Critical Analysis of Value Addition from Continuous Replenishment System & Distributor Financing In Unilever Bangladesh Ltd
PREPARED FOR Mr. Saif Noman Khan Lecturer IBA, University of Dhaka
PREPARED BYTamanna Ikram BBA 13, Roll-12 & Management Trainee Unilever Bangladesh Ltd
Critical Analysis of Value Addition from Continuous Replenishment System & Distributor Financing In Unilever Bangladesh Ltd
Prepared for: Md. Saif Noman Khan Lecturer
Prepared by: Tamanna Ikram BBA 13, Roll-12
June 24, 2009 Institute of Business Administration, University of Dhaka
Letter of Transmittal June 24, 2009 Professor G M Chowdhury Chairman Internship & Placement Program Institute of Business Administration University of Dhaka Dear Sir: I would like to draw your kind attention towards the submission of my Internship Report. The Report titled “Critical Analysis of Value Addition from Continuous Replenishment System and Distributor Financing in Unilever Bangladesh Limited” was assigned as a requirement for the completion of the degree. In this report, I have endeavored to incorporate the knowledge and experiences gained on a practical level. I have tried to produce as well written and informative a report as possible. However, because of the confidentiality policy of Unilever Bangladesh Limited, this study has not turned out to be as informative as I would have preferred. Working on this project was a delightful experience for me as many unknown things were explored while working on the project. I will be available for any clarification and modification that may be required.
Warm Regards and Thanks Sincerely yours,
Tamanna Ikram BBA-13, Roll-12 IBA, University of Dhaka
At the very onset, the author would like to express gratitude towards the faculty advisor, Md. Saif Noman Khan, Lecturer, IBA, who has given invaluable support from the very beginning through giving the direction for the report and also leading about the rules and procedures for internship completion.
Honest appreciation goes to organizational supervisor, Mr. Aminul Bari, Management Accountant-CD Support, Unilever Bangladesh Ltd., who has been a constant inspiration to carry out the project as well as to operate smoothly in the cross-functional tasks. He has also shown immense support and generosity to help in preparing the report.
Sincere gratitude goes to Mr. Mohammad Hedayet Ullah, Project Manager for CRS implementation, for providing the author with valuable information, guidelines and his cooperation in collecting the required data.
The author would also like to extend gratefulness to Mr. Mahtabuddin Ahmed, Finance Director, Unilever Bangladesh Ltd, for helping the author in selecting the topic of this report. His insight into the subject matter and review of the report has augmented the whole report manifolds. Sincere gratitude is also extended to Mr. Debdulal Karmaker, Corporate Risk Controller, for his continuous encouragement and guidance
Their valuable contribution has facilitated the successful completion of this report to a great extent.
Such systems are already in place in other Unilever operating companies. with DF was implemented by UBL to address the above stated issues to improve business efficiency and to reduce lost sales as a result of it.
The results have been largely conclusive.EXECUTIVE SUMMARY
The objective of this report is to conduct a pilot analysis of the value addition to the company.with the cash problem having been solved. to address certain problems in the system such as: Lack of an accurate stock level forecasting and demand planning leading to stock build up in distributor’s warehouse. Post CRS implementation & (ii) Performance of CRS+DF distributors against non CRS+DF ones. 5
. CRS will address the forecasting issues of inventory management. (ii) Cash status of the distributors (since UBL does not sell on credit)
CRS. with Distributor Financing (DF) project has been undertaken in Unilever Bangladesh Ltd.
The Continuous Replenishment System (CRS). The objective of this report is to analyze how successfully this has been implemented in Unilever Bangladesh Ltd. around the world. as a result of the recent implementation of the Continuous Replenishment System. while Distributor Financing arranged by UBL will ensure that CRS suggested inventory levels are fully implemented by the distributors. This has been done by a comparative analysis of (i) Pre CRS implementation vs. This prompted actions to increase true CCFOT by 6%. by identifying where the problem lied.as measured by the CCFOT-which was actually 10% lower as a result of higher Out of Stock situations. Thus. orders not reflecting true market demand as result of modification due to: (i) Prior knowledge about stock availability in UBL warehouse. CRS has provided the company with a true picture of how much of the demand from the market through the customers were being fulfilled. with Distributor Financing in 19 Distribution Houses of Unilever Bangladesh Ltd. First of all.
CRS+DF has brought greater accuracy in the demand planning and stock level forecasting leading to achieving higher growth by maintaining lower stock levels. majority if not 100% distributors need to be brought under the CRS+DF umbrella. The author has recommended working with the banks to speed up the process of providing Distributor Financing to all distributors. the former group of distributors have reduced their stock cover days. on a company level. Unilever Bangladesh Ltd.CRS has helped UBL to remedy their CCFOT situation. their average Return on Investment (ROI) is also higher than those without CRS. while achieving higher levels growth. CRS+DF implementation has resulted in higher sales growth for the 19 distributors. to sum up the superior performance of the CRS+DF distributors.
. Thirdly. should also explore other banks for providing the service as backups and to obtain better deals. Also.than those without CRS+DF. Thus. CRS+DF has delivered business values in the pilot group of distributors. thereby reducing lost sales as a result of Out of Stock %. For the benefits to be realized by Unilever Bangladesh Ltd. Only then can significant improvements in company sales levels can be seen.
Thus. compared to those without CRS+DF.
..................................................................................................................................................................................... 10 METHODOLOGY .................................................1 UNILEVER GLOBAL ..................................................................... 43 3............................................ 10 OBJECTIVES...........................0 CUSTOMER DEVELOPMENT: BACKGROUND.........................4 UNILEVER AT A GLANCE ..TABLE OF CONTENTS
1... 46 3............................................................................................................................................................0 INTRODUCTION ............................... 13 2................................. 46
.............................................................................................................................................................................................................................................................. 17 2................................... 43 3.............6 DETAILED STRUCTURE: FINANCE & IT ...................... 12 2............................................................................................................2 UNILEVER BANGLADESH LIMITED....... 15 2............................ 10 ORIGIN ............................... 11 LIMITATIONS:........................................................................... 16 2.......1 OUTLET BUSINESS STRUCTURE IN BANGLADESH ......................................4 UBL SALES CHANNELS .................................................................................................................................................................................................................................................................................................................................................. 12 2......3 MANAGING TRADE: UBL MODEL . 42 3...........................................................................................................0 THE ORGANIZATION PART .................................................2 TRADE STRUCTURE ................................................................................. 11 2........................................................................... 10 SCOPE .................5 ORGANIZATIONAL STRUCTURE: ...........................................................................7 BRANDS ......3 UNILEVER’S CORPORATE PURPOSE ................................................................. 18 3.............................................................................. 14 2............................................................................
......................................................................................................................................59 FIGURE 7 UBL CCFOT JAN-'09.................... 67 FIGURE 9 STOCK DAYS COVER TREND FOR CRS+DF DISTRIBUTORS ........1 CONTINUOUS REPLENISHMENT SYSTEM ...............................................5 REDISTRIBUTION PROCESS ...................................47 FIGURE 6 CRS PROCESS FLOW................................... 57 5..............2 CRS IN UBL INVOLVES: .................... 76 FIGURE 10 STOCK DAYS COVER TREND FOR NON CRS+DF DISTRIBUTORS ........................... 53 5......... 51 5..............................3 CRS INFORMATION FLOW ...........................5 CRS PROCESS FLOW ..... 80
LIST OF FIGURES
FIGURE 1 MANAGEMENT COMMITTEE ORGANOGRAM ............................................................. 59 6.................................... 53 5..................0 CONCLUSION .................0 THE SOLUTION: CONTINUOUS REPLENISHMENT SYSTEM .................................................................................................................3...............................................................46 FIGURE 5 UBL SALES CHANNELS.0 BUSINESS ISSUE ..................................................................................................................44 FIGURE 4 UBL TRADE MODEL......................................... 64 7..........................................................................................................................................0 EVALUATION OF CONTINUOUS REPLENISHMENT SYSTEM AND DISTRIBUTOR FINANCING ........................................................................................................................ 18 FIGURE 3 SALES REGIONS OF UBL................................................................66 FIGURE 8 OUT OF STOCK% JAN'09-MAY'09 .............................................................................................................................. 57 5..... 48 4.. 17 FIGURE 2 COMPANY LIST OF POSITIONS .....
.............................................................................................FIGURE 11 STOCK DAYS COVER FOR CRS VS NON CRS DISTRIBUTORS ..............MAY 2009 YTD ....2009 MAY YTD ................................................................... 68 TABLE 3 CRS+DF DISTRIBUTORS CHANGE IN GROWTH FROM MAY 2008 YTD.................................................................................................................................................................................... 79 FIGURE 14 CRS+DF DISTRIBUTORS ROI 2008 VS 2009............................... 78 FIGURE 13 DISTRIBUTOR ROI COMPARISON OF CRS+DF & NON CRS+DF DISTRIBUTORS .............. 76 TABLE 7 DISTRIBUTOR ROI COMPARISON OF CRS+DF & NON CRS+DF ............. 78
.............. 70 TABLE 4 NON CRS+DF DISTRIBUTORS CHANGE IN GROWTH RATE FROM 2008 MAY YTD............................................. 79
LIST OF TABLES
TABLE 1 KEY COMPETITORS OF UBL ...................................................................................................................................... 71 TABLE 5 CRS+DF DISTRIBUTORS DAY COVER FROM JANUARY 2009 TO MAY 2009 ................................................................................................................. 77 FIGURE 12 RELATION BETWEEN DISTRIBUTOR ROI AND STOCK DAYS ................................................... 25 TABLE 2 PRODUCT CATEGORY WISE CCFOT ........................................................................................................... 75 TABLE 6 NON CRS+DF DISTRIBUTORS DAYS COVER FROM JANUARY 2009 TO FEBRUARY 2009.......................................
The report was prepared under Mr. DU acting as the Academic Advisor. and Mr Aminul Bari. IBA. which is itself a partial requirement of the BBA Program. Mohammad Saif Noman Khan. Institute of Business Administration.
The objectives of the report as follows: To explore the reasons behind the implementation of CRS+DF To discuss the process and methodology of the workings for CRS+DF To evaluate the effect of CRS+DF on CCFOT To evaluate the effect of CRS+DF on Distributors Sales Growth To evaluate the effect of CRS+DF on Distributors Stock Levels To evaluate the effect of CRS+DF on Distributor ROI
The scope of this report includes only the 19 distributors who have been implemented with both CRS and Distributor Financing.1. The full benefit of the new system could only be realized
. Unilever Bangladesh Limited acting as the organizational advisor. In accordance with the specifications of the Program. the author has completed 10 week period of attachment with the organization. Management Accountant. Lecturer.0 INTRODUCTION
This report was assigned as a requirement for the successful completion of the internship program. Unilever Bangladesh Limited.
Also. some data have been concealed.
. company sales records.
All analysis has been done using the 19 CRS+DF distributors performance. distributor sales growth.if both are in operation. the impact of these distributors on UBL’s total business is not significant enough. They are as follows:
Secondary: Published literature on Continuous Replenishment System. not all the data that could have been shown to gully illustrate the impacts of the CRS+DF program implementation. out of the total 119 distributors of Unilever Bangladesh Ltd-which is only 16% of the total. and Annual Reports of Unilever plc. journal articles. the other 60 distributors who are using only the CRS software without Distributor Financing have been left out of the scope of this report. have been mentioned in the report due to confidentiality reasons. at this time. As a result. In addition. So. these 19 distributors constitute the population of this analysis. distributor ROI are not published data. In addition.
Primary: Key Informant Interviews with people involved in the CRS roll out and with people involved in obtaining bank financing for the Distributors have been used to write this report. However. has been used. CCFOT. but representations of these data has also been used to write this report.otherwise the results could show any strong findings. replaced and/or kept intentionally vague owing to confidentiality concerns.
