Supply Chain Management

Project Submitted to

Sir Samnan
By Iqra Saeed Yasir Arfat Muneeba Sattar 91 59 69

Institute of Business & Management

University of Engineering & Technology

Lahore

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Executive summary
Supply chain is becoming core competency for most of the organizations as it helps reduce cost and save time.ICI and other paint industries also have developed supply chain structures but ICI is ahead of other industries in this sector due to having a structured and well established supply chain and good relations with their suppliers and buyers. ICI Pakistan manufactures and trades in a diversified range of products including Polyester Staple Fiber, Soda Ash, and Decorative, Refinish, chemicals and Industrial paints. The company also markets pharmaceuticals, Animals health products and seeds along with a range of imported industrial chemicals and seeds. Supply chain of ICI does not include separate segment for distributors. Wholesalers, Retailers and consumers also can take product direct from company with certain conditions. Main competitors of ICI are Berger paints and Master Paints. But ICI paint is leader and price setter in Pakistan paint industry as it provides quality products with consistency and in a timely order. Market share of ICI paints is greater as compared to Berger and Master Paints. For entrepreneurial purpose we decided to work on retail part of supply chain of ICI Paints (Decorative) as there are greater opportunities with less risk factor. In Lahore, Pakistan there is lot of construction going on so it will help new stores to stabilize in market in a short span of time. Financial analysis (CAPEX, OPEX, and payback periods) was done to practically understand the nature of business so that we can work on our plan in an organized way.

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Table of Contents

Acknowledgement----------------------------------------------------------------4 Part 1 Supply Chain Analysis Paint industry in Pakistan-----------------------------------------------------5 Introduction to company------------------------------------------------------6 Matrix chart --------------------------------------------------------------------7 Supply chain of ICI ------------------------------------------------------------8 Inbound logistics -------------------------------------------------------------8 Outbound logistics ------------------------------------------------------------9 Part 2 Entrepreneurial Description Retailing in ICI ----------------------------------------------------------------11 Target market ----------------------------------------------------------------11 Market size --------------------------------------------------------------------11 Financial calculations --------------------------------------------------------12 Overview ----------------------------------------------------------------------14

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Acknowledgement
We would like to express special thanks to our teacher Mr.Samnan who gave us the golden opportunity to do this project on the topic of supply chain, which helped a lot in doing research and we came to know about so many new things. We are really thankful to him. Secondly we are highly indebted to organization (ICI) for guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in completing the project. Lets not forget the people (retailers) who have direct contact with consumers, also provide their assistance in deciding how much budget to use for entrepreneurial purpose. Thanks to them for their support and help as well.

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Part 1 Paint industry in Pakistan

The paint industry was one of the first industries in Pakistan. Modern paint factories in Pakistan have adopted new technology and modern processes in manufacturing of paint. Today, we stand self sufficient in this vital section and earnings from export of paints and allied products are increasing, adding to the foreign exchange earnings of the country. Although the variety of paints runs into several hundred, there are certain classifications that can be helpful. These include decorative and general service paints, building paints, industrial finishes and special paints and the variety are growing. And today, different types of varnishes of a high standard are also produced and marketed, meeting demands that emanate from improvisation. Firms that are operating in Paints: ICI Paints Berger Paint Master Paints Brighto Paints Nippons

For our project we have decided to work on supply chain of ICI paints.

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Introduction
AkzoNobel:
ICI Pakistan was

acquired by AkzoNobel in 2008.AkzoNobel is largest global paints and coatings

company. ICI Pakistan manufactures and trades in a diversified range of products including Soda Ash Decorative Refinish Polyester Chemicals Industrial paints

The company also markets pharmaceuticals, Animals health products and seeds along with a range of imported industrial chemicals and seeds. ICI classified its paint business into three major segments 1. Decorative paints 2. Industrial paints 3. Refinish paints for vehicles ICI famous brands are: Dulux Paintex Maxilite Gidden Sikkens

Reason behind selecting this company for supply chain analysis

ICI Pakistan is one of the leading companies of Pakistan. It enjoys the trust of both the people and the government. With its diverse portfolio, ICI is providing training to large number of employees which they can use to enrich their jobs. ICI has promoted competition in paints industry which set the standards of supplying quality paint at affordable prices. And the supply chain of ICI paints is structured as compared to its competitors Berger, Master. We have selected ICI paints (Decorative) to analyze its supply chain.

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Competitors
ICI is the largest manufacture of paints in Pakistan. There are many competitors; competing with ICI in Pakistan, but their market share is very small as compared to ICI. Major competitors of ICI paints are: Direct competitors: Berger paints Master paints Indirect competitors: Tiles Wood peeling Wallpapers

Berger paints Pakistan

Berger paint Pakistan is offering its products since last 52 years. The Berger group has worldwide affiliations with company operation in 46 countries. Its head office is in Karachi, Pakistan. It has divided its products into four divisions 1. 2. 3. 4. Decorative paint Industrial paint Automotive paint Protective paint

Master paint industries

It has established itself in 1975. Its head office is in Lahore. It has acquired sound position in Pakistan paint industry. Its product range includes the following 1. 2. 3. 4. Oil base paints Re-finish Water base paints Wood master

Matrix chart Company Name ICI Paints Berger Paints Master Paints From this we can say that ICI is star in market.
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Market share (%) Above 50% 20-25 % 15-20%

Supply chain of ICI Paints

Supply chain of ICI paints is: Product (Paint) Company (ICI) Factory Wholesaler ---------------Retailer Consumer

Supply chain of ICI paints does not include distributors. It depends on wholesalers whether to distribute to retailers or direct consumers. ICI also deals with direct customers if the product quantity is in defined limits, for example with housing scheme (Bahria town, Eden house), but it is done with the condition of advance payments, but for dealer they also deal on credit.

