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A
Project Report On
“The study of the existing secondary distribution model, identification of gaps in the existing model, developing an improvised model and
implementing and assessing the benefits derived from the new model”
Under The Guidance Of
Prof. Anindra Haldar
Submitted To
Mr. Indroneel Goho
(Vice President Marketing)
IFB Industries limited
In Partial Fulfilment Of
“Post Graduate Program in Business Management”
(2010-2012)
Submitted By
Ms. Punam Garu
Praxis Business School
Bakrahat Road, Rasapunja, Kolkata
1
STUDENT DECLARATION
I hereby declare that this project report titled “The study of the existing
secondary distribution model, identification of gaps in the existing
model, developing an improvised model and implementing and
assessing the benefits derived from the new model” is executed as per
the course requirement for the post graduate program in
management. This has not been submitted by me or any other person to
any other university or institution for degree or diploma. It’s my own
work.
Place: Delhi
Date:
Punam Garu
PGPBM
(2010-2012)
2
ACKNOWLEDGEMENT
In this project I have made an honest attempt to make the research
material as authentic as it could. And I earnestly hope that it
provides useful and workable information and knowledge to any
person reading it.
During this small time frame of two months in which the
project reached its completion, there were a few people whom I
would like to make a mention of and without whose help the project
would have never been successfully completed.
I also thank to my internal guide Prof. Anindra Haldar for his teaching
sessions, which helped in giving the project the initial direction it
needed.
I would like to specially thank Mr. Ranjan Mathur(AVP Marketing),
Mr.Hemant Uniyal(Assistant Manager Logistics), Mr. Amit Kumar(Branch
Manager- Delhi), Mr. Naveen Kumar Verma (Assistant Manager) for
assisting me throughout this project.
I dedicate this project to the employees of IFB Industries Limited at
Delhi for their full faith & cooperation.
3
Punam Garu
PGPBM
2010-2012
PREFACE
We were given a logistics project for IFB industries limited. During the
course of time, we gained experience in warehouse, spare parts logistics
and finished goods logistics.
It was a firsthand experience to get exposed to the professional set-up and
understand the difference in theoretical models and the barriers faced
in implementing those models, which was really a great experience.
Working with IFB Industries Limited, has been a pleasure.
I take this opportunity to present the project report and sincerely hope
that it will be as much knowledge enhancing to the readers as it was to
use during the study of the project and the compilation of the report.
4
CONTENTS
Particulars Page nos
Objectives of the project 6
Methodology 7
Information collated: Warehouse 8
Information collated: Finished goods 9-13
Information collated: Spare parts 14-16
Observations: Warehouse 17
Observations: Finished goods 18-19
Observations: Spare parts 20
Suggested model: Warehouse 21
Suggested model: Finished goods 225
Suggested model: Spare parts 23-24
Implementation 25
Analysis and recommendations 26-27
OBJECTIVES OF THE PROJECT
➢ Analysis of the existing model for both finished goods and spares
➢ Identification of gaps and improvement areas in the existing model
➢ Evolution of an improved model for implementation
➢ Implementation of the model and assessing the benefits derived
6
METHODOLOGY
7
➢ Study of agreements related to dealers, franchisees ,warehouse and
transport carriers
➢ In-depth interviews with the dealers to study their demand forecasting
and inventory management models
➢ In-depth interviews with the personnel in charge of logistics for finished
goods and spares
➢ Study of out register to learn the lot size, no. of replacements and cost
dependency
➢ Study of freight bills to analyze cost
➢ Discussions with CRM and marketing executives
➢ Discussions with account executives
8
INFORMATION COLLATED: WAREHOUSE
Warehouse A
Location: D60 Okhla Phase I
Size: 5400 sq ft
Division of space: Marketing (3000sq ft): Service (2400 sq ft)
Rental per sq ft per month: Rs18
Warehouse B
Location: A54 Okhla Phase I
Size: 3000 sq ft
Division of space: Marketing (2700sq ft): Service (300 sq ft)
Rental per sq ft per month: Rs25
In peak season Warehouse B
9
Size: 6000 sq ft
Rental per sq ft per month: Rs23.75
INFORMATION COLLATED: FINISHED GOODS
LOGISTICS
➢ On demand transportation model is followed
➢ For local and upcountry dispatch, carriers used are Vikram, Champion,
Tata Ace, LPT
➢ For stock transfer LPT is used
10
➢ Rates are charged on the basis of vehicle used and destination and is
irrespective of the no. of goods carried by the vehicle
➢ The point charges are Rs100 per point in Delhi and Rs150 per point in
Gurgaon, Noida and Faridabad
➢ The logistics and reverse logistics cost is borne by IFB incase of both
direct and local billing
➢ There are 9 contracted transporters with only one transporter having a
fixed monthly rate contract
Vehicle Capacity
Vikram 4FLT + 4MWO
Tata Ace, Champion 6FLT + 6MWO
LPT 42 FLT
Exhibit 1: truck rates.xlsx
INFORMATION COLLATED: FINISHED GOODS
AUTHORISED SALES DEALER
11
➢ The authorized sales dealer can sell the product(s) on retailing only and
sale to sub dealers/agents is not permitted
➢ The company will supply the product(s) to the dealers premises
➢ The supply of the product to the dealer against a valid invoice shall
amount to acceptance of the sale (even in the event of an absence of a
written purchase order by the dealer)
➢ Goods once sold will not be taken back by the company unless it is
required, under Warranty obligations as decided by the company
➢ It is the responsibility of the dealer to delivery the product(s) to the
customers from their premises in case of local billing
➢ The company will supply the product(s) subject to stock availability
➢ The dealer can also book orders from customers addressed to the
factory on direct billing on direct door to door basis by placing the order
with full advance payment by way of DD/cheque. Company will delivery
the product(s) directly at the customer’s place. Dealers shall be paid
booking and service commission as per price circular released by the
company from time to time
➢ The dealer will ensure that proper care is taken prior to sale of
product(s) to the customers in terms of correct capacity, proper
installation conditions, availability of proper electrical and voltage
conditions etc
12
INFORMATION COLLATED: FINISHED GOODS
IFB POINTS
➢ The dealer displays, stocks and sells the products of the company in the
premises and uses the premises for the conduct of business as a
franchised retail outlet in the name of IFB KITCHEN/IFB POINT for the
period stated herein
➢ The dealer will display/keep stock of IFB products as mentioned in this
agreement on its own risk and responsibility and will take necessary and
adequate insurance cover for the showroom
➢ The dealer shall make an advance payment of Rs15 Lacs upfront to the
company against the supplies of modular kitchens and IFB home
appliances products and in future all dealing will be as per company
policies which is CASH and CARRY.
➢ The company shall incur the following costs:
In doing the interior of the showroom as per approved design including
design charges payable to the consultant
Branding of the showroom – both interior and exterior
Initial supply of kitchens for display
➢ Initial supply of appliances for display purpose inside the kitchens. The
dealer shall display the other appliances for sale purchasing the same
from the company
13
➢ The interiors, furniture and fixtures of the premises will be arranged by
the franchisee
➢ The company shall supply its products and the said goods will move
under invoice from the company to the dealer at agreed price to be
mutually decided from time to time.
➢ For IFB kitchen the dealers need not carry any stocks
➢ For home appliances the dealer will maintain a minimum inventory level
as per discussion with the branch manager
➢ The company shall bill to the dealer and the dealer shall sell the kitchen
to the customer by keeping a margin of 30% on dealer price
➢ Any institutional order initiated by the dealer will be executed by the
company directly and over riding commission will be given to the dealer
on a case to case basis
➢ The company shall bear the cost of transportation of modular kitchen to
customer’s place. For home appliances company shall bear the cost of
transportation to the dealer warehouse
➢ The dealer shall exclusively use the premises for the purpose of this
agreement and not to stock or sell any other product in the premises
irrespective of whether they are similar to the products of the company
or competing with the products of the company or not
14
➢ The stock of the company in transit to the dealer/customer will be
insured by the company. Cash in the premises and cash in transit will be
insured by the dealer
➢ The dealer shall bear all the expenses related to the running /operation
of the showroom such as :- electrical charges, water charges and
telephone expenses, any rates, taxes, levies including municipal tax,
deposit for electricity consumed etc or any other charge payable in
respect of the running/operation of the showroom premises
➢ The dealer shall appoint a showroom manager- preferably a lady and a
fabricator at the showroom. IFB will be responsible for training and the
dealer alone shall be responsible to pay the salaries, wages and other
remuneration of the members of its staff appointed by it. Company will
provide one demonstrator for sales support
➢ The company shall be responsible for the installation and service of its
