Sales and Distribution Management Full Notes - Presentation Transcript

Sales and Distribution Management Full Notes Presentation Transcript
1. DISTRIBUTION MGT (D.M.)
D.M. HAS 2 PARTS :
DISTRIBUTION CHANNEL (DC) & PHYSICAL DISTRIBUTION/ MARKETING

LOGISTICS (ML)
DISTRIBUTON CHANNEL (MARKETING CHANNEL/TRADE CHANNEL
IS A SET OF INTERDEPENDENT ORGANISATIONS INVOLVED IN THE

PROCESS OF MAKING A PRODUCT/SERVICE AVAILABLE FOR USE/
CONSUMPTION.
KKH/DM/BU-1 www.a2zmba.com
2.
ML CONSISTS OF DELIVERING
COMPLETED PRODUCTS TO CHANNEL INTERMEDIARIES & END USERS /

CONSUMERS.
FUNCTIONS & FLOWS IN MARKETING CHANNELS
(A) MARKETING CHANNEL MEMBERS
(E.G. MANUFACTURERS, WHOLESALERS, RETAILERS,

BANKS/FIN.INSTITUTIONS, TRANSPORT CARRIERS, ETC) DO ONE OR
MORE OF THE FOLLOWING FUNCTONS / TASKS / WORK.
3.
(i) PROMOTION: TO COMMUNICATE ABOUT PRODUCTS, TO GENERATE

DEMAND/ATTRACT CUSTOMERS. IT INCLUDES ADS,S.P., PERSONAL
SELLING, D.M., PUBLICITY.
(ii) NEGOTIATION: AGREEMENT BETWEEN A BUYER & A SELLER, SO AS

TO TRANSFER OWNERSHIP/POSSESSION.
(iii) PHYSICAL DISTRIBUION: PHYSICAL FLOW/MOVEMENT OF GOODS

FROM MANUFACTURER TO FINAL CUSTOMER.
IT INCLUDES MANY ACTIVITIES : TRANSPORTATION, INVENTORY MGT.,

WAREHOUSING, ORDER PROCESSING / CUSTOMER SERVICE, ETC.
4.
(iv) INFORMATION : COLLECTING & SPREADING MARKET INFO.I.E.

CUSTOMERS, COMPETITORS, ENVIRONMENT.
(v) FINANCING / CREDIT / PAYMENT: EXTENDING CREDIT TO

CUSTOMERS, WHO PAY THEIR BILLS THRU BANK / FIN.INSITUTIONS OR
DIRECTLY TO SUPPLIERS
(vi) AFTER SALES SERVICE: DEPENDING UPON

SERVICE/PRODUCT,CUSTOMERS NEED PREVENTIVE
MAINTENANCE/REPAIRS DURING/OUTSIDE WARRANTY PERIOD.
(EG: 2 WHEELERS, GEN. SETS)
5.
DEPENDING ON WHO CAN DO ABOVE FUNCTIONS EFFICIENTLY, THE

MANUFACTURER SHIFTS/SHARES SOME FUNCTIONS WITH
INTERMEDIARIES (EG STORAGE/INVEN.CARRING, FINANACING,
PROMOTION)
(B) FLOWS IN MARKETING CHANNEL.
A FLOW IS THE MOVEMENT OF FUNCTIONS/TASKS PERFORMED BY

CHANNEL MEMBERS, AS SHOWN.
6. KKH/DM/BU-6 www.a2zmba.com
7. KKH/DM/BU-7 www.a2zmba.com
8.
FLOWS / MOVEMENTS IN CHANNEL ARE GROUPED AS
(A) FORWARD FLOWS ARE PROMOTION, PHY.DISTRIN, &

OWNERSHIP/TITLE.
(B)
BACKWARD FLOWS ARE ORDERING & PAYMENT.
(C) BOTH DIRECTION FLOWS / MOVEMENTS ARE INFORMATION,

NEGOTIATION & FINANCING.
9.
ANALYSING MARKETING CHANNEL STRUCTURES
MARKETING CHANNEL STRUCTURES VARY BY
(1) CHANNEL LEVELS/CHANNEL LENGTH WHICH IS BASED ON

NUMBER OF INTERMEDIARIES &
(2) DEGREE OF SPECIALISATION IN FUNCTIONS / FLOWS, AS SHOWN

HEREAFTER.
10.BASED ON CHANNEL LENGTH/LEVELS DIFFERENT TYPES OF CHANNEL
STRUCTURES KKH/DM/BU-10 www.a2zmba.com
11.MULTI CHANNEL MATRIX STRUCTURES (BASED ON SPECILISATION OF
FUNCTIONS)
NOTE : INDIRECT CHANNELS ARE TYPICALLY USED FOR CONSUMER

MARKETING (EXCEPT B2C) & DIRECT / MATRIX CHANNEL STRUCTURES
ARE USED MORE IN INDUSTRIAL MKG.
12.
CRITERIA FOR HARMONIOUS RELATIONSHIP
HARMONIOUS RELATIONSHIP EXISTS IF GOALS ARE CONVERGENT (SIMILAR), & THE

PROCESS OF DELIVERING SERVICE TO CONSUMERS IS EFFICIENT & EFFECTIVE.
13.TYPES OF RELATIONSHIPS IN MARKETING CHANNEL KKH/DM/BU-13
www.a2zmba.com
14.
WHAT IS RETAILING ?
IT IS SELLING GOODS / SERVICES TO FINAL CONSUMERS FOR

PERSONAL / FAMILY USE, NOT FOR BUSINESS USE . GOODS / SEVICES
MAY BE SOLD IN STORES / SHOPS, STREET, OR CONSUMERS HOME, BY

PERSON, MAIL, PHONE, INTERNET OR VENDING M/C.
15.
2. IMPORTANCE / ROLE OF RETAILER
* RETAILER IS THE FINAL BUSINESS IN A CHANNEL, THAT LINKS A

