D&L Exam PPT Mahantesh

KLS Institute of Management Education and Research
Belgaum
Logistics Management
Prof. Mahantesh B Halagatti-KLS IMER-Belgaum
Logistics..
Concerned with getting product and
services where they are needed and when
they are desired.
Involves integration of
information,transportation,inventory,wareh
ousing,materials handling and packaging.
The operating responsibility of logistics is
the geographical positioning of raw
materials,work-in-process,and finished
goods inventories where required at the
lowest cost possible.
Logistical process facilitates the flow of materials

from suppliers to the manufacturing firms and the
distribution of finished products through
marketing channels to consumers.
The complexity of logistics increases with the
number of industrial manufacturers,suppliers,and
the channel intermediaries such as
wholesalers,distributors and retailers within a
nation.
It becomes awesome when we consider business on
a global basis,having global manufacturers, global
suppliers and global consumers.
Logistics defined as..

The process of anticipating customer needs
and wants, acquiring the capital
materials,people,technologies,and information
necessary to meet those needs and
wants,optimising the goods or serviceproviding network to customer requests and
utilising the network to fulfill customer
requests in a timely manner.
Types of Logistics:
Business Logistics
Military Logistics
Event Logistics
Service Logistics
Business Logistics
It is part of supply chain process that
plans, implements, and controls the
efficient flow and storage of goods,
services, and related information from
point of origin to point of use or
consumption in order to meet customer
requirements.
Military Logistics
The design and integration of all
aspects of support for the operational
capability of the military forces and
their equipment to ensure readiness,
reliability and efficiency.
Event Logistics
The network of activities, facilities and
personnel required to organise, schedule
and deploy the resources for an event
to take place and to efficiently
withdraw after the event.
Service Logistics
The acquisition, scheduling and
management of the facilities/assets,
personnel and materials to support and
sustain a service operation or business.
Logistics Management
Logistics management is 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.
Components of logistics management
Benefits of good logistics management

Capability to identify potential
operational break downs and taking
corrective action prior to failure of
service to customers.
Performance above industry average
in terms of inventory availability as
well as speed and consistency of
delivery to customers.
Benefits.
Capability to monitor logistical
performance on a real-time basis
through efficient information systems.
High delivery performance ( near
perfect orders)
Commitment to continuous improvement
Firms having world-class logistical
competency can become attractive
suppliers and ideal business partners.
Logistical Competency
Is a relative assessment of a firms
capability to offer competitively superior
customer service at the lowest possible
total cost.
Characteristics are: Alternative logistical
capability, emphasis on flexibility, timebased performance, operational control,
commitment to perfect customer service
performance.
Logistical Mission:
Logistics of a firm is an integrated effort aimed
at helping to create customer value at the lowest
cost.
Logistics managers seek to achieve the desired
quality of customer service through state-of-theart operating competency.
High level of customer service would be extremely
costly and not necessary to support most
marketing and manufacturing operations.
Hence logistical service must be viewed as a
balance of service priority and cost.
Basic logistics service is measured

in:
Availability
Operational Performance
Service Reliability
Need for logistics management:
Competitive pressures
Information technology
Channel power
Profit Leverage
Logistics Activities
Transportation
Storage
Packaging
Materials handling
Order fulfilment
Inventory forecasting
Production planning
Purchasing
Customer service
Site location
Role of logistics in Supply Chain Management
The Generic Value Chain
Role of Logistics in Economy

Logistics is one of the major expenditures
for businesses, thereby affecting and
being affected by other economic
activities.
Logistics supports the movement and flow
of many economic transactions and it is an
important activity in facilitating the sale of
virtually all goods and services.
Logistics adds value by creating Time
utility and Place utility.
Role of Logistics in Organisation
Relationship between Marketing Mix elements and

logistics
Logistics Costs
Customer service level

Transportation costs
Warehousing costs
Order processing/information systems
costs
Lot quantity costs
Inventory carrying costs

Belgaum
The Marketing Mix
Product
Place
Price
Promotion
Distribution channels help in the place
aspect of the marketing mix
Distribution provides place, time and
possession utility to the consumer
Example
Consumer wants to buy a tube of toothpaste
Made available at a retail outlet close to
her residence place
Made available at 8 pm on a Tuesday
evening when she wants it time
She can pay for the toothpaste and take it
away possession
The company distribution function has made
all this possible.
The situation would be similar if a customer
wants to buy a refrigerator or medicines or
even an electric motor
Players Involved
The company and its distribution network
Direct company to consumer
Company to a C&FA / distribution center to
distributors to retailers
Distributor to wholesaler to retailer
All these intermediaries help the process of

exchange of the product or service.
What is distribution management?
Distribution Management
Management of all activities which facilitate
movement and co-ordination of supply and
demand in the creation of time and place utility
in goods
The art and science of determining
requirements, acquiring them, distributing them
and finally maintaining them in an operationally
ready condition for their entire life.
A distribution channel
Distribution Channels Defined

Are sets of interdependent organizations
involved in the process of making a product or
service available for use or consumption Stern
& Ansary
Whether selling products or services, marketing
channel decisions play a role of strategic importance
in the overall presence and success a company
enjoys in the marketplace.
Distribution Channels
Are intermediaries or middlemen
Exist because producers cannot reach all their
consumers
Multiply reach and provide efficiency to the marketing
process
Facilitate smooth flow and create time, place and
possession utilities
Have the core competence and reach
Provide contact, experience, specialisation and
scales of operation
Types of Channels
Sales: motivates buyers, shares information
between company and its consumers,
negotiates fair bargains for consumers and
finances the transactions
Delivery channel meant only for physical part of
the distribution
Service channel performs after sales service
Channel members
Listing of Channel Members

Company own sales team
C&FAs and CSAs
Distributors, dealers, stockists, value-added resellers
Agents and brokers
Franchisees
Electronic channels
Wholesalers
Retailers
C&FAs / C&SAs
C&FA: carrying and forwarding agent and
C&SA: carrying and selling agent both are
on contract with a company
Both are transporters who work between the
company and its distributors
Collect products from the company, store in a
central location, break bulk and dispatch to
distributors against indents
Goods belong to the company
C&SA also sells the goods on behalf of the
company but remits proceeds after sale
Distributors, Dealers,
Stockiest, Agents
Name denotes the extent of re-distribution
done by them
Distributors invest in the products buy
products from the company
Are on commission, margins or mark-up
May or may not get credit but extend credit
Distributors cover the markets as per a beat
plan. All others merely finance the business.
Distributors could be exclusive for a company
Agents bring buyer and seller together
Wholesalers
Operate out of the main markets
Deal with a number of company products of
their choice
Are not on contract with any company
Sell to other wholesalers, retailers and
institutions
Negotiate about 15 days credit from company
distributors also provide credit to their
customers
Operate on high volumes and low margins
Retailers
The final contact with consumers
Operate out of their shops and sell a large
assortment and variety of goods
Located closest to consumers
Buy from company, distributors or wholesalers
Highest margins in the network
Provide personalised services to their customers
Industrial Products
Customers may also direct from company sales force
Producer
Producer
Agent/middleman
Industrial Distributor
Industrial Distributor
Industrial Customer
Industrial Customer
Consumer Products
Retailers may also direct from company sales force
Producer
Producer
Producer
Distributor
Distributor
Wholesaler
Retailer
Retailer
Retailer
Customer /
consumer
Customer/
Consumer
Customer/
Consumer
Patterns of Distribution
Determines the intensity of the distribution
Intensity decides the service level
provided
Types of distribution intensity:
Intensive
Selective
Exclusive
Distribution Intensity
Intensive: distribution through every
reasonable outlet available FMCG
Selective: multiple, but not all outlets in
the market pharma, frozen food
Exclusive: may be only one outlet in a
market - car dealers
Intensive Distribution
Strategy is to make sure that the product
is available in as many outlets as possible
Preferred for consumer, pharmaceutical
products and automobile spares
Selective Distribution
A few select outlets will be permitted to
keep the products
Outlets selected in line with the image the
company wants to project
Preferred for high value products
Tanishque jewelry
Keeps distribution costs lower
Exclusive Distribution
Highly selective choice of outlets may be
even one outlet in an entire market
Could include outlets set up by companies
Titan, Bata
Producer wants a close watch and control
on the distribution of his products.
Channel strategy
Distribution Channel Strategy

