ROUND 1: THE SIMULATION CHALLENGE

Phase 1 (Weightage 30%)

Round Duration: 30 minutes | Submit response by: 23:15 hours or (11:15 PM)

Google response sheet link: https://tinyurl.com/y6cyhjeg

ITC Ltd, the popular FMCG brand, has witnessed growth even in the unfavourable market conditions previously. The economy in the current quarter has been affected due to a plunge in the GDP growth. As a kirana store owner you are trying to generate profits for your business in such adverse conditions. You have been given a portfolio of 17 products across ITC FMCG brands by your distributor for the following 3 quarters. Each phase of this simulation represents 1 quarter of the fiscal year of 2019-20 and requires you to quote the quantity to be procured for the respective quarter so that your profit is maximized. The overall performance of your team will be calculated on the overall profit of the 3 quarters.

Following are the conditions:

• Due to supply constraints and personal demands from your distributor, you must select exactly 10 brands for your business and this selection would be frozen for the subsequent quarters.

• From the accumulated profits which you earned in previous quarters alongside estimating other operating costs, you have decided to spend only Rs 1,00,000 for procuring materials for this quarter.

• Due to high distributor power in your region you weren’t able to negotiate on the profit margins of the 17 products. The details of profit margins are provided below in Exhibit A.

• Actual demand for the fiscal year 2019-20 is provided below in Exhibit B. • Some of the products are of high importance to ITC and thus to distributor, which means that

you have to sell these products at your store for all of the 3 quarters. The products have been marked yellow in the exhibit provided below.

• You will be levied a penalty for over procuring in terms of inventory holding cost and for under procuring in in terms of sales loss penalty.

Following are the parameters that need to be considered by the participants as a kirana store owners. These will be considered in evaluating the final scores.

• Actual Sales: Actual units sold is dependent on the market conditions (pull by the customers) and also on the willingness of the kirana stores (push by the retailers) to sell. In the simulation, based on every team’s response and market conditions, actual sales number would be generated and will be same for all the teams. Actuals sales number will be communicated at the end of the phase.

• Profit Margin: For every unit sold of each product, this is a designated profit per unit. For every unit sold, teams would receive corresponding profit added to their score.

• Sales loss penalty: In the case where units ordered is less than the actual sales of the products, a sales loss penalty would be added to the score.

• Inventory holding cost: In the case where units ordered is greater than the actual sales of the products, inventory would build up in the kirana stores. Hence, an inventory holding cost would be subtracted from the score.

• Budget Allocation cost: In case the total procurement cost overshoots the allocated budget, the delta would be subtracted from the score. Whereas, when the budget would stay underutilized, the delta would be assumed to be invested in other activities and will attract 10% returns which will be added to the score.

• Inventory loss: Certain % of inventory carried over to the next period undergoes loss due to expiry or pilferage. That % of inventory won’t be available in the next period to sell. Average loss is around 5% of the carried inventory in a normal case and for the products under promotion for the particular period, loss increases to 10%.

Exhibit A:

Brand In INR/Unit

Cost Price Profit margin Inventory Holding Cost

Sales loss penalty

Aashirvaad 104 22 4 7 B Natural 102 19 3 8

Bingo 92 28 5 5 CandyMan 107 15 5 10 Classmate 96 29 4 8

Engage 90 25 6 5 Fabelle 96 26 6 10 Fiama 104 26 6 6

Gumon 95 28 5 10 Kitchens of India 98 25 5 8

mint-o 107 28 5 8 Nimyle 97 21 6 8 Savlon 98 24 4 5

Sunbean 106 18 5 8 Sunfeast 96 27 5 8

Vivel 96 25 6 6 Yippee 91 23 4 7

Exhibit B:

Brand Actual Demand for Fiscal Year 2018-19

Quarter-4 Quarter-3 Quarter-2 Quarter-1 Aashirvaad 116 118 112 115 B Natural 51 45 55 60

Bingo 112 107 106 111 CandyMan 110 110 97 109 Classmate 83 86 100 99

Brand Actual Demand for Fiscal Year 2018-19

Quarter-4 Quarter-3 Quarter-2 Quarter-1 Engage 94 77 79 95 Fabelle 109 113 123 105 Fiama 119 104 106 106

Gumon 109 112 107 111 Kitchens of India 128 123 111 120

mint-o 130 112 112 117 Nimyle 87 93 99 108 Savlon 92 92 88 81

Sunbean - - - 80 Sunfeast 113 110 122 121

Vivel 127 111 124 120 Yippee 114 126 124 125

In addition to the above information, India is going to experience a hot summer this year in the Quarter-1. ITC has launched marketing campaigns around it’s natural fruit beverage in full throttle. Marketers are betting on a sales jump of 50-100% compared to the last quarter.

Q1: If an equal amount is to be invested in top 10 margin brands (profit margin per unit cost), calculate the overall mark-up profit margin (total profit/total cost). Consider there is no constraint on brand selection. Answer in terms of the nearest integer %. (Weightage: 20%)

Q2: Your ITC distributor is facing an issue in finding out the path to distribute his products to 6 different cities for a low cost. You want to impress him by suggesting a route which can help him achieve his targets enabling him to give you higher profit margin in future. He wants you to use a single truck for transporting the products with a mandatory requirement that you must visit each city only once and the truck must return to the warehouse finally. The transportation routes

possible and costs incurred between each cities are given in the figure below. Calculate the least transportation cost incurred to distribute to 6 cities. (Weightage: 30%)

Note: Transportation costs might not reflect actual real-world values and are applicable only for this question.

Q3: Compute the quantities of brands that you as a kirana store would be procuring. (Weightage: 50%)

Note: Participants will be ranked in the first round based on the weightages given against each question asked and on the correctness of the answer.