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Management, Goregaon
Marketing Decision Issues: Distribution strategy can be shaped by how decisions are made in
other marketing areas as under:
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21) Product Issues
The nature of the product often dictates the distribution options available especially if the product
requires special handling. For instance, companies selling delicate or fragile products, such as
flowers, 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.
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32) Promotion Issues
4Besides issues related to physical handling of products, distribution decisions are affected by
the type of promotional activities needed to sell the product to customers. For products needing
extensive salesperson-to-customer contact (e.g., automobile purchases) the distribution options
are different than for products where customers typically require no sales assistance (i.e., bread
purchases).
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23) Pricing Issues
The desired price at which a marketer seeks to sell their product can impact how they choose to
distribute. The inclusion of resellers in a marketer’s distribution strategy may affect a product’s
pricing since each member of the channel seeks to make a profit for their contribution to the sale
of the product. If too many channel members are involved the eventual selling price may be too
high to meet sales targets in which case the marketer may explore other distribution options.
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24) Target Market Issues
A distribution system is only effective if target customers can obtain the product. Consequently, a
key decision in setting up a channel arrangement is for the marketer to choose the approach that
reaches target customers in the most effective way possible. The most important decision with
regard to reaching the target market is to determine the level of distribution coverage needed to
effectively meet customer’s needs. Distribution coverage is measured in terms of the intensity by
which the product is made available. For the most part, distribution coverage decisions are of
most concern to consumer products companies, though there are many industrial products that
also 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 to
the organization. Some of these expenses can be passed along to customers (e.g., shipping
costs) 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 an
analysis 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 – mass
coverage, selective and exclusive.
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31) Mass Coverage – The mass coverage (also known as intensive distribution) strategy
attempts 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 large
target markets (e.g., FMCG products). A product such as Coca-Cola is a classic example since it
is 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 selling
the product the cost of distribution is extremely high and must be offset with very high sales
volume.
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52) Selective Coverage - Under selective coverage the marketer deliberately seeks to limit the
locations in which this type of product is sold. The logic of this strategy is due to the size and
nature of the product’s target market. Products with selective coverage appeal to smaller more
focused target markets (e.g., air conditioners) compared to the size of target markets for mass
marketed products. Consequently, because the market size is smaller, the number of locations
needed to support the distribution of the product is fewer.
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73) Exclusive Coverage - Some high-end products target very narrow markets that have a
relatively small number of customers. These customers are often characterized as
―discriminating‖ 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. These
characteristics of the target market may lead the marketer to sell their products through a very
select 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-owned
stores. 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 how
distribution intensity works, the advent of the Internet has brought into question the effectiveness
of these schemes. For all intents and purposes all products available for purchase over the
Internet are distributed in the same way - mass coverage. So a better way to look at the three
levels is to consider these as options for distribution coverage of products that are physically
purchased by a customer (i.e., walk-in to purchase).
Q.3. A. Differentiate between direct and indirect distribution channels. Also mention the
parties involved in direct and indirect channels.
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2Ans.: Difference between Direct distribution & indirect distribution
3Direct Distribution System:
With a direct distribution system the marketer reaches the intended final user of their product by
distributing the product directly to the customer. That is, there are no other parties involved in the
distribution process that takes ownership of the product. The direct system can be further divided
by 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 through
information gained from non-personal contact with the marketer, such as by visiting the
marketer’s website or ordering from the marketer’s catalog, or through personal communication
with a customer representative who is not a salesperson, such as through toll-free telephone
ordering.
22) Direct Retail Systems – This type of system exists when a product marketer also operates
their 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 whose
main responsibility involves creating and managing sales (e.g., salesperson) is involved in the
distribution 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 by
phone) the salesperson plays a role in generating the sales.
4) Assisted Marketing Systems – Under the assisted marketing system, the marketer relies on
others to help communicate the marketer’s products but handles distribution directly to the
customer. 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.
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2) 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 may
sell 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 sell
the product.
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:
Creating a budget doesn't have to be a complicated or time-consuming task. Actually, in the
beginning, it's best to keep things simple. The key is to determine how much the company will
spend and earn in any given year, and then use that figure to project how it wants to grow in
subsequent years.
