2011

10EX-001 – Aditya Rawat

10EX-027 – Monideepa Saha
10EX-036 – Priyabrata Banerjee
10EX-044 – Sankha Mandal

[MARICO INDUSTRIES]
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 Acknowledgement

The group extends its sincere note of thanks to everyone who supported it during the course of
project execution. It is with the due support, as well as co-ordination between the group
members and our esteemed faculty Dr. VK Gupta, that the project has been completed
effectively and met deadlines.

Dr V K Gupta has been instrumental in guiding and supporting us in different matters regarding
the case review. Supply Chain is an exhilarating domain that offers lot to learn from an
Operations Management perspective. Dr Gupta has been very kind and patient while
suggesting us the outline of this review and correcting our doubts. The phenomenal insights
that he imparted in class for the relevant matters for the project conceptualization cleared
initial ambiguities that acted as bottleneck.

Last but not the least, we would like to thank our classmates who helped us a lot in gathering
information, collecting data and guiding us from time to time in making this project . Despite of
their busy schedules, they gave us different ideas in making this project unique.

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 Marico Industries overview:

Marico's distribution width and penetration is acknowledged as one of the best in the industry and is a
leverage able strength.

Every month, 56 million consumer packs are sold to about 1.8 million households through 1.6 million
retail outlets spread across the country.
Marico's distribution network covers almost every Indian town with a population of over 20,000. The
chart below depicts Marico's distribution network in the urban & rural markets:

Distribution Alliance:
Our distribution strength has been recognized by Indo Nissin Foods Ltd. through their
association with us for the distribution of Top Ramen products on a national basis.

Rural Sales & Distribution:

Marico's parallel rural sales and distribution network ranks among the top three in the industry
and contributes 24% to the company's topline.
Their infrastructure comprises 882 direct distributors, 153 super distributors, catering to 2393
small stockists and 4523 van markets. A dedicated team of Territory Sales Executives and Pilot
Sales Representatives distribute Marico's as well as alliance brands through this vibrant
network.

Sales Capacity:
They have made significant progress in the areas that enhance sales capacity. Quality of our
distributors Quality and number of the distributor field force Upgradation in the role of the
company's front-line sales force.

Technology (IT) in Sales:

Marico has been making investments in IT to ensure:
Supply Chain efficiencies
Availability of the SKU at the right distributor point,
at the right time in right quantities
Timely availability and reliability of Sales
MIS, which help in taking prudent decisions on a real time basis.

In order to reap maximum benefits from its sales and distribution network, Marico embarked
on an internet-enabled application - MI-Net - to establish a network between Marico and its
distributors through a web interface. This project is aimed at providing real time information on

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 the status of various business operations between Marico and its distributors. This initiative is
expected to provide business benefits in the form of increased penetration by the sales force,
reduced communication costs, reduced working capital requirements, etc. The project went live
on April 1, 2002 with connectivity to 330 urban distributors, who together account for about
3/4th of Marico's domestic turnover. The business benefits are expected to accrue over a
period of time.

The company has two types of distribution chains, the urban chain and the rural chain. Its
business process is divided into three business divisions: nature care, health care and the
international division. The company registered a turnover of Rs 700 crore, with a profit of about
Rs 50 crore in the last fiscal.

However, the company faced one big problem. On one hand product promotion calls for a lot
of creativity, but on the other a full-fledged ERP system in an organisation requires tremendous
amount of discipline. “Psychologically, creativity and discipline move in opposite directions and
so the management realised that the ERP implementation would reflect a complete paradigm
shift in terms of attitude and that issue had to be tackled effectively,” says Satish Pendse,
general manager, information systems, Marico Industries. Keeping this in mind, the company
began a brainstorming session highlighting the benefits of the implementation. Once the
company realised the possible return on investment through ERP it decided to go ahead with
the plan, and set the ERP ball rolling.

Developing an extensive supply chain is unarguably one of the breakthrough B2B achievements
of the company. Going by the KPMG survey, the company made plans to build a tool that would
put them on par with other FMCG firms. An additional investment of about Rs 4 crore was
made for a customised software package called MI-NET (Marico Information Network). Internet
initiatives

Though Marico has basic Internet connectivity, it is solely used for the purpose of e-mails, while
data transfer largely happens through PAMA VSATs. Modems were installed in 50 depots in
various locations. After the company started working on its ERP operation it realised the need
for a better connectivity environment. Finding that a mix of VSAT and VPNs gave it the best cost
advantages, the company opted for these options. Out of 50 locations, 25 are integrated
through VPN connections and the rest are connected through 8 PAMA and TDMA VSATs.
“Though VSATs are more expensive they are known for high uptime as compared to VPNs. We
have tried to strike a balance between the two to adopt a cost-effective approach,” says
Pendse.

