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PREPARED FOR Mr. Saif Noman Khan Lecturer IBA, University of Dhaka
PREPARED BYTamanna Ikram BBA 13, Roll-12 & Management Trainee Unilever Bangladesh Ltd
Critical Analysis of Value Addition from Continuous Replenishment System & Distributor Financing In Unilever Bangladesh Ltd
Prepared for: Md. Saif Noman Khan Lecturer
Prepared by: Tamanna Ikram BBA 13, Roll-12
June 24, 2009 Institute of Business Administration, University of Dhaka
Letter of Transmittal June 24, 2009 Professor G M Chowdhury Chairman Internship & Placement Program Institute of Business Administration University of Dhaka Dear Sir: I would like to draw your kind attention towards the submission of my Internship Report. The Report titled “Critical Analysis of Value Addition from Continuous Replenishment System and Distributor Financing in Unilever Bangladesh Limited” was assigned as a requirement for the completion of the degree. In this report, I have endeavored to incorporate the knowledge and experiences gained on a practical level. I have tried to produce as well written and informative a report as possible. However, because of the confidentiality policy of Unilever Bangladesh Limited, this study has not turned out to be as informative as I would have preferred. Working on this project was a delightful experience for me as many unknown things were explored while working on the project. I will be available for any clarification and modification that may be required.
Warm Regards and Thanks Sincerely yours,
Tamanna Ikram BBA-13, Roll-12 IBA, University of Dhaka
At the very onset, the author would like to express gratitude towards the faculty advisor, Md. Saif Noman Khan, Lecturer, IBA, who has given invaluable support from the very beginning through giving the direction for the report and also leading about the rules and procedures for internship completion.
Honest appreciation goes to organizational supervisor, Mr. Aminul Bari, Management Accountant-CD Support, Unilever Bangladesh Ltd., who has been a constant inspiration to carry out the project as well as to operate smoothly in the cross-functional tasks. He has also shown immense support and generosity to help in preparing the report.
Sincere gratitude goes to Mr. Mohammad Hedayet Ullah, Project Manager for CRS implementation, for providing the author with valuable information, guidelines and his cooperation in collecting the required data.
The author would also like to extend gratefulness to Mr. Mahtabuddin Ahmed, Finance Director, Unilever Bangladesh Ltd, for helping the author in selecting the topic of this report. His insight into the subject matter and review of the report has augmented the whole report manifolds. Sincere gratitude is also extended to Mr. Debdulal Karmaker, Corporate Risk Controller, for his continuous encouragement and guidance
Their valuable contribution has facilitated the successful completion of this report to a great extent.
by identifying where the problem lied.as measured by the CCFOT-which was actually 10% lower as a result of higher Out of Stock situations. while Distributor Financing arranged by UBL will ensure that CRS suggested inventory levels are fully implemented by the distributors. with Distributor Financing in 19 Distribution Houses of Unilever Bangladesh Ltd. 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.EXECUTIVE SUMMARY The objective of this report is to conduct a pilot analysis of the value addition to the company. The Continuous Replenishment System (CRS). as a result of the recent implementation of the Continuous Replenishment System. The objective of this report is to analyze how successfully this has been implemented in Unilever Bangladesh Ltd. This has been done by a comparative analysis of (i) Pre CRS implementation vs. with Distributor Financing (DF) project has been undertaken in Unilever Bangladesh Ltd. CRS will address the forecasting issues of inventory management. This prompted actions to increase true CCFOT by 6%. orders not reflecting true market demand as result of modification due to: (i) Prior knowledge about stock availability in UBL warehouse. (ii) Cash status of the distributors (since UBL does not sell on credit) CRS.with the cash problem having been solved. Post CRS implementation & (ii) Performance of CRS+DF distributors against non CRS+DF ones. Thus. 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. CRS has provided the company with a true picture of how much of the demand from the market through the customers were being fulfilled. First of all. The results have been largely conclusive. 5 . around the world. Such systems are already in place in other Unilever operating companies.
on a company level. while achieving higher levels growth. Secondly. 6 .than those without CRS+DF. compared to those without CRS+DF. The author has recommended working with the banks to speed up the process of providing Distributor Financing to all distributors.CRS has helped UBL to remedy their CCFOT situation. Thirdly. thereby reducing lost sales as a result of Out of Stock %. For the benefits to be realized by Unilever Bangladesh Ltd. Unilever Bangladesh Ltd. their average Return on Investment (ROI) is also higher than those without CRS. Also. CRS+DF has delivered business values in the pilot group of distributors. majority if not 100% distributors need to be brought under the CRS+DF umbrella. the former group of distributors have reduced their stock cover days. 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. Thus. Finally. Only then can significant improvements in company sales levels can be seen. should also explore other banks for providing the service as backups and to obtain better deals. Thus. to sum up the superior performance of the CRS+DF distributors.
........................ 10 ORIGIN .........................................................................................3 UNILEVER’S CORPORATE PURPOSE .................................TABLE OF CONTENTS 1...... 12 2.......................................................................... 11 2..................................................... 46 3.................................................................................................................................................... 43 3.................................................. 16 2.................................................2 UNILEVER BANGLADESH LIMITED...............................................................5 ORGANIZATIONAL STRUCTURE: ......................................................... 42 3.............................................................................................................................. 10 METHODOLOGY ................................................................................................................................................................................................................................................................................................... 43 3................................................ 13 2......................................................... 10 SCOPE ......................2 TRADE STRUCTURE ............................................................................................4 UNILEVER AT A GLANCE .......................................................0 INTRODUCTION .......4 UBL SALES CHANNELS ...........................................6 DETAILED STRUCTURE: FINANCE & IT ............... 17 2..............................................................................................................................................................7 BRANDS ......... 15 2.......................................................................................................................................................................0 CUSTOMER DEVELOPMENT: BACKGROUND................ 14 2..............................................................................1 UNILEVER GLOBAL ...............................................................................................0 THE ORGANIZATION PART ................... 46 7 ........3 MANAGING TRADE: UBL MODEL ................................................................................................................. 10 OBJECTIVES....................... 18 3..............1 OUTLET BUSINESS STRUCTURE IN BANGLADESH ................................. 11 LIMITATIONS:................................................... 12 2..........................
.........................................................................0 EVALUATION OF CONTINUOUS REPLENISHMENT SYSTEM AND DISTRIBUTOR FINANCING ...............5 REDISTRIBUTION PROCESS . 67 FIGURE 9 STOCK DAYS COVER TREND FOR CRS+DF DISTRIBUTORS .................. 53 5..........................................................................2 CRS IN UBL INVOLVES: ............... 18 FIGURE 3 SALES REGIONS OF UBL....................................................................................5 CRS PROCESS FLOW ................ 53 5....................................................................46 FIGURE 5 UBL SALES CHANNELS............................................................ 17 FIGURE 2 COMPANY LIST OF POSITIONS .................................................................................... 59 6..................................0 THE SOLUTION: CONTINUOUS REPLENISHMENT SYSTEM ...................66 FIGURE 8 OUT OF STOCK% JAN'09-MAY'09 .............. 80 LIST OF FIGURES FIGURE 1 MANAGEMENT COMMITTEE ORGANOGRAM .................................. 57 5.................59 FIGURE 7 UBL CCFOT JAN-'09.................................................................. 57 5.........................................................................................44 FIGURE 4 UBL TRADE MODEL...........................................................................................................................................................................................................................................3 CRS INFORMATION FLOW ...............1 CONTINUOUS REPLENISHMENT SYSTEM ........................................ 64 7.0 BUSINESS ISSUE ............................................ 76 8 ....0 CONCLUSION ..............................................................................................3......................................................................................... 51 5..............................47 FIGURE 6 CRS PROCESS FLOW..................................................................................................MAY'09............. 76 FIGURE 10 STOCK DAYS COVER TREND FOR NON CRS+DF DISTRIBUTORS .............................................. 48 4........................................................
......................................................................................................... 77 FIGURE 12 RELATION BETWEEN DISTRIBUTOR ROI AND STOCK DAYS ......................................................... 68 TABLE 3 CRS+DF DISTRIBUTORS CHANGE IN GROWTH FROM MAY 2008 YTD................................................................................................................................................................................... 25 TABLE 2 PRODUCT CATEGORY WISE CCFOT .........................................................................................FIGURE 11 STOCK DAYS COVER FOR CRS VS NON CRS DISTRIBUTORS ......................................................................................2009 MAY YTD ....................................................................... 76 TABLE 7 DISTRIBUTOR ROI COMPARISON OF CRS+DF & NON CRS+DF ............................................. 79 FIGURE 14 CRS+DF DISTRIBUTORS ROI 2008 VS 2009...............................................................................................................................MAY 2009 YTD .......................................... 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................. 78 9 ................ 71 TABLE 5 CRS+DF DISTRIBUTORS DAY COVER FROM JANUARY 2009 TO MAY 2009 .................................. 79 LIST OF TABLES TABLE 1 KEY COMPETITORS OF UBL ....... 78 FIGURE 13 DISTRIBUTOR ROI COMPARISON OF CRS+DF & NON CRS+DF DISTRIBUTORS .......................
