Table of Content
Table of Content
Table of Content
SR NO
1 2 3 4 5 6 7 Executive Summary Introduction
TOPIC
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5 6-10 11-14 15-25 25-35 36-41 42
Case Analysis of Nerolac Need of Supply Chain management in Nerolac Supply Chain in Nerolac Paint Benefits and conclusion Biblography
EXECUTIVE SUMMARY Rising consumer spend and favorable housing policies is expected to drive fresh construction and re-painting activities, leading to accelerated growth in decoratives segment Continued growth in the automobile sector during the coming years is expected to maintain the growth in automotive paints albeit at a marginally lower rate Goodlass Nerolac Paints Ltds (GNPL) ability to ward off the higher input cost and improve its margins during FY05 has evolved as an edge over its competitors which may lead to its re-rating going forward The focus of the company is to increase its rural penetration in the coming years. This is expected to be the key growth driver for the company in decorative paints and overall sales New client acquisitions coupled with the continued growth in automobiles is expected to lead to sustained growth in automotive Paints Considering the growth potentials and its inherent strengths, the gap between GNPL and the industry leader Asian Paints is expected to narrow down going forward Working on this facts there is need of upgradation in technology to meet the consumer needs , implementing Supply Chain management software will reduce the operating cost and improve the efficiency of production line of Nerolac Paints. The Project is study of supply chain management of Nerolac and Current Industry trends with comparative analysis of Nerolac strengths and opportunities ofr it after implementation of upgraded SCM software.
INTRODUCTION
Kansai Nerolac Paints Ltd. (KNPL), the Indian subsidiary of Japan based Kansai Paint Co. Ltd, is the second largest paint company in India with presence in decorative paints as well as industrial paints & marine paints, enamels, varnishes, coatings, resins etc. The company, originally incorporated in 1920 as Gahagan Paint & Varnish Company, became Goodlas Wall (India) Ltd, as the entire stake in Gahagan paints was acquired by Lead Industries Group Ltd in 1933. Subsequently in 1946, the company became private company and changed its name to Goodlass Nerolac Paints (Pvt) Ltd in 1957. In 1999, Kansai Paint Company Ltd., Japan took over the entire stake of Tata Forbes group and thus Goodlass Nerolac became a wholly owned subsidiary of Kansai Paint Company Ltd. In 2006, on the 11th of July, Goodlass Nerolac Paints Ltd. name has been changed to Kansai Nerolac Paints Ltd. Kansai Nerolac with a group turnover of Rs. 1315 Cr is at 2nd position with a 205 market share of the 6450 Cr organized Indian paint industry. It is the market leader in the Industrial paints segment. Kansai Nerolac is leader in both Automobile Coating & Powder Coating segment with a market share of 62% and 27% respectively. Kansai Nerolac has 14% market share in the 4900 Cr. decorative paint industry and markets its products under the brand names Nerolac, Glossolite, Goody, Allscapes and Excel. The company has strong presence in automotive paints as it controls 42% of the 1450 Cr. organized Industrial paint segment. Its major clients include OEMs (Original Equipment Manufacturer) like Maruti Udyog, Bajaj Auto, TELCO and Mahindra & Mahindra. It was a pioneer in introducing electro-deposition (ED) technology for Maruti, capturing a sizeable share of the automotive paint market.
Kansai Nerolac, one of the most innovative users of IT in the Indian scenario has leveraged IT for competitive advantage. Kansai Nerolac has used IT extensively to effectively manage supply chain and reduce cost by improving efficiency in raw material procurement, inventory management, production planning and demand forecasting. Kansai Nerolac initially concentrated on industrial supply and this lead to decreasing efficiency and dropping market shares in decorative paints. Since 1990s with effective use of IT in its supply chain and daily activities has seen Nerolac growing by leaps and bounds. Its market share has been steadily increasing, from 16.36% in 2000-01 to around 20% in 2006-07. A VIEW INTO THE PAINT INDUSTRY Evolution of paint industry in India: We could, with a modicum of
pride, trace the Indian History of decorative paints right from mythological times of Mahabharata when Architect Maya built a LAC house from natural resins like shellac. Painted around 4th century B.C. i.e., almost 2500 years ago, are the oldest surviving painted surfaces of Ajanta and Ellora Caves located in Western India, near Bombay. Surprisingly, mineral and earth colors as pigments, and some natural binders were used in those famous wall paintings. Ingenious as human beings are, animal blood, eggs and several juices extracted from trees were used in many other similar durable paintings. Fruits, herbs, soils and oils were some of the media used for making different shades of paints. Research in coal and its byproducts during the interwar period, a rapid growth of the petroleum industry and its byproducts, discovery and invention of new polymers and synthetic resins, all led to the development of many new concepts. New resins, new pigments, both organic and inorganic, were developed. The real acceleration of paint in decoratives started when rutile titanium dioxide and alkyds were made commercially available to the industry.
