shaw-innovations in supply chain cgs eht apac_v04

8/2/2019 Shaw-Innovations in Supply Chain CGS EHT APAC_v04

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Copyright 2011 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Innovations in Supply Chain CG&S and

EHT Industry perspective in APAC region

November 2011


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Copyright 2011 Accenture. All rights reserved.2

Content

Overview and growth story of CG&S and EHT in APAC region

Key Challenges in Supply Chain in APAC Region

Innovations in CG&S to tackle key challenges in Supply Chain

Innovations in EHT to tackle key challenges in Supply Chain

Reverse innovation and examples

Framework for Efficient and Innovative Supply Chains in APAC

Accenture tailor made innovative solutions for APAC region

Appendix


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Emerging markets are changing the balance of economic power andpresent a tremendous opportunity for Global Manufacturers

Traditional Globalization flowed from developed markets toemerging markets but the flow is now reversing with emerging

markets expanding into developed markets

China is projected to catch up with US GDP by 2048 In 2005, emerging economies accounted for half of the

worlds GDP for the first time since the industrial age

By 2020 Asia is projected to contribute 43% of Worlds GDP India and China to remain highest percentage of new jobs by

2020

Snapshot to Emerging Markets Potential

Source: Economist Intelligence Unit.

Relative size of Big 4 economies

New Jobs in the World Economy (% ofworld net increase 2005-20)


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CG&S and EHT industry in emerging markets is expected to grow 4times faster than advanced nations

Emerging markets forecast a ~ 8% GDP growth, much higher than developed markets ~ 2%Since 1990, Emerging markets have registered average underlying sales growth of 9% per annumCG&S Industry growth rates for North America & Western Europe are forecasted to be well below the industry averageEmerging markets will account for the vast majority of growth of mobile phones, PCs and TVs over the next five yearsMany emerging-market multinationals used the downturn to strengthen their position e.g. Chinas Huawei expanded

aggressively, becoming the worlds second-largest telecoms equipment manufacturer

Segment growth rates till 2014

Avg FMCG growth

rate

Source of growth of E&HT products,2010-2015 (number of units, %)

Source: Euromonitor International 2010, World Bank and IMF

34%

17%

12%

Developedeconomies

Emergingeconomies

66%

TVs

PCs

83%

Mobilephones

88%

Source: Economist Intelligence Unit


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Growing Middle class and increase in per capita expenditure inemerging markets are fuelling the growth in market demand

Haves

Have lots

Have nots

2010

2.9

0.9

2020

1.9

2.7

2.0

-1.0

+0.7

+1.1

Change

R

ising

Affluence High

GDPGrowth

RisingPer

CapitaIncome

RisingAffluence

Risingper

CapitaExpendit

ure

HighIndustryGrowth

0

1,000

2,000

3,0004,000

5,000

6,000

7,000

8,000

2009 2010 2011 2012 2013 2014

India China S.E. Asia Africa South America

Per capita expenditure US$

India and China not included in SE AsiaAfrica consists of all African continent countries

Source : Planet Retail

2.0

Emerging economies contributes to a majorshare of growth and revenues for CG&S and EHT

companies.

Billions of people in emerging markets

5 yr CAGR in Emerging Markets

12 %

10%

10%

20%

14%

Source : Unilever Annual Report


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Content








Appendix


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Very attractive global market Large number of intended new

entrants, particularly in the

retail space Poor infrastructure Entry to WTO, increased

competition

JAPAN

Market deregulation Increase level of imports Retail price wars Efficiency drives Re-structuring supply chain

networks and long standingdistributor models

Mature and tight margins Very intense competitive

retail market

Efficiency drives continuedmarket penetration

Increasing level of imports

Good growth Chaebol taming

Increasing deregulation/FreeTrade region and Singapore as

Tax Efficient Hub Market shake-out Good growth, competition up Large number of new entrants Increasingly sophisticated

buyers

Vietnams entryASEAN/AFTA Preferential

tariffs 0%-5% on most items

Source: Accenture thought leadership research: Asia Pacific Supply Chain Challenges and Opportunities

GREATER CHINA

KOREA

Australia/New Zealand

ASEAN

Key APAC Market Trends


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Several forces are impacting the key trends of companies in APAC

Allied(Technology &Governance

Forces)

Trading PartnerForces

InternalForces

MarketForces

Key Trends Globalization Collaboration Seamless

Supply Chain

Compliance Demand Driven

Flow

Flexible governmentpolicies

Increase in Governanceaspects

Free trade vs. Fair trade Immature offshore

infrastructures

Real time information Technology

standardization

Globalization &liberalization ofeconomies

Operation cost pressures Thrust on organic/

inorganic growth

Supply Commoditization Demand based value

chain

Focus on corecompetency-shifting noncore services in theupstream side

Focus on services andvalue added products

Focus on innovation

JVs/Organic/Inorganicrelationship

Shift in the value chain Offshore to co-locate with

manufacturers

Cost vs. Service vs.Quality

Supply Chain spanningacross internalfunctions and tradingpartners

Reliance on operationalflexibility,responsiveness andproductivity

Thrust on R&D Time to Market

Logistics Challenges

Retail Market Challenges

Logistics Costs as percentage of GDP : China- 15-16%,India- 11-13% and Indonesia- 14%

