wires and cables industry and Diamond Infrastructure Ltd
1. Industry :
Cables and
wires
Strategic Procurement and Materials Management
Assignment
Submitted by
Group 12
Nitin Bighane(224)
Subhashini Iyer(197)
Seema Devi(235)
2. Assignment
PART A
•Select an Industry of your choice and identify one company you want
analyze further
•Make a macro level of Spend analysis of major heads (use Prowess ).
Identify at least 10-15 items that Sourcing team is responsible for this
spend.
•With reference to the vision/mission statement (as available on
company website) & corporate strategy, list down 4-5 purchasing goals
this company probably could pursue.
similar
3. Industry Overview
•
Wire Industry Sales Growth
Growth
30.00%
Average
28.09%
25.00%
20.00%
18.74%
15.00%
10.00%
16.67%
•
•
9.98%
5.00%
0.00%
-5.00%
-3.43%
-10.00%
Average Industry Sales Growth from 2007 to
2012 has been 14.01 %
•
The wire and cable industry has moved
from being a small industry 20 years back
to a very large industry over the last
decade. Even though it is a volumedriven product, it has a lot of quality and
technical particulars.
Currently it is a ₹
15,000 crore industry
The wire and cable industry comprises
40% of the entire electrical industry,
which is expected to double in size over
the next five years.
The industry is growing at a CAGR of 15%
as a result of growth in the power and
infrastructure segments, expected to
grow at similar rate for the next five years
5. Industry Spend Analysis
RAW MATERIAL, STORES &
SPARES COST PER SALES
REVENUE(%)
Major Constituents of Operating
Expense
84.00
Series1
82.00
80.00
78.00
76.00
74.00
75.81
74.32
72.00
70.00
68.69
Jan-07
Jan-08
Jan-09
Raw materials, stores & spares
Packaging and packing expenses
Jan-10
Jan-11
69.74
71.17
71.89
Jan-12
Purchase of finished goods
JAN-07
JAN-08
JAN-09
JAN-10
JAN-11
JAN-12
6. Diamond Power Infrastructure Ltd.
•
•
•
•
Diamond Power Infrastructure Ltd. has always outperformed the industry.
It is one of the top 5 cable manufacturers
Launched India’s first 500kv UHV cable
large capacities in conductors (India's second largest), power cables (India's third largest), power
and distribution transformers (India's third largest)
Product Portfolio:
Diamond Power Sales
Growth Rate
Growth
100.00%
Average
94.09%
80.00%
60.00%
44.02%
38.77%
27.77%
40.00%
20.00%
0.00%
25.76%
2.20%
Flexible Wires & Cables
•
Single & Multi Core Flexible Cables (IS 694:1990) of Voltage Grade
1100V
•
Conductor with frozen geometry and stable profile
•
Lower resistance value for increased power saving
•
Dual layer insulation for improved dielectric strength
•
Eliminates current leakage for enhanced safety
•
Flame retardant cables made of Electrolytic grade, bright plain
annealed copper conductor, as per IS: 8130 – 1984
Quality Certifications
•
The products are quality tested and approved by leading
organizations which include:
•
Central Power Research Institute, Bangalore
•
TAG Corporation, Chennai
•
Govt. Testing Laboratory
•
Bureau of Indian Standards Labs
8. Major Clients
State Government
Electricity Board
Central Government
Firms
• Assam State Electricity
Board
• Chttisgardh State
Electricity Board, Raipur
• Dakshin Gujarat Vij
Company Ltd.
• Dakshin Hayana Bijli
Vitran Ltd., Hisar
• Gujarat Alkalies
Chemical Ltd.
• Bharat Heavy Electricals
Limited, Tamil Naidu
• Electrical Research and
Development
Association
• NTPC, Unchahar &
Sonebhadra
• Power Grid Corporation
of India Limited
• Research Design And
Standard Organisation
Private Firms
• Ispat Industries Ltd.
• Jindal Polyfilms Ltd.
• Kalpataru Power
Transmission Ltd.
