By: Neha Sikarwar, Boby Sebestian, Rahul Bedi, Vipul Bajaj and Souvik Roy

OUTLINE
Introduction to Marico

Supply Chain and Nature of Challenges Faced

Initiative Implemented

Results and Sustenance

Future Ahead

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 21% in turnover, 30% in profits - over last 5 years Turnover of 2660 Crores (2009-10)
12 Brands, Turnover Rs 1550 Crores 100 SKUs, 1500 Suppliers 7 Factories, 15 Contract Manufacturers 30 Depots, 1000 Distributor 25 lac Retail Outlets (Reach) Reaching 13 Crore consumers

External Analysis of Marico

Porters Five forces: Threat of substitute products: In FMCG sector the products are highly substitutable. Threat of new entrants: The established companies have huge base of loyal customers which acts as an entry barrier for new entrants. Determinants of Suppliers power: The industry is mostly dependent on the local players for supplies of raw materials. Determinants of buyers power: Highly substitutable products and highly price sensitive market. Industry rivalry: Intense competition

Networking environment
Citrix Presentation Server running on one HP

ProLiant DL 360G4P server and one HCL Global Line server Citrix GoToAssist Microsoft Windows Server 2003 Connectivity through VSATs, VPNs, leased circuits and Internet VPNs HCL/Zenith desktops and Toshiba laptops.

MARICOs SUPPLY CHAIN

Slow Moving SKUs/ low vol RDC 6 RDCs

Raw Material Vendors

Primary Sales Plants Depots Direct Distributors

Secondary Sales Retailer

33 depots, 37 ASM Areas

Super Distributors

Stockists

Total, > 1100

MARICO-SUPPLY CHAIN TRANSACTIONS

MARICOS PROBLEMS
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 Maricos highly regarded distribution network and exposed shortcomings in its forecasting, planning, and supply chain processes.

MARICOS PROBLEMS(Contd..)
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 RATIO KEY BRAND - AN ILLUSTRATION

3.0 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 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

EXCEL

TRACS AOG CAFAS FAS-Ingress

PINS

MPS

Lack of Visibility of stocks on a frequent basis even at depot Departmental System for Transactions, No Integration

INTERNAL OPERATIONS VISIBILITY

Lack of visibility among transaction systems Stand alone applications systems Non-Integration: Departments working with conflicting numbers And coordination problems in supply chain planning and execution Rationalization and Consolidation of data for monthly financial statements Excel spreadsheet based application Only one planner qualified Data Gathering-Indicative Plan-Production Department-Final Production Plan took 30 days

MARKET PLACE VISIBILITY

Reliability on PRIMARY DATA- suboptimal visibility Nest best option- Distributors sales to Retailers MARICO operated with a PUSH METHOD Severe skewing of sales Synchronization between MARICO and distributors- different bucketed time horizons

DISTRIBUTION VISIBILITY
PC-supported legacy systems use of relational database libraries Struggling to meet increased logistics needs

Poor visibility into depot stocks-no prioritization rules in place in configuring for optimal truck loads Excess stock- hire temporary spaces and demurrage charges
Stock-outs Maldistribution of goods- higher delivery costs

THE VICIOUS CYCLE

The Approach
Fully integrated system consisting of
Enterprise Resource Planning (ERP) business application SAP R/3, a Supply Chain Management (SCM) suite. The Advanced Planning and Optimization (SAP APO)

component of my SAP Supply Chain Management (my SAP SCM) My SAP Business Intelligence Solution for Supply Chain Performance Management.

SOLUTION IMPLEMENTED - TO TACKLE VISIBILITY

ERP
Minet

APO

BIW

ERP, APO, BW MIDAS for Distributors Minet :- The face of all the above to users in the field Outcome - Stock visibility of depot and distributor real time

MARICOS EXTENDED SUPPLY CHAIN SYSTEM

SAP

SAP R/3 Integrated Systems-

mySAP SCM & SAP APO

Demand Forecasting and Planning, Supply Network Planning (SNP),

mySAP Business Intelligence

Supply Chain performance management activities, Data Warehousing functionality, Business Intelligence tools and Analytics,

Finance,

Cost Accounting,

Materials Management,

Deployment and Cockpit modules

Production Planning,

Best- Practice Models,

Quality Management,

Administrative resources.

