Avhi Logistic

Management of Business Logistic
WHAT IS LOGISTIC?
The word “logistic” is derived from the Greek word “logistike”, meaning “the science
of computing and calculating” (Practical Mathematics). In ancient times logistics
involved the practical art of moving armies engaged in combats. Since that time
logistics has come to imply moving men and material on war footing to achieve
desired results.
Logistics in the sense of Physical Distribution first appeared in the academic literate
in early 1990’s but it was only during World War II that logistics developed and got
more attention. After World War II, Logistics was transferred in to industry and
developed as industrial logistics or business logistics.
Logistics is concerned with getting the products and services where they are needed
and when they are desired. It is difficult to accomplish any marketing or
manufacturing without logistical support.
Logistics involves the integration of information, transportation, inventory,

warehousing, material handlings and packaging.
The operating responsibility of logistics is the geographical positioning of raw

materials, work-in-progress and finished inventories minimizing the cost as much as
possible. It is through the logistics process that materials flow into the vast
manufacturing capacity of an industrial nation and products are distributed through
marketing channels to consumers.
Definition as per council of logistics management “logistics is the process of

planning, implementing and controlling the efficient, effective flow and storage of
goods, services and related information from the point of origin to the point of
consumption for the purpose of conforming to the customer requirements”
Goals of logistics are to achieve a targeted level of customer service at the lowest
possible total cost. Logistics involves detailed and complex work. However,
implementing best practice of logistics has become one of the most exciting and
challenging operational areas of business and public sector management.
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Logistical competency
Competency is the ability to perform a function. Logistical competency is the ability
of the firm to perform logistical function effectively and efficiently.
Definition: Logistical Competency is the relative assessment of a firm’s capability to

provide competitively superior customer service at the lowest possible total cost. It is
a strategy to provide a superior service at a total cost below industry average. Its aim
is to view how logistics can be exploited as a core competency so that fits into a
firm’s overall strategic positioning.
How can this be achieved?

Logistical competency can be achieved by performing logistical functions effectively.
To understand logistical excellence in each aspect of functional work is relevant only
when it is viewed in terms of improving overall efficiency and effectiveness of
integrated logistics.
In achieving logistical competency the firm should coordinate all functions well.
Network design should integrate the need of information, transportation & inventory.
These elements play important roles in overall effectiveness of logistical function. A
well designed Network keeping in view the objectives of the company is primary for
logistical competency.
In a tour made by a product from a raw material stage (Supplier) to the manufacturing
firm to the point of consumption by the customer, logistics encompasses a wide range
of functional areas like transportat6ion and material handling required for movement
of the material, Storing and Warehousing for storage, Information flow etc.
The work of Business Logistics is to coordinate functional areas like transportation,

information, inventory, warehousing, material handling, and packaging into
NETWORK DESIGN to achieve logistical competency. Work related to these
functional areas is combined to create the capabilities needed to achieve logistical
requirements.
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Mission of logistic management

The mission of logistic management is to plan and co-ordinate all those activities
necessary to achieve desired levels of delivered services and quality at lowest possible
cost. Logistics must therefore be seen as the link between the market place and the
operating activity of the business. The scope of logistics spans the organization, from
the management of raw materials through to the delivery of the final product.
Mission of logistics is to achieve business objectives by delivering desired quality of

service at the lowest total cost.. This can be called creating customer value at
minimum cost.
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Logistic mission is a set of goals to be achieved at a particular type of market for a i
particular type of product. Naturally this is responsive to competition. Hence o
logistical mission is to achieve above goals at minimum system cost. Focus is on
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mission rather on isolated functions. Mission of logistics is providing a means by

which customer satisfaction is achieved.
Five logistical pillars

 Network design
 Information
 Transportation
 Inventory
 Warehousing, Material handling and packaging
Network design
Logistical efficiency is directly dependent upon network design. In integrated
logistical management manufacturing plants, warehouse, and retail stores are included
to market firm’s products. To prepare a proper network design, we must decide how
many of each type of facility are required, their geographical locations, and the work
to be performed at each one of them, the transport cost involves etc. in specific
situation, a particular operation could be outsourced to specialists in that field. But at
the same time, regardless of who does the actual work, all facilities must be managed
as an integral part of the firm’s logistical network.
Network design is a primary responsibility of logistical management since a firm

facility structure is used to provide products and material to customers. Typical
logistical facilities are manufacturing plants, warehouse, cross-dock operation, and
retail stores. Determining how many of each type of facility are need, their
geographical location, and the work to be performed at each is a significant part of
network design.
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Information
The importance of information is extremely essential for logistical performance.
Accurate information can improve logistical performance. Today’s technology
enables anyone to obtain information required for logistical performance at the same
time, if quality information is not available, it can create countless operational
problems.
Forecasting and order management are two areas of logistical work that depend on
information. The logistical forecast is an effort to estimate future requirement. The
forecast is used to guide the positioning of inventory to satisfy anticipated customer
requirements. Logistics manger’s track record in forecasting is not impressive.
Therefore, one of the main reasons managers use information to achieve positive
control of logistical operations is their desire to replace forecasting in accuracy with
faster response to customers requirements. Control concepts such as just-in-time
(JIT), quick response (QR) and continuous replenishment (CR) represent approaches
to positive logistical control made possible by the application logistical of recently
developed information technology. One of the main jobs of logistics mangers is to
plan and implement their firm’s strategy regarding the desired combination of
forecasting and operational control.
Order management concerns the work involved in handling specific customer

requirements. The customer order is the main transaction in logistics. Logistics serves
both external and internal customer. External customers are those that consumer the
product or services and any trading partners that purchase products or services for
resale. Internal customers are organizational units within a firm that require logistical
support to perform designated work.
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The more efficient the design of a firm’s logistical system, the more sensitive it is to
information accuracy. Finely tuned time-based logistical systems have no excess
inventory to accommodate operational errors because safety stocks are held to a
minimum. Incorrect information and delays in order processing can cripple logistical
performance. Information flow renders a logistical system dynamic. Thus, quality
and timeless of information are key factors in logistical operations.
Transportation
In involves physical movement of inventory to and form various geographical points.
Transportation cost is visible i.e it can actually be calculated. This is one of the
reasons why attention is paid to this cost from the point of view of increasing
efficiency at reduced cost. Due to this, almost every organization has appointed
managers to handle transportation.
Broadly, there are three types of carriers,

 Private carriers
 Contract carriers
 Common carriers
But, from the logistical management view point, the three fundamentally important
factors for efficient performance of transportation of goods are:
 Cost: The cost of transport is the payment for movement between two
geographical locations and expenses related to administration and maintaining
in-transit inventory. Logistical system should be designed to utilize
transportation that minimizes total system cost. This means that the least
expensive transportation does not always result in the lowest total cost of
movement.
 Speed: It is the time required to complete a specific movement. Speed and

cost of transportation are related in two ways. First, transport firms, capable of
providing faster service, typically charge higher rates. Second, the faster the
transportation services, the shorter the time interval during which inventory is
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in transit and unavailable. Thus a critical aspect of selecting the most desirable
method of transportation is to balance speed and cost of services.
 Consistency: Consistency of transportation refers to variations in time

required to perform a specific movement over a number of shipments.
Consistency is the reflection of the dependability of transportation. For years,
transportation managers have considered consistency the most important
characteristics of quality transport. If a given movement takes two days one
time and six days the next, the unexpected variance can created serious
logistical operation problems. If transportation lacks consistency, inventory
safety stock will be required to protect against unpredictable service
breakdowns. Transportation consistency affects both the seller’s and the
buyer’s overall inventory commitment and related risk. With the advent of
new information technology to control and report shipment status, logistics
managers have begun to seek faster service while maintaining consistency. It
is also important to understand that the quality of transportation performance
is critical. The quality of transportation performance is critical to time-
sensitive operation. Speed and consistency combine to create the quality
aspect of transportation.
In the design of a logistical system, a good balance must be maintained between

