CASE NUMBER .4
SUPPLY CHAIN
INITIATIVE
AT
“APR LIMITED”
Submitted To:
Mr. N S Uppal
Submitted By:
TABLE OF CONTENTS
METHODOLOGY
CHAPTER. 1. INTRODUCTION
1.1 BACKGROUND 05
1.2 BUSINESSES 05
05
1.4 SUPPLIER
06
1.5 WOOD CONSUMPTION
06
1.6 FUTURE STRATEGIES
CHAPTER. 2. FINDINGS
PROBLEMS 07
3.1 FACILITIES 08
3.2 INVENTORY 09
3.3 TRANSPORTATION 10
10
3.4 INFORMATION
11
3.5 SOURCING
11
3.6 PRICING
27-29
QUESTION NUMBER .3.
BIBLIOGRAPHY 32-33
1.1 Background
1.2 Businesses
1.4 Supplier
Eucalyptus:
60% of eucalyptus was sourced from Andhra Pradesh, 20% from Karnataka
and the balance 20% from Uttar Pradesh.
The Company was currently using two types of wood in the proportion of
60:40 for procuring one ton of pulp; the plant needed about 4.2 tons of wood.
1. Facilities
2. Inventory Logistical Drivers of Supply Chain
3. Transportation
4. Information
5. Sourcing Cross Functional Drivers of Supply Chain
6. Pricing
3.1 FACILITIES
Facilities
There are two type of woods were used in APR limited Eucalyptus &
Casuarina in proportion of 60:40
These woods were coming from three states Andhra Pradesh, Karnataka and
U.P
There could be 6 trucks which unloaded at a time in wood yard.
APR limited had a big wood yard having enough space and it had sufficient
tractors.
Problems
3.2 INVENTORY
All of the raw materials work in process (WIP), and finished goods within the
supply chain. Inventory policies can dramatically alter a supply chain’s efficiency
and responsiveness.
APR Limited
Inventory
Problems
APR limited was holding Inventory of 6 Months of wood stock at its wood
yard, during the first three months the moisture content would come down
at the rate of 4 to 5 percent per month.
More inventory in wood yard increased material handling cost.
Modes and routes for moving inventory throughout the supply chain.
APR Limited
Transportation
Problems
3.4 INFORMATION
Information
Problems
3.5 SOURCING
APR Limited
Sourcing
3.6 PRICING
Pricing is related with that how much a company will charge for Goods &
services that it makes available in the supply chain. Actually pricing affects the
behaviour of the buyer of the goods or services which can affect supply chain
performance.
Pricing
Prices were ruling at about 35000 per MT dropped to a level of about 25000
per MT.
Company is paying about 10 million to the labour contractor for the material
handling of woods and extra material handling cost 100 per ton.
Problems
Question No. 1
Solution
As Saloni Yashpal various wood logistics problems that would come across our way
are as:
1. BACKROUND
Reduction of custom duty on rayon has led the company decide to make
substantial investment so as to double its capacity from 150 MT to 300 MT per day.
Further increase the production upto 500 MT per day.
2.1 PLANNING
The company purchased wood in the form of logs, which were converted into
wood chips before being fed into a digester. The company had two chippers and two
separate silos for eucalyptus and casuarinas. The proportion of the wood instead of
being fixed based on factors like availability of wood.
Therefore as the ratio not being fixed led the company to vary it according to
the availability of wood , as a result of which if the eucalyptus logs are forming a
ratio of more than 60% then the chipper had to wait for a long time as the ratio is
changed . As a result of such decisions trucks had to wait in long queues till early
wee hours and at the same time contractors demanded more money which in turn
led to the cost increment?
Holding six months of inventory was a standard practice followed by the pulp
and paper industry. Wood did get affected with time and the plant yield usually
would be lower if wood was stored for a longer period of time.
Hence there was no proper planning of inventory holding, lead time and the
company didn’t follow a standard practice.
