DISTRIBUTION LINE OF HUL

Supply Chain Management

Submitted By
Abid Rashid 14003
Bikram Das 14019
Md Shahbaz 14031
Rumana Jabin 14040
S. Deepak 14041
Uday Dave 14059
Vivek Mahato 14062

ACKNOWLEDGMENT

After the successful accomplishment of a project, it is the first and foremost duty of researcher to
acknowledge the motivation, guiding and supporting factors which led him/ her to prepare and
finish the project report.
We would like to express our sincere thanks to Prof.Sanjib Biswas and Prof.Indranil
Ghosh for their continuous help and guidance and keen interest in the development of project.
We also thank to the employees, officer and the supervisors of the company who without any
hesitation gave me the details which I required during the preparation of my project. They have
given their valuable time to complete my internship project on time.

A CASE STUDY ON DISTRIBUTION LINE OF HUL

INTRODUCTION
Hindustan Unilever Limited (HUL) is an Indian consumer goods company based in Mumbai,
Maharashtra. It is owned by Anglo-Dutch company Unilever which owns a 67% controlling
share in HUL as of March 2015 and is the holding company of HUL. HUL's products include
foods, beverages, cleaning agents, personal care products and water purifiers.
HUL was established in 1933 as Lever Brothers and, in 1956, became known as Hindustan Lever
Limited, as a result of a merger between Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and
United Traders Ltd. It is headquartered in Mumbai, India and employs over 16,000 workers,
whilst also indirectly helping to facilitate the employment of over 65,000 people The company
was renamed in June 2007 as "Hindustan Unilever Limited".
Hindustan Unilever's distribution covers over 2 million retail outlets across India directly and its
products are available in over 6.4 million outlets in the country. As per Nielsen market research
data, two out of three Indians use HUL products.
HUL is the market leader in Indian consumer products with presence in over 20 consumer
categories such as soaps, tea, detergents and shampoos amongst others with over 700 million
Indian consumers using its products. Sixteen of HUL's brands featured in the ACNielsen Brand
Equity list of 100 Most Trusted Brands Annual Survey (2014), carried out by Brand Equity, a
supplement of The Economic Times.
The "most trusted brands" from HUL in the top 100 list are: Lux, Surf Excel, Clinic Plus, Rin ,
Lifebuoy , Close up , Pond's Pepsodent , Fair & Lovely ,Dove , Sunsilk , Vim , Wheel ,
Vaseline ,Pears , Lakme .
The latest launches for Hindustan Unilever include: Knorr Chinese Noodles, Schezwan and Hot
& Spicy, Lakme Absolute Sculpt Range, Lakme Lip Love, Magnum Choco Cappuccino and Axe
Gold Temptation.

OBJECTIVE
Challenges faced by HUL to establish an efficient distribution channel to support its complex
product line to satisfy the customers needs and compete in the market. Also to understand the
futuristic trend and acclimatize to the market .

DISTRIBUTION NETWORK
The Distribution network of HUL is Formed in such a way so that it benefits it,s customer in the
most effective way and can fulfil the varying demands of its customer.
The finished products of HUL are taken care by the Carrying & Forwarding Agents of the
organization, whose responsibility is to make the product reach the Redistribution Stockiest
taking care of the 5 Rs in account.
Redistribution Stockiest then distribute the stock to the wholesalers or reaches the rural retailers
or urban retailers directly according to the process they follow. HUL has well predefined set of
products for Its rural and urban market based on various criteria.
Rural retailers or urban retailers then serve the product to its end customers.
RURAL DISTRIBUTION MODEL OF HUL
HUL approached the rural market with two criteria the accessibility and viability. To service
this segment, HUL appointed a Redistribution stockist who was responsible for all outlets and all
business within his particular town. HUL assigned a sub stockist who was responsible to access
all the villages at least once in a fortnight and send stocks to those markets. .This substockist
distributes the company's products to outlets in adjacent smaller villages.
URBAN DISTRIBUTION MODEL OF HUL
Generally the manufacturing site is located such that it covers a bigger geographical segment of
India. The manufacturing goods are distributed to carry & forwarding agent through either the
trucks or rail roads depending on the time factor for delivery and cost of transportation.
Then the goods are transported to the retailers based on the local popular and cheap mode of
transport.

