Operations Management Report on Lux Soap Essay

AcknowledgementWe thank all(prenominal) those people who helped us in preparing this report. Immense troublesome work has been d wholey by all the members of our group in compilation of this report. We as advantageously as thank our instructor Mr Jawad Bhatti, who has helped us always by providing us with the much-needed guidance, kind-hearted behavior, moral support and her valuable time. Our contact person in Unilever Pakistan, Ms. Sarah Siddiqui excessively provided us with her expertise in the construction of the report and we ar extremely delicious to her for providing us with valuable insight and information with follow to LUX. The preparation of this report was a wonderful learning experience. We learnt to work in a group expeditiously and equally. The experience gained by the preparation of this report will surely be beneficial for us in the approaching, always.2Executive Summary lx ooze kickoff produced in United Kingdom in 1899. It was produced by British come with stimulate Lever Br early(a)s. Lever Brothers was founded in 1885 by William Hesketh Lever and his blood brother James. They use glycerin and veggie oil such as palm oil to bring close goo called Sunlight scoop shovel. The flaked version of max called sixty liquid ecstasy. glycerin was a lucrative byproduct of the soap making process, and by the end of 1886, Lever brothers also had a glycerin factory.The looker soap industry has a few major producers of which Unilever holds commercialise share of slightly less than 50%. Other competing suckers like dove, Rexona and Capri have geniusted to have a strong consumer base, but LUX.s product features distribution and promotional activities have created gritty shuffle loyalty for which it is still the market leader.Since the 1930s, more than than 400 of the worlds most famed female celebrities have been associated with lux. Sarah Jessica Parker, Katrina Kaif, Aishwarya Rai and Mahira Khan are some actresses featu red in Lux ad campaigns in US, India and Pakistan. Today, Lux is the market leader in several(prenominal) countries including Pakistan, Brazil, India, Thailand and South Africa. Developed by Unilever, Lux (soap) is now headquartered in Singapore.IntroductionLux is a global brand developed by Unilever. The range of products includes dish soaps, cascade gels, bath additives, hair shampoos and conditioners. The brand was founded by the Lever Brothers (today known as Unilever) in 1899. The name changed from Sunlight Flakes to Lux in 1900, a Latin word for light and suggestive of luxury.In 1924, it became the first mass market toilet soap in the world. It is noned as a brand that pioneered female celebrity endorsements. As of 2005, Lux revenue is at 1.0 billion euros, with market shares spread out to more than 100 countries across the globe. Lux toilet soap was launched in the United States in 1925 and in the United Kingdom in 1928. Subsequently, Lux soap has been marketed in several forms, including hand wash, shower gel and choice bath soap.Since the 1930s, more than 400 of the worlds most famous female celebrities have been associated with Lux. Sarah Jessica Parker, Katrina Kaif, Aishwarya Rai and Mahira Khan are some actresses featured in Lux advertising campaigns in US, India and Pakistan. Today, Lux is the market leader in several countries including Pakistan, Brazil, India, Thailand and South Africa. Developed by Unilever, Lux (soap) is now headquartered in Singapore.About UnileverUnilever is a multinational consumer product manufacturing giant operating in over hundred countries all around the globe. Unilever Pakistan is the Pakistan chapter of Unilever, where the company holds 60.75% share whereas the Government of Peoples Republic of Pakistan holds 39.25% share.Unilevers one of the most popular brand in Pakistanimarket is LUX. They have segmented the local market forLUX according to geographical locations. It furtherdifferentiates these segments into Socio scotch Cluster(SEC) which takes into account the criteria of educationand profession which ultimately measures the financialability of consumers. The cluster is divided into tailfin parts starting from A to E. Unilever targets the urban and crampfish urban upper middle class and middle class segment of the population, who falls under A to C of SEC. Tactical marketing tools, 4Ps,are extensively apply by thecompanytomarketLUX.Though LUX is produced inPakistan, Unilever Pakistanmaintains the same standardall around the globe. Theproduct is available in