distribution channel technological advancement

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Amity Business School TECHNOLOGICAL ADVANCEMENT IN DISTRIBUTION CHANNEL IN ITC “Internet will extend electronic marketplace and make it the ultimate go-between, the universal middleman”. - Bill Gates SUBMITTED BY: Nikhil Chandra ------ 12 Abhinav Rajput-------- 39 Gaurav Shukla --------48 Yashpal Malik -------- 53 Rachit Goyal -------- 57 Amity Business School MBA Class of 2011

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distribution channel technological advancement

Transcript of distribution channel technological advancement

Page 1: distribution channel technological advancement

Amity Business School

TECHNOLOGICAL ADVANCEMENT IN DISTRIBUTION CHANNEL

IN ITC

“Internet will extend electronic marketplace and make it the ultimate go-between, the universal

middleman”.

- Bill Gates

SUBMITTED BY: Nikhil Chandra ------ 12

Abhinav Rajput-------- 39 Gaurav Shukla --------48 Yashpal Malik -------- 53 Rachit Goyal -------- 57

Amity Business School

MBA Class of 2011

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Amity Business SchoolINTRODUCTION

What Is distribution Channel?• path or route along which goods move from producers to ultimate consumers.A channel of distribution represents three types of flows: - Goods flow from producer to consumers.- Cash flow from consumers to producer as payment for goods. - marketing information flows in both directions.

What brought changes in distribution channel of ITC.?• Globalization• Changing Time and Technology.• Time, place and possession utilities.• Maximum customer satisfaction.•Expansions and Growth.

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Amity Business SchoolRole Of Technology In Distribution Channels

• Efficiency- Potential to remove many points of frustration (or ‘pain points’) that consume valuable time and resources of the transacting parties.• Speed - No delays in the distribution processes.• Reduce Operation Cost- A typical solution with E-Distribution has proven to help businesses to save more than 50% of communication, information processing and administration cost through effective business automation and paperless technology.• Reduce Exchange Time• It transmits Information. It transfers Knowledge, reduces effort and brings innovations.

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Amity Business School Advancements In Distribution Channels

Latest technologies such as information technologies, communication technologies, automation technologies, and computing and networking technologies are playing the integral role in this transformation of distribution channels. Some of such technologies are-

• E-Commerce• Electronic Distribution• MIS - Management Information System• ERP – Enterprise resource planning• SCM- Supply Chain Management• Long Linked technologies• Inventory Management • Networking and Internet Technologies etc

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Amity Business SchoolE-Commerce- Transforming Distribution Channels

Electronic commerce, commonly known as (electronic marketing) or E-Commerce consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks.

The broad domain of e-commerce

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Amity Business SchoolFunction of E-Commerce in Transforming Distribution Channel

 E-commerce Facilitates- electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange

(EDI), inventory management systems, and automated data collection systems.

Other functions are:Disintermediation- The involvement of electronic commerce in distribution channel has shortened the gap between the supplier and end customer. This concept is referred to as disintermediation or an elimination of one or more organizations from the distribution channel. Being able to conduct business 24 x 7 x 36 - E-commerce systems can operate all day every day. Your physical storefront does not need to be open in order for customers and suppliers to be doing business with you electronicallyAccess the global marketplace. The Internet spans the world, and it is possible to do business anytime and anywhere with any business or person who is connected to the Internet.

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Amity Business School E-DISTRBUTION REDEFINING THE

DISTRIBUTION CHANNELSThe Most Efficient Way to Manage Your Customers, Sales, Distribution & Services. E-Distribution (Electronic Distribution Management System) is a powerful e-business application that facilitates every aspect of your distribution chain like-•Customers•ordering •Inventory•Delivery•Payment right through to services management

ADVANTAGES OF E-DISTRBUTION-•Reduce Business Workflow Problem through Business Automation•Maximizing Revenues through Better Sales Efficiency & Customer Servicing•Reduce Operation Cost

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Amity Business SchoolE-PROCUREMENT SYSTEM

•User-friendly, Internet-based purchasing system•Offers electronic purchase, order processing and enhanced administrative functions to buyers and suppliers.

