Q1: What is the impact of railway gauge conversion (from meter gauge to broad gauge) on

Dalmia cement distribution operation?

Ans:
The company currently is using Trichy as the base to supply to districts.
The distance for transportation is relatively less and we can see that the cost of
transporting is higher in case of rail than road transportation.
Availability of trucks is an issue due to which company will have to pay higher rent for
truck rentals.
After the railway is made into broad gauge the freight container size will increase from
18.6 to 40MT.
Q2: How should be the optimal transport mix for Dalmia Cement?
The following shows the calculation for the optimal transportation mix for Dalmia cement.

material
routed % of material
through routed through tons of
mode of transport depot depot cement bags of cement
Rail + truck yes 45.00 329.85 6597.00
Rail + truck no 5.00 36.65 733.00
Truck yes 30.00 219.90 4398.00
Truck no 20.00 146.60 2932.00

Total tons sold in

96-97 733.00
Capacity of truck 10.00
Fixed cost for each
truck 25000.00
Variable cost 2.00

Transportation
costs Ernakulam Trichur Palghat Madurai Trichi Coimbatore
Train per MT 393.00 335.00 266.00 181.00 107.00 249.00
Truck per MT 385.00 350.00 320.00 156.00 70.00 235.00
Quantity 61.00 87.00 16.00 69.00 460.00 16.00
Distance from
plant 440.00 380.00 300.00 190.00 60.00 250.00
No. of trucks
required 7.00 9.00 2.00 7.00 46.00 2.00
 Material
routed
through Total cost (for
Mode of transport depot same demand)
Rail + truck yes 224495565.52
Rail + truck no 181346442.68
Truck yes 134139000.00
Truck no 168316705.21

Q3: Suggest ways in which Dalmia can get assured supply of trucks throughout the year.

Ans:

Dalmia cement is moving from stocking of inventory to direct shipping of product from the
production site. In such situation the timely and cost efficient availability of product become an
issue of concern.
Ways to make availability sure throughout year can be as followings
Dalmia should do a market research using past data to figure out average demand in
a given month and then can have a fixed contract for every year at a fixed price.
For additional demand fluctuations trucks can be rented at around 50% higher rate
from market as and when required.
Contracts should be made with large transportation firms that have their own fleet of
trucks can thus can provide an uninterrupted supply of trucks.

Q4: Should Dalmia Change its transport policy and manage a fleet trucks on its own for its
distribution function?
Dalmia should not consider maintaining its own fleet of trucks as it is very expensive in
maintaining and managing own mode of transportation. This will also require much management
attention, time and planning to make it work effectively. In case of seasonal uncertainty there are
chances that few trucks will remain idle and the cost of maintenance can be high.
 Distance
Avg from Cost Incurred Transport
Distance Trucks Nearest from plant to ation
District from Plant Sales Volume Sales Volume Required Nearest Depot Depot district Total Trucks Expenses Total Cost
4 250 14 14000 1400 Coimbatore 0 1000 73300 1400000 70056800
15 250 2 2000 200 Coimbatore 117 1000 200000
7 440 61 61000 6100 Ernakulam 0 1760 10736000
8 265 5 5000 500 Madurai 75 1060 530000
9 415 7 7000 700 Madurai 242 1660 1162000
11 190 19 19000 1900 Madurai 0 760 1444000
12 343 6 6000 600 Madurai 153 1372 823200
13 180 17 17000 1700 Madurai 40 720 1224000
20 215 8 8000 800 Madurai 79 860 688000
27 325 7 7000 700 Madurai 135 1300 910000
14 300 16 16000 1600 Palghat 0 1200 1920000
19 445 14 14000 1400 Quilon 0 1780 2492000
1 275 7 7000 700 Trichi 240 1100 770000
2 160 8 8000 800 Trichi 183 640 512000
3 311 91 91000 9100 Trichi 251 1244 11320400
5 120 24 24000 2400 Trichi 156 480 1152000
6 218 0 0 0 Trichi 158 872 0
10 315 45 45000 4500 Trichi 303 1260 5670000
16 175 25 25000 2500 Trichi 177 700 1750000
17 110 21 21000 2100 Trichi 50 440 924000
18 120 48 48000 4800 Trichi 126 480 2304000
21 171 20 20000 2000 Trichi 111 684 1368000
22 241 8 8000 800 Trichi 181 964 771200
23 70 58 58000 5800 Trichi 48 280 1624000
25 60 86 86000 8600 Trichi 0 240 2064000
28 165 19 19000 1900 Trichi 135 660 1254000
24 380 87 87000 8700 Trichur 56 1520 13224000
26 455 10 10000 1000 Trivandrum 0 1820 1820000

Q5:
Ans:
The disadvantages of moving to pack to order strategy
1. There is a possibility of loss of sales/business, though there would be a reduction in cost,
which may lead to difficulty in future expansion plans because of the pack to order
strategy. There would be a reduction in service levels.
2. It is always easier and safer to have stockiest during expansion than servicing directly
from factory keeping in mind the distances to travel.
3. The payment of loaders is based on machine basis and this would not be correct as the
capacity of each is different and in the new strategy, utilization of machine changes
according to the demand.
4. The new strategy demands scheduling the packing dynamically as opposed to the freeze
packing schedule which the current strategy uses. This may require working on
developing an apt scheduling program.
5. Since the new strategy would include stocking of cement in silos itself and no cement
stock would be packed. This means less finished goods inventory.
6. One of them is varying seasonal demand of the orders of different destination.