Dalmia Cement Case Solution

SCMT-1

Supply Chain Management at Dalmia Cement Ltd. Submitted By: Debidatta(13615) | Dhananjay(13616)| Aayush(13701)| Anmol(13704)

Supply Chain Management at Dalmia Cement Ltd 1Q: 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.

2Q: 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 through mode of transport depot Rail + truck yes Rail + truck no Truck yes Truck no

Total tons sold in 96-97 Capacity of truck Fixed cost for each truck Variable cost Transportation costs Train per MT Truck per MT Quantity Distance from plant No. of trucks required

% of material routed through tons of depot cement bags of cement 45.00 329.85 6597.00 5.00 36.65 733.00 30.00 219.90 4398.00 20.00 146.60 2932.00

733.00 10.00 25000.00 2.00

Ernakulam Trichur Palghat Madurai Trichi Coimbatore 393.00 335.00 266.00 181.00 107.00 249.00 385.00 350.00 320.00 156.00 70.00 235.00 61.00 87.00 16.00 69.00 460.00 16.00 440.00

380.00

300.00

190.00

60.00

250.00

7.00

9.00

2.00

7.00

46.00

2.00

Material routed through Mode of transport depot Rail + truck yes Rail + truck no Truck yes Truck no

Total cost (for same demand) 224495565.52 181346442.68 134139000.00 168316705.21

3Q: 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. 4Q: 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.

District 4 15 7 8 9 11 12 13 20 27 14 19 1 2 3 5 6 10 16 17 18 21 22 23 25 28 24 26

Avg Distance trucks from Plant Sales volume Sales Volume required Nearest Depot 250 14 14000 1400 Coimbatore 250 2 2000 200 Coimbatore 440 61 61000 6100 Ernakulam 265 5 5000 500 Madurai 415 7 7000 700 Madurai 190 19 19000 1900 Madurai 343 6 6000 600 Madurai 180 17 17000 1700 Madurai 215 8 8000 800 Madurai 325 7 7000 700 Madurai 300 16 16000 1600 Palghat 445 14 14000 1400 Quilon 275 7 7000 700 Trichi 160 8 8000 800 Trichi 311 91 91000 9100 Trichi 120 24 24000 2400 Trichi 218 0 0 0 Trichi 315 45 45000 4500 Trichi 175 25 25000 2500 Trichi 110 21 21000 2100 Trichi 120 48 48000 4800 Trichi 171 20 20000 2000 Trichi 241 8 8000 800 Trichi 70 58 58000 5800 Trichi 60 86 86000 8600 Trichi 165 19 19000 1900 Trichi 380 87 87000 8700 Trichur 455 10 10000 1000 Trivandrum

Distance from Nearest Depot 0 117 0 75 242 0 153 40 79 135 0 0 240 183 251 156 158 303 177 50 126 111 181 48 0 135​ 56 0

cost incurred transport from plant to ation district total trucks expenses Total Cost 1000 73300 1400000 70056800 1000 200000 1760 10736000 1060 530000 1660 1162000 760 1444000 1372 823200 720 1224000 860 688000 1300 910000 1200 1920000 1780 2492000 1100 770000 640 512000 1244 11320400 480 1152000 872 0 1260 5670000 700 1750000 440 924000 480 2304000 684 1368000 964 771200 280 1624000 240 2064000 660 1254000 1520 13224000 1820 1820000

5Q: 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.