MARICO – PARACHUTE OIL

SUBJECT – DISTRIBUTION MANAGEMENT

GROUP MEMBERS• SAVIO FERNANDES 12• SANJANA IYER 19• RAHUL NAIR 32• AUSTIN TRINDADE 55• ISMILE SHAIKH 43• TRUPTI KUDALKAR 24• RAJESH SHETTY 47

ABOUT MARICO• FMCG company providing consumer

products and services in the areas of Health and Beauty based in Mumbai.

• Sales revenue: FY14-15: INR 4689 Cr

• Net Profit: INR 545 Cr

• Leadership positions in most categories- Coconut Oil, Hair Oils, Post wash hair care, Anti-lice Treatment, Premium Refined Edible Oils, niche Fabric Care etc

• Brand portfolio: Parachute, Saffola, Hair & Care, Nihar, Mediker, Revive. Marico also owns popular brands like Set Wet, Livon, Zatak , and other personal care brands

8 Factories Dehradun, Daman, Jalgaon,Solan (Himachal Pradesh), Palakkad (Kerala), Puducherry, Perundura, Village-Tokion (HP)

Depot – 33 Direct Distributors - 882 Super Distributors - 153 catering to 2393 small stockists and 4523 van markets. Sales territories: Urban-135

Rural-35Towns covered: Urban- more than 32000 Rural- more than 11000

Retail outlets:  Urban - 1.65 million reach & Rural- 0.85 million reach

MARICO FACTS• Parachute is the world’s largest packaged coconut oil brand.• Marico uses 1 out of every 25 coconuts grown in India, and 3 nuts of every coconut

tree in India.• 1 out of every 10 Indians is a Marico consumer.• Marico’s brands enjoy a leadership position (No. 1 or No. 2) in their respective

categories.• Marico is now No. 2 in the hair oil market (up from No. 5) with the success of new

products - Parachute Jasmine and Shanti Amla.• Marico sells over 56 million consumer packs every month.• Marico reaches over 1.2 million retail outlets.• Marico’s distribution network covers almost every Indian town with a population

over 20,000.• Overseas sales franchise of Marico’s consumer products is one of the largest among

Indian companies.• Marico has been distributing dividend every quarter for the past 13 quarters in a

row.• Marico’s ROCE has been consistently above 30% for the past ten years.• Marico ranks 15th among the top 200 corporate houses in India in terms of ROCE

(Business India Survey - November 2003).

MARICO - PARACHUTE OIL

MARICO - PARACHUTE OIL

DISTRIBUTION CHANNEL

Company’s Distribution Channel

DISTRIBUTION CHANNEL

CHALLENGES WITH SUPPLY CHAIN The systems were Un-integrated • The production didn’t scale with logistical requirements • Inaccurate Forecasting • Long Planning Cycle • No Transparency of Warehouse Stocks• Delayed response to customer needs

Problems Faced in Distribution • Shipped only full stocks • No Prioritization rule for configuring optimal truckloads • Depot stocks reduced some days and increased some days • Needed to hire extra space when shipment exceeded depot facility • Higher delivery cost • Sales started affecting • Distributor lost confidence & Customers didn’t get product when required

• Planning Cycle was 30 days • Manufacturing took 02 weeks and distribution took 01 week • Only One qualified planner • Due to the above there was Inventory problem

CHALLENGES WITH SUPPLY CHAIN

• Supply chain was not in tune with Marketing Strategy

• Company started losing Competitive advantage • Poor performance affected cash flows

• Supply chain hindered expansion strategy of growth • Affected Consumer’s Image of the company

BUSINESS IMPACT

IMPLEMENTATIONSADOPTED

FOR SUPPLY CHAIN

BUSINESS INTELLIGENCE

MYSAP BUSINESS INTELLIGENCE • It was installed at Companies, warehouse, Factories, Business Offices & at Contract Manufactures • Improved Forecasting:• Both Primary & secondary sales figure were available

• Advantages:• Lower Inventory Holding and Supply chain cost • Resolve forecasting problems, eliminate Inventory and stock out problem (Timely sales and

inventory information). Manage Distributors Inventory by replenishing Stocks on the basis of distributors input of sales to retailers.

• Operational improvements: • Reduced planning cycle from 30 days to 10 days • Improved forecasting accuracy • Improved delivery reliability

STAGE 1: SUPPLY CHAIN MANAGEMENT• Strengthen the internal Supply Chain Foundation- Planning to Fulfillment• Tech Support- highly integrated application systems (ERP)

STAGE 2: DISTRIBUTOR PARTNERSHIPS AND VMI• Resolve forecasting problems, eliminate major inventory and stock out problems• Larger distributors- provide timely sales and inventory information to MARICO• Access MARICO’S systems for pending orders, stock-in-transit etc.• VMI- MARICO would replenish the stocks on the basis of distributor’s online input of stocks to

the retailers.

HOW IT WAS DONE?

