Analysis of Distribution Network of

HUL
 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
 The  first  phase  of  the  HUL  distribution  network
 had  wholesalers  placing  bulk  orders  directly  with
 the  company
 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
 The  highlight  of  the  third  phase  was  the  
concept  of  "Redistribution  Stockist"  (RS)  who
 replaced  the  RWs
Distribution at Villages…

RURAL DISTRIBUTION MODEL

Distribution at Urban Centers…
 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.
 Generally  the  manufacturing  site  is  located
 such  that  it  covers  a  bigger  geographical  
segment  of  India.
  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

 Mother  Depot  and  Just  in  Time  

System  
 Leveraging  Information  technology  
 RS  Net  Initiative
 Adexa  iCollaboration  suite
 HUL’s  Turnover  Compared  with  Competitors,  2006
HUL’s  Market  Leadership  across  various  FMCG  Categories
 Channel Design
 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:-

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

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

 Modes  of  transport  used:  Rickshaw,  tempo.  

 Incentive  schemes:  Before  2000  holiday  packages  and  tours  but

 after  2000  no  non‐monetary  incentive  for  RS.  

 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.  

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

 Selling  Operations:  RSs  sells  the  goods  to  ‐  

o Wholesaler  (gets   1.5  %  max.  discount  from  RS)  
o Retailers  (gets   1.0%  max.  discount  from  RS)  
Wholesaler:  
 Gets  cash  discounts  and  other  schemes  promoted  by  HUL  (gets
 points  under  Vijeta  Scheme).    
Retailers:  
 Total  retailer  base  in  Jamshedpur:   Approximately  1070.  

 Sales  Margin:  Depends  on  the  product  

 o Soap,  detergents  ‐  8%  on  MRP  

 o Cosmetics              ‐ 10%  on  MRP  
 o Food  items            ‐  8%  on  MRP

Incentive  schemes:   
 Company  programs  (Scheme  Discounts  +  Cash  Discounts)  
 TPR  schemes  based  on  Sales  (1  %  to  4  %)  
 Vijeta  scheme  is  not  for  retailers.  

Field Sales Force:

 Initiatives Taken to Improve The
Distribution Network

 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.  
 Servicing  Channel  partners  and  customers  with  continuous
 daily  replenishment.   
 Leveraging  scale  and  building  expertise  to  service  Modern
 Trade  and  Rural  Markets.  
 Delaying  of  sales  force  to  improve  response  times  and service
 levels
 Launching  the  Unicare  scheme  with  upmarket  pharmacies  and
 retailers  to  sale  its  premium  brands.  
 Launching  of  several  promotional  schemes  for  existing
wholesalers  and  distributors.
 Field Force Management

 In  HUL,  the  field  force  is  evaluated  using

 QOC  (Quality  of  Contribution).  It  consists
 of  4  components  ‐ 
 
 1.  Secondary  Sale  (Max  points  =  2.5)  
 2.  Eco  (Max  points  =  0.5)  
 3.  Focus  (Max  points  =  0.5)  
 4.  FCS  (Max  Points  =  0.5)  
 Non Monetary Methods

 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.

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

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

 If  QOC  score  >  3.5  -The  person  is  eligible  for  3  star  award  
 Analytical Framework
 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  
 Distribution  expenses  include  the  outward  freight
 cost  to  the  company.   
Thank-You