Ram, Supply Chain VP of Sigma Toys company, visited his friend Anand, Business Development head of

a similar Toy Manufacturing firm. While sipping a cold brew and eating the famous hot dog, Ram
appreciated Anand on how his firm was able to grow quickly as they started way late than Sigma Toys.
Anand joked and said it’s always slow and steady who wins the race. Later they were discussing the
general trend in the toy industry and how the e-commerce boom affected their business. During these
discussions Ram got to know that performance of Anand’s firm was much better than Sigma toys in the
last couple of years. Also, he found it hard to digest that they were lagging in many supply chain areas.

Once he was back in his office still thinking about the discussion, he received a text from Lakhan, CEO
of Sigma Toys. Lakhan had just finished the Q1 2021 business review discussion with the board of
directors and was on his way back to the office.

For many years, Sigma Toys, a retail toy company, headquartered in Mumbai, has been a toy market
leader producing high quality toys in India. They produce PVC toys and have been known for the best
toy designs for close to two decades. However, Lakhan was aware that the Q1 numbers weren’t looking
good. In fact, Sigma Toys profitability (Exhibit 1) had been trending downward since early 2018! Ram
was also pondering on how this trend could be reversed. Ram knew that Lakhan will initiate a slew of
measures to get them back on the growth path. As a precursor to this meeting, Ram was prepared with
a broad action plan for optimization of their Supply Chain.

Lakhan reached his office post the board meeting and invited Ram to his cabin. Lakhan came straight to
the point about the issues at hand.

Lakhan: Well...this board meeting was the worst that I have had in my tenure here. There was a general
concern raised by the board of directors about our reducing profitability and market share. Our 2021
Q1 numbers didn’t help either! Our rising YoY cost is an area of utmost concern and is making the board
raise eyebrows.

Ram: Yes, based on the reports, we realized that the increase in costs is significantly higher than our
revenue growth.

Lakhan: The board was worried about the inefficiencies in our overall supply chain that could be
impacting our profits.

Ram: Overall operations cost is one of the biggest concerns that my team is facing. We also looked at
the performance of some of our competitors and their overall cost for similar products, which seem to
be significantly lower. Factors like packaging costs, taxes, and freight charges vary substantially across
different manufacturing sites and the retail price for the end customers has been going up in the past
few years. Also, I was having a word with our manufacturing team, and they are also seeing an uptick
in the manufacturing cost.

Lakhan: So, we already have a head start in identifying the root cause. What’s your action plan?

Ram: Since both logistics and production cost have been rising slowly but constantly for a few years
now, we would need a strategic review of our operations to realize the immediate impact to our
bottom-line. We engaged with multiple consulting firms over the last few weeks and have shortlisted
GEP to review our operations and design an improvement plan. If approved, this plan will help us
optimize our supply chain. In fact, we have a call later today with GEP to kick start the pilot project. We
will provide GEP an overview of some of the challenges that we’re facing.

Lakhan: Oh yes! I remember meeting the GEP team during a recent business conclave and was
impressed with their supply chain and procurement capabilities. Do keep me posted on the progress, I
would like to talk about it in our next board meeting.
Ram: Sure, Lakhan.

Ram rushed back to his office and started preparing for the meeting with GEP. Also, he started getting
the data ready which he thought would be required by GEP to further analyze the problems that they
have at hand. He was prepared with a list of key points he wanted to discuss over the course of the
meeting.

Meeting with GEP

Attendees – Ram (Supply Chain VP, Sigma Toys), Kaviraj (Retail Vertical Head, GEP), Hemant (Supply Chain SME, GEP)

Ram: Hello everyone! Thank you for joining the meeting today. As you are aware, the primary objective
of this call is to kick-start our pilot project, which will be targeted towards helping us tackle some of the
problems we are facing in the supply chain vertical for our company.

