ASIAN PAINTS: The Journey from Lean to Intimate Supply Chain
By Dr Rakesh Singh
Professor of Business Economics
Great Lakes Institute of Management, Chennai India.
Indian Paint Sector
The Rs. 65 billion Indian Paint market has been steadily growing at 8 – 10% CAGR over the past five years. Despite such encouraging growth rates, per capita consumption of paints in India – is estimated at 700 – 800 gms – remains one of the lowest in the world. Lower than countries like Malaysia, Thailand, Philippines and Sri Lanka
The unorganised sector is a strong force in the paint industry and controls almost 35% (an estimated 2500 – 3000 players) of the domestic market. A decade earlier the unorganised segment used to have a much higher share of the market. The reduction of excise duty from 40% in the early 1990s to the present 16% has reduced the significant advantage the small-scale manufacturers had over large companies. Another reason is that most of the players in the unorganized sector dealt with cheaper substitutes such as chuna or cement paints which customers are shying away from. The consumer has also become more brand & quality conscious. Nearly 50% of market share in the organized sector lies with one single company – Asian Paints India Limited (APIL). Also APIL is almost double the size of any other paint company in India. Interestingly there has been no new entrant in the last five years giving an opportunity for the existing players to consolidate their operations and hence market share.
Indian paint sector is also very curious from the point of view of the type of customers. Institutional buyers account for only 20 – 30% of the demand and the rest being painters and contractors with negligible bargaining power. Depending on its use, the market can be further classified into Decorative Paints and Industrial paints. Industrial paints find application in general protective, powder/coil coatings, automobiles, marine paints etc. While decorative paints or architectural paints are basically home paints, used largely in the household sector. House Paints can be further classified into interior and exterior paints depending on the end-use.
Background of Asian Paints
Asian Paints had a very humble beginning way back in 1942, when four young men got together to manufacture paint in a small garage in South-Mumbai. In just three years the company touched a turnover of Rs 350,000. Asian Paints hit on the innovative marketing strategy of reaching consumers in the remotest corners of the country with its small, conveniently-sized packs. Around this time, the company’s mascot, the mischievous imp, Gattu, was born.
The decade beginning 1957 saw the most significant changes at Asian Paints. The company grew from being a family-managed small-time paint manufacturer to a professionally managed organisation that could compete with the best in the world. It was in the late 50s that the company’s one-man R&D department figured out a way to produce international quality phenolic and maleic resins on its simple coal-furnace, with a hand-stirring process.
Meanwhile, the company embarked on an ambitious grassroots level marketing campaign, forming close bonds with thousands of dealers in small towns all over India. By 1967, the company had jolted its multinational competitors by emerging as India’s largest paint company. Today, Asian Paints is close to twice the size of its largest competitor. But, much more important, it is considered one of India’s “Most Respected Companies”.
Asian Paints manufactures a wide range of paints for Decorative and Industrial use. Vertical integration has seen it diversify into specialty products such as Phthalic Anhydride and Pentaerythritol. Not only does Asian Paints offer customers a wide range of Decorative and Industrial paints, it even custom-creates products to meet specific requirements. The company, owns the strongest umbrella paint brand in the company, markets over 10 strong brands through its widespread distribution network of 70 sales offices and approximately 14,000 dealers. ‘Asian Paints currently ranks among the top 10 decorative coatings companies in the world and the company vision is to be among the top 5 decorative coatings companies in the world,’ mentioned Mr S.S. Kini, Vice President – Supply Chain.
Asian Paints operates in 23 countries across the world. It has manufacturing facilities in each of these countries and is the largest paint company in nine overseas markets. It is also India’s largest exporter of paints, exporting to over 15 markets in the Asia-Pacific region, the Middle East, and Africa. In 12 markets it operates through its subsidiary, Berger International Limited and in Egypt through SCIB Chemical SAE.
Asian Paints – Business Outlook
1998 can be etched into the company history books as a landmark year. The company drafted its vision of aiming to become the fifth largest decorative coatings company in the world. In order to achieve this target several changes were made within the company. It re-engineered its operations (to make the processes seamless), aggressively implemented technology (for better information flow) and created a culture that empowered people to take decisions (based on strategic and financial impact) and hence responsibilities. Five key areas were identified that could help the company achieve this feat viz. improved customer orientation, a penetrative and responsive distribution network, value focused R&D, material cost reduction and strong manufacturing capability.