• Kandla Port Trust
• Kirloskar Electric Co.
Ltd.
• L & T, Ahmedabad
11. Major Raw Material
Raw material
Measure
(Rs. Million - NonAnnualised)
Aluminium
12 mths
Quantity
Unit
Rs. Million
Copper
Mar-08 Mar-09 Mar-10
Rs. Million
Mar-12
12 mths 12 mths 12 mths 12 mths
28,900.0 41,300.0
22,565.00
0
0 49,600.00 72,892.00
Tonnes
Tonnes Tonnes Tonnes
Tonnes
4,191.40 5,527.70 6,352.00 10,980.70 16,822.90
Quantity
Unit
Mar-11
656 1,300.00 1,500.00 1,955.00
Tonnes
Tonnes Tonnes Tonnes
2,321.00
Tonnes
12. COMPANY’S PHILOSOPHY
• A Philosophy of continuous improvement and the use of cutting-edge
technologies
• Vision
• “Enable and Enrich”
• Concerted efforts to provide the most innovative and superior power
solutions
• Strong focus on quality and customer delight
– Motto
– “Empower and Enhance”
– Core Belief
– “To implement what we imagine”
13. OBSERVATION ON THE COMPANY
• Believes in being a comprehensive one-stop solutions provider, delivering
everything from EPC services to almost all types of power equipments in
the transmission and distribution space.
• Large scale of operations
• It ‘makes’ the finished goods products and procures none.
• The raw materials expense / sales revenue is as high as ~ 90%.
Comparison with the Market Leader
Aluminium Procurement Cost
Quantity
(tons)
Diamond Power Infrastructure Ltd.
PolyCab Wires Pvt. Ltd.
(MARKET LEADER)
Rs. Million
Quantity
(tons)
Rs. Million
Mar-10
Mar-11
41,300.00
49,600.00
6,352.00
10,980.70
42,070.39
54,358.26
3,489.50
6,611.60
14. PROCUREMENT GOALS
• Focus on procuring raw materials at better prices
• Leverage on the economies of scale of production for major turnkey projects
• Divide the procurement strategy into a minimum consistent
demand and variable demand
• For minimum consistent demand build trust and strong relationship
with vendors in order to provide world-class single-window
solutions to customers at a good price
• For variable demand go for transactional and bidding based
purchase
15. PART B
• Develop a portfolio analysis (for items
identified in step 2)
• List /identify problems that this company
would have experienced with these items in
the past, identify future problems and
opportunities
17. List /identify problems that this company would have experienced with these
items in the past, identify future problems and opportunities
Issue with fluctuating prices of copper in India
•
•
•
•
•
The recent order of the Tamil Nadu Pollution Control Board (TNPCB) asking Sterlite
Industries(India's biggest copper smelter) to immediately shut down its copper
smelter in Tuticorin for 1 week that pushed copper prices higher in India in the
short term
The copper demand in India is currently not very strong and companies do have
inventory build ups so If the shutdown is prolonged then there might be an upward
move in copper prices
Sterlite Industries' STRL.NS plant, which meets half of India's copper demand, was
closed on March 30 after residents complained of emissions that led to breathing
problems
The plant produces 30,000 tonnes of refined copper a month - or more than half of
India's total production
Cashing in on regional oversupply after the Sterlite closure, smelters across Asia
started charging the highest fees in five months to process concentrates.
18. Future problems and opportunities
Future Problems
•
•
•
Operational Risk – resulting from production stoppages, risk of present technology being
outdated and business process failure
Market Related Risk – arising out of competition, fluctuation in copper metal prices, quality
assurances, customer satisfaction
Financial Risk – pertaining to fluctuation in currencies, liquidity problems, capital availability
Opportunities
•
High level of service from supplier of Steel and PVC as these are Leverage item for the
company which include supplier capabilities such as management of onsite inventory, epurchasing capability and ability to respond quickly to our requirement
•
Higher level of quality from supplier of these raw material
•
Reduction in the total cost of raw material to business
19. PART C
• Develop a comprehensive Supply Market
Research for 2 items identified in each quadrant.
