“Exploring Supply Chain for Rupchanda Soyabean

Oil”

A

Flagship band of

“Bangladesh Edible Oil Limited”

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Term Paper on

Supply Chain Management (MKT 418)

Section: 01

Topic: “Exploring Supply Chain for Rupchanda Soyabean Oil”

Submitted To: Saadia Shabnam

Assistant Professor

Department Of Business Administration

Submitted By:

Student Name Id

Ranjoy Kumar Roy 2009-2-13-064

Arindam Kumar Biswas 2009-2-10-274

Md. Rabiul Islam 2009-2-10-248

Mahmuda Haque Sharna 2009-2-10-219

Md. Saroar Alam 2009-2-10-230

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Date of Submission: 13th December, 2013

Letter of Transmittal

December 13, 2013

Saadia Shabnam

Assistant Professor

Department of Business Administration

East West University

Plot-A/2, Jahurul Islam City,

Aftab Nagar, Dhaka-1212

Subject: Submission of term paper on “Exploring Supply Chain for Rupchanda Soyabean Oil”

Dear Madam,

We are very pleased to submit this term paper on “Exploring Supply Chain

for Rupchanda Soyabean oil” which is done according to the given

instruction.

We are honored to prepare this term paper under your guidance since it

gave us the opportunity to know the overall process of supply chain

management.

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We tried our level best to accumulate the information for you as

comprehensively as possible. We will be obliged to provide further

clarification on this report whenever necessary.

Sincerely yours,

Ranjoy Kumar Roy [2009-2-13-064] ________________

Arindam Kumar Biswas [2009-2-10-274] ________________

Mahmuda Haque Sharna [2009-2-10-219] ________________

Md. Rabiul Islam [2009-2-10-248] ________________

Md. Saroar Alam [2009-2-10-230] ________________

Acknowledgement

First of all we want to thank the Almighty Allah for our sound health so that

we could complete the term paper within the due date. We would like to

thank our honorable course instructor Saadia Shabnam, Assistant Professor,

East West University; who helped us through her sound guidance. With her

inexhaustible guidance, valuable advice, continuous inspiration, constructive

criticism and generosity she helped us to carry out this report successfully.

We would like to give special thanks to Mr. Ahsan Habib for sharing the

information related to our study.

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Finally, we would like to thank all our group members and friends those who

directly or indirectly helped us to provide and accumulate all the necessary

information for the accomplishment of this term paper.

Executive Summary

Supply Chain Management is a holistic approach to the collection, processing of raw

materials and delivering the final products to the customers. To ensure the success of this

holistic approach the allignment between supply chain strategy and given competitive

strategy is necessary.

Rupchanda Soyabean Oil, a product of Bangladesh Edible Oil Limited has established

strategic allignment between supply chain strategy and given competitive strategy for it by

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introducing pouch pack. Through the introduction of pouch pack customer responsiveness has

been given priority which can better serve the demand of price conscious consumers at the same

time the transportation cost has been reduced because increased density of product make it

possible to better utilize the given transportation space. So, customer responsiveness and

efficient transportation seem to be moving in the same direction for Rupchanda soyabean oil.

Brazil, Argentina, Indonesia, Malaysia are four major potential crude oil suppliers for

Rupchanda soyabean oil. The ability of providing the quality raw material at right amount and in

the right time are the criteria upon which the final supplier country/ countries are selected.

Excess demand of Rupchanda soyabean oil has made the company to cope with pull based

demand. BEOL also pushing the market demand by introducing different promotional activities.

Global database management software SAP is been used at BEOL for ensuring efficiency of the

central warehouse. The ability to make order keeping minimum six days of stock at hand is the

prime criterion to be selected as the distributor for Rupchanda soyabean oil. Most importantly,

efficient supply chain management has made Rupchanda soyabean oil to generate 95 percent of

the total sales of BEOL.

