Digital Transformation in the PLM domain - distrib.pdf
A Summer Internship Report on IFB
1. A Project report
for
IFB Industries Limited
On improvement of secondary distribution model at
Chandigarh region
Submitted to
Mr. Indroneel Goho
In partial fulfilment of the requirements of the course
Post Graduate Program in Business Management
On May 28th ‘2011
By
Nahid Anjum
Praxis Business School
Kolkata
(2010-2012)
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2. Acknowledgement
I express my sincerest gratitude to Mr. Mohit Chawla (Regional Manager, IFB
Chandigarh), Mr. Sunil Kumar Sharma (Regional Service Manager), Mr.
Saptrishi Manjumdar (Regional Accountant), Mr. Manoj Gupta (Regional
Service Accountant), Mr. Ashish Kaushal (Branch Manager), Mr. Sanjay
Dhawan (Branch Accountant), Mr. Gobinder (Branch Service Incharge) and Mr.
Pawan Rana (Godown Incharge, Chandigarh) for their valuable guidance
throughout the duration of this training project. The quality of this work owes a
great deal to the help rendered by them and their critical reviews through
various stages of the project. I would also like to express my sincere thanks to
all the employees of IFB Chandigarh who have been instrumental in the
successful completion of this project.
I also express my deep gratitude to our faculty Prof. Rajeev Mishra for his
teaching sessions which helped me in the completion of the project successfully
and Prof. Anindra Kumar Haldar for giving me such a nice opportunity to work
with IFB and get a lot of learning and experience from here.
Finally I express my sincere thanks to all those people who have contributed
towards the completion of this project and cannot be mentioned here.
Nahid Anjum
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3. Executive Summary
The objective of this report is to summarize the activities I undertook as part of
my summer internship at IFB Industries Ltd, Chandigarh. I had to work in
coordination with the company’s logistics and operations team to minimise the
cost of secondary distribution model by implementing a new improved model
and to assess the benefit derived from it. It includes the secondary distribution
model of finished goods as well as spare parts. It is acceptable that all
Electronics products are of technical nature and effective after sales services are
required. Customer purchases product by keeping in mind all the factors
includes Product features, Quality, Price but most important is after sale service.
―To be customer’s first choice‖ customer needs proper attention and after sale
service, which in fact has posed a big challenge to every organization.
Customers are more concerned about after sale service from their vendor and at
the right time. That is why company is serving their customers with warranty,
annual maintenance contract and extended warranty. So this project also
includes all the transportation cost which comes under these activities of serving
the customers with the best services.
This project includes the cost and expenses of the previous model as well as the
reduced cost benefits, which the company has availed by implementing the new
one.
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4. Preface
With great pleasure I am presenting my project report on ―Improvement of
secondary distribution model at Chandigarh region‖ of IFB Industries Limited,
Chandigarh. It was an amazing experience to get exposed to a corporate world
with immense learning at every step of the project and to know about the work
culture and how an organisation works.
The project which was assigned to me is to study the existing secondary
distribution model, to identify the gaps and improvement areas and to come up
with a new improved and beneficial model. It was weekly divided in two
months. The data was collected from each and every resource which can be
proved beneficial for the implementation of new improved secondary
distribution model.
Therefore, I take this opportunity to present the project report and sincerely
hope that it will be as much knowledge enhancing to the readers as it was to use
during the fieldwork and the compilation of the report.
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5. Contents
1. Objectives of the project……………………………………………..7
2. Industry Overview……………………………………………………8
3. Company Overview………………………………………………….12
a. The IFB Group……………………………………..………….13
b. Company Profile………………………………..……………..18
c. Financials of the company…………………………………….19
d. IFB Home appliances division
i. The Products and its features……………….………….20
ii. New launches……………………………………………30
iii. Competitors……………………………………………..31
iv. Multi level marketing……………………………………32
4. IFB Chandigarh
a. Location on map………………………………...…………….33
b. Organisation structure…………………………..…………….34
5. Analysis
a. Porter’s Five Forces Model……………………………….…...35
b. PEST Analysis………………………………………………….37
c. SWOT Analysis…………………………………………………38
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6. d. BCG Matrix……………………………………………………..42
e. Product Life Cycle………………………………………………43
f. Ansoff Matrix……………………………………………………44
6. Project Description
a. Overview…………………………..…………………………... 46
b. Situational Analysis………………………………………………46
c. Observation……………………………………………………..48
d. Problem Statement………………………………………………50
e. Options…………………………………………………………..50
f. Criteria……………………………………………………………50
g. Evaluation of options……………………………………………50
7. Recommendations……………………………………………………..52
8. Action Plan…………………………………………………………….53
9. Benefit derived…………………………………………………………54
10.Learning…………………...…………………………………………..55
11.Reference………………………………………………………………56
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7. Objectives of the project
The major objectives of this project are as follows:
To get exposed to the practical situations of business
To know how things work practically in corporate world
To learn to interact with various people in corporate
To understand the importance of logistics and operations in business
To find out the problem and come up with a suitable solution
To get the cost benefit by using an appropriate model for secondary
distribution
To know various details which are important in a company
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8. Industry Overview
Introduction
Durable goods are those which don’t wear out quickly, yielding utility over time
rather than at once. Examples of consumer durable goods include electronic
equipment, home furnishings and fixtures, photographic equipment, leisure
equipment and kitchen appliances. They can be further classified as either white
goods, such as refrigerators, washing machines and air conditioners or brown
goods such as blenders, cooking ranges and microwaves or consumer
electronics such as televisions and DVD players. Such big-ticket items typically
continue to be serviceable for three years at least and are characterized by long
inter-purchase times.