The data for the creation of this report has been collected from both primary and secondary sources. The quality of analysis would have been better if more distributors could have been used for the analysis.
. Some of it laboratories are as such: Vlaardingen in the Netherlands.2. Singapore. Bangalore in India. Colworth and Port Sunlight in England. Korea. Laos. Pakistan. Indonesia. a logical merger as palm oil was a major raw material for both margarines and soaps and could be imported more efficiently in larger quantities. factories and research laboratories in every major country. its history can be traced back to the 1930s. Trumbull. Sri Lanka. and Vietnam. Nepal. With 400 brands spanning 14 categories of home. and Englewood Cliffs. The company is one of the top 100 Fortune 500 companies in the world (Rank 106 in 2006 in terms of revenue). Thailand. Hong Kong.
Formed of Anglo-Dutch parentage. The company is widely listed on the world's stock exchanges. Philippines. etc. China. Bangladesh. New Zealand. Netherlands and Unilever PLC in London. Japan. beverages. and personal care products.
Today. Cambodia. no other company touches so many people’s lives in so many different ways as Unilever.0 THE ORGANIZATION PART
Unilever has two parent companies: Unilever NV in Rotterdam. cleaning agents. New Jersey in the United States.with operating companies.1 UNILEVER GLOBAL
Unilever is one of the leading multinational Fast Moving Consumer Goods Company in the world that owns many of the world's most popular consumer product brands in foods. Malaysia. and Taiwan and enjoys the position of market leader in many Asia pacific countries such as India. Unilever was created in 1930 by the amalgamation of the operations of British soap-maker Lever Brothers and Dutch margarine producer Margarine Unie. Unilever is present in twenty countries including Australia. starting off with just soap and margarine. personal care and foods products. the company is a multinational in truest of senses.
In Asia. England. Both Unilever companies have the same directors and effectively operate as a single business.
Kraft Foods. and CEC (Central and Eastern Europe).25% to the Bangladesh Govt. Mars Incorporated. was inaugurated at Kalurghat.
Unilever's major competitors include Procter & Gamble. however. personal care and food product market of Bangladesh.
Unilever Bangladesh Ltd.75% to Unilever and 39.000 people and had worldwide revenue of €40. and Home and Personal Care.For better control and management and for reporting purposes Unilever operations around the world have been divided into different regions.
2. of Bangladesh with a share arrangement of 60. But on 5th July 1973 it was registered under the name of Lever Brothers Bangladesh Ltd. has local manufacturing facilities. Nestlé. and reporting to regional business groups for innovation and business results. On 25th February 1964 the eastern plant of Lever Brothers Pakistan Ltd. Reckitt Benckiser and Henkel. To manage these brands. Chittagong with a soap production capacity of approximately 485 metric tons. as a joint venture company of Unilever PLC and the Govt. Lever Brothers Bangladesh Ltd. The reporting region for Unilever Bangladesh (UBL) is Asia AMET (Asia.2 UNILEVER BANGLADESH LIMITED
Unilever started its operations in Bangladesh nearly 61 years back. After independence the eastern plant was declared abandoned. Middle East and Turkey). the company focuses on what are called the "billion-dollar brands".5 billion as per figures available in 2008. The brands fall almost entirely into two categories: Food and Beverages. Unilever's top 25 brands account for more than 70% of sales. 13 brands which each achieve annual sales in excess of €1 billion.
. It was a private limited company with 55% share held by Unilever and the rest by the Government of Pakistan. with the regional headquarter being in Singapore.
Unilever owns more than 400 brands as a result of acquisitions. was a subsidiary of Unilever is leading the home care. Unilever employed more than 174.
both the head offices and the factory were located in Chittagong. Ponds'. with over 90% of the households using one or more of UBL products.
Unilever Bangladesh Ltd. Dove. manufacturing Lux and Lifebuoy soaps. a strength shared across Unilever globally. is the drive to serve consumers in a unique and effective way. Fair & Lovely. the product mix are developed locally. Unilever Bangladesh (UBL) has been constantly bringing new and world-class products for the Bangladeshi people.
2. Previously.Operating in Bangladesh since 1948. At the heart of the corporate purpose. While many of its brands are big international names. leading the market in most of the categories it operates in. Close Up. Knorr and Lipton Taaza among others. Today the company is an integral part of the lives of the people of this country. which guides UBL in its approach to doing business.3 UNILEVER’S CORPORATE PURPOSE
UBL’s purpose is to meet the everyday needs of people everywhere. Back in December of 2004 Lever Brothers Bangladesh Ltd changed its corporate identity to Unilever Bangladesh Limited in line with the parent company’s global identity. Rexona. based on a deep understanding of local culture and markets. Sunsilk. UBL had set up its production plant in 1964. Axe.’s portfolio of mega brands includes Wheel. whereas production remained at Kalurghat Heavy Industrial Area in Chittagong. but as of 2002 the corporate offices are located in Dhaka.
. Lifebuoy. Over the last four decades.
Over the years it has consolidated its strength in the FMCG sector and it is now the leading consumer products manufacturer in the country. to anticipate the aspirations of the consumers and customers and to respond creatively and competitively with branded products and services which raise the quality of life. Lux.
Their deep roots in local cultures and markets around the world are their unparalleled inheritance and the foundation of their future growth.
They believe that to succeed requires the highest standards of corporate behavior towards their employees. Fabric Cleaning.
Their long-term success requires a total commitment to exceptional standards of performance and productivity.
Operations: Home and Personal Care. Skin Care. Government of Bangladesh . Deodorant. Hair Care.
This is Unilever’s road to sustainable. to working together effectively and to a willingness to embrace new ideas and learn continuously. Oral Care.4 UNILEVER AT A GLANCE
Mission: Unilever's mission is to add Vitality to life. hygiene and personal care with brands that help people feel good. They bring their wealth of knowledge and international expertise to the service of local customers – a truly multi-local multinational.25%
Product categories: Household Care.75% shares. Colour Cosmetics. Skin Cleansing. Tea based Beverages. growth for their business and long-term value creation for their shareholders and employees.
2.39.60. consumers and the societies and world in which Unilever live. Foods
Constitution: Unilever . look good and get more out of life.
. to meet everyday needs for nutrition. profitable.
there is a tea packaging operation in Chittagong and three manufacturing units in Dhaka. Vaseline & Lakme. These departments are:
• • • • •
Brands & Development Department Customer Development Department Finance & IT Department Human Resource Department Supply Chain Department
. 99. Lux. Vim. Close Up. Besides these. Pond's. Dove. which are owned and run by third parties exclusively dedicated to Unilever Bangladesh. Lifebuoy. UBL has five Management Committee (MC) members in charge of five departments. They have seven top directors leading seven different departments. Fair & Lovely.5% of UBL employees are locals and there are equal numbers of Bangladeshis working abroad in other Unilever companies as expatriates.
Unilever Operations in Bangladesh provide employment to over 10. Clear. Surf Excel. they have two chairmen leading the company worldwide.000 people directly and indirectly through its dedicated suppliers. MANUFACTURING FACILITIES: The company has a soap manufacturing factory and a personal products factory located in Chittagong.Brands: Wheel. Pepsodent.
Unilever Bangladesh limited has one chairman who is the Managing Director (MD).5 ORGANIZATIONAL STRUCTURE:
In terms of Unilever. Lipton Taaza.
2. Sunsilk. distributors and service providers. Rexona. and Axe. They have divided their worldwide business into different region and have different business groups to manage them.
Rakesh Mohan with five Management Committee (MC) members in charge of five departments. Financial Accounting 4. Legal & Corporate Affairs 6.The organization is basically flat in nature.6 DETAILED STRUCTURE: FINANCE & IT
The finance function is further divided into six functions: 1. IT
. Apart from the management cadre other layers are staffs and operatives
The present Managing Director/Chairman of UBL is Mr. The management consists of six layers starting from junior managers to manager Grade v. Corporate Risk Management 2. Factory Commercial Management 3. Management Accounting 5.
FIGURE 1 MANAGEMENT COMMITTEE ORGANOGRAM
2. Here the managers at various levels besides reporting to next higher level also directly report to the director.
Unilever globally divides the Brands function into Brand Development and Brand Building. The product range of Unilever can be divided into two broad divisions: Household and Personal Care. and Foods.FIGURE 2 COMPANY LIST OF POSITIONS
2. Detailed breakdown of the different product categories and brands under them are shown below:
1. since brands are developed regionally. UBL is responsible for only the Brand Building part. Fabric Wash • WHEEL: o Wheel Laundry Soap o Wheel Washing Powder
Skin Care • Fair and Lovely: o FAL Cream
. House Hold Care • Vim o Vim Scourer o Vim Bar o Vim Liquid
3.o Wheel Power White • SURF EXCEL
2. Skin Cleansing • Lux o o o o • Peach Milk Strawberry Crystal Shine Aqua Sparkle
Lifebuoy o LB Regular o LB Gold o Care o Nourish o LB Liquid Hand wash: o Total o Care Dove: Dove Beauty Cream Bar o Pink o White o Dove Body Wash o Beauty Moisture o Fresh Moist •
White Glow Lightening Cream o Pond's Perfect Result Multi Benefit Illuminating Cream o Pond's Flawless White Deep Whitening Facial foam o Pond's Beauty Pinkish .White Glow Lightening Facial Foam o Pond's WB Pinkish .White Glow Lightening Facial Foam o Pond's Age Miracle Daily Regenerating Facial Foam o Pond's Age Miracle Dual Eye Therapy UV o Pond's Age Miracle Overnight Repairing Cream o Pond's Age Miracle Daily Resurfacing Cream o Pond's Age Miracle Concentrated Resurfacing Cream o Pond's Flawless White Light Infusing Under-Eye Cream
Lakme: Sunscreen Lotion Winter Care Moisturizer Peach Milk Moisturizer Deep Pore Cleansing Milk Strawberry Silk Splash Face Wash MATTeffect Purifying Face Wash MATTeffect Icy Fresh Gel MATTeffect Mattifying Fluid
Dove Skin: o Dove Facial Foam
.o Multivitamin o Ayurvedic o Skin Clarity o FAL Menz Active o FAL Body Fairness Milk • Ponds o o o o o o o
Ponds Dream Flower Talc Ponds Vanishing Cream Ponds Cold cream Ponds Dream Flower Lotion Ponds Face wash Ponds Facial scrub Ponds Premium Range: o Pond's Perfect Matte Oil Control Cleansing Foam o Pond's WB Pinkish .
Hair Care • Clear: o All Clear o Complete Soft Care o Anti Dandruff o Hair Fall Defense o Ice Cool o Clear Menz: o Hair Fall Defense o Style Express o Active Sports o Clear Hair Oil Sunsilk o Shampoo: o Anti Dandruff o Black o Hair Fall Defense o Thick and Long o Soft and Smooth o Conditioner o Scalp Lotion o Hair treatment • Dove Hair o Shampoo: o Daily o Dry o Breakage Therapy o Hair Fall Therapy
.o Beauty Moisture o Gentle Exfoliating • Vaseline: o Vaseline Petroleum Jelly o Vaseline Lotion o Cool and Fresh o Total Moisture
o Conditioner o Leave on Lotion o Treatment 6. Oral Care • Pepsodent o Pepsodent Toothpaste o Germicheck o Herbal o Pepsodent Toothpowder o Germicheck o Neem Close up • • • • 7. Foods • Tazaa o Danadar o Tea Bag Knorr o o o o 8. Deodorant • Rexona o Ice Cool o Silk o Power
Minty Chill Red Hot Close Up Crystal Close Up Milk Calcium
Chicken Noodle Cream of Chicken Hot and Sour Tomato
Most of pond’s product range is highly seasonal in nature. It was the pioneer in the category and is still the market leader by large. This requires a
. whereas categories like fabric wash and skin cleansing make the highest volume contribution. while cold cream is strictly a winter product. Talc and Vanishing cream have sales only in summer months.
