Analysis of Asian Paints Integration of Supply Chain Management

11/26/2015 Analysis of Asian Paints integration of Supply Chain Management

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Analysis of Asian Paintsintegration of Supply Chain

ManagementIn this paper, we have analyzed the Asian Paints strategic decision of being asuperior technology driven company to achieve a competitive edge. The focus ontechnology is visible in various decisions taken by Asian paints namely inharnessing the powers of state-of-the-art supply chain system using cutting edgetechnology to integrate all its plants, regional distribution centres, outsideprocessing centres and branches in India. Asian Paints is the only company inIndia to have integrated Supply Chain Management (SCM) Solution from i2Technologies, and Enterprise Resource Planning (ERP) solution from SAP.

Introduction - Paints Industry & AsianPaintsIndia's paint industry can be classified into decorative paints, which account for75% of the market, and industrial paints, which make up the remaining 25%.Asian Paints is India's largest paint company. The leaders in the organized paintindustry in India are Asian Paints with over 40% market share, Kansai Nerolac(20%), Berger Paints (19%) and AkzoNobel (12%). Asian Paints is a market leaderin the decorative segment while Kansai Nerolac dominates the industrial andautomotive segment. Asian Paints is a market leader in the decorative segmentwhile Kansai Nerolac dominates the industrial and automotive segment [1] .

Asian paint is ranked at No 10 among the top Decorative Coatings Companies inthe World. Asian Paints and its subsidiaries has operations in 22 countries acrossthe world and 27 paint manufacturing facilities, servicing consumers in 65



countries.Asian paints was started by Champaklal Choksey, Chimanlal Choksey,Suryakant Dani and Arvind Vakil as "Asian oil and Paints company" .Within threeyears, their turnover reached 3.5 lacs. In April 2009, it reported its turnover foryear 2008-09 as Rs 5463 Crores [2] . Asian Paint is listed in Bombay StockExchange [3] and in National Stock Exchange [4] .

The three main promoters of the company are the Dani, Choksi and VakilFamilies.Out of the 14 member board of directors, 7 belongs to the foundersfamily [5] . Mr Aswin Choksi is the chairman of the board of directors and Mr P.M.Murthy is the MD and CEO. In an interesting decision, Mr. Murthy was asked tocome out of retirement and run the company as CEO in April 2009 [6] .

Asian Paints aims to become one of the top five Decorative coatings companiesworld-wide. They intend to achieve this through alliances with established globalpartners [7] .

One of the main issues with company could be that it has to compete with thesame established global players in the international market with whom it hasalliance in domestic market.

As far as the social issue are concerned All the paint plants have achieved 'zeroindustrial discharge' capability.

Asian Paints product linesAncillaries: Primers, Filler strainers and wall putty

Automotive: for automotive application

Decorative paints : Walls, metal and wood surface

Industrial: Protective coating, floor and road coatings

Ancillaries

Wall Primer

Primer



Wall Putty

Redoxide Oil Primer (Rust Protector)

Thinner Melamyne Brushing

Wood Stains

Knifing Paste Filler

Exterior Sealer

Wood Filler

Floor Colour

Asian paints PPG

Deltron

Delfleet

2K Nexa Autocolor

Decorative Paints

Royale

Emulsion

Wood finish

Utsav

Industrial Products

Protective Coatings

Floor coatings

Powder Coating

Road Marking



Phthalic

Resource Based View of Asian Paints

Resources in Management

Planning and Controlling

Strategic PlanningVision: Asian Paints aims to become one of the top five Decorative coatingscompanies world-wide by leveraging its expertise in the higher growth emergingmarkets. Simultaneously, the company intends to build long term value in theIndustrial coatings business through alliances with established global partners.

The diversification in terms of products has already been covered.

Internationalization:The international market strategy of Asian Paints is to mainly enter the highgrowth emerging markets. For this they have developed an emerging marketbusiness model. As per this the following steps are followed

Introduce new products suited to local needs

Introduce and continuously strive improve the technology aspect

Focus to improve operations especially supply chain for maximum efficiency

Corporate Policy:As per the Asian paints corporate philosophy, the following values are prescribed

Satisfaction of the spirit of the law through ethics in business

Full transparency in all the workings



Truthful communication regarding how the company is run

Simple and transparent corporate structure driven by the business needs

Establish an efficient structure to manage the company`s affairs

SWOT Analysis

Organization

Strategic Planning

AP has acquired short-termcompetitive advantages by using itsdistribution strength and logisticalefficiency in order to raise the Cost ofdoing business for all its competitorsto attain this advantage.

