Module-I: Definition, objectives, Functions and classification of Sales Management, Selling under the Marketing concept, Interdependence of Salesmanship

and Advertising. The Sales Organization: Purpose, principles and policies of sales organization, Setting up of the sales organization, Typical sales organization structure, planning of the selling factors.

Definition, objectives, Functions and classification of Sales Management: Definition: Sales management is a sub-system of marketing management, which translates the marketing plan into marketing performance. Sales managers in the modern organization are required to be customer oriented and profit directed and performs several tasks besides setting and achieving personal selling goals of the firm. Sales management as defined by the American marketing association, The planning ,direction and control of personal selling including recruiting, selecting, equipping, assigning , routing, supervising, paying and motivating the sales force. It is important to differentiate sales management from personal selling and salesmanship. Sales management directs the personal selling efforts, which in turn is implemented largely through salesmanship. Personal selling is a broader concept than salesmanship. It is the art of successfully persuading prospects or customers to buy a product or service from which they can derive suitable benefits, thereby increasing their total satisfaction. Sales managers have still other responsibilities. They are responsible for participating in the preparation of information critical to take key marketing decisions, such as those on budgeting, Quota setting and territory management. They also participate in product decisions, marketing channels and distribution policies, advertising and other promotion and pricing. Thus a sales manager is both an administrator in charge of personal selling activity and a member of the executive group that makes marketing decisions of all types. Sales management is a key function in many kinds of enterprises. It may be a manufacturing concern, a wholesaling unit, a retail outlet, a real estate broker, or a automobile dealer. Even firms selling intangibles such as insurance companies, stock brokers, mutual funds, tours and travel have sales management problems. Objectives of sales management: From company viewpoint there are three general objectives of sales management. These are as follows: Enhancement of sales volume. Contribution to profit Continuous growth. Though the sales manager is responsible to make major contribution on the above areas, yet the top management is accountable for supplying an ever-increasing

volume of socially responsible products that the final buyers want at satisfactory prices. To achieve the above objectives, the following goals are set for the sales manager. 1. Sales executives provide estimates on market and sales potential. 2. To guide and lead the sales personnel and middlemen. 3. To develop strategy for future operations. 4. To provide information to the higher management for making marketing decisions and for setting sales and profit goals. 5. Comparing marketing opportunities with the projected growth rate, the sales manager is responsible for achieving a particular sales volume, gross margin and net profit in units of products and in dollars. 6. To create and maintain relationship with the channel members. 7. To negotiate with the customers. 8. To provide smart service and develop the goodwill for the firm. 9. To provide solutions to the problems Functions of sales management: The determination of sales force objective and goals Sales force organization, size, territory, and quota finalization Sales forecasting and budgeting Sales force selection, recruitment, and training Motivating and leading the sales force Designing compensation plan and control systems Designing career growth plans and building relationship strategies with key customers Selling under the Marketing concept: Sl. No. 01 02 03 04 05 06 07 MARKETING Emphasis is on customers needs and wants. SELLING Emphasis is on the product, and the needs and interests of the seller. Sales are the primary motive.

Satisfaction of the customer is primary. Planning is long-term oriented. Planning is short-term oriented. External, market segmentation. Internal, company orientation. Consumer determines the price Cost determines the price. and price determines the costs. It is an activity that converts the It is an activity that converts the consumer needs into products. goods into cash. Marketing overall a whole process.Selling is a part of marketing process.

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Emphasizes on innovation in every Emphasizing on staying with the sphere; on providing better value existing technology and reducing to the customer by adopting the the cost of production. most innovative technology.

Interdependence ship between salesmanship and advertising: Salesmanship is an art of successfully persuading prospects or customers to buy a product or services from which they can derive suitable benefits, thereby increasing their total satisfaction. Salesmanship therefore is a seller initiated effort that provides prospective buyers with information and other benefits, motivating and persuading them to decide in favor of the sellers product or service. Personal selling effort is a two way communication process. It can be easily measurable. Advertising is any form of non-personal form of communication between the buyer and seller by an identified sponsor. Advertising is a one way communication. In advertising customer does not come in direct contact with any representative of the organization. So the reaction, attitude or perception of the viewers cannot be immediately gauged in advertising.

%age of Promotion al effort

Personal selling

Advertising Simple/ Inexpensive goods Complex/Expensiv e goods

Let us understand a very interesting aspect of advertising and selling, about the relative importance of the two, during the three different stages i.e. pre-purchase phase, the purchase phase and the post purchase phase. of a products/brands market. Pre-purchase stage is a time period when the companies try to generate demand for the product. In

purchase stage the customer actually buy the product. In postpurchase stage the consumer evaluates his/her purchase decision. The figure shows that personal selling has an increasing role in all the three stages of purchase decision and particularly a leading role in the purchase stage. But advertising has a leading role in the pre-purchase stage and post purchase stage to generate mass demand and congratulating the consumer for taking the right product decision. The Sales Organization: Effective sales executive insist upon sound organization. They recognize that the sales organization must achieve both qualitative and quantitative personal selling objectives. The qualitative objectives are instrumental for the long term growth and the quantitative objectives in terms of sales, profit and market share are important for the short term growth of the organization. Therefore the sales organization needs people striving jointly to reach qualitative and quantitative objectives by creating a suitable structure of human relationship. The sales organization should not have a rigid structure. It should have build-in adaptability to respond appropriately in fluid and diverse marketing environments. Purpose: The sales organization must not be worried of designing a formal structure. How an organization works is more important than how it suppose to function. Sales management should direct its organizational efforts towards a informal organization through intelligent leadership. The followings are the purpose of setting a sales organization. 1. To permit the development of specialists: The sales department is organized and reorganized to retain the specialized workforce through proper delegation of authority and responsibility. When the organization grows, the tasks also grow in number and complexity. Therefore it needs to be broken into smaller parts through division of labor. So the structure needs to be reshaped to encourage the specialists to develop. 2. To perform all necessary activities: When an organization grows and specialization increases, it becomes difficult to supervise all the activities. Therefore the change is required to restructure the system. For instance, when the company is small, its executives are in close contact with the end users of the product. But as the company grows, as the marketing channels lengthen and the marketing area expands geographically, the executives become farther and farther from the customers. Therefore the company appoints public relation officer and missionary salesperson to keep such contacts. So there is a change in the structure. 3. To achieve co-ordination or balance: Sales people are the field workers. The entire department is target oriented either qualitatively or quantitatively or both. Sometimes they do not prefer to work in the team because of ego miss-match. Motivating individuals to work together toward common objectives is important in achieving co-ordination. Individual goals are subordinated to the organizational goals. This is achieved through indoctrination and training programmes, group meetings, supervision and guidance and two way communications. Throughout the sales organization different activities are kept

in proper relation to one another in order that the greatest organizational effectiveness is realized. Modern sales organizations should be divided into small, freely communicating and face to face groups to reduce the possibility of un coordinated proliferation. 4. To define authority: Sales executives should know whether their authority is line, staff or functional. Where as the functional authority is suitable technical product or services the staff authority is combined with the line in providing consultancy or advice to the line members. The sales organization should be clear whether the order is unidirectional or multi directional. The organization should be developed to promote harmony among the employees. 5. To economize on the executive time: As the sales departments operations and activities increase in complexity and number, additional subordinates are added. This permits the higher ranking sales executives to delegate more authority towards planning decisions and less time on operational activities. Therefore the lower level sales executives have wider span of control and the higher levels have lower span of control. This change will definitely initiate structural reforms in the organizational set-up. It is all important for time and man management. Principle and Policies of organizational structuring: There must be clear lines of authority running from the top to the bottom of the organization. b. Responsibility should always be coupled with corresponding authority. c. Authority should be delegated as far down the line possible. d. The work of every person should be confined as far as possible to the performance of a single leading function. e. There should a limit to the number of positions that can co-coordinated by a single objective. f. The number of levels of authority should be kept as a minimum. g. The organization should be flexible so that it can be adjusted to changing conditions. h. The organization should be kept as simple as possible. The responsibility and authority of each level should be clearly defined, if necessary in writing. Setting of a sales organization: There are basically five major steps in setting up a sales organization. These are as follows: 1. Defining the objectives: The objectives of the sales department are derived from the objective of the company. Looking into the vision, the top management establishes the shape of the organization. The top management for instance may want the firm not only to survive but to achieve industry leadership, develop a reputation for outstanding technical research, diversify in product lines, provide excellent service to the customers, provide generous return to the investors or establish an image for public responsibility and so on. From these composites, the sales management determines the a.

2.

3.

4.

5.

implications for the sales departments and articulates a set of qualitative and quantitative personal selling objectives. The general objectives may be summed up in three words: sales, profits and growth. Determination of activities and their volume of performance: Fundamental to the sound organizational design is the determination of all the necessary activities and estimating their volume of performance. Then only we can know what executive positions are required and what should be their relationships to the other positions, and what should be the duties and responsibilities of the persons who fill these positions. Grouping activities into the positions: After the activities are identified, they are allocated to different positions to achieve certain objectives. This is mainly done through job description (in terms of reporting relationships, job objectives, duties and responsibilities and performance measures.) Activities are classified and grouped so that closely related tasks are assigned to the same position. But there is variation in job challenge, interest and involvement. Generally in very large organizations, where extreme specialization is practiced, the position comprised of single activity and the burden of proof should be on those proposing such a move. Sometimes a single position is responsible for highly diversified activities like product merchandising and pricing. It has implications in organizational design. Assignment of personnel to positions: The next step is to assign personnel to positions. This is the fitment study. It is a very controversial debate whether the unique talents and abilities those are prudent and profitable will be having the same positions or the positions need to be modified. The ideal approach before the planners to permit situations to have individual growth into a particular job. Provision for co-ordination and control: Co-ordination and control is obtainable through both informal and formal means. Strong leaders control and co-ordinate the efforts of their subordinates largely on an informal basis through their personality. Such leaders make minimal use of formal instruments of control and co-ordination. But the sales executives prefer to use formal means of control to improve effectiveness. The most important formal instrument of organizational control is the written job description where the reporting relationship, job objectives, duties and responsibilities, performance measurements etc are clearly mentioned.

Sales organization structure: There are basically four types of sales organizations from the standpoint of position and relationship. These are as follows: 1. Line organization 2. Line and staff organization 3. Functional organization 4. Committee organization

Line Organization: It is the oldest and the simplest form of sales organizational structure. It is widely used in smaller firms with small number of selling personnel. For instance the companies that cover limited geographic location or sell narrow product line. The chain of command flows from the top sales executives down through subordinates. All executives exercise line authority and each subordinate is responsible only to one person in the next higher order. The lines sales organization sees its greatest use in companies having a vertical structure and all sales personnel report directly to the chief sales executive. There is no cross communication between persons at the same level. This is purely indirect and effected through the next higher level.

