Sales and Distribution Management (PAPER CODE: MM-3201)
Sales and Distribution Management (PAPER CODE: MM-3201)
Sales and Distribution Management (PAPER CODE: MM-3201)
SUBMITTED TO:
DR. NILANJANA CHAKRABORTY
ASSOCIATE PROFESSOR
JAWAHARLAL NEHRU SCHOOL OF MANAGEMENT STUDIES
ASSAM UNIVERSITY
SUBMITTED BY:
BRISTI SONOWAL (Roll No.16)
KONSAM KOROWHANBA (Roll No.30)
PUJA DEBNATH (Roll No.46)
Y.LAXMI SINGHA (Roll No.61)
MBA (3RD SEM)
LOGISTICS
Logistics is the process of planning and executing the efficient transportation and storage of
goods from the point of origin to the point of consumption. The goal of logistics is to meet
customer requirements in a timely, cost-effective manner.
Logistics is used more broadly to refer to the process of coordinating and moving resources –
people, materials, inventory, and equipment – from one location to storage at the desired
destination. The term logistics originated in the military, referring to the movement of
equipment and supplies to troops in the field.
Importance of Logistics:
Functions of Logistics:
Transportation via Roadways: This is one of the most common modes of transportation
used by almost every logistics firm across the world. The reason behind this being the
accessibility of roadways even in the most remote and smallest of town. Usually,
transportation via roadways is done with the help of trucks and Lorries.
Transportation via Waterways: When the amount and quantity of goods and services is
very high, companies prefer waterways for transportation. Not only you can handle cargo
from one country to another, but it is very cost effective as well because waterways is the
cheapest means of transportation.
Transportation via Railways: Railways is yet another important mode of transportation
used in logistics. Apart from being able to handle the cargo from one place to another in a
short period of time, railways are also used for handling cargo from a specific sea port to
different parts of the country.
Transportation via Airways: Undoubtedly, airways are the fastest means of transportation
used in linguistics. But on the other hand, it is very expensive and is used only for handling
valuable and less heavy materials.
Other Modes of Transportation: There are yet another means of transportation used in
linguistics that includes barges and boats, and local animals.
Integrated Logistics:
Integrated Logistics is defined as “ the process of anticipating customer needs and wants;
acquiring the capital, materials, people, technologies and information necessary to meet those
needs and wants; optimizing the goods-or-service-producing a network to fulfill customer
requests; and utilizing the network to fulfill customer request in a timely way.”
Product Availability
Percentage in stock
Order cycle time
Elapsed time from order placement to order receipt
Distribution System flexibility
Response time to special request
Distribution system of response
Speed, accuracy of response
Post-sale product support
Response time in providing product support
Channel Management
The term Channel Management is widely used in sales marketing parlance. It is defined as a
process where the company develops various marketing techniques as well as sales strategies
to reach the widest possible customer base. The channels are nothing but ways or outlets to
market and sell products. The ultimate aim of any organization is to develop a better
relationship between the customer and the product.
James R.Stock and Douglas M. Lambert(1987) define the Physical distribution is the
movement of materiel from the point of production (manufacturer or vendor) to the point of
consumption (consumer/customer). It is identified as the sub-function of supply which deals
with the handling and processing of materiel from acquisition to delivery to the ultimate
consumer -or elimination from the system. This sub-function includes the capability to
identify, classify, receive, document, store, secure, maintain in storage, care and preserve,
select, pack, package, ship, control in transit, and dispose of material.
Channel management helps in developing a program for selling and servicing customers
within a specific channel. The aim is to streamline communication between a business and
the customer. To do this, we need to segment your channels according to the characteristics
of customers: their needs, buying patterns, success factors, etc. and then customize a program
that includes goals, policies, products, sales, and marketing program. The goal of channel
management is to establish direct communication with customers in each channel. If the
company is able to effectively achieve this goal, the management will have a better idea
which marketing channel best suits that particular customer base. The techniques used in each
channel could be different, but the overall strategy must always brand the business
consistently throughout the communication. A business must determine what it wants out of
each channel and also clearly define the framework for each of those channels to produce
desired results. Identifying the segment of the population linked to each channel also helps to
determine the best products to pitch to those channels.
Channel objectives must be related to the broader marketing mix. It is aware of the economic
and social factors which are crucial in managing the organizational relationships necessary to
facilitate the flow of products to the end customer. Types of activities to be performed in
channel management are:
Channel Functions
Marketing channels serve many functions, including creating utility and facilitating exchange
efficiencies.
1) Information :
Middlemen have a role in providing information about the market to the manufacturer.
Developments like changes in customer demography, psychography, media habits and the
entry of a new competitor or a new brand and changes in customer preferences are some of
the information that all manufacturers want. Since these middlemen are present in the market
place and close to the customer they can provide this information at no additional cost.
