RESEARCH PAPER ON

IMPORTANCE OF FILL RATE IN SALES (MODERN TRADE)

Under the Supervision of Dr. Vandana Mathur (ASSISTANT PROFESSOR, ENTREPRENEURSHIP)

SUBMITTED BY SIDDHARTH GUPTA A0102210049 MBA M&S (2010-12)

IMPORTANCE OF FILL RATE IN SALES (MODERN TRADE)

ABSTRACT The main objective of this report is to find out the loopholes in the current distribution system of dabur and find out reasons for the low fill rate and measures retailers perception about the dabur distribution channel. To study the first part, various modern trade outlets and its distributor centers were visited. Information is being collected from retailers and from its distributor in the form of purchase orders and the sales bill against them, to calculate the fill rate of the company. Short interviews are being taken to find out reasons of the low fill rate at both the points from retail stores as well as from the distributor. To study the second part, a questionnaire is being made to analyze the retailers perception and for that I have visited around 20 different retailers. It is a descriptive research with the help of the primary data and SPSS has been used to analyze data.I found that majority of the retailers are being satisfied with the quality, packaging, and distribution network. The companys fill rate is average and took time in handling retailers inquiries and requests and there is a communication gap between different distribution channels. KEYWORDS: fill rate, purchase order, sales bill, distribution system, MBQ

INTRODUCTION Traditionally retailing in India can be traced to the emergence of the neighborhood kirana stores catering to the convenience of the consumers and era of government for rural retail.1980s experienced slow change as India began to open up economy. Companies (Textile) like Bombay Dyieng, Raymonds, Grasim first saw the emergence of retail chains. The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufacturers to Pure Retailers E.g. Titan (initiator), subhiksha, Planet M, etc. Post 1995 onwards saw an emergence of shopping centres.

Organized retail formats in India Malls it is the largest form of organized retailing format today. Ranging from 60,000 sq ft 7, 00,000 sq ft and above. They lend ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof. E.g. shoppers Stop, pyramid, etc. Speciality Stores Focuses on specific market segments and established themselves strongly in their sectors. E.g. Kids Kemp in Bangalore Discount Stores It offers discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. Department Stores Large stores ranging from 20,000-50,000 sq ft., catering to a variety of consumer needs. Hypermarkets/Supermarkets Large self service outlets catering to varied shopper needs are termed as Supermarkets, located near residential streets. Convenience Stores Relatively small stores 400-2000 sq ft. located near residential areas. Carries limited range of products. MBOs Multi Brand Outlets, known as category killers offers several brands across a single product.

Modern trade refers to retailing through large-format stores (organized format) where as general trade refers to retailing through kirana stores. As markets modernizes, the share of traditional trade declines slowly. Three over aching factors affect the speed and nature of market transition. They include (1) consumer trends and purchasing behaviors in the market; (2) factors related to modern retail consolidation; and (3) distruptive factors such as economy, special interests, and government regulations. In Indias case, consumer trends have been the greatest influencer in modern trade to develop. A significant demographic transition is now underway with a large, young and working population; more nuclear families in urban areas; and increase in the number of working women; and emerging opportunities in the service sector.

Urbanization, higher household disposable income, and convenience one-stop shopping are other factors that are fueling this modern trade growth.

Fill Rate definitions and calculations can vary greatly. In the broadest sense, Fill Rate calculates the service level between 2 parties. It is usually a measure of shipping performance expressed as a % of the total order. It simply means how much the company supplies against any purchase order. Sample Fill Rate Metrics Line Count Fill Rate: The amount of order lines shipped on the initial shipment versus the amount of lines ordered. This measure may or may not take into consideration the requested delivery date. E.g.- ABC Company orders 10 products (one order line each) on its Purchase Order #1234. The manufacturer ships out 7 line items on March 1 and the remaining 3 items on March 10. The Fill Rate for this Purchase Order is 70%. It is calculated once the initial shipment takes place. Calculation: Number of Order Lines Shipped on the Initial Order* / Total Number of Order Lines Ordered (7/10 = 70%) SKU Fill Rate: The number of SKU's (Stock Keeping Units) ordered and shipped is taken into consideration. Above, we consider each Order Line to have an equal value (1). Here, we count the SKU's per Order Line example: If on Line 1, the order was for 30 SKU of product "AB" and on line 2, they ordered 10 SKU of item "AC". If Line 1 ships on April 1 and line 2 on April 20, the SKU Fill Rate is 75% Calculation: Number of SKUs Shipped on the Initial Shipment / Total Number of SKUs Ordered (30/40 = 75%). Case Fill Rate: The amount of cases shipped on the initial shipment versus the amount of cases ordered. Example - ABC Company orders 6 products that total 200 cases. The manufacturer ships out 140 cases on 3/1/01 and the remaining 60 cases on 3/10/01. The Fill rate for this Purchase Order is 70%. It is calculated once the initial shipment takes place. The number of Order Lines is not considered in this calculation. This Fill Rate measure gives "weight" to the order lines that are shipped out.

