Module: SALES AND DISTRIBUTION MANAGEMENT

Company: HINDUSTAN UNILIVER LIMITED (HUL)

Submitted to,
Mr. ROHITSINGH

Submitted by, KULDIPAK KHERADIYA SHUBHAM TEKRIWAL

BBA 3rd year (5th sem)

Date: - 6th December 2013

INTRODUCTION
Hindustan Unilever Limited), formerly Hindustan Lever Limited (it was renamed in late June 2007 as HUL), is India's largest Fast Moving Consumer Goods company, touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal Care Products and Foods & Beverages. These products endow the company with a scale of combined volumes of about 4 million tones and sales of nearly Rs. 13718 crores. HUL is also one of the country's largest exporters; the Government of India has recognized it as a Golden Super Star Trading House. 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. It is a mission HUL shares with its parent company, Unilever, which holds 52.10% of the equity. The rest of the shareholding is distributed among 360,675 individual shareholders and financial institutions. HUL's brands like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close up, Lakme, Brooke Bond, Kissan, Knorr Annapurna, Kwality Wall's are household names across the country and span many categories soaps, detergents, personal products, tea, coffee, branded staples, ice cream and culinary products. These products are manufactured over 40 factories across India. The operations involve over 2,000 suppliers and associates. HUL's distribution network comprises about 4,000 redistribution stockiest, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers.

Detail Overview
The distribution network of HUL is one of the key strengths that help it to supply most products to almost any place in the country from Srinagar to Kanyakumari. This includes, maintaining favorable trade relations, providing innovative incentives to retailers and organizing demand generation activities among a host of other things. Each business of HUL portfolio has customized the network to meet its objectives. The most obvious function of providing the logistics support is to get the companys product to the end customer.

Distribution Network of HUL

The HULs distribution network has evolved with time. The first phase of the HUL distribution network had wholesalers placing bulk orders directly with the company. Large retailers also placed direct orders, which comprised almost 30 per cent of the total orders collected. The company salesman grouped all these orders and placed an indent with the Head Office. Goods were sent to these markets, with the company salesman as the consignee. The salesman then collected and distributed the products to the respective wholesalers, against cash payment, and the money was remitted to the company.

The focus of the second phase was to provide desired products & quality service to the company's customers. In order to accomplish this, wholesaler in each market was appointed as a "Registered Wholesaler," a stock point for the company's products in that market. The company salesman still covered the market, inquiring in to for orders from the remainder of the trade. They then distributed stocks from the Registered Wholesaler through distribution units maintained by the company. The Registered Wholesaler technique, therefore, increased the distribution reach of the company to a bigger number of customers.

HUL Factory
Registered Wholesaler Retailers

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The highlight of the third phase was the concept of "Redistribution Stockiest" (RS) who replaced the Registered Wholesalers. The RS was required to provide the distribution units to the company salesman. The second characteristic of this period was the establishment of the "Company Depots" system. This system helped in transshipment, bulk breaking, and as a stock point to minimize stock outs at the RS level. In the recent past, a significant change has been the replacement of the Company Depot by a system of third party Carrying and Forwarding Agents (C&FAs). The C&FAs act as buffer stock points to ensure that stock outs did not take place. The C&FA system has also resulted in cost savings in terms of direct transportation and reduced time lag in delivery. important benefit has been improved customer service to the RS. The most

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HUL Factory C&FAs(Carrying And Forwarding Agent) Redistribution Stockist Retailers And Wholesalers

The role performed by the Redistribution Stockiest

includes:

Financing

stocks,

providing warehousing facilities, providing manpower, providing service to retailers, implementing promotional activities, extending indirect coverage, reporting sales and stock data, demand simulation and screening for transit damages.

DISTRIBUTION SYSTEM OF HUL

HUL's products are distributed through a network of 7,000 redistribution stockiest, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers. There are 35 C&FAs in the country who feed this redistribution stockiest regularly. The general trade comprises grocery stores, chemists, wholesale, kiosks and general stores. Hindustan Unilever provides tailor made services to each of its channel partners. It has developed customer management and supply chain capabilities for partnering emerging self service stores and supermarkets. Around 2,000 suppliers and associates serve HULs 40 manufacturing plants which are decentralized across 2 million square miles of territory.

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Distribution at the Villages:

The company has brought all markets with populations of below 50,000 under one rural sales organization. The team comprises an exclusive sales force and exclusive redistribution stockiest. The team focuses on building superior availability of products. In rural India, the network directly covers about 50,000 villages, reaching 250 million consumers, through 6000 sub stockiest.

HUL approached the rural market with two criteria

the accessibility and viability. To

service this segment, HUL appointed Redistribution stockiest who was responsible for all outlets and all business within his particular town. In the 25% of the accessible markets with low business potential, HUL assigned a sub stockiest who was responsible to access all the villages at least once in a fortnight and send stocks to those markets. This sub stockiest distributes the company's products to outlets in adjacent smaller villages using transportation suitable to interconnecting roads, like cycles, scooters or the age old bullock cart. Thus, Hindustan Unilever is trying to circumvent the barrier of motorable roads. The company simultaneously uses the wholesale channel, suitably incentivizing them to distribute company products. The most common form of trading remains the grassroots buy and sell mode. This enables HUL to influence the retailers stocks and quantities sold through credit extension and trade discounts. HUL launched this Indirect Coverage (IDC) in 1960s. Under the Indirect Coverage (IDC) method, company vans were replaced by vans belonging to Redistribution Stockiest, which serviced a select group of neighboring markets.

2). Distribution at the Urban: 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 RSs by means of trucks and the products finally make the last mile based on the local popular and cheap mode of transport.

3). New distribution channels: PROJECT SHAKTI This model creates a symbiotic partnership between HUL and its consumers. Started in the late 2000, Project Shakti had enabled Hindustan Lever to access 80,000 of India's 638,000 villages. HUL's partnership with Self Help Groups (SHGs) of rural women is becoming an extended arm of the company's operation in rural hinterlands. Project Shakti has already been extended to about 12 states Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Tamil Nadu, Chhattisgarh, Uttar Pradesh, Orissa, Punjab, Rajasthan, Maharashtra and West Bengal. The respective state governments and several NGOs are actively involved in the initiative. The SHGs have chosen to partner with HUL as a business venture, armed with training from HUL and support from government agencies concerned and NGOs. Armed with micro credit, women from SHGs become direct to home distributors in rural markets. 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. In general, a member from a SHG selected as a Shakti

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entrepreneur, commonly referred as 'Shakti' receives stocks from the HUL rural distributor. After being trained by the company, the Shakti entrepreneur then sells those goods directly to consumers and retailers in the village. Each Shakti entrepreneur usually service 6 10 villages in the population strata of 1,000 2,000. The Shakti entrepreneurs are given HUL products on a `cash and carry basis. This two diagrams shown that the project Shakti model as initial by HUL

Project Streamline To cater to the needs of the inaccessible market with high business potential HUL initiated a Streamline initiative in 1997. Project Streamline is an innovative and effective distribution network for rural areas that focuses on extending distribution to villages with less than 2000 11

people with the help of rural sub stockiest/Star Sellers who are based in these very villages. As a result, the distribution network directly covers as of now about 40 per cent of the rural population. Under Project Streamline, the goods are distributed from C & F Agents to Rural Distributors (RD), who has 15 20 rural sub stockiest attached to him. Each of these sub stockiest / star sellers is located in a rural market. The sub stockiest then perform the role of driving distribution in neighboring villages using unconventional means of transport such as tractor and bullock carts. Project Streamline being a cross-functional initiative, the Star Seller sells everything from detergents to personal products.

Higher quality servicing, in terms of frequency, credit and full line availability, is to be provided to rural trade as part of the new distribution strategy. The diagram shows the model of Project Streamline.

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HINDUSTAN UNILEVER NETWORK (HULN)

It is the company's arm in the Direct Selling channel, one of the fastest growing in India today. It already has about several lakh consultants all independent entrepreneurs, trained and guided by HULN's expert managers. HULN has already spread to over 1500 towns and cities, covering 80% of the urban population, backed by 42 offices and 240 service centers across the country. It presents a range of customized offerings in Home & Personal Care and Foods. The New Compensation plan for HULN partners provides new exciting ways of earning substantial income in addition to offering rewards like revenue sharing through the innovative concept of pools

MOTHER DEPOT AND JUST IN TIME SYSTEM

In order to rationalize the logistics and planning task, an innovative step has been the formation of the Mother Depot and Just in Time System (MD JIT). 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. All brands and packs required for the set of markets, which the MD and JITs service in a given area sent to the mother depot by all manufacturing units. The JITs draw their requirements from the MD on a weekly or bi weekly basis.

Redistribution Stockiest Net Initiative:

The RS Net initiative, launched in 2001, aims at connecting Redistribution Stockiest (RSs) through an Internet based system. It now covers stockiest 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. RS Net is one of the largest B2B ecommerce initiatives ever undertaken in India. It provides linkages with the RSs own transaction

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systems, enables monitoring of stocks and secondary sales and optimizes RSs orders and inventories on a daily basis through online interaction on orders, dispatches,

information sharing And monitoring. The ITpowered system has been implemented to supply stocks to redistribution stockiest on a continuous replenishment basis. Today, the sales system gets to know every day what HUL stockiest have sold to almost a million outlets across the country. Information on secondary sales is now available on RS Net every day. RS Net has come as a force multiplier for HUL Way, the company's actionplan to not only maximize the number of outlets reached but also to achieve leadership in every outlet. RS Net has enabled stockiest to place orders on a Continuous Replenishment System. This in turn has unshackled the field force to solely focus on secondary sales from the stockiest to retailers and market activation. It has also enabled RSs to provide improved service to retail outlets. Simultaneously, HUL is servicing the rural market, key urban outlets, and the modern trade as a single concern.

UNILIVER LARGEST FMCG in India

3000

2500

2000

1500

1000

500

TurnoverUS$m

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60

50

40

30

HUL market share (%) Main competitor market share(%)

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Channel Design Hindustan Lever Limited (HUL) has two types of channel selling Regular (traditional) retail channel, Direct Selling Channel in the name of Hindustan Lever Network (HULN).

HUL has a well-entrenched high distribution model, which comprises of C&FAs, Redistribution Stockiest, wholesalers and retailers (as shown earlier). Hindustan Unilever's distribution network is recognized as one of its key strengths. Its focuses on Product availability, Brand communication, and higher levels of brand experience. HULs Sales Break up through different channels:

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Sales Break-up Through Different Channels

7% 33% 60% Modern Retail Urban General Trade Rural Areas

Channel Structure
Typically, the goods produced in each of the HUL's 40 factories are sent to a depot with the help of a carrying and forwarding agent (C&FA). The company has its depot in every state of the country. The C&FA is a third party and gets servicing fee for stock and delivery of the products. In each town, there is at least a redistribution stockiest (RS) who takes the goods from the C&FA and sells them to retail outlets. The HUL management realized certain problems with the existing sales model. First, the model was not viable for small towns with small population and small business. HUL found it expensive to appoint one stockiest exclusively for each town. Secondly, the retail revolution in the country has changed the pattern the customers shop. Large retail selfservice shops are becoming commonplace. In response of these problems, HUL redesigned its sales and distribution channel and the new system is known as 'diamond model' in the company. At the top end of the diamond, there are the self-service retail stores, which constitute 10% of the total FMCG market. The middle, fatter part of the diamond represents the profit center based sales team. In the bottom of the pyramid is the rural marketing and distribution, which accounts for 20% of the

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business. As a result of the new distribution plan the company has planned to reduce the number of RS in small towns.

