SALES AND DISTRIBUTION MARKETING OF

SHABANA BAKERY

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Industry:

India is the world’s second largest producer of food next to China, and has the potential of being
the biggest with its food and agricultural sector. The Indian bakery industry is one of the biggest
sections in the country’s processed food industry. Bakery products, which include bread and
biscuits, form the major baked foods accounting for over 82 per cent of the total bakery products
produced in the country. It enjoys a comparative advantage in manufacturing, with an abundant
supply of primary ingredients required by the industry, and is the third-largest biscuit
manufacturing country (after the United States and China). The bakery segment in India can be
classified into the three broad segments of bread, biscuits and cakes. India’s organized bakery
sector produces about 1.3 million tonne of bakery products (out of three million tonnes) while
the balance is produced by unorganised, small-scale local manufacturers. Despite the fact that
there are many automatic and semi-automatic bread and biscuit manufacturing units in India,
many people still prefer fresh bread and other products from the local bakery. Since the advent
of multinational companies (MNC) selling pizzas and burgers in the country, people are
changing their tastes also. Today, they are not restricted to bread, cakes and biscuits, but to
other bakery products also. With new launches by a few companies like Britannia, Biskfarm
and Morish, competition has increased. Also, the Indian market is observing the establishment
of bakery café chains in the form of Barista, Café Coffee Day and Monginis. The popular biscuit
variants in India are glucose biscuits, Marie, cream biscuits, crackers, digestive biscuits,
cookies and milk biscuits. As far as the Indian biscuit market is concerned, the shares of the
branded and organised sector and the unbranded and unorganized sectors are 60 per cent and
40 per cent respectively. Indian bakery products, especially biscuits, are in great demand in
developing countries.

About:

SHABANA were the primary bread kitchen in Nagpur who presents the Black Forest Pastry in
Nagpur. They have their own particular procedure fabricating plant in Nagpur itself. They have
2 retails outlet stores in Nagpur and numerous spots where they give their pastry shop and
confectionary things like puffs, cakes, cakes, brownies, breads and so on they have their
provisions in PVR, Cinemax, Inox, Delhi Public School, RCOEM and numerous more places
that way. Their unadulterated witticism of the business is to fulfill the requirements of the client.
They likewise give home conveyance benefits on request and furthermore they take online
request through Zomato.

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Distribution channel:

Various marketing intermediaries are used in transferring the products from the hands
of producers to the final consumers or industrial users. These marketing intermediaries
carry alternate names such as wholesalers, distributors, retailers, franchised dealers,
jobbers, authorized dealers and agents. Such marketing intermediaries compromise the
distribution channel. These distribution channels minimize the gap between point of production
and point of consumption, and thereby create place, time and possession utilities.

Distribution Channels perform a crucial role in the successful distribution and marketing of all
products. They have various contacts, expertise and wider knowledge of the products. The
rapidly growing markets and increasing complexities of distribution have increased the demand
and requirement of the distribution channels.

The role of distribution channels can be summarized as follows:

1. Distribution channels offer salesmanship.

2. Distribution channels increase distributional efficiency.
3. The channels offer products in required assortments.
4. They assist in product merchandising.
5. The channels assist in executing the price mechanism between the firm and the final
customers.
6. Distribution channels assist in stock holding.

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Distribution channel management is the collective set of activities and operations B2B firms
employ to get their product to market via channel partners as efficiently and effectively as
possible. These include but are not limited to the following business impact areas:

 Sales Forecasting
 Channel Marketing Management
 Inventory Management
 Incentive Program Management
 Revenue Recognition
 Financial Compliance and Risk Management
 Data Integrity

On a day-to-day basis, many channel-centric companies are overpaying commissions to

partners, losing business due to stock outs, under-collecting royalties, and missing out on huge
new sales opportunities. Many are also at risk for noncompliance penalties due to records that
aren't audit-ready, specifically regarding timely closing and revenue recognition.

