scm &dstrbtn mnagmntclass notes

8/8/2019 SCM &Dstrbtn Mnagmntclass Notes

1/100

SUPPLY CHAIN

MANAGEMENT

&

DISTRIBUTION MANAGEMENT


2/100

DISTRIBUTION MANAGEMENT

Distribution management that arm orwing

ofmanagement whichserves as a link

between procurement, purchase,manufacturing, marketing,sales, &

finance, properfunctioning ofwhich

synergizesthe effectsofall these activities

andthe absence ofwhichcannotonlyreduce efficienciesbutcan leadtochaos

inthe organization


3/100

LOGISTICS MANAGEMENT

International Council ofLogistics

Managementdefined Logisticsin 1991

the processofplanning implementingandcontrolling the efficient effective flow

andstorage ofgoodsservices andrelated

informationfrom the pointoforigintothe

pointofconsumptionforthe purpose ofconforming tocustomerrequirements


4/100

A typical supplychain

Raw material supplier

packing material supplier

componentsupplierFactory

warehouse

distributor

retailer

customer


5/100

supplychain

RM

PM

fcty

fcty

3p

CWH

C&fa

C&fa

C&fa

Db St

Db

R R

R

R

c c c c

c c c

cc


6/100

criticalityofdistribution &

logisticsfunctionProfit = revenue lesscosts (cos + s&d,m)revenue is a functionofvolume & netrealization (whatisnetrealization)

volume dependenton promotional inputscostsdependentoninputsbothdifficulttoreduceoften economiesofscale are not possiblewhen procurementisconcernedso gap canbe improvedbyoptimizingoperational efficiencies / processes


7/100

criticalityofdistribution &

logisticsfunction Processoptimization bettercapacityutilization

in manufacturing orbetterdealsin procurement

Optimizationintransportation more bulk

movementsbettercapacityutilization

Proper locationofdistributioncenterstoreduce

overall inventory / transportationcosts

Reducing overall inventoryrequirements Improving customerservice levels


8/100

conceptofvalue chain

S

U

P

P

O

R

T

SYSTEMS & TECHNOLOGIES

COMPANYS INFRASTRUCTURE

PROCUREMENT

ORGANIZATION PEOPLE & METHODS

MKTG

&

SALES

OUT

BOUND

LOGI-STICS

OPER-

ATIONS

SER-

VICE

G

R

OS

S

M

A

R

GI

N

PRIMARY ACTIVITIES

IN

BOUND

LOGI-STICS


9/100

competitive advantage

competitive advantage derivesfrom the value acompanycreatesforitscustomers which maybeselling an equivalent product atbelow

competitors price orproviding additional unique benefitstocustomerstooffset premium price beingcharged

inthe value chaindiagram 2 outof5 primaryactivities are inthe area of logisticsandherein liesthe criticalityofdistributionfunctioninthe value chain


10/100

logistics as aninterface

s

a

le

functional interest logistics interface

p

r

d

c

n

h

i

h

i

business impact

lo

customer

service

production

constraints

increased revenue thru

mktg.of more variants

rapid intrdctn of new

prdcts/modelsmore credits in market

f

i

n

costeffective prdctn thru

longer runs ofsame batch

manufacturing suiting

production schedules

purchasing agnst cash

l

o

hil

o

strong controls on

costs & investments

strict credit norms

costs

investments


11/100

logisticsinterface

PRDCTN/

OPERTNS

SAMPLEACTIVITIES:

QLTY CNTR

PRDCTN

SCHDLNG

EQPMNT

MAINTNCE

INTERFACE

ACTIVITIESPRDCT

SCHDLNG

PLANT

LOCATION

PURCHASING

LOGISTICS

SAMPLE

ACTIVITIES

TRANSPORTATION

INVENTORY

ORDER

PROCESSING

WAREHOUSE

INTERFACE

ACTIVITIES

CUSTOMER

SERVICE

PRICING

PACKAGING

MARKETING

SAMPLE

ACTIVITIES

PROMOTION

MARKET

RESEARCH

PRODUCT MIXSALES FORCE

MANAGEMENT

PRODUCTION/LOGISTICS

INTERFACE

MARKETING/LOGISTICS

INTERFACE


12/100

logistics as aninterface

Timely & accurate forecastscanreduce areasofconflict allowing operationstobetterplanproductions

