Skip to Content
Author's profile photo Former Member

De-mystifying India

India Basics

India is country which is always described in the western world as a land shrouded by mystery and it has been well guarded by Great Himalayas in the north and south by oceans. Maybe, such mysterious appeal of this land had attracted great emperors, scholars and IT people. Right from the time of Alexander the Great till today. The rich history of this land tells us the story of civilization, art, culture, prosperity and now IT & ITES [including outsourcing]. Taj Mahal being one of the seven wonders of the world has always helped India to remain in the mind of the world forever. But now it is IT & ITES which has held our head high in the Globe map.

Truly speaking, India is transforming and you can see that the winds of change have swept every nook and corner of the country. But the basics of this country are so profound and rock solid that despite all changes, it is very deep rooted in the culture of this place. The civilization of this land is 5000 years old; the diversity is reflected in the statistics of 325 languages spoken in 1652 dialects. Out of which 18 are official languages and very interestingly, it is the largest English speaking nation in the world with 3rd largest pool of scientists and engineers in the world. Most importantly, it is the world largest democracy. The fact sheet clearly indicates that every Indian consumer has freedom of choice – right from the Government to their daily needs. Further, with the everyday flattening of the world and with shrinkage of the distance due to in-roads of IT and with increase in usage of IT, the people of India are becoming more and more discerning.

Other facts on the sheet that must be taken note with great care and importance – by 2050 the Indian economy will grow to a size of 27 trillion USD and will become third largest economy in the world after US and China. Indications are such that the GDP of India will overtake Italy by 2016, France by 2019, UK by 2022, Germany by 2023 and Japan by 2032.  

This data at an aggregated level always creates excitement in the mind of a ‘Consumer Product Company’ since this is perceived to be of tremendous potential – a consumer market all packaged in one land mass called ‘India’. Yes, this is a view of India at 90,000 ft from the ground level. As you start the decent, the visibility will get clearer and sharper, the dispersions will become clearer. The moment you will land, you will find that it is actually a congregation of 28 states which are like countries within a country. It will give you the feeling of a large box of chocolates that was dropped from your hand and the chocolates were scattered so far and wide that you are finding it difficult to collect them and put them back together.

Indian sentiments

With the series of invasions from the pre-historic era till the modern era, India has witnessed many changes and transformations which have impacted and influenced our social life, standard of living, outlook and approach to life. But it is ‘Indian sentiments’ which never gets influenced or changed. As they say – ‘You can take an Indian out of India but cannot take the India out of an Indian’.

The buying behavior, storing behavior and consumption behavior of an Indian has not undergone any major change despite the pace and momentum that has come to their life due to the exposure and influence of the ‘Western World’. These facts have been proven time and again to our western entrepreneur friends. Whenever, they have attempted to address the need of Indian consumers with western business models and consumer theories, they were always proven wrong. One of the classic example is that of a large multination company’s approach in India. During their Indian market launch they found the market to be of high potential, mainly because of the commonality in the   Indian consumers’ food habits. The fact at the outset is absolutely right and the factual assessment about the Indian consumer done by the company as part of their Indian market entry strategy was also correct. But the major flaw in the strategy of the company was that they failed to ascertain the form of consumption and way of consumption.  This is a challenge for every CPG (consumer packaged goods) company operating in India.

Majority of Indian consumers’ buying philosophy is ‘seeing is believing and believing is buying’. Means, from white goods to food products, the buying process is on the basis of perceptible seeing, feeling, touching and sometimes even smelling the product. This is independent of any demographic profile of the consumer. Now, imagine what will be the predicament of branded packaged goods manufacturers! Important and interesting piece of statistics – branded packaged products in India is considered to be niche category and products sold “loose” are considered to be as mass category and that is quite a contrast to the experience in the Western markets.

There are two Indians – ‘Real India’ and ‘Virtual India’. The Real India lives in its villages and the Virtual India lives in urban agglomerates. It is Real India that controls the politics of the country and the Virtual India controls the commerce. The heterogeneity cuts through the length and breadth of these two Indias in terms tastes, preferences, income and consumption patterns. These diversities in the consumer need have resulted into the further fragmentation and segmentation in the market – Organized sector & Unorganized sector.

