DISSERTATION REPORT

ON
SUPPLY CHAIN
MANAGEMENT
AND
DISTRIBUTION SYSTEM
OF ASIAN PAINTS

Acknowledgement
I consider my proud privilege to express deep sense of gratitude
her

admirable

and

valuable

guidance,

keen

interest,

encouragement and constructive suggestions during the course

of the project.
I would also like to express my hearty gratitude to
my faculty guides, for her valuable guidance.

COMPANY PROFILE

BACKGROUND
Champaklal H Choksey, Chimanlal Choksi, SC Dani and A
Vakil set up APIL, in 1942 as a partnership firm .In 1945, it was
converted into a private limited company, under the name of
Asian Oil and Paint Co Pvt. Ltd. In 1965, the name was change
to Asian Paints (India) Pvt. Ltd. In 1973, it was converted into a
public limited company.
APILs first plant came up in Bhandup in 1957 .It has three other
plants located at Ankeleshwar (1981), Patancheru (1985) and
Kasna (1990) .All the plants have captive resin manufacturing
faculties and are capable of producing the entire range of paints.
APIL also manufactures a key raw material Phthalic Anhydride,
at its Ankleshwar plant, 30 % of which is costively consumed.
Earlier APIL used to also manufacture another raw material,

vinyl pyridine latex, which was later hived off onto a separate
company, under the name of Apcotex Lattices Ltd.
Capacity expansions have come in a phased manner.
Productivity at the Bhandup plant has been lackluster. Through a
AVS scheme introduced in 1993, APIL was able to cut back
workforce. Investment in information technology, especially in
the areas of production and distribution logistics has helped
APIL improve its operating efficiency .In FY96 APILs ailing
subsidiary Pentasia Chemicals Ltd. was merged with APIL.

Locations
APIL has 4paints manufacturing plants .The oldest plant is at
Bhandup in Mumabi .The other plants are at Ankleshwar in
Gujarat , Patancheru in Andhra Pradesh and Kasna in Uttar
Pradesh .The Phthalic anhydride plant is located at Ankleshwar

in Gujarat. Penta plant (result of PCL merger) is located at

Cuddalore in Tamil Nadu .The installed Capacity of each
manufacturing facilities are:

Manufacturing

Installed

facilities

(TAP)

Bhandaup, Mumbai

20,000

Ankleshwar

50,000

Patancheru

capacity

Andhra 50,000

Pradesh
Kasna ,Uttar Pradesh

42,700

Total

162,700

APIL ,Indias largest Paints Company , is the market leader in

decorative paints .It has remained focused on core business and
has consistently improved operating efficiencies .The company

has registered a net profile of Rs 1064mn in Fy 01 as compared

to Rs 973 mn in the previous year.
Paints sector can be segmented application wise , as decorative
paints and industrial paints . While both are characterized by
low capital costs and high working capital intensive, ht latter
requires special technology. Capacities are normally set up close
to markets, so as to be able to offer multitude of shades and
colors to customers. Brand building and dealer network act as
effective entry barriers. Demand is seasonal in nature low
during monsoon, high during festivals.

Domestic paints sector, dominated by decorative paints (70%) is

expected to undergo a structural shift towards industrial paints ,
as cross border tie-ups in industrial paints are becoming order
of the day. Most organized sector players are established with

well-entrenched distribution network and established brands.

Threat of global competition in is minimal. The underdeveloped
industrial paints market hold maximum growth potential, albeit
competition, product innovations and a fight for superior
distribution network.
Focussed on decorative paints segment, APIL is set gain the
maximum amongst the peer members from the uptrend in the
housing sector .The company is restructuring its operations into
three

SBUs and has set target to be amongst the top ten

decorative manufactures in the world by 2003. APIL is investing

heavily in dealer tinting machine Colour World and IT
technologies to keep ahead of competition .APIL has set target
of Gross sales of Rs21bn by 2003and earning growth of above
20% . It also has set a vision to be among the top five paint
companies worldwide by 2005.On export front , the company is

looking out for alliances/ takeover in the emerging markets of

Asia.

ASIAN PAINTS OVERVIEW

Asian Paints Limited (APL) is the market leader in the Indian
paint industry, commanding a market share of 38 per cent in
decorative paints and 33 per cent overall in the organised sector.
Its annual sales turnover exceeds Rs. 1,300 crore, way ahead of
all the competitors in the industry. In profits too, Asian Paints is
far ahead. Asian paints market leadership in the decorative
paints segments can be grasped correctly when we take note of
the relative position of the various players in the industry.
Whereas Asian Paints has a market share of 38 per cent, its
nearest rival, Goodlass Nerolac, commands a share of just 14 per
cent. All others have only less than 10 per cent. Such an
achievement by a company that is wholly Indian in capital,
management and technology and in an industry historically
dominated by multinationals is certainly a commendable feat

Asian Paints Limited was established in 1942 as a partnership

firm by four friends Champaklal H. Choksey, Chimanlal N.
Choksi, Suryakant C. Dani and Arvind R.Vakil to manufacture
paints in a garage in Mumbai (Bombay). From its humble
beginnings, the company has moved on to become the largest
paints company in India with a market share of 30 percent. The
company with a turnover of US$ 535 million on standalone
basis and US$ 640 million on consolidated basis (including
turnover of all its subsidiaries) is one of the top ten decorative
paints companies in the world. Its reach and dominance in the
Indian market can be gauged from the fact that it is more than
twice the size of its neares competitor in India and it has been
the market leader in paints industry in India since 1968.The
company operates in 22 countries and has 29 paint
manufacturing plants in the world which service consumers in
over 65 countries. The company operates around the world on

its own and also through its three subsidiaries Berger

International Limited,Apco Coatings and SCIB Chemicals.The
company aims to become one of the top five decorative paint
companies in the world and has embarked on an aggressive
strategy of expanding its global operations. The promoters hold
the majority stake in the company (46.8 per cent of the equity
stake).The next largest shareholders are the foreign institutional
investors (19.5 per cent stake), followed by Indian public (16.5
per cent stake). Domestic banks, financial Institutions, mutual
funds and insurance companies hold 13.4 per cent stake.
Corporate bodies and non-resident Indians hold the remaining
stake.

