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Introduction
Started in 1942 by four entrepreneurs: Champaklal choksey, Chimanlal choksey, Suryakant Dani and Arvind Vakil as ASIAN OIL & PAINTS COMPANY. Within three years, their turnover reached 3.5 lacs. Started with a strategy Going to where Consumer is. In 1967, Asian paints became the 10th largest paint company in the world.
International Operations
Caribbean Islands
Middle East
South Pacific
Paint Industry
Paint industry estimated at Rs. 135bn. Unorganized sector accounts to 35% of paint market.
Product Categories
suppliers
4 PLANTS
RAW MATERIALS
PACKAGING MATERIAL
15000 DEALERS
Backward Integration
Asian Pain produces PAN and PET (35 % of production costs) Competitors are importing these parts till now Benefits :Backward integrations
immunizes Asian Paints to the fluctuation in the prices Material is transferred at low cost to Asian Paints equips the company with the ability to meet sudden surges in demand 1/3rd production is sold to other companies. This gives strategic edge to Asian paints.
Distribution Network
Secunderabad based location
ANKLESHWAR
PLANT
KASNA PLANT
PATANCHERU
77 DEPOT CENTRES
BHANDUP PLANT
Certain Issues
Movement of paints and hazardous goods including raw materials have a series of safety checks to be adhered to, starting with a material safety data sheet. All materials transport from factories to the depots is insured through a blanket insurance policy, which fixes a minimum liability for loss, damage, pilferage or leakage upwards of Rs. 10,000.
Distribution Channel
FAST MOVING GOOD
Factory (4)
Depots (77)
Depots (77)
Dealers (14500)
Dealers (14500)
Conditions
Projected profitability of the proposed location The standing of the dealer in the local market The past records of the dealer (banking and trading history) The presence of other dealers in the vicinity and the projected impact on their volumes The competition scenario at the location The distance of the proposed location from the nearest factory etc.
Distribution Strategy
AP bypassed the bulk buyer segment and went to individual consumers of paints. AP went slow on urban areas and concentrated on semi-urban and rural areas. AP went retail. AP went in for an open-door dealer policy. AP voted for nationwide marketing / distribution
Inventory Management
Facts: Lowest inventory cost in industry Avg inventory level of 28 days sales against industry avg of 51 days Translates into 45 % lower inventory costs Stock of finished goods is only 7% of net sales half the industry average
Inventory Management
Asian Paints allowed
15-21 days credit for dealers in major towns 22-30 days credit dealers in upcountry regions
To deliver products efficiently to customers without holding large amount of inventory To manage cash cycle to free up funding for aggressive growth by acquisition strategy
Existing Processes
Forecasting
The demand pattern was difficult to predict even with the support of historical data/trends as consumer preferences were changing fast Relied on home grown solutions for planning and implementation Raw materials comprise 60% of the value chain which require accurate forecasts Constant updation of BOM and Routing called for frequent changes in the procurement planning process
Procurement
Manufacturing
Manufactured all the shades (30-50 depending on a product line) in all the packs (five to eight packs)
Distribution
Had to maintain inventory levels for all 3000 SKUs Customer choice limited to number of SKUs
Improved processes
Manufacturing Strategy changed to manufacturing bases thus providing economies of scale Using i2 Master planner to deicide which plant to manufacture what product depending on Capacity constraints Environmental constraints Key raw materials Helps optimize the process such that least inventory is produced to maintain the expectations of service and safety stock Better planning reduces the number of rush orders
Factory Scheduler used for machine by machine and unit by unit planning of production schedules
Improved processes
Procurement
i2s factory planner used to identify the raw material and packing materials and who to source it from Also provides the ideal formulations required for manufacturing products A better materials planning system allows the company to create more complex paint formulas Helps select the best vendor and manufacturing method for any given situation
Results of Re engineering
Manufacturing Distribution
Procurement
Reduced Finished Inventory cycle from 56 days to 30 days Business is currently 4 times of that before BPR Increase in the number of shades from 50 to 1300 Achieved an 87-90 percent service levels for SKU sales at the location level Built a competitive advantage in terms of inventory management
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