Dabur is a Indian consumer goods company with interests in Oral Care, Hair Care, Skin Care, Health Care, Home Care and even in foods. From its humble first phase in the bylanes of Calcutta way back in 1884 as an Ayurvedic medicines company. Dabur India Ltd has come a stretched way today to become among the top companies. Dabur India Limited is the 4th largest FMCG Company in India. Dabur had a turnover of approximately US$ 750 Million (Rs. 3390.9 Crore FY 09-10) & Market Capitalisation of over US$ 3.5 Billion (Rs 15500 Crore). The company has kept an eye on new generations of customers with a variety of products that provide to a modern lifestyle, while supervision not to estrange past generations of faithful customers.
Dabur's network is in the form of star topology with 6 DAMA (Demand Assigned Multiple Access) links from Hughes Escorts Communications Limited(HECL). There are around 40-50 Time Division Multiple Access(TDMA) VSATs (Very Small Aperture Terminals), which are used for linking the distribution network. Then there is Virtual Private Network(VPN) connectivity involving Dabur's offices in Delhi and Mumbai, and the corporate office. This link will soon be unmitigated to other locations, also. There are some Radio Frequency links for connecting the local offices within a city. The choice of the network depends upon location and feasibility runs on multiple media. The company uses IDSN connectivity as a support for its prime connectivity. Astonishingly, contrary to the current trend, Dabur doesn't have various leased lines to hold up its datacom network.
Problem Faced By The Company Before ERP Implementation
For years, Dabur had been using Fox Pro based systems for handling logistics but as the network has grown the distribution pressure rises technology development was necessary. Fox Pro was a database in which each of the department likes sales, finance etc had a separate database for their respective departments. It was not a relational database. The company faced a lot of problem because this like data inconsistencies etc. It become necessary to integrate the fragmented distribution network for the benefit of the company. This was the time when Dabur felt the need to implement some kind of ERP system.
Erp Implementation in 4 stages till now
1st ERP implementation - Baan
Dabur implemented Baan's ERP system in 1999 for automation of the manufacturing process. This was the first ERP system implemented by the company in two of the major plants at Sahibabad and Baddi respectively. The server used for this was Alpha Unix servers and this was situated at the corporate office are used for Baan and around 200 concurrent users can login from both plants using fibre and PAMA VSATs in the remote Baddi plant. In Baan ERP system the key modules includes manufacturing, finance, intelligent resource planning, master production planning, costing and dealer planning. The various modules keep the track of the material as the inventory moves through the plant and they are synchronised to each other. The primary distribution plan becomes a very important element of the manufacturing system. The planning process includes one month's permanent Rolling Production Plan (RPP) and two month's rolling plan, based on a Rolling Sales Forecast (RSF).
Problem in case of Baan
The operation of the manufacturing system has been very difficult as raw materials for Dabur's products are mostly sourced from the unorganised sector where herbs and fruits and other natural recourses are procured. The other challenge was of extensive customisation which was necessary to meet stringent FDA regulations in the quality circle in Pharma product lines. Not only this, BaaN requires a central server which was also a problem for the company. To fit so various locations many of them situated in small and remote areas into a central processing system, Dabur needed a VSAT (Very Small Aperture Terminal) network for this. As with the majority companies, sales at Dabur peak towards the last 4-5 days of the month which leads to more load on the server. If the company were to depend on this kind of central server architecture, which would be associated through VSATs, the network would be enormously overburdened during every month-end. However, Dabur never required making the network a serious component in the automation of the outbound logistics. The company determined to go for an ERP solution that was Network Independent and it found that MFG/PRO could be run on independent servers at every location it was a good choice that suited its unique needs.
2nd ERP implementation MFG/PRO ERP
Dabur therefore initiated automation of the outward logistics system in April 2001 with its primary distribution system named 'Project Synergy', which involves implementation of the MFG/PRO ERP system. The MGF/PRO system was running in greater than a dozen Carrying and Forwarding Agents (CFAs) and mother warehouses all over the country. It had covered more than 90 sites in the main Distribution will be finished by 2002.
Implementation
Once it was decided that MFG/PRO it will be to handle outbound logistics then a core implementation team which comprised end users from different departments, like IT, sales, distribution and planning, finance and was set up in order to work. The deployment was made in four stages. In the first stage a requirement study was done here a model was developed. Dabur has five SBUs (Strategic Business Units), each with diverse needs in terms of the outbound logistics. Since it is a traditional FMCG company into family and healthcare products, pharmaceutical products, food products, which is a perishable products division, ayurvedic products for both the medicine and home segments. All these divisions have diverse requirements. The core team had its job cut out: It had to develop a common business model, which could cater to every segment at the same time.
Significant benefits were visible in locations where the ERP system had been implemented. These include:
Improvement in sales dispatches to the carrying and forward agents (CFA). The sales earlier were greatly overloaded towards the last week of the month with over 80 percent of sales taking place for the duration of that time which led to a number of trouble such as sales returns and cheque bouncing from 'pushed' sales to meet sales targets.
Improvement was seen in collections process also. Collections have recorded an upgrading of about 6 days and are more evenly spread over the month which leads to considerable saving on working capital locked up in out-bound logistics.
Reduction in sales returns and unsold stock inventory. Stocks in CFAs are visible to central distribution planners in saleable and un-saleable categories leading to better management and distribution.
Central management of 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.
