Acknowledgment

I have taken efforts in this project. However, it would not have been possible without the
kind support and help of many individuals and organizations. I would like to extend my
sincere thanks to all of them.
I am highly indebted to Mrs. Richa Agarwal our module leader of Supply Chain
Management for her guidance and constant supervision as well as for providing necessary
information regarding the project & also for her support in completing the project. Also I
would like to express my gratitude towards my parents and to my colleagues in developing
the project and people who have willingly or unwillingly helped me out with their abilities.

Index
Sr.
No.

Particulars

Page No.

Introduction

Structure of the Company

Major issues and Success Story

Product line , Packaging and Raw material Consumption

Procurement and Packaging Consumption

Inbound Logistics

7-8

Outbound Logistics

8-9

Case Study Answers

10-16

Conclusion

17

10

Harvard Referencing

18

Introduction

Kapil Health Food Products was established in 1960 as a subsidiary of an

American Multinational pharmaceutical company.

It has a total capital outlay of Rs.50 million.

It started its manufacturing operations at Nahar, which is situated 325 kilometers

west of New Delhi & has a population of 8,500.

Nahar is a semi-urban town supported by a village economy.

Kapil is an ISO 9002 accredited manufacturing firm with state of-the-art

manufacturing & packaging facilities.

Structure of the Company

In 1980, the foreign holding of the company was diluted to 51%, and 49% shares
were offered to Indian nationals and financial institutions.

The company was registered as Kapil Health Products Limited & milk is the
major raw material for the firms product, its major focus is on the diary
development activities.

It undertakes programmes like animal health; animal insurance, mechanized

milking etc. It spends around 750 million rupees per annum on the above
activities.

It is now leading health food manufacturing company contributing to 32% of the

total health food powder production in India.

Major competition is from leading brands like Bournvita, Boost, Horlicks,

Nutramul and Maltova & ayurvedic pharmaceutical companies in India.

All these ayurvedic pharmaceutical companies command around 10-12% of the

health food market in India.

Major Issues

Wholesalers are unable to fulfil two orders in every twenty orders placed by
retailers.
Due to severe competition, KHFP is in the process of reviewing its supply chain
for
Cost reduction
Enhancing customer service.
The management is planning to reduce the inventory to less than 10 days at factory
& C&F agents.

The distribution cost on the present level of sales is at the rate of 8.5%, which they
want to reduce by 40% i.e. from 8.5 they want to bring it down to 5.1%.

In addition they want to reduce inbound transportation cost by proper planning &
scheduling.

Kapils Success Story

Kapil runs three product lines:

Health foods, HOR & BOS

Ghee.

The Company also supplies products in bulk to various repacking stations across
the country to take advantage of freight economy.

Product Packaging at Kapil Health Food Products:

HOR
500gm
1000gm
-

BOS
500gm
1000gm
-

GHEE
500gm
1000gm
2000gm
5000gm
10,000gm

Major Raw Material Consumption MT/Day

Item
Wheat Flour
Malted Barley
Malt Extract
Sugar
Milk Powder
Liquid Milk (Litres)

Consumption
28
26
35
8
14
1,50,000

Procurement

PROCUREMENT
DEPARTMENT

PROCUREMENT
MANAGER

PURCHASE
MANAGER

PURCHASE

PURCHASE

MANAGER

MANAGER

Since the numbers of raw materials are 6, the management thinks that it has a good
control over the inventory & its suppliers.
Barring milk is the major raw material, & NO OF VENDORS ARE RESTRICTED TO 4
OR 5.

Packaging Consumption (Units/day)

Inbound Logistics

The movement of materials from suppliers and vendors into production processes
or storage facilities.

Activities associated with receiving, storing, and disseminating inputs to the

product.

Milk Flow System

Modified Production
MALTED
BARLEY+WHAET
FLOUR

MIXING & BULK

PACAKAGING

WAREHOUSING

WASHING &
MILK+VITAMINS

GRINDING&
SUGAR+SMO

QUALITY &
PACAKAGING
CENTRES

EVAPORATION &
FOOD
SEPARATION

OVEN DRYING &

FOOD SCALPING

DESPATCH

Outbound Logistics
The factory has 4 Regional offices at major metros headed by:

GENERAL
MANAGER
REGIONAL
MANAGER

SALES ADMIN

C & F AGENTS

WHOLESALERS

The process related to the movement and storage of products from the end of the
production line to the end user.
8

Outbound Logistics is the part of the supply chain process, such as custom
assembly or private labelling that moves, stores, and adds value.

Distribution System

8C&F
AGENTS

45
STOCKIST
S

ORGANISING
DISPATCHES

FORECASTED
REQUIREMENT

200
WHOLES
ALERS

CONSUMPTION
PATTERNS

The Product Requirement flows from

C & F AGENTS

REGIONAL
OFFICE

STOCKISTS

WHOLESALERS

RETAILERS

INVENTORY HOLDING

WAREHOUSE

15-18 DAYS

C & F AGENTS

12-15 DAYS

STOCKISTS

8-10 DAYS

WHOLESALERS

7-8 DAYS

Q-1 Map the supply chain of KHFL for weak linkages.