MANUFACTURER TO CONSUMERS.
* RETAILERS PERFORM IMPORTAN ACTIVITIES THAT INCREASE PRODUCT

/ SERVICE VALUE BY 20-50% OF FINAL COST OF MERCHANDISE.
RETAILERS ACTIVITIES:
(i) PROVIDING ASSORTMENT,
(ii) BREAKING BULK,
(iii) HOLDING INVENTORY,
(iv) PROVIDING SERVICES.
16.
3. RETAIL ENVIRONMENT
IT IS CHANGING IN INDIA. EG:
SHIFT IN CONSUMPTION HABIT OF OVER 1 BILLION PEOPLE (DUE TO TV,

LIBERALISED ECONOMY & DEMANDING CONSUMERS)
USD 2.5 BILLION INVESTMENTS (70,000 # EMPLOYMENT) (IN 10 YRS)
>1000 LARGE / SMALL WORLD CLASS RETAIL STORES IN INDIA BY

2005.
MULTI-CULTURAL, SOCIO-ECONOMIC DIFFERENCES (HENCE, PRODUCTMIX MAY VARY)
COOKING OIL & VANASPATHI CONSUMPTION IS 1/3 OF RURAL

EXPENDITURE ON FMCG PRODUCTS.
URBAN POPULATION IS 30% OF TOTAL POPULATION.
50% OF POPULATION < 20 YEARS AGE.
20% RETAILERS OFFER CREDIT TO CUSTOMERS.
50% TEA CONSUMED IN RURAL INDIA.
17.
MAJOR FACTORS AFFECTING RETAILING IN INDIA
HIGH REAL-ESTATE COSTS.
ABSURD RENT CONTROL LAWS (EG - MAHDA 1976 ACT).
HIGH INTEREST COSTS.
UNPLANNED CITIES.
CORRUPTION.
HIGH ELECTRICITY COSTS.
WEAK CONSUMER LAWS.
18.
RETAIL (ORGN.) STRUCTURES
ORGANISATION STRUCTURES DIFFER BASED ON TYPE / SIZE OF THE

RETAILER.
(i) ORG. STRUCTURE OF A SMALL RETAILER
19.(ii) ORIGINAL STRUCTURE OF A DEPARTMENT STORE CHAIN KKH/DM/BU-19
www.a2zmba.com
20.5) RETAIL BASED CHANNEL FORMATS OR TYPES OF RETAILERS
(i) CONVENIENCE STORE : CONVENIENTLY LOCATED , SMALL GROCERY

STORE HIGH MARGIN, LIMITED DEPTH, BROAD VARIETY, LOW WAITING
TIME.
(ii) SPECIALITY STORE : LIMITED NUMBER OF PRODUCT LINE WITH

GREAT DEPTH OF SELECTION . PRICES SAME AS DEPARTMENT STORES
LOW WAITING TIME.
(iii) DEPARTMENT STORE : ORGANISED INTO SEPARATE DEPARTMENTS.

FOR DIFFERENT PRODUCTS MERCHANTISE. EG: CLOTHING, FOOD
ITEMS, APPLIANCES. WIDE VARIETY OF PRODUCTS WITH MODERATE
DEPTH. SPATIAL (SPACE) CONVENIENCE, LOW WAITING TIME.
21.
(iv) DISCOUNT STORE :
WIDE VARIETY, LESS DEPTH MERCHANTISE, LOW COST LOCATIONS,

LESS SERVICE, LOWER (DISCOUNTED) PRICES. TARGET CONSUMERS
ARE LOW/MIDDLE INCOME GROUPS.
OTHER TYPES OF RETAILERS ARE SUPER STORES (20,000-50,000

SQ.FT), SHOPPING MALLS, SUPER MARKETS (20,000 SQ.FT) SELFSERVICE FOOD STORES
6. SHOPPING BEHAVIOUR
(i) SHOPPING NEEDS : MANY PRODUCTS SATISFY
(a) FUNCTIONAL / RATIONAL NEEDS, AND/OR
(b) PSYCHOLOGICAL / EMOTIONAL NEEDS.
22.
(ii) TYPES OF BUYING DECISION MAKING :
(a) EXTENDED PROBLEM SOLVING (HIGH RISK & UNCERTAINITY)
(b) LIMITED PROBLEM SOLVING IMPULSE PURCHASE (MODERATE RISK

& UNCERTAINITY)
(c) HABITUAL DECISION MAKING (LOW RISK & UNCERTAINITY)- BRAND

LOYALITY, STORE LOYALITY ARE EXAMPLES.
23.
STEPS / STAGES IN STORE SELECTION & BUYING PROCESS
24.
RETAIL PLANNING & STRATEGIES
CONSIST OF FOLLOWING STEPS
(i) DEFINE BUSINESS MISSION.
(ii) CONDUCT SITUATIONAL AUDIT (SWOT).
(iii) DECIDE OBJECTIVES & GOALS.
(iv) EVOLVE RETAIL STRATEGY.
(v) DEVELOP FINANCIAL STRATEGY.
(vi) PREPARE ACTION PLAN (PERT-CPM)
(vii) IMPLEMENTATION & CONTROL.
25.
RETAIL STRATEGY CONSISTS OF
(a) TARGET MARKET SEGMENTS.
(b) RETAIL FORMAT/RETAIL MARKETING MIX. IT INCLUDES :
(i) GOODS/SERVICES OFFERED,
(ii) PRICING,
(iii) PROMOTION,
(iv) STORE LOCATION, DESIGN & VISUAL MERCHANTISE,
(v) CUSTOMER SERVICE
26.
(c) SUSTAINABLE COMPETITIVE ADVANTAGE .
CAN BE BUILT BY FOLLOWING AREAS:
(i)
(ii) LOCATION,
CUSTOMER LOYALTY,
(iii) VENDOR RELATIONS,
(iv) MANAGEMENT INFORMATION & DISTRIBUTION SYSTEMS,
(v) LOW-COST OPERATIONS.
27.MERCHANDISE PLAN
RETAILER PLANS
(a) WHAT TYPE OF MERCHANDISE (GOODS) TO BUY .
THIS DEPENDS ON RETAIL STRATEGY 3. FACTORS ARE RELEVANT :
(i) VARIETY(BREADTH),
(ii) ASSORTMENT(DEPTH)
(iii) SERVICE LEVEL
28.
(c)
HOW MUCH TO BUY .
DEPENDS ON : (i) SALES FORECAST - TOP DOWN, BOTTOM-UP

APPROACH & FORECASTING METHODS.
INVENTORY NET SALES
TURNOVER AVERAGE INVENTORY AT RETAIL
THIS CAN BE CALCULATED ON MONTHLY / QUARTERLY / YEARLY BASIS.