India

Only 47% of roads are paved in India 70% of seaborne trade handled by 2 of 12 major ports Fragmented transportation market dominated by small

truck ownersChina The quality of transport infrastructure in its vast inland

areas is inferior compared to the more developed coast Heavy dependence on roads- road transport accounts for

75% of total freight volume

The logistics management cost component in India is ashigh as 7% -10% against the global average of 4% - 5% ofthe total retail price

Organized retail in APAC marketsIndia 5%China 20%Indonesia ~30%

Low initial investment & employmentopportunities are reasons for prevalentunorganized retail

Reaching the local shops across variousmarket tiers require multilayered distributionresulting in higher distribution costs

Amateur Logistics and Fragmentedretail markets are key forces impactingemerging markets


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Operating efficient supply chain and Distribution Network in APACMarkets is hindered by multiple challenges

In the emerging markets, almost2X money spent on logistics costsas a % of GDP compared toadvanced nations

Lack of paved roads andhighways; underdeveloped railnetwork, ports, air ports andcommunication infra restrictsquick turn around time

Communication infrastructure

Different tax structure and multiple tax incidences in one of the

emerging markets is forcing companies to tailor distribution andwarehousing strategies to optimize on tax incidence

Restrictions on FDI to invest in

retail sector in few emergingeconomies

Mom n Pop stores dominate whencompared to advanced nations

Emerging economies poses a challenge to coverdispersed locations with varying level of consumerpattern across several market tiers

Diversegeographies

Amateurlogistics

Fragmentedretail markets

Differential taxregimes andcommercials

Inadequateinfrastructure

Imposing localregulations


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Source: Euromonitor June 2009

China:

China's one child policy means that the proportion of the populationover 65 will rise sharply by 2020, from 9.1% in 2008 to 12.4% in

2020;

China will experience a population bulge, with those born before the1979 policy reaching their peak consumption level around 2020.However, the ageing population will put pressure on social services

Consumer Demographics display different trends within countries ofemerging economies of the world

Implications for FMCG

Even within emerging economies, there will be strongdifferentiation in consumer demands in different markets

India & Brazil markets will continue to remain Youthdominant

China & Russia will increasingly require products cateringto an ageing population, as discussed earlier

India:

India will also experience an ageing population, but its high populationgrowth means that it will still have a large youth population, with those

below 15 years of age totaling 26.7% of the population in 2020, thehighest amongst the BRIC

This will translate into an important emerging consumer market, whichcan be targeted as they begin working life

Russia:

Russia's population is declining, partly owing to emigration, but also toa low fertility rate and low male life expectancy

Russia will therefore suffer doubly, from an ageing population and ashrinking overall population.

By 2020 Russia will have the largest proportion of over 65s at 14.4%of the total population

The proportion of females in the population will be notably larger inRussia than the other BRIC countries at 54.3% of the total populationin 2020.


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Trends specific to countries within APAC poses unique supply chainchallenges that necessitates local innovation

Very High

High

Medium

Low

Very Low

The unique constraints of the developing markets lead to challenges which have an impact on the supply chainperformance parameters

Distribution cost as a % ofproduct cost

Distribution lead times

Forecasting Accuracy

Inventory turns

ChinaIndia

MalaysiaIndonesiaSouth KoreaThailandVietnam

Parameters in above graph acrossgeographies indicate there is a huge

opportunity in improving supply chain

efficiencies through innovation


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To tackle these multiple challenges Supply Chain is an importantcatalyst for growth in emerging markets (according to CxO Surveys)

Source: IMF

0

2

4

6

8

10

Risk Mitigation

Tax Optimizatoin

Market Access

Cost Reduction

When asked Which of the following factors isinfluencing potential emerging markets operations

strategy change?It was found that Market access is the most often citeddriver of potential changes to operations anddistribution models in key markets

When asked Which of the following does your siteregard as their top 3 objectives

It was found that about 70% of respondents indicatethat Improved Customer Service Levels as one of thetop 3 objectives in India

Source: PRTM

Source: E&Y

Most respondents believe it is very important orimportant for the supply chain to help achieve thefollowing imperatives

Revenue growth (97%), effectively managing totaldelivered cost (92%), procurement efficiency andeffectiveness (92%), product innovation (87%) andmanufacturing excellence (87%).

