GAMEPLAN Season 10 – Case Study

It is October 2016, and Jon is sitting in his office overlooking the sunset. As the CEO of Excellentia Stainless (a Europe based stainless-
steel manufacturing company with a production capacity of 7.8 MTPA), he is mulling over the management committee meeting
that happened last month. This meeting was called to comprehend the causes behind reduction in the revenue generation
potential. The revenue has dropped by 11% compared to last year, and the gross profit margin has also declined (Refer Annexure
1). Furthermore, during this meeting, while he was evaluating everyone’s conversations, he also sensed that the entire supply chain
is not being managed efficiently. Almost every vertical was ascribing other verticals for their inadequacies. He felt that there is a
gap, which needs to be filled.

Considering all these factors, Jon thought that this is the right time to seek help from a supply chain expert with proven credentials.
He had read about GEP and their capabilities in the supply chain domain and decided to invite GEP for providing an effective
solution to these challenges. The first meeting of the department heads with GEP is scheduled for tomorrow, and he is hopeful
that GEP could bring in fresh perspective to address these different challenges. This would be a new beginning.

Introductory Meeting of Department Heads with Consultant (Ravi)

Attendees – Jon (CEO), Adriana (VP – Sales), Malcolm (VP – Manufacturing), Paul (VP – Production Planning & Control), Ovidiu
(VP – Logistics), Alexandra (VP – Sourcing & Procurement), Cristina (VP – Finance)

Jon – Good morning everyone, thank you all for being here. Let’s get started. As mentioned in my email couple of weeks ago, we
have partnered with GEP to help us cope with the challenges we’re facing across our supply chain. This is Ravi, from GEP, and he
would be heading the effort from GEP’s side.

Pleasantries exchanged followed by introduction of each VP – (Refer Annexure 2)

Jon – As part of this effort, GEP will be reaching out to each of you for a conversation about your respective verticals to understand
your concerns. Please extend your full support and give Ravi all the information that he needs. Let’s work together to make sure
that this is a win-win partnership for all of us.

Ravi – Thanks Jon. It was a pleasure to meet you all and I look forward to working together!

Conversation excerpt between Consultant (Ravi) and Sales Head (Adriana)

Ravi – Could you please throw some light around the sales and business development department?

Adriana – Sure. We sell our products directly to end customers. Considering stainless steel has very specific industry applications
and due to its non-substitutable nature, we typically see a consistent demand throughout the year. To manage this demand, we
have a robust team of 18 members managing our North, East, West and South regions. Apart from these, we also have a small
team of SMEs i.e. Subject Matter Experts with expertise in different product segments. The regions are primarily managed by the
regional team and the SMEs fly in-and-out as and when required. (Refer Annexure 9 and Annexure 10)

Furthermore, we have products that cover the complete range of stainless-steel products covering 200, 300 and 400 grade series.
These grades are sold in as flats in the intermediate manufacturing stages such as HR Plates and Coils, CR Coils & Sheets, HRAP and
CRAP Coils & Sheets, etc. to ensure adequate diversity in the product mix.

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Ravi – That’s great to know. I was having a conversation with Jon just prior to this meeting and he mentioned that the capacity
utilization is low. Is it because of order book position or operational issues? Do you face any challenges currently within your
department?

Adriana – Sales is always considered the torchbearer for generating revenue, as it is the primary interface between a company and
its customer. However, in order to accomplish this, there needs to be a responsive supply chain management across all
departments.

As you may be aware, typically in sales, the market and customer requirements determine order receipts and the order book
position, which is currently in poor shape and skewed towards month end. You might hear this from other vertical heads as well
when you speak to them. Often there is a delay in commercial clearance for domestic orders. Along with this, sales orders for fast
moving items are received typically towards 2 nd / 3 rd week of the month with an order - delivery time of around one week.
Invariably, we are struggling with dispatches to meet customer expectations, and the logistics seems to be raising this as an issue
of shortages of trucks towards month-end.

Ravi – Understood. Any concerns from a pricing standpoint?

Adriana (in a frustrated tone) – Oh yes! This was the next point that I was going to bring up. The Finance team sets price limits for
both, raw material and finished goods, in-line with the hedging strategy and budget. From a sales perspective, it becomes difficult
to adhere to these limits. For stainless steel, market is the price-setter. The prices depend a lot on the demand generated in the
market. Finance team sets very stringent guidelines to avoid any negative repercussions to the bottom-line. This does make sense,
but sometimes we lose out on customers due to this rigidity in the final prices.

Ravi – Yes, I agree! We have seen this as a primary concern with few of our other clients as well. We’ll brainstorm around this and
find an optimal solution.

Adriana – That would be really helpful. Thank you!

Ravi – Sure, no problem! How does the raw material pricing affect the finished goods pricing? Any concerns in this regard?

Adriana – Our end products, especially the ones with high Ni content, experience adverse effects on final price due to erratic price
fluctuations associated with Ni (Refer Annexure 11). When the Ni prices go down, some customers who are opportunistic in nature,
expect immediate reduction in final prices. On the other hand, if Ni prices increase, there is resistance from these customers to
absorb the price increase. Moreover, the manufacturing lead times are also high, making it even more difficult for us to adequately
absorb these price fluctuations in the final price.

