AMITY MBA 3 SEMESTER MAJOR OPERATION

 

Supply Chain Management (EDL 325)-Semester III

 

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1st Module Assessment

 

CASE STUDY

 

In 2009, Reliance Dairy Foods Ltd (Reliance Dairy), a subsidiary of Reliance Retail, entered the country’s branded milk product market. It introduced a range of dairy products including milk, curd, butter, and flavored milk. Reliance Dairy had 75,000 to 80,000 liters of milk sale per day, out of which 10 percent was sold through the Reliance Dairy stores and 90% through its distributors. The price of Reliance Dairy was only Rs 28/- per liter which according to some analysts seemed to be value for money. The company claimed that strict hygiene was maintained in production and that its milk was of the best quality. Also, the product was considered to be free from chemicals and preservatives and adhered to the best packaging technology. The milk variants were also modified as per the geographical requirement of customers. The company tried to capture the market by following a strong supply chain and branding strategy. However, sustaining itself in the dairy business was difficult as the market was highly competitive and flooded with several brands such as Amul, Mother Dairy, and Nestlé. In April 2017, Reliance Diary was acquired by Hyderabad-based dairy company Heritage Foods Limited (Heritage). Heritage planned to achieve breakeven in Reliance’s dairy business by closing down milk procurement on loss making routes and shifting the processing and packaging of milk from third party facilities to Heritage’s own facilities.

In 2009, Reliance Dairy Foods Ltd (Reliance Dairy), a subsidiary of Reliance Retail , forayed into the Indian branded dairy market, offering products such as packaged milk, curd, sweeteners, and skimmed milk powder. Reliance Dairy operated a pan-India dairy procurement, processing, and distribution platform under the Dairy Life and Dairy Pure brands. Its backend operations were strong as it procured milk at the grass-root level from farmers in remote villages. It offered higher margins to retailers and 10% extra milk to customers. With its strong supply chain and branding strategy, the company tried to capture the market. However, sustaining itself in the dairy business was difficult as the market was highly competitive and flooded with several brands such as Amul , Mother Dairy , and Nestlé. In April 2017, Reliance Diary was acquired by Hyderabad-based dairy company Heritage Foods Limited (Heritage). Heritage planned to achieve breakeven in Reliance’s dairy business by closing down milk procurement on loss making routes and shifting the processing and packaging of milk from third party facilities to Heritage’s own facilities, said analysts.

Reliance Industries Limited (RIL) was founded by Dhirajlal Hirachand Ambani, popularly known as Dhirubhai, in 1977. The company went in for an initial public offering (IPO) in 1977, issuing 2.8 million shares of Rs10 each. The issue was oversubscribed seven times, strengthening Reliance’s growth ambitions. RIL was technically formed in 1985 when Reliance Textiles Industries Pvt. Ltd. was renamed as Reliance Industries Limited with the aim of expanding to other industries. Thereafter, RIL established its presence in petrochemicals, textiles, natural resources, retail, and telecommunications. Some of the company’s well-known brands were Reliance Fresh , Reliance Footprint , Reliance Time Out , Reliance Digital , Reliance Wellness, Reliance Trends , Reliance Super, Reliance Mart, Reliance Home Kitchens , Reliance Market(Cash n Carry), and Reliance Jewels.

India, the largest milk producer in the world, recorded production of 163.7 million tonnes in 2016-17.

 

It ranked first in milk production, accounting for 18.5 % of world production and achieving an annual output of 146.3 million tonnes during 2014-15 as compared to 137.69 million tonnes during 2013-14 – a growth of 6.26 %.

 

The Indian dairy industry was divided into the organized and unorganized segments (See Exhibit I). The unorganized segment consisted of milk sold by traditional milkmen and vendors who collected milk individually from farmers and sold it to the consumers. The unorganized segment consisted of traditional milkmen, vendors, and farmers who used the milk for consumption at home. The organized segment, on the other hand, consisted of cooperatives and private dairies. Unlike the unorganized segment, cooperatives and private dairies had a well ordered channel of milk procurement and distribution.

As Reliance Retail planned to enter the dairy business, it scrutinized the market for all viable options including acquisitions, buyouts, leasing, and capacity sharing. The company planned to begin its dairy operations in Hyderabad, as the city offered real estate at affordable prices as compared toother metros in India. As per a Neilson Report dated 2012, FMCG sales through modern trade was the highest in Hyderabad.

At Reliance Dairy, a Reliance van generally collected the raw milk from villagers every morning. Once the milk was collected, it was sent to the production lab for pasteurization. Reliance outsourced the pasteurization and processing to local players rather than doing it itself. All the investment in infrastructure, labor, machinery, and quality testing lab was undertaken by Reliance Dairy. Reliance adopted a prompt payment method to sustain its brand image in the public eye. It money was immediately transferred to the farmers’ accounts through an efficient information system from the head office after milk was delivered. Unlike other major players, Reliance did not rely on credit business with its suppliers, but used a daily payment to inculcate trust among them.

Reliance Dairy had been procuring 2.25 lakh liters of milk per day from 2,400 villages across 10 Indian states. It generated revenue of Rs 5.5 billion in 2016. However, the intense competition in the Indian dairy sector and managing its supply chain were some of the major challenges it encountered. Reliance Dairy faced tough competition from regional brands. The market was mostly dominated by state cooperatives with high subsidies from the respective state government. Procuring, processing, and packaging the milk required a strong supply chain as well as an efficient procurement and marketing network as milk was a perishable product.