RAPID INVENTORY TURNOVER SHOWS FINANCIAL SUCCESS.
(ii) KKH/DM/BU-28 www.a2zmba.com

29.
PROCUREMENT & DESTRIBUTION
AFTER MERCHANTISE PLAN IS MADE, PROCUREMENT
FOCUSES ON BUYING MERCHANDISE. IT INCLUDES:
(i)
SELECTING VENDORS/SUPPLIERS,
(ii)
MEETING,NEGOTIATING,
(iii)
DEVELOPING RELATIONSHIP.
RETAIL DISTRIBUTION / LOGISTICS
IT IS PHYSICAL FLOW OF MERCHANDISE FROM THE
SOURCE OF SUPPLY TO CUSTOMER.
30.
SOME RETAILERS HAVE DISTRIBUTION CENTER TO STORE BUFFER

STOCKS, AS COST OF SPACE IS LESS.
IF RETAILER HAS FEW STORES, DIRECT DISTRIBUTION TO STORES IS

BETTER.
DISTRIBUTION CENTER ACTIVITIES : TRANSPORTATION, RECEIVING,

CHECKING, STORING, MARKING, FILLING ORDERS.
31.
RETAIL (STORE) MANAGEMENT
INCLUDES THE FOLLOWING:
(i) MANAGING STORE EMPLOYEES : RECRUITING, SELECTING,

TRAINING, MOTIVATING, MEASURING & EVALUATING PERFORMANCE,
(ii) MANAGING MERCHANDISE,
(iii) CUSTOMER SERVICE,
(iv) INVENTORY CONTROL,
(v) STORE PERFORMANCE EVALUATION.
32.
PERFORMANCE EVALUATION SYSTEM IS DESIGNED BY H.R.

DEPARTMENT, BUT EVALUATION IS DONE BY IMMEDIATE SUPERVISOR.
SUBJECTIVE & OBJECTIVE CRITERIA SHOULD BE USED.
BOTH YEARLY/HALF YEARLY REVIEW + FREQUENT APPRAISALS ARE

DONE.
33.
WHOLESAILING (B2B)
IT INCLUDES SELLING PRODUCTS TO BUSINESSES LIKE RETAILERS,

INDUSTRIAL & INSTITUTIONAL USERS, CONTRACTORS & MERCHANTS,
BUT NOT TO HOUSEHOLD CONSUMERS.
WHOLESALER/DISTRIBUTOR SMALL DIFFERENCE IS IGNORED.
TERMINOLOGIES/TERMS VARY IN INDUSTRY.
34.
IMPORTANCE OF WHOLESAILING
LARGEST SALES IN WHOLESALE TRADE.
SALES GROWTH > ECONOMIC GROWTH.
STEADY GROSS MARGINS.
PERFORM IMPORTANT TASKS/ FUNCTIONS.
35.
FUNCTIONS/TASKS PERFORMED BY WHOLESALERS/ DISTRIBUTORS.
SELLING & PROMOTING.
BUYING & ASSORTMENT BUILDING.
BULK BREAKING.
WAREHOUSING/STORAGE-INVENTORY HOLDING.
TRANSPORTATION
FINANCING
RISK BEARING.
MARKET INFORMATION.
36.
STRUCTURE OF WHOLESAILING
37.
DIFFERENT FORMATS / TYPES OF WHOLESALERS
(A) MERCHANT WHOLESALERS , INDEPENDENT BUSINESSES, BY

MERCHANDISE, THEY ARE CALLED JOBBERS,DISTRIBUTORS OR MILL
SUPPLY HOUSES. TWO CATEGORIES :
(i) FULL-SERVICE WHOLESALERS : THEY CARRY STOCK, HAVE A SALES

FORCE, OFFER CREDIT, ARRANGE DELIVERIES.
38.
TWO TYPES OF FULL SERVICE WHOLESALERS
(a) WHOLESALE MERCHANTS SELL TO RETAILERS &GIVE FULL RANGE

OF SERVICES.
(b) INDUSTRIAL DISTRIBUTORS : SELL TO MANUFACTURERS, GIVE

SERVICES LIKE STORAGE, CREDIT, DELIVARY.
39.KKH/DM/BU-39 www.a2zmba.com
40.
(ii) LIMITED SERVICE WHOLESALERS OFFER FEW SERVICES TO

SUPPLIERS & CUSTOMERS. FOLLOWING TYPES:
(a) CASH & CARRY WHOLESALERS HAVE LIMITED FMCG PRODUCTS,

SELL TO SMALL RETAILERS FOR CASH.
(b) TRUCK WHOLESALERS SELL & DELIVER LIMITED SEMI-PERISHABLE

MERCHANDISE TO RETAIL STORES, HOSPITALS, RESTAURANTS
(c) DROP SHIPPERS OPERATE IN BULK INDUSTRIES LIKE HEAVY

EQUIPMENT TO SHIP FROM MANUFACTURER TO CUSTOMER.
41.
(b) RACK JOBBERS SELL TO GROCERY & DRUG RETAILERS , DELIVER,

DISPLAY, BILL FOR GOODS SOLD TO CONSUMERS, KEEP STOCK
RECORDS.
(e) MAIL-ORDER WHOLESALERS .
(f)
(B) BROKERS : BRING BUYERS & SELLERS TOGETHER, NEGOTIATION

HELP, COMMISSION PAID BY PARTY WHO HIRED THEM. EX: REAL
ESTATE.
PRODUCERS CO-OPERATIVES : COLLECT & SELL FARM PRODUCTS.
42.
(C) AGENTS : REPRESENT EITHER BUYERS/SELLERS.
(i) MANUFACTURERS REPRESENTATIVES / AGENTS,
(ii) SELLING AGENTS
(iii) PURCHASING AGENTS
(iv) COMMISSION MERCHANTS.
(D) MANUFACTURERS & RETAILERS BRANCH OFFICES
(E)
(i) AGRICULTURAL ASSEMBLERS,
(ii) PETROLEUM BULK PLANTS / TERMINALS,
(iii) AUCTION COMPANIES.
MISCELLANEOUS WHOLESALERS
43.
SELECTION & USING WHOLESALERS
WHOLESALERS ARE USED WHEN THEY ARE MORE EFFECTIVE &

