CASE STUDY

ON
LAXMI TRANSFORMERS

Submitted To:
Mr. Vivek Raina
Faculty of Supply Chain Management
Xcellon Institute-School of Business
Ahmedabad

Prepared By:

Name Roll No.

Nita Ahir 04
Manish Asnani 06
Ishit Bhatt 08
Kuldip Champawat 09
Prayag Chauhan 14
Pradeep Chauhan 15
Shalini Chettiar 16
Yogesh Chhimpa 17
Kaushal Dhakan 19
Jayesh Hotwani (Absent) 27
Ram Chaudhary (Absent) 39
Tushar Tewani 59
Nilesh Thacker 61
Ankur Thacker 62
Submitted on: 10/02/2012
 Laxmi Transformers

Q. 1: What is the best mode for logistic supply of raw material?

Ans.: Various mode of supply

Rail:
If in case of rail transport the following things are taken into consideration while
setting up the rail track of 15kms from Pen to Alibag.
Rail costing (from Pen)

kms Cat 1 Cat 2 Cat 3 Total

Goa 500 19770000 27240000 61790000
14780000
Mangalore 700 - - - -
Daitari 2200 103500000 140260000 195340000 439100000
Banspani 1800 91900000 12442000 173140000 277482000
Alibag 15 212500000 27200000 36200000 425900000
 {In the case of alibag 15 cr investment also get add in total cost }

Moreover 15crores are added in the total cost shown in the above table. Because as
given 1km line cost 1crore and the line is 15 kms long.
Now the following table shows the details about road transport.
Road:
Inbound road cost:

Possibility 1 0.5 rs / km
Goa Mangalore Daitari Banspani
Alibag 520 800 1780 1650
(K.M x 0.5) 260 400 890 825
Total Cost 26000000 - 178000000 165000000 369000000
(K.M x 0.5 x % of 40%
raw material ) 20% 40%

0.7 rs / km
Possibility 2
Goa Mangalore Daitari Banspani

Alibag 520 800 1780 1650 Kms

(K.M x 0.7) 364 560 1246 1155 Cost

Total Cost 36400000 - 249200000 231000000 516600000

(K.M x 0.7 x % of raw
material ) 20% 40% 40%

If we compare the above charts of rail and road then it seems that road transport cost
the company less. But in case of rail transport the company has benefit to share the
rail with a cement bagging plant, a gas based fertiliser plant and few other in the
drawing board stage. Moreover in future if any other companies come in the same
board stage then it can also share the same rail.

According to the group the company can go for road transport option. The reason
behind this is because company has not to take any pain to construct rail and further
handling it. Moreover if forecast of sharing the rail line goes wrong then it is
beneficial for the company. Also looking at opportunity investment of 15 crores
company can invest the same amount in some other areas and what return company
gets from the investment can be used in handling transport cost by road.

Sea:
The above table shows the calculation of various cost given if we take sea route as a
mode of transportation compare to other given options ,here we are considering 2
vessel having capacity of 35000 tonnes and 650000 tonnes considering draft
 restriction as a barrier due to this Barges are used for loading and unloading of a
cargo

Ship 1 (35000 and ship 2 65000)

cost/Ports Mangalore Paradip Calcutta
Ship 1 ship 2 ship 1 ship 2 ship 1 ship 2
raw material 33000000 33000000 50000000 50000000 50000000 50000000
fuel charges 337500 352500 1575000 1645000 1800000 1880000
Entry fees 330000 453750 380000 522500 420000 577500
standing Charges 1836000 3825000 1989000 4335000 2142000 4590000
barge charges 1440000 3960000 1440000 3960000 1440000 3960000
loading/unloading
charges FOBT FOBT 1360000 2560000 1530000 2880000
TOTAL COST 36943500 41591250 56744000 63022500 57332000 63887500
No of ship 1(SHIP 1 +
required 3 ship 2) 6 3 6 3
TOTAL COST 110830500 78534750 340464000 189067500 343992000 191662500

Conclusion:-

According to our cost analysis explained above the best mode of transport will be by
sea ,because its cost is minimum compare to other mode of transport
Q- 2 What final markets should Laxmi Transformers choose to serve based on
logistical consideration ? What is the best mode for the finished goods dispatch to
key markets?
Ans 2 Zone wise final markets are as follows:

North: South: East: West:

Delhi, Ludhiana, Bangalore Calcutta, Bhilai, Ahmadabad,

Lucknow, Jaipur, , Chennai, Bokaro, Jamshedpur. Baroda

As it was specified in the case is that as DRI the final product of the Laxmi
Transformers was used in both mini steel plant and large integrated steel plant
GUJARAT and MAHARASTRA were the two most industrialized states in India
and had a number of Mini steel plants and ferrous foundries which are the potential
sponge buyers

For the final market these two states were to be supplied as demand is there along
with other places which are as follows:

 Calcutta
 Bhilai
 Bokaro
 Jamshedpur
 Ahmedabad
 Baroda
 Delhi
 Ludhiana
 Lucknow
 Jaipur
 Bangalore
 Madras

ROAD:-
These are the final markets which the Laxmi transformers choose to serve based on
logistical consideration ,the best mode between ROAD and RAIL to dispatch for the
final goods to the key markets calculations are as follows:-

We assume that one truck can carry 30 tonnes (overload) source (GOOGLE)

The cost of per tones (overload) = 0.7 (given in the case)

Therefore:

Demand for the sponge iron market estimated = 10,000 tpa (exhibit 1).

