d&l Exam Ppt Mahantesh

8/9/2019 d&l Exam Ppt Mahantesh

1/309

Logistics Management

Prof. Mahantesh B Halagatti-KLS IMER-Belgaum

KLS Institute of Management Education and Research

Belgaum


2/309

Logistics…..

•

Concerned with getting product andservices where they are needed and when

they are desired.•

Involves integration ofinformation,transportation,inventory,wareh

ousing,materials handling and packaging.•

The operating responsibility of logistics isthe geographical positioning of rawmaterials,work-in-process,and finishedgoods inventories where required at thelowest cost possible.


3/309

•

Logistical process facilitates the flow of materials

from suppliers to the manufacturing firms and thedistribution of finished products throughmarketing channels to consumers.

•

The complexity of logistics increases with thenumber of industrial manufacturers,suppliers,andthe channel intermediaries such aswholesalers,distributors and retailers within anation.

•

It becomes awesome when we consider business ona global basis,having global manufacturers, globalsuppliers and global consumers.


4/309

Logistics defined as…..

•

“

The process of anticipating customer needs

and wants, acquiring the capitalmaterials,people,technologies,and informationnecessary to meet those needs and

wants,optimising the goods or service-

providing network to customer requests andutilising the network to fulfill customer

requests in a timely manner.”


5/309

Types of Logistics:

•

Business Logistics

•

Military Logistics

•

Event Logistics

•

Service Logistics


6/309

Business Logistics

•

It is part of supply chain process that

plans, implements, and controls theefficient flow and storage of goods,services, and related information frompoint of origin to point of use orconsumption in order to meet customer

requirements.


7/309

Military Logistics

•

The design and integration of all

aspects of support for the operationalcapability of the military forces andtheir equipment to ensure readiness,reliability and efficiency.


8/309

Event Logistics

•

The network of activities, facilities and

personnel required to organise, scheduleand deploy the resources for an eventto take place and to efficientlywithdraw after the event.


9/309

Service Logistics

•

The acquisition, scheduling and

management of the facilities/assets,personnel and materials to support andsustain a service operation or business.


10/309

Logistics Management

•

“Logistics management is the process of

planning, implementing, and controllingthe efficient, effective flow andstorage of goods,services,and related

information from point of origin to pointof consumption for the purpose ofconforming to customer requirements.”


11/309

Components of logistics management


12/309

Benefits of good logistics management

•

Capability to identify potential

operational break downs and takingcorrective action prior to failure ofservice to customers.

•

Performance above industry averagein terms of inventory availability as

well as speed and consistency ofdelivery to customers.


13/309

Benefits….

•

Capability to monitor logisticalperformance on a real-time basis

through efficient information systems.•

High delivery performance ( near

perfect orders)•

Commitment to continuous improvement•

Firms having world-class logisticalcompetency can become attractivesuppliers and ideal business partners.


14/309

Logistical Competency

•

Is a relative assessment of a firm’scapability to offer competitively superiorcustomer service at the lowest possibletotal cost.

•

Characteristics are: Alternative logisticalcapability, emphasis on flexibility, time-

based performance, operational control,

commitment to perfect customer serviceperformance.


15/309

Logistical Mission:

•

Logistics of a firm is an integrated effort aimedat helping to create customer value at the lowest

cost.•

Logistics managers seek to achieve the desiredquality of customer service through state-of-the-

art operating competency.•

High level of customer service would be extremelycostly and not necessary to support mostmarketing and manufacturing operations.

•

Hence logistical service must be viewed as abalance of service priority and cost.


16/309

Basic logistics service is measured

in:•

Availability

•

Operational Performance

•

Service Reliability


17/309

Need for logistics management:

•

Competitive pressures•

Information technology

•

Channel power

•

Profit Leverage


18/309

Logistics Activities

•

Transportation

•

Storage•

Packaging•

Materials handling

•

Order fulfilment•

Inventory forecasting•

Production planning

•

Purchasing•

Customer service•

Site location


19/309

Role of logistics in Supply Chain Management


20/309

The Generic Value Chain


21/309

Role of Logistics in Economy

•

Logistics is one of the major expenditures

for businesses, thereby affecting andbeing affected by other economicactivities.

•

Logistics supports the movement and flowof many economic transactions and it is animportant activity in facilitating the sale ofvirtually all goods and services.

•

Logistics adds value by creating Timeutility and Place utility.


22/309

Role of Logistics in Organisation


23/309

Relationship between Marketing Mix elements andlogistics


24/309

Logistics Costs

•

Customer service level

•

Transportation costs•

Warehousing costs

•

Order processing/information systemscosts

•

Lot quantity costs•

Inventory carrying costs


25/309


26/309


27/309

The Marketing Mix

•

Product

•

Place•

Price

•

Promotion

•

Distribution channels help in the ‘place’aspect of the marketing mix

•

Distribution provides place, time andpossession utility to the consumer


28/309

Example

•

Consumer wants to buy a tube of toothpaste

–

Made available at a retail outlet close to

her residence –

place –

Made available at 8 pm on a Tuesdayevening when she wants it –

time

–

She can pay for the toothpaste and take itaway –

possession

•

The company distribution function has made

all this possible.•

The situation would be similar if a customerwants to buy a refrigerator or medicines or

