materials management hll

8/3/2019 Materials Management HLL

1/13

Materials Management > HLL

USEFUL LINKS Related to this project :

Hindustan Lever Limited

Meeting Everyday Needs Of People Everywhere

Introduction

Hindustan Lever Limited (HLL) is India's largest fast moving consumer goods company, with leadership in

Home & Personal Care Products and Foods & Beverages. HLL's brands, spread across 20 distinct

consumer categories, touch the lives of two out of three Indians. They endow the company with a scale

of combined volumes of about 4 million tonnes and sales of Rs.10,000crores.

The leading business magazine, Forbes Global, has rated Hindustan Lever as the best consumer

household products company. Far Eastern Economic Review has rated HLL as Indias most respected

company. Asiamoney has rated HLL as one of Indias best managed companies. Leading national

publications, like The Economic Times, Business World, and Business Today have also rated HLL as one

of Indias most respected companies and the number one in Market Value Added and EVA.

The vision that inspires HLL's 32,400 employees (40,000 including Group Companies), including about

1,425 managers, is to meet everyday needs of people everywhere - to anticipate the aspirations of our

consumers and customers and to respond creatively and competitively with branded products and

services which raise the quality of life. This objective is achieved through the brands that the company

markets.

It is an ethos HLL shares with its parent company, Unilever, which holds 51.55% of the equity. A Fortune

500 transnational, Unilever sells Foods and Home and Personal Care brands through 300 subsidiary

companies in about 100 countries worldwide with products on sale in a further 50.

State-of-the-art research facility

HLL has traditionally been a company, which incorporates latest technology in all its operations. The

Hindustan Lever Research Centre (HLRC), with facilities in Mumbai and Bangalore, and global technology

centres in India have over 200 highly qualified scientists and technologists, many with post-doctoral

experience acquired in the US and Europe. Set up in 1958, HLRCs aim is to develop new products and

processes, improving benefits and quality of existing products, optimal use of resources, energy

conservation and pollution control. The company has many achievements in these areas, with about 184

patents till date.


2/13

Product and process innovations

Major innovations have taken place in detergents manufacturing. Most recently, HLL has developed a

proprietary technology which reduces water consumption and time taken for rinsing by 50%. It is a

significant benefit, given the acute water scarcity in most of India. Given that laundry consumes upto

20% of household water, this technology will have a big impact.

New technology has helped manufacture concentrated powders without going through the high-energy

route of spray drying. These powders being of high bulk density also need less packaging material for a

given weight compared to low bulk density powders. All the money saved in energy conservation and

processing has been reinvested in better formulations and performance of products. Fundamental

research in the area of particulate soil-fabric wash liquor interactions has led to filing of several patents

that deal with avenues to improve detergency.

Novel detergent bars, like Nil Mineral Bar, and next generation pre-treatment products have also been

developed. HLL scientists have developed a patented breakthrough technology to stabilize iodine in salt,

following work on the stability of iodine under Indian conditions of storage and cooking. Iodine added to

salt is lost in transport, storage as well as in the process of cooking. The technology developed by HLL

encapsulates iodine, protecting its bio-availability. This is a very key benefit, given the importance of

iodine, especially for the mental development of young children.

Valuable insights have also been gathered in understanding soap phases and how soap properties such

as the feel, lather, colour, appearance, size and shape can be improved, resulting in better performance.

Research into how soap gets its rigidity has enabled development of bars containing liquid actives. New

understanding about network forming structurants has enabled creation of novel bars that are milder to

skin, with unique sensory feel and the ability to deliver functional actives onto skin or hair.

Research in the biology of skin pigmentation has led to the formulation of a product like Fair & Lovely

Skin Cream and Lotion. The product has been periodically updated through new patented actives. It has

now become a global success through exports to over 30 countries. The product is equally used by the

local population of these countries, apart from those of Indian origin.

Significant technological breakthrough has also been achieved in the area of ice-cream. A notable

achievement has been development of freezers, which can maintain an operating temperature below

Minus 18 Degree Celsius, even with power cuts lasting upto eight hours. The benefit has been extended

to mobile units like vans and pushcarts. HLL has also developed the capability to design and

manufacture machines in-house or have them assembled by third parties as per given specifications.

This enables the company to set up plants at half the cost of others.

