Meeting of all the depts.

President ( ), Marketing Head ( ), Production head ( ), Logistics Head ( ),

Sales Head ( ), IT dept expert ( ), Accounting / Taxation expert ( ),
Marketing Manager (SM)
Marketing Manager
The case brief has been sent to all relevant and interlinked depts. Just revisiting
the points.
We have two product lines viz. Product A & Product B. Product A goes through a
particular Dist Ch 01 and hence we pay ED on sales value, whereas Product B
going to same customer but on account of high numbers, we have to sell it
through Dist Ch 02 and thus have to pay ED on abated value (65% standard of
MRP value). Hence we are losing out a significant amount here. I have made a
small exercise and found out that only 34 customers make it almost 85% of the
total sales value when it comes to sales through Ch 01. If we can make a
provision in our IT system for these 34 customers then we can improve at least
0.4% of margin value which accounts for Rs 114lacs approx annually.
On behalf of Product Management & Marketing, I have explored a few ways to
approach the problem and resolve the issue. Before putting forward those points,
I would like to request our expert from Accounts Mr. / Ms ............. to throw some
light on the legal aspects of the issue.
Accounting
I have consulted with the Tax Standards of Govt. under which our products come
into and it has a clear demarcation of abated and non-abated products. When we
sell a product through dealers and where we dont know who will be our end
customer, the product comes under abated category. In this case we have to pay
ED on 65% of MRP value of the product as per rules.
On the other hand, if we know our end consumer then products can be sold
through non-abated route and ED will be on Sales value depending upon the
actual discount levels. In this case, if we can make certain provisions in the IT
system so that we can segregate products according to the Sales orders fed in
the system then it is fine as far as accounting process and taxation issues are
concerned.
President
But then are you sure that this will be a fair-play? What about our competitors?
What are they doing?
Marketing Head
Sir, we have information regarding our competitors and yes they have been
doing this since last 2 years. We couldnt started at that time because our factory

was in a process of shifting from here to Vadodara and it took more time than we
expected to become fully operational.
President
Ok, fine then, lets do it fast.

Marketing Manager
Mr/Ms .......... can we have the necessary changes in the IT system within a
month so that we can start without any more delay. Maybe you can do a pilot
project; we can test it at our end and also in the production line. First we can
take only one or two Customers to whom we sell directly and then later we will
implement it for all the 34 customers.
IT expert
Yes it can be done. There is a certain field in the SAP system called Customer
Pricing group which is used to segregate special industrial customers and
retailers. We will introduce it as a mandatory field and ask all Sales & Service
people to fill the field. We will first do it for one customer and then check it in the
system by invoicing a product and finding what ED value it is picking. The whole
process should be over by 3-4 weeks.
President
Great !!
Production head
The entire process is absolutely fine but we need to be very cautious and look for
loopholes in the entire supply-chain. And I have a query in this regard. What
happens when a certain customer returns a product i.e. the case of Sales Return?
As per current practices, Product A comes back to the factory whereas Product B
goes to Warehouses. Now if we introduce this new rule of ED calculation for some
products under B then in case of sales returns, where will it go? Factory or
Warehouse?
Logistics head
It has to go back to factory. There is no other way otherwise it will cause serious
errors. Now what we can do is we will ask IT for one more field for tracking the
product in case of sales returns. And in case of returns, the service people will be
filling the fields in SAP system. Hence please make it mandatory to include
model no and serial no of the product which is being returned so that it can be
tracked.
IT expert
Yes it can be done. Not an issue!

Logistics Head
Also we need those 34 customers to sign a contract that whenever they are
retuning a product for any functional / operational issue they should return it to
the factory and not the warehouse. This statement needs to be included in the
annual contract page. I would request Mr/Ms........... (Sales Head) to take up the
issue on priority.
Sales head
Yes we will do it on URGENT basis. Maybe first we will go for the top 3 customers
according to descending sales value and then implement it for rest from next
month.
Marketing Head
Sir, ........... (President), we will do the testing in IT system first and let you know
about the same. Hopefully, the same will be reflected in the actual SAP structure
within 2-3 weeks for the top 3 customers. And based on the response we receive,
we will go for full fledged implementation by next month.
President
Good. Please keep me in the loop. And do let me know in case of any difficulty.
Marketing Manager
Sure sir. Thanks you all for attending the meeting. I will circulate the MoM bu the
EoD. Thanks once again to all. Signing off..........