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

Internship Report

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.


CRS has provided the company with a true picture of how much of the demand from the market through the customers were being fulfilled. The Continuous Replenishment System (CRS). as a result of the recent implementation of the Continuous Replenishment System. Post CRS implementation & (ii) Performance of CRS+DF distributors against non CRS+DF ones. Thus. by identifying where the problem lied. 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. 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. 5 . Such systems are already in place in other Unilever operating companies. CRS will address the forecasting issues of inventory management. with Distributor Financing in 19 Distribution Houses of Unilever Bangladesh Ltd. orders not reflecting true market demand as result of modification due to: (i) Prior knowledge about stock availability in UBL warehouse. while Distributor Financing arranged by UBL will ensure that CRS suggested inventory levels are fully implemented by the distributors. The objective of this report is to analyze how successfully this has been implemented in Unilever Bangladesh Ltd. The results have been largely conclusive. First of measured by the CCFOT-which was actually 10% lower as a result of higher Out of Stock situations.with the cash problem having been solved. with Distributor Financing (DF) project has been undertaken in Unilever Bangladesh Ltd. This has been done by a comparative analysis of (i) Pre CRS implementation vs. (ii) Cash status of the distributors (since UBL does not sell on credit) CRS. This prompted actions to increase true CCFOT by 6%. around the world.EXECUTIVE SUMMARY The objective of this report is to conduct a pilot analysis of the value addition to the company.

on a company level. Thus. to sum up the superior performance of the CRS+DF distributors. CRS+DF has brought greater accuracy in the demand planning and stock level forecasting leading to achieving higher growth by maintaining lower stock levels. CRS+DF implementation has resulted in higher sales growth for the 19 distributors. majority if not 100% distributors need to be brought under the CRS+DF umbrella. Secondly. Thirdly.than those without CRS+DF. Thus. thereby reducing lost sales as a result of Out of Stock %. their average Return on Investment (ROI) is also higher than those without CRS. compared to those without CRS+DF. Also. Finally.CRS has helped UBL to remedy their CCFOT situation. while achieving higher levels growth. Only then can significant improvements in company sales levels can be seen. Unilever Bangladesh Ltd. CRS+DF has delivered business values in the pilot group of distributors. 6 . 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. For the benefits to be realized by Unilever Bangladesh Ltd. should also explore other banks for providing the service as backups and to obtain better deals.

................................. 43 3........................0 INTRODUCTION ......................7 BRANDS .......................................................................................................... 10 ORIGIN ....................................................................................................................................................................................................................................................................... 17 2.............6 DETAILED STRUCTURE: FINANCE & IT ................................................................................... 12 2.....................................................................................................................................................4 UNILEVER AT A GLANCE ..........TABLE OF CONTENTS 1............................................0 CUSTOMER DEVELOPMENT: BACKGROUND...........2 TRADE STRUCTURE .................................................................................................... 16 2..................................................... 10 OBJECTIVES......................................................... 15 2............3 MANAGING TRADE: UBL MODEL .............................................................................. 43 3.............................................................................................................0 THE ORGANIZATION PART ......................1 UNILEVER GLOBAL .. 10 METHODOLOGY ................... 11 LIMITATIONS:..................... 18 3...................................................................5 ORGANIZATIONAL STRUCTURE: ....................... 13 2...................................................... 46 3............................................................................................................................... 11 2......... 46 7 ............3 UNILEVER’S CORPORATE PURPOSE ......................................................................................................................................1 OUTLET BUSINESS STRUCTURE IN BANGLADESH .... 14 2...................................................................................................................4 UBL SALES CHANNELS ................................................................................................................................................................................................................................................................................. 42 3..... 10 SCOPE ..................................................................2 UNILEVER BANGLADESH LIMITED................................. 12 2...........................................................

................................................................................................................................46 FIGURE 5 UBL SALES CHANNELS.......................................3 CRS INFORMATION FLOW ............................................................................. 48 4...............................44 FIGURE 4 UBL TRADE MODEL............ 64 7.................................................................47 FIGURE 6 CRS PROCESS FLOW..................... 57 5.............................. 18 FIGURE 3 SALES REGIONS OF UBL...........0 BUSINESS ISSUE .....................................0 CONCLUSION ..........................5 CRS PROCESS FLOW .................................................................... 51 5............................................................................................................................................................................. 67 FIGURE 9 STOCK DAYS COVER TREND FOR CRS+DF DISTRIBUTORS .. 76 8 ..................................................0 EVALUATION OF CONTINUOUS REPLENISHMENT SYSTEM AND DISTRIBUTOR FINANCING ................................ 80 LIST OF FIGURES FIGURE 1 MANAGEMENT COMMITTEE ORGANOGRAM .. 76 FIGURE 10 STOCK DAYS COVER TREND FOR NON CRS+DF DISTRIBUTORS ................................................................................................ 53 5.............................. 57 5................. 59 6..............................................................................................................................................................MAY'09................... 17 FIGURE 2 COMPANY LIST OF POSITIONS ...................................................1 CONTINUOUS REPLENISHMENT SYSTEM .................66 FIGURE 8 OUT OF STOCK% JAN'09-MAY'09 ..................0 THE SOLUTION: CONTINUOUS REPLENISHMENT SYSTEM ...5 REDISTRIBUTION PROCESS ....2 CRS IN UBL INVOLVES: .................................................................................................................................... 53 5............................................................................................................................................................................................59 FIGURE 7 UBL CCFOT JAN-'09.......3..

........ 70 TABLE 4 NON CRS+DF DISTRIBUTORS CHANGE IN GROWTH RATE FROM 2008 MAY YTD........................ 75 TABLE 6 NON CRS+DF DISTRIBUTORS DAYS COVER FROM JANUARY 2009 TO FEBRUARY 2009................................................ 77 FIGURE 12 RELATION BETWEEN DISTRIBUTOR ROI AND STOCK DAYS ..................................................... 68 TABLE 3 CRS+DF DISTRIBUTORS CHANGE IN GROWTH FROM MAY 2008 YTD.............FIGURE 11 STOCK DAYS COVER FOR CRS VS NON CRS DISTRIBUTORS .................................................................................... 25 TABLE 2 PRODUCT CATEGORY WISE CCFOT .......... 79 FIGURE 14 CRS+DF DISTRIBUTORS ROI 2008 VS 2009..................................................................................................................................................MAY 2009 YTD ....................................................................................................................................................................................................................................................... 78 FIGURE 13 DISTRIBUTOR ROI COMPARISON OF CRS+DF & NON CRS+DF DISTRIBUTORS .................... 79 LIST OF TABLES TABLE 1 KEY COMPETITORS OF UBL .................2009 MAY YTD .................................................... 78 9 ................................................................... 71 TABLE 5 CRS+DF DISTRIBUTORS DAY COVER FROM JANUARY 2009 TO MAY 2009 .......... 76 TABLE 7 DISTRIBUTOR ROI COMPARISON OF CRS+DF & NON CRS+DF ........................................................................................................................

1. The full benefit of the new system could only be realized 10 . IBA. OBJECTIVES 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 SCOPE The scope of this report includes only the 19 distributors who have been implemented with both CRS and Distributor Financing. Lecturer. In accordance with the specifications of the Program. which is itself a partial requirement of the BBA Program. and Mr Aminul Bari. Unilever Bangladesh Limited. Mohammad Saif Noman Khan. Unilever Bangladesh Limited acting as the organizational advisor. the author has completed 10 week period of attachment with the organization. Management Accountant. The report was prepared under Mr. Institute of Business Administration. DU acting as the Academic Advisor.0 INTRODUCTION ORIGIN This report was assigned as a requirement for the successful completion of the internship program.

distributor sales growth. not all the data that could have been shown to gully illustrate the impacts of the CRS+DF program implementation. 11 . In addition. company sales records.if both are in operation. out of the total 119 distributors of Unilever Bangladesh Ltd-which is only 16% of the total. the impact of these distributors on UBL’s total business is not significant enough. In addition. but representations of these data has also been used to write this report. As a result. CCFOT. journal articles. The quality of analysis would have been better if more distributors could have been used for the analysis. 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. METHODOLOGY The data for the creation of this report has been collected from both primary and secondary sources. Also. have been mentioned in the report due to confidentiality reasons.otherwise the results could show any strong findings. They are as follows: Secondary: Published literature on Continuous Replenishment System. the other 60 distributors who are using only the CRS software without Distributor Financing have been left out of the scope of this report. and Annual Reports of Unilever plc. So. at this time. some data have been concealed. However. has been used. replaced and/or kept intentionally vague owing to confidentiality concerns. distributor ROI are not published data. LIMITATIONS: All analysis has been done using the 19 CRS+DF distributors performance. these 19 distributors constitute the population of this analysis.

