Supply Chain Management Case

Mr. Somnathan was recently promoted to regional logistics manager for the Maharashtra cluster due to his
excellent track record. He was invited to a functional review meeting that takes place every month to examine
the major performance metrices and any problem that requires management intervention.
Pune Depot is the new difficulty in logistics because of its high cost to serve in the secondary network.

“Though we have a service level of 95%, the same is coming at the expense of high inventory levels
and high cost to serve” pointed out Mr. Ratul, Head of Supply Chain.
Ratul put his dilemma to Somnathan to further dip dive in the current situation and suggest a suitable course
of action. Additionally, he also wants Somnathan to understand the most recent industry standards for
distribution, replenishment, and delivery in a secondary network.
Success of Pune Depot may probably redefine the secondary distribution strategy for Pidilite
business across India and can bring milestone opportunity to cut the cost in this Cost Competitive World.
About company:
Pidilite Industries Limited is an Indian MNC who has mastered the adhesives business in past 60+ years with
Legacy Brands like Fevicol, Fevistick, Fevikwik amongst others. Since its inception in 1959, Pidilite, while
holding its dominant and leading position in adhesives market has also come up as a strong distribution
company. While known for its Iconic B2C brands like Fevicol, Fevistick, Fevikwik Pidilite also has equally
strong foot hold in the adhesive market for art and stationery Material; fabric care; car products, and sealants;
and specialty industrial products including adhesives, pigments; textile resins, leather chemicals, and
construction chemicals.
The company has manufacturing facilities across India including manufacturing clusters in
Maharashtra, Gujrat, Himachal, Andhra Pradesh etc. With an annual turnover of over INR 12000 cr and
3000+ Active SKUs across 80+ Brands, Pidilite is today enjoying the 70% market share in Indian adhesive
segment. Driven by the vision of “Together we will create a high performing, innovative, Indian Multinational
where it is a pleasure to work” Pidilite has enhanced its global presence to about 71 countries.

Supply chain:

The Distribution Network has been the backbone of the success of Pidilite which has ensured in-depth
penetration into the rural and urban markets across product categories with excellent product
availability. With time, Pidilite has evolved both its traditional multi-echelon distribution network for its mass
market B2C brands and its unique D2C distribution network for its upcoming brand like RoFF.
 Traditional Supply chain Model

D2C model

Pidilite has been few of the early adaptors in Industry companies who have implemented the concept
of Theory of Constraints (TOC) in their Supply Chain. The Stock replenishment is made through TOC
system. All the stocking nodes have set norm (buffer stock), and as and when those norms deplete,
requirement generates to the upper node.
Norm: Maximum stock that any nodes carry to service their customers.

Primary Distribution: Plant to RDC/Depot and Plant/RDC to depot network

Secondary Distribution: Depot to distributors network

TOC based replenishment: Sale at the distributor reduces the amount of inventory the distributor has
in hand, which prompts stock deployment from the depot to restock the distributor's norm. Similar
process is there for Depot-RDC and RDC-Plant networks.
Top of green is considered as norm,. Dynamic Norm management triggers replenishment based on sock
consumption.

Case:
Pune is the 2nd Largest depot for Maharashtra. Currently the warehouse replenishes the WSS on daily
basis and orders are generated by system based on norms defined. MOQ is defined as 1 case and orders
are generated in multiple of cases. Somanathan is called upon to decide the secondary distribution model
for Pune depot in order to reduce the cost to serve without impacting the service. There are different
models in the mind of Somnathan which include Fixed trip base model, Milk run, Fixed day delivery model
amongst others. While deciding the distribution model he has to balance the trade off between cost to serve
and Service level.
Data provided:

1. 3-month primary sales data at SKU depot level (in excel)

2. 3-month shipment data at SKU lane level (in excel)
3. Norm at Pune linked distributors (in excel)
4. Distributors location (in excel)
5. Size of Pune warehouse: Avg monthly storage capacity in MT: 726 & Sq. Ft area: 52000
6. Minimum primary invoice value : 25K

Terms:

1. Primary sales: Sale from depot to Distributors

2. Secondary sales: Sale from distributors to dealers

Assumption:

1. Primary sales = Secondary sales

2. In case of milk run, a vehicle can cover only 3 to 4 points
3. For all the distributors within 50kM of depot radius should be serviced within 24 hrs
from dispatch. 51 to 200kM 48hrs. Beyond 200km in 72 hrs
4. Truck capacity and truck type to be taken as per market standard
5. Take necessary assumption for any missing fields
Deliverables:

1. What type of replenishment strategy should the company follow for Pune depot to deliver best in
class service and cost?
2. What are the industry best practices Pidilite can adapt to deliver efficient process outcome for
distributor’s inventory management, allocation of stock and delivery process to improve asset
turnaround and better profitability?
3. What real time/time phased factors should Pidilite look at to determine the efficiency of deployed
inventory norms and trigger changes if required?
4. What should be the Secondary Distribution Model for Pidilite at Pune Depot?