The Indian consumer durables segment can be divided into 3 consumer
electronics groups:
White Goods Kitchen appliances/Brown Consumer Electronics
goods
Air conditioners Mixers Televisions
Refrigerators Grinders Mobile phones
Washing machines Microwave ovens MP3 players
Sewing machines Iron DVD players
Speakers and audio Electric fans VCD players
equipments Cooking range
Watches and clocks Chimneys
Cleaning equipments
Other domestic
appliances
Performance
India’s consumer durables market is riding the crest of the country’s economic
boom. Driven by a young population with access to disposable incomes and
easy finance options, the consumer market has been throwing up staggering
figures. The Indian durables market, with a market size of US$ 27.38 billion in
2008-09, has grown by 7.1% over the previous year.
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9. Indian durables industry-segments
Air conditioners 6%
Audio/video equipments 12%
Components 7%
Computer and peripherals 19%
1%
1% 6%
Electric fans 1%
18% 12%
Industrial electrical and
1% electronics 5%
2% 7% Mobile phones 20%
3%
4% Other domestic appliances 4%
Others 3%
19%
20% Refrigerators 2%
5%1%
Sewing machines 1%
Telecommunication 18%
Washing machines 1%
Watches and clocks 1%
In the past 10 years, the global market has witnessed a surge in demand as
economies such as Brazil, Mexico, India and China have opened up and begun
rapid development, welcoming globalization with élan. The consumer durables
industry has always exhibited impressive growth despite strong competition and
constant price cutting, and the first contraction since the 2001 dot-com bust has
been due to the global recession. Given the strong correlation between demand
for durables (both new and replacements) and income, the industry naturally
suffered during the 2008-2009 period. However, projections for current year
going forward are very optimistic, as consumers resume spending, and
producers launch new enticing variants to grab new customers.
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10. The Indian consumer durables industry has witnessed a considerable change in
the past couple of years. Changing lifestyle, higher disposable income coupled
with greater affordability and a surge in advertising has been instrumental in
bringing about a sea change in the consumer behavior pattern.
According to a research report ―Booming Consumer Electronics Market in
India‖, with huge middle-class population and rapid economic growth, India is
one of the largest spenders in consumer electronics in Asia. However still the
consumer electronics goods, have low penetration in the country leaving vast
room for future growth. The market is projected to grow at a CAGR of around
15% during 2010-2013.
According to recent reports, the Indian consumer sector is attracting more
interest from both private equity (PE) and mergers and acquisitions (M&A).
India ranks first in the Nielsen Global Consumer Confidence survey released in
January 2011. ―India is one of the fastest growing markets in the world and the
current consumer belief that recession would soon be a thing of the past has
filled Indians with confidence,‖ said Piyush Mathur, Managing Director, South
Asia, The Nielsen Co. With 131 index points, India ranked number one in the
recent round of the survey, followed by Philippines (120) and Norway (119).
Challenges
The biggest threats to the local industry going forward are supply-related issues
pertaining to distribution and infrastructure, as well as demand issues due to
competition from imported goods. The lack of well developed distribution
networks makes it especially challenging to penetrate the fastest growing rural
areas economically. In addition, regular power cuts and poor road linkages
make systematic production, assembly and delivery problematic.
On the demand side, customers have increasing choice from both domestically
produced and imported goods, with similar features. This homogeneity makes it
difficult for players to remain ahead of the competition.
MNCs hold an edge over their Indian counterparts in terms of superior
technology combined with a steady flow of capital, while domestic companies
compete on the basis of their well-acknowledged brands, an extensive
distribution network and an insight in local market conditions. The largest
MNCs incorporated in India are Whirlpool India, LG India, Samsung India and
Sony India and home grown brands are Videocon, Godrej Industries and IFB.
