Analysis of Asian Paints integration of Supply Chain Management

Published:

In this paper, we have analyzed the Asian Paints strategic decision of being a superior technology driven company to achieve a competitive edge. The focus on technology is visible in various decisions taken by Asian paints namely in harnessing the powers of state-of-the-art supply chain system using cutting edge technology to integrate all its plants, regional distribution centres, outside processing centres and branches in India. Asian Paints is the only company in India to have integrated Supply Chain Management (SCM) Solution from i2 Technologies, and Enterprise Resource Planning (ERP) solution from SAP.

Introduction - Paints Industry & Asian Paints

India's paint industry can be classified into decorative paints, which account for 75% of the market, and industrial paints, which make up the remaining 25%. Asian Paints is India's largest paint company. The leaders in the organized paint industry in India are Asian Paints with over 40% market share, Kansai Nerolac (20%), Berger Paints (19%) and AkzoNobel (12%). Asian Paints is a market leader in the decorative segment while Kansai Nerolac dominates the industrial and automotive segment. Asian Paints is a market leader in the decorative segment while Kansai Nerolac dominates the industrial and automotive segment [1] .

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Asian paint is ranked at No 10 among the top Decorative Coatings Companies in the World. Asian Paints and its subsidiaries has operations in 22 countries across the world and 27 paint manufacturing facilities, servicing consumers in 65 countries.Asian paints was started by Champaklal Choksey, Chimanlal Choksey, Suryakant Dani and Arvind Vakil as "Asian oil and Paints company" .Within three years, their turnover reached 3.5 lacs. In April 2009, it reported its turnover for year 2008-09 as Rs 5463 Crores [2] . Asian Paint is listed in Bombay Stock Exchange [3] and in National Stock Exchange [4] .

The three main promoters of the company are the Dani, Choksi and Vakil Families.Out of the 14 member board of directors, 7 belongs to the founders family [5] . Mr Aswin Choksi is the chairman of the board of directors and Mr P.M. Murthy is the MD and CEO. In an interesting decision, Mr. Murthy was asked to come out of retirement and run the company as CEO in April 2009 [6] .

Asian Paints aims to become one of the top five Decorative coatings companies world-wide. They intend to achieve this through alliances with established global partners [7] .

One of the main issues with company could be that it has to compete with the same established global players in the international market with whom it has alliance in domestic market.

As far as the social issue are concerned All the paint plants have achieved 'zero industrial discharge' capability.

Asian Paints product lines

Ancillaries: Primers, Filler strainers and wall putty

Automotive: for automotive application

Decorative paints : Walls, metal and wood surface

Industrial: Protective coating, floor and road coatings

Ancillaries

Wall Primer

Primer

Wall Putty

Redoxide Oil Primer (Rust Protector)

Thinner Melamyne Brushing

Wood Stains

Knifing Paste Filler

Exterior Sealer

Wood Filler

Floor Colour

Asian paints PPG

Deltron

Delfleet

2K Nexa Autocolor

Decorative Paints

Royale

Emulsion

Wood finish

Utsav

Industrial Products

Protective Coatings

Floor coatings

Powder Coating

Road Marking

Phthalic

Resource Based View of Asian Paints

Resources in Management

Planning and Controlling

Strategic Planning

Vision: Asian Paints aims to become one of the top five Decorative coatings companies world-wide by leveraging its expertise in the higher growth emerging markets. Simultaneously, the company intends to build long term value in the Industrial coatings business through alliances with established global partners.

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The diversification in terms of products has already been covered.

Internationalization:

The international market strategy of Asian Paints is to mainly enter the high growth emerging markets. For this they have developed an emerging market business model. As per this the following steps are followed

Introduce new products suited to local needs

Introduce and continuously strive improve the technology aspect

Focus to improve operations especially supply chain for maximum efficiency

Corporate Policy:

As per the Asian paints corporate philosophy, the following values are prescribed

Satisfaction of the spirit of the law through ethics in business

Full transparency in all the workings

Truthful communication regarding how the company is run

Simple and transparent corporate structure driven by the business needs

Establish an efficient structure to manage the company`s affairs

SWOT Analysis

Organization

Strategic Planning

AP has acquired short-term competitive advantages by using its distribution strength and logistical efficiency in order to raise the Cost of doing business for all its competitors to attain this advantage.