If it is a running business, it's simply a matter of digging through some records to see where the
money 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 the
business. Either way, a budget is simply a tool that allows them to put the money where it can
best 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 borrowings
The 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 expected
next year. For this it is necessary to look at what sales were made last year, and extrapolate and
forecast from that. New business owners without this kind of history should try to determine how
much 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 being
incurred 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 exactly
how much revenue & profit is needed every month to keep things afloat, and how much will be
left over for extra expenses. It will be far less tempting to spend money on business expenses
that aren't part of the plan. And that's really what a budget is for – to ensure that the expenses
aren'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? Once
you have made the selection, what would be your next step in order to make the new
recruits effective in their sales jobs?
Logistics the process of planning, implementing, and controlling the efficient, effective flow and
storage of goods, services, and related information from point of origin to point of consumption for
the purpose of conforming to customer requirements
Logistics is the science of planning and implementing the acquisition and use of the resources
necessary 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 items
ordered. 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 to
monitoring service levels relating to dependability.
Customer communication is essential to design of logistics service levels. The communication
channel 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 logistics
service information to the customer. In addition many customers request information on the
logistics status of shipments. The customer who needs information to plan operations expects the
logistics manager to provide answers on a timely basis.
Importance of Logistics: The logistics function includes sourcing and procurement, production
planning and scheduling, packaging and assembly, and customer service. It is involved in all
levels of planning and execution – strategic, operational and tactical. Logistics management is an
integrating function, which coordinates and optimizes all logistics activities, as well as integrates
logistics activities with other functions including marketing, sales manufacturing, finance and
information technology.
Logistics is much more and much wider than mere physical handling of goods. Logistics involves
several other functions such as purchasing, plant location, plant layout, etc., and even the
disposal of wastes. It covers astonishingly varied professional disciplines. They are:
11) Facility location
22) Planning
33) Forecasting and order management
44) Transportation: the mode and the route
55) Inventory management: all inventories
66) Warehousing
77) Protective packaging
Raw material and finished products had always to be moved, though on a small scale. Things
began changing with the advance in transportation. Population began moving from rural to urban
areas and to business centers. No longer did people live near production centers, nor did
production take place near residence centers. The geographical distance between the production
point and consumption point increased.
Since the early 1990's, the business scene has changed. The globalization, the free market and
the competition has required that the customer gets the right material, at the right time, at the
right point and in the right condition at the lowest cost. This is "globalization" and is not unusual
today. Here are some of the logistics functions that allowed this to happen:
11. Purchasing – of raw materials, assembled products, finished products from all over the world.
Where can you get the quality you want at the best price?
22. Manufacturing operations – how should the machines be organized, how many workers do
you need, where do you stock your materials and finished products, how many products do you
manufacture on each production run, etc.
33. Transportation – domestic and international, from raw materials to finished product; that
moves what, and when, and for what price?
44. Warehousing – product is either moving (transportation) or not (warehousing). This is
becoming a very sophisticated area and a key to shortening the time to market for products.
5. Inventory control – how much product is on hand, on order, in transit, and where is it?
Inventory drives logistics.
6. Import/export – international regulations and documentation can be complex. It takes a
specialist to understand the best way to get product across borders.
7. Information systems – globalization on today's scale is possible because there is technology
that transfers the needed information. Logistics functions are unavoidable costs to a company,
but today they are recognized as crucial to a company's competitiveness and profitability.
Ans.: Costs involved in distribution: In discussing selling and distribution expenses with
winery owners, they often start their list with the increased cost of labor, over-generous discounts,
or high commissions. These discussions usually center upon tasting room sales or winery direct
sales to local restaurants or wine shops. However, even if a winery does not maintain its own
sales force or uses outside brokers and salespeople, there can be hidden sales and distribution
expenses involved on the wholesale level. Consider some of the following:
These additional costs can impact profit levels if not anticipated when projecting net profits.
Once accurate production costs per case are established for each wine, pricing and profit levels
can be projected. However, sales and distribution costs must be determined in order to identify
expenses attributed to the cost of sales. Regardless of whether wineries maintain their own
salespeople, use outside sales teams, or develop a wholesaler network, there are expenses
incurred when attempting to sell their wines to restaurants and retailers. These selling costs
usually involve activities surrounding the storage, distribution, and selling of bottled case goods.
If case storage is not at the winery, storage and distribution expenses begin with wine stored in
an off-site warehouse location--or several locations--convenient for local and interstate trucks to
pick up, consolidate, and deliver wines to customers. Monthly case storage (by varietal and
vintage), can add up--especially if sales are not moving at as fast as projected. Storage costs
continue until a vintage is completely sold out, and is one of the most commonly overlooked
distribution expenses.