even an electric motor


29/309


30/309


31/309


32/309

Distribution Channels

•

Are intermediaries or middlemen –

Exist because producers cannot reach

all theirconsumers

–

Multiply reach and provide efficiency

to the marketingprocess

–

Facilitate smooth flow

and create time, place andpossession utilities

–

Have the core competence

and reach

–

Provide contact, experience, specialisation

andscales of operation


33/309

Types of Channels

•

Sales: motivates buyers, shares information

between company and its consumers,negotiates fair bargains for consumers and

finances the transactions

•

Delivery channel meant only for physical part ofthe distribution

•

Service channel –

performs after sales service

Channel members…


34/309

Listing of Channel Members

•

Company own sales team

•

C&FAs

and CSAs•

Distributors, dealers, stockists, value-added re-

sellers

•

Agents and brokers•

Franchisees

•

Electronic channels

•

Wholesalers

•

Retailers


35/309


36/309

Distributors, Dealers,

Stockiest, Agents•

Name denotes the extent of re-distribution

done by them

•

Distributors invest in the products –

buy

products from the company

•

Are on commission, margins or mark-up•

May or may not

get credit –

but extend credit

•

Distributors cover the markets as per a beat

plan. All others merely finance the business.•

Distributors

could be exclusive for a company

•

Agents bring

buyer and seller together


37/309


38/309


39/309

Industrial Products

Producer Producer

Industrial Distributor

Industrial Customer

Industrial Distributor

Industrial Customer

Agent/middleman

Customers may also direct from company sales force


40/309

Consumer Products

Producer Producer Producer

Customer /

consumer

Retailer

Distributor Distributor

Retailer

Customer/

Consumer

Wholesaler

Customer/

Consumer

Retailer

Retailers may also direct from company sales force


41/309

Patterns of Distribution

•

Determines the intensity

of the distribution

•

Intensity decides the service level

provided

•

Types of distribution intensity:

–

Intensive

–

Selective

–

Exclusive


42/309

Distribution Intensity

•

Intensive: distribution through every

reasonable outlet available –

FMCG•

Selective: multiple, but not all outlets in

the market –

pharma, frozen food•

Exclusive: may be only one outlet in a

market -

car dealers


43/309

Intensive Distribution

•

Strategy is to make sure that the product

is available in as many outlets as possible•

Preferred for consumer, pharmaceutical

products and automobile spares


44/309


45/309

Exclusive Distribution

•

Highly selective

choice of outlets –

may be

even one outlet in an entire market•

Could include outlets set up by companies

–

Titan, Bata•

Producer wants a close watch and control on the distribution of his products.

Channel strategy…


46/309

Distribution Channel Strategy

•

Derived from

the corporate strategy and themarketing strategy

•

Steps for designing

the distribution strategy are: –

Defining customer service levels

–

Distribution objectives

and steps –

Structure

of the network required

–

Policy and procedure

to be followed

–

Key performance indicators –

Critical success factors


47/309


48/309


49/309

Set of Activities

•

Manner

in which the company and itsmarketing channels go about achieving thecustomer service levels

•

Some of these steps

could be: –

Sales forecasts

–

Despatch

plans –

Market coverage beat plans

–

Journey plans for service engineers

–

Collection of sales proceeds –

Carrying out promotional activities

•

The company also decides as to who is to

perform which task Organization….


50/309

Distribution Organization

•

Extent of company support and outsourcing

to

be decided•

Budget

for the cost of the distribution effort

•

Select suitable channel partners

–

C&FAs, and

distributors

•

Setting clear objectives for the partners

•

Agree on level of financial commitments

by thechannel partners.

Policy and procedure..


51/309

Policy & Procedure

•

Define policy and implementation

guidelines through Operating Manuals•

Policy guidelines

include

–

Code of conduct

for channel members

–

System for redressal of complaints

–

Any additional subsidies

etc

–

Handling institutional business –

Service policy

for engineering products

KPIs….


52/309

Key Performance Indicators

•

For measurement of effectiveness. Some ofthese could be: –

Consistent achievement of targets

by product groups,periods and territories

–

Achievement of market shares

–

Achievement of profitability

–

Zero complaints

from customers

–

No stock returns

–

Ability to handle emergencies

and sudden spurts indemand


53/309

Key Performance Indicators

•

For measurement of effectiveness. Some

of these could be: –

Balanced sales achievement

during a period –

no period end skews

–

Market coverage

with ready stocks –

Excellent management of accountsreceivables

–

Minimize losses

on account of stock-outs –

Minimize damages

to products

CSFs…


54/309

Critical Success Factors

•

The distribution strategy also needs thesupport and encouragement of topmanagement

to succeed

•

Some of the CSFs

could be: –

Clear, transparent and unambiguous policy andprocedure

–

Serious commitment

of the channel partners

–

Fairness

in dealings

–

Clearly defined

customer service policy

–

High level of integrity

–

Equitable distribution

at times of shortage

–

Timely compensation

of channel partners


55/309

55Prof. Mahantesh B Halagatti-KLS IMER-Belgaum


Belgaum


56/309


57/309


58/309

Direct Distribution

•

Company to consumers or retailers

without use of intermediaries. Alsoincludes reaching Institutional buyers.

•

Selling on the Internet

•

If products are technically complex, thissystem is preferred

•

Cost

is a major consideration to adopt thismode


59/309


60/309

Indirect Distribution

•

Goods may move through a set of

intermediaries –

Most FMCG companies follow this route

•

The intermediary has a far better reach

than the company•

The cost of operations

of an intermediary

like a wholesaler / retailer is shared withmany businesses.


61/309

Indirect Distribution -

Examples•

All FMCG, consumer durables and

pharmaceutical•

Petrol / diesel / cooking gas -

franchisees

•

Insurance•

Mobile phones

•

All kinds of passenger transport


62/309

Marketing Channel Systems

•

Vertical:

–

Corporate –

Administered

–

Contractual

•

Horizontal

•

Multi-channel

Vertical….


63/309

Vertical Marketing System

•

Various parties like producers, wholesalers andretailers act as a unified system to avoidconflicts

•

Improves operating efficiency and marketingeffectiveness

•

3 types: –

Corporate

–

Administered –

Contractual

Corporate…


64/309

Corporate VMS

•

Combines

successive stages of production

and distribution under single ownership•

Examples:

–

Bata, Bombay Dyeing, Raymond –

Sears, Goodyear

–

Suppliers of food items could be also their

own supplying firms -

like Nilgiris

Administered…


65/309

Administered VMS

•

Co-ordinates distribution activities

•

Gains market power by dominating a channel•

Usually true of dominant brands like GE, Kodak,

Pepsi, Gillette, Coke and HLL in certain

locations –

Command high level of co-operation in shelf space,

displays, pricing policies and promotion strategies

Contractual…


66/309

Contractual VMS

•

Independent producers, wholesalers and

retailers operate on a contract

•

Could take the forms of:

–

Wholesaler sponsored voluntary chains

–

Retailer co-operatives –

Manufacturer sponsored retail or wholesale franchise

–

Franchise organizations

–

Service firm sponsored retail franchise


67/309

Horizontal MS

•

Two or more unrelated companies join

together to pool resources and exploit anemerging market opportunity

–

In-store banking in hotels, big stores

–

Retail outlets in petrol bunks

–

Coffee Day outlets in airports

Multi channel…

M lti h l Di t ib ti


68/309

Multi-channel Distribution

•

Company uses different channels to

reach / same or different marketsegments

–

Most FMCG companies have separatenetworks for retail market andinstitutions

–

Pharma

companies may use differentchannels to reach doctors, chemists andhospitals

M lti h l Di t ib ti


69/309

Multi-channel Distribution

•

Used in situations where:

–

Same product but different marketsegments

–

Unrelated products in same market –

detergents and ice creams (HLL) –

Size of buyers varies

–

Geographic concentration of potential

consumers varies –

Reach is difficult


70/309

Distribution Channels

•

Take care of the following ‘discrepancies’

–

Spatial –

Temporal

–

Breaking bulk

–

Assortment and

–

Financial support


71/309

Spatial Discrepancy

•

The channel system helps reduce the

‘distance’ between the producer and theconsumer of his products.

–

Consumers are scattered

–

Have to be reached cost effectively

•

Example: companies produce products in

one location even for global needs


72/309

Temporal Discrepancy

•

The channel system helps in speeding up in

meeting the requirement of the consumers

–

Time when the product is made and when it is

consumed is different

–

Limited number of production points but hundreds ofconsumers

•

Maruti plant in Gurgaon

–

cars and spares are

available when the consumer wants


73/309

Breaking Bulk

•

The channel system reduces large quantities

into consumer acceptable lot sizes

–

Production has to be in large quantities to benefit

from economies of scale

–

Consumption is necessarily in small lot sizes•

India is the ultimate example in breaking bulk

–

you can buy one cigarette, one Anacin, one

toffee etc


74/309

Need for Assortment

•

The channel system helps aggregate a

range of products

for the benefit of theconsumer –

it could be made by onecompany or several of them.

–

For the same product, it could be a variety

ofbrands and pack sizes

•

MICO makes fuel injection equipment,

spark plugs etc in different plants but itsdealer will sell the entire range.


75/309

Financial Support

•

The channel system provides critical

working capital to its customers byextending credit.

•

Some channel members like stockists

and

wholesalers finance the business

of their

customers.

–

Medical diagnostic equipment to hospitals


76/309

Channel Flows

•

Forward flow –

company to its customers

–

goods and services•

Backward flow –

customers to the

company –

payment for the goods.

Returned goods.

•

Flows both ways -

information


77/309

Three Flows Recognized

FORWARD

BOTH WAYS

BACKWARD

Goods and Services

Information

Payment for goods / returns

Company Customers

C


78/309

The Five Channel Flows

•

Physical flow

of goods

•

Title flow

of goods (negotiation, ownershipand risk sharing also)

•

Payment flows

(financing and payment)•

Information flow

(about goods, orders

placed and orders executed)

•

Promotion flows

Who is responsible?

Channel Flows


79/309

Channel Flows

•

Some channel member/s have to performthem

•

There is a cost associated

with each flow

•

If a channel member is discontinued, the flowhas to be performed by another

•

All flows and transactions can be effectiveonly with timely, accurate and correctinformation

•

The channel flow is ideally to be handled bythe most competent channel member whocan deliver best service at the lowest cost.

D f I l t


80/309

Degree of Involvement

Manufacturer C&FA or

DistributionCenter

Distributor,

dealers

Wholesaler or

retailer

Physical

Title / ownership

Information

Risk sharing

Promotions

Physical

Title

Information

Payment

Order

processing

Physical

Title / ownership

Information

Payment

Order placement

Negotiation

Risk sharing

Promotions

Physical

Title / ownership

Information

Payment

Order placement

Negotiation

Risk sharing

Promotions

Channel formats…

Ch l F t


81/309

Channel Formats

•

Is decided by who

‘drives’ the channel

system:

–

Producer driven

–

Seller driven –

Service driven

–

Others

P d D i


82/309

Producer Driven

•

This is the effort of the manufacturer

to reach theproduct to his consumers. Examples: –

Company owned retail outlets –

petrol, Bata, Reliancemobiles

–

Licensed outlets –

KMF

–

Consignment selling agents –

Franchisees

–

Brokers

–

Vending machines –

Company contracted distributors

S ll D i


83/309

Seller Driven

•

Use of existing channels

to reach the

largest number of end users –

Existing wholesalers and retailers

–

Modern retail formats

–

Specialty stores –

Shoppers’

Stop

–

Discount stores –

Subhiksha

–

Pheriwalas

S i D i


84/309

Service Driven

•

These are the people who facilitate the

distribution –

Transporters and freight forwarders

–

Providers of warehouse space

–

C&F agents

–

3P Logistics service providers

–

Couriers

Other formats


85/309

Other formats

•

Multi-level marketing systems –

Amway,Modicare, Tupperware, Herbalife

•

Co-operative societies

•

Telephone kiosks

•

TV home shopping

•

Catalogue marketing•

The internet

•

Exhibitions, fairs and trade shows

•

Data base marketing

Channel levels…

Ch l L l


86/309

Channel Levels

•

Zero level –

if the product or service is provided

to the end user directly by the company.

–

Used mostly by companies delivering service like

health, education, banking (also known as service

channels)

•

One level –

consists of one intermediary

•

Two level –

consists of two intermediaries and

is the most common for FMCG products

S i Ch l


87/309

Service Channel

•

Companies establish their own uniquechannels to deliver services like health,

education, banking, insurance etc –

Hundreds of bank branches to be close toprospects

–

Banks may also recruit independent agents to getcustomers to walk in

–

Consulting or IT firm uses one team for Biz

Development and another for execution –

Musician or magician may use mass media,events or web sites to reach customers

Channel LevelsSummarize Expectations…


88/309

Channel Levels

Manufacturer Manufacturer Manufacturer

End User

Retailer

End User

Retailer

End User

Distributor/ wholesaler

Zero level Two levelOne level

KLS I tit t f M t Ed ti d R h


89/309

89Prof. Mahantesh B Halagatti-KLS IMER-Belgaum


Belgaum

What is Retailing?