43%

37%

38%

39%

46%

32%

54%

50%

54%

48%

46%

54%

2%

12%

7%

11%

8%

12%

1%

1%

1%

2%

1%

2%

Revenue Growth

Product Innovation

Procurement Efficiency andEffectiveness

Manufacturing excellence

Effectively managing totaldelivered cost

Meeting corporate socialresponsibility and carbon


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Content








Appendix


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Supply Chain Issues Early Indicators

Strategy and operations linkage Significant process and organizational changes Need to manage PD across multiple collaboration

partners

Complex standardization requirements

Slow time-to-market Design defects in manufacturing Low new product success rate

Fluctuations in demand and inaccurate forecasting Lack of coherence in planning and execution

Non optimized inventory levels Sub-optimal planning and management of network

capacity

Consistent forecast misses and errors Supply and Demand planning not coordinated excess inventory, obsolete inventory, and incidence of

stock outs

Imbalance in priorities between achieving best cost/service and minimizing impacts to operations

Limited collaboration with suppliers Higher direct and indirect operating costs

Lack of holistic sourcing strategy Indirect spend growth out of sync with business growth Fragmented spend spread across multiple business

units

Increasing raw material & commodity costs Production capacity not aligned with changing demand

trends

Shortage of skilled labor forces Stringent production quality standards Collaborating with contract manufacturers Manufacturing mix decisions local vs. global

High COGS Low ROA and production overcapacity Increasing labor and production cost variances Minimal data sharing/visibility of operations Unreliable quality performance and adherence to specs

Customer requirement for shorter delivery lead times Volatile fuel/transportation costs Extremely large carrier base Misalignment between distribution network and

customer base

Underperforming on-time shipment metrics Increasing transportation and warehousing costs Low utilization of preferred carriers Dropping customer satisfaction levels

Develop

PD/NPD lead time Innovation Operations

Plan

Supply plan Demand Plan Inventory

Management

Source

Sourcing Procurement Ops Inbound Logistics

Deliver

Order Management Distribution Outbound Logistics Reverse Logistics

Make Engineering Manufacturing Assembly

The leaders in Emerging Markets need to innovate to address specificissues across these supply chain key areas to gain competitiveadvantage


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Global Sourcing Strategies

Quality Service and Quality Production

Flexibility + Cost of Manufacture / Supply

ProductCentricEfficiencyCentric

Customer Centric

MultiChain

Strategy

PortfolioStrategy

Multi PartnerStrategy

Plan, Make+

Fulfill

Innovate

+

Source

Customer+

Service

Manage

Profitable

Growth

Flexibility

Push versus Pull Networks

Total Cost to Serve

Information versus Assets

Serving New Markets

Managing Complexity

Sustainability Strategy

These Supply Chain Innovations should be centered around three keyareas: Customer, Product & Efficiency


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Copyright 2011 Accenture. All rights reserved. 16

Supply Chain Success Stories Develop Phase

Tata Nano is an incredible example of innovation in PD. The concepts such as Frugal Engineeringwherein the components and designs were developed using existing platforms

This innovation in PD was complemented with collaborative approach between Tata and suppliersto develop components and optimize the cost of the car

Frugal Engineering-An innovation in PD

ITC in India blends Aashirvaad atta differently for different regions in India based on regionaltastes and preferences.

The company launched Aashirvaad Select for the northern market, Aashirvaad MP Chakki for thewest and Aashirvaad for the east. ITC used its e-Choupal initiative to source 18 different gradesof atta.

ITC Aashirvaad Different flavors catering to different regions

Develop

How do we make ourPD group aligned withsupply chain

How do we reduce newproduct development

lead time?

How do we executeseamless coordinationof PD withManufacturing?

How do we effectivelymanage the new

product developmentprocess?

How do we become selfreliant to design new

products?

How can we launchnew products earlier

than competition?

How do we design highquality products aligned

to customers

requirements

P&G recognizes Chinese customers needs and potential and segments market carefully. Abrand offers different products oriented at different customer classes.

E.g., in China, Olay offers a series of product oriented on both medium-high and medium-lowmarket while in many other countries oriented only on medium-low market.

The extended product line increased market share. The sales in China helped Olay becomeP&Gs 13th brand achieving sales above $1 billion one year earlier

Re-segmentation aligned to China market needs


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Supply Chain Success Stories Plan Phase

MSIL offers 11 car models with 150 variants for almost all customer segments. 55% market share inIndian market

Lately MSIL is emphasizing on fuel efficiency, reliability, responsiveness and flexibility in supplychain

The first in the automotive industry to focus on rural supply chain. More than 10% of sales arecoming from Rural market and this market needs a different approach in supply chain. MSIL has

successfully penetrated this market by emphasizing on dealers and distribution network

Indias car market is expected to grow at a CAGR of 16% on the next 5 years. This unprecedentedgrowth requires OEMs to launch the products in the respective categories aligned fully tocustomers requirements and taste.

Product development has emerged as the key differentiator for OEMs to penetrate the Indianmarket. The OEMs have begun developing R&D centers within India to design and develop the

cars. GM has made investments in engineering center in Bangalore to serve Powertrainrequirements for entire APAC market.

A sustained market leadership with critical focus on Supply Chain (Mfg/Sourcing/Distribution)

Product Development-key for competitive advantage

Plan

How can we make thesupply chain moreresponsive and flexible?