Fair and Lovely is one of the biggest brands in Unilever Bangladesh.
Penetration in the shampoo market is high but frequency of use or consumption is very low. there is a huge scope for growth in the shampoo market if the frequency of use can be increased. In the urban area the scenario is complete reverse with 60% of the business coming from bottle and 40% coming from sachet. 1 sachet in the rural area. Color Cosmetics o Lakme Color Cosmetics Personal care products like skin care and hair care contribute high in terms of margin. So. Following is a brief description of some of the major categories and brands.
60% of the business comes from Tk.o Ionic • Axe o o o o
Dark Temptation Vice Click Pulse
Now the petroleum jelly is going for local production.
Vaseline has only been introduced this year. and finally get them to use Vim liquid. It is mainly targeted to urban areas.
Lipton Taaza is one of the very few brands that are market followers to another brand. with Lakme SKU number totaling the sum of all SKUs of all other brands combined together.but is already outperforming expectations
Lakme has the highest SKU list in the entire company portfolio.
. Since its introduction..hugely delicate task of balancing the sales and volume projections to avoid unsold stock at the end of the season or vice versa. The company aims at moving people up this in this list. The price premium charged by UBL is often the reason claimed behind it. 70% of the total Lakme products are manufactured locally (creams and lotion are filled in locally. Local brands had already established a too strong foothold there already. It has tried to venture into the budget market. and is targeted to the very upscale market. Traders don’t associate Taaza with budget. with especially the face-wash growing phenomenally. powder users to bar users. to more upscale consumers. The lotion is currently it is being imported from India. It is still too new to add much contribution to the business.
House Hold Care
The 3 Vim variants are in ascending order of sophistication.e. Lakme has been seeing good growth. convert non users to powder users. while petroleum jelly used to be imported. though packages are imported) and about 30% is imported from India (mainly color cosmetics).
Pond’s Premium Range is a very new addition to the portfolio. i. but has not been able to do so successfully.
Keya Laundry Soap. even better than expectations. Chaaka. It has sold quite well. In other Unilever operating companies Knorr has proved to be hugely successful. Camelia
Lifebuoy Detergent. Now the challenge remains in removing illegal importers from the market completely. So.Knorr is only a new addition to UBL’s portfolio. Ltd itself. and in future there are lots of potentials for it.
Axe has just been launched in Unilever Bangladesh. Tubes. Bactrol Tibet. and Sachets – to drive penetration through low income groups. “Pocha” ball soap
2. there is a huge potential if it can be developed properly. It already has a very strong foothold in Bangladesh due to product infiltration through the grey market. currently being imported from Pakistan. Savlon.
Rexona is available in different forms: Roll on. Brand relevance is very low for deodorants in Bangladesh. and claim all of Axe sales for Unilever Bangladesh. Tibet Beauty Soap. Laundry and Wheel Laundry Soap Household Wash
Dettol. Aromatic.8 COMPETITIVE SCENARIO
The following table summarizes the competitive scenario for UBL:
TABLE 1 KEY COMPETITORS OF UBL
Category Personal Wash
Products of UBL LUX
Competition Keya Beauty Soap. since the only competitor here is Maggi from Nestle.
Medi Plus Magic toothpowder Mostly different foreign brands Meril. Ariel Trix . Tetley.
. Fresh Gel White Plus. Scrub Pond’s Lotion Pond’s Powder Tide. Meril Talc.
Washing Powder Surf Excel Vim Liquid Lifebuoy Liquid Oral Care Close Up Pepsodent Pepsodent Powder Skin Care Pond’s Face Wash.Wheel Powder
Powder. Emami Pantene and other foreign brands Head & Shoulders Mostly foreign brands
2.9 SWOT ANALYSIS
Brands have the added appeal for international heritage and connection. Finley Fair and Care. Almost all the brands are the top brands in their respective categories. Johnson & Johnson Tibet Talcum Powder. Johnson & Johnson Fair and Lovely Hair Care Sunsilk All Clear Deodorant Rexona Axe Food Lipton Taaza Ispahani Mirzapore. Saaf Dettol Liquid Colgate.
competitors find it very easy to make their own foothold. which helps them to get raw material more in a more cost effective manner. In such situation.with demand in the market often exceeding supply.• •
Strong hold over the distributors Has competitive advantage in terms of consumer insight. has less opportunity to impact a brand’s direction. and efficient human resources.
As a brand developing country.
Has access to top notch process and systems designed for Unilever by the best consultants
Can implement tried and tested processes of innovation and process simplification wit help for Unilever global assistance teams.
World wide supply chain network.
Offers the consumers value for money with world-renowned brands at an affordable price. Many global and regional decisions may not be in line with business’s well being at country level
Bangladesh trade structure is a lot different than majority of other Unilever operating countries: with modern trade being a very minuscule proportion of the business in Bangladesh.
Suffers from consistent supply chain issues. whereas elsewhere it is often an important-if not majority of the business. This is something local competitors can never do.
Huge potential for growth as the Bangladesh economy gathers momentum. on-shore manufacturing experience. With no huge brand building costs.
Has access to numerous global brands targeted to any and all target segments that can be sourced anytime by Unilever Bangladesh Ltd.
it provides a huge opportunity to capitalize on the untapped market and limitless sales growth opportunities
Slow down of the economy in general can effect sales growths in the coming periods New tax policy can effect growth and penetration of brands aimed at the upscale market
Competitors are not fully compliant with government regulations. While this is a challenge. Deodorant is very low.10 FINANCIAL PERFORMANCE
Unilever Bangladesh Ltd. Foreign products therefore are now entering the domestic market with greater ease.
As a result of globalization.
2. The following table summarizes the performance for 2008 and compares it to that of 2007. trade barriers are slowly being lifted. has delivered sustained double-digit top-line growth at an average of nearly 3 times the country’s GDP growth for the last eight years. Most of them evade taxes and therefore are able to offer the traders a higher margin.•
In Bangladesh. It has been one of the fastest growing businesses for Unilever in entire Asia and has developed leading edge activation. The growth percentages are provided:
TABLE 2: FINANCIAL PERFORMANCE OF UBL FROM 2000-2008 (GROWTH %)
2006 Turnover Total Cost Gross Profit 28 22% 26% 15%
2007 21% 24% 17%
2008 35% 38% 29%
. penetration in personal products such as: Toothpaste. customer management and general management practices that are being showcased and emulated by other Unilever Companies. Shampoo.
Grey market imports and selling of Unilever brands could hurt UBL’s business.
2. Average days sales outstanding was 18 days. The turnover for 2008 was BDT 16. The cash flow growth rate for 2008 was over 50%.175 million in 2007. Unilever does not take into account cash.3 days. They will similarly respect the legitimate interests of those with whom they have relationships. while calculating working capital. average inventory outstanding 47 days and average day’s receivable outstanding of nearly 23 days.
Unilever Bangladesh Limited had revenue of over Taka 16 billion in 2008.
The company has been operating at a negative working capital over the last few years. integrity and openness. The company has no long term outstanding debt. and with respect for the human rights and interests for their employees. Moreover the profitable growth was delivered as marked by the 53% improvement of Profit before Tax and 62% improvement of Profit after Tax. according to its financial principles.11 CODE OF UNILEVER’S BUSINESS PRINCIPALS:
Standard of Conduct They conduct their operations with honesty. However.5% to global Unilever revenue.476 million as opposed to BDT 12. it tries to make the most profit by making selective investments.
. the company had a cash cycle of 37. Also. In 2008.Total Advertisement & Promotion Profit before indirect Indirect Trading results Trading contribution
20% 11% 9% 13% 8%
4% 25% 40% 14% -19%
7% 40% 1% 78% 82%
After nine consecutive years of double digit sales growth in the period 1999-2007. It is among the top five tax payers of Bangladesh Government. UBL delivered a staggering top line growth of 35% in 2008. contributing about 0.
regular and reliable information on our activities. In their business dealings they expect their business partners to adhere to business principles consistent with their own. and which are safe for their intended use. Products and services are accurately and properly labeled. They provide timely. They will recruit. They are committed to safe and healthy working conditions for all employees.
Business Partners Unilever is committed to establishing mutually beneficial relations with our suppliers. customers and business partners. advertised. structure. They maintain good communications with employees through company based information and consultation procedures. and communicated.
Consumers Unilever is committed to providing branded products and services which consistently offer value in terms of price and quality. They will not use any form of forced. They are committed to working with employees to develop and enhance each individual’s skills and capabilities. financial situation and performance to all shareholders. employ and promote employees on the sole basis of the qualifications and abilities needed for the work to be performed.Obeying the Law Unilever companies and their employees are required to comply with the laws and regulations of the countries in which they operate.
Shareholders Unilever conducts its operations in accordance with internationally accepted principles of good corporate governance. compulsory or child labor.
Employees Unilever is committed to diversity in a working environment where there is mutual trust and respect and where everyone feels responsible for the performance and reputation of their company. They respect the dignity of the individual and the right of employees to freedom of association.
Innovation In their scientific innovation to meet consumer needs they respect the concerns of their consumers and society. They work on the basis of sound science applying rigorous standards of product safety. both directly and through bodies such as trade associations. They neither support political parties nor contribute to the funds of groups whose activities are calculated to promote party interests.
The Environment Unilever is committed to making continuous improvements in the management of their environmental impact and to the longer-term goal of developing a sustainable business. No employee may offer give or receive any gift or
Business Integrity Unilever does not give or receive whether directly or indirectly bribes or other improper advantages for business or financial gain. as an integral part of society. They co-operate with governments and other organizations.Community Involvement Unilever strives to be a trusted corporate citizen and. to fulfill our responsibilities to the societies and communities in which they operate. They conduct their operations in accordance with the principals of fair competition and all applicable regulations. which may affect legitimate business interests. in the development of proposed legislation and other regulations. They work in partnership with others to promote environmental care. increase understanding of environmental issues and disseminate good practice.
Public Activities: Unilever companies are encouraged to promote and defend their legitimate business interests.
Competition Unilever believes in vigorous yet fair competition and supports the development of appropriate competition laws.
No undisclosed or unrecorded account. Education. Your company also continued the operations of
. UBL believes in placing the interest of the society right up in front which is reflected by the widespread CSR activities that the company undertakes. Women’s Empowerment. They must not seek gain for themselves or others through misuse of their positions.
1. Any demand for. HEALTH
Pepsodent Dentibus: A mobile dental unit of professional dentists offering free check up and advice continued its operations to various schools and neighborhoods. This program intends to increase the level of awareness in Bangladesh about the need of good and regular oral care. Unilever focuses its CSR efforts in areas of Health. 200.payment. or maybe construed as being.
2. fund or asset will be established or maintained. or offer of.12 CSR ACTIVITIES
UBL believes in being a good corporate citizen and is fully aware of its responsibilities toward the society it operates in. and visiting dentists regularly to help avoid major pain and discomfort. a bribe must be rejected immediately and reported to management. which could conflict with their responsibilities to the company. and Disaster Relief.000 contacts per year have been made since its inauguration.
Conflicts of Interests All Unilever employees are expected to avoid personal activities and financial interests. Their accounting records and supporting documents must accurately describe and reflect the nature of the underlying transactions. which is. a bribe.
In this endeavor. It treats around one and a half lakh patients annually providing Pediatric. However due to insufficient resources it could not cater to all the requirements of the patients . new needs for equipment have led to further
.5 million. Having its major manufacturing facilities in Chittagong. 2004.Lifebuoy Friendship Hospital which aims to bring medical advice to the doorsteps of the underprivileged and water locked people in the chars. Diagnostic services etc. Blood Transfusion.
The involvement of UBL in bringing modern surgical facilities to this hospital did not stop at the OT. This was a much needed upgrade of the hospital which is one of the very few health care facilities in the city with a population of 2. UBL has spent 6. Unilever Bangladesh has a long-standing association with Maa Shishu O General Hospital and this initiative will radically enhance the services of the hospital. The new OT now has world class surgical equipment including Life support.
UBL was actively involved in this project. and an opportunity to help provide access to world-class surgical facilities through this hospital that caters for less privileged citizens of Chittagong. This hospital brings essential health care to the water locked population in Bangladesh and provides a platform to talk about a healthy and hygienic lifestyle in areas beyond the reach of traditional media. recognizing the dire need in the region for good health care.despite the executive committee’s best intentions. With regular assessment. Gynecology . child and General hospital) in the Port city of Chittagong. Obstetric. Anesthesia machines etc.
Chittagong Maa Shishu O General Hospital: Unilever Bangladesh sponsored the setting up of a modern operation facility at the Maa Shishu O General Hospital (Mother.5 Million Taka towards modernizing the existing operating theatre and in setting up a new operating theatre together with an advanced Intensive Care unit.
The Maa Shishu O General Hospital was set up in 1979 and is a popular reference in Chittagong for the treatment of mothers and infants. This is where UBL came in as a sponsor and besides financial help extended personal involvement of UBL managers in ensuring speedy completion of the project. This facility was inaugurated on May 25th.
Lifebuoy: lifebuoy concentrating on all rural communities has a team of trained personnel to visit neighborhoods. it must first take steps to improve the well-being in the community that it operates in. The management quarterly visits the hospital to take patients’ feedback and meet with the administration to review the quality of services and carry out need assessments to enhance the services of the hospital.5 million Taka in 2005 as well. UBL is working with the Hospital management to enhance the skills and capabilities of the hospital staff and management as well to be able to provide better health care to the patients. All these activities helped improve the emergency.
Promoting hygiene awareness: Bangladesh has a population of over 142 million and 80% of this population lives in rural areas. In 2007 again. a 3 month long Nurses’ Training Programme was organized at the Hospital. schools etc and communicate the importance of a healthy lifestyle through flipcharts and leaflets. both of which have been quantum leaps in developing good oral hygiene practices. market places. The programme covered several skill areas and had experts from outside the country help enhance nursing related skills.
Pepsodent: The Pepsodent team concentrates on schools across the country and suburban localities to promote oral hygiene. there remains a general ignorance about the importance of hygiene. It is the company’s firm belief that to help bring vitality everywhere. This is then followed by demonstrating the use of Lifebouy soaps – which have been made available in small packs for people of all income groups. critical treatment and recovery facilities for the port city residents and increased the hospital’s ability to do surgery. Initiatives like the Dental Support Program and Dental Health Awareness Week. UBL’S 2 health related brand: Lifebuoy and Pepsodent have done significant work on this issue. Although there has been a lot of social progress and economic development in these areas since the country’s independence in 1971.investment of another 1.
The company not only sponsors projects at Maa Shishu O General Hospital but also actively supports and monitors its improvement.
to millions of people across Bangladesh. One of the major activities that is carried out in partnership is the Pepsodent . Unilever believe. Unilever Bangladesh reached out to educate imams at mosques on dental hygiene. Furthermore. WOMEN’S EMPOWERMENT
Fair & Lovely Foundation: Unilever strongly believes in the importance of empowering women in Bangladesh. Lifebouy and Pepsodent have been instrumental in bringing the message of a better lifestyle. because the progress of any society will be constrained if a significant part of its population is neglected and excluded from the benefits of development.500 people. the day was organized on November 16. the Program reaches out to countless others indirectly by training primary and secondary school teachers. 300 dentists at 257 clinics in 64 districts gave free dental check-up to 12.
Together.The Dental Support Program is a mammoth community exercise that encompasses both direct and indirect dissemination of the need and importance of oral hygiene. In 2007.Bangladesh Dental Society Oral Health Day.
2. so that they can disseminate the message to their congregations.
Unilever Bangladesh and Bangladesh Dental Society (BDS) have been working together for over a decade to promote oral health of Bangladeshi people. free from germs and associated trauma. Unilever setup temporary dental facilities in districts where there were no clinics available. People called in for appointment at a stipulated time to have his or her teeth checked by dental professionals. More than 3 million school children have been covered through this Program and Unilever is committed to continue providing this service to the community. Not only does a qualified dentist visit schools to educate school children. The Day provided people with an opportunity to be aware of the condition of their teeth and also promoted general awareness of oral hygiene. It is therefore necessary that women be progressively brought into the main stream of economic activities. with economic and
the Fair & Lovely Foundation aired a 13-episode TV series in Channel i. it will be most unfortunate if a significant part of it is neglected and excluded from the benefits of development. Fair & Lovely Foundation tailor-made yet another scholarship programme for women seeking higher education. This led to the Fair & Lovely Foundation’s Career Guidance Programme. Any Bangladeshi female student with good academic track record is eligible to apply for these scholarships. it is easy to make a wrong decision.500 women students (at standard 10 level) received courses on basic IT from NIIT.
Career: Education is like a beacon for the right career. Yet.
Designing. and an inspiring success story to instigate interest. Bangladeshi women’s economic empowerment is looked upon as a luxury. Supplementary scholarship programs are also ongoing in partnership with the Faria Lara Foundation. Fair & Lovely Foundation was set-up as a social initiative by Unilever Bangladesh Limited on 15 June 2004 under its leading skin care brand Fair & Lovely.
During its inception in 2004. It hints at what one is good at. While the economic growth of a country is dependent directly on the level of education of its general population. The mission of the Foundation is to "Encourage economic empowerment of Bangladeshi women through information and resources in the areas of Education.
Keeping this mind and women’s empowerment at the forefront. means of undertaking it. as well as training and assistance.educational empowerment. It is this realization that has brought about the Fair & Lovely Foundation Scholarship Programme. in 2004. Each episode showcased one particular career… encapsulating detailed information about its prospects. Banking. This programme aims at providing women with basic and higher education. Career showcased in the programme were – Law. Advertising. with so many choices that are available.
. Career and Enterprise"
Education: Even in the twenty-first century. women can become more vocal about their rights and become stronger in withstanding repression in any form. Graphic Designing. After the successful project entitled "Uttoroney Nari" in 2003 where 1. Defence.
The Fair & Lovely Foundation Entrepreneurship Programme was set up to explore the endless possibilities that lie in this sector for women. Hence with a sizeable margin they would be able to generate sustainable income for themselves and hence be financially empowered. Project Joyeeta came out as a realistic venture of Unilever Bangladesh aimed at improving the lives of rural women bringing them into a sustainable income generation through entrepreneurial skills.
3. From an initial twenty-five Joyeetas the number has now increased to over two thousand. Journalism. Joyeeta is the embodiment of a fearless female spirit trying to better her socio-economic condition by trying new options given her surroundings and ground realities.
The project started in August 2003 in a nearby Thana of Manikganj as a pilot for six months. Under this project. The women termed as Joyeetas are given a task of selling Unilever products and communicating the brand values in the rural households of their village. Joyeeta is derived from the Bengali word ‘Joy’ which means ‘Win’. Project Joyeeta: ‘Joyeeta’ is a unique initiative of Unilever Bangladesh to provide sustainable opportunities for over 2900 women in rural Bangladesh to earn their livelihood. The programme received a huge response in terms of viewer enquiries and letters.
Enterprise: Unilever believe that small & medium enterprises are crucial to the economic development of a country like Bangladesh. In recent times Non Government Organizations (NGO)s and government bodies are collaborating to establish self-help groups for the development of rural women supported by microcredit program.Merchandising. Medicine and Business. UBL will be able to expand initiative to reach 20 more Upazillas of the country’s northern and eastern districts. This Programme assists both urban and rural women by providing practical knowledge as well as business expertise.
The success story of Joyeeta is taken even further with a similar project named “Aparajita” with the support from CARE. These women (Joyeetas) are serviced from the distributor through a third party agency at a regular interval. So.
. Architecture. IT.
. There exist some institutions that provide education to these hapless children and one such organization is Shathee Samaj Kalyan Samity (SSKS).
Besides entrepreneurial training and other activities. in the south of the country. Executive Director of the Faria Lara Foundation. FAL Foundation came forward to work with this organization to assist semi-urban female students to acquire spoken/written English and basic Computer skills after their SSC Exam and help them to compete with their urban peers. This program continues in 2008 as well. Under this project 40 female SSC students from 16 secondary institutions in the district went through a three-month training program on basic computer skills. UBL’s agency for executing the various projects related to FAL Foundation. Fair & Lovely Foundation again re-started the programme of providing Supplementary Education programme with Faria Lara Foundation. EDUCATION
IT scholarships for women: Faria Lara Foundation is a voluntary organization working in the remote village of Halta Dawatala in Bamna Upozila.
School for slum children sponsored (SSKS): Unilever came forward to support an institution that provides free primary education to children of lowest income families.Banani.
In April 2005. SSKS runs a free evening school for children residing in slums and was funded by an international NGO thus far. an NGO working for the slum residents in the city’s posh residential area. 20 SSC and 20 HSC Examinees were given the opportunity to train for three months in Borguna District. Towards the end of 2004. Barguna District.
The courses were conducted by Certified IT professionals and English language professors. UBL Chairman Sanjiv Mehta officially handed over a cheque of Taka 5 Lakh and 10 computers to Selina Hossain.These Unilever led projects will continue to empower women all over the country and give them the
3. In 2007 May. The effectiveness of the course was evaluated by a final exam conducted by Adcomm. spoken and written English.
supporting organization wrapped up its activities from Bangladesh which left SSKS floundering for funds. The sponsorship helps to cover salaries for the teachers and staff. Education and Women’s Empowerment.
Moreover. Unilever's Pepsodent Dentibus also visits the school premises to create awareness about good oral hygiene. These include Origami. 39
. Pop quizzes through which the children could win Lifebouy soaps. aimed at providing opportunities for post-graduate study in the UK for young professionals in early or mid-careers who demonstrate both academic excellence and the potential to become leaders.
UBL volunteers also visits the school to demonstrate the importance of hygiene and health. Good behavior. and other administrative outflows.
In January 2005. Electricity and safety etc. Nurturing the intellect and development of the children coming to this school can help build a strong example of conscientious involvement of the privileged society in support of the needy. Gulshan. company managers volunteer to spend time with the children and take innovative learning sessions. decision-makers and opinionformers in their own countries. Unilever Bangladesh initiated the sponsorship of the school' major expenses.
Chevening Scholarships:Unilever Bangladesh Limited and the British High Commission signed an agreement on 11thSeptember 2006 to jointly fund a Chevening Scholarship titled the “Unilever Chevening Scholarship” for a Bangladeshi national wishing to study in a University in the United Kingdom. Badda slum areas and UBL provides support for opportunities such as training for teachers and sports lessons for the students.
The fields of study included for the Unilever Chevening Scholarship are the areas of Health. The children eagerly await such visits which inspire their creative thinking and are a break from the everyday school work. Chevening Scholarships are prestigious scholarships awarded by the UK’s Foreign and Commonwealth Office. uniforms and books for the students. or Pepsodent toothpaste with each correct answer creates a flurry of eager hands to jumping up to answer that makes it a sight to see!
The existence of the school is a great support for the children living in Banani.
