Group Project on Marico Bangladesh Limited

Group Name: Group 2

Semester: Spring, 2017
Course: MGT 314.13
Course Instructor: Shah Iftekhar Hossain

Project Manager:
Md. Rafid Imran - 141-1312-630
Mobile No: 018-56333-304
Email: rafid.imran007@gmail.com

Group Members:

Mohammad Imran Uddin 131-0148-030

Nasifur Rahman Sharif 141-0148-030

Abu Salah Mohammad Nasim 141-0263-030

Fakhrul Islam Bhuiyan 143-1160-630

Anika Nawar Oishi 151-0067-030

Anisur Rahman 151-1429-030

 Executive Summary

Marico Bangladesh Limited, a concern of the global company Marico India Limited

was established here in the midst of 2000. With a view to serve Bangladeshi consumers it has

successfully secured the peak of FMCG hair oil industry with a growth of 86% market share.

Parachute Coconut Hair oil at present stands as the top selling hair oil in the market.

This report on the very company is intended to portray a comprehensive idea of its

operations management. The purpose of this report is to provide a clear idea of how

operations work in the industry Marico Bangladesh operates in. The tone of this project is set

as such that anyone with a basic idea on operations management can understand its content

with ease.

This report has been fragmented into major topics including – Company Products,

Operations Strategies, Implemented Operations Concepts, Forecasting Methods, and

Recommendations. The recommendations also contains how Marico Bangladesh can make

improvements in certain aspects of their operations; such as better quality control, further

automation in their process, better use of human resources, implementing barcode for product

identification. The recommendations do not imply any suggestion without the existence of

respective trade-offs. However, it is believed that with implementations of the given

recommendations, the company will excel in the long term.

By implementing the recommendations provided, Marico Bangladesh can aim for

finer operations management and consistently maintain its market position. Hence, we

believe that through introduction of strategic tools like barcoding, further automation, and

SPC the company will thrive to be the industry benchmark and be well off in achieving 6

sigma model in the long term.

 Marico Bangladesh – Brands and Products

With one of the largest distribution network and production facility, Marico

Bangladesh stands among the biggest FMCG companies in Bangladesh at present. This has

led us to seek how they perform operations given the fact that their success lies greatly on

operations management. Marico Bangladesh incorporated in this country in 1999 with their

flagship brand – Parachute Hair oil. However, over the years the company has expanded their

brand portfolio, with dominance in Value Added Hair Oils (VAHO) segment of the market.

In this section of the report we take a brief look at their products.

Parachute Hair Oils: Parachute hair oil is Marico’s flagship product in Bangladesh

as well as the leading hair oil brand in the country. The product is said to be available in more

than 7 lack retail store with the help of a robust distribution network. The Parachute family

consists of other sub-brands like Parachute Advanced - Extra Care, Beliphool, and Cooling

Hair Oil.

Parachute Advanced Body Lotion: Marico offers two different variations of body

lotions in the market, namely - Parachute Advanced Deep nourish and Summer Refresh.

Mediker Plus Anti Lice Shampoo: The only shampoo product from Marico

Bangladesh. Although not the most popular product in the shelves, Mediker has a substantial

and progressive consumer base.

Set Wet: Hyped most within the youth, Set Wet has taken a good position in the

market with its deodorant and hair gel.

Saffola: The Saffola brand consists of edible oil- Saffola Active and Oats- Saffola

Oats. This product family promotes healthy lifestyle.

Other Hair Products: Livon and Nihar Shanti Amla are two of their other brands.
 Existing Operations Strategies

Quality Based: Marico Bangladesh applies quality based strategies as opposed to

time based strategies, for most of their products including their major product – Parachute

Coconut Hair Oil. According to our analysis, this is a better choice for the production

company due to their stable rate of production over a year.

As an evidence of their strategic efforts we have found Parachute Coconut Hair oil to

be the best quality hair oil in the market with a whopping 82% market share and first on the

list. Through primary data (interview) we have come to know that Marico Bangladesh aspires

to hold if not progressively improve their quality.

Economies of Scale: Being one of the major Fast-Moving-Consumer-Goods (FMCG)

Company, Marico aims for economies of scale. That too not only in their production process

but their supply chain. According to the interviewee:

“We used to have four different bottle vendors before, which has later been reduced

to two vendors. This has led to both standardization and economies of scale for costs. We

believe that a bit of diversification that comes from two vendors and the economies of scale

from this minimization gives us a sweet spot.”

We retrieved from this strategy that it’s not about extreme ends but the balance of a

healthy process that helps a business to rise above without making unnecessary costs.

Global Strategy from Home Country: The underlying baseline strategy of Marico

Bangladesh comes from its country of origin – India. According to their supply chain

manager, this has been set to maintain consistency and global standard.
 Systems Approach: Marico Bangladesh has taken up systems approach in recent

years due to identifying effects of less-than-standard quality from departments such as pre-

production processing to bottle outsourcing. The company is at present on their way to

achieving systems approach. As evidence, they are having a factory renovation to include a

better quality control unit that will be sufficient enough to take the production tolerance from

- 3 sigma to 6 sigma.

