Distribution Channel Report.docx

1 SUPREME RICE MILL

Supply chain management

2 SUPREME RICE MILL

SUPREME RICE MILL P.V.T (LTD) Contents ...................................................................................................................................................................... 1 SUPREME RICE MILL P.V.T (LTD) ......................................................................................................... 2 ACKNOWLEDGEMENT .............................................................................................................................. 6 Executive Summary ...................................................................................................................................... 7 Introduction ................................................................................................................................................... 7 Pakistan’s contribution in rice industry .................................................................................................... 7 History ...................................................................................................................................................... 7 Introduction of company ........................................................................................................................... 8 Vision ........................................................................................................................................................ 8 Mission...................................................................................................................................................... 8 PRODUCTS.................................................................................................................................................. 8 Supply chain network diagram ..................................................................................................................... 9 Procurement method ..................................................................................................................................... 9 Just in time approach ................................................................................................................................ 9 Channel structure .......................................................................................................................................... 9 Members ................................................................................................................................................... 9 Intensity/quantity of members ................................................................................................................ 10 channel’s structure hierarchy ...................................................................................................................... 10 Roles and responsibilities of members.................................................................................................... 10 Manufacturer ....................................................................................................................................... 10 Wholesaler .............................................................................................................................................. 10 Retailers .............................................................................................................................................. 11 Customer profile ......................................................................................................................................... 11 Major segmentation variables for consumer markets ....................................................................... 11 Geographic............................................................................................................................................. 11 Demographic ......................................................................................................................................... 11 Psychographic ....................................................................................................................................... 11 Behavioral .............................................................................................................................................. 12 Segmentation............................................................................................................................................... 12

Supply chain management

3 SUPREME RICE MILL Service output demands .......................................................................................................................... 12 SOD template .............................................................................................................................................. 13 Spatial convenience ................................................................................................................................ 13 Bulk breaking .......................................................................................................................................... 13 Information provision ............................................................................................................................. 13 Customer service..................................................................................................................................... 13 Waiting time .......................................................................................................................................... 13 Demands in product variety ................................................................................................................. 14 Household ............................................................................................................................................... 14 Industrial ................................................................................................................................................. 14 Efficiency Template .................................................................................................................................... 14 Physical possession ............................................................................................................................. 16 Ownership ........................................................................................................................................... 16 Promotion............................................................................................................................................ 16 Negotiation.......................................................................................................................................... 16 Financing............................................................................................................................................. 16 Risking ................................................................................................................................................ 17 Ordering .............................................................................................................................................. 17 Payment............................................................................................................................................... 17 Calculation of profit ................................................................................................................................ 17 Profit of each channel member ............................................................................................................... 17 Efficiency template of SUPREME RICE MILL ......................................... Error! Bookmark not defined. Gap analysis ................................................................................................ Error! Bookmark not defined. Demand side gaps ....................................................................................... Error! Bookmark not defined. Household segment ............................................................................. Error! Bookmark not defined. Industrial segment ................................................................................... Error! Bookmark not defined. Supply side gap analysis ............................................................................. Error! Bookmark not defined. Household segment ................................................................................. Error! Bookmark not defined. Techniques for closing gaps in household segment ............................ Error! Bookmark not defined. Industrial segment ................................................................................... Error! Bookmark not defined. Techniques for closing gaps in industrial segment ............................. Error! Bookmark not defined. Supply side gap analysis template .......................................................... Error! Bookmark not defined. Segmentation ......................................................................................... Error! Bookmark not defined.