VENDOR MANAGED INVENTORY (VMI)

Places order

Distributor Marico

Replenishment based on order

EARLIER

NOW WITH VMI

Distributor Marico

Replenishment based on norms

MIDAS Mi-net APO SAPOrders are automatically generated

PERFORMANCE IMPROVEMENTS

FUNCTIONS - CHANNEL INTERMEDIARIES

Agents/Brokers:Act as an extension of the manufacturing companyRepresent the producer to the final user in selling a productThey do not own the product directly, they take possession of the product in the distribution processMake their profits through fees or commissions

Wholesalers:Independently owned, and they own the products that they sell. Do not work with small numbers of product: they buy in bulk, and store the products in their own warehouses and storage places until it is time to resell them.They sell the products to other intermediaries such as retailers, for a higher price than they pay

Distributors:•Responsible for redistribution of the products, retail penetration and market coverage•Function similarly to wholesalers in that they take ownership of the product, store it, and sell it off at a profit to retailers or other intermediaries•Maintains stock of the product to absorb the supply fluctuation from manufacturer•Expands retail universe as well as retail penetration of various products•They can maintain a closer relationship with their suppliers than wholesalers do

Retailers:•The most popular channel intermediary for consumer goods, retailers operate outlets that trade directly with household customers•Enable producers to reach a wider audience, particularly if broad coverage by the major retail chains can be obtained•Retailers can be classified in several ways:•Type of goods being sold (e.g. clothes, grocery, furniture)•Type of service (e.g. self-service, counter-service)•Size (e.g. corner shop; superstore)•Ownership (e.g. privately-owned independent; public-quoted retail group)•Location (e.g. rural, city-centre, out-of-town)•Brand (e.g. nationwide retail brands; local one-shop name)

• Manufacturer• Products are moved from 7 company manufacturing units to depots in each state• Number of depots in each state is determined by size of state. For example, Maharashtra

and Uttar Pradesh have multiple depots to cater the demand of whole state.• Area Sales Manager sits at Depot and handles the operations• Also helps in evading taxes on movement of Marico goods from one state to another

• Parameters taken into consideration while appointing distributors Market Dynamics: Number of distributor in each district depends upon size of market

and number of outlet each distributor is required to cater Financial Factors: Depending upon availability of financially strong distributor and his

risk taking capacity, an independent or share distributor is appointed. Only those shared distributors are selected which does not stock products of competing brands

• Big markets like Hyderabad, Delhi and Mumbai might have multiple independent dealers while tier 2 and tier 3 towns might have shared distributors

MARGINS / COMMISSION STRUCTURE

• Margins• In urban areas Marico gives a margin of 5% to its distributor and 10% to its retailer• Margins are in line with that of Industry Standards• Marico never increases margins, instead it plays on schemes on trade promotion which are

volume and SKU’s bases• The scheme passed on to distributor is known as Primary Scheme, to Retailer is known as

Secondary Scheme and to Customer as Tertiary Scheme• In rural area Marico gives a margin of 7% to its super distributor, 3% to its wholesaler and

5% to retailer

Credit Policy• Marico gives credit of 30 – 45 days to its distributor • Retailer gets credit only for 1-2days• The restocking at retailer is either once in a week or fortnight depending upon the area

• Wholesalers : Sell at a margin of 8-10%. Sell at local Kirana Stores in case the stock is left over.

• Kirana Store : The product is purchased at MRP and a margin fixed by the distributors of the company is earned.

• Super Markets : Buyers decide on pricing Strategies depending on the locality and nearby retailers. Products can be sold at a discount of Rs.1 or 50 paisa for Prachute Hair Oil.

• Hyper Markets : They sell in packs of 3 and reduce the total MRP by Rs.5-8. Small SKU’s are at times available for free with the product.

TRADE PROMOTION

• Point of Purchase- Best product display award at retailer level.• Jo Dikhta hai woh bikta hai.

Trade allowances• Gifts and Attractive schemes to make the retailers and distributors to stock more which

would increase the sales • Additional margins for the retailers who sell more

CONTEST’S & AWARDS • Retailers Meeting the celebrity contest.• Retail Product push winner award.• Best Seller of the quarter award.

DEALER MOTIVATION TECHNIQUES• Business promotion Recognition is the best incentive – Parachute King award for the

best Dealer

• Parachute Diamond award given to best distributor at Zonal level

• Training / informative recreational tours about hair therapy and coconut oil to potential performing sales and trading partners.

WAREHOUSING & TRANSPORTATION Chamadia Group - OUTSOURCED

The group is into construction of Warehousing facilities including those on Built To Suit (BTS) basis. At present the group has three warehousing complexes located in and around Pune having a total built up area of about 6.75 lac sq. ft. These warehouses are provided on Lease rentals to many companies of the various industries. One of its largest warehouse composite unit under one roof for a single client is of 1.20 lac sq. ft.The salient features of our warehouse facilities are: Engaged in Transportation of FTL and Part Load Consignments Dedicated Fleets of about 60 Vehicles Trucks and LCVs Carrying about 2000 Truck Load of Consignments per month Reaching out to about 450 locations across the country Business Associates includes TCI, KTC, Patel, NECC, GCC etc. Handling about 8000 dockets per month Handling Shipping Consignments with time bound demurrage undertakings

WAREHOUSING FACILITIES

PACKAGING

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