IT usage and its benefits of Indian FMCG players - Free Essay Example

Sample details Pages: 6 Words: 1680 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? The following table describes the IT usage and its benefits of Indian FMCG players. Only top key players and their benefits of IT usage are listed below. Most of the companies are using ERP SAP for their supply chain processes. Players IT usage Benefits Hindustan Unilever Limited SAP ERP,SAP SCM, SAP NetWeaver, SAP CRM, SAP SRM, SAP Solution Manager, SAP Advance Planning Optimization Production Planning and Detailed Scheduling, SAP Transportation Planning and Vehicle Scheduling, EDI, Internet, Extranet etc. Improved cash management Greater reduction in inventory (detergent business alone dropped inventory level from 105,000 tons to less than 55,000 tons) Achieves negative working capital due to improvement in the information flow across the network Improved in inventory turnover ratio (from 7% to 9.5%) Response Time dramatically improved (from 14days to 2 days) IT facilitated with streaming the business operation, improved information sharing with partners, reduced transaction and coordination cost, improved the operational efficiency and overall organizational performance. Don’t waste time! Our writers will create an original "IT usage and its benefits of Indian FMCG players" essay for you Create order Indian Tobacco Company Limited MFG/PRO, SAP NetWeaver, SAP ERP, CRM, Web-based application. Accounts closure takes place 80 % faster than before. 70% reduction in potential stock-out scenarios Visibility of inventory level across locations thereby reducing the load on the system. Reduction in transaction cost from 8% to 2%. Nestle India Limited mySAP.com, CRM, EDI, RFID, VMI, GIS, GPS, and Internet. Maintains higher inventory accuracy Ease in traceability of materials Increases efficiency and productivity in the warehouse and shop-floor. Improves operation excellence Reduced lead time Dabur India Limited SAP ERP, Web-based application,MFG/PRO, intranet and extranet Improvement sales and distribution system Improvement in demand forecasting Lowered inventory cost Increases in annual sales by 17% due to supply chain efficiency It helps in expansion of distribution network by 19%. Decrease in sales returns and unsold stock inventory. Marico Limited SAP ERP, mySAP SCM, SAP R/3, SAP Business Information warehouse, VMI Achieved improved cash flow to fund future growth. Reduced the production planning cycle time from 30 days to 10 days Decreased stock-outs associated with distributors to retailers by 33% Reduced lost sales due to stock-outs by 28%, which thereby improved the total revenue by 1.5%. Lowered excess distribution inventory by 33% Reduced late deliveries to distributors by 37.5% Reduced cost associated with supply chain exceptions by 25% (For instance, intracompany stock transfers, truck detention costs) Reduced communication costs and working capital requirements. Improved forecasting accuracy at the brand and region level from 70% to more than 80% Reduced Maricoà ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¾Ãƒâ€šÃ‚ ¢s average total inventory by 25% from 29 days to 22 days of supply Emami Limited SAP ERP, SAP ECC, Bar coding, MRP, EDI 10 % improvement in production and efficiency levels. Improved in product identification, traceability and managing finished goods inventory. Strengthen relationships Improved in accuracy of information Improved timeliness Real-time status of raw materials, packing materials, finished goods, and sales information Table 4.2: Indian FMCG playersà ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¾Ãƒâ€šÃ‚ ¢ IT usage and its benefits 4.6 FMCG Industry Supply Chain Focus Areas The below table shows the key focus areas of supply chain against extent of time spent on supply chain, which is rated on scale of 1 to 5 (level of importance). It is regarding the sum of time spent by the supply chain personnel in dealing them. The key objective of the firm is to produce quality product at low cost and delivery them on-time in the market. The firm can improve the customer satisfaction by producing quality product and delivery them on-time. Hence, the firms have given high degree of importance to order fulfillment and quality. Even though on-time delivery fall below the expanding of company revenues and reducing of inventory costs, but in the level of prioritization, they are found to be guiding factor for customer satisfaction while taking decisions on supply chain. Supply chain focus areas Weighted score for extent of time spent Order fulfillment 4.20 Quality 4.11 Inventory reduction 3.83 Demand forecasting 3.58 Transportation 3.49 Distribution 3.35 Lead time compression 3.21 Table 4.3: FMCG industry supply chain focus areas Source: (Saha et al, 2006) The importance of increasing the sales revenue and reducing various costs and lead times in supply chain is focus to maximize the profit of firm. In face of ever-changing competitive market, profitability of firm is the measure of sustainability. By focusing on operational excellence in the supply chain, the firms can increase their return on investment. It is achieved by enhancing the production processes, reducing the supplier base, innovating new products and services, expanding of distribution and having products in stock on orders. 4.7 IT Investment The IT investment is still a major concern part for Indian FMCG firms. The investment on IT system found to be lower compared to international standards. Although the technology is available in the market, the firms are still lacking behind in using or spending on them. This shows that firms have low understanding of its benefits and usage. The figure 4.21 shows the IT spending of the firms in their supply chain, in reference to gross sales. The overall average IT spending of 1.3% of the respondents is certainly low compared to the overall global average IT spending of 4.93% (Sahay et al, 2006). The IT investment by the Indian FMCG firms is low compared to firms like Wal-Mart and Metro in developed countries (Basker, 2007). However, the organizations have planned to increase their IT investments in the coming years to gain the new market opportunities and market share. Figure 4.21: IT investment by Indian firms Source: (Sahay et al, 2006) According to FICCI Indian retail report, by 2010 over US$2.5 billion will be spent on IT. This includes 40% spent on software and services, purchasing new assets and maintaining of existing infrastructure (Gandhi, 2008). These investments in IT facilitate firms in reaching potential consumers in tier II and tier III cities in India. Increasing supermarkets, hypermarket and department stores in these regions consider a direct presence of firms, which is essential to sustained growth and profitability. 4.8 Comparison of IT Investment of FMCG Sector with Other Sectors in India The below table shows the comparison of FMCG sector with other Indian sectors; their investments in ERP, bar coding, EDI, SCM software, and automated storage and retrieval system (AS/RS). The comparison is made for the degree of IT investment in supply chain automation, in reference to their annual turnover made by these sectors. Figure 4.22: IT investments of FMCG sector Vs other sectors in India Source: (Jharkharia et al, 2006) The FMCG sector IT investment is slightly lower compare to other sectors in India. This indicates that the sector needs to improve their investment in IT in order to gain the operational excellence and efficiency in their supply chain. From the descriptive statistics it is observed that the FMCG sector has made low investment in EDI and supply chain software compared to other sectors. But they have made significant investment on EPR solution, a stand-alone system to compare to other sectors. The FMCG sector should try to observe and learn the processes and technologies using in other sectors, which would benefit to improve their business processes and organization performance. 4.9 Usage of IT Application The usage of IT application in the organization processes are shown in the figure 4.23. The IT application gives both operational and organizational benefits. Comparatively, more Indian firms are using software packages and stand-alone system in their supply chain rather than integration. The pattern in the figure clearly reveals that there is bias towards using stand-alone component in the firms instead of adopting integrated solution. Figure 4.23: Usage of IT applications Source: (Sahay et al, 2006) It shows that only 8% of the respondents using supply chain management solution, which is found to be main area of concern in developing the supply chain capabilities in the firm. But around 22% of the respondents are using ERP solution in their processes. This shows that firms are adopting more towards in-house components than complete integration. When looking into other areas of the supply chain, the firms also need to increase their focus on using IT application in warehouse management and demand management, where these are the major area of concern in managing their inventories. 4.10 Technology Adoption and Usage The technology adoption and usage in India is quite low by international standards. The firms like Wal-Mart and Metro are using the latest technology like RFID in their supply chain, which provide greater inventory visibility. Hence, the firms are facilitates with efficient inventory management and achieves greater reduction in their transaction cost. But, in India the firms are still using bar coding technology for inventory management. Figure 4.24: Level of IT usage among Indian retailers Source: (KPMG, 2005) Even the IT integration is quite low in India, which can be clearly observed from the figure 4.24. Most of the Indian organizations do not have integrated IT system in their processes. It also shows that IT systems used at lower levels in vendor development, supply chain management, inventory management and merchandising. Those are the essential areas for the sector in order to gain the operational efficiency in the supply chain. But the result shows low level indication of IT system on those crucial areas. However, most of firms have plans to implement integrated IT system in the coming years. Figure 4.25: Inventory Turnover of Indian FMCG firms Source: (OC C, 2010) The inventory turnover of Indian FMCG firms is fairly done better management of inventory in 2009. However, the mid sized firms are lacking behind due to inefficient supply chain processes. So, the organizations in India have a major catch-up act to do both in the supply chain management and adoption of technology in order to fulfill these gaps. Definitely, Indian firms can leverage the experiences of international players to advance them in adopting the latest practices in managing their supply chain. 4.11 Summary This chapter analyzed the Indian FMCG industry market growth, trends, importance of SCM practices in the sector and its challenges. And then analysis of various IT components used in the SCM and its impact on supply chain. Then data analyzed on FMCG firmà ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¾Ãƒâ€šÃ‚ ¢s IT investment, usage and adoption pattern. The comparison is made on IT investment of FMCG sector with other sectors in India. The analyzed data reveals that Indian FMCG firms should increase their IT investment, adopt new technologies and integrate IT with SCM. Finally, the discussion is made on analyzed data, benefits of adopting IT in SCM and steps needs to be taken by Indian FMCG firms.