Founded in 1995, XYZ Limited is one of the upcoming leading player in the personal and healthcare products in India with its headquarters located in Kolkata, having more than 25 products under its portfolio. The main focus of the company is to innovate new products to meet the demands of the consumer. The company also adds value by touching the life of all consumers by extending its brand across the various socio-economic groups in the urban and rural areas. As said by Drucker (1998), in order to grow the company must innovate new products. It not only helps in prosperity of the industry but also helps in sustaining high profitability. The vision of the management is to drive more values for the customer by providing quality and innovative products
The company has its own production facility and distribution system under its control and it also outsources its products to various distributors in India. The company outsources its basic raw material from the various suppliers located in the different parts of India. The company maintains a strong command over its suppliers so that the raw materials are available in time to their production department. The consumers are attracted to its products because of its innovation in healthcare products specially ayurvedic and herbal products. Since the FMCG (Fast Moving consumer Goods) sector is the fourth largest segment in Indian market and the penetration of personal and healthcare products is not too high, hence this sector promises to have a very high demand in the coming future.
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The company does not spend much on advertising as compared to its peers. Its spends nearly 2% on advertisement and marketing as compared to normal industrial standard of 8%. (AC Neilson, 2009)in order to penetrate to a larger customer base they need to spend higher on the advertising and marketing so that the consumers become aware of the products.
The company is having a vision of targeting the entire country by opening around 200 shops within a span of 3 year. For this, they require an efficient work team along with proper resources and technology to fulfill their mission. For its expansion plans the company requires more subsidiaries, retailers and suppliers. The company additionally requires strong distribution network and work force.
CURRENT TECHNOLOGY BEING USED:
The information technology system used by the company is Oracle with Developer 2000 based mini ERP system which is an offline system. The information was gathered in batches and was sent to the central database through Electronic Data Interchange(EDI) via email. The person sending information from the depot level had to generate reports through MS Office and send it to the head office through mail. At the head office the data was downloaded and fed into the server using customized tailor made software programs. These customized programs have been developed by external software developers who were hired by the company. It was then the company got the status reports. There was a certain period that neither the depot knew what was happening at the head office nor the head office knew what was happening at the depot. The data was sent to the respective departments once in 24 hours. These data were then collected, transferred and utilized for making useable reports.
The company hired software developers from time to time for maintaining the systems and sometimes updating the current software as and when required. But this present legacy system was not able to support their over expanding business as it caused excessive delays in getting required information. The information which was obtained had lot of errors within it which created problem for the management as they were not able to take decisions with the information available at that point of time.
BOTTLENECKS WITH THE CURRENT TECHNOLOGICAL SYSTEM:
The main problem faced by the current system was
a) the system was not updated online as it did not operate on real time basis. Thus the information available at the centralized system was not sufficient.
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b) The information which was not sent from all the depots on daily basis was not delivered to the concerned user. This hampered the management decision as they were not able to plan their future strategies due to unavailability of data.
c) The data transfer of dispatch orders from depot to main server was done at the fixed time slot but dispatches continued throughout the day. So the information in the system regarding any concerned product was missing during that time. The delay of 24 hour seem to be very small but it had ripple effects across the entire system. This affected the scheduling of every department such as marketing who needed lead time to get their promotional activities in time, the finance and purchasing department who needed much time to purchase the raw material and how to keep the inventory at minimum level and the sales and logistic department who needed to reroute their shipments to priority zones.
d) Data was mainly sent through email which violates the basic principle of integration.
e) There was no plant maintenance module as which machines should go for maintenance and if the machine went for the breakdown, then what was the reason behind it. Thus the management was not able to optimize equipment utilization and production capacity. It was a major concern area.
f) When the management had to issue credit or debit notes for the sales, there were certain complication associated the system for which they could not raise it.
g) Since the sales data was not available online, hence if there were any sales return from distributors and retailers they had complication in maintaining the stock.
h) Since the system was distributed, as each department had their own system, hence there was separate replica of master data which was maintained in all depots and factories.
i) Since there was no proper information of what the stocks they had, neither had they about the inventory level of their stores, hence it was very tough for the management to employ proper system of budgeting and also they were not able to forecast the sales.
j) There was no proper coordination of any department such as Sales, Research and Development, Purchase, Human Resource and Planning.
k) The store manager at the depot level maintained the stock manually, which is a very slow procedure and also the resources are wasted as the managers and their staffs were preoccupied in the administrative works. The managers had no clear idea of how much inventory is available at the depot. This led to poor maintenance of inventory as it was found that there is surplus stock in one depot whereas under stock in another depot. There was no online inventory information for transfer of stocks between depots.
l) The critical part of any fast moving consumer good (FMCG) is to study the behavior of the customer. They were not having the proper information system such as data analysis, customer information etc. to study what the customers required. Hence this hampered them to innovate new products.
New technology to be used:
In order to compete in this highly competitive environment, the company needs to provide the consumer with the quality product at best possible prices. To reduce cost they need to deliver the information effectively and efficiently by utilizing the same resources. To support this the company requires an information system which not only helps in proper utilization of resources but also helps in delivering product to the consumer within a shorter framework of time.
The company's operations is spread across India, hence they need to consolidate the data from different sources. They need to have an online system where they can have proper information of manufacturing plants, distributors, shops, suppliers etc. "Consolidation of information is essential for any FMCG company as it helps monitor the company's efficiency levels, inventory movements and brings greater visibility across its supply chain. It also helps in planning and forecasting future requirements more efficiently." (Mani Mulki, )
This consolidation of data not only helps to analyze the market but it also helps to understand the level of competition. The software such as Enterprise applications if developed would acts as an information transfer between the manufacturer and the consumer. This helps the company to innovate more products as per the consumer preference. The company could employ business intelligence(BI) tools for having a better market analysis.
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The company's main target is the customers. So they need to employ different technology such as data mining, data analysis, service centers etc to understand and interact with the customers. This helps the manufacturer to respond quickly to the consumer request for product innovation. If accurate requirements of customer is provided to the manufacturer through this CRM, it would help the manufacturer to provide better customization to them. Dean and Evan (1994) CRM has also positive effect on market innovation as it helps to devise different marketing strategies for particular targeted customer groups. Thus technology based CRM not only enhances operational efficiency but also increases performance and quality.(Groznik et al,2008).