Seasonal and Safety Inventory Strategies: Although seasonal increase in demand

for their major products remains to a minimum, the company produces Parachute coconut

hair oil relatively more than at other times of the year. Moreover, the company maintains a

level of safety stock due to random variations like natural disaster, political issues and

disruption in coconut production which mostly takes place in south India.

Variety and Flexibility Strategies: With a few brands and mass production, Marico

Bangladesh goes with less variety thus causing the operations process to be less flexible. This

actually makes sense for the company given the industry it is in. The production process they

follow is – Batch Processing.

N.B: An enlarged copy of the layout has been attached in the Appendix section
 Facility Layout Analysis

Main Processing Area

Grinding Plant: The coconut meat (basic raw material), is grinded in this plant.

Extraction Plant: Coconut puree is extracted in this plant from the grinded coconut meat.

Paring/Filtering: Then the puree is filtered to prepare for oil extraction.

Centrifuge: In this plant, the filtered puree is pressed to make coconut oil.

Enhancement plan: Then the base oil is enhanced to create finished hair oil.

Bottling plant: The oil is now filled into the bottles (bottles come from the bottle-store).

Packaging: Finished products i.e. the oil filled bottle is now packed into 12 bottles per pack.

Ingredients preparation area

Checking area: The enhancement raw materials like additives and perfume enters the facility

at this point.

Raw Material Preparation: The enhancement raw materials are prepared according to

different batch of hair oil.

Ingredients Storage: The enhanced ingredients are stored here after preparing them for hair

oil production.

Bottling Area

Checking area: The bottles arrive from the 3rd party supplier and are tested here to detect

presence of any leakage or defects.

Storage: The empty bottles are later stored in the bottle store which are ready to be filled,
 Operational Concepts

For Parachute Coconut hair oil, Marico Bangladesh follows several operational

strategies to maintain greater sales. Through our analysis, we found out that many of their

operations strategies to align with what we have learnt in operations management.

• Marico BD applies the DELPHI METHOD to launch their product extension

for Parachute Coconut Hair Oil. For instance, before bringing out any new modification for

Parachute coconut oil, into the market, they conduct a survey among the FMCG experts.

However, the company puts greater emphasis on the survey conducted on the employees.

They conduct a survey on employees on estimated sales to plan for production capacity for

the new products.

• Marico BD strongly adheres to the concept of ‘Economies of Scale’. They

consistently pursue to increase their production volume as per unit cost will go down with

the greater output. In this case, they made major improvement regarding their capacity

issues, which dates 3 years back. They increased and improved automated machinery,

which will ensure no means of diseconomies of scale. Their main goal is to increase the

production volume and to check if overall defect level is under tolerance level or not.

• They are manufacturing coconut oil at a very large quantity. There is almost no

scope to difference or customization in their production process. According to our learning,

they are following a ‘Repetitive process’. The characteristic, which we can find to be

complying repetitive process, is beside large amount in production and low customization,

they employ low skilled workers. Overall process depends on automated process.

• Marico BD measures ‘Productivity’ in the case of Parachute hair oil. They have

an expert team that conduct various tests to measure against pre determinant standards

regarding the process. These data is required to find out the ratio of output to input. They
use the productivity ratio to check if their overall daily production is according to their

forecast or not.

• Marico BD is ISO: 9001 certified. This international standard specifies that

requirements for a quality management system is present. Marico uses the standard to

demonstrate the ability to provide products and services consistently that meets customer

and regulatory requirements. Marico also ensures strong focus on customer, the motivation

and implication of top management, the process approach and continual improvement.

• Marico BD seek and set the mindset of ‘Continuous Improvement’ strategy.

Marico’s business model is based on focused growth across all its brands and territories

driven by continuously improving value propositions to consumers, market expansion and

widening of retail reach. Marico aims to be the leader in each of the businesses; by

heightened sensitivity to consumer needs, setting new standards in the delivery and quality

of products through continuous learning and improvement.

• Marico BD maintains quality of the coconut oil through statistical process

control. For example, if due to the process of the extraction as it is processed by pressing

sun-dried coconut kernel and process further in the operation.

They select quality coconuts to produce 100% pure coconut oil. They go through

PH test while selecting coconut kernels. PH of 100% pure coconut is 7.2 to 7.3 and the

company considers only those coconuts that have the PH of 7.2 and 7.3. They reject the

rest of coconuts that have higher or lower PH as higher one suggest that the coconuts are

more like alkane and lower one suggest acidic. They ensure hygiene in every phase of the

operation.

Marico BD uses limit control charts to make sure their process is in control. If the

quality control team detects anything out of control, they apply SPC; and they take

immediate action on that error(s).

 • They also use cause and effect diagram known, as ‘Ishiwaka diagram’ to detect

the major problems and take required actions. They break down every major problems to

as little as possible to find the core problems. Then they take action accordingly.

• Marico also follow ‘Quality Assurance’ concept. They have their global

inspection team who inspects the quality of the products each year. Inspection team takes

necessary decisions before and after production considering the acceptance sampling. They

look into process control, as they might have to take some corrective actions during

production.

