Supply Chain Management

Organization: Godrej Industries (GCPL) Group members: Abhishek Podar 202 Chetan Devadiga 208 Ronak Desai 232 Sameer Thakkar 236 Sudeep Nair 243 Sachin Gaikwad - 235

FMCG Sector
FMCG are products that have a quick shelf turnover, at relatively low cost and don't require a lot of thought, time and financial investment to purchase Fast Moving Customer Goods is in opposition to consumer durables such as kitchen appliances that are generally replaced less than once a year FMCG is characterized by strong presence of MNC and well established distribution network. The intense competition between the organised and unorganised segments operating at low operational cost.

Market Analysis

SIZE Distribution Channels

Growth

Risk

Profit

Growth Prospects
The FMCG market is set to triple from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. The FMCG sector witnessed more than 50 per cent growth in rural and semi-urban India in 2010. Penetration level as well as per capita consumption in most product categories is low indicating the untapped market potential , hence the market potential of growth is very high. Burgeoning Indian population, presents an opportunity to makers of branded products to convert consumers to branded products.

With the retail gaining momentum, the FMCG prospective growth can be realized with increase in sales volumes.

Organization: Godrej Industries (GCPL)

GCPL
GCPL COMPANY DETAILS Godrej Consumer Products Limited (GCPL) Company Profile Corporate headquarters Local office address Mumbai, India Godrej & Boyce Mfg. Company Ltd., Pirojshanagar, Eastern Express Highway, Vikhroli, Mumbai - 400079 950 Rs. 6573.2 million (146 mn USD) Consumer Packaged Goods

Number of employees Revenue Manufacturing sub-segment

Main business groupings

Key manufacturing locations/facilities

The business groups are based on Product Lines

Malanpur (M.P.), Guwahati (Assam), Silvassa (U.T.) and Baddi (H.P.)

Products

Toiletries, Hair Care, Household Care, Fabric Care & Body Care

URL

www.godrejcp.com

SWOT ANALYSIS
Strength
113 Years old reputed Brand Name Easy access to High Grade natural resources Well established distribution networks Large Financial reserves Presence of well know brands in FMCG sector

Weakness
High level of Centralization Low exports level High operational cost

Threats Opportunities
Untapped Rural market Untapped emerging African and Middle East market Increase in purchasing power of consumers Large domestic market of 1.1 billion HUL, P&G, ITC capturing domestic market Slow down in rural demand Tax and regulatory structure Seasonality

Poters 5 Force Model

Implication of Porters Model to FMCG sector

Barriers to Entry Huge investments in promoting brands Setting up distribution network Intense competition Some of the companies are integrated backwards which reduces the suppliers clout Manufacturing is largely outsourced

Bargaining Power of Suppliers

Bargaining Power of customers

In case of branded products, there is little that the consumer can influence , but intense competition within FMCG companies results in value for money deal ( e.g. Buy one and get one free)
Competition is faced from both domestic players, MNCs and also from cheaper imports Price wars are a common phenomenon

Competition

Distribution channel

Existing distribution channels

Can be described by how direct they are to the customer in other words how many channels it take the goods to reach customer.

Trends and emerging channels

New channels can offer the opportunity to develop a competitive advantage shorten the channel length.

Channel power structure

For example, in the case of a product having little brand equity, retailers have negotiating power over manufacturers and can capture more margin.

Supply Chain Management

..Supply Chain Management is

Getting the right things to the right places at the right times, for profit ..

New information and communications technologies have revolutionized todays supply chains, making them extraordinarily better, faster, and cheaper

Godrej Consumer Product Supply Chain Management

Supply Chain for GCPL

It consists of movement of Goods from the Plants (Factories)to the Plant warehouse (PWH) to Regional warehouse (RWH)

From RWH, the Goods move to CFA and then to Distributor and then to Retailer and finally to the Customer.

Value Chain Analysis

Value chain analysis Primary Activities by GCPL

Inbound Logistics
Quality raw material available Palm oil is now importable in India duty free GCPL locks in key raw material to hedge profit

Operations
Godrej hopes to maintain margins relying on certain internal economies. For example, it manufactures fatty acids, used in soaps, in-house and enjoys economies of scale in buying vegetable oils. Vegetable oil prices are likely to remain soft this year With Manufacturing Plants in Katha (HP), Guwahati (ASSAM) and Sikkim, the company will get 100% excise exemption for 10 years, 100% tax exemption for 5 years and 30% for another 5 years

Outbound logistics A demand driven forecasting and replishment strategy that will correlate real time information on consumer behavior patterns with sales and supply information

Sales & Marketing Effective distribution network Effective brand awareness using Advertisement

Servicing There is no after sales service. Defective products are replaced.

Problem/Opportunity facing the Company

For GCPL, the thrust on IT started about a decade back, when as a group it decided to adopt ERP across the enterprise. In 1995-96, GCPL was one of the very early companies in India to adopt ERP. It selected MFG/PRO as the ERP package In 2000, GCPL decided to look beyond ERP & leverage the Internet to the maximum possible extent. While ERP MFG/PRO had helped GCPL significantly to gain benefits within the organization; the new initiatives were to connect the business partners outside the organization. MFG/PRO has a de-centralized architecture and doesnot support B2B, dealer or supplier networks. Also MFG/PRO has not kept pace with the market developments.