transportation cost and quality of service. In some circumstances low cost, slow
transportation will be satisfactory. In other situations, faster service may be essential
to achieve operating goals. Findings and managing the desired transportation mix is a
primary responsibility of logistics.
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Inventory
The inventory requirement of a firm depends on the network structure and the desired
level of customer service. Theoretically, a firm could stock every item sold in a
facility dedicated to service each customers. Few business operations could afford
such a luxurious inventory commitment because the risk and total cost would be
prohibitive. The objective is to achieve the desired customer service with the
minimum inventory commitment because the risk and total cost would be prohibitive.
The objective is to achieve the desired customer service with minimum inventory
commitment, consistent with lowest total cost. Excessive inventories may compensate
for deficiencies is basic design of a logistic network and to some degree inferior
management. However, excessive inventory used as a crutch will ultimately result in
higher than necessary total logistical cost.
Logistical strategies are designed to maintain the lowest possible financial assets in
inventory. The basic goal of inventory management is to achieve maximum turnover
while satisfying customer’s commitments. A sound inventory management policy is
based on five aspects of selective deployment, customer segmentation, product
requirement, transport integration, time based requirement and competitive
performance.
 Customer segmentation: Every company that sells products realizes that

there are various types of customer whom they have to deal with. While, some
customers are highly profitable to the company others are not so profitable.
The company is in effect, targeting different types of customers depending
upon their profitability to the company. Highly profitable customers from the
core market for an enterprise. The company must keep inventories ready at
hand to meet demands of these customers.
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 Product requirements: Normally a large organization has different types

of products for sales. The volume of each of the products sold will be
different. Again the profitability due to each of the products will also be
different. Assuming that no restrictions of any sort are applied; generally a
company would find that less than 20% of all the products manufactured
accounts for more than 80% of the total profits. This is also called as the 80/20
rule, or Pareto’s principle. It is obvious, for reasons of better profitability, a
company would offer higher availability and consistent delivery on more
profitability must be considered. Again, to satisfy core customers, faster
modes of delivery can be thought of as compared to meeting the need of non-
core customers for whom slower modes of transport, which are less expensive,
can be thought of.
 Transport integration: Most of the transportation rates are based on the

volume and on the size of the shipments. Hence it would appear, as a sound
strategy to stock sufficient goods at a warehouse where potential customer are
located. This is apparently to reduce the transportation cost. But this decrease
in the transportation cost may be offset by inventory holding cost.
 Time-based requirement: In logistic, we are connected as to how to

deliver goods to the customer in the shortest possible time. If products and
material can be delivered quickly, then there will not be stock of inventory of
manufacturing plant. Again, if it is possible to replenish retail stores at regular
short time intervals, less safety stock will have to be maintaining forward in
the supply chain.
 Competitive performance: Sound inventory policies are essential to gain

customer service advantage or to neutralize strength that a competitor
currently enjoys.
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Warehousing, material handling and packaging

The functions of warehousing, materials handling and packaging are not independent
of each other like the four functional areas. At the same time, warehousing, material
handling and packaging are an integral part of logistics. For examples, good require
being stored at a warehouse at same point during the logistic process. Again to unload
or loads goods on transport vehicles, material handling equipments will be required.
Finally, products require appropriate packaging to avoid any damage during handling
and transport.
When warehouses are required in a logistical system, a firm can choose between
obtaining the services of a specialist and operating its own facility. The decision is
broader than simply selecting a facility to store inventory, since many activities
essential to overall logistical process are typically performed while products are
warehoused. For examples sorting, Sequencing, order selection, transportation
consolidation.
Within the warehouse, material handling is an important activity. Products must be

received, moved, sorted and assembled to meet customer order requirements. Inferior
manner can lead to product damage. It stands to reason that the fewer times a product
is handled, the less potential exists for product damage, and the overall efficiency of
the warehouse is increased. A variety of mechanized and automated devices exist to
assist in material handling in essence, each warehouse and its material handling
capability represent a mini-system within the overall logistical process.
To facilitate handling efficiency, products in the form of cans, bottles, or boxes are
typically combined into larger units. The initial unit, the master carton, provides two
important features. First, it serves to protect the product during the logistical process.
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Secondly, it facilitates ease of handling by creating one large package rather then
multiple small ones.
When effectively integrated into an enterpriser’s logistical operations, warehousing,

material handling and packaging facilitate the speed and overall ease of product flow
throughout the logistical system.
TYPES OF LOGISTICS
1. Military Logistics
2. Business Logistics
3. Service Logistics
4. Service Response Logistics
5. Event Logistics
6. Third Party Logistics
7. Fourth Party Logistics
8. Inbound Logistics
9. Outbound Logistics
10. Reverse Logistics
1. MILITARY LOGISTIC
Logistics: (military definition) The science of planning and carrying out the
movement and maintenance of forces… those aspects of military operations that deal
with the design and development, acquisition, storage, movement, distribution,
maintenance, evacuation and disposition of material; movement, evacuation, and
hospitalization of personnel; acquisition of construction, maintenance, operation and
disposition of facilities; and acquisition of furnishing of services.
 Military Logistics: The “practical art of moving armies.”
 Military Logistics: The design and integration of all aspects of support for the
operational capability of the military forces and their equipment to ensure
readiness, reliability and efficiency.
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 Military Logistics: Is the system established to create and sustain military

capability. The military definitions are more detailed than civilian definitions
of Logistics and do not take cost into consideration.
2. BUSINESS LOGISTICS
BUSINESS LOGISTICS: It is the part of the supply chain process that plans,
implements and controls the efficient flow and storage of goods, services and related
information from point of origin to point of use or consumption in order to meet
customer requirements.
Logistics: (Business Definition) Logistics is defined as a business planning

framework for the management of material, services, information and capital flows. It
includes the increasingly complex information, communication and control systems
required in today’s business environment.
Business Logistics: The science of planning, design, and support of business

operations of procurement, purchasing, inventory, warehousing, distribution,
transportation, customer support, financial and human resources.
According to Dr. Plowman, objective of Business Logistics is “to achieve the

optimum coordination of inbound material, storage, work in progress, handling and
the outbound packaging, warehousing and movement of finished products.
3. SERVICE LOGISTICS
Service Logistics: The acquisition, scheduling and management of the

facilities/assets, personnel and material to support and sustain a service operation of a
business.
4. SERVICE RESPONSE LOGISTICS (SRL)
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While the traditional logistics concept looks at product movement, service response
logistics addresses the coordination of nonmaterial activities to fulfill services
efficiently and effectively. In fact, physical logistics and service response logistics are
mutually dependent. Many service response logistics activities relate closely to the
logistics activity of communication and information.
5. EVENT LOGISTICS
The network of activities, facilities and personnel required to organize, schedule and
deploy the resources for an event to take place and to efficiently withdraw after the
event.
6. THIRD PARTY LOGISTICS
Third party logistics is the activity of outsourcing activities related to Logistics and
Distribution. The 3PL industry includes Logistics Solution Providers (LSPs) and the
shippers whose business processes they support. Companies opt for Third Party
Logistics for the following reasons:
 Focus on core competence

 Resource constraints
 Cost saving/cost optimization
 For large and global coverage
 For more professionals and scientific approach to logistics problems
 For improvement in service levels with improved response time
 Efficient management of inventory resulting in better utilization of working
capital.
In short, A Third Party Logistics firm may be defining as an external supplier which
performs all or part of the company’s logistics functions.
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7. FOURTH PARTY LOGISTICS
Fourth party logistics provider is a supply chain integrator that assembles and
manages the resources, capabilities, and technology of its own organization with those
of complementary service provider to deliver a comprehensive supply chain solution
to the client.
A standard 4PL supply chain solution involves four distinct steps:
Step 1: Reinvention:
At this level, the overall business strategy is aligned with supply chain strategy to
reengineer the supply chain of the participants.
Step 2: Transformation:
Here the focus is on coordinating specific supply chain functions such as sales and
operations planning, distribution management, procurement strategy, customer
support and supply chain technology, with the aid of process and organizational
changes, T & D, information technology, etc. as applicable.
Step 3: Implementation:
The implementation is done on the basis of recommendations made at the earlier two
levels and the transition is put across to the 4PL delivery team, taking special care to
consider the dimension of human resources and organizational change.
Step 4: Execution:
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A 4PL provider’s scope of responsibility also includes operational responsibility for

numerous supply chain functions, besides the traditional transportation management
and warehousing operations logistics outsourcing.
8. INBOUND LOGISTICS
Activities associated with receiving, storing and disseminating inputs to the product
such as material handling, warehousing, inventory control, vehicle scheduling and
returns to suppliers.
This take care of the various activities the firm needs, to procure material and parts
from its vendors. It takes care of the procurement cycle. The task involves
 Sourcing
 Order placement
 Transportation
 Receiving
In inbound logistics, factors like required delivery time, size of shipment, mode of
transportation, value of material, inventory levels etc. have to be planned. For E.g. A
breads manufacturer will buy flour in bulk, as bulk purchases will be cheaper, while
an automobile manufacturer wanting high priced items may prefer fewer inventories
to bulk purchases, Again a company dependent on coal will stock more in summer as
coal is preferentially delivered to thermal power stations in India in summer.
9. OUTBOUND LOGISTICS
Activities associated with collecting, storing and physically distributing the product to
the buyers (Physical Distribution Cycle). It includes distribution of finished goods,
order processing, warehousing, material handling, delivery vehicle operations,
scheduling, shipping etc.
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10. REVERSE LOGISTICS
Reverse Logistics deals with storage and movement of material that flows from the
end customer back to the seller or supplier. This includes defective, containers and /
or packaging material. Reverse logistics is also known as environmentally responsible
logistics as it helps to recycle unwanted material (boxes, bottles). In soft-drink trade,
empty bottles are to be returned for re-use.
Reverse logistics may be defined as a process of moving goods from their place of use
to their place of manufacture for reprocessing, refilling, repairs of waste disposal. It is
a planned process of goods movement in the reserve direction, done in an effective
and cost efficient manner through an organized network.
Recycling: The primary goal of the reverse logistics system (RLS) is to move
products or materials backward through the distribution network.
Recycling has four processes:

I. Collecting waste materials form recycling bins and delivering them to the entity
responsible for recycling the used material.
II. Processing recyclable to create secondary raw material.
III. Using the secondary material to manufacture new products.
IV. Returning the product to the market place. The replacement process cannot be
successfully completed without an effective reverse logistics system.
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HISTORY OF CEAT Limited
CEAT Limited is a tyre manufacturing company based in Mumbai, India. CEAT is an

abbreviation for Cavi Electrici Affini Torino (Electrical Cables and Allied Products
of Turin). Founded in Italy as CEAT Tyres by Virginio Bruni Tedeschi. The company
established its manufacturing in India in 1958 and was sold to Pirelli by Virginio's
heir Alberto Tedeschi (Carla Bruni’s stepfather) in the 1970s. The company's Indian
division was then taken over by RPG Enterprises in the year 1982 which also got the
rights to the CEAT brand and renamed the company as CEAT Limited. Its tagline is
"Born Tough".
The oldest company of the RPG Enterprises CEAT Tyres was established in 1958.
Today, we are one of India’s leading tyre manufacturers, with an annual turnover of
Rs 1,952 crores (US $434 million). Our solid brand equity has empowered us to
establish a strong presence in both, domestic and international markets. Our tyres,
tubes and flaps are renowned for their superior quality and durability, and are
recognized as being ‘born tough’.
We offer the widest range of tyres to all user segments, and manufacture world-class
radials for all Indian vehicles including:
 Heavy-duty Trucks and Buses
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 Light Commercial Vehicles

 Earthmovers
 Tractors
 Trailers
 Cars
 Motorcycles and Scooters
 Auto-rickshaws
We also market tubes and flaps, which are outsourced from 7 to 8 units. Possessing an
enviable list of clients. We enjoy long-standing business tie-ups with major OEMs
including TATA Motors, Ashok Leyland, Mahindra & Mahindra, Maruti, L&T,
Eicher, Swaraj Mazda, Caterpillar, Bajaj Tempo, Piaggio, Hero Honda, HMSI
(wholly owned subsidiary of Honda Motors, Japan) and TVS Motors. Focused on
Quality at CEAT, we continue to stay committed to enhancing the quality of our
products and upgrading our technologies. It goes without saying that we adhere to the
highest standards of safety.
Testimony to our endeavors is the fact that we are the first and only Indian tyre
company to be awarded the ISO/TS 16949:2002 certification, by TUV, a reputed
certification body, based in Netherlands. CEAT Quality Policy, We are customer-
centric and consistently deliver excellent products and services at competitive prices.
It is our endeavour to continually improve all our business processes and ensure
conformance to the established quality systems. We accomplish this through constant
upgrading of our employees’ skills.
Profile
CEAT is a leading tyre manufacturer in India, and one of the most recognized brands
in the country. The company also exports a range of tyres to over 130 countries.
Operations
 CEAT has a wide distribution network of over 3500 dealers
 33 regional offices and more than 100 C&F agents.
 The company’s manufacturing plants are located in Mumbai and Nasik.
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Products
CEAT manufactures largest range of tyres in the industry which incorporate both
cross-ply and radial technology. The range of tyres covers virtually all user segments
– from giant earthmovers to specialty tyres for scooters and motorcycles. The
company also markets tubes and flaps.
RESEARCH REPORT
Customer Segment
CEAT business have categorized into 3 segment
CEAT
Original Export Replacement

Equipment (Within 1 Year)
Manufactures
Divisional CEAT
Distribution
Centre
Dealers
C&F
Customers
Dealers
Customers
1. Original Equipment Manufacture {O.E.M.}:

CEAT main business is that, to convert the raw material into finished tyres. These
finished tyres are called as O.E.M. O.E.M. is directly supplied to customer or supplied
through the O.E.M Godown.
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Directly supplied means supplying the finished tyre without storage to the potential
customer. Company supplies directly to Tata motors, Ashok Leyland, Mahindra and
Mahindra, L&T, Eicher, Swaraj Mazda, Bajaj Tempo, Hero Honda and TVS motors
and many more.
Whereas, O.E.M godown is a godown where the finished tyres are stored and supplied
as per the requirement of the customers. OEM godown is only for few customers, i.e.
O.E.M godown supplies to Maruti.
2. Export:
CEAT Company export small as well as big tyres to the foreign country i.e. In
England, USA and many other countries. Firstly, company sends finished tyres to the
Divisional Distribution centre and from their it goes to clearing and forwarding agent
{C&F}, and then it is placed at dealer’s location and finally reaches to customer. But,
CEAT job is till the C&F, because company gets the payment from C & F agent.
3. Replacement / Reverse Logistics:

Reverse Logistics is a specialized segment of logistics focusing on the movement and
management of products and resources after the sale and after delivery to the
customer.
Reverse logistic deals with storage and movement of material that flows from the end
customer back to the seller or supplier.
CEAT company gives 1 year warrantee to its customer on account of damaged tyres.
There are 3 stages in reverse logistics of CEAT tyres
Stage-I
Customer:
Customer sent the destroyed tyres to the dealer from their company pick up the
damaged tyres and give the replacement of tyre as per the date of purchase by the
customer.
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Stage-II
Dealer:
Dealer collect the bad tyres form that customer and the send it to CEAT tyres regional
office. There are 30 regional offices which look after the reverse logistic system.
Stage-III
CEAT Company or manufacturing plant:
Company receives the destroy tyres form the regional office and then bad tyres are
send for the recycling process and from that new tyres are manufactured. Company
sends that new tyres to the dealer and dealer give the finished tyre to that customer
who brought the bad tyre to the dealer place.
This process goes again and again for the replacement of CEAT tyre
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Raw Material Management
A. Raw Materials needed for Tyre Manufacturing

The following are the material which is required for the manufacturing of a tyre.
Rubber 70%
Carbon 15%
Chemical 5%
Oil
Fabric 10%
Wire
B. Procurement of Raw Materials-Suppliers

There are 6 kinds of material required for producing a finished tyre and there are
different suppliers for different material.
CEAT Company has Material suppliers from within the country as well as from the
foreign countries.
Material Suppliers
For Rubber:
Material supplier
(Rubber)
Domestic International
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Indonesia
Kerala
Thailand
[Cochin]
Rubber is procured from Domestic as well as from international suppliers. In
Malaysia
Domestic is procured from Kerala {Cochin}. In Cochin there are large numbers of
small farmer who cultivate the raw rubber and sold to traders and finally, company
gets the rubber from that of traders. There are large number traders. Company switch
on from one trader to another trader. Company buys or purchases the rubber by taking
into consideration price and quality of rubber.
International suppliers are from Indonesia, Thailand, Malaysia and others countries.
For Fabric:
Fabric has also procured form domestic as well as International supplier.
 In Domestic, procurement of Fabric is from SRF fabric.
 In International, suppliers are from china, Malaysia, Thailand and other
countries.
For other Raw material such as

Oil
Chemical
Are procured from domestic
Carbon supplier
Copper wires
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Quality checking
Quality checking is different for finished tyre from that of raw material
 Raw material quality checking:

Raw material comes from domestic as well as from international suppliers. Company
does the quality checking of raw material when it reaches to company warehouse.
Company contact to supplier about Quality purpose
If satisfied If Not Satisfied
Production Proceed Goods Return to Supplier
Company charge Penalty

