Professional Documents
Culture Documents
Company Overview:
Issues:
Sales:
1. Order receipts and the order book position is in poor shape and skewed towards month end
2. Delay in commercial clearance for domestic orders
3. Sales orders for fast moving items are received typically towards 2nd / 3rd week of the
month with an order - delivery time of around one week
4. Issue of shortages of trucks towards month-end from logistics
5. The Finance team sets rigid price limits for both, raw material and finished goods which
results in customer lose
6. Adverse effects on final price due to erratic price fluctuations associated with Ni
7. The manufacturing lead times are also high
8. Manufacturing delivers more than 10-15% quality diversion whereas as per norm acceptable
quality norm is 5%. This leads to loss sales of 10-15% in a month and poor OTIF performance.
PPC:
Manufacturing:
1. A low order book is a constant challenge faced by us. We typically start week 1 of a month
with <10% of orders and new orders keep coming in during the month, which significantly
impacts operations.
2. We receive orders for products with a low order to delivery lead time in week 2 or 3 of the
month
Finance:
1. Sales deals seem to fall through at the last minute, so many orders getting cancelled. Our
receivables keep mounting, with customers not paying up advances or adhering to their
committed orders.
2. We frequently overdraw on credit limits that we’ve established with banking partners. With
markets falling as they are, our receivable days and consequently our payable days are
growing to worrying proportions and working capital management has become a serious
challenge
3. Sourcing comes to me in the last moment with requests to release additional funds for new
requirements
4. Logistics costs are also typically over-budget.
5. For raw material price risk however, we have trouble creating an optimum strategy because
of the lack of visibility from Sales & Sourcing. They are unable to appropriately forecast
demand for different commodities.
6. Asset turnover ratio and Inventory turnover ratio are lower than the industry average
Logistics:
1. Some gaps in terms of requirements and contractually available trucks specifically for
outbound transportation.
2. High demand of trucks towards the month end leading to temporary shortages faced by
transporters and that leads to a lot of pressure on timely dispatch. In case trucks are not
placed within 48 hours, we go into the spot market to cover the additional truck
requirements but end up paying more than contracted rates with the same suppliers for
spot buys.
3. The lead time for Ni is as high as 3 months, making it difficult to cope with its market price
risk. And, with different lead times for raw materials, proper inventory planning becomes a
challenge
Procurement Lead:
1. The fluctuation in the raw material prices over the last few years, especially that of Nickel
has made it difficult for us to manage inventory levels properly and has hampered the lead
time
2. One of our challenges is adhering to the price limits set by the finance team for raw
materials.
Sales:
1. We would like to understand if you could help us bring in some industry best practices from
a pricing structure perspective, which would enhance visibility to our customers and help us
retain and build long term relations.
2. Could you help in identifying any potential markets apart from Asia?
PPC:
Finance:
1. We should ideally be booking to capacity from the get-go where we know exactly how much
we would be producing.
2. Sourcing should negotiate with long-standing suppliers to fix raw material pricing and take
on a higher burden of the price risk
3. They are unable to appropriately forecast demand for different commodities and that
diminishes our ability to hedge appropriately. We currently try to balance that using a range
of product mix, producing different grades of stainless steel based on price and demand
fluctuations, but it’s not the most effective. I’d be happy to hear any recommendations you
may have on how to handle this better.
Logistics:
Procurement Lead:
1. we procure the raw materials from different countries, and it is important to understand
their different lead times. Once the weighted average lead time for each category is found,
Finance decides the hedging strategy. Material unavailability in different countries and
prices are the primary drivers of sourcing decisions (which is market determined) and
invariably do no align with sourcing mix norms created by Finance.