hvn 11 and Cognizant present

Chankaya 2011

ROUND 1

Contents Rules and Regulations for Round 1 Caselets 1 - 4

RULES & REGULATIONS FOR ROUND 1

There are 4 cases outlined below. You are required to solve any TWO cases of your choice. The analysis and recommendations for each case should be based on the case facts only. Reasonable assumptions, if any, should be stated upfront and based on the information in the case. All caselets carry equal weightage. The solutions of the caselets should be restricted to 2 pages. The solutions should only be submitted in the format specified in the attached template. The deadline for sending entries is 6th October, 2011 11:59 p.m. The answers should be mailed to chanakya@ahvan.in. The subject of the mail should be Chanakya solutions: TeamName_CaseletNo1_CaseletNo2 (Example Chanakya_2_4). The entries should be in pdf format. The document should be named as TeamName_CaseletNo1_CaseletNo2. The results of the first round will be updated on the website and will be mailed to the individual teams that qualify as well. You can follow us on facebook at http://www.facebook.com/Chanakya.iimi and at twitter at http://twitter.com/Chanakya.iimi In any case of dispute, the decision of the organizing team will be final and binding.

Caselet 1: St. Mary Glasses India Pvt. Ltd St. Mary Glasses, an international glass manufacturer entered India through its subsidiary in the year 2000. Several factors prompted their move. Firstly, there was a huge demand in the Indian market. Secondly, the Government of India funded the construction and plant set up completely. Thirdly, they could keep their raw material costs constant for the next 15 years because of they had access to a captive raw material base. Fourthly, they had a patented technology that would allow them to cut down any variations in processing costs. St. Mary Glasses could produce a variety of glasses such as Soda glass, Pyrex glass, Optical glass, Lead Crystal Glass, and Coloured Glass. They established their first plant in Mumbai. The high transportation cost involved in distribution of fragile glass made it uneconomical for them to supply glass over larger distances. This encouraged them to setup 3 new different plants at 3 different parts of the country Kochi, Vizag and Kolkata in the years 2001, 2002 & 2003 respectively. Each plant incurs a fixed cost of Rs 52 Crores per year to keep it running. As a practise, the company employed an external special task force for the first year of operation of each of its plants, after which it handed over the control to the plant managers. St. Mary Glasses enjoyed a monopoly in the Indian markets. However, regulations from Govt. of India put an upper cap on the price that St Mary could charge. In 2006, the company caught wind of a German competitor planning to enter this high growth market. Keeping in view this threat, St Marys set up a new plant at Indore in 2007, with a capacity similar to that of the previous plants. The new plant was operating at full capacity within a year and could sell all that was produced. Each of these plants had a separate Plant Manager and functioned as an independent entity enjoying operational flexibility. The headquarters incentivised each of the plants according to the revenues they achieved. In addition, as the selling price was capped, the plants were given additional incentives on the basis of their profitability. They gave full freedom to the individual plants to plan their marketing, sales and operations. Each plant ran at near its full capacity of 250 metric tonnes In Jan 2008, Mike Jordan joined St. Mary Glasses as the CEO. In order to revisit the business strategy of the 8 year old company, he carefully reviewed all the company decisions and data which included certain forecasts. In addition, he noticed that some of the plant managers were disgruntled. What should be Mikes action plan of action for the short term and the long term? Exhibit 1: Sales per plant Sales per plant in Metric Tonnes 2005 2006 2007 2008 2009* 2010* Mumbai 244 245 245 247 247 250 Kochi 245 243 245 246 248 249 Vizag 244 245 246 246 248 248 Kolkata 242 245 247 247 249 249 Indore 0 0 150 248 250 250 *Forecasted Demand Exhibit 2: Variable Cost Break up for 2006
Distribution

5% Transportation 30%

Raw Material 25%

Processing

15%
Packaging

25%

Exhibit 3: Cost vs. Revenue Cost Vs. Revenue (in Cr.) 2007 2008
Cost Revenue Cost Revenue Cost

