Sales & Distribution Management

A Report on

Group 4
Efforts by:
Arun Chopra Zain Inhonvi Shreya Muralidhar Varuna Singh Apurva Agarwal Vibhor Tyagi

June 2007

In the summer of 1888, visitors to the Kolkata harbour noticed crates full of Sunlight soap bars, embossed with the words "Made in England by Lever Brothers". With it began an era of marketing branded FMCG

Over 16500 direct employees~ over 1,500 managers Over 2,000 suppliers & associates About 2,900stockist Total Coverage 6.4 million Outlets Direct Coverage 2 million outlets Net Sales Rs. 22,116 Crore Net Profit Rs. 2,691 Crore
http://www.hul.co.in/Images/HULFactsheetApril2011_tcm114188694.pdf

CUSTOMER CREDO

Business Verticals
HUL

URBAN

RURAL

CSD- Canteen Store Deptt

GENERAL TRADE

MODERN TRADE

HUL 1

HUL 2

HUL 3

DETERGENTS, FOOD & BEVERAGES

PERSONAL CARE

COLOR COSMETICS

Food Brands

Home Care

Personal Care Brands

Product Flow

FACTORY

DEPOT

DISTRIBUTOR/REDISTRI BUTION STOCKIST

WHOLESELLER

BETTER STORES (HIGH VISIBILITY)

FAMILY GROCER

BAKERIES

CONVINIENCE STORES

KIOSK OUTLETS

CUSTOMER

CUSTOMER

CUSTOMER

CUSTOMER

CUSTOMER

Sales Force Structure

HUL 1

Regional Sales Managers (Delhi, Mumbai, Kolkata, Chennai)

Area Sales Manger (6-7 per ASM)

Field Sales and Customer Manager

(channel programmes, incentive programmes, handling merchandisers)

Field Force

Junior most level at the company s payroll

(15-30 depends on size of area) Territory Sales Officer

Activation Executives

(Man on field who handles RS)

Recruitment & Selection

Application for becoming a channel partner is accepted through 2 sources: 1. Internet 2. Personal Contact
Existing Channel Partners Field Agents/Managers Others

 Cost of recruitment is budgeted.

Survey is done to ascertain type of channel partners

needed based on products & respective target markets. Channel members evaluated on the above

parameters. If required, a proper training session is also held for the selected channel partners.

Motivation
In order to realize the potential of each Channel partner,

it is imperative that the member is motivated to perform.

The following tools are used to motivate the channel partners:
Special Discount Schemes Season Discounts Incentives

Field Force Management

Working Cycle: 21st till 20th To start with the field force member is given a particular area and his responsibility is to cater to all the retailers in

that area.
While deciding the area for each member of the field force, the company makes sure that the operating area of each field member doesn't overlap with his other colleagues.

 There are various methods used by the company to

incentivize the field force: Monetary and Non

Monetary. 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)

 Secondary Sale Based on the operating area, each

member is given a specific target in terms of value

(e.g., Rs. 15 lacs) for the operating month (21st 20th of next month). If he achieves 100% of the target he gets 2.5 points,

if he achieves 95% target he gets 1.5 points. These

points are used to add to the total QOC score as well as linked to monetary incentive.

 ECO / Width pack Target This is used for the

penetration/reach of certain products in the existing

market. The following is a typical ECO target assigned

to a field force agent:

Lux International 105 outlets x 1 SKU Pears Soap 135 outlets x 1 SKU Rin 104 outlets x 1SKU Breeze Soap 100 outlets x 1 SKU

 The outlets mentioned are within the operating area of the

person and 1 SKU = Rs. 27/. Based on this the Field person
calculates number of packs he should sell to the retailers. The concerned agent receives this target around 25th of each month and has to complete this target within the 5th day of next month.

Upon completion he gets additional 0.5 points added to his QOC score along with monetary incentive associated with it. However if this is not met within 5th, he looses the opportunity.

 Focus / Depth Pack target This is mainly used to increase

the sales volume of certain products. A typical Focus target is

given below: Lux International Rs 20,640 / @ Rs 6/per unit

Life Buoy Rs 70,220 / @ Rs 10/ per unit

Wheel Rs 99,000 / @ Rs 10/ per unit Breeze Soap Rs 27,000 / @ Rs 10 / per unit This target needs to be achieved within 20th of next month. Upon achieving the target the field person is awarded 0.5 points which is then added to his overall QOC score.

 Field Capability Score (FCS) In this component, the field force persons are required to ensure that the scheduled visit/outlet billing is such that at least 15 items are demanded per order. If this is achieved the retailer gets a discount of 1% on the billed amount

and on the other hand the field person gets an additional score of 0.5
which is added to his QOC score. Each scheduled visit per outlet is one per week. For example if there are 100 outlets within the operating area of a field person then the number of visit per week is 100 and total number of visit per month = 100x4 = 400.

