DISTRIBUTION CHANNEL
HINDUSTAN UNILIVER LIMITED
Submitted by:
Group 4
Rohit Yadav-P182B65
Damandeep Singh-P182B14
Kartik Mehrotra-P182A20
Chayya Rathi-P182B52
Scope of the project
This project about the sales & distribution network of HUL. In this project a brief study has been done
regarding their strategies and how they distribute their product according to the fluctuating demand of the
market
Methodology
The channel structure information was collated with the help of sales and distribution executives of HUL across
Biaspur and Gurgaon region. In addition to the above, we took some help from open sources and retailers who
sell HUL consumable products to the end consumer via structured and unstructured retail houses.
Distribution System of HUL
Hindustan Lever pioneered FMCG distribution in India in the 1940’s. Over time they have benefited from a
significantly wider reach than any other company. They are now reinventing distribution to strengthen their
competitive advantage in the emerging consumer and market scenario. Their earlier focus was to drive wide
availability and enable easy access to their brands for consumers. They now seek to go well beyond this
distribution paradigm. Their new approach is more holistic – touching consumers in multiple ways at the point-
of-purchase and, more importantly, creating opportunities for consumers to receive brand messages and
experience their brands. They are redefining their approach to the current channels and are also creating new
distribution channels with these features.
Evolution of Distribution Network
Phase 1: Wholesaler net work
HUL has a large distribution network comprising 5000 redistribution stockiest and 40 C & F agents (Clearing
and Forwarding Agents). The first phase of the HUL distribution network had wholesalers placing bulk orders
directly with the company. Large retailers also placed direct orders, which comprised almost 30 per cent of the
total orders collected. The company salesman grouped all these orders and placed an indent with the Head
Office. Goods were sent to these markets, with the company salesman as the consignee. The salesman then
collected and distributed the products to the respective wholesalers, against cash payment, and the money
was remitted to the company.
Phase 2: Registered Wholesaler
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. In order to achieve this, one wholesaler in each market was
appointed as a "Registered Wholesaler," a stock point for the company's products in that market. The
company salesman still covered the market, canvassing for orders from the rest of the trade. He would then
distribute stocks from the Registered Wholesaler through distribution units maintained by the company. The
Registered Wholesaler system, therefore, increased the distribution reach of the company to a larger number
of customers.
Phase 3: Redistribution Stockist
The highlight of the third phase was the concept of "Redistribution Stockist" (RS) who replaced the Registered
Wholesaler (RW) as shown in Figure 4-1. The RS was required to provide the distribution units to the company
salesman. The RS financed his stocks and provided warehousing facilities to store them. The RS also undertook
demand stimulation activities on behalf of the company. The second characteristic of this period they realized
that the RS would be able to provide customer service only if he was serviced well. This knowledge led to the
establishment of the "Company Depots" system. This system helped in transshipment, bulk breaking, and as a
stock point to minimize stock-outs at the RS level.
Present Scenario
At present, HUL's products, manufactured across the country, are distributed through a network of about
7,000 redistribution stockists covering about one million retail outlets. The distribution network directly covers
the entire urban population. In addition to the ongoing commitment to the traditional grocery trade, HUL is
building a special relationship with the small but fast emerging modern trade. The recent measures to make
the system more effective are described here.
C& FAs as buffer stock points
In the recent past, a significant change has been the replacement of the Company Depot by a system of third
party Carrying and Forwarding Agents (C&FAs). The C&FAs act as buffer stock-points to ensure that stock-outs
did not take place. The C&FA system has also resulted in cost savings in terms of direct transportation and
reduced time lag in delivery. The most important benefit has been improved customer service to the RS. The
role performed by the Redistribution Stockists has also undergone changes over the years. Financing stocks,
providing manpower, providing service to retailers, implementing promotional activities, extending indirect
coverage, reporting sales and stock data, screening for transit damages are some of the functions performed
by the RS today.
Formation of mother report
HUL has grown manifold over the years. In the process, the number of factories and the number of SKUs too
have increased. To rationalize the logistics and planning task, an innovative step has been the formation of the
Mother Depot and Just in Time System (MD-JIT). Certain C&FAs were selected across the country to act as
mother depots. Each of them has a minimum number of JIT depots attached for stock requirements. All brands
and packs required for the set of markets which the MD and JITs service in a given area are sent to the mother
depot by all manufacturing units. The JITs draw their requirements from the MD on a weekly or bi-weekly
basis.
RS Net
An IT-powered system has been implemented to supply stocks to redistribution stockiest on a continuous
replenishment basis. Launched in 2001, RS Net is part of Project Leap, HUL’s end to-end supply chain initiative.
Project Leap begins with the supplier, runs through the factories and depots and reaches up to the RSs. The
objective is to catalyze HUL’s growth by ensuring that the right product is available at the right place in the
right quantities and at the right time. Leap also aims at reducing inventories and improving efficiencies right
through the extended supply chain.
(Fig. 1 – Schematic of HUL’s Distribution Network)
Distribution oriented projects
The well recognized distribution programs of HUL are: Project Streamline, and Project Shakti.
Operation Harvest
HUL launched Operation HARVEST (Harmonize All Resources in Village to Enhance Sales and Turnover) in 1989
as a seeding exercise with an objective to increase the penetration, awareness of brand, to generate demand,
and thus to make the routes viable for coverage by route schedule vans. This operation was conducted in
villages that were not covered by route schedules and where the reach of conventional media was weak.
Project Streamline (Super Stockist Channel)
In a significant move, with long-term benefits, HUL has mounted an initiative, Project Streamline, to further
increase its rural reach with the help of rural sub-stockists. It appointed 6000 sub-stockists. As a result, the
distribution network directly covered about 50,000 villages, reaching about 250 million consumers. This gave
the company the required competitive edge and extended its direct reach to 37 per cent of the country’s rural
population. Rural distributor will have around 20 stockist attached to him who performs the role of driving
distribution in villages using unconventional means of transport such as tractor, bullock cart, etc.
Star seller
Star Seller Rural
Distributor
(RD)
Combine PCs to
leverage scale
Distribution
Van
Star seller
Motorability not a constraint: 37%
rural population serviced