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11. Future Prospects
Overall, the industry’s future remains robust, and interested applicants will
benefit from a holistic learning experience. Many of the research, sales,
marketing and advertising related roles will necessitate a good on-the-job
learning of target audiences, who may well be a totally new segment, based in
never-before visited Class II and III towns. In addition, those with technical
backgrounds will be able to leverage their knowledge and experience to
constantly develop and innovate the product variants. With more MNCs
growing their Indian businesses, there is great potential to also learn best-in-
class systems and management skills.
Emerging Consumer Demand in India
India is set to undergo a major transform over the next two decades with
sustained growth resulting in dramatic poverty reduction and the formation of a
half billion strong middle class.
The unique period in India’s evolution will see total consumption in the country
quadrupling, making India the fifth largest consumer market in the world by
2025.
India’s consumer market is set to explode over the next two decades with total
private consumption growing from $370 billion today to over $1,500 billion by
2025. Contrary to popular belief, this growth will not be driven by population
growth or by dramatic changes in household savings behaviour, but rather
almost entirely by rising incomes. Geographically, urban India will account for
over two-thirds of market growth, despite housing only 37% of the country’s
population (in 2025). The size of India’s market will, however, still be tied
closely to its large population, with average per capita consumption growing to
only about $1,000 by 2025.
Source: McKinsey Global Institute
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12. India’s consumer market will quadruple over the next two decades
Total household consumption, billion, Indian rupees, 2000
69,503
48,677
2005
34,089 2010
2015
23,840
2020
16,896
2025
2005 2010 2015 2020 2025
Urban India will account for more than two-thirds of consumption growth
over the next 20 years
Aggregate annual consumption, billion, Indian rupees, 2000
consumption growth
consumption
All India consumption, 2005 growth 32% India consumption, 2025
Rural consumption consumption growth 68%
Urban All
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13. Company Overview
The IFB Group
IFB Industries Limited originally known as Indian Fine Blanks Limited started
their operations in India during 1974 in collaboration with Hienrich Schmid AG
of Switzerland. The product range includes Fine Blanked components, tools and
related machine tools like Straighteners, Decoilers, Strip loaders and others.
Mr. Bijon Nag, Chairman, IFB Industries Ltd, pioneered the fine blanking
technology in India and set up the first unit in Kolkata. Since then, the company
has evolved into one of the most respected and trusted engineering group to
meet the growing needs of domestic and international automotive and domestic
international automotive market.
IFB pioneered the production of fully automatic washing machine in India in
agreement with BOSCH, Germany in the year 1989. Today IFB supplies Fully
Automatic Washing Machines, Micro Wave Ovens, Dish Washers & Dryers
with factories in Goa and Bhopal.
The Engineering divisions are located at Kolkata & Bangalore. The Bangalore
unit, apart from Fine Blanked components, manufactures motors for White
goods as well as Automotive applications.
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14. The group co.’s are:
IFB Industries Ltd.
Engineering Division.
Home Appliances Division.
IFB venture Capital Ltd.
IFB Agro Ltd.
IFB Securities Ltd.
IFB Leasing and Financing Ltd.
IFB Subsidiaries
IFB even ventured abroad by setting up European Fine Blanking Plant at
Wrekhan, Northern Wales, UK along with Heinrich Schmidt.
As mentioned before setup over two decades ago, IFB has moved beyond the
world of Fine Blanking and Tool making to machine tools, F.H.P Motors, Home
appliances, automotive sub assemblies and accessories and global training .
IFB Engineering Division
- Fine Blanking
IFB is the Premier Fine Blanker in India having Fine Blanking Presses, ranging
in size from 90 to 800 T. It has two manufacturing unit in Kolkata and
Bangalore. The 2nd unit Bangalore was established in 1988. The company has
total of nine (9) Fine Blanking Presses, capacity range from 90T to 800T.
- Machine Tools
The company’s potential in tool design promoted it to diversify into the
manufacture and supply of precision NC and CNC special purpose machines
used for coil processing.
IFB Home Appliances Division
The IFB brand offers fully automatic washing machines, Microwaves, Domestic
and Industrial dishwashers, clothes dryers. They have also recently launched
fully built up modular kitchens and kitchen equipments.
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15. The IFB front loading design is based on German principles – for both
aesthetics as well as mechanical and electronic configuration.
Having established the image of a high quality brand of fully automatic
machines, the company is to reach a wider section of buyers through an
exhaustive dealer network spread all over India and 12 other countries. The
main washing machine production plant at Goa is poised for a major expansion
and modernization program to meet the growing demand.
