The case study is an attempt to explain the current Supply Chain processes, issues and the best practices at HUL. Just to give an idea of the utility of IT in SCM, a financial analysis has been done to show the changes in revenue and net earnings when SAP was implemented in HUL in 2004.
Modern Trade Challenges
Business optimisation Hurdles
Process Centric Collaboration
Result of the Implementation
Supply Chain Management, 2011
Existing Supply chain
Key Issues in the SCM @ HUL
Exhibit 1 – Financials (Before and after SAP implementation)
The fast moving consumer goods (FMCG) industry is an unforgiving one. “If a retailer’s shelves are empty of a manufacturer’s product, he will simply fill them with a competing product,” says KS Arunkumar, IT Group Manager, Hindustan Unilever Limited (HUL). This challenge of ensuring that the business is optimised to cater to ever changing market demands is an issue that HUL is deeply familiar with. Established in 1931, this stalwart of the India FMCG market is a subsidiary of the world-renowned Unilever Group. Behind HUL’s vast business footprint that spans 4,000 distributors is an entity consisting of 15,000 staff as well as multiple factories, warehouses and branches. It is not easy keeping its house in order but it found a perfect solution to its business management needs with SAP. Modern Trade Challenges
HUL’s SAP journey started in 2004 when it decided to streamline its operations in order to address the emerging market challenges. Market fundamentals require HUL to ensure availability of its products so that it can respond quickly to customers’ orders in the most cost efficient manner. This is even more critical in the emerging modern trade scenario. “The distribution of goods across the country in the right quantity, right time and at the right place is already one of the biggest challenges we face. In order to thrive in the era of modern trade, we need to deliver a service level that is higher than what the industry is used to and operate a supply chain which is superior to our competitors’,” says Arun. Business Optimization Hurdles
The first part of HUL’s business optimisation strategy to enhance efficiency involved consolidation of its warehouses and branch offices. It streamlined its business systems concurrently too, and it was in 2003 that HUL discovered the limitations of its incumbent enterprise resource planning (ERP) system. “The old system just couldn’t scale up to meet future transaction and process capability requirements of the modern trade,” explains Arun. At the same time, HUL knew that business optimisation and supply chain efficiency cannot be achieved without tight communication links with its external business partners. However, the task of ensuring seamless connectivity between its IT systems with that of its distributors was not an easy one. For instance, the company was using an in-house developed e-business system to manage the replenishment and order fulfilment process. This was done by exchanging and synchronizing inventory and sales data between itself and its distributors. “But because our customers had multiple, disparate systems of their own, integrating our system with theirs to facilitate data exchange was a big headache. Furthermore, the e-business system was a customized module. So as our business grew, there were problems scaling it to fit our constantly changing business needs,” he adds. In a distributed general trade environment, HUL has implemented a standard distributor management system. To cover the extended supply chain, the distributor operations needed to be tightly integrated with its internal ERP solutions. This system is functioning well, HUL wants to preserve its investment in this area. This meant that the new ERP solution must be able to integrate with this back-office application too, so that HUL...
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