90/309

What is Retailing?

•

Any business entity selling to consumersdirectly is retailing

–

in a shop, in person, bymail, on the internet, telephone or a vendingmachine

•

Retail also has a life cycle

–

newer forms ofretail come to replace the older ones –

thecorner grocer may change to a supermarket

•

Includes all activities involved in selling or

renting products or services

to consumers fortheir home or personal consumption

Retailing


91/309

Retailing

•

Term retail derived from French word‘retaillier’

meaning ‘to break bulk’

•

Characteristics: –

Order sizes tend to be small but many

–

Caters to a wide variety of customers. Keeps alarge assortment of goods

–

Lot of buying in the outlet is ‘impulse’- inventory

management is critical

–

Selling personnel and displays are important

elements of the selling process –

Strengths in ‘availability’

and ‘visibility’

–

Targeted customer mix

decides the marketing mix

of the retailer

Retailing


92/309

Retailing

•

Retail stores are independent of the

producers –

not attached to any of them

•

A survey shows that only 35% ofsupermarket purchases are pre-

planned. The rest are ‘impulse’-

greatlyinfluenced by quality of the

merchandising efforts

Functions of Retailers


93/309


•

Marketing functions to provide consumersa wide variety

•

Helps create time, place and possessionutilities

•

May add form utility

(alteration of a trouserbought by a customer)

•

Helps create an ‘image’

for the productshe sells



94/309


•

Add value

through:

–

Additional services

–

extended store timings,credit, home delivery

–

Personnel to identify and solve customer

problems

–

Location

in a bazaar to facilitate comparison

shopping

How do Customers Decide on a


95/309

Retailer?•

Price

•

Location•

Product selection

•

Fairness

in dealings•

Friendly sales people

•

Specialized services

provided

Kinds of Retailers


96/309

Kinds of Retailers

Type of

retailer

Characteristics

Specialty store Narrow product line with deep assortment –

apparel,

furniture, books

Department

store

Several product line in different departments –

Shoppers

Stop, Big Bazaar

Supermarket Large, low-cost, low-margin, high volume, self-service

operation with a wide offering

Conveniencestore Small stores in residential areas, open long hours alldays of the week –

limited variety of fast moving

products like groceries, food

Discount store Standard merchandise sold at lower prices for low

margins -

Subhiksha

Kinds of Retailers


97/309

Kinds of Retailers

Type of

retailer

Characteristics

Corporate

chains

More outlets owned and controlled by one firm –

Globus

Voluntary chain Wholesaler sponsored group of independent retailers

Retailer co-ops Independent retailers with centralized buying operations

and common promotions

Consumer co-

ops Co-op societies of groups of consumers operating theirown stores –

farmers, industrial workers etc

Franchise

organisation

Contractual arrangement between the producer and

retailers –

selling products exclusively –

Kemp Toys

Retailers’ Strengths


98/309

Retailers

Strengths

•

Choice of merchandise

is their prerogative –

put

pressure on producer suppliers

•

Many new products on offer. Can charge penalty

if products do not do well

•

New developments in IT

help them runoperations optimally

and keep track of loyal

customers. Also helps them identify profitable

store locations.

Organized Retail Features


99/309

Organized Retail -

Features

•

Sponsored

by companies or corporate groups

•

Large formats

like supermarkets, departmentstores and now hypermarkets

•

Right ambience

to make shopping a pleasure

•

Use latest technology

for customer care andsupply chain management.

•

Large employment

potential

•

Effectively manage operating costs•

Offer consumers value for money

Retailing Trends India


100/309

Retailing Trends -

India

•

Consumer wants more benefits without

additional costs•

Rising income levels –

cheap no longerworks, but ‘value for money’

•

Explosion of communication

channelsinfluences choices of products

•

Increased literacy

has made consumer more

conscious of his bargaining power •

Growing number of urban nuclear families

Retailing Trends India


101/309

Retailing Trends -

India

•

Influence of retailer

increasing –

assortmentplus other facilities offered

•

Rural consumers want the same things andas their urban counterparts and are willing topay for it

•

Better organized supply chains

to cater to alarge number of outlets in different locations

•

Improved infrastructure

helping theconsumers

•

Bigger volumes help in economies of scale

Trade / Retail Format


102/309

•

Range of goods

and customer service

dimensions determine the ‘format’. Elementsdistinguish between stores and include:

–

Store ambience. (Kemp Fort)

–

Saving in time

for shopping –

interiors of practicaldesign –

reduce time for search and pick-up of

goods –

Location

–

Physical characteristics

–

external appearance,

arrangement of goods•

All these are parts of the positioning strategy

and influence the ‘footfalls’

to the store.

Categories of Shoppers (1)


103/309

Categories of Shoppers (1)

•

Identified by Cook & Walters

•

Task focused shopper

–

visits the store to buyspecific things he has planned for –

Convenience, minimum time, easily accessiblegoods, pleasing store format

–

Grocery shopping is an example

•

Leisure shopper

–

more interested in theambience and environment –

Has plenty of time, wants to have a good time

while shopping

–

Lifestyle stores are examples

Category of Shoppers (2)


104/309

Category of Shoppers (2)

•

Convenience goods (low value):

probable gainfrom shopping and making comparisons is small

compared to the time, effort and mentaldiscomfort required in the search -toothpaste

•

Shopping goods (high value):

gain is large -

refrigerator •

Specialty goods: clearly distinguished by brandpreferences –

Maruti Zen car or Tag-Heuer

watch

Trading area…

Trading Area


105/309

Trading Area

•

Catchment

area from where most of thecustomers of a retail store come

–

Corner grocery store caters to the locality in which itis situated

–

Discount stores have a wider area. Subhiksha

locations for consumers in 2 km radius –

Specialty stores have a much wider trading area –

MTR, Shoppers’

