You are on page 1of 14

Supply Chain Management

ICT Implementation in Asian Paints

Submitted by: Prasoon Kumar PGP27236 Section D

Table of contents

1. 1.1 1.2 2. 3. 3.1 3.2 3.3 4. 5.

Introduction.............................................................................................. 3 Characteristics of paint industry................................................................4 Role of ICT in supply chain management.................................................5 Supply chain of Asian Paints.....................................................................6 Supply chain issues before implementation of ICT...................................7 Implementation of ICT to improve ISCM.................................................8 Benefits of ICT implementation in Supply chain.......................................9 Challenges in CRM and SRM...................................................................12 Evaluation of ICT implementation in Asian Paints..................................13 References.................................................................................................14

1.Introduction
The paint trade in India is divided in two segments Industrial paints and Decorative paints. Automobile manufacturers are the biggest targets of the Industrial paints segment as they are the one who has the maximum demand in this segment of market. It is very difficult to study the supply chain of the paint industry in the industrial segment, as there is a different set of works for every customer or every set of customers. Every customer in this segment is such big that the company has to change the working style as per the customer. Decorative is market which leads the Indian paint industry and which needs all the efforts on all the sides. This is one segment of the market that needs all the efforts of all the functions of the market as in this segment the market covers whole India. The product range which one company covers in the market is also huge in the organised sector companies. . The selection of the paint needs to be approved by both the end client as well as the recommending authority the contractor, the architect, the painter or in some cases the shop keeper as well

Paint

Solvents

Binders

Pigments

Additives

Fig .1: Components of paint

Solvents give the paint a liquid flow while the binder binds it to the surface. Pigments impart colour and opacity to the paint and the additives give it special resistance properties.

1.1Characteristics of paint industry


1. Working Capital intensive: The number of shades is very large and a sufficient stock of every shade has to be maintained at all levels of the distribution channel, the working capital cycle is very high. The extent can be gauged from the fact that Asian Paints has a 12000 strong dealer network selling more than 150 shades. Also, the number of raw materials required can stretch up to 300. As majority of these raw materials are either imported or sourced from small chemical manufacturers, a large stockpile needs to be maintained.

2. Seasonal nature of demand: The demand peaks during festival season while is very lean during monsoons. Thus, a major part of the sales are achieved in the second half of the fiscal year.

3. Inventory Management at the dealer level: The product differentiation is minimal and the substitutes are readily available, hence it is necessary to have inventory management at the dealer level. This enhances brand visibility and occupying strategic shelf spaces.

4. Low Distribution Costs: For a product like Distemper, it is necessary to have low distribution costs, since it is the most widely used product in the paint industry.

Fig.2: Supply chain of paint industry

Fig.3: Paint industry characteristics

1.2 Role of ICT in Supply Chain Management


The objectives of SCM are to match or exceed the customer service level in targeted market while optimising the total supply chain investment and cost. Achieving the desired service level at the optimal cost demands elimination of non value adding activities throughout the supply chain. Similarly, every product is delivered to end consumer through a series of complex movements between companies which constitute the chain .An inefficiency at any point in the chain results failure in achieving competitive potential of the firm. The strength of supply chain is measured in terms of its weakest link. For a supply chain to achieve its true potential in terms of effectiveness and efficiency, material flows and information flows throughout the entire chain, it must be managed in an integrated and holistic manner, driven by the overall service and cost objectives. Effective management of material and financial flows is, therefore, predicated upon the effective management

of the related information flows. For this reason, information and communications technology (ICT) is becoming an increasingly indispensible tool for supply chain management

2.Supply chain of Asian Paints


Asian Paints has harnessed the powers of state-of-the-art supply chain system using cutting edge technology to integrate all its plants, regional distribution centres, outside processing centres and branches in India. All the company's paints plants in India, two chemical plants, 18 processing centres, 350 raw material and intermediate goods suppliers, 140 packing material vendors, 6 regional distribution centres, 72 depots are integrated. . The Supply Chain Management is backed by IT efforts that help the company in demand forecasting, deriving optimal plant, depot and SKU combinations, streamlining vendor relationships, reducing procurement costs and scheduling production processes for individual factories. In determining cost of raw materials, packing materials, traded goods, stores, spares and consumables, weighted average cost method is used. FIFO is used for work in progress and finished goods. Fixed production overheads are allocated on the basis of normal capacity of production facilities. It uses Economic Order Quantity with Back Orders to manage its levels of inventory with appropriate safety and anticipation levels stocks while using the model. It does not use the Just in Time method to manage inventory. Accurate demand forecasting by means of inventory management software helps them target the kind of markets that have specific needs, and enables the company to avoid situations where they are either out-of-stock or wasting resources on inventory. i2 Planning solutions provides Asian Paints improved demand forecasting for approximately 1,500 SKUs and allows the business to simultaneously plan for procurement, production, distribution and inventory across its entire supply chain including manufacturing locations, warehouses, distribution centres and depots. The supply chain runs through a wide spectrum of functions right from materials planning to procurement to primary distribution. It has played a pivotal role in improving operational efficiencies and creating agile procurement, production and delivery systems. It has also enhanced the flexibility of operations, lowered output time and reduced delivery costs, while improving customer-servicing levels and profitability.

3.Supply chain issues before implementation of ICT


the demand pattern was difficult to predict with the support of historical data as consumer preferences were changing fast home grown solution for planning and implementation proved ineffective in managing dynamic bussiness conditions Raw materials comprised 60% of the value chain which required accurate forecasts Constant updation of BOM and Routing resulted frequent changes in the procurement planning process

Forecasting

Procurement

Manufactured all the shades(30-50 depending on product line) in all the packs(58 packs)
Manufacturing

Distribution

Had to maintain inventory levels for all 300 SKUs Wide product range implied expensive distribution

Fig .4: Supply chain issues in Asian Paints

3.1Implementation of ICT to Improve Internal Supply Chain Management (ICSM)


i2 planning solutions provide Asian Paints improved demand forecasting for approximately 1,600 SKUs and allows the business to simultaneously plan for procurement, production, distribution and inventory across its entire supply chain including manufacturing locations, warehouses, distribution centres and depots. i2 solutions are helping Asian Paints manage the following business processes:

Master Planning: The i2 solution generates a supply chain plan for Asian Paints that synchronizes procurement, production and distribution. This plan is optimized and constrained by resin/emulsion and critical material availability, shade-stream manufacturing capacity, target inventory requirements and demand forecast. It also makes pre-season, pre-build planning process repeatable, consistent and logical while eliminating non-value added activities.
7

Material Planning: Given the high number of raw materials and vendors, optimized material planning is a key requirement for Asian Paints. i2 Supply Chain Planner connects across multiple factory planning instances provides visibility for resolving shortages/lateness across plants and maintains an audit trail of the actions taken. i2 solutions have significantly reduced planning cycle time and improved consistency of the decision making process.

Distribution Planning: The demand patterns experienced by Asian Paints are typically highly skewed towards the last week of a month. This requires flexible distribution planning to cater to frequent changes to demand and supply positions in the supply chain. The i2 Supply Chain Planner solution allows planners to quickly re-plan, thus optimizing distribution costs and reducing inventory stock-outs simultaneously.

The i2 SCM engine links all the vendors and suppliers, thus helping the company in assessing the stock of their vendors and suppliers at any given time.

Additionally, Microsoft Dynamics NAV 4.0, formerly Microsoft Business SolutionsNavison, offered a hub-and-spoke model which was ideal for Asian Paints. The hub-and-spoke concept refers to a parent or holding company that uses one business software system (the hub), which is integrated with the systems.

3.2 Benefits of ICT implementation in Supply chain


A decade after the i2 supply chain opportunity assessment demonstrated that i2 solutions paid for themselves after one year of use, Asian Paints has dramatically improved its debt-to-asset ratio. The company has became debt free, and leveraged its supply chain efficiencies to pursue an aggressive growth strategy.

In 1999, the company operated with an average of 56 days of finished goods inventory. During the initial implementation phase, the company reduced that to an average of 40 days of finished goods inventory on hand, and in recent years has further reduced that figure to 30 days of finished inventory. This leaner inventory stance was a key factor in the companys improved cash flow position and its ability to invest in growth-oriented acquisitions.
8

The company has also used i2 solutions to move from an end-service-level metric to a more proactive and precise order-fill method of analysis. After fully implementing various i2 solutions, Asian Paints now achieves 8790 percent service levels for SKU sales at the location level, which puts the company well ahead of competing firms in the marketplace. The companys enhanced master planning system enables Asian Paints to optimize the kinds and size of inventory it holds, and to deal more effectively with fluctuations in the volatile paints marketplace. A better materials planning system allows the company to create more complex paint formulas, and to select the best vendor and manufacturing method for any given situation

Modern distribution planning enables Asian Paints to plan deployment on a weekly basis, and to quickly and easily adjust those distribution plans as needed. By adopting a robust approach to change management, the company can now adapt more nimbly to shifts in market demand, to new manufacturing processes, and to changing regulatory pressures or business requirements.

In terms of market performance, improved supply chain planning and execution systems have allowed the company to growit is now four times the size it was 10 years agowhile dramatically reducing the on-hand inventory needed to serve its customers.

To further optimize the execution of the supply chain processes in conjunction with the planning solution, and to provide a seamless plan-do-check-act framework to the supply chain executives, Asian Paints deployed the i2 platform. This has provided Asian Paints with the ability to build highly customized planning and execution workflows to further improve supply chain efficiencies. The companys ability to deliver the right product at the right time and to the right place has become a differentiating factor for Asian Paints. The supply chain has become one of the most crucial functions in taking the company ahead of the competitors. Asian Paints has launched a supplier portal that includes an automated digital document exchange facility that will improve the efficiency and effectiveness of interaction with suppliers. An employee portal has also been set up. Customer Relations Management (CRM) tools are being used in Asian Paints Helpline and Home Solutions initiatives.

The successful deployment of ERP, CRM, Business Intelligence and Portal software from leading solution providers and integrated SCM systems has helped improve efficiency in the business as well as increase the transparency and accuracy of information across the company.

Fig.5 : Offerings and results of i2 solutions(ICT tool )

10

3.3 Challenges in Customer Relationship Management (CRM) and Supplier Relationship Management(SRM)

Developing a direct link to the customer

Standardizing sales delivery processes

Implementing a real-time reporting system for employees and business partners

Creating a platform for supplier processes integration

Fig .6 Challenges in CRM and SRM

Asian paints launched a supplier portal provided by SAP which constitutes an automated digital document exchange facility to improve the efficiency and effectiveness of interaction with suppliers. To manage internal customers an employee portal was also created. Customer relation Management (CRM) tools are used in Asian Paints helpline and Home Solutions initiatives. The home solutions includes a state of the art call centre, an effective lead management system to prioritize and route leads for proper handling and standardizing the sales delivery to ensure the same quality of service every time . This tool enables to view all customer interactions and financial information in real time.

11

4. Evaluation of ICT implementation in Asian Paints


Supplier Relationship Management (SRM) Internal Supply Chain Management (ISCM) Customer Relationship Management

Transaction Management Foundation (TMF)

Source : Information Technology in supply chain(Chopra, Meindl ,Kalra) Chopra, Meindl and Kalra emphasize on the importance of including all processes along the supply chain in ICT implementation. They further categorize all the processes in the supply chain into three main areas: processes focused downstream (CRM); processes focused internally (ISCM) and processes focused upstream (SRM).Another important category is TMF which includes basic ERP systems, infrastructure software and integration software. TMF is necessary for the three macro processes to function and communicate to each other. It is imperative that firms focus on these macro processes, a firm must expand the scope beyond internal processes and look at the entire supply chain to achieve breakthrough performance. Asian paints had implemented its ICT tool for ISCM by using services of i2 Technologies in year 1999 and they upgraded it in 2005. So this is evident that they were proactive in improving internal supply chain activities from the beginning but didnt focus much on SRM and CRM initially. Gradually they took holistic view of the situation and included CRM and SRM .It is essential that ISCM macro process aims to fulfil demand that is generated by CRM processes, there needs to be strong integration between ISCM and CRM macro processes. After implementation of ISCM Asian paints realized that it is of little use for the factory to have production capacity to meet demand if supplier cant supply the parts effectively due to lack of proper co-ordination. ISCM software providers have helped improve decision making within ISCM processes but good integration with CRM and SRM is still largely inadequate at software levels. One of the major causes of failure in IT implementation is companies trying to implement IT systems in a wide variety of processes at the same time which was not quite obvious a decade back when Asian Paints initiated IT implementation they chose to move forward in incremental steps rather than
12

Big Bang approach which helped them to learn from mistakes and improve the efficacy of IT implementation. After IT implementation in ISCM and CRM successfully they are now focussing on SRM which is a wise step.

13

5. References
1. http://www.octopuse.com/WhitePapers/White%20Paper%20for%20Paint%20Industry.pdf 2. Sweeney, E. Managing the Supply Chain: the Role of Information and Communications Technology (ICT) as a Key Enabler of the Process. Business Ireland, Summer Issue, June 2005, p.105-109. 3. Kemp, J. Asian paints enables growth through improved planning. Website:http://digital.bnpmedia.com/article/Asian_Paints_Enables_Growth_Through_Improved_Planning/51 3049/48366/article.html 4.Elkin,B: The next level of collaboration. Supply Chain Leader : Ideas and Innovations from i2, Issue No. 8,2009 Website:http://laurenbossers.writersresidence.com/system/attachments/files/3629/original/Supply_Chain_Lea der_issue_8.pdf 5. http://www.asianpaints.com/corporate_information/supply_chain.aspx 6. Chopra, Meindl, Kalra .(2010) Supply Chain Management :Strategy, Planning and Operation(4th Edition);Pearson Education ,Inc.

14

You might also like