Consumer
Packaged Goods
The Consumer-Packaged Goods Industry broadly contains FMCG, Pesticide, Insecticide, and Pharmaceutical Industries. Even the White Goods Industry such as manufacturers of air conditioners, refrigerators, washing machines and dryers, dishwashers, and LED Lights, follows similar Industry dynamics to some extent. The peculiar aspect of CPG Industry is that the manufacturing is mostly formulation-based and relatively easier than other hardcore manufacturing Industries. The complexity in the CPG Industry lies in the Distribution side, since in India and Developing Nations most CPG reaches the customer through general trade, unlike in Developed Nations where Goods reach the customers through Modern Trade.
From an ERP point of view tracking, schemes, discounts, and rebates becomes a challenge area. Our CPG journey started with the pesticide Industry which has one of the most complex schemes, discounts, and rebates across the CPG Industry. Over the years we have worked for all kinds of pesticides, Pharma Retail Pharma Distribution, and FMCG companies. In FMCG again we work for long shelf life and short shelf life food products.
Sales & Dealer Portals
&
Mobile Apps
- Sales Portal
- Dealer Portal
- Schemes, Discounts, Rebates
- Events
- Sales Alerts
- Launch Notifications
- Email & SMS Broadcasts
- Sales Target V/S Actuals
- Ledger Reconcillations
End Consumer
Institutional
Corporate
Web Ordering
Dealer
Retailer
Modern Trade
AX Distribution Managament System
- Sales Force
- VAN Sales
- Schemes, Discounts
- Settlements
- Vehicle Management
- Routing Management
- Asset-Refrigirator Management
- Replenishment
- Min/Max, Buffer Stock
- Multisite Warehouse
Logistics
Management
Centralized Process, Schemes and Master Data Control in Multiple Application-integration Scenario
Designing
- Ground Up
- Top Down
- Sales Forecasting
- Sales Targets
Manufacturing
- Vendor Empanelment
- Delivery Schedules
- Procure to Pay
Sourcing
- Merchandising (Traded)
- Vendor Empanelment
- Procure to Pay
Warehouse Management
- Multisite Order Routing
- Dynamic Warehousing
- Rack-Bin
- Pick-Put
Project Service & Asset Management
- Timelines
- Owner
- Delegation
- Escalation
- CAP EX Process
- Sampling Management
- Job Work Workflows
- Service Management
- Project Plan
HR Management
- Skills
- Roles
- Responsibilities
- KPIs
- Timelines
- Owner
- Delegation
- Escalation
Management Accounting
- Trading Vs Manufacturing
- Brand Vs Brand
- Region Vs Region
- Budgeting & Control
- Profit Center Acct.
- Cost Accounting
Treasury Management
- Fund Flow
- Cash Row
- Dollar & Currencies
- Hedging & Risk Management
- Bond and Investments
- Debt & Equity
Statuary Management
Business Intelligence & Data Warehousing
Vendor Portal
&
Mobile Apps
- Delivery Schedules
- Job Work Updates
- Material In-Transit Updates
- Invoice Priting
- Online Ledger Reconciliation
The solution vision slide shows the CPG industry’s business processes, which are automated and integrated through business applications such as ERP, CRM, POS, Distribution Management Systems and apps to provide a seamless control and decision support system for the organization.
CPG Breadth and Diagram.
After implementing ERP for many of our CPG customers and thorough understanding, we then developed a Distribution Management System for primary connection, secondary sales, and channel sales operations. We still support many of our DMS customers who are using our DMS system and Domain knowledge of Primary, Secondary, and Tertiary Sales is one of the key value additions that we bring to CPG Implementations.
Target Operating Model
After implementing ERP for many of our CPG customers and thorough understanding, we then developed a Distribution Management System for primary connection, secondary sales, and channel sales operations. We still support many of our DMS customers who are using our DMS system and Domain knowledge of Primary, Secondary, and Tertiary Sales is one of the key value additions that we bring to CPG Implementations.
