Ptak prize supply chain case competition 2014

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Published on April 28, 2014

Author: sazzad128

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SUPPLY CHAIN MANAGEMENT IN DBPL: AN INITIATIVE TO
BOOST UP BUSINESS

This is the actual case submitted bu our team. We won the competition. We are giving it to the world as if they can have an idea.

PTAK SUPPLY SUPPLY CHAIN MANAGEMENT IN DBPL: AN INITIATIVE TO BOOST UP BUSINESS Name: Maliha Foiroz Anika Signature: Name: Signature: TAK PRIZE UPPLY C SUPPLY CHAIN MANAGEMENT IN DBPL: AN INITIATIVE TO BOOST UP BUSINESS Name: Maliha Foiroz Anika Signature: Name: Eshaque Fahad Signature: RIZE CHAIN SUPPLY CHAIN MANAGEMENT IN DBPL: AN INITIATIVE TO BOOST UP BUSINESS Driver’s Name: INVENTORY Team’s Name: MXES D A T E O F Team Member Name: Maliha Foiroz Anika Team Member Eshaque Fahad HAIN CASE SUPPLY CHAIN MANAGEMENT IN DBPL: AN INITIATIVE TO BOOST UP BUSINESS Driver’s Name: INVENTORY Team’s Name: MXES A T E O F S Team Member -1 Team Member - 3 ASE COMPETITION SUPPLY CHAIN MANAGEMENT IN DBPL: AN INITIATIVE TO BOOST UP Driver’s Name: INVENTORY Team’s Name: MXES S U B M I S S I O N OMPETITION SUPPLY CHAIN MANAGEMENT IN DBPL: AN INITIATIVE TO BOOST UP Driver’s Name: INVENTORY Team’s Name: MXES U B M I S S I O N : Name: Sazzad Hossain Signature: Name: Navid Anjum Signature: Team’s Name: MXES OMPETITION MANAGEMENT IN DBPL: AN INITIATIVE Driver’s Name: INVENTORY Team’s Name: MXES-0113/14 A P R I L Name: Sazzad Hossain Signature: Name: Navid Anjum Signature: Team’s Name: MXES DBPL: AN INITIATIVE Driver’s Name: INVENTORY 0113/14 P R I L 0 8 , 2 0 1 Team Member Name: Sazzad Hossain Team Member Name: Navid Anjum Page Team’s Name: MXES-0113/14 2 0 1 4 Team Member - 2 Team Member - 4 Page 1 of 4 0113/14

Page | 1 1. CASE BRIEF AND CRITICAL ISSUES Dutch Bangla Pack Ltd. (DBPL), a Netherland-Bangladesh joint venture established in 2007, is one of the leading FIBC producers in Bangladesh which started its commercial operations in 2008. Its major products are- Pharma Clean FIBCs, Food clean FIBCs, Intermediate Clean FIBCs, Industrial Clean FIBCs, Laminated FIBCs, HDPE/LDPE Liner (inner bag). The FIBCs produced by DBPL are used as bulk containers for packing various products e.g. pharmaceuticals products, industrial raw materials etc. DBPL maintains highest quality and in 2010 they added two production facilities that can produce both food and liquid packaging. Better quality and timely delivery has made it stand out of the crowd. The ISO certifications have made this competitive strength more strong. 1.1 CURRENT SNAPSHOT: The production capacity of DBPL is 400 ton/month and it produces 350 ton/month. The used raw materials are Polypropylene, LDPE, Master batch, Calcium, HDPE, UV and their composition is- Polypropylene=90%,LDPE=2%,Master batch=2%,Calcium=3, HDPE=1%, UV=2%. Raw materials are purchased for three months production and kept in the warehouse for production. It can meet up the demands. The work-in-process (WIP) and finished goods, raw materials occupy major portion of its inventory facility. It has a safety stock of 5 weeks. All these incur huge amount of carrying cost to the organization. Throughput time of DBPL is very long; on an average 6 weeks. Most time is spent in the storage period. The lead time and setup of machineries takes on an average 40 minutes. The production starts only after getting orders from the customers. The wastes are directly disposed without any further utilization of them. DBPL’s annual turnover is around 10 crore Tk. DBPL’s major sold products are- Food clean FIBCs (32%), Industrial Clean FIBCs (33%) and Laminated FIBCs (30%). The rest consists of the Pharma Clean FIBCs, Intermediate Clean FIBCs, HDPE/LDPE Liner (inner bag). 1.2 DECISIVE ISSUES: The DBPL has some crucial decisional issues in its operation: i) Storing too much WIP, finished goods and raw material occupying unnecessary storage space. ii) Maintenance of too much inventories incurs in higher carrying costs which increase the cost of production and eats up the competitive advantages. iii) Within the initial operation of 2 years company has opened 2 new production facilities. Until now in 2014, it has not opened any additional production facilities. iv) No initiative to make the customer place order before they need to order has been seen. In a word, assisting the customer in their business is not observed. v) Relationship with suppliers is not strong. It takes on an average 4 weeks to get a raw materials order supplied. Whereas, a good relationship can reduce it to 1 week. vi) Management of scrap is ignored. vii) Flexible production procedures are not applied due to unskilled human resources. viii) Proper allotment of the storage in proportion to the sales of the products is absent.

Page | 2 2. SUPPLY CHAIN MANAGEMENT IN DBPL: AN INITIATIVE TO BOOST UP BUSINESS Supply Chain Management (SCM) is an effort to line up the whole business process in a single chain. It entails the other aspects and related issues of the business rather than considering single departments in decision making. In SCM, decisions and actions are taken considering all relevant aspects and issues to make a complete and self-sufficient decision. Establishing the SCM entails the consideration of major six drivers of the SCM, but we focused on the driver- inventory. At DBPL no SCM is present. As a result, in establishing the SCM the following elements are necessary to be built up: 2.1 MACRO PROCESS IN THE COMPANY: In establishing the SCM of DBPL, firstly we need to develop these three macro processes in the company: a) SRM (Supplier Relationship Management) – Making a good relationship with supplier breeds into the benefit of having the required raw materials at the right time, right place and at the right price. This facilitates in lower safety stock, less inventory costs and less carrying and labor costs. b) ISCM (Internal Supply Chain Management) - The inside production flexibility of the company is not so much smooth and most of the time the wastages would have no use. This situation makes comparatively low delivery and sometimes provides it to customer in delay. The pro-sales are not present as well. c) CRM (Customer Relationship Management) - A good customer relationship makes a good supply chain tendency between DBPL and its customer. As the company believes in quality product delivery, the demand of products is high. These three processes jointly will make a good supply chain system of the company. Yet some critical issues should be improved to achieve the supply chain macro process of DBPL. 2.2 IMPROVEMENT OF PRESENT DECISIVE ISSUES: Issue-1: Storage of WIP, finished goods and raw materials need to be reduced to a significant level. Issue-2: DBPL needs to focus on the existing demand and anticipated demand whether they need expansion of production facilities or they can outsource some of the orders effectively. Issue-3: DBPL can offer its customers to use new design FIBCs and increase its promotional activities to increase customers and sales. Issue-4: Searching for alternative and available suppliers can achieve the benefits of having an almost Just-In- Time inventory system. Issue-5: Scraps can be sold to gain some residual values. Issue-6: Allocating the factory space to ensure efficient production and management of inventories. 2.3 ECONOMIC ORDER QUANTITY (EOQ): Company orders 1200 tons of raw materials of 67 containers each containing 18 ton. They order 4 times a year and 3 months at a time. This basically locks a huge portion of working capital, storage space of the organization. Thus the carrying costs, labor costs become high throughout the period. Calculating the EOQ we get that DBPL has to order 790 ton per order of 44 containers. This will result in ordering every 2 months. The carrying cost will reduce by 35% and space will increase by 46% of the total capacity. This will reduce the product cost by 20%. Thus greater value addition will be done.

Page | 3 3. IMPLEMENTATION STRATEGY OF INVENTORY BY DBPL Managing inventory for a manufacturing company like DBPL is very essential. The success and growth of the company depends on it. After 2010 to 2014 no additional production facilities have been established which can be attributed to its high inventory related costs. The matching of demand, supply, creating demands and maintain good relationship with suppliers and customers are very important for an effective and efficient inventory management in SCM. The strategies to implement it are: 3.1 IMPLEMENTATION OF INVENTORY STRATEGIES i) Using Robust Methods for Safety Stock Management: The current safety stock is at 4 weeks level. DBPL uses simple ordering to measure the safety stock level. Increasing relationship with suppliers will result in 1 week delivery of raw materials and safety stock can be reduced to 10 days. ii) Add Inventory Planning to the S&OP Process: The Sales and Operations Planning (S&OP) are done isolated in the DBPL. The inventory is ignored in S&OP process. Thus, the inefficiencies arise and throughput time increases. Adding this to S&OP process will reduce the associated costs. iii) Regular Use of Supply Chain Network Optimization Tools for Tactical Planning: Using the SCM network tools once in 3 or 6 months rather than 3-5 years basis will help to cope up with the dynamic market and help operate better. iv) Distributed Order Management Tools to Manage Multi-Channel Complexity and Reduce Inventories: The multi-level products and inventories are currently organized centrally rather than in distributive manner. Following distributive manner and other tools will reduce complexity and reduce inventory level. v) Step Up to Inventory Optimization Software: Use of Enterprise Resource Planning or ERP software increases productivity to a great extent. But use of ERP solutions in DBPL will cost more than the benefits. Thus, setting up specialized software only for inventory management will work better and efficiently and effectively. 3.2 SENSITIVITY EFFECTS Implementation of the inventory SCM strategies will effect in the following sensitivity effects:  Better Business Relationship: SCM focuses on the vertical and horizontal parties, that is, any related parties of the business. It helps to thrive those parties which will result positively to the organization. As a result, better business relationship develops and sustains.  Increase in Satisfaction: Higher productivity, less wastage, higher profitability and many more are the result of SCM inventory strategies which increase in the satisfaction level of the associated parties. 4. CONCLUSION In any production unit, inventory management plays the major managerial challenges of the organization. The SCM inventory approach makes it easier considering the total scenario very effectively and efficiently in achieving the desired results. Following of the stated tools, strategies, Dutch Bangla Pack Ltd. or DBPL can boost up its profitability a lot. Reference: Sazzad Hossain Production Manager [Cell- XXXXXXX(not shown in public for privacy) ] Dutch Bangla Pack Ltd.

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