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CASE NUMBER .4
SUPPLY CHAIN
INITIATIVE
AT
APR LIMITED
Submitted To:
Mr. N S Uppal
Submitted By:
Supply Chain Initiative at APR Limited
Page 1
Atul Jain
Kavita Deora
Sahil GABA
Sandeep Khowal
TABLE OF CONTENTS
S.NO.
TOPICS
PAGE
NO.
METHODOLOGY
CHAPTER. 1.
04
INTRODUCTION
1.1
BACKGROUND
05
1.2
BUSINESSES
05
1.3
REQUIRED WOOD
05
1.4
SUPPLIER
05
1.5
WOOD CONSUMPTION
1.6
FUTURE STRATEGIES
06
06
Page 2
1.7
CHAPTER. 2.
FINDINGS
PROBLEMS
CHAPTER. 3.
07
3.1 FACILITIES
08
3.2 INVENTORY
09
3.3 TRANSPORTATION
10
3.4 INFORMATION
10
3.5 SOURCING
3.6 PRICING
CHAPTER. 4.
06
11
11
DISCUSSION QUESTIONS
13-18
19-26
27-29
Page 3
CHAPTER. 5.
CONCLUSION
30-31
BIBLIOGRAPHY
32-33
Page 4
OBJECTIVE
Page 5
1. INTRODUCTION
1.1 Background
APR Limited was a diversified Taper group company engaged in a number of
businesses.
Pulp
Packaging
Leather footwear
Page 6
Eucalyptus:
60% of eucalyptus was sourced from Andhra Pradesh, 20% from Karnataka
and the balance 20% from Uttar Pradesh.
1.5 Wood Consumption
The Company was currently using two types of wood in the proportion of
60:40 for procuring one ton of pulp; the plant needed about 4.2 tons of wood.
1.6 Future Strategies
In early 1995, the company decided to make substantial investment so as to
double its capacity by 1997 end from 150 MT of rayon pulp to about 300 MT per
day. The company had further plans to increase the capacity so as to reach to the
level of 500 MT per day by 2002.
MONEY
INFORMATIO
MATERIAL FLOW
1. FINDINGS
Page 7
1.
2.
Holding Inventory of 6 Months of wood stock at its wood yard, during the first
three months the moisture content would come down at the rate of 4 to 5
percent per month. Subsequently, with every month the moisture content
would come down at the rate of 1 to 2 percent per month.
3.
4.
5.
One point in time the company was paying about Rs. 10 million to the labour
contractor for the material handling of wood.
If a truck unloaded at the wood yard and material was subsequently brought
to the chipper, it would result in extra material handling costs of Rs. 100/ton.
The company employed contract labourers who were paid on the piece rate
basis.
1.
Each Chipper only one truck could be unloaded at a time because truck
unloading required special equipment.
2.
3.
4.
5.
6.
Unloading of a truck required about 1.5 to 2 hours because they unloaded the
trucks manually.
7.
Page 8
Drivers determine supply chain performance. For each driver, managers must
make tradeoffs between efficiency (cost) and responsiveness.
Six Drivers of Supply Chain are as follows
1.
Facilities
2.
Inventory
3.
Transportation
4.
Information
5.
Sourcing
6.
Pricing
3.1 FACILITIES
Places within the supply chain where inventory is stored, assembled, or
fabricated. Decisions on location, capacity, and flexibility of facilities have a
significant impact on performance.
APR Limited
Facilities
There are two type of woods were used in APR limited Eucalyptus &
Casuarina in proportion of 60:40
These woods were coming from three states Andhra Pradesh, Karnataka and
U.P
There could be 6 trucks which unloaded at a time in wood yard.
APR limited had a big wood yard having enough space and it had sufficient
tractors.
Problems
Page 9
Unloading of trucks at wood yard took huge time because they did it
manually.
At each chipper only one truck could be unloaded at a time.
