University of Michigan College of Engineering- MEng in Manufacturing MFG 503 Project Final Report Sustainability of Supply Chains Among Sports Goods Manufacturers in India Case Study- Batting for BAS Aniruddha Mysore Srinath ([email protected]) Program in Manufacturing-2012 Page 1 University of Michigan College of Engineering- MEng in Manufacturing MFG 503 Project Final Report EXECUTIVE SUMMARY In the summer of 2012, I undertook research for the Indian School of Business (ISB) in order to prepare a case study for teaching supply chain growth and sustainability in India. The primary focus of the research was the sports goods manufacturing sector of India, concentrated particularly in the city of Jalandhar. Jalandhar, along with another North Indian city, Meerut is the major region of activity in the making and exporting of Indian sports goods. In Jalandhar, input was collected from various stakeholders in the sports goods industry in order to gain a better understanding as well as analyze the present situation. However, the case study was prepared through a series of interviews with Pushp Kohli of BAS Vampire, a leading cricket bat maker. The case study also focuses specifically on a major sporting product, the cricket bat owing to the nature of its complex supply chain structure. Though the project was initially envisaged to include industry study, analysis, case study preparation and provide key recommendations to the industry, the key recommendations were not covered as they were beyond the scope of requirement of the host institute (ISB). This report contains a brief introduction to the Indian sporting good industry and its present status. A true picture of the industry was difficult to obtain because of the nature of operations in this sector; most firms are privately owned and hence not obligated to disclose any sales data. Industry trends like growth in revenue, profit margins or percentage of market share of specific companies are impossible to predict in this sector and hence, have not been quoted in the case study or in the report. The industry analysis has been carried out using the PESTLE analysis as well as the Porter’s 5 forces analysis. This is then followed by the key project deliverable, the case study named “Batting for BAS Vampire”. Possible solutions for the problem have also been described and they will be used as a teaching note. Permission has obtained from BAS Vampire in order to use its information throughout the case study. Page 2 University of Michigan College of Engineering- MEng in Manufacturing MFG 503 Project Final Report TABLE OF CONTENTS COVER PAGE ............................................................................................................................................................ 1 EXECUTIVE SUMMARY ......................................................................................................................................... 2 TABLE OF CONTENTS ............................................................................................................................................ 3 PROJECT DESCRIPTION........................................................................................................................................ 4 PROBLEM DESCRIPTION ...................................................................................................................................... 4 STRATEGIC ANALYSIS-PESTLE .......................................................................................................................... 6 STRATEGIC ANALYSIS-PORTER’S 5 FORCES ............................................................................................... 13 CASE STUDY-BATTING FOR BAS ...................................................................................................................... 20 CASE STUDY SOLUTIONS-BATTING FOR BAS .............................................................................................. 41 CONCLUSION ......................................................................................................................................................... 44 ACKNOWLEDGEMENTS ..................................................................................................................................... 45 Page 3 University of Michigan College of Engineering- MEng in Manufacturing MFG 503 Project Final Report PROJECT DESCRIPTION The Indian sports good industry is a $1billion industry, growing at a rapid rate of 35~40%. The total export of sports goods recorded by the Sports Goods Export Promotion Council(SGEPC), based on the export returns submitted by the members for year 2008-09 is over Rs.586 crores ($114.6 milion).There are about 1250 registered and 2000 unregistered large, medium and small sports goods manufacturing units providing direct and indirect employment to about 170,000 employees. The top items of exports were reported to be Inflatable Balls, Hammocks, Cricket Bats, Boxing Equipment, Carrom Boards & General Exercise Equipment. The share of top 5 items in overall exports is around 60%. The Indian School of Business is a business school in Mohali and Hyderabad, India. It offers a Post Graduate Programme and a Fellow Programme in Management, as well as executive education programs for middle and senior management. The school was founded by two senior executives of McKinsey and Company and is governed by a board comprising both Indian and non-Indian businessmen. ISB maintains close associations with Wharton, the Kellogg School of Management, and the London Business School, referred to as "founding associate schools." Additional associate schools later included MIT Sloan and The Fletcher School. The school's Post Graduate Programe was ranked #20 in the world in the 2012 Financial Times Global MBA Rankings. The Munjal Global Manufacturing Institute is going to undertake this study. Started in ISB’s new campus at Mohali near Chandigarh, India, it is the premier academic institution for operational excellence and innovation in the manufacturing ecosystem in India and beyond. The Institute is headed by Prof Manmohan Sodhi, who also continues to work at the Cass Business School in the area of Supply chain and management. He was the project guide for this case study.. PROBLEM DESCRIPTION Supply chain management is increasingly recognized as a key component of an organization’s overall ‘Health’. Managing the supply chain in terms of economic, strategic, environmental and social factors makes good business sense as well as being the right thing to do. However, supply chains consist of continuously evolving markets and relationships. The rise of companies based in India and China is challenging current models of sustainable supply chain management (SSCM) as “Indian” and “Chinese” approaches to SSCM are formulated in different regulatory, institutional, and historical contexts than those found in Europe or North America. Page 4 University of Michigan College of Engineering- MEng in Manufacturing MFG 503 Project Final Report The Indian sports goods sector is a high potential industry, operating both in the domestic and the export markets. As is the case in the overall Indian manufacturing sector, it is undergoing rapid changes in the recent years due to globalization, increased competition, varying customer requirements and changing political and social conditions. In this context, its supply chain is not very well defined and is in a state of flux. By virtue of it being a material intensive sector, and considering that the levels of automation throughout the industry are typically low, the dependence of an organization on its supply chain is higher. Hence, companies in this sector face the challenge of extracting the most out of their supply chain while at the same time ensuring that relations are long lasting, in order to ensure their own long term survival and growth. PEOPLE INVOLVED Meng Program Co-ordinator Program Director Project Advisor Project Head & Advisor Project co-ordinator Page 5 University of Michigan College of Engineering- MEng in Manufacturing MFG 503 Project Final Report STRATEGIC ANALYSIS- PESTLE POLITICAL The sports goods industry is affected by political situations, both inter-state and international. This is because of the nature of trade, both on the buyer and supplier side; which involves multiple players across diverse regions. Since raw materials are imported from abroad, and goods are sold abroad, the stability of the political environment is important for this industry. Government type and stability:- The industry enjoys the privilege of working in a stable democracy (unlike China), which implies that it is free to frame its own policies in its own best interests. In China, the type of industry activity that the people of a region can undertake is contingent upon the primary industrial product specified for that region. An area of concern is Jammu and Kashmir, an emerging competitor for the clusters of Jalandhar and Meerut where there is still unrest due to the ongoing conflict with Pakistan. Makers of that region are thus operating in a volatile environment. The Punjab government is stable and is an incumbent rule. It is expected to last its full term of five years and hence the political situation in the Jalandhar sports goods industry is stable. Tax policy, and trade and tariff controls: - There is a dilemma in the case of availability of raw materials. Kashmir willow, which is the most widely used type of willow (80 %) is scarce because of the protectionist policy