Derived from the corporate strategy and the
marketing strategy
Steps for designing the distribution strategy are:
Defining customer service levels

Distribution objectives and steps
Structure of the network required
Policy and procedure to be followed
Key performance indicators
Critical success factors
Customer Service Levels

Defined by the nature of the industry, the
products, competition and market shares.
Affordability also decides the service level
It should at least match competition.
Customer expectations have no limit
Distribution Objectives
Influenced by the customer expectations
Defines the extent of time, place and
possession utility which the customer can
expect out of the channel network
Set of activities.
Set of Activities
Manner in which the company and its
marketing channels go about achieving the
customer service levels
Some of these steps could be:
Sales forecasts
Despatch plans
Market coverage beat plans
Journey plans for service engineers
Collection of sales proceeds
Carrying out promotional activities
The company also decides as to who is to

perform which task
Organization.
Distribution Organization
Extent of company support and outsourcing to
be decided
Budget for the cost of the distribution effort
Select suitable channel partners C&FAs, and
distributors
Setting clear objectives for the partners
Agree on level of financial commitments by the
channel partners.
Policy and procedure..
Policy & Procedure

Define policy and implementation
guidelines through Operating Manuals
Policy guidelines include
Code of conduct for channel members
System for redressal of complaints
Any additional subsidies etc
Handling institutional business
Service policy for engineering products
KPIs.
Key Performance Indicators

For measurement of effectiveness. Some of
these could be:
Consistent achievement of targets by product groups,
periods and territories
Achievement of market shares
Achievement of profitability
Zero complaints from customers
No stock returns
Ability to handle emergencies and sudden spurts in
demand
Key Performance Indicators

For measurement of effectiveness. Some
of these could be:
Balanced sales achievement during a period
no period end skews
Market coverage with ready stocks
Excellent management of accounts
receivables
Minimize losses on account of stock-outs
Minimize damages to products
CSFs
Critical Success Factors

The distribution strategy also needs the
support and encouragement of top
management to succeed
Some of the CSFs could be:
Clear, transparent and unambiguous policy and
procedure
Serious commitment of the channel partners
Fairness in dealings
Clearly defined customer service policy
High level of integrity
Equitable distribution at times of shortage
Timely compensation of channel partners

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Channel Functions
Information gathering
Consumer motivation
Bargaining with suppliers
Placing orders
Financing
Inventory management
Risk bearing
After sales support
Role of Intermediaries
Company 1
Company 2
Company 3
Intermediary
Large number of CONSUMERS

Direct and Indirect.
Direct Distribution
Company to consumers or retailers
without use of intermediaries. Also
includes reaching Institutional buyers.
Selling on the Internet
If products are technically complex, this
system is preferred
Cost is a major consideration to adopt this
mode
Direct Distribution - Examples
Banking services
Credit cards
Petrol / diesel company own outlets
Land line phone connections
Health services
Utilities electricity, water
Subsidized ration
Education
Indirect Distribution
Goods may move through a set of
intermediaries
Most FMCG companies follow this route
The intermediary has a far better reach

than the company
The cost of operations of an intermediary
like a wholesaler / retailer is shared with
many businesses.
Indirect Distribution Examples
All FMCG, consumer durables and

pharmaceutical
Petrol / diesel / cooking gas - franchisees
Insurance
Mobile phones
All kinds of passenger transport
Marketing Channel Systems

Vertical:
Corporate
Administered
Contractual
Horizontal
Multi-channel
Vertical.
Vertical Marketing System

Various parties like producers, wholesalers and
retailers act as a unified system to avoid
conflicts
Improves operating efficiency and marketing
effectiveness
3 types:
Corporate
Administered
Contractual
Corporate
Corporate VMS
Combines successive stages of production
and distribution under single ownership
Examples:
Bata, Bombay Dyeing, Raymond
Sears, Goodyear
Suppliers of food items could be also their
own supplying firms - like Nilgiris
Administered
Administered VMS
Co-ordinates distribution activities
Gains market power by dominating a channel
Usually true of dominant brands like GE, Kodak,
Pepsi, Gillette, Coke and HLL in certain
locations
Command high level of co-operation in shelf space,
displays, pricing policies and promotion strategies
Contractual
Contractual VMS
Independent producers, wholesalers and
retailers operate on a contract
Could take the forms of:
Wholesaler sponsored voluntary chains

Retailer co-operatives
Manufacturer sponsored retail or wholesale franchise
Franchise organizations
Service firm sponsored retail franchise
Horizontal MS
Two or more unrelated companies join
together to pool resources and exploit an
emerging market opportunity
In-store banking in hotels, big stores
Retail outlets in petrol bunks
Coffee Day outlets in airports
Multi-channel
Multi-channel Distribution
Company uses different channels to
reach / same or different market
segments
Most FMCG companies have separate
networks for retail market and
institutions
Pharma companies may use different
channels to reach doctors, chemists and
hospitals
Multi-channel Distribution
Used in situations where:
Same product but different market
segments
Unrelated products in same market
detergents and ice creams (HLL)
Size of buyers varies
Geographic concentration of potential
consumers varies
Reach is difficult
Distribution Channels
Take care of the following discrepancies
Spatial
Temporal
Breaking bulk
Assortment and
Financial support
Spatial Discrepancy
The channel system helps reduce the
distance between the producer and the
consumer of his products.
Consumers are scattered
Have to be reached cost effectively
Example: companies produce products in

one location even for global needs
Temporal Discrepancy
The channel system helps in speeding up in
meeting the requirement of the consumers
Time when the product is made and when it is
consumed is different
Limited number of production points but hundreds of
consumers
Maruti plant in Gurgaon cars and spares are

available when the consumer wants
Breaking Bulk
The channel system reduces large quantities
into consumer acceptable lot sizes
Production has to be in large quantities to benefit
from economies of scale
Consumption is necessarily in small lot sizes
India is the ultimate example in breaking bulk

you can buy one cigarette, one Anacin, one
toffee etc
Need for Assortment

The channel system helps aggregate a
range of products for the benefit of the
consumer it could be made by one
company or several of them.
For the same product, it could be a variety of
brands and pack sizes
MICO makes fuel injection equipment,

spark plugs etc in different plants but its
dealer will sell the entire range.
Financial Support
The channel system provides critical
working capital to its customers by
extending credit.
Some channel members like stockists and
wholesalers finance the business of their
customers.
Medical diagnostic equipment to hospitals
Channel Flows
Forward flow company to its customers
goods and services
Backward flow customers to the
company payment for the goods.
Returned goods.
Flows both ways - information
Three Flows Recognized

Goods and Services
Payment for goods / returns
Information
Company
FORWARD
BACKWARD
BOTH WAYS
Customers
The Five Channel Flows

Physical flow of goods
Title flow of goods (negotiation, ownership
and risk sharing also)
Payment flows (financing and payment)
Information flow (about goods, orders
placed and orders executed)
Promotion flows
Who is responsible?
Channel Flows
Some channel member/s have to perform
them
There is a cost associated with each flow
If a channel member is discontinued, the flow
has to be performed by another
All flows and transactions can be effective
only with timely, accurate and correct
information
The channel flow is ideally to be handled by
the most competent channel member who
can deliver best service at the lowest cost.
Degree of Involvement
Manufacturer
Physical
Title / ownership
Information
Risk sharing
Promotions
C&FA or
Distribution
Center
Physical
Title
Information
Payment
Order
processing
Distributor,
dealers
Wholesaler or
retailer
Physical
Title / ownership
Information
Payment
Order placement
Negotiation
Risk sharing
Promotions
Physical
Title / ownership
Information
Payment
Order placement
Negotiation
Risk sharing
Promotions
Channel formats
Channel Formats
Is decided by who
drives the channel
system:
Producer driven
Seller driven
Service driven
Others
Producer Driven
This is the effort of the manufacturer to reach the
product to his consumers. Examples:
Company owned retail outlets petrol, Bata, Reliance
mobiles
Licensed outlets KMF
Consignment selling agents
Franchisees
Brokers
Vending machines
Company contracted distributors
Seller Driven
Use of existing channels to reach the
largest number of end users
Existing wholesalers and retailers
Modern retail formats
Specialty stores Shoppers Stop
Discount stores Subhiksha
Pheriwalas
Service Driven
These are the people who facilitate the
distribution
Transporters and freight forwarders
Providers of warehouse space
C&F agents
3P Logistics service providers
Couriers
Other formats
Multi-level marketing systems Amway,
Modicare, Tupperware, Herbalife
Co-operative societies
Telephone kiosks
TV home shopping
Catalogue marketing
The internet
Exhibitions, fairs and trade shows
Data base marketing
Channel levels
Channel Levels
Zero level if the product or service is provided
to the end user directly by the company.
Used mostly by companies delivering service like
health, education, banking (also known as service
channels)
One level consists of one intermediary

