ABFL Akiz Biri Factory limited is one of the large and old national private sector enterprises operating in Bangladesh for long fifty-two years. ABFL performs a wide and diversified range of activities which start from tobacco growing to marketing of Biri both national and international market.
ABFL is well-structured organization based on modern management and most sophisticated technology. For smooth functioning ABFL segregated its total function under the head of the departments with appropriate authority and responsibility. Is a sister concern of “Akij Group” ABFL dominates the national medium segment tobacco market by its product.
ABFL is committed to earn profit by marketing the best quality Biri In order to achieve these objectives it adopts various modern technologies and in traduce various modern marketing techniques and tools. But, every attempts go in vain if the products are not reached to the customers and consumers at appropriate time, place and price is distribution and it is done by an independent business house being under strong command and control of ABFL who is called distributor. (DTI) appoint distributor. This distributor plays a crucial role in total marketing efforts. Various distribution elements and company prescribed modern technique are being following for effective and sound distribution.
In order to have an effective distribution system time to time evaluation of the existing system is a must. The close monitoring and performance assessment led the organization towards success. This report is an attempt to evaluate the effectiveness of distribution system and reveal the relevant facts.
Introduction To ABFL
ABFL is the largest native tobacco company in Bangladesh. It is the oldest national tobacco Company in Bangladesh. ABFL is one of the industry introducing quality in Bangladesh. It is sole proprietorship business, owned and controlled by the great industrialist Shaikh Akij Uddin. He is also the founder of prominent group of industries named “Akij Group”. Among all the tobacco Industry it is highly cash solvent and fully. It is highest taxpayer industry among all national industry.
ABFL has a long heritage in this its business in 1992 and in the early life of its business it was in very small scale. Before liberation war. Before 1997 it usually serves the local need of Jesore and it’s surrounded area. In 1971 Bangladesh was born and Added new dimension in its business. In April 1978 Dhaka tobacco industries Ltd. Purchase a Govt. Tobacco industries from Bangladesh Govt. By 80 taka. At that time its production capacity was one crore fifty lack sticks per month, and after expanding its capacity by Dhaka tobacco sticks per month. Last 2002-2003 financial year Dhaka Tobacco industries Ltd. has paid as tax Tk. 501 crore
Graph 3.5 Sales Performance of Dhaka Region & Contribution to National Sales Volume.
1.1 Background Of The Study
For the completion of internship it requires to submit a report on a topic in which organization, Academic Intuition and the Internee have an interest. Management of ABFL, head office had a special interest in evaluating their distribution system in Dhaka city. As the management of always wants to have an effective distribution system in order to serve it’s customers and consumers with the maximum possible event of their satisfaction. During the period of Internship Company Management was looking to know the current position of Company’s distribution system in Dhaka city Management assigned to prepare a report on the effectiveness of distribution system of it’s product in Dhaka city. It was proposed to “Institutional Supervision” (See Annexure:1). After Institutional Supervisor is approving it on the basis of consent of Organizational Supervisor and Institutional supervision the title of the study was selected as ABFL. this report has been prepared after the completion of the assigned study.
1.2 Statement Of The Problem
Akij Biri Factory Ltd prime objectives is to make their products available to the easiest and the quickest access of the consumers. Since cigarette is Fast Moving consumer Good (FMCG) and it’s consumers are vastly scattered. So, its distribution is a complicated task. In distribution these cigarettes there are two focal points for which the management is utmost concerned. To ensure the brand presence in every possible door steps of the consumers and to ensure the availability of the brand every time when the consumers need and want Dhaka is the largest city of Bangladesh and availed market. ABFL Dhaka Tobacco products Dhaka is a rapidly expanding market. ABFL is looking to consolidate it’s position here and to exploit the future potentiality of the market by extending quality serviced it’s consumers. to achieve this end a well structured distribution system is to run by ABFL. This study attempts to reveal whether he existing distribution regard some selected variables have been set to measure the effectiveness of the distribution system.
