India Glycols Limited

SCM Project Report
Submitted to : Prof. Atanu Chaudhuri & Prof. Sushil Kumar
3/25/2012

Submitted By: Group 2

Anand Pathak PGP 1004 Cobi Sarangal PGP 1011 Kunal Kejriwal PGP 1021 Mohit Rastogi PGP 1025 Ravikant PGP 1029 Ramsiva Linga PGP 1028 Varun Kumar Agarwal PGP 1034

S and Europe are carried from Kashipur to Kandla port. Defence Forces Canteen (CSD) are also one of the major consumers of Indian made foreign liquid products of company. Exports to U.)Gas Division. how efficient is the production process. The product range and basic manufacturing building blocks of IGL can be understood from following diagram In this project we visited the IGL’s Kashipur plant and understood the manufacturing processes and inquired the management about how flexible is raw material sourcing.e Molasses as a result the company proactively engages with cane growers and other sugar manufacturing industries to ensure availability of molasses. The sale of IGL spirits primarily is in Uttarakhand and Uttar Pradesh. The chemical division is the chief business of IGL. how the distribution channel network fits with nature of operations and business strategy.Executive Summary India Glycols Limited is manufacturing quite diversified although interconnected product group. Although the company has location advantage in terms of supply of raw material (firm present in sugarcane belt of India) but faces equivalent disadvantage in terms of transporting alcohol. . It brings 70% of total revenue of the firm. We also tried to gain some insights on customer interactions and their requirements for each of the product divisions.To understand the supply chain of IGL we can divide its business primarily into three major product category: a. Spirits division which contributes roughly 20% of total revenues is an important by-product of the manufacturing process and financially vital to the organization as the firm enjoys highest ROI in spirits division compared with the other two.) Chemicals Division c. Hence the management is also finalizing construction of railway based logistic services adjacent to existing plant at Kashipur to ensure raw material (molasses availability) and low transportation cost.) Spirits Division b. The damage cost and transportation cost are high than ideal. The company is critically dependent on agriculture feedstock i. Other than this molasses is being also used for firing 40 MW captive power plant boiler.

The division contributes 11% of total revenues. Hence IGL serves a variety of industry spread geographically all over India. BPCL and HPCL. Although the company has ambitious expansion plans but scope of more efficient supply chain is there.) Ethylene Oxide Derivatives (EODs).e Emulsifiers: agrochemicals.fattyamine ethoxylates to Textile industry etc. The major challenges for IGL remain up-scaling its operations to meet growing domestic demand. Given the strict norms and regulations in transportation of chemicals and gases. 30-40 kms from IGL factory. Absence of third party logistics provider has forced IGL to develop its own fleet of trucks. Transportation of molasses from other states like Maharashtra and Andhra is an option which will increase transportation costs of raw material.The Chemical segment comprises. Brake fluids and coolants to IOCL. The wide usage of these chemicals can be understood from the variety of industries IGL serves to i. The hazards of fire and leakage has prompted the management to install state of the art Fire management system in IGL. surfactatnts and ethoxylates to local paper industries. The company boasts of possessing “path breaking” green approach to manufacturing ethylene oxide and its derivatives. The gas division is another important by-product of manufacturing process and also one of the riskiest operations. DEG. IGL has vendor managed inventory system for its bigger customers like Pepsi and KVS. Raw material availability still remains a big concern. Oxygen required for blast furnace process is sourced by the steel products manufacturing plants in Kashipur.) Glycols (MEG. The CO2 produced is sourced primarily by Pepsi and coca-cola plant in Bazpur. TEG and Heavy Glycols) b. The construction of Railway freight terminal in Kashipur will give a fillip to Management’s endeavour to reduce costs. IGL has to spend lot of resources on its fleet management. .

Its product range spans the chemicals. spirits.Introduction India Glycols is a leading company that manufactures green technology based bulk. Apart from chemicals. industrial gases and realty sectors. a well-established natural gum division manufacturing guar gum and a variety of derivatives. The company’s facilities have been approved and certified by international agencies including Det Norske Veritas (DNV). The company was established as a single mono-ethylene glycol plant in 1983. IGL’s integrated facilities manufacture chemicals including glycols. quality and safety. The operations at all plants are closely monitored through distributed control systems (DCS). ethoxylates. industrial gases. . sugar and nutraceuticals. herbal and other phytochemical extracts and guar gum. and finds application across an increasing number of industries. a spirits division that manufactures country and Indian-made foreign liquor adhering to the highest quality standards. which facilitate a high degree of control over the quality of products. glycol ethers and acetates. spirits. India Glycols has a significant presence in the natural active pharmaceuticals and nutraceuticals space with Ennature Biopharma. These products are manufactured in compliance with stringent global standards of plant operations. and Shakumbari Sugar – a well-established player in the Indian sugar industry. specialty and performance chemicals and natural gums. and various performance chemicals.

