MK0010-Sales Distribution & Supply Chain Management-Fall-10-Solved

8/8/2019 MK0010-Sales Distribution & Supply Chain Management-Fall-10-Solved

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often developing strong mutual trust and rapport with subordinates. Leadership styles vary, buteffective leaders are adept at initiating structure that is, organizing and motivating employees,setting goals, enforcing rules, and defining expectations. In addition to leading the sales force inbusiness results, sales managers are also expected to lead by example in encouraging ethicalbehavior within the sales force. Salespeople are continually confronted with ethical dilemmas.Sales managers use a variety of tools in their efforts to motivate salespeople to work moreefficiently and effectively.125) Goal directed effort:There are many techniques that have proved to be effective motivators, including sales meetings,quotas, sales contests, and recognition awards. The most powerful motivator for salespeople isoften a well-designed compensation package. Money is an important consideration for attractingand motivating people to work hard. A key task for sales managers is to devise an effective mix of salary, bonuses, commissions, expenses, and benefits without putting the firms profitability in

jeopardy.

16) Evaluate the performance of the sales force:The final step in the sales management process is to evaluate the performance of the sales forceand develop the skills of their people. This involves analyzing sales data by account, territory, andproduct line breakdowns. It also means reviewing selling costs and measuring the impact of salesforce activities on profits.

b. Define sales quotas with 2 examples.

Ans.: Sales QuotasSales quotas are a way of life for the sales force. All activities of the sales force revolve aroundthe fulfillment of sales quotas. Sales quotas are targets assigned to sales personnel. They signifythe performance expected from them by the organization. Sales quotas help in directing,evaluating and controlling the sales force. They form an indispensable tool for sales managers tocarry out sales management activities. Sales quotas are prepared on the basis of sales forecastsand budgets. Sales quotas serve various purposes in organizations.They provide targets for sales personnel to achieve & also act as standards to measure salesforce performance and help motivate the sales force. Compensation plans are invariably linked toquotas. The commission and bonuses given to sales persons are based on their meeting quotasset for them. The four categories of sales quotas widely used are:

Sales volume quotas, Expense quotas, Activity quotas and Profit quotas.Sales quota should be fair, challenging yet attainable, rewarding, easy to understand, flexible andmust satisfy management objectives.It must also help in the coordination of sales force activities. Setting motivating and easy to

understand quotas is essential to obtain the cooperation of the sales force. Various methods areused to set sales quotas, among which, quotas based on sales forecasts and market potential arethe most common. Skilful administration by sales managers is required for effectiveimplementation of quotas. Convincing salespeople about the fairness and accuracy of quotashelps the sales management to successfully implement quotas.Sales quotas have certain limitations such as being time consuming, difficulty in comprehending if complicated statistical calculations have been used and focusing on attaining sales volumes atthe cost of ignoring important non-selling activities. Quotas may reduce risk-taking among salespersonnel and may influence them to adopt unethical selling practices. With changes in thecompetitive environment and variations in customer expectations, many companies have started


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developing compensation plans that are increasingly based on non-traditional aspects, therebyreducing dependency on quotas.The process of establishing normal and reasonable sales quotas can vary greatly as a function of the business, industry, type and size of the sales organization, and product and/or service beingsold. However, there can often be a great deal of commonality in the approach to this importantsales-generating tool.Q.2 Just a few months back, Laker Pvt. Ltd. has expanded its product mix. Themanagement has decided to set up new objectives for its distribution system. Themanagement also wants to change the channel design and network according to the newobjectives. Please advice the management of Laker Pvt. Ltd. on how to go about it.

Ans.: Designing Marketing Channels1) Factors considered for designing Distribution Channels:Like most marketing decisions, a great deal of research and thought must go into determininghow to carry out distribution activities in a way that meets a marketers objectives. The marketer must consider many factors when establishing a distribution system. Some factors are directlyrelated to marketing decisions while others are affected by relationships that exist with membersof the channel.The following are the key factors to consider when designing a distribution strategy. We cangroup these into two main categories:

Marketing decision issues and Channel relationship issues.

Marketing Decision Issues: Distribution strategy can be shaped by how decisions are made inother marketing areas as under:121) Product IssuesThe nature of the product often dictates the distribution options available especially if the productrequires special handling. For instance, companies selling delicate or fragile products, such asflowers, glass articles, etc., look for shipping arrangements that are different than those sought for companies selling extremely tough or durable products, such as steel rods.12

32) Promotion Issues4Besides issues related to physical handling of products, distribution decisions are affected bythe type of promotional activities needed to sell the product to customers. For products needingextensive salesperson-to-customer contact (e.g., automobile purchases) the distribution optionsare different than for products where customers typically require no sales assistance (i.e., breadpurchases).123) Pricing IssuesThe desired price at which a marketer seeks to sell their product can impact how they choose todistribute. The inclusion of resellers in a marketers distribution strategy may affect a productspricing since each member of the channel seeks to make a profit for their contribution to the saleof the product. If too many channel members are involved the eventual selling price may be toohigh to meet sales targets in which case the marketer may explore other distribution options.124) Target Market IssuesA distribution system is only effective if target customers can obtain the product. Consequently, akey decision in setting up a channel arrangement is for the marketer to choose the approach thatreaches target customers in the most effective way possible. The most important decision withregard to reaching the target market is to determine the level of distribution coverage needed toeffectively meet customers needs. Distribution coverage is measured in terms of the intensity bywhich the product is made available. For the most part, distribution coverage decisions are of


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most concern to consumer products companies, though there are many industrial products thatalso must decide how much coverage to give their products.The marketer must take into consideration many factors when choosing the right level of distribution coverage. However, all marketers should understand that distribution creates costs tothe organization. Some of these expenses can be passed along to customers (e.g., shippingcosts) but others cannot (e.g., need for additional salespeople to handle more distributors). Thus,the process for determining the right level of distribution coverage often comes down to ananalysis of the benefits (e.g., more sales) versus the cost associated with gaining the benefits.

1Levels of distribution coverage: There are three main levels of distribution coverage masscoverage, selective and exclusive.231) Mass Coverage The mass coverage (also known as intensive distribution) strategyattempts to distribute products widely in nearly all locations in which that type of product is sold.This level of distribution is only feasible for relatively low priced products that appeal to very largetarget markets (e.g., FMCG products). A product such as Coca-Cola is a classic example since itis available in a wide variety of locations including grocery/provision stores, convenience stores,vending machines, hotels and many, many more. With such a large number of locations sellingthe product the cost of distribution is extremely high and must be offset with very high sales

volume.452) Selective Coverage - Under selective coverage the marketer deliberately seeks to limit thelocations in which this type of product is sold. The logic of this strategy is due to the size andnature of the products target market. Products with selective coverage appeal to smaller morefocused target markets (e.g., air conditioners) compared to the size of target markets for massmarketed products. Consequently, because the market size is smaller, the number of locationsneeded to support the distribution of the product is fewer.673) Exclusive Coverage - Some high-end products target very narrow markets that have arelatively small number of customers. These customers are often characterized asdiscriminating in their taste for products and seek to satisfy some of their needs with high-quality, though expensive products. Additionally, many buyers of high-end products require a high

level of customer service from the channel member from whom they purchase. Thesecharacteristics of the target market may lead the marketer to sell their products through a veryselect or exclusive group of resellers. Another type of exclusive distribution may not involve high-end products but rather products only available in selected locations such as company-ownedstores. While these products may or may not be higher priced compared to competitive products,the fact those these are only available in company outlets give exclusivity to the distribution.While these three distribution coverage options serve as a useful guide for understanding howdistribution intensity works, the advent of the Internet has brought into question the effectivenessof these schemes. For all intents and purposes all products available for purchase over theInternet are distributed in the same way - mass coverage. So a better way to look at the threelevels is to consider these as options for distribution coverage of products that are physicallypurchased by a customer (i.e., walk-in to purchase).