 

 

1. Reliance Dairy operated a pan-India dairy procurement, processing, and distribution platform under ?

 

Dairy Life brand

 

Dairy Pure brand

 

Both a & b

 

None of these

 

 

 

2. Which of the following options is /was NOT offered by Reliance Dairy Foods Ltd ?

 

packaged milk, curd

 

Children Apparel

 

sweeteners

 

skimmed milk powder

 

3. As per this case study, Reliance outsourced the ____ to local players rather than doing it itself.

 

Marketing activities

 

Operational Work

 

Pasteurization and processing

 

Customer Support

 

4. Reliance Dairy had been procuring 2.25 lakh liters of milk per day from____?

 

2,400 villages across 10 Indian states

 

4000 villages across 15 Indian states

 

3000 villages across 18 Indian states

 

1500 villages across 28 Indian states

 

5. Which of the following is NOT related to the unorganized segment of the Indian Dairy Industry?

 

Traditional milkmen who collected milk from farmers

 

Vendors who collected milk from farmers

 

Private dairies

 

All of above

 

6. As per this case study ,Reliance Industries Limited (RIL) was founded by____?

Group of answer choices

 

Mukesh Ambani

 

Dhirajlal Hirachand Ambani

 

Anil Ambani

 

Neeta Ambani

 

7.  Brands in competition with Reliance Dairy were ?

 

Amul

 

Nestle

 

Mother Dairy

 

All of Above

 

8. The intense competition in the Indian dairy sector and _____  were some of the major challenges Reliance Dairy encountered.

 

Customer Support

 

Managing Promotional activities

 

Both a & B

 

Managing its supply chain

 

9. When did Reliance Dairy Foods Ltd  entered the country’s branded milk product market ?

 

2009

 

2015

 

2001

 

1995

 

 

 

10. In April 2017, Reliance Diary was acquired by__?

 

Kwality Dairy India Ltd.

 

Heritage Foods Limited

 

Britannia Industries Ltd.

 

Cadbury India Ltd.

 

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2^nd Module Assessment

 

CASE STUDY

 

In 2010, PepsiCo Beverage Company (PBC), an operating unit of PepsiCo Inc. (PepsiCo), the second largest food and beverage company in the world, received the supply chain innovation award from the Council of Supply Chain Management Professionals (CSCMP). PepsiCo was given this award for its innovative distribution strategy, the “Direct to Store Delivery model”, that reduced system-wide inventory, eliminated warehouse space constraints, enhanced the potential for unlimited SKU growth, and delivered warehouse cost savings. After showing spectacular growth in the 1990s and early2000s, PBC found it difficult to manage its distribution centers and warehouses.

The origins of Pepsi date back to the late 19th century when a young pharmacist Caleb Bradham (Bradham) started selling a refreshing drink called ‘Brad’s Drink’ in his pharmacy. The drink was later renamed Pepsi-Cola after the digestive enzyme pepsin7used in the recipe. The sales of Pepsi soon started to increase.This convinced Bradham to form a company called the Pepsi-Cola Company. Bradham got an official patent for the drink in 1903 and then started to sell it in bottles. The business showed spectacular growth and Bradham sold 7,968 gallons of the drink in the year 1903. He later started to award franchises to grow his business and the Pepsi-Cola Company’s franchisees spread to 24 states of the US. The strong franchise system developed by Bradham was one of the main reasons for Pepsi’s initial success. The sales of Pepsi also reached 100,000 gallons by 1910.

The outbreak of World War I, however, affected the company’s business due to fluctuations in the price of sugar and Pepsi went bankrupt in the year 1923.

Bradham sold the Pepsi-Cola trademark to Craven Holdings Corporation and resumed his pharmacy business. Pepsi Cola Company was declared bankrupt for a second time in the year 1931 as the Great Depression8 affected its sales.

Pepsi’s fortunes changed when its assets were purchased by a successful candy manufacturer Charles G. Guth (Guth). Guth had been thinking of selling his own soft drink at his stores after Coca Cola declined to give him a discount on its drinks. He reformulated the Pepsi formula and started to sell it in 12-ounce bottles at a cheaper price than its competitors. With sales rising, Guth decided to purchase the Mavis Bottling company9 and start his own bottling operations. In 1935, PepsiCo Company was moved to the Mavis Bottling location at 47-51 33rd street, Long Island City, New York

PepsiCo's supply chain management had been based on the idea of collaboration and integration. The company took several initiatives to have a more collaborated and integrated supply chain, which would become a source of competitive advantage.

The raw materials used in manufacturing PepsiCo's beverage and food products were: apple, pineapple juice and other fruit juice concentrates, corn, aspartame, corn sweeteners, flour, flavoring, grapefruits, oats, oranges, rice potatoes, sucralose, sugar, vegetable and other oils, and wheat.

Raw materials also included packaging material — plastic resins such as polyethylene terephthalate and polypropylene resin used for plastic beverage bottles, film packaging for snack foods, aluminum for cans, and also fuels and natural gases

PepsiCo employed many technologies at its production facility when it realized that production flow was not smooth due to the frequent breakdown of machine and mismanaged inventory. Production at PepsiCo plants began with the unloading of empty bottles from the trucks via the conveyor and their being moved to the depalletizer

PepsiCo used different distribution strategies to bring its products to market depending upon product characteristics, local trade practices, and customers’ needs. It delivered fragile and perishable products which were less likely to be impulse purchases, from its manufacturing plant and warehouses to customer warehouses and retail stores. PepsiCo used third party foodservices and vending distributors to distribute its snacks, foods, and beverage to restaurants, schools, stadiums, businesses, and other locations

PepsiCo also made its supply chain better by establishing a collaborative relationship with its retailers. One such example was its relationship with Wegman’s retail . PepsiCo approached Wegman’s with a proposal for the Frito-Lay line which controlled two fifth of the world market for salty snacks and PepsiCo products

As of 2011, PepsiCo was continuing with its efforts in the direction of having a well managed supply chain and of strengthening its relationship with all its supply chain partners. In January 2011, PepsiCo changed the distribution system of its Gatorade products from warehouse delivery to “Direct to store” at convenience stores through both company-owned independent bottlers in the US and Canada.

 

 

 

 

1.  PBC was formed in , 2010, when PepsiCo acquired __?

 

PepsiCo bottling Group

 

PepsiCo America Inc.

 

Both A & B

 

None of these

 

2. PepsiCo's supply chain management had been based on the idea of?

 

Collaboration and Integration.

 

Collaboration Only

 

Integration Only

 

None of the options

 

3. The ____ was later renamed as Pepsi-Cola after the digestive enzyme pepsin used in the recipe.

 

Bradham's Juice

 

Brad’s Drink

 

Bradham's Drink

 

Coke Drink

 

4. PepsiCo Beverage Company (PBC), received the award from the Council of Supply Chain Management Professionals (CSCMP) for?

 

supply chain innovation

 

Innovation in Promotional Activities

 

Innovation in Customer Support activities

 

None of these

 

5. PepsiCo used _____to distribute its snacks, foods, and beverage to restaurants, schools, stadiums, businesses, and other locations.

 

Its Own foodservices and vending distributors

 

Third party foodservices and vending distributors

 

Only vending distributors

 

None of these

 

6. As Per this Case Study ,"In January 2011, PepsiCo changed the distribution system of its Gatorade products from warehouse delivery to “Direct to store” at convenience stores through both company-owned independent bottlers in the US and Canada. "This Statement is ?

 

True

 

Partially true

 

FALSE

 

None of these

 

7. PepsiCo approached ___ with a proposal for the Frito-Lay line which controlled two fifth of the world market for salty snacks and PepsiCo products.

 

Wegman’s

 

Britannia

 

Cadbury

 

Nestle

 

8. PepsiCo was given this award by CSCMP for its innovative distribution strategy, the “Direct to Store Delivery model”, that reduced___?

 

System-wide inventory & eliminated warehouse space constraints

 

Enhanced the potential for unlimited SKU growth

 

Delivered warehouse cost savings

 

All of Above

 

9. Which of the Following is/are the objectives of  this Case study?

 

To understand and discuss PepsiCo’s innovative distribution strategy, the “Direct to Store Delivery model”

 

To examine the benefits of the “Direct to Store Delivery model".

 

To understand the supply chain process of PepsiCo

 

All of Above

 

10. PepsiCo used different distribution strategies to bring its products to market depending upon ?

 

product characteristics

 

local trade practices

 

customers’ needs

 

All of above

 

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3rd Module Assessment

 

CASE STUDY

 

This case discusses Amazon.com's business model, supply chain, and its order-delivery processes. In 2005, Amazon.com introduced a premium membership scheme called ‘Amazon Prime'. It was a free two-day shipping and discounted one-day shipping rates service offered to the members in the US on eligible purchases for a flat annual fee of $79. Over the years, the service was extended to other countries like Japan, the UK, Germany, France, and Canada. In 2009, Amazon introduced same-day delivery in 10 big cities in the US, which were close to Amazon warehouses. However, in August 2012, Amazon.com introduced same-day delivery as an option and made next-day delivery a standard service to all its customers. However, analysts were skeptical about the success of the model due to the impracticality of the model and logistical hurdles that the company could face. Apart from these problems, the delivery model also faced competition from other big and small players.

In August 2012, Amazon.com, the world's biggest online retailer, announced that it would introduce same-day delivery of its orders as a service option to its customers and make next-day delivery standard service. This move came in response to the regulatory changes in some states of the US that required consumers to pay sales tax, which in turn would strip it off its price advantage. In order to stay ahead of the competition, Amazon decided to cut its shipping time. In 2005, the company had introduced free two-day shipping and discounted one-day shipping rates in the US on eligible purchases for a flat annual fee under a service known as ‘Amazon Prime'.

The same services were introduced in Japan, the UK, and Germany in 2007, in France in 2008, and in Canada in 2013. Apart from ‘Amazon Prime' services, in 2009, the company had introduced same-day delivery in 10 big cities which were close to Amazon warehouses and only on certain items ordered in the morning (before 7 A.M). In 2012, it decided to roll out the same-day model for all.

 

However, analysts were skeptical about the success of this extended model due to the logistic hurdles that the company would have in the process, the large scale of operations needed, the extra costs involved for the company, and face reluctance to usage by consumers. Some argued that if successful, this model would become a nightmare for small retailers and would threaten their very survival. While speculations about the success and failure of Amazon's same-day delivery model of Amazon were just one side of the coin, the competition that the model would face with the entry of other big and small players like Walmart , Postmates , Instacart , eBay , etc., in the same arena, was the other.

E-commerce, the buying and selling of products and services over the internet and other networks, had evolved through several phases since the internet was born in 1973. The internet was seen by many as the realm of techno-savvy people. However, when the World Wide Web (www) and HTML were conceived in 1989, it made the sharing of unlimited data possible in a user-friendly way. By 1993, entrepreneurs and consumers had come to realize the vast potential of the internet for retailing, publishing, and entertainment. In the economic boom that followed, thousands of new internet-based businesses were established and stock markets soared.

But with the collapse of NASDAQ in 2000, the industry entered a dreary phase. However, by 2003, the sector had recovered and e-commerce firms began to prosper. Businesses found that the internet created wider opportunities, increased operational efficiencies, and derived profits. Consumers also began to increasingly get used to online purchasing. The convenience of fast internet access (wired or unwired) at lower prices, improved infrastructure and laws, evolved consumer preferences, and decreased costs of mobile internet devices fuelled the rapid growth of e-commerce.

