Role of IT & Operations in FMCG Industry

Roles of IT & Operations in Mondelez International Cadbury India

Veer Gupte
IBS Business School !G!M IBS Business School Mu"bai Mu"bai India #eer$upte%$"ail&co"

So"esh '("era
IBS Business School !G!M IBS Business School Mu"bai Mu"bai India so"esha("era%$"ail&co"

AbstractThis paper is a research document to study the Role of IT & Operations in FMCG Industry with the help of Mondelez International Cadbury In our study! we ha"e #i"en information on how Cadbury uses Information Technolo#y and Operations Mana#ement to achie"e its Mission and $ision Cadbury has always been a pioneer in the Chocolate and Confectionery Industry Cadbury is the Mar%et &eader in this se#ment I& I)TRO*+CTIO) (HEADING 1) The fast,"o#in$ consu"er $oods -FMCG. sector in India is the fourth lar$est sector in the econo"y& It also called the consu"er pac/a$ed $oods sector& The FMCG sector in India has "ar/et size in e0cess of +S1 23&2 billion as of the year 4524& The FMCG sector in India had a $ro6th rate of 278 in the year 4522& The FMCG Industry has outperfor"ed all other sectors contributin$ to India9s G*!& In our paper 6e ha#e considered Mendelez International Cadbury to hi$hli$ht the role of Infor"ation Technolo$y -IT. and Operations in the FMCG Industry& 't Cadbury Mission: Financial Scorecard (udiciously reinforced by our !riorities Co""it"ents and Culture& Core $alues: !erfor"ance ;uality Respect Inte$rity and Responsibility Cadbury India <td& is a part of the Mondel=z International $roup of co"panies and is in the business of creatin$ a delicious 6orld , producin$ delectable chocolate confectionaries $u" and candy products and popular be#era$es and foods that include "any of India>s "ost popular and trusted food brands& Cadbury India has been in India for o#er ?5 years ha#in$ started in 2@AB as an i"porter of chocolates& Since 2@?7 Cadbury has pioneered and enhanced the de#elop"ent of cocoa culti#ation in India& CeadDuartered in Mu"bai Cadbury India has sales offices in )e6 *elhi Mu"bai Eol/ata and Chennai and si0 "anufacturin$ facilities at Thane Ben$aluru Cyderabad Induri -!une. Malanpur -G6alior. and Baddi -Ci"achal !radesh.&

O#er the years Cadbury ha#e 6on our custo"ers> hearts and achie#ed a F5 percent "ar/et share in the chocolates cate$ory in India& Cadbury fla$ship brand Cadbury Dairy Milk (CDM) is considered the GGold StandardG for chocolates , the pure taste of CDM defines the chocolate taste for the Indian consu"er& The FMCG Industry has out$ro6n any other sector in ter"s of the "ar/et penetration and operations acti#ities& FMCG sector has hi$h potential in the rural "ar/et& The #olu"e $ro6th for the sector has co"e do6n to 4&7,3 percent co"pared to B,25percent $ro6th seen last year& On the other side one sees the consu"er price inde0 -C!I. inflation double di$it in urban India& So consu"ers are really tryin$ to balance their e0penditure and loo/in$ at their inco"e they "ana$e their "onthly balance sheet& They ha#e actually postponed a lot of their consu"ption habits& 'uto"oti#e sales ha#e $one do6nH they are delayin$ their durable purchases& Iithin the FMCG sector 6e see that personal care is really slo6in$ do6n& Food consu"ption is still up& The real stand out despite all the slo6 do6n is rural India and "iddle India 6hich is really 2 to 25 la/h to6ns& So they are relati#ely $ro6in$ faster and in so"e 6ays are the bell6ethers for the FMCG $ro6th durin$ the slo6 do6n& Cadbury India has al6ays loo/ed at creatin$ brand #alue and hi$h brand recall& Cadbury has an opportunity to e0pand its "ar/et into the rural "ar/ets& In 4524 Cadbury has created 7555 ne6 stoc/ists and superstoc/ists in Rural areas& Cadbury has e#ol#ed its Infor"ation Technolo$y all dra6bac/s it faced in operations ha#e been re"o#ed fro" its current IT syste"s& Cadbury 6as incorporated in India on 2@ July 2@AB& Currently Cadbury India operates in fi#e cate$ories K Chocolate confectionery Be#era$es Biscuits Gu" and Candy& So"e of the /ey brands are Cadbury *airy Mil/ Bourn#ita 7 Star !er/ Bourn#ille Celebrations Ge"s Calls Lclairs Bubbaloo Tan$ and Oreo& Its products