IFB International Division
The company’s international business division has become a recognized Export
House dealing in not only IFB's own products but also third-party exports.
The company’s customers include Maruti Udyog, Ford India, Fiat India, Toyota
Kirloskar Motors, Lucas TVS, Brakes India, Autoliv India, Rane TRW, IFB
Automotive, Germany’s Takata Petri, BorgWarner, Avtec and Bosch chasis.
IFB Venture Capital Finance Ltd.
The company was incorporated in 1992 with a view to achieve long term capital
gains by investing in ventures having an attractive potential for growth and
earnings has since started commercial activities. In view of the need for stronger
capital base, the company went public in March 1995 and was considerably
oversubscribe, the allotment was made in May 1995.
IFB Agro Ltd.
IFB Agro Industries Limited is a reputed Public Limited Company. The
company has various consumer oriented products both for domestic & export
markets. The Corporate office is situated at EM Bypass, Kolkata, West Bengal.
IFB Agro Industries Limited is a Public Limited Company, listed in the Indian
Stock Exchange. The company is one of the largest producer of alcohol in
Eastern India, having 6 large captive bottling plants situated in Bengal, Orissa &
North East. The company is also engaged in the production of Carbon Dioxide
Gas & processing of marine products for Export as well as for the Indian
market.
IFB Securities Ltd.
The company has obtained the membership in both the wholesale and capital
market segments of the national stock exchange. In addition to the membership
of the O.T.C.E.I., it has already commenced full-fledged commercial
operations.
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16. IFB Leasing and Financing Ltd.
The increasing scope in money market operations prompted the company to
venture into the relatively newer areas of Foreign exchange Brokering &
Merchant Banking activities in addition to its existing line of activity in Hire,
Purchase Financing & Leasing. The company has branch offices at Bangalore,
Mumbai, Delhi and Madras. Resource mobilization activities have been stepped
up substantially and public response to deposit mobilization has shown an
encouraging trend.
IFB Subsidiaries
IFB, in collaboration with Germany’s RHW and Sweden’s Electrolux, has two
joint venture subsidiaries -- RHW India and RHW Autoliv India -- to
manufacture automotive seat recliners or seating systems and safety
equipments.
European Fine Blanking Ltd. U.K.
RHW India Ltd. (Collaboration with RHW, Germany)
RHW AUTOLIV INDIA Ltd. (auto live of Sweden)
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17. Company Profile
Vision
To be customer’s first choice
Mission
TO BE THE BEST IN THE EYES
OF OUR CUSTOMERS,
EMPLOYEES, BUSINESS
PARTNERS & SHAREHOLDERS
For Our Customers – The best product to buy, an innovative product that
consistently outperforms peers and outstanding service that makes every
customer smile.
For Our People - An environment where individuals can constantly learn,
grow and prosper.
For our Business Partners – IFB should be the first choice for their
products and services.
For Our Investors - The Company should be acknowledged as one with
the highest standards of corporate transparency that delivers on promises
given to shareholders.
• TO BE IN EVERY HOME VALUED AT Rs 15 LACS + (AND
ACHIEVE OUR TARGET OF Rs 4000 CRORES TURNOVER BY
2013 – 14)
Values
―WE TREAT CUSTOMERS THE WAY WE WOULD WANT TO BE
TREATED‖
ELEVEN IDENTIFIED BEHAVIOURS THAT MAKE THE ABOVE COME
TO LIFE
Never let profit centre conflicts get in the way of doing what is right for
the customer
Give customers a good, fair deal. Great customer relationships take time.
Do not try to maximise short term profits at the expense of the building
those enduring relationships.
Always look for ways to make it easier to do business with us
Communicate daily with your customers. If they are talking to you, they
can’t be talking to a competitor.
