Kota Fibres, Ltd, a nylon fiber producer located in India, was created in 1962. They have been steadily growing, developing relationships with locale textile weavers and other suppliers, and its main product are saris. This traditional Indian woman’s attire is highly sought after, considering there is over 500 million women in India. On average, women will purchase three a year, will the majority purchased during peak season. However, Kota has to constantly borrow money from the bank during its heavy selling season despite being a very profitable company. The main owner and managing director, Ms. Pundir, has to figure out a more stable financial solution for the near future. Ms. Pundir has several options going forward, that she received from her operating and sales managers. The first option came from Pondicherry Textiles, wanting to make Kota to become its primary supplier. This would be about a six million rupee increase that has not been implemented into the current forecast. This would make Pondicherry as one of their biggest accounts. However, it is requesting an extension of Kota’s credit terms, something that is not exactly beneficial for Kota. This would be a good option but it doesn’t directly fall under a solution but more of the 15% estimate growth increase forecasted for the company.
The next option relates to shipping and inventory cuts which can directly save money and makes for an easier for inventory tracking. By switching up routes to recently improved roads on the 1100km 15 days travel, it can reduce the amount of days Kota maintains raw materials by half. Thus it will free up a lot of the space in the warehouse without affecting any of the other departments. This is another great option, and should be highly considered in conjunction with some of the others.
The third option Ms. Pundir has is from Hibachi Chemicals with a proposal to supply polyester pallets at a just in time basis. Their plant is only 20km away from Kota and the polyester pallets account for 35% of all the raw materials Kota utilizes. So in-turn, this will drop their 60 days outstanding for inventory, down to just a few days. This would have the most direct effect if Hibachi can indeed follow through and perform at this level. As shown on the Hibachi graph, it shows a greater amount of profit over the base Kota model and Pondicherry’s six million rupee bonus, generating an additional 258 thousand rupees.
The final option presented to Ms. Pundir is from Kota’s operations manager who determined the efficiencies of the same level of annual production. Currently, Kota goes