Management Assignment

Topic: Sales and Distribution

Introduction
Sales refers to the exchange of goods/ commodities against money or service. It is the only
revenue generating function in an organization. It has formed an important part in business
throughout history. Distribution is the process of making a product or service available for
use or consumption to the end consumer or business.

Distribution could be of the following two types:

Direct Distribution
It can be defined as expanding or moving from one place to another without changing
direction or stopping. For example, Bata has no distribution channel; it sells its products
directly to the end consumers.

Indirect Distribution
It can be defined as means that are not directly caused by or resulting from something. For
example, LG sells its product from the factory to the dealers, and it reaches the consumers
through dealers.

Objective of Sales Management

Sales Volume

It is the capacity, or the number of items sold, or services sold in the normal operations of a
company in a specified period. The foremost objective of sales management is to increase
sales volume to generate revenue.

Contribution to Profit

The sales of the organization should contribute to profit, as it is the only revenue generating
department. It can be calculated as the percentage or ratio of gain in total turnover.

Continuing Growth

One of the main objectives of Sales Management is to retain consumers to continue growth
of the organization. There should be regular expansion of sales and demand for an item in
the market with new advanced formulation.

Let us look at an example of how sales and distribution is carried out in a real-
world company:
Haldiram's Food International Limited today is recognized as a Star Export House, by the
Directorate General of Foreign Trade, a department working under the Ministry of
Commerce, Government of India.

Haldiram's has its roots established in 1937 in the form of a small retail Sweet & Namkeen
shop in Bikaner, Rajasthan, a small but significant town in the Thar Desert. The company
shifted its base to Nagpur in 1970. For the first time people heard of a factory that was
operating to manufacture Sweets & Namkeens. A model plant of its times was set up at:-
Haldiram's House; 880, Small Factory Area, Wardhaman Nagar, Nagpur. In a very short span
'Haldiram' developed into a brand and became an inseparable part of every occasion.

This was followed by a chain of retail outlets & showrooms. The product lines were
expanded to match the taste of various segments of the society. Sweets and namkeens
were presented in more durable and commercially viable packaging. This fetched an
overwhelming response and in 1997, Haldiram's forayed into milk and milk product industry
with products such as Khowa, Ghee & Butter Milk, the manufacture of Extruded foods such
as vermicelli and 3-D Snacks.

Presently, it is a $4,000,000 brand and is a familiar sight not only in India, but also on shelves
across USA, UK and the middle-east. The product profile consists of a whole range of
varieties from sweets to namkeens (savoury snacks). In our study we will focus on the
namkeens. The namkeens business contributes to 70% of Haldiram’s total sales. There are
different distribution channels within a product category w. r. t. their size and weight.

Presently, they have four plants in and around Delhi. Production capacity of these plants on
a daily basis is: 50 tonnes of namkeens, 20 tonnes of chips and other fun foods and 5 tonnes
of tinned sweets and soan papadi (data from 2011). Regular laboratory checks are made to
ensure that quality standards are being met.

Sales and Distribution

At Haldiram’s, they have defined their distribution network with respect to the weight and
price of their various products. This is because they have defined their retail outlets in terms
of the kind of product they keep. For e.g., a 10 gm bhujiya packet is generally opted by the
“paan wala’s” and very small retailers. Thus, they have a different distribution channel.

Similarly, a parallel channel of distributor is for the “kirana stores” in various colonies and
localities where our middle-class housewife visits who prefers the less than ½ kg packets but
more than the small chillar of 10gms. This segment of consumers is supplied through a
different set of distributors who stock the 200gm and 400gm packets.

Thirdly, the big modern trade stores like Spencer's, Vishal Mega Mart, Reliance Fresh,
Subhiksha etc., generally prefer keeping the 500 gm and 1 kg packets. They have assigned
exclusive distributors for them.

Fourthly, for army canteens, or BSF, CRPF canteens, there is a separate channel of
distribution followed. Since, the price at which the products are sold to these canteens are
very low, goods are supplied through the exclusive CSD, Company Sales Depots. These
depots are located near army cants, like one in Delhi near Palam. The company has various
CSD all throughout the northern and north-eastern India covering as far as Nagaland and
Jammu & Kashmir.

The C & F (Consignee & Forwarding) agents are used for distribution of the product outside
Delhi, NCR. The C & F agents work on Freight paid basis till their warehouse. If the
Warehouse is either on the first floor or the basement, then the labour charges are borne by
the agent and not the company.

Within Delhi, the Distributors are located by dissecting the city into four zones north, east,
south, and west Delhi. They pick the products from the depots and the logistics are
managed by themselves. Though the company does have a say in it but leaves the
responsibility on them as distribution is more about relationships, as per a company
representative.

Profit Margins within the distribution channel is as following:

 4% commission to the C & F agent

 7% margin to the distributor
 15 to 20% margin to the retailer

In case of Army Canteens, a fixed price policy is followed which can be revised once in three
years as per govt. regulations. The profit margin in these canteens is very negligible due to
the fixed price at which they are supplied.

