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Sales and Distribution Management

Submitted By

N.S.Aswin 80303180002
PGDM – 2018-2020
NMIMS - Hyderabad

Submitted To

Mr. Gopal Krishna

NMIMS Hyderabad

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 Hair-N-Shine

S&S is planning to launch a brand of its Hair – N – Shine shampoo in India in a tube form.
Product is successful in other Asian countries such as Singapore, Korea, Malaysia and
Thailand where it contributes 9 Percent of total sales. Company is planning to launch Hair –
N – Shine tube shampoo, so that it can increase its sales and market share in the shampoo
range.

Facts in the case

Hair-N- Shine is growing by 18 Percent in most of the developing countries whereas in India
it is 11 Percent. Shampoo market in India is growing at 17 Percent whereas the S&S
shampoo range is growing by 14 Percent.

Problem Statement
1. Last financial year (2016) the total revenue is 230 Million and the company is
targeting 275 million in the current year (2017).
2. Predict the sales growth of new product and revenue from the new product in 2017,
assuming the total revenue as 275 Million.

Solution 1
For the above problem we use different sales forecast method to predict the estimated
sales revenue as 275 million using below methods,
 Unitary Method
 Trend Forecasting
 Forecast by Comparing Last year
 Moving Average

Over all the total sales as to grow from 11 % (in 2016) to 19.57 % (in 2017) to attain a sales
target of 275 Million.

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Unitary Method

In this method we assume the sales growth of all the zone as to same % to yield a sales
target of 275 Million.

Interpretation
 According to this method the estimated growth % in each zone is 19.57%.
 This assumption will not be correct as each zone as a different sales criteria.

Trend Forecast Method

In this method we estimate the sales target of 275 Million using trend analysis of each zone
and further scaling it to the desired estimation.

According to the trend forecast method, overall sale will be 249.11 Million with an annual
growth rate of 7.67 % but our target is 275 Million, so we scale the total sales to 275 million.
By scaling, growth rate from trend forecast should be scaled by 10.39 % to achieve the
target of 275 Million.

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Zonal wise trend prediction using trend forecast,

Interpretations
 Trend forecast method is comparatively better method than that of unitary method.
 Estimated growth is different for all the zones.

Forecast by Last Year

In this method we estimate the sales target of 275 Million using last year growth change of
each zone with respect to the overall growth change and further scaling it to the desired
estimation.

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Interpretations
 This method will predict the best sales because the sales forecasting is based on
previous year, even if there is an economic or political change, this method predicts
the nearest sales.

Moving Average

In this method we estimate the sales target of 275 Million using moving average of growth
change of each zone for three years and further scaling it to the desired estimation.

Sales target of 254.92 million is predicted using moving average method for 2017 with an
annual growth rate of 10.83%, we further scale the predicted sales to 275 million, so that
we scale each and every zone final moving average annual growth rate by 7.88%.

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Interpretations
 With the moving average the sales target can be estimated closely.
 It gives annual growth rate in each zone which might be close to the exact figures.

Solution 2

For the new product, we use different sales forecast method to predict the estimated sales
revenue as 275 million using below methods,
 Unitary Method
 Trend Forecasting
 Moving Average

Unitary Method

 Citrus Paribus, Keeping the revenue from all the pack and size same, no change in
growth, new product to have a maximum contribution.
 New Product Contribution = Estimated Sales - Predicted Sales

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  New Product Contribution = 275 - 230 = 45 mn

Interpretations
 In unitary method keeping every other product constant by using citrus paribus, we
predict the sale of tube pack as 45 Million with growth rate of 19.57% and revenue
contribution as 16.36
 But according to this method contribution and growth becomes insignificant. We
generally avoid this method.

Trend Forecast Method

In this method we estimate the sales target of 275 Million using trend analysis of each zone
and further scaling it to the desired estimation. According to the trend forecast method,
overall sale will be 249.11 Million with an annual growth rate of 7.67 % but our target is 275
Million, so we scale the total sales to 275 million. By scaling, growth rate from trend forecast
should be scaled by 10.39 % to achieve the target of 275 Million.

Citrus Paribus, Keeping 7.67 % increase in contribution to revenue and % growth for all
products, calculating the target contribution for tube with 10.39 % Growth.

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Interpretations
 Using this method , tube growth will be 10.39% for 2017 with a total revenue
contribution of 27.35 Million

Moving Average

 Using Moving Average Method, we found actual growth rate for 2017 is 10.83%
and Sale will be 254.92 mn.
 But the estimated sales as to be 275 mn and growth rate as to be 19.57 % we are
scalling predicted sales by the change in growth.
 New Product Growth = (275 -254.92)/254.92 = 20.8 Million
 New Product Growth % = 7.88%

Interpretations
 Using this method , tube growth will be 7.88% for 2017 with a total revenue
contribution of 20.08 Million
 This method predicts the growth % and Contribution % close to the exact values.

