Hul

DISTRIBUTION NETWORK

Introduction….. l

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Hindustan Unilever Limited (‘HUL’), formerly Hindustan Lever Limited (it was renamed in late June 2007 as HUL). India's largest Fast Moving Consumer Goods company HUL is also one of the country's largest exporters The mission that inspires HUL's over 15,000 employees, including over 1,300 managers, is to "add vitality to life.“ HUL meets everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life.

Products…..

Analysis of Distribution Network of HUL l

We have analyzed the distribution network of HUL from the following aspects: 1. 2. 3. 4. 5. 6. 7.

Evolution of HUL’s distribution network Transportation & Logistics Channel Design Initiatives taken for channel member management Field force management Analytical Framework Financial Analysis

Evolution of HUL’s distribution Network l

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The first phase of the HUL distribution network had wholesalers placing bulk orders directly with the company 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 The highlight of the third phase was the concept of "Redistribution Stockist" (RS) who replaced the RWs

Distribution at Villages…

RURAL DISTRIBUTION

Distribution at Urban Centers… l

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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. Generally the manufacturing site is located such that it covers a bigger geographical segment of India. From the C & F agents, the goods are transported to RS’s by means of trucks and the products finally make the ‘last mile’ based on the local popular and cheap mode of transport.

New Distribution Channels…

Project Streamline….

Hindustan lever Network l Mother

Depot and Just in Time

System l Leveraging Information technology l RS Net Initiative l Adexa iCollaboration suite

HUL’s Turnover Compared with Competitors, 2006

HUL’s Market Leadership across various FMCG Categories

Channel Design l Hindustan

Lever Limited (HUL) has two types of channel selling ‐

i. Regular (traditional) retail channel, ii.Direct Selling Channel in the name of Hindustan Lever Network (HLN).

Channel structure Redistribution stockists:l

Sales Margin: 4.76% which includes cash discount, unloading expenses from depot, distribution expenses to retailers, incentive schemes & other incidental expenses.

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Modes of transport used: Rickshaw, tempo.

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Incentive schemes: Before 2000 holiday packages and tours but after 2000 no non‐monetary incentive for RS.

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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 figures etc to and from the common shared platform.

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Areas of Operations: Marked for each of the RS.

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Selling Operations: RSs sells the goods to ‐ o Wholesaler (gets 1.5 % max. discount from RS)

Wholesaler: l Gets cash discounts and other schemes promoted by HUL (gets points under Vijeta Scheme). Retailers: l Total retailer base in Jamshedpur: Approximately 1070. l

Sales Margin: Depends on the product

o Soap, detergents ‐ 8% on MRP l o Cosmetics ‐ 10% on MRP l o Food items ‐ 8% on MRP Incentive schemes: l Company programs (Scheme Discounts + Cash Discounts) l TPR schemes based on Sales (1 % to 4 %) l Vijeta scheme is not for retailers. Field Sales Force: l

Initiatives Taken to Improve The Distribution Network l

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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. Servicing Channel partners and customers with continuous daily replenishment. Leveraging scale and building expertise to service Modern Trade and Rural Markets. Delaying of sales force to improve response times and service levels Launching the Unicare scheme with upmarket pharmacies and retailers to sale its premium brands. Launching of several promotional schemes for existing wholesalers and distributors.

Field Force Management l

In HUL, the field force is evaluated using QOC (Quality of Contribution). It consists of 4 components ‐

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1. 2. 3. 4.

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Secondary Sale (Max points = 2.5) Eco (Max points = 0.5) Focus (Max points = 0.5) FCS (Max Points = 0.5)

Non Monetary Methods l

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.

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If QOC score > 4.5 - The person is eligible for 7 star award

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If QOC score > 4

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If QOC score > 3.5 -The person is eligible for 3 star award

- The person is eligible for 5 star award

Analytical Framework l

We tried to analyze 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. 1. No of Consumers 2. Geographic Dispersion Of Consumers 3. Frequency of purchase 4. Tendency to postpone purchase 5. Level of Familiarity/Knowledge (of consumer) 6. Degree of brand loyalty 7. Purchased on Impulse 8. level of Involvement(LOI) 9. Purchased as a Basket of Goods 10. Speed & complexity of Decision making process

Analytical Framework cont…. 11. 12. 13. 14. 15. 16. 17. 18. 19.

present of Expert influencer in the decision making process Element of crisis purchase exists Element of risk aversion exists Perish ability of the product Time band associated with the purchase of the product Fungibility Degree of customization possible Negative/Positive reinforcing product Value/Volume ration(value density) of the product

Financial Analysis Marketing Expenses As stated earlier also, marketing expenses here include the following – - Commissions - Rebates 29 - Discounts - Sales promotional - Expenses on direct selling agents - Entertainment expenses etc. Distribution Expenses l Distribution expenses include the outward freight cost to the company.

Thank-You