FMCG

1. 2. 2 3. 4. 5. 5 6. 7. 7 8. 8 9. Rs. 43,000 crores fast moving consumers goods industry in India can be Rs.80,000 crores. Sector has negative working capital of 17days, and profit after tax has gone 17days to 33% from 22% in 1999. Key to the development of FMCG in India continues to be retailing. Retailing indicates beginning of pull system in India. 34% retailers are grocers. grocers The rural market has to be tapped profitably. As A many as 30% of all FMCG outlets generate a daily turnover of below f ll tl t t d il t fb l Rs.300/- and 0.3% generate more than rs.10,000 a day. Over a period of 50 years, companies like HLL, Godrej and P&G along with Nirma, have built their distribution networks diligently. India to day, can boast of one of the best and most cost effective distribution systems anywhere in the world.
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GMCG
Share of Personal Care Indian FMGC Industry. y
Segment Toilet Soaps Fabric Wash Dental Care Hair Care (Shampoos) Skin Care & Creams Creams* Nail Enamel Lipsticks Perfumes Deodorants Talcum Powers Market Value (Rs.Cr.) 4500 4600 2600 700 550 150 70 100 100 350 Growth rate % 2-4 24 7-8 9-10 9 10 10 25 25 25 20 25 12

Total 13,600 15 * Includes sun care, fairness creams, moisturizers, foundations, lotions & balms.

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Important 5 SCM Parameters

order fulfillment and replenishment Inventory Management Primary sales stock at various level of the chain Stock levels, ageing sales, v/s production & stock, possibility of sales promotions. promotions Sales-historical, current trends likely off take estimates, estimates current inventory level Retail universe, salereturns of territory, mix of retail y, outlet, product sales, distributors, C&F A. No: & mix of transports used; frieght cost, alternative fright, costs% loading, transit time idle time, delivery time. Inventory visibility, retail level data. Inventory visibility across the chain, mfg. sites, and warehouses Data aggregation, forecasting software, flexible manufacture Replenishment Inventory management, y g , freight mix, packaging, utilization GIS. Tracking, palletization frieght, scheduling, increase truck loading, same day despatch, transit time. IT, integrated standardised data flow, bottom up ERP systems, barcoding

Retail Outlets
FMCG/Foods Outlets Over 100-sq. ft. 501-1000 251-500 251 500 7250 Total Total Number 5996 17248 100,327 100 327 16,70,399 18,06,733 18 06 733 60,00,000* Share of Total % 0.3 1.0 5.6 56 92.5 100 100 Monthly turnover (Rs.) 97,000 95,000 69,000 69 000 25,000

Forecasting

Data capture at all stages, ERP system, statistical analysis ability. IT, personnel management ,goods g ,g allocation (ERP) System. Larger truck sizes warehouse locations, third party providers third party units (TPUs)
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Distribution Reach

* Estimated organised & unorganised. unorganised

Transport Management

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Type of Retail Outlets in FMCG

TYPE OF OUTLET Total Outlets Crocer General Store Food Store Cosmetic Store i Chemist Paan Bidi Others % 100 34.6 12.8 7.1 4.5 5.9 16 19 Total No: of Products 30 52 37 9 12 53 14 3 Mumbai Delhi Kolkota Chennai Total City

Urban FMCG Retailing in India.

Total no: of outlets 83,743 70208 86683 30903 Average daily sales/outlet 128 1963 1476 2773 Population per outlet 180 143 152 209 2,71,733 15

Total GMCG Outlets % Urban to Total

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FMCG retailers Daily Turnover FMCG Inventory Cycles

Turnover/day (Rs.) Less than Rs.300 Rs.301 500 Rs.501 1000 Rs.1001 R 1001 3000 Rs.3000 5001 Rs.5001 Rs 5001 7500 Rs.7501 10,000 Rs.10,001 20,000 Total No: of Outlets 529,754 450,015 423,854 286,171 286 171 77186 20704 9922 5179 1806,733 % of total 29 25 23 16 4 1 0.5 0.3 100% RM WIP Debtors Total W.C. Cycle 1994 51.0 51 0 5.4 40.3 128.8 7.1 1995 55.1 55 1 6.0 31.2 31 2 40.5 132.8 1.9 1996 55.1 55 1 4.5 32.1 32 1 32.7 124.4 7.7 1997 42.0 42 0 3.9 26.4 26 4 29.3 101.6 (5.5) 1998 45.4 45 4 3.8 26.3 26 3 26.9 102.4 (8.1) 1999 40.3 40 3 3.3 24.5 24 5 24.5 92.6 10.2 2000 41.3 41 3 3.4 25.4 25 4 20.5 90.6 17.7

Finished Goods 32 0 32.0

(Days)

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FMCG SCM Trends in India

Supply Chain Element Retailer Status Today Dispersed, unorganised not much buyer power High numbers of SKUs, of various sizes, offers and usage Push to warehouse Time dated Top down (from parent) to vendors); l of buffer d ) lots f b ff stocks & time. Long production runs, low overheads, fixed stations. Trends towards Larger retail outlets, more number of SKUs, concentration of buyers, retailer power in creases il i Rationalization of SKUs, to optimise costs. Pull from retailers/C& F As Dynamic, Dynamic instantaneous & fast corrective action. Collaborative but still with some buffer i b ff time & inventory. i Flexible manufacturing short runs, low change over times, increased overhead. Forecasting Information

Contd.

