Supply chain process of Otobi

1. Dhaka International University
Assignment on:
Supply chain process of OTOBI
Course title: Supply Chain Management
Course Code: 0413-1101
Submitted to:
Mr. Md. Rezaur Rahman
Lecturer,
Department of Business Administration
Dhaka International University
Submitted by:
Name : Md Topu Kawser
Batch : 56th
-A
Roll : 45
Program : RMBA
Reg : BS-M1-56A-22-122322
Department of Business Administration
Dhaka International University
Date of Submission: 10th
March 2023
DIU

2. Company Overview 3
The Supply Chain Strategy of "Otobi Furniture" 4
Supply Chain & Competitive Strategy of Otobi Furniture 5
Step 1: Understanding customer and supply chain uncertainty. 5
Step 2: Understanding the supply chain capabilities 7
Step 3: Achieving strategic fit: 8
The Drivers and Strategic Scope of Otobi Furniture 9
Distribution Network of Otobi Furniture 11
Supply Chain Strategy In Furniture Industry 12
Major Challenges 14
Recommendations 15
Conclusion 16
References 17

3. Company Overview
“OTOBI – means forest and is a Bengali word picked by Late Nitun Kundu, perhaps the most
prestigious artist and furthermore the author of OTOBI Limited.”
OTOBI, the leading furniture producer and retailer in Bangladesh is the most favored way of
life arrangement brand as a result of its constant developments, advanced innovative skill,
fabricating capacity in the greatest scope of furniture categories, biggest distribution network,
and dependable service reputation.
From the beginnings in 1975 in the corporate furniture area to the tremendous speed increase
into the method of way of lifestyle giant that it is presently, OTOBI’S story of
accomplishment goes over forty years. With creative invention pulsating through the whole
association, OTOBI has coordinated the whole furniture solution stage in home, office,
industry, and interior design through its activity.
Nitun Kundu, founder and late administrator began this association with the desire to make
items that none other could do. Presently OTOBI has transformed into a foundation of
creativity and motivation containing 5,120 individuals with a similar expectation as the
maestro.

4. The Supply Chain Strategy of "Otobi Furniture"
● We have found that they want to be more cost efficient rather than responsive.
● As they are so much renowned brand, they hold 18 retail outlets of their own with 288
executive dealer outlet all over the country. Among them 12 retail outlets and 106
executive dealer outlets are situated in Dhaka. They try to expand their business all over
the country by making the products more available to the consumers.
● They import their raw materials basically from China and Malaysia. Especially the board
they use for making the furniture, import that from Malaysia and China but other
accessories like (lock, nobs) they make those in Bangladesh or sometimes import these
things from India.
● They ship as the transportation mode for collecting raw materials. So that they can be
very much cost efficient in manufacturing the furniture. In most of the case they use their
own transportation system like pickup vans. Basically they follow a system for the
transportation of the products that is in a particular day they send a number of furniture in
the retail outlets of a particular area. For that, they use their own transportation modes but
if any consumer demand immediate delivery of the furniture than sometimes they
outsource the transportations for reducing the transportation cost. Thus they balance the
cost efficiency with responsiveness by being responsive to the customers through
outsourcing the transportation.
● Most of their customers want slight variation on products. Because they focus basically
on quality and price. So the company do not make variation that much.
● They do not focus on customization of furniture that much but they customize some
categories like designing office space, kitchen appliance, interior design. They do it in a
systematic way. Like at 1 the dealer of OTOBI visit the customer's house or office and
take the measurement of their room size and estimate the price. If the customers confirm
accordingly than the company send the designer again to design the particular space. The
designer design the overall interior and select the materials they want to use for that
design. After that the designer give the final estimated price. Thus they do customization
of the products.
● They stock less inventory which is their current situation. Because they want to maintain
cost efficiency. But to manage the overall inventory system they use a very powerful and
expensive software called "SAP". If any consumer want any category of furniture they
can immediately check the stock with the help of this software. If it is available than they
can deliver it whenever customers want it or if product is not available than they ask for 2
days to the customers for the delivery of the product. This software makes it easy to
maintain the inventory management.

