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Logistics & Supply Chain Management

Table of Contents
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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TECHNOLOGY ENABLED LOGISTICS


Introduction
Logistics is a nascent and fragmented industry in India. This is despite the fact that last few
years of high growth in Indian Economy have resulted in a significant rise in volume of
freight traffic. Indian logistics market is expected to grow at a CAGR of 12.17% by 2020
driven by a growth in manufacturing, retail, FMCG and e-commerce sectors. India spends
around 14.4% of its GDP on logistics and transportation. Logistics market in India is expected
to be worth US$ 307 billion by 2020.
Background
Outbound Logistics Division of ABC company is responsible for ensuring despatch of goods
to the customer. It looks after both transportation as well as warehousing. The company
follows a hub and spoke distribution model for supply of products to its more than 2 lakh
customers across the country. ~ 65% of material is transported via rail and rest of the
material moves by road.
Every morning based on despatch-able inventory in finishing steel mills, despatch planning is
done. The despatch of material is planned primarily by rail. The rest of the material is
released by Road. However, the aim remains to maximise rail despatches as in majority of
the cases, it rail transportation is cheaper than road.
30% of outgoing material goes to the customers directly. The rest of it goes to the
stockyards from where it is despatched to the customers on order placement. Despatch
from stockyards, referred to as second leg movement, is by Road only. 100% of road
transportation is outsourced and is carried by our vendor partners. The transportation
vendors can deploy their own fleet of vehicles or can procure them from the market.
Problem Statement/Challenges Faced
Logistics industry till date is dominated by unorganized sector and penetration of
technology is minimal. Most of the processes are paper based which are highly redundant,
wastes lot of time and is seen has a roadblock. With right technologies in place, companies
can aim to reduce operational expenses by over 30 percent. These systems also help in
reducing the lead time and facilitate express distribution, reduce manual errors, and enables
enterprises set-up lean structure for efficient working models.
While ABC has been using technology for order creation, inventory and vehicle tracking
using a swipe card mechanism; the vendors are not that technology enabled. In case of
owned vehicle GPS tracking is available in real time but when the vendor uses a market
vehicle, GPS is not necessarily fitted onto the vehicle. With a number of technological
solutions now available in the market, its not easy to understand which one suits our needs
the best. The dynamics of logistics industry is also expected to change with the entry of
logistics e-commerce startups which act as transport aggregators.
Critical Case Questions
1. With a constant pressure to reduce cost, how can ABC leverage technology to reduce
cost in planning, transportation & warehousing while maintaining the same service
level to the customer?
2. How can ABC leverage digitization to reduce its carbon footprint by reducing the
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paperwork required for logistics, while complying with all the government
regulations?
3. How will the dynamics of logistics industry change with the entry of logistics ecommerce startups which act as transport aggregators? As the company outsources
its entire transportation activities, how can they leverage such startups to create a
competitive advantage?
4. How can they successfully coordinate between both these new age transport
aggregators and the existing traditional transportation partners with whom they
have shared a long and fruitful relationship?

