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Enterprise Resource Planning

PROJECT ON

DABUR’S ERP-SAP IMPLEMENTATION

UNDER THE GUIDANCE OF

Pratima Dabholkar

BY

Group No. 3

Kavyashree(24)

Avradeep Mallik(28)

Malavika Menon(29)

Purbasha Panda(35)

PGDM-IV-Finance

K.J.Somaiya Institute of Management Studies and Research

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Contents ENTERPRISE RESOURCE PLANNING: ......................................................................................................... 3

FMCG INDUSTRY MARKET: ...................................................................................................................... 4

ROLE OF ERP IN FMCG INDUSTRY: ........................................................................................................... 5

DABUR –THE COMPANY: ......................................................................................................................... 6

SOME KEY FACTS: ................................................................................................................................ 7

DABUR WORLDWIDE: .......................................................................................................................... 9

EXPECTED FEATURES OF AN EFFICIENT ERP SYSTEM .............................................................................. 12

KEY STAKEHOLDERS IN ERP IMPLEMENTATION ...................................................................................... 13

BENEFITS OF ERP ................................................................................................................................... 15

IT INITIATIVES .................................................................................................................................... 17

UPCOMING CHALLENGES................................................................................................................... 17

Sample Report: .................................................................................................................................. 18

CONCLUSION: ........................................................................................................................................ 18

REFERENCES .......................................................................................................................................... 19

FIGURES:

Figure 1:ERP Systems Architecture .......................................................................................................... 5

Figure 2:Various products under Dabur ................................................................................................... 7

Figure 3:Category contribution to ccd ...................................................................................................... 8

Figure 4: Dabur international reach ......................................................................................................... 9

Figure 5: Sample reports........................................................................................................................ 18

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ENTERPRISE RESOURCE PLANNING:

To define, Enterprise Resource Planning (ERP) is a system which brings all the decision making

information from all the departments in a company into one single place in order to increase efficiency,

productivity and profit of the company. ERP consists of 3 words-Enterprise, Resource and Planning. The

first word among these three is the most important. There are many systems which deal with resource

planning. It is the enterprise part that is important. ERP’s power and Potential comes from the

movement from the traditional business model to enterprise business model.

Before the beginning of Systems Integration, different departments in an organization were responsible

for developing their own computer systems, each one working separately using its own applications and

data. Each and every department relied on the others to transfer key information. Items such as

employee numbers would be generated in one system, then passed on and entered manually into the

other applications.

This process was not convenient. The coordination of information was manual, slow and unreliable.

Mistakes happened, leading to additional complications as erroneous data propagated throughout the

organization.

Enterprise Resource Planning (ERP) standardizes and reduces the number of software specialties

required in large organizations.

The ERP systems of today generally cover one or a number of the following:

1. Manufacturing Bills of material, scheduling, quality control, cost management.

2. Supply Chain Management Inventory, order entry, purchasing.

3. Financials General Ledger, cash flow, accounts payable, accounts receivable.

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4. Projects Costing, billing, expenses.

5. Human Resources Payroll, benefits, training.

6. Customer Relationship Management (CRM) Sales and marketing, commissions

7. Data Warehouse, Reporting, Data Mining

FMCG INDUSTRY MARKET: The FMCG industry market is very competitive in nature. If a retailer’s shelves are empty of a

manufacturer’s product, he will simply fill them with a competing product. This challenge of ensuring

that the business is optimized to cater to ever-changing market demands is an issue which every FMCG

major is facing. The demands of a competitive market require a solution that supports process-centric

collaboration internally and across its value chain.

The key challenges which FMCG industry is facing are:

Arrival of modern trade in India

Legacy systems and business infrastructure are unable to meet transaction and process

capability requirements of the modern trade

Market fundamentals require companies to ensure availability of their products so that they can

respond quickly to customers’ orders in the most cost efficient manner. This is even more critical in the

emerging modern trade scenario. The distribution of goods across the country in the right quantity, right

time and at the right place is already one of the biggest challenges they face. In order to thrive in the era

of modern trade, companies need to deliver a service level that is higher than what the industry is used

to and operate a supply chain which is superior to the competitors.

