Supply chain mgt

A PROJECT OF SUPPLY CHAIN & DISTRIBUTION MANAGEMENT

(SDM) ON “CERAMIC TILES INDUSTRY”

To: Dr. Tejash PujaraBy: Group no. 4

Roll no. Name of student

54 Bharat Lalwani

75 Mayur Patadia

78 Rajkumar Patel

80 Bhavesh Patel

88 Mayank Pujara

116 Pintu Vaishnav01

OBJECTIVES• To understand following concepts in 2 different

companies (SME, LE) of same ceramic tiles industry:

“Supply chain issues & relationship, Distribution channel, Modes of transport, procurement, order cycle, inventory & demand management, roles of 3 PL and IT in supply chain”

• To identify pros & cons of supply chain of both companies.

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INDUSTRY OVERVIEWRank Country name Capacity (mn sq.ft)

1 China 2200

2 Spain 635

3 Italy 589

4 Brazil 566

5 India 270

Total world consumption 7565

Sr. No Sector Revenue Share of production No. of companies

1 Large Enterprise 3500 cr 56% 16

2 Small Enterprise 3000 cr 44% > 250

• Ceramic tiles industry of India provide a direct 50,000 employment & 5,00,000 indirect employment.

Source: Indian ceramic industry, EXIM bank report, March 2005. 03

CERAMIC TILE INDUSTRY IN INDIA

• Growth of tiles industry is almost double than the growth of real estate industry.

• Per capita consumption of India is 0.15 sq. meter, while in European country demand is 2.5 sq. meter.

• Demand of ceramic tiles is increased due to following industries:– IT industry.– Housing industry.– Retail industry.

04Source: Indian ceramic industry, EXIM bank report, March 2005.

SWOT ANALYSISStrengths:• Consistent growth of 12-15 percent in spite of slowdown in economy.• The Indian ceramic export market is rising at the rate of 15 percent per annum. (44% of unorganized sector)

Weakness:• Not much importance given on brand building and network thus creating hindrance for export growth.• Low per capita consumption (0.15 sq.mt. p.a.) as compared to developed nations. 05Source: Indian ceramic industry, EXIM bank report, March 2005.

SWOT ANALYSIS Opportunities:• The construction and Housing Boom to provide bolstering demand for ceramic tiles.• The untapped rural market supported by a strong growth witnessed by Indian Agriculture provides tremendous potential for the domestic ceramic manufacturers.

Threats:• Freight, supply of power and gas remains the key cost-related issues impacting the industry.• Basic Customs Duty on import of ceramic tiles from China and raw materials imported from abroad should be corrected to prevent dumping of tiles from China. 06Source: Indian ceramic industry, EXIM bank report, March 2005.

FEW ORGANIZED PLAYERS

Asian granito India ltd.Euro ceramic Ltd.

H & R Johnson Ltd.

Kajaria ceramic Ltd.

Nitco tiles Ltd.

Somany tiles Ltd.

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Company overview

• We have studied supply chain management of tiles industry in both large unit (30 production line) as well as small unit (2 line).

• H & R Johnson. • Atom ceramic.

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Characteristics of both companies

Description Large enterprise Small enterprise

Sector LE SME

Extent of integration Highly integrated Less integrated

Location of Plant All around in World At Morvi (Rajkot)

Employment Not Available 250

Management Professional Traditional

Capacity Not available 2700 tons/ day

Prescence In World India & Gulf countries

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Supply chain of ceramic tiles industry

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Supply chain issuesSupply chain Issues Large unit Small unit

Supply chain network Strong (More intermediaries)

Weak (Less intermediaries)

Complexity of supply chain High Low

Inventory deployment Easy to achieve Difficult to achieve

Information / technology ERP system Email & Daily stock report

Efficiency / Effectiveness Effectiveness Efficiency

Organizational relationship Both internal & External Internal only

Performance measurement Financial as well as Non financial

Financial only

Transportation management

Road, Rail, Sea. Air (For sample only)

Supply chain security Highly secured (Customized software)

Less secured (General software)

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Types of collaborationSmall unit

Supplier

Manufacturer

Distributor

Retailor

Large unit

Manufacture

Supplier

Manufacturer

Distributor

Retailor

Supplier

Manufacturer

Distributor

Retailor

Vertical collaboration Full collaboration 12

Models for developing supply chain relationshipStages of model Small unit Large unit

Strategic assessment Cost sensitive supply Chain

Flexible & Responsive supply

chainDecision to form

relationshipPlant to warehouse & construction site

Evaluate alternatives 2 or 3 preferred partner (Truck avail.

& order time)

1 right partner

Select partner With help of opposite party (EX:

Bangalore)

On basis of capacity and flexibility

Structure Operating model

Planning Priority

Improvement Almost nil Continuous

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Third party logistics

Small unit• Transport base.• Forwarder base. (Export)

Large unit• Transport base.• Forwarder base. (Export)• Warehouse base.

• It is an external supplier that perform company’s logistic functions.

