Care and Concern retailers.
For FMCG companies, this is the most critical
Dabur commenced its operations in 1884 when Directors.
S.K. Burman started mail order sales of the companys
products. Today, Dabur is a multilocational-multiprduct
enterprises. In the past five years, Dabur grew at a
compounded annual growth rate. But to go any further from
here to become the largest Indian FMCG, with a sales
turnover of Rs. 2,000 crore by the year 2003, the company
has to look into its internal process in general and logistical
operations in particular in order to maintain the pace of that
kind of growth, especially in the global competitive
environment.
Consider logistics. When a Dabur dealer wanted stocks from
any of the companys 19 branches across the country, the
branch took 6 days to process the order. It then took an almost
equal number of days to ferry the goods from its godowns.
Very often, the godowns did not have the right stocks. Since
the goods used to be sent by truck, and truckers wanted full
truckloads before they started rolling, at time, the goods
would remain at the transporter godown for a week.\. Dabur
distributors also used to pay the company through an
elaborate system of vouchers, and that too almost never on
time.
Similarly, there was little coordination between production
procurement and sales. Neither were Daburs forecasting
technique precise and it used to be an annual procedure.
Feedback from the companys sales department would be
jointly. Again, the branch heads would request for fresh
stocks based on the estimates which were part statistical and
part gut feel. T his, at times, led to huge inventory pile-ups.
The finished goods inventory cost is Rs.118 crore and the
working capital cycle used to be 160 days against an industry
average of 60 days.
The commercial department of the company looked at after
all these activities and prepared six copies of challan one
copy for the department itself, one copy for the warehouse,
one copy for the information cell, two copies for the branch,
and one copy to move with truck.
It was only on 2nd November 1988, when he 114-year old
Dabur India reinvented itself. Breaking over a century of
tradition, executive powers of running the company were
handed over to Ninu Khanna, an outsider appointed as CEO,
former Marico General Manager (commodities) Mr. Shyam
Shanker, as head of Daburs purchase and procurement
planning cell, and exchange-HLL man Mr. G. Kashinath in
the central supply chain cell (CSCC).
Dabur began to set right its entire supply chain from the
buying of raw materials to the selling of finished goods at the
aspect of business. The objectives of efficient supply chain
management are threefold one, have the right stock, at the
right place, at the right time; two, keep inventories down; and
three, do all this with the lowest operational costs.
In fact, Dabur hired consulting Firm McKinsey & Co.
primarily to fix its internal processes, which have initially
been on supply chain front, spanning the five aspects of
demand forecasting, production planning, logistics, order
processing and procurement planning. The present
performance of logistics and supply chain system is as
follows
i. Logistics Systematized forecasting method and
branch sales staff encouraged to collect orders from
geographical routes;
ii. Forecasting A three-month rolling forecast is made
with firm productions for one month and for the
other two, tentative. This is also done SKU-wise;
iii. Vendors Vendor appraisal systems are being put in
place. Every month, vendors are rated on the four
parameters of cost, quality, delivery and service.
Vendors can be dropped if found unsatisfactory;
iv. Inventory Finished goods inventory were already
down from 52 days to 40 days;
v. Production Planning Indents replaced by a
replenishment model which uses available
information to control both manufactured and transit
of goods to the marketplace.
When Dabur benchmark itself against other FMCG Cos like
HLL, P&G, Cadbury India, etc., it realized where it stood.
Normally, a stock replenishment cycle is of about 2 weeks in
the FMCG industry. Furthermore, every time Dabur failed to
restock a dealer on time, the Co lost sales. For example, HLL
tracks the number of times in C&F agents fail to restock
dealers (which incidentally happened only once in 10
attempts). Dabur did not even know the number of times its
dealer returned empty handed because there was no scientific
system of knowing what is happening.
Questions
1) Being the head of CSCC, identify the major logistical
problems associated with Dabur India Ltd.
2) Suggest a detailed logistics and supply chain system
in order to reduce the replenishment cycle time and
working capital cycle.
3) How can an information technology solution to
L&SCM in the implementation of a new strategy
facilitate in the improvement of productivity and
efficiency?
4) What sorts of restructuring would you suggest?
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