A SUMMER INTERNSHIP REPORT ON EFFECTIVE IMPLEMENTATION OF SDS AND SEAMLESS OPERATIONS OF CHANNEL

FINANCE

SUBMITTED BY VIDYUT PERTI PGDM ROLL NO. 131 BIMTECH 09-11

UNDER THE GUIDANCE OF CORPORATE GUIDE

Mr. ANIL SAYAL BRANCH CONTROLLER DELHI BRANCH NESTLE INDIA LTD.

ACADEMIC GUIDE
Dr. ANSHUL VERMA ASSOCIATE PROFESSOR FINANCE BIMTECH

Birla Institute of Management Technology

Summer Project Certificate

This is to certify that Vidyut Perti, Roll No. 131 , a student of Post Graduate Diploma in Management has worked on the Summer Project titled Effective Implementation of SDS and Seamless Operations of Channel Finance at Nestle India Ltd. after trimester III in partial fulfilment of the requirement for the programme. This is his original work to the best of my knowledge.

Date: Seal:

Signature (Dr. Anshul Verma)

ACKNOWLEDGEMENT
A Summer Training project is a synthesis of knowledge and experience of experts in their related fields. However, no project is possible without the guidelines and help that is extended by the experts to the student with the sole benevolent purpose of intellectual development. First and foremost I would like to express my gratitude and thank Mr. Anil Sayal, Branch Controller, Delhi Branch who was my Mentor, for guiding me throughout the entire training period. I owe enormous intellectual debt towards my teacher and mentor Dr. Anshul Verma whose suggestions and guidance were invaluable and helped me throughout my project I am also thankful to Mr. Rohit Talwar (Assistant Manager Accounts) and Mr Pankaj Kumar Jaiswal (Assistant Branch Controller) for guiding me and for providing fruitful insights on subject. This Report would not have complete without the inputs and the words of advice from them for which I shall always remain grateful to him. I would also like to thank all members of the Finance & Control Department who have directly or indirectly helped in providing the information and amenities which have helped in development of this report, without such help this report would not have been possible. This project has given me the opportunity to work with one of the most Respected companies in the world. I am Thankful to Nestl India Limited for providing me with this opportunity

(Vidyut Perti)

TABLE OF CONTENTS
INDEX TO CHAPTERS
CHAPTER 1- INTRODUCTION...........................................................................................8 1.1 1.2 1.3 1.4 ABOUT NESTLE..............................................................................................9 NESTLE INDIA................................................................................................9 NESTLE DELHI BRANCH...........................................................................11 TYPES OF CHANNELS................................................................................14

CHAPTER 2 OBJECTIVES..............................................................................................16 CHAPTER 3 METHODOLOGY......................................................................................18 CHAPTER 4 CLAIMS MANAGEMENT........................................................................20 4.1 4.2 WHAT ARE CLAIMS.................................................................................21 GROUPING OF CLAIMS..........................................................................21
SECTION II CLAIMS................................................................................23 LUMPSUM CLAIMS................................................................................26

4.2.1 4.2.2

4.3 4.4

KEY ACCOUNTS.....................................................................................33 BAD GOODS.............................................................................................34

CHAPTER 5 SAR DISTRIBUTOR SOLUTION (SDS).................................................36 5.1 5.2 5.3 5.4 5.5 5.6 INTRODUCTION TO SDS....................................................................37 ADVANTAGES......................................................................................38 LANDSCAPE..........................................................................................39 CONSOLE...............................................................................................40 DESKTOP ANALYSER.........................................................................41 KEY PROCESSES & FUNCTIONALITIES..........................................41

CHAPTER 6 PROCEDURES FOR SETTING OF BUDGETS & RECEIVING CLAIMS IN THE SAR DISTRIBUTOR SOLUTION........................46 6.1 6.2 6.3 6.4 6.5 6.6 TEMPORARY PRICE PROMOTIONS................................................47 DISPLAY CLAIMS...............................................................................47 BAD GOODS.........................................................................................48 SAMPLING............................................................................................49 REDISTRIBUTOR COMMISSION & FREIGHTS..............................50 MANUAL CLAIMS...............................................................................51

CHAPTER 7 CHANNEL FINANCE................................................................................52

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7.1 7.2 7.3

INTRODUCTION TO CHANNEL FINANCE....................................53 RTGS......................................................................................................53 ADVANTAGES OF CHANNEL FINANCE.......................................54

CHAPTER 8 FINDINGS & ANALYSIS..........................................................................56 8.1 8.2 PROBLEMS..........................................................................................57 CHANGES & IMPACTS......................................................................58
TEMPORARY PRICE PROMOTIONS (TPP)...................................58 DISPLAY CLAIMS............................................................................59 SAMPLING CLAIMS........................................................................60 REDISTRIBUTOR COMMISSION & FREIGHT.............................60 BAD GOODS....................................................................................61

8.2.1 8.2.2 8.2.3 8.2.4 8.2.5

8.3

ANALYSIS OF CLAIMS RECEIVED................................................62

CHAPTER 9 CONCLUSION............................................................................................67

INDEX TO TABLES
T 1.1 - AREA WISE SALES CONTRIBUTION TO DELHI SALES....................................11 T 1.2 - STAR PROGRAM.......................................................................................................30 T 1.3 - MAGIC STICK PROGRAM.......................................................................................31 T 1.4 - CHOCOLATE DOMINANCE PROGRAM................................................................31 T 1.5 - DIFFERENCE BETWEEN DIRECT & INDIRECT PARTIES.................................34 T 1.6 - NET PROCEED FROM SALES (NPS).......................................................................62 T 1.7 - TOTAL CLAIMS.........................................................................................................63 T 1.8 - PERFORMANCE OF TRADE SPENDS (PTS)..........................................................64 T 1.9 - BAD GOODS.............................................................................................................. 64

INDEX TO GRAPHS
G 1.1 - NET PROCEED FROM SALES (NPS)......................................................................11

 INDEX TO FIGURES
F 1.1 - DISTRIBUTION MODEL...........................................................................................12 F 1.2 - TYPES OF CHANNELS..............................................................................................14 F 1.3 - TYPES OF DISPLAY PROGRAMS...........................................................................29 F 1.4 - LANDSCAPE OF SAR DISTRIBUTOR SOLUTION (SDS)....................................39 F 1.5 - SCREEN SHOT OF SAR DISTRIBUTOR SOLUTION (SDS).................................42

INDEX TO ANNEXURE
ANNEXURE 1 PRODUCTS OF NESTLE INDIA..............................................................69 ANNEXURE 2 MANUAL LUMPSUM CLAIM FORMAT...............................................71 ANNEXURE 3 MANUAL FOOD SERVICES/VENDING CLAIMS FORMAT..............72 ANNEXURE 4 MANUAL SECTION II CLAIMS FORMAT............................................73 ANNEXURE 5 RETURN REQUEST FORM......................................................................74 ANNEXURE 6 MANUAL FOR CDs FOR USAGE OF SDS.............................................75 ANNEXURE 7 - MANUAL FOR DOCUMENTATION FOR OPENING OF A CHANNEL FINANCE ACCOUNT................................................................................75 ANNEXURE 8 AUDIT REPORT FOR ATUL ENTERPRISES.........................................76

EXECUTIVE SUMMARY
My Summer Internship at Nestl, Delhi Branch Office included 2 main projects. The Project Effective implementation of SDS looks after the newly implemented Sales Automation project SDS( SAR Distributor Solution). As SDS was implemented in November 2009, it is a relatively new system. The basis of the project being understanding the operations of the system at the Distributor level and finding out the various bottlenecks so as to convey them to management to help streamline the process. It included visiting various Distributors in different areas in Delhi and NCR. It also included preparing a manual to help Distributors operate SDS. A major part of the project included understanding the Claims Management System at Nestl. Claims management is a process by which the distributors of Nestle claims the various discounts, promotions, schemes, commissions etc. provided to them by the company. The project included understanding the manual process undertaken so far for passing these claims and how effectively has SDS been in improving the process. The results of this study were mainly that SDS is a New Automation System. Even though Nestle has achieved 100% implementation, there are a number of Distributors who are facing problems which have been listed and are in need for a manual which has been prepared. The second project is Seamless Operations of Channel Finance. Channel Finance(CF) is an innovative mode of payment for distributors. More and more MNCs are using asking there distributors to open Channel Finance accounts. Nestl Delhi branch has an agreement with HDFC Bank to open up Channel Finance A/Cs for its distributors. It currently takes 1.5 months to open a CF A/C. My project included understanding the entire process of Account opening and preparing a Manual for distributors to help speed up the process The results of this study were that, Channel Finance has been useful to small distributors who sometimes face a cash crunch. For the big Distributors, it does not make much of a difference as they have a strong Liquid position. However Distributors do face a problem for documentation, for which an employee of Nestle has to visit them each and every time. This wastes time and increases costs. With the manual, it helps the Distributors and if they face any problem, they can call the Branch and easily solve their problems. I had also gone for an Audit at one of the Chilled Distributors. The Audit report prepared can be seen in Annexure 8.

CHAPTER 1 INTRODUCTION

ABOUT NESTL
Nestle SA, Switzerland is amongst the worlds largest food and beverages companies, founded and headquartered in Vevey, Switzerland. Nestl originated in a 1905 merger of the Anglo-Swiss Milk Company, which was established in 1866 by brothers George Page and Charles Page, and the Farine Lacte Henri Nestl Company, which was founded in 1866 by Henri Nestl. The company is progressively evolved from a respected, trustworthy food and beverage company to a respected, trustworthy food, beverage, nutrition, health and wellness company. This objective is encapsulated in Good Food, Good Life. The principle activities of the group encompass: beverages, milk products, nutrition and ice cream; prepared dishes and cooking aids; chocolate, confectionery and biscuits; water; and pet care. It has 511 factories in 86 countries and employs nearly 283,000 individuals around the world