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. DU acting as the Academic Advisor. The full benefit of the new system could only be realized 10 . Unilever Bangladesh Limited acting as the organizational advisor. The report was prepared under Mr. Management Accountant. Institute of Business Administration. and Mr Aminul Bari. which is itself a partial requirement of the BBA Program. the author has completed 10 week period of attachment with the organization. In accordance with the specifications of the Program. Mohammad Saif Noman Khan. Unilever Bangladesh Limited. Lecturer.1. IBA.0 INTRODUCTION ORIGIN This report was assigned as a requirement for the successful completion of the internship program.
the impact of these distributors on UBL’s total business is not significant enough. these 19 distributors constitute the population of this analysis. CCFOT. In addition. The quality of analysis would have been better if more distributors could have been used for the analysis. have been mentioned in the report due to confidentiality reasons. As a result. at this time. METHODOLOGY The data for the creation of this report has been collected from both primary and secondary sources. distributor ROI are not published data. company sales records. has been used. LIMITATIONS: All analysis has been done using the 19 CRS+DF distributors performance. the other 60 distributors who are using only the CRS software without Distributor Financing have been left out of the scope of this report. They are as follows: Secondary: Published literature on Continuous Replenishment System.if both are in operation. However. not all the data that could have been shown to gully illustrate the impacts of the CRS+DF program implementation. some data have been concealed. 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. In addition. out of the total 119 distributors of Unilever Bangladesh Ltd-which is only 16% of the total. 11 . Also. journal articles. replaced and/or kept intentionally vague owing to confidentiality concerns. but representations of these data has also been used to write this report. and Annual Reports of Unilever plc. distributor sales growth. So.otherwise the results could show any strong findings.
Malaysia. Today. Cambodia. Bangalore in India. etc. Singapore. Both Unilever companies have the same directors and effectively operate as a single business. China. In Asia. Bangladesh. Unilever was created in 1930 by the amalgamation of the operations of British soap-maker Lever Brothers and Dutch margarine producer Margarine Unie. England. Sri Lanka. 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.2. 12 . starting off with just soap and margarine. and Taiwan and enjoys the position of market leader in many Asia pacific countries such as India. its history can be traced back to the 1930s. beverages. Unilever is present in twenty countries including Australia. and Vietnam. and Englewood Cliffs. Netherlands and Unilever PLC in London. Philippines. Trumbull. no other company touches so many people’s lives in so many different ways as Unilever. personal care and foods products.0 THE ORGANIZATION PART 2. Laos. New Jersey in the United States. cleaning agents. factories and research laboratories in every major country. Korea. Thailand. New Zealand. Nepal. Japan. Formed of Anglo-Dutch parentage. With 400 brands spanning 14 categories of home. Pakistan. Indonesia. the company is a multinational in truest of senses.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. Colworth and Port Sunlight in England. Hong Kong. and personal care products. Connecticut. The company is widely listed on the world's stock exchanges. Some of it laboratories are as such: Vlaardingen in the Netherlands.with operating companies. Unilever has two parent companies: Unilever NV in Rotterdam. The company is one of the top 100 Fortune 500 companies in the world (Rank 106 in 2006 in terms of revenue).
To manage these brands. The brands fall almost entirely into two categories: Food and Beverages. the company focuses on what are called the "billion-dollar brands". After independence the eastern plant was declared abandoned.25% to the Bangladesh Govt. Unilever employed more than 174. The reporting region for Unilever Bangladesh (UBL) is Asia AMET (Asia.5 billion as per figures available in 2008. Middle East and Turkey). 2.For better control and management and for reporting purposes Unilever operations around the world have been divided into different regions. Kraft Foods.75% to Unilever and 39. Nestlé. Unilever's major competitors include Procter & Gamble. Lever Brothers Bangladesh Ltd. Chittagong with a soap production capacity of approximately 485 metric tons. with the regional headquarter being in Singapore. On 25th February 1964 the eastern plant of Lever Brothers Pakistan Ltd. Reckitt Benckiser and Henkel. and reporting to regional business groups for innovation and business results. and Home and Personal Care. as a joint venture company of Unilever PLC and the Govt. Unilever Bangladesh Ltd. It was a private limited company with 55% share held by Unilever and the rest by the Government of Pakistan. however. has local manufacturing facilities. was a subsidiary of Unilever is leading the home care. of Bangladesh with a share arrangement of 60. Unilever's top 25 brands account for more than 70% of sales. Mars Incorporated. 13 . 13 brands which each achieve annual sales in excess of €1 billion. But on 5th July 1973 it was registered under the name of Lever Brothers Bangladesh Ltd. was inaugurated at Kalurghat. Unilever owns more than 400 brands as a result of acquisitions.000 people and had worldwide revenue of €40. personal care and food product market of Bangladesh. and CEC (Central and Eastern Europe).2 UNILEVER BANGLADESH LIMITED Unilever started its operations in Bangladesh nearly 61 years back.
whereas production remained at Kalurghat Heavy Industrial Area in Chittagong.Operating in Bangladesh since 1948. Axe. leading the market in most of the categories it operates in.3 UNILEVER’S CORPORATE PURPOSE UBL’s purpose is to meet the everyday needs of people everywhere. Dove. with over 90% of the households using one or more of UBL products. At the heart of the corporate purpose. Knorr and Lipton Taaza among others. which guides UBL in its approach to doing business. Sunsilk. 14 . manufacturing Lux and Lifebuoy soaps. UBL had set up its production plant in 1964. Today the company is an integral part of the lives of the people of this country. but as of 2002 the corporate offices are located in Dhaka. a strength shared across Unilever globally. Fair & Lovely. Ponds'. Lux. Unilever Bangladesh Ltd. based on a deep understanding of local culture and markets. Over the years it has consolidated its strength in the FMCG sector and it is now the leading consumer products manufacturer in the country. Over the last four decades. is the drive to serve consumers in a unique and effective way. 2. While many of its brands are big international names. 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. both the head offices and the factory were located in Chittagong. 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. Lifebuoy. Previously. Close Up. the product mix are developed locally. Unilever Bangladesh (UBL) has been constantly bringing new and world-class products for the Bangladeshi people. Rexona.’s portfolio of mega brands includes Wheel.
60. 2.75% shares. hygiene and personal care with brands that help people feel good. Fabric Cleaning.39. Their long-term success requires a total commitment to exceptional standards of performance and productivity. Hair Care. Oral Care.Their deep roots in local cultures and markets around the world are their unparalleled inheritance and the foundation of their future growth. Government of Bangladesh . Deodorant. to working together effectively and to a willingness to embrace new ideas and learn continuously. Skin Care. 15 . They believe that to succeed requires the highest standards of corporate behavior towards their employees. 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. consumers and the societies and world in which Unilever live. Tea based Beverages. Colour Cosmetics. look good and get more out of life. Foods Constitution: Unilever .25% Product categories: Household Care. This is Unilever’s road to sustainable. profitable. growth for their business and long-term value creation for their shareholders and employees. Skin Cleansing.4 UNILEVER AT A GLANCE Mission: Unilever's mission is to add Vitality to life. to meet everyday needs for nutrition.
which are owned and run by third parties exclusively dedicated to Unilever Bangladesh. MANUFACTURING FACILITIES: The company has a soap manufacturing factory and a personal products factory located in Chittagong. Close Up. Sunsilk. EMPLOYEES: Unilever Operations in Bangladesh provide employment to over 10. Dove. distributors and service providers.Brands: Wheel. Lifebuoy. 2. and Axe.000 people directly and indirectly through its dedicated suppliers. Pepsodent. Rexona. they have two chairmen leading the company worldwide. Lipton Taaza. Unilever Bangladesh limited has one chairman who is the Managing Director (MD).5 ORGANIZATIONAL STRUCTURE: In terms of Unilever. They have divided their worldwide business into different region and have different business groups to manage them. Pond's. Surf Excel. Vim. UBL has five Management Committee (MC) members in charge of five departments. They have seven top directors leading seven different departments. Vaseline & Lakme. These departments are: • • • • • Brands & Development Department Customer Development Department Finance & IT Department Human Resource Department Supply Chain Department 16 . 99. Fair & Lovely. there is a tea packaging operation in Chittagong and three manufacturing units in Dhaka. Lux.5% of UBL employees are locals and there are equal numbers of Bangladeshis working abroad in other Unilever companies as expatriates. Clear. Besides these.
Here the managers at various levels besides reporting to next higher level also directly report to the director. IT 17 . Financial Accounting 4. Factory Commercial Management 3. Apart from the management cadre other layers are staffs and operatives The present Managing Director/Chairman of UBL is Mr. Rakesh Mohan with five Management Committee (MC) members in charge of five departments. Legal & Corporate Affairs 6.6 DETAILED STRUCTURE: FINANCE & IT The finance function is further divided into six functions: 1.The organization is basically flat in nature. FIGURE 1 MANAGEMENT COMMITTEE ORGANOGRAM 2. Management Accounting 5. Corporate Risk Management 2. The management consists of six layers starting from junior managers to manager Grade v.
7 BRANDS Unilever globally divides the Brands function into Brand Development and Brand Building. UBL is responsible for only the Brand Building part. Detailed breakdown of the different product categories and brands under them are shown below: 1. since brands are developed regionally. Fabric Wash • WHEEL: o Wheel Laundry Soap o Wheel Washing Powder 18 .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.
House Hold Care • Vim o Vim Scourer o Vim Bar o Vim Liquid 3. Skin Care • Fair and Lovely: o FAL Cream 19 . 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.
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 .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 Cream o Pond's Perfect Result Multi Benefit Illuminating Cream o Pond's Flawless White Deep Whitening Facial foam o Pond's Beauty Pinkish .White Glow Lightening Facial Foam o Pond's WB Pinkish .
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 • .