Plant
Cost

2005
Revenue Cost

2006
Revenue

2009*
Revenue Cost

2010*
Revenue

Mumbai 72.33 Kochi Vizag Kolkata 72.42 72.33 72.17

81.33 81.67 81.33 80.67

72.42 72.25 72.42 72.42 -

81.67 81.00 81.67 81.67 -

76.50 76.50 76.60 76.70 64.50

81.67 81.67 82.00 82.33 50.00

76.70 76.60 76.60 76.70 72.67

82.33 82.00 82.00 82.33 82.67

76.70 76.80 76.80 76.90 72.83

82.33 82.67 82.67 83.00 83.33

77.00 76.90 76.80 76.90 72.83

83.33 83.00 82.67 83.00 83.33

Indore *Forecasted

Exhibit 4: Domestic Demand for Glass in India (in Metric Tonnes)

Exhibit 5: Exports - by plant (in Metric Tonnnes)

60
1400

1370

7 6 8 18 14 5 18

1260

1220
1200

40

1180 1140 1100 1060 1020 20

12

26

24

25

19 8

1000 2005 2006 2007 2008 2009* 2010* 2011* 2012*

0 *Forecasted Demand

10

Mumbai Kochi
2005 2006 2007

Vizag
2008

Kolkata Indore
2009* 2010*

*Forecasted Exports

Caselet 2: Vegetable King Vegetable King (VK) is an Ohio based retailer of fresh fruits and vegetables. It is a well-established brand and is the leader in the retail and wholesale segment. It has been in existence since 1988 and enjoys high brand recall and consumer loyalty. It was ranked No. 4 in the Most Trusted Brands list compiled by Readers Digest in 2005-06. In 2007, it had 10 domestic chains and wanted to expand its business. In the decade leading up to it, they enjoyed a return on equity of more than 130%. However, like many other retailers, they still depended on traditional media for their sales and marketing. In 2005, their turnover touched $300 million; but ever since, their top-line growth has been on a decline. The last few years have witnessed a host of retailers exploring alternative channels to grow their business. Vegetable Mart (VM), a retailer like VK, has been engaging with its customers online since 2006. Their online sales channel has been contributing close to 20% of their revenues. By 2009, it had managed to acquire an overall market share of 22%. VKs market share, in the meanwhile, has been on a downward slope, having slipped to 66% from the all-time high of 73% it achieved in 2005. Seeing VMs success, in 2008, VK poached the online marketing head of VM, Mr. Blink, in a bid to meet its objective of increasing its topline by 20%. Over the next two years Mr Blink launched a series of online campaigns for VM. He spearheaded their social media foray, setting up presence on facebook and twitter. You are called upon to review VKs decisions and assess Mr Blinks performance.
Vegetable King revenues ($ 1000s) Fresh Food Products 2010 Ohio NYC San Diego Texas North Carolina South Carolina New Jersey Delaware Philadelphia Mexico 19175.73 14381.80 21572.70 35954.50 45542.36 38351.46 14381.80 14142.10 12943.62 11984.83 2009 17077.10 15559.14 15748.88 27133.62 32256.75 30169.55 13851.43 10834.47 11574.48 7381.10 Canned Food 2010 898.86 786.50 823.96 838.94 374.53 449.43 464.41 771.52 764.03 1176.01 2009 351.89 376.04 334.64 417.44 162.15 231.14 196.65 403.64 389.84 527.84 Dairy Products 2010 4314.54 4808.91 5842.61 3865.11 3559.50 4089.82 3685.34 4359.48 4570.72 4337.01 2009 8219.78 6906.74 8880.09 7362.13 7058.54 6754.94 6906.74 6299.55 8272.91 6808.07 Health Food 2010 741.56 764.03 689.13 801.49 730.33 653.92 764.03 696.62 816.47 659.17 2009 733.45 627.20 669.28 683.08 618.92 807.97 752.08 614.09 710.68 545.09 Snacks 2010 7640.33 8464.29 6966.18 6516.75 8164.67 7715.24 8014.86 8164.67 7265.80 5992.42 2009 7037.84 7796.82 6416.85 6002.86 7520.83 7106.84 7382.83 7520.83 6692.84 5519.87

