Asian Paints Operations Strategy

A study on Distribution and Inventory Management System

Group -6 Deepthi C James M Praveen Kumar Rajesh P Shishir Jindal PGP-12-104 PGP-12-113 PGP-12-057 PGP-12-208 PGP-12-065 Diwakar Koushik Ramji PGP-12-106

Agenda
Indian Paint Industry Overview High Impact operations in Paint Industry Supply Chain Asian Paints: About the Company Competitor Analysis Asian Paints v/s Nerolac Distribution Strategy Of Asian Paints

Cost v/s Service

Competitive Advantage

Indian Paint Industry

100 year old, 21000Cr INR industry First player Shalimar Paints Kolkata in 1902 Porters Five Forces applied on the Indian Paint Industry
Availability of Substitutes: Low to Medium

Competitive Rivalry: Medium

Buyers Power: Medium

Supplier Power: Medium

Entry Barriers: Medium

Indian Paint Industry

Operations in the Paint Industry Broad Major categories Players in ofthe paints market in India Sales data of companies Market shares of major companies
12,000.00 10,474.57 10,000.00

8,000.00

Sales (Rs. Crore)

6,000.00

4,000.00

2,901.20

3,375.65

2,162.30
2,000.00 528.64 0.00

Asian paints Berger Paints

Kansai Nerolac

Akzo Nobel

Shalimar Paints

High Impact Operations in the Supply Chain

Impact
16 14 12 10 8 6 4 2 0 Raw material sourcing Inbound logistics Raw Material Inventory Productions Outbound logistics DC

Impact

Distrubutor

Wholsaler

Retailer

Asian Paints: History

1942-67: Evolution Phase - APIL founded on 1st Feb.1942 by 4 friends with the strategy of Going where the customer is.

1967-82: Brand extension and consolidation - Innovations spurred, lot of investments in up gradation of technology.

1982-86: Years of excellence - added products to portfolio, brand building initiatives Spectrum of excellence.

1987-97: Moving closer to the customer Painting signifies festivity, joy and plentitude, Celebrate with AP, Lasting beauty, rural reach.

1997-99: Changing rules of the game Business restructuring, ERP, Helpline, Color world, CRM

Asian Paints
The largest Indian Paint company Leader in the Decorative segment, 2nd Largest player in the Industrial Segment Current presence in 17 countries across the world; in 5 regions namely South Asia, South East Asia, South Pacific, Middle East and the Caribbean regions Extensive computerized operations incorporation of SAP CRM, BI, Portal and integrated SCM systems APs success is a combined result of its Marketing and Corporate Strategies Prominently, its Distribution Excellence

10 Paint Manufacturing Facilities in India

350 Raw material suppliers

6 Regional DCs and 72 Depots

Robust Distribution System

Competitor Analysis
Heads Asian Paints Market leader in the Decorative segment Available in the rural and urban area High quality MIS Pricing policy oriented to all kinds of customers Only 15% share in the Industrial segment No foreign tie ups Acquiring Market share in the Industrial Paints sector Developing market in the Automobile Industry; which accounts for 50% of the Industrial segment Nerolac is advancing in the Decorative segment Nerolac Paints Leader in the Industrial Paints segment Tie up with Kansai Paints provides foreign technology Main supplier in the Indian Industrial and automobile market Low presence in the Decorative segment Low presence in the rural areas Improve stand in the Decorative market segment Capturing the entire Industrial segment

Strengths

Weaknesses

Opportunities

Threats

Asian Paints is advancing in the Industrial Segment

Asian Paints Distribution Strategy

Bypassed the bulk buyer segment
Wide product range Extensive distribution

Concentrated on semi urban and Enlargement of the distribution function Large number of dealers and co. depots rural areas
Direct to Retail
Channel management Extensive physical distribution facilities Large number of retail dealers

Open door dealer policy

Nationwide marketing and distribution

High costs

Steps followed by Asian Paints for implementing the new Strategy Create a large network of Dealers Establish Company Depots to service those dealers Create a Marketing organisation to match the distribution

Distribution Network Requirements

CORPORATE STRATEGY
Rural Segment & Semi Urban Segment Concentration on retail consumers Strong Customer Focus Short term competitive advantage by increasing cost of doing business for competitors Based on consumer insights, changing value drivers of industry

SUPPLY CHAIN STRATEGY URBAN INSIGHTS

Supply at right time is focus Consumer decision was driven by product variety High competition and strong foothold

URBAN STRATEGY
Development of Retail Network Increase in number of SKUs offered Fully integrated & Computerized SC Highly operational Supply Chain

Distribution Strategy of Asian Paints

PLANTS Plant 1 DC 1
Ankhleswar

DC

RETAILER Retailer

Plant 2 Plant 3 Plant 4 DC 1

Rohtak

DC 1
Kasna

WHOLESALERS

Retailer

Retailer

Plant 5

Retailer

Contract Manufacturer

DC 1
Chennai

Retailer

Balancing costs & Service Levels

Strong Commitment to Distribution cost control
Pricing to suit the average Indian consumer Reduce costs in order to remain profitable

Effective Inventory Management

Inventory level 28 days; Industry average 51 days FG stock 7% of sales; Industry average 14%

Control of Credit Outstanding

Incentive schemes for Dealers to reduce the large credit outstanding 3.5% discount for Perfection in Payments 5% cash discount for all Outright cash purchases Achieved credit outstanding of 25 days against industry average of 40 days

IT initiative to reduce Distribution cost

Computerisation enabled Asian Paints to forecast sales for 100 fast moving SKUs Initiative ensured prompt billing, accurate customer accounting and control of credit All the factories and 55 depots were linked through C-SAT

Achieving Competitive Advantage

Asian Paints has successfully managed to achieve both forms of competitive advantage Differentiation through the product variety in the form of number of variants in shades and pack sizes Cost leadership through effective inventory control and distribution

Road ahead

Conduct primary survey for competitors of Asian paints Nerolac and AkzoNobel

In depth analysis on the inventory held at different stages of the supply chain

Details on the type of logistics used in different parts of the supply chain

Thank You