000KLPA . The company has three distilleries in Kashipur (Uttarakhand). ISO 14001:2004. regular and prestige segments within the whisky. and OHSAS 18001:2007 certified. Uttar Pradesh) with a total distillery capacity of 280. out of which. IGL's plants are ISO 9001:2008.000KLPA for the production of ethyl alcohol. Constant innovation and a passion to consistently provide quality products have helped the company to establish itself as a market leader in a number of segments in the chemicals industry. brandy. Gorakhpur (Uttar Pradesh) and Todarpur (Saharanpur. With IGL being the sole supplier of Bacardi the company has a strong presence in the semi premium. Spirits Division The spirits division of IGL commenced operations in 2002.Production Flow System Source: Rinc research India Glycols' chemicals division has integrated state-of-the-art technology with its captive feedstock of raw materials to manufacture chemicals in a cost-efficient and environmentally responsible manner. 80. vodka and gin product categories. rum.

e. At present. With a production capacity of bottling (potable liquor) 1.5 lakh litre is used because of the pollution norms set up by Central Pollution Control Board..is for potable alcohol. . IGL is one of the largest players in this segment. Apart from producing industrial alcohol for its captive consumption. the distillery is working on the 'smart distillery concept' capable of producing alcohol from different raw materials. Both the processes of converting molasses into alcohol and alcohol into spirits are done in-house. IGL also exports ENA (neutral spirit). 14000 and 18000. i. molasses. Below is a diagram showing the steps involved in Alcohol production at IGL. grain and sugarcane. Manufacturing With an installed capacity of 4. Although currently only 2. Kashipur is the only bottling plant in India to adopt ISO 22000 (food safety management systems) quality standards in addition to ISO 9000. Products Indian-made foreign liquor (IMFL) Extra neutral alcohol / rectified spirit Country liquor Sourcing The main raw material for all the three type of product group of the division is alcohol which in turn ids derived from molasses.25 lakh litre per day capacity. These restrictions came into being in the last 3-4 years since the declaration of Ganga as a National river which in turn resulted in a Zero discharge policy.50 million cases per annum. The company has plan to resume production at full capacity by 2013 by implanting the new boilers which it had commissioned based on pollution guidelines and which are nearing completion.

Haryana and Kerala. The company has a strong international presence with export markets including the United States.Distribution With customers spreading throughout the world the transportation and distribution of liquor is a major challenge for IGL. The distribution of liquor happen using two storage mediums. The reason for not directly supplying using glass bottles is the high duty on liquor-140%. With a loss percentage in glass bottles pegged at 4-5%. Using modern technology coupled with smart ideas IGL seeks to minimize its losses. The other medium of transporting tankers is used to transport to Bottling tie ups in Maharashtra. which is very high by any standard the company. . Kashipur plant has a bottling plant to help package the liquor for destinations where directly glass bottles are transported. The company also has commissioned a new bottling plant at Hazira and is in process of identifying Kandla Port as a future hub for its exports. due to breakage. To all these location except Yemen Liquor is transported sans glass bottles. the first being glass bottles and the second being in tanks. incurs more losses in terms of duty than in the production cost involved. Europe and Middle East.

Polyethylene Terephthalate (PET) resins (12%). . Another raw material which imposes challenge is the coal required for its boiler. With its boilers not designed to handle high caloric coal from abroad. Glycols contributed 43% and EO derivatives 38% in FY08 sales and were the main drivers of revenues. Chemicals Division The Chemicals segment’s product range includes Glycols (MEG. MEG as a key product accounted for ~51% within Chemicals. The company has tried to mitigate this problem by having tie ups with bottling plant in various states in India as well as abroad but still the company uses glass bottle up to 500 km distance. At 1500 km. IGL is forced to depend on Coal India for its supply of coal which in turn has fixed allocation policy often resulting in shortages. anti-freeze and coolants are the key consumers of MEG.e. Molasses is a very price sensitive product with price varying as much as 5-6 times the normal price in a single month itself. Apart from fibres.Challenges IGL has its set of challenges some of which are inherent to the company location and other which have been imposed on it by various factors. and ~41% of total gross sales in FY08. the nearest port is a still a whole lot of distance away from IGL mother plant at Kashipur. On the raw material side the biggest challenge lies in the fact that the supply of molasses is seasonal and this seasonality imposes stiff challenge in the form of price sensitivity. Also because of this seasonality the company has to maintain a safety stock of almost 3 months to continue smooth production which creates a huge burden of carrying cost. One peculiar trait of the company is its unwillingness to tie itself with long term contracts with its supplier of molasses. Glycol Ethers and other Performance Chemicals). despite molasses being a critical to the smooth functioning of the plant. This stance of the company lays the fact that the company although wanting to safeguard itself from the price rises. polyester films (7%) and others (12%) viz. Partially Oriented Yarn (POY)/Polyester Filament Yarn (PFY) and Polyester Staple Fibre (PSF). Di-ethylene Glycols and Heavy Glycols) and EO derivatives (Ethoxylates. MEG demand-supply scenario MEG is mainly consumed by polyester fibres (~70%) i. Another challenge faced by the company lays the fact that it has to obtain permission for transportation of flammable liquid which imposes upon it strict procedural checks and the need for specialized tankers to transport the liquor. The biggest challenge in our eye as well as the management is the distance from the port. also want to take full advantage of times when the prices of molasses are at prohibitively low. With majority of its product destined for export IGL has to incur a great deal of costs in transportation of liquor which is already plagued by high loss percentage of 2-3%.