At this time, Accenture was hired to prepare the 'Strategic IT Investment roadmap' for the next five years. This requirement gave rise to a new initiative in the form of SAMPARK for connecting distributors and another initiative called SAHAYOG to connect to the suppliers

Working of SAMPARK
The underlying business concept behind this IT initiative is based on replenishment. It monitors the inventory levels at distributor end and based on that it suggests a replenishment plan The distributor has to furnish information on sales to CFA. The information on current stock levels and Goods-in-transit flows from CFA to distributors as also to GCPL The system considers all the above three things to determine the order level by considering the replenishment logic To convince them, GCPL made a team of sales manger & 4 Officer Executive level people (one for each region) and they were made a part of the SAMPARK initiative Initially the initiative was piloted on 25 distributors and was used for day-to-day billing, invoicing and payment processing. At the back-end, GCPL developed a replenishment engine based on Broadvision platform The current system works on data from 32 CFAs and 450 distributors. The 450 distributors have Internet connection and the 32 CFAs are connected on WAN. To ensure that data is properly collected, GCPL has deployed middleware based on IBM platform i.e. (IBM MQ Series). This data is collected centrally into the Broadvision database. Broadvision application layer has got the replenishment formula (SAMPARK Order Replenishment System).

Implementation/Deployment:
TABLE 2 SAMPARK Project Implementation Details Scope Implementation strategy/approach Cover 450 Distributors spread across India Vendor driven initiative (WIPRO), incremental and Phased approach , use of pilot sites

Timeline
Resources and team structure Description of solution components and suppliers of the different components IT investment amount

18 months from conceptualization to the first roll-out to a Distributor.

Sampark: Internal Team of 5 people. Business led proect, Consists of Sampark DMS(Distributor Management System); Vendor-Botree Software International Ltd.Chennai Component-Sampark Web site ; VendorBroadVision SAMPARK: Software cost=Rs 4.5 mn (0.1 mn USD); Hardware cost= Rs 10 mn. (0.02 mn USD) SAHAYOG: Rs 2 mn (0.04 mn USD)

SAHAYOG (connects Suppliers)

GCPL has extended Sampark to the suppliers and this initiative is called SAHAYOG. Based on distributors sales, CFA generates orders and informs regional warehouse on the quantity that is shipped to the CFA. Thus, CFA inventory level is also maintained at minimum The data from the Regional warehouse is shared with the Plant warehouse and based on it, the Plant warehouse decides on the quantity that is to be shipped to the Regional warehouse Based on this, the manufacturing plants derive the quantity that is to be shipped to the plant warehouse. This information helps GCPL to finally decide on the quantity of different products to be produced at each of the plant Based on this, the supplier is informed of the quantity that is to be dispatched Thus for GCPL, SAHAYOG is like an extension of SAMPARK. Also now production is done on the basis of demand. Also, now there is no over production. Production is matched to the demand. And thus the entire supply chain is covered

SAMPOORNA (connects Retailer)

In this, 0.1 million retailers are to be connected. The system will be based on replenishment logic again. Therefore, the retailers will also come into the current IT architecture

Thus it is a trio of SAMPARK-SAHAYOG-SAMPOORNA. And a real-time visibility for total end-to-end distribution would be there for GCPL across the Supply Chain Going forward, GCPL is also planning to change its ERP from MFG/PRO to SAP R/3.

Benefits

SAMPARK Improvement in quality of Service Reduction in lead time 60% reduction in time spent on collection and compilation of data from distributors Automation of claims data preparation Automated sales MIS for the distributor area Therefore, increased availability of field working time SAHAYOG: Improved Order tracking of Vendors/suppliers Reduction in dispatch lead time Quick settlement of outstanding SAMPOORNA Extending the replenishment to the last link in the supply chain, thereby improving the efficiency 30% time save in Order taking process at the retailer Increase in accuracy level of billing information. Better reach of all the range of Products.

2nd Intiative by GCPL

One more initiative known as Godrej IT was started. This initiative led to creation of employee portal. Godrej IT is the company intranet and is like a virtual workplace encompassing all the workflows like performance appraisal, leave and reimbursements into it. It also helps the employees located away from Head Office to know what's happening in the organization. It also helps in sharing best practices, learnings, events, updates etc across the organization. All the above initiatives and the current IT investments at GCPL align with the strategy

It also helps in sharing best practices, learnings, events, updates etc across the organization
SAP was implemented at a central system which replaced the old ERP from MFG/PRO keeping the business logic of the supply chain same.

Supply Chain @ GCPL

Initiative taken to improve Performance GCPL

Create competetive advantage through supply chain Create value from Operations To get Systems ready to address future needs Create World class Supply chain organisation Leveraging IT effectively