Gen. Manager Sales manager

Asst. S. Mgr Div- 1 Sales people

Asst. S. Mgr Div-2 Sales people

Asst. S. Mgr Div-3 Sales people

Asst. S. Mgr Div-4

Sales people

As per the above figure , if the assistant sales manager of division 1 wants to contact with the assistant sales manager of division 2, it can be effected through the sales manager. Similarly the sales people of two division can interact each other through the assistant sales manager which is ultimately through the sales manager. The basic simplicity of the line organization is the main reason for its use. The clarity of authority and responsibility saves time in policy making, deciding new plans and converting plans into action . But the greatest weakness of this structure is the excessive dependency on the department head and therefore inappropriate for the growing concerns having large sales staffs. Line and staff organization: The line and staff sales department is often found in large and medium sized firms, employing substantial number of sales personnel, and selling diversified product lines over wide geographic areas. In contrast to the line organization, the line and staff organization provides the top sales executives with a group of specialists- experts in dealer and distributor relations, sales promotions, sales analysis, sales training, sales planning, service, traffic and warehousing and similar fields These staffs helps the top sales executives by providing the necessary informations and saves

the time of the top executives. Similarly the tasks involving deep study and analysis are given to the staffs and the top sales executives devote more time towards planning and strategic matters. The staff sales executives do not have authority to issue orders and directives. Their recommendations are submitted to the top sales executives and if approved is transmitted to the line members for its implementation. The advantages of the line and staff organization are mainly those of specialization. The chief sales executives being relieved from much detailed work, can take a broader view to the department. Problems can be seen in clear perspective and connection between un related problems are brought into focus. A pool of experts provides advice and assistance in the specialized fields. President

V.P- Marketing

Advertising Mgr

Gen. Sales Mgr

Mgr- Marketing Research Mgr- Sales Promotion Dic. Dealer &Distributor Relations

Dic. Sales Training

Dic. Sales Personnel

Asst. Gen. Sales Mgr District Sales Mgrs (6) Branch Sales Mgrs (32)

Sales Personnel (450) The greatest weakness of the line and staff model is the role ambiguity and conflict. The success of this model depends upon the co-coordinated effort between the line and staffs which is very much costlier. Sufficient time should be devoted for problem recognition and corrective action which may hamper the decision making process. Functional Sales Organization: Some few sales departments use functional organization .This structure has been developed as the brainchild of Frederic W Taylor which is based upon the principle of specialization. The outstanding advantage of the functional sales department is improved performance. Specialized activities are assigned to the experts whose guidance should help in increasing the effectiveness of the sales force. The sales operations are highly centralized and therefore becomes ineffective for

many large firms. Even the practicality of a functional organization do not finds its feasibility for small and medium sized firms. It is not financially possible to adopt high degree of division of labor.

Director of Sales Administration

MgrInstallation & service

Mgr- Sales Training

Mgr- Sales Promotion

Mgr- Dealer & Distributor Relation

Salesperson

Salesperson

Salesperson

Salesperson

It is sometimes contended that functional organization is suitable for large firms with stable operations and opportunity for considerable division of labor. But the large companies with stable selling operations are the exceptions rather than the rule. Committee sales organization: It is not the sole basis for organizing a sales department. It is a method of organizing the executive group for planning and policy formulation while leaving the actual operation including implementation of plans and policies to the individual executives. Therefore the organization may have many committees such as sales training committees, customer relation committees, human resource committees and new product committees. The sales training committee may consist of sales training manager, his/her assistants, the general sales manager and the regional sales manager. All the members sit together to draft training plans and formulate sales training policies but its implementation sole responsibility of the sales training manager. The use of committees in the sales department has many advantages. Before policies are made and action is taken, important problems are deliberated by committee members and are measured against varied viewpoints. It also promotes co-ordination among members of the executive team. But the committee meetings consume more time. Therefore the agenda of the meeting should be properly framed to avoid wastage of time. The marketing organization can be organized on any of the following basis: a. b. c. d. e. Function-oriented Sales Organization. Product-oriented Sales Organization. Customer-oriented Sales Organization. Geography-oriented Sales Organization. Combined-based Sales Organization.

a. Function-Oriented Sales Organization: When departmentation of sales organization is done on the basis of sales activities, it is called departmentation on function basis. MARKETING MANAGER

Advertising Deptt.

Sales Promotion Deptt

Marketing Research Deptt.

Sales Planning Deptt.

Sales Manager Sales Supervisor Sales Supervisor

Salesman b. Production Oriented Sales Organization:

Salesman

Product type of departmentation is done when the enterprise produces or manufacturers or markets different types of products. In this case separate sales executives are appointed for each product or group of products in the product line. Each will have its own organization to perform the various sales tasks. GENERAL MANAGER MARKETING

Marketing Officer Product - 1

Marketing Officer Product - 2

Marketing Officer Product - 3

Sales Supervisor

Sales Supervisor

Sales Supervisor

Salesmen

Salesmen

Salesmen

c. Customer-oriented Marketing Organization: When the departmentation sales organization is done on customer basis, it is called customer oriented Marketing Organization. We may also call it as departmentalization on the basis of distribution channels. MANAGER MARKETING Sales Officer Direct Marketin g Salesme n Sales Officer Foreign Customer s Salesme n

Sales Officer Channel Mktg. Salesme n

Sales Officer Industrial Products Salesme n

Sales Officer Consumer Products Salesme n

d. Geography/Territory Oriented Marketing Organization: Here for the selling of a particular product types, the total marketing area is divided into territories. Each territory is under the control of a separate sales executive. He is assisted by a separate sales force. COUNTRY MARKETING MANAGER

Regional Sales Manager NORTH

Regional Sales Manager SOUTH

Regional Sales Manager EAST

Regional Sales Manager WEST

Sales Supervisor

Sales Supervisor

Sales Supervisor

Sales Supervisor

Sales man

Sales man

Sales man

Sales man

e. Combined-base Marketing Organization: The combination of two more basis of departmentation such as territorial, product and customers basis etc. is called combined basis of departmentation of sales organization. Planning of the selling factors: Examine customers in each market. Determine the types of sales jobs needed to serve a market. Note the job activities salespeople must do. Design sales jobs around customers. Set up the sales force organizational structure, which includes the various sales jobs and geographic territories. Product and service related factors Organization related factors Marketing mix related factors External factors: . The speed of market change . Reduction in the number of vendors per buyer . Closer to customer relationships . Changes in regulations and international practices

Other Factors like: The product The customers Territory Techniques of selling Promotional materials His/Her own organization Targets

Stages in the selling process:

Pre-sale preparation

Prospecting

Preapproach before the interview Handling Customer Objections

Approach to the customer

Follow up action

Closing the Sale

Sales Presentation

Module II - Sales Forecasting - Sales strategies and policies determining the size of the sales force, - Sales territories, routing and scheduling, - Controlling the selling effort - Sales budget and budgeting procedures - Quota setting and administration. - Management of sales force: Personnel problems of sales management, recruiting and selecting, training and development, motivating salesman, sales meetings and contests, compensating sales personnel, evaluation and supervising salesmen. =============================================================== Sales Forecasting: Sales Forecasting: Sales forecasting is as estimate of sales, in dollars or physical units, in a future period under a particular marketing programme. A sales forecast may be for a single product or for an entire product line. Although a sales forecast can be made for a short run or long run yet the short run or operating sales forecast is important to the sales executive. The operating sales forecast is the prediction of how much of a companys particular product (or product line) can be sold during a future period under a given marketing programme and an assumed set of out side factors. Sales Forecasting Methods: The sales forecasting methods are the procedures for estimating how much of a given product (or product line) can be sold if a given marketing program is implemented. No sales forecasting method is foolproof. Each is subject to error. But some are unsophisticated such as expert opinion or the pool of salespersons opinion and others are sophisticated as they use statistics. Therefore the well managed companies do not rely upon a single sales forecasting method but use several of them. The followings are the different sales forecasting methods. Jury of Executive Opinion: According to this method, a company invites the opinion of the executives and consultants who are well informed about the industry outlook and the company marketing position, capabilities and marketing programme. The companies use this experts opinion method for one or more of the four reasons. 1. This is a quick and easy way to turn out a forecast. 2. This is a way to pool the experience and judgment of well informed people.

3. This is a feasible approach for the young companies who do not have experience in other forecasting methods. 4. This method may be used when adequate sales and market statistics are missing. But the weakness of this method is the difficulty of breaking down the estimates of probable sales by products, by time intervals, by markets, by customers and so on. The Delphi technique: In this method the experts responds to a sequence of questionnaires which is vividly discussed. Out of the brainstorming the estimate is calculated on the basis of past performance. Poll of Sales Force Opinion: This is otherwise known as the grass-root approach. Here the individual sales person forecast sales for their territories. These individual forecasts are combined and modified as the management thinks necessary to arrive at the company sales forecast. This approach appeals to the practical sales managers because the forecasting responsibility is assigned to those who produce the results. Furthermore, there is a merit in utilizing this method as the salesmen become closest to the market conditions. Again the quota can easily be broken down according to the products, territories, customers, middlemen and sales force. But the weakness of this method is the use of inexperienced sales force who sometimes become optimistic or pessimistic about the sales prospects just looking at the current business conditions. Some times they are too near the trees to see the forest. They are unaware of the sudden changes in the business conditions. Projection of Past Sales: The projection of past sales method of sales forecasting takes a variety of forms. To calculate the next years sale, the formula is Next years sales = this years sales x this years sale Last years sale This method is more appropriate for the companies which are more or less stable or mature industries. Time- series analysis: It is a statistical procedure for studying historical sales data. This procedure involves isolating and measuring four types of sales variations. 1. Long term trends 2. Cyclical changes 3. Seasonal variations 4. Irregular fluctuations. Generally these methods are used for the long run forecasting .Incase of the short run if the sales pattern is clearly defined or relatively stable from year to year, then the time series analysis can be appropriately used. Exponential Smoothing: Exponential smoothing is a short range sales forecasting technique in the form of moving average that represents a weighted sum of all past numbers in a time series, with the heaviest weight placed on the most recent data. The formula is: Next years sales = a(this years sales)+ (1-a)(this years forecast) a in the equation is called the smoothing constant and is set between 0.0 and 1.0. If for example, actual sales for this year came to 320 units of products and the sales forecast for this year was 350 units and the smoothing constant was 0.3 , the forecast for the next

years sales is= (0.30)(320) + (0.7)(350) = 341 units of products. Determining the value of a is the main problem. If the series of the sales data changes slowly, a should be small but if the series changes rapidly, a should be large enough so that the forecast respond to those changes. Survey of Consumer Buying Plans: This method is basically used for industrial marketing where the potential market consist of small numbers and prospects, substantial sale is made to the individual accounts, the manufacturer sells directly to the users and the customers are concentrated in few geographical areas. In such cases it is inexpensive to survey a sample of customers and prospects to estimate the product or project the sales forecast. Regression Analysis: Regression analysis is a statistical process used in sales forecasting determines and measures the association between company sales and other variables. There are three major steps of regression analysis. 1. Identify variables causally related to company sales 2. Determine or estimate the values of these variables related to sales. 3. Derive the sales forecast from these estimates. There may be two types of regression; simple and multiple. Exponential Smoothing: Exponential smoothing is similar to the moving-average forecasting method. It allows consideration of all past data, but less weight is placed on data as it ages. Next Years Sales = a (This Years Sales) + (1-a) (This Years Forecast) a in the equation is called the smoothing constant and is set between 0.0 and 1.0. Moving Average: Moving averages are used to allow for marketplace factors changing at different rates and at different times. The 3-yearly moving average can be computed with the following formula: a+b+c b+c+d c+d+e d+e+f --------- , ----------- , ---------- , --------- , . 3 3 3 3 A sales forecast is important for at least five reasons: 1. A sales forecast becomes a basis for setting and maintaining a production schedule manufacturing. 2. It determines the quantity and timing of needs for labor, equipment, tools, parts, and raw materials purchasing, personnel. 3. It influences the amount of borrowed capital needed to finance the production and the necessary cash flow to operate the business controller.