Vegetable Mart revenues ($ 1000s) Fresh Food Products 2010 Ohio NYC New Jersey Delaware Philadelphia 3565.49 2726.55 3565.49 4823.89 4551.24 2009 4317.04 3012.44 4008.68 5930.00 4530.52 Canned Food 2010 2116.82 2292.10 2831.42 2561.76 2831.42 2009 1591.74 2016.20 2217.82 2090.48 2048.03 Health Foods 2010 2005.96 2160.27 2931.79 3240.40 3934.77 2009 2022.44 1977.50 2067.38 2280.86 2056.15 Beverages 2010 5602.91 4284.58 5504.03 3954.99 4383.45 2009 4586.70 4119.79 4366.97 3213.43 3762.74 Cereals and Cookies 2010 4089.82 5348.23 4404.43 5977.43 3460.62 2009 2596.71 4119.79 3420.67 4569.22 4019.91 Day-to-day grocery 2010 6000.3 5325.7 4260.6 5680.8 4331.6 2009 4141.5 3784.5 3462.4 4267.7 3945.6

Income Statement for Vegetable King (in 1000 dollars) 2009 Revenues: Net Sales Fresh Food Products Canned Food Dairy Products Health Foods Uncle Joe's Membership and other income Costs and expenses: Cost of sales Operating, selling, general and administrative expenses: Freight Charges Employee Salaries Internal IT systems Selling and marketing expenses Misc Operating Income Interests Income from continuing operations before income taxes And minority interest Provision for income taxes Income from continuing operations before minority interest Minority interest Income from continuing operations Loss from discontinued operations, net of tax Net income 6,365 6,908 264,152 64,001 13939.4178 9292.9452 3801.6594 14080.22 22,887 20,497 1,529 286,515 70,288 13917.02 1226.669 2783.405 15463.36 36,898 21,996 1,798 344,992 189745.6 3449.92 75898.24 6899.84 68998.4 3,658 348,650 374,526 239696.6 7490.52 44943.12 7,491 74905.2 4,273 378,799 2010

Income statement for Vegetable Mart (in 1000 dollars) 2009 Revenues: Net Sales Fresh Food Products Canned Food Health Foods Beverages Cereals and Cookies Day-to-day grocery Costs and expenses: Cost of sales Operating, selling, general and administrative expenses: Freight Charges Employee Salaries Internal IT systems Selling and marketing expenses Misc Operating Income Interests 74905.2 17477.88 2307.08 4614.16 6991.152 2621.682 943.8055 32458.92 699.38 82,396 18,876 2242.482 4609.546 8116.727 2831.417 1,076 48,539 818 124842 23719.98 10611.57 11235.78 27465.24 24968.4 26841.03 149,810 20973.46 13482.94 15430.47 32,958 31460.18 35,505 2010

18,968

20,198

Income from continuing operations before income taxes And minority interest Provision for income taxes Income from continuing operations before minority interest Minority interest Income from continuing operations