The advantage is short-lived andultimately imitable.

Moreover, AP has established such anextensive network that gettingincremental advantage would be verydifficult.



difficult.

Futuristic approach should be gainingcompetitive advantage throughchannel control or occupying mindspace.

Organizational Structure

Depot

Regional Office

RDC

Plants

Head Office

DM Office

Fig. 1 Organizational Structure ofAsian PaintsContinuous line: flow of instruction/authority



Dashed line: flow of information

Group SubsidiariesApco Coatings is a subsidiary of Asian Paints in the South Pacific islands. AsianPaints operates in Australia, Fiji, Tonga, Solomon Islands and Vanuatu under thebrand name of Apco Coatings.

Asian Paints Industrial Coatings Limited has been set up to cater to the powdercoatings market which is one of the fastest growing segments in the industrialcoatings market.

Over the years Berger expanded its operations across oceans, to cover numerousgeographies. In 1994, Berger units were brought under the single umbrella of theholding company 'Berger International Limited (BIL)' with headquarters inSingapore, which was also listed on the Singapore stock exchange. In November2002, BIL became a part of the Asian Paints Group. Today, the name of Berger issynonymous with quality and innovation. BIL has presence across three regionsviz. Middle East, Caribbean and South East Asia.

Founded in 1979, SCIB Paints today is a reputed name and ranks amongst the topfive paint companies in Egypt. SCIB Paints became a part of the Asian Paintsgroup in August 2002.

Asian PPG Industries Limited, a joint venture between Asian Paints (India) Limitedand PPG Industries, Inc. USA with 50:50 equity sharing was established in March1997 with the objective of providing solutions to the paint requirements of IndianAutomobile manufacturers. The joint venture brought together two leadingcompanies with strengths in technology, manufacturing and customer insight.

Taubmans Paints Fiji, the fourth largest paint company in Fiji, became a part ofthe Asian Paints family in September 2003. Taubmans Paints is the dominantplayer in the project sales segment in the country and is a leader in theneighbouring Samoa Islands. It has two manufacturing facilities, one in Suva (Fiji)and the other in Samoa.

Manufacturing/Operations factors



Manufacturing/Operations factorsSize advantage in relation to competitors.

Finesse in production planning ,scheduling ,matching with marketingrequirements

In-house production -outsourcing -high reliability suppliers - superior qualityassurance.

Four production location -spread benefits

Information Technology

Asian Paints, at a very early stage ofits growth, recognized the importanceof IT and how it could use thetechnology to its advantage. In 1983,it was the first company in India touse computer technology on its shopfloor. The use of computers providedan automated way of generatingdetails of dispatches to the depots.AP also invested in branchcomputerization which helped zonaldistribution centers to get daily stockposition levels. This information was



position levels. This information wastracked and analyzed to determinethe performance of the dealers, thushelping forecast sales, take correctiveactions in case of low sales andincentivize the high performingdealers. Also, around 1994, AsianPaints installed terminals whichconnected factories to depots andhelped in accounting and planningprocedures.Asian Paints was also one of the first paint companies to use Supply ChainManagement (SCM) and Enterprise Resource Planning (ERP) software forstreamlining and automating its processes. It selected the SCM solution offeredby i2 Technologies and later also started using SAP's ERP solution, much beforeother companies adopted similar solutions. This helped the company to connectto all their vendors and suppliers.

One of the biggest advantages ofimplementing these solutions was theaccurate demand forecasts - thishelped them bring down inventory

stock costs and working capital costs.



stock costs and working capital costs.For e.g., white color was always inhigh demand, so these was alwayskept in stock. The Retails outletscould blend the whites with othertints to meet the requirements ofcustomers. Warehouses that weresituated nearby used to supply therequested paints within a day. Thishelped minimize supply chaininefficiencies. It is estimated thatthese initiatives gave AP an estimatedsavings of INR 100 million, 25% ofwhich came due to reduction infinished goods inventory.