4. It provides a basis for sales quota assignments to various segments of the sales force sales management. 5. It is the overall base that determines the companys business and marketing plans, which are further broken down into specific goals marketing officer. THE FORECASTING PROCESS:

F O

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Sales strategies and policies determining the size of the sales force: Determining the sales force size is an important decision for every sales department. As compensating sales people is a very costlier affair, there fore its size should be appropriate to serve customer and the firm needs. The customer needs may be easy availability of the product, timely delivery, providing sufficient product informations etc the firm needs may be increase of sales volume, increase of profit margin, creating a strong customer base etc. Therefore the sales person should work both efficiently and effectively. Similarly each company has individualized requirements as to the kind of sales personnel best fitted to serve its needs. Furthermore different selling jobs require different levels of selling and non-selling abilities, training and technical and other knowledge. Therefore in determining the kind of sales people and their size we must understand what is expected of them: the job objectives, the duties and responsibilities and the performance measures.

It is difficult, perhaps impossible to determine the exact number of sales persons that a particular company should have. Three basic approaches are used in approximating this number. 1. The workload method 2. The sales potential method 3. The incremental method 1. The Work Load Method: In the work load method the basic assumption is that all sales personnel should shoulder equal work loads. The management first estimates the total work load involved in covering the companys entire market and then divides by the work load that an individual sales person should be able to handle, thus determining the total number of sales person required. Companies applying this method generally assume that the interactions of three factors such as customer size, sales volume potential, and the travel load determine the total workload involved in covering the entire market. The work load approach is very attractive to the practicing sales executives. It is easy to understand and easy to apply. Large firms such as IBM, AT &T, and HLL etc use this approach. But the basic flaw in the work load approach is that, as usually applied it disregards profit as an explicit consideration. However practically many factors other than account size such as gross margin on the product mix purchased by an account, the expenses incurred in serving an account etc determines the length and frequencies of the sales calls which ultimately influence profitability. Another shortcoming of this approach is that not only should all sales personnel have the same work load but they all should utilize their time with equal efficiency. 2. The Sales Potential Method: The sales potential method is based on the assumption that performance of the set of activities contained in the job description represents one sales personnel unit. A particular sales person may represent either more or less than one sales personnel unit. If the individuals performance is excellent, that individual may do the job more than one unit; if the individuals performance is below par, he/she may do less. If management expects all companys sales personnel to perform as specified in the job description, then the number of sales person required equals the number of units of sales personnel required. The formula used in this method is N = S/P + T(S/P) or N = S/P (1+T) Where N = number of sales personnel units. S = forecasted sales volume P = estimated sales productivity of one sales personnel unit T = allowance for rate of sales force turnover. For example, a firm with forecasted sales of $1 million estimated sales productivity per sales personnel unit of $ 100,000 and an estimated annual rate of sales force turnover of 10 percent. So N = $10, 00,000/ $1, 00.000 (1.10) Or N = 11 sales personnel units. This is a simplified model for determining the size of sales force. The crucial estimate of the sales productivity of one unit of sales strength relies heavily on the accuracy and completeness of the sales job description, it depends also on the managements appraisal of what reasonably maybe expected of those who fill the position. In addition both the

estimates for the unit sales productivity and the sales force turnover rate require management to have some means of evaluating the efficiency of individual sales person and of determining the probabilities of their retention rate. 3. Incremental Method: Conceptually the incremental method is the best approach to determining the sales force size. It is based on one proposition that the net profits will increase when additional sales personnel are added if the incremental sales revenues exceed the incremental costs incurred. Thus to apply this method, one needs two important items of information. Incremental cost and incremental revenues. Though this method is most conceptually correct, it is also most difficult to apply. It requires first that the company develop a sales response function to use in approximating (in terms of sales volume) the markets behavior in relation to alternative levels of personal selling effort. A sales response function is a quantitative expression that describes the relationship between the personal- selling effort and the resulting sales volume Sales territories, routing and scheduling: A sales territory is composed of a group of customers or a geographic area assigned to a salesperson. Reason for establishing Sales territories: Sales territories are set up and subsequently revised as the market conditions dictate to facilitate the planning and control of sales operations. More specifically there are five reasons for having sales territories. 1. To provide proper market coverage 2. To control selling expenses 3. To assist in evaluating sales personnel 4. To contribute to the sales force morale 5. To aid in the co-ordination of personal selling and advertising efforts. To provide proper market coverage: Some times a company looses business to competitors because it does not have proper market coverage. To overcome this problem, generally management must establish sales territories, if the company does not have them or revise those that it has. If the sales territories are intelligently set and the assignments of the sales personnel are carefully made it is possible to obtain proper market coverage. Good territorial design allows sales personnel to spend sufficient time with customers and prospects and minimize the travel time. This permits them to become thoroughly conversant with customers problems and requirements. To control selling expenses: Effective territorial design combined with careful deployment of sales person results in low selling expenses and high sales volumes. Sales person spend fewer nights away from home which reduces or eliminates many charges for lodging and fooding, at the same time cutting travel miles reduces transportation expenses. These savings, plus the higher sales volumes from increased

productive selling time reduce the ratio of selling expenses to sales. Well designed sales territories and appropriate assignments of sales personnel increase the total time available for contact with customers and prospects and helps improving sales volume. To assist in evaluating sales personnel: Through geographically dividing the sales territories, management can easily assess the strength and weakness of different areas and appropriate adjustments can be made in selling strategies. This territory analysis will help the management to fix targets/quota by evaluating the sales and cost responsibility against the performance of individual sales person. Contribution towards sales force morale: Good territorial design helps maintaining sales force morale. Well designed territories help the sales force to cover areas with reasonable workloads and their effort yields results. Effective territorial design combined with intelligent sales person assignment makes each sales person productive; develop their self confidence and job satisfaction. Factors to consider while designing sales territories: Sales force objectives may be based on factors such as contribution to profits, return on assets, sales/cost ratios, market share, or customer satisfaction Scheduling: refers to establishing a fixed time when the salesperson will be at a customers place of business. In theory, strict formal route designs enable the salesperson to: 1. Improve territorial coverage. 2. Minimize wasted time. 3. Establish communication between management and the sales force in terms of the location and activities of individual salespeople. The customer contact plan involves scheduling sales calls and routing a salespersons movement around the territory.

Three Routing Patterns: I.

S t r a i g h B a s e c c c c W t - L i n e P a t t e r n

i r s t c o r k

a l l B a c k

II.

III.

l o v e r l e a f c

ac t t e r n c

a j o

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a t t e r n

c c c c

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t o

Controlling the selling effort : Sales budget and budgeting procedures: Budgeting can be defined as the process of planning and anticipating costs and expenditure of various financial resources on projects. It is the process of making specific financial plans for a short period of time. It helps in predicting and controlling the money spent within the organization and also involves day to day monitoring of current budgets. The first budget prepared. Each of the other budgets depends on the sales budget.

It is derived from the sales forecast. It represents managements best estimate of sales revenue for the budget period. Sales Budget is the estimated amount of anticipated sales allocated by product, territory, or person; prepared weekly, monthly, or annually.

Sales Budget is the Operating plan for a period expressed in terms of sales volume and selling prices for each class of product or service. Preparation of a sales budget is the starting point in budgeting since sales volume influences nearly all other items. The sales force budget is the amount of money available or assigned for a definite period, usually one year. Sales Budget: The budget is made to forecast sales in terms of units sold and value of goods sold. This budget acts as a base for making production budget. What is Benefit of sales budget? Sales budget is the most important budget while making the overall budget for the organization for a fiscal year. It is important in this sense that how would anybody make fiscal budget for organization if he don't know about how much to sale or what are the organization's sale would be. If you know the sales volume of units of product you want to sale in a fiscal year then you will make production budget according to that sales requirement in mind you will have production information in mind you will purchase raw material, hire labour according to requirements.

So if you don't know about how much you want to sale then how would you budget other things and how would you compare your performance at the end of fiscal year. Purposes of Sales Budget: The sales budget is required for Planning Coordination Control-of the sales activities. Budget Procedure:

Quota setting and administration: A quota refers to an expected performance objective. Quotas are tactical in nature and thus derived from the sales forces strategic objectives. WHY ARE QUOTAS IMPORTANT? Because: Quotas provide performance targets. Quotas provide standards. Quotas provide control. Quotas provide change of direction. Quotas are motivational. TYPES OF QUOTAS Sales volume quotas. Breakdown total sales volume. Profit quotas. Expense quotas. Activity quotas. Quota combinations. Sales volume quotas include dollar or product unit objectives for a specific period of time. Product lines. Individual established and new products. Geographic areas based on how the sales organization is designed, which would include:

Sales division. Sales regions. Sales districts. Individual sales territories.

The two types of profit quotas: Gross margin quota determined by subtracting cost of goods sold from sales volume. Net profit quota determined by subtracting cost of goods sold and salespeoples direct selling expense from sales volume. Expense quotas are aimed at controlling costs of sales units. Often expenses are related to sales volume or to the compensation plan. Activity quotas set objectives for job-related duties useful toward reaching salespeoples performance targets. Customer satisfaction refers to feelings about any differences between what is expected and actual experiences with the purchase. METHODS FOR SETTING SALES QUOTAS Quotas based on forecasts and potentials. Quotas based on forecasts only. Quotas based on past experience. Quotas based on executive judgments. Quotas salespeople set. Quotas related to compensation. THE PROCEDURES FOR SETTING OBJECTIVES AND QUOTAS WITH SALESPEOPLE Prepare the way. Schedule conferences with each salesperson. Prepare a written summary of goals agreed upon. Optional group meeting to share objectives.

A GOOD OBJECTIVE AND QUOTA PLAN IS SMART Specific Measurable Attainable Realistic Time specific

Module-3

Recruitment & Selection of Sales Force:

RECRUITMENTS PURPOSE Recruitment is the set of activities and processes used to legally obtain a sufficient number of individuals in such a manner that the recruits and the sales forces best interests are taken into consideration.