The sales person is required to achieve 90% success rate to get 0.5 points
for his QOC score and at least 65% for a satisfactory performance.

Non Monetary Methods

The other purpose of the QOC scores is to highlight the performance of the field person among his peers. 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. MOC stands for Monthly operating Cycle. 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 In the event of exceptional performance, management representatives from the regional office come to the zonal office to distribute the awards. The photograph of the award winners is displayed in the office as a source of inspiration for other sales person.

Target Setting Mechanism and monitoring

The regional office monitors the performance of various zones. A thorough analysis is done at the end of each month. Based on that the weak products are identified or those for which the demand has weakened. This is the basis of setting ECO and FOCUS targets for the field persons. Each field person is given a palmtop wherein he can feed the entries on the spot where the transaction is done. This solves basically the two purposes:
a) The field person is freed from the tedious task of maintaining cumbersome records and can then concentrate on the job

b) The sold item is immediately updated in the company information system.

Distribution System of HUL

HUL's products, are distributed through a network of 4,000 redistribution stockists, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers. There are 35 C&FAs in the country who feed these redistribution stockists regularly. Around 2,000 suppliers and associates serve HULs 40 manufacturing plants which are decentralized across 2 million square miles of territory

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 nonmonetary 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 ? Wholesaler (gets 1.5 % max. discount from RS) Retailers (gets 1.0% max. discount from RS)

Wholesaler:

Gets cash discounts and other schemes promoted by

HUL (gets points under Vijeta Scheme).

Retailers: Sales Margin: Depends on the product

Soap, detergents 8% on MRP Cosmetics 10% on MRP Food items 8% on MRP

Number of Distributors
Each district to have 1 distributor (more than 1 for large districts)
Varanasi- 5 Lucknow- 5 Mirzapur- 1 Azamgarh 2

Monthly Turnover Small Distributor: Rs 15- 20 lakh/month Large Distributor: Rs 5 -7 Crore / Month

Distributors
HUL 1 TSO
Distributor

HUL 2 TSO

Salesmen on dist. Payroll

Godown (Godown Keeper, Loaders, Unloader) Accountant Computer Operator Salesman Vehicle

Distributor Norms
Norm Days ( Safety Stock as per historical sales) Order Quantity Handled through IT, automatic generation of order if stock falls the required level

NO CREDIT FOR DISTRIBUTOR FROM THE COMPANY

- Distributors has an A/c with the company - If default has happen RTGS before dispatch

Rural Distribution Network

Business Potential

(Population < 50000)

NEW DISTRIBUTION CHANNELS

 This model created a symbiotic partnership between HUL and its consumers

Project Shakti

Started in 2000, Project Shakti has enabled Hindustan Lever to access 80,000 of India's 638,000 villages, over 45000 shakti ammas & 30000 Shaktimaans in villages across India Women from Self Help Groups become directtohome distributors in rural markets.

Setup in 1997

Project Streamline

Caters to high business potential markets , which are inaccessible. Covers rural areas with population less then 2000 through rural sub stockists

Project Streamline

It is the company's arm in the Direct Selling channel

Hindustan Lever Network

All independent entrepreneurs, trained and guided by HLN's expert managers Customized offerings in Home & Personal Care and Foods.

Mother Depot and Just in Time System

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 biweekly basis.

Leveraging IT

RS Net Initiative : Launched in 2001 , connected the redistribution stockists to HUL. Project Leap - increasing supplier/distributor responsiveness, reducing inventory buffers, and optimizing planning and scheduling.

IT interface
Unify The Billing System Schemes are pushed through it Tax ( VAT) Integral Part of Sales Force Geotagging is being used Field Force is now IT Enabled!!!

Channel Conflict
Channel Conflict: Tension/Clash between channel

members as a result of perceived unfairness.

At HUL, this conflict was indeed present some years

back (after project millennium). This was a case of a

horizontal conflict between distributors/stockists.

Channel Conflict
Reason: HUL used to have different

stockists/distributors for different categories in the

same area

Solution: HUL solved this issue by allowing the same

distributor to cater to all its business segments in a

particular area.

OTHER INITIATIVES

Visibility Programmes
Give VIM Bar a better display in the retail store eg: make a pyramid of vim bars Good displays will be rewarded

Visual Merchandiser
Looks after the window display of products On 3rd party payroll Managed by HUL

Activation Executives
Manages channel programmes Incentive programmes Handles merchandisers