An Overview: The paint industry worldwide is classified into 2 segments viz. decorative and industrial segment in India constitutes nearly 70% of the market whereas the scenario is just the reverse in the developed countries. Decorative Segment is dominated by the unorganized sector which now accounts for 70% of the total paint production as against 75% three to four ago. The unorganized sector has an advantage over the organized sector since it is fully exempted from the 20% excise duty and other government levies. In the organized sector Asian is the market share of 31% followed by Goodlass Nerolac with a share of 16% Latest Developments: New foreign equity is getting highly attracted in this sector. Kansai Paints acquired controlling interest in Goodlass Nerolac - the second largest Indian paint company. There are talks about other companies also being taken over by foreign companies. Some foreign companies have actually opened shops in India
Asian Paints Goodlass Nerolac Berger Paints ICI Jenson & Nicholson Shalimar Others
Architectural Industrial
70% 30%
Architectural Segment
19% 6% 6% 8% 11%
Asian Paints ICI Others
37% z 13%
Berger Paints Shalimar
Industrial Composition
8% 6% 14% 8% 8% 14% 42%
Automotive Paints High Performance Coating Powder Coating Coil Coating Marine Paints
Goodlass Nerolac Paints Ltd. (GNPL), the Indian subsidiary of Japan based Kansai Paint Co. Ltd, is the second largest paint company in India with presence in decorative paints as well as industrial paints & marine paints, enamels, varnishes, coatings, resins etc. It is the market leader in the Industrial paints segment. The company markets its products under the brand names Nerolac, Glossolite, Goody, Allscapes, Excel, in decoratives. The company, originally incorporated in 1920 as Gahagan Paint & Varnish Company, became Goodlas Wall (India) Ltd, as the entire stake in Gahagan paints was acquired by Lead Industries Group Ltd in 1933. Subsequently in 1946, the company became private company and changed its name to Goodlass Nerolac Paints (Pvt) Ltd in 1957. In the same year it went public and became Goodlas Nerolac Paints Ltd. It came into the fold of Tata Forbes Group in 1976, as its foreign holdings were acquired by Forbes Gokak. It turned into Joint Venture Company in 1986 as the foreign collaborator Japan based Kansai Paints picking 36% of equity capital of the company. With the acquisition of entire stake of Forbes Gokak and its associates by Kansai Paints it became the subsidiary of the latter in 1999. The stake of Kansai Paints in the company now stood at 64.52% of the total equity of the company. Technical Assistance Agreements of the company with renowned players in paint industry at international level puts the company in a strong position to offer products which meets stringent international specifications. It all started in 1993 when the company tied-up with Kansai Paints of Japan (for manufacture of sophisticated architectural Coatings) and Nihon Tokushu Torya Co. Ltd also of Japan (for body seal and under seal coatings). The latest being the technical assistance agreement with Dupont Performance Coatings GmbH & Co. KG, Germany for know-how of manufacture of Anodic Electro-deposition Coatings System during the year 2000-01. The company's other Technical Assistance agreements include E.I. Dupont De Nemours & Co. Inc. of USA for automotive coatings; Oshima
Kogyo Company Ltd., of Japan for heat resistant paints; Valspar Corporation of US for powder coatings; Drew Chemicals Corporation of US for water and fuel treatment chemicals and Ameron Inc. USA for high performance coatings The company has strong presence in automotive paints as it controls 45% of the organized Industrial paint segment. Its major clients include OEMs like Maruti Udyog, Bajaj Auto, TELCO and Mahindra & Mahindra. It was a pioneer in introducing electro-deposition (ED) technology for Maruti, capturing a sizeable share of the automotive paint market. The company has two wholly owned subsidiaries namely Saurashtra Paints and GNP (Madras). It has the software package, computerized color dispensing machine from Fluid Management Holland, Gyroshaker of 10-Litre capacity touch screen monitor, 136 column palette-share display units and a Kirloskar Champion UPS 1 KVA. The system has an ability to supply over 1305 shades accurately, consistently and instantly in several products covering a variety of application viz doors, windows, walls, exteriors, gates, grills etc. During the year 2001-02, the company has entered into a technical agreement with EFTEC Shroff (India) Ltd. for the manufacture and supply of Automotive Paint Shop Sealers and Underbody Compounds.