NESTL INDIA
Nestl India comes under the Nestl SAR region which includes India, Bangladesh and Sri Lanka. Nestle India Limited is the Indian arm of Nestle SA, which holds a 51% stake in the company. It is one of the leading branded processed food companies in the country with a large market share in products like instant coffee, weaning foods, instant foods, milk products, etc. It also has a significant share in the chocolates and other semi-processed foods market. Nestl's leading brands include Cerelac, Nescafe, Maggie, Kitkat, Munch and Milkmaid. Nestls relationship with India dates back to 1912, when it began trading as The Nestl Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in the Indian market. After Indias independence in 1947, the economic policies of the Indian Government emphasized the need for local production. Nestl responded to Indias aspirations by forming a company in India and set up its first factory in 1961 at Moga, Punjab, where the Government wanted Nestl to develop the milk economy. Nestl Indias first production facility, set up in 1961 at Moga (Punjab), was followed soon after by its second plant, set up at Choladi (Tamil Nadu), in 1967. Consequently, Nestl India set up factories in Nanjangud (Karnataka), in 1989, and Samalkha (Haryana), in 1993. This was succeeded by the commissioning of two more factories - at Ponda and Bicholim, Goa, in 1995 and 1997 respectively. The seventh factory was set up at Pantnagar, Uttarakhand, in 2006. Nestl has been a partner in India's growth for over nine decades now and has built a very special relationship of trust and commitment with the people of India. The Company's activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods.
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The Company continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings. The culture of innovation and renovation within the Company and access to the Nestl Group's proprietary technology/Brands expertise and the extensive centralized Research and Development facilities gives it a distinct advantage in these efforts. It helps the Company to create value that can be sustained over the long term by offering consumers a wide variety of high quality, safe food products at affordable prices. Nestl India manufactures products of truly international quality under internationally famous brand names such as NESCAF, MAGGI, MILKYBAR, MILO, KIT KAT, BAR-ONE, MILKMAID and NESTEA and in recent years the Company has also introduced products of daily consumption and use such as NESTL Milk, NESTL SLIM Milk, NESTL Fresh 'n' Natural Dahi and NESTL Jeera Raita. The 4 branch offices in the country help facilitate the sales and marketing of its products. They are in Delhi, Mumbai, Chennai and Kolkata. The Nestl India head office is located in Gurgaon, Haryana. Nestle has divided its product offering into 4 major categories: 1. Beverages like coffee, tea and health drinks contribute to about 30% of Nestle s turnover 2. Infant food/ milk products Milk based products such as EveryDay, Milkmaid & Fresh 'n' Natural Dahi and baby food such as Cerelac, Lactogen & NAN contributes to 43% of Nestle's turnover. 3. Chocolates & Confectionery Nestle comes 2nd in this segment in India. This category contributes 14% to Nestle s turnover. It includes mostly the following brands - Kitkat, Milky Bar ,Bar-One, Munch Polo etc 4. Prepared Dishes & Cooking Aids - Ready to cook food/ cooking aides are sold under the umbrella brand name Maggie. This category accounts for about 14% of Nestle s turnover. Maggie is the market leader in the noodles (45% market share) and the ketchup (43% market share) categories. The various products produced by Nestle under Different Heads can be seen in Annexure 1

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NESTL DELHI BRANCH

The Delhi Branch looks after the following regions Delhi+NCR, Rajasthan, Haryana, U.P, Jammu & Kashmir, Uttaranchal, Himachal Pradesh, Punjab & also Nepal. It covers 31% of the total area and reaches 30% of the population. Nestle calculates its Growth by looking at its Net proceeds from Sales(NPS) and Real Internal Growth(RIG).NPS is calculated by reducing the claims received from the Gross Sales. The RIG is calculated by calculating present year sales on the basis of previous years prices, i.e they do not include into count external factors such as Inflation. T 1.1 - Area wise Sales Contribution to Delhi Sales Region Delhi+NCR Western UP Eastern UP Chandigarh Rajasthan Source- Nestle % Contribution 31% 14% 14% 25% 16%

G 1.1 NET PROCEEDS FROM SALES FOR DELHI BRANCH (INR MiO)

16000 14000 12000 10000 8000 6000 4000 2000 0 05 06 07 08 09

NPS(INR MiO)

The entire business of Nestle is conducted through Cash Distributors known as CD. The CD is the main party of contact between the company and the Retailer. There are around 450 CDs
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under the Delhi Branch. Another important party is the Re-Distributor known as RD. A RD is a distributor in small rural areas where it is not viable to set up a separate CD. An RD looks after a smaller area mostly which are in the rural areas. A RD is set up under a CD. The role of a CD is: Accomplish the Company Business Plan Shares Leadership of the company Provides support in Distribution Maintain effective contact with the market Co-ordinate with the Sales Officer

The Role a RD is: Vital distribution link Sell in areas which cannot be reached by a CD Shouldnt be in the same town as a CD

The following is the distribution model of Nestle: F 1.1 Distribution Model of Nestle

Factories Distribution Centres CD RD Retailer Retailer Direct Parties Consumer

Consumer

Consumer

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In the above figure Direct Parties are huge Retailers to which the company supplies goods itself, for ex. Bharti Wal Mart, Reliance. There are 3 main groups of CDs: i. ii. Trade Parties- This CD handles all those products which come in retail packs and are meant for the end consumer to buy directly from the retailers Nestle Professional (NP) - This includes CD who looks after the Food Services (FS), Vending & Alternate Trade Channels (ATC). FS includes all the Nescafe and Maggi Stalls that we see in different Institutions. Vending products are those which are packed in bulk for the various Vending machines that we see for ex. The Nescafe Vending Machines. ATC includes packings meant for events, gatherings ex. Weddings. There are CDs specially established for the sale of these packs or a CD can look after both Trade Products and NP products Chilled Dairy-This includes CDs who handle only the milk products of Nestle. There are only 6 exclusive Chilled dairy CDs and that only so far in Delhi as the other areas face problems of logistics

iii.

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Types of Channels
Nestle has divided its market into 10 Channels as shown below:
F 1.2- Types of Channels

Apart from the above, there are Parties which are categorised under Key Accounts. Key Account parties include the Huge retailers that have entered the Market recently. They can be either Direct Parties or supplied through by the a CD. However the schemes and discounts provided to these parties are different than those given to normal retailers. Some the Key Account Parties are Aditya Birla Retail Limited, KB's Fair Price, Reliance Fresh Limited Each CD has a Sales Officer (SO) who is an employee of Nestle. A SO is the link between a CD and the company. A SO reports to an Area Sales manager (ASM) who looks after a particular area. This area may be a city and a few towns in the same district. The ASM in turns reports to the Regional Sales Manager. There are 6 RSMs. The Delhi Branch office has 5 Departments: Supply, HR, Accounts, Information System and Administration. The accounts and administration department are under the Finance & Control Division of the firm. In the Branch, a Branch Controller heads its activities. The basic duties of the Accounts Departments are: Handling the various claims of CDs Receiving payments for the orders of CDs
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Releasing orders after receiving payment Handling the claims of the employees

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CHAPTER 2 OBJECTIVES

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OBJECTIVES
1. To understand the Claims Management Process 2. To understand the Operation Aspects of SDS, its advantages and shortcomings 3. To prepare a SDS manual for Distributors 4. To understand the workings of Channel Finance 5. To prepare a Manual for Opening of a Channel Finance Account for Distributor

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CHAPTER 3 METHODOLOGY

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EFFECTIVE IMPLEMENTATION OF SDS

The following Methodology was used: 1. Understand about Claims Management, their various types, the manual processes from the employees of the Finance & Control Department. This was done by sitting next to the employees while they process claims and ask them question when things were not clear 2. Understanding what is SDS from Mr. Nirmesh Gupta and Mr. Raman Ghosain. 3. Had to visit the following Distributors for understanding the Operational Working of SDS from them: a. Advance Agencies, Gurgaon b. CPL Trading Company Private Limited, Delhi c. Siddharth Enterprises, Delhi d. Suntime Traders, Delhi 4. Used SDS at the CD points. Also asked questions related to SDS usage 5. Gave a Presentation to Mr. Pankaj Jaiswal, Mr Rohit Talwar and Mr. Raman Ghosain 6. Prepared the manual 7. Collected Raw Data which included the Claim Data sheet of February & March 2009 & 2010. Also collected the GPS and NPS figures from SAP 8. Conducted an analysis to see the various claim spends made by the company Pre and Post implementation of SDS to see the impact

SEAMLESS OPERATIONS OF CHANNEL FINANCE

The following Methodology was used: 1. Understanding the meaning and use of Channel Finance from Mr. Rohit Talwar 2. Understanding the process of Order Release from Ms. Sandhya 3. Understanding the process of opening Channel Finance Accounts from Mr. Amit Parashar 4. Undertook to visit the following CDs to understand the importance of the Channel Finance Documentation a. Kala Singh Kuljit Singh, Rithala b. M.K Traders, Amritsar c. Mukund lal ude chand, Bhatinda d. K.R Agencies, Rewari 5. Prepared a Manual

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CHAPTER 4 CLAIMS MANAGEMENT

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An important part of the project Effective Implementation of SDS involves understanding the claims Management system. The entire SDS is based upon streamlining the claims procedure and making it simpler for the CD to ask for reimbursement of claims and for the company to provide the schemes and budgets for various products and activities. Therefore it is pertinent to understand in detail Claims Management WHAT ARE CLAIMS? Seeing the distribution structure of nestle, we observe that the products from factories go to the Distribution centres and from here they are picked up and sold to the CDs. After the invoicing the title of goods is transferred from nestle to the customer. Now nestle reimburses its customers (CD and RD) for a lot of activities and expenses incurred by the CDs in promotional and selling activities (i.e. making the product available to the end consumer for consumption).These expenses are claimed by the CD & RD through various types of claims. For ex. The following are types of claims Buy 3 kg of Ice Tea and get a discount of 4% Buy 12 pieces of Dahi and get 1 piece more The Merchandise that is shown in the Shops, CD claims the amount of the Boards Providing incentives to the Salesman Providing discounts to the RDs Claims for Bad Goods returned by the Retailer

GROUPING OF CLAIMS
All claims can be classified under the following different heads:

1. SECTION II CLAIMS

a. ZCR Claims ZCR Claims require a detailed product wise (with product code) break up of expenses. The expenses claimed under this head include: RD Commission Staff Sales Discount Dented Discount Price Difference Branch Special Activity
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Dhamaka Home Economics Branch Media

b. FB75 Claims
FB75 claims are claims that do not require a product dimension. They are booked to pre-specified account codes (G/L) and cost centres directly. Ideally, these should be expenses that cannot be directly linked to any one product sold by the distributor. These would be expenses reimbursed to the distributor for carry out the business in general. These include the follow expenses: RD Freight Van Operation Expenses PS / DS Subsidy Merchandiser Subsidy Cycle Boy Incentive Training Expenses Visicooler Maintenance The above heads under ZCR and FB75 were popularly known as Section II claims. Claims under each of the subheading require different types of supporting documents and authorization letters. The details are mentioned further in this document.