Ravi – I’ll connect with the manufacturing head to understand the high lead times.

As a market best practice, pricing is typically reviewed monthly/quarterly with customers. Do you follow the same? Also, could you
please share your inputs around how are contracts structured? Is there a mechanism in place to insulate from the risk associated
with these price fluctuations?

Adriana – We have long term (at least for 1 year) contracts with our customers, but we do review pricing every month/quarter.
The mechanism to arrive at the final price is not disclosed to customers, due to internal confidentiality constraints. Few customers
have complained about the transparency behind arriving at these prices. We would like to understand if you could help us bring in
some industry best practices from a pricing structure perspective, which would enhance visibility to our customers and help us
retain and build long term relations.

Ravi – Sure, we’ll suggest industry best practices around this. Any other concerns?

Adriana – Another factor that affects our revenue generation potential is on account of quality diversion. We must maintain a
norm of 5% quality diversion; however, manufacturing delivers more than 10-15%. This means that the total tonnage of a customer
varies by 10-15% by the time it is ready for dispatch. This leads to loss sales of 10-15% in a month and poor OTIF performance for

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that customer. In addition, there is rise in FG inventory for which we need to start looking for customers, whose requirements will
match with these FGs appropriately.

Ravi – This makes sense. Lastly, have you considered exports from a revenue generation perspective?

Adriana – Yes, we primarily export to Asian countries. However, we are open to exploring other markets too, which have a demand
potential. This would also help us establish a firm footprint in the global market. Could you help in identifying any potential markets
apart from Asia?

Ravi – Sure, we can help you with that. Thank you for your time. Have a great day ahead!

Adriana – Thanks! You too.

Conversation excerpt between Consultant (Ravi) and PPC Head (Paul)

Ravi: Paul, how is PPC managing the capacity utilization? It would be good if you could help me with the current process followed
for order book filling and scheduling dispatches.

Paul: Ravi, currently the company is operating at 65-70% capacity utilization with a lot of challenges. 50% of our customers are
loyal, while the rest are opportunists. These opportunistic customers are the ones who want to reduce the prices when the prices
soften & get products at old prices when prices are hardening, stating that the product has been produced from the inventory
purchased at older prices.

Ravi: Got it. How does the team work on the product mix under such conditions?

Paul: Product mix is the challenge that PPC is supposed to solve because at the start of a month we start with low order book
position of 8~10% of monthly demand. Furthermore, orders are predictable for only 30-35% of the total production capacity, which
arise from the loyal customers, while for the remaining 65% of production capacity, I need to plan in a way wherein the inventory
carrying cost is less and there is not much price fluctuation in the raw material and finished goods.

Ravi: Ok. This leads me to the question that how is inventory managed? Would it not be difficult to source raw material without
having customer requirement?

Paul: Exactly Ravi. HR scrap/ SS Scrap/ CR Scrap are bought in bulk, but we never buy Ni & Cr in bulk as the prices are highly
fluctuating. The end price could rise significantly if RMs are procured at high cost. All fluctuating RMs are bought and tracked from
plant entry to exit like Ni and Cr (In/Out) metrics. Also, lead time for procurement of Ni is 3 months. Thus, it is very important that
Ni is brought at the right time in adequate quantity.

Ravi: Thus, the sales team would ensure that order book is maintained and PPC would have to follow the order sequencing to meet
specific customer requirements. Correct?

Paul: Correct, as we begin the month, we produce in SMS the materials of the highest grade that would be required at the steel-
centers, followed by the cold roll mill and ultimately at the HR mill; ensuring that dispatches are initiated for the last process first.
Therefore, based on the manufacturing lead times, this results in dispatch skew. Also, there can be delay in commercial clearance
for domestic orders which can also result in dispatch skew.

Ravi: Wouldn’t this affect the quality of the end-product? The VP – Sales mentioned that end products typically have 10-15% of
quality diversion.

Paul: Quality diversions doesn’t mean a problem in quality as it is normal in industry. The sales team is not able start with good
order book position in the beginning of the month, hence there are more quality diversions due to multiple changes of product
line in SMS sequencing. Furthermore, the PPC allocates the end products based on customer specifications, by aligning them to
the requirements of some other customers. In my opinion, the sales team needs to ask for deviations from customers.

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Ravi: Thank You Paul. Have a good day ahead!

Paul: Good day, Ravi.

Conversation excerpt between the Consultant (Ravi) and the Manufacturing Lead (Malcolm)

Ravi: Sir, as discussed, I just wanted to meet up with you to understand any concerns or challenges that you might be facing within
your department.

Malcolm: Not really, things are going smoothly. The throughput time has been lower than ever, and we have been constantly
meeting our production volumes!
Ravi: Good to know sir! I met up with VP - Sales yesterday and she mentioned that the Manufacturing Lead Time has been high
recently which is leading to a decline in Sales.