How can we improvecustomer service leveland consistency?

How can we improvethe customer demand

visibility & forecastaccuracy?

How can we improveinventory performancewithout impactingcustomer servicelevels?

How can we improveMaster Production Plancompliance?

How can we ensureoptimum networkcapacity planning andmanagement?

How can we servicecustomers moreprofitably?

How can we tailor ourbusiness streamsbased on customersegmentation?

Big Bazaar and Futrure Bazaar is a part of Future group and has around 12 million square feet ofretail space in over 71 cities and towns and 65 rural locations across India.

FutureBazaar.com an e-arm of the parent group provides an integrated shopping experience andhighly responsive supply chain to customers wherein they are able to buy products online from

any of their businesses such as Big Bazaar , eZone, Pantaloon etc.

Redefining Supply Chain in the Indian market


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Maruti maintains a spare Just-In-Time inventory which is replenished on an hourly basis. Maruti has 250 plus Tier-I vendors and 20 global suppliers who ensure this continuous supply Its vendors are connected to the companys much-lauded e-nagare system, which is an

electronic supply chain system, through which the vendors inform the company on a day-to-

day basis of diverse requirements and provision of supplies. Once informed of desired

supplies, the vendors deliver the material to the factory doorstep.

Supply Chain Success Stories Source Phase

Innovative Supply Chain footprint in India

Dabur has conducted e-sourcing auctions of projects worth close to Rs 150 crore. Dabur usesthe same concept to source products like herbs, honey, spices and even packaging.

Today Dabur has not only managed to save costs by close to 8 percent but has also managedto bring in transparency in the complex, fragmented market for herbs.

The aggressive bidding by many vendors has cut costs massively and company sources saythat Dabur has already saved close to Rs 2.5 crore by adopting e-sourcing practices.

E Sourcing A strategic Initiative

Source

How can we collaboratewith our suppliers?

How can we reduceindirect and directmaterial cost?

How should we moreeffectively leverageglobal / low-cost

sourcing?

How can we improvecompliance to contractsand policies?

How can we improvesupplier performanceand management ofraw materials?

How can we improvecommoditymanagement

strategies?

How can we ensurealignment ofprocurement strategy,organization, processesand metrics?

Marutis very slim, trim and robust value chain model

Indias retail market comprises of mostly unorganized players with organized market constitutingonly 6% of market share. Around 40% of raw products is wasted due to lack of cold storage andstringent supply chain processes

Wal-Mart jointly with Bharti are emphasizing on Cash and Carry business in the Indian market.Wal-Mart is persistently focusing on effective supply chain network by expanding supplier basethrough training on supply chain practices. This resulted in 20% cost savings for both of them


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Supply Chain Success Stories Make Phase

Make

How can we optimizeour manufacturingprocesses?

How can we improveutilization of productioncapacity?

Should themanufacturing strategybe regional or global in

nature? Should we employ a

single source or multi-source plantmanufacturing strategy?

How should weleverage low-costproductionopportunities?

How can weconsolidatemanufacturing

footprint? How can we identify

improvementopportunities?

How can improvementopportunities beidentified, evaluated,and implemented?

How should we managecontract manufacturingcapacity?

Manufacturing innovation to cater to local constraints

Faced with growing criticism regarding its very high consumption of water ,Coca Cola inIndia revamped its manufacturing processes to prevent wastage and optimize usage of

water.

The plants aim at efficient & effective use of water during beverage manufacturing process bycontinually improving the infrastructure, monitoring & controlling the consumption of water at

individual areas & imparting awareness to associates.

The water conservation strategy is centered on the 4R approach (reduce, reuse, recycle andrecharge).

The Coca-Cola system in India has improved its water use efficiency (water usage ratio) byover 25 percent since 2005

ITCs Mangaldeep is already the second-largest national agarbatti brand, riding on thesuccess of two sub-brands, Madhur 100 and Yantra. Sector analysts peg the agarbatti

market at around Rs 1,800 crore, and growing at 8-10 per cent yearly.

Around 10-11 small firms are engaged in contract manufacturing the agarbattis and togetherthey supply about 180-200 million sticks per month to ITC.

These are marketed through half a million retail outlets that distribute ITCs other products.The sticks are available at a price between 8 paise and Re 1, with urban and rural markets

contributing equally to the turnover.

Contract Manufacturing A strategic Initiative


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Supply Chain Success Stories Deliver Phase

Deliver

How can we improvedistribution networkperformance?

How can werationalize our DCnetwork?

How can weimprove distribution

centers cost andserviceperformance?

How can weleverage volume to

managetransportation costsand service?

Coca Cola India employs direct to market strategy in metros where it services around 4 millionoutlets through company owned infrastructure thus enabling high service levels

Also Coca Cola leverages its direct to market data to know and hence categorize and profile itscustomers, leading to analytical decisions deriving higher returns.