EFFICIENT IN PERFORMING IMPORTANT FUNCTIONS/TASKS.
WHOLESALER INDUSTRY IS VULNERABLE.
SELECTION OF WHOLESALERS DEPEND UPON :
(i) GIVING VALUE-ADDED SERVICES AS PER NEEDS OF

MANUFACTURERS & RETAILERS.
(ii) REDUCING COSTS WITH MODERN MATERIAL HANDLING & I.T.
(iii) FULFILLING COMMITMENTS (AS PER AGREEMENTS) LIKE SALES

VOLUME, TIMELY PAYMENTS & MARKET INFORMATION.
44.
WHOLESALE STATEGIES
(a) INCREASE PRODUCTIVITY BY BETTER MANAGEMENT OF

INVENTORIES & RECEIVABLES.
(b) IMPROVE DECISIONS ON
(i) TARGET MARKET & RELATIONSHIP BUILDING.
(ii) SELECT PROFITABLE PRODUCTS & SERVICES.
(iii) NEW PRICING STRATEGIES. (iv) DEVELOP OVERALL PROMOTION

STRTEGY.
(v) DEVELOP AUTOMATED WAREHOUSES & SUPERIOR MIS & ORDER

PROCESSING.
45.CHANNEL PLANNING
DESIGNING CHANNEL SYSTEM
STEPS ARE :
A. UNDERSTAND SERVICE OUTPUTS NEEDED BY TARGET CUSTOMERS.
B. DECIDE CHANNEL OBJECTIVES & CONSTRAINTS.
C. IDENTIFY MAJOR CHANNEL ALTERNATIVES.
D . EVALUATE CHANNEL ALTERNATIVES & CHOSE A CHANNEL SYSTEM.
46.
(A) UNDERSTAND SERVICE OUTPUTS NEEDED BY TARGET CUSTOMERS
SOME OF THE SERVICE OUTPUTS ARE :
(i) LOT SIZE,
(ii) WAITING TIME,
(iii) SPATIAL (SPACE) CONVENIENCE.
(iv) PRODUCT VARIETY/ASSORTMENT.
(v) SERVICE BACK-UP.
IF A CHANNEL GIVES MORE SERVICE OUTPUTS, COST & PRICES GO UP.

OPPOSITE IS TRUE.
EX : DISCOUNT STORES.
47.
(B) DECIDE CHANNEL OBJECTIVES & CONSTRAINTS.
(i) CHANNEL OBJECTIVES VARY WITH DIFFERENT MARKET SEGMENTS.

CHANNEL OBJECTIVES ARE TARGETED SERVICE OUTPUT LEVELS .
(ii) CHANNEL OBJECTIVES VARY WITH PRODUCT CHARACTERISTICS.
(iii) STRENGTHS & WEAKNESSES (CONSTRAINTS) OF DIFFERENT

INTERMEDIARIES MUST BE CONSIDERED.
(iv) CONSTRAINTS OF ENVIRONMENT MUST BE CONSIDERED.
48.
(C) IDENTIFY MAJOR CHANNEL ALTERNATIVES.
CONSIDER 3 ELEMENTS OF CHANNEL ALTERNATIVES:
(i) TYPES OF INTERMEDIARIES.
(ii) NO. OF INTERMEDIARIES : EXCLUSIVE, SELECTIVE, INTENSIVE

DISTRIBUTION.
(iii) TERMS & RESPONSIBILITIES : PRICE POLICY, CONDITIONS OF SALE,

TERRITORIES RIGHTS, SERVICES & RESPONSIBILITIES.
49.
(D) EVALUATE MAJOR CHANNEL ALTERNATIVES & SELECT A CHANNEL

SYSTEM.
CRITERIA USED FOR EVALUATION :
(i) ECONOMIC CRITERIA . ESTIMATE COST OF SELLING DIFFERENT

SALES VOLUME THRU EACH CHANNEL.
(ii) CONTROL
(iii) ADAPTIVE CRITERIA. DEGREE OF CONTROL VARIES WITH

DIFFERENT CHANNELS. THE MANUFACTURER NEEDS CHANNELS WHICH
ADAPT TO CHANGING NEEDS OF MARKETS.
50.ORGANISATIONAL PATTERNS IN MARKETING CHANNELS.
TO DELIVER SERVICE OUTPUTS DESIRED BY END-USERS, DIFFERENT

CHANNEL SYSTEMS ARE DEVELOPED THESE ARE:
(1) CONVENTIONAL (FREE FORM) MARKETING CHANNEL CONSISTS OF

INDEPENDENT FIRMS REPRESENTING MANUFACTURER, WHOLESALERS,
RETAILERS. EACH SEEKS TO MAXIMISE OWN PROFITS. NO MEMBER HAS
CONTROL OVER OTHER CHANNEL MEMBERS. CHANNEL MEMBERS
BARGAINED OVER EACH TRANSACTION. THEY WERE UNSTABLE &
COULD NOT ACHIEVE ECONOMIES AND SUPERIOR SERVICE.
51.
(2)VERTICAL INTEGRATION / VERTICAL MARKETING SYSTEM (VMS)
TO IMPROVE EFFECTIVENESS & EFFICIENCY OF FREE

FORM/CONVENTIONAL MKT. CHANNEL, VERTICAL MARKETING SYSTEM
(VMS) HAS EMERGED. IT IS A UNIFIED SYSTEM IN WHICH ONE MEMBER,
THE CHANNEL LEADER, OWNS OTHERS OR HAS SO MUCH POWER THAT
OTHERS COOPERATE, BEHAVE BETTER, & HAVE LESS CONFLICT. THERE

ARE TWO TYPES OF VERTICAL INTEGRATION :
(A )HARD VERTICAL INTEGRATION
(CORPORATE VMS).
(B)SOFT VERTICAL INTEGRATION, WHICH INCLUDES
52.
(B1) ADMINISTERED VMS, & (B2) CONTRACTUAL VMS.
(A) HARD VERTICAL INTEGRATION INCLUDES OWNERSHIP OF THE

CHANNEL BY ONE FIRM THRU GROWTH/ACQUISITION. THIS STRATEGY
IS FOLLOWED BY COMPANIES ( EX BATA & CG-TRANF& HTSG) WHEN
PRODUCTION AND DISTRIBUTION ARE COMBINED UNDER SINGLE
OWNERSHIP.
54.
DEGREES OF VERTICAL INTEGRATION & OUTSOURCING.
IN MARKETING CHANNELS, DECISIONS ON MAKE-OR-BUY ARE SAME

AS VERTICAL (FORWARD) INTEGRATION OR OUTSOURCE.
55.
OUTSOURCING IS BUYING GOODS / SERVICES FROM OUTSIDE

VENDORS.
REASONS :
(I) LESS COST
(II) LESS CAPITAL INVESTMENT,
(III) BETTER QUALITY.
IN DISTRIBUTION MGT., OUTSOURCING ACTIVITIES INCLUDE INVOICING,

SHIPPING, FINANCING, SELLING, WAREHOUSING, ETC.
CAUTION : IF A VENDOR GETS KEY INFORMATION, IT CAN BECOME A

COMPETITOR.
56.
ELECTRONIC CHANNELS
IT MEANS REACHING & SELLING GOODS/SERVICES TO END-USERS

ELECTRONICALLY-BY USING THE INTERNET. IT IS SIMILAR TO ECOMMERCE.
ON LINE SHOPPING IS THIRD MOST POPULAR ACTIVITY ON THE

INTERNET, AFTER E-MAIL & RESEARCHING/ GETTING INFORMATION.
MARKET POTENTIAL OF E-CHANNELS IS HIGH, ALTHOUGH PRESENTLY

SMALL.
57.
SOME OF THE PROBLEMS OF E-CHANNEL ARE :
(i) HOW VAT (VALUE ADDED TAXES) WILL BE COLLECTED FOR ON LINE
SALES?
(ii) ON-LINE-PAYMENTS PROBLEMS.
(iii) DIAL-UP SYSTEM IS SLOW FOR ACCESSING WEB-SITES. OTHER

SYSTEMS LIKE ISDN, DSL, CABLE MODEM ARE COSTLY.
58.MAJOR REASONS FOR ON-LINE SHOPPING.
CAN SHOP ANY TIME.
LESS TIME THAN SHOPPING AT STORES.
ENJOY ON-LINE SHOPPING & EASY TO SHOP.
LOWER PRICES, DONT LIKE CROWD AT RETAIL STORES,

PRODUCTS / BRANDS NOT AVAILABLE WHERE THE BUYER LIVE.
59.MAJOR REASONS FOR NOT MAKING ON-LINE PURCHASE
NOT SURE ABOUT TIMELY DELIVERY.
DONT WANT TO PAY SHIPPING COSTS.
ENJOY SHOPPING AT RETAIL STORES.
TOTAL COST OF BUYING MORE.
PRODUCT RETURNS DIFFICULT.

DESIRED PRODUCT NOT AVAILABLE.
60.CONFLICTS DUE TO ON-LINE SALES
MANUFACTURER SELLING DIRECTLY THRU OWN WEB SITES, OR OTHER

ON-LINE RESELLER CAN FACE GOAL & DOMAIN RELATED CONFLICTS.
MANAGING CONFLICTS
(i) SELLING AT LIST PRICE. (WITHOUT DISCOUNTS) (EX. NIKE)
(ii) SELLING DIFFERENT PRODUCTS (EX. P&G).
(iii) GIVE CREDIT TO OFF-LINE RETAILERS.
(iv) PROMOTE, DONT SALE.
61.
CHANNEL MANAGEMENT
1.
CHANNEL CONFLICTS.
2.
CHANNEL POLICIES.
INTRA CHANNEL CONFLICT MEANS CONFLICTS WITHIN A CHANNEL .
MULTIPLE CHANNELS HAVE CONFLICTS BETWEEN 2 OR MORE

CHANNELS .
62.
SOURCES/CAUSES OF CONFLICTS.
GOAL DIFFERENCES
DIFFERING PERCEPTIONS.
DOMAIN DIFFERENCES.
GRAY/BLACK MARKETS.
MANAGING CHANNEL CONFLICTS
ASSESS CONFLICT BY INTENSITY, FREQUENCY & IMPORTANCE OF

THE ISSUE.
SOME CONFLICTS CAN BE CONSTRUCTIVE.
63.
METHODS FOR MANAGING CONFLICTS
EXCHANGE OF PERSONS.
COOPTATION
ACHIEVING COMMON GOALS.
DIPLOMACY.
MEDIATION.
ARBITRATION.
64.
2.0. CHANNEL POLICIES
POLICIES ARE MADE TO MANAGE THE CHANNEL & EFFORTS OF

MEMBERS.
POLICIES DISCUSSED ARE:

MARKET & CUSTOMER COVERAGE, PRICING & PRODUCT LINE.
2.1. MARKET COVERAGE POLICIES
INTENSIVE DISTRIBUTION MAY INCREASE INTRABRAND

COMPETITION.
SELECTIVE & EXCLUSIVE DISTRIBUTION TO MINIMISE INTRABRAND

& IMPROVE INTERBRAND COMPETITION & SERVICE OUTPUTS.
LEGALITY VARIES IN COUNTRIES.
65.
2.2. CUSTOMER COVERAGE POLICIES
WHOM INTERMEDIARIES RESELL
PREVENT GRAY MARKETS
PREVENT INTRABRAND COMPETITION
2.3. PRICING POLICIES
MANUFACTURER HAS PRICE LIST & DISCOUNT POLICIES. FOR

INTERMEDIARIES COST OF SERVICE OUTPUTS, PROFITS, AND MARKET
(COMPETITORS) NORMS ARE CONSIDERED.
MAXIMUM RETAIL PRICE MAINTAINENCE (RPM) IS ADOPTED.
66.
PRICE DISCRIMINATION LEGALLY ALLOWS DIFFERENT PRICES TO

