Compound Annual Growth Rate (CAGR) --- The year-over-year growth rate of an investment over a specified period of time. CAGR isn't the actual return in reality. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate. You can think of CAGR as a way to smooth out the returns. Don't worry if this concept is still fuzzy to you - CAGR is one of those terms best defined by example. Suppose you invested $10,000 in a portfolio on Jan 1, 2005. Let's say by Jan 1, 2006, your portfolio had grown to $13,000, then $14,000 by 2007, and finally ended up at $19,500 by 2008. Your CAGR would be the ratio of your ending value to beginning value ($19,500 / $10,000 = 1.95) raised to the power of 1/3 (since 1/# of years = 1/3), then subtracting 1 from the resulting number:1.95 raised to 1/3 power = 1.2493. (This could be written as 1.95^0.3333). 1.2493 - 1 = 0.2493Another way of writing 0.2493 is 24.93%. Thus, your CAGR for your three-year investment is equal to 24.93%, representing the smoothed annualized gain you earned over your investment time horizon.
Transcript of "Marico IT structure"
By:Neha Sikarwar, Boby Sebestian, Rahul Bedi, Vipul Bajaj and Souvik Roy
OUTLINE Introduction to Marico Supply Chain and Nature of Challenges Faced Initiative Implemented Results and Sustenance Future Ahead
ABOUT MARICO Found in 1991, Public Limited Company A leading Indian Group in Consumer Products and Services Renowned Brands like Parachute, Saffola, Kaya Skin Clinics CAGR of 21% in turnover, 30% in profits - over last 5 years Turnover of 2660 Crores (2009-10) 12 Brands, Turnover Rs 1550 Crores 100 SKUs, 1500 Suppliers 7 Factories, 15 Contract Manufacturers Reaching 13 Crore 30 Depots, 1000 Distributor consumers 25 lac Retail Outlets (Reach)
External Analysis of Marico Porter’s Five forces: Threat of substitute products: In FMCG sector the products are highly substitutable. Threat of new entrants: The established companies have huge base of loyal customers which acts as an entry barrier for new entrants. Determinants of Supplier’s power: The industry is mostly dependent on the local players for supplies of raw materials. Determinants of buyer’s power: Highly substitutable products and highly price sensitive market. Industry rivalry: Intense competition
Networking environment Citrix Presentation Server™ running on one HP ProLiant DL 360G4P server and one HCL Global Line server Citrix® GoToAssist® Microsoft® Windows Server® 2003 Connectivity through VSATs, VPNs, leased circuits and Internet VPNs HCL/Zenith desktops and Toshiba laptops.
MARICO’S PROBLEMS More brands and more products incur costs: This entails more sales and markets to track, more forecasts to make, more production to plan, more SKUs to track, more pallets and truckloads to configure and route. The SKU/distribution point combinations run in millions. The distribution network became more costly and complex, exposing many process inefficiencies. The resulting growth strained Marico’s highly regarded distribution network and exposed shortcomings in its forecasting, planning, and supply chain processes.
MARICO’S PROBLEMS(Contd..) Forecast accuracy was at 70%. Distributors were suffering stock-outs and loss of sales on 30% of Marico SKUs. Excess inventory The costs of errors in shipments to remote depots were mounting.
CHALLENGES- SUPPLY CHAIN Penetrate areas with less than 20, 000 population. No secondary sales data. Peak / Min Sales Ratio - across months Skew of Sales with in a month Data Visibility Order placement process Distribution network complexity
KEY ISSUE - PEAK / MIN SALES RATIO KEY BRAND - ANILLUSTRATION 3.0 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 1 2 3 4 5 6 7 8 9 10 11 12 Month Peak / Minimum Sales ratio Variation across the year as high as 3:1 (Key Brand)
KEY ISSUE - DATA VISIBILITY EXCEL TRACS PINS AOG CAFAS MPS FAS-Ingress Lack of Visibility of stocks on a frequent basis even at depot Departmental System for Transactions, No Integration
INTERNAL OPERATIONS VISIBILITYLack of visibility among transaction systemsStand alone applications systemsNon-Integration: Departments working with conflicting numbersAnd coordination problems in supply chain planning and executionRationalization and Consolidation of data for monthly financial statementsExcel spreadsheet based applicationOnly one planner qualifiedData Gathering-Indicative Plan-Production Department-Final Production Plantook 30 days
MARKET PLACE VISIBILITY Reliability on PRIMARY DATA- suboptimal visibility Nest best option- Distributor’s sales to Retailers MARICO operated with a PUSH METHOD Severe skewing of sales Synchronization between MARICO and distributors- different bucketed time horizons
DISTRIBUTION VISIBILITYPC-supported legacy systems – use of relational database librariesStruggling to meet increased logistics needsPoor visibility into depot stocks-no prioritization rules in place in configuring foroptimal truck loadsExcess stock- hire temporary spaces and demurrage chargesStock-outsMaldistribution of goods- higher delivery costs
The Approach Fully integrated system consisting of Enterprise Resource Planning (ERP) business application SAP R/3, a Supply Chain Management (SCM) suite. The Advanced Planning and Optimization (SAP APO) component of my SAP Supply Chain Management (my SAP SCM) My SAP Business Intelligence Solution for Supply Chain Performance Management.