1.3 SIGNIFICANCE OF THE STUD
Marketing is always dynamic practice, which depends on the movements of various natural, social, and economic variables Now a days an effects of the political change, trade liberalization and global expansion of electronic media there have been a great movement in people’s level of knowledge and consciousness. This change has brought a change in the concepts of and practices of marketing. The Corporate giants the world are trying to come to a close contact with the consumers a much as possible. For this reason the companies are establishing such a marketing system that suits with the nature of the product stand the Consumer class Bangladesh. ABFL deals in such a product which consumers are widely spread all over the country in such a fashion that it is impossible for the Company to go the consumer directly. Another considerable point si that, due to legal barrier the ABFL Firms cannot use the electronic media for promoting their products. As a result Biri companies tries to go to the consumers through the shoppers. Taking the advantage of the Free market economy there is a strong chance for entrance of other big corporate giants of World cigarette industry n any market at any time. Excepting this, any company survival and growth is fully dependent on the marketing system which distribution system plays a pivotal role by taking the responsibility of reaching the product physically to the customer and consumers. ABFL Ltd. (DTI) is passing through a transitional phrase where it is thinking and working to bring a radical change in its marketing system. In this regard the evaluation of existing distribution system will give a support to the distribution system. As a result this study could be taken as a model study of a distribution system.
1.4 OBJECTIOVES OF THE STUDY
This study has conducted to focus on he following key objectives and their relevant facts.
© To observe the existing distribution system of ABFL
© Evaluation of the effectiveness of the existing distribution system of ABFL products in Dhaka city.
© To dig out problems association with the existing distribution system of Dhaka city.
© To provide suggestions for probable solution of the distribution related problems that would help the Company Management, Existing Distributor and other interest groups to build up a need based appropriate distribution system.
Scope of the Study
This study was micro study. this study has been confined in Dhaka are. Only selected outlets and Distributor within this area have been conducted under the guidance of Dhaka Regional Trade Marketing & Distribution Office of ABFL Ltd. (DTI).
Statement of the Hypothesis
This study has assumed that, Distributing system of Akij Biri Factory Ltd. Is not functioning effective in Dhaka city. This study has taken such initial hypothetical stand in the light of discussion with the Officials ABFL, inspection of distribution related office records and personal observation on of the Researcher.
Methodology is the outline of the entire work. It consists of steps that should be covered in a organized and systematic fashion in order to complete the week. Methodology differs with the nature of the study. An appropriate methodology has to be adopted for completing a work efficiently and effectively. The core objective of this research is to Dhaka city. The study is absolutely of micro nature, which is based on field survey and personnel observation. For this purpose this study has been conducted mainly ion the retail outlet of Dhaka city. In order to complete this micro study the following steps have been covered.
FIXATION RESEARCH TOPIC
SELECTION OF SAMPLE
CONSTRUCTING OF QUESTIONNAIRE
PRESENTING OF QUESTIONNAIRE
FLECTIONS OF DATA
PROCESSING OF DATA
ANALYSIS AND INTERPRET
FINAL REPORT PREPARATION
Selection of the sample:
A sample is a reflection of the whole population and it bears the maximum features of the population. In order to make the researcher work hardly, valid and reliable it is essential that a sample to be selected on representative basis. About Thirty five hundred (3500) Retail outlets are operating in different corners of Dhaka Metropolitan City, harmony among them cannot be establish and as a result, inferences can not reliable in such a case. In order to keep the reliability of the research and to keep the harmony each corner of Dhaka city. The dates of visiting the Retailers have been chosen on random basis. The sample taking is shwwn in below in below diagram.
Sources of Data Collection
Determination the source of data is an important part of any research both Primary Data and Secondary Data have been used. Primary data have been collected from the Retailers and the Distributor. Books and journals have also been used for collecting secondary data.
Construction of the Questionnaire
A questionnaire is a schedule composed of a number of coherent questions on a particular topic. In order to produce a reliable questionnaire efforts have been made to collect and go through all the materials available on the current topic. Two sets of questionnaire have been constructed. One is for the Recallable and another is for the Distributor. Each questionnaire contains both Structured Non Disguised and Non Structured-Non Disguised questions for the Distributor contains five (5) questions. No scale has been used here.
Protesting of Questionnaire
After designing the questionnaire it was considered essential for qualitative investigation to pretest the questionnaire. The helped the investigator to carry on his work with clear notion and confidence.
Only the questionnaire for Retaliates has been protested. For protesting ten (10) questionnaire were given to ten (10) Retailers i. e. to the 10% of the total sample of retailers. The questionnaire has been accepted excepting some alteration in the presentation of the questions, which the respondent could not follow. The protesting helped the Researcher in forming the Final questionnaire to collect the requisite information. Pr attesting really helped the investigator to make study realistic and meaningful.
Finalizing the questionnaire
On the basis of protesting the Research farmed the final questionnaire. Some changes have been brought on the questions, which are summarized as under.
* Complex sentences have been changed into simple forms.
* Some questions, which were not there in the Try Out Questionnaire, have been added to make the questionnaire more intelligible to the Retailers.
A set of Final Questionnaire for the Retails is presented in ANNNEXURE: I and for the Distributor is presented in ANNEXURE:
Collection of Data
After preparing the final questionnaire the researcher approached oto the Retailers and to the Distributor. Primarily, in case of every Retailer they could not understand the purpose of the study. Thus they were reluctant to impart their views regarding the questions approached to them. But later they started to give information, once they were convinced that the information were being gathered only for academic purpose and forr the purpose of their well being.
In total one hundred and ten (110) Retailers the Researcher approached, one hundred (100) responded to the questionnaire fully, ten (10) responded incompletely due to their disinterest. the Researcher filled himself all the questionnaire for retailer himself. Questionnaires for the Distributor was administered by the Researcher himself and filled it by own. researcher used personal used personal observation every where he went.
Processing of Data
A careful and systematic processing of data facilitates the comparison and renders it for further statistical analysis and other interpretation. Data professing includes Editing, Coding Classification and Tabulation.
Editing was careful scrutiny of the filled u questionnaires to detect errors committed by the Researcher himself or caused by supplying inconsistent or wrong information by the respondents. Filling fresh questionnaires instead of erroneous questionnaires rectified the errors.
Once the data are collected and edited it edited becomes necessary to organize the data in such a form that it becomes possible to analyze it. this is done through classification. After completion of editing the data was classified into various groups like route wise outlet served. Brand reach route Day wise Brand call Productivity etc.
After the classification of the data it becomes necessary to tabulate t properly for further analysis and interpretation. The whole data have been tabulated.
* On the basis of respondents
* On the basis of statements
Analysis And Interpretation
The Data so collected and tabulated were duly shifted for utilizing it to construct a number of tables, which have been analyzed in order to achieve the objectives of the study.
The Respondent wish Mean Score led to know the Average Mean Score obtained by a particular Brand, Opinion for improvement, Satisfaction level regarding existing system.
Percentages of the total score have been calculated to find strike rate, Brand call productivity, Brand reach, Out of stock situation.
Here in this study all analysis and interpretations have done mainly on the key brand due to the interest of the Company management. the key brand is Akij Biri.
Final Report Preparation
The researcher getting support all the collected data & consulting with institutional supervisor has prepared a final consolidated report.
Limitations of the Study
This study has been conducted keeping the following constraints in consideration, which were inevitable. Those bring the reliability of the report into question to some extent.
Maximum retailers are illiterate. They don’t keep any systematic record of their business. as a result they gave facts and figures from their memory which might not be true always.
Unstable political situation tremble the market heavily as a result when the study was conducted the market was not always in normal position.
Concept Of Trade Marketing & Distribution
Marketing is the performance of activities that direct the flow of goods services from the producer to the consumers and accomplish the firm’s objective. Under the coverage of Marketing there are various activities like product related activities, price related activities, activities related to reach the product to the customers, activities related to the promotion of the product and other ancillary activities like research etc. To support the core activities. These activities have a common destination. i. e. to achieve the organizational objective by satisfying the consumers or users in the best manner. With the passage of time and development of science and technology needs, wants, values and outlooks of people are being changed. This has a tremendous impact in bringing change in organization’s objectives. As a basic objective profit earning is being remaining intact. But earning this profit is getting hard as the consumers are in better position to take there buying decision due to the change in environment. In the changed environment oil practices do not give the desired result. In order to achieve the desired result the organizations also have to develop new practices. Plying in this way a new strategy in marketing. An American University Professor Hans Neidermann has promulgated trade Marketing & Distribution in late eighties. This strategy has been put into practice by world famous business houses like, PEPSI co, IBM, etc.
Trade marketing recognizes the sustainable competitive advantage in getting closer to the consumers and staying there. Trade Marketing is the adaptation of products, logistics and brand marketing policies in away that best meet the needs of particular trade channels and strategic customers brand Marketing Policies refers to activities which and intangible values to the brands, Distribution is the flow of product or services from the producers to the customer or from one channel member. Distribution is a vital and core service and it will always play a crucial role in selling the products to the customers or consumers. Therefor efficient distribution is a must to achieve organizational objective. Particularly incase of ABFL distribution is a two fold exercise of Distributing to the outlets and Distributing in the outlets. Distributing to the outlets refers to mere physical transfer of Products to the placing the product inside the outlets in such a manner that the products can come visible to the customers or consumers who come to the shop or pass by. It ensures that the products are physically available to the consumers or customers. Trade Marketing & Distribution is a strategy of marketing where organization strive to achieve it’s objective by supporting the trade along side general business relationship. This a Win-Win. situation. Her organization first sells it’s Product to the traders, then provides some Intangible value added and indirect service to the traders to ensure to ensure their maximum sale.
