Supply Chain of Atlas Exercise Books

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Contents

Product Briefing

Books
Atlas
Product  
Atlas Exercise Books (EXBOOK)
Company  
Ceylon Pencils CO (Private) Limited



Elements of the Supply Chain

Planning

Demand Planning

In every week on Wednesday there’s a meeting held in the Ceylon Pencils CO (Private) Limited premises by the marketing department of the company. In the above mentioned meeting, demand planner of the company conducts a presentation to the marketing executives of the company. In that presentation he explains about the present market trends and the future demand analysis for the product. As discussed most of the time he is using the below factors to predict the future demand for the product.



Past trend

How the products have been sold during the last month/season.

Season
October - December
Atlas Exercise books are having a seasonal demand. During the period of October to December in any year their products are highly demanded. Because during this period of the year school students buy new books for the next school year.
April – May
Even during the Sinhala/Hindu new year season, these products are highly demanded.

Demand forecaster of the company is considering the above mentioned factors and forecasts the demand for their product for the next week. At the end of the month, after discussing the fact for four weeks the marketing department is sending their next month demand forecasting reports to the production department. Then production department takes the necessary steps to manufacture the quantity as suggested by the marketing department.

Supply Planning

The company is maintaining a safety stock of raw materials in their warehouse in Welisara. Because, as the normal procedure in the company, they import raw materials from India in 5,000 kg lot form. Even if their total production need of row materials for the week is 3,000 kg, they purchase 5,000 kg from their suppliers. This limitation has been set by their supplier for them for their convenience (by the more powerful company). They provide only 5,000 kg lots of paper reels, printing boards at a time. Therefore the company is always having an excess amount of row materials.

Currently Ceylon Pencils CO (Private) Limited is manufacturing their products according to the orders received form their dealers. Therefore the company doesn’t maintain any safety stock for finished goods. When a dealer placed an order the company processes the order and then the finished goods are sent to the warehouse in Welisara. Then the order is sent to the dealer on the relevant day using the company’s normal destitution procedure. (will be explained in detailed in the delivery sections).

Sourcing

As mentioned in the Demand Planning section, when the marketing department sent the demand forecasting report to the production department, production department makes a budget for the raw materials needed for the forecasted demand. First they check the available amount of raw materials in the warehouses and create a list to import the rest.

Almost all the raw materials are imported from India. Raw materials needed for the production are as below.

Paper reels

  • 250 GSM (for exercise books)
  • 280 GSM (for CR exercise books and science books)

Paper reel suppliers

The company is relaying on two major paper product suppliers (manufacturers) from India.

  1. EFFEM International (India)
  2. Clariant Company (India)

Printing boards

Printing boards are basically cardboards which are used to manufacture the covers of the exercise books. Supplier is EFFEM International (India).

Ink

Basically four colous are used in the production. They are using the CMYK color modal for printing. The colours which are imported are,

  1. Cyan
  2. Magenta
  3. Yellow
  4. Key (usually black)

Supplier is Clariant Company (India)

Making

Ruling Process

In this process the all paper reels are ruled with ink using a machine. The machine is called as Linomatic Web Machine. The machined automatically rules (print rules) on the paper reels inserted and then the reels are cut to match the size of an exercise book. Each printed reel is cut to 7,500 papers; each paper can be used to make 8 pages of a normal exercise book. Folding Process

The machine used for this process is called the folding machine. In this process the printed papers are folded.  

Board Printing Process

In this process, the cover pages are printed. They use a machine named Speed Master Sordz to handle this process. When the paper boards and the ink are loaded to the machine it automatically prints the cover art using the relevant colours.

Next the printed boards are sent to the UV Varnish machine. There the printed paper boards (book covers) are laminated. Then the laminated paper boards are cut to match the six of exercise book. (40 pages, 80 pages, CR etc.)

