Software

How Dabur transformed its supply chain

InformationWeek News Network, October 27, 2010

The supply chain transformation initiative is expected to deliver about six percent incremental revenue for Dabur

Dabur, India’s fourth largest Consumer Packaged Goods (CPG) firm, has seen robust growth over the last four years clocking a CAGR of 18 percent in net revenue and 33 percent in PAT. Despite this robust growth, the Dabur management felt there was potential to derive incremental growth of about
Rs 50 crore of potential benefits through supply chain efficiencies. Dabur believed there was substantial opportunity to enhance customer service, reduce working capital and reduce the cost base.

Since the company was running on high efficiency, it was a challenge for the management to further increase the company’s efficiency to improve its profitability and increase its bottom line. With help from IT, Dabur management captured the total opportunity potential from a supply chain exercise across the

different levers. It was observed that incremental revenue through lost sales could account for six percent revenue. Cost reduction was cited as an area where the company could become more profitable. Damaged goods formed about 10 percent of the existing spend. The company has implemented SAP APO modules: DP (demand planning) and SNP (supply network planning) and integrated them with some existing legacy applications.

The supply chain challenge

Dabur’s supply chain is far more complex than other FMCG firms in India given its diverse product portfolio:

  • More than 800 SKUs spanning  multiple shelf-life foods, personal
    care, home and healthcare products
  •  A fragmented and multi-tiered distribution network, more than 10
    plants, more than 40 warehouses and 1,500 distributors
  •  It also has a large fragmented front end; general trade has direct reach to
    1.5 million retail outlets and indirect reach to more than six million outlets;
    modern trade consists of B2B and B2C institutional sales
  • Seasonal products with a significant sales skew

To manage these challenges, Dabur innovatively used the APO capabilities
in forecasting and SNP by modeling several internal and external variables
for improving key performance levers. In addition, the program was supported by a well-managed KPI dashboard — which was supported by the IT system.

"Post deployment, Dabur has observed about 20 percent savings in stockist subsidy reduction and 10 percent spend in SLOB (slow moving and obsolete) and damaged goods"

- Anil Garg, General Manager - IT, Dabur India

 

Ever since the FMCG major reached out to new areas using BI or analytics, it
has seen an improvement in its market share. The initiative is expected to
deliver about six percent incremental revenue for Dabur, which is quite
significant, given it is already growing in double digits.

In terms of costs, Dabur has observed about 20 percent savings in stockist subsidy reduction and 10 percent spend in SLOB (slow moving and obsolete) and damaged goods. The company has seen an improvement of 8 to 10 percent in DIFOT (a measure of the delivery performance in a supply chain) to customers and 6 percent in incremental sales. With elaborate Excel planning being replaced by the solution, the planning team now actually does reviews, analysis, monitoring and followups.

Earlier, most of their time was spent in doing the planning manually. Post
implementation, there is job enrichment for the team in addition to increased
productivity. Supply chain being the backbone of FMCG companies, Dabur

believes the solution is delivering the need of the hour.

Dabur is a Diamond EDGE (2010) winner. The complete list of EDGE winners is published in the October print issue of InformationWeek (India)

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