CASE PREPARATION ASSIGNMENT ON

JSW STEEL LTD.: A LOGISTICS DILEMMA

SUBMITTED TO

PROF. SAURABH CHANDRA

BY

SARATH C. WARRIER (2018PGP332)

IN PARTIAL FULFILMENT OF

CONTEMPORARY LOGISTICS MANAGEMENT

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 1. What are the existing challenges facing Kumar? What are the alternatives available to
him?

It was the last week of September 2014 to achieve the company’s quarterly targets. Their
client JSAW had ordered 7000 tons and Kumar only had a short window of time to decide
the mode of transportation (by barge/rake). The material for JSAW products had always
been transported by rail route from the time the two companies started doing business
together. The rake option was faster. However, the combined cost of transporting coils to
the port in Goa by rake and then to the Mudra port by barge was approximately 22
percent cheaper than that of transporting the coils directly by rail. This option would still
ensure that the materials reached the client in time.

2. How much money would JSW make if Kumar chose to send the material to JSAW by rail?

By rail, the material would reach the client in roughly 8 days. The demand is for 7000
tons. Hence, 3 BOXN rakes would be required (capacity 2500 tons). The price for full
delivery of the ordered quantity is Rs. 30,000/ton. Hence, revenue is Rs. 21,00,00,000.
We do not know the cost of raw materials or the processing costs. Only cost of
transportation by rail to Mundra region is known (Rs. 3180 per ton).

3. If material is sent by barge, what is the probability that Kumar would be able to ship it to
JSAW in time without any damage? How much money would JSW make in this scenario?

The availability of clean storage Class 1 barges was only 30 percent. Class 1 vendors had a
record 80 pc timely delivery. Class 2 vendors provided clean storage space with a
probability of 75 pc and had a record of only 35 pc timely delivery. So, the probability of
in time delivery without any damage for Class 1 vendors is 24 pc whereas the same for
Class 2 vendors is 26.25 pc. If the delivery is in time without any damages, JSW would
make Rs. 30,000 per ton.

4. How many hours are required to transport the material from JSW to JSAW using the rail
and barge options? Which mode is faster?

The rail option requires 142.5 to 172.5 hours whereas the barge option requires 140.5 to
168.5 hours. The barge option seems faster. However, the Class 2 vendors had a record of
only 35 pc timely delivery. (Rake – 70 pc, Class 1 vendors – 80 pc).

5. Keeping all the possibilities in mind, what should Kumar do? Why?

Kumar should not risk the relationship between JSW and JSAW. The probabilities of in
time delivery without any damage for barge transport is very low. The price which JSW
would get for the materials delivered will be lower than expected. Unavailability of the
materials would cause the production process to shut in JSAW. Also, the traditional

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 method of transportation to the client is by rail. The logistics team also prefers
transportation by rail. So, Kumar should consider the same option.

6. An agency at the Goa port can provide immediate information to Kumar on the
availability of Class I barges. How much should Kumar pay the agency to obtain such
information?

Kumar’s willingness to pay the agency should be the savings JSW has by transporting the
material by barge.

7. Kumar approached a consultant who was ready to provide information on Monday,

Kumar’s willingness to pay the consultant would be the savings JSW has by transporting
the materials in 2 JUMBO rakes instead of the 3 BOXN rakes.

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