Page 212 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Unit 10: Building of a Supply Chain

In conclusion, the advantages and disadvantages of single sourcing, both from the buyer’s Notes
perspective as well as the vendor’s perspective are shown in Table 10.1.

Task What are the advantages of ‘single sourcing’ over ‘networking’? Which option
would you choose for a machine tool manufacturing unit and why?

Self Assessment

Fill in the blanks:
12. Generally, manufacturing organizations with an assembly-type of operation choose
……………… sourcing as the sourcing choice.

13. Traditional purchasing was dominated by a ……………… strategy.
14. According to the experience curve concept, costs of value added decline approximately 20
to 30 percent in real terms each time accumulated experience is ……………… .

15. Single sourcing is preferred as purchasing method, when strategic emphasis is on the
supplier’s availability of technical support, the reliability of the product, and ………………
of the product.



Case Study Indian Detergent Market: Nirma vs HLL

etergent Powder was introduced in India by the Soap & Detergent Division of
Hindustan Lever Ltd. (HLL) in 1954, a subsidiary of Unilever. The division had
Dtwo major products, ‘Surf’ detergent powder and ‘Rin’ washing soap. HLL viewed
the products as middle class products. This was not a large market but HLL provided high
quality products giving it a reasonable profit margin. Its product ‘Surf’ emerged as the
market leader in detergent powder. ‘Nirma’ was established by Karsan Patel in Dec. 1969.
Traditionally, clothes were washed by hand using hard yellow bars of laundry soap.
Karsan Patel saw this as his market. This accounted for 95% of the detergent market.
Nirma targeted this segment, producing cheap detergent powder that was easier to use
compared to the laundry soap.
By 1977, Nirma had dented the detergent powder market with a market share of 12 percent
compared to Surf’s 31 percent. It continued to grow aggressively and between 1977 and
1984 Nirma’s sales grew at a compound rate of 49 percent. By 1984, Nirma was selling
20,000 tonnes of detergent powder in comparison to HLL’s 2000 tonnes. Within 15 years, it
had become the one of the largest detergent powder brands in the world and was seriously
challenging HLL’s brand ‘Surf’. Nirma was able to manufacture and distribute its product
around 1/3rd the price of ‘Surf’.
HLL’s traditional approach was, ‘think globally, act locally’. They had applied this
philosophy to the detergent market. Initially, HLL management was of the view that “We
can’t make this detergent product. The Nirma powder is so different in quality, unit cost
etc.” They froze; in their minds there was no viable way to act except to wait for it all to
blow over.

Contd...

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