If the company satisfied about the quality of raw material then the material move
forward for the production process. But, if the company not satisfied about the quality
of the raw material then the company contacts with the supplier about the quality and
return the goods to the supplier plant. For this the company also charges the penalty
on supplier, because of supplier bad quality of rubber, it affect the production process
or smooth flow of raw material in process.
 Finished goods quality check:

Finished goods quality checking has been done on the basis of tyre quality and given
the following tags such as
 Green tag means “OK”
 Red tag means “REJECT”
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 White tag means “ NOT INSPECT”
On the basis of this, the tyre quality has check by the company and forwards the tyre
as per this available checking information.
i. Lead time {For Procurement of Raw material}

Define as:
Lead time is the amount of time from the date of release of an order by the customer
to the receipt of the entire ordered material at his doorstep.
In CEAT, Lead time is different for domestic and for international supplier
 In domestic supplier of raw material is on daily basis. Company gets the raw
material from Kerala (Cochin) on daily basis
 In International it takes 40 to 60 days for procurement of material
ii. Reorder level

Meaning
Reorder level represents the stock level when the stores must place purchase
requisition on the purchase department for replenishment of stock through fresh
purchase. Order level should be so adjusted that fresh supply is obtained often enough
and in some cases invariably before the stock runs out. In other words re-order point
may be defined as that level of inventory when fresh order should be placed with the
suppliers for procuring additional inventory equal to the economic order quantity. The
reorder level would be established at a point such that the stock in hand would be just
sufficient to meet the demand during the lead time.
In CEAT, Reorder level has done on the basis of price effect i.e. availability of raw
material at cheap rate whether it is domestic or international.
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For ex: - If Domestic supply i.e. in Kerala the price of rubber cost to Rs.180 with the
good quality whereas the same quality of rubber cost in Import is at Rs.126. Then the
company prefer to Import rather than from Domestic supplier.
iii. Fill rate

Introduction
It is magnitude or impact of stock out over time. If a customer order 50 units and the
firm is able to provide 47 units, the fill rate is 94% (47/50). It is not necessary that if
fill rate is less than 100 %, a customer satisfaction would be low. It will depend on
how critical the total quantity is ordered to the customer. If all the units were needed
immediately, then even 98% fill rate would be bad. The fill rates can be further
classified as:
Case fill rate:

It defines percentage of cases of units ordered that can be shipped as per requested.
E.g. a 95% case fill rate indicates that, on average, 95 cases out of 100 could be filled
from available stock. The remaining 5 cases would be back ordered or deleted.
Line fill rate:

Is the percentage of order lines that could be filled completely. Each line on an order
is a request for an individual product. So an order may have multiple lines.
E.g. when a customer order is received requesting 80 units of product A and 20 units
of product B, the order contains 100 cases and two lines. If there are only 75 units of
product A available and all 20 of product B, the case fill would be 95% [ (75 +20) /
(80+20) ] and the line fill would be 50% (1/2).
In CEAT, Fill Rate for the financial year 2009-2010

 Fill Rate for Bhandup Plant (per metric ton)
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250 Demand
230 Supply
Therefore Fill Rate = 230/250 * 100
= 92%
 Fill Rate For Nashik Plant
200 Demand
170 Supply
Therefore Fill Rate = 170/200 * 100 = 85%
Forecasting:
Introduction
Most of the important business decisions involve some degree of uncertainty and risk.
Outcome of such decision cannot be predicted accurately. Forecasting is technique
used to reduce such uncertainty. It involves predicting future economic conditions and
estimating their impact on the business. Forecasting can be applied to following areas:
a) Inventory control/production planning: On the basis of demand forecast of an

item, the production schedule and inventory requirement can be planned
b) Investment policy: It depends on forecasting financial information such as
interest rates, exchange rates, shares prices etc.
c) Economic policy: Forecast of factor like economy growth, inflation rates etc.
have bearing on economic policy.
The forecast is a Projection/Prediction made, on the Basis of relevant logistical

assumption, of the volumes likely to be Produced, Transported and Sold.
 Forecast allows logistics dept. To pro-actively allocate organizational

resources for attaining the pre-set objectives.
 Forecasting increases logistics effectiveness by enabling exchange and co-
ordination of information rather than inventory.
 Forecasting is necessary to develop a procedure integrating financial,
marketing, sales, production and logistics perspective.
How Forecasting Works in CEAT COMPANY
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In CEAT company financial year is April to March
Company do the sales forecasting every year for the purpose of smooth flow of goods
and satisfied the customer by providing the goods on time or without any variance.
For ex: - Sales forecasting for the Financial Year April 2010 to March 2011, they will
conduct their forecast on Jan 2010 or Feb 2010
Steps in forecasting:-
Sales Forecast (Yearly)
Prepared on the basis of {Previous Year Sales +

Additional Demand Comes from STU (State Transport
Unit)}
They Prepared Monthly Budget
Market Demand (Sales Forecast)
Average Monthly Requirement
SKU (Stock Keeping Unit)
Step 1:- (Sales Forecast)

In first steps, company forecast the sales for the current year with the help of previous
year sale forecast.
Step 2:- (Prepared on the basis of Previous Year Sales + Additional

Demand Comes from STU)
Company prepares the sales forecast on the basis of previous year sales plus
additional demand comes from STU (State Transport Unit). STU is unit where the
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customer places the order for the purpose of purchasing the CEAT TYRE. Any
customers who want to place order or to buy the CEAT TYRE will have to contact
with STU and then STU takes all the order and give it to the company. On the basis of
previous year sales and additional demand come from STU the sales forecasting is
carried out for the current year.
Step 3:- (Prepared Monthly Budget)

After preparing the sale forecast, on the basis of that company prepared the monthly
budget.
Monthly budget prepared by the co-ordinate effort of
 Marketing committee
 Management
 Production committee
 Engineering department
Company conducts the budget plan on every 24th of a month which will be applicable
for next month. It considers the following cost:
 Raw material
 Inventory cost
 Material cost (it considers 70% of total cost)
 Conversion cost (Rupee/unit)

Conversion cost means the cost which is required to convert the raw material to
finished tyres.
Conversion costs from raw material to finished tyre are
 Power 10%
 Employee cost 65%
 Fuel 10%
 Remaining 15% of conversion cost goes to preliminary expenses
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Company Review the plant in first week of the month and again they do MRP
(MATERIAL REQUIREMENT PLANNING) and change the requirement as per the
plant and this plan is followed throughout the month.
Step 4:- (Market Demand)

Determining the market demand with the consideration of sale forecasting. Company
combined market demand with sales forecast and gets the predicated market demand
for the next month.
Step 5:- (Average Monthly Requirement)

From market demand company get to know the average monthly requirement of raw
material needed for fulfillment of market demand and when to order the material i.e.
Reorder.
Step 6:- (SKU {Stock Keeping Unit})

From average monthly requirement company get to know how much stock are
required to be kept for the smooth flow of raw material or the production process.
After Sales Forecasting, Company does Capacity Forecasting. In that both plant
Bhandup as well as Nashik plant & Outsource Forecast their capacity and find the
problem and suitable measures for fulfillment of Market demands.
Step for capacity forecasting:-

Central forecasting
Self Forecasting
Self Capacity
Step 1:- (Central forecasting)
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First Step Company does the central forecasting together with all the plant i.e.
Bhandup and Nashik and also outsource. Here company forecast there actual demand
for the year or month.
Step 2:- (Self Forecasting)

After the central forecasting both the plants and outsource do the self forecasting
individually. Here every individual plant and outsource decide their capacity for
fulfillment of the market demand.
Step 3:- (Self Capacity)

From self forecasting they also determine their self capacity. If more requirements
occur they expand or enhance their capacity as per their ability of plant and outsource.
While determining the self capacity the individual plant and outsource find their self
capacity problem such as
 Capacity problem
 Labour absenteeism
 Machinery capacity
 Manpower requirement
CEAT manufacturing plant mostly depend on the manual labour and skilled worker
requirement, because of the non-availability of labour the production process of a
company will effect and it ultimately affect the market demand of company tyre.
There is less availability of manpower during April, May, June or during the Festival
time.