First, the company innovated keeping the consumer in mind – Asian Paints focused on what the consumer wanted rather than what they could offer. Value for money was the proposition being sold, not in context of an economy product but rather in the context that whatever you pay, you get good value for it, whether it’s the premium or the economy range of Asian Paints. Innovation has been the hallmark of the company. The company has continuously innovated in all its areas of operations. Besides its innovative product offerings the company has introduced new concepts like ‘Colour World’ – Dealer Tinting systems, Asian Paints ‘Helpline’ & Asian Paints Home Solutions.
Second, the distribution network was identified as the critical area that the company should build. This was critical, as the multinationals did not have a distribution network outside of the main cities. Asian Paints worked on this aspect of putting in place a dynamic supply chain model and invested significant sums in technology and systems for the network. Today Asian Paints supply chain model is well recognised by Corporate India. Expansion of the dealer network was also critical to the company’s success. This has resulted in today a strong dealership network of over 14,000 dealers that we service directly through our 70 selling locations.
Asian Paints R&D has formulated all the products for the company in the area of house paints. Product innovations have helped Asian Paints service the entire area of decorative coatings. Also the company has been able to provide products across the price spectrum in each segment. This has helped the company tremendously. Hence at every single point of time it is innovation and uniqueness of the product offering that has led to the success of the company.
Materials contribute to about 61 % of the NNS (Net Net Sales) of the company in 1997-98. Through aggressive sourcing initiatives and working with vendors, the cost of materials have been reduced substantially and the contribution of materials to NNS has been lowered to a commendable 57 % by 2002-03. These reductions have been passed on to the customers and have helped increase the market share of the company substantially.
The improved manufacturing capability of the company has resulted in the postponement of capital expenditure by at least four years and has helped further bolster the strong financial position of the company. Productivity has significantly improved and so has the asset turnover – the latter almost by 50 % over the last four years.
APIL – Operations
With over 3000 SKUs the supply chain at Asian Paints is very complex. . (One SKU would mean specific product – shade – pack combination e.g. 1 ltr Apcolite Enamel Shade: Black would mean a single SKU.) Of these around 300-350 are fast moving with extremely high liquidity at the counter. The company also has the practice of adding around 2 -3 new products in its bouquet each year, which would mean the addition of another 15 – 20 skus.
Customer driven approach: Customer focused Supply Chain
“The entire Asian Paints supply chain revolves around what the customer wants”, says Mr Soren Malekar, General Manager – Materials. He further added that brand restructuring has always been driven by market, customers and their needs. For example, the management’s decision to focus on Asian Paints as an umbrella brand with sub-brands, Tractor (distempers) and Utsav was a function of a market survey indicating the strong identification of the Indian customer with Asian Paints rather than particular brands . APIL has also changed its logo and packaging to give it a more lively, global and contemporary look.
APIL launched several innovative service based initiative to gain proximity to the end customer. These involve Home Solutions (a complete painting solution), Colour World (tinting systems) and Paint Helpline (an online customer support helpline).
Home Solutions is a complete service whereby APIL(through its authorized painters) undertakes the entire painting job on the request of the customer. The basic concept is to sell a “painted wall” instead of selling paint. Launched in Hyderabad in October 2000, the service has now been extended to the six metros and has received a good response- 2,300 sites were painted under Home Solutions during H1FY03. This makes the customer happy and adds the benefit of dealing directly with the company.
Colour World is a user-friendly, dealer tinting system (DTS) to dispense paints. These systems are essentially dispensers with an attractive user friendly front end. Based on the shade and base requirement of the customer, the machine creates the desired paint (out of over 1100 shades) using a combination of white (colourless) paint base and a range of colour tinters. These formulae are stored inside a computer which controls the colourant additions. This machine gives exact quantities and uses colourants that are developed in-house by the company unlike dealer tinting systems (DTS) of other companies that have to use imported colourants. In fact, it is said that Asian Paints is one of the few companies worldwide that manufacturers its colourants through indigenous technology. The Dealer Tinting system has helped Asian Paints provide over 1000 shades to their consumers for their existing products. This has helped reduce dealer inventory as the dealer has to now stock only bases and do not stock the entire range of shades in various products. This has helped bring down the working capital of the dealer and he is able to rotate his capital much faster. Launched in 1998, company today has more than 3,000 Colour World outlets.
