Q&A Farhan Khan Radico Khaitan, chief information officer (CIO)
Farhan Khan, chief information officer (CIO) Radico Khaitan is an IT veteran with 18-plus years of experience in IT operations planning and management in manufacturing across sectors. With his vast experience of ERP implementation, Khan has been at the forefront of IT evolution. He is proficient in developing and streamlining systems with proven ability to enhance operational effectiveness and meet operational goals vis-à-vis cost, time, and quality parameters. In a tête-à-tête with ForwardView, Khan shares the IT journey at Radico Khaitan implemented by IBM India.
1. What are the unique characteristics of a liquor/beverage company?
In India, liquor industry is one of the most complex industries. It is driven by the complexities of government procedures, rules, and regulations that are linked to purchase of raw material and movement of finished goods from one state to another.
Besides the complex government regulations, there are other challenges linked to logistics, manufacturing, and distribution of liquor. For instance, we have a manufacturing facility in UP, and if we are to send our products to Delhi, there is an excise route that has been defined through which our products have to move. Any diversion would result in penalty. Even within this route, there are booths, where we have to register our trucks.
Moreover, the tax regimes vary across the states. For instance, in UP, there are seven or eight types of taxes that we are paying while in some other states there are 12 types of taxes. In Maharashtra, there is an entry tax, octroi, and quantity tax. So each state has its own set of policies, rules, and regulations.
These unique scenarios pose lot of challenges to successful functioning of liquor business in the country.
2. How is a domestic liquor company such as Radico different from its global counter part?
A key factor that sets apart the domestic liquor industry from its global counterpart is that there is low social acceptance for liquor consumption in India. It is a unique characteristic that the industry has to contend with. Having said that the liquor business is on an upswing owing to many factors in the country. These being increase in disposable per capita incomes, market expansion due to entry of new Indian and international brands, ready availability of a wide range of products, change in taxation structure, and opening up of new distribution channels. There has been an increase in proportion of youth and middle-aged population from 48% in 2001 to 54% in 2011. All this augurs well for the liquor business in India.
Moreover, it is a global market and Indian brands compete with global players on quality and other areas.
3. Describe in detail the common IT applications/solutions deployed in liquor/beverage companies.
The Indian liquor industry is primarily an unorganized sector. Setting the IT environment in itself is a challenge. Nonetheless, enterprise resource planning (ERP) is a key IT application deployed by majority of the key players. Every state has its tax structure which defines how business will be done in that particular state. As a result, IT has to take cognizance of the various tax structures be it for streamlining of manufacturing, distribution, or sales and marketing, and so on.
4. Could you share Radico’s IT journey?
Radico Khaitan is a leader in liquor manufacturing having a distillery at Rampur, Uttar Pradesh and a network of 30 liquor bottlers, four of them being company-owned, and five zonal offices. We opted for SAPs ERP solution for robust centralized information 10 years back in 2002 implemented by IBM. We have around 200 locations where SAP is being accessed, whether it is a depot or a manufacturing unit. We ensured that all our manufacturing units, either company-owned or franchisee, are on SAP. We make sure that all our sales and zonal offices have access to the application so that seamless information is available at all locations. If someone puts a sales order, it should be available for the people who are concerned with it. It took us 6–7 years to cover the entire footprint because of 200 locations, different states, and complexities. Now we have reached a level, wherein if we get a franchisee, we can make it up and running in 15 days.
5. Can you enlist any one IT application that has helped Radico to achieve competitive advantage? What objective do you want these applications to accomplish at your organization?
We implemented Transportation Management a year and a half back to address our logistic challenges. We sell around 20 million cases in a year. Using the application, we could make savings of Rs 2.50 per case, leading to savings of Rs 7–8 crores per annum. This was a remarkable achievement for the organization. It is one of the first initiatives that involved optimization.
6. Liquor/beverage companies must successfully manage complex distribution processes to compete in a highly competitive market. Is it a concern at Radico as well? If yes, how do you handle it?
The distribution process is indeed complex in a liquor business as we cannot sell to the customers directly. It is through dealers and distributors. As a result, logistics and supply chain are cumbersome in a liquor business. The Transportation Management application that we implemented two years back stood us in good stead.
7. What is your current engagement with IBM? Why did you opt for IBM amidst other players?
IBM is the backbone of our IT infrastructure. Besides the hardware network, all our applications are on IBM such as mailing solutions, disaster recovery, looking for CRM– TPM (Trade Promotion Management) and so on. Most of the companies operate on hybrid environments using a mix of SAP, Oracle, Tally, and other standard or non standard solutions. It is only at Radico that we have one standard application to maintain uniformity.
My association with IBM has been for over 15 years, of which 10 have been with Radico.
The one thing that sets apart IBM from other players is its customer approach and its service commitment levels. It is not driven by archaic processes with regards to service delivery. I am most confident that if something goes wrong with the server at 12:30 a.m. in the night, the IBM support staff would be present within an hour to rectify it. They will be there till the job is done. They do not follow unnecessary protocols but have customer service as their key priority and their foremost aim is to solve the problem at hand at any cost.
We are very thrilled with our association with IBM and look forward to strengthening it.
8. What is the next course of action for Radico wrt using IT to its advantage?
We are the first liquor company in the country to have adopted IT on an organized level. Our IT journey has been very satisfying, having added to our bottom line tremendously. In the future we are looking at upgrading our email solutions as well as implementing customer relationship management (CRM) initiatives such as CRM–TPM (Trade Promotion Management), SAP–BPC (Business Planning and Consolidation), and so on.
The next big challenge at hand is to introduce business intelligence (BI) into the system which will not only help us make faster decisions but also analyze the data for better business forecasting.