Distributi

on &
Logistics
Managem
ent
Case: Where is My
Profit?
Submitted To

Prof. Asif Zameer Jitesh Kejriwal, FMG 18 Y,

91084
FORE School of Management

New Delhi
 Distribution & Logistics Management

Q1. Why did the President-Distribution & Logistics of BFL separate distribution function
from marketing and sales functions? What prompted him to integrate logistics system with
distribution management?

Answer

The President of Bharat Foods Ltd. would have separated distribution and logistics function from
marketing and sales function may be because of the following reasons:

1. The focus on the distribution function will be increased which will help in bringing
down the rising distribution costs over the years. E.g. Distribution Channel cost had
increased from 10% in 2005 to 14% in first two quarters of 2006.
2. Replenishment cycle time can be reduced as focus would be more on distribution
related strategies, hence best practices pertaining to transportation and warehousing can
be easily implemented. At present replenishment cycle is the biggest headache where
retail chain owners are on the verge of breaking their commitment with the company.
Hence it may be an important decision in this regard.
3. The bullwhip effect can be checked as the focus would be more on order delivery and
order fulfillment. Hence, the effect of sales forecasting by various participants of the
channel and the resulting order variability won’t be there.

The several benefits which could be obtained by integrating Logistics with the distribution
system can be listed as

1. Replenishment cycle time is reduced as there would be better order monitoring due to
the integration of logistics capabilities with the distribution practices.
2. There would be better monitoring of demand and thus, a perfect match between
demand and supply can be achieved. Due to this there would be better order management,
demand management; transportation management also, there would be enhanced tracking
of inventory and order movement.
3. Due to centralized and integrated approach the communication between the company
and the supply chain members would improve and hence this would lead to better
coordination.

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4. In the current scenario the transportation at Bharat Foods Limited (BFL) takes place on
full truck load (FTL) basis. This in turn increases the replenishment cycle time and the
order delivery time. Now, due to the integration between logistics and distribution,
company can arrange for less than truck load (LTL) transportation by collaborating
with some other traders or competitors who are willing to transport their goods to the
same destination. Thereby, the cost of transportation for BFL would reduce and also the
time taken for order fulfillment and delivery.

2. According to you which internal link should be bypassed by him and why?

Answer

The company has decided to remove the internal links any one out of the central warehouse or
distribution centre. The current distribution system of Bharat Foods limited is as follows:

In the present case the products are first shipped to the central warehouse and then to the
distribution centre and from there on they are shipped to stockist/ Retail chain, local wholesalers
and retailers subsequently.

The problem in the current situation is that

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1. The products are shipped on Full Truck Load Basis, be it either from the plant or the
central warehouse or the distribution centre. The products are not delivered until the truck
load is full as this may result in increased transportation cost. This delays the entire
delivery process thus increasing the replenishment cycle to 45-60 days as the case
mentions.
2. Again each of them has their own local transport services for shipment of products
which are not integrated with the plant.
3. The packaging is done both at the plant (for institutional buyers) and at central
warehouse or distribution centre (for consumers). This increase the time at the plant
as the products are shipped depending on which will be sold in the consumer market and
then they are packaged at the central warehouse.

Hence in this case the Distribution Centers can be removed and in turn number of stockist
can be increased.

1. The distribution centre’s are more of a redundant as they only deliver the products to
the stockist as the same can be done by the central warehouse if they various stockist’s
are linked to the central warehouse on the basis of their geography so that on central
warehouse is looking after the stockist’s of its geographic region only i.e. North Central
Warehouse is responsible for all the stockist’s and retail chain deliveries in north India.
2. To facilitate the increased work of managing stockist’s at central warehouse, the
packaging of consumer products can be brought back to the plant where the
packaging for the institutional products is already going on.

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3. Do you feel that some of the logistical functions (especially running and maintain 25
warehouses across the nation) should be replaced by 3PL? If not, how can transportation
and warehousing efficiency and productivity can be improved?

Answer

Third-party logistics provider is a firm which acts as a one stop shop service to its customers of
outsourced logistics services for part, or all of their supply chain management functions. They
typically specialize in integrated operation, warehousing and transportation services that can be
scaled and customized to customer’s needs based on market conditions and the demands and
delivery service requirements for their products and materials.

In this case 3rd party logistics support can be taken to maintain the 25 warehouses across the
nation:

1. 3rd Party Logistics will allow Bharat Foods to focus on its core competency of
manufacturing the products and focus more on the institutional buyers.
2. 3PL will integrate well with all the warehouses and will allow for one transport system to
be followed both by the central warehouse and the distribution centre where as presently
each of them is using a local transport service.

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3. The need of delivering the products on full truck load basis to save of transportation cost
would be eliminated as 3PL provider would integrate its systems throughout the supply
chain which will help in brining the replenishment cycle down from 45-60 days.
4. 3PL can help in packaging process thus bringing the replenishment cycle further down.
5. Here the Role of Customer Adapter: 3PL (this type of 3PL provider comes in at the
request of the customer and essentially takes over complete control of the company’s
logistics activities. The 3PL provider improves the logistics dramatically, but do not
develop a new service.) would appropriate as in this case
a. The supply chain is large starting from the warehouse to retailers all are present,
b. Again, they all are not integrated as it is apparent that each of them are using their
local transport service providers to deliver products further in the supply chain

If, however, 3rd PL services are not used then transportation and warehousing efficiency can be
improved only by

1. Integrating the entire supply chain through the use of I.T. systems which will allow all
the supply chain partners to monitor the movement of goods and inventory and deliver
the same as and when needed.
2. The use of single transportation system by all the supply chain partners or company
owned distribution system would reduce the replenishment cycle and the loss due to
stock outs as this will eliminate the need of shipping the products only when the truck
load is full.

Q4. What is your opinion about his decisions? Do you think that such decisions will give a
new direction towards gaining market responsiveness capability in general and logistical
cost containment in particular? How will IT facilitate him? Justify your view.

Answer

The president of Distribution and logistics at BFL (Bharat Foods Ltd.) took the right decisions by
separating the distribution function from marketing and sales function as this arrangement would

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give the company advantage not only in terms of more focus on order delivery and order
fulfillment but Replenishment cycle will also get reduced considerably since it will result in
better coordination between various channel members.

1. The elimination of Distribution centre will result in cost containment. This is because of
the fact that the presence of distribution centres was a redundant. Moreover with less
channel members, market responsiveness will increase and will help in better sales
forecast and accurate production.
2. The use of 3rd party logistics will help company in focusing its efforts more on
manufacturing and demand – supply chain. Moreover the Full truck load shipments
which results in delays can be eliminated by sharing the truck load with competitors or
other manufacturers. This can also be arranged by the 3PL which will monitor the
complete shipment process right from the plant to the retailer.

The various benefits that can be derived by implementation of information systems in the
distribution network of Bharat Foods Limited can be listed down as:

1. The use of Information Technology in the management of logistics function such as order
management, demand management, transportation management will help in integrating
all the partners of the distribution system and will allow them to work as a single
integrated distribution function of the company.
2. Information systems will allow the channel members to monitor the movement of
inventory and replenish them same as and when needed. Better management of inventory
throughout the supply chain can be achieved by using RFID tags which will help in
keeping a watch over the amount of goods sold at the retailer’s outlet and will thus help
in accurate production and shipment of goods.
3. This will result in better coordination among the various channel members which will
also help in eliminating the problem of lost sales due to stock-outs.
4. Finally all this would result in reduced transportation time which in turn will help
reducing the replenishment cycle.

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