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Stratagem.... The SCM Strategy Game
Stratagem.... The SCM Strategy Game
Stratagem.... The SCM Strategy Game
Organizational Background
Reckitt Benckiser India Ltd (RBIL) is a fully owned subsidiary of Reckitt Benckiser Plc., world’s No.1
Company in Household, Health and Personal Care. Reckitt Benckiser Plc came into being with the
merger of Reckitt & Colman Plc with Benckiser NV in 1999. The company has operations in 60
countries, sales in 180 countries and has had net revenues in excess of $6.6 billion (2008). Reckitt
Benckiser India Ltd (RBIL) manufactures and markets a wide range of products in Personal care, Pest
control, Shoe care, Antiseptics, Surface care, Fabric care and other categories. Amongst its many
well-known brands are Dettol, Mortein, Harpic, Cherry Blossom, Lizol, Disprin, Robin powder, Colin,
etc. Most of these brands are either number 1 or number 2 in their respective categories in India
The company has sales of over £ 6.6 Billion consistently growing ahead of the industry due to its
leading brands, its operations in over 60 countries and sales in 180, & its highly motivated
multinational management.
Vision
Passionately delivering better solutions in household cleaning and health & personal care for the
ultimate purpose of creating shareholder value.
PRODUCT PORTFOLIO
b) Manufacturing plant > Regional Mother Go-down (RMG) > CFA >Distributor > Retailer.
Some Facts:
To meet the current changing retail scenario and increased demand Reckitt Benckiser (India) is
planning to further increase its manufacturing capacities beyond the existing 7 plants.
There is one CFA per state and all the CFAs are handled by local 3PL partners. The RMG are situated
in 4 metros (Mumbai, Bangalore, Kolkata and Delhi) .Transfer of ownership of products happens at
the CFA level. The existing mode of transport for all the categories is by road.
STRATAGEM.... The SCM Strategy Game
Number of Factories: 7
Number of SKUs = 250-300
Number of Co-Packers:17
No. Of CFAs : 32
Retail Outlets
STRATAGEM.... The SCM Strategy Game
Organizational structure
Opportunities:
Growing Urbanization and increased consumerism Greater use of Credit
Many big corporates like RIL, ABG, Bharti etc have already started there operations in the Indian
Retail market.
Challenges:
High inflation rate for foods and commodities other than petroleum.
The Case
Department wise procurement details for RB are as given under:
1. Raw Material procurement: Total procurement cost for RB (India) is 1300 Crores of which raw
material accounts for 40-45%. Around 350 items come under the raw material category with overall
250-300 vendors for the same. The imported raw materials are 15 – 18 % of total procurement.
CATEGORY SPEND %
Organics 20%
Surfactants 10%
Fragrances 8%
Govt Controlled 8%
Others Balance
2. Packaging Material procurement: Accounts for 30% of total procurement costs. RB deals
with total 18 categories in all. Along with 1000 SKUs RB delivers several promo packages and
artworks.
Glass 12%
Laminates 12%
Trays 12%
Tin 5%
Labels 5%
Injection Mould 5%
Boxes 5%
Balance 4%
STRATAGEM.... The SCM Strategy Game
Finished Goods procurement: Accounts for 25-30% of procurement costs. There are 26 co-packer
units and 17 co-packers producing 23 items in number. Three main products under finished goods
are: Liquid Vaporizer- Liquid Vaporiser, Coils and Soaps. These are 75% of the total finished goods
procured.
Since past 15 months RB has allowed the plants to plan and schedule the requirements and directly
place order with the vendor while the prices and share of business are controlled centrally.
A. Vendor identification
B. Vendor Development
E. Mould planning
Plant planning team meets the central planning and schedules the production inline with sales
demand. Local plant procurement team calculates the material requirement considering the opening
stocks, in transit stocks, inventory norms etc. The day-wise delivery schedules are then made in the
ERP in line with the vendor share given by the central procurement teams. Plant can release a
schedule only if there is an authorised Bulk Purchase order existing in the ERP.
Though the constraints regarding the availability of RM and PM are discussed between the local and
corporate teams during the fixed weekly reviews, the local teams still approach the Central
procurement team for their intervention on almost daily basis- and most of the times at the last
moment.
One of the major reasons for shortfall of materials is the frequent changes in the production plan by
the central planning team which is agreed to by the plant procurement.
STRATAGEM.... The SCM Strategy Game
The three divisions in Central procurement - Raw material procurement, Packaging material and
finished goods (Co-packers) procurement are run by a divisional head and a team under him. The
local plant team structure is as shown below:
Total Shortfall in Months Production is around 15%. Over the period of last 12 months it is observed
that 30-40% of the production shortfall is on account of Material availability. Rest of the failures
occur due to manpower availability, and machine breakdown and change in plan etc.
Deliverable:
The company is now wondering whether its decision to decentralize was right or not as the very
purpose of decentralization (that central team is more focused on strategic issues) is defeated and
there are frequent disruptions in manufacturing due to material availability.
A. Describe a strategy that RB should follow to remove this conflict between Central and Local
Purchase, so that central teams can devote more time on long term procurement plans and at
the same time service levels improve.
Problem 2: Inventory
Inventory control is the responsibility of each plant. Each plant has its own Month End inventory
targets which includes both domestic and imported items. Imported Materials are 15-18% of total
materials procured and inventory norms for imported materials are decided by Central Procurement
teams considering lead-times, MOQ etc. Plant has no ownership on the planning of imported
materials though they are accountable for overall inventory. The order placement and scheduling
for imported materials is done by the central procurement team. Since the lead times for imported
items is high, 45-90 days, planning needs to be done 3 months in advance. Central team does this
planning basis the 3 month rolling plans released by the central planning team and it has been
observed that accuracy of 2nd and 3rd month plan is 60% and 40% respectively. Any major change in
demand during this period leads to stock outs or excess inventory.
For domestic material both central and factory teams are responsible for inventory levels. MOQ of
50% of the materials do not fulfil the average monthly requirement. If plant orders quantities less
than the MOQs the purchasing cost becomes very high.
Deliverable:
A. For imported materials what should be the ideal safety stocks to be maintained. What should be
the reordering point for imported raw materials? Highlight the inventory model which can be
used.
B. What would be the best responsibility matrix between the central and local procurement teams
in terms of Inventory planning and control.
STRATAGEM.... The SCM Strategy Game
Storage of FG attracts costs in form of space, interest cost, obsolescence costs etc. Then there is also
change in weather patterns that affects the demand scenario. Below is the example of Demand
fluctuation for Item A. Item A is procured by three co packers.
Demand In
Month Mio Units
January 5
February 5
March 11
April 14
May 13
June 5
July 5
August 7
September 8
October 7
November 10
December 10
Deliverable:
Propose a strategy to take care of the seasonality of demand which is implementable and cost
effective.
STRATAGEM.... The SCM Strategy Game
1. A team can consist of maximum two members (Management Students only) from the same
college. A student cannot be a member of more than one team.
2. The team members need to register on the Prerana 2009 website www.prerana.nitie.net (if you
are unable to register on the website for any reasons please mail your entries directly to
stratagem09@prerana2k9.com)
3. The solution should not exceed 2000 words inclusive of all exhibits and appendices.
4. Solution format: Font Size – 12, Font Type – Times New Roman, 1.5 line spacing and the file
should be a Microsoft Word Document/PDF.
5. The front page should carry only a) Institute Name, b) Team Name, c) Details of the team
members (Name, Email IDs, Phone Nos.) and d) Prerana Registration IDs.
6. The details of the participants SHOULD NOT appear anywhere else in the case solution.
7. Send entries to stratagem09@prerana2k9.com with the document name as
“Stratagem_TeamName_CollegeName” and subject line as “ReckittBenckiser_Stratagem”.
8. The entries must reach us by October 22nd, 2009 (23:59:59). Short listed students will be
intimated by email.
9. The decision of the organizers of the contest and the panel of judges will be final and binding on
all contestants.
Prize Money
First Prize: Rs 30,000 +PPI