Supply chain management

4 SUPREME RICE MILL Channel members and flow they perform .......................................... Error! Bookmark not defined. Environmental/Managerial bounds..................................................... Error! Bookmark not defined. Supply side gaps (affecting which flow) .............................................. Error! Bookmark not defined. Techniques for closing gaps ................................................................. Error! Bookmark not defined. DOIDID action creates other gaps ...................................................... Error! Bookmark not defined. Household .............................................................................................. Error! Bookmark not defined. Supply the product to another retailer in same region or Change the retailer ........ Error! Bookmark not defined. No............................................................................................................ Error! Bookmark not defined. Industrial ............................................................................................... Error! Bookmark not defined. Compensate in price................................................................................ Error! Bookmark not defined. Reduction in profit ................................................................................ Error! Bookmark not defined. Degree of commitment ............................................................................................................................... 18 Member as a business partner ............................................................................................................. 20 Low employee turnover ...................................................................................................................... 20 Good commissions .............................................................................................................................. 20 Annual awards .................................................................................................................................... 20 Conflicts ...................................................................................................................................................... 21 Vertical conflicts ......................................................................................................................................... 21 Dual distribution ................................................................................................................................. 21 Oversaturation ..................................................................................................................................... 21 Partial treatment .................................................................................................................................. 21 Price conflict ....................................................................................................................................... 21 Performance conflict ........................................................................................................................... 21 Conflict Resolution ..................................................................................................................................... 21 Responsibility of conflict resolution ................................................................................................... 21 Power sources ............................................................................................................................................. 22 Reward power ..................................................................................................................................... 22 Legitimate power .................................................................................................................................... 22 Reference power ................................................................................................................................. 22 Conclusion .................................................................................................................................................. 22 Recommendations ....................................................................................................................................... 23

Supply chain management

5 SUPREME RICE MILL

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ACKNOWLEDGEMENT In the name of “Allah”, the most Beneficent and Merciful; who gave us the strength and knowledge to complete this assignment. In performing our assignment, we had to take the help and guideline of some respected persons, who deserve our greatest gratitude. The completion of this assignment gives us much Pleasure. We would like to expand our deepest gratitude to all those who have directly and indirectly guided us in writing this assignment. In addition, a thank you to Professor Imran Ijaz who introduced us to the Methodology of work, and whose passion for the “underlying structures” had lasting effect.

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7 SUPREME RICE MILL

Executive Summary This report of Supreme Rice Mill PVT LTD commences with its introduction, claiming to be the manufacturer and traders of rice since 2010 under the supervision of its founder. The company is very dedicated towards its vision and mission

The company's distribution channel structure includes

Manufacturers who in turn gives the product to the wholesalers who provide it to the retailers and they forward it to the end-users. (SOD) Template which shows how segmentation occurs on the basis of demands of the different segments involved. It includes the Household and industrial segments which either have high or low spatial convenience, bulk breaking, information provision, product variety, customer service and waiting time service. The Efficiency Template has been provided in the template which clears the amount of profit gained by each channel member. The Gap Analysis Template analyses and recognizes the gap or problem occurring in the demand side and the supply side regarding the under/over supplying of the product. The demand-side gaps are judged on the basis of the six services mentioned in the Service Output Demand (SOD) template. the supply side gap talks about the managerial issues and about which member of the distribution channel is causing an issue or creating a gap, and how can these gaps be closed and will they affect the other flows in the channel or not. In between the conflicts occurring inside the company are mentioned with their solutions the degree of commitment among the employees and what sort of power/reward sources the company uses for its members are also mentioned. Lastly, we have provided a set of recommendations for the company on which the company.

Introduction Pakistan’s contribution in rice industry Pakistan contributes approximately 10 million tons to global rice production every year and is the fourth largest exporter of rice Supreme Rice Miller India, Vietnam and Thailand. Annual rice exports from Pakistan stand well in excess of $2 billion.

