fauji cereals final report

DISTRIBUTOR AUTOMATION: FAUJI CEREALS PAKISTAN

LETTER OF TRANSMITTAL

April 21, 2012

Mr. Rafay A KhanCourse InstructorSupply Chain ManagementInstitute of Business Management

Dear Sir:

We have been assigned to draft a report on supply chain management issues & possible solutions of an organization, for which we have selected “Fauji Cereals Pakistan”. This report leads us to explore downstream supply chain of the company & possibilities of ERP based integration with upstream supply chain of the company.

Evaluating supply chain perspective of real work environment had been an exhilarating experience for both of us and is going to help in our professional career.

We express our deep gratitude to you for giving us such great deal of learning opportunity.

Best Regards,

Salman Saleh (10992)Muhammad Misbah-ul-Haq Siddiqui (10979)

Institute of Business Management- SCM Term Report Spring 2012 of 28


LETTER OF ACKNOWLEDGEMENT

April 21, 2012

Dear Readers:

We are thankful to Almighty Allah for giving us the strength and capability to complete this report on “Distributor Automation at Fauji Cereals Pakistan.”.

We would like to thank our course instructor of Supply Chain Management course Mr. Rafay A. Khan for putting in all the hard work in this course to make it a memorable experience for all of us. We appreciate his guidance and shall appreciate the valuable feedback on this report as well.

We are highly obliged to Mr. Hassan Naeem & Mr. Kashif Mujhtaba from Fauji Cereals Pakistan who shared their valuable time from busy schedule in order to guide us through the report and provide the relevant information.

Sincerely,

Salman Saleh (10992)Muhammad Misbah-ul-Haq Siddiqui (insert your id here)

MBA IoBM



S. NO. TOPIC PAGE NO.

1. Abstract 4

2. Introduction: FMCG Over view 4

3. About Fauji Cereals Pakistan 5

4. Pakistani Breakfast Cereal Industry 11

5. Literature Review 14

6. Fauji Cereals’ Supply Chain 15

7. Distributors Automation Project 16

8. Better Market Opportunities 17

9. Implementation Process 18

10. Findings & Discussions 19

11. SWOT as Conclusion 23

12. Similar Implementations: Kohinoor Soap & Detergent (Pvt) Ltd 25

13. Recommendations 26

14. References 28



ABSTRACT:With the increasing awareness of integrated chain management, demand of

implementation of Information Technology based ERP software

in producing industries specially is on an increase. It is not solely integrates many to

all business processes within the organization; however the most advantage of

integration of suppliers & customers in the light of Extended Supply Chain concept.

In this paper, we are analyzing importance of integration of distributors with such IT

based technologies with taking the case of a FMCG based food company Fauji

Cereals. We’ll analyze how their downstream offer chain related issues will

be addressed by ERP implementation.

INTRODUCTION:

FMCG Overview

Products that have a quick turn over and comparatively low value are referred to

as Fast Moving Consumer Goods (FMCG). FMCG products are those that get

replaced at intervals a year. samples of FMCG usually embody a good vary of

frequently purchased client product like toiletries, soap, cosmetics, tooth

cleaning product, shaving product and detergents, additionally as alternative non-

durables like glassware, bulbs, batteries, paper product, and plastic merchandise.

Pakistan’s FMCG sector is one among the biggest sector within the economy and

creates employment for more than one million people in downstream activities. The

whole FMCG market is currently growing at double digit growth rate and is

predicted to take care of a high growth rate. The FMCG sector is dominated

by each MNC and domestic players.



The FMCG sector in Pakistan is engaging attributable to the subsequent reasons:

There could be a low level of penetration additionally as low per capita

consumption for many of the product.

An average Pakistan spends 40% of his monthly income on groceries and 8% on

personnel care product.

Large population base of Pakistan.

The problems faced by the FMCG sector are as follows:

High deviation in forecasted and actual sales due to inaccurate demand

prediction

Inability to realize operational excellence due to multiple level of

sales knowledge tracking within the offer chain

Over production, higher occurrences of stock outs due to the

bullwhip result (lack of information sharing among the members of the

provision chain)

Due to random changing purchasing power, the consumption pattern of average

Pakistan is changing continuously.

