A Review Of The FMCG Sector Information Technology Essay

Introduction

Products having an instant turnover and of relative low cost are called as (FMCG)FAST PACED Consumer Goods. Mostly FMCG goods are perishable in aspect. Examples of FMCG products are personal health care, household maintenance systems, food and drinks, pharmaceuticals etc.

FMCG sector in India is fourth largest sector in Indian economy and almost creates employment opportunities for around 3 million people in indirect activities. The total FMCG market is just about Rs. 1, 00, 000 crores and the expansion rate is dual digit and is also expected to expand in future with high growth rate

FMCG sector can be seen as a properly established circulation systems, low per capita ingestion, low operating cost and highly competitive between your planned retail and unorganized retail.

Company Background

Hindustan Unilever Limited which was earlier known as Hindustan Liver organ Small is India's biggest fast moving consumer goods (FMCG) company. They have it's headquarter in Mumbai, India and the worker strength is around 15000 and considering indirect job the count extends to 52, 000.

HUL distribution includes almost 1 million shops directly but shelf presence is in over 6. 3 million outlets i. e. almost 80% of the full total store in India.

HUL has a occurrence in more than 20 consumer types of home and personal health care and food and beverages, such as detergents, tea, shampoos, soups, jam, glaciers creams etc. HUL has many brands in the most respected list.

HUL Supply Chain

HUL had 23 office buildings 2 research centre, almost 1, 000 suppliers and 7, 000 stockist and almost 1 million shops, 100 factories, 13 sales branches, 121 warehouse depots and 93 processing sites.

So the integration between all the departments of the business the suppliers, distributor the stockist was a major problem for the company.

HUL Supply Chain

The Hold and forwards agent (C&FA) distributor designs the distribution as per the demands increased by the stockist and these stockist received 60-90 times credit period for the merchandise.

HUL had a need to manage the differing needs of the resource chain and wanted to achieve high penetration of the distribution channels as the merchandise were frequently purchased and of small value availability near to the consumer through this distribution network was an critical factor.

The world wide web current asset according to the capital spent was almost 44 percent and the inventory was 24 percent of the total divisional turnover from the personal care products and 20 percent of the turnover from detergents which indicated that some changes were needed to the system.

HUL ERP system

HUL objectives for implementation of ERP

The initial selection was mainly motivated by the company's requirement to integrate the supply string and also to the re-engineering needs.

The main target was to reduce the route inventory in its circulation network and also standardizing the business enterprise processes over the business units. MFG/PRO acquired many good supply management tools and helped in synchronizing the distributed operation, and therefore was picked by HUL though not being the market leader.

Major modules of MFG/PRO

MFG/PRO Distribution

MFG/PRO Manufacturing

MFG/Expert Financial Services

Purchasing

Sales Quotations

Sales Purchases and Invoices

Inventory & Physical Inventory

Sales Analysis

Configured Products

EMT (Business Material Copy) and EOP (Business Operations Plan)

Product Structures

Routing/Work Centers

Formula/Process

Work Orders

Repetitive

Advance Repetitive

Shop Floor Control

Quality Management

Forecasting/Master Development Scheduling

Material Requirements Planning

Capacity Requirements Planning

Distribution Requirements Planning

General Ledger

Accounts Receivable

Accounts Payable

Multiple Currency

Cost Management

Cash Management

Fixed Assets

Global Taxes Management

HUL after MFG/PRO (ERP Collection)

The initial final result of the machine was the workflow automation of the complete supply chain and a solid integration between the business processes and business units.

The stock replenishment circuit reduced greatly from 14 days to 3. 5 times as the manual planning was replaced by automatic planning, which helped in reducing the inventory cost.

The current possessions regarding the capital invested was reduced to 8% and the inventory held was to right down to almost 5-6%.

The channel inventory in the syndication network was reduced as the demand forecasting could be achieved on a weekly-daily basis, and also the level of finish good stock at distribution centre was reduced from 3 weeks to at least one 1 week.