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18. Don’t forget to say thank you
Leaner is better
Eliminate bureaucracy
Cut waste relentlessly
Operations should be fast and simple
Value each other’s time
Invest in infrastructure
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19. Financials of the Company
From April’10 to April’11
Share holding pattern
Promoter holdings
5% 16% Govt. holding
6% Domestic institutions
1% 72% Foreign holdings
0%
Non promoter corporate
holdings
Public & others
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20. Products and its features
There are various types of products in its Home Appliances Division. They are:
Front loaded Washing Machine
Top loaded Washing Machine
Microwave oven
Dishwasher
100% clothes dryer
Wash care products
Front loaded Washing Machine
The different models of front loaded washing machines are:
Digital 7 Kg
Digital SX
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24. Some other new models are:
Washer Dryer 9/7 Kg
Angular 6.5 Kg Red
Angular 6.5 Kg Silver
Digital 7 Kg Direct Drive
Digital 8 Kg Direct Drive
Elite Sx
Seno Dx 5.5 Kg
Top loaded Washing Machine
There are 4 models of top loaded washing machine:
AW 60 - 8061
AW 60 - 8062
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25. AW 7233
AW 6563
Microwave oven
The different ranges of microwave oven are divided in 3 categories according to
their features:
Solo
Grill
Convection
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29. 1 more new model of convection is 38 SC1
Dishwasher
ZEPHYR EX Neptune
100% clothes dryer
EASY DRY
MAXIDRY
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30. MAXIDRY EX
Wash care Products:
Protecta
Descal
Limo
Fabo
Autodish dish detergent
Autodish rinse aid
New launches
There are some more upcoming products in pipeline which are going to be
launched next year by IFB. These new launches are:
Water Filter
Combo kit Washing Machine
Combo kit Dish Washer
Combo kit Microwave Oven
Dry sheet
Electrical & Plumbing
Small Appliances
Refrigerator
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32. Multi level marketing
Company is launching its products in
network marketing through multi level
marketing. This multi level marketing is
just in its launching stage. The best part
of networking is anyone can be a brand
ambassador of IFB. It is a very easy way
to earn and learn for the company, its
employees as well as its customers.
Actually in multi level marketing one
can register himself just for Rs. 1000/-
and can be a brand ambassador. You will get your ID password and virtual
office. He is just supposed to purchase a product or recommend it to anyone
else and make two other members under him. Now those two other members are
supposed to do the same thing. By purchasing its products or recommending to
others he will earn some points on each product. Also he will get the products in
very low price which cannot be offered by any dealer. The two members will be
his right and left member and when both sides’ points will match then he will
earn 1000 points on each pair which will give him Rs. 1000/-. One can
recommend 20 people to purchase its products each day. In this way, he gets an
opportunity to earn up to Rs. 20,000/- per day and up to Rs. 6, 00,000/- per
month. Anyone including working, non-working, students, retired person or
even house wives can join this network and make money. It ultimately increases
the brand loyalty of customers towards its products as they are supposed to
recommend its product to everyone. This plan is known as ―IFB at home-earn
for life‖.
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33. IFB Chandigarh
Location on map
IFB INDUSTRIES LTD, CHANDIGARH is located at Plot no.640-A, Phase-
IX, Industrial area, Mohali. It comes in North II region which includes four
other states too. These are Punjab, Haryana, J&K and Himachal Pradesh. It has
a ware house in Mauli Jagran, Chandigarh to store the finished goods as well as
spare parts to supply further to various dealers and customers. It has 17 dealers
in whole Chandigarh which further supply the finished goods to the customers
whereas 2 franchisees and 1 direct service which deal with all the after sales
service complains.
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35. Analysis
PORTER’S FIVE FORCES MODEL:
Power of
Suppliers
Threat of
New Competitive Power of
Entrance Rivalry Buyer
Availability
of
Substitutes
Threat of New Entrants (Moderate):
Most current players are global players
New entrants will need to invest in brand, technology, distribution
Power of Suppliers (Low):
Indigenous supply base limited—most raw materials are imported
Power of Buyers (High):
Multitude of brands across price points—wide variety of choice for
customers
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36. Availability of Substitutes (High):
Unbranded products and cheaper imports could enter the market
Competitive Rivalry (High):
Number of well-established players; several new players entering
Good technological capability
Many untapped potential markets
Overall, the sector is a dynamic one, with significant growth opportunities.
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37. PEST ANALYSIS:
Political factor
High import duty
Plants in tax-incentive areas like Goa and Bhopal
Export promotion schemes of the Indian Government like EPCG (Export
Promotion Capital Goods scheme) and EOQ (Export Oriented Unit)
status
Economical factor
Increase in per capita income
Growing GDP high disposable income
Increase in spending power
Socio-cultural factor
Manufacturing eco-friendly product
Increasing life style and comfort
Technological factor
Improvement in technology made the electronic product more featured
Quality of product has been increased
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38. SWOT ANALYSIS
Strengths of the company Weaknesses of the company
Brand image in Home Price of the products
Appliances Division Spare parts/AMC of the product
So many models to choose are costly
Healthy financial banking No promotional activities
Innovative products Less range of products in
Compatible workforce consumer durables
Strong after sales service Products are for winter season
Wide distribution network in all but no product is specially for
over the country summer season
Opportunities for the company Threats for the company
Scope for growth in the rural Competitive pressure on the
market domestic market
New launches can give more Threats from competitors in the
benefit area of pricing
The trust in company’s product Significant rise in material cost
by valued customers and exchange fluctuation
Strengths of the company
Brand image in Home Appliances Division
IFB has a brand image in Home Appliances Division and it is leading
market in this segment with the major number of customers of washing
machines and microwave oven.
