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INTRODUCTION
PAINT INDUSTRY:
Asian Paints is India's largest paint company and ranks among the top ten decorative
coatings companies in the world today, with a turnover of Rs.30.2 billion (USD 680
million). It was formedasa partnership firm by fourfriendsin 1942. The companyhasan
enviable reputation in the corporate world for professionalism, fast track growth, and
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buildingshareholderequity.Asian Paintsisheaded by Mr.Ashwin Dani, Vice President
andManaging Director.
Asian Paints - largest paint company in Indiahasreported modestresults in thequarter
ended December 2010 with 11% increase in the bottom line at Rs 220.33 crore over
strong30% rise in the topline at Rs2099.60 crore. Spike in the raw material costhas
mainly pulleddown Operating profit margins by320 bpsand curtailedgrowthinthe Net
Profit.
For the current quarter, the period in the consolidated results for the parent company,
Indian subsidiaries and JV and overseas subsidiaries isApril 2010 to December2010
except forAsian paints Nepal, wherethe period consideredis 14th
March - 15th
December
2010. On the otherhand, for the correspondingquarterofthe previousyear, the period
considered in the consolidated results is January - September 2009 for the overseas
subsidiaryexcept fortheAsian Paints Nepal wherethe period of consideredis 14 January
2009 to 16 September2009.
On liketo like basis Netsales forthequarterwasup by 11% to Rs crore whilethat of Ne
Profit wasup by 11% to Rs crore.
Quarterly performance:
Indian Paint major- Asian paintshavereportedstronggrowth of30% inthe consolidated
top lineat Rs2099.60 croreinthequarterended December2010. Demand conditions for
business were buoyant coupled with late Diwali. However the Operating marginshave
slipped by320 bps to 16.4% mainly on the back ofspike in theraw material cost. The
consumption cost including raw material costas % salesnet ofstockadjustmentshave
increased by 50 bps to 56.1% while that of otherexpenditure jumpedup by200 bps to20.2%. Onthe otherhandemployee costhasdeclined by 40 bpsto 5.8%. Thusthetotal
expenditurehas inchedup by 920 bps to 91% inquarterunderreview against 81.8% a
yearago.
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The Operating profit was thus curtailed to grow by 8% to Rs344.91 crore. The other
income wasup by 16% to Rs 19.37 crore. Thus EBITDA marginshavedeclined by330
to 17.3% inthequarterunderreview. The Interest costhasdeclined by26% to Rs 5.85
croreandthedepreciationhas movedup by 46% to Rs28.64 crore,thereby paving PBT
up by7% to Rs329.79 crore. Theeffective taxratedeclined by 150 bps to 29.5% and
paved Patup by 10% to Rs232.37 crore. Further,nil EO inquarterunderreview against
gain of Rs 0.21 crore in the corresponding previous year and 9% dip in the minority
interestat Rs 12.04 crorehas led Net Profitup by 11% to Rs220.33 crore.
Other information:
The Board ofAsian Paints (APL)todayapproved plansto enhance its fourteenyear old
relationship with PPG Industries Inc. (PPG), one of the world's leading coatings and
specialty Products Company, to accelerate growth of the non-decorative coatings
businessesin India.As part ofthisarrangement,APL and PPG will enhancetheirexisting
non-decorative coatings presencein India byexpandingtheircurrent 50-50jointventure
relationship,Asian PPG Industries Limited (APPG),andalso establisha second 50-50
joint venture. The modalities are being worked on. The arrangement is subject to
regulatory approvals and is expected to be completed during 2011. APPG currently
servicesthe Indiantransportation coatings marketsandthis change will expanditsscope
to additionallyservicetheindustrial liquid, marineand consumerpackaging markets. The
proposed second joint venture will service the protective, industrial powder, industrial
containersand lightindustrial coatings markets.
A interim dividend of Rs 8.50/- (Rupees Eightand paise fifty only) perequityshare of
the facevalue of Rs 10/- wasdeclaredatthe Board Meetingheld on27th October2010
and paid on 4th November,2010.A final dividend of Rs 18.50/- (Rupeeseighteenand
paise fifty only) perequityshare ofthe facevalue of Rs 10/- each forthe financial year
2009-2010 was approved by the shareholders at theAnnual General Meeting held on
16th July,2010andthesame was paid on 19th July,2010.