England. Connecticut.with operating companies. Korea. Laos. Japan. and personal care products. 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. Both Unilever companies have the same directors and effectively operate as a single business. Some of it laboratories are as such: Vlaardingen in the Netherlands. Thailand. Singapore. Bangladesh. Hong Kong. New Zealand. Cambodia. Formed of Anglo-Dutch parentage. With 400 brands spanning 14 categories of home. etc. New Jersey in the United States. Colworth and Port Sunlight in England. and Taiwan and enjoys the position of market leader in many Asia pacific countries such as India. Netherlands and Unilever PLC in London. the company is a multinational in truest of senses. starting off with just soap and margarine. The company is widely listed on the world's stock exchanges.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. Trumbull. 12 . and Vietnam.0 THE ORGANIZATION PART 2. In Asia. no other company touches so many people’s lives in so many different ways as Unilever. Pakistan. personal care and foods products. Bangalore in India. The company is one of the top 100 Fortune 500 companies in the world (Rank 106 in 2006 in terms of revenue). Philippines. Malaysia. Unilever is present in twenty countries including Australia. Unilever has two parent companies: Unilever NV in Rotterdam. Indonesia. Today. China. Nepal. and Englewood Cliffs. Sri Lanka.2. Unilever was created in 1930 by the amalgamation of the operations of British soap-maker Lever Brothers and Dutch margarine producer Margarine Unie. cleaning agents. beverages. its history can be traced back to the 1930s. factories and research laboratories in every major country.

After independence the eastern plant was declared abandoned. was inaugurated at Kalurghat. 2. Unilever employed more than 174. Reckitt Benckiser and Henkel. But on 5th July 1973 it was registered under the name of Lever Brothers Bangladesh Ltd.2 UNILEVER BANGLADESH LIMITED Unilever started its operations in Bangladesh nearly 61 years back. with the regional headquarter being in Singapore. as a joint venture company of Unilever PLC and the Govt. Unilever's major competitors include Procter & Gamble. Unilever owns more than 400 brands as a result of acquisitions. Mars Incorporated. It was a private limited company with 55% share held by Unilever and the rest by the Government of Pakistan. To manage these brands. Kraft Foods.5 billion as per figures available in 2008. Unilever's top 25 brands account for more than 70% of sales. 13 . 13 brands which each achieve annual sales in excess of €1 billion. personal care and food product market of Bangladesh. On 25th February 1964 the eastern plant of Lever Brothers Pakistan Ltd. and Home and Personal Care. Middle East and Turkey). Nestlé. has local manufacturing facilities. Unilever Bangladesh Ltd. Chittagong with a soap production capacity of approximately 485 metric tons. The brands fall almost entirely into two categories: Food and Beverages.000 people and had worldwide revenue of €40. and CEC (Central and Eastern Europe). Lever Brothers Bangladesh Ltd. was a subsidiary of Unilever is leading the home care.For better control and management and for reporting purposes Unilever operations around the world have been divided into different regions.75% to Unilever and 39. and reporting to regional business groups for innovation and business results.25% to the Bangladesh Govt. The reporting region for Unilever Bangladesh (UBL) is Asia AMET (Asia. of Bangladesh with a share arrangement of 60. however. the company focuses on what are called the "billion-dollar brands".

Close Up. Previously.3 UNILEVER’S CORPORATE PURPOSE UBL’s purpose is to meet the everyday needs of people everywhere. a strength shared across Unilever globally. with over 90% of the households using one or more of UBL products. Unilever Bangladesh (UBL) has been constantly bringing new and world-class products for the Bangladeshi people. both the head offices and the factory were located in Chittagong. Over the years it has consolidated its strength in the FMCG sector and it is now the leading consumer products manufacturer in the country. Unilever Bangladesh Ltd. 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. While many of its brands are big international names. UBL had set up its production plant in 1964. Dove. 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. Lux. 14 . Ponds'. is the drive to serve consumers in a unique and effective way. manufacturing Lux and Lifebuoy soaps. Axe.’s portfolio of mega brands includes Wheel. Knorr and Lipton Taaza among others. but as of 2002 the corporate offices are located in Dhaka. Sunsilk. Fair & Lovely. 2. At the heart of the corporate purpose. based on a deep understanding of local culture and markets. leading the market in most of the categories it operates in. Over the last four decades. Rexona. whereas production remained at Kalurghat Heavy Industrial Area in Chittagong. Lifebuoy. the product mix are developed locally.Operating in Bangladesh since 1948. which guides UBL in its approach to doing business. Today the company is an integral part of the lives of the people of this country.

Tea based Beverages. Colour Cosmetics. growth for their business and long-term value creation for their shareholders and employees.60. consumers and the societies and world in which Unilever live. to meet everyday needs for nutrition.39. 15 . This is Unilever’s road to sustainable. Hair Care. Fabric Cleaning. to working together effectively and to a willingness to embrace new ideas and learn continuously. profitable. Skin Cleansing. look good and get more out of life. Oral Care.25% Product categories: Household Care. Foods Constitution: Unilever . hygiene and personal care with brands that help people feel good. Skin Care. Deodorant. Their long-term success requires a total commitment to exceptional standards of performance and productivity. They believe that to succeed requires the highest standards of corporate behavior towards their employees. Government of Bangladesh . Operations: Home and Personal Care. They bring their wealth of knowledge and international expertise to the service of local customers – a truly multi-local multinational. 2.4 UNILEVER AT A GLANCE Mission: Unilever's mission is to add Vitality to life.Their deep roots in local cultures and markets around the world are their unparalleled inheritance and the foundation of their future growth.75% shares.

5 ORGANIZATIONAL STRUCTURE: In terms of Unilever. They have seven top directors leading seven different departments. UBL has five Management Committee (MC) members in charge of five departments. Lifebuoy. they have two chairmen leading the company worldwide. 2. Fair & Lovely. distributors and service providers.Brands: Wheel. Besides these. Dove. Vaseline & Lakme.5% of UBL employees are locals and there are equal numbers of Bangladeshis working abroad in other Unilever companies as expatriates. Rexona. Vim. 99.000 people directly and indirectly through its dedicated suppliers. EMPLOYEES: Unilever Operations in Bangladesh provide employment to over 10. Lipton Taaza. Lux. Unilever Bangladesh limited has one chairman who is the Managing Director (MD). Clear. They have divided their worldwide business into different region and have different business groups to manage them. which are owned and run by third parties exclusively dedicated to Unilever Bangladesh. there is a tea packaging operation in Chittagong and three manufacturing units in Dhaka. These departments are: • • • • • Brands & Development Department Customer Development Department Finance & IT Department Human Resource Department Supply Chain Department 16 . Sunsilk. MANUFACTURING FACILITIES: The company has a soap manufacturing factory and a personal products factory located in Chittagong. Pepsodent. Close Up. Surf Excel. and Axe. Pond's.

The management consists of six layers starting from junior managers to manager Grade v. Here the managers at various levels besides reporting to next higher level also directly report to the director. IT 17 . FIGURE 1 MANAGEMENT COMMITTEE ORGANOGRAM 2. Rakesh Mohan with five Management Committee (MC) members in charge of five departments. Legal & Corporate Affairs 6. Factory Commercial Management 3. Corporate Risk Management 2.The organization is basically flat in nature. Management Accounting 5. Financial Accounting 4. Apart from the management cadre other layers are staffs and operatives The present Managing Director/Chairman of UBL is Mr.6 DETAILED STRUCTURE: FINANCE & IT The finance function is further divided into six functions: 1.

Fabric Wash • WHEEL: o Wheel Laundry Soap o Wheel Washing Powder 18 . Detailed breakdown of the different product categories and brands under them are shown below: 1. UBL is responsible for only the Brand Building part. since brands are developed regionally.FIGURE 2 COMPANY LIST OF POSITIONS 2. and Foods. The product range of Unilever can be divided into two broad divisions: Household and Personal Care.7 BRANDS Unilever globally divides the Brands function into Brand Development and Brand Building.

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 • • 4.o Wheel Power White • SURF EXCEL 2. House Hold Care • Vim o Vim Scourer o Vim Bar o Vim Liquid 3. Skin Care • Fair and Lovely: o FAL Cream 19 .