D H

e t e r m i ir n s etG F o w I M n t a e n r yv t o H i r e T

r a d i e w i m

Bu a e t g i T oi n r n a i nA i ns s g i g n e W o rEk n d T s e r r i t o r e L i n e

FACTORS TO CONSIDER WHEN DETERMINING HOW MANY TO HIRE

S a l e s F o r c e O b j e c t i v e s S t r a t e g P l a n s T D
Q u i t s H i r i n g , C u r r e n t T e r m o t -i o P n r s o , m S a cl e s F + r Pc er o m o i P e r s o n n e T l r a n s f e r s T I r na n s o r R e , i n o t f e t i r a t i o i o= n r s O e m n s , P e o p l e s , F o r e c a s t s u t , e n t

e r r i t o r i a l e s i g n

DETERMINING THE TYPE OF PERSON FOR THE JOB A job analysis refers to the formal study of jobs to define specific roles or activities to be performed in sales promotions. The three steps in the job analysis are to: 1. Examine the total sales force and each job, and determine how each job relates to other jobs. 2. Select the jobs to be analyzed. 3. Collect the necessary information through observation of what people actually do in the jobs, interviews of people in the jobs, and questionnaires completed by job holders. MAJOR INFLUENCES AND COMPONENTS OF SALES RECRUITMENT

I n t e r n a l S o u r c e s S a l e s H u m a Rn e c r R e s o u r c e P l a n n i n g
Q u a l i f i e d A p p l i c a A n pt p l i c a n t e nPt o o l P o o l

i t m

e l e c t i o

E x t e r n a l S o u r c e s

To be an effective recruiter, a sales manager must have the answer to several questions, including: How many people do I need to recruit? Who does the recruiting? Where do I find recruits? How can I develop a qualified pool of applicants? How can recruiting programs be evaluated?

SOURCES OF RECRUITS INTERNAL SOURCES Internal recruitment sources come from inside the company: Current Employees. Promotions. Transfers. EXTERNAL SOURCES Walk-ins. The Internet. Employment agencies Radio and television. Newspaper advertisements. Telephone-in advertisements. Internships. Colleges and universities. Competitors. Sales Training and Development , Motivating Sales personnel: WHAT IS SALES TRAINING? Sales training is the effort an employer puts forth to provide sales people job-related culture, skills, knowledge, and attitudes that should result in improved performance in the selling environments. PURPOSES OF SALES TRAINING: Increasing customer satisfaction. Helping salespeople become managers. Orienting new salespeople to the job. Improving knowledge in areas such as product, company, competitors, or selling skills. Lowering absenteeism and turnover. Positively influencing attitudes in such areas as job satisfaction. Lowering selling costs. Informing salespeople. Obtaining feedback from salespeople. Increasing sales in a particular product or customer category.

A SALES TRAINING MODEL DETERMINE HOW TO EVALUATE TRAINING WHEN PLANNING

P P

D l a n n i n O g r g a n i z Si n t ag f f i n g h a s e P h a s e P h a s e P

i r e c t i nE g v a l u a t i o n h a s e P h a s e

PHASE ONE: PLANNING FOR SALES TRAINING The first step when developing or maintaining an ongoing sales training program is assessing needs. Needs assessment entails determining the training needs of the sales force and setting objectives for satisfying those needs. ORGANIZATIONAL ANALYSIS Four principles ensure a successful training effort: Value Focus Mass Duration OPERATIONAL ANALYSIS A difficulty analysis uncovers and analyzes problems salespeople experience. SALES PERSONNEL ANALYSIS The behavioral objectives identify the goals of the training program for both the trainer and the trainee. CUSTOMER ANALYSIS Incorporate the voice of the customer.

MAKING THE NEEDS ASSESSMENT This requires the following sequence: 1. 2. 3. 4. 5. 6. 7. 8. Identify the requirements of the position. Determine the difference between performance objectives and results. Determine why a difference exists. Revise the training program (if needed). Develop training objectives. Conduct the training program. Evaluate the training program. Revise the training program (if needed).

PHASE TWO: ORGANIZING FOR SALES TRAINING Training objectives to be accomplished. Number of trainees. Trainers experience. Each salesperson understands of the subject matter. Each trainees ability to learn and past experience. Training materials available. The costs per trainee of each method. Extent of presession assignments PHASE THREE: STAFFING FOR SALES TRAINING WHO IS INVOLVED IN TRAINING? Corporate staff trainers. Sales force personnel. Outside training specialists. PHASE FOUR: DIRECTING THE SALES TRAINING EFFORT TRAINING CULTURE Sales culture is the set of key values, ideas, beliefs, attitudes, customs, and other capabilities and habits shared or acquired as a sales group member. PHASE FIVE: SALES TRAINING EVALUATION STEPS IN THE EVALUATION 1. Determine what should be measured. 2. Determine the information collection method. 3. Determine the measurement methods. 4. Analyze the data, determine the results, and draw conclusions for making recommendations.

Sales meetings and contests: Meaning & Definition A meeting of interactive questions directly aimed at - Testing product knowledge, - service features and - Sales policy will clearly show the strengths and weaknesses, and allow you to address any problem areas that would have otherwise gone unseen. Concepts The purpose of a sales meeting is to get sales staff ready to sell. Salespeople hate meetings without an apparent purpose or agenda. And when no new information is shared, they feel as if they're wasting valuable time. It's important that one does not waste salespeople's time, but the person also needs to avoid overloading them with information.

Points of discussion in Sales Meeting 1. Test Product Knowledge 1. 1. 1. 1. 1. 1. Locate Problem Areas in the Sales Process Reinforce Key Issues Address Customer Concerns Prioritize Company Policy Evaluate Service Potential Spotlight New Features and Services

Sales Meeting Design Design sales meetings with one primary objective: to raise the bar in attaining greater sales results. The right meeting design will encourage participants to be fully engaged, solve roadblocks, find creative ways to shorten sales cycles and inspire each other to sell at a higher level than before. Designing of Sales Meeting requires: Detailed agenda planning Theme achievement Breakouts that are engaging and productive Activities to build skills, Product, service, forecast, presentations will be meaningful and interesting Sales meeting would be more fruitful with expert facilitators who know how to maintain enthusiasm and participation from your team throughout the meeting. Facilitators key role can help senior sales managers get the most out of their sales meetings by Participating - not up in front dealing with details. Assessing talent in the room for future action and development. Focusing on content, not process.

How to Evaluate Your Sales Meetings and Obtain Evaluation report In some organizations, every person attending the meeting is asked to evaluate it. We want the opinion of the salesman. Our meetings are strictly for him. This pointed statement was made by the manager of an electronics firm. He obtains an evaluation report from every person in attendance. Other companies get opinions from supervisory personnel only. The feeling here is that the salesman has no right to evaluate anything management does, including the manner in which it conducts sales meetings. When the salesmen run the company, theres no need for me/ declared a sales manager. SALES CONTEST Sales contests should be designed to accomplish specific objectives over short periods. Some objectives that sales Contests might have: To obtain new customers. To secure larger orders per sales call . To overcome seasonal sales slumps. To get higher rates. To sell a higher percentage of retail, direct, or agency business. To sell special inventory or packages. To increase the use and quality of sales presentations. To secure a higher percentage of renewals .

To improve customer satisfaction (as determined by before-andafter surveys) There are three requirements for a successful sales contest:

There must be an increased effort which leads directly to increased rewards for both salespeople and a company. Contests in which just salespeople or a company benefits are doomed to failure. Contests must motivate salespeople to increase their efforts. Contests must assist salespeople in patterning their efforts along more productive lines and encourage them to continue these good habits past the contest period.

Types of Sales contests There are two types of contests: direct and novelty. Direct contests are straightforward, such as "achieve 15 percent higher rates," or "write 20 percent more direct business."

Novelty contests are ones that "hunt for hidden gold," or "win the Super Bowl." Novelty contests are more fun, but many sales managers feel that they tend to insult the intelligence of more sophisticated salespeople. Novelty contests tend to work better with younger, less experienced, less jaded salespeople. Novelty contests can be fun for selling special inventory, special events, or seasonal packages. Generally, there are four kinds of prizes for sales contests: Cash, merchandise, travel and special honor, recognition, or privileges. How Many Prizes? How many prizes are given in a sales contest is an important consideration. In general, it is best to make it possible for everyone to win something. The smaller the staff, the more important this element is in order to avoid destructive competition. Have several big winners (first, second, and third place), but also have a little something for everyone. Remember, in a six-person sales staff, if there is only one winner, five people feel like losersnot a good outcome.

Characteristics of Sales Contests: Contest Duration. The duration of a contest should be no shorter than four weeks and no longer than thirteen weeks. Six weeks is a good duration for a sales contestlong enough to effect behavior and billing and short enough so that the salespeople don't get bored with it. Because contests must be relatively short to maintain interest, it is difficult to run effective sales contests that require longterm, developmental selling.

Contest Frequency. Do not use sales contests regularly, because then they are no longer special. In fact, salespeople come to expect the goodies they get from regularly scheduled contests and to see the rewards not as extras but as a normal part of their compensation package. Also, remember, that the competition generated from a hyped contest can cause morale problems, especially among those who do not the top prize. Spread out contests to avoid too frequent postcontest lulls. Two sales contests a year is a reasonable frequency. Standard Setting. Contests help set performance standards. It is vital that nonwinners (don't let a sales staff feel like losers) be given clear advice on ways to improve their performance. Offer additional sales training so non-winners feel they have a chance to win the next contest. Promote Contests. Promote contests well to keep the enthusiasm level high. Promote them at all levels of the organization, not just in the sales department in order to get everyone in the company involved and supporting the salespeople (even include vital support people in prizes). Promote the progress of contests on a weekly basis. Give feedback on how the individual salespeople or teams are progressing. Weekly bulletins are a vital element of contests in order to give feedback and to create both awareness and excitement. Fairness. Fairness is the most important dimension in a contest. Participants must believe that a contest is absolutely fair and that no one has an edge at the beginning. Simplicity. Sales contests should be designed so that they are easy to understand. Objectives must be clear and progress toward them must be simple and easily represented graphically.

Visibility. Contest progress must be visible to everyone in an office. Among salespeople there is often as strong a motivation not to lose as there is to win, so post progress reports daily so that both those ahead and behind will be continually informed. Sales force Compensation, Evaluation and Supervision: PURPOSES OF COMPENSATION Connect individual with organization. Influence work behavior. Organizational choice. Influence satisfaction. Feedback. Reinforcement.

