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Case 1:
Hindustan Oil
Company
(HOC)
2
• ERP
• Vendor Management Inventory
How to reduce
Bullwhip
Effect?
• Modification of Classic
Inventory Control
How to eliminate
or manage
Bullwhip Effect?
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
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
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
Planning
cycle
15 days
Frozen
for 3
months
Sales
Push
Inventory
& Mal-
distributio
n
Customer
Dis-
satisfactio
n
Reduced
Sales
Decreased
Profitabilit
y
Planning
Want big impact?
Use big image.
7

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Bullwhip effect

  • 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. 7