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RECONFIGURING THE SUPPLY CHAIN AT XTRA POWER ENERGY SYSTEMS
1. RECONFIGURING THE SUPPLY CHAIN
AT XTRA POWER ENERGY SYSTEMS
SUBMITTEDBY
AKSHITJAIN
ALI MAVLI
ALMASFIROZ
AMANBAIJAL
AMANSWARUPSRIVASTAVA
AMBERBHARDWAJ
2. Xtra Power needs to make
changes in order to grow
Key issues to address
LOGISTICS
-Lead time
-Retail needs
DEMAND
-Growing
-Production capacity
-Potential for
reconditioned peaks
CONSUMER
-After sales service
-Competitive Product
3. Xtra Power Energy Systems
They are one of the leading suppliers of automotive components in the
domestic market (2 WHEELERS)
They have 2 separate business divisions
Xtra Power
Auto
Industries
Xtra Power
Energy
Systems
4. Demand is growing for batteries
Industrial sector and economy are developing
Battery market is estimated to be Rs. 200 billions
Organized/unorganized market: 45% of the market
Imports: 55% of the market
Market for batteries is growing at an annual rate of 25%
Lead acid batteries (account for 70% - 75% share of the market)
Guided by frequent power cuts
Replacement battery market is Rs. 5b units/year
5. Bank batteries account for the largest
percentage of sales for your company
65%5%
30%
REVENUES SOURCE NEW BANK BATTERIES
RECONDITIONED BANK
BATTERIES
SINE
WAVES/INVETORS/UPS
SYSTEMS
6. You don’t have the total control of
your value chain
Suppliers Manufacturer Sales After‐sales
Lead time:
2
days
Raw
materials
To retailers
TransportationTransportation
7. Changing your value chain will
decrease lead time and help you
meet demand
LEAD TIME
(DAYS)
8 6
Avani International Galaxy Electrical Cretto
SERVICE 2 imp. Components -Plastic container
-Internal Lead plates -Lead terminals
-Battery acid - Others
Transportation
12
Able to slash prices
down
Good relationship
with clients
Larger player
Highest lead time
Retailer
dissatisfaction
COST LOW Rs.200/Unit
(Rs.400 to Rs.1450/cell)
STRENGTHS Market share almost 20% Quality supplies
WEAKNESSES Market share is been
declining
8. The average lead time of the
industry is 7 days
Dolphin Power
SERVICE
LEAD TIME
(DAYS)
4 Reduced
More expensive
STRENGTHS Reduced lead times
Proximity to your
Company’s plant
Haley Power &
Electricals
DLSP
-Plastic casing -Battery leads
-Lead terminals -Electrolyte
Transportation
4
More expensive
Reliable and
consistent in
services
Least lead time in
the industry
COST Rs. 220/unit
Weaknesses
9. How does the future looks like?
The market for batteries is expected to keep growing
at an annual rate of 25% (till 2015)
Both new and reconditioned batteries
Total demand for your company bank batteries would
be 2.000 units/year
Your supply chain would only be able to cate
25% of that demand
10. S
W
O
T
Good customer service
Diversified Product portfolio
Total supply chain lead time highly dependable on the logistics
partner
Ineffective response to demand peaks
Gap between demand and supply of lead acid batteriesr
Energy demand growth rate higher than electrical energy system
expansion rate
Increase adoption and necessity for renewable energies (solar PV)
Many players in the battery market
High fragmentation of lead acid battery market
11. Your company has many options
for changing the supply chain
Supply Chain Shift
logistics
6 day lead
time is already
lowest
Higher cost
Not highest
priority
Higher cost
8 day lead
time
still not most
pressing issue
Too much all
at once
Not smart to
replace all
parts of mostly
functioning
business
Take over most
pressing problem
Logistics/lead
Time core to
Business success&
reconditioned
Replace Galaxy
with Haley
Replace Avani
and Cretto
with Dolphin
Replace all
suppliers an
d logistics
Internal
13. Strategy 1: Internalize logistics
Cretto lead time unacceptably high
Lack of response from Cretto
