Managing Distribution for Supply

Chain Excellence
Presented By: Subrat Sarangi

Venue: Xavier Institute of

Management, Bhubaneswar
Date: 17th August’ 2010
Agenda
What we intend to cover in the session?

 Your expectations

 Distribution – What we understand?

 Experience Sharing

 Key Learning's

 Q&A
Distribution
What, Where, When, Why ? (1/2)
Supply chains have become increasingly more global and complex, presenting
greater challenges
Partners Customer
Suppliers Supply Chain
Channels
Contract Mfg.
4 Flows: Product, Information, Work, Cash Retail
3PL’s Direct
Warehousing Online
Exchanges Plan Source Deliver Stock Sell Resellers

• Companies have dramatically Existing channels under pressure –

increased use of global sourcing requires constant change to retain
partners i.e. low cost destinations like market
China, India, Thailand etc Customers more demanding
• Trend towards collaborative
initiatives:  Greater service levels
 Customer self-service  Higher degrees product/service
 e-procurement systems customization
 Advanced planning -  Real-time order configuration &
Collaborative status
 Collaborative logistics  Optimally priced
product/service bundles
Distribution
What, Where, When, Why ? (2/2)
A fragmented information infrastructure is unable to meet the increasing
complexity and performance requirements of today’s supply chain

Plan Source Deliver Stock Sell

Multi-source Difficulty Inadequate Multiple order entry

Disparate systems & monitoring managing and and
orders and
fragmented shipment status tracking of customer touch
fulfillment
demand points
information > Lack of ability to > Need to more easily inventory
track orders monitor shipment > Need for updated > No single source
> Difficulty in sharing status tracking dashboard to view
through their
timely forecasts with mechanisms i.e. overall supply chain
suppliers
entire lifecycle > Need for improved
RFID installed in performance
> Lack of ability to > Lack of ability to ability to identify
easily understand order substitutions, warehouses, DC’s > Lack of ability to
understand supplier short and over and stores forecast stock outs
total pipeline
capacity during
inventory shipments > Seamless based on most recent
planning and inventory data
purchasing > Lack of ability to
easily assess
rationalization > Difficulty in
across stores and identifying
supplier
online portals unanticipated sales
commitment to
order trends
Distribution
Challenges are myriad, of varying complexity and dynamic in nature..
The core is to have a robust supply chain design to address the complexities and
bring agility

Key elements to consider:

• Planning & Forecasting – Statistical forecasting and collaborative

planning
We shall focus on
• Sourcing – Vendor management, e-marketplace, Strategic
Distribution
sourcing
through a couple
• Stocking & Transportation – Warehouse Management, of caseTracking
studies
goods movement, 3PL

• Distribution – Channel Design and Channel Servicing

Experience Sharing
Case Study 1: Leading Auto Manufacturer – Channel Design (1/2)

Background:
Leading commercial vehicle manufacturer (“X”) in the country with a market
share close to 33%. Operates primarily in BUS and HCV segments (including
Tippers etc). Has a skewed presence in terms of market share, dominance in
the four southern states and reduced presence in the rest of the country.

Problem Statement:
Design the distribution strategy and channel for launch of Light Commercial
Vehicle (LCV’s) across India

Context:
Had an unsuccessful attempt into the LCV segment about 6-7 years back and
managed to sell about 15,000 vehicles. Got a huge drubbing in the market
and since then has not been able to re-establish itself in the LCV segment.

Spend 5 minutes to understand the background, problem statement and next steps
Experience Sharing
Case Study 1: Leading Auto Manufacturer - Channel Design (2/2)
Key Questions to be asked?
• Why did “X” fail the first time? What were the critical factors for failure –
PRODUCT, PRICE, PROMOTION, PLACE?
• What was the channel design used in the first place? Does it suit the product
segment?
• What is the right sales strategy for the product segment? Were the dealers of
“X” adopting the same strategy? If No, then what was the selling strategy?
• What is the kind of service support expected by LCV customers? Were the
dealers doing the desired thing to meet customer service expectations?
•Etc,…
Key Data Elements:
•Customer profile and decision drivers for LCV’s.
•Channel structure of “X” during the first launch – spread, density, channel
economics etc.
• What were the problems faced by the channel – customer reactions, sales
feedback, etc.
• What is the best practice for the product segment for both sales and service –
competitor channel design.
Experience Sharing
Case Study 2: Leading Auto Manufacturer – Channel Servicing (1/2)
Background:
Leading commercial vehicle manufacturer (“Y”) in the country with a rapidly
declining market share for spare parts in the after market. Sales from captive
centers i.e. dealerships and authorized service stations also declining with
increased share of competitor part lines. Highly skewed sales spread in terms
of geography and SKU’s. Huge stock piles and dead inventory worth Crores.

Problem Statement:
Define a spare parts strategy to defend and increase market share, increase
sales spread in terms of SKU’s and geography, propose ways and means to
minimize inventory.

Objectives:
• Increase market share in after market – both retail and captive
• Increase spread of sales and thus enhance customer wallet share
• Increase inventory turns and improve channel profitability
Spend 5 minutes to understand the background, problem statement and next steps
Experience Sharing
Case Study 2: Leading Auto Manufacturer - Channel Servicing (2/2)
Key Questions to be asked?
• What is the share of OEM spares in overall captive sales (i.e. dealers,
authorized service centre's)? The reasons for the same - PRODUCT, PRICE,
PROMOTION, PLACE.
• What is the breakdown of retail sales in terms of key part lines (Rule of
80/20)? The reasons for the same.
• What is the current channel servicing strategy – frequency/ strategy – push or
pull, feeder vs. peripheral markets/ key communication messages/ stock
assessment for POS/ retailer economics – margins from OEM vs. Competition.
• Key decision makers/ influencers in spares buying – impact on distribution
Key Data Elements:
• Spare parts value chain – decision makers/ influencers.
• OEM spares sale breakdown in captive and retail/ wholesale.
• Spares ordering pattern by captive/ retail (Feeder and Periphery) – net of
returns.
• Distribution strategy – frequency, route plan, messaging, POS stock
assessment.
Key Learning's
Summary
• Supply chains have become increasingly complex posing myriad
challenges to business in keeping them agile and responsive.
• Technology is just an enabler. Supply chain design has a huge
bearing on overall supply chain efficiency.
• Distribution serves as the link between the manufacturer and
consumer and hence significantly impacts top line and bottom
line.
• There are two key components to Distribution – Channel Design
& Channel Servicing .
• Elements of Channel Design - Layers in Channel, Geographical
Spread, Density, Channel Economics.
• Elements of Channel Servicing – Push vs. Pull, Service Frequency,
Route Plan, POS stock assessment
Q&A
No question is a wrong question!