Problem Identification

Concer
Major Challenges Key Issues to Address
Sales/BD
Orders skewed towards the end of the month Y
50% opportunitstic Clients Y
No Demand Forcasting Y
Poor Oder Book Order Cancellations Y
Position / Order Book
Skewness Very Low Order Book Position at the start of the month Y
Low visibility for future demand Y
Limited Market Coverage Y
Inefficient budgeting
High Fluctuations in the Price Y
High Risk Exposure to No Pipeline Inventory
Raw material Price Opaqueness in Pricing of Goods Y
Fluctuations Very Lenient Credit Policy
50% Oppurtunistic Customers Y
Inefficient budgeting/ Emergency Loan Disbursment Y
Very Lenient Credit Policy
Extremely High opportunistic clients Y
Working Capital / Poor Higher Costs/Wastage Due To Quality Deviation
Performance Ratios High Accounts Recievable Time Y
Rigid Finance Policies
Challenges for closing the deal Y
High Skewness in availability of trucks
Inefficient and ordinary Delayed Commercial Clearance for Domestic Orders
Inbound/Outbound
Logistics High Lead Time for Procurement of Raw Materials
High Variation in Shipping Line Lead Times
Underutilisation of No Pipeline Inventory
Capacity/Quality
Deviation/ Ineeficient Higher Costs/Wastage Due To Quality Deviation
Sequencing No Demand Forecasting Strategy Y

Categorization of Issues under MECE framework &

Major Challenges Key Issues to Address Sales/BD

Orders skewed towards the end of the month R

Order Cancellations R
Poor Oder Book
Position / Order Book Very Low Order Book Position at the start of the month R
Skewness R
Low visibility for future demand
Limited Market Coverage R
No Pipeline Inventory I
High Risk Exposure to
Raw material Price
Fluctuations
 High Risk Exposure to High Fluctuations in the Price A
Raw material Price Opaqueness in Pricing of Goods A
Fluctuations
Inefficient budgeting/ Emergency Loan Disbursment −

Very Lenient Credit Policy A

Extremely High Working opportunistic clients R
Capital / Poor R
Performance Ratios High Accounts Recievable Time
Rigid Finance Policies A
Challenges for closing the deal R
Delayed Commercial Clearance for Domestic Orders A
Inefficient and ordinary −
Inbound/Outbound High Lead Time for Procurement of Raw Materials
Logistics High Skewness in availability of trucks R
High Variation in Shipping Line Lead Times −
Underutilisation of Higher Costs/Wastage Due To Quality Deviation A
Capacity/Quality No Demand Forecasting Strategy I
Deviation/ Ineeficient
Sequencing High Lead Time for Few Products C
TOTAL
ntification
Concerned Departments
PPC Manufact- Finance Logistics Sourcing &
uring Procurement Poor Order B
Y Position / Or
Book Skewn
Y
High Risk
Y Y Exposure to R
Y Y Material Pri
Y Fluctuation
Y
Y Extremly Hi
Y Working Capi
Y Poor
Performanc
Y Y Ratios

Y Y
Inefficient a
Average
Y Y Inbound/Out
Y nd Logistic
Y
Y
Y UnderUtilisa
Y Y
of capacity
Quality devia
Y Y due to Ineffic
Y Y Sequencin
Y
Y Y

under MECE framework & Criticality Score Calulation

Manufact- Sourcing & No. of effect-

PPC uring Finance Logistics Procurement Cause Total Score
Relationships
A A C A I 1 17
I C A A − 1 14
A A − − I 1 12 68
A A − − C 1 13
I I A C − 1 12
R A C C A 2 17

52
C − C − R 1 12
I − R − C 1 11 52
C C R − C 2 12
− − R − − 1 8
− − A − − 2 9
− − R − − 9 51
1
I − R − A 1 12
I − R A − 1 13
A − R R − 1 15
A A − − R 1 11
53
C C − R − 1 13
A A − A R 1 14
R R A − − 2 16
R A − − A 2 13 43
R R − − A 1 14
267
 Problem-Issues and their Cause-Effect Relationship with Respective Departments

Most orders skewed towards Opaqueness in Pricing of

the end of the month goods
Poor Order Book
Position / Order High fluctuations in the price Order Cancelleations
Book Skewness of Nickel

Very Low order book position

Ineffcient Budget planning / at the start of the month
High Risk emergency loan disbursment
Exposure to Raw
Material Price Low visibility for future
demand
Fluctuations No Pipeline Inventory

Limited market Coverage (few

export options)
Extremly High
Very lenient Credit
Working Capital / Policy
Challenges for closing the
Poor deals
Performance
50% opportunistic
Ratios Customers Inefficient and rigid Finance
Policies

Higher costs due to quality

deviation/wastage
High Accounts Recievable
Inefficient and time
Average
Inbound/Outbou high skewness in
availability of trucks
nd Logistics High Lead Time for few
products

No Demand Forecasting
Strategy
UnderUtilisation High lead time for
procurement of raw materials
of capacity /
Quality deviation Delayed Commercial
Clearance for domestic orders
due to Inefficient High Variation in Shipping
Sequencing Line Lead times