Sugar mills are running in loss due to the price fluctuations. and rest from open market in India. . Indonesia and Iran is better import is restricted as the boilers do not support these types of coal. The plant produces three derivatives of ethylene glycols — monoethylene glycol (MEG). and meeting stringent international specifications as required by the polyester fiber. Once in 4-5 years molasses are imported because of high price fluctuations and to ensure that prices are in control. This is a highly politically motivated crop as the prices are fixed by the government. These cater to the requirements of its MEG/EO manufacturing unit and also enable IGL to run fullfledged Indian Made Foreign Liquor (IMFL) operations of ~11klpd. USA. New boilers are being built to suit the requirements and would be up and running by early 2013. diethylene glycol (DEG) and triethylene glycol (TEG). IGL has been manufacturing bio-MEG derived from bio-ethanol since 1989. Acidic acid (1500 tonnes) is imported from China and Singapore. Due to seasonality of the crop an inventory of 2 to 3 months is maintained. who allot in terms of coal mines. 20-25 % of coal is purchased from Coal India Limited. Sourcing Sugarcane is the major raw material for IGL. IGL has 2 distilleries of capacity of 300klpd and 400klpd at Kashipur and Gorakhpur respectively. Although the calorific value of coal from Malaysia. Coal regulation is as done by government of India. Molasses is the product obtained from Sugarcane which is the direct raw material for IGL. film and PET resin industries. Coal is one other highly procured product.Sales 7 12 PET PSF 27 POY Film Others 42 12 India Glycols has set up its ethylene glycol plant in technical collaboration with Scientific Design Inc. yarn.

Distribution is done through IGL fleet. This brought into its fold 3. finds use in a number of applications. Also we found that the concept of VMI is not being implemented and thus orders are placed as requested. . Automotive. 300klpd and 26MW. slimming regimens. Agro. setting and cement plaster There is a huge surge in demand recently due to its application in binding of oil wells. Plans are underway to expand these capacities to 8. milled and screened to obtain the guar gum.000tcd. viscosifying syrups. The reason for choosing Kashipur as a location was the availability of raw material and fiscal incentives. This demand also resulted in moving the loss making unit into a cash cow. pale. IGL’s state-of-the-art facility manufactures a wide range of guar products such as treated and pulverized guar gum. This causes for 25% of their product cost.200tcd cane crushing capacity. 40klpd distillery and a 3MW power plant. beverages and instant mixes. The guar seeds are dehusked. Sourcing: It is primarily the ground endosperm of guar beans. This also led to an expansion of the plant from 450 tonnes to 3000 tonnes (planned). high molecular weight polysaccharide due to its high water-binding ability. sauces and salad dressing. canned foods. Gujarat. bakery products. enhanced oil recovery.Backward integration to boost value chain In Dec'07. coarse to fine ground powder. Major portion of the chemicals are also exported through Kandla port. disintegrating aids and suspending agents Building and paint industry: Binding. reducing drainage of fines. plugging holes and pour point depressants Textile: Textile fabric and carpet printing. as quoted. Plans of establishing a warehouse in Gujarat near to the port is in talks. Advanced GPS tracking mechanisms are used to ensure the timely delivery of products. and improving rattling Pharmaceuticals: Tablet binding. Distribution Textile. offwhite-colour. Natural gum Guar gum. It is typically produced as a free-flowing. a natural. soluble fiber and various clinical nutrition recipes Oil and gas: Deep oil well drilling. IGL acquired a majority stake in Shakumbari Sugar & Allied Industries (Shakumbari) for Rs470mn. etc Given below are the industry-wide applications that it serves: Healthcare and food processing: Dairy and frozen foods. increasing strength and burst factor. textile sizing and crisp finishing of clothes Paper: Wet and dry end additives. special dietetics and diabetic diets. depolymerized guar gum and derivatised guar gum. packaging are the major industries which constitute the buyer segment.

