CASE STUDY ON LAXMI TRANSFORMERS

Submitted To: Mr. Vivek Raina Faculty of Supply Chain Management Xcellon Institute-School of Business Ahmedabad
Prepared By: Name Nita Ahir Manish Asnani Ishit Bhatt Kuldip Champawat Prayag Chauhan Pradeep Chauhan Shalini Chettiar Yogesh Chhimpa Kaushal Dhakan Roll No. 04 06 08 09 14 15 16 17 19

Jayesh Hotwani (Absent) 27 Ram Chaudhary (Absent) 39 Tushar Tewani Nilesh Thacker Ankur Thacker 59 61 62

Submitted on: 10/02/2012

Laxmi Transformers
Q. 1: What is the best mode for logistic supply of raw material? Ans.: Various mode of supply

Rail:
If in case of rail transport the following things are taken into consideration while setting up the rail track of 15kms from Pen to Alibag. Rail costing (from Pen) kms Goa Mangalore Daitari Banspani Alibag 500 700 2200 1800 15 14780000 103500000 91900000 212500000 Cat 1 Cat 2 19770000 140260000 12442000 27200000 Cat 3 27240000 195340000 173140000 36200000 Total 61790000 439100000 277482000 425900000

{In the case of alibag 15 cr investment also get add in total cost }

Moreover 15crores are added in the total cost shown in the above table. Because as given 1km line cost 1crore and the line is 15 kms long. Now the following table shows the details about road transport.

Road:
Inbound road cost: Possibility 1 Goa Alibag (K.M x 0.5) 520 260 Mangalore 800 400 0.5 Daitari 1780 890 178000000 40% rs / km Banspani 1650 825 165000000 40% 369000000

Total Cost 26000000 (K.M x 0.5 x % of raw material ) 20%

Possibility 2 Goa Alibag (K.M x 0.7) 520 364

0.7 Mangalore 800 560 -

rs / km Daitari 1780 1246 249200000 40% Banspani 1650 1155 231000000 40% Kms Cost 516600000

Total Cost 36400000 (K.M x 0.7 x % of raw material ) 20%

If we compare the above charts of rail and road then it seems that road transport cost the company less. But in case of rail transport the company has benefit to share the rail with a cement bagging plant, a gas based fertiliser plant and few other in the drawing board stage. Moreover in future if any other companies come in the same board stage then it can also share the same rail. According to the group the company can go for road transport option. The reason behind this is because company has not to take any pain to construct rail and further handling it. Moreover if forecast of sharing the rail line goes wrong then it is beneficial for the company. Also looking at opportunity investment of 15 crores company can invest the same amount in some other areas and what return company gets from the investment can be used in handling transport cost by road.

Sea:
The above table shows the calculation of various cost given if we take sea route as a mode of transportation compare to other given options ,here we are considering 2 vessel having capacity of 35000 tonnes and 650000 tonnes considering draft

restriction as a barrier due to this Barges are used for loading and unloading of a cargo

cost/Ports raw material fuel charges Entry fees standing Charges barge charges loading/unloading charges TOTAL COST No of ship required TOTAL COST

Ship 1 (35000 and ship 2 65000) Mangalore Ship 1 ship 2 33000000 33000000 337500 352500 330000 453750 1836000 3825000 1440000 3960000 FOBT 36943500 FOBT 41591250 1(SHIP 1 + 3 ship 2) 110830500 78534750

Paradip ship 1 50000000 1575000 380000 1989000 1440000 1360000 56744000

ship 2 50000000 1645000 522500 4335000 3960000 2560000 63022500

Calcutta ship 1 50000000 1800000 420000 2142000 1440000 1530000 57332000

ship 2 50000000 1880000 577500 4590000 3960000 2880000 63887500

6 3 340464000 189067500

6 3 343992000 191662500

Conclusion:According to our cost analysis explained above the best mode of transport will be by sea ,because its cost is minimum compare to other mode of transport

Q- 2 What final markets should Laxmi Transformers choose to serve based on logistical consideration ? What is the best mode for the finished goods dispatch to key markets? Ans 2 Zone wise final markets are as follows: North: Delhi, Ludhiana, Lucknow, Jaipur, South: Bangalore , Chennai, East: Calcutta, Bhilai, Bokaro, Jamshedpur. West: Ahmadabad, Baroda

As it was specified in the case is that as DRI the final product of the Laxmi Transformers was used in both mini steel plant and large integrated steel plant GUJARAT and MAHARASTRA were the two most industrialized states in India and had a number of Mini steel plants and ferrous foundries which are the potential sponge buyers For the final market these two states were to be supplied as demand is there along with other places which are as follows: Calcutta Bhilai Bokaro Jamshedpur Ahmedabad Baroda Delhi Ludhiana Lucknow Jaipur Bangalore Madras

ROAD:These are the final markets which the Laxmi transformers choose to serve based on logistical consideration ,the best mode between ROAD and RAIL to dispatch for the final goods to the key markets calculations are as follows:-

We assume that one truck can carry 30 tonnes (overload) source (GOOGLE)

The cost of per tones (overload) = 0.7 (given in the case)

Therefore: Demand for the sponge iron market estimated = 10,000 tpa (exhibit 1). Therefore: demand / total tones per truck. = 10000/30 = 333.33 (trucks per year) therefore 333 (approx). Therefore: 333 trucks were required for 1 year and for month. Total trucks/ no of months = 333/12 = 27.75 Estimating (25- 30) trucks were required for a month.

Cost by Road: Demand Outbound per Per tonne distance to 10,000 Kilometre market centers tpa 0.7 0.7 0.7 2160 1450 2200 2040 441 357 1043 1235 1015 875 679 917 42.82 30 35 20 3.38 5.23 35.21 15.39 13.73 9.9 10.6 8.47 Demand x 10,000/30 (per Total truck tonnes) cost 14273.33333 10000 11666.66667 6666.666667 1126.666667 1743.333333 11736.66667 5130 4576.666667 3300 3533.333333 2823.333333 21581280 10150000 17966666.67 9520000 347802 435659 8568940.333 4434885 3251721.667 2021250 1679393.333 1812297.667 81769895.67

road

Market Calcutta Bhilai Bokaro

Jamshedpur 0.7 ahmedabad Baroda delhi Ludhiana lucknow jaipur banglore Madras Total 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7

market Bombay nagpur Kolapur Total

Cost by rail 27135520 45574900 8189620 80900040

market Bombay nagpur Kolapur Total

Cost by road 22300600 65405200 6639500 94345300

Compare the two mode of transport to dispatch the final goods in three market are as follows: BOMBAY NAGPUR KOLAPUR From the above calculation if we compare the two modes to transport the finished goods than RAIL ROUTE will be best mode of transport Q-3 Contingent on a particular Choice for inbound movement, can the same mode be used servicing some final market? Ans 3 As per the calculation of the above answer no 1 SEA ROUTE is feasible for the inbound logistics and in outbound from answer 2 RAIL ROUTE is feasible for outbound logistics for serving the inbound and outbound market different modes will be used. Q- 4 Is a rail siding from pen to alibag worth the investment? Ans 4 As per the case from Alibag to Pen the distance is about 15 K.M and the cost of per K.M is 1 cr, if we take or go for the investment than it will cost almost 15cr to set a new railroad from alibag to pen and as the 3 categories mention in the case 110,150,220 the cost will be 63.75, 81.6, 108.6 (per quintal) As the company invest today it will give fruits tomorrow so according to our analysis the investment is worth wile it is also shown in Q-1 also in calculation of RAIL and the total investment cost is Rs 425900000 (including all the category) Q-5 If ships are to be used for inbound logistics, how many barges would be required for the lighterage operations from the mother vessel to the jetty at alibag?

If the vessel of 35000 tonnes capacity is used then 4 barges will be required and if 65000 tonnes capacity is used then 6 barges to be used for the lighterage operations from the mother vessel to the jetty at Alibag. Q-6 would the scheduling of carries in any mode affect the economics of the mode choice? Ans-6 yes, the scheduling carriers in all the modes affect the economics of the mode choice because variable and fixed cost in every mode are different, the balance between time and speed affect the delivery of goods in transportation while choosing the appropriate modes available. Operating cost in each mode has relevance to cost and safety is the other main component which plays a major role because of which the choice of modes does change in one way or other. Available choices in transport: 1. Rail 2. Road 3. Sea

Pricing plays a vital role: This is an important area, where due to practices of administered and often placative pricing, major distortions have set in. They may have been in existence long enough to have even influenced investment decisions, that is resulted in allocative distortions. The most glaring example is the shift of freight traffic from rail to road due to inter alia pricing way above the true economic cost. This has resulted in a significant increase in road traffic where large investments are now being channelized. The main role of transportation depends upon the operation i.e. The services and level of safety is more than compared to other means of transport but the capacity and means to reach the hubs and destinations differs from one another so the main task is to make a appropriate decision which will result into productivity.