The players in the Unorganized sectors are mainly catering to the local and differentiated needs of the consumers of both the Real India and the Virtual India. The player at this sector has branded its offerings of goods & services instead of offering branded goods and services. The reach and penetrations of such offerings are mainly through small and micro mom & pop stores. The degree of customization in goods & service offerings are so high that a large Organized players will find it extremely difficult to tap into such markets with their standard offerings. Further, there is no measurement standard possible to assess the size and the potential of such markets in absence any form of statics. The entire Unorganized sector is operated on the basis of guesstimate, gut feel or person equation. It is very personalized and region centric. The needs of the mass are served through these micro stores. These stores sells either in small units or break bulk larger pack size to fulfill the daily consumption needs, often incentivize the purchase by extending credit to the clientele. These segments of market are of huge potential for any Organized CPG Player but in reality they are invincible.

This market phenomenon is corroborated by the fact that in India, there are very few National Brands in CPG space, the trade is  mainly populated by small unorganized retails as compared to organize modern format stores or distributors. The service providers of the trade like carrier, warehouse, distribution etc, are controlled by unorganized sectors with virtually non-existent  large Corporate Houses.

Therefore, to run a successful business model in India, you have to operate as an ‘Indian Multi-national’ where your every product / service delivery must be customized and best suited to the ‘Indian Sentiment’.

Conquering of Mt Everest – powered by SAP

Terrain ahead  

The up-stream of the supply chain process is a combination of multiple models, varying from dedicated / own sourcing [through procurement network like Choupals, contract farming etc.] to third party sourcing. The manufacturing model ranges from out-sourced processing through small contract manufacturer with limited capacity to large state of the art own manufacturing centers with large processing capacities & capabilities. The sourcing and manufacturing locations are well spread out across the length and breadth of the country. The input materials used in manufacturing of all these branded packaged products rages from basic seasonal agri-commodities like wheat, tobacco etc. to a high value-added & branded materials like laminates, plastic containers etc. The profile of supply chain partners are also very diverse, it could be a simple farmer or a large corporate entity.    

The front-end of the supply chain is carrying the entire basket of goods through a common distribution platform of process to reach the product to the end – consumer, located at the every nook & corner of the country. The reach to the end consumer is enabled by service providers like dealers or stockists who are well spread across all parts of the country. The profile of the retail trade includes from large sophisticated modern format stores to tiny mom & pop stores or even a hole in the wall. In fact, the population of these small and micro mom & pop stores are substantially big as compared to the modern format stores in the country. This poses a challenge in method and timeliness of data capture; visibility of downstream of supply chain; disparate systems and non-exclusive dealership resulting in difficulties in collaboration and data sharing.          

The other challengers to the business model are multiple levels of tax levies which are very dynamic and they pose a constant threat to the relevance of the Operating Supply Chain Model of the organization. The availability of key input commodities and its price points dueled by Government policies and control – results in a constant variability to the back-end procurement model. The service providers of supply chain like freight service providers, warehouse service providers, distributors etc. are all part of the unorganized sector and a majority of them are small time operators. The service delivery components like truck size, handling, storing etc. are primarily operated manually and in a non-standard manner.  

Combat strategy

The business model adopted by entity to combat these challenges is to blend flexibility, regional operating capability and low cost with a focus on quality and hygiene in terms of:-

  • Backward integration of ingredients procurement
  • Outsourcing of manufacturing facilities
  • Outsourcing of warehousing and logistics

The construct of the out-sourced model is also from the perspective of better Return On Invested Capital (ROIC), which will enable the business to improve the returns with the productivity improvement in these external business partners of the value chain.

The solution envisaged – the combination of organizational separation and value chain ancillarization – will increasingly become viable with the evolution of the business. Further, with the implementation of ERP systems, the risk associated with organizational separation have been largely eliminated. Hence this has enabled the Business to manage the balance sheet relatively ‘asset light’ by using unutilized existing capacities in the country.

This will allow the supply companies to focus 100% of its attention on operations issues and build operational skills thereby, driving operational excellence that will translate directly into a lower cost of delivery for the business. In addition, the supply companies could negotiate a lower cost of capital through greater use of debts, supported by more stable cash flows and assets backing. Hence, from the perspective of the Company, ancillarisation allows the business to focus on customer and consumer management – the main engines of growth – while sharing in progressive operations cost improvements through ‘ Open book’ supply / third party contract. This will help the business to achieve a quantum leap in return on capital employed.