3.2 INVENTORY
All of the raw materials work in process (WIP), and finished goods within the
supply chain. Inventory policies can dramatically alter a supply chains efficiency
and responsiveness.
APR Limited
Inventory
Raw Material
Work in Progress
CHIPPER 1
CHIPPER 2
SCHEDULE
8:00AM TO 1:00PM
7:00AM TO 1:30PM
TYPE OF WOOD
Casuarina
Eucalyptus
MT
125
230
CHIPPER 1
CHIPPER 2
4:00PM TO 7:30PM
4:30PM TO 9:30PM
Casuarina
Eucalyptus
150
260
CHIPPER 1
CHIPPER 2
10:30PM TO 1:30AM
11:30PM TO 5:30AM
Casuarina
Eucalyptus
105
185
Finished Goods
Problems
APR limited was holding Inventory of 6 Months of wood stock at its wood
yard, during the first three months the moisture content would come down
at the rate of 4 to 5 percent per month.
More inventory in wood yard increased material handling cost.
Page 10
3.3 TRANSPORTATION
Modes and routes for moving inventory throughout the supply chain.
APR Limited
Transportation
In APR limited they are using truck for transport purpose.
APR Limited was sourced Eucalyptus from Andhra Pradesh, Karnataka &
Uttar Pradesh & Casuarina was sourced from various parts of Andhra
Pradesh.
Problems
There is no systematic pattern of Truck Arrival. Below there is truck arrival
pattern on a day. Truck arrival pattern would change drastically on a dayto-day basis.
Expected truck arrival pattern on a typical day
Eucalyptu
06:00 - 08:00
08:00 - 10:00
10:00 - 12:00
12:00 - 02:00
02:00 - 04:00
04:00 - 06:00
06:00 - 08:00
s
8
14
18
10
10
6
4
Casuarina
5
7
10
6
6
4
2
3.4 INFORMATION
Data and analysis regarding inventory, transportation, facilities, and
customers throughout the supply chain. It is potentially the biggest driver since it
affects all the other drivers.
Supply Chain Initiative at APR Limited
Page 11
APR Limited
Information
Wood procurement data was managed by procurement personnel, the wood
yard was managed by stores personnel and the chipper was managed by
production personnel. Maintenance personnel was managed to replace blunt knives
with sharpened knives at the chipper.
Problems
Lack of coordination between the various departments personnel.
3.5 SOURCING
Sourcing is the set of business processes required to purchase goods &
services. Managers must first decide which tasks will be outsourced & those that will
be performed within the firm.
APR Limited
Sourcing
Truck to purchase the woods from different states.
3.6 PRICING
Pricing is related with that how much a company will charge for Goods &
services that it makes available in the supply chain. Actually pricing affects the
behaviour of the buyer of the goods or services which can affect supply chain
performance.
Page 12
APR Limited
Pricing
Company have no choice but to accept the terms dictated by suppliers in
pricing fixed rate ton.
Prices were ruling at about 35000 per MT dropped to a level of about 25000
per MT.
Company is paying about 10 million to the labour contractor for the material
handling of woods and extra material handling cost 100 per ton.
Problems
Very high material handling costs & extra handling cost.
International Price dropped by about 40 percent.
Question No. 1
Supply Chain Initiative at APR Limited
Page 13
As Saloni Yashpal, what would you do to address the wood logistics problem?
Where would you focus your attention and solution efforts?
Solution
As Saloni Yashpal various wood logistics problems that would come across our way
are as:
1. BACKROUND
Reduction of custom duty on rayon has led the company decide to make
substantial investment so as to double its capacity from 150 MT to 300 MT per day.
Further increase the production upto 500 MT per day.
2. WOOD LOGISTIC PROBLEM
2.1 PLANNING
The company purchased wood in the form of logs, which were converted into
wood chips before being fed into a digester. The company had two chippers and two
separate silos for eucalyptus and casuarinas. The proportion of the wood instead of
being fixed based on factors like availability of wood.
