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2015 TOCICO International Conference

Transforming Industries Track

Mridul Danuka
Director (Operations) Agro division
Dhanuka Group

Chandrashekhar Chaudhari
Chandrashekhar Chaudhari
Goldratt Consulting
Transforming India's Agriculture:
Winning Against the Weather!
September 7, 2015

About the Products and Environment: Dhanuka Agritech Ltd. is one of the fastest growing agro-chemical company in India for last 10 years. The company produces various types of pesticides, insecticides used to treat various pest attacks on crops. The company produces around 400 SKUs, and distributed across the country (India) through a network of 40 warehouses, and 8000 distributors and retailers.

Each crop, depending on changes in climatic condition faces several pest attacks, weeds or disease which can destroy the crop. To protect the crop from damage when such attacks happen, farmers have to use these chemicals. Technological advancement has produced unique formulations for each crop and individual pests. The company produces around 80 different types of formulations, which are packed in different sizes resulting in around 400 SKUs.

Demand for a specific product is triggered by the relevant pest attack on specific crop which depends on a number of factors including but not limited to:

  • Day of Rain : How early or late rains starts in season and how much it rained
  • Crops in neighbor’s plot: Insects migration from neighbor’s plot is possible.
  • Temperature patterns: Higher or lower temperatures demand different products

The Unique Challenges Faced: Apart from traditional supply chain challenges, the agro chemical environment faces more unique challenges which makes management of supply chain by forecasts almost impossible. Some of the key unique challenges faced by the environment are as follows:

  • Products are seasonal in demand, for several products season is only once in a year. Start time and end time of season is highly unpredictable.
  • Most of the time, demand is created by need i.e. which crops and nature of pest attack generate the demand, no pests - no demand.
  • Whenever a pest attack happens, there is significant spike and almost the entire demand will come in the span of one or two weeks.
  • Around 60% of sale in a year takes place between June to September, which forces companies to build up stock in advance as per forecasts
  • Discounts can’t help to liquidate unwanted inventories (if there is no pest on crop, farmers won’t buy it)

All these challenges resulted in lower availability, loss of sale, surplus inventories, lower inventory turn, higher age of products at the time of sale. Moreover, sometime a particular formulation will be out of stock in entire market, causing significant national damage due to loss of crop.

The Direction of Solution: No matter how complex is environment, there is always an inherent simplicity. Such inherent simplicity was identified in this environment and considering challenging needs, unique elements of solutions were developed to provide the following:

  • Maintain higher availability of products at warehouse level with significantly lower inventory at warehouses.
  • Build capabilities to fulfil any spikes in demand in a region within 24 hours in most cases.
  • Build mechanism to set norms and bring it to zero when the season is over.
  • Managing capacity of factories - Producing in advance, but in a way that the risk of getting stuck up with unsold stock is significantly reduced. Building capacity buffer.

The biggest challenge in developing and testing solutions was - period to test and prove solutions was only between June to October in a year.

The key results achieved:

  • Biggest paradigm that was broken is without forecast and building inventories at warehouse level one can’t capture demand. Exchange mechanism was implemented despite rise in transportation cost.
  • Capabilities to fulfil any reasonable demand in a region within 24 to 48 hours.
  • Significant jump in availability across warehouses (from around 65% to 90-95%).
  • Improvement in freshness of products when sold, drastic improvement in inventory turns.
  • Even though sales growth can’t be credited to only improvement in availability, the company has seen significant improvement in top line, bottom line as compared to other similar competitors.

The Challenges Ahead: 95% of distributors, dealers don't have computers and no visibility to stock and consumption data. Hence, not able to implement replenishment mechanism to market with the technology we have available today.

MRIDUL DANUKA is a Chemical Engineer and an MBA from one of the leading business schools of India. From 2005 to 2009 he was part of the Pharma Division of Dhanuka group and responsible for Supply Chain and New Markets. Dhanuka group is a USD 200 million diversified company with interests in Pharma and Agri-Inputs.

From 2009 onwards he is Director (Operations) at Agro division of Dhanuka group, managing the implementation of TOC, and other transformation initiatives at Dhanuka, including but not limited to ERP implementation, New Product Development, S&OP Planning, New Projects for Expansion and HR and IT transformation.

CHANDRASHEKHAR CHAUDHAIR is a Mechanical Engineer and has completed his ‘Post Graduation’ in operations from one of the leading operations business schools from India. 2002 to 2008 he has worked with the Godrej Group (one of the leading and more than 100 years old business house in India.) He has worked on several TOC implementations, many of them within the Godrej Group of companies.

Since 2008 he has been associated with Goldratt Consulting and involved in various ‘Viable Vision’ implementations in various companies across the globe in different roles. He loves to develop and experiment with new solutions beyond traditional TOC solutions and share new knowledge at various forums including TOCICO

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