Selection of a Distributor
The first rule of selecting a distributor is “NO CREDIT”. Derived from it, they view the
following points of reference before selecting a distributor:

 Financial Strength,
 Reputation in the market,
  The System followed by the distributor,
 Positive Attitude.

Also, the distributor of Haldiram’s solely sells their products. They cannot keep any product
of any competitor, in short, they are exclusively Haldiram’s distributors.

Beat Chart
A beat chart is generally a visit planner that is designed by the company in collaboration
with the distributor. It is designed to inform the distributor that the company sales
executives will visit the following distributor on the following days as per the schedule for
order taking and other queries.

This helps both the company as well as the distributors to work in an organized manner as
each know when the company will visit and when to expect the stock delivery. Similarly, the
company officials know which distributor to visit when and how the goods will be
dispatched and in what lot sizes.

At Haldiram’s, they have further divided each zone in Delhi into smaller segments. The
company sales executives meets, for e.g.,

 Lajpat nagar and to G.K.1 belt on Monday

 South Delhi to G.K.2 belt on Wednesday.

Similarly, within this they meet their various distributors on days assigned and take their
orders that are dispatched the very next day. There is a separate team of sales executives
for the 4 Delhi zones with each having their respective ASM and RSM. Similar exercise is
followed in other regions involving C & F agents.

Issues and Challenges faced

Shelf Placement
Shelf placement is an important issue in today’s modern trade stores. Though Haldiram can
define the shelf space they would prefer at these outlets, their policy is to let the retailer
decide it. This is mainly due to the following two reasons:

 Firstly, such a demand does not come without a price.

 Secondly, it is believed at Haldiram’s that their product has the right customer pull
so in any case the retailers prefer to keep its product at visible places.

Transit Losses
There can be three to four types of transit losses mainly, these are:

 Loss due to drenched in rain.

 Damage of Carton seal.
 Unfilled or empty packets.
  Incomplete Cartons.

Three major problems are faced in such a situation are:

 Product flow,
 Document flow,
 After – Delivery Issues.

Claim Settlements
The procedure to claim settlement is as follows:

 The moment the distributor finds damaged products it informs the company about
the quantity of packets damaged, of which product, and their batch no.
 If the distributor checks it before signing the transport slips it can send them back
with the transporter.
 In case, he finds them after the transporter has left the goods in godown, then the
company issues a credit note when informed on phone, which the distributor can
cash on the next visit.

Since, the company shares cordial relationship with its distributors there does not exists a
very standardized procedure that is followed. In case the transporter has left and the
damaged goods were found afterwards the product as well as the document are sent in the
next visit of the company.

The document needed in case of transit losses is delivery note mentioning the details
explained above. But in case of C&F agents, they destroy the product after their expiry dates
have passed without informing the company.

Significance of Sales and Distribution for an organization

Sales management is very crucial for any organization to achieve its targets. In order to
increase customer demand for a particular product, we need management of sales.

The following points need to be considered for sales management in an organization

 The first and foremost importance of sales management is that it facilitates the sale
of a product at a price, which realizes profits and helps in generating revenue to the
company.
 It helps to achieve organizational goals and objectives by focusing on the aim and
planning a strategy regarding achievement of the goal within a timeframe.
 Sales team monitors the customer preference, government policy, competitor
situation, etc., to make the required changes accordingly and manage sales.
 By monitoring the customer preference, the salesperson develops a positive
relationship with the customer, which helps to retain the customer for a long period
of time.
  Both the buyers and sellers have the same type of relationship, which is based on
exchange of goods, services and money. This helps in attaining customer satisfaction.

Sales Management may differ from one organization to the other, but overall, we can
conclude that sales management is very important for an organization for achieving its short
and long-term goals.

Analysis
By specializing in the manufacturing, in the namkeen market, the company has created a
niche market. The raw materials used to prepare namkeens are of best of quality and are
sourced from all over India.

Haldiram’s customizes its products to suit the tastes and preferences of customers from
different parts of India. It launched products, which catered to the tastes of people
belonging to specific regions. For example, it launched ‘Murukkus’ a south Indian Snack and
‘Chennai Mixture’ for south Indian customers. Similarly, Haldiram’s launched ‘bhelpuri’
keeping in mind customers residing in western India. The company offered certain products
such as ‘Nazarana’, ‘Panchratan’ and ‘Premium’ only during the festival season in gift packs.
These measures have helped Haldiram’s compete effectively in a market that is flooded with
a variety of snack items in different shapes, sizes & flavours.

Haldiram’s has developed a strong distribution network to ensure the widest possible reach
for its products in India as well as overseas. Apart from the exclusive showrooms owned by
Haldiram’s, the company offers its products through retail outlets such as supermarkets,
sweet shops, provision stores, bakeries and ice cream parlours. The products are also
available in public places such as railway stations and bus stations that account for a
sizeable amount of its sales.