Research & DevelopmentAt Asian Paints, Research & Development has played a significant role in thegrowth of the organization. The company has continuously invested in R&D. Theentire decorative coatings portfolio for the Indian market and for overseas



ventures has been developed in-house. Our technologists not only develop newproducts and improve upon existing formulations; but also act as a pillar ofsupport to other functions, viz

Supports Manufacturing in process cycle time reduction & improves productivityby alternate / break through processes

Provides solutions to environmental issues by minimizing waste at the time ofgeneration and also in recycling

Aids Marketing in providing technical tools/USPs to demonstrate and push newproducts

Support Materials by providing new Raw Materials as alternate to current one togive them negotiating power and also alternate vendors for supply chainflexibility

It consists of 140 strong R&D team consisting of 7 doctorates and around 115qualified scientists, has always backed the company's business plan anddemands of the market place. Asian Paints' R&D team has successfully managedto develop High-end exterior finished and wood finishes in-house.

Supply ChainAsian Paints has harnessed the powers of state-of-the-art supply chain systemusing cutting edge technology to integrate all its plants, regional distributioncentres, outside processing centres and branches in India. All the company'spaints plants in India, two chemical plants, 18 processing centres, 350 rawmaterial and intermediate goods suppliers, 140 packing material vendors, 6regional distribution centres, 72 depots are integrated.

The supply chain runs through a wide spectrum of functions right from materialsplanning to procurement to primary distribution. It has played a pivotal role inimproving operational efficiencies and creating agile procurement, production



and delivery systems. It has also enhanced the flexibility of operations, loweredoutput time and reduced delivery costs, while improving customer-servicinglevels and profitability.

The Supply Chain Management is backed by IT efforts that help the company indemand forecasting, deriving optimal plant, depot and SKU combinations,streamlining vendor relationships, reducing procurement costs and schedulingproduction processes for individual factories.

Licensing of ProductAsian Paints Ltd has put in place a new business strategy to generate additionalrevenues by licensing out its brands and technology. As part of a massive reviewof its global business, the company has taken a re-look at its operations across allits plants. As per the new business strategy, Asian Paints out-licensed the brandname and the paint manufacturing technology. The company licensed out itsbrand and technology to PT Abadi, a leading paint company in Indonesia also.Asian Paints also licensed its technology to Berger Paints, Pakistan.

Merger & AcquisitionsAsian Paints (India) Ltd acquired 50.1 per cent stake in Berger International Ltd(BIL), a holding company incorporated in Singapore. BIL has no operations inIndia in 2002.

As part of its strategy to transform itself to a global player, Asian Paints acquiredTaubmans, promoted by Axo Nobel, for $1.42 million in 2003. The acquisitionincreased the market share of Asian Paints to over 50 per cent from the current40 per cent.

Asian PPG bought ICI India unit for 520 million rupees in 2007 expanding itspresence in India. The company became become the largest player in the autorefinish (paints) market in India.

Organization & Environment



Organization & Environment

Customer FocusOver the last 10 years, the average Indian customer has become more involved inthe painting activity. AP realized this earlier than its competitors and devisedmarketing strategies to develop its brand image in the customer's mind andhoped to convert this increased 'mind share' into 'market share'. This was done intwo ways; one was to explain the advantages of their products directly to thecustomer and offer them more services. The second was to improve AP's brandvalue and image among customers.

Increasing product awarenessThis strategy was aimed at helping the customer in making the right choice and inthe process of doing that select AP products. A few key initiatives taken by thecompany are explained below.

Color World Stores: These were specialty AP stores which had an in shop 'ShadeDisplay Unit' which displayed over a thousand unique shades along with ready-to-use combinations. Customers had the advantage of seeing how their roomswould appear in those colors before they bought the paint. Asian Paints workedwith academic institutions in India and kept the Indian customer in mind whiledesigning these shades. An interactive computer system allowed the customer tochange the colors and select the one they liked. Also, these stores gave thecustomers shade strips, on which the colors selected by the customer wereprinted by an automated paint mixer machine. Customers could take away thesestrips back to their homes and see if the color suited the room. There are about15000 such stores and machines across India and the company believes that asubstantial amount of sales will be coming from these stores.