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 20 .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 .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 .White Glow Lightening Facial Foam o Pond's WB Pinkish .

o Beauty Moisture o Gentle Exfoliating • Vaseline: o Vaseline Petroleum Jelly o Vaseline Lotion o Cool and Fresh o Total Moisture 5. 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 21 • .

Deodorant • Rexona o Ice Cool o Silk o Power 22 • Minty Chill Red Hot Close Up Crystal Close Up Milk Calcium • Chicken Noodle Cream of Chicken Hot and Sour Tomato . 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.o Conditioner o Leave on Lotion o Treatment 6.

whereas categories like fabric wash and skin cleansing make the highest volume contribution. Talc and Vanishing cream have sales only in summer months. 1 sachet in the rural area. This requires a 23 . Color Cosmetics o Lakme Color Cosmetics Personal care products like skin care and hair care contribute high in terms of margin. In the urban area the scenario is complete reverse with 60% of the business coming from bottle and 40% coming from sachet. Hair Care 60% of the business comes from Tk. So. Most of pond’s product range is highly seasonal in nature. Penetration in the shampoo market is high but frequency of use or consumption is very low. Following is a brief description of some of the major categories and brands. while cold cream is strictly a winter product.o Ionic • Axe o o o o Dark Temptation Vice Click Pulse 9. there is a huge scope for growth in the shampoo market if the frequency of use can be increased. Skin Care Fair and Lovely is one of the biggest brands in Unilever Bangladesh. It was the pioneer in the category and is still the market leader by large.

24 . Foods Lipton Taaza is one of the very few brands that are market followers to another brand. and finally get them to use Vim liquid. House Hold Care The 3 Vim variants are in ascending order of sophistication. The company aims at moving people up this in this list. It is still too new to add much contribution to the business. but has not been able to do so successfully. convert non users to powder users. Now the petroleum jelly is going for local production.hugely delicate task of balancing the sales and volume projections to avoid unsold stock at the end of the season or vice versa. with especially the face-wash growing phenomenally. while petroleum jelly used to be imported. Vaseline has only been introduced this year. Traders don’t associate Taaza with budget. The lotion is currently it is being imported from India.e. to more upscale consumers. 70% of the total Lakme products are manufactured locally (creams and lotion are filled in locally. Pond’s Premium Range is a very new addition to the portfolio. It has tried to venture into the budget market. Lakme has been seeing good growth. The price premium charged by UBL is often the reason claimed behind it. i. though packages are imported) and about 30% is imported from India (mainly color cosmetics). with Lakme SKU number totaling the sum of all SKUs of all other brands combined together. powder users to bar users. Since its introduction.but is already outperforming expectations Lakme has the highest SKU list in the entire company portfolio. Local brands had already established a too strong foothold there already.. It is mainly targeted to urban areas. and is targeted to the very upscale market.

Chaaka. and Sachets – to drive penetration through low income groups. even better than expectations. Camelia Lifebuoy Detergent. Keya Laundry Soap. Deodorant Rexona is available in different forms: Roll on. It has sold quite well. In other Unilever operating companies Knorr has proved to be hugely successful.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. Bactrol Tibet. Aromatic. Brand relevance is very low for deodorants in Bangladesh. It already has a very strong foothold in Bangladesh due to product infiltration through the grey market. Savlon. “Pocha” ball soap 25 . Ltd itself. Laundry and Wheel Laundry Soap Household Wash Dettol. Tubes. Axe has just been launched in Unilever Bangladesh. since the only competitor here is Maggi from Nestle.Knorr is only a new addition to UBL’s portfolio. and in future there are lots of potentials for it. there is a huge potential if it can be developed properly. currently being imported from Pakistan. So. Tibet Beauty Soap. Now the challenge remains in removing illegal importers from the market completely. 2. and claim all of Axe sales for Unilever Bangladesh.

Almost all the brands are the top brands in their respective categories.9 SWOT ANALYSIS Strengths: • Brands have the added appeal for international heritage and connection. Keya Washing Powder Surf Excel Vim Liquid Lifebuoy Liquid Oral Care Close Up Pepsodent Pepsodent Powder Skin Care Pond’s Face Wash. Saaf Dettol Liquid Colgate. Tetley. Johnson & Johnson Fair and Lovely Hair Care Sunsilk All Clear Deodorant Rexona Axe Food Lipton Taaza Ispahani Mirzapore. Emami Pantene and other foreign brands Head & Shoulders Mostly foreign brands 2. 26 . Ariel Trix .Wheel Powder Tibet Washing Powder. Scrub Pond’s Lotion Pond’s Powder Tide. Medi Plus Magic toothpowder Mostly different foreign brands Meril. Meril Talc. Finley Fair and Care. Fresh Gel White Plus. Johnson & Johnson Tibet Talcum Powder.

27 . • Huge potential for growth as the Bangladesh economy gathers momentum. With no huge brand building costs. whereas elsewhere it is often an important-if not majority of the business. This is something local competitors can never do. Opportunities: • Has access to numerous global brands targeted to any and all target segments that can be sourced anytime by Unilever Bangladesh Ltd. has less opportunity to impact a brand’s direction. on-shore manufacturing experience. In such situation. competitors find it very easy to make their own foothold. which helps them to get raw material more in a more cost effective manner. • Offers the consumers value for money with world-renowned brands at an affordable price. and efficient human resources.with demand in the market often exceeding supply. • • As a brand developing country. • World wide supply chain network. Weaknesses: • Suffers from consistent supply chain issues.• • Strong hold over the distributors Has competitive advantage in terms of consumer insight. • 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. 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.

Deodorant is very low. Shampoo. While this is a challenge. 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. 2. it provides a huge opportunity to capitalize on the untapped market and limitless sales growth opportunities Threats: • • 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. 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% .10 FINANCIAL PERFORMANCE Unilever Bangladesh Ltd. • As a result of globalization. trade barriers are slowly being lifted. Most of them evade taxes and therefore are able to offer the traders a higher margin. • Grey market imports and selling of Unilever brands could hurt UBL’s business. customer management and general management practices that are being showcased and emulated by other Unilever Companies. It has been one of the fastest growing businesses for Unilever in entire Asia and has developed leading edge activation. Foreign products therefore are now entering the domestic market with greater ease. penetration in personal products such as: Toothpaste.• In Bangladesh. The following table summarizes the performance for 2008 and compares it to that of 2007.

Average days sales outstanding was 18 days. UBL delivered a staggering top line growth of 35% in 2008. contributing about 0.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. Unilever Bangladesh Limited had revenue of over Taka 16 billion in 2008. it tries to make the most profit by making selective investments. 2.476 million as opposed to BDT 12. The cash flow growth rate for 2008 was over 50%. Also.11 CODE OF UNILEVER’S BUSINESS PRINCIPALS: Standard of Conduct They conduct their operations with honesty.3 days. average inventory outstanding 47 days and average day’s receivable outstanding of nearly 23 days. The company has no long term outstanding debt. while calculating working capital. and with respect for the human rights and interests for their employees. 29 . It is among the top five tax payers of Bangladesh Government. Moreover the profitable growth was delivered as marked by the 53% improvement of Profit before Tax and 62% improvement of Profit after Tax. In 2008. However. Unilever does not take into account cash. the company had a cash cycle of 37. integrity and openness. The turnover for 2008 was BDT 16.5% to global Unilever revenue. They will similarly respect the legitimate interests of those with whom they have relationships.175 million in 2007. according to its financial principles. The company has been operating at a negative working capital over the last few years.

financial situation and performance to all shareholders. They maintain good communications with employees through company based information and consultation procedures. customers and business partners. Shareholders Unilever conducts its operations in accordance with internationally accepted principles of good corporate governance. They will not use any form of forced. regular and reliable information on our activities.Obeying the Law Unilever companies and their employees are required to comply with the laws and regulations of the countries in which they operate. advertised. structure. They are committed to working with employees to develop and enhance each individual’s skills and capabilities. Consumers Unilever is committed to providing branded products and services which consistently offer value in terms of price and quality. and communicated. and which are safe for their intended use. 30 . 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. In their business dealings they expect their business partners to adhere to business principles consistent with their own. They are committed to safe and healthy working conditions for all employees. compulsory or child labor. They will recruit. Products and services are accurately and properly labeled. They provide timely. employ and promote employees on the sole basis of the qualifications and abilities needed for the work to be performed. They respect the dignity of the individual and the right of employees to freedom of association. Business Partners Unilever is committed to establishing mutually beneficial relations with our suppliers.