2) Promotion:
Promoting the products in his territory is another function that middlemen perform. Many of
them design their own sales incentive programmes, aimed at building customers traffic at the
other outlets.
3) Financing:
Middlemen finance manufacturers’ operation by providing the necessary working capital in
the form of advance payments for goods and services. The payment is in advance even
though the manufacturer may extend credit, because it has to be made even before the
products are bought, consumed and paid for by the ultimate consumer.
6) Price Stability:
Maintaining price stability in the market is another function a middleman performs. Many a
time the middlemen absorb an increase in the price of the products and continue to charge the
customer the same old price. This is because of the intra-middlemen competition. The
middleman also maintains price stability by keeping his overheads low.
7) Pricing:
In pricing a product, the producer should invite the suggestions from the middlemen who are
very close to the ultimate users and know what they can pay for the product. Pricing may be
different for different markets or products depending upon the channel of distribution.
Channel Levels
Channel level refers to the intermediary in marketing distribution channel between the
producer/manufacturer and the end consumer. Every channel level plays a role in making the
good available to the end consumer. The number of channel levels between the producer and
consumer could be 0,1,2,3 or more.
1) A zero level channel is a direct marketing channel where there is no intermediary and the
producer sells directly to the consumer. For example – direct mails, telemarketing etc
2) A one level channel has one intermediary, typically a retailer between a manufacturer and
consumer.
3) A two level channel and a 3 level channel have 2 and 3 intermediaries respectively.
An example of various channel levels is illustrated as below:
• Horizontal marketing systems include two or more companies at one level that join
together to follow a new marketing opportunity.
• Companies combine financial, production, or marketing resources to accomplish more
than any one company could alone.
• Hybrid marketing channels exist when a single firm sets up two or more marketing
channels to reach one or more customer segments.
Channel Management Decisions
Supply chain management is the management of the flow of goods and services and includes
all processes that transform raw materials into final products. It involves the active
streamlining of a business's supply-side activities to maximize customer value and gain a
competitive advantage in the marketplace.
SCM represents an effort by suppliers to develop and implement supply chains that are as
efficient and economical as possible. Supply chains cover everything from production to
product development to the information systems needed to direct these undertakings.
1. Planning
This is one of the most important stages. Before the beginning of the entire supply chain, it is
essential to finalise the strategies and put them into place. Checking the demand for the
product or service, checking the viability, costing, profit, and manpower etc., are vital.
Without a proper plan or strategy in place, it will be well-nigh impossible for the business to
achieve effective and long term benefits. Therefore, enough time has to be devoted to this
phase. Only after the finalisation of the plans and consideration of all pros and cons, can one
proceed further. Every business needs a plan or blueprint or a roadmap based on which the
strategies are made. Planning helps to identify the demand and supply trends in the market
and this, in turn, helps to create a successful supply chain management system.
2. Information
The world today is dominated by a continuous flow of information. In order to be successful,
it is essential that a business stays abreast with all the latest information about the various
aspects of its production. The market trends of supply and demand for a particular product
can be best understood if the information is properly and timely disseminated through the
many levels of the business. Information is crucial in a knowledge-based world economy, and
ignorance about any aspect of business may actually spell doom for the prospects of the
business.
3. Source
Suppliers play a very crucial role in supply chain management systems. Products and services
sold to the end user are created with the help of different sets of raw materials. It is therefore
necessary that suitable quality raw materials are procured at cost effective rates. If a supplier
is unable to supply on time, and within the stipulated budget, the business is bound to suffer
losses and gain a negative reputation.
It is crucial that a company procures good quality resources so it can create good quality
products and maintain its reputation in the market. This necessitates a strong role for
suppliers in the supply chain management system.
4. Inventory
For a highly effective supply chain management system it is essential that an inventory is
kept and thoroughly maintained. An inventory means the ready list of items, raw materials
and other essentials required for the product or service. This list has to be regularly updated
to demarcate available stock and required stock. Inventory management is critical to the
function of supply chain management, because without proper inventory management the
production, as well as sale of the product, is not possible. Businesses have now started to pay
more attention to this component simply because of its impact on the supply chain.
5. Production
Production is one among the most important aspects of this system. It is only possible when
all the other components of the supply chain are in tandem with each other. For the process of
production to start it is essential that proper planning and supply of goods, as well as the
inventory, are well maintained. The production of goods is followed by testing, packaging
and the final preparation for delivery of the finished product.
6. Location
Any business, that wants to survive as well as flourish, needs a location which is profitable
for the business. Take for example, a carbonated drink factory is set up in an area where
water supply is scarce. Water is a basic necessity of such business. The lack of water could
hamper the production as well as affect the goodwill of the company. A business cannot
survive if it has to share an already scarce raw material with the community. Hence, a
suitable location, which is well connected, and very close to the source of essential resources
for production is vital to a business’ prosperity. The requirement and availability of
manpower must also be considered while setting up a business unit.
