BY ABHIJIT SAH (302) VIVEK RAJ (361) YOGENDRA SHARMA (362)

CASE STUDY NO 23.17

TUSHAR ENTERPRISE
FMCG
Fan division

PHARMA

FMCG products are marketed through 22 C&F agents, 80 distributers, 300 sub stockists and the retail shops (over1000). They have for regional offices and 25 branch offices for the sales administration. This division has achieved sales of INR 4000 million in 2001.
There are three fan units in Mumbai, Nasik and panjim(Goa) manufacturing 1 million fans annually and a sales figure of INR 1000 million. The marketing and distribution network now consists of four regional warehouses 1200 dealers, 12 C&F agents, four regional offices and 12 branch offices The pharma products are marketed and distributed through a network of four regional warehouses, 16 C&F agents, 75 stockists and more than 5500 retail outlets (pharma shops). The marketing set- up consists of four regional office and 10 branch offices(resident executives).

Q.1. I S

THIS A CASE FOR CONSOLIDATION

OF THE DISTRIBUTION SYSTEM OF THREE DIVISION INTO ONE SYSTEM USING A FEW

WAREHOUSING HUBS ?

ANSWER:

Yes, the case is for consolidation of the distribution system of the three division into one system using a few warehousing hubs.

Q.2.H OW WILL YOU GO ABOUT

REDESIGNING THE WAREHOUSING NETWORK TO SERVICE THE CUSTOMER AND REDUCE THE OPERATING COST ?

A NSWER.

For redesigning the warehousing network to service the customer and reduce the operating cost the following problem should be solved :The company hold too much inventory stock in many warehouses spread across a wider geographical area. The reason are :

The Complex Transportation System Historical ownership patterns More lenient to customer satisfaction.

Delay in delivery
Cost of Warehouse is Higher Duplication of logistic operation.

Transit Damage due to Not proper handling and packaging

Full utilisation of Warehouse space

Q.3. D O THE DISTRIBUTION SYSTEMS

OF THE THREE DIVISIONS HAVE SYNERGY IN OPERATIONS IN THE MARKETS THEY ARE SERVING ? C OMPARE AND CONTRAST THE OPERATING REQUIREMENTS OF THE THREE DISTRIBUTIONS SYSTEMS .

Solution- No, the distribution systems of the three divisions have not
synergy in operations in the markets they are serving. In the total outbound logistics cost the ratio of transportation, warehousing & administrative cost respectively was 60:25:15 for the pharma division, 57:30:13 for the fan division and 63:20:17 for the soap division.

The outbound logistics cost for the Tushar Pharmaceuticals is 3.50 as compared to 1.75- 2.25 of the industry. For the fans it is 4.75 as compared to that of the later which is 2.75- 3.50 and for the soaps & detergents it was 7.50 as compared to 4.50 6.00. Distribution of fan 4 regional warehouses, 1200 dealers, 12 C & F agents. Distribution of Pharma- 4 regional warehouses, 16 C & F agents, 75 stockists Distribution of FMCG- 5 regional warehouses, 22 C& F agents, 80 distributors, 300 sub-stockists. For the pharma products better cold warehousing are needed, therefore it have an effect on the cost as compared to other 2 types. Product handling, product packaging also are the factors which will increase the cost of the pharma inventories.

Q.4. D ISCUSS THE IMPLICATIONS OF

ELIMINATION OF REGIONAL WAREHOUSES FROM THE DISTRIBUTION NETWORK AND ORGANIZING THE DISPATCHES DIRECTLY FROM THE C & F AGENTS .

 Solution- The implications of elimination of regional

warehouses from the distribution network and organizing the dispatches directly from the C& F agents are:

One warehouse can be eliminated in Mumbai because there are 2 factories of pharma & fans are placed, one each. Both can use a common warehouse to minimise the cost. One from Indore also can be eliminated. It can operate all the warehousing functions in Mumbai only. Some of the C&F agents can be reduced in all the three divisions to minimise the cost to achieve economy of scale. Tushar Enterprises can also achieve the economy of distance through competitive strategies to achieve its objective with the customer satisfaction.

Q. 5. A NALYZE THE OPTION OF

OUTSOURCING THE ENTIRE LOGISTIC OPERATION TO A 3 PL FIRM .

A NSWER
Advantage and challenges of Tushar Enterprise of outsourcing the entire logistic operation to a 3 PL firm.

Advantage: Economies of scale save on capital investments Challenges: Reliable 3PL Provider And cost-effective partnership

THANK

YOU !