Supply chain management project


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Supply chain management project

  1. 1. A Project Report On Comparative Analysis of Traditional outlets and Retail stores Of TeaSubmitted to: - Submitted by:-Ms. Ajeta Bhatia Lavika Dixit Mohit Sharma Muskan Asnani Nitish Srivastav
  2. 2. Contents Index Supply Chain Management .................................................................................................... 3 Introduction............................................................................................................................ 4 Company Profile ..................................................................................................................... 4 Tapri........................................................................................................................................ 4 Traditional company .............................................................................................................. 5 Resources involve in Supply Chain Operations ...................................................................... 7 Analysis:- .............................................................................................................................. 13 Recommendations:- ............................................................................................................. 16 Value of project to Learning:- .............................................................................................. 18
  3. 3. Supply Chain Management:-Supply chain management is a set of approaches utilized to efficiently integrate suppliers,manufacturers, warehouses, and stress, so that merchandise is produced and distributed at theright quantities, to the right locations, and at the right time, in order to minimize system widecosts while satisfying service level requirements.In other words, the Supply Chain Management Program integrates topics from manufacturingoperations, purchasing, transportation, and physical distribution into a unified program.Successful supply chain management, then, coordinates and integrates all of these activitiesinto a seamless process. It embraces and links all of the partners in the chain. In addition tothe departments within the organization, these partners include vendors, carriers, third partycompanies, and information systems providers.We can say it takes into consideration every facility that has an impact on cost and plays arole in making the product conform to customer requirements from supplier andmanufacturing facilities through warehouse and distribution centers to retailers and stores.The objective of supply chain management is to be efficient and cost-effective across theentire system, total system wide costs, from transportation and distribution to inventories ofraw material, work in process and finished goods, are to be minimized. Thus the emphasis isnot on simply minimizing transportation cost or reducing inventories but, rather, on takingsystems approach to supply chain management.
  4. 4. IntroductionDrinking tea has become part of life for many people. Only secondary to drinking water inthe world, tea has become even more popular than coffee. However, most people have noidea of tea production process from processing, blending, packaging, transportation and sale,as well as the major players involved in this process that spans agriculture, industry andretail, let alone the impact of tea consumption and production upon the tea growers andworkers lives.Company ProfileTapriTea may not run in the blood of Indians, but it sure comes close. India is the largest consumerof the beverage in the world, consuming nearly 25 percent of the global tea production,according to a December 2011 report by trade association ASSOCHAM.Reading the tea leaves, one may be forgiven for thinking that India would be a land where tealounges exist in every corner, with their owners laughing all the way to the bank. The reality,however, is different. In India, tea rules the homes, while coffee rules the streets. Nationalchains specializing in hot beverages exist all over the country, but they serve coffee, not tea.A Café Coffee Day or Barista running hundreds of cafes in all parts of India is yet to emergeon the tea-scope of this part of the world.“We wanted to do tea and not coffee because the potential lying under „thadi‟ [local tea stall]has still not been recognized in India. We were totally fixated on opening up a „Chai kidukaan‟ and were sure of setting up a new trend – in this I think we have succeeded,” saysAnkit Bohra ,owner of Tapri which sells 40 types of tea in Jaipur and is planning to open asecond outlet in a few months.