History Rice is a staple food for a large part of the world’s human population, especially in tropical Latin America, and East, South and Southeast Asia, making it the second-most consumed cereal grain. Rice provides more than one fifth of the calories consumed worldwide by humans. Rice factory is not a history of rice Culture in ancient times. It is a modern industrial story of one man who probably did more than anyone to advance the growing and milling of rice in the region

Supply chain management

8 SUPREME RICE MILL

Introduction of company Supreme rice Mill is a professionally managed organization that specializes in providing comprehensive range of Basmati & Non-Basmati Rice. Established in the year 2010, the company office located in Multan road Lahore Pakistan. Company is using drying, husking, processing & parboiling setup with high quality state of the art latest machines imported from different countries. company provides products to our customers over all at right cost, with good quality, with easy availability,. company’s strategic location is more useful, to export basmati or any products without any delay. company can procure pure basmati as earlier possible. So that its customers get their products on given schedule. We take care of our entire business partners because we believe to make life time relation with them.

Vision Committed to become leading seller dedicated to provide its consumers the best grade of rice.

Mission To elevate Supreme Rice as a symbol of quality and recognized brand of choice.

PRODUCTS Supreme Rice Mill is producing quality products and different varieties in order to meet the demands of their customers Supreme Rice Mill is producing following products 

Super Kernel Basmati Rice



Super Basmati Rice



Short Grain Basmati Rice

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9 SUPREME RICE MILL

Supply chain network diagram

Rice processing units cleaning polishing packing

middle man/Agents

Distributers

storing

Wholesalers

Retailers

paddy formers

customers

Mundi

The above diagram shows the supply chain network diagram of company. Company purchases raw material from the formers through the agents. Then the raw material in the form of paddy processed in rice mills, then the finished product in the form of rice is delivered to wholesalers and retailers through distributers, finally rice reaches to customers through wholesalers and retailers.

Procurement method Just in time approach The inventory level of Supreme rice mill is managed by just in time approach. Company buys rice only at the time of production. Since rice fields are seasonal so company buys paddy approximately 20000kg per year at the starting months of the year. That is processed in mills and final product (Rice) are stored for specific period of time for selling.

Channel structure Supreme Rice Mill is using two level structures in order to deliver the product to end user

Members Supreme Rice Mill has following members in their distribution channel 

Manufacturer



Wholesaler



Retailer

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10 SUPREME RICE MILL 

End user

Intensity/quantity of members Currently SUPREME RICE MILL have 200-250 wholesalers with the chain of retailers in different regions of Lahore which are providing the product to end user

channel’s structure hierarchy

Manufacturer Wholesaler Retailer

Customer Roles and responsibilities of members Manufacturer Purchase raw paddy and prepare the rice of different variety and sale the product through agents to wholesalers in markets

Wholesaler Buys product from manufacturer then store and handle product and resale to retailer rather sailing to end user

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11 SUPREME RICE MILL

Retailers Buys product from wholesaler and sells goods to end user in relatively small quantities for use or consumption rather than for resale

Customer profile Major segmentation variables for consumer markets Geographic

Region

North-east south-east south-west

City

All over Pakistan

Demographic

Age

Under 10-80

Family

Married, single

Gender

Male, Female

Income

20000-40000

Education

Illiterate, graduate post graduate,

Occupation

student, home duties, un-employed and retired

Psychographic

Life style

Culture oriented

Personality

Compulsive, ambitious

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Behavioral

Occasions

Regular, special

Benefits

Quality, service, economy

User status

First time user, Regular user, Non-user.

Usage rate

Light user, moderate user.

Loyalty status.

Switchers

Readiness stage

Unaware, aware, intention to buy.

Attitude towards Price conscious, quality conscious product

Segmentation To provide its product at best possible way and in order to know the needs and wants of customers company is mainly targeting middle and lower class

Service output demands Supreme rice mill is providing different types of services to their customers in order to make purchasing process easy and pleasant and in order to meet the demands of its customers. Company have segmented its customers into two types. 