5. ● They have no return policy since 4/5 years But they strictly handle the after sale service.
For enjoying the after sale service the customers have to show the appropriate reason for
what they want that after sale service.
The overall supply chain management of OTOBI really helps them to gain the supply chain
profitability and consumers are also satisfied with their products and services.
Supply Chain & Competitive Strategy of Otobi Furniture
The supply chain strategy company decides how to structure the supply chain over the next
several years. It decides what the chain's configuration will be, how resources will be
allocated, and what processes each stage will perform. Strategic decisions made by
companies include whether to outsource or perform a supply chain function in-house, the
location and capacities of production and warehousing facilities, the products to be
manufactured or stored at various locations, the modes of transportation to be made available
along different shipping legs, and the type of information system to be used. Otobi's supply
chain strategy is based on their strong R&D department, which determines the proportion of
target market, manufacturing capabilities, and purchasing capability. Rather than being
responsive, their objective is to be more cost effective.
A company's competitive and supply chain strategies must be aimed for the same objective.
3 steps of achieving strategic fit:
Step 1: Understanding customer and supply chain uncertainty.
● Implied demand uncertainty:
The unpredictability of consumer demand for a product is reflected in demand uncertainty. In
contrast, implied demand uncertainty indicates the uncertainty for only the fraction of the
demand that the supply chain expects to meet based on the customer's desired characteristics
For Otobi, we believe it has low levels of implied demand uncertainty but comparatively high
supply uncertainty. The reason is, usually Otobi's demand can often be predicted, for example
during peak wedding season demand will rise, corporate bulk buying can also be predicted
beforehand and so on. Also, since furniture is a fast product, that is its fashion changes
rapidly, manufacturer can apprehend the next trend of furniture design and prepare for them
in advance. However, the supply is relatively uncertain since the raw materials they gather
from China and Malaysia may be disrupted by global political and environmental concerns
such as strikes, economic policies, or natural disasters. Currently, the whole world is going

6. through pandemic situation, due to which supply of raw materials is very uncertain.
Graphically shown as below:
● Impact of Supply Source Capability on Supply Uncertainty:
When uncertainty comes and company faces it, the next question is how the company meet
demands in that uncertain environment.
Otobi tries to expand their business all over the country and increase their product
availability. As their focus is cost efficiency so they do not keep large variation and they get
much time for producing their product. So we can say that they are highly efficient. But they
sometimes are customized in some particular areas like kitchen appliance, office interior and
house interior design. They use their own transportation for their product. But when customer
demands immediate delivery, they deliver the product immediately to the customer. So in that
case, they are somewhat efficient.
When the time of occasion like wedding season, corporate bulk buying etc. In that time they
have to follow these given below points:
Customer Need Causes Supply uncertainty to increase because…
Range of quantity increases Wider range of quantity implies greater variance in demand
Lead time decreases Less time to react to orders
Variety of products required
increases
Demand per product becomes more disaggregated
Number of channels increases Total customer demand is now disaggregated over more
channels
Rate of innovation increases New products tend to have more uncertain demand
Required service level increases Firm now has to handle unusual surges in demand
So, here otobi have to be more responsive then efficient, so that they can generate more sales.

7. Step 2: Understanding the supply chain capabilities
After understanding the uncertainty that company faces, the following question is how does
the firm best meet demand therein uncertain environment. Otobi tries to expand their business
everywhere the country and increase their product availability. As their focus is cost
efficiency so that they don't keep large variation and that they get much time for producing
their product. So we are able to say that they're highly efficient. But they generally being
customized in some particular areas like household appliance, office interior and house
interior design. They use their own transportation for their product. But when customer
demand immediate delivery, they deliver the merchandise immediately to the customer. So
therein case, they're somewhat efficient. Primarily, Otobi has ready to install furniture in
many of their showrooms all over the country. Their sales technique are mostly brick and
mortar based, where customers go to store to see the products themselves and then they order
it. Product and delivery are processed usually within 2 to 4 weeks after being bought
depending on the volume of work. Point to be noted, this scenario is more apt for pre-COVID
situation, however, during COVID period their demand has reduced significantly.
● Cost- Responsiveness Efficient Frontier:
When the term comes ‘Responsiveness’ then we have to understand that how much abilities a
supply chain has, So that, they can be more responsive.
Here, the cost-responsiveness efficient frontier is the curve in Figure showing the lowest
possible cost for a given level of responsiveness. Lowest cost is defined based on existing
technology; but not every firm is able to operate on the efficient frontier; Otobi need to
increase efficiency from their platform, especially through online on this Covid-19 Situation
to generate more sales. Because it represents the most Cost responsiveness performance of
the best supply chains.
In contrast, a firm on the efficient
frontier can improve its responsiveness
only by increasing cost and becoming
less efficient. Here Otobi must then
make a trade-off between efficiency
and responsiveness.
Supply chains range from those that
focus solely on being responsive to