Particularly in ABFL the mission of Trade Marketing & Distribution is to achieve the status of preferred supplier with all trading partners in the trade sector within which tobacco products are sold. This achieved by being a volume supplier of branded products pursuing a policy of mutuality in all trading relationships and delivering to the consumers and own business an improving contribution and percentage profit admeasured against gross sales. The foundation stone of Trade Marketing & Distribution strategy is developing the best trade marketing people to guarantee the success.
Channel of Distribution
Akij Biri Factory Ltd. is the largest manufacturer of tobacco products viz. Biri, Pipe tobacco in Bangladesh. Is the market leader in tobacco product market of Bangladesh. Markets it’s products by own In order to do it ABFL has well structured distribution channel.
ABFL produces Biri in their own factory in Dhaka and primarily stores it in it’s godown in Dhaka. According to the allocation made by marketing Department there are ten (10) Depots under (4) regions. The Biri remain in the depots until the distributors take them. Several Distributors take stocks from one depot.
Distributor is an independent business firm nominated by ABFL with an authority to distribute ABFL products within a specific geographical location. Distributorship is given o any firm by the Company basing on some criteria like financial capacity, There is written contract between the Distributor and the Company and Distributor of Bangladesh Tobacco Company Ltd. (DTC) cannot deal in Biri of any other company. Distributor has to abide by all advice and instructions regarding distributor activities records as specified by the Company Management time to time. Distributor has to keep distributors records as specified by the Company Management Activities of the Distributor are directly monitored and supervised by the Territory Officer. Distributor by no means can carry out his activities outside his specific geographical location. Distributors purchase stoke from the Company at a rate called Distributor’s Rate. Distributors cannot take stock as will. The Territory Officer in chare of that area determines a Sale Forecast for a specific distributor area for a specific time period normally for one month. Sales Forecast is done by brand wish. Monthly Sales Forecast is divided into four weeks, then two or three dates in a week are fixed for the distributor to take stocks. They are called lifting days in a week. The weekly Sales Forecast is divided by lifting Days in a week and that amount of stock the distributor can lift in a lifting Day. Distributors has to pay all cash, there is also a little provision for credit.
Then, distributor delivers this stock to the Retailers and Whole seller. Distributors cannot deliver all the stock in the market he has to keep Stock Coverage Ratio which is alike to Safety stock level to fight a contingency, which is equal to two days, estimated sales. What amount of deliver is to be made to the Retailers and Whole seller, is also decided by the Company M management. Distributors then make a plan for providing service being under the supervision of Company Official (Territory Officer). Total Distributor Area is divided into some segments, which are called Sections. Some days in a week that may be any number are fixed for the distributor operation there. This total plan is called Route Plan.
Distributor does delivery to the retailers of a section in fixed days of the week. A Sales Representative who is a Distributors employed personnel goes to the market with Branded Vehicle for giving service there. Salesmen makes delivery to the Retailers.
Distributor delivers stock to Whole seller also seller is an independent intermediary who purchases stock from the Distributors at company fixed Rate. Whole seller is normally a big store with strong financial condition. One reason is, there are some areas where the Distributor cannot give direct delivery but that areas are good markets. To serve the Retailers of those areas company appoints Whole seller in some strategic and convenient points who normally purchase stocks from company at Company Rate store them and sell them to the retailers of that area at Company Rate Excepting these in every section there is no one more big store to whom the company gives a substantial quantity of stokes thinking that the Retailers of that section will be able to buy from them in emergencies when the company cannot make direct delivery. They are called Route Whole seller. They are given stock at Retail Rate. All transactions between the Distributor and Whole seller is done in cash. But, there might be transaction between Retailer and Whole seller in credit. But, this is unofficial.
Dhaka Distributory Market is under the distributorship of M/S Miami International. This market ranges from Farmgate-Mohjammadpur-Kamrangirchar-Dhaka Medical. M/S Miami International lifts stocks three (3) day in a week. Three are about 3350 retail outlets in Dhaka (Dhanmondi) Distributors Market.
Concept Of Effective Distribution System
Marketing is a social and managerial by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with each other. According to J. Mc Carthy, Marketing is performance of business activities that direct the flow of goods and service from producers to consumers or user n order to best satisfy the consumers and understandable manner. According to P. Kotler Marketing s getting the right goods and services to the right people, at right places, at right time, at a right price with the right communication and promotion. From the above discussion it comes out that reaching good or service to the consumer from the producer is one of the prime tasks of Marketing.
Distribution refers to the flow of title of the goods and services or physical flow of good and services from the Producers to the target group who may be customer or consumer. Distributing performs the prime task of marketing. Distribution system refers to a well-organized set of activities backed by appropriate logistic support by which goods and services flow from the producer to the target group. This flow includes both physical and title flow of goods and services. Prime objective of distribution system is to reach he goods and services to the target group. But in order to keep compliance with the concept of marketing goods and services to be reached to the target group at the right time when they need at the right price. These phenomena of a distribution system reflect an ideal distribution system.
Effectiveness refers to the extent to which the organizational goals are attained or the extent to which organizations achieves their missions and objectives within a given set up of resources. According to Koontz, Effectiveness is the achievement of objective. Effectiveness reflects the total performance level.
Effectiveness of distribution system means the extent of achievement of distribution objectives. Evaluation of effectiveness of distribution system means examination critically how much distribution system is achieving the objective. Particularly, in case of ABFL distribution objective is to reach the right amount of goods, in right time i.e. when they are needed, at the right price to the customers. In order to achieve these objectives. Bangladesh Tobacco Company Ltd. (BTC) gives emphasis on some related events.
So while evaluating the effectiveness of distribution system of ABFL both core and related events to be considered. In this regard Bangladesh Tobacco Company Ltd. (BTC)’s vocabularies.
Distribution variables are as follows:
- Distribution Coverage.
- Strike Rate.
- Brand Call Productivity.
- Brand Reach.
- Out of Stock Situation.
- Service Frequency.
- Stock Coverage Ratio.
- Market Rate.
- Retailers Purchase Ratio.
- Distributor’s Manpower & Logistics.
The above stated variables have set standards when the standards are met the distribution system is termed as effective by Dhaka Tobacco Industries Ltd. (DTI)’s Management. The variables are discussed elaborately later.
Distribution coverage refers to the extent of existence of distribution service in a specific geographical area. Distribution coverage is a crucial consideration in evaluating the effectiveness of a distribution system. At any distribution system always targets to serve the market to the maximum possible extent of the target market for the product. Rendering service is the prime duty of any distribution system as until the market is served to the maximum plausible extent nothing can be achieved. So, any effective distribution system has to sure the maximum possible coverage in the market in order to be termed as and effective distribution system. Primarily Distribution coverage is very much related with the success of the market acceptance of any product and the success of the promotional drive taken for any product outlets to draw the attention of the market. ABFL deals in tobacco products, which is a Fat Moving Consumer Good (FMCG). The market of it’s product is very much wide spread all over the country which ranges from metropolitan city location of wants to reach it’s products in each and every possible single outlet n a specific geographical area. Due to the legal restrictions tobacco products are n
allowed to take the chance of promotional drives through electronic media, which has the most wide spread coverage. Dhaka ABFL wants to make up this short coming by placing its products when they come in the outlets. POS materials include poster, stickers, bunting and etc. Due to these implication while evaluating the effectiveness of distribution system Distribution Coverage demands substantial concentration. Distribution coverage is measured by determine how many outlets are under service out of the total outlets in a specific geographical location in a specific time. On an average ABFL wants a distribution Coverage of major part of Dhaka city market.
Service Frequency refers to the number of time service is provided to the markets in a specific time frame-which is normally in week. Service Frequency is very much related with the effectiveness of distribution system. Prime goal of any distribution system is to supply the right amount of goods to the market in right time. Right time refers to when the customers need stock. If goods mare not delivered to the sellers when they need them supply update with the needs of the customers company has fixed some definite days for allocation where the distributor will make delivery only at those days. Attending those days is an important indicator of effectiveness of distribution system. Another those angle of Service Frequency is fixed by ABFL for a location basing on the analysis of demand for the product in that locality. So, to evaluate the effectiveness system it is necessary to reveal whether current Service Frequency is sufficient for the customers or not. Service Frequency is an important indicator of effective distribution system, so, it has been emphasingly considered in this study.
One of the main objectives of any distribution system is to present the brands in the outlets. The companies dealing in various geographical locations may have biases to different particular brands. There are some locations where all brands have acceptance in different extents. Where the main target of the distribution system is to make the product available to the customers and consumers it has to ensure the Brand Reach which refers to how many brands are present in the particularly market in a particular time. It is very much important to evaluate the effectiveness of distribution system. Particularly in case of evaluation of effectiveness of distribution system of ABFL product in Dhaka city Brand Reach is very much important consideration because ABFL deals in completed brands of Dhaka ABFL has a widespread market all over the country where in some locations some brands are thong already And some where the company wants to create new market for some brands. For this reason the management wants the maximum brand presence. Particularly, Dhaka market is omnivorous market by the nature of consumer demand. In this market Company Management wants the presence of all brands. The Management wants 90%+ So, intruder to evaluate the effectiveness of distribution system in Dhaka market Brand Reach is a key focal point
Strike Rate id the percentage of the successful calls to the Retailers among the total outlets visited by the sales man in a specific geographical location in the specific time. Strike rate refers to the number of the outlets who have taken stock among the total number of outlets visited by the salesman in a specific geographical location in a specific time. This is a normal phenomenon that some Retailers don’t need stock or do not have enough cash to take stock or keep the shop close when the salesman visit the outlets. in these case they do not take stock. As a result the outlets remain stock less which is not a sign of effective distribution system, as the prime target of any distribution system is to make the stock available in the outlets every time. So while evaluating the effectiveness of the distribution system Strike rate is a crucial considerable factor. Particularly, in the cash of ABFL product Strike Rate is very much crucial because Biri is a fast Moving Consumer Good FMC which is sought by the consumers very frequently as well as their delivery of the salespersons. As a result Strike Rate is an indicator of distribution, capability system. As result Strike Rate is an indicator of effective distribution system. ABFL naturally wants the maximum possible STRIKE rate in any geographical location in any time. 80%+ Strike Rate is considered as satisfactory for ABFL in Dhaka distributor market.
Brand Call Productivity
Dhaka Tobacco Industries Ltd. (DTI) deals in various brands of cigarette Among the existing brands the Company has marked three viz. NAVY, LEGEND, 5 STAR as Critical Brands or Drive Brands Company Management gives maximum concentration on Critical Brands to establish them in the market and to ensure their continuous growth as a long term business strategy of the Company which is related with growth and survival of the Company. These brands have been selected considering their present market share and popularity. Company Management always gives top priority in promoting Critical Brand in every Called & Served outlets. Brand call Productivity refers to the rate of the presence of Critical Brand wants the presence of in every called Brands in Called & Served outlets in a specific geographical location in specific time. Brand call Productivity is calculated separately for each of the critical brands. Each of the critical brands has different market acceptance in different locations. As a result Expected Brand Call Productivity differs from location to location. Particularly Dhaka Tobacco Industries Ltd. (DTI) gives emphasis on the Achievement Status. As one basic objective of the distribution system of Dhaka Tobacco Industries Ltd. (DTI) is to make it’s Critical Brands available in each and every outlets of any distributor market.
Out Of Stock Situation
Out of Stock Situation is a position where the consumers are coming in the outlets for the product but there is no product in the outlets. generally this situation is signal of ineffective distribution. An ideal distribution system is committed to reach the products in the outlets as per the needs of the outlets when the supply is available or sufficient. So in sufficient supply situation. Out of stock Situation for any brand surely indicates ineffectiveness of the distribution system. Sometimes due to distributor malpractice Salesman dump stocks in big outlets and insufficient dilivery to the small outlets. As a result small outlets become out of stock before the next delivery to them. They become helpless to purchase from the big outlets in a high price, which erodes their profit and creates dissatisfaction in the market. The business goes to the hands of some big stockiest for some time and they exploit the Small outlets. This situation is very much unexpected to The Management as it damages the company image to the small outlet owners and the company suffers from a huge sale loss. Company Management whets Zero out of stock situation in the market. Since here is a lead time between two deliveries and due to unpredictable and inevitable reasons this target is not achievable practically. Dhaka Market is very important to the Management of ABFL here they want 5% stock out situation. So in order to evaluate the effectiveness of distribution system of ABFL products in Dhaka City Out Stock Situation study plays a key role in making decision on it.
STOCK COVERAGE RATIO
Stock Coverage Ratio is an in house indicator of effectiveness distributor system. Stock Coverage Ratio refers to the minimum level of stock that should be kept in the Distributor’s godown at the time of placing order for the next stock lot. This is also called Reordering point. An effective distribution system should be dressed with such a device that it remains always well prepared for the contingencies. If any contingency arises that could interrupt the supply of stock to the Distributor’s godown from the Producer’s godown or could give arise in demand abruptly that was totally unanticipated then to keep the delivery of the products in the market smooth and uninterrupted the Distributor has to maintain Stock Coverage Ration and revise it time to time. ABFL deals in Fast Moving Consumer Good which needs instant over the counter delivery. So to ensure smooth supply of the product should undoubtedly be an distributor of an effective distribution system. So, while evaluating the effectiveness of distributor system in Dhaka City observation and evaluation of Stock Coverage Ration is a key factor.