Foods • Tazaa o Danadar o Tea Bag Knorr o o o o 8.o Conditioner o Leave on Lotion o Treatment 6. 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.
Penetration in the shampoo market is high but frequency of use or consumption is very low. So. 1 sachet in the rural area. Most of pond’s product range is highly seasonal in nature. while cold cream is strictly a winter product. Following is a brief description of some of the major categories and brands. This requires a 23 .o Ionic • Axe o o o o Dark Temptation Vice Click Pulse 9. Skin Care Fair and Lovely is one of the biggest brands in Unilever Bangladesh. Hair Care 60% of the business comes from Tk. Talc and Vanishing cream have sales only in summer months. 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. whereas categories like fabric wash and skin cleansing make the highest volume contribution. there is a huge scope for growth in the shampoo market if the frequency of use can be increased. It was the pioneer in the category and is still the market leader by large.
Lakme has been seeing good growth.e. The price premium charged by UBL is often the reason claimed behind it. and is targeted to the very upscale market. though packages are imported) and about 30% is imported from India (mainly color cosmetics). powder users to bar users. The company aims at moving people up this in this list. Now the petroleum jelly is going for local production. convert non users to powder users. to more upscale consumers. The lotion is currently it is being imported from India. while petroleum jelly used to be imported. and finally get them to use Vim liquid. It is mainly targeted to urban areas. i. 24 . It is still too new to add much contribution to the business. Local brands had already established a too strong foothold there already. House Hold Care The 3 Vim variants are in ascending order of sophistication. but has not been able to do so successfully. with Lakme SKU number totaling the sum of all SKUs of all other brands combined together. Vaseline has only been introduced this year. It has tried to venture into the budget market.. Traders don’t associate Taaza with budget. Since its introduction.but is already outperforming expectations Lakme has the highest SKU list in the entire company portfolio. 70% of the total Lakme products are manufactured locally (creams and lotion are filled in locally. Foods Lipton Taaza is one of the very few brands that are market followers to another brand. with especially the face-wash growing phenomenally. Pond’s Premium Range is a very new addition to the portfolio.hugely delicate task of balancing the sales and volume projections to avoid unsold stock at the end of the season or vice versa.
Tubes. there is a huge potential if it can be developed properly. and in future there are lots of potentials for it. Bactrol Tibet. Camelia Lifebuoy Detergent. Tibet Beauty Soap. Savlon. Chaaka. It already has a very strong foothold in Bangladesh due to product infiltration through the grey market. and Sachets – to drive penetration through low income groups.Knorr is only a new addition to UBL’s portfolio. It has sold quite well. 2.8 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. Deodorant Rexona is available in different forms: Roll on. Brand relevance is very low for deodorants in Bangladesh. Now the challenge remains in removing illegal importers from the market completely. since the only competitor here is Maggi from Nestle. “Pocha” ball soap 25 . even better than expectations. Keya Laundry Soap. So. In other Unilever operating companies Knorr has proved to be hugely successful. currently being imported from Pakistan. Ltd itself. and claim all of Axe sales for Unilever Bangladesh. Laundry and Wheel Laundry Soap Household Wash Dettol. Axe has just been launched in Unilever Bangladesh. Aromatic.
Tetley. Almost all the brands are the top brands in their respective categories. Emami Pantene and other foreign brands Head & Shoulders Mostly foreign brands 2. Fresh Gel White Plus.9 SWOT ANALYSIS Strengths: • Brands have the added appeal for international heritage and connection. Ariel Trix . Finley Fair and Care. Saaf Dettol Liquid Colgate. Scrub Pond’s Lotion Pond’s Powder Tide. Keya Washing Powder Surf Excel Vim Liquid Lifebuoy Liquid Oral Care Close Up Pepsodent Pepsodent Powder Skin Care Pond’s Face Wash. Medi Plus Magic toothpowder Mostly different foreign brands Meril. Johnson & Johnson Fair and Lovely Hair Care Sunsilk All Clear Deodorant Rexona Axe Food Lipton Taaza Ispahani Mirzapore.Wheel Powder Tibet Washing Powder. Meril Talc. 26 . Johnson & Johnson Tibet Talcum Powder.
27 . • World wide supply chain network. • Offers the consumers value for money with world-renowned brands at an affordable price. whereas elsewhere it is often an important-if not majority of the business.with demand in the market often exceeding supply. • 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. This is something local competitors can never do. on-shore manufacturing experience. With no huge brand building costs. 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. In such situation. • • As a brand developing country. and efficient human resources. Opportunities: • Has access to numerous global brands targeted to any and all target segments that can be sourced anytime by Unilever Bangladesh Ltd. competitors find it very easy to make their own foothold. has less opportunity to impact a brand’s direction.• • Strong hold over the distributors Has competitive advantage in terms of consumer insight. which helps them to get raw material more in a more cost effective manner. • Huge potential for growth as the Bangladesh economy gathers momentum. Weaknesses: • Suffers from consistent supply chain issues.
2. Shampoo. • As a result of globalization. Deodorant is very low. 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. penetration in personal products such as: Toothpaste. Foreign products therefore are now entering the domestic market with greater ease. 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% . 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. • Grey market imports and selling of Unilever brands could hurt UBL’s business.• In Bangladesh. trade barriers are slowly being lifted. The following table summarizes the performance for 2008 and compares it to that of 2007. While this is a challenge. It has been one of the fastest growing businesses for Unilever in entire Asia and has developed leading edge activation.10 FINANCIAL PERFORMANCE Unilever Bangladesh Ltd. customer management and general management practices that are being showcased and emulated by other Unilever Companies. Most of them evade taxes and therefore are able to offer the traders a higher margin.
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. 29 . and with respect for the human rights and interests for their employees. Moreover the profitable growth was delivered as marked by the 53% improvement of Profit before Tax and 62% improvement of Profit after Tax. Unilever Bangladesh Limited had revenue of over Taka 16 billion in 2008. integrity and openness. UBL delivered a staggering top line growth of 35% in 2008. The company has been operating at a negative working capital over the last few years. In 2008.11 CODE OF UNILEVER’S BUSINESS PRINCIPALS: Standard of Conduct They conduct their operations with honesty. according to its financial principles. contributing about 0. The company has no long term outstanding debt. it tries to make the most profit by making selective investments.175 million in 2007.5% to global Unilever revenue. the company had a cash cycle of 37. The cash flow growth rate for 2008 was over 50%. It is among the top five tax payers of Bangladesh Government.3 days. However. 2. The turnover for 2008 was BDT 16. They will similarly respect the legitimate interests of those with whom they have relationships. average inventory outstanding 47 days and average day’s receivable outstanding of nearly 23 days.476 million as opposed to BDT 12. Average days sales outstanding was 18 days. Unilever does not take into account cash. Also. while calculating working capital.
Business Partners Unilever is committed to establishing mutually beneficial relations with our suppliers. They respect the dignity of the individual and the right of employees to freedom of association. In their business dealings they expect their business partners to adhere to business principles consistent with their own. 30 . They maintain good communications with employees through company based information and consultation procedures. financial situation and performance to all shareholders. advertised. They provide timely. Consumers Unilever is committed to providing branded products and services which consistently offer value in terms of price and quality. They are committed to safe and healthy working conditions for all employees. customers and business partners. and communicated. regular and reliable information on our activities. compulsory or child labor. They will not use any form of forced. Products and services are accurately and properly labeled.Obeying the Law Unilever companies and their employees are required to comply with the laws and regulations of the countries in which they operate. They are committed to working with employees to develop and enhance each individual’s skills and capabilities. and which are safe for their intended use. structure. 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. employ and promote employees on the sole basis of the qualifications and abilities needed for the work to be performed. They will recruit. Shareholders Unilever conducts its operations in accordance with internationally accepted principles of good corporate governance.
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 . Business Integrity Unilever does not give or receive whether directly or indirectly bribes or other improper advantages for business or financial gain. They co-operate with governments and other organizations. which may affect legitimate business interests. Public Activities: Unilever companies are encouraged to promote and defend their legitimate business interests.Community Involvement Unilever strives to be a trusted corporate citizen and. in the development of proposed legislation and other regulations. to fulfill our responsibilities to the societies and communities in which they operate. both directly and through bodies such as trade associations. Innovation In their scientific innovation to meet consumer needs they respect the concerns of their consumers and society. as an integral part of society. They work on the basis of sound science applying rigorous standards of product safety. increase understanding of environmental issues and disseminate good practice. They conduct their operations in accordance with the principals of fair competition and all applicable regulations. They work in partnership with others to promote environmental care. They neither support political parties nor contribute to the funds of groups whose activities are calculated to promote party interests. Competition Unilever believes in vigorous yet fair competition and supports the development of appropriate competition laws.
No undisclosed or unrecorded account. HEALTH Pepsodent Dentibus: A mobile dental unit of professional dentists offering free check up and advice continued its operations to various schools and neighborhoods. or offer of. UBL believes in placing the interest of the society right up in front which is reflected by the widespread CSR activities that the company undertakes. Your company also continued the operations of 32 . and Disaster Relief. or maybe construed as being. a bribe must be rejected immediately and reported to management. This program intends to increase the level of awareness in Bangladesh about the need of good and regular oral care. Unilever focuses its CSR efforts in areas of Health. which could conflict with their responsibilities to the company.12 CSR ACTIVITIES UBL believes in being a good corporate citizen and is fully aware of its responsibilities toward the society it operates in. 2. They must not seek gain for themselves or others through misuse of their positions. Education. Conflicts of Interests All Unilever employees are expected to avoid personal activities and financial interests. fund or asset will be established or maintained. and visiting dentists regularly to help avoid major pain and discomfort. Any demand for.000 contacts per year have been made since its inauguration. a bribe. Their accounting records and supporting documents must accurately describe and reflect the nature of the underlying transactions. Women’s Empowerment. which is. 1.payment. 200.