8. those that focus on a goal of producing and supplying at the lowest possible cost. Figure iii)
shows the responsiveness spectrum and where some supply chains fall on this spectrum.
Step 3: Achieving strategic fit:
The third and last stage is to guarantee that the degree of supply chain responsiveness is
compatible with the indicated demand uncertainty after mapping the level of implied demand
uncertainty and understanding the supply chain position on responsive spectrum, the third
and final step is to ensure that the degree of supply chain responsiveness is consistent with
the implied demand uncertainty. The goal is to target high responsiveness for a supply chain
facing high implied demand uncertainty, and efficiency for supply chain facing low implied
demand uncertainty. Although it would result in high warehousing cost, for Otobi a
responsive supply is better suited to meet the needs of customer.

9. The Drivers and Strategic Scope of Otobi Furniture
Intraoperation Scope: The Minimize Local Cost View mainly refer to:
● Each stage attempts to minimize its own cost
● Distribution may ship a full truckload without considering the impact on inventory
● Sales may offer trade promotion without considering the effect on production and
warehousing.
So Strategic Scope of Otobi Furniture matches with Intraoperation Scope: The Minimize
Local Cost View in terms of facilities, inventory, transportation, information, souring and
pricing etc.
Facilities: Actual physical location within the supply chain network where product is stored,
assembled and fabricated. They import the raw materials from Chain and Malaysia and a few
other accessories from India and a few they manufacture in Bangladesh. They produce the
items and assemble the items in their own manufacturing plant.
Inventory: Inventory means to the products and materials that a business holds for the last
word goals to own a purpose of resale. Inventory encompasses all raw materials, work
process, and finished goods within a supply chain. The inventory belonging to a firm is
reported under assets. Changing inventory policies can dramatically alter the whole supply
chain's efficiency and responsiveness. In terms of inventory of Otobi furniture they are doing
less inventory because they require to be more cost efficient but they have so many retail
outlets and executive dealer outlets and stock their products in those outlets so they can
confirm, their customers can always get product available.
Transportation: They use ships as the transportation mode for collecting raw materials.so
they can be much cost efficient in manufacturing the furniture. In most of the case they use
their own transportation system like pickup vans. Basically they follow a system for the
transportation of the products that during a particular day they send a variety of furniture in
the retail outlets of a specific area. For that, they use their own transportation modes but if
any consumer demands immediate delivery of the furniture then sometimes they outsource
the transportations for reducing the transportation cost. Thus they balance the cost efficiency
with responsiveness by being responsive to the customers through outsourcing the
transportation.

10. Information: They use awfully powerful and expensive software called "SAP". If any
consumer wants any category of furniture they can immediately check the stock with the
assistance of this software. If it's available then they can deliver it whenever customers want
it or if the product isn't available then they ask for 2 days to the customers for the delivery of
the product. This software makes it easy to maintain the inventory management.
Sourcing: In business, the term word sourcing refers to a variety of procurement practices,
aimed toward finding, evaluating and engaging suppliers for acquiring goods and services.
Sourcing is the choice of who will perform a specific supply chain activity like production,
storage, transportation, or the management of information. At the strategic level these
decisions determine what functions affirm performs and what functions the firm outsources.
Sourcing decisions affect both the responsiveness and efficiency of a supply chain Otobi
collects raw material from both local and foreign countries. Majority of the raw materials
come from China and Malaysia. Others are collected from-India and a few manufactured in
Bangladesh. raw material like-nobs, some joining parts etc. actually they collect from the
local market.
Pricing: Pricing is the process whereby a business sets the worth at which it'll sell its
products and services, and will be a part of the business's marketing plan. Pricing determines
what proportion a firm will charge for the products and services that it makes available within
the supply chain. Pricing affects the behavior of the customer of the products or service, thus
affecting supply chain performance. In setting prices, the business will take into consideration
the value at which it could acquire the products, the manufacturing cost, the marketplace,
competition, market condition, brand, and quality of product. Otobi has set their price same
for all group of customer. In every sphere of the supply chain they require to be cost efficient.
so they can charge comparatively less from the other brands and may keep the product
quality up to the mark. They use slower transportation mode for raw materials collection,
stock less inventory so on to keep the price lower.