products. The dealer shall have no authority to replace goods of
customers, without the prior written sanction of the company or its
authorised representative
15
INFORMATION COLLATED: SPARE PARTS
LOGISTICS
➢ Two contracted transporters (Ajay Devgan and Shobha Kant)
➢ Champion is used for local dispatches and only two champion’s are
provided for spare parts dispatch
➢ The transporters are paid a fixed rate on a monthly basis. The toll taxes,
parking charges challans and labor cost are charged extra
➢ In case of part-to-part replacement the reverse logistics cost is borne by
the franchisee in case of small units and by IFB in case of bigger units
➢ The logistics cost is borne by IFB in case of part-to-part replacement
➢ In case of spare billing the logistics cost is borne by the company
➢ There are 4 direct service centers and 10 service partners in Delhi
16
INFORMATION COLLATED: SPARE PARTS
FRANCHISEES
➢ The franchisees should maintain an inventory of 30 days of all the spare
parts
➢ All the spares are purchased against cash and carry system
➢ When the franchisees get orders for spare parts replacement from
customers they do the necessary replacement from their present stock
and return the defective parts to the company with a rejection tag 17
within 3 days from such replacement clearly specifying the customer’s
name, machine serial number and the nature of the fault
➢ The company would give equal number of good spares on return of bad
spares if the replacement is under AMC or warranty period. The
franchisee would otherwise pay the company on purchase of spares
➢ The company pays at the rate of Rs65/- for each fresh
installation/demonstration completed call, within 24 hrs or else
completed thereafter
➢ The company pays at the rate of Rs65/- for each minor fresh service call
attended and completed within 24hrs or else completed thereafter
➢ The company pays at the rate of Rs95/- for each major service call
(replacement of cabinet, tub assembly, front balance weight, tub front
ring, bearing and jobs which requires dismantling of the machine)
➢ To reimburse Rs100/- per call for carrying spare parts for major service
calls to customers residence and back. This is applicable for calls that
involve carrying of bulky spare parts
➢ To pay at the rate of Rs150/- (for 1 yr AMC contract) and Rs200/- (for 2
yr AMC contract) for each service contract executed and payments
collected subject to scheme letter signed
CHANGES INTRODUCDED
18
➢ In case of part to part replacement, the franchisees can take the spare
parts on credit i.e. they advance indent the spare parts, they take the
fresh spares from the company and return the bad spares within a
period of 10 days. This is applicable only when the spares are taken
against AMC’s or warranty machines
➢ Stock return request is when the franchisee takes more than one spare
part (usually two) on credit and returns the unrequired spare within 15
days in case of part to part replacement
OBSERVATIONS: WAREHOUSE
19
➢ The rent of the warehouse taken during peak season which is located
in Okhla A54, Phase I is higher by Rs7 per sqft per month than the
warehouse located in Okhla D60, Phase I
➢ The warehouse space used for service in Okhla D60, Phase I is
insufficient as there is no separate space allotted for packing of the
spares. This blocks the free movement inside the warehouse
➢ Due to space constraint in the warehouse (especially the service
area), proper layout and planning of the warehouse is not there.
Separate rack/space cannot be allotted for the each category of item,
doing which could have fastened the picking of spares.
OBSERVATIONS: FINISHED GOODS
20
➢ Dispatches made in Vikram increases the freight cost per unit. Hence
Tata Ace , Champion and LPT should be used since their capacity is more
thereby decreasing the cost per unit
➢ An average of 3.4% of the total monthly sale is replacement cases
Exhibit 2: fg out register.xlsx
Exhibit 3: Replacement.XLS
Exhibit 4: frieght bill.xlsx
➢ Maximum dispatches occur at the month end
Exhibit 2: fg out register.xlsx
➢ The dealers do inventory check on daily basis but usually places orders
at the month end
➢ They do not have any systematic inventory management , an
approximate safety stock is maintained but it’s not systematic or regular
Exhibit 5: safety stock.xlsx
➢ The dealer starts picking up or emptying stock a month before the
season starts or ends respectively
➢ The dealers have good warehousing facilities and hence they even
stated that they are ready to store more IFB products provided IFB
improves its servicing
21
➢ According to dealers competitors like LG, Whirlpool attends and closes a
call within 6hrs of reporting whereas IFB pays a bonus of Rs25 to attend
and close a call within 48hrs. Also the process of registering a problem in
the CRM is stated as harassing and time consuming.
➢ The dealers have a good display stock of IFB products (especially FLT’s
and MWO’s)
Exhibit 6: display stock.xlsx
22
OBSERVATIONS: SPARE PARTS
➢ Only two champions are provided for dispatching the spare parts for the
entire area of Delhi NCR
➢ Only two pickers are there who are responsible for loading, unloading,
picking and packing of the spare parts. Due to this a lot of time is spent
on the non-value added activities (unloading, picking, packing, loading).
This reduces the time for value added activities (transportation) as in
Delhi the transport permit is from 11am-5pm
➢ Very frequent orders are generated by the Authorized Service Centre
(ASC) as the minimum stock level (MSL) is not maintained by them and
IFB does not have a system of tracking the line of items stocked by the
ASC’s on any given day
➢ For part to part replacement, the franchisees bring the defective spares
to the branch and the fresh spares are delivered to the franchisees most
recently the next day
➢ The CRM does not generate a consolidated spare part pending list for
service franchisees and direct service centres. Due to this it is a hectic
23
task to find out the pending spare parts of each franchisee as per the
spare part code on a daily basis
➢ The service franchisees and direct service centres close most of the calls
within the time frame of more than 24 hours and less than 48hours
Exhibit 7: Call_Closure_Report.xlsx
SUGESSTED MODEL: WAREHOUSE
➢ The area allotted for service in warehouse A, Okhla D60, Phase I should
be increased and a separate space for packing and unpacking of spares
should be allotted. The warehouse needs to be more planned and
organised, for which each category of item should be stacked in a
specific place and a chart should be maintained where the items and
their location in the warehouse should be listed. This would make the
picking and packing of spares more efficient
➢ The warehouse in Okhla A54, Phase I can be abandoned due to its
relatively high rental cost and the second warehouse can be set up near
central/north Delhi after considering the factors of rental costs and road
transport permit
● The warehousing of Delhi NCR can be segmented into two
divisions
24
● The warehouse in Okhla D60, Phase I can cater to the
requirements of south Delhi, Noida and Gurgaon
● Another warehouse can be set up in the areas of central/north
Delhi (taking into consideration the rental costs) which can cater
to the requirements of north, central, east and west Delhi
● The warehouse set up near central/north Delhi will have good
connectivity to east and west Delhi through NH-1-Wazirabad road,
NH-24, Vikas Marg, Ring road, Outer ring road, Rohtak Road
● Both the warehouses should have separate management and
should work independent of each other
Exhibit 8: delhi_map.gif
Exhibit 9: route planning.docx
SUGGESTED MODEL: FINISHED GOODS
➢ The finished goods should be dispatched maximum during 11am-
4pm so that most of the goods gets delivered within the transport
permit of 11am-5pm. For following this particular model the lot size
also needs to be improved, so that maximum goods can be
dispatched in higher capacity vehicles and vehicle capacity
optimization can also be practiced. For this model to get
implemented successfully the following steps need to be followed
25
● The monthly billing cycle could be gradually converted into a
weekly billing mechanism. This would ensure equal
distribution of sales throughout the month and hence the lot
size would also improve
● The CSR’s in the IFB authorized dealer stores should be briefed
to do a daily stock check and the sales executives should do a
daily calling during the day closing and take orders from the
CSR’s
● This would help to get orders in advance so that they can be
dispatched the next day at the earliest as the transport permit
is from 11am-5pm and also the dispatches could be planned if
the orders are generated earlier
● Orders generated after 4pm should not be dispatched. Only in
case of emergency it may be dispatched
SUGGESTED MODEL: SPARE PARTS
➢ If the fresh spares (for part to part replacement) are delivered to the
franchisees the same day when the franchisees bring the damaged
spares to the branch, then the logistics cost of delivering the spares
to the franchisees can be saved. For this model to get implemented
successfully the following steps need to be followed26
● The service executives can check from the CRM the SPU
requisition generated by the franchisees and hence the
documentation work can be done in advance
● The pickers can pick and pack the spares which are generated
in the requisition in advance
● When the franchisees arrive in the branch with the damaged
spares, they need to be checked against the requisition
generated, make any changes if required and then the
franchisees can be handed over the fresh spares
➢ A consolidated pending part list generation with SAP code through
CRM for all service franchisee as well as direct service centre will
enable the following
