1 by Milind M. Shahane 2009-10 Case Studies Distribution Management.

1

by

Milind M. Shahane

2009-10

Case StudiesDistribution Management

Sales Management 2

Case Study – Superb Appliances Ltd.

Situation Analysis

• Changing market conditions

• Declining sales and market shares

• Increased competition from MNCs

• Change in distribution channels

• Uncompetitive products

• Technology issues

• Response to market growth

Sales Management 3


Products

• Air-conditioners

• Water coolers

• Refrigerators

• Deep freezers

• Washing machines

• Ovens

• White goods portfolio

Sales Management 4


Current Distribution System

• Franchisee distributors

• Small distributors – appliance stores

• Direct sales for institutional customers

• Higher margins

• Limited exposure to department stores

• Coverage of around 1500 outlets

Sales Management 5


Current Distribution System• Characteristics– Family owned businesses– Small size– Low volume, high margin– More emphasis on service support

• Positives– Exclusive– Full focus on company’s products– Full service

Sales Management 6


Current Distribution System• Positives– Sales persons for push– High degree of specialisation– Demonstrations

• Negatives– Non-prominent areas– Limited capacity to invest– No investments in promotion– Family owned

Sales Management 7


Market Changes

• Consumer profile changing

• Fast growth of economy – higher PDI

• Increase in DINKs

• Change in buyer shopping habits

• More retail oriented

• Growth in household segment

• Attracted by promotions

Sales Management 8


New distribution system

• Super markets / chain stores / malls

• Prominent areas

• High volume

• Hard sell

• Large organisations

• Professionally managed

• Low on service

Sales Management 9


Positives

• High volume, high capacity

• Consumer pull

• Promotion schemes

• Mass selling techniques

• Attractive showrooms

• Multiple product lines

Sales Management 10


Negatives

• High cost

• Low margin

• No proper salesforce

• No service support

• No specialisation

Sales Management 11

Case Study – Pure Tea and Beverages

Situation Analysis

• M&A (takeover) of DDL by PTBL

• Need to align the distribution systems

• Rationalise distribution system for DDL

• Increase volumes and market shares

• Payback / ROI on the purchase of DDL

• Large and very fast growing market for mineral water

• How to exploit the market?

Sales Management 12


Market Structure

• Various segments – retail and institutional

• Highly fragmented distribution structure

• Competitors using bottler route

• Franchisee bottlers are used in distribution

• High physical distribution costs – transportation, storage, packaging

Sales Management 13


Decision Factors

• Approach for sales and distribution– Different sales force– Use of alternative channel structures for

different segments

• Use of Bottlers as a channel alternate

• Use of non-store retailing as alternate

• Modification of current distribution structures

Sales Management 14


Decision Factors

• Merging channels of PTBL and DDL

• Appointing new distributors

• Increasing reach

• Re-aligning physical distribution in line with new channel structures / alternatives

Sales Management 15


Advantages – Traditional channel

• Well set

• Relationships with retailers

• Relationships with customers

• Established terms and conditions

Sales Management 16


Disadvantages – Traditional channel

• Family managed

• Lack of professionalism

• Aversion to modern techniques

• Use of technology

• Reach to new areas / segments

• Lack of flexibility

Sales Management 17

Case Study – Bisleri Mineral Water

Products

• Bottled mineral water

• Consumer acceptance – why will they buy / pay?

• Price point is critical

• Impulse purchase

• Wide / intensive distribution is critical

• Brand recall is key

• Hi volume – lo margin business

Sales Management 18


Market

• High growth sector > 40% CAGR for past many years

• Many local players

• Few national brands – Bailey, Aquafina, Kinleys, Oxyrich

• Competition from MNCs

• Cold chain / refrigeration at POP

• POP displays / advertising

Sales Management 19


Brand Building / Creation

• Bisley (Blue Monster) – Mascot

• Distinct Green labeled bottles

• Advertising

• Brand visibility on trucks

• Has become generic name for mineral water

• Purity is critical – loss of reputation due to contamination

Sales Management 20


Company Details

• Revenues – Rs.500 crores

• No. of manufacturing plants – 49

• No. of SKUs handled - 6

Distribution

• No. of distributors – 3000

• No. of retail outlets covered – 1 million

• No. of supply chain employees - 200

Sales Management 21


Distribution

•No. of WH – 10

•Inventory turnover – 2 days

•No. of LSPs – 6 (various transporters)

•No. of technology providers – 2

•Various suppliers for items – 10 for Pre-forms, Bottle caps and labels

Sales Management 22


Supply Chain•Divided into 4 regions – NEWS•Own logistics and supply chain as low margins•Run mini logistics company•Need to continuously innovate supply chain to keep costs under control•Cost structure– Freight 28-30%– Packaging 30%– Distributor margins 30%

Sales Management 23


Supply Chain•Short route distribution•Continuous Replenishment Program•Replenish JIT / real time based on sales•Needs high level of synchronisation– Production schedules– Raw material delivery from suppliers– Product planning / job scheduling

•Direct routes e.g. Mumbai– 230 trucks (150 own + 80 hired) run daily– Deliver 50,000 cases per day– Make 2 trips per day

Sales Management 24


Supply Chain•Route charting and mapping for optimisation•Returns of 20 litre bottles for re-filling and re-delivery•Hub and spoke model•Transfer stocks in bulk to WH – pallets and caged bins•Handling, loading / unloading is a problem as its voluminous and bulky items•Storage space is scarce due to Hi volume•Need to be efficient and operate JIT / real time•Replenish distributors daily as can hold only 2-3 days of stock at any time

Sales Management 25


Material Handling•Bulky yet fragile SKUs – bottles•Multiple handling will lead to damages – avoided as much as possible•Care to be taken with mechanised handling•Distributor WHs also used for storage

Sales Management 26


Manufacturing•Standard products – no customisation•High volume manufacturing – automated assembly lines•RM suppliers close to the plants•Contract manufacturing – 30 plants– Manufacture and supply to company WH

– Paid for manufacture only

•Franchisees – 11 plants– Manufacture and supply to distributors and

retailers

Sales Management 27


Manufacturing

•Franchisees – 11 plants

– Manufacture products and sell / supply to distributors and retailers

– Pay royalty to Bisleri for use of brand

– Strict quality norms to be met

– Need full adherence to manufacturing standards laid down

– Company involved in growth plans

•Own plants

– 600 bottles per minute – 70000 cases per day

– Run 24x7x365 days

– 3 automated lines

Sales Management 28


Supply Chain Optimisation•Shorten distance from manufacturing to distribution to minimise cost•Contract packer for every 200 km to shorten distances•200 distributors in Mumbai territory with defined areas•Strict adherence to boundaries for operation•Unable to keep pace with demand growth

Sales Management 29


Supply Chain Optimisation•Reverse supply chain to collect empty PET bottles •Send bottles back to recyclers for re-use•Environment friendly actions•Continuous improvement for cost reduction– Reduced logistics cost by 24% in one year

– Load optimisation

– Larger trucks – more trips per day

– Mechanisation of handling – forklifts

– Manpower reduced to 1 from 8 needed

Sales Management 30


Supply Chain Optimisation•Delivery of products to retailers in the evening•Adding blowing machines for faster filling to increase manufacturing capacity•Rural markets through contract packers•Aim to have plant for every 200 km as transportation beyond this is unviable•Many other problems – complex logistics– Cash collection from retailers

– 24 hour operation

– Daily replenishment

1 by Milind M. Shahane 2009-10 Case Studies Distribution Management.

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Transcript of 1 by Milind M. Shahane 2009-10 Case Studies Distribution Management.