Reducing performance cycle timereducing transportationtimereducing response time acrossthe supplychainthroughstrategic placementsofmother/ feeder

depotsfasterorderprocessing caninturnimprovecustomerservice & reduce customeroutstandings


13/100

distribution planning

how do we

know we

have

arrived

where

are we

now

where do

we want

to be

how do

we get

there

audit distribution

performance

define distribution

mission

develop distribution

strategy

design distribution

controls


14/100

distribution mission

While marketing missionscanbe like:we wanttobe the largest providerofpleasuretravel we wishtobe world leadersin

information processing technology oursis acompanythat will provide total dental care

Distribution missionscanbe a little different:ourproducts will be available at all retail pointsinthe country none ofourproductson anyshop shelfwill be more than 2 monthsoldall customerorders will be serviced within 24hrsofreceipt


15/100

distributionstrategy

The mission will have take stockofground

realities

thusifcurrent presence in marketis @ 30%

level a missionstatement ourproducts will beavailable at all retail pointsinthe country may

sound a bithollow

Thusthe missionstatement will have totake into

accountthe presentsituation whichis whysome

rethinking at eachstage maybecome necessary


16/100

distributionstrategy

Since strategies (meansto achieve goals) willnormallyflow from the missions (objectivesorgoalstobe achieved)

evaluate customerservice requirements

estimate the costsforproviding those services

matchthe same withthe corporate distributiongoals

Cost effectivenessbeing importantdistribution

strategy will have tofactorin:achieve targetedcustomerservice at leastcostorwithindistributionbudget maximise service


17/100

deciding distributionstrategy

DISTRIBUTION STRATEGY WILL DEPEND UPON

Product viz. type / nature /stage of PLC

Channel viz. direct / indirect / mixture

Outlets viz. large / medium / very small

Customerservice strategy

warehouse transport inventory communication


18/100

distribution planning process

Starting froma strategic planbasedon markets, products,distributionchannels,

one getsintooperational planning concernedwith manufacturing / distribution / customerservice goals / & budgets,followedby actual managementofthe functionsofinventorycontrol,traffictransportation,

manpowerdeployments, & finallyonto performance measurements whichcanleadto midcourse corrections


19/100

distribution planning cycle

strategic planning

products/ markets

& channels

performance measurement

actual vs plan

mid course corrections

operational planning

manufacturing/ customer

services/ budgets

distribution management

inventory control

transport


20/100

intermediaries

Stockists

Distributors

Wholesalers

Superstockists / substockistsSemi wholesalers

Dealers

Retailers

Howeverupto C&FAs which are warehousingoperationsoutsourcedownership in productsremain withthe organization


21/100

intermediaries

situationof3 suppliers & 3 procurers

DIRECTTHROUGH INTERMEDIARY


22/100

intermediaries

DIRECT BY COMPANY

THROUGH

INTERMEDIARIES


23/100

use ofintermediaries

Advantagesincreasedoutletcoverage at lowercostofcoverage peroutlet

stockholdingssharedbyintermediaries (netofcredit extended)bettermarketcoverage

improved marketinformationcredittoretailers

Disadvantageslossofdirectcntrldilutionoffocusoncompanys

product linesmarketinf.canbelimited / selective/ biasedcustmrservice

canbe atriskvulnrbltytointrmdrs pressuretactics


24/100

costbenefit analysis

Organizationhastodo a trade offbetweenabilityto meetcustomerservice requirement atreasonable cost / reductionin amountofcapital

employed / flexibilityofcapacity / increasedgeographical coverage

vis a vislossofdirectcontrol / problemsofestablishingaccountability / inabilitytorespond quicklytodemandchanges / highercostsdue todamages& stock losses / communication problems withendconsumers


25/100

source & sinks

Sourcesare facilitiesfrom whichfreightoriginate

such ascompany plantsraw material sources

vendors ware houses

Sinksare facilitiesthatreceive freightsuch ascustomer locationsfactories warehouses

