A New Beginning

As Ranjana Singh was making her inspection rounds of the Mumbai depot, she
could sense a quiet turmoil. Her interactions with the depot operators revealed that
things were not as frictionless as they should ideally be. They were overloaded and
worked up. They were juggling between phone calls to the sales team and
distributors. They were frantically punching orders into the system and ensuring that
distributor orders were booked and stocks were dispatched. This is one of the most
important parts of Maricos supply chain which ultimately brings in revenue for
Marico. It was clear to Ranjana that there was a problem in the mid-supply chain
that needed urgent attention from the organization. There also was this unanswered
question Are we doing what we are best at?
Ranjana is the Head of Supply Chain in Marico and has delivered many
transformations to make the supply chain dependable, efficient and responsive.
Marico is seen as one of the pioneers in implementing supply-chain best-practices.
While clocking a consistent revenue growth of over 20% per annum, dozens of new
SKUs are being added to the portfolio at a brisk pace. Foreseeing higher growth, the
organization has plans of implementing aggressive Go-To-Market (GTM) strategies
with a tight integration between sales and supply chain. But the current ordermanagement process consumes a lot of management bandwidth. There is friction
between the distributor and sales teams. Both Marico and the distributors arent able
to predict the correct stock levels to be maintained. In order to support future
growth, and to relook at the root causes of unrest, Ranajana setup a task force to
suggest a transformation roadmap to her.
The task force studied Maricos supply chain in detail. It also interviewed all the key
members involved in the process. The findings of the task force are as below:
Maricos Supply Chain
The end objective the supply chain is to ensure that stocks are available at the
shelves of the retailer so that consumers can buy them when they need it. In order to
ensure availability, products are first sent to depots which are stock aggregation
centres.
Primary Sale: Distributors are Maricos partners who help Marico distribute stocks to
various retailers in the market. They place orders for stocks and a Marico depot
services the distributor order. This is the point when the ownership of the stocks moves
from Marico to the distributor. This sale from Marico to the distributor is called Primary
sale.
Secondary Sale: The Distributor has his own sales force. The sales force consists of a
team of people who make rounds of the market and collect orders from each
retailer. The distributor services the retailer orders. This is the point when the ownership
of stocks moves from the distributor to the retailer. This sale from the distributor to the
retailer is called a secondary sale.

Order Management: Based on the potential for secondary sales in the market, the
distributor makes an estimate of how much stock he needs to buy from Marico. He
places an order for the desired stocks. These orders are billed and delivered by
Marico Depots. This process is called Order Management.

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Permanent Dispatch Plan: Since every depot serves a large number of distributors, it
becomes difficult to collect orders, invoice them and dispatch ordered goods to
every distributor every day. In order to make it operationally feasible, every
distributor has a Permanent Dispatch Plan (PDP). A PDP is a schedule with specified
days of the week where distributors are serviced from the depots.
Distributor Service Level: Marico endeavours to maintain a 95% service level at the
distributor point. A high service level ensures that retailer orders are not missed and
retailer shelves are not occupied by competitor products.
Maricos Sales Organization
In order to pin-point the problem, Ranjanas task force selected the Mumbai ASM
area. Rekha Goyal was the Area Sales Manager (ASM) for the chosen sales area.

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Rekha managed a team of two Tertiary Sales Officers called Suresh and Ramesh.
PDP Schedule of Mumbai distributors
Marico customer Name

Monday

Tuesday

Wednesday

Thursday

Friday

Saturday

Sunday

Ram Agencies

Yes

Yes

Yes

Laxman Agencies

Yes

Yes

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The primary and secondary sales of Maricos top SKUs for each of these distributors
are provided in the attached sheets.
The task force conducted interviews with all the stakeholders and asked them about
the issues faced in managing the stocks at distributor point.
Interview with Rekha
As an area sales manager, I have to maximize the sales of Marico products in the
market. We are a public limited company and the stock markets are highly focused
on Maricos growth. We have made it a habit to show aggressive quarter and
quarter growth and take great pride in this fact.
It is important to ensure range selling as the organisation intends to have a balanced
portfolio of products for revenue generation. I also have to ensure a good return on
investment for my distributors by maximizing the inventory turnover. The right level of
stocks at distributor point would play an important role in achieving the above
objectives. Currently, my team is facing the following main issues:

Many times, the stock of some SKUs is not available at distributor point which
leads to a loss of secondary sale

The inventory levels for some of SKUs is much higher at 1 distributor point
wherein the sales are poor, and the same SKUs are stocked out at other
distributor points

