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Ranjeet FMCG Final
Ranjeet FMCG Final
RESEARCH REPORT
ON
“CHANGING TRENDS IN FMCG INDUSTRY IN INDIA”
Roll.no.-1651770056
AFFILIATED TO
,Lucknow for the partial fulfillment of the requirement for the award
undertaken by me and the has not formed the basis for the award of
any degree.
Ankur Srivastava my mentor for this opportunity & for their valuable
Last but not the least ,I would like to express my sincere thanks to all my
family members, friend and well-wishers for their immense support and
best wishes throughout the research duration and the preparation of this
report. I believe that this report will be a valuable assets not only for
academic institution, but will also be useful for all those who are interested
industry. We have tried to study and understand the ideologies of the distribution
with regards to FMCG sector and further how much interaction is there, how much
feed back is there, how much successful are the companies in utilizing distribution
The project can be divided in two parts. In the first part – the current or the present
status of distribution, its changing face and the transition from push to pull
In the second part -we visited companies like HLL, AMUL, NESTLE, and
department and studied the distribution set-up of the respective company. Secondly
also studied the implication of the companies in near future i.e. in the era of
globalization and IT. This part was cumbersome as nothing was organized and as
distribution dynamics not with the help of books but with the help of real learning –
Topic Page No
1. DECLARATION......................................................................................................2
2. ACKNOWLEDGEMENT........................................................................................3
3. SYNOPSIS.................................................................................................................4
4. TABLE CONTENTS............................................................................................5-6
5. INTRODUCTION..............................................................................................7-16
6. LITERATURA SURVEY................................................................................17-18
7. CHANGING FACE..........................................................................................19-28
12. OBJECTIVE.........................................................................................................84
14. LIMITATION........................................................................................................88
17. CONSULATION..................................................................................................106
18. SUGGETION................................................................................................107-108
19. BIBLOGRAPHY...........................................................................................109-110
INTRODUCTION
unpredictable, Indian industry has found a new avenue to pin its hopes on. Supply
chain and logistics management are suddenly under close scrutiny. Between them,
they offer companies the best way to sustain their businesses in rough times. Thus
studying and evaluating one of the aspect of supply chain management i.e.
Distribution and that too of the industry, which is a key component of India’s GDP
distribution network is one of the strengths of this FMCG sector, so we tried to carry
WHAT IS FMCG?
FMCG refers to consumer non-durable goods required for daily or frequent use.
Typically, a consumer buys these goods at least once a month. The sector covers a
Individual items are of small value. But all FMCG products put
The consumer spends little time on the purchase decision. Rarely does
purchase decisions.
meet the demands of the entire cross section of population. Price and
sector has been in existence for quite a long time, it began to take shape only during
the last fifty-odd years. To date, the Indian FMCG industry continues to suffer from
and market size, among others. The sector touches every aspect of human life, from
not easy.
After witnessing booming sales and flooding markets with innumerable products,
FMCG companies have had to abruptly apply the brakes and look for various
ways to save costs. The RS. 52,000 crore (listed companies) FMCG industry in
India, which has been on a roll for many years, faces tough times ahead, although
Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer
packaged goods. Items in this category include all consumables (other than
groceries/pulses) people buy at regular intervals. The most common in the list are
goods. These items are meant for daily of frequent consumption and have a high
return. The Indian FMCG sector is the fourth largest sector in the economy with a
total market size in excess of US$ 13.1 billion. It has a strong MNC presence and is
between the organized and unorganized segments and low operational cost.
Availability of key raw materials, cheaper labour costs and presence across the entire
value chain gives India a competitive advantage. The FMCG market is set to treble
from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. Penetration level as well
as per capita consumption in most product categories like jams, toothpaste, skin
care, hair wash etc in India is low indicating the untapped market ...
TRENDS
Global Concentration
Nestle, Heinz) have a lion's share of the global market. These companies have been
established for a very long time and possess a clutch of strong brands with
proprietary technology. Most of these companies are cash rich and well managed.
Their brands generate strong cash flows and allow them to reinvest in strengthening
Business Review, Sept-Oct, 2004) They also have the financial clout to acquire
small local brands to strengthen their position in the category. These companies also
make considerable investment in R&D to sharpen and maintain their edge in the
business.
Most of the global majors have their origins in Europe or USA. They find their
home markets saturated and are banking on the third world for future growth. These
companies are setting up shop and are aggressively expanding their base in these
countries. They also look out for opportunities to acquire local brands to push start
particularly after reduced consumer spending during the global recession, the new
buzz word is value for money. FMCG companies globally have embarked upon
major re-structuring/ cost cutting exercises as the business has become fiercely
competitive. Also, several innovations in packaging media have taken place. (CMIE
reports) Adapting To Local Conditions In the last few years, process of adapting to
MNCs are adapting their products, process and marketing communication to the
local conditions. They alter the manufacturing process to maximize use of local raw
materials and suit their products to the taste and requirements of local consumers.
This process has been necessitated by the imperative to be cost effective and be
The role of packaging has increased significantly in recent times, partly due to
serve the purpose of protection and economy. Then, packaging was expected to
as an effective tool for promotion. Besides, new packaging technology has enabled
distribution Increased focus on rural distribution has increased logistics spend for the
leading companies.
but the Indian market was too small for global MNCs. HLL had a manufacturing
base, Colgate and Nestle mainly undertook only trading activities. In the early '60s,
strong emphasis on self sufficiency. As a result economic growth was slow (around
3.5% pa which many economists dubbed as Hindu rate of growth) and India's share
in international trade was nominal (even today India's share in international trade is
only 0.6%). Slow growth was aggravated by major set backs in the late 60's due to
drought and in the early 70's due to oil shock. The new Government in power
It also forced MNCs to dilute their equity stake to 40% or leave the country. IBM,
Coca-Cola and several others decided to leave. Amongst major MNCs, Unilever
(HLL) was the only one which managed to retain 51% foreign stake by complying
with the Government conditions of minimum 10% export and 60% turnover from
priority sectors. Thus HLL got into the business of fertilizer and chemicals. In the
'80s, when the underlying factors for the economy were strong such as major oil
discovery at Bombay High, satisfactory monsoon, stable oil prices etc, the economic
growth averaged 5% pa, much lower than its potential. (www.hll.com) Several
FMCG products such as toiletries and cosmetics which are essentially mass
duties, sales tax (which added up to over 150% on basic price). Local players sans
technology and capital were not able to provide good quality products.
suggested reform process began. The reforms have continued over the last few years.
The economic growth rate is averaging 5-6% pa which is likely to continue. This
growth rate in GDP will imply 4-5% volume growth in mature categories and 8-10%
importantly, the organized sector will witness even a faster growth at the cost of the
unorganized sector.
FMCG in India has a strong and competitive MNC presence across the entire value
chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in
2015 from US $ billion 11.6 in 2003. The middle class and the rural segments of the
Indian population are the most promising market for FMCG, and give brand makers
the opportunity to convert them to branded products. Most of the product categories
like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita
consumption as well as low penetration level, but the potential for growth is huge.
The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid
urbanization, increased literacy levels, and rising per capita income.The big firms
are growing bigger and small-time companies are catching up as well. According to
the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs,
and the balance by Indian companies. Fifteen companies own these 62 brands.