include Cadbury *airy Mil/ *airy Mil/ Sil/ Bourn#ille 7,Star !er/ Ge"s -a #ersion of M&M>s. Mclairs Bourn#ita Celebrations Bil/ul Cadbury *airy Mil/ Shots Toblerone Calls Tan$ and Oreo& II& MMTCO*S TO IM!ROVM IT & O!MR'TIO)S Information Techolo y and !"eration# are the backbone of any or ani#ation$ Cadbury relie# on %ariou# o"eration# throu h it# IT #er%ice#$ A$ !"eration# at Mondele& International Cadbury Cadbury is /no6n to be one of the best run co"panies in India& Credit $oes to its operations& Operations Mana$e"ent at Cadbury is ta/in$ into consideration its factory locations 6arehouse locations stoc/ deli#ery and production processes& Cadbury Factories in India: Thane !une Ci"achal !radesh G6alior Cyderabad Ban$alore& Cadbury Cocoa Operations: *harapura" Out of all the factories in India the factory at Baddi Ci"achal !radesh is the lar$est production facility for Cadbury& Operations include different processes in all the factories 6hich are e0actly sa"e at all the factories across the $lobe& 'roduction processes(

Total )uality Mana#ement( 'ny lapses in the Duality control at any of thesta$es li/e no proper dryin$ o#er roastin$ not $ettin$ proper consistency can result inDuality proble"s in the chocolate& Iater e0tre"e te"peratures and i"proper pac/a$in$ and stora$e are the archene"iesof chocolate& The only Duality proble" e#er to ha#e beenassociated 6ith Cadbury is the 6or"contro#ersy that hit Maharashtra in due toi"proper stora$e and pac/a$in$&

T;M ensures that the products that Cadbury produces: tastes $ood to the custo"ers is appealin$ to the custo"ers custo"er co"plaints are sol#ed listenin$ to custo"ers "a/in$ continuous to their products&

'ast 'roduction 'rocesses( Cazard 'nalysis and Critical Control !oint -C'CC!. : Means of pre#ention rather than finishedproduct inspection& Good Manufacturin$ !ractices -GM!.: GM!s are $uidelines that outline the aspects of production that 6ould affect the Duality of a product& !atho$en testin$ syste"& Operate audited Duality "ana$e"entsyste"s& Guarantee that our custo"ers andconsu"ers co"e first& Maintain a ri$ht first ti"e culture& 'ssi$n clear "ana$e"ent accountability& Ior/ 6ith our supply chain and business partners& etc

Process followed while making chocolate:

Car#est Fer"entation *ryin$ Cleanin$ Roastin$ Crushin$ and shellin$ Blendin$ Grindin$ Eneadin$ Rollin$ Conchin$ !ac/in$ and pac/a$in$

'$ Im"ro%ement# in (roduction "roce##e#) 'roducti"ity impro"ements( Replacin$ 'ir Co"pressors Chillin$ syste" "achines at Manufacturin$ and !ac/a$in$ lines& Technolo#ical Chan#es( Rin$6ood Victoria !lant Identifies "any opportunities for "a/in$ inno#ation and technolo$ies that 6ill reduce the 6aste fro" the Chocolate&

*i"ersity in the +or%place( ,*i#ersity & Inclusi#enessN is the punch line on its 6ebsite for creatin$ a 6elco"e Ior/place for e#eryone& -ppro"ed by the Food and -#riculture Or#anisation of the ./0s +orld 1ealth Or#anisation Incorporate elements of the International 2tandards Or#anization0s )uality Mana#ement 2ystem Cadbury monitor the production process by usin# Total )uality Mana#ement 3T)M4 Cadburys ha"e super"isors that monitor the machines!the other wor%ers and the products C$ Internal Con#traint# The e0istin$ scale and capacity of buildin$s and "achinery used in the production process-Good. The s/ills and trainin$ of the labor force-Bad. The a#ailability and fle0ibility of the labor force-Bad. 'ccess to an abundant supply of parts and ra6 "aterials-Good. Ti"e-Good. Finance-Good.