Q.3. A. Differentiate between direct and indirect distribution channels. Also mention theparties involved in direct and indirect channels.12Ans.: Difference between Direct distribution & indirect distribution3Direct Distribution System :


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With a direct distribution system the marketer reaches the intended final user of their product bydistributing the product directly to the customer. That is, there are no other parties involved in thedistribution process that takes ownership of the product. The direct system can be further dividedby the method of communication that takes place when a sale occurs. These methods are:11) Direct Marketing Systems With this system the customer places the order either throughinformation gained from non-personal contact with the marketer, such as by visiting the

marketers website or ordering from the marketers catalog, or through personal communicationwith a customer representative who is not a salesperson, such as through toll-free telephoneordering.22) Direct Retail Systems This type of system exists when a product marketer also operatestheir own retail outlets. Bata Shoes is an example of this strategy.33) Personal Selling Systems The key to this direct distribution system is that a person whosemain responsibility involves creating and managing sales (e.g., salesperson) is involved in thedistribution process, generally by persuading the buyer to place an order. While the order itself may not be handled by the salesperson (e.g., buyer physically places the order online or byphone) the salesperson plays a role in generating the sales.4) Assisted Marketing Systems Under the assisted marketing system, the marketer relies onothers to help communicate the marketers products but handles distribution directly to thecustomer. The classic example of assisted marketing systems is eBay, which helps bring buyers

and sellers together for a fee. Other agents and brokers would also fall into this category.02) Indirect Distribution System :With an indirect distribution system the marketer reaches the intended final user with the help of others. These resellers generally take ownership of the product, though in some cases they maysell products on a consignment basis (i.e., only pay the supplying company if the product is sold).Under this system intermediaries may be expected to assume many responsibilities to help sellthe product.

Indirect methods include:11) Single-Party Selling System - Under this system the marketer engages another party whothen sells and distributes directly to the final customer. This is most likely to occur when theproduct is sold through large store-based retail chains or through online retailers, in which case it

is often referred to as a trade selling system.22) Multiple-Party Selling System This indirect distribution system has the product passingthrough two or more distributors before reaching the final customer. The most likely scenario iswhen a wholesaler purchases from the manufacturer and sells the product to retailers.33) Multi-channel or Hybrid System In cases where a marketer utilizes more than onedistribution design the marketer is following a multi-channel or hybrid distribution system. Manyelectronic appliance companies like Videocon or LG follow this approach as their distributiondesign includes using a direct retail system by selling in company-owned stores, a directmarketing system by selling via direct mail/internet, and a single-party selling system by sellingthrough general appliance stores (they also use other distribution systems).

The multi-channel approach expands distribution and allows the marketer to reach a wider market. However, the marketer must be careful with this approach due to the potential for channel

conflict.

b. Distinguish between sales forecasting and sales budget with examples.Ans.: Sales Forecasting & Sales Budgeting:


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Creating a budget doesn't have to be a complicated or time-consuming task. Actually, in thebeginning, it's best to keep things simple. The key is to determine how much the company willspend and earn in any given year, and then use that figure to project how it wants to grow insubsequent years.If it is a running business, it's simply a matter of digging through some records to see where themoney went, and deciding where the management actually wants it to go. If it is a new company,the management needs to do some homework and make realistic assumptions about thebusiness. Either way, a budget is simply a tool that allows them to put the money where it canbest be used.To get started, the management should have following data:

Expected sales of products/services Expected Prices of goods or services Estimated cost to produce these products Estimated operating expenses Estimated taxes Expected borrowings & cost of such borrowingsThe above data will form the basis of the overall budget and forecast.In the income category, one should conservatively estimate how much sales revenue is expectednext year. For this it is necessary to look at what sales were made last year, and extrapolate andforecast from that. New business owners without this kind of history should try to determine howmuch money their competitors gross, and use that as a guide.As far as expenses go, all sales related expenses including advertising, automobile expenses,insurance, rent, taxes, phone, mobiles, utilities, equipment, payroll, commissions, incentives, etc.

in other words, any and all sales related expenses, should be listed out whether they are beingincurred now or whether the company may incur them in the future.Once the projected income and expenses are listed down on paper, it will be known as to exactlyhow much revenue & profit is needed every month to keep things afloat, and how much will beleft over for extra expenses. It will be far less tempting to spend money on business expensesthat aren't part of the plan. And that's really what a budget is for to ensure that the expensesaren't more than the income.

Q.4. You are a sales manager in ABC firm. You have taken some interviews and short-listed a few candidates. How will you select the right candidate for the sales job? Onceyou have made the selection, what would be your next step in order to make the newrecruits effective in their sales jobs?

Ans.: Selecting of Right Sales PersonnelSelection of the right sales people involves the following steps:1) Researching Candidates:This covers the early stages of the selection process - often called pre-selection. The recruitmentcampaign would have attracted a pool of applicants from which selectors can make their choice.

If a job analysis has been conducted, the criteria or competences, which are deemed necessary,have been identified. These may be well defined and focused on experience and skills, as in the'right person' approach; or general and related to education, intellect and personality for the'cultural fit' and 'flexible person' models.122) Application letters/CVs/resumes:These are typically used for initial or speculative applications. The first stage in the application willrequire a resume or a CV.1


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23) Application forms (blanks):Both letters and CV/resumes present a problem for a large recruitment programme: applicantsmay not provide all the relevant information and what there is will be presented in different ways.Comparison of applicants is easier if data is presented in a standard application form (blank).124) Interviewing:

The interview is a social ritual, which is expected by all participants, including applicants. It issuch a 'normal' feature of filling vacancies that candidates for a job would be extremely surprisednot to be interviewed at least once. Despite the existence of alternative methods of selection mostemployers regard the formal selection interview as the most important source of evidence inmaking the final decision. A selection interview can be neatly defined as a conversation with apurpose.125) Preparation for interviews:Training for interviewers stresses the need to put the candidate at ease, have a comfortableenvironment, etc. The interviewer should ensure that relevant information (e.g. application forms)is read beforehand - it is surprising how many interviewers are found reading such material for the first time during the interview. It is necessary to improve the interpersonal skills of theinterviewer and the interviewer's ability to make decisions without influence from non-job related

information. Interviewers should be trained to:0 1) Avoid asking questions unrelated to the job1 2) Avoid making quick decisions about an applicant2 3) Avoid stereotyping applicants