Two level consists of two intermediaries and
is the most common for FMCG products
Service Channel
Companies establish their own unique
channels to deliver services like health,
education, banking, insurance etc
Hundreds of bank branches to be close to
prospects
Banks may also recruit independent agents to get
customers to walk in
Consulting or IT firm uses one team for Biz
Development and another for execution
Musician or magician may use mass media,
events or web sites to reach customers
Channel Levels
Manufacturer
Manufacturer
Summarize Expectations
Manufacturer
Distributor/ wholesaler
End User
Zero level
Retailer
Retailer
End User
End User
One level
Two level

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What is Retailing?
Any business entity selling to consumers
directly is retailing in a shop, in person, by
mail, on the internet, telephone or a vending
machine
Retail also has a life cycle newer forms of
retail come to replace the older ones the
corner grocer may change to a supermarket
Includes all activities involved in selling or
renting products or services to consumers for
their home or personal consumption
Retailing
Term retail derived from French word
retaillier meaning to break bulk
Characteristics:
Order sizes tend to be small but many
Caters to a wide variety of customers. Keeps a
large assortment of goods
Lot of buying in the outlet is impulse- inventory
management is critical
Selling personnel and displays are important
elements of the selling process
Strengths in availability and visibility
Targeted customer mix decides the marketing mix
of the retailer
Retailing
Retail stores are independent of the
producers not attached to any of them
A survey shows that only 35% of
supermarket purchases are preplanned. The rest are impulse- greatly
influenced by quality of the
merchandising efforts
Functions of Retailers
Marketing functions to provide consumers
a wide variety
Helps create time, place and possession
utilities
May add form utility (alteration of a trouser
bought by a customer)
Helps create an image for the products
he sells
Functions of Retailers
Add value through:
Additional services extended store timings,
credit, home delivery
Personnel to identify and solve customer
problems
Location in a bazaar to facilitate comparison
shopping
How do Customers Decide on a

Retailer?
Price
Location
Product selection
Fairness in dealings
Friendly sales people
Specialized services provided
Kinds of Retailers
Type of
retailer
Characteristics
Specialty store
Narrow product line with deep assortment apparel,

furniture, books
Department
store
Several product line in different departments Shoppers

Stop, Big Bazaar
Supermarket
Large, low-cost, low-margin, high volume, self-service

operation with a wide offering
Convenience
store
Small stores in residential areas, open long hours all

days of the week limited variety of fast moving
products like groceries, food
Discount store
Standard merchandise sold at lower prices for low

margins - Subhiksha
Kinds of Retailers
Type of
retailer
Characteristics
Corporate
chains
More outlets owned and controlled by one firm Globus
Voluntary chain
Wholesaler sponsored group of independent retailers
Retailer co-ops
Independent retailers with centralized buying operations

and common promotions
Consumer coops
Co-op societies of groups of consumers operating their

own stores farmers, industrial workers etc
Franchise
organisation
Contractual arrangement between the producer and

retailers selling products exclusively Kemp Toys
Retailers Strengths
Choice of merchandise is their prerogative put
pressure on producer suppliers
Many new products on offer. Can charge penalty
if products do not do well
New developments in IT help them run
operations optimally and keep track of loyal
customers. Also helps them identify profitable
store locations.
Organized Retail - Features

Sponsored by companies or corporate groups
Large formats like supermarkets, department
stores and now hypermarkets
Right ambience to make shopping a pleasure
Use latest technology for customer care and
supply chain management.
Large employment potential
Effectively manage operating costs
Offer consumers value for money
Retailing Trends - India

Consumer wants more benefits without
additional costs
Rising income levels cheap no longer
works, but value for money
Explosion of communication channels
influences choices of products
Increased literacy has made consumer more
conscious of his bargaining power
Growing number of urban nuclear families
Retailing Trends - India

Influence of retailer increasing assortment
plus other facilities offered
Rural consumers want the same things and
as their urban counterparts and are willing to
pay for it
Better organized supply chains to cater to a
large number of outlets in different locations
Improved infrastructure helping the
consumers
Bigger volumes help in economies of scale
Trade / Retail Format

Range of goods and customer service
dimensions determine the format. Elements
distinguish between stores and include:
Store ambience. (Kemp Fort)
Saving in time for shopping interiors of practical
design reduce time for search and pick-up of
goods
Location
Physical characteristics external appearance,
arrangement of goods
All these are parts of the positioning strategy

and influence the footfalls to the store.
Categories of Shoppers (1)

Identified by Cook & Walters
Task focused shopper visits the store to buy
specific things he has planned for
Convenience, minimum time, easily accessible
goods, pleasing store format
Grocery shopping is an example
Leisure shopper more interested in the

ambience and environment
Has plenty of time, wants to have a good time
while shopping
Lifestyle stores are examples
Category of Shoppers (2)

Convenience goods (low value): probable gain
from shopping and making comparisons is small
compared to the time, effort and mental
discomfort required in the search -toothpaste
Shopping goods (high value): gain is large refrigerator
Specialty goods: clearly distinguished by brand
preferences Maruti Zen car or Tag-Heuer
watch
Trading area
Trading Area
Catchment area from where most of the
customers of a retail store come
Corner grocery store caters to the locality in which it
is situated
Discount stores have a wider area. Subhiksha
locations for consumers in 2 km radius
Specialty stores have a much wider trading area
MTR, Shoppers Stop etc
Trading area increases with the size of the store

and the variety it offers
Retail Strategy
Positioning of the retailer

Merchandising
Customer service
Customer communication
Positioning Strategy
Wide range with a high value add
Lifestyle brand of stores
Limited range but a high value add
Tanishque jewelry store
Limited range with a limited value add
Bata stores
Wide range of goods but a limited value
add a Food World outlet
Merchandising
A set of activities involved in acquiring goods
and services and making them available at the
places, times and prices and the quantity that
enable a retailer to reach his goals
The most critical function in retail
Directly effects the revenue and profitability of
the store
Also takes into account the assortment of goods
and their quality
Customer Service Strategy

Developed to create stickiness in customers
Personal data collected using IT including
purchasing practices and preferences
Customer loyalty programs planned
Create customer delight
Location strategy to give competitive advantage
Understanding the buying profile of the
customers
Communication
Customer Communication
The manner in which the retailer makes
himself known to his customers. Has two
parts to it:
The messages which the retailer sends to his
customers and prospects
The word of mouth support which satisfied
customers give to the retailer by talking to others
Retailer communicates about:

Announcing the opening of a store
Promotions running in the store
Additional facilities introduced by the stores
Pricing Strategy
Premium and indicating high value

Reasonable pricing with good value
Low pricing but high value for money
All strategies are focused on giving value
to the customer
Product differentiation.
Product Differentiation
Feature exclusive national brands not available
in competing retailers unlikely
Exclusivity of products specialty stores
Mostly private labels Westside
Feature, big, specially planned merchandising
events Kemp Fashion sows
Introduce new products before competition - again unlikely
Performance measures
Franchising
Franchisor is the firm which wants to sell
its goods or services
Franchisee is the firm or group that are
willing to sell the products or services on
behalf of the franchisor
The first party gives advice and help to the
second to find good locations, blue prints for a
store, financial, marketing and management
assistance
Franchisor benefits
Benefits to Franchisor
Faster expansion
Local franchisee pays lower advertising
rates than a national firm
Owners motivated to work more hours
than mere employees
Local taxes and licenses are responsibility
of franchisees
Franchisee benefits
Benefits to Franchisee
Quick recognition among potential customers
Management training provided by principal
Principal may buy ingredients and supplies and
sell to franchisee at lower prices
Financial assistance
Promotional aids, in-store displays etc
Electronic channels
Retailing on the Internet

Unlimited assortment
Items may not be on hold someone has to
deliver the product delays
No product touch or feel
More info makes the customer a better
shopper
Comparison shopping possible
Consumer has to plan purchases ahead
No need to handle cash payment can be
on-line
Shopping is 24X7
E-tailing Issues
Logistics support to selling

Payment gateway
Customer product returns
Conflicts with Brick &Mortar overcome
by selling separate products
FDI in retail.

