PROJECT REPORT

ON
MAPPING SUPPLY CHAIN FOR WEAK LINKAGES
AT

KAPIL HEALTH FOOD PRODUCTS

BY:

PARTHA PATIM GIRI

1
 TABLE OF CONTENTS

CONTENT PAGE NUMBER

1. Acknowledgements …………………………………………… 02
2. Declaration…………………………………………………….. 03
3. Introduction……………………………………………………. 05
4. Executive Summary…………………………………….. …….. 06
5. Industry analysis…………………………………………..
6. Company Analysis…………………………………………….. 07
a) Company Profile……………………………………….. 08
b) Structure of Company………………………………..... 09
c) Mission& Values………………………………………. 10
7. Research Methodology…………………………………………. 12

8. Cross Culture…………………………………………………… 13

9. Discussion & Descriptions……………………………………… 14

10.Interpretation of the questionnaire……………………………… 15

11.Analysis (A)……………………………………………………… 31

12.Analysis (B )…………………………………………………….. 32

13.Abstract From Personal Interview……………………………… 33

14.Conclusion………………………………………………………. 34

15.Recommendation………………………………………………… 35

16.References……………………………………………………… 36

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 3. INTRODUCTION

This project is about finding the Issues, Constraints, Relevant alternatives, develop an implementation
plan & mapping Supply Chain for weak linkages. This project is done mainly for academic purpose in the
subject of Logistics Management for the course of PGPSCOM (08-10).

India is the world's 2nd largest producer of food next to China, and has the
potential of being the biggest with the food sector. With India's food production likely to double
in the next decade, there is an opportunity for large investments in food and food processing
technologies, skills and equipment, especially in areas of Canning, Dairy and Food Processing,
Specialty Processing, Packaging, Frozen Food/Refrigeration and Thermo Processing. Milk &
Milk Products, Packaged/Convenience Foods are important sub-sectors of the food processing
industry. Health food and health food supplements are other rapidly rising segments of this
industry.

Experts estimate the industry GDP at 6-8 per cent with value addition of food products to
increase from 8 per cent to 35 per cent by the end of 2025.

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 4. EXECUTIVE SUMMARY

The accomplishment of the project mainly depends upon research methods viz.industry analysis,
different business sectors such as Marketing, Finance, Human Resource, and Logistics.

The project assigned was to perform the analysis of Health Food Products industry with
reference to a case study of Kapil Health Food Products and study the environment in which it
operates. The contents are Issues, Constraints, Relevant alternatives, develop an implementation
plan & mapping Supply Chain for weak linkages. A comparative study of various players like
Marketing, Human Resource, Finance, Logistics sectors was made to understand the actual
dynamics of the working of the Kapil Health Food products in its concerned sector.

All aspects are taken into consideration to understand the actual performance of the Supply
Chain in functioning of Kapil Health Food Products.

The analysis of last few years of company are identified, studied and interpreted in light of their
performance. Critical decisions of company’s performance and other current news are analyzed
and their impact on the bottom line of the company is assessed.

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INDUSTRY ANALYSIS

5
 ABOUT INDUSTRTY

OVERVIEW:

• The health food industry, a $4-billion-dollar-a-year business in the early 1990s, was
founded on the fact that American consumers increasingly regarded health as a primary
concern when buying food.
• The average food bill per individual at that time was more than four thousand dollars per
year, of which almost half was spent on food away from home.
• As people became more concerned about healthful food in the 1980s and 1990s,
consumption of organic foods increased. Because they are cultivated without synthetic
additives, fertilizers, or pesticides—some of which are proven carcinogens that often
leach into public water supplies—organic foods are better for consumers because many
pesticides are systemic, meaning that the food absorbs so that they cannot be washed off.
• Beside natural foods, food supplements such as vitamins and herbal products made up a
large part of the health food industry. These supplements constituted a form of alternative
medicine for people disenchanted with over-the-counter drugs and concerned about side
effects of pharmaceuticals. Despite Food and Drug Administration regulations
prohibiting the manufacturers of food supplements from making specific medical claims,
sales of herbal supplements rose 70 percent to $22.7 million in supermarkets alone during
1993.
• The health food industry bonanza was largely based on the connection made by the
scientific community between disease and fatty foods, and on the fact that the average
consumer ate more than sixty-five pounds of fat each year.
• Many manufacturers began to make processed foods with low-fat and low-calorie
ingredients and claimed that these products were more healthful and more nutritious than
the more standard options.