Color Store: AP recently opened its flagship store in Mumbai. The store, the firstof its kind in India does not sell any paint but sells a concept of a lifestyle to thecustomers. The store was inspired by 'Holi', the Indian color festival and providesa complete solution to customers including help in selecting the colors based oncustomer's inputs, volume and price estimates and also includes a home paintingservice. This has a direct impact on the customer's minds who will then buy paintfrom dealers. By customizing the colors for the customer, in a way AP is lockingthe customer as the customer may not get the same color/shade from acompetitor. This store was recently awarded the 'Store of the year' by the RetailDesign Institute in India.

Asian Paints Home Solutions (APHS): This is an end-to-end paint service providedby Asian Paints. Started as a pilot project in 2000 in Hyderabad, this service hasgained momentum over the years and is now available in 13 Indian cities. To thecustomer, this provides a hassle free painting service. In the Indian context, thiswas unique as the actual paint job is usually done by small paint servicecompanies, which were not that reliable and sometimes difficult to deal with. Thetrusted brand name of Asian Paints was helpful in attracting customers as well.Also, the company gave a 1 year warranty with this service, something which isnot common in the paint industry.

Building Brand NameThe company aggressively invested in consumer research efforts in order to buildits brand name. In 2002, the company started marketing its paint under the AsianPaints brand name instead of the name of the paint and also changed its logowhich strongly portrayed the name of the company. The company also playedwith the psyche of the Indian consumer to popularize its brand name byexploiting the emotional connect a consumer has with his / her home. It realizedthat Indian consumers preferred painting their homes before festivals and otherimportant family functions such as marriages. Painting the home signified a newbeginning, and, fittingly, Asian Paints brand unveiled its new tagline "Celebrate



with Asian Paints" to tap into this consumer demographic of the Indian market.This was the first step the brand took in establishing an emotional connectionwith the consumer in a low-involvement category.

The company also invested a lot of money in advertising and roped in famousbollywood stars to attract the end customers with the hope that they will buyAsian Paints to paint their homes.

Joint VenturesAsian Paints along with PPG Inc, USA, one of the largest automotive coatingsmanufacturers in the world has begun a 50:50 joint venture, Asian PPG Industriesto service the increasing requirements of the Indian automotive coatings market.Another wholly owned subsidiary, Asian Paints Industrial Coatings Limited hasbeen set up to cater to the powder coatings market which is one of the fastestgrowing segments in the industrial coatings market. This wholly owned subsidiaryof Asian Paints has entered into a tie-up with Canada-based Protech Chemicalswhich is one of the top ten powder coatings companies in the world fortechnological know-how in the area of powder coatings.

Competitors

Company Name

Net Sales

Net Profits

Net Profit Ratio (%)Asian Paints



5,367.72

774.5

14.4

Kansai Nerolac

1,814.71

165.5

9.119914

Berger Paints

1,510.96

88.76

5.874411

Akzo Nobel

937.7

159.3

16.98838

Shalimar Paints

333.25

3.56

1.068267

Jenson Nicholson

37.47

-7.61



-20.3096

Hardcastle

13.63

0.58

4.255319

Killick Nixon

4.32

-1.57

-36.3426

Reputation:

Environment and Safety:Asian Paints approaches the environment issue from the perspective of wasteminimization and conservation of resources.

It attempt is to reuse, recycle and eliminate waste, which results in less and lesswaste being generated. Accordingly, the material losses in manufacturing havebeen reduced substantially over the last few years.

It has ISO 14001 certification for environment management standards.

It has achieved 'zero industrial discharge' capability. These have been achieved bythe installation of upgraded effluent treatment facilities and installation ofreverse osmosis plants in conjunction with appropriate recycling and reuseschemes. Our emulsion manufacturing facility has

Quality Policy:



We shall provide products and services that meet stated standards on time, everytime.

We accept Zero Defect as a quality absolute, and shall design and operate ourquality system accordingly.

We will organize our work practices to do a job right the first time, every time.

We are committed to continuous improvement in quality in all businessprocesses and shall track such improvement through measurable indicators.