For solving this problem:
 They consider buffer stock to fill that festival time
 Company considers the buffer stock for 8 to 9 days
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Buffer stock: Buffer stock is an inventory held because of uncertainty in demand

or delays in lead time.
From here the company gets the exact capacity of plant and outsources for fulfillment
the market demand.
Manufacturing Process
Component of Tyres
 Thread
 Side wall
 Chaffer
 Band (fabric)
 Bead (copper wire)
Proportion of bead = 10/6 rubber wire layer i.e. form a layer through using 10 time
rubber and 6 time wire.

Beads: It made upon high tensile steel wire. They anchor the tyre to the rim. Bead is
usually coated with Bronze or Brass coating for achieving adhesion with rubber.

Thread: It is made of rubber compounds designed to give high mileage, together with
good traction on wet and dry roads. Since there is a conflict between these
requirements, thread compounding uses a combination of rubbers and blacks designed
to give the best compromise.

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Sidewall: Protects the tyre carcass and use compounds which give resistance to
cutting and cracking.

Chaffer: Protects the tyre beads against the rim. They can be made of rubberized
fabric or hard rubber compound.

Extruder: It is a manufacturing process where a billet of material is pushed and/or
drawn through a die to create a shaped rod, rail or pipe. The process usually creates
long length of the final product and may be continuous or semi continuous in nature.
Some materials are hot drawn while others may be cold drawn.

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PROCESS OF CEAT TYRE
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RMS
(Raw Material Storage)
Bead Dept Mixing Cobalco Dept

(Bead) Dept (Zell Calendar)
Bias Cutting
Extruder Dept Dept
(Treads)
Cheffer Band Building

dept
(Band)
Tyre Building
Curing Dept
Molding
Finishing & Inspection

Department (F.I.D)
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There are 3 Department in manufacturing of a tyre

1. Bead department
2. Mixing department
3. Cobalco department
RMS (Raw Material Storage) is a storage area, which stores all material, from here
all material goes to their respective department as per their required quantity
Bead department makes Bead which is made up of copper wire and rubber.
Mixing department makes the tread through mixing rubber, carbon, oil and
chemical.
Cobalco department makes chaffer and bend which is made through the proportion
of fabric and rubber.

Calendar: The raw carcass materials made of textile or steel are coated with rubber.
This is done by passing them through a machine called a Calender, which has a series
of rollers in a stock, normally four. The rollers are called boles. The fabric passes
between the middle rollers and rubber is fed from above and below. The thickness of
the rubberized fabric is controlled by the gap between the rollers. The gap is called the
nip.
Extruding: The profiled slabs of rubber which go to make up the tread and sidewalls
of the tire are produced using an extruder. This machine forces the green rubber
through a die to give the required shape.
Assembly: All the components were assembled together in a tyre building department
where a tyre is made which is called as Green Tyre. Green Tyre is not a finished tyre.
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Curing: The green tyres are molded in a curing machine. The tyre is cured with high
pressure hot water inside the butyl bladder. This has replaced steam as the curing
medium, since pure steam at the pressures required would give too high temperature
for an even cure. The mold sidewall assembly is fixed to steel plates which are heated
by steam.
Finishing: After curing, the tyres pass to the finishing dept., where they are inspected
for defects after which they are run on balance machines and the heavy spots marked.
Then the tyre undergo to the other uniformity controls on a force variation machine.
Warehousing
Introduction
Warehousing is that part of a firm’s logistics system that stores products at and
between point- of- origin and point of consumption, and provides information to
management of the status, condition and disposition of items being stored.
A warehouse is a point in the logistics system where a firm stores or holds raw
materials, semi- finished goods, or finished goods for varying periods of time. It
creates time utility for raw material, industrial goods and finished products. The
proximity of market-oriented warehousing to the customer allows a firm to serve the
customer with shorter lead times. This warehousing function continues to be
increasingly important as companies and industrial use customer services as a
dynamic, value-adding competitive tool.

Need for warehousing:-
A) Convention Approach: (Push Concept)
 Protection against delays and uncertainty in transportation
 Availability of products on desired time and at desired place
 Provide adjustment between the time of production and use of the product
B) Modern Approach (Pull Concept)

 Movement of products
 Warehouse is a location where inputs received from production are converted
into outputs to the customers, at shortest possible time.
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 Warehouse is defined as a location of temporary storage facility and from

where they are dispatched with main objective of maintaining the flow of
goods throughout the logistics system (cross docking)
CEAT Company uses the pull concept

How it works: Company gets the raw material from Cochin on daily basis and it
stores in Bhandup warehouse, which is near the Bhandup plant and raw material is
supplied to production area quickly or without delay, it increases the efficiency of
production process.
A. Warehouse Structure
Bhandup Bhiwandi Panvel

Warehouse Warehouse Warehouse
(Near the Plant) (Private) (Private)
2000 Metric ton
Capacity
(250 Metric Ton)
Bhandup Nashik
Plant Plant
Owned Domestic Replacement

goes to
Bhiwandi

For
For
Finished
Raw
Material
Goods
Import Raw Material

(China, Thailand,
Malaysia, Indonesia)
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Domestic Export Imported

Finished Finished Outsourcing
Goods Store Goods Store finished Goods
Interport Goods
CEAT warehouse are located at Bhandup, Bhiwandi and Panvel
Bhandup Warehouse:
 It is situated near the manufacturing plant of Bhandup
 It has the capacity of storing 250 metric tones of raw material
 It is owned by company himself
Bhiwandi Warehouse:
 It is the private owned warehouse
 It is at the mid of Bhandup and Nashik plant
 It is also store the goods which come for replacement/recycling work
Panvel Warehouse:
 It is privately owned warehouse
 It has the capacity of storing 2000 metric tones, but it has capacity to do
expansion or enhance its capacity if required by company
 It stores import of raw material which comes from China, Thailand, Malaysia,
Indonesia and many other countries
 It stores domestics finished goods
 It too stores import of finished tyres which come from SriLanka, which is an
outsourcing of company for small tyre
 It also stores finished goods which are for export purpose
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B. Flow of material
For flow of Domestic raw material through warehouse
Trader CEAT
Raw
material
Bhandup Bhiwandi
(Warehouse)
(Warehouse)
Bhandup Nashik Plant

Plant
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Domestic raw material supplied to Bhandup warehouse as well as Bhiwandi

warehouse and then Bhiwandi warehouse supplies the raw material to Nashik
manufacturing plant and Bhandup manufacturing plant gets the raw material from
Bhandup warehouse.
For flow of Import raw material through warehouse
Import (Raw Materials)
Panvel (Warehouse)
Bhandup Bhiwandi
(Warehouse) (Warehouse
)
Bhandup Nashik
Plant Plant
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Possession of Imported raw material are first taken place at the Panvel warehouse,
from there it supplies to Bhandup warehouse as well as Bhiwandi warehouse. Nashik
plant gets the imported raw material from Bhiwandi warehouse. Whereas, Bhandup
plant gets the imported raw material from Bhandup warehouse as well as Bhiwandi
warehouse.
For flow of Imported Small Finished Tyre through warehouse
Import (Outsourcing Small Tyre) [Srilanka]
Panvel
(Warehouse
)
Domestic Interport
Outsourcing:
Meaning:
In highly competitive markets, logistics outsourcing provides the operational
flexibilities to meet the changing needs of the customers. The critical reasons why
companies outsource are
 To focus on core competencies
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 Resources constraints

 Cost saving resulting from better management of the supply chain
 Wide geographical coverage
CEAT has an outsourcing for the small tyres which is from Srilanka. Imports of
finished tyre are received in Panvel warehouse. From here it directly supply to
domestic customer and also to the foreign customer.
Interport: It means import the goods from one country and make some change or
not in the product within nearby port and directly export to other country.
For flow of Finished Tyres for Export purpose through warehouse
Finished Tyre
Export
Panvel
(Warehouse
)
Divisional
England Distribution Centre
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Exports
Ultoura Brand
C and F Markets
In Metro Brand
Agent
USA- Pierly Dealer

Brand
Customer
Finished tyres which are manufactured by the company for export purpose are stored
in Panvel warehouse. From there it goes to Divisional Distribution Center and then
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goes to C&F agent (Clearing and Forwarding) after it is forwarded to the dealer and
then finally it reaches to the customer.
But, the company job is end to C&F agent. From C&F Agent Company gets the Bill
of payment.
In England CEAT Tyre is sells with the name of ULTOURA BRAND and IN

METRO BRAND whereas, in USA it sells with the name of PIERLY BRAND.
C. Material handling equipment