Stop etc

•

Trading area increases with the size of the storeand the variety it offers

Retail Strategy


106/309

Retail Strategy

•

Positioning

of the retailer

•

Merchandising•

Customer service

•

Customer communication

Positioning Strategy


107/309

Positioning Strategy

•

Wide range with a high value add

–

Lifestyle brand of stores

•

Limited range but a high value add

–

Tanishque

jewelry store

•

Limited range with a limited value add

–

Bata stores

•

Wide range of goods but a limited valueadd

–

a Food World outlet

Merchandising


108/309

Merchandising

•

A set of activities involved in

acquiring goodsand services and making them available at the

places, times and prices and the quantity thatenable a retailer to reach his goals

•

The most critical function in retail

•

Directly effects the revenue and profitability ofthe store

•

Also takes into account the assortment of goodsand their quality

Customer Service Strategy


109/309

Customer Service Strategy

•

Developed to create ‘stickiness’

in customers

•

Personal data

collected using IT –

includingpurchasing practices and preferences

•

Customer loyalty programs

planned

•

Create ‘customer’

delight•

Location strategy

to give competitive advantage

•

Understanding the buying profile

of the

customers

Communication …

Customer Communication


110/309

Customer Communication

•

The manner in which the retailer makeshimself known

to his customers. Has two

parts to it: –

The messages

which the retailer sends to hiscustomers and prospects

–

The word of mouth support

which satisfiedcustomers give to the retailer by talking to others

•

Retailer communicates about:

–

Announcing the opening

of a store –

Promotions running

in the store

–

Additional facilities

introduced by the stores

Pricing Strategy


111/309

Pricing Strategy

•

Premium and indicating high value

•

Reasonable pricing with good value•

Low pricing but high value for money

•

All strategies are focused on giving valueto the customer

Product differentiation….

Product Differentiation


112/309

Product Differentiation

•

Feature exclusive national brands not available

in competing retailers –

unlikely

•

Exclusivity

of products –

specialty stores

•

Mostly private labels

–

Westside

•

Feature, big, specially planned merchandisingevents

–

Kemp Fashion sows

•

Introduce new products

before competition -

-

again unlikely

Performance measures…

Franchising


113/309

Franchising

•

Franchisor is the firm which wants to sellits goods or services

•

Franchisee is the firm or group that arewilling to sell the products

or services on

behalf of the franchisor –

The first party gives advice and help to thesecond to find good locations, blue prints for a

store, financial, marketing and managementassistance

Franchisor benefits…

Benefits to Franchisor


114/309

Benefits to Franchisor

•

Faster expansion

•

Local franchisee pays lower advertisingrates

than a national firm

•

Owners motivated

to work more hoursthan mere employees

•

Local taxes and licenses are responsibility

of franchisees

Franchisee benefits…

Benefits to Franchisee


115/309

Benefits to Franchisee

•

Quick recognition

among potential customers

•

Management training

provided by principal•

Principal may buy ingredients and supplies

and

sell to franchisee at lower prices

•

Financial

assistance

•

Promotional

aids, in-store displays etc

Electronic channels…

Retailing on the Internet


116/309

g

•

Unlimited assortment

•

Items may not be on hold

–

someone has to

deliver the product –

delays•

No product touch or feel

•

More info makes the customer a better

shopper •

Comparison shopping

possible

•

Consumer has to plan purchases ahead

•

No need to handle cash –

payment can beon-line

•

Shopping is 24X7

E-tailing Issues


117/309

E tailing Issues

•

Logistics

support to selling

•

Payment

gateway•

Customer product returns

•

Conflicts

with Brick &Mortar –

overcomeby selling separate products

FDI in retail….


B l


118/309


Belgaum

Need for Wholesalers


119/309

Need for Wholesalers

•

Widespread economy

–

consumers can onlyreached by thousands of retailers (except for

consumer durables and industrial products)•

Reaching these retailers by a company directlyis not possible

(except for consumer durables

and industrial products)•

Hence the need for wholesalers in two forms: –

Well established free-lance

wholesalers

–

Contracted

distributors, stockists

and agents

Characteristics….

Characteristics of Wholesalers


120/309


•

Operate on large volumes

but with chosen groupof products

–

Food, grocery, pharma

or automobile spares etc

•

The company itself, contracted parties or freelancers, can operate as wholesalers

•

Mostly B2B business

–

trade and institutions

•

Wholesaler could also be a retailer –

in rural

markets –

W/s sells to other retailers and also toconsumers



121/309


•

Sell physical inputs or products –

tangible goods

( Ws in some service industries)

•

Optimise

results, maximise

service

(effectiveness)

and minimise

operating costs

(efficiency)•

Buy goods for resale, keep inventory, take risks

of price changes, negotiate terms, procure

orders, deliver and extend credit.

Definition…

Definition


122/309

•

Wholesaling is concerned with the

activities of those persons orestablishments that sell to retailers and

other merchants and / or industrial,

institutional and commercial users

butdo not sell in large amounts to

consumers –

US Bureau of Census

Delivering value…

Delivering Value


123/309

Delivering Value

•

Keep goods accessible

to customers

instantly•

At times, get together to bargain

for better

terms

•

Pass on

benefits or incentives to their

customers

•

Have a wide trading area


124/309

Functions of Wholesalers


125/309

u c o s o o esa e s

•

Varies in degree

between free-lance, company

distributors and stockists

/ agents

•

Sales and promotion

of chosen company

products

•

Buying the assortment

of goods•

Breaking bulk

to suit customer requirements

•

Storage

and protection

of goods till sold

Functions of Wholesalers


126/309

•

Grading and packing

of commodities

•

Transportation

of goods to customers•

Financing

the buying of customers

•

Bearing the risks

associated with the

business

•

Collecting and disseminating market

information

to both suppliers andcustomers

Types of Wholesalers


127/309

yp

•

Full service: stocking, selling, offering credit,delivery and business assistance (company

distributors, wholesale merchants)•

Limited service: range of service is limited(examples include Metro C&C, mail order)

•

Merchant w/s: independent businesses

•

Brokers and agents: bring buyer and sellertogether –

do not take possession of goods

•

Others: agri

business, auction companies etc

Limitations of Wholesalers


128/309

•

Some of them do not give

completeinformation to suppliers for selfish reasons

•

Cannot be relied on to do

equitabledistribution

•

At times, do not want

company and

customers to meet•

Tend to hoard goods

and influence pricing

•

Consumers have no say in pricing or quality

in a w/s dominated system

Major decisions…

Major Wholesaling Decisions


129/309

j g

•

Which markets

to operate in

•

Manpower

to employ

•

What products

to sell

•

Pricing decisions

/ Promotional support

•

Credit and collections

•

Image and customer perception

•

Warehouse location and design•

Inventory Control

Favourable Factors


130/309

•

Companies have limitations in market / outletcoverage.