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MANUFACTURING CAPABILITIES
Location STATE Products Annual Capacity Certification Lote MAH. Decorative Industrial 31000 MT QS- 9000 ISO- 14000 OHSAS- 18001 Jainpur U. P. Decorative Industrial 62800 MT QS- 9000 ISO- 14000 OHSAS- 18001 Vatva GUJ. Industrial 9000 MT QS9000 Chennai T. N. Decorative Industrial 30700 MT ISO9002 Bawal HAR. Industrial PC, PTC 22800 MT -
156300 MT 64%
What56%
is the relationship between ERP and SCM? Many SCM applications are reliant upon the kind of information that is stored in the most quantity inside ERP software. Theoretically you could assemble the information you need to feed the SCM applications from legacy systems (for most companies this means Excel spreadsheets spread out all over the place), but it can be nightmarish to try to get that information flowing on a fast, reliable basis from all the areas of the company. ERP is the battering ram that integrates all that information together in a single application, and SCM applications benefit from having a single major source to go to for up-to-date information. Most CIOs who have tried to install SCM applications say they are glad they did ERP first. They call the ERP projects "putting your information house in order." Of course, ERP is expensive and difficult, so you may want to explore ways to feed your
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SCM applications the information they need without doing ERP first. These days, most ERP vendors have SCM modules so doing an ERP project may be a way to kill two birds with one stone. Companies will need to decide if these products meet their needs or if they need a more specialized system. Applications that simply automate the logistics aspects of SCM are less dependent upon gathering information from around the company, so they tend to be independent of the ERP decision. But chances are, you'll need to have these applications communicate with ERP in some fashion. It's important to pay attention to the software's ability to integrate with the Internet and with ERP applications because the Internet will drive demand for integrated information. For example, if you want to build a private website for communicating with your customers and suppliers, you will want to pull information from ERP and supply chain applications together to present updated information about orders, payments, manufacturing status and delivery.
Before the Internet came along, the aspirations of supply chain software devotees were limited to improving their ability to predict demand from customers and make their own supply chains run more smoothly. But the cheap, ubiquitous nature of the Internet, along with its simple, universally accepted communication standards have thrown things wide open. Now, you can connect your supply chain with the supply chains of your suppliers and customers together in a single vast network that optimizes costs and opportunities for
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everyone involved. This was the reason for the B2B explosion; the idea that everyone you do business with could be connected together into one big happy, cooperative family. Of course, reality isnt quite that happy and cooperative, but today most companies share at least some data with their supply chain partners. The goal of these projects is greater supply chain visibility. The supply chain in most industries is like a big card game. The players don't want to show their cards because they don't trust anyone else with the information. But if they showed their hands they could all benefit. Suppliers wouldn't have to guess how many raw materials to order, and manufacturers wouldn't have to order more than they need from suppliers to make sure they have enough on hand if demand for their products unexpectedly goes up. And retailers would have fewer empty shelves if they shared the information they had about sales of a manufacturer's product in all their stores with the manufacturer. The Internet makes showing your hand to others possible, but centuries of distrust and lack of coordination within industries make it difficult. Over the last few years most companies have gotten over the trust issue. In many cases "gotten over" is a euphemism for "have been bullied into sharing supply chain information from a dominant industry player." Want to sell your goods in Wal-Mart? Better be prepared to share data. The payoff of timely and accurate supply chain information is the ability to make or ship only as much of a product as there is a market for. This is the practice known as just-intime manufacturing, and it allows companies to reduce the amount of inventory that they keep. This can cut costs substantially, since you no longer need to pay to produce and store excess goods.
system that hooked P&G up to Wal-Mart's distribution centers. When P&G's products run low at the distribution centers, the system sends an automatic alert to P&G to ship more products. In some cases, the system goes all the way to the individual Wal-Mart store. It lets P&G monitor the shelves through real-time satellite link-ups that send messages to the factory whenever a P&G item swoops past a scanner at the register. With this kind of minute-to-minute information, P&G knows when to make, ship and display more products at the Wal-Mart stores. No need to keep products piled up in warehouses awaiting Wal-Mart's call. Invoicing and payments happen automatically too. The system saves P&G so much in time, reduced inventory and lower order-processing costs that it can afford to give Wal-Mart "low, everyday prices" without putting itself out of business.