Hemant: Thanks Ram for setting this up. We are excited to be part of this journey and look forward to
helping you in solving the problems that you are facing

Ram: Let me provide you with a quick overview of our company. We are an end-to-end PVC toys
manufacturing firm based out of Mumbai, with close to 15% market share in the Indian Toy Market. We
manufacture toys for various age categories and in various genres. (Exhibit 2)

We have our PVC manufacturing plant at Pune, where we produce PVC, which is used to manufacture
toys in our Toy manufacturing plants. The PVC manufacturing plant is currently running at 80% capacity
manufacturing PVC in 3 cycles/day. Our toy manufacturing plants are located at 5 locations – Noida,
Nagpur, Bhubaneshwar, Lucknow & Rajkot, and they serve the demand of our wholesale distribution
stores located in 8 cities– Delhi, Chennai, Kolkata, Goa, Mumbai, Jaipur, Bhopal & Shimla. Our Toy
manufacturing plants are currently running at 60% capacity which converts 1 MT of PVC into 50 Toys.
Our toys are then sold to the end customers through retail only channels, which procure the toys from
these distribution stores. We seek GEP’s help in reviewing our existing network and helping us identify
what we can do to improve our bottom line. To enable this process, we will be sharing our PVC
manufacturing data and the process flow. Also, we would be sharing our toy production data along with
the demand data from each of our distribution centers. It will also include some preliminary information
on the process flow for our finished toys. (Exhibit 3,4,8,9)

Hemant: Thanks Ram for the quick overview of the business operations. We have helped several of our
clients to streamline their supply chain and have been successful in achieving great cost savings. We
would like to assess equipment efficiency, capacity utilization, and FTE utilization for the PVC
manufacturing plant as a starting point. We will conduct an “As-Is” analysis to identify the bottlenecks
and provide recommendations for a better structure. We would like to see the organizational structure
along with the types of equipment used in the PVC manufacturing plant.

Ram: That’s a very good point Hemant. Yes, I can provide the organizational structure for our PVC Plant.
Also, along with that, I will provide the production and demand data for you to better understand the
overall scope. (Exhibit 5,6,10,11) But please do note that we are labor and equipment intensive in our
PVC manufacturing process, whereas our Toy manufacturing process is fully automated. And, for our
PVC manufacturing plant, our factor of safety is 90%, which means no equipment in our PVC Plant can
run at more than 90% capacity utilization.

We employ 50 people in the PVC manufacturing plant, and for each Toy manufacturing plant, we deploy
8 people: 3 designers, 3 skilled labors working on machines, and 2 management personnel. Each of our
distribution centers has 2 people to manage the facility. Toy designers are the brains of the toys, they
create different designs, and often will be well versed in both the creative thought process and the
technical aspects associated with materials and creation of toys. Skilled Labors manage the molding
machines in our Toy Manufacturing stations and management personnel look over the complete
operations and functioning of the plant.

The type of toy mold machines we have in our Toy Manufacturing station are:

1. Injection Toy Molding Machine – Most commonly used in our Toy manufacturing, PVC is molten
and injected into molds, until it is dry and can be popped out and is then sent to the automated
assembly line for painting, staining, or further assembly if it is a toy with numerous parts .

2. Hollow Toys Extrusion Blow Molding Machine – It is used for hollow toy products with complex
shapes, high thickness products, huge size toys which overall require low dimensional accuracy .

3. Electroforming Toy Molding Machine – Mostly we use them to produce head, torso, and limbs
on the toy dolls, animals, and other figures.

We believe that our Toy Manufacturing plant is efficiently utilized as compared to our PVC
manufacturing plant. Also, to increase the efficiency of our PVC manufacturing plant, we thought of
reducing the waiting time by adding a reactor a few years back, but we were unsure of the ROI and
hence the initiative was put on hold.

Additionally, we have seen that our attrition has gone up in the last few years which has led to increased
training efforts and costs. (Exhibit 7)

Kaviraj: Understood Ram. We will have a look at your current structure and based on our experience
and data analysis, we will come up with a recommendation to tackle these problems.

To help us better understand the specifications of the reactor, can you provide more details regarding
the functioning and dimensions of the same?
Ram: Sure Kaviraj. In our PVC Plant only one reactor can function at a time. Please note that radius of
reactor is 3.5m and height of reactor is 8.4m. Additionally, can you suggest the optimal number of
reactors we can install in our PVC Plant if we the ability to run multiple reactors simultaneously?

One thing I would like to point out is that many times we face shelf availability issues as we are not able
to replenish toys in our toy distribution centers, which in turn aren’t able to reach the retail stores ,
leading to loss of sales.