Some of the articles have seasonal demands and demand prediction

becomes troublesome for them.



About Fauji Cereals Pakistan

Fauji Cereals was established in 1954, a totally owned Project of Fauji Foundation

and began production at the beginning in collaboration with Quaker Oats England in

1956. It’s the pioneer business venture of Fauji Foundation. It’s the most important

producer of breakfast cereals in Pakistan with big selection of product. It’s

Pakistan’s most prestigious and largest cereal processing unit, having the newest

modernized machinery, extremely hygienic environses for production of Halal Food

product. Fauji Cereals is the number one consumer and trade-preferred brand in

Pakistan with a really sturdy brand equity and client following. The corporate enjoys

over 80% of the market share in the category of Breakfast Cereals and Porridge

Food product.

The company has achieved ISO 9001-2008 Certification by adopting the

International normal Procedures for manufacturing top quality food product. 100%

Halal ingredients are utilized in the producing method of all products. The company

has additionally penetrated in International Market and exporting its product to

varied countries. It’s additionally a provider to World Food Programme and UNICEF.

Products Categories

Fauji Cereals has three main product categories,

Breakfast Cereals

Desserts

Other Products


http://www.faujicereals.com.pk/break_fast.html

http://www.faujicereals.com.pk/others.html

http://www.faujicereals.com.pk/powdered.html


Breakfast Cereals

Ready to eat Cereals -(Flakes)

Fauji Flakes product are produced on automatic plant manufactured by “Buhler

Switzerland” underneath strict hygienic conditions. Flakes are manufactured

from very best quality Corn/Wheat/Rice with ancient cooking and flaking

methodology to relinquish best style and quality which might not be duplicated

by the other technique. The products are carried on automatic packaging machines

to conserves their property of being pure, fresh and crispiness in all atmospheric

condition. Flakes owe their popularity among customers thanks to their crisp

texture, fresh flavours and their ready-to-eat characteristic. The marque enjoys a

clear-cut market leadership attitude in Flakes with over eightieth market share.


http://www.faujicereals.com.pk/break_fast.html


Ready to cook Cereals-(Porridge)

Barley Porridge or Rolled Pearled Wheat Porridge and Porridge Food are more

desirable cholesterol free able to cook cereals. The Wheat/Barley after cleaning is

half-cooked and rolled. It might be outlined as rolled, gelatinized, dried

Wheat/Barley product and planate. The marque enjoys a clear-cut market

leadership position in Wheat and Barley Porridge with over seventieth market share.



Desserts

Jelly fast Set, Custard Powder and Kheer combine are one among the

foremost standard and family favorite dessert foods. In-spite

of alternative established brands of competitors, Kheer Mix, Fauji Custard, Jelly and

Firni Khas have created substantial inroads into the competitor's market share and

are currently the quantity two client most well-liked marque in Pakistan.

Other Products



Besides its powerful presence in Breakfast Cereals and Desserts classes, Fauji

Cereals is additionally producing numerous alternative quality product like Corn

Flour, Rice Flour, Pearl Barley, Laundry Kalaf, Ice Cream Powder, Fauji Atta, Fauji

Basmati Rice and Instant Porridge.



Pakistani Breakfast Cereal Industry

With an estimated market size of Rs. 200 million a year and an estimated growth

rate of 20% every year, the breakfast class in Pakistan was experiencing

tremendous growth. The breakfast class in Pakistan, includes product like cereals,

cornflakes etc with popular brands like Fauji, Kellogs and alternative imported

brands.

Focus on ‘Health’ as a trend was gaining ground. Further, the distinction between

‘good food’ and ‘food that’s smart for you’ is turning into a lot of dominant with

a larger proportion of customers falling in line with the new trend. A lot of players

have additionally entered into this space.

Besides some established ones, native players also are testing the grounds with

their own cereal variants. Another issue propelling the expansion of health

food, particularly in Pakistan, is that the changing lifestyle of various individuals.

Worldwide, the issues are high concerning wrong eating habits, health disorders like

obesity and diabetes and Pakistan is not any exception.