DIFFERENT BUYERS, AS FOLLOWS:
(i)
(ii) CUSTOMER SEGMENT PRICING;
(iii) IMAGE PRICING;
(iv) LOCATION PRICING;
(v) TIME PRICING;
VOLUME DISCOUNT;
PREDATORY PRICING IS ILLEGAL,
67.
2.4. PRODUCT LINE POLICIES
(A) EXCLUSIVE DEALING & TERRITORY ARRANGEMENT ARE LEGAL IF

SELLERS MARKET SHARE IS NOT DOMINANT & COMPETITION IS NOT
LESSENED SUBSTANTIALLY.
(B) TYING AND FORCING FULL PRODUCT LINE ARE HELD BY COURTS AS
ILLEGAL, IF THE ARRANGEMENT LESSONS COMPETITION
SUBSTANTIALLY.
68.
A PRODUCT MIX CONSISTS OF PRODUCT LINES. EACH PRODUCT

LINE MANAGER TO DECIDE WHICH PRODUCT ITEMS TO BUILD,
MAINTAIN, HARVEST, OR DIVEST, BASED ON SALES, PROFITS, MARKET
PROFILE ANALYSIS.
69.
CHANNELS INFORMATION SYSTEMS
1. ELEMENTS OF CHANNEL INF-SYSTEM :
(i) HARDWARE & NETWORKS.
(ii) DATABASES.
(A) DATABASE GENERATION.
(B) DATABASE USE.
2. IMPACT ON SERVICE.
(i)
(ii) WAITING (DELIVARY) TIME REDUCTION.
(iii) STOCKING NEEDED PRODUCTS & AVOIDING STOCK-OUTS.
SPATIAL (SPACE RELATED) CONVENIENCE.
70.
CUSTOMERS BY USING CHANNEL INFO.SYSTEM. (BY USING

DATABASES), FAST MOVING ITEMS ARE ORDERED & SLOW MOVING
PRODUCTS ARE DELETED.
3. IMPACT OF INF.SYS. ON CHANNEL FLOW PERFORMANCE
INF.TECHNOLOGY HAS IMPROVED PERFORMANCE OF MAJOR CHANNEL

FLOWS, AS SHOWN BELOW. IT HAS INCREASED CONSUMER
SATISFACTION & REDUCED COSTS.
72.
ASSESSING MARKETING CHANNEL PERFORMANCE
1. MEASURING & EVALUATING CHANNEL MEMBERS CONTRIBUTION TO

CHANNEL PERFORMANCE. THIS IS SAME AS MARKETING COSTS &
PROFITABILITY,DISCUSSED EARLIER.
THE STEPS ARE :
(i) IDENTIFY CHANNEL ACTIVITIES.
(ii) CONVERT NATURAL EXPENSES TO CHANNEL ACTIVITIES/FUNCTIONS.
(iii) ALLOCATE FUNCTIONAL COSTS TO VARIOUS CHANNELS.
(iv) PREPARE P & L FOR EACH CHANNEL.
73.
2. RESULT OF CHANNEL PERFORMANCE .
CHANNEL PERFORMANCE IS ASSESSED BY AUDITING SERVICE QUALITY.
THIS IS DONE BY A QUESTIONNAIRE TO MEASURE TARGET

CUSTOMERS PERCEPTIONS, FOCUSING ON FOLLOWING 5 FACTORS:
(i)
(ii) RELIABILITY.
(iii) REPONSIVENESS.
TANGIBLES.
(iv) ASSURANCE.
(v) EMPATHY.
74.
MARKETING LOGISTICS
IT IS DELIVERING THE FINAL PRODUCT TO CUSTOMERS &

INTERMEDIARIES, AT DESIRED TIME & LOWEST COST. IT IS ALSO
CALLED PHYSICAL DISTRIBUTION
75.
IN DEMAND CHAIN MGT: A FIRM FIRST THINKS OF TARGET MARKET &

ITS DEMAND, & THEN DESIGNS SUPPLY CHAIN BY WORKING
BACKWARD. REPLACE CHAIN WORD BY NETWORK IS FURTHER
IMPROVEMENT.
76.
MISSION OF LOGISTICS MGT IS TO PLAN & COORDINATE AND

INTEGRATE THOSE ACTIVITIES THAT ARE NECESSARY TO SATISFY
CUSTOMER NEEDS OF EXCELLENT SERVICE AT LOWEST COST, WITHIN
THE ORGANISATION.
77.THE SUPPLY CHAIN IS A NETWORK. KKH/DM/BU-77 www.a2zmba.com
78.
SUPPLY CHAIN MGT (SCM)
IT IS A NETWORK OF CONNECTED & INTERDEPENDENT FIRMS

COOPERATIVELY WORKING TO CONTROL, MANAGE & IMPROVE FLOW
OF MATERIALS & INFORMATION FROM SUPPLIERS TO END USERS.
ACTIVITIES OF SCM ARE DESIGN OF PRODUCT, PLANNING &

FORECASTING, PURCHASE, PRODUCTION, ORDER PROCESSING,
INVENTORY CONTROL, WAREHOUSING, MATERIAL HANDLING,
CUSTOMER SERVICE.
LOGISTICS SCOPE STARTS FROM MGT.OF RAW MATERIAL THRU

OPERATIONS TO DELIVARY OF FINAL PRODUCT TO CUSTOMERS.
79.
LOGISTICS & COMPETITIVE STRATEGY.
GOALS/COMPETITIVE ADVANTAGE A FIRM WANTS TO ACHIEVE

DELIVERING SUPERIOR CUSTOMER SERVICE AT LOWER COST/SUPERIOR
CUSTOMER VALUE.
COMPETITIVE STRATEGIES ARE:
PERFORM VALUE CHAIN ACTIVITIES (PORTERS) MORE EFFICIENTLY &

DIFFERENTLY THAN COMPETITORS..
USE LOGISTICS CONCEPT (& SCM) TO INTEGRATE DISTRIBUTION,

OPERATIONS, PROCUREMENT WITHIN THE FIRM & NETWORK
(RELATIONSHIPS) BUILDING WITH SUPPLIERS & CUSTOMERS.
80.
CUSTOMER SERVICE DIMENSION
IT HAS MANY ELEMENTS WHICH ARE GROUPED IN 3 CATEGORIES:
(i) PRE-TRANSACTION / PRE-SALES SERVICE.
(ii) TRANSACTION / DURING-SALES SERVICE.
(iii) POST-TRANSACTION / POST-SALES SERVICE.
SERVICE MUST BE CUSTOMISED, TO SATISFY DIFFERENT NEEDS OF