EFFECTS OF PAY DISSATISFACTION:

Perform ance

P D

y i s s a

D e s i r e f o r Absente t i s f a M c t oi o r ne P a y eism

Grievan ces Job b J o Dissatisfa ction Turno ver

P W S A P H

s y c h i t h

o l o g i c a l d r a w a l

t r e s s , n x i e t y o o r M e a l t h e n t a l

Individuals are satisfied with the rewards they receive in the following terms: How much reward is actually received in relation to how much was expected to be received. How the rewards received compare with what others received. Whether the rewards lead to other rewards. The level of extrinsic and intrinsic satisfaction from the rewards. The value of different rewards. FORMAL COMPENSATION PROCESS:

E O

D e t e r m i n e C o m e te e n r sm a it n o e n M D p i a j o s t a b l i s h S a l e s F o r c e O b j e c t i v e s , S t r Ca t o e mg i pe e ,n s a t i o n s b j e c t i v e s a n d P l a n s a n d T a c t i c s F a c t o r s A p p r a i s a l a n d R e c y c l i n g

I m p l e m e n t L o n g - a n d S h o r t R a n g e P r o g r a m

M e a s u r e I n d i v i d u a l , C R e l a t e R e w a r G r o u p , a n d O r g a n i z a t i o n a l C t o P e r f o r m a n P e r f o r m a n c e P

o d o c o

m m u n i c a t e s m p e n s a t i o n e l i c y

DESIGNING A COMPENSATION PROGRAM: Compensation plans should have general and specific objectives: Attaining yearly sales volume and gross margins (general). Attaining monthly sales volume and sales on specific products (specific). Market penetration and exploiting the territorys potential (General). Call management and development of potential in key accounts as well as development of new accounts (specific). Introduction of new products (specific). DETERMINE MAJOR COMPENSATION FACTORS: Wage level. Wage structure. Individual wage. Administration procedures. TYPES OF COMPENSATION PLANS: STRAIGHT SALARY Of all the compensation plans, the straight salary plan is the simplest: The salesperson is paid a specific dollar amount at regular intervals. PROFILE OF A STRAIGHT SALARY COMPANY Dominant market share in mature, stable industry Highly defined and stable customer base Strongly centralized and closely managed selling effort Significant number of house accounts Highly team-oriented sales effort

Service versus selling emphasis

STRAIGHT COMMISSION PLANS The straight commission plan is a complete incentive plan. If salespeople do not sell anything, they do not earn anything. Two basic types of commission plans exist: 1. Straight commission. 2. Draw against commission. Situations where commission plans can be used: Little nonselling, missionary work involved. The company cannot afford to pay a salary and wants selling costs to be directly related to sales. The company uses independent contractors and part-timers. PROFILE OF A COMMISSION PLAN COMPANY Low barriers to entry into the job Limited corporate cash resources Small entrant into an emerging market or market segment High risk reward sales force culture Undefined market opportunity or customer base Inability to set quotas or other performance criteria Volume-oriented business strategy PROFILE OF A COMBINATION-PAY PLAN COMPANY Established company with growth potential, many products, and active competition Need to direct a complex set of behaviors Need for a variable pay component that will ensure top performers are rewarded commensurately When to Use a Combination Salary Plan 1. To motivate the sales force. 2. To attract and hold good people. 3. To direct the sales force efforts in a profitable direction. KEY INDICATORS FOR POSSIBLE SALES COMPENSATION PROBLEMS 1. 2. 3. 4. 5. 6. 7. 8. Declining revenues Declining market share Declining profitability Insufficient premier accounts High sales force turnover Uneven sales force performance Inadequate servicing of customers Concentrating on easy-to-sell and unprofitable products

Module-4 Design of Distribution Channel

Distribution channel: The route by which a product or service is moved from a producer or supplier to customers. A distribution channel usually consists of a chain of intermediaries, including wholesalers, retailers, and distributors, that is designed to transport goods from the point of production to the point of consumption in the most efficient way. A way of selling a company's product either directly or via distributors "possible distribution channels are wholesalers or small retailers or retail chains or direct mailers or your own stores". Classification of Distribution channels: 1. Sales Channel- which has the functions of motivating buyers, sharing information between the consumer and the company, negotiating fair bargains for the consumer and financing the transactions. 2. Delivery ChannelA delivery channel represents a delivery endpoint, such as an e-mail server or Web server. Using the protocol specified by the delivery channel, Notification Services delivers notifications to the delivery endpoint. The delivery endpoint may forward the notification as appropriate.

Delivery channels are associated with individual notifications using subscriber devices. When a user creates a subscription, they select a device on which to receive the notifications. The selection of a device associates a delivery channel with each subscription, and ultimately with each notification. Each instance has one or more delivery channels. Each delivery channel is associated with one delivery protocol, which Notification Services uses to send notifications and perform other communication with the delivery channel. When defining a delivery channel, you specify a delivery channel name, specify which delivery protocol is used to deliver notifications to the delivery channel, and any arguments required by the delivery protocol, such as server name, user name, and password. If you are configuring an instance of Notification Services through XML, specify the database name in the instance configuration file (ICF). If you are configuring an instance of Notification Services programmatically, use Notification Services Management Objects (NMO) to specify the database name.

3. Service Channel- which performs after sales service like a Maruti service station. Distributors: A company that sells a variety of products to a customer. Many companies sell products to a distributor before they reach the final customer. Dealers: A person or business firm acting as a middleman to facilitate distribution of securities or goods. Typically, a dealer buys for his or her own account and sells to a customer from the dealer's inventory. Thus a dealer acts as a principal rather than as an agent. The dealer's profit or loss is the difference between the price he pays and the price he receives for the same security or goods. The same individual or company may, at different times, function as a dealer or as a broker, who buys and sells for his clients' accounts. Agents: Middlemen that provide a risk-free procurement function by not taking title to the merchandise they buy or sell for their customers. Patterns of Distribution: 1. Intensive Distribution: Marketing strategy under which a firm sells through as many outlets as possible, so that the consumers encounter the product virtually everywhere they go: supermarkets,

drug stores, gas stations, etc. Soft drinks are generally made available through intensive distribution. 2. Selective Distribution: Selective Distribution is a form of market coverage in which a product is distributed through a limited number of wholesalers or retailers in a given market area. 3. Exclusive Distribution: Offering a product for sale only in one outlet or the outlets of a single company. For example, Kodak announced in early 2007 that the firm's new line of Easy Share printers would be available only in Best Buy stores for the first three months. Activities that a typical distribution channel performs Spatial Discrepancy: Spatial Discrepancy is defined as the discrepancy that exists because of the physical distance between the location where a product is manufactured and the location where the product is eventually consumed. Temporal Discrepancy: Temporal Discrepancy is defined as the discrepancy that exists because of the inevitable difference in the point in time at which a product is manufactured and the point in time when the product is consumed. Temporal Discrepancy, like the spatial discrepancy, is also caused due to the concentrated nature of the manufacturing activity.

Management of Channels
Selecting channel members Companies need to select their channel members carefully. To customers, the channels are the company. Training channel members Companies need to plan and implement careful training programs for their intermediaries. Motivating channel members A company needs to view its intermediaries in the same way it views its end users. It needs to determine intermediaries needs and construct a channel positioning such that its channel offering is tailored to provide superior value to these intermediaries. Evaluating channel members Producers must periodically evaluate intermediaries performance against such standards as sales-quota attainment, average inventory levels, customer delivery time, treatment of damaged and lost goods, and cooperation in promotional and training programs. Modifying channel arrangements A producer must periodically review and modify its channel arrangements. Modification becomes necessary when the distribution channel is not working as planned, consumer buying patterns change, the market expands, new competition arises, innovative distribution channels emerge, and the product moves into later stages in the product life cycle.

Conflict, Cooperation and Competition

Types of conflict & competition Vertical channel conflict exists when there is conflict between different levels within the same channel. Horizontal channel conflict exists when there is conflict between members at the same level within the channel. Multi-channel conflict exists when the manufacturer has established two or more channels that compete with each other in selling to the same mkt.

Channel Conflict: Channel conflict can be defined as any scenario where two different channels compete for the same sale with the same brand. Conflict can take the form of a direct sales force competing with an independent distributor, two different types of competing distributors, two like distributors competing for the same sale, or all of the above.

A few facts about achieving an appropriate balance between coverage and conflict:

Lack of any channel conflict in a marketing strategy usually indicates gaps in market coverage Conflict cannot be eliminated. The goal of marketing management must be to optimize market coverage and manage a healthy level of channel conflict so that it does not become destructive Market share erosion and declining street prices are evidence that channel conflict is becoming destructive. Channels are responding to excessive competition by deemphasizing the brand or by giving away too much in order to keep an account Every manufacturer will likely face destructive channel conflict at some point. As markets evolve and mature, many manufacturers will be required to add new, lower-cost channels in order to cover all major market segments. Often, destructive conflict arises because changes in the manufacturer's go to market strategy lags the market changes associated with market evolution.

1.Causes of Channel Conflict Channel conflict can also occur when there has been over production. This results in a surplus of products in the market place. Newer versions of products, changes in trends, insolvency of wholesalers and retailers and the distribution of damages goods also affect channel conflict. In this connection, a company's stock clearance strategy is of

importance. To avoid a channel conflict in a click-and-mortar, it is of great importance that both channels are fully integrated from all points of view. Herewith, possible confusion with customers is excluded and an extra channel can create business advantages. 2.Causes of channel conflict

Goal incompatibility Unclear roles & rights Differences in perception Intermediaries' great dependence on the manufacturer

Minimizing Channel Conflict Several ways manufacturers can minimize channel conflict. Once the decision has been made to sell direct to consumers online, lower levels of channel conflict will be experienced: 1. By not pricing products on their web site below the resale price of their partners. 2. By diverting fulfillment of orders places on their web site to their partners. 3. By promoting partners on their web site. 4. By encouraging partners to advertise on their web site. 5. By limiting the offering on their web site to a subset of their products. 6. By using a unique brand name for products offered on their web site. 7. The earlier the products offered on their web site are in the demand lifecycle. 8. The more effectively they communicate their overall distribution strategy. 9. The more effectively they coordinate their overall distribution strategy. 10. The more they make use of super ordinate (over-reaching) goals. Channel conflict is an integral part of your channel strategy, so you must examine your market position and channel strategy before attempting to manage it. Taking a closer look at the problem often reveals that the perceived channel conflict issue masks a larger channel strategy issue. So prior to executing solutions to address channel conflict, the manufacturer is encouraged to examine all elements of its overall channel strategy, including pricing, end user segmentation, channel support programs, company policies, etc. Have you created a conflict situation through the design or implementation of these other components of channel strategy?

Destructive channel conflict is managed through economics and structural controls. Economics motivate the channels to avoid conflict. Structural controls lay the ground rules within which conflict is managed. With each tactic, communication before conflict arises is critical. The right economic solution is dictated by the type of conflict being faced, the manufacturer's market and channel position, and the company's strategic goals. Economic approaches include;

Dual compensationapplied when conflict exists between direct and indirect channels. The goal is to move the indirect channel from a position of potential adversary for the direct sales force to one of "partner" for the direct sales force Activity based compensation or discountused to manage cross-channel conflict or conflict between channels of differing cost structures and capabilities. Activity based discounts are applied by paying a channel a specific discount if it performs a measurable task or function. These discounts allow the "high-cost" channel to compete against "low-cost" channels for those customers who value the high support

Shared coststhe key difference between this concept and functional discounts is that functional discounts compensate the channel for incremental tasks via a discount on product sold, while shared costs pay directly for the task Compensation for market shareusually applied to direct versus indirect conflict, the direct sales rep is compensated based on total market share in a territory. The goals of the sales rep are based on direct and indirect volume, thus motivating the direct rep to "partner" with indirect channels to maximize territory volume

Structural controls are only as effective as their enforcement. There is no value unless you are willing to clearly spell out the controls at the outset of the channel agreement and enforce the stated penalties to all channel members. The structural controls are typically applied to:

Accountsyou specify "named" or "house" accounts where indirect channels can expect to compete with your direct channels. Named accounts are usually specified based on end-user sourcing capabilities, channel ability to meet end-user buying requirements, and volume and strategic value Productschannels can qualify for franchising by product line/category across your company's offering. Product qualification is usually based on end-user product support needs, channel support capabilities, "fit" or positioning of the product category in the channel's overall business, and strategic considerations

Geographyas a manufacturer, you can specify those geographies/account types in which you will provide sales support to the channel. These geographies are usually defined by granting the channel a primary area of responsibility

The successful marketer combines the elements of economic and control-related solutions that best address conflict challenges framing them in an understanding of market position, channel position, and strategic goals. Channel conflict can also occur when there has been over production. This results in a surplus of products in the market place. Newer versions of products, changes in trends, insolvency of wholesalers and retailers and the distribution of damages goods also affect channel conflict. In this connection, a company's stock clearance strategy is of importance. To avoid a channel conflict in a click-and-mortar, it is of great importance that both channels are fully integrated from all points of view. Herewith, possible confusion with customers is excluded and an extra channel can create business advantages.

