Case Study

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A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm. Below is an example of a very simple supply chain for a single product, where raw material is procured from vendors, transformed into finished goods in a single step, and then transported to distribution centers, and ultimately, customers. Realistic supply chains have multiple end products with shared components, facilities and capacities. The flow of materials is not always along an arbores cent network, various modes of transportation may be considered, and the bill of materials for the end items may be both deep and large. Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Marketing's objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization---there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such integration can be achieved. Supply chain management is typically viewed to lie between fully vertically integrated firms, where the entire material flow is owned by a single firm and those where each channel member operates independently. Therefore coordination between the various players in the chain is key in its effective management. Cooper and Ellram [1993] compare supply chain management to a well-balanced and well-practiced relay team. Such a team is

more competitive when each player knows how to be positioned for the hand-off. The relationships are the strongest between players who directly pass the baton, but the entire team needs to make a coordinated effort to win the race.

The AFL history can be traced back to 1867 when Nusserwanji Tata, the founder of the TATA Empire entrusted Framji Guzder with the entire shipping arrangement of the British Commissariat campaign supplies. AFL was founded in 1945 by Jamshed Guzder when he was appointed by TATA Airlines as its first sole cargo agent in India. Eventually AFL added a range of services to its name. Indtavels, one of the first travel agencies to be appointed by IATA in India, was launched in 1948. By 2000, Indtavels became 50:50 JV company between AFL and Carlson Wagonlit Travel, the global corporate travel leader. In 1979, AFL introduced India to the concept of Express Delivery through an exclusive alliance with DHL Worldwide Express, the world’s largest international express company. In 1993, AFL pioneered the concept of 3PL Services in India. In 1997, the company was renamed AFL Private Limited. In 2001, AFL launched its Domestic Courier service under the brand name AFL WiZ. In 2004, AFL strengthened its position as India’s leading 3PL service provider with 45 Warehouses having an area of over 5 lac sq. ft. The year 2005 saw the company entering into the booming Retail Industry and in the early 2006, the first AFL Touch World store was set up in Mumbai.

On 9th February 2007, AFL joined hands with one of the largest logistics company of the world, DACHSER Germany.

It’s a big question how a logistic company manages its supply and demand. As being observed, many Indian Logistic companies forecast their demand on the Intuition Basis. They merely forecast coming demand on the basis of their experience. AFL is also following the same forecasting criteria. AFL is the leader when it comes to warehousing. AFL has around 50 warehouses across India with 5 mother warehouses across 5 zones. AFL provides their space to the corporate clients in their warehouse and manages their inventory on their client’s behalf. Let’s say HP is being provided a space in their warehouse of 1000 sq. ft. The area being allotted will be utilized by HP to keep their stock – PC, Servers, Printers and all other products of HP.

Managing the inventory is the sole responsibility of AFL. While making the contract, HP mentions the minimum inventory to be maintained in the warehouse. Regarding the demand forecasting, it’s the HP that do the forecasting. AFL has nothing do with the forecasting part. However, during festivals like Diwali AFL asks for more stocks in hand as the demand tends to be increasing during Diwali season. There are some occasions where AFL forecasts the demand seeing the past trends and on the basis of their experience. No Mathematical Approach is followed. It’s just Intuitions. Indore is a hub as far as AFL operations are concerned. The warehouse spacing is utilized

by HP, Ranbaxy etc… whenever the space being given to the clients is not sufficient in case of increase in demand or any other space constraints, the extra stock is transferred to the nearest mother warehouse i.e. Nagpur. The mother warehouses are having very huge area to support their clients demand. They maintain rack system to bear any amount of load. AFL uses latest technology like automatic Loading and Unloading by Frock Lifts. AFL only manages the space for their clients and in case of forecasting, AFL does not follow any scientific model but merely intuition based forecasting helps them to manage their supply and demand.

INVENTORY MANAGEMENT IN AFL AFL is the leader in warehousing in India. It has about 50 warehouses across the country. Having such a good market share in ware housing AFL’s main concern is of Warehouse Management and Inventory Management. Inventory Management in AFL’s mother warehouses are considered every 15 days. Warehouse manager counts the inventory. AFL has supported their managers with front end application of IT. The whole ware house is equipped with SAP system. Each and every stock item is being bar coded. The bar code is entered into the system and through SAPERP the manager comes to know the exact quantity being sold during that period and how much more stock is available. Application of SAP-ERP has made the inventory management much simpler and saves lot of time. AFL main business comes from space selling. They sell their space in their warehouse to their corporate clients and manage inventory for the client. While negotiating the space selling deal, clients often mention the minimum inventory to be maintained in the ware house. This makes the job of the ware house manager more challenging. Any extra stock due to increase in demand has to be arranged in the same space. There is annual inventory check up with 15 days routine check up.

The application of SAP has helped AFL to manage their inventory more efficiently and effectively. Through SAP system, right from the procurement of the item to the delivery of the item, every thing is recorded in the system and whenever there is shortage of any item or mismatch, the system application helps the organization to detect the error and minimize or eliminate them as early as possible. BUSINESS ANALYSIS India continues to experience significant growth in demand for 3PL & supply chain operators. As India remains some way behind the developed Western Economies, this fact continues to present opportunities for logistic services and supply chain partnership. As with Juzer Mustan, CEO of AFL Logistic, remaining as an advisor this can only be good for business & the industry sector as a whole. With extensive network & logistics infrastructure of AFL, FedEx enables to deepen its penetration in the Indian market. AFL’s customers will be excited by the prospects of AFL’s service offering being strengthened under the leadership of a global leader in express delivery & transportation. IMPLEMENTATION AFL Logistics has different warehousing strategy. AFL Logistics are technologically sound and developed people capabilities. They are hiring people and trainees from different organization so that the domain knowledge of that organization comes into their organization. They are aiming to provide logistics services to not only end retailer or user but to the whole sector. As the Indian logistics are growing, the scope of companies like AFL Logistics which provides high service values at higher cost is increasing. Today lot of infrastructure - ports, terminals, railways, transport hubs - is being developed at various places at the same time and it is good for the country.

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