So many models to choose
The products have variety of models with different features as well as
prices to tap the customers of middle class, upper middle class and high
class.
Healthy financial banking
The company is financially sound and can grow well if it targets the rural
areas as well.
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39. Innovative products
The products are actually innovative and new in Indian market so they
have a near monopoly in dishwasher and clothes dryer with maximum
market share. So it attracts the customers of higher class for more
luxurious life style.
Compatible workforce
The company has a compatible work force which works in team to give a
new height to the company.
Strong after sales service
The company is also providing best after sales service to its customers by
the schemes like warranty, annual maintenance contract and extended
warranty.
Wide distribution network in all over the country
It has a wide distribution network which covers almost every state of the
country having various dealers and franchisees in each state.
Weaknesses of the company
Prices of the products
The prices of the products are a bit high in comparison to other brands.
So it will not be able to cover the lower middle class.
Spare parts/AMC of the product are costly
Even the spare parts and annual maintenance contract of the products are
costly which shows a chance of losing customers.
No promotional activities
There are no promotional activities for the promotion of the products.
Even there is not any advertisement which can show the features and
variety of products. This is the reason that there are very less sales of
hobs and chimneys because people are not aware of its new products.
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40. Less range of products in consumer durables
It has less range of products which is not sufficient to capture the whole
market. Though some new products are ready to be launch in coming
year but some small consumer durables like iron, water heater, camera
etc. can be added.
Products are for winter season but no product is specially for summer
season
The products like clothes dryer can be used in winter season mainly
which comes just for 2 months in entire year. Such products can only be
purchased by north people due to having very less temperature in winter
season. There should be some summer products like refrigerator, AC,
cooler, water cooler etc. so that it can be purchased in entire year and can
capture the whole Indian market.
Opportunities for the company
Scope for growth in the rural market
IFB still have not covered the rural market of country. As India has its
major population in rural areas, the company has a wider scope for
growth in rural market by launching low price products useful for rural
people which can also have chargeable features because rural area still
don’t have full time electricity facility. For example - chargeable lamps.
New launches can give more benefit
The new launches which are there in the pipeline can give more benefit to
the company. Even some more launches in coming future can add more
benefit to the company.
The trust in company’s product by valued customers
The greatest opportunity of the company is its brand equity, product
quality, latest technology and last but not least is the trust in company’s
products by the valued customers. This trust will definitely be helpful in
the promotion of other new products.
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41. Threats for the company
Competitive pressure on the domestic market
Growth of the Indian economy together with the reduction of import
duties makes India increasingly a target market for many MNCs and
therefore, competitive pressure on the domestic market will continue to
grow.
Threats from competitors in the area of pricing
As its competitors are also there in the market with some low price
products the company is facing threats from those competitors.
Significant rise in material cost and exchange fluctuation
The significant rise in material cost and exchange fluctuation drastically
impacts margin of the company.
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42. BCG Matrix
IFB has high market growth rate as well as high relative market share.
Therefore it is a star. Now being a star it leads to large amount of cash
consumption and cash generation. It also requires heavy investment, to maintain
its market share. In the product life cycle it is at the growth stage. Therefore the
company has a nice opportunity for growth in Indian market.
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44. ANSOFF MATRIX
The company should follow the four strategies depending on the demand and
product as indicated in the matrix.
Market penetration
Market penetration is the name given to a growth strategy where the business
focuses on selling existing products into existing markets.
It is been clear from the above definition that market penetration is the strategy
were company try to maintain its share in the existing market with its existing
product. Having wide range of product in market IFB is already following this
strategy of market penetration.
Market development
Market development is the name given to a growth strategy where the business
seeks to sell its existing products into new markets. IFB is now almost covered
all states with its existing products. As far as rural market is concerned, it
cannot capture it with its existing product due to high price. But still it is trying
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45. to target B2B market with its B2B products like industrial dishwasher, washer
and dryer.
Product development
Product development is the name given to a growth strategy where a business
aims to introduce new products into existing markets. Now the company is
ready to launch some new products like refrigerator, water filter etc. It is
following the product development strategy.
Diversification
Diversification is the name given to the growth strategy where a business
markets new products in new markets. The new products which are there in the
pipe line can cover the new market also with its unique features and reasonable
prices.