Managing channel conflict Some channel conflict can be constructive. It can lead to more dynamic adaptation to a changing environment. But too much is dysfunctional. Perhaps the most important mechanism is the adoption of super ordinate goals. Working closely together might help them eliminate or neutralize the threat. Exchange of persons between two or more channel levels is useful. Cooptation is an effort by one organization to win support of the leaders of another organization by including them in advisory councils, boards of directors, etc. Encouraging joint membership in & between trade associations. When conflict is chronic, the parties may have to resort to diplomacy, mediation or arbitration.

Legal & Ethical Issues in Channel Relations

Exclusive dealing Exclusive territories Tying agreements Dealers' rights

Motivating channel members Constant training, supervision & encouragement. Producers can draw on the following types of power to elicit cooperation: Coercive power. Manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate. Produces resentment. Reward power. Manufacturer offers intermediaries extra benefits for performing specific acts. Legitimate power. Manufacturer requests a behavior that is warranted by the contract. Expert power. Manufacturer has special knowledge that the intermediaries value. Referent power. Intermediaries are proud to be identified with the manufacturer.

Channel System
Conventional marketing channel

Comprises an independent producer, wholesaler(s) & retailer(s). Each is a separate entity. No channel member has complete or substantial control over the other members.

Vertical Marketing Systems 1. 2. 3. 4. Producer, wholesaler(s) & retailer(s) act as a unified system. They all cooperate. Can be dominated by any of the three members of the system. It arose as a result of strong channel members' attempts to control channel behavior & eliminate the conflict that results when independent channel members pursue their own objectives. 5. Has become the dominant mode of distribution in the U.S. consumer marketplace. 3 types of VMS: 1. Corporate VMS Combines successive stages of production & distribution under single ownership. (Sears).

2. Administered VMS Coordinates successive stages of production & distribution through the size & power of one of members (Kodak, Gillete, P&G) 3. Contractual VMS Wholesaler-sponsored voluntary chains Retailer cooperatives Franchise organizations Independent firms at different levels of production & distribution integrating their programs on a contractual basis to obtain more economies &/or sales impact than they could achieve alone. 3 types: Horizontal-Marketing-Systems Two or more unrelated companies put together resources or programs to exploit an emerging-marketing-opportunity. Multichannel-Marketing-Systems A single firm uses two or more marketing channels to reach one or more customer segments. By adding more channels, companies can gain 3 important benefits: increased mkt coverage, lower channel cost, more customized selling. Roles of individual firms in the channel Insiders. Members of the dominant channel. Strivers. Firms seeking to become insiders. Complementers. Not part of the dominant channel Transients. Outside the dominant channel & do not seek membership. Short-run expectations. Outside innovators. Real challengers & disrupters of the dominant channels.

Wholesaler Marketing Decisions

Definition of Wholesaler A distributor or middleman who sells mainly to retailers and institutions, rather than consumers. Functions of Wholesalers The primary functions performed by the wholesalers are as follows:

He assembles varieties of goods from different producers. In case of agricultural goods, he collects small quantities of goods from numerous small-scale producers and store in his godown.

He stores the assembled goods in proper warehouse till the goods are sold. Warehousing or storing of goods fills up the time gap between the production and consumption. He distributes the assembled goods to the retailer or to the consumer directly. He thus helps in the dispersion process of marketing. He helps in the transportation of goods form the place of production to his godown and to the retailer. He provides financial assistance to the retailers by supplying products on credit. He helps in proper grading of goods as per quality, size and colour. He involves all the risks associated with the ownership as he makes bulk purchases and makes arrangement for assembling and warehousing.

Classification of Wholesalers 1. Merchant wholesalers. These wholesalers own (take title to) the products they sell. For example, a wholesale lumber yard that buys plywood from the producer is a merchant wholesaler. It actually owns - takes title to - the plywood for some period of time before selling to its customers. About four out of five wholesaling establishments in the United States are merchant wholesalers - and they handle about 59 percent of wholesale sales. Merchant wholesalers often specialize by certain types of products or customers and they service relatively small geographic areas. And several wholesalers may be competing for the same customers. For example, about 3,000 specialized food wholesalers compete for the business of restaurants, hotels, and cafeterias across the UnitedStates. 2. General merchandise wholesalers. These are service wholesalers who carry a wide variety of nonperishable items such as hardware, electrical supplies, plumbing supplies, furniture, drugs, cosmetics, and automobile equipment. These wholesalers originally developed to serve the early retailers - the general stores. Now, with their broad line of convenience and shopping products, they serve hardware stores, drugstores, electric appliance shops, and small department stores. 3. Single-line (or general-line) wholesalers. These are service wholesalers who carry a narrower line of merchandise than general merchandise wholesalers. For example, they might carry only food, wearing apparel, or certain types of industrial tools or supplies. In consumer products, they serve the single- and limited-line stores. In business products, they cover a wide geographic area and offer more specialized service. 4. Specialty wholesalers. These are service wholesalers who carry a very narrow range of products - and offer more information and service than other service wholesalers. A consumer products specialty wholesaler might carry only health foods or oriental foods instead of a full line of groceries. Or a specialty wholesaler might carry only automotive items and sell exclusively to mass-merchandisers. Specialty wholesalers often know a great deal about the final target markets in their channel. For example, Advanced Marketing is the leading wholesale supplier of books to membership warehouse clubs.

The company offers hardcover best sellers, popular paperbacks, basic reference books, cookbooks, and travel books. Consumers in different geographic areas are interested in different kinds of books and that affects what books will sell in a particular store. 5. Cash-and-carry wholesalers. These wholesalers operate like service wholesalers except that the customer must pay cash. Some retailers, such as small auto repair shops, are too small to be served profitably by a service wholesaler. So service wholesalers set a minimum charge - or just refuse to grant credit to a small business that may have trouble paying its bills. Or the wholesaler may set up a cash-and-carry department to supply the small retailer for cash on the counter. The wholesaler can operate at lower cost because the retailers take over many wholesaling functions. And using cash-and-carry outlets may enable the small retailer to stay in business. These cash-and-carry operators are especially common in less-developed nations where very small retailers handle the bulk ofretailtransactions. 6. Drop-shippers. These wholesalers own (take title to) the products they sell - but they do not actually handle, stock, or deliver them. These wholesalers are mainly involved in selling. They get orders - from wholesalers, retailers, or other business users - and pass these orders on to producers. Then the producer ships the order directly to the customers. Because drop-shippers do not have to handle the products, their operating costs are lower. Drop-shippers commonly sell products so bulky that additional handling would be expensive-and-possibly-damaging. 7. Truck wholesalers. These wholesalers specialize in delivering products that they stock in their own trucks. By handling perishable products in general demand - tobacco, candy, potato chips, and salad dressings - truck wholesalers may provide almost the same functions as full-service wholesalers. Their big advantage is that they deliver perishable products that regular wholesalers prefer not to carry. Some truck wholesalers operate 24 hours a day, every day - and deliver an order within hours. A 7-Eleven store that runs out of potato chips on a busy Friday night doesn't want to be out of stock all weekend! 8. Mail-order wholesalers. These wholesalers sell out of catalogs that may be distributed widely to smaller industrial customers or retailers who might not be called on by other middlemen. These wholesalers operate in the hardware, jewelry, sporting goods, and general merchandise lines. For example, Inmac uses a catalog to sell a complete line of 3,000 different computer accessories and supplies. Inmac's catalogs are printed in six languages and distributed to business customers in the United States, Canada, the United Kingdom, Germany, Sweden, the Netherlands, and France. Many of these customers especially those in smaller towns - don't have a local wholesaler. 9. Producers' cooperatives. These wholesalers operate almost as full-service wholesalers - with the "profits" going to the cooperative's customer-members. Cooperatives develop in agricultural markets where there are many small producers. Examples of such organizations are Sunkist (citrus fruits), Sunmaid Raisin Growers Association, and Land O' Lakes Creameries, Inc. Successful producers' cooperatives emphasize sorting - to improve the quality of farm products offered to the market. Some also brand these improved products - and then promote the brands. For example, the California Almond Growers Exchange has captured most of the retail market with its BlueDiamondbrand. 10. Rack jobbers. These wholesalers specialize in nonfood products sold through grocery stores and supermarkets - and they often display them on their own wire racks.

Most grocers don't want to bother with reordering and maintaining displays of nonfood items (housewares, hardware items, and books and magazines) because they sell small quantities of so many different kinds of products. Rack jobbers are almost service wholesalers - except that they usually are paid cash for what is sold or delivered.

Retailer and Retailer Marketing Decisions

Definition of a Retailing Commercial transaction in which a buyer intends to consume the good or service through personal, family, or household use. Types of Retailers Retail industry includes all set of activities to sell the goods or services to the final consumers for personal, non business use. There are three types of retailers: 1) Store retailers: operates on a fixed point of sale and depending upon the certain criteria they are divided into Department store, Discount Stores, Specialty Store, Category Killer, Convenience Store, Off-Price Retailer, Warehouse Clubs. 2) Non-store retailers: use various methods such as broadcasting of "infomercials" direct response advertising etc. They are categorized as Direct Selling, Direct Marketing, Automatic Vending and Buying Service. 3)Corporate Organization: achieve economies of scale, greater purchasing power wider brand recognition and better trained employees because of the central buying of the merchandising. They are classified as Corporate Chain Store, Voluntary Chain, Retailer Co-operative, Consumer Co-operative, Franchise's Organization and Merchandising Conglomerate.

Role of Retailers While the companies profiled in this journal are all on the manufacturing side, the vast majority of our readership will be retailers. Retailers have an indispensable role to play in terms of advancing the cause of sustainability. They function as both the industrys interface with the community, and at least potentially, as the consumer conscience of the community. They are positioned to acquaint their customers with those companies doing good on behalf of people and planet, and also to buy conscientiously on behalf of the highest values held by their customers.