The challenges were in managing the interfaces across the extended enterprise – for example, product development, forecasting, order forecasting etc. With implementation of ERP, these challenges have become far less daunting than it appeared initially. The technology intervention has enabled the business to disaggregate the supply chain without losing the connectivity between the components – contract manufacturer, third party service providers for logistics & warehousing etc.

Internationally FMCG companies have already de-verticalised the supply chain by way of outsourced manufacturing to some degree and many private firms, raw material suppliers and specialist manufacturers, constrained by growth in their traditional markets, are now actively exploring the FMCG ancillarisation opportunity.

The key drivers of the business model are:

  • Responsive supply chain management (from Farm – Table or Seed to smoke) by
  • – Leveraging in-house procurement capability [ farmer network etc]. from markets as well as through dedicated tie ups
  • – Outsourced Manufacturing other than some specialty products which could be manufactured in-house
  • – Innovative logistics & distribution models to meet freshness norms, reach & availability
  • – Efficient and effective management of inventory of input materials & finished goods
  • Customer Relationships & Demand servicing
  • Consumer retail sales both in the domestic and export markets including
  • – Domestic
  • – Institutional Sales
  • – Internal
  • – Key export customers

The key business imperatives are:

Product innovation and product development to match the diverse consumer palate and preference

  • Responsive and flexible manufacturing
  • Operate multiple channels of procurement both internal and external sources for lowest cost input material sourcing for a given quality standard.
  • Efficient management of supply chain service costs
  • Agile sales & distribution process to ensure minimum time to market at least cost

In order to power the combat strategy and to de-risk the operation, the data availability at every object level of the supply chain was analyzed in depth. It was observed that there are wide dispersions and clutter in the data interface and inter-changeability at every stage of the operation.

Analysis of gaps in the current information flow

The structure of information flow across these business objects were as follows:

  • Discreet and hence database is personalized
  • Transaction flow is bare minimum resulting in limited information visibility for decision support
  • Business information are manual and hence the data integrity for decision support is weak
  • Business objects are not seamlessly integrated thereby limiting the scope of end – to-end visibility of business information
  • Change management response will be slow due lack of flexibility and agility
  • Scale up of the operation cannot be supported by the manual system
  • No collaboration and communication support – data is stored in individual spreadsheets, often scattered around in different machines, and it requires enormous discipline to work on the same spreadsheet
  • Difficult analysis – because data is stored in individual spreadsheets, it is difficult and time consuming to bring them together for analysis

Information System Strategy that was evolved  

The primary objective of Information Management system is to

  • a. Integrate – connecting discrete information, manual systems and best practices solutions into flexible end to end business process
  • b. Automate – execution and optimization of transaction processes, interface with the processes of business partners and harness business objects to process activities
  • c. Manage all phases of processes which will enable to discover, design, deploy, operate and analyze business processes, within an integrated environment that supports the needs of managers, process engineers, functional departments and IT
  • d. Deploy processes seamlessly to design on-line business process by business users and process engineers on scalable IT infrastructure and to operate the same by the business itself.
  • e. Provide end to end visibility to enable processes for end to end analysis of multiple applications and multiple business partners. This will provide global visibility and control of the extended enterprise.

The two dimensions of Information Management

  • Transaction management & Operations support
  • Decision Support


Transaction Management aims to handle

  • a. Integrity – Built-in Checks and controls for data consistency across the functions
  • b. Scalability – transaction volume and data throughput
  • c. Simplicity – user friendly operation
  • d. Agility – adoptable and responsive design to support change management in processes
  • e. Security – robust information access controls and fidelity
  • f. Large and complex business processes – involving the flow of materials, information and business commitments
  • g. Diverse and distributed processes across boundaries with both internal and external linkages spanning multiple applications and technology platforms


Decision Support aims to handle

  • a. Dynamic scenarios – responding to demands from customers and changing market conditions
  • b. Information & data of the value chain for devising strategies to take advantage of new scenarios.


The application strategy for the business would comprise of core enterprise application (an ERP) and set of peripheral applications comprising of interactive systems that communicate with the Core application and Satellite Applications for data interchange. Central to the concept is that different business processes are more stable than others and the technology application to support these differing characteristics should be tailored to the process that is defined.