Public Activities: Unilever companies are encouraged to promote and defend their legitimate business interests. Business Integrity Unilever does not give or receive whether directly or indirectly bribes or other improper advantages for business or financial gain. which may affect legitimate business interests. as an integral part of society. increase understanding of environmental issues and disseminate good practice. They co-operate with governments and other organizations. Competition Unilever believes in vigorous yet fair competition and supports the development of appropriate competition laws. They neither support political parties nor contribute to the funds of groups whose activities are calculated to promote party interests. They conduct their operations in accordance with the principals of fair competition and all applicable regulations. in the development of proposed legislation and other regulations. Innovation In their scientific innovation to meet consumer needs they respect the concerns of their consumers and society. both directly and through bodies such as trade associations. They work in partnership with others to promote environmental care. to fulfill our responsibilities to the societies and communities in which they operate. 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 31 .Community Involvement Unilever strives to be a trusted corporate citizen and. They work on the basis of sound science applying rigorous standards of product safety.

a bribe must be rejected immediately and reported to management. Their accounting records and supporting documents must accurately describe and reflect the nature of the underlying transactions. Conflicts of Interests All Unilever employees are expected to avoid personal activities and financial interests. a bribe. fund or asset will be established or maintained.12 CSR ACTIVITIES UBL believes in being a good corporate citizen and is fully aware of its responsibilities toward the society it operates in. They must not seek gain for themselves or others through misuse of their positions. or offer of. 200. 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. 1.000 contacts per year have been made since its inauguration. 2. This program intends to increase the level of awareness in Bangladesh about the need of good and regular oral care. and Disaster Relief.payment. which could conflict with their responsibilities to the company. which is. Women’s Empowerment. Unilever focuses its CSR efforts in areas of Health. 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. Education. No undisclosed or unrecorded account. Your company also continued the operations of 32 . and visiting dentists regularly to help avoid major pain and discomfort. or maybe construed as being.

Lifebuoy Friendship Hospital which aims to bring medical advice to the doorsteps of the underprivileged and water locked people in the chars. It treats around one and a half lakh patients annually providing Pediatric.despite the executive committee’s best intentions. Blood Transfusion. and an opportunity to help provide access to world-class surgical facilities through this hospital that caters for less privileged citizens of Chittagong.5 million. Anesthesia machines etc. Unilever Bangladesh has a long-standing association with Maa Shishu O General Hospital and this initiative will radically enhance the services of the hospital. Gynecology . Obstetric. 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. UBL has spent 6. 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. In this endeavor. Having its major manufacturing facilities in Chittagong. new needs for equipment have led to further 33 . UBL was actively involved in this project.5 Million Taka towards modernizing the existing operating theatre and in setting up a new operating theatre together with an advanced Intensive Care unit. 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. This facility was inaugurated on May 25th. However due to insufficient resources it could not cater to all the requirements of the patients . 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. 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. recognizing the dire need in the region for good health care. With regular assessment. The new OT now has world class surgical equipment including Life support. child and General hospital) in the Port city of Chittagong. 2004. Diagnostic services etc.

UBL’S 2 health related brand: Lifebuoy and Pepsodent have done significant work on this issue. 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. 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. All these activities helped improve the emergency. In 2007 again. Although there has been a lot of social progress and economic development in these areas since the country’s independence in 1971. a 3 month long Nurses’ Training Programme was organized at the Hospital. market places. Initiatives like the Dental Support Program and Dental Health Awareness Week. 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. Promoting hygiene awareness: Bangladesh has a population of over 142 million and 80% of this population lives in rural areas. both of which have been quantum leaps in developing good oral hygiene practices. It is the company’s firm belief that to help bring vitality everywhere. there remains a general ignorance about the importance of hygiene. 34 .investment of another 1. critical treatment and recovery facilities for the port city residents and increased the hospital’s ability to do surgery. Pepsodent: The Pepsodent team concentrates on schools across the country and suburban localities to promote oral hygiene. The programme covered several skill areas and had experts from outside the country help enhance nursing related skills. The company not only sponsors projects at Maa Shishu O General Hospital but also actively supports and monitors its improvement. schools etc and communicate the importance of a healthy lifestyle through flipcharts and leaflets. 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.

People called in for appointment at a stipulated time to have his or her teeth checked by dental professionals. Unilever Bangladesh reached out to educate imams at mosques on dental hygiene. Not only does a qualified dentist visit schools to educate school children. 300 dentists at 257 clinics in 64 districts gave free dental check-up to 12. More than 3 million school children have been covered through this Program and Unilever is committed to continue providing this service to the community.The Dental Support Program is a mammoth community exercise that encompasses both direct and indirect dissemination of the need and importance of oral hygiene. Unilever setup temporary dental facilities in districts where there were no clinics available. In 2007. Furthermore. One of the major activities that is carried out in partnership is the Pepsodent . Unilever believe. 2. WOMEN’S EMPOWERMENT Fair & Lovely Foundation: Unilever strongly believes in the importance of empowering women in Bangladesh. Unilever Bangladesh and Bangladesh Dental Society (BDS) have been working together for over a decade to promote oral health of Bangladeshi people. so that they can disseminate the message to their congregations.Bangladesh Dental Society Oral Health Day. the Program reaches out to countless others indirectly by training primary and secondary school teachers. the day was organized on November 16. It is therefore necessary that women be progressively brought into the main stream of economic activities. Lifebouy and Pepsodent have been instrumental in bringing the message of a better lifestyle. Together. with economic and 35 . to millions of people across Bangladesh.500 people. 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. The Day provided people with an opportunity to be aware of the condition of their teeth and also promoted general awareness of oral hygiene. free from germs and associated trauma.

means of undertaking it. Defence. . the Fair & Lovely Foundation aired a 13-episode TV series in Channel i. Yet. Career: Education is like a beacon for the right career. While the economic growth of a country is dependent directly on the level of education of its general population. This led to the Fair & Lovely Foundation’s Career Guidance Programme. Career and Enterprise" Education: Even in the twenty-first century.500 women students (at standard 10 level) received courses on basic IT from NIIT. 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. with so many choices that are available. Fair & Lovely Foundation tailor-made yet another scholarship programme for women seeking higher education. it is easy to make a wrong decision. as well as training and assistance. This programme aims at providing women with basic and higher education. Advertising. During its inception in 2004. Any Bangladeshi female student with good academic track record is eligible to apply for these scholarships. It hints at what one is good at. women can become more vocal about their rights and become stronger in withstanding repression in any form. 36 Engineering. The mission of the Foundation is to "Encourage economic empowerment of Bangladeshi women through information and resources in the areas of Education. in 2004. and an inspiring success story to instigate interest.educational empowerment. Graphic Designing. Each episode showcased one particular career… encapsulating detailed information about its prospects. Fashion Designing. Career showcased in the programme were – Law. Supplementary scholarship programs are also ongoing in partnership with the Faria Lara Foundation. It is this realization that has brought about the Fair & Lovely Foundation Scholarship Programme. Keeping this mind and women’s empowerment at the forefront. After the successful project entitled "Uttoroney Nari" in 2003 where 1. it will be most unfortunate if a significant part of it is neglected and excluded from the benefits of development. Banking. Bangladeshi women’s economic empowerment is looked upon as a luxury.

Under this project. Medicine and Business. 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. 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. 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. The programme received a huge response in terms of viewer enquiries and letters. UBL will be able to expand initiative to reach 20 more Upazillas of the country’s northern and eastern districts. Hence with a sizeable margin they would be able to generate sustainable income for themselves and hence be financially empowered.Merchandising. 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 Fair & Lovely Foundation Entrepreneurship Programme was set up to explore the endless possibilities that lie in this sector for women. Architecture. The success story of Joyeeta is taken even further with a similar project named “Aparajita” with the support from CARE. The project started in August 2003 in a nearby Thana of Manikganj as a pilot for six months. 3. Enterprise: Unilever believe that small & medium enterprises are crucial to the economic development of a country like Bangladesh. From an initial twenty-five Joyeetas the number has now increased to over two thousand. This Programme assists both urban and rural women by providing practical knowledge as well as business expertise. 37 . IT. 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. So. Joyeeta is derived from the Bengali word ‘Joy’ which means ‘Win’. Journalism. These women (Joyeetas) are serviced from the distributor through a third party agency at a regular interval.