Pr
Underutilisation of Capacity/Quality Devia
Legend for RACI score calculation
Inefficient and ordinary

Descreption Code Score Extremely High Working Capita

High Risk to Raw

Departments which are
R 4 Poor Oder Book Pos
responsible for solving the issue
Departments that are affected
by the issue and will be A 3
impacted by the solution
Departments that should be
C 2
consulted before any changes
 Department that should be
I 1
informed about any changes
Number of cause effect
relationships shared with major − −
challenges

Problem Prioritization
Major Problems Identified Criticality Weights
Score
Poor Oder Book Position / Order Book Skewness 68 25.47%
High Risk to Raw material Price Fluctuations 52 19.48%
Extremely High Working Capital / Poor Performance Ratios 51 19.10%
Inefficient and ordinary Inbound/Outbound Logistics 53 19.85%
Underutilisation of Capacity/Quality Deviation/ Ineeficient Sequencing 43 16.10%
tments

Sales & Business

Development

Production
Planning & Control

Manufacturing

Finance

Logistics

Sourcing &
Procurement

Problem Prioritization Chart

utilisation of Capacity/Quality Deviation/ Ineeficient Sequencing

Inefficient and ordinary Inbound/Outbound Logistics

Extremely High Working Capital / Poor Performance Ratios

High Risk to Raw material Price Fluctuations

Poor Oder Book Position / Order Book Skewness

0 1 2 3 4 5 6
Priority

5
3
2
4
1
 Identified Issues/Hypothesis
Orders skewed towards the end of the month
Order Cancellations
Very Low Order Book Position at the start of the month
Low visibility for future demand
Limited Market Coverage
No Pipeline Inventory
High Fluctuations in the Price
Opaqueness in Pricing of Goods
Inefficient budgeting/ Emergency Loan Disbursment
Very Lenient Credit Policy
opportunistic clients
High Accounts Recievable Time
Rigid Finance Policies
Challenges for closing the deal
Delayed Commercial Clearance for Domestic Orders
High Lead Time for Procurement of Raw Materials
High Skewness in availability of trucks
High Variation in Shipping Line Lead Times
Higher Costs/Wastage Due To Quality Deviation
No Demand Forecasting Strategy
High Lead Time for Few Products
 Acceptance Criteria
Mentioned in the case : In conversation with Sales Head Adriana
Mentioned in the case : In conversationwith Finance
Mentioned in the case : In conversation with PPC Hhead
Assumed due to low manufacturing in the start of the month
Mentioned in the case : In conversation with Sales Head Adriana
different lead times for goods which have other finishd goods as their intermedieries
Mentioned in the case: also the fact that customers are opportunistic to exploit these fluctuations
Customers complained about the lack of tranparancy
mentioned in the case
Assumed due to very hugh Recievable days
Mentioned in the case: "50% of the customers are opportunistic"
Direct Inference from the annexures
Mentioned in the case: "Finance team sets very stringent guidelines to avoid any negative repercussions to the bottom-line."
Mentioned by the sales Head, difficult to match market prices and order cancellation occur
Mentioned in the case : Delay in commercial clearance
Direct Inference from the annexures
based on the data available in the annexures, and analysis backed up in the sheet
Direct Inference from the annexures
Mentioned in the case: 15% quality variation. Roughly translated into wastage and costs
The fact that they plan production with only 10% order book position and do not have pipeline inventory
Mentioned in the case: Data Available in the Annexures
ssions to the bottom-line."
 Operating Cycle
Operatinc Cycles Excellentia Industry Mean Industry Best Variance

Working Capital Cycle 323 94 44 243.6%

Receivable Days 316.1 90.8 22.3 248.1%
Payable Days -107.7 -98.9 -44.7 8.9%

Operating Cycle Pe
10
9
Payable Days
8
7
6
Receivable Days
5
4
3
Working Capital Cycle 2
1
-150 -100 -50 0 50 100 150 200 250 300 350 0
Asset Turnover Ratio

Excellentia Industry Average Industry Best Excellentia

 Performance
Industry
Performqnce Ratios Excellentia Industry Best Variance
Mean
Asset Turnover Ratio 0.4 0.8 1 -50%
Inventory Turnover Ratio 3.2 4.5 8.8 -29%

Performance Ratios
10
9
8
7
6
5
4
3
2
1
0
Asset Turnover Ratio Inventory Turnover Ratio

Excellentia Industry Mean Industry Best

 Nickel Price Price fluctuations
Year 2011 2012 2013 2014
Nickel Prices (USD/ton) 28,000 22,000 20,000 16,000
CAGR of Price Change -15.59%

* The prices here are simple approximation based on graphical data and taken for rough estimation and underst

Nickel price fluctuation throughout last few years

30,000 28,000

25,000
22,000
20,000
20,000
17,000
16,000
15,000
12,000
10,000

5,000

0
Nickel Prices (USD/ton)
 2015 2016
17,000 12,000

estimation and understanding

ars

2011
2012
2013
2014
12,000 2015
2016
 Inbound Logistic Process B
Order initiation Slot Preparation Process Sailing