Sikkim. almost 100% of the outputs are exported through Kandla port. The total of gases production is around 5000 metric tonnes per month.e.99%. The drivers are trained for handling any untoward incidents. IGL is using Vendor Managed Inventory for some of its regular clients. Apart from the surge demand in binding of oil wells. oxygen and carbon dioxide. Negotiations with container carriers are directly done through the IGL and without any intermediates.com/india-glycols-enters-indian-industrial-gases-market/3387. this division is in the growth stage and thus IGL is working towards rapid expansion. It is exported to China and USA largely for the same. they are obtained as a by-product of the manufacturing process. Negotiations are directly on with the buyers with minimal intervention from DGFT as this is a general licensed product. IGL maintains its own fleet of tankers for delivery of gases. Seeds  drier  fine grind  mixing (addition of chemicals and preservatives) 450 tonnes  1100 tonnes (current)  3000 tonnes per day (after setting up new plant ) Distribution: Due to recent surge in demand from US market.gasworld. The entire fleet is tracked continuously via a GPS system. For others. UP and Bhutan.article] There are stringent government norms regarding the transportation of gases. [Source: http://www. These gases are picked inhouse i. The major customers for gases are situated in Orissa. Short-term distribution planning decisions involve deciding which customers receive . the demand is made by the customers and the gas is supplied to the client. Prior permission has to be obtained from the Explosives Department for transporting the gases. scrubbing and absorption methods. The company produces CO2 without using any chemicals for purification. nitrogen. gum is also used in seasonings of Pizza’s. There is no distribution centre for the gases and they are transported in tankers on trucks directly to the customer premises from the factory. Gas Division IGL produces and distributes argon. Plans are on to almost triple the current outputs by end of 2013. Gujarat. Nitrogen and Oxygen constitute the remaining 30%.Manufacturing: As mentioned. One suggestion could be moving to other markets and thus reducing the fluctuations in global economy. with purity level of 99. CO2 is purified using washing and adsorption methods. This is one area which could be worked upon as introduction of 3PLs would bring in efficiencies into the system. while Argon. IGL has installed storage tanks in customer locations and manages their replenishments to satisfy customer demands by coordinating the deliveries. The raw CO2 is purified using washing. The CO2 produced is liquid beverage grade at plants in Kashipur and Gorakhpur. Carbon dioxide constitutes the major portion (70%) of gas produced. and a specially designed NOx removal system.

deliveries each day. The frequency of data collection depends on the rate of consumption. The long-term inventory decisions involve deciding how many tanks and when to install. IGL receives data regularly at a frequency of 2-5 days from the customer about the inventory level. chemical and food industries require high-availability and highpurity in the gases. They also face a problem of shortage of distribution trucks sometimes. and then combining deliveries into routes and determining which truck or trailer for each delivery and the capacity of each truck for delivery. It is difficult and expensive to maintain steel cylinders in a clean condition due to rough handling and aggressive industrial environment. especially in the medical. They currently face a marketing constraint for their gases. Generally. filling incandescent and fluorescent bulbs . how much to deliver.     Carbon Dioxide is sold to soft-drink bottlers like Coca Cola. the gases are a critical component of the industries where they are used. The company currently has a fleet of 19 trucks at Kashipur plant for distributing the gases. like in the summer months demand for CO2 is high by the soft-drink bottlers. The company has a storage capacity of 440 tonnes. especially when the demand is high. Pepsi Co etc Nitrogen is used in packaged food Industry Oxygen is used for metal fabrication/production and steel manufacturing Argon is used for glass window manufacturing. For clients where VMI is implemented. Due to the high lead time of about 5-6 days in some cases. when to deliver. a high amount of inventory is maintained at the customer premises. Most of their customers.

The lead time will be reduced and customer service level will thus be improved. instead of maintaining inventory at each customer’s premises.vrv-group. In the short run.jpg Source Due to the high lead time and supply of gases directly from the plant. they may consolidate the inventory and thus a smaller total inventory is required. the gases may be supplied to the distribution centre by train or by trucks and the lead time can be reduced. The company may go in for having a distribution centre at a place where the client concentration is high. Then. a large fleet of tankers is required. Thus. They may consider increasing the fleet of the distribution tankers. .Distribution of Industrial Gases Source: http://www.com/upl/ckuploads/images/Supply/industrial.

gasworld.indiaglycols.com/upl/ckuploads/images/Supply/industrial.vrv-group.article] http://you.mccormick.edu/papers/11IECR_PX1.pdf Pinc Research on IGL www.com http://www.northwestern.htm as on 17/03/2012 .jpg www.com/divisions/ethylene_glycols.com/india-glycols-enters-indian-industrial-gases-market/3387.IGL.References       http://www.