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46. Project Description
Overview
This project is basically on secondary distribution model of IFB, Chandigarh. It
was weekly divided into 8 weeks. First we did the study of existing secondary
distribution model of Finished Goods and Spares to dealers and franchisees,
study of agreements, fill rate etc, collate information on truck rates, size of
branch and warehouses – rental rate – storage capacity etc. Then we identified
the gaps and improvement areas in the existing model and came up with an
improved model. By implementing the new improved model we accessed the
benefit to the company.
Situational Analysis
IFB Chandigarh is a branch of IFB which supply its product in Chandigarh and
handle internet customers around Chandigarh (Panchkula and Mohali). There is
only 1 warehouse in Chandigarh which gets its stock from Bhopal. The capacity
of the ware house is 300 WM (only) or 900 MW (only).
There are 4 types of vehicles used to transport the goods from Chandigarh ware
house. The capacity and the fixed remuneration for logistics equipment are
different as per the location. These vehicles are-
1) LPT
17 feet long
Capacity-42 WM or 42*3 MW
2) Canter
14 feet long
Capacity-36 WM or 36*3 MW
3) Tata 407
12 feet long
Capacity-24 WM or 24*3 MW
4) Tata magic (Auto)
8 feet long
Capacity-12 WM or 12*3 MW
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47. This is the fixed remuneration for logistics equipment from June, 2008 to May,
2011-
Tata 407 canter LPT Auto
Jammu (J&K) 0 6820 7750 0
Karnal (Haryana) 2300 3150 3400 1800
Ludhiana (Punjab) 2000 2750 3100 1600
Mohali (Chandigarh) 600 800 1000 400
Parwanoo (HP) 1600 2150 2600 1300
Now this fixed remuneration is going to change from June, 2011 and the new
fixed costs are as follows-
Tata 407 canter LPT Auto
Jammu (J&K) 0 7800 8800 0
Karnal (Haryana) 2530 3465 3740 1980
Ludhiana (Punjab) 2200 3025 3410 1760
Mohali (Chandigarh) 1200 1500 1700 500
Parwanoo (HP) 1760 2365 2860 1430
There are 17 dealers in Chandigarh which deal with the IFB products and 2
franchisees which are basically service centres of IFB. Now for the
transportation there is an Auto owned by company on rental basis agreement. In
case, when there is heavy transportation of goods to the dealers or stock transfer
to the other states of North II then they hire vehicles from outside which gives
extra cost to the company.
Information on transportation of spare parts
The information of transportation of spare parts by service centres are as
follows-
2 franchisees in Chandigarh
1 company on company operation (owned by the company)
2 rickshaws- 1 for drag service, 1 for godown service
Cost of rickshaws- drag service – 5000/- (fixed for 1 month)
godown service – 4000/- (fixed for 1 month)
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48. Drag service – the service in which the spare parts to be taken to the
customer’s home and repaired there only
Godown service – the service in which we get the defected machine to
the godown and repair there due to heavy spare parts or major defect
Products which are under warranty period, annual maintenance contract
or extended warranty period are serviced free of cost
Products out of warranty are serviced on charges
Spare parts dispatched from the warehouse to franchisees by the auto
owned by the company and if load is more than the auto then it goes on
hired transport vehicle
Service given to the customers through a systematic way
They get the spare parts to the customer’s place to repair the machines
and repair them there only
In case the spare part needed is a huge one then they use a vehicle
In case the machine cannot be repaired there then they bring it to the
service centre
Maximum 2000/- to 3000/- monthly cost on the transportation which is to
be paid by the company
Observation
The whole situation seems to be interconnected here. The distribution is of two
types- primary and secondary. The distribution from Bhopal to Chandigarh
ware house is called primary distribution whereas the further distribution to the
various dealers from Chandigarh ware house is called secondary distribution. As
per the data studied there are many transportation which can be done on Canter
as per the quantity but instead of using Canter, LPT is being used which is Rs.
200 expensive than Canter. There is much transportation which is being done
half loaded only. Though the capacity of the vehicle is more than it is being
used. The only vehicle can go to Jammu for stock transfer is LPT. Even when
there is the order of minimum quantity of stock there will be transportation by
LPT only. No other vehicle can go there. Most of the stock transfer is for
Ludhiana which incurred Rs. 22760 in March only.