7. Transportation
Transportation is vital in terms of carrying raw materials to the manufacturing unit and
delivering the final product to the market. At each stage, timely transportation of goods is
mandatory to sustain a smooth business process. Any business which pays attention to this
component, and takes good care of it, will benefit from the production and transportation of
its goods on time.
It is essential that a company works towards a safe and secure transportation process. Be it in-
house or a third-party vendor, the transportation management system must ensure zero
damage and minimal loss in transit. A well-managed logistics system along with flawless
invoicing are the two pillars of secure transportation.
8. Return of goods
Among the various components that create a strong supply chain is the facility for the return
of faulty/malfunctioning goods, along with a highly responsive consumer grievance redress
unit.
No one is infallible. Even a machine may malfunction once in a million times if not more. As
a part of a strong business process, one may expect the return of goods under various
circumstances. Even the best quality control processes may have unavoidable momentary
lapses. In the case of such lapses, inevitably followed by consumer complaints, a business
must, instinctively, recall the product/s and issue an apology. This not only creates a good
customer bonding, but also maintains goodwill in the long run.
The eight components discussed here are interdependent and ensure a smooth supply chain
management system. It ensures the success and reputation of a business. A business must
focus on all these components in order to create a flawless supply chain.
Businesses that have a strong supply chain management system in place always put great
emphasis on all the components listed, and also ensure that management, as well as the teams
at various levels, play by the rules. Profit is the bottom line and to make sure that the business
achieves it, it is essential that the supply chain does not have any gaps. Any snag should be
dealt with immediately and the weak links repaired or removed.
Demand and supply are two of the most important aspects of a business. For any business to
be successful, trends, with respect to demand and supply, need to be studied carefully while
implementing an effective plan of execution. A supply chain management system is required
not just for the timely manufacture of goods; it is also a very critical system for ensuring that
consumer requirements are met effectively.
SCM is based on the idea that nearly every product that comes to market results from the
efforts of various organizations that make up a supply chain. Although supply chains have
existed for ages, most companies have only recently paid attention to them as a value-add to
their operations.
In SCM, the supply chain manager coordinates the logistics of all aspects of the supply chain
which consists of five parts:
The supply chain manager tries to minimize shortages and keep costs down. The job is not
only about logistics and purchasing inventory. According to Salary.com, supply chain
managers, “make recommendations to improve productivity, quality, and efficiency of
operations.”
Improvements in productivity and efficiency go straight to the bottom line of a company and
have a real and lasting impact. Good supply chain management keeps companies out of the
headlines and away from expensive recalls and lawsuits.
Logistics and Channel Management of Nescafe in India – A Study
Objective of the study:
The objective of the study is based on the strategy adopted by Nestle India Ltd. for
managing supply chain processes of Nescafe.
The study focuses upon:
Process views of Supply Chain.
Social welfare programs for sustainability of Supply Chain.
Major issues and challenges with coffee supply chain.
Introduction
• The collection of all producers, suppliers, distributors, retailers and transportation,
information and other logistics providers that are involved in providing goods to end
consumers. A supply chain includes both the internal and external participants for the firm. -
Chow & Heaver (1999)
• Since around 1990, companies across a wide variety of industries have become increasingly
interested in exploring the opportunities for competitive advantage that can be gained by
leveraging the core competence and innovative capabilities to be found among network of
business partners.
Sourcing of Chicory
• Chicory is an important ingredient for various coffee drinks. (For example, Nescafe
Sunrise has 30% chicory content)
• In 2001 Nestle started developing new areas to cultivate chicory. Support was given
to Paras Spices in 2005 to diversify into chicory roasting and to start cultivation with
local farmers.
• The suppliers were trained on sowing, drying and roasting of chicory.
• Currently Nestle is connected to more than 7500 farmers and 7 suppliers for
procurement of chicory.
Packaging:
• Packaging protects food products from damage due to external environment and
keeps them safe till consumption by customer.
• Coffee is packaged by Nescafe in attractive jars and sachet of various sizes.
• Nescafe sources jars and sachet from third party suppliers.
• Air tight foiling is done for keeping the coffee fresh for long time.
• After packaging, labelling of jars is done.
Process Views:
• Cycle view
• Push/Pull process: Nestle follows push based supply system. Pull System is only
prevalent at penultimate node of supply chain i.e. retailers.
• Nestlé India ltd is determined and willing to pay fair price for coffee produce to
farmers as good quality raw material is essential for business.
• Nestle promotes better agricultural practices, support rural development in line with
local priorities, and address supply chain issues from gender inequality to
deforestation.
• The Lean Supply Chain of Nescafe is ensured by NCE.
Issues and Challenges
– Overproduction
– Lead Time management
– Quality Maintenance throughout the SC
– Excess Inventory
– Seasonality