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CATEGORY STRATEGY TO CATER INCREASED DEMAND WHILE


ENSURING AVAILABILITY AND COMPETITIVENESS OF BUY
Introduction
E-mails marked Urgent are always dangerous on Friday evenings. Ravi Khanna,
procurement manager for Metals at Tata Steel, just received one. He wasnt going to be
proved wrong. The newly started steel plant at Kalinganagar had shared their requirement
for next quarter. Contrary to the annual plan shared earlier, requirement of Aluminium
products for next quarter was going to be twice the initial figures. Jamshedpur plant had
also indicated an increase in requirement of ~ 20%1 owing to the change in grade mix of
final product.
Background
Aluminium products required by Tata Steel Aluminium cubes & Aluminium notch bars are
typically produced by SMEs with limited capacity. The requirement of these products has
steadily grown over the years and for current financial year, it was expected to be ~ 25,000
TPA. With increasing requirement, new suppliers were added and currently there are 15
suppliers in the panel. Many of them are having small capacity. The capacities of suppliers
are limited mainly because of constraints in raw material sourcing (Aluminium scrap),
manual process of manufacturing these products & limited working capital. Total capacity of
current supplier panel is ~ 75,000 TPA. Generally, suppliers dont want exposure of more
than 40% supplies going to one customer as Aluminium is a commodity and customers have
low risk in switching supplier. This leads to orders being placed to 5-6 suppliers for each
product.
Ravi had the notes of cost review meeting held in the morning on his desk. Steel Industry is
still facing challenging times with low global steel prices and demand is yet to improve. Tata
Steel is also undergoing this difficult phase. The company is relying on procurement to
reduce cost and ensure that companys profitability is maintained. Ravi has got the target to
reduce cost by 10% in his category.
Problem Statement/Challenges Faced
With Metal prices mainly driven by LME Index, Ravi was finding it difficult to maintain the
cost at last years level when LME was at multi-year low. At this point of time, he had no
idea of how he will achieve the cost reduction target. To add to his problems, the increased
requirement of Aluminium products would further reduce the competition in his supplier
panel as major suppliers were assured of getting orders. Also, by placing orders on too many
suppliers, supply chain was getting complex and he was losing on economies of scale.
Quality of Aluminium products has direct impact on steel quality. Impurities in this product
also cause safety issues while usage and create fumes which is not good for environment
and health of operators. In past, there were some instances of quality issues in this product
and operations team had clearly stated that quality needs to improve for this product. Ravi
feared that strict quality norms in contract may further increase the cost.
1

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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There was also a need to increase the efficiency of supply chain. Due to high value of
material, inventory needs to be optimal. This required suppliers to deliver on time. While
some suppliers were having good delivery compliance, few others were struggling to
consistently deliver on time. Last year, plant had a near stock-out situation for Aluminium
cubes and this could have severely impacted production.
Extensive supplier search has been done last year in this category and all suppliers having
significant capacity in India are a part of supplier panel now. There are many other suppliers
but they have small capacity and their quality is a concern. These products are generally not
imported due to high duties. Ravi was not sure if he should still keep searching for suppliers
to meet the requirement.
Tata Steel is currently placing quarterly contracts and has a LME based monthly price
variation clause for raw material component. Ravi had to do finish contracting for next
quarter in next 20 days and he was not able to get his strategy right.
Critical Case Questions
1) What should Ravi do to achieve the cost reduction target?
2) What should be Ravis plan to meet requirement ensuring that there is enough
competition among suppliers?
3) What steps need to be taken to improve quality score and delivery compliance of
suppliers?
Participants are expected to develop a category strategy for Aluminium products which
addresses the above concerns.

Exhibit I:
Location

Projected Requirement of Aluminium Products (MT/Month)

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

Annual Production Capacity of suppliers currently in Panel (in MTs)

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Exhibit III:

Typical Cost Break-up of a supplier of Aluminium Products

Exhibit IV:

Quality & Delivery Score of Aluminium Suppliers

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CONTRACTING STRATEGY TO REDUCE SINGLE SOURCE DEPENDENCY.


Introduction
Scaffolding is a temporary structure used to support a work crew and materials to aid in the
maintenance activities while working at heights. This is a very critical service for any
manufacturing industry and maintaining safety standard is critical. The overall scaffolding
service quality depends on various parameters like quality of the steel pipes, the locking
process of steel pipes, skill level of scaffolder and productivity in terms of erection and
dismantling. Therefore it is essential for any industry to critically analyse proven expertise
and capabilities of the scaffolding service provider before contracting with them.
In the year 2009-10 Tata Steel, in order to improve safety standards of working at heights,
introduced M/s ABC Scaffolding, who is the pioneer in terms of technology. Since then,
maximum share of business in TSL for scaffolding hiring services remains with ABC,
however in between one smaller player XYZ was introduced with relatively low share of
business.
Background
TSL annual spend in scaffolding category is approximately Rs 50 Cr.
There are two parties providing this service to TSL: ABC (80% SOB) and XYZ (20% SOB).
There are key 3 cost components covering the total spend: Manpower (68%), Material
(20%), Transport (12%).
Productivity (speed of erection of scaffolding) industry avg
Height of scaffold

Productivity (per cub m per hour)

< 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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consolidate entire TSL requirement to avail volume benefit. To mitigate single source
dependency new vendor development initiative is also being taken up. The main challenges
being faced by Mr Ratan are :
1. Reluctance of technical team to be flexible in allotting share of business to new players, as
they want maximum share to be provided to ABC, considering their track record, experience
and expertise.
2. ABC is charging 50% premium on manpower and material cost when their rates are
compared with other industry players.