● Pick list could be generated on a daily basis very easily and
supply of spares to the service franchisees will become faster
and more efficient
● The unavailable spare parts could be re-ordered immediately
without any delay against their requirement
27
● The service franchisees can raise their material requisition in
CRM with SAP part code which would be more convenient and
systematic
● We can always be updated against the spare part pending list
➢ The spare parts dispatch should be combined with the finished goods
dispatch, especially when small spare parts needs to be dispatched
➢ Appropriate route planning needs to be done when spare parts are
dispatched. As the transportation cost is charged on a fixed monthly
basis, hence the objective should be to cover the maximum no. of points
in a particular day and also minimize the labor cost (which is fixed) by
maximizing its utilization
Exhibit 8: delhi_map.gif
Exhibit 9: route planning.docx
➢ The spare parts can be picked and packed at the closing of the day which
needs to be dispatched on the next day. This would ensure that the
spares get dispatched at the earliest possible (transport permit from
11am-5pm), the vehicle does more number of trips (as only two vikram’s
are available) and also the labor force gets better managed (as only two
28
pickers are provided for unloading, loading, picking and packing of
spares)
IMPLEMENTATION
The models implemented were:
➢ A system of calling up the CSR’s by the closing of the day to get orders
for the next day was implemented so that the goods can be dispatched
at the earliest (transport permit from 11am-5pm) and also lot size can
be improved and route planning can be done. This model was
implemented to ensure that most goods get dispatched from 11am-4pm
➢ A system of delivering the fresh spare parts to the franchisees
immediately on return of the damaged spares for part to part
replacement was implemented. This model was implemented to save
the logistics cost of delivering the spares to the franchisees
➢ A system of picking and packing the spares at the closing of the day
which needs to be sent the next day was implemented. This model was
implemented so that time is least consumed on non value added
activities (unloading, loading, picking, packing) and the vehicle could
serve more number of trips ( as only two Champion’s are available and
transport permit is from 11am-4pm)
29
ANALYSIS AND RECOMMENDATIONS
➢ A system of calling up the CSR’s by the closing of the day to get
orders for the next day was implemented by the closing of the month
(from 23rd May-28th May), hence no extra orders were generated at
the closing of the day as the sales executives were almost constantly
following up with the CSR’s as the dealers follow a monthly billing
system.
This model would be most useful when followed from the
first/second week of the month and the CSR’s and dealers are asked
to do a daily/weekly inventory check and hence break the monthly
billing cycle and start following a weekly billing cycle
➢ The model of delivering the fresh spares to the franchisees in return
for damaged spare parts in case of part to part replacement was not
successfully implemented, the reason being the franchisees refused
30
to take back the fresh spares by themselves. To implement this
model successfully the following changes need to be made
● The franchisee contract when renewed, it should be made
mandatory that franchisees bear the logistics cost along with
reverse logistics cost of the spares for part to part replacement
● When the franchisees send their damaged spare parts, a
technically sound person from the franchisees should
accompany who can assist the pickers in checking the fresh
spares against the damaged spares and note any discrepancy if
any
● The two pickers should only be allotted the task of picking,
packing, checking the SPU order list and dispatching the
spares. Whereas two separate people should be allotted the
tasks of loading, unloading and the arranging of spares in the
warehouse
➢ The model for picking and packing the spares at the closing of the day
which needs to be delivered the next day was implemented successfully.
● The daily average number of trips of the spare parts
delivery vehicle increased from 3.17 to 4.11. This increase
31
was due to the reduction of time consumed in non value
added activities (picking and packing) and hence the
delivery vehicle could be loaded faster and it could start
dispatching spare parts at an early hour and hence serve
more number of trips.
● As a fixed amount is paid to the transporters on a monthly
basis, hence the more the number of trips the vehicles
serves, the more beneficial is it for the company. This would
indirectly improve the franchisees performance in
delivering service to the company customers
● This model was also effective in organizing and utilising
manpower in an efficient manner
Exhibit 10: project implementation.xlsx
32
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