LUBOL INDIA LIMITED

LOGISTICS CASE STUDY

Presented by:
Sakshi Gupta Samay Meena Bellana Shankar Sarvesh Satya Swarup Shantanu Mishra (85) (86) (87) (88) (89) (90)
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CASE DESCRIPTION IN A NUTSHELL

Lubol India Ltd A Joint Venture of Lubol Petroleum Inc. and National Oil Company (NOC) Product Lubricating oil Current Market Share 1 % (1998) Target 9 % share (2002-03) LIL uses the spare capacity that NOC has at three lube bending plants at Mumbai, Chennai and Haldia LCWs at Mumbai, Chennai, Calcutta and Gurgaon

Blending plants

Mumbai Chennai Haldia

Filling lines

LCWs

Mumbai Chennai Calcutta Guragaon

DISTRIBUTION NETWORK
40 NOC depots

Wholeseller

LILs retail

Consumers

DEPOT MANAGEMENT DECISIONS

Options Available

Continue with NOC managed depots

Establish LIL Managed depots Appointing CFAs

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Sales Tax Structure CST, LST, D- form concession Demand/Fuel consumption Sales volume Urban population

Location of three blending plants and four LCWs, existing NOC depots
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A single LIL depot in West Bengal catering to the needs of the north-eastern states Arunachal Pradesh Assam Manipur Meghalaya Tripura

Demands in the following states can be met by the adjoining states Goa Himachal Pradesh Jammu and Kashmir

No depots in Mizoram, Nagaland and Sikkim as fuel consumption is zero

At least 1 LIL depot in Maharashtra, Tamil Nadu and West Bengal to cater to large consumption and urban population in addition to existing depots, blending plants and LCWs

LIL depots in rest of the states to be constructed

Union Territories catered to by the nearest states

WHAT ARE THE CRITERIA FOR SELECTION FOR DECIDING ON THE METHOD OF DEPOT MANAGEMENT(WITH RESPECT TO THE OPTIONS OF CONTINUING WITH NOC, OPERATING OWN WAREHOUSES AND APPOINTING CFAS)

Ability to handle growth

Cost
Services and responsiveness

Strategic Marketing (state wise sales & demand)

Sale Tax Structure Prevailing in the country

SELECTION OF DISTRIBUTION NODES

High demand, More future growth, Competition, Responsiveness, Long term Plan Warehouse Maharashtra, Gujarat, UP, TN

CFAs

Moderate demand, Operational Efficiency, Expected ROI less poor connectivity and high logistics cost North Eastern region, A&N, Lakshadweep etc.

Low Demand, Customer scattered, Low Accessibility, Growth Potential low

NOC

Low demand Markets

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CONTD.

Cost structure for calculation of expenses for LIL/CFAs: - Inventory Carrying cost - Rental for Space - Fixed Operating costs salaries etc.

- Variable costs hired labors etc.

It has been assumed that NOC takes Rs 50000 monthly; correspondingly, the annual cost comes out to be Rs 6,00,000

Direct
LIL Channel NOC Channel 10% to 29% 35% to 6%

Retail
35% to 50% 20 to 15%

States with High Retail Trade - NOC depots States with High Direct Trade - LIL Depots Low Demand or High Cost States - CFAs
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High demand uncertainty in smaller markets as compared to larger markets

Procurement cost is higher & Replenishment cycle is less frequent in smaller depots

Economic order quantity will vary depending upon the annual sales and also the frequency of replenishment cycle

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Why should we go for CFAs? Hired labour cost & Fixed costs It will affect customer service level & growth The CFAs recommended fee structure can be based on sales Fee structure should be based on volume handled but should be less than total cost incurred by LIL if it were to open its own depot

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OUT OF 3 SOURCES , WHICH SOURCE SHOULD BE ALLOCATED TO WHICH DEPOT ? COULD THE EXISTENCE OF 3 SOURCES INFLUENCE THE NEED OF MULTIPLE DEPOTS IN CERTAIN STATES?

Market priorities and demand Well established connection with the bounding states Planned capacity of the allocated sources to meet the requirement Thus,states like Maharashtra, Uttar Pradesh, Tamil Nadu need to have multiple depots so as to meet the demands of depots in neighbouring sites

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THANK YOU

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