TABLE OF CONTENTS

PART A: INTRODUCTORY POINTS........................................................................................................................ 7

1.0 ORIGINS................................................................................................................................................................7

1.1 OBJECTIVES............................................................................................................................................................7

1.2 SCOPE..................................................................................................................................................................7

1.3 LIMITATIONS..........................................................................................................................................................8

1.4 METHODOLOGY......................................................................................................................................................8

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2.0 COMPANY INTRODUCTION:.......................................................................................................................................9

2.1 CHOSEN PRODUCT INFORMATION:.............................................................................................................................9

2.3 BASIC SUPPLY CHAIN STRATEGY...............................................................................................................................10

Corporate Strategy:............................................................................................................................................10Logistics Strategy:..............................................................................................................................................11

2.4 STRATEGIC FIT BETWEEN THE STRATEGIES..................................................................................................................12

PART B: PHYSICAL SUPPLY CHANNEL................................................................................................................. 13

3.0 DETERMINING SUPPLY REQUIREMENTS:....................................................................................................................13

3.1 PLACING ORDERS:.................................................................................................................................................13

3.2 INBOUND LOGISTICS ACTIVITIES & PARTIES:...............................................................................................................14

3.3SUPPLY OF RAW MATERIALS:...................................................................................................................................15

3.4MODE OF TRANSPORTATION:...................................................................................................................................15

3.5 TERM & CONDITIONS:...........................................................................................................................................16

3.6 VENDOR SELECTION:.............................................................................................................................................16

PART C: PHYSICAL DISTRIBUTION CHANNEL.......................................................................................................17

4.0 FORECASTING OF MARKET DEMAND:........................................................................................................................17

4.1 FORECASTING FACTS OF RUPCHANDA SOYABEAN OIL:..................................................................................................18

4.2 ORDER PROCESSING..............................................................................................................................................19

4.3 INVENTORY MANAGEMENT:....................................................................................................................................20

4.4 WAREHOUSING:...................................................................................................................................................20

4.5 OUTBOUND LOGISTICS OF PRODUCTS / TRANSPORTATION:...........................................................................................21

4.6 VENDOR PERFORMANCE APPRAISAL:........................................................................................................................21

4.7 APPLICATION OF 80-20 PRINCIPLE...........................................................................................................................22

PART D: THE REVERSE LOGISTICS CHANNEL.......................................................................................................23

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5.0 CONCLUSION:......................................................................................................................................................23

6.0 REFERENCES:.......................................................................................................................................................24

PART A: INTRODUCTORY POINTS

1.0 Origins

This term paper is prepared to give an idea about the overall Supply Chain

Management of a selected product ( Rupchanda Soyabean Oil) of

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Bangladesh Edible Oil Ltd (BEOL). The preparation and submission of this

term paper is supplementary requirement of Supply Chain Management

(MKT 418) course.

1.1 Objectives

By doing the report, we will be able to know the inbound and outbound

logistical activities of Rupchanda Soyabean oil. Some major objectives

include

Identify strategic moves of the given product in the context of

supply chain.

Identify physical supply channel of the given product.

Identify psychical distribution channel of the given product.

Identify reverse logistics channel of the given product.

1.2 Scope

The report is prepared concentrating on supply chain of Rupchanda

Soyabean oil. Other areas of marketing like branding, marketing research

will not be the subject of this report and therefore can be the issues of future

research. It is a comprehensive report based on people’s opinion, our

perception and knowledge, and books of Business Logistics/Supply Chain

Management.

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1.3 Limitations

While preparing the report we had to face some problems.

1. For the sake of official secrecy, the concerned officials could not

provide enough information.

2. Time shortage was one of the major problems.

1.4 Methodology

Nature of the study: Exploratory

Source of information: Both primary and secondary.

Primary Source: Primary data were collected form Territory Manager,

Ahasan Habib

of Bangladesh Edible oil Ltd,

Secondary Sources: Secondary information was collected from the

internet and newspapers.

Presentation of Information: Collected and calculated information are

presented in graphical forms.

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2.0 Company Introduction:

“Consumers inspire us to continue creating some of the healthiest edible oils

to keep millions of families healthy and happy. We are known as Bangladesh

Edible Oil Limited (BEOL)”

Bangladesh Edible Oil Limited (BEOL), the only 100% foreign owned

joint venture in edible oil industries in Bangladesh was established in 1993

and has since been aggressive in the marketing of consumer pack edible oil

under the well known household brands like Rupchanda, Meizan, King's, etc

in Bangladesh. BEOL is the first company to introduce packing of edible oil in

PET bottles, pouch pack and also the first to launch a sachet pack in mustard

oil in Bangladesh. According to AC Nielsen report, Rupchanda ranks number

1 in terms of the most preferred brand in the soybean oil consumer pack

category. BEOL does not participate in selling of edible oil in loose form.