The Indian Paint industry, estimated to be a Rs.21,000 Cr.

industry, has been growing at a rate of above 15% for the past
few years. The organized players of the industry cater to about
65% of the overall demand, whereas the unorganized players
take care of the remaining 35%, in value terms. The unorganised
players mainly dominate the distemper segment.
The industry consists of two segments, namely
Decorative segment caters to the housing sector and

 Industrial segment - consists of powder coatings, floor

coatings and other protective coatings catering to the
automobile, marine and other industries.
In the domestic market, Decorative segment accounts for 70% of
the total demand for paints whereas the industrial segment
accounts for the remaining 30%. Globally, the demand for paints
is almost equally distributed, where both the segments account
for close to 50% of demand.

INDIAN PAINT
INDUSTRY

DECORATIVE
SEGMENT (70%)

INDUSTRIAL
SEGMENT (30%)

PREMIUM
RANGE (HIGH
END
ACRELYC
EMULSION)

MEDIUM
RANGE
(ENAMEL
PAINTS)

METROS
AND LARGE
CITIES

SMALL CITIES

DISTEMPER
RANGE
(LOW END
PAINTS)

AUTOMOTIV
E SECTOR
(2/3 rd
SHARE)

CONSUMER
DURABLES,
MARINE
PAINTS,
OTHER OEMs

SUB URBAN
AND RURAL
AREAS

So, how does the industry work? Here is the analysis.

The working of the Paint industry has been explained pictorially
below:

Raw Materials: On an average, raw materials constitute ~56%

of the total expenditure in paint companies. Titanium dioxide is
one of the major raw materials and price fluctuations in its cost
have direct and substantial impact on the cost of production.
Crude oil derivatives are the other major raw materials and have
similar impact. Apart from these a large number of other raw
materials are used for adding/giving specific properties to the
wide product range offered by the industry.
End-User: The decorative paints segment products find use in
households and construction whereas the industrial segment
products find use in automotive industry, consumer durables

industry and other

MANUFACTURER).

OEMs

(ORIGINAL

EQUIPMENT

Asian Paints is the market leader in the Indian Paint Industry

and gets the major portion of its revenue from the Decorative
segment. Over the years, it has outperformed its peers in every
aspect by wide margins. This is mainly due to its strong moat
(competitive advantage) which lies in its strong Brand Equity
and an extensive Distribution Network. The companys Net
sales, Net Profit and Book Value have grown with a 5 year
CAGR of 22%, 27% and 28% respectively. Also the companys
debt is very low and its ROIC has been 40% on an average over
the last six years.
Kansai Nerolac holds the second position in the Indian Paint
market, and is the market leader in the Industrial Paint Segment,
owing to its leadership position in the Automobile Paint
segment. It is the subsidiary of Kansai Paints Ltd., the leading
Japanese paint company. Berger paints has the third position and
derives its major revenue from the Decorative segment. Akzo
Nobel (former ICI Paints) is the subsidiary of the worlds largest
Paint Company and is at the fourth position. Shalimar Paints is
at the fifth position.

Main Concerns Of The Paint Industry

Cost of raw materials: The Cost of Raw materials is an

important factor as the industry is raw material intensive.

Fluctuation in the prices of Titanium dioxide and Petroleum
directly affect the production cost. This is more of a concern for
the Industrial segment as compared to the Decorative Segment,
as it is comparatively easier to pass on the costs in case of
decorative paints. Also, a large portion of raw materials are
imported, leaving the cost factor vulnerable to exchange rate
fluctuation.

MNCs entering the Indian Paint Market: The entry of

Established foreign players in the Indian market may increase

the competition among the players of the industry. This may lead
to price competition which may impact the profit margin of the
companies. As a result, the increase in volume growth may not
equally reflect in the profit growth for the companies.

Top Paint Brands In India

Goodlass Nerolac : - This companys paint decors every third
car in the country. It is the market leader in the industrial paint
segment supplying over 90% of the requirements and has
planned to increase its presence in the decorative segment
through aggressive new product development and brand
building. They are the second largest company in India in the
decorative segment with a market share of around 20%. They
are the leaders in powder coatings. Goodlass Nerolac Paints Ltd
is a subsidiary of Kansai Paint Company Limited, which is the
largest paint manufacturing company in Japan and among the
top ten coating companies of the world, with a human asset of
over 1900 professionals and a sales turnover of Rs. 925 crores.
This company started in 1920 as Gahagan Paints and Varnish
Co. Ltd. at Lower Parel in Bombay. In 1930, three British
companies merged to formulate Lead Industries Group Ltd. In
1933, Lead Industries Group Ltd. acquired entire share capital of
Gahagan Paints in 1933 and thus, Goodlass Wall (India) Ltd.
was born. Subsequently, by 1946, Goodlass Wall (India) Ltd.
was known as Goodlass Wall Pvt. Ltd. In 1957, Goodlass Wall

Pvt. Ltd. grew popular as Goodlass Nerolac Paints (Pvt.) Ltd.