There are many retailers doing great work on behalf of the environment and their communities, but I dont think any would be offended if we just declared Mountain Equipment Co-op (MEC) the gold standard. MEC is a ten-store Canadian chain. The adjacent sidebar (adapted from the MEC website) could serve as an industry wide statement of values and purpose. Their green building story is utterly inspiring. And perhaps best of all, they are the un-Wal-Mart, endeavoring to use their buying power with high purpose. Weve all observed the way Wal-Marts relentless pursuit of rock bottom prices has had deleterious effects for both people and planet up and down the supply chain. This is the inevitable result of a reductionist, one dimensional approach to both value and wellbeing. To paraphrase Theodore Roszak from the forward to the classic book Small is Beautiful by E.F. Schumacher, What sort of business is it that must, for the sake of market share, hope and pray that people will never be their better selves, but always be greedy social idiots with nothing finer to do than getting and spending, getting and spending? MEC offers a classic example of the Wal-Mart ethos turned on its head. Instead of using their buying power to effectively drive down wages and environmental standards across the planet, they are actively engaged in both educating their customers on issues of sustainability and lifting the standards of all business partners. (Check out their Supplier Team Evaluation Process (STEP), not to mention their organic cotton initiative.) Every retailer has the opportunity to engage their customers on issues of sustainability (as well as local environmental and social issues, if desired), in a non-invasive way. The idea is to nurture an upward spiral of values that is good for the environment, good for your community, and what the hell, good for your store! One of the objectives of the Green Steps Association going forward is to develop a magazine similar in format and content to this one, but calibrated for a general readership. The magazine would be provided to interested retailers for free distribution to their customers. Values-oriented in-store signage can be a great tool for this purpose, and its our intention to invite companies within the industry to collaborate on materials of this nature. Events, from clean-up days to concerts to composting workshops, can also be a great opportunity to connect with the community and provide tools and resources. As a retailer, perhaps your primary tool in terms of affecting change is your buying power. Wield those dollars with a dual purposeboth to meet the needs of your customers and to support the companies in the industry who are doing positive work on behalf of issues you care about. Communicate your specific concerns about issues that are important to you to the companies you work with. Another objective of the Green Steps Association is to establish a web forum where retailers can share information on companies with compelling enviro and social stories, as well as about whats checkin at retail. (Look for this by Summer Market 2005.) It may not be feasible to change your vendor mix abruptly, so think in terms of gradually redistributing it to better reflect values of sustainability over time. The speed with which you can do this probably depends to a degree upon the composition of the community you serve, and each retailer

will weight aesthetics, performance, price, and sustainability somewhat differently. Its okay to start small! (The most important thing is to start now.) For the retailer, the primary issues related specifically to energy, chemical and material inputs and outputs are relatively few and readily apparent. Here are a few simple things that can be done. Develop an energy conservation strategy. Buy renewable energy when its an option (go to www.greenmountain.com, or check with your power utility), and maybe even consider installing solar panels, if you have the right climate and the right exposure. Even if youre not willing or able to use fluorescent bulbs to illuminate the sales floor, you probably have several bulbs in the bathrooms, back room, storage, and office that could be replaced with fluorescent. Use recycled shopping bags with the highest post consumer recycled content you can find, and then find ways to gently discourage their use. Reuse packing and shipping materials and recycle, including cardboard. If you share a building or a shopping center with other retailers, encourage them to work cooperatively with you to do the same. Your chemical use is probably limited, but consider replacing those conventional cleaning products with their counterparts from Seventh Generation, available at your local natural foods store. Seventh Generation also has you covered for recycled toilet paper (buck up, you get used to it) and trash bags. Need fixtures? Theres a company coming on line that will be producing a wide array of retail fixtures from sustainably harvested small diameter logs. (Stay posted.) Ready to replace a threadbare carpet? Consider bamboo or another highly renewable, long lasting option. Consolidating orders with a given vendor can often save cardboard and energy. Encourage employees to use public transportation, walk, or ride a bike to work, and do so yourself, if possible. Motivating the Retailer With a view to motivating retailers to put in their best efforts in the conduct of sales displays, sponsoring organizations encourage them by : 1 provision of display goods and fixtures at special subsidised prices 2 cooperative advertising and sales promotion i.e., promoting the retail store as well as the manufacturer's product on cost-sharing basis 3 publicity through newsletter as well as keeping the retailer informed of the market movements of the product on display in different markets 4 organization of display contests carrying catchy rewards and effort related consolation prizes 1 photoflashing of retailer's displays at work to other retailers 2 visit of mystery shoppers who assess and award prizes to outstanding retailers. For example, Food Specialities Limited in India attaches considerable importance to the retail trade. Even much before the trend of hiring display windows had caught on, it embarked on a drive to enrol all high-visibility shelves and counters for displays. The company, generally speaking, offers nearly 25 per cent more money for shelf space than almost any other company. It has also devised a host of retail dispensers - hanging net baskets, counter top and floor racks to carry a range of its brands. Likewise, one of the principal factors for the success of brands such as Vicks Vaporub and Gold Cafe in 1988

is attributed to the ability of their sponsors in motivating retailers and hiring out premium display windows. With the passage of time we find that the art of organizing effective sales displays has been perfected. Quite a few consumer goods companies in India which have been using sales displays almost regularly have developed very comprehensive checklists covering pre-planning steps ; event planning ; design preparation and procurement of aids for displays ; selection and signing of select retailers ; monitoring of display scheme in action ; judging criteria, rewards, follow up and lessons for the future. These checklists also find an outline of the role of the sales force at the various stages of the sales displays.

Order Processing
Order processing is a key element of Order fulfillment. Order processing operations or facilities are commonly called "distribution centers". "Order processing" is the term generally used to describe the process or the work flow associated with the picking, packing and delivery of the packed item(s) to a shipping carrier. The specific "order fulfillment process" or the operational procedures of distribution centers are determined by many factors. Each distribution center has its own unique requirements or priorities. There is no "one size fits all" process that universally provides the most efficient operation. Some of the factors that determine the specific process flow of a distribution center are:

The nature of the shipped product - shipping eggs and shipping shirts can require differing fulfillment processes The nature of the orders - the number of differing items and quantities of each item in orders The nature of the shipping packaging - cases, totes, envelopes, pallets can create process variations Shipping costs - consolidation of orders, shipping pre-sort can change processing operations Availability and cost and productivity of workforce - can create trade-off decisions in automation and manual processing operations Timeliness of shipment windows - when shipments need to be completed based on carriers can create processing variations Availability of capital expenditure dollars - influence on manual verses automated process decisions and longer term benefits Value of product shipped - the ratio of the value of the shipped product and the order fulfillment cost Seasonality variations in outbound volume - amount and duration of seasonal peaks and valleys of outbound volume Predictability of future volume, product and order profiles Predictability of distribution network - whether or not the network itself is going to change

Warehousing
Warehousing A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns. They usually have loading docks to load and unload goods from trucks. Sometimes warehouses load and unload goods directly from railways, airports, or seaports. They often have cranes

and forklifts for moving goods, which are usually placed on ISO standard pallets loaded into pallet racks. Reasons for Warehousing 1. To support the companys service policy. If the service policy says that items would be delivered to the major customers twice a week, the stocks have to be kept in a warehouse close to the customer location. 2. To maintain a source of supply without interruptions 3. To achieve production economics in terms of set-up times. 4. To achieve transportation economics. Warehousing and Distribution

Warehouse Strategic PlanningSelecting the most efficient storage designs, material handling systems and warehouse management systems to ensure peak operations performance. Distribution Center Design and ImplementationCreating, maintaining and administering budgets and schedules; assisting with obtaining proper permits; overseeing installation; developing product slotting configurations for maximum material handling and storage efficiency; conducting equipment acceptance testing and providing start-up support when operations go live. Distribution Network ConfigurationDetermining the number and location of distribution centers and manufacturing plants. Site SelectionEvaluating existing structures and Greenfield sites, utilities, fixup costs, gradability, support services, community desirability and incentive packages. Construction ServicesProviding total project management for facility construction and renovation, including site selection, construction team selection and on-site project management. Systems IntegrationSeamlessly integrating computerized and manual warehousing systems through system configuration and set up, acceptance testing start-up and implementation. Inventory ManagementAnalyzing inventory levels throughout the supply chain. Transportation System PlanningSelecting the best transportation configuration and suppliers to minimize costs. MaintenanceTurning the maintenance operation into a profit center by improving product quality, utilization of equipment operators, overall equipment effectiveness, throughput capacity and equipment life.

Distribution warehouse site selection factors 1.) Labor Tops the List. Area Development magazine conducts an Annual Manufacturing and Warehouse/Distribution Operations Site Selection Survey to determine how the site selection components rank in level of importance. The 2008 survey confirmed that labor costs and availability of skilled labor are in the Top 10 most important site selection factors.

2.) Its Not Your Fathers Warehouse More associates needed. In the past, warehouses typically handled bulk shipments of goods in and out with the warehouse providing little value-added work. The number of workers inside the fourwalls of a 250,000-square-foot warehouse would total 12 to 15. Today, warehouses are frequently referred to as customization-centers and/or mini-manufacturing operations. Their focus is to prepare floor-ready merchandise so retail store associates dont have to spend valuable time in back rooms preparing products for shelves rather than assisting customers. It is not uncommon today to find a 250,000-squre-foot warehouse operating with 60 to 75 workers performing value-added services. 3.) Evolution of Automated, High-Tech Warehouse Operations. Warehouse tenants continue to focus on improving supply chain velocity and quality of customer service while reducing supply chain costs. In many cases, corporations have implemented more automation and technology in their warehouse operations to achieve these objectives. For example, Walgreens 700,000-square-foot facility in Perris, Calif., has more than $100 million invested in automation and technology within the four walls. A quality, trainable work force is essential in order for Walgreens to achieve a good return on its investment. 4.) Mass Retailers Vendor (Warehouse Tenants) Compliance Rules. There is good news and some challenging news when mass retailers select vendors. The mass retailers issue a Vendor Compliance book (see example below) that vendors are expected to know and follow. Violations of a chargeback item can result in costly deductions from a vendors invoice. If warehouses do not have access to a good, lowturnover, trainable work force in the area, the cost impact can be significant. 5.) An Areas Specialized Training. Economic development agencies in cooperation with local community colleges have established specialized training programs for warehouse workers so local warehouse operators can find good workers. This can provide a key advantage in one location competing with another. 6.) Rooftops Can be Too Close. We frequently we hear supply chain executives say, In order to be in my comfort zone I want to be able to see the rooftops of where my potential warehouse labor force lives from my warehouse location. Today, we are seeing increasing situations nationwide where residential developments located adjacent to industrial parks are pressuring local politicians to place serious operating moratoriums on warehouse and truck operations. 7.) Agricultural Labor Shed Leads to Exceptional Warehouse Workers. Numerous demographic studies have confirmed that an area with a good size agricultural labor shed provides excellent, loyal, hard-working workers for a warehouse operation. For example, a large retailers regional distribution center located in the Central Valley of California consistently wins the companys warehouse network annual challenge as the most productive and highest quality warehouse operation in the U.S. 8.) Amenities. We have conducted more than 75 warehouse location operations studies across the U.S. and have found a majority of operations executives are putting a higher level of

importance on an area with good amenities (public transportation to/from the site, nearby restaurants, etc.) for warehouse workers. 9.) Warehouse Operations Challenges. As part of WCL Consultings warehouse site selection studies, we frequently interview current warehouse operations workers in an area. Over the last six to seven years, a consistent pattern has emerged: The most important challenges include labor quality, including skill levels and labor turnover. 10.) Developing a More Compelling Warehouse Site Location Story. Demographic studies range from very detailed or high-level overviews. It is recommended that industrial real estate developers/landlords provide some level of demographic information that will help communicate a more compelling story of why their location is better than competitors.

Inventory Management
Functions of inventory:

Decoupling inventory:

You find this predominantly in Batch where this decouples one process from the next. The emphasis is on the material waiting for the process so that the process itself is most efficiently used.