 

With the rapid increase in the number of online shoppers, the global internet retail sales (business to consumer sales) grew to over $1 trillion in 2012 (by 21.1% over 2011), with the US holding the top spot with $364 billion (Refer to Exhibit I for global e-commerce statistics). Japan took second place with sales of $127 billion, followed by the UK ($124 billion), and China ($110 billion). Interactive Media in Retail Group (IMRG), a UK online retail trade organization, estimated that Global B2C e-commerce sales would pass the 1 trillion euro ($1.25 trillion) mark by 2013. eMarketer estimated that e-commerce would grow 18.3% in 2013 and that the Asia-Pacific would grab the number one position with a growth of 30%.

As developed markets were getting saturated, retailers were looking for new paths for global expansion and online trade had become an easy and a low-risk solution for them to expand globally and test new markets. AT Kearney studied the top 30 countries of the 2012 Global Retail Development Index (GRDI) and prepared the E-Commerce Index, which revealed the top countries where online growth would be the highest. According to the index, AT Kearney assessed that China, Brazil, and Russia would be the top three countries with a strong growth in the online retailing sector in the near future.

Amazon.com, Inc. (Amazon) headquartered in Seattle, Washington, US, was the world's largest online retailer. It started as an online book store but later diversified its offerings to DVDs, CDs, MP3 downloads, software, video games, electronics, apparel, furniture, food, toys, and jewelry. It allowed manufacturers and sellers to sell their products through its websites. It further offered its own consumer electronic products like the Amazon Kindle e-book reader and the Kindle Fire tablet computer. It was also a major provider of cloud computing services. By December 2012, the company had separate retail websites for the US, Canada, the UK, France, Germany, Italy, Spain, Brazil, Japan, and China with international shipping facility to a few other countries.

In 2013, Amazon.com was a Fortune 500 company and a global leader in e-commerce. It had a wide array of products, international sites, and a worldwide network of fulfillment centers and warehouses and customer service centers. It had developed a customer base of around 30 million people. The company was a retailing site that followed a sales revenue model and made money by taking a small percentage of the sale price of each item sold through its website. It also allowed sellers to advertise their products by paying a fee.

Over the years, Amazon had been pitching on the price of the products it offered to compete with other players. It offered products at very low prices as it did not charge customers sales tax on the products. For instance, when a customer purchased a laptop of about $1000 from a brick and mortar store, the company collected local sales tax of say $100, and the customer ended up paying $1100. However, Amazon was exempt from the rule. The 1992 US Supreme Court ruling said that ‘only firms with physical presence in a state are required to collect taxes from residents'. Amazon avoided having a physical presence in the states that required e-tailers to charge sales tax. This helped it keep its prices low as it followed the strategy of locating its distribution centers far away from such states. So, when a customer from California ordered a laptop, Amazon shipped it from its warehouses located in some other state.

Though Amazon's same-day delivery was considered by many as a game changing strategy in which the company could succeed by leveraging on its strong supply chain, Amazon had a bigger challenge ahead – competitors too began offering same-day delivery service. In October 2012, Walmart, hoping to beat Amazon, began testing its same-day delivery business model for products that were sold online in the US markets. It had been experimenting with the model in San Jose, California, for more than two years

With the introduction of online shopping of books (and later expanding the product range), Amazon.com had time and again changed the consumers' shopping habits. It also helped in the growth of global online retail. But earlier, Amazon was not able to deliver products to its customers immediately. Its competitors, the local brick and mortar stores, were at an advantage as they offered the service. However, in 2013, Amazon tried to reach its customers faster with the same-day delivery model. Industry experts opined that this development could have significant consequences for local brick and mortar stores. "Everybody in retail is terrified of Amazon," said research analyst Sucharita Mulpuru.

Amazon, unlike the other big companies like Google, Apple, Microsoft, etc., did not invent any new product or service, but grabbed power by systematically taking down an entire existing industry. It adopted a strategic approach to its business. Other companies made strategic moves occasionally and in isolation, but Amazon made its moves continuously, thinking multiple moves ahead on several fronts. Amazon neither created a new market like Apple nor competed with a single company, but it disrupted an entire industry. Amazon took on every part of the supply chain of the retail industry. E-commerce experts opined that the success of Amazon's same-day delivery experience in the future would hinge on its supply chain and fulfillment capabilities, and the continuation of its popular pricing strategies

E-commerce and the consumer's desires had changed retail logistics, pushing down the delivery times from a few weeks to a day or even less, despite the fact that it was logistically complicated, unprofitable, and might not even be something many consumers looked for. However, the retail landscape was fast changing and was dominated by retailers who had accepted this new reality. Amazon and other Big Box retailers had started embracing the concept on their own, while small local retailers had started to hub together to fight the competition from their bigger counterparts. In the process, the courier and logistic companies were forming a part of the supply chain. Software and phone companies like Apple and Google also had specific roles to play in making this same-day delivery work. Retail companies developed exclusive applications for same-day delivery to make it easier for customers to purchase goods over the internet.

 

 

 

 

 

 

1. As developed markets were getting saturated; retailers were looking for new paths for global expansion and online trade had become an____  for them to expand globally and test new markets.

 

Hard & High Risk Solution

 

Moderately High Risk solution

 

easy and a low-risk solution

 

None of these

 

2. In 2005, Amazon had introduced free two-day shipping and discounted one-day shipping rates in ____on eligible purchases for a flat annual fee under a service known as ‘Amazon Prime'.

