IntroductionThis is Cargo Motors, which is a Franchise of Mitsubishi Motors Japan in Ahmedabad, One among the 6 Franchises operating in the West Zone. Cargo Motors are specialized dealers in Ford, Hyundai, Harley Davidson and Honda across Gujarat. Each franchise is operated as Independent unit.

The Franchise offered only one product Mitsubishi Pajero Sport, positioned as SUV with great muscle, state of art technology and effortless drive. It is priced around 29 Lakhs and is available in 2 variants one manufactured in India In the Hindustan Motors facility and the other Imported from Mitsubishi Motors Japan with 5 color choices.

Distribution Channel

The Franchises in a location are responsible for marketing the product to consumer. The flow of the products through this channel is coordinated by sales executive appointed by Mitsubishi Motor Corporation India. India has been divided into 4 sales regions, 4 sales executives along with sales team sitting in Chennai coordinate franchises in each region individually. The supply chain is simple as seen in Exhibit-1 where there is only one layer (Franchise) between producer and customer. The Franchise holds certain level of Inventory as per the demand projections that it estimates and for display in the showroom.Product: The product ordering happens via central order processing system. Where the order placed by the customer is routed to company headquarters. The channel captain then coordinates the order processing based on the availability of the model, the total demand expected from the nearby franchises to pool the demand and thereby reduce the logistic costs and the time promised to the customer for delivery of the vehicle. He tries to build up orders from franchises by offering higher markup if they buy the product for the expected demand and increase the inventory.Price: the Company decides the price for the product along with a markup percentage. The franchise can reduce the price to customer as per their discretion to make as sale by paying the cost price to the company. As the sales are majorly credit operated the channel captain coordinates the flow of transactions from franchise to manufacturer at regular intervals. The franchise facilitates loan processing without any margin by coordinating with banks to speed up documentation and faster processing. Promotion: Mitsubishi Motors India does not participate in any promotions and also does not promise any promotional budget. But if the franchise wants to promote the product it needs to be informed to the company, channel captain along supports the channel partner by negotiating company to compensate a part of advertisement spend. Service: Full sales service of the product is offered by the franchise as part of contract agreement. For major service issues, which need supervision or component replacements, which need company’s approval, channel captain directs the flow the information from the franchise to the appropriate channel in the company to address the issue.

Analysis and suggested ImprovementsAs of now the demand structure is Pull and this is causing inconsistencies in logistics due to variable demand across franchises. If channel captain tries to push the demand across franchises by supporting promotions and increase credit cycle for demand ordered to store in inventory he can ensure increased and smooth demand and hence can reduce the costs of logistics. As majority of the manufacturers are located in Chennai the channel captain may identify strategic channel alliances of other auto manufacturers to provide logistic services to franchises when there are not sufficient orders. Also, by identifying frequent service problems which needs supervision from company technicians or component ordering and thereby directing the franchise to maintain the inventory on credit will reduce the lead time of consumers and hence reduce the time spent in resolving customer complaints due to delay in promised service period.