Malcolm (in a slightly irritated tone): All the products that we manufacture for our customers have different manufacturing lead
times (Refer Annexure 3 & Annexure 4). Son, steel making is a science as well as an art, and the heart of the art is the SMS! For
your information, the SMS is hugely governed by the order book, which determines exactly what needs to b e manufactured and
by how much. For example: we cannot start manufacturing the 400 series immediately after manufacturing the 300 series since
the alloy composition is different and the Ni-Cr alloys will be captured within the furnace linings and mix with the next Heat. Hence,
the sequencing is pre-determined based on the order book and a low order book is a constant challenge faced by us. We typically
start week 1 of a month with <10% of orders and new orders keep coming in during the month, which signific antly impacts
operations.
Ravi: Oh okay! The Sales Lead also mentioned the other day that there has been constant difficulty in adhering to the 5% norm of
quality diversion.

Malcolm (in a detesting tone): The answer to this is precisely what I explained earlier. In certain months, we start with a 5% order
book! How can we manufacture products which have an order to delivery lead time of more than 3 weeks in such cases? Moreover,
we receive orders for products with a low order to delivery lead time (such as HR sheets & coils and HRAP sheets and coils) in week
2 or 3 of the month.

Sales really need to understand the concept of sequencing, which if not done right, will result in a significant increase in
manufacturing costs, which will in-turn drive an increase in price and thereby a loss in sales!!! Also, in the stainless-steel industry
quality diversion doesn’t mean a problem in quality as in other industries. In my opinion, customer requirements aren’t too
different from each other. Sales should be able to convince such customers to accept these minor variations, since this doesn’t
impact their end products significantly.

Ravi: I understand, I’ll make sure I pass this information across. Do we have inventory towards the end of a month?

Malcolm: No, in order to balance price fluctuation risk, we make sure that no pipeline inventory remains in the system at the end
of every month.

Ravi: Alright, a last question. Have there been any unscheduled breakdowns or equipment problems recently?

Malcolm: We are in a business that’s entirely dependent on machines which unfortunately have their problems from time to time.
But the uptime has been higher than ever in recent times!

Ravi: Thank you for your time, I shall circle back to you if I have any other questions.

Malcolm: Thank you, have a good day!

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 Conversation excerpt between the Ravi and Finance (Cristina)

Ravi: Ma’am, as you’re aware, our team is in the process of talking to different department leads to understand their challenges. I
wanted to connect with you to get your thoughts on some of those concerns as well as discuss the challenges that your team is
facing.

Cristina (chuckles): I’m sure there must’ve been many complaints. The one counting the coppers is always seen as the villain. But
most people don’t appreciate the difficulty involved in keeping up this balancing act you know, of striving for profitability while
maintaining a healthy cash position. We need to balance our inflows and outflows, and for that there needs to be strict adherence
to our policies across departments. Sadly, that is becoming very difficult to enforce.

Ravi: I understand what you’re saying ma’am. But we heard a concern from the sales team that the policies may be too rigid? The
limits on pricing is causing the company to lose customers.

Cristina: I don’t think that’s fair. Our internal pricing policy (Refer Annexure 5) already considers the inherent volatility in prices
because of the market. That’s why there’s a base component and then a surcharge based on prevalent raw material prices. Their
biggest problem is not the pricing policy, but customer management. Our order book is in such poor shape. Sales deals seem to fall
through at the last minute, so many orders getting cancelled. Our receivables keep mounting, with customers not paying up
advances or adhering to their committed orders. How am I supposed to cover our costs if we don’t set limits?

Ravi: I see your point ma’am. Have you faced a situation where there was shortfall of working capital and you had to go back to
your financing partners? I imagine that must impact your overall cost of capital

Cristina (exasperated): So many times! Financial discipline is so poor across the different departments, we frequently overdraw
on credit limits that we’ve established with banking partners. With markets falling as they are, our receivable days and
consequently our payable days are growing to worrying proportions and working capital management has become a serious
challenge (Refer Annexure 6 and Annexure 7). This poor credit discipline raises our costs and impacts our credibility with our
financers, but I have no choice. And the problem is compounded by poor control on the costs side of the chain.

Ravi: Right. Are there any cost areas that are particularly concerning to you? Departments that are frequently over-budget?

Cristina: Yes, for sure. Sourcing comes to me in the last moment with requests to release additional funds for new requirements.
Logistics costs are also typically over-budget. Our capacity is under-utilized. Overall, I have trouble understanding why we can’t
plan better.

Ravi: Do you mean a clear understanding of our requirements in advance?

Cristina: Yes, exactly. We should ideally be booking to capacity from the get-go where we know exactly how much we would be
producing. That is how we can maximize our efficiency ratios. How are our competitors doing better than us (Refer Annexure 8)?
Additionally, we should be holding suppliers accountable to stronger payment terms. Sourcing should negotiate with long-standing
suppliers to fix raw material pricing and take on a higher burden of the price risk, our relationship over all these years sh ould mean
something during these troubled times.

Ravi: I understand ma’am. Given the current situation, do you currently employ any hedging strategies to balance the price risks
on both sides of the chain?