Therefore as the ratio not being fixed led the company to vary it according to
the availability of wood , as a result of which if the eucalyptus logs are forming a
ratio of more than 60% then the chipper had to wait for a long time as the ratio is
changed . As a result of such decisions trucks had to wait in long queues till early
wee hours and at the same time contractors demanded more money which in turn
led to the cost increment?
Holding six months of inventory was a standard practice followed by the pulp
and paper industry. Wood did get affected with time and the plant yield usually
would be lower if wood was stored for a longer period of time.
Hence there was no proper planning of inventory holding, lead time and the
company didnt follow a standard practice.
Supply Chain Initiative at APR Limited
Page 14
2.2 PROCUREMENT
The company usually had two kinds of contracts with the suppliers who
supply the wood. In one kind the price of wood is based on its moisture content. The
contract price would mention the price for having wood say, 10 percent moisture.
The actual moisture content in the wood would vary from one truck to another.
Based on the sample collected at the time of receipt, the quality control personnel
would estimate the actual moisture content in the incoming wood and the supplier
would be paid accordingly. Another kind of contract involved fixed prices per ton of
wood irrespective of moisture content in the incoming wood. The company would
like to get wood based on the first type of contract, but suppliers insisted on the
latter type. As there was shortage of wood in the Andhra Pradesh region, the
company had no choice but to accept the terms dictated by suppliers.
Hence while not giving heed to the demand of suppliers the Company was
hitting their own shoe as sourcing from far away regions like Karnataka and UP for
almost all the wood logs would lead to cost increment. Moisture content had no
specific quality problem.
2.3 TRANSPORTATION
A steady stream of trucks would arrive at the gates of the company, each
carrying about 10 MT of logs. Each truck was weighed at the weigh bridge and
depending on the schedule and availability of chipping schedule logs would be
unloaded. The company would prefer if the truck was unloaded directly at the
chipper. Because if a truck unloaded directly at the Woodyard then it would lead to
extra material handling costs of about 100 per ton . At each chipper only one truck
could be unloaded at a time
And the balance material was bought from the Woodyard using the tractor
which could carry capacity of two tons of material. Unloading at the chipper can be
done only when the chipper is operational. At the Woodyard they had capacity to
unload a maximum of six trucks at a time. Unloading of a truck required about 1.5-2
hours. For all the material handling costs contract labourers were employed who
Page 15
were paid on piece rate basis. Labour contractor were paid Rs 10 million for the
material handling of wood.
Hence, handling of trucks carrying heavy logs of wood was one of the major
areas of concern for the Company. This lead to a daily problem of trucks standing in
long queues waiting till morning for their turn to come.
2.4 MAINTENANCE
In the actual pressurized environment of day to day operations it was difficult
to understand how decisions were taken by the various departments, how they
interacted with each other .There was no material accounting at the Woodyard.
Truck arrival pattern would change drastically on a day to day basis. Production
personnel also changed their chipping schedules frequently on a day to day basis.
Production personnel also changed their chipping schedules frequently during the
day and rarely followed the schedule that they would have given to the Woodyard
personnel.
Thus there was no maintenance regarding the chipper schedule, truck arrival
pattern, Woodyard material accounting problems and if the Company targeted
increased production this would lead to the problems like mismanagement of all the
activities as already when the production is 250 MT long queues of trucks keep
waiting for their turn and in return they are demanding for more price of their wood.
In addition there is no maintenance for High Inventory which in turn would lead to
loss of production due to reduction in cellulose content .Hence maintenance of the
logistics problem would keep a check on the various issues arising and would keep
a quality control check on all the variations occurring due to deviations occurring.
3. ADDRESSING THE PROBLEM
3.1 UNDERSTANDING THE SITUATION
Understanding the ongoing situation would be the first priority as it would help
make a complete view of the system and it would help as
Page 16
All the above would help in making a note of real situation going around in the
Company.
3.2 MEETING VARIOUS DEPARTMENTS PERSONNEL
Managing effective logistics involved coordinating with various departments.
