Industry Characteristics:

Paint is a mixture of four elements: solvents binders pigments additives Solvents give the paint a liquid flow while the binder binds it to the surface. Pigments impart colour and opacity to the paint and the additives give it special resistance properties. On product lines, paints can be differentiated into decorative or architectural paints & industrial paints.

The industry is raw material intensive. Of the 300 odd raw materials, nearly half of them are imported petroleum products. Thus, an deficit in global oil reserves affects the bottom-line of the players. The major raw materials titanium dioxide, phthalic anhydride and peutarithrithol constitute 50 percent of the total cost. Besides, this, there are other raw materials such as castor, linseed and soybean oils, turpentine.

Commercially, Paint is among the rather few commodities that may be classified both as an OTC products as well as an Industrial product. The selection of the paint needs to be approved by both the end client as well as the recommending authority the contractor, the architect, the painter or in some cases the shop keeper as well.

Al thought the manufacture of Paint falls under the Process industry segment (& hence the white paper for Chemicals would be applicable), the industry has its special characteristics that one needs to focus upon while planning & implementing an ERP

Special requirements of the Paint Industry that need to be factored in while designing an ERP for the Paint manufacturing company. Supply Chain related issues: Multiple Units of Measurement: In the paint industry, Finished goods are maintained in tins. Product shades, intermediates & other raw materials are maintained in kgs / tons etc. The packing materials are maintained in numbers. This obviously requires the ERP to manage inventory in multiple units of measurement. Damaged stocks management : Paint is usually sold in liquid form in plastic or metal drums / tins. Due to its dual characteristics of an OTC product as well as an Industrial product, paints are sold in decorative & attractive packaging through a chain of hardware stores & merchants. Further, the distribution chains & networks are some times long. These invariably lead to damaged drums / stocks. Most often, this stock is reusable & can be reused simply by repacking it in alternate containers. For the sake of profitability, the management of the damaged stocks plays a critical both in terms or value as well in terms or logistics. The organization needs to manage & monitor the quantity & value of its damaged stock. Repacking, although possible, is rather an expensive process. The ERP system needs to track the damaged stocks at the various ware houses, locations etc. Multi Locational ware housing & processing: Again, in keeping with its basic nature of a retail industry, products need to be close to be as close to the end customer as possible. The logistic requirements of the Paint industry require stocks to be maintained at various locations (ware houses, stock points etc). This obviously puts additional pressure on the supply chain as well as on Working capital management. Further, the need to maintain the stocks as semi finished goods adds that extra

work on the ERP & Supply Chain planning engine. Management & control of stocks across the value chain is an essential. Production Planning & Control: As in any manufacturing environment, the management & allocation of semi finished goods & intermediates is extremely important. This ensures minimum in process stock / inventory. The allocation of raw materials, intermediates, semi- finished goods & packing materials to specific production batches ensures against better inventory & production batch cost control. Keeping in view the dynamics governing the process manufacturing & the uncertainties of paint industry, production plan needs to be initiated either at the finished goods levels or the semi & finished goods levels. This is governed by the market demands & the availability of formulation in the system. Any ERP for the paint industry has to have this flexibility with respect to Production Planning. Central Monitoring & Control system: To ensure regional competitiveness & the inherent need in the industry to cater to regional & local demands, paint manufacturers have located manufacturing facilities at rather remote locations. In India, specific tax incentives provided to developing & backward areas have also contributed to the setting up of these plants. Although, setting up plants at remote locations provides greater cost (& tax) advantages, managing these remote locations poses a challenge of sorts. Often it is difficult to get senior / responsible managers to be stationed at these remote be the best. Often, these companies are forced to operate these plants with minimal managerial staff or staff of persons with lower managerial abilities. This inherently forces the companies to develop Centralized control systems that can be managed with minimum staff. As a matter of strategy, it is important to move essential activities such as

accounting, HR, Payroll, Planning, inventory planning, administration of discount structures, production scheduling etc to a centralized control system. To make matters more complex, it is often the experience that communication facilities such as telephones, internet bandwidth & such communication aids are poorest at these remote locations. Hence the ERP or management software needs to be robust to accommodate these challenges. Important transactions related to Production planning, Formulation definition, SKU Pricing, Inventory allocation, Materials planning etc need to have features that can be managed centrally & at the same time use minimum communication aids. . Reprocessing, Tinting & Repacking: Another activity that is critical in the business is the reprocessing & repacking of damaged or non-conforming stocks. As mentioned earlier, the management of damaged stocks plays a crucial role in the profitability of the company. Paint in most form is an emulsion of solvents, pigments, binders & additives. Often on long storage, the various elements separate. A simple act of high or medium speed stirring is essential to ensure homogeneity. It is rather uneconomical to transport tins & drums Further, a lot of decorative paints are maintained as brite stocks at ware houses. They need to be tinted with the right pigments before sending to the end client. leads to Besides, damaged stocks, there is also a high quantity of stocks that oftn becomes are has been stocked at ware houses The reprocessing of non-conforming products, damaged products, damaged packing etc is an important activity in the Paint Industry. This has been given special importance to in the Octopus-e ERP. Repacking: The management of packing materials damaged in transit etc directly adds to

costs of distribution. Thus re-packing not only needs to be managed effectively, it also needs to be controlled & constantly analyzed. Since often the packing material is procured from sub contractors locally, this analysis helps in the identifying the erring suppliers, transporters, etc. The Octopus-e ERP has a drill down feature that enables automatic analysis of these. Tinting: The management of stocks & tinting colors has been specifically treated in the Octopus-e ERP. Costing: In the paint industry, the production of all items - (intermediates, semifinished goods, finished goods etc is taken up batch wise. Hence the costs for various activities need to be consolidated Batch wise. The costs of various other activities - tinting, Re-processing, Re-packing etc are also consolidated batch wise. The Octopus-e ERP is designed exactly for this form of cost accounting. Costs of finished goods & SKU are dynamically compared versus the standard costs. This enables dynamic tracking of batch wise costs. Packing: The paint industry's business dynamics requires the maintenance of semi finished goods in bulk form. Finished goods packing is done based on the requirement of specific pack sizes. Hence often the sales forecasting / order booking have a direct bearing on the consumption of the packing materials. This special need of the Paint industry has been provided for in the Octopus-e ERP. Quality Policy: For the effective utilization of the various products (intermediates, semi finished goods), the availability of Quality / analysis reports of materials in

stock is essential. This batch wise maintenance of quality / analysis reports has been specifically provided for in the Octopus-e ERP Bill of materials: Keeping in view the specific requirements of the Paint industry, the Bill of Materials (BOM) has been designed in a multi level structure. Further this takes into account manufactured & bought out intermediates. BOM based on standard & specific gravity: Yet again, important for the paint & chemical processing industry. While defining the standard costs & bill of materials, the standard specific gravity is taken in to consideration. However, while allocating materials to a specific batch, the specific gravity of the materials in stock is taken in to account. Sales: The sales process in the Paint industry generally consists of various forms of schemes & discounts. These schemes / discounts may be based on quantity, value, pack sizes, products, shades & even customers. The Octopus-e ERP facilitates the creation of a schemes administration system that can be managed by the company directly & does not require programmers to constantly modify the programs.