Binding Process

In this process the papers are bound. Books which have more than 160 pages are sewing and others are staplering. This process is handled by a machine called Parallel Binder. Parallel Binder can be used for the books which has less than 160 pages. For others since the process is different, they use a different machine which is called the Perfect Binder which is using gum to bind the pages with the cover. Quality Checking

In this process, a square root quantity of the total quantity of samples of the finished good are checked. Ex: if 100 books are manufactured, 10 books have to be checked for the quality standards.

Packing

This process is handles by five packing teams. Each team consists of twelve members. In this process 12 books are packed and covered by a polythene seal. Then they are stored in pallets. And now the pallets are ready to be delivered to the warehouse! Production process is complete.

Delivery

Whole delivery part is handled by the vehicles owned by the Ceylon Pencils CO (Private) Limited. These services are not out soured. There are two steps in delivery.

Delivering the Finished Goods To The Warehouse

All finished good are delivered immediately to the warehouse in Welisara soon after they have completed the manufacturing process in Paliyagoda manufacturing plant. Normally Lorries are used for this delivery.

Delivering the Finished Goods To The Retailers / Dealers

Even this process is handled by the vehicles owned by the Ceylon Pencils CO (Private) Limited. The total distribution process is divided in to five parts.

Monday Tuestady Wednesday Thursday Friday
Galle Hatton Kuliyapitiya Jaffna Southern Province excluding Galle

For example, on Monday all distribution vehicles will be used to distribute the products in Hatton area. The vehicles will send the goods to the retailers and the dealers in the same area and return. The same process will be done for all five days respectively according to the above table.

Apart from that a different distribution process is done for the Colombo area. Books are distributed to the retailers and the dealers in the Colombo area daily (six days in a week including the Saturdays) using a different set of vehicles of the company.

Return

There are two types of returns mentioned by the company

  1. Delivery return
  2. Goods return

Delivery Return

Delivery return can be happened due to the problems in invoices, unloading incorrect goods or unloading to the incorrect places. The distribution vehicles normally collect these returned goods from the dealers or the retailers and they are directly sent to the warehouses. The warehouse management system is credited with the retuned goods quantities.

Goods Return

Goods can be returned due to the quality issues. Goods delivered with damages are returned by the dealers or the retailers. Damages can be happened due to the bad delivery conditions. These returned goods are also collected by the distribution vehicles and they are sent to the manufacturing plant and not to the warehouse. Then the quality and damages are checked by a team in the Atlas. If they are not up to the standards these products are destroyed.

Importance of the Supply Chain Management for Atlas Exercise Books

Cost Cutting

An efficient supply chain is important for any company in order to make sure that the company is not wasting the time and money in their integration process. It is very vital to understand the inefficient areas in the supply chain and correct them in order to make the whole upstream and downstream processes faster and to make sure that the company is earning a maximum profit.

As mentioned above Atlas does not maintain any buffer stock for finished goods. Because keeping a high amount of inventory is a cost to the business. According to the business nature of the industry it is not needed to have a buffer stock too (as they mentioned; because they process only orders by their dealers and they are given a reasonable time to process the order).

Deliver the Right Goods at Right Time

It is very essential to send the finished goods on time in full (OTIF) to the dealers and retailers. Because it is needed to maintain the company’s reputation and good will. If the goods are not delivered at the right time to the right place in right quantity the customers may start to complaint about the service. But the current supply chain system handled by the company has helped them to avoid those problems and to maintain a smooth flow of goods to their customers.

Product Availability

If the product is not available with the retailer there is a probability of moving to a different brand. If the customer is satisfied with the new brand he/she may continue to use the new brand other than using Atlas. Therefore product availability is one of the key factors considered in marketing. As described in the delivery section under supply chain elements, Atlas is having well planned distribution system. In each day of the week they do distributions in selected areas to make sure that the products are always available to the customer. Also they do distributions in all six days (Monday to Saturday) in the Colombo area where we can find more educational institutions. Product availability is very helpful to win a good market share.

High Customer Utility

Final outcome of any business should be increasing the customer’s utility. By providing goods to the correct dealers and retailers on time in the correct forecasted demand quantity, it makes easier the customer to buy the product with less effort. It increases the customer’s satisfaction.

