischler MSIA Class of 2013 BSc International Business, ESB
Business School, GermanyExperience: Consulting internships at Booz
& Company and KPMG Online marketing at a Sheraton
Hotels property
Debora Manea MSIA Class of 2013 BSc International Business, ESB
Business School, GermanyExperience: Consulting internship at Oliver
Wyman Finance internship at GE
Capital
Pan Pan
GSCMI 2013 Case Competition 3
Agenda
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3
4
2
Geddy´s and SC Planning Challenges
Operations Analysis
Future Outlook
Recommendations
Pan Pan
GSCMI 2013 Case Competition 4
Geddy´s
Franchised retail outlets but own buildings
No sale in major supermarkets Collaboration with ´Just Bake´
Bakeries
Competitively priced No price
differentiation
Ice-cream: 40 flavors Low and high margin flavors
No particular customer segment
Electronic and print media
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34
2
Pan Pan
GSCMI 2013 Case Competition 5
Ambiguous growth opportunities in India
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34
2Low ice-cream – per capita consumption
Demand Constraints: Economic conditions Affordability Product availability Inadequate infrastructure Many other dessertsHigh Seasonality
PRESENT
FUTURESignificant growth of ice cream consumption
Growth enabler: Strong growth of disposable
income (especially: urban)
Branded: 20-25% p.a. growth expected
Market-driven challenges
Amit Chaudhary
GSCMI 2013 Case Competition 6
Supply Chain
1. Product (ice cream) and ingredient durability2. Cold-storage requirements
1. Production planning based on service level policy2. Idle capacity
1. Cold transportation requirements2. Missing cold-storage infrastructure at supermarkets3. Product availability
Challenges for Supply Chain Planning
Challenges
1. High price fluctuations 2. Import tariffs3. Inbound logistics 4. Currency fluctuations5. Middlemen costs 6. Supplier selection
Procurement
Inventory Mgmt
Manufacturing
Outbound logistics/Retailer
1
34
2
Amit Chaudhary
GSCMI 2013 Case Competition 8
High discrepancy of actual and expected sales
Weekly Profit (100 Rupee)
Total Weekly Sales
1
34
2
Debora Manea
GSCMI 2013 Case Competition 9
Weekly Profit (100 Rupee)
Total Weekly Sales
Drop in sales & profits
High fluctuations
High discrepancy of actual and expected sales
1
34
2
Debora Manea
GSCMI 2013 Case Competition 10
Different service level policies are used
Weekly Profit (100 Rupee)
Total Weekly Sales
Target Service Level Scaled Stocking Level Common Service Level
Target Level Top 3 Margin Target Level Top 2 Margin
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2
Debora Manea
GSCMI 2013 Case Competition 11
Changing the policies led to loss in profits
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2
Scaled Policy Common Service Level
Policy Change in Profit % Change
Scaled 1,296 Rs 4.5 %
Common Service 1,264 Rs 4.4 %
Top 2 Margin (477) Rs - 1.7 %
Top 2 Margin Policy
Actual Weekly Profit (in ‘000 Rs)Policy Change Estimated Weekly Profit (in ‘000 Rs) *
* Assuming we would sell at least the minimum between expected demand and order, for previous stock-out instances
Debora Manea
GSCMI 2013 Case Competition 12
Part of the gap was driven by overall lower demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55100
150
200
250
300
350
Week
Dem
and
an
d S
ales
(in
un
its)
Expected Demand for TV, BBS and LL (in units)Actual Sales for TV, BBS and LL (in units)Period of few or no stock-outs
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2
Debora Manea
GSCMI 2013 Case Competition 13
The storage capacity cap limits profits
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2
REVENUES COSTS
PROFIT
Policy Optimization
Capacity Cap
Ralf Tischler
GSCMI 2013 Case Competition 14
Two options might lead to higher profits
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2
REVENUES COSTS
PROFIT
2.Cost Efficiency
Policy Optimization
Capacity Cap
1. Expansion
Ralf Tischler