Still the Pakistan Breakfast Cereal business is facing challenges

Pakistan population not used to consuming processed foods

Easy availability and low-price ofancient breakfast

Low awarenessconcerning processed foods

Habit of eatingsignificant breakfast

Low awareness ofthe need of healthy eating and calorie intake

Price sensitive customers



Changing Mind set of the Consumers

People are getting aware of healthy & hygienic. There’s an amendment within

the mind-set of the buyer and currently viewing “Money for Value” instead of “Value

for Money”. We've seen willingness in customers to maneuver to evolved products/

brands, due to changing lifestyles, rising disposable income etc. customers are

switching from economy to premium product even we've witnessed a

pointy increase within the sales of packaged water and water purifier.

Information Technology in FMCG

Market share movements indicate that company like UniLever Pakistan Ltd and

Nestle Pakistan Ltd, with domination in their key classes, have improved their

market shares and outperformed peers within the FMCG sector. This has

significantly been aided by the employment of data technology to

facilitate varied processes and logistics demand.

A competitive edge in sales and distribution provides abundant required muscle to

the corporations to compete in market place as has been epitomized by companies.

Use of IT in sales and distribution guarantees to produce a regular supply of

competitive advantage which will go an extended approach in enhancing the power

of company in market place.

Sales and Distribution in Pakistan suggests that a collection of levels- wholesalers,

Stockists, transporters, retailers etc. Automation of S & D guarantees the reduction

in storage prices, administrative prices, communication prices, lesser wastage and

lesser transportation price due to higher route designing. It enhances the

revenue due to higher selling designing, demand volatility management, responsive

product development. The individuals’ productivity is additionally enhanced due

to effective use of sales knowledge, improved communication flows and pc assisted



ordering. Considering of these blessings, it's prefer to be a natural candidate to

be utilized in sales and distribution.

Fauji Cereals, as a corporation, has forever been related to healthy food and this

changing shopper mind-set indicates that it’s poised to grow at a

comparatively higher rate in Pakistan with its massive product portfolio. To be able

to exploit this chance, the sales and distribution network ought to be capable

enough to handle the increased masses with reduced

logistics price. Information technology is the answer to needed potency in S&D and

would undoubtedly act as an enabler.

LITERATURE REVIEW:

Primary Objective

One of the first objectives is to know the Distributor automation project that aims at

connecting all the distributors on a standard platform named DBA Manufacturing

Sales & Distribution Module.

The main aim of the “Distributor Automation study” is to try to an intensive analysis

of the project comparing it with alternative such initiatives from alternative FMCG

companies and supply recommendations to confirm successful implementation of

the platform.

This report will also study the vital success factors that make sure the success of IT

automation in sales and distribution networks. Finally the report ends with a

collection of recommendations to be followed for the project.



Fauji Cereals’ Supply Chain

The manufacturing for Fauji Cereals is done in production plant. After that the

finished merchandise are transported to Carry and Forward Agents (CFA) who

further deliver it to the distributors and super distributors.

Primary Sales

The requirement for smart delivery comes from the distributor who sends out a mail

to the CFA primarily based on this inventory levels and therefore the delivery is

sometimes done twice for each distributor.

Secondary Sales

DVSM (Salesman) sometimes goes to a collection of outlets in a day (called a Beat)

and records the inventory levels in the slightest degree the retailers in that beat.

Then he notes the requirement for new stock based on the average turnover and

retailers’ suggestion for each retailer that he additional notifies the distributor. The

bills are created at the distributor end and therefore the delivery is either done



on same day or the next one.

Currently most of the distributors use one or the opposite proprietary software to

record all the invoices, stock keeping, payment settlement et cetera. In majority of

the cases, it’s the DVSM who truly operates the system to make invoices and prints

the outline beside alternative reports needed for the delivery.

Distributors Automation Project

For Visibility in Forward Supply Chain

Project plans to automate most of the aspects of the provision chain using the IT

platform from SAP Sales & Distribution module. The implementation of the

software needs that the MicroERP gets installed on all the distributor sites that shall

aid in day-to-day operations of the distributors like Invoicing, Stock Keeping,

Payment settlement, Claims handling etc.

The MicroERP shall be needed to upload sales knowledge on a daily to a central

server from where knowledge is fetched by an application known as the Sales

Portal that shall offer MIS reports to the sales team on a true time basis

concerning the sales knowledge and connected trends.



