Page 213 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes However, that did not happen. In 1986, Nirma introduced the Nirma bar, challenging
HLL’s other product ‘Rin’. The quality difference between the two, Nirma bar and Rin, was
limited but Nirma bar was sold at ` 1.50 for a 150 gm. cake which was 1/3rd the price of
Rin. By 1989, the Nirma bar had a market share of 40 per cent. By 1992, Nirma had sales of
333,000 tonnes and had captured 55% market share.
The brand leader was finding pressure on its premium product, ‘Surf.’ Consumers were
moving to lower price brands. To counter Nirma, HLL was unable to increase price of
‘Surf’ and had to put a lot of support below the line—its profit had eroded. It was losing its
market of ‘Rin’. The Soap & Detergent Division of Hindustan Levers was depending for its
sustenance on ‘Rin’, as the margins of ‘Surf’ had shrunk. Nirma had hit the company at its
soft spot and it was left with no option but to fight. It was forced to jettison its value
creation logic and adopt an entirely new way of operating. It had to enter the low cost
detergent market to stop the growth of Nirma.

They set up third party production in the states of Gujarat, Rajasthan, Uttar Pradesh,
Punjab, Pondicherry, etc. These were called AFACON manufacturing units. HLL created
‘Wheel’—a detergent powder that competed successfully with Nirma detergent powder.
The Units were given conversion contracts. Raw Materials were supplied by HLL.
Initially, HLL tried to use its own distribution system to market the products. HLL had
one of the strongest distribution networks in the country, but it did not deliver. Though
HLL strengthened the network and the distribution system was highly motivated, yet it
was very expensive. They still found this was not giving them enough margins to compete
successfully.

The rest is history. HLL created Stefan Chemicals, a fully owned subsidiary. The
responsibility of the AFACON manufacturing units was passed on to Stefan Chemicals.
This finally was able to arrest the decline of HLL in this market. Initially, the manufacturing
costs were 15 percent higher than Nirma’s, but with a cost effectiveness program, HLL was
able to help the AFACON units reach Nirma’s costs. By 1991, Stefan Chemicals had 15
manufacturing units as compared to only 3 in the early 1980’s. Ultimately Stefan Chemicals
took over the marketing and distribution for Wheel. Stefan Chemicals successfully copied
the structure used by Nirma. In 2004, Wheel’ became the first Indian brand to exceed sales
of ` 1,000 crores.
Questions
1. Compare Nirma’s strategy vis-à-vis HLL’s strategy.
2. Determine the role of SCM in success of HLL’s detergents in India.

10.5 Summary

 Supply chain design reflects the structure of the supply chain over the next several years.
 In the Supply Chain planning phase, companies define a set of operating policies that
govern short-term operations and are normally determined on an annual basis.

 Aggregate planning is the basis for decisions at Supply chain operations stage.
 The internal supply chain is that portion of a given supply chain that occurs within an
individual organization.

 Once the decision is made to purchase a product or service from external suppliers,
purchasing is brought into the process.

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