Also, it went public in the same year and established itself as
Goodlass Nerolac Paints Ltd. In 1976, Goodlass Nerolac Paints
Ltd. became a part of the Tata Forbes Group on acquisition of a
part of the foreign shareholdings by Forbes Gokak. In 1983,
Goodlass Nerolac Paints Ltd. strengthened itself by entering in
technical collaboration agreements with Kansai Paints Co. Ltd.,
Japan and Nihon Tokushu Toryo Co. Ltd., Japan. In 1986,
Goodlass Nerolac Paints Ltd. turned into a joint venture of the
Tata Forbes and the Kansai Paints with the latter acquiring 36%
of its share capital. In 1999, Kansai Paints Company Ltd., Japan
took over the entire stake of Tata Forbes group. During this
journey, Nerolac has entered into technical collaborations with
other industry leaders such as E.I. Du-Pont de Nemours &
Company Inc., USA and Oshima Kogya Company Ltd., Japan
for different products.
Berger Paints:- This company started in 1947 as British Paints
when it acquired Hadfield's (India) Limited, a paint company
that produced 150 tonnes of ready mixed stiff paints, varnishes
and distempers.Sales offices were opened in Delhi and Mumbai

and in 1951 a depot was started in Guwahati. Sales rose to Rs.60

lakhs in 1952. The Company declared its first dividend and
shifted the H.O. to 32, Chowringhee Road, Calcutta. By 1959,
modernization of the Howrah Factory was completed and the
first Resin Plant commissioned. With that, the Company entered
the Synthetics Paints market. By 1965 British Paints (Holdings)
Limited, UK was acquired by Celanese Corporation, U. S.A. As
a result, the controlling interest of British Paints (India) Limited
passed on to Cel. Euro N.V., Holland. In 1969 Celanese
Corporation sold their interest in the Indian Company to Berger
Jenson Nicholson Limited, UK. In 1975, the foreign holding of
the Company was reduced from 60% to 45% through a Public
issue. A year later the foreign holding was diluted to below 40%
by sale of a portion of the shares to the UB Group.
In 1983, the name of the Company was changed to Berger Paints
India Limited (BPIL) and by this time the Berger's operations
were divisionalized into the Retail Business Line (RBL) and the
Industrial Business Line (IBL) in order to better cater to the
needs of the customers. During this period many new products
were launched like "Luxol Silk" the first premium emulsion in

India, Viton Refinish for cars, Bison Acrylic Distemper and

Rangoli Acrylic Emulsion.
In 1990s, Berger Pro Links, a service aimed at providing paint
and application related information to professionals, was
introduced marking one of the first steps into painting related
services. In 1991, the stake of the UB Group in the Company
was purchased, by Mr. K S Dhingra,

Mr. G S Dhingra and

their associates. The sales of the company touched 276 crores by

1995-96. The latter half of the nineties saw Berger attain the ISO
- 9000 certification (1996) and establishment of Berger's Quality
Management System. Color Bank tinting system was also
launched through which the consumer can select from a range of
over 5000 colors and which are then made available in minutes.
As part of its expansion program, a new paint-manufacturing
unit at Pondicherry was commissioned in early 1997. Berger
Paints Home Decor a complete painting solution service was
launched making painting a hassle free activity for consumers.
An illusion multichrome finishes was also introduced as
"designer finishes for walls" allowing consumers to transform

their walls into fashion statements. This is a first for the Indian
paint industry.
ICI:- ICI India was the subsidiary of the $15 billion British
multinational company ICI Plc. Brunner Mond & Co., one of the
four Companies that combined to form ICI in UK in 1926,
opened a trading office to sell alkalis and dyes in Calcutta. In
1923, Brunner Mond & Co. (India) was incorporated and the
company's name was subsequently changed to Imperial
Chemical Industries (India) Ltd., in 1929. During its 70 years in
India, ICI had created six subsidiary companies in businesses
such as research, chlorine, caustic soda, paints, rubber
chemicals, explosives, polyester fiber, urea, agro-chemicals,
seeds, pharmaceuticals, specialty chemicals, polyurethane,
nitrocellulose, and surfactants. In 1984, all ICI companies
consolidated in one of the largest mergers in Indian corporate
history. By 1997, as a part of a restructuring exercise ICI had
exited or was planning to exit from several non-core businesses.
The 1996 sales break up was as follows: Paints 43%, Explosives
28%, Rubber chemicals 17%, Pharmaceuticals 8%, and Other
Products 4%. ICI (India) ranked No. 4 in the paint business,

after Asian Paints, Goodlass Nerolac Paints and Berger Paints.

Unlike the other paint companies ICI (India) was a diversified
unit and paint constituted 43% of its net sales. ICI (India)s
turnover in 1996-97 was $180 million and paint amounted to
$77.4 million. ICI identified paints as a thrust area and was
aggressively moving to improve their position. They invested
$11 million in a new decorative paints plant near Bombay and
were constructing a $16.7 million plant for industrial paints near
Chandigarh in North India. ICI (India) intends to go on an
offensive with a target of achieving ten-fold growth in 10 years.
The 10X Plan, as it was called, envisaged a strategy based on
acquisitions, take-over and alliances.

THE INDIAN PAINT INDUSTRY

The paint industry of India is 100 years old. Its beginning can
be traced to the setting up of a factory by Shalimar Paints in
Kolkata in 1902. Till the advent of World War II, the industry
consisted of just a few foreign companies, and some small,

indigenous producers. The war led to a temporary stoppage of

imports leading to many more local entrepreneurs setting up
manufacturing facilities.
Nevertheless, foreign companies
continued to dominate the industry. Even now, they remain
active contestants, though their foreign shareholdings stand
reduced, with two of them having become totally Indian.
Currently, the industry has a sales turnover of about Rs.3, 600
crore. In terms of volume, it corresponds to 5 lakh tonnes. The
industry is composed of two sectors, the organised and the
unroganised. The organised sector controls 70 per cent of the
total market. The remaining 30 per cent is in the hands of the
unorganised sector, consisting of 2000 odd small-scale units.
The industry is not capital intensive. It is however working
capital intensive. The demand for paints is fairly price-elastic
and is linked to economic and industrial growth. Demand is
somewhat seasonal in nature-low during monsoon months, high
during festival seasons.
Drivers to the growth of the Paint Industry
1. Increasing level of income and education The increasing
proportion of young population along with increasing disposable
incomes is leading to a change in consumer habits. The Indian
economy is shifting from a savings economy to a spending
economy. With more income at their disposal, people are now
ready to pay for better products and paint is no exception.

