Achieving the Cutting Edge with Supply Chain
Presented by:Hamsika karthik Prasanna Desikan Vikram Santhanam
Paint Industry
Paint industry estimated at Rs. 135bn. Unorganized sector accounts to 35% of paint market.
Volume growth estimated at 15%.
Indias share in the world paint market is 0.6%.
Per capita consumption of paint in India is 1.2kg/annum.
Introduction
Started in 1942 by four entrepreneurs: Champaklal choksey, Chimanlal choksey, Suryakant Dani and Arvind Vakil as ASIAN OIL & PAINTS COMPANY. Within three years, their turnover reached 3.5 lacs. Started with a strategy Going to where Consumer is. In 1967, Asian paints became the 10th largest paint company in the world and leader in India.
Asian Paints- Today
International Operations
Caribbean Islands
Middle East
Barbados, Jamaica, Trinidad & Tobago.
Bahrain, Egypt, Oman & United Arab Emirates.
South Pacific
South East Asia
Fiji, Tonga, Vanuatu, Solomon & Samoa Islands.
South Asia Bangladesh, Nepal & Sri Lanka.
China, Malaysia, Singapore & Thailand.
Product Categories
Supply chain of Asian Paints
Headquarters in Mumbai 4 Factories 18 Processing Centres 350 raw material and intermediate goods 140 Packing Material Vendors 6 Regional Distribution Centre 72 depots are integrated
suppliers
Elements of Supply Chain
3000 SKUS
KEY SUCCESS FACTORS
FLEXIBLE OPERATIONS
4 PLANTS
RAW MATERIALS
6 RDC 35 JOB WORK CENTRES 77 DEPOTS
LOWER OUTPUT TIME
LOW DELIVERY COST
PACKAGING MATERIAL
15000 DEALERS
500 INDUSTRIAL CONSUMERS
Backward Integration
immunizes Asian Paints to the fluctuation in the prices
Material is transferred at low cost to Asian Paints equips the company with the ability to meet sudden surges in demand 1/3rd production is sold to other companies. This gives strategic edge to Asian paints.
Outbound Logistics
Four manufacturing facilities are supported by Six Regional Distribution Centers (RDC) and Seventy-seven depots. Each RDC and depot is taken by Asian Paints on lease and then further assigned to a C&F Agent. Distributing the Asian Paints products to the 14,500 dealers all over the country. There are 4 depots of Asian Paints in Mumbai and 73 outside Mumbai.
Distribution Network
Secunderabad based location
Delhi based location
ANKLESHWAR
PLANT
KASNA PLANT
PATANCHERU
77 DEPOT CENTRES
BHANDUP PLANT
ASIAN PAINTS HEADQUART ERS MUMBAI
Bangalore based location
Chennai based location
Kolkata based location
Ahmedabad based location
Certain Issues
Movement of paints and hazardous goods including raw materials have a series of safety checks to be adhered to, starting with a material safety data sheet. All materials transport from factories to the depots is insured through a blanket insurance policy, which fixes a minimum liability for loss, damage, pilferage or leakage upwards of Rs. 10,000. Projected profitability of the proposed location The standing of the dealer in the local market The past records of the dealer (banking and trading history) The presence of other dealers in the vicinity and the projected impact on their volumes The competition scenario at the location The distance of the proposed location from the nearest factory etc.
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
Implications of Distribution Strategy
Going to Individual Consumers Implied Wide Product Range and Complex Distribution Smaller Packs proliferated the product depth further Wide Product range Implied Expensive distribution Going retail Implied Deep Involvement in Channel Management National Marketing necessitated nationwide organization
Inventory Management
Facts: Lowest inventory cost in industry Avg inventory level of 28 days sales against industry avg of 51 days Translates into 45 % lower inventory costs Stock of finished goods is only 7% of net sales half the industry average
Inventory Management
Asian Paints allowed
15-21 days credit for dealers in major towns 22-30 days credit dealers in upcountry regions
Incentive schemes to reduce inventory
A special discount of 3.5 per cent - discount for perfection in payments. It was passed on at the end of the year, provided each and every payment throughout the year was made within the stipulated time norms. A cash discount of 5 per cent. This was paid for all outright cash purchases. It was given whenever payments were received within 24 hours of the supply/invoice. In respect of outstation accounts, the payments have been made in advance by draft in order to be eligible for the cash discount
Supply Chain Re-engineering
To deliver products efficiently to customers without holding large amount of inventory To manage cash cycle to free up funding for aggressive growth by acquisition strategy
Existing Processes
Forecasting
The demand pattern was difficult to predict even with the support of historical data/trends as consumer preferences were changing fast Relied on home grown solutions for planning and implementation Raw materials comprise 60% of the value chain which require accurate forecasts Constant updation of BOM and Routing called for frequent changes in the procurement planning process
Procurement
Manufacturing
Manufactured all the shades (30-50 depending on a product line) in all the packs (five to eight packs)
Distribution
Had to maintain inventory levels for all 3000 SKUs Customer choice limited to number of SKUs
Enabling IT across the Supply Chain of Decorative Paints
Distribution
Paint dispensing machines
Altered the production pattern from shades to producing bases Reduced inventory and Eliminated redundancy of stocks Approx. 11000 color tinting machines including multiple machines across some counters Has helped expand the range of shades for each product category, offering a choice of shades to consumers in the hundreds. For the retailers it has eliminated the sales loss for want of range/desired shade
i2 distribution planner used to develop distribution schedules based on constraints
Improved processes
Manufacturing Strategy changed to manufacturing bases thus providing economies of scale Using i2 Master planner to deicide which plant to manufacture what product depending on Capacity constraints Environmental constraints Key raw materials Helps optimize the process such that least inventory is produced to maintain the expectations of service and safety stock Better planning reduces the number of rush orders
Factory Scheduler used for machine by machine and unit by unit planning of production schedules
Improved processes
Procurement
i2s factory planner used to identify the raw material and packing materials and who to source it from Also provides the ideal formulations required for manufacturing products A better materials planning system allows the company to create more complex paint formulas Helps select the best vendor and manufacturing method for any given situation
Results of Re engineering
Manufacturing Distribution
Procurement
Reduced Finished Inventory cycle from 56 days to 30 days Business is currently 4 times of that before BPR Increase in the number of shades from 50 to 1300 Achieved an 87-90 percent service levels for SKU sales at the location level Built a competitive advantage in terms of inventory management
Thank You