PROJECT SHAKTI - New distribution channels

This model was incorporated to support the livelihood of rural women and to connect the brand
with the customers. This help to reach the rural market and strengthen the operation in rural

market. They partnered with Self Help Group in various states through which they train people
which created a great advantage for all.
The model consists of groups of (1520) villagers below the poverty line (Rs.750 per month)
taking microcredit 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 entrepreneur,
commonly referred as 'Shakti Amma' 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 610 villages in the population
strata of 1,0002,000. The Shakti entrepreneurs are given HUL products on a `cash and carry
basis.'

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
people with the help of rural substockists/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 1520 rural substockists attached to him. Each of these substockists / star sellers
is located in a rural market. The substockists 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 fullline availability, is to be provided
to rural trade as part of the new distribution strategy.
The diagram in the next page shows the model of Project Streamline.

HINDUSTAN LEVER NETWORK (HLN)

To support such type of operation a huge well planned network and upgradation is required. . It
already has about several lakh consultants all independent entrepreneurs, trained and guided by
HLN's expert managers. 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.
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 (MDJIT). 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 are sent to the mother depot by all manufacturing units. The JITs
draw their requirements from the MD on a weekly or biweekly basis.
LEVERAGING INFORMATION TECHNOLOGY
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. 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. They have also combined backend processes into a
common Shared Service infrastructure, which supports the units across the country. All these
initiatives together have enhanced operational efficiencies, improved the service to the customers
and have brought us closer to the marketplace.
RS NET INITIATIVE
The RS Net initiative, launched in 2001, aims at connecting Redistribution Stockists (RSs)
through an internet based system. 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. RS Net is one of the largest B2B ecommerce initiatives ever
undertaken in India. It provides linkages with the RSs own transaction 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 stockists on a
continuous replenishment basis. Today, the sales system gets to know every day what HUL
stockists have sold to almost a million outlets across the country. Information on secondary sales
is now available on RS Net every day.

RS Net is part of Project Leap. Project Leap begins with the supplier runs through the factories
and depots and reaches up to the RSs. This ensures HULs growth by ensuring that the right
product is available at the right place in the right quantities and at the right time in the most cost
effective manner. Leap also aims at reducing inventories and improving efficiencies right
through the extended supply chain.
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 stockists to place orders on a Continuous Replenishment System. This in turn has
unshackled the field force to solely focus on secondary sales from the stockists 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.
ADEXAI COLLABORATION SUITE
In 2000, HUL identified improved supply chain management as a critical business priority and
launched a comprehensive initiative, Project Leap, tasked with increasing supplier/distributor
responsiveness, reducing inventory buffers, and optimizing planning and scheduling. 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. With the aggregated view of data provided by the iCollaboration suite,
HUL was able to combine sales and distribution efforts on the diverse product lines, which
resulted in significant savings on the cost side for inventories and distribution. 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.

DISTRIBUTION EXPENSES
Distribution expenses include the outward freight cost to the company.
Diagram of Distribution Expenses as percentage of Sales:

We have seen that T&L plays a very important role for HUL & others who have panIndian
presence in FMCG business. ColgatePalmolive, Emami & ITC has some of the lowest
distribution expenses (as % to sales figures) & P&G has the highest. HUL is lower in this respect
than Nirma & P&G, but higher than Henkel. This can be explained somewhat from the impact of
the variable, Time Band of purchase, on the increased transport intensity for HUL in the last mile
for some of the products like household personal care, laundry detergent, branded atta etc in the
first & last week of the moth. ITC (tobacco), Henkel (largely B2B) are mostly protected from
this implication of the variable.
Another important thing to remember that value density of FMCG goods is relatively lower,
causing share of transportation costs in the overall cost structure to be relatively higher. This
implies dispersed manufacturing, locating manufacturing plants nearer to major markets. So one
location manufacturing to get higher economies of scale and on the other hand, trying to serve
geographically diverse markets may not be economically attractive for FMCG sector. Compared
to HULs 40 manufacturing plants across India, Nirma, the 2nd largest FMCG major in soaps and
detergents category, has 6 manufacturing plants, all located in and around Gujarat. So,
transportation cost of Nirma, if it tries to cater to panIndian market will be higher. This is
supported by the fact that Nirmas higher distribution cost percentage than HUL. For P&G, the
same reasons significantly affect its distribution cost which is highest for the group analyzed.