  5. 5. “Tea is a common man‟s drink, but there are many uncommon tea types – white, oolong,pearls, green and herbal, to name a few – yet to be experienced by him. That is where theopportunity lies.” Over the last one year, Bohra has seen many start-up tea bars emerge in tea.“The reason behind opening up a tea lounge was that we thought we should take this kind ofownership to take the category to the next level. From being a poor man‟s beverage, wewanted to take tea to the level of coffee. We wanted people to enjoy our tea. Also, we wantedto educate people about the different kinds of tea available, apart from the regular ones. Weare providing our customers with 45 varieties of tea.”With its first outlet that begun in Jaipur in August 2010, Tapri the tea house has been able toattract approx 300 footfalls a day. It has an area of about 1000 sq.feet with sales ofRs.40/day/sq. feet.Traditional companyRoad Side Tea Stall:-It is a road side tea stall at Pratap Nagar, Jaipur owned myMr. Mahveer Prasad Gautam who established it two yearsback with the intention of capture the market nearSanganer Bus Depo with localites. He has a “chai kiThadi” with Average 56 Sq. Ft. area. Where his sales areaverage 100-160 cups per day. To make Tea he use normally following Supply ChainOperations:-
  6. 6. 1. Procure the raw material for Tea making like Milk, Tea, Ginger, Water, Sugar, Masala etc. and to get all these material he make contacts with different wholesalers or Sales people who provide these things to him on daily basis. And the costs of this supply transportation bear by the Company or wholesaler.2. Storage of raw material:-to store all these raw material he has some small containers in which he store all these things and use it according demand.3. Demand forecasting:-on the past basis record he forecast the demand of tea for every day and accordingly he store the raw material like in working day the more people are coming to take Tea but on Sundays or holydays the customer demand is decrease. Seasonal factors are also play an important role in demand forecasting because in winter the demand of Tea is normally increase by 80%-90% while in summers it decrease by 5%-10%.4. Just in Time:-he normally make Tea on Just in Time concept because he make tea for customer only when they demand, he not make extra tea. And it helps him to reduce his risk of disposal or wastage.5. Network Planning:-In his business the importance of network planning is very critical because some time the demand of raw material is increasing on such duration the networking with wholesaler is very useful and he store it in extra amount.6. Distribution Strategy:-To distribute Tea he actually not uses any special strategy because he serves tea to their customer directly on their demand.
  7. 7. 7. Profit margin: - In his business profit margin is not fixed because it depends on the number of customers if no. of customers are limited then he make tea with good quality but when large number of customers are order Tea at one time then he compromise with the quality of Tea and mix more water so the profit margin is vary according customers Numbers. 8. Customer Value:-To add customer value he also provide the facility of “Fans”, “Mathari” and other snacks for their customers with Tea on reasonable price. 9. Risk management:-because he use milk and ginger in his Tea and both these things can be waste after some time so to reduce the risk of wastage of these items he manage orders of these items in limited numbers. And continuously boil milk twice or thrice in a day as well as use cold storage.Resources involve in Supply Chain Operations:To perform a supply chain management from raw material to distribute final product manyresources are used by Mr. Mahaveer Prasad Gautam and Tapri as well ,they are as following:- 1. Transportation:- first of all to get the raw material from the wholesaler or retailer Mr. Mahaveer use his motor cycle for transportation because to get ginger and milk he required his vehicle and the cost of this transportation is born by himself. While in case of milk, sugar, Tea and other thing are provide by sales people so the transportation charges of this are pay by company or wholesaler itself. While Tapri gets it supplies from the distributers where the cost is born by the latter itself.
  8. 8. 2. Storage: - as above mention the consumption of Tea is almost 100 to 150 cups per day so there is need of storage area to store all material so for that Mr. Mahaveer has some small containers where he put all his raw material which required for making Tea. And to purchase these container some fixed cost bear by Mr. Mahaveer. Where as in case of Tapri most of the operations are based on just in time concept there by eliminating the need of large storage facilities.3. Equipments:-to fulfill the demand of customer for Tea there is need of some equipments which are used to make Tea so the Tea making machine or Stove etc. are manage by Mr. Mahaveer to start his business which increase his fixed cost. And he uses it on regular basis to prepare the Tea. So was the case with Tapri as Startup.4. Distribution:-to distribute the tea to the customer Mr. Mahaveer has two kinds of Cups one which made by the glass and other one made with disposal. So on the requirement of customer he serves the Tea in Glass cup or disposal cup. Whereas Tapri realize on ethnic and traditional cutlery to serve its clients.5. Communication Channel:-to make an order to wholesaler Mr. Mahaveer has a mobile phone which is very helpful for him because whenever he needs anything he ordered that thing with the help of his mobile phone and it is used as an important communication channel for him. While for Tapri their networking strategies help a lot while making use of basic facilities like telephone and internet.
