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SMU Roll No. 511116196 Page 1 Master of Business Administration- (Semester 3) MK0010 Sales Distribution And Supply Chain Management ASSIGNMENT- Set 1 (Marks 60) Note: Each Question carries 10 marks. Answer all the questions. 1. Describe the role of distribution channel. List the factors in the selection of distribution channel. Ans: Distribution channel Meaning and Role: When a manufacturer, in order to deliver his goods and services to his final consumers, utilizes a set of extra-corporate institutions to affect this distribution, he uses, what is called, a channel of distribution. Distribution channels or intermediaries can be viewed as a set of interdependent organizations involved in the process of making a product or service available for use or consumption. It should be clear at the very outset and recognized that not only do marketing channels satisfy demand by supplying goods and services at the right time and place, quantity and price; they also stimulate demand through the promotional activities of the channel members. A channel of distribution therefore should be seen as a network that creates value for the consumer by generating possession, time and place utilities. Factors in the selection of distribution channel:- Selection of appropriate distribution channel is very important because several elements of the marketing mix, like price and promotion, are closely interrelated with and inter-dependent on the distribution channels. Each channel member involves some cost which enters into the price of the product that the ultimate consumer has to bear. The choice of the appropriate channels of distribution is not a simple task. Dougles M Lambert has suggested some criteria for selecting intermediaries as given in Table 1. Table 1: Criteria for Selecting Intermediaries Criteria Sub-criteria Size of prospective channel member Sales, financial strength Sales strength Number of salesmen, sales and technical competence Product lines Competitive products Compatible products Complementary products Quality of lines carried Reputation Leadership well- established Leadership Market coverage Geographic coverage Outlets per market area Industrial coverage Call frequency or intensity of coverage Sales performance Performance with related lines General sales performance Growth prospects

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SMU Roll No. 511116196 Page 1

Master of Business Administration- (Semester 3)

MK0010 – Sales Distribution And Supply Chain Management

ASSIGNMENT- Set 1 (Marks 60)

Note: Each Question carries 10 marks. Answer all the questions.

1. Describe the role of distribution channel. List the factors in the selection of distribution

channel.

Ans: Distribution channel – Meaning and Role:

When a manufacturer, in order to deliver his goods and services to his final consumers, utilizes a set of

extra-corporate institutions to affect this distribution, he uses, what is called, a channel of distribution.

Distribution channels or intermediaries can be viewed as a set of interdependent organizations

involved in the process of making a product or service available for use or consumption. It should be

clear at the very outset and recognized that not only do marketing channels satisfy demand by

supplying goods and services at the right time and place, quantity and price; they also stimulate

demand through the promotional activities of the channel members. A channel of distribution therefore

should be seen as a network that creates value for the consumer by generating possession, time and

place utilities.

Factors in the selection of distribution channel:-

Selection of appropriate distribution channel is very important because several elements of the

marketing mix, like price and promotion, are closely interrelated with and inter-dependent on the

distribution channels. Each channel member involves some cost which enters into the price of the

product that the ultimate consumer has to bear.

The choice of the appropriate channels of distribution is not a simple task. Dougles M Lambert has

suggested some criteria for selecting intermediaries as given in Table 1.

Table 1: Criteria for Selecting Intermediaries

Criteria Sub-criteria

Size of prospective channel member Sales, financial strength

Sales strength Number of salesmen, sales and technical

competence

Product lines Competitive products

Compatible products

Complementary products

Quality of lines carried

Reputation Leadership well-

established

Leadership

Market coverage Geographic coverage – Outlets per market area

Industrial coverage

Call frequency or intensity of coverage

Sales performance Performance with related lines

General sales performance

Growth prospects

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Management

Advertising and sales promotion

Sales compensation

Acceptance of training assistance

Transportation savings

Inventory Kind and size

Safety stocks

Reduction in manufacturer‘s inventories

Warehousing Supplied in files

Ability to handle shipments efficiently

Lot quantity costs

Prof William J Stanton has suggested a large number of factors in the choice of distribution channel.

Figure 1: Factors in the Choice of Distribution Channel

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2. Compare and contrast the various types of sales organization structures.

Sales organization development refers to the formal, coordinating process of communication, authority

and responsibility for sales groups and individuals. An effectively designed sales organization has a

framework that enables the organization to serve its customers. Once the sales people know what their

responsibilities are and who they report to, they can concentrate on doing their expected jobs to the

best of their ability.

Thus, a sales manager must recognise and deal with some basic problems faced by organizations, when

developing his own sales organization. The sales organization structure can be:

Line and staff components of organizations,

Formal and informal organizations,

Horizontal and vertical organizations,

Centralized and decentralized organizations

Line and staff components

Marketing organizations also feature line and staff components. A line function is a primary activity

and a staff function is a supporting activity. In a marketing organization, the selling function is the line

component whereas advertising, marketing research, marketing planning, sales training and

distributor relations are usually considered staff roles.

Although the use of the terms line and staff has been criticized in many quarters, the basic premise

behind them remains applicable to marketing organizations. A modern sales force has to receive

various types of support in order to accomplish its objectives. Advertising and sales promotional

support is needed to precondition the prospect to accept the salesperson's presentation; marketing

research and sales planning are required because they allow field representatives to concentrate their

efforts on the largest potential markets; in-house sales correspondents relieve the field force of activities

that would distract them from their basic efforts; and distribution, credit, and maintenance of personnel

ensure that the customer is satisfied with the purchase.

Figure 1.1: A Line Marketing Organization

Some firms operate with a simple line marketing organization such as the one shown in Figure 1.1.

Here, a marketing organization is simply the sales organization. This type of arrangement may be

satisfactory for small firms in basic industrial markets.

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Figure 1.2 demonstrates several key aspects of a large-scale marketing organization. First, the Chief

Marketing Officer is typically called the Vice President for Marketing or Director of Marketing, rather

than Vice President of Sales. The title change is indicative of the person's added responsibilities under a

line and staff structure. The Vice President for Marketing is in charge of more than just the field sales

force. The line and staff organization shown in Figure 1.2 indicates that all marketing activities have

been grouped together, suggesting that the basic tenets of the marketing concept have been accepted.

Figure 1.2: Line and Staff Marketing Organization

Second, staff activities report to the line position that they support. Distributor relations, sales

planning, sales analysis and sales training are considered to be directly supportive of the field sales

effort so these departments report to the General Sales Manager. By contrast, marketing research and

advertising are broader functions and they report to the Vice President for Marketing.

Formal and informal organizations

Every firm has a formal and an informal organization. The formal organization is a fixed set of rules of

intra organization procedure and structure that of the management whereas the informal organization

is often developed from the informal relationships existing within the organization. Also called the

grapevine, informal organization is basically a communications pattern that emerges to facilitate the

operation of its formal counterpart. Most formal organizations would be totally ineffective if it were not

for a supportive informal organization.

Figure 1.3 shows an informal communications pattern that might exist in a marketing organization.

Actual communications do not usually follow the formal organizational lines. This allows the formal

structure to operate efficiently.

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Figure 1.3: Informal Communication System in a Marketing Organization

Consider the case of a field salesperson who is responsible for collecting certain competitive

information such as prices and trade discounts. If this information were forwarded through the formal

organization (Figure 1.4) the data would be so backdated that it would be useless to the management.

The informal communication system, however, allows the information to be transmitted directly to the

director of marketing research. Similarly, consumer complaints over delays in correcting billing errors

can be mitigated when the district sales manager directly contacts the head of accounts.

Figure 1.4: A Lengthy Formal Communications

The development of an effective sales organization requires that informal relationships and

communication patterns be recognised as being equally useful in accomplishing sales objectives. They

should be encouraged to the extent that they improve organizational efficiency.

SMU Roll No. 511116196 Page 6

3. Describe the term “physical distribution management”. Discuss various components of

physical distribution management.

Ans: Physical Distribution Management (PDM) is concerned with ensuring the product is in the right

place at the right time.

It is now recognized that PDM is a critical area of overall supply chain management. Business logistical

techniques can be applied to PDM so that costs and customer satisfaction are optimized. There is little

point in making large savings in the cost of distribution if in the long run; sales are lost because of

customer dissatisfaction. Similarly, it does not make economic sense to provide a level of service that is

not required by the customer but leads to an erosion of profits. This cost/service balance is a basic

dilemma that physical distribution managers face.

The reason for the growing importance of PDM is the increasingly demanding nature of the business

environment. In the past it was not uncommon for companies to hold large inventories of raw materials

and components. Although industries and individual firms differ widely in their stockholding policies,

nowadays, stock levels are kept to a minimum wherever possible. Holding stock is wasting working

capital for it is not earning money for the company. To think of the logistical process merely in terms of

transportation is much too narrow a view. Physical Distribution Management is concerned with the

flow of goods from the receipt of an order until the goods are delivered to the customer. In addition to

transportation, PDM involves close liaison with production planning, purchasing, order processing,

material control and warehousing. All these areas must be managed so that they interact efficiently

with each other to provide the level of service that the customer demands and at a cost that the

company can afford.

Components of physical distribution management

There are four principal components of PDM and these are:

Figure 2.1: Principal Components of PDM

Order Processing: Order processing is the first of the four stages in the logistical process. The efficiency

of order processing has a direct effect on lead times. Orders are received from the sales team through

the sales department. Many companies establish regular supply routes that remain relatively stable

over a period of time ensuring that the supplier performs satisfactorily. Very often contracts are drawn

up and repeat orders (forming part of the initial contract) are made at regular intervals during the

contract period. Taken to its logical conclusion this effectively does away with ordering and leads to

what is called ‗partnership sourcing‘. This is an agreement between the buyer and seller to supply a

SMU Roll No. 511116196 Page 7

particular product or commodity as and when required without the necessity of negotiating a new

contract every time an order is placed.

Order-processing systems should function quickly and accurately. Other departments in the company

need to know as quickly as possible that an order has been placed and the customer must have rapid

confirmation of the order‘s receipt and the precise delivery time. Even before products are

manufactured and sold the level of office efficiency is a major contributor to a company‘s image. When

buyers review their suppliers, efficiency of order processing is an important factor in their evaluation.

Inventory: Inventory, or stock management, is a critical area of PDM because stock levels have a direct

effect on levels of service and customer satisfaction. The optimum stock level is a function of the type of

market in which the company operates. Few companies can say that they never run out of stock, but if

stock-outs happen regularly then market share will be lost to more efficient competitors. The key lies in

ascertaining the re-order point. Carrying stock at levels below the re-order point might ultimately mean

a stock-out, whereas too high stock levels are unnecessary and expensive to maintain. Stocks represent

opportunity costs that occur because of constant competition for the company‘s limited resources. If the

company‘s marketing strategy requires that high stock levels be maintained, this should be justified by

a profit contribution that will exceed the extra stock carrying costs.

Warehousing: Many companies function adequately with their own on-site warehouses from where

goods are dispatched direct to customers. When a firm markets goods that are ordered regularly, but in

small quantities, it becomes more logical to locate warehouses strategically around the country.

Transportation can be carried out in bulk from the place of manufacture to respective warehouses

where stocks wait ready for further distribution to the customers. This system is used by large retail

chains, except that the warehouses and transportation are owned and operated for them by logistics

experts. Levels of service will of course increase when number of warehouse locations increases, but

cost will increase accordingly. Again, an optimum strategy must be established that reflects the desired

level of service.