Cristina: We do safeguard ourselves against foreign exchange fluctuation and interest rate risk. Our imports being backed by our
exports creates a natural hedge, and any additional exposure is managed using forward contracts, currency swaps and options.
Interest cost risk is also managed using interest swapping tools. For raw material price risk however, we have trouble creating an
optimum strategy because of the lack of visibility from Sales & Sourcing.

Ravi: Why is that so?

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Cristina: They are unable to appropriately forecast demand for different commodities and that diminishes our ability to hedge
appropriately. We currently try to balance that using a range of product mix, producing different grades of stainless steel based on
price and demand fluctuations, but it’s not the most effective. I’d be happy to hear any recommendations you may have on how
to handle this better.

Ravi: Definitely ma’am, my team and I will investigate this as well as all the other concerns you raised. We’ll come up with an
optimal solution that works for everyone. I have one last question. Are you looking to make any new long-term capital investments
in the near future?

Cristina: No, there were some recently concluded in the past couple of years. And we are operating at below 70% capacity
utilization; we should be focusing on maximizing return form the fixed investments we have already made. We are not able to take
on additional long-term debt at this moment.

Ravi: This has been extremely helpful ma’am, thank you for all your inputs. I shall circle back to you if I have any other questions
and I look forward to working together.

Cristina: No problem, I look forward to seeing what you all come up with. Feel free to reach out for anything else.

Ravi: Will do, have a nice day!

Cristina: You too.

Conversation excerpt between the Consultant (Ravi) and the Logistics Lead (Ovidiu)

Ravi – I have scheduled this meeting to discuss some of the ongoing challenges under the logistics function. And, I am sure it’s
going to be interesting as you might bring in some fresh ideas from your last firm.

Ovidiu – Certainly, I see some challenges and gaps here when I compare with my last firm. Then again, the dynamics of the two
businesses are entirely different. I was working with a CPG firm where demand, supply and inventory planning is more stable.
Here, on the other hand, my supply chain (Refer Annexure 13 ) needs to be more responsive. Whether you talk about sourcing,
inventory, truck placement or evacuation, everything is market driven as the price of key RMs and FGs fluctuates. However, we
can surely revamp some of the basic practices where I do see some potential improvement opportunities.

Ravi – That’s true! And, our company has wide experience in supply & value chain mapping while working with various clients. We
are quite hopeful with this project.

Ovidiu – Sure! I am here to help you guys. Just bring your ideas to the table and I will tell you if we can execute them or not.

Ravi – Thank you Sir! While looking at the contractually agreed truck capacities for outbound logistics (Refer Annexure 15), I found
some discrepancies in terms of what is required and what is contracted annually. Why do we have such variations? Also, I met the
CFO yesterday and she mentioned that logistics costs are typically overbudget. Are you facing any challenges here?

Ovidiu – You are right, we do have some gaps in terms of requirements and contractually available trucks specifically for outbound
transportation. Due to skewed production orders during month end, we have high demand of trucks towards the month end
leading to temporary shortages faced by transporters and that leads to a lot of pressure on timely dispatch. In case trucks are not
placed within 48 hours, we go into the spot market to cover the additional truck requirements but end up paying more than
contracted rates with the same suppliers for spot buys. Apparently, this is the reason for overshooting budget targets. I would
really need your support to optimize this area of spot market for us. I also want these suppliers to adhere to some service levels
and industry standards.

Ravi – Yes, we will definitely investigate this aspect. And, for Inbound transportation, I see different transportation requirements
for different raw materials in terms of volumes being sourced and lead times. Is it deliberately done or are you facing some issues
here?
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Ovidiu – As mentioned earlier, we must have a responsive supply chain to mitigate price risk. Raw material such as Ni and Cr are
sourced depending upon favorable market rates with almost no inventory whereas SS and other scrap materials are sourced in
bulk which requires inventory planning. The lead time for Ni is as high as 3 months, making it difficult to cope with its mar ket price
risk. And, with different lead times for raw materials, proper inventory planning becomes a challenge. Further, we must ensure
proper coordination with shipping lines, timely action on letter of credit process, no delays in slot preparations etc. I will share with
you the current lead times of these process/materials (Refer Annexure 14). I would really like your help to streamline the inbound
process.

Ravi – Thanks you for this information and your time. I think I am good at this point and will get back to you in case of any further
questions or doubts.

Ovidiu – Thank you! Have a nice day.

Conversation excerpt between the Consultant (Ravi) and the Sourcing and Procurement Lead (Alexandra)

Ravi: Before jumping to the nitty-gritty of the problem, could you give me a little more background about your division?

Alexandra: Sure! So, our objective is quite straight forward – We aim to ensure that there is alignment with Sales and Production
Planning, so that we receive the raw materials at the right quantity, quality and price to produce FG whilst managing the risk of
availability and quality of material at the most competitive prices.

Ravi: And how do you manage these risks to keep your benefits afloat?

Alexandra: To ensure that we are minimizing price and quantity risk, the procurement value chain has been designed to run on the
JIT philosophy and to have a responsive supply chain to ensure that RMs with high price volatility are managed with minimum/no
inventory.

