SUPPLY CHAIN

MANAGEMENT
Experience at Hindustan Lever

Pramod K Nigam
13.07.2001
 STRUCTURE

• Presentation comprises
– Corporate Purpose
– Supply Chain Vision
– Initiatives / Achievements
– Way forward
 CORPORATE PURPOSE

Our purpose is to meet the

everyday needs of people everywhere -
to anticipate the aspirations of our
customers and consumers and to
respond creatively and competitively
with branded products and
services which raises the quality of life
 HLL BUSINESS PROFILE
India's largest and leading consumer products company

Market size Share

Home Care Rs. 40 bln 39 %

Personal Care Rs. 65 bln 54 %

Foods and Beverages Rs. 100 bln 26 %

Industrial and Agricultural : i.e. Fertilisers, Chemicals

100 + brands
Wide spectrum of businesses from Aviance (direct marketing)
to Atta (mass market)
SUPPLY CHAIN VISION
 THE TASK

Complexity
SKU’s, -1200 + Deliverables
Channel Multiplicity (2 ts to 2 Lac ts p.a.) Freshness
Retail servicing Suppliers - 1000 + Speed of innovation
Wholesalers Inputs - 5000 +
Direct marketing Mfg units - 100+ Cold chain Fidelity
Institutional sales Distribution centres - 110 Multiple price points
Stockists - 7000
Seasonality

Excellence in customer service

Best value to customers
Competitive cost structure
Operational Excellence
 KEY FOCUS AREAS
Supplier management Manufacturing management Customer management

Vendor Development Regionalisation Key accounts

Scale economies Flexibility Expand rural reach
Strategic alliances Process innovations Freight economies
Vendor managed Asset productivity
inventory Make v/s buy v/s Imports
Focussed vendors
‘Win - Win’ approach

• Replenishment logic across the entire supply chain

– Offtake and not forecast driven
• Networking and connectivity
• Information : Quality, Speed & Transparency
 SUPPLY CHAIN
INITIATIVES / ACHIEVEMENTS
 THE IT STRATEGY
MFG-PRO Financial

HO Branch INFORMATION

GOODS
RDC

Supplier Factory Depot RS Retailer Consumer

RS Connectivity
MFG-PRO MFG-PRO Customer Service
Manufacturing Distribution Monitoring
 SPREAD OF ERP IN HLL
●
Businesses:
●
Detergents, Personal Products, Tea, Coffee, Oil
and Dairy Fats, Culinary Products, Ice Cream,
Animal Feeds, Chemicals and Exports
●
Factories: 100 +
●
Distribution Centres: 110
●
Buying Centres: 5
●
Offices: 20

Inventory, Purchase, MRP, Despatch/Excise, Costing, Fixed

Assets/Capex monitoring, GL, AP, AR, Tea Management,
Central Buying, Quality, Invoicing , Banking
 BUFFER DEPOT CONCEPT
Low Volume SKUs

EARLIER

Factory 1 Factory 2

Direct
servicing of
Depots
Centres

Depot Depot Depot

21 days stocks
 BUFFER DEPOT CONCEPT
Low Volume SKUs

EARLIER NOW
Factory 1 Factory 2
Factory 1 Factory 2

Replenish
Direct buffers
servicing of
Depots Regional Buffer
Centres Daily
Replenishment of
aggregate demand

Depot Depot Depot

Depot Depot Depot

21 days stocks 3 days stocks

Lower inventories with improved response times

 PARADIGM SHIFT
 Monthly forecast driven to daily order driven distribution plan;
Weekly to daily frequency of planning
 Manual to automated Planning
 Physical stock reduction from weeks to days
 Integration of sales, commercial & planning operations
 Reliability of IT infrastructure
 ERP package - Mfg/Pro at all sites

 Robust hardware

 Reliable wide area network - 240 sites

 RESPONSE TIME

14 Days

2 Days
 SERVICE LEVEL INDICATORS

Stock Service Index - an indicator of stock
availability - % SKUs having stock upto pre-
defined level

Idle Stock Index - stock over norm as a % of total
stock

Stock Outs - % of SKUs with no stock
 WITH LOWER INVENTORIES
Improved Customer Service

50
19

10
75
95

0
19

10
76
96

82

0
19

74

87
97
19

62
98

91
19

55
Cover Index

99

93
70

80

90

10
Se

0
rv

Se
ov
ic

rv
e

er

i
(%

ce
)

(Detergents)

Inventories halved with 25% improvement in customer service

 WORKING CAPITAL TURNOVER
Discontinuous Improvement
60

50

40

30
No. of Times

20

10

0
1991 1995 1999

10 times improvement in turnover

WAY FORWARD
 KEY PRIORITIES
• Web enable the total supply chain

• Extend replenishment logic across

the whole chain (supplier to retailer)

• Exploit B2B opportunities

• Sustain cost, productivity and quality leadership

• Move to a new paradigm in customer service

Leverage skill, scale and technology

 WEB ENABLED SUPPLY CHAIN

DECENTRALISED PHYSICAL OPERATIONS

CENTRALISED INFORMATION PROCESSING

Central web
Off take

Retailers
Supplier Factory Depot Stockist
Internal supply chain processes

More rigour in customer service standards

Online information to support decision making
Transparency across the extended supply chain
 SUPPLIER CONNECTIVITY
Factories
Purchasing

Net

Suppliers
Banks
 RS / TRADE CONNECTIVITY
Sales Team

C&FAs

Retailers

Net

Banks
Stockists
 TO SUM UP
• Leverage technology to establish complete connectivity
– Harness knowledge across the chain
– Exploit global synergies, where relevant
• New channels for improved reach
• Improve speed to market through decentralised supply
chain processes
– Seamless access to information across supply chain
– Unlock the full potential of intellectual capital

SUSTAIN LONG TERM COMPETITIVE ADVANTAGE TO ….

 MAXIMISE VALUE CREATION

SATISFIED DELIGHTED
SUPPLIERS CONSUMERS

MOTIVATED
EMPLOYEES

VALUE CREATION FOR

SHARE HOLDERS
Thank You