case study -inventory, megalite

8/7/2019 Case Study -Inventory, Megalite

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Case studyCase study - - MEGALITEMEGALITE


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MEGALITEMEGALITE

Megalite was started in 1995 by Ramesh Patel inPune.Ramesh had a burning desire to push the limits

and create new goals for himself.Men like Henry Ford, Thomas Bata and J N Tatawho had the guts to build great brands, deeplymoved him and he was all set to turn Megalite"into a household word as well as a trusted brand.

Megalite started manufacturing electric bulb andfans and supplying it to local dealers.The untiring quest for superlative quality andinnovative design made megalite a popular namein bulb and fan market.


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MEGALITEMEGALITE

In 2001, Management at Megalite identified agolden opportunity for producing CFL (CompactFluorescent Lamp).Marketing research indicated a potential marketof 5,00,000 CFL per year, if Megalites CFLselling price could be brought down to Rs.125per unit.Engineering started working day and night to

develop a CFL whose variable production costwould be no more than Rs70.Supply management also started working withpresent and potential suppliers to lower the totalcost of purchased material.


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MEGALITEMEGALITE

Finally Megalites CFL were launched in 2002 atthe average price of Rs 125 (for a 15 w 2u).Though profit in CFL was just 15%,Megalite hadan intuition the prices of CFLs will go up.But due to the entry of several players, theprices of CFLs went down to average price of Rs

100 (for a 15 w 2u).It created a sense of uneasiness, in themanagement of Megalite.


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MEGALITEMEGALITE

Later on Megalite management realized thatwith a variable cost of Rs 70, they cant competein market.They had the only option of reducing the cost,which would have helped them in positioningthe price of CFLs at Rs 100.

Ramesh Patel , hired an expert in cost reduction,Mr. Suyog ,who had previously worked withBajaj electricals for five years.


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MEGALITEMEGALITE

Suyog started digging into the problem andvisited the stores and plant of Megalite.When he entered the stores ,he saw piles of raw materials .

After enquiring the Stores Manager, hediscovered that company has a policy of buying

raw materials for entire quarter in advance. And few costly and critical materials used to bebought a couple of quarters in advance.


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MEGALITEMEGALITE

Suyog scheduled a meeting with Mr. Ramesh todiscuss his major concerns.Suyog began I requested this meeting with youbecause I feel the reasons for high productioncost is nothing but the poor inventorymanagement in your company

Mr.Ramesh Poor inventory management?But our production line never stops due to stockout


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MEGALITEMEGALITE

Kindly explain the following points to Mr.Ramesh:

1.What is the need of inventory?2.What are the types of inventory ?

3.How to control inventory?

case study -inventory, megalite

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