HUL through its ERP infrastructure got e-commerce initiatives to extend the business through the net linking it s all lovers, distributors, suppliers and customers. This technique spanned to almost 240 sites related to supply string and it handled some efficiency such as planning, order handling, invoicing and many financial tasks throughout the complete enterprise

HUL distribution network after the execution of the ERP system

Key Issues with the existing ERP

Modern Trade Challenges

The business infrastructure and the existing legacy system were not able to meet the process ability requirements and the transactional requirements that have been because of the introduction of modern trade practices.

As with the emerging markets the clients required the response time of their purchases to decrease and the problems of product supply in market were nurturing certain issues to the existing system.

The biggest problem to the company was the syndication of the products diagonally throughout the country at right time, in right amount and at the right place. The company needed to target service levels higher than those followed on the market and to improve the supply chain to be a leader on the market.

Business Optimization Hurdles

Consolidation of branch offices and the warehouse was the original area of the strategies designed for business marketing. This needed the business enterprise systems to be streamlined and this led to recognition of the limitation of the existing ERP system.

The company also experienced the importance of integration and cohesive communication links with the external entities as all improvements of business process and offer chain flow acquired external entities as an intrinsic part. But this integration was difficult with the existing ERP system.

The company used an in house developed e-business system mainly to manage all replenishment and order fulfilment process, and it was done by regular exchange and synchronization of the info between the company and its own distributor. But these distributor had their own systems so integration with then led to compatibility issues. The e-business collection developed in house was not so scalable according to the changing business needs.

Further the company used a typical centralized distributor management system to use extended supply chain and so the businesses of the distributor needed to be highly included with the existing ERP system therefore the new ERP system should be backward compatible and should be able to combine properly with the trunk office application as the company wanted to leverage the prevailing system in future too.

Process Centric Collaboration

HUL determined in 2004 to revamp its existing IT system with SAP and it was based on the Unilever's decision to put into action SAP as it standard IT solutions company and HUL wanted to use all rich top features of SAP for venture solution and its own great experience in FMCG sector and which would in turn help to align themselves with the global visionary strategy. This technique was targeted at mainly

SAP Task Objectives

To optimize the business operations and also to simplify the management of the IT systems.

To consolidate the procedure internally and over the extended supply string.

Preserving their investment in the legacy cash to order management and the inventory systems for the existing business partners.

Integrating with the IT infrastructure of the business enterprise partners irrespective of their existing systems.

Implementation in Phases

Phase 1

SAP ERP Central Component

5. 0, SAP NetWeaver PI (Process Integration)

SAP Solution Manager

SAP NetWeaver Portal

SAP SCM (Resource Chain Management)

SAP NetWeaver BI (Business Brains)

SAP NetWeaver CE Structure Environment

Phase 2

SAP CRM (Customer Relationship Management)

SAP Advanced Planning

SAP Transport Planning and Vehicle Scheduling

Optimisation Creation Planning and

Detailed Scheduling

Key Benefits after SAP Implementation

It helped in standardizing and streamlining the business enterprise operations across its global functions which accelerate business performance and simplify the IT systems.

Process centric cooperation not only internally but throughout the worthiness chain including suppliers and end users.

Exchange of data and information between multiple programs request with the partners IT infrastructure.

SAP NetWeaver Website has substituted existing e-business system and helped in customer collaboration and they have abilities to cope with the changing needs of the market.

Quoted Statement

"We have been happy with the results. With SAP NetWeaver PI, we've finally streamlined, advanced and integrated our process capacity. This goes a long way in enhancing HUL's capacity to meet up with the demands of the present day trade, "

KS Arunkumar, IT Group Director, Hindustan

Unilever Limited

Conclusion:

The FMCG sector has been an early on adopter of the ERP system and deals if we consider the S-Curve. It has taken about a radical change available workflows with IT initiatives in it. The data and information management has become an easy process when compared with the legacy system.

Using ERP we can rationalize the cost drivers across the whole supply string, including insight costs, inventory cost, syndication cost and manufacturing cost.

ERP execution helped in boosting relations with the business lovers and creating value for the client.

A successful ERP execution can give an advantage over the rivals and with the changing market needs and would like proper technology execution in need.

ERP implementation isn't just for bettering the performance of an corporation, or increasing ROI but it's an integration of the existing system with newer solutions for sustainable business development.

As the margin per product is very less in FMCG sector the margin lies in reducing the cost at each stage of the value chain which may be achieved using such technological implementation.

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