Supply Chain Innovation at Geddy´s

1. Supply Chain Innovation at Geddy´s Team Name: Buffalo Consulting 1st Round Room: RAWLS 3097 AmitChaudhary Pan Pan Debora Manea Ralf Tischler

2. Team Overview Pan Pan • Amit Chaudhary • MBA Class of 2014 • BSc Engineering, Bangalore University, India • Experience: • Market Research Analyst at Fidelity Investments • Pan Pan • MBA Class of 2014 • BSc Economics, Hubei University of Economics, China • Experience: • Client Manager at Agricultural Bank of China • Debora Manea • MSIA Class of 2013 • BSc International Business, ESB Business School, Germany • Experience: • Consulting internshipatOliver Wyman • Financeinternshipat GE Capital • Ralf Tischler • MSIA Class of 2013 • BSc International Business, ESB Business School, Germany • Experience: • Consulting internshipsatBooz & Company and KPMG • Online marketingat a Sheraton Hotels property

3. Agenda Pan Pan 1 Geddy´sand SC PlanningChallenges 2 Operations Analysis 3 Future Outlook 4 Recommendations

4. Geddy´s Pan Pan 1 2 3 4 • Ice-cream: 40 flavors • Low and high marginflavors • Competitivelypriced • Nopricedifferentiation • Franchisedretailoutlets but ownbuildings • Nosale in majorsupermarkets • Collaborationwith´Just Bake´ Bakeries • Noparticularcustomersegment • Electronic andprintmedia

5. Ambiguous growth opportunities in India Amit Chaudhary PRESENT 1 Market-drivenchallenges Low ice-cream – per capita consumption 2 3 • Demand Constraints: • Economic conditions • Affordability • Product availability • Inadequate infrastructure • Many other desserts • High Seasonality 4 FUTURE Significant growth of ice cream consumption • Growth enabler: • Strong growth of disposable income (especially: urban) Branded: 20-25% p.a. growth expected

6. Challenges for Supply Chain Planning Amit Chaudhary Supply Chain Challenges 1 Procurement 1. High price fluctuations 2. Import tariffs 3. Inbound logistics 4. Currency fluctuations 5. Middlemen costs 6. Supplier selection 2 3 4 InventoryMgmt 1. Product (ice cream) and ingredient durability 2. Cold-storage requirements Manufacturing Production planning based on service level policy Idle capacity Outboundlogistics/Retailer 1. Cold transportation requirements 2. Missing cold-storage infrastructure at supermarkets 3. Product availability

7. Demand is highly dependent on temperature Debora Manea 1 2 3 4

8. High discrepancy of actual and expected sales Debora Manea 1 2 Weekly Profit (100 Rupee) 3 4 Total Weekly Sales

9. High discrepancy of actual and expected sales Debora Manea 1 2 Weekly Profit (100 Rupee) 3 4 Total Weekly Sales High fluctuations Drop in sales & profits

10. Different service level policies are used Debora Manea 1 2 Weekly Profit (100 Rupee) 3 4 Total Weekly Sales Target Service Level ScaledStocking Level Common Service Level Target Level Top 3 Margin Target Level Top 2 Margin

11. Changing the policies led to loss in profits Debora Manea Scaled Policy Common Service Level 1 2 3 4 Actual Weekly Profit (in ‘000 Rs) Policy Change Estimated Weekly Profit (in ‘000 Rs) * Top 2 Margin Policy * Assuming we would sell at least the minimum between expected demand and order, for previous stock-out instances

12. Part of the gap was driven by overall lower demand Debora Manea Expected Demand for TV, BBS and LL (in units) Actual Sales for TV, BBS and LL (in units) 1 Period of few or no stock-outs 2 3 4

13. The storage capacity cap limits profits Ralf Tischler 1 Capacity Cap 2 3 4 PolicyOptimization PROFIT REVENUES COSTS

14. Two options might lead to higher profits Ralf Tischler 1 1. Expansion Capacity Cap 2 3 4 PolicyOptimization PROFIT 2.Cost Efficiency REVENUES COSTS