Therefore: demand / total tones per truck.

= 10000/30 = 333.33 (trucks per year) therefore 333 (approx).

Therefore: 333 trucks were required for 1 year and for month.

Total trucks/ no of months = 333/12 = 27.75

Estimating (25- 30) trucks were required for a month.

Cost by Road:

Demand
Outbound per Demand x
Per tonne distance to 10,000 10,000/30 (per Total road
Market Kilometre market centers tpa truck tonnes) cost

Calcutta 0.7 2160 42.82 14273.33333 21581280

Bhilai 0.7 1450 30 10000 10150000

Bokaro 0.7 2200 35 11666.66667 17966666.67

Jamshedpur 0.7 2040 20 6666.666667 9520000

ahmedabad 0.7 441 3.38 1126.666667 347802

Baroda 0.7 357 5.23 1743.333333 435659

delhi 0.7 1043 35.21 11736.66667 8568940.333

Ludhiana 0.7 1235 15.39 5130 4434885

lucknow 0.7 1015 13.73 4576.666667 3251721.667

jaipur 0.7 875 9.9 3300 2021250

banglore 0.7 679 10.6 3533.333333 1679393.333

Madras 0.7 917 8.47 2823.333333 1812297.667

Total 81769895.67

Cost by
market rail
Bombay 27135520
nagpur 45574900
Kolapur 8189620
Total 80900040
 Cost by
market road
Bombay 22300600
nagpur 65405200
Kolapur 6639500
Total 94345300

Compare the two mode of transport to dispatch the final goods in three market are
as follows:

BOMBAY
NAGPUR
KOLAPUR

From the above calculation if we compare the two modes to transport the finished
goods than “RAIL ROUTE” will be best mode of transport

Q-3 Contingent on a particular Choice for inbound movement, can the same mode
be used servicing some final market?

Ans 3 As per the calculation of the above answer no 1 “SEA ROUTE” is feasible for
the inbound logistics and in outbound from answer 2 “RAIL ROUTE” is feasible for
outbound logistics for serving the inbound and outbound market different modes
will be used.

Q- 4 Is a rail siding from pen to alibag worth the investment?

Ans 4 As per the case from Alibag to Pen the distance is about 15 K.M and the cost of
per K.M is 1 cr, if we take or go for the investment than it will cost almost 15cr to set
a new railroad from alibag to pen and as the 3 categories mention in the case
110,150,220 the cost will be 63.75, 81.6, 108.6 (per quintal)

As the company invest today it will give fruits tomorrow so according to our
analysis the investment is worth wile it is also shown in Q-1 also in calculation of
RAIL and the total investment cost is Rs 425900000 (including all the category)

Q-5 If ships are to be used for inbound logistics, how many barges would be
required for the lighterage operations from the mother vessel to the jetty at
alibag?
If the vessel of 35000 tonnes capacity is used then 4 barges will be required and if
65000 tonnes capacity is used then 6 barges to be used for the lighterage operations
from the mother vessel to the jetty at Alibag.

Q-6 would the scheduling of carries in any mode affect the economics of the mode
choice?

Ans-6 yes, the scheduling carriers in all the modes affect the economics of the mode
choice because variable and fixed cost in every mode are different, the balance
between time and speed affect the delivery of goods in transportation while
choosing the appropriate modes available.

Operating cost in each mode has relevance to cost and safety is the other main
component which plays a major role because of which the choice of modes does
change in one way or other.

Available choices in transport:

1. Rail
2. Road
3. Sea
Pricing plays a vital role:

This is an important area, where due to practices of administered and often placative
pricing, major distortions have set in. They may have been in existence long enough
to have even influenced investment decisions, that is resulted in allocative
distortions. The most glaring example is the shift of freight traffic from rail to road
due to inter alia pricing way above the true economic cost. This has resulted in a
significant increase in road traffic where large investments are now being
channelized.

The main role of transportation depends upon the operation i.e. The services and
level of safety is more than compared to other means of transport but the capacity
and means to reach the hubs and destinations differs from one another so the main
task is to make a appropriate decision which will result into productivity.