ASSIGNMENT DRIVE SUMMER 2014

PROGRAM MBADS (SEM 3/SEM 5) MBAFLEX/ MBA (SEM 3) PGDMMN (SEM 1)

SUBJECT CODE & NAME MK0010- Sales, Distribution and Supply Chain Management
BK ID B1721 CREDIT & MARKS 4 Credits, 60 marks

Q1 Describe the supply chain Benchmarking Procedure.

(Definition of Benchmarking, Procedure for supply chain benchmarking)2, 8
Answer.
Benchmarking
Benchmarking has been used variedly to refer to several activities. Several definitions have described
as benchmarking. Some of these definitions are discussed to emphasize the diversity:

A continuous systematic process for evaluating the products, services and work of organizations
that are recognized as representing best practices for the purpose of organizational improvement

(Spendolini, 1992).
A continuous search for, and application of, significantly better practices that lead to superior

competitive performance (Watson, 1993).

A disciplined process that begins with a thorough search to identify bestpractice- organizations,
continues with the careful study of ones own practices and performance, progresses through
systematic site visits and interviews, and concludes with an analysis of results, development of
recommendations and implementation (Garvin, 1993).

Procedure for supply chain benchmarking

There is a procedure for defining the methodologies and metrics, achieve milestones and set
comparisons for benchmarking. At the implementation level, application of benchmarking is
generally believed to involve seven key steps:
(i) Determine which functions to Benchmark: The organization needs to first ascertain which
functional areas are to be benchmarked, those which will gain the most from the benchmarking
procedure.

(ii) Identify performance variables and collect data: The organization needs to recognize the
performance variables which will be used to measure those functional areas and then accordingly
collect data.
(iii) Select best in class companies: The organization needs to first choose the best-in-class
company for each area that is to be benchmarked. The chosen company should be one that performs
its functions at the lowest cost and achieves the highest level of customer satisfaction.
(iv) Compare: An organization needs to compare its performance with that of the best-in-class
company for each benchmark being considered. The results need to be compared in an easy format
to ascertain the gap between its own performance and that of the best-in-class company.
(v) Specify programmes and actions to meet and surpass: The organization needs to
specify the programmes and actions to meet and exceed the competition which is based on a strategy
to improve the areas which have some possibility of improvement. The organization can either devise
its own methods to improve its weak areas or look up to the industry leaders for guidance.
(vi) Implement and monitor: The organization needs to implement these programmes by setting
specific goals to be achieved within a stipulated time period. The organization also needs to develop a
monitoring mechanism to review and update the examination/study done within the stipulated time
period.
(vii) Recalibrate: The monitoring mechanism developed by the organization will form the basis
for revision and change of measurements in the subsequent benchmarking studies.

2 Explain recent trends in the area of sales management under International sales
management.
(Definition of sales management 2, Explanation of trends 8) 10
Answer: Definition of sales management
Goods were produced either only after receiving the sufficient orders or for which sufficient demand
existed. Further, there existed little or no competition in those days. But in the modern days, sales
and distribution system is a complex and technology driven. New and new innovations are taking
place and changing the way we used to perform sales related functions. The game is old but the rules

are new and still developing. Consequently, modern sales managers should get acquainted
themselves with these changes and prepare themselves to these emerging trends.
Following are the recent trends in the area of sales management:
(i) Intense Competition: Due to liberalization, privatization and globalization (LPG), the sales
environment of todays organizations has changed a great deal. The selling firms are not competing
with new domestic players but with foreign competitors too. Manufacturing hubs based in Asia,
notably in China, South Korea, Hong Kong, Japan, etc. have captured huge market shares of most of
the industries like automobiles, home appliances, machine tools, entertainment goods and industrial
chemicals. The battle between national and international players is expected to continue. The
economic heart will largely depend on how sales managers manage their sales forces to meet foreign
competition in their country and to improve their company image and market share in the global
market place..

(ii) Rising Customer Expectations: Internet age, increased computer awareness and shrinking
usage charges have made people enabled buy things on line resulting in growth of non-store selling
(on line retail), customers today can get information on product prices, features, cross comparison
details and place orders on the internet in a matter of seconds. They can access public feedback and
the products performance reports from industry experts on line. Marketing firms can also collect
detailed information about markets, customers, competitors, international trends, and prospects by
using the internet. Consequently, it has made customers demanding than never before. Today
customers want value for their money. Value is the relationship between customers expectations and
his paying ability.
(iii) Customer Relationship Marketing (CRM): Customer relationship marketing (CRM) is a
business strategy built around the concept of being customer centric. Information and
communication technology (ICT) plays a vital role in carrying out CRM. Through the use of CRM
software packages, companies can offer excellent real time customer service by focusing on meeting
the individual needs of each valued customer. The practice of relationship marketing has been
facilitated by several generations of customer relationship management software that allow tracking
and analyzing of each customers preferences, activities, tastes, likes, dislikes and complaints. For
example, a fast food supplier maintaining a database of when and how repeat customers buy their

products, the options they choose, the way they consume the purchase etc., is in a powerful position
to develop one-to-one marketing offers and product benefits.
(iv) Revolution in computer Technology: Internet revolution and communication technology
has enabled the customers to go on line and get information on product assortment, compare
suppliers prices and product fractures, customers feedback and market experts reports in few
seconds on the mouse click. They can access on line a great amount of information about almost
every aspect of the products and companys offerings. Similarly, sales managers cannot afford to
miss out on this revolution because it offers great opportunities to win competitive advantages with
customers. Sales managers themselves can collect information about target markets, competitors
and customers. They can pass on this vital information to their R&D department to produce goods as
per customers changing needs and wants. Further, companies can develop two-way communications
with supply chain members and potential customers to pass on necessary information from time to
time and make provisions to collect their feedback and suggestions.
(v) Cost cutting approach: Today throughout the globe, sales managers are emphasizing on cost
control policies and adapting to the new selling environment. Buying power is more in fewer hands.
Sellers can use this power and drastically cut their own administrative and operational costs by
shifting more of their in-store activities including labour and display to manufacturer.
(vi) Influx of women, minorities and rural into sales careers: The composition of sales
force is changing shape with increasing involvement of women, minorities and rural communities
that we had never heard of fifteen years ago. The future of selling requires changes to keep pace with
generational and cultural shifts. Statistics even clearly depict that women and minorities are
performing successfully in the new role. While change is good, it requires adjustment.
(vii) Ethical social issues: The present economy is morphing faster than in the days of both
immigration and the industrial revolution. We now do business with nations and communities that
we had never known ten years ago. Today sales managers face a number of moral and righteous
issues. At times, the sale manager conveys incorrect information about a product to the customer,
gives false commitments to the customer, etc., just to increase his sales revenue. There are instances,
when the sales manager offers expensive gifts to the senior management of an organization in order
to ensure that he receives the bulk order for a particular product. These unethical practices are being
adopted today by the sales managers just to ensure speedy success in the current scenario.

(viii) Managing multi-channels: Multi-channel marketing system takes place when an

organization adopts two or more distribution (or marketing) channels to reach one or more customer
segments. Most of consumer durables and FMCG companies use a different set of channels to service
the retail trade and institutional customers. This system undoubtedly has benefits of cost and time
savings, increased market coverage and customized selling. Anchor, for example, sells electrical parts
and instruments through a network of middlemen such as wholesalers and sellers in and outside the
country (direct selling). While for selling capital goods, it does through a team of their own sales
engineers, involving little or no intermediary support (i.e. direct selling).

3 Briefly discuss about the nature and responsibilities of a Sales manager.

Goal setting 3
Planning and budgeting 3
Organizing and implementing 2
Controlling and evaluating 2 10
Answer:
Goal Setting
The role of the sales manager in goal setting can broadly be classified into two areas:
Role played in supporting the organizational goal setting
Role played in enumerating the goals of the sales force
The critical role played by the sales manager is because of the proximity and interface of his sales
force with the customer. This enables:
(i) A first-hand understanding of customer needs to be provided as a feedback to the organization
(ii) Ascertaining market potential, defined as the total estimated sales for a product or service in a
market over a time period for the entire industry
(iii) Converting the market potential to the sales potential, which is nothing but estimating how
much of the total market potential can be captured by the individual company through its products
or services
(iv) Formalizing this sales potential through a 'sales forecasting' which is used by organizations as a
starting point in finalizing overall organizational objectives

Through the above steps and feedback, the sales manager plays a key role in shaping and influencing
the development of organizational strategy. However, once the overall organizational strategy is
finalized, this, in turn, influences the goal setting of the sales manager for the current plan period.
Besides the overall strategy, the nature of the industry and competitive position of the company also
impact goal setting.
The effort of personal selling has high weightage in the services and industrial goods selling scenario.
This is because the product or the service is more technical in nature and requires the selling effort to
be one of direct interaction with the customer on a one-to-one basis. The critical task of the sales
manager in such an environment pertains to hiring of salesmen with higher personal capability,
education and quality, followed by regular development through training and other inputs. Training
and development goals form an important aspect of goal setting in such industries. The efforts of
personal selling in advertising and promotions and in consumer durable sales, need to be integrated
with the key initiatives. By and large, the selling of non-durable goods involves indirect selling
through channels and the sales force calibre, and is generally of a lower order. Marketing aspects of
promotions, branding and advertising play a key role here. In aligning goals with sales management
strategies, three common approaches are listed by Michael Porter in his seminal work Competitive
Strategy, which are:
Goal setting for low-cost strategy
Goal setting for differentiation strategy
Goal setting for niche marketing strategy
Planning and Budgeting
Once the goal(s) for the organization's sales force have been finalized, the next step is to develop an
action plan to achieve these goals. Some of the actions that could be decided upon have already been
decided by this stage, but essentially annual sales planning pertains to drawing up the sales strategy
for meeting specified goals and objectives. The annual plan could further be broken into monthly and
quarterly plans, and it is the monthly sales plan that guides the day-to-day operations of an
organization. Sales planning primarily deals with the following decisions:
1. Market coverage: The decisions on which markets to be covered, market extensions, Ideal
Journey plan, frequency of visits, etc., are taken here. Market- specific requirements would need to
be understood while planning extensions and these could include the type of sales personnel
suitable, their market knowledge, etc.
2. Sales force strength and composition: The decisions involved here would be related to the
number of sales personnel required for proper territory coverage and their composition (i.e., whether
in-house or contract personnel which) have a definite bearing on the sales budget as well as sales
output. Considerations like the quality and experience of a new hire are also important.

3. Capability building: This deals with devising ideal sales call protocol, training for improving
efficacy, demonstration, coaching on the field, etc. The level and content of training varies based on
the product sold and the sales process adopted. For example, a complex product would require a
more qualified salesperson to be hired who will be further thoroughly trained in product knowledge,
process knowledge and application knowledge, besides an understanding of troubleshooting and
solving product performance issues. Additionally, the nature of the product also determines the
selling process adopted which could range from a hard sell to consultative selling.
4. Performance standards setting: This is a very important aspect of a sales plan which enables
control and evaluation on an ongoing basis. Establishing milestones is also a common practice which
assures that progress is in the right direction.
Organizing and Implementing
Once the plan and the budget are frozen (usually by the end of the previous financial year), the next
step calls for organizing and implementation. One common practice adopted by many organizations
is to arrange for a roll out of the budget to the sales team. 'Annual conference' and 'budget roll out
meeting' are some common terms used for such gatherings. The purpose of such a meeting is:
To familiarize the entire team with the task at hand and the contribution of each team member
desired (as per the plan) in the forthcoming performance period
To familiarize all concerned with the changes (if any) in operating norms, territory reallocation,
policies, procedures, etc.
To review and address gaps (if any) between the resources available and resources required,
including manpower, funds, training inputs, equipment and support systems
To review the detailed strategy and plan of the various sales teams to achieve their targets and add
value to these
To provide a forum to announce special rewards (if any) for exceptional performance
To enable the launch of a well planned and directed effort from the beginning of the performance
period
Once such a meet is over, the time is ripe for balance implementation activities so as to achieve all
that had been planned and organized for the year.
Controlling and Evaluating
Essentially, the first step in control and evaluation is determining the elements that need to be
reviewed for ensuring control. Also termed as performance metrics, establishing proper metrics is, in
fact, a key activity based on which effective control can be exercised. Many organizations utilize the
'budget roll out meeting' or 'annual sales conference' to finalize and chart out the key annual metrics
of each member of the sales team. The next step is analysing what went wrong and the actions
neededthe core objective of a reviewis many a times cut short due to time constraints as a

consequence. Hence, one of the most important requirements for a productive evaluation and review
mechanism is to have a transparent and objective performance metrics, which has been agreed upon
at the beginning of the performance period by all concerned.

4 Explain the SCOR model with a diagrammatic representation.

SCOR model 5 Focusing Aspects with diagram 5 10
Answer: SCOR model
The SCOR model is used to understand simple or complex supply chains through a common set of
terms. Consequently, different industries can be related to each other to interpret any supply chain.
SCOR is based on five unique management methods. These are: Plan, Source, Make, Deliver and
Return.
(i) Plan: It includes methods required to balance collective demand and supply to devise a strategy
which meet sourcing, production and delivery requirements in an optimum manner.
(ii) Source: It includes methods to procure goods/services to meet the actual or anticipated
demand.
(iii) Make: It includes methods that convert a raw product to a finished product to meet the actual
or anticipated demand.
(iv) Deliver: It includes methods that are involved in the transfer of final products to the end
consumer. This includes concepts such as distribution management, transportation, etc.
(v) Return: It includes methods which are involved in receiving the returned products no matter
what the reason for return is.

Focusing Aspects with diagram

The SCOR model focuses on the following aspects:
1. All communication with the customer right from the purchase of a product to its payment.
2. All product transactions that come in the process right from the supplier to the end customer
which includes equipment, bulk commodities, spare parts, etc.
3. All market communication right from understanding the collective demand to the fulfilment of
each order. Other key notions highlighted by the SCOR model are information technology,
guidance, quality and administration.

Figure: SCOR Model

5 When one member of distribution channel tries to maximize its profits at the
expense of rest of the members, it will create conflicts, resulting in the decline of
profits. To avoid these conflicts, now retail firms have started forming vertical
Marketing systems (VMS). Explain the three types of VMS through which goods and
services are usually distributed to customers.
Definition of VMS 2
Three types of VMS 8 10
Answer: Vertical Marketing systems (VMS)
A Vertical Marketing System (VMS) is a system in which almost all the members of distribution
channel such as manufacturers, wholesalers and retailers work together to satisfy human needs and
wants by facilitating the smooth flow of goods and services from manufacturer to the ultimate
consumer. In traditional marketing system, manufacturers, wholesalers and retailers are separate
entities who try to maximize their own profits. The philosophy behind developing vertical marketing
system is that when one member of distribution channel tries to maximize its profits at the expense
of rest of the members, it will create conflicts, resulting in the decline of profits for the whole channel
of distribution. To avoid these conflicts, now retail firms have started forming vertical marketing
systems.
Types of VMS:

Three types of VMS are:

1. Independent firm VMS
2. Partially integrated VMS
3. Fully integrated VMS
1. Independent firm VMS is a marketing system where manufacturers play a vital role to provide
goods and services to customers. This is the case where retailers are very small and therefore,
manufacturers have to reach the whole market. Also when a firms financial resources are limited
and channel members are not in a position to share risks and expenses, therefore, they want the
manufacturer to come forward and lead the retailing efforts. Independent retailers on the other
hand, target their customer base and build loyalty by becoming a friendly retailer and word of mouth
publicity.

2. Partially integrated VMS is a marketing system in which two independent, financially strong
firms along a channel of distribution perform all manufacturing and distribution functions without
the involvement of any intermediary. This is the case where involvement of wholesalers may be
expensive and/or unaffordable. The example of such system is where manufacturers and retailers
divide all the retailing activities like production, storage and distribution without any independent
wholesalers. Partially integrated VMS is most suitable where:
I.
II.
III.
IV.
V.

wholesalers are costly to afford

company has ample resources
both manufacturers and retailers are large
unit sales are moderate, and
Strict control over channel is required.

3. Fully integrated VMS is a system where one member of the distribution channel for say
manufacturer performs all production, storage and distribution functions without the involvement of
any channel member. This is the case where manufacturer having sufficient resources wants direct
interaction with its customers. Earlier this system was usually employed by manufacturers of repute
but now due to easy availability of finance and retail facilities that significantly contribute to a
nations economy, retailers are also moving upward in the chain.

Q6 An organization needs to be extremely cautious in making investments in various

types of inventories. The extent of control required to be maintained on all items is not
the same. Explain some important tools of Inventory management like ABC analysis,
Just-In-Time & Economic order quantity model.

(Definition of Inventory and Inventory Management, ABC analysis, Just-In-Time & Economic Order
Quantity Model) 3, 7
Answer.
Inventory and Inventory Management
Inventory
The term inventory means any stock of direct or indirect material (raw materials or finished items
or both) stocked in order to meet the expected and the unexpected demands in the future.
Inventory Management
Inventory management is primarily about specifying the size and placement of stocked goods.
Inventory management is required at different locations within a facility or within multiple locations
of a supply network to protect the regular and planned course of production against the random
disturbance of running out of materials or goods. The scope of inventory management also concerns
the fine lines between replenishment lead time, carrying costs of inventory, asset management,
inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting,
physical inventory, available physical space for inventory, quality management, replenishment,
returns and defective goods and demand forecasting.

Tools of Inventory management

ABC analysis
ABC classification is one of the models of inventory classification. ABC stands for Always Better
Control. The value of inventory items consumed in a year is one of the important factors of this
control method.

Small quantities of inventory items form a very large portion of inventory consumption

throughout the year.

Somewhat larger number of inventory items form a reasonable share of inventory

consumption throughout the year

Huge number of inventory items form a very small share of inventory consumption

throughout the year

These essential facts have given rise to the concept of ABC Analysis. It has been observed

that in a manufacturing firm only

10% of items contribute to 70% of the inventory consumption throughout the year.
20% of the items contribute to 20% of the inventory consumption throughout the year.

70% of the items contribute to only 10% of the inventory consumption throughout the
year.

Just-In-Time
The concept of just-in-time (JIT) system has been made popular by Japanese firms. In a JIT system,
manufactured components and parts are transported to the manufacturing site just few hours before
they are actually put to use. The delivery of material is integrated with the manufacturing cycle and
speed.
Economic Order quantity Model
It is defined as the level of inventory order at which the cost of holding inventory (i.e., ordering cost
+ inventory carrying cost) is the minimum. By using the EOQ model, it becomes easy for a firm to
understand that its total expenditure will increase if it orders too much or too little of a stock item.