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 Reaching 13 Crore consumers

30 Depots, 1000 Distributor

20 lac Retail Outlets (Reach)

FINANCIALS

MARICOs SUPPLY CHAIN

Slow Moving SKUs/ low vol 6 RDCs

RDC

Raw Material Vendors

Primary Sales Plants Depots Direct Distributors

Secondary Sales Retailer

33 depots, 37 ASM Areas

Super Distributors

Stockists

Total, > 1100

SALES & DISTRIBUTION AT MARICO

Factory + Subcontractor

Depot

Distributor

Super Distributor

Stockist

Retailer

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%

MARICOS 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

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

MARICOS 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 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

MARICO-SUPPLY CHAIN TRANSACTIONS

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 distributorsdifferent bucketed time horizons

KEY ISSUE - SKEW IN SALES WITHIN MONTH

70 60

50

40

30

20

10

0 1st-10th 11th-20th 21st-31st

Sales Skew as 10 : 28 : 62 within the month

Maximum Sales towards end of month

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

SOLUTION IMPLEMENTED - TO TACKLE VISIBILITY

ERP
Minet

APO

BIW

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

How does Billing Happen?

Sales Order Distributor Marico

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 Adopted for Supply Chain Challenges

Fully integrated system consisting of

Big Bet- Big Bang Approach in 2000-2001.

All resources and management commitment to redesign the process.

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.

Implementation Deadlines- 9 months All started a few months apart.

Groundwork for major developments SAP R3- went live in April, 2001 SAP APO in May, 2001
Technology supported partnerships with major distributors Vendor Managed Inventory (VMI) Online exchange of distributor sales and other information.

Using mySAP SCM and SAP R/3 ERP modules in the first 2 years

Visibility and tools provide by SCM & ERP yielded:

 Reduced Sales Skew and balanced distribution levels Decreased SKU stock outs by 50% Reduced Excess Inventory at Distributors by 50% Reduced Maricos 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 Benefits

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

3.0

2.5

2.0

Before After

1.5

1.0 1 2 3 4 5 6 7 8 9 10 11 12

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

BLOCK SKEW- KEY BRAND IN % MONTH SALES

70 60 50 40 30 20 10 0 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 INVENTORY - KEY BRAND IN KL

4000 3500

3000

2500 Depot Distr Total

2000

1500

1000

500

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

Total Inventory is system is reduced by 1000 KL

BENEFITS - IMPROVEMENT IN METRICS

Metric Distributor stockouts Stockouts at Marico Inventory at Marico Forecast accuracy Freshness Index Skewness within month Service Levels

Before 30 15 29 76 98.20% 10:28:62 96%

After 15 5 22 84 99.68% 24:34:42 99%

Remark Avg. Distr Stk. Out in % Average Depot Stk. Out in % Avg. Inventory in No: of days at Marico Accuracy at Depot level % index Percentage sale per block of 10 days Supply vs Plan %

VMI BENEFITS REALISED

Distributors Service Levels
90.0%

85.0% 81.8% 80.0% 74.5% 75.2% 76.5% 75.1% 72.5% 72.0% 81.6% 80.6%

75.0%

70.0% R O L L O U T M O N T H
%

65.0%

61.3%

60.0%

55.0%

50.0%

45.0%

40.0% Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 Month May-06 Jun-06 Jul-06 Aug-06

HOW IT WAS DONE?

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

STAGE 2: DISTRIBUTOR PARTNERSHIPS AND VMI

o Resolve forecasting problems, eliminate major inventory and stock out problems o Larger distributors- provide timely sales and inventory information to MARICO o Access MARICOS systems for pending orders, stock-in-transit etc. o VMI- MARICO would replenish the stocks on the basis of distributors online input of stocks to the retailers.

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

THE IMPLEMENTATION

SYSTEM ANALYSIS
KPMG Consulting Cost-Benefit Analysis

KPMG- Cautious role out of ERP system

MARICO- Big Bang approach

SAP
SAP R/3 Integrated SystemsmySAP SCM & SAP APO
Demand Forecasting and Planning, Supply Network Planning (SNP), Deployment and Cockpit modules

mySAP Business Intelligence

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

Finance,

Cost Accounting,

Materials Management ,

Production Planning,

Best- Practice Models,

Quality Management ,

Administrative resources.

Sales & Distribution

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

Not used for Sourcing and Manufacturing

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

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 functionssales, 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
Appointed functional managers as PROCESS OWNERS for revision of their respective processes Work on this was made a KPI in their performance appraisals

Survey of employees about Credibility Risk the potential obstacles for Organization Risk success (pre-implementation Individual Risk & post-implementation)
Training to 60 power users and train-the-trainer approach

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 months data to asses the impact.

STRATEGY-DRIVEN METRICS

Pure Metric
Distributor stock-out percentage

Derived Metric
Estimated secondary loss of sales

Freshness Index
Information about old stocks in the supply chain

Supply Chain Costs

Costs of Maldistribution Truck Demurrage Interware house stock transfers Temporary renting of additional storage spaces.

Excess stocks

Estimated primary loss of sales

Forecasts accuracy

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
Using the Demand Planning Module- Consensus Process

Last week of the month- regional sales managers Aggregate data from six regions
Brand - level sales plan for the coming month Preliminary estimates of Primary and Secondary sales data- indicative sales plan for the coming period

Supply Chain Planning group converts Sales plan into a Demand plan using pack-mix heuristic available in SAP APO.

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)

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 method

Lessons the BULL-WHIP method caused by many layers of intermediaries between MARICO and the customers VMI- reduces one layer of distortion between MARICO and its majority of major distributors

VMI-THE PHILOSOPHY

Improve distributors performance and increase ROI

Higher sales for MARICOS products

Reduce Supply ChainDistortions

VMI FOUR IMPACT SET

Financial Impact

15% reduction in Distributor Inventory Days 7% increase in service levels Hence leading to higher ROIs
Transparency No Manual Intervention

How Norms are

calculated is shared with all

Access of blockwise

norms given to all distributors as well as everyone in Sales Force

Four Impact Area Set

Norms are generated

dynamically No Manual Intervention Any changes in final order is captured in VMI Score

Order Time Closure

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

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 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

MARICOS EXTENDED SUPPLY CHAIN SYSTEM

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

MARICO IT SYSTEM - OVERVIEW

R3

MIDAS

BIW

MI-Net

MIDAS

APO

SD MIDAS

USERS

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