• Propose appropriate Sourcing strategy with an
action plan
–Insourcing vs Outsourcing (Make or Buy)
–Identify one item/process that can be globally
sourced and list down the likely barriers in sourcing
from global sources along with a listing of the risks
associated.
20. Develop a comprehensive Supply Market Research for 2 items identified in
each quadrant
Raw Material
aluminium Rods
Supplier 1
Supplier 3
Nalco
Sacheta Metals
Mahavir Metal
aluminium Wires Corporation, Mumbai
Sanghvi Overseas,
Mumbai
Solitaire Impex,
Mumbai
copper Rods
Sterlite
Hisdustan Copper
Hindalco
Krishna Copper Private
Limited, Mumbai
Sanghvi Overseas,
Mumbai
copper Wires
PVC compound
,PVC tape,PVC
fillers
Hindalco
Supplier 2
ARJE Copper Pvt.
Ltd., Mumbai
Meet Marketing
Suvarna Additives Private Private Limited,
Acme Plastics, Faridabad Limited, Navi Mumbai Ahmedabad
Ratandeep Hardware &
Steel
Tata Steel
Electricals
CELECTRO POWERS
Newgen Specialty
Rajda Industries &
Plastics Ltd, Greater
Polylink Polymers India Exports Limited,
XLPE compound Noida
Limited, Ahmedabad
Kolkata
Industrial Steel
wooden
M. R. Packaging, Greater
Rolling Mill & Co.,
drum/steel drum Noida
SS Air Tools, Chennai
Kalyan
thermoplastic
sheaths
Osaka Rubber Private
Limited, Mumbai
Maharashtra Polymer
Products, Thane
Supplier 4
Supplier 5
PG Foils
Hind Aluminium
Vijay Trading
Grand Metal
Corporation,
Corporation, Mumbai Bengaluru
Jhagadia Copper
Limited
Birla Copper
Krishna Copper
Vijay Trading
Private Limited,
Corporation,
Mumbai
Bengaluru
Hwashin Industries
Real Polymers,
Private Limited,
Ahmedabad
Agra
PRATHAM
ENTERPRISE
J. K. STEEL
CORPORATION
Apratim
BLS Polymers Limited, International Pvt
New Delhi
Ltd, New Delhi
Suresh Timber Co.,
Vadodara
J & D Industries,
Thane
Newgen Specialty Technovinyl Polymers Sperry Plast
Plastics Ltd., Noida India Ltd., Mumbai
Limited., New Delhi
21. Financial Analysis of Critical Raw Material Supplier(Aluminium)
Company
No of Days in working
Capital
Current Ratio
Working Capital(in Cr.)
Hindalco
103
1.26
3560
Nalco
146
1.64
1005
Sacheta Metals
179
0.88
28
PG Foils
194
1.03
86
Hind Aluminium
82
0.80
82
22. Analysis of Copper Suppliers
Hindustan Copper
Limited
• Capacity:- Current:
3.4 million tonne
per annum (32000
T copper metal)
Projected: 12.4
million tonne per
annum (1, 25,000 T
copper metal) by
2017
Hindalco
• Increased smelter
capacity from
1,00,000 tpa in
1998 to 5,00,000
tpa
Sterlite Industries
Ltd.
• Installed Capacity:
Current - 9,995,000
MT Projected :
1,449,500 T by
2015.
• ii) Demand:
Current - 5,70,000
MT Projected 1,227,900 MT by
2015 considering
8% growth rate
23. Identify one item/process that can be globally sourced and list down the
likely barriers in sourcing from global sources along with a listing of the risks
associated.
• Import duty 2.5%
• Aluminum (8mm rod):
– International price range: ₹ 60/Kg to 300/Kg
₹
– Current procurement cost: ₹
230/Kg
• Copper (8mm rod):
– International price range: ₹210/Kg ₹
to 720/Kg
– Current procurement cost: ₹
460/Kg
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