Unilever Bangladesh has a long-standing association with Maa Shishu O General Hospital and this initiative will radically enhance the services of the hospital. UBL has spent 6. Gynecology .despite the executive committee’s best intentions. Having its major manufacturing facilities in Chittagong. In this endeavor. Obstetric. The new OT now has world class surgical equipment including Life support. This facility was inaugurated on May 25th. Blood Transfusion. 2004. child and General hospital) in the Port city of Chittagong. new needs for equipment have led to further 33 . Anesthesia machines etc. Chittagong Maa Shishu O General Hospital: Unilever Bangladesh sponsored the setting up of a modern operation facility at the Maa Shishu O General Hospital (Mother. and an opportunity to help provide access to world-class surgical facilities through this hospital that caters for less privileged citizens of Chittagong. Diagnostic services etc.5 million. 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. It treats around one and a half lakh patients annually providing Pediatric. 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. The involvement of UBL in bringing modern surgical facilities to this hospital did not stop at the OT. 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. With regular assessment. recognizing the dire need in the region for good health care. 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. 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. However due to insufficient resources it could not cater to all the requirements of the patients .Lifebuoy Friendship Hospital which aims to bring medical advice to the doorsteps of the underprivileged and water locked people in the chars.
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. there remains a general ignorance about the importance of hygiene. schools etc and communicate the importance of a healthy lifestyle through flipcharts and leaflets. It is the company’s firm belief that to help bring vitality everywhere. 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. UBL’S 2 health related brand: Lifebuoy and Pepsodent have done significant work on this issue. both of which have been quantum leaps in developing good oral hygiene practices. Initiatives like the Dental Support Program and Dental Health Awareness Week. 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. Promoting hygiene awareness: Bangladesh has a population of over 142 million and 80% of this population lives in rural areas. it must first take steps to improve the well-being in the community that it operates in. critical treatment and recovery facilities for the port city residents and increased the hospital’s ability to do surgery. Lifebuoy: lifebuoy concentrating on all rural communities has a team of trained personnel to visit neighborhoods. All these activities helped improve the emergency. Pepsodent: The Pepsodent team concentrates on schools across the country and suburban localities to promote oral hygiene. 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. The company not only sponsors projects at Maa Shishu O General Hospital but also actively supports and monitors its improvement. 34 . a 3 month long Nurses’ Training Programme was organized at the Hospital. market places.investment of another 1. The programme covered several skill areas and had experts from outside the country help enhance nursing related skills.
In 2007.Bangladesh Dental Society Oral Health Day. Lifebouy and Pepsodent have been instrumental in bringing the message of a better lifestyle. free from germs and associated trauma. It is therefore necessary that women be progressively brought into the main stream of economic activities. Together.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 Dental Support Program is a mammoth community exercise that encompasses both direct and indirect dissemination of the need and importance of oral hygiene. Unilever Bangladesh reached out to educate imams at mosques on dental hygiene. 2. to millions of people across Bangladesh. 300 dentists at 257 clinics in 64 districts gave free dental check-up to 12. the day was organized on November 16. The Day provided people with an opportunity to be aware of the condition of their teeth and also promoted general awareness of oral hygiene. People called in for appointment at a stipulated time to have his or her teeth checked by dental professionals. One of the major activities that is carried out in partnership is the Pepsodent . Furthermore. Unilever believe. so that they can disseminate the message to their congregations. More than 3 million school children have been covered through this Program and Unilever is committed to continue providing this service to the community. Not only does a qualified dentist visit schools to educate school children. with economic and 35 . Unilever setup temporary dental facilities in districts where there were no clinics available. 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. the Program reaches out to countless others indirectly by training primary and secondary school teachers.
in 2004. Supplementary scholarship programs are also ongoing in partnership with the Faria Lara Foundation. Fair & Lovely Foundation tailor-made yet another scholarship programme for women seeking higher education. means of undertaking it. Keeping this mind and women’s empowerment at the forefront. Career: Education is like a beacon for the right career. women can become more vocal about their rights and become stronger in withstanding repression in any form. Banking. This led to the Fair & Lovely Foundation’s Career Guidance Programme. . Graphic Designing. Any Bangladeshi female student with good academic track record is eligible to apply for these scholarships. Defence. it will be most unfortunate if a significant part of it is neglected and excluded from the benefits of development. Career and Enterprise" Education: Even in the twenty-first century. This programme aims at providing women with basic and higher education. the Fair & Lovely Foundation aired a 13-episode TV series in Channel i. Each episode showcased one particular career… encapsulating detailed information about its prospects. Fashion Designing. 36 Engineering. After the successful project entitled "Uttoroney Nari" in 2003 where 1. Career showcased in the programme were – Law. It hints at what one is good at. it is easy to make a wrong decision. Advertising. During its inception in 2004. Yet. While the economic growth of a country is dependent directly on the level of education of its general population. as well as training and assistance. The mission of the Foundation is to "Encourage economic empowerment of Bangladeshi women through information and resources in the areas of Education. 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. Bangladeshi women’s economic empowerment is looked upon as a luxury. and an inspiring success story to instigate interest. with so many choices that are available. It is this realization that has brought about the Fair & Lovely Foundation Scholarship Programme.educational empowerment.500 women students (at standard 10 level) received courses on basic IT from NIIT.
These women (Joyeetas) are serviced from the distributor through a third party agency at a regular interval. The project started in August 2003 in a nearby Thana of Manikganj as a pilot for six months. Enterprise: Unilever believe that small & medium enterprises are crucial to the economic development of a country like Bangladesh. 3. Medicine and Business. 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. Architecture. The Fair & Lovely Foundation Entrepreneurship Programme was set up to explore the endless possibilities that lie in this sector for women. IT. This Programme assists both urban and rural women by providing practical knowledge as well as business expertise. UBL will be able to expand initiative to reach 20 more Upazillas of the country’s northern and eastern districts. Journalism. 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. 37 . Under this project. The programme received a huge response in terms of viewer enquiries and letters.Merchandising. Joyeeta is derived from the Bengali word ‘Joy’ which means ‘Win’. From an initial twenty-five Joyeetas the number has now increased to over two thousand. The success story of Joyeeta is taken even further with a similar project named “Aparajita” with the support from CARE. Hence with a sizeable margin they would be able to generate sustainable income for themselves and hence be financially empowered. 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. So. 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. Project Joyeeta: ‘Joyeeta’ is a unique initiative of Unilever Bangladesh to provide sustainable opportunities for over 2900 women in rural Bangladesh to earn their livelihood.
the 38 . Besides entrepreneurial training and other activities. UBL’s agency for executing the various projects related to FAL Foundation. 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. In April 2005. 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. Executive Director of the Faria Lara Foundation. an NGO working for the slum residents in the city’s posh residential area. in the south of the country. School for slum children sponsored (SSKS): Unilever came forward to support an institution that provides free primary education to children of lowest income families. SSKS runs a free evening school for children residing in slums and was funded by an international NGO thus far. This program continues in 2008 as well. There exist some institutions that provide education to these hapless children and one such organization is Shathee Samaj Kalyan Samity (SSKS). 20 SSC and 20 HSC Examinees were given the opportunity to train for three months in Borguna District.These Unilever led projects will continue to empower women all over the country and give them the 3. spoken and written English. Towards the end of 2004. In 2007 May. The effectiveness of the course was evaluated by a final exam conducted by Adcomm. Barguna District. The courses were conducted by Certified IT professionals and English language professors.Banani. UBL Chairman Sanjiv Mehta officially handed over a cheque of Taka 5 Lakh and 10 computers to Selina Hossain. Fair & Lovely Foundation again re-started the programme of providing Supplementary Education programme with Faria Lara Foundation. EDUCATION IT scholarships for women: Faria Lara Foundation is a voluntary organization working in the remote village of Halta Dawatala in Bamna Upozila.
uniforms and books for the students. 39 .supporting organization wrapped up its activities from Bangladesh which left SSKS floundering for funds. or Pepsodent toothpaste with each correct answer creates a flurry of eager hands to jumping up to answer that makes it a sight to see! The existence of the school is a great support for the children living in Banani. UBL volunteers also visits the school to demonstrate the importance of hygiene and health. Pop quizzes through which the children could win Lifebouy soaps. Unilever's Pepsodent Dentibus also visits the school premises to create awareness about good oral hygiene. The children eagerly await such visits which inspire their creative thinking and are a break from the everyday school work. 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. Good behavior. Moreover. Gulshan. Education and Women’s Empowerment. decision-makers and opinionformers in their own countries. Chevening Scholarships are prestigious scholarships awarded by the UK’s Foreign and Commonwealth Office. 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. and other administrative outflows. The fields of study included for the Unilever Chevening Scholarship are the areas of Health. In January 2005. Electricity and safety etc. These include Origami. Unilever Bangladesh initiated the sponsorship of the school' major expenses. company managers volunteer to spend time with the children and take innovative learning sessions. 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. Badda slum areas and UBL provides support for opportunities such as training for teachers and sports lessons for the students.