2.3 TRANSPORTATION
A steady stream of trucks would arrive at the gates of the company, each
carrying about 10 MT of logs. Each truck was weighed at the weigh bridge and
depending on the schedule and availability of chipping schedule logs would be
unloaded. The company would prefer if the truck was unloaded directly at the
chipper. Because if a truck unloaded directly at the Woodyard then it would lead to
extra material handling costs of about 100 per ton . At each chipper only one truck
could be unloaded at a time
And the balance material was bought from the Woodyard using the tractor
which could carry capacity of two tons of material. Unloading at the chipper can be
done only when the chipper is operational. At the Woodyard they had capacity to
unload a maximum of six trucks at a time. Unloading of a truck required about 1.5-2
hours. For all the material handling costs contract labourers were employed who
2.4 MAINTENANCE
In the actual pressurized environment of day to day operations it was difficult
to understand how decisions were taken by the various departments, how they
interacted with each other .There was no material accounting at the Woodyard.
Truck arrival pattern would change drastically on a day to day basis. Production
personnel also changed their chipping schedules frequently on a day to day basis.
Production personnel also changed their chipping schedules frequently during the
day and rarely followed the schedule that they would have given to the Woodyard
personnel.
Thus there was no maintenance regarding the chipper schedule, truck arrival
pattern, Woodyard material accounting problems and if the Company targeted
increased production this would lead to the problems like mismanagement of all the
activities as already when the production is 250 MT long queues of trucks keep
waiting for their turn and in return they are demanding for more price of their wood.
In addition there is no maintenance for High Inventory which in turn would lead to
loss of production due to reduction in cellulose content .Hence maintenance of the
logistics problem would keep a check on the various issues arising and would keep
a quality control check on all the variations occurring due to deviations occurring.
Solution
In the beginning of the fiscal year 1997, the government slashed custom duty
on rayon pulp from 25 to 10 per cent. Subsequently the international pulp prices
dropped by about 40% putting the company under tremendous pressure. So the
company not only had to gear up for doubling the production level, it also had to cut
its costs substantially.
To increase the Rayon production the first focus would be on the wood
consumption i.e. Wood Logistics problem as the company was holding about 6
months of wood stock at its Woodyard.
Above all are the various options which exist for the increase in the
production level.
RECOMMENDATIONS
The proportion varied from month to month on the basis of factors like
availability of wood. In the last four years the proportion of Eucalyptus had never
gone below 50% but at the same time there was a month when the company
operated with a high proportion of eucalyptus as 70%.
As the suppliers want to be paid on the basis of fixed prices per ton of wood
irrespective of the moisture content in the incoming wood. This would help as
follows:
As the company would like to expand its RG pulp manufacturing, the demand of the
product may get reduced hence the company should look at other alternatives like
paper pharmaceutical and textile industries.
As the cellulose content in the wood did get affected with time and the plant yield
usually would be lower if the wood was stored for a longer period of time. Hence
high holding inventory will lead to
As in the first 3 months the moisture content would reduce at rate of 4-5%.So
inventory must not be kept for more than three months.
Conduct Workshops
Moreover it will bind all the members together and help them focus on
company goals and targets.
Such a system would ensure that each and every entity in the system would
have knowledge on real-time basis about the status of the system. This will help all
departments to make optimal decisions on a real-time basis.