Brand Equity Brand equity refers to the intangible asset in the form of brand
names. The consumer's loyalty for a particular brand is due to the perception that the
product has distinctively superior and consistent quality and also satisfies his/ her
specific needs. Further provides better value for money than other competing brands.
(Kotler Philip, 2003) In FMCG products, brand equities are relatively stronger as the
technical or functional grounds and therefore little reason to switch from a known
brand. A successful brand generates strong cash flow, which enables the owner of
Distribution Network
In FMCG sector, one of the most critical success factors is the ability to
near the consumer is vital for wider penetration as most products are low
unit value products and frequently purchased. Distribution network refers
retailers, dealers etc and establish their loyalties. (Poirer C. Charles, 2004)
There are entry barriers for a new entrant as a new product is typically
slow moving and has lesser consumer demand. Therefore dealers/ retailers
are reluctant to allocate resources and time. Established players use their
Thus we see that distribution is the critical factor that at times even drives the brand
equity factor.
Assumption is made that views and suggestion given by the respondent are his
LITERATURE SURVEY
There is only one formula to win a 100-meter race --- run faster than the other
guys. To do that, you need to be learner and fitter than the competition. The same
applies to business as well. The only way to stay ahead in business is to be faster and
fitter. Indian business realized this clearly during the tumultuous decade of the 90’s,
which changed the rules of the game forever. No longer does any artificial wall
protect any business. In the race to get more competitive, an area that is increasingly
coming under focus is Distribution i.e. the physical movement of good. Here an
attempt is made to study aspects of distribution, along with its changing face.
Further the transition from push to pull environment is also studied. Thus in nut shell
distribution manager believed the way to market dominance was by reaching the
(Carvalho, 2002) The large scale and geographical diversity in retail outlets spread
across the country meant that all FMCG markets needed to service a large
percentage of these outlets to really reap economics of scale. Over the period
companies like HLL, Godrej, P&G along with recent entrants like Nirma and Wipro
have build their distribution networks diligently. Distribution is the crucial success
factor for FMCG, but distribution at best cost, is vital. For Company’s like GCMMF
(Maul) distribution is literally all, since it deals in perishables like milk and milk
products. For all higher product visibility and lesser inconvenience for the customer
CHANGING FACE
The Basic structure of FMCG supply chain has not changed in many years. What
has changed is the attitude of efficiency of each element. The end of 1990’s revealed
a different way of looking at distribution. A new movement called SCM had been
slowly redefining the distributor’s role in channel. The market was changing and
distributors were expected to corporate with suppliers and customers to decrease
total channel costs. While increasing customer expectations were nothing new, they
satisfy customer expectations were not necessarily the ones that distributor’s would
have chosen (Lawrence et. al. 2002) FMCG or the Fast Moving Consumer Goods
industry is also known as the CPG (Consumer packaged goods) industry in India.
This industry is named so because goods are produced, distributed, marketed and
Products which are frequently purchased are examples of Fast Moving Consumer
pharmaceuticals, soft drinks, packaged food products, tissue paper and chocolates.
In the year 2005, the FMCG Market in India was growing at a rapid rate of 5.3
percent. The value of the industry stood at Rs. 48,000-crore in the same year.
Currently the FMCG Market in India is one of the biggest and is growing at a rapid
rate of almost 60 per cent. Despite the economic downturn the FMCG Market in
India currently stands at Rs.85,000 crore. The phenomenal growth of the FMCG
industry especially in the tier II and tire III cities in India is mostly due to the
improvement in the standard of living of the people of such cities and the rise in the
level of disposable income. Over the last few years companies like Dabur, HUL and
ITC have managed to change the face of the FMCG industry in India by using
Companies like Colgate Palmolive and Britannia have also managed to penetrate
The FMCG sector in India happens to be the fourth largest in the world. According
to experts this industry will reach US$ 33.4 billion by 2015. Both the organized and
the unorgaganized sectors are largely responsible for the success of the Indian
FMCG industry. The Indian FMCG market also has a well defined and established
distribution network that makes products available even in the most urban areas of
DISINTERMEDIATION MYTH
suggested for distributors in the early 1990’s no a response to new technology and
increasing pressure on the supply chain to cut costs. Distributors were perceived as
middlemen who added cost to supply chain through redundant inventory, services
and information handling. It scared logical that if suppliers and end users could
“Automatic out in efficiency” they could eliminate the distributor. This logic follows
from the reasoning that a shorter supply chain is inherently more inefficient (Narus
The statement covers the need for the following two roles. First is that of a channel
leader, who determines where the sources of supply are and how to access them. The
like Just in Time (JIT). The technological revolution caused by the Internet and
flux. It is unclear now new channels and new bus models will be structured. To
eliminate the distributor from supply chain, channel members must eliminate the
services the distributor currently supplies. Thus this means eliminating some
services following others. (Agawam D.K, 2000) All in all, distributors sound like a
rather noble bunch-always rising to occasion for customer, willing to deal with
uncertainty, provide flexibility and focus as customer service (Lawrence, et. al.
2002).
et al, 2001) Early scholar grouped functional requirements for effective distribution
Buying
Exchange Function
Serving
Transportation
Storage
Standardization
Risk Bearing
The exchange functions involved broad activities related to buying and selling.
distribution functions are the origin of what is referred to as logistics. The essential
activity consists of getting the right products to right place at the right time.
encompassing all work related to inventory positioning, which can also involve
Thus there is supply chain integration, below figure illustrates an overall supply
ENTERPRISE
Inventory Flow
Support
Physical
Distribution
Customers
CURRENT STATUS
As already started that FMCG supply chain has not charged in many years. What
has changed is the attitude and efficiency of each element. Also several new
business models have developed in the recent past like Direct Market, e tailing, B2C,
B2B, intranet and extranet (McAfee Andrew, 2004). The increasing competition in
unorganized, not much buyer power Larger retail outlets; more number of SKUs,
SKUs of various sizes, offers and usage Rationalization of SKUs to optimize costs
Top down (from parent to vendors); lots of buffer stocks & time Collaborative but
still with some buffer time and inventory Manufacturing Practice Long production
runs, low overheads, fixed stations Flexible manufacturing, short runs, low change-
level and then transmitted upwards loss of time in reacting to change in demand
flow; some hub and spoke Hub and spoke at more than one level; distributors get
their goods directly from C&FAs Integrated Data Systems ERP used internally ERP
used with supply chain planning to improve throughput and efficiencies Technology
E-mail, Fax, Telephones V-SATs, leased lines, mobile ordering & automatic Source:
ETIG, L&SCM 2007 The emergence of the Internet, ERP systems and contract
manufacturing are important trends in India. Each has a clear implication for the
FMCG supply chain. All the FMCG companies list logistics above all other issues
like price, how to get the product at the right time, in the right quantity, assortment
The supply chain concept in the FMCG business in India really took root during
the downturn of the industry in 1999. A look at the FMCG industry growth trends in
distribution, raw materials, finished goods and ad spends clearly shows that the
industry, while undergoing strong fluctuations in all aspects, never really suffered a
degrowth.
2001, while net margins grew by 9 per cent, distribution expenses grew by 9 per
Most companies confirm they had initiated cost cutting measures, but heading
the list was control of supply chain costs. Other measures included longer credit
periods to vendors; faster collections, dropping slow moving brands and cutting back
Increased focus on rural distribution has increased logistics spend for the
leading companies.
