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Operations Management issues for a Sanitary Napkin Maker

Operations Management issues for a Sanitary Napkin Maker

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Published by pulakguy
Analysis of operations issue of a sanitary napkin maker - inventory analysis, product mix analysis and demand management
Analysis of operations issue of a sanitary napkin maker - inventory analysis, product mix analysis and demand management

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Published by: pulakguy on Jun 29, 2009
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Name – Anubhav SinghRoll No - 0910010
Supply-Demand Management study of aSanitary Napkin Maker
1.Company Background2.Market analysis & Demand Behavior3.Production Details4.Analysisa.Calculate optimal inventory for finished goods & inventorycostsi.Lead Time Demandii.Safety inventoryiii.Effect on Working Capital b.Calculate optimal inventory of raw material & inventory costsi.Lead Time Variabilityii.Lead Time Demandiii.Safety Inventoryiv.Cycle Inventoryv.Effect on Working Capitalc.Product Mix Analysisd.Effect of Government businessi.Lead Time Demandii.Safety inventoryiii.Optimal product mix between Government & privateiv.Effect on Working Capital5.Conclusion
1- Company Background
Royal Hygiene is the maker of ‘She’ brand of sanitary napkins. ‘She Comfort’ brand was launched in the year 2003. The sanitary napkins were imported fromNorth America and sold under ‘She comfort’ Brand in India. By Jan 2005, amanufacturing facility was created at Turbe near Mumbai, under the name RoyalHygiene Care Pvt. Ltd. Recently the company shifted its production to Kandla,Gujarat. The company saw a turnover of over Rs 25 crores for 2008-09. Thecompany is growing at an impressive rate and is aiming a 50 crore turnover for2009-10.
2.a-Market Structure
Feminine Hygiene ironically has not been the priority of Indian women so for. Asof now, only 5% women use sanitary pads in India. In China, 55% women usesanitary pads with a market potential of 4 Billion USD. There are 1300manufactures in China compared to only 5 major manufactures in our country.The penetration rate in developed countries is close to 100%.Recently napkin usage has been promoted by Governments in various states byway of free distribution of the products to women in Tier II cities and towns. Thishas worked as an extra demand for manufacturers. The suppliers are selectedunder bidding system and are assured a minimum fixed quantity to be supplied.This demand stream does not require any marketing effort and has the potentialto provide significant contribution margin to the business.The company maintains higher MRP than the other premium products in themarket. However, it provides volume offers to its customers to bring the averageprice lower than competitors. The market is largely segmented into modern trade(large retail houses) and retail (traditional general merchant and pharmacyshops).
2.b- Main competitors:
Indian feminine hygiene market is estimated at Rs.1000 crores per annumentirely dominated by large MNC’s like P&G, J&J & HUL. P&G, J&J manufacture
in India, where in the others like HUL are importing from China andsubsequently marketing in the country.P&G is the market leader with its brand ‘Whisper’ holding more than 52%market share followed by J&J at 39% and Levers at 5%. She Comfort enjoys 2%market share. Balance 1% sales are shared by eleven smaller companies.Modern trade (organized retailers) accounts for roughly 30% of its volumes.However, the company is forced to give higher discounts to large retail houses.Its contribution margin is lower for a market segment where it has lowervolumes at the moment. However this has paid off. Its brands are ranked no 2 or3 by shelf space in the large retail format in key cities. In Bangalore it ranks 1
byshelf space in key Pantaloon locations. Royal Hygiene Health Care has alreadytaken 3rd position (ahead of HUL) in terms of sales in this format of business inan industry with roughly 11 players.
2.c- Demand Behavior
Sanitary napkin demand behavior is a boon for any manufacturer. It is used byany user once in a month for an average of 4 days. So for a sizable group ofwomen, it can be safely assumed that the demand will be evenly distributed in amonth and the quantity required would be fixed. Once customer is satisfied withthe product, usage has almost no discretionary component and very high brandloyalty due to personal nature of the product. The only change in demand shouldreally come from new customer additions. So if the company expects to doubleits sales, it can be safely assumed that 50% of sales would have near zerovolatility and the rest 50% would have some volatility based on the firm’s speedof customer addition (and product switch by new customers in the initial trialstage).
3- Production Details
The company has source its production units from China. The ZYG type line thatthe company deploys runs at the maximum speed of 200 pads/minute with thenormal steady operation speed of 150 pads/minute.

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