Coca Cola Direct To Market

HULs Project Shakti

Project Shakti was launched by HUL in 2000 in partnership with non governmental organizations,banks and government.

Women in self-help groups across India are invited to become direct-to-consumer salesdistributors for Hindustan Levers soaps and shampoos.

The company provides training in selling, commercial knowledge and bookkeeping to help thembecome micro-entrepreneurs

Gillette optimized its cost to serve by relocating its pack centers to Baddi (Tax holiday zone)there by significantly reducing the cost to serve its customers through reduced taxes and utilizing

low cost manpower.

Gillette Cost to Serve Strategy


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Appendix


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Worlds most economical refrigerator-Godrej Chotukool

Supply Chain Success Stories Develop Phase

Develop

How do we make ourPD group aligned withsupply chain

How do we reduce newproduct development

lead time?

How do we executeseamless coordinationof PD withManufacturing?

How do we effectivelymanage the new

product developmentprocess?

How do we become selfreliant to design new

products?

How can we launchnew products earlier

than competition?

How do we design highquality products aligned

to customers

requirements

At $ 45 as against iPads $ 499 this tablet PC is the most economical in the world.Sporting a 7-inch touch screen, Aakash runs on Android 2.2 operating software.According to specifications, it has a high-definition video co-processor for goodmultimedia experience.

Frugal engineering along with economies of scale is expected to make this productfinancially viable in the market.

Aakash-Indias low cost answer to the iPad

At $ 69 Godrej Chotukool is the worlds most economical refrigerator.Chotukool does not have a compressor. The refrigerator weighs only 7.8 kg, runs on

a cooling chip and a fan similar to those used to cool computers.

The operational cost is low: the refrigerator consumes half the power consumed byregular refrigerators.

The Chotukool was co-designed with village women to assure its acceptability

Micromax is a fastest growing mobile handset firm in India with ~7% market share The strategy focuses on innovation, design and technology to tap the growing mobile handset

market

Micromax considers PD as a cornerstone for bringing the innovative product in this market The product innovation includes differentiated approach by long battery life, dual GSM

capability, low-cost QWERTY phones, universal remote control and gaming phones

Innovative product approach


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Supply Chain Success Stories Plan Phase

Based on keen customer insight and fine customer segmentation, Nokia launched aservice called LifeTools -Providing farmers in India, China and Indonesia with realtime commodity market data.

By providing this the service Nokia commands tremendous brand loyalty in a marketwhere the majority of phones are non smart phones

The aim is to service this massive consumer segment profitably and also provide aservice which will improve the livelihood of the farmers.

Already over 15 million people have signed up to pay Nokia $ 1.35 a month for thisinformation.

Nokia Life tools

Haier

Engineers in Chinese company Haier noticed that the pipes in their washingmachines were getting clogged because customers were using the machine to

wash vegetables.While other companies put warning stickers on their machines advising customers

not to wash vegetables in the washing machine ,Haier tweaked their machines,added bigger pipes and encouraged this new innovative use if the washing

machine

They also designed a washing machine which could be used to make goatscheese.

By adapting products to the needs of the customers and having a keen insight onconsumer behavior ,Haier was able to become a leading player in the highly

competitive consumer electronics industry.

Plan

How can we make thesupply chain moreresponsive and flexible?

How can we improvecustomer service leveland consistency?

How can we improvethe customer demandvisibility & forecastaccuracy?

How can we improveinventory performancewithout impactingcustomer servicelevels?

How can we improveMaster Production Plancompliance?

How can we ensureoptimum networkcapacity planning andmanagement?

How can we servicecustomers moreprofitably?

How can we tailor ourbusiness streamsbased on customersegmentation?


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Supply Chain Success Stories Source Phase

By centralizing the procurement function in all its 115 factories LG has been able togain tremendously because of increased visibility and better deals with thesuppliers .

By buying aluminum instead of higher-priced copper for the guts of electrical goodssuch as home appliances, purchasing officers saved $25 million annually.

The cost-cutting saving them $2 billion annually helped LG get through the globaldownturn better than many competitors.

These innovations have enabled the company to reduce cost of many of itsconsumer products. For example, it was able to reduce the cost of its best sellingtouch screen phone (LG Cookie)by 30%.

Source

How can we collaboratewith our suppliers?

How can we reduceindirect and directmaterial cost?

How should we moreeffectively leverageglobal / low-cost

sourcing? How can we improve

compliance to contractsand policies?

How can we improvesupplier performanceand management ofraw materials?

How can we improvecommoditymanagement

strategies?

How can we ensurealignment ofprocurement strategy,organization, processesand metrics?

LG Electronics

Flextronics

A major contract manufacturing company based in China ,Flextronics makes cellphones ,X-box game consoles ,PCs and other hardware in 13 factories.

Almost every chemical, component, plastic, machine tool, and packing materialFlextronics needs is available from thousands of suppliers within a two-hour driveof the site

That alone makes most components 20% cheaper in China than in the U.S By effectively collaborating with suppliers and ensuring that material cost is

reduced Flextronics enjoys considerable low cost advantage.