The Core system would be the enterprise transaction processing backbone and a central repository of transaction data for analysis and reporting. This system would be internal to the organization with features like high security, reliability and scalability. They would support relatively stable functionality.

Interactive systems would be collaborative real time systems and external to the core system and would frequently poll in / out data from the core system. Their functionality would be specialized in nature and would provide access to internal and external users. These systems would primarily handle specific operating procedures. These systems can significantly enable areas like supply-chain collaboration and would be web-based, best-of-breed solutions. The following characteristics would be typical of such systems.

  • a. Built on a web-based, thin-client, scalable technology platform
  • b. Ability to connect with existing applications via simple and standard interfaces
  • c. Highly configurable to accommodate different collaboration processes
  • d. Ability to rapidly accommodate change
  • e. Proven security and scalability

SAP Architecture which is designed to transform the dream to reality. SAP has enabled and empowered the business to integrate and collaborate with all supply chain partners to drive value for entity’s business and also for their partners. It has provided the business with a common platform for process and end -to-end visibility of performance across the value chains for responsive, agile and pro-active decision support. Through the deployment of SAP’s Netweaver architecture, it was envisaged that a “Composite Application Architecture” would be created with SAP being the Core and other allied applications integrated to varying degrees depending on process maturity, level of integration required and business process needs.

Salience of the solution landscape

  • Single instances for entire FMCG business supporting multiple business verticals
  • Divergent supply chain processes integrated in the single APO box
  • Common transaction process for multiple business verticals with classified information capture at the respective business verticals level for responsibility accounting
  • Interface with vendor / suppliers information through SRM for back-end supply chain planning
  • Real-time and on-line decision support for responsiveness and agility

Mission accomplished

Presently almost 80% of the organization’s Supply Chain and business operation process is run on SAP. The size of the operation which is getting supported through SAP can be inferred from the statistics given below :-

  • Single Operating Concern and Controlling Area for the entire instance which enables the Business to have an overall visibility of the its CPG vertical performance
  • Business vertical’s responsibility accounting is enabled by way of four Company Code.
  • Business Areas are defined for unit / category level accountability measure –  Business Areas
  • Product / variant level profitability measure is enable by creating 49 Profit Centers
  • To enable inventory level visibility for responsive and accurate Supply Chain Planning, there are multiple plants with differentiated storage locations for reflecting sharper inventory level information. The numbers of storage locations. 
  • To enable supply chain complexities and drivers of the various product lines and to ensure 100% supply availability at all levels in the Supply Chain.
  • In order to capture the business imperatives and up-stream supply chain drivers, five different Purchasing organizations are created for each of the business categories. Further, large number of  purchasing groups are created at input material variant level to ensure accurate and comprehensive KPI measures of procurement function at all levels of responsibilities.
  • Total number of 3000+ users, across the landscape, to ensure accurate data capture at the business process level on real-time basis for analytics and decision-support.


This mission of Mt Everest conquest was only possible with power of SAP. The application has provided us a ‘best-in-class’ enterprise application platform embedded with ‘industry best-practices’ functionalities in the solution landscape. The design of solution architecture is such that it has tremendous flexibility that has helped the organization to design the landscape that ‘best suits you’. Yet it has the robustness to ensure the data integrity and data quality both at the planning and execution level. The risk control at the process level are so generic, yet done with so much of intricacy that no matter how unique is your business risks are, they are all addressed through the solution offerings. SAP in our organization is a ‘WAY OF LIFE’. You may like to love it or hate it but you cannot ignore it… 

Assigned Tags

      You must be Logged on to comment or reply to a post.
      Author's profile photo Former Member
      Former Member
      India's mystery is phenomenal It's what draws me back there so often & I'm sure many other visitors. I'm a third generation South African Indian & I have family lineage in India. But there's a certain je ne sais quoi about India...Every place you visit in India is unique & spiritual in it's own way.

      I couldn't agree more when you say:
      ‘You can take an Indian out of India but cannot take the India out of an Indian', I consider myself a visitor to India but my affinity towards India is unparalleled.

      BTW, the rest of the blog was good too! 🙂

      Author's profile photo Aditya Varrier
      Aditya Varrier
      Nice thread to read, best part was about India 😉
      To add to the amazement, read somewhere that the highest SAP implementation in the world was done for an Indian company 😉


      Author's profile photo Aditya Varrier
      Aditya Varrier high as 10,000 ft altitude.