Interview with Suresh

Marico has a very complex product hierarchy. Within each SKU, there are many
changeovers on account of consumer and trade offers run by the company. I have
to closely manage the inventory of all products for Ram agencies to ensure
secondary sales. Estimating the right quantum of stocks for so many SKUs is a very
difficult and time consuming task. I am not able to focus on the new GTM initiative
as I spend most of my time deciding the quantity of each SKU to be ordered from
the depot. Even after years of experience, it gets impossible to predict right levels of
stocks as the sales environment is very dynamic and volatile.
I do my best to assess the SKUs and quantity which Ram Agencies needs so that he
can full-fill the market requirement. But I am never able to convince him and always
end up having a negotiation based approach rather than a business forward
approach.
Interview with Ram Agencies
As a business partner to Marico, I want to maximize the sales potential for the
organisation and also earn a high return for my investment in the business. There is
cut-throat competition in the market and the right availability of products as per
retailer orders is an important aspect in the FMCG business. Currently, my investment
in the business is huge due to very high stock levels in some products. At times, I am
not able to buy necessary products from the Marico depot as per market demands
because my working capital gets locked in non-moving SKUs. Also, the working
capital requirement fluctuates a lot as sales in some peak months are very high as
compared to other non-peak months. The inefficiencies in stock management lead
to lesser ROI for me.
Suresh tries to push stocks onto me as he faces pressure from Mario to maximize
primary sales. I dont mind buying stocks as long as I can sell them to the retailers. But
I always have a feeling that he tries to push a high volume of stocks to me. I am
worried that my money may get blocked.
Interview with the Depot Operator
We have a stressful day every-day. First we have to talk to the distributors and take
their orders. Then we need to confirm the orders with the sales team. The Sales team
wants to push SKUs and increase the volume of high-running SKUs in the distributor
order. The distributors say that they dont want any excess stocks. By the time they
both agree on the final order, it is too late in the day. I find it hard to place trucks

and dispatch the order quantities. It also sometimes leads to delays in stock
connection at the distributor point.

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Interview with Ranjana:
The final objective of the any supply chain is to achieve a seamless flow of goods
to ensure the availability of products as per demand. A pull based replenishment
system is recommended in order to avoid mal-distribution and unnecessary
inventory in the supply chain. But some factions believe that push based systems
might be good for maximizing sales for the organisation. The FMCG industry in India is
very competitive and it is easy to lose shelf space to other players. Thus, Push vs Pull is
a raging debate which persists in the organization.
As distributors consume stocks from our depots, the depots need to be replenished.
As of now, stocks are pushed from plants to the depots only on the basis of the
months primary forecasts. I wonder if the back end of the supply chain needs a
transformation to ensure depots are stocked correctly so that the ordermanagement process works like a well-oiled machine
Problem Statement
The Task force needs to formulate a strategy and propose the following to Ranjana
1. What is the change in operating model required to ease the pains of Rekha,
Suresh, the distributors and the depot operators?
2. What are the correct stock levels to maintain at the distributor points such
that they can service all secondary orders
3. For Jan and Feb 2015, Rekha has identified a potential to sell certain
quantities in Mumbai Area. She has discussed with the Marico head-office
and taken on the same stretched sales targets. (Quantities provided in data
sheet)
a. How should the sales targets be disaggregated to the distributors?
b. What primary plans should Rekha target for the month to ensure
secondary sales?
4. Are there any IT and process improvements that can be suggested for
automation and touch-free distributor handling
5. How should the back end of the supply chain (from Factory to Depot) be
reorganized to ensure correct stock availability
6. What are the Key change management issues and how can Marico address
them

The task force may need to gather best practices in the FMCG industry to get a
clear understanding of solutions which can be quickly implemented.
Data may be assumed if required. Ranjana may ask for excel workings in the
strategic review.

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Appendix
Marico is a pioneer in implementing multiple IT and analytics solutions to
enable smooth business functioning. Where many organizations have tried
and failed, Marico has been exemplary in establishing processes and
enabling them through IT systems. Below is a snapshot of the many systems
implemented to ease the process of Distributor Order management and flow
of material from depot to the retailer shelves

Other Data attached with the case

 Secondary forecasts and sales data for Mumbai Area

Primary sales data for Mumbai Area
PDP schedule and transit times from Depot to distributors
Jan and Feb 2015 sales Mumbai secondary sales targets and distributor
opening stocks