Calculation: Number of Cases Shipped on the Initial Order / Total Number of Cases Ordered. (140/200 = 70%) Value Fill Rate: Same as above, except the order line value is used instead of cases. Calculation: Value of Order Lines Shipped on the Initial Order / Total Value of the Order ($400/$500 = 80%).

LITERATURE REVIEW Choudari, Vinita (2009) state that consumers becoming more demanding with their rising standard of living and changing lifestyles. The major factors fuelling this growth spur are the increase in disposable income of the people, improving lifestyles, increasing international exposure and increasing awareness among the customers. Due to boom in the retail sector, the consumers are having the advantage of the more and more choices and they have become the king of the market. In this research 2 methodologies have been adopted ethnographic observations and in depth interviews. This research results suggest that retail has redefined itself into an experience which is therapeutic for the new age Indian consumer. On observing consumer behavior is various retail outlets we have come to conclusion that retail therapy works on the emotions of a consumers. Singh, Rajwinder; Sandhu, H.S.; Metri, B.A.; and Kaur, Rajinder (2010) identified that an effective supply chain management has become a potential way nowadays to improve organizational performance through matching supply chain practices and competitive advantages so as to strive in this competitive world. Organizations focus on better supply chain management practices to gain competitive advantage for better organizational performance to make their supply chain management system more efficient.The results indicate that Indian retailers know that competitive advantage has high impact on Supply Chain Practices but they fail in matching supply chain practices, competitive advantage and, organizational performance. Khare, Arpita and Rakesh, Sapna (2010) state that an assortment of factors is responsible for mall traffic. These may be categorized under entertainment facilities, services, ambience and mall management.

Thomas, Douglas J. (2005) investigates the behavior of the distribution of the finite-horizon fill rate when a stationary base-stock policy is used to control inventory. For a vendor facing a finite-horizon, fill-rate-level contract and using a stationary stocking policy, I examine how the length of the review horizon (i.e., monthly or quarterly), the demand distribution, and the cost of failing to meet the target affect the stocking decision. This work was motivated by observing nite-horizon, ll-rate performance contracts in practice. Kate, Vitasek and Karl, Manrodt (2004) enlightens the concept of customer satisfaction and the customers are the king of any business. As companies dig deeper in their efforts to increase customer satisfaction, more are learning that customer satisfaction has far more nuance than a simple fill rate number might have one believes. What really matters in todays customer driven economy is Did the customer get what they wanted, when they wanted it, how they wanted itand not how well a distribution centre ships. Mishra, Debi P. (2008) has discussed the challenges and opportunities for manufacturers and retailers in growing Indian FMCG market. FMCG manufacturers and retailers will have to develop and implement deliberate strategies for gaining market access. This paper provides an in-depth look at the strategic role of distribution channels in the FMCG industry. Specifically, it surveys the state of current distribution channels in India and identifies four archetypes that FMCG firms can use as a starting point to develop their distribution strategy.

OBJECTIVES OF THE STUDY Main objective of the research is to calculate the fill rate of the company and to measure the retailers satisfaction with the distribution of dabur To accomplish this objective it has been divided into four: -

To find out the fill rate of the company. To find out the reasons for the low fill rate of the company To measure the retailers satisfaction with the distribution network of dabur and finding out the gaps. To find out which of the product category is being mostly preferred.

RESEARCH METHODOLOGY

Dabur India is one of the leading FMCG companies in India. So, through this study I would analyze the concept of fill rate in modern trade, finding out the loopholes in the current distribution system of dabur, also to find out the reasons for the low fill rate and this study aims at to measure retailers satisfaction with the dabur distribution network. The research is primarily both exploratory as well as descriptive in nature. The sources of information are both primary & secondary. A well-structured questionnaire was prepared and personal interviews were conducted to collect the customers perception and buying behavior, through this questionnaire. Initially, a rough draft was prepared keeping in mind the objective of the research. A Pilot Study was done in order to know the accuracy of the Questionnaire. The final Questionnaire was arrived only after certain important changes were done. Thus my sampling came out to be judgmental and convenient. The respondents who were asked to fill out questionnaires are the sampling units. These comprise of retailers for dabur products (organized retail format). The sample size was restricted to only 20, which comprised of retailers of organized retail format. The area of the research was Vaishali, Ghaziabad and Indrapuram. Tools i used are SPSS and Microsoft Excel. There are various limitation, firstly the research is confined to only one unit distributor and does not necessarily shows a pattern applicable to every unit secondly In a rapidly changing industry, analysis on one day or in one segment can change very quickly and thirdly Some respondents were reluctant to divulge personal information which can affect the validity of all responses.

