BY: KARAN GUPTA NIKHIL SINHA RAHUL MEHTA SAHIL SINGLA

Supply Chain Management

y SCM is the strategic management of activities involved in

the acquisition and conversion of materials to finished products delivered to the customer.
y Supply chain management spans all movement and storage

of
raw materials  work-in-process inventory  finished goods from point of origin to point of consumption.


Supply Chain Management

y Ultimate goal of any effective supply chain

management system is to reduce inventory (with the assumption that products are available when needed)

Supply Chain Management

y A set of approaches used to

efficiently integrate
   

Suppliers Manufacturers Warehouses Distribution centers

y So that the product is produced

and distributed
  

In the right quantities To the right locations And at the right time

Supply Chain Management

y Supply chain management flows can be divided into

three main flows:

  

The product flow The information flow The finances flow

Problems addressed by SCM

y Distribution Network Configuration y Distribution Strategy y Trade-Offs in Logistical Activities y Information y Inventory Management y Cash-Flow

Difficulties in Implementing SCM

y Uncertainty is inherent to every supply chain  Travel times  Breakdowns of machines and vehicles  Weather, natural catastrophe, war  Local politics, labor conditions, border issues y The complexity of the problem to globally optimize a

supply chain is significant

  

Minimize internal costs Minimize uncertainty Deal with remaining uncertainty

Tobacco & Cigarette Industry in India

 With the establishment of British colonial rule, however, that

the commercial dimensions of Indias tobacco production and consumption grew to be greatly magnified.  The British East India Company began growing tobacco in India as a cash crop. Attempts were made, under the colonial rule, both to increase the land under tobacco cultivation and to enhance the quality of the leaves produced.  As domestic consumption of cigarettes rose, the Imperial Tobacco Company commenced production within India.  Today tobacco occupies a prime place in the Indian economy on account of its considerable contribution to the agricultural, industrial and export sectors. India is the second largest producer of tobacco in the world.

Introduction to ITC
y ITC was set up in 1910 by the name of 'Imperial Tobacco

Company of India Limited'. y It changed its name on September 18th,2001 and now the company is known as ITC ltd. (Indian Tobacco Company Ltd.)
y Presently, ITC has a market capitalization of nearly US $ 15

y    

billion and a turnover of over US $ 4.75 billion. It employs over 21,000 people at more than 60 locations across India. ITC has been rated as: World's Best Big Companies by Asia's 'Fab 50' . World's Most Reputable Companies by Forbes magazine. India's Most Respected Companies by Business World. India's Most Valuable Companies by Business Today.

Why ITC is operationally efficient?

y The Company has been able to build on its leadership

position because of its single minded focus on value creation for the consumer through significant investments in product design, innovation, manufacturing technology, quality, marketing, supply chain management and distribution.

From SEED to SMOKE

Raw Material
y ITC helps the tobacco leaf farmers by giving technological help. y ITC has focused crop development initiatives and extension services. y Model villages are adopted to exhibit all scientific farming techniques

and the comprehensive advantages of their adoption to farmers. y Regular visits of managers and support staff to remotest of tobacco growing regions. are digitally monitored to substantially enhance the shelf life of processed leaf tobaccos, is a unique service proposition to niche customers.

y ITC has refrigerated storage facility, where temperature and humidity

Flue Curing of Tobacco

y Introduction of venturi Furnace  fuel-efficient  reduce curing time  supplement firewood with briquettes made of coffee or paddy husk and other agri-waste.

Manufacturing units
y ITC's cigarettes are produced in its state-of-the-art factories

at Bengaluru, Munger, Saharanpur, Kolkata and Pune.

y These factories are known for their high levels of quality,

contemporary technology and work environment.

