Marico is an Indian consumer goods company providing consumer

products and services in the areas of Health and Beauty based in Mumbai.

The organisation holds a number of brands including Parachute, Saffola,

Hair&Care, Nihar, Mediker, Revive, Manjal, Kaya Skin Clinic, Livon, Set Wet,

Zatak, Fiancee, HairCode, Eclipse, Xmen, Hercules, Caivil, Code 78 and Black

Chic.

Marico’s strategy of Supply chain

We could see that in in response to the growing International competition

from rivals –Unilever and ConAgra Marico started increasing efforts on building new

brands. It conducted Extensive advertising, innovative promotion schemes –

Advertising expenditure increased steadily. The introduction of more products and

more brands lead to more costs and incurred more costs to the company in

production. Marico decided to go on an expansion strategy and it started to

introduce more brands and tried to increase reach created Supply Chain problems

1995 – Focus on Brand Development

This was in response to the growing International competition from rivals –

Unilever and ConAgra

For survival -Increased efforts to develop new

brands

Reduced reliance on 3 market leader brands -Parachute coconut Oil ,Saffola and Sweekar

Introduction of more products and more brands

– incur cost

Extensive advertising ,Innovative promotion schemes – Advertising expenditure increased

steadily

Expansion strategy –introduced more brands

and tried to increase reach – created Supply Chain

problems

Outbound Supply chain for rural markets

Outbound Supply Chain Transactions

But the outbound supply chain transactions lack of integration among

transaction systems. I resulted in

• Poor visibility into internal operations

• Did not scale with increased logistics requirements

• Inaccurate forecasts, long planning cycles, no transparency of warehouse stock,

delayed response to customer needs

They also faced problems in distribution of trucks

The problem was that they shipped only full trucks

• Obstacles to good distribution:

• Random decisions due to

• Poor visibility into the depot stocks of growing number of SKUs

• No prioritisation rules for configuring optimal truckloads

• Monthly distribution levels

• First 20 days: 16-32%

• Last 10 days: 53%

• Result

• Needed to hire extra space when shipment exceeded depot facility

• Excess inventory for some SKUs, stock-out in others

• Higher deliver costs

• Erosion of sales, distributor confidence and customer satisfaction

The solution to the problem was using my SAP business Intelligence and big bang

approach for SAP implementation. At Company factories, warehouses, business offices,

contract manufacturers

The following ways can be used to implement change

• Lower inventory and supply chain cost

• Technological support through highly integrated applications system

• Resolve forecasting problems, eliminate inventory and stock-out problems

• Partner relationship with distributors

BENEFITS OF REDISGN

Operational improvements reduced planning cycle from 30 days to 10 days and

also improved forecasting accuracy. I also improved delivery reliability and

improved forecasting. Both primary and secondary sales figures were available

Improved distribution lead to the

• VMI implemented for C&FA

• SAP heuristics ensured shipments are sent in full truckloads and that depot

inventories simultaneously remain within prescribed inventory norms

• Improved distributor relationship: reduced bullwhip effect

• Partnership relation with distributors

• Monitor and manage distributor inventory by replenishing stock on the

basis of secondary sales

• C&FA supposed to replenish distributors within specified period or face

penalty.

Marico From Copra to Coconut : Marico is the largest buyer of copra

in India with about 100,000 tonnes a year—and is striving to meet steadily

growing demand for its popular range of Parachute coconut oils, reliable,

resilient and sustainable in-bound raw material chains are a lynchpin for a

crisis-free future. The difficult years spent to “broad-base supply” has

evidently borne fruits for the company feted for its supply chain innovations.

The recent unveiling of a pilot collection centre near Madurai in Tamil

Nadu—where farmers can troop in with their ‘raw’ coconuts—is a milestone.

Earlier, Marico would buy only copra—coconuts sun-dried by its vendors. This

migration from copra to coconut is significant. After an effort spanning two

decades to dis-intermediate its copra supply chain—ridding it of exploitative

structures and agents—and infuse it with technology platforms for quick,

transparent transactions, FMCG major Marico is nearing its holy grail: the

enviable situation of dealing with the smallest possible vendor—a marginal

farmer with a few coconut palms in his backyard.

One-Stop Shop : This collection centre, one of the thousands it has, has

machines to de-husk, de-shell and dry coconuts. Farmers disinclined or

unable to convert their coconuts to copra can sell their produce here. The

Madurai centre is a turning point in streamlining the supply chain and

establishing a relationship with the smallest farmer possible, without

engaging in contract farming. Marico has suffered during two bull runs in

copra—in 2003-05 and in 2008-09—as middlemen salted away copra in

warehouses. From Rs 18,000 a tonne in 2001-02, the price peaked at Rs

52,000 a tonne in 2005. To break this stranglehold, Marico set a goal of

reaching out to the largest possible mass of people willing to sell. The idea

was farmers don’t usually hoard. Their aim, always, is to sell their produce as

quickly as possible and invest in the next crop.

In the early years, Marico sourced its copra from terminal markets of Kerala—

a beehive of agents and unions. There was the transporter, who doubled up

as trading facilitator; traders undertook fumigation, drying and sorting; a

workers’ union also sorted; another union filled copra into sacks, and stitched

and loaded them; and yet another union stacked the sacks in trucks. All these

activities cost around Rs 500 a tonne and gunny bags cost another Rs 300

per tonne.

Knowing that sourcing from terminal markets couldn’t go on, Marico

diversified into buying directly from individual traders, who moved truckloads

of copra directly to its factory. Simultaneously, the company started

developing a sourcing base in Tamil Nadu to de-risk itself from Kerala. In

2002, with of reverse auctions, price discovery and a feel of the quantity

available became much easier. This prompted a month-long blockage by

Kerala traders. Another tactic adopted by angry traders, to break and

discredit the auction system, was to offer copra at lower prices than those

accepted by Marico, after auction hours. Marico buyers, however, refu sed to

renege on the high prices contracted. Traders even complained to top

management that the company was incurring losses by buying copra at

higher prices. However Marico had decided it would not go for offline buying

.They set up a transparent system and ensured the process never violated.

A web-based system was also crafted. Marico set up its first copra collection

centre in Perambra, Kerala. It was another significant step in broad basing

supplies and also enabled Marico to rehabilitate smaller agent s as centre

heads, paying them Rs150 a tonne as commission. Today, over 50% of copra

procurement by Marico is through its centre’s; the rest comes from normal

trade.