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HUL Distribution Model

HUL Distribution Model

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Published by Arpan Mehra

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Published by: Arpan Mehra on Feb 03, 2011
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DistributionModel of HUL
 
SDM Assignment 
 
Ankit Chhabra (104)Sankalp Kohli (110)Abhijit Arora (303)Arpan Mehra (309)Anshum Kawatra (308)Anshul Jindal (306)
 
MBA (Tech.)NMIMS, MUMBAI
 
1 |Page 
Introduction
 
 –
 
Hindustan
 
Unilever
 
Limited
 
Hindustan Unilever Limited (‘HUL’), formerly Hindustan Lever Limited (it was renamed in
late June 2007 as HUL), is India's largest Fast Moving Consumer Goods company, touchingthe lives of two out of three Indians with over 20 distinct categories in Home & PersonalCare Products and Foods & Beverages. These products endow the company with a scale of combined volumes of about 4 million tonnes and sales of nearly Rs. 13718 crores.HUL is also one of the country's largest exporters; it has been recognized as a Golden SuperStar Trading House by the Government of India.The mission that inspires HUL's over 15,000 employees, including over 1,300 managers, is to"add vitality to life." HUL meets every day needs for nutrition, hygiene, and personal carewith brands that help people feel good, look good and get more out of life. It is a missionHUL 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 financialinstitutions.HUL owns 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
which are household names
across the country and span many categories ‐
soaps, detergents, personal products, tea, coffee, branded staples, ice cream and culinaryproducts. These products are manufactured over 40 factories across India. The operationsinvolve over 2,000 suppliers and associates. HUL's distribution network comprises about4,000 redistribution stockists, covering 6.3 million retail outlets reaching the entire urbanpopulation, and about 250 million rural consumers.
We have analyzed the distribution network of HUL from the following aspects:1)
 
Introduction of the company2)
 
Distribution Model3)
 
The key stakeholders in the distribution model4)
 
How is the work of these stakeholders monitored?5)
 
What incentives are given to these stakeholders?6)
 
What are the key challenges in the distribution model?7)
 
How are the key challenges tackled by the company?8)
 
Recommendations on whether the company's action plan for tackling distributionchallenges is right.
 
2 |Page 
Distribution
 
Network
 
of 
 
HUL
 
Evolution
 
over
 
Time
 
The
HUL’s
distribution network has evolved with time. The first phase of the HULdistribution network had wholesalers placing bulk orders directly with the company.Large retailers also placed direct orders, which comprised almost 30 per cent of the totalorders collected. The company salesman grouped all these orders and placed an indentwith 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 therespective wholesalers, against cash payment, and the money was remitted to thecompany.The focus of the second phase, which spanned the decades of the 40s, was to providedesired products and quality service to the company's customers. In order to achieve this,one wholesaler in each market was appointed as a "Registered Wholesaler," a stock pointfor the company's products in that market. The company salesman still covered themarket, canvassing for orders from the rest of the trade. He then distributed stocks fromthe Registered Wholesaler through distribution units maintained by the company. TheRegistered Wholesaler system, therefore, increased the distribution reach of thecompany to a
larger
number of customers.The highlight of the third phase was the concept of "Redistribution Stockist" (RS) whoreplaced the RWs. The RS was required to provide the distribution units to the companysalesman. The second characteristic
of 
 
this
period was the establishment of the "CompanyDepots" system. This system helped in transhipment, bulk breaking, and as a stock point tominimise stock
outs at the RS level. In the recent past, a significant change has been thereplacement of the Company Depot by a system of third party Carrying and ForwardingAgents (C&FAs). The C&FAs act as buffer sto
ck‐poi
nts to ensure that stoc
k‐outs
did nottake place. The C&FA system has also resulted in cost savings in terms of directtransportation and reduced time lag in delivery. The most important benefit has beenimproved customer service to the RS.The role performed by the Redistribution Stockists 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

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