Educated consumers are more brand conscious and seek value in

what they consume. Thus, paint companies offering value-added
features like non-toxicity, weather protection, texture, ecofriendly production, etc. will attract more demand. These valueadded products enable the manufacturers to earn a better
premium as compared to the regular paints, thus offering higher
margins.
2. Increasing Urbanization: Urbanization is leading to a shift
from temporary houses to permanent houses. Urban houses are
well-designed in its interior as well as exterior aspect. This calls
for more houses being painted using medium and premium
paints. For urban houses, interior design is becoming a fashion
statement and a lot of paint is used to decorate the interiors. This
will lead to an increase in the per capita consumption of paint
which will increase the overall demand of paint. Urbanization
also brings more nuclear families. More nuclear families mean
more number of houses even for the existing population thus
further driving the demand.
3. Increasing share of organized sector: Decrease in taxes on key
raw materials will improve the position of the organized players.

The Organized sector is expanding its distribution network and

adopting the installation of tinting machines at retail outlets.
These tinting machines offer a wide variety of colour shade
options to choose from. The unorganized players are not in a
position to offer such facility as it is comparatively capital
intensive. Shift in use, from distemper segment towards premier
segment is also shifting market share from the unorganized
sector to the organized sector.
4. Development of the Realty, Automobile and Infrastructure
sector: The growth of the paint industry is largely dependent on
the development of the realty and housing sector, as decorative
segment generates about 70% of the total paint demand from
this sector. The Automobile segment generates more than twothird of the demand for Industrial paints, and hence is the growth
driver for Industrial Paints. The Infrastructure segment creates
direct demand for paints as well as creates indirect demand
through supporting the growth of the realty, automobile, FMCG
and other industries where paint is used.

The growth potential in the above 3 sectors is immense, the

paint industry being dependent on these 3 sectors is expected to
grow along with them.
5. Availability of financing options: Easier housing finance and
auto finance is expected to favour more people to buy houses
and travel in personal vehicles. This will drive the growth of
housing and automobile sector, of which the Paint industry will
get its share.

6. Increasing Penetration in the Rural Markets: Paint usage in

rural areas is generally in the distemper segment, hence
dominated by the unorganized players. Demand in rural areas is
dependent on agriculture, which is dependent on the monsoons.
With the development of irrigation facility, the dependence of

agricultural output on monsoons will be on a decreasing trend.

Also, with the modernization of agriculture and accompanying
development of rural India, consumer preferences are expected
to improve. Paint companies are expanding their distribution
network in rural parts of India, which is a relatively untapped
market for the organized players. These factors supported by the
increasing penetration of the paint companies will help drive the
demand for paints.

Distribution Strategy
AP bypassed the bulk buyer segment and went to individual
consumers of paints.
AP went slow on urban areas and concentrated on semiurban and rural areas.
AP went retail.
AP went in for an open-door dealer policy.
AP voted for nationwide marketing / distribution

Market Share of Decorative Paints

Asian Paints (India) Ltd.

Goodlass Nerolac Paints Ltd.

Berger Paints (India) Ltd.

25%
38%
6%
8%
9%
ICI India (Ltd.)

14%

Shalimar Paints Ltd.

Others

COMPETETIVE ADVANTAGE PROFILE :

Marketing Factors
Market leader -38% share in organized sector.
Asian Paints is more than twice the size of its nearest
competitor.
>50 yrs -leader
Widest product range -product shades, wide colours ,pack
sizes
40 different decorative paints -1000 shades, 8 different
sizes in packing, no. of brands -all segments
Brands -quite powerful
high quality MR & MIS , 90% accuracy in forecasting, 100
fastest moving Stock Keeping Units, monitored daily
Countrywide
countries) .

distribution

(29

plants

in

22

 Physical distribution far superior to

competitors
strong in inventory control (18 processing centres, 350 raw
material and intermediate goods suppliers, 140 packing
material vendors, 6 regional distribution centres, 72 depots
are integrated)
Manufacturing/Operations factors :
Size advantage in relation to competitors.
Finesse in production planning ,scheduling ,matching with
marketing requirements
In-house production outsourcing
suppliers superior quality assurance.

high

reliability

Four production location spread benefits.

Human Resources :
Asian Paints believes that people are its strongest assets
HIGH calibre

 A talent pool of over 4700 employees employed across 23

countries bring in a unique blend of mindsets and skills
Excellent training is provided to develop leaders and restrengthen competencies from within the organisation
Information Technology :
Asian Paints is the only company in India to have
integrated Supply Chain Management (SCM) Solution
from i2 Technologies, and Enterprise Resource Planning
(ERP) solution from SAP.
Customer Relations Management (CRM) tools are being
used in Asian Paints Helpline and Home Solutions
initiatives
Improve efficiency in the business as well as increase the
transparency and accuracy of information across the
country.
Research & Development

At Asian Paints, R&D plays an important role in

developing new products and innovations, and reducing
costs by value re-engineering of formulations.
It consists of 140 strong R&D team consisting of 7
doctorates and around 115 qualified scientists, has always

backed the company's business plan and demands of the

market place.
Asian Paints' R&D team has successfully managed to
develop High-end exterior finished and wood finishes inhouse.
ENVIRONMENT AND SAETY :
Asian Paints approaches the environment issue from the
perspective of waste minimisation and conservation of
resources.
It attempt is to reuse, recycle and eliminate waste, which
results in less and less waste being generated. Accordingly,
the material losses in manufacturing have been reduced
substantially over the last few years.

It has ISO 14001 certification for environment

management standards.

It has achieved 'zero industrial discharge' capability. This

has been achieved by the installation of upgraded effluent
treatment facilities and installation of reverse osmosis
plants in conjunction with appropriate recycling and reuse
schemes. Our emulsion manufacturing facility has also
achieved 'zero waste' status. It has adopted the principles of
"green productivity".

 Some of its innovative schemes which enhance green

productivity are dealer tinting systems which has resulted
in large batch sizes ; bulk storage facility for monomers
which reduces wastage; Use of natural gas which is a
cleaner fuel ; solvent recovery plants have been set up
which has resulted in zero reduction of solvent disposal ;
Improved incinerating systems and reverse osmosis.
The "Sword of Honour", instituted by the BSC, is
recognized the world over as the pinnacle of achievement
in safety management systems.