E-CRM (Electronic Customer Relationship Management) SYSTEM•eCRM Electronic CRM concerns all forms of managing relationships with customers making use of Information Technology (IT).•With the right CRM solutions in place, organizations can build and nurture lasting one-on-one relationships with customers.•It allows you to grow your customer base and increase profitability. An effective eCRM solution will help you retain current customers and attract new business as well.

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MANAGEMENT INFORMATION SYSTEM (MIS)

• Concerned with processing data into information, which is then communicated to the various departments in an organization for appropriate decision-making.•Information system has made a big difference to channel operations and management. Information is collected, stored and transmitted between channel members. They add value to the distribution function and enable channel members to integrate different channel functions, which was not possible in conventional distribution systems. •Channel information systems have also influenced the structure of distribution channels. •Lengthy channels have given way to shorter and highly efficient distribution systems

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Amity Business SchoolCHANNEL INFORMATION SYSTEM

•Channel information systems comprise an information database and the hardware and networks that help in the collection, processing and transmission of information. •. CIS has influenced the physical distribution of products or distribution flow.•Transaction flow, promotion flow, inventory flow and negotiation flow have improved with the advent of information technology in channel management.•profound impact on channel member relationships.•Coordination and cooperation among channel members have greatly improved due to CIS. Channel members have opted for collective goals over individual goals and have started looking for benefits to the channel as a whole. Information is easily available to all channel members, resulting in an increase in trust and commitment

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Amity Business SchoolCompanies That Are Using Technologies In Channel

P&G: Getting ‘dot combined’P&G’s feels its assets – global scale, strong brands, in-depth consumer understanding and superior technology – combined with the unique proprietiesof the Web can put it among leading consumer-driven, Web enabled enterprise: What it calls a ‘dot combined’ company. P&G is using an integrated strategy to commercialize the NetThat focuses on four key pillars:– Creating new consumer relationships– Developing new ways to create, market and sell its brands– Reinventing the supply chain– Developing new partnerships

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Canon revamping distribution

• CANON India is unveiling a business strategy combining technology with marketing. "As consumer and business markets develop, this combination would propel Canon India to a powerful position," a company spokesperson said..

• Canon is planning to de-layer the distribution channel in phases by restructuring the channel model for faster information flow, increasing retail expansion and shifting its selling focus from volumes to `value.'

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The Teleshopping Business In India: Offering 'Miraculous' Products!Through Its Innovative Distribution Channel

• "Interested in reducing that 'extra flab' on your body in a matter of hours? Would you like to grow hair on that balding pate of yours in just a few days? All you need to do is watch the television (TV) and order the 'miraculous' products being advertised through the phone.“

• Direct marketing is a zero-level channel, wherein marketers interact with the customer on a one-to-one basis.

• Teleshopping is another name for Direct Response Television (DRTV) shopping, a concept that originated in the US in the mid-1980s.

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Case Study E-Choupal- An Initiative By ITC

TRADITIONAL INDIAN AGRICULTURAL MARKETPLACE • Agriculture is the backbone of Indian economy. It contributes around 26% of the

total GDP.• Agriculture provides livelihood to about 65% of the labor force and accounts for

8.56% of India's exports.• Despite green revolution Indian agriculture sector has not been able to achieve the

world level productivity.• The fragmented farms are constraining the risk taking ability of Indian farmer

locking him up into a vicious cycle of “low risk taking ability > low investment > low productivity > weak market orientation > low value addition > low margin > low risk taking ability”.

• This is a case study of the development of a rural market hub using a set of information communication technologies.

• This is the largest e-market initiative undertaken by any corporation in India and also it has been a successful experience.

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The ITC E-Choupal Proposition

• Step 1: Leveraging Information Technology for empowered access to markets (inputs & outputs)

• Step 2: Economic viability of IT infrastructure investments through Win-Win business model, hence scaleable

• Step 3: Customer responsive IT infrastructure in the villages facilitate access to supplementary Education, Health, eGovernance services

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How Conventional value chain works.

Figure 1: Conventional value chain

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Contd..• Indian farmers rely on Department of Agriculture for various inputs such as weather, modern and scientific farming practices and insurance cover.

• For seeds, fertilizers etc. farmers approach input retailer who source them from wholesalers who are in direct contact with the manufacturers.