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HEALTH FOOD PRODUCTS:

• Indian health drinks market is still in its infancy due to the lack of awareness among the
population. In value terms, the health food drink market is around Rs 1, 400 crore and in
volume terms around 65,000 tonnes per annum.

• Glaxo Smith Kline (GSK) with four brands - Horlicks, Boost, Viva and Maltova - is the
leader in Indian health drink market. Complan, GluconD from Heinz India and Cadbury
India's Bournvita are also popular among the Indian health drink brands.
According to retail audit unit ORG Marg, GSK with four brands in the category Horlicks,
Boost, Viva and Maltova - has a 70 per cent volume market share and Complan's share is
13 per cent.

ABOUT DIFFERENT HEALTH PRODUCTS STRATEGIES:

• No doubt, Horlicks is the leading health drink brands in India since 1930, immediately
after its launch in the country. Horlicks is sold in a number of countries across the world.
In different countries, the product has different formulations in order to cater to varying
consumer segments and serve different consumer needs. In India, the Horlicks available
has been scientifically developed and specifically caters to the nutritional needs of the
Indian diet. It helps meet the requirements of essential nutrients in children, such as iron
and vitamins that aid iron absorption.

• Boost is health food drink (HFD), which is positioned on the energy platform in India.
Developed by the Indian R&D team in 1974, and launched in 1975-76 in Kerala, Boost
has been one of the fastest growing brands in the Indian GSK Consumer portfolio.
Realising that the energy segment had a huge potential, GSK India launched the brand as
the 'Vitaminised Energy Fuel' with a unique chocomalt taste. The brand was launched
nationally in the early 80s and has always been targeted at 8-14 year old boys. This is the
section of population most enthusiastic about sports, and also with high-energy needs, in
India.

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• According to GSK sources, Viva is based on the belief that a good start to the day ensures
that rest of it goes well too. New Viva is Vitahelth, combination of nine essential
vitamins (vitamin A, C, D, B1, B2, B6, B12, Niacin and Folic acid), Iron, Phosphorus
and Calcium. Viva contains a natural goodness of milk, wheat and malted barley.
Maltova, a chocolate health food drink, was acquired from Jagjit Industries in Feb 2000.

• According to GSK official sources, to kids Maltova is the fun health drink, which is
extreamly tasty and makes nourishment truly enjoyable and exciting. It was relaunched in
June 2002 with an enriched formulation and improved packaging. The relaunched
Maltova had active rechargers, a combination of essential vitamins, minerals and
carbohydrates. Maltova has again been restaged in November 2004, with an attractive
new packaging that connotes an extreamely high taste appeal and a sense of fun and
excitement.

• American foods major H J Heinz's Indian arm Heinz India has a strong market presence
with brands like Complan and Glucon-D. Complan contributes 40 per cent to Heinz's
sales. Heinz's most profitable products are Complan and GluconD. Even Glucon D has
shed its health tag and repositioned itself as a fun drink. In 2001, Heinz launched a slew
of new products - coffee flavoured Complan. Complan is ideal for convalescents and the
elderly - complete nutrition when you're off your food , pregnant and nursing mothers
provides vitamins and minerals necessary for good health , busy people - a satisfying
lunchtime snack at home or at work , athletes - who require fluid, carbohydrate and high
quality protein without the bulk of solid food.

• In early 1990s Cadbury reentered the health drink market with Bournvita, the product of
essential vitamins and minerals with memorable campaigns based on the 'Tan ki Shakti,
Man ki Shakti'. The next big breakthrough happened in 1999 when the brand was re-
launched with a new RDA Balanced Formula. The brand was re-launched with a
completely new identity in 2001. Bournvita has a unique taste that combines the
goodness of malt and chocolate.

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COMPANY ANALYSIS

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COMPANY PROFILE:

• Kapil Health Food Products was established in 1960 as a subsidiary of an American

Multinational pharmaceutical company.

• It has a total capital outlay of Rs.50 million.

• It started its manufacturing operations at Nahar, which is situated 325 kilometers west of
New Delhi & has a population of 8,500.