Belgaum
Need for Wholesalers

Widespread economy consumers can only
reached by thousands of retailers (except for
consumer durables and industrial products)
Reaching these retailers by a company directly
is not possible (except for consumer durables
and industrial products)
Hence the need for wholesalers in two forms:
Well established free-lance wholesalers
Contracted distributors, stockists and agents
Characteristics.
Characteristics of Wholesalers
Operate on large volumes but with chosen group
of products
Food, grocery, pharma or automobile spares etc
The company itself, contracted parties or free

lancers, can operate as wholesalers
Mostly B2B business trade and institutions
Wholesaler could also be a retailer in rural
markets W/s sells to other retailers and also to
consumers
Characteristics of Wholesalers
Sell physical inputs or products tangible goods
( Ws in some service industries)
Optimise results, maximise service
(effectiveness) and minimise operating costs
(efficiency)
Buy goods for resale, keep inventory, take risks
of price changes, negotiate terms, procure
orders, deliver and extend credit.
Definition
Definition
Wholesaling is concerned with the
activities of those persons or
establishments that sell to retailers and
other merchants and / or industrial,
institutional and commercial users but
do not sell in large amounts to
consumers US Bureau of Census
Delivering value
Delivering Value
Keep goods accessible to customers
instantly
At times, get together to bargain for better
terms
Pass on benefits or incentives to their
customers
Have a wide trading area
Functions
Difference with Retailers

Not too worried about location, ambience or
promotions prefer to be in the main market
Deal with other businessmen and not
consumers
Deal with a specific group of products only
Much larger trading area
Much larger transactions with suppliers and
customers
Believe in low margins but high volumes.
Functions of Wholesalers
Varies in degree between free-lance, company
distributors and stockists / agents
Sales and promotion of chosen company
products
Buying the assortment of goods
Breaking bulk to suit customer requirements
Storage and protection of goods till sold
Functions of Wholesalers
Grading and packing of commodities

Transportation of goods to customers
Financing the buying of customers
Bearing the risks associated with the
business
Collecting and disseminating market
information to both suppliers and
customers
Types of Wholesalers
Full service: stocking, selling, offering credit,
delivery and business assistance (company
distributors, wholesale merchants)
Limited service: range of service is limited
(examples include Metro C&C, mail order)
Merchant w/s: independent businesses
Brokers and agents: bring buyer and seller
together do not take possession of goods
Others: agri business, auction companies etc
Limitations of Wholesalers
Some of them do not give complete
information to suppliers for selfish reasons
Cannot be relied on to do equitable
distribution
At times, do not want company and
customers to meet
Tend to hoard goods and influence pricing
Consumers have no say in pricing or quality
in a w/s dominated system
Major decisions
Major Wholesaling Decisions
Which markets to operate in

Manpower to employ
What products to sell
Pricing decisions / Promotional support
Credit and collections
Image and customer perception
Warehouse location and design
Inventory Control
Favourable Factors
Companies have limitations in market / outlet
coverage. Wholesalers are required to fill the
gaps
Hundreds of small companies who cannot
afford to set up distribution networks need
to depend on wholesalers
In food grains, fruits and vegetables hardly
any organised distribution network.
Wholesalers help move goods from farm gate
to consumers
Favourable Factors
Big companies also need wholesalers to
get big volumes
W/s extend credit to customers.
Companies cannot match this
Retailers have to visit w/s markets to
buy food grains, cereals and pulses
buy a lot more.
Unfavourable
Unfavourable Factors
Companies coverage focus on retailers
and institutions through their distributors
Using modern retail formats as
wholesalers
More outlets like Metro C&C being
encouraged
Enforcing strict price control so that w/s do
not sell below company prices.
Distributor
Is a wholesaler nominated by a company to
exclusively re-distribute the company products to
its customers in a designated territory. He does
not deal in competitors products. Does not sell
from his premises. Extends credit selectively.
A redistribution stockist for HLL
A distributor for Philips lighting division
A distributor for L&T engineering division
Dealer
Role similar to a distributor but
May not have a clearly defined territory and may sell
both in the market and from his shop
May deal with competitive products also
Extends credit selectively.
Dealers in industrial products may have better defined
roles.
Examples:
Dealer for an edible oil company
A dealer for garment brands
Stockist
May be working for a company with a
designated territory but does not redistribute the stocks. Sells from his
premises. Extends credit selectively.
A stockist for paper products
A stockist for automobile spares
Re-distribution is visiting customer

premises to sell products
Managing distributors.
Managing Distributors
The principles are similar across
industry verticals. FMCG is the most
complex.
Has the capacity to maximise sales and
market shares.
Has to ensure buying goods from the
company and re-distribution to the trade
Why necessary?.
Managing Distributors
Distributor responsibilities include:
Buying adequate quantities by Stock Keeping Unit
(SKU) for redistribution
Ensuring full market coverage of all customers in
the territory assigned to him
Help finance the operations pays for the goods
upfront but extends credit to his customers
Maintaining inventory of company products
adequate at all times to service the market
Assist company in its promotional efforts
Need for Distributors

Under three circumstances:
For entering a new town
For additional coverage in the same town
For replacing an existing distributor
For entering a new town, assess the potential

for business to decide:
If the town can sustain a full fledged distributor
The number of distributors required
Starts with a town profile of potential, number

of customers to be serviced and the
competition.
Cost of servicing
Cost of Servicing
Cost benefit of using distributors to be
assessed
Logistics cost of serving the market
The number of customers to be covered by
category wholesalers, retailers, institutions
Frequency of visits to markets and outlets
Sales revenue estimate from each visit
Markets to be covered with ready stocks or order
booking for later delivery
Likely collections during each visit gives an idea
of the credit requirements
Expectations
Expectations from a Distributor

To be stated at the start of the relationship
Helps get the right kind of distributor also
Achieving sales targets volume, value and packs

Financial commitment on inventory and credit
Investment in infrastructure space, vehicles
Manpower front line and back office
Distribution effort market and outlet coverage as per
a beat plan with productive calls
Developing new markets and new accounts
Managing key accounts and institutional business

Merchandising and displays in the market
Secondary sales efforts and tracking critical for
fmcg and pharma (secondary sales is sales from
the distributor to the outlets in the market)
Effectively handling promotions and schemes
initiated by the company
Managing damaged stocks

Organising and participation in promotional
events
Assist company in making a success of
launching new products and packs
Handling consumer quality complaints
Handling statutory requirements on behalf of the
company
Payments and remittances promptly to the
company

Belgaum
Channel Design Factors

Product mix and nature of the product
Width and depth of market / outlet coverage
planned
Long term commitments to channel partners
Level of customer service planned
Cost affordable on the channel system
Channel control requirements of the company
Steps.
Channel Design Steps

Define customer needs
Clarify channel objectives
Look at alternative systems which can
meet these objectives
Estimate cost of operating the channel
system
Evaluate available alternatives
Finalise the ideal system
Customer needs.
Customer Needs
Lot size most convenient pack size which
the consumer can buy at a time
Waiting time time elapsed between the
desire to buy the product and the time when
he can actually buy it should be almost zero
Variety choice of products, brands, packs
Place utility choice of buying where he
wants. For a consumer product it has to be at
a location closest to his residence
Components
Channel Design Components

Revenue generation or the commercial
part
Physical delivery of the goods or services
the logistics part
The service part to take care of aftersales support
Each part of the system is likely to be
handled by a different entity.
Design issues.
Channel Design Issues

Activities required and who will perform
Activities relationship to service levels
Number of channel members required and
the relationship between categories
Roles, responsibilities, remuneration and
appraisal of performance of channel
members
Channel Design Process