TOM
Key Business Change
Transformation
RAID
Remarks
Current
State
Target
State
New
Role/Process
Data
Transformation
Habit
Transformation
Assumptions &
Dependencies
Risks &
Issues
Sales Forecasting
Master Planning
Active Recipe Formulation
Landed Cost for RM and PM
Cost of Goods Sold (COGS)
Net Realisation Value (NRV)
Legacy Accounts Closing Accuracy
Bar Coding/Tagging and Batch-Wise Tracking & Costing
Production variance factoring in backflush
Formula Secrecy
Service Procurement (Freight)
Warehouse Capacity Management
Fixed Assets
Sales Forecasting
| Forcasting is usually done in Excel sheet from Top Down and Ground up. Compiling and review forcasting data is difficult on regular basis. Periodic review and control of Forecated vs Actual on a periodic bassis becomes difficult due volume of data due to excel limitation. | Ground up workflow for creating a consolidated proposed forecast at region product and category level. Top level review and target setting and subsequent review from ERP. | Periodic direct entry into forcaecasting portal, grounds up. Target setting in the portal and final commitment to ERP Sales Forecast | In some industries, the forecast is done at catgory level, threfore forceast relations between category and actual sales at SKU level. | Portal based forecast at ground level and priodic review by sales person and sales leadership on the forecast v/s actual portal. | Each sales person provides ground up sales forecast for the period and reviews the final target v/s actual on the forecasting portal. | NA |
Master Planning
| Disconenct between sales foreacst, production plan and material plan due to disconencted systems due to which the impact of change in demand, change in capacity change in material availability are not caliberated across the oerthe functions to optimise operations. Minimum/Maximum, Reorder Level, safety Stock level for Item is maintained for store consumable but not for Raw materials and Packaging materials. | BY bringing Sales forecast, production plan and material plan in ERP in real time, any change in the demand, capacity, availabilitywill trigger replan of the other dependent actions. Policy to be defined for Item/Item category wise whether it will be on Min/Max, Safety Stock or reorder Level. Change in Min/Max, Reorder and Safety stock due to season, demand or any other reason to be redifened perodically. | Creation of a Supply Chain departmetn / role by removing siloed roles of sales planning, production planning and matrail planning. Periodic reveiew and updation of standards like Min/Max, Safety Stock, Re-order level. | Multi-Stage Bill of Material, Standardisation of BOMS acoss plants, uinits and then accuracy of BOMs/Recipes wiuth changes in versions. Item Level maintainance of standards to be defined (Min/Max, Safety Stock, Re-order Level). | Real-time updating the ERP when change in demand (forecast, Sales Order, Sales Indents, Planned Transfers), cahnge in Capcity (Production Plan) and change in avaailiablity happes due to internal and external factors. Periodic review and updates of the standards. | All inventory transactions and demand, plan, supply documetns should be updated in real time. | In inventoy and related docuemts are not updated accurately in real time, tehn system driven Material planninga and productoin planning will beome inacucate. |
Active Recipe Formulation
| where formulation is depend on potency of active / passive ingredients, and any change in potency of the active ingredient changes the potency and composition of other ingredients. Then such formulation is done for each batch manually. | Complex formulation algorithms can be built in the system for doing automated formulations and reformulation’s based on available potencies of the batches in hand. | NA | Potency based formulation algorithms for each formula knees to be created as master data, and alternate materials also need to be mentioned. | Real-time updates required in change in formulations and accurate recording of batch-wise potency for each batch. Physical discipline of batch-wise issue and consumption to be maintained. | Physical discipline of batch-wise stock maintenance and accurate redoing of the same in system. | physical indiscipline or inaccurate recording in system will make the formulation inaccurate. |
Landed Cost for RM and PM