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Supply Chain Success Stories Make Phase

Initially known only as low cost manufacturing locations primarily because ofabundance of cheap labor ,APAC countries are improving their manufacturingprocesses to attain high levels of quality and efficiency.

Samsung has effectively used the philosophy of Six Sigma to improve itsmanufacturing processes and attain high levels of quality.

SamsungMake

How can we optimizeour manufacturingprocesses?

How can we improveutilization of productioncapacity?

Should themanufacturing strategybe regional or global in

nature? Should we employ a

single source or multi-source plantmanufacturing strategy?

How should weleverage low-costproductionopportunities?

How can weconsolidatemanufacturing

footprint? How can we identify

improvementopportunities?

How can improvementopportunities beidentified, evaluated,and implemented?

How should we managecontract manufacturingcapacity?

The Micromax phones are designed by the in-house research and developmentteam, as is the embedded software. Manufacturing is outsourced to about 11factories in Taiwan, South Korea and China.

Micromax has recently invested in setting up a plant in Himachal Pradesh, Indiaas it feels outsourcing manufacturing completely leaves the door open for supply-side uncertainties.

By effectively leveraging low cost production opportunities while mitigating therisk involved and by streamlining the manufacturing process to ensure reducednew product development times, Micromax has innovatively managed to make itsmark in the competitive handset manufacturers market .

Micromax


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Supply Chain Success Stories Deliver Phase

Faced with Loss of Market Share and decline in margins due to Very low visibilityfor secondary sales causing stock outs and high cash lock up ,Motorola decided torevamp its distribution network in India

It removed the National Distributor and introduced a Direct to Town Distributor(DTTD) and Direct to Retail (DTR) model.

With initiatives likes Collaborative forecasting and online ordering they were able toovercome their business challenges.

MotorolaDeliver

How can we improvedistribution networkperformance?

How can werationalize our DCnetwork?

How can we improvedistribution centers

cost and serviceperformance?

How can we leveragevolume to managetransportation costs

and service? Nokia created a new channel named Fulfillment Distributor in China. In this mode Nokias sales people promote to the end retailers directly while the

distributors act as a platform of delivery, money flow and service.

In Guangdong the sales increased by 40% through this mode. And Nokiasuccessfully extended battlefield to tier 3 and tier 4 cities.

Innovative Channel Strategy


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Appendix


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Emerging Markets are the Innovation Laboratories and giving rise toReverse Innovation

28 2011 Accenture. All rights reserved.

Reverse innovation," the concept encompasses any innovation that is adopted first in thedeveloping world and then migrates into mature markets.

-Worlds cheapest water purifier

Swacch means clean in Hindi. Tata launched the water purifier Tata

Swacch targeting the rural market in India with the cheapest water purifier

in the market. The product does not require running water, power or

boiling and uses paddy husk ash as a filter. It also uses silver

nanotechnology. It can give purified water enough to provide a family of

five drinking water for a year. The company feels it will open a whole new

market.

eKOCool.

Introduced eKOCool, a chest cooler operating on solar energy with a

capacity to store about 4 dozen 300 ml glass bottles. The innovation also

charges a mobile and solar lanterns. Coca-Cola has plans to pilot the

innovation in different cities in India and may be it will introduce it in other

developed countries as well.

Kurkure and Aliva

Kurkure is a INR 700 Cr successful brand in India over a decade.

PepsiCo planning to launch particularly in west Asia.Made from corn, riceand gram flour, zero per cent trans fats and no cholesterol, Rs-3 small

packs for pushing sales in the lower-tier towns.

Glocalization involves adapting to local marketpreferences rather than truly innovating

Some of the most compelling innovations of our timeare poised to emerge not in the U.S. or other developed

countries but in emerging markets such as China andIndia

Because of the rapid growth in demand and scale inemerging markets, like Brazil, China and India, theopportunity to create local, customized solutions is muchmore pronounced

Tata Motors Tata Nano

While companies like Ford set up its global automobile platform in India

and catered to the niche premium segments in India, Tata introduced the

Tata Nano for the price conscious consumer in India in 2009. Tata plans to

launch Tata Nano in Europe and U.S. subsequently.


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Examples of Reverse Innovation in EHT Industry

GE MAC 800

The machine is the field model that GE Healthcare developed for doctors in Indiaand China in 2008.

These were Introduced in the US market at $2500 or at 80% markdown fromproducts with similar capabilities.

Xerox Innovation Hub

Xerox Innovation hub launched in Chennai, India in 2010-the first such venture in thedeveloping world.

The aim is to tie up with local entrepreneurs and institutions to identify and leverageinnovations which can be introduced globally.

Nokia 1100

Launched with the tagline- Made in India- it had a built in flashlight, a dust proofnon slippery grip, and was lightweight and had a small size.

The phone was an instant success in the developed world as well because of itsdurability and long battery life.


