stratagem.... the scm strategy game

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STRATAGEM.... The SCM Strategy Game




Organizational BackgroundReckitt Benckiser India Ltd (RBIL) is a fully owned subsidiary of Reckitt Benckiser Plc., world’s No.1

Company in Household, Health and Personal Care. Reckitt Benckiser Plc came into being with the

merger of Reckitt & Colman Plc with Benckiser NV in 1999. The company has operations in 60

countries, sales in 180 countries and has had net revenues in excess of $6.6 billion (2008). Reckitt

Benckiser India Ltd (RBIL) manufactures and markets a wide range of products in Personal care, Pest

control, Shoe care, Antiseptics, Surface care, Fabric care and other categories. Amongst its many

well-known brands are Dettol, Mortein, Harpic, Cherry Blossom, Lizol, Disprin, Robin powder, Colin,

etc. Most of these brands are either number 1 or number 2 in their respective categories in India

The company has sales of over £ 6.6 Billion consistently growing ahead of the industry due to its

leading brands, its operations in over 60 countries and sales in 180, & its highly motivated

multinational management.

Vision

Passionately delivering better solutions in household cleaning and health & personal care for the

ultimate purpose of creating shareholder value.

Some facts about Reckitt Benckiser

World Leader in House Hold Cleaning (except Laundry Detergent)

• Head Quartered at Slough, United Kingdom

• Sales in over 180 countries and operations in 60 countries

• Turn-over of 6.6 billion GBP

• Operating Profit of 1.23 billion GBP (Increase of 35% last year)

• 23,000 employees in over 60 countries

• Over 10 million products sold every day

• Recently acquired BHI- Boots Healthcare International, Adams Respiratory Therapeutics.

Reckitt Benckiser (India) Limited

It is experiencing a double digit growth with the revenue almost doubling in the last five

years. Reckitt Benckiser (India) manufactures and sells many different and successful

categories under brands like Dettol, Harpic, Lizol, Cherry, Mortein and Veet etc. It is

expected to post revenue of over 17 billion INR in the current year and is

targeting growth of 15% YOY in the coming years. Reckitt Benckiser is known for worldwide for its

product and marketing innovation.




PRODUCT PORTFOLIO

Brief Summary of Reckitt Benckiser (India) Supply Chain Structure

Reckitt Benckiser (India) does in-house manufacturing of all the categories of products at Seven (7)

Manufacturing locations. Apart from this, it also has arrangements with about 17 Co-packers. The

Distribution system followed by RB (India) is typical of any FMCG company. There are two parallel

distributions networks:

a) Manufacturing plant > CFA >Distributor > Retailer

b) Manufacturing plant > Regional Mother Go-down (RMG) > CFA >Distributor > Retailer.

Some Facts:

To meet the current changing retail scenario and increased demand Reckitt Benckiser (India) is

planning to further increase its manufacturing capacities beyond the existing 7 plants.

There is one CFA per state and all the CFAs are handled by local 3PL partners. The RMG are situated

in 4 metros (Mumbai, Bangalore, Kolkata and Delhi) .Transfer of ownership of products happens at

the CFA level. The existing mode of transport for all the categories is by road.




Number of SKUs = 250-300

Number of Factories: 7

Number of Co-Packers:17

No. Of CFAs : 32

Retail Outlets

No. of distributors: 4000




Organizational structure

Emergence of India as big retail market: Opportunities and challenges

The organized segment of the Indian retail industry is expected to grow from the current 5 per cent

of the total market to about 14-18 per cent of the expected Rs 18-lakh crore market by 2015

(Source : McKinsey and Co)

Opportunities:

Growing Urbanization and increased consumerism Greater use of Credit

Many big corporates like RIL, ABG, Bharti etc have already started there operations in the Indian

Retail market.

Challenges:

High inflation rate for foods and commodities other than petroleum.

Stringent norms of Modern Trade

High Real Estate rates.




The CaseDepartment wise procurement details for RB are as given under:

1. Raw Material procurement: Total procurement cost for RB (India) is 1300 Crores of which raw

material accounts for 40-45%. Around 350 items come under the raw material category with overall

250-300 vendors for the same. The imported raw materials are 15 – 18 % of total procurement.

CATEGORY SPEND %

Palm Based 25%

Organics 20%

Oil Vegetable 15%

Surfactants 10%

Dyes & Pigments 10%

Fragrances 8%

Govt Controlled 8%

Others Balance

2. Packaging Material procurement: Accounts for 30% of total procurement costs. RB dealswith total 18 categories in all. Along with 1000 SKUs RB delivers several promo packages and

artworks.

Main Categories % Procurement

Blow moulded 40%

Glass 12%

Laminates 12%

Trays 12%

Tin 5%

Labels 5%

Injection Mould 5%

Boxes 5%

Balance 4%




Finished Goods procurement: Accounts for 25-30% of procurement costs. There are 26 co-packer

units and 17 co-packers producing 23 items in number. Three main products under finished goods

are: Liquid Vaporizer- Liquid Vaporiser, Coils and Soaps. These are 75% of the total finished goodsprocured.

Problem 1: Local Vs Central procurement:

In the past, ordering and scheduling of material, for production at the plants, was handled by the

central procurement team. Central procurement team would place orders and release schedules to

the vendors who would then supply the material to all the plants. However to help central teams to

focus more on strategic issues, planning and scheduling procedure was decentralized.

Since past 15 months RB has allowed the plants to plan and schedule the requirements and directly

place order with the vendor while the prices and share of business are controlled centrally.

