Crunch Time

By NewsDesk Feature,Supply Chain 10 days ago Replenishment Manager, Raviraj Rodrigues and National Distribution Manager, Sanjay Mukherjee, manage the supply-chain of Britannia Industries Ltd. How do they clear the roadblocks in supply-chain while ensuring replenishment continuity? Jayashree Mendes follows the trail. Freshest fresh is a catch line often seen in advertisements. But I got a taste of it when offered a piece of cake from the communal jar at the Britannia office in Bangalore. Soft, fresh, with the aroma still sealed in. It came out of our factory only yesterday, says Raviraj Rodrigues, Replenishment Manager, Britannia Industries Limited. This is how we want our products to reach consumers. Although most products (biscuits, cakes and rusks) have a shelf-life of three to six months, we want our consumers to taste the goodness of fresh products. The supply-chain function of Britannia hinges on a single theme: Delivering fresh stock to consumers. It is also the reason it is termed as the Supply-Chain of Replenishment. For administrative purposes and to cater competently to the vast Indian market, the company has two functions within the supply-chain Planning, overseen by Raviraj Rodrigues, and Logistics run by Sanjay Mukherjee. Right Manufacturing As an FMCG, Britannias call is to deliver the right products at the right cost, maintain price position vis--vis the competition, ensure freshness of stock, and keep inventory minimal. Considering that the products are low margin combined with scale, the company has tailored its supply-chain to be flexible and responsive to fluctuations in consumer demand. Britannia follows a policy of local sourcing, and a weekly production schedule. The production plan is arrived at by looking at sales of the previous week and upcoming trends, a weekly task for the replenishment team. The replenishment model starts when the customer demand is recorded. Though we conduct a monthly demand planning exercise, it is done with a view to understand trends for the base product groups. Biscuits have several groups. So demand planning tells me whether the glucose biscuit is selling better or the cookie or the cream biscuit, says Mr. Rodrigues. Mr. Mukherjee adds, To ensure a robust replenishment system, we need to understand the trends. Trends are the shifting consumer preferences. While glucose biscuits were a rage a few years ago, cookies are now popular. So we scale up our capacities accordingly. Last year, we launched the diabetic range of products. This is an urban trend. For snacking, we have Time Pass toasted snack and Nutrichoice Thins. We have to juggle manufacturing and inventory according to trends. The marketing research team plays an important role into gauging consumer insight, collecting data and works out the way consumer preferences are shifting. Based on those trends, Mr. Rodrigues anticipates the areas where the team needs to build manufacturing capacities. An error to perceive trends correctly could have hazardous consequences as building capacities for any particular brand takes about nine to twelve months. In the last couple of years, the company has

entered into new opportunity spaces such as Britannia Healthy Start range (which includes Oats & Ready to Cook Breakfast), Choco Decker (Biscuit enrobed in chocolates) & Gourmet Cheese, and has along the way built capacities. Replenishment also demands that the company does not retain inventory for more than seven to nine days at warehouses. Currently, it is now averaging between 35 and 38 inventory turns a year. When I track my product freshness, it should be around 7 days at the depot, and another 45 days at the distributor, Mr. Rodrigues adds. Demand And Supply As with other aspects of its supply-chain, Britannia is constantly evolving its own tried and tested methods. Currently, it is in the process of further improving agility to market. Mr. Rodrigues says, For the present, we plan a rolling cost with the marketing and sales team. They submit their business plans along with a growth agenda. That gives us the trends for the next couple of months. The replenishment team then arrives at a sales forecast for the next quarter. The numbers are then used to gauge existing manufacturing and supply-chain capacities. This understanding plays an important role as the right manufacturing catering to the needs and requirements of the consumer are paramount for making the top-line. An accurate demand planning exercise translates into correct manufacturing. The complexity of the manufacturing lines does not permit the company to change processes at the last minute. We need to choose the lines from where any product will be manufactured, then know the kind of machines that will sit on those lines and this changes with the type of product. Line complexities are reflected in the product of choice, says Mr. Rodrigues. Converting a line that manufactures one product type to another takes a decent amount of lead time, as this includes ordering equipment, setting it up and changing the line layout. So it is not surprising that the company stresses on gleaning trends from the market for its demand planning. Demand planning is not for the purpose of accuracy, avers Mr. Rodrigues. There is a base business you understand in terms of how products are selling, and there are seasonal peaks. Accurate demand fulfillment is about creating agility in the system, he adds. Mr. Rodrigues compares demand fulfillment to how a milk supplier would rotate his inventory based on consumption patterns. As a seller, he has a fair idea of how much milk he can sell per day. So he works out an agile system to finish off his inventory for the day, while managing the fluctuations in demand-supply pattern through inventory rationalization, he adds. Region-wise Strategy Mr. Mukherjee says, The entire system rotates round our policy of quick delivery from factory to shelves so that we keep minimal inventory. This is achieved through our 50-plus manufacturing locations across the country. The fragile nature of the products proscribes products travelling long-distances and be restricted from frequent loading and unloading. For this reason, the company has also spread out supplychain operations across five regions: North (headquartered in Delhi), West (headquartered in Mumbai), East (headquartered in Kolkata), South 1 (covers Andhra Pradesh and Karnataka; headquartered in Hyderabad), and South 2 (covers Tamil Nadu and Kerala; headquartered in Chennai). Mr. Rodrigues says, The main supply-chain division sits in Bangalore with the regional supply-chain structure reporting to us and passing on regional knowledge. The idea of breaking down the South region was to aid concentration. Britannia views the Southern market, with the largest demand, mature as compared with other regions. The maturity