New alliances and re-negotiation with vendors is increasing, with the concept
Working capital cycles are already turning negative for most FMCG majors
due to tighter control of credit, closer demand matching and SKU rationalization
Vendors
Manufacturers
Central Warehouse
Regional Distribution Centres
Stockiest
Consumers
Supply
Chain
Planning
And
ERP
Software
CRM
DATA PREPARATION AND ANALYSIS
QUESTIONNAIRE ANALYSIS
Q1. Please specify the importance of various functions of marketing in the present
days competitive scenario in the scale of 1-7: 1 being least important and 7 being
most important?
Brand Mgmt. 7 6 7 7
Advertising Mgmt. 6 3 5 6
Distribution channel
Management 7 5 6 6
Physical
distribution/Logistics
Management 7 6 5 7
Demand forecasting
& Management
7745
Q2. Please specify various purposes behind efficient distribution management on the
Sustainable Bus. 7 7 6 7
32
performance
Greater market
dominance
5546
Competitive
advantage
5676
Total cost
containment
7555
of harmonious
channel relationships
7636
Improvement of
welfare
2625
Q3. Please indicate the combination of advertising and sales promotion for the
products
of the company.
More advertising
promotion
**
33
More sales
advertising
Both equally ^ * *
Here we see that although HLL stresses that more of advertising should be done and
less of sales promotion, yet it is stated that at times both are to be done equally.
AMUL says that advertising should be done more than sales promotion.
On the other hand NESTLE & BRITANNIA believe both should be done equally.
Q4. Please specify the share of trade related schemes meant for channel members
out of
total promotional budget?
Below 20% * *
20 – 30% * *
30 – 40%
40 – 50%
34
Above 50%
HLL & AMUL say that share of channel members in trade related schemes
Q5. Do you think that in the global competitive scenario and the era of information
Increased * * * *
Decreased
No Change
35
Here every body is of the view that increased competition and advent of IT has
imposed greater challelenges for the channel members and has also increased
YES *
NO * * *
Only AMUL has B2C venture over Internet. In fact 9it was one of the
36
YES
NO * * *
37
YES *
NO * * *
Only HLL has the system where all its stockists and the C&FA are in a web
38
Q9. In order to have smaller demand chain, if you have been asked to cut down one
C & F agents *
Stockists/Distributors ^
Retailers/Dealers
None * * *
done away with C&FA and as such our sales team directly meets with the
Again HLL would not like to cut any of its channel members, but if a
AMUL& BRITANNIA believe every part of the channel is inevitable and as such
39
Q10. Do you think that qualitative results of marketing largely depend on
contributions
YES ** * * ½*
NO
Here HLL strongly believes that due to the contributions of distribution channel
members overall marketing efforts have a synergistic effect, thus they have given
AMUL & NESTLE also are of the similar view, but BRITANNIA thinks that it is
true but other factors also affect the overall marketing results and that is why half
star.
40
Q11.Is it essential to keep channel members happy, loyal & well motivated towards
trade?
YES * * * *
NO
41
Q12.Rate the role of intermediaries in the era of globalisation and IT? Rate on a
scale of
HLL
FACTORS
to 7 (very important)
Distributors
Retailers
Breaking Bulk 5 6 6
Assortment
Products
673
Trust Building 2 7 7
Product performance 0 5 7
Market knowledge 2 4 6
42
NESTLE
FACTORS
to 7 (most important)
Distributors
Retailers
Breaking Bulk 4 2
Assortment 5 2
Products
77
Trust Building 4 5
Product performance 7 7
Market knowledge 7 7
43
AMUL
FACTORS
to 7 (very important)
Distributors
Retailers
Breaking Bulk 6 4 3
Assortment 6 6 5
Products
764
Trust Building 2 7 7
Product performance 0 4 7
Market knowledge 1 5 6
44
BRITANNIA
FACTORS
to 7 (very important)
Distributors
Retailers
Breaking Bulk 6 4 2
Assortment 5 3 2
Products
573
Trust Building 2 7 7
Product performance 2 5 7
Market knowledge 2 6 6
45
COMPANY OF FMCG
(HLL)
You simply cannot think of the FMCG industry in India without Hindustan Lever
go
down segment by segment (Nirma in soaps, for example) to find out who can (if at
all)
On any given day, you end up using at least one HLL markets 110 brands with
950 pack sizes across categories as diverse as foods and soaps. The logistics handled
vary from the cold chain for its ‘Walls’ range of products to the open-air cycles in
the
rural hinterland of India for ‘Surf. All possible and feasible modes of transport are
used
and vast quantities of products and unlimited information zips across from one end
of
the country to the other. (www.indiainfoline.com/fmcg/stma/st35.html)
It is an ethos HLL shares with its parent company, Unilever, which holds 51 per
cent of its equity. A Fortune 500 transnational, Unilever sells over 1,000 foods and
home and personal care brands through 300 subsidiary companies in 88 countries
Unilever’s foods and home and personal care brands 150 million times a day across
the
world. Unilever is the number one consumer goods company in the world in market
46
(http://www.indiainfoline.com/ meet/me516.html)
A few numbers drive home the scale of operations at HLL 7,500 distributors, 100
locations. With 36,000 employees and 1,300 managers, it reaches about 1 million
retailers across the subcontinent. HLL’s distribution network directly covers the
entire
urban population and reaches as far as villages with over 2,000 people. In the rather
smallish Indian market for cosmetics alone, it has 70 brands. This diverse product
range
is manufactured in close to 100 factories located across the length and breadth of
India.
The operations involve 2,000 suppliers and associates. About 28 factories are
situated in
backward areas. Obviously, the company has its financials well under control
HLL is known today for its massive and penetrative distribution set up Many of its
products are no different from those manufactured by others, but what sets HLL
apart is
its unique approach. The company web site explains: “While the distribution system,
is
quite similar for different businesses, each of the businesses have, over the years,
finetuned
the system to meet their objective of serving their respective customers and
consumers in the most efficient manner. The differences, therefore, lie in the manner
business use an existing distribution network, and the channel players involved
therein,
to improve their reach and service to their customers and end users"”.
(www.domainb.
com/news_review)
HLL has several lines of business detergents, personal products and foods, the
detergents & soaps division is the largest (contributing 18 and 16 percent
47
respectively to turnover), followed by the personal products (16 percent) and foods
lines with tea contributing 16 percent. In almost all lines, it holds dominant market
shares. Analysis and company estimates suggest that at tight focus on supply chain
and usage of IT has saved HLL up to US$ 125 million (Rs. 6,000 crore) in
PRODUCT OF HLL
Tubal Rings
48
Hidox
49
Hincryl
HIVAC –B
50
51
GROWTH OF HLL
HLL’s is a journey that started with a single contraceptive unit in 1966. It is today a
multi-product, multi-location organisation addressing various public health
challenges
facing humanity.
With a vast array of innovative products and social programmes, HLL Lifecare
Limited
is day after day taking a step closer to its vision of ‘Innovating for Healthy
Generations’.
