Tobacco Procurement Logistic at CMC

Abstract

This case focuses on the issues of concern of the Tobacco Procurement Division of Cigarette Manufacturing Company (CMC). The primary concern was the buying of tobacco at the auction floors, followed by the logistics of processing and inventorying, prior to cigarette manufacture. Since tobacco constitute the single largest cost component, appropriate guidelines for bidding grade-wise quantity and price, keeping in view the yields had to be provided. A linear programming model could be used for this.The concern related to logistics (transportation and inventory) could be addressed by a simple assessment of the sensitivity of some of the parameters on the cost.