Cycle inventory:

This function relates to the decision to manufacture a quantity of products (like in a lot/batch size) The mainspring is to reduce set-up costs and avoid the loss of process capacity

Capacity-related inventory:

The general idea is to stock-pile inventories in the low sales period for selling in the high sales period (such as producing skates in summer time for the winter period)

Pipeline inventory:

We are dealing with pipe-line inventory, when a company decides to subcontract one process to an outside supplier at some time during the total process lead time.

Buffer inventory:

The basic problem of average demand, by definition, is that it varies around the average. To master this problem, the company may hold higher levels of inventory. So the general idea of buffer inventory is to (help to) protect against unpredictable variations in demand or supply.

Categories of Inventory 1. Anticipation 2. Safety or fluctuation: 3. Lot size: 4. Transportation: 5. Hedge: 6. Maintainence Wrong reasons for carrying inventory 1. Poor quality of materials. 2. Unreliable supplier deliveries 3. Extended order cycle times 4. Inaccurate uncertain demand forecast 5. Custom items used for standard applications 6. Extented material pipelines 7. Inefficient manufacturing processes. Inventory performance measures 1. Inventory turns is the measure of the value of business which the inventory holding has helped the company to generate. 2. Number of days of supply is another simple measure. This denotes the number of days of production or days sales which the inventory holding can service. Inventory management and control Inventory control is concerned with minimizing the total cost of inventory. In the U.K. The cost of holding the stock (e.g., based on the interest rate).

The cost of placing an order (e.g., for row material stocks) or the set-up cost of production. The cost of shortage, i.e., what is lost if the stock is insufficient to meet all demand.

The third element is the most difficult to measure and is often handled by establishing a "service level" policy, e. g, certain percentage of demand will be met from stock without delay. The ABC Classification The ABC classification system is to grouping items according to annual sales volume, in an attempt to identify the small number of items

that will account for most of the sales volume and that are the most important ones to control for effective inventory management. Reorder Point: The inventory level R in which an order is placed where R = D.L, D = demand rate (demand rate period (day, week, etc), and L = lead time. Safety Stock: Remaining inventory between the times that an order is placed and when new stock is received. If there are not enough inventories then a shortage may occur. Safety stock is a hedge against running out of inventory. It is an extra inventory to take care on unexpected events. It is often called buffer stock. The absence of inventory is called a shortage. Quantity Discount Model Calculation Steps:

Compute EOQ for each quantity discount price. Is computed EOQ in the discount range? If not, use lowest cost quantity in the discount range. Compute Total Cost for EOQ or lowest cost quantity in discount range. Select quantity with the lowest Total Cost, including the cost of the items purchased.

Inventory handing 1. All stocks regularly being consumed and in stock for less than 6 months could be considered as moving. 2. Slow moving stocks are those which are in stock for more than 6 months but less than 2 years. 3. All items where the stock levels are more than 2 years old can be considered as dead stock and have to be removed from inventory quickly before they deteriorate further in value. 4. These items will never again be procured. Inventory costs A list of costs related to inventory is given below: 1. Item or unit cost: basic value of item carried 2. Carrying costs: capital, storage, risks which could be damage, deterioration, obsolescence 3. Ordering costs of materials-mostly relating to follow-up with vendors but could also include generating and sending a material release, transport or any other acquisition costs. 4. Stock-out costs-back-order costs, lost sales or lost customers 5. Quality costs associated with non-conforming goods 6. Other costs could include duties, tooling, and exchange rate differences. Inventory strategy

A strategy for managing inventory has the focus of providing the agreed service levels at the lowest possible inventory cost. The strategy cannot be the same for companies in different industries nor for companies in the same industry as in each case the service levels and the cost the company is willing to lock up in inventory varies.

Transportation
Transportation Transport or transportation is the movement of people and goods from one location to another. Transport is performed by modes, such as air, rail, road, water, cable, pipeline and space. The field can be divided into infrastructure, vehicles, and operations. Infrastructure consists of the fixed installations necessary for transport, and may be roads, railways, airways, waterways, canals and pipelines, and terminals such as airports, railway stations, bus stations, warehouses, trucking terminals, refueling depots (including fueling docks and fuel stations), and seaports. Terminals may both be used for interchange of passengers and cargo, and for maintenance. Vehicles traveling on these networks may include automobiles, bicycles, buses, trains, trucks, people, helicopters, and aircraft. Operations deal with the way the vehicles are operated, and the procedures set for this purpose including financing, legalities and policies. In the transport industry, operations and ownership of infrastructure can be either public or private, depending on the country and mode. Passenger transport may be public, where operators provide scheduled services, or private. Freight transport has become focused on containerization, although bulk transport is used for large volumes of durable items. Transport plays an important part in economic growth and globalization, but most types cause air pollution and use large amounts of land. While it is heavily subsidized by governments, good planning of transport is essential to make traffic flow, and restrain urban sprawl. Air transport Air transport is by far the quickest and most reliable way to get around India. Key airports exist in Delhi, Mumbai, Kolkatta, Cochin, and Chennai, each of which is serviced by an extensive array of domestic and international carriers. Fierce competition, increased tourism, and online ticketing have helped lower airfares considerably in recent years, but it still pays to shop around for the best deals far in advance. If youre coming to India for medical tourism, your healthcare provider might already have special deals and discounts available. Once in the country, however, youll probably have to rely on a great deal of land travel in order to fully develop an appreciation for the vastness and variety of the country. Indian Railways The best way to see India is by train. Most intercity travelers rely on impressive locomotives such as the Shatabdi and the Rajdhani that hurtle across the country at speeds of 145kph. For those who prefer to travel in and around the various cities, underground metro systems are available (in Delhi and Kolkatta). These public transport

systems have made navigating urban centers infinitely easier, but be forewarned; the trains are often crowded, and its easy to become lost if youre not paying attention. When traveling between cities, if youre someone who craves air conditioning and reserved seating, dont hesitate to purchase 1st class fares. The price difference can be substantial, but most agree that its worth it. Indias Roadways With the worlds third largest road network of over 3,300,000 kilometers of national & state highways, district roads, and village roads, driving is still the countrys foremost mode of transportation. Trucks, private cars, public buses, taxis, rickshaws, and bullock carts carry people and goods to every corner of India. As a visitor, youll probably want to avoid driving yourself since traffic signs, lanes, and speed limits are optional at best. But for a modest fee, you can hire a day or week-long driver to escort you to whatever destinations you have on your agenda.

Concept of Logistics and Supply Chain Management

Logistics Logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers (frequently, and originally, military organizations). Logistics involves the integration of information, transportation, inventory, warehousing, material-handling, and packaging, and occasionally security. Logistics is a channel of the supply chain which adds the value of time and place utility. Today the complexity of production logistics can be modeled, analyzed, visualized and optimized by plant simulation software. Scope of Logistics a. Key Logistics Activities Outlined below are the key activities required to facilitate the flow of a product from point of origin to point of consumption. All of these activities, listed alphabetically below, may be considered part of the overall logistics process. Customer service Customer service has been defined as "a customer-oriented philosophy which integrates and manages all elements of the customer interlace within a predetermined optimum costservice mix. Customer service is the output of the logistics system. It involves getting the right product to the right customer at the right place, in the right condition and at the right time, at the lowest total cost possible, Good customer service supports customer satisfaction, which is the output of the entire marketing process.

Demand forecasting/planning There are many types of demand forecasts. Marketing forecasts customer demand based on promotions, pricing, competition, and so on. Manufacturing forecasts production requirements based on marketing's sales demand forecasts and current inventory levels. Logistics usually becomes involved in forecasting in terms of ho\v much should be ordered from its suppliers (through purchasing), and how much of finished product should be transported or held in each market that the organization serves. In some organizations, logistics may even plan production. Thus, logistics needs to be linked to both marketing and manufacturing forecasting and planning. Inventory management Inventory management involves trading off the level of inventory held to achieve high customer service levels with the cost of holding inventory, including capital tied up in inventory, variable storage costs, and obsolescence. These costs can range from 14 to over 50 percent of the value of inventory on an annual basis! With high costs for items such as high-tech merchandise, automobiles, and seasonal items that rapidly be come/obsolete, many organizations, including Hewlett Packard. Xerox, and Sears, are giving inventory management much more attention.

Logistics communications Communications are becoming increasingly automated, complex, and rapid. Logistics interfaces with a wide array of functions and organizations in its communication processes. Communication must occur between: 1. The organization and its suppliers and customers. 2. The major functions within the organization, such as logistics, engineering, accounting, marketing, and production. 3. The various logistics activities listed previously. 4. The various aspects of each logistics activity, such as coordinating warehousing of material, work in process, and finished goods. 5. Various members of the supply chain, such as intermediaries and secondary customers or suppliers who may not be directly linked to the firm. Communication is key to the efficient functioning of any system, whether it be the distribution system of an organization or the wider supply chain.

Material handling Materials handling is a broad area that encompasses virtually all aspects of all movements of raw materials, work in process, or finished goods within a plant or warehouse. Because an organization incurs costs without adding value each time an item moves or is handled, a primary objective of materials management is to eliminate handling wherever possible. That includes minimizing travel distance, bottlenecks, inventory levels, and loss due to waste, mishandling, pilferage, and damage. Thus, by carefully analyzing material flows, materials management can save the organization significant amounts of money. Order processing Order processing entails the systems that an organization has for getting orders from customers, checking on the status of orders and communicating to customers about them, and actually filling the order and making it available lo the customer. Part of the order processing includes checking inventory status, customer credit, invoicing, and accounts receivable. Thus, order processing is a broad, highly automated area. Because the order processing cycle is a key area of customer interface with the organization, it can have a big impact on a customer's perception of service and. therefore, satisfaction. Packaging Packaging is valuable both as a form of advertising/marketing, and for protection and storage from a logistical perspective. Packaging can convey important information to inform the consumer. Aesthetically pleasing packaging also can attract the consumer's attention. Logistically, packaging provides protection during storage and transport. This is especially important for long distances over multiple transportation modes such as international shipping. Packaging can ease movement and storage by being properly designed for the warehouse configuration and materials handling equipment.

Parts and service support In addition to supporting production through the movement of materials, work in process and finished goods, logistics also is responsible for providing after-sale service support. This may include delivery of repair parts to dealers, stocking adequate spares, picking up defective or malfunctioning products from customers, and responding quickly to demands for repairs. Traffic and transportation

A key logistics activity is to actually provide for the movement of materials and goods from point of origin to point of consumption, and perhaps to its ultimate point of disposal as well. Transportation involves selection of the mode (e.g., air, rail, water, truck, or pipeline), the routing of the shipment, assuring of compliance with regulations in the region of the country where shipment is occurring, and selection of the carrier. It is frequently the largest single cost among logistics activities. Supply-Chain-Management Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain). Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally." More common and accepted definitions of Supply Chain Management are:

Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer et al, 2001). Global Supply Chain Forum - Supply Chain Management is the integration of key business processes across the supply chain for the purpose of adding value for customers and stakeholders (Lambert, 2008). According to the Council of Supply Chain Management Professionals (CSCMP), Supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, thirdparty service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise.