Abstract: The study consists of a Fast Moving Consumer Goods (FMCG) beverage company wherein a portion of supply chain which deals with out-bound logistics is taken for improvement in order to reduce its logistics cost by using CPM method. Logistics is a major portion of supply chain where customers are not willing to pay as it adds cost to product without adding value.
In this study, it is necessary to ensure that products are delivered to clients at the right time while preserving high-quality standards from the beginning to the end of the supply chain.
CPM is a logical sequencing method where in the most efficient route is achieved by arranging the series of events. CPM enables to identify critical factor in order to minimize the delays and interruption by providing a feasible solution
Keywords: FMCG, Supply Chain, Outbound logistics, Vehicle turnaround time, Critical path method, Cost reduction
Globalization and liberalization has made a significant change in human lifestyle with availability of wide range of products required on daily basis. Also the consumption rate has increased with increase in number of nuclear families and working couple. All these factors have made a positive impact for the growth of FMCG industries leading to increase in Indian economy by 12% YoY. FMCG industries relative gain very low profit on each product but as it handles high bulky volume of products the profit gets added up cumulatively.
FMCG sector is categorized as Personal & Oral Care, Household Care and Packed Food and Beverages. Indian consumers enjoy wide taste of beverages being alcoholic or non-alcoholic, carbonated or non-carbonated thus providing a large market for F&B sector. Thus increasing customer demand gave a large platform for market players in F&B sector to satisfy customer needs.
Due to increasing competition ample amount of products boomed into the market unifying small market player. In order to provide unique product and increase profit margin several cost reduction projects emerged within company’s interunit such as new product development, manufacturing, quality, marketing, sales and distribution ultimately leading to minimize supply chain cost.
Supply chain management can be delineated as network of facilities and distribution option. The main driving factors of supply chain are facilities, inventory, transportation, information, sourcing and pricing. Facilities provide physical location for product where they are stored, assembled or fabricated. The supply chain performance may affect due to improper decisions made while selecting location, capacity and flexibility of facilities. Inventories involve all the raw material, work in progress and finish goods involved in supply chain. Supply chain efficiency can be altered by changing inventory policies.
Transportation choice has a large impact on supply chain efficiency and responsiveness as it is responsible to physically move the inventories from one location to another. Information is potential driver of supply chain as it analysis data from provided facilities, inventory and transportation. The information provides management to make decision beneficial for company. Sourcing provides choice for various interdependent activities. Pricing determine the charges of goods and services as it affects the behaviour of buyer.
Logistics being a part of SCM is essential and applicable to all types of industries and services viz. manufacturing, retail, health care, service sector, transportation etc. Turnaround time is probably the most important key performance indicator in any logistics operation. TAT is the time taken by the transport vehicles to complete the whole process of loading finished goods, starting from the point of entry to its exit from the factory premises.
Short turnaround time is economically advantageous, making the most efficient use of time and materials. Thus CPM method is used to find the delays in activities which lead to high vehicle TAT. An activity is said to be critical if a delay in its start will cause a further delay in the completion of the entire project. The sequence of critical activities in a network is called the critical path. It is the longest path in the network from the starting event to the ending event and defines the minimum time required to complete the project.
The procedure of determining the critical path is; List all the jobs and then draw network diagram. Each job is indicated by an arrow with the direction of the arrow showing the sequence of jobs. Indicate the normal time for each activity and calculate the earliest start time and the earliest finish time for each event and write the earliest time for each event and also calculate the latest finish and latest start time, from this we calculate the latest time for each event and write. Identify the critical activities and connect them with the beginning event and the ending event in the network diagram by double lines.
Logistics: Logistics is important because it creates value – value for customers and suppliers of the firm, and value for the firm’s stakeholders.
Value in logistics is expressed in terms of time and place. Products and services have little or no value unless they are in the possession of customers when (time) and where (place) they wish to consume them. To many firms throughout the world, logistics has become an increasingly important value-adding process for a number of reasons. The overall divided into three segments: inbound logistics, intra-facility logistics and outbound logistics.
The processes of planning and operational decisions of one segment have a direct impact on other segment. The challenges for the logistics decisions are based on total cost approach as far as the industry is concerned as it gets related to profits and SCM in food supplies generally gets related to availability of the right item, in right quantity, at right place and at the right time, so as to meet the requirement of consumers without any damage or loss of perishable short life items.
Vehicle Turnaround Time: The Vehicle Turnaround Time (TAT) is defined as the time taken by the transport vehicles to complete the whole process of loading finished goods, starting from the point of entry to its exit from the factory premises, unloading the finished goods and loading the empties at the distributers end and returning of vehicle in the factory again.
Turnaround time is probably the most important key performance indicator in any logistics operation. Short turnaround time is economically advantageous, making the most efficient use of time and materials. TAT is further classified as internal and external TAT. Internal TAT is responsible for all the activities carried out inside the plant and external TAT is responsible for all the activities carried out outside the plant.