sisedifferentfragrancesunderthree different sizes. Since thedemandforbeautysoapmarket is to a great extent oligopolistic, variations in footing lead to charge war which can eventually break mickle the companys market share.Thus Unilever cannot provide a better price than its competitors. But the price is affordable by most of the people. Unilever Pakistan has outsourced its distribution channels to third party distributors which allow them to distribute LUX in massivebulks amounting to around ten million pieces. It undertakes the largest promotional activities in the beauty soap industry.The beauty soap industry has a few major producers of which Unilever holds market share of slightly less than 50%. Other competing brands like Dove, Rexona and Capri have started to have a strong consumer base, but LUX.s product features distribution and promotional activities have created high brand loyalty for which it is still the market leader.History of lux soapsLux soap first produced in United Kingdom in 1899. Itwas produced by British company name LeverBrothers. Lever Brothers was founded in 1885 byWilliam Hesketh Lever and his brother James. Theyusing glycerin and vegetable oil such as palm oil tomanufacture soap called Sunlight guck. The flakedversion of soap called Lux soap. Glycerin was alucrative byproduct of the soap making process, andby the end of 1886, Lever brothers also had a glycerinfactory.Lever opened their small office in New York in 1895. The company started selling Sunlight and Lifebuoy but did not doing well until 1916. Lux soapwas first launched in United States in 1916. The Lux trademarkwas registered in United States in 1900.Lux soap was launched in India in 1929and later in Pakistan. The soaps very firstadvertisementfeaturedactressLeelaChitnis as its brand ambassador. It waspopularly known as the beauty soap offilm stars.From 1930s right through 1970s, Lux soap colors and packaging were altered several times to reflect fashion curls. In 1958 five colors were made up the range pink, white, blue, green and yellow. In 1990s, Lux launching its own range of shower gels, liquid soaps and moisturizing bars. Today, Lux soap is change in 100 countries and sales achieved 1.0 billion euros in 2005 alone. From 1930s right through 1970s, Lux soap colors and packaging were altered several times to reflect fashion trends. In 1958 five colors were made up the range pink, white , blue, green and yellow. In 1990s, Lux launching its own range of shower gels, liquid soaps and moisturizing bars. Today, Lux soap is sold in 100 countries and sales achieved 1.0 billion euros in 2005 alone.Building the Beauty SoapCredentialsIntroduced in the US in 1924, Lux became the worlds first mass market toilet soap with the tag retrace made as fine as French Soap. In the first 2 years of launch, Lux concentrated on building its beauty soap credentials. Advertisements offered consumers a beauty soap made in the French method at an affordable price, with the promise of smooth skin.Made with fine-texture, rich in fragrance, and manufactured using a method created in France, the first Lux toilet soap was sold for 10 cents apiece.19281940 9 out of 10 starsThis era saw paint launches of LUX in the UK, India,Argentina and Thailand. The brand concentrated onbuilding its association with the increasingly popularmovie world, centralizeing more on movie stars and their meansrather than on the product. In 1929, advertising featured26 of the biggest female stars of the day, creating a hugeimpact among the movie-loving target audience. This wasfollowed by Hollywood Directors talking about theimportance of smooth and youthful skin. This pioneeredthe trend of celebrity product endorsements.In 1931, Lux launched a campaign with older stars, I am over 31. The series of print ads had stars talking about preserving youthful skin. Lux also launched campaigns featuring interviews with Stars and Close Ups of Stars, bringing to life the 9 out of 10 idea40s & 50s Romancing the consumerUsing movie star as role models, Luxs strategy was to build relevance by looking at beauty through the consumers eyes. While still retaining the star element, the focus channeled to the consumer and the role of the brand in her life. Advertising commercials showed ordinary looking women with direct references to stars, such as Deanna Durbin.60s Romancing the brandThe 60s saw a shift in advert ising to product stories and the romanticizing of brand through its sensorial & emotional dimensions. This was the era of the film star feeling and the Golden Lux, featuring