Distribution Problem @ FastGo Inc.

Introduction
 FastGo inc. – a Household name in Indian FMCG industry.

 High quality products @ reasonable prices.

 Competitive edge- Extremely Low time to market

 Selling goods in 9 Calendar days after manufacturing.

 Competition takes in between 9-12 months

Situation
 FastGo’s Diversification into ready to eat products-

 Market size of existing Product line was shirking

 Cash Reserves which were lying Idle

 No Expectation of profit from first 5 years

 However Division Still in Red after 10 years

Problem
How to turn around Fast Go’s Ready to eat division, by making changes in the company’s
Supply Chain?

Facts of the case

Delhi

Factory Plant &

Factory Warehouse
in Pune

Chennai
Mumbai
  Regional warehouses send their monthly forecast

 Minimum One Truck Load of transport

 No Inventory Planning

 Stocks in warehouse is 3-4 months old

 No cross-shipment of between warehouses

 Customers Reluctant to Buy if stock more than 2 months old

Results in Old & High Inventory in Regional Warehouses

 Customers Refuses to Buy if stock more than 6 months old

Regional
Warehouse - 1

Manufacturing Factory Regional

Plant Warehouse Warehouse - 2

Regional
Warehouse - 3

Minimum One No Cross shipment

Truck Load

Why there is High and Old Inventory which the Customer refuse to buy?

 3 months Inventory (sales forecast (actual + tentative))

+ One month’s inventory at Regional Warehouse

+ One month’s inventory at Factory Ware house

= 5 Months Inventory
 Customer’s Reluctance to
5 months Inventory buy Product Older than 2
months

Product Already Obsolete

HIGH INVENTORY

What To Do?
At the Regional Warehouse

 Reduce Inventory at regional Warehouse to that of (normal Case) 3 week from 3

month

 Order Based on the Stock currently in the Warehouse

 FIFO system

 Stock Which came in earlier should be moved/sent to the Retailer earlier

 The Actual Inventory level to depend on

 Expected consumption in the given week

 Lesser Time à More accurate Sales forecast

 Transportation time to from Factory warehouse

 Inventory (Max stock Level)= 3 x LTC

 LTC = Lead Time Consumption

 Should Take into account

Demand in the current Week

Transportation time from the Regional Warehouse.

At the Factory Warehouse

 Decide on the Maximum Level of Inventory

 Order Based on the Stock currently in the Warehouse

  FIFO system

 Stock Which manufactured earlier should be moved sent to the Regional

Warehouse Earlier

 The Actual Inventory level to depend on

 Expected demand per week

(Given by the regional warehouse)

 Time to Manufacture goods at the manufacturing plant

 Inventory (Max stock Level)= 3 x L x C

 L = Time to Manufacture goods

 C = Daily Consumption

How will this Benefit?

 Reduced Inventory Throughout

 3 weeks Inventory @ regional warehouse

 1 months inventory @ factory warehouse

 No Need for Cross Shipment

 Combined inventory stored in Factory warehouse

 Pull System

 Manufacturing of goods only when there is demand for the good

 Increased throughput

 Better Sales Forecast

 Max 3 weeks of inventory at regional warehouse

 So weekly demand forecast will be More Accurate

 If possible

 Different dispatch days for different Warehouses

 Attempt sharing of trucks

  Outsource transportation to a transport company

 Or Company can hire local manufacturers so that transportation

costs and time are reduced.

 The inventory for the products should be planned according to the

region where it has to be sold.

 Eg- Sambhar powder will move more quickly in South India than in
North Indian markets.

 Also difference in demands of Urban & Rural markets.

 Ready to eat food has more demand in Urban cities than in rural
areas.