SOLVING THE SUPPLY

SHORTAGE AT ICC INDIA

Building the Context⊸ Headquarted in Calcutta⊸ Has 3 manufacturing plants⊸ Distribution Network is 12K retail outlets strong⊸ Business segregated primarily into Decorative

and Refinish Paints Business

⊸ ICC India had launched its top-of-the-line 2-pack refinish product range

⊸ A shortage of certain SKUs was found out⊸ Despite the efficiency of ICC’s logistics chain, it

was not capable to handle small quantity products like 2-pack paints

Paints Market in India⊸ Pegged at INR 21,000 million per annum in

2012⊸ Annual turnover of ICC in 2011-12 is stagnant at

INR 5,000 million

⊸ Unorganized sector accounts for about 40% of the overall market turnover

⊸ This comprises of 1000 small players with annual turnover less than INR 300 million

⊸ Major usage of the refinish paint was by the automobile dealerships to repair chip offs that occurred in transit

⊸ Main customers to the refinish paints market were auto dealers, mid-sized garages and roadside painters

Key Problems in the CaseShortage of certain SKUs

In certain markets there was a shortage of specific SKUs of the 2-pack finish paint

Issues in Warehouse Stock

There was a mismatch between book stock and actual stock in warehouses

Legacy SCM and IT Systems

The existing supply chain and structure could only to the existing suite of products and was not adaptable to new additions

Products at ICC India

Decorative Refinish

Share in Annual Turnover 65% 35%

Weighted Average Price per Kg / Litre INR 90 INR 110

Contribution to Annual Profits 30% 70%

Average gross margin per Kg / Litre INR 30 INR 50

Organizational Sales StructureBusiness Manager

(Decorative Paints)

Business Manager

(Refinish Paints)

Manager (Automobile Manufacturer

Relations)

Regional Manager (North)

Regional Manager (West)

Regional Manager (East)

Regional Manager (South)

2 Separate

ASMs4

Separate ASMs

1 ASM1 ASM

Common Sales Force

Distribution Set-up for Refinish Business

ICC Warehouse

Dealer

Automobile service dealerships & big garages that order in full packs and enjoy free delivery

Net Margin – INR 3-4 per Litre, Max INR 15 per Litre

Average Stock T/O – 40 DaysCredit Period Enjoyed – 45 Days

Customers

Roadside garages, Painters took advantage of bulk breaking. Enjoyed Credit facilities

Credit Period Enjoyed – 15 Days

Distribution Set-up for Advanced Refinish Business (2-Pack Paints)

Company Dealer Garages Invested in Paint Booths and Training of manpower – INR 0.1 Million

• Investment warranted : INR 0.3 Million (for Stirrer Machine) + INR 0.3 Million (for set of tinters)

• Collected orders from Garage and supplied forward

Customers

Customers used to pay 2-3x than the price of a normal paint job

• Imported and Supplied to dealers all the required 2-pack painting materials

• recruited and trained paint technologists (Technical Sales Executives)

• Provided colour matching training to dealers and garages

Changes in the Market⊸ Preference of the automobile customer changed⊸ New entrants in the Indian automobile industry

introducing new colours every few months

⊸ Refinishing had 2 parameters▫ Colour matching▫ Gloss matching

⊸ Above mentioned changes induced increase in

colour of gloss and other exotic finishes (metallic and bold colours)

⊸ Inability of Ready-mix paint technology to meet the market requirements

⊸ Technical solution was 2-pack paints⊸ The entire painting workforce needed to be

trained

ICC’s Decision on Refinish BusinessIn the year 2012 ICC took some major decisions

⊸ Over the next five years the automotive paint market is expected to shift from conventional paints to 2 pack paints

⊸ Changes demanded ICC to import from ICC’s international base in England

⊸ 2 managers in Kolkata Head Office (business development and product management)

⊸ Recruitment of special sales force to supervise refinish business

⊸ No change logistics, Import, IT and branch operations

Reason to Problems⊸ IT systems were not calibrated to read alpha

numeric product codes

⊸ High lead time: 3 months by ship ⊸ SKU count- 1000 nos. of finish products and 300

nos. of raw material apart from 108 SKU’s of AR⊸ Complexity in the logistics after introduction of AR

(warehouses to Vashi)

⊸ Mismatch in forecast and the actual demand⊸ AR material last in priority for the logistics team⊸ Air Courier not a feasible option for AR materials

Proposed Action PlanITUpgrade the information system-MIS to avoid any confusion with regard to scanning and recording of SKU codes

DemandBetter coordination with the dealers to overcome the forecast and actual demand mismatch

BalanceStrike a balance between legacy and new products in tune of how the supply chain services them

SCMRecalibrate the supply chain in such a manner that it introduces new products to the market while clearing the existing backlogs

Switching CostsSensitizing dealers about the benefits of investing in the new system of Advanced Refinish

TrainingEducating the sales personnel at ground and middle level on the new system so as to make the transition a smooth one

Thanks!Any questions?Sampad Acharya UR15037Shashank Guwalani UR15041Swati Mohanty UR15045Ranjana J UR15066Samarjit Pattanaik UR15070Satyajit Chatterjee UR15075Tridib Mondal UR15088