Sales & distribution management

Group 5 Term Project

Management Development Institute
4th March 2013

Introduction

Shriram Pistons & Rings Ltd

Channel Network

Shriram Pistons & Rings Ltd

Shriram Pistons & Rings Ltd (SPR) is Indias largest integrated manufacturer of Pistons, Piston Rings, Gudgeon Pins and Engine Valves.

SPR has 4000+ employees in India and has an annual turnover of approx.
US$176 million.

Technical collaboration with Kolbenschmidt ,Germany to produce Pistons, Riken corporation ,Japan for Piston Rings, Fuji Oozx ,Japan for the manufacture of engine valves; Honda foundry ,Japan for technical support.

The company has two state of art manufacturing plants in India : Ghaziabad & Pathredi (Bhiwadi Industrial Area, Haryana)

50 National & International OE Customers : Ashok Leyland ,Tata motors ,

Maruti Suzuki ,Mahindra &Mahindra , Swaraj Mazda, Bajaj auto ,Honda Car,
Hero Motocorp, Honda Scooters , Ford, UK, Renault, France, Hyundai, Korea

SPRL Marketing Organizational Structure Marketing

Managing Director Marketing Executive Director II Marketing Executive Director I

Exports

After Market

Executive Director I (Marketing)

OE Sales

Sr General Manager(After Market)

Sr Marketing Manager
Regional Sales Manager Regional Sales Manager Regional Sales Manager

After market

Regional Sales Manager

Sales Team

Sales Team

Sales Team

Sales Team

Head Office
New Delhi

Regional Sales Offices

5
Jalandhar, New Delhi, Kolkata, Pune, Bangalore

Manufacturing Plants

Geographical location of consumer profile categorized

A= Metro Cities B= Major towns C & D= Remote Locations

Godowns in India

13

Profile of Channel members

MD- Main Distributer

(4 Nos.)

TD- Town Distributer (600 Nos)

Very old distribution channel 15 to 20 years of relationship

Vital channel partners . Knowledge source

Move the products through incentives Big retailer in SPR distribution network

Exclusive

Registered firms having PAN, TAN Have their own godowns

99% MD : Appointed retailer (Big in that area)

Retailers in remote locations in other states Cant sell competitors brand Dont sell to exclusive TDs
(Exception: Non-availability of product)

Sell only SPR products Dont sell competitor brands Company registered with PAN & TAN no. and sell SPR products with bills. Sell other engine products. Better presentation / promotion of SPR brands. Responsible for educating the customers of the benefits of the SPR products.
Non-exclusive
Located in all places cities , towns, remote locations. Sell competing brands Sell without bills (Billing at retail point would entail additional service tax)

MD sell product to exclusive TDs

SPRL Sales & Distribution Network

SPR Factory

SPR Godown

Main Distributor

Exclusive TD (Big Retailer)

Non Exclusive TD (Retailer with competitive products)

END CUSTOMER ( General Public & Mechanics )

Issue in SPR channels

Delhi & Gurgaon market

1. Channel Control Issue

Town distributor sells the parts to another Town Distributor. Town Distributors get TOD (Turnover discount) of 2.5%. Turnover discount are given to achieve monthly/quarterly sales targets. When they find that it is difficult for them to achieve target and obtain benefit of TOD then they sell at prices lower than their cost of purchase (by 1 to 1.5 %) in order to avail TOD of 2.5% on Total sale Both the Town Distributors get benefited. Problems which are arising due to improper channel control are : Mismatch of target and demand Price undercutting by TD to achieve turnover discounts from SPR

Price control by distributors in Delhi market i.e. collusion of exclusive distributors

Issue of inter-selling between TDs

SPR Godown

Main Distributor

Exclusive TD
(Big Retailer)

Non Exclusive TD (Retailer with competitive products)

Sales to each other

Exceptional case

END CUSTOMER ( General Public & Mechanics )

Demand forecasting Recommendations Focused market demand forecasting Sales persons are trained more frequently on technical issues and not much on structured data collection.

Prepare structured questionnaire for sales persons to collect the data from mechanic/ distributors/ retailers
Product model / specifications of frequently demanded products

Manufacturing date
Last service date Last Piston / piston ring / engine valve change (if applicable)

Present problem in vehicle / engine

Advice by mechanic on SPR suggestion card to the customer Others points relevant to vehicle servicing

Problem faced if recommendation

Mechanics may not respond for filling up the questionnaire. Sales executives may not take up the questionnaire seriously.

Measures to take care

Arrange for channel partner meet with company senior management to explain the need for such a strategy. Emphasis them that they will not be having demand supply mismatch in case company is able to do better demand forecasting. Incentives to both channel partners and mechanics for supporting this activity. Relationship building to be done.

Data collection may be a tedious process, since it needs to be collected and compiled which requires more time.
Getting similar efforts from all sales officers of Delhi & Haryana region and with similar consistency may not be feasible Customers at different locations may show different customer behavior which may be difficult to evaluate. Channel partners may not support.

Price undercutting & price control by distributors

Recommendations Stop selling SPR products through channel partners who resell the products to unauthorized retailers. Selective Distribution of channel partners: Choose channel partners who have very high reputation in that area. Make sure powerful and large channel members do not exert pressure on less powerful channel members to undertake price cutting measures. SAP sales and distribution module that already exists with the MDs can be extended to Town distributors to monitor the price given by them.

Problem faced if recommendation

SPR intension to increase channel partner in un-penetrated region may face the opposition from prospective SPR partners. SPRs intensive distribution strategy may take a beating. Over control by SPR sales executives may backfire. Existing channel partner may not pass on market information. Channel partners may collude for a joint decision if their vested interests are hurt. Channel partner may lose confidence on SPR.

Measures to take care

Sales person to accurately forecast demand for future products where stock piling takes place. To clear retailer stocks introduce small incentive deals or pull activities in local region. Channel partner meet with senior management to make them aware of company objectives ( high premium SPR brand)

2. Market Penetration & Market Share

The Delhi & Gurgaon markets are highly competitive markets for SPR. It has specific exclusive and non exclusive distributors for its different range of products. We were told that the Main distributors have a team of sales person who not only take order from Delhi retailers but also go to remote locations in other states to take orders where the nearest SPR distributor in that state is not serving them.

Problems which are arising due to improper channel control are : It can lead to development of a market in other region not as per SPR sales strategy

SPR Sales Strategy : Premium product, exclusive / non exclusive dealers, low overlap of region etc.

Creating pull in the Delhi & Gurgaon market

Recommendations Shift the larger portion of Coupons in primary packing to secondary packing so that mechanics can be better incentivized and the benefit which distributors avail for by selling to some other market get reduced. Pay higher slotting allowances (payment of shelf space) than competitive manufacturer. Offer higher trade discounts (margins) to channel members than competitive offers. Make available to channel members more special deals and merchandising campaigns than do competitors.

Problem faced if recommendation

Delhi distributors which have developed good market in remote locations in other states May find it difficult to sustain and tend to go for competitors product. Cutting the portion of coupon on primary packing may discourage the distributors which are not involved in such activities.

Measures to take care

Put stickers on primary and secondary consignments for the region it is intended for (i.e. promoting in remote locations) so that controlled dispensing of coupons can be done.

Avoid conflict between state TD & Delhi MD

Recommendations Define the area and width of the TD. Understand his financial and resource capability of local / state TD to reach the remote location in his area which falls within the vicinity of allotted location. Mapping of customer requirement from remote location by SPR sales person. Appoint special sales officer for mapping demand from remote locations Monitor and document how much sales generated by MD sales person from remote location. Whether it is feasible and all Ps (Product, Price, Place and Promotion) are being served properly by MD.

Problem faced if recommendation

Customers may still approach the nearest local TD in spite of demarcation of boundary. Local TD cannot refuse remote location customer coming to his retail outlet.

Measures to take care

Budget allocation at start of year towards market penetration in remote locations. Special incentive scheme to sales officers handling remote location. Training of MD & TD in making understand company objectives behind demarcation of boundaries. Joint meeting between local TD, MD and company management for confidence building.

Mapping of customer requirement from remote location by SPR sales person may not be utilized by MD sales person.
Financial and resource requirement required to reach, collect data, inform and train MD sales person. Monitoring will be a huge task. Auditing of sales from remote locations by regular visits may not be feasible for company in long run. Additional cost to the company for recruiting special sales officer for remote location.

3. Channel Performance Evaluation

Channel partner evaluation is presently on quantitative basis rather qualitative basis

There is loss to distributor if not they are not able to meet assigned target
Inventory get piled up at the distributors end which results into the significant blockage of working capital, this resulting into no further orders to company and decreased interest of retailer to stock SPR product. Performance evaluation of distributors is done on quarterly basis.

In case targets are not met, 2.5% TOD loss to distributors.

Increase frequency of performance evaluation

Recommendations Distributor performance evaluation frequency should be increased from quarterly to monthly or once in two months. This would help to indentify that whether inventories is being piled up by the distributor due to mismatch between this commitment to achieve target and real sales being achieved by him. This would help to re-evaluate the target assigned to him instead of putting him in the situation where he blocks his substantial working capital and as result of it losing interest in keeping companys product.

Problem faced if recommendation

Increase in SPR cost to monitor frequent channel evaluation. Increase in hassles for distributor. May not cooperate in evaluation.

Measures to take care

Emphasize that this would help in better forecasting and reducing the chances of capital lock up in inventory. Present work force is sufficient to do such evaluation. If there is nominal cost increases due to increase in frequency of performance evaluation may be beared by SPR marketing team considering the overall merits.

4. Sales Force Performance Evaluation

Company level forecast is done and then regional sales managers are allocated with target. This target is negotiated between salesman, RSM and Sr. General Manager (After market). Based on the discussions, adjustment is done. In case gaps are seen in the middle of the year, reevaluation is done. Presently, SPR is evaluating its salesperson based only on the following two aspects
Achievement of Sales Target

Performance during the interview in the middle of the year

Delhi region
7 different sales person handling specific two wheeler, car, tractor, HCV & LCV products.

It is difficult to create push in two wheeler market for sales person because SPR products are premium and get tough competition from local product.
HCV product may be sold easily since it does not face similar completion as two wheeler market.

Comparison of two such sales person subjectively is difficult.

Outcome-Based Perspective
Recommendations
To focus on objective measures of results with little monitoring or directing of salesperson behavior by sales managers.

The outcome measures are Sales Target Achievement

Orders (No. of orders, No. of Size & orders, No. of canceled orders) Accounts (No. of Active Accounts / New Accounts / Lost Accounts / Overdue Accounts / No. of prospective Accounts)
Behavioral Results

Salesperson Performance

Professional Development

Profitability

Behavior-Based Perspective
Recommendations Incorporates complex and often subjective assessments of salesperson characteristics and behaviors Monitoring and directing of salesperson behavior by sales managers. This not only to address activities related to short-term sales generation Include non-selling activities needed to ensure long-term customer satisfaction.

Consists of criteria related to activities performed by individual salespeople

Sales calls, Channel Members / Customer complaints, required reports submitted, training meetings, letters and calls

Problem faced if recommendation

Sales Manager Job load increase Increase in Monitoring Activities Performance Evaluation Bias Occurs when a managers evaluation of a salesperson is affected by considerations other than the specified criteria Common sources of bias: Personal relationships Perceived difficulty of territory Outcomes (i.e., ends justifies the means)

Measures to take care

SPR can avoid the above difficulties by creating the framework for performance evaluation as follows Consider the criteria on which members will be evaluated and the methods used to evaluate performance

Establish a link between team performance and positive outcomes to promote individual and team effort
May be beneficial to allow team to help develop goals and evaluation criteria

Framework for performance evaluation

Evaluate Salespeople against Relevant Performance Criteria

Compare Salesperson Evaluations to Identify Problem Area

Investigate Problem Areas to Identify Causes of Performance Problems

Determine Sales Management Actions to Eliminate Causes of Future Problems and to Solve Existing Problems

Thank You