Supply chain management

Abstract

Logistics and cost optimization is an essential aspect for any competitive company. Major players in any Industry are cognizant of their supply chain costs and they consistently try to improve their processes and methodologies to elevate their capabilities in order to meet and exceed customers' requirements. Our objective in this report is to strategize and reimagine the outbound logistics plan for Hindustan Petroleum Corporation Limited (HPCL). Given the distribution network for the company is pan India with multiple manufacturing plants, the nature of the logistics is many-to-many. Hence in our analysis, we have suggested Hub and spoke model fort he company with hubs serving as the central mega warehouses cateri ng to their respective region. Pooling of inventory at central warehouses is vital to reduce variability in demand as the company offers a wide range of SKUs. Most of the inventory can be stored at the central warehouses and shipped to spokes on short term demand estimates. We have included regional diversity, connectivity, cost of property, demand proximity and many other factors while modeling for the hubs. The spokes are small warehouses located close to market for faster replenishments at the demand points. They are small in size stores with lean inventory levels and selected SKUs. We have identified potential spokes as districts with sufficient levels of demand. Lead time to meet the demand, frequency of transportation from corresponding Hub (transportation cost and full truck load), flexibility and close vicinity to cater maximum demand on time are some other considerations while processing the potential spokes. We hope that our suggestions assist the company to gain some insights and he I p them to optimize their distribution model.