Similar to any other marketing task
Segmentation
Positioning
Focus
Development
Segmentation
Putting customers in similar clusters based on
their needs
Doctors who prescribe medicines
Chemists who dispense medicines
Hospitals and nursing homes who use them
Each segment has a different need to be

serviced by the channel
Gives an idea to the sales manager as to the
kind of channel members he should be planning
for.
Positioning
Defines the channel element required to service
each of the segments
The sales manager decides the channel partner who
is ideal to meet the expectations of the segments.
The number of each category of intermediary is also
decided based on the number of customers to be
serviced in each segment.
The service objectives and flows for each channel
partner are also frozen
Focus
It may not be possible to meet the needs
of all segments cost and practicality
considerations (the managerial talent
available for instance)
The sales manager has to firmly decide
which of the segments he will service
The competitive scenario also helps in this
decision
Development
At this stage the channel system is being put
in place to achieve the objectives
Select the best of the alternatives
Comparison with the most successful competitor
could be a good benchmark
Channel partners of competitors may be

willing to share best practices of their
principals
For modifying an existing channel, the gap
between the ideal and the existing is to be
identified for remedial action.
Channel Objectives
Defines what the channel system is supposed
to do to support customer service.
Customer needs could include:
Lot size convenience

Minimum waiting time
Variety and assortment
Place utility
The product characteristics and the market

profile also impact the objectives.
Competition could also affect the objectives
Channel Alternatives
Are planned after deciding the customer
segments to be serviced and the levels of
service
Business intermediaries currently available like
C&FAs, distributors, dealers, agents wholesalers and
retailers.
The number and type of intermediaries required
Developing new channel types
Roles of each channel member
Evaluation of Major
Alternatives
Cost of operations
Ability to manage
and control
Adaptability
Range and volume
to be handled
Criteria for evaluation
Evaluation Critieria
Cost:
If existing sales force can be expanded cost
effectively, this is the best alternative
Cost of alternatives at different volumes can only
be estimated for comparison
System with the lowest cost is preferred
Adaptability the channel should be flexible

to handle different types of markets and
changes in the market conditions
Volume and range to be handled Capable
even when business grows or expands
Evaluation Criteria
Ability to manage and control:
Distribution network being an extended arm of the
company, the channel partners have some
obligations
Operating guidelines specify these rules
The channel system should help the company
enforce these rules fairly to all channel partners
Some of the operating rules are
Company trains channel personnel and

provides proper product literature
Selecting Channel Partners

Getting good channel partners is a difficult part
of doing business
Some of the methods employed to select
channel partners are:
Sales people identify prospects and talk to them

Press advertising (industrial goods)
Existing channel partners can give good references
Competitors channel members for reference, not
poaching
Selection Criteria
Qualitative: willingness, confidence in
company products, willingness to abide by
company rules, building company image,
innovativeness etc
Quantitative: financial status,
infrastructure, location, present
businesses, customer relationships,
market standing etc
Training Channel Members

Starts from the time of recruitment
Channel member owner and his staff
Market views channel member as part of the
company he has to behave in a like manner
hence training assumes significance
Training could be on the job field training or
classroom training
Training is an ongoing process.
Subjects..
Subjects for Training

Field training on how the markets are to be
worked to achieve sales, collect payments and
ensure the right kind of merchandising
Class room training on company products,
competition and how to tackle it to gain market
shares
Special meetings for new product launches
Submitting reports and maintaining records
Statutory compliance
Subjects for Training

Care of company products
Technical specifications and answering FAQs of
customers
For technical and industrial products
recognition of specs, installation procedure,
repair and maintenance and effective
demonstrations
Servicing of automobiles and other engineering
products
Motivation.
Motivating Channel Members

Ambitious volume and growth targets
continuous motivation required to achieve
Motivation includes:
Capacity building programs

Training
Promotions support
Marketing research support
Working with company personnel
Incentives
power
French & Raven
Power of Motivation
Reward positive support

Coercion- threat of punitive action
Referent positive effects of association
Legitimate enforcing a contract
Expert support of special knowledge
Support additional benefits for performers
Competition pitting against peers
Role of ROI..
Channel Members Evaluation

Effectiveness of the distribution channel
determines the success of the company
Company would like its channel partners to
perform at the highest standards possible
Need to constantly evaluate performance on
sales targets, coverage, productivity, inventory
holdings, attending to servicing requests etc
ROI as a Measure
Leading FMCG companies feel that an ROI of
30% for a distributor is healthy and is a fair
indication that he is performing well.
If the ROI is more, additional tasks are given
If the ROI is less, the company may provide additional
support
Post evaluation tasks include counseling,

retraining and motivating. In extreme cases it
may result in termination.
Performance Evaluation
On pre-agreed tasks only. No surprises.
Specific targets on periodical basis are set.
Targets on volume and outlet productivity could be for
a week or a month
Targets relating to increasing market shares or total
outlet coverage could be for 6 months
Different weightages could be given for each of the
parameters for evaluation
The performance appraisal is open and

transparent
Modifying a network..
Steps for Modifying Networks

Service level desired and willing to deliver
Activities required to deliver service level,
who will do it and at what cost
Derive ideal channel structure and compare
with existing to know gaps by evaluating
based on standard parameters relating to
effectiveness and efficiency
Action to bridge the gaps and put modified
channel system into place
Define key performance indicators
Channel Comparison Factors

Efficiency
Effectiveness
Scalability
Flexibility
Consistency
Reliability
Integrity
Non-store Retailing
Selling door-to-door
Vending machines
Tele-shopping networks
Selling through catalogs
Other forms of direct selling
Electronic channels
Electronic channels
Retailing on the Internet
Unlimited assortment
Items may not be on hold
No product touch or feel
More information makes the customer a
better shopper
Comparison shopping possible
Consumer has to plan purchases ahead
No need to handle cash payment can be
on-line
Shopping is 24X7
Vertical integration.
Vertical Integration
This means owning the channel. The
company does the work of production,
branding and distribution.
Downstream integration means the
producer of the goods also does the
distribution Eureka Forbes, Bata
Vertical Integration
Upstream integration means the seller
also produces the goods private
labels of modern retailers.
If the organization does the work of
production, branding and distribution, it
is said to be vertically integrated.
Vertical Integration provides better
control over the distribution function
Outsourcing..
Outsourcing Distribution
Is the most prevalent situation as:
The reach is better
The cost may be lower
The company can exploit the core competence of
its channel partners, which is distribution
Vertical integration is a choice which will

become long term and cannot be easily
changed once the resources have been
committed.
However, direct distribution (owning the
channel) is still the best solution for intensive
distribution.

Belgaum
Warehousing
A role beyond storage
Warehousing ?..
A place where finished goods are stored
till they are further distributed
A variable in make-and-sale equation of
the organization
Its distribution centre playing key role in
organizations logistics strategy. Its a point
where organization fails or succeeds in
fulfilling the sales & marketing promises
A switching facility in logistical network
Typical Warehouse Layout

MATERIAL INWARD & INSPECTION
BULK STORAGE
PLACE
RACK /BIN
STORAGE
PLACE
ORDER PICKING SECTION

PACKAGING SECTION
MATERIAL DISPATCH SECTION
Types of Warehouses
Captive warehouse
Located inside the factory premises
For monitoring excisable goods
Field warehouse
Located near to place of consumption
For servicing the customers & channel partners
Customs warehouse
Located near to air & sea ports
For goods meant for imports & exports
Storage Alternatives
Private
WH
Public
WH
Contract
WH
V.high
None
V. Less
Controls
High
Low
Medium
Operation
Flexibility
High
Low
Medium
Inversely
related to
volumes
Low
Inversely
related to
volumes
High
Low
Medium
FACTORS
Investment
Cost per unit

stored
Risk
Warehouse Functions
Stock holding
Consolidation
Break bulk
Cross docking
Processing
Postponement
Assortment
Mixing / assembling
Packaging & labelling
Material handling
Order filling
Information handling
Warehouse Layout Design

Guidelines
- Make maximum use of available area
- Use unitized load system
- Minimize the goods movement by
proper storage allocations
- Provide flexibility for changes in future
- Design for safe, clean & secure space
Factors Influencing Warehouse

