RFID Helps Sheela Foam Tackle Rogue Dealers and Improve Supply Chain

Summary:

Sheela Foam launches an IT-based attack to figure out how its products were getting into the hands of unauthorized dealers, who cost the company about Rs 25 crore a year. 

A year ago, if you were on the lookout for a quality mattress in any part of India, chances are that Sheela Foam was trying to get your attention. However, if you fit that profile, you probably weren’t listening to what Sheela Foam had to say. What’s worse, there was a possibility that you were buying one of its mattresses from an unauthorized dealer, who offered no support for a product that Sheela Foam guarantees for 10-15 years.

Unsurprisingly, this annoyed Rakesh Chahar, CEO of Sheela Foam’s Sleepwell brand and head of sales, plenty. Not only because his customers were being misled, but also because unauthorized dealers drove customers away from Sleepwell’s products and into the arms of its competition. Unauthorized dealers, according to the company, lost Sheela Foam between 5 and 7 percent annually in sales—about Rs 25 crore.

“Unauthorized dealers either converted customers to other brands or local products by bad-mouthing Sleepwell. They also offered heavy discounts on Sleepwell products, which discouraged authorized selling,” says Pertisth Mankotia, head of IT at the company.

The question Sheela Foam wanted to answer was: How did its mattresses get to unau­thorized dealers in the first place?

Sheela Foam isn’t the first—nor will it be the last—company to bump heads against this problem. Tracing inventory downstream in order to protect a company’s brand is a challenge many manufacturers face. One example is the pharmaceutical industry’s battle against the fake medicine industry. But it was a problem Sheela Foam, a leader in home comfort products with a 40-year legacy, wanted to end.

The operations team’s initial response was to try and curb the illegal sales by buying back its own products from the unauthorized dealers. But that didn’t solve the problem.

So they decided to sniff out which of the com­pany’s 4,500-plus authorized dealers and distributors were responsible for feeding unauthorized dealers with its products.

The quickest way to do that was to use the serial numbers on the products they had bought back. With the number they could trace the product’s path down the supply chain and pinpoint where it left the hands of an authorized dealer or distributor. Then they could shut down that illegal channel.

They quickly found out that the bad guys were one step ahead of them.

“We have unique product serial numbers imprinted on the MRP labels of our prod­ucts. But, rogue dealers tampered with them making it impossible to track a product and identify how it was sold to an unauthorized dealer. To nip the problem in the bud, we had to identify and stop the unauthorized deal­ers’ supply source,” says Mankotia.

By April 2011, the company’s operations team turned to Pertisth’s team to find a fix to the challenge. Working together, they decided that RFID tags were the solution they needed. The operations team found a way to work RFID tags into Sleepwell’s products during manufacturing and the IT team integrated them with the company’s home-grown ERP system and linked them to existing serial numbers.

“We implemented an internal project called “controlling unauthorized dealer sales with RFID” with the main objective of strengthening Sleepwell’s retail brand identity,” says Mankotia.

Now, with the RFID solution, Sheela Foam’s team could use mattresses they bought back from rogue dealers. “Until the RFID solution, such purchases weren’t fruitful because a product’s serial number was tampered with. But now with RFID tags, product serial numbers of every product available in an unauthorized dealer shop can be read by the RFID readers carried by our sales people,” says Mankotia.

Also, using RFID readers, Sheela Foam’s sales representatives can now detect which products an unauthorized dealer is carry­ing. “Once the serial numbers are collected, the dispatch history of the product is known very easily,” says Mankotia.

The RFID solution also helps Sheela Foam with its product guarantee. Customers generally lose invoices and product guar­antee cards, making it difficult to determine how old a product is and whether it is still under guarantee. RFID makes that problem history. In addition, the project increased the satisfaction and motivation levels of the company’s authorized dealers.

Unauthorized dealers either converted customers to other brands or local products by bad-mouthing Sleepwell.

Unauthorized dealers either converted customers to other brands or local products by bad-mouthing Sleepwell.