Вы находитесь на странице: 1из 9

CLOGGING THE CHANNELS

Presented by (Group 10): Denny Joseph Mohamed Sahle Varun Deshpande Nikhil Pandit Rohan Khatre Makushla Santimano

Identify the Problem


The sales management at Terrest India Ltd. (TIL) failed to

understand that while they had sales targets to achieve, the same could not be pushed on to the distributors and retailers. By pushing the slow-moving brands on to the distributors and retailers, the company did not allow them to decide their own product-mix and this dissatisfied them and demotivated them to stock the companys brand even if some of the products were popular and fast-selling. TILs sales targets for the brand of April were increased by 8% of the actual sales of February and March. The increased sales was expected from the new brand of tea, Valleys Pride. However, the increased sales targets seemed unrealistic as Valleys Pride which was a new entrant in the market was not doing as well as expected. Moreover, the consumers preferred other varieties of tea especially dust tea.

Also, since the sales of Valleys Pride was not picking up, both

the distributors as well as the retailers were hesitant to stock the brand. To add to this, TILs nearest competitor Tea Estates India (TEI) was going to launch its new brand, Green Darjeeling next month making it even tougher for TIL to sell Valleys Pride. The company was pushing stocks of least preferred flavours of fruit drinks on to the distributors thereby resulting in unsold stock lying with the distributor. TIL was messing up the stocks and not sending it as per the requirements of the distributor thereby changing the product mix desired by him. Take even for example, the situation where the consignment was one tonne short of a truck load, the company by sending that one extra tonne upset the distributor as it hampered with his product mix and inventory space. If this was done on a one-off basis, the distributor would have accepted it, but the pack sizes and desired mix of products was also wrong.

The problem for the various parties involved:


For Arjun Kapoor (sales representative)
The revised sales targets for the month of April were

unrealistic and unfeasible. He could not push the sales of Valley any higher, due to the reluctance of both the distributor and the retailer to accept the increased volumes. The distributors in Gujarat and Maharashtra had reduced their orders for Valley since the sales for Valley in the previous 4 months were low. He was finding it difficult to convince the distributor to accept more volumes of Valleys Pride as the brand was slow moving and not generating enough returns. There was stock of the fruit drink Healthy lying unsold with the distributor as this stock consisted of flavours that were not popular in the market.

For Damodar Girjee (distributor)


The previous months sales of Valley were dismal and hence

he didnt want to block his funds by keeping huge stocks of Valley. Valleys Pride was not even getting trials since the customer had established preferences for other brands of tea. He was keeping unsold stock of Healthy consisting of flavours that he did not want, but it had been pushed on him by TIL. Girjees carrying costs were already high and the company was sending him extra stock that he had not asked for. As a result, his stock turnover was low as he was only managing to sell. Moreover, the retailers were asking for more credit and for longer periods.

For Khimji Tanna (retailer)


Incorrect product mix 1kg packets of Valleys Pride when he

wanted 0.5kg packets. The bigger pack sizes were more difficult to push since Valley was just launched and it is taking up his shelf space.

Is the problem specific or universal?


The problem is specific as it is restricted to only

the parties mentioned in the case. Company The pressure of increased TIL volumes and sales targets Area Sales Manager follows the hierarchy Vipul Desai as seen in the flowchart shown Sales Representative on the right. Arjun Kapoor
Distributor

Damodar Girjee
Retailer

Khimji Tanna

Is the problem short-term or longterm?


The problem looks to be a short-term problem since it exists only for

that month however on closely studying the case, it looks to be longterm.


The problem seems short-term because:
Once the sale has been made to the next party, the problem is over. The problem exists so long as the stock exists. Once the stock, gets sold to

the party next in the hierarchy, the problem is over.


However, the Hardsell technique is a short-term solution. In the long-

term it puts a strain on the working capital finances and also takes longer to implement as convincing takes time and effort.
It can be argued that the problem is long-term for the company if the

brand, Valleys Pride continues to perform dismally in the market. If this is the case, then pushing the sales in the future is again going to be a challenge for all the parties involved.
It is also a long-term problem for the parties involved as the

manufacturer needs to understand that incentive to sell a product comes from the manufacturer and not only from the retailer. If the retailer and distributor sees no profit in the long-run, then sales will start slipping.
Also, more and more new products and new brands are being launched

Solution
The stocks and product-mix should be sent as per the requirements of

the distributor. The quantity, pack sizes and consignment size should be checked before it can be dispatched to the distributor.
Also, the distributor should be informed in case of any change in the

consignment and/or product-mix.


While it may seem reasonable to push stocks on to the distributors who

in turn will push it on to the retailers, it is harmful for the company to have stock lying unsold in the warehouse. This is because, while the company may have registered the stock as being sold to the middlemen, the product has not yet reached the consumer. It is stuck somewhere in the pipeline, thereby giving a wrong impression to the manufacturer that it has been sold.
The manufacturer must not push slow-moving items on to the retailer as

a pre-condition for ensuring stock of the popular items since this will force the retailer to stop stocking the brand altogether. Today, in addition to private labels there are close substitutes existing for almost all products and the retailer will not hesitate in going for these alternatives.

Sales representatives should be allowed to work out and offer

schemes to the distributor within a certain limit. Also since advertising plays such an important role in influencing consumer purchases, the company should have launched the ad first before increasing the sales targets. It is not sufficient to educate only the distributor as to how to push up sales, but the retailer must also be informed and educated as to how he can increase sales of the slow moving items through
o product bundling (2 items at 20% less than the original price of both)

o promotions(buy one, get one free)


o and in-store advertising.

From the manufacturers end, he should also focus on


o offering samples(e.g. Buy Healthy in mango flavour and get 200g of

Valleys Pride free) o promotions for new launches