 "Marico Buys Its Copra Online")
When one of India’s most recognised FMCG companies felt the need to better its sourcing and procurement processes, it turned to technology and preached IT to an audience, the majority of which didn’t even know the extended form of IT.
Marico, most renowned for its Parachute coconut hair oil buys one out of every 25 coconuts grown in the country. Buying Copra - the dried meat of the coconut is very serious business at Marico. In fact, copra forms roughly 50% of Marico’s total purchase portfolio and the company procures close to 20 lakh coconuts everyday.
Sluggish Old Process
Copra buying at Marico was earlier done over telephone. Everyday copra suppliers from different locations would make calls to company’s central buying office and enquire about the day’s buying rates. They would then negotiate a price for their quantity on offer. Though old and outdated, the process seemed to work for Marico for some time. But as the company’s copra requirements grew with time, price discovery became increasingly time consuming and buying efficiency slumped to an unacceptable low.
The advent of brokers and middlemen made the entire exercise even more complicated and the process began eating into a lot of Marico’s productive time. Brokers more or less began to call the shots in negotiations and Marico felt underserved by the process.
It was under these circumstances Marico realised that things had to change.
Time For A Change
In order to do away with the established framework, Marico embarked on a lengthy yet meticulously designed strategy. In 2003, it introduced a gradual overhaul of the transaction process. First, to reduce the buying time, the company began buying in three different sessions of one hour each. It allowed vendors to make their own sell-offers over the phone. Based on the quantity and price information supplied by the vendors, Marico would take a final call on whether to buy or not, without spending any time on negotiations.
The second step was familiarising the supplier base with the basics of IT and introducing them to the benefits of internet. The company gave email IDs to each of its vendors and taught them how to use the internet for communication. It also encouraged vendors to tie up with local cyber cafes to help facilitate internet access. As a result of this, vendors began sending/receiving transaction data via e-mails and communication between the two parties became faster and more precise.
Using the e-mail, vendors were able to send goods receipt information, advance payment information, PO numbers, debit and credit notes, and shipping notification for their dispatches. The initiative not only improved exchange of information but also improved the IT literacy of Marico’s suppliers.
Launch of Copra Portal
Marico’s first two steps by now had laid the foundation for its most ambitious project on the supplier side yet, the copra portal. In the third and the final leg of the exercise, Marico launched “e-marico.com” a copra portal where vendors and copra suppliers could bid/quote prices online. Built on the .NET platform, the portal ran on SAP and MS SQL Server 2000 backend.
In addition to English, the portal was designed in Tamil and Malayalam to make users feel comfortable. To ensure that the portal was utilised efficiently, the company also engaged in rigorous onsite education and training activities for the users.
According to Marico, the launch of the portal has lead to a completely paper less transaction scenario. Right from bid to payment all the processes have become paper independent and are carried out on the portal itself. All our vendors have now been moved on the copra portal.
Benefits Aplenty
Automation of the copra buying process has resulted in significant benefits for both Marico as well as copra suppliers. According to Marico, the vendors have now become more self reliant and don’t have to depend on brokers and middlemen for their dealings. Because of the real time nature of the transactions, they can now settle their accounts on a daily basis and manage the cash flow extremely efficiently.
On the Marico side, one of the biggest advantages has been the significant improvement in the buying efficiency. The company says that post the launch of the portal, managerial time spent on buying transaction has decreased from 6 hours to less than 30 minutes. Spending lesser time on purchasing has aided in higher production time and allowed the company to concentrate on other areas of business.
The company is now planning to increase the number of its collection centres and even buy copra directly from the farmers.