UBL partnered with the Bangladesh Army and set out to rebuild one of the worst-affected villages of the calamity. rebuilding one retail outlet and providing ten cows and fifteen goats for income generation to the village people.
. The Army Engineering Corp designed the houses and oversaw the implementation of the project based on the plan conceptualized by UBL. DISASTER RELIEF
Char Nazir To help the victims of SIDR. installation of five deep tube wells. The village was finally completed and formally inaugurated in July of 2008. The BDT 8 million (80.000 Euro) project included providing housing with sanitary latrines for all 75 families. Char Nazir.4.
0 CUSTOMER DEVELOPMENT: BACKGROUND
UBL sales come from its customers: Distributors. dealer service materials. Major thrust in rural market. etc. previously called the Sales Department. Effective and focused company sales force. Retailers. With more and more sophistication. role of Customer Development has also been gradually shifting from traditional “Sales” to “Trade Marketing”. wholesalers. product manuals etc. Exploring and developing new channels are becoming critical to drive their business forward.e. is becoming critical day by day. the role of Customer Development will evolve further and the whole game will be turned into “Relationship Marketing”. is responsible for managing the actual sales of all company goods. retailers. Category Management. With the evolution of modern trade and aggressive local and international competition. etc
The Customer Management Department is also responsible for merchandising to educate trade about benefits and to promote visibility to generate consumer awareness through tools such as point of sale (POS) displays. Managing customers i. and their key strengths are: Strong distribution network. and distributors. The Distributor’s Sales Representatives (DSRs) perform the following functions: • • • • Direct selling to trade Immediate delivery to trade Product /POS display Market feed back
The company sales force performs the following functions:
Manage distributors by: o Guiding distributor’s sales efforts o Supervising and training the DSRs both on the job and off the job
The Customer Development Department. Wholesalers. Space Management and In-store merchandising are becoming more and more important.3.
3. Breaking this figure down. These are further subdivided into 9 Areas and then into 40 Territories. which is around 21%.2 TRADE STRUCTURE
The Customer Development director (CDD) heads the Customer Development Department. average brand per store is 112. The average brand per store on a national level is 36. average brand per store is 44. . o Market feedback
Direct servicing through: o Redistribution o Merchandising o Trade relations
The average Category per store on a national level is 14. In comparison. average category per store is 16. whereas in Rural it is 13. The average SKU per store on a national level is 89. average UBL business is approximately US$ 18 /Month. in Urban.
UBL has organized its trade into the above stated 6 Regions.5. Breaking this figure down. whereas in Rural it is 66. The Area Sales Mangers report to
. in Urban.1 OUTLET BUSINESS STRUCTURE IN BANGLADESH
The average FMCG business in Bangladesh is approximately US$ 87/Month. Sales Operation Manager and 6 Regional Sales Managers in charge if sales of each of the 6 sales regions. Breaking this figure down. in Urban. Reporting to him are the Trade Marketing Manager. Processed Foods (except only Tea). whereas in Rural it is 28.o Expansion of coverage. However FMCG includes categories UBL does not operate in: Tobacco. Milk.
Thus. 38 deal with General trade. to be discussed later.which are further subdivided into channels. secondary sales are what really matters. what really matters is sales in the retail market to consumers.the Regional Sales Managers and are in charge of their own areas.and they have the Territory Managers reporting to them.
. while the remaining 2 deal with Modern Trade & Shopping Complex-which are 2 separate channels altogether.
Bogra Region: Contribution: 17%.
Unilever measures to kinds of sales: • • Primary Sale: When UBL makes a sale to the distributor.
Dhaka Outer Region: Contribution: 23%
Growth: 40% Growth: 36% Distributor: 21 Distributor: 22 Dhaka Metro: Contribution: 18% Growth: 30% Distributor: 10 Sylhet Region : Contribution: 8% Growth: 27% Distributor: 12
Khulna: Contribution: 19% Growth: 33% Distributor: 32
FIGURE 3 SALES REGIONS OF UBL
Chittagong Region: Contribution: 15 % Growth: 30% Distributor: 22
Of the 40 territories. Secondary Sale: When the distributor makes a sale to retailers. but since it is an FMCG company rather than a B2B.
For UBL sale is recognized when primary sale happens.
Bogra.000 outlets /day. and their breakdown is as follows: • • Approx 120. Barisal.The sales flow of UBL goes as follows:
Buys at list price (Primary Sales)
Buys at trade price (Secondary Sales)
(Buys at Retail Price)
The distributors take their supply from any of the 6 depots that the company holds in Dhaka.000 outlets were grouped into 27 different channels.3. And the number of outlets is growing @ 3.2% Urban. and finally in Chittagong.
.000 direct coverage in Urban Approx 130. with a total of 700.6%. Infrastructure geared to meet fragmented trade 700. which is around 3 lakh outlets.000 outlets nationally. Usually distributors maintain seven days of secondary sales in stock as buffer. with 23% in urban & 77% in rural. Kalurghat factory.2.
UBL delivers to 37% of all outlets. Khulna.8% / Rural. Sylhet. It is mostly traditional & rural.000 direct coverage – Rural
This is done through 119 exclusive distributors with a distributor sales force of 2025 DSRs – calling on 75.
Trade in Bangladesh is extremely fragmented.
5% UBL Warehouse 97.4 UBL SALES CHANNELS
Of the 27 channels. target setting. 9 contribute to the maximum chunk of business.5% Distributors Sp. for ease of serving. Channel Distributors
Shopping Complex Out of Home
25% 75% Wholesale Use as gap-filler Retailer Under Direct Coverage Retailer Not under Direct Coverage
FIGURE 4 UBL TRADE MODEL
Priority Channels: • • • • • • Urban wet market grocer (UWMG) Urban neighborhood grocer (UNG) Urban general store (UGS) Urban HPC Tong Rural wet market grocer (RWMG) Rural neighborhood grocer (RNG)
.3 MANAGING TRADE: UBL MODEL
Key Accounts 2.3. etc. UBL has divided these 9 into 6 priority and 3 emerging channels. based on common characteristics of the outlets and the shoppers who usually visit them.
i. They are still serviced by UBL products. They are fed through indirect distribution coverage by the Alternate Route to Market which contributes the remaining 25% of value.e. Joyeeta. In addition to these. UBL does not intend to increase direct coverage of outlets unless significant value addition could be gained from it. Urban hunters. the rest of 68.. but indirectly.9% of outlets is not ignored.
However. Alternative Root to Marketing.1% of all retail outlets are under the direct coverage of UBL. which covers – Wholesalers. there is the ATTM channel. which contributes to 75% of total business. Areas beyond that are referred to as rural. and Pollyduth. The cost of increasing direct distribution coverage is much higher than the sales growth benefits to be gained.
ALTERNATE ROUTE TO MARKET
31.Emerging Channels: • • • Rural cosmetic store Shopping complex/Cosmetic shop Key Accounts (modern trade)
Urban Channels: Channels located in Thana HQs or Municipal areas Rural Channels: Channels not under the geography occupied by Urban Channels
9 UBL Channels
FIGURE 5 UBL SALES CHANNELS
Urban channels are those are located within Thana Parishad area of each Zilla.
Till date modern trade comprises of a total of 84 stores.5 REDISTRIBUTION PROCESS
ROLE OF THE DISTRIBUTOR Distribution business operation in Bangladesh is regarded as one of the benchmark system in today’s time. but there is still an opportunity
3. Unilever Bangladesh Ltd. Similarly. In return the distributor gives away 3% of his commission to them. The distributor’s business growth and profitability plays a significant role for UBL’s business growth both in terms of volume and value. the Pollyduth buy from the distributors and carry the materials to faraway places on their cycles. undoubtedly plays a key role in overall business operation of UBL. Distributors.
. There are mainly 4 big Customers with multiple stores. For example. Modern Trade contributes 1% of National sales and 5.Special projects under ATTM have been undertaken to ensure that the supply of UBL also reaches places where there is no direct coverage.
EMERGING MODERN TRADE
Modern Trade is growing very fast in number. Modern Trade started to emerge in Bangladesh since 1999-2000. They are considered to be the backbone of UBL’s business. UBL has been able to reach this position over the years through rigorous activities and sound team work with its stakeholders. 5 Customers contribute 60% of MT business. and experiencing 40% cumulative growthalmost 3 times faster than General Trade in terms of value. She buys goods from the hub and then sells those from door to door.5% of Dhaka sales. In the FMCG industry. Modern Trade in Bangladesh is nascent. Distributor gives away 2% of his commission to Joyeeta and she also gets the retailers margin of 10-15%. (UBL) plays the leading role in making Unilever brands available in all the corners of the country. Joyeeta is a lady from a far away village where there are even no retail stores.
the day’s orders are entered into system and invoice and memo is prepared
Next the distribution house manager.
. and cash available to the distributors. etc. Call Productivity. prepare different report.
After returning to the distribution centre. on distribution effectiveness – BPC. LPC.. daily. and monthly. Distributor Sales Representatives (DSRs) all over the country visit the outlets according to the coverage plan. They also accommodate and install various process innovations of UBL .UBL distributors function as business partners and have to strictly follow UBL guidelines. etc. POP Register. distribution correction.considering the order size of each product. It is the DSR’s responsibility to ensure availability of the products.
ROLE OF THE TM
The TM’s main responsibility is to manage the distribution.
Distributors have to maintain various important files and registers on a day to day basis like Stock Register.
OVERVIEW OF THE REDISTRIBUTION PROCESS
This is the process of getting the products to traders through the distributors:
On one day of the week. etc. etc. merchandizing activities. weekly.use of Personal Digital Assistant (PDA) to take orders or use of Distributor Management System (DMS) to record orders. DSRs take orders for the different product and enter the order into his hand held terminal (PDA). current stock levels in the warehouse.places an order (Indent) to the Unilever Depot. competitors’ activities. brand innovation. DMPR (Distributor’s monthly performance report). train and coach distributor team. They have to accommodate the territory manager and Area Sales manager of UBL.
The grievance procedure for damaged goods follow the following sequence: o The trader first informs it to the DSR o If the DSR finds the claim to be logical as per company policy for replacement. gives delivery and collects the money
In case of any change in memo – additions or deductions. The CMs are paid for by Unilever.
Memo is sent to the warehouse and orders prepared and products loaded into the delivery vans (mechanized or non-mechanized) accordingly
ADSR carries the printed invoices and the respective supply to the market the next day. channel characteristics. he notifies the ADSR about it o The ADSR then collects the goods from the shop in his next visit and submits it to the TM o Only on approval by the TM the good is replaced. the ADSR makes it manually and informs the computer operator on getting back to office. otherwise it is returned back to the trader
The Contract Merchandisers visit shops in his route.•
Distributor pays through Demand Draft and the stock is delivered the next morning to the distributor warehouse.
A territory is divided into routes based on geographical proximity. His main responsibility is to ensure visibility of the products through proper merchandizing and point of sales/purchase displays. The CM raises the availability token for cross checking the performance of the DSR. It represents the outlets to be covered at one go. etc. necessary changes are then made in DMS+ and the corresponding Memo.
The objective of this report is to evaluate a recently implemented solution to bring increased efficiency in the distributor’s process of ordering inventory from UBL.divided into sections – the number of times a route is serviced in a week. Even then there are areas of improvement. o times a week and household once)
Mechanized vehicles cover 2 sections per day.
To understand the need for the new system. There are several areas from where inefficiency rises in the business of the distributor and Unilever Bangladesh Ltd.0 BUSINESS ISSUE
The distribution system in UBL is one of the most advanced in the FMCG industry in Bangladesh. whereas. non-mechanized vehicles cover 1 section per day.
The distributor’s organogram is as follows:
Distributor/Owner House Manager
Distributor’s Sales Representative (DSR)
Contract Merchandisers (CM)
4. we will first analyze the problems with the previous system of operation.