 

India

 

US

 

Japan

 

Germany

 

3.  Analysts were skeptical about the success of  model(Amazon Prime) due to _____ , the extra costs involved for the company, and face reluctance to usage by consumers

 

to the logistic hurdles

 

Need of scale of operations

 

Both A & B

 

None of these

 

4. Amazon initially started its business as __?

 

An online Software Store

 

An online Fashion Store

 

An online Electronics Store

 

An online Book Store

 

 

5. The Headquarters of Amazon.com, Inc. is at ?

 

London , UK

 

Seattle, Washington, US

 

Sydney , Australia

 

None of these

 

6. In___, Amazon.com was a Fortune 500 company and a global leader in e-commerce

 

1990

 

1990

 

2013

 

2005

 

7. As per this case study, "E-commerce and the consumer's desires had changed retail logistics, pushing down the delivery times from a few weeks to a day or even less, despite the fact that it was logistically complicated, unprofitable, and might not even be something many consumers looked for" . This statement is ?

 

True

 

False

 

Partially True

 

None of these.

 

8. With reference to this Case study, the Correct form of GRDI is?

 

 

Globally Re-Development Index

 

Global Retail Development Index

 

Global Restructuring Development Index

 

Global Retail Divisioning Index

 

 

 

9. In 2009, Amazon introduced ___ in 10 big cities in the US, which were close to Amazon warehouses.

 

same-day delivery

 

5 day Delivery

 

Instant Delivery

 

None of these.

 

10. Which of the Following is/are the Objectives of this Case study?

 

Understand the impact of Amazon's same day delivery on the industry

 

Understand the concept of e-commerce and its impact on traditional retail

 

Both A & B

 

None of these.

 

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4^th Module Assessment

 

CASE STUDY

 

The case focuses on the problems faced by Dr. Reddy’s Laboratories (DRL), a leading Indian pharmaceutical company, with respect to its Mexico plant in 2011. The company had acquired the plant, which supplied these bulk drugs to other pharmaceutical companies in the West, from Roche. DRL received a warning letter from the US drug regulator, USFDA, for violating current good manufacturing practices.

USFDA inspected the plant and found it non-compliant with the manufacturing practice norms for APIs. The FDA sought an answer from DRL within 15 days of the letter. Though the company managed to submit a report to the USFDA within the stipulated time, a ban was imposed on the import of products from the Mexico plant as USFDA was not satisfied with the company’s response.

The month of July was usually pleasant in Hyderabad. But in 2011, temperatures were soaring at Hyderabad, and the city was bracing for a prolonged hot and dry spell. GV Prasad (Prasad), the chairman of Dr. Reddy’s Laboratories (DRL) had just had his morning coffee, when he received the news that US Food and Drug Administration (USFDA) had imposed an import ban on products manufactured at DRL’s Mexico plant for violation of good manufacturing practice norms.

 

Before him was an envelope addressed to him from the US Food and Drug Administration (USFDA) dated June 14, 2011, stating that the American drug regulator would impose an import ban on products made at DRL’s Mexican arm -- Industrias Quimicas Falcon de Mexico SA -- if corrective action was not taken and communicated to USFDA within 15 days.

DRL’s Mexican arm, which the company bought from Swiss pharmaceutical major Roche in 2005, produced intermediates and Active Pharmaceutical Ingredients (APIs). After going through the letter twice, Prasad was convinced that he had to take immediate corrective actions. Though the company had taken some corrective actions following the warning letter and also replied back to the USFDA, it faced this ban. As Prasad looked back at the fond memories following the acquisition in 2005, he wondered what went wrong at the Mexico plant and how could he address them without upsetting the current stakeholders of DRL.

An Indian pharmaceutical multinational, DRL started as an API manufacturer in 1984 for India and later international markets. The company was committed to producing affordable and innovative medicines. It started its formulation operation in India in the year 1987. Since the 1970s, the Indian pharmaceutical industry had been flourishing as the Patents Act of 1970 which came into effect in 1972 only recognized process patents and not product patents.

This enabled Indian drug manufactures, such as DRL, to grow by focusing on reverse engineering the drugs developed by research-based pharmaceutical companies in the West (also referred to as Big Pharma). These generic versions of the drugs were sold at a fraction of the price of the proprietary drugs offered by the research-based pharmaceutical companies.

 

After consolidating its position in domestic market DRL started its globalization initiative in 1991. Within two decades, DRL established a presence in over hundred countries. There were three core businesses of DRL innovators. As a consequence DRL enjoyed the first mover advantage to launch a generic product by leveraging on IP strengths. The API global team had to ensure timely product development and supply in accordance with all regulatory and quality requirements. The CPS business took care of the serving several innovators comprising both, Big Pharma and emerging biotech; offering speed and flexibility. Its value proposition of providing end to end services and competitive pricing and capability to supply both small scale and commercial scale quantities had provided DRL with an edge over the other players in the game. DRL was known for its process expertise and operations strength.

In 1984, the US became a lucrative market for Indian companies following changes to the Hatch-Waxman Act in that country. Under this new law , manufacturers of generic drugs no longer had to go through a lengthy period of clinical trials in order to market a generic drug. It also allowed generics companies to challenge the originator companies long before patent expiration and also established a 180-day exclusivity period for the first company to file an Abbreviated New Drug Applications (ANDA) under this provision.

Struggling with rising healthcare costs many other countries in the West also formulated similar favorable policies for generic drugs. Indian pharmaceutical companies viewed markets such as the US and Europe as major opportunities. Companies such as Ranbaxy, Sun, and DRL were trying to tap the lucrative US generic market as several blockbuster drugs (with sales of more than US$1 billion per annum) were going off-patent .

On November 8, 2005, DRL announced that an agreement had been signed by the company to acquire Roche’s API plant in Cuernavaca, Mexico, including all employees and business supply contracts. It was an all-cash deal with the Indian drug maker shelling out US$59 million for the acquisition, which included working capital as well. Roche, headquartered in Basel, Switzerland, was one of the world’s leading research-based pharmaceuticals and diagnostics companies.

