Nisha New Thesis


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Nisha New Thesis

  1. 2. <ul><li>Hindustan Unilever Limited (‘HUL’), formerly Hindustan </li></ul><ul><li>Lever Limited (it was renamed in late June 2007 as HUL). </li></ul><ul><li>India's largest Fast Moving Consumer Goods company </li></ul><ul><li>HUL is also one of the country's largest exporters </li></ul><ul><li>The mission that inspires HUL's over 15,000 employees, including over 1,300 managers, is to &quot;add vitality to life”. </li></ul><ul><li>HUL meets everyday needs for nutrition, hygiene, and </li></ul><ul><li>personal care with brands that help people feel good , look good and get more out of life. </li></ul>
  2. 3. <ul><li>A fortune 500 transnational with a turn </li></ul><ul><li>over of $90 billion. </li></ul><ul><li>Unilever, which holds 52.10% of the equity. The rest of the shareholding is distributed among 360,675 individual shareholders and financial institutions. </li></ul><ul><li>HUL was the first foreign Subsidiary to offer 10% of its equity to the Indian public. </li></ul><ul><li>HUL holds 40 factories across India for manufacturing its diverse product range. </li></ul><ul><li>HLL has network of over 1500 towns in India covering 80% of urban population, with 250,000 consultants. </li></ul><ul><li>Around 2,000 suppliers and associates serve HUL’s 40 manufacturing plants which are decentralized across 2 million square miles of territory. </li></ul>
  3. 6. <ul><li>To add Vitality to life. </li></ul><ul><li>Help people feel good, look good and get more out of life. </li></ul>
  4. 7. <ul><li>Analyzing the distribution network of HUL in following aspects </li></ul><ul><li>1. Evolution of HUL’s distribution network </li></ul><ul><li>2. Transportation & Logistics </li></ul><ul><li>3. Channel Design </li></ul><ul><li>4. Initiatives taken for channel member </li></ul><ul><li>management </li></ul><ul><li>5. Field force management </li></ul><ul><li>6. Analytical Framework </li></ul><ul><li>7. Financial Analysis </li></ul>
  5. 8. <ul><li>The first phase of the HUL distribution network had wholesalers placing bulk orders directly with the company. </li></ul><ul><li>The focus of the second phase, which spanned the decades of the 40s, was to provide desired products and quality service to the company's customers. </li></ul><ul><li>The highlight of the third phase was the concept of &quot;Redistribution Stockist&quot; (RS) who replaced the RWs(Registered Wholesalers). </li></ul><ul><li>HUL's products, are distributed through a network of 4,000 redistribution stockists , covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers. </li></ul>
  6. 11. <ul><li>Distribution of goods from the manufacturing site to C & F agents take place through either the trucks or rail roads depending on the time factor for delivery and cost of transportation. </li></ul><ul><li>Generally the manufacturing site is located such that it covers a bigger geographical segment of India. </li></ul><ul><li>From the C & F agents, the goods are </li></ul><ul><li>transported to RS’s by means of trucks and </li></ul><ul><li>the products finally make the ‘last mile’ </li></ul><ul><li>based on the local popular and cheap mode </li></ul><ul><li>of transport. </li></ul>
  7. 13. <ul><li>To distribute their products in remote rural areas through its Project Shakti. (2001). </li></ul><ul><li>Thirty per cent of FMCG business comes from villages with a population less than 2,000 </li></ul><ul><li>The Shakti model trains women from SHGs to distribute HLL products of daily consumption such as Detergents, Toilet soaps and Shampoos </li></ul>
  8. 14. <ul><li>Distribution acquired a further edge with Project Shakti, HLL's partnership with Self Help Groups of rural women. The project, started in 2001, already covers over 5000 villages in 52 districts of Andhra Pradesh, Karnataka Madhya Pradesh and Gujarat, and is being progressively extended. </li></ul><ul><li>The vision is to reach over 100,000 villages, thereby touching about 100 million consumers. The SHGs have chosen to adopt distribution of HLL's products as a business venture, </li></ul>
  9. 16. <ul><li>The model consists of groups of (15‐20) villagers below the poverty line (Rs.750 per month) taking micro‐credit from banks, and using that to buy our products, which they will then directly sell to consumers. </li></ul><ul><li>In general, a member from a SHG selected as a Shakti entrepreneur, commonly referred as 'Shakti Amma' receives stocks from the HUL rural distributor. </li></ul><ul><li>After being trained by the company, the Shakti entrepreneur then sells those goods directly to consumers and retailers in the village. </li></ul><ul><li>Each Shakti entrepreneur usually service 6‐10 villages in the population strata of 1,000‐2,000. </li></ul><ul><li>The Shakti entrepreneurs are given HUL products on a `cash and carry basis.' </li></ul>
  10. 17. <ul><li>Project Streamline is an innovative and effective distribution network for rural areas </li></ul><ul><li>Focuses on extending distribution to villages with less than 2000 people with the help of rural sub‐stockists/Star Sellers who are based in these very villages. </li></ul><ul><li>The distribution network directly covers as of now about 40 per cent of the rural population. </li></ul>
  11. 19. <ul><li>The goods are distributed from C & F Agents to Rural Distributors (RD), who has 15‐20 rural sub‐stockists attached to him. </li></ul><ul><li>Each of these sub‐stockists / star sellers is located in a rural market. </li></ul><ul><li>The sub‐stockists then perform the role of driving distribution in neighboring villages using unconventional means of transport such as tractor and bullock carts. </li></ul><ul><li>Being a cross functional initiative, the Star Seller sells everything from detergents to personal products. </li></ul>
  12. 20. <ul><li>It is the company's arm in the Direct Selling channel, one of the fastest growing in India today. </li></ul><ul><li>It already has about several lakh consultants ‐ all independent entrepreneurs, trained and guided by HLN's expert managers. </li></ul><ul><li>HLN has already spread to over 1500 towns and cities, covering 80% of the urban population, backed by 42 offices and 240 service centres across the country. It presents a range of customized offerings in Home & Personal Care and Foods. </li></ul><ul><li>The New Compensation plan for HLN partners provides new exciting ways of earning substantial income in addition to offering rewards like revenue sharing through the innovative concept of “pools” </li></ul>
  13. 21. <ul><li>Mother Depot and Just in Time </li></ul><ul><li>System </li></ul><ul><li>Leveraging Information technology </li></ul><ul><li>RS Net Initiative </li></ul><ul><li>Adexa iCollaboration suite </li></ul>
  14. 22. <ul><li>In order to rationalise the logistics and planning task, an innovative step has been the formation of the Mother Depot and Just in Time System (MD‐JIT). </li></ul><ul><li>Certain C&FAs were selected across the country to act as mother depots. Each of them has a minimum number of JIT depots attached for stock requirements. </li></ul><ul><li>All brands and packs required for the set of markets which the MD and JITs service in a given area are sent to the mother depot by all manufacturing units. </li></ul><ul><li>The JITs draw their requirements from the MD on a weekly or bi‐weekly basis. </li></ul>
  15. 23. <ul><li>HUL customers are serviced on continuous replenishment. This is possible because of IT connectivity across the extended supply chain of about 2,000 suppliers, 80 factories and 7,000 stockists. </li></ul><ul><li>This sophisticated network with its voice and data communication facilities has linked more than 200 locations all over the country, including the head office, branch offices, factories, depots and the key redistribution stockists. </li></ul><ul><li>They have also combined backend processes into a common Shared Service infrastructure, which supports the units across the country. </li></ul><ul><li>All these initiatives together have 10 enhanced operational efficiencies, improved the service to the customers and have brought them closer to the marketplace. </li></ul>
  16. 24. <ul><li>The RS Net initiative, launched in 2001, aims at connecting Redistribution Stockists (RSs) through an internet based system. </li></ul><ul><li>It now covers stockists of the Home & Personal Care business and Foods & Beverages in close to 1200 towns and cities. Together they account for about 80% of the company's turnover. </li></ul><ul><li>RS Net is one of the largest B2B e‐commerce initiatives ever undertaken in India. </li></ul><ul><li>It provides linkages with the RSs’ own transaction systems, enables monitoring of stocks and secondary sales and optimises RS’s orders and inventories on a daily basis through online interaction on orders, despatches, information sharing and monitoring. </li></ul>
  17. 25. <ul><li>HUL chose the Adexa iCollaboration suite for facilitating centralized monitoring of the SCM, live customer /supplier collaboration, and integrating demand and distribution planning with production scheduling. </li></ul><ul><li>With the aggregated view of data provided by the iCollaboration suite, HUL was able to combine sales and 11 </li></ul><ul><li>distribution efforts on the diverse product lines, which resulted in significant savings on the cost side for inventories and distribution. </li></ul><ul><li>HUL updates inventory positions, shipments and customer orders on a daily basis with these software packages and can get a pulse on the market real time. </li></ul>
  18. 26. <ul><li>Hindustan Lever Limited (HUL) has two </li></ul><ul><li>types of channel selling ‐ </li></ul><ul><li>i. Regular (traditional) retail channel, </li></ul><ul><li>ii. Direct Selling Channel in the name of </li></ul><ul><li>Hindustan Lever Network (HLN). </li></ul>
  19. 27. <ul><li>At the top end of the diamond, there are the self service retail stores which constitute 10% of the total FMCG market. </li></ul><ul><li>The middle, fatter part of the diamond represents the profit‐center based sales team. </li></ul><ul><li>In the bottom of the pyramid is the rural marketing and distribution which accounts for 20% of the business. </li></ul><ul><li>As a result of the new distribution plan the company has planned to reduce the number of RS in small towns. </li></ul>
  20. 28. <ul><li>Redistribution stockists :- </li></ul><ul><li>Sales Margin : 4.76% which includes cash discount, unloading expenses from depot, distribution expenses to retailers, incentive schemes & other incidental expenses. </li></ul><ul><li>Modes of transport used: Rickshaw, tempo. </li></ul><ul><li>Incentive schemes: Before 2000 holiday packages and tours but </li></ul><ul><li>after 2000 no non‐monetary incentive for RS. </li></ul><ul><li>Software systems and Information System: UNIFY 8.3 (Developed by IBM & CMC). This software needs to be synchronized daily and the system updates any information/ incentive schemes / sales figuresetc to and from the common shared platform. </li></ul><ul><li>Areas of Operations: Marked for each of the RS. </li></ul><ul><li>Selling Operations: RSs sells the goods to ‐ </li></ul><ul><li>Wholesaler (gets 1.5 % max. discount from RS) </li></ul><ul><li>Retailers (gets 1.0% max. discount from RS) </li></ul>
  21. 29. <ul><li>Wholesaler: Gets cash discounts and other schemes promoted by HUL (gets points under Vijeta Scheme). </li></ul><ul><li>Retailers: </li></ul><ul><li>Total retailer base in Jamshedpur: Approximately 1070. </li></ul><ul><li>Sales Margin: Depends on the product </li></ul><ul><li>o Soap, detergents ‐ 8% on MRP </li></ul><ul><li>o Cosmetics ‐ 10% on MRP </li></ul><ul><li>o Food items ‐ 8% on MRP </li></ul><ul><li>Incentive schemes: </li></ul><ul><li>Company programs (Scheme Discounts + Cash Discounts) </li></ul><ul><li>TPR schemes based on Sales (1 % to 4 %) </li></ul><ul><li>Vijeta scheme is not for retailers. </li></ul><ul><li>Field Sales Force: </li></ul><ul><li>(i) target chasing </li></ul><ul><li>(ii) reporting on a daily basis. </li></ul>
  22. 30. <ul><li>Setting up of a full‐scale sales organization comprising key account management and activation to impact, fully engage and service modern retailers as they emerge. </li></ul><ul><li>Servicing Channel partners and customers with continuous daily replenishment. </li></ul><ul><li>Leveraging scale and building expertise to service Modern Trade and Rural Markets. </li></ul><ul><li>Delaying of sales force to improve response times and service levels </li></ul><ul><li>Launching the Unicare scheme with up market pharmacies and retailers to sale its premium brands. </li></ul><ul><li>Launching of several promotional schemes for existing wholesalers and distributors. For instance, it has started the ‘Vijeta ‐ Rishta Jeet Ka’ scheme to provide a platform for the wholesaler and HUL to grow the business by earning points and redeeming them. </li></ul>