2.1 Chosen Product Information:

Rupchanda, the flagship brand of Bangladesh Edible Oil Ltd. ( BEOL),

entered the unorganized Soyabean Oil market of Bangladesh in 1996 and

since then, it has scaled unprecedented heights through continuous

innovation and uncompromising quality control. True to the brand essence of

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"Happy Family Moments", Rupchanda's single minded vision has helped it

emerge as the undisputed market leader in the edible oil category in the

country.

2.3 Basic Supply Chain Strategy

Supply Chain Strategy is the process whereby guidelines/plans are

formulated for positioning the firm to meet its objectives. Supply Chain

Strategy joins together two very important strategies namely Corporate and

Logistics strategy.

Corporate Strategy:

o Customers are important consideration for BEOL. For this

reason BEOL has offered cholesterol free Rupchanda soyabean

oil enriched with omega 3, 6 components and vitamin A. This

vitamin A has been incorporated with Rupchanda oil by the help

of UNESCO.

o Suppliers are given opportunity to convey the product

( Rupchanda soyabean oil) in different size and shapes. This

convenience has added value to the different market segments

according to the corresponding demand of the product.

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o Market competition has been given priority from the point of

time the competitors started coming into the bottled soyabean

oil market in 2000. From that point, A heavy onslaught of

aggressive marketing and advertising activities helped in

building the brand 'Rupchanda' in the consumer mind space and

consolidates its position as the market leader in the soyabean oil

category.

Logistics Strategy:

Bangladesh Edible oil Ltd has successfully reduced the

variable cost by introducing the pouch pack of Rupchanda

Soyabean oil. When oil is transported by using pouch pack

instead of bottle then larger amount of oil can be moved given

the same portion of transport space. Thus, this strategic change

has given the company opportunity to lower the price of the

product.

Bangladesh Edible oil Ltd has reduced the capital investment

by not setting up any divisional warehouse. In this case oil is

shifted directly to the district wise distributer from the factory.

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Bangladesh Edible oil Ltd has improved the service through

mixing Vitamin A with Rupchanda Soyabean oil. Rupchanda is

not charging any additional price to

the customer since it is a social

project with UNICEF.

2.4 Strategic Fit between the strategies

Strategic fit suggests about a blending of strategies where a company

will focus in both responsiveness towards customers and efficiency

towards the reduction of cost. In case of Bangladesh Edible Oil Ltd,

customer responsiveness has given priority by introducing pouch pack

soyabean oil which can better serve the demand of price conscious

consumers at the same time the transportation cost has been reduced

because increased density of product make it possible to better utilize

the given transportation space.

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PART B: PHYSICAL SUPPLY CHANNEL

3.0 Determining Supply Requirements:

The determining factors of supply chain requirements by Bangladesh Edible Oil Ltd are discussed below:

The factors include the necessity to have right material at right amount

and in the right time. Along with these three important factors, transport

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mode selection and information exchange with suppliers play vital role in

the whole supply process.

3.1 Placing Orders:

Company places the order to get raw materials for continuing present production and securing future production. So, Bangladesh Edible oil Ltd places the orders upon analyzing:

The level of warehouse inventory, availability of products in the

pipeline, and finally receiving schedule of the pipeline products for

maintaining a minimum stock level.

Probable yearly, quarterly and monthly production schedule.

3.2 Inbound Logistics Activities & Parties:

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In case of Bangladesh Edible Oil Ltd, the inbound logistic part is simple.

Basically three parties are involved, the company itself, suppliers and the

supplier’s supplier. The supplier collects the solid soyabean from the

farmers’ and turns into crude oil then this crude oil is shifted to the factory

of Bangladesh Edible Oil Ltd at Narayangong, Dhaka.

3.3Supply of Raw Materials:

Farmers produce soyabean and store it for the contractor.

Supplier's supplier

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Raw material of Rupchanda soyabean which is crude oil is not

mainly produced in Bangladesh. Means insignificant amount of

crude oil come from native sources.

So, the raw material is collected from outside Bangaldesh.

Brazil, Argentina, Indonesia, Malaysia are the major sources for

crude oil for Bangladesh.