Introduction
Material handling has emerged as a new and complex science evolving rapidly. For
moving the material in and out of warehouse, various kinds of equipment and systems
are used depending on the type of products and volume to be handled. These
equipments are used for the movement of goods over a short distance for the purpose
of loading and unloading operations. Material handling in warehouse is restricted to
unitized form, which requires smaller size equipment. However, for bulk handling
material at logistics nodes, such as shipyards, ports and airports, different types of
equipment are used. In warehouse, the material handling operation is performed at the
following stages:
 Unloading the incoming material form transport vehicles

 Moving the unloaded material to the assigned storage place in the warehouse
 Lifting the material from its storage place during order picking
 Moving the material for inspection and packing
 Loading the packages, boxes or cartons on to the transport vehicles
Efficiency of the material handling equipment adds to the performance level of the
warehouse. The internal movement of goods has a direct bearing on the order picking
and fulfillment cycle. The ware house is considered as a more labour intensive, if the
material handing equipments are more sensitive to labour productivity than the
manufacturing. There is much scope to reduce the labour and enhance the
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productivity by using the emerging technologies in material handling. A good

material handling system will definitely enhance the speed.
Equipment used for material handling by CEAT Company are:

 Fork lift truck
 Power jet
 Cranes
 Weighting machines
 Lift machines
 Roller
All this equipment used by company for the purpose of efficient flow of raw material
as well as finished tyre, it starts from the time of raw material unloaded till the time of
finished tyre loaded for distribution or delivery to customer.
Material handling through outside Agencies:

Material handling has not being done by CEAT Company. Material handling has done
by outside Agency as per service contract given by company to that agency. Service
contract has changed period after period. Minimum period for service contact is 5
year, after that it can be renewed or cancelled and given to other service agency.
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Machinery details
Machinery used for production process and which are available at
Bhandup plant:
 6 mixers
 2scruders
 1cobelco
 7wire cutter
 30 blades
 72 truck tyre building
 112 presses
 350 tyre size
 930 mould available
These are the machinery used for manufacturing of CEAT tyre
Precaution for safety of machinery:

The production process does not stop at any point of time. It runs 24X7 and 365 day a
year. But, for the safety, the company stoppage of machinery for 8 hours in a month,
for the purpose of repair and remove or eliminate the hazardous or any kind of
uncertainty in future.
It does not mean that in a month company stop production process for 8 hour.
Machinery is repair one by one without stoppage of production process.
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Company which provides machinery:

Company gets machinery from
 VOLTAS
 JOSHTE
 GODREJ
Distribution Management
Introduction
Distribution channels helps in creating time and place utilities of the product, which
are important for customer satisfaction. The channel will help the firm to make the
product available at the right place and channel efficiency and effectiveness is greatly
dependent on the logistics operation of the firm to fulfill the demand. However,
logistics will help in the movement of the product to make it available in the right
quantity whenever the customer needs it. Hence the logistics network needs to be
integrated with the distribution channels of the company.
The distribution channel is the place of transaction for the firm’s product and it acts as
an interface between the customer and the firm. However, the effectiveness of this
interface is greatly dependent on the efficiency of the logistics operation to move
product in the required quantity and variety with speed.
In fact, The basic role of logistics in the distribution channels is to ensure smooth
movement of product to make them available at distribution outlets as and when they
are required by the customer. This is not an easy task, since it involves a great degree
of planning for material availability and movement at the lowest cost and with speed.
In CEAT Distribution Channel are different for both Domestic as

well as for International.
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Domestic distribution:
CEAT DEALER
CEAT produces the finished tyre i.e. O.E.M. (Original Equipment Manufacture) and
are mostly supply directly to the dealer without storage except some dealer where
company stores the goods in O.E.M. Godown and dealer gets the finished tyre from
O.E.M. godown. In domestic distribution there are no intermediaries between the
company and dealer.
CEAT company job is till the dealer in domestic distribution. Company does not
supply the goods to user customer directly.
International Distribution:
CEAT
DIVISIONAL DISTRIBUTION CENTER
C&F AGENT (CLEARING AND

FORWARDING)
DEALER
CUSTOMER
Company supply export of finished tyre first to Divisional Distribution Centre, who
sent the goods to the Clearing and Forwarding Agent and they forward the good
through shipment and it reaches to the Dealers hand from their it goes to ultimate or
potential customer hand.
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Company job is till the C&F Agent, because the company gets the bill or payment
form C&F Agent.
There are 5 Divisional Distribution Centre. 1 Divisional Distributional Center handles

20 C&F Agents. Division Distribution is handled by company where as the Clearing
and Forwarding is an external agency which provide the service to company.
Problems in distribution:
There are some problems faced by the company for providing the goods to the
customer on time or with minimum variance are
 Transit time increasing in Rainy: In Rainy Season the transit time for
the distribution of goods increases. As usual it takes 5 to6 days for delivery
of goods but in rainy it increases up to 7 to8 days.
 Vehicle problem: In Road Transport there is huge problem in transit,

because in rainy there is large road block occurs, which creates problems
in distribution of company tyres.
 Forecast: Sometime Company forecast goes wrong and which make the
problem in the distribution strategy of a company.
 Strike: Strike is very complicate situation for a company. Which effect the
production process of a company and which ultimately effect the company
distribution as well as customer need fulfillment is effected from this.
For solving this problems company takes or took forecasting regularly and eliminate
the distribution problem to the lowest extent.
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Transportation System
Introduction
With limited choice of types of transportation and little difference in the prices and
quality of service offered by the suppliers of transportation some years back, transport
was considered as unimportant function. But today with a wide range of choice, the
scenario has changed and transport has become one of the very important deciding
factors in logistics.
 10% to20% of material cost is transportation cost.

 Large number of new alternatives is available.
 Proper selection of mode/modes of transport as well as transport vehicle
is required for timely delivery, optimum Cost and safe handling.
 Delays in transport can affect production schedules and distribution
schedules.
In the movement of raw materials or products from place of production to the place of
consumption, transportation is the most important components of the logistical
system. It serves two purposes, one is product movement and the other is in-transit
product storage. Movement of the product can be achieved through various modes,
such as road, rail, air, and sea, subject to the availability of and access to the
infrastructure.
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There are various mode of transportation available are

Road:
Road transportation is one of the promising means for agricultural and industrial
advancement of the country. It is suitable for short and medium distance where other
means are unable to reach. It provides door-to-door service, which is not possible with
other means. Road transportation provides the basic infrastructure to bring trade and
commerce from remote rural areas to the urban areas.
Road transportation helps assumed greater important due to the growing demand for
making the right product available at the place of consumption itself. Today road
transportation is occupying pre-dominant position in the transport network in the
country. Road transportation offers a number of advantages such as:
 Door to door service
 Flexibility
 Reliability
 Reaching remote place
 Speed
Railways:
Railways are the principal carriers of men and material and play a major role in
country’s trade and commerce activities. It is the main source of supplying essential
commodities, transporting them through length and breath of the country. Across the
world, railways have played an important role in industrialization and development of
the nation. It has been the primary means for movement of raw material and finished
goods.
Water:
This mode is the link between countries separated by water. Water transport is
classified into deep water transportation and navigable inland water transportation or
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domestic water transportation on lakes, rivers or canals. Main advantage of water

transportation is its capacity to move extremely large shipment at a very low cost.
Air:
Compared to all other modes of transportation, air transport is less hazardous in
nature. Air transportation is a costly affair and it is used only for highly perishable
commodities and items, whose life is short and value is high.
CEAT Company use different mode of transportation for the domestic supply
of Goods which is different from that of international
MODE OF
TRANSPORTATION
DOMESTIC INTERNATIONAL
Roadway Waterway
Airway
(Rare Cases)
For domestic:
In domestic movement of raw material and for finished goods company uses the Road
way, because of it daily Availability, Reliability and Cost Effective.
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For international:
In international movement of raw material and for finished goods company uses the
Waterway for transportation, because of it huge handling capacity and cheapest mode
of transportation in international trade. But company also use the Air transportation in
rare cases, this has been used when the customer required the goods urgently.
Transportation has done by:

Company does not have it own transportation system. Both the inbound and outbound
transportation have done by the transportation agency as per service contract.
Company does not have their own transportation, Because outsourcing is cost
effective and it does not require huge investment.
Information system
Introduction
Logistics is an information-based process of material movement wherein the flow of
information is a key to the success of logistics operations. The starting point of
information in logistics is the customer order. The customer spells out his needs and
passes it on to the supplier in the form of a document either paper or electronic.
Depending on the need in terms of product quality, product variety, place of use and
urgency the logistical operational chain is activated at the suppliers end to fulfill the
customer requirement at the right place, at the right time and with least cost. Thus
planning the material flow in the supply chain of the enterprise is essentially
dependent on the information flow across the system. Information flow start with the
customers and end with suppliers via distribution, manufacturing and procurement
centers.
The degree of success of the decisions largely depends on the information quality and
timeliness. With the advancement in information and communication technologies,
the speed of information analysis and flow has increased tremendously. As a result,
efficiency and effectiveness of logistic operation have improved considerably, which
in turn has led to increasing the level of customer satisfaction.
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CEAT Company use the SAP (Software Application Protocol)

SAP Information system used for the purpose of transferring of data from one
department to another department, for the purpose of forecasting, planning the MRP
(Material Requirement Planning), for placing the order as per the requirement,
maintain the distribution channel efficiently and many other facility provided by SAP.
There are some advantages of using the SAP information system in CEAT are
 No duplication of work
 Fast flow of internal information
 Control tariff management
 More efficient replenishment
 More on time delivery
 Avoiding the purchase of unnecessary equipment
There is only one disadvantage which is that, it is too costly. Company has invested
Rs.10,00,00,000/- for the adopting the SAP Technology. But, company does not
consider it is a disadvantage, it can be consider as investment, because of using of
SAP technology the flow of information become faster and distribution of goods
made efficiently or with minimum variance.
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MRP (Material Requirement Planning)
Introduction:
Materials requirement planning (MRP) is a computer based system in which the given
master production schedule is exploded with Bills of Material, into the required
amount of raw materials, part and sub assemblies needed to produce the final products
in each time period of say a week or month (called as “Buckets”).
MRP is a scientific way of planning the material usage and ordering at various level
of production and monitoring the inventory stocks during these transactions.
MRP deals with both inventory control and scheduling.
MRP serves as key component for planning and controlling production operations and
procurement of materials and helps to control shop floor activities and vendor follow
ups.
The main aim of introducing such a package is to maintain a low level of inventory
without affecting the production schedules and ensuring timely deliveries.
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MRP have 5 Stages –
1 – Sales Forecasting
2 – Master Production Schedule
3 – Bill of Material Explosion
4 – Gross Material Requirement
5 – Net Material Requirement
Sales Forecasting: The output of this process is quantity demanded per year (or
per unit time) is known. This indirectly helps in knowing quantity to be supplied i.e.
manufactured to the market.
Master Production Schedule: While preparing master production schedule,

determine the gross requirements of the finished products.
The gross requirements are modified to “net requirement by considering available

inventory. From net requirement, for” each time period, master production schedule is
prepared. A master production schedule expresses the overall plan of production. It
gives the details of products to be manufactured over the given space of time from
master production schedule, material requirement planning (MRP) is worked out.
Bill of Materials (BOM): Bill of material is the document generated at design

stage. It gives the details of the structure of the product by dividing the final assembly
into major assemblies, major assemblies into subassemblies and subassemblies into
parts/components. The individual parts, as far as practical, are listed in the sequence
of assembly. Bill of material provides details such as part name, part number,
description, quantity required, material etc.
In CEAT MRP works as
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CEAT MRP
Orders and Forecast
Demand Forecast
MRP Program
Inventory Status
In CEAT it applied as:
1st Step (Orders andNet

Forecast):
Material Requirement
Company forecast the sales for future period
and also consider the new order comes from STU (States Transport Unit), from this
company gets the requirement of stock on monthly basis.
2nd Step (Demand Forecast): From the forecasting and order, the company gets
to know the actual demand of the product of a company in the market. They also do,
Demand forecasting for any additional quantities of raw material required, that
management decides to manufacture for smooth flow of the production process.
3rd Step (MRP Program): Company runs the MRP program, from where they
get the actual inventory requirement for future fulfillment of market demand. MRP
Program is run on regularly basis.
4th Step (Inventory Status): After running the MRP program, company gets the
exact inventory status or raw material available in hand.
5th Step (Net Material Requirement): Lastly, from the actual inventory
status, company gets the Net Material Requirement for the production of future tyre or
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actual stock replenishment and accordingly they order for additional quantity which is
required.
Hence, in this way, how the company reduces the level of inventory and makes the
smooth flow of material in production process.
Just-in-Time (JIT) (Supplier)

Meaning:
Just-in-time (JIT) is an inventory management philosophy aimed at reducing waste
redundant inventory by delivering products, components or materials just when an
Organisation needs them. It has profound Implications on logistics systems.
JIT required close coordination of demand needs among logistics, carries, suppliers
and manufacturing. JLT also represents a tremendous opportunity for the logistics
function to contribute to the organization’s success by reducing inventory while
simultaneously maintaining or improving management/ Logistics Management.
In short, JLT means:

I. Supplying the quantities of raw material that is needed, no more or no less.
II. Supplying them on the date and at the time required, not before, not after.
Just In Time (JIT) (Supplier) Benefits:

When purchasers have consistent, reasonable production schedule, JIT Purchasing is
best. Potential productivity benefits include reduces costs of material, less rework,
fewer delays and less supervision. Administrative efficiency is derived from fewer
contracts, lower expediting expenditure, fewer suppliers, better and more accurate
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communication and more accounting. Lower inventory costs, lower transportation

costs, less scrap and fewer defects lead to lower delivered material costs. Also faster
response to engineering modifications and more design innovation.
In CEAT Just In Time (JIT) (Supplier) work as

 Just In Time Works in Domestic procurement which is from Kerala (Cochin),
Because of daily supply of Raw Material
It Reduces
 Warehouse Charges
 Material Handling Cost
 Reduce Finished Goods Inventory
 Reduce Transit Time of Material
 Less scrap
 Delay of Material
Advantages:-
 Time Saving Process
 Meet Working Capital Needs
 Inventory Carrying Cost Reduce
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Measures for cost cutting

Logistic cost
Meaning:
Logistics is the area where the firm has a lot of scope for cost control and reduction.
Logistics cost varies from 5 to35% of sales for different product-market. Hence the
management of logistics costs has become increasingly important due to its impact on
product profitability, product pricing, customer profitability and ultimately, corporate
profitability. Logistics can offer key source of competitive advantage through service
differentiation or by reducing costs and increasing corporate profitability. The firms
were increasingly focusing of planning and managing complex logistics operations
and networks, while reducing cost and enhancing service.
In a competitive market, firms require more accurate and detailed logistics cost
information form their cost accounting systems to work out the cost–benefits analysis
of their logistics strategies in order to design a cost-effective supply chain. Logistics
managers requires detailed information to determine how different products,
customers or supply channels affect the costs of providing logistics services. The
detail and complexity of the cost information will depend on the diversity of products
handled, customer requirements or supply channels used. The cost components that
are considered for computation of logistics cost.
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Components of logistics costs

Order processing
 Order registration
 Order checking and acceptance
 Order processing
 Co-ordination
Warehousing
 Material handling
 Material storage
 Order picking & filling
 Dispatching
Inventory
 Inventory(WIP & FG)
 Handling damages
 Obsolesce
 Shrinkages
Process
 Non-chore activities
 Faulty layout
 Ergonomics
 Set-ups
Packaging
 Packaging stocks
 Wastage
Transportation
 Freight
 Distribution
 Transit damages
63
 Service delays
The increased visibility of logistics costs will serve several purposes for the firm, such
as identification of direct costs, better understanding of price/volume relationships,
opportunity to address significant cost reduction measures, better evaluation and
justification of investment in new technology and give more attention to these costs.
There are some measures for cost cutting which CEAT COMPANY applies
1. Measures for its scrap
While producing the finished tyres, after production of finished tyre there are two
condition are possible, first is that their might be some defect to the product which can
be remove from repair or through reprocess and second is scrap, which comes out
from production of tyres.
For reducing cost company sells the scrap to other company. Those company who
brought the scrap, goes for the manufacturing of a mud flap. They give name to mud
flap as GEAT.
This selling scrap minimizes the expenses and it also reduces the conversion cost.
2. Measures for outsourcing

CEAT Company does not produce the small tyre. They do the outsourcing from
Srilanka.
It gives benefit to company such as

I. It gives tax benefit
II. Company does not require to handle & storage of goods
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III. It is cost effective as compared to produce from its own.
3. Measure for vendor rating