Besides entrepreneurial training and other activities. In April 2005. There exist some institutions that provide education to these hapless children and one such organization is Shathee Samaj Kalyan Samity (SSKS). an NGO working for the slum residents in the city’s posh residential area. The courses were conducted by Certified IT professionals and English language professors. 20 SSC and 20 HSC Examinees were given the opportunity to train for three months in Borguna District.Banani. Executive Director of the Faria Lara Foundation. UBL Chairman Sanjiv Mehta officially handed over a cheque of Taka 5 Lakh and 10 computers to Selina Hossain. spoken and written English. 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. SSKS runs a free evening school for children residing in slums and was funded by an international NGO thus far. EDUCATION IT scholarships for women: Faria Lara Foundation is a voluntary organization working in the remote village of Halta Dawatala in Bamna Upozila. Fair & Lovely Foundation again re-started the programme of providing Supplementary Education programme with Faria Lara Foundation. UBL’s agency for executing the various projects related to FAL Foundation. Barguna District.These Unilever led projects will continue to empower women all over the country and give them the 3. in the south of the country. Towards the end of 2004. The effectiveness of the course was evaluated by a final exam conducted by Adcomm. This program continues in 2008 as well. In 2007 May. the 38 . School for slum children sponsored (SSKS): Unilever came forward to support an institution that provides free primary education to children of lowest income families. 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.

Chevening Scholarships are prestigious scholarships awarded by the UK’s Foreign and Commonwealth Office. 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. The sponsorship helps to cover salaries for the teachers and staff. Gulshan. Education and Women’s Empowerment. 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. 39 . Good behavior. The children eagerly await such visits which inspire their creative thinking and are a break from the everyday school work. The fields of study included for the Unilever Chevening Scholarship are the areas of Health. 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. company managers volunteer to spend time with the children and take innovative learning sessions. Unilever Bangladesh initiated the sponsorship of the school' major expenses. decision-makers and opinionformers in their own countries. UBL volunteers also visits the school to demonstrate the importance of hygiene and health. Moreover.supporting organization wrapped up its activities from Bangladesh which left SSKS floundering for funds. 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. Unilever's Pepsodent Dentibus also visits the school premises to create awareness about good oral hygiene. Badda slum areas and UBL provides support for opportunities such as training for teachers and sports lessons for the students. These include Origami. uniforms and books for the students. Electricity and safety etc. and other administrative outflows. In January 2005.

4. installation of five deep tube wells. Char Nazir. DISASTER RELIEF Char Nazir To help the victims of SIDR. 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.000 Euro) project included providing housing with sanitary latrines for all 75 families. The village was finally completed and formally inaugurated in July of 2008. The BDT 8 million (80. 40 . The Army Engineering Corp designed the houses and oversaw the implementation of the project based on the plan conceptualized by UBL.

Project Part 41 .

e. Major thrust in rural market. etc. and their key strengths are: Strong distribution network. Retailers. dealer service materials. wholesalers. The Customer Development Department. is responsible for managing the actual sales of all company goods. retailers. Wholesalers. product manuals etc. 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 42 . With more and more sophistication. role of Customer Development has also been gradually shifting from traditional “Sales” to “Trade Marketing”. the role of Customer Development will evolve further and the whole game will be turned into “Relationship Marketing”. is becoming critical day by day. Space Management and In-store merchandising are becoming more and more important. With the evolution of modern trade and aggressive local and international competition.0 CUSTOMER DEVELOPMENT: BACKGROUND UBL sales come from its customers: Distributors. previously called the Sales Department. 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.3. Category Management. Effective and focused company sales force. Exploring and developing new channels are becoming critical to drive their business forward. Managing customers i. and distributors.

o Expansion of coverage. whereas in Rural it is 13. . average brand per store is 112. o Market feedback • Direct servicing through: o Redistribution o Merchandising o Trade relations 3. However FMCG includes categories UBL does not operate in: Tobacco. whereas in Rural it is 28. UBL has organized its trade into the above stated 6 Regions. which is around 21%. These are further subdivided into 9 Areas and then into 40 Territories. Reporting to him are the Trade Marketing Manager.1 OUTLET BUSINESS STRUCTURE IN BANGLADESH The average FMCG business in Bangladesh is approximately US$ 87/Month. The average SKU per store on a national level is 89. etc The average Category per store on a national level is 14. average brand per store is 44. Breaking this figure down.2 TRADE STRUCTURE The Customer Development director (CDD) heads the Customer Development Department. 3. The average brand per store on a national level is 36. In comparison. average category per store is 16. in Urban. in Urban. Breaking this figure down. average UBL business is approximately US$ 18 /Month. Processed Foods (except only Tea). Sales Operation Manager and 6 Regional Sales Managers in charge if sales of each of the 6 sales regions. The Area Sales Mangers report to 43 . whereas in Rural it is 66. Breaking this figure down.5. in Urban. Milk.

Secondary Sale: When the distributor makes a sale to retailers. 44 . 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 sales are what really matters.and they have the Territory Managers reporting to them. Thus. Unilever measures to kinds of sales: • • Primary Sale: When UBL makes a sale to the distributor. For UBL sale is recognized when primary sale happens.which are further subdivided into channels. while the remaining 2 deal with Modern Trade & Shopping Complex-which are 2 separate channels altogether. 38 deal with General trade. but since it is an FMCG company rather than a B2B. to be discussed later.the Regional Sales Managers and are in charge of their own areas. what really matters is sales in the retail market to consumers. Bogra Region: Contribution: 17%.

with a total of 700. Trade in Bangladesh is extremely fragmented. Sylhet. which is around 3 lakh outlets. Barisal. Khulna. UBL delivers to 37% of all outlets. 45 .The sales flow of UBL goes as follows: Distributors Buys at list price (Primary Sales) Retailers Buys at trade price (Secondary Sales) Shoppers/Consumers (Buys at Retail Price) The distributors take their supply from any of the 6 depots that the company holds in Dhaka. with 23% in urban & 77% in rural. Bogra.6%. Kalurghat factory.000 direct coverage – Rural This is done through 119 exclusive distributors with a distributor sales force of 2025 DSRs – calling on 75. Usually distributors maintain seven days of secondary sales in stock as buffer. and finally in Chittagong.000 outlets were grouped into 27 different channels. and their breakdown is as follows: • • Approx 120.000 outlets /day.8% / Rural.000 outlets nationally.2% Urban.3.000 direct coverage in Urban Approx 130. And the number of outlets is growing @ 3. It is mostly traditional & rural.2. Infrastructure geared to meet fragmented trade 700.

4 UBL SALES CHANNELS Of the 27 channels.3 MANAGING TRADE: UBL MODEL Key Accounts 2. 9 contribute to the maximum chunk of business. UBL has divided these 9 into 6 priority and 3 emerging channels. 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) 46 . for ease of serving.3. 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 3. based on common characteristics of the outlets and the shoppers who usually visit them. etc.5% UBL Warehouse 97.5% Distributors Sp. target setting.

which contributes to 75% of total business. UBL does not intend to increase direct coverage of outlets unless significant value addition could be gained from it. there is the ATTM channel. The cost of increasing direct distribution coverage is much higher than the sales growth benefits to be gained. i. the rest of 68. They are fed through indirect distribution coverage by the Alternate Route to Market which contributes the remaining 25% of value. and Pollyduth. Areas beyond that are referred to as rural. However.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 3 Emerging + 6 Priority FIGURE 5 UBL SALES CHANNELS Urban channels are those are located within Thana Parishad area of each Zilla. They are still serviced by UBL products. which covers – Wholesalers. In addition to these. ALTERNATE ROUTE TO MARKET 31. Alternative Root to Marketing..e. 47 .9% of outlets is not ignored. Urban hunters. Joyeeta. but indirectly.1% of all retail outlets are under the direct coverage of UBL.