Household includes (housewives)



Industrial includes ( restaurants, cooking centers, and super stores)

And the services of the channel are 

Spatial convenience



Bulk breaking



Information provision



Waiting time

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13 SUPREME RICE MILL 

Customer service



Product variety

SOD template The Service Output Demand (SOD) Template shows how the users of rice differ in their level of demand. We have identify two segments of rice buyers which are business buyers and home buyers

Spatial convenience In spatial convenience a home buyer has a high demand because he wanted that the product should available near its home and he never wants to travel too much to buy rice on the other hand business buyer may have low demand of spatial connivance because he contacts through agents and place an order on phone call

Bulk breaking A business buyers purchase rice in large quantity than a home buyer so the business or industry segments require low bulk breaking while the home buyer have high demand of bulk breaking because they buy in small quantity

Information provision A home buyer may need more information related to usage of the product and how to handle the product while business buyer need low information about the product because they are experience enough and know how to use and handle product

Customer service Business buyer requires high customer service in terms of delivery of product and Supreme Rice Miller sale complaints on the other hand home buyer requires low service because rice is a staple product which means technical assistance required for it.

Waiting time The demand of waiting time of home buyer will be high because if he buying from retailer stores and place an order he will get rice on spot don’t have to wait while business buyer have Medium demand because he has already some storage and don’t need the rice in hurry

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Demands in product variety Business buyers have high demand of variety because they need rice for cooking different dishes and it’s also depends upon the taste and class of the people while home buyer have Low demand of variety. The below table shows analysis of service output demands of SUPREME RICE MILL

Household Segments

Spatial

Bulk

Information

Waiting

Customer

Product

convenience

Breaking

Provision

Time

service

variety

High

High

High

High

Low

Low

Restaurants

Low

Low

Low

Medium

High

High

Cooking

Low

Low

Low

Medium

High

High

Low

Low

Low

Medium

High

High

Housewives

Industrial

centers Super stores

Efficiency Template It is tool to measure the costs borne and the value added by each channel member in its performance of channel flow. The efficiency template is used to describe 1) The types and amounts of work done by each channel member in the performance of the marketing flow. 2) The importance of each channel flow to the provision of demanded consumer service outputs 3) The resulting share of total channel profits that each channel member should trap In order to calculate cost and profit following factors are considerable      

Physical possession Ownership Promotion Negotiation Financing Risking

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15 SUPREME RICE MILL  

Ordering Payment

Efficiency template of SUPREME RICE MILL The table shows the efficiency template for Supreme Rice Mill which serves small and medium sized end-user who usually buys through agents because rice is a staple product so physical possession and handling has the highest cost of the total cost.

Weight of flows

Flow performance by channel members

Wholesaler

Cost

Benefit

Final weight

Mfg.

Retailer

End user

Total

Physical possession

30%

High

30%

30%

40%

20%

10%

100%

Ownership

15%

Medium

16%

20%

30%

10%

40%

100%

Promotion

20%

Medium

21%

45%

30%

20%

5%

100%

Negotiation

5%

Low

4%

10%

40%

30%

20%

100%

Financing

17%

Medium

20%

40%

30%

20%

10%

100%

Risking

5%

Low

4%

30%

40%

20%

10%

100%

Ordering

5%

Low

3%

30%

40%

20%

10%

100%

Payment

3%

Low

2%

30%

40%

20%

10%

100%

Total

100%

Supply chain management

100%

100%

16 SUPREME RICE MILL Profit share



32.75%

34.3%

18.8%

14.15 %

First step is to determine the cost the other step is to allocate the total cost of each flow across all channel members (manufacturer, wholesaler, wholesaler, retailer, &end user}

Physical possession In SUPREME RICE MILL Physical possession has 30% cost, which includes storage and delivery cost in which manufacturer is bearing 30% of total cost while wholesaler is bearing 40% because he buys product in bulk and need more space for storage and does more deliveries than others while retailer and end user have 20% and 10% cost respectively

Ownership In SUPREME RICE MILL ownership has 16% cost in which manufacturer is bearing 20% of total cost while wholesaler and retailer have 30% and 10% respectively and end user has highest percentage 40% ownership than other members because he owns the product for long period of time

Promotion Supreme Rice Mill is investing 20% in promotion of their product and manufacturer is investing 45% of total cost because he wanted to create impact of their product in market and wants to attract more customers and this will give him a good competitive advantage. while wholesaler and retailer have 30% and 20% cost respectively and end user has 5% because he promoting product through positive word of mouth.

