Final Logistics Project

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S.K.SOMAIYA COLLEGE OF SCIENCE, ARTS AND COMMERCE PROJECT ON:“LOGISTICAL FUNCTIONS OF ASIAN PAINTS” NAME

ROLL NO

SONAM GUPTA

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(GROUP LEADER) DEEPA BALWANI

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PRITI HATTE

61

SHRUTIKA BORHADE

19

UJWALA BADHE

11

ROHAN BHAT

16

RITESH NAGDA

98

ROHIT KAMBLE

78

MAHENDRA DAWKHAR

29

SHARAD DAWKHAR

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TYBMS 2

“A” Submitted to:ARVIND IYER SIR DINESH SIR

{Signature}

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“ACKNOWLEDGEMENT” “Every

work

accomplished

is

in

a

sense,

a

feeling

of

satisfaction”. We are thankful to ARVIND SIR AND DINESH SIR for giving us such an interesting topic through which we had acquired such valuable information on the Logistical functions of Asian Paints.

I would like to thank my seniors without whose support the task cannot be accomplished and to the group members for their support and co-operation. We are now aware of the various logistical functions of Asian Paints and is all because of ARVIND SIR AND DINESH SIR.

We had tried to deliver our best and hope we have done so.

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LOGISTICS As demand in India is dispersed and spread over a wide geographical area, Asian Paints strategy to focus on building an extensive distribution (nearly 15,000 retail outlets) and logistics management network has paid it rich dividends. As a result of its wider reach and better logistics management, it has been able to market brands aggressively, thereby outperforming the industry year after year In this rapidly changing Business Environment, what gives companies like Asian Paints the Competitive Advantage...The answer is LOGISTICS. We can actually compare logistics to the most precious element on this planet WATER. It’s the ability of water to reach and occupy all available space and quench thirst, similarly it’s the ability of logistics to reach wherever the consumer demand exists. Logistics is a process of planning, implementing and controlling efficient and cost-effective flow of materials and information from point of origin to point of consumption. Hence, Logistics is nothing but the process of strategically managing the movement and storage of materials, parts, and finished inventory from suppliers, between enterprise facilities and customers. Typically 10-15% of a company’s turnover is spent on logistics, depending on the nature of product and the distribution pattern adopted. Having exhausted all options in the areas of product differentiation, pricing, promotional strategies and advertising warfare, corporations are increasingly turning to logistics. Hence efficient management of logistics is critical for the profitability of any company. To gain a competitive advantage over its competitors, a company needs to be flexible and adaptable to the market demand. In this changing scenario the following are the needs of the hour: The company needs to reach the customer at the right time ensuring the availability of the product on shop shelves This calls for reduction in lead time, operating costs and inventory levels And Improved asset productivity to leverage core competency Modern business concepts advocate "let experts do the job". A paradigm shift could be towards partnering with the professional in the field, which will positively impact the bottom-line. This can definitely be achieved through Outsourcing. Outsourcing logistics is the new weapon in the corporate arsenal. It is an easy access to World-Class Logistics capabilities and better control over the distribution system through an external agency offering specified services, which could be constantly improved upon.

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PAINT INDUSTRY

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INTRODUCTION

Asian Paints is India's largest paint company and ranks among the top ten decorative coatings companies in the world today, with a turnover of Rs.30.2 billion (USD 680 million). It was formed as a partnership firm by four friends in 1942. The company has an enviable reputation in the corporate world for professionalism, fast track growth, and building shareholder equity. Asian Paints is headed by Mr. Ashwin Dani, Vice President and Managing Director.