ANALYTICAL FRAMEWORK

We tried to analyze HULs distribution network in the light of 20 most significant variables that
affect the distribution part of channel management for any organization in the business of
marketing & selling of goods. The variables, their explanations and their impact on the HULs
distribution network are given below
1. Number of Consumers
In retail business dominated by traditional stores like Kirana Stores etc. (Indian retail business
falls in this category), higher the no. of consumers, higher will be the no. of channel
intermediaries. The implication of this is that there will be many layers in the channel in such a
situation and managing such a complex distribution network by keeping tabs on every player will
be a huge task. Moreover, Transport & Logistics (T&L) support provided by the organization
needs to be well organized.
Implication for HUL
HULs key strength lies in managing its distribution network in India. HUL is Indias largest
FMCG Company with unmatched distribution network, which is built over a century focusing on
traditional retail. HUL's distribution network comprises about 4,000 redistribution stockists,
covering about 6.3 million retail outlets reaching the entire urban population, and about 250
million rural consumers in India. Its said that HUL is able to touch the lives of about 2 out of
every 3 Indian consumers. This achievement is due to the sheer strength of its distribution
network (products should be good as always, otherwise they will find no buyers in the long run).
For a comparison, P&G, worlds largest FMCG major, does not find its name in the list of top 5
FMCG majors in India as its strength lies in managing modern retail (biggest example, Wal
Mart), but not traditional retail.
2. Geographic Dispersion of Consumers
Again, this is closely related with the previous variable, more so in a large, geographically
diverse country like in India. With the increase in this dispersion level, more intermediaries and
more layers are required in the distribution network so as to effectively reach the length &
breadth of the country. Obviously the T&L management for such an organization would be
critical to accomplish this.
Implication for HUL
For a country as geographically diverse as India, panIndian presence & market leadership can
only be possible when products reach even the remotest parts of the country. HUL is very
successful in achieving and maintaining this reach due to its distribution network.

3. Frequency of Purchase
If the frequency of purchase is high, then transport intensity in the last mile (i.e., from
distributor to retailers) increases manifold. For FMCG products, as a thumb rule we can take that
the mean time between two purchases is ~ 90 days. With the introduction of smaller form factor
packaging for FMCG goods (Re.1 / shampoo sachets being a very good example), the transport
intensity increased further.
Implication for HUL
HUL has about 4000 redistribution stockists, who supply to approx. 6.3 million outlets across
India. Since manufacturing is done at 40 plants around the country, rationalizing the logistics and
planning is a huge task. An innovative step in that regard has been the formation of the Mother
Depot and Just in Time System (MDJIT). 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 are sent to the mother depot by all manufacturing units. The JITs draw
their requirements from the MD on a weekly or biweekly basis and supply to stockists in that
area, who, in turn, supply to retailers.
4. Tendency to Postpone Purchase
If the tendency to postpone purchase is lesser, then the product will be easier to distribute. For
example, products/services like Fire Extinguishers, Life Insurance etc. are such that though these
are needed, the overall tendency for the consumers is to postpone the purchases these
products/services can be termed as necessary evil. For this kind of products, regular
reinforcement in the minds of consumers becomes necessary, sales field force becomes critical
and use of expert field force is commonplace.
Implication for HUL
Since FMCG products are used regularly and these products are not necessary evils,
distribution network of HUL does not require any expert field force to sell its products. Only the
recent diversification of HUL into Home Water Purification business (Pure It brand) needs
dedicated field sales force.
5. Level of Familiarity/Knowledge (of consumer) about the Product
If the level of familiarity of consumer with the product is higher, lower will be the importance of
field sales force and higher will be the importance of channel.
Implication for HUL