Issues and Challenges in Road Transportation:
- Delay at regulatory check points: These regulatory check points inspect the export and transportation documents and may also physically check the cargo along with fulfilment of tax formalities
- Time bound vehicle entry restrictions in cities: Cities put entry restrictions for the cargo vehicles to enter and cross the city during day time as these vehicles occupy more space on roads and local traffic during this period is high. Due to this kind of restriction; cargo vehicles have to wait at city border for city entry time
- Unavailability of vehicles/trailers may be an issue in some areas
- Technology level of existing vehicles: Most of the cargo vehicles do not have inbuilt tracking technology through GPS which makes it difficult to have real time and correct information. The vehicles are also ill maintained which leads to breakdown of vehicles. Breakdown of the vehicles also happens due to excessive cargo load which is beyond the permissible load
- Inadequate road networks: Although India has second largest road network in the world but still the inadequacy of road network is felt in case of freight transportation
- Poor quality/condition of roads: The poor quality and bad conditions of roads are a challenge in road transportation. It has been observed that roads are narrow and made of substandard quality materials
Critical Path Method: Translating a project’s needs into a mathematical system requires an understanding of general stages within which the CPM routines may be applied: planning, scheduling, and controlling (more appropriately termed “monitoring” for research application). The project goals and necessary activities can be overlooked by CPM and also minimize them. CPM proves beneficial at planning stage. A time study is carried out to find the start and finish time of each activity and corresponding float is found out. The basic three steps carried in planning phase are:
Constructing a network diagram: A network diagram is graphical representation which shows relation between the precedence and successor of activities using arrows. An arrow represents an activity; arrowheads indicate the order of those activities. A “node” or point denotes the beginning and end of an activity..
Calculating start, finish, and slack or float times: The start and finish time is calculated for activities using the relationship diagram and their duration. Start and finish times are used to determine float times associated with each activity. Critical activities are identified using float time.
Further there are two phase in calculation namely forward pass and backward pass. The forward pass involves a sequence of calculations beginning at the start of the network and moving forward toward the end of the network. This phase computes the earliest possible finish time. The backward pass involves a sequence of calculations beginning at the end of the network and moving backward toward the start of the network. This phase computes the latest possible finish time.
Constructing a time chart: A time chart is constructed which shows start time, finish time and float of all activities and relation between the activities Because many of the activities of a project have favourable total float, many time charts could represent a possible project schedule.
A schedule is possible in the sense that, if available resources are unlimited, the project could be completed at the scheduled time. The two extremes are the schedule in which every activity starts as early as possible and the schedule in which every activity starts as late as possible
Company Background: ABC Beverage is leading soft drink brand in India. It is made up of 7000 local employees, 500 managers, over 60 manufacturing locations, 27 Company Owned Bottling Operations (COBO), 17 Franchisee Owned Bottling Operations (FOBO) and a network of 29 Contract Packers that facilitate the manufacture process of a range of products for the company. It also has a supporting distribution network consisting of 700,000 retail outlets and 8000 distributors.
Application of CPM Method: The aim of this study is to determine the excess time taken by vehicle to complete its external activity at ABC Beverages Mumbai plant and suggest measures to reduce them. A detailed time study was conducted with the help of shipping department and distributer to know the process.
Thus the above figure indicates that whole process is delayed due to delay in three activities which are waiting at Mumbai limit while reaching distributor, waiting at distributor end and waiting at Mumbai limit while returning to factory. It is thus found necessary to reduce these delays as it accounts for more than 70% of total time required to complete the process. In order to complete whole process in minimum possible time it is necessary to align all the activities such that the check limits are taken into advantage and distributer time in utilized.
It is studied that the Mumbai limits are from 800 hrs to 1100 hrs in morning and 1700 hrs to 2200 hrs in evening. A brainstorming session is conducted with distributor and causes of delays are noted. It is noticed that due to unavailability of certain facilities and limited resources the vehicle need to wait at distributor end. Now it becomes necessary to align the process with maximum utilization of resources of distributor.
Solution: A travel exit model is thus prepared taking into consideration the limit timing and distributor resource availability
- Unloading time @Distributors 11 AM – 4 PM
- No entry slot 1 8 AM – 11 AM
- No entry slot 2 5 PM – 10 PM
- Transit time from Plant to Mumbai limit 3 hours
- Transit time from Mumbai limit to Distributor 3 hours
- Total Transit time – one way 6 hours
- Unloading time @Distributor 2 hours
- Plant internal TAT 3 hours
Fig 4: Travel Exit Model
Results: The implementation of travel exit model has helped organization to reduce external TAT by 55%. CPM made it easy to analyse the delays in activities and align the process
Fig 5: Current time reduction achieved
Conclusion: The case study represented gives an approach to reduce vehicle turnaround time for outbound logistics using critical path method. The study began with time study of vehicles so as to identify all the activities carried out in outbound logistics and the time required to complete each activity. After complete analysis and identification of critical path, travel exit model is designed in order to reduce the delays identified by CPM. Implication of travel exit model helped the organization to reduce its external TAT by 55%
Acknowledgement: Authors would like to acknowledge continuous support of ABC Beverages and its various functional departments. Combined effort has resulted into providing an efficient solution to identified problem.
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