  9. 9. Fresh Leaves Self processed Tea Growers crude tea Fresh Leaves Primary Processing Factory Brand tea factory Refining Brand Owner Dealers 1. Local Tea Vendors Consumers (2.Tea House) Ultimate consumerSupply chain Operations:- A. TEA After picking fresh tea leaves, tea growers have two options: selling the leaves directly or selling self‐processed tea. As processed tea is more expensive than fresh leaves, to get more profit, skilled tea growers tend to process tea themselves and sell the remaining fresh leaves to primary processing factory and brand tea factory.
  10. 10. There are mainly three distribution channels that turn fresh leaves picked by tea growers intofinished tea. I. Tea growers sell fine tea leaves they handpicked to brand tea factories which process the leaves into tea and then sell it to dealers. Through wholesale and retail the tea is sold to tea store, teahouse, supermarket and other stores, and finally to consumers. II. Tea growers sell both leaves and buds to processing factories for mass‐producing tea. After the processing factories have turned them into crude tea, the refineries will buy it and reprocess it into finished tea after sorting and selection. Refineries mainly engage in tea mass production, and tea mass produced, after entering the distribution channel, is sold in the market mainly through wholesale. Such tea is mainly supplied to places such as hotels and restaurants that provide free tea. III. Tea growers process fresh leaves into tea and sell it themselves. On the one hand, tea growers sell their roughly processed tea to refineries, brand tea factories and businessmen that come to their place to buy tea. On the other hand, tea growers further process crude tea into high‐end tea and sell it in the township‐ or county‐level retail market. In the genuine tea areas, as the tea available is limited but expensive, dealers and consumers will also go to the tea growing households to buy tea directly.There is another different distribution channel, which consists of tea growers, brand ownersand consumers. The brand owners here refer to comprehensive tea companies that engage inproduction, supply and marketing. Such companies usually have their own production bases
  11. 11. and processing factories, and place orders to tea growers for fresh leaves and have their owntea chain stores directly selling tea products to consumers.B) MILK AND OTHER INGREDIENTSIn the tea houses like Tapri, the orders are placed regularly likewise the orders for grocery,vegetables, milk and etc. They place orders mostly over phone. And some suppliers providethings on regular basis without any intimation.In case of local tea vendor, distributors visit him quite often, take orders and deliver onregular basis. There is a regular supply of Saras Milk.Comparing supply chain operations of formal organization and traditionalorganization i.e. Tapri vs. .local Tea Vendora) Demand Forecasting and Seasonal Factors affecting the sameTapri teahouse: - Like any other organized firm, there is a well established system of recordkeeping. The stock reports keep track of regular purchases, depicting their trend therebyenabling estimation of sales turnover.Sudden rains, post- examination period, IPL matches or other significant cricket matchesmake sales a sensitive issue and deriving impacts of more of such occasions are determinedpurely on common sense.Unlike Tapri, a local vendor merely assumes the footfall of a day. To handle any shortages hemaintains good relations with the distributers-who tend to be just a phone call away.b) Network Planning
  12. 12. The Tapri believes that Network planning plays role when it comes to sourcing tea fromdifferent gardens. A well established network helps getting right product at right time.Whereas there exist no similar criteria with a local vendor.c) Value of informationIn circumstances like expected price rise, Tapri stocks well in advance. It seconds the factthat “Information is Money”. Whereas it‟s just the assumptions on basis of their experiencesthat local vendors work upon.d) Over stocking, shortage or wastage at storesTapri has undergone such problems. As is evident from the incidence when it had ordered5000 kulhad (earthen mugs) without arranging space for same. A lot got wasted because ofimproper stocking. Also, there occurs a problem of shortage in stock with bakery products asthey outsource them to a bakery, and because they don‟t have good shelf life, they haveproblem managing stuff in short notice.Whereas at local vendors, inventory is limited and so is the risk and associated problems.Material handling requirements are low as the products as the products are consumable,immediately.e) Tackling problemsUnlike vendors, Tapri has options to store the surplus or the unpredictable ones at thewarehouse.f) Importance of relationships
  13. 13. A lot of times monopoly lies with the vendors (in areas like taste, consistency or economy inprices) In that case, Tapri people (owners) have to maintain relationship. And, be it anyrelationship, it has to be like a marriage.g) Preferred methods of making supply chain management effectiveAccording to Ankit Bohra, a realistic approach towards forecasting and calculation of riskcould make a supply chain effective. Whereas the vendor Mr. Gautam had no clue as to whata supply chain exactly was. To him SCM merely meant to be concept of timely transportationand availability of product.h) SCM vacuumIn absence of an effective Supply chain, Tapri tends to lose its revenues at times. A lot ofstuff in the Menu is not offered due to its unavailability. This is majorly the case with whitetea as it grows only for a particular period of time thus making its procurement a tough job.Reverse is the case with the local Tea shop where the owner remains ignorant from takingcare of any of the supply chain operations. He maps his trivial profits with the proportion ofwater that is used in preparation of tea.Analysis:-By doing the comparative analysis of both local “chai ki Thadi” and “Tapri” we foundfollowing results which are very helpful to highlight the importance of this study:- 1. Demand forecast:-both the traditional outlets and retail stores are actually work on demand forecasting and for that where traditional outlets are more focus on the past
  14. 14. data or records the retail outlets are focus on the market competition, trends and the need of the customers. And both are almost maintain the output and forecasting in balance so that the risk factor is minimize and it increase the profit of firm and minimize its cost.2. Suppliers:-both traditional outlets and retail stores are depend on their suppliers for supply of the raw material which they required to make their product but there is a huge difference in both approach where traditional outlets are more focus on those suppliers who provide them more profit margin the retail outlets are focus on the quality product because in market there are many kind of Teas are available but as we know the consumption of “chai ki Thadi” is not so much so they are not concentrate on quality but retail outlets purchase material in bulk so they can get good quality product from the suppliers. In traditional outlets wholesalers or suppliers are approaches them while in retail store they ask to selected suppliers for tender or some other process to find out best from them.3. Numbers of Suppliers:-As we already know that the demand of traditional outlets are limited so they normally purchase their material from one or two suppliers while in case of retail stores they approach to multiple Numbers of suppliers but as Mr. Ankit Bohra founder of tapri said that there was monopoly of suppliers so the relationship between suppliers and them is like a marriage where they both are cooperate with each other.4. Transportation:-The role of transportation is very important in their logistic activities because both traditional as well as retail store required transportation for procure raw
  15. 15. material from the suppliers but as we know the purchase amount of raw material is different for both the firms so the need of transportation is also different like for traditional outlets they required limited amount of raw material on daily basis so there is supply of these item with the help of two wheeler can be possible while Tapri required raw material like Tea and sugar in bulk so they use “riksha trali” or “Pick up” as a transportation.5. Order:-If we talking about the order numbers then it is very clear that the traditional outlets are required more order in respect of Tapri because the amount of investment capacity is different for both. Where traditional outlets purchase raw material in less amount so the no. of orders are increase the retailer stores are purchase raw material in bulk so no. of orders are less in comparison of traditional outlets.6. Warehouse:-by studying both kind of stores we found that the requirement of warehouse is different for both and it is required because they both manage inventory of raw material for their product Tea but the difference is this that the cost of warehouse is less for traditional in respect of retail stores due to order amount if they don‟t have warehouse then there should be a problem like in case of Tapri due to lack of warehouse in Mr. Bohra‟s ordered 5000 “Kulhar” some are damage which increase his cost and risk.7. Inventory management:-Inventory management impact directly on the firm or their profit because if a firm has good inventory management then in that case the optimum utilization of inventory is there. Inventory management includes storage of inventory, right amount of order for right quantity of raw material at right place.
  16. 16. 8. Flow of information:-flow of information also play a vital role because the flow of information is flow at time then only the supply chain can run smoothly like whenever there is requirement of material it should be communicate to the supplier on time so that he can provide raw material on time similarly the right information flow by the customer to the person for Tea then only he can make Tea in that number and reduce the chances of wastage. And different external or internal factors are also communicated on right time to both the party then it reduced the chance of misunderstanding. So we can say that the flow of information in both directions is very useful. 9. Structure:-Structure includes the infrastructure of both “chai ki Thadi” and “Tapri” and it shows the investment in fixed assts. Where “chai ki Thadi” required a nominal space with some small equipments and furniture, a retail store (Tapri) required a big space as well as they use latest technological equipments for Tea making they also use good furniture and other facilities like Air conditioner, LCD and other products like snacks, different Tea flavors etc. to enhance customer satisfaction. In structure we also include the number of employees where in “chai ki Thadi” Mr. Mahaveer handle all task in Tapri on different point of purchase different people are there.Recommendations:-On the basis of above analysis we want to recommend some suggestion to both traditionaland retailer store which help them to improve their profit and service as following:-
  17. 17. 1. Like Mr. Mahaveer told us that he compromise with the quality of Tea according number of customers but if he maintain their good quality for everyone in every situation then it increase the trust and loyalty of his customers which helps him to increase his market share.2. Although he has some snacks in his shops but in today‟s scenario people not want “mathris” and “fans” that much so to additional he can also store other snacks like Chips, Kurkure etc. that give him additional benefits.3. Normally Mr. Mahaveer purchase raw material from those supplier who provide him it on cheaper rate but in my opinion he should go for quality product because if he purchase good quality Tea, sugar or milk then indirectly it decrease his cost because less amount of these things can increase the taste and quality of his Tea which attract most of the people.4. Mr. Mahaveer order each raw material on daily basis but in my opinion some raw material like Tea and Sugar he can purchase in bulk or we can say in sufficient amount because these things are not waste in early time period which decrease his order cost and also provide uniformity to his product taste because normally Tea comes from different places so some time the taste of tea become change. But the question is if he purchases these things in bulk then the storage cost will increase but actually Mr. Mahveer already has container with sufficient place so there is no additional cost of storage is there.
  18. 18. 5. In my opinion near to this “chai ki Thadi” many small and big shops are there so if Mr. Mahaveer also provide home delivery facility to them for distribute his product it will increase his market share then again the question is that the wages of that person is increase so in spite hire any person for it he can approach himself to those places where he can easily distribute it. 6. As mention by the owner of the Tapri, the problem facing the firm is from the supplier‟s monopoly, at times. So it is advisable for the firm to keep suppliers offering similar products as options. 7. Targeting the business class while designing ambience congenial to business meeting (this could be an add –on to the upcoming brand to the jaipur. 8. Organization‟s move in long run may undergo criticism for having hampered the growth of local entrepreneur. So it is required that the company benefits the participants of its supply chain. Also, it can employ a few local venders to prepare offerings of Tapri against Justified payments.Value of project to Learning:- This project is valuable for us to understand the practical implication of Supply chain management in to real market. During the analysis we found that the course design of Supply chain management is very helpful for us and actually cover all the practical aspects of supply chain management. Because normally we learn what kind of supply chain management concept are used in market only theoretical but due to this project
  19. 19. during interviewing the concern person at both “chai ki thadi” and “Tapri” we foundthat these all theoretical concepts are used by those people even they are literate orilliterate. Like Mr. Mahaveer owner of “Chai ki thadi” is not so literate but eventhough he used all the basic concepts of supply chain management like demandforecasting, inventory management, network planning etc. in unorganized way whileMr. Ankit Bohra founder of “Tapri” who has good knowledge of supply chainmanagement concept used all these thing in organize form.And both the parties Mr. Mahaveer and Mr. Ankit bohra want to increase their profitby reduce their cost which incur in transportation, warehouse, order of raw material tosupplier etc. by applying these supply chain management concepts.Now we are able to understand that by using Supply Chain Management concept wecan enhance the performance of the organization and for that it is very important thatthe flow of information is move in both direction smoothly.Complexities within the entire network i.e. their exists too many supply chain within alarge supply chain. Lack of management amongst them could create hassle in theentire process.Before entering a niche, one must not only analyze growth factors but also understandthe interest that the stack holder will hold.