| Charges like freight needs to be loaded on RM & PM to calculate accurate Landed cost, but booked as expense. | All known charges related to procurement will be tagged on RM & PM Purchase order and will be allocated to material based on allocation rules like – Quantity, Value, Fixed cost, proportionately etc. | Charge allocation method and posting GL to be configured based on charge Items. | All possible Charge Items to be created. | Real-time updates required in change in formulations and accurate recording of batch-wise potency for each batch. Physical discipline of batch-wise issue and consumption to be maintained. | Physical discipline of batch-wise stock maintenance and accurate redoing of the same in system. | 1. In case charges are not know then it will be booked as expense and will not be loaded on Inventory. 2. There may be difference in actual bill received and charges loaded on PO, then differential amount will be booked in Gain/Loss of P/L Item. |
Cost of Goods Sold (COGS)
| Processing cos / production cost are generally loaded on Finished goods at month/period end at a consolidated level equal distribution on products in excel sheets. Therefore, plant-wise, line-wise, product-wise costing and yield cannot be bifurcated for decision making. | Identification of Cost elements (Labour, Power, Fuel, Overhead etc.) Tenderization of Cost elements calculation (Number of GLs). Standardization of run time for each operation. Activity cost will be (Run Time x cost elements) is qual to one operation cost. Sum of all operation cost is total cost of operation. Consumption of Material will be direct cost (landed cost). COGM is sum of Direct Cost + Indirect Cost. Monthly Closure of Inventory must be done. |
1. All direct exposes like Freight, Commission, CHA, handling etc. should be loaded on PO/GRN to derive Landed Cost.
2. Monthly closing and Provisional booking for which Invoices are not received and loaded on Inventory. 3. On receipt of Actual Invoice against provision, difference should be booked in P/L (SOP/Policy). 4. Comparison of Cost loaded on production and actual cost occurred during the period and comparison with the standard defined. Difference to be booked as variance (SOP/Policy). 5. Standard to be redefined and reason of spike to be analysed. 6. Inventory Valuation method for bought out items becomes (weighted moving average) and Finished Goods becomes Standard Price (SOP/Policy) |
1. BOM structure to be defined.
2. Routing (Process cost) to defined. 3. Version management policy to be defined. 4. Cost elements/Categories to be defined. |
1. Policy for redefining Routing to be defined.
2. Provision booked to be reversed on actual booking and difference Provision vs Actual to be booked in P/L. 3. Standard Cost should analysed periodically and adjusted if required. |
1. Periodic Closure of Inventory.
2. Standards are defined. 3. Policy/SOP is defined for Direct Cost element and Indirect Cost elements. |
In case Real time transaction not done then costing will not be accurate and reconciliation of COGS and GL becomes challenging. |
Net Realisation Value (NRV)
| NRV is derived for the purpose of Profitability calculation. Currently the cost can only be derived at the Material (RM, PM) level and indirect and overhead cost doesn’t become part of Cost calculations. Since it’s not possible to capture the cost at the Brand, Product, Customer, Salesperson level the Profit calculation is not accurate to this extent. | The target is capture indirect and overhead cost and allocate up to SKU level so that Last level Profit calculation can be done for effective decision making. | Any expense / cost which is not allocated at the Product level level, that needs to be allocated periodically. At the time of actual expense booking it should be booked as per the deepened cost center available (like Brand, Branch, Customer, etc.) | After allocation is done at the level of data available. Allocation program / processes the data upto the Item / Customer level | Booking expense / cost up to the deepest level available | While allocation is done need to ensure that the allocation abount and cost center is accurate otherwise it may lead to incorrect profit statements | Unallocated cost may lead to incorrect figures | after COGM, there ae many expenses comes before and after sales, Allocating algorithm, Matrix for specific and common expenses, Sales return, Debit Note, Credit Note. Sales Line wise profitability and reconcilation with PL. |
Legacy Accounts Closing Accuracy
| 1) Inventory Valuation is not system driven, it is entered for a period end, based on gross, uniform allocation. 2) Sales, Purchase, JVs are some times not updated in real time and books are pending updates / backdate entries are open. 3) Fixed Asset is present as a gross block and deprecation is not factored accurately end of each period. 4) Inventory, Assets, Freight, control accounts closing figures keep caching even after final commitment / period closure points. 5) Back Date entries are done even after opening transfer to new ERP/Books |
