Kapil Health Food ProductsKapil Health Food Products

Introduction Introduction

• Kapil Health Food Products was established in 1960 as a subsidiary of an American Multinational pharmaceutical company.

• It has a total capital outlay of Rs.50 million.

• It started its manufacturing operations at Nahar, which is situated 325 kilometers west of New Delhi & has a population of 8,500.

• Nahar is a semi-urban town supported by a village economy.

• Kapil is an ISO 9002 accredited manufacturing firm with state –of-the-art manufacturing & packaging facilities.

Structure of the companyStructure of the company

• In 1980, the foreign holding of the company was diluted to 51%, and 49% shares were offered to Indian nationals and financial institutions.

• The company was registered as Kapil Health Products Limited & milk is the major raw material for the firm’s product, its major focus is on the diary development activities.

• It undertakes programmes like animal health; animal insurance, mechanized milking etc. It spends around 750 million rupees per annum on the above activities.

• It is now leading health food manufacturing company contributing to 32% of the total health food powder production in India.

• Major competition is from leading brands like Bournvita, Boost, Horlicks, Nutramul and Maltova & ayurvedic pharmaceutical companies in India.

• All these ayurvedic pharmaceutical companies command

around 10-12% of the health food market in India.

MAJOR ISSUESMAJOR ISSUES

• Wholesalers are unable to fulfil two orders in every twenty orders placed by retailers.

• Due to severe competition, KHFP is in the process of reviewing its supply chain for – Cost reduction– Enhancing customer service.

• The management is planning to reduce the inventory to less than 10 days at factory & C&F agents.

• The distribution cost on the present level of sales is at the rate of 8.5%, which they want to reduce by 40% i.e. from 8.5 they want to bring it down to 5.1%.

• In addition they want to reduce inbound transportation cost by proper planning & scheduling.

KAPIL’S SUCCESS STORYKAPIL’S SUCCESS STORY

• PARAMETER 1960 2001

• PRODUCTION CAPACITY 2 35

• NO.OF.UNITS 1 4

• FACTORY AREA 40,000 75,000

• NO.OF.PRODUCT LINES 1 14

• MANPOWER EMPLOYED 50 1700

• MILK PROCESSED 7000 1,50,000

PRODUCTS PRODUCTS

Kapil runs three product lines:

• Health foods, HOR & BOS

• Ghee.

• The Company also supplies products in bulk to various repacking stations across the country to take advantage of freight economy.

Product Packaging at Kapil Health Food Products:Product Packaging at Kapil Health Food Products:

HOR BOS GHEE

• 500 gms 500 gms 500 gms,

1000 gms

• 1000 gms - 2000 gms ,

5000 gms

• - - 10,000 gms

MAJOR RAW MATERIALS CONSUMPTION (Mt/Day)MAJOR RAW MATERIALS CONSUMPTION (Mt/Day)

• WHEAT FLOUR 28

• MALTED BARLEY 26

• MALT EXTRACT 35

• SUGAR 8

• MILK POWDER 14

• LIQIUD MILK (LITRES) 1,50,000

PROCUREMENTPROCUREMENT

Since the numbers of raw materials are 6, the management thinks that it has a good control over the inventory & its suppliers.Barring milk is the major raw material, & NO OF VENDORS ARE RESTRICTED TO 4 OR 5.

PACAKAGING CONSUMPTION (units/day)PACAKAGING CONSUMPTION (units/day)

• TIN CONTAINERS 1800• CARTONS 250• POLYTHENE 435

MILK PROCUREMENT:

• MILK PRODUCERS 25,000• DAIRY FARMERS 200• CONTRACTORS 20

 

INBOUND LOGISTICS INBOUND LOGISTICS

• The movement of materials from suppliers and vendors into production processes or storage facilities.

• Activities associated with receiving, storing, and disseminating inputs to the product.

MILK FLOW SYSTEMMILK FLOW SYSTEM

MODIFIED PRODUCTION SYSTEMMODIFIED PRODUCTION SYSTEM

• PLANT CAPACITY: 35 kilo tones in a year’s time frame. Therefore 100 Mt/day.

• PROCESS:

• OUTBOUND LOGISTICS: The factory has 4 Regional offices at major metros headed by:

OUTBOUND LOGISTICS OUTBOUND LOGISTICS

• The process related to the movement and storage of products from the end of the production line to the end user.

• Outbound Logistics’ is the part of the supply chain process, such as custom assembly or private labelling, that moves, stores, and adds value ...

DISTRIBUTION SYSTEMDISTRIBUTION SYSTEM

• The product requirement flows from

INVENTORY HOLDING

• WAREHOUSE 15-18 DAYS

• C & F AGENTS 12-15 DAYS

• STOCKISTS 8-10 DAYS

• WHOLESALERS 7-8 DAYS

RECOMMENDATIONSRECOMMENDATIONS

1. INVENTORY MANAGEMENT:

• Reduce the inventory at warehouse i.e. from 15-18 to 12-15.• This can be done by providing discounts to C&F agents at 3%

discount rate.• This would automatically provide a benefit of discounts to

stockiest, wholesalers via C&F agents.• Hence ultimate result would be that the inventory level at

warehouse would lower down & thereby at C&F agents, stockiest & warehouse.

2. TRANSPORT CHECK:

• The transport facility should be a good one as it is a major factor.

• The energy in terms of fuels and hence costs which is wasted in standing of trucks at check posts now can be saved.

• The company can be relieved by regular challan’s on transports.

• Training of truck drivers could enhance their speed of work.

FACTORY

45 km

55 km30 km

27 km

16 km49 km

36 km23 km

32 km42 km

17 km

10 km

20 kmA

BC

D

From this point directly to the factory, so that production process for the urgent requirement can be done

Milk Collection And Processing Units

4. Manufacturing Resource Planning-MRP II

• MRP II system provides data on the cost of production, machine time, labour time and material consumed and the final output to accounting and finance. As the new milk collection centres and processing units will be setup, so we will require MRP II.

CONCLUSIONCONCLUSION

• The growing health consciousness among the educated families, particularly in the urban areas, is contributing to the growth of health food requirements.

• Kapil Health Food Products is a continuous success story since its inception in 1960.

• It is now a leading health food manufacturing company in India contributing 32% to the total health food powder production.

• By following the recommendations the company would improve its inventory management and will have lower transportation cost and help the company to increase its market share.

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