• Nahar is a semi-urban town supported by a village economy*

• Kapil is an ISO 9002 accredited manufacturing firm with state –of-the-art manufacturing
& packaging facilities.

STRUCTURE OF COMPANY:

• In 1980, the foreign holding of the company was diluted to 51%, and 49% shares were
offered to Indian nationals and financial institutions.

• The company was registered as Kapil Health Products Limited & milk is the major raw
material for the firm’s product, its major focus is on the diary development activities.

• It undertakes programmes like animal health; animal insurance, mechanized milking

etc.It spends around 750 million rupees per annum on the above activities.

• It is now leading health food manufacturing company contributing to 32% of the total
health food powder production in India.

• Major competition is from leading brands like Bournvita, Boost, Horlicks, Nutramul
and Maltova & ayurvedic pharmaceutical companies in India.

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 • All these ayurvedic pharmaceutical companies command around 10-12% of the health
food market in India.

KAPIL’S SUCCESS STORY:

PARAMETERS 1960 2001

PRODUCTION CAPACITY 2 35

NO.OF.UNITS 1 4

FACTORY AREA 40,000 75,000

NO.OF.PRODUCT LINES 1 14

MANPOWER EMPLOYED 50 1700

MILK PROCESSED 7000 1,50,000

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 PRODUCTION
80000 CAPACITY

70000
NO OF UNITS
60000

50000 FACTORY
AREA
40000
NO OF
30000 PRODUCT
LINES
20000
MANPOWER
10000 EMPLOYED

0 MILK
1960 2001 PROCESSED(L
/DAY)

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PRODUCTS: Kapil runs three product lines:

• Health foods, HOR & BOS

• Ghee.

• The Company also supplies products in bulk to various repacking stations across the
country to take advantage of freight economy.

Product Packaging at Kapil Health Food Products:

HOR BOS GHEE

500 gms 500 gms 500 gms,1000 gms

1000 gms - 2000 gms ,5000 gms

- - 10,000 gms

5
4.5
4
3.5
3 HOR
2.5 BOS
2 GHEE
1.5
1
0.5
0

SUPPLY CHAIN PROCESS:

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INBOUND LOGISTICS:

PROCUREMENT

1.>: MAJOR RAW MATERIALS CONSUMPTION (Mt/Day)

WHEAT FLOUR 28

MALTED BARLEY 26

MALT EXTRACT 35

SUGAR 8

MILK POWDER 14

LIQIUD MILK (LITRES) 1,50,000

Since the numbers of raw materials are 6, the management thinks that it has a good control over
the inventory & its suppliers.

Barring milk is the major raw material, & NO OF VENDORS ARE RESTRICTED TO 4 OR 5.

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Consider that it has 6 suppliers i.e.

S1

S2

S3 30 VENDORS.

S4

S5

S6

PACAKAGING CONSUMPTION (units/day):

TIN CONTAINERS 1800

CARTONS 250

POLYTHENE 435

MILK PROCUREMENT:

MILK PRODUCERS 25,000

DAIRY FARMERS 200

CONTRACTORS 20

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 FIG: MILK RUN DISTRIBUTION SYSTEM

*The normal inventory at inbound is around 25 days (assumption) EQUATION-A

PRODUCTION SYSTEM:

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PLANT CAPACITY: 35 kilo tones in a year’s time frame. Therefore 100 Mt/day.

PROCESS:

HANDLING & PACAKAGING MATERIALS:

BREAKUP IN TERMS OF BULK & FLEXIBLE PACKS ARE SHOWN BELOW:

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 BULK PACK(DRUMS/DAY) FLEXIBLE
PACKS(DOZENS/DAY)

HOR 270 1800 (500 g) , 1450(1000g)

BOS 170 1650 (500g)

TOTAL 440 4900

*The normal inventory at warehouse is 15-18 days-EQUATION-B

OUTBOUND LOGISTICS: The factory has 4 Regional offices at major metros headed by:

DISTRIBUTION CHANNELS:

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The product requirement flows from:

STOCK KEEPING UNITS:

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INVENTORY HOLDING:

WAREHOUSE 15-18 DAYS

C & F AGENTS 12-15 DAYS

STOCKISTS 8-10 DAYS

WHOLESALERS 7-8 DAYS

CENTRAL ISSUES:

• Wholesalers are unable to fulfill two orders in every twenty orders placed by retailers.

