INDUS MOTORS: INVENTORY MANAGEMENT
CASE STUDY SOLUTION
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SYNOPSIS
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Indus Motors was the largest automobile dealer in the state of Kerala, providing services in this southern state
of India across multiple verticals, including sale of new cars, automobile servicing and repairs, reselling of
second-hand cars, rent-a-car service, and car financing and insurance. Five large warehouses in the state supplied
spares and accessories consisting of 19,000 stock keeping units (SKU) to the 76 automobile service workshops
across Kerala, each warehouse supplying items to the service centres in that zone. The company implemented
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an enterprise resource planning (ERP) system recently but did not realize the benefits of data driven decisions
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and inventory management remained a concern. Demand uncertainties, forecast errors, and model
refresh/facelifts resulted in excessive dead stock in the system and inefficiencies in procurement and distribution.
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So
OBJECTIVES
• Understand the complexity of managing inventory in a large auto spare part supply network.
• Learn about types of inventory classification and the movement (flow) of inventory through the system.
• Identify reasons for inventory buildup and ways to mitigate it.
• Understand the impact of improper inventory management on a company’s operations.
• Analyze procurement and inventory holding patterns and apply appropriate inventory control
techniques that best suit the situation’s dynamics.
• Manage issues with procurement and distribution given the challenges of demand forecasting.
The Case Solution Starts From page 6
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ASSIGNMENT QUESTIONS
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1. What is the principal dilemma in the case and the challenges faced by Indus Motors?
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2. Analyze the inventory managed at Indus Motors’ warehouses and stores in Kerala and comment on the
stocking issues that you observe from the data available.
3. Explain the procurement and ordering practices at Indus Motors and quantify the stock-outs and excess
(deadstock) inventory in the network. What are the managerial implications of your observations and
n
assessment in order to improve inventory management at Indus?
4. Based on the case analysis, what suggestions should Unni and Jaleel offer to the company’s directors
tio
to improve and optimize parts management?
5. What is the scope for data driven decision making, supply chain analytics, and use of digital systems
for improving inventory-related systems at Indus Motors? (Use supplementary data file of the Kannur
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warehouse for more detailed granular analysis.)
So
The Case Solution Starts From page 6
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Sa
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2. Analyze the inventory managed at Indus Motors’ warehouses and stores in Kerala and comment
on the stocking issues that you observe from the data available.
As the parts inventory consists of more than 19,000 SKUs with diverse service requirements, physical and
economic attributes, and demand patterns, inventory classification is essential for streamlining operations
and maintaining optimum inventory levels. Inventory policies must be established to set maximum and
minimum stock levels, safety stock, and ROPs to avoid excess stock or stock-outs based on the parts
characteristics and demand pattern. High-cost parts should have a different stocking policy to low-cost
parts, and parts with high consumption value should have a different stocking policy to small consumption
value parts. Fast-moving parts are easier to forecast than slow-moving parts, and they therefore should have
a stocking policy different from slow-moving items.
The first step can be an ABC classification to establish degree of control over each item. From case Exhibit
4, the annual consumption value of the 11 representative items can be calculated
The Case Solution Starts From page 6
, EXHIBIT -1: ANNUAL CONSUMPTION VALUE AND ABC CLASSIFICATION
Annual Percentage
Part Percentage
Part code consumption consumption Classification
no. of total
value (₹) value
11 BY90 1322892000 74.41 74.41 A
10 AJ41 208362816 11.72 B
18.25
6 SL42 116156240 6.53 B
9 MR27 80186785 4.51 C
8 SA15
7.33
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The Case Solution Starts From page 6
, EXHIBIT -7: SUPPLY CHAIN SEGMENTATION BASED ON INVENTORY CHARACTERISTICS
Stable demand, high volume
Consumption volume (sales)
consumption SKUs
Volatile demand, low volume
consumption SKUs
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Demand variability
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Sa
n
Inventory level
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So
Inventory level
The Case Solution Starts From page 6
CASE STUDY SOLUTION
e
pl
m
SYNOPSIS
Sa
Indus Motors was the largest automobile dealer in the state of Kerala, providing services in this southern state
of India across multiple verticals, including sale of new cars, automobile servicing and repairs, reselling of
second-hand cars, rent-a-car service, and car financing and insurance. Five large warehouses in the state supplied
spares and accessories consisting of 19,000 stock keeping units (SKU) to the 76 automobile service workshops
across Kerala, each warehouse supplying items to the service centres in that zone. The company implemented
n
an enterprise resource planning (ERP) system recently but did not realize the benefits of data driven decisions
tio
and inventory management remained a concern. Demand uncertainties, forecast errors, and model
refresh/facelifts resulted in excessive dead stock in the system and inefficiencies in procurement and distribution.