However, while ‘Price’ and ‘Quality’ are the market risks, ‘Availability’ forms a part of the operational risk. Amidst the recent volatile
market conditions, we are facing a challenge to manage these risks. (Refer Annexure 11)

Ravi: We have helped many organizations mitigate similar risks and create significantly higher returns or value for the sourcing &
procurement function. But before analyzing your case, could you brief us about the major challenges you are facing currently?

Alexandra: To start with, the fluctuation in the raw material prices over the last few years, especially that of Nickel has made it
difficult for us to manage inventory levels properly and has hampered the lead time. For example, the lead time for procurement
of Ni is 3 months. Thus, making it very important to buy Ni at the right time and right quantity. We can attribute this to several
external market conditions related to price and containers’ availability, shipping line lead times/slots etc. Also, I strongly feel that
these challenges are further aggravated by the virtue of other functions not performing, which makes our task to reach the end
goal even more difficult. (Refer Annexure 14)

Ravi: Oh okay! So, talking about the alignment with other functions, I had a meeting with the Finance Head the other day – She
believes Sourcing only comes to them at the last moment to release additional funds and that the planning could be managed
better. Can you elaborate on this?

Alexandra (in a stern tone): If you look at the volatile market conditions, you would understand that we are left with no option
but to deviate from Finance and align with the market conditions. One of our challenges is adhering to the price limits set by the
finance team for raw materials. For a department that is so sacrosanct about the guidelines impacting the bottom-line, it is difficult
to even discuss the importance of market conditions with them.

Ravi: I see... And what are your current strategies in play?

Alexandra: As far as the current strategy is concerned, we procure the raw materials from different countries, and it is important
to understand their different lead times. Once the weighted average lead time for each category is found, Finance decides the
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hedging strategy. Material unavailability in different countries and prices are the primary drivers of sourcing decisions (which is
market determined) and invariably do no align with sourcing mix norms created by Finance.

Ravi: Indeed, these are some great steps being taken! Having tackled such problems before, I’m sure that I along with my team
can brainstorm and come up with satisfactory solutions to your problems.

Alexandra: That’s great to hear! Looking forward to some insightful recommendations from your side! Let’s discuss it in a fortnight.

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 Annexure 1
Current Financial Position
Annexure 2
Introduction & Key Responsibility of each vertical lead
Vertical Introduction
VP Manufacturing is an older gentleman who
has been with the organization for 30+ years.
Manufacturing He is referred to as the ‘Guru’ on the
manufacturing floor and is set in his own ways,
generally reluctant to change
VP PPC has more than 30 years of experience
Production in industry & has completed 15 years with the
Planning & current organization. He is very friendly in
Control nature & fully supportive. He knows in & out of
the entire supply chain process.
VP Sales has more than 25+ years of
experience within sales and business
development in the manufacturing sector and
Sales has completed ~10 years with the current
organization. She is very dynamic and open to
exploring new avenues to enhance revenue
generation potential
VP S&P lead is a middle aged individual and
comes with an experience of 15+ years. She
Sourcing & has been with the organization for the past 4-5
Procurement years. She is known as someone who is not
guided by rules and has a free flow of
thoughts.
Key Responsibility
Smooth functioning and timeliness of the
entire manufacturing process; right from the
SMS to the end-product shops.
Ensuring product mix as well as order
sequencing so that right product at the right
time is available for sale. PPC must forecast
order sequencing based on the limited sales
order available at the start of the month
Manage the order book and align with other
departments to ensure order fulfillment. Also,
work towards minimizing the risk of price
fluctuations for FGs
Alignment with Sales and Production Planning
so that raw materials are received at the right
quantity, quality and at the right price to
produce FG. Simultaneously, manage the risk
of availability and quality of material at the
most competitive prices.
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 The logistics lead is a middle-aged gentleman
who has recently switched from a well- Logistics Lead's responsibility is to ensure a
established company. With 8 years of supply responsive supply chain that is moving in a
Logistics
chain experience, he is not afraid of taking timely and efficient manner according to
risks, rather more open to new ideas and their sourcing, planning and sales requirements.
implementation.
Overall financial well-being for the company –
VP Finance has 20+ years of business finance &
striving for profitability while maintaining our
strategy experience but is new to the company
cash position to sustain operations.
Finance (~ 1 year). She comes from the Energy sector,
Responsible for financial planning, managing
and is used to a more structured environment
the different financial risks as well as
with strict adherence to policies
reporting/financial statements.

Annexure 3

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 Annexure 4

Manufacturing Lead Times for Products (from the SMS)

HR Sheets and HR Coils 8-9 days
HRAP sheets and HRAP coils 10-11 days
CR Sheets and CR Coils 17-18 days
CRAP Sheets and CRAP Coils 20-21 days
Slit Coils 25-26 days

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 Annexure 5

Pricing Policy Overview

Base Price – takes into consideration the cost of revenue ( labour costs, fixed costs, market trends etc.)

