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GROUP 10

DIVANSHU KAKKAR (PGP-15-110)


PRIYASHA DUTTA (PGP-15-050)
SHIRSHO GHOSH (PGP-15-228)
SHWETA VED (PGP-15-151)
SHENA KUNDU (PGP-15-066)

THE
UBIQUITOUS
PAANWALAH

Contents

Topics

Page No

Objective

Background

Details of Paanwalah

Methodology

Primary Observations

i)

Product Portfolio

ii)

Store Layout

iii)

Customer profile and behaviour

iv)

Source to store

Inferences

Recommendations

Appendix

10-14

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Objective
To study and analyze the distribution network of the FMCG goods sold by a paanwalah from source
to store

Background
MANY a marketer in India would swear by the fact that had it not been the ubiquitous paanwalah,
they would be struggling to sell their FMCG product. Yet, amid all the brouhaha about the countrys
retail explosion, most paan shops remain oblivious as sometimes blocking footpaths or shabbily
jutting out of the boundary walls of government buildings - quotes a famous business magazine in an
article on the topic of growing interest of FMCG giants in studying and utilizing the business model
of the Indian paanwalah as he is increasingly becoming the 5th P of marketing after product, price,
promotion and place.
FMCG companies are increasingly leveraging the spread and consumer-connect of paanwalah to sell a
growing array of products. Industry estimates show that there are about 14 million paanwalah in India
and many companies are using them to diversify their product portfolio like ITC did through its huge
distribution network of paan shops to diversify into candy and snack food. The secret behind it is that
paanwalahs provide a few significant advantages over any other retail store .The primary advantage
is the location because paan shop is not very difficult to spot and are located near roads, parking lots
which are frequently visited by people. So it is a very convenient point for impulse purchases for
candies, biscuits and beverages. This study is mainly concerned with the distribution network of the
paan shop business model which is helping them to reach a huge range of customers through the wide
spectrum of the products at right time in right quantity at right place.

Details of the Paanwalah


The name of the Paanwalah we studied is Prakash Singh. The paan shop is located beside Raj Palace
and is named Raj Palace paan shop. Prakash and his brother Pratap have been running this paan shop
jointly for more than 10 years. The size of the paan shop is a humble 4x6 square feet and is
approximately 8-9 square feet in height. It remains open from 7.00 am in the morning to almost 12 am
at night for seven days in a week. Prakash opens the shop at 7am and runs it till 11am, after that his
elder brother takes care of the shop till the lunch time. Prakash again resumes duty from 2-30pm to
9pm. The late night shift is again done by Pratap. Prakash works longer hours during weekdays and
Pratap takes care of the shop during weekend. Prakash is a very friendly and co-operative person and
helped us immensely in our study of the distribution method as well as in our interactions with
customers, the salesman and the wholesaler to understand the customer standpoint.

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Methodology
The methodology followed to conduct the survey for this project is as follows:

Identification of Paanwalah: The first step in the process was to identify the paanwalah
around whom our project would be based. The project was concerned with understanding the
flow of FMCG products and that is why it was important for us to identify a paanwalah which
stocked a decent quantity and variety of FMCG products. Also, since the project would
involve us asking questions pertaining to his business, we chose someone whom we have
interacted with before to avoid the instance of the paanwalah being apprehensive to answer
questions.
Literature review: A literature review was primarily done to understand the current
functioning of the paanwalah. Before we could move further into the project, it was important
for us to have a basic understanding of the kind of challenges that the paanwalahs face and
what kind of policies do they generally follow. This was to ensure we had the right questions
to be asked and since at any time of the day there are a lot of customers, the shopkeeper
should not feel irritated. The background study also helped to get an idea of the kind of
questions that needed to be asked to the retailer. Since the project is related with some key
aspects of the concerned persons business, the questions had to put forward in a specific way
so as to not deter the paanwalah from answering.
Preparing the questionnaire: After doing the needful research, we made a questionnaire
which would help us analyze and execute rest of the project. The questionnaire was divided
into 3 categories for the different sets of people:o Paanwalah
o Salesman
o Customer

The different questionnaires were primarily to get different perspectives and also reason and find
out what are the causes for a particular action being taken by one party over another.
(APPENDIX 2)

Conducting the Interviews: The interviews that were conducted are listed below:

Retailer The retailer was visited thrice. In the first visit, general questions were asked about
his background, sales performance and general questions that would make the retailer more
forthright while answering questions. This was to ensure that he develops a minimum level of
trust which would also aid the smooth progress of the project. The second visit was to ask him
more detailed questions pertaining to the project. The last visit was done during the time of
the salesman visit and some of the questions were asked in front of the salesman to gauge the
relationship that he shares with the salesman.
Salesman The salesman was interviewed once when he had arrived. He was asked questions
some of which were similar to that asked to the retailer. This was done to get an idea of the
authenticity of information received from the retailer. He was also asked some questions
which were regarding his distribution of goods in the particular area and those which were
pertaining to the project.
Customer On all three visits any random customer was picked up and asked questions
regarding to the products that he/she prefer to buy from the given shop. They were also asked
about certain specific preferences they have while making a purchase and the availability of

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the desired products. A video was recorded to capture how a customer shops and what the
consumer preferences are during a purchase and how do they do secondary purchases.

Primary Observations
PRODUCT PORTFOLIO
The way the products are stocked in the shop varies category wise. The shopkeeper displays the
products depending on the propensity to sell. If a product is new, the product would be displayed in
front so that it is easily spotted by the consumer while purchasing. Products that contribute to standard
sales volume every day are kept at a convenient place so that the customer can see the availability of
the product and it also takes lesser time for the shopkeeper in serving the customer. The description of
the way the shopkeeper stocks products is given below:Candies & Toffees: All the toffees and chewing gums are stocked in separate containers and kept
right in front so that the buyer doesnt hesitate when such a product has to be picked up after a
cigarette is bought. This is often regarded as a secondary or dependent sale due to its relation with the
primary product sale.
Brands Stocked: Cadbury Eclairs, Candyman Eclairs, Pulse, Juicy Jelly, Chingles, Melody, FundaGol
Replenishment: Most of these candies are replenished almost every week when the salesman
comes. In case during a particular week the sale for a particular variety is not good, they do not
take up new set till the time the existing container finishes.
Biscuits: Biscuits are stocked up horizontally on the shelves that are there in the shops, and also the
fast moving brands such as Parle-G, Marigold are kept in such a way that they are easily visible. The
other biscuits such as bourbon etc. are also kept there but are not easily visible.
Brands Stocked: Mainly Britannia and Parle form the major players in this segment. There is no
local private label in this segment. In Britannia, the variants are Good-Day (Rs.5/10/20 SKUs; the
Rs.10 SKU sells the most), 50-50 (Rs. 5 SKU), Maska-Chaska (Rs. 10 SKU). In Parle, there are
many more variants Parle G, Top, Bourbon, Happy-Happy, Monaco Marie, Crack-Jack (all
Rs.10 SKU).
Replenishment: The biscuits are replenished weekly by the wholesalers. For the most selling SKUs
like Parle G, Britannia Good-day they stock up 30-40 pieces weekly.
Sweets: Some of the containers which contain sweets typically sourced from local manufacturers are
kept right in front of the shop which is just about a little ahead of the containers carrying toffees and
chewing gums. The off-takes of those products are not too high and keeping them in front gives them
a perception that consumers would be more willing to buy them once they are spotted.
Mouth Fresheners: Mouth fresheners are usually hung from a convenient place inside the store to
ensure that they do not occupy any shelf space and also easily torn and provided to the customers.
Along with them, the shopkeeper also hangs the typical Pan Masala that is used in making Pan.
Brands Stocked: Pass Pass, Chutki, Baba Elaichi, Centerfruit, Orbit, Minto-Gol, Polo
Replenishment: Weekly replenishment is done
Cigarettes: The cigarettes are stacked on a shelf which is located behind the shopkeeper. It has a
board of the major cigarette brands such as Classic or Gold Flake which houses the packets. Some
cigarettes which are usually sold at a faster rate are kept loose because predominantly, the buyers
come for and purchase cigarettes loose. This is to reduce the time to serve the customer.

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Brands Stocked: This paanwalah stocks mainly ITC (Classic Mild, Gold Flake Light) and
Marlboro (Four Squares)
Replenishment: Every day the company salesman comes to replenish stocks (10 packets on an
average)

STORE LAYOUT
Refer APPENDIX 1

CUSTOMER PROFILE AND BEHAVIOUR


The proximity of the Paan-Wala to a bar, which is close by to SPJIMR, makes it a place often visited
by students, offering the owner to increase his sales by offering complementary products that the
customer demand like cigarettes, mouth freshening candies, chocolates and biscuits.
Along with that he serves the need of the local, lower strata of society by offering them daily
essentials such as soap sachets, biscuits, and snacks in the form of chips and sweets and candies. The
products kept are which are cheap as they are for the lower strata of the society and have a good
margin such as biscuits, cakes, detergents, soaps etc. It also serves the need of people at the nearest
point and they do not have to go any farther to get what they want.
Categorization of customers:
1. Who came to buy Cigarettes
2. Who came to buy Paan
3. Who came to buy FMCG goods
Time of observation- 7.30 -8.45 PM
Usually the customers who came to buy cigarettes were very particular about the brand of cigarette
they purchased. Except that, they would ask for either a mint or pan masala along with the primary
purchase. They were not very particular about the brand of secondary purchase.
Customers who came to buy the paan had a lot of time on their hands which they would utilize to talk
to a person who had accompanied them or look around the shop if they had to buy something. 3 out of
10 customers would end up buying either a sweet or a chocolate. 2 out of 20 bought biscuit packets.
The last segment of customer was either children or girls who came to buy something that they
needed at home. This included offtakes of shampoo, toothbrush, biscuits and chocolates.
The number of such customers was very low in the evening.
Time of observation- 9-10 A.M
The customers who came at this hour were mostly workers who were about to go to work. They
would buy gudkha and bidis. Some of them would buy parle-G which would go with the tea that was
prepared next to the Paan shop. They would not buy any toffees or candies.
There are no customers who come to buy paan in the morning.
The frequency of the third cadre of customers was very high during the morning hours. The customers
who came were very sure of what they want. Sunsilk was a shampoo brand which sold like hotcakes.
Apart from these, the restaurants from the neighboring locality would buy toothbrushes for cleaning
the utensils. On probing him, Pratap spoke about how he started keeping toothbrushes to cater to this

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customer segment. Earlier they would come asking for scotch brite (steel). He understood what they
needed it for and realized he would have a better margin if he sold Colgate toothbrushes.
Most of his customers addressed him by his name which showed the kind of relation he had
established with the customers.
Before telling him about my project, I bought a paan from him. Meanwhile I was looking at his shop.
After I ate the paan, he offered me a piece from the newspaper to clean my hand. This was a gesture I
would remember and I guess this is how he builds the relationships.
Interview with a customer:
Time: 9.30 A.M
Questionnaire has been added to the appendix. (APPENDIX 2)
Customer asked the paanwalah for a Sunsilk black. The customers name was Pareeta.
I asked her what her age was. She said she was 16 years old. She always bought the same Sunsilk
shampoo on every Sunday and sometimes when her father was happy with her he would give her
extra money to buy sweets.
Also she addressed him as uncle. The relationship of the paanwalah with the customers is such that
he can convince the customer to try something new and they would listen to the advice readily.

SOURCE TO STORE
Suppliers
There are majorly 5 suppliers to our Paan-wala which help in his endeavor to provide the customer
with the FMCG products they desire when they visit his shop.

ITC Salesman- Mukesh Shah is the distributor


Britannia Salesman- Sri Krishna is the distributor
Parle G Salesman
Marlboro Salesman
Wholesalers who picks up goods from Andheri wholesale market

On emergency basis an inter-shop transfer from other retail stores occur to fulfill the demand for the
loyal customers. As he does not keep any cold drinks, his suppliers are limited. The reason for not
stocking cold drinks is the proximity of a bar right next to it, which can fulfill the need of the
prospective customers.
Go-down
The Paanwalah does not hold any other inventory apart from the shelf inventory, which he keeps on a
rolling basis. His only space of storage is his shop.
Money transfer terms
Due to low demands from this channel, mostly the credit is not offered; the Paanwalah offers money
in exchange for the goods he buys then and there itself for all channels of purchase. The customers are
offered products on credit terms because on the relationships they have with the owner and proximity
of their homes to the shop.

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Inventory Stocking and Replenishment Policies


The inventory in the shop primarily comprises of Toffees and Chewing gums, Cigarettes and Biscuit.
The shop has a shelf at the top where the shopkeeper stocks the necessary inventory of Chewing gums
and toffees in containers. Some products like biscuits and cigarettes which come in cartons are stored
kept on the floor at a corner of the shop. Usually the inventory is build up, when the distributor is not
available for a particular period of time or the specific company is initiating a promotional campaign.
This is the time when the retailer anticipates a surge in demand or unavailability of supply. There are
3 modes of replenishment that happens for the Paan-wala. For cigarettes, candies, aftermint or
emergency orders he gets direct delivery i.e. on the spot delivery for the goods, for other FMCG
items, he places and order through the sales man that arrives at his shop, who uses a hand-held device
to take the orders which are subsequently services in two days. The third mode is the wholesaler who
picks stuff based on the trends and seasons to service the retailers. His delivery cycle is daily. Much
greater details follow:
I.

II.

III.

On the Spot delivery and emergency orders The products that fall into this category are
cigarettes, mints, candies and biscuits/cakes respectively. Cigarette delivery is on the stop
itself whereas emergency orders have to be conveyed to the salesman before-hand, so that the
replenishment can be provided at the time he arrives. The after mint and candies come on a
daily basis also. The billing and payment terms are on the spot payments and no credit policy
from the Paanwalah. The sales man offers those bills for emergency orders and a receipt for
sale of cigarettes.
Two day replenishment- Parle G, Britannia, ITC all offer two day delivery cycles to the
customer, where he places an order for a week. They visit him once a week to take order,
which are feed in hand-held devices, consolidated for a whole area when synced with the
computers. The billing and packing occurs the next day followed by dispatch in a Tata 407
the next day.
Daily replenishment for other selling brands- The Paanwalah offers many other products such
as sweets, agarbattis, cream filled biscuits apart from Parle G and Britannia, detergent sachets,
toothbrush, shampoos and soaps for whom he does not have a salesman to fulfill his demand,
as his requirement is too low. For such purposes he is dependent on the wholesaler. The
wholesaler based on the cumulative trends and using his volition picks up stuff from the
Andheri market and service the need of the Paanwalah on the availability and need basis. His
transactions are on the spot without any bills being procured. He services many other retailers
and Paanwalahs in the area on similar basis. The relationship is based on trust and mutual
respect.

He does not believe in procuring goods directly from the wholesale markets as he does not have the
quantity to make it a feasible option nor the space to accommodate all the products.
Distribution Channels
Three different channels are used by the Paanwalah for replenishment for his goods.
I. One day delivery channel for cigarettes, mints/candies & chewing gums (APPENDIX 3)
The model was pretty commonly followed earlier for most FMCG products, but now is now cigarettes
and candies only. The long term understanding and dealing between Paanwalahs and salesman for
these products provide a good idea about the requirements. So the salesman assuming an aggregate
demand carries with a certain amount of inventory for delivery for cigarettes and mints. If certain

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orders come on an emergency basis for products like biscuits and cakes they are also catered too on
similar basis. If any shortfall or backorders are there, those are carried additionally the following day.
It is a daily replenishment system that is to a great extent very accurate as per our interactions with the
Paanwalah and the sales persons. These daily interactions help reduce the demand supply gap as well
as improve sales, by building good customer relationships for the sales person. No credit or minimum
credit policy followed in this case. Ordering policy is defined by the paanwalah at that very moment,
delivery depends on correct forecasting seeing past trends and availability. The ordering pattern is
similar to fixed time period model, where the shelf space acts an indicator for maximum order and
current inventory levels, the difference between them is replenished on the fixed period.
II. Two day delivery for biscuits, cakes and chips by ITC, Britannia and Parle G i.e. generic
FMCG delivery model (APPENDIX 4)
This is the model currently in place that is used by all FMCG companies for order replenishment. It
occurs over a cycle of 2 days, where on the day 0 a company salesman comes to take the order from
the area in his hand held device for biscuits, candies, mints, cakes and chips. He goes back the next
day to sync it with the computer of the distributor, where a consolidated order is generated and
prepared for delivery. On the third day, through a milk run the orders are delivered along with money
collection to close the deal. There is no scope for guess work involved, it is purely based on the pull
of the market forces. By aggregating the demand the distributor saves his logistics cost.
Ordering pattern is once a week, wherein the order and delivery happens on a month wise basis. The
shelf space acts a maximum order quantity basis, seeing the lead time consumption and periodic
review period consumption the Paanwalah places an order. No credit policy is followed here also.
III. Distribution through Wholesaler for smaller quantity products & sweets (APPENDIX 5)
The distribution through a wholesaler is similar to the first mode of distribution discussed. The
wholesaler picks up goods from the Andheri wholesale market based on past trends for a specific area
and loads on his Tata 407, which he calls his godown. He goes and provides products according to
needs of the paanwalah with a transaction occurring there itself. Because of the addition of another
level of transportation the margin for the Paan-Wala reduces by 5-6%, but he gets the branded
products and sweets that he cannot procure from the salesman himself because of low volume
requirements. This is essential for him as it helps him satisfy the needs of the consumer and increase
his revenues. The products coming through channel are detergents, soaps, sweets, shampoos,
toothbrush and biscuits.
If any shortfall or backorders are there, those are carried additionally the following day. It is a daily
replenishment system that is to a great extent very accurate as per our interactions with the Paanwalah
and the sales persons. These daily interactions help reduce the demand supply gap as well as improve
sales, by building good customer relationships for the sales person. No credit or minimum credit
policy followed in this case.
The ordering pattern is similar to fixed time period model, where the shelf space acts an indicator for
maximum order and current inventory levels, the difference between them is replenished on the fixed
period.
Metric Comparison between Channels (APPENDIX 6)

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Inferences
The paanwalah system has revolutionized the mode of selling FMCG products and has shown, over
the years, immense capability in influencing buyers to choose one particular brand over another. Their
art of developing can be attributed some unique procedures that they follow while pushing products
and the way they work. Their plethora of expertise and capability in building and maintaining
relationships have not only made distributors rely on them but also provide them with sufficient
incentives to ensure they stay loyal. Some of the key inferences can be listed below:o
o
o

o
o
o
o
o

Most of the FMCG companies rely on Paanwalahs for their intense consumer connect
The Paanwalahs have evolved from their traditional stocking of satches to larger SKUs and
also offer a wide range of products like shampoos, biscuits etc.
The increasing regulations concerning the sale of cigarettes, have not discerned the retailers
as their reliability has shifted to FMCG products which offer marginally higher margins than
cigarettes.
There is an increasing need for stocking local brands to gain higher margins
The retailers understand the importance of maintaining a good relationship with customers,
distributors and wholesalers.
The high capability to influence buyers to shift from one brand to another
The higher interaction with customers gives them an advantage over modern retail stores
while interacting with price-sensitive customers
The retailers do not gain a significant margin when it comes to the products that it pushes and
hence they are more focussed towards stocking products which are fast moving so that they
can avail the discounts when purchasing in bulk

RECOMMENDATIONS
From the observations and inferences drawn from our study, it can be concluded that the product
portfolio of Prakash is limited only to candies, after mint, biscuits and confectionaries. But compared
to his neighboring paan-shops, he is losing out on certain products which could have enhanced his
margins. One of the lost opportunities is sale of cold drinks which is not possible because of the very
small area of the paan shop and there is not enough space for installing the refrigerator. Secondly, its
location gives its maximum revenues from the Raj palace customers whose demand for cold drinks is
met by Raj palace itself or otherwise met by the neighboring paan-shops. So to improve his profit
margins, there are certain recommendations which we can suggest for:
a) Sale of condoms:
There has been an increasing trend of countrys leading pharmaceutical companies to channel the sale
of condoms through paan shops. The primary reason behind that is the easy accessibility and one on
one interactions of the paanwalah with the customers. From the customer profile, we can see that the
customers of Prakash are primarily from lower strata and the age group is between 18-35.From
secondary researches, it was found that this particular segment of customers is highly sexually active,
has low disposable incomes and has a high condom usage rate. Again, these lower income groups are
highly sensitive towards price points. From the psychological point of view, there is a certain degree
of difficulty and hesitation on the part of customers to ask for a condom directly from the

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pharmaceutical stores. Moreover they have a tendency to buy unknown brands because they hesitate
to ask for the condoms by brand name from the shop and it is in the retailers discretion as to what
brand to give. So if condoms are sold through a channel which they trust, where their late night
purchase could be encumbered and where they can ask for the desired brands, there cannot be a better
option than the paanwalah. The fact that such channeling has been successful is evident form the fact
that 10% of TTK-LIG sales-marketers of Durex and Kohinoor condoms nationally come from
paanwalah. From the sale and distribution point of view, there are 5-6 medical stores nearby and the
initial business can be started by contacting with the medical representatives and salesman of those
stores. Moreover, sale of condoms does not require any license like other pharmaceutical products and
hence this idea is quite feasible.
b) Mobile Recharge coupons
Prakash can also venture into selling mobile recharge coupons which is appropriate for the category of
customers he serves since the penetration of online recharge practices among this lower income group
and customers with lower education level. The margin is 4-5% which is pretty decent and profitable.

APPENDIX
Appendix 1(Store Layout)

FRONT SHELF (Candies and


confectionaries)

LEFT SHELF (Biscuits and chips)

RIGHT SHELF(Biscuits)

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BACK SHELF (Cigarettes)

Appendix 2(Questionnaire)
For Paanwalah
1. For how long you had been running this shop and what is your monthly income?
2. Does anyone help you in your business?
3. What all do you stock in FMCG products?
4. Tell us something about the frequency and quantity of purchase of products and also about the product
preferences of the customers.
5. What is your approximate margin in different products?
6. Do you buy on credit?
7. Who supplies you the goods?
6. How is your relationship with the salesman?
7. How do you replenish your stock and how frequently?

For Salesman
1.

What is your name?

2.

Which company are you working for?

3.

What is the kind of products you offer this shop?

4.

Who is your distributor?

5.

How often do you take orders? When are the replenished?

6.

What is the delivery pattern used for replenishment?

7.

What are the incentives you get?

8.

How many shops do you go to on a weekly basis?

9.

How many times a day do you go to those shops?

10. Do you use electronic devices for order taking?


11. Is there a particular area you have to service?
12. Do you have to sell competitive products?
13. What offers you give to the paanwalah to put your products in the front?
14. Since the margins are so thin, how do you convince the retailers to buy your product?
15. What is the credit period you offer?
16. In case the retailer wants to order something because there is a sudden demand for it, how many days in
advance does he have to book the order?
17. How are emergency orders taken? What is the billing process?

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For Customer
1. What is your age and where do you stay?
2. When do you buy the shampoo and from where?
3. Why do you buy a sachet and not a bottle?
4. Do you buy only shampoo from here?
5. What are the other things you want the uncle to store?
6. Would you buy a new shampoo if he asks you to try once?

Appendix 3 (Distribution Channel 1)

Salesman

Factory

Distribution/
Stockist

Distribution
Centre

Inventory

On the spot
order &
delivery

Pull

Push
On the spot delivery and emergency orders

Appendix 4(Distribution Channel 2)


Day 0
Day 1
Day 2
Syncing data
and billing

Hand
Held
Device
Salesma

Factor
y

Distributio
n Centre

Places
order

Distribution/ Area Wise Milk


run Dispatch
Stockist

Push
Normal FMCG distribution Channel

Pull
Page | 12

Appendix 5(Distribution Channel 3)


Aggregated
forecasted
demand
Market
Delivery

Distribution/
Stockist

Distributio
n Centre

Factor
y

Same day
delivery of goods

Push

Pull
Wholesaler Channel

Appendix 6(Metrics comparison between different channels)


Metric
Categories of Products

Channel I
Cigarettes, mints, candies

Channel II
Biscuits, cakes, chocolates,
chips

Channel III
Detergents, soaps,
shampoos, sweets,
toothbrush

Companies

ITC, Marlboro

ITC, Parle G, Britannia

PnG, Colgate Palmolive

Flow of Money
Flow of Information
Margins for Paan-Wala
Accuracy of Forecast for
Channel
Backorders
Credit policy
POS data
Bills
Hand Held devices used
Scope for Emergency Orders
Revenue generation

On the Spot
On the Spot
High
High

Two days after


Next day by syncing of data
High
No need, Order basis

On the Spot
No way of tracking
Medium
Medium

Medium
NA
Available
Available
Yes
Yes
High (12-15%)

No scope
NA
Available
Available
Yes
No
High (12-15%)

High
Possible
NA
NA
No
Yes
Medium (8-10%)

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Appendix 7 (Ordering Policy)


Maximum Shelf Space for a Product

Fixed time period replenishment

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