Company: Asian Paints
Asian Paints adopted an automated storage and retrieval system that included paint racks 12 levels high and connected it to its ERP.
Har ghar kuch kehta hai. Asian Paints’ tagline illustrates just how much a house speaks about the people who live in it and how it reflects their personality, imagination, creativity, and lifestyle in the language of color. Asian Paints should know, for over 72 years it’s been using its palette of colors to brighten up homes.
Its long innings is what’s partially responsible for its success. Today, Asian Paints is ranked among the top five decorative coatings companies in the world, with a consolidated turnover of Rs 12,714 crore, and it commands over 45 percent of the Indian paint market. That’s a position it aims to maintain—or better—as the market grows to over Rs 49,000 crore by 2016-2017.
Longevity, however, is only part of the reason for its success. Innovation is the other.
In the early 2000s, the company expanded its product portfolio as it began to shift its customer value proposition from paints and colors to home decor. In a response that was consistent with this business move, the company increased the number of depots through which it serviced its customers. It also witnessed SKU (stock keeping unit) proliferation to offer a wider choice to consumers. Both of those trends had a direct effect on Asian Paints’ ability to forecast demand. If this is not addressed, inventory management issues would surface. Within a short while, a grim portrait of supply chain inefficiency was juxtaposed against the bright canvas of Asian Paints’ growth.
The company’s depots maintained average inventory levels of 30 days, but if it retained its existing supply chain model that number would shoot up to 40. This would throw up several challenges. First, it would put pressure on inventory management, which would affect working capital. Second, the number of depots needed to store inventory would rise. Both of this would lead to spiraling costs and potential sales loss due to mal-distribution.
“We are in a made-to-stock business with high seasonality, where inventory and service is a function of accuracy sales forecast, variability of supply, and the ability to respond to demand. While the company uses supply chain optimization tools, the need of the hour was to alter the physical structure of the supply chain. If we had to rationalize our inventory we would have to store closer to the manufacturing location so as to retain flexibility in distribution,” says Harish Lade, GM-systems, Asian Paints.
Automated warehousing could solve the company’s supply chain challenges. The technology was aligned with the business direction the company was taking.
Traditionally, the company employed a ‘ground storage’ approach to store its inventory. As the name suggests, finished goods were stored in pallets on the floor and on two level racks. The entire wearhouse operations of ‘pick and put away’ were manual. This was laced with chances of error. Besides it had high area and manpower requirements. “We are present in well-entrenched industrial zones. So getting large swathes of land close to our manufacturing plants was not a workable solution,” says Lade.
The company realized that robotic warehousing was a solution that could solve its challenges. But robotics, a big noise today, was merely a whisper back in 2008 when Asian Paints conceptualized its use. Asian Paints became an intrepid exception by undertaking a first-of-its-kind project. “If you take into account the extent of automation, the range of SKUs, and the volume/weight of liquids that needed to be handled, the project was unparalleled in the country. We simply had no reference points,” says Lade.
Accepting the competitive necessity of the technology, the paint major adopted an automated storage and retrieval systems (ASRS) that included storage racks 12 levels high. There were no companies manufacturing such systems in India. So Asian Paints procured them from Germany.
Then the company decided to adopt an unconventional implementation approach.
“We insisted that we wanted to seamlessly connect our ERP with the ASRS. This would ensure that there was no manual intervention at any level. It was a tall order. An enterprise system talking to a robotic system is no mean feat. To achieve this, we worked closely with the engineers of the ASRS system to understand the protocols between the SAP layer and robotics layer. While there are standard middleware software solutions that integrate enterprise systems, this is not the case with robotic systems,” he says.
The ASRS system talks seamlessly to the ERP to take commands. Each morning based on the latest demand situation across the country and inventory in the warehouses, the distribution planning system draws up an optimized truck planning schedule. A wave pick up command is executed in the warehouse management system, which identifies the optimized pick location in the warehouse. The command flows via the integration layer, goes to the ASRS control system, and sequences all commands to pull the material out and make it available in the pick-up area from where a human truck operator picks it up and loads it into a truck. This is a huge improvement over what used to be a cumbersome, time-consuming, and error-prone manual process.
The ASRS and the integration with ERP was a master stroke. And the benefits came cascading in. Post deployment, the company was able to reduce its inventory target by 12-18 percent. This lead to direct benefit in working capital improvement.
“As subsequent warehouses were launched, the company was able to maintain same inventory levels but enhance service levels from 90 percent to 95 percent. While at the same time the number of depots increased from 78 to 110. This is a major benefit because the company was able to service the market with same inventory levels but at a higher customer service level, resulting in direct savings in working capital and preventing loss of sale,” says Lade.
The successful execution of the project established the manufacturing vision for Asian Paints’ new high-capacity plants in Rohtak and Khandala. The Khandala facility is the world’s largest integrated paint plant. These plants have a manufacturing philosophy of complete automation right from the point when raw material or packing material enters the factory to the shipment of finished paint. While this may be the norm in food and beverages industry, for the paints and coatings industry this is quite a forward-looking philosophy, more so because in paints industry, there is a fair amount of variety in input raw materials (powers/liquids/pastes) which needs to be handled by the automation systems. Accuracy of addition is also crucial. At each stage, factory control systems interact with the ERP systems through a manufacturing execution system to optimize the flow of material. The robotics packaging has translated into an improvement in accuracy. Normal packaging systems have a 1 percent variance whereas the automated packing machines work with less than 0.1 percent variance. These systems are also seamlessly integrated with the ERP.
The other significant advantage in having end-to-end automation is around reducing factory level losses. There are invariably losses during the process due to shade changeover or spillage/sticking losses/contamination losses/over packing etcetera. Automation has brought down FLL by around 85 percent in automated plants as against conventional plants which has resulted in substantial raw material savings year-on-year.