The Army Engineering Corp designed the houses and oversaw the implementation of the project based on the plan conceptualized by UBL. The village was finally completed and formally inaugurated in July of 2008. 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. 40 . The BDT 8 million (80.4.000 Euro) project included providing housing with sanitary latrines for all 75 families.
Project Part 41 .
etc. and distributors. Exploring and developing new channels are becoming critical to drive their business forward. With more and more sophistication. previously called the Sales Department. Major thrust in rural market. wholesalers. The Customer Development Department. role of Customer Development has also been gradually shifting from traditional “Sales” to “Trade Marketing”.e. Wholesalers. is responsible for managing the actual sales of all company goods. 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. dealer service materials. Managing customers i. is becoming critical day by day. Effective and focused company sales force. Retailers. and their key strengths are: Strong distribution network.0 CUSTOMER DEVELOPMENT: BACKGROUND UBL sales come from its customers: Distributors. product manuals etc. Space Management and In-store merchandising are becoming more and more important. With the evolution of modern trade and aggressive local and international competition. Category Management. the role of Customer Development will evolve further and the whole game will be turned into “Relationship Marketing”. 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 .3. retailers.
1 OUTLET BUSINESS STRUCTURE IN BANGLADESH The average FMCG business in Bangladesh is approximately US$ 87/Month. Breaking this figure down. Milk. in Urban. UBL has organized its trade into the above stated 6 Regions. . The Area Sales Mangers report to 43 .o Expansion of coverage. Reporting to him are the Trade Marketing Manager. o Market feedback • Direct servicing through: o Redistribution o Merchandising o Trade relations 3. However FMCG includes categories UBL does not operate in: Tobacco. Processed Foods (except only Tea). average brand per store is 44. in Urban. in Urban. whereas in Rural it is 28. In comparison. whereas in Rural it is 13. The average brand per store on a national level is 36. which is around 21%.5. Breaking this figure down. Sales Operation Manager and 6 Regional Sales Managers in charge if sales of each of the 6 sales regions. whereas in Rural it is 66. etc The average Category per store on a national level is 14. The average SKU per store on a national level is 89. 3. average UBL business is approximately US$ 18 /Month. These are further subdivided into 9 Areas and then into 40 Territories. average category per store is 16. Breaking this figure down. average brand per store is 112.2 TRADE STRUCTURE The Customer Development director (CDD) heads the Customer Development Department.
to be discussed later. 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.the Regional Sales Managers and are in charge of their own areas. secondary sales are what really matters.and they have the Territory Managers reporting to them. Unilever measures to kinds of sales: • • Primary Sale: When UBL makes a sale to the distributor. but since it is an FMCG company rather than a B2B. 38 deal with General trade. what really matters is sales in the retail market to consumers. 44 . Thus.which are further subdivided into channels. Secondary Sale: When the distributor makes a sale to retailers. while the remaining 2 deal with Modern Trade & Shopping Complex-which are 2 separate channels altogether. For UBL sale is recognized when primary sale happens. Bogra Region: Contribution: 17%.
Barisal. with a total of 700. 45 . with 23% in urban & 77% in rural. and finally in Chittagong.3. Kalurghat factory. and their breakdown is as follows: • • Approx 120. Sylhet. Trade in Bangladesh is extremely fragmented.000 direct coverage in Urban Approx 130.000 direct coverage – Rural This is done through 119 exclusive distributors with a distributor sales force of 2025 DSRs – calling on 75.000 outlets nationally.6%. Khulna. It is mostly traditional & rural.8% / Rural. Bogra.2% Urban.000 outlets /day. Infrastructure geared to meet fragmented trade 700. which is around 3 lakh outlets. And the number of outlets is growing @ 3.000 outlets were grouped into 27 different channels.2. UBL delivers to 37% of all outlets. Usually distributors maintain seven days of secondary sales in stock as buffer.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.
3. 9 contribute to the maximum chunk of business. 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 3.3 MANAGING TRADE: UBL MODEL Key Accounts 2. etc. for ease of serving.5% UBL Warehouse 97.4 UBL SALES CHANNELS Of the 27 channels. target setting. UBL has divided these 9 into 6 priority and 3 emerging channels.5% Distributors Sp. 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 . based on common characteristics of the outlets and the shoppers who usually visit them.
47 . Urban hunters.9% of outlets is not ignored.e. there is the ATTM channel. which contributes to 75% of total business.. and Pollyduth. which covers – Wholesalers. They are fed through indirect distribution coverage by the Alternate Route to Market which contributes the remaining 25% of value. Joyeeta. but indirectly. In addition to these. The cost of increasing direct distribution coverage is much higher than the sales growth benefits to be gained.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. However. They are still serviced by UBL products. Areas beyond that are referred to as rural. the rest of 68. UBL does not intend to increase direct coverage of outlets unless significant value addition could be gained from it. i. ALTERNATE ROUTE TO MARKET 31. Alternative Root to Marketing.1% of all retail outlets are under the direct coverage of UBL.
In return the distributor gives away 3% of his commission to them. The distributor’s business growth and profitability plays a significant role for UBL’s business growth both in terms of volume and value.5% of Dhaka sales. (UBL) plays the leading role in making Unilever brands available in all the corners of the country. Modern Trade started to emerge in Bangladesh since 1999-2000. undoubtedly plays a key role in overall business operation of UBL. In the FMCG industry. and experiencing 40% cumulative growthalmost 3 times faster than General Trade in terms of value. UBL has been able to reach this position over the years through rigorous activities and sound team work with its stakeholders. There are mainly 4 big Customers with multiple stores. 5 Customers contribute 60% of MT business. but there is still an opportunity 3. For example. Distributors. Distributor gives away 2% of his commission to Joyeeta and she also gets the retailers margin of 10-15%. Joyeeta is a lady from a far away village where there are even no retail stores. They are considered to be the backbone of UBL’s business.5 REDISTRIBUTION PROCESS ROLE OF THE DISTRIBUTOR Distribution business operation in Bangladesh is regarded as one of the benchmark system in today’s time. Modern Trade in Bangladesh is nascent.Special projects under ATTM have been undertaken to ensure that the supply of UBL also reaches places where there is no direct coverage. Till date modern trade comprises of a total of 84 stores. Unilever Bangladesh Ltd. 48 . EMERGING MODERN TRADE Modern Trade is growing very fast in number. She buys goods from the hub and then sells those from door to door. Modern Trade contributes 1% of National sales and 5. Similarly. the Pollyduth buy from the distributors and carry the materials to faraway places on their cycles.
etc.considering the order size of each product. OVERVIEW OF THE REDISTRIBUTION PROCESS This is the process of getting the products to traders through the distributors: • On one day of the week. Call Productivity. etc.. merchandizing activities. the day’s orders are entered into system and invoice and memo is prepared • Next the distribution house manager. They have to accommodate the territory manager and Area Sales manager of UBL. competitors’ activities. LPC. ROLE OF THE TM The TM’s main responsibility is to manage the distribution. Distributor Sales Representatives (DSRs) all over the country visit the outlets according to the coverage plan.places an order (Indent) to the Unilever Depot.use of Personal Digital Assistant (PDA) to take orders or use of Distributor Management System (DMS) to record orders. weekly. on distribution effectiveness – BPC. distribution correction. They also accommodate and install various process innovations of UBL . • After returning to the distribution centre. daily. DMPR (Distributor’s monthly performance report). train and coach distributor team. It is the DSR’s responsibility to ensure availability of the products. and monthly. etc. and cash available to the distributors. current stock levels in the warehouse.UBL distributors function as business partners and have to strictly follow UBL guidelines. POP Register. brand innovation. DSRs take orders for the different product and enter the order into his hand held terminal (PDA). Distributors have to maintain various important files and registers on a day to day basis like Stock Register. prepare different report. 49 . etc.
• 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 CM raises the availability token for cross checking the performance of the DSR. His main responsibility is to ensure visibility of the products through proper merchandizing and point of sales/purchase displays. A territory is divided into routes based on geographical proximity. channel characteristics. Routes are 50 . otherwise it is returned back to the trader The Contract Merchandisers visit shops in his route. gives delivery and collects the money • In case of any change in memo – additions or deductions. the ADSR makes it manually and informs the computer operator on getting back to office. etc. necessary changes are then made in DMS+ and the corresponding Memo. The CMs are paid for by Unilever.• Distributor pays through Demand Draft and the stock is delivered the next morning to the distributor warehouse. • 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. It represents the outlets to be covered at one go.
Even then there are areas of improvement. o times a week and household once) Mechanized vehicles cover 2 sections per day. There are several areas from where inefficiency rises in the business of the distributor and Unilever Bangladesh Ltd. 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. 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. 51 . we will first analyze the problems with the previous system of operation. To understand the need for the new system. Itself.0 BUSINESS ISSUE The distribution system in UBL is one of the most advanced in the FMCG industry in Bangladesh. whereas.divided into sections – the number of times a route is serviced in a week. non-mechanized vehicles cover 1 section per day.
The business issues are as follows:
1. Distributors need to maintain a certain amount of safety stock in their warehouses to account for unpredicted circumstances. Previously, Unilever Bangladesh Ltd. had mandated a fixed number of days cover for inventory. Stocking inventory requires forecasting, but most distributors lack forecasting tools; thus, inventory management is often done without them. Improper stock management methods result in capital blockage in slow moving stock and stock out in fast moving stock
2. There is no systematic method to measure how much stock of each product there should actually be. There is no forecasting and demand planning done by the distributor
3. Warehouse keepers don’t understand the proper stock requirement. Indent is made based on Judgment and Physical verification by the house manager
4. There is significant time loss in decision making regarding primary sales orders.
5. Indent is sometimes modified due to conversation between the distributor and the depot manager. If there is an order for a particular product but no stock available, then indent is not placed for that product. What happens as a result of this is that, true picture of the efficiency of production and Supply Chain Management is not apparent. And unless a problem is identified, it can’t be solved.
