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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