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 Increasing
competition and sluggish growth put the FMCG sector
in stormy seas. But FMCG companies hope they can use
IT to restore calm and normalcy once again. by Mani
Mulki
Within
the manufacturing vertical, the FMCG slice has always
been the most vibrant for a variety of reasons—whether
it relates to the aggression shown by players in having
a greater market share, or while recruiting management
trainees in management schools. The sphere of Information
Technology is no different. The FMCG sector has always
been in the forefront of early adopters of technology,
and is seen as an attractive proposition for IT vendors—be
it hardware or application software.
Gone are the days when market growth in the FMCG sector
was a foregone conclusion. With the level of competition
and sluggish growth most FMCG corporates are looking
at IT to reduce costs in the supply chain, and flatten
the bottom line. They want technology to integrate business
processes across the enterprise, suppliers and customers.
They would like technology to help them sense changes
in market conditions rapidly and the agility to respond
quickly.
The current issues that FMCG companies have are:
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How do we rationalize cost drivers across the supply
chain—whether it relates to 'input' costs, manufacturing
costs or distribution costs?
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Gathering market intelligence to be ahead of the competition.
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Enhancing relationship with business partners.
Listed below are some of the major IT initiatives most
FMCG organizations are pursuing.
ERP
The FMCG sector was the early adopter of ERP packages.
They were the first to jump into the ERP bandwagon.
While the subsequent benefits that were derived were
certainly as those which were expected, it has formed
a strong and stable base of the current IT initiatives
being pursued. ERP has also helped to bring in a sense
of discipline in the various business workflows, besides
ushering in a level of standardization in recording
various business transactions across locations. This
standardization has helped in quickly aggregating data
and presenting a consolidated view which in turn has
hastened the process of accounting and MIS reporting.
Nobody questions the need for an ERP now. Over the years,
it has transitioned from an IT initiative requiring
top management deliberations and decision, to something
that is more infrastructural in nature. It is as essential
for running an organization as say tables or chairs.
It is so well meshed into the organization fabric that
it gets noticed only when there is a downtime. It has
now become an important platform on which various e-initiatives
are built.
Supply Chain Initiatives
FMCG organizations are now looking at extending their
IT initiatives to touch business partners like suppliers
on one hand and the distributors on the other. Extending
the IT chain to link the distributors for instance,
would be of mutual benefit. The distributor would benefit
by having a greater 'say' in what would be dispatched
to him by the Carrier and Forwarding Agent or CFA (distribution
outlet) servicing him. In essence this would propel
a movement from a 'push' based system to a 'pull' based
system, translating into inventory efficiencies right
from the distributor stock point to the CFA and to the
manufacturing location. Efficiencies in inventory would
generate better ROI for the distributor thereby strengthening
the relationship with the organization. Besides, the
organization would have a daily view of the secondary
sales (from the distributor to the retailer) translating
into a higher degree of accuracy in forecasting and
demand planning.
Connecting to the suppliers on the other hand would
allow an organization to move towards 'Vendor Managed
Inventory' type of a relationship. Hence the supplier
can not only control the inventory at his level, but
also at the organizational level. He also gets a view
of future requirements which allows him to plan his
production schedule efficiently. The inventory at the
organization would always be at a balanced level.
Supply Chain Optimization
Linking up the distributors and suppliers would help
in seamlessly integrating business partners into the
organization’s workflows, which would definitely
help in reducing the supply chain cost. Once that is
successfully achieved, supply chain optimization tools
like SAP APO, i2, Manugistics, Adexa would help in generating
the most optimal and constraint based cost-effective
plan across the supply chain.
Packages like these would for instance consider the
capacity constrains of the manufacturing lines. Combination
of various input blend costs and other constraints before
unfolding the least cost production schedule. It would
also generate the least cost dispatch schedule considering
the stock levels at various segments of the supply chain
and the distance between the source and the destination
sites.
Packages like these require real-time online data and
would place the organization into a different orbit
altogether with a high degree of efficiency and flexibility
across the supply chain.
PDA
Awareness of the use of PDAs is definitely increasing
and more applications are being built for this platform.
FMCG companies are looking at automating their sales
force with the help of PDAs. It is envisaged that the
efficiency of the sales force would increase by at least
15-20 percent with the help of these devices. This would
have a direct and a favorable impact on top line growth.
Most of the planning activities of the sales person,
like the retail outlets to be visited during the daily
'beat,' and the order-taking process at the retailer's
outlet, would be automated, thereby allowing him to
spend more time with the retailer for selling. The data
can then be brought into the corporate database and
Enterprise Resource Planning by syncing the PDA with
a distributor's desktop.
However,
the market for PDA's in India is currently nascent,
as prices are still on the higher side. It would be
difficult to predict as to when these devices would
become mass market products. Reduction in prices
and awareness amongst corporates would definitely help
in rapid expansion of the market for PDA's.
Business Intelligence tools
With the hot pace of competition looming large, the
management would need to arm itself with the type of
proactive market intelligence that allows it to be one
step ahead of the competition. This is where Data Warehousing/Business
Intelligence tools come to the fore. While ERP and supply
chain packages would allow for data collection, data
warehousing tools would allow the information to be
extracted.
Once transactional data is put into a data warehouse,
the potential to extract hidden and unforeseen information
is tremendous. For instance, sales trends across multiple
dimensions like time periods, channels of sales, customer
types, and geographic locations can be seen in one view.
The efficacy of the sales promotional schemes can very
easily be elicited by viewing the sales pattern across
time zones.
The same information can be viewed in numerous graphical
outputs adding more and more value to the same data.
One could also have a GIS solution (Geographical Information
Systems) layered on the top of a data warehouse wherein
the same sales data can be juxtaposed onto the Indian
map. Different states can then be colored differently
to indicate the level of sales. A powerful visual representation
like this would allow the marketing department to have
a fast and a meaningful feedback of the sales/marketing
initiatives.
Besides the above, companies are looking at improving
the communication process among employees, and at streamlining
operational efficiencies through initiatives like Employee
Portals. Employees are also being educated on the importance
of guarding the information infrastructure. Stringent
IT security policies are in place to protect the 'Information
Assets' and prevent its misuse.
The writer is General Manager (Information Systems),
Godrej Industries
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