Wholesalers are required to fill the

gaps•

Hundreds of small companies who cannotafford to set up distribution networks

–

needto depend on wholesalers

•

In food grains, fruits and vegetables –

hardlyany organised

distribution network.Wholesalers help move goods from farm gateto consumers

Favourable Factors


131/309

•

Big companies also need wholesalers toget big volumes

•

W/s extend credit

to customers.Companies cannot match this

•

Retailers have to visit w/s markets tobuy food grains, cereals and pulses – buy a lot more.

Unfavourable…

Unfavourable Factors


132/309

•

Companies coverage focus on retailers

and institutions

through their distributors

•

Using modern retail formats aswholesalers

•

More outlets like Metro C&C

beingencouraged

•

Enforcing strict price control

so that w/s donot sell below company prices.

Distributor


133/309

•

Is a wholesaler nominated by a company to

exclusively re-distribute the company products to

its customers

in a designated territory. He doesnot deal in competitor’s products. Does not sell

from his premises. Extends credit selectively.

–

A redistribution stockist

for HLL

–

A distributor for Philips lighting division

–

A distributor for L&T engineering division

Dealer


134/309

•

Role similar to a distributor but –

May not have a clearly defined territory

and may sell

both in the market and from his shop –

May deal with competitive products

also

–

Extends credit selectively.

–

Dealers in industrial products may have better definedroles.

•

Examples:

–

Dealer for an edible oil company –

A dealer for garment brands

Stockist


135/309

•

May be working for a company with adesignated territory but does not re-

distribute the stocks. Sells from hispremises. Extends credit selectively.

–

A stockist

for paper products –

A stockist

for automobile spares

•

Re-distribution is visiting customer

premises to sell products

Managing distributors….

Managing Distributors


136/309

•

The principles

are similar

across

industry verticals. FMCG is the most

complex.•

Has the capacity

to maximise

sales and

market shares.•

Has to ensure buying goods from the

company and re-distribution

to the trade

Managing DistributorsWhy necessary?….


137/309

•

Distributor responsibilities include: –

Buying

adequate quantities by Stock Keeping Unit(SKU) for redistribution

–

Ensuring full market coverage

of all customers inthe territory assigned to him

–

Help finance the operations

–

pays for the goods

upfront but extends credit to his customers –

Maintaining inventory

of company productsadequate at all times to service the market

–

Assist company in its promotional efforts


138/309

Cost of Servicing


139/309

•

Cost benefit of using distributors to beassessed

–

Logistics

cost of serving the market –

The number of customers

to be covered bycategory –

wholesalers, retailers, institutions

–

Frequency

of visits to markets and outlets –

Sales revenue

estimate from each visit

–

Markets to be covered with ready stocks or orderbooking for later delivery

–

Likely collections

during each visit –

gives an ideaof the credit requirements

Expectations…

Expectations from a Distributor


140/309

•

To be stated at the start

of the relationship

•

Helps get the right kind of distributor also –

Achieving sales targets

–

volume, value and packs

–

Financial commitment

on inventory and credit

–

Investment in infrastructure

–

space, vehicles

–

Manpower

–

front line and back office

–

Distribution effort

–

market and outlet coverage as pera beat plan with productive calls

–

Developing new markets and new accounts –

Managing key accounts and institutional business



141/309

•

Merchandising

and displays in the market

•

Secondary sales

efforts and tracking –

critical for

fmcg

and pharma

(secondary sales is sales from

the distributor to the outlets in the market)

•

Effectively handling promotions and schemesinitiated by the company

•

Managing damaged stocks



142/309

•

Organising

and participation in promotionalevents

•

Assist company in making a success oflaunching new products

and packs

•

Handling consumer quality complaints

•

Handling statutory requirements

on behalf of thecompany

•

Payments and remittances

promptly to thecompany


Belgaum


143/309


Channel Design Factors


144/309

•

Product mix and nature

of the product

•

Width and depth

of market / outlet coverageplanned

•

Long term commitments

to channel partners

•

Level of customer service

planned

•

Cost affordable

on the channel system

•

Channel control requirements

of the company

Steps….

Channel Design Steps


145/309

•

Define customer needs

•

Clarify channel objectives

•

Look at alternative systems

which canmeet these objectives

•

Estimate cost

of operating the channelsystem

•

Evaluate

available alternatives•

Finalise

the ‘ideal’

system

Customer needs….

Customer Needs


146/309

•

Lot size

–

most convenient pack size whichthe consumer can buy at a time

•

Waiting time

–

time elapsed between thedesire to buy the product and the time whenhe can actually buy it –

should be almost zero

•

Variety

–

choice of products, brands, packs•

Place utility

–

choice of buying where hewants. For a consumer product it has to be at

a location closest to his residence

Components …

Channel Design Components


147/309

•

Revenue generation

or the commercialpart

•

Physical delivery

of the goods or services –

the logistics part

•

The ‘service’

part

to take care of after-

sales support

•

Each part of the system is likely to behandled by a different entity.

Design issues….

Channel Design Issues


148/309

•

Activities

required and who will perform

•

Activities relationship to service levels•

Number

of channel members required and

the relationship

between categories

•

Roles, responsibilities, remuneration and

appraisal

of performance of channel

members

Channel Design Process


149/309

Segmentation

Development

Focus

Positioning

Similar to any other marketing task

Segmentation


150/309

•

Putting customers in similar clusters

based ontheir needs

–

Doctors who prescribe medicines –

Chemists who dispense medicines

–

Hospitals and nursing homes who use them

•

Each segment has a different need

to beserviced by the channel

•

Gives an idea to the sales manager as to the

kind of channel members

he should be planningfor.

