IT SYSTEMS OF MARICO

Ashish Bansal (ROLL NO.03)NMiMS University,Mumbai - India

STRUCTURE OF PRESENTATION

Introduction to Marico

Supply Chain and Nature of Challenges Faced

Initiative Implemented

Results and Sustenance

COPRA: A SPECIAL FOCUS

Other Challenges

ABOUT MARICO

• Found in 1991, Public Limited Company

• A leading Indian Group in Consumer Products and Services

• Renowned Brands like Parachute, Saffola,Kaya Skin Clinics

• CAGR of 13% in turnover, 15% in profits - over last 5 years

• Turnover of 1550 Crores (2006-07)

12 Brands, Turnover Rs 1150 Crores

100 SKUs, 1500 Suppliers

7 Factories, 15 Contract Manufacturers

30 Depots, 1000 Distributor

20 lac Retail Outlets (Reach)

Reaching 13 Crore consumers

FINANCIALS

MARICO’s SUPPLY CHAIN

RawMaterialVendors

DirectDistributors

Plants

RDC

Depots

SuperDistributors

Retailer

Stockists

33 depots,

37 ASM Areas

6 RDCs

Total,

> 1100

Slow Moving SKUs/ low vol

Secondary Sales

Primary Sales

Factory + Subcontractor

Distributor

Retailer

Depot

Super Distributor

Stockist

SALES & DISTRIBUTION AT MARICO

SUPPLY CHAIN

RETAIL FMCG MARKET IN INDIA

• Retail FMCG Market in India is estimated to be Rs. 460bn

• Challenges – local, unbranded players

• Fragmented nature of Retail trade

• Scattered mass population

• Multiple product choices

• Local Kirana - Still the ruler

– However increasing share of Modern Trade%

MARICO’S STRATEGY

• Understanding and anticipating consumer needs

• Developing product and packaging innovations to meet those needs

• Ensuring wide availability of its products on retail shelve

• Creating advertising campaigns to reinforce the value delivered

• Tracking metrics that support product positioning strategies

Nature of

Challenge faced

in

FMCG Supply Chain

MARICO’S PROBLEMS

• Aggressive strategy• More brands and more products incur costs: This entails more

sales and markets to track,• More forecasts to make, • More production to plan, • More SKUs to track, • More pallets and truckloads to configure and route. The

SKU/distribution point combinations run in millions.• The distribution network became more costly and complex,

exposing many process inefficiencies. • The resulting growth strained Marico’s highly regarded

distribution network and exposed shortcomings in its forecasting, planning, and supply chain processes.

MARICO’S PROBLEMS(CONT)

• Forecast accuracy was at 70%.

• Distributors were suffering stock-outs and loss of sales on 30% of Marico SKUs.

• Excess inventory

• The costs of errors in shipments to remote depots were mounting.

CHALLENGES- SUPPLY CHAIN

• Penetrate areas with less than 20, 000 population.

• No secondary sales data.

• Peak / Min Sales Ratio - across months

• Skew of Sales with in a month

• Data Visibility

• Order placement process

• Distribution network complexity

KEY ISSUE - PEAK / MIN SALES RATIOKEY BRAND - AN ILLUSTRATION

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

1 2 3 4 5 6 7 8 9 10 11 12

Month

Peak / Minimum Sales ratio Variation across the year

as high as 3:1 (Key Brand)

KEY ISSUE - DATA VISIBILITY

AOG

TRACS

FAS-Ingress

CAFAS

MPS

PINS

EXCEL

Lack of Visibility of stocks on a frequent basis even at depot

Departmental System for Transactions, No Integration

INTERNAL OPERATIONS VISIBILITY

MARICO-SUPPLY CHAIN TRANSACTIONS

MARKET PLACE VISIBILITY

KEY ISSUE - SKEW IN SALES WITHIN MONTH

Sales Skew as 10 : 28 : 62 within the month

Maximum Sales towards end of month

0

10

20

30

40

50

60

70

1st-10th 11th-20th 21st-31st

DISTRIBUTION VISIBILITY

SOLUTION IMPLEMENTED - TO TACKLE VISIBILITY

MIDAS

Minet

APO

BIW

ERP

ERP, APO, BW - April 2001

MIDAS for Distributors - Nov 2001

Minet :- The face of all the above to users in the field (April 2002)

Outcome - Stock visibility of depot and distributor real time

ORDER PLACEMENT PROCESS

Distributor Marico

Sales Order

How does Billing Happen?

Non Clarity/Non Uniform Norms

Very High Order Closure Time at Depot

No Scientific way of Defining Norms

Too much of manual interventions

Strong need to make it system generated and not person dependent

THE VICIOUS CYCLE

Solution AdoptedSolution Adopted

for for

Supply Chain Supply Chain ChallengesChallenges

• Reduced Sales Skew and balanced distribution levels

• Decreased SKU stock outs by 50%

• Reduced Excess Inventory at Distributors by 50%

• Reduced Marico’s Average Total Inventory by 25%

• Reduced Supply Chain exception-handling costs by more than 60%

• Increased funding for advertising, brand innovations and expansion

• Greater sales productivity

• Improved win-win situation with the distributors

• Continued double-digit growth in earnings and revenues

Impact and BenefitsImpact and Benefits

Peak / Minimum Trend : Before Vs Peak / Minimum Trend : Before Vs After (Key Brand) (Normalized Data)After (Key Brand) (Normalized Data)

1.0

1.5

2.0

2.5

3.0

1 2 3 4 5 6 7 8 9 10 11 12

Before

After

Peak to Minimum ration down from 3 to 1.3Average sales is same

BLOCK SKEW- KEY BRAND IN % MONTH BLOCK SKEW- KEY BRAND IN % MONTH SALESSALES

0

10

20

30

40

50

60

70

Apr01-Sep01 Oct01-May02 Apr02-Sep02 Oct02-Mar03

1-10th

11th-20th

21st-31st

Block wise Skew trend changes from 10:28:62 to 24: 34 : 43

DEPOT PLUS DISTRIBUTOR AVERAGE DEPOT PLUS DISTRIBUTOR AVERAGE INVENTORY - KEY BRAND IN KLINVENTORY - KEY BRAND IN KL

0

500

1000

1500

2000

2500

3000

3500

4000

Apr01-Sep01 Oct01-May02 Apr02-Sep02 Oct02-Mar03

DepotDistrTotal

Total Inventory is system is reduced by 1000 KL

BENEFITS - IMPROVEMENT IN METRICS

Metric Before After RemarkDistributor stockouts 30 15 Avg. Distr Stk. Out in %Stockouts at Marico 15 5 Average Depot Stk. Out in %Inventory at Marico 29 22 Avg. Inventory in No: of days at MaricoForecast accuracy 76 84 Accuracy at Depot level Freshness Index 98.20% 99.68% % index

Skewness within month 10:28:62 24:34:42 Percentage sale per block of 10 daysService Levels 96% 99% Supply vs Plan %

VMI BENEFITS REALISED …Distributors Service Levels

74.5%

61.3%

75.2% 75.1%

72.5% 72.0%

76.5%

81.8% 81.6%80.6%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06

Month

%

ROLLOUT

MONTH

HOW IT WAS DONE?

STAGE 1: SUPPLY CHAIN MANAGEMENTo Strengthen the internal Supply Chain Foundation- Planning to Fulfillmento Tech Support- highly integrated application systems (ERP)

STAGE 2: DISTRIBUTOR PARTNERSHIPS AND VMIo Resolve forecasting problems, eliminate major inventory and stock out problemso Larger distributors- provide timely sales and inventory information to MARICOo Access MARICO’S systems for pending orders, stock-in-transit etc.o VMI- MARICO would replenish the stocks on the basis of distributor’s online input of stocks to the retailers.

VENDOR MANAGED INVENTORY (VMI)VENDOR MANAGED INVENTORY (VMI)

Places order

Distributor Marico

Replenishment based on order

EARLIER

NOW WITH VMI

Distributor Marico

Replenishment based on norms

MIDAS Mi-net APO SAPOrders are automatically generated

THE IMPLEMENTATION

SYSTEM ANALYSIS

• KPMG Consulting Cost-Benefit Analysis

• KPMG- Cautious role out of ERP system

• MARICO- Big Bang approach

SAP

SAP APO

SAP

PROJECT PLANNING

• Big-Bet Big-Bang policy Work on a few large initiatives at a time Support fully with all the resources and organizational support Roll-out to all offices, plants and depots within 9 months

• High- Powered steering committee headed by the CFO------VINOD KAMAT

• 18-member team formed across all relevant functions—sales, manufacturing, finance & logistics.

• 12 consultants from Siemens Information Systems Limited (SISL) – support for SAP R/3 and SAP APO

• MARICO- first APO project in India-4 consultants from SAP India

IMPLEMENTATION METHODOLOGY

• Accelerated SAP (ASAP)

• Comprehensive package for supporting the planning and implementation of SAP solutions

• SISL & SAP teams met every Saturday to discuss and resolve issues

• Every month, the project team reported progress to the Steering Council- establishes specific milestones

IMPLEMENTATION METHODOLOGY

PROJECT EXECUTION

CHRONOLOGY

MODULE IMPLEMENTATION STARTED

WENT LIVE ON

SAP R/3 June,2000 April,2001

SNP of SAP APO August,2000 May,2001

SAP APO could not be launched in April because it needed at least one month’s data to asses the impact.

STRATEGY-DRIVEN METRICS

mySAP Business Intelligence System configured to provide information on a real time basis, necessary views to users to perform analysis needed.

THE VIRTUOUS CYCLE

• First year achievements Reduced planning cycle time Improved forecasting accuracy Improved delivery reliability

• Second year aided by VMI Ahead of Return on Investment expectations from 3-4 years to 2 years Reduction in working capital Reduction of sales lost because of bottlenecks and inaccurate

forecasting Reduction in losses from poor control and lack of data visibility

OPERATIONAL IMPROVEMENTS

DEMAND PLANNING

DEMAND PLANNING- SAP APO

SUPPLY NETWORK PLANNING

PLANT SNP in SAP APO

DEPOT SNP in SAP APO

DEPOT SNP in SAP APO

VMI IMPLEMENTATION

• Short-term reduction in sales- improved forecasting and planning reduced stocks at its distributors

• Loss in one quarter sales to correct dysfunctions• Reactive to Proactive

Monitor and manage distributor inventory by replenishing on the basis of secondary sales

• Push to Pull methodLessons the BULL-WHIP method caused by many layers of

intermediaries between MARICO and the customersVMI- reduces one layer of distortion between MARICO and its

majority of major distributors

VMI-THE PHILOSOPHY

VMI – FOUR IMPACT SET

No Manual Intervention

•Norms are generated dynamically •No Manual Intervention •Any changes in final order is captured in VMI Score

FourImpact Area Set

Transparency

•How Norms are calculated is shared with all

•Access of blockwise norms given to all distributors as well as everyone in Sales Force

Order Time Closure

•Only VMI Exceptions Discussed•Reduction by at least three hours everyday on Order Closure Time

•15% reduction in Distributor Inventory Days•7% increase in service levels•Hence leading to higher ROIs

Financial Impact

MARICO IT SYSTEMS

• Distribution Automation Software package- MIDAS (MARICO INDUSTRIES DISTRIBUTION AUTOMATION SOFTWARE) Received distributor stock and sales data in offline mode through

floppy transfers But for VMI- real time data needed • Internet based system MI-NET in which distributors could log in

and supply data online• Application which could automatically transfer data from

distributor’s PC to MARICO’s central servers

MARICO IT SYSTEMS

• MI-NET directly linked to SAP R/3 Stock in Transit Depot Stocks Pending Orders Statement of Accounts Promotion Schemes to distributors

MARICO IT SYSTEMS

• Potential Primary developed using mySAP Business Intelligence

Average sale of the previous three months Develops and reports brands and regional sales potential that

should be targeted by the sales group Cumulative actual sales to date—mySAP provides daily updates

through Primary Potential Proactive work rather than Postmortem analysis

MARICO’S EXTENDED SUPPLY CHAIN SYSTEM

SALES BENEFITS OF VMI

• MI-NET AND SAP R/3, Field Sales PersonnelImmediate access to MARICO’S depot stock levelOrder status and distributor performanceTime saved for collecting data for sales reportsFocus on sales, brand development and distributor

relationshipsBolster trust among sales personnel and win distributor

trustDumping has stopped

MARICO IT SYSTEM - OVERVIEW

R3

APO

BIW

MIDAS

MIDAS

SDMIDAS

USERS

MI-Net

SOURCING SPENDS AT MARICO

ENTERPRISE WIDE BUY-IN OF NEW PROCESSES AND SYSTEMS

NATURE OF CHALLENGE -COPRA

NATURE OF CHALLENGE -COPRA

NATURE OF CHALLENGE

NATURE OF CHALLENGE-COPRA

INITIATIVE IMPLEMENTED- COPRA

PHYSICAL BUYING PROCESS CHANGE (PHASE -1)

SUPPLIER I.T PENETRATION (PHASE-2)

E-BUYING : COPRA PORTAL e-marico.com (PHASE -3)

COPRA PORTAL: e-marico.com SNAP SHOT SUPPLIER VIEW

COPRA PORTAL: e-marico.com SNAP SHOT BUYER VIEW

E-BUYING COPRA PORTAL “e-marico.com” (PHASE -3)

E-BUYING: VENDOR FEEDBACK

BENEFITS: COPRA E-BUYING

Thank You