Another innovation is its ‘Help Line’. The helpline is toll-free and accessible from multiple locations across the country. The Helpline has been a great success. Asian Paints believes they have converted most of the calls into actual sales for the company. Once the caller agrees to view the paint options, the existing supply chain provides the services. It’s just the entry point into the customer supply chain that is different.
Customer friendly website with an online chat is another very innovative initiative aimed at targeting an IT and Net savvy customer. Extremely user friendly, easy to navigate and despite usage of heavy pictures and colours is easily downloadable. There is an option to check various colour possibilities in various rooms. The next step is to simulate a customer’s house and check how the room will look in a particular colour. This can be done by scanning pictures of the customer’s home and then using the software to check out various colour options. Then there is Kavita with whom customers can chat online and get all information they want about colours and paints that may or may not be available on the site. The website has continuously changed to keep its attractiveness
Basically the whole idea is to provide several entry points to the customer. And that every point in the business should synergize with supply chain. Asian Paints has brought in the element of modernity, speed and customer services without any significant increase in cost.
Distribution – Initiatives (Outbound Logistics)
It is estimated that Asian Paints will have to carry nearly 25,000 tonnes a month of paint if its plans for the paints business go as expected in 2003-04. That’s nearly 4,000 trucks a month criss-crossing the nation. Given that there are 3,000 SKUs and over 14000 dealers who need servicing, Asian Paints’ supply chain strategy needs to be very dynamic.
This puts tremendous pressure on forecasting, planning and speed and accuracy of information flow. However networking and a strong IT initiative were required to build a powerful forecasting system. For many years, APIL has been a pioneer of sorts in its innovative use of IT to enable its business processes and had very well in house developed software. There was felt the need to upgrade to cutting edge IT and tie it in with the ambitious plans of the company. APIL was using a legacy software to manage the internal operations and the option, rather the industry norm, was to convert this first into using ERP and then implement SCM around this ERP.
It is normally believed that ERP is the basic building block for any further system, the integrator and the means to make data visible and on a shared basis. Conventional wisdom then said you could plug in optimisers to enhance the ERP data and thereby optimise your entire corporation. Asian Paints did the opposite.
Contrary to industry practice, Asian Paints installed the Supply Chain Trade Matrix suite before it implemented ERP. “This was because we felt our transactions systems had the strength to support a state of the art supply chain management software and that would help us gain faster return on the IT investment”, opined Mr. Malekar. “At that time, we felt going in for an ERP would give us a good transaction system to integrate all our operations of the BUs and the joint venture, Asian PPG. We were happier pursuing the benefits of a decision support system, first. Also, we felt we should remove costs from our systems using the optimization engines and then plough that return into fresh IT investment”. “We could clearly see the tangible benefits of implementing an SCM solution”, he further added.
The integration is now complete and the data that i2 suites need come from SAP and Asian Paints is one of the few companies, which is implementing all the SAP modules.
Asian Paints has implemented the SCM solution and is infact the first company in India to have implemented the full suite of the SCM solution from i2 Technologies. Due to Asian Paints prowess in the area of supply chain management and the expertise that it has in this area, as the earlier SCM systems were completely developed in-house by the company, the SCM suite was significantly reoriented by Asian Paints to see that the solution meets all the requirements of the company. The various modules implemented are as follows:
1. Demand Planner (DP)
– This would help APIL to improve the Demand Management process thus reducing forecast error. In addition to historical data analysis, the tool also has the ability to combine that with data on historical causals for greater responsiveness.
2. Supply Chain Planner (SCP)
– Using the demand plans generated earlier, this tool allocates the production of products at a gross level across the manufacturing locations based on an optimization engine and aggregate planning techniques. This tool uses cost data to do an optimal allocation of stock as well as take basic decisions on inventory to hold at various points in the supply chain. It optimises the customer service level vs. cost equation as the basis for inventory holding.
3. Factory Planner (FP)
– Post the Master Planning exercise done in the Supply Chain Planner, this tool uses the proposed deployment plant to generate a week-to-week factory plan and proposes the procurement plan for all raw materials and packaging materials. It also helps to plan for production of intermediates such as resins, emulsions, etc. and schedule material shipment (intermediates) across all manufacturing locations including outside processing vendors.
– With particular reference to the industrial and automotive businesses, it will allow these businesses to be able to Order Promising.
4. Optimal Scheduler (OS)
– This helps the plant to do shift-to-shift sequencing based on resource considerations and arrive at an optimal schedule which minimizes changeovers while optimising throughput in the company owned manufacturing locations
The overall Demand Management process using Demand Planner has been changed from the earlier hierarchical model to a model based on the consensus. The process itself in addition to all the mathematical capabilities of the software further aids the improvement in forecast accuracy. The greater frequency of planning helps improve the responsiveness of the Supply Chain and allows the company to proactively service the market based on the latest market intelligence as supplied to us by our Sales personnel in 70 field offices.
Going against a set standard has several repercussions. At first, ERP did not “talk” to the new SCM solution and a lot of data normalisation had to be done. Data masters had to be matched and data reliability had to be cross checked. There was, in effect, no common platform for data analysis or response. Data would take days to normalise and then its concurrency would not be certain. But over a period of time all of these issues were successfully overcome providing a seemless flow. “Our ERP system makes the SCM solution more successful,” asserts Mr. Kini. “We also have scalability in our operations, since databases have been rationalised and common, optimisers cut out unseen flab and real time information will reduce chances of inventory pileups. Tracking of stock throughout the chain is another advantage that we are looking for”, he adds. The software to have the ERP talk to the SCM solution was developed by the company. After the SCM solution was linked to ERP, the company has managed to get further benefits as now data was real-time, every time. This further brought some tangible benefits in terms of inventory count that is reflected in the company’s working capital numbers.
Asian Paints is today considered as one of the most networked and progressive Indian companies, having spent up to Rs 40 crore over the last three years on various levels and technologies It understands very clearly that the key to sustained market leadership in the decorative segment will come through a relentless focus on the various components of its supply chain- from the vendors to the customers. “The upshot of this investment is much better inventory visibility, appreciation of working capital, which could be freed and, more importantly, the ability to take corrective action quickly to prevent the bullwhip effect as well as take advantage of market demands”, shares Mr Kini.
“The visibility to the market demand has given us deeper insights in our operations vis-a-vis what the customers actually want”, says Mr. Malekar. This coupled with several projects and initiatives has helped deliver significant value to the customer. “For example, a lot of thinking and innovation went into designing and developing new and alternate packing material for paints”, he further adds. The company has achieved significant benefits through material cost reduction. These savings are quite sizeable.
“Similarly, with efficient use of the supply chain engine, we have managed to reduce working capital requirements by nearly 50% in the last financial year. This has significantly helped increase cashflows for the company, which was around Rs.1760 million in 2001-02. This enabled us to take the processes to a much better level than in the past”, feels Mr. Kini.
Another common challenge that any industry faces is how to improve service without increasing the cost of service i.e. inventory. Usually it is very difficult to achieve a trade off between inventory and service and in most cases companies opt for service and accept inventory increase as part of the business plan. Asian Paints through its consistent efforts have been able to achieve optimal service levels while controlling, infact reducing inventories throughout the supply chain. And Asian Paints has proved that by lowering inventory also, it is possible to have a significant increase in service levels. Working capital management is the key for a paint company and APIL had concluded that it had to work at lower inventories of all its inputs. Asian Paints concluded that the only way of doing this was by adopting the following three strategies. Firstly, by investing heavily in IT, with the sole intention of getting visibility across the supply chain; secondly by investing into tinting machines (as APIL can respond to demand immediately) and finally, by expanding the dealer base to enhance penetration at the same level of inventory. Today, Asian Paints has, at its fingertips, information about every dealer including patterns of offtakes, orders, payment and growth. “This helps us in responding to specific schemes and helps us improve the sales of the specific SKUs we target” , opines Mr. Malekar.
Forecasting and Planning
While embarking on the process of planning and forecasting the following points had to be considered:
1. Peak to Average : Paint even though sold throughout the year, sales at the dealer level increase tremendously during Diwali and to a certain extent during other festivals. Now if sales happen near Diwali then the most crucial month for the dealer to lift inventory is August or September (depending when Diwali falls). So increased production for the build up has to begin in July and also in August. Forecasting has to be done for around 300-400 fast moving SKUs accurately so that inventory turnover is high and the company is not stuck with dead stocks. Another innovative practice was implemented in this context was to split the peak in the months of relatively low sales by using various promotional schemes. This would help balance out facility management and inventory held.
2. Causals: While forecasting demand for a specific period, several factors need to be considered such as schemes, causals during that period and then arrive at the variable sale that happened due to these causals. Now again, considering the amount of SKUs it is indeed a complex task for the distribution department to find variable sale and some assessments are made wherever the historical data needs to be backed up.
3. Large User Business : Sudden demand requirements from large institutions have to be factored in all of the above. These prominent large institutions do not give much lead-time and production has to be scheduled for these unexpected huge orders in between these hectic months.
All this makes demand forecasting extremely crucial for optimisation of company’s resources. Even a small error can create huge amount of inventory, which will be deterrent for the company.
Forecasting of demand is the starting point for Asian Paints. Historical data is used to update forecasts of demand for a four month horizon every fortnight by the Demand Analyst. The Demand Planner reduces the forecast error since it holds, within its database, details of past sales, present scenarios as put in by Asian Paints, variances, one-off demand spurts and so on. In effect, it rationalises the variances between the forecast and the trend and gives a far more realistic picture than was based only on forecasts, which may really be nothing more than pure gut feel. The demand expected is whetted by the field for specific inputs and thrust areas. These estimates are cross checked with the previous year’s actuals as a sanity check. The assessment of the General Manager – Sales is then applied on the product mix that has been obtained at a month level. This process normally takes around 10 days.
The demand planner is dynamic and real time, It can change forecasts, situations and promotions strategies and the planner would re-run and get a close estimate of sales, taking into account any changes and the effect of changes on other parameters in business.
Once the demand planner is run, the Supply Chain Planner is run. This package now optimally allocates demand to the plants on the basis of landed costs of materials and the cost of labour. It also deploys the plan at all the field units ensuring rapid replenishment. The level of “drill down” depends on how much detailing the company wants and needs. The supply chain planner has the master plan, the inventory plan (with safety and replenishment parameters) and the distribution plan. In other words, this planner allocates the demand using a “what-if” scenario, working out the best way to allocate production and distribution considering the type, quantity and direction of demand to ensure optimal costs. In this planner, total cost of logistics is central, not just individual components of transport, warehousing and so on. It also looks at the “postponement” principle, how much a product can be delayed before being put into a final irrevocable form and how close to the customer can the paint be made in distance and time. This package gives Asian Paints the best possible solution to meet the complexity of cost benefits of manufacturing sites and sales sites.
The next step is to run Factory Planner. This package allocates the quantities, times and machines to be used at each plant. It is fed with all manufacturing details and in correlation with the supply chain planner (which feeds it the allocation of SKUs and distribution to the market), the factory planner then decides which machine should make how much and when. In essence, it does an “aggregate” plan. This planner ensures optimal asset utilisation and constantly considers real-life constraints like material and machine availability, unlike other planning systems, which consider them separately, and end up with a constantly adjusting production plan. The use of this planner has given Asian Paints “clear reduction in raw material and packaging material inventory, better coordination between machines, people and vendors.” In Asian Paints, the result of the factory planner is the generation of the daily production schedules, which are as real time as technology can make it”, feels Mr. Vikram Jaisinghani, GM – Manufacturing.
All the above are done at HO and take 5-6 days to complete. Once the rough cut is ready, it is sent down to the factories which break down the rough cut into people, shifts, material procurements and so on to give a final production plan. Having done this, Asian Paints is in a position to respond quickly to changes in demand patterns, unforeseen events like for example Gujarat earthquake or even a sudden export demand
An immediate advantage was that the company achieved benefits in terms of reduced finished goods inventory and raw material inventory. A look at the company’s performance points to sustained reduction in finished goods inventory, which stood at 24 days in 01-02 compared to 34 days in 00-01 and 37 days in 97-98. The value of finished goods stood around 6.7 per cent of net sales in 01-02, compared to 9.6 % in 00-01 and 10.2% in 97-98. Clearly the finished good inventory has seen a drastic reduction. All this has helped the company improve its working capital. As a result free cash flow situation is extremely healthy which is evident from the results of the company in 01-02, where the company had released around Rs. 176 crores of free cash-flow, which was primarily due to the reduction in working capital requirements. Further, Asian Paints has always been known for its strict credit policy, which is reflected in its management of debtors. Debtors for 01-02 was around 33 days compared to 37days in 97-98. The industry average of debtors is over 40 days. Net Working capital in 00-01 was 87 days compared to 106 days in 97-98 and 144 days in 91-92. All this proves that the company has come a long way in the management of working capital. Over here, one must be reminded that the number of SKUs that Asian Paints manufactures are the highest compared to any industry. Hence seeing the way the company has managed working capital is commendable.
Freight costs were Rs 41 crores in 2000, up 24 per cent since 1999, but remaining constant at 3.4 per cent of net sales. This shows that while sales have gone up, freight, a major component of supply chain costs, hasn’t gone up in the same proportion. The freight, however, includes some percentage of freight paid for inbound too. It is noteworthy that total inventories have actually fallen to 11.5 per cent of net sales in 01-02 from 16.3 per cent in 00-01, a fall of 4.8 % in just a year. From the total inventory in number of days, one can see the significant improvement in the last decade. Total inventory in number of days was 55 days in 01-02, 76 days in 00-01, 99 days in 97-98 and 118 days in 91-92. This exemplifies the improvement in working capital management done by the company
The following table is a further testimony to the tremendous achievements of APIL.
Asian Paints: Working Capital (Days)
Inventory cycle 01-02 00-01 99-00 98-99 97-98 96-97 95-96 94-95 93-94 92-93 91-92 Raw Material 24.93 29.40 31.72 35.20 45.09 37.60 40.37 57.88 40.94 37.79 63.40 Work in Progress 6.01 12.34 11.99 13.55 17.19 15.48 15.58 18.80 11.75 12.77 13.53 Finished Goods 24.00 34.45 35.96 34.84 36.61 35.48 37.72 41.78 33.94 34.68 41.39 Debtors 32.54 36.60 29.26 32.17 35.54 32.68 30.61 34.55 30.10 38.05 36.72 Creditors 0.00 25.81 29.87 19.46 28.12 18.08 16.08 22.55 11.40 10.47 11.27 Working Capital Cycle 86.99 79.06 96.30 106.32 103.16 108.19 130.46 105.33 112.81 143.77 (Source: Company Balance Sheets)
Procurement of Raw Materials
Like all other companies in the industry, raw materials account for more than 55 per cent of expenses. As mentioned earlier, APIL has a strong base of 18 Outside Processing Units (OPU) located all over the country. Part of the production is outsourced to these units. Very Interestingly procurement, distribution etc is all handled by APIL. These units need to just concentrate on converting the inputs into paint as per the APIL standards. Hence APIL has to handle inbound as well as outbound logistics for these OPU’s as well. Inorganic chemicals, pigments, solvent etc are some of the key inputs to Asian Paints manufacturing. For example Titanium Dioxide is one of the key ingredients in paints. These commodities can be imported freely and sourcing at Asian Paints considers the import option very seriously.
Also paint contains solvents and monomer, which are petro product derivatives. They are price sensitive and fluctuation can be high depending on the global business environment. Other material like tins and paper bags are procured locally since the vendors find sufficient incentives in terms of volumes from Asian Paints to set up plants near the factories. Raw material inventory as a percentage to Net sales has been consistently coming down. It was around 11.6% in 91-92 and was 7.6% in 97-98. In the financial year, 01-02, it was at the its lowest at 3.9% of Net Sales.
RM Control (Rs crore)
01-02 00-01 99-00 98-99 97-98 96-97 95-96 94-95 93-94 92-93 91-92 Net Sales 1,316 1,197 1,066 895 802 737 705 512 402 373 339 RM Inventory 51.9 56.8 55.8 53.7 61.1 47.9 52.0 52.4 30.3 25.2 39.5 % RM Inventory to Sales 3.9% 4.7% 5.2% 6.0% 7.6% 6.5% 7.4% 10.2% 7.5% 6.7% 11.6% (Source: Company Balance Sheet)
The company has started using the e-procurement tools for negotiating with the suppliers’ viz. reverse auctions etc. They have also been used for negotiating with transport contractors and needless to say the savings were substantial. The company does its own distribution and has no plan to engage a 3PL in the near future.
Manufacturing – Environmentally friendly policies
Manufacturing of paints is done at four plants located at Bhandup, Mumbai which has a capacity of around 20,000 tonnes, Ankleshwar at Gujarat with capacity of 80,000 tonnes, Patancheru at AP which has a capacity of 80,000 tonnes and Kasna at UP with a capacity of 50,000 tonnes. An additional capacity of 36,000 tonnes comes from the outside processing units located all over the country. “All the plants are ISO 9001 certified and have received ISO 14001 certification for environment management standards. All the plants are moving along an integrated manufacturing strategy towards global competitiveness and global standards”, says Mr. Vikram Jaisinghani, General Manager – Manufacturing.
A multi-locational setup helps Asian Paints save substantially on transportation costs. And respond quickly to market demands. Paints manufacturing uses a lot of hazardous chemicals and hence generates a lot of effluent and waste as by products. “Treating this effluent for reuse without damaging the environment is the philosophy of Asian Paints”, adds Mr. Kini. The plants use incinerators to incinerate, recycle and reuse this waste. The water used for cleaning in the plant is also recycled and reused either for watering the plants or for some other use other than human consumption. All practices are governed by sensitivity to the environment. In 2001, the company plants in Ankleshwar & Patancheru got clearances to increase capacity from 50,000 tonnes to 80,000 tonnes each. These clearances were given to both plants, by proving to the authorities that these plants would increase capacity by reducing effluent i.e. that is these plants would generate less effluent per tonne produced on the increased capacity of 80,000 tonnes than the effluent it generated when these plants produced 50,000 tonnes. The company’s proactive policy in environment management was recently recognised in June’02 when its plant at Patancheru received two of the highest awards in environment management. The plant was conferred ‘The Golden Peacock award’ instituted by the World Environment Foundation and presented by His Holiness, The Dalai Lama. The award for excellence in environment management given by the Andhra Pradesh government and presented by the Chief Minister, Mr. N. Chandrababu Naidu. All of this definitely puts APIL in a different league altogether. Last but not the least, APIL has won the runners up Golden Peacock Award for Quality Management for the year 2002-03 in the large manufacturing category !
Tapping other High Growth Areas
The industrial coatings segment in India is essentially dominated by Automotive paints. In order to capitalize on the high growth opportunity in autos. APIL has set up a 50:50 joint venture with PPG industries (USA).
Another high growth opportunity in the domestic paints market is the Powder coatings segment. In FY02, APIL acquired Hawcoplast Chemicals Ltd. which enjoys a strong position in the powder coatings market with established product brands. The company was acquired by APIL’s 100% subsidiary, Asian Paints Industrial Coatings Limited (APICL). The Powder Coatings segment is the fastest growing segment in the industrial coatings market registering growth of around 12 % in the last financial year. The trend noticed is that other segments like Can, Coil & OLP (Other liquid paints) are gradually switching to powder coatings. It is this trend and available new opportunities ensure a bright future for powder coatings.
Asian Paints – Truly Global
Through the 1990s, APIL had ventured into overseas markets and established a significant presence in 11 countries across Asia, Australia and the Middle East. However all the oversees ventures put together accounted for less than 5% of the company’s consolidated turnover in FY02.
APIL has recently taken a big leap in the international arena by acquiring controlling stake in SCIB Chemical, Egypt and the Singapore based Berger International Limited. Currently Asian Paints operates in 23 countries across the world. It has 27 paint manufacturing facilities across these countries with combined paint manufacturing capacity of 330 million tonnes per annum.
Supply Chain and Acquisitions
“The important aspect of these acquisitions is that they were funded through internal accruals by the strong free cash flows of the company which was a result of the working capital saved on account of best SCM practices adopted by the company”, proudly states Mr. Kini. Infact the entire top management is thrilled about this, and why not. Over the last couple of years since SCM initiatives were put in place the company could expand in all directions. There was money to fund these expansion plans, enhance control and visibility into operations and most importantly spur management and staff to move ahead.
“In the future we plan to consolidate our position further and take steps that would make us one among the top five decorative companies in the world”, says Mr. Kini while talking about the future plans. Agrees Mr. Malekar and further adds, “in the next couple of years the focus will be on extending the supply chain by bringing in some dealers as part of our CRM initiatives and extending it at the other side to include some of the key suppliers as well, as part of our SRM initiatives.”