2. Lumpsum Claims
A Lumpsum claim format is used when the CD has to claim expenses incurred while running certain temporary product promotions (TPP) as when directed by the company. In addition to this the CD can use this format to claim reimbursement for expense incurred on account of payment to authorized retail outlets for providing dedicated display shelves (PPP) for Nestle products. Please refer the sales manual for further details. The format for the Lumpsum claim statement is attached as Annexure II. Ongoing / FS Claims Ongoing / Food Services discount are claims made by the CD on account of expenses incurred by the CD for discount to Food Service outlets or product promotions which are more permanent in nature. Subsidies given to cycle boy (sting operations) are also claimed under Ongoing/ FS claims The format for Ongoing / FS / ATC claims is attached as per Annexure III Now to understand in brief the meaning & procedure followed in each type of claims. The procedures given below is the basic manual procedures that were followed before the implementation of SDS. As the software is new, not all the claims can be claimed through SDS, therefore the manual process is needed to be understood, so as to understand the advantages brought about by SDS: 22

BRIEF SUMMARY OF SECTION II CLAIMS 1. RD Commission & RD Freight

This is commission allowed to the CD on account of goods sold by the CD to the RD for the company. The freight incurred by the CD on account of supplying goods to the RD can be claimed as per the approval from the office. This claim is usually reimbursed per case of finished product shipped to the RD. This claim should be in line with the claim for RD commission claimed by the CD. The purpose for providing these discounts to RDs is so as to keep the RD interested in Supplying Nestle Products in rural areas. The format of all Section II claims is in Annexure 4 The following is the procedure for making and checking claims: Approved RD list already available with the branch. RD discount should be given after the scheme discount be it TPP or Ongoing Discount While the commission paid by the CD to the RD will be 4% (for all products where the CD commission is 5.8% or higher), Nestle shall reimburse 1% to the CD. For products where the CD commission is 4.8% or lower, the RD is allowed a commission of 3%. Here again the company will reimburse 1% to the CD. CD submits the signed and stamped copy of the Invoice raised on the RD as supporting for the claim and send it to Nestle CD also submits a RD discount summary report which contains the Number of cases billed to various RDs. No. of cases multiplied by the pre-approved freight rate per case would be the RD freight claim. CD to give consolidated amount basis claims cycle in the specified format. The Accounts department the check the Claim Top Sheet with the various supporting provided by the CD

2. Staff Sales DiscountThis is the discount given by the CD to Nestle Staff. The procedure is as given below: The total amount needs to be mentioned on the ZCR/FB75 claim format (Section II). A pack wise summary of goods sold to Nestle staff needs to be attached. Supporting bills (carbon copies and not photocopies) duly signed by the sales officer also need to be attached with the claim and submitted to Nestle

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3. Dented Discount This is the discount given by the CD to the retail outlets for purchase of Dented Products. Sometimes while the goods are In transit from the Distribution Centre(DC) to the CD or at the CD godown they might get dented. However it can be sold only if the product inside the package has not been affected. For these products, the CD claims on account of dented discount, the following procedure is followed: SO looks at the product & approves of the discount After that an authorisation from the concerned Area Sales Manager (ASM) is required Supporting bills for the dented products are to be sent to the Branch along with the SO folio stating the discount amount The following are the norms to be followed for providing the discounto Up to 10% to be passed basis Sales Officers authorizations o Up to 15% to be passed basis ASMs authorizations o Beyond this, a sanction from the Branch Controller is required 4. Price Difference These are claims on account of changes in price of a product. The claims should be supported by a SO Folio certifying the holding of the CD at the time the change in price was made effective. This needs to be counter signed by the concerned ASM

5. Branch Spl Activity / Dhamaka / Home Eco. / Branch Media / Branding For all of the above claims, the claim amount should be supported by bills as well as an SO folio verifying the expense. The folio needs to be counter signed by ASM. These special activities are to be conducted only after an approval. The SO has to ensure that the above activities should be within the sanctioned budget. Any expense in excess of the budget will not be passed by the Branch 6. Van Expenses CD can claim their expenses for covering outstation markets through their expense statements under the head FB-75 duly authorized by Regional Sales Manager. This claim should be supported with a monitor sheet wherein the following details should be mentioned: Freight Sanctioned Name of the market Distance in KMs Date
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Cash Memo numbers Quantity in cases Total Amount If freight is to be reimbursed then the same should be approved by the branch controller in the specified format

This statement has to be duly signed by the sales officer before being sent to the office. Unsigned statements will not be processed. 7. Pilot Salesman / Merchandiser Subsidy/Cycle Boy Coverage A Pilot Salesman (PS) is Salesman who is employed by the RD. It is he who gets the orders from the various retailers.. A Merchandiser subsidy is related to all the Merchandise i.e Boards, Hoardings of Nestle at Retail Outlets. Nestle appoints a 3rd party to prepare these Merchandise and they deal with the CD. The CD then claims a subsidy on the price of the Merchandise bought from the Company. A cycle boy is a normal salesman in smaller areas where even DS dont go. They are usually paid on a commission basis by the CD. A PS subsidy involves that apart from their commission, a part of their salary is paid by Nestle. In a Merchandiser Subsidy, the CD can claim 69% of the value of the merchandise from Nestle, the rest has to be borne by the CD. Subsidy for appointment of PS/Merchandiser can be made along with the section II claim. While the total amount needs to be mentioned under the FB75 section of the claim format, it needs to be supported by the DMP Format (Distributor Market Participation) with complete details and duly signed by both the CD and SO.

8. Training Expenses / Visi Cooler Maintenance Training is needed to be provided to DS/PS/Cycle Boys. The usual training period is 1 week. Expenses such as Food, Transportation or sometimes wrong orders taken involving certain loss to the CD can be claimed. Training Expenses for DS/PS/Cycle Boys can be claimed from the company provided they are pre-authorized by Branch Training Exec and are well supported by all relevant bills. Visicoolers are small Fridges provided by Nestle to keep their products such as Chocolate & Dahi. Their maintenance expenses can be claimed on SO Folio and should be supported by relevant bills. 9. D.S Incentives A Direct Salesman (DS) is employed by the CD. He has the same role as a PS. DS have incentives based on the amount of sale they make per month. These Incentives can be claimed by the CD in accordance to the directives issued by the company from time to time. The same must be claimed in the D.S Incentive format.
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LUMPSUM CLAIMS
Lumpsum claims are the most important types of claims. They are also the most common claims to be claimed by the CD and passed by the company. They have a product dimension to them. All expenses under this head can be traced to a unique SKU / Brand. According all claims under this section should have product wise breakup. Lumpsum claims are generally of 2 types viz Display Claims & TPP

Temporary Price Promotions (TPP)

TPP claims are on account of discount schemes run by the company from time to time. The schemes are run for a short duration (< 1 month) and the expense can be claimed by the CD basis the sales for that month. This is the procedure that was used prior to the implementation of SDS. Now the claims for TPP are made entirely through SDS. A comparison would be made later showing the Key change impacts between the 2 methods. These claims require budgets to be prepared and the CD can claim only as much discount as whatever he has spent or the budget limit whichever is less. Before that it important to understand the role of The Branch Channel Category & Sales Development (BCCSD): Optimum Utilisation of VISAs VISAs over here mean Budgets. It is this department which decides provides the Budget for the various promotions and schemes to the CDs SWOT analysis for the Market They undertake a SWOT analysis regularly at different areas for the purpose of understanding the market better which would help in sales Channel Opportunities in Regions They continuously strive to develop more Business Partners with Nestle for ex. Getting more CDs, RDs, wholesalers The following is the entire procedure from the preparation of budgets to submitting the claims by the CD:

1. BCCSD to receive category wise budget for the quarter from Head Office and give RSM wise in SAP for the quarter to Branch Control. 2. Branch Control to enter Plan Split into SAP. 3. BCCSD to create RSM wise trade activity in SAP to run schemes in market for the next month. 4. BCCSD to issue ASMs wise VISAs for the schemes to be run in the next month by 25th of the previous month.
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5. ASMs to split the VISA amount among distributors considering the sale requirements. 6. ASMs to prepare the input plan for each distributor. ASMs to ensure that the Input Plan conveyed is exactly in line with the BCCSD VISA. The number of BCCSD VISA should also be mentioned in the ASM Visa. Also, VISAs must be issued up to the overall budgetary cap. 7. ASMs to communicate the absolute amount, schemes to be run and input plans to the distributor in hard copy signed by him/her for the next month before the end of the previous month. It must be serially numbered. 8. ASMs to forward VISA amount for each distributor to respective DC locations for providing Off Invoice Discount (OID) up to the extent of 80% of the budget amount to the distributor. 9. Distributor must have the hard copy of input plan available and displayed at the CD point. 10. Distributors to run the scheme in the market as per the input plan given by the ASMs. 11. Sales officers to ensure that the scheme is operated as per the input plan and VISA given by the ASM. 12. In case of any change during the month, it must be communicated to the distributor following the same procedure and mention clearly that the latter VISA supersedes the initial VISA. ASMs must take written approval from BCCSD for additional budgets or any deviation in Input plans. 13. After completion of the month, distributors to generate SKU wise TPP statement checked by Sales Officer and send it to the branch control for claims by 10th of the next month. 14. Sales Officer should sample check TPP register against cash memos and countersign such records on a routine basis. 15. Branch Control to check the correctness of TPP register on sample basis and pass the credit note in SAP after adjusting the OID discounts from actual authorized spends. 16. Branch Control to make accrual for the scheme expenses in SAP before month end on the basis of estimated expenses from BCCSD. 17. In case of Nestle Professional (NP) party specific schemes or contracted rates, Nestle Professional Manager to provide listing of such schemes/contracted rates to Branch Control. 18. Branch Control to approve such schemes on the basis of written approval from Nestle Professional Manager. Apart from the normal TPP, Trade schemes also include Food Service (FS), Vending, Ongoing, Alternate Trade Channels (ATC) and Key Accounts. Ongoing discounts are discounts meant to be given to Wholesalers by the CD. The process of FS, Vending & ATC discounts are provided in the same way as TPP schemes are
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OFF INVOICE DISCOUNT In the above, in Point No. 8, Off Invoice Discount is mentioned. Off Invoice Discount (OID) is given by the branch administration department to a CD while Invoicing. OID is meant for advance funding to the CD. These may be given as one of the various discounts monitored by the branch office such as Temporary Price Promotion (TPP), Ongoing Wholesale Discount, Food Services Discount (FS) etc. The rationale behind advance funding or OID is to: Avoid cash flow problems for distributors Accrue tax related savings

A detailed procedure is outlined below:

1. A VISA is to be given by the Branch Marketing Operations giving ASM wise budget allocation. This is established in the month previous to the month in which the scheme will be run. VISA clearly states the scheme start and end dates of redistribution and invoicing cycle to CDs and the scheme details. 2. Accounts to intimate to the Order Management Centre (OMC) applicable rates and validate OID given as per the VISA. 3. ASM, after discussion with the SO, is to give a CD wise OID allocation in the prescribed format to the OMC at the beginning of the month. 4. The OMC is to ensure that the OID given to the CD does not exceed budget allocation. 5. The Scheme utilization reports which are to be generated monthly by the distributors are sent to the branch in the prescribed format. This needs to be verified and counter signed by the SO. The statement gives details of the scheme, the OID received and the actual utilization during the period. If the total balance (Utilization less OID) is due to the CD, the same will be given through a Credit Note. Similarly, if at the end of the month money is due from the CD, it will be recovered through a debit note. 6. A maximum OID that can be given is 80% of the Invoice, SKU wise 7. An OID will be given is only after VAT factorisation

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DISPLAY CLAIMS
Display claims deals with expenses undertaken by the CD for undertaken promotional display activities showcasing the various products of Nestle at Retail Outlets. The retailers can be compensated for the display shelves provided for Nestle products. The CD is allowed to compensate the approved list of outlets to the extent sanctioned by the branch. This amount that was given to the retailers can be claimed by the CD as a Display claim.
F 1.3 Different Types Programs under Display

The Display claims in Nestle mostly come under Nestle Corporate Visibility Program (NCVP) head. There are 3 main programs under NCVP described as below:

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1. STAR PROGRAM

The objective is to have dedicated space for Nestle Products within the shop, showcasing Nestle Products & New from Nestle to the Shopper with the purpose of increasing Sales. The priority channels targeted here are Large Grocers and Tier III Supermarkets. This program would operate in areas where there are currently CDs undertaken Merchandise. The Pay out for the retail outlets would be on a Quarterly basis. The Star program would be removed if for continuously 2 Quarters the sales of the Retail Outlet is below its slab. The Star Program is classified into Platinum, Gold, Diamond and Silver. T 1.2 Summary of the Star Program
Monthly Turnover in Rs. Brands & Products Maximum Pay Out in Rs.

STAR PROGRAM

Classification

Pay Out (Quarterly) 2.50%

Minimum

Maximum *F&B(-C&CNUT-GHEE) F&B-C&CNUT-GHEE F&B-C&CNUT-GHEE F&B-C&CNUT-GHEE 9000

5000

7449

SILVER

2.75%

7500

14999

GOLD

3.00%

15000

79999

DIAMOND

3%

80000

PLATINUM

*Food

& Beverages excluding Chocolate & Confectionary, Nutrition and Ghee

2. MAGIC STICK PROGRAM The objective is to have a dedicated space for nestle product specific SKUs within the shop on a hanger called Magic Stick for a clear visibility to the shopper with the sole purpose of inducing trials & increasing sales. The priority channels for this program are Small Groceries. The payout is fixed at Rs. 300 per quarter. The SO has to provide the Sales data for each outlet monthly. A SO also has to make visits at outlets to see if the Displays are put correctly and are clearly visible.

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T 1.3 Summary of the Magic Stick Program

MAGIC STICK Pay Out Minimum Turnover (Rs.) *Only F&B (Ghee-NUT.) Brands & Products

300/- per Quarter

1500

*Food & Beverages excluding Ghee and Nutrition

3. CHOCOLATE DOMINANCE PROGRAM

The objective is to have a dedicated space for only Nestle Chocolates within the shop, showcasing Nestle Chocolates & Confectionery to the Shopper with the purpose of increasing Sales through Visibility Program. The priority channels here are Bakeries & Large Grocers. The payout here would be made on a monthly basis. There are 2 classifications here are Gold and Silver. T 1.4 Summary of the Chocolate Dominance Program
CHOCOLATE DOMINANCE PROGRAM Pay Out 4% 5% Brands & Products Maximum Pay Out in Rs.

Monthly Turnover in Rs.

Classification

Minimum 2000 5000

Maximum 4999 *C&C C&C 2500 SILVER GOLD

CHOCOLATE & CONFECTIONARY

PROCESS FOR PROVIDING VISAs & CLAIMS The below procedure is the same for all the 3 Programs Star, Magic Stick and Chocolate Dominance. 1. There is a periodic activity of the selection of outlets which adhere the to company specified norms/parameters prior to market level negotiations by the field force. 2. After the feedback from the field, a manual VISA is issued by the BCCSD team containing ASM wise split of Quarterly Budget
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3. Finalization of Dealer list is done by the field. Inclusions/Exclusions/ Modifications/ Exceptions, if any, need to be approved by the management. 4. After the Dealer list is finalized, a contractual agreement signed by the Retailer is carried, a copy of the same is given to the branch for control purposes 5. Branches then prepare Coupons to be given to the Retail Outlets indicating the Pay Out amount. They are signed & Stamped by the Branch Controller 6. A centralized manual database is created indicating the Sales amount of Retailers and the amount of Payouts that they should get ensuring Budgetary control 7. Distributors on Quarterly basis make the payment to respective dealers in line with contract. For proof of payment, Counter foils of Coupons which were issued against market level disbursement are signed by the retailer. 8. Post payout to Dealers, distributor Claims through assigned Document (Sec II) supported by reimbursement details duly acknowledged by the third parties/authorized Coupons.

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KEY ACCOUNTS
With the increase in urbanization of 1125 million Indians, food spending per capita has surged from INR 299 in 2007 to INR 350 2009 with a significant potential for growth. To tap this opportunity created by sustained development witnessed by the Indian economy over the last few years, increase in the consumption and provide shoppers a more sophisticated shopping experience, leading player have set up retail chain across India. This includes sector pioneers such as Big Bazaar, resourceful Reliance and Aditya Birla and foreign giant like Walmart and Carrefour. To address the specific needs of evolving Modern Trade channel and ensuring better service, Nestl India set up a Key Accounts team to look after these Modern Retailers There are different types of customers which come under Key Accounts International Accounts accounts which have global presence like Wal-Mart, Tesco, and Carrefour etc. Their strength is technical expertise, international experience and global tie up. National Accounts accounts which have national presence like Big Bazaar, More and Reliance Fresh etc. Their strength is deep understanding of Indian markets, project management and implementation skills and customized solutions for different kinds of shoppers. Regional Accounts - Accounts which have regional presence like DMart, Sabka Bazaar etc. Their strength is catering to local needs and loyal customer base. Organised Wholesalers accounts which sell to wholesalers and retailers on a B2B model like METRO, Wal-Mart, Cash & Carry. Their strength is low cost operations, dual customer base i.e. retailers and shoppers and manufacturers perceive them as enablers of distribution.

As mentioned before there are certain parties which are called Direct Parties which come under Key Accounts. Apart from Direct parties there are 2 more kinds of services being provided Direct supplies made directly from Nestls DC to Key Accounts DC. Indirect supplies made by Nestls CD to Key Accounts. Hybrid - In case of some Key Accounts supplies are made direct to some locations or categories and indirect for other locations and categories.

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T 1.5 Difference between Direct & Indirect parties Basis Direct Logistics & Infrastructure Cost to Serve Servicing Confidentiality Responsibility of Nestl. Lower due to saving of CD commission. Better due to better focus. Ensures confidentiality.

Indirect Responsibility of CD. High due to CD commission. Servicing through CD may have some defaults. Does not ensure confidentiality.

BAD GOODS
At certain times there are goods which are returned from the market to the CD. It may be due to certain reasons such as expiry or breakage. These goods which are returned are referred to as Bad Goods. The format of Bad goods is given in Annexure 5. Bad goods claims are made by the Distributor due to the following reasons: 1) Expired Stocks from Market 2) Damaged Stock from Market 3) Expired Stock at CD 4) Damages in Transit 5) Shortages in Transit 6) Technical Defect

For Expired / Damaged stocks from Market or CD (for 1, 2 & 3) Bad Goods returned to the company from the CD or the market must be accompanied by an Exchange of Goods Advice (EOGA). This advice is to be filled in complete by the Direct Salesman (DS) while replacing the bad goods lying with the retailer. The retailer is required to sign and stamp the advice. Similarly for products expired at CD point EOGA needs to be prepared, signed and stamped by the CD as well. The claim form for bad goods due to above reasons must be supported by a product sheet which is essentially a summary of EOGAs that are supporting the bad goods claim. For Damaged/shortages in transit (for 4 & 5) Claims for Damages / Shortages in transit should be accompanied with transporters certificate, a copy of the Goods Received and SO Folio requesting credit (or supply) for goods received Damaged / Short by the CD.
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For Technical Defect (for 6) Claims for technical defects either from market or CD has to be accompanied by SO folio and necessary approval received from the Head Office/Factory quality assurance. The quality assurance is needed from the Head Office as Nestle takes the aspect of quality of goods very seriously For each of the above types of goods return (1 to 5), a separate Transfer Memo (Return Request Form Bad Goods Related) must be raised. The Transfer Memo must clearly mention on the reason code for which the goods are being returned.

35

CHAPTER 5 SAR DISTRIBUTOR SOLUTION

36

INTRODUCTION TO SDS
Nestle believes that while its products must be available to as many people who may prefer to buy them, the freshness and quality of the stocks is important and the distribution system needs to continuously improve to ensure this despite a larger reach. The retail trade in India is predominantly fragmented General Trade where the distributors play a major role in the route to market. In order to use this network more efficiently and be able to better track the movement of stocks through this pipeline, Nestle has decided to connect the Distributors through a uniform, robust and integrated Distribution Management System and have started the process of Advanced Sales Automation. This will increase transparency, accuracy, speed, enable enhanced efficiencies in trade spends and ultimately, execution in the market. It will also help the frontline sales force from some of their administrative burden and enable them to focus more on their core function. It will improve productivity and internal controls

The SDS (South Asia region distributor solution) is a recent and contemporary Sales Automation project at Nestle India Limited. It is a standard operating procedure being implemented at nestle India limited on a continental level. SDS has been installed and implemented at both the distributor point and at the nestle offices. Also as SDS is directly connected to nestle servers and thus Nestle has access to the operations being undertaken by the distributor. This means that there is a continuous updation of information. This hence leads to efficiency in terms of reduced time lag between formulation of plans and their final implementation. SDS has been implemented with the objective to ensure timeliness, accuracy and transparency, efficiency in TPP (temporary product promotions) schemes and claims. It is an ERP solution, built on a centralized database and normally utilizes a common computing platform; it consolidates all business operations into a uniform and enterprise wide system environment. It is an integrated computer-based system used to manage internal and external resources including tangible assets, financial resources, materials, and human resources. Nestle India Ltd. has a wide distribution channel comprising of around 1800 distributors through which it ensures that its products are fresh and easily available to its consumers. In its quest to make its products available throughout the territory, it has a well planned distribution structure as seen before comprising of Order Management Centers, Factories, and Distribution Centers, Redistributors, Customers, Retailers and Consumers. SDS caters to this issue by standardizing and simplifying the claims management process. Before SDS, there was a software named Nesprint was used by Nestle India limited. It was a distributor management solution. It was a standalone system installed by the company at
37

distributor point for billing purposes and had to be operated manually and nestle people had no connectivity with the system installed at the distributor point. This led to a possibility or chance of manipulation in bills and claims as nestle had no control over the Nesprint system installed at distributor point apart from providing technical support. Claims generated from Nesprint were printed and send to nestle at the end of month and a lot of times a lot of adjustments and manipulations were made by the distributors. Thus, a solution to NESPRINT: SDS (South Asia region distributor solution) The following are the advantages of using SDS over the manual system that was previously used:

1. It is a Distributors ERP. It automates their entire business All the details of a distributor are entered into SDS at the beginning of the Automation Process. From then on all the transactions that take place via the Distribution Centre or Retailer is done through SDS. This gives a Distributor a clear picture of its transactions any time he wants to see them 2. Enables Corporate control over the Distributors Inventory With SDS, Nestle can check the distributors sales, inventory, various kinds of reports, whether the schemes are being cut or not etc. 3. Improves the Sales Force Efficiency It improves sales force efficiency from both Nestle and the Distributors point of view. The SO can manage his operations more efficiently at the CD point. Manual reports need not be prepared by him anymore. Everything is automated, so he can get whatever information he wants at that moment only. The Direct Salesman (DS) employed by the CD, his Sales Routes are now chalked out in SDS, so by looking into the system the CD and Nestle knows where all are the DS going. Apart from that earlier after getting the orders from Retailers, it used to take them a long time to feed in the orders into the system. Now it is done faster. 4. Better informed Sales force The SO can get information about the present stocks, the closing stocks as this is very important while writing a new order. He would know for which product would be needed and how many units of the product would be needed. 5. Informed Decision making at all levels
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The schemes and discounts are automatically uploaded in SDS by Nestle. Therefore the CD can see for which products, channels, outlets, whether they are Trade, Food service or Vending schemes, are the schemes and discounts for. This way the CD can target its sales by inducing a retailer with the various schemes and discounts. Nestle can keep a check on various CDs as they have the option of logging on the CDs SDS and looking at what all they are doing. 6. Prevents Manipulation Earlier there used to be a lot of manipulation going on in terms of whether the CD is providing proper schemes and discounts to Retailers or not, whether they were claiming false Bad Goods claims etc. Through Implementation of SDS these practices have tremendously reduced. 7. The entire system is online The most important advantage that SDS has over its previous systems is that SDS is online. Through this, all the information that is uploaded by the company for, schemes, promotions etc. Flows into SDS. Also, all the information that is saved at the CD point flows into the Nestle system.