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management, something retailers have traditionally done on their own. Wal-Mart had the clout to demand this from P&G, but it also gave P&G something in return-better information about Wal-Mart's product demand, which helped P&G manufacture its products more efficiently. To get your supply chain partners to agree to collaborate with you, you have to be willing to compromise and help them achieve their own goals. Internal resistance to change. If selling supply chain systems is difficult on the outside, it isn't much easier inside. Operations people are accustomed to dealing with phone calls, faxes and hunches scrawled on paper, and will most likely want to keep it that way. If you can't convince people that using the software will be worth their time, they will easily find ways to work around it. You cannot disconnect the telephones and fax machines just because you have supply chain software in place. Many mistakes at first. There is a diabolical twist to the quest for supply chain software acceptance among your employees. New supply chain systems process data as they are programmed to do, but the technology cannot absorb a company's history and processes in the first few months after an implementation. Forecasters and planners need to understand that the first bits of information they get from a system might need some tweaking. If they are not warned about the system's initial naivet, they will think it is useless. In one case, just before a large automotive industry supplier installed a new supply chain forecasting application to predict demand for a product, an automaker put in an order for an unusually large number of units. The system responded by predicting huge demand for the product based largely on one unusual order. Blindly following the system's numbers could have led to inaccurate orders for materials being sent to suppliers within the chain. The company caught the problem but only after a demand forecaster threw out the system's numbers and used his own. That created another problem: Forecasters stopped trusting the system and worked strictly with their own data. The supplier had to fine-tune the system itself, then work on reestablishing employees' confidence. Once employees understood that they
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would be merging their expertise with the system's increasing accuracy, they began to accept and use the new technology.
manufacturing brings back a lot of the uncertainty that supply chain systems were designed to eliminate. The good news is that technology capable of tracking shipments throughout the world is getting better. The bad news is that a lot of this technology is still pretty expensive, that some of the places you would want to deploy it don't have the necessary infrastructure in place, and well, there isn't a piece of technology out there that can make up for the whim of a Chinese Customs official. Furthermore, labor costs in some places are so low that IT automation and monitoring projects may add more to costs in terms of software, hardware and still-precious (and unreliable) bandwidththan they save in productivity. Hence, some low-tech or commodity products may not be worth monitoring at all until they hit a ship in a foreign port. In the meantime, the best bet is to use whatever systems you can to gain as much visibility into the global supply chain as possible. It may be impossible to replicate the just in time model on a global scale, but by applying whatever technology you can, and by choosing the supply chain partners who have the capability to share data with you, you can get many of the benefits of just in time while paying low foreign prices.
What are some emerging technologies that will affect the Supply Chain?
The most notable is Radio Frequency Identification, or RFID. RFID tags are essentially barcodes on steroids. Whereas barcodes only identify the product, RFID tags can tell what the product is, where it has been, when it expires, whatever information someone wishes to program it with. RFID technology is going to generate mountains of data about the location of pallets, cases, cartons, totes and individual products in the supply chain. It's going to produce oceans of information about when and where merchandise is manufactured, picked, packed and shipped. It's going to create rivers of numbers telling
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retailers about the expiration dates of their perishable itemsnumbers that will have to be stored, transmitted in real-time and shared with warehouse management, inventory management, financial and other enterprise systems. In other words, it is going to have a really big impact. Another benefit of RFIDs is that, unlike barcodes, RFID tags can be read automatically by electronic readers. Imagine a truck carrying a container full of widgets entering a shipping terminal in China. If the container is equipped with an RFID tag, and the terminal has an RFID sensor network, that containers whereabouts can be automatically sent to Widget Co. without the truck ever slowing down. It has the potential to add a substantial amount of visibility into the extended supply chain. Right now the two biggest hurdles to widespread RFID adoption are the cost of building the infrastructure and the lack of agreed-upon industry standards.