Ans :-

Present Supply chain of KHFL is

Suggested Supply Chain due to weak linkages

10

The point from Rakhra can be used in order to be used during urgent requirement.
And Point A, B, C, D can serve as collection centres for the rest of the point sending the
raw material to the factory.

11

Q-2 For Improvements in critical areas in KHFL supply chain , what measures do
you suggest to reduce cost and improve customer service?
Ans :Supply chain management is directly related to a companys customer service. And if a
company has great customer service, it can get a leg up on the competition. To be
successful, a small business must take advantage of every opportunity it can to stand out
from the competition.
Good supply chain management boosts your companys customer service by allowing
you to do three things:

Deliver products to customers faster and with greater accuracy.

Track shipments to ensure they reach their destination safely.

Maintain optimal inventory levels so you always have what customers want in stock.
KHFL should Focus on:INVENTORY MANAGEMENT:

Reduce the inventory at warehouse i.e. from 15-18 to 12-15.

This can be done by providing discounts to C&F agents at 3% discount rate.

This would automatically provide a benefit of discounts to stockiest, wholesalers

via C&F agents.

Hence ultimate result would be that the inventory level at warehouse would lower
down and will increase at C&F agents, stockiest and wholesaler level.

Thus the increase in the stock will ensure the C&F order filling rate reaches to 100% than
the present one at 89% where they are unable to fulfil two orders in every twenty order
placed by retailers.

12

Q-3 The Major cost-spinner in KHFL logistics operation is inbound transportation.

Do you agree with this? How can it be reduced?
Ans :In order to save costs:-

1. Use of Mini-trucks from all milk collection centres to Points A,B,C,D and a direct
Mini-Truck from E to the Factory. Also assuming high quantity use of large trucks
only from points to the factory.

13

2. C&F Agents :- It is observed that the job of C&F agents is just the provision of
stock to the regional office demand. If possible company should invest in 8
different warehouses from where provision of the stock can be done to the
regional offices demand. It will save costs in long term and also reduce the
commission of the C&F agents.

14

3. Manufacturing Resource Planning-MRP II

MRP II system provides data on the cost of production, machine time, labour time
and material consumed and the final output to accounting and finance. As the new
milk collection centres and processing units will be setup, so there will be
requirement MRP II.
Manufacturing resource planning (MRP II) is an integrated method of operational and
financial planning for manufacturing companies. MRP II serves as an extension
of MRP(closed loop manufacturing resource planning, also abbreviated as CLMRP).

15

The typical MRP II system employs a modular organizational structure. Modules keep track
of, and regulate, specific characteristics and functions of the entire organization. Examples
include, but are not limited to, the following:

Product design
Product specifications
QC (quality control)
QA (quality assurance)
Shop floor control
Order management
Purchasing
Inventory
Cost calculation
Cost reporting
General accounting
Cash flow
Tax calculation
Tax payments
The MRP II process is carried out by a synergistic combination of computer and human
resources. The MRP II differs fundamentally from point contact planning, in which
individual characteristics and functions have their own dedicated systems.

16

Conclusion
Supply Chain Management (SCM) is an essential element to operational efficiency. SCM
can be applied to customer satisfaction and company success, as well as within societal
settings, including medical missions; disaster relief operations and other kinds of
emergencies; cultural evolution; and it can help improve quality of life. Because of the vital
role SCM plays within organizations, employers seek employees with an abundance of
SCM skills and knowledge. Supply chain management is critical to business operations and
success.
Through Basic solutions provided in the above presentation as well as through complex
calculations of vehicle scheduling and distribution network design options it is possible for
Kapil health food products to reach the intended level of optimum supply chain
management.

17

Harvard Referencing
How to Improve Customer Service with Supply Chain Management | Fishbowl. 2016. How to
Improve Customer Service with Supply Chain Management | Fishbowl. [ONLINE] Available
at:https://www.fishbowlinventory.com/articles/supply-chain-management/how-to-improve-customerservice-with-supply-chain-management/. [Accessed 08 March 2016].
Manufacturing resource planning - Wikipedia, the free encyclopedia. 2016. Manufacturing
resource planning - Wikipedia, the free encyclopedia. [ONLINE] Available
at:https://en.wikipedia.org/wiki/Manufacturing_resource_planning. [Accessed 08 March 2016].
What is Manufacturing resource planning (MRP II)? - Definition from WhatIs.com.
2016. What is Manufacturing resource planning (MRP II)? - Definition from WhatIs.com.
[ONLINE] Available at:http://whatis.techtarget.com/definition/Manufacturing-resource-planningMRP-II. [Accessed 08 March 2016].
. 2016. . [ONLINE] Available at: http://faculty.ineg.uark.edu/rmeller/web/CELDiPI/InboundTransportation-CH-Robinson.pdf. [Accessed 08 March 2016].
. 2016. . [ONLINE] Available
at: http://nptel.ac.in/courses/110106046/Module%2011/Lecture%204.pdf. [Accessed 08 March
2016].

18