DISTRIBUTION NETWORK

Introduction…..

l Hindustan Unilever Limited (‘HUL’), formerly Hindustan

Lever Limited (it was renamed in late June 2007 as
HUL).
l India's largest Fast Moving Consumer Goods company
l HUL is also one of the country's largest exporters
l The mission that inspires HUL's over 15,000
employees, including over 1,300 managers, is to "add
vitality to life.“
l HUL meets everyday needs for nutrition, hygiene, and
personal care with brands that help people feel good,
look good and get more out of life.
Products…..
 Analysis of Distribution Network of
HUL
l We have analyzed the distribution network of HUL from the
following aspects:

1. Evolution of HUL’s distribution network

2. Transportation & Logistics
3. Channel Design
4. Initiatives taken for channel member management
5. Field force management
6. Analytical Framework
7. Financial Analysis
 Evolution of HUL’s distribution
Network
l The first phase of the HUL distribution network
had wholesalers placing bulk orders directly with
the company
l The focus of the second phase, which spanned
the decades of the 40s, was to provide desired
products and quality service to the company's
customers
l The highlight of the third phase was the
concept of "Redistribution Stockist" (RS) who
replaced the RWs
Distribution at Villages…

RURAL DISTRIBUTION
Distribution at Urban Centers…
l Distribution of goods from the manufacturing
site to C & F agents take place through
either the trucks or rail roads depending on
the time factor for delivery and cost of
transportation.
l Generally the manufacturing site is located
such that it covers a bigger geographical
segment of India.
l From the C & F agents, the goods are
transported to RS’s by means of trucks and
the products finally make the ‘last mile’
based on the local popular and cheap mode
of transport.
New Distribution Channels…
Project Streamline….
 Hindustan lever Network

l Mother Depot and Just in Time

System
l Leveraging Information technology
l RS Net Initiative
l Adexa iCollaboration suite
HUL’s Turnover Compared with Competitors, 2006
HUL’s Market Leadership across various FMCG Categories
 Channel Design
l Hindustan Lever Limited (HUL) has two
types of channel selling ‐

i. Regular (traditional) retail channel,

ii.Direct Selling Channel in the name of
Hindustan Lever Network (HLN).
 Channel structure
Redistribution stockists:-

l Sales Margin: 4.76% which includes cash discount, unloading

expenses from depot, distribution expenses to retailers,
incentive schemes & other incidental expenses.

l Modes of transport used: Rickshaw, tempo.

l Incentive schemes: Before 2000 holiday packages and tours but

after 2000 no non‐monetary incentive for RS.

l Software systems and Information System: UNIFY 8.3 (Developed by

IBM & CMC). This software needs to be synchronized daily and the
system updates any information/ incentive schemes / sales figures
etc to and from the common shared platform.

l Areas of Operations: Marked for each of the RS.

l Selling Operations: RSs sells the goods to ‐

o Wholesaler (gets 1.5 % max. discount from RS)
Wholesaler:
l Gets cash discounts and other schemes promoted by HUL (gets
points under Vijeta Scheme).
Retailers:
l Total retailer base in Jamshedpur: Approximately 1070.

l Sales Margin: Depends on the product

l o Soap, detergents ‐ 8% on MRP

l o Cosmetics ‐ 10% on MRP
l o Food items ‐ 8% on MRP
Incentive schemes:
l Company programs (Scheme Discounts + Cash Discounts)
l TPR schemes based on Sales (1 % to 4 %)
l Vijeta scheme is not for retailers.

Field Sales Force:

 Initiatives Taken to Improve The
Distribution Network

l Setting up of a full‐scale sales organization comprising key

account management and activation to impact, fully engage
and service modern retailers as they emerge.
l Servicing Channel partners and customers with continuous
daily replenishment.
l Leveraging scale and building expertise to service Modern
Trade and Rural Markets.
l Delaying of sales force to improve response times and service
levels
l Launching the Unicare scheme with upmarket pharmacies and
retailers to sale its premium brands.
l Launching of several promotional schemes for existing
wholesalers and distributors.
 Field Force Management

l In HUL, the field force is evaluated using

QOC (Quality of Contribution). It consists
of 4 components ‐

l 1. Secondary Sale (Max points = 2.5)

l 2. Eco (Max points = 0.5)
l 3. Focus (Max points = 0.5)
l 4. FCS (Max Points = 0.5)
 Non Monetary Methods

l Based on the QOC various awards are distributed to the field

persons at the end of every month. These awards are also
known as ‘MOC Star’ awards.

l If QOC score > 4.5 - The person is eligible for 7 star award

l If QOC score > 4 - The person is eligible for 5 star award

l If QOC score > 3.5 -The person is eligible for 3 star award
 Analytical Framework
l We tried to analyze HUL’s distribution network in the light of 20
most significant variables that affect the distribution part 0f
channel management for any organization in the business of
marketing & selling of goods.
1. No of Consumers
2. Geographic Dispersion Of Consumers
3. Frequency of purchase
4. Tendency to postpone purchase
5. Level of Familiarity/Knowledge (of consumer)
6. Degree of brand loyalty
7. Purchased on Impulse
8. level of Involvement(LOI)
9. Purchased as a Basket of Goods
10. Speed & complexity of Decision making process
Analytical Framework cont….

11. present of Expert influencer in the decision making process

12. Element of crisis purchase exists
13. Element of risk aversion exists
14. Perish ability of the product
15. Time band associated with the purchase of the product
16. Fungibility
17. Degree of customization possible
18. Negative/Positive reinforcing product
19. Value/Volume ration(value density) of the product
 Financial Analysis
Marketing Expenses
As stated earlier also, marketing expenses here
include the following –
- Commissions
- Rebates 29
- Discounts
- Sales promotional
- Expenses on direct selling agents
- Entertainment expenses etc.
Distribution Expenses
l Distribution expenses include the outward freight
cost to the company.
Thank-You