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was able to control the higher raw material cost but was also able to improve its margins. This was achieved through a combination of forward contracts for raw materials and cost control exercises.
GNPL has a diversified portfolio in paints. The company has a strong presence in the industrial segment while its attempting to increase its share in the decorative paints segment. Both decorative and industrial paints have almost equal contribution to the company sales. This gives the company a hedging tool in the paint industry. Thus when the paint industry is undergoing a slowdown due to lackluster demand in the decorative segment which forms a major part of the industry, GNPL is the least affected as it has a consistent institutional clientele in the auto mobile industry and the white good industry. Thus presence in the decorative segment gives GNPL the scope to scale up its operation while presence in automotives provides consistent business in an adverse business environment.
Goodlass Nerolac is the leading player in the automobile sector. The company has a commanding share of around 65% in the automotive paints segment. It caters to around 90- 95% of Maruti's automotive paint requirement. Further its list of automobile manufacturers includes companies like Hero Honda, Mahindra and Mahindra, Bajaj Auto and Ashok Leyland. GNPL provides value added services to its institutional clients in the automobile industry by managing their paint shops. It also has research and development executives placed in these paint shops to take care of their operations. GNPL's technological tie up with Japan's largest paint manufacturer, Kansai Paints, which gives it an edge over other paint manufacturers in the auto industry. Its technological tie ups enables it to leverage on the strong relationships that these global paint manufacturers share with the global OEMs which in turn have tie ups in place with Indian OEMs. Resultantly these OEMs prefer their global relationship to be extended to India as well, which is depicted well in the case of Maruti's paint requirement, where 9095% is supplied by GNPL attributed to Kansai' strong relationship with Suzuki.
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Additionally GNPL also has tie ups with Dupont De Nemours, USA, Oshima Koyogo, Japan and Dupont Performance coatings, Germany. These technical Assistance Agreements at international level puts the company in a strong position to offer products which meets stringent international specifications. The company has taken up cost cutting initiatives during FY05 which has facilitated the company in controlling cost in conditions of suppressed margins. The company has consistently brought down its working capital cost through prudent management of working capital. It has successfully lowered its debtors and inventory levels during the last few years which happened largely through tightening up of operations at the dealers end. GNPL has also installed an ERP system SAP to streamline the supply chain management.
At the manufacturing level, the company is using tools like Six Sigma and TPM for improving efficiency and reducing losses by reducing wastages during the manufacturing process. Further to improve the capacity utilization, the company has implemented measures like Overall equipment efficiency which has reduced breakdowns by 25% and has improved overall equipment efficiency by 33%. The company has increased prices of decorative paints by around 4-5% during March 2005, while on automotive paints it has taken a selective price increase of around 2-3%. This has been against the rise in raw material and packaging cost. Cost of key raw materials has increased due to the increase in the price of crude oil while the packing cost has gone up due to higher prices of steel. The company was able to maintain its raw material cost at lower levels during FY05 due to forward contracts.
Key Drivers
Goodlass Nerolac has a wide spread distribution network of over 11,000 dealers across the country. The company has divided its distribution network in to 4 zones viz, North, 20
West, East, and South. Each zone is further divided in to 14 Regions which has a total of 66 depots to take care of local needs. It has currently 2500 outlets across the country. The company is in the process of further increasing its penetration in the coming years. It is mainly focusing on increasing its rural penetration which is mainly directed towards driving its decorative paint sales where the margins are higher. With the government thrust on improving agricultural output, rural income is poised to improve. Thus with expected higher disposable income in rural India and consequent higher rural demand, Goodlass is expected to witness higher sales with higher rural penetration. The company will be further launching new products in architectural coatings and will be focusing on wood finishes to drive growth in decoratives. GNPL is attempting the institutional route to improve its presence in decorative paints. The company is in talks with builders and real estate developers for supplying of decorative paints. With the increase in construction activity in the country, GNPL is expected to witness accelerated growth in Decorative paints where the margins are higher. Thus the same is expected to lead to better profitability for the company going forward. Further the growth in decorative paints is expected to be essentially through Exterior paints. The company will be also focusing on Wood finishes to improve growth in decorative paints. The expected sustained growth in the automobile sector will continue to drive GNPL's automotive paint sales. The auto sector is expected to witness growth of 13%. GNPL has a strong presence in automotive paints where institutional sales are the major contributors to sales. In the auto sector the company has placed its service engineers in the paint shops of OEMs (Original Equipment Manufacturers). Thus through its sales to original equipment manufacturers the company is expected to garner continued growth in sales going forward. Further the company has found inroads for new client acquisitions in the automotive segment. General Motors has approved its automotive paint product. Though this is just in the approval stage, such approvals show the growing acceptance of GNPL in the automobile industry. Further the company has also launched The company is setting up a new manufacturing unit at Bawal, Haryana with a total installed capacity of 100,000 mtpa. The first phase of the expansion has been already commissioned with
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an installed capacity of 20400 tons per annum while the balance will come in phases. This unit will currently be largely catering to industrial paints demand. The close proximity of this plant to the automobile manufacturers and consumer durable manufacturers will forward benefits like lower transporation cost and delivery in lower lead time to its clients for industrial paints. This will further improve its presence in the automotive paints segment and is thus expected to benefit in terms of higher sales and better margins to the company.