4) Avoid giving too much weight to a few characteristics.5) Try to put the applicant at ease during the interview6) Communicate clearly with the applicant7) Maintain consistency in the questions asked

Sales Personnel Training Programmes: The primary function of professional sales is togenerate and close leads, educate prospects, fill needs and satisfy wants of consumersappropriately, and therefore turn prospective customers into actual ones. The successfulquestioning to understand a customer's goal and requirements relevant to the product, the further creation of a valuable solution by communicating the necessary information that encourages abuyer to achieve their goal at an economic cost is the responsibility of the salesperson. A goodsales person should never miss sell or over evaluate the customers requirements.The sales personnel training programmes will include the following areas:11) Market information:This information is about customer profile, market updates, and computer integratedmanufacturing applications, etc12) Sales Process:This covers how to deal in the situation of conflicts with customer, coaching on undesirablebehavior, supplement skills developed during live courses, etc.13) Product information:This includes information such as, product usage, applications, system description, productdescription, comparison with competitors products, etc

14) Policies and procedures:2This area covers information about sales contests; incentive plans on achieving targets, annualbonuses, winners receiving the best salesperson award to motivate the sales force, etc.

Q. 5 a. What is logistics? What is its importance?


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Ans.: Origin and Definitions of Logistics:The term "logistics" originates from the ancient Greek "logos" means ratio, word, calculation,reason, speech, and oration". Logistics is considered to have originated in the military's need tosupply themselves with arms, ammunition and rations as they moved from their base to a forwardposition. In ancient Greek, Roman and Byzantine empires, there were military officers with thetitle Logistics- who were responsible for financial and supply distribution matters."Logistics means having the right thing, at the right place, at the right time."Logistics, the synonymous term of physical distribution, involves planning, implementing, andcontrolling the physical flow of materials from the point of origin to the point of the consumer at aprofit. The role of logistics is to get the right amount of product to the right places in the right time.Logistics is defined as a business-planning framework for the management of material, service,information and capital flows. It includes the increasingly complex information, communicationand control systems required in today's business environment.

Logistics the process of planning, implementing, and controlling the efficient, effective flow andstorage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirementsLogistics is the science of planning and implementing the acquisition and use of the resourcesnecessary to sustain the operation of a system.The two logistics activities vital to order filling are the communication of customer order information to the order filling area and the actual process of picking out of the inventory the itemsordered. In the order information stage, communication can reduce errors in transferring order information from the order to the warehouse receipt. Communication with customers is vital tomonitoring service levels relating to dependability.Customer communication is essential to design of logistics service levels. The communicationchannel must be constantly open and readily accessible to all customers. Without customer contact, the logistics manager is unable to provide the most efficient and effective service.Communication must be a two-way process. The seller must be able to transmit vital logisticsservice information to the customer. In addition many customers request information on thelogistics status of shipments. The customer who needs information to plan operations expects thelogistics manager to provide answers on a timely basis.

Importance of Logistics : The logistics function includes sourcing and procurement, productionplanning and scheduling, packaging and assembly, and customer service. It is involved in alllevels of planning and execution strategic, operational and tactical. Logistics management is anintegrating function, which coordinates and optimizes all logistics activities, as well as integrateslogistics activities with other functions including marketing, sales manufacturing, finance andinformation technology. Logistics is much more and much wider than mere physical handling of goods. Logistics involvesseveral other functions such as purchasing, plant location, plant layout, etc., and even thedisposal of wastes. It covers astonishingly varied professional disciplines. They are:11) Facility location22) Planning33) Forecasting and order management44) Transportation: the mode and the route55) Inventory management: all inventories

66) Warehousing77) Protective packaging

Raw material and finished products had always to be moved, though on a small scale. Thingsbegan changing with the advance in transportation. Population began moving from rural to urbanareas and to business centers. No longer did people live near production centers, nor didproduction take place near residence centers. The geographical distance between the productionpoint and consumption point increased.Since the early 1990's, the business scene has changed. The globalization, the free market andthe competition has required that the customer gets the right material, at the right time, at the


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Q. 6. Examine the recent trends in sales management.

1Ans.: Recent Trends in Sales Management:1) WholesalingWholesaling refers to the activities involved in selling to organizational buyers who intend to either resell or use for their own purposes. A wholesaler is an organization providing the necessarymeans to: 1) allow suppliers (e.g., manufacturers) to reach organizational buyers (e.g., retailers,business buyers), and 2) allow certain business buyers to purchase products which they may notbe able to purchase otherwise.According to the 2002 Census of Wholesale trade, there are over 430,000 wholesale operationsin the United States.While many large retailers and even manufacturers have centralized facilities and carry out thesame tasks as wholesalers, we do not classify these as wholesalers since these relationshipsonly involve one other party, the buyer. Thus, a distinguishing characteristic of wholesalers is thatthey offer distribution activities both for a supplying party and for a purchasing party. For our discussion of wholesalers we will primarily focus on wholesalers who sell to other resellers suchas retailers.2) RetailingThe term retailing refers to the activities involved in selling commodities directly to consumers.DefinitionRetailing consists of the sale of goods or merchandise for personal or household consumptioneither from a fixed location such as a department store or kiosk, or from a fixed location andrelated subordinated services.Defined here as sales of goods between two distant parties where the deliverer has no directinterest in the transaction, the earliest instances of distance retailing probably coincided with thefirst regular delivery or postal services. Such services would have started in earnest once manhad learned how to ride a camel, horse, etc.Why?When individuals or groups left their community and settled elsewhere, some missed foodstuffsand other goods that were only available in their birthplace. They arranged for some of thesegoods to be sent to them. Others in their newly adopted community enjoyed these goods anddemand grew. Similarly, new settlers discovered goods in their new surroundings that theydispatched back to their birthplace, and once again, demand grew. This soon turned into aregular trade. Although such trading routes expanded mainly through the growth of travelingsalesmen and then wholesalers, there were still instances where individuals purchased goods atlong distance for their own use. A second reason that distance selling increased was through war.As armies marched through territories, they laid down communication lines stretching from their home base to the front. As well as garnering goods from whichever locality they foundthemselves in, they would have also taken advantage of the lines of communication to order goods from home.In commerce, a retailer buys goods or products in large quantities from manufacturers or

importers, either directly or through wholesalers, and then sells individual items or smallquantities to the general public or end-user customers, usually in a shop, also called a store.Retailers are at the end of the supply chain. Marketers see retailing as part of their overalldistribution strategy.Shops may be on residential streets, or in shopping streets with few or no houses, or in shoppingcenters. Shopping streets may or may not be for pedestrians only. Sometimes a shopping streethas a partial or full rooftop to protect customers from precipitation. Online retailing, also known ase-commerce, is the latest form of non-shop retailing.Shopping generally refers to the act of buying products. Sometimes, this is done to obtainnecessities such as food and clothing; sometimes, it is done as a recreational activity.