Assignment Set – 2
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 to
developing an appropriate forecasting technique. The main factors influencing forecasts are
demand, supply, and product-related Phenomena. On the demand side, a company must
ascertain whether demand is growing, declining, or has a seasonal pattern. These estimates
must be based on demand-not sales data. For example, a supermarket may have promoted a
certain 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 low
in July.
The supermarket should not use the sales data from 2002 to estimate that demand for this brand
will be high in July 2003, because this will only be the case if the same brand is promoted again
in July 2003 and other brands respond as they did the previous year. When making the demand
forecast, 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
of information will allow the supermarket to forecast demand for July2003 given the promotion
activity planned for that year.
On the supply side, a company must consider the available supply sources to decide on the
accuracy of the forecast desired. If alternate supply sources with short lead times are available, a
highly accurate forecast may not be especially important. However, if only a single supplier with a
long 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 and
whether these variants substitute for or complement each other. If demand for a product
influences 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 that
the demand for the existing product will decline because new customers will buy the improved
version. While the decline in demand for the original product would not be indicated by historical
data, 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.
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22) Determine the Appropriate Forecasting Technique
In selecting an appropriate forecasting technique, a company should first understand the
dimensions that will be relevant to the forecast. These dimensions include geographical area,
product groups, and customer groups. The company should understand the difference in demand
along each dimension. A firm would e wise to have different forecasts and techniques for each
dimension. At this stage, a firm selects an appropriate forecasting method from the four methods
discussed earlier-qualitative time series, casual, or simulation. As mentioned earlier, using a
combination of these methods is often effective.
At the end of the sales season, the company must compare actual demand to forecasted demand
to estimate the accuracy of the forecast. The observed accuracy should be compared with the
desired accuracy and the resulting gap should be used to identity corrective action that the mail
order 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 the
systematic component of demand and estimate the random component. The systematic
component of demand data, in the most general form, contains a level, a trend, and a seasonal
factor. 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 will
depend on the nature of demand. Companies may develop both static and adaptive forecasting
methods for each form.
2) Static Methods: A static method assumes that the estimates of level, trend, and seasonality
within the systematic component do not vary as new demand is observed. In this case, we
estimate each of these parameters based on historical date and then use the same values for all
future forecasts. In this section we discuss a static Forecasting method for use when demand has
a trend as well as a seasonal component. We assume that the systematic component of demand
is 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 t
D t =Actual demand observed in period t
F t =Forecast of demand for period t
In a static forecasting method, the forecast in period t for demand in period t + l is given as
follows:
F t +l= [L + (t + l) T] S t + l
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 Salt’s product is sold through a variety of independent retailers around the Lake Tahoe
area of the Sierra Nevada Mountains. In the past, Tahoe Salt has relied on estimates of demand
from a sample of their retailers but they have noticed that these retailers always overestimated
what 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. Tahoe
Salt now has data on the actual retail sales of their salt and they intend to work with the retailers
to create a more accurate a more accurate forecast with this data. This is the quarterly demand
data for the last three years from this we observe that demand for salt is seasonal with demand
increasing from the second quarter of a given year to the first quarter of the following year. The
second quarter of each year has the lowest demand of all quarter in the year. Each cycle lasts
four quarters and the demand pattern repeats itself every year. There is also a growth trend in the
demand, with sales growing over the last three years. The company estimates that growth will
continue in the coming in the coming year at historical rates. We now describe how each of the
three parameters-level, trend, and seasonal factors may be estimated. The following two steps
are 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 produce
10 million units a year whereas high-capacity plants can produce 20 million units a year as shown
in Cells H4:H8 and J4:J8, respectively. High-capacity plants exhibit some economies of scale and
have fixed costs that are less than twice the fixed cost of a low-capacity plant as shown in cells
I4:I8. All fixed costs are annualized. The vice president would like to know what the lowest cost
network should look like. Next, we discuss the capacitated plant location model, which can be
used in this setting.
Q.2 a. Identify and evaluate the different inventory reduction and cycle reduction
strategies.
Achieving Strategic Fit: This step ensures that what the supply chain does particularly well is
consistent with the targeted customer’s needs. The implied demand uncertainty represents
customer needs or the firm’s strategic position. The supply chain responsiveness represents the
firm’s strategy. In order to achieve strategic fit, the greater the implied demand uncertainty, the
more responsive the supply chain should be. If the implied demand uncertainty from customers is
increasing, it is best served with increasing responsiveness from the supply chain. This
relationship is represented by the “Zone if strategic fit”. To achieve complete strategic fit, a
company must consider all functional strategies within the value chain and it must ensure that all
functions in the value chain have consistent strategies that support the competitive strategy. All
functional strategies must support the goals/objectives of the competitive strategy and all sub
strategies within the supply chain (such as manufacturing, inventory and purchasing) must also
consistent with the level of responsiveness of the supply chain. Firms with different locations
along the responsiveness spectrum must have different functional strategies that support their
responsiveness. A highly responsive supply chain must devote all its functional strategies to
responsiveness, whereas an efficient supply chain must focus all its functional strategies on
efficiency. However it must be remembered that (i) there is no right supply chain strategy
independent of the firm’s competitive strategy and (ii) there is a right supply chain strategy for a
given competitive strategy of a firm.
CHASE STRATEGY:
A chase strategy implies matching demand and capacity period by period. This could result in a
considerable amount of hiring, firing or laying off of employees; insecure and unhappy
employees; increased inventory carrying costs; problems with labor unions; and erratic utilization
of 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-time
production concept utilize a chase strategy approach to aggregate planning. Most firms find it
advantageous 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 goals
and policies and achieve their costs than either of the pure strategies used independently.
Logistics managers need to know more about information systems, technologies and their
management. But unfortunately, they do not always have the information needed to make
effective decisions.
Often, information available to logistics managers may not be accurate and hence tends to cause
sub optimal management decision-making. Many firms use out-dated cost accounting and
management control systems. Such systems distort product cost information and do not produce
the information that logistics managers need to make best decisions.
To be useful to managers, information needs to be communicated effectively. Information need to
be communicated in the language of the intended recipient to facilitate accurate perception of the
information communicated. Effective communication requires knowledge of the recipient can
perceive, what the person expects to perceive and what the person intends to do with what is
perceived. Examples:
1. Bar coding,
2. Electronic Data Interchange (EDI)
3. XML (Extensible markup language),
4. Data management,
5. Imaging,
6. Artificial intelligence/expert systems
7. RF technology and
8. Computers on board and satellite tracking,
9. Intranet/Extranet,
10. E-commerce.
Vertical marketing systems can take several forms. In a corporate VMS, one member of the
distribution channel owns the other members. Although they are owned jointly, each company in
the chain continues to perform a separate task. In an administered VMS, one member of the
channel is large and powerful enough to coordinate the activities of the other members without an
ownership stake. Finally, a contractual VMS consists of independent firms joined together by
contract for their mutual benefit. One type of contractual VMS is a retailer cooperative, in which a
group of retailers buy from a jointly owned wholesaler. Another type of contractual VMS is a
franchise organization, in which a producer licenses a wholesaler to distribute its products.
The concept behind vertical marketing systems is similar to vertical integration. In vertical
integration, a company expands its operations by assuming the activities of the next link in the
chain of distribution. For example, an auto parts supplier might practice forward integration by
purchasing a retail outlet to sell its products. Similarly, the auto parts supplier might practice
backward integration by purchasing a steel plant to obtain the raw materials needed to
manufacture its products. Vertical marketing should not be confused with horizontal marketing, in
which members at the same level in a channel of distribution band together in strategic alliances
or 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. In
this 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. In
addition, 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 by
developing close relationships with suppliers and distributors. "What suppliers or distributors
would you buy if you had the money? These are the ones to work with and form a strong
relationship," 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 concepts
in its distribution, logistics and supply chain systems. If you were an employee of this
company, why do you think the top management would take this step? Are there any
benefits of green supply chain management?
ii) Logistics information system combine hardware and software to manage, control and measure
logistics activities which occur within specific firms as across the overall supply chain.
Hardware includes computers and servers, Internet technologies such as barcode and RF
devices, communication channels and storage media.
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 more
successful than other firms, which do not have such abilities.
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1iii) Companies need better information on their customers (such as customer service and sales
forecasting), information on their suppliers, (such as production planning and sourcing and
purchasing). Areas of technology systems including decision support system/information
technology and logistics management activities were not delivering needed information to the
management for making strategic decisions.