Location of Manufacturing plants

The Manufacturing Process

y PRIMARY MANUFACTURING DIVISION


Tobacco Processing Unit is called PMD or Primary Manufacturing Division. Cigarette manufacturing process involves processing of tobacco leaf and stem to different tobacco blends, which is called cut tobacco. ITD receives various grades of Tobacco Leaf and Stem from Indian Leaf Tobacco Division (ILTD) based mainly in Guntur, Andhra Pradesh

SECONDARY MANUFACTURING DIVISON

y The cut tobacco is then sent to the Secondary Manufacturing Division

(SMD) for making and packing cigarettes. Cut tobacco is then converted to cigarettes using other raw materials for making cigarettes and packing them in various forms as per the trading requirements. At SMD, there are two processes: Making and Packing.  Making process is the rolling of cigarette sticks.  Packing process is packing of these cigarette sticks in the cigarette packets of various pack styles. Cigarettes are categorized in different segments based on filter or nonfilter type, cigarette length, circumference, pack style, filter length and cigarette placement. Under each segment there are various brands.

Rest of the raw material required for making or packing cigarettes is provided to all factories from various suppliers, most of which are part of ITC Ltd. Like ITC's Paperboards and Specialty Papers Division supplies packaging material required to pack cigarettes. Finished Good (Cigarettes) are supplied from the factories to godown using mainly road and rail transportation.

Vertical Integration
y ITC filtrona  Provides Cigarette filters y ITC Infotech  It offers Enterprise Resource Planning (ERP) software solutions.  It provides software solutions to 3PL service providers. y ITC's Packaging & Printing Business  Provides Packaging solutions to cigarette business.

Warehousing
y Our in-house warehousing facilities are

benchmarked to international standards for

  

Phytosanitary Hygiene Infestation control

y ISO 9000 certified

Raw material

ILTD supplies Leaf and stem.

PMD

Input is converted into Cut tobacco. Cigarette is manufactured.

SMD

Godowns

FG is stored into godowns. FG sent to retailers and wholesalers.

Distribution channels

Inventory Management
y Inventory is managed to facilitate just-in-

time delivery. y Use of IT in inventory management

  

ITC Cigarettes have consolidated their inventory by deploying SAP module of Information technology in their warehouses. The stock positions are automatically updated in the database as & when goods are sold from the warehouse. Accordingly, replenishment orders are generated to the company when the stock level goes below the benchmark level which takes into account the order lead time as well. This way ITC cigarette reduces its inventory holding costs by deploying proper inventory management.

Logistics
y Supported by an ERP system, the movement of leaf

tobacco from buy-to-box can be tracked, a key enabler towards attaining traceability. y ITC uses 3PL ( third party logistics) service provider for transportation of raw material and goods.

ITCs Distribution channel

COMPANY HUB FACTORY Carried and forward agent

Wholesale dealer Small Wholesale dealer

Retailer

Consumer

Carry and Forward Agent (C&F agent)

It receives a token amount as service chain. Receives goods from the factory and updates the online inventory. C&F agents deliver goods to dealers and retailers. The deliveries are made according to the deliver summary which he gets from the branch everyday. Maintenance of the godown according to the prescribed norms.

Wholesale Distributors
y It mainly refers to the agency holders of the company who act as the

company representative in the market and supplies the product to the different selling points in the market. y The distributors are available in almost each city and other important areas of the market to increase the availability of the brand in the market and compete against the competitors. y One hand they are representing company in the market and on the other hand they are involved in promotional activities of the product (due to restriction on advertising and promotion of the Cigarettes using media types).
y RURAL DISTRIBUTION


last mile connectivity: 100 partnering companies

Wholesalers
y They help in bulk breaking from the local distributors and

also supplies to the retailers in the in and around its periphery.

y They also help in promoting the company and other

promotional activities through various visual merchandising.

Retailers
y The last intermediate that is available before the Cigarette

reaches to the customer are the retail outlets. y Various retail outlets
    

Pubs/bars Kirana shops Pan shops Kiosks Multi Branding Outlets

ITC v/s Godfrey philips

Operating Profit Margin
40% 35% 30% 25% 20% 15% 10% 5% 0% ITC Godfrey philips Operating Profit Margin

Q&A