Ways of the Product Differentiation (Using Supply Chain)

Quality of the Product

Atlas is following two rules in their supply chain to maintain the high quality of their products (exercise books).

  1. Use their own reliable vehicles and team to deliver the products to minimize the damage during the delivery process.
  2. Atlas does not maintain stocks for finished goods (for more than a week). All stocks are distributed within 6 days after the manufacturing so that the damages or quality reductions that can take place in the warehouse is reduced. Weekly distribution procedure and the correct demand forecasting methods of the company have helped them to run with fewer inventories.

Availability

Atlas exercise books can be purchased from almost any book shop or small scale shop in any area. One of the ultimate goals of a successful supply chain should be increasing the product availability. With the Atlas’s product distribution procedure, they make sure that the products are available in almost all areas in the island at any given time. With respect to other brands, Atlas is having relatively high product availability when it comes to exercise books. This helps the company to beat other companies and to win a good market share in the exercise books market.

Online Orders

You can buy Atlas exercise books online using their website (www.atlas.lk). This is one of the main product differentiations they have against their competitors. They receive the orders online, and then they produce it and deliver using the methods described in the delivery part.

Lead Time Analysis

Preprocessing

When a dealer or another company placed an order to Atlas for a certain quantity of exercise books, the production department of the company starts to create a budget to the order. It includes the needed amount of raw materials to complete the order. This takes only one business day. Then the budget is sent to the finance department for approval and finance allocation. It takes less than a business day. After the approval they place orders for raw materials from the Indian suppliers. Usually it takes 1 week to receive the full raw material order shipment to the company. Therefore the total average time duration for preprocessing is 8 days.

Processing

Usually company takes one week to complete an average order. Because they have to complete the all the processes as described in the making section. Therefore average required time duration for processing is 7 days.

If the order was a customized one (customized design: Ex: exercise book design for a school with their logo on the front page) it takes an additional three days to make the design. Then they have to send the design to the client for approval. This process usually takes 4-5 days. After the approval they start the making. Therefore for a customized order average required time duration for preprocessing is 14 days. (Because making takes additional seven days)

Post Processing

As described in the delivery section, delivery is made on weekly basis according to a schedule. After manufacturing the finished goods are sent to the warehouse in Welisara and they are kept there till the relevant day comes for the delivery according to the area-wise prepared delivery schedule. According to the schedule, it can take 1 to 7 days to complete the delivery.

Total maximum lead time for a normal order
22 days. (Minimum is 16)
Total maximum lead time for a customized order
29 days. (Minimum is 23)


Partner Integration in the Supply Chain

Sophisticated ERP System

Ceylon Pencils CO (Pvt) Limited is using a sophisticated ERP system which connects all dealers to the company and the warehouse. They use applications developed using the SAP system. With this system dealers can exchange information with the company and it has helped them to run the business processes faster.

Discounts and Allowances for the Dealers

Every dealer has to register with the company by paying a deposit. After paying this deposited amount the dealer becomes a trusted partner to the company. Then they are given a period of 30 days to pay money for any order they place. They can even pay after they sold the lot (within 30 days). This type of allowances makes the relationship between the dealers and the company much stronger which help them to improve their sales. Because, the dealers are the people who are really handling the sales part of the Atlas exercise books.

Good Relationship with the Suppliers

The product Atlas exercise books is completely relaying on two major suppliers from India. Since the business is having less number of suppliers the company has to maintain a good relationship with them in order to make sure that they are always getting the required amount of raw materials on time. Although it is a risk for a company to have only two suppliers, Atlas is getting the benefit of economies of scale by having only two suppliers.

Reliable and On Time In Full (OTIF) Delivery System

With a good delivery system almost all the parties in the supply chain can be benefitted. When it comes to Atlas, the scheduled distribution method helps them to deliver their products (orders) on time in full. Therefore the dealers, retailers and the company are benefitted at the same time. This has also helped the company to build the trust with their partners and to improve the sales.

