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FMCG and E Commerce

Assignment 3 submitted by

Raghav Mishra

CS06B018

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INTRODUCTION

Over the past 150 years, there has been a shift in the manufacturing system from Centralized

(Industrial Era) to Distributed (Mid 20th Century) to the present day outsourcing framework. It is in

the Distributed Framework of FMCG Manufacturers that we have the following 5 steps in the goods'

life-cycle:

Design

Manufacturing

Marketing

Accounting

Maintenance

In this report, all the above 5 steps have been explained using the very popular FMCG good,

Cigarettes' production cycle. A cigarette is a product consumed through smoking and manufactured

out of cured and finely cut tobacco leaves and reconstituted tobacco, often combined with otheradditives, then rolled or stuffed into a paper-wrapped cylinder.

In the production life cycle of a Cigarette, the stages followed are very analogous to those followed in

principle for any e commerce product, right through the procurement of raw materials to the sale of

the final product to the consumer.

Approximately 5.5 trillion cigarettes are produced globally each year and are smoked by over 1.1

billion people or greater than one-sixth of the world population. Any cigarette manufacturing attempt

made to meet such demands of people needs to have its process well networked; not everything can be

made under one roof. Supply Chain Management is an example of such a process which is used in the

manufacturing of Cigarettes. It is the management of a network of interconnected businesses involved

in the ultimate provision of the product and service packages required by the end consumers.

Raw Materials used in the commercially manufactured cigarettes are seemingly simple objects

consisting mainly of a tobacco blend, paper, PVA glue to bond the outer layer of paper together, and

often also a based filter.

DESIGN

In a generic E Commerce designing application, design is given as an input to get the product as an

output, post manufacturing. Ensuring that correct design is given to the Implementation stage is very

crucial, which is what it is like in the Cigarette design and subsequent manufacturing process.

The major deciding factor in the Design abstraction of a cigarette is essentially the amount of tobacco

that should be burnt with ease with every puff of the consumer. Also to be determined mechanically is

the amount of nicotine that is inhaled with every puff. Although a variety of designs of cigarettes are

available in market today, a very traditional and a popular design of cigarettes has its length as about

120 mm and the width as 10 mm.

Design stage has its stages as the product specifications, Computer Aided Design (CAD) and the

Computer Aided Manufacturing(CAM) as its stages.

THE MANUFACTURING PROCESS

While the assembly of cigarettes is straightforward, much focus is given to the creation of each of the

components, in particular the tobacco blend, which may contain over 600 ingredients,[11] many of

them just flavors for the tobacco. A key ingredient that makes cigarettes more addictive is the

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inclusion of reconstituted tobacco, which has additives to make nicotine more volatile as the cigarette

burns.

A cigarette essentially has two parts to it paper and the tobacco blend. The process used is described

below.

Paper:

The paper for holding the tobacco blend may vary in porosity to allow ventilation of the burningember or contain materials that control the burning rate of the cigarette and stability of the

produced ash. The papers used in tipping the cigarette (forming the mouthpiece) and surrounding

the filter stabilize the mouthpiece from saliva and moderate the burning of the cigarette as well as

the delivery of smoke with the presence of one or two rows of small laser-drilled air holes.

The burn rate of cigarette paper is regulated through the application of different forms of micro-

crystalline cellulose to the paper. Cigarette paper has been specially engineered by creating bands

of different porosity to create "fire-safe" cigarettes. These cigarettes have a reduced idle burning

speed which allows them to self-extinguish. This fire-safe paper is manufactured by mechanically

altering the setting of the paper slurry.

Tobacco Blend:

The process of blending gives the end product a consistent taste from batches of tobacco grown in

different areas of a country that may change in flavor profile from year to year due to different

environmental conditions.

Each cigarette's tobacco blend is made mainly from the leaves of flue-cured bright-leaf, burley

tobacco, and oriental tobacco. These leaves are selected, processed, and aged prior to blending and

filling. The processing of bright-leaf and burley tobaccos for tobacco leaf "strips" produces several

by-products such as leaf stems, tobacco dust, and tobacco leaf pieces. To improve the economics ofproducing cigarettes, these by-products are processed separately into forms where they can then be

possibly added back into the cigarette blend without an apparent or marked change in the

cigarette's quality. The most common tobacco by-products include:

Blended leaf (BL) sheet: a thin, dry sheet cast from a paste made with tobacco dust collected

from tobacco stemming, finely milled burley-leaf stem, and pectin.