1) Final Opening / Closing figures are required with accuracy and trail, P&L and balancing figures taxying to each other. 2) Fixed Asset details are required asset and child asset wise. With due closing figures post factoring deprecation. 3) No back-date updates to be done in legacy accounting post upload of openings in ERP…, without corresponding updates the ERP. |
1) Periodic closure Discipline and Process. 2) Pre-Live mock Closure required to compile all opening / closing figures required by ERP on actual closing date, as per the formats and details required by the new ERP to test the data transformation. |
Batch-wise inventory opening figures | 1) Batch-wise Inventory is not maintained in legacy accounting. 2) Drill down functionality from Top to transaction for sub-Ledgers. |
1) Security and Roles not defied strictly in legecy system but in ERP Security and Roles should be well defined before starting. 2) Approval workflow is required but not defined. 3) Chart of account definition and categorisation. 4) Control Ledger reconciliation. 5) Goods in Transit (GIT) handling. |
1) Closing balances are not accurate at the time of starting Opening. 2) Inventory Valuation reciliation is always challenging because of back dated entry and received in multiple steps for plant and Locations. 3) GL Codes, Customer Codes, Vendor codes are different and opening balances gets updated incorrectly. 4) Individual balances are provided from Legacy system but not balanced for complete opening data for Ledger and Sub-Ledger. 5) Back date permission to users in legacy system. |
COA definition, control Leger monitoring and reconciliation process. Closing and Opening balances for Ledger and Sub-Ledger, GIT (Goods in Transit), |
Bar Coding/Tagging and Batch-Wise Tracking & Costing
| 1) Batch Wise tracking, movement is required to maintain accurate Inventory status and costing. 2) It becomes problem when discipline is not maintained and there is discrepancy between physical movement of batch vs Inventory movement in books. 3) Bar coding is next step to maintain batch wise movement and tracking but tagging barcode add another process. |
1) Discipline should be maintained in physical inventory movement vs ERP. 2) Barcode should be maintained in system for pre-printed Barcodes. 3) Barcode should be generated and tagged on material at receiving. 4) Scan facility to be available. This will help in fasten and accuracy of batch. |
1) Scan facility to be developed. 2) Physical verification before Inventory movement. 3) Warehouse maintenance so that Batch wise Inventory can be tracked physically. |
1) Barcode data should be maintained in system. 2) Inventory along with Batch number and Batch wise Value. 3) Batch Master maintenance. |
1) Batch number must be verified with any Inventory Transaction. 2) If Barcode is to be used then it should be mandatory from receiving to sell. |
1) Batch is maintained at each transaction. 2) Every Material/pack has Barcode and Barcode is scannable. |
1) Mismatch of batch in physical movement and transaction will lead to inaccuracy of Inventory for quantity and value. 2) Dependent values will never be accurate like COGM, COGS, NRV. 3) If Barcode master is not maintained or barcode is not scannable, then will hamper process and chances of mismatch will arise. |
Batch wise tracking – Physical vs Books reconcilation, |
Production variance factoring in backflush
| Gain and Loss of Raw material is booked through JV due to which costing of Material was not accurate on SKU and Batch Level. | Developed back flush process to calculated and post consumption against each SKU and Batch. | Month End Process needs to be created as new Process and close Inventory, so that Costing and consumption can not be changed once closed. | NA | Month End process to be done. Production consumption will be sum of standard consumption + differential consummation entries. |
Month End is necessary Process. | Inventory defence Books vs Actual will occurs. User have to post Inventory Adjustment entries. Inventory Valuation will never be accurate for FG. If Inventory is not closed on Monthly basis then Valuation data may change every month on exaction of Inventory Valuation. |
Formula Secrecy
| Consumption is posted by Production executives, due to this all formula/BOM is accessible to users directly or indirectly. | Back Flush Principle – Formula/BOM is accessible to only Authorised person. Total consumption against any SKU is combination of Standard BOM-Gain+Loss. | Authorised person can access Formula/BOM and standard consumption as per BOM. |
