CK Rotors Pvt Ltd

Case Study
Overview of the case study

Ck rotors is the small scale industry

located in Coimbatore in Tamil Nadu. It
has recently started manufacturing of
ceiling fans. It has approximately 60%
of market share. It has capacity to
manufacturing 200 fans per day but
some how it utilizes only the 60% of its
capacity.
Conti..

Its prime markets are Tamil Nadu and

Kerala. It has appointed 10 distributors
in Kerala and 20 distributors in Tamil
Nadu. These distributors are also known
as wholesalers and retailers. They are
given 5% of discount while retailers
keep margin of 15%. The gross margin
of the company from each fan is 30%
which can be increased by 10 to 15% if
the plant produces to its full capacity.
Conti..
It has 10 different varieties of fans in
three colors.
The company has contemplates two
options for solving the problem.
– To produce its full capacity and stock goods at two
warehouses which located in Kerala and Tamil
Nadu. So that it also expected to reduce the
transportation cost as less than one truckload
inventory will now transported through small
distances instead of long distances as the previous
system is used to.
Conti..

– Is to automate the order processing and

production planning process by installing
computers in the factory. This also requires
order transmittal through phone or some
other electronic means on the part of
dealers.
Which alternative should the
company pursue and why?
According to me as per the condition of
the company I will prefer option 1. due
to various reasons they are as follows
If company starts to produce the
production of its full capacity, it
increases its margin by 10 to 15%.
Conti…

 Due to opening warehousing will

reduce stock outs and dealers need not
worry about spending working capital
on carrying the inventory.
So that due to frequent order by the
retailers to distributors they never feel
that company is not producing the
products frequently due to frequent
stock outs
Cont….

It reduces transportation cost as less

than one truck load inventory will now
be transported through small distance
instead of long distances as the previous
system used to.
Keep customer retention.
How are the costs of
distribution interlinked?
Cost of distribution is the cost which
incurred for transporting the goods
from manufacturer to end users of the
goods.
Also it is directly linked with
transportation cost because CK rotors
has to pay 1% of the total cost of goods
as transportation cost.
Conti…

It is inversely related to warehousing or

inventory cost. If warehousing or
inventory cost is increased that will
conclude the inventory is increased and
it will affect less number of distribution
channels.
Is there any other alternative
than the two presently being
contemplated?
It can have another alternative by
combining two options :- To increase
the capacity and at the same time
automate the order processing and
production planning process. Due to
automation of order processing and
production planning ,it will reduce the
fixed cost. But the revenue would
increased due to increased the capacity.
Conti….

Company can adopt vertical marketing

channel instead of conventional
marketing channel to increase its
profitability and avoid middle man. Due
to this it will eliminate the distribution
cost.