mms-1

MMS - MARKETING

II Year – III Semester

Mumbai University

WELCOME

• DISTRIBUTION & SCM

TOPICS

• The role of distribution function in marketing mix and the meaning of distribution equity

• Channel design and management for consumer, Industrial products, rural markets and services

• Task and responsibilities of Channel members

TOPICS…..

Channel selection, training, development and motivation and performance appraisal of Channel members

Financial dimensions of dealer management

Management issues in distribution viz. channel conflict, use of power bases, disputes etc.

Supply chain management – issues, opportunities and strategies

ERP solutions – Opportunities and challenges

Distribution Budgeting and control systems, cost of distribution, inventory, warehousing, material handling, order processing, packaging and transportation

Fiscal levies / regulations in distribution – CST, LST, Octroi duties etc.

EVALUATION METHODOLOGY

• Written : 30 Marks

• Projects: 20 Marks

TREND….

• Total logistics market earned $ 75 billion in 2009

• Representing 6.2.% of Country's GDP

• The market is expected to reach $ 120 billion of 2014 with a CAGR of 9.9 % between 2009-2014

• Transportation amounts for about 62 % of total market

• Source: Frost & Sulllivan

ROLE OF DISTRIBUTION

• What is logistics management ?

Logistics management includes the design and the administration of systems to control the flow of material, work – in process and finished inventory to support business unit strategy

• Logistics competency to gain competitive advantage..

Logistics ManagementLogistics Management

Procurement Inventory Decision Goods in process / finished goods

Field inventory

-Material verification- Value analysis-Supply market Negotiations- Buying -Quality assurance.- Inbound log.

Raw materialsSub assembliesManufactured partsPackaging materials

ReceivingStoringMaterial handlingProduction schedulingControlTransportation

TransportationIn store inventory

ROLE OF DISTRIBUTION

• Logistics Mission:

Integrated efforts to create greater customer value at the lowest Total cost.

Strategic Level

Seek to achieve a previously agreed upon quality of customer service through the state of the art operating competency…

The challenge is to balance service expectations and cost expectations in a manner the business objective is achieved.

SERVICE EVALUATION

• Availability – Material availability at the manufacturing / production point

• Operational Performance – It handles all aspects of customer relation and requirement.

• Service Reliability –Accurate availability of operational performance.

Logistical Renaissance

• QuantativeTechniques:– Order processing– Forecasting– Inventory control– Transportation

• Volatile Economic factors– Profitability

Learning Objective

• Role of distribution management in the marketing mix

• Why distribution channels are required

• Distribution channel strategy

• Overview of distribution channel

• Intensity in the distribution effort

The marketing mix Products

• 4 P`s• Distribution channel help in the Place

aspect.• Distribution provides place, time and

possession utility to the consumers

E.g.: Tooth Paste – Retail out let

Availability – 8 pm Possession – can be paid across the counter

Players involved

• The company and its distributors network facilitate:– Direct to the consumer / customers– Company to a C&F / Distributor / Distributor to

retailer– Distributor to the wholesaler - Retailer

• All these intermediaries helps the process of exchange of product or services.

Distribution Management

• Management of all activates which facilitate movement and co-ordination of supply and demand in the creation of time and place utility in goods

• The art and science of determining requirements, acquiring them, distributing them and finally maintaining them in an operational ready condition for the entire life.

Distribution Channel Defined

• Are sets of interdependent organizations involved in the process of making a product or services available for the use or consumption

– Whether selling products or services, marketing channel decisions plays a role of Strategic importance in the overall presences and success a company enjoys in the market place.

Types of Channels

• Sales : Motivates buyers, shares information between company and its consumers, negotiates fair bargains for consumers and finances the transactions

• Delivery channel meant only for physical part of the distribution

• Service channel – performs after sales service

C&FAs / C&SAs

• C&FA : Carrying and forwarding agent and

C&SA: Carrying and selling agent – both are on contract with a company

• Both are transporters who work between the company and its distributors

• Collect products from the company, store in a central location, break bulk and dispatch to distributors against indents

• Goods belong to the company• C&SA also sells the goods on behalf of the company but

remits proceeds after sale

Distributors, Dealers,Stockists, Agents

• Name denotes the extent of re- distribution done by them

• Distributors invest in the products – Buy products from the company

• Are on commission, margins or mark-up• May or may not get credit – but extent credit• Distributors cover the markets as per a beat plan. All

others merely finance the business.• Distributors could be exclusive for a company• Agents bring buyer and seller together