In June 2011, DRL received a warning letter from the USFDA relating to the plant in Mexico. At the same time it was being probed by the Indian directorate of factories over the alleged safety violations that contributed to the demise of two workers at facilities close to its Hyderabad headquarters.

As Prasad looked out of the window of his office, he could still see no signs of rain. Since 2006, the DRL found itself facing a spate of troubles. The risky acquisition of the German generics company betapharm, patent litigations in the US market, quality problems at its Mexico unit, falling revenues in key markets, and a string of fatal accidents at its facilities were some of the serious issues nagging the company.

 

 

 

1. What is the correct Form of USFDA, as per this case study?

 

US Food Diagnostic Administration

 

US Food Chemicals and Drug Administration

 

US Food and Drug Administration

 

None of these

 

2. DRL started as an API manufacturer in ____ and later international markets.

 

1984 for India

 

1950 for India

 

1990 for Mexico

 

1960 for Mexico

 

3. US became a lucrative market for Indian companies due to the changes in ____ in the country.

 

Patents Act

 

Pharmaceutical Manufacturing Act

 

The Hatch-Waxman Act

 

None of these

 

4. USFDA inspected the DRL Plant and found it non-compliant with___ norms for APIs

 

The Marketing Activities

 

The manufacturing practice

 

The Customer Support Activities

 

All of above

 

5. Which of the following is the correct form of ANDA, as per this case study ?

 

Abolishment of New Drug Applications

 

Abbreviated Nexa Drug Apportionment

 

Abbreviated New Drug Apportionment

 

Abbreviated New Drug Applications

 

6. The case study focuses on the problems faced by Dr. Reddy’s Laboratories (DRL), a leading Indian pharmaceutical company, with respect to _____in 2011.

 

Its Mexico plant

 

Its Germany plant

 

Its Sydney plant

 

Its New York plant

 

7. DRL received a warning letter from the US drug regulator, ___, for violating current good manufacturing practices.

 

USFPA

 

USEDP

 

USEDS

 

USFDA

 

8. As per this case study, the chairman of Dr. Reddy’s Laboratories (DRL) is?

 

Mukesh Ambani

 

Anil Thakur

 

GV Prasad

 

KSV Prasad

9. The Hatch-Waxman Act established a ___ exclusivity period for the first company to file an ANDA under this provision.

 

145-day

 

180-day

 

190-day

 

360-day

 

10. Which of the following is/are objectives of this case study?

 

Understand the issues and challenges in quality management

 

Understand the issues and challenges for a company from an emerging market competing in the global markets, particularly markets in the West

 

Understand the issues and challenges in competing on low cost and sustaining the low cost competitive advantage

 

All of above

 

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5^th Module Assessment

 

 

CASE STUDY

 

Ford Motor Company, one of the world's largest automotive manufacturers, has worked with Penske on several Six Sigma initiatives. As its lead logistics provider (LLP), Penske's quality team of associates are trained in Six Sigma practices and work closely with Ford to streamline operations and create and maintain a more centralized logistics network. Together, they uncovered several areas for real cost savings as a result of reducing inbound carrier discrepancies, eliminating unnecessary premium costs and reducing shipment overages. Plus, Penske implemented accountability procedures and advanced logistics management technologies to gain more visibility of its overall supply network.

Challenges

• To develop, implement and operate a centralized logistics network for Ford

• To streamline supplier and carrier operations for improved performance and accountability

• To provide Ford with real-time supply chain and financial visibility

Solutions / Results

• Penske established 10 Origin Distribution Centers (ODCs) and consolidated shipments to plants. Approximately 1,200 trailers now ship to and from Ford's ODCs per day, with most trucks at 95 percent capacity. Penske has reduced plant inventory by 15 percent.

• Penske trained more than 1,500 suppliers on a uniform set of procedures and logistics technologies. Stringent carrier requirements and a Carrier Rating System were implemented to measure carrier performance.

• Penske implemented strict accountability procedures and advanced logistics management technologies to gain real-time visibility of delivery status, routing schedules and productivity. A new freight billing system was designed to immediately capture logistics costs.

Getting Started

Penske Logistics began its relationship with Ford as lead logistics provider (LLP) for Ford's assembly plant in Norfolk, Va. At the time, each of Ford's 20 North American assembly plants managed its own logistics operations. A decentralized approach provided total control of logistics at the plant level, but presented costly redundancies in materials handling and transportation.

Ford conducted studies to determine the benefits of transitioning the company's decentralized logistic operations to a centralized approach. The decision was quickly apparent—centralization of the company's logistics operations would increase both velocity and visibility throughout the network, as well as reduce supply chain costs.

Shortly thereafter, Ford selected Penske as its North American LLP. Under the contract, Penske would centralize and manage all inbound materials handling for 19 assembly plants and seven stamping plants.

Consolidating Logistics Operations

Penske immediately developed an aggressive logistics transition program with Ford. Penske would provide Ford with a single point of contact for all logistics operations.

By working with individual plants and corporate management, Penske established a baseline of current operations and outlined the proposed solutions. The new logistics program would establish a Penske Logistics Center that included the following core functions:

• Network Design Optimization—implement a more efficient inbound materials strategy through Origin Distribution Centers (ODCs)

• Carrier and Premium Freight Management—manage all carriers and logistics companies, while reducing premium freight costs

• Information Technology System Integration—achieve real-time visibility of supply chain shipments, schedules and orders

• Finance Management—improve freight bill payment, claim processing and resolution throughout the supply chain

Upon development of this new plan, the Penske/Ford team began evaluating Ford's existing network design. Under the plant-centric approach, suppliers would make multiple deliveries of the same parts to different plants. A supplier would pick up a small load, deliver it to one plant, pick up another small load of the same parts and deliver it to another plant. Carriers with half-empty trucks would often cross routes with each other en route to the same plant. Aside from being highly inefficient, this design allowed for excessive inventory and storage costs at the plant level.