cities& This has resulted in better In#entory Turno#er and hi$her )et Sales& Operations related to the better brand #isibility such as OVisi,coolersN OMerchandiseN etc& ha#e been pro"oted& Visi,coolers are the coolers that are seen at #arious outlets for stora$e of Cadbury Chocolates& They are pro#ided to the Top Outlets dependin$ on the Sales and Outlet throu$hput& Visi, coolers are produced by third party #endors li/e OVoltasN& Such facilities pro#ided to the top outlets ha#e helped the outlets to store "ore in#entory for lon$er period& Cadbury has al6ays loo/ed at e0pandin$ its operations by inte$ratin$ IT in the syste"& Cadbury India shall soon start 6or/ on the bi$$est production facility in 'sia,!acific in 'ndhra !radesh& Statistical correlation bet6een the adoption of the #alues of T;M and successful Duality "ana$e"ent& One of the core #alues of the or$anization is to put Duality and safety at the heart of all their acti#ities their products custo"ers partners and perfor"ance& Total ;uality Mana$e"ent is one of the "ain reasons for the success of the co"pany&

E$ Information Technolo y Infor"ation Technolo$y -IT. plays a /ey role in the success of Cadbury India& Currently Syste"s 'nalysis and !ro$ra" -S'!. and Mnterprise Resource !lannin$ -MR!. are bein$ successfully used at Cadbury& ' lot of the production processes hea#ily sepends on the IT Soft6are that is e"bedded into the robots and #arious production "achinery& 5R' IM'&5M5/T-TIO/ M5T1O*O&OG6 C1-&&5/G52 Cadburys India 6as the #ery first or$anisational unit allo#er the 6orld to i"ple"ent MR! in its processes& The i"ple"entation process in India 6as started fro"scratch as they 6ere the first to i"ple"ent that in allo#er $lobal application of the Cadbury& They tried to inculpate the best practises of the co"pany and triedto build on the stren$ths the past syste"s in ne6 MR!syste"s& Cadburys /ne6 that for i"ple"entation 6ill they 6illbe standardizin$ the processes in 2? different locations& The MR! initiati#e 6as to brin$ about a co"pleteinte$ration of the "a(or processes in the business& The"a(or processes bein$ procure"ent syste" financesyste" the Cu"an Resources and other depart"ents& Cadburys ha#e four branch operations and 23 "anufacturin$ operations and each had their o6n syste"s runnin$ in isolation& The finance depart"ent 6as the only one co""on to all& MR! ser#ed as an inte$ratin$ syste" and a solution for theirthen e0istin$ decentralised "odel&

D$ !"eration#* (roduction and (roduction +ine Operations , The core acti#ities of a business& 'roduction , 'cti#ities in#ol#ed in creatin$ a product& 'roduction line , a set of seDuential operations established in a factory 6hereby "aterials are transfor"ed in order to produce an end,product or co"ponents are asse"bled to "a/e a finished article& Cadbury India has #ery fe6 hu"an resources 6hich are in#ol#ed in production of the final product& Robots "achines con#eyers rotators Infor"ation Technolo$y Soft6ares etc& ta/e care of all different production lines& Cadbury de#elops its final product in sta$es& 'part fro" the production processes Cadbury India has de#eloped their operations in local "ar/et and deli#ery syte"s to aid better in#entory "o#e"ent dispatch and help in $ro6th of sales& Cadbury India has strate$ically placed all the 6arehouse facilities near the Tier 2 Tier 4 Tier 3

