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

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OUTLINE

Introduction to Marico

Supply Chain and Nature of Challenges Faced

Initiative Implemented

Results and Sustenance

Future Ahead

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ABOUT MARICO

Found in 1991, Public Limited Company

A leading Indian Group in Consumer Products and Services

Renowned Brands like Parachute, Saffola, Kaya Skin Clinics

CAGR of 21% in turnover, 30% in profits - over last 5 years

Turnover of 2660 Crores (2009-10)

12 Brands, Turnover Rs 1550 Crores

100 SKUs, 1500 Suppliers

7 Factories, 15 Contract Manufacturers

30 Depots, 1000 Distributor

25 lac Retail Outlets (Reach)

Reaching 13 Croreconsumers

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External Analysis of Marico

Porters Five forces: Threat of substitute products: In FMCG sector the

products are highly substitutable.

Threat of new entrants: The established companies have

huge base of loyal customers which acts as an entrybarrier for new entrants.

Determinants of Suppliers power: The industry is mostlydependent on the local players for supplies of raw

materials. Determinants of buyers power: Highly substitutable

products and highly price sensitive market.

Industry rivalry: Intense competition

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Networking environment

Citrix Presentation Server running on one HPProLiant

DL 360G4P server and one HCL Global Line server Citrix GoToAssist

Microsoft Windows Server 2003

Connectivity through VSATs, VPNs, leased circuits

and Internet VPNs HCL/Zenith desktops and Toshiba laptops.

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RawMaterialVendors

DirectDistributors

Plants

RDC

Depots

SuperDistributors

Retailer

Stockists

33 depots,

37 ASM Areas

6 RDCs

Total,

> 1100

SlowMovingSKUs/low vol

Secondary

Sales

Primary

Sales

MARICOs SUPPLY CHAIN

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MARICO-SUPPLY CHAIN TRANSACTIONS

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MARICOS PROBLEMS

More brands and more products incur costs: This entails more

sales and markets to track, more forecasts to make, more

production to plan, more SKUs to track, more pallets and

truckloads to configure and route.

The SKU/distribution point combinations run in millions.

The distribution network became more costly and complex,

exposing many process inefficiencies.

The resulting growth strained Maricos highly regarded

distribution network and exposed shortcomings in its

forecasting, planning, and supply chain processes.

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MARICOS PROBLEMS(Contd..)

Forecast accuracy was at 70%.

Distributors were suffering stock-outs and loss of sales on

30% of Marico SKUs.

Excess inventory

The costs of errors in shipments to remote depots were

mounting.

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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

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KEY ISSUE - PEAK / MIN SALES RATIO KEY BRAND - AN

ILLUSTRATION

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

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

Month

Peak / Minimum Sales ratio Variation across the yearas high as 3:1 (Key Brand)

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KEY ISSUE - DATA VISIBILITY

AOG

TRACS

FAS-Ingress

CAFAS

MPS

PINS

EXCEL

Lack of Visibility of stocks on a frequent basis even at depot

Departmental System for Transactions, No Integration

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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 Plantook 30 days

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MARKET PLACE VISIBILITY

Reliability on PRIMARY DATA- suboptimal visibility

Nest best option- Distributors sales to Retailers

MARICO operated with a PUSH METHOD

Severe skewing of sales

Synchronization between MARICO and distributors- differentbucketed time horizons

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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 foroptimal truck loads

Excess stock- hire temporary spaces and demurrage charges

Stock-outs

Maldistribution of goods- higher delivery costs

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THE VICIOUS CYCLE

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The Approach

Fully integrated system consisting of

Enterprise Resource Planning (ERP) business application

SAP R/3, a Supply Chain Management (SCM) suite.

The Advanced Planning and Optimization (SAP APO)

component of my SAP Supply Chain Management (my SAP

SCM)

My SAP Business Intelligence Solution for Supply Chain

Performance Management.

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SOLUTION IMPLEMENTED - TO TACKLE VISIBILITY

Minet

APO

BIW

ERP

ERP, APO, BWMIDAS for Distributors

Minet :- The face of all the above to users in the field

Outcome - Stock visibility of depot and distributor real time

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MARICOS EXTENDED SUPPLY CHAIN SYSTEM

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SAP SAP R/3IntegratedSystems-

Finance,

CostAccounting,

MaterialsManagement,

Production

Planning,

QualityManagement,

Sales &

Distribution

mySAP SCM &SAP APO

DemandForecasting

and Planning,

SupplyNetworkPlanning

(SNP),

Deploymentand Cockpit

modules

mySAPBusiness

Intelligence

Supply Chainperformancemanagement

activities,

DataWarehousingfunctionality,

BusinessIntelligence

tools andAnalytics,

Best- PracticeModels,

Administrativeresources.