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The promoters shareholding has increased to 53.33% inquarterended December2010
against 50.02% a year ago. The promoters have pledged 21.04% of their total
shareholdingatend of December2010against 18.10% ayearago.
The Scrip ishoveringat Rs2625 on BSE
sian Paints - largest paint companyin Indiahasreported modestresultsinthequarter
ended December2010 with 11% increaseinthe bottom lineat Rs220.33 crore over
strong30% riseinthetoplineat Rs2099.60 crore. Spikeintheraw material costhas
mainly pulleddown Operating profit margins by320 bpsand curtailedgrowthinthe Net
Profit.
Forthe currentquarter,the periodinthe consolidatedresults forthe parent company,
Indiansubsidiariesand JV and overseassubsidiariesisApril 2010to December2010
except forAsian paints Nepal, wherethe period consideredis 14th
March - 15th
December
2010. Onthe otherhand, forthe correspondingquarterofthe previousyear,the period
consideredinthe consolidatedresultsis January - September2009 forthe overseas
subsidiaryexcept fortheAsian Paints Nepal wherethe period of consideredis 14 January
2009 to 16 September2009.
On liketo like basis Netsales forthequarterwasup by 11% to Rs crore whilethat of Ne
Profit wasup by 11% to Rs crore.
Followingarefewofthefamous productsofAsian Paints :-
Apex Weatherproof ExteriorEmulsion
Premium Emulsion
Apcolite Premium Satin Enamel
Utsav
Royal
Tractoremulsion
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OBJECTIVES
PRIMARY OBJECTIVES
y Logistic function ofAsian Paint.y To find out how the logistic function has been implemented by the
company.
y To know about the various operation techniques adopted by asianpaints.
SECONDARY OBJECTIVES
y To find outhow supply chain management works.y To findMarket Share of company.
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Research Methodology
Data: Dataarethe facts, figuresand otherrelevant information material , past present ,
servingas bases for the studyandanalysis . Dataare considered the backbone of any
research projectasithelpsthe managerto takerightdecision.
Dataare primarily oftwo types:
1. Primary Data2. Secondary Data
SECONDARY DATA:
Secondarydata may bedefinedasthedatahas been collectedearlierforsome
purpose otherthanthe purpose ofthe presentstudy.Anydatathatisavailable priorto the
commencement oftheresearch projectissecondarydata,there foresecondarydataisalso
calledashistorical data. Secondarysources ofthedata provide wealth ofinformationto
the researcher. It often obviates the need of the primary data collection and saves the
valuable time,effortand money. Even where thesubsequent primarydata collection is
required, an analysis of the secondary data enlightens the researcher regarding many
aspects ofthestudyandgives contextual familiarity ofthe primarydata collection. Itthus
providesrichinsightsinto the process.
SOURCES OF THE SECONDARY DATA:
1. Published sources these may be governmental & nongovernmental sources.Example censusreport, publications ofthe planning commission.
2. Unpublished sources: Letters, diaries, biographies, autobiographies, manuals,brochures
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INTERNATIONAL OPERATIONS
Asian Paints operates in22 countriesacross the worldandhas30 paint manufacturing
facilities that serve consumers in more than 65 countries with a combined total
manufacturing capacity ofaround370 million liters perannum and2,700employees. It
has manufacturing facilitiesineach ofthese countriesandisthe largest paint companyin
ten overseas markets.Asian Paints operates in five regionsacross the worldviz. South
Asia, South EastAsia, South Pacific, Middle Eastand Caribbeanregionthroughthe five
corporate brandsviz.Asian Paints, BergerInternational, SCIB Paints,Apco Coatingsand
Tubmans. In ten markets, it operates through its subsidiary, Berger International
Limited; in Egypt through SCIB Paints; in five markets in the South Pacific it operates
throughArco Coatings and in Fiji and Samoa it also operates through Tubmans. The
countriesthatAsian Paintshas presenceareas follows:
SouthAsia : Bangladesh, Nepal,and Sri Lanka
South EastAsia : China, Malaysia,Myanmar, Singaporeand Thailand
Caribbean Islands : Barbados, Jamaica, Trinidadand Tobago
Middle East : Bahrain, Egypt, Omanand UnitedArab Emirates
South Pacific :Australia, Fiji, Solomon Islands, Samoa Islands, Tonga and
Vanuatu
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RAW MATERIAL
The paintindustryisraw material intensive. Ittakesaround300differentraw materialsto
make paint, most of whichare petroleum based. Theraw materialsare ofa widevariety.