15. Fast capitalization on cost efficiencies Ralf Tischler 1 Benefit Cost/Risk Applications 2 3 4 Price differentiation (2 Categories) • Increases margins • Accounts price fluctuations • Less customer convenience • Sales volume decrease Decrease number of flavors • Unties capacity • Eases sourcing/production • Disliked by customers • Sales volume decrease Cost Efficiency Increase capacity of stores (peak season) • Reduces SG&A overheads per unit: Margin & Sales ↑ • Required investments • Unused equipment Increase sourcing from foreign supplier • Reduces sourcing costs if Rupee is strong • High ex-rate dependency • Difficult relationship building Change receivable / payable policy • Less working capital needs • Free cash for investments • Resistance of franchisee • Resistance of supplier Beneficial & less risky Less beneficial and/or risky Not beneficial or too risky

16. Expansion offers long term opportunities Ralf Tischler 1 Benefit Cost/Risk Applications 2 3 4 Expand the product line (related product) • Balance the off season demand • Extra production cost • Increase in Operational cost Enter retail • Reach to new customers • Brand awareness: Sales ↑ • Expensive shelf space • Compete with other brands In-store Freezer/Kiosk • Low upfront investment • Meet peak demand • Low margin • Space constraints Expansion Standalone Parlor • Increase the market share • Reach out to diff. markets • High initial investment • Longer breakeven period Vending Cart • Increases mobility • Nominal initial investment Beneficial & less risky Less beneficial and/or risky Not beneficial or too risky

17. Cost efficiencies will enable future expansion Ralf Tischler 1 Short-term focus Long-term focus 2 3 4 • Volatile and low demand • Uncertain margins • Storage constraints • Stable cash inflow • Meet current demand • Increasing demand • Market consolidation • Decrease utilization gap • Capital • Infrastructure Environment Needs Cost Efficiency Expansion

18. Recommendations Ralf Tischler 1 SOLUTION 2 PROBLEM 3 Space constraint in peak season and high seasonality 4 1 Scaled Stocking Level Policy 2 Short-term focus: Cost Efficiency 3 Long-term focus: Expansion

19. Thank you for your attention!Q&A AmitChaudhary Pan Pan Debora Manea Ralf Tischler

20. Back-up Slides

21. Fast capitalization on cost efficiencies Ralf Tischler Benefit Cost/Risk Applications Price differentiation (2 Categories) • Increases margins • Accounts price fluctuations • Less customer convenience • Sales volume decrease Decrease number of flavors • Unties capacity • Eases sourcing/production • Disliked by customers • Sales volume decrease Cost Efficiency Increase capacity of stores (peak season) • Reduces SG&A overheads per unit: Margin & Sales ↑ • Required investments • Unused equipment Increase sourcing from foreign supplier • Reduces sourcing costs if Rupee is strong • High ex-rate dependency • Difficult relationship building Change receivable / payable policy • Less working capital needs • Free cash for investments • Resistance of franchisee • Resistance of supplier Beneficial & less risky Less beneficial and/or risky Not beneficial or too risky

22. Expansion offers long term opportunities Ralf Tischler Benefit Cost/Risk Applications Expand the product line (related product) • Balance the off season demand • Extra production cost • Increase in Operational cost Enter retail • Reach to new customers • Brand awareness: Sales ↑ • Expensive shelf space • Compete with other brands In-store Freezer/Kiosk • Low upfront investment • Meet peak demand • Low margin • Space constraints Expansion Standalone Parlor • Increase the market share • Reach out to diff. markets • High initial investment • Longer breakeven period Vending Cart • Increases mobility • Nominal initial investment Beneficial & less risky Less beneficial and/or risky Not beneficial or too risky

23. India- Disposable income vs. ice-cream consumption

24. Ice-cream – per capita consumption

25. Market shares of organized players

26. Temperature and Investment costs

27. Cost Structure Every percentpointsaved in sourcingproportionatelyincreases EBITDA!

28. Business model and value proposition

29. Manufacturing Process

30. States with operations

31. Exchange Rate

32. Menu