HUL 'PopEye'

Some think that the retail industry has matured and there are no new opportunities, but Hindustan Unilever Limited (HUL) doesn’t think this way. It thinks out of the box. It thinks there are tremendous opportunities in the market. Just imagine a 55% market share in skin care for HUL. If it can retain this and work to develop and expand the market it would fetch HUL a phenomenal growth. For this, INNOVATION alone isn’t enough. There should also be RENOVATION which makes the brand look fresh all the time. Innovation doesn’t just mean launching new products; it shows the company is on a step higher than it was previously. Along with these two, HUL believes in a third aspect, ACTIVATION. The important part of it is how to take innovation and make it alive in the market where the science of marketing is at play.

Study on HUL shows some interesting facts - it has built the detergent market in India with RIN bar, it was the one which brought in the concept of washing powder with SURF. All these examples clearly prove a point - HUL’s main focus is on Brand Building. Taking forward this mission of Brand Building, HUL has launched a new technique named POPeye where in the employees of different departments can flag the products which are in shortage or out of stock in any store across any country. By this they are assuring themselves of not losing consumers to their rival brands.

Under this program the employees enter their feedback which directly lands in a portal or a call centre that has been set up for this purpose. This feedback is validated on a real time basis before alerting the sales department. The company believes that there are more than enough sales employees across the length and breadth of the country who can support the sales in the country.

Six months ago, HUL launched this program in Bengaluru and could get 230 calls from 100 different outlets. The sales department had been alerted and they converted them into action plans for the salesmen. Last month the company extended this program to Chennai and Baddi plant in Himachal Pradesh. Looking forward, the company is expecting a huge increase in the sales opportunities.

Implementing this further would bring great benefit to the company as the loopholes in the distribution system would be eliminated. At present, HUL has an on-shelf availability of 95%. POPeye would spruce up the distribution network, the company believes. Employee involvement has made it possible for HUL to directly reach two million outlets in just two years. POPeye is a broader thought of HUL’s “Mission Bushfire” which was implemented to increase the availability of its products in 16,000 kirana stores. Despite this improvement in ordering system, the store owners are proactive enough to re-order products before a condition of out of stock is reached. The customer satisfaction is expected to improve as the number of out-of-stock complaints against HUL would be drastically reduced.

The benefit of POPeye is that the feedback given by the employees is collected and it is immediately made accessible to the decision makers who analyze it. This provides a clear picture of flow of material through the entire supply chain. It is more like data mining where there is a single point access to the data which could be used by all the departments of the company avoiding confusion between the various departments like Operations, Marketing, Finance and HR. The ease of using the data and efficiency of data access has been improved.

During 2010-11, HUL added over 600,000 outlets and tripled its direct coverage in rural India, which contributed to 50% of its rural growth. POPeye can make the products reach the consumer in a better way. It helps in avoiding the missing out of consumers due to lack of availability or the visibility in a store.


Reference: Economic Times article "HUL launches 'POPeye' to enable staffs flag products shortage in any store" dated 9th November, 2011.

The writer of this article, T V Dheeraj Vishnu is a PGP student of Indian Institute of Management, Raipur. He has done his B.Tech in Electrical and Electronics Engineering from Nalla Malla Reddy Engineering College, Hyderabad and can be reached at pgp11039.dheeraj@iimraipur.ac.in or at +91-7587208639.

P&G To Produce Locally

Though Procter and Gamble (P&G) is a world leader in FMCG, its market share in developing countries like India, China, Vietnam, Brazil etc. is meager in comparison to that of its archrival, Unilever. It is always anticipated that P&G will come out with a strategy which will make its products more affordable and competitive in the developing countries than its competitors. The recent decision of the company to stop the imports of major chunk of its products in India and to manufacture these products in India itself is one such step towards the goal mentioned above.

                                               

Till now, P&G imports most of its premium products manufactured in other countries to India for sale. The imports add an additional overhead to its products which put them on an unaffordable premium product shelves. The decision of P&G is to invest Rs. 700 crores to enhance the production capacity of P&G firms in India so that they can cater to the demands of its products and distribute them through its 1.3 million outlets across the country.

The localized production will help P&G in many ways. Firstly, it will save huge amounts of duties that it has to pay to the Government of India for importing its products. Secondly, the availability of large workforce at low price will further reduce the cost of production and will maximize the profits. Thirdly, it will also protect P&G from the fluctuation in the foreign exchange markets. It is obvious that when the currency of a country depreciates, it is the importers who have to bear the maximum loss as they could import only few items with the given amount in comparison to when currency appreciates. Fourthly, India has signed free trade agreements with many countries in Asia and Africa. P&G can take advantage of this to pump its products manufactured in India to these countries without any difficulties. In addition, it will also make P&G's Supply Chain more responsive by reducing the lead time for replenishment. As a result of which, the different elements of the Supply Chain i.e. retailers, dealers, manufacturer, suppliers etc. will have to maintain lower inventory levels, thus reducing inventory holding cost. All these factors will help in increasing the market share of P&G which in turn will improve its revenues.

But the biggest challenge for P&G would be to maintain the quality standards. Even the slightest degradation in the quality of its products might severely hurt its entire market shares in India. Moreover, it is a general perception among the Indian consumers that the imported products are better in quality. It would be a challenge for P&G to change this perception of the general Indian consumers.

No doubt that P&G has made a well calculated move by deciding to enhance the production of its premium and mass premium products in India. Whether it is going to be successful or not remains to be seen.

Reference

Article “P&G Plans Big Move, to Make More Locally” by Mr. Sagar Malviya in The Economic Times dated 14^th November 2011

The writer of this article, Abhay Shankar is a PGP student of Indian Institute of Management, Raipur and has done his B. Tech (Chemical Engineering) from BIT Sindri. Prior to joining IIM Raipur, Abhay was working at Vedanta Aluminium Ltd. Abhay can be reached at pgp11001.abhay@iimraipur.ac.in

Dabur- “The Oldest Supply Chain in India”

Dabur the leading  personal and healthcare company among the four FMCG giants in India is managing the Oldest Supply Chain in India. Dabur is over 125 years old and deals with the diversified product range in ‘Natural and Herbal’ which leads to the EBITDA –quarter growth of 27.8% and consolidated Q1 net Profit up 19.6% at `127.74 Cr with  Revenue surges 31.6% to `1216.24 Cr, for the Q1 2011-12. Building on a legacy of Quality and Experience, Dabur is at present India’s trusted name and world’s largest Ayurvedic and Natural Helath Care Company having distinct brand  identities such as Dabur master brand for the natural health care product, Vatika for premium personal care, Hajmola for digestives, Real for fruit juices and beverages & Fem for fairness bleaches and skin care products.

Dabur procures raw materials worth around `500 Cr from a wide base of vendors. The Company has wide and integrated distribution network for its around 600 SKU delivering to around 2100 stockiest, further connecting to the thousands of retail outlets covering every small and remote part to organized stores of India. Dabur has improved distribution system through its unique Retails Excellence program, “DARE” (Driving Achievement of Retail Excellence). the Program covers a major objective as a channel focus, activating key customer, improving rural focus, rewarding distribution efficiency, maximizing brand impact and building information capabilities.

Dabur has used Direct Shipment Strategy which was implemented in order to bypass warehouses and distribution centers. Thus Dabur delivers products directly to the retailers/consumer through the Institutions & Modern Trade System. Advantages of implementing strategy are –

·         The retailer avoids the expense of operating a distribution center

·         Reducing lead time

Thus, Dabur has achieved cost reduction in the transportation process which overall adds to the reduction in price of the product. By this strategy Dabur has reduced the lead time, bringing Dabur and other elements in the Supply Chain closer which improves overall efficiency of the supply chain as shown in following figure. Reduction in lead time has added in reduction in Bullwhip Effect of the Supply Chain. Dabur has managed to minimize the Inventory-Transportation cost Trade-off. By elimination of the warehouse in supply chain, the company has reduced the inventory carrying cost and Implementing ‘Milk run’ system by the small truck loads Dabur has managed the increased transportation cost in the chain.

Overall efficient tactics in the supply chain has made Dabur to succeed and sustain in the supply chain network and has increased the entry barriers in the FMCG industry. Thus, Dabur having strong distribution network will have to cope up when organized distribution network plays a major role.

Figure : Supply Chain of  Dabur

The writer of this article, Amol Deogade is a PGP student of Indian Institute of Management, Raipur and has done his B.E. from Government College of Engineering, Amravati. Prior to joining IIM Raipur, Amol was working at Cognizant Technology Solutions. Amol can be reached at titanamol@gmail.com

The Pepsi Challenge

Pepsi Pennsauken is easing distribution flow by outfitting its sales representatives with handheld computers that instantly send data back to the distribution centers over a wireless network. Sales and delivery capacity have increased at lower costs than before.

A bottleneck at one of Pepsi's biggest bottlers was choking distribution and costing thousands of dollars in overtime pay and lost sales. Pepsi Pennsauken, which serves the Philadelphia and southern New Jersey region, was servicing a booming cola market with an aging, outmoded infrastructure--a common dilemma across the soft drink industry. For the nation's number-two cola brand, though, it was a hard problem to swallow.

The difficulty was, sales reps couldn't get their orders from the field back to the loading docks quickly enough. Workers in the distribution centers would spend their afternoons sitting on their signals. The backlog of weekday orders stacked up so that they ended up delivering 30,000 to 40,000 cases on Saturday--and paying time-and-a-half plus commission to do it. Then the orders would start backing up on Monday, and would go through the whole vicious cycle again.

The scenario was leaving a bad taste in the mouths of Pepsi Pennsauken's customers, too. The solution appeared in 1994, when Pepsi Pennsauken outfitted its sales reps with handheld computers that instantly send data back to the distribution centers over a wireless network. Reps no longer had to waste precious selling time listening to busy signals, and workers in the distribution centers received orders as soon as they were taken. When drivers made it back to the loading dock, their orders were waiting for them, instead of them for their orders. Pepsi had a fifteen percent improvement in labor efficiency in the first months the program was in operation.

Wireless was perfectly suited to the demands of the soft-drink industry. Generally, bottlers sell soft drinks to retailers in one of two ways: on a route sales basis, where drivers take orders and pull cases right off the truck; or pre sell, where reps take orders in advance for later delivery. With the explosive growth of the ultra competitive soft-drink business--fueled by the introduction of New Age teas, juices, and waters—pre selling for next-day delivery was critical to bottlers' strategic planning.

Beginning in May 1994, each of the company's 15 route-sales drivers were given wireless equipped handheld computers. Reps now carry the devices with them as they check inventory at each of the client retail outlets. Soft-drink orders are punched directly into the device as reps stand in front of the counters and tally the inventory. The order is then immediately sent over wireless network to large antennas that forward the order via a landline connection back to the distribution center.

The real-time element of wireless data transfer meant that the warehouse could receive an order almost as soon as the rep could write it. A rep could transmit the order from a radio modem in his car without jammed phone lines forcing him to transmit all the orders at the end of the day. It used to be that one salesperson handled three stores; now one salesperson covers four or five. It helped in increased sales and delivery capacity, and at lower costs than before.

Aniket Choudhary is a PGP student of Indian Institute of Management, Raipur. He has done his B.E. in Mechanical Engineering from College of Technology and Engineering, Udaipur. Aniket can be reached at aniketchoudhary87 at gmail . com