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The distribution structure of ITC can be broadly divided into four layers as given below:-

1.m Factories or the Manufacturing units

2.m Go-downs or Hubs
3.m Exclusive Distributors
4.m Wholesalers, Retailers etc.

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The diagram above gives the network of partners in the value chain that operate together to
bring products from producers to ultimate consumers. These include distributors, wholesalers,
retailers, Pan Shops, malls etc. They are called intermediaries or middlemen between the
company and the ultimate consumers. The value chain starts from the Manufacturing units for
various sectors that ITC deals with starting from cigarettes, biscuits to all other FMCG products.
The go downs/hub is the hub which supplies the assortments to the distributor who in turn
supplies them to wholesalers, retailers, Pan shops and malls. The wholesalers supply to many
small retailers. The stocks of goods flow from manufacturing units to the consumer and
information flows back to the company from the consumer through the channels.

            
 

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m


: Goods are manufactured and supplied to the hub or go downs. The carrying
and forwarding (C&F) agent picks up goods from the factory and stores in its go downs using
trucks. The truck is billed against the various wholesalers.

  The main function of C&F is to maintain the go downs and to break the bulk of the supply from
the manufacturing units. It supplies to different wholesaler distributors using LCV like Tata Ace.
ITC pays monthly remuneration to C&F and it owns the go down.


m 
 There are branch offices for every go down respectively. They act as the
connection between the wholesale distributors and the factories. The monthly demand (through
weekly demand estimation done by the supervisors) is done by branch offices and it is updated to
the factories through ITCǯs ERP systemî

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m 

 They are responsible for supplying to the retailers on a daily basis for
tobacco business and on a weekly basis for other businesses. The salesman travel either on cycles
or a motorized vehicle for tobacco business since service is high and volume is low. The wholesaler
receives 2% of sales as commission. If the wholesaler fails to supply to a location he transfers the
responsibility to a secondary wholesaler appointed by ITC. The entire margin is then absorbed by
them.

 
 There are mainly four types of retailers that ITC caters to as give below:

1.m Grocery stores

2.m Pan shops & small kiosks
3.m Hotels and Restaurants
4.m Supermarkets/Malls

  
   

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m
m  mThis is the most obvious and first function of channels. Retail
advocacy is very high in India and hence the role retailer is very critical here for availability
of offerings. Moreover retailers are great source of information for the factory. This is
because the retailer is closest to the customer. The retailer is also involved in sales and
promotion.
m



mmThey need to finance the inventory as they take the physical ownership of the
goods since inventory always has carrying costs.m
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m
m mm

m 
mDnce the channel members take the physical ownership of the products the
onus for selling the products lies on the channel member. Thus risk taking and sharing
becomes a significant role of marketing channels.m
m
 m
mSome value added services are offered by the marketing channels
as well. Servicing of cars, bikes or home delivery etc. are some examples of such services.
For FMCG products which ITC deals with, the scope of value added services may not be as
many.

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Îaushik

  


Dne of the critical issues that can impact a distribution network is channel conflict. Channel conflict
is a big problem in distribution and ITC tries to resolve these issues by calling meeting among the
parties involved if such a circumstance gets created. These meetings between channel partners are
quite regular, four to five times a year. These meetings are conducted by the Branch Managers so
that they can come to know about the prevailing scenario. The other important aspect of such
meetings is review and appraisal of the channel partners.
The prime reason for channel conflicts is snatching sales from neighboring territories. Even though
respective territories are allocated in the beginning with strict vigilance from the sales authorities
and likelihood of channel partners eating into other territories is minimal there are some rare
instances where this has occurred and can occur. There are certain cases wherein personal issues
between the sale personnel of a channel partner and retailer culminates into such unfortunate
scenarios. The retailer may take then take the services of another channel partner and the earlier
sales personnel may as well end up selling to another outlet situated outside the territory assigned
to him in order to meet his sales targets. These situations though rare ought to be avoided as they
could lead to channel conflicts. This problem is referred to as infiltration. Such rare cases are
resolved by the Area sales manager by calling meetings between the channel partners involved.