31759.54

47,720

3745.26

4,105

12,603 -425 12,178 -894 11,284

13,290 -406 12,884 -153 12,731

28014.28 -215 27799.28

43,615 -221 43,394

Net income

27799.28

43,394

Caselet 3: SuperPure Chayan, a seasoned chemical engineer, had joined SuperPure only 4 months ago and in this short time itself, he had shown considerable results as the Assembly Shop Supervisor. SuperPure was a manufacturer of resin-based water purifiers. It was a relatively small, family-owned company which had acquired a 10-year patent that converted tree sap almost magically into a compound that filtered water, making it 99.99% pure. Using this resin, SuperPure had developed a lowprice long-life water purifier aimed at rural markets which had been very successful for the last 2 years. Though the market had the potential to absorb any quantity manufactured, the owner had no plans of expanding capacity. On joining, Chayan received a warm welcome at the plant. He was thoroughly impressed by the companys policy of honing all workers as multi-skilled workers whose level of expertise qualified them to work at different workstations and operations (Exhibit 1). However, simultaneously he found a lot of opportunities to cut costs and increase manpower utilization. The plant had 2 shops the Assembly shop and the Finishing shop. As purifiers complete assembly at the assembly shop, they are immediately sent to the finishing shop where they are inspected, painted, packaged and dispatched available space being limited for any kind of storage. Highly skilled workers were employed in processes such as Inspection, Painting and Packaging. Each purifier was inspected by one worker each of L1 and L3 type working together for 4 hours. Painting a purifier required two L4 workers working together for 7 hours, whereas Packaging utilized two L3 workers working together for 6 hours. Though all operations at all workstations in the plant could be spread over 2 days with some part of the work being done on one day and the rest on the other, the operations at the resin curing workstation were an exception. At this workstation in the Assembly Shop, the process took 10 hours at a stretch with no breaks, which implied one L1 worker had to work overtime for 2 hours every day (the plant had 8-hour shifts and operated 20 days a month). Eliminating this overtime was the first challenge that Chayan wanted to address. He then wanted to increase the manpower utilization. The activities carried out at the assembly shop workstations with their details are shown in Exhibit 2. Chayan went through a lot of literature on the patented process and with the help of a local chemical laboratory was able to modify the one-step 10-hour process into a two-step process, first one of 6 hours (requiring 1 L1 worker) and second of 4 hours (needing 1 L2 worker). This reduction of cycle time allowed Chayan to eliminate overtime in his shop by reallocating operations at workstations, and also operate the shop at a higher production rate without increasing the manpower requirements. This improvement had been implemented for 3 months and had shown excellent results. His shops quarterly financial report clearly showed the reduction in costs and increase in monthly production. On the insistence of his colleague, he made a report to highlight his achievements and submitted it to his boss (Excerpts shown in Exhibit 3).

Buoyed by this success, Chayan planned to attack the other challenge he faced (low manpower utilization) by finding ways of integrating the inspection shop with the Final Assembly Workstation, thus utilizing idle time at this workstation. He had hinted doing this in his report too. Just then Chayans cellphone rang. It was the plant manager. The accountant had delivered Chayans report along with the plant quarterly results. Sounding very angry, the manager ordered, Chayan! Come down to my office this instant. Confused, Chayan collected a copy of his report, a notepad and rushed to the managers office. He wondered why his boss was angry. Can you help him out?
Exhibit 1: Classification of Workers Labour Type L1 L2 L3 L4 L5 Monthly Wages (Rs.) 4,800 8,000 10,000 15,000 20,000 Hiring Cost (Rs.) 1,500 2,500 3,000 4,500 8,000 Firing Cost (Rs.) 2,000 3,000 4,000 6,500 9,750 Skills/Designation Apprentice Semi-skilled worker Skilled labour, Workman Specialized labour, Painting Shop Supervisor

Exhibit 2: Assembly Plant Description Workstations 1 2 3 4 5 Assembly Processes Mould Processing Resin Curing Cartridge Filling Precipitator Integration Final Assembly Labour Requirement Two L1 Worker One L1 Worker + One L2 Worker One L1 Worker + One L2 Worker + One L4 Worker One L1 Worker One L1 Worker + One L3 Worker Duration (Hrs.) 5 10 6 5 4 Remarks L1 worker required for 10 hours while L2 required for 8 hours only -

Exhibit 3: Excerpts from Chayans Report After implementing the new process the improvement in profits can be calculated as follows:-

On an average the monthly production increased by 6-7 units. The contribution of each unit produced is about Rs 400-500. So monthly increase in profit = 6 500 = Rs 3,000
In addition, the savings made by eliminating overtime can be calculated as follows:Hourly wages of L1 labour = 4800 / (20 8) = Rs 30; Overtime hourly wages for L1 labour# = 1.5 30 = Rs 45 Monthly overtime wage saved = 45 2 20 = Rs 1800 Total increase in profit by implementing new process = 3000 + 1800 = Rs 4800
#

For overtime, the company had a policy of paying 1.5 times the hourly rate for all employees

