CASE STUDY CONCEPT: Maximizing Supply Chain Performance to Increase Company Profits.
In the restaurant industry in India, “Spice Max” is a well-known brand of Biryani Masala owned by a company named “Paramount Restaurant” which is very famous for its Hyderabadi Biryani. This delicious food seasoning is made from a blend of different spices. They are mixed together and heated over low flame to bring out the flavor of each spice. Then they are run through a blender to create a flavorful powder that is used to season many kinds of meats and vegetables, and create popular dishes served in restaurants throughout India.
(pictures courtesy of Foodvedam – Hyderabadi Biryani Masala – https://youtu.be/QqdZhumXIRE)
Hyderabad is the city where the company was founded and where it has prospered for many years. Hyderabad is a historic city located at the crossroads of trading routes that bring the products of Southeast Asia to markets in the Middle East and beyond. The city is known for its trade in pearls and diamonds, and its street markets and open air bazaars are hubs of activity and commerce.
(Hyderabad is circled in yellow in the screenshot above. Instructors, students and professionals can request a free SCM Globe evaluation account .)
Supply Chains to Support Business Expansion
To maintain high quality of product and customer service, Paramount has not opened new branches for a long time. But now, due to tough competition from various other brands, the company has decided to open new branches in the cities of: Bengaluru; Vijayawada; Chennai; and Pune. Additionally, along with restaurants in those cities, they have decided to sell Spice Max separately to other franchises and distributors.
You have been hired by Paramount Restaurant to manage the supply chain of Spice Max. The following are the features of the current supply chain:
- A manufacturing facility and a distribution center in Hyderabad
- Stores in Hyderabad, Secunderabad, Vijayawada, Bengaluru, Chennai and Pune
- Transportation modes of small, medium and large sized trucks, and also train freight cars.
Your immediate task is to increase the company’s net profit by making improvements in the supply chain and lowering inventory and operating costs over the next 30 days. You can do this by using combinations of these actions:
- Managing the logistics framework by adding new delivery fleet vehicles and creating new routes or adding more delivery stops to existing routes
- Adjusting delivery frequencies and amounts delivered to stores to meet demand yet also reduce on-hand inventory and transport costs
- Modifying production rates and maximum storage capacity at the factory to manage on-hand inventory and rent expense
- Modifying maximum storage capacity of the distribution center and the stores so as to manage rent expenses
- And remember – you must still meet daily product demand at every facility over a 30+ day period
You can add/remove delivery routes and vehicles and change the delay between their respective departures. The following table mentions various parameters related to different vehicles that are available for use in this supply chain (parameters are based on research done in September 2018; prices are converted from Indian rupees to US dollars). Use only these vehicles and values in the simulation. Do not use any other vehicle or different parameter values in your simulations.
|Truck small||Truck Med||Truck Large||Train|
|Carry Volume (m3)||6||17||25||85|
|Max Weight (Kg)||1000||4500||9000||20000|
|Ops Cost/Km ($)||0.13||0.24||0.34||0.2|
You can change factory production volume per day and maximum storage capacity. You can also change the maximum storage capacity of the distribution center and stores. The maximum storage capacity should be greater than the initial quantity of on-hand inventory.
The following table shows the various other parameters related to different facilities (parameters are based on research done in September 2018; prices are converted from Indian rupees to US dollars). These must not be changed. Also do not change the product details.
|Daily Rent Cost ($/m3)||1.35||1.08||0.81||1.01||1.21||1.01||0.94||0.67|
|Daily Operating Cost ($)||471.1||403.8||269.2||376.88||376.88||403.8||4037.96||1009.49|
[ If you have not done so already, please take 15 – 30 minutes to scan the short videos and tutorials in the Getting Started section of the online guide before proceeding to work with this case study. ]
YOUR CHALLENGE – Improve Supply Chain Performance and Company Profits
Login to SCM Globe and go to the online library. Load a copy of the “Paramount Hyderabad” supply chain into your account.
In your account management screen click the “Edit” button next to Paramount Hyderabad and the supply chain that distributes Spice Max in southern India appears on your screen (click your browser “Refresh” button if your screen does not display the complete supply chain as shown below).
