|Type of paper:||Case study|
|Categories:||Company Supply chain management|
Valjibhai stones is a stone crushing company located in Mundra, India. The company's had already received information about a massive contract by Global Construction Company (GCC) located in the special economic zones (SEZs). Valjibhai had gone to pick his son and wondered whether he was ready to take up the task and supply the Global Construction Company with the required stones to facilitate the construction project. GCC required a reliable supplier who would deliver the quality stones for the construction of Mundra port in the Mundra special economic zone.
Valjibhai was a suitable contractor for the stones supplies. His business had been operational for 30 years and was therefore considered as the contact favourite by the Global Construction Company. Valjibhai Stones had a considerable market share and were engaged in the distribution of stones which were of superior quality. Therefore, this shows why the company had been regarded as the best supply of the stones contract by Global Construction Company.
Valjibhai Stones was concerned if it would be able to meet the capacity to supply the stones required. Even though it was reputable and had a larger market share, Global Construction Company required 28000 metric tonnes of stone chips to be supplied for eight years. Therefore, this was a significant concern for the company since its annual output capacity was 15,600 metric tonnes. Thus meeting the contract requirements would mean that Global Construction Company will not have sufficient materials to complete the construction of the Mundra Port.
Also, the company had other clients whose demand for stones were high as there were other two large contracts as well as smaller contractors. The company, therefore, was in a difficult position to sustain the increasing demand for stone chips. The only solution was to expand production of stone chips to avoid problems relating to abandoning clienteles in order to ensure that Global Construction Company gets the required supply capacity. Valjibhai Stones had already invested heavily in capital expenditures which means that even though the company was to increase its production capacity also the transportation costs would rise higher. Consequently, the cost issues were the impeding problem in the company and Valjibhai Stones had to deal with both production capacity and increasing costs.
Perhaps, Valjibhai Stones was able to facilitate the contract since they were able to receive the terms of the contract from Global Construction Company (GCC). Acceptance of the contract helped Valjibhai Stones in meeting current costs and incremental costs since there was an advance payment by the Global Construction Company. The advance payment which increased yearly was used to cater for expenditure on machinery which was used to expand production capacity as well as on increasing mining and crushing costs. Valjibhai Stones was also able to cover the transportation costs required to ensure all clients had received the stones without compromising any contract.
All in all, despite the challenges of low production capacity a new contract was successful in aiding Valjibhai Stones to turnaround. Valjibhai Stones increased production capacity, and Valjibhai was able to source all clients with stones.
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