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7/31/2019 Re Ding Ton

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Redington- A study on SCMsolutions


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Nature of Supply Chain- Margins


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Redingtons Profile

Amongst the largest supply chain service providers.

Large distribution network of more than 24,200channel partners, 7200 SKUs.

Market penetration of more than 16 countries. Tie-ups with 100 leading manufacturers across IT,Telecom, Lifestyle and consumer electronics products.

Highly integrated automated distribution centres.

Provides 3rd party logistics services.


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Redingtons Value Chain

Procurement&

Warehousing

Warehousing,logistics &

Distribution

Credit toSellers

After SalesService

Logistics

Company

Services

CompanyNBFC


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Primary Activities

Physical Management- Distributors of reputed

IT and non-IT products.

Financial flows Management- Working capital

management, investments on assets.

Information Management- Using

ERP/Automated distribution centres.


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Challenges

Statutory norms for movement of goods

between states and union territories.

Higher warehousing and transportation costs.

High manpower costs.

Absence of trained manpower.

Insistence on efficient supply chainmanagement by manufacturers to reduce

costs.


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Key Success Factors:

Ability to cope with contingencies eg. Insurance cover.

Ability to build trustworthy channel partners.

Risk ManagementCapability

Maintenance and setting up of warehouses, SKUs.

Ability to build and maintain distribution network throughintermediaries.

Large distribution network.

Supply Chaininfrastructuremanagement

Ability to share valuable information that includes forecasts,inventory, transportation, potential collaboration.

Ability to closely monitor the distribution of goods through thechannel partners.

Managementinformation

systems


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EfficientSupplyChain

Reputed IT

and Non-ITvendors

ITintegration

Efficient Riskmanagement

Strategy

Decentralisedoperation

Forward andreverselogistics

capabilities

EfficientWarehouse

management

Reliablechannelpartners

Internal Appraisal


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External Appraisal

Emerging Indian economyto drive the demand ofconsumer products.

IT hardware industry togrow at CAGR of 20.3%

Increase of MNCs in India,

Opportunities in overseasmarket.

Opportunities in overseasmarket

Opportunity

Risk of economicslowdown.

Forex Risk

Geo-Political Risk

Large number ofunorganized players

Threat


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Financial RatiosRatios FY09 FY08 FY07 FY06 FY05

Return on

Assets

8.92% 8.17% 4.98% 5.14% 4.03%

Return on

Equity

1.04 0.86 0.54 0.46 0.285

Total Asset

Turnover

Ratio

6.70 7.02 5.53 6.51 5.84

Fixed Asset

Turnover

109.89 115.72 158.62 178.90 167.74

Net working

capital

Turnover

11.71 12.88 8.08 10.02 9.82

Gross profit

Margin

2.04% 1.8% 1.4% 1.21% 1.08%

Net profit

Margin

1.33% 1.16% 0.9% 0.8% 0.7%

Overhead-

cost ratio

2.9% 2.48% 2.12% 1.83% 1.68%


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Analysis on performance

There is an efficient utilisation of assets.

Increase in performance owing to automated

distribution centres, efficient warehouse

management.The ability to turnover the working capital in the

system has been fairly good over the years.

However during the FY09, it has shown a

decrease from that of FY08.

Also, the companys overhead expenses as a

fraction of sales are on rise over the years.


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The companys net profit margin and return

on capital employed are fairly good. However, the ROCE has a decline from the

FY08s.

Reduction in overhead cost is critical to thisbusiness as the margins are very low.

Redington should concentrate on reducing its

overhead cost.


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Important Parameters

Strength Weakness Comment

Assets * Optimum

performance of

assets.

Overhead cost * Need to decrease

the overhead cost

Working capital * Should maintain

the working capital

in the system.

Shows that there is

a right balance inaverage collection

and payment

period.


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Assets and Working capital needs

The investments on assets has been increasing year after

year.

Also, the working capital in the system has been on the rise.

The ability to turnover the increasing working capital has

been fairly good.

The company has a bad debt of only 0.11%.

This shows that it has effective working capital management.


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Critical Success Factors in 3PL industry

Challenges

Relationships

Ownership/Control over

assets

Systems andProcesses

EfficientOperations

Manpower

IndustrySpecific Value-added services


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Redingtons Sophistication for 3PL

Relationships

Has long-term

relationships with IT/NonIT vendors

Cross referrals arepossible.

Ownership overassets

Efficient warehousemanagement.

Strong relationship withvalue chain partners.

Important to combat costchallenges on manpowerand transportation. Needsimprovement.

Manpower

Huge investment in

operations includingmanpower.

Needs improvement toemerge as a strong supplychain player globally.


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Industry specificvalue-added services

Redington alreadyprovides after-salesservice.

Remote infrastructuremanagement services forits corporate customers.

However it has to venturein to other markets aswell and develop specific-competencies for those

markets.

Efficient Operations

Decentralised operationsat distribution centres tohave minimum delay.

Automated distributioncentres.

Systems andprocesses

Efficient warehousemanagement

ERP integration.


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References

www.nseindia.com/content/corporate/eq_RE

DINGTON_base.pdf.

http://www.valuenotes.com/uploads/article_

pdf/A957651301817716.pdf

www.kpmg.com/IN/en/IssuesAndInsights/.../F

inal_with_CII.pdf

Redington(India) Limited- Case Study.
http://www.nseindia.com/content/corporate/eq_REDINGTON_base.pdfhttp://www.nseindia.com/content/corporate/eq_REDINGTON_base.pdfhttp://www.nseindia.com/content/corporate/eq_REDINGTON_base.pdfhttp://www.nseindia.com/content/corporate/eq_REDINGTON_base.pdfhttp://www.valuenotes.com/uploads/article_pdf/A957651301817716.pdfhttp://www.valuenotes.com/uploads/article_pdf/A957651301817716.pdfhttp://www.kpmg.com/IN/en/IssuesAndInsights/.../Final_with_CII.pdfhttp://www.kpmg.com/IN/en/IssuesAndInsights/.../Final_with_CII.pdfhttp://www.kpmg.com/IN/en/IssuesAndInsights/.../Final_with_CII.pdfhttp://www.kpmg.com/IN/en/IssuesAndInsights/.../Final_with_CII.pdfhttp://www.kpmg.com/IN/en/IssuesAndInsights/.../Final_with_CII.pdfhttp://www.kpmg.com/IN/en/IssuesAndInsights/.../Final_with_CII.pdfhttp://www.kpmg.com/IN/en/IssuesAndInsights/.../Final_with_CII.pdfhttp://www.kpmg.com/IN/en/IssuesAndInsights/.../Final_with_CII.pdfhttp://www.kpmg.com/IN/en/IssuesAndInsights/.../Final_with_CII.pdfhttp://www.valuenotes.com/uploads/article_pdf/A957651301817716.pdfhttp://www.valuenotes.com/uploads/article_pdf/A957651301817716.pdfhttp://www.nseindia.com/content/corporate/eq_REDINGTON_base.pdfhttp://www.nseindia.com/content/corporate/eq_REDINGTON_base.pdfhttp://www.nseindia.com/content/corporate/eq_REDINGTON_base.pdfhttp://www.nseindia.com/content/corporate/eq_REDINGTON_base.pdf


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Thank You

- Aravind K K

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