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Future Institute of

Management, Goregaon

Name: Arpansinh Vansadia

Roll No.: 520961608

Specialization : Marketing Management

Subject code: MK0010

Sales, Distribution and Supply Chain


Management
Assignment Set – 1

Q.1 a. Explain the different types of sales organizations.

Ans.: Different types of Sales Organization


11) Organizing the Sales Force:
An effective sales force is a powerful asset for any company. Doctors & physicians in United
States have consistently ranked Pfizer’s sales force as one of the best in the pharmaceutical
industry. As a result, when Parke-Davis launched its blockbuster cholesterol-lowering drug,
Lipitor, it entered into an alliance in which Pfizer’s sales force helped selling the drug to
physicians throughout the United States.
A company’s management process is fundamentally affected by the firm’s overall business
strategy and its strategy for accessing its target markets. The relationship between business
strategies, a firm’s marketing strategy, and a firm’s strategic sales force program is discussed in
this unit.
Sales force organization is primarily a function of properly sizing the sales organization to assure
that customers and prospects receive appropriate coverage, company products get proper
representation, and the sales force is stretched but not overworked. The appropriate planning of
the sales force will also depend on the size of the opportunity a firm faces and its expected sales
level.
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22) Roles & Structure of the Sales Force:
To be successful and produce profitable results, the sales force must implement a firm’s business
strategy and market access strategy. In other words, strategic plans are implemented through the
activities and behaviors of the sales force. Key sales force behaviors include calling on certain
types of customers and prospects, managing customer relationships and creating value for
individual customers. The role of the sales force in implementing a firm’s market access strategy
is very important.
To meet customer needs efficiently and effectively and to sell the firm’s products and services, a
sales force must be well organized. Sales force structure decisions influence how customers see
the firm because sales force structure will affect the selling skills and knowledge level required of
salespeople. In turn, sales management activities such as compensation, recruitment, training,
and evaluation are affected.

13) Building Sales Competencies:


Sales managers are responsible for hiring salespeople with the appropriate skills and
backgrounds to implement the sales strategy. Good sources must be found for new hires, and
those who are weak in these areas must be carefully screened out. In addition to hiring qualified
people, salespeople’s competencies are usually developed through training before they are sent
into the field. Sales managers are responsible for making sure that training is completed, and
they often conduct some of the classes. Most initial training programs are designed to familiarize
salespeople with the company’s products, services, and operating procedures, with some time
devoted to development of selling skills. Because sales training is expensive, the sales manager
is responsible for selecting the most cost-effective methods, location, and materials.
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24) Leading the Sales Force:
Effective sales managers know how to supervise and lead their salespeople. Sales managers
provide leadership by inspiring people to grow and develop professionally, while achieving the
revenue goals of the firm. Good leaders provide models of behavior for employees to emulate,
often developing strong mutual trust and rapport with subordinates. Leadership styles vary, but
effective leaders are adept at initiating structure – that is, organizing and motivating employees,
setting goals, enforcing rules, and defining expectations. In addition to leading the sales force in
business results, sales managers are also expected to lead by example in encouraging ethical
behavior within the sales force. Salespeople are continually confronted with ethical dilemmas.
Sales managers use a variety of tools in their efforts to motivate salespeople to work more
efficiently and effectively.
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25) Goal directed effort:
There are many techniques that have proved to be effective motivators, including sales meetings,
quotas, sales contests, and recognition awards. The most powerful motivator for salespeople is
often a well-designed compensation package. Money is an important consideration for attracting
and motivating people to work hard. A key task for sales managers is to devise an effective mix of
salary, bonuses, commissions, expenses, and benefits without putting the firm’s profitability in
jeopardy.

16) Evaluate the performance of the sales force:


The final step in the sales management process is to evaluate the performance of the sales force
and develop the skills of their people. This involves analyzing sales data by account, territory, and
product line breakdowns. It also means reviewing selling costs and measuring the impact of sales
force activities on profits.

b. Define sales quotas with 2 examples.

Ans.: Sales Quotas


Sales quotas are a way of life for the sales force. All activities of the sales force revolve around
the fulfillment of sales quotas. Sales quotas are targets assigned to sales personnel. They signify
the performance expected from them by the organization. Sales quotas help in directing,
evaluating and controlling the sales force. They form an indispensable tool for sales managers to
carry out sales management activities. Sales quotas are prepared on the basis of sales forecasts
and budgets. Sales quotas serve various purposes in organizations.
They provide targets for sales personnel to achieve & also act as standards to measure sales
force performance and help motivate the sales force. Compensation plans are invariably linked to
quotas. The commission and bonuses given to sales persons are based on their meeting quotas
set for them. The four categories of sales quotas widely used are:
– Sales volume quotas,
– Expense quotas,
– Activity quotas and
– Profit quotas.
Sales quota should be fair, challenging yet attainable, rewarding, easy to understand, flexible and
must satisfy management objectives.
It must also help in the coordination of sales force activities. Setting motivating and easy to
understand quotas is essential to obtain the cooperation of the sales force. Various methods are
used to set sales quotas, among which, quotas based on sales forecasts and market potential are
the most common. Skilful administration by sales managers is required for effective
implementation of quotas. Convincing salespeople about the fairness and accuracy of quotas
helps the sales management to successfully implement quotas.
Sales quotas have certain limitations such as being time consuming, difficulty in comprehending if
complicated statistical calculations have been used and focusing on attaining sales volumes at
the cost of ignoring important non-selling activities. Quotas may reduce risk-taking among sales
personnel and may influence them to adopt unethical selling practices. With changes in the
competitive environment and variations in customer expectations, many companies have started
developing compensation plans that are increasingly based on non-traditional aspects, thereby
reducing dependency on quotas.
The process of establishing normal and reasonable sales quotas can vary greatly as a function of
the business, industry, type and size of the sales organization, and product and/or service being
sold. However, there can often be a great deal of commonality in the approach to this important
sales-generating tool.
Q.2 Just a few months back, Laker Pvt. Ltd. has expanded its product mix. The
management has decided to set up new objectives for its distribution system. The
management also wants to change the channel design and network according to the new
objectives. Please advice the management of Laker Pvt. Ltd. on how to go about it.

Ans.: Designing Marketing Channels


1) Factors considered for designing Distribution Channels:
Like most marketing decisions, a great deal of research and thought must go into determining
how to carry out distribution activities in a way that meets a marketer’s objectives. The marketer
must consider many factors when establishing a distribution system. Some factors are directly
related to marketing decisions while others are affected by relationships that exist with members
of the channel.
The following are the key factors to consider when designing a distribution strategy. We can
group these into two main categories:
– Marketing decision issues and
– Channel relationship issues.

Marketing Decision Issues: Distribution strategy can be shaped by how decisions are made in
other marketing areas as under:
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21) Product Issues
The nature of the product often dictates the distribution options available especially if the product
requires special handling. For instance, companies selling delicate or fragile products, such as
flowers, glass articles, etc., look for shipping arrangements that are different than those sought for
companies selling extremely tough or durable products, such as steel rods.
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32) Promotion Issues
4Besides issues related to physical handling of products, distribution decisions are affected by
the type of promotional activities needed to sell the product to customers. For products needing
extensive salesperson-to-customer contact (e.g., automobile purchases) the distribution options
are different than for products where customers typically require no sales assistance (i.e., bread
purchases).
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23) Pricing Issues
The desired price at which a marketer seeks to sell their product can impact how they choose to
distribute. The inclusion of resellers in a marketer’s distribution strategy may affect a product’s
pricing since each member of the channel seeks to make a profit for their contribution to the sale
of the product. If too many channel members are involved the eventual selling price may be too
high to meet sales targets in which case the marketer may explore other distribution options.
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24) Target Market Issues
A distribution system is only effective if target customers can obtain the product. Consequently, a
key decision in setting up a channel arrangement is for the marketer to choose the approach that
reaches target customers in the most effective way possible. The most important decision with
regard to reaching the target market is to determine the level of distribution coverage needed to
effectively meet customer’s needs. Distribution coverage is measured in terms of the intensity by
which the product is made available. For the most part, distribution coverage decisions are of
most concern to consumer products companies, though there are many industrial products that
also must decide how much coverage to give their products.
The marketer must take into consideration many factors when choosing the right level of
distribution coverage. However, all marketers should understand that distribution creates costs to
the organization. Some of these expenses can be passed along to customers (e.g., shipping
costs) but others cannot (e.g., need for additional salespeople to handle more distributors). Thus,
the process for determining the right level of distribution coverage often comes down to an
analysis of the benefits (e.g., more sales) versus the cost associated with gaining the benefits.