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 • Due to severe competition, KHFP is in the process of reviewing its supply chain for

a) Cost reduction

b) Enhancing customer service.

• The management is planning to reduce the inventory to less than 10 days at factory &
C&F agents.

• The distribution cost on the present level of sales is at the rate of 8.5%, which they want
to reduce by 40%.

• In addition they want to reduce inbound transportation cost by proper planning &
scheduling.

ALTERNATIVE NO 1.

1.>INVENTORY MANAGEMENT:

Reduce the inventory at warehouse i.e. from 15-18 to 12-15.

This can be done by providing discounts to C&F agents at 3% discount rate.

This would automatically provide a benefit of discounts to stockiest, wholesalers via C&F
agents.

Hence ultimate result would be that the inventory level at warehouse would lower down &
thereby at C&F agents, stockiest & warehouse.

2.>TRANSPORT CHECK:

The transport facility should be a good one as it is a major factor.

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The energy in terms of fuels and hence costs which is waisted in standing of trucks at check
posts now can be saved.

The company can be relieved by regular challan’s on transports.

Training of truck drivers could enhance their speed of work.

3.>FORECASTING IMPROVEMENT:

TIME-SERIES FORECASTING METHOD:

The goal of any forecasting method is to predict the systematic components of demand and
estimate the random component.

Companies should develop both static & adaptive method for forecasting.

PERIOD DEMAND DESEASONALIZED

DEMAND

1 3,000

2 4,000

3 4,667 4556

4 2345 3456

5 3423 5567

6 3345 6654

7 3212 3456

8 4356 6754

9 3343 3456

SUPPLY CHAIN LINKAGES:

CUSTOMER RELATIONSHIP MANAGEMENT

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CUSTOMER SERVICE MANAGEMENT

PERFORMANCE
RETURNS METRICES
CHANNELS
PRODUCT
MANUFACTURING
FORECASTING
PROCUREMENT
ORDER
DEVELOPMENT
FULFILMENT
AND
&MANAGEMENT
SUPPLIER
DEMAND
& COMMERCIALISATION
MANAGEMENT
MANAGEMENT
13. CONCLUSION

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After surveying & interacting with Global Logic HR Head, we came to the conclusion about company's
work culture & its cross cultural, their innovations in that & if any comparisons are their. By going
through the questionnaire, it was found that the work culture differs from that of global presence i.e.
Ukraine and coming to the comparisons part there are differences but, the information couldn't be carried
out because of lack of information. As discussed earlier the operations differ here & globally so
comparisons parts were not fully recognized.

Coming to the internal part the work load at different level is quite reasonable .They can approach their
seniors easily. The co-ordination between different departments is good. While in Ukraine it differs in
some matter in their work culture.Programmes for stress management & employees are provided with
training whenever needed for performance enhancement. Equal opportunities are there for both Men &
Women. Employees should have more freedom of trying out new things & they should not be afraid of
making mistakes. By doing this, they can be more innovative.

In all we extracted that the Cross Culture of Global Logic is appreciating.

14. RECOMMENDATIONS

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Few recommendations have been put with a view that implementation of those can give an improved
picture of the organizational Cross Culture & its comparisons of Global Logic.

• Company should take proper actions to build good Cross Cultural Relationships & make the same
implementations in their Ukraine & China presence.

• Though the company is concerned about their software development programmes,they should
also look into Cross Cultural comparisons & also into its new innovations.

15. REFERENCES

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1. http://www.answers.com/topic/health-food-industry
2. http://www.google.co.in/search?
hl=en&q=health+food+products-wikipedia&meta=
3. http://www.freehealthreview.com/search.html?
q=health+products&submit=Search
4. http://www.ibef.org/artdisplay.aspx?cat_id=496&art_id=18515
5. http://www.fcbulkacomstrat.com/Comstrat_files/Comstrat2000.
pdf
6. http://www.fnbnews.com/article/detnews.asp?
articleid=18133&sectionid=32
7. http://blogs.siliconindia.com/StrategicMind/KywbTQJ2489458
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8.

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