CUSTOMERS.
PERFECT ORDER ACHIEVEMENT CAN BE USED TO MEASURE SERVICE

PERFORMANCE & TO SET SERVICE STANDARDS.
81.
DEVELOPING LOGISTICS ORGANISATION & MANAGEMENT.
1. HOW TRADITIONAL ORGANISATION PROCESSES A CUSTOMER

ORDER. IT IS SEQUENTIAL & TAKES A LONG TIME.
82.
2. CONVENTIONAL (VERTICAL) ORG. STRUCTURE IS ON FUNCTIONAL

BASIS.
THIS ORG. IS INPUT FOCUSED & BUDGET DRIVEN. IT CANNOT INTEGRATE LOGISTICS
MGT.TO ACHIEVE COMPETITIVE ADVANTAGE. KKH/DM/BU-82 www.a2zmba.com
83.
3. HENCE, HORIZONTAL ORG.SHOULD BE DEVEOPED WITH

FOLLOWING CHARACTERISTICS :
(A) ORGANISE AROUND PROCESSES & NOT TASKS.
(B) HAVE A FLAT ORGANISATION.
(C) BUILT ON MULTI FUNCTIONAL TEAMS.
84.(A) MARKET-BASED PERFORMANCE MEASUREMENT.
FIG. HORIZONTAL ORG. FOCUS
85.
SOME OF CORE PROCESSES ARE :
(i)
CUNSUMER DEVELOPMENT.
(ii)
BRAND MANAGEMENT
(iii) CRM,
(iv) CUSTOMER SERVICE
86.
THESE PROCESSES ARE BEST MANAGED BY CROSS-FUNCTIONAL

TEAMS.
LEADERS ARE INTEGRATORS, WHO FOCUS THE TEAM ON

MARKET BASED GOALS.
REWARD SYSTEM SHOULD CHANGE.
PRODUCTION SHOULD PRODUCE WHAT IS NEEDED BY MARKET.
FOR MARKET DRIVEN LOGISTICS, CHANGE FROM VERTICAL TO

HORIZONTAL IS IMPORTANT.
87.TRANSPORTATION DECISIONS
1. CAN AFFECT CUSTOMER SATISFACTION.
2. THEREFORE SELECTION OF RIGHT TRANSPORTATION MODE IS

IMPORTANT.
3.
RAIL, AIR, TRUCK, WATERWAYS, PIPELINES, RAIL-TRUCK,TRUCKWATER,RAIL-WATER, AIR TRUCK.
ALTERNATIVES :
88.
4.
CRITERIA FOR SELECTION
DEPENDABILITY, AVAILABILITY, SPEED, LOSS / DAMAGE, & COST.
5.
PRIVATE CARRIERS.
CONTRACT CARRIERS.
COMMON CARRIERS.
MARKETERS CHOOSE FROM :
89.
WAREHOUSING DECISIONS
EACH FIRM STORES FINISHED PRODUCTS UNTIL THEY ARE SOLD.
PRODUCTION & COMSUMPTION CYCLES DO NOT ALWAYS MATCH.
THEREFORE, FIRMS MUST DECIDE :
(i) HOW MANY WARE HOUSES ARE NEEDED .
(ii)THEIR LOCATION.
90.
4. DECISION DEPENDS ON :
(A) MARKET COVERAGE,
(B) CUSTOMER SERVICE LEVEL,
(C) DISTRIBUTION COSTS.
5. TYPES OF WAREHOUSES AVAILABLE
(i)
PRIVATE (COMPANY OWNED)
(ii)
PUBLIC (LEASED/RENTED)
(iii) STORAGE (MEDIUM-LONG TERM)
(iv) DISTRIBUTION CENTRES.
(v) AUTOMATED.
91.
INVENTORY MANAGEMENT
INVESTMENT IN INVENTORY IS HIGHEST, OUT OF TOTAL INVESTMENT IN

ASSETS.
INVENTORIES ARE HELD AT:
PRODUCTION, DISTRIBUTION, RETAIL LEVELS.
INVENTORY COST RISES AT FASTER RATE AS CUSTOMER SERVICE LEVEL

COMES CLOSER TO 100%.
A FIRMS OBJECTIVE : SUPERIOR CUSTOMER SERVICE AT LOWER COST.
92.
5. INVENTORY DECISIONS ARE :
(A) WHEN TO ORDER?
(B) HOW MUCH TO ORDER?
93.
MARKETING LOGISTICS COST AND PERFORMANCE
MARKETING LOGISTICS/PHYSICAL DISTRIBUTION (PD) COST, P, IS AS

FOLLOWS:
P = F+W+I+LS
F = FREIGHT/TRANSPORTATION COST.
W = WAREHOUSE COST.
I = INVENTORY COST.
LS = COST OF LOST SALES, DUE TO DELAY IN DELIVARY.
94.
2. TWO APPROACHES FOR PERFORMANCE MEASUREMENT .
(A) MINIMISE TOTAL COST OF P.D. (P).
(B) RETURN ON INVESTMENTS (ROI).
95.
MATERIAL HANDLING (M.H.)
OBJECTIVES : TO INCREASE USABLE CAPACITY OF THE WAREHOUSE

AND TO IMPROVE OPERATING EFFICIENCY.
GUIDELINES/PRINCIPLES OF MATERIAL HANDLING.
OPTIMISE MATERIALS FLOW.
SIMPLIFY BY REDUCING, ELIMINATING, COMBINING MOVEMENTS.
USE GRAVITY PRINCIPLE.
96.
MAKE OPTIMUM USE OF BUILDING SPACE.
SELECT RIGHT M.H.EQUIPMENT.
STANDARDISE M.H. METHODS & SIZES/TYPES OF EQUIPMENT.
ADOPT SAFETY PRINCIPLE.
97.
BENCHMARKING
MEANING : STUDYING WORLD-CLASS PERFORMERS & ADOPTING

