ROUND 1

TEAM NAME: Terrific Trio TEAM MEMBERS:

COLLEGE: FORE School of Management Kushal Kamra, Himanshu Grover, Anurag Goyal
 KEY ISSUES & HYPOTHESES TESTING

Key Issues Possible Impact Priority

Increase in the RM prices • Will decrease profit margins 1
Carbon Emissions • Increase in carbon emissions will lead to decrease in sales & increase in cost. 2

Worker Unionization & Power Holidays • More downtimes during the production hour. 3
• Disruption in production plan & low production rate.
• Lead to poor inventory management.

Poor OTIF • Loss of sales among existing & new customers 4

Shortage of trucks for delivery owing to • Late delivery of FGs will lower OTIF 5
skewed demand towards end of month • Loss of sales

Constraint in Storage Capacity • Not able to stock RM whose prices will increase in future. 6

Preliminary Hypotheses Qualitative Analysis

Inculcating the sense of belongingness within the workers • Reduction in production downtimes. FG will be produced as per the production plan.
for the company • Improve OTIF as FGs will be available for delivery during middle of the month also.

Improved supplier or logistics partner relationship. • Improvement in relationship will offer flexibility & cost reduction

Accept the Supplier facility upgrade proposal (Refer to • Decrease in carbon emission will increase sales
Annexure 1 slide) • Reduction in Direct Cost

Upgradation in Storage facility • Will be able to stock more RM whose price will increase in future (Refer to Annexure 2 slide)

Abbreviations Used - RM: Raw Material; FG: Finished Good; OTIF: On-Time In-Full
 SUSTAINABILITY IN SUPPLY CHAIN

Sustainability in Supply Chain can be achieved by

improving ESG performance. ESG means using
Environmental, Social & Governance factors to evaluate
a company on how far they are with sustainability.

An Organisation
S.No. Scope Ways to Improve Priority
1 Direct GHG emissions This can be improved by proper & timely maintenance of 3
machineries & vehicles. Old machineries should be replaced.
Moreover, old materials & equipment should be recycled.
2 Electricity Indirect GHG emissions This can be improved by saving as much electricity as possible. 1
Turning off the electrical appliances when not in use. Using
appliances which uses less electricity.
3 Other Indirect GHG emissions It can be improved by choosing the suppliers with low GHG 2
emissions & try to use products and service which meets EGS
requirements.

Chemicals Company Private Limited should build a long-term relationship with supplier 4 & 5 by investing in their proposal. This will save
some cost of raw material as their price is comparatively less than other suppliers and reduce the carbon emissions in long term.
 Thank You

References:
• https://
www.dbs.com/sustainability/responsible-banking/sustainable-financing/sustainable-investing/the-tim
e-is-now
• https://hbr.org/2020/03/a-more-sustainable-supply-chain
Annexures
Annexure 1:
Improvement opportunities
Supplier facility upgrade
Suppliers 4 and 5 are among the few vendors the company has dealt with since its inception. Over these years, the company has built a strong
relationship with these suppliers. As the company grew over the years, the suppliers' capacity did not expand proportionately, representing
15000 MT/year. Moreover, the sustainability risk of these suppliers is not reasonable either, which leads to increased regularity pressures and
higher costs. The suppliers do not have enough capital to upgrade their facilities and have approached the company with an investment
proposal. With this investment, the suppliers' capacity would be 2x the current state. Moreover, the sustainability risk could be nine or even
better.

Storage capacity expansion

The sourcing team has proposed to increase the raw material storage capacity, which currently stands
at 2000 MT. The project involves a € 1M investment, including buying the storage and human resources to maintain them.
Project Projected Projected
SN Opportunity Description Investment (in timeline in sales increase (% cost reduction
Name € M) months of net sales) (% of Sales)

Investment in overhauling
Supplier facility supplier plant to minimize
1 upgrade carbon emissions and € 2.0 12 15% 2.3%
increasing capacity by 2x

Storage Increase raw material storage

2 increase € 1.0 2 5% 0%
Annexure 2:
Sustainability and supplier Selection criteria

Note: The $ to € exchange rate is 1

While planning a 5-year roadmap, the company is creating robust supplier selection policies. The policies would improve the supply chain resilience and ensure
that the company is prepared for future government regulations on sustainability.
While selecting the suppliers, the company is focused on strengthening three pillars – Cost efficiency, Supply Chain Resiliency and Sustainability.
 Cost efficiency –
Although it is known that the market is going through inflationary pressures, some suppliers are passing way more than the costs justified through inflation.
Therefore, the company wants to ensure that the supplier selection should consider the impact on the gross margins
Annexure 2 (Continued):

 Supply chain resiliency –

Raw material shortage and the delays in logistics are the most significant contributors to the lost sales
One of the most vital raw materials used for production is palm oil. The RSPO regulates this raw material, and certification from them is paramount in
maintaining good sustainability risk scores in Palm Oil Sourcing. With the regulations in place, an acute shortage in this raw material is anticipated in the
upcoming months.

Moreover, multiple factors such as Geopolitical Risks have created huge bottlenecks in production and logistics:
1. Russia-Ukraine War – Ukraine, the largest producer of Sunflower oil, cannot supply it. As a result, it has created a global shortage of edible sunflower oil.
In response, consumers are now turning towards Palm oil as a substitute. Moreover, palm oil is another critical material used in surfactants. Now that
there is a considerable demand from the edible oil sector, there is a demand-supply gap, leading to price increases due to anticipated global shortage.
2. China's lockdown – Some other raw materials and MRO inventory are being sourced today from China. Due to multiple lockdowns on account of Covid, the
suppliers cannot run the production at total capacity, leading to shortages.

While creating the supplier strategy, the company wants to guard itself against similar issues.

 Sustainability –

As the company's customers are pushing to improve the sustainability risk score, the company is paying more attention to enhancing ESG performance.

ESG scores in a nutshell:

An ESG score measures a company's exposure to long-term environmental, social, and governance risks often overlooked during traditional financial analyses.
These risks include energy efficiency, worker safety, and board diversity, which can have significant economic consequences.

What do ESG scores measure?

ESG scores are based on environmental, social, and governance factors and assess issues s uch as energy use, employee satisfaction, business ethics
standards, and executive pay.
Annexure 2 (Continued):
Environmental issues can include factors such as:
 Carbon emissions
 Climate change vulnerability
 Water sourcing
 Biodiversity & land use
 Toxic emissions & waste
 Packaging material & waste
 Electronic waste

ESG rating companies also consider the opportunities within different ESG categories. For example, environmental options can include clean technology, green
building, and renewable energy. At the same time, some social opportunities can be better communication, finance, or healthcare access.
Under the Carbon Emissions Segment, the greenhouse gases (GHG) are primarily divided into these three categories. Therefore, the right way to rate a
company's sustainability is by tracking the Scope 1,2 & 3 emissions, which are defined as follows:
Scope 1 (Direct GHG Emissions): Direct GHG emissions occur from sources owned or controlled by the company, for example, emissions from combustion in
owned or controlled boilers, furnaces, vehicles, etc.; emissions from chemical production in owned or controlled process equipment.
Scope 2 (Electricity Indirect GHG Emissions): Scope-2 accounts for GHG emissions from the generation of purchased electricity consumed by a company.
Purchased electricity is defined as electricity that is purchased or otherwise brought into the organizational boundary of the company. Therefore, scope-2
emissions physically occur at the facility where electricity is generated.
Scope 3 (Other Indirect GHG Emissions): Scope-3 is an optional reporting category that allows for treating all other indirect emissions. Scope-3 emissions are
a consequence of the company's activities but occur from sources not owned or controlled by the company. Some examples of scope-3 activities are extraction
and production of purchased materials, transportation of purchased fuels, and use of products and services.

The company is planning to formulate a strategy to work on these scopes and prioritize within these scopes based on which scope would possibly improve the
GHG Emissions rating most quickly.
With all these factors in place, the company needs some help shortlisting the suppliers to build a long- term relationship.
Annexure 3:
Supplier landscape
Serial No. 1 2 3 4 5 Others
Supplier Name Supplier 1 Supplier 2 Supplier 3 Supplier 4 Supplier 5 Others
Ability to provide a variety
of RM 100% 100% 100% 100% 100% 100%
Spend in € M € 3.71 € 0.60 € 0.29 € 0.72 € 0.53 € 0.31
Asia (Indonesia,
Plant/WH location Europe (Germany) North America (USA) Malaysia) Europe Europe (Germany) Global
(Germany)
Sustain. Risk
(low-10, 1 is high) 9 8 5 7 6 5
OTIF performance* 80% 80% 70% 90% 90% 70%
Geo. Risk (Low-10, 1 is
high) 7 9 5 7 7 6
Annual capacity in MT 50,000 40,000 25,000 15,000 15,000 30,000
% of capacity
committed to client 45% 10% 10% 40% 40% 11%
Price movements (% of
indices) 120% 110% 85% 95% 90% 96%
last year's
Landed price (€/MT) € 67 € 73 € 71 € 73 € 53 € 45
This year's Landed price
(€/MT) € 200 € 183 € 142 € 145 € 106 € 113
Capacity Available (MT) 22500 4000 2500 6000 6000 3300
Quantity Purchased 18531 3294 2059 4942 4942 2718
(MT)
1. Increased 1. Increased prices
1. Increased prices by
1. Increased prices by 200% prices by 150% 1. Increased prices by 1. Increased prices by by 100% in 2022 150% in 2022
in 2022 in 2022 100% in 2022 100% in 2022 2. The client is the biggest 2. Low
2. Planning to expand 2. Pledged to 2. Filed for bankruptcy in 2. The client is the customer
sustainability risk score
capacity by 50% by achieve a sustainability 2020 biggest customer 3. Low due to insufficient
2025 risk score of 9 and OTIF of 3. Planning to 3. Pledged to sustainability
funds for wastewater
3. Considering the 90% expand capacity in achieve a risk score due to and carbon emission
Other information acquisition of a supplier 3 3. Planning to expand Europe by 2024 sustainability risk of 9 insufficient funds for wastewater mgmt.
4. Incoterms are DDP capacity by 100% by 2025 4. Incoterms are DDP by 2023 and carbon emission 3. Incoterms are DDP
4. Incoterms are DDP 3. Incoterms are DDP management
4. Incoterms are DDP