Now you can start looking at the current supply chain model and making changes. Click on the menus for products, facilities, vehicles, and routes on the right side of the screen. As you do this dialog boxes will open to display information about the entity you have selected (as shown above). As you run simulations and find problems with the supply chain design you can type over some of the existing values (such as production rates, vehicles, delivery routes and delivery amounts, etc.) to fix the problems that are found.
When you are ready to simulate, click on the “Simulation” button in upper right corner of the Edit screen. The Simulate screen as shown below will open in a new browser tab.
Click on “Play” in upper right corner of the Simulate screen. You can change the simulation speed as required (click on “Speed” and select desired speed from drop down list). As the simulation plays out you see the vehicles move on their delivery routes, and on the right side of the screen are graphic and numeric data displays showing simulation results. When an error appears in the simulation due to a stock out at any store, or storage maxed out at any facility, the simulation will stop.
You can then go back to the Edit screen in the earlier tab and make any changes you think are required to fix the problem and get your simulation to run for 30+ days (add new vehicles, new routes, new delivery quantities, delay between departures for delivery vehicles, etc).
Once you have made changes in the Edit screen then run the simulation again. Go to the browser tab with the Simulate screen and click on “Reload Supply Chain”. The changes you made will be updated and click “Play” to simulate again.
Your simulation will generate a lot of data that you can analyze. You can view the data in the onscreen displays. And you can also export the simulation results to a spreadsheet and generate monthly profit and loss reports plus key performance indicators showing how well the supply chain is operating.
Profit & Loss Reports and Key Performance Indicators
When the simulation completes 31 days or more, click on the “Stop” button. You can now download the simulation results as a comma separated values file (CSV file) by clicking on “Export Results to Excel”. Once downloaded to your computer you can open this file with any spreadsheet: Excel; Apple Numbers; Google Sheets; etc.
Read more about how to analyze simulation data in the online guide section “Analyzing Simulation Data“. Toward the bottom of that section is the header “Download Simulation Data to Spreadsheet Reporting Template – Monthly P&L Report”. There you will find instructions for downloading your simulation data to your PC and creating monthly Profit & Loss Reports.
There is a custom Profit & Loss Reporting template created for this case study. This template has two tabs, when you import 30 days of simulation data into the simulation data tab, equations in the reporting tab will create a monthly profit and loss report plus key performance indicators (KPIs). This is shown below. You can download a copy of this custom reporting template here
Optimize the supply chain by choosing the best vehicles, routes and delivery frequencies. Deliver products so as to meet demand at the stores while also maintaining minimum on-hand inventory and lowering storage and transportation costs. You can read about ideas for cutting inventory and operating costs in the online guide section “Cutting Inventory and Operating Costs“.
Try different ideas for improving the operations and profitability of this supply chain. The simulations show you what works best. Keep improving your supply chain design based on what you learn from the simulations. What you learn in these simulations will also work on actual supply chains in the real world.
Send Your Best Solution to Your Course Instructor
Once you have obtained your best simulation results and downloaded the simulation data into your P&L reporting template, save your supply chain model by clicking on Options > Create Save State in the upper right corner of the Edit screen. The file saved will have the latest time stamp.
In your account screen, click on “Download Save State” button to download the file and rename the file as <yourname>.json where <yourname> is your first and last name. Attach this .json file with your supply chain model and the spreadsheet with your P&L Report to an email and send them to your course instructor (see further instructions in “Download and Share Supply Chain Models“).
You will be evaluated based on the Net Profit generated by your solution, and on route optimization used in your supply chain. Net Profit is calculated by deducting inventory holding cost from gross profit. Inventory holding cost is estimated at 25% of the value of on-hand inventory left at the end of your 30-day simulation. Extra points will also be awarded for creative transportation solutions that maximize use of vehicles and transportation infrastructure on delivery routes.
SAVE BACKUP COPIES of your supply chain model from time to time as you make changes. There is no “undo”, but if a change doesn’t work out, you can restore from a saved copy. And sometimes supply chain models (json files) become damaged and no longer work, so you want backup copies of your supply chain to restore from when that happens.
This case was created by students in the Post Graduate Program in Management at the Indian School of Business (ISB), Hyderabad, India. The students were: Anoop Rajan (Anoop_RajanM2019@isb.edu ); Jayadeep P. (Jayadeep_P2019@isb.edu); and Sanchit Mital (Sanchit_Mital2019@isb.edu).