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Analysis of Distribution Network ofAnalysis of Distribution Network ofHULHUL

We have analyzed the distribution network of HUL from thefollowing aspects:

1. Evolution of HULs distribution network

2. Transportation & Logistics

3. Channel Design

4. Initiatives taken for channel member management

5. Field force management

6. Analytical Framework7. Financial Analysis

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Evolution of HULs distributionEvolution of HULs distributionNetworkNetwork

The first phase of the HUL distribution networkhad wholesalers placing bulk orders directly withthe company

The focus of the second phase, which spannedthe decades of the 40s, was to provide desiredproducts and quality service to the company'scustomers

The highlight of the third phase was the

concept of "Redistribution Stockist" (RS) whoreplaced the RWs

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Distribution at VillagesDistribution at Villages

RURAL DISTRIBUTION MODEL

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Distribution at Urban CentersDistribution at Urban Centers

Distribution of goods from the manufacturingsite to C & F agents take place througheither the trucks or rail roads depending onthe time factor for delivery and cost of transportation.

Generally the manufacturing site is locatedsuch that it covers a bigger geographicalsegment of India.

From the C & F agents, the goods aretransported to RSs by means of trucks andthe products finally make the last mile based

on the local popular and cheap mode of

transport.

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New Distribution ChannelsNew Distribution Channels

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Project Streamline.Project Streamline.

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Hindustan lever NetworkHindustan lever Network

Mother Depot and Just in TimeSystem

Leveraging Information technology

RS Net Initiative

Adexa iCollaboration suite

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HULs Turnover Compared with Competitors, 2006

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HULs Market Leadership across various FMCG Categories

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Channel DesignChannel Design

Hindustan Lever Limited (HUL) has twotypes of channel selling

i. Regular (traditional) retail channel,

ii.Direct Selling Channel in the name ofHindustan Lever Network (HLN).

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Channel structureChannel structureRedistribution stockists:-

Sales Margin: 4.76% which includes cash discount, unloading e xpenses 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 nonmonetary 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

o Wholesaler (gets 1.5 % max. discount from RS)o Retailers (gets 1.0% max. discount from RS)

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Wholesaler:

Gets cash discounts and other schemes promoted by HUL (getspoints under Vijeta Scheme).

Retailers:

Total retailer base in Jamshedpur: Approximately 1070.

Sales Margin: Depends on the product

o Soap, detergents 8% on MRP

o Cosmetics 10% on MRP

o Food items 8% on MRP

Incentive schemes:

Company programs (Scheme Discounts + Cash Discounts)

TPR schemes based on Sales (1 % to 4 %)

Vijeta scheme is not for retailers.

Field Sales Force:

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Initiatives Taken to Improve TheInitiatives Taken to Improve TheDistribution NetworkDistribution Network

Setting up of a fullscale sales organization comprising key

account management and activation to impact, fully engageand service modern retailers as they emerge.

Servicing Channel partners and customers with continuous

daily replenishment.

Leveraging scale and building expertise to service ModernTrade and Rural Markets.

Delaying of sales force to improve response times andservice levels

Launching the Unicare scheme with upmarket pharmacies andretailers to sale its premium brands.

Launching of several promotional schemes for existingwholesalers and distributors.

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Field Force ManagementField Force Management

In HUL, the field force is evaluated usingQOC (Quality of Contribution). It consistsof 4 components

1. Secondary Sale (Max points = 2.5)

2. Eco (Max points = 0.5)

3. Focus (Max points = 0.5)

4. FCS (Max Points = 0.5)

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Non Monetary MethodsNon Monetary Methods

Based on the QOC various awards are distributed to the fieldpersons at the end of every month. These awards are alsoknown as MOC Star awards.

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

If QOC score > 4 - The person is eligible for 5 star award

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

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Analytical FrameworkAnalytical Framework

We tried to analyze HULs distribution network in the light of20 most significant variables that affect the distribution part 0fchannel management for any organization in the business ofmarketing & 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 Impulse8. level of Involvement(LOI)

9. Purchased as a Basket of Goods

10. Speed & complexity of Decision making process

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Analytical Framework cont.Analytical Framework cont.

11. present of Expert influencer in the decision making process

12. Element of crisis purchase exists

13. Element of risk aversion exists

14.P

erish ability of the product15. Time band associated with the purchase of the product

16. Fungibility

17. Degree of customization possible

18. Negative/Positive reinforcing product

19. Value/Volume ration(value density) of the product

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Financial AnalysisFinancial Analysis

Marketing Expenses

As stated earlier also, marketing expenses hereinclude the following

- Commissions- Rebates 29

- Discounts

- Sales promotional

- Expenses on direct selling agents

- Entertainment expenses etc.

Distribution Expenses

Distribution expenses include the outward freightcost to the company.

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ThankThank--YouYou