LANDSCAPE OF SDS
F 1.4 - Diagrammatic representation of SDS showing its working and connection with other

systems

The above diagram shows the 2 other systems involved so that SDS can work effectively
39

CONSOLE
The console is an Interface for Nestle. Just as SDS is installed at the CD point, the Console is installed at the Branch Sales Automation office. It is through the console that all the information flows into SDS. As shown in the diagram the following flows down through the Console into SDS: Promotions- This includes all the Schemes, Discounts, Promotions on different Standard Key Units (SKU). An SKU is defined as each product has different packaging and different weights for ex a Bar One can be 55 pieces of 8 grams each, or it can be of 28 pieces of 32 grams each. 2-3 people at the Branch office enter these promotions every month. The CD can see the new schemes at the beginning of each month Master Data This includes new products introduced by Nestle or new SKU. Apart from that If a CD has to include a new Wholesaler, RD or a retailer he will pass the information to the sales Automation Office, after it is approved it is entered into their system and the CD can start billing them Updates As the system is newly implemented, constant updates are provided by the company. Currently there are many aspect of SDS that are not being used. Whenever a new application is started or if changes are brought about in the current application being used, the CD is informed about them Invoices This is a very important aspect. Earlier when the CD used to give an order to the company, they used to receive a physical invoice from the Distribution Centre (DC). They then had to physically enter the increase in stocks and the various schemes on them into the system. Now the invoice flows through the console from the Distribution Centre (DC). Therefore after they have checked the goods received, the CD saves and confirms the invoice, everything is automatically updated into SDS. Pricing & taxation The CD does not have to keep a check on the prices of goods and does not have to enter them manually into the system. The prices of various SKUs flow into the SDS. Apart from the various VAT rates, Sales Tax rates are also updated automatically

As shown in the diagram the following flows up from SDS into the Console: Claims From Distributors Ideally all the various types claims discussed in the Chapter Claims Management are to flow through into the Console and no more annual reports are to be sent to the Branch. All the CD has to do is to Save & Confirm the various schemes and discounts cut for the Outlets. However as of now only Claims Regarding Temporary Price Promotions (TPP) and Bad Goods claims flow into the Console.
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Sales Details The Branch can check on the sales made by the CD. Various types of sales Report can be seen. For eg. Retailer wise, DS wise, Product Wise, Brand wise etc. These reports are generated automatically Inventories The Branch can also see how much stock does the CD holding currently Promotions Monitor The Branch can check whether the various promotions and schemes being given, are they being passed down to the other parties. Through this they can also check for any false claims being made.

DESK TOP ANALYZER

The Desk top analyse is a local system installed at the CD point. It is connected with the SDS. It is basically a Report Generator. One can see reports in SDS, however the types of reports or already defined and cannot be changed. It is basically a Pivot Table List. Through the Desk top Analyser the CD can take reports of any mostly any type. It consists of 3 elements or cubes: Sales Stocks Schemes The Pivot Table list consists of 39 Fields for ex. Batch code, Sales, Month, Product Code, Date etc. Therefore for instance the CD can take out under the Sales Cube the Sales of some of the following reports: Brand/Channel Salesman wise Sales by Value, Volume & Quantity Brand wise sales by volume, value & quantity Product wise sales by volume, value & quantity Outlet wise sales Brand/SKU/month wise sales Promotion Utilisation sales etc.

KEY PROCESSES & FUNCTIONALITIES As a part of the project Effective Implementation of SDS was to prepare a Manual for Distributors showing them the various steps In using the present options available in SDS. Explained below are the modules of SDS and the key function under them and why they are used. However before a CD starts using SDS, there is an important function called Sync. When the CD opens SDS, there is a sync process that takes place. This syncing helps the flow of information from the Console to SDS. Therefore if there are new schemes, or a invoice to flow through, it all happens when the system is synced. For this the Internet Connection is a must.
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F 1.5 A screenshot of the background display of SDS

As can be seen above, there are 12 modules available in SDS. They are as following: 1. Company Management 2. Inventory Management 3. Customer Management 4. Product Management 5. Sales Force Management 6. Route Management 7. Logistics Management 8. Financial Management 9. Stocky Management 10. Claim Management 11. Planning 12. Reports

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1. COMPANY MANAGEMENT Under Company Management the only function used here is Purchase Receipt. The Purchase Receipt is the invoice that the CD receives when he makes an order with the company. Earlier on, the CD used to receive only a physical invoice. Now, usually on the day the CD receives the goods, he receives the soft copy of the invoice through the Purchase Receipt Master. The advantage that a CD has by receiving the Invoice through SDS is that once it is Save & Confirmed, the stocks in the system get updated and the schemes and discounts for each SKU are also automatically updated A screen shot of the Purchase Receipt Master can be seen the SDS Manual on Page no.7 2. INVENTORY MANAGEMENT This module handles the Inventory details for the CD. The important functions used here are: Batch Transfer Each SKU produced has a Batch Code to it. The basic reason for having the Batch Transfer function is due changes in the tax rates or surcharges. For ex. If the CD has a current stock 2 cases of MAGGI Tomato Ketchup Bottle 24x500g which has VAT of 12.5 %. Now the VAT rates for these products increase to 14%. But in SDS they are still at 12.5%. Therefore when the CD purchases a new batch of the above product, they would include a VAT rate of 14%. Through Batch Master the CD can transfer his old stock into the new batch. Therefore now all his current stock would reflect a VAT rate of 14%. A screen shot of the Purchase Receipt Master can be seen the SDS Manual on Page no.31 Salvage This function is used by the SO for confirmation of Bad Goods received. The Bad goods received by the CD is entered in the Sales Return Module which is explained below. The CD can only enter the Bad Goods received. At the end of the month, the SO physically checks the Bad Goods with the Bad Goods information entered in the system. After that he saves & confirms in the Salvage Module after which the claim is made.

3. CUSTOMER MANAGEMENT This is the most important module for the CD. It includes the following important function: Billing The CD uses this when he has to prepare a bill for its Outlets. It is prepared one day before the actual delivery of goods. The CD has to select the retailer, the DS, the route at which the outlet is & select the SKUs ordered. After that a temporary Bill is generated. The CD can see various other details such as the scheme being cut, the current stock of the product, the tax rate and amount, Batch details etc. A screen shot of the Purchase Receipt Master can be seen the SDS Manual on Page no.10
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Delivery Process Over here, the CD selects the Delivery Boy, DS again, Sales route. It is here that the Bill is confirmed and a Tax Invoice can be printed Sales Return This is a very important function. Over here the CD enters all the goods returned from the market. The Goods returned can be Saleable or Unsalable i.e Bad goods. A screen shot can be seen in the SDS manual, Page No. 29 Scheme Master In this Master, the CD can see all the information regarding a particular SKU and the schemes being provided for it. A screen shot can be seen in the SDS manual, Page No. 33 Retailer Master Through this function, the CD can see the details of all the Retail Outlets. The CD can add new Retailers through this Master. A screen shot can be seen in the SDS manual, Page No. 58 Collection Register In this function, the CD can add the Cash/Cheque received from its Retail outlets. It will also display the pending amounts which can be seen through this register or when the particular party is billed next time in the Billing Master. A screen shot can be seen in the SDS manual, Page No. 62

4. PRODUCT MANAGEMENT Under Product Management, the only function used is the Product Master. The Product Master gives information about all the available products at Nestle. They can also check the Batch information. A screen shot can be seen in the SDS manual, Page No. 65 5. SALES FORCE MANAGEMENT Under this Module the CD might find 2 functions that might be useful Salesman Master and Delivery Boy Master. The CD can see information about its DS and Delivery boys. They can also add new DS and delivery boys. A screen shot can be seen in the SDS manual, Page No. 68 6. ROUTE MANAGEMENT As the name suggests, this module deals with the various Routes the DS uses. The various routes used by all the DS can be seen here and new routes can be added also. A screen shot can be seen in the SDS manual, Page No. 73 7. LOGISTICS MANAGEMENT Under this Module the most important and used function is Vehicle Allocation. This function is used after the Bill is saved under Billing Master in Company Management. Over
44

here, the DS, the sales route and delivery route are selected and the vehicle to be used is selected. Also at the time Billing, the Bill numbers are not permanent as changes may be made in the Bill, these pending bill numbers are allocated permanent bill numbers in this function. A screen shot can be seen in the SDS manual, Page No. 17 8. FINANCIAL MANAGEMENT This module deals with all the accounting part of the business. However this application has not been started in SDS yet. 9. STOCKY MANAGEMENT Under this Module a CD can see the information about themselves. This module also shows the Financial Calendar used. 10. CLAIM MANAGEMENT The 2 important functions used here are: Customised Claim Top Sheet Under this function, the CD can the schemes & Discounts cut on various SKUs sold. Ideally all the claims discussed in the Claims Management Chapter can be seen here; however as of now only TPP, Ongoing claims can be seen as of now. Manual Claims Under these claims all the Section II claims are entered here. The CD then sends the Manual claims report along with supporting to the Branch

11. REPORTS Custom Reports There are a total of 156 different types of reports that can be generated and printed. However the most important reports for the CD are o Bill wise Sales Report o Product wise Report o Customised Claim Top Sheet Report o Customised Claim Top Sheet Summary o Scheme Utilisation Report o Closing Stock Report Bill Print After the Delivery Process Master, the CD can print the Bill. The sales return details can also be printed here.

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CHAPTER 6 PROCEDURES FOR SETTING OF BUDGETS AND RECEIVING CLAIMS IN SDS

46

In the Claims Management Chapter, the old and manual procedures to make claims were explained. The following will discuss the ideal procedures, for the CD to do while making claims through SDS. After that an analysis will be made to discuss the differences and advantages for making claims through SDS.

TEMPORARY PRICE PROMOTIONS

1. The BCCSD will issue all the budgets to ASMs for the schemes to be run in the next month by the last week of the previous month. For ex. For the month of July, the BCCSD will issue the budget by June 24th or 25th. 2. The ASMs will then sign a hard copy of budget splits which is the same as in the soft copy and to be sent to Branch Control within a week of receipt of soft copy by the Branch Control. 3. The ASMs will then forward Budget amount for each distributor to respective DC locations for providing Off Invoice Discount (OID) up to the extent of 80% of the budget amount to the distributor. 4. The Branch control will then define the schemes to be run in next month and upload the budget for each distributor in CONSOLE by around 28th of the previous month. 5. The CD will then get an update of all the schemes to be run in the month, absolute budget and from SDS. 6. After completion of the month, distributors are to generate a Claim Top Sheet (No need of TPP register), get it approved by Sales Officer and send it to the branch control for claim. This Claim Top Sheet will include all the Trade claims. 7. The Branch Control is to check the correctness of TPP claim sheet from CONSOLE whether both the amounts match or not. And pass the credit note in SAP after adjusting the OID discounts from actual authorized spends.