One canobserve thatthe same facilitycanserve

both as a source as well as a sinkdepending on

itsrelative locationinthe chain


26/100

sources & sinks

sink

source

sink

source

sink

source

sink source


27/100

supplychain management

Anticipatorybusiness model

inthis model each partneris adversarial

forecast buy/manufacture deliver

make tostock

Response basedbusiness model

each partneriscooperative

sell buy/manufacture delivermake toorder


28/100


Choice board

interactive online system that allowsindividual

customerstodesigntheirown productsby

choosing from a menuofattributes,components, prices, & deliveryoptions eg.

Dellson line configurator

Postponement

postpone manfctr. form postponementpostpone timing of logistic

fulfilment possession postponement


29/100


Dell pioneeredthe direct model ( a SCM

model thatis elegant) Dell takesorders

from customers & builds PCs as per

demandthusbypassing traditional dealer

channel Factoryscheduling algorithm runs

every 2 hrs & Dell poststhe results along

withforecasts & inventory levelsonthesuppliers extranet Suppliers maintain 5

daysstandardinventory


30/100


Wal Mart pioneered CPFR (collaborative

planning forecasting & replenishment)

model through which Walmart provides

informationonsales & inventoryto all

10000 supplierson 2700 storesvia its


31/100

movement acrossthe chain

Move as much & asfaras possible inbulk

Bulkbreak as much as possible nearthe endof

the chain

This will ensure transportationinbulk

Movementinbulk means lowerperunit

transportation

Create central motherdepotsto which materialscanbe movedinbulk & from where materials

canbe transportedinsmalls


32/100

depots

Byspreading outthe depots,besidesoverall reductionsintransportationcostsresponse time & vulnerabilitytoindividual

depotfailures getreduced Howeveroverall inventory & warehousingcosts may move up due to multiplicityofstorage locations

A balance betweenthe 2 costshastobedone


33/100

acceleration(whip lash) effect

Factory C&FA Retailer Customer

8 weeks 12 weeks 2 weeks |

| | | Increase in

demand 10 %| | Increase in period demand

of 10 % + 10 % of 2/52 = 10.4 %| |

| Increase in period demand

| of 10.4 % + 10.4 % of 12/52 = 12.9 %

Increase in period demand

of 12.9 % + 12.9 % of 8/52= 14.84 %


34/100

distributionbudget

Budgeting isbasically a tool forPlanning andControl.

Like anyotherBudget, a Distributionbudget will

have toconsider#the activities requiredtobe performed

Objectives/ Targets

#the costs/ expenses requiredto perform those

activities#the period of time to whichthe activities will

pertain


35/100

distributionbudget

startfrom the sales plan at SKU level & at

all selling points

aggregate to a pointfrom where all thesales pointstobe serviced canbe a

central warehouse ormotherdepot

furtheraggregate backwardtofactoryfrom

where materials are tobe supplied

LeadstoDistribution Requirement PlanDRP


36/100

distributionbudget

The DRP will setthe quantityofFinishedgoodsthatneedtobe producedperiodicallyforseveral storage locations

Thisinturn will translate into movementrequirementsviz.numberoftrucksrequiredfordifferentsource sinkcombinations

The DRP will also meanrequirementofmaterials at plant level


37/100

distributionbudget

Once the finished goodsrequirements are blownup intothe bill ofmaterialsthe same will give theMRP whichisthe material requirement plan

whichinturn will generate the masterproductionschedule

Transportation / warehouse / inventory plans willfollow

Foreachofthe activitycosts andinvestment ( oflong term & shortterm working capital nature)details will be workedout


38/100

distributionbudget

Ideally atthe planning stage all transportationhastobe reckonedonfull truck load (FTL) basis

Hence ifmovementis made in LTLs (lessthan

truck load) the consequentunderutilizationoftruckcapacity will reflectinhighercosts

