ABSTRACT
In this paper we check out the various distribution systems utilized by leading companies in the consumer goods sector. We look for the advantages of different circulation network designs to various companies. The key reason why these leading companies are determined upon that one circulation network design will be found out in this specific newspaper. in this paper we see in to the role of syndication systems in the supply chain of consumer goods. The companies we look into are Hindustan Unilever Limited, PepsiCo Limited and Nestle India Small.
Distribution networks are channels that move various varieties of products and services in one location to another. They are also known as marketing stations, they are made of 3rd party organisations such as distributor, shop, sales people, etc. which get excited about the making of products and services and ensuring them to reach its final consumers. The concept of syndication network is a very wide idea of which distribution route is just one component, they are tangible systems of interconnected resources and destinations by which products and services move on the way to last customers.
Every circulation network has two parts:
Places where in fact the products and services are stored such as factories, warehouses, retail outlets, etc.
a set of paths that hook up these places such as land, sea, air, satellite, wire, internet, etc.
Distribution systems can be classified into sophisticated and simple. A straightforward distribution networks the one which consists of an individual demand and also to fulfil that only a single source of supply and a set path that hook up the source with other areas of the systems. Managers decide after a particular syndication network based on what and how much they need to ship, based on interior purchasing and inventory thought.
In short syndication identifies the attempts done to move the products and services from the developing plants to the ultimate customers through the many independent organisations in between such as sellers and wholesalers. The main aim is to ensure the products reach the ultimate consumers in to the simplest way as well as the cheapest way. A good distribution network offers a great competitive gain to the company whereas an undesirable distribution network can lead to the failing of a good very superior product. Hence a syndication network should be well chosen and a lot of thought process should go involved with it.
DISTRIBUTION Stations FOR CONSUMER GOODS
The distribution sites that the companies usually use for consumer goods are the ones which use both the marketers or the wholesalers and the retailer and that's because it allows them exposure to the wide sites that wholesalers have previously set up. Products that are of low variety and of common use are usually distributed via intermediaries and those products that are expensive are usually sold by the company itself. Products that are heavy and cumbersome or are perishable are put through shorter distances and are sent out directly. The main aim in every than it is to lessen the cost as much as possible. Products such as digital appliances need after sales service also to provide the customers all the relevant information to utilize it.
The businesses that produce large variety of products in large number may develop their own shops and spread their products through distribution centres whereas organizations producing products in small number may written agreement wholesalers as intermediaries and get the merchandise delivered to merchants to be sold to the finish customers. For products that are newly launched they need a wider syndication network so that they can reach as much consumers as you can. They need to reach all the merchants before the marketing attempts start hence many intermediaries may be required. While products that happen to be on the previous few stages with their lifecycle might need less intermediaries because the sales and the demand drops down by this stage.
Firms that are small in proportions may depend on few number of intermediaries various large businesses may appoint large number of intermediaries for a wider distribution network. The type of intermediaries also affects the decision of distribution systems just like a consumer goods producing organization may necessitate intermediaries that could raise the sales of the merchandise i. e. the middlemen that are popular and also have a goodwill on the market and those who have large safe-keeping capacities for large quantities of products to be allocated.
All the aforementioned discussed factors influence the decision which syndication network to be chosen for consumer goods hence a manager should successfully choose which middlemen to choose and what route to check out for sending their products to maximum populace of consumers in the minimum possible cost.
LEADING CONSUMER GOODS Businesses OPERATING IN INDIA
Some of the best consumer goods companies functioning India may be:
Hindustan Unilever Limited
PepsiCo Limited
Nestle India Limited
HINDUSTAN UNILEVER LIMITED
It is a subsidiary of UNILEVER which includes market capitalization of $ 14 billion. It really is an FMCG major which is the owner of around 35 of India's very powerful and trusted brands and is also a market innovator in lots of the consumer goods categories such as dish wash, personal wash, fabric wash, skin care, hair rinse, jams, packet teas, talcum powders, etc. and it is number second in the toothpaste, instant espresso and ketchup portion.
HUL products can be found at about seven million different outlets of the united states, it is employed in one of every 28 homes and fifty nine percent of the outlets are situated in rural India. HUL also will serve certain stores straight and that portions to around one million and has a broad network of seven thousand stockists and distributors
There are about 35 CFAs (Take Forward Real estate agents) appointed by HUL in the united states who serve the stockists with the merchandise. The trade mainly comprises of grocery stores, chemists, kiosks, wholesalers and general stores. It really is known for providing customized services to all its distribution channel partners. They have about two thousand suppliers that supply to forty different creation vegetation of HUL that are decentralized across two million sq meters of the territory.