Marico uses third party to produce bottles in different sizes and different shapes to

package oil. They also make sure that the quality of the bottles remain intact. They maintain

hygiene factors in every phase of the process. Marico is indirectly involved in producing

bottles as they train the bottle producers on designing of these bottles.

 Quality Control

Separate Quality Assurance Team: The company emphasizes on quality assurance

of their products and monitors for defects. However, they face issues in such assurance as

Bangladeshi people are not well-trained on being rigorous to maintain quality. Lack of

motivation between the employees is also a major issue.

Quality at the source: They maintain quality at the source by providing separate

training on quality assurance to the suppliers of coconut shell and hair oil bottles and thus

making them responsible for the quality of their work. Such training and assurance comes

with a great cost which becomes difficult to maintain during political unrests and natural

disaster period.

TQM is practiced: At times to comply with TQM, it gets difficult for them to

motivate each and every one equally for achieving a specific goal as work-life balance of the

employees gets hampered due to higher dedication and involvement.

ISO Certified: Maintains international standard in production as their manufacturing

plants are ISO 9001, 14000, 18000, 22716 GMP (Good Manufacturing Practices) certified.

Maintaining such higher standard gets extremely difficult if any of the employee is not

professional i.e. does not have the quality maintain such standard.

Random sampling: Quality checks are done regularly through taking random sample

of produced products in order to avoid both internal and external failure costs (type I and type

II error). Having the same experts for the same job of quality assurance often gets difficult

when the job gets monotonous for them thus subconsciously missing the quality check.

Yearly Audit: The global team performs yearly audit. To meet the standard,

employees work harder before the delegates arrive to audit so that everything seems perfect

to them. This quality check shouldn’t be done in the last minute as production process might

get hampered anytime.

 Analysis of demand forecasting

Through the interview and our analysis, we came to know that, they follow four

forecasting methods: Naive Forecast, Time Series Forecast, Judgmental forecasts and Delphi

method to know their product’s demand.

Naive Forecasts: Marico uses naive forecast to determine their future demand from

their previous data. To know the forecast, they take help of their direct and indirect retailers

to get a clear idea about how much they have to produce according to customers demand.

They perform naive forecast on daily basis. These daily accumulated data is later matched

with annual demand.

Time Series Forecasts: They use time series forecast on yearly basis. Mostly they

use it to know cycles and trends during the year. According to their analysis, the demand for

parachute coconut oil slightly increases during winter season as opposed to other seasons.

Judgmental Forecasts: Marico uses their sales representatives and different regional

managers as their source of judgmental forecast. They mostly use the bottom-up approach for

this forecast.

i. Sales force Opinions: Marico Bangladesh takes sales data from their retailers

of several parts of the country. This data is collected by a territory manager and submitted

to the area manager. The area manager directly reports it to regional manager.

ii. Executive Opinions: Marico collect data from their regional managers.

Rather than implementing the data directly, they analyze sales data with their executives

and adjust it with their previous forecast.

Delphi Method: Marico also uses Delphi method to encourage honest responses from

their staffs and employee who have the understanding and potential to contribute for the

company.
 Although, they execute forecasts for an entire year, they also perform quarterly

reviews for their forecasts.

Notable Finding: For their major product – Parachute coconut Oil, they don’t use

bar-coding, hence making its forecast less efficient and more resource wasteful.

Recommendations

After going through a lot of consideration and analysis, we came up with some

method that should improve their production and efficiency rate, including possible solution

for their bottle neck issue. However, these recommendations aren’t beyond expansive costs.

EOQ Model over Fixed Order Interval:

• Marico Bangladesh should implement Economic Order Quantity model to replace

their fixed order interval system. By the introduction of EOQ model, the company can better

serve the market in terms of demand fluctuations. However, the company should continue to

maintain safety stock of raw material (coconut) due to random variations in coconut

production.

Database and coding system for inventory:

• For their major product – Parachute Coconut hair oil, they should introduce bar-

coding to keep real time track of supply chain till end sales. The bar-coding will also enable

Database Management (for example: Oracle) while saving time and human resource. This

will not only save resources but also ease fast solutions.
Redesigned Layout:

• To fix their bottle neck problem, the facility should be redesigned to keep the

enhancement ingredients storage near the production facility.

• The solution of this bottle neck issue will also enable better and easier implication of

automation within the facility.

Further Automation:

• While most of their production process is automated, the company has still room for

improvement. They should automate raw materials movement within the facility as well as

product unit counting. This way the company will reach increased standardization and will

have human resource to employ in more analytical activities – such as SPC.

Location Fix:

• Because the basic raw material (coconuts) mostly comes from south India, this puts

enough stress on the lead time. By coming up with a solution for this location issue, the lead

time can be drastically improved.

• As possible solution, the coconuts can be grown more here at Bangladesh with

dedicated plantation and worker employment. However, this is a trade-off between time and

cost that Marico Bangladesh has to make.

References:
• http://marico.com/bangladesh/about-us/overview

• http://marico.com/bangladesh/brands

• http://www.investopedia.com/terms/d/delphi-method.asp
Appendix