Similarlyholding more than plannedinventorywill resultinhigherwarehouse costs / higher

inventorycarrying cost Cross movements will pushup transportation

costs


39/100

distributioncost analysis

Distributioncostscanbe measured as a % ge of

sales / gross margin / productioncots (key

ratio) whicheverratiochosenthe same mustbe

followed periodto periodonsame basis keyratios maybe brokendownto

intermediate ratiosviz.transportation,

warehouse,inventory

intermediate ratioscanbe brokendownto

grassrootsratios


40/100

distributionfunction audit

use ofstandards

reviewing existing performance / cost

accounting techniques / zerobased / using

owninternal best performance as

benchmarks

competitorsstandards / industry

benchmarks using ROI concepts


41/100


Organizationsusing 3rd party logisticscan

reduce assetssubstantially howeverin

anxietytoreduce assetholdingsone

shouldnotsacrifice service efficiency

Logistics auditshouldreview boththe

external andinternal dimensionsofthe

organizationsoperating environment


42/100


External environmental factors wouldbe:

Source market wherefrom inputstothemanufacturing process are procured

User market where products will be sold Competition inthe source as well asuser

market,competitionis a veryimportant & crucial

Channel animportantconstituentofthe

external environment,itimpactsstrategy,costs,and efficiency.

Statutory & Governmental factors are alsoimportant elements.


43/100


The Internal environmental factors would

be:

Product related: Seasonality, Special promotions

New products, modifications

Special Handlings,special packaging Special requirements


44/100

distributionfunction audit(internal)

Distribution Pattern related:

Organizationstructure

Productcharacteristics

Shipmentcharacteristics Purchasing characteristics

Ware house utilization

Transportutilization

Stocking requirementsbothforraw materials aswell asfinished goods


45/100

distributionfunction audit(internal)

Systems related:

Purchasing system

Production Scheduling Data processing facility

Ware house facility

Transportfacility Material handling facility


46/100


distribution auditshouldcover:

Customerservice perception audit

Competitoraudit Channels audit

Materialssupply audit

Finished goodsdistribution audit


47/100


Evaluationofdistributionfunctionnecessary

when :

organization makessignificantchange inits

marketing strategy eg:

going directvis a visselling through

intermediaries

size ofthe organizationchangessignificantly new products/businesses addedtothe system

signsofmaldistribution manifest


48/100


Typical signsofmaldistribution:

inventoriesturnveryslowly poorcustomerservice

numerousinterware house shipments

premium freightcharges


49/100


Auditobservations mustbe

discussed withresponsible managers

agreementsobtainedforcommitmentstocorrective actions

time periodforimplementationsspecified

compliance follow up meetingsdecided


50/100

systemsindistribution

Systemscanbe at 2 levelsviz.supporting theoperations & supporting the decision process

Main aimsofanysystem supportcanbe:

. costreductionthroughincrease in productivity

. improvedcustomerservice throughreductionsintime lags

. improveddecisionsthrough more accurate inputdata

Anotherimportant aim ofanysystem couldbe tointegrate variousfunctionsthrough a commondata base.


51/100

systemsindistribution

one stage applicationsoftwares

crossfunctional integratedsoftwares

softwaresconnecting several functions

& operationsERP systems


52/100

ERP implementation

Toimplement anystandard ERP package,organization prepares a briefincorporating:

#the existing processes and procedures,

#the information and material flow patterns,

#the workloads atvarious points,

#the organizationstructure,

#the availability and preparednessoftheorganizations manpowerintermsof

#technical capabilities,the existing systemsinplace,ifthere are any,

#the IT language platform inuse,


53/100

ERP implementation

#the size andcapacitiesofhard ware in place,particularlyserverstheirfunctions,theirworkstations, as well astheir locations,

# pointsofthe supplychainthe ERP system

should map andconnect, eg. will itbe from thefactorytothe C&FAs,orfrom the factorytotheDistributors,orextendbackwardstorawmaterial suppliers,because it will haveimplicationintermsofcosts as well ascomplexity andimplementationtime,

#the numberofpersons who will be using thepackage withindependent log inidentifications,


54/100

ERP implementation

An ERP systems would enable the organizationtohave all its activities withinthe ERP network,

#happening ON LINE, whichinotherwords

mean, anytasktaking place any where will be inthe system, and

#the company will have REAL TIME DATA,because each & everytransactionstaking placeonthe system isbeing recorded asdata.