Positioning


151/309

•

Defines the channel element

required to service

each of the segments

–

The sales manager decides the channel partner who

is ‘ideal’ to meet the expectations of the segments.

–

The number of each category

of intermediary is also

decided based on the number of customers to beserviced in each segment.

–

The service objectives and flows

for each channel

partner are also frozen

Focus


152/309

•

It may not be possible to meet the needsof all segments –

cost and practicality

considerations (the managerial talentavailable for instance)

•

The sales manager has to firmly decidewhich of the segments he will service

•

The competitive scenario

also helps in this

decision

Development


153/309

•

At this stage the channel system is being putin place

to achieve the objectives

•

Select the best of the alternatives –

Comparison with the most successful competitorcould be a good benchmark

•

Channel partners of competitors may bewilling to share best practices

of theirprincipals

•

For modifying an existing channel, the gapbetween the ideal and the existing

is to beidentified for remedial action.

Channel Objectives


154/309

•

Defines what the channel system is supposedto do to support customer service.

•

Customer needs could include: –

Lot size convenience

–

Minimum waiting time

–

Variety and assortment –

Place utility

•

The product characteristics and the market

profile

also impact the objectives.•

Competition could also affect the objectives

Channel Alternatives


155/309

•

Are planned after deciding the customer

segments to be serviced and the levels of

service –

Business intermediaries currently available like

C&FAs, distributors, dealers, agents wholesalers and

retailers.

–

The number and type

of intermediaries required

–

Developing new

channel types

–

Roles

of each channel member

Evaluation of Major


156/309

AlternativesCost of operations

Ability to manage

and control

Adaptability

Range and volumeto be handled

Criteria for evaluation


157/309

Evaluation Criteria


158/309

•

Ability to manage and control:•

Distribution network being an extended arm of the

company, the channel partners have someobligations

•

Operating guidelines specify these rules

•

The channel system should help the companyenforce these rules fairly to all channel partners

•

Some of the operating rules are……

•

Company trains channel personnel andprovides proper product literature

Selecting Channel Partners


159/309

•

Getting good channel partners is a difficult part

of doing business

•

Some of the methods employed

to selectchannel partners are: –

Sales people

identify prospects and talk to them

–

Press advertising

(industrial goods) –

Existing channel partners can give good references

–

Competitors’

channel members for reference, not

poaching

Selection Criteria


160/309

•

Qualitative: willingness, confidence in

company products, willingness to abide by

company rules, building company image,

innovativeness etc

•

Quantitative: financial status,infrastructure, location, present

businesses, customer relationships,market standing etc

Training Channel Members


161/309

•

Starts from the time of recruitment

•

Channel member owner and his staff

•

Market views channel member as part of the

company –

he has to behave in a like manner –

hence training assumes significance•

Training could be on the job

field training or

classroom

training

•

Training is an ongoing

process.

Subjects…..

Subjects for Training


162/309

•

Field training on how the markets are to beworked

to achieve sales, collect payments and

ensure the right kind of merchandising•

Class room training on company products,competition

and how to tackle it to gain market

shares•

Special meetings for new product launches

•

Submitting reports

and maintaining records

•

Statutory compliance

Subjects for Training


163/309

•

Care of company products

•

Technical specifications

and answering FAQs

of

customers•

For technical and industrial products –

recognition of specs, installation procedure,

repair and maintenance and effectivedemonstrations

•

Servicing

of automobiles and other engineeringproducts

Motivation….

Motivating Channel Members


164/309

•

Ambitious volume and growth targets –

continuous motivation

required to achieve

•

Motivation includes:

–

Capacity building

programs

–

Training –

Promotions support

–

Marketing research

support

–

Working with company personnel –

Incentives

“power”……

“Power” of MotivationFrench & Raven


165/309

•

Reward –

positive support

•

Coercion-

threat of punitive action

•

Referent –

positive effects of association

•

Legitimate –

enforcing a contract

•

Expert –

support of special knowledge

•

Support –

additional benefits for performers

•

Competition –

pitting against peers

Channel Members EvaluationRole of ROI…..


166/309

•

Effectiveness

of the distribution channel

determines the success of the company

•

Company would like its channel partners to

perform at the highest standards

possible

•

Need to constantly evaluate

performance onsales targets, coverage, productivity, inventory

holdings, attending to servicing requests etc

ROI as a Measure


167/309

•

Leading FMCG companies feel that an ROI of

30%

for a distributor is healthy and is a fair

indication that he is performing well. –

If the ROI is more, additional tasks are given

–

If the ROI is less, the company may provide additional

support

•

Post evaluation tasks include counseling,

retraining and motivating. In extreme cases itmay result in termination.

Performance Evaluation


168/309

•

On pre-agreed tasks

only. No surprises.

•

Specific targets

on periodical basis are set.

–

Targets on volume and outlet productivity could be fora week or a month

–

Targets relating to increasing market shares or total

outlet coverage could be for 6 months –

Different weightages

could be given for each of theparameters for evaluation

•

The performance appraisal is open andtransparent

Modifying a network..

Steps for Modifying Networks


169/309

•

Service level desired and willing

to deliver

•

Activities required

to deliver service level,

who

will do it and at what cost•

Derive ideal

channel structure

and comparewith existing to know gaps

by evaluating

based on standard parameters relating toeffectiveness and efficiency

•

Action to bridge the gaps

and put modified

channel system into place•

Define key performance indicators

Channel Comparison Factors


170/309

Efficiency

Effectiveness

Scalability

Flexibility

Consistency

Reliability

Integrity

Non-store Retailing


171/309

•

Selling door-to-door

•

Vending

machines•

Tele-shopping

networks

•

Selling through catalogs•

Other forms of direct selling

•

Electronic

channels

Electronic channels…

Retailing on the Internet


172/309

•

Unlimited

assortment

•

Items may not be on hold

•

No product touch or feel•

More information

makes the customer abetter shopper

•

Comparison shopping

possible•

Consumer has to plan purchases ahead

•

No need to handle cash –

payment can beon-line

•

Shopping is 24X7Vertical integration….