QUALITY POLICY:
We shall provide products and services that meet stated
standards on time, every time.
We accept Zero Defect as a quality absolute, and shall
design and operate our quality system accordingly.
We will organise our work practices to do a job right the
first time, every time.
We are committed to continuous improvement in quality in
all business processes and shall track such improvement
through measurable indicators.
Product Distribution & Implementation Strategy

A company formulates and implements a product distribution

strategy to make more money and ensure that clients have timely
access to goods. The business also draws up the outline to quell
or limit rivals' commercial aspirations. A product distribution
plan is integral to the marketing strategy an organization sets to
manufacture top-quality items that clients relish and can afford.

A product strategy deals with the thinking process

corporate management goes through to foster innovation in
departments as varied as research and development (R&D),
sales, marketing and logistics. In the blueprint, top leadership
analyzes market trends and customer needs, defines prototypes
that R&D engineers must work on, discusses positioning issues
with marketing personnel and asks shipping and logistics
professionals to weigh in on item marketability and shipping
convenience. Product positioning touches on the way a business
wants the public to perceive its items and services, along with
the tools the corporation relies on to implement that vision.
Distribution Policy

Distribution policies cover various conduits and tools an

organization uses to convey its products from corporate
warehouses to retail centers and wholesale platforms. These
include neighborhood plazas, shopping malls and department
stores. These policies touch on how a business limits money it
pays in product distribution, how it selects the best and quickest

intermediaries, whether it uses exclusive or non-selective

distribution models, and how it prevents goods decay and
equipment obsolescence throughout the distribution spectrum.
The whole idea is not to give competitors a free pass and let
them get a leg up against the business in terms of logistical
superiority and quickness in goods distribution.

To implement product strategies and distribution tactics,

corporate personnel heed such factors as nature of goods, client
preferences, geography and regulatory compliance -- all of
which figure in the policy book of supply chain management
(SCM) specialists. These professionals help a company facilitate
the shipping and maintenance of materials to distribution centers
or other temporary -- or permanent -- storage facilities. The
nature of goods involved in SCM processes is essential. For
example, perishable goods mandate that a logistics company
deliver them as early as possible or set proper conservation
procedures to prevent outright decay or gradual putrefaction.
Geography -- in other words, distance -- may bring more
shipping costs into the distribution equation. Regulatory
compliance often is cardinal in distribution strategy
implementation, because a shipping business may need to adopt
specific procedures to conform to government directives. For
example, the transportation of hazardous materials calls for

compliance with U.S. Occupational Safety and Health

Administration edicts.
Connection

Discussions about product strategy, distribution tactics and

implementation considerations generally fall under the broader
topics of corporate strategy and marketing management.
Although they're distinct terms, top leadership heeds these
concepts when formulating plans for sales growth, corporate
branding and future profitability.

Product Distribution Strategy

When selling products is your business' main purpose, the first

thing you must do is create a demand for those products. The
second is getting those products into consumers' hands. It's
imperative to know how you will satisfy the demand for your
product once you have created desire in the hearts of your
consumers. Planning your product distribution strategy should
be considered during the product development stage.

The Importance of Product Distribution Strategy

A thorough product distribution strategy attempts to define the

cost-variables involved in getting your products from creation to
consumption. The method of distribution will impact the actual
retail price of the product, the profit margin, the marketing
budget and the way the product is marketed. Lars Perner, Ph.D.,
assistant professor of clinical marketing at the University of
California teaches that cost is the leading factor in determining
distribution. He says, "Cost has to be traded off against speed of
delivery and intensity."

Exclusive Distribution Strategy

Exclusivity is a strategy often used to establish a particular

image of a product or brand. Using a limited number of
distribution channel partners helps to create an image of
exclusivity. It's also a measure of quality control by using only
distributors who specialize within that industry. Distribution
channel partnerships requires both the manufacturer and the

distribution partners to take a larger stake in one another's

survival.

Creating a Product Distribution Strategy

Keep an open mind on new possibilities in distribution and

changes that may impact current distribution structures.
Consider parallel distribution opportunities and joint promotion
partnerships. Get the opinions of distribution partners. Set up
market research opportunities to find out how the customer
prefers to receive the product. Examine competitors' strategies
and compare them to your own. Adopt the ones that work and
discard or improve the ones that don't.

Supply Chain Management (SCM)

Supply Chain Management (SCM) is the management of

the inter-connectivity between suppliers, manufacturing and
corporate customers. It addresses the movement of all raw
inventory, production in progress inventory and the end product
from origin to consumption. According to management
consulting firm R. Michael Donovan & Co., supply chain
management "sees all suppliers and customers as part of one
complex supply chain network and understands that
transforming that supply chain into a synchronized chain is the
primary goal."

Lean Supply Chain Management (LSCM)

Lean Supply Change Management (LSCM) is Supply

Change Managment coupled with continuous and ongoing
process improvement methodology to ensure supply chain
management systems always runs at peak efficiency. LSCM
touches all aspects of a corporate supply chain from
procurement, manufacturing, warehousing and transportation.

Asian Paints Distribution Strategies

Asian Paints is a leading company in the paint industry in India.
While it has grown from a relatively small, decorative paint
company to a large business that has a vast consumer customer
base, the company's methods of distribution and marketing have
only changed slightly over the years. The basic distribution and
marketing strategies are still similar to the initial strategies used
when
Asian
Paints
first
opened
its
doors.

Wide Range of Products

Asian Paints used the strategy of offering a wide range of

products to push competitors to the side and become the leading
Indian company in decorative paint. Companies that have a
larger selection available for clients or customers are more likely
to retain those clients and customers than companies which are
limited and do not have the color choices. By offering a wide
range of products, Asian Paints has been able to broaden its
customer base.
Automated Machines at Distributors

Technology is a large part of Asian Paints' distribution

success. According to a distribution strategy case study of Asian
Paints, the company provided automated machines that mixed
paint colors at the distributors to allow customers and consumers
more range in color and more options. These machines use

technology to produce colors that otherwise are unavailable,

resulting in a wider range of selection.