stars such as SandraDee, Diana Rigg and Samantha Eggar.The bathing ritual, the fantasy element that has been the imagery of Lux, was created in this era. The brand also moved forward with launching LUX in the Middle East, entering a more conservative market.70s Dimensionalizing beautyReflecting the shift in beauty trends in the 70s, the Lux stars stepped down from their pedestals and were portrayed as multi-faceted women with natural, wholesome beauty that the ordinary consumer could bear upon and aspire to. The executions were more of a day in the life of the stars with focus on their natural beauty. Stars included Brigitte Bardot and Natalie Wood.80s Owning the category spaceEstablishing itself as THE beauty soap for stars andbeautiful women, the 80s emphasized the importance ofskin care the first step to be auty. LUX was launched inChina at this time. Sophia Loren, Raquel Welch and CherylLadd were some famous celebrities used during this time.In India actresses Hema Malini, Parveen Babi, MadhuriDixit, endorsed Lux soap.90s Early 2000s Advanced skin benefitsIn the 90s, Lux moved from generic beauty benefits to focus on specific benefits and transformation. More strain on functionality and variant associations with different 12skin types as well as mention of ingredients. The communication was far more partal specific and localized, using stars like Malu Mader and Debora Bloch. This period launched product brand extensions Shower Cream and Gels and Lux Super Rich Shampoo in Japan and China.2000s Beyond movie starsIn early 2000, the focus shifted from specific skin benefits to a stronger emotional space. The brand provided the link between the aspirational rolemodels and real life with the campaign, Lux brings out the star in you. The benefit was now more than just beauty, it was also about the confidence that comes from beautiful skin. In 2005, Lux encouraged women to celebrate and indulge their charwomanhood with the Play with Beauty philosophy, with stars like Aishwarya Rai. The brand also connected with consumers to take a more active stance on beauty.From 2008, building off the brands rootstrengths, focus has shifted to beauty (vs.femininity), appealing to consumersfantasies and aspirations. Lux believesthat beauty is a female instinct thatshouldnt be denied and showcases thepleasure that every woman enjoys fromusing her beauty, encapsulating that ideain a simple phrase Declare your beauty.Today, LUX products are manufactured at 71 locations with more than 2000 suppliers and associates providing the raw fabrics. It has key markets in Pakistan, Brazil, USA, China, Bangladesh and South Africa, and is a market leader in India (for soap bars), Pakistan, Brazil, Saudi Arabia (for soap bars), Bangladesh, Thailand and Vietnam.Operations at LuxUnilever has establi shed itself as a leader in the FMCG industry, intermitn its wide product range which consists of home care, skin and hair care, beauty care and oral care products.An FMCG (Fast-Moving-Consumer-Goods) is a prescribed model factory. Unilever under its skin care, soap category has 3 skincare brands Lux (Middle Class), Dove (Upper Class) and Lifebuoy (Lower Class).Lux and Lifebuoy are produced (in-house production) in the factory located at Rahimyaar Khan in Pakistan while Dove is mainly imported as the production methods and procedure are extremely technical and critical to maintain thehigh standards of the quality of the product. Another reason for importing Dove is the cost of production. Doves manufacturing is high-ticket(prenominal) due to the ingredients and raw material mingled for it to produce in Pakistan and raw materials will be extremely expensive to import. Recently however, a rumor was spread in the market that Unilever Pakistan in order to cut down costs, will be outs ourcing its production to Unilever South East Asian countries and will stop all the production in Pakistan. It was a rumor and completely delusive of them to be shifting to Malaysia. Unilever has one of the oldest factories in Pakistan and enjoy high EOS and have denied any intension to move production as it would be too expensive to produce outside Pakistan and import it back. The procurance of palm oil for Lux is the main ingredient in the production and manufacturing of the product. As palm oil is not produced in Pakistan, importing it from foreign suppliers is the best option available and costs are affordable for the company. Before the production is begun, capital expenditure is evaluated after which the frame-up is done for production in factories. The