52
HLL is the only company in the world manufacturing and marketing the widest
range of
HLL’s healthcare product range include: Blood Collection Bags, Surgical Sutures,
Auto
Blood Bank equipment, Iron and Folic Acid Tablets, Sanitary Napkins, and Oral
Rehydration Salts
Over the past fifteen years HLL has steadily set up a strong and sound infrastructure
for
direct marketing. HLL has put in place a vast distribution network covering the
length
HLL today reaches out to over half a million-retail outlets, including over 1,00,000
The company set up the not-for-profit organisation, the Hindustan Latex Family
Planning Promotion Trust (HLFPPT), in 1992 for the purpose of designing and
reproductive
health, women empowerment and HIV prevention and control activities, with the
objective of creating planned social change. HLFPPT is today one of the top social
HLL’s association with world leaders include those with Okamoto of Japan;
Finishing
Enterprises, USA; Female Health Company, UK; and Beijing Zizhu Pharma of
China.
53
HLL has seven state- of -the art manufacturing facilities with quality and
environmental
management system certifications. Products manufactured at its Plants also have the
‘CE’ marking.
Nearly 2700 employees and with several world leaders as partners, HLL has over the
past four decades stood to uphold its mission to achieve and sustain a high growth
path,
and focus on five key thrust areas to achieve its vision. These are - customers,
In the future through technical collaborations, marketing alliances and joint ventures,
HLL wishes to keep alive the dream of all humanity – of a healthier world.
Directors
expanded
to include independent Directors. The list of Directors in the Board is given below
Explaining that HLL has now transformed into a healthcare delivery company
"The HLL corporate research and development centre, the 60,000 sq ft state-ofthe-
art facility that started functioning here Jan 1 is an example of this growth
54
story aided by innovation. The key focus area of the research centre will be
Elaborating on the firm's expansion plans, the CMD said the construction of the
schedule.
The Department of Public Enterprises (DPE) has rated the performance of HLL
facility management.
HLL was established in 1966 with the objective of providing quality condoms for
55
INBOUND LOGISTIC
In the mid – 1990s, HLL realised it had too many suppliers for its raw materials.
plastics- a logistical maze. Around 40 odd key raw materials and 60 plus
suppliers were around 1,000 not to mention overseas unilever vendors for
products like deodorants and after shaves. Earlier, there was a lot of
This meant not just checking the quality of each supplier, but also five
items in the same paperwork. In the 1980s, the inbound side of not just
Then came the crunch of the 1990s. Several factors combined to help rationalise
56
Inventories
days of raw materials falling continuously from 84 days in 1990 to just 29 days of
stock
in 2005 (see table Remarkable Result). That’s a reduction of over 66 per cent over
the
past 10 years. This reduction has been made possible largely due to better
forecasting
data which is now being transmitted throughout the HLL supply chain quickly-and
the
initiatives that will bring e-business to the heart of the company’s operations. HLL’s
vision is ‘Connect, Attract and Fulfil’ on a massive scale. In the supply chain for
example, the vision is to link in with some 3,000 stockists, 30,000 retailers and 100
suppliers spread over some 1,000 locations. The size of the ambition is based on
HLL’s
unique ability to leverage on scale and technology and the development in the
telecom
segmentsbusiness
The Net- based e- tailing will work on a combination of HLL’s own V-SAT
network, that of others, mobile telephony and the public network. HLL is creating an
57
extranet covering its key stockists and retailers to optimise the supply chain right up
to
the front end. Similarly, an extranet is also being created covering the suppliers,
factories and the purchasers with the aim of achieving real time, vendor- managed
inventory.
Today, the inbound side of HLL is a very different from what it was even five
years ago. There are upwards of 240 supply chain locations- be it own plants around
the
Almost all are linked by one form of IT or another - from the simple telephone call
to
V-SATs. The plants and TPUs are, in fact, linked by V-SATs and HLL’s ERP
system
(MFG-PRO). MFG-PRO today works on more than 220 locations all over the
country,
including the head office, branch offices, factories, depots and key redistribution
stockists. Also, HLL plans to move towards vendor- managed inventory (VMI).
“VMI
(www.indiainfoline.com/fmcg/stma/st35.html)
Information exchange is critical for HLL. Sales information systems will be linked,
eventually, to the retail level. They are already linked at the stockist level. The
moment
HLL sells 5,000 pieces of Lifebuoy in any one region, a signal traces right back via
the
stockist to the region depot and the branch office straight through into the production
and replenishment plans, and thence onto the factory. It is this backward trace
ability,
which gives HLL a sharp edge over competition in the one area that is crucial for
any
58
OUTBOUND LOGISTICS
HLL works on the hub and spoke system. The hubs are the mother depots and
regional depots, while the spokes radiate from these to the stockists, depots and
retailers. But HLL’s large number of SKUs and brands demand a more sophisticated
version of the hub and spoke system. Fittingly, HLL uses not a one-tier hub and
spoke,
Like any other company, HLL has slow moving and fast moving brands. It has
premium and mass-market products and any other segment that you may think of is
catered to. Inevitably, you have the Pareto Principle working 80 per cent of business
from 20 per cent of brands. In HLL’s case , brands like ‘Lifebuoy’, ‘Lux’, ‘Hamam’,
‘Vim’, ‘Rin’ and ‘Surf’ are the fast moving ones, while brands like ‘Denim’,
‘Rexona’,
HLL has a three-tier system of stocking and order replenishment. On the first tier it
has the all – India buffer depot, the second level has the regional depots and the last
level h has the JIT (just-in-time) depots. From the last level, they supply the products
to
the brand that needs to travel more than two days goes to this depot. These are sent
from the manufacturing sites to the all India buffer depot where these products are
accumulated up to a full truckload for that sales region. Once the truckload is made
up,
the goods are sent to the regional buffer depot in the states, where break bulk
occursthe
load is split into the supply as per area demand. The smaller lots are now sent onto
the JIT godowns in the cities or towns and then onto the retailers via the stockists.
59
The real challenge for HLL begins now when the FMCG industry is in a
downturn. Most analysts predict that HLL is well poised to fight it out. HLL itself
has
started focusing on supply chain as a means to maintaining its leadership profile.
How it
manages the chain will be the only factor that will ensure its sustained leadership.
60
61
Raw Materials
suppliers
Packaging materials
supplier
Manufacturing units
buffer depot
Regional
Offices
Regional
buffer depot
JIT godowns
Rolling sales
forecasts & mktg
plans
Stockists
Wholesalers Retailers
Consumers
food marketing company in India today with sales turnover of Rs. 2,500 crore.
While
there are a host of other players in the foods market, GCMMF reigns in the milk and
GCMMF has come a long way. It is the largest organised collector and distributor
of milk and its value added products are marker leaders under the brand names of
Maul
(cheese, butter, milk, powder) and Dhara, Lok Dhara (oils). Amul’s brands of
paneer,
ice cream and sweets like Gulab Jamun and Shrikhand are fast catching up with the
over the past two decades. GCMMF is today in a position to leverage all its assets
for
exports. Some thing not even considered some years ago.(www.amul.com)
GCMMF owes its market dominance to several factors. Crucial amongst these is
its milk procurement system, which gives it access to a vast reservoir of milk at
massive economies of scale. The logistic of milk are considerably more difficult
than
62
Products of Maul
63
64
65
GROWTH OF AMUL
Amul India's growth in revenues has dropped from over 20 per cent a year till
about 2011, to 8 per cent in the quarter ended September 2013, which is its last
query by ET, stating that since the company was in the 'closed period', it would
be unable to comment.
