Maxwell Case Analysis

Maxwell Case Analysis Submitted By – Group 7 Prakhar Singh 100 Somil Joshi 113 Tarun Gupta 117

Varun S Pilla 119 Prajith VM 99 Rakesh M 43

QUESTION - 2 Analysis of the proposed distribution channels MODEL 1 Point to Point Model – SW Analysis STRENGTH

WEAKNESS

Distribution Centre Costs are saved Low Lead Time

No Risk Pooling Higher Transportation Costs

MODEL 2 HUB and Spoke Model – SW Analysis STRENGTH

WEAKNESS

Lesser Complexity vis-à-vis P2P mechanism (*) Most efficient when spoke is closer to the hub Hub can focus on complex activities like packaging thus saving the spoke’s time Better Scheduling of tasks

Inflexibility in daily operations

Reduced Inventory Management

(*) No: of Nodes No: of Routes Complexity

Distortion in one spoke may affect the whole model Effective Traffic management is needed

Capacity of the hub is the capacity of the network May cause longer delivery time vis-à-vis P2P

Hub and Spoke N N-1 O(n)

Point to Point N N(N-1)/2 O(n*n)

MODEL 3 Central Ware House Model – SW Analysis STRENGTH

WEAKNESS

Best Inventory Management

Higher lead Time

Optimum Resource allocation Economies of Scale

Higher Transportation Costs Prone to Bull Whip effect as per sudden change in demands

Outsourcing Model – SW Analysis STRENGTH

WEAKNESS

Lesser cycle time Decrease inventory Helps to focus on core competencies Better Cash flow

Lack of accountability Conflicting Interests Share of Margin Conflicts with existing channel members Lesser Control Confidentiality Issues

Higher Working Capital Leverage 3PL’s distribution and reach

On the basis of the above said analysis, the group would like to suggest Maxwell Corp to go for an Outsourcing model for their distribution. The points that substantiate them are as follows • •

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As discussed in the case, the point to point mechanism is having a variety of problems. The hub and spoke model has a variety of positives. But the positives can be leveraged only if the company is playing a high volume game. The nature of product line, variability of demand pattern etc works against the H&S model. The ideal location for the central ware house would be Aurangabad or Bhopal. But as the main factory is present in Vizag, the transportation from Manufacturing plant to Central warehouse is itself taxed with inefficiencies as per the following facts  Average Logistics costs for a non consumer good: 10-35 % of revenue  Average Transporting costs for a non consumer good: 60% of Logistics Cost  Source: PRTM Consultancy

Once a decision to outsource the entire supply chain is taken, the following pointers will keep a check on the efficiency of the proposed model. • Accountability – Acquire a stake hold in the 3PL so that mutual interests are always maintained. • Confidentiality – Post Company Personnel as interface between company and 3PL

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Manage conflicts of the existing channel members

QUESTION – 3 Marketing and Sales Set up Once the distribution part is well handled, the company should now focus on the M&S part – • • • • •

Focusing on ‘Push’ selling (as product is complex and is bought aided) Tie up with hospitals, clinics for popularizing the product Enlist the services of medical representatives for product promotions Establish an effective after sales network Leverage the Marketing and Sales Strength of a Budget competitor (eg. Organised retail)