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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.pdf7/31/2019 Re Ding Ton
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Thank You
- Aravind K K