How The Sustainable Supply Chain At Marico Works – Pooja, TISS Mumbai
Did you know that Marico buys 1 out of every 25 coconuts produced in India? Before joining Marico as a fieldwork intern, I certainly didn’t. While stories about the distribution network of Marico are well known, I figure the stories about their supply chain must be legendary. In my previous article, I tried to understand the values that Marico stands for. As I tried to understand how the sourcing works, I also realized that it exemplifies one of the core values of Marico – transparency and openness.
In the FMCG industry, the supply chain plays a crucial role. In the words of Jitendra Mahajan, the Chief Supply Chain Officer, Marico India, “There is no bigger crime an FMCG company can commit than to have a demand and being unable to supply.” Marico buys around 30% of copra – dried coconut – that’s produced in India. Understandably, copra is something that Marico spends a lot of its procurement budget on. Around 10 years ago, Marico faced an acute shortage of copra, which led to capacity lying fallow. Thus began the quest of finding a sustainable solution for this problem – something that would not only be in the interest of the business, but also in the interest of the suppliers and associates.
It decided to cut through the tangles and go to the first unit in the chain – the farmer. They moved sourcing centres closer to the farmers and started setting up copra collection centres. Today, there are 25 such centres in Kerala and Tamil Nadu. Since this approach reduced the number of intermediaries, the procurement costs decreased. Thus began the de-intermediation of the copra supply chain. This has been the subject of a case study in IIM Ahmedabad. Smaller farmers could now directly approach Marico’s collection centres instead of waiting it out like the bigger traders could. Efforts were made to improve the process and enhance transparency in the system to ensure benefits for the farmers.
Of course, Marico has not stopped with that. It has set up a team to understand the best practices in coconut farming through learning programs and field experiments. The information is then circulated to the farmers. It has also partnered with the Government of Kerala, and has collaborated with the Coconut board of India.
If we look at this transformation of the supply chain, where does transparency and openness come in? At the Marico collection centres, automated rate display boards have been set up. Every day, the team determines the rate for copra, based on the requirements, market conditions and future outlook, and is communicated to the people who run the collection centres. This has helped to strengthen the trust between Marico and the farmers. In addition, automated SMS are also sent to farmers registered with Marico, to ensure that those in remote locations are also aware of the prices, and there is no information asymmetry.
This is a classic example of the transparency and openness that Marico values, and that is not only for the employees, but also for the business associates and suppliers who are connected to Marico in one way or another.
Fieldwork is a unique practice in TISS, Mumbai. Every semester, the students work in organisations from different sectors to gain an industry perspective and put their theoretical knowledge into practice.
You can find out more about it here – Fieldwork in TISS: The What, Why and Where.
About the Author:
Pooja Wanpal considers reading the sole aim of her life. She is obsessed with trekking, pani puri, and adores traveling. She is a freelance content writer, and has penned the novel, ‘Love and Lokpal’. She is currently studying Human Resource Management and Labour Relations at Tata Institute of Social Sciences, Mumbai. She is also a part of the InsideIIM Student Team 2016-17.