A CASE STUDY ON

SUPPLY CHAIN OF

Submitted By,
Richesh Krishnan
14MMCC24

Contents
Company Profile
Maricos Inbound Copra Supply Chain
Remedial Action
Marico Strategy and Supply Chain Impact
Marico Outbound Supply chain
Improved Outbound supply Chain
Conclusions
References

Company Profile
Founded on 1971
Marico is one of India's leading Consumer Products &
Service Industry
Brand portfolio: Parachute, Saffola, Hair & Care, Nihar,
Mediker, Revive. Marico also owns popular brands like
Set Wet, Livon, Zatak , and other personal care
brands.

Marico is a FMCG company providing consumer products

and services in the areas of Health and Beauty based in
Mumbai.
Leadership positions in most categories- Coconut Oil, Hair
Oils, Post wash hair care, Anti-lice Treatment, Premium
Refined Edible Oils, niche Fabric Care etc
Marico's own manufacturing facilities are located at Goa,
Kanjikode, Jalgaon, Pondicherry, Dehradun, Baddi, Paonta
Sahib, Perundurai and Daman.
Sales revenue 2012: INR 4596 Cr
Net Profit: INR 396 Cr
Part of Maricos business strategy is to expand
continuously into ever smaller locales until its brands are
available to most Indian households.

Maricos Inbound Copra Supply Chain:

Prior to 1991, Copra purchase unit was in Mumbai
Marico contracted brokers in Mumbai who in turn contracted
brokers in Kerala.
Brokers in Kerala had their own trail of intermediaries (local
brokers, Copra Converters, farmers)
Copra buying is approximately 50% of Maricos purchase
portfolio

Marico

Mumbai
based
Brokers

Terminal
Market
Brokers in
Kerala

Supplier
Network in
Terminal
Market

Problems with the Inbound Copra

Supply Chain
Increased cost of
procurement due to
presence of many
intermediaries

Quality of the copra

bought from market
significantly different
from one that reached
Marico factories

Price and Payment

terms were dictated
by brokers

Quantity discrepancies

Frequent supply
disruptions

Copra Supply Chain

7

Remedial Action: Disintermediation &

Interiror

Traders
8

Disintermediationreducing intermediaries in
supply channel. Buying Office
set up in Kozhikode in 1991,
bypassing 2 layers of primary
brokers at Mumbai & Kerala

Factory set up in Kanjikode,

Puduchery and Goa. Mumbai
factory shut down.

New factories closer to

sourcing locations and
markets

Initial Problems with the

initiative:

Terminal markets had

strong labour unions
Ability to dictate terms
of payments

High labour charges

Consequence of
unionized terminal
markets in Kerala

Separate unions for

handling, loading,
unloading, drying,
stacking etc.

Increased overheads
and cost

To reduce dependency on terminal markets, Marico started sourcing

from Interior Traders- small aggregators who sourced Copra from
interior villages

Vendor Development Initiative

10

Vendor Development
Ten Vendors
Initiatives:
Starting 1994,

identified in N.
Kerala and given
Copra dryers along
with some training

attempts to
develop vendor
base in Tamil
Nadu, other states

Sourcing from terminal

markets discontinued
completely by 1998
This eliminated
transaction fee at
Exchange

Unnecessary
loading/unloading
avoided

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The IT push:
Big bang ERP implementation in
2001-02
Maricos Copra suppliers
connected through web portalMarico Connect
Institutionalize e-buying in
Copra purchase (dealt later)
Further
Disintermediation:
To further eliminate traders,
Marico started with own
collection centers
This brought more stability to
the supplies: Small farmers
could sell directly to Maricos
Collection Centers unlike large
traders who generally would
wait for the right quantity and
price

Share of sourcing through Copra

Collection Centers

12

Process Improvement: Institutionalize e-buying

Web Based Auctions:

Most suppliers were computer illiterate; this challenge was met by:
Opening Rediff email ids for each vendors
Training on e-mail usage & tie-up between vendors and cyber cafes

Fast Track Payment (FTP): allowed vendors to rotate their money faster.

3 Phase: Copra e- Portal e-marico.com launched in 2005.

Enabled placing of bids through

SMS.

13

Process Improvement:
Daily negotiations with Copra traders was done
away with
Reverse Auction: Buying team would accept
quotes from copra traders only during three
one-hour auction slots in a day and the lowest
bidder would be selected.
The initial resistance to Reverse Auction died
down in a few months and traders accepted the
process.