Field Sales Force

To meet the ever changing needs of the consumer, HUL has set up a distribution network that ensures availability of all their products, in all outlets, at all times. This includes, maintaining favorable trade relations, providing innovative incentives to retailers and organizing demand generation activities among a host of other things. The important activities that HUL field sales force does are (I) target chasing and (ii) reporting on a daily basis. Account information is maintained on palmtops given by HUL. During a research and informal survey of HUL field sales force, it was found that for the last two years, training is not being given at all to the sales force. HUL has limited the network channel selling to categories of Home & Personal Care (HPC) and Food products with exclusive brands for this channel. That is, these particular brands (products) are all exclusive to HLN, specifically developed for the Direct Selling channel, and not available in the retail channel. The general trade comprises grocery stores, chemists, wholesaler, kiosks and general stores. Hindustan Unilever services each with a tailor made mix of services. Channel Structure (Special Focus is on Jamshedpur) Typically, the goods produced in each of the HUL's 40 factories are sent to a depot with the help of a carrying and forwarding agent (C&FA). The company has its depot in every state of the country. The C&FA is a third party and gets servicing fee for stock and delivery of the products. In each town, there is at least a redistribution stockiest (RS) who takes the goods from the C&FA and sells them to retail outlets. In Jharkhand the C&FA is in Ranchi and Jamshedpur is serviced by 3 Redistribution Stockiest at Sakchi (M/s Om Prakash Agarwal), Bistupur and Parsudih. The HUL management realized certain problems with the existing sales model. First, the model was not viable for small towns with small population and small business. HUL found it expensive to appoint one stockiest exclusively for each town. Secondly, the retail revolution in the country has changed the pattern the customers shop. Large retail selfservice shops are becoming commonplace. In response of these problems, HUL redesigned

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its sales and distribution channel and the new system is known as 'diamond model' in the company. At the top end of the diamond, there are the self-service retail stores, which constitute 10% of the total FMCG market. The middle, fatter part of the diamond represents the profitcenter based sales team. In the bottom of the pyramid is the rural marketing and distribution that accounts for 20% of the business. As a result of the new distribution plan the company has planned to reduce the number of RS in small towns. Redistribution Stockiest: Total number of RS in Jamshedpur = 3 (at Sakchi, Bistupur, Parsudih). This is going to be reduced to only one with effect from next month of this year.
Sales Margin: 4.76%, which includes cash discount, unloading expenses from depot, distribution expenses to retailers, incentive schemes & other incidental expenses. Modes of transport used: Rickshaw, tempo. Incentive schemes: Before 2000 holiday packages and tours but after 2000 no non monetary incentive for RS. 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. Areas of Operations: Marked for each of the RS. Selling Operations: RSs sells the goods to Wholesaler (gets 1.5 % max. discount from RS) Retailers (gets 1.0% max. discount from RS)

Wholesaler: Gets cash discounts and other schemes promoted by HUL (gets points under Vijeta Scheme). Retailers:
Total retailer base in Jamshedpur: Approximately 1070. Sales Margin: Depends on the product Soap, detergents 8% on MRP Cosmetics 10% on MRP Food items 8% on MRP

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Incentive schemes: Company programs (Scheme Discounts + Cash Discounts) TPR schemes based on Sales (1 % to 4 %) Vijeta scheme is not for retailers.

Initiatives taken to improve the Distribution Network

HUL has taken the following initiatives to improve its distribution network:
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. Delayering of sales force to improve response times and service levels. Revamping of its sales organization in the rural markets to fully meet the emerging needs and increased purchasing power of the rural population. HULs distribution network in rural India already directly covers about 50,000 villages, reaching about 250 million consumers through about 6,000 subs stockiest. Implementation of supply chain system that connects stockiest across the country, and also includes a back end system connecting suppliers, all company sites and stretching right up to stockiest. IT tools have been deployed for connectivity across the extended supply chains. Backend processes have been combined into a common Shared Service infrastructure. 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. Launching of HUL Network to leverage the channel of direct selling by presenting customized offerings in 11 home and personal care and food categories. Started in 2003, it already has a base of 300,000 consultants across the country. Starting of franchised Lakme Beauty Salons and Ayush Therapy centers to offer standardized services, in line with the strategy to leverage the equity of its brands through relevant services.

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 Finding out Innovative ways to reach out to its consumers, particularly in rural areas by leveraging non conventional media like wall paintings, cinema vans, weekly markets (haats), fairs and festivals. 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. In addition to this, to boost up traditional retail in the face increasing in roads made by large, modern retailing chains like Spencers, Reliance Fresh etc. (where HUL is squeezed harder for discounts), 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. Launching of several promotional schemes for existing wholesalers and distributors. For instance, it has started the Vijeta Rishta Jeet Ka scheme last year to provide a platform for the wholesaler and HUL to grow the business by earning points and redeeming them.

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Conclusion
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.

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