The business issues are as follows:
1. Distributors need to maintain a certain amount of safety stock in their warehouses to account for unpredicted circumstances. Previously, Unilever Bangladesh Ltd. had mandated a fixed number of days cover for inventory. Stocking inventory requires forecasting, but most distributors lack forecasting tools; thus, inventory management is often done without them. Improper stock management methods result in capital blockage in slow moving stock and stock out in fast moving stock
2. There is no systematic method to measure how much stock of each product there should actually be. There is no forecasting and demand planning done by the distributor
3. Warehouse keepers don’t understand the proper stock requirement. Indent is made based on Judgment and Physical verification by the house manager
4. There is significant time loss in decision making regarding primary sales orders.
5. Indent is sometimes modified due to conversation between the distributor and the depot manager. If there is an order for a particular product but no stock available, then indent is not placed for that product. What happens as a result of this is that, true picture of the efficiency of production and Supply Chain Management is not apparent. And unless a problem is identified, it can’t be solved.
6. Finally, indent is often adjusted according to cash availability- since UBL does not sell on credit; order size is often reduced even though market demands more. This represents lost sales for UBL, since even though there is demand in the market & there might even be stock in UBL depots- sales is lost because of cash problem of the middleman- the distributor.
5.0 THE SOLUTION: CONTINUOUS REPLENISHMENT SYSTEM
To address all of these issues, Unilever Bangladesh Ltd has decided to roll out state of the art software for turning the manual process of making indent into a fully automatic, standardized process. This system is called Continuous Replenishment System. To allow a better and more fully integrated application of the system, Unilever Bangladesh Ltd. has also devised another system called Distributor Financing.
Continuous Replenishment System and Distributor Financing run together can deliver the maximum benefits. CRS will address the forecasting issues of inventory management, while Distributor Financing arranged by UBL itself will ensure that the inventory levels suggested by the CRS system can be fully implemented by the distributors, with the financing problems taken care of by the banks-under the direction of UBL. Each process will be discussed in detail, and combined benefits of the 2 systems are analyzed to give future recommendations.
Currently in UBL, 60 distributors have been equipped with CRS, due to longer time & more formalities involved in processing bank financing. However, only 19 distributors have been implemented with CRS along with distributor financing. This is because arranging Distributor Financing is much more complicated by installing the CRS software. However work is underway on making all distributors CRS distributors with Distributor Financing
5.1 CONTINUOUS REPLENISHMENT SYSTEM
Continuous Replenishment System is the total automation of the Product replenishment from UBL to the Distributors. It starts from generating indent based on SKU wise stock norm and ends with receiving the stocks without any manual entry.
Electronic data interchange (EDI), used traditionally to exchange business documents, has recently been extended to facilitate inter-organizational collaborative processes such as the Continuous Replenishment System (CRS).
Manufacturers and retailers have been reengineering supply chains using information technology (IT) such as point-of-sale (POS) systems and electronic data interchange (EDI). While EDI has been used traditionally to exchange business documents between trading partners, its capabilities have been extended recently to facilitate collaborative business processes across firms. Continuous replenishment program (CRP) is one such IT-enabled reengineering effort. The key features of CRP are as follows: (1) Retailers provide the manufacturer with real time access to their inventory positions. (2) Based on this information, the manufacturer replenishes retailer inventory (3) Products are sold to retailers at an pre-agreed price
In CRS, retailer orders are essentially eliminated because manufacturers determine quantities to ship to retailers based on observed retail sales.
CRS is a way to cope with demand uncertainty because it coordinates the supply chain players to work with common forecasts. Theory of coordination or "coordination science" often focuses on the value of information sharing in achieving intra-inter-firm coordination (Malone and Crowston 1994). However, information sharing is only one aspect of coordination; business processes are also redesigned along with information sharing.
CRP restructures the supply-chain ordering process in two fundamental ways. • First, it requires the customer to share inventory level, which is traditionally viewed as sensitive and secret information. • Second, under CRS, the retailer inventory management is performed by the manufacturer and not by the not customer.
It is well known that traditional Electronic Data Interchange (EDI) reduces transaction costs and errors (Mukhopadhyay et al. 1995, Wang and Seidmann 1995, Srinivasan et al. 1994, Riggins and Mukhopadhyay 1994). Although the benefits of EDI for ordering were widely publicized, few firms in the retail industry had experienced significant savings from using EDI to automate the existing ordering process (Clark and Hammond 1997). Many authors have also noted that EDI must involve changes in business processes to realize savings enabled by the EDI innovation (Riggins and Mukhopadhyay 1994, Venkatraman 1994).
Case studies of CRS implementation speculated that for continuous replenishment systems to work effectively, demand must either be stable or reasonably predictable (Clark and Hammond 1997). Products that change frequently such as seasonal goods may not be appropriate for the CRS approach. Retail grocery product demands are relatively stable and are effectively managed by CRP (Clark 1994b).
When there is no CRS, the retailers communicate only their orders to the manufacturer. Under CRP, the manufacturer has real-time access to participant retailers' inventory levels, and the manufacturer replenishes the inventory for each participant retailer. CRS reduces the expected inventory holding costs of both the manufacturer and customer participants.
Research on CRS is recent. Pioneering empirical research has been carried out by Clark and others in a series of case studies of the grocery industry (Clark 1994a, Hammond 1995, Clark and Hammond 1997, Lee et al. 1999). The primary result of this stream of research is that channel transformation, defined as the combination of process and technological innovation, provides significantly greater performance improvements than either technological innovations or process redesign changes implemented independently.
Analytical modelling of the CRS innovation is limited and has focused primarily on channel coordination through information sharing. These studies discuss how a manufacturer can elicit information from retailers through inventory, lead-time, and shortage allocation policies (Bourland et al. 1996, Gavirneni et al. 1996, Aviv and Federgruen 1998, Moinzadeh and Bassok 1998, Cachon and Fisher 1998). In these studies, the benefit of information
can be used by the management for demand analysis and achievement of integrated demand management. This is used by the supplier as input to ongoing forecasts and adjustments to the next production cycle. In today's global marketplace. Inventory and sales data is transferred electronically by the buyer to the supplier as often as the replenishment system is executed. the buyer maintains the responsibility for inventory management and replenishment. depending on which party. A firm order is generated by the supply for the required quantities without further confirmation by the retailer. with a series of enabling technologies like Electronic Data Interchange. When a supply chain is viewed as a demand chain. actually manages the inventory and on the extent to which information gets shared. The consumers are ultimately better
VENDOR MANAGED INVENTORY (VMI): In VMI.Co-Managed Inventory (CMI) and Vendor Managed Inventory (VMI). the data captured along the chain. the responsibility for inventory management and replenishment shifts totally to the supplier.sharing to the manufacturer comes primarily from the manufacturer's ability to forecast more accurately the size of retailer's future orders and/or the actual timing of the future order placement. A proposed order is generated by the supplier and revised and confirmed by the retail buyer.
CO-MANAGED INVENTORY (CMI) In CMI. with partnership being the key word traditional replenishment processes are fast giving way to the Continuous Replenishment concept. product numbering and bar-coding. This embraces two main initiatives . supplier or buyer.
The key characteristics of CRS are the sharing of real-time inventory data by retailers with manufacturers and continuous replenishment of retailer inventory by manufacturers.
INTEGRATED DEMAND MANAGEMENT The rationale behind Continuous Replenishment System is more than product replenishment. The order messages sent merely update the retailer’s information system.
Indent will be generated in distributors system.
3) This system generated suggestive indent must be authorized by distributor/ distributor’s authorized person in DMS+.
2) Indent Logic and lifting schedule will be sent to distributors system-DMS+ online using UniBD. then staged to go out. based on received Indent logic.
The goal of CRS is to bring in inventory when the customer needs it. Lifting Schedule etc. Innovation and Seasonal SKUs etc.2 CRS IN UBL INVOLVES:
Full Automation of Indent process Electronically fund transfer & indent submission Electronically receiving the stock Stock Auto updating Cash transfer according to indent
5. i. The process applies lean principles to distribution operations as a way to increase inventory velocity.DMS+. There will be electronic signature of the acknowledgement regarding the indent and financial issues.
." CRS can help make warehouse function closer to a crossdocking operation where items are received. Stock Norm by SKU. Nevertheless the effort of one party alone is not enough. it will be freeze. the Indent will be uploaded to UniBD. Distributor will be able to change only three types of SKUs i. logic for indents which will be generated from the distributors’ computer system must be setup in Unilever central system.e. Option will be provided to view the value of the Indent. Strong cooperation between trading partners is essential for the success of good demand management. As opposed to the old "receipt.e. After authorization. Once an indent is authorized.served.3 CRS INFORMATION FLOW
5. Activity. store and pull.
In any point of time distributor’s Current Stock = Physical Stock + Safety Stock
5) From UniBD the indent will move to Unilever Main System.
7) The Bank will arrange transfer of required fund to UBL account either from distributor’s balance or his OD limit and confirm UBL through electronic advice.
6) A pro forma invoice will be auto generated in MFGPro. Supply Chain department can make limited correction with proper reason.
9) Getting confirmation from bank.4) RSM / ASM or their authorized person in their absence has to then authorize the indent in UniBD for their designated distributors.
10)Finally. DMS+ operator in the distribution house will download the Invoice from UniBD to DMS+. The invoice will first enter as Transit Stock and after getting the product it will move to current stock.
8) The electronic advice will be uploaded to MFGPro as balance confirmation. which will be maintained in MFGPro. firm invoice will be created and sent to UniBD through an Interface to change item codes compatible to DMS+. The pro forma indent value will go to the concerned bank for financial clearance.MFGPro through an interface to convert DMS+ item code to MFGPro item code using a cross table.
Option will be provided to upload manually from Nucleus to MFGPro. Everyday this cross table will be uploaded to MFGPro.DMS generated Indent Indent uploaded to UNIBD RSM/ASM authorization Pro forma Invoice Bank Declaration Firm Invoice Invoice uploaded in UNIBD Invoice downloaded in DMS Stock Updated in DMS
Limited Edit Option
Based on Availability
OD Arrangement & Account Transfer
FIGURE 6 CRS PROCESS FLOW
5.5 CRS PROCESS FLOW
Nucleus will be basically used for setup necessary logic.
b) Parameter for Indent calculation • • • Nucleus: Duration for Sales SKU wise ( Number of days ) Nucleus: SKU Factor – SKU wise manual entry ( with decimal ) Nucleus: Avg Lead Time : Distributor wise separate manual entry (Decimal)
. which are as follows 1) Master Setup:
SKU a) Cross table: This is a table where there will be a related DMS+ item code for every MFGPro item code.
if any invoice contains any new SKU code which does not have equivalent DMS+ code in cross table.2. In this case distributor has to first upload the SKU flat file then the invoice.•
Nucleus: OCF=OCF Weight*SD (Order Cycle weekly (1. default
benchmark is the original SKU itself. At the same time Nucleus user have to send the new SKU code to distributor also.4 etc ) and Weightage (with decimal ) – Different for different lifting pattern)
Nucleus: SD of Lead time – distributor wise manual entry
c) Benchmark SKU:
Will be selected in current Stock Keeping Unit (SKU). For any innovative SKU where there are no history sales Benchmark SKU will be taken into consideration for Indent generation in DMS+ and provide the result in the original SKU.
3) DOWNLOAD OPTION: One common download option under heading CRS
1) Indent Logic • DMS+ generated Indent date and the corresponding firm invoice in MFGPro must be in the same date.
a) Lifting pattern: Distributor wise lifting pattern will be entered in NUCLEUS and will be uploaded to DMS+
2) INVOICE ISSUE : In MFGPro.3. Then the NUCLEUS user will update the cross table and refresh the invoice.
