A Business Strategy of Coal Procurement from India to Overseas

Recently we shifted our source of coal procurement from India to overseas but coal from overseas is delivered on port in bulk unlike domestic coal that normally arrives on site in relatively smaller chunks. On the contrary, the demand of coal by our clients is spread over longer periods. This contrast of supply and demand of overseas coal is the biggest challenge facing our business. Moreover, most other suppliers have lagged far behind in matching their sales with the supply. Consequently, they have started selling their stock at lower prices to avoid accrual of interest.

This has led to reduced profit margins. Finally, developing our sales network in southern India is another challenge we need to overcome. Although in the last few years we have successfully added clients from southern India, yet our sales network in Southern India isn't as vast as our sales network in Northern India.

I figured most of these challenges during my visit to our various branches and since then my primary concern has been to circumvent these problems.

As such, I put great emphasis on increasing the High Sea Sale (HSS) of Coal i.e. selling stock in bulk while it is still in transit via sea, because increasing HSS would imply less work load on our sales team and lesser paper work and help us avoid penalties due to non-compliance of government procedures by our buyers. Moreover, this is the best time to increase HSS because most of the coal suppliers, who once procured coal from northeast India, are now looking for alternative sources of procurement after extraction of coal in Meghalaya was reduced.

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Since HSS occurs in large chunks, this would resolve the problem of contrast of supply and demand. The problem of reduced profit margins can be tackled by increasing sales and reducing costs. This can be achieved by tying up with larger companies and factories which consume coal in bulk. For this, I have already started mapping our network to figure out how we can approach these companies. For example, my paternal uncle supplies aluminium to Nestle. Nestle has a huge demand of coal. So we would approach Nestle through my uncle.

Finally, if we can increase our sales in southern India we would consequently be also handling the problem of reduced profit margin. I would rather outsource dealership in southern India rather than appoint our own men there for sales. This is because currently we are rapidly consolidating and expanding our sales network in Northern India and to distribute our man power right now wouldn't be a wise choice. I am already in process of building a database of small coal traders in southern India which specialise in a particular area and soon we will start contacting them for outsourcing.

Lastly, there are multiple ports in southern India that allow relatively smaller vessels to be docked on board. Also we have observed that there are multiple coal traders there who are interested in importing coal from overseas but do not have sufficient capital. Financing these traders, is another thing we can do to increase our revenues with minimize costs.