FMCG SCM Trends in India

Instant transmission to hubs, redirected to supply centres, rather than planners, faster response to demand change.

Aggregated at every level and then transmitted upwards, loss of time in demand pattern d d

SKU Variety.

Historical data based, Use of sophisticated software tools, ERP, varying levels of accuracy trend data, qualitative field inputs & person based, allowances for force majure. To maintain stock level, on shelf, at plant. Dynamic replenishment mix of products, replenishing depends on an array of factors, only of which is stock. Hub H b & spoke, at more than one l l k h level. Distributors get their goods directly from C&F As. ERP used with supply chain planning to import through put & efficiencies V-SATs, leased line mobile ordering & automation
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Inventory at Plant SKU Analysis Production planning

Replenishment

Distribution S Di ib i System T di i l linear flow, Traditional li fl some hub & spoke. Integrated data Systems Technology ERP Used internally

Manufacturing practice

g Contractual, opportunistic Strategic p , pp g partnership alliance, p , Contract manufacturing (Outsourcing)/Third Party essential cost control element. manufacturing RWL/LV/PII-36

E-mail, Fax Telephone

EMCG Logistics Cost Trends

1996 ( ) Sales (Rs. Cr.) Cost of production (Rs. Cr.) Outbound costs/Sales (%) RM Inventory holding (days) FG Inventory holding (days) IHC/Sales IHC/S l (%) Inbound Logistics Cost/Sales (%) Total Logistics Costs/Sales (%) 17455 13882 2.7 41 31 2 1.7 6.4 1997 1998 1999 2000

Important Indicators
Parameter Net sales (Rs. Cr.) Frieght (Rs. Cr.) g ( ) Frieght/Net Sales (%) Growth i Net Sales Yoy (%) G th in N t S l Y Growth in frieght Costs, Yoy (%) 1995 1996 1997 1998 1999 2000

19421 22192 24559 25290 14952 16828 18592 18335 2.5 50 33 1.9 19 1.5 5.9 2.4 52 30 1.4 14 1.4 5.3 2.4 50 28 1.3 13 1.4 5.1 2.6 49 29 1.1 11 1.4 5.1

3337 6560 7736 138 4.1 6.8 68 97 279 4.3 4.6 46 18 289 3.7 5.4 54 22

9926 10116 10588 345 3.7 6.3 63 7 366 3.6 12.2 12 2 5 446 4.2 17.7 17 7 5

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HLL: Market Shares

Personal products Toilet soaps 59 Detergents 39 Detergent bars 47 Scourers 59 Oral Care Shampoo Hair Oil Skin care Talcum powder 36 64 15 55 62 Food & Beverages Tea Instant coffee Roast & Ground Coffee Ice cream Ketchup Jams & Squashes Atta Salt Edible oils & Fats 36 32 54 25 41 74 18 17 2
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HLLs Inventory Management

Inventory cycles RM WIP Finished Goods Debtors D bt Total WC CYCLE 1994 48.5 8.4 33.2 17.5 17 5 107.6 (16.8) 1995 47.8 6.3 39.2 17.2 17 2 110.6 (5.7) 1996 29.6 3.1 28.8 8.0 80 69.5 (13,3) 1997 32.3 2.4 27.3 6.9 69 68.9 1998 31.7 1.9 23.9 7.5 75 65.0 1999 32.1 2.1 27.8 8.4 84 70.5 2000 29.0 2.4 23.7 9.1 91 64.2

(26.0) (24.8) (27.8) (33.8)

* HLL Follows January to December financial year Days ll b fi i l

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HLL Distribution Network

Raw Materials Suppliers Packaging Materials Suppliers

HLLs Main Indicators

Growth Sales 1995 19.3 4.1 41 35.5 1996 96.6 4.3 43 63.1 1997 17.9 3.7 37 40.8 1998 21.8 3.7 37 42.2 1999 7.3 3.6 36 33.2 2000 4.7 4.2 42 23.6 (%)

Manufacturing UnitsIn-house, third party Head Office Rolling sales Forecasts & mktg. plan Regional Offices Regional buffer depot JIT godowns Stockists Whole sellers Retailers Consumers
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All India buffer depot p

Frieght Fi h PAT

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Import of Materials Marico SCM Co ce s co SC Concerns

