HLL (Supply Chain)

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HLL (Supply Chain)

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Retailers Satisfaction and Expectation towards HLL Distributor

Retailers Satisfaction and Expectation towards HLL Distributor

EXECUTIVE SUMMARY

Hindustan lever limited is Indias largest fast moving consumer goods company and it also having largest distribution channel, with a leader in Home & personal care products and also foods & Beverages, having its reach to around 1 million retail outlets. These retailers form an important link between manufacturer, distributor and customer.

The project assigned me was to access the satisfaction level of retailers and their expectation towards HLL distributor in Belgaum rural. This project taken up by me is a part of academic assignment to find out the attributes that affect the satisfaction level of retailers and suggestions to the distributor for improving quality of service.

PROBLEM STATEMENT: Retailers Satisfaction and Expectation towards HLL Distributor in Belgaum rural.OBJECTIVES OF THE RESEARCH: To know the perceptions of retailer regarding distributor.

Find out the attributes that affects the satisfaction level of rural retailer.

Ascertain the opinion about merchandising activity.

To measure the behavior of sales person during visit.

METHODOLOGY1. Personal Interaction with TSI, RSP and interviews with retailer.

2. A research survey (using questionnaire) would be conducted.

OUTCOME & BENEFITS OF THE STUDY:1. This study would bring into light on the expectation and perception of the retailers with respect to the distributors functioning.

2. It will help distributor to take the necessary steps to improve quality of service.

3. It will help distributor to know the attributes that affect satisfaction level of retailers.

4. Finally, it will help me understand (in practical) HLL distribution as whole and thus enriching my knowledge.

SCOPE OF THE STUDY:

My study is restricted to only Belgaum rural retailers. The whole study and analysis is done to measure the level of satisfaction and expectations of retailers towards their distributor and to find out the attributes and factors that affect the satisfaction level.

FMCG INDUSTRY IN INDIA

FMCG INDUSTRY IN INDIAAs the name suggests, products of daily usage under the heads of personal care, fabric care, household care, packaged foods, beverages and tobacco characterize the sector. These are part of the monthly purchase basket. Such products generally have a non-cyclical consumer demand, low unit value, are mostly branded products, involve high marketing expenditure and have to be widely distributed. This sector has observed a 2% decline in the past 4 year period. FMCG pundits attribute this to various theories like FMCG commanding lower share of the wallet, what with several other newer expenditures in mobiles, computers, automobile etc. Other reasons to the decline may be down trading in brands or lower rural off takes. The Industry has a lot of potential since the product penetration and the per capita use is still low in India. As a matter of fact TV, which is the major source of information, reaches out to 80% of urban and 46% of the rural population. The key entry barriers into this section are the Brand, Supply Chain Management and the complexity involved in managing SKUs (Stock Keeping Units). Also an Indian FMCG Company faces strong competition from the existing MNC-owned brands.

Supply Chain The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources. A supply chain, logistics network, or supply network is a coordinated system of entities, activities, information and resources involved in moving a product or service from the supplier to the customer.

Typically a simple supply chain model will be as follows:-

There are several stages through which the money circulates. The distribution intermediaries make the whole system of supply chain economically viable. Each layer of intermediaries implies fewer transaction complexities for all the layers, augmenting the reach. The experience, specialization and knowledge of local conditions, contacts and scale through such a network help achieve Operational Efficiency. Without having to focus upon distribution, the brand managers can concentrate on their core activity of product development, sourcing and marketing. The companies get a cost advantage since most intermediaries are family owned businesses with low overhead and operational costs. The brand owners get a better return on capital employed as intermediaries hold the inventories.

The Challenge Involved India has around 7.3 million retail outlets of which 3.0 million are in the 3768 towns and 4.3 are in the 627,000 villages. This fact is significant since the biggest challenge is to reach out to every nook of such a huge and diverse nation as India. As aptly said by Mr. Pusalkar, Supply Chain can be well learnt here.