Caselet 4: Mocker n Scramble Mocker n Scramble (M&S) is a startup firm producing FMCG goods. It particularly targets the mens segment and specializes in products like shaving creams, hair-gels, after shave lotions, deodorants, razors and the like. M&S hired a marketing research firm D C Bielsen in December 2010 to identify unaddressed customer needs in the market and launch products to satisfy them. D C Bielsens research indicated several unmet needs in a particular segment of men whose typical profile they described as - Aged 26-34, he is single, has a post graduate degree, earns between 18-25 Lakhs per annum, owns a Smartphone and is very conscious of his looks. He shaves once every day, uses after-shave lotion, applies hair gel and moisturizing cream before he leaves for office. Having identified the needs of this Target Group, the R&D department developed four products - a shaving cream, razor, after shave lotion and hair gel. These products were scientifically tested among the target segment. Every test subject was given a different product to try at a particular rate for a particular length of time (as specified by the R&D). Test subjects who used the after shave lotion observed their skin glisten almost immediately. Those who used the hair gel continuously for 7 days reported a 50% drop in their dandruff. Subjects who used the shaving cream observed 40% more lather (than in existing creams) and reported a superior shave. Users reported a noticeable change in their skin texture after 50 shaves. All these results eventually became product claims. Mocker n Scramble came out with the assortment in February, 2011. They launched the Freelette Mach3 razor and Freelette Foamy shaving cream in February. Later they launched Acryl cream hair gel and Freelette-After Shave lotion in March and April respectively. The assortment of products along with their prices and offers has been tabulated in Exhibit 1. As expected the products caught up easily in the market; partly due to their unique features and partly due the aggressive promotional campaign and a plethora of offers presented by M& S. The sales figures of the different products are presented in Exhibit 2. The sales have been increasing at a healthy rate and the management is quite content with the proceedings. But the CEO of the company, Mr. Fretter, asked the respective brand managers for detailed reports. The brand managers compiled their data in tables and sent it to Mr. Fretter. The data that they sent is same as that in Exhibits 3 and Exhibit 4. The aggregate cost of production of each unit of one product has also been tabulated in Exhibit 5. Without much ado, he hired you, a renowned consultant, to evaluate the performance of the products, identify problems (if any) and recommend solutions.

Exhibit 1- Product portfolio of Mocker n Scramble

Products After shave lotion Hair gel Razor Shaving cream Price Rs. 250 / bottle Rs. 200 / tub Rs. 125 / cartridge Rs. 200 / tube Product Portfolio of Mocker n Scramble Promotional offer Miscellaneous information Available in 250ml bottles. The Indicated price has 20% discount factored in the discount. Buy 1, Get 1 free Sold in tubs. Each tub lasts for 7 applications. Sold in cartridges (2 razors per cartridge). Each razor lasts 7 % discount for 10 shaves. Indicated price has factored in the discount. Sold in tubes. One tube lasts for 2 months, based on average Target Group usage

Exhibit 2 - Sales figures (in million INR)

Products After shave lotion Hair gel Razor Shaving cream Sales figures(in Million INR) Feb11 March11 April11 0 0 750 0 1100 1200 900 1100 1200 550 650 750 May11 800 1300 1300 850 June11 950 1450 1400 1250

Exhibit 3 - Percentage of first-time users

Products After shave lotion Hair gel Razor Shaving cream Percentage of first-time users Feb11 March11 April11 N/A N/A launch N/A launch 24 launch 60 65 launch 95 45 May11 16 26 70 50 June11 19 27 80 55

Exhibit 4 User Base (No of customers who purchased various products in various months)
Products After shave lotion Hair gel Razor Shaving cream User base (in 1000s of users) Feb11 March11 April11 N/A N/A 2900 N/A 3700 4000 6000 6800 7500 2740 2780 3650 May11 3100 4100 8200 4100 June11 3700 4200 8800 6240

Exhibit 5 - Cost of manufacturing

Products After shave lotion Hair gel Razor Shaving cream Cost of Manufacturing Cost per unit product (in Rs. / unit) 180 75 40 125