Thusimplementationofan ERP system willmean accessto REAL TIME ON LINE DATA.


55/100

ERP

limitations

ERP system isincapable tohelp decide whichofseveral alternatives wouldbe the best,undercertain pre setconditions.

Thisbringsustothe nextstage ofsystems,viz.optimizers, whichcanhelp inselecting the bestalternative through a package.

forexample Ifproductionhastobe plannedbasedonsales estimates,keeping inviewproduction & transport limitations manyindependent alternatives may presentthemselves,


56/100

optimizers

Ifthe managerhastochoose the onesthat givethe mostoptimum result,notonlyfrom theaspectofcosts,but alsooperational efficiencywhich will have a directbearing oncustomer

service level andsatisfaction, we come tothearea ofOptimizationsystem packages.

Standardsystem packages are available inthemarket. These packages are costly,Organization mustbe ready & capable to absorb

andinternalize the system,significantdatastorage isreqd. which means additionalinvestmentsinhardware & software.


57/100

system linkages

Organizations, are adding ontotheirERPsystems,initiatives toincorporate SupplierRelationship Management, and / orCustomerRelationship Managementtools, along with

intermediate softwares which enable them toextendthe boundaryofthe interconnectionbeyondthe confinesofthe internal area ofoperations.

These in effect, mean:

# extending the ambitofreal time,on linetransaction processing,backwardstosupplrs


58/100

system linkages

sothatrequirementscanbe available onthe

system ofthe supplierassoon as productiondraws a batchofraw material forproduction /

processing,or#hooking up the sales / delivery / stocksystem ofthe Distributor,orretailer,

sothat assoon as a customerordersupplyis

executedfrom theirpoint,the organizationssystem recordsthe same andtriggers a processofrequirementnoting.


59/100

ware house

Formanufacturing locationnormallysite selectionbasedon :

# existing facilityofthe organization

# availabilityofresourcesviz.skilled labour,power,infrastructure

# governmentincentives,viz.tax concessions

#scope forfurtherexpansions, as and whenrequired

#doesthe locationofferadvantagesintermsofcompetition / offerscope forimprovedcoordination withsuppliers


60/100

ware house

#overall costofsetup inthe location

#industrial climate inthe area

# experience ofexisting industriesinthat location

#how lonelyorcrowdedisthe area

For location ware houseshoweverthe determiningfactors wouldbe:

# primarilyhow close itistothe area tobeserviced

#this allows largermovementsinbulkup tothewarehouse


61/100

ware house

# a depotnearertothe point ofconsumptionhelpstoreduce the response time substantially

#selling interstate attractscentral salestax,hence

organizations locate depotsin eachstate,saleeffectedinthe state attractsonlythe local statesalestax

locationschosenoutside town limits,sothat entrytax oroctroiisonly paidon what issoldinthetown.

# availabilityofresources andinfrastructures


62/100

ware house

Term ware house combinationofwords ware andhouse,thatitis a place tohouse orstore /keep wares.

A functional ware house should ensure thatthe

waresstoredtherein are:inthe bestofcondition, easily available /locatable, properly accountedfor,rotatedsothatthe olderones are movedoutfirst,secured /protectedfrom losses anddamages,separatelyand properlysegregatedbetween good andbad.


63/100

ware house

Ware houses perform the following functions:

Receiptsofitems,

Storing the same properly,

Dispatching products as perrequirements,

Preparing relateddocuments,

Maintaining recordsoftransactions,

Any associatedtasksthatthe warehouse activitymayinvolve, like depositing customerscheques,

posting tothem invoice copies etc.