For a typical mid-size FMCG company, the numbers would be as

C&FA (Carrying & Forwarding Agent) 30

Distributors & Super-stockiest 1,200

Sub-stockiest 1,000

Retailers reached

Retailers directly covered 500,000

Retailers via wholesalers 1,000,000

TOTAL 1,500,000

Consumers 10,000,000

The 7.3 million outlet strong retailing industry provides direct employment to more than 18 million people which roughly means one in every 25 families in India is engaged in the business of retailing.

The rural markets are emerging to be the growth drivers of the future. The industry seeks to cater to a large rural population of the order of 700 million people. Of the 7.3 million retailers 58% are in rural areas. In most categories penetration is low and innovative packaging such as sachets and promotion is required. Achieving cost effectiveness to make the products reach rural outlets is essential.

The Economics For an FMCG company, the direct customer is the distributor. The several intermediaries between the company and the actual consumers ( C&FA, Distributors, Super-stockiest, Sub-stockiest, Wholesalers, and Retailers ) need compensation for the costs incurred, namely the inventory holding costs, manpower costs, credit provided to the next intermediary, transportation costs, overheads, and entrepreneurs risks and efforts. The remuneration is provided as a combination of gross margin (mark-up) on sales, commission on sales, and reimbursements.

Typical Margins in such Supply Chain are:-

Distributor 5%

Retailer 7-15%

Wholesaler 1-1.5%

Super-stockiest 2%

Sub-stockiest 5%

A distributors investment consists of inventory, Accounts receivable and accounts payable. He draws his income from gross margin or commission on sales. The expenses include discount expense, distribution expense and overheads. Typically an FMCG distributor expects a 25% ROI.

Emerging Trends in FMCG Business The industry has lately observed a rise of regional stalwarts such as Ghadi detergent, Baagh Bakri Tea etc. who are very strong in their respective geographical areas. Another emerging trend has been the rush to design products for the mass market in villages. C.K. Prahlads famous Bottom of the Pyramid theory is the guiding principle. The market is moving really fast as constant innovations are required in product, packaging and distribution. With the growth of information technology, the retailer has transformed from the old gala owner to a much better informed businessman. Direct Selling (e.g. Amway) as a parallel way of marketing is picking up. Increasing role of influencers (such as Shakti Amma, a famous concept in Andhra) has also emerged. There has been an influx of imports and ever increasing presence of multinational companies in this sector.

The retailing business is also becoming more organized. Organized retailing comprises professionally managed single or chain of self-service stores. This has implications such as shorter supply-chain, move from inventory build-up method to collaborative planning, forecasting, and replenishment system, greater dependence on few sophisticated buyers, customer management strategy etc.

To sum up all

A world-class FMCG Sales & Distribution system.

Ensures product availability

At the right place

In the right quantity

Ensures product replenishment

Ensures profit for all intermediaries

At a minimal cost

GROWTH IN SALES OF FMCG COMPANIES:

All top 10 categories record growth, the only exception being packaged tea. Spurred by high rural demand and retail sales, the fast-moving consumer goods (FMCG) sector posted 10.6 per cent growth year on year in February, the highest in the past five years, according to data provided by market research agency AC Nielsen.

The rise does not come on a low base since the sales growth in February 2005 was 8.1 per cent year on year. And what is more, the growth has been broad-based with all the top 10 categories growing, the only exception being packaged tea.

Besides, five of these categories have posted double-digit growth. And for the first time in four years, all the companies tracked by AC Nielsen have posted a growth in sales.

The revival in the sector has been evident for some time now and the December quarter saw strong top line growth.

For example, Dabur saw its revenue grow 26 per cent year on year, while Colgates sales grew 21 per cent. Besides, most companies now have far more pricing power than they did a year ago, which is reflected in the better operating margins last quarter.

Colgates margin, for instance, was up 10 percentage points at 23 per cent, while that

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