Supply Chain Management | NMIMS September 2023 assignment solution

1. “Vidyut” is a electric bike start up which commenced operation in 2015. They cater to low-power vehicle for town ride. Their focus is Max 30 Kms speed limit vehicles which give maximum mileage of 40 Km per full charge. The price point is also matching this basic specification. With the city traffic increasing, they are seeing a good volume increase for their e-bikes. There are about 6 variants in their portfolio currently in addition to old models launched in the past. The need they face is the distribution of replacement batteries, maintenance parts in addition to vehicle itself. They have high business activity in Bangalore, Mangalore, Mysore etc. They have home pickup and delivery for regular service customers. Describe any 3 types of distribution network design they can look at to cater to the sales of vehicle, batteries, spare parts and also service provision?

Vidyut, the electric bike startup, can consider the following three types of distribution network designs to cater to the sales of vehicles, batteries, spare parts, and service provision:

  1. Centralized Distribution Network: In a centralized distribution network, Vidyut can establish a central distribution center in a strategically located area, such as Bangalore, Mangalore, or Mysore, which are their high business activity regions. The central distribution center would serve as a hub for receiving and storing all the products, including vehicles, batteries, spare parts, and service equipment. From the central hub, Vidyut can efficiently distribute the products to various retail outlets and authorized service centers in different cities. This distribution model ensures centralized inventory management, streamlined logistics, and cost-effective operations.
  2. Franchise Distribution Network: Vidyut can opt for a franchise distribution network where they partner with independent franchisees to establish retail outlets and service centers. They can identify enthusiastic individuals or existing automotive businesses interested in promoting electric mobility and offer them franchise opportunities. These franchisees would be responsible for selling Vidyut’s vehicles, batteries, and spare parts while also providing after-sales service. This model allows Vidyut to leverage the local expertise and customer base of franchisees while expanding their sales and service network rapidly.
  3. Online Direct-to-Customer Distribution Network: In addition to physical distribution channels, Vidyut can establish a strong online presence and develop an e-commerce platform to directly sell their products to customers. Through their website or dedicated online marketplace, customers can browse and purchase vehicles, batteries, spare parts, and accessories. Vidyut can partner with reliable logistics companies for efficient delivery across different cities. To support after-sales service, they can also provide an online service booking system and arrange doorstep pickup and delivery for regular service customers. This distribution model provides convenience and accessibility to customers while minimizing the need for physical retail outlets.

By implementing these distribution network designs, Vidyut can effectively cater to the sales of vehicles, batteries, spare parts, and service provision, ensuring their products reach customers efficiently and conveniently.

“NAVRASA” ice-creams have 100+ varieties of flavors and pack sizes. They also come up with new variants of flavors, innovative pack designs and also graphics on packs. Increase in variety leads to short life cycle, out of stock and some huge stock which needs to be disposed as well. The immediate step they want to address is to ensure availability before they move on with other phases of improvement. Recommend how you would approach safety stock maintenance for NAVRASA?

To ensure availability and address the challenges of short product life cycles and stockouts for NAVRASA ice creams, a safety stock maintenance approach can be implemented. Safety stock is an extra inventory buffer maintained to protect against uncertainties in demand and supply. Here’s how you can approach safety stock maintenance for NAVRASA:

  1. Demand Forecasting: Implement a robust demand forecasting system to estimate the demand for each flavor and pack size accurately. This can be done by analyzing historical sales data, considering seasonal patterns, market trends, and customer preferences. Accurate demand forecasting forms the basis for determining the appropriate level of safety stock.
  2. Determine Service Level: Define the desired service level, which represents the percentage of customer demand that the company aims to meet without stockouts. A higher service level indicates a lower risk of stockouts but requires maintaining higher levels of safety stock. The service level should be carefully balanced based on customer expectations, product characteristics, and the company’s resources.
  3. Lead Time Evaluation: Evaluate the lead time required for replenishing the ice cream inventory. Consider the time taken from placing an order with suppliers to receiving the stock. Accurate lead time estimation is crucial to ensure that safety stock is available to bridge any gaps between ordering and replenishment.
  4. Safety Stock Calculation: Once the demand forecast, service level, and lead time are determined, calculate the appropriate safety stock level. Several methods can be used for safety stock calculation, such as statistical models (e.g., standard deviation, Z-score), probabilistic models (e.g., service level formula), or advanced inventory management techniques like the reorder point (ROP) and economic order quantity (EOQ).
  5. Monitor and Adjust: Continuously monitor inventory levels, actual demand, and lead times to assess the effectiveness of the safety stock. Regularly review and update the safety stock levels based on changes in demand patterns, new flavor introductions, promotional activities, and other relevant factors. Adjustments should be made to maintain the desired service level while avoiding excessive stockholding costs.
  6. Collaboration and Communication: Collaborate closely with suppliers, distributors, and retailers to gather real-time data on sales, stock levels, and market trends. Establish effective communication channels to share information promptly, enabling quick responses to changes in demand or supply conditions. This collaborative approach helps minimize stockouts and aligns the entire supply chain towards maintaining availability.

By implementing a well-designed safety stock maintenance approach, NAVRASA can ensure availability of their ice cream flavors and pack sizes, reduce stockouts, and optimize their inventory management processes.

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