Better Market Opportunities

OBJECTIVES

Distributors’ point of view

Improved sales due to higher call creating

Better inventory management resulting in perceivable price reduction

Problem of stock out (being faced by several distributors) will certainly be

benefited to a good extent

Better turnaround time for Claims processing

Purchase order processing: Reduced effort

Fauji Cereals Company’s point of view

Improve logistics and warehouse act of managing - Absence of secondary

and tertiary level data blurs the demand-supply graph.

In-depth market understanding - Dealer's/retailers purchase reflects

the buying pattern of outlets. Tracking secondary sales data with the

assistance of a totally integrated Sales Tracking System helps you to

grasp that section, region, and products mix have high and low demands.

Formulating and evaluating distribution strategies - Recognize the

distribution channel's performance and strategize ensuing distribution cycles

accordingly. You can plan-out remunerative schemes for distributors who are

under-performing or who are less motivated to sell your product.

Better stocking : Elimination of lost sales and mal-distribution of stock due

to stock outs or massive inventory levels.



Sales Team’s point of view

Reduced manual effort in terms of collecting data from the distributor,

collating and processing it to extract meaningful info.

Real-time data helps keeping a detailed watch on the sales performance on

a daily facilitating action at the right time for maximum results.

MIS for improved conclusion making and performance appraisal.

Implementation Process

Initial

FINDINGS & DISCUSSIONS:


Site Readiness check

Installation of the software

Loading the masters – Item, Customer etc.

Initializing the system with opening inventory and other dealer specific details like User-defined codes, printing formats etc.

Providing sufficient training to the distributor to ensure usage of the system


Process Related Issues

Parallel Billing

There are two possible primary reasons for the distributors indulging in parallel

billing:

Lack of trust in ERP Software:

Unskilled personnel of Fauji Cereals who will do the installation at the distributor site and operate the software are found to be not properly equipped to handle the job at hand. These personnel should be trained properly in the ways of how they are supposed to interact with the distributors as well as well-versed with the software to be able to respond to their queries.

Possible SolutionThis problem is being taken care of and the condition is improving with better

response mechanisms put into place which will help develop the required

trust among the distributors.

Consolidated Financial Statements: The need for consolidated financial statements to be maintained under single software is one of the primary reasons. The rationale is that most of the distributors have more than one agency of different companies and invoicing the bills for different companies in different software makes it very difficult for them to obtain consolidated financial statements for purposes like tax filling, VAT return etc.

If the distributor makes sure that if he is doing parallel billing then he enters all the bills manually as well as in ERP software then as a company Fauji Cereal shouldn’t have any problem with that. A possible roadblock here would be that as the volume of the business grows, this method of operation shall become unsustainable and the whole purpose will get defeated.

Batch Numbers and Packaging Date (PKD) Not Being



The purchase invoice received from the CNF does not contain Batch no's and PKD and that’s the reason that none of the distributors are in a habit to record them when they receive stock from the CNF.

Possible SolutionOnce all distributors & CNF get integrated with the organization, computer

readable Batch numbers & PKD are required to be pasted on the products

when they are leaving manufacturing site to CNF. Radio-frequency

identification (RFID) or bar coded labels can be used for this purpose.

Installation/Training Issues

Inexperienced and Unskilled Personnel

Unskilled personnel of Fauji Cereals who will do the installation at the distributor site and operate the software are found to be not properly equipped to handle the job at hand. These personnel should be trained properly in the ways of how they are supposed to interact with the distributors as well as well-versed with the software to be able to respond to their queries.

No Representatives from Fauji Cereals to Oversee the Installation

Process

One major disconnect here is the fact that the ERP software installation personnel cannot be expected to understand the business process assuming that they are technical people who only understand the software part. Absence of any person from Fauji Cereals who understand the sales processes and the distributor requirements makes the whole process very slow when distributor raises issues on site and the ERP software person cannot answer them satisfactorily.

Learning is an Outgoing Process



We can’t expect the distributor to understand the whole software at the time of training. Once the basic understanding is there, the distributor will try to explore the software more and will definitely come up with queries regarding the technicalities of software. Right now the only way they can get information is by calling ERP software call centre representatives which causes inconvenience for the distributor hampering extensive use of the software.

Possible Solution A comprehensive Usage Manual for ERP Software should be documented and

provided to all the distributors using the system. We should ensure that the

manual should be easy to understand from a distributor’s point of view and the

language used in it should not be too technical.

Distributor Specific Concerns

Tech Savvy Distributors

The more tech-savvy a distributor is, the more he wants to explore the system. These are the kind of distributors who willingly accept a superior system and further explore it to provide valuable suggestions. Good thing about their raised issues is that they give pretty detailed suggestions on the software which can be incorporated into the system from a convenience point of view. In the long run, these suggestions shall help to refine the system for maximum performance.

But in the short run, such issues cannot be entertained since these are just too specific to be resolved right now when other bigger issues are still pending. This creates a problem since distributors start losing trust in the system and the processes driving the implementation of this project just because either they have not been properly attended to or their queries have not been satisfactorily answered.

Possible Solution



The solution lies in effective relationship management. We should be the first

ones to appreciate the effort spent by the distributor to understand the

system and to raise issues. After all he deserves it having spent so much

time on it and the only way to keep him engaged is to show that the inputs

by him are considered valuable and highly regarded.

Financially Constraints Distributors

One thing realized is the fact that not all distributors are capable enough to be able to invest extra time and money to be able to use the system. There might be some distributors who do a monthly business of around Rs 15-20 Lacs from Fauji Cereals and do not make enough money to justify the additional cost that the incur in getting financial statements audited from two different ways.

Also some of the low volume distributors take out only one bill for a particular retailer in a day to keep his printing costs low. This is how they have been running their business and it’s definitely not cost-effective for them to start using the new system.

Change Management

Gaining Trust of Partners

Supply chain automation is uniquely difficult because its complexity extends beyond your company's walls. People will need to change the way they work and so will the people from each distributor that company adds to its network. Most of the larger FMCG players have also faced issues trying to force such radical changes down distributors’ throats.

Possible Solution



Distributors have to be convinced that the system just does not sit to benefit the company, rather there’s something in it for the distributors as well. Increased ROI with reduced stock outs, and better managed inventory should be something that can be highlighted here.

Internal Resistance to Change

If selling supply chain systems is difficult on the outside, it isn't much easier inside. Sales people are accustomed to dealing with phone calls, faxes and hunches scrawled on paper, and will most likely want to keep it that way. If we our sales people can’t see the benefits that it has for them and using the software will be worth their time, they will easily find ways to work around it. Also they won’t have the conviction to convince the distributors to use the system.

SWOT ANALYSIS AS CONCLUSION OF THE REPORT:

STRENGTHS Fauji Cereals' experience with DBA Manufacturing software as an ERP

application for upstream supply chain from supplier to manufacturing

products is a great leverage point to understand distributor's preferences and

that knowledge should be used to improve the system.

DBA Manufacturing is a matured software with most of the features at par

with the other software which are available in the market.

User friendliness of the software will go a long way in driving the usage

among the distributors.

WEAKNESSES Dissatisfaction among the distributors while adopting ERP software should be

well & timely taken care of in order to win their trust.



Due to the money and effort required, it might not be possible to bring all the

distributors online easily especially the ones who do not do enough business

from Fauji Cereals to justify the costs.

OPPORTUNITIES Auto-replenishment of stock at the distributor end shall help manage the

inventory well.

Use of ERP software at downstream supply chain will give company accurate

information about the tertiary sales which can be used for market research

understanding consumer behavior

Sales forecast module can be used to make it a pull based selling rather than

the currently used push based

Ability to introduce dealer specific schemes can be a great feature to push

sales for specific products in selected areas as per the trend

Automatic data upload eliminates the need for manual data retrieval saving

time for other activities

Centralized upload of price lists leaves no room for manipulations at the

distributor end

Real time sales data facilitates intervention at the right time for declining

sales

THREATS Current trend of Parallel billing might not be sustainable in the future as the

volume grows

Lack of exposure to the ERP software among the distributors might require

addition efforts in the future to get the necessary support.