6. Finally, indent is often adjusted according to cash availability- since UBL does not sell on credit; order size is often reduced even though market demands more. This represents lost sales for UBL, since even though there is demand in the market & there might even be stock in UBL depots- sales is lost because of cash problem of the middleman- the distributor.
5.0 THE SOLUTION: CONTINUOUS REPLENISHMENT SYSTEM
To address all of these issues, Unilever Bangladesh Ltd has decided to roll out state of the art software for turning the manual process of making indent into a fully automatic, standardized process. This system is called Continuous Replenishment System. To allow a better and more fully integrated application of the system, Unilever Bangladesh Ltd. has also devised another system called Distributor Financing.
Continuous Replenishment System and Distributor Financing run together can deliver the maximum benefits. CRS will address the forecasting issues of inventory management, while Distributor Financing arranged by UBL itself will ensure that the inventory levels suggested by the CRS system can be fully implemented by the distributors, with the financing problems taken care of by the banks-under the direction of UBL. Each process will be discussed in detail, and combined benefits of the 2 systems are analyzed to give future recommendations.
Currently in UBL, 60 distributors have been equipped with CRS, due to longer time & more formalities involved in processing bank financing. However, only 19 distributors have been implemented with CRS along with distributor financing. This is because arranging Distributor Financing is much more complicated by installing the CRS software. However work is underway on making all distributors CRS distributors with Distributor Financing
5.1 CONTINUOUS REPLENISHMENT SYSTEM
Continuous Replenishment System is the total automation of the Product replenishment from UBL to the Distributors. It starts from generating indent based on SKU wise stock norm and ends with receiving the stocks without any manual entry.
Electronic data interchange (EDI), used traditionally to exchange business documents, has recently been extended to facilitate inter-organizational collaborative processes such as the Continuous Replenishment System (CRS).
Manufacturers and retailers have been reengineering supply chains using information technology (IT) such as point-of-sale (POS) systems and electronic data interchange (EDI). While EDI has been used traditionally to exchange business documents between trading partners, its capabilities have been extended recently to facilitate collaborative business processes across firms. Continuous replenishment program (CRP) is one such IT-enabled reengineering effort. The key features of CRP are as follows: (1) Retailers provide the manufacturer with real time access to their inventory positions. (2) Based on this information, the manufacturer replenishes retailer inventory (3) Products are sold to retailers at an pre-agreed price
In CRS, retailer orders are essentially eliminated because manufacturers determine quantities to ship to retailers based on observed retail sales.
CRS is a way to cope with demand uncertainty because it coordinates the supply chain players to work with common forecasts. Theory of coordination or "coordination science" often focuses on the value of information sharing in achieving intra-inter-firm coordination (Malone and Crowston 1994). However, information sharing is only one aspect of coordination; business processes are also redesigned along with information sharing.
CRP restructures the supply-chain ordering process in two fundamental ways. • First, it requires the customer to share inventory level, which is traditionally viewed as sensitive and secret information. • Second, under CRS, the retailer inventory management is performed by the manufacturer and not by the not customer.
It is well known that traditional Electronic Data Interchange (EDI) reduces transaction costs and errors (Mukhopadhyay et al. 1995, Wang and Seidmann 1995, Srinivasan et al. 1994, Riggins and Mukhopadhyay 1994). Although the benefits of EDI for ordering were widely publicized, few firms in the retail industry had experienced significant savings from using EDI to automate the existing ordering process (Clark and Hammond 1997). Many authors have also noted that EDI must involve changes in business processes to realize savings enabled by the EDI innovation (Riggins and Mukhopadhyay 1994, Venkatraman 1994).
Case studies of CRS implementation speculated that for continuous replenishment systems to work effectively, demand must either be stable or reasonably predictable (Clark and Hammond 1997). Products that change frequently such as seasonal goods may not be appropriate for the CRS approach. Retail grocery product demands are relatively stable and are effectively managed by CRP (Clark 1994b).
When there is no CRS, the retailers communicate only their orders to the manufacturer. Under CRP, the manufacturer has real-time access to participant retailers' inventory levels, and the manufacturer replenishes the inventory for each participant retailer. CRS reduces the expected inventory holding costs of both the manufacturer and customer participants.
Research on CRS is recent. Pioneering empirical research has been carried out by Clark and others in a series of case studies of the grocery industry (Clark 1994a, Hammond 1995, Clark and Hammond 1997, Lee et al. 1999). The primary result of this stream of research is that channel transformation, defined as the combination of process and technological innovation, provides significantly greater performance improvements than either technological innovations or process redesign changes implemented independently.
Analytical modelling of the CRS innovation is limited and has focused primarily on channel coordination through information sharing. These studies discuss how a manufacturer can elicit information from retailers through inventory, lead-time, and shortage allocation policies (Bourland et al. 1996, Gavirneni et al. 1996, Aviv and Federgruen 1998, Moinzadeh and Bassok 1998, Cachon and Fisher 1998). In these studies, the benefit of information
The order messages sent merely update the retailer’s information system. In today's global marketplace. supplier or buyer. VENDOR MANAGED INVENTORY (VMI): In VMI. with partnership being the key word traditional replenishment processes are fast giving way to the Continuous Replenishment concept. the responsibility for inventory management and replenishment shifts totally to the supplier.sharing to the manufacturer comes primarily from the manufacturer's ability to forecast more accurately the size of retailer's future orders and/or the actual timing of the future order placement. can be used by the management for demand analysis and achievement of integrated demand management. A proposed order is generated by the supplier and revised and confirmed by the retail buyer. 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. with a series of enabling technologies like Electronic Data Interchange. When a supply chain is viewed as a demand chain. A firm order is generated by the supply for the required quantities without further confirmation by the retailer. This embraces two main initiatives . the buyer maintains the responsibility for inventory management and replenishment. Inventory and sales data is transferred electronically by the buyer to the supplier as often as the replenishment system is executed.Co-Managed Inventory (CMI) and Vendor Managed Inventory (VMI). INTEGRATED DEMAND MANAGEMENT The rationale behind Continuous Replenishment System is more than product replenishment. CO-MANAGED INVENTORY (CMI) In CMI. depending on which party. The consumers are ultimately better 56 . This is used by the supplier as input to ongoing forecasts and adjustments to the next production cycle. the data captured along the chain. product numbering and bar-coding.
Innovation and Seasonal SKUs etc.DMS+. based on received Indent logic. Activity. After authorization.served. Option will be provided to view the value of the Indent. There will be electronic signature of the acknowledgement regarding the indent and financial issues. Lifting Schedule etc. Once an indent is authorized. i. Strong cooperation between trading partners is essential for the success of good demand management.Nucleus. Stock Norm by SKU.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. 57 . the Indent will be uploaded to UniBD. store and pull.3 CRS INFORMATION FLOW 1) Initially. Indent will be generated in distributors system.e. it will be freeze. As opposed to the old "receipt." CRS can help make warehouse function closer to a crossdocking operation where items are received. Nevertheless the effort of one party alone is not enough. logic for indents which will be generated from the distributors’ computer system must be setup in Unilever central system. 5. Distributor will be able to change only three types of SKUs i. 2) Indent Logic and lifting schedule will be sent to distributors system-DMS+ online using UniBD. The goal of CRS is to bring in inventory when the customer needs it. then staged to go out. The process applies lean principles to distribution operations as a way to increase inventory velocity. 3) This system generated suggestive indent must be authorized by distributor/ distributor’s authorized person in DMS+.
4) RSM / ASM or their authorized person in their absence has to then authorize the indent in UniBD for their designated distributors. The invoice will first enter as Transit Stock and after getting the product it will move to current stock. The pro forma indent value will go to the concerned bank for financial clearance. In any point of time distributor’s Current Stock = Physical Stock + Safety Stock 58 . 6) A pro forma invoice will be auto generated in MFGPro.MFGPro through an interface to convert DMS+ item code to MFGPro item code using a cross table. DMS+ operator in the distribution house will download the Invoice from UniBD to DMS+. 10)Finally. 8) The electronic advice will be uploaded to MFGPro as balance confirmation. which will be maintained in MFGPro. Supply Chain department can make limited correction with proper reason. 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. firm invoice will be created and sent to UniBD through an Interface to change item codes compatible to DMS+. 9) Getting confirmation from bank. 5) From UniBD the indent will move to Unilever Main System.
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. 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 . 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.5 CRS PROCESS FLOW Nucleus will be basically used for setup necessary logic. Everyday this cross table will be uploaded to MFGPro.
default benchmark is the original SKU itself. DISTRIBUTOR a) Lifting pattern: Distributor wise lifting pattern will be entered in NUCLEUS and will be uploaded to DMS+ 2) INVOICE ISSUE : In MFGPro. the corresponding flat file containing the total invoice information will go to NUCLEUS from MFGPro and in NUCLEUS there will be a pop up message for the user. After that the invoice will go to UniBD using interface system. Then the NUCLEUS user will update the cross table and refresh the invoice. In this case distributor has to first upload the SKU flat file then the invoice.2. 60 .• Nucleus: OCF=OCF Weight*SD (Order Cycle weekly (1. 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. if any invoice contains any new SKU code which does not have equivalent DMS+ code in cross table.3.4 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.
• 2 types of indent can be generated from DMS+. the indent will be closed automatically. b) Indent will be generated in the benchmark SKU for innovation SKUs. iii) Schedule Missed – If any schedule indent missed for any reason. ‘U’ . in the next day the indent will be closed and if distributor requires a fresh indent will be generated with updated quantity but in the same indent number. but will be displayed for the original SKU. • If any invoice missed. indent will become ineffective in MFGPro & DMS+. c) Indent formula: • • SS – Safety Stock SD: StdDev = Standard Deviation 61 . There will be no system generated suggestion for unscheduled indent. 2) Indent Generation ( Schedule and Unscheduled ): a) During indent generation DMS+ will check schedule or unscheduled day. Indent will be zero quantity with all SKUs. i.• If the Depot user fails to create firm invoice within the same date. will be of 8 digits – Distributor code (3 digit) + Flag (1 digit – ‘S’ .unscheduled) + Serial no (4 digit). • Indent no. 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.scheduled. For example D01S0815. i) Scheduled– Auto generated indent on lifting days. ii) Unscheduled– Manually generated indent on non-lifting days. Distributor must send a fresh indent from DMS+ in the following day maintaining the same approval process by RSM & ASM and with updated quantity. After receiving corresponding firm invoice or notification for not invoiced from MFGPro.e.
user will be able to manually edit Innovation. a) After suggestive indent has been created.2. Activity and Seasonal (definition should be set at Nucleus) SKUs only. 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. b) Weekly allocation from month target will also be taken in to consideration during indent generation.• • • • • • • OCF: Order Cycle Factor FC : Fixed Cover ROQ : Re-Order Quantity Nucleus : Avg Lead Time : Distributor wise separate manual entry (Decimal) Nucleus : Duration for Sales SKU wise ( Number of days ) Nucleus : SKU Factor – SKU wise manual entry ( with decimal ) Nucleus : OCF – Order Cycle weekly (1. But the user must enter a reason (drop down list) at the time of modification.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. 62 .72 X SqRt (Avg Lead Time X SD^2 ) + ( Avg.
63 . After indent generation.3. will be uploaded to UniBD along with tag (scheduled/ unscheduled). a flat file will be created in encrypted mode along with Site code and with not ordered SKU list.
More than a measure. 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. As Unilever moves ahead globally to be the best supplier in its class. CCFOT enables the business to identify opportunities and actions necessary to improve the order to delivery process.e. EFFECT OF CRS IMPLEMENTATION ON CUSTOMER DEMAND SATISFACTION MEASURED THROUGH (CCFOT) Customer Case Fill on Time (CCFOT) is a measure to see how much of the demand from the market on time is being met by supply chain. i. The process has been implemented in 19 distributors fo 1. Market demand is taken as the order every day from distributors every day. CCFOT has been given great importance in recent times both globally and locally.6.0 EVALUATION OF CONTINUOUS REPLENISHMENT SYSTEM AND DISTRIBUTOR FINANCING The CRS+DF project proposal stated the above benefits to be realized after CRS implementation. requiring the business to understand loss areas and develop action plans. case fill has been a key performance indicator (KPI) which measures what was shipped to customers. Over recent years. distributors against what had been ordered. 64 . CCFOT is a consistent measure of Order to Delivery (OTD) performance across Unilever. CCFOT forms part of a root cause analysis process. 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.
which allows for automatic indent generation.CCFOT in UBL This has always been measured in UBL. Thus. This was a vicious cycle that needed drastic measures to come out of.g. it was not possible to devise any remedies. E. Because of this practice. However. The production team did not remedy the production situation. This was a big enough problem. 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 . with minimum human intervention. the company used to run on the belief that almost 90% of market demand is being fulfilled. and hence there was undersupply. but the CCFOT figures for that month show a completely misleading result of a very good performance.on the basis that was not enough market demand for the product. even the 10% gap between demand and supply didn’t seem to corroborate with the market feedback of gross undersupply. Sales were being lost. even though market was demanding the product. the distributors only placed orders for the products currently in stock at the company depot.but there was no concrete way to measure these lost sales and to identify areas for action to be taken on. This was another problem that was going to be addressed by CRS. 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. 10% of potential sales was being lost every month. that is. because there was no way of gauging the demand without a correct CCFOT figure. Without a true picture of the situation. and has consistently shown strong positive resultsaround 90%. as demand was not being met in all cases. After the conversation. there were no orders placed for products which were under produced and hence undersupplied. it is often seen that a particular products in currently under supplied in the market in a particular month.
In the very next month. The business implication of this was huge.MAY'09 It prompted the necessary changes in the business. not 10% that was believed previously. FIGURE 7 UBL CCFOT JAN-'09. it is actually quite the opposite. now there is simply a way to measure this and hence take corrective steps to improve it. the supply could now be adjusted accordingly.e. The CCFOT figure rose to 83% in May from 77% in April: a rise of 6%. i. This shows the company a true picture of how much of the customers’ (distributors’) demand. The potential sales being lost was actually 23%. CCFOT fell to 77% in April from 89% in January: a drastic 10% fall. 66 . And the results of this move to automatic indent generation by CRS are quite obvious from latest changes in CCFOT. 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. the market demand is being fulfilled. guided in the right direction by the CCFOT results. Once the demand figure was accurate. we see a sharp increase from the downward trend starting from Janaury’09.stock norm built into the system as explained before. Thus CRS generated indents from all the distributors in the country the company a real number of the demand for each type of SKU. This is again evident from the CCFOT results of May’09. The situation has always persisted in the company. Although this might seem deterioration in performance.
This shows changes being made to increase the supply vs demand ratio. the Out of Stock % rose only by 2% while CCFOT by 6%.which again reinforces our previous deduction. and CCFOT could be greatly improved. 14% of all order cannot be supplied it is out of stock. These heads account for the balance between 100% and the CCFOT figure. Of the 23% lacking.hence it can be said 14% of potential sales has been lost in April due to stock out situations alone. it fell by 2% to 12% in May. Out of Stock criteria makes up about 14% of it. The remaining was due to increase in efficiency in other areas such as: Transit Time Delay & Credit Limit Issue. The rest 9% is divided among the other 9 categories. Customer Order Issues. etc. and is a reason for a shortage from 100% CCFOT.the CCFOT. The major ones among those are: Out of Stock. But due to positive steps taken the Supply Chain Team. 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. 67 .CCFOT Components CCFOT calculation has 10 criteria of measurement. From there it jumped to 14% in April. That is. However. Transit Time Delay. Each contributes to the CCFOT figure. It was very low at 7% in January.
and constant efforts are under way to increase its growth. CCFOT could be significantly improved by focusing on these areas. 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. & Oral Care. 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. and hence the loss the company is even more. which consequently will have several impacts on the business: • Meeting. Deodorant is a very young market in Bangladesh. In addition. then at least a higher percentage of demand received from the market • Higher growth in sales by streamlining the supply chain 68 .which carry the highest Gross Margin %.Category Wise CCFOT Across all major categories as well. Skin Care. if not fully. All of these 3 categories are Personal Products.
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. By not carrying enough inventories. As a result. although the initial instinct for distributors is to overstock rather than lose sales because of stock out situations. their costs rose and they had less cash to spare on trade and consumer 69 . But the impact of the decrease in stock levels on sales levels need to be examined. The key here is moving towards optimal stock levels. UBL saw a lot of changes in the marketplace and within itself in 2008.had to start paying them then. for us to get full view of the benefits and costs of CRS+DF implementation. which they fear they might run out of.rather than achieving low or high inventory levels. We have established previously that CRS+DF implementation has helped distributors lower their stock levels to an optimum level based on a stock norm. rather than an indication of performance. and also fast moving SKUs. it has been proved over time to the contrary. companies can not only lose out on sales but also suffer reputation damage by not meeting customer needs. • The Caretaker government was in power.2. determined by forecasts. As a result. 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. So distributors often make the mistake of overstocking: both for slow moving SKUs. UBL’s local competitor’s who were previously not paying income taxes and VAT. However this can be attributed to extraordinary reasons. in case there is an order in which case they don’t want to miss out. However. and law enforcement was much stronger than in any other democratic government.
TABLE 3 CRS+DF DISTRIBUTORS CHANGE IN GROWTH FROM MAY 2008 YTD.MAY 2009 YTD Distributors Change In Growth Level 14% 18% -5% -5% 50% -2% 70 G1 G2 G3 G4 G5 G6 . In addition.which was the highest in the history of UBL’ performance. The actual names of the distributors have been encoded to protect confidentiality of information. “G” represents the change in growth rate from 2008 May YTD to 2009 May YTD. now we look at the growth performance of the 19 CRS+DF distributors are isolated from rest of the distributors. the base for growth in 2009 is much higher than ever. Consequently competitor sales fell.and sometimes even less than planned. The growth rate comparison of these distributors can be seen below: The table below. So even though the growth of the company is modest by previous standards. the actual growth rate has fallen in comparison to 2008. while UBL sales rose while spending the same amount. such huge sales growth is not possible this year.which contributed to higher value from each product being sold All of these resulted in a 30%+ growth rate in 2008 from 2007. with the democratic government back in power in 2009. an entirely different picture can be seen. However.promotions. CRS+DF Distributors’ Growth Rate Having established the falling growth rate of the company. • This was also coupled by a price hike the company pulled in 2008.
this performance is even more significant given the performance of the rest of the company. However. this enables us to see that CRS+DF has enabled these distributors to actually increase their growth levels while that of the rest of the company has gone down. while that of the rest of the 100 distributors have gone down by 11%. The combined effect on UBL is 5% decreases in growth level. since a mere only 15% of total distributors are CRS+DF distributors. we can conclude CRS+DF have enabled the distributors to achieved higher growth in sales. TABLE 4 NON CRS+DF DISTRIBUTORS CHANGE IN GROWTH RATE FROM 2008 MAY YTD. CRS+DF has thus enabled UBL distributors to only buy what they need based on the computer information. and ship the items when they arrive at their warehouse from the 71 .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%.2009 MAY YTD Change In Growth Level Rest of the company -11% Thus.
determined by forecasts. Companies need to 72 . effective inventory management is a critical component of financial health. 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. which has not at all resulted in increased lost sales due to stock out. although the initial instinct for distributors is to overstock rather than lose sales because of stock out situations. it has been proved over time to the contrary. However. which they fear they might run out of. 3. companies can not only lose out on sales but also suffer reputation damage by not meeting customer needs. For many companies. As a result UBL enjoys 2 benefits: • • If the distributor sells more to retailers. We have established previously that CRS+DF implementation has helped distributors lower their stock levels to an optimum level based on a stock norm. and becoming eligible for Trade Return. they will have to buy more from UBL Lesser amount of claims for Trade Return. This is also beneficial for UBL itself. and also fast moving SKUs. By not carrying enough inventories. The key here is moving towards optimal stock levels. but their inventory level is substantially lower compared to what they carried in the past. They still carry a ‘comfort zone’ inventory level just in case shipments get delayed. But the impact of the decrease in stock levels on sales levels need to be examined.depot. they will be able to sell it off faster. for us to get full view of the benefits and costs of CRS+DF implementation.rather than achieving low or high inventory levels. Inventory Management is a delicate process of balancing.thus not building up stock reaching expiry dates. rather than being afraid of running out of stock and buying additional inventory every time the company receives large new orders. If the distributors buy of the right kind of stock at the right time in the right time. in case there is an order in which case they don’t want to miss out. So distributors often make the mistake of overstocking: both for slow moving SKUs.
management is about two things: not running out. along with uncertainties in demand and supplier lead times are why inventory is maintained in the first place. Inventory There are three basic reasons for keeping an inventory: 1. but too little inventory is risky since some suppliers could lose their financial footing.The time lags present in the supply chain. when he needs it" principle tends to incur lots of costs in terms of logistics. and not having too much. thus inventory. Essentially. arbitrarily set. 3. One of the established benefits of continuous replenishment as observed by the industry is stock level optimization. Economies of scale . The business needs to avoid stock outs.Inventories are maintained as buffers to meet uncertainties in demand. UBL had previously mandated all distributors to carry at least inventory enough for 7 days stock cover. However. So bulk buying. Excess inventory ties up money and needs to be reduced in order to free up cash for investment in revenue-growth activities. However holding too much of the wrong inventory can bring down the profitability of the distributor-which is something. businesses also don’t want to hold onto too much inventory because of holding costs. Uncertainty .Ideal condition of "one unit at a time at a place where user needs it. and whether this has been realized by UBL will be tested using 2 measures: Stock Cover & Stock Value 73 . Time . movement and storing brings in economies of scale.balance inventory to meet customer needs while accommodating shifting preferences. inventory is a reserve system to prevent a stock out. as important as it is to prevent such a stock out. from supplier to user at every stage. By not carrying enough inventory. requires that you maintain certain amount of inventory to use in this "lead time" 2. supply and movements of goods. There is often a paradox: holding too much inventory ties up valuable cash. companies can not only lose out on sales but also suffer reputation damage by not meeting customer needs. UBL works at to avoid.
the last quarter sales data approach has been undertaken by UBL. Actual Days Cover is monitored every week. the lower the investment in stocks the better. 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. Previously it was based on average Year Till Date (YTD) sales. based on the weekly stock level 74 . modern stock control theory tells us to minimise our investment in stocks. 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. it is communicated to all distributors. sudden changes in demand and so on. Distributor Stock Cover Value is fixed every quarter based on the average sales of the previous quarter. which is then implemented. In principle. Apart from buffer stocks that businesses sometimes need in case of shortages of supply and strategic stocks in case of war.Stock Cover Inventory days represent the number of days cover for inventory. since UBL conducts selling on 6 days of the week. but to keep the plan more dynamic and most closely resembling current scenario. 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.
0 5.3 6.7 6.0 7.5 6.9 March 7.1 Average 6 6 7 8 8 6 10 6 7 6 6 7 7 7 7 75 .5 8.8 10.7 7.8 5. The distributors are in no particular order.9 8.0 6.4 4.4 7.5 6.0 7.6 5.4 6.0 11.1 6.0 7.8 6.1 7.1 6.5 8.7 6.7 8.2 7.2 7.2 6.6 4.7 6.8 7.8 May 5.9 7.8 6.1 7.0 6.8 5.0 7.2 6.0 8.9 6.9 6. It measures how many days’ sales are maintained by each distributor.0 8.2 5.2 6.maintained by the distributor.CRS Distributors.6 April 6.8 7.5 6.7 6. “D” represents the stock days cover from January 2009 to May 2009.9 6.4 7.2 8.5 8.2 6.3 February 6. Actual Days Cover= Actual Stock Value/ (Q1 Stock Cover Plan/ Planned Days Cover) To find out whether CRS has helped distributors reduce their stock levels the stock cover for CRS distributors is compared with stock cover figure for Non.7 8.4 7.9 9. The actual names of the distributors have been encoded to protect confidentiality of information.4 6.0 6.9 8.9 5. 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 5.1 7.4 7.1 5.1 7.2 8.6 7.8 7.9 5.6 7.2 6.
4 6.1 6.1 8.4 March 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.2 6.1 Average 8 The tables above show the month by month Average Days Cover for both CRS and Non CRS distributors.2 6. Below the tables are graphically represented FIGURE 9 STOCK DAYS COVER TREND FOR CRS+DF DISTRIBUTORS FIGURE 10 STOCK DAYS COVER TREND FOR NON CRS+DF DISTRIBUTORS 76 .0 8.9 7.4 6 6.6 8. while the average Stock Cover of all the other Non-CRS Distributors is 8 days.1 8.1 8 5.5 8 6.D16 D17 D18 D19 Total Average 6.3 4. TABLE 6 NON CRS+DF DISTRIBUTORS DAYS COVER FROM JANUARY 2009 TO FEBRUARY 2009 Days cover Total Others January 7.8 May 7.9 8.5 6.0 9.6 6.9 February 8.3 April 6.1 9.
as shown in the figure below.which is supposed increase profitability over investment. We will examine whether and how this impacted their growth and profitability in the following hypotheses. 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. Days Cover for Non CRS+DF distributors have actually gone up in the months from January to May. 77 . The ROI was expected to increase because of lower level of investment in stock. On the Other hand. Actual Days cover for CRS+DF implemented Distributors has been on a downward trend.As we can see from the figure above. FIGURE 11 STOCK DAYS COVER FOR CRS VS NON CRS DISTRIBUTORS Thus. The following bar chart again demonstrates that in each of the months in 2009. 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. stock cover for CRS distributors have been significantly lower than that of Non-CRS Distributors.
in each of the months. etc. As shown in the table below. 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 . This suggests it is unlikely to significantly raise ROI by simply reducing stock levels. Cost Structure. The chart is as follows: FIGURE 12 RELATION BETWEEN DISTRIBUTOR ROI AND STOCK DAYS The test yielded a correlation of -0.2. which is a very weak negative correlation. Sales Growth. instead of in isolation. A lot of other factors play in a role in influencing ROI: Sales levels. ROI of CRS Distributors has been consistently higher than that of Non-CRS Distributors. If we view the ROI performance of CRS Distributors in comparison with that of Non-CRS Distributors. we created a scatter plot of average ROI and average stock days cover of the CR distributors in 2009.we can get a better picture.To examine the relationship between stock days cover and ROI.
FIGURE 14 CRS+DF DISTRIBUTORS ROI 2008 VS 2009 As can be seen in the figure above. The results can be seen in the figure below. the ROI performance of the 19 CRS+DF distributors have gone up from 2008 by 6%.FIGURE 13 DISTRIBUTOR ROI COMPARISON OF CRS+DF & NON CRS+DF DISTRIBUTORS The ROI performance of CRS+DF distributors could also be looked at from another anglecomparison of the ROI of these 19 distributors in 2009 against that in 2008. 79 .
higher sales growths and ultimately greater customer satisfaction of the distributors due to higher Return on Investment. we can conclude that implementation of CRS+DF has delivered quite significant value additions in the pilot group of distributors. 7. In addition. lower level of stock buildup. That is probably when the high sales growth of the pilot distributors could be reflected on Unilever sales levels. to maximize the benefits of CRS+DF implementation. The model promises enormous benefit to the business in the form of more dynamic stock movement. As a pilot model. Currently. Unilever could explore alternative banks for distributor financing bring further efficiency in the process of approval of Distributor Financing to all distributors. 80 . using both measures we can conclude that implementing CRS+DF does have a positive influence on distributors’ profitability over investment.0 CONCLUSION From the above analysis. has been quite successful.Thus. 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. although this is not due to lower level of stocks. and after complete integration into business processes. Continuous Replenishment System with Distributor Financing implemental in 19 distributors of Unilever Bangladesh Ltd. the results will be truly significant.