1Levels of distribution coverage: There are three main levels of distribution coverage – mass
coverage, selective and exclusive.
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31) Mass Coverage – The mass coverage (also known as intensive distribution) strategy
attempts to distribute products widely in nearly all locations in which that type of product is sold.
This level of distribution is only feasible for relatively low priced products that appeal to very large
target markets (e.g., FMCG products). A product such as Coca-Cola is a classic example since it
is available in a wide variety of locations including grocery/provision stores, convenience stores,
vending machines, hotels and many, many more. With such a large number of locations selling
the product the cost of distribution is extremely high and must be offset with very high sales
volume.
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52) Selective Coverage - Under selective coverage the marketer deliberately seeks to limit the
locations in which this type of product is sold. The logic of this strategy is due to the size and
nature of the product’s target market. Products with selective coverage appeal to smaller more
focused target markets (e.g., air conditioners) compared to the size of target markets for mass
marketed products. Consequently, because the market size is smaller, the number of locations
needed to support the distribution of the product is fewer.
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73) Exclusive Coverage - Some high-end products target very narrow markets that have a
relatively small number of customers. These customers are often characterized as
―discriminating‖ in their taste for products and seek to satisfy some of their needs with high-
quality, though expensive products. Additionally, many buyers of high-end products require a high
level of customer service from the channel member from whom they purchase. These
characteristics of the target market may lead the marketer to sell their products through a very
select or exclusive group of resellers. Another type of exclusive distribution may not involve high-
end products but rather products only available in selected locations such as company-owned
stores. While these products may or may not be higher priced compared to competitive products,
the fact those these are only available in company outlets give exclusivity to the distribution.
While these three distribution coverage options serve as a useful guide for understanding how
distribution intensity works, the advent of the Internet has brought into question the effectiveness
of these schemes. For all intents and purposes all products available for purchase over the
Internet are distributed in the same way - mass coverage. So a better way to look at the three
levels is to consider these as options for distribution coverage of products that are physically
purchased by a customer (i.e., walk-in to purchase).
Q.3. A. Differentiate between direct and indirect distribution channels. Also mention the
parties involved in direct and indirect channels.
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2Ans.: Difference between Direct distribution & indirect distribution
3Direct Distribution System:
With a direct distribution system the marketer reaches the intended final user of their product by
distributing the product directly to the customer. That is, there are no other parties involved in the
distribution process that takes ownership of the product. The direct system can be further divided
by the method of communication that takes place when a sale occurs. These methods are:
11) Direct Marketing Systems – With this system the customer places the order either through
information gained from non-personal contact with the marketer, such as by visiting the
marketer’s website or ordering from the marketer’s catalog, or through personal communication
with a customer representative who is not a salesperson, such as through toll-free telephone
ordering.
22) Direct Retail Systems – This type of system exists when a product marketer also operates
their own retail outlets. Bata Shoes is an example of this strategy.
33) Personal Selling Systems – The key to this direct distribution system is that a person whose
main responsibility involves creating and managing sales (e.g., salesperson) is involved in the
distribution process, generally by persuading the buyer to place an order. While the order itself
may not be handled by the salesperson (e.g., buyer physically places the order online or by
phone) the salesperson plays a role in generating the sales.
4) Assisted Marketing Systems – Under the assisted marketing system, the marketer relies on
others to help communicate the marketer’s products but handles distribution directly to the
customer. The classic example of assisted marketing systems is eBay, which helps bring buyers
and sellers together for a fee. Other agents and brokers would also fall into this category.
0
2) Indirect Distribution System:
With an indirect distribution system the marketer reaches the intended final user with the help of
others. These resellers generally take ownership of the product, though in some cases they may
sell products on a consignment basis (i.e., only pay the supplying company if the product is sold).
Under this system intermediaries may be expected to assume many responsibilities to help sell
the product.

Indirect methods include:


11) Single-Party Selling System - Under this system the marketer engages another party who
then sells and distributes directly to the final customer. This is most likely to occur when the
product is sold through large store-based retail chains or through online retailers, in which case it
is often referred to as a trade selling system.
22) Multiple-Party Selling System – This indirect distribution system has the product passing
through two or more distributors before reaching the final customer. The most likely scenario is
when a wholesaler purchases from the manufacturer and sells the product to retailers.
33) Multi-channel or Hybrid System – In cases where a marketer utilizes more than one
distribution design the marketer is following a multi-channel or hybrid distribution system. Many
electronic appliance companies like Videocon or LG follow this approach as their distribution
design includes using a direct retail system by selling in company-owned stores, a direct
marketing system by selling via direct mail/internet, and a single-party selling system by selling
through general appliance stores (they also use other distribution systems).

The multi-channel approach expands distribution and allows the marketer to reach a wider
market. However, the marketer must be careful with this approach due to the potential for channel
conflict.
b. Distinguish between sales forecasting and sales budget with examples.
Ans.: Sales Forecasting & Sales Budgeting:
Creating a budget doesn't have to be a complicated or time-consuming task. Actually, in the
beginning, it's best to keep things simple. The key is to determine how much the company will
spend and earn in any given year, and then use that figure to project how it wants to grow in
subsequent years.
If it is a running business, it's simply a matter of digging through some records to see where the
money went, and deciding where the management actually wants it to go. If it is a new company,
the management needs to do some homework and make realistic assumptions about the
business. Either way, a budget is simply a tool that allows them to put the money where it can
best be used.
To get started, the management should have following data:
– Expected sales of products/services
– Expected Prices of goods or services
– Estimated cost to produce these products
– Estimated operating expenses
– Estimated taxes
– Expected borrowings & cost of such borrowings
The above data will form the basis of the overall budget and forecast.
In the income category, one should conservatively estimate how much sales revenue is expected
next year. For this it is necessary to look at what sales were made last year, and extrapolate and
forecast from that. New business owners without this kind of history should try to determine how
much money their competitors gross, and use that as a guide.
As far as expenses go, all sales related expenses including advertising, automobile expenses,
insurance, rent, taxes, phone, mobiles, utilities, equipment, payroll, commissions, incentives, etc.
– in other words, any and all sales related expenses, should be listed out whether they are being
incurred now or whether the company may incur them in the future.
Once the projected income and expenses are listed down on paper, it will be known as to exactly
how much revenue & profit is needed every month to keep things afloat, and how much will be
left over for extra expenses. It will be far less tempting to spend money on business expenses
that aren't part of the plan. And that's really what a budget is for – to ensure that the expenses
aren't more than the income.

Q.4. You are a sales manager in ABC firm. You have taken some interviews and short-
listed a few candidates. How will you select the right candidate for the sales job? Once
you have made the selection, what would be your next step in order to make the new
recruits effective in their sales jobs?