Following are few of the famous products of Asian Paints

• • • • • •

Apex Weatherproof Exterior Emulsion Premium Emulsion Apcolite Premium Satin Enamel Utsav Royal Tractor emulsion

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INTERNATIONAL OPERATIONS Asian Paints operates in 22 countries across the world and has 30 paint manufacturing facilities that serve consumers in more than 65 countries with a combined total manufacturing capacity of around 370 million liters per annum and 2,700 employees. It has manufacturing facilities in each of these countries and is the largest paint company in ten overseas markets. Asian Paints operates in five regions across the world viz. South Asia, South East Asia, South Pacific, Middle East and Caribbean region through the five corporate brands viz. Asian Paints, Berger International, SCIB Paints, Apco Coatings and Taubmans. In ten markets, it operates through its subsidiary, Berger International Limited; in Egypt through SCIB Paints; in five markets in the South Pacific it operates through Apco Coatings and in Fiji and Samoa it also operates through Taubmans. The countries that Asian Paints has presence are as follows: South Asia

: Bangladesh, Nepal, and Sri Lanka

South East Asia

: China, Malaysia, Myanmar, Singapore and Thailand

Caribbean Islands

: Barbados, Jamaica, Trinidad and Tobago

Middle East

: Bahrain, Egypt, Oman and United Arab Emirates

South Pacific

: Australia, Fiji, Solomon Islands, Samoa Islands, Tonga and Vanuatu

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RAW MATERIAL The paint industry is raw material intensive. It takes around 300 different raw materials to make paint, most of which are petroleum based. The raw materials are of a wide variety. On an average, raw materials account for 60% of net sales (industry average). In case of small-scale units it forms up to 70% of the net sales. These raw materials can be divided into three broad categories as shown in the chart below:

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Asian Paints require two types of raw materials Powder and Liquid. Pigments, Binders and Additives are included under the Powder category and Solvents and other Petroleum based products are included in the Liquid category. The powder raw materials are stored in Jumbo bags of 25 kg/ 50 kg/ 500 kg; whereas liquid raw materials are stored in big containers and can be stored for 7 days. Around 300 raw materials are required by the industry and all raw materials are not directly related to crude oil. The basket of raw materials is quite exhaustive. Raw materials, which constitutes around 60 per cent of total cost for the paints industry is an important factor for maintaining operating margins. The industry imports around 25 per cent of raw materials. But the most important raw material is titanium dioxide, which accounts for around 30% of total manufacturing costs. Besides TiO2, there are other petroleum based raw materials which constitute around 40-50% of total raw material consumed. Hence any movement in crude oil prices will impact the profitability of the company.

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SOME LOGISTIC FUNCTION OF ASIAN PAINTS (a)

Order processing:

Most paint companies are hit by the fact that they do not make the raw materials themselves. For example, phthalic anhydride (PAN) is manufactured from orthoxylene and which goes into the production of paints along with titanium dioxide. Asian Paints is the only paint company that manufactures PAN. The other paint companies have to import their stock. Since PAN prices generally outpace international orthoxylene prices by almost 50% paint companies end up paying a fortune when prices rise. In such a situation Asian Paints benefits by selling PAN in the open market. (b) Transportation Management The company has outsourced its transport management to Dynamic Logistic Pvt. Ltd. (c) Inventory Management The company prefers to maintain low inventory levels due to having large no. of suppliers at bay. AP’s average inventory level equals only 14 days sales, while the industry average is 51 days sales. This right away provides a 45% edge in inventory costs to AP compared to its competitors. The company has 350 raw material and intermediate and goods suppliers. (d) Warehousing The company does not own warehouses instead they have 90 depots scattered all over the India which are on lease basis. (f) Packaging The company has 140 packing material vendors. (g) Plants The company currently has 5 paint manufacturing plants in India. It manufactures and markets more than 2,800 items of paints (SKU). The current paint plants of the company in the country are located at Bhandup (Maharashtra) established in 1955, Ankleshwar (Gujarat) established in 1981, Patancheru (Andhra Pradesh) established in 1985, Kasna (Uttar Pradesh), and Sriperumbudur (Tamil Nadu) with a combined annual production capacity of 3.90 lakh KL.

Sriperumbudur Plant The capacity of the Sriperumbudur Plant is 100,000 KL per annum spread across 25-30 acres of land. The plant is located in the Sriperumbudur industrial park of the State Industries Promotion Corporation of Tamil Nadu (SIPCOT) on the outskirts of Chennai.

Kasna Plant and Ankleshwar Plant The Distribution Centres at Kasna Plant and Ankleshwar Plant have been commissioned. The Kasna Plant is spread across 25 acres of land.

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(h) Acquisition The acquisition gives Asian Paints a foothold in an emerging market and also opens the possibility of exporting to neighbouring countries. Asian Paints has already made its presence felt in the emerging markets after its acquisitions in Singapore (Berger International) and Egypt (SCIB Chemicals SAE). These acquisitions immediately give access to both emerging markets and those in which Berger International has a strong presence. In the industrial coating segment, the company acquired Hawcoplast Chemicals in November 2001 for Rs 22 crore, which provided it with a presence in the growing powder coating segment. (i) Subcontracting The company has around 28 subcontractors that manufacture various product lines. (j) Vendors Asian Paints manages more than 800 vendors that supply around 15,000 materials that are used to manufacture around 17,000 SKUs in various categories. (k) Research and Development The company has 140 R & D teams around the world, 7 decorators, 115 scientists (l) Retail Outlets or Dealers The company supplies to more than 22,000 retail outlets or dealers and 65 sales offices in India through 90 depots as opposed to 12000 to their nearest competitor. Over 35% of the dealers do business only with APIL. It has 90 offices in India and 30 situated all across the country.

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SOME OF THE DEALERS OF ASIAN PAINTS Alwell and company authorized dealers of Nerolac Paints in Pune. Maharashtra » Pune

Kamal Hardware : Authorised Dealer Asian Paints Uttaranchal » Dehradun

Dharmaraj hardware Tamil Nadu » Coimbatore

Annai Hardwares & Paints - Whole Sale Merchant Tamil Nadu » Tuticorin

Mayur Paints & Hardware Shop in Malakpet Andhra Pradesh » Hyderabad

Suman Hardware & Paints in Deals in home furnishing, Bangalore Karnataka » Bangalore

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THIRD PARTY LOGISTICS MJ Logistic Services Limited It provides warehousing facility of 5,00,000 square feet to Asian Paints.

LALIJI MULJI TRANSPORT CO CLIENTS It has 180 branches within India and provides over 3 lakh sq.ft Warehousing & Storage facility and Handling of over 4 lac tonnes of cargo p.a. to Asian Paints.

TAMBOUR LTD Tambour Ltd. is an Israel-based paint manufacturer. The Company operates five factories throughout Israel. It manages the production, imports and marketing of decorative paints, industrial paints and marine paints. In addition, the Company offers accompanying products, such as coating materials, filling materials, diluters, adherents and decorative tiles. The Company's Acco warehouse covers an area of 12,000 square meters, contains around 3,000 different kinds of paint and distributes over 85 million litters of paint per year.

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Waste Minimisation, Recycling and Reuse APIL has identified a total of 78 types of wastes from paint manufacturing facilities, out of which 18 are hazardous as per HW Amendment Rules, 2000. Given below is the approach to waste minimisation adopted by APIL. (Options are not given in order of preference) a. Recycling a potential waste or portion of it 'on site' where it is generated b. Improving process technology and equipment that alter the primary sources of waste generation c. Improving plant operations, such as housekeeping, materials handling, equipment maintenance, automating process and packing equipment d. Redesigning or reformulating products e. Conducting waste audits and monitoring and tracking of waste generation The company’s efforts have resulted into almost no wastage during production. There is almost no damages during transportation also.

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THE SUPPLY CHAIN Asian Paints has harnessed the powers of state-of-the-art supply chain system using cutting edge technology to integrate all its plants, regional distribution centres, outside processing centres and branches in India. Eight of the company's paints plants in India, 2 chemical plants, 18 processing centres, 350 raw material and intermediate goods suppliers, 140 packing material vendors, 6 regional distribution centres, 72 depots are integrated. The supply chain runs through a wide spectrum of functions right from materials planning to procurement to primary distribution. It has played a pivotal role in improving operational efficiencies and creating agile procurement, production and delivery systems. It has also enhanced the flexibility of operations, lowered output time and reduced delivery costs, while improving customer-servicing levels and profitability. The Supply Chain Management is backed by IT efforts that help the company in demand forecasting, deriving optimal plant, depot and SKU combinations, streamlining vendor relationships, reducing procurement costs, and scheduling production processes for individual factories.

➢ ➢

Upgraded i2 Solutions to Improve its Supply Chain Planning Capabilities

i2 planning solutions provide Asian Paints improved demand forecasting for approximately 1,600 SKUs and allows the business to simultaneously plan for procurement, production, distribution and inventory across its entire supply chain including manufacturing locations, warehouses, distribution centers and depots. i2 solutions are helping Asian Paints manage the following business processes: -- Master Planning: The i2 solution generates a supply chain plan for Asian Paints that synchronizes procurement, production and distribution. This plan is optimized and constrained by resin/emulsion and critical material availability, shade-stream manufacturing capacity, target inventory requirements and demand forecast. It also makes pre-season, pre-build planning process repeatable, consistent and logical while eliminating non-value added activities. -- Material Planning: Given the high number of raw materials and vendors, optimized material planning is a key requirement for Asian Paints. i2 Supply Chain Planner connects across multiple factory planning instances, provides visibility for resolving shortages/lateness across plants and maintains an audit trail of the actions taken. i2 solutions have significantly reduced planning cycle time and improved consistency of the decision making process. -- Distribution Planning: The demand patterns experienced by Asian Paints are typically highly skewed towards the last week of a month. This requires flexible distribution planning to cater to frequent changes to demand and supply positions in the supply chain. The i2 Supply Chain Planner solution allows planners to quickly re-plan, thus optimizing distribution costs and reducing inventory stock-outs simultaneously. The i2 SCM engine will link all the vendors and suppliers, thus helping the company in assessing the stock of their vendors and suppliers at any given time. Additionally, Microsoft Dynamics NAV 4.0, formerly Microsoft Business Solutions—Navison®, offered a hub-and-spoke model which was ideal for Asian Paints. The hub-and-spoke concept refers to a parent or holding company that uses one business software system (the hub), which is integrated with the systems 16

used by its individual subsidiaries or divisions (the spokes). It was decided: While the parent company was running SAP, the subsidiaries would be standardized on Microsoft Dynamics NAV.

Benefits The hub-and-spoke model has enabled Asian Paints subsidiaries to interact with the parent organization easily and effectively, removing the need for generating multiple reports. Reduces IT Administration No More Double Reporting

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ASIAN PAINTS : 'We plan to have customized colors for consumers' Manish Choksi, chief, Corporate Strategy, and CIO, Asian Paints joined the paints major in 1992. He is a member of the Management Board of the Asian Paints Group responsible for new business, corporate planning, and information technology across the Group. He has seen his company through successful ERP and SCM initiatives, and spearheaded adoption of new information technology solutions across the extended enterprise. In a chat with VOICE&DATA, he talks about his company's foray into services such as painting, décor, home improvement solutions as well as new initiatives. Excerpts

Which new technologies will be deployed by Asian Paints to reduce cost and increase employee productivity? At Asian Paints, we always make sure the technology that we implement is cost effective and increases employee productivity. We have deployed SAP R3, i2 supply chain planning suite, ERM employee platform formula management, product lifestyle platform, and so on. It is very essential for adopting new technologies, since IT is an enabler to service retailers. Also, the supply chain effectiveness has helped to capture more of the enterprise platform. The i2 software, which was deployed nearly in 2001, has helped to increase productivity from 3 tons to 8 tons.

How is telecom making business more competitive? Considering today's competitive scenario, it is essential that organizations have the best technology in place to ensure good results. We at Asian Paints deploy technology that connects the entire field-force across all our branches in the country as well as globally. To ensure connectivity we have provided laptops and PDAs in the retail sales force areas. Laptops with data cards are a key driver for enterprises. We have implemented VSAT, which is an early adopter in far-flung locations.

Manish Choksi chief, Corporat e Strategy, and CIO, Asian Paints

Asian Paints has about ninety offices in India and thirty globally. How are they connected? Typically, all the offices are connected through MPLS, VSAT, and radio, but the preferred medium is landline. Ninety percent of our offices have MPLS and we use radio strategically where last mile 19

connectivity is required. We have VSATs for our operations in rural areas and there is a back up of two VSATs in every location of operations.

How does the IT function ensure consistent service across all channels? We have a properly planned process, which ensures accurate execution of sales, marketing, and delivery. We also evaluate how IT can be effective, and our philosophies are far more flexible.

What vendor management strategies do you follow? Our biggest requirement is that we expect our vendors to be competent enough to be able to forge a longterm partnership. We do not look for a vendor for a short period of time. All our partnerships-large platform applications such as SAP, i2, and so on-have been long-term. While selecting a vendor, we spend a lot of time understanding their roadmap, their fit with our strategies, their fit with our IT architecture, and so on. After a careful selection, we make sure that we implement the technology efficiently. The process does not stop here, we make sure that the future roadmap is in our interest and it has the capability to take us forward. In some cases we have looked at the best-of-breed, especially in areas where we have been laggards, in terms of utilization and maturity. In such cases, we tend to partner vendors who have the required capabilities, so that we have some kind of synergy and cost benefits. For that, we have created IT and the support infrastructure.

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STRENGTH OF ASIAN PAINTS AS COMPARED TO COMPETITORS Large sales network Asian Paints have their own sales depots Asian Paints supply directly to retailers that reduces the cost of paints to its customers. They manufacture their raw material named PAN whose price rises often and they benefit by selling it in open market. Asian Paints average inventory level is 14 days and hence it provides a 45% edge in inventory costs. Over 35% of the dealers do business only with Asian Paints.

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CONCLUSION In spite of difficult conditions, Asian Paints has done well. The company currently has a 45 per cent share of the decorative segment of the organised sector paint industry. They want this to grow to 60 per cent in the next seven years. Two thirds of this expansion should come organically and a third from acquisitions. That's how they can achieve growth that's higher than the industry average. In the paint industry, they have to go by alliances as it is observed that domestic companies virtually rule the roost. For example, Shervin Williams, the largest American company, has no place outside the US. In house paints, technology does not play a major role. It is governed more by distribution efficiencies and marketing logistics. That is where the core competence of Asian Paints lies. The paint industry the world over is undergoing consolidation. Change is the operative word here. It is a fact that large paint companies are growing at a much faster pace. They are virtually dominating the scene. Nearly three fourths of the American paint market is shared by the 10 largest paint companies. In Europe, the big companies have a 35 per cent share and in Asia the big firms control 26 per cent. In India too, the scene is much the same. Of the seven major paint companies, one has gone out of business and two are weak. So, the major players like Asian Paints are expected to consolidate their positions and increase their market shares in the coming future.

COMMENTS –

1. The warehousing facilities are well maintained.

2. The company specially looks after the environmental aspects and tries to avoid pollution and pollutants by adapting eco friendly production methods.

3. The company keeps low inventories in off seasons, and high inventory in festival seasons.

4. The company has huge base of raw material suppliers, giving company bargaining power resulting in higher profit margins than competitors.

5. The company has succeeded in establishing themselves in rural parts of India by large distribution network, retail outlets etc. 22

6. Asian Paints has around 1,600 stock-keeping units (SKU; one SKU would mean a product of a particular pack and shade), of which around 300-350 are fast moving with extremely high liquidity at the counter. This puts great pressure on the demand forecasting and inventory management functions of the company.

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SUGGESTIONS – 1. As seen above the company’s raw material price is directly related to crude oil prices, keeping this in mind the company should try to keep optimum level of raw material to avoid breakdowns in production function.

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BIBLIOGRAPHY

Primary Data: Asian Paints employee Ms. Divya. www.google.com www.asianpaints.com www.deadpresident.blogspot.com

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