Alloy Surcharge - based on the price levels of the alloy elements present in stainless steel. Primary contributors are: Nickel,
Chromium, Molybdenum

To calculate surcharge, first average value is calculated for each relevant alloy component for one month before the date
of the calculation. Multiplying by the average proportion of alloy in the material to the corresponding value gives us the
contribution of the alloy to the alloy surcharge. This is carried out for all relevant alloy component parts, and through
adding them together we obtain the alloy surcharge for the material.

Extras - The component “extras” includes charges for non-standard dimensions, different thicknesses, services, packing
and other non-standard costs.

Inventory Risk – takes into account the risk undertaken due to the price volatility of the commodities by holding inventory
𝑛

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𝑖=1

𝐵𝑎𝑠𝑒 𝑃𝑟𝑖𝑐𝑒 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 𝑝𝑒𝑟 𝑘𝑔 𝑜𝑢𝑡𝑝𝑢𝑡 𝑓𝑟𝑜𝑚 𝑝𝑎𝑠𝑡 𝑞𝑢𝑎𝑟𝑡𝑒𝑟

𝐴𝑣𝑔𝑖 = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑎𝑙𝑙𝑜𝑦 𝑐𝑜𝑚𝑝𝑜𝑛𝑒𝑛𝑡 𝑖 𝑜𝑛𝑒 𝑚𝑜𝑛𝑡ℎ 𝑏𝑒𝑓𝑜𝑟𝑒 𝑑𝑎𝑡𝑎 𝑜𝑓 𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑖𝑜𝑛
𝑤𝑡𝑖 = 𝑃𝑟𝑜𝑝𝑜𝑟𝑡𝑖𝑜𝑛 𝑜𝑓 𝑎𝑙𝑙𝑜𝑦 𝑖 𝑖𝑛 𝑡ℎ𝑒 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙
𝐼𝑛𝑣 = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑝𝑒𝑟 𝑘𝑔 𝑜𝑓 𝑡ℎ𝑖𝑠 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙
𝑃𝑀 = 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛

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 Annexure 6

Working Capital Management FY 15-16

400
323316
300
199
200
114 106 104 94 91 103
84 80 69
100 46 41 56 38 44 47
22 42
0
Excellentia Company A Company B Company C
-7 Company D Company E MEAN
-100 Stainless -66 -45
-71
-108 -101 -99
-200
-203
-300

Operating Working Cycle Recievable Days Days Inventory Outstanding Days Payable Outstanding

Annexure 7

Working Capital Management – Competitive Landscape

Receivable Days

Exc ellentia
Mean Median Company A Company B Company C Company D Company E
Receivable Days Stainless
FY 15 – 16 3 16.1 90.8 44.4 41.3 37.6 22.3 79.9 47.5
FY 14 – 15 2 06.1 68.7 38.9 35.0 36.5 17.1 76.3 41.2
FY 13 – 14 5 4 .8 46.6 45.8 38.7 47.6 13.3 81.4 44.1
FY 12 – 13 5 7 .3 50.2 52.1 37.7 69.8 13.0 76.7 46.9

13
 Payable Days

Exc ellentia
Mean Median Company A Company B Company C Company D Company E
P ayable Days Stainless
FY2016 -1 07.7 -98.9 -85.8 -100.9 -66.4 -70.6 -44.7 -202.8
FY2015 -1 35.9 -93.2 -87.1 -113.0 -57.9 -61.2 -43.0 -148.2
FY2014 -1 08.5 -87.3 -86.1 -130.2 -63.6 -43.1 -46.0 -132.3
FY2013 -1 00.6 -81.3 -90.1 -100.5 -79.7 -37.1 -44.0 -126.1

Annexure 8

Management Efficiency Ratios – Competitive Landscape

Asset Turnover Ratio

Exc ellentia
Mean Median Company A Company B Company C Company D Company E
Asset Turnover Ratio Stainless
FY 15 - 16 0 .4 0.8 0.8 0.9 1.0 0.9 0.7 0.6
FY 14 - 15 0 .4 0.9 0.9 1.1 0.9 1.1 0.8 0.8
FY 13 - 14 0 .7 0.9 0.8 0.9 0.7 1.4 0.7 0.9
FY 12 - 13 0 .7 0.9 0.8 1.1 0.6 1.5 0.8 0.9
Inventory Turnover Ratio
14
 Inventory Exc ellentia Company
Mean Median Company A Company B Company C Company D
Turnover Ratio Stainless E
FY 15 - 16 3 .2 4.5 3.9 3.4 4.3 8.8 5.3 1.8
FY 14 - 15 2 .1 4.3 4.5 4.0 5.0 7.6 5.3 1.8
FY 13 - 14 2 .7 4.1 3.6 3.5 3.7 7.9 5.0 2.0
FY 12 - 13 2 .7 3.7 3.0 3.4 2.4 7.1 4.7 2.1