Ans.: Selecting of Right Sales Personnel


Selection of the right sales people involves the following steps:
1) Researching Candidates:
This covers the early stages of the selection process - often called pre-selection. The recruitment
campaign would have attracted a pool of applicants from which selectors can make their choice.
If a job analysis has been conducted, the criteria or competences, which are deemed necessary,
have been identified. These may be well defined and focused on experience and skills, as in the
'right person' approach; or general and related to education, intellect and personality for the
'cultural fit' and 'flexible person' models.
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22) Application letters/CVs/resumes:
These are typically used for initial or speculative applications. The first stage in the application will
require a resume or a CV.
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23) Application forms (blanks):
Both letters and CV/resumes present a problem for a large recruitment programme: applicants
may not provide all the relevant information and what there is will be presented in different ways.
Comparison of applicants is easier if data is presented in a standard application form (blank).
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24) Interviewing:
The interview is a social ritual, which is expected by all participants, including applicants. It is
such a 'normal' feature of filling vacancies that candidates for a job would be extremely surprised
not to be interviewed at least once. Despite the existence of alternative methods of selection most
employers regard the formal selection interview as the most important source of evidence in
making the final decision. A selection interview can be neatly defined as a conversation with a
purpose.
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25) Preparation for interviews:
Training for interviewers stresses the need to put the candidate at ease, have a comfortable
environment, etc. The interviewer should ensure that relevant information (e.g. application forms)
is read beforehand - it is surprising how many interviewers are found reading such material for
the first time during the interview. It is necessary to improve the interpersonal skills of the
interviewer and the interviewer's ability to make decisions without influence from non-job related
information. Interviewers should be trained to:
0 1) Avoid asking questions unrelated to the job
1 2) Avoid making quick decisions about an applicant
2 3) Avoid stereotyping applicants
4) Avoid giving too much weight to a few characteristics.
5) Try to put the applicant at ease during the interview
6) Communicate clearly with the applicant
7) Maintain consistency in the questions asked

Sales Personnel Training Programmes: The primary function of professional sales is to


generate and close leads, educate prospects, fill needs and satisfy wants of consumers
appropriately, and therefore turn prospective customers into actual ones. The successful
questioning to understand a customer's goal and requirements relevant to the product, the further
creation of a valuable solution by communicating the necessary information that encourages a
buyer to achieve their goal at an economic cost is the responsibility of the salesperson. A good
sales person should never miss sell or over evaluate the customer’s requirements.
The sales personnel training programmes will include the following areas:
11) Market information:
This information is about customer profile, market updates, and computer integrated
manufacturing applications, etc
12) Sales Process:
This covers how to deal in the situation of conflicts with customer, coaching on undesirable
behavior, supplement skills developed during live courses, etc.
13) Product information:
This includes information such as, product usage, applications, system description, product
description, comparison with competitor’s products, etc
14) Policies and procedures:
2This area covers information about sales contests; incentive plans on achieving targets, annual
bonuses, winners receiving the best salesperson award to motivate the sales force, etc.

Q. 5 a. What is logistics? What is its importance?

Ans.: Origin and Definitions of Logistics:


The term "logistics" originates from the ancient Greek "logos" means ratio, word, calculation,
reason, speech, and oration". Logistics is considered to have originated in the military's need to
supply themselves with arms, ammunition and rations as they moved from their base to a forward
position. In ancient Greek, Roman and Byzantine empires, there were military officers with the
title „Logistics- who were responsible for financial and supply distribution matters.
"Logistics means having the right thing, at the right place, at the right time."
Logistics, the synonymous term of physical distribution, involves planning, implementing, and
controlling the physical flow of materials from the point of origin to the point of the consumer at a
profit. The role of logistics is to get the right amount of product to the right places in the right time.
Logistics is defined as a business-planning framework for the management of material, service,
information and capital flows. It includes the increasingly complex information, communication
and control systems required in today's business environment.

Logistics the process of planning, implementing, and controlling the efficient, effective flow and
storage of goods, services, and related information from point of origin to point of consumption for
the purpose of conforming to customer requirements
Logistics is the science of planning and implementing the acquisition and use of the resources
necessary to sustain the operation of a system.
The two logistics activities vital to order filling are the communication of customer order
information to the order filling area and the actual process of picking out of the inventory the items
ordered. In the order information stage, communication can reduce errors in transferring order
information from the order to the warehouse receipt. Communication with customers is vital to
monitoring service levels relating to dependability.
Customer communication is essential to design of logistics service levels. The communication
channel must be constantly open and readily accessible to all customers. Without customer
contact, the logistics manager is unable to provide the most efficient and effective service.
Communication must be a two-way process. The seller must be able to transmit vital logistics
service information to the customer. In addition many customers request information on the
logistics status of shipments. The customer who needs information to plan operations expects the
logistics manager to provide answers on a timely basis.

Importance of Logistics: The logistics function includes sourcing and procurement, production
planning and scheduling, packaging and assembly, and customer service. It is involved in all
levels of planning and execution – strategic, operational and tactical. Logistics management is an
integrating function, which coordinates and optimizes all logistics activities, as well as integrates
logistics activities with other functions including marketing, sales manufacturing, finance and
information technology.
Logistics is much more and much wider than mere physical handling of goods. Logistics involves
several other functions such as purchasing, plant location, plant layout, etc., and even the
disposal of wastes. It covers astonishingly varied professional disciplines. They are:
11) Facility location
22) Planning
33) Forecasting and order management
44) Transportation: the mode and the route
55) Inventory management: all inventories
66) Warehousing
77) Protective packaging

Raw material and finished products had always to be moved, though on a small scale. Things
began changing with the advance in transportation. Population began moving from rural to urban
areas and to business centers. No longer did people live near production centers, nor did
production take place near residence centers. The geographical distance between the production
point and consumption point increased.
Since the early 1990's, the business scene has changed. The globalization, the free market and
the competition has required that the customer gets the right material, at the right time, at the
right point and in the right condition at the lowest cost. This is "globalization" and is not unusual
today. Here are some of the logistics functions that allowed this to happen:
11. Purchasing – of raw materials, assembled products, finished products from all over the world.
Where can you get the quality you want at the best price?
22. Manufacturing operations – how should the machines be organized, how many workers do
you need, where do you stock your materials and finished products, how many products do you
manufacture on each production run, etc.
33. Transportation – domestic and international, from raw materials to finished product; that
moves what, and when, and for what price?
44. Warehousing – product is either moving (transportation) or not (warehousing). This is
becoming a very sophisticated area and a key to shortening the time to market for products.
5. Inventory control – how much product is on hand, on order, in transit, and where is it?
Inventory drives logistics.
6. Import/export – international regulations and documentation can be complex. It takes a
specialist to understand the best way to get product across borders.
7. Information systems – globalization on today's scale is possible because there is technology
that transfers the needed information. Logistics functions are unavoidable costs to a company,
but today they are recognized as crucial to a company's competitiveness and profitability.

b. Name the various costs involved in distribution with examples.

Ans.: Costs involved in distribution: In discussing selling and distribution expenses with
winery owners, they often start their list with the increased cost of labor, over-generous discounts,
or high commissions. These discussions usually center upon tasting room sales or winery direct
sales to local restaurants or wine shops. However, even if a winery does not maintain its own
sales force or uses outside brokers and salespeople, there can be hidden sales and distribution
expenses involved on the wholesale level. Consider some of the following:

1) Compliance and licensing fees.


2) The cost of samples (including shipping).
3) Wine list charge backs.
4) Market visits.
5) Internal employee errors.
6) Promotional expenses.

These additional costs can impact profit levels if not anticipated when projecting net profits.

Once accurate production costs per case are established for each wine, pricing and profit levels
can be projected. However, sales and distribution costs must be determined in order to identify
expenses attributed to the cost of sales. Regardless of whether wineries maintain their own
salespeople, use outside sales teams, or develop a wholesaler network, there are expenses
incurred when attempting to sell their wines to restaurants and retailers. These selling costs
usually involve activities surrounding the storage, distribution, and selling of bottled case goods.