main raw material is in the production of Lux is palm oil which is imported due to its unavailability in the Pakistani region. This is the major head expense for Lux withal the facility itself.The production method for Lux a nd Life Buoy is down processing and Dove is mainly produced through job order processing technique. Production is heavily dependent on palm oil.Production ProcessThe production method for Lux is batch processing and Dove is mainly produced through job order processing technique. Production is heavily dependent on palm oil. Lux Soap is the combination of animal fat or plant oil and caustic soda. The Soap needs two major raw materials one is fat and the other one is alkali. Lux soap makers use fat that has been processed into fatty acids. This eradicates miscellaneous impurities, and it produces as by-product water as an alternative of glycerin. Many vegetable fats, including olive oil and coconut oil, are also used. The alkali most commonly used is sodium hydroxide and sometimes, Potassium hydroxide is also used. Additives are used to enhance the color, texture, and scent of the soap.Palm oil is used for the manufacturing of Lux Soaps which is processed and bleached. This is then d ivided into two proportions as per the soap requirements to manufacture Lux and Life buoy. After separation as per the proportions, alkali in the form of sodium hydroxide/ Potassium hydroxide are added to the palm oil barrels. celluloid chemicals are added to clean and sterilize the mixture to remove any impurities. After this the mixture is divided into categories as per the product variety, after which perfumes and colors are added to give the soap a nice subtle fragrance and attractive color. Fragrances and perfumes are added to the soap mixture to protect the smell of dirt and leave behind a fresh smelling aroma. Substances to enhance the texture of soap include silica, talc, and marble pumice. Soap made without color is of a brown or dull white-haired color, but Lux manufacturers color the soap to make it more appealing to the end-user. Other material is then added according to the particular variety of soap. After the blameless process of chemicals and ingredients have been added, the soap is further processed, cut and shaped into bars of soap according to the product specifications and SKUs of the product. The produced soap bars are then send to packaging, where they are wrapped in the respective prepared packaging and transferred to warehouse until delivery has to be made. Loading and unloading of commitment and also wrapping of cargo is handled by labor but the process is mostly auto mated.Production FlowProcured Palm Oil IsProcessed AndBleachedThe Oil Is Divided Into ii Portions, For LuxAnd For LifebouySynthetic Chemcials ar Added To CleanAnd Steerelize TheMixtureOther Ingredients AreAdded As Per TheRequirements Of TheProduct VarietyPerfumes And ColoursAre Added To TheMixtureThe Mixture Is Cooled, come on Processed AndCut Into Soap BarsThe Bars Are Sent ToPackagining WhereThey Are Wrapped InThe Prepared PacksPacked Soap Bars AreSent To WarehousesUntil Delivery be and ExpensesThe method of costing used for the manufacture of Lux Soaps is Batch Cos ting which is a part of Operation Costing.First of all the ingredients of the soap are mixed together in order to make a mixture. The entire mixture for the preparation of the soap produces, approximately, 1 lakh unit of soaps this 1 lot will be treated as a batchand will be automatically numbered by the help of machines during the process of packaging.The purpose of manufacturing the soaps using batch costing is that, it becomes easier for the company to track their product in the factory as well as in the market. For example, the end-user finds something wrong with the soap and move a complain to the company, now if the management finds some defect in the manufacturing of the soap, it can easily track the batch number and withdraw all the soaps from the market that were produced in that particular batch.The cost of unit is determined by dividing the cost of the batch by the number of units produced in that batch. Given below is the cost winding-sheet of Lux soap that shows the M aterial Cost, Prime Cost as well as the Factory Cost.PARTICULARSAMOUNT (in Rs.)Direct MaterialAcidSpecialty chemicals run-of-the-mill chemicalsPerfumes tally6.450.110.040.817.41Direct Labor12.6Direct Expenses1.73PRIME COST21.74Production OverheadsPower0.62Maintenance0.14FACTORY COST1722.50Revenue Generation and CostingThis table shows the details of the