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SJMSOM, IIT

Logistics & Supply Chain


Management
Bombay
Submitted to:- Prof. Rahul Patil

Submitted by:-
Group 6
Kunal Kumar Roy - 09927801
Shreyas Ganesh N - 09927808
Shrey Sharan - 09927826
Yask Khemka
Amulya Ratna Case Analysis: Bayer
-
-
09927861
09927876
Arun Kumar KG - 09927884
Manoj Vimal Raj S -
Ashish Rijwani -
CropScience
09927887
09927909
Contents
Bayer Crop Science Ltd..............................................................................................3
Few Fast Facts:........................................................................................................3
Distribution & logistics Network..............................................................................3
Pesticide Market:.....................................................................................................4
Inventory:................................................................................................................4
Challenges for Bayer Crop Science.............................................................................4
Forecast Accuracy due to distortion in demand......................................................4
Supply Chain Structure:..............................................................................................5
Seasonality of Demand:.............................................................................................6
Restructuring strategies:............................................................................................6
Restructuring the flow in the chain:........................................................................6
Effects:....................................................................................................................7
This would help:...................................................................................................7
Finding the Correct Demand:...............................................................................7
Reducing the effects of Bullwhip:.........................................................................7
Advancing the Customer ordering point.....................................................................8
Postponement of Differentiation:............................................................................8
Advance Customer Entry Point:...............................................................................8
Analysis of Forecasted Sales Vs Actual Sales:............................................................9
National Level:........................................................................................................9
East Zone:...............................................................................................................9
West Zone:............................................................................................................10
North Zone:...........................................................................................................10
Conclusion:...............................................................................................................11
Conclusion:
Bayer Crop Science Ltd

Few Fast Facts:


• Annual Turnover : Rs 7865 million (2004)
• 35% turnover of Bayer group in India
• Market Share : Close to 20%
• Competitors : Syngenta, Du Pont, Dow Chemicals Etc
• Operates in production of insecticide, herbicide & Fungicide
• 53 distinct products variants
• Operates in Over 200 SKUs
• India divided in 4 zones
• 25 regions
• 169 Territories

Distribution & logistics Network

Pesticide Market:
• Made of insecticide, herbicide & Fungicide

• Highly seasonal sales

• Sales in direct proportion to a good monsoon

• Different pesticides for different stages of crop growth

• Used for Prohibitive applications & curative applications

Inventory:
• The company employed FIFO (First-in-First-Out) rule

• Inventory planning based on determination of stock coverage


• Coverage tracked on Zonal & National Basic

• Provision for tracking also existed for Aggregate and SKU basis

• Target inventory coverage f 1.5 months was considered ideal

Challenges for Bayer Crop Science


Forecast Accuracy due to distortion in demand.
• Sales incentives given by marketing department to create artificial demand.

• Sampat Singh – 10% discount – with short delivery time

• Trade promotion tactics – Dealers transfer lumpsum amount without giving


SKU level forecasts

• Incorrect demand estimation at the ground level without understanding the


current trends.

• High dependence on seasonal factors – temperature & rainfall.

• The production takes place at only one region (Thane & Ankhleshwar); both
located in West.

• No production capacity in the largest market – south zone.

• Point of differentiation occurs very early in the supply chain.

• Major way of transport from manufacturing unit to warehouses is Single


source single destination full loaded trucks.

• Distribution to 25 warehouses in 25 regions increases complexity in inventory


management.

• Risks associated with redeployment of stocks.

• Costs associated with branch returns and reprocessing

• Revenue loss due to non-availability of stocks.

Supply Chain Structure:


At present, the company transports goods from 13 manufacturing centers to 25
warehouses through Single source Single destination full loaded trucks (75%)
and single source multiple destination full loaded trucks(25%)

Seasonality of Demand:

Restructuring strategies:

• Forecasting to be done on the basis of actual previous sales data.

• At present the company considers acreage under cultivation and the


quantity of different varieties produced. This is redundant as both are hardly
changing.

• One might argue that amount of food production is increasing but that can be
attributed to

• several other factors like increased irrigation facilities, better crops etc.

Restructuring the flow in the chain:


• The first stage of production happens in Ankhleshwar (& a little in Thane) &
and the second stage at Ankhleshwar, Kharar & Himmatnagar.

Effects:
This would help:
• Reduce average inventory at the Manufacturing centers as well as
warehouses.

• Reduce the risks and costs associated with intra-zonal redeployment.

• Better aggregate forecasts at zonal level.

• Efficient tracking of expired/near expiry stocks

• Reduction in expired stocks as warehouses can follow FIFO rule.

Finding the Correct Demand:


• Bullwhip effect dominates the supply chain of Bayer Crop Science.

• Since, there is no direct contact with the consumers, it is difficult to predict


the demand.

• What Bayer crop science comes to know about is the demand at the Dealer
or the distributor level.

Reducing the effects of Bullwhip:


• Bayer crop science has no retail presence which leads to this distorted idea of
demand.

• Bayer should collaborate with companies which has rural retail presence
(IFFCO, Kribhco, ITC-e choupal etc). This will help them asses the demand at
the end user level and forecast better.

Advancing the Customer ordering point


Postponement of Differentiation:
Presence of a mixing station near the Zonal DC/LWH Warehouse would ensure that
the POD is postponed enabling more accurate use of aggregate level forecast
rather than variant-level forecast

Advance Customer Entry Point:


More discounts or perks to distributors / PD / dealers / big farmers who would order
much in advance before the actual start of the season.

Analysis of Forecasted Sales Vs Actual Sales:


National Level:

East Zone:

West Zone:

North Zone:

South Zone:

Conclusion:
The standard deviation for the forecast is more or less within the allowable range,
when we consider the data at national level. But on examining the trend at zonal
level, we can see that the standard deviation is very high in East and North Zone.
Additionally, the transfers within the zone and outside zone are higher in these
zones. Branch returns are also higher here. South and North zones have their
standard deviation within reasonable limits. This suggests that territory level
forecasting is the best suited method. Also, the reasons for the high variability in
East and North should be investigated. The underlying reason might be the policies
of marketing department of these zones.