CASE STUDY

ON

LAXMI TRANSFORMERS

Submitted To:

Mr. Vivek Raina

Faculty of Supply Chain Management

Xcellon Institute-School of Business

Ahmedabad

Prepared By:

Name Roll No.

Nita Ahir 04

Manish Asnani 06

Ishit Bhatt 08

Kuldip Champawat 09

Prayag Chauhan 14

Pradeep Chauhan 15

Shalini Chettiar 16

Yogesh Chhimpa 17

Kaushal Dhakan 19

Jayesh Hotwani (Absent) 27

Ram Chaudhary (Absent) 39

Tushar Tewani 59

Nilesh Thacker 61

Ankur Thacker 62

Submitted on: 10/02/2012

Laxmi Transformers

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

Ans.: Various mode of supply

Rail:

If in case of rail transport the following things are taken into consideration while

setting up the rail track of 15kms from Pen to Alibag.

Rail costing (from Pen)

kms Cat 1 Cat 2 Cat 3 Total

Goa 500 14780000

19770000 27240000 61790000

Mangalore 700 - - - -

Daitari 2200 103500000 140260000 195340000 439100000

Banspani 1800 91900000 12442000 173140000 277482000

Alibag 15 212500000 27200000 36200000 425900000

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

Moreover 15crores are added in the total cost shown in the above table. Because as

given 1km line cost 1crore and the line is 15 kms long.

Now the following table shows the details about road transport.

Road: Inbound road cost:

Possibility 1 0.5 rs / km

Goa Mangalore Daitari Banspani

Alibag 520 800 1780 1650

(K.M x 0.5) 260 400 890 825

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

26000000 20%

- 178000000 40%

165000000 40%

369000000

Possibility 2

0.7 rs / km

Goa Mangalore Daitari Banspani

Alibag 520 800 1780 1650 Kms

(K.M x 0.7) 364 560 1246 1155 Cost

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

36400000 20%

- 249200000 40%

231000000 40%

516600000

If we compare the above charts of rail and road then it seems that road transport cost

the company less. But in case of rail transport the company has benefit to share the

rail with a cement bagging plant, a gas based fertiliser plant and few other in the

drawing board stage. Moreover in future if any other companies come in the same

board stage then it can also share the same rail.

According to the group the company can go for road transport option. The reason

behind this is because company has not to take any pain to construct rail and further

handling it. Moreover if forecast of sharing the rail line goes wrong then it is

beneficial for the company. Also looking at opportunity investment of 15 crores

company can invest the same amount in some other areas and what return company

gets from the investment can be used in handling transport cost by road.

Sea:

The above table shows the calculation of various cost given if we take sea route as a

mode of transportation compare to other given options ,here we are considering 2

vessel having capacity of 35000 tonnes and 650000 tonnes considering draft

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

cargo

Ship 1 (35000 and ship 2 65000)

cost/Ports Mangalore Paradip Calcutta

Ship 1 ship 2 ship 1 ship 2 ship 1 ship 2

raw material 33000000 33000000 50000000 50000000 50000000 50000000

fuel charges 337500 352500 1575000 1645000 1800000 1880000

Entry fees 330000 453750 380000 522500 420000 577500

standing Charges 1836000 3825000 1989000 4335000 2142000 4590000

barge charges 1440000 3960000 1440000 3960000 1440000 3960000 loading/unloading

charges FOBT FOBT 1360000 2560000 1530000 2880000

TOTAL COST 36943500 41591250 56744000 63022500 57332000 63887500

No of ship required 3

1(SHIP 1 + ship 2) 6 3 6 3

TOTAL COST 110830500 78534750 340464000 189067500 343992000 191662500

Conclusion:-

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

Q- 2 What final markets should Laxmi Transformers choose to serve based on logistical consideration ? What is the best mode for the finished goods dispatch to key markets? Ans 2 Zone wise final markets are as follows:

As it was specified in the case is that as DRI the final product of the Laxmi

Transformers was used in both mini steel plant and large integrated steel plant

GUJARAT and MAHARASTRA were the two most industrialized states in India

and had a number of Mini steel plants and ferrous foundries which are the potential

sponge buyers

For the final market these two states were to be supplied as demand is there along

with other places which are as follows:

Calcutta

Bhilai

Bokaro

Jamshedpur

Ahmedabad

Baroda

Delhi

Ludhiana

Lucknow

Jaipur

Bangalore

Madras ROAD:-

These are the final markets which the Laxmi transformers choose to serve based on

logistical consideration ,the best mode between ROAD and RAIL to dispatch for the

final goods to the key markets calculations are as follows:-

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

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

North:

Delhi, Ludhiana,

Lucknow, Jaipur,

South:

Bangalore

, Chennai,

West:

Ahmadabad,

Baroda

East:

Calcutta, Bhilai,

Bokaro, Jamshedpur.