The advantage is short-lived and ultimately imitable.

Moreover, AP has established such an extensive network that getting incremental advantage would be very difficult.

Futuristic approach should be gaining competitive advantage through channel control or occupying mind space.

Organizational Structure

Depot

Regional Office

RDC

Plants

Head Office

DM Office

Fig. 1 Organizational Structure of Asian Paints

Continuous line: flow of instruction/authority

Dashed line: flow of information

Group Subsidiaries

Apco Coatings is a subsidiary of Asian Paints in the South Pacific islands. Asian Paints operates in Australia, Fiji, Tonga, Solomon Islands and Vanuatu under the brand name of Apco Coatings.

Asian Paints Industrial Coatings Limited has been set up to cater to the powder coatings market which is one of the fastest growing segments in the industrial coatings market.

Over the years Berger expanded its operations across oceans, to cover numerous geographies. In 1994, Berger units were brought under the single umbrella of the holding company 'Berger International Limited (BIL)' with headquarters in Singapore, which was also listed on the Singapore stock exchange. In November 2002, BIL became a part of the Asian Paints Group. Today, the name of Berger is synonymous with quality and innovation. BIL has presence across three regions viz. Middle East, Caribbean and South East Asia.

Founded in 1979, SCIB Paints today is a reputed name and ranks amongst the top five paint companies in Egypt. SCIB Paints became a part of the Asian Paints group in August 2002.

Asian PPG Industries Limited, a joint venture between Asian Paints (India) Limited and PPG Industries, Inc. USA with 50:50 equity sharing was established in March 1997 with the objective of providing solutions to the paint requirements of Indian Automobile manufacturers. The joint venture brought together two leading companies with strengths in technology, manufacturing and customer insight.

Taubmans Paints Fiji, the fourth largest paint company in Fiji, became a part of the Asian Paints family in September 2003. Taubmans Paints is the dominant player in the project sales segment in the country and is a leader in the neighbouring Samoa Islands. It has two manufacturing facilities, one in Suva (Fiji) and the other in Samoa.

Manufacturing/Operations factors

Size advantage in relation to competitors.

Finesse in production planning ,scheduling ,matching with marketing requirements

In-house production -outsourcing -high reliability suppliers - superior quality assurance.

Four production location -spread benefits

Information Technology

Asian Paints, at a very early stage of its growth, recognized the importance of IT and how it could use the technology to its advantage. In 1983, it was the first company in India to use computer technology on its shop floor. The use of computers provided an automated way of generating details of dispatches to the depots. AP also invested in branch computerization which helped zonal distribution centers to get daily stock position levels. This information was tracked and analyzed to determine the performance of the dealers, thus helping forecast sales, take corrective actions in case of low sales and incentivize the high performing dealers. Also, around 1994, Asian Paints installed terminals which connected factories to depots and helped in accounting and planning procedures.

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Asian Paints was also one of the first paint companies to use Supply Chain Management (SCM) and Enterprise Resource Planning (ERP) software for streamlining and automating its processes. It selected the SCM solution offered by i2 Technologies and later also started using SAP's ERP solution, much before other companies adopted similar solutions. This helped the company to connect to all their vendors and suppliers.

One of the biggest advantages of implementing these solutions was the accurate demand forecasts - this helped them bring down inventory stock costs and working capital costs. For e.g., white color was always in high demand, so these was always kept in stock. The Retails outlets could blend the whites with other tints to meet the requirements of customers. Warehouses that were situated nearby used to supply the requested paints within a day. This helped minimize supply chain inefficiencies. It is estimated that these initiatives gave AP an estimated savings of INR 100 million, 25% of which came due to reduction in finished goods inventory.