HUL's method of distribution is divided into 3 segments predicated on the accessibility of the area and the turnover per market:
Direct coverage: under direct coverage HUL distributes its products from its manufacturing plant life to the Take Forward Agents. Following that the products are carried to the stockist or the distributor and lastly to the merchants.
Indirect coverage: HUL has certain stockists for several villages located near by, the products are first delivered to the stockists from the production plants and then they deliver the products to the villages around them.
Streamline syndication: in regions of low availability but high turnover per market, the products are sent to the distributor by the CFAs which gives the products to sub-stockists in rural areas positioned in the villages itself, also, they are known as the Star Sellers.
In order to reach the rural society HUL started the Task SHAKTI in 2000. Under this project HUL has partnered with Self Help Communities (SHG) of rural women who get trained by HUL and also get support from government firms and NGOs plus they first receive HUL products from the rural distributor and sell those to various villages. These are basically Shakti enterprisers commonly referred as Shakti Amma who've helped HUL stretch its syndication network to around 80000 villages of India.
PEPSICO LIMITED
Pepsico came into India in 1989 and has since that time gotten one of the largest food and beverages company of the united states. Pepsi owns lots of the leading food and drink brands of the united states such as Pepsi, Mirinda, 7up, Aquafina, Gatorade, Tropicana, Slice, Leher, Dukes, Lays, Uncle potato chips, Kurkure, etc.
For the syndication of these products they use the Direct Store Delivery (DSD) system which is the key method for circulation of products such as food and beverages, home and personal care products, etc. It is a type distribution process where the companies send their products directly from the manufacturing plant to the ultimate consumers.
Direct Store Delivery (DSD) system: Pepsico uses a system called GES which means geographical enterprise solution and it is the reshaping of the powerful direct store delivery system. In addition to great products and tremendous brands, the strength of Pepsico's DSD source chain has been another driver of the company's success. DSD means that it brings their products directly to stores and then their employees put the merchandise right on to the store shelves. This technique has a multiple benefits:
it ensures the business gets great penetration of most its products
that the products are delivered safely and securely and efficiently
it also permits Pepsico to provide great service to its customers and provides them an chance to work directly using their customers to get the area they have to reach their consumers.
DSD system is one of its ideal competitive advantages. Desire to at GES was to use the latest technology and lean supply chain thinking to considerably enhance their DSD system and ensure that they could support another 30 plus many years of growth. For their customers they have better their service and accuracy and reliability and dramatically increased their potential to bring new items to the market. Because of their consumers they'll be able to improve their product's freshness by over one week and get unique products that they want at their store instead of just a general line up of products.
As the product is made at their plant life from where it is then delivered to large circulation centres in the metro areas, also to the syndication centres in the rural markets.
Now in this model store requests are either picked at the distribution centre or even at the back of the road pickup truck. Once the purchases are placed they can be then delivered to the stores on the familiar pickup trucks that one perceives on the highway today. Their sales team members are limited by the number of line items which they can take predicated on what's in a circulation centre or on the pick up truck and which means their customers don't will have full access to their full line of products.
Well GES changes all of that. With GES the requests are not located at the syndication centres but are hand held and are sent back at the manufacturing facility and the plants are now all installed with the latest automated picking technology where these orders get assembled. Once they are set up they can now take the large format purchases to the stores like Big Bazaar or other excellent markets plus they can go immediately from flower to stores completely bypassing distribution centres altogether. This is the most efficient resource string possible direct from plant to store. It also enables their customers to choose from their full type of product offerings as they no longer can be limited by what the distribution centre or the vehicle can hold. For small format customers like seven eleven our other stores things are just a bit different. In this particular scenario they send orders to small combination dock facilities called product exchange centres. After the product gets there it is then moved on 12 pickup trucks and powered to stores by their own sales people. So since they no longer carry inventory on the trucks they are able to use much smaller vehicles and reduce drive mile and this helps them improve their environmental footprint. The other important good thing about GES is the fact their plant founded opt for centres are being configured to handle over a 1000 line items which is more enough to handle their growth in the next 10 to twenty years. The pick centres that enable them to choose orders at this scale are by means of large pallets and are automatically depalletised. Once all the conditions are chosen, they find their way in to the collection area where they may be automatically released in exact store order to access their delivery vehicles and not just are they waiting for you order however they are also purchased just like they are at the shelves in the stores. So that it helps it be very efficient to merchandise their product at the store.
Pepsico also uses other ways of syndication such as Broker Warehouse Syndication (BWD) in which it delivers its products and services to the vendors and from there to the stores. It also uses Vending and Food Service (VFS) which is method matching to which Pepsico distributes its products to the restaurants.
NESTLE INDIA LIMITED
It is the world's number one health and fitness company. It had been set up in 1866 in Switzerland. Since that time they have delighted its customers worldwide. It really is well known for its distribution worldwide and also in India. Its target is to provide its customers with the tastiest and the most nutrient packed foods and beverages all the time.
It has wide spread distribution network all over India covering all the major claims and metropolitan areas and also most of the villages. The company has divided its distributors into two categories i. e. trade distributors and the chocolate vendors. Trade distributors package with products such as Maggi, Nestle Dahi, etc. whereas the chocolate marketers deal with products such as chocolates, sweets, etc. Every distributor has appointed somebody who would go to various outlet stores every few days i. e. once or twice a week based on the type of area. They take the order from the stores and either gives it at the minute or may be next day.
It is assumed that any retailer has a restricted sum of money to buy products for a particular day. Hence Nestle believes that sending more than one retailer would be more beneficial as the shop shells out limited money for a single distributor and therefore more distributors are certain to get more volume of orders. They have also started an procedure STING under which their sales reps continue bicycles and sell smaller amounts of products to outlets that are small rather than much catered to like pan walas, etc.
The stocks that are made at the plant life and then packed finally for delivery are sent to the mom godowns at various places. The companies from the mother godowns are delivered to the Take and Store Brokers (C&S) where they are really stored as a house of Nestle. The amount of money for the stocks and shares receive as guidelines directed at the C&S and the Cash Distributors (Disc) via invoicing. Along with the key products in addition they store with them give aways and support materials such as stickers and free gifts, etc.
Note: the wholesalers aren't an integral part of the formal composition of Nestle India's distribution network for NCR. They make bulk acquisitions from the distributors directly therefore leveraging on the margins.
The products and services of Nestle India Small are first manufactured in the manufacturing plant and transferred utilizing a Transfer Challan to the Mother Godown (one for a large geographical area). From the Mother Godown the companies are transferred to the Hold and Stock Providers (C&S) by using a Transfer D. A. Right up until here the shares are a firm property. Then via invoicing the stocks are used in the Cash Vendors and finally to the Stockists. At these phases the possession of the stock exchanges from the business to the Cash Marketers and Stockists.
Transport: to be able to transport perishable food and beverage items such as milk, curd, etc. the company ensures a carry system having refrigeration facilities up to speed. The company also has cold storage facilities at its Mother Godowns at various locations so the goods don't get spoilt during safe-keeping even for a few hours. Hence the company ensures that medical factor remains intact.
They have dedicated Air Conditioned Vans for the move of products like chocolates from the Mother Godown to the money Distributors.
The pursuing is the carry system being utilized by the company:
Selection of vendors:
The various marketers are selected based on certain criteria which can be the following:
Capital investment: the vendors are selected predicated on the amount of money they invest and also the money they can spend money on the business in the future. It is not only based on the turnover that is necessary in today's but also in the foreseeable future. This is also based on the quantity of growth the business is expecting for the reason that particular area. The volumes required may differ from region to region.
Relevant experience: in line with the company norms it is vital that the distributor that they choose should be having some earlier experience of being truly a distributor in the FMCG sector. The primary aim here is that the business will not have to give him any training in the same field. The company also aims at selecting dedicated vendors hence it ensures that the distributor it chooses does not work for a competitor such that it only focuses in distributing products of Nestle. For example if choosing a distributor for Nestle milk products it would select a distributor who already distributes Nestle products such as Maggi so that he's dedicated towards complete selection of products and not only a particular SKU.
Infrastructure: the distributor should be having the necessary infrastructure necessary for storing and distributing the many products such as cool storage area, sales men, warehouses, carry vehicles, etc.
However there are no fixed guidelines for choosing the particular distributor. The company gets the discretion to choose a specific distributor based on the region or the market it is providing or likely to serve.
Incentives to the Distributors
2) scheme propagate over 2-3 calendar months: the distributors are given financial benefits such as extra margin of 2-3 % if the sales goals placed are achieved and the expansion rate is high for example a 15 % development rate means a distributor having Rs 1 lac sales will have significantly more benefit than one having Rs 25000 sales.
The benefits can also be in kind such as free gifts on achieving goals. It will always be kept in mind that despite having such rewards he gets financial benefit for example by reselling it.
3) Certificates: marketers achieving goals are also given certificates of acknowledgment that they may style in their shops as a license from a business like Nestle is respected by everyone.
Motivation of Route Associates - "Proud to be Nestle"
The company will keep on discovering schemes to provide rewards to the distributors for achieving focuses on and also to build good and long-term relations using its distributors. One such scheme that became successful was "Proud to be Nestle - Super awards for super achievers!" launched on March 30, 2002. All of them are open for the following:
Area Sales Managers
Sales Officers
Cash Distributors
Pallet Salesmen (these are the officers that work under the sales officers in order to allow him to take care of a wider area of distribution. )
Distributor Salesmen (these are sales men who work under the distributors are hence paid indirectly by the company)
Merchandisers
How does indeed it work?
Step 1: listed below are the criteria that require to be fulfilled:
The focuses on need to fulfilled to the 100% for the 1 / 4 III
RDBN turnover expansion should be at least 10% within the last year Quarter II.
Duration should be:
Invoicing: 01/04/2011 - 29/06/2011
RD: 02/03/2011 - 23/06/2011
Step 2: all the ASMs that match the above criteria are then placed on the basis of an index number.
INDEX = % RD turnover growth * utter value increase
Step 3: now awards are awarded to the top ASMs.
The being successful team comprises of:
All Sales Officials in the ASM team
2 top placed Cash Distributors in each Sales Official Zone
(Index = %RD growth * definite turnover increase)
Two distributor salesmen in each one of the top two Cash Distributors
The sales officers based on the quality of merchandising achieved decide on a merchandiser to be honored.
The awards are brought up in the desk below:
RDBM T/O development achieved
SO
CD
PS
DS
Merchandisers
20% +
5500
3500
2300
2000
1200
15-19. 99%
4500
2500
1800
1500
1100
10-14. 99%
3500
1800
1300
1000
1000
The ASM groups are ranked at the top get certificates and trophies.
Evaluation
When a distributor gets picked he is examined predicated on his sales goals but he does not lose business from the business until he under performs for an extended period of their time. Also the goals vary based on the region where he is located because each area may have a different sales projected.
DISTRIBUTION IN PRACTICE (Drop) TRAINING
For the distributor and the Carry & Forward Real estate agents there are training programs proposed by the companies to the give them the comprehensive knowledge of the business aspects. Following will be the training programs
Quality System
Good Warehousing Techniques (GWP)
Good Distribution Techniques.
Major areas of the program include:
Stacking according to norms:
First In First Out (FIFO) method is employed for Inventory management. The pallets are established in an orderly manner that too away from the walls in order that they don't get spoilt or ruined. Also there will do space between the pallets to go around easily.
Good Warehousing Practices
Security
Fire Fighting with each other: special precautions are taken up to prevent harm by open fire and also appropriate actions are taken to fight flames.
Control of Pests
Cleanliness/Tidiness
Temperature record and maintenance at the Air Conditioned Godowns
Proper ventilation
All the fees and licenses receive as per the federal government norms
Transportation: availability of reliable resources of travelling to and from the godowns or warehouses.
Proper Launching / unloading: proper launching and unloading of the pallets happen. It really is either computerized or the labour is given proper training and instructions to take care of them carefully.
Remittance: the remittance is deposited on a timely basis.
The warehouses have an archive of all the Sales Duty given and the exemption certificates
Accounting
The record of Receipts and the data of dispatches are preserved in registers for refrence whenever required. In case there is shortages they are really treated seperately. The Carry & Stock Real estate agents are responsible for managing the Sales taxes and the Octroi. Another registered is maintained for the freely sent out material. All of the expenses that happen are handled by the Take & Stock Realtors which are then paid back to them by the business.
Handling of Bad Goods:
The good and the bad or spoilt goods are segregated from the other person and are consequently proclaimed salable or not salable.
Temperature control: there are special provisions for Air Conditioned warehouses for products like dairy food and chocolates and also vehicles which have a service for cold storage area.
CONCLUSION
As seen above that the buyer goods in India usually use a circulation network that has few number of intermediaries among as these are fast paced goods and need some middlemen to be able to reach a long way away locations in minimum amount time possible. For any company like HUL the merchandise aren't perishable and a delay by a couple of days can be tolerated. But when it comes to a firm like PepsiCo and Nestle they have certain perishable food and drink items that need to be transported quickly and safely and securely. Hence this means food and beverage organizations have their warehouses located near by so that transport doesn't take enough time or they could even use faster settings of transportation such as railway, etc. but also for a business like HUL the warehouses may be a little a long way away with slower modes of carry. Hence according to the needs of the company and the kind of products or services a syndication network is well chosen to compete and better serve the customers. The main goal always is to deliver the products carefully in the lowest cost possible.