Annexure 9

Industry segmentation for various grade series across regions along with revenue contribution
Profit
Grade # of Sales Total Revenue
Region Industry Segments # of customers Margin
Series Representatives ($MM)
(%)
200 Consumer Durables 24 $25.74 8.2%
North 300 Manufacturing 4 39 $146.45 6.2%
400 Manufacturing 10 $60.34 6.1%
200 Architecture & Construction 28 $29.78 7.4%
Automobiles/Railways/
35 $123.42 5.2%
East 300 Transportation 6
Architecture & Construction 16 $98.25 7.8%
400 Consumer Durables 17 $93.86 7.4%
Automobiles/Railways/
200 37 $55.84 6.7%
West Transportation 3
300 Manufacturing 58 $116.05 7.5%
200 Consumer Durables 12 $14.35 8.0%
300 Consumer Durables 40 $154.04 8.1%
South 5
Automobiles/Railways/
400 16 $96.13 6.2%
Transportation
TOTAL 18 332 $1,014.25
Products sold within all grade series - HR Plates and Coils, CR Coils & Sheets, HRAP and CRAP Coils & Sheets

15
 Annexure 10
Key trends and considerations across various industry segments
Industry Segments Key Products*
White goods such as
dishwashers, refrigerators,
washing machines, toasters,
microwave ovens,
Consumer Durables
thermowares, home mixers,
vacuum cleaners, water
coolers, sinks, cookware,
serving bowls, utensils, etc.
• Dairy, food processing,
pharmaceutical industries,
hospital equipment, nuclear
Manufacturing
industry
• Furnace parts, conveyor
belts & heat exchanger
• Pump parts, valves,
fasteners
• Furniture, handrails for
staircase, elevators,
escalators, door window
Architecture & frames
Construction • Airport exterior and interior
trims
• Angles, mailbox, bathroom
cabinet, washroom fixtures
• Transportation cars such as
railway/metro coaches,
subway cars
• Automotive hose clamps,
Automobiles/Railways/ safety belt anchors, truck
Transportation and bus frames
• Visible parts of automotive
exhaust: central & rear
muffler, exhaust pipes,
catalytic converter
*Includes key products only, list is not exhaustive
Key trends and other considerations
• Prevalent usage across white goods due to non-corrosive
nature and aesthetic appeal
• Rising disposable incomes and easy access to credit will add to
demand
• Huge untapped market in developing countries (for e.g. in India,
currently only 29 percent of households own a refrigerator, 11
per cent own a washing machine and 6 percent own a
computer or a laptop)
• Increasing electrification of rural areas and wide usability of
online sales will add to demand in long run
• Emerging rural areas have a great potential for appliances like
refrigerators and washing machines
• Extensive demand in food, chemical processing and oil & gas
industries for stainless tanks, pipes, pumps and valves
• Due to non-corrosive nature of stainless steel, there is
prevalent utilization, especially in cases wherein there is long
term exposure to harsh chemicals
• Special grades of stainless which have greater corrosion
resistance at different temperatures, are used in desalination
plants, sewage plants, offshore oilrigs, harbour supports and
ships propellers
• Usage in food industry as stainless steel allows for faster and
more efficient cleaning and imparts no taste to the food that it
comes into contact with.
• Carbon steel is primarily used, however stainless steel is used in
corrosive environments and for aesthetic purposes
• Exposed stainless beam, stainless angle, and stainless channel
shapes are not only functional, but are also attractive because
the alloy contains a natural coating that prevents oxidation
• Do not succumb to the effects of damage from exposure to
water, heat, or chemical damage
• Increased use within transportation for metro coaches and
subway cars
• Very limited application within automobiles, primarily used
near exhaust pipes and for catalytic converters
• Increased use of Aluminum over stainless steel in vehicles to
reduce weight and correspondingly fuel consumption, provide
more malleability, better acceleration and braking, better
energy absorption capacity in case of collision, etc.
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 Annexure 11

Price Trends – Nickel vs. FG

Nickel price volatility (USD/ton):

Source – Markets Insider

Steel price volatility (USD/ton)

Source - FocusEconomics

17
 Annexure 12
Relation between Nickel consumption and stainless-steel production

Ferrochrome –

18
Consumption Pattern of Scrap 2005 to 2017 -

19
 Annexure 13

Overview of Inbound & Outbound Logistics

Inbound Logistics

Inbound logistics mainly involve transportation and storage of incoming materials like RM, plant fuel etc. We have been importing
raw materials like Nickel, Ferro Nickel, SS/MS Scrap on container mode. Raw materials get loaded at vendors warehouse and is
shifted to shipping line yard and warehouse where third party agency inspects the material. The important point is to have
complete coordination with the shipping lines to align with of our production planning requirements. The material is then loaded
into the vessel with proper documentations and transported from origin port to destination port. Further, documents are
generated for custom clearances. The material is then transported from port to plant by rail/road or through multimodal route.
For raw material inventory planning, we closely work with sourcing & procurement and production functions to maintain an
optimum inventory.
Vessels
Shuttling/ Trucks/Trailers/Rail
Raw material (Ocean Freight) Destination Plant Storage
Inspection Origin Port Transportation
Vendor’s Port Location
Warehouse 3 days 10-45 days 3 - 5 days
(depending on RM)

* The above-mentioned lead times are only transit times. Refer table below for lead times of complete process/materials.