Distribute to Rural Areas

A big problem with paint companies in India was a

competitive market in the large cities, where distribution was
relatively easy and the risks were low. Asian Paints started by
working from the rural areas, where distribution was a challenge
and where the other companies had overlooked. Instead of
focusing in cities and urban areas, Asian Paints focused on a
national level and worked in until reaching the cities.

Focus on Emerging Markets

Expanding from India, Asian Paints started working on

distributing decorative paints to emerging economies. It is a
similar strategy to the initial strategy used in India, but it is now
expanding to countries and locations outside of India. Rather
than distribute to economies like the U.S., Asian Paints has
turned its focus to customers in places like Singapore and Egypt.
Market

segmentation

Asian Paints segment the market based on the usage :

BRAND

POSITIONING

It is how the Asian paints enabled people to form a mental image

for their products in the customers mind. The strategies that
they
followed
where
as
follows,
Brand

Image

The ways in which Asian Paints attempted to meet the

customers psychological and social needs.Indian paint industry
is a low involvement industry. Till 1990s people will just tell
their budget for painting their house to their contractors. And
few customers will also mention the colour they need. During
that period Asian Paints analyzed the customer market and
found that people where not brand conscious but their concern
was only the price of the paint. To meet this needs of the
customer
Asian paints reduced the cost of the raw materials by backward
integration in order to reduce the cost of the paints
Established an advertising strategy with created an emotional
touch
among
the
customers
All these strategies helped them in creating a Brand Image for
their products among people and people started realizing the
need
for
brand
conscious
in
this
industry.
Umbrella

Brand

In 2004 the company realized that though they have almost 20

brands only few products like Apex emulsion, Royale interior

emulsion, Apcolite and Touch wood had high recall among the
customers. Therefore they decided to promote the brand as a
whole, to create a corporate image and the various products
under their Umbrella Brand Asian Paint, which became their
mother brand. This created a Brand Awareness as a whole
among
the
customers.
Brand Portfolio:
It was realized that instead of spending on individual brands and
in promoting them it was logical to promote their corporate
image and allthe brands under their umbrella brands ...
Asian Paints has embarked on an umbrella branding policy
encompassing all its products and services. The project includes
a new visual identity that establishes the company name as the
dominant reason for purchase. Tractor, Royale, Utsav and
Apcolite names are no longer the focus on the can, rather
consumers will be buying "Asian Paints." Some key brand
names are being retained for the time being--to signal a position
in the market rather than a product or surface. For instance,
Tractor will represent the "value for money" brands.
The immediate advantage is obvious. Rather than spread
resources thinly across brands and sub-brands, a company
centric portfolio can synergize communication efforts. To be
competitive in a world of fragmentation and rising costs,
traditional mass media, such as television, can be prohibitively
costly.

With the umbrella-branding move, Asian Paints can also afford

to move forward from a mere functional platform for each
individual product to the high ground of a mood-based
emotional dimension.

An Underlying Theme
At Asian Paints, the underlying theme is "har ghar kuchh kehta
hai," or "every home has something to say." The depth and
texture visualized by this line goes into the customer's basic
psyche of owning a home, and will carry through various
messages emanating from the company, which is the leader in
the decorative coatings market in India.
Accessibility of Asian paints to the customers :
Asian paints have started a 24 hours customer help centre at
Hyderabad. It is informationto consumers to answer their needs
for any query related, to their products. Through thiscompany is
also getting a lot of data related to the customers need &
appreciations of the products.In order to provide better
consumer
service,
company
has
connected
all
colour world installations with Asian Paints main sys
tem through software & providingcomputes to dealers.
This
is speeding up
order execution,
electronic banking will speedup recovery & money transfer.
Market Share Analysis

The market share clearly shows that Asian paint is the

leader in Indian paint industry.The nearest competitors of
Asian paints are Nerolac & Barger paints. Asian paints has
thelargest sells in Decorative paints Asian paints annually
spends on an average Rs325 Cr on its selling &
marketingexpenses. It givers us an idea about the effort the
company put on expanding its market inall segments.When
customers buy the products of Asian paints As the
customers normallyuses the products of Asian paints on
certain occasions like. Marriage ceremony, Dewalior any other
special occasions, other than normal paint in houses,
customers are verychoosy & brand specific. This
appreciation by the customers helped Asian paints
to become the number one paint company in India.
ANSOFF Matrix
Asian Paints value for the customers was build through
innovative package (size),distribution , and communication .In
1970s they decide to computerize and network their 30 depots
round the country ,to provide proper feedback of market needs
,resulting in quick response to meet the needs.
They planned a new distribution structure , smaller
packages and computerized communication networks. Asian
paints differentiation strategy starts from market segment,
distribution & packaging .
With increasing volumes in chosen segments Asian Paints
achieved economies of scale for cost leadership .With their

dominant position they diversified in product range as also

market and geographic segment.
1. They diversified into manufacturing raw materials for paints.
2. product diversification also included industrial paints .Now
with a large market share ,they have strong distribution network
even in metros.
Asian paints strategy of quick response translates into supplying
95% of the order supply in 48 hrs which is a positive
competitive advantage .Their R&D has developed new products
to later to industrial & scientific segments . The paint industry is
in growth stage in India as construction activity has a high
priority.
With 27% market share, they enjoyed double the market share
than their nearest competitor .In order to maintain this leadership
position they have drawn up the following strategy.
Asian Paints went to backward vertical integration by getting
into manufacturing raw materials for paints.
With liberalized economy more international brands are likely
to enter the Indian markets as entry barriers are low in the Paint
Industry.
To keep their dominant position Asian Paints should pursue
vigorous R & D for innovative products ,increase the number of
depots for covering the entire country advertise separately for

each market segment & average continuous market research to

enhance their competitive advantage.

DISTRIBUTION
Asian paints have an extensive distribution channel
through out the country. Itused to maintain unique channel
from the manufacturer to the customer. Distribution system
at Asian paints : -

1.Multiplant Distribution setup.