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15

Marico Strategy and Supply Chain

Impact
1995 Focus on
Brand Development

Extensive advertising
,Innovative
promotion schemes
Advertising
expenditure
increased steadily

This was in response

to the growing
International
competition from
rivals Unilever and
ConAgra

Introduction of more
products and more
brands incur cost

For survival
-Increased efforts to
develop new brands

Reduced reliance on
3 market leader
brands - Parachute
coconut Oil ,Saffola
and Sweekar

Expansion strategy
introduced more
brands and tried to
increase reach
created Supply Chain
problems

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Marico Outbound Supply chain

Maricos Supply Chain

Plants

Depots

Distributor

Super
Distributor

Retailer

Stocklist

Urban
Consumer

Retailer
Rural
Consumer

Initial Outbound Supply Chain

17
Factory
Stock
Transfer
Depots
Ideal
Information
Flow

Supplier/Super
Supplier
Retailer

Consumer

Primary
Sales
Secondary
Sales

Offtakes

Maricos Supply Chain Transactions

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Features of the Outbound Supply Chain

Nature of the Market
Fragmented nature of Indian supply chain
Supply chain can provide competitive advantage

Bullwhip Effect
Only 2% - represents organized retail stores(tiny grocery stores)
95% : Kirana stores
Point of sale information Not readily, directly available from retailers
Sales data collected from field test, customer focus group, well
financed advertising program

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Key Strength
Relatively low commodity Raw material such as Vegetable oil,
safflower seeds.
Strong control on sourcing of RM
Less variation in sales seasonality
No major manufacturing constraints

Managing Supply Chain

Slow moving SKUs shipped directly from factories to depots
Fast moving SKUs shipped to redistribution centre and
subsequently to depots
Distribution Alliances

20

Challenges Faced in the outbound

Supply chain
Supply chain not scalable with Expansion Plan
Strategy:
Expand continuously to reach most Indian households
Growth through new brands and product lines
Penetrate more into rural areas - represents 70% of Indian
population
Entails more sales and market to track more forecast to
make ,more product to plan, more SKUs to track-more
truckloads to configure.
To cater to the new areas with existing supply chain logistic
challenge

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Forecasting Errors
Low cost products leading to impulsive buying decisions
Product availability Key to impulse buying
Forecast accuracy was 70%
Distribution suffered stock outs leading to loss of sales 30%
On one hand low level of service level due to product
availability
Other hand, excess inventory lying at Marico and in the channel
Cost of errors in shipments to remote depots increased

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Un-integrated Application systems

Lack of integration among transaction systems
Result
Poor visibility into internal operations
Did not scale with increased logistics requirements
Inaccurate forecasts, long planning cycles, no transparency of
warehouse stock, delayed response to customer needs.

Problems with distribution

Shipped only full trucks
Obstacles to good distribution:
Random decisions due to
Poor visibility into the depot stocks of growing number of SKUs
No prioritisation rules for configuring optimal truckloads

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Monthly distribution levels

First 20 days: 16-32%
Last 10 days: 53%

Result
Needed to hire extra space when shipment exceeded depot facility
Excess inventory for some SKUs, stock-out in others
Higher deliver costs
Erosion of sales, distributor confidence and customer satisfaction

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Outbound Supply Chain redesign

Solution: mySAP business Intelligence
Big bang approach for SAP implementation
At Company factories, warehouses, business offices, contract
manufacturers

SAP APO implemented for:

Not implemented for:

Demand forecasting

Sourcing

Supply chain network planning

Sales
Manufacturing

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Stage 1:

Stage 2:

Supply Chain Implementation

Lower inventory
and supply chain
costs

Resolve
forecasting
problems,
eliminate
inventory and
stock-out
problems

Revamp
processes

Technological support
through highly
integrated applications
systems

ERP

Big bang rollout in

2001

Partner
relationship with
distributors
VMI

Timely sales and

inventory information
Manage distributor
inventory by replenishing
stocks on the basis of
distributors input of sales
to retailers.

Improved Outbound supply Chain

26

Complete
Visibility

Improved
Forecast
Accuracy

Short Planning
Cycle

Reduced
Inventory and
stockouts

Uniform scales

Low Inventory
and stockouts

Reliable and
Responsive
production and
distribution data

Reduction in
Delivery Cost
Fast response to
market dynamic

Equal Attention
to Smaller
Brands

Benefits of redesign
27

Operational improvements
Reduced planning cycle
From 30 days to 10 days
Improved forecasting accuracy
Improved delivery reliability

Improved forecasting
Both primary and secondary sales were available

Improved distribution
VMI (Vendor managed Inventory) implemented
SAP heuristics ensured shipments are sent in full truckloads and that
depot inventories simultaneously remain within prescribed inventory
norms

Improved distributor relationship: reduced bullwhip effect

Partnership relation with distributors

Monitor and manage distributor inventory by replenishing stock on the
basis of secondary sales
C&FA supposed to replenish distributors within specified period or face
penalty

Outbound Supply chain performance

improvements
28

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Conclusions
Maricos Outbound Supply Chain
Forecasting and distribution errors impacted companys cash flows and hindered
expansion
By effective implementation of SAP, forecasting and distributor relationship improved,
costs and inventory levels went down

Maricos Inbound Supply Chain

Marico faced increased costs of procurement and frequent supply disruptions due to
many levels in supply channel
Disintermediation and IT assisted process improvement led to reduced costs, procurement
lead time and efficient operations

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References

Marico Industries: mySAP Supply Chain

Management
IIM, Bangalore
By, Janat Shah and Angeline Pantages
Economics Times Appachi Supply Chain Article
http://articles.economictimes.indiatimes.com/2013-11-26/news/44486941_1_saugata
-gupta-fmcg-major-marico-supply-chain

Marico - An Information Update April 26, 2007

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THANK YOU