Negotiation Company is bearing just 5% of negotiation cost among that wholesaler has highest 40% cost because he buys product in bulk and does more negotiation while retailer has 30% and end user have relatively low cost

Financing Company has 17% financing cost whereas manufacturer has highest 40% cost because he invest more in producing the product and has high expense than other members while wholesaler has 30% because he buys product in bulk and has high investment on the other hand retailer and end user have 20% and 30% respectively

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Risking most risk is beard by wholesaler 40% because he buys product in bulk and have more risk of spoilage of product and have chance of not saling of product while retailer and end user have 20% and 10% respectively

Ordering Company has very little cost just 5% of total cost on which wholesaler has highest cost 40% of total cost because cost of the packing of product and delivery cost in bear by wholesaler while end user has minimum cost 10 % while retailer and manufacturer have 2% and 30% cost respectively

Payment The highest payment is done by wholesaler 40% of total cost because he purchase product in bulk and have to pay more money while end user buys in small quantity and pay less than other members while manufacturer and retailer have 30% and 20% cost respectively

Calculation of profit Profit is calculated by following steps 

Covert the final weight and the cost of member into decimals



Multiply the converted values and add to next value answer



In the end multiply with 100% in order to calculate profit into percentage

Profit of each channel member 

wholesaler has the highest profit margin because he is the most active person in the channel and enjoys 34.3% of the total profit



Manufacturer has 32.75% and retailer has 17.05% of the total profit while end user has 13.6% and agent has 18.8%



So in this regard, the end user gets the least profit 14.1% due to less effort in distribution channel

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Gap Analysis Demand side gaps At this time company is facing following gaps in order to meet the demand of the product

Segments

Household

Spatial

Bulk

Information Waiting

Customer

Product

convenience Breaking

Provision

Time

service

variety

Low

High

Low

High

Low

High

(SOS<SOD)

(SOS=SOD)

(SOS<SOD)

(SOS=SOD)

(SOS<SOD)

(SOS=SOD)

Gap

Industrial

Gap

Gap

Low

Low

Low

Medium

Low

High

(SOS=SOD)

(SOS=SOD)

(SOS=SOD)

(SOS=SOD)

(SOS<SOD)

(SOS=SOD)

Gap

Household segment Spatial convenience Company’s product is not easily accessible due to which the supply is lower than the demand which creates a shortage of the product. Information provision Supreme Rice Mill is not providing enough information related to their product which needs to be fulfill Customer service Company does not provide any customer service to its customer while purchasing the product and does not have any assistance during the purchasing of product 

On the other hand there is no gap in bulk breaking service because company is meeting with the demand of quantity which is required by its customer



The waiting time service is provided in a favorable way as rice is a staple product and nobody really has to wait to get rice, hence the service of supply equals the service output demand.

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19 SUPREME RICE MILL 

Although, the product variety is high and the house holds receive the product as per supplied.

Industrial segment 

The company just have gap only in customer service because company does not provide this service to their industrial customer even product delivery is totally managed by the customer while the other services

Techniques for closing gaps in industrial segment Household segment In supply side the issue/gap occurs with the Retailer in the Household segment, who cause a problem in the flow. Whenever, new rice enters in to the market, they store the rice in the warehouses for a few months, and when the price of the rice increases with the demand of the product, they then sell it in to the market. for this gap to be closed, the company should provide its product to the other wholesaler in the same region or change the wholesaler and appoint somebody better than him who is able to handle the price gauging and selling of the product

Industrial segment When talking about the industrial sector, the Wholesaler cause an issue in the sense that whenever new rice enters in to the international market, they are of relatively lower price which pushes them not to purchase the rice. Due to which, the other channel members will not be able to receive the rice and so the channel flows will get disturbed. For this, the company should try compensating the price so that the wholesalers also get able to get their profit. The closing techniques are shown in table.