  23. 31. <ul><li>Revamping of its sales organization in the rural markets to fully meet the emerging needs and increased purchasing power of the rural population. HUL’s distribution network in rural India already directly covers about 50,000 villages, reaching about 250 million consumers through about 6,000 sub stockists . </li></ul><ul><li>Implementation of supply chain system that connects stockists across the country, and also includes a back‐end system connecting suppliers, all company sites and stretching right up to stockists . IT tools have been deployed for connectivity across the extended supply chains. Backend processes have been combined into a common Shared Service infrastructure. </li></ul><ul><li>Launching of Project Shakti through which the company is able to extend its operations in villages. HUL has also included several NGOs and state governments as the initiative helps rural women to improve their financial position. </li></ul>
  24. 32. <ul><li>Initiating the concept of Super Value Stores (SVS) in urban areas to partner traditional stores to provide a range of services ranging from managing their inventory to setting up POS (point of sale) banners. </li></ul><ul><li>HUL started restructuring some of the selected SVSs into the form of self‐service retail shops a la modern retails. This is to protect & maintain the competitive advantage that HUL has over its biggest competitors in the other markets (e.g., P&G), with its very deep distribution reach through traditional retail. </li></ul><ul><li>Undertaking several initiatives for traditional channels in order to improve its capabilities at the front‐end by developing skills for stockists' sales force. Under 'Project Dronacharya', the FMCG major continuously imparted training to over 10,000 stockist salesmen. </li></ul>
  25. 33. <ul><li>In HUL, the field force is evaluated using </li></ul><ul><li>QOC (Quality of Contribution). It consists </li></ul><ul><li>of 4 components ‐ </li></ul><ul><li>1. Secondary Sale (Max points = 2.5) </li></ul><ul><li>2. Eco (Max points = 0.5) </li></ul><ul><li>3. Focus (Max points = 0.5) </li></ul><ul><li>4. FCS (Max Points = 0.5) </li></ul>
  26. 34. <ul><li>Based on the QOC various awards are distributed to the field persons at the end of every month. These awards are also known as ‘MOC Star’ awards. </li></ul><ul><li>lf QOC score > 4.5 - The person is eligible for 7 star award </li></ul><ul><li>If QOC score > 4 - The person is eligible for 5 star award </li></ul><ul><li>If QOC score > 3.5 -The person is eligible for 3 star award </li></ul>
  27. 35. <ul><li>Analyzing HUL’s distribution network in the light of 20 most significant variables that affect the distribution part 0f channel management for any organization in the business of marketing & selling of goods. </li></ul><ul><li>1. No of Consumers </li></ul><ul><li>2. Geographic Dispersion Of Consumers </li></ul><ul><li>3. Frequency of purchase </li></ul><ul><li>4. Tendency to postpone purchase </li></ul><ul><li>5. Level of Familiarity/Knowledge (of consumer) </li></ul><ul><li>6. Degree of brand loyalty </li></ul><ul><li>7. Purchased on Impulse </li></ul><ul><li>8. level of Involvement(LOI) </li></ul><ul><li>9. Purchased as a Basket of Goods </li></ul><ul><li>10. Speed & complexity of Decision making process </li></ul>
  28. 36. <ul><li>11. Present of Expert influencer in the decision making process </li></ul><ul><li>12. Element of crisis purchase exists </li></ul><ul><li>13. Element of risk aversion exists </li></ul><ul><li>14. Perishability of the product </li></ul><ul><li>15. Time band associated with the purchase of the product </li></ul><ul><li>16. Fungibility </li></ul><ul><li>17. Degree of customization possible </li></ul><ul><li>18. Negative/Positive reinforcing product </li></ul><ul><li>19. Value/Volume ration(value density) of the product </li></ul>
  29. 37. <ul><li>Marketing Expenses </li></ul><ul><li>As stated earlier also, marketing expenses here include the following – </li></ul><ul><li>- Commissions </li></ul><ul><li>- Rebates 29 </li></ul><ul><li>- Discounts </li></ul><ul><li>- Sales promotional </li></ul><ul><li>- Expenses on direct selling agents </li></ul><ul><li>- Entertainment expenses etc. </li></ul><ul><li>Distribution Expenses </li></ul><ul><li>Distribution expenses include the outward freight cost to the company. </li></ul>
  30. 38. <ul><li>Hindustan Unilever, which once pioneered distribution in India, is today reinventing distribution - creating new channels, and redefining the way current channels are serviced. In the process it is converging product availability, with brand communication and brand experience. </li></ul>