Reasons : why the shifted to another ERP system (SAP)
By 2005 Dabur felt the need of maintaining two independent ERP systems for the company. They were facing some of the issues like there were still data redundancies and inconsistencies in the database system. Substantial amount of rework was essential in just data format translation between the two systems. It still did not provide a holistic picture and thus posed troubles in formulating a policy or taking business significant decisions. Maintenance cost of MGF/PRO was also very high. Dabur realized that it is not just the operational excellence it needed but in also needed decision support infrastructure and as a result of this the proposal of a solitary organization wide ERP implementation was planned in Dabur. So, with the help of Accenture, Dabur implemented strategic and operational changes by implementation of organization wide SAP core modules.
3RD ERP implementation - SAP (major change)
Migrated from standalone ERP systems - Baan and Mfg to centralized SAP ERP system from 1st April, 2006 for all business units (BUs).Dabur implemented a country wide new WAN infrastructure for running centralized ERP system. Setting up of new data center at KCO head office in Ghaziabad. Extension of Reach system to distributors for capturing Secondary Sales Data to collect near real-time pipeline information was done by 2004.Roll out of IT services to new plants.Dabur India Ltd. is no exception and realized it needed to perform better and make faster decisions in order to outpace its peers in revenue and profitability growth. To meet its goals, Accenture proposed that Dabur improve its supply chain management, sales and distribution capabilities and use IT as a strategic enabler for its business strategy. This included migration to a nimbler outsourcing model that would generate value through agility and support business initiatives and maintenance of its SAP ERP system. SAP was basically selected due to the extensive experience in India and it is used by its competitors also.
How Accenture helped Dabur
Accenture proposed that Dabur improve its supply chain management, sales and distribution capabilities and use IT as a strategic enabler for its business strategy. From an IT perspective, Accenture recommended a two-pronged strategy: migration to a nimbler outsourcing model that would generate value through agility and support business initiatives and maintenance of its SAP enterprise resource planning (ERP) system. To bring these initiatives to life, Accenture assembled a team of highly skilled industry experts, as well as professionals with extensive SAP design and implementation experience.
Implementing a new sales and distribution strategy. Accenture helped develop a comprehensive retail strategy that marked Dabur's first significant effort to identify key customer segments in urban and rural markets, customize sales programs for key accounts and reorganize Dabur's sales teams by one of four trade channels. There were some profit from these initiatives like increase in annual sales by 17% whereas amplify in profits by over 40% performance more operational effectiveness and cutting down of costs.
Operational Benefits
Impact
Lost Sales
-40%
Forecast Error
-53%
Full,on - time delivers
+7%
Rolling production plan adherence
+73%
Accenture supported this business approach with a lucrative IT solution. It has developed in-house over several platforms, which captured actionable information crosswise the national footprint of practically 500 distributors. In the area of product distribution, the team focused on bolstering efficiencies and rural market penetration and designed a channel-specific strategy for grocers, chemists, modern trade, wholesalers and convenience stores.
In developing a more effective sales program, Accenture paid special attention to how Dabur might improve service to Indian mega retailers, which are expected to account for more than 15 percent of consumer product sales by 2010. For this group of customers, the team established a new operating model that included a pricing architecture framework to aid negotiations, an activation strategy to guide tactical initiatives, and revised roles and responsibilities for all members of the trade field force. In devising this strategy, the Accenture and Dabur team optimized the company's distribution processes and internal logistics for mega retail customers, and put incentives in set to drive definite goals such as uniformity of sales in grocery stores, increased sales via wholesale channels.
4th ERP implementation SAP - APO (Current Scenario)
Automating forecasting: Dabur hence decided to automate the procedure to develop its forecasting procedure. The company was already running SAP ERP from 2006 and decided to put into practice SAP's Advanced Planner and Optimizer (APO).To ensure the accuracy of SAP APO, historical data was deconstructed to derive the baseline sales and impact of ATL/BTL inputs. Dabur has greatly benefited from SAP APO with improved business outcomes.
Project was divided into four different phases. The first phase was Diagnosis in which design and organisation structure was done. It also established the potential opportunity size and the business case. In the second phase the design of the supply chain took place. The third phase the actual implementation of APO modules took place. In the last phase the actuall running took place (april 2010). Once you have input the growth target the entire sales volume plan will me generated. All the other calculations are in real time like required capacity planning,markets where we can get more business. Then the system will automatically convert the sales forecast into actual requirements at the factory level.
Changes experienced in top line, bottom line and inventory turnover due to ERP implementation
Before the deployment, the lost sales which was earlier accounted to 6% were decreased to 3.75%. moreover the company's error forecast was also reduced from 85 to 40 percent and its forecast accuracy amplified from 25 to over 60 percent. Achieving this feat in just eight months was a huge achievement for Dabur. This would not have been possible exclusive of a business benefit-led move towards to the exercise moderately than an IT-led approach.
With the recent execution of ERP, the effectiveness of the distribution and logistics network is expected to advance more in the future. Consumer health division grew by 12.5%, that division has been impacted in the first quarter by the ERP platform changeover.
The Project
Solution
SAP Advanced Planner and Optimizer (APO)
Project Duration
Eight months
Benefits
Lost sales opportunities reduced from 6 to 3.75 percent
Error forecast reduced from 85 to 40 percent
Forecast accuracy increased from 25 to over 60 percent
Conclusion
A strong program management approach and an implementation partner having good business understanding and proven experience were other factors that served as catalysts.
