28383895-HUL-ITC-amp-Godrej-Supply-chain-management-comparision

8/7/2019 28383895-HUL-ITC-amp-Godrej-Supply-chain-management-comparision

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Supply Chain Managementin FMCG

HUL

ITC

Godrej

ITM Chennai

Prepared byJeetesh Kumar


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FMCG Sector

FMCG are products that have a quick shelf turnover, at relativelylow cost and don't require a lot of thought, time and financialinvestment to purchase

Fast Moving Customer Goods is in opposition to consumer

durables such as kitchen appliances that are generally replacedless than once a year

FMCG is characterized by strong presence of MNC and well

established distribution network.

The intense competition between the organised and unorganised

segments operating at low operational cost.


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Marketer Point of View

Product Analysis Product

Price

Place

Promotion

Market Analysis Size ( Past , Present and Future)

Growth ( Expected Trends ) Profitability

Risks / Threats

Distribution Channels


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Market Analysis

Growth

ProfitRisk

Distribution

Channels

SIZE


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FMCG Sector Size (cont.)

Fast moving consumer goods has gained importance withretailing gaining prominence.

Over the last one decade the market is growing at the rate

of 18.7 %.

Total market size in excess of US$ 13.1 billion

Availability of key raw materials, cheaper labour costs and

presence of highly effective supply chain system gives

competitive advantage.


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Growth ProspectsThe FMCG market is set to treble from US$ 11.6 billion in2003 to US$ 33.4 billion in 2015.

The FMCG sector will witness more than 50 per centgrowth in rural and semi-urban India by 2010.

Penetration level as well as per capita consumption in most product categories is low indicating the untapped market potential , hence the market potential of growth is veryhigh.

Burgeoning Indian population, presents an opportunity tomakers of branded products to convert consumers tobranded products.

With the retail gaining momentum, the FMCG prospectivegrowth can be realized with increase in sales volumes.


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Profitability of the sector

Hindering ( Down)

Increase in competition resist the growth of the profit

margin.

Margins remain under pressure due to unprecedented rise

in input costs.

Pushing (Up) FMCG sector depends upon bulk sales only. High the

volume of the sales , higher is the profit.

Balancing (Up/Down)

Small packaging typically known as Sachet - Is a twoedged sword. Helps in trapping the bottom segment of

the Customer Pyramid .

But it decreases the profit margin per unit sale.

In the long run increases the volume of sales. Thus must be used ver wisel .


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Profitability of the sector

Balancing (Up/Down)

Small packaging typically known as Sachet - Is a two

edged sword. Helps in trapping the bottom segment of

the Customer Pyramid .

But it decreases the profit margin per unit sale.

In the long run increases the volume of sales.

Thus must be used very wisely.


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Threats / Risks

Due to cut throat competition there is severe pressure onmargin for the manufacturers of FMCG products.

The rural and semi urban population is growing but the

problem faced by the FMCG manufacturers is thelogistics.

Some problems associated with rural markets is acutedependence on the vagaries of the monsoon, seasonal

consumption linked to harvests, festivals and specialoccasions, poor roads and power problem.


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Distribution channel

Existing distribution channels

Can be described by how direct they are to the

customer in other words how many channels it take the

goods to reach customer.

Trends and emerging channels

New channels can offer the opportunity to develop a

competitive advantage shorten the channel length.

Channel power structure

For example, in the case of a product having little

brand equity, retailers have negotiating power over

manufacturers and can capture more margin.


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..Supply ChainManagement isGetting the right thingsto the right places atthe right times, for

profit ..

New information and

communications

technologies haverevolutionized todays

supply chains, making

them extraordinarily

better, faster, and

Supply Chain Management


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This is example of FMCG company HUL

HUL Supply Chain Management


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Introduction HUL SCM

Some of its brands includeKwality Wall's ice cream,Lifeboy,Lux,

Breeze,Liril,Hamam,Pureit Water Purifier,Lipton tea,Brooke Bond tea,Bru Coffee,Pepsodent and toothpaste and brushes andmany more.


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Introduction HUL SCM

The company was renamed in lateJune 2007 to "Hindustan UnileverLimited, to provide the optimum

balance between maintaining heritageof the company and future benefits.

HUL holds 100 factories across Indiafor manufacturing its diverse productrange.


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Distribution System of HUL

HUL's products, are distributed

through a network of about 7,000

redistribution stockists covering about

one million retail outlets.

The general trade comprises grocery

stores, chemists, wholesale, kiosks and

general stores.

Hindustan Unilever provide tailor

made services to each of its channel

partners.


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Distribution System of HUL

HUL is using the point of purchase method formuch higher level of direct contact, throughin-store facilitators, sampling, education and

experience.It has developed customer management andsupply chain capabilities for partneringemerging self-service stores and supermarkets.

2,000 suppliers and 7,500 distributors serveHLLs 100 factories which are decentralizedacross 2 million square miles of territory.


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Distribution at the Villages

The company has brought all markets withpopulations of below 50,000 under onerural sales organisation.

The team comprises an exclusive salesforce and exclusive redistributionstockists.

The team focuses on building superior

availability of products.In rural India, the network directly coversabout 50,000 villages, reaching 250 millionconsumers, through 6000 sub-stockists.


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E- Shakti (HUL)

Enhancinglivelihoods75000 poor women

have benefited withan additional incomeof Rs.18.75 crorethrough a livelihoodenhancementprogrammeestablished by aunique corporate-NGO partnership


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Distribution at the Supermarkets

HUL has set up a full-scale sales

organisation, for this channel to serve

modern retailing outlets.

Product tests and in-store sampling is

provided to consumers.


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Harnessing Information Technology

An IT-powered system has beenimplemented to supply stocks toredistribution stockists.

The objective is to make the productavailable at the right place and right timein the most cost effective manner.

For this, stockists have been connectedthrough an Internet-based network,called RS Net, for online interaction.

RS Net is part of Project Leap, HUL'send-to-end supply chain.


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Pioneering New Channels

Hindustan Unilever is simultaneouslycreating new channels, designed on thesame principle of holistic contact with

consumers.

1) Project Shakti :HUL's partnership withSelf Help Groups of rural women.Started in 2001, Project Shakti hasalready been extended to about 50,000villages in 12 states - Andhra Pradesh,Karnataka, Gujarat and others.


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Pioneering New Channels

2) Hindustan Unilever Network (HUN): it is the company'sarm in the Direct Selling channel. It presents a range ofcustomised offerings in Home & Personal Care andFoods.

3) Out-of-Home : this deals in providing vending machinesfor hot beverages like tea and coffee. HULs alliancewith Pepsi Co. has significantly strengthened thechannel.

4) Health and Beauty services : Lakme Salons providespecialised beauty services and solutions, under therecognised authority of the Lakme brand. The AyushTherapy Centres provide easy access to authenticAyurvedic treatments and products.


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Conclusion

Hindustan Unilever, which oncepioneered distribution in India, is today

reinventing distribution - creating newchannels, and redefining the way current

channels are serviced. In the process it is

converging product availability, withbrand communication and brand

experience.


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This is example of FMCG company ITC

ITC Supply Chain Management


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ITC Limited Imperial tobacco Ltd.

Turnover of US $ 4.75 billion

Registered office in Kolkata

Employs over 20,000 people

More than 60 locations across India

Listed on Forbes 2000

Cigarettes, Hotels, Paperboards,Packaging and Agri-Exports

Packaged Foods & Confectionery,Branded Apparel and GreetingCards.


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ITC FMCG Supply chain

Consists of diverse categories with different prioritiesMore than 1000+ SKUsBuying Value $68 MMWarehousing space of more than 3.5m SFT around

55+LocationsProducts manufactured at 45+ plantsMore than 650 trucks moved every dayDirect distribution from factories to Distributors.

Indirect movement through RDCsCombination of Rail/Road/Sea movement within thecountry depending on the product type.(Target is Safer, Faster, cost effective


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E-Choupal SCM Process


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Positioning of ITCA leading FMCG player in India

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F

A

R

ME

R

S

M

A

R

KE

T

S

Cigarette Trade Marketing capability

BrandedFoods

Expanded FMCG distribution capability

e-choupal rural two-wayfulfillment capability

A basis for strategic partnerships with other FMCG brand owners

VPN providing SCM, ERP & CRM capability

Lifestyleretailing

EducationStationery

Matches&Agarbattis

PersonalCareProducts


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Godrej


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Godrej Consumer Product SupplyChain Management


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Supply Chain for GCPL

It consists of movement of Goods fromthe Plants (Factories)to the Plantwarehouse (PWH) to Regional

warehouse (RWH). From RWH, theGoods move to CFA and then toDistributor and then to Retailer and

finally to the Customer.


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Supply Chain Management

SAMPARK: New initiative connectingdistributors.

SAHAYOG: connect to the suppliers.

1200 distributors.

400-450 are A-class distributorscontributing 75-80% of the total

business.

750-800 distributors are B & C class.


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SAP in Godrej SCM

SAP is robust as it would be based oncentralized system.

The implementation of SAP was

started around December, 2005SAMPARK: Software cost=Rs 4.5 mn(0.1 mn USD); Hardware cost= Rs 10 mn.

(0.02 mn USD)SAHAYOG: Rs 2 mn (0.04 mn USD)

Sampark & Sahayog


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Sampark & SahayogConcept based on Replenishment

Monitoring Inventory levels Information on current stock levels and Goods-in-

transit flows

Benefits

Sales orders generated on same day slashing delays. Convenient Data Flow

Portal framework - cutting edge concept

Daily visibility of Retailing information.

Lower carrying cost to distributors.

Reduced Product Stagnation.

Better Decision Making about forecasting.


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Key learnings from this studyIn todays economic scenario cost saving is what companies

are focusing majorly. Which an FMCG firm can get by

focusing on 3 important aspects Facilities, Informationcollection, Software.

By this Study of 3 Major FMCG players SCM, we canconclude following points:

Relations with distributors, suppliers & retailers will give ancompetitive edge in a long run.

Effective software like SAP will ease the flow of information.

Godrej getting a edge by connecting close with the Suppliers,Distributors & Retailers (Sampoorna in process).

HUL Dominating the market with huge margin due to effective SCM .

ITC making diverse products and growing rapidly in the markets.

All 3 majors are equally focusing on the UNTAPPED RURALmarkets, where the Business of tomorrow lies.

ITC E-Choupal

HUL E-Shakti

Godrej Major distributors are of B & C Class

28383895-HUL-ITC-amp-Godrej-Supply-chain-management-comparision

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