FINDINGS
For part one: The company is having a lower fill rate of 71% (amount wise) and 72.50% (SKU wise). I have also calculated different types of fill rate like category wise, mall wise, day wise, etc. In mall wise comparison it is found that Aditya mall has the highest fill rate whereas EDM mall is having the lowest. Regarding the day wise comparison the last 10 days of a month is having a higher fill rate than that of first 10 days and it should be vice versa because most of the customers in modern trade are usually salaried class people and they usually get their salaries in first 10 days of a month, so the company should try to increase the fill rate for mainly the first 10 days. In category wise comparison the company is enjoying sufficient fill rate in skin care, oral care and home care categories but it lacks behind in the food products, juices and shampoos, so the company should work upon their limitations. All of the fill rates were not up to the mark due to various reasons. For part two: Majority of the retailers are selling the dabur products for around 4-6 years and most of them generate business up to 24%. Quality of the dabur products is very good and all the retailers are being satisfied. The prices of dabur products are generally high. Half of the retailers want that dabur products should come up with various new offers which would excite the consumers to purchase their product. 60% of the retailers are being supplied with the expected quantity of goods in time. Majority of the retailers are being supplied with a fill rate of 60-80% and being supplied in a period of 4-6 days. 55% of the retailers said that they are being timely informed by the company for any new changes taken by them and rest is not being informed. Retailers are being satisfied by the packaging of the dabur products.

Companys management is not much efficient in handling retailer requests and inquiries, retailers are having mixed response towards their management. Food product category is being mostly preferred by the consumers, which is being followed by home care products category. Quality of a product is being considered to be the most important factor to a retailer for dabur products, which is being followed by the factor distribution.

CONCLUSION AND RECOMMENDATTION Conclusion: The research in the field of Modern Trade threw some interesting trends which can be seen in the above analysis. The fill rate of the company and the reasons behind the low fill rate of the company is being successfully analyzed. The fill rate is being average and it is not up to the mark, but to survive in this competitive world the company should increase its fill rate, otherwise it would lose its share to its competitors. Analysis done on the retailers satisfaction of the dabur product in the modern trade business can be helpful in determining better relationship with retailers which would result in increase of companys market share.

Overall dabur distribution network is satisfactory; there are some loopholes on which the company has to work upon. And the retailers are also satisfied with the companys distributor and the food product category is being mostly preferred by the consumers. The project has met the expectations of the organization and the institute satisfactorily, though it still has quite some scope for improvements which could be incorporated subsequently.

Recommendations: For part 1: The company should try to avoid shortage problem and to mainly focus upon those SKUs which are like hot selling cake in the market. For e.g. Dabur real juices are having a huge demand in the summer season so the company should be prepared to serve the demand by increasing their production capacity. The company should adopt a uniform pricing policy so as to reduce the MRP problem. For this they can change their prices monthly quarterly, etc. and the company should inform before handedly so as to reduce confusion. Company should avoid wrong marking of MRP problem, missed out and billing problems by recruiting efficient sales force. POs should be preferred through mails. A notification should be sent to all the distributors and retailers in case company the company introduces any new product or information regarding the stoppage of production of any product. Minimum Base Quantity should not be the same throughout the month. Since there is increase in the footfall of consumers in first 10 days of the month as compared to the rest of the month due to most of the customers are salaried class people and they usually get their salaries during the first 10 days.

For Part 2: The company should inform all the retailers for any new changes taken up by them, there should be no communications gap between them. The distributor should try to increase its fill rate above 80%. The distributor should replenish its orders in time and should try to dispatch order within 3 days. The companys management should take timely action in handling retailers inquiries and consider their suggestions. The distributor should try to give more margins so as to motivate retailers.

REFERENCES: Journal references

Choudari, V. (2009). Impact of retail on Indian consumer. Advances in Consumer Research Asia- Pacific Conference Proceedings, Vol. 8 , 361.

Kate, V., & Karl, M. (2004). Beyond Fill Rate: Perfecting the Perfect Order. Distribution Business Management Journal, Vol. 2 .

Khare, A. a. (2010). Retailers in malls: Retailers' preferences for store space in India malls. Journal of Retail & Leisure property , Vol. 9 Issue 2 , 125-135.

Mishra, D. P. (2008). FMCG Distribution Channels in India: Challenges and Oppurtunities for Manufacturers and Retailers. Journal of Global Business Issues .

Singh, R., Sandhu, H., Metri, B., & and Kaur, R. (2010). Relating Organised Retail Supply Chain Management Practices, Competitive Advantage And Organisational Performance. Vision, Vol. 14 Issue 3 , 173-190.

Thomas, D. J. (2005). Measuring Item Fill-Rate Performance in finite horizon. Manufacturing & Service Operations Management, Vol. 7 Issue 1 , 74-80.

Web References http://powerpointpresentationon.blogspot.com/2011/05/powerpoint-presentation-onretail.html, retrieved on 24th June 2011 http://www.supplychainmetric.com/fillrate.htm, retrieved on 28th June 2011 http://www.dabur.com/About%20Dabur, retrieved on 4th July 2011