Unless we got involve all of them, we would not be able to make any headway.
Page 17
Inventory Planning
Page 18
Simulation would help in calculating the various drawback areas like waiting of truck
at all resources and calculating the costs of all the materials bought from Woodyard
by tractors.
Page 19
Question No. 2
What options exist? What would you recommend? Why?
Solution
In the beginning of the fiscal year 1997, the government slashed custom duty
on rayon pulp from 25 to 10 per cent. Subsequently the international pulp prices
dropped by about 40% putting the company under tremendous pressure. So the
company not only had to gear up for doubling the production level, it also had to cut
its costs substantially.
To increase the Rayon production the first focus would be on the wood
consumption i.e. Wood Logistics problem as the company was holding about 6
months of wood stock at its Woodyard.
Various options which exist are:
Page 20
Maintain proper lead time and Reorder cycle with the Suppliers
Reduce the truck waiting time at all the resources (Weigh Bridge,
chipper and Woodyard)
Above all are the various options which exist for the increase in the
production level.
RECOMMENDATIONS
Various Recommendations that exist are:
Maintaining fixed proportion of wood (60:40)
The proportion varied from month to month on the basis of factors like
availability of wood. In the last four years the proportion of Eucalyptus had never
gone below 50% but at the same time there was a month when the company
operated with a high proportion of eucalyptus as 70%.
Supply Chain Initiative at APR Limited
Page 21
As in the first 3 months the moisture content would reduce at rate of 4-5%.So
inventory must not be kept for more than three months.
Conduct Workshops
Since there is no coordination among the various departments personnel so
conducting workshops would be helpful to understand the concept of
Procurement
Manufacturing
Marketing
Page 22
Corporate Planning
Moreover it will bind all the members together and help them focus on
company goals and targets.
Invest in Integrated Information System
Such a system would ensure that each and every entity in the system would
have knowledge on real-time basis about the status of the system. This will help all
departments to make optimal decisions on a real-time basis.
Invest in one more weigh bridge, two chippers and special equipments
As a result of the Data Sheets for Simulation Exercise following problems
occurred
Truck waiting at Weigh Bridge, chipper and wood yard
Extra loading and unloading costs
Increase in production would be an impossible task
Hence investing in two chippers will help as
No more waiting queues for trucks
Will reduce extra material costs of contract labourers
Will reduce the cost of 100 per ton
More quantity of wood can be cut easier
Following is the Scheduling of two chippers of Eucalyptus and Casuarina
SCHEDULE
EUCALYPTUS SCHEDULE
Chipper No. 1
7:00 AM
to 1:30
PM
1:30 PM
to 4:30
PM
4:30 PM to
9:30 PM
9:30 PM to
11:30 PM
11:30 PM
to 5:30 AM
5:30 AM to
7:00 AM
Page 23
Chipper
1
Eucalypt
us
Operatio
n
Close
Operation
Close
Operation
Close
6.5 Hour
3 Hour
5 Hour
2 Hour
6 Hour
1.5 Hour
7:30 PM to
9:30 PM
9:30 PM to
3:30 AM
3:30 AM to
5:00 AM
EUCALYPTUS SCHEDULE
Chipper No. 2
5:00 AM
to 11:30
AM
Chipper
2
Eucalypt
us
11:30 AM
to 2:30
PM
2:30 PM
to 7:30
PM
Operation
Close
Operatio
n
Close
Operation
Close
6.5 Hour
3 Hour
5 Hour
2 Hour
6 Hour
1.5 Hour
7:30 PM to
10:30 PM
10:30 PM
to 1:30 AM
1:30 AM to
8:00 AM
CASUARINA SCHEDULE
Chipper No. 1
8:00 AM
to 1:00
PM
Chipper
1
Casuarin
a
1:00 PM
to 4:00
PM
4:00 PM
to 7:30
PM
Operation
Close
Operatio
n
Close
Operation
Close
5 Hour
3 Hour
3.5 Hour
3 Hour
3 Hour
6.5 Hour
CASUARINA SCHEDULE
Chipper No. 2
11:00 AM
to 4:00
PM
4:00 PM
to 7:00
PM
7:00 PM
to 10:30
PM
10:30 PM
to 1:30 AM
1:30 AM to
4:30 AM
4:30 AM
TO 11:00
AM
Page 24
Chipper
2
Casuarin
a
Operation
Close
Operatio
n
Close
Operation
Close
5 Hour
3 Hour
3.5 Hour
3 Hour
3 Hour
6.5 Hour
Casuar
ina
art
dept
time
time
06:00
06:34
06:15
06:49
06:30
07:04
06:45
07:19
trucke
d
art
time
dept
time
Page 25
E5
E6
E7
E8
07:00
07:15
07:30
07:45
07:34
07:49
08:04
08:19
C1
C2
08:00
08:15
08:34
08:49
For Eucalyptus
chipper operations
sheet
Chipper Queue
time
time
of
of
truck joinin leavi
ed
g
ng
Eucalyptus
Chipper 1 Operation
trucke
d
Start of
operation
s
End of
operatio
ns
Eucalyptus
Chipper 2 Operation
truck
ed
Start of
operati
ons
End of
operatio
ns
Page 26
E1
E2
E3
E4
E6
E8
06:10
06:25
06:40
06:55
07:25
07:55
06:30
06:45
07:00
07:15
E5
07:10
07:30
E7
07:40
08:00
07:45
08:15
For Casuarina
Casuarina
Chipper 1
Operation
Trucked
Casuarina
Chipper 2
Operation
Start of
operation
s
End of
operation
s
08:10
08:25
08:30
08:45
C1
C2
trucked
Start of
operations
End of
operation
s
Page 27
Time
Slot
Wood
receiv
ed
Direct
ly
Wood
receive
d from
Woody
ard
Time
Slot
Wood
receiv
ed
Direct
ly
Wood
receive
d from
Woody
ard
Unload-1
Operation
s
Truck id
E1
Unload-2
Operatio
ns
Star
t of
End of
Op.
Op.
06:1
0
Truck id
Start
of
Op.
End of
Op.
Truck
id
Unloa
d-4
Operat
e
Start
of
Op.
End
of
Op.
Truck
id
Unloa
d-5
Opera
te
Star
t of
Op.
End
of
Op.
Truck
id
Unloa
d-6
Opera
te
Sta
rt
of
Op.
End
of
Op.
Truck
id
Sta
rt
of
Op.
End
of
Op.
Question No. 3
Page 28
In what way the simulation exercise suggested by Saloni Yashpal would help APR in
attacking the wood logistics problem?