SOLUTION IMPLEMENTED - TO TACKLE VISIBILITY APO ERP Minet BIW ERP, APO, BW MIDAS for Distributors Minet :- The face of all the above to users in the field Outcome - Stock visibility of depot and distributor real time
SAP SAP R/3 Integrated Systems- mySAP SCM & SAP APO mySAP Business Intelligence Demand Supply Chain performance Finance, Forecasting management and Planning, activities, Supply Data Cost Network Warehousing Accounting, Planning functionality, (SNP), Deployment Business Materials Intelligence and Cockpit tools and Management, modules Analytics, Production Best- Practice Planning, Models, Quality Administrative Management, resources. Sales & Distribution
SAP(Contd..) SAP R/3 integrated business systems, including finance, cost accounting, materials management, production planning, quality management, and sales and distribution A key component of mySAP SCM, SAP APO, including its demand forecasting and planning, supply network planning (SNP), deployment, and supply chain cockpit modules mySAP Business Intelligence for supply chain performance management activities, a system that provides data warehousing functionality, business intelligence tools and analytics, best-practice models, and administrative resources
SAP APO • few commodity raw materials • no manufacturing capacity constraints Not used for • no sales seasonality- no promotions and minimize Sourcing and Manufacturing artificially induced demand surges • Improve internal Collaborative forecasting between manufacturing sites and warehouses.Demand forecasting • Assigned and accountable ownership- distribution and Supply Chain from warehouses to distributors met service levels Planning
DEMAND PLANNING- SAP APO Actual pack-mix sales of previous three months Pack-mix allocation factors Detailed demand plan at the SKU level Production Capacity Vs Raw Material Availability and provide feedback (1st week) Minor modifications using Primary and Secondary data for every region now available Check Pack-Mix allocation to reflect the current market trends Release final demand plan to the supply chain group at the Head Office
SUPPLY NETWORK PLANNING SNP module in SAP APO Reliable, Responsive Production and Distribution Planning Process Depot and Plant Heuristics Production and Dispatch related decisions for the planning period of a month
PLANT SNP in SAP APO Run unconstrained Plant Heuristics using Indicative Demand Planning Data Firm Demand in Place Run Constrained Plant Heuristic in SNPFirm Production Plan prepared for Factories and Contract Manufacturing Plants Provide broad feasibility related feedback to the sales force
DEPOT SNP in SAP APO Using a Truck Builder Module-coordinate multiple SKU’s and depots Shipments are sent in full truck-loads Depot inventories simultaneously remain within the inventory normsPlans in blocks of 10 days- tradeoff between Transportation Costs and Inventory Carrying costs Provide broad feasibility related feedback to the sales force
DEPOT SNP in SAP APO Built prioritization rules Assign relative priority of depots and SKU’s in the TRUCK BUILDER MODULE Depot heuristics run thrice a month (primary sales data vary from forecast)
MARICO IT SYSTEM - OVERVIEW R3 MIDAS MI-Net MIDAS BIW SD APO MIDAS USERS
MARICO IT SYSTEMS Distribution Automation Software package- MIDAS (MARICO INDUSTRIES DISTRIBUTION AUTOMATION SOFTWARE) Internet based system MI-NET in which distributors could log in and supply data online Application which could automatically transfer data from distributor’s PC to MARICO’s central servers
MARICO IT SYSTEMS• MI-NET directly linked to SAP R/3 Stockin Transit Depot Stocks Pending Orders Statement of Accounts Promotion Schemes to distributors
MARICO IT SYSTEMS• Potential Primary developed using mySAP Business Intelligence Average sale of the previous three months Develops and reports brands and regional sales potential that should be targeted by the sales group Cumulative actual sales to date—mySAP provides daily updates through Primary Potential Proactive work rather than Postmortem analysis
HOW MiNET WORKS? MiNet is a portal that links 800 distributors and 110 super distributors of Marico spread across the country to the company MiNet also enables the company to get daily updates at the stockist level At the backend, Marico has installed the SAP R3 transaction handling modules for sales, finance and materials management The company has also installed the Advance Planner & Optimizer (APO), a supply chain module, which works right from demand forecasting to materials management and production planning. Marico claims to be the first APO installation for SAP in India The company has in place a Business Information Warehouse (BIW) which is the repository of every bit of information relevant to the company. This backend is linked to the outside world comprising scores of business associates for Marico, through MiNet.
THE “MIDAS” TOUCH The company has also put in place a software called the Marico Industries Distributor Application Software (MIDAS) which is akin to an ERP (enterprise resource planning) software to capture “secondary sales” data MIDAS has been created by Marico in conjunction with Chennai-based firm Botree Every morning the distributor logs on to MiNet and uploads information from MIDAS and we pass on the information regarding invoices, running schemes etc to the distributor This means that the distributor can keep feeding his data on MIDAS and then dial in periodically and feed the information on MiNet. He doesn’t have to be online all the time
VENDOR MANAGED INVENTORY (VMI) Places order Marico EARLIER Distributor Replenishment based on order Replenishment based on norms Distributor Marico NOW WITH VMI MIDAS Mi-net APO SAP Orders are automatically generated
SALES BENEFITS OF VMI MI-NET AND SAP R/3, Field Sales Personnel Immediate access to MARICO’S depot stock level Order status and distributor performance Time saved for collecting data for sales reports Focus on sales, brand development and distributor relationships Bolster trust among sales personnel and win distributor trust Dumping has stopped
Using mySAP SCM Visibility and tools and SAP R/3 ERP provide by SCM & modules will: ERP will: