Distribution Channel Management Week 6 4 Managing The

Distribution Channel Management Week 6

(4) Managing The Channel Manufacturer Distributor Wholesaler Retailer • Channel Choices • Managing the Channel • Supporting Promotion • Selling & Distribution • Stocking • Delivering • Collecting • Merchandising • Selling • Customer Services Manufacturer • Channel Choices • Managing the Channel • Supporting Promotion Internet Retailer / Dropshipper • Selling • (Stocking) • Merchandising • Customer Services Logistic Provider • (Picking Up) • Delivering S H O P P E R / C O N S U M E R

Managing the Channel Tasks 1. Setting pricing per layer, make sure you give enough margin per distribution layer. Examples: Product Tea 500 ml RTD CBP = 3500 RBP = 2800 ( 20% margin ) WBP = 2650 ( 6% margin ) DBP = 2500 ( 6% margin if sell to WS, 12% margin if sell to R) 2. Setting & Empowering Distributor Sales Force to deliver the Biz objectives 3. Making sure Distributor Profitability

Distributor’s Scope of Work • Distributor is Principal extension in the Market as Principal representative • Distributor is given the right to serve specific channel / market by the Principal • That’s why there should be distribution agreement between them before the works started Distributor Key Performance Indicator Selling & Distribution • # sales force/channel/area • # outlet covered • # outlet transaction/month • # item sold/outlet/month • # sales value/month Stocking • Total inventory (days) • Inventory per item (days) • Account Payable (days) • Out of stock (#item/month) Merchandising Delivering • OTD (% on time delivery) • OTIF (% on time delivery in full) Collecting • Account Receivable (days) • % overdue • % product placed at eye level • # item at eye level/store/month • % product with right price tag

If your Distributor Sales Force doing well = Your Product doing well Managing your channel in day to day means you are managing distributor sales force in day to day basis The Distributor Sales Force is the most important assets for you Managing them means that you have to empower them to do the tasks

We expect Distributor doing selling, distribution, stocking, delivering, collecting, and merchandising. What do they get in return? Gross Margin = Sales - COGS -------------- x 100% Sales Operating Margin = Sales – COGS – Overhead Cost – Distribution Cost ---------------------------------- x 100% Sales

Components of Distribution Costs Distribution Cost is also called Cost to Serve, meaning all cost occur as the consequence of serving specific market Note: Not all costs is exist for each channel type

Maximizing Profit through Working Capital Cycle

Make sure your Distributor can gain better Return on their investment compare to Bank’s Interest Rate Return on Invested Capital (ROIC) Operating Profit -Tax ROIC = ----------------------Invested Capital Sustainable Distribution Business if ROIC > Interest Rate Non-Sustainable Dist. Business if ROIC < Interest Rate

Your group paper about (4) Managing the Channel for your chosen product, should be submitted …. . March 2014. It accounts for 30 points of Nilai Tugas… The Tasks should contain 1. Setting Price per Distribution Layer 2. Setting Distribution Sales Force # of people 3. Identify Distribution Costs occur on selected channel and how big is the Distribution Cost If there’s something you need to ask about this task, feel free to find me in the lecturer room, or contact me to make appointment. Every group eligible for 1 consultation meeting with me. You decide whether you need to use this privilege or not. This is optional not an obligation.