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A Chicken Story Gone Wrong?

CASELET, OPERATIONS MANAGEMENT , SUPPLY CHAIN MANAGEMENT
ET Cases, 5 Pages

Case Preview

A Chicken Story Gone Wrong?

 

Narsimha Reddy (Reddy), the Managing Director of Reddy Poultry Farms Limited (RPFL) was in his office, lost in deep thought. He was looking for concrete explanations in the stacks of paper lying on his desk. Reddy Poultry Farms Limited started by the three brothers way back in 1992 and had reached a turnover of 2,500 crore in 2010– 2011. Though the company had done quite well over the years from its humble beginning, the last year had been appalling.

Reddy Poultry Farms Limited ranks among the top ten poultry companies worldwide. With operations in 11 States across India, it offered a varied range of poultry products and services. The fully-integrated operations cover broiler and layer farming, hatcheries, feed mills, processing plants, vaccines and exports.

RPFL had overestimated the poultry market and to add to their further woes, competition was fast catching up. The prices of chicken and eggs had plummeted and as they had excess supply, RPFL had to sell the live birds at various levels of their life cycle at lower than cost price to minimize losses. They had also tried to venture into packaged meat as it attracted more margins in this business, but because of the Indian mindset of having fresh chicken, this venture was also not picking momentum.

From an unorganized sector, RPFL had successfully done a vertical integration. They had pioneered the model of contract farming and had integrated the value chain. Scaling up also happened through integration of the value chain. It was realized that the key to increasing the value of the value chain lay in feed which formed 70% of the cost. But of late, the contract manufacturers loyal to RPFL had also started competing and demanded increased growing charges.

The threat of Bird Flu and other related diseases were also lurking large. Reddy was now wondering whether vertical integration with so many stakeholders was the correct choice to operate in this industry..........

 



Teaching Note Preview

A Chicken Story Gone Wrong?

 

Synopsis

This caselet looks at the problems faced by Reddy Poultry Farms Limited where they had overestimated the poultry market and to add to their further woes, competition was fast catching up. The prices of chicken and eggs had plummeted. They had excess supply and hence had to sell the live birds at various levels of their life cycle at lower than cost price to minimize losses. They had also tried to venture into packaged meat but because of the Indian mindset of having fresh chicken, this was also not picking up though margins are more in this business.

Prerequisite Conceptual Understanding

This caselet presupposes conceptual understanding of the following:

A working knowledge along with the business implications of the following concepts would enable an effective discussion leading to more practical solutions than a mere intellectual exercise.

  • • An understanding of end to end Supply Chain
  • • An understanding of the poultry industry
  • • An understanding of the complexities change with growing (rather than consumed elements in the supply chain

 

Expected Learning Outcomes

  • • Understand the stakeholders in the supply chain for the poultry business
  • • Appreciate the challenges faced in vertical integration
  • • Understand how much inventory to store at each node in the supply chain
  • • Demand Forecasting in poultry industry

 

Case Positioning and Setting

This caselet can be used in either MBA or Executive MBA or Executive Development Programs, for the following modules/topics in the Supply Chain Management course:

  • • Demand Forecasting
  • • Vertical Integration
  • • Inventory Management

 

Assignment Questions

The case seeks answers to the following questions:

  • I. What is the appropriate Value Chain in Poultry Business?
  • II. If 1 GP is imported, what is the time frame when Reddy Poultry Farms gets the first Broiler and last Broiler and approximately how many?
  • III. ..................

 

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Product code: SCM-2-0001, SCM-2-0001A

Abstract

This caselet tries to analyze the problems faced by Reddy Poultry Farms Limited (RPFL) where they had overestimated the poultry market and to add to their further woes, competition was fast catching up. The prices of chicken and eggs had plummeted. They had excess supply and hence had to sell the live birds at various levels of their life cycle at lower than cost price to minimize losses. RPFL tried to venture into packaged meat business as margins were more in this business, but because of the Indian mindset of having fresh chicken, this endeavor also was not picking momentum. Narsimha Reddy the Managing Director of RPFL was in a dilemma whether vertical integration with so many stakeholders was an appropriate decision in this industry. Was there any scope for further integration and/or diversification to increase the turnover?


Pedagogical Objectives

  • To understand the stakeholders in the supply chain for the poultry business
  • To appreciate the challenges faced in vertical integration
  • To understand how much inventory to store at each node in the supply chain
  • To cognize demand forecasting in poultry industry

Case Positioning and Setting

This caselet can be used in either MBA or Executive MBA or Executive Development Programs, for the following modules/topics in the Supply Chain Management course:

  • Demand Forecasting
  • Vertical Integration
  • Inventory Management


This Case Pack Includes:
 - Abstract
- Caselet
- Teaching Note (**ONLY for Academicians)
$3.66
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