of the Tamil Nadu and Kerala region and the huge geographical spread of Andhra Pradesh and Karnataka levy a certain obligation in catering to it fittingly. To avoid constant handling and long-distance travel, not only does Britannia manufacture and sell region-wise, but also believes in quick and local sourcing. Certain raw materials are sourced from a central point to get economies of scale. But we believe in manufacturing and serving our customers from within the regions we are based in, says Mr. Rodrigues. Fighting The Flab Serving within a region confines Britannia to use road transportation for delivery to its warehouses and its direct customers. Mr. Mukherjee says, We have strategically decided to use road transportation as the main mode, since it is faster, more flexible than any other method and cost effective. It also gives us an opportunity to cover larger territory and sending the goods directly to the larger distributors. In such a delivery kind of scenario, you cannot use anything but road. The logistics team of Britannia covers end to end transportation starting from primary and secondary transportation, warehousing, and front end customer order servicing. Simultaneously, the corporate has sought to achieve cost rationalization in transportation. It has done this in three areas. For primary transportation and in terms of truck utilization, it uses large trucks thus bringing down the Rs/per kg cost. Truck utilization is an initiative the supply-chain measures daily across regions. Since we are paying for a full truck, we might as well carry fullload. Our product has a high volume to weight ratio and hence volume metric utilization will continue to be an important focus area for us, says Mr. Mukherjee. The company has recently begun the process of sending goods by containerized transport for long distances. Deals are negotiated with transporters for a period of one year. Britannia screens transporters through online (reverse auction) or offline. Mr. Mukherjee adds, A mix of both helps us to check out local parties with a ready fleet and develop them with right truck types. Vendor development is undertaken at regular frequency, and it has helped us to bring down our transportation cost significantly. Right strategy of routing with optimal truck sizing is the key to improve serviceability at optimal cost. He adds, Faster truck turnaround is the key to achieve highest level of warehouse productivity & control transportation cost in long run. The third area it has focused on is direct dispatches for the large volumes thus eliminating warehousing and storage costs and reducing primary transportation costs. For achieving cost efficiency, Britannia has formed a cross-functional team who look at various avenues of taking out cost from the system. The team runs multiple projects by coordinating with the various departments. The most recent ones are increasing share of direct dispatches, and remapping of distributors based on distances. Directly to Customer The products flow path runs from factory to mother depot or child depot depending on the lane frequency. With the new initiative of direct dispatches, goods from the factory are sent directly to the authorized wholesaler/distributor or retailer. The idea is to reduce inventory at the warehouses and replenish directly to the distributor. At the warehouses, Britannia prefers to go with box-stocking. The regional warehouses service to a particular location and some could even double up as a mother warehouse. Britannia also applies consolidation of SKUs in metros. Inventory consolidation has helped the company reduce inventory levels, while achieving cost-efficiency in transportation. But the aim is to reduce goods in transit and shuffling it from warehouse to depots.