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Also, traditional product lifecycle management is being challenged with the frequent introduction of

new products and services with shorter lifecycles and a focus on brand extension. All of the above is

placing intense pressure on conventional manufacturing and supply chain practices.

ROLE OF ERP IN FMCG INDUSTRY:

Manufacturers’ investment in strategic infrastructure, such as Enterprise Resource Planning (ERP) and

networks, can provide the foundation to bring people, processes, and relationships together to build an

integrated business system that supports the e-business strategy for critical business initiatives without

huge IT investments. The importance lies in the extent to which the technology can be integrated and is

interoperable to allow all of your systems and the Internet (for communication and collaboration) to

work in concert.

Figure 1:ERP Systems Architecture

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Such an example in the FMCG sector is Dabur.Dabur implemented ERP in year 2001. The project was

named Project Synergy and it worked on two ERP systems: For the outbound logistics it runs QAD ERP

suite known as MFG/PRO. For manufacturing locations, there was BaaN. By 2005 Dabur started to feel

the pinch of maintaining two independent ERP systems. They were facing issues like maintenance costs,

data redundancy, etc. So, in April 2006, they migrated from standalone ERP systems - Baan and Mfg to

centralized SAP ERP system for all business units (BUs).

DABUR –THE COMPANY:

Dabur India Ltd is one of India’s leading FMCG Companies with Revenues of about US$750 Million (over

Rs 3416Crore) &Market Capitalization of over US$3.5 Billion (over Rs 16,000Crore). Building on a legacy

of quality and experience of over 125 years, Dabur is today India’s most trusted name and the world’s

largest Ayurvedic and Natural Health Care Company.

Dabur India is also a world leader in Ayurveda with a portfolio of over 250 Herbal Ayurvedic products.

Dabur's FMCG portfolio today includes five flagship brands with distinct brand identities -- Dabur as the

master brand for natural healthcare products, Vatika for premium personal care, Hajmola for digestives,

Réal for fruit juices and beverages and Fem for fairness bleaches and skin care products.

Dabur today operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin

Care, Home Care and Foods. The company has a wide distribution network, covering over 2.8 million

retail outlets with a high penetration in both urban and rural markets.

Dabur's products also have a huge presence in the overseas markets and are today available in over 60

countries across the globe. Its brands are highly popular in the Middle East, SAARC countries, Africa, US,

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Europe and Russia. Dabur's overseas revenues stand at over Rs 500Crore in the 2008-09 fiscal,

accounting for about 20% of the total turnover.

The 125-year-old company, promoted by the Burman family, had started operations in 1884 as an

Ayurvedic medicines company.

Figure 2:Various products under Dabur

SOME KEY FACTS:

Dabur is a leading consumer goods company in India with a turnover of Rs. 2834.11 Crore (FY09)

3 major strategic business units (SBU) – Consumer Care Division (CCD), Consumer Health

Division (CHD) and International Business Division (IBD)

3 Subsidiary Group companies – Dabur International, Fem Care Pharma and newu and 8 step

down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care

(Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria), Naturelle LLC

(Ras Al Khaimah-UAE), Weikfield International (UAE) and Jaquline Inc. (USA).

17 ultra-modern manufacturing units spread around the globe

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Products marketed in over 60 countries

Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over

2.8 million retail outlets all over India

Consumer Care Division (CCD) addresses consumer needs across the entire FMCG spectrum

through four distinct business portfolios of Personal Care, Health Care, Home Care & Foods

Master brands:

o Dabur – Ayurvedic healthcare products

o Vatika – Premium hair care

o Hajmola – Tasty digestives

o Réal – Fruit juices & beverages

o Fem – Fairness bleaches & skin care products

Figure 3:Category contribution to ccd

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DABUR WORLDWIDE:

Dabur's mission to popularise a natural lifestyle transcends national boundaries. Today, there is growing

global awareness about alternative medicine, nature-based and holistic lifestyles and an interest in

herbal products. Dabur has been in the forefront of popularising this alternative way of life, marketing

its products in more than 60 countries all over the world.

