Assignment 2

Supply Chain Management

(Last Date 21 August 2013, before 11 am)

PASHU KHADYA COMPANY LIMITED (PKCL)

Group No. Section Total Marks Marks Obtained
SA

70

Sr No. 1 2 3 4 5

Name of Students Piyush Mathur Sameer Singh Pokharia Aniruddh Singh Rathore Midhun Rajagopal Amit Menon 12136 12148 12110 12128 12108

Roll No

1.

What are the various cost components that needs to be considered in making the logistics decision? Provide subcomponent with- in each head of the cost component if available Material Cost: This is the cost of the rice barn extract purchased from Lucknow. Transportation Cost: This is the cost incurred on transporting the goods from Lucknow to the various production facilities. o Rail-rake cost: This is the cost of transportation for using the railrake. o Rail-wagon cost: This is the cost of transportation for using the railwagon. o Road Cost: This is the cost of transportation by road. o Two point booking cost Rebooking rate and charge: A minimum rate of Rs. 130/- per ton plus an additional Rs. 250/- rebooking charge.

Inventory Holding Cost: This is the cost incurred to hold the inventory in the warehouse. o Holding Cost: Considered to be 20% of the cost of rice barn o Local Transport and handling Cost: Applicable additional to the holding cost, but is essentially a part of holding cost. o Cost of additional storage: Applicable above storage capacity of warehouse.

2.

What will be the total cost for moving rice bran extract from Lucknow to the four demand centers in Maharashtra by using the:

Lot Size of the shipment = 1600 tons = Q Qrake = 1600 Qwagon = 22 Qroad = 12 Cycle inventory = Q/2 like 1600/2 = 800 Safety inventory = (Lead time/2) * (Demand/365) In-transit inventory = Demand (Lead time/ 365) Total average inventory = Cycle inventory + Safety inventory + In-transit inventory Holding cost = 20% of the one ton price = 1400 * .20 = 280 ~ Rs 300/ton Total cost = Total average inventory + Transportation cost a. Road option

Qroad = 12

Lot size (motors) Kalyan Pune Karad Kirloskar wadi 12 12 12 12

Annual Transport ation cost 8550000 15040000 26640000 16960000

Cycle inventory 6 6 6 6

Safety inventory 86 153 230. 153.

In-transit inventory 172.60 306.85 460.27 306.85

Total Inventory cost 79471 139882 208923 139882

Total cost 8629471 15179882 26848923 17099882

Inventory units 264 466 696 466

Total Time 7 7 7 7

Transit Time 7 7 7 7

b. Rail-wagon load option (without two point booking)

Qwagon = 22
Lot size (motors) Kalyan Pune Karad Kirloskar wadi 22 22 22 22 Annual Transport ation cost 5670000 10720000 16680000 11120000 Cycle inventory 11 11 11 11 Safety inventory 777 1381 2071 1381 In-transit inventory 937 1666 2499 1666 Total Inventory cost 517410 917273 1374259 917273 Inventory units 1725 3058 4581 3058 Total Time 63 63 63 63 Transit Time 38 38 38 38

Total cost 6187410 11637273 18054259 12037273

c. Rail-rake option (without two point booking) Qrake = 1600

Lot size (motors) Kalyan Pune Karad Kirloskar wadi 1600 1600 1600 1600 Annual Transport ation cost 5400000 10240000 15840000 10560000 Cycle inventory 800 800 800 800 Safety inventory 246 438 657 438 In-transit inventory 295 526 789 526 Total Inventory cost 402739 529315 673972 529315 Inventory units 1342 1764 2246 1764 Total Time 20 20 20 20 Transit Time 12 12 12 12

Total cost 5802739 10769315 16513972 11089315

Safety Stock observation: Safety stock is highest in case of transport medium: Wagon. The reason behind this is the highest lead time. Lead time is higher due to higher ordering time and transit time. In terms of location, safety stock level is higher in Karad as compared to other cities. This is due to the higher demand.

3.

What do you conclude by comparing from the results of Question 2?

The comparative analysis clearly indicates the following: a. Rail rake is the cheapest transportation available for all the locations. b. Followed closely by Rail wagon in terms of cost. But the time taken to replenish the inventory is the highest causing high inventory cost. c. Road seems to be ideal for transportation within cities and not warehouse and locations because the cost is very high and also the quantity transferred is very less as compared to rake and wagon. d. Lead time wise: Road is followed by rake and wagon, distantly. But due to the lesser capacity it is ruled out for farther transport.

4.

If you want to consider combinations of road and rail movements, what are ALL the options you would want to consider? Now consider two-point booking. For example: Karad + Kirloskarwadi (Two point booking via rail rake), & from Karad road to Pune; and Kalyan (via rail rake from Lucknow). Be smart with your choices based on the results of Question 2?

The following would be the better solution: Karad + Kirloskarwadi we will club together for 2 point rake as the total cost would be reduced by 2,40,000.00. Kalyan and Pune should be served by Rake directly without two point as the two point cost increase due to >100 Km distance. Hence we will use warehouse to location direct transport using rake for both Kalyan and Pune.

Hence the total cost would be minimized to this

Karad +Kirloskarwadi Kalyan Pune Total 273,63,287.67 58,02,739.73 107,69,315.07 439,35,342.47

5.

What is the best procurement network option for the overall movement of raw materials from Lucknow to the demand points of PKCL?

Using Rake from Lucknow to Karad and Kirloskar wadi using two point network and direct transport to Kalyan and Pune from the warehouse using rake. Rake is the best possible transport mode available and thus gives the most optimized solution with minimum transportation cost.