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mySAP™ SUPPLY CHAIN MANAGEMENT AT MARICO
Marico offers a range of products to the local and export markets (primarily South Asia and the Middle East). This approach was enabled by mySAP™ Supply Chain Management software. well-capitalized international rivals such as ConAgra Foods and Unilever. Ltd. developing advertising campaigns to reinforce value delivered to consumers. including refined edible oils. a key strength of the company has been its ability to build brands. three are market leaders. Marico’s distribution network is key to ensuring that its products reach about 100 million people throughout the Indian subcontinent each month.ENHANCING BRAND EQUITY BY IMPROVING DISTRIBUTION PERFORMANCE AT A GLANCE: mySAP™ SUPPLY CHAIN MANAGEMENT AT MARICO Strategic Goals: • Enhance long-term value of company brands by achieving excellence in distribution performance • Maintain market share growth in a competitive environment with much larger. it has maintained steady revenue and profitability growth throughout the past 10 years. Marico produces 125 SKUs at its own factories and through 15 subcontracting manufacturers. which includes demand planning and supply network planning capabilities coupled with SAP® R/3® and SAP® Business Information Warehouse (SAP® BW). Marico was incorporated in 1988 and began commercial operations in 1990 when it acquired the consumer products division of Bombay Oil Industries.6 million domestic retail outlets. With 6 factories and about 1. Since its inception. domestic brands. Nevertheless. It stores products at 32 warehouses and sells to 3.96 billion (approximately $142 million) for the fiscal year ending March 2002. niche fabric care products. Of Marico’s nine brands. Marico has pursued a rigorous approach to creating and sustaining its brands. food products such as jams and sauces. and implemented an improved process to replenish its distributors. truck detention costs) • Positioned the company for a vendor-managed inventory implementation and further performance improvements . focusing on understanding and anticipating consumer needs. offshore rivals • Scale supply chain operations to sustain customer service as the business grows Marico Industries.000 employees. Results (achieved during 3Q01 to 1Q02): • Decreased stock-outs associated with distributor sales to retailers by 33% • Reduced lost sales due to stock-outs by 28%. The company focused on achieving relatively even shipment levels throughout each month and developed internal collaborative processes to support planning.500 distributors. revised its demand planning process to forecast “sales out” (shipment from distributors to retailers). Marico’s approach has enabled the company to create unique value for consumers and thereby to build significant market share in many product categories.5% • Reduced costs associated with supply chain exceptions by 25% (for example. intracompany stock transfers. • Reduce total delivered cost Approach: Marico shortened its planning cycle from 30 days to about 15 days. and tracking metrics that support product positioning strategies. and other unique developments. These distributors in turn provide products to 1. a cold-water clothes starching product. Marico faces competition from large. is a leading India-based consumer goods company with sales of Rs 6. thereby improving total revenue by 1. and hair oils. and non-branded products. A key attribute of Marico’s brands is the widespread availability of the company’s goods throughout India. innovating in distinct ways. The company’s approach has enabled it to pioneer polyethylene packaging for coconut oils.5% • Lowered excess distributor inventory by 33% • Reduced late deliveries to distributors by 37.
By concentrating on internal operations. Greater rivalry in its core markets meant it had to increase marketing expenditures. the company realized that it would face challenges to continued profitable growth. Moreover. the company recognized in the latter part of the decade that it must renew its focus on profitability in order to participate in long-term growth opportunities. As a result. the company had a planning cycle of 30 days. The company has achieved improved cash flow to fund future growth. sustained the viability of its independent distributor network. given market factors and the need to maintain its distribution effectiveness. and maintained those elements of its brands’ images that are tightly coupled with high availability of its products to its customers. led to a mismatch of supply and demand. and truck demurrage. costs would . which often required interwarehouse stock transfers. and stock-outs – all of which adversely affected endconsumer perceptions. Total delivered costs were increasing due to storage capacity constraints. spreadsheet-based planning methods and multiple. Marico’s goals included improving forecast accuracy and delivery performance in order to sustain the widespread availability of its products in the market and the associated positive perceptions of its brands. and final third of each month. The company also was unable to sustain the performance of its supply chain as its scale of operations grew. even though distribution was a core strength for Marico. For example. nonintegrated transaction systems inhibited widespread visibility into essential data. Marico determined that it must improve its supply chain capabilities. This meant that Marico would have to increase its advertising expenditures to defend the market positions of its various products and continue to invest in product development to ensure continued growth. Also.Marico’s peer companies in other countries recognize its strength in distribution. expired products. CHALLENGES AND OBJECTIVES Although Marico had achieved a compound annual growth rate of about 18% during the 1990s. Marico was increasingly experiencing inaccurate forecasts. was unable to respond to changes in demand. and. Marico has been able to lower inventory and supply chain operating costs. second. stock-outs. the performance of its supply chain network was not keeping pace with the growing scale of its operations. The company had become highly dependent on its three leading brands for generating revenue and earnings. Though Marico experienced robust expansion throughout the 1990s. 32%. with a weighting of 15%. key goals for Marico included improved forecast accuracy and more uniform distribution levels throughout each month. and delays in response to market requirements. temporary renting of additional storage space. and 53% for the first. Thus. coupled with low levels of forecast accuracy. and was facing increasing competition in the associated edible oil markets as well as in other product categories. inventory build-ups at Marico and at its distributors. Marico selected mySAP™ Supply Chain Management (mySAP™ SCM) to enable the reengineering of its associated planning and execution processes. After a careful analysis of alternatives. It also needed to reengineer its planning processes to more effectively match supply and demand. further compounding planning-process problems. The bucketed time horizons for manufacturing and distribution were not synchronized and distribution levels were uneven. These supply chain performance issues were reducing Marico’s cash flow and did not support the product brand images the company had taken care to develop. the company focused on customerfacing business processes as well as on its internal operations. particularly those expenses that could be reduced through better planning in areas such as intracompany stock transfers. consequently. This suboptimal skewing of distribution activity over time. during this period. Specifically. Marico has secured a distribution alliance with Indo Nissin Foods and a distribution agreement with Procter & Gamble. excess inventory. In order to achieve sustained profitable growth.