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SAP(Contd..)

SAP R/3 integrated business systems, including finance,cost accounting, materials management, productionplanning, quality management, and sales and distribution

A key component of mySAP SCM, SAP APO, including itsdemand forecasting and planning, supply networkplanning (SNP), deployment, and supply chain cockpitmodules

mySAP Business Intelligence for supply chain performance

management activities, a system that provides datawarehousing functionality, business intelligence tools andanalytics, best-practice models, and administrativeresources

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SAP APO

Not used forSourcing and

Manufacturing

few commodity raw materials

no manufacturing capacity constraints

no sales seasonality- no promotions and minimizeartificially induced demand surges

Demand forecastingand Supply Chain

Planning

Improve internal Collaborative forecastingbetween manufacturing sites and warehouses.

Assigned and accountable ownership- distributionfrom warehouses to distributors met service levels

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DEMAND PLANNING- SAP APO

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

Check Pack-Mix allocation to reflect the current market trends

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

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

Detailed demand plan at the SKU level

Pack-mix allocation factors

Actual pack-mix sales of previous three months

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SUPPLY NETWORK PLANNING

SNP module in SAP APO

Reliable, Responsive Production

and Distribution Planning Process

Depot and Plant Heuristics

Production and Dispatch relateddecisions for the planning period

of a month

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PLANT SNP in SAP APO

Provide broad feasibility related feedback to the sales force

Firm Production Plan prepared for Factories and Contract Manufacturing Plants

Run Constrained Plant Heuristic in SNP

Firm Demand in Place

Run unconstrained Plant Heuristics using Indicative Demand Planning Data

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DEPOT SNP in SAP APO

Provide broad feasibility related feedback to the sales force

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

Depot inventories simultaneously remain within the inventory norms

Shipments are sent in full truck-loads

Using a Truck Builder Module-coordinate multiple SKUs and depots

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EPOT SNP in SAP APO

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

Assign relative priority of depots and SKUs in the TRUCK

BUILDER MODULE

Built prioritization rules

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MARICO IT SYSTEM - OVERVIEW

R3

APO

BIW

MIDAS

MIDAS

SD

MIDAS

USERS

MI-Net

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MARICO IT SYSTEMS

Distribution Automation Software package- MIDAS

(MARICO INDUSTRIES DISTRIBUTION AUTOMATION

SOFTWARE)

Internet based system MI-NET in which distributors could log

in and supply data online

Application which could automatically transfer data from

distributors PC to MARICOs central servers

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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

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MARICO IT SYSTEMS

Potential Primary developed using mySAP

Business Intelligence

Average sale of the previous three monthsDevelops 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 PotentialProactive work rather than Postmortem analysis

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HOW MiNET WORKS? MiNet is a portal that links 800 distributors and 110 super

distributors of Marico spread across the country to the company MiNet also enables the company to get daily updates at the stockist

level

At the backend, Marico has installed the SAP R3 transactionhandling modules for sales, finance and materials management

The company has also installed the Advance Planner & Optimizer(APO), a supply chain module, which works right from demandforecasting to materials management and production planning.Marico claims to be the first APO installation for SAP in India

The company has in place a Business Information Warehouse(BIW) which is the repository of every bit of information relevant tothe company. This backend is linked to the outside worldcomprising scores of business associates for Marico, through MiNet.

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THE MIDAS TOUCH The company has also put in place a software called the

Marico Industries Distributor Application Software (MIDAS)which is akin to an ERP (enterprise resource planning)software to capture secondary sales data

MIDAS has been created by Marico in conjunction withChennai-based firm Botree

Every morning the distributor logs on to MiNet and uploadsinformation from MIDAS and we pass on the information

regarding invoices, running schemes etc to the distributor This means that the distributor can keep feeding his data on

MIDAS and then dial in periodically and feed the informationon MiNet. He doesnt have to be online all the time

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VENDOR MANAGED INVENTORY (VMI)

Places order

Distributor Marico

Replenishmentbased on order

EARLIER

NOW

WITHVMI

Distributor Marico

Replenishment based onnorms

MIDAS Mi-net APO SAPOrders are automatically generated

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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 distributortrust

Dumping has stopped

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Using mySAP SCMand SAP R/3 ERP

modules will:

Visibility and toolsprovide by SCM &

ERP will:

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Thank You