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3iv) The order processing system is the nerve center of the logistics and supply chain
system. A customer orders provides the communication message to set the logistics process in
motion. 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 manufacturing
inefficiencies caused by frequent changes in the production line. The order processing and
information system forms the foundation for the logistics and corporate management information
systems.
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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 logistics
practices include use of logistics information systems as a key to competitiveness.
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7vi) Computer based decision support systems (DSS) support the executive decision making
process in logistics and supply chain management. To support time-based competition, firms are
increasingly using information technologies as source of competitive advantage. Systems such as
a quick response (QR) just in time (JIT) and efficient consumer response (ECR) are
integrating 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 export
systems are being used directly to support decision-making in logistics and supply chain
management.
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1vii) Today, companies are restructuring their businesses to function in the new era of electronic
commerce. Organizations can have a deluge of information on dictums, business-to-business
requirements and online customer and supplier linkages. ERP systems, purchasing databases
and data warehouses, electronic data interchange (EDI), business to business electronic
commerce are recent developments which are applied in logistics and supply chain management.
To be successful in the new visual e-based economy, even traditional companies are taking
notice of the need for new information systems. The next generation of systems will promote the
free 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 having
competitive advantage in terms of speed and excellence of education. The drivers of new supply
chain systems and the new e-economy are:
1i) Internal and external strategic integration
2ii) Globalization and communication
3iii) Data information management
4iv) New business processes
5v) Replacement of obsolete systems and
6vi) Strategic cost management
These are briefly discussed in the following paragraphs:
i) Internal and External Strategic Integration: As supply chain members work increasingly
together, it becomes necessary to integrate the different functions such as purchasing,
engineering manufacturing, marketing, logistics, accounting etc., which are internal to the
organization as well as between parties that are external to the organization (end customers, third
party 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 same
information system, which spans across business sites and functions. This can be accomplished
through a company wide enterprise resource planning system (ERP) that links these internal
groups together via a single integrated set of master records.
External integration refers to the systems, which link the external suppliers and distributors to the
firm. It is needed to forecast demand and balance the levels of supply and demand at different
points in the supply chain. Internet linkages, network communications and electronic data
exchanges are example \s of systems used for external integration.
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2ii) Globalization and Communication: Firms require systems which enable them to carry out
their 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 component
standardization worldwide and improve communication of their strategies across global business
units and supply chain partners. Supply chain systems must be able to communicate in a variety
of languages even though English is the universal language of the Internet.
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4iii) 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 internal
users. Information systems must be able to effectively filter, analyze and store abundant data to
enable effective decision-making. It must be possible for the users to access databases and
extract the needed information to make better supply chain decisions. This achieved through
systems known as data warehouses.
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6iv) New Business Process: In the final two decades of 20th century, many organizations went
through the process of business process reengineering (a form of restructuring) in an effort to
increase productivity and reduce costs. Along with this change, organizations adopted computers
and information systems to perform tasks, which were performed manually earlier. Even after
these changes, business processes are constantly being changed to respond to a rapidly
changing environment. Such business processes include customer order management, supplier
evaluation and selection and new-product development. In this processes of change, firms can
create a “rapid response” capability, which allows them to quickly adept to their customers’
changing 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 system
usage such that each function such as purchasing, engineering, accounting etc., use its own
system which was not linked to other systems. Such systems are referred to as obsolete systems
or legacy systems, which need to be integrated into a single enterprise-wide system used by
everyone in the supply chain.
vi) Strategic cost management: The complete supply chain cycle, from order fulfillment back to
purchasing and order payment, involves a large number of transactions between different
members of the supply chain. Firms used to automate the cost based on outdated cost
accounting systems in order to determine specific cost drivers behind different business
processes. But the new systems develop promise to automate data capture throughout supply
chain systems. This has automated the transactions that occur in the traditional procurement
cycle. This will reduce the costs of purchasing and logistics departments, and considerably
reduce 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 and
customer complaints. The store manager is your friend and is needs your help in
managing inventories. Kindly help him and his business.
Ans.: There are a few things, which the perfect retail store manager will embody. One positive
trait, which makes a wonderful retail store manager, is an individual who has exceptional
conversational skills. Since a main component of a retail store manager’s daily duties is to
interact with customers and employees, it is very important that they know how to converse in
such a manner which is courteous yet effective. Looking for individuals with this trait will help
interviewers 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 possible
candidate for the job, it still is a highly desirable one. Choosing a retail store manager who has
some past managerial experience will equate with less training that is needed and perhaps a
more established and useful manager overall.