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Information technology capabilities

Small unit• Only headquarter has

information regarding inventory at each stockiest as well as production schedule.

Large unit• Information available

throughout organization.• Also facilitate automatic

transmission order.• EX: Plant 1 for Ivory color

product, Plant 2 for Matt color product.

• {For consistent quality and to reduce production changeover}

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Distribution channel

Large enterprise• Traditional channel (Multi

level)• Factory outlet (1 level)• Direct client (0 level) (Web

based service)• Export level (0 level)

Small enterprise• Traditional channel (Multi

level)

• Project order (0 level) Export level

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Manufacturing plant

Factory warehouse

Regional warehouse

Stockiest

Retailor

Client

Multi level 1 level

Manufacturing plant

Factory warehouse

Retailor (Factory outlet)

Client

Export

Manufacturing plant

Factory warehouse / Export division

Client

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0 level for small enterprise Project order (Special type of order)

Order from customer to Mfg.

plant

Production department arrange schedule to minimize

production changeover

Warehouse department

arrange goods which minimize movements of

goods

Company ensure on time delivery

Complete the order by full payment

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• JK tire from

0 level for large enterprise

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Criteria 0 level 1 level Multi level

Lot size

Delivery time

Product variety

Min. Volume per order

Evaluation of each channel

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Types of distribution

Exclusive

• Gold plated

• Mirror tiles

Selective

• Current scenario

Intensive

• Catalogue &

Stockiest

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Modes of transport

Modes H & R Johnson Atom ceramic

Rail road carrier Out bound ---

Motor or truck carrier Inbound + Outbound Inbound + Outbound

Water carrier Inbound (Chemicals)+ Outbound (Export tiles)

Outbound (Export tiles)

Air carrier Out bound (Sample) Out bound (Sample)

• 80% of raw materials has been arrived from near by area of Morvi, so Road transport is convenient modes.

• As a part of outbound logistics, Yet Morvi has not received rail facility from government, but process is still continued, it will help to SMEs to reduce outbound logistic cost.

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Inventory

Inventory

Raw material

Diff. Clays

Chemicals

Finish goods Tiles

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Diff. Clays

Parameters H & R Johnson Atom ceramic

Safety stock (Throughout year) 15 days 7 days

Safety stock (Rainy season) 21 days 15 days

Order system Fixed quantity system

Fixed quantity will be changed on basis of capacity utilization

Min. order quantity 1 truck 1 truck

Documents verify at warehouse Report of sample of clay, Weigh bridge report

80% of total raw material inventory

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Chemicals

Parameters H & R Johnson Atom ceramic

Supplier Import from China Local supplier of Morvi

Payment Advance payment Credit payment

Ordering cost High Low

Priority Cost Inventory

Min. order quantity 1 container 5 or 10 kg

20% of total raw material inventory

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Tiles

Parameters H & R Johnson Atom ceramic

Design variety Less High

Brand variety >1 1

Inventory at Mfg. plant Less inventory High inventory

Inventory of stockiest point High inventory Less inventory

Influencing factor Delivery time, Types of order

Availability of truck, Delivery time, Types of order

NOTES:-• SME has comparatively less number of stockiest point. • SME has less accurate forecasting system than LE.

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Warehouse for finish goods

Parameters H & R Johnson Atom ceramic

No. of warehouses in India Approx. 50 Only 4

No. of Sub company Approx. 28 (EX: H & R J Maharashtra Ltd.)

Zero

Types of products Tiles, Sanitary-ware Only tiles

NOTES:-• Raw materials has been stored at manufacturing plant only.

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Criteria for procurement

Large enterprise• By tender system, which

has been revised by 3 months.

• Price of raw material has been remained same for 3 months.

Small enterprise• Proximity (Geographical

area)• Credit policy of supplier.• Customer service of

supplier.

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Order management cycle

Order entry

Routine order

Delivery date based

on production schedule

Credit policy

Dispatch of goods

Project order

Production schedule based on

date

Credit issue Dispatch of goods

Export order

No changeover is allowed (1 batch

product)29

Demand management• During rainy days, Construction company has been slow down its

construction,, so its ultimately leads to reduce demand of tiles.• On an average capacity utilization of tiles companies is 90 to 95%,

so during rainy season capacity utilization goes to 60%. (Because 50% is BEP)

• Generally maintenance or routine breakdown has been carried out during rainy season.

• But last 2 years are exception, because Italy and China tiles industry severely affected. So Indian tiles industry get benefit from it.

• On an average, demand management is easy for Small unit than large unit. (Because of single brand)

• Both types of unit outsourcing tiles as a part of demand management.

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Learning outcomes

• Max. market share can only be achieved by more than 1 distribution channel.

• Selection of distribution channel depends on type of product, turnover, size of company & industry.

• Market leader always use product differentiation or innovation for sustain profitability.

• SME mainly concern for center for gravity.31

Acknowledgment

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ANY QUERIES???

?32

Thank You

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• Animation• SKU