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and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies. Supply chain management must address the following problems: Distribution Network Configuration: Number and location of suppliers, production facilities, distribution centers, warehouses and customers. Distribution Strategy: Centralized versus decentralized, direct shipment, Cross docking, pull or push strategies, third party logistics. Information: Integrate systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory and transportation etc. Inventory Management: Quantity and location of inventory including raw materials, work-in-process and finished goods. Supply chain execution is managing and co ordinating the movement of materials information and funds accross the supply chain. The flow is bi directional.
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8 RDCS
66 DEPOTS
T
7 MANUF. UNITS & 8 OPUS
The supply chain management at Nerolac starts from the procuring raw material from the suppliers and ends at distributing the fineshed goods to the customers. Through dealers and depots the raw material for industrial paints are imported while that for decorative paints is from local markets. The need for a particular raw material depends on feedback from each of the depots and the forecast from the head office. After procuring raw materials they are supplied to various manufacturing units and outside processing units. The inventory levels of semi fineshed and finished goods is maintained optimally with the help of IT . After the completion of manufacturing process depending on reserves from APO the finished goods are supplied to the 8 RDCs . From each of these RDCs the fineshed goods are passed on to the 66 srategically located depots. From these depots the finished goods are passed on to various dealers, institutions and exported .
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Decorative paints sector is highly competitive and thus it becomes imperative for a company to analyze the past trends and be ready with a plan which is better and earlier than that of your competitor. Hence, the decorative paint sector follows a pushstrategy. In a push-strategy, it is very important to satisfy a latent need of a customer and meet the demands of the customers in the shortest possible time. For this it is must that a company has a sound chain wherein the information regarding the likes-dislikes, change in behavior towards a particular brand reaches the management in least time possible so as to have time to analyze and take corrective steps. Also, a strong information chain helps in knowing the attitude of customers towards say a newly launched brand. Nerolac understands the importance of information and has developed a systematic chain for the same. For ease of distribution and to exploit the advantage of having dispersed manufacturing locations Nerolac has divided their distribution chain as per 8 major regions and each region has a regional distribution centre (RDC). Each of these regions are further sub-divided into number depots depending on the demand and reach-ability. Nerolac has in all 66 depots. Each of the depots controls a number of areas which are headed by the Area Sales Manager (ASM). The dealers are usually provided with goods from there area sales centers. The dealers are the most important to source of information as they are the ones who interact with the customers and are in a position to provide appropriate feedback. They also give opinion regarding the saleability or say demand of a particular product. This critical information is gathered by a Territorial Sales In-charge (TSI). The sole business of a TSI is to collect the data on a weekly basis from all the dealers which fall under his/her territory. This information well tabulated, explained and is passed onto the ASMs. Each of the ASMs scan through the demands and information gathered and add their own views and forecasts and passes this data to each of the depots. The information is then passed on to the respective depots and the RDCs, where at each level, some forecasts or analysis is added. Finally all the information is transferred to the Head Office where the production departments, marketing department etc use high end software called the Advanced Planning and Optimizer (APO) to come out with optimum schedules. It is
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important to note that all the depots, RDCs, Head Office and a few centers and connected to the ERP systems. This helps in easy transfer of data and helps to store and present a data in a simple manner. Also any change or updates are made on real-time basis, thus assisting in effective decision making.
