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 G PȂ6

Akhil Jain Ȃ 06
Bhumi Shah Ȃ 16
Kunal Golani Ȃ 26
Natasha Bandodkar Ȃ 31

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 TAB OF CONTNTS

CK otors Ȃ Overview of the caseǥǥǥǥǥǥǥǥǥ04

Analysis of the caseǥǥǥǥǥǥǥǥǥǥǥǥǥǥǥǥ..05
Questions of the case:
Answer to question 1ǥǥǥǥǥǥǥǥǥǥǥǥǥǥǥ..05
Answer to question 2ǥǥǥǥǥǥǥǥǥǥǥǥǥǥǥ..06
Answer to question 3ǥǥǥǥǥǥǥǥǥǥǥǥǥǥǥ..06

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The case is about CK otors Pvt. td, which is a small scale industry. t is
located in Coimbatore, Tamil Nadu. t has recently started manufacturing
ceiling fans. CK otors accounts for approximately 60% of the market
share. This company has a capacity of manufacturing 200 fans a day;
however it utilizes only 60% of the capacity, due to lack of demand. ts
prime markets are Kerala and Tamil Nadu.

The company has appointed 10 distributors in Kerela and 20 in Tamil

Nadu. These distributors can act as wholesalers as well as retailers.
Distributors are given discount of 5% while retailers keep a margin of 15%.
The gross margin from each fan is 30% which can be increased by 10 Ȃ
15% if the plant produces to full capacity. t produces 10 different varieties
of ceiling fans in 3 different colours.

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This case provides with two options that the CK otors has in front of them.

| Produce full capacity and stock goods at two warehouses, one at
factory (Tamil Nadu Market) and another in Kerala.

| | To automate the order processing and production planning

process by installing computers in the factories.

Questions of the case answered:

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Ëe feel the company should go for option 1. That is, they should
produce to full capacity and stock goods at two warehouses.
The company should go for this option due to the following reasons:
â| t reduces transport costs as less than one truckload inventory
will now be transported across small distances instead of long
distances as the previous systems used to.
â| ncreasing the capacity increases margin by 10 -15% percent.
â| Opening warehouses will reduce stock outs. The stock out
issues for CK otors were such that distributors are not keen
on spending ËC on carrying inventory and the dealers reorder
after consolidating orders from their retailers and are not
interested in carrying minimal inventory. This gives the
impression that they do not produce stocks frequently. f
warehouses are opened, this issue can be tackled.
â| Prevent sales lost to competitors.

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Cost of distribution or the distribution expense is the cost or expense
incurred in moving goods from the point of production to the point of
consumption.
Cost of distribution is directly linked to the transportation cost. For
CK otors, the transportation cost is 1% of the total value of goods.
This cost is borne by the company itself. As mentioned in the case,
the transporter is hired by the company. However, the distributor is
responsible for the transportation from the distributorsǯ end to the
retailersǯ end.
Cost of distribution is also inversely linked to the inventory cost or
the warehouse cost. f inventory or warehouse cost will increase, it
implies that that the inventory is increasing. This will lead to less
number of distribution channels. For example, if the Kerela plant has
a warehouse, they can stock in bulk and thus reduce the number of
transport rounds.

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Few alternative or suggestions the company can go for are as follows:
â| They stop selling through retail outlets. They become
wholesalers and sell their products directly. This will eliminate
the middlemen, reduce the distribution costs and increase the
company profits.
â| Another alternative is that the company should combine the 2
options given above. This will increase the capacity and at the
same time automate the order processing and production
planning process. This can be done by conducting a cost benefit
analysis and implementing accordingly. The automation of

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order process and production planning can be a little more
manual to reduce fixed cost. Thus, the revenue will increase
due to increased capacity. This will also make the order
process more systemized, thus reducing sales lost.

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