Transportation: Transportation usually represents the bulk of distribution cost. It is usually easy to

calculate because it can be related directly to weight or numbers of units. Costs must be carefully

controlled through the mode of transport selected amongst alternatives, and these must be constantly

reviewed.

The patterns of retailing that have developed, and the pressure caused by low stock holding and short

lead times, have made road transport indispensable. When the volume of goods being transported

reaches a certain level some companies purchase their own vehicles, rather than using the services of

haulage contractors. However, some large retail chains have now entrusted all their warehousing and

transport to specialist logistics companies.

For some types of goods, transport by rail still has advantages. When lead-time is a less critical element

of marketing effort, or when lowering transport costs is a major objective, this mode of transport

becomes viable. Similarly, when goods are hazardous or bulky in relation to value, and produced in

large volumes then rail transport is advantageous. Rail transport is also suitable for light goods that

require speedy delivery (e.g. letter and parcel post). Except where goods are highly perishable or

valuable in relation to their weight, air transport is not usually an attractive transport alternative. For

long-distance overseas routes air transport is popular. Here, it has the advantage of quick delivery

compared to sea transport, and without the cost of bulky and expensive packaging needed for sea

transportation, as well as higher insurance costs.

SMU Roll No. 511116196 Page 8

4. Describe the motivational factors used to motivate sales team.

Ans: Motivation is the force within us that directs our behaviour. Motivation is unique to every

individual. A sales manager may adopt different methods to motivate his sales force. He should

examine individual needs and use them as the basis for motivating his salespersons.

According to Maslow, “Only unsatisfied needs motivate an individual”.

There are seven ways to motivate team:

1. Involve them: Many employees want to be involved in the ongoing development and progress of

their company. Plus they often have insightful ideas that can make a significant difference in the

company.

2. Communicate: Use memos, email, telephone, and one on one and group meetings to keep your team

apprised of changes, updates, new products, etc.

3. Celebrate individual and team performance: Provide positive reinforcement, issue awards, use a

corporate newsletter to highlight specific achievements.

4. Set challenging goals: People strive to achieve what is expected of them, if you set challenging goals

your team will work hard to accomplish them, providing of course, they are realistically attainable.

5. Give them the tools to succeed: No team will stay motivated if they do not have the necessary tools

required to do their job. This includes; equipment, internal support, inventory, marketing materials,

training, etc.

6. Manage poor performance: Your team expects you to manage individuals who do not perform to

standard. However, many managers ignore these situations because they are afraid to deal with them.

Hoping instead that the situation will resolve itself. It never does and this “blind” approach affects

profitability, causes higher turnover, and generates low morale.

7. Believe in your people: The majority of people want to do well; very few individuals approach a job

with the intent of screwing up. Yet, many managers run their business thinking that employees must be

treated with a “watchdog” mentality. They install hidden cameras, monitor email, and set up procedure

that requires employees to get multiple approval signatures for decisions.

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5. Critically analyse the role of employment agencies and internal transferring.

ANS: The role of employment agencies and internal transferring is analysed below:

Recruitment sources:-

Figure: Sources of Recruitment

Frequently used sources of salesmen are as follows:

Promotion

The sales person is promoted from one department to another or from one level to another with more

benefits and greater responsibility based on efficiency and experience.

Recommendation

Many organisations have structured system where the current employees of the organisation can refer

their friends and relatives for some position in their organisation. Also, the office bearers of trade

unions are often aware of the suitability of candidates. Management can inquire these leaders for

suitable jobs. In some organizations these are formal agreements to give priority in recruitment to the

candidates recommended by the trade union.

Hiring of Ex-employees

Retired and Retrenched employees may also be recruited once again in case of shortage of qualified

personnel or increase in load of work. Recruitment such people save time and costs of the organisations

as the people are already aware of the organisational culture and the policies and procedures.

Advertisements

Advertisement is a non personal form of promotion that is delivered through selected media.