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HEAD OFFICE
RDC 1
RDC2
.
DEPOT
RDC 8
DEPOT
DEPOT
DEPOT
DEPOT
DEPOT
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DEPOT
ASM
ASM
ASM
ASM
ASM
ASM
TSM
TSM
TSM
TSM
TSM
TSM
D1
D2
D3
D4
D5
D6
D7
D8
D9
D10
D11 D12
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Advanced Planning and Optimizer (APO):SAP APO is one of the major tools of Advanced Planning and Scheduling (APS) software. APS helps in production scheduling by considering various input data and constraints like inventory and bills of materials constraints, inventory stock and replenishment levels and order generation policies. APS can operate in time frames longer than the sum of procurement and production lead times. It accepts both sales orders and, through a bill of material explosion, creates purchase and manufacturing orders. APS is capable of generating plans for multiple manufacturing facilities which makes it valuable & irreplaceable. APO helps in forecasting based on characteristics of configurable end-products; for example, based on characteristic color etc. Moreover, one can forecast the demand for a combination of several characteristics, thus taking into account mutual interdependency of the demand of these characteristics. Characteristics based forecasting allows to forecast many different variants of same product and reacting swiftly to changes in market demand. One can also place orders with suppliers for raw materials in timely fashion. In Nerolac the data obtained from the TSI's and various other intermediary sources and the various constraints are used as an input for APO. A few important inputs are: Materials constraint Sales figure of past year Sales figure of past year for the month in consideration Shades
After various factors and constraints are fed into the system, APO uses Demand Planning (DP) module and Supply Network Planning (SNP) module for effective forecasting.
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number of depots. The primary purpose of this is to make the transportation system as cost-effective as possible. The supply chain group has built prioritization rules that assign the relative priority of depots and SKUs in TLP module.
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Fourth Phase With a massive scale of operations covering around seven manufacturing units, 66 sales offices, around 11,500 dealers and over 2,000 SKU (stock keeping units)managing inventory levels and data from all sources was a massive task. Further, the organization had a transaction-based legacy system with a server located in each region. The data was captured on different servers and then manually consolidated at a central location. As data was not collated at a single location for analysis, business users could not use the consolidated data. It is then that the management decided to go in for an ERP system. After screening a variety of packages, the company zeroed in on SAP R/3. The organization also took a major policy decision to empower the functional user to run day-to-day functions on the application software instead of depending on the IT department. At the same time, the organization also decided to implement a data warehousing solution. The company selected the SAP suite of data warehousing tools as it provided facilities for multi-dimensional analysis of data and allowed for import of data from all platforms. The next step was the integration of the data mining solution with SAP R/3 data .The final step was Web-enabling the sales and marketing data, which would give remote users the power to carry out analysis. At the same time, on the networking front, efforts were directed towards making usage more secure. This step also saw a firewall being installed to authenticate all users.
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Benefits of ERP Apart from the fact that data now is pooled in a central server that helps in analyzing data quickly and predicting trends, there have been other major benefits. The ERP system has brought about a positive change in almost every department which are as follows: The ERP system has resulted in better collection efficiency. Unlike earlier transaction, one cannot make a sale unless a collection is done as every transaction is cross-checked by the system. Internal efficiencies have increased and bad debts have come down. The system has even brought down the finished goods stock. It enables to analyze which batch in the system has not been sold. In short, the quality of work has gone up without an increase in manpower.
Data warehousing and Data Mining Introduction: Data warehouse stores data that have been extracted from the various operational, external, and other databases of an organization. It is a central source of the data that have been cleaned, transformed and cataloged so that they can be used by managers and other business professionals for data mining, online analytical processing, and other forms of business analysis, market research and decision support. The acquisition process might include activities like consolidating data from several sources, filtering out unwanted data, correcting incorrect data, converting data to new data elements, and aggregating data into new data subsets. Data mining analyzes the data present in data warehouse to reveal hidden patterns and trends in historical business activity. This is used in tandom with data ware housing to help managers make decisions about changes in business operations to gain competitive edge in market place.
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SELECTION
DATA TRANS.