To centralize transportation and distribution operations, Penske implemented a new network design consisting of 10 new ODCs. The ODCs would be a central delivery point for suppliers. Different supplier shipments going to the same plant would now be cross-docked into trailers at the ODC. Loads would be consolidated and delivered on a scheduled basis to reduce the amount of milkruns, less than truckload shipments (LTL) and premium freight charges. To meet Penske's new transportation and distribution standards, more than 1,500 suppliers were trained on new uniform procedures.

For carrier and premium freight management, Penske's goal was simply stated: maximize carrier service, minimize carrier costs. Penske refined Ford's carrier bidding process by placing more stringent requirements on carrier partners. Carriers were now required to meet specific safety, equipment and technological specifications; provide experienced and certified drivers; and show proven experience of on-time delivery/pickups.

Penske's new procedures required carriers to meet established route pick-up and delivery windows within 15 minutes of the scheduled time. Additionally, carriers would supervise loading and unloading operations to verify order accuracy, adequate packaging and labeling, and freight damage.

With new stringent carrier requirements in place, Penske closed the accountability loop by implementing a Carrier Rating System. All incidents would be recorded and reported. Carriers would issue corrective action reports for actions that negatively impacted Ford's operations. If a carrier accumulated an excessive amount of incidents on their "scorecard," Penske would issue a low carrier rating, thus jeopardizing the carrier's ability to participate in future bids.

Penske also implemented several information technology solutions throughout the logistics network, including its proprietary Logistics Management System and RouteAssist, an advanced routing tool. Other programs included a Web-based metric reporting system and order tracking software. Drivers were provided with PDA scanners and an electronic driver log. Carriers were now required to have satellite communications and engine monitoring systems on all trucks for load tracking. ODCs were provided with integrated RF cross-dock scanners that tracked the delivery of individual parts.

Prior to implementing a centralized approach, Ford was unable to gain a clear view of the financial status of logistics operations. With approximately 1,500 suppliers handling more than 20,000 shipments per week, freight billing was complicated. As part of its carrier management system, Penske would now provide drivers with a single set of paperwork procedures to ensure delivery documentation was collected and submitted to accounting. Penske developed a new freight billing system that would capture freight costs and allocate those costs by plant. As a result, Ford could see which plants had the highest and lowest freight costs and which carriers were most cost effective.

Penske and Ford:

Entering a New Century of Automotive Achievement

In approximately 18 months, Penske had completely transitioned Ford's logistics operations to a centralized network design. More than 700 inbound and 500 outbound trailers now move to and from Ford's ODCs per day, with most loads carrying at 95 percent capacity. Shipments are consolidated at the ODC and previously unused cross-docking space is now in high demand. Fourteen million pounds of freight are cross-docked each day, resulting in an inventory reduction of 15 percent.

Suppliers and carriers currently operate under a single set of transportation and distribution procedures, enabling better service throughout the supply chain. The level of accountability established with Penske's Carrier Rating System has enabled Ford to rid its distribution network of costly, ineffective carriers.

With uniform technologies, ODCs are able to monitor shipments, identify inefficiencies and address materials handling issues in a real-time environment. Furthermore, logistics costs now enter the supply chain immediately. This allows Ford to see overall supply chain costs and per plant allocations at any given point in time.

Penske met its logistics program objectives six months ahead of schedule—a testament to the joint-team approach established between Penske and Ford. More importantly, as Ford continues to evolve, the Penske Logistics Center provides Ford with a single point of contact for all logistics operations.

"Having a single point of contact delivers more than cost benefits. Penske allows us to clearly understand how our logistics operations impact the entire company. From the assembly line to the end-consumer, the efficiencies provided by Penske are realized at virtually every level throughout Ford."

Grant Belanger, director of material planning and logistics, Ford Motor Company

Penske continues to deliver significant cost savings to Ford by continuous process improvement. And, to keep pace with assembly plant requirements, Penske closed six of its ODCs due to a change in shipping frequency strategy. With four ODCs operating at full capacity, Penske once again streamlined its logistics strategy to reduce costs for Ford.

Ford has honored Penske with several awards, including the Q1award, its highest recognition of superior supplier quality. Today, with a century of automotive achievement behind them, Ford and Penske continue to redefine the highest standards for logistics and operational efficiency.

 

1. The core functions of the Penske Logistics Centre are/were?

 

Information Technology System Integration

 

Carrier and Premium Freight Management

 

Network Design Optimization

 

All of above

 

2. Penske's new procedures required carriers to meet established route pick-up and delivery windows_______ of the scheduled time.

 

within 15 minutes

 

within 90 minutes

 

within 2 days

 

within 3 days

 

3.  Penske met its logistics program objectives_____ of schedule—a testament to the joint-team approach established between Penske and Ford

 

Ten months ahead

 

six months after

 

Six months ahead

 

None of these

 

4. To centralize transportation and distribution operations, Penske implemented a new network design consisting of ___?

 

20 new ODCs.

 

10 new ODCs

 

15 new ODCs.

 

50 new ODCs.

 

5. (A) Penske trained more than 1,500 suppliers on a uniform set of procedures and logistics technologies.(B) Stringent carrier requirements and a Carrier Rating System were implemented to measure carrier performance. Which of the above statement is true in context of this case study.

