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Supply chain management in Asian Paints

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.

Asian Paints- Today

International Operations
Caribbean Islands

Middle East

Barbados, Jamaica, Trinidad & Tobago.

Bahrain, Egypt, Oman & United Arab Emirates.

South Pacific

South East Asia

Fiji, Tonga, Vanuatu, Solomon & Samoa Islands.

South Asia Bangladesh, Nepal & Sri Lanka.

China, Malaysia, Singapore & Thailand.

Paint Industry
Paint industry estimated at Rs. 135bn. Unorganized sector accounts to 35% of paint market.

Volume growth estimated at 15%.


Indias share in the world paint market is 0.6%.

Per capita consumption of paint in India is 1.2kg/annum.

Product Categories

Supply chain of Asian Paints


Headquarters in Mumbai 4 Factories 18 Processing Centres 350 raw material and intermediate goods 140 Packing Material Vendors 6 Regional Distribution Centre 72 depots are integrated

suppliers

Elements of Supply Chain


3000 SKUS

KEY SUCCESS FACTORS


FLEXIBLE OPERATIONS

4 PLANTS

RAW MATERIALS

6 RDC 35 JOB WORK CENTRES 77 DEPOTS

LOWER OUTPUT TIME


LOW DELIVERY COST

PACKAGING MATERIAL

15000 DEALERS

500 INDUSTRIAL CONSUMERS

Raw material Requirements


Paint Industry is raw material intensive with RW being 70% of production costs. 300 types of raw materials used in manufacturing process The most critical ones are

Titanium Dioxide (TiO2) Phthalic Anhydride (PAN) Pentaerythritol (PENTA) 30 % 20 % 15 %

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.

Outbound Logistics Distribution Network


Four manufacturing facilities are supported by Six Regional Distribution Centers (RDC) and Seventyseven depots. Each RDC and depot is taken by Asian Paints on lease and then further assigned to a C&F Agent. Distributing the Asian Paints products to the 14,500 dealers all over the country. There are 4 depots of Asian Paints in Mumbai and 73 outside Mumbai.

Distribution Network
Secunderabad based location

Delhi based location

ANKLESHWAR

PLANT

KASNA PLANT

PATANCHERU

77 DEPOT CENTRES

BHANDUP PLANT

ASIAN PAINTS HEADQUART ERS MUMBAI

Bangalore based location

Chennai based location

Kolkata based location

Ahmedabad based location

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)

SLOW MOVING GOODS


Factory (4)

Regional Distribution Center (6)

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

Implications of Distribution Strategy


Going to Individual Consumers Implied Wide Product Range and Complex Distribution Smaller Packs proliferated the product depth further Wide Product range Implied Expensive distribution Going retail Implied Deep Involvement in Channel Management National Marketing necessitated nationwide organization

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

Incentive schemes to reduce inventory


A special discount of 3.5 per cent - discount for perfection in payments. It was passed on at the end of the year, provided each and every payment throughout the year was made within the stipulated time norms. A cash discount of 5 per cent. This was paid for all outright cash purchases. It was given whenever payments were received within 24 hours of the supply/invoice. In respect of outstation accounts, the payments have been made in advance by draft in order to be eligible for the cash discount

Supply Chain Re-engineering

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

Enabling IT across the Supply Chain of Decorative Paints


Distribution
Paint dispensing machines
Altered the production pattern from shades to producing bases Reduced inventory and Eliminated redundancy of stocks Approx. 11000 color tinting machines including multiple machines across some counters Has helped expand the range of shades for each product category, offering a choice of shades to consumers in the hundreds. For the retailers it has eliminated the sales loss for want of range/desired shade

i2 distribution planner used to develop distribution schedules based on constraints

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

Thank You

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