Layout Design
- Inventory turnover
- Storage method
- Product configuration
- Product characteristics
- Housekeeping
- Material handling methods
- Safety and security
Warehouse Site Selection
Market proximity
Infrastructure(Road, utilities, communication)
Access to site
Transportation cost
Availability of space
Taxes and levies
Regulation
Warehouse Network
Cost implications
Total
Cost
Primary
Transportation
Cost
Inventory
Carrying
Cost
Cost
Secondary
Transportation
Cost
No of Warehouses
Warehouse Decision
Strategic Decisions
Layout, Equipment,
Storage scheme, IT
Product
characteristics
value density,
Logistics Reach,
Perishability
ResourcesCompetency
level,
Financial
resources,
System
Type Private,
Public,
Contract
Tactical Decision Storage

allocations, Order picking,
Transportation
Operational Decisions
Work allocations,
Job
scheduling, Performance
monitoring
Warehousing Strategy
Proximity to market
Reliability in service
Flexibility in operations
storage space
Throughput
Material handling
Location flexibility
Economies of scale
Warehouse Capacity Planning
Public or contract warehouse

(for 25 % 0f capacity)
Storage
capacity
requirement
Private warehouse
(for75 % 0f capacity)
M
Months
Warehouse Performance
Parameters
- Stock turn over ratio
- Warehouse cost to sales
- Warehouse cost per unit handled
- Warehouse occupancy rate

Belgaum
Material Handling Systems
For
exploiting productivity potential in logistics
Material Handling Stages

9Unloading the incoming material fro transport vehicle
9Moving the unloaded material to assigned storage place in
warehouse
9Lifting the material from storage place during order picking
9Moving material fro inspection and packing
9Loading the boxes / cartons on to transport vehicle
Material Handling Principles

9Standard equipment should be preferred to keep low capital
investments
9Equipment designed for maximum continuous flow should be
preferred
9 Portable or movable equipment to be preferred
9 Ratio of dead weight to pay load should be minimum for
handling equipment
9Gravity flow should be incorporated in the system design

9Manual
9Mechanical
9Semi-automatic
9Automatic
9Information guides
Selection Criteria:
9Volumes to be handled
9Speed in handling
9Productivity
9Product characteristics
(weight, size, shape)
9Nature of the product

(hazardous, perishable, crushable)
Material Handling
Manual Trolley
Versatile
For smaller loads
For short distance
Material Handling
Forklift
Manual or mechanized
Portable
Large distance travel
Medium & large loads handling
Vertical movement
Intermittent duty
Directional undeliverable
Material Handling
Overhead Crane
Carry heavy loads
Continuous duty
Size shape no bar
Material Handling
Material handling
at sea ports
Advanced Material
Handling Systems
Pneumatic tube system
For handling material in powered form
Semi-automatic system
Sorting devices
Robotics
Automatic guided vehicle system

Material handling on a fixed path
computer operated guided vehicle
Speed of operation 150-250 feet per minute
Automatic system
Human factor eliminated
Operator required for to programming and controls
Productivity

Belgaum
Material Storage
Systems
For space efficiency and storage density
Storage Principles
High storage density
Minimum travel distance
Ease in material movement
Ease in material storage and retrieval
Material & human safety
Benefits of Scientific Storage

Ensures space economy
Enhances warehouse throughput
Ease in material location and tracing
Ensures security, safety and housekeeping
Storage Methods
Block Storage
Pallets
Racks
Shelves
Bins
Modular Storage
Automated Storage & Retrieval
Storage Methods
Block Storage
Block Storage
Advantages
Simplest system
No investment
Stacking on platform or floor
Wide variety of products can be stored
Disadvantages
Limitation on stack height
Loading / unloading problem
Storage Methods
Rack storage
Pallet Storage
Advantages
Helps in optimum utilization of storage space
Increases stability of products during transportation
Lower handling cost due to unitizing
Increases speed of material flow
Reduces frequency of material handling
Facilitates handling loads with machines
Disadvantages
Does not give compete protection to product from
environmental effects
Load Unitization
The unit load is constructed by bringing together large number of
individual items of identical configuration, so as to make a large
load, which ensures convenience during storage, handling and
transportation
Pallet storage
SKU (Stock Keeping Unit)

1. Shirts
Sizes : 32 , 34 , 36, 38, 40, & 42,
Six SKUs
2. Toothpastes
Pack size : 10 grams, 50 grams, 100 grams, 250 grams
Four SKUs
1. Automobile Spares
Items : 6000
Six thousand SKUs

Belgaum
Inventory
Management
For
Creating Lean Supply Chain
Integrated Material Management

Objectives
Internal customer satisfaction
Cost reduction by elimination of waste
Reduce the order performance cycle
Optimize the inventory level
Integrated Materials Management

Functions
Material planning and scheduling
Inventory control
Source development
Material movement & storage
Inventory Types
Raw material and components
Work-in-progress (WIP)
Finished goods
Pipeline inventory
- Channel inventory
- In-transit inventory
Maintenance, repairs and operating

supplies
Reasons for Carrying Inventory

Meet production requirements
Customer service consideration

Hedge against future expectations
Inventory Expectations
Top Management
Higher inventory turn over, Lower operating cost,
Excellent customer service
Sales & Marketing Department

Quick delivery, No stock out, Varieties & volumes,
frequent & small deliveries
Manufacturing Department
Less varieties, Economic batch qty, Quick off-take,
No rejection & cancellations
Finance Department
Lower inventory levels, Low operation cost,
Higher inventory turn over, Lower cost of delivery
Inventory Related Costs

Capital cost
Carrying cost
- Interest on funds blocked
- Storage cost
- Handling cost
- Insurance
Transaction cost
- Planning, scheduling and ordering
Stock-out cost
- Opportunity loss
Risk Cost
- Obsolescence, damage & pilferage cost
- Exchange rates differentials
Inventory Control Techniques

ABC
(Related to the annual cost of a particular item)
VED
(Vital, Essential and Desirable)
SAP
(Scares, Available and Plenty)
FSN
(Fast , Slow and Normal)
ABC Inventory Control

It separates most significant items from
less important ones
Small number of items will have significant
value
- 10 % of items account for 70 % of total inventory
value
- 20 30 % items account for 20 % value
- 60-70 % items account for 10 % of value
It decides the degree and level of controls

on different categories of items
Inventory Performance Cycle

Order
Placement
Order
Arrival
Average stocks
Inventory
Level
Reorder
stocks
Safety stocks
0
60
20
40
Days
Inventory Planning Models

EOQ (Economic Order Quantity)
JIT (Just-in-time)
JITII (Vendor Managed Inventory)
MRP (Materials Requirement Planning)
DRP (Distribution Requirement Planning)
KANBAN (Japanese Inventory system to
AITS
support manufacturing operations)

(Automated Inventory Tracking System)
Inventory Models Selection

Variables
Inventory Problem
Types of Inventory
Inventory Goals
Planning Environment
Supporting Strategies
When?
Where?
How much?
Purchase
Process
In-transit
Channel
Cost
Profit
Service
Technology
Organization
Product-Market
Make to order
Make-to-stock
Mass customization
Flexible manufacturing
Modern Approach to Inventory

Control
FLOW
Inventory flow from s to customers
Flexibility
In delivering volumes and varieties in given
time frame
Balancing
Between customer service and inventory level
Integration
For supply chain efficiency and effectiveness
EOQ Model
Q=
2 DS
HC
Q= Ordered quantity in units

S=Cost of placing an order in Rs
D=Average annual consumption in units
H= Percentage of inventory cost vis-a-vis unit cost
C= cost per unit
Just-in-Time System
JIT is a concept based on the fact that the activity
should not take place unless there is need for it.
Hence the inventory should not be brought in to
the system until it is required for making the final
product
Pre-requisites of JIT System :

Buyer-seller partnership
On-line communication and information sharing
Commitment to zero defects from both sides
Frequent and small size lots
Barriers to JIT System
Organization culture
Organization structure
Technology differentials
at buyer and supplier ends
Reluctance to information sharing
Dispersed suppliers
JIT -II
* It is concept called Vendor managed
Inventory (VMI) made popular by
Bose Corporation
* In VMI supplier takes charge of the
inventory management and manages
the replenishment process based on
consumption pattern at customer end
* They use EDI or inter organizational
software package or place representative
at customers place
MRP
(Material Requirement Planning)
Its a computer based inventory
planning system
The forecast of inventory items are
controlled by the production items
It determines type, quantity and timing
of the inventory requirement
It establishes and maintains the priorities
of the requirements
MRP Framework
Master
Production
Schedule
Inventory
Status
Material
Requirement
s
Planning
Production
Plan
Bill of
material
DRP
(Distribution Requirement Planning)
Its the latest IT tool for controlling the
inventory in the distribution system of
the organization
DRP is guided by customer demand
It allocates the finished goods inventory
from mother warehouse to various
distribution centres
DRP
(Distribution Requirement Planning
DRP allocates finished goods

inventory
based on the following
Customer demand pattern
Ordered lot size
Safety stocks requirement
Replenishment point
Performance cycle time
Benefits of DRP System
Improves the customer service level

Reduces the finished goods inventory level
Helps in shipment coordination between the
transportation and inventory requirements
of the distribution centres
Helps in reduction in warehouse space needed
KANBAN System
Aggregate Assembly Line
Shelf Stock Replenished
Buffers
Shelf Stock
1
3
5
7
9
11
2
4
6
8
10
12
Line Stock
2
4
Line Stock Replenished
Withdraw from shelf stock
Kanban triggers production

Withdrawal Kanban
1
3
5
7
9
11
Aggregate Shop
2
4
6
8
10
12
One unit used
Assembly Line
Automated Inventory Tracking System

(AITS)
It tracks the inventory based on sales

generated
Make use of EDI to track inventory flow
through supply chain
It connects suppliers, manufacturers,
distribution hubs and retail outlets
Used by Wal-Mart USA
Inventory Policy
Control Level
Centralized
Decentralized
Service Level
Order cycle time
Order fill rate
Stock Level
Minimum stocks
Safety stocks
Inventory Strategy
Maketo-stock
Make-to-order
Assemble-to-order

Belgaum
Transportation Management
The backbone of logistics
Transportation Modes
Road
Rail
Air
Sea
Waterways
Ropeways
Air Transport
Advantages
Disadvantages
Speed
Low packaging cost
Good security
Less risk
High Freight cost

Limitation on size
Needs airport facility
Rail Transportation
Advantages
Any type of commodity

can be moved
Low freight cost compared
to road and air
Large carrying capacity
Disadvantages
Varying handling
conditions
Strong packing required
Needs loading/unloading
platforms
Low delivery reliability
Road Transportation
Advantages
Flexibility
Door to door service
Reliability
Cost- comparative
and negotiable
Access to remote
places
Disadvantages
Environmental
pollution
Varying handling
condition
Strong packaging
required
Slow speed
Water Transportation (Sea &

Inland)
Advantages
Cheapest freight cost

No capacity constrains
Size and shape no bar
No environmental problems
Disadvantages
Varying handling conditions

Strong packing required
Whether condition affect delivery
Slow movement
Comparative Hazards of
Air
Variations in
temperature
and pressure
Sea
Water damage
- Corrosive
atmosphere
- Wave impact
- Hostile storage
condition
-
Road/Rail
- Shocks
- Vibrations
- Careless
handling
- Trains-shipment
- Impact due to
breaking
Comparative Characteristics of
Characteristics
Road
Rail
Water
Air
Pipeline
Speed
Investment
Freight cost
Reliability
Frequency
Capability
Note: Lowest ranking is the best
Transport Mode Selection

Criteria
9Speed
9Frequency
9Availability of service
9Reliability
9Consistency in delivery
9Capability
9Cost
Transportation Network-1
1.Point
to point network
Origin
2.Multiple
Destination
delivery points
Origin
Destination
3.Trans-shipment
Origin
points
Trans
shipment
Destination
Network-2
4. Nodal
MPD
MPD
MPD
Network
Road
Terminal
Road
Terminal
Port
Terminal
Rail
Termina
l
Road
Terminal
(MPD Multiple pick-up & delivery)
Air
Terminal
5. Hub & Spoke
Plant-A
DC
DC
Mother
Hub
DC
DC
Plant-B
DC Distribution Centres
Container Shipping
Containerization - Benefits
1. Inter-modal transportation possible
2. Elimination of cargo trans-shipment
leading to speedier delivery services
3. Door-to door service to customer possible
4. Risk of transit damages and pilferages
reduced
5. Substantial reduction in logistical
packaging cost
6. Reduction in overall distribution cost
Freight Pricing
Distance- Fuel, Maintenance & Labour cost
Volume - Load volume
Density Product density
Stowability - Product dimensions
Handling Special handling equipments
Liability- Risk and damages leading to claims
Traffic Management
RATE NEGOTIATIONS
CARRIER EVALUATION
VEHICLE SCHEDULING
CARRIER INTEGTRATION
TRACING AND TRAKING
AUDITING & CLAIM ADMINISTRATION

Belgaum
Logistical Packaging
For
Safe Product Handling,
Movement and Storage
Consumer vs. Logistical

Packaging
Primary Packaging
- Product packaging
- Designed for marketing objectives
- Unit Load Packaging
- Container packaging
- Designed for distribution objective
Requirement
Distribution Needs
Material handling arrangement
Transportation modes
Storage conditions
Communication
Regulations
Requirement
Product Environment
Type
Dimensions
Characteristics
Requirement
Cost Implications
Design
Material
Reusability
Requirement
Regulations
Design
Communication
Waste disposal
Logistical Packaging Materials

Corrugated board
Advantages
Easy to fabricate
Cheapest alternative
Light weight
Easy to handle
Waste can be recycled
Disadvantages
Prone to easy damage
Cannot take more load

Wood
Advantages
Readily available
Easy to make
Can be repaired in-house
Takes loads upto 2000 kgs
Disadvantages
Dimensional variation
Nailing may cause split in planks
Prone to damage

Plastics
Advantages
More durable than wood
Cleaner than wood pallets
Can be machines mould
No dimensional variations
Disadvantages
Not disposable
Strength lower than wood
Cannot be repaired

Metals
Advantages
Most durable
Very strong
High repairability
Designed for high capacity loads
Excellent for liquid packaging
Disadvantages
More expensive
Export Packaging
Contents of package
Type of good
Name of manufacturer
Name of consigner
Name of consignee
Country of origins
Handling
marks
Shipper's code
<R
AM
AD
A
Ma
de
in
>
Riyadh
via
Dubai
DS / PS/ 00965
Ind
ia
Han
dlin
gm
ark
s
Port of destination
Consignee order no
Entry port
MUMBAI PORT
Gross wt 250 Kgs
Net wt. 235 Kgs
150x125x50 cms
Handling marks
Weight
marks
Size / measurent
marks
Containerization - Benefits
1. Inter-modal transportation possible

2. Elimination of cargo trans-shipment
leading to speedier delivery services
3. Door-to door service to customer possible
4. Risk of transit damages and pilferages reduced
5. Substantial reduction in logistical packaging cost
6. Reduction in overall distribution cost
Container Types
20 ft container
6.1x2.4x2.6 meter
Volume -33.3 m3
40 ft Container
12.192x2.438x2.896 meters
Volume-76 m3
Dry type and Refrigerated

End loading, top loading

Belgaum
Logistical Information System

(LIS)
A Vehicle for Supply Chain Competency
Why Logistics Information System?