Dependence of external company for core business fac
tor
Retailer dissatisfaction
Agility for peak time hindered
PROBLEM
14. Strategy 1: Internalize logistics
Start internal logistics department
Slowly over time to learn and not disrupt business or value chain
Year 1-‐2 : 25%, Year 2-‐3 : 50%, Year 4 and on :75%
Don’t do 100% in order to accommodate additional peak time capacity
Adjust in-‐house capacity based on success and future demand
Remain control of crucial supply chain element
Evaluate other aspects of supply chain after this period to lower
lead time & increase capacity further
SOLUTIONS
15. Strategy 2: Meet growing demand
and increase production
PROBLEM
Can’t meet demand
Not taking advantage of peaks/not agile
Production capacity will need to increase with lower lead time
SOLUTION SHORT TERM
Evaluating existing facility capacity‐> increase shifts if possible (up to 3 a day)
Reinforce maintenance of production machinery, ensure quality control and staff
training
Optimize production process(lean manufacturing) Use “just in time” logistics
possibly increase warehouse capacity
Add capacity for inverter production to take advantage of solar
16. Strategy 2: Meet growing demand
and increase production (CONTD)
SOLUTION LONG TERM
Build additional production line if needed
Designed production line according to “guaranteed”
demand,
increase shift to meet peaks
Continue to increase inverter capacity
17. Strategy 3: Ensure superior after
sales service
POSTIONING
Position yourself as the quickest problem solving
battery supplier to be depended on in all heat
Satisfy retailers AND end users
COMMUNICATION
PEOPLE e
Create IT platforms to connect retailers, suppliers and
internal
-Optimization of supplies, ensure quality, price and
inventory
- Management of product on according to inventory
Ensure training and relationship with retailers
Implementation proper response/maintenance team for repairs
and quick response
Keep up staffing levels with increased production and
market share
19. Main Assumptions
– 1. Xtra Power uses only ONE shift per day in production
– 2. In/house logistics cost will increase to Rs.1.6/kg/km to
Rs, 2.5/kg/km
3. In-house logistics needs 100 trucks to replace 100% of Cretto
services
4. Marketing expenses increase of 50%
20. Total investment of RS 610
2013 2014 2015 2016 2017 2018
Trucks (M RS)
LogisIcs LogisIcs facility (M RS)
IT monitoring and control
systems (M RS)
Maintenance & Quality Control
Production
Staff training
Warehousing
Inverters production
IT platform Development
Implementation & OpImizaIon
TOTAL (M RS)
0.75 0 0 0.75 0 0.75
20 20 40 40 60 60
15 15 15 15 15 15
5 5 5 5 5 5
7 7 7 7 7 7
20 20
25 26
34.5 34.5
16.75 16.75 4 4 4
127 144 84 72 91 92
21. Sales will increase 3x and direct
costs will increase 3.6x
OVERHEADS
SALARIES
UTILITIES
MARKETING
TOTAL
SALES 2013 2014 2015 2016 2017 2018
HEAT SHIELDED BATTERY (IN RS)
OPEN SHIELDED BATTERY (IN RS)
RECONDITIONED SHIELDED BAT.
OTHERS
TOTAL (IN RS)
DIRECT COSTS (IN RS)
RAW MATERIALS
PACKAGING
LOGISTICS
TOTAL
90 180 180 270 270 270
126 252 252 379 379 379
18 36 36 53 53 53
126 252 252 378 378 378
360 720 720 1080 1080 1080
2013 2014 2015 2016 2017 2018
90 179 179 269 269 269
8 17 17 25 25 25
95 297 297 446 393 393
193 493 493 740 686 686
2013 2014 2015 2016 2017 2018
41 83 83 124 124 124
37 37 37 37 37 37
1 1 2 3 4 6
80 121 122 164 166 168
24. Risks & Mitigation
Cost will go
up
You will become more agile
75% of untapped demandImpact
Demand might
slow
India Energy consumption
is growing at a higher rate
than
India Electrical Power Systems
Production/Transport/Distributio
n
Impact
Changing the value
chain, might create
problems in our
process
Slower and flexible
changing
Impact
Prob.Prob.Prob.