Dragon Bathroom Fittings

Dragon Bathroom Fittings (DBF) specializes in chrome plated bath fittings such as showers,
soaps stand, decorative taps, cloth hangers and pipe fittings. DBF is a five-decade old firm
with factory and warehouse in Coimbatore, Tamil Nadu. In 2009, the firm had a sales
turnover of about Rs.75 Cr. The firm employs about 300 workers at its factory and another 50
in its salesforce spread all over the country. DBF has been expanding rapidly over the past
decade and plans to double its sales turnover in next five years.
DBF produces about fifty different products under its brand name and sells through multi-
brand distributors. The company has a strong presence in Tamil Nadu and parts of Kerala, but
is not well represented in other states of India, especially in North India. DBF has a
distributor in almost all cities with population of more than 0.5 million and in smaller cities
of Tamil Nadu and Kerala. The company has recruited 40 salespeople and 5 supervisors to
manage the sales function. Each salesperson looks after 10-20 distributor outlets and each
sales supervisor manages 8-10 salesperson in a region. DBF offers a very high 40% margin to
distributors, which is way above the industry standard of 20-25%. This acts as an incentive
for distributor to recommend DBF products to customers who are often plumbers and
architects. Despite such high returns, most of the distributors are not committed to the
company. Distributors have to protect their own requirements of attracting customers by
stocking other well-known brands. These brands typically have a faster turnover compared to
DBF.
The biggest problem facing DBF is the lack of a credible and purposive channel information
system. Through the firm receives a constant stream of orders from distributors, the company
often has to face stock-outs for most of its product variants. Since the company has about 50
different SKUs and more than 600 distributors, it is very difficult to achieve a hundred
percent fill rate for its products. This creates problems with the distributors, since many of
them end up getting far fewer numbers of products that they have ordered. Problem also
occur with pricing of the product. The company follows a freight absorption pricing method
with the distributor not being charged for the transport. However, with the transportation cost
increase, DBF ends up revising its prices almost once in very 2-3 months, which creates
confusion in the system.
At present, DBF has a sales information system at the central office which is crudely linked
to the production system. Sales are recorded based on the invoice raised from accounts
department. This is fed to the sales department which shares this with the production
department. This is compared to the sales of a similar product last month to develop
production plans. Raw material procurement is not linked to sales and there have been rare
instances when raw material was found to be short during a busy production month. The
middle management monitors this activity to compare the sales and production figures with
their quarterly targets. DBF does not analyze sales per distributor, although the accounts
department while raising an invoice for each distributor could, if they wanted to develop such
a system.
-What are the biggest drawbacks of the present system?
-Design / propose a channel information system considering the constraints DBF faces.