Another trait to look for in a potential retail store manager is professionalism. A professional store
manager not only will benefit the customers who enter the store on a daily basis but will be a
good morale booster for other employees as well. A professional retail store manager does not
have to be stuffy yet must know when it is the right time for serious behavior and when he/she
can 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 to
have 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 apply
to the personal sales force.
Following are the important tasks involved in the success of sales management in any
organization:
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 force
1010. Managing the sales force
1111. 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 sales
organization 16. Co-ordination with marketing management in the areas like, product mix, pricing,
distribution, advertising and sales promotion. 17. Creating and maintaining the right image for the
company and its products in the market.
Management Competencies:
Sales management competencies are defined as sets of knowledge, skills, behaviors, and
attitudes 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 will
discuss six competencies that are needed for today’s sales management responsibilities. These
competencies are as under:
a) Strategic Action Competency: Understanding the overall strategy and goals of the company
and ensuring that the manager's actions and those of the people he/she manages are consistent
with 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 assign priorities and makes decisions that are consistent with the firm’s mission and strategic
goals
• 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 the
organization
• To establish tactical and operational goals that facilitates the firm’s strategy implementation
Today’s sales managers are being challenged to think strategically in order to improve their job
performance. One dimension of strategic thinking is to anticipate strategic trends in the industry
and to make the appropriate adjustments to take advantage of these changes. Failure to do so
may be very costly. The plight of Encyclopedia Britannica Corporation is a good example of the
possible penalty for ignoring important industry trends. First published 225 years ago in
Edinburgh, Scotland, sales of Encyclopedia Britannica peaked in 1990 at $650 million, with profits
of $40 million.
As CD-ROM technology gained acceptance, however, Britannica’s management failed to respond
and continued to market through a direct sales force of 2,300 people. Part of the reason
Britannica 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 have
dropped significantly. It also would have required marketing through competing channels of
distribution such as retail outlets, direct mail, and telemarketing, a change the powerful direct
sales force would have resisted. Sales have declined drastically, the company is in financial
trouble, 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 which
the manager works. Goals and standards will flow from above. Unless the manager is well
connected 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 must
be developed, which will have implications for how resources are allocated across various market
opportunities, what types of customer relationships are developed, and how the account
interaction is executed.
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, whereas
salespeople 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 feedback
and encouragement to a salesperson or sales team member with the goal of improving that
person’s performance.
• Performance improvement is achieved by:
Ans.: Supply chain process consists of all parties involved directly or indirectly in fulfilling a
customer request. It not only includes the manufacturer and suppliers but also transporters,
warehouses, retailers and customers themselves. Within each organization such as
manufacturer, 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 goods
from the raw materials stage through to the end user as well as the associated information flows.
Supply chain extends from customer’s customer to supplier’s suppliers. In today’s rapidly
changing business environment, even greater demands are being placed on business to provide
right products and services quicker with greater added value to the correct location with no
relevant 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 suppliers
Each stage need not be presented in a supply chain. The appropriate design of the supply chain
will depend on both the customer’s needs and the roles of the stages involved.
Following figure represents a simplified form of supply chain process
All process in supply chain fall into one of the two categories: i) Push Process and ii) Pull
Process. In pull process, execution is initiated in response to a customer order.
In push process; execution is in anticipation of customer order. At the time of execution of a pull
process, demand is known with certainty whereas at the time of execution of a push process
demand is not known but forecasted.
Data warehousing is defined as a process of centralized data management and retrieval. Data
warehousing, like data mining, is a relatively new term although the concept itself has been
around for years. Data warehousing represents an ideal vision of maintaining a central repository
of all organizational data.
Data warehouse is a repository of an organization's electronically stored data. Data warehouses
are designed to facilitate reporting and analysis.
This definition of the data warehouse focuses on data storage. However, the means to retrieve
and analyze data, to extract, transform and load data, and to manage the data dictionary are also
considered essential components of a data warehousing system. Many references to data
warehousing use this broader context. Thus, an expanded definition for data warehousing
includes business intelligence tools, tools to extract, transforms, and load data into the repository,
and tools to manage and retrieve metadata.
Some of the benefits that a data warehouse provides are as follows:
• a data warehouse provides a common data model for all data of interest regardless of the
data's source.
• Information in the data warehouse is under the control of data warehouse users so that, the
source system data is purged over time.
• The information in the warehouse can be stored safely for extended periods.