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Appendix


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Organizational divisionsBudgeting processInconsistent goals, objectives,measurements

Cultural differences

Flows Physical Services Digital Information Financial Legal

Demand

Order to delivery

Service/Return

.to value deliverysystemBarriers

Plan Buy Make Move

From Supply Chain

EcosystemPartners

The key is to redefine the supply chain as a value delivery system

With this broader perspective, companies can identify a greaternumber of opportunities to innovate and improve performance. In

addition, by seeing the interconnections among these elements, theyare less likely to sub optimize the whole by optimizing one of the

parts.


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Seven Supply Chain imperatives (Value deliver systems) combine todrive high performance

Companies that excel in above seven areas will be better positioned to develop, source, manufacture and distributesuperior products at lower relative costs; increase revenue, profit and shareholder value faster than competitors; and

more effectively anticipate customer needs and meet them profitably

Segmented Design

Adapted toCharacteristics

Value Delivery

System Approach

Dreamers

Efficient Under-Performers

Losers

Optimize globaloperating model

Clear ValueCreation System

Thinking:Fit with business Strategy

Selective investmentfor mastery

IT focused on insightand responsiveness

Process Executionpowered by high

performance culture

Doing: Ability to Execute

High Performance


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Appendix


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End to End Solutions provided by Accenture to tackle key challengesin APAC CG&S Industry

Digital

Consumer

Services

Channel &Revenue

Management

Services

Speed to Consumer

Services

Integrated

Business

Services

ERP Transformation

Services


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Accenture can help creating a differentiated distribution capability foremerging markets, that enables firms overcome challenges and growtheir revenues, margins and market share

Accentures Response and Value DeliveredDistribution Challenges

We help clients select the right distribution model and channel partner, which means they canbetter serve their end customers and extend their reachand profitabilityin new andexisting markets.

Solutions: Distributor Selection Criteria; Distribution Model-Maturity Assessment; Baselining &Benchmarking

We help clients optimize their product portfolio, which reduces complexity and distributioncosts, and also allows them to focus on those SKUs that matter most.

Solutions: Portfolio optimization; SKU rationalization; Product complexity management; Channel &retailer assortment optimization

We help clients examine every aspect of their distribution capabilities to identify opportunitiesto reduce their cost to serve.

Solutions: Logistics PMO; 3P IPO; Sales and operations planning; Inventory optimization; Networkoptimization; Demand and supply planning

We help clients Integrate their infrastructures and applications with those of their distributors

to provide greater visibility into inventory levels, sales data and customer trends, and toenable more effective management and control of the distribution network.

Solutions: Infrastructure optimization & management; Application portfolio strategy; Applicationdevelopment & maintenance; Industrialized global ERP deployments; SAP upgrade; ERP valuerealization

We help clients apply analytics to gain valuable and actionable insights into the distributionnetworks costs, effectiveness and ability to serve the end customer.

Solutions: Supply chain analytics; Channel & revenue management analytics services; Businessintelligence; BPO services for analytics

Geographical diversity & reach Logistical maturity Long lead /transit times Service levels for remote markets Cost-effective Reverse Logistics

Distributor Exclusivity Distributors investment capability Serving remote markets Distributor Performance Management

Visibility of Distributors Inventory &Sales

Visibility of POS data and Consumerbuying trends

Product Proliferation Multiple Pack-sizes and Price points Combative Pricing

Data availabilityAccurate inventory deployment Detecting changes in demand trends

3

1

2

4

5


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End to End Solutions provided by Accenture to tackle key challengesin APAC EHT Industry


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Appendix


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Supply Chain Cost followed by Optimized Distribution Network andRight Selling Cost are the levers preferred by

Company Country Cost to Serve advantages

IndiaP&G in India identified that cost to serve for its products for Rural segment will not create economic value andhence realigned the market and distribution strategy for Urban market through traditional and modern trade.

India

Cost to Serve exercise uncovered the breakdown of costs incurred in supply of products to its customerspreviously treated as black box and helped the organization to evaluate Investment profitability and CTS VsInvestment of all the Trade accounts. This reduced the companys increasing spend on emerging Modern Trade

affecting the Total Business Operating Profit .

IndiaGillette optimized its cost to serve by relocating its pack centers to Baddi (Tax holiday zone) there by significantlyreducing the cost to serve its customers through reduced taxes and utilizing low cost manpower.

ChinaIn China, P&G analyzed that cost to serve will not be able to sustain competitive pricing in rural and mid-tiermarkets. Hence, P&G decided not to target rural markets and moved to Design to Cost concept in mid-tier .

China Colgate acquired a substantial stake in local Chinese toothpaste company Sanxio and discovered a 30% costadvantage and reduced costs by some 60% through localizing production and accessing distributor chain ofSanxio.

ChinaCoca Cola China plans to improve packaging material efficiency per liter of product sold by 7% from 2008baseline.