64/100

ware house

Organizationscanhave own warehouse

Organizationscanoutsource warehousingfunctionsto C&FAs

3P Logistics where a 3rd

partytakesoverall thelogisticsfunctionsincluding transportation aswell as warehousing

4P Logistics a term coinedby Accenture they

are typicallynot assetbasedbutsystemsoftware driven whouse 3P logistics providertoservice


65/100

ware house

Important aspectsin a warehouse

Stockrotation FIFO OPFO

Storage capacityutilization stackingheights

Safetyrequirements riskcoverage

Perpetual inventory Packedstock

reconciliation Pareto analysisfor locating stocks as pervelocityofmovement


66/100

no.ofdistributioncenters

NUMBER OF DISTRIBUTION CENTERS

TOTAL

COST

WARE HOUSE

COST

2ND LEG

TRANSPORT

PRIMARY

TRANSPORT


67/100

logisticsnetworkdesign

SAILS ( strategic analysisforintegrated logisticssystems) is a logisticsnetworkdesign modelwhichuses :

NetworkrationalizationissuesCustomerservice levelstobe maintainedAssignmentofcustomerstodistributioncenters(DCs)Number& locationsofDCs

MissionofeachDC inventories & serviceterritories

AssignmentofDCsto plantsby product


68/100


Number& locationofplantsMissionofeach plant productionto product,inventories & service territory

WhatifquestionsEnvironmental issues- marketshifts- strikesnatural disasters energyshortage- global economicconditions

Logisticssystem decisions- impactofchangesin mode choice &/orcarrierselection


69/100


- use ofcompanyoperatedversuscontractversusthird party logisticsoperation- incorporationofplant-directtocustomershipmentsBusinessdecisions & policyissues- plantcapacity & expansion- new productintroduction- shipment planning policy analysis

- DC capacity expansionorelimination- multidivisiondistributionsystem merger- merger/ consolidation withotherbusiness


70/100


Cost & service sensitivityissues

- total production / logisticssystemscost

- logisticscostvscustomerservice

- logisticscost asfunctionofnumberofDCs

- demandforecast


71/100

supplychain models

Simulation models

processofdesigning a model ofa real

system & thenconducting experiments

withthe model forthe purpose ofunderstanding the behaviorofthe system

orofevaluating effectsofseveral

strategies withinthe limitsimposedby acriterionorsetofcriteriaforthe operation

ofthe system


72/100

supplychain models

Heuristic models toreduce the numberof

alternatesthe decision makermayincorporate

characteristics as limiting attributes eg. a

locationidentifying team mayonlyconsiderwarehouses meeting the following requirements:

(1) shouldbe within 20 km ofa market area

(2) at leastspaced 250 km from anyother

company warehouse(3) within 3 km ofa high way

(4) within 40 km ofanyrailwaystation


73/100

supplychain models

While modeling one must avoidthe followingpitfalls:shortterm horizon (ensure a long termperspective)

too little ortoo muchdetails (data shouldbeadequate)using publishedcosts ( suchcosts mayoftenrepresentonly list prices whichcanvaryfromnegotiated prices)

inaccurate orincomplete costs (analysisbasedoninaccurate costs mayvitiate results)use oferroneous analytical techniques


74/100

ware house efficiency

Customerservicing isofcritical importance

inrespectoftimelinessoforderexecution,orderfill rate,ie. what %ge ofordereditems are sent,

qualityofitemssent,ie. properstockrotation,informationbackup,ie,sending theminformation aboutorderprocessing,

secondarytransportation efficiency,

adherence to proceduressuch aschequedeposits,

maintaining the approvedcredit period


75/100

inventory

Costsof Inventorycostofcapital costofcarrying costofobsolescence costofstockouts

Discrepanciesin exchange due to spatialie.due to geographical distance betweenbuyer& seller temporalie.due to gapbetween production & consumption

Geographical specializationininventoryopening depots atseveral places


76/100

inventory

Decoupling inventorystocking wip atcertainstagesofproduction eg.Tomato paste

Balancing supply & demandmanufacturing in quantitiestobuildup foraseason eg mosquitorepellant mats

Buffering foruncertainties

Selective control onbasisofABC classificationVED SAP scarce available plenty FSN fastslow normal


77/100

inventory

Safetystock

Reordering systems

EOQ


78/100

channelsofdistribution

Channel membership

Intensive distribution - Where the majorityofresellersstockthe `product' (withconvenienceproducts,forexample, and particularlythe brand

leadersinconsumergoods markets) pricecompetition maybe evident.