Inbound logistics:
These are the activities concerned with receiving the material from the suppliers, storing these materials and handling them within the company. In ICI paints following manufacturing activities are performed. Charging Grinding Mixing Finishing Color matching Quality check Filling Printing

Factory:
Production unit of ICI paints is only in Lahore.

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Raw material import:

There are around 400 different types of raw material that are being used in the formation of final product. ICI paints imports raw material from many countries including USA, Hong Kong and Malaysia.

Inventory management:
ICI use SAP software for inventory management. There are built in function about suppliers and distributors in SAP.

Demand forecasting:
In ICI paints every region manages its demand and reports to production department. If ICI have to manage extra demand they have the capacity to meet that demand in 15-20 days. ICI paints avoid from Bull Whip effect by setting limits on dealers demand.

Outbound logistics
These are the activities concerned with distributing the final product to the customers. After the final product is being produced at ICI plants then it is being forward to the warehouses. ICI paints have built strong relationship with its dealers so that they can deliver maximum customer satisfaction. ICI continuously find about the best dealers and give them training. ICI paint is not having much numbers of warehouses in Pakistan. They have their warehouse for paints only in Lahore.

Wholesaling:
ICI paints have very strong relationship with their wholesalers, providing them best quality products in time with consistent behavior on credit as well as cash payment.

Delivery time:
With in Lahore delivery time for paints is 24 hours while its 3 days for all over the Pakistan. They export only to Afghanistan through Quetta.

Dealers of ICI:
Major dealers of ICI paints Lahore are: Chaudry paints Ferozpour road Madina paints Cantt. Modern Paints Ferozpour road Rang Sang Multan road
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 Lala Ji paints

Retailing:
ICI paints provides its retailers the liberty to buy product either from wholesalers or direct from factory. In case of factory, demand is set within limits and on cash basis.

Consumers:
Households, painters. interior designers, building contractors are usually the consumers of ICI Paints.

Comparison of Dulux with Robillac and Master

Here is the comparison of Dulux with its competitor Berger and master. As there are only two competitors who offered full range of products that could be compared with Dulux. Critical success factors Market share Product range Advertising Customer satisfaction Relative cost ICI Dulux Rating 4 3 3 4 3 Berger Robillac Rating 3 4 1 3 2 Master Rating 2 2 4 3 2

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Part 2
Retailing in ICI paints:
In retailing its easy to start business as compared to wholesaler or production as less investment is needed and risk factor is also less. But at the production or wholesaler level huge investment is required.

Target market:
Our target market will be small housing scheme and for houses that needed to be repaint, in Lahore region around Thokar Niaz Baig as lot of construction is going on there. There are many kinds of retailing such as specialty stores, convenience stores, discount stores, supermarket etc. But our focus will be on opening convenience store that will help our consumers to reduce cost and most importantly their time.

Market size:
For a small retailer there is enough market size in Thokar Niaz Baig and around to start business without spending too much.

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Financial calculations

1. Capital Expenditure (CAPEX)

Amount Furniture cost of installation of lights and fans Brokerage paid for arranging loans Computer Vehicle Total 50,000 15,000 35000 25000 500,000 625,000

2. Operating Expenses(OPEX)
Operating expenditure Purchase of inventory ( Paint) Rent on building Stationery Interest on loans Expenses for distribution Advertising expenses Maintenance of building and vehicle Salary of Employees Total Amount 400,000 15,000 2,000 2,000 10,000 30,000 5,000 30,000 494,000

3. Payback Period
Period Jan 2013 Jan-14 Jan-15 Jan-16 Jan-17 Pay back period Initial investment cash Inflow cash Inflow cash Inflow cash Inflow Amount 500000 50000 100000 150000 200000

Payback period

4 years

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Loan:
We will take loan of 500,000 from a bank say HBL. Payback of this loan with interest will be completed in four years.

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Overview of project
We started our project by analyzing the secondary data from online sources. After this we screened out the questions that needed to be asked in order to clarify the concepts of supply chain of ICI paints. Than we took the appointment from MR. Kashif Asghar who is Sales manager (Decorative) in ICI paints Lahore. We discussed all the questions about supply chain, inventory management, demand forecasting and also about entrepreneurial opportunities. He gave a very good response and supported us in an every possible way. According to that information we analyzed whole supply chain of ICI paints and found out that it is well structured as explained above. We also made visits to wholesalers and common retailers to clarify the entrepreneurial queries and problems.

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