Communication Is Key To Efficient SCM

Satish Pai, Systems Administration Manager, Marico talks to Biztech2 about the importance of having an agile supply chain and gives a brief account of SCM operations at his company.

Typically, FMCG companies have very tight SCM operations; how critical is it at Marico?

Because of the constant pressure on margins, Fast Moving Consumer Goods (FMCG) companies have no choice but to have a highly integrated and efficient supply chain. The designs of the FMCG supply chain are usually so comprehensive that other industries which lag in SCM can take the FMCG sector as a benchmark.

Our SCM operations at Marico are no different and we lay an unremitting focus on our SCM. Having an agile and responsive supply chain helps us refine our internal production process and increase efficiency. It helps us reduce unnecessary overheads at every step of the way, right from procurement to distribution. Our SCM operations have helped us become extremely responsive to evolving market scenarios and customer needs.
What according to you is the most critical element in having an efficient SCM?

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Communication is of great importance. It can help you build an agile and responsive SCM. The ability to communicate effectively across locations, suppliers, distributors and other partners can mean the difference between a good or a bad SCM.

It is for this reason we have taken great pains to connect each and every location of ours irrespective of the role of that facility. We lay very high stress on uptime because we believe that your supply chain is only as good as the efficiency with which your information flows across the organisation and beyond. The more up-to-date the information is, the better and accurate business decisions will be.

Hence, for facilitating this communications, we have invested in owning strong IT enabled infrastructure. We have a good mix of VSATs, leased lines & Wireless connecting important locations. In addition to this we’ve taken the reliability and high availability issues into consideration, so that our users have the required information whenever they require it.

What about software and its role in optimising your supply chain?

Of course software solutions are important and they do play a crucial role in our SCM efforts. Over the years, we’ve implemented many solutions to fortify our supply chain. Some of the solutions implemented at Marico include SAP R/3 for transactions, SAP APO which takes care of our demand planning.

Every month we have a demand planning cycle in which the sales teams enter their projected sales figures for the next three months. Based on these figures we do our back calculation, which in turn allows us to estimate our raw material supply and other goods for manufacturing the products.

The SAP APO has a feature called vendor managed inventory. It allows us to automatically replenish our distributors’ stock as it reaches a certain limit. By using complex algorithms and information such as previous sales figures etc. we can determine the net order content which needs to be shipped to the distributors as their stock reaches the designated limit.

In addition to this we’ve launched a Copra portal for simplifying the copra buying process. Using the portal , the suppliers can quote the quantity and price for their coconuts and Marico can then make the final call on price and quality and make a purchase decision.

Given the size and complexity of today’s IT departments, a major chunk of the IT budget is often allocated to just maintenance than acquiring new IT capabilities or innovation. Is this true of Marico as well?

In some respects it is true and not just for Marico but for most organisations with mature IT set ups. Maintaining and running existing IT set up is something that companies have to invest in. Let’s take communication for example; if I invest in a VSAT installation, it’s not much today. However, I’ll end paying more for the bandwidth it uses over a period of time. Similarly in case of software applications, applications maintenance, renewing and buying additional licenses, buying new hardware for applications, security are the sort of expenses that companies can’t really avoid.

Having said this, we at Marico have always tried to invest in technologies that have low recurring cost. We might invest a little more in capital so that the operating costs come down because we want less of fixed overheads. We evaluate all investments through the prism of SEVA(Simplified Economic Value Added). We believe in evaluating the Total Value of Ownership(TVO) which encompasses the business benefits as well as costs over the period of investment. Also IT is very business driven at Marico. We have a history of projects that can not be deemed pure play IT projects. Majority of our IT related initiatives over the years have had a clear business case and individuals from the business side have always had a greater role in defining the nature of the project.