Neither geographic nor product specific.
Offers flexibility & variable cost advantages
2.Servicing has been key competitive advantage.
3.Around 15000
sales location.40

dealers serviced

from

around

85

4.Role of distribution department is to ensure timely

product availability at theselocations at minimum
cost.The company ahs
4 manufacturing facilities & more than 2800 stock ke
eping units(SKUs) These
are supported
by 6 regional distribution
centers,
which cater
55 deposits.Each depot is having branch manager for
supervision over more than 15000 dealers inmore than 3500
small & big cities in India.Asian paint implemented & concisely
improving its IT systems over the years. Ithas already linked
all sites & Depots through V-SAT technology, which helps
them tomonitor constantly & has given benefits in streamlining
the
distribution
channel.A s i a n p a i n t s a l s o i m p l e m e n t e d 1 2 s o l u t i o n
s t o i n c r e a s e i t s n e t w o r k i n g s & solutions, which is a
very good replacement of ERP.

Asian paint is highly accepted in the urban sector

a n d n o w t h e company is trying to access the rural market with
low price product like Utsavtargeting every customer of all
income level.
To enhance their marketing in rural sector a huge amount
investmentis made in adcampaign and demonstration cum sales
technique is going on.
To increase its sales in the urban sector Asian paints today
have 30colour world located in different cities of India
where any body can have thereal taste of the colour.
Online marketing has become an integrated part of the
company andcompany is trying install a strong integrated for
online marketing.
Asian paints international unit, which have a dedicated
marketing teamis also targeting for a rapid growth in overseal
market.
Asian paint is concentrating on the development of
technological intheir industrial coating so that to make the
product more stronger positon inthe market. And do it they
are following the product with huge ad compaign.
Asian paint is now targeting to provide paint solution with
insurance.
Asian paint is following unlque strategy of marketing
in the ruralareas by using their official mascot. According

to the company it feels that picture are more dominant than

name.
Asian paint website Asian paints com provides several
informationregarding the product and various other information
that is being required bycustomer and dealer.
Programme Objective
Programme objective is one of the main objective of
thecompany. Here the company frames the strategy about
the products related issue andvarious other thing relating to
the business. Most of the company follows the 4Ps
policynamely price, product peace and promotion.
Product : Asian paint details with product that is
(i) Decorative
(ii) Industrial
(iii)Automative.
In decorative segment company has a wide range of product
from low price19 to high price low price product like utsav
which is basically targeted to the rural customer and high
price product Apex cefirma for exterior and interior
emulsion. Asian paintinvesting a huge amount of fun
in
R
&
D
sector
for
Quality
and
the
technologicaldevelopment of product so that it compets
globally.
Price : the price range of Asian paint varies according to
the product. Asian paint hadalways a stragegy in
domination in the rural sector. The product that is supplied

to therural area have low price range. Where as in the

urban sector some of the high price product circulates.
Place : Asian paint is available to all types of customer
and the main advantage of theAsian paint is that it is
easily accessible to its customer. At present there are
20,000dealer and a large no. of retailer. Asian paints
distribution channel extends to the thirtystate of India. Asian
paints is also exporting to contrites like Caribbean, Africa,
Middleeast Asia and south pacific.
Promotion : Asian paint follow good promotional strategy
regarding their sales of the product. Their promotional
strategy are made looking at the different category of
the product and price associated with it. In urban areas Asian
paint established colour worldwhere the customer can enjoy
the taste real colour while in rural sector it follow
salesdemonstration programme along with van displaying
the product of Asian paint in therural market. It also
invest a huge amount of funds in the advertising
sector for the promotion of this product.20
MARKETING STRATEGY
STRATEGY ALTERNATIVES
:
The prospect of a paint company has many dependence
like weather, occasionslike puja, id etc. when we
consider the decorative segments. So there is always
a possibility of ups & downs in the business. Besides this there

is
another
very
importantfactor i.e. the position of the competitor. Thr
ough Asian paints is the largest paintcompany still under
circumstances it will have to go for some strategy
alternatives.Alternatives available :
1.As
Asian
paints
market
is mainly
the
decorative segment so a downfall in that market will lead
the company in trouble them it immediate focus will turn to
theIndustrial segment.
2.Importance on water based paints may recover
a poor situation created due to sustain poor weather
condition in some region.
3.As there is every possibility that conventional
coatings are likely to lose some share ecofriendly
coasting is going to be very good alternatives.
4. With all countries in southeast Asia beginning to adhere
to the ASEAN free tradeArea (AFTA) that will reduce
trade barriers for paints & coatings. A reduce indomestic
market share of Asian paints then will not be a constant
for growth, became export of paints to the foreign countries
will contribute a lot.
5.Increasing the product package & application oriented
service will make companydifferent from others.
6.A strong post
sales service division will
b e a n i m p o r t a n t f a c t o r i n b u i l d i n g customer loyalty.

7. Tie up with automobile sector with strong appearance

will be effective.
8.Lastly
but
not
the
least price of
oil
i s i n c r e a s i n g d a y b y d a y, w h i c h r e s u l t s t o increase
the price of paints. If this can be controlled by stocking oil
or directlylinking up with foreign cheap refineries so as get oil
at least available price.21
AP creates a Marketing Organisation that Matched its Distribution Intensity

Effective control of the large number of depots, each having

substantial stocks of 2,000 odd distinct items necessitated a
matching marketing organisation structure. AP set up a
marketing organisation consisting of four regional sales offices,
35 branch sales offices and a large number of sales supervisors
and sales representatives spread all over the country. The
marketing organisation of the company is presented in Exhibit 4.
It can be seen from the chart that a very extensive structure has
been created in the consumer division. It is primarily meant for
taking care of the massive distribution task involved in this
sector. Each branch sales office has its own depots and the
various items are stocked in the depots under the control of the
concerned branches. The branches service the dealers and
customers in their territories.

These are supported by six regional distribution centres, which

cater to 55 depots. Each depot has a branch manager for
supervision of several salespersons who cater to more than
14,500 dealers in the more than 3,500 big and small cities all
over the country. AP faced many challenges. Of these, the costservice dilemma was no doubt, the most important one. And,
that is the aspect in which we are mainly interested in this study.