lu
So
OBJECTIVES
• Understand the complexity of managing inventory in a large auto spare part supply network.
• Learn about types of inventory classification and the movement (flow) of inventory through the system.
• Identify reasons for inventory buildup and ways to mitigate it.
• Understand the impact of improper inventory management on a company’s operations.
• Analyze procurement and inventory holding patterns and apply appropriate inventory control
techniques that best suit the situation’s dynamics.
• Manage issues with procurement and distribution given the challenges of demand forecasting.
The Case Solution Starts From page 6
, e
pl
ASSIGNMENT QUESTIONS
m
1. What is the principal dilemma in the case and the challenges faced by Indus Motors?
Sa
2. Analyze the inventory managed at Indus Motors’ warehouses and stores in Kerala and comment on the
stocking issues that you observe from the data available.
3. Explain the procurement and ordering practices at Indus Motors and quantify the stock-outs and excess
(deadstock) inventory in the network. What are the managerial implications of your observations and
n
assessment in order to improve inventory management at Indus?
4. Based on the case analysis, what suggestions should Unni and Jaleel offer to the company’s directors
tio
to improve and optimize parts management?
5. What is the scope for data driven decision making, supply chain analytics, and use of digital systems
for improving inventory-related systems at Indus Motors? (Use supplementary data file of the Kannur
lu
warehouse for more detailed granular analysis.)
So
The Case Solution Starts From page 6
, e
pl
m
Sa
n
tio
lu
So
2. Analyze the inventory managed at Indus Motors’ warehouses and stores in Kerala and comment
on the stocking issues that you observe from the data available.
As the parts inventory consists of more than 19,000 SKUs with diverse service requirements, physical and
economic attributes, and demand patterns, inventory classification is essential for streamlining operations
and maintaining optimum inventory levels. Inventory policies must be established to set maximum and
minimum stock levels, safety stock, and ROPs to avoid excess stock or stock-outs based on the parts
characteristics and demand pattern. High-cost parts should have a different stocking policy to low-cost
parts, and parts with high consumption value should have a different stocking policy to small consumption
value parts. Fast-moving parts are easier to forecast than slow-moving parts, and they therefore should have
a stocking policy different from slow-moving items.
The first step can be an ABC classification to establish degree of control over each item. From case Exhibit
4, the annual consumption value of the 11 representative items can be calculated
The Case Solution Starts From page 6
, EXHIBIT -1: ANNUAL CONSUMPTION VALUE AND ABC CLASSIFICATION
Annual Percentage
Part Percentage
Part code consumption consumption Classification
no. of total
value (₹) value
11 BY90 1322892000 74.41 74.41 A
10 AJ41 208362816 11.72 B
18.25
6 SL42 116156240 6.53 B
9 MR27 80186785 4.51 C
8 SA15
7.33
e
pl
m
Sa
n
tio
lu
So
The Case Solution Starts From page 6
, EXHIBIT -7: SUPPLY CHAIN SEGMENTATION BASED ON INVENTORY CHARACTERISTICS
Stable demand, high volume
Consumption volume (sales)
consumption SKUs
Volatile demand, low volume
consumption SKUs
e
pl
Demand variability
m
Sa
n
Inventory level
tio
lu
So
Inventory level
The Case Solution Starts From page 6