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49. The primary distribution depends on these points:
Stock of last month should be cleared from Chandigarh ware house
Outstanding of last month should be sent to the head office
And the secondary distribution depends on these points:
Sales target of each month given by the company
Outstanding of last month sales from each dealer should be collected
Now the demand from dealers’ side depends on these points:
Further sales to the customers
Stock left in their shop
The situation goes like this:
Sales people take order from the dealers each month
Now dealer further sale the product in the market
Within a specified time they pay the amount of the stock to the company
And then the company give outstanding of the branch to the head office
In some cases, it takes time till the end of the month
Sometimes it lead to late submission of outstanding to the head office and
that is why stock move late from the Bhopal ware house
Due to this, major secondary distribution occur at the time of month
closing which ultimately increase the cost
Sometimes late submission of outstanding lead to account closing of the
branch
In such case, they get their stock from other states
It lead to the stock transfer which ultimately increase the cost of
secondary distribution of that state
If the same case happens with Chandigarh branch then stock comes from
other state to Chandigarh warehouse which gives extra cost to the
secondary distribution
This whole system breaks at the festival season when there is heavy
demand and high sales in the market
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50. Problem Statement
The major problem in this existing secondary distribution model is that
the maximum sales and billing occurs at the end of the month which cause
heavy transportation at that time for which there is a need to hire more vehicles
for transportation and the challenge is to maintain the sales in whole month
evenly so that there can be the maximum utilization of the vehicle owned by the
company.
Options
The options that company has in hand-
Weekly billing
Proper distribution from Bhopal itself
Division of Chandigarh into different zones
Criteria
Before coming to any decision these important points should be taken in
consideration-
Sales-The new model should not hamper the sales anyhow
Service-In order to minimise the cost of transportation service should not
be hampered
Profitability-The profit that new model will give to the company
Evaluation of Options
Weekly billing
o Pros
It will evenly distribute the sales for entire month
Maximum time vehicle will not move half loaded
Proper utilization of owned vehicle
o Cons
The dealers don’t need the stock each week
It totally depend on the demand from customers’ side
Proper distribution from Bhopal itself
o Pros
There will be no need of stock transfer
There will be no need to hire the extra vehicles
o Cons
It may increase the cost of primary distribution
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51. The extra stock which is not in demand in Chandigarh will
be lying in the warehouse and it will also capture the area of
warehouse
Division of Chandigarh into different zones
o Pros
Each zone’s dealers can be asked to order on a fixed
particular date
The same vehicle can be used for the distribution of goods to
all the dealers of that particular zone
o Cons
There are only 2 areas in Chandigarh where our maximum
number of dealers exist so even the zones will not be equally
distributed
Even after the division there are some areas where only 1 or
2 dealers exist and demand is low then the vehicle will still
move half loaded
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52. Recommendation
There should be weekly billing so that sales could be evenly
distributed in the entire month
Area wise distribution can minimize the cost to some extent
The collection from dealers should also be done at time to time
and not at month closing only
Stock from Bhopal should come till the second week of the month
to distribute the products evenly in the entire month
Products and its features are excellent but there should be some
more promotional activities like TV ads to promote the products
and its features in market
Quality of products is good in dealers’ point of view
Dealers want the new kitchen equipment products to be promoted
because there is some demand from customers’ side
There should be some products which can target the rural segment
because still India has its major population in rural areas
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53. Action Plan
Area wise distribution gave some convenience in distribution
This time secondary distribution is done in a very systematic way so that
each vehicle don’t move half loaded
This is done under the guidance and efforts of all concerned people
We also tried to avoid the stock transfer as it is not needed now
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54. Benefit derived
February’11 March’11 April’11
Auto fixed cost-19800/- Auto fixed cost-19800/- Auto fixed cost-19800/-
Km charges- Km charges- Km charges-
2149*2=4298/- 1800*2=3600/- 1408*2=2816/-
Extra vehicles’ cost-14740/- Extra vehicles’ cost- Extra vehicles’ cost-
3360/- 2800/-
No stock transfer Stock transfer-30860/- Stock transfer-4950/-
Total cost-38838/- Total cost-57620/- Total cost-30366/-
(All costs are in Indian rupees)
Total benefit derived in comparison to March’11 is Rs.27,254/-
Total benefit derived in comparison to Feb’11 is Rs.8,472/-
Maximum utilization of owned vehicle
Only three extra vehicles hired
Only two stock transfer occurred
For spare parts, a rickshaw vehicle is owned by the company on a
monthly rental basis Rs. 4,000/-
The prices of vehicles are going to increase from the next month due to
hike in petrol price
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55. Learning
Practical insights into the life and work in a body corporate.
How to apply the management learning and soft skills while working at
the coalface.
How to discuss an issue with the concerned people and come up with an
agreed solution.
Interacting with various dealers and franchisees to understand how whole
logistics and operations work.
Various details on agreements and costing.
Exposure to the fierce competition and the struggle, where only the fittest
survive.
How to remain patient and composed in the face of anxiety and pressure.
Analysing each pros and cons related to various options of the solution .
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