To revive its fortunes in India, industry experts said Nestle could do well to bring
in fresh perspective from outside. "One of the best ways forward for Amul could
products) at Ernst & Young, said. Currently it works mostly with its own set of
Industry peers say the lack of an Indian CEO could be another reason for Amul
comparatively slow growth in the country. After Daraius E Ardeshir quit the
"Understanding local consumers and insights, and being in direct contact with
market realities are critical," CEO of a top global foods firm said, requesting
with intense competition playing out across categories," the person added.
66
Healthcare and PepsiCo have almost always banked on Indians to head their
years now.
Under Carlo M Donati, who was incharge from 1998 to 2004, Maggi noodles
became a top power brand and the firm kicked off an innovation pipeline of
products such as Munch. Martial Rolland led Amul from 2004-09, followed by
Antonio Helio Waszyk till October 2013 when MD Etienne Benet took over.
rapidly.
At a time when most firms are innovating products, analysts and rivals say
Nestle doesn't have enough products for the middle class. The firm is also
ITC's Sunfeast Yippee and HUL's Knorr soupy noodles and to a small extent
GSK's Foodles have taken away share from its flagship Maggi, although the
Nestle brand still dominates with 80 per cent market share. Newer entrants
such as Danone in dairy, Cremica in ketchup and several regional players have
been making it tough for Nestle to grow its volume share. All this shows that
Nestle needs a new recipe for India and, perhaps, an Indian at the top to
prepare that.
67
INBOUND LOGISTICS
Inbound logistics in milk are governed by time. “Within 2.5 hours, they collect,
check, transport and process up to 1 million litres of milk every day – 365 days a
year,
non stop.” “Maul is committed to accepting every drop of milk it is offered, whether
GCMMF and the National Dairy Development Board, under the able guidance of
Dr. Verghese Kurien and Tribhuvnadas Patel, formed what is today called the Anand
cases the small marginal, non-landed farmer with 2.3 cows in his herd – sells
directly to
the cooperative society and then by extension to the dairy. The traditional
middlemen –
the brokers, the consolidator, the trucker – who are so potent in other agriculture
markets, are conspicuously absent here. The direct implication of this structure is on
costs of procurement, fair returns to the producer and quality of the milk.
So how does GCMMF procure milk? The farmers tip over their milk into a standard
container that the village society has. The computer linked to the scale electronically
notes the weight of milk and container. The same computer automatically deletes the
weight of the container from the total to give the weight of the milk.
At the same time, another man at the counter (again an employee of the society)
takes a small sample of the milk into a machine called the lactometer. This machine
68
determines the fat content of the milk and automatically transmits the result to the
computer. The price to be paid to the farmer is pre-determined based on the fat
content. The computer then generates a pay slip for the farmer who is paid either in
the
evening or the next morning, as the case may be. There is no credit period and the
disbursements are completed within one day of selling the milk to the society.
At the farmer level, the aggregation is low – from 1 litre to 10 litres/. But at the
society level, the total volume of milk may touch more than 5,000 litres a day.
GCMMF
The milk that is bought from the farmers is filled into these VCCs, which maintain
a temperature of 4 degrees Celsius. In the absence of these VCCs, the milk would
either
get contaminated or spoilt. Moreover, in order to reduce this wastage, the collected
milk
would have to be transported urgently to the nearest district chilling centre or, it
possible, to the dairy directly. In a country like India with massive infrastructure
bottlenecks, this short window span of 2 hours ore often than not meant that overall
milk quality was low and cost of procurement was much above what it should have
been. Lots of things could go wrong – the truck would not come, the milk could
spill,
too much heat or bad roads. These were the issues at the village level.
The development of the VCCs down to the village level could cause several crucial
changes in Amul’s supply chain. Also, the milk could be held at the village longer,
thus
smoothening out the morning high capacity utilisation and spreading the receipt and
69
processing of milk evenly over the day. In effect, the window span of two hours to
handle 1 million litres of milk was expanded to 4-8 hours. Today, Maul chaims to
have
upwards of 10,000 VCCs across the state, with average capacity of around 2,000
litres
each. At the same time, it must be noted that just about 2-3 per cent of all GCMMF
societies have these VCCs. While its success on a small scale is clear, on a state-
wide
Having collected the milk at the VCC and ensured its quality level, the milk now
has to be transported to the chilling centre or the dairy. Each dairy has 4-5 chilling
centres. Earlier, the vehicles used were either matadors or jeeps or 9-tonne trucks.
Today, the 9-tonne truck and the insulated truck are the norm. The insulated
stainless
steel truck-tanker, with capacities up to 10,000 litres, goes from society to society
and
collects the milk. The trucks reach the dairy by 9 am and the ‘milk run’ is
completed.
(http://www.indiainfoline.com/meet/me516.html)
At the dairy, the milk is either processed into butter, cheese or powder, or is
pasteurised. GCMMFs priority is for liquid milk, which has a shelf life of a hours at
the
Take a peek into the scale of Maul Dairy 120 trucks arrive daily at the gates with
milk from the societies. Around 1.5 to 2 lakh litres come from other dairies, either
due
to excess at their ends, or for further processing at Anand into powder. Each truck
can
carry up to 10,000 litres in its tank, chilled and ready for processing. On an average,
the
70
milk travels 150 to 160 km. every day the whole year around, all of these arriving in
span of 4 hours up to 9 am
OUTBOUND LOGISTICS
As Critical As The Inbound Side Is For Maul, the outbound is just as complex with
108 SKUs – all at various levels of perishability. Maul butter, cheese, shrikhand,
curd,
ice cream and mithaee all are perishable and time-bound products. This means they
have to be sold within a very tight window from the date of production. GCMMFs
reach
extends nation-wide, so accounting for packing time, transfer times and delivery to
retail outlets time, the net time available for sale can be as low as four days for curd
and
is less than one day for milk. this, in turn, means that inventory management is of
prime
one
day. So GCMMF follows a strategy where plans of procurement and production are
made for 12 months rolling forecaste and inventories of butter and others are built up
milk that I collect and process. This means that a vast sales and distribution network
is
almost imperative”. GCMMF certainly has spread its wings. Today, it directly
reaches half a million retailers and aims to expand its reach to a million by 2005 (see
table ‘Wide Reach’). Its products need a rather different set-up than a typical FMCG
company, due to the requirement of the cold chain. Says Sodhi, “we reach 4,000
distributors
71
invest in facilities like freezers, cold rooms and insulated vans.” Sodhi claims
GCMMF
72
Fig # 23
73
Farmer
Society
Milk weighing
Fat content check
Payment slip
1.5 hours
6 – 7.30 am
2–3
hours
by 9 am
Society collection
Sent by truck to
DCC or dairy
GCMMF today uses 35-40 transporters to ferry its products nation-wide to 2,500
distributors of butter and 1.5 lakh outlets for refrigerated products. Along with the
butter, cheese and other products can also be sent, but temperature requirements are
different. For example, ice cream needs freezing t temperatures (below zero), while
Today, 125 refrigerated trucks ply on the routes. These cost up to Rs. 3 lakh to
configure and have higher running costs but the net result is very desirable. Ultra
Heat
Treated (UHT) milk is sent daily by refrigerated trucks to Vashi where it is
processed
further for sale in Mumbai. These trucks have enabled GCMMF to leverage both its
products as well as its distribution. Highly perishable goods like ice cream and curds
are sent to Mumbai – GCMMFs largest market for these products – and stored at
chilled
GCMMF’s butter, frozen foods (Peas) and ice cream need frozen temperatures
(below zero degrees Celsius) while products like milk and powder need chilled
settings.