Company does the vendor rating on the basis of pricing and quality.
For ex: - If Domestic supply i.e. in Kerala the price of rubber cost to Rs.180 with the
same quality where as the good quality of rubber cost in Import is at Rs.126. Then the
company prefer to Import from rather than from Domestic supply.
For application of this the company does the regular forecasting for cost benefit.
4. Measure for warehouse and material handling

Company produce the finished goods i.e. O.E.M (Original Equipment Manufacture)
are directly supplies to customer without storage.
Therefore, it reduces the storage facility and also the material handling cost.
Employee motivation factor

In CEAT supervisor have been motivated through the Key Result Area. Key Result
Area is work on the yearly basis. Company use these for the purpose of improve the
production of tyre and utilize the full production capacity. Key Result Area function
like
a) First the supervisor has given the target
b) It works in 10 point basis
Supervisor Previous Financial Year Comparison Point

Year Target Target (given) (Actual Target
Achieved Achieved)
A 200 250 230 6
B 200 250 220 4
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C 200 250 240 8
From the above example:

It shown that,
 In first column there are 3 supervisors A, B & C.
 In second column show their previous year target they have achieved.
 In third column show on the basis of previous target achieved by

supervisor the company given the new target for financial year.
 In fourth column shows how much they have actually achieved in

financial year in relation to given target.
 In fifth column shows the points of supervisor which calculate as per:-
I. Step: Less the previous year target achieved with financial year
target given (200-250=50)
II. Step: Divide the extra target given i.e. 50 with 10 point i.e. 50/10=5,
then 5 is considering as 1 point for extra target achieved.
III. Step: Extra target achieved i.e. on an above 200 is divided by 5 i.e.
in case of A supervisor 230 target has achieved, in that 30 is the
extra target achieved then 30/5=6 point got by supervisor ‘A’
Hence, on the basis of the point the efficiency of the supervisor has found out.
It ultimately helps the company in reducing the wastage; improve the production
process which result into optimum utilization of production capacity and also it
increase efficiency of logistic function.
63
RECOMMENDATION
Two Factors Lacking In CEAT
1. Bottle Neck Approach in Employee Motivation
2. Lack of Technology Development
Employee Motivation
(Motivation at Plant Site)
63
Employee Supervisor
Motivation
No Motivation through Key
Factor result Area on
(Monetary & Ten Point
Non-Monetary Basis.
Benefit)
 Thus, In CEAT 65% Conversion Cost goes to Manpower requirement and

Skilled Worker then also they do not give more importance to employee
 That’s why they never achieve their target of 250 metric ton (Day) and they
stick to 230
Conclusion: If Employee have given due waitage Just like supervisor it gives
more benefit to achieve their target.
Lack of Technological Development

 They use old technology instead of New technology
 (For e.g.) In CEAT Mould Machine Takes 40 minutes for giving Final
Production
 By using of new technology there is a chance of reducing the moulding

duration.
Conclusion: - It will increase the Production Efficiency and they will fulfill
their additional market demand.
63
ANNEXURE
QUESTIONNAIRE
1. How many plants do you have?
2. How many stages in production process do you have? Which are they?
3. How much do you produce in a day/ week or in a month?
4. What kind of raw-material do you need for production process?
5. From where do you get raw-material?
6. For different raw-material, you must have different vendors, can you specify
them?
7. How far they are from your production plant?
8. How do you select your supplier, on the basis of quality, reliability (on the
time delivery), their capability or financial consideration?
9. How much time will supplier takes to supply the raw material?
10. Where do you store your raw material?
11. Whether it is owned or taken on lease basis?
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12. What factor do you consider while selecting the warehouse?(that is layout or
design)
13. How do you contact with your suppliers and consumers through direct
contact, e-mail or through the any information system?
14. What is your mode of transportation to procure raw-material?
15. Whether do you contact your supplier for informing quality of raw material
or you suggest any recommendation for improving quality?
16. How much raw-material do you consider as buffer stock?
17. What is your reorder level?
18. What is the lead time? What is the delivery time?
19. In what proportion do you obtain different raw material? (In which quantity
do you order different raw material?)
20. How do you get to know about stock replenishment? (keeping proper record
of receipt)
21. Which type of equipment do you used for material handling?
22. How do you maintain your material handling equipments?
23. In case of any machinery failure or anything happen in production process,
does your worker have an authority to stop the process and rectify that or they
can proceed further without rectifying?
24. How do you manage your waste-resources?
25. How do you safeguard your finished product from damage?
26. How do you design your packing?
27. Do you consider one die for all customers or different die for different
customer?
28. How do you decide your vendor rating (i.e. preference wise)
29. Which information system do you used for internal transferring of data?
30. Whether your warehouse is near your plant?
31. What precaution do you take to protect your raw-material? Whenever it is in
warehouse or do you have any fast moving raw-material?
32. Where do you store your finished products or you directly supply to your
customer?
33. If you store, how fare is your warehouse from your plant?
34. How do you transport your finished product?
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35. Do you have your own transportation system or you get from transport
agency?
36. What is your distribution channel?
37. Do you produce on your regular production capacity, or you produce on the
basis of demand or on the contract basis?
38. Please highlight strategies which your company follows to develop your
company logistic.
BIBLIOGRAPHY
Book Referred:
 Logistic Management
 -V.V.Sople
 Logistic Management
 -David Boomberg
Notes Referred:
 Elements of logistics Management
 -Prof. Vikram Shrotri
Website Referred:
 WWW.CEAT.COM
WEBILOGRAPHY
63
CONTACT WITH:
 MR. HEMANT KARKARE Production Manager (Bhandup
Plant) of CEAT TYRE Limited
 MR. RAHUL KAPARIA, Outbound Logistic Manager of
CEAT TYRE Limited
63

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Management of Business Logistic

Logistics involves the integration of information, transportation, inventory,

The operating responsibility of logistics is the geographical positioning of raw

Definition as per council of logistics management “logistics is the process of

Definition: Logistical Competency is the relative assessment of a firm’s capability to

How can this be achieved?

The work of Business Logistics is to coordinate functional areas like transportation,

Mission of logistic management

Mission of logistics is to achieve business objectives by delivering desired quality of

mission rather on isolated functions. Mission of logistics is providing a means by

Five logistical pillars

Network design is a primary responsibility of logistical management since a firm

Order management concerns the work involved in handling specific customer

Broadly, there are three types of carriers,

 Speed: It is the time required to complete a specific movement. Speed and

 Consistency: Consistency of transportation refers to variations in time

In the design of a logistical system, a good balance must be maintained between

 Customer segmentation: Every company that sells products realizes that

 Product requirements: Normally a large organization has different types

 Transport integration: Most of the transportation rates are based on the

 Time-based requirement: In logistic, we are connected as to how to

 Competitive performance: Sound inventory policies are essential to gain

Warehousing, material handling and packaging

Within the warehouse, material handling is an important activity. Products must be

When effectively integrated into an enterpriser’s logistical operations, warehousing,

 Military Logistics: The “practical art of moving armies.”

 Military Logistics: Is the system established to create and sustain military

Logistics: (Business Definition) Logistics is defined as a business planning

Business Logistics: The science of planning, design, and support of business

According to Dr. Plowman, objective of Business Logistics is “to achieve the

Service Logistics: The acquisition, scheduling and management of the

4. SERVICE RESPONSE LOGISTICS (SRL)

6. THIRD PARTY LOGISTICS

 Focus on core competence

7. FOURTH PARTY LOGISTICS

A standard 4PL supply chain solution involves four distinct steps:

A 4PL provider’s scope of responsibility also includes operational responsibility for

10. REVERSE LOGISTICS

Recycling has four processes:

HISTORY OF CEAT Limited

CEAT Limited is a tyre manufacturing company based in Mumbai, India. CEAT is an

 Heavy-duty Trucks and Buses

 Light Commercial Vehicles

Original Export Replacement

1. Original Equipment Manufacture {O.E.M.}:

3. Replacement / Reverse Logistics:

There are 3 stages in reverse logistics of CEAT tyres

Raw Material Management

A. Raw Materials needed for Tyre Manufacturing

B. Procurement of Raw Materials-Suppliers

For other Raw material such as

 Raw material quality checking:

Company contact to supplier about Quality purpose

If satisfied If Not Satisfied

Production Proceed Goods Return to Supplier

Company charge Penalty

 Finished goods quality check:

 White tag means “ NOT INSPECT”

i. Lead time {For Procurement of Raw material}

 In International it takes 40 to 60 days for procurement of material

ii. Reorder level

iii. Fill rate

Case fill rate: