Supply Chain Innovation at Geddy´s Team Name: Buffalo Consulting 1 st Round Room: RAWLS 3097 Amit Chaudhary Pan Debora Manea Ralf Tischler.

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


Agenda

1

3

4

2

Geddy´s and SC Planning Challenges

Operations Analysis

Future Outlook

Recommendations

Pan Pan


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

1

34

2

Pan Pan


Ambiguous growth opportunities in India

1

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


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


Demand is highly dependent on temperature

1

34

2

Debora Manea


High discrepancy of actual and expected sales

Weekly Profit (100 Rupee)

Total Weekly Sales

1

34

2

Debora Manea



Total Weekly Sales

Drop in sales & profits

High fluctuations

High discrepancy of actual and expected sales

1

34

2

Debora Manea


Different service level policies are used


Total Weekly Sales

Target Service Level Scaled Stocking Level Common Service Level

Target Level Top 3 Margin Target Level Top 2 Margin

1

34

2

Debora Manea


Changing the policies led to loss in profits

1

34

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


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

1

34

2

Debora Manea


The storage capacity cap limits profits

1

34

2

REVENUES COSTS

PROFIT

Policy Optimization

Capacity Cap

Ralf Tischler


Two options might lead to higher profits

1

34

2

REVENUES COSTS

PROFIT

2.Cost Efficiency

Policy Optimization

Capacity Cap

1. Expansion

Ralf Tischler


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


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


1

34

2

Ralf Tischler


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

1

34

2

Ralf Tischler


Recommendations

1

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

Thank you for your attention!

Q&A

Amit ChaudharyPan PanDebora ManeaRalf Tischler

Back-up Slides


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


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


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


Ralf Tischler


India- Disposable income vs. ice-cream consumption


Ice-cream – per capita consumption


Market shares of organized players


Temperature and Investment costs


Cost Structure

Every percent point saved in sourcing proportionately increases EBITDA!


Business model and value proposition


Manufacturing Process


States with operations


Exchange Rate


Menu

Supply Chain Innovation at Geddy´s Team Name: Buffalo Consulting 1 st Round Room: RAWLS 3097 Amit Chaudhary Pan Debora Manea Ralf Tischler.

Documents

case competitionnr

margin1342debora manea

ge capital pan pan gscmi

expected sales weekly

rupeetotal weekly salesdrop

bsc international business

bsc economics

esb business school