Vertical Integration


173/309

•

This means owning the channel. The

company does the work of production,

branding and distribution.•

Downstream integration

means the

producer of the goods also does thedistribution –

Eureka Forbes, Bata

Vertical Integration

U i i h ll


174/309

•

Upstream integration

means the selleralso produces the goods –

private

labels of modern retailers.•

If the organization does the work ofproduction, branding and distribution, it

is said to be vertically integrated.•

Vertical Integration provides better

control

over the distribution function

Outsourcing..

Outsourcing Distribution

I th t l t it ti


175/309

•

Is the most prevalent situation

as: –

The ‘reach’

is better

–

The cost

may be lower

–

The company can exploit the ‘core competence’

ofits channel partners, which is distribution

•

Vertical integration is a choice which will

become long term and cannot be easilychanged once the resources have beencommitted.

•

However, direct distribution (owning thechannel) is still the best solution for ‘intensive’

distribution.


Belgaum


176/309

Warehousing

A role beyond storage


W h i ?


177/309

A place where finished goods are stored

till they are further distributed

A variable in make-and-sale equation of

the organization

It’s distribution centre playing key role in

organization’s logistics strategy. It’s a point

where organization fails or succeeds infulfilling the sales & marketing promises

A switching facility in logistical network

Warehousing ?…..

Typical Warehouse Layout


178/309

MATERIAL INWARD & INSPECTION

BULK STORAGEPLACE

RACK /BINSTORAGE

PLACE

ORDER PICKING SECTION

PACKAGING SECTION

MATERIAL DISPATCH SECTION

T f W h


179/309

Types of Warehouses

•Captive warehouseLocated inside the factory premises

For monitoring excisable goods

•Field warehouseLocated near to place of consumption

For servicing the customers & channel partners

•Customs warehouseLocated near to air & sea ports

For goods meant for imports & exports

St Alt ti


180/309

MediumLowHighRisk

Inverselyrelated tovolumes

LowInverselyrelated tovolumes

Cost per unitstored

MediumLowHighOperationFlexibility

MediumLowHighControls

V. LessNone V.highInvestment

Contract

WH

Public

WH

Private

WH

FACTORS

Storage Alternatives

W h F ti


181/309

Warehouse FunctionsStock holding

ConsolidationBreak bulkCross dockingProcessingPostponement

AssortmentMixing / assembling

Packaging & labellingMaterial handlingOrder fill ing

Information handling

Warehouse Layout Design

Guidelines


182/309

-Make maximum use of available area

- Use ‘unitized‘ load system

- Minimize the goods movement byproper storage allocations

- Provide flexibility for changes in future

- Design for safe, clean & secure space

Guidelines

Factors Influencing WarehouseLayout Design


183/309

- Inventory turnover - Storage method- Product configuration

- Product characteristics- Housekeeping- Material handling methods

- Safety and security

Warehouse Site Selection


184/309

•Market proximity•Infrastructure(Road, utilities, communication)• Access to site•Transportation cost• Availability of space•Taxes and levies

•Regulation

Warehouse Site Selection

Warehouse Network

Cost implications


185/309

Secondary

TransportationCost

InventoryCarrying

Cost

PrimaryTransportation

CostTotalCost

Cost

No of Warehouses

– Cost implications

Warehouse Decision


186/309

Product

characteristics

value density,

Logistics Reach,

Perishability

Resources-

Competencylevel,Financialresources,System

Type -Private,

Public,

Contract

Strategic Decisions

Layout, Equipment,

Storage scheme, IT

Tactical DecisionStorage

allocations, Order picking,

Transportation

Operational DecisionsWork allocations, Job

scheduling, Performance

monitoring

Warehouse Decision

Warehousing Strategy


187/309

Warehousing Strategy

•Proximity to market•Reliability in service•Flexibility in operations

storage spaceThroughput

Material handling

•Location flexibility

•Economies of scale

Warehouse Capacity Planning


188/309

J F M A M J J A S O ND

Storagecapacity

requirement

Public or contract warehouse

(for 25 % 0f capacity)

Private warehouse(for75 % 0f capacity)

Months

Warehouse Capacity Planning

Warehouse Performance

Parameters


189/309

- Stock turn over ratio

- Warehouse cost to sales

- Warehouse cost per unit handled

- Warehouse occupancy rate

Parameters


Belgaum


190/309

Material Handling Systems

Forexploiting productivity potential in logistics


Material Handling Stages


191/309

Unloading the incoming material fro transport vehicle

Moving the unloaded material to assigned storage place inwarehouse

Lifting the material from storage place during order picking

Moving material fro inspection and packing

Loading the boxes / cartons on to transport vehicle

Material Handling Stages

Material Handling Principles


192/309

Standard equipment should be preferred to keep low capital

investments

Equipment designed for maximum continuous flow should be

preferred

Portable or movable equipment to be preferred

Ratio of dead weight to pay load should be minimum forhandling equipment

Gravity flow should be incorporated in the system design

Material Handling Principles



193/309

Manual

Mechanical

Semi-automatic

Automatic

Information guides


Selection Criteria:



194/309

Volumes to be handledSpeed in handling

ProductivityProduct characteristics

(weight, size, shape)

Nature of the product(hazardous, perishable, crushable)


Material Handling


195/309

Material Handling

Manual TrolleyVersatileFor smaller loadsFor short distance

Material Handling


196/309

Material Handling

Forklift•Manual or mechanized

•Portable•Large distance travel

•Medium & large loads handling

•Vertical movement•Intermittent duty

•Directional undeliverable

Material Handling


197/309

Material Handling

Overhead CraneCarry heavy loadsContinuous duty

Size shape no bar

Material Handling


198/309

Material Handling

Material handling

at sea ports

Advanced MaterialHandling Systems


199/309

Pneumatic tube systemFor handling material in powered form

Semi-automatic systemSorting devices

Robotics

Automatic guided vehicle systemMaterial handling on a fixed path

computer operated guided vehicle

Speed of operation 150-250

Documents

d&l Exam Ppt Mahantesh