Marico is a large Indian Fast Moving Consumer Goods (FMCG) company established in the year 1991.
Their brand portfolios are embedded with renowned brands like Suffola, Parachute, Kaya Skin care etc...
Marico Supply Chain:
Stage 1: Marico receives raw materials from vendors.
Stage 2: These raw materials are processed in Plants
Stage 3: In this satge, Marico adopts two strategies
Strategy a) Move the slow moving Stock Keeping Units (SKU)'s and low volume products to RDCs
Strategy b) Move the final products to company depots
Stage 4: Primary sales
Strategy a) Send the goods to direct distributors
Strategy b) Send the goods to super distributors who in turn will send them to stockists.
Stage 5 : Secondary Sales
In this stage, both Direct distributors, and stockists send the goods to retailers.
E-procurement of Copra;
Copra procurement is a big challenge for Marico due to its vast geographical spread.The major markets includes Goa, Karnataka, Tamilnadu, and Andhra pradesh. Further,within Karnataka it has to procure from two big markets Managalore and Tiptur near Bengaluru. Similarly, In Kerala, the company has to source it from Kasargod, Kannur, Kozhikode, Malappuram and Thrissur. In line with the strategy, the company procured copra from Tamilnadu markets centers like Pollachi, Kangeyam, Dindigal, Tanjavore, and Vedarayam. The copra also procured from Ambajipeta in Andhrapradesh.
The challenges of Copra procurement are first, its an unorganized market and suppliers are not information technology Savvy. second, most of the suppliers were illiterate. Third, the volume of copra purchased was huge i.e. 20 lakhs copra per day which amounts to 2 copra per tree. Fourth, this 50% revenue earning product for the company has 25% of their terminal market in India.
The company identified two goals in setting up information technology infrastructure. The company intention was to adopt e- buying of copra and expand the existing vendor base and source it from new vendors and new places.Through these goals Marico wanted to have better price discovery and avoid brokers who were affecting the company margin.
When the company began its implementation plan, it understood that traditional processes adopted. In this method the company purchased he copra over the phone. There was huge delay in closing deals as negotiations used to take large time.This further affected the company price discovery and buying efficiency. In addition to this, traditional processes limited the coverage of suppliers and overlay on brokers.Thus, buying time was huge.
The company began the phased approach to implement e-procurement. In the stage 1 it made changes to physical buying processes. Later , it worked on Information Technology penetration. finally working on maturity of the process.
In this stage 1 the company modified its buying in sessions. It adopted 3* 1 hour model.It started asking the vendor to sell offers over the phone about the quantity and price. However, Marico had the control of buying. It can accept or reject the quote. To streamline the process, the company stopped negotiating the price with vendors.This has resulted in the change in the buying process by reducing time of negotiation.
In the second stage, the company began the process of opening email ids for vendors on Rediff, the email platform popular that time. Further, the company trained vendors to use emails.To facilitate this, Marico tied up with cyber cafes to educate vendors.These emails were used for sending gods receipt information, advance payment information, enabling debit and credit notes, and shipping notification for all dispatches.To execute the phase , the company tied up with banks those were having e-transfers at that time who can settle payments in 1 day. Thus, the supplier learning curve has improved.
In the final phase of implementation; he company developed copra portal e-marico.com. looking at he literacy levels of suppliers , content was developed in regional languages. In addition to this, the company rigorously trained suppliers Hence, supplier began utilizing portal for bidding along with email information. As a result of this, all transactions became paperless and all suppliers started utilizing e-portals. additionally, payments were done digitally.This stage also have to overcome obstacles such as vendor with less turnover, same cyber cafe used by multiple vendors for quoting the price and cyber cafe owner shared the information to other suppliers. This has forced Marico to eliminate use of cyber cafes and requested vendors to send quotes via SMS. Thus, the entire process was de-cartelisation.
The e-procurement system has numerous benefits. It has widened vendor base, reduced the broker dependency, buying efficiency has increased, and time for procurement reduced drastically