Also, our logistics team is always challenged with the overall costs whenever we take a longer route to
deliver toys. What do you think we should do?

Hemant: Ram, that’s an interesting problem! Surely, we can do that. We understand that for Sigma
Toys, toys availability on the shelf will always be a priority to meet the demand, while keeping the
logistics cost at the minimum. And, to make that happen I believe Sigma Toys’ network requires an
attention. On top of it, some best-in-class industry practices from GEP would help you in incorporating
additional benefits.

From our experience, we know that demand pattern in retail industry keeps fluctuating across the
months. We would be interested in knowing if this is the case with Sigma Toys as well. This would give
us more direction in evaluating the demand-supply at each of the nodes.

Ram: Though our demand has declined in the last couple of months but, our long-term projections are
robust and expected to grow at a CAGR of 15%.

Also, to answer your other question – We do have seasonal demands, and the delay caused in the
shipment impacts our overall sales. Our peak demand is in the months of March, April and October,
November. The demand shoots up by an average of 20% in these 4 months (This increase is already
included in our demand numbers). (Exhibit 11)

Hemant: It’s good to know that the future numbers are robust. We will review your demand and suggest
the optimal network.

Ram: Also, note that the quality and finish of our toys are key demand drivers. We have a very strict
policy for QA to check if the toys are safe for the kids, and we do not compromise on that. Hence, our
rate of rejection i.e., error rates are high. And we sell those rejected toys at a flat rate of INR 50. We do
not pay any shipping or logistics costs here. It is picked up by a Mumbai-based scrap dealer and payment
is made online. (The Toys are sold without Sigma Toy Label)

Here we would also like to add that we have seen that the defective toys reaching market impacts our
brand, and hence we keep a very strict check to not let any defective products reach our customers.

Kaviraj: Ram, good to know that we keep our quality and safety standards high, which makes sense for
a brand like yours. When you say INR 50 per toy, do we incur any loss or profit here? By this, I want to
understand are we doing the right thing by selling those products at a flat rate/ toy or there can be better
ways to deal with it? Did we try any other avenues or a differential strategy to manage the defective
toys, thereby increasing the revenue?
Additionally, as you mentioned that QA checks are taken very seriously, do we have any SOPs in place
to check the manufactured toys for safety standards?

Ram: We sell our toys in the market at an average of INR 500/piece. No, we haven’t tried any other
avenues of monetization for our defective toys.

And, no, we do not have any SOPs currently in place, but it would be great to have. Would GEP help us
in devising SOPs for our QA department? AARUSHI

Kaviraj: Sure Ram, we can help devise standard documents for the QA department. Also, we will review
your current scrappage policy and get back with recommendations.

And, considering the plant utilization capacity and current monetization avenues for the company, do
ANJALI
you think we should also consider improving the bottom line by increasing revenue via higher capacity
utilization? Also, would your company be open to new channels of overall sales monetization?
SWE
Ram: Sure Kaviraj! We always worked on our retail distribution channel till now and never ventured
into any other form of sales.

Kaviraj: Thanks Ram for those details. We think we can investigate other channels and recommend
SWE
avenues of monetization.

Did we happen to change our toy segmentation strategy based on the current market trends? The
reason for asking this is that, in our experience, keeping product mix in line with the trend, results in
significant impact to the bottom line and the market share.

Ram: Kaviraj, we did add many new categories of toys, but we never altered our strategy basis research.

Kaviraj: We think we can benchmark our current product mix vs the market trends and provide a plan
to change our toy segmentation strategy, if applicable. We believe this way we can match up to the
changing demands of our customers.

Ram: Perfect! Looking forward to meeting with you in a couple of weeks!