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 MARICO-SUPPLY CHAIN TRANSACTIONS

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 Nature of Challenge faced in Supply Chain of Marico
• Nature of FMCG market : Aggressive strategy

• 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 Marico’s highly regarded distribution network and
exposed shortcomings in its forecasting, planning, and supply chain processes.

• 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.

• 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

• Order placement process

• Distribution network complexity

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 INTERNAL OPERATIONS PROBLEMS

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 Plan took 30 days

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 MARKET PLACE PROBLEMS

Reliability on PRIMARY DATA- suboptimal visibility

Next best option- Distributor’s sales to Retailers

MARICO operated with a PUSH METHOD

Severe skewing of sales

Synchronization between MARICO and distributors- different bucketed time horizons

DISTRIBUTION PROBLEMS

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 for optimal 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

Solution Adopted for Supply Chain Challenges

IMPLEMENTATION METHODOLOGY

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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 transaction handling 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 demand forecasting 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 to the company. This backend is linked
to the outside world comprising scores of business associates for Marico, through
MiNet.

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 Marico IT Systems SAP:

Distribution Automation Software package- MIDAS (MARICO INDUSTRIES DISTRIBUTION

AUTOMATION SOFTWARE) Received distributor stock and sales data in offline mode through
floppy transfers But for VMI- real time data needed Internet based system MI-NET in which
distributors could log in and supply data online Application which could automatically
transfer data from distributor’s PC to MARICO’s central servers

Potential Primary developed using mySAP Business Intelligence Average sale of the previous
three months Develops and reports brands and regional sales potential that should be
targeted by the sales group Cumulative actual sales to date—mySAP provides daily updates
through Primary Potential Proactive work rather than Postmortem analysis

Marico’s Extended Supply Chain System:

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 The Approach

Fully integrated system consisting of

• Enterprise Resource Planning (ERP)
business application
All resources and • SAP R/3, a Supply Chain Management
Big Bet- Big Bang management (SCM) suite.
Approach in commitment to • The Advanced Planning and Optimization
2000-2001. redesign the (SAP APO) component of my SAP Supply
process. Chain Management (my SAP SCM)
• My SAP Business Intelligence Solution for
Supply Chain Performance Management.

Groundwork for major

developments
Implementation •Technology supported
Deadlines- 9 SAP R3- went live in partnerships with major
months April, 2001 distributors
•Vendor Managed Inventory
All started a few SAP APO in May, 2001 (VMI)
months apart. •Online exchange of distributor
sales and other information.

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 Results

Using mySAP SCM

and SAP R/3 ERP Visibility and tools provide by
modules in the SCM & ERP yielded:
first 2 years

Reduced Improved
Improved Improved
Improved Planning planning and
forecasting
visibility of visibility of Production operations of
accuracy
internal the market Cycle Time- the
from 70% to
operations place- VMI 30 days to 10 distribution
80%
days network

Reduced Sales Skew and balanced distribution levels

Decreased SKU stock outs by 50%

Reduced Excess Inventory at Distributors by 50%

Reduced Marico’s Average Total Inventory by 25%

Reduced Supply Chain exception-handling costs by more than 60%

Key Accomplishments
• Increased funding for advertising, brand innovations and expansion

• Greater sales productivity

• Improved win-win situation with the distributors

• Continued double-digit growth in earnings and revenues

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 Impact and Benefits
VENDOR MANAGED INVENTORY (VMI)

SAP APO

•few commodity raw materials

•no manufacturing capacity constraints
Not used for •no sales seasonality- no promotions and minimize artificially induced demand
Sourcing and surges
Manufacturing

•Improve internal Collaborative forecasting between manufacturing sites and

warehouses.
Demand •Assigned and accountable ownership- distribution from warehouses to
forecasting and
distributors met service levels
Supply Chain
Planning

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 OPERATIONAL IMPROVEMENTS

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 THE LAST MILE…WHAT IT IS NEXT?

With its ERP and SCM implementation in place, what are Marico’s future IT plans? Explains
Pendse, “We are in the process of building a knowledge platform, which will enable the group
members to share information and knowledge across the entire group.” In short, Marico aims
to create the infrastructure for future collaboration and convert it into a virtual knowledge
community. Also on the anvil is the introduction of payment gateways within the system to
speed up the payment process. Marico also realizes that the IT infrastructure in terms of the
SAP suite of products or MI-NET or the data-communication network has good potential for
further exploitation. “When the users start basic use of IT tools, they uncover more areas
where the same set of tools can deliver more benefits. The same applications can be used for
different sets of internal customers who are not tapped till now,” says Pendse.

Marico is now working on the last mile—capturing data at the tertiary or retailer end. The
company plans to arm its distributor sales representatives with handheld devices with a
customised application that will allow them to record the stock position at the retailers’ end on
a weekly basis and then feed it into MiNet at the distributor office. Consumer complaints can
also be fed in and acted upon in record time. But the most important aspect of capturing this
data for the company lies in the market data generated and the potential to link the entire
supply chain to consumer off-take

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