. the corresponding flat file containing the total invoice information will go to NUCLEUS from MFGPro and in NUCLEUS there will be a pop up message for the user. After that the invoice will go to UniBD using interface system.
b) Indent will be generated in the benchmark SKU for innovation SKUs.
2 types of indent can be generated from DMS+. i. the indent will be closed automatically. i) Scheduled– Auto generated indent on lifting days. Indent will be zero quantity with all SKUs.e. iii) Schedule Missed – If any schedule indent missed for any reason.
c) Indent formula: • • SS – Safety Stock SD: StdDev = Standard Deviation
If any invoice missed. ‘U’ . in the next day the indent will be closed and if distributor requires a fresh indent will be generated with updated quantity but in the same indent number. For example D01S0815.
2) Indent Generation ( Schedule and Unscheduled ):
a) During indent generation DMS+ will check schedule or unscheduled day.unscheduled) + Serial no (4 digit).•
If the Depot user fails to create firm invoice within the same date. There will be no system generated suggestion for unscheduled indent. but will be displayed for the original SKU. Distributor must send a fresh indent from DMS+ in the following day maintaining the same approval process by RSM & ASM and with updated quantity. ii) Unscheduled– Manually generated indent on non-lifting days.
Indent no. After receiving corresponding firm invoice or notification for not invoiced from MFGPro. in the next day it will be treated as scheduled even if the day is unscheduled
Only one indent can be generated in a day. indent will become ineffective in MFGPro & DMS+. will be of 8 digits – Distributor code (3 digit) + Flag (1 digit – ‘S’ .
3.72 X SqRt (Avg Lead Time X SD^2 ) + ( Avg.
a) After suggestive indent has been created.2.
b) Weekly allocation from month target will also be taken in to consideration during indent generation.• • • • • • •
OCF: Order Cycle Factor FC : Fixed Cover ROQ : Re-Order Quantity Nucleus : Avg Lead Time : Distributor wise separate manual entry (Decimal) Nucleus : Duration for Sales SKU wise ( Number of days ) Nucleus : SKU Factor – SKU wise manual entry ( with decimal ) Nucleus : OCF – Order Cycle weekly (1. Sales^2 X SD of Lead Time^2) FC Value = Safety Stock + SKU Factor + OCF FC Days = FC Value / Average Sales Value FC Quantity = Round in Higher Side (FC Value / Trade Price )
ROQ = FC Quantity – Current Stock
If ROQ is positive that will be suggestive quantity or if this will be negative than suggestive quantity will be zero. But the user must enter a reason (drop down list) at the time of modification. Activity and Seasonal (definition should be set at Nucleus) SKUs only.
.4 etc ) and Weight (with decimal) Distributor wise manual entry
Nucleus: SD of Lead time – Distributor wise manual entry
SD = StdDev (Particular Duration Daily Sales Value)
Avg Sales = Total duration sales value / Total duration
SS = 3. user will be able to manually edit Innovation.
. After indent generation. a flat file will be created in encrypted mode along with Site code and with not ordered SKU list.3. will be uploaded to UniBD along with tag (scheduled/ unscheduled).
Market demand is taken as the order every day from distributors every day. CCFOT forms part of a root cause analysis process. Over recent years. CCFOT has been given great importance in recent times both globally and locally. case fill has been a key performance indicator (KPI) which measures what was shipped to customers. requiring the business to understand loss areas and develop action plans.
As Unilever moves ahead globally to be the best supplier in its class. distributors against what had been ordered.e. EFFECT OF CRS IMPLEMENTATION ON CUSTOMER DEMAND SATISFACTION MEASURED THROUGH (CCFOT)
Customer Case Fill on Time (CCFOT) is a measure to see how much of the demand from the market on time is being met by supply chain.
. It enables measurement of customer service as seen by the customer and a common mechanism for sharing performance and major losses to facilitate improvement by the sharing of best practice.
More than a measure. With this in mind. The process has been implemented in 19 distributors fo
1.6. i. it has become important to adopt a consistent measurement of its relationship with the customer including service to customer and efficiency in providing this service.
CCFOT is a consistent measure of Order to Delivery (OTD) performance across Unilever.0 EVALUATION OF CONTINUOUS REPLENISHMENT SYSTEM AND DISTRIBUTOR FINANCING
The CRS+DF project proposal stated the above benefits to be realized after CRS implementation. CCFOT enables the business to identify opportunities and actions necessary to improve the order to delivery process.
but there was no concrete way to measure these lost sales and to identify areas for action to be taken on. with minimum human intervention.
Sales were being lost.g. CRS automatically calculates how much quantity of each product should be ordered given the current stock level and the market demand measured by memos from retailers-based on the prescribed
. that is. there were no orders placed for products which were under produced and hence undersupplied. even the 10% gap between demand and supply didn’t seem to corroborate with the market feedback of gross undersupply. Without a true picture of the situation. but the CCFOT figures for that month show a completely misleading result of a very good performance. After the conversation.
Because of this practice. E. This was a big enough problem. it was not possible to devise any remedies. even though market was demanding the product. because there was no way of gauging the demand without a correct CCFOT figure. 10% of potential sales was being lost every month. and hence there was undersupply. This was a vicious cycle that needed drastic measures to come out of. it is often seen that a particular products in currently under supplied in the market in a particular month.on the basis that was not enough market demand for the product.
This was another problem that was going to be addressed by CRS. and has consistently shown strong positive resultsaround 90%. the company used to run on the belief that almost 90% of market demand is being fulfilled.CCFOT in UBL
This has always been measured in UBL. Thus. as demand was not being met in all cases. the distributors only placed orders for the products currently in stock at the company depot. However. The production team did not remedy the production situation. which allows for automatic indent generation.
The reason for such misleading CCFOT figures was a result of a common business practice of distributors to check stock levels with the depot manager before placing an order.
CCFOT fell to 77% in April from 89% in January: a drastic 10% fall. the supply could now be adjusted accordingly.
FIGURE 7 UBL CCFOT JAN-'09.
. The business implication of this was huge. The potential sales being lost was actually 23%. we see a sharp increase from the downward trend starting from Janaury’09. As we can see from the figure below: CCFOT for the Total Company has shown a drastic fall in April-which was the month that CRS was fully operation in more than 50% of the distributors. Thus CRS generated indents from all the distributors in the country the company a real number of the demand for each type of SKU. The CCFOT figure rose to 83% in May from 77% in April: a rise of 6%. This is again evident from the CCFOT results of May’09. not 10% that was believed previously. This shows the company a true picture of how much of the customers’ (distributors’) demand. i. The situation has always persisted in the company.
And the results of this move to automatic indent generation by CRS are quite obvious from latest changes in CCFOT.stock norm built into the system as explained before. the market demand is being fulfilled.e.MAY'09 It prompted the necessary changes in the business. guided in the right direction by the CCFOT results. it is actually quite the opposite. now there is simply a way to measure this and hence take corrective steps to improve it. Once the demand figure was accurate.
Although this might seem deterioration in performance. In the very next month.
The rest 9% is divided among the other 9 categories. Each contributes to the CCFOT figure. the Out of Stock % rose only by 2% while CCFOT by 6%.hence it can be said 14% of potential sales has been lost in April due to stock out situations alone.CCFOT Components
CCFOT calculation has 10 criteria of measurement. This shows changes being made to increase the supply vs demand ratio.
However. The remaining was due to increase in efficiency in other areas such as: Transit Time Delay & Credit Limit Issue. These heads account for the balance between 100% and the CCFOT figure.
FIGURE 8 OUT OF STOCK% JAN'09-MAY'09
The figure above shows the changes in Out of Stock from January to May. and is a reason for a shortage from 100% CCFOT.
. Customer Order Issues. Of the 23% lacking. It was very low at 7% in January. From there it jumped to 14% in April. and CCFOT could be greatly improved. Transit Time Delay. So the only major category of inefficiency is Out Of Stock. Out of Stock criteria makes up about 14% of it.which again reinforces our previous deduction. But due to positive steps taken the Supply Chain Team. That is.the CCFOT. it fell by 2% to 12% in May. The major ones among those are: Out of Stock. etc. 14% of all order cannot be supplied it is out of stock.
All of these 3 categories are Personal Products.Category Wise CCFOT
Across all major categories as well. which consequently will have several impacts on the business: • Meeting. and hence the loss the company is even more.which carry the highest Gross Margin %. Deodorant is a very young market in Bangladesh. if not fully. The situation of Deodorant growth is even more hampered by such Out of Stock Situations. Skin Care. and constant efforts are under way to increase its growth.
A further breakdown shows which categories have suffered the worst from out of stock situations:
TABLE 2 PRODUCT CATEGORY WISE CCFOT
Category Deodorant Skin care Oral care Skin cleansing Detergent Hair care Household care Tea
Out of Stock 28% 24% 23% 13% 12% 9% 8% 1%
The highest out of stock situation occurs in Deodorant. then at least a higher percentage of demand received from the market • Higher growth in sales by streamlining the supply chain
CCFOT could be significantly improved by focusing on these areas. we can see that CCFOT has drastically fallen in April’09 contributing to the overall fall in Total Company CCFOT. & Oral Care. In addition.
As a result. We have established previously that CRS+DF implementation has helped distributors lower their stock levels to an optimum level based on a stock norm.
We are going to evaluate the impact of CRS+DF implementation of distributor’s sales by comparing growth level of YTD 2008 and 2009 of CRS+DF distributors versus that of non CRS+DF distributors
UBL Growth Rate The average growth level of all distributors in the company has fallen by 5% in 2009 compared Same Period Last Year. for us to get full view of the benefits and costs of CRS+DF implementation. UBL saw a lot of changes in the marketplace and within itself in 2008.
However. and law enforcement was much stronger than in any other democratic government. By not carrying enough inventories. The key here is moving towards optimal stock levels. although the initial instinct for distributors is to overstock rather than lose sales because of stock out situations. and also fast moving SKUs. which they fear they might run out of. EFFECT OF CRS IMPLEMENTATION ON SALES GROWTH OF UNILEVER AND DISTRIBUTORS Forecasting sales and inventory levels is probably one of the most difficult jobs as companies need to unite demand signals with supply. So distributors often make the mistake of overstocking: both for slow moving SKUs. rather than an indication of performance.2. companies can not only lose out on sales but also suffer reputation damage by not meeting customer needs. in case there is an order in which case they don’t want to miss out. However this can be attributed to extraordinary reasons. As a result. their costs rose and they had less cash to spare on trade and consumer
.rather than achieving low or high inventory levels. UBL’s local competitor’s who were previously not paying income taxes and VAT. it has been proved over time to the contrary.
The Caretaker government was in power. But the impact of the decrease in stock levels on sales levels need to be examined.had to start paying them then. determined by forecasts.
The actual names of the distributors have been encoded to protect confidentiality of information. with the democratic government back in power in 2009. the base for growth in 2009 is much higher than ever. • This was also coupled by a price hike the company pulled in 2008. an entirely different picture can be seen. In addition.which contributed to higher value from each product being sold
All of these resulted in a 30%+ growth rate in 2008 from 2007.which was the highest in the history of UBL’ performance.MAY 2009 YTD
Change In Growth Level 14% 18% -5% -5% 50% -2% 70
G1 G2 G3 G4 G5 G6
. So even though the growth of the company is modest by previous standards. The growth rate comparison of these distributors can be seen below: The table below. However. Consequently competitor sales fell.promotions.
CRS+DF Distributors’ Growth Rate
Having established the falling growth rate of the company. while UBL sales rose while spending the same amount.
