Marico Over The Wall 2016

Operations Case Study Team Deepan Sarkar

Bullseye

Shailesh J. Mehta School of Management

Noopur Parikh Charandeep Rana

Current Scenario

Category Savings

Supply & Service

Innovation & Productivity

Supplier Relationship

Copra Collection from Collection Center (in MT)

Copra Production and Cultivation Area

PROBLEMS TO SOLVE • • • •

• •

Area under cultivation increased till 2013-14 with rapid decline afterwards Production reached a peak in 102212 with a gradual decline Copra Productivity and Prices afterwards

• • •

The seasonal variation in copra collection is the same for the 3 years The trend shows that the overall collection is falling • every year Marico needs to be prepared for reduction in Copra • Customers collections

Coconut Farmers

Collection Centers

Marico Factory • •

Production per hectare peaked during 2010-11 followed by considerable decline Prices show an overall steady rise

Raw Materials other than Copra Marico Supply Chain

Category Savings Long term supply assurance Service Delivery Supplier Relationship Management Delivery on Innovation Transaction Productivity

Retailers Microsoft Word Document

Distributor

Executive Summary

Problem Areas 2

Current Scenario Catego ry

Category Savings

Type

Problem • •

Procurem ent

Supply & Service

• •

Copra

Inconsistency of Indian monsoon 60% coconut production in Apr-July Yield per hectare is decreasing Sellers can easily take positions expecting rise in prices

Solution • • •

• •

Logistics

•

•

Facilitate the loan application process for the farmers to get loans for irrigation from banks Partner with Government and research institutions for improved farming techniques Engage in futures contracts for procurement Set up small trade centers in other places to remove the control of central procurement Increase the direct procurement from farmers by paying slightly above the market rate

Savings •

•

•

•

Copra prices will reduce resulting in saving in purchasing costs Hedging will protect from future price shocks Faster stock movement will reduce logistics cost Significant reduction of middle men costs

• Promote innovative value Cost savings mostly through • Value enhancements through better deals one to one negotiations and enhancement will and incentives reverse auctions and not cost more but • RFQ process should be made more Procurem through innovation enable greater transparent with more emphasis on • Key supplier Yash with future savings ent value innovation volumes are not • Transparent RFQ procurement among •to Distribute Improvedmaximum Research will lead to up 50% increase in per hectare coconut switching to transparent process will reduce 3 multiple suppliers to reduce supplier production due to pentagonal plantation techniques i.e. more trees per hectare andcosts models hidden •

Packag ing Materi al

Trade center is a 50 sq. km area at Kaveri, Tamil Nadu Only 40% procured directly from farmers

Innovation & Productivity

Supplier Relationship

Streamline and standardise the purchase of goods and services Gain greater visibility into supplier relationships and performance Accelerate procurement processing and cycle times Increase transparency in cost models of suppliers

Category Savings

Factory Suppliers

Copra Suppliers

Current Scenario

Supply & Service

Engage in futures contract with suppliers to hedge against fluctuating prices Automate operational processes to increase efficiencies Establish connectivity across all stages of transportation Optimize transportation of materialsCollection using GPS based Prediction trackingwith of 90% trucks CI

Copra collection will fall in future if the current trend continues. Marico needs to increase efficiency in the supply chain to

Supplier Relationship

Transpar ent RFQ Process

Innovation & Productivity

• Marico should go for open tenders with no special benefits for existing suppliers • Price should be on a long term effect basis and not just the current delivery price

• Suppliers should reduce logistics costs • Copra delivery on scheduled times Better only Value • Reduce dependence on suppliers Innovatio with large volumes and go for pioneering suppliers n

Negotiat e better Terms

• Delivery times should be fixed and early or late delivery should be heavily fined • Establish a Business Continuity Plan with the supplier in case of nondelivery

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Current Scenario

Category Savings

Supply & Service

Towards Knowledg e Based relationship

From traditional “BlackBox” model

Each party maximizing it’s profit Unwillingness of suppliers to switch to transparent cost models No personalized interaction between supplier and company e.g. Vendor “Intex” missing RFQ Company and Suppliers not transparent about the products and processes

Innovation & Productivity

Supplier Relationship

COMMODITIZE D HIG H LO W NARRO W LOW LOW

COLLABORATIV E PRICE SENSITIVITY

LOW

Equal citizenship, no fighting for antiquated status quo

WILLINGNESS TO DISCLOSE

HIGH

Results in innovation and productive efforts for problem solution

RELATIONSHIP SCOPE

BROA D

Can become locus of value creation, value jointly being created

OPENNESS TO OPPORTUNITY

HIGH

DEGREE OF TRUST

HIGH

CLIENT RELATIONSHIP CHARACTERISTICS

Can help in convergence of technologies and industries Liberated suppliers creative zeal can lead to resources being reimagined and re-worked

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Current Scenario

Category Savings

Supply & Service

Supplier Relationship

Innovation & Productivity

Integrated Farming • Combine individual coconut holdings to reduce overall costs • Appoint POCs for village clusters to effectively manage coconut plantations and their productivity improvement

Insurance Scheme

Technolog y

• Farmers should be assisted in getting proper insurance against crop failure due to poor monsoon or other factors • Marico can sponsor the insurance premium of the best performing farmers as an incentive of the other farmers

Information • Marico can partner with Government and Universities to publish the best practices of the industry • Conduct seminars and workshops for farmers and traders to educate them about scientific farming and post harvest processing

Smart inventory

• E-purchasing: Alternative way to get more material from suppliers • More competitive pricing as no longer limited to local merchants • Cost of transaction processing can be reduced

• Inventory control system to reduce inventory, improve profitability • Online order management system, integration with organization's purchasing • Easy identification of peak and low periods allowing to adjust supply purchases and better management of working capital

Financial Assistance

• Marico can partner with banks to facilitate the loan approval process for the farmers and traders • The adoption of best practices can be rewarded with first right to sell and better price support

Statistical Analysis • Use logistics data to identify and remove bottlenecks in transportation networks • Supplier data can be used to find and remove the poor performers from the supply chain and promote the best

Continuo us improvem ent

• Formal suggestion system in place for employees and suppliers • Specific teams for specific problems or processes • Establish a Business Continuity Plan with the supplier in case of non-delivery

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