Leadership

Name

DesignationAshwin Choksi

Chairman / Chair Person

P M Murty

Managing Director & CEO

Amar Vakil

Director

Dipankar Basu

Director

Deepak Satwalekar

Director

S Sivaram



Director

Abhay Vakil

Director

Ashwin Dani

Vice Chairman

Mahendra Choksi

Director

Tarjani Vakil

Director

Mahendra Shah

Director

R A Shah

Director

S Ramadorai

Director

Ina Dani

Non Executive Director

Human Resources with SubcategoriesAsian paints has a talent pool of over 4700 employees employed across 23countries bring in a unique blend of mindsets and skills. They recruit only fromthe top schools and believe in getting the people from the highest calibre in the



company. To enable better interface, initiatives like HR help desk, Employee selfservice, and e-learning applications were done during the previous year. Peopledevelopment is a key area of focus for Asian paints. Though every employeeplays a part in his own development, focused activities are also carried out forensuring synergy and growth. E-Learning was introduced as new concept, tomeet the ever growing diverse developmental needs of the organization. With themultiple locations throughout the globe, the present of e-learning will help theemployees. The year 2009-10 also saw the stabilization of the PMS that was put inplace during the previous year. They do follow a 360 degree method of appraisal.

An open and interactive work culture brings out the best in the people. A sense ofownership and freedom to experiment at their workplace brings out creativityand innovation in every individual. Excellent training is provided to developleaders and re-strengthen competencies from within the organization. Theybelieve in encouraging achievers from within the organization to climb up thehierarchy and take up bigger roles and assignments. Thus, the task is cut out forevery individual within the framework of result-orientation market insight,customer perspective, trust, respect and problem solving. AP looks forward to thecommitment of the people and their sense of discipline and ownership continueto drive growth for the company

Resources - A bird's eye view

Specific Level \ Concrete Level

Tangible AssetsFixed assets

Equipment (Eg - Machinery, hard- and software), facilities, plant, land

Current Assets

Inventory



(Eg- raw materials, semi finished goods)

FinancesAssets

Investments, cash reserve, trade receivables, factoring

Capital

Equity Capital, liabilities (loans, leasing, salaries and wages), financial incentives(eg- social contributions, private use of company's car)

General CharacteristicsLocation, areas, type of product and services, size (eg- turnover, market size,goodwill, physical value, competition position)

Non-Financial indicators of thecompany1) Raw Material: Paint is a raw material intensive industry. It takes over 300different raw materials to produce paint, most of which are petroleum-based.Titanium dioxide is the largest consumed raw material. It constitutesapproximately 30% of the total manufacturing cost. Besides this, there arepetroleum-based raw materials, which constitute 40-50% of the total raw materialconsumed. Hence any movement in crude oil prices impact prices andprofitability in the paint industry.

2) Research and development [8] : At Asian Paints, Research & Development hasplayed a significant role in the growth of the organization. It has set up a newResearch & Technology centre at Turbhe on the outskirts of Mumbai (India).



3) Supply chain [9] : Asian Paints has harnessed the powers of state-of-the-artsupply chain system using cutting edge technology to integrate all its plants,regional distribution centres, outside processing centres and branches in India.All the company's paints plants in India, two chemical plants, 18 processingcentres, 350 raw material and intermediate goods suppliers, 140 packing materialvendors, 6 regional distribution centres, 72 depots are integrated.

Finances

AssetsInvestments, cash reserve, trade receivables, factoring

Application Of Funds

Mar '06

Mar '07

Mar '08

Mar '09

Mar '10Investments

274.55

334.39



422.88

234.77

703.69

Inventories

348.79

434.07

538.97

546.71

763.14

Cash and Bank Balance

28.17

42.47

41.33

128.05

28.58

Total Current Assets

562.07

712.5

832.2

985.78

1,123.15

Net Current Assets



89.75

166.06

17.94

137.44

-168.36

Market capital of the company = Rs 17,357 Cr

Volume of the shares traded = 24,372

Trading turnover = Rs 43.57 Cr

Trading turnover/ market capital = 0.0025

This is a very low figure which indicates that the share of the company are tradedvery less as compared to market average

CapitalEquity Capital, liabilities (loans, leasing, salaries and wages), financial incentives(eg- social contributions, private use of company's car)

in Rs Crore

Mar '06

Mar '07

Mar '08

Mar '09

Mar '10

Total Share Capital



95.92

95.92

95.92

95.92

95.92

Equity Share Capital95.92

95.92

95.92

95.92

95.92

Reserves526.36

648.16

832.58

998.55

1,461.30

Networth622.28

744.08



928.5

1,094.47

1,557.22

Secured Loans31.88

66.9

36.7

24.59

25.59

Unsecured Loans40.7

40.7

40.7

40.7

40.7

Total Debt72.58

107.6

77.4

65.29



66.29

Total Liabilities694.86

851.68

1,005.90

1,159.76

1,623.51

The cost of capital for Asian paints is lesser than KansaiNerolac by nearly 6%,which shows that market has more TRUST in Asian paints.

