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 Bahrain, Egypt,Barbados, Jamaica, Oman &Trinidad & Tobago. United Arab Emirates. South Pacific South East Asia South Asia China, Malaysia, Fiji, Tonga,Vanuatu, Solomon & Singapore & Samoa Islands. Bangladesh, Nepal Thailand. & Sri Lanka.
Paint Industry Paint industry estimated at Rs. 135bn. Unorganized sector accounts to 35% of paint market. Volume growth estimated at 15%. India’s share in the world paint market is 0.6%. Per capita consumption of paint in India is 1.2kg/annum.
Supply chain of Asian Paints Headquarters in Mumbai 4 Factories 18 Processing Centres 350 raw material and intermediate goods suppliers 140 Packing Material Vendors 6 Regional Distribution Centre 72 depots are integrated
Elements of Supply Chain3000 SKU’S KEY SUCCESS 4 PLANTS FACTORS FLEXIBLE OPERATIONS 6 RDC RAWMATERIALS LOWER OUTPUT TIME 35 JOB WORK LOW DELIVERY CENTRESPACKAGING COST MATERIAL 77 DEPOTS 500 INDUSTRIAL 15000 DEALERS 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) 30 % • Phthalic Anhydride (PAN) 20 % • Pentaerythritol- (PENTA) 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 Seventy- seven 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 Delhi based ANKLESHWAR based location location PLANT KASNA PLANT PATANCHERU ASIAN BHANDUP 77 PLANT PAINTS DEPOT HEADQUARTCENTRES ERS MUMBAIBangalore Chennai Kolkata Ahmedabad based based based based location location location 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 ChannelFAST MOVING GOOD SLOW MOVING GOODS Factory (4) 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 ManagementFacts:• 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 ManagementAsian Paints allowed• 15-21 days credit for dealers in major towns• 22-30 days credit dealers in upcountry regionsIncentive 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 • The demand pattern was difficult to predict even with the support of historical data/trends as consumer preferences were changing fast Forecasting • 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 theProcurement procurement planning process • Manufactured all the shades (30-50 depending on a product line)Manufacturing in all the packs (five to eight packs) • Had to maintain inventory levels for all 3000 SKUs Distribution • 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 processesManufacturing 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 processesProcurement i2’s 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