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LOTUS THREAD COMPANY LIMITED

SUPPLY CHAIN MANAGEMENT


GROUP II – AKSHARA, KESHAV, SHUBHAM
INDUSTRY OVERVIEW
Total Market Size – Rs. 750 Crores
Industry Size – Thread (1992-93)

Industry Size – Thread (1992-93)


14%

350
400
12%

60%
14%
Organised Sector Unorganised Sector

ZYX LTCL AAA New Entrants


5C FRAMEWORK
Company Customer Competition Collaborators Context

 Established: 1973  Tailoring and Large manufacturers:  Raw Material  Increase in stock to
 Leading thread household: 56% ZYX – 60% market suppliers sales ratio from 2 in
manufacturer (14%  Hosiery: 22% share  Marketing team 1991 to 2.48 in
market share)  Readymade AAA – 12% market  Logistics team 1992-93
 Corporate office in garments: 11% share  Independent  Inefficient use of
Patiala, Punjab  Kite flying: 8% New Entrants – 14% Consultant trucks
 Manufacturing in  Others: 3%  Stockouts and
Jalandhar, Punjab excess inventory for
 Central marketing  Dealers various SKUs
office in Delhi  RMG Manufacturers  Inaccurate demand
 Industry – High forecasting
entry and high exit
cost
 Stock to monthly
sale ratio: increase
to 2.48 in 1992-93
from 2 in 1991-92
LTCL SALES

Average Demand in Cartons per month – Sales per month – INR lacs 1992-93
1992-93
20
400

70
1400

1200 60

Delhi Coimbatore Indore Delhi Coimbatore Indore

Total Sales in 1992-93 – Rs. 480 lacs per month


MAJOR ISSUES – INVENTORY COSTS

Higher Inventory for low selling SKUs and lower inventory for high selling SKUs – 21.5 lacs per month inventory
holding cost (2% of total inventory carrying costs per month)
• Lead time from procurement to delivery is high
• Demand forecasts are not accurate
• Plant did not maintain buffer stock – regions maintained buffer stock in response to lead time and demand
variance
• “Additional Requirement” plan – urgency tag for immediate supply around 20th of each month
• Inventory in finished goods stores (FGS – 2700 cartons or Rs. 135 lacs), pipeline and regions (18000 cartons or Rs.
940 lacs)
MAJOR ISSUES – TRANSPORTATION COSTS

• Only full truckload shipments were sent – even though there was no demand, leading to excess inventory at
regional offices
• For fast moving items, cases of stockout occurred, as the company did not dispatch trucks unless they were full
• According to feedback from the market, their competition had better response times in delivering orders and
providing new shades