Research & Development

At Asian Paints, Research & Development has played a significant role in the growth of the organization. The company has continuously invested in R&D. The entire decorative coatings portfolio for the Indian market and for overseas ventures has been developed in-house. Our technologists not only develop new products and improve upon existing formulations; but also act as a pillar of support to other functions, viz

Supports Manufacturing in process cycle time reduction & improves productivity by alternate / break through processes

Provides solutions to environmental issues by minimizing waste at the time of generation and also in recycling

Aids Marketing in providing technical tools/USPs to demonstrate and push new products

Support Materials by providing new Raw Materials as alternate to current one to give them negotiating power and also alternate vendors for supply chain flexibility

It consists of 140 strong R&D team consisting of 7 doctorates and around 115 qualified scientists, has always backed the company's business plan and demands of the market place. Asian Paints' R&D team has successfully managed to develop High-end exterior finished and wood finishes in-house.

Supply Chain

Asian Paints has harnessed the powers of state-of-the-art supply chain system using cutting edge technology to integrate all its plants, regional distribution centres, outside processing centres and branches in India. All the company's paints plants in India, two chemical plants, 18 processing centres, 350 raw material and intermediate goods suppliers, 140 packing material vendors, 6 regional distribution centres, 72 depots are integrated.

The supply chain runs through a wide spectrum of functions right from materials planning to procurement to primary distribution. It has played a pivotal role in improving operational efficiencies and creating agile procurement, production and delivery systems. It has also enhanced the flexibility of operations, lowered output time and reduced delivery costs, while improving customer-servicing levels and profitability.

The Supply Chain Management is backed by IT efforts that help the company in demand forecasting, deriving optimal plant, depot and SKU combinations, streamlining vendor relationships, reducing procurement costs and scheduling production processes for individual factories.

Licensing of Product

Asian Paints Ltd has put in place a new business strategy to generate additional revenues by licensing out its brands and technology. As part of a massive review of its global business, the company has taken a re-look at its operations across all its plants. As per the new business strategy, Asian Paints out-licensed the brand name and the paint manufacturing technology. The company licensed out its brand and technology to PT Abadi, a leading paint company in Indonesia also. Asian Paints also licensed its technology to Berger Paints, Pakistan.

Merger & Acquisitions

Asian Paints (India) Ltd acquired 50.1 per cent stake in Berger International Ltd (BIL), a holding company incorporated in Singapore. BIL has no operations in India in 2002.

As part of its strategy to transform itself to a global player, Asian Paints acquired Taubmans, promoted by Axo Nobel, for $1.42 million in 2003. The acquisition increased the market share of Asian Paints to over 50 per cent from the current 40 per cent.

Asian PPG bought ICI India unit for 520 million rupees in 2007 expanding its presence in India. The company became become the largest player in the auto refinish (paints) market in India.

Organization & Environment

Customer Focus

Over the last 10 years, the average Indian customer has become more involved in the painting activity. AP realized this earlier than its competitors and devised marketing strategies to develop its brand image in the customer's mind and hoped to convert this increased 'mind share' into 'market share'. This was done in two ways; one was to explain the advantages of their products directly to the customer and offer them more services. The second was to improve AP's brand value and image among customers.

Increasing product awareness

This strategy was aimed at helping the customer in making the right choice and in the process of doing that select AP products. A few key initiatives taken by the company are explained below.

Color World Stores: These were specialty AP stores which had an in shop 'Shade Display Unit' which displayed over a thousand unique shades along with ready-to-use combinations. Customers had the advantage of seeing how their rooms would appear in those colors before they bought the paint. Asian Paints worked with academic institutions in India and kept the Indian customer in mind while designing these shades. An interactive computer system allowed the customer to change the colors and select the one they liked. Also, these stores gave the customers shade strips, on which the colors selected by the customer were printed by an automated paint mixer machine. Customers could take away these strips back to their homes and see if the color suited the room. There are about 15000 such stores and machines across India and the company believes that a substantial amount of sales will be coming from these stores.