Most companies are constantly struggling to address all this ever-growing complexity with
inefficient, piecemeal approaches and an overworked staff who is always a couple steps behind
the curve. Current systems are incomplete in data reconciliation, automation, analytics and
integration with other enterprise applications. They often succumb to believing whatever their
partners say and paying claims without question in order not to rock the boat.

Worse yet, some companies have simply adopted a culture of acceptance that the complexity,
inefficiency and profit leakage in their go-to-market channels are just “necessary evils” that
can’t be resolved. So they’ve settled into a pattern of ignoring the issues and accepting the
Losses
.

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 Manufacturer

Outlet Outlet

RCOEM,
Customer DPS,
Cinemex,
PVR, INOX

Home Delivery

Channel of Bakery Business

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Logistics management

The commercial network take care of the resources required for the efficient and effective
operation of the logistical network. The Logistical network is involved in the actual
transportation of the goods and services from the place of manufacture to the place of
consumption.

Logistics management is conventionally defined as the process that has the responsibility to
ensure the delivery of the right product at the right place at the right time in the right quantities.
Normally, when logistics management is talked about, the entire supply chain is considered,
from the raw material procurement stage to the delivery of finished goods to the customers.

However, since we are limiting our focus to the Logistical activities concerned with the
distribution channels we will only be concentrating on the second part of the chain namely the
delivery of the finished goods and services to the customers from the manufacturers end. This
part of the logistical activities of a firm is called the outbound logistics of the company. The
outbound logistics is a critical activity in any firm asset directly linked with the company to its
customers and comprises a set of activities that complement the marketing function of the firm.

Logistics planning

It is a continuation of the logistics strategy in the sense that the strategy developed is given a
more detailed and practical meaning in the planning phase. Logistics planning, as in the case of
the Planning process in the order functions, can be considered as arranging the flow of
activities. At SHABANA’S Bakery, the planning process starts from the taking order
from the customers, then manufacturing the order in manufacturing unit, packing it for the
delivery, placing it in the delivery vehicle to deliver it, getting order delivered to the customer
at right time & at the right place.

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Cost considered under logistics planning

1) Cost of lost sales - The cost of lost sales is the stock out cost when a customer order is not
fulfilled due to lack of availability of stock within the permissible waiting time allowed by the
customers. This is basically an opportunity cost, as actual outflow of money does not take place.
However, it is an important consideration since in a competitive environment, no firm can
afford to lose sales beyond a point due to stock out. Also, a stock out would imply wastage of
marketing efforts since the customer despite being attracted towards the company cannot be
serviced due to Logistical problems. It is estimated that when the number of outlet increases,
the possibility of stock out reduces and consequently the cost of lost sales come down.
SHABANA’S Bakery have 24 to 27 outlets which helps in maintaining lower losses from
unsold products, as the unsold products from one outlet can be moved to other outlet where the
demand for same exists.

2) Transportation cost – At SHABANA’S Bakery, transportation cost of the system includes

the cost incurred in transportation for the entire systems considering of the transportation
from the production points to the outlet, as well as from the outlet to the point of sale (end
customers). Transportation cost declines with the increase in the number of units (cakes,
pastries, breads, other bakery items), since it becomes possible to increase the proportion
of full truckload shipment in the overall shipment from the production plant.

3) Warehousing cost - The warehousing cost consist of the cost of renting, leasing, or owning
the warehouse as well as the maintenance of the warehouse. Warehousing cost will naturally
increase in direct proportion with the number of warehouses. Since SHABANA’S Bakery does
not own any warehouse for the purpose of storing or keeping their excess production, as the
product they produce does not have much shelf life and is not durable (cannot be stored for
more than
2-3 days), so they do not incur any warehousing cost.