Another rime objective of an ideal distribution system is to ensure a stable market rate. Here market rate to the actual position of company decided Retail rate prevailing in the Whole seller market from where the retirees Retailers purchase in their needs. Company set a retail price but it varies due to mismatch of demand supply situation of the product. Supply side of the product is very much related with the distribution. When product enters into markets in a quality than a market demand, small Retailers do not purchase more than their need, but the stockiest Whole seller purchases it and stock it. Due to the repetition of the situation. Whole seller becomes overloaded with the stocks and in a stage he wants to liquidate the stocks. In the mean time there grows a scarcity in the market. The Whole seller can sell stock in a lower price than company price by lowering downs this profit margin. In the same time the Distributor supplies stock to the Retailers in company price, which is higher than the price offered by Whole seller. In such situation the Retailers find it a loss to purchase from the Distributor. As a result the normal sell of the Distributor’s falls. But the Distributor has to lift a certain amount in due date from the company. In such situation the Distributor gives intentionally delivery to in a lower price than the company price. Inevitably the Distributor has to give the stock to Whole seller at a lower price than specified by the company by lower down his profit margin. This situation is called Under Rate Market. In such situation business goes out of the grip of the company. Direct delivery of the Distribution decreases. In order to save him self the Retail market. This is a totally disastrous and humiliating situation for the company. So company Management always strives to eliminate Under Rate Market. Management always wants a Market At Pa where the Distributor Whole seller and the Retailers get company specified profit margin. Market At Par is the reflection of effective distribution system. But always it can not be maintain as market demand cannot be predicted accurately. Company also discourage Over Rate is to some acceptable to the company in some situation than the Under Rate Market.
Retailer Purchases Ratio
Retailer purchase ratio refers to the causation of the total purchase of the retailers from the company van and whole. This composition of purchase is an important consideration of any distribution system, Prime objective of any distribution system is to reach the desired group of customers with their maximum satisfaction. Particularly ABFL distributor objective is to reach maximum possible amount of stock to the retailers and to go a close contact with the consumers. Company delivers stock at company rate. When the retailer purchase from Whole seller they have to sacrifice their profit. But in all cases delivery can not be made to the retailers according to their need due to various internal and external cause. Company supports wholesaler in the market to face such situations. So that the retailer can collect stock even with a high price, but do not loss the valued consumers. While evaluation the distribution system of ABFL Retailer Purchase from company Van and Wholesaler. The most preferred ratio is 80:20 ABFL is expect this.
Distributor’s Logistics & Manpower
In order to perform the task of physical distribution manpower and logistics are essential in all cases. In order to take the product in different locations vehicles are essential. In this purpose various types of vehicles are required to reach the product timely. Vehicle requirement depends on the distance of the market form the distributor house and the nature of the product. Somewhere speedy vehicles are appropriate somewhere manually driven vehicle are used for serving the city and its adjacent areas. For distant locations normally Scooters are used, These Vehicles are specially made for carrying cigarettes and cash.
Manpower especially salesmen are very important in distributor. Actually the sales man in the field level finally does distributor work. Salesmen apply their judgment and trained knowledge in allocating stocks. Sales man also collect and keep the accounts for cash. Vehicle drivers assist salesman.
For this crucial role of sales man and vehicles a distribution system is to be termed s effective when there is sufficient number of vehicle and group of trained sales man to serve the market appropriately. So in order to evaluate the effectiveness of distribution system examination of manpower and logistics is must.
Company Management determines the appropriate amount of vehicle and manpower the Distributor should posses.
Sales Performance And Profit Performance
Form the viewpoint of the company a distribution system is effective when besides achieving other landmarks, sales also increasing. Prime objective of the company is to earn profit. Profit will be earn and will increase company establish a distribution system and runs it. So how many objectives the distribution system has all objectives head towards achieving sales increase and profit. So only then any distributor system can be said effective when it is giving maximum sales and profit. This is also a considerable fact in case of evaluation of effectiveness of distribution system of ABFL product in Dhaka city.
While evaluating sales performance profit performance interestedly another thing Lifting performance comes. To keep the delivery in the market regular and sufficient the distributor has to lift his allocation of stock from company in the forecasted quantity in he schedule dates. If the distributor dose not lift the required amount of stock in schedule dates Distributor will not be able to supply the necessary amount of stocks in the market which will crease crisis in the market. This situation makes the distribution system ineffective. So the company Management wants to distributor to lift allocation in the schedule date in forecasted quantity.
The study was conducted in the beginning of the year. It is the peak season of the tobacco business. Thermal duration of the peak season is October to March due to winter season and sunny weather. So most of the collection data & information provides a positive result, and it is also standard & accepted by the Company Management.