BEST PRACTICES, OR STUDYING BEST PRACTICE COMPANIES TO
IMPROVE PERFORMANCE.
INITIALLY BENCH MARKING WAS FOCUSED ON COMPETITORS, BUT NOW

IT IS FOCUSED ON TOP PERFORMING FIRMS, REGARDLESS OF THEIR
INDUSTRY.
98.
3. STEPS INVOLVED IN BENCHMARKING
(i)
DECIDE WHICH FUNCTIONS TO BENCHMARK.
(ii)
IDENTIFY KEY PERFORMANCE VARIABLES.
(iii) IDENTIFY BEST IN CLASS COMPANIES.
(iv) MEASURE PERFORMANCE OF THESE FIRMS.
(v) MEASURE THE COMPANYS PERFORMANCE.
(vi) SPECIFY ACTION PLAN TO CLOSE THE GAP.
(vii) IMPLEMENT ACTION PLAN.
(viii) MONITOR RESULTS.
FOR SR.NO. (iii), ASK CUSTOMERS, SUPPLIERS, DISTRIBUTORS, MGT.

CONSULTING FIRMS.

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1. DISTRIBUTION MGT (D.M.)

D.M. HAS 2 PARTS :

DISTRIBUTION CHANNEL (DC) & PHYSICAL DISTRIBUTION/ MARKETING

DISTRIBUTON CHANNEL (MARKETING CHANNEL/TRADE CHANNEL

IS A SET OF INTERDEPENDENT ORGANISATIONS INVOLVED IN THE

COMPLETED PRODUCTS TO CHANNEL INTERMEDIARIES & END USERS /

FUNCTIONS & FLOWS IN MARKETING CHANNELS

(A) MARKETING CHANNEL MEMBERS

(E.G. MANUFACTURERS, WHOLESALERS, RETAILERS,

(i) PROMOTION: TO COMMUNICATE ABOUT PRODUCTS, TO GENERATE

(ii) NEGOTIATION: AGREEMENT BETWEEN A BUYER & A SELLER, SO AS

(iii) PHYSICAL DISTRIBUION: PHYSICAL FLOW/MOVEMENT OF GOODS

IT INCLUDES MANY ACTIVITIES : TRANSPORTATION, INVENTORY MGT.,

(iv) INFORMATION : COLLECTING & SPREADING MARKET INFO.I.E.

(v) FINANCING / CREDIT / PAYMENT: EXTENDING CREDIT TO

(vi) AFTER SALES SERVICE: DEPENDING UPON

(EG: 2 WHEELERS, GEN. SETS)

DEPENDING ON WHO CAN DO ABOVE FUNCTIONS EFFICIENTLY, THE

(B) FLOWS IN MARKETING CHANNEL.

A FLOW IS THE MOVEMENT OF FUNCTIONS/TASKS PERFORMED BY

FLOWS / MOVEMENTS IN CHANNEL ARE GROUPED AS

(A) FORWARD FLOWS ARE PROMOTION, PHY.DISTRIN, &

BACKWARD FLOWS ARE ORDERING & PAYMENT.

(C) BOTH DIRECTION FLOWS / MOVEMENTS ARE INFORMATION,

ANALYSING MARKETING CHANNEL STRUCTURES

MARKETING CHANNEL STRUCTURES VARY BY

(1) CHANNEL LEVELS/CHANNEL LENGTH WHICH IS BASED ON

(2) DEGREE OF SPECIALISATION IN FUNCTIONS / FLOWS, AS SHOWN

NOTE : INDIRECT CHANNELS ARE TYPICALLY USED FOR CONSUMER

CRITERIA FOR HARMONIOUS RELATIONSHIP

HARMONIOUS RELATIONSHIP EXISTS IF GOALS ARE CONVERGENT (SIMILAR), & THE

IT IS SELLING GOODS / SERVICES TO FINAL CONSUMERS FOR

MAY BE SOLD IN STORES / SHOPS, STREET, OR CONSUMERS HOME, BY

2. IMPORTANCE / ROLE OF RETAILER

* RETAILER IS THE FINAL BUSINESS IN A CHANNEL, THAT LINKS A

* RETAILERS PERFORM IMPORTAN ACTIVITIES THAT INCREASE PRODUCT

(i) PROVIDING ASSORTMENT,

(ii) BREAKING BULK,

(iii) HOLDING INVENTORY,

(iv) PROVIDING SERVICES.

IT IS CHANGING IN INDIA. EG:

SHIFT IN CONSUMPTION HABIT OF OVER 1 BILLION PEOPLE (DUE TO TV,

USD 2.5 BILLION INVESTMENTS (70,000 # EMPLOYMENT) (IN 10 YRS)

>1000 LARGE / SMALL WORLD CLASS RETAIL STORES IN INDIA BY

MULTI-CULTURAL, SOCIO-ECONOMIC DIFFERENCES (HENCE, PRODUCTMIX MAY VARY)

COOKING OIL & VANASPATHI CONSUMPTION IS 1/3 OF RURAL

URBAN POPULATION IS 30% OF TOTAL POPULATION.

50% OF POPULATION < 20 YEARS AGE.

20% RETAILERS OFFER CREDIT TO CUSTOMERS.

50% TEA CONSUMED IN RURAL INDIA.

MAJOR FACTORS AFFECTING RETAILING IN INDIA

HIGH REAL-ESTATE COSTS.

ABSURD RENT CONTROL LAWS (EG - MAHDA 1976 ACT).

HIGH INTEREST COSTS.

HIGH ELECTRICITY COSTS.

WEAK CONSUMER LAWS.

RETAIL (ORGN.) STRUCTURES

ORGANISATION STRUCTURES DIFFER BASED ON TYPE / SIZE OF THE

(i) ORG. STRUCTURE OF A SMALL RETAILER

(i) CONVENIENCE STORE : CONVENIENTLY LOCATED , SMALL GROCERY

(ii) SPECIALITY STORE : LIMITED NUMBER OF PRODUCT LINE WITH

(iii) DEPARTMENT STORE : ORGANISED INTO SEPARATE DEPARTMENTS.