Reconstituted leaf (RL) sheet: a paper-like material made from recycled tobacco fines,

tobacco stems and "class tobacco", which consists of tobacco particles less than 30 mesh in

size (~0.599 mm) that are collected at any stage of tobacco processing. RL is made by

extracting the soluble chemicals in the tobacco by-products, processing the leftover tobaccofibers from the extraction into a paper, and then reapplying the extracted materials in

concentrated form onto the paper in a fashion similar to what is done in paper sizing. At

this stage ammonium additives are applied to make reconstituted tobacco an effective

nicotine delivery system.

Expanded (ES) or improved stems (IS): ES are rolled, flattened, and shredded leaf stems

that are expanded by being soaked in water and rapidly heated. Improved stems follow the

same process but are simply steamed after shredding. Both products are then dried. These

two products look similar in appearance but are different in taste.

A recipe-specified combination of bright-leaf, burley-leaf and oriental-leaf tobacco will be mixedwith humectants such as propylene glycol or glycerol, as well as flavoring products and enhancers

such as cocoa, licorice, tobacco extracts, and various sugars, which are known collectively as

"casings". The leaf tobacco will then be shredded, along with a specified amount of small laminate,

expanded tobacco, BL, RL, ES and IS. A perfume-like flavor/fragrance, called the "topping" or

"toppings", which is most often formulated by flavor companies, will then be blended into the

tobacco mixture to improve the consistency in flavor and taste of the cigarettes associated with a

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certain brand name.[18] As well, they replace lost flavors due to the repeated wetting and drying

used in processing the tobacco. Finally the tobacco mixture will be filled into cigarettes tubes and

packaged.

The Supply Chain Management plays a major hand in the process, making the process a lot more

precise with precise E Commerce applications automating the entire process of specific manufacturing

machineries involved. No one department in any typical Cigarette Manufacturing unit specializes in

all the above listed tasks. The work is always distributed The Distributed Framework ofmanufacturing. The linking of various departments can be easily visualized and practically

implemented by the support that E Commerce application provide.

MARKETING

Before the Second World War many manufacturers gave away collectible cards, one in each packet of

cigarettes. This practice was discontinued to save paper during the war and was never generally

reintroduced, though for a number of years Natural American Spirit cigarettes included "vignette"

cards depicting endangered animals and American historical events; this series was discontinued in

2003.

However, as it stands today, in many parts of the world tobacco advertising and even sponsorship of

events has been outlawed. In such a scenario, maintaining a relationship through the customer

becomes a tricky scenario. Indian companies, like ITC, launched various ventures to improve the

brand visibility amongst the consumers, most prominently, advertising the umbrella brand in sub

urban Indian towns (where the consumer market is of the highest percentages) using E Commerce

ventures like E Choupal etcetera.

ACCOUNTING

TheAccounting department of a company communicates financial information about the business entity to

persons such as customers, shareholders or managers. This communication is generally in the form of

financial statements that show, in monetary terms, the economic resources under the control of

management. This again becomes a tricky scenario, when one considers the sheer volume of cigarettes

manufactured and sold through out the world in general any manufacturer specifically.

Specifically developed E Commerce applications keep track of the various products used in the

manufacturing of a cigarette and the number of these manufactured through the automated machines in

the company in a certain period of time, giving exact precise figures to the accounting in terms of

manufacturing costs, discarded end products etcetera.

MAINTENANCE

The maintenance phase plays a key role in any product or service life cycle, FMCG goods in general, where

in, a consumer feed back for the end product sale of bad goods becomes a very important issue. E Commerce

has helped make this stage of the cycle a much easier task, both for the manufacturer and the consumer.

The consumer can list down complaints, if any, on the company's e portal and the customer complaints can

be looked into efficiently, depending upon the versatility of the e commerce application, by the respective

persons in the respective department of the company.