Since FMCG goods are very much familiar to consumers, channel and its different members are
very much important to HUL and field sales forces function is mostly limited to channel
management and ensuring availability of products.
6. Degree of Brand Loyalty
If the consumers are more brand loyal, then less push will be required from the channel
members to sell the products as there will be sufficient pull or demand from the consumers.
This implies that for products with loyal customer base, efforts from the channel members can be
much lesser for final offtake to happen which in turn leads to lesser margins to the channel
members for those products. For faster moving products (mostly due to brand pull), retailers may
not be averse to slightly lesser margins as rotation of the products is high and thus his/her ROI is
protected.
Retailers ROI = Margin * Rotation / Investment
For a FMCG player with a nonestablished brand, margins to channel members and point of sale
(POS) advertising are both important.
Implication for HUL
As HUL enjoys leadership position in many FMCG segments like Soaps, Detergents, Personal
Care products etc with strong brands with continuous pull, HUL has less to worry about
margins to channel members or POS advertising. But this situation can change considerably in
the face of rise of a significant competitor having almost the same reach as HUL has (e.g., ITC as
its eating into HULs market share continuously since it entered FMCG segment).
7. Purchased on Impulse
The impulse purchase products like chocolates, toffees, colas, ice creams etc. follow Says Law
which states that Supply Creates Demand, implying availability of these products are the most
critical aspect for these to be sold and consumed. This stresses on the fact that T&L for these
products becomes very important.
Implication for HUL
HUL has only one product in this impulse purchase category Kwality Walls (ice cream). HUL
is #2 after Amul in this FMCG segment. To increase this brands sale & market share,
availability, visibility and consumer mind share has to be increased and improved as well.
8. Level of Involvement (LOI)
Level of involvement (i.e., time & effort spent by the consumer) generally depends on the
product cost. If LOI is higher, lower is the importance of availability and more critical is the

supply of information as consumer decision process depends more on elaborate information

search.
Implication for HUL
As FMCG products are generally Low Involvement Products, HUL has to bother more on
ensuring availability of the products, rather than supply of information.
9. Purchased as a Basket of Goods
The products which are generally bought together by consumers as a basket of goods (e.g., Rice,
Flour powder, Cooking oil etc. at the beginning of the month) are to be made available together
for final offtake.
Implication for HUL
This aspect partly applies to HULs products as some products like shampoos, soaps, detergents
may fall in a basket. Efficient distribution network of HUL ensures availability of all such
products at each selling point (individual retailer).
10. Speed & Complexity of Decision Making Process
If the speed is low, then the complexity of the decision making process is higher and greater is
the importance of field sales force and the salespersons skill, knowledge and quality.
Implication for HUL
For FMCG products, complexity of decision making process is not there and so, speed of
decision making is high. This means that for HUL, field sales force is of limited functional
usage.
11. Present of Expert Influencer in the Decision Making Process
Roles of sales field force vary depending upon whether expert influencer (e.g., doctors) is
present in the process or not. If present, then consumer buying behavior may become
subcontracted and the expert influencer becomes another customer of the network, apart from the
enduser. In that situation two groups of sales force are needed to cater to both the segments.
Implication for HUL
For FMCG goods, role of expert influencer is limited. But companies try to associate brands with
regulatory bodies/authorities and show advertising with experts commenting upon superior
virtues of a product in an attempt to make the buying behaviour shift from picking/varietyseeking to subcontracted and make consumers more loyal to the brand. These are true for HUL
also (e.g., Ponds Intitute).

12. Element of Crisis Purchase Exists

If element of crisis purchase exists in the buying decision of a product (for example, bulbs &
tubes), then its availability becomes critical.
Implication for HUL
None of the products of HUL fall under this category. Nevertheless, availability of products of
HUL is necessary for other reasons.
13. Element of Risk Aversion Exists
If the level of involvement of the consumer in buying decision process is higher, risk taking
tendency of the consumer will be lower or consumer will be more risk averse. In such a situation,
channel members can unsell a brand by giving explicit or implicit suggestions. This implies
that in such a case, selling depends on many cases how the company is taking care of channel
members (keeping them happy) such that they are not lured by other competitors or directed
by grievances so as to unsell the brand. This situation is prevalent mostly in Consumer Durables
(like TV, Refrigerators etc.). In FMCG goods, the situation does not exist per se.
Implication for HUL
HUL is not affected for its FMCG products by this variable. For water purifier Pure It, this can
have considerable impact if its sale starts to happen through channel members rather than by
field sales force as is happening now.
14. Perishability of the Product
If the product is perishable (having small shelf life; examples newspaper, milk, fruits etc), then
the dimension of speed in reaching the end consumers becomes critical & T&L assumes great
significance for the company.
Implication for HUL
The FMCG products that HUL sells are not perishable by nature, but have limited life. So this
aspect is not critical for HUL.
15. Time Band Associated with the Purchase of the Product
If there is seasonality/cyclicity for the demand or purchase of the product (examples
newspaper, milk are most on demand in the 1st three hours of the day; cooking oil, rice etc.
grocery items are most on demand in the 1st week of the month), then high T&L and
infrastructural requirements are needed for the last mile for the time band when demand is
maximum. It is possible to have idle capacity in the areas mentioned above outside the peak
required time band.