Invest in one more weigh bridge, two chippers and special equipments
SCHEDULE
EUCALYPTUS SCHEDULE
Chipper No. 1
7:00 AM 1:30 PM
to 1:30 to 4:30 4:30 PM to 9:30 PM to 11:30 PM 5:30 AM to
PM PM 9:30 PM 11:30 PM to 5:30 AM 7:00 AM
EUCALYPTUS SCHEDULE
Chipper No. 2
CASUARINA SCHEDULE
Chipper No. 1
CASUARINA SCHEDULE
Chipper No. 2
Truck
Monitori
ng
Sheet
Eucalyp Casuar
tus ina
For Eucalyptus
chipper operations
sheet Eucalyptus Eucalyptus
Chipper Queue Chipper 1 Operation Chipper 2 Operation
time time
of of Start of End of Start of End of
truck joinin leavi trucke operation operatio truck operati operatio
ed g ng d s ns ed ons ns
For Casuarina
Casuarina Casuarina
Chipper 1 Chipper 2
Operation Operation
Start of End of End of
operation operation Start of operation
Trucked s s trucked operations s
C1 08:10 08:30
C2 08:25 08:45
Question No. 3
Solution
Chipper 1 Chipper 2
Wood Wood
Wood Received Wood Received
Received from Received from
Time Slot Directly Woodyard Time Slot Directly Woodyard
08:00- 07:00-
09:00 10 08:00 30
After filling all the sheets of the simulation exercise we come up with certain points
which are as follows:
• As per the table -2 (truck arrival pattern on a typical day) 13 trucks should be
there in between 6:00 AM to 8:00 AM, but this simulation exercise tells us
that only 9 trucks can go inside the premises which show that work is not
going according to the standard.
• Because we are not able to match the actual arrival pattern with standard
arrival pattern, which creates a problem of waiting (queue) the truck outside
the factory which also increases our Handling & Extra Material Handling Cost.
• In Chipper Wood Management Sheet we can see that there is only one truck
of casuarina on slot of 8:00 AM to 9:00 AM. So, it will incur the Extra Material
Handling Cost because we have to supply the material by the help of tractor
and a single tractor carries only 2 Tons of wood and the extra material
handling cost will be 200 Rupees.
This simulation exercise helps APR in attacking the wood logistic problem by
describing the loop holes in the company.
Inbound Logistics can be maintained by sourcing the material from AP, UP,
Karnataka. Operations maintenance can be done by good coordination among
various departments’ personnel so that any delay or early arrival can be handling
accordingly. Outbound logistics can be maintained by supplying the material to
textile industries, paper and pharmaceutical industries. Marketing interface would
help managing multiple products and grades and accordingly they can be selling to
different customers. Service can be maintained by supplying Rayon Grade Pulp with
short lead time as it would help in incurring fewer costs. On time delivery will help
making customers satisfied and will out step the competitors.
➢ “AAI paper recycling unit takes off”, The Times of India, New Delhi (3 October
2009) toireporter@timesgroup.com
➢ “The Drivers of Supply Chain Management Competitive Advantage” Puff file
Presented by ‘Dr. John (Tom) Meltzer, presented at the CHA 2006 (30 January
2006)
➢ David Fogarty and Sunland Creech. “Paper Giant Promises Green Curbs On
Expansion”, Planet Ark, Australia (11 September 2009)
➢ Handan Kumar Das. “Drivers of Supply Chain Management” Puff file, (07
November 2008.
➢ “Big mills turn to waste paper” Business Line, New Delhi (03 July 2009).
➢ A. K. Sharma & Et Al, M. E. Khan, Sunita Chatham.”Cost-effective production of
handmade paper through recycling of shredded currency waste of Reserve Bank
of India” IPPTA Vole: 21 Issue: 3 pp: 111-117 (July 2009).
➢ P. Marimuthu. “Clean Development Mechanism: Opportunities in pulp and paper
business in India”, IPPTA Vole: 21 Issue: 3 pp: 101-105 (July 2009).
➢ “Ballarpur Industries”, Puff file (29 March 2008).
➢ “Audited consolidated financial results”, Acanthi Group Company, Puff file, (21
September 2009).
➢ Master Thesis. “Cutting logistic costs with a centralized distribution Model” puff
file, (December 2005).
➢ Case Study of Unisom Business Solution (http://www.unisoma.com.br/en/casos-
celulose-1.php)
➢ Supply Chain Management Overview & objective from Janet Shah.
➢ Wood Biodegradation Division
➢ (http://www.icfre.org/UserFiles/File/iwst/divisions/wbd/ wad .him)
➢ Eucalyptus Tree Book from Google Book.
➢ Karnataka Forest Division from Google Book.
➢ Uttar Pradesh Forest Division from Google Book.
➢ Case Analysis of ABB of logistics problem.
➢ Article related to Logistic Problems from Hindu Times.