XTRA POWER ENERGY SYSTEMS JMSB CONSULTING ELLIOTT ALTILIA MATTHEW BECK SIMON FOUCHER LYSIANE PROULX
Supply? Demand? Relationships? HOW CAN XTRA POWER RECONFIGURE ITS SUPPLY CHAIN TO ENSURE LONG TERM SUCCESS? Growth? Profit? Staffing?
RECONFIGURE CLOSED-LOOP SUPPLY CHAIN Address logistics issues Investment: Improve Rs 42M Staff retailer relationships Rs 100K ERP Rs 200K Marketing Partner with DLSP Integrate Dolphin Power materials Partner with Harley in Y3 Leverage ERP for orders/pickups Benefit: Timeline: 3 IT Years platform for on-going feedback Retailer program for recycling Profit: Rs 585M Prepare for increased production capacity Increase plant staffing Integrate ERP (leverage partners) Government relations SWITCHING LOGISTICS IS ESSENTIAL TO ADDRESSING THE MARKET
KEY FINDINGS
HIGH DEMAND LEADS TO HIGH MARKET GROWTH AND COMPETITION 25% Market Demand is greater then supply Price Efficient Logistics Competitive Split Market After Sales Service XTRA POWER NEEDS TO BETTER LOGISTICS TO COMPETE
THE CLOSED LOOP SYSTEM IS CURRENTLY BROKEN Galaxy Plastic Casting Lead Terminal Cretto Logistics Xtra Manufacturing Plant (assembly) Cretto Logistics Retailer Customers Avani International Lead Plate Battery Acid Cretto Logistics ABILITY TO CLOSE THE LOOP EFFICIENTLY WILL
PARTNER EVALUATION: LOGISTICS Cretto 8 year relationship One of largest provider in India 20% MS in Delhi Network of retailers Volume player Complaints, little responsiveness DLSP No relationship ERP usage Reliable, consistent Condition: sole provider of lead plate & electro. Cretto DLSP Lead time (days) 12 (one of highest) 4 (lowest) RS /kg of load/km travelled 1.6 2.35
PARTNER EVALUATION: ACID AND LEAD PLATES Avani Long-standing relationship Supply 2 most imp. components Negligible inbound logistics cost Decreasing market shares Dolphin Power Limited No relationship Reduced lead time Dolphin Power: fast growth, top 10 supplier Synergies with DLPS Avani DPL Cost of supplies (Rs / cell) 400-1450 535 to 1800 Lead time Industry average: 7 8 4 Distance 63Km 36km A 40% REDUCTION IN LEAD TIME WILL DOUBLE THE EFFICIENCY
PARTNER EVALUATION: LEAD TERMINALS AND PLASTIC CASINGS Galaxy Relationship Quality supplies Negligible inbound logistics cost Harley Power No relationship Reduced lead time Galaxy Harley Power Price Rs / unit 200 220 Lead time 6 4 Distance from plant 2.9km 2.7km 2/3 LEAD TIME LEADS TO 25% INCREASE IN EFFICIENCY
PRIMARY BATTERY EXPENSE COMES FROM LEAD PLATES AND ACID Lead Plates: 28kg Avani or Dolphin Power Limited Terminal: 1kg Average Battery: 43.6kg Acid: 11.5kg Plastic: 3.1kg Galaxy or Haley REDUCTION IN DISTANCE TRAVELLED CAN OFFSET COST INCREASE
XTRA POWER HAS THE PRODUCT BUT NEEDS THE SUPPORT High Quality Product Short Production Time High Product Demand Low Reconditioned Sales High Reconditioned Margins Retailer Recommendations Retailers only customer touch point The product is able to address market need Necessary to fix closed loop system Retail relations are essential to brand strength A NEW PARTNER IS NEEDED TO SUCCEED
FINANCIALS
Y/Y SALES GROWTH PER CATEGORY 30% 25% 20% 15% 10% 5% 0% -5% -10% 2012-2013 Growth Market Growth EXCEPT FOR OPEN SHIELD BATTERIES, NOT MEETING MARKET GROWTH
SAVINGS IN PACKAGING COUNTERED LOSSES IN LOGISTICS 300% y/y changes in direct costs 200% 100% 0% -100% Raw Materials Packaging Logistics -200% LEAD DOES NOT SEEM TO BE A SIGNIFICANT CONCERN
WHAT IF ANALYSIS EXCLUDING PACKAGING SAVINGS 2012 2013 Total Sales 328 360 Raw Materials 84 90 Packaging 74 74 Logistics 26 95 Total Direct Costs 183 258 Other Costs 71 80 80 60 40 20 0 Total Profits (M INR) 2012 2013 Total Profits 74 22 PROFITABILITY DROPPED BY 70% IN ONE YEAR
ESTIMATION OF QUANTITY SOLD AND RECYCLED Sales (M INR) Low High Heat Shield 89.9 Open Shield 126.2 Reconditionned 17.8 Unit price Heat Shield Battery 9200 20000 Open Shield 9200 25000 Reconditionned 4700 10500 Qty Sold High Low Heat Shield Barrety 9,772 4,495 Open Shield 13,717 5,048 Reconditionned 3,787 1,695 WITH LOSSES, ASSUME 4000 BATTERIES REPURCHASED
ASSUMPTIONS ON TRANSPORTATION TO/FROM RETAILERS Northern Delhi Region % Trips Breakdown 59% 41% Average Distance Travelled (km) 35 100 WEIGHED AVERAGE DISTANCE PER TRIP - INBOUND
INBOUND TRANSPORTATION COSTS Cretto # repurchased Recycled batteries 4,000 DLSP Average weight (in kg, dry) 32 Average Distance 62 Cost/(kg.km) 1.6 2.4 Total Cost to Pickup 12,737,280 18,707,880 DIFFERENCE OF 6M INRS BETWEEN PROVIDERS
OUTBOUND TRANSPORTATION COSTS Cretto DLSP # batteries shipped 18000 Average distance / trip 62 Average weight / battery (kg, wet) 43.6 Cost/(kg.km) 1.6 2.4 Total Costs of Delivery 77,852,160 114,345,360 ADDITIONAL 36M INRS; FOR A TOTAL OF 41M INRS
ALTERNATIVES
ALTERNATIVES COSTS PER COMPONENTS Avani / Galaxy Avani / Haley DLSP / Galaxy DLSP / Haley Terminals/ lead 7150 7150 8172 8172 Acid/Plated 1000 1050 1000 1050
COSTS OVERALL Avani / Galaxy Avani / Haley DLSP / Galaxy DLSP / Haley Terminals/lead 0 0 18 18 Acid/Plated 0 1 0 1 Transportrtation 0 0 41 41 Total 0 1 59 60
Avani / Galaxy Avani / Haley DLSP / Galaxy DLSP / Haley % Market 0.25 0.32 0.53 0.6 # Batteries 18000 23040 38160 43200 Sales (M INRs) 359 459.52 761.08 861.6 Costs 87 111.36 184.44 208.8 Additional Costs 60.0 76.8 99.4 67.9 Profits 212.0 271.4 477.3 584.9
SITUATIONAL SYNOPSIS Strategy Distribution Through Retailers Premium Quality Closed Loop Core Competency Short-Lead Time Refurbishment Demand > Supply Market Highly Competitive Price & Seasonally Sensitive SUPPLY CHAIN IMPROVEMENTS REQUIRED TO MEET DEMAND
OPTIONS Decision Criteria Status Quo Haley Alone DLSP Full Change Ability to Meet Demand 25% 32% 53% 60% Revenue Profit Relationships with Retailer At Risk At Risk Improve Improve
SITUATIONAL SYNOPSIS Risks Mitigations Contingencies Impact of retailer relationships Improved experience Faster lead times Over change management compensation Staffing of manufacturing plant Comprehensive HR Plan Leverage supplier network
RECONFIGURE CLOSED-LOOP SUPPLY CHAIN Address logistics issues Improve retailer relationships Partner with DLSP Integrate Dolphin Power materials Partner with Harley in Y3 Leverage ERP for orders/pickups IT platform for on-going feedback Retailer program for recycling Prepare for increased production capacity Increase plant staffing Integrate ERP (leverage partners) Government relations
IMPLEMENTATION
3 YEAR TIMELINE June 2013 Year 1 Year 2 Year 3 Logistics issues DLSP DLSP logistics Components from Dolphin Power From Galaxy to Harley Power Retailer relationships Prepare for production capacity
CLOSED-LOOP SUPPLY CHAIN Galaxy Plastic Casting Lead Terminal Cretto Logistics Xtra Manufacturing Plant (assembly) Cretto Logistics Retailer Customers Avani International Lead Plate Battery Acid Cretto Logistics
CLOSED-LOOP SUPPLY CHAIN Galaxy Plastic Casting Lead Terminal DLSP Logistics Xtra Manufacturing Plant (assembly) DLSP Logistics Retailer Customers Dolphin Power Lead Plate Battery Acid Cretto DLPS Logistics START BY ADDRESSING THE LOGISTICS ISSUES
CLOSED-LOOP SUPPLY CHAIN Harley Power Plastic Casting Lead Terminal Customers DLSP Logistics Xtra Manufacturing Plant (assembly) DLSP Logistics Retailer Dolphin Power Lead Plate Battery Acid Cretto DLPS Logistics MOVE FROM GALAXY TO HARLEY POWER IN YEAR 3
3 YEAR TIMELINE June 2013 Year 1 Year 2 Year 3 Logistics issues DLSP DLSP logistics Components from Dolphin Power From Galaxy to Harley Power Retailer relationships Increase reps visits platform for order / pick-up Reconditioned battery campaign Prepare for production capacity
RECONDITIONED BATTERY CAMPAIGN FOR RETAILERS Proprietor Mr. Dutta Marketing Manager (Mr. Nanda) Sales Manager Operations Managers (Mr. Sheik) Reps in contact with retailers Develop Savings for you and the planet sales kit Provide retailers with sales kits (flyers, posters, displays) PROMOTING RECYCLING SHEDS YOU FROM FLUCTUATING LEAD PRICES
RETAILER RELATIONSHIPS CAN BE IMPROVED WITH DLSP More frequent representative visits Place orders DLSP Platform Client feedback Retailers Feedback training Consumers Schedule pickup XTRA POWER CAN LEVERAGE THE ERP EXPERTISE OF DLSP
3 YEAR TIMELINE June 2013 Year 1 Year 2 Year 3 Logistics issues DLSP DLSP logistics Components from Dolphin Power From Galaxy to Harley Power Retailer relationships Increase reps visits Launch platform for order / pick-up Prepare for production capacity Double plant staff size Approach government for subsidy (recycling) Leverage DLSP IT expertise
PLANT STAFF MUST BE ADJUSTED Proprietor Mr. Dutta Marketing Manager (Mr. Nanda) Sales Manager Operations Managers (Mr. Sheik) DOUBLE plant staff size over 2 years Use ERP system to manage CLSC LEVERAGE SUPPLIER NETWORK TO STAFF PLANT
RECONFIGURING XTRA POWER SUPPLY CHAIN WILL NOT ONLY INCREASE ITS BOTTOM LINE BUT ADDRESS AN ESSENTIAL NEED OF THE MARKET