As the lending rates decrease, Asian paints can further lower its cost of capital byincreasing debt usage

As Asian paints diversifies its products and expands its presence in othercountries, the difference between the cost of capital for the two companies canincrease further

Above numbers indicates that Asian paints is consolidating its position as marketleader and has no immediate threat with its nearest competitor.

Salient features/TrendsIn case of Asian paints the average tax are more or less equal to the corporateincome tax of 33.99%. This signifies the fact that it is not getting any subsidiesfrom the government.

There is a significant drop in CFO in last years. This can be attributed to twoevents

i) Global economic meltdown which had an impact on both construction andautomobile business which are the main source of income for the company.



ii) Increase in the value of oil prices and hence in the price of raw materials forthe company which are predominantly petroleum based products.

Considerable increase in Capex in last two years which means that the companyis looking for expansion (mostly outside India) which is a good sign for investors.

Excess cash has consistently been used to buy Investments except for last year.

Cash balance has decreased in last two years, which can be due to adversemarket conditions and investments purchases.

Indian paint industry is growing

Asian paints is retaining most of its profits which is supposed to pay highdividends in the future

Asian paints is increasingly investing in total assets which should result in higherdividends returns in future.

Asian paints is planning to invest in a plant at Rohtak (India).The plant is locatedon 130 acres of land and will manufacture both water and solvent based paints;including emulsions and resins. The project cost for the initial 1.5 Lakh KLcapacity will be Rs. 400 Crores and the plant is expected to start production byearly 2010(last quarter of year 2009-10).

Capacity increase at Asian paints in last 4 years:

Year

2006

2007

2008

2009

Capacity

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282602 KL

316871 KL

354370 KL

Sales

2678 Cr

3244 Cr

3915 Cr

4819 Cr

Expenditure

1967 Cr

2399 Cr

2868 Cr

3708 Cr

Net profit*(PAT)

187 Cr

272 Cr

375 Cr

362 Cr

The change in the value suggests that Asian paints has decreased its operatingleverage/financial/business risk. This is true as company has slowed down itsinvestment in new plants and in new markets for last year or so.

The company share has become little less risky than what it was in last 5 years

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One of the reasons for Asianpaints to sustain such low level of debt could be thatit wants to increase its flexibility for future Merger & Acquisition opportunity

Asian paints is a cash rich company which has a general reserve of Rs 998 Cr(asper latest year balance sheet). This amount is sufficient to fund its operations andexpansion plans

Asian paints consistently pays a dividend which is higher than its peers. As thecompany is a market leader in its segment by a huge margin, it has cash reserveswhich are sufficient to funds its expansion and pay dividends at a constant rateover the years.

To expand: Asian paints is expanding its operations [10] and has no plans ofshutting any of its plans in near future. In the newly constructed Rohtakplant [11] , the company will develop 43 Acres of green belt which can be used inthe future for expansion or real estate purpose.

To Abandon: Asianpaints exited its Mauritius Operations [12] in 2005 toconcentrate on emerging markets like Middle East.

To Time: The company showed a decrease in growth in south pacificregion [13] but has no intension of exiting. This indicates the fact that it might bewaiting for the market to pick up demand and then increase the capacity.

To Flexibility: Company is bringing in new Lead-free paints [14] which will help itexpand in global market and meet the stringent safety norms in westerncountries. This will also help the company in case the Indian governmentincreases the safety standards in paints components in future.

Resources lackingIn the decorative range of paints Asian Paints is the market leader and has itspresence in almost all the segments. One of the major areas in which it does nothave a presence is the exterior cements paint area.