Depending on the region, the company prefers to work with Warehouse Service Providers (WSP) with local expertise. They are then trained by an in-house training team. Mr. Mukherjee says, Roping in large reputed WSPs may not always be the best option. We have been working with the same C&F agents for years who understand the business dynamics better. However, in certain metros where the operation is complex we are open for considering professional 3PLs who will be able to bring in desired expertise to manage the operation. Given its current product mix Britannia prefers to use semi-mechanized warehouse handling equipments. The company stresses on being environmental friendly and ensures use of equipment is restricted to manual trolley or a hydraulic pallet trolley. However, systems are in place for faster product identification, layout design, efficient picking & put away. IT System And Distribution The IT system that runs Britannias entire system is SAP. The software is connected across manufacturing to various departments to warehouses and distributors, though with restricted access to each. The replenishment and distribution begins only after the distributor has uploaded data. Since its more of a pull strategy, stocks to the distributors are replenished only on the basis of what has been sold. Mr. Mukherjee says, Every morning, the warehouse runs the system to generate demand for the day. Based on the stock availability with the distributor, the software figures out how much they need to replenish. If If the distributor needs to maintain a stock norm of 100 cases for an SKU and has a closing stock of 70, we replenish 30 cases. So how did the distributors take to installing the software? Initially we did meet with resistance. We wanted visibility so that replenishment can be accurate. That way we eliminate stock-outs or overstocking. Our front-end distribution has achieved crisp collaboration through SAP. Now about 95-97 percent of our distributors use the software, says Mr. Mukherjee. The software Udaan is inter-linked to SAP at the back-end. The integration of the IT system has helped Britannia to view the distributors orders at the company level. The Replenishment team culls out the stock status, and decides on the SKUs that need to be sent across. The logistics team is responsible for allocating the trucks to deliver. Plans are then issued to the transporter a day in advance. The complete IT integration has enabled company officials to acquire a pulse of sales in real time. Mr. Rodrigues says with a quiet pride, From my office I can see sales of distributors in Vijayawada or Dehradun. I know the geographies performing well and where to build stocks, the pressure points in those locations, and what stocks are nearing expiry. Mr. Mukherjee, on the other hand, looks at routes and scans for new ones to ensure more movement. The marketing team can look at places where products are not selling as per expectations and rectify it. So our entire process is ensuring better agility to fulfillment and ways to streamline the demand planning process. Retail And Fill Rates For modern retail Britannia has a separate team sitting in the executive office, also a part of the replenishment team. The key focus in modern retail is fill rate. The modern trade team coordinates with the replenishment of the logistics team to ensure that fill rates are met, adds Mr. Rodrigues. They are also responsible for bar coding, product listing, promotions, and kitting. Revamping of the 200 SKUs is a continuous process. With Britannia on the cusp of launching more products, including its dairy business, there is a regular increase in the number of SKUs.

Future Of Supply Chain Mr. Mukherjee is excited about the future for a supply-chain professional at Britannia. The company is planning a transformation in terms of products, which will have a cascading effect on the supply-chain. With volumes growing in double digit, capacity in terms of manufacturing units, depot sizing, or transportation network will also rise. The supply chain department will be one of the most crucial department and in the limelight. The key function for us will be delivering the products at the right cost. We are not talking about the least possible cost, but optimized cost, he adds. The growth is also seeing a consolidation of manufacturing operations and warehousing operations. Post GST, this should be complete. However, there is still work to be done. There will be constant pressure on cost. So how can we deliver the right product at the right cost? The food and commodity business is going through a cyclic process. In that kind of situation, whats a better way to service and how do we do it more cost efficiently? How do we process our order fulfillment better? How do we structure our production processes to make it more agile? How do we sequence runs day by day to see that we have minimum disruption in changeover but yet dont have inventory buildup? How do we manage handling process in the factories and warehouses so that damages come down because thats a big component? How do I ensure freshness? How do we ensure stocks at minimum inventory throughout the supply chain? To answer all these, the company is continuing with its benchmarking in the area of delivery processes and cost to service the customers. I left them with that.