Onanaverage,raw materialsaccount for60% ofnetsales (industryaverage). In case of
small-scaleunitsit formsup to 70% ofthenetsales.
Asian Paints require two types of raw materials Powder and Liquid.
Pigments, BindersandAdditivesare includedunder the Powder categoryand Solvents
and otherPetroleum based productsareincludedinthe Liquid category. The powderraw
materialsarestoredin Jumbo bags of25 kg/ 50kg/ 500kg; whereas liquidraw materials
arestored in big containersand can bestored for7days.Around300raw materialsare
required by the industryandall raw materialsarenotdirectly related to crude oil. The
basket ofraw materials isquiteexhaustive. Raw materials, which constitutesaround 60
per cent of total cost for the paints industry is an important factor for maintaining
operating margins. The industry imports around25 per cent of raw materials. But the
mostimportantraw material istitanium dioxide, whichaccounts foraround30% oftotal
manufacturing costs. Besides TiO2,thereare otherpetroleum basedraw materials which
constitutearound 40-50% oftotal raw material consumed. Henceany movementin crude
oil prices will impactthe profitability ofthe company.
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SOME LOGISTIC FUNCTION OF ASIAN PAINTS
A)Order processing:-
Most paint companies are hit by the fact that they do not make the raw materials
themselves. Forexample, phthalic anhydride (PAN) is manufactured from orthoxylene
and whichgoesinto the production of paintsalong withtitanium dioxide.Asian Paintsis
the only paint company that manufactures PAN. The other paint companies have to
import theirstock. Since PAN pricesgenerally outpace international orthoxylene prices
by almost 50% paint companies end up paying a fortune when prices rise. In such a
situationAsian Paints benefits byselling PAN inthe open market.
B)Transportation Management:-
The companyhas outsourceditstransport managementto Dynamic Logistic Pvt. Ltd.
C)Inventory Management:-
The company prefers to maintain low inventory levels due to having large no. of
suppliers at bay. APs average inventory level equals only 14 days sales, while the
industryaverageis 51 dayssales. Thisrightaway providesa 45% edgeininventory costs
to AP comparedto its competitors. The companyhas350raw material and intermediate
andgoodssuppliers.
D)Warehousing:-
The companydoesnot own warehouses instead theyhave 90depotsscatteredall over
the India whichare on lease basis.
E)Packaging:-
The companyhas 140 packing material vendors.
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F) Plants:-
The company currentlyhas 5 paint manufacturing plants in India. It manufacturesand
markets morethan, 800 items of paints (SKU). The current paint plants ofthe company
in the country are located at Bhandup (Maharashtra) established in 1955,Ankles war
(Gujarat)established in 1981, Patancheru (Andhra Pradesh)established in 1985, Kasna
(Uttar Pradesh), and Sriperumbudur (Tamil Nadu) with a combined annual production
capacity of3.90 lakh KL.
1) Sriperumbudur Plant:-
The capacity ofthe SriperumbudurPlantis 100,000 KL perannum spread
across25-30acres of land. The plant is located in the Sriperumbudur industrial park of
the State Industries Promotion Corporation of Tamil Nadu (SIPCOT) onthe outskirts of
Chennai.
2)Kasna Plantand Ankleshwar Plant:-
The Distribution Centersat Kasna PlantandAnkles warPlanthave been
commissioned. The Kasna Plantisspreadacross25 acres of land.
G) Acquisition
TheacquisitiongivesAsian Paintsa foothold inanemerging marketandalso opensthe
possibility of exporting to neighboring countries. Asian Paints has already made its
presence felt in the emerging markets after its acquisitions in Singapore (Berger
International) and Egypt (SCIB Chemicals SAE). These acquisitions immediatelygive
access to bothemerging marketsand those in which Berger International hasa strong
presence. Intheindustrial coatingsegment,the companyacquired Hawcoplast Chemicals
in November 2001 for Rs22 crore, which provided it with a presence in the growing
powdercoatingsegment.
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H) Subcontracting:-
The companyhasaround28 subcontractorsthat manufacturevarious product lines.
1) Vendors:-
Asian Paints manages more than 800 vendors that supply around
15,000 materialsthatareusedto manufacturearound 17,000 SKUsinvarious categories.
l) Researchand Development:-
The companyhas 140 R & D teamsaroundthe world,7decorators, 115 scientists
1) Retail Outletsor Dealers:-The companysuppliesto morethan22,000retail outlets ordealersand
65 sales offices in India through 90 depots as opposed to 12000 to their nearest
competitor. Over35% ofthedealersdo business only withAPIL. Ithas 90 offices in
Indiaand30situatedall acrossthe country
.
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SOME OF THE DEALERS OF ASIAN PAINTS
y Alwell and companyauthorizeddealers of Nerolac Paintsin Pune.Maharashtra Pune
y Kamal Hardware:Authorised DealerAsian PaintsUttaranchal Dehradun
y DharmarajhardwareTamil Nadu Coimbatore
y Annai Hardwares & Paints - Whole Sale MerchantTamil Nadu Tuticorin
y MayurPaints & Hardware Shop inMalakpetAndhra Pradesh Hyderabad
y Suman Hardware & PaintsinDealsinhome furnishing, BangaloreKarnataka Bangalore
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THIRD PARTY LOGISTICS
MJ Logistic Services Limited
It provides warehousing facility of 5,00,000square feetto Asian Paints.
LALIJI MULJI TRANSPORT CO CLIENTS
Ithas 180 branches within Indiaand provides over3 lacksq.ft Warehousing & Storage
facilityand Handling of over4 lacktones of cargo p.a.to Asian Paints.
T AMBOUR LTDTambourLtd.isan Israel-based paint manufacturer. The Company operates five factories
throughout Israel. It managesthe production,importsand marketing ofdecorative paints,
industrial paints and marine paints. In addition, the Company offers accompanying
products, suchas coating materials, filling materials,diluters,adherentsanddecorative
tiles. The Company'sAccorwarehouse coversanarea of 12,000square meters, contains
around3,000differentkinds of paintanddistributes over 85 million liters of paint per
year.
Waste Minimization, Recyclingand Reuse
APIL hasidentifiedatotal of78 types of wastes from paint manufacturing facilities, out
of which 18 are hazardous as per HW Amendment Rules, 2000. Given below is the
approachto wasteminimizationadopted byAPIL. (Optionsarenotgivenin orderof
Preference)
a. Recyclinga potential waste orportion ofit'onsite' whereitisgenerated
b. Improving process technologyandequipment thatalter the primarysources of waste
generation
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c. Improving plant operations, such as housekeeping, materials handling, equipment
maintenance,automating processand packingequipment
d. Redesigning orreformulating products
e. Conducting waste audits and monitoring and tracking of waste generation The
Companys efforts have resulted into almost no wastage during production. There is
almostno damageduringtransportationalso.
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THE SUPPLY CHAIN
Asian Paints has harnessed the powers of state-of-the-art supply chain system using
cuttingedge technology to integrateall its plants, regional distribution centers, outside
processing centersand branchesin India. Eight ofthe company's paints plantsin India,2
chemical plants, 18 processing centers, 350 raw material and intermediate goods
suppliers, 140 packing material vendors, 6 regional distribution centers,72depots are
integrated. The supply chain runs through a wide spectrum of functions right from
materials planningto procurementto primarydistribution. Ithas playeda pivotal role in
improving operational efficiencies and creating agile procurement, production anddeliverysystems. Ithasalso enhanced the flexibility of operations, lowered outputtime
andreduceddelivery costs, whileimproving customer-servicing levelsand profitability.
The Supply Chain Managementis backed by IT effortsthathelp the companyindemand
forecasting, deriving optimal plant, depot and SKU combinations, streamlining vendor
relationships, reducing procurement costs, and scheduling production processes for
individual factories.
Upgraded i2 Solutionsto Improve its Supply Chain Planning
Capabilities:-
The i2 planning solutions provide Asian Paints improved demand forecasting for
approximately 1,600 SKUs and allows the business to simultaneously plan for
procurement, production, distribution and inventory across its entire supply chain
including manufacturing locations, warehouses, distribution centers and depots. i2
solutionsarehelpingAsian Paints managethe following business processes:
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Master Planning:
The i2 solution generates a supply chain plan for Asian Paints that synchronizes
procurement, production and distribution. This plan is optimized and constrained by
resin/emulsion and critical material availability, shade-stream manufacturing capacity,
target inventoryrequirementsanddemand forecast. Italso makes pre-season, pre-build
planning process repeatable, consistent and logical while eliminating non-value added
activities.
Material Planning:
Given thehighnumber ofraw materialsandvendors, optimized material planning isa
key requirement forAsian Paints. i2 Supply Chain Planner connects across multiple
factory planning instances, provides visibility for resolving shortages/lateness across
plants and maintains an audit trail of the actions taken. i2 solutionshave significantly
reduced planning cycletimeandimproved consistency ofthedecision making process.
Distribution Planning:
Thedemand patternsexperienced byAsian Paintsare typicallyhighly skewed towards
the last weekofa month. Thisrequires flexibledistribution planningto caterto frequent
changes to demand and supply positions in the supply chain. The i2 Supply Chain
Plannersolutionallows plannersto quicklyre-plan,thus optimizingdistribution costsand
reducinginventorystock-outssimultaneously.
The i2 SCM engine will link all the vendors and suppliers, thus helping the
companyinassessingthestockoftheirvendorsandsuppliersatanygiventime.
Additionally, Microsoft Dynamics NAV 4.0, formerly Microsoft Business
SolutionsNavison, offeredahub-and-spoke model which wasideal forAsian Paints.
Thehub-and-spoke conceptrefersto a parent orholding companythatuses one business
software system (thehub), which is integrated with the systemsused by its individual
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subsidiaries or divisions (the spokes). It was decided: While the parent company was
running SAP,thesubsidiaries would bestandardized onMicrosoft Dynamics NAV.
Benefits
The hub-and-spoke model has enabled Asian Paints subsidiaries to interact with the
parent organization easily and effectively, removing the need for generating multiple
reports.
y Reduces IT Administration
y No More Double Reporting
ASIAN PAINTS : 'We plantohavecustomizedcolorsfor
consumers':-
Manish Choksi, chief, Corporate Strategy,and CIO,Asian Paintsjoinedthe paints major
in 1992. Heisa memberofthe Management Board oftheAsian Paints Group responsible
fornew business, corporate planning,and information technologyacross the Group. He
has seen his company through successful ERP and SCM initiatives, and spearheaded
adoption of new information technology solutions across the extended enterprise. In a
chat with VOICE&DATA, he talks about his company's foray into services such as
painting,dcor,homeimprovementsolutionsas well asnew initiatives. Excerpts
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y Which new technologies will be deployed by Asian Paints toreducecostand increaseemployee productivity?
AtAsian Paints, wealways makesurethetechnologythat weimplementis costeffective
and increases employee productivity. We have deployed SAP R3, i2 supply chain
planningsuite, ERM employee platform formula management, product lifestyle platform,
and so on. It is very essential foradoptingnew technologies, since IT isanenabler to
serviceretailers.Also, thesupply chaineffectivenesshashelped to capture more ofthe
enterprise platform. The i2software, which wasdeployednearly in2001,hashelped to
increase productivity from 3tonsto 8 tons.
y How istelecommakingbusinessmorecompetitive?Considering today's competitivescenario, it isessential that organizationshave the best
technology in place to ensuregood results. WeatAsian Paintsdeploy technology that
connectstheentire field-forceacrossall ourbranches inthe countryas well asglobally.
To ensure connectivity wehave provided laptopsand PDAsintheretail sales forceareas.
Laptops withdata cardsareakeydriver forenterprises. Wehave implemented VSAT,
whichisanearlyadopterin far-flung locations.
y Asian Paintshasaboutninetyoffices in Indiaandthirtyglobally.Howaretheyconnected?
Typically, all the offices are connected through MPLS, VSAT, and radio, but the
preferred medium is landline. Ninety percent of ourofficeshave MPLS and weuseradio
strategically where last mile connectivityisrequired. Wehave VSATs forouroperations
inrural areasandthereisa backup oftwo VSATsinevery location of operations.
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y How does the IT function ensure consistent service across allchannels?
We have a properly planned process, which ensures accurate execution of sales,
marketing, anddelivery. Wealso evaluatehow IT can beeffective,and our
philosophiesare farmore flexible.
y What vendormanagementstrategiesdoyoufollow?Ourbiggestrequirementisthat weexpect ourvendorsto be competentenoughto beable
to forgea longterm partnership. Wedo not lookforavendor forashort period oftime.
All our partnerships-large platform applications suchas SAP, i2, and so on-have been
long-term. Whileselectingavendor, wespenda lot oftimeunderstandingtheirroadmap,
their fit with ourstrategies, their fit with our IT architecture,andso on.Aftera careful
selection, we makesurethat we implementthetechnologyefficiently. The processdoes
not stop here, we make sure that the future roadmap is in our interest and it has the
capability to take us forward. In some cases we have looked at the best-of-breed,
especially inareas where wehave been laggards,interms ofutilizationand maturity. In
such cases, we tend to partner vendors who have the required capabilities, so that wehavesomekind ofsynergyand cost benefits. Forthat, wehave created IT andthesupport
infrastructure.
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STRENGTH OF ASIAN PAINTS AS COMPARED TO
COMPETITORS
y Largesalesnetwork
y Asian Paintshavetheirownsalesdepots
y Asian Paintssupplydirectlyto retailersthatreducesthe cost of paintsto itsCustomers.
y Theymanufacturetheirraw material named PAN whose pricerises oftenandtheybenefit bysellingitin open market.
y Asian Paintsaverageinventory level is 14 daysandhenceit providesa 45% edgeininventory costs.
y Over35% ofthedealersdo business only withAsian Paints.
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CONCLUSION
Inspite ofdifficult conditions,Asian Paintshasdone well.The company currentlyhasa
45 percentshare ofthedecorativesegment ofthe organizedsectorpaintindustry. They
wantthisto grow to 60 percentinthenextsevenyears.Two thirds ofthisexpansion
should come organicallyandathird from acquisitions. That'show they canachieve
growththat'shigherthantheindustryaverage.Inthe paintindustry,theyhaveto go by
alliancesasitis observedthatdomestic companiesvirtuallyruletheroost. Forexample,
ServingWilliams,the largestAmerican company,hasno place outsidethe US. Inhouse
paints,technologydoesnot playa majorrole. Itisgoverned more bydistribution
efficienciesand marketing logistics.Thatis wherethe core competence ofAsian Paints
lies. The paintindustrythe world overisundergoing consolidation. Changeisthe
operative wordhere. Itisa factthat large paint companiesaregrowingata much faster
pace. Theyarevirtuallydominatingthescene. Nearlythree fourths oftheAmerican paint
marketisshared bythe 10 largest paint companies. In Europe,the big companieshavea
35 percentshareandinAsiathe big firms control 26 percent.
In Indiatoo,thesceneis muchthesame.Oftheseven majorpaint companies, onehas
gone out of businessandtwo are weak. So,the majorplayers likeAsian Paintsare
expectedto consolidatetheirpositionsandincreasetheirmarketsharesinthe coming
future.
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FINDINGS
1. The warehousing facilitiesare well maintained.
2. The company specially looksafter theenvironmental aspectsand tries to avoidpollutionand pollutants byadaptingeco friendly production methods.
3. The companykeeps low inventoriesin offseasons,andhighinventoryin festivalseasons.
4. The companyhashuge base ofraw material suppliers,giving company bargainingpowerresultinginhigherprofit marginsthan competitors.
5. The companyhassucceeded inestablishingthemselves inrural parts of India bylargedistributionnetwork,retail outletsetc.
6. Asian Paintshasaround 1,600stock-keepingunits (SKU;one SKU would meanaproduct ofa particularpackandshade), of whicharound300-350are fast moving
with extremely high liquidity at the counter. This puts great pressure on the
demand forecastingandinventory management functions ofthe company.
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BIBLIOGRAPHY
Books:y Productionand operation management
Author-L.C. JHAMB
y Logisticsandsupply chain managementAuthor- D.K.Agrawal
Website:
y www.wikipedia.comy www.newswatch.comy www.answer.comy www.asianpaints.com