• After harvest, farmers bring their produce to Mandis (regional market yards) in small multiple lots throughout the year, where the beans are auctioned to the traders and agents of the processing companies in an open outcry method. Most of these activities are done by intermediaries.

• But with every intermediary the cost of produce increases to the processor as intermediary adds his profit margin to the cost although the farmers get the lowest price and margin in the whole value chain.

• Intermediaries also block the flow of market information to the farmers and use that information for their own good. Here poor farmers are squeezed to the maximum without the benefits of their labor accruing to them but to the intermediaries.

• International Business Division of ITC started the new initiative namely e-choupal (village meeting place on an electronic platform).

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Amity Business SchoolHow ITC E-Choupal Made A difference

The E-Choupal Concept•E-choupal is a Hindi word which means “village meeting place”.•E-choupal is a virtual market place where farmers can transact directly with a processor and can realize better price for their produce.•Geographical distances do not restrict participation in the e-choupal. The main disadvantage of conventional market is that information asymmetry is inherent in the market where as e-choupal provides for transparent transactions. •Elimination of some layers of intermediaries allows for larger share of profits to reach the lower end of value chain. •e-choupal does not attempt total elimination of intermediaries, as intermediaries are indispensable in Indian economy.•E-Choupal provides farmers with all the market information and this helps them to become market oriented. In e-choupal intermediaries are leveraged but they are disintermediated from the market information flowing to the farmers.

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Amity Business SchoolIdea GenerationThe idea of creating and leveraging an electronic market place

came from the brainstorming session done by senior executives of ITC-IBD. ITC believes in using a business model that does good to society and helps in improving the standard of living of stakeholders

as well as add value to the shareholder wealth. Idea Initiation

•ITC was increasingly looking to introduce service element in its activities and improve the customer centricity. •ITC is the major exporter of soya bean. It used to buy soya bean mainly from the local markets. This created the problem of poor quality produce; need to handle a large variety and high cost of intermediation. •Was looking for a solution that doesn’t eliminate the intermediaries entirely but at the same time leverage their strengths.

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Amity Business SchoolUnique Business Model: e-Choupal

Figure 2: e-Choupal, a new business model

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•ITC sets up a back-up physical service support at the village level, called Choupal, through Sanchalak: a lead farmer, who acts as the interface between computer and the farmer.•ITC accumulates information regarding weather, modern farming practices, and market prices from sources like Meteorological Department, Agri-universities, mandis (regional market) etc., and uploads all information on to e-Choupal web site.•Availability of market information helps farmers to become market oriented.•They know what price ITC is quoting and the price prevalent in the local market, thereby helping better price realization for farmers.•. If farmer decides to sell to ITC, Sanchalak works as the aggregator of small farmers produce to sell them to ITC. Sanchalak also aggregates farmers input purchase orders for various items like seeds, pesticides and places them directly with the suppliers through internet and facilitate supply of high quality farm inputs as well as purchase of farm produce at farmer’s doorstep with the help of intermediaries.

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Amity Business SchoolTransaction Costs in Mandi ChainSoybeans Example

Farmer Incurs

Trolley Freight to Mandi = 120Labour = 50Kacchha Adat = 150Handling Loss = 50

Rs per MT

370

ProcessorIncurs

Commission to Agent = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Handling at Mandi = 40

335

Total Chain 705

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Amity Business SchoolTransaction Costs in Choupal ChainSoybeans Example

Farmer Incurs

Trolley Freight to ITC Hub = 120Labour = 50Kacchha Adat = 150Handling Loss = 50

Rs per MT

370

ProcessorIncurs

Commission to Sanchalak = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Storage & Handling at Hub = 40

335

Total Chain 705

120

50

Cash Disbursement Costs = 50

215

335

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Amity Business SchoolCONCLUSION ON TECHNOLOGICAL

ADVANCEVENT IN DISTRIBUTION CHANNEL

•Distribution channel is considered as the backbone of every company and technology is the most important ingredient to make it firm and strong.•One of the effects of globalization is that a dramatic shift has been witnessed in the importance of the technology as one of the main drivers for value adding in distribution sector.• Now companies are involving latest technologies such as information technologies, communication technologies, automation technologies, and computing and networking technologies are playing the integral role in this transformation.

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THANK YOU.