11. Distribution Network of Otobi Furniture
Distribution refers to the step taken to maneuver and store a product from supplier stage to
customer stage within the availability chain. Distribution occurs between every pair of stages
within the provision chain, material and components are moved from supplier to
manufacturer, whereas finished product is moved from manufacturer to finish consumer.
Distribution could be a key driver of the profitability of a firm because it effects both the
availability chain cost and customer value directly. Two factors influence the distribution
network design
1. Customer need that are met
2. Cost of meeting customer need
Otobi furniture collect raw materials from foreign and native suppliers and for this they use
ship as their transportation mode. The works collect those things and produce or assembled
the materials and make finished goods. then they deliver those products to the shops situated
everywhere the country. As they need to be more cost efficient, so they need less product
variability and customers need to choose among the selective designs.
For Otobi they are doing not stock their products in any warehouse. They directly deliver the
products to the stores from factory. This is often somewhat the same as distribution storage
with carrier delivery but here the corporate uses manufacturing storage with carrier delivery.

12. ● Manufacture storage with carrier delivery
Cost Factor Performance
Inventory The inventory cost is somewhat higher for the Manufacturing storage
because retail outlets hold less inventory.
Transportation They use their own transportation so that it makes less cost and use slow
moving transportation mode like ship for collecting raw materials.
Facilities and handling Their facility and handling cost is less because they stock less inventory
and they do not have much product variability.
Information They use powerful software for information processing so that it is
simpler.
Service Factor Performance
Response time Their response time is slower than distribution storage
Product variety They do not have more product variability though they store the products
in the manufacturing plants.
Product availability As they have so many retail outlets so they try to make the products
available to the customers always.
Customer experience As they have no drop shipping so customers have to wait for a long to get
their products if the product is not available in the retail outlets.
Time to market Lower than distribution storage.
Order visibility Easier for the customers because they use software and other technology
for the order system
Return ability They have no return policy.
Supply Chain Strategy In Furniture Industry
The supply chain strategy of the furniture industry went through a significant change over the
past few decades. It started off by creating a hedonic value for those who required and was
considered to be posh but now a days varieties of furniture has been considered to be a
necessity. With rise in demand the strategies embraced by the organizations has been more
lucrative and interactive to get a competitive advantage over their market competitors. Due to
current demand hybrid strategical approach has been adopted by the influencers where both
pull and push strategy is being implemented.
Pull Strategy Push Strategy Hybrid Strategy

13. The pull strategy consists of the upstream supply chain mediums which consists of the
furniture makers and the distributors. Here the distributors gives their desired designs and
requirement to the furniture makers who in turn contacts with the suppliers of the raw
materials required to make the furniture. Two type of suppliers needs to be considered as
Tierl being the people who are in-charge of supplying the raw materials to the furniture
makers and Tier2 are the people in-charge of getting the raw materials in this case wood from
forest or other potential sources.
The push strategy consists of the downstream supply chain medium, which consists of the
distributors, retailers and the end users. The distributors are in charge of providing the retail
shops with the required furniture parts and their spares. The retailors on the other hand are the
ones who deals with the end users/customers and pursue them in buying their products.
TIER1 TIER2 Supplier Distributor Retailor Customer
To optimize the operating functions of the supply chain procedure most of the organizations
in such industry are taking the help of an online integrated platform ERP (enterprise, resource
and planning) which is also known as SAP (system, application and product).Such
application is used to sustain and conduct the procurement, finance, inventory, production,
sales and managerial operations in a much more efficient and productive procedure. This
platform helps in keeping records of raw materials entering the production floor till the
finished goods have been delivered. Also, a huge informative data base has been created from
where the organization can themselves extract the information which will be required for
maintaining the future forecasting of the supply and demand.