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Recreational shopping often involves window shopping (just looking, not buying) and browsingand does not always result in a purchase.

Assignment Set 2

Q.1 Give a note on demand management, demand forecasting and MRP.

Ans.: Demand management, demand forecasting and MRP.In this era of competition among supply chains, the success of a corporation is increasinglydependent on management's ability to integrate the company's networks of businessrelationships. Supply chain management has been defined as the integration of key businessprocesses, from raw-material suppliers through end users that provide products services andinformation.The focus of supply chain management must evolve in response to changing businessenvironments and evolving product life cycles. Different interactions among participants arerequired during each phase of the product life cycle, from inception through recycling. Thesupplies chains for products in new markets must be flexible to respond to wide fluctuations indemand (both in quantity and product mix). Products in mature, stable markets require supplychains that can reliably deliver products at low cost. Thus, effective supply chain managementmust be responsive to these changing conditions to ensure that the supply chain evolvesaccordingly.For example, marketing excellence used to be the primary source of Procter & Gamble's (P&G's)dominance of the consumer products industry. However, as P&G expanded its product andservice offerings in response to market opportunities, the increased complexity of these offeringscreated difficulties in meeting the needs of retail partners and customers. Traditional marketingstrategies involving in-store sales and price promotions created great variations in productdemand. To meet heavy short-term marketing-induced peaks in demand, P&G invested in hugemanufacturing capacities, inventories, warehouses, and logistics capabilities.In response to these problems, P&G modified its supply chain focus and remade itself through aseries of innovative initiatives. Working both internally and with suppliers and customers, thecompany created a heralded partnership with Wal-Mart, virtually eliminated price promotions, andstreamlined its logistics and continuous replenishment programs. These initiatives reducedvariations and uncertainties in demand, thereby reducing the need for surge production capacitiesand large inventories. Thus, by evolving their primary supply chain focus from marketing toproduction, inventories, and logistics in response to changing business requirements, P&G wasable to reduce costs, meet customer demand, and build strong, coordinated relationships withretail partners and customers.


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Basic Approach to Demand ForecastingThe following basic, six step approach helps an organization perform effective forecasting:1. Understand the objective of forecasting2. Integrate demand planning and forecasting throughout the supply chain3. Understand and identify customer segments4. Identify the major factors that influence the demand forecast5. Determine the appropriate forecasting technique6. Establish performance and error measures for the forecastEach organization must use all six steps to forecast effectively.121) Understand the Objective of ForecastingThe objective of every forecast to support decisions that are based on the forecast, so animportant first step is to clearly identify these decisions. Examples of such decisions include howmuch of a particular product to make, how much to inventory, and how much to order. All partiesaffected by a supply chain decision should be aware of the link between the decision and theforecast. For example, if Wal-Mart plans a promotion in which it will discount detergent during themonth of July, this information must be shared with the manufacturer, the transporter, and othersinvolved in filling demand as they all have decisions to make that will be affected by the forecastof demand. All parties should come up with a common forecast for the promotion and a sharedplan of action based on the forecast. Failure to make these decisions jointly may result in either too much or too little product in various stages of the supply chain.

Identify Major Factors that Influence the Demand Forecast Next, a firm must identify major factors that influence the demand forecast. A proper analysis of these factors is central todeveloping an appropriate forecasting technique. The main factors influencing forecasts aredemand, supply, and product-related Phenomena. On the demand side, a company mustascertain whether demand is growing, declining, or has a seasonal pattern. These estimatesmust be based on demand-not sales data. For example, a supermarket may have promoted acertain brand of cereal in July 2002. As a result, the demand for This cereal may have been high while the demand for others, comparable cereal brands was lowin July.The supermarket should not use the sales data from 2002 to estimate that demand for this brandwill be high in July 2003, because this will only be the case if the same brand is promoted againin July 2003 and other brands respond as they did the previous year. When making the demandforecast, the supermarket must understand what the demand would have been in the absence of promotion activity and how demand is affected by promotions. A combination of these two pieces


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of information will allow the supermarket to forecast demand for July2003 given the promotionactivity planned for that year.On the supply side, a company must consider the available supply sources to decide on theaccuracy of the forecast desired. If alternate supply sources with short lead times are available, ahighly accurate forecast may not be especially important. However, if only a single supplier with along lead-time is available, an accurate forecast will have great value.On the product side, a firm must know the number of variants of a product being sold andwhether these variants substitute for or complement each other. If demand for a productinfluences or is influenced by demand for another product, the two forecast are best made jointly.For example, when a firm introduces an improved version of an existing product, it is likely thatthe demand for the existing product will decline because new customers will buy the improvedversion. While the decline in demand for the original product would not be indicated by historicaldata, the historical demand is still useful in that it allows the firm to estimate the combined total for the two versions. Clearly, demand for the two products should be forecast jointly.122) Determine the Appropriate Forecasting TechniqueIn selecting an appropriate forecasting technique, a company should first understand thedimensions that will be relevant to the forecast. These dimensions include geographical area,product groups, and customer groups. The company should understand the difference in demandalong each dimension. A firm would e wise to have different forecasts and techniques for eachdimension. At this stage, a firm selects an appropriate forecasting method from the four methodsdiscussed earlier-qualitative time series, casual, or simulation. As mentioned earlier, using acombination of these methods is often effective.At the end of the sales season, the company must compare actual demand to forecasted demandto estimate the accuracy of the forecast. The observed accuracy should be compared with thedesired accuracy and the resulting gap should be used to identity corrective action that the mailorder company needs to take. In the next section, we begin by discussing the techniques for static and adaptive time series forecasting.

1) Time Series Forecasting Methods: The goal of any forecasting method is to predict thesystematic component of demand and estimate the random component. The systematiccomponent of demand data, in the most general form, contains a level, a trend, and a seasonalfactor. The systematic component may take a variety of forms, as shown following. Multiplicative: Systematic component =level x trend x seasonal factor Additive: Systematic component=level + trend +seasonal factor Mixed: systematic component= (level + trend) x seasonal factor the specific form of the systematic component applicable to a given forecast willdepend on the nature of demand. Companies may develop both static and adaptive forecastingmethods for each form.

2) Static Methods : A static method assumes that the estimates of level, trend, and seasonalitywithin the systematic component do not vary as new demand is observed. In this case, weestimate each of these parameters based on historical date and then use the same values for allfuture forecasts. In this section we discuss a static Forecasting method for use when demand hasa trend as well as a seasonal component. We assume that the systematic component of demandis mixed, that is,Systematic component= (level + trend) x seasonal factor.

A similar approach can be applied for other forms as well. We begin with a few basic definitions:L =Estimate of level at t=0(the depersonalized demand estimate during period t=0)T =Estimate of trend (increase or decrease in demand per period)S t =Estimate of seasonal factor for period tD t =Actual demand observed in period tF t =Forecast of demand for period tIn a static forecasting method, the forecast in period t for demand in period t + l is given asfollows:F t +l= [L + (t + l) T] S t + l


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We now describe one method for estimating the three parameters L, T, and S. As an example,we consider the demand for rock salt used primarily to melt snow and produced by Tahoe Salt.Tahoe Salts product is sold through a variety of independent retailers around the Lake Tahoearea of the Sierra Nevada Mountains. In the past, Tahoe Salt has relied on estimates of demandfrom a sample of their retailers but they have noticed that these retailers always overestimatedwhat they would purchase, leaving Tahoe (and even retailers) stuck with lots of excess inventory.After meeting with their retailers Tahoe has decided to produce a collaborative forecast. TahoeSalt now has data on the actual retail sales of their salt and they intend to work with the retailersto create a more accurate a more accurate forecast with this data. This is the quarterly demanddata for the last three years from this we observe that demand for salt is seasonal with demandincreasing from the second quarter of a given year to the first quarter of the following year. Thesecond quarter of each year has the lowest demand of all quarter in the year. Each cycle lastsfour quarters and the demand pattern repeats itself every year. There is also a growth trend in thedemand, with sales growing over the last three years. The company estimates that growth willcontinue in the coming in the coming year at historical rates. We now describe how each of thethree parameters-level, trend, and seasonal factors may be estimated. The following two stepsare necessary to making this estimation:11. Depersonalize demand and run linear regression to estimate level and trend.22. Estimate seasonal factors.

Sun Oil is considering two different plant sizes in each location. Low-capacity plants can produce10 million units a year whereas high-capacity plants can produce 20 million units a year as shownin Cells H4:H8 and J4:J8, respectively. High-capacity plants exhibit some economies of scale andhave fixed costs that are less than twice the fixed cost of a low-capacity plant as shown in cellsI4:I8. All fixed costs are annualized. The vice president would like to know what the lowest costnetwork should look like. Next, we discuss the capacitated plant location model, which can beused in this setting.

Q.2 a. Identify and evaluate the different inventory reduction and cycle reduction

strategies.

Ans.: Different inventory reduction and cycle reduction strategies. Supply chain strategies for those items to be purchased are:

1i) Many suppliersii) Few suppliersiii) Vertical integrationiv) Keiretsu networks andv) Virtual companies

The above strategies are briefly discussed in the following paragraphs:Many Suppliers : In this strategy, the supplier responds to the request for quotation sent by the

buyer indicating the demands and specifications of the items the buyer wants to purchase. Theorder is usually placed on the supplier whose bid or quotation is the lowest among the manysuppliers who have submitted their quotations. This strategy plays one supplier against another and the supplier has the burden of meeting the buyers demands. Although the buyers may usethe negotiation approaches with this strategy, there is no emphasis on long term partneringrelationship with the suppliers. The supplier holds the responsibility for maintaining the requiredtechnology, expertise and forecasting abilities as well as cost, quality and delivery competencies.Few Suppliers : In this strategy the buying firm rather than looking for short-term attributes suchas low cost, forms a long-term relationship with a few dedicated suppliers. Long-term suppliersare more likely to understand the broad objectives of the buying firm and the end customer. This


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approach has the advantage of creating value by allowing the suppliers to have economies of scale (because of bigger orders) and a learning curve , which will result in lower transactioncosts and lower production costs.Few dedicated suppliers are more committed to the buyer and may be willing to participate in JITsystem as well as provide innovations and technological expertise.Mutual trust between the buying firm and the few committed supplying firms may contribute to thealignment of organizational cultures of the two firms further strengthening the partnership.The disadvantage with this strategy is that with few suppliers, the cost of changing suppliers ishigh and both supplier and the buyer have the risk of becoming captive of the other. Further thebuyer has the risk of facing poor supplier performance.The buyer must also be concerned about trade secrets and suppliers who make alliances or jointventures with other buyers.Vertical Integration: Vertical integration means developing the ability to produce goods or services previously purchased or actually buying supplier or a distributor. Vertical integration canbe either forward integration or backward integration.When a firm purchases its supplier firms it is backward integration and when a firm purchases itswholesalers warehouses or owns its distribution network including retailing, it is forwardintegration. Also when manufacturer of components make the finished product, it amounts toforward integration.For firms with the necessary capital, managerial talent and required demand, vertical integrationmay provide substantial opportunities for cost reduction. Also advantages in inventory reductionand scheduling can be obtained by effectively managing vertical integration.For firms manufacturing products with purchased items representing a large part of the cost of sales, vertical integration can yield cost reduction, quality adherence and timely delivery.Keiretsu Networks: Keiretsu is a Japanese term used to describe suppliers who havebecome part of a company coalition. This approach is a middle ground between purchasing fromfew suppliers and vertical integration. In this approach, the manufactures often support their suppliers investment. Suppliers in the Keiretsu network are assured long-term relationships andtherefore they are expected to function as partners, providing technical expertise and stablequality products to the buying.Virtual Companies: Vertical integration has some severe limitations. The technological societycontinually demands more specialization that further complicates vertical integration. Similarly, afirm having its own department or division for everything may be too bureaucratic to be world-

class. On the other hand, another approach is to find flexible suppliers rather than letting verticalintegration lock an organization into business that it may not understand or be able to manage.Virtual companies that rely on variety of supplier relationships to provide services on demand.There are also known as hollow corporations or network companies .Virtual companies have fluid; moving organizational boundaries that allow them to create aunique enterprise to meet changing market demands. These relationships may provide a varietyof vendor services that include doing the pay role, hiring personnel, designing products, providingconsulting services, manufacturing components, conducting tests or Distributing products. The relationships may be short-term or long-term and may include thepartners, collaborators or able suppliers and sub-contractors. The advantages of virtualcompanies include specialized management expertise, low capital investment, flexibility andspeed. The result is efficiency and exceptionally lean performance. A traditional example of virtualorganization is apparel or readymade garments business in which the designers of clothes

seldom manufacture, rather they license the manufacture. The manufacturer may then rent thesewing machines and contract for labor. The result is an organization that has low overheads,remain flexible and can respond rapidly to the market.

Achieving Strategic Fit : This step ensures that what the supply chain does particularly well isconsistent with the targeted customers needs. The implied demand uncertainty representscustomer needs or the firms strategic position. The supply chain responsiveness represents thefirms strategy. In order to achieve strategic fit, the greater the implied demand uncertainty, themore responsive the supply chain should be. If the implied demand uncertainty from customers isincreasing, it is best served with increasing responsiveness from the supply chain. This


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relationship is represented by the Zone if strategic fit. To achieve complete strategic fit, acompany must consider all functional strategies within the value chain and it must ensure that allfunctions in the value chain have consistent strategies that support the competitive strategy. Allfunctional strategies must support the goals/objectives of the competitive strategy and all substrategies within the supply chain (such as manufacturing, inventory and purchasing) must alsoconsistent with the level of responsiveness of the supply chain. Firms with different locationsalong the responsiveness spectrum must have different functional strategies that support their responsiveness. A highly responsive supply chain must devote all its functional strategies toresponsiveness, whereas an efficient supply chain must focus all its functional strategies onefficiency. However it must be remembered that (i) there is no right supply chain strategyindependent of the firms competitive strategy and (ii) there is a right supply chain strategy for agiven competitive strategy of a firm.

b. What is the difference between level strategy and chase strategy?

Ans.: LEVEL STRATEGY.A level strategy seeks to produce an aggregate plan that maintains a steady production rateand/or a steady employment level. In order to satisfy changes in customer demand, the firm mustraise or lower inventory levels in anticipation of increased or decreased levels of forecastdemand. The firm maintains a level workforce and a steady rate of output when demand issomewhat low. This allows the firm to establish higher inventory levels than are currently needed.As demand increases, the firm is able to continue a steady production rate/steady employmentlevel, while allowing the inventory surplus to absorb the increased demand. A second alternativewould be to use a backlog or backorder. A backorder is simply a promise to deliver the product ata later date when it is more readily available, usually when capacity begins to catch up withdiminishing demand. In essence, the backorder is a device for moving demand from one period toanother, preferably one in which demand is lower, thereby smoothing demand requirements over time. A level strategy allows a firm to maintain a constant level of output and still meet demand.

This is desirable from an employee relations standpoint. Negative results of the level strategywould include the cost of excess inventory, subcontracting or overtime costs, and backorder costs, which typically are the cost of expediting orders and the loss of customer goodwill.

CHASE STRATEGY:A chase strategy implies matching demand and capacity period by period. This could result in aconsiderable amount of hiring, firing or laying off of employees; insecure and unhappyemployees; increased inventory carrying costs; problems with labor unions; and erratic utilizationof plant and equipment. It also implies a great deal of flexibility on the firm's part. The major advantage of a chase strategy is that it allows inventory to be held to the lowest level possible,and for some firms this is a considerable savings. Most firms embracing the just-in-timeproduction concept utilize a chase strategy approach to aggregate planning. Most firms find itadvantageous to utilize a combination of the level and chase strategy. A combination strategy

(sometimes called a hybrid or mixed strategy) can be found to better meet organizational goalsand policies and achieve their costs than either of the pure strategies used independently.

Q.3 a. What are the features of electronic channels? Give examples.

Ans.: Features of electronic channels :


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To be effective, the strategy eventually selected should clearly demonstrate advantages over andabove the alternatives. To do this effectively requires a sophisticated information base whichaddresses the interface between the macro issues of corporate and marketing strategies and thesupply chain support requirements, for which a strategy should be developed prior to theallocation of capital resources.Quality of informationThree issues that characterize the quality of information are;1i) The availability of the information required to the best possible decisions.2ii) The accuracy of the information and3iii) The effectiveness of the various means those are available to communicate neededinformations.

Logistics managers need to know more about information systems, technologies and their management. But unfortunately, they do not always have the information needed to makeeffective decisions.Often, information available to logistics managers may not be accurate and hence tends to causesub optimal management decision-making. Many firms use out-dated cost accounting andmanagement control systems. Such systems distort product cost information and do not producethe information that logistics managers need to make best decisions.

To be useful to managers, information needs to be communicated effectively. Information need tobe communicated in the language of the intended recipient to facilitate accurate perception of theinformation communicated. Effective communication requires knowledge of the recipient canperceive, what the person expects to perceive and what the person intends to do with what isperceived. Examples:

1. Bar coding,2. Electronic Data Interchange (EDI)3. XML (Extensible markup language),4. Data management,5. Imaging,6. Artificial intelligence/expert systems7. RF technology and8. Computers on board and satellite tracking,9. Intranet/Extranet,10. E-commerce.

b. Write a short note on vertical marketing systems.

Ans.: Vertical Marketing System:

A vertical marketing system (VMS) is one in which the main members of a distribution channelproducer, wholesaler, and retailerwork together as a unified group in order to meet consumer

needs. In conventional marketing systems, producers, wholesalers, and retailers are separatebusinesses that are all trying to maximize their profits. When the effort of one channel member tomaximize profits comes at the expense of other members, conflicts can arise that reduce profitsfor the entire channel. To address this problem, more and more companies are forming verticalmarketing systems.

Vertical marketing systems can take several forms. In a corporate VMS, one member of thedistribution channel owns the other members. Although they are owned jointly, each company inthe chain continues to perform a separate task. In an administered VMS, one member of the


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channel is large and powerful enough to coordinate the activities of the other members without anownership stake. Finally, a contractual VMS consists of independent firms joined together bycontract for their mutual benefit. One type of contractual VMS is a retailer cooperative, in which agroup of retailers buy from a jointly owned wholesaler. Another type of contractual VMS is afranchise organization, in which a producer licenses a wholesaler to distribute its products.

The concept behind vertical marketing systems is similar to vertical integration. In verticalintegration, a company expands its operations by assuming the activities of the next link in thechain of distribution. For example, an auto parts supplier might practice forward integration bypurchasing a retail outlet to sell its products. Similarly, the auto parts supplier might practicebackward integration by purchasing a steel plant to obtain the raw materials needed tomanufacture its products. Vertical marketing should not be confused with horizontal marketing, inwhich members at the same level in a channel of distribution band together in strategic alliancesor joint ventures to exploit a new marketing opportunity.

As Tom Egelhoff wrote in an online article entitled "How to Use Vertical Marketing Systems,"VMS holds both advantages and disadvantages for small businesses. The main advantage of VMS is that your company can control all of the elements of producing and selling a product. Inthis way, you are able to see the whole picture, anticipate problems, make changes as they

become necessary, and thus increase your efficiency. However, being involved in all stages of distribution can make it difficult for a small business owner to keep track of what is happening. Inaddition, the arrangement can fail if the personalities of the different areas do not fit together well.

For small business owners interested in forming a VMS, Egelhoff recommended starting out bydeveloping close relationships with suppliers and distributors. "What suppliers or distributorswould you buy if you had the money? These are the ones to work with and form a strongrelationship," he stated. "Vertical marketing can give many companies a major advantage over their competitors."

Q.4. Jalal Chemicals Company is considering implementing green supply chain conceptsin its distribution, logistics and supply chain systems. If you were an employee of thiscompany, why do you think the top management would take this step? Are there anybenefits of green supply chain management?

