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TECHNOLOGY ENABLED LOGISTICS ..................................................... 2
CATEGORY STRATEGY TO CATER INCREASED DEMAND WHILE
ENSURING AVAILABILITY AND COMPETITIVENESS OF BUY ................. 4
CONTRACTING STRATEGY TO REDUCE SINGLE SOURCE DEPENDENCY.
............................................................................................................ 7
CATEGORY STRATEGY TO CATER INCREASED DEMAND WHILE
ENSURING AVAILABILITY AND COMPETITIVENESS OF BUY ............... 11
CONTRACTING STRATEGY IN MONOPOLISTIC TRANSPORTATION
CONTRACT AT INDORE ...................................................................... 15
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Data cited in the case is for illustrative purpose only. The name of suppliers, requirement, volume, business
share and prices are not representation of actual data.
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Exhibit I:
Location
Material
Jamshedpur Aluminum Notch Bar
Plant
Aluminum Cubes
Kalinganagar Aluminum Notch Bar
Plant
Aluminum Cubes
Exhibit II:
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Q3FY17
1500
2400
300
1200
Q4FY17
1500
2550
400
1400
FY18
6000
10800
2000
6400
FY19
6400
12000
2400
7200
FY20
6400
13200
2400
8000
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Exhibit IV:
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< 15 m
2.5
15 30 m
>30 m
1.5
Current assumption taken for scaffolding at TSL is 1.5; reaching 1.8 in last 6 months.
>80% scaffoldings in TSL are < 15 m height.
Present scaffolding technique being used by TSL is cup lock type. The other type of
scaffolding technique which is relatively new in the industry is ring lock type. Ring lock
scaffolding assembles quicker than cup lock. It offers more flexibility to any building
configuration.
The total volume requirement of scaffolding is 1800 Mt (40 m3 =1 Mt), the material rent is
paid to the party on per Mt basis.
Problem Statement/Challenges Faced
All the present contracts of scaffolding hiring have expired. Mr Ratan, Category Manager of
Service procurement is in charge of finalising the new scaffolding contract. It is proposed to
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3. As there is constant predictable demand of scaffolding, should TSL buy their own material
and hire the services only? (TSL sample cost component is attached for reference) annex I.
List of material with indicative pricelist for 100 T scaffolding attached as annex II.
4. What should be the overall strategy of the category manager to achieve spend reduction,
with required quality standard and which will reduce single source dependency. Also define
risk mitigation mechanism if alternate source fails to deliver required standard.
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UOM
100-200
MON
201-400
MON
401-700
MON
Service Scaffolding
Man-power
701-1200 MON
Safety Supervisors
Scaffolders Gang
Over time
Material
MON
NOS
H
TO
NOS
NOS
SFT
Description
Weight in
Kgs
Nos
0.85
0.18
5.50
6.60
10.26
11.40
16.60
2.70
3.70
5.17
6.96
9.40
5.48
7.52
10.24
13.95
500
500
50
50
50
50
1000
400
400
600
700
800
100
100
300
600
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TOTAL
Weight in
Kg
425.0
90.0
275.0
330.0
513.0
570.0
16600.0
1080.0
1480.0
3102.0
4872.0
7520.0
548.0
752.0
3072.0
8370.0
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18.70
8.50
9.80
11.50
6.70
4.54
6.81
7.26
1.11
5.30
5.00
2.37
4.73
7.10
9.47
11.83
14.20
16.57
18.93
23.67
27.91
0.60
1.10
1.25
1.30
1.60
14.50
18.00
21.00
38.00
59.85
600
50
50
50
40
50
50
500
100
400
50
50
50
200
75
250
300
300
60
40
50
2500
3000
2500
100
500
20
20
40
50
6
11220.0
425.0
490.0
575.0
268.0
227.0
340.5
3630.0
111.0
2120.0
250.0
118.3
236.7
1420.0
710.0
2958.3
4260.0
4970.0
1136.0
946.7
1395.5
1500.0
3300.0
3125.0
130.0
800.0
290.0
360.0
840.0
1900.0
359.1
100011.1
100 MT
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II.
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Realistic Capacity
( MT/Month)
SPC 1
Jharkhand
25,000
19,761
21%
SPC 2
West Bengal
10,000
5,993
40%
SPC 3
Maharashtra
6,000
4,957
17%
SPC 4
West Bengal
5,000
4,481
10%
SPC 5
Maharashtra
14,000
9,472
32%
SPC 6
West Bengal
6,000
4,483
25%
66,000
49,147
26%
Total
Actual Usage
( MT/Month)
Ideal Capacity
At cost
8
Cost
Market
10
12
16
18,885
18,269
17,550
17,040
15,695
26,979
1,110
945
-309
-32
-338
9,797
19,457
17,988
17,540
15,485
19,112
1,328
311
123
-2,396
1,083
Cost
Market
Cost
16,497
11,384
14,355
Market
-1,007
-4,724
-2,429
Cost
21,645
20,456
Market
20
25
28
32
40
Total
17,729
329
16,307
-1,145
21,614
4,071
365
17,177
14,418
Market
-1,818
-3,294
Cost
22,194
20,061
22,097
4,164
2,696
4,160
Cost
Market
3,974
13,709
13,883
14,022
12,906
11,958
-3,774
-3,594
-2,739
-2,715
-3,644
14,213
-3,201
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In 2011 the contract was renewed with STI on single transporter basis for 2 years
with 7.7% increase in rate w.r.t. previous contract.
In 2013 the contract was renewed with STI again on single transporter basis for 3
years with 3.72% increase in rate w.r.t previous contract of 2011.
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Type of Material
Annual
Volume in
MT
Mode - 1
*Direct
dispatches by
Road from
Jamshedpur
Plant
( Rs./ MT )
3944
3944
3944
3944
3944
3944
3944
3944
10 Days
Mode - 2
*#Transshipment
via Nagpur
SY
( Rs. / MT )
Mode - 3
*#Transshipment
via Indore
SY
( Rs. / MT )
3985
3862
3804
3966
3825
3709
3458
3691
3787
3575
3478
3944
3512
3709
2934
3349
5 days
1 Day
Jamshedpur
Nagpur
Indore
Plant
Stock yard
Stock yard
As per policy TSL always prefers Safely delivery through optimum cost followed by fastest
delivery mode.
#Rail dispatched requires monthly volumes of material to be more than full one rake
volumes i.e. 2500 MT.
*A diesel price variation clause in the contract takes care of changes in diesel rates every
month.
Problem Statement/Challenges Faced
The existing contract is valid till 30th Sept 2016 and Mr. S. Awasthi Procurement officer of
Transportation category at TLS is in charge of renewing transportation contract from Indore.
Some other Transporters showed interest in Indore transportation contract and asked for
some trial orders but TSL is not sure about success of the trials. Challenges for the renewal
of the contract are:
1. Benchmarking data and cost model analysis shows that cost of Transportation at Indore
Stockyard is ~5 to 10% higher than other stockyards. However transportation rates also
depends on several local factors like availability of vehicles in the market, return freight
, road conditions, toll and other socio political factors like unions etc. which makes the
transportation cost vary from benchmark figures. Considering the previous trend the
transportation cost is likely to increase in upcoming contract if no alternate measure
taken.
Point of Inventory
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