TABLE 3 CRS+DF DISTRIBUTORS CHANGE IN GROWTH FROM MAY 2008 YTD.and sometimes even less than planned. “G” represents the change in growth rate from 2008 May YTD to 2009 May YTD. such huge sales growth is not possible this year. now we look at the growth performance of the 19 CRS+DF distributors are isolated from rest of the distributors. the actual growth rate has fallen in comparison to 2008.
2009 MAY YTD
Change In Growth Level Rest of the company -11%
Thus. However. this enables us to see that CRS+DF has enabled these distributors to actually increase their growth levels while that of the rest of the company has gone down. The combined effect on UBL is 5% decreases in growth level.this performance is even more significant given the performance of the rest of the company.
TABLE 4 NON CRS+DF DISTRIBUTORS CHANGE IN GROWTH RATE FROM 2008 MAY YTD.G7 G8 G9 G10 G11 G12 G13 G14 G15 G16 G17 G18 G19 Average
7% 1% 30% -9% -4% 13% -2% 22% 0% 6% 3% 3% 8%
The average growth rate of the CRS+DF distributors have actually gone up by 8%. CRS+DF has thus enabled UBL distributors to only buy what they need based on the computer information. we can conclude CRS+DF have enabled the distributors to achieved higher growth in sales. while that of the rest of the 100 distributors have gone down by 11%. and ship the items when they arrive at their warehouse from the
. since a mere only 15% of total distributors are CRS+DF distributors.
which has not at all resulted in increased lost sales due to stock out.rather than achieving low or high inventory levels. but their inventory level is substantially lower compared to what they carried in the past. rather than being afraid of running out of stock and buying additional inventory every time the company receives large new orders.thus not building up stock reaching expiry dates. and also fast moving SKUs. The key here is moving towards optimal stock levels. companies can not only lose out on sales but also suffer reputation damage by not meeting customer needs. for us to get full view of the benefits and costs of CRS+DF implementation.
However. Companies need to
. But the impact of the decrease in stock levels on sales levels need to be examined.
Inventory Management is a delicate process of balancing.
This is also beneficial for UBL itself. which they fear they might run out of. If the distributors buy of the right kind of stock at the right time in the right time. For many companies. they will be able to sell it off faster. They still carry a ‘comfort zone’ inventory level just in case shipments get delayed. We have established previously that CRS+DF implementation has helped distributors lower their stock levels to an optimum level based on a stock norm. in case there is an order in which case they don’t want to miss out. So distributors often make the mistake of overstocking: both for slow moving SKUs. As a result UBL enjoys 2 benefits: • • If the distributor sells more to retailers. determined by forecasts. although the initial instinct for distributors is to overstock rather than lose sales because of stock out situations.depot. effective inventory management is a critical component of financial health.
3. By not carrying enough inventories. it has been proved over time to the contrary. they will have to buy more from UBL Lesser amount of claims for Trade Return. and becoming eligible for Trade Return. EFFECT OF CRS IMPLEMENTATION ON DISTRIBUTOR STOCK LEVELS Forecasting sales and inventory levels is probably one of the most difficult jobs as companies need to unite demand signals with supply.
and whether this has been realized by UBL will be tested using 2 measures: Stock Cover & Stock Value
The business needs to avoid stock outs. However holding too much of the wrong inventory can bring down the profitability of the distributor-which is something.Ideal condition of "one unit at a time at a place where user needs it. Economies of scale . So bulk buying. Uncertainty . arbitrarily set. Essentially. By not carrying enough inventory. requires that you maintain certain amount of inventory to use in this "lead time" 2. thus inventory. There is often a paradox: holding too much inventory ties up valuable cash. inventory is a reserve system to prevent a stock out. when he needs it" principle tends to incur lots of costs in terms of logistics. and not having too much. Inventory
There are three basic reasons for keeping an inventory: 1. companies can not only lose out on sales but also suffer reputation damage by not meeting customer needs.
However.Inventories are maintained as buffers to meet uncertainties in demand. as important as it is to prevent such a stock out. Time . but too little inventory is risky since some suppliers could lose their financial footing. Excess inventory ties up money and needs to be reduced in order to free up cash for investment in revenue-growth activities. management is about two things: not running out.balance inventory to meet customer needs while accommodating shifting preferences. movement and storing brings in economies of scale. along with uncertainties in demand and supplier lead times are why inventory is maintained in the first place. from supplier to user at every stage.
One of the established benefits of continuous replenishment as observed by the industry is stock level optimization. supply and movements of goods.
UBL had previously mandated all distributors to carry at least inventory enough for 7 days stock cover. UBL works at to avoid. 3.The time lags present in the supply chain. businesses also don’t want to hold onto too much inventory because of holding costs.
Planned Q1 Days Cover as per lifting: This is pre-planned number of days fixed every based on the number of days delivery is made to a particular distributor. but to keep the plan more dynamic and most closely resembling current scenario. based on the weekly stock level
Inventory days represent the number of days cover for inventory. In principle. sudden changes in demand and so on. Apart from buffer stocks that businesses sometimes need in case of shortages of supply and strategic stocks in case of war. modern stock control theory tells us to minimise our investment in stocks.
Distributor Stock Cover Value is fixed every quarter based on the average sales of the previous quarter. the last quarter sales data approach has been undertaken by UBL. Actual Days Cover is monitored every week. Previously it was based on average Year Till Date (YTD) sales. which is then implemented. This is divided into 3 categories: o For distributors that are not CRS implemented o For distributors that have a 6 day lifting and are CRS implemented o For distributors that have a 3 day lifting and are CRS implemented
Actual Days Cover:
After the plan is made every quarter. it is communicated to all distributors. since UBL conducts selling on 6 days of the week. the lower the investment in stocks the better.
The formula for determining Stock Cover:
Planned Distributor Stock Cover Value =
Q1 Average Secondary Sales/ Sales days in the week* Days Cover as per lifting
Sales Days in the week: This is fixed at 6.
7 6.4 6.0 11.0 7.2 6.0 8.8 5.1
Average 6 6 7 8 8 6 10 6 7 6 6 7 7 7 7
.9 9.0 6.4 7.1 7.2 7.8 5.1 7.9 8.maintained by the distributor.5 8.8 10.4 7.0 7.2 8.2 6.5 6.2 6.1 7.5 6.
Actual Days Cover= Actual Stock Value/ (Q1 Stock Cover Plan/ Planned Days Cover)
To find out whether CRS has helped distributors reduce their stock levels the stock cover for CRS distributors is compared with stock cover figure for Non.5 6.2 6.7 6.0 7.1 5.CRS Distributors.9 6.8 7.9 5.6 5.1 6.0 6.1 6.8
May 5.0 5.9
March 7.2 7.4 4. The distributors are in no particular order. It measures how many days’ sales are maintained by each distributor.0 6.2 8.0 7.8 7.
TABLE 5 CRS+DF DISTRIBUTORS DAY COVER FROM JANUARY 2009 TO MAY 2009
Days cover D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 D11 D12 D13 D14 D15
January 5.6 7.1 7.8 7. The actual names of the distributors have been encoded to protect confidentiality of information.9 8.7 6.7 8.9 5.0 8.6 4. “D” represents the stock days cover from January 2009 to May 2009.9 6.7 7.6 7.9 7.8 6.5 8.2 5.8 6.4 7.5 8.3
February 6.7 6.2 6.6
April 6.4 7.4 6.3 6.9 6.7 8.
March 8.9 6
6 7 7 8 7
As we can see Days Cover for CRS distributors is perfectly 7 days as recommended by UBL.1 6.4 6
TABLE 6 NON CRS+DF DISTRIBUTORS DAYS COVER FROM JANUARY 2009 TO FEBRUARY 2009
Days cover Total Others
January 7.6 8.8
May 7.1 9.2 6.1 8.9 8.1 8. while the average Stock Cover of all the other Non-CRS Distributors is 8 days.5 6.1
The tables above show the month by month Average Days Cover for both CRS and Non CRS distributors.1 8
5.4 6. Below the tables are graphically represented
FIGURE 9 STOCK DAYS COVER TREND FOR CRS+DF DISTRIBUTORS
FIGURE 10 STOCK DAYS COVER TREND FOR NON CRS+DF DISTRIBUTORS
.9 7.5 8
6.6 6.0 9.3 4.0 8.2 6.D16 D17 D18 D19 Total Average
Actual Days cover for CRS+DF implemented Distributors has been on a downward trend. The ROI was expected to increase because of lower level of investment in stock.As we can see from the figure above. On the Other hand. the hypotheses is proved that by implementing CRS+ DF in the selected distribution houses UBL has been able to reduce their stock levels compared to those operating without CRS+DF.
FIGURE 11 STOCK DAYS COVER FOR CRS VS NON CRS DISTRIBUTORS
Thus. Days Cover for Non CRS+DF distributors have actually gone up in the months from January to May. stock cover for CRS distributors have been significantly lower than that of Non-CRS Distributors. as shown in the figure below.which is supposed increase profitability over investment.
4 EFFECT OF CRS IMPLEMENTATION ON PROFITABILITY OVER INVESTMENT OF DISTRIBUTORS
The second objective of this report was to analyze the impact of CRS implementation on Return of Investment (ROI) of distributors.
The following bar chart again demonstrates that in each of the months in 2009.
. We will examine whether and how this impacted their growth and profitability in the following hypotheses.
A lot of other factors play in a role in influencing ROI: Sales levels. Sales Growth. we created a scatter plot of average ROI and average stock days cover of the CR distributors in 2009. ROI of CRS Distributors has been consistently higher than that of Non-CRS Distributors.we can get a better picture. As shown in the table below. Cost Structure. which is a very weak negative correlation.
If we view the ROI performance of CRS Distributors in comparison with that of Non-CRS Distributors. in each of the months.2. This suggests it is unlikely to significantly raise ROI by simply reducing stock levels. etc.To examine the relationship between stock days cover and ROI. instead of in isolation. The chart is as follows:
FIGURE 12 RELATION BETWEEN DISTRIBUTOR ROI AND STOCK DAYS
The test yielded a correlation of -0.
TABLE 7 DISTRIBUTOR ROI COMPARISON OF CRS+DF & NON CRS+DF
January February March CRS+DF Non CRS+DF 45% 40% 28% 28% 35% 36%
April 23% 24%
Average 37% 32%
The results can be seen in the figure below.
. the ROI performance of the 19 CRS+DF distributors have gone up from 2008 by 6%.FIGURE 13 DISTRIBUTOR ROI COMPARISON OF CRS+DF & NON CRS+DF DISTRIBUTORS
The ROI performance of CRS+DF distributors could also be looked at from another anglecomparison of the ROI of these 19 distributors in 2009 against that in 2008.
FIGURE 14 CRS+DF DISTRIBUTORS ROI 2008 VS 2009
As can be seen in the figure above.
From the above analysis. the results will be truly significant. to maximize the benefits of CRS+DF implementation. The effectiveness of the model can be further improved if it is rolled out with majority of the distributors. that is the major time consuming part of the model. higher sales growths and ultimately greater customer satisfaction of the distributors due to higher Return on Investment. and after complete integration into business processes. has been quite successful. lower level of stock buildup. That is probably when the high sales growth of the pilot distributors could be reflected on Unilever sales levels. Unilever could explore alternative banks for distributor financing bring further efficiency in the process of approval of Distributor Financing to all distributors. we can conclude that implementation of CRS+DF has delivered quite significant value additions in the pilot group of distributors. Currently. The model promises enormous benefit to the business in the form of more dynamic stock movement. using both measures we can conclude that implementing CRS+DF does have a positive influence on distributors’ profitability over investment. Continuous Replenishment System with Distributor Financing implemental in 19 distributors of Unilever Bangladesh Ltd. although this is not due to lower level of stocks.
As a pilot model.