revenue and the cost generated to manufacture Lux Soaps REVENUE AND COST GENERATION OF LUX( innovation for the preparation of Cost Sheet)PARTICULARSUNITSAMOUNT (in Rs.)Revenue Generated sales PriceRs./packet25Sales Volumepackets3,20,000Sales RevenueRs. (in lakhs)80-Acidpaise/ ml4.5-Specialty chemicalspaise/ ml2.75-Ordinary chemicalspaise/ ml1.5-Perfumespaise/ ml7Cost Generated in the raw Material PricesRaw Material Volumes-AcidIn 1000 litres14.34-Specialty chemicalsIn 1000 litres0.41-Ordinary chemicalsIn 1000 litres0.29-PerfumesIn 1000 litres1.15-AcidRs. (in lakhs)6.45-Specialty chemicalsRs. (in lakhs)0.11-Ordinary chemicalsRs. (in lakhs)0.04-PerfumesRs. (in lakhs)0.81Rs. (in lakhs)7.41Raw Material CostTOTALHeadcount-ManufacturingNumbers11-Marketing professionalsNumbers2-Corporate employeesNumbers118Average monthly Salary-ManufacturingRs./Month10000-Marketing professionalsRs./Month15000-Corporate employeesRs./Month16500Bonus on Salary (% of Salary)12%Employee Cost-ManufacturingRs./Month (in 10,000)12.6-Marketing professionalsRs./Month (in 10,000)4.53-Corporate employeesRs./Month (in 10,000)1.63TOTAL18.76Power CostRs. (in lakhs)0.62Packaging CostRs. (in lakhs)1.73Advertising costRs. (in lakhs)7.23CommissionsRs. (in lakhs)5.3Maintenance CostsRs. (in lakhs)0.14Insurance PremiumRs. (in lakhs)0.5Total CostsRs. (in lakhs)41.6919dodge and CompetitivenessVisionWe help people around the world tint every day needs for nutrition, hygiene and wellbeing, with brands that help people look good, feel good and get more out of life.A clear commissioningUnilever helps people around the world meet every day needs for nutritio n, hygiene and wellbeing, with brands that help people look good, feel good and get more out of life. In 2009, they launched called The Compass Unilevers strategy for sustainable growth. At the heart of that vision is the philosophy of working to create a better future every day for their consumers and the communities in which they operate. Another key element of their strategy is our aim of doubling the size of Unilever while reducing our impact on the environment. Its a goal the company is seeking to achieve by developing new ways of doing business through which can minimize our direct impact. The company is also working with suppliers, consumers and the retailers who sell the brands to improve their sustainability credentials too. By combining our multinational expertise with the deep roots in diverse local cultures, Unilever is continue to provide a range of products to suit a wealth of consumers. The company is also strengthening its strong relationships in the emerging marke ts they believe will be significant for future growth.Achieving significant growth objectives while decoupling growth from environmental impact is a bold but challenging vision, says Unilever CEO Paul Polman. not many companies have yet taken it on. But I believe its the only viable vision. One that builds on Unilevers long-term hereditary pattern and achievement, while supporting a responsible future. . total Chain ManagementThe supply scope of Lux is the core feature which looks after the efficient tally of the entire business production and processes. Supply chain is divided into two parts one is the efficiency and the other looks after quality control.Supply chain is the core of Lux sales since it is responsible to make the deliveries to the depot, distributer and ultimately the shops. To ensure the supply chain is well maintained Lux management has each week meetings and a software to record our forecast, orders placed by distributors (primary sales) and ultimately the order s delivered to the distributor.MSO is in direct contact with the brand team. He is responsible for call for production and also informs organizations about lag or delays in production and all logistics involved and other things related to production.Forecast is based on a trend line that is predicted out of exponential sales trend graph and marketing impact added on. There are 2 major raw materials that go into production besides acid and bases. One is palm oil which is ultimately brought to the factory for further processing. The other is perfume which is globally tested and supplied. Various people within the supply chain department are responsible for various functions such as one for forecast and right demand planning, one for production and quality confidence (R&D) and one for ultimate supply and logistics. The management of the supply chain has the following processes which creates the whole flow of the supply chain network