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Inventory management

Managing the inventory in the distribution system is probably the most critical activity in the
logistics management process, especially in the bakery industry, as constant supply is needed
with the continuous sales. Inventory levels directly influence the profitability of a company
since building up inventory lead to greater costs. The inventory held by the SHABANA’S
Bakery is not much and as per the daily demand due to shorter shelf-life, so they have
to plan their delivery system for daily delivery at all the outlets so that products kept at each
outlet could be maintained fresh. Further, inventory pile up could also lead to greater chances
of pilferage or damage to the inventory which generally occurs at all the bakery outlets, so to
minimize this, daily demand has to be analyzed and accordingly the inventory of all the bakery
products has to be kept. Sometimes it may also happen that, delivery has to be made for more
than one time a day to some specific outlets due to sudden increase in demand, which generally
occurs during the months October to February due to festive season. At the same time, it is also
impossible to reduce the inventory levels beyond a point. This is mainly because of the
difficulty in forecasting demand in a precise manner over a short term. Hence in the absence
of adequate inventory at various levels in the logistics system, a firm may not be able to provide
service to the customers even when there is a slight fluctuation in demand.

Why do we need inventory?

• Improve customer service – to make customer available with all the items ordered by them,
without any delay, so that their trust can be built regarding quick service and availability of all
the products, which will give them a reason to visit the outlet again in future.

• Smoothen the operation of the logistics system – if the inventory is not maintained at the
minimum level at all the outlets of bakery, then it would be difficult at some point of time for
the company to deliver the requirements of the bakery urgently, when there would be a demand
for that product.

• Reduces cost – sudden requirement of a product requires a special delivery for that product to
the outlet which increases the cost for that product, and thereby leaves the company with a very
low profit margin and gives the image to the public (customers) of non-availability of such
product at the outlet at all the times due to which they might not visit outlet again. So it is
important to maintain inventory at all the times so that costs can be reduced.

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Inventory level decisions

While it is possible to eliminate the costs associated with inventory by keeping track on the
available and required inventory time to time, the most important thing concerning inventory
management is the decision about the quantum of inventory to be carried during a specific
period. Since this decision directly affect the inventory carrying cost to significant extent, the
entire logistics cost of a company is based to a great extent on the policy decision that are taken
about the level at which inventory is to be managed in a system. These decisions involve
decisions about ‘push or pull’ inventory strategy and inventory replenishment points.
The second component is, of course, interlinked to other logistics functions such as
transportation. However, since it can be argued that the transportation decisions are actually
driven by the inventory policy of a firm, it is the inventory replenishment policies that drives
decision on the other logistical activities.

Push vs Pull Inventory Control

The push and pull system that distinguish by the way a company’s production system
is managed. In push strategy the inventory management is centralized and decisions about the
inventory levels are forecast at the Central level.

The push method is considered to be appropriate way the production quantity succeed the short-
term requirements of the inventory is a post system is otherwise not preferred since it is not
capable of acting swiftly to the changes in the market this is because only Bulk production as
possible the production function cannot retract immediately to inventory requirements of small
quantities.

For instance, SHABANA’S follows both push and pull inventory control system for Bakery
they
follow push inventory system where they forecast the expected sales.

Order Quantity Decisions

Important decisions that has to be made at the retailers of warehouses end in pull based
inventory system is the quantity and the time of reordering the product so that inventory is
replenished at the most ideal rate at the most ideal read the Optima in entry level is not maintain
when stock out happens now is there excess inventory pile up this point is calculated by the
Classic economic order quantity.

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 This is carried out by each store of SHABANA’S throughout the city and it is also anticipated
by the trend they follow. Since the shelf life for bakery is 2 days thus the reorder period is
mostly on the daily basis and for non-bakery items it is 10-12 days and it depends upon the
sale of each outlet and the order is placed accordingly.

Transportation Decisions

The transportation activity moves products to market started a rough includes partying provides
added value to the customers when the poor dog today you want I’m on the mentioned in
quantities acquired the utility provided by transportation function is called place utility while
the utilities get a weather so Ridge function however without transportation function the
delivery of time utility will not be completed tense transportation function decide how fast and
how consistently a product move from one point to another.