If case storage is not at the winery, storage and distribution expenses begin with wine stored in
an off-site warehouse location--or several locations--convenient for local and interstate trucks to
pick up, consolidate, and deliver wines to customers. Monthly case storage (by varietal and
vintage), can add up--especially if sales are not moving at as fast as projected. Storage costs
continue until a vintage is completely sold out, and is one of the most commonly overlooked
distribution expenses.

Q. 6. Examine the recent trends in sales management.

1Ans.: Recent Trends in Sales Management:


1) Wholesaling
Wholesaling refers to the activities involved in selling to organizational buyers who intend to either
resell or use for their own purposes. A wholesaler is an organization providing the necessary
means to: 1) allow suppliers (e.g., manufacturers) to reach organizational buyers (e.g., retailers,
business buyers), and 2) allow certain business buyers to purchase products which they may not
be able to purchase otherwise.
According to the 2002 Census of Wholesale trade, there are over 430,000 wholesale operations
in the United States.
While many large retailers and even manufacturers have centralized facilities and carry out the
same tasks as wholesalers, we do not classify these as wholesalers since these relationships
only involve one other party, the buyer. Thus, a distinguishing characteristic of wholesalers is that
they offer distribution activities both for a supplying party and for a purchasing party. For our
discussion of wholesalers we will primarily focus on wholesalers who sell to other resellers such
as retailers.
2) Retailing
The term ‘retailing’ refers to ‘the activities involved in selling commodities directly to consumers’.
Definition
Retailing consists of the sale of goods or merchandise for personal or household consumption
either from a fixed location such as a department store or kiosk, or from a fixed location and
related subordinated services.
Defined here as sales of goods between two distant parties where the deliverer has no direct
interest in the transaction, the earliest instances of distance retailing probably coincided with the
first regular delivery or postal services. Such services would have started in earnest once man
had learned how to ride a camel, horse, etc.
Why?
When individuals or groups left their community and settled elsewhere, some missed foodstuffs
and other goods that were only available in their birthplace. They arranged for some of these
goods to be sent to them. Others in their newly adopted community enjoyed these goods and
demand grew. Similarly, new settlers discovered goods in their new surroundings that they
dispatched back to their birthplace, and once again, demand grew. This soon turned into a
regular trade. Although such trading routes expanded mainly through the growth of traveling
salesmen and then wholesalers, there were still instances where individuals purchased goods at
long distance for their own use. A second reason that distance selling increased was through war.
As armies marched through territories, they laid down communication lines stretching from their
home base to the front. As well as garnering goods from whichever locality they found
themselves in, they would have also taken advantage of the lines of communication to order
goods from home.
In commerce, a retailer buys goods or products in large quantities from manufacturers or
importers, either directly or through wholesalers, and then sells individual items or small
quantities to the general public or end-user customers, usually in a shop, also called a store.
Retailers are at the end of the supply chain. Marketers see retailing as part of their overall
distribution strategy.
Shops may be on residential streets, or in shopping streets with few or no houses, or in shopping
centers. Shopping streets may or may not be for pedestrians only. Sometimes a shopping street
has a partial or full rooftop to protect customers from precipitation. Online retailing, also known as
e-commerce, is the latest form of non-shop retailing.
Shopping generally refers to the act of buying products. Sometimes, this is done to obtain
necessities such as food and clothing; sometimes, it is done as a recreational activity.
Recreational shopping often involves window shopping (just looking, not buying) and browsing
and does not always result in a purchase.

Assignment Set – 2

Q.1 Give a note on demand management, demand forecasting and MRP.

Ans.: Demand management, demand forecasting and MRP.


In this era of competition among supply chains, the success of a corporation is increasingly
dependent on management's ability to integrate the company's networks of business
relationships. Supply chain management has been defined as the integration of key business
processes, from raw-material suppliers through end users that provide products services and
information.
The focus of supply chain management must evolve in response to changing business
environments and evolving product life cycles. Different interactions among participants are
required during each phase of the product life cycle, from inception through recycling. The
supplies chains for products in new markets must be flexible to respond to wide fluctuations in
demand (both in quantity and product mix). Products in mature, stable markets require supply
chains that can reliably deliver products at low cost. Thus, effective supply chain management
must be responsive to these changing conditions to ensure that the supply chain evolves
accordingly.
For example, marketing excellence used to be the primary source of Procter & Gamble's (P&G's)
dominance of the consumer products industry. However, as P&G expanded its product and
service offerings in response to market opportunities, the increased complexity of these offerings
created difficulties in meeting the needs of retail partners and customers. Traditional marketing
strategies involving in-store sales and price promotions created great variations in product
demand. To meet heavy short-term marketing-induced peaks in demand, P&G invested in huge
manufacturing capacities, inventories, warehouses, and logistics capabilities.
In response to these problems, P&G modified its supply chain focus and remade itself through a
series of innovative initiatives. Working both internally and with suppliers and customers, the
company created a heralded partnership with Wal-Mart, virtually eliminated price promotions, and
streamlined its logistics and continuous replenishment programs. These initiatives reduced
variations and uncertainties in demand, thereby reducing the need for surge production capacities
and large inventories. Thus, by evolving their primary supply chain focus from marketing to
production, inventories, and logistics in response to changing business requirements, P&G was
able to reduce costs, meet customer demand, and build strong, coordinated relationships with
retail partners and customers.

Basic Approach to Demand Forecasting


The following basic, six – step approach helps an organization perform effective forecasting:
1. Understand the objective of forecasting
2. Integrate demand planning and forecasting throughout the supply chain
3. Understand and identify customer segments
4. Identify the major factors that influence the demand forecast
5. Determine the appropriate forecasting technique
6. Establish performance and error measures for the forecast
Each organization must use all six steps to forecast effectively.
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21) Understand the Objective of Forecasting
The objective of every forecast to support decisions that are based on the forecast, so an
important first step is to clearly identify these decisions. Examples of such decisions include how
much of a particular product to make, how much to inventory, and how much to order. All parties
affected by a supply chain decision should be aware of the link between the decision and the
forecast. For example, if Wal-Mart plans a promotion in which it will discount detergent during the
month of July, this information must be shared with the manufacturer, the transporter, and others
involved in filling demand as they all have decisions to make that will be affected by the forecast
of demand. All parties should come up with a common forecast for the promotion and a shared
plan of action based on the forecast. Failure to make these decisions jointly may result in either
too much or too little product in various stages of the supply chain.

Identify Major Factors that Influence the Demand Forecast Next, a firm must identify major
factors that influence the demand forecast. A proper analysis of these factors is central to
developing an appropriate forecasting technique. The main factors influencing forecasts are
demand, supply, and product-related Phenomena. On the demand side, a company must
ascertain whether demand is growing, declining, or has a seasonal pattern. These estimates
must be based on demand-not sales data. For example, a supermarket may have promoted a
certain brand of cereal in July 2002. As a result, the demand for
This cereal may have been high while the demand for others, comparable cereal brands was low
in July.
The supermarket should not use the sales data from 2002 to estimate that demand for this brand
will be high in July 2003, because this will only be the case if the same brand is promoted again
in July 2003 and other brands respond as they did the previous year. When making the demand
forecast, the supermarket must understand what the demand would have been in the absence of
promotion activity and how demand is affected by promotions. A combination of these two pieces
of information will allow the supermarket to forecast demand for July2003 given the promotion
activity planned for that year.
On the supply side, a company must consider the available supply sources to decide on the
accuracy of the forecast desired. If alternate supply sources with short lead times are available, a
highly accurate forecast may not be especially important. However, if only a single supplier with a
long lead-time is available, an accurate forecast will have great value.
On the product side, a firm must know the number of variants of a product being sold and
whether these variants substitute for or complement each other. If demand for a product
influences or is influenced by demand for another product, the two forecast are best made jointly.
For example, when a firm introduces an improved version of an existing product, it is likely that
the demand for the existing product will decline because new customers will buy the improved
version. While the decline in demand for the original product would not be indicated by historical
data, the historical demand is still useful in that it allows the firm to estimate the combined total for
the two versions. Clearly, demand for the two products should be forecast jointly.
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22) Determine the Appropriate Forecasting Technique
In selecting an appropriate forecasting technique, a company should first understand the
dimensions that will be relevant to the forecast. These dimensions include geographical area,
product groups, and customer groups. The company should understand the difference in demand
along each dimension. A firm would e wise to have different forecasts and techniques for each
dimension. At this stage, a firm selects an appropriate forecasting method from the four methods
discussed earlier-qualitative time series, casual, or simulation. As mentioned earlier, using a
combination of these methods is often effective.
At the end of the sales season, the company must compare actual demand to forecasted demand
to estimate the accuracy of the forecast. The observed accuracy should be compared with the
desired accuracy and the resulting gap should be used to identity corrective action that the mail
order company needs to take. In the next section, we begin by discussing the techniques for
static and adaptive time series forecasting.

