Global Supply Chain Management of Hindustan Unilever - Essay Example

Global Supply Chain Management of Hindustan Unilever Contents Contents 2 Introduction 3 Identify the risks and issues for this organisation to their supply chain (using a particular product segment) based on the changing economic climate 3 Optimal design of current supply chain to achieve lower cost 5 Use of information technology to aid the transformation to a responsive Omni-channel responsive business mode 8 Adoption of sustainability measures (green standards) to ensure long term security 10 Evaluate the role of suppliers and various supply chain partners in maintaining CSR expectations of end customers 12 Analyse the organisation’s annual financial results and derive the supply chain performance from analysis of the financial performance indicators 14 17 Conclusion 18 References 19 Introduction HUL (Hindustan Unilever Limited) was formerly known as Hindustan Lever Limited. It is one of the India’s biggest fast moving Consumer Goods Company. The company has been able to attract many customers and is found that two out of three people in the country have been using products launched by HUL. The company has sales of around Rs. 13718 Cr with an approximate sales volume of about 4 million. The company has in total of 20 categories of distinctive products which are been used in the daily life of every individual. Most of these products are in the category of hone and personal care, though the company also has a range of food and beverages in its product list also. The company is also one of the largest exporters and has its branches in various parts in other countries where it has expanded its business successfully. The various products that the company have are like Lux, Wheel, Rin, Surf excel, Kwality Wall’s for ice cream section etc. and many more brands in the category of tea, coffee, soaps, personal care products, ice cream. To have such a good and wide network the company has a good supply chain management system. In this report the supply chain network of the company and its importance in the business process of the company is been seen using various theories and concepts of supply chain management. The effective use of supply chain and the process for implementation of efficient supply chain is been analysed in this essay. Identify the risks and issues for this organisation to their supply chain (using a particular product segment) based on the changing economic climate For such a huge company like Hindustan Unilever it needs to have an effective supply chain management and have a good control over the supply chain network. The company has a good supply chain network and different for villages and different for the urban cities. There are few issues related to the supply chain network of the company which can affect the company and also is affecting the company in a huge way. With the growing competition the company needs to have an error free supply chain network so that it can capture most of the market share (James, Rowland-Jones and O’Brien, 2004, pp. 56-64). The issues that are affecting the supply chain network of the company are been listed below. Order’s are not getting fulfilled properly as every retail shop is finding shortage of some or the other particular product in their stores. This unavailability of thee product does affects the company as the customers tend to buy other brand products and HUL looses customers in this way. This also makes the retailer to be less interested in selling other HUL products and he/she prefers to sell other brands which are available more in the store. This generally happens because of the shortage of stock in the depots. This affects in supply of the product to the retailer o time and thus the order been put by the retailer is not been fulfilled successfully. The newly launched products that are already been advertised through various mediums are not been supplied to the stores on time as a result of which customers looking to avail that particular product might turn up in taking a competitor’s product of the same category. This affects the company’s sales in a huge way as the customers are already getting used to other brands and they might also start their brand preference or liking towards their brand. This will make it more difficult for the company to get the customers to shift their preference. The employees in the supply chain network don’t get good payment from the company as a result of which they don’t work in a dedicated manner for making the supply chain efficient. Thus the employees don’t visit the retail outlets regularly and even if they visit they generally visit the big stores leaving the small stores. This doesn’t allows the company to focus on the small stores as well, because of which lot of market is not been captured by the company and small retailers look to sell more of other brand products. HUL doesn’t conducts any meeting between the large and small retailers and wholesalers to understand the market demand and also making the members of the supply chain network getting involved to the supply chain more, which would make them support the company in a better way by selling more of products under the band of HUL. Thus the company has lot of issues related to the supply chain network. These issues are affecting the company in a huge way in increasing by reducing the sales volume as a result of which its profit margin is also going down. The company has to have an effective and efficient supply chain network not only in the country but also in other parts of the world so that it can have a good idea about the demand of a particular product and also provide enough stock in the retail outlets so that they sell the products under the brand name of Hindustan Unilever (Crosby, 2004, pp. 124-128). Optimal design of current supply chain to achieve lower cost The current supply chain network of the company can be seen in the below diagram which clearly shows how the company distributes its products and makes it available for the customers. It can be seen from the diagram how the products flow from the factory to the customers of various forms like army people, cooperative stores and also end customers. The company has two stages one of secondary sales and other of primary sales. Primary sales is in regard to the selling of the product from the factory or the company to the distributors, government societies and also to the army canteen, in this the company directly sells its products to the customers without any middle men (Johnston and Clark, 2008, pp. 234-243). On the other hand in the secondary sales the distributors who get the products from the company sell them to the retail outlets or the wholesalers and the government provides the products in their co-operative stores from where the end customers can avail the particular product of their choice (Mahadevan, 2009, pp. 156-164). The company has a good supply chain network for the supply of its products across to different places. In case of villages the company supplies its products to a big distributor from the distributor in the town to the big distributor been set up covering 10-12 villages. From this distributor the products are been supplied to each retailer in all the 10-12 villages. The company is incurring a lot of loss because of the increasing cost. HUL can look to reduce the cost by having an information flow in its supply chain network which will help the company to know the exact requirement of the market and also make the company understand the needs and demands of the customers based on which the company can launch the products in the market. This will help the company to reduce the cost and also meet the requirement of the customers. The flow of information from the retail outlets to the distributors from where the company can get to know will help the company to know which product has more demand and which product has less demand in the market. Based on which the company can supply the products to the market. It will make sure that the company can successfully full the orders made by the retailers and there is no shortage of a particular product in the market (Liker and Meier, 2005, pp. 78-85). The flow of information in the supply chain network is been shown in the below diagram which gives a clear indication on how the information related to the demand and the changes in the market that affect in the successful running of the company’s business process. Thus the optimum supply chain network for the company will have both flow of product and also flow of information. This will enhance the company to remove all the issues present in the supply chain and also help the company to have good competitive advantage over the competitors fulfilling the orders and also involving all the members of the supply chain network (Ravi, 2008, pp. 45-52). Use of information technology to aid the transformation to a responsive Omni-channel responsive business mode With the increasing growth in the technology the supply chain network of companies has become more efficient and also effective. The latest technological improvements have helped the company to remove the problems in their business process. Companies across the word have utilised various technologies in their supply chain network which has helped them not only to supply their products in right time at the right place but also get information from the market which helps the company to implement better process and also improve more. Omni-Channel model is improved version of multi-channel model wherein the company uses other medium also in its supply chain network like mobile internet devices, direct mail an computers (Martinich, 2008, pp. 45-57). HUL works on the basis of continuous replenishment in its service. This is possible only because of the IT connectivity that the company has across its complete supply chain network. They have sophisticated network across the complete supply chain network and has used IT system to bring all the members together and also move close to the market place. The company has launched RS Net initiative in 2001 which is used to connect the Redistribution stockists (RS) across the entire supply chain network. The redistribution stockists include the Home & personal care products, foods & beverages in more than 1200 towns and cities across the country. These stockists accounts to 80% of the total company’s turnover. RS Net is one of the biggest and popular e-commerce initiatives taken by a retail company in India. This helps the company to have a good monitoring of the stocks and also have a good inventory management process in the company along with providing important information about the inventory to the company management from time to time. This software helps the sales team to know which product is been sold in what amount in which part of the market on daily basis (Slack, Chambers and Johnston, 2001, pp. 245-252). Apart from this the company also has many other IT systems in its process. The salesman books the orders using palmtop in the database directly which helps the company to know the exact requirement of the particular product and in how much time it is needed in the particular store. The company uses ERP (Enterprise resource planning) to have a continuous look over the stock of items in the warehouses in the factory based on which the production is been done. The company looks to have a good IT system in its supply chain network in an effective way and also in an efficient way such that they can supply the right product in the right time to the right place. This will help the company to reduce the chances of shortage of any product in any retail store and thus help the company to meet the demands of the market in an effective way (Stevens and National Cooperative Highway Research Program, 1981, pp. 26-32). The effective use of latest technology and new IT systems in the supply chain network makes the supply chain of the company highly efficient and thus it helps the company to attract more customers and also create a good market share in the available market. The IT system also helps the company to get information with regards to the demands of the market about a particular product and this will make the company to meet the demand by providing same supply as the demand without any shortage in supply. Adoption of sustainability measures (green standards) to ensure long term security Hindustan Unilever is the biggest soaps and detergents manufacturing company in the country. It has used many actions for having a sustainable business process in the company. The company looks to use many environmental friendly processes in its overall business process. HUL looks to provide reward to the departments which implement the sustainable process which are highly environmental friendly. The company uses environmental friendly products for packaging of the products. Focus is made by the company to make sure that the release of green house gases is been reduced to a great extent after identifying the exact segment where the focus has to be made more (Starr, 1996, pp. 143-147). Hindustan Unilever has a different sustainable development group which has experts from outside the company, who access the condition very strictly and also suggest the changes that can be implemented for changing the work environment, and makes it more environmental friendly. The company has a vision to get all its 100% raw materials from agricultural products by 2020. It has made attempts to reduce the emission of green house gases from skin cleansing and hair washing and also from the washing of clothes. It has reduced the impact of green house gases over the customers by 6% from 2010. The company has also made attempts to reduce the usage of water by reducing its usage in the laundry process by bringing more efficient and less water consuming detergents and soaps (Wireman, 2004, pp. 45-53). The company has looked to reduce its weight in the packaging of its products. HUL is able to achieve this by selecting new materials for packaging which are more environmental friendly and also enables itself in using less material as much possible for packaging. The company has achieved got 9.5% reduction in weight of packaging been used per customer in 2011-12 than 2010 by implementing light weight and new material design. Hindustan Unilever uses the technique of recycling for its packaging process (HUL, 2014). It looks to recycle the materials that are already been used for its packaging purpose which reduces the over production of packaging materials. The company aims to increase recycling at an approximate rate of 5% by 2015 and 15% by 2020 in the top 14 countries which will help the environment in a huge way. For achieving this aim the company has made participation with various governmental and NGO’s. The company uses most of the recycled item from the customers for making plastics that can be used for packaging purpose (Vollmann, William, Clay and Jacobs, 2005, pp. 145-156). Apart from this the company has also made attempts to reduce the wastes in the production process so that the company can utilise most of its resources in the most optimum way and help the company to efficiently utilise the sources helping the environment in a huge way. In the production process the usage of water, energy is been done in the optimum way so that the company doesn’t uses more energy or more water in the production process than required. It takes special care to dispose the wastes in a proper way so that they don’t cause much problem to the environment and also tries to reuse the wastes as much as possible in the production process which also helps the company in reducing its operational cost apart from causing less effect to the environment (Baker, 2002, pp. 176-182).The company tries to reduce its wastes even in the office in the form of papers that are been used, the electric energy etc. This helps the company to reduce the wastes that can be used in some or other way and also reduce their cost in a huge way. It has reduced the office waste by 88% in 2012 from previous year, by reducing the usage of paper in the top 21 countries of its presence by 24% per employee working in the company in all these countries. Most of the invoices were been made electronically at the rate of usage of electronic base for making the invoice increased to 14% in 2012 from 10% in 2010. This also improved the efficiency and productivity of the employees and helped in reducing the wastes to a great extent. The company looks to create long term relationships with the farmers for the supply of raw materials most of which are obtained from the farms and forests. This long term relationships with the farmers help the company to have a secured supply of raw materials from the farmers and also get more environmental friendly materials for production of their products (Hino, 2006, pp. 43-47). The company also takes the responsibility for deforestation and makes sure that they do plant trees also along to compromise the deforestation that takes place because of the company. Hindustan Unilever takes the resources like paper, palm oil mostly from the certified members present in different countries who are been certified by the government for selling paper, palm oil etc. Evaluate the role of suppliers and various supply chain partners in maintaining CSR expectations of end customers Hindustan Unilever looks to give a lot of importance to the corporate social responsibility by helping the society to improve in various ways and also by creating more awareness among the customers. It does helps the society by participating with many NGO’s and conducts various activities from time to time. The company has founded the Hindustan Unilever Foundation, with an intention to work in the areas of environmental, social and economical condition of the society. For making the company to do the corporate social activities the members of the supply chain network plays a major role. As a part of CSR activity HUL looks to give a certain amount of money from every products price which is been sold in the market. For increasing this amount more and more of the products from this brand are to be sold. These can be obtained only when the retail outlets promotes more and more of HUL brand products and make sure that more customers buy more of the products under the brand Hindustan Unilever. With sales of more and more of the products more and more amount can be donated by the company to a particular cause or a charity or to a NGO. The co-operative stores under the government of the country should also look to promote and sell the products under the brand of Hindustan Unilever and the same has to be done even in the army canteens (Monden, 2011, pp. 34-45). It is the duty and responsibility of the members in the supply chain network that are the retailers, co-operative stores, wholesalers, army canteens And also the distributors to make the customers know about the way they can help the society indirectly by buying a product under the brand of HUL. Generally people will look to take up the service by which they can even serve to the society without even spending extra money. When they can serve the society with the same money it makes them feel great as they are able to help the society as well in some manner. For people to know that they have this facility in the market and they can serve the society, the retailers and the distributors in various forms play a vital role in providing the exact information. It is the responsibility of the members in the supply chain to effectively promote the company’s product it a way that they represent a good brand and also a brand which helps in making the society better. These are the responsibilities of the members that are present in the forward direction of the supply chain where the members are directly in contact with the end customers and they help in creating a good brand image in the mid of the customers and also makes helps the company in increasing its CSR activities. On the other hand the suppliers also play a vital role in creating and maintain the CSR activities of the company to the end customers. The suppliers need to provide good quality raw materials to the company so that they can produce quality and environmental friendly products. It is also responsibility of the suppliers to pursue certain CSR activities for the society so that the end customers come to know more about the company and also are highly benefited from the CSR activities. They need to supply all the materials following the legal norms and regulations made by the government and strictly follow those rules on a continuous manner. The company also need to have a good choice of selection of the suppliers and implement proper ways for procurement of the materials. The suppliers must follow all the legal laws like paying the taxes and the other subsidiaries which are been set by the government and the company and also should not lead to any kind of conflicts with the company that might cause problem top the society in a log run. Thus the various members of the supply chain network do create a lot of impact in maintain corporate social responsibility to the end customers. They also help the company to maintain and also increase its corporate social activities towards the betterment of the society along with its growth in long run. It also helps the company to build the society in a better way thus making it possible for the company to f\grow and also help the society grow. Analyse the organisation’s annual financial results and derive the supply chain performance from analysis of the financial performance indicators The financial data for Hindustan Unilever in the last four years from 2009-13 can be seen in the below diagram. It can be seen from the data that the quick ratio has gone down in a huge way from 2009 to 2013, which shows that the company has reduced its inventory stock to a great extent. The inventory turnover ratio has also increased which also shows that the company has moved forward towards implementing the Just-In-Time concept for stock maintenance and it has been able to have an efficient and fast supply chain network. The company has looked to reduce the raw material handling cost in a huge way and in the year 2013 it has not incurred any cost for raw material handling. The company’s service delivery standards have grown up steadily and they have been able to maintain customer case full on time at 93% and have successfully reduced the loss by 20% in 2013 from previous year. The company has a robust supply chain network which has helped the company to increase its sales revenue to 25,810.21 crores to 22,116.37 crores. During the year 2013, the company has made savings of 5% in its overall cost that is spend in the whole supply chain network. The company has been able to achieve this by reducing the wastes and also by improving the process related to sourcing like network optimisation, improved utilisation of logistics available, improving in the technical efficiency, improving the yield and also reducing the cost in production process (HUL, 2014). The company also has seen an improvement of about 15% in providing the products to the retailers and distributors on time and in full quantity from the previous year. The company has been able to achieve this by continuous innovations in its process and by bringing more than 150 innovations in the networks which cover around 50% of the total product portfolio under the company. The company’s focus on the continuous innovation of the company’s practices has made it possible for the company to come up with so many innovative ideas in the supply chain network leading to a significant improvement in the supply chain network of the company during the year 2013 (Johnston and Johnston, 2006, pp. 25-32). The company has reduced its costing in holding on to the finished goods which increases the stock in the warehouse and also leads to lots of costing in the stock maintenance. It has not kept any finished goods in the warehouse and has transported all the finished goods to the members of the supply chain as soon as they were been produced. Thus it was able to remove this huge amount from its cost this year than 2011 when the cost of the finished goods was pretty high and it thus increased the operations cost of the company in a huge way. Even the imported cost for raw materials consumed in the year 2013 is far less that been incurred by the company in 2012, which does implies that the company has improved its supply chain network in a huge way and the companies supply chain members are working very efficiently helping the company to grow more rapidly in the competitive world (Mohana, 2011, pp. 47-54). (Source: Money Control, 2014) Conclusion Looking at this essay it can be seen that the company Hindustan lever has grown at a fast rate over the years and also improved its overall performance in a huge way. The supply chain management of a particular company especially in retail sector needs to be very efficient and error free to help the company in reducing its cost and also in increasing its revenue. The company do have certain issues related to the supply chain network system towards which it needs to focus hard and make sure that they are been removed successfully making the department more efficient. To reduce the cost and also to reduce the waste the flow of information through the supply chain network which helps the company to get the information about the demand in the market according to which the company can supply the products. Utilisation of latest technically build information technology systems is very important for success of the company as it helps the company to store the information and also get information about the stock in the correct way. With growing global warming and efforts made by various countries to adapt eco-friendly systems, HUL has also looked to implement eco-friendly green system in its overall process and also in the supply chain to make it eco-friendly by using various materials and techniques which will reduce the harm caused to the environment by the company. HUL has continuously looked to conduct various CSR activities and also has seen that that the suppliers and other members of the supply chain network also get involved in various CSR activities and help in improving the condition of the society. The financial data of the company has clearly shown that the company has been growing at a fast rate in the previous few years and it has improved its supply chain network in a huge way looking to remove all the issues that it faced in the previous years. References Baker, K. 2002. Elements of Sequencing and Scheduling. Hanover: Baker Press. Crosby, P. 2004. Quality without Tears. New York: McGraw-Hill. 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