Each is stored separately with separate, insulated stres and sophisticated temperature
controls. From this warehouse, h the stockists withdraw the butter, curds and other
products as and when needed. This single warehouse gives GCMMF a winning edge
over competitors.
74
GCMMF also encourages containerised cargo. It pays up to 6-7 per cenmt more
than usual open truck rates. Today, up to 40 per cent of GCMMF’s cargo goes by
such
trucks.
GCMMF estimates that vehicle costs have gone up to Rs. 6 lakh from Rs. 3-4 l akh
some years ago and fuel rates have also increased substantially to nearly Rs. 20 per
litre from Rs. 12 five years ago. Petrol is today Rs. 28 per litre in the metros. But
relative to these increase, freight rates haven’t gone up in the same ratio put together,
(www.domain-b.com/news_review)
Distributors 7
Retailers 3-4
* Summer ** Winter
GCMMF Network
2000 2005
Offices 48 100
75
it
the advantage of introducing new products into the same system at little extra costs.
Unlike other companies, GCMMF use a legacy system for ERP designed by Tata
Consultancy Systems (TCS) in the early 1990s. This system is still used to track
business data. The orders booked by the branches are compiled and stocks and sales
are
monitored daily. The data is received from the depots and branches by
email/fax/phone
and these are collated everyday. Then dispatch department breaks down the demand
into product groups and decides which dairy (member union) should supply the
goods.
their
goods at the respective dairies and deliver. The goods are taken to the C&FA’s who
manage the depots in the zones. Today this set-up is considered the most robust and
strategy.
GCMMF was, in fact, one of the firsts to launch shopping (amul.com shoppe) on its
web site. GCMMF accepts the order placed through the ‘shoppe’, relays it to the
nearest dealer of Maul in that area who then delivers and collects payment. Hence,
the
system uses the existing network, but has created a new channel for sales.
76
Branches
(Mumbai)
Depots
(Mumbai)
Head Office
(Anand)
products/destination at Anand
Demand allocation to various
Anand)
stockistwise demand
Dispatch to stockist
Retailers
77
ABOUT NESTLE .
Nestlé is the world's leading Nutrition, Health and Wellness company. Our mission
of
"Good Food, Good Life" is to provide consumers with the best tasting, most
nutritious
choices in a wide range of food and beverage categories and eating occasions, from
morning to night.
The Company was founded in 1866 by Henri Nestlé in Vesey, Switzerland, where
our
headquarters are still located today. We employ around 2,80,000 people and have
factories or operations in almost every country in the world. Nestlé sales for 2009
were
The Nestlé Corporate Business Principles are at the basis of our Company’s culture,
developed over 140 years, which reflects the ideas of fairness, honesty and long-
term
thinking.
78
Products of Nestle
79
80
81
GROWTH OF NESTLE
Nestle India's growth in revenues has dropped from over 20 per cent a year till
about 2011, to 8 per cent in the quarter ended September 2013, which is its last
query by ET, stating that since the company was in the 'closed period', it would
be unable to comment.
To revive its fortunes in India, industry experts said Nestle could do well to bring
in fresh perspective from outside. "One of the best ways forward for Nestle
partners," Pinakiranjan Mishra, partner and national leader (retail & consumer
products) at Ernst & Young, said. Currently it works mostly with its own set of
Industry peers say the lack of an Indian CEO could be another reason for
Nestle's comparatively slow growth in the country. After Daraius E Ardeshir quit
"Understanding local consumers and insights, and being in direct contact with
market realities are critical," CEO of a top global foods firm said, requesting
82
Healthcare and PepsiCo have almost always banked on Indians to head their
years now.
Under Carlo M Donati, who was incharge from 1998 to 2004, Maggi noodles
became a top power brand and the firm kicked off an innovation pipeline of
products such as Munch. Martial Rolland led Nestle from 2004-09, followed by
Antonio Helio Waszyk till October 2013 when MD Etienne Benet took over.
rapidly.
At a time when most firms are innovating products, analysts and rivals say
Nestle doesn't have enough products for the middle class. The firm is also
ITC's Sunfeast Yippee and HUL's Knorr soupy noodles and to a small extent
GSK's Foodles have taken away share from its flagship Maggi, although the
Nestle brand still dominates with 80 per cent market share. Newer entrants
such as Danone in dairy, Cremica in ketchup and several regional players have
been making it tough for Nestle to grow its volume share. All this shows that
Nestle needs a new recipe for India and, perhaps, an Indian at the top to
prepare that.
83
INBOUND LOGISTICS
Nestle India’s inbound supply chain is similar to most companies in the business,
using tankers, collections and so forth to bring the milk into the plants. As early as
1999, Carlo Donatti, Nestle India’s CEO, had talked about Nestlé’s foray into tetra
packed milk which needed a basic shift in supply chain. In an interview to a business
magazine, Donatti acknowledges that, if Nestle launches milk in tetra packs, its milk
production facilities will have to be close to its customers. “You must have satellite
factories and manufacturing facilities close to the market,” he says. Nestle has a
giant
operation going at Moga in Punjab – set up in 1962, the plant processes 800,000
litres of
milk that’s collected from 71,000 farmers, every day. But to be close to customers,
the
equivalent of the Moga plant may have to be set up around the country, with perhaps
smaller plants at the district level. So Nestle may have to eventually invest huge
sums in
setting up plants, though it won't have to invest in freezers for shops because milk in
The coffee supply chain is of course more volatile dictated by global pricing, which
in turn affects inventory planning. Nestle has no major issue with either milk or
coffee
inbound logistics.
Trace ability in the entire chain was crucial. Nestle India demarcated trace ability
of goods into two types - reactionary (trace and point the goods after an event), and
preventive (ensuring the goods are a high quality right from the start). In this regard,
84
Nestlé’s views are very similar to those echoed elsewhere in India. Both these, needs
information back up. Firstly, regarding the type, speed, format and ease of data
collection; and secondly on the IT system back up". In all these, it’s the people that
will
make the difference. Today, Nestle uses MRP and ERP for internal planning and
processes, but our folloups with vendors and others still remain on phone, fax and
85
OUTBOUND LOGISTICS
The longer the supply chain, the weaker the demand signal becomes. In India, on
retail side as well as the vendor’s side, Nestle has too many intermediaries. That
adds to
time and costs, also badly impacting quality. In India, no feedback comes from
retailers.
The only source is Nestle's own staff, and the data is limited by sheer size and
complexity of the Indian market. It is in these conditions that initiatives like ERP,
SCM
In Nestle India, the demand plan using statistical tools the demand plan using
statistical tools and sales data is first prepared, then broken down into stocks data -
where and when to hold, which in turn gets broken down into a manufacturing plan.
This plan is then further broken down into materials plan handed over to the
different
vendors. For materials like cocoa and coffee, where imports play a role, stock norms
could be one-month stock, or price based. If prices go down, stock up; if up,
maintain
the safety stock only. Milk is brought in daily, as detailed above. The finished goods
move by truck, containerized trucks and concor (by rail) to far off areas. Nestle has
no
issue with outbound transport, using very much the same structure as most corporate
in
India. It spent Rs. 87 crore in 1995. Spend on freight has remained well in control at
around 5.4 percent of net sales, in spite of increasing sales over the past five years.