1Ans.: Importance of Logistics and Supply Chain Information Systems:

i) Effective information management can help ensure that a firm meets the logistical needs of itscustomers. Firms need to place priorities on logistical elements such as on time delivery, stock-out levels, order status, shipment tracking and expediting, order convenience, order completeness, creation of customer pick up and back-haul opportunities and product substitution.The logistics managers are responsible for these activities and timely and accurate flow of

meaningful information enables them to successfully implement the same. The logistics activitiesassist significantly in meeting customer needs and an accurate and relevant information systemcan facilitate the logistics mission.

ii) Logistics information system combine hardware and software to manage, control and measurelogistics activities which occur within specific firms as across the overall supply chain.

Hardware includes computers and servers, Internet technologies such as barcode and RFdevices, communication channels and storage media.


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Software includes system and application programs used for logistics and supply chain activities.The ability to integrate and thus leverage the power of these technologies makes the firms moresuccessful than other firms, which do not have such abilities.11iii) Companies need better information on their customers (such as customer service and salesforecasting), information on their suppliers, (such as production planning and sourcing and

purchasing). Areas of technology systems including decision support system/informationtechnology and logistics management activities were not delivering needed information to themanagement for making strategic decisions.23iv) The order processing system is the nerve center of the logistics and supply chainsystem . A customer orders provides the communication message to set the logistics process inmotion. The cost and efficiency of the entire operation are impacted by the speed and quality of the information flows. Slow and erratic communication can result in loss of customers or excessive transportation, inventory and warehousing costs together with possible manufacturinginefficiencies caused by frequent changes in the production line. The order processing andinformation system forms the foundation for the logistics and corporate management informationsystems.4

5v) Leading-edge organizations are utilizing computers-extensively to support logistics activities.Computers are used in order entry; order processing, finished goods inventory control,performance measurement, freight audit/payment, and warehousing. World-class logisticspractices include use of logistics information systems as a key to competitiveness.67vi) Computer based decision support systems (DSS) support the executive decision makingprocess in logistics and supply chain management. To support time-based competition, firms areincreasingly using information technologies as source of competitive advantage. Systems such asa quick response (QR ) just in time (JIT) and efficient consumer response (ECR) areintegrating a number of information-based technologies in an effort to reduce order cycle times,speed responsiveness and lower supply chain inventory. More sophisticated application of information technology such as decision support systems; artificial intelligence and exportsystems are being used directly to support decision-making in logistics and supply chain

management.81vii) Today, companies are restructuring their businesses to function in the new era of electroniccommerce. Organizations can have a deluge of information on dictums, business-to-businessrequirements and online customer and supplier linkages. ERP systems, purchasing databasesand data warehouses, electronic data interchange (EDI), business to business electroniccommerce are recent developments which are applied in logistics and supply chain management.

Benefits of Green Supply Chain Management:

To be successful in the new visual e-based economy, even traditional companies are takingnotice of the need for new information systems. The next generation of systems will promote thefree flow of perfect information instantaneously up and down the supply chain. To survive in a

perfectly competitive market, firms need to develop fluid and swift supply chain havingcompetitive advantage in terms of speed and excellence of education. The drivers of new supplychain systems and the new e-economy are:1i) Internal and external strategic integration2ii) Globalization and communication3iii) Data information management4iv) New business processes5v) Replacement of obsolete systems and6vi) Strategic cost management


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These are briefly discussed in the following paragraphs:i) Internal and External Strategic Integration : As supply chain members work increasinglytogether, it becomes necessary to integrate the different functions such as purchasing,engineering manufacturing, marketing, logistics, accounting etc., which are internal to theorganization as well as between parties that are external to the organization (end customers, thirdparty logistics, retailers, distributors, warehouses, transportation provides, suppliers agents,financial institutions etc.)

For the internal strategies to be effective, all members within the firm must use the sameinformation system, which spans across business sites and functions. This can be accomplishedthrough a company wide enterprise resource planning system (ERP) that links these internalgroups together via a single integrated set of master records.External integration refers to the systems, which link the external suppliers and distributors to thefirm. It is needed to forecast demand and balance the levels of supply and demand at differentpoints in the supply chain. Internet linkages, network communications and electronic dataexchanges are example \s of systems used for external integration.12ii) Globalization and Communication: Firms require systems which enable them to carry outtheir business in different culture and geographic and manage suppliers and customers all over the world. Firms need to calculate total global logistics costs, increase leverage and componentstandardization worldwide and improve communication of their strategies across global businessunits and supply chain partners. Supply chain systems must be able to communicate in a varietyof languages even though English is the universal language of the Internet.34iii) Data Information Management: Firms have access to new forms of servers,telecommunication and wireless applications and software which increase the accuracy,frequency and the speed of communication between suppliers, customers as well as internalusers. Information systems must be able to effectively filter, analyze and store abundant data toenable effective decision-making. It must be possible for the users to access databases andextract the needed information to make better supply chain decisions. This achieved throughsystems known as data warehouses .56iv) New Business Process: In the final two decades of 20th century, many organizations wentthrough the process of business process reengineering (a form of restructuring) in an effort toincrease productivity and reduce costs. Along with this change, organizations adopted computersand information systems to perform tasks, which were performed manually earlier. Even after these changes, business processes are constantly being changed to respond to a rapidlychanging environment. Such business processes include customer order management, supplier evaluation and selection and new-product development. In this processes of change, firms cancreate a rapid response capability, which allows them to quickly adept to their customerschanging needs and control costs. Computer network and ERP are the information systems,which enable the firm to link these business processes efficiently.1v) Replacement of obsolete systems: Firms often adopted a piece-meal approach to systemusage such that each function such as purchasing, engineering, accounting etc., use its ownsystem which was not linked to other systems. Such systems are referred to as obsolete systemsor legacy systems, which need to be integrated into a single enterprise-wide system used byeveryone in the supply chain.

vi) Strategic cost management: The complete supply chain cycle, from order fulfillment back topurchasing and order payment, involves a large number of transactions between differentmembers of the supply chain. Firms used to automate the cost based on outdated costaccounting systems in order to determine specific cost drivers behind different businessprocesses. But the new systems develop promise to automate data capture throughout supplychain systems. This has automated the transactions that occur in the traditional procurement


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cycle. This will reduce the costs of purchasing and logistics departments, and considerablyreduce inventory held in warehouses and stock rooms throughout the entire supply chain.2

Q. 5 Durga Lab Equipment & Components are finding it difficult to manage their inventories. They are frequently facing the problem of shortage, delivery gaps andcustomer complaints. The store manager is your friend and is needs your help inmanaging inventories. Kindly help him and his business.

Ans.: There are a few things, which the perfect retail store manager will embody. One positivetrait, which makes a wonderful retail store manager, is an individual who has exceptionalconversational skills. Since a main component of a retail store managers daily duties is tointeract with customers and employees, it is very important that they know how to converse insuch a manner which is courteous yet effective. Looking for individuals with this trait will helpinterviewers to find the best type of retail store manager.

Past experience is another important aspect, which all retail store managers should have.Although past employment may not be the only contributing factor to obtaining the best possiblecandidate for the job, it still is a highly desirable one. Choosing a retail store manager who hassome past managerial experience will equate with less training that is needed and perhaps amore established and useful manager overall.

Another trait to look for in a potential retail store manager is professionalism. A professional storemanager not only will benefit the customers who enter the store on a daily basis but will be agood morale booster for other employees as well. A professional retail store manager does nothave to be stuffy yet must know when it is the right time for serious behavior and when he/shecan take a lighter attitude with both the customers and employees.

A great retail store manager should also have excellent mathematical skills, which may benefit

the store the most. Since efficient math skills are an important thing for retail store managers tohave since they will be working with money on a daily basis, it is good to have this particular quality.

Management involves the Planning, direction and control of personal selling including recruiting,selection equipping, assigning, routing, supervising, paying and motivating as these tasks applyto the personal sales force.Following are the important tasks involved in the success of sales management in anyorganization:11. Setting personal selling objectives.22. Formulating sales policies.33. Structuring the sales force.44. Deciding the size of the sales force.

55. Designing sales territories.66. Developing the sales territories.77. Developing the sales forecasts and sales budgets.88. Fixing sales targets for individual sales territories/salesman.99. Creating the sales force1010. Managing the sales force1111. Managing the marketing channels.12. Ensuring growth and developing new accounts. 13. Sales communication and reporting 14.Sales coordination and sales controlling including sales expense control. 15. Building the salesorganization 16. Co-ordination with marketing management in the areas like, product mix, pricing,


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distribution, advertising and sales promotion. 17. Creating and maintaining the right image for thecompany and its products in the market.

Management Competencies:

Sales management competencies are defined as sets of knowledge, skills, behaviors, andattitudes that a person needs to be effective in a wide range of industries and various types of organizations. People use many types of competencies in their everyday lives. Here we willdiscuss six competencies that are needed for todays sales management responsibilities. Thesecompetencies are as under:a) Strategic Action Competency: Understanding the overall strategy and goals of the companyand ensuring that the manager's actions and those of the people he/she manages are consistentwith these goals involves strategic action competency. Strategic action competency includes-understanding the industry, understanding the organization & taking strategic actions. Understanding the Industry involves the following:

To understand the history and general trends in the industry and their implications for the future to stay informed of and to anticipate the actions of competitors and strategic partners to identify attractive market segments and their buying needs Understanding the Organization involves:

To understand the vision, overall strategy, and goals of the organization To appreciate the distinctive competencies of the organization with respect to marketopportunities and limitations To understand how to utilize organizational resources to meet the needs of the customers

Taking Strategic Actions include:

To assign priorities and makes decisions that are consistent with the firms mission and strategicgoals To implement specific account selection, retention, and dominance strategies To develop an appropriate portfolio of account relationships To consider the long-term implications of actions in order to sustain and further develop theorganization To establish tactical and operational goals that facilitates the firms strategy implementationTodays sales managers are being challenged to think strategically in order to improve their jobperformance. One dimension of strategic thinking is to anticipate strategic trends in the industryand to make the appropriate adjustments to take advantage of these changes. Failure to do somay be very costly. The plight of Encyclopedia Britannica Corporation is a good example of thepossible penalty for ignoring important industry trends. First published 225 years ago inEdinburgh, Scotland, sales of Encyclopedia Britannica peaked in 1990 at $650 million, with profitsof $40 million.As CD-ROM technology gained acceptance, however, Britannicas management failed to respondand continued to market through a direct sales force of 2,300 people. Part of the reasonBritannica found it hard to change is that a typical sale pays the salesperson a commission of $300. With CD-ROM encyclopedia packages priced from $99 to $395, commissions would havedropped significantly. It also would have required marketing through competing channels of

distribution such as retail outlets, direct mail, and telemarketing, a change the powerful directsales force would have resisted. Sales have declined drastically, the company is in financialtrouble, and the sales force is now less than half its former size.This competency also involves understanding the organization not just the sales unit in whichthe manager works. Goals and standards will flow from above. Unless the manager is wellconnected and can influence them, his/her point of view goes unheard at the top.After examining the competitive environment, a strategy or plan for achieving specific goals mustbe developed, which will have implications for how resources are allocated across various marketopportunities, what types of customer relationships are developed, and how the accountinteraction is executed.


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b) Coaching Competency: Comparisons are often made between the competitive worlds of sports and business sales. Athletes compete against opposing players to win the game, whereassalespeople compete with other companies salespeople to win accounts. Like the athletic coach, the sales manager plays an important role in this competition by helping to develop the skills of the sales team.

Coaching is defined as a sequence of conversations and activities that provide ongoing feedbackand encouragement to a salesperson or sales team member with the goal of improving thatpersons performance. Performance improvement is achieved by:

Providing verbal feedback Role modeling Building trust Providing Verbal Feedback will include:

Providing specific and continuous performance and selling skills feedback Building a feeling of appreciation and recognition by taking the time to acknowledge a job welldone, an effort beyond the call of duty, or an important victory Reinforcing success and positive attempts to support desirable behaviors Role Modeling would involve:

Leading by example rather than ordering Providing role models, either themselves or others, and sharing best practices Model professional attitudes and behaviors.

Q. 6 a. What do you mean by value chain analysis? Is it important in SCM?

Ans.: Supply chain process consists of all parties involved directly or indirectly in fulfilling acustomer request. It not only includes the manufacturer and suppliers but also transporters,warehouses, retailers and customers themselves. Within each organization such asmanufacturer, the supply chain includes all functions involved in receiving and filling a customer request.The supply chain encompasses all activities associated with the flow and transformation of goodsfrom the raw materials stage through to the end user as well as the associated information flows.Supply chain extends from customers customer to suppliers suppliers. In todays rapidlychanging business environment, even greater demands are being placed on business to provideright products and services quicker with greater added value to the correct location with norelevant inventory position.

A typical supply chain may involve a variety of stages. These supply chain stages include: Customers Retailers Wholesalers/Distributors Manufacturers Component/Raw material suppliersEach stage need not be presented in a supply chain. The appropriate design of the supply chainwill depend on both the customers needs and the roles of the stages involved.Following figure represents a simplified form of supply chain process


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Logistics is the process of anticipating customer needs and wants, acquiring the capital, material,people and technologies and information necessary to meet those needs, optimizing the goods or service to fulfill customer requests and utilizing the network to fulfill customer requirements in atimely way.Logistics is viewed as the competency, which links an enterprise with its customers and suppliers.Information from and about the customers will flow through the enterprise in the form of salesactivity, forecasts and orders. The information is refined into specified manufacturing andpurchasing plans. As products and materials are procured, a value added inventory flow isinitiated which ultimately results in transfer of ownership of finished products to customers. Thelogistics process is viewed in terms of two interrelated efforts namely: inventory flow andinformation flow. This basic process is not restricted to manufacturing firms and for profit businessalone. There is a need to integrate requirements and operations in all businesses including publicsector organizations.

MK0010-Sales Distribution & Supply Chain Management-Fall-10-Solved

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