DISPLAY CLAIMS
1. 2. 3. 4. After feedback from the field, the number of outlets that will be brought under Product Display program, the BCSSD will issue the Budgets for the same. Thereafter branch promotional person in Branch Control enters this visa in console. This Visa will be essentially created specific display related activities (category wise). Same visa will be defined for all RSM zone. Thereafter, distributor wise budget will be uploaded in Console. Creation of Display related scheme in the console centrally at the branch by the Branch Control team basis manual VISA. The Schemes will have various slabs (i.e Silver, Gold, Diamond etc.) with Turnover, Payout % and Maximum payout. The Schemes as before will be created quarterly. Post download of the scheme to SDS; it will automatically pick the retailers on the basis of their turnover of the previous quarter. Apart from this, CD/SO has the option that they may include/exclude the retailers.
47

5.

6.

All these additional retailers included/excluded will come to the Visibility Manager for approval. 7. After the end of the period of scheme, on the basis of their turnover of the current quarter, the slabs will be picked by SDS for the above retailers which have been added. 8. For the current retailer under the Display schemes, after the end of the period of scheme, on the basis of their turnover, SDS will decide their payouts 9. Visibility amount will be given in the bills raised after the end of the period of scheme and it could be given only up to a date pre-specified in the scheme (upto two months from the date of end of the scheme). 10. For claiming the CD has to Go Customized Claim Top sheet under Claim management. They should select the Display claims category and press Save & Confirm. The claim them flows into the console 11. All the above bills wherein the Visibility amount has been adjusted will come as monthly claim.

BAD GOODS
For Expired / Damaged stocks from Market or CD Following is the process of recording expired/damaged stock returns from the market in SDS:1. The Direct Salesman (DS) at the time of order booking, along with taking order for fresh stocks to be delivered, would also note the details of products to be taken back from the outlet. However he would not pick up the Bad Goods. 2. The DS on return to the CD point would generate an outlet wise sales return order for the expired/damaged stocks to be collected. This document is called Delivery Return Challan (DRC). This is printed in Bill Print under the Reports Module. 3. The delivery boy will take the printout of the DRC and collect the expired/damaged stocks in the market as per the same. Any difference in the quantity collected with the DRC quantity (both higher and lower) need to be mentioned in the DRC at the time of collection 4. The delivery boy should collect the sign and stamp of the outlet acknowledging the actual quantity handed over. The DRC without the sign and stamp of the retailer are invalid. 5. After collecting the Bad Goods from the market, the DRC has to be confirmed in SDS which will then be converted into un-saleable sales return and credit note will be generated for the value of the return at trade price (incl. VAT) payable to the retailer. Stock could then be visible in un-saleable stock location. 6. The credit note to the retailer for bad goods should be paid by adjusting in the subsequent invoices only. No cash payment to be made to the retailer by the CD. For Damaged/shortages in transit
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In this case transit refers to goods getting damaged or short while coming from the Distribution Centre (DC). In case of Damage/shortage in transit by the CD, it should be received as saleable stock during company invoice download and then CD should transfer this stock from saleable condition to un-saleable condition using a stock journal. Claims for Damages / Shortages in transit should be accompanied by a copy of the Lorry Receipt (LR) signed by the driver of the vehicle agreeing for the shortage/damage. For Technical Defect In case of technical defects in transit, CD should transfer this stock from saleable condition to un-saleable condition using a Stock Journal under the Inventory Management module. Claims for technical defects have to be accompanied by necessary approval received from Head Office/Factory for quality assurance stating that there was a technical defect Without this a CD would not be able to claim this. For each of the above types of bad goods, the SO has to confirm the Bad Goods under the Salvage Process; under the Inventory Management module in SDS. Under the salvage process the SO will destroy the bad goods and post the quantity destroyed and quantity to be claimed by the CD. Post the Salvage Process, while loading the claims, these salvages will be picked as part of the monthly claim. This salvage claim would contain the quantity and the value calculated at the trade price (incl. VAT).

SAMPLING
Nestle also undergoes Sampling activities either done by the CD or through 3rd parties. Following kinds of free stocks are being handled at CD
1. Stock (Nestle Product) received through Zero value invoicing and issued for Sampling 2. Stock (Non Nestle Product i.e. Coffee Mug etc.) received through Zero value invoicing

and issued for Sampling 3. Sampling out of CD stock In the above Zero value invoicing refers to those goods which are used for sampling however they have a Zero value when the CD receives the invoice i.e. the CD does not pay for these goods. Following is the procedure for handling and claiming zero value items in SDS:49

Stock (Nestle Products) received through Zero value invoicing and issued for sampling All the zero value invoiced Nestle products are entered manually as receipt in the Sample Management Module. The screen shot can be seen in the SDS module page no. 53 All Issues of these free stocks should also be through this module No claim can be raised on the company on issue of this stock as they are invoiced at zero value to the CD Stock (Non Nestle Products) received through Zero value invoicing and issued for Sampling All the zero value invoiced for Non Nestle products should be handled outside system No claims can be raised on the company on issue of this stock Sampling out of CD Stock Issue of stocks for Sampling has to be done through Sample Management. If zero value stock is un-available in the system, system will issue stock from the saleable stock. Claim for these stocks will be raised on the company at CD Purchase price of the respective product. In the remark column of the sample issue, CD has to mention: - Date and description of the Sampling activity - Batch code of the products issued - VISA (Budget) No. Format of the VISA is attached herewith.

RD COMMISSION & FREIGHT

The RD claims are a part of the Section II claims. However in SDS once the rates & the RD commission are entered into SDS, the claims are automatically generated once billing to RDs are done. Following is the proposed procedure to be followed in SDS: Whenever a new SKU is being created in the Console, RD Commission and RD Claim % has to be defined. Whenever a new RD is being created in SDS, it will come for approval in the Console. The same has to be approved by concerned ASM and RSM. Post creation of the CD in SDS, the Branch control uploads the RD freight as rate per case in console which is pre-approved at CD level.

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At the month end, along with other claims, CD has to load the RD claim as well. In the same load both the RD Commission claim (basis the RD claim % defined while creating an SKU) and RD freight claim (basis the rate per case defined as mentioned above) will be created. This claim has to be approved by SO after scrutinizing the signed and stamped RD bills maintained by the CD. Post SO approval, claim will come in console for processing.

MANUAL CLAIMS
As discussed before, manual claims in SDS refers to the section II claims discussed in the Claims Management Chapter. The following are the types of Section II claims: RD Commission & RD Freight Staff Sales Discount Dented Discount Price Difference Branch Spl Activity / Dhamaka / Home Eco. / Branch Media / Branding Van Expenses Pilot Salesman / Merchandiser Subsidy/Cycle Boy Coverage Training Expenses / Visi Cooler Maintenance D.S Incentives

For the above apart from the RD commission & RD freight, the rest of the claims are manually entered in Manual Claims under the Claim Management Module. After they are entered, the CD can see all the claims under Claim Top Sheet under Claims Management. For all the manual claims entered, the CD has to send the supporting documents showing the expenses undertaken such as Bills, workings for the claims etc. To the Branch office.

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CHAPTER 7 CHANNEL FINANCE

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INTRODUCTION TO CHANNEL FINANCE Channel Finance Scheme for collections has been implemented to facilitate efficient and faster collection from distributors. Channel Finance is a mode of payment used by Nestle to receive payments from their CDs. More and more FMCG companies are using. Earlier and still in many companies, that of payment in Cash or Cheque/DD. Nestle has a strict policy of no Cash Transactions. Therefore in the beginning, all the payments were made by Cheques or DDs. As the Banking Industry involved so did the mode of Payments. Then came Real Time Gross Settlement (RTGS). However this mode also faced sum problems. RTGS was meant for anyone to use. There was no special arrangement for Nestle. Soon banks started to provide nice service to Corporate Clients. One of these services was Channel Finance. ABOUT CHANNEL FINANCE Nestle India has a tie up with HDFC & ICICI Bank for opening up of channel finance A/Cs. Under these facilities, the CD has to have a Channel Finance with any one of these Banks. Payments can be made into this A/C like any other A/C and through any mode, for ex. Cash, Cheque, RTGS etc. Nestle can see in its login with the respective banks whether payments have been received or not. At the end of the Day, the Accounts Manager sweeps all the funds from the Channel Finance A/C of Nestle into the Accounts of Nestle. In this facility, the CD only has the option of depositing Money, and Nestle has the authority to Debit the Account. Before understanding the process of Channel Finance, RTGS should be explained first. RTGS
Real Time Gross Settlement (RTGS) is a system managed by RBI through which the transfer of payment is carried out electronically between banks. Leading banks (89 banks & about 18000 branches) are members of RTGS system and are providing transfer of funds through RTGS to its account holders. This process involves giving RTGS fund transfer application by the Customer at his bank's branch to remit the amount by debiting their bank account & crediting beneficiarys bank account. Successful execution of RTGS transfer by the Remitting bank at Banks system generates a Unique Transaction Reference number (referred as UTR No.) Under this mode, the money is transferred from the Bank Account of the Remitter (Customer) to the Bank Account of the Beneficiary (Nestle India Limited) on the same day. Normally, it can be carried out during stipulated RBI business day which are till 3.00 p.m on all working days & upto 12.30 p.m on Saturday. In case the recipient branch is holiday on the day of receipt, then the funds will be credited on the next working day with the value date of the previous working day 53

PREREQUISITES FOR A CD TO OPEN A CHANNEL FINANCE A/C For a CD to get a O/D limit, he must be a distributor with Nestle for at least 2 yrs Nestle should contribute 60% if the firms Turnover They must have an account with HDFC

ADVANTAGES OF CHANNEL FINANCE For CD The CD is getting an O/D limit without any Security Deposit; They just have to make an annual payment of Rs. 1000 to use this Account At the time of Invoicing, if there are not enough funds in the CDs Account, the O/D limit is used automatically. Therefore because of delay in payments, the CDs business does not suffer A nominal interest rate of 12% is being offered (HDFC Bank) For Nestle Identification of Payments Earlier most of the payments were made through RTGS. It was difficult for the Accounts Dept. To track which UTR no. Is of which CD. Through Channel Finance, identification is very simple Transfer of Funds Earlier transferring of funds from the different A/Cs to Nestles A/C use to take 2-3 hours. Now it takes around 10 minutes Business Flows for the CD as well as Nestle, as Nestle is getting its money on time VARIOUS FUNCTION INVOLVED FOR RELEASE OF PAYMENTS 1. Estimate Order File Every morning the Branch receives a Estimate order File from the Order Management Centre (OMC). This excel sheet contains the estimated amount of money that they will receive for each region. This is made on the the basis of the orders. 2. Matching - When the money is received, the Accounts department enter this amount in to SAP. 3. Order Release Form The Branch receives an Order Release Form throughout the day. This sheet contains the List of orders made by CDs along with their amounts. The Accounts Department has to then check whether the CD has done the payment either through Channel Finance, DD, or RTGS. If the amount paid by the CD is less than the order amount, then Accounts will pass the order till the amount paid. This is then sent to OMC. OMC then passes these orders onto the Distribution Centre. Over here parties under Channel Finance are at an advantage. Even if they have not made the payment, the Accounts Department will use their O/D limit to finance the
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order. However before the next invoicing, the CD has to pay the outstanding amount along with interest. 4. Sweeping This process is done at the end of the day. This process transfers all the funds from the Channel Finance A/C to Nestles A/C

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CHAPTER 8 FINDINGS & ANALYSIS

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FINDINGS ON THE PROJECT EFFECTIVE IMPLEMENTATION OF SDS

After understanding the operational workings of SDS, meetings with the CDs and while preparing the Manual, the following problems have come up: 1. Not fully functional There are still a number of function not working in SDS. The Financial Management Module still has not been started. This would be a huge help for CDs who now use other softwares for accounting 2. Invoice not Reaching on Time The Purchase Receipt which is to flow from the Console into SDs before the physical receipt of goods, does not flow sometimes. Due to this the CD cannot save & confirm the Purchase receipt which in turn delays the entire Billing Process. The stocks are not updated into the system 3. Invoice Date & goods Received Date are different In the Purchase Receipt master, these 2 dates are different. Sometimes the Retailers might complain to the Company that they are not receiving their goods on time, even though the invoice date shows that the CD has received the goods earlier. This may cause problems for the CD 4. Schemes are not Uploaded Sometimes the new schemes are not uploaded onto the scheme master. Even though, the CD receives a physical copy of the schemes for that particular month, till the schemes are not uploaded on SDS, the Retailers cannot receive the schemes 5. SDS stops working A few CDs have faced a problem that SDS stopped working, and due to that their entire system crashed 6. No Confirmation after Save & Confirm The SO & CD after they press Save & Confirm on the various masters, they do not receive a confirmation whether the information has flowed to the Console or not. There have been a number of instances where, the SO and CD have saved & confirmed however the console has not receives such information 7. Time in Claim Settlement At the time of implementing SDS, the major benefit for CDs was that, it was said that the claim settlement would take only a week compared to a month. However this still has not been implemented. The claim settlement still takes 1.5 months as before. 8. Budget Constraints Selling is an art. However due to SDS it has become part science. When a CD requires additional budget for schemes, discounts and

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promotions, it take 4-5 days for it to be approved and uploaded to SDS. This time should be reduced as the CD would loose that particular selling opportunity. 9. Company Demands Reports The console has the option of taking out various kinds of reports just as in the Desk Top Analyser. However they are not used and Nestle still asks for reports to be send by the CD 10. Closing Stock Report In this report, there are no separate columns for the Price and the VAT. They are added together in the same column. 11. Unwanted Back Up Every time the CD syncs SDS with the Console a Back Up is creates. This back up takes up unwanted space on the CDs Hard disk. They then have to be manually deleted at the end of the day 12. VAT related issues There are certain VAT related issues with SDS 13. Dedicated Helpline There are no dedicated help lines to solve the SDS problems. Uniliever have the same type of software and also a team to answer the distributors problems. Nestle should develop such a helpline.

IMPORTANT CHANGES & IMPACTS AFTER IMPLEMENTATION OF SDS

TEMPORARY PRICE PROMOTIONS 1. Better monitoring of TPP schemes and allocated budget: SDS will not allow billing more than the budgeted amount allocated to a particular distributor and also any variation in the TPP scheme will not get invoiced by the distributor. This will ensure better monitoring of TPP schemes and allocated budget.

2. No need of manual TPP register checking: Implementation of SDS will eliminate the need of comprehensive manual TPP register to be sent to the Branch control. It will further reduce the manual checking efforts made to check TPP register by Branch Control.

3. No need of Hard Copy Input Plan: Implementation of SDS will eliminate the need of input plan to be sent to the distributor. CD can get an update of all the schemes to be run in the month, absolute budget and input plan from SDS.

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4. Increased Accuracy and transparency: Implementation of SDS will result into Increased Accuracy and transparency due to automated checks and procedures.

5. Better Monitoring of Party Specific Schemes and schemes other than TPP: Branch Control to approve such schemes entered by distributor in SDS on the basis of written approval.

6. CD wise Better OID control: Implementation of SDS will result into CD wise better OID control as ASMs will have to give OID split in soft copy for each distributor to branch control.

7. Better RDBN control: Implementation of SDS will make available correct reporting of physical holding by the distributor and will result into better RDBN controlling.

8. Increased Market Exposure for Sales Officers: With the implementation of SDS, Sales officers would be able to spend more time in market area rather than at CD point.

9. Better Product and Price Management: Currently product & price masters are defined by the distributors manually. It can negatively affect data standards & data hygiene. In SDS product & price master will be maintained centrally & down loaded to the distributor system. It will enable standardized data across all distributors.

10. Better Planning and Transparency in Invoicing: Currently the distributors do not have visibility of the invoice till they receive the stock. After receipt of stock & invoice manual entry is done. In SDS the invoice gets downloaded giving visibility of the stock in transit.

DISPLAY
1. Shift in focus of control from manual to system driven. a. Budgetary control in the system. Total payout cannot exceed budget (at CD level) pre defined in the system console. b. Any exceptions in retail outlets will need approval in the SDS c. Retail outlets will be selected and approved via workflow in the system. d. Payout will happens automatically by adjusting the specified amount on the first bill of the next month.

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2. Claim request will flow electronically via console. Necessity of Manual claims documents i.e. signed and stamped coupons for processing claims is not required. 3. Preservation of physical copies of claims for governmental regulatories /statutory requirements is subject to legal consultations/advices. 4. Increase in white collar productivity by maximizing potentials of electronically automated system. 5. The System helps on analyzing affectivity of the spends.

SAMPLING
1. All the Zero Value Invoiced Nestle product will be handled through SDS. It would provide the complete trace of the stock. 2. Every activity should have a Budget issued to the field by BCCSD indicating the CD from whom stock will be drawn & what stock will be drawn. 3. Complete trace back of the Sample stock will be available in the system, particularly the zero value stocks issued by the company. 4. Claim for sampling of CD stock will have all the relevant detail i.e. Date and description of sampling, Sampling Agencys name, batch code etc. 5. Issue to be made only for the quantity exactly to be consumed in the activity as any excess issue cannot be reversed or taken back by the CD as reversal in SDS. 6. In current setup, all the Zero value invoicing needs to entered manually in Sample Receipt. If the CD doesnt do this and issue the same stock through Sample Issue, a claim would be generated.

RD COMMISSION & FREIGHT

1. There is no need to manually maintain and update list of RDs by the Branch Control because each new RD is being approved by ASM & RSM. The required list of RDs can be taken from Console on real time basis. 2. The Signed and Stamped RD bills are not required to be submitted along with the claim since in SDS RD Commission is strictly passed to only those outlets which are
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mapped under RD channel and these outlets are pre-approved by ASM/RSM in SDS. Similarly RD freight rates are pre approved & cant be changed in SDS. 3. However these signed and stamped bills should be maintained at CD point and these acknowledgements need to be randomly verified by Branch Control during field visits. 4. All the new RDs are being approved by ASM, RSM and Branch Control and only post approval billing can happen. 5. Claim % and RD freight is approved in console and it cant be changed in SDS.

BAD GOODS
1. The existing manual EOGA document will be replaced by SDS generated Delivery Return Challan (DRC) which will have necessary details like the retailer details, SKU details, reasons for return etc except Batch Code. 2. There is no need to prepare EOGA summary manually as the same is available in SDS and the same can be accessed online in console. 3. Similarly there is no need to attach EOGA summary to branch office along with Bad Goods claim because reason code wise, retailer wise trail of bad goods will be available in SDS/Console for cross checks. 4. Tracking of bad goods at retailer level, SKU level, reason code wise etc become easier, real time and more effective for both CD & Nestle. 5. Credit to the retailer for bad goods to be given only through the bill and other modes of reimbursement like cash payment, stock replacement etc will be discontinued.

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ANALYSIS OF CLAIMS RECEIVED As a part of understanding Claims Better, and see whether there is any difference Pre & post implementation of SDS, I undertook an analysis of the Gross Proceeds from Sales (GPS), Net Proceeds from (NPS), Performance Trade Spends (PTS), Gross Price Reduction (GPR) and Bad Goods for the duration February & March 2009 and February & March 2010. Firstly to understand what the various terms above mean: GPS It signifies the turnover of the CD, the actual sales NPS This is the figure we get after we reduce GPR from GPS GPR It includes FS/Vending, Ongoing & ATC claims PTS It includes Trade & Display claims

The purpose was to see the changes in the claims made in different regions, as by January 2010 most of the CDs were using SDS. In the tables below are a comparison of figures for February & March 2009 & 2010 T 1.6 NPS (Figures in Crores)

February
ASM Zone Delhi Haryana HP J&K Punjab Rajasthan UP Uttaranchal TOTAL 09 19.00 3.75 4.28 4.57 13.77 8.25 19.86 4.81 102.98 10 23.36 5.24 5.49 5.79 16.56 10.11 24.91 6.06 121.95 % Change for February 18.66% 28.32% 22.01% 21.12% 16.81% 18.45% 20.29% 20.71% 15.56% 09 17.63 3.44 3.88 5.33 12.16 7.16 17.81 4.40 90.26

March
10 21.70 4.95 5.67 5.69 15.32 9.02 22.18 5.26 107.22 % Change for March 18.75% 30.48% 31.54% 6.29% 20.60% 20.60% 19.72% 16.46% 15.82%

FEBRUARY: As can be seen above the Turnover has increase by 15.56%. The maximum growth takes place in Haryana. In absolute terms, UP has the highest NPS, that of Rs. 24.91 crore in 2010. MARCH:

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The NPS for March has increased by 15.82% from 2009 to 2010. The maximum growth takes place in HP, with Haryana after that. In absolute terms, UP has the highest NPS with Rs. 22.18 crore. The growth rate has been steady for both the months. T 1.7 - TOTAL CLAIMS (Figures in Crores)

February
ASM Zone Delhi Haryana HP J&K Punjab Rajasthan UP Uttaranchal TOTAL 09 0.37 0.09 0.05 0.09 0.38 0.18 0.40 0.08 2.06 10 0.51 0.09 0.13 0.16 0.32 0.23 0.23 0.13 2.85 % Change for February 27.10% 0.88% 57.96% 40.99% -18.84% 20.98% -77.64% 41.75% 27.77% 09 0.30 0.03 0.06 0.06 0.21 0.08 0.23 0.03 1.27 10 0.51 0.03 0.06 0.06 0.18 0.08 0.21 0.03 1.52

March
% Change for March 40.18% 10.54% 6.46% -2.09% -18.41% 0.77% -12.76% -3.94% 16.93%

FEBRUARY: The claims raised by the CDs have increased by 27.77%. The maximum increase happened in Himachal Pradesh. This happens even though its NPS increased by only 22.01%. However as we can see above the claims raised by the CD in Punjab & UP reduced by 18.84% and 77.64 respectively. The reason for this may due to the implementation of SDS. Through SDS, false claims cannot be raised, therefore this might indicate the amount of False claims being raised in these 2 states. MARCH The claims raised by the CD have increased by 16.93%. There is a fall in claims between the 2 months. This phenomenon can be seen in both the years. The reason can be due to less NPS as can be seen in T 1.10. Also during the winter months, the Sales of Chocolate and confectionaries are more. There are a number of Schemes and discounts provided for these items