Days Slot Customs & other Plant

Raw Sourcing Ordering Port Rail
Inventory Preparation Sailing documentation Storage
Material Region Process Operations Out
Plant Process process location
Nickel Europe 8 5 days 14 - 22 days 10 - 13 days 5 - 11 days 3 days 7 days 2 days
Ferro Nickel Asia 2 5 days 13 - 27 days 19 - 33 days 7 - 19 days 3 days 8 days 2 days
SS Scrap Japan 9 5 days 9 - 28 days 19 - 33 days 7 - 19 days 3 days 15 days 2 days
SS Scrap Europe 9 5 days 9 - 20 days 7-12 days 7 - 13 days 3 days 14 days 2 days
MS Scrap Asia 24 5 days 9 - 28 days 23 - 45 days 4 - 16 days 3 days 12 days 2 days

Outbound Logistics

For Outbound logistics, the finished goods are mostly distributed domestically (80% volumes) by trucks and remaining volumes are
exported to Asian countries through multimodal transportations. For export, cargo gets handed over to agent of shipping yard
company for advance booking. Cargo is then loaded into vessel with proper documentations and custom clearances and sails to
the discharge port. It gets shifted from port to customer warehouse through rail/road transportation. We work closely with
production department to plan an optimum level of finished goods inventory.

Vessels
ICD Operations Trucks/Rail
Plant / Rail Out (Ocean Freight) Destination Customer
Origin Port Transportation
Warehouse Port Warehouse
7-12 days 27-45 days 5 days

20
 Annexure 14

Different processes involved under Inbound Logistics

Ordering Process In this process, import orders are being communicated to suppliers according to planning
Slot Preparation In this process, supplier creates plan for container evacuation. The process also involves
Process documentation and waiting time at port for loading
Vessel sails from origin to destination port. Different shipping lines have different sailing
Sailing
times
Port Operations This involves unloading of containers and shifting to rail yard after selecting rail carriers
Containers in transit from port to plant through rail movement (with fixed rail out
Rail Out
frequency)
This process majorly involves examination of documents and material. Further, containers
Customs & other are being handed over to transporters. The focus of organization is largely on raw materials
documentation with price sensitivity and hence the lead times vary from 7 to 15 days. The custom
process department tries to validate the nickel content to establish the price of scrap as they see
from loss of custom duty perspective.
Plant Storage location Containers in transit to plant storage area.

21
 Annexure 15

Outbound logistics
Weekly truck requirement for domestic outbound

Domestic Outbound - Weekly Truck

Requirement
1500 1335
1145
1000 900
770
665
570
500 372 435

0
Week 1 Week 2 Week 3 Week 4

Minimum # trucks required Maximum # trucks required

For these dispatches, multidrop logistics is not possible with customer - demand situation in some locations, so truck
requirement further increases by 10-12%

Different processes involved under Export Outbound

Minimum Maximum
Activities
lead time lead time
Plant operations 1 3
Plant to ICD 1 1
ICD Operations 2 3
Rail Out 3 5
Port Operations 6 7
Sailing 21 38
Total 34 57

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 Participant’s Corner

Deliverables

Participants are expected to provide in-depth analysis and recommendations to address the case study. Key aspects to address
are detailed below:

Categories Key Aspects to Address*

Current State (As Is State) Scope
Identification of addressable
issues
Possible Solutions - Hypothesis
Testing
Final Recommendations and
Implementation Strategy (To Be
State)
Overall structure presentation
& effectiveness
1. Overall Assessment of the company
2. Identification of all the challenges & issues across functions
1. Identify key addressable issues from all challenges and prioritize them
2. Possible impact on the supply chain function
1. Different scenarios with possible solutions
2. Hypothesis generation and validation by qualitative and quantitative
assessments.
1. Recommended solutions with associated benefits, risks/challenges
and mitigations steps for each idea
2. Balanced solution meeting the requirements of “all stake-holders”
3. Develop some planning rules and guidelines
1. Overall structure and effectiveness of presentation

*Note- Use MECE framework for holistic supply chain snapshot & recommendations

Submission format
Please ensure your submission abides by the below guidelines:
1. Maximum number of slides is 15 (excluding cover slide).
2. Appendix slides are not mandatory and there is no limit on number of appendix slides if you wish to add any. Please
mark these separately to avoid confusion with the actual solution. Appendix slides will not be considered for evaluation.
3. You are encouraged to use graphs, charts, tables to strengthen your solution.
4. Clearly state any assumptions you make & include all quantitative / qualitative analysis you have performed to arrive at
your hypothesis / recommendations
5. Only Calibri fonts are allowed and font size in any slide should not be lower than 10. However, lower limit for the font
sizes is 8 for graphs and charts.
6. Teams are required to prepare a PPT for their final solution. The PPT files along with other supporting documentation
can be submitted in the form of a .zip or .rar format file (maximum size of 15 MB). Files that exceed this size will be
disregarded.
7. Please name your submission file as <Institute Name>_<Team Name>. For e.g., if you are a student of ABC college and
your team name is XYZ, your submission file should be named as ABC_XYZ.

Queries
Kindly email all queries to gameplan@gep.com

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