1) Time Series Forecasting Methods: The goal of any forecasting method is to predict the
systematic component of demand and estimate the random component. The systematic
component of demand data, in the most general form, contains a level, a trend, and a seasonal
factor. The systematic component may take a variety of forms, as shown following. 
Multiplicative: Systematic component =level x trend x seasonal factor  Additive: Systematic
component=level + trend +seasonal factor  Mixed: systematic component= (level + trend) x
seasonal factor the specific form of the systematic component applicable to a given forecast will
depend on the nature of demand. Companies may develop both static and adaptive forecasting
methods for each form.

2) Static Methods: A static method assumes that the estimates of level, trend, and seasonality
within the systematic component do not vary as new demand is observed. In this case, we
estimate each of these parameters based on historical date and then use the same values for all
future forecasts. In this section we discuss a static Forecasting method for use when demand has
a trend as well as a seasonal component. We assume that the systematic component of demand
is mixed, that is,
Systematic component= (level + trend) x seasonal factor.
A similar approach can be applied for other forms as well. We begin with a few basic definitions:
L =Estimate of level at t=0(the depersonalized demand estimate during period t=0)
T =Estimate of trend (increase or decrease in demand per period)
S t =Estimate of seasonal factor for period t
D t =Actual demand observed in period t
F t =Forecast of demand for period t
In a static forecasting method, the forecast in period t for demand in period t + l is given as
follows:
F t +l= [L + (t + l) T] S t + l
We now describe one method for estimating the three parameters L, T, and S. As an example,
we consider the demand for rock salt used primarily to melt snow and produced by Tahoe Salt.
Tahoe Salt’s product is sold through a variety of independent retailers around the Lake Tahoe
area of the Sierra Nevada Mountains. In the past, Tahoe Salt has relied on estimates of demand
from a sample of their retailers but they have noticed that these retailers always overestimated
what they would purchase, leaving Tahoe (and even retailers) stuck with lots of excess inventory.
After meeting with their retailers Tahoe has decided to produce a collaborative forecast. Tahoe
Salt now has data on the actual retail sales of their salt and they intend to work with the retailers
to create a more accurate a more accurate forecast with this data. This is the quarterly demand
data for the last three years from this we observe that demand for salt is seasonal with demand
increasing from the second quarter of a given year to the first quarter of the following year. The
second quarter of each year has the lowest demand of all quarter in the year. Each cycle lasts
four quarters and the demand pattern repeats itself every year. There is also a growth trend in the
demand, with sales growing over the last three years. The company estimates that growth will
continue in the coming in the coming year at historical rates. We now describe how each of the
three parameters-level, trend, and seasonal factors may be estimated. The following two steps
are necessary to making this estimation:
11. Depersonalize demand and run linear regression to estimate level and trend.
22. Estimate seasonal factors.

Sun Oil is considering two different plant sizes in each location. Low-capacity plants can produce
10 million units a year whereas high-capacity plants can produce 20 million units a year as shown
in Cells H4:H8 and J4:J8, respectively. High-capacity plants exhibit some economies of scale and
have fixed costs that are less than twice the fixed cost of a low-capacity plant as shown in cells
I4:I8. All fixed costs are annualized. The vice president would like to know what the lowest cost
network should look like. Next, we discuss the capacitated plant location model, which can be
used in this setting.

Q.2 a. Identify and evaluate the different inventory reduction and cycle reduction
strategies.

Ans.: Different inventory reduction and cycle reduction strategies.


Supply chain strategies for those items to be purchased are:

1i) Many suppliers


ii) Few suppliers
iii) Vertical integration
iv) Keiretsu networks and
v) Virtual companies

The above strategies are briefly discussed in the following paragraphs:


Many Suppliers: In this strategy, the supplier responds to the “request for quotation” sent by the
buyer indicating the demands and specifications of the items the buyer wants to purchase. The
order is usually placed on the supplier whose bid or quotation is the lowest among the many
suppliers who have submitted their quotations. This strategy plays one supplier against another
and the supplier has the burden of meeting the buyer’s demands. Although the buyers may use
the negotiation approaches with this strategy, there is no emphasis on long term “partnering”
relationship with the suppliers. The supplier holds the responsibility for maintaining the required
technology, expertise and forecasting abilities as well as cost, quality and delivery competencies.
Few Suppliers: In this strategy the buying firm rather than looking for short-term attributes such
as low cost, forms a long-term relationship with a few dedicated suppliers. Long-term suppliers
are more likely to understand the broad objectives of the buying firm and the end customer. This
approach has the advantage of creating value by allowing the suppliers to have economies of
scale (because of bigger orders) and a learning curve, which will result in lower transaction
costs and lower production costs.
Few dedicated suppliers are more committed to the buyer and may be willing to participate in JIT
system as well as provide innovations and technological expertise.
Mutual trust between the buying firm and the few committed supplying firms may contribute to the
alignment of organizational cultures of the two firms further strengthening the partnership.
The disadvantage with this strategy is that with few suppliers, the cost of changing suppliers is
high and both supplier and the buyer have the risk of becoming captive of the other. Further the
buyer has the risk of facing poor supplier performance.
The buyer must also be concerned about trade secrets and suppliers who make alliances or joint
ventures with other buyers.
Vertical Integration: Vertical integration means developing the ability to produce goods or
services previously purchased or actually buying supplier or a distributor. Vertical integration can
be either forward integration or backward integration.
When a firm purchases its supplier firms it is backward integration and when a firm purchases its
wholesaler’s warehouses or owns its distribution network including retailing, it is forward
integration. Also when manufacturer of components make the finished product, it amounts to
forward integration.
For firms with the necessary capital, managerial talent and required demand, vertical integration
may provide substantial opportunities for cost reduction. Also advantages in inventory reduction
and scheduling can be obtained by effectively managing vertical integration.
For firms manufacturing products with purchased items representing a large part of the cost of
sales, vertical integration can yield cost reduction, quality adherence and timely delivery.
Keiretsu Networks: “Keiretsu” is a Japanese term used to describe suppliers who have
become part of a company coalition. This approach is a middle ground between purchasing from
few suppliers and vertical integration. In this approach, the manufactures often support their
supplier’s investment. Suppliers in the Keiretsu network are assured long-term relationships and
therefore they are expected to function as partners, providing technical expertise and stable
quality products to the buying.
Virtual Companies: Vertical integration has some severe limitations. The technological society
continually demands more specialization that further complicates vertical integration. Similarly, a
firm having its own department or division for everything may be too bureaucratic to be world-
class. On the other hand, another approach is to find flexible suppliers rather than letting vertical
integration lock an organization into business that it may not understand or be able to manage.
Virtual companies that rely on variety of supplier relationships to provide services on demand.
There are also known as hollow corporations or network companies.
Virtual companies have fluid; moving organizational boundaries that allow them to create a
unique enterprise to meet changing market demands. These relationships may provide a variety
of vendor services that include doing the pay role, hiring personnel, designing products, providing
consulting services, manufacturing components, conducting tests or
Distributing products. The relationships may be short-term or long-term and may include the
partners, collaborators or able suppliers and sub-contractors. The advantages of virtual
companies include specialized management expertise, low capital investment, flexibility and
speed. The result is efficiency and exceptionally lean performance. A traditional example of virtual
organization is apparel or readymade garments business in which the designers of clothes
seldom manufacture, rather they license the manufacture. The manufacturer may then rent the
sewing machines and contract for labor. The result is an organization that has low overheads,
remain flexible and can respond rapidly to the market.