Central team is therefore responsible for

A. Vendor identification

B. Vendor Development

C. Price Negotiation and release bulk purchase orders in the ERP.

D. Deciding the share of the business for the vendors

E. Mould planning

F. Planning and Scheduling for Imported materials only.

Plant planning team meets the central planning and schedules the production inline with sales

demand. Local plant procurement team calculates the material requirement considering the opening

stocks, in transit stocks, inventory norms etc. The day-wise delivery schedules are then made in the

ERP in line with the vendor share given by the central procurement teams. Plant can release a

schedule only if there is an authorised Bulk Purchase order existing in the ERP.

All types of vendor follow ups are also done locally.

Though the constraints regarding the availability of RM and PM are discussed between the local and

corporate teams during the fixed weekly reviews, the local teams still approach the Central

procurement team for their intervention on almost daily basis- and most of the times at the last

moment.

One of the major reasons for shortfall of materials is the frequent changes in the production plan by

the central planning team which is agreed to by the plant procurement.




The three divisions in Central procurement - Raw material procurement, Packaging material and

finished goods (Co-packers) procurement are run by a divisional head and a team under him. The

local plant team structure is as shown below:

Total Shortfall in Months Production is around 15%. Over the period of last 12 months it is observed

that 30-40% of the production shortfall is on account of Material availability. Rest of the failures

occur due to manpower availability, and machine breakdown and change in plan etc.

Deliverable:

The company is now wondering whether its decision to decentralize was right or not as the very

purpose of decentralization (that central team is more focused on strategic issues) is defeated and

there are frequent disruptions in manufacturing due to material availability.

A. Describe a strategy that RB should follow to remove this conflict between Central and Local

Purchase, so that central teams can devote more time on long term procurement plans and at

the same time service levels improve.

B. Benchmark the process against global practices or other FMCG companies.




Problem 2: Inventory

Inventory control is the responsibility of each plant. Each plant has its own Month End inventory

targets which includes both domestic and imported items. Imported Materials are 15-18% of total

materials procured and inventory norms for imported materials are decided by Central Procurement

teams considering lead-times, MOQ etc. Plant has no ownership on the planning of imported

materials though they are accountable for overall inventory. The order placement and scheduling

for imported materials is done by the central procurement team. Since the lead times for imported

items is high, 45-90 days, planning needs to be done 3 months in advance. Central team does this

planning basis the 3 month rolling plans released by the central planning team and it has been

observed that accuracy of 2nd and 3rd month plan is 60% and 40% respectively. Any major change in

demand during this period leads to stock outs or excess inventory.

For domestic material both central and factory teams are responsible for inventory levels. MOQ of

50% of the materials do not fulfil the average monthly requirement . If plant orders quantities less

than the MOQs the purchasing cost becomes very high.

Deliverable:

A. For imported materials what should be the ideal safety stocks to be maintained. What should be

the reordering point for imported raw materials? Highlight the inventory model which can be

used.

B. What would be the best responsibility matrix between the central and local procurement teams

in terms of Inventory planning and control.




Problem 3: Co packs and seasonality

Most of the products manufactured at the co packs are seasonal in nature and there is a high

fluctuation in demand. The capacities are available during the lean season but are scarce during the

peak demand months and have to be booked in advance, if required.

Storage of FG attracts costs in form of space, interest cost, obsolescence costs etc. Then there is also

change in weather patterns that affects the demand scenario. Below is the example of Demand

fluctuation for Item A. Item A is procured by three co packers.

Month

Demand In

Mio Units

January 5

February 5

March 11

April 14

May 13

June 5

July 5

August 7

September 8

October 7

November 10

December 10

Deliverable:

Propose a strategy to take care of the seasonality of demand which is implementable and cost

effective.




Rules and Guidelines

Round -I: Case Study

The case would be open for all IIMs, SPJIMR, JBIMS, IIFT, IMT-G, MDI, NMIMS, SIBM, XIMB, ISB,

MICA, NITIE, FMS, IIT Delhi, IIT Mumbai, IIT Kanpur, IIT Kharagpur, XLRI, SIOM (symbiosis institute of

Ops mgmt)

1. A team can consist of maximum two members (Management Students only) from the same

college. A student cannot be a member of more than one team.

2. The team members need to register on the Prerana 2009 website www.prerana.nitie.net (if you

are unable to register on the website for any reasons please mail your entries directly to

[email protected])

3. The solution should not exceed 2000 words inclusive of all exhibits and appendices.

4. Solution format: Font Size – 12, Font Type – Times New Roman, 1.5 line spacing and the file

should be a Microsoft Word Document/PDF.

5. The front page should carry only a) Institute Name, b) Team Name, c) Details of the team

members (Name, Email IDs, Phone Nos.) and d) Prerana Registration IDs.

6. The details of the participants SHOULD NOT appear anywhere else in the case solution.

7. Send entries to [email protected] with the document name as

“Stratagem_TeamName_CollegeName” and subject line as “ReckittBenckiser_Stratagem”.

8. The entries must reach us by October 22nd, 2009 (23:59:59). Short listed students will be

intimated by email.

9. The decision of the organizers of the contest and the panel of judges will be final and binding on

all contestants.

Round - II: Case Presentation

The finalists would be asked to present the case to the jury from RB in NITIE campus

1. Five teams shall be short listed for the final round.

2. All participants in second round will be provided two way train travel fare for the shortest

route from their institute to Mumbai.

Prize Money

First Prize: Rs 30,000 +PPI

Second Prize: Rs 15,000 + PPI

For More Details/ Queries contact:

Divya Bhadani:- +91 9833723473

Sambit Mishra:- +91 9769052677

stratagem.... the scm strategy game

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