Dabur tackles the secondary supply chain

Managing extended supply chains is one of the biggest challenges faced by FMCG companies. Dabur tackled this with a Intelligent Enterprise 2003 award winning project, a secondary SCM solution that it developed in-house

In 2001, Dabur decided to tackle its extended supply chain of over 30 factories, six key warehouses, and 52 stocking points distributing over 1,000 SKUs to 10,000 stockists countrywide. The company needed a system to accurately control distribution and sales forecasting to reduce inventory in the pipeline.

Dabur went ahead and built a system using Visual Basic and ASP with SQL Server 2000 as the database. It decided not to use a packaged SCM solution due to its high cost and the relative lack of complications in its supply chain.

The initiative

An easy-to-use, Intranet-based data-warehouse developed in-house displays as-of-yesterday’s sales, stock, receivables and banking. Over 5,000 ASP pages meet almost all reporting requirements and make this a single source of information for all levels of decision-makers.

The primary rollout began in April 2001 and took 16 months. The first six months were spent creating a business model common to all divisions (family products, healthcare, ayurvedic products, and pharmaceuticals), and testing and piloting the same.

The innovation

The integrated primary and secondary system has a number of unique features. The tight integration of schemes, stockist credit limit control, automated banking of cheques, and online cheque reconciliation are of great use when it comes to primary distribution. These are basically extensions to the MFG/PRO ERP system and not core customisations.

Although Dabur’s stockists supply 1.5 million retailers, 70 percent of its sales are accounted for by the top 500 stockists. The induction of these top stockists into its supply chain is a first for any Indian FMCG company. The average sales of each stockist and current stock levels are the two parameters.

Details are collected from stockists on a weekly basis. In case of primary distribution points, an incremental backup is sent to the central location after the CFA closes operations for the day. These are computed at night in a process called ‘cubing’. And when managers come into office in the morning, the information is ready for them.

The problems

Internet connectivity had to be provided to secondary stockists and reliable links were hard to come by. Dabur’s solution was to offer the option of downloading software, working offline, and connecting later to send in updates. Power was another issue. The company has laid down stringent standards. Every stockist needed to install a UPS, and in cases where the power shortages are chronic, a genset.

The benefits

By integrating its primary and secondary supply chains, Dabur intends to reduce the number of days of inventory carried in the pipeline by four from the present 29 days and save Rs 5 crore in the process. Beyond this, the system lets it forecast seasonal spikes in sales and manufacture accordingly. The aim is to shift the focus to stockists rather than the CFAs to get a true picture of what’s happening in the market and react faster.

Future roadmap

Schemes based on secondary volumes help control secondary pipelines and sales. Primary sales will therefore come from a resultant ‘pull’ from secondary replenishments. Sales order servicing can be further improved by taking orders on the Internet, and by setting stocking norms and replenishing stocks to improve the RoI of stockists. Sales officers’ targets can be set against a measure of secondary sales and pipelines to further improve control and avoid pushing stiff targets onto the CFAs.