Achieving Strategic Fit: This step ensures that what the supply chain does particularly well is
consistent with the targeted customer’s needs. The implied demand uncertainty represents
customer needs or the firm’s strategic position. The supply chain responsiveness represents the
firm’s strategy. In order to achieve strategic fit, the greater the implied demand uncertainty, the
more responsive the supply chain should be. If the implied demand uncertainty from customers is
increasing, it is best served with increasing responsiveness from the supply chain. This
relationship is represented by the “Zone if strategic fit”. To achieve complete strategic fit, a
company must consider all functional strategies within the value chain and it must ensure that all
functions in the value chain have consistent strategies that support the competitive strategy. All
functional strategies must support the goals/objectives of the competitive strategy and all sub
strategies within the supply chain (such as manufacturing, inventory and purchasing) must also
consistent with the level of responsiveness of the supply chain. Firms with different locations
along the responsiveness spectrum must have different functional strategies that support their
responsiveness. A highly responsive supply chain must devote all its functional strategies to
responsiveness, whereas an efficient supply chain must focus all its functional strategies on
efficiency. However it must be remembered that (i) there is no right supply chain strategy
independent of the firm’s competitive strategy and (ii) there is a right supply chain strategy for a
given competitive strategy of a firm.

b. What is the difference between level strategy and chase strategy?

Ans.: LEVEL STRATEGY.


A level strategy seeks to produce an aggregate plan that maintains a steady production rate
and/or a steady employment level. In order to satisfy changes in customer demand, the firm must
raise or lower inventory levels in anticipation of increased or decreased levels of forecast
demand. The firm maintains a level workforce and a steady rate of output when demand is
somewhat low. This allows the firm to establish higher inventory levels than are currently needed.
As demand increases, the firm is able to continue a steady production rate/steady employment
level, while allowing the inventory surplus to absorb the increased demand. A second alternative
would be to use a backlog or backorder. A backorder is simply a promise to deliver the product at
a later date when it is more readily available, usually when capacity begins to catch up with
diminishing demand. In essence, the backorder is a device for moving demand from one period to
another, preferably one in which demand is lower, thereby smoothing demand requirements over
time. A level strategy allows a firm to maintain a constant level of output and still meet demand.
This is desirable from an employee relations standpoint. Negative results of the level strategy
would include the cost of excess inventory, subcontracting or overtime costs, and backorder
costs, which typically are the cost of expediting orders and the loss of customer goodwill.

CHASE STRATEGY:
A chase strategy implies matching demand and capacity period by period. This could result in a
considerable amount of hiring, firing or laying off of employees; insecure and unhappy
employees; increased inventory carrying costs; problems with labor unions; and erratic utilization
of plant and equipment. It also implies a great deal of flexibility on the firm's part. The major
advantage of a chase strategy is that it allows inventory to be held to the lowest level possible,
and for some firms this is a considerable savings. Most firms embracing the just-in-time
production concept utilize a chase strategy approach to aggregate planning. Most firms find it
advantageous to utilize a combination of the level and chase strategy. A combination strategy
(sometimes called a hybrid or mixed strategy) can be found to better meet organizational goals
and policies and achieve their costs than either of the pure strategies used independently.

Q.3 a. What are the features of electronic channels? Give examples.


Ans.: Features of electronic channels:
To be effective, the strategy eventually selected should clearly demonstrate advantages over and
above the alternatives. To do this effectively requires a sophisticated information base which
addresses the interface between the macro issues of corporate and marketing strategies and the
supply chain support requirements, for which a strategy should be developed prior to the
allocation of capital resources.
Quality of information
Three issues that characterize the quality of information are;
1i) The availability of the information required to the best possible decisions.
2ii) The accuracy of the information and
3iii) The effectiveness of the various means those are available to communicate needed
information’s.

Logistics managers need to know more about information systems, technologies and their
management. But unfortunately, they do not always have the information needed to make
effective decisions.
Often, information available to logistics managers may not be accurate and hence tends to cause
sub optimal management decision-making. Many firms use out-dated cost accounting and
management control systems. Such systems distort product cost information and do not produce
the information that logistics managers need to make best decisions.
To be useful to managers, information needs to be communicated effectively. Information need to
be communicated in the language of the intended recipient to facilitate accurate perception of the
information communicated. Effective communication requires knowledge of the recipient can
perceive, what the person expects to perceive and what the person intends to do with what is
perceived. Examples:

1. Bar coding,
2. Electronic Data Interchange (EDI)
3. XML (Extensible markup language),
4. Data management,
5. Imaging,
6. Artificial intelligence/expert systems
7. RF technology and
8. Computers on board and satellite tracking,
9. Intranet/Extranet,
10. E-commerce.

b. Write a short note on vertical marketing systems.

Ans.: Vertical Marketing System:


A vertical marketing system (VMS) is one in which the main members of a distribution channel—
producer, wholesaler, and retailer—work together as a unified group in order to meet consumer
needs. In conventional marketing systems, producers, wholesalers, and retailers are separate
businesses that are all trying to maximize their profits. When the effort of one channel member to
maximize profits comes at the expense of other members, conflicts can arise that reduce profits
for the entire channel. To address this problem, more and more companies are forming vertical
marketing systems.

Vertical marketing systems can take several forms. In a corporate VMS, one member of the
distribution channel owns the other members. Although they are owned jointly, each company in
the chain continues to perform a separate task. In an administered VMS, one member of the
channel is large and powerful enough to coordinate the activities of the other members without an
ownership stake. Finally, a contractual VMS consists of independent firms joined together by
contract for their mutual benefit. One type of contractual VMS is a retailer cooperative, in which a
group of retailers buy from a jointly owned wholesaler. Another type of contractual VMS is a
franchise organization, in which a producer licenses a wholesaler to distribute its products.

The concept behind vertical marketing systems is similar to vertical integration. In vertical
integration, a company expands its operations by assuming the activities of the next link in the
chain of distribution. For example, an auto parts supplier might practice forward integration by
purchasing a retail outlet to sell its products. Similarly, the auto parts supplier might practice
backward integration by purchasing a steel plant to obtain the raw materials needed to
manufacture its products. Vertical marketing should not be confused with horizontal marketing, in
which members at the same level in a channel of distribution band together in strategic alliances
or joint ventures to exploit a new marketing opportunity.

As Tom Egelhoff wrote in an online article entitled "How to Use Vertical Marketing Systems,"
VMS holds both advantages and disadvantages for small businesses. The main advantage of
VMS is that your company can control all of the elements of producing and selling a product. In
this way, you are able to see the whole picture, anticipate problems, make changes as they
become necessary, and thus increase your efficiency. However, being involved in all stages of
distribution can make it difficult for a small business owner to keep track of what is happening. In
addition, the arrangement can fail if the personalities of the different areas do not fit together well.

For small business owners interested in forming a VMS, Egelhoff recommended starting out by
developing close relationships with suppliers and distributors. "What suppliers or distributors
would you buy if you had the money? These are the ones to work with and form a strong
relationship," he stated. "Vertical marketing can give many companies a major advantage over
their competitors."

Q.4. Jalal Chemicals Company is considering implementing green supply chain concepts
in its distribution, logistics and supply chain systems. If you were an employee of this
company, why do you think the top management would take this step? Are there any
benefits of green supply chain management?

1Ans.: Importance of Logistics and Supply Chain Information Systems:


i) Effective information management can help ensure that a firm meets the logistical needs of its
customers. Firms need to place priorities on logistical elements such as on time delivery, stock-
out levels, order status, shipment tracking and expediting, order convenience, order
completeness, creation of customer pick up and back-haul opportunities and product substitution.
The logistics managers are responsible for these activities and timely and accurate flow of
meaningful information enables them to successfully implement the same. The logistics activities
assist significantly in meeting customer needs and an accurate and relevant information system
can facilitate the logistics mission.

ii) Logistics information system combine hardware and software to manage, control and measure
logistics activities which occur within specific firms as across the overall supply chain.

Hardware includes computers and servers, Internet technologies such as barcode and RF
devices, communication channels and storage media.
Software includes system and application programs used for logistics and supply chain activities.
The ability to integrate and thus leverage the power of these technologies makes the firms more
successful than other firms, which do not have such abilities.
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1iii) Companies need better information on their customers (such as customer service and sales
forecasting), information on their suppliers, (such as production planning and sourcing and
purchasing). Areas of technology systems including decision support system/information
technology and logistics management activities were not delivering needed information to the
management for making strategic decisions.
2
3iv) The order processing system is the nerve center of the logistics and supply chain
system. A customer orders provides the communication message to set the logistics process in
motion. The cost and efficiency of the entire operation are impacted by the speed and quality of
the information flows. Slow and erratic communication can result in loss of customers or
excessive transportation, inventory and warehousing costs together with possible manufacturing
inefficiencies caused by frequent changes in the production line. The order processing and
information system forms the foundation for the logistics and corporate management information
systems.
4
5v) Leading-edge organizations are utilizing computers-extensively to support logistics activities.
Computers are used in order entry; order processing, finished goods inventory control,
performance measurement, freight audit/payment, and warehousing. World-class logistics
practices include use of logistics information systems as a key to competitiveness.
6
7vi) Computer based decision support systems (DSS) support the executive decision making
process in logistics and supply chain management. To support time-based competition, firms are
increasingly using information technologies as source of competitive advantage. Systems such as
a quick response (QR) just in time (JIT) and efficient consumer response (ECR) are
integrating a number of information-based technologies in an effort to reduce order cycle times,
speed responsiveness and lower supply chain inventory. More sophisticated application of
information technology such as decision support systems; artificial intelligence and export
systems are being used directly to support decision-making in logistics and supply chain
management.
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1vii) Today, companies are restructuring their businesses to function in the new era of electronic
commerce. Organizations can have a deluge of information on dictums, business-to-business
requirements and online customer and supplier linkages. ERP systems, purchasing databases
and data warehouses, electronic data interchange (EDI), business to business electronic
commerce are recent developments which are applied in logistics and supply chain management.

Benefits of Green Supply Chain Management:

To be successful in the new visual e-based economy, even traditional companies are taking
notice of the need for new information systems. The next generation of systems will promote the
free flow of perfect information instantaneously up and down the supply chain. To survive in a
perfectly competitive market, firms need to develop fluid and swift supply chain having
competitive advantage in terms of speed and excellence of education. The drivers of new supply
chain systems and the new e-economy are:
1i) Internal and external strategic integration
2ii) Globalization and communication
3iii) Data information management
4iv) New business processes
5v) Replacement of obsolete systems and
6vi) Strategic cost management
These are briefly discussed in the following paragraphs:
i) Internal and External Strategic Integration: As supply chain members work increasingly
together, it becomes necessary to integrate the different functions such as purchasing,
engineering manufacturing, marketing, logistics, accounting etc., which are internal to the
organization as well as between parties that are external to the organization (end customers, third
party logistics, retailers, distributors, warehouses, transportation provides, suppliers agents,
financial institutions etc.)

For the internal strategies to be effective, all members within the firm must use the same
information system, which spans across business sites and functions. This can be accomplished
through a company wide enterprise resource planning system (ERP) that links these internal
groups together via a single integrated set of master records.
External integration refers to the systems, which link the external suppliers and distributors to the
firm. It is needed to forecast demand and balance the levels of supply and demand at different
points in the supply chain. Internet linkages, network communications and electronic data
exchanges are example \s of systems used for external integration.
1
2ii) Globalization and Communication: Firms require systems which enable them to carry out
their business in different culture and geographic and manage suppliers and customers all over
the world. Firms need to calculate total global logistics costs, increase leverage and component
standardization worldwide and improve communication of their strategies across global business
units and supply chain partners. Supply chain systems must be able to communicate in a variety
of languages even though English is the universal language of the Internet.
3
4iii) Data Information Management: Firms have access to new forms of servers,
telecommunication and wireless applications and software which increase the accuracy,
frequency and the speed of communication between suppliers, customers as well as internal
users. Information systems must be able to effectively filter, analyze and store abundant data to
enable effective decision-making. It must be possible for the users to access databases and
extract the needed information to make better supply chain decisions. This achieved through
systems known as data warehouses.
5
6iv) New Business Process: In the final two decades of 20th century, many organizations went
through the process of business process reengineering (a form of restructuring) in an effort to
increase productivity and reduce costs. Along with this change, organizations adopted computers
and information systems to perform tasks, which were performed manually earlier. Even after
these changes, business processes are constantly being changed to respond to a rapidly
changing environment. Such business processes include customer order management, supplier
evaluation and selection and new-product development. In this processes of change, firms can
create a “rapid response” capability, which allows them to quickly adept to their customers’
changing needs and control costs. Computer network and ERP are the information systems,
which enable the firm to link these business processes efficiently.
1v) Replacement of obsolete systems: Firms often adopted a “piece-meal” approach to system
usage such that each function such as purchasing, engineering, accounting etc., use its own
system which was not linked to other systems. Such systems are referred to as obsolete systems
or legacy systems, which need to be integrated into a single enterprise-wide system used by
everyone in the supply chain.

vi) Strategic cost management: The complete supply chain cycle, from order fulfillment back to
purchasing and order payment, involves a large number of transactions between different
members of the supply chain. Firms used to automate the cost based on outdated cost
accounting systems in order to determine specific cost drivers behind different business
processes. But the new systems develop promise to automate data capture throughout supply
chain systems. This has automated the transactions that occur in the traditional procurement
cycle. This will reduce the costs of purchasing and logistics departments, and considerably
reduce inventory held in warehouses and stock rooms throughout the entire supply chain.
2

Q. 5 Durga Lab Equipment & Components are finding it difficult to manage their
inventories. They are frequently facing the problem of shortage, delivery gaps and
customer complaints. The store manager is your friend and is needs your help in
managing inventories. Kindly help him and his business.

Ans.: There are a few things, which the perfect retail store manager will embody. One positive
trait, which makes a wonderful retail store manager, is an individual who has exceptional
conversational skills. Since a main component of a retail store manager’s daily duties is to
interact with customers and employees, it is very important that they know how to converse in
such a manner which is courteous yet effective. Looking for individuals with this trait will help
interviewers to find the best type of retail store manager.

Past experience is another important aspect, which all retail store managers should have.
Although past employment may not be the only contributing factor to obtaining the best possible
candidate for the job, it still is a highly desirable one. Choosing a retail store manager who has
some past managerial experience will equate with less training that is needed and perhaps a
more established and useful manager overall.

Another trait to look for in a potential retail store manager is professionalism. A professional store
manager not only will benefit the customers who enter the store on a daily basis but will be a
good morale booster for other employees as well. A professional retail store manager does not
have to be stuffy yet must know when it is the right time for serious behavior and when he/she
can take a lighter attitude with both the customers and employees.

A great retail store manager should also have excellent mathematical skills, which may benefit
the store the most. Since efficient math skills are an important thing for retail store managers to
have since they will be working with money on a daily basis, it is good to have this particular
quality.

