Urea Distribution Planning and Sinofert Holdings Limited Case Study - Management Assignment Help

Assignmemnt Task 

High transportation costs, imbalance between supply and demand, competition and market volatility had  all been listed as challenges to Sinofert’s urea business. The company had invested a great deal of time and  money in this business but had still reported losses in 2007 and 2009 and only a small profit in 2008. If the  company was to make its urea business profitable, it needed a fresh look and a change in the way of doing  business. Chief Analytics Officer (CAO) of Sinofert, Lee Jun, was asked to look at the company’s urea  business and to provide recommendations to increase profitability.  

COMPANY  

Sinofert Holdings Limited (Sinofert) was the largest comprehensive fertilizer enterprise in China with a  market capitalization of US$4.2 billion (as of March 26, 2010). Its major shareholders were Sinochem (52  per cent share), a well-known petrochemical company in China with annual sales over US$40 billion, and  the Potash Corporation of Saskatchewan (PCS) (20 per cent share), the largest fertilizer company in the  world.  
Sinofert manufactured fertilizers, sold them in wholesale and retail markets and also conducted research  and development on new and improved fertilizers. It also procured end products directly from suppliers for  sale to 40,000 customers (small-sized fertilizer wholesalers, retailers and farmers). The end products  included urea, diammonium phosphate (DAP) and monoammonium phosphate (MAP) potash. Urea was  the biggest volume seller, accounting for 40 per cent of Sinofert’s distribution business

THE UREA MARKET  

Fertilizer (“food’s gold”) had always played a very important role in improving yields in food production.  Urea was a major fertilizer, and in 2009 China consumed more than 50 million tons of it. The goal of  Sinofert was to maintain the leading position in China’s fertilizer market and to expand its market share in  each province 

China had many retailers who bought fertilizers from large wholesalers or producers and sold them to  farmers. Being a large fertilizer company, Sinofert distributed urea and other fertilizers to different  township and county level dealers through its local distribution centres and logistics facilities.  

The urea market was volatile, with price variations over time as well as from province to province resulting  from fluctuations in supply and demand. In order to plan and monitor the new year’s sales and production,  Sinofert would set a yearly sales budget for each province according to market size and sales ability (see  Exhibit 1).

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