Outsourcing

Although the outsourcing can be a good solution towards building an efficient supply chain, currently Atlas has not outsourced anything in their supply chain.

Current Problems in the Supply Chain Integration

Problems With Respect To the Importing Raw Materials

All raw materials are imported through a local agent. The agent is placing the order on behalf of Ceylon Pencils CO (Pvt) Limited and imports the raw materials. Normally it takes around four days to receive the raw materials shipment to the port of Colombo. Then the goods should be released within three days from the port of Colombo via the local agent. If there was any delay of releasing then Atlas has to pay fines to the port of Colombo.

Actually the complete process is taking around seven days and it is somewhat longer than expected by the company. Most of the time Atlas has to pay fines for delayed goods releases too.

Unexpected Delivery and Goods Returns and Longer Delivery Times

Sometimes the delivery team is not doing their job well. They send the wrong goods to certain dealers or retailers, sometimes they send the goods in the wrong quantity or sometimes they do not deliver the goods too (bring back without unloading). This situation has been a problem to maintain the good relationship between the company and the dealers.

When the goods are returned then they are sent to the warehouse and the dealers have to wait another week till the distribution vehicle comes in the next week to receive their orders (for dealers outside Colombo).

Monthly High Cost for Delivery

Ceylon Pencil CO (Pvt) Limited’s core competence is making stationary and not doing the transport activities. Therefore they are not experts in managing a good transport network with a lower cost. Their transport costs are relatively high which finally makes the end product more expensive.

Suggetions to Improve Integration Within the Supply Chain

Outsourcing the Transport Activities

By outsourcing the transport activities, the company can reduce their transport cost and make their distribution more reliable. With this action both company and the dealers or the retailers can be benefitted. Because a reliable and faster transport network can always help to improve the supply chain integration. Finally due to the fixed cost reduction (no vehicles needed) the total cost of the product can be reduced. Therefore reducing the price can help the company to compete with a good price in the market against their competitors and to increase the customer satisfaction too.

Finding More Reliable Local Agents to Import the Raw Materials

As discussed, it takes nearly seven days to import and to clear a shipment of raw materials. Also most of the time Atlas has to pay fines to the port of Colombo due to the delays made by the local agent. It increases the variable cost of the product and finally the total lead-time too. I think Atlas has to find more reliable local agents for importing process so that they can reduce the lead-time and also they can make a good relationship with their suppliers. Lead-time reduction also helps the company to process their orders faster. It helps to improve the satisfaction of the dealers and the retailers too.

Expand the ERP System As It Can Be Used By the Suppliers

Currently Atlas ERP system can be used by the company, warehouse and the dealers only. If the company can expand this system as it can be used by the suppliers and the local importing agents, then suppliers or local agents can check the amount of stocks available in the Atlas warehouses and send the raw materials as it goes. Companies such as Zara are doing so. Final outcome of a good ERP system should be this. It can always help to improve the supply chain integration in the both upstream and the downstream sides of the supply chain.

Information Systems Used By the Supply Chain Members

SAP-ERP System

Currently Ceylon Pencils CO (Pvt) Limited is using a sophisticated ERP (Enterprise Resource Planning) system to handle the company functions, warehouse functions and to share information with the suppliers. The system is programmed using SAP. Currently all the payment processes and the order making processes can be handled by the system other than handling them manual. The system helps the dealers and the company to process the orders faster and to improve the relationship between the dealers and the company.

Online Sales

Company is having an online shopping cart which the customers can place orders online with a discounted price. This system helps the company to receive more orders, to build a good reputation and also to compete against the competitors too. After processing the order, the finished goods are delivered to the customer’s premises by the Atlas vehicles. I think the system helps to build new relationships with the new customers.



--Gishan Chaturanga 12:04, 20 January 2012 (MST)



References

  1. Eranga, D. (Logistics Executive), 2011. Interview on Supply Chain Management of Ceylon Pencils CO (Pvt) Limited. 1 November 2011, 3.00 PM
  2. Atlas Shopping Cart. [ONLINE] [Accesses 10 November 2011].