Segmentation

Channel

Environmental/Managerial Supply

side Techniques

members and bounds

gaps

for

flow

(affecting

gaps

they

perform Retailer Household

closing action creates other

which flow)

gaps

Creates Temporary shortage Product of product and when demand unavailable is high then they sell the for end user

Supply chain management

DOIDID

Supply product

the No to

20 SUPREME RICE MILL product

another retailer

in

same region or Change

the

retailer Wholesaler Industrial

When the price of rice falls The

retailer

in international market, the and end user wholesaler

refuse

purchase the rice

to will

not

be

Compensate in Reduction in price

profit

able to get the supply

Degree of commitment In order to maintain degree of commitment among the members of channels company takes following steps.

Member as a business partner SUPREME RICE MILL focus on the commitment of employees. Company considers its member as a part of their business and values their efforts

Low employee turnover Company believes Employees who are engaged in their work and committed to their organizations give companies crucial competitive advantages - including higher productivity and lower employee turnover

Good commissions in order to maintain commitment company gives good commissions and providing good quality at right cost to its customers

Annual awards Company hosts award function for channel members every year and distribute price among best sellers

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21 SUPREME RICE MILL

Conflicts Channel conflict does not always have negative impact sometimes it is quite useful for the company In SUPREME RICE MILL mostly conflicts occur between manufacturer and wholesaler due to difference in goal and objective, misunderstanding and poor communication

Vertical conflicts In supreme rice mill most of the conflicts occur due to difference in goals and objectives misunderstanding and mainly due to poor communication between two channel members.

Dual distribution Sometime retailer directly buys rice from the company due to reference power and does not involve wholesaler which creates a disagreement between manufacturer and wholesaler.

Oversaturation Another main conflict is oversaturation in which manufacturer deals with many wholesalers which are running operations in same area which is reducing sales opportunities for individual dealer and ultimately shrink profit

Partial treatment Another common conflict is Partial treatment on which manufacture give some favor in price to his special members

Price conflict Channel members are setting their own prices, which ultimately increase the price of the product, and devaluing the product in the market.

Performance conflict Channel members just aren’t doing effectively what they said they would do like selling product, maintaining inventory, shipping product

Conflict Resolution Responsibility of conflict resolution The ultimate responsibility of conflict resolution is of general manager and top management of company consider its channel members most important because they made huge sales through them

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22 SUPREME RICE MILL In Supreme rice mill channel conflicts are mostly handled by using channel power sources.

Power sources SUPREME RICE MILL is using following powers in order to maintain and resolve the conflicts of its members.

Reward power Supreme Rice Mill is using Reward power in order to convince and maintain channel member Company in the form of 

good commissions



in the form of prize



in the form of credit sales

Legitimate power In order to avoid conflict company makes legal agreement or contract between its channel members in order to keep committed to its channel.

Reference power Sometimes company use reference power In order to convince a particular member which have a famous identity in market and realize that this member can make huge sales for company

Conclusion At the end I want to conclude that SUPREME RICE MILL is producing quality products and distributing its products through proper channel structure. SUPREME RICE MILL products is available in Lahore only which needs to expand to other cities Apart from that company is providing different services in order to satisfy their customers while each member of the company’s channel is enjoying good profit company also facing some gaps in its distribution channel which needs to be fulfill because the company sale force and communicating decisions depends on how much training, motivation and support its channel member need and the company success totally depends upon the performance of channel’s member

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Recommendations 

Company should Build relationships at each step of your channel member



Company should know who best sales performers in the channel are. And should identify and improve underperforming partners and keep your top performers happy.



Establish a pricing strategy and stick to it. Company should treat all its customer fairly



Company should avoid direct sailing of their product to wholesaler and retailer. Because its creates the distrust between wholesaler and company



Company should investing on promotional campaigns that may attract more customers for company



Company should try to sale its product through a well-known members of a market

Supply chain management