Advertising is a method of mass promotion in that a single message can reach a large number of

people. Advertisements are both a source of recruits and a method of reaching them. Newspapers,

magazines and trade journals are the most widely used media for advertisements. Advertisements

ordinarily produce large number of applicants in a very short time and at a low cost.

Employment agencies

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An employment agency is an organization which matches employers to employees. To use this source

effectively, sales manager must ensure that the agency understands the company and its needs

thoroughly. Whenever an agency is used, it should have the clear understanding of the job's objective,

job specifications and the literature about the company.

Educational institutions

This source includes colleges, universities, technical and vocational institutes. This source is, tapped for

getting qualified people for entry level positions in sales. Students from technical/ vocational institutes

or with specific subjects like Physics, Biology, Hotel Management are recruited by the companies,

where selling requires specialised knowledge and skills for that particular industry. Their main

limitation is lack of selling experience.

Salesmen of non-competing companies

Individuals currently employed as salesmen for non-competing companies are often the attractive

recruiting prospects. Such people already have selling experience, some of which may be readily

transferable. A firm that hires salesmen from other companies should be especially careful to

determine, why the man is interested in changing jobs and why he wants to work for the hiring

company.

Salesmen of competing companies

It is considered unethical to recruit the competitors' salesmen actively, after he has spent the money on

hiring and training them. Furthermore, these salesmen may be able to divulge company secrets to the

competitors. On the one hand, they know the product, customers and competitors. They also are

experienced sellers and, therefore, no money is required to be spent for their training. On the other

hand, it is a costly source as generally, higher pay must be offered to them to leave their organization.

Internal transfers

Internal transfer is like if you are working in any other department of the company and transferred to

sales department as a salesman. This is generally used along with the other recruitment sources.

Transfers are good prospects for sales positions, whenever product knowledge makes up a substantial

portion of sales training.

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6. List the roles and responsibilities of a sales manager.

ANS: Sales Manager: Role and Responsibilities

The sales manager is the most important person in a sales organization so; all activities are based on his

functions and responsibilities. Following are some of the principal duties of a sales manager:

Organising sales research, product research and such other research activities.

Getting the best output from the sales force under him.

Setting and controlling the targets, territories, sales experiences, distribution expenses, etc.

Advising the company on various media, sales promotion schemes, etc.

Monitoring the company's sales policies.

1. Sales Manager as sales coordinator

The sales manager performs the function of a coordinator and ensures that the other departments in the

company are well informed of sales activities so that they can produce what is required, when it is

required and whether the same can be produced with the existing facilities or it requires changes and

so on.

The sales manager also carries out coordinating work with the distribution network.

2. Sales Manager as controller

Sales manager should act as per the objectives set by the organization and exercise control over his staff

so that they may look for advice and may give their best efforts to bring results. He should analyze

present condition of the firm, make plans for future and find ways to achieve those plans.

3. Generating profits

Sales department is responsible for the sales of the products at the best available prices in the given

circumstances. Salesperson produce volume sales as per targets, and he sell the product at a price

which may generate profit for the company. After all it is positive financial results that add position

and power to the sales manager and bring credit to the sales department.

4. Sales manager skills

A sales manager should possess following skills:

Active listening: Giving full attention to what other people are saying, taking time to understand

the points being made, asking questions as appropriate, and not interrupting at inappropriate

times.

Speaking: Talking to others to convey information effectively.

Mathematics: Using mathematics to solve problems.

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Time management: Managing one's own time and the time of others.

Service orientation: Actively looking for ways to help people.

Persuasion: Persuading others to change their minds or behavior.

Social perceptiveness: Being aware of others' reactions and understanding why they react as they

do.

Reading comprehension: Understanding written sentences and paragraphs in work related

documents.

Monitoring: Monitoring/Assessing performance of self, other individuals, or organizations to make

improvements or take corrective action.

Negotiation: Bringing others together and trying to reconcile differences.

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