In order to ensure that the distribution objectives are met at the lowest cost, Godrej Soaps Ltd's distributor management, field management and promotions management processes have been examined exhaustively. The fundamental change identified in the area of distributor management was the need to move to a `win-win' position in transactions with the distributor.

As a result, GSL is trying to enhance the profitability of the distributor by managing his working capital more efficiently as this would lead to substantial improvements in the service level he provides and also reduce the cost of subsidies that GSL provides.

Already, the managing of distributor economics has arrested the high turnover among distributors. Additionally, the process has improved market hygiene at all levels as the company is finetuning the ratio between resources pumped in and the margins gained. The finetuning has corrected the problem of overstocking which forced distributors to sell at discounts, funded obviously by GSL. Pilot projects are already in place in Uttar Pradesh and Andhra Pradesh.

As more of such operational inefficiencies get uncovered, customised solutions are being used to correct them. For example, the fundamental shift in distributor management also requires a change in field force management systems. Also, as per the distributor requirement planning process, GSL has begun working on its primary logistics in terms of which source should supply to which depot. For inventory reduction, the frequency of supply from depots is also being monitored regularly. This has helped GSL in rebuilding its distribution network more effectively.

GSL will also be adopting a new method of sales forecasting which will include a robust secondary number detailing. This means that GSL's forecasting will be a combination of top-down macro-numbers along with a bottoms-up number crunching which will be provided for by the field force. The new system is already being implemented in 17 major locations for the field force.

Restructuring the organisation: The need for increased focus on GSL brands clearly means that they would need to be distributed by the same entity that handles marketing. In this case, GSL's consumer products division. As a result, the soaps distribution is being transferred from Hi-Care to GSL with effect from January 1, 1999. Says GSL chairman Adi Godrej: "There is a triple benefit in doing so. First, GSL does not have to pay a fee to Godrej Hi-Care any longer for doing its distribution. Secondly, Hi-Care will be able to focus on its core business. And, thirdly, the group now has two crack distribution systems which add value in terms of servicing the market effectively."

The transfer of soaps distribution back to the mother company has also brought to the fore the issue of what the new organisational structure in GSL would be. Andersen Consulting followed a set of principles to work out the new structure. These were: an increased level of accountability for profits, an integrated supply chain planning, an increased commercial control on transactions with CFAs (carry forward agents) and on promotion and spends, and a single-point ownership for CFA processes.

The application of these principles to GSL have resulted in the creation of a new function -- commercial -- that performs the role earlier undertaken by finance and logistics separately. The attempt is to improve efficiencies at the CFAs as well as greater financial control. Says Khanna, "It was clearly the output of viewing the organisation as a set of processes rather than a collection of functions."

Infotech support: To support the entire distributor management process, a robust system of capturing a distributor's sales is required. GSL, therefore, is using its chosen ERP solution -- MFG/Pro -- to integrate supply chain issues and compress lead times in servicing the market. The ERP implementation has also helped GSL in unbunching sourcing from procurement, leading to benefits in terms of reducing downtime on the shop floor. For example, with a manual control system the finished product stock used to be as high as 40 days' production. The size of the inventory also fluctuated a lot. Today, with a sales and operation plan in place, it has been brought down to 20 days.

The MFG/Pro is expected to be used as a competitive tool in the next phase where information gathered through forecasting will be processed by it to strategise market expansion plans and further cost savings. According to Godrej, only 25 per cent of the real benefit potential of ERP has been absorbed by the group and, therefore, he plans to exploit the opportunity better. He also aims at having a negative working capital in the next six months at GSL and Hi-Care.

Conclusion: For Godrej, the last two years have been a hectic series of changes. Changing business processes to face the future, changing organisational structure to deal with the new business processes and changing mindsets in a 100-year-old group. He says, "Luckily, people at Godrej have had no difficulty in perceiving the challenge that the past years' developments have brought in... within the organisation there is a clear understanding that the group cannot depend on the economy to pick up but (instead depend) on our own efficiencies to grow profitably."

The biggest challenge for Godrej, however, is changing himself as a leader. In a detailed appraisal exercise carried out by the company some time ago -- on the basis of the 360 degree appraisal format supplied by business partner GE -- Godrej was found wanting. His report card had two red marks, that of not being a good listener and not encouraging team work sufficiently in the company. He says that he never questioned the criticism and has tried to work on these two issues. Clearly, the 57-year-old Godrej thinks that it is never too late to reinvent his company and himself.