Transportation is a critical logistics activity it has been founded apart from the cost of goods
sold which is reflected in inventory carrying cost the transportation cost is the largest
component of the logistics cost in India it is estimated that a transportation sector constitutes
around 5.4% of the total economy the transportation cost account for nearly 40% of the cost of
production with more than half the goods in India being moved by road due to lack of efficient
in your cost effective infrastructure transportation cost are often very substantial in the overall
distribution cost of the company the company save from the transportation and hence greatly
help in improving the bottom line of the company.

For SHABANA’S too the cost of transportation lies somewhere between 12-15% of the overall
costs. To manage this cost the transportation decisions are very practically taken by the
management.

Mode Selection

Some of the Criteria’s for Selecting the Mode of Transportation of Products are:
(a) Time Sensitive
(b) Cost
(c) Capability
(d) Dependability
(e) Frequency

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 The problems of inadequate transportation service and uncertain transit times can cause
a company to hold several days more inventory than physical distribution plan falls for.

This in turn adds to the cost of carrying inventory and reduces the number of times that capital
invested in inventory can be turned over during the year, and the undesirable effects of poor
customer service and missed product promotions. Hence the selection of appropriate
transportation modes and maintenance of effort by physical distribution management are
prerequisites for accomplishing distribution objectives.

Depending upon such factors since all of them affect the business activities of SHABANA’S
the mode of selection of transportation is very well planned out by the management. Also they
plan the movement of their 3 three vehicles such that it takes minimum time to deliver and is
able to do maximum turns.

Vehicle Routing & Scheduling

For SHABANA’S this is done such that al orders of the same route is planned and delivered at
one go. It saves time and cost for the company. All the customers are mapped to their location
and the delivery person is thoroughly briefed about the routes and scheduling of the orders.

Transportation costs

 Fuel costs

 The labour market for commercial drivers

 Demand for freight

 Customer loyalty

 Vehicle capacity

 Government regulation

 Geopolitical events
 Your reputation as a merchant

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 All of these factors somewhere affect the business activities of SHABANA’S Bakery
too. Since Nagpur city is all over covered by the construction of metro rail it is creating trouble
for timely delivery of goods for the bakery. Also it consumes time more than required.

Distribution Channel Strategy

The channel strategy assumes critical importance since SHABANA’S Bakery had to
consciously plan and implement the most efficient process by which the discrepancies
can be bridged. A company’s distribution strategy involves the strategic choices that the
company makes in the realm of organizing and managing the distribution function for achieving
the objective set forth in the overall strategy of the company. The distribution strategy is a
component of the marketing strategy, which in turn forms part of the business strategy.

The Major domains across which SHABANA’S Bakery distribution is framed

includes:

1. Setting distribution objectives in terms of the customer requirements.

2. Finalizing the set of activities that is required to be performed to achieve the channel
objectives.
3. Organizing the activities so that the responsibility of performing the activities is
shared among the entities that are meant to perform the activities.
4. Developing policy guidelines for the smooth functioning of the channel on a day-to-
day basis.

Setting Distribution Objectives

Without a clear-cut objective for action, a distribution strategy will become very ineffective for
SHABANA’S Bakery. The distribution objective communicates with the entire distribution
system, explaining what is expected of the channel in terms of the service that it
provides to the customers. The distribution objectives are set in terms of the service output
demands of the target customers.

SHABANA’S Bakery a lot of times sets the channel objective as ‘zero waiting time’
for the customers. Customers can achieve greater differentiation through setting high levels of
channel objectives that would delight the customers.

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 Finalizing Channel Activity

To achieve any channel objective that has been set in terms of the service output demands, a
number of activities have to be performed. The first step in channel activity finalization is the
identification of these activities for SHABANA’S Bakery. For example, ‘zero waiting time’
would involve accumulating sufficient levels of buffer stocks at every outlet, which in turn
would require some investment in inventory coupled with accurate sales forecasting.