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T 1.8 - PTS (Figures in Crores)

February
ASM Zone Delhi Haryana HP J&K Punjab Rajasthan UP Uttaranchal TOTAL 09 0.27 0.07 0.04 0.07 0.24 0.14 0.26 0.05 1.19 10 0.51 0.09 0.13 0.16 0.32 0.23 0.23 0.13 2.85 % Change for February 46.70% 24.61% 69.48% 55.72% 25.69% 37.76% -14.51% 65.40% 58.31% 09 0.64 0.02 0.03 0.03 0.10 0.05 0.14 0.01 1.05 10 0.47 0.02 0.03 0.03 0.08 0.06 0.14 0.01 1.09

March
% Change for March -36.76% 28.36% 5.13% 0.00% -31.11% 14.43% 2.24% 3.68% 4.06%

FEBRUARY: Performance of Trade Spends (PTS) include Trade & Display claims. The claims are shown as expenses in the P&L A/C. These are the important claims raised by the CD. There has been a growth 58.31% increase. They increase with the increase in GPS. MARCH: There has been a drop in PTS claims for Delhi and Punjab for March. The increase has been marginal in March as compared to February. There has been a huge drop in PTS claims from Feb 2010 to March 2010. T 1.9 - Bad Goods as a Percentage of NPS

February
ASM Zone Delhi Haryana HP J&K Punjab Rajasthan UP Uttaranchal AVERAGE 09 0.32% 0.15% 0.13% 0.26% 0.13% 0.11% 0.28% 0.15% 0.19% 10 0.07% 0.11% 0.14% 0.22% 0.06% 0.06% 0.03% 0.10% 0.10%

March
09 0.20% 0.23% 0.12% 0.12% 0.17% 0.12% 0.14% 0.14% 0.16% 10 0.38% 0.17% 0.12% 0.20% 0.15% 0.09% 0.20% 0.15% 0.18% 64

FEBRUARY Nestle has to keep a check on the Bad Goods coming. There are certain bad Goods Norms which are followed by Nestle. They usually vary around .19% of the NPS. As it can be seen above in 2009, Delhi, J&K, UP had huge Bad Goods. When compared to 2010, only J&K exceeded the Bad Good norms. This decrease in Bad Goods can be attributed to SDS. Through SDS, the process of claiming Bad Goods becomes stringent. MARCH In March 2009 only Haryana exceeded the Bad Good Norms. Whereas in 2010 Delhi exceeded the norms. The increase in Bad goods of Delhi from February to March 2010 may be due to the unsold stock during the winter such as Beverages or processed foods.

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CHAPTER 9 CONCLUSION

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SDS
With SDS being implemented it has helped both the CD & Nestle. Despite some of the problems being faced by it, Nestle requires a system of this kind to keep everything on Track. With A Huge company like Nestle, a system like SDS will help it grow more. Claims processing through SDS have resulted in better and efficient handling of claims saving time, money, resources and energy for everyone. It has reduced the workload for the accounts and control department. The accounts receivables department now has access to the distributor point data and that too on a real time basis. This results in faster processing of claims. Also the number of false and invalid claims has reduced significantly. Most importantly, as such a huge company it is difficult keeping track of everything, with SDS, there will be total transparency Thus SDS is an invaluable and multi tasking tool.

CHANNEL FINANCE
Channel Finance is an extremely important mode of payment. With a huge company like Nestle, it has deals to deal with a huge number of accounting transactions. Channel Financing helps reduce the administrative work. However while opening Channel Finance Accounts, the time taken for opening an A/C can be reduced. Also the documentation should be reduced. This can happen if Nestle & HDFC can work out a procedure effectively

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BIBLIOGRAPHY
www.nestle.in Nestle Intranet www.fmcginfo.com www.inbics.co.kr www.indianfoodindustry.net Nestle journal-Creating Shared Value Other internal sources of Nestle Personal interviews and interactions from various department heads

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APPENDIX
ANNEXURE 1 Milk Products & Nutrition NESTL EVERYDAY Dairy Whitener NESTL EVERYDAY Ghee NESTL Milk NESTL NESVITA PROHEART MILK NESTL Fresh NESTL 'n' Natural MILKMAID Dahi NESTL Fresh NESTL 'n' Natural Slim NIDO Dahi NESTL Jeera NESTL Raita Slim Milk NESTL MILKMAID Fruit yoghurt NESTL NESVITA Dahi

Prepared Dishes & Cooking Aids MAGGI 2MINUTE Noodles MAGGI Vegetable Atta Noodles MAGGI CUPPA MANIA MAGGI Healthy Soups MAGGI Sanjeevni Cup Soup Beverages NESCAF CLASSIC NESCAF SUNRISE Premium NESCAF CAPPUCCINO NESCAF SUNRISE Special NESTEA ICED TEA WITH GREEN TEA NESTEA ICED TEA NESTEA Instant Hot Tea Mixes NESCAF 3in1 MAGGI Masala-aeMagic MAGGI Sauces MAGGI Pichkoo MAGGI Pizza Mazza MAGGI MAGIC Cubes MAGGI Bhuna Masala MAGGI Coconut Milk Powder MAGGI Pazzta

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Chocolates & Confectionery NESTL KIT KAT NESTL KIT KAT CHUNKY NESTL MUNCH NESTL MILKYBAR NESTL MILKYBAR CHOO NESTL BARONE NESTL Milk Chocolate NESTL MUNCH POP CHOC POLO NESTL Eclairs

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ANNEXURE 2

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ANNEXURE 3

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ANNEXURE 4

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ANNEXURE 5

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ANNEXURE 6

MANUAL FOR CDs FOR USAGE OF SDS

ANNEXURE 7

MANUAL FOR DOCUMENTATION FOR OPENING OF A CHANNEL FINANCE ACCOUNT

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ANNEXURE 8 - AUDIT REPORT CD Name : Atul Enterprises, IP Extension, Delhi. Sales Officer : Ritesh Anand Audited By : Vidyut Perti (Under the Guidance of Mr. Jindal Haria) Date : 14th May, 2010 ----------------------------------------------------------------------------------------------

Warehouse:The warehouse/godown cooler was not on. The temperature was considerably higher than 8 degrees Celsius and the temperature indicator was not working. The proprietor reasoned that it was because the last vehicle had just left and the vehicle needed to be loaded with goods.

Market Visit:
We connected with one of the salesmen Kanhaiyaji whose route included Mayur Vihar Phase 1 and 2.
There was Presence of pre-signed and stamped EOGAs (Exchange of Goods Advice) ,without rest of the details being filled out.

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Almost all the outlets we visited complained of old stock. As supporting to this complaint, we found old stocks in the delivery van as well as the godown.

Stock with Mfg Date 04/05/2010 in the van

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Stock of mfg date 11th may in Godown

Bad Goods:
We visited the following Outlets for verification of EOGA (The sample was selected out of Jan EOGAs absence or difference in signatures in EOGAs of the same store, improbable number of bad goods etc)

1)

Annapurna Stores (Mayur Vihar Phase2)

The proprietor was shown all EOGAs in the name of his store. He verified that the signatures on all the EOGAs were not his. As seen below, there are 2 EOGAs for the same retailer on the same day, indicating at least 1 is a fraudulent claim.

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Date

EOGA No 185819 185817 2770

Retailer

No of Pieces Returned 6 16 3 6 10 3 6

Dealer Amt 164 341 82 137 232 82 137

Issue

1/2/2010 5/1/2010 21/1/2010

Annapurna General Store Annapurna General Store Annapurna General Store Annapurna General Store Annapurna General Store Annapurna General Store Annapurna General Store

No DS Sign Diff Coloured Ink,No DS sign

25/1/2010 185847 22/1/2010 185818 18/1/2010 21/1/2010 2773 2778

No DS Sign No DS Sign No DS Sign No DS Sign

Probable Adverse Impact: INR 1,174 2) Gulshan Provision Stores

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The EOGAs had different signatures. The proprietor could identify only one signature out of 3 shown.

Date

EOGA No 2878 2895 2883

Retailer

No of Pieces Returned 5 9 14

Dealer Amt 96 150 314

Issue

3/1/2010 26/1/2010 19/1/2010

Gulsan Pro Store Gulsan Pro Store Gulsan Pro Store

Diff Coloured Ink No DS Sign Diff Coloured Ink,No DS sign

Probable Adverse Impact: INR 560 3) Jain Provision Stores

The proprietor acknowledged his signatures. EOGAs in this stores name had no problems.

4)

Snack Point

The proprietor acknowledged his signatures. EOGAs in this stores name had no problems.

5)

Richa Sweets

Signatures refused on all EOGAs. He accepted that sometimes there are bad goods from his stores, but they havent exceeded 5. But the EOGAs were showing exaggerated number of bad goods. EOGA No 2846 2761 2844 2849 No of Pieces Returned 16 18 22 17 Dealer Amt 437 437 600 437

Date

Retailer

Issue

30/1/2010 4/1/2010 12/1/2010 28/1/2010

Richa Sweets Richa Sweets Richa Sweets Richa Sweets

Too Many BG False BG Diff Colored Ink, False BG False BG

Probable Adverse Impact: INR 1,911 6) M B Enterprises

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Large number of bad goods through periodic EOGAs. Though the proprietor accepted that his bad good returns were often high, he appeared surprised at the numbers. But also acknowledged his signatures. This retail partner is a wholeseller with monthly turnover of about Rs 1 lac.

Salesmans Rapport:
Salesman Kanhaiya enjoyed tremendous rapport with the retailers whom he serviced. All praised his service and efficiency.

CONCLUSION
EOGAs
Out of the selected sample, 26% of EOGAs could not be verified. At a business level, this is an impact of INR in Jan2010. All figures in INR except % Sales in Jan 10 EOGAs in Jan 10 % EOGAs Unverified (based on sample) Probable Adverse Impact (Jan 10) based on sample set 567,769 31,847 26%

8,280

Extrapolation for the year 2010

All figures in INR except % Sales '10 (Based on Jan 10 Turn Over) EOGA '10 (Based on Jan 10 EOGA) % of EOGA not approved by retailer Probable adverse Impact '10 due to incorrect claims 11,355,380 636,940 26% 165,604

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Warehouse
The warehousing practices still need to be improved.

Inventory
FEFO is not being followed leading to presence of old stock in the system. This is also impacting market image with retail partners.

RECOMMENDATIONS
There have been substantial efforts by the Accounts team to point out the fact that there are significant portion of unjustifiable EOGAs in the system. Unless EOGAs are kept in check, they will have a tendency to balloon. 1) Dahi is a difficult business and EOGAs will be generated at higher percentage as compared to other businesses of Nestle. However they need to be kept in check. 2) A directive must be sounded to the CEPs that they will be debited for unsubstantiated EOGA claims (based on a random sample of EOGAs appropriated to monthly turnover) 3) This must be done for a couple of months in continuation and then similar study should be carried out again to understand the changes in EOGA levels and claims. 4) As an alternative, the distributor can be debited for a month. This will indicate the seriousness with which Nestle is looking at the veracity of EOGA claims and instill discipline.

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