Similarly. 48 . Modern Trade started to emerge in Bangladesh since 1999-2000.5 REDISTRIBUTION PROCESS ROLE OF THE DISTRIBUTOR Distribution business operation in Bangladesh is regarded as one of the benchmark system in today’s time. Joyeeta is a lady from a far away village where there are even no retail stores. the Pollyduth buy from the distributors and carry the materials to faraway places on their cycles. For example.5% of Dhaka sales. In return the distributor gives away 3% of his commission to them. Modern Trade in Bangladesh is nascent. (UBL) plays the leading role in making Unilever brands available in all the corners of the country. Unilever Bangladesh Ltd. There are mainly 4 big Customers with multiple stores. The distributor’s business growth and profitability plays a significant role for UBL’s business growth both in terms of volume and value. undoubtedly plays a key role in overall business operation of UBL. She buys goods from the hub and then sells those from door to door. and experiencing 40% cumulative growthalmost 3 times faster than General Trade in terms of value. Till date modern trade comprises of a total of 84 stores. Distributor gives away 2% of his commission to Joyeeta and she also gets the retailers margin of 10-15%. 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. EMERGING MODERN TRADE Modern Trade is growing very fast in number. In the FMCG industry. Distributors. 5 Customers contribute 60% of MT business. but there is still an opportunity 3. 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.

considering the order size of each product. current stock levels in the warehouse. 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. etc. weekly. They have to accommodate the territory manager and Area Sales manager of UBL. It is the DSR’s responsibility to ensure availability of the products.UBL distributors function as business partners and have to strictly follow UBL guidelines. prepare different report.places an order (Indent) to the Unilever Depot. POP Register. Distributor Sales Representatives (DSRs) all over the country visit the outlets according to the coverage plan. distribution correction. Call Productivity. DMPR (Distributor’s monthly performance report).. etc. merchandizing activities. • After returning to the distribution centre. etc. and cash available to the distributors. on distribution effectiveness – BPC. competitors’ activities. train and coach distributor team. OVERVIEW OF THE REDISTRIBUTION PROCESS This is the process of getting the products to traders through the distributors: • On one day of the week. brand innovation.use of Personal Digital Assistant (PDA) to take orders or use of Distributor Management System (DMS) to record orders. 49 . and monthly. etc. DSRs take orders for the different product and enter the order into his hand held terminal (PDA). daily. the day’s orders are entered into system and invoice and memo is prepared • Next the distribution house manager. LPC. They also accommodate and install various process innovations 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. 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 CM raises the availability token for cross checking the performance of the DSR. necessary changes are then made in DMS+ and the corresponding Memo. the ADSR makes it manually and informs the computer operator on getting back to office. A territory is divided into routes based on geographical proximity. Routes are 50 . His main responsibility is to ensure visibility of the products through proper merchandizing and point of sales/purchase displays. gives delivery and collects the money • In case of any change in memo – additions or deductions. etc.• Distributor pays through Demand Draft and the stock is delivered the next morning to the distributor warehouse. otherwise it is returned back to the trader The Contract Merchandisers visit shops in his route. It represents the outlets to be covered at one go. • 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. The CMs are paid for by Unilever. channel characteristics.

The distributor’s organogram is as follows: Territory Manager Distributor/Owner House Manager Supervisor Computer Operator Distributor’s Sales Representative (DSR) Contract Merchandisers (CM) Delivery Man Assistant DSR(ADSR) Driver 4.0 BUSINESS ISSUE The distribution system in UBL is one of the most advanced in the FMCG industry in Bangladesh. There are several areas from where inefficiency rises in the business of the distributor and Unilever Bangladesh Ltd. Even then there are areas of improvement. o times a week and household once) Mechanized vehicles cover 2 sections per day. 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. non-mechanized vehicles cover 1 section per day. To understand the need for the new system.divided into sections – the number of times a route is serviced in a week. whereas. we will first analyze the problems with the previous system of operation. 51 . Itself.

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.



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


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

the responsibility for inventory management and replenishment shifts totally to the supplier. A proposed order is generated by the supplier and revised and confirmed by the retail buyer. This is used by the supplier as input to ongoing forecasts and adjustments to the next production cycle. The consumers are ultimately better 56 . the buyer maintains the responsibility for inventory management and replenishment.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 firm order is generated by the supply for the required quantities without further confirmation by the retailer. actually manages the inventory and on the extent to which information gets shared. 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. Inventory and sales data is transferred electronically by the buyer to the supplier as often as the replenishment system is executed. VENDOR MANAGED INVENTORY (VMI): In VMI. In today's global marketplace. When a supply chain is viewed as a demand chain. This embraces two main initiatives . depending on which party. with partnership being the key word traditional replenishment processes are fast giving way to the Continuous Replenishment concept. can be used by the management for demand analysis and achievement of integrated demand management. product numbering and bar-coding. the data captured along the chain. with a series of enabling technologies like Electronic Data Interchange. CO-MANAGED INVENTORY (CMI) In CMI. The order messages sent merely update the retailer’s information system.Co-Managed Inventory (CMI) and Vendor Managed Inventory (VMI). supplier or buyer. INTEGRATED DEMAND MANAGEMENT The rationale behind Continuous Replenishment System is more than product replenishment.

i. the Indent will be uploaded to UniBD. Once an indent is authorized. Stock Norm by SKU. Innovation and Seasonal SKUs etc. The goal of CRS is to bring in inventory when the customer needs it. Distributor will be able to change only three types of SKUs i. Option will be provided to view the value of the Indent.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.e. As opposed to the old "receipt. Strong cooperation between trading partners is essential for the success of good demand management.Nucleus. There will be electronic signature of the acknowledgement regarding the indent and financial issues.served. Lifting Schedule etc. Indent will be generated in distributors system.DMS+. 5. it will be freeze. based on received Indent logic. After authorization. 57 . 3) This system generated suggestive indent must be authorized by distributor/ distributor’s authorized person in DMS+." CRS can help make warehouse function closer to a crossdocking operation where items are received. The process applies lean principles to distribution operations as a way to increase inventory velocity. then staged to go out. Activity. 2) Indent Logic and lifting schedule will be sent to distributors system-DMS+ online using UniBD.3 CRS INFORMATION FLOW 1) Initially. store and pull.e. logic for indents which will be generated from the distributors’ computer system must be setup in Unilever central system. Nevertheless the effort of one party alone is not enough.

10)Finally. 8) The electronic advice will be uploaded to MFGPro as balance confirmation. DMS+ operator in the distribution house will download the Invoice from UniBD to DMS+.4) RSM / ASM or their authorized person in their absence has to then authorize the indent in UniBD for their designated distributors.MFGPro through an interface to convert DMS+ item code to MFGPro item code using a cross table. In any point of time distributor’s Current Stock = Physical Stock + Safety Stock 58 . 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. which will be maintained in MFGPro. 6) A pro forma invoice will be auto generated in MFGPro. The invoice will first enter as Transit Stock and after getting the product it will move to current stock. Supply Chain department can make limited correction with proper reason. 5) From UniBD the indent will move to Unilever Main System. 9) Getting confirmation from bank. 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.

Option will be provided to upload manually from Nucleus to MFGPro. 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. 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) 59 .5 CRS PROCESS FLOW Nucleus will be basically used for setup necessary logic.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 Stock Norm Limited Edit Option Based on Availability OD Arrangement & Account Transfer FIGURE 6 CRS PROCESS FLOW 5. Everyday this cross table will be uploaded to MFGPro.

• Nucleus: OCF=OCF Weight*SD (Order Cycle weekly (1.4 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). At the same time Nucleus user have to send the new SKU code to distributor also. 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. In this case distributor has to first upload the SKU flat file then the invoice.2.3. default benchmark is the original SKU itself. 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. 3) DOWNLOAD OPTION: One common download option under heading CRS DMS+ INDENT: 1) Indent Logic • DMS+ generated Indent date and the corresponding firm invoice in MFGPro must be in the same date. 60 . After that the invoice will go to UniBD using interface system. if any invoice contains any new SKU code which does not have equivalent DMS+ code in cross table. Then the NUCLEUS user will update the cross table and refresh the invoice. DISTRIBUTOR a) Lifting pattern: Distributor wise lifting pattern will be entered in NUCLEUS and will be uploaded to DMS+ 2) INVOICE ISSUE : In MFGPro.

After receiving corresponding firm invoice or notification for not invoiced from MFGPro.• If the Depot user fails to create firm invoice within the same date. b) Indent will be generated in the benchmark SKU for innovation SKUs. iii) Schedule Missed – If any schedule indent missed for any reason. • Indent no. 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. Indent will be zero quantity with all SKUs.e. 2) Indent Generation ( Schedule and Unscheduled ): a) During indent generation DMS+ will check schedule or unscheduled day. i) Scheduled– Auto generated indent on lifting days. the indent will be closed automatically. 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. ‘U’ . There will be no system generated suggestion for unscheduled indent. but will be displayed for the original SKU. ii) Unscheduled– Manually generated indent on non-lifting days. indent will become ineffective in MFGPro & DMS+. c) Indent formula: • • SS – Safety Stock SD: StdDev = Standard Deviation 61 . • If any invoice missed. • 2 types of indent can be generated from DMS+.scheduled.unscheduled) + Serial no (4 digit). i. For example D01S0815. will be of 8 digits – Distributor code (3 digit) + Flag (1 digit – ‘S’ . Distributor must send a fresh indent from DMS+ in the following day maintaining the same approval process by RSM & ASM and with updated quantity.

