Link – The Supply Chain Excellence Case Contest
Miebach Consulting India Pvt. Ltd.
About the Firm:
Calvin Trade Ltd. (CT) is into multiple business segments of fertilizers, pesticides and retail. W ith annual revenue of INR 4300 Crores, CT is a leading fertilizer manufacturer in India. Fertilizer, though a low margin business for CT accounts for 72% of the total turnover of the firm.
The entire fertilizer production happens from the plant in Hobbesville, Andhra Pradesh. The plant has a production capacity of 4500 tons per day. Capital intensive plant set-up and process issues mandates round the year operation of the plant. CT has a Pan-India footprint but Andhra Pradesh contributes to 50% of CT’s market share in volume.
Sale of fertilizer primarily happens through a dealer channel. However, CT operates its own retail stores through which it sells fertilizers directly to farmers. The reason behind the introduction of retail concept is that footfall in stores is driven b y presence of fertilizers which improves the sale of other high margin products in the store. Retail currently accounts for 3% of the total revenue of CT. A four-fold increase in revenue for the retail business is envisaged in the next 5 years.
Fertilizer being an essential commodity, is a completely regulated market. Over the last few years, the fertilizer industry has seen many changes in the freight subsidy po licies. Earlier government completely reimbursed freight cost incurred by rail movement while road movements (both primary and secondary) were reimbursed on the equivalent rail freight basis. Since rail is cheaper than road, a under recovery was inevitable in case of road movements. (ref: Annexures – Table I: the subsidy policy for road movements). Note: The first leg of movement of fertilizers from plant via road/rail to any location is termed as primary movement. All subsequent movements are termed...