Service Procurement (Freight)
| Expenses like freight is booked as expense and Service Invoice is booked after receipt of Invoice. There does not have any link between RM procurement and its additional expenses and Tracking. | Expenses like freight are marked with RM purchase Order and subsequently loaded on Inventory or booked in expenses as per requirement. Parallary converted to Service Order for booking of Service Invoice. This creates link and trackability. | Service Order will be created before receipt of Invoice. | 1. Transporter will be created as Vendor. 2. Freight will created as Service Master |
1. In case Freight to be paid by Supplier, then only Freight will be loaded on Inventory and no Transporter SO will be created. 2. In case Freight to be paid by Company, then Service Order will be created at time of Product Receipt (GRN). 3. In case Freight to be paid by Company for Sales Process, Service Order will be created. 4. In case of Transfer, Service Order will be created. |
Warehouse Capacity Management
| Warehouse capacity is not well defined. Physical placement of material and capacity does not exist. | 1) Warehouse capacity, placement of material, scape availability should be defined. 2) Material planning should consider warehouse storage capacity with special storage requirement (Cold Storage). |
1) Assigning and marking warehouse in Location, Aisle, Racks and Pellets. 2) Policy to be defined either Item and location mapping will be predefined or on available space basis. 3) Physical discipline should be maintained in put-away and picking process. |
1. Warehouse breakdown into Location, Aisle, Racks with volumetric parameters. 2) Item and location mapping. 3) Inventory Transaction with batch and location |
Put Away and Picking process should be changed. Item must be stored at designated place so that while picking it is located easily. | 1) Capacity of each Rack and Location is defined properly. 2) Material is stored at designated locations. 3) Item and Location mapping is defined. |
1) Incomplete/ undefined information for capacity. 2) Item and Location mapping for existing items, New Items and discard/obsolete items. |
Fixed Assets
| Fixed Assets Register is not maintained properly even in excel. Grosss block and Net block is not available asset wise. | 1) Fixed asset to be maintained in System. Depreciation should be calculated by system. 2) Fixed Asset register is available from system at any point. 3) Budget for Fixed Asset acquisition should be maintained on System. |
1) Asset wise Gross block, Net Block to be prepared. 2) New acquisition to be booked asset wise. |
Asset Wise Fixed asset Register to be prepared. | 1) Asset acquisition, Transfer and disposal should from system. 2) No manual entry should be made for Fixed assets in GLs |
1) Fixed assets must be maintained Asset wise not Group wise. 2) Depreciation should be calculated periodically. |
Audit discrepancy/Qualified Audit report. |
Operational Capability based ERP implementation
After implementing ERP for many of our CPG customers and thorough understanding, we then developed a Distribution Management System for primary connection, secondary sales, and channel sales operations. We still support many of our DMS customers who are using our DMS system and Domain knowledge of Primary, Secondary, and Tertiary Sales is one of the key value additions that we bring to CPG Implementations.
RESEARCH REPORT
Cracking the labor productivity conundrum in the chemical industry
RESEARCH REPORT
Reinvention in the age of generative AI
RESEARCH REPORT
Where’s the money in sustainability for chemical companies?
RESEARCH REPORT
Powered for
change
INDIA ENTRY STRATEGY FOR S. KOREA'S LARGEST E-COMMERCE COMPANY
Overview
After implementing ERP for many of our CPG customers and thorough understanding, we then developed a Distribution Management System for primary connection, secondary sales, and channel sales operations.
Objective
After implementing ERP for many of our CPG customers and thorough understanding, we then developed a Distribution Management System for primary connection, secondary sales, and channel sales operations.
What We Did
After implementing ERP for many of our CPG customers and thorough understanding, we then developed a Distribution Management System for primary connection, secondary sales, and channel sales operations.
Results
After implementing ERP for many of our CPG customers and thorough understanding, we then developed a Distribution Management System for primary connection, secondary sales, and channel sales operations.