Solution
The Simulation Exercise suggested by Salnoi Yashpal is:
Truck
Status
ID E1
UNLOAD
ED
Time
of
Joining
07:38
Truck
ID
ID E1
07:45 ID E1
ID E2
ID E2
ID C1
ID C1
ID C2
ID C2
UNLOAD
ED
08:35
08:36 ID C2
ID E3
Truck
Status
LOADED
UNLOADE
D
LOADED
UNLOADE
D
LOADED
UNLOADE
D
LOADED
UNLOADE
D
LOADED
Start of
End of
Operatio Operatio
ns
ns
06:00
06:08
07:45
06:10
07:48
06:18
07:48
00:00
07:51
06:35
08:20
00:00
08:24
06:50
08:36
07:00
08:40
07:12
Page 29
ID E3
ID E5
ID E5
ID E6
ID E6
ID C3
ID C4
UNLOAD
ED
LOADED
UNLOAD
ED
LOADED
UNLOAD
ED
LOADED
LOADED
07:37
07:40 ID E3
ID E4
07:30
ID E4
07:32 ID E5
07:55
07:40
07:59 ID E5
07:51 ID E6
08:14
07:55
08:16 ID E6
08:02 ID C3
08:10
ID C3
08:12 ID C4
ID C4
UNLOADE
D
LOADED
UNLOADE
D
LOADED
UNLOADE
D
LOADED
UNLOADE
D
LOADED
UNLOADE
D
LOADED
UNLOADE
D
07:40
07:20
07:45
07:32
09:32
07:32
09:37
07:40
07:59
07:51
08:02
07:59
08:16
08:02
08:19
08:12
08:32
08:12
08:36
08:16
10:01
10:05
Chipper 1 Operation
Start of
Truc Operati
k ID on
ID
C3
08:12
End of
Operati
on
Chipper 2 Operation
Start of End of
Truc Operati Operati
k ID on
on
ID
E3
07:12
07:37
ID
E5
07:40
07:55
ID
E6
07:59
08:14
08:32
Time Slot
08:0009:00
Chipper 2
Wood
Received
from
Woodyard
Wood
Received
Directly
10
Time Slot
07:0008:00
Wood
Received
from
Woodyard
Wood
Received
Directly
30
Page 30
Woodyard Queue
Unload 1 Operation
End
Truc Start
of
k ID of Op. Op.
ID
E1
06:08 07:38
Unload 2 Operation
Start End
Truc of
of
k ID Op.
Op.
ID
06:1
E2
8 07:48
Unload 4 Operation
Start End
Truc of
of
k ID Op.
Op.
ID
06:5
C2
0 08:35
Unload 5 Operation
Start End
Truc of
of
k ID Op.
Op.
ID
07:3
E4
2 09:32
Unload 6 Operation
Start End
Truc of
of
k ID Op.
Op.
ID
08:1
10:0
C4
6
1
After filling all the sheets of the simulation exercise we come up with certain points
which are as follows:
As per the table -2 (truck arrival pattern on a typical day) 13 trucks should be
there in between 6:00 AM to 8:00 AM, but this simulation exercise tells us
that only 9 trucks can go inside the premises which show that work is not
going according to the standard.
Because we are not able to match the actual arrival pattern with standard
arrival pattern, which creates a problem of waiting (queue) the truck outside
the factory which also increases our Handling & Extra Material Handling Cost.
Page 31
In Weigh Bridge Monitoring Sheet we can see that most of the trucks stand in
queue. And because trucks have to wait in queue the supplier is asking, to
increase the cost.
In Chipper Wood Management Sheet we can see that there is only one truck
of casuarina on slot of 8:00 AM to 9:00 AM. So, it will incur the Extra Material
Handling Cost because we have to supply the material by the help of tractor
and a single tractor carries only 2 Tons of wood and the extra material
handling cost will be 200 Rupees.
This simulation exercise helps APR in attacking the wood logistic problem by
describing the loop holes in the company.
Page 32
By following the above value chain the company will be able to focus at each
and every perspective from the incoming of raw materials to marketing and services.
Inbound Logistics can be maintained by sourcing the material from AP, UP,
Karnataka. Operations maintenance can be done by good coordination among
various departments personnel so that any delay or early arrival can be handling
accordingly. Outbound logistics can be maintained by supplying the material to
textile industries, paper and pharmaceutical industries. Marketing interface would
help managing multiple products and grades and accordingly they can be selling to
different customers. Service can be maintained by supplying Rayon Grade Pulp with
short lead time as it would help in incurring fewer costs. On time delivery will help
making customers satisfied and will out step the competitors.
Page 33
Procurement will help if suppliers are contracted at fixed prices per ton of
wood and maintain good relations with them as there is shortage of wood in AP. By
developing our technology like chipper, weigh bridge, special equipment will help in
fastening the chipping schedule which in turn would help in quick manufacturing and
meeting the demands of customers investing in Integrated Information System will
give complete real time basis which would help make optimal decisions. H R
Management will be helpful if all the heads of departments are motivated
continuously and there is good coordination among them.
Page 34
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Page 36