Strategic Decision of Leveraging I2



Strategic Decision of Leveraging I2In the challenging Indian marketplace Asian Paints established a leaner, moreagile and cost-efficient supply chain and found it to be a clear advantage ingetting a competitive edge.

Asian Paints is India's largest paint company and is ranked among the top 10decorative coatings companies in the world. The company provides innovativesolutions for decorative home improvement, industrial and automotive paintingrequirements. Asian Paints has more than 25000 local retailers to resell itsproducts to home users, contractors and painters. The company also sells paintsand colors to original equipment manufacturers (OEM) and to large contractorsserving the OEM marketplace. To serve those demanding market segments, AsianPaints produces more than 1,200 standard paint product SKUs and many made-to-order formulations, and operates about 80 sales offices.

AP manufactures products at five production locations owned by the company,and at several contract manufacturers who make specialty or low-end finishes. Tomanage the cash cycle as well as deliver the products to the customers withoutholding a large amount of inventory, it is extremely important to integrate all themanufacturing sites into a cohesive entity.

For the purpose of achieving a dynamic marketing and production environment,a sophisticated and robust supply chain is mandatory. To accomplish this task APagreed on two key ideas: first, delivery of the products to the customer efficientlywithout accruing a large inventory; and second, fund an bullish growth-by-acquisition strategy by managing the cash-cycle to free up the funding.

Building a strategic supply chainAsian Paints has leveraged advanced i2 solutions for supply chain masterplanning, materials and distribution planning, production scheduling, and changemanagement since more than a decade. The processes from sales forecasting,



master production planning, raw material planning, distribution planning andshop floor scheduling were covered through the implementation of key solutionsfrom i2's advanced planning solutions.

These advanced master planning technologies are applied to decide whichproducts should be produced at which manufacturing plants. This strategy isintegrated with variables such as cost and demand volume, capacity, currentinventory levels, environmental requirements and other factors, and areoptimized across multiple objective levels like capacity, demand satisfaction,safety stock requirements, inventory optimization and transportation costs.

The raw material is procured from domestic vendors and international suppliers.These supplies are managed through the use of a sophisticated materialsplanning system. Due to the fact that raw materials comprise 60 percent of itsvalue chain, bill of materials, routings and alternate parts are continuouslyimprovised. This leads to a complex alternate materials scenario during theprocurement planning process. Asian Paints uses i2's factory planning softwareto manage a wide range of variables, such as the inflow and use of raw materialsamong multiple possible alternates across multiple alternate vendors andpossible production routes to ensure optimum raw materials selection. Weeklytiming requirements on a plant, unit and machine-by-machine basis is set byusing i2's advanced scheduling software.

AP often experiences a "hockey stick" variation in monthly demand for itsproducts. During the festive seasons in different parts of India, often the demandupsurge is also seen. A sophisticated distribution planning system from i2 is ananswer for Asian Paints to handle these surges. This also helps in smoothmovement of the products in the complicated and dynamic marketplace.

To ensure a smooth evolution to this re-engineered solution, Asian Paintsenlisted i2 to support deployment, change management and continuousimprovement. The company also relied on i2 for help in streamlining processworkflows, reducing the planning cycle and in formulating overall solution



architectures. AP has used the advantages in inventory management and thesupply chain to build an organization that is much stronger. It has really allowedAP to leverage skills and strengths in the marketplace.

Savings, service and growthA decade after the i2 supply chain opportunity assessment demonstrated that i2solutions would pay for themselves after one year of use; AP has drasticallyimproved its debt-to-asset ratio. It has almost become a debt-free company.Supply chain efficiencies have been used to follow an aggressive growth strategy.

With the use of i2 SCM solutions, the company has reduced its days of finishedgoods inventory from 56 days in 1999 to less than 30 days currently. During theinitial implementation phase itself, the days of finished goods inventory wentdown from 56 days to 40 days. This has been a major reason behind thecompany's improved cash flow. This has helped AP to invest in growth orientedacquisitions.

Whereas earlier the company used an end-service-level metric, with the usage ofi2 solutions, the company has moved towards a more proactive and preciseorder-fill method of analysis. A whopping 87-90 % service levels for SKU saleshave been achieved at the location level after complete adoption on i2 solutions.This has enabled the company to achieve greater success than the competitors.