Days Max Min Max

Raw Material - Inventory Ordering Number of Number of Variance Avg Number Number of
Sourcing Region Plant Process days days of days days

Nickel - Europe 8 5 22 14 8 18 12
Ferro Nickel - Asia 2 5 27 13 14 20 33
SS Scrap - Japan 9 5 28 9 19 19 33
SS Scrap - Europe 9 5 20 9 11 15 12
MS Scrap - Asia 24 5 28 9 19 19 45

Inbound Logistics Lead time measurement

160

140

120

100

80

60

40

20

0
Nickel - Europe Ferro Nickel - Asia SS Scrap - Japan SS Scrap - Europe MS Scrap - Asia
 Inbound Logistic Process Breakdown and Lead times
Sailing Port Operations Order Reception
Customs &
Min Avg Max Min Avg other Plant
Number of Varianc Number of Number of Number of Variance Number of Rail Out document Storage
days e days days days days ation location
process

12 0 12 11 5 6 8 3 7 2
19 14 26 19 7 12 13 3 8 2
19 14 26 19 7 12 13 3 15 2
7 5 10 13 7 6 10 3 14 2
23 22 34 16 4 12 10 3 12 2

measurement

SS Scrap - Europe MS Scrap - Asia

This Information is taken from the GEP knowledge bank. : https://www.gep.com/blog/mind/di

a-burgeoning-practice-in-the-american-trucking-industry | To combat the relatively incompet
booking, on-demand trucking platforms are increasingly being favored by procurement mana
bookings.
 Lead Time calculation

Best Case Average Worst Cae Variance

Scenario Scenario Scenario

56 63 70 14
59 79 99 40
69 91.5 114 45
56 67 78 22
82 108.5 135 53

s://www.gep.com/blog/mind/digital-freight-booking-
combat the relatively incompetent modes of freight
g favored by procurement managers for impromptu
.
 Order Skewness Measure*
Monthly Ord
Skew Skew Skew
Weeks Min Max Avg 45.0%
(Min) (Max) (Avg)
Week 1 372 435 403.5 13.0% 13.0% 13.0% 40.0%
Week 2 570 665 617.5 20.0% 23.3% 19.9% 35.0%
Week 3 770 900 835 27.0% 31.5% 27.0%
30.0%
Week 4 1145 1335 1240 40.1% 46.7% 40.1%
25.0%
19.9%
* Order Skewness is calculated assuming that all order dispatch goes 20.0%
through trucks, therefore the truck utilisation is calculated to measure 13.0%
skewness 15.0%
10.0%
5.0%
0.0%
Week 1 Week 2
 Monthly Orderbook Skew (Avg)
%
40.1%
%
%
% 27.0%
%
19.9%
%
3.0%
%
%
%
%
Week 1 Week 2 Week 3 Week 4
A. As-Is

FY 14-15 15-16
Total revenue (in Mn $) 1136.8 1014.25
COGS (in Mn $) 998.4 920.23
Gross Profit (in Mn $) 138.4 94.03
Gross Profit as % revenue 12.17% 9.27%
YoY change in Revenue -10.78%
YoY change in GP -32.06%

Year 2011 2016

Nickel Prices (USD/ton) 28,000 12,000
YoY Average Price Change -15.59%

Year 2011 2016

Steel Prices (USD/ton) 700 500
YoY Average Price Change -6.51%

B. To-Be
Premium Pricing with Mark up
Base COGS (in $) 920230000
Units of steel sold (in tons) 1840460
Base selling price inland (In $ per ton) 625 25% Mark up
Base selling price overseas (In $ per ton) 750 50% Mark up
Units sold inland (in tons) 1472368 Domestic
Units sold overseas (in tons) 368092 Export

Inland Sales Best Possible Scenario Most Likely Scenario

Units sold at 10% discount (due to upfront 0 736184
payment)
Units sold at base selling price 1472368 736184
Total Revenue- Inland Sales (in $) (A) 920230000 874218500

Overseas Sales Best Possible Scenario Most Likely Scenario

Units sold at 10% discount (due to upfront 0 184046
payment)
Units sold at base selling price (due to upfront 368092 184046
payment)
Total Revenue- Inland Sales (in $) (A) 276069000 262265550

Total Sales Best Possible Scenario Most Likely Scenario

Total revenue (in $) (A)+(B) 1196299000 1136484050
Base COGS (in $) 920230000 920230000
Gross Profit (in $) 276069000 216254050
Gross Profit as % of revenue 23.08% 19.03%

Total revenue (in $) (A)+(B) 1196.299 1136.484

Base COGS (in $) 920.23 920.23
Gross Profit (in $) 276.06 216.25
Gross Profit as % of revenue 17.95% 12.05%

ROI 44.87% 30.13%

CAGR

Final product based on intermediate goods pricing

Ex rate and fluctuation

Least Acceptable Scenario

1472368
0
828207000

Least Acceptable Scenario

368092

248462100

Least Acceptable Scenario

1076669100
920230000
156439100
14.53%

1076.69
920.23
156.43
6.16%

15.38%