DATA MINING
INTERPRETIION/EVALUATION
TARGET DATA
DATA WAREHOUSE
PATTERNS
DEPOT
Uses:The sales and marketing team extensively use data warehousing tools to study trends of products, shades, markets and customers across different geographies. The huge investment made in data warehousing tools paid off for Goodlass Nerolac when it was able to pinpoint the trends in the market and identify potential geographies during the launch of its product, AllScapes. Mini Case: When Allscapes was first launched in the market, the response was not exactly enthusiastic. While the marketing team tried to gauge the market response from different geographies, the amount of data generated was too complex to analyze and take a decision. But with the help of data warehousing tools, the company was able to exactly pinpoint problem areas and adjust supplies to the dealer network in such a way that the paints were stocked where more sales were taking place. During evaluation for Allscapes, the company also realized that manufacturing only the base (white) and then performing the shade matching would make the process more efficient. Accordingly, AllScapes was re-launched with only 38
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shades. If the customer wanted more choices, he could simply walk up to the counter where the base would be mixed appropriately with Nerolac Hi-Power Universal stainers to obtain his choice of colours. The shift to tinting machines meant that inventory levels fell drastically. This naturally led to faster movement of goods across the supply chain. Due to data warehousing tools, the company got insights into the positioning of the product as well as indications on which markets to target. The result was that the product has enjoyed a good launch and has sold more in a shorter time frame as compared to its earlier performance. Sales and marketing are not the only departments using this tool. The purchase department uses data warehousing tools to improve performance of vendors. The manufacturing department uses them to improve cycle times, standardise production across factories, work on quality parameters and improve capacity monitoring and utilisation.. After ensuring that the ERP system and the data warehousing tools were fine-tuned to perfection, Goodlass Nerolac saw the need for supply chain optimization. Accordingly, after studying various packages, the company selected APO from SAP. In an industry where preferred shades keep on changing, it is difficult to estimate the demand across nearly 15,000 dealers. Further, raw materials that go into industrial paints are extremely costly as they are imported, making forecasting of demand very difficult. In some cases, the raw material that is imported goes into the creation of a single paint. Further, shade passing at the customers end is critical and hence there is a need for a system, which would help respond to changes very fast. An optimized supply chain gives the ability to deliver the right product at the right price. It would also help the company in improving forecasting efficiency and facilitate production on the shop floor.
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Outsourcing IT: To save & be Efficient Goodlass Nerolac has also outsourced some services like facilities management at the corporate headquarters, annual maintenance for all the infrastructure facilities and firewall management. The need for outsourcing services is predominantly due to the fact that in an ever changing technology landscape, the concept of managed services is important as the organisation is kept aware of all the relevant technology options and how they can be best applied to the organisation. IT assets have a life cycle. The life cycle typically commences from the time an order is placed for it to the time the organisation decides to retire the asset. For a manufacturing and distribution organisation, at a time when IT is becoming more business centric, more time is spent developing the competence to complement business needs with software or communication capabilities. At the same time, there is also a need to manage an organisations IT assets in a systematic manner so that they perform when needed and in the manner expected so as to avoid any surprises. This is the reason why Nerolac decided consciously to work with vendors for technology sustenance rather than the organisation investing in developing the required skills. The rationale is that since this is the core area of operation, a vendor is more likely to invest in the required skills and systems more and thus be able to offer more to Goodlass Nerolac rather than if the company invested in them itself. Apart from ERP and data warehousing tools which have helped in improving the efficiency and productivity levels of Goodlass Nerolac, the speed of the organization in reacting to events has increased rapidly. For example, if the organization launches a regional scheme or contest, the subsequent sales figures can be immediately known to a sales or marketing person. Accordingly, the company can then decide on future schemes to be launched and trends can be tracked regionally.
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To conclude, one can say that the success of Goodlass Nerolac in using information technology is a perfect example of how an organization can use the power of information technology not only as an enabler but as a strategic and competitive advantage
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Bibliography
1. Market Size & Shares Mar 2007- CMIE 2. Capital Line Data Resources 3. Pitch- March Edition 4. Supply Chain Management, Concept & Cases- Rahul Altekar 5. Supply Chain Management- Malini Gupta 6. Supply Chain Management- Sarika Kulkarni & Ashok Sharma 7. Data Mining- Pieter Adriaans & Dolf Zantinge 8. www.nerolac.com 9. www.hindu.com
10. www.financialexpress.com
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