Calculation
Sales forecasting calculation are made in the below attached document. Kindly open the
document for the reference

N.S.Aswin.xlsx

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 Martin Packaging Company

Martin packaging company faced a task of evaluating the marketing and sales strategy
imputations of the proposed new method of using standard cost in budgeting sales costs.
Hannibal had two sales force one selling in major urban areas to soft bottles only and
another selling in all other markets to a broader group of bottlers.

Facts in the case

In the past accounting department had estimated by adding up the total selling cost in past
months and dividing the total number of units of products being sold. Selling expenses per
dollar of sales for the thirty people in the non-urban sales force were higher than for the ten
urban sales people.

Problems in the case

Company faces a continuing problem in the budgetary process in estimating the various
elements in selling cost.

Solutions

1. Explain why the new budget standard costs might be fairly accurate, yet vary from
previous budget estimates.

In the old technique the relationship between urban and non-urban areas are not
calculated properly and also had many issues in estimating the selling cost with
previous budget estimates. In the new standard cost embraced technique, a lot of
standard expenses are set that took into account varieties as indicated by level of
urbanization and size of client. This computation considered various expenses in the
two areas consequently giving better outcomes. Standard costs of the manufacturing
activities will be recorded in the inventories and the cost of goods sold accounts.
Standard costs are often an integral part of a manufacturer's annual profit plan and
operating budgets. Standard costs are more accurate than average costs that can be
flexible as per customer base and urbanization.
 It can gain greater cost control by setting standards for each type of cost
incurred and then highlighting exceptions or variances. Variances provide a
starting point for judging the effectiveness of managers in controlling the
costs for which they are held responsible.
 More useful information for managerial planning and decision making, When
management develops appropriate cost standards and succeeds in
controlling production costs, future actual costs should be close to the

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 standard. A standard cost system can be valuable for top management in
planning and decision making.
 A standard cost system may lead to cost savings. The use of standard costs
may cause employees to become more cost conscious and to seek improved
methods of completing their tasks.
 Standard costs can reduce clerical labour and expense by avoiding the
detailed record-keeping which is necessary when actual costs alone are used.

2. What are the limitations of attempting to use standard costs in budgeting selling
expenses?
 It is partly determined on the basis of past experience and partly on the basis
of forecast of future expenses.
 Workers do not always report all exceptions or variances. If management
only investigates unusual variances, workers may not report negative
exceptions to the budget or may try to minimize these exceptions to conceal
inefficiency. Workers who succeed in hiding variances diminish the
effectiveness of budgeting.
 Determining the materiality limits of the variances may be controversial. The
management of each business has the responsibility for determining what
constitutes a material or unusual variance.
 The standard costing system controls the operating part of an organization
only as it ignores the other items like quality, lead-time, service, customer
satisfaction and so on.
 Standard costs strategy does not consider the changing expense while
figuring spending plan. Along these lines, the varieties were not appropriately
recorded.
 The business accepts the possibility of obsolescence in exchange for the
benefits standard cost provides, such as efficiency and cost-effectiveness.

3. How can George Hannibal explain the standard cost method to his salesforce, so as
to obtain their expectance of the proposed new method?

Hannibal should make sure that he keeps them motivated to effectively report the
units manufactured and make sure they don’t miss out on regular updates. He can
give its salesforce a legitimate correlation of both the old and new strategy where
the realities like poor spending estimation and powerlessness of the business group
to accomplish targets. He can also explain his team, how standard cost would make
performance evaluation system transparent and easy for the sales force. A standard
cost requires the full participation of all management levels and employees. He can
also educate his salesforce about the reduction in inventory management.

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4. Evaluate Hannibal’s claim that selling expenses change so rapidly that standard
costs would always be out of date.

Hannibal’s claim that selling expenses change rapidly, because a chaos will be
created when standard cost are implemented because all the participants have to
work honestly and work with dedication.

Average costing is actually not a viable option considering the difference in products
and difference in selling regions. Thus the selling expense will be difficult to estimate
and this will lead to a bad management.

Selling expenses take the following into account,

 Salaries and wages
 Overhead Cost and Manufacturing cost
 Cost of raw material
 Rent for warehouse, logistics and show rooms

A standard cost system may lead to cost savings. The use of standard costs may
cause employees to become more cost conscious and seek improved methods to
complete their tasks. Only when employees become active in reducing costs can
companies really become successful in cost control. Thus standard cost method will
not be out of date as all these expense do not change rapidly.

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