Supply Chain Management.

Submitted By- Dhaval Lokhande.

 Introduction
• Started in 1942 by four entrepreneurs:
Champaklal choksey,
Chimanlal choksey,
Suryakant Dani and
Arvind Vakil as
“ASIAN OIL & PAINTS COMPANY.”

• Within three years, their turnover reached 3.5 lacs.

• Started with a strategy “Going to where Consumer is”.

• In 1967, Asian paints became the 10th largest paint company

in the world.
Asian Paints- Today
 International Operations
Caribbean Islands Middle East

Bahrain, Egypt,
Barbados, Jamaica,
Oman &
Trinidad & Tobago.
United Arab
Emirates.

South Pacific South East Asia

South Asia China, Malaysia,

Fiji, Tonga,
Vanuatu, Solomon & Singapore &
Samoa Islands. Bangladesh, Nepal Thailand.
& Sri Lanka.
Product Categories
 Supply chain of Asian Paints

 Headquarters in Mumbai
 9 Factories
 18 Processing Centres
 350 raw material and intermediate goods
suppliers
 140 Packing Material Vendors
 6 Regional Distribution Centre
 77 depots are integrated
 Elements of Supply Chain
3000 SKU’S KEY SUCCESS 9 PLANTS
FACTORS
FLEXIBLE
OPERATIONS 6 RDC
RAW
MATERIALS LOWER
OUTPUT TIME 35 JOB WORK
LOW DELIVERY CENTRES
PACKAGING COST
MATERIAL
77 DEPOTS

1500+
14500+ DEALERS INDUSTRIAL
CONSUMERS
 Raw material Requirements
• Paint Industry is raw material intensive with RW
being 70% of production costs.

• 300 types of raw materials used in manufacturing

process

• The most critical ones are

• Titanium Dioxide (TiO2) 30 %
• Phthalic Anhydride (PAN) 20 %
• Pentaerythritol• (PENTA) 15 %
 Backward Integration
• Asian Pain produces PAN and PET

• (35 % of production costs)

• Competitors are importing these parts till now

• Benefits :Backward integrations

– immunizes Asian Paints to the fluctuation in the prices

– Material is transferred at low cost to Asian Paints
– equips the company with the ability to meet sudden surges in
demand
– 1/3rd production is sold to other companies. This gives strategic
edge to Asian paints.
• Nine manufacturing facilities are supported by Six
Regional Distribution Centers (RDC) and Seventy-
seven depots.
• Each RDC and depot is taken by Asian Paints on
lease and then further assigned to a C&F Agent.
• Distributing the Asian Paints products to the 14,500
dealers all over the country.
• There are 4 depots of Asian Paints in Mumbai and
73 outside Mumbai.
 Certain Issues

 Movement of paints and hazardous goods

including raw materials have a series of safety
checks to be adhered to, starting with a material
safety data sheet.

 All materials transport from factories to the

depots is insured through a blanket insurance
policy, which fixes a minimum liability for loss,
damage, pilferage or leakage upwards of Rs.
10,000.
 Distribution Strategy

• AP bypassed the bulk buyer segment and went

to individual consumers of paints.
• AP went slow on urban areas and concentrated
on semi-urban and rural areas.
• AP went retail.
• AP went in for an open-door dealer policy.
• AP voted for nationwide marketing / distribution
 Implications of Distribution
Strategy Resulted into:

• Going to Individual Consumers Implied Wide

Product Range and Complex Distribution
• Smaller Packs proliferated the product depth
further
• Wide Product range Implied Expensive
distribution
• Going retail Implied Deep Involvement in
Channel Management
 Inventory Management

Facts:
• Lowest inventory cost in industry
• Avg inventory level of 28 days sales against
industry avg of 51 days
• Translates into 45 % lower inventory costs
• Stock of finished goods is only 7% of net sales
half the industry average
 Inventory Management
Asian Paints allowed
• 15-21 days credit for dealers in major towns
• 22-30 days credit dealers in upcountry regions

Incentive schemes to reduce inventory

• A special discount of 3.5 per cent - discount for perfection in payments.
It was passed on at the end of the year, provided each and every payment throughout the
year was made within the stipulated time norms.

• A cash discount of 5 per cent. This was paid for all outright cash purchases.
It was given whenever payments were received within 24 hours of the supply/invoice. In
respect of outstation accounts, the payments have been
made in advance by draft in order to be eligible for the cash discount
 Supply Chain Re-engineering

• To deliver products efficiently to customers

without holding large amount of inventory

• To manage cash cycle to free up funding for

aggressive growth by acquisition strategy
 Existing Processes
• The demand pattern was difficult to predict even with the support of historical
data/trends as consumer preferences were changing fast
Forecasting • Relied on home grown solutions for planning and implementation

• Raw materials comprise 60% of the value chain which require accurate forecasts
• Constant updation of BOM and Routing called for frequent changes in the
Procurement procurement planning process

• Manufactured all the shades (30-50 depending on a product line)

Manufacturing
in all the packs (five to eight packs)

• Had to maintain inventory levels for all 3000 SKUs

Distribution • Customer choice limited to number of SKUs
Enabling IT across the Supply Chain
of Decorative Paints
• Reduced inventory and Eliminated redundancy of stocks
• Approx. 11000 color tinting machines including multiple
machines across some counters
• Has helped expand the range of shades for
each product category, offering a choice of
shades to consumers in the hundreds.
• For the retailers it has eliminated the sales loss for want of
range/desired shade
• – i2 distribution planner used to developdistribution
schedules based on constraints
 Improved processes
Manufacturing
 Strategy changed to manufacturing bases thus providing
economies of scale

 Using i2 Master planner to deicide which plant to manufacture

what product depending on
 Capacity constraints
 Environmental constraints
 Key raw materials

 Helps optimize the process such that least inventory is produced

to maintain the expectations of service and safety stock

 Better planning reduces the number of rush orders

 Factory Scheduler used for machine by machine and unit by unit

planning of production schedules
 Improved processes
Procurement

 i2’s factory planner used to identify the raw material and

packing materials and who to source it from

 Also provides the ideal formulations required for

manufacturing products

 A better materials planning system allows the company to

create more complex paint formulas

 Helps select the best vendor and manufacturing method

for any given situation
Results of Re engineering

Manufacturing
Distribution

Procurement

Reduced Finished Inventory cycle from 56 days to 30 days

Business is currently 4 times of that before BPR
Increase in the number of shades from 50 to 1300
Achieved an 87-90 percent service levels for SKU sales at the location level
Built a competitive advantage in terms of inventory management
Thank You