Analyzing the Distribution Channel of Gcpl

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Analyzing the distribution channel of GCPL

Part-2

Submitted to:                                                                                                               Submitted by:

Prof. Vinod Kalia                                                                                                              Group B-5

M Gireesh Babu (12P084)

Manish Gupta (12P085)

Mohit Batra (12P086)

Nikhil Gupta (12P087)

Nitish Gupta (12P088)

Recommendations

• ROI of distributor

• ROI Structure

• Net income of a Godrej distributor is approximately 5% of his turnover
• Investment of a distributor is in following four aspects:

• Stock Level- The inventory level which is kept by the distributor keeping a safe level in order to avoid stock-out
• Market Credit- It is the number of days after which the money is collected after delivering the goods to the wholesaler/retailer
•  Claims- Any special schemes, which are prevalent in that month from the company’s side, are paid on behalf of the distributor. This money has to be collected from the company
• Damaged Stock- Any goods which are damaged while transporting or while in inventory have to be incurred by the distributor

• Net Expenses of the distributor is in the following four aspects:

• Salary provided to the DSR (Distributor Sales Representative) and the delivery unit cost, which further consists of salary of delivery boy, driver and the cost of the vehicle. For the area covered by every 2 DSRs, there is one delivery unit. A delivery unit is further of two types- mechanized (motor vehicle) and non-mechanized (rickshaw). The cost of a non-mechanized delivery unit is about 40% lesser than that of a mechanized unit.
• Cost of the office and Warehouse, along with its opportunity cost
• An extra cash discount given by the distributor to the wholesaler of about 1% in comparison to the retailer
• Miscellaneous expenses in the form of telephone, stationary, Internet etc.

• Subtracting the expenses from the net income and dividing the net profit calculated by the investment gives the final ROI of the distributor

• To increase the ROI following steps can be taken by the distributor

• Supply chain velocity- A fast replenishment system would help in bringing more sales. Every time a DSR goes to a shop, he should be able to take an order and avoid taking orders that last for two weeks. Along with this, newer SKU’s (which were not earlier bought by that shop) should be pushed in because they will be sold incase the usually bought goods stock-out. Thus increasing sales for the company and distributor
• Visibility- Distributor should take care that the merchandising is being done properly and that the products have proper shelf space in the shops or not. With increased visibility, sales would have an increase
• Market confidence- Schemes offered by the company should be passed on to the retailer. This helps in creating a market confidence on the company
• Pilferage- Stealing of goods at the warehouse by any person should be checked upon in order to maintain proper “hygiene”. This can lead to loss for the distributor.

• Repercussion of the Changes- If the above mentioned recommendations are applied, in order to maintain a fast supply chain process, extra man force may be required at the distributor point. So there might be a need for more delivery units to make sure that the delivery is done on the consecutive day of taking the order. Moreover, the Field Officer would also have to keep a check on this fact as even one day of stock-out would amount to lost sales for the company.

Also, currently not all DSRs maintain a check on the visibility of Godrej products when they go to a shop. If the visibility needs to be checked, the DSRs would have to spend more time on each shop that might reduce their productivity.

Above-mentioned problems can be taken care of by efficient working of the company and distributor officials. For visibility, there is a merchandiser separately hired by the distributor, who can keep a proper check on the visibility of Godrej products at a shop.

• Credit Allocation- Wholesalers are always the bottlenecks in extraction-credited money. It is easier to take money from retailers than wholesalers because they always deal in large volumes; hence the amount to be paid by them is always larger. Certain steps which can be followed to avoid this problem is:

• Double billing shouldn’t be allowed i.e. the order for the goods should be taken by the DSR only if the wholesaler/retailer has paid for the previous consignment taken
• A record should be maintained as to the stock, which is generally maintained by the wholesaler/retailer so that only that amount of stock is delivered every week. If enough stock is given that lasts for one week only and not for two weeks, then the shopkeeper will have to order every week, which can only be done if he has paid for the previous order
• If this system were followed then the delivery process would have to be checked. The distributor will have to make sure that the good are being delivered the very next day, because otherwise there is a chance of stock out for the shopkeeper along with the weekly cycle of taking orders would also be disturbed
• Finally, the company will have to play by its own rules i.e. if they have set the rules of not taking the next order in case the previous bill has not been cleared, then this system should be strictly followed. The market has trust on the distribution system of Godrej Consumer Products Ltd. and would also start adhering to its rules as there is a demand for its products in the market
• Repercussions of the Changes- For the above steps, being strict with the retailers on credit basis but end up losing some shops for Godrej, but in the long run it would give a correct signal to the rest of its customers and avoid the problem for credit collection.

• Availability of Products- A wholesaler doesn’t keep all SKU’s that the company offers. Instead it keeps only certain SKUs but it deals in large volumes. The total SKUs carried by a wholesaler are always greater than the total SKUs stocked by a retailer. There can be three reasons for the unavailability or stock out of products at a wholesaler:

• There is a stock shortage at the company level
• The brand being talked about is a slow moving brand because it is not generating the necessary pull and hence not bringing high sales. Hence, the retailers are not ordering in proper cycles and its getting stock out at certain times
• Issue in the distributor’s distribution style

Now, in the above mentioned points the first two points are outside the purview of sales and have to be considered by officials belonging to the marketing department of the company. Checking the record of the billing frequency of wholesalers/retailers can check the third issue. The Field Officer (FO) of the company can check these records. Another alternative is that more number of SKUs should be pushed forward at the outlets that are facing an unavailability situation. This can always help in increasing the sales for the company.