Over the years, Dabur's overseas business has successfully transformed from being a small operation

into a multi-location business spreading through the Middle East, North Africa, West Africa and South

Asia. The chart below shows the operations of Dabur in the world market.

Figure 4:Dabur international reach

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THE CHALLENGES FACED BY DABUR:

Dabur operates in FMCG Industry which is characterised by high degree of competition and a large

number of low-value transactions. Dabur had to maintain a very short time lag between procurement,

manufacturing, order, distribution and consumption for it to be competitive. Also, the profit margins for

any FMCG company per transaction are very low hence it demands Dabur to be cost effective in its line

of business. The inventory management system for FMCG companies is different & unique from that of

the other industries and Dabur had to balance the inventory system effectively.

One of the problems Dabur faced severely was the Selling and Distribution problem. Dabur was

facing problems to ensure availability of their products so that they can respond quickly to customers’

orders in the most cost efficient manner. By 2000, the company’s distribution network has grown

rapidly over a period of time, spanning 29 factories, 6 mother warehouses, 47 stocking points, 4 zonal

offices and over 10,000 stockists and dealers. About one hundred trucks were dispatched daily. The

distribution of goods across the country in the right quantity, right time and at the right place is already

one of the biggest challenges they face. With distribution pressures rising, technology upgradation was

becoming more and more important. In order to thrive in the era of modern trade, companies need to

deliver a service level that is higher than what the industry is used to and operate a supply chain which is

superior to the competitors.

Also, Dabur faced problems with their product lifecycle management. The new products and

services were usually of shorter lifecycles and a focus on brand extension was demanded through the

development of new products. Management was unable to figure out the demands and expectation of

their customers.

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Currently, Dabur Company did demand forecasting internally with little or no direct liaison with

the organisation’s customers. In fact, sometimes forecast information is not even shared amongst

appropriate stakeholders internally, example, price promotions run by marketing without adjusting for

inventory holdings or capability to deliver on the factory floor.

OBJECTIVES OF IMPLEMENTING ERP SYSTEM:

In order to mitigate the above mentioned problems, Dabur implemented two ERP systems. To

manage the outbound logistics QAD ERP suite known as MFG/PRO was used and to manage

manufacturing locations BaaN was implemented. Though it showed improvements in the sales dispatch

and demand forecasts, it posed severe problem due to data redundancies and inconsistencies at time.

Thus formulating strategy and taking business decisions still remained as severe problem.

The key objectives of new system “SAP ERP system” were:

1. Implementing a new sales and distribution strategy

One of the important reasons for the implementation of the SAP system was to develop new

sales and distribution strategy so as to identify key customer segments in urban and rural

markets, customize sales activities for main accounts and reorganize Dabur’s sales teams. Dabur

teamed up with Accenture to optimize the internal logistics and distribution processes for mega

retail customers, and put incentives and metrics in place to drive specific goals.

2. Developing a new supply chain management capability

Company wanted to leverage SAP by automating Dabur’s material resource planning processes

across the complex manufacturing arena spread across different parts of the country. Also the

new system allowed the company to forecast the demand more accurately than before, this

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new approach allowed management to shift their focus from simple transactions to more

strategic procurement efforts to reduce the cost.

3. Optimizing Dabur’s ERP capabilities

With the existing two independent ERP systems, though the company was able to realize the

operational excellence theinfrastructure for decision support was not adequate. The idea of a

single organization wide ERP implementation was proposed in Dabur to improve the availability

of data to the higher management for them to make decisions. Company needed to improve its

capabilities in order to implement strategic and operational changes.

4. Leveraging IT for business initiatives

Gathering real-time data is one of the biggest challenges for any FMCG company. Through the

implementation of the ERP the company aimed at integrating their key customer in order to

gather real time data which would further help them to forecast the demand more accurately

and help them in making sales and distribution decisions swiftly.

EXPECTED FEATURES OF AN EFFICIENT ERP SYSTEM

1. Packaged Software

The ERP system should be a complete package of modules that are required by the company. As

far as Dabur is concerned, the system should comprise of modules like Sales and Distribution,

Materials Management, Production Planning, Quality Management, Plant Maintenance, etc. The

system modules should be well-integrated and highly efficient.

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2. Process the Majority of an Organisation’s Transactions

The ERP system should cover as many functions of the organisation as possible, so that most of

the organisation is brought under the umbrella of a centralised database system.

3. Use a Data Warehouse

The ERP system should be capable of keeping an up-to-date database of all the important

information flowing through an organisation, and all the information should be updated

constantly, on a real time basis.

4. Accessibility

The ERP system should be designed in such a way that any authorised employee of the

organisation, regardless of which department he is employed in, should be able to access the

information contained in the ERP database, from anywhere in the organisation.

KEY STAKEHOLDERS IN ERP IMPLEMENTATION

1. Management

The most important stakeholder in the implementation of ERP is the management, since it is the

management which is responsible for the funding of the implementation. Effective

implementation an ERP system requires considerable investment of time and money on the part

of the management. As such, it would be in their interest to ensure that the system is working

efficiently and achieving the desired results.

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2. Employees

The next priority in the list would be the employees of the company. It has been observed that

employees in an organisation are always less than receptive to ERP implementation in their

company, because they are worried that their jobs and positions in the organisation would be in

danger. Therefore, employees need to be given assurance that their services are still valuable in

the company in order to ensure that their loyalty towards the company does not waver.

3. Customers

The customers of Dabur are also involved because they would expect better service and

products from the company now that it has implemented ERP software. So it is in the interest of

the company to ensure that it meets the customers’ expectations.

4. Suppliers

The suppliers of Dabur would also be interested in the ERP implementation program of Dabur

because the information supplied to them regarding orders, materials and other production

planning decisions would now be more accurate and timely. Accordingly, they can meet the

orders in time and without any mistakes as to the quality, quantity, etc. of the goods to be

supplied.

5. External Users

External users refer to the shareholders as well as the potential investors in the company. This

category of people would be interested in knowing how far the implementation of ERP in the

company has been successful and whether it has achieved the results it originally set out to

achieve. This knowledge might ultimately play an important role in their decisions regarding

their investment in the company.

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BENEFITS OF ERP

DABUR is one of those companies who have implemented two ERP systems successfully by streamlining

its primary distribution system and outbound logistics. It has used both MFG/PRO and BaaN. MFG/PRO

can run in an offline mode using local database and it is network independent which served as one of

the major benefits of this kind of system.They were facing issues like maintenance costs, data

redundancy, etc. So, in April 2006, they migrated from standalone ERP systems - Baan and Mfg to

centralized SAP ERP system for all business units (BUs).MFG/PRO is a fully integrated ERP (Enterprise

Resource Planning) solution, which includes manufacturing, distribution, customer service and financial

applications and back-end system (Baan) for materials planning and production scheduling. Thus it helps

create deliverable processes in the outbound logistics and seamlessly integrate it with strategic

inventory management, credit control and sales generation.

The major advantages can be summarized as:

It helped them to improve the sales dispatch to the Carrying and Forwarding Agents (CFA). In an

FMCG sector, the major chunk of sales happens at the end of the month. Thus over 80% of the

sales happen during this period. Hence they faced a number of problems due to the sheer

volume of the transactions and no system to keep a track of all these. Some of the problems

would be like sales returns and cheque bouncing from ‘pushed’ sales to meet sales targets. ERP

helped them to remove all these glitches in their supply chain to make them into a more

profitable organization.

Improvement in collections. Collections have recorded an improvement of about 6 days and are

more evenly spread over the month. This leads to considerable saving on working capital locked

up in out-bound logistics. The collection improvement has also helped them to manage their

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account receivables and thus more efficiently manage their working capital. In turn it has also

helped them to reduce their bad debts.

The ERP system has provided them with a platform for visibility of the data across all the

domains in the organization. Thus the stocks with the CFA are visible to the central distribution

planners in saleable and unsalable categories. This has helped them to better plan their

distribution and management by reducing the sales returns and unsold stock inventory.

In FMCG sector one of the major sources of income is the sale and promotion schemes. Without

an ERP system it becomes very difficult to track the changes in this area especially when one is

to monitor a base as huge as the whole of India. Thus the ERP system has helped towards the

central management of the sales schemes. The schemes and free issues are now managed

centrally at the corporate office and the ERP system keeps a strong check on schemes leading to

reduction in misuse of schemes in the field.

MFG/PRO gives real-time information sales situation of distributors,about their inventory and

improves the accuracy of demand forecasts.These demand forecasts are then fed into the back-

end system (BaaN) for materials planning and production scheduling. Integration of these two

systems has significantly enhanced their efficiency.Mfg Pro is fully operational in the zonal

offices, motherwarehouses and CFAs and Baan is already live in five manufacturing locations.

Information on inventories, return of products, collections done and dispatch orders from

warehouses are now all available at a central location.

A Secondary Sales System has been implemented to provide countrywide information on

Secondary pipelines and sales by brand.This new Secondary Sales System has played an

important role in tracking brand-wise sales, and reducing pipeline inventories by focusing on

secondary sales.

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The improvement in area-wise and brand-wise inventory management has scaled up the entire

supply chain management through better sales forecasts, production scheduling, materials

planning, vendor management and raw material sourcing.

Company has implemented another new initiative of Claims Settlement using an Intranet/

Extranet based system, for systematic tracking and settlement of claims. The Company also

implemented another major initiative-Employee Management System (EMS), an intranet based

HR-information system, including Payroll and PF processing.

IT INITIATIVES

Migration from Baan and Mfg ERP Systems to centralized SAP ERP system from 1st April 2006

for all business units.

Implementation of a country wide new WAN Infrastructure for running centralized ERP system.

Setting up of new Data Centre at KCO Head Office.

Extension of Reach System to distributors for capturing Secondary Sales Data.

Roll out of IT services to new plants and CFAs.

UPCOMING CHALLENGES

Forward Integration of SAP with Distributors and Stockists.

Backward Integration of SAP with Suppliers.

Implementation of new POS system at Stockist point and integration with SAP-ERP.

Implementation of SAP HR and payroll.

SAP Roll-out to Dabur Nepal Pvt. Ltd (DNPL) and other new businesses.

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Sample Report:

Figure 5:Sample reports

CONCLUSION:

DABUR made a very right move to change into the existing ERP system. This has helped them not only to

remain competitive in the market but also act as an example that even two models can be integrated

together in spite of all the challenges faced by them. The ERP software has helped them to increase

their profitability many folds since 2006.

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REFERENCES Simchi-Levi, “Designing N Managing Supply 3E”, Tata McGraw-Hill Education

Alexis Leon, “ERP Demystified”

http://www.dabur.com/Media-ProductShots

http://russellobrien.hubpages.com/hub/ERP-Explained

http://www.dabur.com/en/investors1/Annual_reports/2005-06/Dabur_Annual_Report_05-

06.pdf

http://www.dabur.com/About%20Dabur-Dabur%20World%20Wide

http://www.valuenotes.com/Investment-Strategy/Dabur-Long-term-outlook-remains-

intact/172842/12540103.00/C

http://provigator.com/dabur-india-limited

http://www.chillibreeze.com/articles_various/Dabur-story.asp

http://www.tspl.com/dabur_case_study.php

http://www.dabur.com/About%20Dabur

http://www.accenture.com/us-en/Pages/success-dabur-india-operational-excellence-

competitive-advantage.aspx