 

Only A

 

Only B

 

Both A & B

 

None of these

 

6. To meet Penske's new transportation and distribution standards, more than 1,500 suppliers were___?

 

trained on new uniform procedures.

 

Laidoff from the Plant

 

Shifted to a new Location

 

None of these

 

7. Ford has honored Penske with several awards, including the Q1award as _____?

 

its Lowest recognition of superior supplier quality

 

its highest recognition of superior supplier quality

 

Average & good recognition of superior supplier quality

 

None of these

 

 

8. What are the challenges faced in this case study ?

 

To develop, implement and operate a centralized logistics network for Ford

 

To provide Ford with real-time supply chain and financial visibility

 

Both a & b

 

None of these

 

9. For carrier and premium freight management, Penske's goal was ?

 

maximize carrier service

 

minimize carrier costs

 

Both a & b

 

None of these

 

10. Penske refined Ford's carrier bidding process , Carriers now required to ____?

 

provide experienced and certified drivers

 

meet specific safety

 

show proven experience of on-time delivery/pickups.

 

All of above

 

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Assignment 2

 

CASE STUDY

 

Finland-based Nokia Corporation (Nokia) is the world's leading manufacturer of mobile devices. Analysts attributed Nokia's success to its supply chain management practices. The company had an integrated supply chain which inter-linked suppliers, manufacturing plants, contract manufacturers, sales, logistics service providers, and the consumers. It entered into a long-term relationship with its suppliers and also supported them in improving their processes, which in turn helped the company. Nokia was able to keep its costs low because of its efficient manufacturing systems and processes. The company adopted a hybrid manufacturing system which was a combination of in-house manufacturing and outsourcing. It also adopted the Smart manufacturing technique so as to enhance the competitiveness of its manufacturing facilities.

The company had a wide distribution network which helped it to effectively reach the end customers. The case highlights the unique supply chain management practices of Nokia. It also discusses the impact of global economic slowdown on Nokia's revenues and profitability. The case examines how the company is making its supply chain efficient to counter the impact of reduced demand of mobile handsets.

In May 2009, Finland-based Nokia Corporation (Nokia), the world's leading manufacturer of mobile devices, was placed sixth in the list of top 25 companies in global supply chain management, announced by AMR Research . According to AMR Research, "Nokia continues to stay ahead of the curve on everything from regional sourcing and deep supplier collaboration to an organizational design based on true value chain principles." AMR Research selected the manufacturing and retail companies from Fortune's Global 500 ranking.

The companies were judged on the basis of two components -- financials and opinion, where the financial component accounted for 60 percent and the opinion component for 40 percent of the total score.

 

The financial component included "return on assets i.e. the ratio of net income and total assets, inventory turns i.e. the ratio of cost of goods sold and inventory, and revenue growth i.e the change in revenue from prior year"6.

 

The opinion component included a panel of AMR Research experts and a peer panel, each giving a maximum score of 20 percent.

Founded in 1865 as a paper mill, Nokia started producing phones in 1982. The company had interests in several businesses including telecommunications, consumer electronics, rubber, and cable. In 1992, Nokia took a strategic decision to focus only on the telecommunications business and to close down its other businesses. And this decision paid off. Its focus on the telecommunications business had turned Nokia into a global leader by the year 1998.

 

According to industry experts, Nokia's supply chain management was the key factor for the success of the company. The company maintained a long-term relationship with its suppliers and helped them in improving their processes.

The history of Nokia can be traced back to the mid-1860s. In 1865, Fredrik Idestam (Idestam) started a paper mill at the Tammerkoski Rapids in south-western Finland. Idestam, a mining engineer, introduced a cheaper paper manufacturing process followed in Germany in Finland.

Nokia comprised three business groups - Devices, Services, and Markets. These three groups were supported by the Corporate Development Office .The Devices division developed and managed Nokia's mobile device portfolio, including the sourcing of components.

The global economic slowdown which affected consumer spending worldwide had a negative impact on Nokia's net sales and profitability. In fiscal 2008, its net sales fell to €50.7 billion from €51.06 billion in fiscal 2007. The company's operating profit declined by 38 percent to €4,966 million from €7,985 million in 2007.

1. In this case study ,the companies were judged on the basis of two components . What are these 2 components ?

 

Financial Component

 

Opinion Component

 

Both A & B

 

None of these

 

2. Nokia had an integrated supply chain which inter-linked__?

 

Suppliers, manufacturing plants

 

Contract manufacturers, sales

 

Logistics service providers, and the consumers

 

all of above

 

3. The global economic slowdown which affected consumer spending worldwide had  ____on Nokia's net sales and profitability.

 

Negative impact

 

Positive Impact

 

An Average Impact

 

No impact at all

 

4. Nokia adopted a hybrid manufacturing system which was a combination of ?

 

In-house manufacturing

 

outsourcing

 

Both A & B

 

None of these

 

5. As per this case study , ___was the key factor for the success of Nokia.

 

Marketing strategies

 

Diversification Strategies

 

Management of Inventories

 

Supply Chain Management

6. Nokia Corporation (Nokia) the leading manufacturer of mobile devices is based in ?

 

Germany

 

Finland

 

Korea

 

Japan

 

7. Nokia started producing phones in the year ?

 

1950

 

1936

 

1982

 

1990

 

8. Nokia was able to keep its costs low because of ?

 

Its efficient manufacturing systems and processes

 

Its Promotional strategies

 

Market Share

 

None of these

 

9. The financial component mentioned in this Case study  included ?

 

return on assets

 

inventory turns

 

revenue growth

 

All of Above

 

10. Nokia decision to focus on the telecommunications business had turned Nokia into a ___by the year 1998.

 

Good Player

 

Global Leader

 

Good Competitive advantage

 

Losing Player

 

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