Implication for HUL

For some of the products of HUL, the above stated variable is significant. For example, in Food
segment, Branded Atta Annapurna; in segments like Laundry Detergents, Shampoo & Hair
Oil etc. this element of demand time band exist to a certain extent. This underscores the
importance of T&L for HUL as the transport intensity between distributors and retailers increases
in the 1st & 4th week of a month for the products mentioned above. This is over and above the
regular replenishment of stocks at retailers done by distributors. Festivals like Holi etc. may also
increase the demand for personal care items like soaps, shampoos etc for a short period and
distribution network should be geared up not to miss any such opportunity.
16. Fungibility
Fungibility is the property of a good or a commodity whose individual units are capable of
mutual substitution. Examples of highly fungible commodities are crude oil, wheat, orange juice,
precious metals, and currencies. Fungibility has nothing to do with the ability to exchange one
commodity for another different commodity. It refers only to the ease of substitution of one unit
of a commodity with another unit of the same commodity for all intents and purposes.
Fungibility is different from liquidity. A good is liquid and tradable if it can be easily exchanged
for money or for another different good. A good is fungible if one unit of the good is
substantially equivalent to another unit of the same good of the same quality at the same time
and place. It is said that commodities are fungible, goods tangible, services intangible,
experiences memorable & transformations are effectual1.
As an example, one Rs. 100/ bank note is interchangeable with another. Cash is fungible. A
barrel of West Texas Intermediate crude oil is fungible (direct exchange) with another barrel of
the same crude oil. Oil (of the same type) is fungible.
Fungibility does not imply liquidity, and liquidity does not imply fungibility. Jewels can be
readily bought and sold (the trade is liquid), but individual diamonds, being unique, are not
interchangeable (diamonds are not fungible). Indian rupee bank notes are interchangeable in
London (they are fungible there), but they are not easily traded there (they are not liquid in
London). In contrast to diamonds, gold coins are fungible. They are also liquid, especially under
a gold standard. The combination of fungibility and liquidity is one of the reasons why gold has
successfully served as money for thousands of years.
Further, a fungible thing can become nonfungible under some circumstances. For example, an
old coin or a currency note may assume a value which is way above its face value due to
historical reasons or due to some defects in it which makes it unique from others from a
viewpoint which sees it differently than its intended purpose.

The outcome of product fungibility is that the more fungible a product becomes, higher is the
chance that parts of the distribution channel it can be replaced by IT. A good example of this is
dematerialization (Demat) route for share trading now where there is no physical existence of
shares.
Implication for HUL
As branded FMCG goods are not fungible per se (branding is done to de-commoditize &
differentiate the product), the importance of channel members will continue.
17. Degree of Customization Possible
Degree of customization directly affects economies of scale; higher the customization, lesser the
economies of scale. Also, criticality of sales field force increases with customization levels of the
offering.
Implication for HUL
For FMCG products of HUL, which are mass produced, such customizations are not possible and
thus with higher economies of scale, lower criticality of field forces from the standpoint of
customization of product offerings, costs are lower in these respects with HUL.
18. Negative or Positive Reinforcing Product
Negative reinforcing products are those which are bought to avoid/reduce the problem (ex.
insurance, washing machine, car battery etc). Positive reinforcing products are those which
gratify the senses (ex. Perfumes, Chocolates, Vacation etc). Shopping experience becomes a
critical aspect for positive reinforcing products to reaffirm the positive feelings.
Implication for HUL
Axe & Rexona deodorants are distinctly positive reinforcing products from HUL, including
others like Lux, Lakme etc. So these are seen in most shopping malls etc. with high visibility
displays to reaffirm the feelings. Consumers are willing to pay higher for these brands.

REFERENCES

1. B. Joseph Pine, James H. Gilmore (1999), The Experience Economy: Work is Theatre &
Every Business a Stage, Published by Harvard Business Press, 254 pages.
2. HUL Website (http://www.hul.co.in/)
3. HUL CLSA Conference, Investor Presentation (24th Sept., 2008).
4. Reckitt Benckiser Website
(http://www.reckittbenckiser.com/site/RKBR/Templates/Home.aspx?pageid=1)
5. Colgate Palmolive Website (http://www.colgate.co.in/app/Colgate/IN/HomePage.cvsp)
6. Emami Group Website (http://www.emamigroup.com/Brands)
7. CMIE
8. Wikipedia