A case on

Logistics Management at
VOLTAS
Refrigerator Business Group
 V aluable
O btainable
L adylike
T hrifty
A mazing
• Valuable- worth great deal of money S alutary
• Obtainable- available
• Ladylike- polite and dignified
• Thrifty- careful with money and resources
• Amazing
• Salutary - Useful
 INTRODUCTION
 Public limited company in 1954
 Joint venture between Volkart Brothers, and TATA
Sons.
 Marketing and Distribution company
 Trading in imported goods
 Large inventory
 Create own production base
 In 1988- six manufacturing units located in
Maharashtra & West Bengal
ORGANIZATION OF BUSINESS

 Appliance Business Group (ABG)

 Agro-industrial products and pumps division (AIP)
 Air-conditioning and Refrigeration business group
 Chemical division
 Electrical business group (EBG)
 Machine tool division (MTD)
 Refrigerator business group (RBG)
MARKETING

 National distribution network

 Markets product of small, medium & large
producers
 4 zonal offices, 9 branches and 16 offices
 2000 plus stockists
 1,00,000 retail outlets
 Branch in New York and London
 MANUFACTURING

 Six manufacturing facilities :

1. Thane plant
2. Switch-gear plant
3. Hermetic motor plant
4. Refrigerator plant
5. Transformer plant
6. Mining equipment design and manufacturing
plant
SERVICE DEPARTMENTS

 Centralization
REFRIGERATOR BUSINESS GROUP

 2 models – 165 liters & 300 liters(double door), white, green

blue & brown.
 1984 - 85
oPlant setup at “Warora”.
oLaunched in east zone followed by extension to south &
west.
oProduction of compressors in collaboration with Danfoss –
leaders in this field.
 1986 - 87
o Steps were taken to raise the annual production capacity
to 1,00,000 units.
REFRIGERATOR BUSINESS GROUP

 1987 – 88
o Increased output, sales & profit.
o Continued to enjoy customer preference & a premium price.
o Export order from Iraq, beginning to international business.

 1988 – 89
oFire at company's plant.
oPlan to increase annual production capacity to 2,50,000 units
by 1991.
MARKET SHARE OF VOLTAS
REFRIGERATORS
East Zone
10%

North Zone
South Zone
35%
20%

West Zone
35%
MARKET SHARE

Market Share (%)

Zenith
Allwyn 4% Tropicana
10%

Tropicana Godrej
Voltas
12% 39%
Voltas

Allwyn

Zenith

Godrej
35%
 Transportation

Inventory Packaging

Total
Logistic
Cost

Godown
Insurance
Operations

Losses
 • 13
Godowns • 301 dealers

• 18
Stocking
• 351 dealers
Centres

Road • Annual freight rate contract

• Rs. 3850 per truckload
Transportation

• Rs. 182 for a 300- litre

Packaging • Rs. 126 for 165- litre
 • 3000 defectives per lakh pieces
• 400 units in stocks for repairs
Losses • Rs 10/ refrigerator for inspection

• Excise -> 15%

• Octroi -> 5-10% (depending on city)
Taxes • Sales Tax -> No tax- 16.6 % (depending on
city)
TOTAL COST AS A FUNCTION OF
VALUE ADDED

=
• Total • Cost of
_
Product Raw
Cost Material
Rs 13535 Rs 5000

=
• Value
Added
Cost
Rs 8535
LOGISTICS RELATED DECISIONS

 Strategic

 Tactical/Planning

 Operations
STRATEGIC

 Warehousing
 How many?
 Where to place?
 Owned or rented
 Size
 Storage – Material Handling
 Raw materials policy
 Finish Goods policy
 Transportation
 Warehouse replenishment/ transportation
 Distribution to clients
TACTICAL/PLANNING

 Warehousing
 Rent or buy?
 Location?
 Capacity?
 Equipment?
 Storage – Material Handling
 Size of Pallets
 Transportation
 Buy or rent vehicles
 Fleet, mix or size
 Delivery vehicles
OPERATIONS

 Warehousing
 Personnel
 Working hours, shits, overtime
 Storage – Material Handling
 Products for stock
 Desired amount of stock
 Which Supplier
 Order picking and control
 Transportation
 What type of vehicle should be used
 Service region of each vehicle
 Routes of vehicle
 Maintenance of vehicles
EXPANSION AT WARORA-
ADVANTAGES

 Less capital cost (-10 crores)

 Twin power connection

 Proximity to NH-7 & NH-6

 Economies of scale

 Centrally located
EXPANSION AT WARORA-
DISADVANTAGES

 Higher transit time for north & East India

 Heavy losses due to transit & handling

 4% central sales tax

EXPANSION AT NEW LOCATION-
ADVANTAGES

 Proximity to potential market

 Backward area benefits

 Entry into competitor’s location

 Tax subsidiaries
EXPANSION AT NEW LOCATION-
DISADVANTAGES

 Higher capital cost (35 crores)

 Clearance of governing bodies & local authorities

 Developing local suppliers for raw material

 Economies of scale cannot be availed

 Decentralized purchasing decisions

 LEARNING

 Product movement

 Product storage

 Transportation cost elements

 Location selection

 Types of vehicle required