Sales & Distribution

SAP(Contd..)
SAP R/3 integrated business systems, including finance,

cost accounting, materials management, production planning, quality management, and sales and distribution A key component of mySAP SCM, SAP APO, including its demand forecasting and planning, supply network planning (SNP), deployment, and supply chain cockpit modules mySAP Business Intelligence for supply chain performance management activities, a system that provides data warehousing functionality, business intelligence tools and analytics, best-practice models, and administrative resources

SAP APO
Not used for Sourcing and Manufacturing

few commodity raw materials no manufacturing capacity constraints no sales seasonality- no promotions and minimize artificially induced demand surges

Demand forecasting and Supply Chain Planning

Improve internal Collaborative forecasting between manufacturing sites and warehouses. Assigned and accountable ownership- distribution from warehouses to distributors met service levels

DEMAND PLANNING- SAP APO

Actual pack-mix sales of previous three months

Pack-mix allocation factors

Detailed demand plan at the SKU level

Production Capacity Vs Raw Material Availability and provide feedback (1st week)

Minor modifications using Primary and Secondary data for every region now available

Check Pack-Mix allocation to reflect the current market trends

Release final demand plan to the supply chain group at the Head Office

SUPPLY NETWORK PLANNING

SNP module in SAP APO

Reliable, Responsive Production and Distribution Planning Process

Depot and Plant Heuristics

Production and Dispatch related decisions for the planning period of a month

PLANT SNP in SAP APO

Run unconstrained Plant Heuristics using Indicative Demand Planning Data

Firm Demand in Place

Run Constrained Plant Heuristic in SNP

Firm Production Plan prepared for Factories and Contract Manufacturing Plants

Provide broad feasibility related feedback to the sales force

DEPOT SNP in SAP APO

Using a Truck Builder Module-coordinate multiple SKUs and depots

Shipments are sent in full truck-loads

Depot inventories simultaneously remain within the inventory norms

Plans in blocks of 10 days- tradeoff between Transportation Costs and Inventory Carrying costs

Provide broad feasibility related feedback to the sales force

DEPOT SNP in SAP APO

Built prioritization rules

Assign relative priority of depots and SKUs in the TRUCK BUILDER MODULE

Depot heuristics run thrice a month (primary sales data vary from forecast)

MARICO IT SYSTEM - OVERVIEW

R3

MIDAS

BIW

MI-Net

MIDAS

APO

SD MIDAS

USERS

MARICO IT SYSTEMS
Distribution Automation Software package- MIDAS (MARICO INDUSTRIES DISTRIBUTION AUTOMATION SOFTWARE)
Internet based system MI-NET in which distributors could log

in and supply data online Application which could automatically transfer data from distributors PC to MARICOs 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 datemySAP provides daily updates through Primary Potential Proactive work rather than Postmortem analysis

HOW MiNET WORKS?

MiNet is a portal that links 800 distributors and 110 super

distributors of Marico spread across the country to the company MiNet also enables the company to get daily updates at the stockist level At the backend, Marico has installed the SAP R3 transaction handling modules for sales, finance and materials management The company has also installed the Advance Planner & Optimizer (APO), a supply chain module, which works right from demand forecasting to materials management and production planning. Marico claims to be the first APO installation for SAP in India The company has in place a Business Information Warehouse (BIW) which is the repository of every bit of information relevant to the company. This backend is linked to the outside world comprising scores of business associates for Marico, through MiNet.

THE MIDAS TOUCH

The company has also put in place a software called the

Marico Industries Distributor Application Software (MIDAS) which is akin to an ERP (enterprise resource planning) software to capture secondary sales data MIDAS has been created by Marico in conjunction with Chennai-based firm Botree Every morning the distributor logs on to MiNet and uploads information from MIDAS and we pass on the information regarding invoices, running schemes etc to the distributor This means that the distributor can keep feeding his data on MIDAS and then dial in periodically and feed the information on MiNet. He doesnt have to be online all the time

VENDOR MANAGED INVENTORY (VMI)

Places order

EARLIER

Distributor Replenishment based on order

Marico

Replenishment based on norms Distributor Marico

NOW WITH VMI

MIDAS Mi-net APO SAP Orders are automatically generated

SALES BENEFITS OF VMI

MI-NET AND SAP R/3, Field Sales Personnel
Immediate access to MARICOS depot stock level Order status and distributor performance Time saved for collecting data for sales reports Focus on sales, brand development and distributor

relationships Bolster trust among sales personnel and win distributor trust Dumping has stopped

Using mySAP SCM and SAP R/3 ERP modules will:

Visibility and tools provide by SCM & ERP will:

Thank You