The volatility in the fluctuating paint market is dealt with effectively and the sizeof inventory is optimized with the company's enhanced master planning system.The company creates more complex and effective paint formulae with theassistance of better material planning system. It further helps the company tochoose the most appropriate vendor and manufacturing methods for differentcircumstances.

Modern distribution planning has facilitated Asian Paints to reduce thedeployment of the inventory. They do it on a weekly-basis. This also enables themto adjust the distribution plans as per their needs. This assists them to adapt



more easily to the variations of the market demand and the changing regulatorypressures or business requirements. They also adapt better to the newmanufacturing processes.

The improvements of supply chain management and execution systems haveenabled the company to develop fast. Within ten years of the adoption of thetechnologies, the company has grown over four times of its size. In addition tothat, the company has also reduced the on-hand inventory required to assist itsconsumers

To further optimize the execution of the supply chain processes in conjunctionwith the planning solution, and to provide a seamless plan-do-check-actframework to the supply chain executives, Asian Paints deployed the i2 platform.Highly customized planning and execution workflows have been developed toenhance the efficiencies of the supply chain.

The company's ability to deliver the right product at the right time and to theright place has become a differentiating factor for Asian Paints. The supply chainhas become one of the most crucial functions in taking the company ahead of thecompetitors.

Where Asian Paints are going andhow they can leverageThe exterior paints market is expected to be the high growth area for atleast fiveyears into the future from now. This is the area that Asian Paints has entered nowwith its exterior emulsions. Snowcem is the market leader in this area with amarket share of 26% in the cement paints and 50% [15] share of the texturedfinish area.

If Asian Paints decides to takeover Snowcem, it would provide Asian Paints withtotal leadership in the total decorative segments market including the exteriorpaints market in its portfolio. It could also look at upgrading the customers from



Snowcem's cement paints to the more advanced exterior emulsions that it hasbegun offering.

The acquisition of Snowcem would also fit nicely into AP`s strategy of providingvalue added services, as they would be able to provide a complete solution forany customer, who approaches them

FUTURE PLANSAsian paints primarily plans to consolidate its dominant position in India bylaunching new products in line with the market developments in both decorativepaint as well as industrial coating segments. As far as product innovation isconcerned, it is looking at water based paints. The company nurtures an aim ofbecoming a top five decorative paints company in the world, in view of this, thecompany plans to constantly look for both organic and inorganic growthopportunities in existing and new markets. The rural sector also needs to belooked in thoroughly. They may need to reposition certain brands in the ruralmarket to achieve maximum impact. The company will also further exploreopportunities of building long term value in the Industrial coatings businessthrough alliances.

The company is focusing on further improving the operations of all of itssubsidiaries in India and abroad and has already launched E-Strides, an ERPinitiative through which all the overseas ventures are being covered for sharing ofglobal knowledge, best practices and better control on operations. Thecompany's objective is to be among the top three players in each market where itis currently operating or plans to operate in the future.

Global ForayingTo be amongst the top three, it needs to look into their global foray very carefully.



Many factors, which have made Asian Paints a household name in India, havealso contributed immensely in its global expansion. The company is known to bean innovator and has introduced thousands of colour shades for its customers tochoose from.

Also, it has been a market creator like in the case of exterior paints at a timewhen exterior paints used to be mostly cement paints. It has been following anaggressive marketing

strategy in India and this has helped it in entering and competing withmultinational companies in

global markets.

The company has continuously followed its vision - "Think Global, SynergiseRegional and Act Local" to drive its performance. In 1999, the company embarkedon an ambitious plan to emerge as one

of the top 10 decorative paint companies in the world. Once this goal wasachieved, the company

set for itself a much steeper target which was to become one of the top fivedecorative paint companies in the world. The company explored opportunities ofbuilding long term value in the Industrial coatings business through alliances withestablished global partners. All the strategies and policies of the company havebeen designed to achieve these goals.

To capture the global markets, it has been following the strategy of entering fastgrowing

markets with robust demand and low per capita consumption of paints. AsianPaints has especially targeted companies in emerging markets of Africa,Southeast Asia and South Asia, Middle East and Pacific region. In order toincrease the pace of globalization, the company has also focused on

acquiring international companies which have a widespread presence in theglobal markets like the acquisition



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Analysis of Asian Paints Integration of Supply Chain Management

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