86
Product strategy also plays a role in Nest's supply chain. Nestle plans to market
milk in tetra packs, which gives milk a longer shelf life and in fact helps by
increasing
the sales window. Because milk can be sold over a longer period of time, it can also
be
distributed further. Nestle India has a world of experience to draw upon in strategy,
implementation and usage of the Net and e-commerce for its supply chains here. At
Nestle's the consumer demand chain involves the entire business including people
and
processes as well as managing the links between them. The importance Nestle places
on
The keywords for linking people with the technological infrastructure are connect,
collaborate, consolidate and compress. The last named involves cutting least times.
And
discovered the root causes for such problems were: 45%, partner's process, 36%
nonaligned
systems and 19%, incomplete data and poor communications. The solution lies
information
87
IT has been used as a tool in Nestle, but Nestle's is not award by E-Commerce's
newer channels that argument existing ones. At the same time Nestlé’s would retain
its
88
ABOUT BRITANNIA
Britannia is the market leader in the organized biscuit and bakery product market in
India. Biscuits contribute to more than 80% of Britannia's total turnover. Other
products
include bread and cakes. Britannia diversified into dairy products in 1997 with
processed cheese and dairy whitener. The portfolio was expanded with the launch of
The biscuit market in India is estimated to be 1.1mn tap, valued at Rs35bn. The
unorganized sector accounts for over 50% of the market. The market has been
growing
1.5kgs,
reflecting the huge potential for growth. Manufacturing was reserved for small scale
up
to 1997, which put large players at a disadvantage. In the organized sector, Britannia
and Parley are the only national players with dominant market shares. Other
organized
players include domestic players like Brakeman’s, Champion, Quality, Praia and
MNC’s like SmithKline Consumer, Kellogg’s, Sara Lee, Heinz, Excelsior (Nestle)
and
United Biscuits.
Operating margins have been improving despite the fast pace of new product
launches in the last 2-3 years. Rationalization of manufacturing operations, and
greater
contribution of higher margin dairy products has both contributed to the margin
gains.
Britannia has decided to hive off its dairy business into a joint venture with the New
Zealand based Fonterra Cooperative. Britannia and Fonterra will each hold 49% of
the
Rs2.25bn equity, while the balance business associates will hold 2%.
89
Again in this case where milk is the main raw material, the inbound logistics is
governed by time. But inbound logistics in case Britannia is not as efficient as in the
case of Maul, though it works more or less on the same principle as that of Maul.
As it also uses VCCs but it does not matches the scale and reach of Maul. Further
management
V.K.Rao is going to be implemented very soon. Thus Britannia uses the local
Channel
means i.e. near and easily accessible to the plant location in the respective city and
this
Products of Brittan
91
92
93
GROWTH OF BRITANNIA
The company said the organisational changes will enhance "Britannia's position
"We are preparing Britannia for high growth in India operations by catering to
the changing food habits of the evolving Indian consumer and pursuing
opportunities for growth in the overall food domain, here and abroad," said
During Bali's tenure, first as CEO and then as MD, the company's revenues
have quadrupled from Rs 1,510 crore in 2005 to Rs 6,185 crore in 2013. But net
profit in these eight years has increased from Rs 149 crore to Rs 259 crore, a
This is because the company has had to navigate high costs and ward off
competition not just from older rivals such as Parle and ITC in its core biscuits
business, but also from relatively new entrants like Cadbury Kraft's Oreo and
94
While biscuits still make up over three-fourths of its total sales, the company
has made an aggressive push into other categories such as milk, cheese and
ready-to-eat food to earn higher margins. In these segments, too, it is facing stiff
competition from MTR, PepsiCo and its erstwhile partner Danone, among
others.
The international business currently accounts for less than 10% of Britannia's
revenues, with the Middle East being its main overseas market. It operates in
of Britannia and Associates (Dubai) Ltd, which in turn holds investments in the
international business is very small right now, and there could be some
95
PLANT LOCATIONS
Britannia's plants are located in the 4 major metro cities - Kolkata, Mumbai, Delhi
and Chennai. A large part of products are also outsourced from third party
producers.
Dairy products are out sourced from three producers - Dynamic Dairy based in
96
FUTURE STRATEGIES
The firm must recognize that it cannot make this journey alone. Companies that
want to be industry leaders realize they must reinvent the total network in which
they
are merely one player. To achieve such leadership, a firm must cooperative in
creating
the value chain constellation that will dominate an industry. This network consists of
linked set of agile companies that not only react to market challenges but in fact
dynamically anticipate and exploit new opportunities that can sustain profitable
revenue growth and exceptional shareholder value well into the next decade.
organizations
With the road map laid out and the destination defined, value chain partners can
works
for other networks or on new and innovative designs created by the members of the
97
Suppose that these revenues are 10 to 20 percent above the business plan. Imagine
percent, and inventory as a percentage of revenue cut in half. Add to the dream in
fact
that shareholder value rises because of a doubling in earnings per share, and
customer
These results can be achieve by leveraging the network effort and the enabling
shareholder value through the supply chain strategies and solutions outlined in this
United efforts may be used to move an entire industry forward. Efficient health-care
response (EHCR), efficient food service consumer response (EFCR), and several
forecasting,
constellation focuses on meeting the classic supply chain objective; offering the
right
98
combination of data, products, and services to customers and consumers at the right
time and place and at the right price. Available-to-promise is an important feature of
this alliance, backed with the lowest total delivered cost. To achieve this reality, the
order.
A glass pipeline for viewing availability and flow of goods and services.
99
OBJECTIVES: -
IT.
100
RESEARCH METHODOLOGY
METHODOLOGY: -
The study conducted to achieve the before said objectives was both exploratory and
format.
Primary source
Secondary source
Primary sources: -
respondents.
101
Secondary Sources: -
Websites
CMIE Report
Business magazines
Trade guides
102
QUESTIONNAIRE/TECHNIQUE USED: -
Open ended questions: - To bring out the ideas and pertinent thinking
of the respondents.
Multiple-choice questions: - These questions made answering
Tools: -
BRITANNIA.
103
LIMITATIONS
Throughout the study utmost care has been taken to avoid biases, errors so as to
ensure authenticity and accuracy. But there is possibility for some discrepancies to
Respondents may give their biased opinion, as they know the identity of
interviewer.
understanding it fully.
104
DATA INTERPRETATION
Q1.
Importance of various functional areas
Brand Mgmt.
Advertising Mgmt.
Distribution channel
Management
Physical
distribution/Logistics
Management
Demand forecasting
& Management
Sales admn. & Mgt.
Functional areas
Here we see that almost by all the companies the functional areas of Physical
most
Important. Thus we learn how important is distribution these days as it even drives
the
branding factor.
105
Q2.
6
7
Sustainable Bus.
term
performance
Greater market
dominance
Competitive
advantage
Total cost
containment
Dev. &
maintenance of
harmonious
channel
relationships
Improvement of
economic &
social welfare
ratings
In this graph we see that why companies want efficient distribution management.