After unbiased judgment of all the variables of distillation system followed by ABFL we get a distinct picture of distributor system of the Company. The situation was observed from very close to the actual field. After analyzing the supporting and relevant elements of distribution system and all the positive indication of the variables proves that in Dhaka (Dhanmondi Territory) market their exist a sound distribution system in the market, And it is also seconded by the management of the company.
This final report has prepared on the basis of analyzing and interpretation and consulting with the Institutional and Organizational guide. So finally this reveals that distribution system of ABFL in Dhaka City is functioning effectively.
This study on effectiveness of distribution system in Dhaka (Dhanmondi Territory) market has given exposure to some problems prevailing in the market. These problems impede the effectiveness of distributor system by hindering the achievement of distribution objective. The problems are highlighted below.
1. 80% of the retailers complained that the salesman gives maximum stock to the big shops by depriving the small shops. In vitiation in to their complaints has revealed that in all the case this complaint is not absolutely true. But in some areas of the market this case happens really. This malpractice is not done regularly, rather occasionally specially when there prevails a Over Rate in the market.
2. 90% of the Retailers complained that the salesman do not give stock as per their demand especially when the market goes on Over Rate. The sales men dump stock in wholesale market in a higher rate than the rate perceived by the company. These creates scarcity in the market the market goes in farther premium. As a result the retailer become bound to purchase from Whole seller in higher rate which erodes their profit. Dishonest salesmen make unscrupulous profit. In vestigation in to this complaint has reveled that this complaint is true in some cases but not prevails as much as said by the retailers.
3. 10% of the retailers complained that the salesman do arithmetical mistakes in preparing cash memo which causes to pay more the actual amount by the retailer. This creates financial loss to the retailer without his consciousness’s always the salesmen are not well informed of it as a result there develops by the sales man. In vestigation into this mater has revealed that this incident occurs in the market, some specific cases have been dugout.
4. 90% of the retailers and wholesaler do not know any thing about the company’s distributor objectives distribution strategy. As a result in many cases they bear some misconception about the companies distributor activities. Even some time the salesmen are not well informed of it a result there develops reluctant a communication gap between the company and customers. Customers become reluctant to give information regarding their problems and desire to the company management. As a result it crates some difficulties to formulate or update the distribution policy.
5. 40% of the retailers said that Company Management does no after them, specially the small retailers. According to them company Management is not fully aware of market situation In vestigation into this mater revealed that this complains is not true in all the cases, but in case of remote area this complains true.
This study suggest that some development oriented steps can be consider to make the distribution system effective further and distribution system ready to meet any possible challenge and to grab any further opportunity as remove the problems lying with the distribution system currently. These can be as follows.
A group of energetic, aggressive and motivated salesman is essential for running the distribution system effectively and efficiently and efficiently. For this reason a sensible, edutated, well trained with positively minded group of sales man should be build up. As, without a group of efficient salesman no distribution objective can be achieved. But to develop and retain such sales force an attractive package of compensation should be offered to them. To make the job of salesman prestigious the job should be highlighted in the society. This would make the chance of any malpractice lesser by the salesman.
Since the Distributor plays the most pivotal role in the distribution system, company should keep an extra sight on the development of distributor. To develop distributorship company can arrange Distributor Shaping Program in which the company can arrange training program to make distributor motivate, committed and to increase professionalism within them. Even a special compensation package can be offered to them for target achievement.
Market level Distributor policy and strategy should be formulated by the company management through joint participation of Distributor, sales man and company management. Salesman can supply the market level information, Distributor can express his strength and weakness clearly. If taking the matters into consideration distributor policy and strategy is formulated on the basis of consensus, it become sounder. Distributor and salesmen enjoy a feeling of participation in decision-making which boosts up their level of commitment.
Company management should take an exhaustive close monitoring drive in the market. This could enable the management to know the distributor related problem within the quickest possible time and to take necessary steps to find it out which could undoubtedly increase effectiveness of distribution system. For this purpose, in the present marketing setup of the company number of Zonal merchandising Incharge (ZMI) should be increased who will look after the market for full time basis and will report to the Territory officer.
Recommendation For Further Study
While conducting this study the researcher saw some problems with the activities of the salesmen relating to distributor activities. The salesmen play the most crucial role in distribution in the field level. So the researcher feels that duties and responsibilities of salesmen should be reset and some controlling and motivating devices should be developed for them. But it was not possible for the researcher to explore this side elaborately in this report, as in this report the researcher had to cover many other Distribution variables. But this has a strong impact on the effective performance of distribution work. In this context the researcher thinks that further study can be conduct on this on this matter.
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