Color Store: AP recently opened its flagship store in Mumbai. The store, the first of its kind in India does not sell any paint but sells a concept of a lifestyle to the customers. The store was inspired by 'Holi', the Indian color festival and provides a complete solution to customers including help in selecting the colors based on customer's inputs, volume and price estimates and also includes a home painting service. This has a direct impact on the customer's minds who will then buy paint from dealers. By customizing the colors for the customer, in a way AP is locking the customer as the customer may not get the same color/shade from a competitor. This store was recently awarded the 'Store of the year' by the Retail Design Institute in India.

Asian Paints Home Solutions (APHS): This is an end-to-end paint service provided by Asian Paints. Started as a pilot project in 2000 in Hyderabad, this service has gained momentum over the years and is now available in 13 Indian cities. To the customer, this provides a hassle free painting service. In the Indian context, this was unique as the actual paint job is usually done by small paint service companies, which were not that reliable and sometimes difficult to deal with. The trusted brand name of Asian Paints was helpful in attracting customers as well. Also, the company gave a 1 year warranty with this service, something which is not common in the paint industry.

Building Brand Name

The company aggressively invested in consumer research efforts in order to build its brand name. In 2002, the company started marketing its paint under the Asian Paints brand name instead of the name of the paint and also changed its logo which strongly portrayed the name of the company. The company also played with the psyche of the Indian consumer to popularize its brand name by exploiting the emotional connect a consumer has with his / her home. It realized that Indian consumers preferred painting their homes before festivals and other important family functions such as marriages. Painting the home signified a new beginning, and, fittingly, Asian Paints brand unveiled its new tagline "Celebrate with Asian Paints" to tap into this consumer demographic of the Indian market. This was the first step the brand took in establishing an emotional connection with the consumer in a low-involvement category.

The company also invested a lot of money in advertising and roped in famous bollywood stars to attract the end customers with the hope that they will buy Asian Paints to paint their homes.

Joint Ventures

Asian Paints along with PPG Inc, USA, one of the largest automotive coatings manufacturers in the world has begun a 50:50 joint venture, Asian PPG Industries to service the increasing requirements of the Indian automotive coatings market. Another wholly owned subsidiary, Asian Paints Industrial Coatings Limited has been set up to cater to the powder coatings market which is one of the fastest growing segments in the industrial coatings market. This wholly owned subsidiary of Asian Paints has entered into a tie-up with Canada-based Protech Chemicals which is one of the top ten powder coatings companies in the world for technological know-how in the area of powder coatings.

Competitors

Company Name

Net Sales

Net Profits

Net Profit Ratio (%)

Asian Paints

5,367.72

774.5

14.4

Kansai Nerolac

1,814.71

165.5

9.119914

Berger Paints

1,510.96

88.76

5.874411

Akzo Nobel

937.7

159.3

16.98838

Shalimar Paints

333.25

3.56

1.068267

Jenson Nicholson

37.47

-7.61

-20.3096

Hardcastle

13.63

0.58

4.255319

Killick Nixon

4.32

-1.57

-36.3426

Reputation:

Environment and Safety:

Asian Paints approaches the environment issue from the perspective of waste minimization and conservation of resources.

It attempt is to reuse, recycle and eliminate waste, which results in less and less waste being generated. Accordingly, the material losses in manufacturing have been reduced substantially over the last few years.

It has ISO 14001 certification for environment management standards.

It has achieved 'zero industrial discharge' capability. These have been achieved by the installation of upgraded effluent treatment facilities and installation of reverse osmosis plants in conjunction with appropriate recycling and reuse schemes. Our emulsion manufacturing facility has

Quality Policy:

We shall provide products and services that meet stated standards on time, every time.

We accept Zero Defect as a quality absolute, and shall design and operate our quality system accordingly.

We will organize our work practices to do a job right the first time, every time.

We are committed to continuous improvement in quality in all business processes and shall track such improvement through measurable indicators.

Leadership

Name

Designation

Ashwin Choksi

Chairman / Chair Person

P M Murty

Managing Director & CEO

Amar Vakil

Director

Dipankar Basu

Director

Deepak Satwalekar

Director

S Sivaram

Director

Abhay Vakil

Director

Ashwin Dani

Vice Chairman

Mahendra Choksi

Director

Tarjani Vakil

Director

Mahendra Shah

Director

R A Shah

Director

S Ramadorai

Director

Ina Dani

Non Executive Director

Human Resources with Sub categories

Asian paints has a talent pool of over 4700 employees employed across 23 countries bring in a unique blend of mindsets and skills. They recruit only from the top schools and believe in getting the people from the highest calibre in the company. To enable better interface, initiatives like HR help desk, Employee self service, and e-learning applications were done during the previous year. People development is a key area of focus for Asian paints. Though every employee plays a part in his own development, focused activities are also carried out for ensuring synergy and growth. E-Learning was introduced as new concept, to meet the ever growing diverse developmental needs of the organization. With the multiple locations throughout the globe, the present of e-learning will help the employees. The year 2009-10 also saw the stabilization of the PMS that was put in place during the previous year. They do follow a 360 degree method of appraisal.

An open and interactive work culture brings out the best in the people. A sense of ownership and freedom to experiment at their workplace brings out creativity and innovation in every individual. Excellent training is provided to develop leaders and re-strengthen competencies from within the organization. They believe in encouraging achievers from within the organization to climb up the hierarchy and take up bigger roles and assignments. Thus, the task is cut out for every individual within the framework of result-orientation market insight, customer perspective, trust, respect and problem solving. AP looks forward to the commitment of the people and their sense of discipline and ownership continue to drive growth for the company

Resources - A bird's eye view

Specific Level \ Concrete Level

Tangible Assets

Fixed assets

Equipment (Eg - Machinery, hard- and software), facilities, plant, land

Current Assets

Inventory

(Eg- raw materials, semi finished goods)

Finances

Assets

Investments, cash reserve, trade receivables, factoring

Capital

Equity Capital, liabilities (loans, leasing, salaries and wages), financial incentives (eg- social contributions, private use of company's car)

General Characteristics

Location, areas, type of product and services, size (eg- turnover, market size, goodwill, physical value, competition position)

Non-Financial indicators of the company

1) Raw Material: Paint is a raw material intensive industry. It takes over 300 different raw materials to produce paint, most of which are petroleum-based. Titanium dioxide is the largest consumed raw material. It constitutes approximately 30% of the total manufacturing cost. Besides this, there are petroleum-based raw materials, which constitute 40-50% of the total raw material consumed. Hence any movement in crude oil prices impact prices and profitability in the paint industry.

2) Research and development [8] : At Asian Paints, Research & Development has played a significant role in the growth of the organization. It has set up a new Research & Technology centre at Turbhe on the outskirts of Mumbai (India).

3) Supply chain [9] : Asian Paints has harnessed the powers of state-of-the-art supply chain system using cutting edge technology to integrate all its plants, regional distribution centres, outside processing centres and branches in India. All the company's paints plants in India, two chemical plants, 18 processing centres, 350 raw material and intermediate goods suppliers, 140 packing material vendors, 6 regional distribution centres, 72 depots are integrated.

Finances

Assets

Investments, cash reserve, trade receivables, factoring

Application Of Funds

Mar '06

Mar '07

Mar '08

Mar '09

Mar '10

Investments

274.55

334.39

422.88

234.77

703.69

Inventories

348.79

434.07

538.97

546.71

763.14

Cash and Bank Balance

28.17

42.47

41.33

128.05

28.58

Total Current Assets

562.07

712.5

832.2

985.78

1,123.15

Net Current Assets

89.75

166.06

17.94

137.44

-168.36

Market capital of the company = Rs 17,357 Cr

Volume of the shares traded = 24,372

Trading turnover = Rs 43.57 Cr

Trading turnover/ market capital = 0.0025

This is a very low figure which indicates that the share of the company are traded very less as compared to market average

Capital

Equity Capital, liabilities (loans, leasing, salaries and wages), financial incentives (eg- social contributions, private use of company's car)

in Rs Crore

Mar '06

Mar '07

Mar '08

Mar '09

Mar '10

Total Share Capital

95.92

95.92

95.92

95.92

95.92

Equity Share Capital

95.92

95.92

95.92

95.92

95.92

Reserves

526.36

648.16

832.58

998.55

1,461.30

Networth

622.28

744.08

928.5

1,094.47

1,557.22

Secured Loans

31.88

66.9

36.7

24.59

25.59

Unsecured Loans

40.7

40.7

40.7

40.7

40.7

Total Debt

72.58

107.6

77.4

65.29

66.29

Total Liabilities

694.86

851.68

1,005.90

1,159.76

1,623.51

The cost of capital for Asian paints is lesser than KansaiNerolac by nearly 6%, which shows that market has more TRUST in Asian paints.

As the lending rates decrease, Asian paints can further lower its cost of capital by increasing debt usage

As Asian paints diversifies its products and expands its presence in other countries, the difference between the cost of capital for the two companies can increase further

Above numbers indicates that Asian paints is consolidating its position as market leader and has no immediate threat with its nearest competitor.

Salient features/Trends

In case of Asian paints the average tax are more or less equal to the corporate income tax of 33.99%. This signifies the fact that it is not getting any subsidies from the government.

There is a significant drop in CFO in last years. This can be attributed to two events

i) Global economic meltdown which had an impact on both construction and automobile business which are the main source of income for the company.

ii) Increase in the value of oil prices and hence in the price of raw materials for the company which are predominantly petroleum based products.

Considerable increase in Capex in last two years which means that the company is looking for expansion (mostly outside India) which is a good sign for investors.

Excess cash has consistently been used to buy Investments except for last year.

Cash balance has decreased in last two years, which can be due to adverse market conditions and investments purchases.

Indian paint industry is growing

Asian paints is retaining most of its profits which is supposed to pay high dividends in the future

Asian paints is increasingly investing in total assets which should result in higher dividends returns in future.

Asian paints is planning to invest in a plant at Rohtak (India).The plant is located on 130 acres of land and will manufacture both water and solvent based paints; including emulsions and resins. The project cost for the initial 1.5 Lakh KL capacity will be Rs. 400 Crores and the plant is expected to start production by early 2010(last quarter of year 2009-10).

Capacity increase at Asian paints in last 4 years:

Year

2006

2007

2008

2009

Capacity

241903 KL

282602 KL

316871 KL

354370 KL

Sales

2678 Cr

3244 Cr

3915 Cr

4819 Cr

Expenditure

1967 Cr

2399 Cr

2868 Cr

3708 Cr

Net profit*(PAT)

187 Cr

272 Cr

375 Cr

362 Cr

The change in the value suggests that Asian paints has decreased its operating leverage/financial/business risk. This is true as company has slowed down its investment in new plants and in new markets for last year or so.

The company share has become little less risky than what it was in last 5 years

One of the reasons for Asianpaints to sustain such low level of debt could be that it wants to increase its flexibility for future Merger & Acquisition opportunity

Asian paints is a cash rich company which has a general reserve of Rs 998 Cr(as per latest year balance sheet). This amount is sufficient to fund its operations and expansion plans

Asian paints consistently pays a dividend which is higher than its peers. As the company is a market leader in its segment by a huge margin, it has cash reserves which are sufficient to funds its expansion and pay dividends at a constant rate over the years.

To expand: Asian paints is expanding its operations [10] and has no plans of shutting any of its plans in near future. In the newly constructed Rohtak plant [11] , the company will develop 43 Acres of green belt which can be used in the future for expansion or real estate purpose.

To Abandon: Asianpaints exited its Mauritius Operations [12] in 2005 to concentrate on emerging markets like Middle East.

To Time: The company showed a decrease in growth in south pacific region [13] but has no intension of exiting. This indicates the fact that it might be waiting for the market to pick up demand and then increase the capacity.

To Flexibility: Company is bringing in new Lead-free paints [14] which will help it expand in global market and meet the stringent safety norms in western countries. This will also help the company in case the Indian government increases the safety standards in paints components in future.

Resources lacking

In the decorative range of paints Asian Paints is the market leader and has its presence in almost all the segments. One of the major areas in which it does not have a presence is the exterior cements paint area.

Strategic Decision of Leveraging I2

In the challenging Indian marketplace Asian Paints established a leaner, more agile and cost-efficient supply chain and found it to be a clear advantage in getting a competitive edge.

Asian Paints is India's largest paint company and is ranked among the top 10 decorative coatings companies in the world. The company provides innovative solutions for decorative home improvement, industrial and automotive painting requirements. Asian Paints has more than 25000 local retailers to resell its products to home users, contractors and painters. The company also sells paints and colors to original equipment manufacturers (OEM) and to large contractors serving the OEM marketplace. To serve those demanding market segments, Asian Paints produces more than 1,200 standard paint product SKUs and many made-to-order formulations, and operates about 80 sales offices.

AP manufactures products at five production locations owned by the company, and at several contract manufacturers who make specialty or low-end finishes. To manage the cash cycle as well as deliver the products to the customers without holding a large amount of inventory, it is extremely important to integrate all the manufacturing sites into a cohesive entity.

For the purpose of achieving a dynamic marketing and production environment, a sophisticated and robust supply chain is mandatory. To accomplish this task AP agreed on two key ideas: first, delivery of the products to the customer efficiently without accruing a large inventory; and second, fund an bullish growth-by-acquisition strategy by managing the cash-cycle to free up the funding.

Building a strategic supply chain

Asian Paints has leveraged advanced i2 solutions for supply chain master planning, materials and distribution planning, production scheduling, and change management since more than a decade. The processes from sales forecasting, master production planning, raw material planning, distribution planning and shop floor scheduling were covered through the implementation of key solutions from i2's advanced planning solutions.

These advanced master planning technologies are applied to decide which products should be produced at which manufacturing plants. This strategy is integrated with variables such as cost and demand volume, capacity, current inventory levels, environmental requirements and other factors, and are optimized across multiple objective levels like capacity, demand satisfaction, safety stock requirements, inventory optimization and transportation costs.

The raw material is procured from domestic vendors and international suppliers. These supplies are managed through the use of a sophisticated materials planning system. Due to the fact that raw materials comprise 60 percent of its value chain, bill of materials, routings and alternate parts are continuously improvised. This leads to a complex alternate materials scenario during the procurement planning process. Asian Paints uses i2's factory planning software to manage a wide range of variables, such as the inflow and use of raw materials among multiple possible alternates across multiple alternate vendors and possible production routes to ensure optimum raw materials selection. Weekly timing requirements on a plant, unit and machine-by-machine basis is set by using i2's advanced scheduling software.

AP often experiences a "hockey stick" variation in monthly demand for its products. During the festive seasons in different parts of India, often the demand upsurge is also seen. A sophisticated distribution planning system from i2 is an answer for Asian Paints to handle these surges. This also helps in smooth movement of the products in the complicated and dynamic marketplace.

To ensure a smooth evolution to this re-engineered solution, Asian Paints enlisted i2 to support deployment, change management and continuous improvement. The company also relied on i2 for help in streamlining process workflows, reducing the planning cycle and in formulating overall solution architectures. AP has used the advantages in inventory management and the supply chain to build an organization that is much stronger. It has really allowed AP to leverage skills and strengths in the marketplace.

Savings, service and growth

A decade after the i2 supply chain opportunity assessment demonstrated that i2 solutions would pay for themselves after one year of use; AP has drastically improved its debt-to-asset ratio. It has almost become a debt-free company. Supply chain efficiencies have been used to follow an aggressive growth strategy.

With the use of i2 SCM solutions, the company has reduced its days of finished goods inventory from 56 days in 1999 to less than 30 days currently. During the initial implementation phase itself, the days of finished goods inventory went down from 56 days to 40 days. This has been a major reason behind the company's improved cash flow. This has helped AP to invest in growth oriented acquisitions.

Whereas earlier the company used an end-service-level metric, with the usage of i2 solutions, the company has moved towards a more proactive and precise order-fill method of analysis. A whopping 87-90 % service levels for SKU sales have been achieved at the location level after complete adoption on i2 solutions. This has enabled the company to achieve greater success than the competitors.

The volatility in the fluctuating paint market is dealt with effectively and the size of inventory is optimized with the company's enhanced master planning system. The company creates more complex and effective paint formulae with the assistance of better material planning system. It further helps the company to choose the most appropriate vendor and manufacturing methods for different circumstances.

Modern distribution planning has facilitated Asian Paints to reduce the deployment of the inventory. They do it on a weekly-basis. This also enables them to adjust the distribution plans as per their needs. This assists them to adapt more easily to the variations of the market demand and the changing regulatory pressures or business requirements. They also adapt better to the new manufacturing processes.

The improvements of supply chain management and execution systems have enabled the company to develop fast. Within ten years of the adoption of the technologies, the company has grown over four times of its size. In addition to that, the company has also reduced the on-hand inventory required to assist its consumers

To further optimize the execution of the supply chain processes in conjunction with the planning solution, and to provide a seamless plan-do-check-act framework to the supply chain executives, Asian Paints deployed the i2 platform. Highly customized planning and execution workflows have been developed to enhance the efficiencies of the supply chain.

The company's ability to deliver the right product at the right time and to the right place has become a differentiating factor for Asian Paints. The supply chain has become one of the most crucial functions in taking the company ahead of the competitors.

Where Asian Paints are going and how they can leverage

The exterior paints market is expected to be the high growth area for atleast five years into the future from now. This is the area that Asian Paints has entered now with its exterior emulsions. Snowcem is the market leader in this area with a market share of 26% in the cement paints and 50% [15] share of the textured finish area.

If Asian Paints decides to takeover Snowcem, it would provide Asian Paints with total leadership in the total decorative segments market including the exterior paints market in its portfolio. It could also look at upgrading the customers from Snowcem's cement paints to the more advanced exterior emulsions that it has begun offering.

The acquisition of Snowcem would also fit nicely into AP`s strategy of providing value added services, as they would be able to provide a complete solution for any customer, who approaches them

FUTURE PLANS

Asian paints primarily plans to consolidate its dominant position in India by launching new products in line with the market developments in both decorative paint as well as industrial coating segments. As far as product innovation is concerned, it is looking at water based paints. The company nurtures an aim of becoming a top five decorative paints company in the world, in view of this, the company plans to constantly look for both organic and inorganic growth opportunities in existing and new markets. The rural sector also needs to be looked in thoroughly. They may need to reposition certain brands in the rural market to achieve maximum impact. The company will also further explore opportunities of building long term value in the Industrial coatings business through alliances.

The company is focusing on further improving the operations of all of its subsidiaries in India and abroad and has already launched E-Strides, an ERP initiative through which all the overseas ventures are being covered for sharing of global knowledge, best practices and better control on operations. The company's objective is to be among the top three players in each market where it is currently operating or plans to operate in the future.

Global Foraying

To be amongst the top three, it needs to look into their global foray very carefully.

Many factors, which have made Asian Paints a household name in India, have also contributed immensely in its global expansion. The company is known to be an innovator and has introduced thousands of colour shades for its customers to choose from.

Also, it has been a market creator like in the case of exterior paints at a time when exterior paints used to be mostly cement paints. It has been following an aggressive marketing

strategy in India and this has helped it in entering and competing with multinational companies in

global markets.

The company has continuously followed its vision - "Think Global, Synergise Regional and Act Local" to drive its performance. In 1999, the company embarked on an ambitious plan to emerge as one

of the top 10 decorative paint companies in the world. Once this goal was achieved, the company

set for itself a much steeper target which was to become one of the top five decorative paint companies in the world. The company explored opportunities of building long term value in the Industrial coatings business through alliances with established global partners. All the strategies and policies of the company have been designed to achieve these goals.

To capture the global markets, it has been following the strategy of entering fast growing

markets with robust demand and low per capita consumption of paints. Asian Paints has especially targeted companies in emerging markets of Africa, Southeast Asia and South Asia, Middle East and Pacific region. In order to increase the pace of globalization, the company has also focused on

acquiring international companies which have a widespread presence in the global markets like the acquisition