Pankaj Kumar Singh S-41

Change at Hindustan Lever Limited

Introduction of HLL
Hindustan Lever Limited (HLL) is India's largest Fast Moving Consumer Goods Company with a heritage of over 75 years in India and touches the lives of two out of three Indians. HUL works to create a better future every day and helps people feel good, look good and get more out of life with brands and services that are good for them and good for others. With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the everyday life of millions of consumers across India. Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Ponds, Vaseline, Lakm, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit. The Company has over 16,000 employees and has an annual turnover of around Rs. 21,736 crores (financial year 2011 - 2012). HUL is a subsidiary of Unilever, one of the worlds leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe with annual sales of about 46.5 billion in 2011. Unilever has about 52% shareholding in HUL. HUL deals in FMCG sector which has huge potential to grow. Over the last one decade this sector has grown at the rate of 18.7%. Availability of key raw materials, cheaper labour costs and presence of highly effective supply chain system gives competitive advantage to HLL. The FMCG sector will witness more than 50% growth in rural and semi-urban India. There is an increase in the disposable income and altered lifestyle which is being fuelled by the increase in the per capita income. The ever growing population is also increasing the demand manifold.

Profitability of the sector

There are several factors which influences the profitability of the sector. This can be broadly categorized into three segments. 1. Positive Factors: - The livelihood of this sector is largely dependent upon the volume of the sales. Higher the turnover, higher is the profitability. 2. Negative factors: - There is huge competition in this field which resists the profit margin to increase. Further, the increasing input costs also put a dent over the profit margin. 3. Balancing factors: - There are few things which increases the sales but at the same time decreases the profit margin. There is huge demand of sachet, but it comes at extra cost which put a pressure over the margin. But this sachet helps to tap the market which is there at the bottom.

Threats
There is huge pressure over the margin as there is huge competition in the market. The major problem and opportunity for HLL is its logistics. Since in any FMCG company the logistics plays a vital role, same is the case with HLL. Logistics can be better described as, how many channels the company is taking before reaching at the final consumer. Lesser the number of channel better is the connectivity with consumer and lesser is the time taken to arrive at the doorstep of consumer. The companies always aspire to shorten the channel length. Here comes the role of supply-chain management. Supply chain management plays the dominant role in any FMCG company and the HLL is not an exception to that. Supply Chain Management (SCM) is all about getting the right things to the right place at the right time. There has been great revolution in SCM techniques and the companies are exploring new opportunities day-in day-out. Better the SCM, better is the sales and hence the profitability. New communication technologies have revolutionized the SCM these days.

HLL Supply Chain Management

Distribution System of HLL HLLs products are distributed through a network of about 8000 redistribution stockists covering over 1 million outlet. Such a huge network is there and even a

single miss or unavailability of product with any distributor can cause a huge dent in the market share and hence the profitability of the company. Hindustan Lever Limited provides specefic tailor-made services to its channel partners. HLL uses point of purchase methods for higher level of direct contact through instore facilitators. It has developed customer management and supply chain capabilities for partnering emerging self-service stores and super markets. More than 2000 suppliers and 8000 distributors serve HLLs 100 factories which are decentralized across 2 million square miles of territory. The villages form a major chunk of the HLLs business. The company has created a devoted Rural Sales Organisation for catering the need of the villages. The team comprises of an exclusive sales force and exclusive redistribution stockist. The team focuses on availability of products in these markets. In rural India, the HLLs network directly covers about 50,000 villages, reaching over 250 million consumers through over 6200 sub-stockist. When we see the network in the previous paragraph it is a huge network and meeting the demand supply at each store is a herculean task. HLL is known for pioneering the distribution network in India. With the advent of the information technology and latest communication channels it decided to upgrade its logistics to meet the challenges and to make efficient use of its network. This proved to be a very herculean task. To incorporate the IT measure at its entire network was not easy at all. It required a lot of determination at the senior management level as it required huge amount of fund and at the same time to satisfy all of its employees and also to provide the justification of this huge investments. As per this new plan an IT enabled system has to be implemented to supply stocks to the redistribution stockists. The objective was to make the product available at the right place and the right time in the most cost-efficient manner. For this to happen the stockists had to be connected through an Internet based network for on-line interaction. This is known as RS Net. RS Net is a part of Project Leap, HULs end-to-end supply-chain.

Partnering with SAP for CRM

The HLLs management decided to implement the SAP module. The IT group manager of then HUL stated that, Considering the value we are getting through implementation of enhanced change and transport system functionality of SAP solution manager, the cost is minimal. We completed the implementation at the end of Aug 2007 and it paid for itself at the beginning of 2008.

Challenges
The challenges and opportunities both were there prior to implementing this SAP module. The major challenge was to broaden the scope of change and transport system functionality to handle change request, automate workflow for change request to happen etc. The objective was to streamline the transport process and to provide effective SCM. For this SAP has a tool known as SAP Solution Manager. It enhances the change and transport system functionality and the change request management functionality. One of the major challenges in implementation of change is to do it fast so that lesser resistance is there. This change was implemented within a record time of 3 months across all the locations of HLL. On-site support from the SAP expert was one of the major boosters in this implementation. With offices throught India and change management becoming a key issue, the company decided to implement the change request management functionality of the SAP Solution Manager. The solution gave HLL control over the management of Inventory which is crucial in any FMCG industry.

Benefits of SAP Implementation in HLL

1. The transport of products becomes easier and speedier. As per the company reports the speed of delivery got enhanced by as high as 70%. 2. Greater transparency and accountability. 3. Higher level of automation and greater accuracy. 4. Almost complete elimination of disruptions and mistakes. 5. Cost reduction through reduced inventory and transportation costs and avoidance of mistakes. 6. Improved responsibility and tracking of changes.

Hindustan Lever Limited, which once pioneered distribution in India, is today reinventing distribution creating new channels and redefining the ways current channels are serviced. In this process it is converging products availability, with brand communication and brand experience.