Stock availability SKU Rationalization Picking up demand signal Time management Integration of all entities Working capital
Oil offloaded into barges Barges offload into Shore based silos Oil into truck tankers
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Marico R lli b i M i Rolling buying plans l y g p Actual buying in the market place Sunflower oil loaded onto Tanker ships for Mumbai (Sailing time 30 days) Arrival at Mumbai Port (JNPT) Clearing time 7-10 days Direct off loading Onto port silos

To Jalgaon

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Principal Ratios Cavin Kare: Top 5 SCM Concerns

Growth rates Net sales Frieght Frieght/Sales RM/Sales 1995 20.0 8.4 84 3.3 52.8 1996 23.2 1.0 10 3.5 52.3 1997 17.5 6.5 65 3.5 52.3 1998 18.9 19.7 19 7 3.8 52.7 1999 13.4 17.6 17 6 4.0 56.2 2000 18.0 159.9 159 9 3.9 49.5 2001 1.0 35.3 35 3 4.8 35.8 (%)

Rationalisation of SKUs Data i ibili D visibility Through put The chain Order fulfillment d f lfill Inventory management Integration of all entities On common I.T. platform.

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Cavin Kare: Setup

Field Staff/Depot Sales forecast S l f Faxxpro, SAP TPUs (25) Mother Depots (3 1 North, (3-1 North 2 south) Sourcing depot at HO Regional offices (4) Depots ( ) (27) Stockists (2300) ( ) Retailers (6.25 lacs) Consumers 6.
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FMCG Logistics
1. 2. 3. Basic structure of the FMCG supply chain has not changed in many years. y g Attitude and efficiency of each element has changed. The key trends emerging are:
Increased focus on rural distribution has increased logistics spend for the leading companies. New alliances have increased. Working W ki capital cycles are turning negative for most FMCGs due to tighter i l l i i f FMCG d i h credit control, SKU rationalization.

Lead times, Product SKU Wise forecast, stocks Inventory data, Invoicing collection, Daily despatch Advice (DDA)

4. 4 5.

Import regulations are more relaxed now & contract manufacturing is the industry norm. Slowdown has resulted in sales growth decreasing from 13% to 5% while g g distribution costs have increased 2.85% but as a% to net sales dropped by 1%. Logistics costs should be reduced by 2-3% in the next 5 years.
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Hindustan Lever
HLL markets 110 brands with 950 pack sizes 7500 distributors, 100 manufacturing locations, SKU vary from 5 ml to 1 lit going to 56 distribution locations. 3. 36000 employees, 1300 managers, it reaches about 1 million retailers across the subcontinent. It covers villages upto 2000 popular. 4. Tight focus on supply chain and usage of IT has saved HLL upto VS $ 1250 MILLIONS ( O S (Rs. 6000 crores) i i ) in inventories in the chain. i i h h i 5. Overall suppliers were around 1000 and for one item there were as money as 5 suppliers which increased inspection 5 times. 6. Suppliers costs become an issue in SCM when sales went up. Now HLL uses two 6 S li b i i h l N vendors for one time. 7. RM inventory reduced from 84 days in 1990 to 29 days in 2000 i.e. HLL has unlocked Rs.1200 crores in two year Rs 1200 year. 8. It is extensively used in HLL. 9. HLL is planning for vendor managed inventory. 10. Presence of b ll hi effect. 10 P f bullwhip ff t 11. Expenses towards packaging material reduced by 2%. 12. 25% reduction in clearance time of vendors.
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Outbound Logistics
1. 2. 3. 4. 5. Hub and spoke system of distribution followed. Hubs are mother depots, regional depots, while the spokes radiate from these to the stockists, depots, and retailers . Linking of stockists with MFG-PRO ERP System already 700 stockists out of 7500 have been liked. JIT depots 800 trucks on road at any moment of time 12-14 days from Pondichery to Gowahati

1. 2.

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MARICO
1. 2. 3. 3 4. Sales turnover Rs. 650 crores. India imports 50% of its oil requirement. Marico s Maricos share varied from 20 to 30% in two-three yrs yrs. Edible oil supply chain.
Sailing time from Argentina to India 4 weeks I week to 10 days for immediate storage. 10-12 weeks lead time from the time of placement of order. order

Contd. Contd

MARICO

7. Transport costs $36 to $42 per Tonne for import. 8. Barges are used for transferring oil from ship at a cost of Rs.150/Tonne. 9. 9 Import duties are 75% of CIF price. price 10.80% of branded oil is processed in 24-36 hrs. 11.Yearly 11 Yearl contract for trucks, toners. Tanker rates are Rs.700 to 1000/Tonne. tr cks toners Rs 700 1000/Tonne 12.Spends 7 to 8% on logistics.

Outbound Logistics
17 SKUs in oil. Total 100 SKUs distributed through 14,00,000 outlets, and is their largest network in FMCG in India. 100 super distributors, 2300 stockists & 9000 van markets.
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5. 6.

JNPT has a discharge rate of 200-400 T/hr. while in west it is 600-700 T/hr. T/hr Vessel demmrage: waiting charge USD 1.5/Ton/day.