Critical Case Questions


The new contracting strategy should meet both the requirement of spend reduction and
stringent safety and quality standard. While introduction of any new party can provide cost
benefit, they will not be having experience of working with TSL, which enhances risk of
failure.
Based on above please suggest the following :
1. Should TSL ask for quotes for different SOB brackets from bidders? Do you think the
pricing of the vendors will change with SOB? Please provide sufficient reason for your
answer.
2. What are the measures TSL can take in contracting to enhance productivity?

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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Sample Cost Model Annex I
Services

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

Scaffolding Material per tone

Vehicle for workforce


TransportaVehicle for material shifting
tion
Driver Cost

TO
NOS
NOS
SFT

Material Indicative Price list annex II

Description

Weight in
Kgs

Nos

CUPLOK LOOSE SPIGOT GALV


CUPLOK SPIGOT PIN ONLY
VERTICAL 1.0M GALV CUPLOK
VERTICAL 1.3M GALV CUPLOK SPIGOTLESS
VERTICAL 1.8M GALV CUPLOK SPIGOTLESS
VERTICAL 2.0M GALV CUPLOK
VERTICAL 3.0M GALV CUPLOK
HORIZONTAL 0.6M GALV CUPLOK
HORIZONTAL 0.9M GALV CUPLOK
HORIZONTAL 1.3M GALV CUPLOK
HORIZONTAL 1.8M GALV CUPLOK
HORIZONTAL 2.5M GALV CUPLOK
HOOKED STEEL BOARD 0.6M GALV
HOOKED STEEL BOARD 0.9M GALV
HOOKED STEEL BOARD 1.3M GALV
HOOKED STEEL BOARD 1.8M GALV

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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HOOKED STEEL BOARD 2.5M GALV
FACE BRACE 1.3 X 2.0M GALV CUPLOK
FACE BRACE 1.8 X 2.0M GALV CUPLOK
FACE BRACE 2.0 X 2.5M GALV CUPLOK
CUPLOK CASTOR WHEELS NYLON
CUPLOK STEEL TOEBOARD 0.6M HANGING
CUPLOK STEEL TOEBOARD 0.9M HANGING
CUPLOK STEEL TOEBOARD 1.3M HANGING
PLAIN BASE PLATE
JACK & BASE PLATE .86 FOR .65M
WOODEN SOLE BOARD
GALV SCAFFOLD TUBE 0.5M
GALV SCAFFOLD TUBE 1.0M
GALV SCAFFOLD TUBE 1.5M
GALV SCAFFOLD TUBE 2.0M
GALV SCAFFOLD TUBE 2.5M
GALV SCAFFOLD TUBE 3.0M
GALV SCAFFOLD TUBE 3.5M
GALV SCAFFOLD TUBE 4.0M
GALV SCAFFOLD TUBE 5.0M
GALV SCAFFOLD TUBE 6.0M
SINGLE COUPLER
SWIVEL COUPLER EN34
DOUBLE COUPLER EN74B
SLEEVE COUPLER EN34
GRAVLOK COUPLER
STEEL LADDER 2.5M PAINTED
STEEL LADDER 3.0M PAINTED
STEEL LADDER 3.5M PAINTED
STEEL LADDER 5.5M PAINTED
STEEL LADDER BEAM 6.0M PAINTED
TOTAL

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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CATEGORY STRATEGY TO CATER INCREASED DEMAND WHILE


ENSURING AVAILABILITY AND COMPETITIVENESS OF BUY
Introduction
Rebars and wire rods are the main products in Long Products segment for TSL. Steel long
products are used by industries such as infrastructure, transmission & distribution,
construction and general engineering. Out of these, rebars accounted for the largest share
of the market in 2015. Tata Steel is a major player in Steel Long product Segment. Tata Steel
has 3 MnTPA manufacturing capability in Long products.
Background
Tata Steel has own manufacturing capacity at Jamshedpur and there are SPCs (Steel
Processing Centres) owned by third-party vendors who do the contract manufacturing for
Tata Steel. These SPCs are exclusive manufacturers for Tata Steel with stringent quality
control, process excellence and Safety Standards.
Developing SPCs to Tata Steel standard is a long term process considering Safety, Quality
control, Process excellence and trust required in this capital intensive business. It is a
partnership in business where Tata Steel and the vendor are highly interdependent. There
are 6 SPCs in Long Product Segment and all of them are strategically located in various parts
of India (Please refer Annexure I) to serve customers across India.
Steel industry is a cyclical industry and is passing thru difficult times in last few years. The
prices are at decade low levels and there is excess supply worldwide. Demand side is also
not favourable. However, there is hope that govt policies may fuel investment driven
growth in the near future.
Problem Statement/Challenges Faced
I.

II.

Capacity rationalisation of the SPCs:


In the last financial year capacity utilisation of the SPCs was low (Annexure II) due to
weak market demand. Capacity utilisation is very important to recover the fixed cost
and if capacity utilisation is low, the cost of manufacturing goes up. Tata Steel
Management is considering various options to rationalise the Long product
processing business.
Tata Steel may consider closing down some of the SPCs to rationalise the capacity
utilisation. This may bring short term benefits for Tata Steel but in the long term it
may have adverse implications. If Tata Steel closes some of the SPCs the whole
supply chain network has to be reworked to meet the customer needs. The SPCs
have long time partnership with Tata Steel and trust has been built over decades.
. Tata Steel senior management is looking for answers to these critical questions
A. Which SPCs to be closed and what would be the business rationale?
B. How to manage the market demand when there is an upswing in the market?
Improvement in cost Performance
Cost of manufacturing is going up in SPCs and main reasons identified are Manpower
Cost (~15%), Fuel Cost (~ 30%) and Electricity Cost (~30%). All these are external
factors and SPCs dont have much control over these. However, there are different

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commercial levers available to control the cost. Some of them require capital
investment and some require calculated business risk. Some of the available levers
are tabled as annexure III.
SPCs are reluctant to make new investments and take risk during tough times but
Tata Steel needs to see immediate improvement in the system.
Critical Case Questions
Tata Steel senior management is looking for answers to these critical questions.
A. How to convince the SPCs for Capital Investment to reduce system cost?
B. How to avoid the fixed cost due to underutilisation of the SPCs capacity?

Annexure I: Footprint of Tata Steel in India

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Annexure II : SPCs Location and Capacity utilisation
Unit Location

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

Annexure III: Profitability Analysis of Different SPCs


Sections
SPC 1
SPC 2
SPC 3
SPC 4
SPC 5
SPC 6

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

: Semi finished good supplied price is taken as manufacturing cost

At Market : Semi finished good supplied price is taken as Market cost


Green colour: The segment is Profitable to Tata Steel (Each ton TSL is making profit)
Red Colour : The segment is not profitable (Each ton TSL is making Loss)

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Annexure IV
Fuel Usage: SPCs can build capability to use different types of Fuel (Coal, Natural Gas
and Furnace Oil).International crude price is going down and reached the lowest in
last 6 months. Fuel cost is around 30% of processing cost and there is a savings
potential of Rs. 250-300 /MT at current FO price. It requires ~1 Cr capital investment
to use Furnace oil in place of Coal. Currently SPCs are using Coal as fuel. However
Crude oil market is very dynamic and cyclic in Nature. EPAs are not sure about
investment to build capability in using Furnace Oil.

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CONTRACTING STRATEGY IN MONOPOLISTIC TRANSPORTATION


CONTRACT AT INDORE
Introduction
For out bound logistics Tata Steel Ltd. (TSL) works with a model of keeping staggered
inventory at various stockyards across the country to meet customer demand. 30 - 40% of
local and strategic customers are directly served from the Jamshedpur plant and around 60
70 % of TSLs finished materials are delivered to customers via stock yards. Stockyards are
strategically located across the country to stay close to customers. This minimizes the
Transit Lead Time (TLT ) customer order booking to delivery cycle. Operations at these
Stockyards and transportation of last mile deliveries to the customers are mainly done by
TSLs business partners. Some of these partners are working with TSL for several decades
and also have decent local influence in their respective areas.
In Madhya Pradesh TSL has a Stockyard at Indore. The material handling at Indore Stockyard
is done by M/s. INOX Ltd. and transportation from this Stockyard is done by M/s. Steel
Transportation of India (STI). TSL has some key customers at Indore; most of these
customers are served by STI.
Background
STI is working with TSL since late 1980s and has a long relationship with TSL at Indore. Some
critical information about Indore transportation contract is given below.
A. Transporters Performance in FY 16.
Performance of a Transporter is measured under various criteria like Transit time, Safety,
Quality of delivery etc. STI is the only transporter at Indore and his performance for FY 16 is
as follows:
Transporter Performance & Grades
AprMayJunJulAugSepOctNovDecMonth
15
15
15
15
15
15
15
15
15
scores
98
95
100
100
100
100
100
99
99
A score greater than 98% is considered as very good. 95% to 98% - Good, & Below 95% poor
B. History of transportation from IndoreThe contract for transportation from Indore was placed on STI on Single party basis as other
vendors did not evince interest to participate in contracting process.

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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Considering monopoly in the market, STI is likely to ask for an increase again in 2016
renewal of the contract. Efforts were made along with Vendor development team to bring
new transporters in the circuit. Earlier some transporters indicated that STI is a politically
connected transporter and will not let other transporters work in that area but recently we
discovered some Mumbai based transporter who would be interested to work as a
transporter at Indore.
C. Over view of distribution model to Indore based customers.
TSL can service Indore based customers via 3 different modes. Overall cost involved,
point of inventory and Transit days are listed below.
Mode 1 _ Direct dispatched from Jamshedpur Plant via road
Mode 2 _ Multimodal transportation (Rail & Road) -Dispatched via Nagpur Stockyard (Rail
dispatched from Jamshedpur to Nagpur + Storage and change of mode from Rail to Road +
Road Transportation till customer at Indore)
Mode 3 _ Multimodal transportation ( Rail and Road) Dispatched via Indore Stockyard
(Rail dispatched from Jamshedpur to Indore SY + Storage and change of mode from Rail to
Road + Road Transportation till customer at Indore) (STI is working in this mode as a
transporter at Indore SY)

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Cost of various modes of transportation is indicated below. (Inclusive of all material
handling and overheads)

Type of Material

Annual
Volume in
MT

Hot Rolled Coil (HRC)


97187
SHEET/PLATES (Hot Rolled)
29400
SLABS
28200
Cold Rolled Coils (CRC)
13067
SHEET (Cold Rolled)
4300
Rebars
1931
Wire Rods (WR)
1434
BILLET
33
Transit Lead Time ( TLT)
Customers order booking to delivery. (
Days )

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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Logistics & Supply Chain Management


Use of other mode of transportation like we can serve Indore based customer directly from
Jamshedpur or Via Nagpur which will reduce TSLs dependence on STI. This may reduce STIs
transportation volume and profit but will increase TSLs transit lead time (TLT) to customers.
Marketing and sales (M&S) prefers the most reliable, safest and fastest mode of delivery to
the customers. TSLs competitors can target this market if TSL fails to serve these customers.
Critical Case Questions
1. What are the possible risks in the current scenario? Identify the early warning
indicators.
2. What strategies should be adopted by the category manager to get rate reduction in
the monopolistic market? Also discuss negotiating levers?
3. What Improvements do you suggest for Inventory planning and supply chain of TSL?
4. How could you leverage inputs from Vendor Development team, Marketing & Sales,
existing and potential Transporters to convert this risk into an opportunity?

Page 18 of 18

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