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.CG&S companies to reduce overall Cost-to-Serve in APAC Markets

Company Country Cost to Serve advantages

Indonesia

Unilever keep improving its distribution by developing distribution center in Cibitung and renovate its distributioncenters in other cities to better leverage economy and scale and to reduce stock outs during long public holidaysuch as Lebaran.

IndonesiaKalbe Farma own its distribution & logistics company, Enseval Putera Megatrading which also distributes non-Kalbe Farma products. By strengthening its distribution infrastructure, Kalbe Farma will gain advantage of

improved distribution network, better product accessibility and improved working capital position.

IndonesiaStarting in 2010, HM Sampoerna has expanded its business activities to include direct sales and distribution,gaining efficiencies from the distribution network. PT Handal Logistik Nusantara is the subsidiary of Sampoernathat handle the sales and distribution.

Indonesia

Garudafood outsource its distribution via SNS Integrated Consumer Goods Distributor. SNS has numerous ofdepos that serve hundreds and thousands of customer outlets throughout Indonesia. SNS also has a join ventureoperation with sub distributors that operate from Aceh to Papua, thus increase the geographical coverage of thedistribution.

IndonesiaIndofood has one of the most extensive distribution network in Indonesia. It owns the distribution center as well asoutsource some of the distribution activity to third party. Its strategy is to include many stock points in high densitymarket area such as retail outlets and traditional market to serve geographical needs at the shortest time.


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Company Product Portfolio Optimization Strategy

Leading in Mens grooming products, introduced Menz Facewash targeting the Metropolitan Man andmens cosmetics market .

Introduced Minute Maid Orange and Nimbu and Maaza Aam Panna under Non-carbonatedbeverages segment.

Parle recently introduce the Baked chips through product differentiation in waffers market and use itsfar reach of existing distribution channels of biscuits.Responding to trend shift from carbonated to health drinks, Parle sold Thumbs Up to Coca Cola.

P&G launched bargain-priced Tide Naturals in India. It now offers laundry detergents at three distinctperformance and pricing levels, delivering a solid value that is now affordable for more than 70% ofIndian consumers.

Marico expanded its Saffola Low cholesterol Cooking oil portfolio by adding Saffola Tasty oil, Saffola

Salt, Saffola functional foods and oats.

Started Business with low cost Vada Pav and expanded portfolio with variants like cheese andSchezwan according to varying customer tastes. It also introduced beverages like Lassi, Mango Lassiand Fountain Pepsi leading to improvement in revenues.

CG&S companies have successfully expanded product portfolio tocapture local tastes/habits/preferences in APAC Markets(India Examples)


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CG&S companies have successfully expanded product portfolio tocapture local tastes/habits/preferences in APAC Markets(China Examples)


Introduced four Minute Maid flavors in China--orange, pink grapefruit, tropical fruit, and grape withaloe vera pulp

Launched Yuan Ye ("original leaf"), a ready-to-drink teaIn 2008, generated 19% overall volume growth in China for Coca Cola

Altered product formulation of Oreo cookie to suit local tastes Research showed that Chinese consumers found them too sweet, while Indonesian consumers

preferred a sweeter cookie

Oreo is now the #1 selling packaged cookie in China

Introduced Head & shoulders specifically to address the dandruff problem of the Chineseconsumer. It was priced 3 times higher than the local brandsNew Crest was launched 8 yrs after Crest as a differentiated pricing strategyP&G Market Share 5.18% with Head & Shoulders- 25% of Chinese Shampoo Market

Owns Nescafe, Nan and Maggi brands in China and has also acquired local brands Totole, Haojiand Dasha

Posted sales of2.1bn in 2010


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CG&S companies have successfully expanded product portfolio tocapture local tastes/habits/preferences in APAC Markets(Indonesia Examples)


Entered water purification business with new introduced brand Pureit, safe drinking water solution without theneeds of electricity and gas

Launched Ponds Gold Radiance and enhance customer development by opening Ponds Institute Launched 3 variants of Magnum ice cream which produced 2010 sales 20x above that of 2009In 2010, acquired PT Sara Lee Indonesia Tbk to be operated under Unilever sales & distribution

Altered product formulation of cookies to suit local tastes

Research showed that Indonesian consumers preferred a sweeter cookie, variants of Oreo cookie has beenintroduced

Introduced new brand that accommodate chili tasted cookieOreo is one of the fast selling packaged cookie in Indonesia

Kalbe Farma is diversified pharmaceuticals which also expand the product offering to Consumer Health andNutritional segment.Well known consumer brand such as Tipco, Fatigon Hydro, Extra Joss and PrenagenKalbe Farmas Consumer Health and Nutritional are 39% out of total Kalbe market share

Owns Kit and other Home Hygiene Products such as Baygon, Autan, Bayfresh and Bayclin

Penetrate its product portfolio through marketing campaign nationwide

Acquired PT Megasari Makmur group to expand portfolio enter the Household insecticides, wet tissues and airfreshener Market in Indonesia

Portfolio Expansion strategy

shaw-innovations in supply chain cgs eht apac_v04

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