 Exhibit 1

Income statement for Sigma Toys (In INR Cr)

(In INR) FY 2020 FY 2019 FY 2018

Revenue 457 398 320

Cost of Revenue 378 325 249
Direct Material 365 315 238
Direct Labor 13 10 11
Gross Profit 79 73 71
Sales, General
35 28 26
and Admin.
Internal SG&A
11 8 8
Expense
External / 3rd
24 20 18
Party Expense
Operating
44 45 45
Income
Additional
3 1 2
Expense Items
Interest Expense 2 1 4
Taxes 9 9 9
Net Income 30 34 30

Exhibit 2

Toy Segmentation % Of Manufactured Toy Categories % Of Sold Avg Selling Price (INR)
0-18 Months 12% Action Figures & Play Sets 7% 300
Arts & Crafts 16% 380
18-36 Months 6%
Blasters & Accessories 4% 800
3-5 Years 52% Construction & Building Toys* 6% 700
5-7 Years 18% Dolls & Playsets 12% 650
Games & Puzzles 22% 325
7-9 Years 9%
Infants & Preschool Toys 22% 510
9-12 Years 1%
Ride on & Scooters 1% 1200
12+ Years 2% Roleplay & Playsets* 10% 750

*Newer category of toys added in the last 5 years

 Exhibit 3

PVC Flow Chart (For 1 Cycle)

Exhibit 4

Equipment Description

Equipment Equipment # Capacity Utilization Processing Time (in hours) Waiting Time (in hours)

Tank T1, A1, B1, T2 50% - -

Reactor R1 80% 4 4

Column Stripping C1 75% 1 -

Compressor E1 80% 0.5 -

Dryer D1 75% 1.5 -

Magnetic Separator M1 75% 1 -

Warehouse Tank WH1 50% - -

 Exhibit 5

Current Organization Structure (2020)

Shift Manager 1 Shift Manager 2 Shift Manager 3 Shift Manager Standby
06:00- 14:00 14:00 - 22:00 22:00 - 06:00 Floating/Emegercy/Leave
Operations 12
Shift Engineer A1 Shift Engineer B1 Shift Engineer C1 Shift Engineer D1(standby)
Shift Engineer A2 Shift Engineer B2 Shift Engineer C2 Shift EngineerD2(standby)
2 Inventory Managers Overall Maintenance lead
2 rotary Mechanical Engineers 2 static Mechanical Engineers 2 warehouse Mechanical Engineer
Technician Technician Technician
Rigger Rigger Rigger
Maintenance & Procurement 27
Helper 1 Helper 1 Helper 1
Helper 2 Helper 2 Helper 2
Helper 3 Helper 3 Helper 3
Helper 4 Helper 4 Helper 4
2 Intrument Engineers 3 Electrical Engineers
Technician Technician
Instrument & Electrical 11
Rigger Rigger
Helper 1 Helper 1
Total Strength 50

Exhibit 6

Current Salary Structure 2020 (in INR)

Operations
No Salary Total Salary
Shift Manager 4 15,00,000 60,00,000
Shift Engineer 8 6,00,000 48,00,000
Total 1,08,00,000
Maintenance & Procurement
Maintenance Lead 1 15,00,000 15,00,000
Inventory Manger 2 7,00,000 14,00,000
Mechanical Engineer 6 6,00,000 36,00,000
Technician 3 2,16,000 6,48,000
Rigger 3 1,08,000 3,24,000
Helper 12 54,000 6,48,000
Total 81,20,000
Instrument & Electrical
Instruments Engineers 2 6,00,000 12,00,000
Electrical Engineers 3 6,00,000 18,00,000
Technician 2 2,16,000 4,32,000
Rigger 2 1,08,000 2,16,000
Helper 2 54,000 1,08,000
Total 37,56,000
Grand Total 2,26,76,000
 Exhibit 7

Employee Headcount Data

Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Headcount (Start of the Year) 35 36 37 39 42 46 46 49 52 53 50
New Hired 2 5 6 7 5 8 9 8 8
Attrition Count 1 3 3 3 5 5 6 7 11
Attrition Rate 3% 8% 8% 7% 11% 11% 12% 13% 21%

Exhibit 8

Toy Manufacturing Company Process

Manufacturing Station (PVC) Manufacturing (Toys) Distribution Stores
Pune Noida Delhi
Nagpur Chennai
Bhubaneshwar Kolkata
Lucknow Goa
Rajkot Mumbai
Jaipur
Bhopal
Shimla

Exhibit 9

Yearly Shipment from PVC Manufacturing to Toy Manufacturing (MT)

From/To Noida Nagpur Bhubaneshwar Lucknow Rajkot

Pune 48,604 37,390 60,558 19,433 25,632

Exhibit 10

PVC to Toy conversion (2020)