Wholesalers

• Operates out of the main markets• Deal with a number of company products of their choice• Are not on contract with any company• Sell to other wholesalers, retailers and institutions• Negotiate about 15 days credit from the company

distributors – also provide credit to their customers• Operates on high volume and low margins

Retailers

• The final contact with consumers• Operate out of their shops and sell a large assortment

and variety of goods• Located closest to consumers• Buy from Company, distributors or wholesalers• Highest margins in the network• Provide personalised services to their customers

Industrial Products

Customers may also direct from Company force

Producer

Industrial Distributor

Industrial customer

Agent / Middle men

Consumer Products

Retailers may also direct from Company force

Producer

Distributor

Retailers

Customers

Wholesalers

Pattern of Distribution

• Determines the intensity of the distribution• Intensity decides the service level provided• Types of distribution intensity

– Intensive– Selective– Exclusive

Distribution Intensity

• Intensive: Distribution through every reasonable outlet available – FMCG

• Selective – Multiple, but not all outlets in the market – pharma, frozen food

• Exclusive: May by only one outlet in a market – car dealers

Intensive Distribution

• Strategy is to make sure that the product is available in as many outlets as possible

• Preferred for consumers, pharmaceutical products and automobile spares

Selective Distribution

• A few selective outlets will be permitted to keep the products

• Outlets selected win line with the image the company wants to project

• Preferred for high value products– Guess watches / Tanishque Jewels

– Keeps distribution cost lower

Exclusive Distribution

• Highly Selective choice of the outlets – May be even one outlet in an entire market

• Could include outlets set up by Companies – Titan, Bata, Giordano

• Producer wants a close watch and control on the distribution of his products.

Distribution Channel Strategy

• Derived from the corporate strategy and the marketing strategy

• Steps for designing the distribution strategy are:– Defining customer service levels– Distribution objectives and set ups– Structure of the network required– Policy and procedure to be followed– Key performance indicators– Critical success factors

Customer Service Levels

• Defined by the nature of the industry, the products, competition and market shares

• Affordability also decides the service level• It should at least match competition• Customer expectations have no limit

Distribution Objectives

• Influenced by the customer expectation• Defines the extent of time, place and possession utility

which the customer can expect out of the channel network

Set of Activities

• Manner in which the company and its marketing channels go about achieving the customer service levels

• Some of these steps could be:– Sales forecast– Despatch plans– Market coverage beat plans– Journey plans for service engineers– Collection of sales proceeds– Carrying out promotional activities

The Company also decides as to who is to perform which task

Distribution Organization

• Extent of Company support and outsourcing to be decided

• Budget for the cost of the distribution effort• Select suitable channel partners – C&FAs, and

distributors• Setting clear objectives for the partners• Agree on level of financial commitments by the channel

partners.

Policy and Procedure

• Define Policy and implementation guidelines through Operating Manuals

• Policy guidelines include– Code of Conduct for channel members– System for redressal of complaints– Any additional subsides etc– Service Policy for engineering products

KPI

• For measurement of effectiveness, some of these could be considered:– Consistent achievement of targets by product groups, periods

and territories– Achievement of market share.– Achievement of Profitability– Zero Complaints from customers– No stock returns– Ability to handle emergencies and sudden spurts in demand

KPI

• For measurement of effectiveness, some of these could be considered:– Balanced sales achievements during a period – no period and

skews– Market coverage with ready stocks– Excellent management of accounts receivables– Minimize losses on account of stock-outs

Critical success Factors

• The distribution strategy also needs the support and encouragement of top management to succeed

• Some of the CSF could be• Clear. Transparent and unambiguous policy and procedure

• Serious commitment of the channel partners

• Fairness in dealing

• Clearly defined customer service policy

• High level of Integrity

• Equitable distribution at times of shortage

• Timely compensation of channel partners

Key Learning

• Companies use distribution channels to reach their large customer base

• The channel members could be nominated like distributors or free lancers like retailers

• Distribution channels provide the time,place and possession utility for the consumers for the company products

• Distribution channels could be sales, service or delivery focused.

Key Learning

• Companies could also choose the intensity of distribution based on their products and distribution objectives

• Distribution could be intensive, selective or exclusive• The distribution strategy takes care of service levels,

objective, activities, organization to deliver the service, measurement of performance and critical success factors.