Such technological developments have also led to significant improvement in productivity. The capacity

of a toilet soap line has gone up from 6,000 tonnes per annum in the early nineties to 20,000 tonnes per

annum now, while that of a detergent bar line has gone up from 7,000 tonnes per annum to 40,000

tonnes per annum now, thus substantially increasing capital productivity.


3/13

HLL has also developed a technology to manufacture Instant Tea Powder. This has been used to set up a

100% export-oriented plant in Etah to manufacture Instant Tea Powder for exports to Unilever

companies abroad. Research has also been carried out to see as to how nutrition in tea can be improved

and enhanced.

In the past, one of the most significant breakthroughs of HLLs research initiative has been thedevelopment of a technology to use non-conventional forest seed oils for soap-making which, since the

1970s, has helped save around $1.2 billion in foreign exchange. HLL had received the Government of

India's prestigious award for import substitution. Development of Structurant Technology for soap

manufacturing also helped save costly conventional oils without any compromise on product

performance and quality. The latest technology to produce Distilled Fatty Acid for soap making and the

resultant plant capacity expansion has drastically brought down specific energy consumption while

improving distillation yields. The evolution of continuous soap processing technology has also reduced

energy consumption.

Attracting, motivating and retaining best talent

While these competencies have played a seminal role in HLL's growth and progress, the company's key

strength is its people. HLL's 32,400 employees, including about 1,425 managers, are all sharply focused

on the common goal, which is to meet the everyday needs of people everywhere.

HLL has equally played a seminal role in India's overall employment generation, creating over 200,000

indirect jobs in those sectors of the economy connected with the company's operations. On an average,

HLL creates five indirect jobs for every single permanent employee. HLL abides by a policy of scrupulous

meritocracy, which unfailingly seeks calibre, competence and contribution.

As early as 1942, the decision was taken to develop Indian managers for running the business. The first

Indian Director was appointed in 1951 and the first Indian Chairman in 1961. Managers are selected by a

unique, time-proven system of performance in groups and as individuals. HLL is the number one

preferred employer at leading campuses. It is enriching its talent base with diversity by recruiting people

with complementary skills, especially for the newer businesses, and is also bringing in a large number of

talented women. On completion of training, this includes projects in Indian villages and international

cities, the manager works in different functions.

Progress is based on merit, ability and performance, adhering to the company's Code of Business

Principles. The values of Truth, Courage, Action and Caring form the bedrock of these business

principles. HLL's managers are of the highest standing not only in Indian industry, but also handleinternational assignments in the Unilever world. Today, over 60 HLL managers hold top positions in

different Unilever companies or corporate functions.

Training of all employees began in the early fifties and in-house management development programmes

commenced in 1953. Such formal training activities now cover all levels of employees, through three

exclusive Staff and Management Training Centres, besides training at the company's units. First


4/13

introduced in 1954, productivity techniques and payment by results are now applied at all levels. One of

the most spectacular successes has been in developing a whole new generation of industrial workmen.

Employees at the company's new factories in backward areas have all come from an agricultural

background. But systematic training has converted them into first generation industrial workmen. They

are adopt not only in operating and maintaining state-of-the-art machines but have adopted the latestmanagement techniques like Total Productive Maintenance (TPM). The result has been that HLL

factories, like those in Khamgaon and Sumerpur with first generation industrial workmen, have come to

be recognised as among the best in the Unilever world.

HLL's progressive and constructive policies towards its employees are especially relevant, now that the

country is globalising. The company's belief that a 'fair day's work deserves a fair day's wages' has

helped preserve harmonious industrial relations. The factories register production and productivity

rates, which are the best in the industry, and also have benefits, which are comparable to the best in

their respective regions.

Materials management function

company has its own planning section for deciding the site of the factory office and so on. This

approval of the site depends upon freights, taxes, octroi, cost; SEZs etc. The site which is more feasible

in these terms is selected as the factory, office, etc.

pretty old compared to the other factories of Hindustan Lever Limited as this is the companys first ever

factory. Other world renowned factories are at Silvassa, Haldia, Sumerpur, Goa etc.

Raw materials

Being into the FMCG industry for the past 100 years, Hindustan Lever Limited makes utmost

efforts to place all the necessary materials required for the production process at hand and from the

best of the supplier in the country or even the world.

1. Chemicals and special chemicals- Around 600 types of indigenous chemicals are used in the factory.

The use of these chemicals varies according the production item or the finished product. Suppliers for

the chemicals are the various Oleochemical companies that are, in general, local companies and costsaround Rs150-200 crores. Some of the special chemicals are imported from Singapore. Order from the

company to the supplier and its acceptation process depends upon the lead time of the material. Here

for instance the lead time from suppliers extend from 2 - 4 days whereas that of the foreign suppliers is

from 2-3 weeks to a month even.


5/13

2. Perfumes- Perfumes are the most important chemicals used in the production of FMCGs. The reason

being the varied use of chemicals and the direct use of the finished products by the consumers. The

company uses around 200 types of perfumes depending upon the product, the market for the product

and so on.

For Eg: - the perfume used in Lifebuoy is stronger while the one used in Dove is gentle. The suppliers forthe perfume are as follows:-

IFF

Quest

Firmenich

Bragago

The cost of these various perfumes range from Rs 20-2000/kg depending upon the type of perfume.

This sums to around Rs 200 crores.

3. Oils- Oils are one of the key ingredients in the manufacture of soaps detergents creams etc.

They are specially imported from Indonesia in huge tanker vessels which costs around Rs22,000/ tonRs

31,000/ ton. This vary is price is due the seasons, especially during the monsoon, the costs are the

lowest. Thus for this reason, the company stocks oil for about 2-3 months on an average

4. Extracts: - These are the other natural ingredients chemicals that are used in the manufacture of

the products. They are supplied by the local suppliers

5. Packaging materials- they are one of the most important materials used by the company. Generally

they come in a printed format as prescribed by the company. As they are printed with all the

information of the product-size, colour, weight, name, batch etc, it becomes very easy in codification of

the product, raw material, product-batch etc. and cannot be reused again elsewhere. They are also not

recycled. So the company ensures a systematic and judicious use of the packaging material.

Machineries used in the company:

1. Soap machine: The machineries used in the factory at Sewri were mainly used for the

production of soap bars and detergents. These were the basic machineries that were used in the

manufacture of soaps. But the only problem was that they were pretty old as this factory plant at Sewri

is the oldest of all the plants that the company owns.


6/13

2. Other machines: The other machines used in the company which are quite common are as

follows:-

- Used for stamping or imprinting on the soap bar. This machine stamps around 189

bars/minute and has a shelf life of 15-18yrs.

The company has its own dyes engineering unit in Kholapur which prepares the dyes and the stamp for

the company. Machines produced by the company have a shelf life of around 25-30 years.

- The batch machines are used to print batches on the cartoons which are helpful

while packing the soap bars in the boxes or cartoons.

For every machine there is specific break-down maintenance time which is around 85%, in general. The

machine utilization , though , is not as good as that in the other factories but comparatively it is neither

lagging behind also. The average machine and materials utilization is around 85 % again

Materials handling equipments and instruments:-

As the factory is the oldest of all the factories of the company, the materials handling

equipments also remain to be of the older days. Out of the various materials handling tools and

equipments used in the factory, some of them are stated below:-

- It consists of a vertical framework of angel-iron carrying a platform which can be

raised or lowered for stacking or unstacking(as shown in the diagram). This is used to carry the perfume

drums in the factory from the dry storage room to the feeding centre

Pulley blocks:- It is geared pulley system fixed to an overhead beam and fitted with lifting hook at the

end of a chain. It is used to carry heavy goods items in the factory.

- Folk lift trucks are used in the warehouses to stock the finished products.

-line conveyor:- This overhead tow-line conveyor is so called because it runs parallel

to the two opposite side of the walls thereby helping to carry, load ,and unload heavy items at one time

Materials holding equipments:-

trolled


7/13

huge containers and for months. This is because the lead time of delivery of oil is very large as it needs

to be imported from other country.

of machinery

Purchasing process of the company:-

Follow is the material purchasing process of the company:-

- here the company checks the requirements of the market by constantly

being in touch with them and then analyzing their need. This helps them to have and effective and

efficient research and development processes.

ided, the company then checks the raw materials that are

required for the product, its costs and the suppliers.

quality material at an effective cost. Here, the cost stated by the supplier is again scrutinized on its

actual value and then it is negotiated. This process is known as Price Confirmation Package.

d at an

effective cost are given the title as Star Supplier. A supplier has to provide a test certificate to the

company stating the quality of the raw materials supplied. Every supplier has certain and specified lead

time.

d of raw material is taken, tested and analysed for quality check by the quality

assurance department of the company. If accepted the materials are endorsed to the stores

department. If else the materials are rejected then the supplier comes and takes them back

Research analysis:-


8/13

The company has its very own market research unit and a development process centre which takes care

of the market and consumer requirements. This is done by market research or survey, feedback forms

from customers, retailers and whole seller. These are studied and the results are computed and then

certain specific conclusions are drawn.

Production planning process:-

1. According to the market survey, the company estimates its future sales and prepares the

production plan. This plan is comprises of two parts: -

a.) Rolling Plan b.) Journey Cycle.

A.)Rolling Plan:-

A Rolling Plan as stated by the company is an estimated production budget developed according to the

estimated sales that might take place in the near 3 months. In other words, a Rolling Plan is the

manufacturing budget that is centrally decided for each of the plants located in various parts of the

country for only 3 months.

Eg.

In the case of production of say Dove Soaps, the estimated production is 350 tonnes for the months

July, August, September and is divided as follows:-

July - 120 tonnes

August -100 tonnes

September -130 tonnes.

Now, this tonnage of production of Dove soaps will be distributed amongst the various production units

in the country. The central body will decide which unit will produce how much for the month. After

deciding, this central body allocates the production plan to these various units for production. This

production plan is available online for every unit which is connected to the central authority.


9/13

According to the Rolling Plan the materials department allocates the required raw materials to these

units. This Rolling plan of 3 months is then further divided in a Journey Cycle

B.)Journey Cycle:-

A journey cycle is the break-up monthly rolling plan. This helps in proper ordering of the raw

materials and ensuring that the estimated production and the actual production do not lie in very far

away from each other. In other words a Journey Cycle is the divided version of the rolling plan. The

rolling plan of three months is divided into journey cycle of every month which is further divided into 4

weekly plans.

Eg. In the above given example, considering the month of

July:

Week 1 2 3 4

Production 25 tonnes 30 tonnes 40tonnes 25 tonnes

August

Week 1 2 3 4

Production 25 tonnes 30 tonnes 25 tonnes 20 tonnes

September

Week 1 2 3 4

Production 30 tonnes 35 tonnes 35 tonnes 30 tonnes

tonnage is considered, on the middle weeks. This is because these weeks are completely available for

production. The need of the journey cycle is because the lead time of each and every raw material that

is used in the production process is different. Thus when one raw material is on the verge of exhaustion

from the stores department and the production will be continued, the journey cycle helps to make an

order of required necessary quantity of these raw materials.


10/13

estimated production increases or decreases, there will have to be made immediate changes in the

journey cycle as per the needs.

order and demand thereby maintaining a healthy relationship with the supplier.

Production process (for soap bars only):-

distilled fatty acids (DFA).

high temperature of

around 228 degrees centigrade. But this soap has a lot of impurities in it.

and solidified by cooling it quickly

lidified soap is cut in shapes as desired, stamped and dyed wherever required.

Total productive maintenance:-

Hindustan Lever Limited are adopt not only in operating and maintaining state-of-the-art machines but

have adopted the latest management techniques like Total Productive Maintenance (TPM). The result

has been that HLL factories, like those in Khamgaon and Sumerpur with first generation industrial

workmen, have come to be recognised as among the best in the Unilever world.

HLL is now implementing a turnaround strategy for Modern Foods, which is progressing as per plan.

HLL's manufacturing facilities, like the Khamgaon soap plant and the Sumerpur detergent bar unit, have

been recognised as among the best in the Unilever world. HLL has adopted Total Productive

Maintenance (TPM) for achieving manufacturing excellence. Eight factories have already won different

TPM awards from the Japan Institute of Plant Maintenance (JIPM). TPM has been launched in all key

factories.

Equally, HLL has an enviable track record in taking over sick enterprises, in response to requests from

government authorities, and converting them into viable operations through the use of TPM. The

company's units at Mangalore and Rajpura all bear testimony to this achievement. In the process, HLL

has saved precious jobs and developed local economies.

Inventory Control Techniques:-


11/13

As we all know that the FMCG industry, in India, is one of the leading industries and HLL as the

leading company generating the most to the government revenue from the said industry. Thus for HLL

the same factor is the main reason for controlling the inventory upto its optimum level. Following are

the ways in which the company reduces its inventory carrying costs.

price

fluctuations, transport costs, excise duty etc.This helps the company to reduce lot of inventory carrying

cost. Eg:-HLL pays an excise duty of 16% to bonded warehouse to keep its raw materials as well as

finished goods. Earlier, this excise duty of 16% was around 22%. This reduction in the excise duty of the

company was due to its active participation in the annual budgets, financial crisis aid etc.to the

government.

ered Just-In-Time.

This is because it helps in cutting inventory carrying costs by a large amount. Eg. Chemicals, caustic soda,

etc.

These techniques which are general in nature, but when used to its optimum utilization prove to be very

important as it helps in reducing obsolete items and surplus finished products.

Materials information system:-

The company has its own material information system with codification, helping to know the stocks-in

and out, rate of consumption, cost weight, batch, product name, size, price, etc.

The suppliers also have the in hand information about the stocks supplied, in transport, expiry date,

exhaustibility period , time of order, time duration of reaching of the product, etc. This all is donethrough one central program which is fixed in the Central Head-office which is situated in Mumbai.

Stockists have been connected with the company through an Internet based network, called RSNet, for

online interaction on orders, despatches, information sharing and monitoring. RS Net covers about 80%

of the company's turnover. Today, the sales system gets to know every day what HLL stockists have sold

to almost a million outlets across the country. RS Net is part of Project Leap, HLL's end-to-end supply

chain, which also includes a back-end system connecting suppliers, all company sites and stretching right

upto stockists. RS Net has come as a force multiplier for HLL Way, the company's action-plan to

maximise the number of outlets reached and to achieve leadership in every outlet, by unshackling the

field force to solely focus on secondary sales from the stockists to retailers and market activation.

Value analysis system:-


12/13

HLL has its much designed Value Analysis System which is again accessed only through one

central point-Mumbai and the concluded price of each and every product is displayed on their WAN

which connects each and every factory, office and research units in and outside the country.

Quality control:-

HLL has its own quality control department checking the quality of the in-bound as well as the out-

bound products. HLL is reputed for conducting its business in a transparent manner with honesty and

integrity and with respect for the interests of those the company's activities can affect. HLL believes that

this reputation is an asset, just as real as its people, brands and factories.

HLL markets products, which consistently offer value in terms of price and quality and are safe for their

intended use. Its operations are run in an environmentally sound and sustainable manner, ensuring that

the processes and products conform to standards set by the authorities. If HLL straddles the Indian

corporate world, it is also single-minded in identifying itself with Indian aspirations and devotes itself to

upgrading the value of Indian resources to globally competitive levels.

At every unit, there exists a Quality Circle which has a meeting on every Saturday at 11 am sharp. The

objective of this meeting is to discuss all the operations that took place throughout the week- batch, last

24hours production cycle, rejections (if any), analysis of machine, manpower and materials utilisation,

faults (if occurred-where, when, how) etc.

If the finished goods do not match the quality limits or the tolerance limits which are already set then

they are reworked in the best possible manner again to recover full or at least partial cost from it.

Analysis of the financial statement 2003:-

As per the Balance Sheet as on 31st December, 2003.

Current assets, loans and advances Schedule 2003(lakhs) 2002(lakhs)

Inventories 9 1489,83.04 1364,07.68

As per the profit and loss account for the year ended 31st December , 2003.

Income Schedule 2003(lakhs) 2002(lakhs)

Sales 1 10836,94.78 10628,60.91

Schedule 9 2003 (lakhs) 2002(lakhs)

Inventories

( At lower of cost and net realisable value)


13/13

Stores and spares, etc. 43,76.29 39,14.01

Raw materials 589,65.24 583,34.18

Packing materials 89,19.51 71,65.51

Work-in-progress 62,12.57 50,70.90

Processed chemicals 1,71.50 5,84.76

Finished goods 693,32.69 599,06.04

Property development activity(incl. land dev.

rights)-work-in-progress 88.07 14,31.92

1480,65.87__ 1364,07.68

Share of joint-ventures 9,17.17 -- ____

1489,83.04 1364,07.68

Income 2003(lakhs) 2002(lakhs)

Sales 11779,56.62 11638,20.98

Less: Excise duty -972,76.43 -1009,60.07

10806,80.19 10628,60.91

Inference :-

1. The cost of inventory has decreased by 9.21% which is considerably a good amount

2. Sales have increased in proportion to the amount of raw materials consumed in that given

accounting years.

3. Since there is no scrap, or wastage or obsolescence produced during the manufacturing process, we

can conclude that there exists an excellent material management function in the company.

materials management hll

Documents