AP Successfully Resolves the Cost-Service Conflict in Distribution

Managing the cost-service conflict was the main challenge that

AP faced in the implementation of its distribution strategy. AP
met this challenge successfully.

We have seen that AP has over 15,000 dealers in 3,500 towns in

India. AP caters to all of them directly. As a result, for AP, the
distribution task gets tremendously extended and distribution
cost becomes a significant business parameter.

Demand for decorative paints is characterised by seasonality.

Demand drops during monsoons and picks up around a mouthand-a-half before the festive season. Major part of the sales take
place in the second half of the financial year. Manufacturers

have to carry huge inventories during the lean period. As a

result, distribution cost becomes all the more significant.

Naturally, distribution cost emerged as a major hurdle that AP

had to cross. The strategy adopted by AP necessitated expensive
distribution. In addition, AP took another basis decision. It went
in for a very high service level in distribution. Service level is
measured in terms of the number of stock keeping units (SKUs)
available in stock as a percentage of the number of SKUs that
should have been in stock. APs service level is more than 85 per
cent whereas that of other large paint companies falls between
50 and 60 per cent. This meant a further rise in APs physical
distribution costs. AP had to resolve this cost-service conflict.

In the chapter on Physical Distribution and Logistics

Management, we had seen that a cost-service dilemma is
inherent in any physical distribution situation. A high service
level in physical distribution-in transportation, warehousing,
order processing and inventories necessarily means a high level
of costs. Every firm has to face this cost-service dilemma and
work out a compromise. AP voted for a high service level and
without compromising this service level, it tried to contain the
distribution costs. Interestingly, AP succeeded in this endeavour.
When we go in to the details as to how AP actually resolved the
cost-service dilemma, four factors stand out:

 A strong commitment to distribution cost control, without

compromising service level
Effective inventory management
Effective control of credit outstanding
IT initiatives in support of distribution cost control
Conclusion
The supply chain is very important aspect of the business,
basically when you are in the manufacturing industry. The
demand of paint is very high in the market because of customer
choice become broad and they give more priority to the
decorative paints and also the real estate is booming sector. So
providing the right product at right time to the right person is
very important in today scenario, as these two companies are
doing well for their supply chain management to be good for the
market so that they dont have any problem in future in
inventory management and logistic management.
The supply chain system includes supply chain process
management

or

event

management

capabilities.

These

capabilities will enable close to real time, event based escalation

of relevant pieces of information through the organization to

appropriate individuals, Resulting strategies, potentially systemrecommended,

could

involve

the

following

options:

confirmation of the event with the supplier, an examination of

the possibility of replacing the material, or an assessment of the
impact on downstream value chain coupled with an evaluation
of alternate suppliers.
As in one of the previous chapters we have seen that the
controlling of such a huge bunch of products is very difficult
and is not possible to attain a optimal formula to get all the
products at the right time, at the right place and also at the right
price, which is one of the key areas on which the paint company
works.
Real-time visibility of the supply chain, combined with a
monitoring and an event-management system, will increase the
proportion of decisions that are taken preemptively to minimize
unintended consequences or exploit unforeseen situations.
Increasingly, key decisions will be made by cross-functional
teams, chosen explicitly with the right skill set mix, and

sometimes assembled just for the purpose of solving the

problem at hand.
The demands for supply chain efficiency will emphasize a
combination of both centralized and decentralized structures and
approachescollaborative

and

centralized

planning

with

decentralized executionrequiring real time visibility for

monitoring and rapid response mechanisms for event-driven
management involving close to real-time problem escalation and
remediation. Effective management of supply chains will occur
through the deployment of integrated organizational team
structures at multiple levelsexecutive through senior and
middle managementexecuted through physical and/or virtual
facilities such as war rooms.
The first area where the industry has to move is that they have to
make the customer involved in the process of purchasing the
products; in fact the industry should try and make paint as a
product that should be a part of a persons life. This should be
done as a person is spending most of the time in a day in his
office or at his home and he is only able to see the colors of the

walls. This has also been proved scientifically also that the
colors that are surrounding us have a major effect.
By doing the above they will first be able to create demand in
the market, which will finally force the dealers to stock the
product in the market. This will improve the reach of a company
in the market and will create presence in the market.
By creating the presence in the market a company can create fast
turnover of the product. i.e. the product will quickly get cleared
from the dealers counter which will finally help the company to
quicken the whole process and this will lead to an effective
supply chain management. A company if have the fast moving
of the products from the counter can even plan things in a better
manger as on the forecasting front. This company can very well
forecast that what the market will be demanding in this
particular period. The existing system of paint industry, which
mainly runs on the rebates base, will also not affect the player;
this is because of the market demand that is been created in the
mind of a customer.

For getting best results of the promotions a company also needs

to educate the customer as to how to use the products. This is
needed because of the painter involvement in the final output of
the product. If a painter works well on the paint then only the
paint will give the best result. As also been discussed earlier that
if a painter uses 3rd grade paint in a proper manner and a 1 st
grade paint in not a proper manner then he will be able to get a
better result from the 3rd grade paint. This is the reason that a
company needs to educate the customer also so that the
customer will be well equipped to supervise the whole process
and will be able to notice about the mistakes made by the
painter.
In addition to educating the customer a company also needs to
educate the painters in a better manner, a big initiative is to be
taken as to make a better class of painters in the country. This is
needed as that by improving the whole class of painters one is
improving the whole paint industry. Painters are the first point of
interaction for the paint industry, even to many they are the only
level of interaction for getting the work done. To improve this
some of the companies have taken the initiative as by

introducing Home Dcor by Berger Paints and Home Solutions

by Asian Paints. These two services that are been provided by
these the companies, provides all the painting services to the
customer. This service starts from giving quotation to the
customer to shifting the stuff back to the places where it was
before the painting work started. This all will be take n care by a
well-educated executive of the company. By providing all these
services companies are trying to improve the customer
satisfaction by getting the products from a company. This is one
of the most important focuses of the supply chain management.