Selective distribution - Thisisthe normal pattern(inbothconsumerandindustrial markets) where`suitable'resellersstockthe product.

Exclusive distribution - Onlyspeciallyselectedresellers (typicallyonlyone pergeographicalarea) are allowedtosell the `product'


79/100


Marketing channels are setsofindependent

organizationsinvolvedinthe processofmaking

a productorservice available foruse or

consumption Thustheynotonlysatisfydemandsbysupplying

goods / services atthe right place, quantity,

quality, price butthey alsostimulate demand

They generate form, possession,time and placeutility


80/100


Intermediaries are typicallydistributionorientedinstitutionsserving asthe linkbetweenproduction andconsumption

They perform: sorting breaking down

heterogeneoussupplyintoseparate stocksthatare relativelyhomogenous eg. gradingagricultural produce according tosizeaccumulation bringing similarstocksfrom anumberofsourcestogetherinto a larger

homogenoussupply eg. wholesalersaccumulating varietyofitemsforretailers &retailers accumulating forcustomers


81/100


allocation breaking down a homogenoussupplyintosmaller lots eg. wholesalerdoingbulkbreaking it may alsoinvolve geographicaldispersal assorting building up assortments

ofproductsforresale in association with eachother

ROUTINIZATION a processinchannelmanagement whichseeksto eliminate theprocessofindividual transactions,involving

separate ordering of,valuationof, & paymentforgoods & services at every pointoftransaction,whichinturn means a differentsetofbargaining


82/100


with a concomitant lossofefficiencyby

making the processroutine eg. automatic

ordering like Apna Bazaarautomatically

getting itssuppliesreplenishedfrommanufacturers

Marketing channelsfacilitate the process

ofsearch asbuyers andsellers are oftenengagedsimultaneouslyinsearch


83/100


General retailing formats

Departmentstores sell wide varietyofmerchandise including apparel furnishingsappliances

Specialtystoresbroadselectionofrestrictedclassofgoods / limited linesofsoft (clothingslinen) orhard (kitchenutensils appliances)

Chainstoressystemscentral ownership or

control,similarityofstores,twoormore units Supermarkets low marginhighturnoverretailorganizationstypically large departmentalized


84/100


retail establishmentoffering broad & complete

stockofdry groceries, perishable products along

with a hostofconvenience nonfood

merchandise operatedon a selfserve basis Plannedshopping centers MALLS integrated

developmentsundersingle ownership with

coordinated andcomplete shopping facilities &

adequate parking space. Storesfacilitiesinthecenterare leasedtovariousretailers


85/100


Discounthouses retail establishmentsthatgenerallyfeature a broad merchandiseassortmentincluding bothsoft andhard goodsprice asthe mainsales appeal relatively low

operating costsrelativelyinexpensive buildinggetup emphasisonselfservice very limited addoncustomerservices emphasisonrapidturnoverofmerchandise large stores parkingareascarnival like atmosphere

Combinationstores large supermarketofferingextensive selectionofnonfooditemsincludingcategoriestypicallyfoundinsuperstores


86/100


Superstoressimilartocombinationstores

Convenience storestypicallykirana stores

Hypermarkets enormousstores withnumerouscheckout lanesselling food & nonfooditemson

selfservice & discountbasis Franchising refersto a wayofdoing business &

ensuring a revenue stream once outlets areestablished.Franchisee will payroyalty,fees,

initial charges. Sometimes a manufacturermaysimplyfranchise (authorise) a dealertobe partofhissystem ofselective orexclusivedistributionon a fee eg Bata McDonads


87/100


Quantitative measuresofchannel performance

1.total distributioncost perunit

2.transportationcost perunit

3. warehousing cost perunit

4. productioncost perunit

5.costs associated with avoiding stockouts

6. percentofstockoutunits

7. percentofobsolete inventories8. percentofbaddebts

9.customerservice level by product,mktsegmnt


88/100


10. accuracyofsalesforecast

11.no.oferrorsinorderfilling/custmercomplnts

12.numberofnew markets entered

13. % salesvolume innew markets entered

14. % ofmarkdownvolumes

15.no & % ofdiscontnd.channel intermediaries

16.number& % ofnew distributors

17. percentofdamaged merchandise18. percentofastrayshipments

19.size oforders


89/100


Qualitative measuresofchannel performance

1.degree ofchannel coordination

2.degree ofcooperation

3.degree ofconflict

4.degree ofdomainconcensus (role prescription& variation)