prepDemand PlanningThis phase is the pre-production phase where business analysts and managers sit together and create a strategic plan based on two core functions, promotional rank selling and the base line target. Demand planning is carried out for a period of 5 years at Luxpromotional Value change is where Lux managers sit together with the planning team and set targets to achieve in call of sales and production after advertising and marketing campaignsBase Line is the bottom line target of sales which can be achieved even without any marketing efforts. This is what the brand will achieve in terms of sale at all costsSupply PlanningIn this phase the team forecasts the demands with the supply in order to procure the material required for the manufacturing of the soap bars. The supply plan is derived from the demand plan.Material Requirement Plan is the procurement plan in whichvendors and suppliers are identified and the material is procured. The details of procurement are established and are further shared with the budget cont rol team.Master Production Schedule is the detailed plan of how the product will be produced, All details are included in this portion in terms of batches, number of bars produced, time period, production methods and flow,Procurement is done and the material is sent to the production departmentProduction where the manufacturing and packaging is done and storedDistribution where product is warehoused and further sent to distributors around Pakistan and the distributors further give it to whole sellers.Supply Chain flowPlanningDistribution Demandplan Supply plan Warehousing DistributorsDemandPlanProductionManufacturingPackagingPromotionalValue SellingBase linetargetProcurementSupply PlanMPSMRPBuyingDepartmentWarehousingStrategy and R&DStrategyThe strategy used by Unilever is in two regions, production and campaigns. In order to maintain their strategic function, the factory is one of the oldest in Pakistan. It was Rahim Yar Khan and it was ab initio Unilever HO. It was initially chos en because of the following factors1. Proximity to Labor Majority of labor working in the factory reside close by in Punjab region which is densely populated2. Proximity to Source of Supply Water supply from the rivers flowing close by provide ease of water availability (Punjnad)3. terminal and Warehousing Since the factory site was owned by Unilever, there was no space shortage problem so expansion and new installments was possible along with ample space for warehousing.4. Community Considerations5. AccessibilityResearch and DevelopmentIn order to maintain the competitive advantage of being the leading beauty soap brand of Pakistan, the R&D department also supervises production and packaging. R & D and Supply both monitor production and quality. Eachmachine involved is configured for production according to the amount required and for how much should be in each carton so that the carton does not explode. R & D carries out research and tries to increase efficiency by running machin e trials.Further to ensure quality product is produced and any likely flaws are eliminated, batch inspections are done at random to check the quality. The Supply Chain acknowledges the capacity of the machinery and production figures, therefore R & D only work on improvement and monitoring. The R&D department also carries out focus groups and sample testing when introducing new variants in the product according to consumer insight self-contained through research and development. The R&D is responsible for the 24suggestions for upcoming variants, which is then strategically planned by the brand team and tested at a small scale. If successful, the new variant is sent for production.Total quality managementTQM is different for every company and is defined by each with respect to 5 major factors1. Conformance to specifications2. Fitness quality3. Value for price paid4. Support services5. Psychological factorsBeing a manufacturing firm, Lux observes fixed manufacturing quality as the f ocus is on a tangible product with respect to the features, reliability and conformance. Total Quality management for Lux is split into R&D functions which look into formulation, quality assurance, and packaging and ultimately logistics transit trials. Various people within the supply chain department are responsible for various functions such as forecast and demand planning, one for production and quality assurance (R&D) and one for ultimate supply and logistics.The quality of production at lux relies on the following basic concepts