case 1 hindustan oil company (hoc) on how to reduce the Bullwhip effect, and how we should plan, what was the weakness of the HOC, what mean by bullwhip effect.

1. Case 1:
Hindustan Oil
Company
(HOC)

2. 2
• ERP
• Vendor Management Inventory
How to reduce
Bullwhip
Effect?
• Modification of Classic
Inventory Control
How to eliminate
or manage
Bullwhip Effect?

3. Products
Hair Oil
Edible Oil
Fabric care
Skin Care
Processed
food
 Turnover : 8 Billion (2003)
 Sales CAGR :6% (1999-2003)
 Profit CAGR :16 % (1999-20003
 Retail Outlets : 1.7 Million
 Customer base : 100 million
 Employees: 1000
○ Growth Strategy:
○ Aim Market Leadership
 Brand building
 Strengthening Distribution System
 Controlling Cost
 Innovative Management System
For support of Growth Plan
 Value Added Products
 Repositioning of Products
Hair oil to personal care
Edible oil to Nutrient
 Use of Technology

4. Reason
 Non sophisticated
mathematical model
 Mal-distribution
 Shrinkages, Damages
 Product sold after expiry
date
 Insufficient Information
 High Inventory
Managerial
Weaknesses
Issues
 Inaccurate Forecast
 Sales Opportunity Loss
 Non availability of stocks
 Low delivery Performance
 Increased cost
 Departmental Silos and
Myopic – lead sub best
solution
4

5. Supply Chain Structure
6 Factories
15 contract
manufacture
rs
32 stock
locations
1000
distributors
1.2 million
retailors
Sales Fluctuation
Ratio btw peak & min. sales: 3:1
Sales in 10 equal days
10% 28% 62%
Information System
Planning system-excel speared sheet
Primitive
No System for Distribution Planning
Confusion Data inaccuracy Inconsistency
No common database
Complex network
98% unorganized
Sourcing was restricted to commodity

6. 6
Planning
cycle
15 days
Frozen
for 3
months
Sales
Push
Inventory
& Mal-
distributio
n
Customer
Dis-
satisfactio
n
Reduced
Sales
Decreased
Profitabilit
y
Planning

7. Want big impact?
Use big image.
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