Material movement in supply
chain is information based activity
Logistics operations planning,
implementation and control needs
information support
Customer service without place & time
barriers is possible with accurate and
speedy information flow
Elements of LIS
Information sources
Information collection system
Information storage
Information processing
Information retrieval
Report formatting
Levels of Logistics Information

System
Operating level
Tactical Level
Control level
Strategic level
Logistical Information System at

Operating Level
Order registration
Order processing
Inventory planning
Warehousing
Distribution
Transportation
Delivery

Tactical Level
Inventory
Facility planning
Channel integration
Vehicle route planning
Outsourcing

Control Level
Customer service
System productivity
Cost control
Asset utilization

Strategic Level
Capability & capacity planning

Alliances
Customization
Information Handling Functions

Goods inwards
Inspection and auditing
Goods outwards
Stock outs
Excess stocks
Invoicing
Warehouse expenses
Transit damages & breakages
Consignment tracking
Performance parameters
Logistics Information System

Characteristics
Interactive
Accuracy
Availability
LIS
Timeliness
Flexibility
Format

Belgaum
Logistics Outsourcing
An Emerging Trend
Drivers to Outsourcing
Globalization of markets
Competitive pressure
Changing customer demands
Emerging technologies
Why Outsourcing?
- To focus on core competencies
- Resource constraints
- Cost-saving resulting form better management
- Cross pollination of better available practices
- Wider geographical coverage
- Reduction in risk and liability
- Extend superior customer service
- Source of process improvement
Which Logistics Activities Are

Outsourced ?
Warehousing and warehousing management

Transportation and freight management
Freight payment and audit
Inventory management
Customs clearance
Material Handling
Packaging
Logistics Evolution
4 Party
Logistics
3 Party
Logistics
In-house
logistics
Alliance with
3 PL Service provider
IT Organization
IT/logistics Consultant
Outsourcing
Warehousing
Transportation
Inventory
Order processing
Self -relient
Organization
performing
all logistics
operation
3 PL Service Provider
Wholesalers
The stand-alone operators, who extend only one
type of service in which they have an expertise
such as:
- Warehousing
- Transportation
- Customs clearance
- Packing
- Equipment suppliers
- IT support
Integrators
One who provides entire logistics services and offers
Logistics solutions to customers logistics problem
Advantages of 3 PL
Reduction in risk and liabilities
Value added service to the customer
Source of process improvement
Wider market coverage
Speed to market
Value Added Services by 3 PL

Service Providers
Cross docking
Customs clearance
Reverse logistics
Assembly or mixing
Freight consolidation
Special packaging & labelling
Logistics audits
Stock financing
4 PL Service Provider
- Covers the entire supply chain of the customer
- Collaboration between two or more 3PL service
Providers on the resources sharing basis to
extend logistic solution to a common customer
- Alliances to be led by integrator with IT based
and not asset based service provider
- Flexible arrangement
Advantages of 4 PL
Reduced logistics cost
Concentration on core competencies
Release of management capacities
Reduced assets
Economies of scale
Increase of process quality
Access to latest technologies
Logistics Outsourcing Issues
Switching cost
Degree of control
Human & electronic interface
Tuning logistics to need of channel partners
Degree of outsourcing
Legal aspects
Service Provider Selection - 1

Define logistics problems
Identify problem areas
Establish objectives
Search for service provider
Proposal evaluation
Selection of service provider
Service Provider Selection- 2
Define logistics problems

- High logistics cost
- Longer performance cycle
- Increased customer complaints
- Reverse logistics
- Route selection
Service Provider Selection-3
Identify problem areas

- Warehousing
- Material handling
- Storage arrangement
- Transportation
- Packaging

Establish objectives
- Cost reduction
- Performance cycle compression
- Customer complaints resolution
- JIT delivery
- Freight optimization
- Route planning
- Inventory carrying cost
Search for service provider

- Integrator
- Wholesaler
- Consultants

Proposal evaluation & Selection
- Credentials
- Logistics infrastructure
- Experience and customer base
- Technology
- Cost of service
- Reliability
- Government liaison
Logistics Service Contract Agreement

Date & place of the contract
Names and addresses of contracting parties
Scope of service
Delivery requirements
Payment terms
Extra services from service providers
Charges for services offered
Value proposition by service provider
Damage liability
Responsibilities
Performance measures criteria
Risk sharing
Termination of contract
Notice period
Notice for claims and filing suits
Authority & jurisdiction of dispute settlement
Governing laws

Belgaum
Reverse Logistics -A New Wave
Reverse Logistics
What it is
The process of moving goods from their place of
use , back to their place of manufacture for
reprocessing, refilling, repairs or waste disposal
Its a planned process of goods movement in
reverse direction done in efficient and costeffective manner through the organized network. It
can be standalone or integrated system in
companys supply chain
Why Reverse Logistics ?

Growing public concern for
environmental pollution
Government regulations on
product recycling and waste disposal
Growing consumerism
Stiff competition
Reverse Logistics Scope

Refilling
LPG Cylinders, Soft Drink Bottles, Liquor Bottles
Product Recall
Defective product, Shelf life over
Refurbishing
Used and returned within warranty period
Remanufacturing
Used product for quality up-gradation
Waste Disposal
Recycling the waste
Three Stage Reverse Logistics

System for Used Car Recycling
Stage III
Stage II
Steel
melters
Car
Dealer
Battery
suppliers
Packaging
manufacturers
Tyre
producers
Components
producers
Stage I
Car
Producer
Car
Dealer
Car
Dealer
Customer
Customer
Customer
Customer
Customer
Customer
Reverse Logistics:
System Design Considerations
Product location identification
Product collection system
Product recycling / disposal centres
Documentation system
Cost implications
Legal issues
Reverse Logistics in India

Refilling of LPG Cylinders, & Soft Drink
Bottles
Bharat Petroleum, Hindustan Petroleum
Pepsi, Coca-Cola
United Breweries (Beer)
Return of Life Expired Products

Nestle (Yoghurt)
Monginis (Cakes)
Reverse Logistics:
A competitive Tool
Enhances service capability
Extends value added service to customer
Creates switching barriers to customers

Belgaum
Strategic Logistics
Looking Beyond the Basics
Strategic Logistics
Competitive Framework
Responsiveness
Reliability
Rationalisation
Relationship
Logistics Strategies
Cost Leadership
Reduction in inventory cost
Freight consolidation
Scale economics
Reduction in transaction cost
Reduction in vendor base
System approach for error free operations
Differentiation
Committed / guaranteed delivery time
Customised logistics solutions
Consignment tracking
Penalty for deviation
Value Addition
Cobbling
Payment collection
Customs clearance
Packaging & labelling
Vendor managed inventory
Outsourcing
Strategic alliance with experts in
logistics operations to reduce costly
Diversification
Manufacturing firms having
voluminous logistics operations goes
in for diversification into logistics
operations

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KLS Institute of Management Education and Research

Prof. Mahantesh B Halagatti-KLS IMER-Belgaum

Logistical process facilitates the flow of materials

Logistics defined as..

Components of logistics management

Benefits of good logistics management

Basic logistics service is measured

Need for logistics management:

Role of logistics in Supply Chain Management

The Generic Value Chain

Role of Logistics in Economy

Role of Logistics in Organisation

Relationship between Marketing Mix elements and

Customer service level

KLS Institute of Management Education and Research

Prof. Mahantesh B Halagatti-KLS IMER-Belgaum

The Marketing Mix

All these intermediaries help the process of

What is distribution management?

Distribution Channels Defined

Listing of Channel Members

Keeps distribution costs lower

Distribution Channel Strategy

Defining customer service levels

Customer Service Levels

The company also decides as to who is to

Policy & Procedure

Key Performance Indicators

Key Performance Indicators

Critical Success Factors

KLS Institute of Management Education and Research

Prof. Mahantesh B Halagatti-KLS IMER-Belgaum

Large number of CONSUMERS

Direct Distribution - Examples

The intermediary has a far better reach

Indirect Distribution Examples

All FMCG, consumer durables and

Marketing Channel Systems

Vertical Marketing System

Wholesaler sponsored voluntary chains

Example: companies produce products in

Maruti plant in Gurgaon cars and spares are

India is the ultimate example in breaking bulk

Need for Assortment

MICO makes fuel injection equipment,

Three Flows Recognized

Payment for goods / returns

The Five Channel Flows

One level consists of one intermediary

KLS Institute of Management Education and Research

Prof. Mahantesh B Halagatti-KLS IMER-Belgaum

How do Customers Decide on a

Narrow product line with deep assortment apparel,

Several product line in different departments Shoppers

Large, low-cost, low-margin, high volume, self-service

Small stores in residential areas, open long hours all

Standard merchandise sold at lower prices for low

More outlets owned and controlled by one firm Globus

Wholesaler sponsored group of independent retailers

Independent retailers with centralized buying operations

Co-op societies of groups of consumers operating their

Contractual arrangement between the producer and

Organized Retail - Features