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Effectiveness and Efficiency of Distribution Channels in FMCG
Effectiveness and Efficiency of Distribution Channels in FMCG
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Q6. What percentage of bottling is done by the company vis-a vis
subsidiaries?
Company.. b. Subsidiaries
Q7. What are the major bottling companies of the company?
..........................................................
...
Q8. What is the revenue sharing model that the company adopts with the
bottling plants owned by franchisees?
Q9. What incentives that the company fives to distributors and large retailers?
..
Q10. What is the margin given to the following on an average:
Distributors..
Retailers..
Q11. What happens to the bottles that break during transportation?
Company takes it back b. Sells it to Kabariwala c.Other
Q12. Who bears the loss of the broken bottles?
Retailer b. Company c. Sharing between Retailer and Company
Q13.How much does the sales increase in peak season?
Double b. 3 times c. 4 times d. 5 times e. Higher
Q14. What does company do to meet the demands in peak season?
Q15. Is there any complaint/feedback mechanism for the distributor and
retailers?
Yes No
Q16. What is the process for reverse logistics of bottles?
Case Study: Study of Distribution Channel of Coca-Cola
Distribution Network of Coca Cola:
HCCBPL has a wide and well managed network of salesmen appointed for
taking up the responsibility of distribution of products to diverse parts of the
cities. The distribution channels are constructed in such a way that the
demand of customers is fulfilled at the right place and the right time when it is
needed by them.
A typical distribution chain at HCCBPL would be:
Production --- Plant Warehouse --- Depot Warehouse --- Distribution
Warehouse --- Retail Stock --- Retail Shelf --- Consumer The customers of the
Company are divided into different categories and different routes, and every
salesman is assigned to one particular route, which is to be followed by him
on a daily basis. A detailed and well organized distribution system contributes
to the efficiency of the salesmen. It also leads to low costs, higher sales and
higher efficiency thereby leading to higher profits to the firm.
DISTRIBUTION ROUTES The various routes formulated by HCCBPL for
distribution of products are as follows:
Key Accounts: The customers in this category collectively contribute a large
chunk of the total sales of the Company. It basically consists of organizations
that buy large quantities of a product in one single transaction. The Company
provides goods to these customers on credit, payments being made by them
after a certain period of time i.e. either a month of half a month.
Examples: Clubs, fine dine restaurants, hotels, Corporate houses etc.
Future Consumption: This route consists of outlets of Coca-Cola products,
wherein a considerable amount of stock is kept in order to use for future
consumption. The stock does not exhaust within a day or two, instead as and
when required stocks are stacked up by them so as to avoid shortage or non-
availability of the product.
Examples: Departmental stores, Super markets etc.
Immediate Consumption: The outlets in this route are those which require
stocks on a daily basis. The stocks of products in these outlets are not stored
for future use instead, are exhausted on the same day and might run a little
into the next day i.e. the products are consumed at a fast pace.
Examples: Small sized bars and restaurants, educational institutions etc.
General: Under this route, all the outlets that come in a particular area or an
area along with its neighbouring areas are catered to. The consumption period
is not taken into consideration in this particular route.
DISTRIBUTION SYSTEM
Direct distribution: In direct distribution, the bottling unit or the bottler partner
has direct control over the activities of sales, delivery, and merchandising and
local account management at the store level.
Indirect distribution: In indirect distribution, an organization which is not part of
the Coca-Cola system has control on one or more of the distribution elements
(Sales, delivery, merchandising and local account management)
Merchandising: Merchandising means communication with the consumer at
the point of purchase to convey product benefit, value and Quality. Sales
people and delivery personnel both have this responsibility. In certain
locations special teams who go into business locations to specifically
merchandise our products.
DEPARTMENTS INVOLVED IN THE
DISTRIBUTION PROCESS:
The Distribution process mainly consists of three departments:
Distribution Department: It appoints distributors and establishes a distribution
network, processes approved sale orders and prepares invoices, arranges
logistics and ship products, co-ordinates with distributors for collections and
monitors distribution stocks and their set-up.
Finance Department: It checks credit limits and approves sales orders in
compliance with the credit policy followed by the firm, records collections from
distributors, periodically reconciles outstanding balances from distributors,
obtains balance confirmation from distributors and follows up outstanding
balances.
Shipping or Warehousing Department: It dispatches goods as per approved
by order, ensures that stocks are dispatched on a FIFO basis, ensures
physical control over load out area and updates warehouse stock records in a
timely manner.
Data Analysis and Interpretation
On the basis of the survey done the inferences can be drawn as follows:
Packaging and sales:
From the survey it can be easily found that the maximum sales happen for the
300ml bottles and then come the 600ml packaging. When coming to family
pack and cans their sales are very less in numbers and it is driven mainly by
the region. It means that the sales of can will be higher in ares near the
schools/college that is the area in the youth vicinity whereas the sales of
family pack is in residential areas.
For the pictorial representation, considering only 2 types of packing i.e. 300ml
and 600ml.
Their sales can be represented as:
This shows that the sales of the company is driven mainly by the 300ml
followed by 600ml and the rest packaging styles are just an add on for the
company.
Replacement Time: Most of the retailers were happy with the replacement of
the stock. The average time came out to be within 1 to 2 days that is a good
sign for the company. This helps the company to interact more frequently with
the retailers and ensures that no sales are lost due to unavailability of the
stock.