Thus accordingly respective companies gave ratings. The reason, which was rated as
most important by almost all the companies, was Sustainable Business growth &
longterm
106
HLL
in case of HLL
6
7
movement and
Delivery of Products
Availability and
proper storage of
products
Fulfilment
Functions
Here the role of various channel members like C&F agents, Stockist and Retailers
under the broader function of Logistics & Exchange were rated on a scale of 7,
where 7
is the most important. Rest is quite evident from the graph that which sub-function
was
107
2.) MARKETING FUNCTION
Market
coverage and
penetration
Facilitating
Buyers in
Information
search
Supporting
Buyers in their
Purchase
Decision
Product
Holding and
Risk - sharing
Local Credit
(if any)
Push Effort to
generate sales
volume
Trust Building
Marketing functions
Here again the role of various intermediaries is rated under the broader function of
108
0
1
Product
performance
Market
knowledge
Consumer
Tastes and
preferences
Dynamic Price
effectiveness
Competitors
Actions and
Reactions
Effectiveness
of Current
promotional
strategy
categories
Here again we see that role of channel members varies with category of function as
in
product performance C&F agents plays no role at all. Similarly in Dynamic price
109
NESTLE
Here we see there are no C&F agents as company has already done away with them.
Therefore, in case of timely Intact movement and delivery of products and in order
110
0
1
Breaking Bulk
Assortment
Timely, intact
movement and
Delivery of
Products
Availability and
proper storage of
products
Order processing
and Fulfilment
Function
C&F Agent Stockist/Distributors Retailers
2. MARKETING FUNCTION
search
111
penetration
Facilitating Buyers in
Information search
Supporting Buyers in
their Purchase
Decision
Risk – sharing
Push Effort to
generate sales
volume
Trust Building
Function
112
0
1
Product performance
Market knowledge
Consumer Tastes
and preferences
Dynamic Price
effectiveness
Competitors Actions
and Reactions
Effectiveness of
Current promotional
strategy
Function
C&F Agent Stockist/Distributors Retailers
GCMMF (AMUL)
movement and
Delivery of Products
Availability and
proper storage of
products
Functions
Here this graph tells us very clearly that where time is a pertinent factor. C&FA play
most important role than distributors and retailers. This is so because products are
113
34
Market
coverage
and
penetration
Facilitating
Buyers in
Information
search
Supporting
Buyers in
their
Purchase
Decision
Product
Holding
and Risk -
sharing
Local Credit
(if any)
Push Effort
to generate
sales
volume
Trust
Building
Functions
In this graph we learn that in push effort to generate sales, trust building, helping
buyers
in their decision and facilitating buyers in information search, retailers play most
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5
6
Product
performance
Market
knowledge
Consumer
Tastes and
preferences
Dynamic Price
effectiveness
Competitors
Actions and
Reactions
Effectiveness
of Current
promotional
strategy
categories
Ratings 1 being least important
In this graph we see that for judging the effectiveness of current promotional
strategy
and competitors action, stockists/distributors and retailers play a major role than
C&F
agents
BRITANNIA
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8
Breaking Bulk Assortment Timely, intact
movement and
Delivery of Products
Availability and
proper storage of
products
Fulfilment
Functions
Here we see all the three play an equally important role in almost all of the Logistics
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3
4
Market
coverage and
penetration
Facilitating
Buyers in
Information
search
Supporting
Buyers in their
Purchase
Decision
Product
Holding and
Risk - sharing
Local Credit
(if any)
Push Effort to
generate sales
volume
Trust Building
Functions
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8
Product
performance
Market
knowledge
Consumer Tastes
and preferences
Dynamic Price
effectiveness
Competitors
Actions and
Reactions
Effectiveness of
Current
promotional
strategy
Category
118
Cost of production
(Rs Cr)
Distribution Cost
(Rs Cr)
Outbound
Cost/Sales (%)
RM Inventory (Rs
Cr)
FG inventory (Rs
Cr)
RM Inventory
Holding (Days)
41 50 52 50 49 1.5
FG Inventory
Holding (Days)
31 33 30 28 29 (1.1)
Inventory Holding
Material
Consumption (Rs
Cr)
Inbound Logistics
Inbound Logistics
Cost/Sales (%)
Total Logistics
Total Logistics
Cost/Sales (%)
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CHAPTER V – FINDINGS
Following Are The Findings Of the Study On The Topic Dynamics Of Distribution
In
FMCG Industry
India is still in its infancy in the logistics and supply chain business.
FMCG industry is in doldrums and as such must look for ways to save costs.
Thus the most drastic end effective way is controlling the distribution or in
Today distribution systems have a linear flow and some hub and spoke,
whereas the trend is moving towards Hub & Spoke at more than one level and
With the passage of time use of sophisticated software tools- ERP, Trend Data,
One major finding is that, while branding differentiates the image of the
Rural markets would be the cornerstones of all FMCG strategies in the near
future and this difficult markets will only be cracked by companies that form
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FMCG companies are now realising that change will come faster and harsher
than ever before, so why not change before change is thrust upon. Therefore,
Distribution has suddenly emerged from the background of the business to the
very forefront.
Last but definitely not the least with all attention now being centred on Supply
chain and logistics specifically in FMCG sector, this could well turn out to be
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CONCLUSION
important. In India, all the various elements of the chain already, exist,
but none work in a cohesive entity. The disparate players even today
look no further than their immediate supplier and dealer. On one hand
the farmer get one-third of the final retail price, while on the other,
high prices of value added processed foods limits the demand. There is
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SUGGETION
On the basis of the project done and the before said analysis we may conclude that
the distribution management has emerged from the back-benches of the marketing
discipline and is all set to become a specialized area of expertise, critical to the
success
of any brand. Till date the distribution strategies of FMCG companies were
evolutionary, but from now onwards the strategies would be revolutionary and in
this
In recent years the profile of distributors has been changing. No longer are they
old style traders, sitting in dusty godowns and keeping track of inventories with hand
written account books. Those distributors had mostly been appointed in the
preliberalization
era of low competition, where supply was what mattered. Business was a
minded breed of local entrepreneurs, who couldn’t care less about the company or its
managers, is supplanting them. Their sole interest is growing their business and
increasing returns. However it is worth noting that role of distributors in this sector
is
changing
paradigm is must.
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the case with distribution. Information technology has enabled distribution as key
uncertainty
that simply existed because information was not being shared. IT enables integration
of
disparate processes successfully.
The concepts of distribution or SCM started filtering in India in late 80’s and
early 90’s and now they are beginning to acquire momentum over the broad business
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BIBLIOGRAPHY
Agawam D.K, Dr. Deeply Singh and Agawam D.P. Paper on Efficient Consumer
Agawam D.K, Dr. Deeply Singh and Agawam D.P. Paper on IT enabled
Distribution
Systems, 2000
Hill
Dyer Jeffery and Hatch Nile, “Using Supplier Networks to Learn Faster”, MIT Sloan
Harper W.Boyd, Marketing Research, Prentice Hall Europe, 3rd Edition, Chapter
of
India).
Business
Strategy, No 2 - 2004
CMIE Reportes
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WEBSITE
www.hll.com
www.aberdeen.com
www.agencyfaqs.com
www.web-enable.com/industry/
www.expresscomputersonline.com
www.i2.com/home/solutionareas/scm
http://www.dobney.com/Research/Brand_equity_research.htm
http://www.indiainfoline.com/fmcg
http://www.domain-b.com/news_review
http://www.adclubbombay.com
http://hydepages.com
http://www.agencyfaqs.com/news/stories
http://www.expressindia.com
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