OTHER SIMILAR IMPLEMENTATIONS

Kohinoor Soap & Detergents (Pvt.) Ltd

Managing Change

The company went along the philosophy that possession brings out a way of

responsibility in a person. One of the initiatives for making a

way of possession among staff was the appointment of practical heads of assorted

departments, because the process-owners, of the combination. The difficulty of

managing the whole method was on these process-owners and to feature to the

seriousness of the effort was taken into thought for their performance appraisals.

Key Success Factors

The success of this initiative can even be attributed to the thorough designing that

backed the project at the time of implementation. The primary step was to involve

the channel partners from the beginning.

The channel partners and therefore the entire organization had active roles in

defining the functionality of the solution. Considerations raised by partners were

addressed and far of the functionality desired by them was included within the

solution.

Next was allocation of adequate resources for the project. The core team consisted

of line managers moreover as members of the systems team. They were free

of their regular roles to consider the deliverables of the project. To extend the main



target of the team on the task at hand, a separate workplace was created for

the length of the project separate from the head office.

Finally, an intensive analysis of all the danger factors was distributed as a part

of the planning method for the implementation. Clear mitigation plans were

developed and deployed for each of the danger factors.

RECOMMENDATIONS:

We need to make sure that distributors trust the system and the

processes behind it. One thing which is most important behind successful

implementation is the involvement of the channel partners and the

critical role of top management in ensuring that.

Another important thing is to take care of trying to be responsive to the

queries raised by the distributors in a prompt and satisfactory manner.

This is not to suggest that we fix all the issues as they come but probably

a convincing reply as to assure them that we understand the issue, and

will go a long way in maintaining a healthy relationship.

Just as distributors need to be convinced about using the system, the

same effort needs to be put into training the sales team as well. This is

very important since the translation of all these efforts into results will

only come if they use the system to its potential and are committed to it.

Financially constrained distributors (Ref. Distributor Specific Concerns)

will be given a differential treatment initially as it would not be possible

for them to be able to use the system from the start. The low volume

nature of the business does not justify the extra cost incurred to use the



system. Such distributors would not be part of the system right now but

would be brought online as and when their sales exceed a particular

threshold level.

Re-implementations are being done at all the distributor sites so that

everyone is on the latest version of the software and also includes

refresher training on it. From now on, the usage of the software shall be

strictly monitored and distributors would be required to maintain the daily

usage.

Regular audit of sale and channel partners should be done to identify

improvement like reduction in inventories, reduction in stock outs

increase in sales owing to availability, increase in coverage, expiry of

perishable items etc.

The first reaction of some of the distributors would be to continue with

the parallel billing. But once the distributors will have command on the

software in the specific time then the distributors are asked to

compulsorily use the system, they won’t have any choice but to use it.

REFERENCES

http://www.erp.asia/scm-implementation.asp

http://www.faujicereals.com.pk/

http://en.oboulo.com/

information+technology+as+an+enabler+of+sales+and+distribution

http://www.dbamanufacturing.com/contact/


http://www.dbamanufacturing.com/contact/

http://www.faujicereals.com.pk/

http://www.erp.asia/scm-implementation.asp


http://fmcg-marketing.blogspot.com/2007/12/maricos-distribution-network.html

http://howtogetfasteratrunning.com/botree-software-international-bags-order-

from-nestle-globe/

http://eng.hi138.com/?

i261762_Distributor_of_FMCG_industry_how_to_make_money

http://books.google.co.in/books?

id=orimz5E6IO4C&pg=PA88&lpg=PA88&dq=marico++MidAs&source=bl&ots=-

tl9DR4Ksa&sig=VexQsXyiHT0sChGAfHghxBm2-xM&hl=en&ei=9wPJTf3mIJS-

tgfjrayECA&sa=X&oi=book_result&ct=result&resnum=9&ved=0CFcQ6AEwCA#v

=onepage&q=marico&f=false

http://www.itcinfotech.com/CPG/mobility-application-service.aspx

http://www.slideshare.net/WayneGoodrich/how-automation-can-help-fmcg-sales-

managers

http://en.wikipedia.org/wiki/Fauji_Cereals_Company


http://en.wikipedia.org/wiki/Fauji

fauji cereals final report

Documents

consolidated financial statements

upstream supply chain

fauji cereals pakistan

fauji cereals

breakfast cereals

fauji foundation

provision chain

cook cereals