Toy Manufacturing Location Yearly (Number of Toys)
Noida 38,92,080
Nagpur 18,47,652
Bhubaneshwar 15,42,520
Lucknow 9,79,709
Rajkot 13,18,928
 Exhibit 11

Demand in Number of Toys (2020)

Distribution Centers Annual

Delhi 32,29,340
Chennai 8,80,737
Kolkata 13,21,168
Goa 4,40,389

Mumbai 4,11,0034

Jaipur 5,87,172
Bhopal 5,87,214

Shimla 5,87,130

Exhibit 12

PVC Manufacturing to Toy Manufacturing center cost heads

PVC Manufacturing Location Capacity (MT Per annum) Freight Rates/kg (INR) Taxes Lead Time(days)*

Pune 2,40,000 0.0023 11.5% 2

*Lead time is time to reach any of the Toy manufacturing centers from PVC Manufacturing stations

Exhibit 13

Toy Manufacturing to Distribution center cost heads

Toy Manufacturing Location Capacity Number of toys (Per annum) Packaging Cost/toy (in INR) Error Rate* Taxes

Noida 64,86,800 1 1.50% 10.0%

Nagpur 30,79,421 2 1.65% 8.0%

Bhubaneshwar 25,70,866 3 4.60% 5.0%

Lucknow 16,32,849 2 3.60% 9.0%

Rajkot 21,98,213 1 5.55% 6.0%

*Error Rate is the percentage of toys getting rejected due to QA checks
 Exhibit 14

Freight Cost (in INR per toy)

Toy Manufacturing Location Delhi Chennai Kolkata Goa Mumbai Jaipur Bhopal Shimla
Noida 2 3 1 1 2 2 2 1
Nagpur 3 2 2 3 2 3 1 1
Bhubaneshwar 3 2 1 2 1 3 3 3
Lucknow 3 2 1 3 3 2 1 1
Rajkot 1 3 3 1 2 1 3 2

Exhibit 15

Lead Time (in days)

Toy Manufacturing Location Delhi Chennai Kolkata Goa Mumbai Jaipur Bhopal Shimla
Noida 1 2 3 2 2 2 3 3
Nagpur 2 4 2 3 2 5 4 2
Bhubaneshwar 3 3 5 2 5 3 3 4
Lucknow 4 5 4 4 3 4 5 1
Rajkot 5 2 4 1 2 4 3 3
*Lead time greater than 1 day costs us INR 4/toy/day
 Participant’s Corner

Deliverables
Participants could use the below mentioned guidelines to approach the case:

Categories Key Aspects to Address

Current State • Overall assessment of current supply chain structure

Identification of addressable • Identify key issues from all the challenges and possible
issues impact on the business functions

• Identify and design the solution(s) incorporating various

standpoints to have a comprehensive solution
Solution Creation (Hint: Consider how the demand, supply, lead time, cost,
equipment utilization, capacity management, long term &
short term, etc. would play a role)

• Recommended solution(s) with associated benefits,

Final Recommendations and risks/challenges, and potential mitigations steps for risks
Implementation Strategy • Propose a to-be state solution that meets requirement of as
many stakeholders as possible
*Note- Use MECE framework for holistic supply chain snapshot & recommendations

Submission format
Please ensure your submission abides by the below guidelines:
1. The maximum number of slides is 5 (excluding the cover slide).
2. Appendix slides are not mandatory and there is no limit on the number of appendix slides if you
wish to add any. Please mark these separately to avoid confusion with the actual solution.
Appendix slides will not be considered for evaluation.
3. You are encouraged to use graphs, charts, tables to strengthen your solution.
4. Clearly state any assumptions you make & include all quantitative/qualitative analysis you have
performed to arrive at your recommendations/solutions.
5. Only Calibri fonts are allowed and font size in any slide should not be lower than 10. However,
the lower limit for the font sizes is 8 for graphs and charts.
6. Teams are required to prepare a PPT for their final solution. The PPT files along with other
supporting documentation can be submitted in the form of a .zip or .rar format file (maximum
size of 15 MB). Files that exceed this size will be disregarded.
7. Please name your submission file as <Institute Name>_<Team Name>. E.g., if you are a student
of ABC college and your team name is XYZ, your submission file should be named ABC_XYZ.

Queries
Please drop your queries here: https://forms.office.com/r/3ijaSwt6XA