MR! ser#ed as an inte$ratin$ syste" and a solution for theirthen e0istin$ decentralised "odel&The i"ple"entation "ethodolo$y adopted by Cadburys happened in 2@@7 and they 6ent ahead usin$ a bi$ ban$ approach& They did the i"ple"entation co"pany 6ise&Cadburys had one "a(or e0pectation fro" MR! ie& IT to help the "ana$e"ent 6or/ better than before 6ith the e0istin$ syste"s in place&In order to carry out the MR! i"ple"entation Cadburys had to ali$n 6ith an e0ternal #endor& For MR! partnership 6ith Sie"ens and for infrastructure "ana$e"ent partnership 6ith IBM& Initially Cadburys 6ent 6ith Finance and then subseDuently to production and supply chain& They6ent for a function based bi$ ban$ approach in India and then i"ple"ented the 6hole "odule all acrossco"pany in span of 2 year so it can be said as bi$ ban$ as 6hole& It 6as co"pletely top "ana$e"ent dri#en& Cadburys ha#e a proper MIS no6& *ata is entered only once& The entire syste" $ets updated& One can see theconsolidated data fro" any6here and "a/e decisions&Fro" "anual entries it has beco"e a totally syste" dri#en data entry no6& Ihile i"ple"entin$ the MR! syste"s the co"pany has built it upon the past stren$ths of the co"pany thereby not losin$ out on itsco"petiti#e ad#anta$e and at the sa"e ti"e saddlin$ itself up for a fast paced $ro6th& The initial i"ple"entation too/ ti"e and then the successi#e i"ple"entations too/ lesser ti"e and cost and there is a hu$e ad#anta$e in sa#in$ cost 6hile in the i"ple"entation phase itself& The reaction fro" co"petition does not "atter in this because thisis not a chan$e that 6as ad#ertised to the "ar/et& This is an internal process restructurin$ and 6as a 6elco"e chan$e 6ithin the co"pany 6hich badly needed the chan$e& The co"pany also has built in a robust re$ular feedbac/ syste" to"onitor the chan$es and chec/ if they $o accordin$ to the initialplan& The entire i"ple"entation is cross functional and hence it is i"portant that there is a hi$h increase in the efficiency& The MR! #endor 6as also selected fro" a"on$ the best in class #endors 6hich helped the process occur in a strea"lined fashion and a#oided any possible chances of hiccups durin$ the initial i"ple"entation phase& The syste" has also been deployed up to the #endors& They ha#e aportal called #endor connect 6here they can see their in#entory "o#e"ent and "a/e plans accordin$ly& Cence the restructurin$ happens not only internally but also across to the supplier 6hich 6ill add on to the benefits that are accrued& It 6as considered allo6 cost and hi$h result i"ple"entation 6hich by itself hi$hli$hts the success and the benefits& Syste" 'nalysis & !ro$ra" -S'!. has helped Cadbury forecast its production sales lo$istics in#entory etc& S'! is used to enable s"ooth flo6 of production processes 6ith (ust in ti"e principle& 'll the Functional *epart"ents in Cadbury ha#e

been brou$ht on to a sin$le platfor" usin$ S'!& 'n e"ployee data can be fetched fro" any 6here in the 6orld& S'! has enabled the co"pany to be "ore bounded internally but uni#ersally accessible& S'! has been a /ey co"ponent for s"ooth inte$ration of Eraft Foods ta/eo#er 6ith Cadbury& Both Eraft and Cadbury rely on syste"s pro#ided by S'! one of the 6orld leaders in enterprise resource plannin$ -MR!. syste"s& S'! also pro#ides financial plannin$ and hu"an resources -CR. syste"s called MR! Financials and MR! Cu"an Capital Mana$e"ent respecti#ely& Eraft up$raded all of its S'! syste"s in 455B& Cadbury on the other hand has had a tryin$ ti"e 6ith S'!& Before de"er$in$ fro" Sch6eppes Cadbury reported that trouble 6ith its S'! i"ple"entation had i"pacted on perfor"ance and contributed to its P24" deficit& It see"s to ha#e been sorted out since& Eraft e0pects to spend PB4F" inte$ratin$ the t6o co"panies> production "ana$e"ent and IT syste"s and a lar$e part of that 6ill probably $o to S'! or one of its inte$ration specialists& Ob#iously it is /eepin$ the details to itself and S'! is notorious for $i#in$ a6ay as little as possible e#en to its custo"ers&

III& RMS+<TS Role of IT and Operations Mana$e"ent has played a /ey role in Cadbury to enhance its "ar/et share& S'! has enabled Duic/ response to any chan$es reDuired in the syste"& IT has follo6in$ roles in Cadbury: 74 84 94 :4 ;4 <4 2ecurity 'roduction 'rocesses 2-' 5R' 5mployee Mana#ement 2ystem Mana#ement Information 2ystem 3MI24

1ow to handle a mer#er The initial 6or/ should happen lon$ before any "er$er or acDuisition is planned& ' co"pany that is $ro6in$ should ensure that its IT is fle0ible and able to support its $ro6th plans& If $ro6th in#ol#es buyin$ another co"pany the due dili$ence process should include an assess"ent of the tar$et co"pany>s IT to Duantify any ris/s to business continuity outline the reDuired operational and capital e0penditure for the first 24 "onths follo6in$ the acDuisition identify the opportunities for syner$y and define the hi$h le#el inte$ration plan&

Sounds $ood but it>s an unfortunate fact of business life that "er$ers and acDuisitions are often contro#ersial 6hether it>s t6o s"all co"panies "er$in$ a"icably or a hostile ta/eo#er of a lar$e corporation by an e#en lar$er one the tendency is for ne$otiations to be conducted by a #ery s"all $roup of people often (ust the proprietors in the case of s"all co"panies or a handful of directors and the chief financial officers in the case of lar$er ones& The IT "ana$er -CIO in a lar$e or$anisation. is often one the last to /no6& Co6 IT inte$ration proceeds after the "er$er or acDuisition depends on "any factors not least the relati#e sizes of the co"panies& Ihere a lar$er co"pany ta/es o#er a s"aller one it is co""on to e0port data fro" the s"aller co"pany syste" and "er$e it into the lar$er one& Iith SMMs this can be relati#ely strai$htfor6ard thou$h ti"e and "oney 6ill ha#e to be spent retrainin$ the staff fro" the old co"pany to use the ne6 syste"& Iith Eraft and Cadbury the principle is the sa"e but the su"s a lot bi$$er& The fact that both rely on S'! $i#es the" a sli$ht ad#anta$e but S'! and other MR! syste"s are usually hea#ily custo"ised to suit different situations so it>s not $oin$ to be li/e a Gco"pare docu"entG operation on t6o 6ord processed files& Operations Mana$e"ent 6ith Total ;uality Mana$e"ent -T;M. has helped Cadbury deal 6ith #arious issues related to production Duality life cycle of the product& Cadbury in India is the "ar/et leader 6ith "ore than F5 8 of "ar/et share& Cadbury is no6 loo/in$ at Cloud Stora$e of data 6hich needs to be accessed $lobally& Thus sa#in$ ti"e and also "inisin$ cost& The Mco,Friendly approach is #arious operational acti#ities can help the co"pany $ain $ood Corporate Social Responsibility -CSR. Ratin$s& IV& *ISC+SSIO)S The FMCG Industry can easily be related to 6hat Cadbury India has been able to do 6ith the help of IT and Operations& It is i"portant for any or$anisation to consider the constant up$radation of its IT Resources and also its Operations& ' $ood MIS can 6or/ li/e an open library to the e"ployees of any or$anisation& Co6e#er care should be ta/en so as to "aintain pri#acy of the sensiti#e data& Thus 6e conclude that IT and Operations play a /ey role in the FMCG Industry& FMCG or fast "o#in$ consu"er $oods is a rapidly e0pandin$ industry 6ith an e#er,$ro6in$ de"and and "any stores rely on FMCG as a core part of their business& The lo$istics of a FMCG business "ust be perfectly scheduled and e0ecuted in order to /eep the business runnin$ properly& Custo"er ser#ice is also an area 6hich usually sees the benefits of FMCG IT Mana$e"ent as reduced costs are passed to consu"ers as Duality i"pro#es& Other /noc/,on

effects of IT control of production is effecti#e "ana$e"ent of suppliers 6hich aids or$anisation 6ithin the co"pany and can conseDuently create a solid 6or/in$ at"osphere 6ith hi$h e"ployee "orale& S'! and other MR! syste"s are usually hea#ily custo"ised to suit different situations& ' co"pany that is $ro6in$ should ensure that its IT is fle0ible and able to support its $ro6th plans& 'CE)OI<M*GMM)T This paper is a research 6or/ to hi$hli$ht the role of IT & Operations in the FMCG Industry& Ie ha#e considered Mar/et <eader Cadbury for co"pilin$ our study& The report shall help students understand the i"portance of IT & Operations& Or$anisations should focus on constant up$rade of the syste"s& RMFMRM)CMS
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