Strategy development thus would involve developing the activity set for the given channel
objectives. Finalizing a set of channel objectives is very important for SHABANA’S Bakery
because this step precedes the most critical step of the organization of the channel in terms of
dividing the activities among different entities. While finalizing the set of activates, though the
channel objective should be the basic starting point, infrastructural and market related
constraints have to be considered.

For example, traffic deviation and transport increase time due to metro construction is a big
constraint for SHABANA’S
Bakery.

Organizing the Channel Activity

Once the set of activities is identified, SHABANA’S Bakery then decides about
organizing the performance of these activities by choosing the organizational entities who will
be entrusted with the task of performing the specific activities. This involves decisions on the
extent of outsourcing the company is willing to tolerate, as well as the extent of direct
involvement the company desires in the distribution function. SHABANA Bakery’s doesn’t
outsource any of its products or raw materials hence its overheads are more.

Bakery also involves an established internal system which monitors and control the channel
activities.

Developing Policy Guidelines for Day-to-day Operations

It is not enough to establish a well-planned channel network, the actual performance of the
channel would depend on the way the channel members are managed. Though this could come
under the realm of tactical issues, often strategic management is warranted. Strategic issues for
SHABANA’S Bakery involve developing guidelines for extraordinary remunerations,
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 channel member control, policies for settling disputes such as the establishment of a dispute
settlement mechanism, strategies for building trust, etc. These decisions are often well
thought out decisions and cannot be made in an ad hoc manner.

Distribution Channel Management

Distribution Channel Management encompasses all activities dealing with the distribution
function of a firm. The distribution strategy provides guidelines for decision making.
The management function involves implementing the distribution strategy of SHABANA’S
Bakery.

The distribution management function can be viewed as happening in two phases: the ex-phase
and the ex poste phase.

The ex-ante phase involves all the activities that are associated with the design and
establishment of the distribution channel. These activities takes place before the distribution
channel actually start functioning. It involves SHABANA’S Bakery to chart the distribution
process for the channel, including the transportation and storage facilities, site analysis
for the warehouses, stocking of raw materials and reordering procedures, ordering and
payment procedures, etc.

Channel manager at SHABANA’S Bakery would also be involved in setting up exclusive retail
outlets at the new locations in Nagpur, erecting displays in retail outlets, helping the channel
partners in procuring and installing software for ordering and payment process, or even helping
the
channel members in recruiting personnel, etc.

Designing a customer-oriented channel

Designing a customer-oriented channel starts with the analysis of the service demands of the
customer segment sought to be targeted by the channel. While we may have a broad idea about
the requirements of the customers, the important task is to analyse it in a proper manner and
incorporate in the channel design. In SHABANA’S bakery, once the specific needs of the
customer is known, it makes them to work backwards and decide on not only the activities
performed, but also the type of entity most suited to perform the activities.

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 Activities including compiling the requirement of raw material, type of cake to be made,
deciding the route, etc. A channel designed in such a way would automatically become
customer-centric rather than firm-centric. Thus channel is needed to be sequentially designed
from one activity to another. Some customers pick from the shop itself but some ask to get it
delivered. It is important to make a proper channel design as the product – cake and other
bakery items, are perishable items.

Capturing the customer requirements

SHABANA’S use following steps process to collect and analyze customer data. These four
steps are:

 Identify - Identify is to identify who the customer are. There may be one
customer or several customers with different needs. Customers could be an
individual or a bulk order like RCOEM Nagpur.

 Collect - Collect is to collect customer needs. This may be as straightforward

as obtaining a copy of a service level agreement, or specification, or as
complex as conducting a full range of surveys of different customers
and there varying requirements. It also helps SHABANA’S to innovate with
different baked items in Nagpur.

 Analyze - Analyze is to examine the collected requirements and start to think

about how they can be made relevant to the project, for example summarizing
survey results, both qualitatively and quantitatively.

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