14. Major Challenges
The above mentioned design does face some major challenges which needs to be coped up
with to overcome any unattended catastrophe.
Price Variation: Uncertainty factor is applicable for all organizations. Big implication of such
factor are the raw materials of the product. In furniture industry, if the prices of the raw
materials used to make the furniture fluctuates then this would definitely put a significant
impact on the later price of the product.
Relationship with Supplier: Relationship with supplier needs to be managed at all times. This
can be done by treating them well, not holding up their previous dues and letting them know
beforehand about their future scope of work. This helps to build the confidence and trust
required to sustain the relationship.
Forecasting of raw materials: Forecasting of raw materials properly will help to minimize
certain costs for example: holding cost, inventory cost etc. Not being able to do so will
impact the lead time in delivering the products to the distributors.
High inventory: Not able to know the current demand and overestimating the demand will
lead to such hazardous situation. High inventory will bring up unnecessary charges which
may later on be inevitable.
Customer Disapproval: Customers disapproval mainly occurs via the transportation method
which the company adopts. Safety transportation facility needs to be provided for the
products so that the end users can witness their intact and fresh desired orders. Customers like
being informed about their product on a frequent basis. A proper integrated system should be
implemented where the customers can visualize the movement of their product and can
predict the tentative time of arrival.

15. Recommendations
With the presence of 4th
industry revolution it is clear that involvement of technology is a
must. Organizations must be efficient and highly responsive to queries which are thrown
towards them. Lag time needs to be shortened and transaction of products needs to be quick
with maximum efficiency and to offer such proposal automated supply chain system needs to
be installed. This would allow furniture companies to issue faultless and customer preferred
products.
In today’s market personification as per a customer’s requirement helps an organization and
its product to stand out for themselves from the rest of their competitors. Having a solid
infrastructure giving customers the platform to customize their product as per their need and
delivering them in the shortest possible time frame.
Most companies in the furniture industry imports about 10% of the raw materials required To
manufacture the furniture. Compared to the amount exported and the revenue earned From
them, furniture exporters complain of not offering a competitive price in the global Market as
they have to pay 104% duty on the raw materials imported. Though government Offers a cash
incentive of 15% against exports of furniture but that is not enough to Withstand other costs.
Bangladesh furniture industry should depend more on utilizing their Raw materials in the
production for furniture and try in exporting them instead of importing. Since, china is
focusing mainly high-tech business, developing countries like us have that opportunity in
supplying cheap furniture materials globally. Providing product quality assurance instead of
looking out for cheaper procedures will help Bangladesh furniture industry to grab and
sustain in the global market.
Lastly, investing on R&D and assigning consultants will help an organization to obtain the
optimal efficacy which is required to become profitable. Upgrade in industrial technology is
required and professional advisory is always preferable. Investing in database system is also
necessary as company’s can harness on this information and deduce what steps needs to be
taken as per customer current demand preferences.

16. Conclusion
Innovation helps one to build products which provides better services to customers and can
also help to foster competitive advantage over other competitors. Introducing technology can
also help improve the brand value of the organization and can help in luring in more
customers.
Hatil Furniture has recently introduced ‘Furniture Lab’, a simulated platform of their
products where with the help of AR and VR they are able to provide a real time experience to
their customers on how and where their furniture can be placed and how it will look. This
simulation is done by providing Hail the floor design of the customer’s current residence
beforehand. The simulated platform gave the customers the upper hand by giving them the
power of choice if they actually want the product to be in that designated spot or not. Hatil on
the other hand, has deduced their inventory cost as they do not have to showcase all of their
products in the showroom rather can use the help of augmented reality to give a live
demonstration. This also allowed Hatil to reduce their showroom size to an optimal one
which in return has reduced their rent cost as well. (1)
Introduction of such technologies are important cope up with the market competitors.
Strategies and steps which needs to be taken should be beneficial for both the parties and not
just one.

17. References
1. https://www.thedailystar.net/city/hatil-opens-virtual-showroom-1517653
2. https://www.newagebd.net/article/41043/high-duty-on-raw-materials-barrier-to-furniture-bus
iness-say-makers
3. https://blog.flexis.com/the-supply-chain-managers-guide-to-the-furniture-industry
4. https://www.academia.edu/36274501/COURSE_TITLE_Supply Chain Managem
ent_COURSE_CODE_MKT418_SECTION_-1_SUBMITTED TO
5. http://www.otobi.com/
6. https://www.researchgate.net/publication/314458137_Otobi_Beyond_the_Horizon
7. http://www.thedailystar.net/news-detail-44382
8. http://cosmictoaststudios.com/37-awful-otobi-kitchen-furniture-photos-Inspirations/acrylic-kit
chen-cabinet-price-awful-otobi-furniture-photos/
9. http://cerasis.com/2015/01/23/history-of-supply-chain-management
10. https://www.intechopen.com/books/howtoreference/supply-chain-management-
applications-and-simulations/supply-chain-management-scm-theory-and-evolution