5.recognitionofsuperordinate goals

6.degree ofdevelopmentofchannel leadership

7.degree offunctional duplication

8.degree ofcommitmenttochannel


90/100


9.degree offlexibilityinfunctions

10. availabilityofinformation about:

a) physical inventory

b) productcharacteristicsc) pricing structures

d) promotional data (personal selling assistance,

advertising, pop displays,special promotions)

e) marketconditionsf) services availability

g) organizational changes


91/100


11. assimilationofnew technology

12.innovationindistribution generated

withinthe channel

13. extentofintrabrandcompetition

14. extentofuse ofoptimal inventory

standards

15.relations withtrade associations as well

asconsumergroups

channels of distribution


92/100


ininternational context

4 basicroutes

1. exportation throughforeigndistributorsoragents oroverseas

marketing subsidiaries advantages are minimalinvestments andriskoffailuresdonotimpactthe organizationvery muchbutthedisadvantage isthe organizationhasverylittle control



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2. licensing companyforges a contractual

agreement withforeignorganizationto

manufacture &/orsell its productsinthe foreign

country Again while thisform may afford low investment

butintermsreal control the same maybe low

3. jointventure itis a more involvedroute

wherebythe participating organizationssharethe investment & risks



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4. directinvestment establishmentof

whollyownedsubsidiaryinthe foreign

country while controls are assuredrisks

ofexpropriation & nationalizationis alwayspresent



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While designing international distributionchannelsthe marketerneedstofocuson:

Adequate marketcoverage

Control overgoodsinthe channel Reasonable distributioncosts

Continuityofchannel relationships &

continuous presence inthe market Desiredvolume marketshare marginrequirements & ROI



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Foreignbased middlemen provide place & time

utilitybyholding goods at locationsconvenient

toconsumers, provide creditservice,bringsthe

manufacturercloserto market. Howeverdisadvantage the wholesalermayselectown

selling price mayhave less manufacturer loyalty

favoring high profithighturnoveritems. Hence

the issue boilsdowntoone ofcontrol the extent& quantum ofcontrol the manufactureris able to

exert



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Status & role ofwholesalersdiffercountrytocountry. One world wide trendin wholesaling isthe move toward more vertical integrationie.from wholesaler / retailertothe manufacturer.

Thus an exportermayfindhis productsblockedbythe wholesalersowncustom manufacturedproducts. Wholesalersoftenhave voluntarychainsofretailers who give purchase

commitmentsin exchange forcertainserviceslike creditsstocktake backsdealercooperativeadvertisements etc.



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Retailing formatscountrytocountrycanbe verydiverse intermsofsize scale locations Retailingbeing a localized activitycanbe deeplyinfluencedby prevailing social & cultural norms

as well as govt.controls Withindustrial progressretailing normally assumes largerunits eg.Supermarkets are more commonindevelopedcountries ascompared withsmallergrocersin

underdevelopedcountries with whom aninternational marketerwill findit more difficulttodeal & hence require wholesaler



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International physical distributionhasthefollowing complexities:

Transportationinvolving multiple modescanincrease risksofdamages, pilferage,delay

Distance & durationoftransportincreasescostoftransport as well ascostofinventoryintransit

Exposure tovariedclimaticconditionsoftennecessitate different packaging & storagearrangements

More documentations maybe necessary

Tariffs & customsduties are anotherfactor



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forservices

Since by and large services arepredominantlyintangible andcannotbestored andtransportedtheyhave tobe

soldthrough multiple outlets where acombinationofsimultaneous promotionand productionhastooccur

Service toservice the format maychange

Eg.banking hotel tours andtravelhospital chain franchisee

scm &dstrbtn mnagmntclass notes

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