MarketSet and Enterprise Buyer are jointly owned trademarks of SAP AG and Commerce One. These results led to reduced internal and distributor inventory. These processes included calculation of monthly shipment requirements from its plants to its warehouses to support make-tostock operations. with SKU/distribution point combinations numbering in the millions. Printed on environmentally friendly paper. Marico focused on business processes that addressed internal collaborative forecasting between its manufacturing sites and warehouses.com. while its distribution operations were the key source of opportunity. All rights reserved. using AcceleratedSAP™ (ASAP™) methodologies to ensure a rapid implementation. By early 2002. fewer stock-outs. The company defined clear responsibilities to ensure that distribution from its warehouses to distributors would meet service level and inventory objectives. and enhanced reporting facilitated management decision making. and higher levels of delivery performance. vegetable oils and safflower seeds). Also. Marico procured only a few commodity raw materials (for example. and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world.sap.SAP AG Neurottstraße 16 69190 Walldorf Germany T +49/18 05/34 34 24 * F +49/18 05/34 34 20 * * Subject to charge www. satisfy customer needs. 32%. After a careful evaluation. The scope included all company factories. All other product and service names mentioned are the trademarks of their respective companies. cost accounting. Implementation of SAP® R/3® capabilities in finance. SAP. The planning-cycle time was reduced from 30 days to 15-20 days. mySAP. warehouses and business offices. quality management. The company concluded that sourcing and manufacturing were straightforward. Marico plans to implement vendor-managed inventory (VMI) processes by making use of Internet-based integration of distributors’ stock levels into the company’s SAP R/3 system. freeing cash flow to reinvest in growthgenerating activities. lower levels of lost sales. distributors. Implementation of the demand planning and supply network planning capabilities of the SAP® Advanced Planner & Optimizer of mySAP SCM – along with the SAP® Business Information Warehouse (SAP® BW) – began in August 2000 and went live in a “big bang” implementation in May 2001.com be more in line with best-in-class operations in the consumer industry. and sales and distribution was started in June 2000 and went live quickly in a “big bang” implementation in April 2001. Marico selected mySAP SCM to enable the associated planning and execution processes. production planning. the distribution network was complex. mySAP. profitable growth. had no sales seasonality associated with its products. Marico targeted improvements in stockout reductions and on-time delivery that would be a consequence of better planning processes. In the future. The implementation produced quick results. and position the company for long-term growth. support its brands’ images. and the implementation achieved systems integration that efficiently supported the new planning and execution processes. the company implemented policies to distinguish the relative priority of SKUs and of distributors. had no major manufacturing capacity constraints. Inventory carrying costs and total supply chain costs would be reduced. IMPLEMENTATION Marico to distributors based on forecasted retail-level demand and distributor inventory levels. In 1999. and 43%). and reduced supply chain exception-handling costs. materials management. reduced inventory. Marico initiated a detailed evaluation of its supply chain operations to determine how best to reduce costs. lower supply chain management costs. These results will continue to reinforce the company’s branding initiatives and position Marico for long-term. However. These actions would support the company’s branding initiatives as well as help ensure the profitable operation and continued viability of its distributor network. electronic transfer of stock level data from the distributors to Marico. This VMI implementation will enable Marico to further reduce the planning cycle to 10 days and ensure greater visibility into distributor operations. Twenty-six staff members and 20 consultants assisted in the project. forecast accuracy was improved by 14%. and push distribution of products from 50 059 358s (02/10) 2002 by SAP AG. and minimized artificially induced demand surges by avoiding the use of promotions. and contract manufacturers. © . and the levels of shipment activity through each third of a month had become more even (25%.
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