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 = 3.3. Activity and Seasonal (definition should be set at Nucleus) SKUs only. user will be able to manually edit Innovation.72 X SqRt (Avg Lead Time X SD^2 ) + ( Avg.2. But the user must enter a reason (drop down list) at the time of modification. a) After suggestive indent has been created. 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. 62 .• • • • • • • 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. b) Weekly allocation from month target will also be taken in to consideration during indent generation.

a flat file will be created in encrypted mode along with Site code and with not ordered SKU list. will be uploaded to UniBD along with tag (scheduled/ unscheduled). After indent generation.3. 63 .

i. distributors against what had been ordered. 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. CCFOT has been given great importance in recent times both globally and locally. requiring the business to understand loss areas and develop action plans. With this in mind. 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. case fill has been a key performance indicator (KPI) which measures what was shipped to customers.e. 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. More than a measure. CCFOT enables the business to identify opportunities and actions necessary to improve the order to delivery process. Over recent years.0 EVALUATION OF CONTINUOUS REPLENISHMENT SYSTEM AND DISTRIBUTOR FINANCING The CRS+DF project proposal stated the above benefits to be realized after CRS implementation.6. Market demand is taken as the order every day from distributors every day. As Unilever moves ahead globally to be the best supplier in its class. The process has been implemented in 19 distributors fo 1. 64 . CCFOT is a consistent measure of Order to Delivery (OTD) performance across Unilever. CCFOT forms part of a root cause analysis process.

CCFOT in UBL This has always been measured in UBL. that is. the company used to run on the belief that almost 90% of market demand is being fulfilled. After the conversation. and has consistently shown strong positive resultsaround 90%. as demand was not being met in all cases. E. The production team did not remedy the production situation. and hence there was undersupply. it was not possible to devise any remedies. 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 65 . However. the distributors only placed orders for the products currently in stock at the company depot. This was a big enough problem. This was another problem that was going to be addressed by CRS.g. which allows for automatic indent generation. there were no orders placed for products which were under produced and hence undersupplied. Thus. 10% of potential sales was being lost every month.but there was no concrete way to measure these lost sales and to identify areas for action to be taken on. even though market was demanding the product.on the basis that was not enough market demand for the product. with minimum human intervention. 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. but the CCFOT figures for that month show a completely misleading result of a very good performance. it is often seen that a particular products in currently under supplied in the market in a particular month. because there was no way of gauging the demand without a correct CCFOT figure. Sales were being lost. Because of this practice. This was a vicious cycle that needed drastic measures to come out of. Without a true picture of the situation. even the 10% gap between demand and supply didn’t seem to corroborate with the market feedback of gross undersupply.

FIGURE 7 UBL CCFOT JAN-'09. the market demand is being fulfilled. 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. Although this might seem deterioration in performance. This is again evident from the CCFOT results of May’09. we see a sharp increase from the downward trend starting from Janaury’09. The situation has always persisted in the company.stock norm built into the system as explained before. The CCFOT figure rose to 83% in May from 77% in April: a rise of 6%. Thus CRS generated indents from all the distributors in the country the company a real number of the demand for each type of SKU. 66 . it is actually quite the opposite. CCFOT fell to 77% in April from 89% in January: a drastic 10% fall.MAY'09 It prompted the necessary changes in the business. The business implication of this was huge. now there is simply a way to measure this and hence take corrective steps to improve it. This shows the company a true picture of how much of the customers’ (distributors’) demand. not 10% that was believed previously. guided in the right direction by the CCFOT results.e. In the very next month. the supply could now be adjusted accordingly. i. And the results of this move to automatic indent generation by CRS are quite obvious from latest changes in CCFOT. The potential sales being lost was actually 23%. Once the demand figure was accurate.

Out of Stock criteria makes up about 14% of it.hence it can be said 14% of potential sales has been lost in April due to stock out situations alone. However. it fell by 2% to 12% in May. Of the 23% lacking.the CCFOT. Customer Order Issues. It was very low at 7% in January. the Out of Stock % rose only by 2% while CCFOT by 6%. The remaining was due to increase in efficiency in other areas such as: Transit Time Delay & Credit Limit Issue. 67 .CCFOT Components CCFOT calculation has 10 criteria of measurement. 14% of all order cannot be supplied it is out of stock. The rest 9% is divided among the other 9 categories. and CCFOT could be greatly improved. This shows changes being made to increase the supply vs demand ratio.which again reinforces our previous deduction. From there it jumped to 14% in April. and is a reason for a shortage from 100% CCFOT. But due to positive steps taken the Supply Chain Team. etc. Transit Time Delay. Each contributes to the CCFOT figure. The major ones among those are: Out of Stock. That is. So the only major category of inefficiency is Out Of Stock. FIGURE 8 OUT OF STOCK% JAN'09-MAY'09 The figure above shows the changes in Out of Stock from January to May. These heads account for the balance between 100% and the CCFOT figure.

which carry the highest Gross Margin %.Category Wise CCFOT Across all major categories as well. then at least a higher percentage of demand received from the market • Higher growth in sales by streamlining the supply chain 68 . if not fully. 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. and hence the loss the company is even more. CCFOT could be significantly improved by focusing on these areas. All of these 3 categories are Personal Products. & Oral Care. and constant efforts are under way to increase its growth. The situation of Deodorant growth is even more hampered by such Out of Stock Situations. we can see that CCFOT has drastically fallen in April’09 contributing to the overall fall in Total Company CCFOT. Skin Care. In addition. Deodorant is a very young market in Bangladesh. which consequently will have several impacts on the business: • Meeting.

UBL saw a lot of changes in the marketplace and within itself in 2008. UBL’s local competitor’s who were previously not paying income taxes and VAT. By not carrying enough inventories. which they fear they might run out of. • The Caretaker government was in power. for us to get full view of the benefits and costs of CRS+DF implementation. and also fast moving SKUs. in case there is an order in which case they don’t want to miss out.2. As a result.rather than achieving low or high inventory levels. So distributors often make the mistake of overstocking: both for slow moving SKUs. 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. We have established previously that CRS+DF implementation has helped distributors lower their stock levels to an optimum level based on a stock norm. However this can be attributed to extraordinary reasons. As a result. 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. The key here is moving towards optimal stock levels. However.had to start paying them then. it has been proved over time to the contrary. their costs rose and they had less cash to spare on trade and consumer 69 . companies can not only lose out on sales but also suffer reputation damage by not meeting customer needs. and law enforcement was much stronger than in any other democratic government. although the initial instinct for distributors is to overstock rather than lose sales because of stock out situations. But the impact of the decrease in stock levels on sales levels need to be examined. determined by forecasts. rather than an indication of performance.

So even though the growth of the company is modest by previous standards. However. The actual names of the distributors have been encoded to protect confidentiality of information. an entirely different picture can be seen. Consequently competitor sales fell. now we look at the growth performance of the 19 CRS+DF distributors are isolated from rest of the distributors.which contributed to higher value from each product being sold All of these resulted in a 30%+ growth rate in 2008 from 2007. “G” represents the change in growth rate from 2008 May YTD to 2009 May YTD. such huge sales growth is not possible this year. the base for growth in 2009 is much higher than ever. CRS+DF Distributors’ Growth Rate Having established the falling growth rate of the company. The growth rate comparison of these distributors can be seen below: The table below. • This was also coupled by a price hike the company pulled in 2008. TABLE 3 CRS+DF DISTRIBUTORS CHANGE IN GROWTH FROM MAY 2008 YTD. while UBL sales rose while spending the same amount.which was the highest in the history of UBL’ performance.MAY 2009 YTD Distributors Change In Growth Level 14% 18% -5% -5% 50% -2% 70 G1 G2 G3 G4 G5 G6 .promotions. the actual growth rate has fallen in comparison to 2008. In addition.and sometimes even less than planned. with the democratic government back in power in 2009.