Management involves the Planning, direction and control of personal selling including recruiting,
selection equipping, assigning, routing, supervising, paying and motivating as these tasks apply
to the personal sales force.
Following are the important tasks involved in the success of sales management in any
organization:
11. Setting personal selling objectives.
22. Formulating sales policies.
33. Structuring the sales force.
44. Deciding the size of the sales force.
55. Designing sales territories.
66. Developing the sales territories.
77. Developing the sales forecasts and sales budgets.
88. Fixing sales targets for individual sales territories/salesman.
99. Creating the sales force
1010. Managing the sales force
1111. Managing the marketing channels.
12. Ensuring growth and developing new accounts. 13. Sales communication and reporting 14.
Sales coordination and sales controlling including sales expense control. 15. Building the sales
organization 16. Co-ordination with marketing management in the areas like, product mix, pricing,
distribution, advertising and sales promotion. 17. Creating and maintaining the right image for the
company and its products in the market.

Management Competencies:

Sales management competencies are defined as sets of knowledge, skills, behaviors, and
attitudes that a person needs to be effective in a wide range of industries and various types of
organizations. People use many types of competencies in their everyday lives. Here we will
discuss six competencies that are needed for today’s sales management responsibilities. These
competencies are as under:
a) Strategic Action Competency: Understanding the overall strategy and goals of the company
and ensuring that the manager's actions and those of the people he/she manages are consistent
with these goals involves strategic action competency. Strategic action competency includes-
understanding the industry, understanding the organization & taking strategic actions.
• Understanding the Industry involves the following:

• To understand the history and general trends in the industry and their implications for the future
• to stay informed of and to anticipate the actions of competitors and strategic partners
• to identify attractive market segments and their buying needs
• Understanding the Organization involves:

• To understand the vision, overall strategy, and goals of the organization


• To appreciate the distinctive competencies of the organization with respect to market
opportunities and limitations
• To understand how to utilize organizational resources to meet the needs of the customers
• Taking Strategic Actions include:

• To assign priorities and makes decisions that are consistent with the firm’s mission and strategic
goals
• To implement specific account selection, retention, and dominance strategies
• To develop an appropriate portfolio of account relationships
• To consider the long-term implications of actions in order to sustain and further develop the
organization
• To establish tactical and operational goals that facilitates the firm’s strategy implementation
Today’s sales managers are being challenged to think strategically in order to improve their job
performance. One dimension of strategic thinking is to anticipate strategic trends in the industry
and to make the appropriate adjustments to take advantage of these changes. Failure to do so
may be very costly. The plight of Encyclopedia Britannica Corporation is a good example of the
possible penalty for ignoring important industry trends. First published 225 years ago in
Edinburgh, Scotland, sales of Encyclopedia Britannica peaked in 1990 at $650 million, with profits
of $40 million.
As CD-ROM technology gained acceptance, however, Britannica’s management failed to respond
and continued to market through a direct sales force of 2,300 people. Part of the reason
Britannica found it hard to change is that a typical sale pays the salesperson a commission of
$300. With CD-ROM encyclopedia packages priced from $99 to $395, commissions would have
dropped significantly. It also would have required marketing through competing channels of
distribution such as retail outlets, direct mail, and telemarketing, a change the powerful direct
sales force would have resisted. Sales have declined drastically, the company is in financial
trouble, and the sales force is now less than half its former size.
This competency also involves understanding the organization – not just the sales unit in which
the manager works. Goals and standards will flow from above. Unless the manager is well
connected and can influence them, his/her point of view goes unheard at the top.
After examining the competitive environment, a strategy or plan for achieving specific goals must
be developed, which will have implications for how resources are allocated across various market
opportunities, what types of customer relationships are developed, and how the account
interaction is executed.
b) Coaching Competency: Comparisons are often made between the competitive worlds of
sports and business sales. Athletes compete against opposing players to win the game, whereas
salespeople compete with other companies‟ salespeople to win accounts. Like the athletic coach,
the sales manager plays an important role in this competition by helping to develop the skills of
the sales team.
Coaching is defined as a sequence of conversations and activities that provide ongoing feedback
and encouragement to a salesperson or sales team member with the goal of improving that
person’s performance.
• Performance improvement is achieved by:

• Providing verbal feedback


• Role modeling
• Building trust
• Providing Verbal Feedback will include:

• Providing specific and continuous performance and selling skills feedback


• Building a feeling of appreciation and recognition by taking the time to acknowledge a job well
done, an effort beyond the call of duty, or an important victory
• Reinforcing success and positive attempts to support desirable behaviors
• Role Modeling would involve:

• Leading by example rather than ordering


• Providing role models, either themselves or others, and sharing best practices
• Model professional attitudes and behaviors.

Q. 6 a. What do you mean by value chain analysis? Is it important in SCM?

Ans.: Supply chain process consists of all parties involved directly or indirectly in fulfilling a
customer request. It not only includes the manufacturer and suppliers but also transporters,
warehouses, retailers and customers themselves. Within each organization such as
manufacturer, the supply chain includes all functions involved in receiving and filling a customer
request.
The supply chain encompasses all activities associated with the flow and transformation of goods
from the raw materials stage through to the end user as well as the associated information flows.
Supply chain extends from customer’s customer to supplier’s suppliers. In today’s rapidly
changing business environment, even greater demands are being placed on business to provide
right products and services quicker with greater added value to the correct location with no
relevant inventory position.

A typical supply chain may involve a variety of stages. These supply chain stages include:
• Customers
• Retailers
• Wholesalers/Distributors
• Manufacturers
• Component/Raw material suppliers
Each stage need not be presented in a supply chain. The appropriate design of the supply chain
will depend on both the customer’s needs and the roles of the stages involved.
Following figure represents a simplified form of supply chain process
All process in supply chain fall into one of the two categories: i) Push Process and ii) Pull
Process. In pull process, execution is initiated in response to a customer order.
In push process; execution is in anticipation of customer order. At the time of execution of a pull
process, demand is known with certainty whereas at the time of execution of a push process
demand is not known but forecasted.

b. A warehouse plays an important role in the physical distribution system. Elaborate


how?

Ans.: Importance of Warehousing in physical distribution system:

Data warehousing is defined as a process of centralized data management and retrieval. Data
warehousing, like data mining, is a relatively new term although the concept itself has been
around for years. Data warehousing represents an ideal vision of maintaining a central repository
of all organizational data.
Data warehouse is a repository of an organization's electronically stored data. Data warehouses
are designed to facilitate reporting and analysis.
This definition of the data warehouse focuses on data storage. However, the means to retrieve
and analyze data, to extract, transform and load data, and to manage the data dictionary are also
considered essential components of a data warehousing system. Many references to data
warehousing use this broader context. Thus, an expanded definition for data warehousing
includes business intelligence tools, tools to extract, transforms, and load data into the repository,
and tools to manage and retrieve metadata.
Some of the benefits that a data warehouse provides are as follows:
• a data warehouse provides a common data model for all data of interest regardless of the
data's source.
• Information in the data warehouse is under the control of data warehouse users so that, the
source system data is purged over time.
• The information in the warehouse can be stored safely for extended periods.

The Process of Logistics


Logistics is the process of anticipating customer needs and wants, acquiring the capital, material,
people and technologies and information necessary to meet those needs, optimizing the goods or
service to fulfill customer requests and utilizing the network to fulfill customer requirements in a
timely way.
Logistics is viewed as the competency, which links an enterprise with its customers and suppliers.
Information from and about the customers will flow through the enterprise in the form of sales
activity, forecasts and orders. The information is refined into specified manufacturing
and purchasing plans. As products and materials are procured, a value added inventory flow is
initiated which ultimately results in transfer of ownership of finished products to customers.
The logistics process is viewed in terms of two interrelated efforts namely: inventory flow and
information flow. This basic process is not restricted to manufacturing firms and for profit business
alone. There is a need to integrate requirements and operations in all businesses including public
sector organizations.
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