3.4Mode of Transportation:

For transporting crude oil BEOL only use water ways. Imported raw

crude oil is transported through two phases. At first crude oil enters

into Chittagong port then small lighter ships are used to take the oil to

the factory in Narayan gong. Means multimodal transportations like air

way and road way are absent here. Water way transportation gives the

company an option of less possible cost to incur.

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3.5 Term & Conditions:

Pre specified lead time is to be maintained strictly by the supplier of

crude oil otherwise suppliers’ may be faced with penalty as

documented earlier.

Crude oil has to be handed over to the company at the Chittagong port

and before that all the liability regarding the oil will have to be borne

by the suppliers’.

The quality assurance team will examine the incoming oil under

specific standard. If the incoming crude oil does not fulfill the level of

standard then the full shipment will be taken back to the exporting

country according to the agreement.

3.6 Vendor Selection:

Phase one ( Outside to

Chitagong port)

Phase two ( Chitagong port to

factory)

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For vendor selection BEOL has specified a set of criteria for Rupchanda

soyabean oil. There are four major available crude oil supplying countries

including Brazil, Argentina, Indonesia, and Malaysia. Now, the criteria will

be followed to determine who will be the ultimate supplier/suppliers.

Vendor should be able to supply specific amount of crude oil.

Lead time should be maintained carefully and efficiently.

Most importantly the quality of the crude oil will have to be up to the

standard. The reason BEOL does not have any soft corner for low

quality crude oil and will reject the shipment if proven low standard.

The offered price for crude oil will have to be competitive given the

international standard.

After scrutinizing the criteria safely the supplier/suppliers are selected

eventually for Rupchanda soyabean oil.

PART C: PHYSICAL DISTRIBUTION CHANNEL

4.0 Forecasting of Market Demand:

Demand forecasting is the activity of estimating the quantity of a product

or service that consumers will purchase. Demand forecasting involves

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techniques including both informal methods, such as educated guesses, and

quantitative methods, such as the use of historical sales data or current data

from test markets.

In this case, BEOL follows time series analysis to forecast current and future

demand of Rupchanda soyabean oil based on data of past years. From 1996

the data has shown upward trend making it easier for BEOL to take

production decision.

4.1 Forecasting facts of Rupchanda Soyabean oil:

Gradual improvement in demand in recent past years in spite of

increasing amount of competition has made BEOL to plan for the

increase in production from 200 tons to 400 tons of soyabean oil per

day by the next year.

Since Rpuchanda Soyabean oil is dealing with excess demand so BEOL

is mainly concerned of pull based demand.

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Active consumer engagement began in 2005 at a mass scale with the

organization of a chain of cooking contests which weaved in the vital

elements of 'taste enhancement' along with 'health in every drop' and

'uncompromising quality' in the brand imagery of Rupchanda. 'Monitor

Chef of the Year' (2005), Agora's 'Rupchanda Cooking Competition'

(2005) and Rupchanda's 'Potato Recipe Contest' were some popular

programs. Consumer engagement reached a peak in 2009 with

'Rupchanda Food Carnival' in 6 major districts of Bangladesh .These

program allowed Rupchanda to push the market for generating extra

demand.

So, Rupchanda, despite being the market leader with around 30%

share, maintains healthy aggression in all dimensions of demand

development.

4.2 Order Processing

Order processing is a key element in maintaining healthy supply chain

relationship with customers. Since demand is very high so the company

does not have to go for postponement. Order processing is represented

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by a number of activities like order preparation, order transmittal, order

entry, order filling and order status reporting. The process is discussed

Table: Showing the order processing mechanism at Bangladesh

Edible Oil Ltd.

At first distributor receive the order from retailers manually and after that all

the procedures are followed by electronic means. Here, mainly four parties

are involved and they are Distributors, Territory Managers, Head office and

Factory office. The process has been discussed by the above mentioned

table.

DistributorDistributor estimates the asking amount to be ordered and deposit the money to the company's bank acount and fax the deposit slip to territory manager.

Territory Manager

Territory mangager varify the slip and forward it through email to the head office mentioning the amount of product to be delivered

Head OfficeHead office receives the email and completes the documentation upto the door of factory

FactoryOffice

After getting the document from head office the prduction manager starts the operation immediately

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4.3 Inventory Management:

In head office inventories are managed electronically through the help of

database management software SAP. Using database management software

BEOL has managed to maintain actual information about level of stock and

take production decision accordingly.

In the distribution houses inventories are managed manually without the

help of computers. According to the company rule the distributors are asked

to manage the inventory in a way so that minimum stock of 6 days is

maintained. It means distributors are bound to order immediately when are

left with only 6 days of stock.

4.4 Warehousing:

BEOL has only one central factory warehouse at Narayangong but no

divisional warehouse. District wise warehouses are not company owned

means the distributor’s warehouses are used to stock the product for

spreading the product around the country. To be eligible to become

distributor for the company, the concerned distributor has to have certain

arrangements and those are:

A warehouse having capacity to accommodate 150-20 tons of oil.

A manager who will be in charge of the warehouse.

One warehouse keeper with two helpers.

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Has to agree to keep the stock for minimum 6 days.

4.5 Outbound Logistics of Products / Transportation:

Outbound logistics for BEOL is very simple. Since there is no postponement

so oil cartons are transported every day across the country in bulk amount.

Some facts regarding the transportation of Rupchanda soyabean oil are

discussed below:

20 percent of total Oil is transported through won transport facility.

80 percent of total Oil is transported through third party transport

facility like sarkar , min transports e.t.c.

Only one mode of transport (Truck) is used for transportation. Small

trucks are used inside Dhaka and large trucks are used outside Dhaka.

Only one route is followed which is road way.

4.6 Vendor Performance Appraisal:

The process of supplier appraisal and short listing involves a number of

steps. It begins with determining which criteria will use to assess potential

vendors. Based on this, the company needs to identify and screen the

vendors that the company wants to apprise, and then collect the information

for this purpose.

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In case of Rpchanda soyabean oil, the main intermediary party between the

BEOL and next link in the supply chain is called distributor. So, distributors

are known to be vendor for BEOL. BEOL has an appraisal plan for their

distributors.

According to the plan the distributors are given primary target to buy certain

amount of product from the company. If 90 percent of the target is achieved

the distributors will be allowed to purchase the Rupchankda soyabean oil

with 90 paisa less per litter. If 100 percent is achieved then distributors will

be allowed to purchase Rupchanda soyabean oil at 1 taka less per litter. If

115 percent of primary target is achieved then distributors will be allowed to

purchase Rupchanda soyabean oil at 1.25 taka less per litter.

4.7 Application of 80-20 Principle

Bangladesh Edible Oil Ltd has varieties of products like Rupchanda soyabean

oil, Rupchanda mustard oil, Mijan palm oil, Kings sunflower oil. Among them

Rupchanda soyabean oil has got highest sales with above 95 percent of total

profit. So, it can be claimed that Rupchanda soyabean oil falls in the 20

percent category of 80-20 principle known as Pareto’s low.

Given Strategy:

Since Rupchanda soyabean oil is A graded convenience product so it has

been made available in every district and sub-district of the whole country.

For this reason customer can get this oil from their nearby store.

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PART D: THE REVERSE LOGISTICS CHANNEL

BEOL does not have a conventional backward supply channel for the faulty

or inappropriate logistical products. Means, when any faulty or inappropriate

products come into notice then that products are not taken back to the

factory rather those products are sold out in local market without brand

level.

For example, if a bottle oil or pouch pack is found with leak then the oil is

extracted from the bottle or pouch pack and sold out in open market. At the

same time the looser parties may be retailers or distributors are rewarded

with new fresh packaged oil.

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5.0 Conclusion:

Building strong supply chain is possible when all the concerned supply chain

parties act in a holistic way towards achieving unified goal. Supply chain

management is an integral part for any company. A firms needs to establish

an effective supply chain in order to gain competitive advantage. In response

to BEOL, it has established a harmony among inbound logistics, operation ,

outbound logistics, marketing, service and eventually this harmony works for

creating a superior competitive position for Rupchanda soyabean oil.

6.0 References:

Ahasan Habib

Territory Magager, Bangladesh Edible Oil Ltd.

Ballou Rona;d H., J 2005, “Business Logistics / Supply Chain Management”, 5th Edition, Pearson publication, New Jerscy.

www.superbrands.com/bd/images/PDF/26.pdf www.beol-bd.com www.bangladeshdir.com/webs/catalog/

bangladesh_edible_oil_limited__beol_.html

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