Customer Behavior: Customer behavior is also on the company side as most
of the customers specifically ask for the companys product.
This data can be show as:
This is a good sign for the company as in such times of competition having
brand loyalty is not only important but it also helps the company to introduce
new products much easily.
Incentives for high Sales: From the survey it is clear that the company does
not have a proper policy in place to reward the distributors and retailers
having high sales. This is an area of concern for the company as giving
incentives to the retailers would help in increase in sales and brand visibility of
the company.
At present the company is only giving cash incentives to the retailers but it
should also start looking at awarding these retailers in some kind of annual
meet of the company so that the retailers feel of being a part of the company.
Peak Season Demand and Supply: It is pretty evident from the survey that the
company is unable to meet the demands in peak times of sales and the
competitor is cashing on this weakness of the company.
Most of the retailers say that the company is unable to meet the demand in
summers and peak seasons and in times when the supply should be
increased, the company cuts the supply causing loss of sales to the retailer as
well as the company.
In peak season the increase in sales can be depicted as:
From the graph it is clear that most of the retailers feel that the sales almost
quadruples in peak season and there is no measure from the company to
meet this huge demand as the company changes nothing to meet this
demand. The company has the same distribution strategy even in peak
season that leads to loss of sales for the retailers and making them unhappy.
Reverse Logistics: The company has a proper channel in place for reverse
logistics as follows:
Coca Cola
COBO/FOBO
Distributor
Retailers
Customers
The reverse logistics start from the customer and ends back to the company.
The retailers are imposed monetary fines if they do not return the bottles
allotted to them.
Core Issues and Parameters in supply of goods to the whole sellers:
Minimizing Order Processing Wait times
Wait times occur in many places and are often a key determinant of the
quality of logistics service (airlines wait times: pre, through, and post flight
inspections; depot repair time; defect trouble shooting and repair time)
For Coca-Cola the wait times of the products resulted in the supply chain
delivery system as seen in the figure below:
Predicting the scheduling wait times for the delivery of the products and
payments
We perform a scheduling simulation using the predicted runtimes as the run
times of the applications. This provides predictions of when applications will
start to execute.
We simulate the FCFS, LWF, and back_ll scheduling algorithms and predict
the wait time for each application when the application is submitted to the
scheduler
Demand Forecasting
Demand is the desire of a customer to purchase your products or services.
Demand is mainly affected by:
Exogenous Factors:
Economic Prosperity
Competing Products
Weather
Seasonality
Internal Factors
Promotions
New Product Introductions
Reaction to competitors activities
Pricing Decisions
Advertising
Service Levels
Demand Management includes ALL decisions that a company makes that
affect demand.
Need for Demand Forecasting:
Need to make production/procurement/capacity decisions in advance of actual
demand
In a pure make-to-order environment or if lead times were 0, forecasting
would not be necessary
Increase customer satisfaction
Reduce stock-outs
Schedule production more efficiently
Lower safety stock requirements
Reduce product obsolescence costs
Manage shipments better
Improve pricing and promotion management
Negotiating superior terms with suppliers
Making more informed pricing decisions
Steps in the Forecasting Process
Establish objectives for the forecast.
Determine what to forecast.
Specify the time period for the forecast.
Gather and analyze data.
Select a forecasting method.
Make the forecast.
Present the forecast results.
Monitor and control the forecast.
Considerations in selecting a Forecasting Method:
Type and amount of data available.
Underlying pattern of the past data.
Forecast time horizon.
Technical ability of the forecaster.
Use of the forecast.
Attitude of the end user toward specific methods.
Forecasting Methods:
Judgment Methods:
Nave Extrapolation
Sales Force Composite: Each salesperson projects their sales. It is combined
at district and national levels.
Jury of Executive Opinion: It involves group of high-level managers. The
group estimates demand working together. They combine managerial
experience with statistical models.
Delphi Technique: It is an iterative group method.
Forecasting Methods:
Counting Methods:
Market Testing
Consumer Market Survey: Asking consumers about their purchasing plans
Industrial Market Survey
Time Series Methods:
Moving Averages
Exponential Smoothing
Time Series Extrapolation
Time Series Decomposition
Box-Jenkins Method
Causal Methods
Correlation Methods
Regression Methods
Econometric Methods
Recommendation:
Aggressive Marketing
Regular visit to distributors
Sales promotion and advertising to be made more frequent for brand building .
Communications should be improved. Fulfil the Demand of product by
company. In the fields sales situation. Sales persons work independently and
away from the office .
Good communication requires interaction between those preparing and those
receiving reports. A good sales reporting system provides both for
communication from the field to office and form office to the field.
Sales reports provide data for evaluating performance.
Company should make plans for better performance to the sales man.
Company should be implementing the customers suggestions and complaints
about products, service policies, price changes, advertising companies etc.
Company should gather information of competitors activities. Transportation
confers time utility and place utility to the product. It determines the companys
customer service; it has also crucial bearing on the other elements of physical
distribution and marketing.
Conclusion
To conclude we can say that the company should do the following to maintain
an increase its sales:
Increase in supply in peak seasons
More incentives to retailers and distributors
Feedback mechanism for retailers
More consumer centric approach
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