GSCMI 2013 Case Competition 15
Fast capitalization on cost efficiencies
Price differentiation (2 Categories)
Applications Benefit Cost/Risk
Increases margins Accounts price fluctuations
Less customer convenience Sales volume decrease
Decrease number of flavors
Unties capacity Eases sourcing/production
Disliked by customers Sales volume decrease
Change receivable / payable policy
Less working capital needs Free cash for investments
Resistance of franchisee Resistance of supplier
Beneficial & less risky Less beneficial and/or risky Not beneficial or too risky
Cost
Effi
cien
cy
Increase capacity of stores (peak season)
Reduces SG&A overheads per unit: Margin & Sales ↑
Required investments Unused equipment
Increase sourcing from foreign supplier
Reduces sourcing costs if Rupee is strong
High ex-rate dependency Difficult relationship building
1
34
2
Ralf Tischler
GSCMI 2013 Case Competition 16
Expansion offers long term opportunities
Expand the product line (related product)
Applications Benefit Cost/Risk Balance the off season
demand Extra production cost Increase in Operational cost
Enter retail Reach to new customers Brand awareness: Sales ↑
Expensive shelf space Compete with other brands
In-store Freezer/Kiosk
Low upfront investment Meet peak demand
Low margin Space constraints
Expa
nsio
n
Standalone Parlor Increase the market share Reach out to diff. markets
High initial investment Longer breakeven period
Vending Cart Increases mobility Nominal initial investment
Beneficial & less risky Less beneficial and/or risky Not beneficial or too risky
1
34
2
Ralf Tischler
GSCMI 2013 Case Competition 17
Cost efficiencies will enable future expansion
Volatile and low demand Uncertain margins Storage constraints
Stable cash inflow Meet current demand
Increasing demand Market consolidation
Decrease utilization gap Capital Infrastructure
Long-term focusShort-term focus
Envi
ronm
ent
Nee
ds
Cost Efficiency Expansion
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2
Ralf Tischler
GSCMI 2013 Case Competition 18
Recommendations
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34
2SOLUTION
Space constraint in peak season
and high seasonality
PROBLEM
Scaled Stocking Level Policy
Short-term focus: Cost Efficiency
Long-term focus: Expansion
1
2
3
Ralf Tischler
GSCMI 2013 Case Competition 21
Fast capitalization on cost efficiencies
Price differentiation (2 Categories)
Applications Benefit Cost/Risk
Increases margins Accounts price fluctuations
Less customer convenience Sales volume decrease
Decrease number of flavors
Unties capacity Eases sourcing/production
Disliked by customers Sales volume decrease
Change receivable / payable policy
Less working capital needs Free cash for investments
Resistance of franchisee Resistance of supplier
Beneficial & less risky Less beneficial and/or risky Not beneficial or too risky
Cost
Effi
cien
cy
Increase capacity of stores (peak season)
Reduces SG&A overheads per unit: Margin & Sales ↑
Required investments Unused equipment
Increase sourcing from foreign supplier
Reduces sourcing costs if Rupee is strong
High ex-rate dependency Difficult relationship building
Ralf Tischler
GSCMI 2013 Case Competition 22
Expansion offers long term opportunities
Expand the product line (related product)
Applications Benefit Cost/Risk Balance the off season
demand Extra production cost Increase in Operational cost
Enter retail Reach to new customers Brand awareness: Sales ↑
Expensive shelf space Compete with other brands
In-store Freezer/Kiosk
Low upfront investment Meet peak demand
Low margin Space constraints
Expa
nsio
n
Standalone Parlor Increase the market share Reach out to diff. markets
High initial investment Longer breakeven period
Vending Cart Increases mobility Nominal initial investment
Beneficial & less risky Less beneficial and/or risky Not beneficial or too risky
Ralf Tischler
GSCMI 2013 Case Competition 27
Cost Structure
Every percent point saved in sourcing proportionately increases EBITDA!