Case study

Report

The fast-moving consumer goods (FMCG) sector is the fourth largest economic sector and boasts a 3 million strong workforce. The sector accounts for 50% of the total rural spending. It is set to experience increased demand in the coming decades as the average household in rural and semi-urban areas gets access to higher disposable income. Just the $963 billion processed food market is expected to reach $1.2 trillion in the next five years, growing at a CAGR of 7% through 2023-2027.

While increasing awareness, accessibility, and lifestyle transformation have been the key growth drivers, ignorance of regulatory obligations, intricacies of compliance processes, and the sheer volume of updates have complicated the FMCG regulatory framework. In addition, an enterprise planning to get involved in producing agricultural and dairy products must obtain 23 licenses, permissions, and approvals before it can start operations. These include registration as a food business operator (FBO), factory license, fire compliance certificate, approval for sewage discharge, and municipal corporation license, among others. The regulations extensively cover all aspects of the production process, including preparation of raw materials/ ingredients, processing, packaging, labelling, storage, and distribution spread across production and storage units. This report delves into the existing regulatory framework for FMCGs and the challenges businesses face in the modern regulatory ecosystem.

The client is one of the leading FMCG and Ayurvedic manufacturing companies in India. It has over 36 locations including its factories and offices. The company employs over 5,500 people including contract staff. The company is one of the leading and fastest growing personal and healthcare businesses in India, with an enviable portfolio of household brand names. The company deals in providing various categories of products, such as, chyawanprash, hair oil, face creams, health care products including several ayurvedic products as well.

The company sells through a strong national network of over 45 lakh retail outlets via a network of 3,200 distributors in India. They have 8 plants, 4 regional offices, 1 international unit, 11 overseas subsidiaries, 31 distribution centres across India.

Our client had a very complex compliance environment lead by its business and operational complexity. As a result, they were facing multiple challenges, such as meeting strict safety and compliance requirements related to the raw materials, processes adopted in manufacturing and packaging among others. Some of the key challenges are as given below:

Highly distributed compliance environment with no central visibility and control
Lack of confidence in the list of applicable Acts and Compliances. No baseline review and gap analysis had been done for years
Highly manual and spreadsheet system for tracking the status of various compliances
Penalties on account of delayed Filings due to human errors
Lack of clarity on compliance obligations under various industry specific acts including Drugs and Cosmetics Act, Schedule M of Good Manufacturing Practices and Requirements of Premises, Plants and Equipments for Pharmaceuticals Products, Explosives Act, 1884, Legal Metrology Act, 2009; and various other related acts and standards laid down under FSSAI
Highly manual and time intensive search for applicable Legal Updates
Several statutory notices on on account of missed compliances
Lack of clarity on State Rules and State Wise applicable Compliances
Business risks arising out of missed license renewals

Our client needed a compliance automation solution that could help them bring greater control in their risk and compliance program. They needed more accountability at lower levels, better transparency, centralised reporting, greater assurance and lower costs. They were looking for a solution that could be implemented in a few weeks and did not require any new technology spend. The solution needed to be accessible and available to all their office locations with ease.

Client Facts

Private Limited Company
300 + products
Rs 2693 crore Turnover
3200 Employees
36 locations, including factories and offices
Manufacturer of FMCG and Ayurvedic Products

Project Highlights

101 users, including 18 management users
158+ acts mapped
6,700 compliances
4 Weeks to go live

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TeamLease Regtech Engagement

TeamLease Regtech engaged with the client in June 2018 and took 8 weeks to complete the entire implementation. A team of 3 SMEs was constituted to work with the Compliance Officer and General Counsel for planning the implementation

RegTrack went live in August, 2018

Phase 1 - Business Discovery

This phase of the project focussed on understanding their business, markets, raw materials and machines / equipment used. This enabled the team of experts in understanding the applicability of various acts, notifications and circulars issued by the govt. in this regard to establish. Comprehensive information was collected via in-person interviews / meetings / discussions with the Board & Management, individual department heads, regional heads and other representatives in the company. The following items were collated:

Business Set up (Group, Entities, Locations, clients, number and nature of establishments, Industry, export)
Products (Healthcare, Household products, Cosmetics etc)
Equipment, Machines and Raw Materials
Mandatory repeatable items driven by ISO and other standards
Statutory Compliances (Drugs and Cosmetics Act, Legal Metrology Act, Explosives Acts and other specified rules), meeting regulatory compliances of FSSAI

Phase 2 - Compliance Applicability Assessment

TeamLease Regtech identified several diesel generators, Pressure Vessels, Hoists and Lifts, Lifting tools and tackles, Gas Cylinders, Chemical tanks, among others. These equipment were located in various plants based in all the manufacturing units spread across 30+ locations in the country leading to applicability of different Acts, guidelines and Compliances.

Our Client also dealt in exporting its products to various other countries too, therefore it also has to comply with global standards of protection. The client has to comply Product Safety, Environment Friendly, Safe to Use. Moreover, the client has to meet regulatory compliance of FSSAI, on the basis of, Design and Facilities of Products, Control of operation; Maintenance and Solution, Personal Hygiene, and Training and Complaint Handling.

Phase 3 - Implementation

TeamLease Regtech assigned an 8 member team to work with the client and their various offices located across the company in their respective manufacturing plants. This phase was the most critical as the team after doing in depth analysis of all the offices of the client, discovered major areas which required attention, such as:

Review of identified applicable Acts and Compliances with various key stakeholders
Discussion on identified gaps with CXOs, Regional Heads and Compliance Head
Creation of the Group and all the entities based on establishment types and locations
Mapping of Compliances to specific users along with their roles
Hands on training sessions with user groups based on their locations and roles
Dashboards were created and provided to the users, having automated reminders, alerts

The team identified 158 Applicable Acts, over 6,700 compliances across 36 locations. A total of 156 users including 18 Management users were mapped and trained. Mobile Apps were downloaded on their IOS / Android devices and configured for use.

In Conclusion

TeamLease Regtech completed end to end implementation of such a complex business group in 12 weeks. In less than 4 weeks, Compliance officer has much greater control over their organisation’s compliance. He is able to identify risks and issues in real time and plan necessary interventions. His ability to provide assurance to his management has shot up significantly. There is greater visibility, transparency and accountability in the system. The cost of poor compliances arising out of delays and missed compliances is likely to reduce by 80% in the first year.