Therefore:

Demand for the sponge iron market estimated = 10,000 tpa (exhibit 1).

Therefore: demand / total tones per truck.

= 10000/30 = 333.33 (trucks per year) therefore 333 (approx).

Therefore: 333 trucks were required for 1 year and for month.

Total trucks/ no of months = 333/12 = 27.75

Estimating (25- 30) trucks were required for a month.

Cost by Road:

Market

Per tonne

Kilometre

Outbound

distance to

market centers

Demand

per

10,000

tpa

Demand x

10,000/30 (per

truck tonnes)

Total road

cost

Calcutta 0.7 2160 42.82 14273.33333 21581280

Bhilai 0.7 1450 30 10000 10150000

Bokaro 0.7 2200 35 11666.66667 17966666.67

Jamshedpur 0.7 2040 20 6666.666667 9520000

ahmedabad 0.7 441 3.38 1126.666667 347802

Baroda 0.7 357 5.23 1743.333333 435659

delhi 0.7 1043 35.21 11736.66667 8568940.333

Ludhiana 0.7 1235 15.39 5130 4434885

lucknow 0.7 1015 13.73 4576.666667 3251721.667

jaipur 0.7 875 9.9 3300 2021250

banglore 0.7 679 10.6 3533.333333 1679393.333

Madras 0.7 917 8.47 2823.333333 1812297.667

Total 81769895.67

market Cost by rail

Bombay 27135520

nagpur 45574900

Kolapur 8189620

Total 80900040

market Cost by road

Bombay 22300600

nagpur 65405200

Kolapur 6639500

Total 94345300

Compare the two mode of transport to dispatch the final goods in three market are

as follows:

BOMBAY NAGPUR KOLAPUR

From the above calculation if we compare the two modes to transport the finished goods than “RAIL ROUTE” will be best mode of transport

Q-3 Contingent on a particular Choice for inbound movement, can the same mode

be used servicing some final market?

Ans 3 As per the calculation of the above answer no 1 “SEA ROUTE” is feasible for

the inbound logistics and in outbound from answer 2 “RAIL ROUTE” is feasible for

outbound logistics for serving the inbound and outbound market different modes

will be used.

Q- 4 Is a rail siding from pen to alibag worth the investment?

Ans 4 As per the case from Alibag to Pen the distance is about 15 K.M and the cost of

per K.M is 1 cr, if we take or go for the investment than it will cost almost 15cr to set

a new railroad from alibag to pen and as the 3 categories mention in the case

110,150,220 the cost will be 63.75, 81.6, 108.6 (per quintal)

As the company invest today it will give fruits tomorrow so according to our

analysis the investment is worth wile it is also shown in Q-1 also in calculation of

RAIL and the total investment cost is Rs 425900000 (including all the category)

Q-5 If ships are to be used for inbound logistics, how many barges would be

required for the lighterage operations from the mother vessel to the jetty at

alibag?

If the vessel of 35000 tonnes capacity is used then 4 barges will be required and if

65000 tonnes capacity is used then 6 barges to be used for the lighterage operations

from the mother vessel to the jetty at Alibag.

Q-6 would the scheduling of carries in any mode affect the economics of the mode

choice?

Ans-6 yes, the scheduling carriers in all the modes affect the economics of the mode choice because variable and fixed cost in every mode are different, the balance between time and speed affect the delivery of goods in transportation while choosing the appropriate modes available.

Operating cost in each mode has relevance to cost and safety is the other main component which plays a major role because of which the choice of modes does change in one way or other.

Available choices in transport:

1. Rail 2. Road 3. Sea

Pricing plays a vital role:

This is an important area, where due to practices of administered and often placative pricing, major distortions have set in. They may have been in existence long enough to have even influenced investment decisions, that is resulted in allocative distortions. The most glaring example is the shift of freight traffic from rail to road due to inter alia pricing way above the true economic cost. This has resulted in a significant increase in road traffic where large investments are now being channelized.

The main role of transportation depends upon the operation i.e. The services and level of safety is more than compared to other means of transport but the capacity and means to reach the hubs and destinations differs from one another so the main task is to make a appropriate decision which will result into productivity.