this performance is even more significant given the performance of the rest of the company. and ship the items when they arrive at their warehouse from the 71 . 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%. TABLE 4 NON CRS+DF DISTRIBUTORS CHANGE IN GROWTH RATE FROM 2008 MAY YTD.2009 MAY YTD Change In Growth Level Rest of the company -11% Thus. However.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%. The combined effect on UBL is 5% decreases in growth level. since a mere only 15% of total distributors are CRS+DF distributors. 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.

in case there is an order in which case they don’t want to miss out. and becoming eligible for Trade Return. which has not at all resulted in increased lost sales due to stock out. companies can not only lose out on sales but also suffer reputation damage by not meeting customer needs. They still carry a ‘comfort zone’ inventory level just in case shipments get delayed. As a result UBL enjoys 2 benefits: • • If the distributor sells more to retailers. This is also beneficial for UBL itself. We have established previously that CRS+DF implementation has helped distributors lower their stock levels to an optimum level based on a stock norm. Companies need to 72 . but their inventory level is substantially lower compared to what they carried in the past.depot. which they fear they might run out of. it has been proved over time to the contrary. However. for us to get full view of the benefits and costs of CRS+DF implementation. The key here is moving towards optimal stock levels. So distributors often make the mistake of overstocking: both for slow moving SKUs. although the initial instinct for distributors is to overstock rather than lose sales because of stock out situations.rather than achieving low or high inventory levels. rather than being afraid of running out of stock and buying additional inventory every time the company receives large new orders. and also fast moving SKUs. 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. If the distributors buy of the right kind of stock at the right time in the right time. effective inventory management is a critical component of financial health. Inventory Management is a delicate process of balancing. they will have to buy more from UBL Lesser amount of claims for Trade Return. they will be able to sell it off faster. By not carrying enough inventories. determined by forecasts. 3.thus not building up stock reaching expiry dates. But the impact of the decrease in stock levels on sales levels need to be examined. For many companies.

Time . arbitrarily set. Uncertainty . along with uncertainties in demand and supplier lead times are why inventory is maintained in the first place.The time lags present in the supply chain. and not having too much. management is about two things: not running out. UBL works at to avoid. Inventory There are three basic reasons for keeping an inventory: 1. Essentially. movement and storing brings in economies of scale. One of the established benefits of continuous replenishment as observed by the industry is stock level optimization. supply and movements of goods. The business needs to avoid stock outs. as important as it is to prevent such a stock out. thus inventory. inventory is a reserve system to prevent a stock out. requires that you maintain certain amount of inventory to use in this "lead time" 2. However holding too much of the wrong inventory can bring down the profitability of the distributor-which is something. companies can not only lose out on sales but also suffer reputation damage by not meeting customer needs.Ideal condition of "one unit at a time at a place where user needs it. However. but too little inventory is risky since some suppliers could lose their financial footing. So bulk buying. and whether this has been realized by UBL will be tested using 2 measures: Stock Cover & Stock Value 73 . businesses also don’t want to hold onto too much inventory because of holding costs. UBL had previously mandated all distributors to carry at least inventory enough for 7 days stock cover. 3.balance inventory to meet customer needs while accommodating shifting preferences. There is often a paradox: holding too much inventory ties up valuable cash. Economies of scale . By not carrying enough inventory.Inventories are maintained as buffers to meet uncertainties in demand. when he needs it" principle tends to incur lots of costs in terms of logistics. from supplier to user at every stage. Excess inventory ties up money and needs to be reduced in order to free up cash for investment in revenue-growth activities.

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.Stock Cover Inventory days represent the number of days cover for inventory. Distributor Stock Cover Value is fixed every quarter based on the average sales of the previous quarter. the lower the investment in stocks the better. Actual Days Cover is monitored every week. which is then implemented. 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. it is communicated to all distributors. but to keep the plan more dynamic and most closely resembling current scenario. Previously it was based on average Year Till Date (YTD) sales. based on the weekly stock level 74 . 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. In principle. since UBL conducts selling on 6 days of the week. 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. modern stock control theory tells us to minimise our investment in stocks. the last quarter sales data approach has been undertaken by UBL.

0 5.3 6.9 5.2 6. It measures how many days’ sales are maintained by each distributor.0 7.7 6. The distributors are in no particular order.2 6.6 7.0 6.9 8.2 6.6 4.9 9.8 7.9 6.2 8.9 5. The actual names of the distributors have been encoded to protect confidentiality of information.9 6.6 April 6.7 6.5 8.1 6.8 5.0 11.8 5.5 6.0 7.5 8. “D” represents the stock days cover from January 2009 to May 2009.7 7.8 7.6 5.2 5.1 Average 6 6 7 8 8 6 10 6 7 6 6 7 7 7 7 75 .9 7.3 February 6.9 8.4 7.8 6.0 7.CRS Distributors.4 7. 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 6.7 8.4 7.6 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 5.8 7.1 6.1 7.0 8.0 6.8 May 5.2 6.7 6.0 7.1 7.1 7.1 5.4 4.7 6.7 8.5 6.4 6.1 7.2 7.0 6.9 6.2 6.8 6.2 7.maintained by the distributor.2 8.8 10.4 7.9 March 7.4 6.0 8.5 8.

6 8.9 7.2 6.0 8.3 4.8 May 7.1 6.9 February 8.1 Average 8 The tables above show the month by month Average Days Cover for both CRS and Non CRS distributors.2 6.4 6.1 8.2 7 6.9 6 6 7 7 8 7 As we can see Days Cover for CRS distributors is perfectly 7 days as recommended by UBL.1 9.4 6 6.5 6.3 April 6. while the average Stock Cover of all the other Non-CRS Distributors is 8 days. 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 76 .5 8 6.1 8.4 March 8. TABLE 6 NON CRS+DF DISTRIBUTORS DAYS COVER FROM JANUARY 2009 TO FEBRUARY 2009 Days cover Total Others January 7.9 8.D16 D17 D18 D19 Total Average 6.1 8 5.6 6.0 9.

On the Other hand. The ROI was expected to increase because of lower level of investment in stock. The following bar chart again demonstrates that in each of the months in 2009. stock cover for CRS distributors have been significantly lower than that of Non-CRS Distributors. We will examine whether and how this impacted their growth and profitability in the following hypotheses. 77 . 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. Days Cover for Non CRS+DF distributors have actually gone up in the months from January to May. 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. FIGURE 11 STOCK DAYS COVER FOR CRS VS NON CRS DISTRIBUTORS Thus.which is supposed increase profitability over investment. as shown in the figure below.As we can see from the figure above. Actual Days cover for CRS+DF implemented Distributors has been on a downward trend.

2. The chart is as follows: FIGURE 12 RELATION BETWEEN DISTRIBUTOR ROI AND STOCK DAYS The test yielded a correlation of -0. As shown in the table below.To examine the relationship between stock days cover and ROI. etc. ROI of CRS Distributors has been consistently higher than that of Non-CRS Distributors. Cost Structure. Sales Growth. in each of the months. which is a very weak negative correlation. A lot of other factors play in a role in influencing ROI: Sales levels.we can get a better picture. This suggests it is unlikely to significantly raise ROI by simply reducing stock levels. instead of in isolation. 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% 78 . we created a scatter plot of average ROI and average stock days cover of the CR distributors in 2009. If we view the ROI performance of CRS Distributors in comparison with that of Non-CRS Distributors.

the ROI performance of the 19 CRS+DF distributors have gone up from 2008 by 6%. 79 . The results can be seen in the figure below. FIGURE 14 CRS+DF DISTRIBUTORS ROI 2008 VS 2009 As can be seen in the figure above.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.

Continuous Replenishment System with Distributor Financing implemental in 19 distributors of Unilever Bangladesh Ltd. That is probably when the high sales growth of the pilot distributors could be reflected on Unilever sales levels. and after complete integration into business processes. using both measures we can conclude that implementing CRS+DF does have a positive influence on distributors’ profitability over investment. 7. although this is not due to lower level of stocks. higher sales growths and ultimately greater customer satisfaction of the distributors due to higher Return on Investment. 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. 80 . lower level of stock buildup. In addition. to maximize the benefits of CRS+DF implementation. has been quite successful. The model promises enormous benefit to the business in the form of more dynamic stock movement. Currently.0 CONCLUSION From the above analysis. we can conclude that implementation of CRS+DF has delivered quite significant value additions in the pilot group of distributors.Thus. Unilever could explore alternative banks for distributor financing bring further efficiency in the process of approval of Distributor Financing to all distributors. the results will be truly significant. As a pilot model.

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