Mr. Clean is a global household cleaning brand made by P&G, created in 1950s.

The
overall brand portfolio includes bathroom cleaners, Multi-surface liquids and sprays,
and other cleaning tools in several variants under the Mr. Clean brand. Your task is to
prepare a product launch plan for introducing the Mr. Clean Multi- surface liquids and
sprays in Pakistan. You can introduce either the entire line-up of Mr. Clean liquids and
sprays or just one or more specific variants (with proper reasoning) as listed on the
global Mr. Clean website.

Your plan needs to be holistic, and should cover marketing, finance, supply chain,
and sales strategy elements. For each of these areas we will provide a set of
assumptions and a list of expectations in the following pages. Good luck!

Financials
The Finance function provides stewardship towards all business decisions,
ensuring the organization reaches profitability goals and adds to shareholder’s return.
It is critical to understand the driving factors of all business decisions and propose
solutions that maximize return and minimize the risks involved.

Your task is to prepare a detailed financial analysis on the Mr. Clean launch for the
next 5 years. You should understand and question all assumptions behind the launch
and prospective solutions offered by your counterparts. Your key objective would be to
prioritize and focus investment on the right business fundamentals, while delivering a
healthy profit growth.

Key Measures

You are expected to fill the table below in absolute numbers and also show each
component as a %age of your Sales Revenue for each year. Additionally you need to
include NPV of your 5 year plan. You may also include additional financial measures
while explaining your financial plan.

Brand Financials Y1 Y2 Y3 Y4 Y5
Volume

Price (PKR)
Sales Revenue
(PKR)
Cost of Goods Sold
Gross Margin (PKR)
Marketing Expenses
Organization Costs
Profit (PKR)

Key Budgets

• Cost of Goods Sold (COGS): This is the cost of sourcing and transporting your
product and will be determined through the Supply Chain Toolkit
• Marketing Spend Budget: For Year 1, this is capped at $3,500,000. For Years 2-5
your Marketing
Budget is capped at $2,000,000 (you can exceed by using your profit, if any).
• Organization Costs: Costs of running the organization are $300,000 per annum
 Key Assumptions

Your financials must accommodate for the following:

Assumptions Year 1 Year 2 Year 3 Year 4 Year 5

$/PKR Exchange Rate 80 85 90 95 100

Inflation (YOY)* 5% 10% 5% 5% 5%

Sales Tax** 17% 17% 17% 17% 17%
Distributor Margin*** 12% 12% 12% 12% 12%
Corporate Tax Rate 35% 35% 35% 35% 35%

* Inflation has already been applied to all Year 1 Costs

**Sales Tax: is applied on your consumer price
*** Distributor Margin: is the incentive/payment made to your distributor. This amount applies on your total revenue

Key Expectations

You are required to act as the CFO of your brand, keeping into consideration both short
term & long term impact of your decisions on business growth and profitability.
Evaluation will be made on the basis of how you deliver profits by incorporating a
sustainable business model. You may take help of graphs and visual aids to enhance
your presentation.

You may be asked to share calculations and rationale regarding the following elements:

1) NPV and Breakeven Profitability

2) Building blocks of profit drivers (Pricing, COGs, Marketing Spend, etc)

Supply Chain

The task at hand is to build the downstream supply structure for Mr. Clean in
Pakistan. The key
questions that need to be answered are:

Volume Forecast for Year 1 (Annexure 1)

• What will be the monthly base forecast based on the marketing trends you have
established in the Marketing toolkit?
• What will be the impact of the initiatives you are proposing as per your Sales &
Marketing
Strategy?
• What will be the Net Forecast for Year 1?

Distribution Structure (Annexure 2)

• What will be your downstream logistics structure based on your proposed

sales strategy?
How many replenishment points (and in what cities) do you propose and, depending
on the transit times, what will be the replenishment frequency?
• Assuming that you are operating with a single distributor who sells your
product across Pakistan, what replenishment strategy will you adopt over the
initial 5 years of your launch? Option 1: Vendor Managed Inventory (You manage
the inventory of your customer)
Option 2: Customer Managed Inventory (The customer manages its own inventory and
orders as per requirement)
• Based on your decisions above, what will be the inventory cover in terms of
days that needs to be maintained at the distributor?

Supply Chain Operating Strategy (Annexure 3)

• What will be your strategy to maintain the target service level?

Define the inventory levels in terms of days required at your Central Distribution
Centre (DC) to meet the desired service level
• What will be the warehousing cost (per annum) based on the projected
inventory levels?
• What transportation model will you use for replenishments (refer to options
in Annexure 3)?
• What will be the Total Logistics Cost/Finished Product Logistics Cost (FPLC)
per annum?
FPLC = Import Cost + Warehousing Cost + Transportation Cost

Annexure 1 – Volume Forecasting

Forecast in Cases J F M A M J J A S O N D
Base Forecast r r y n l g p t o e
Marketing
Initiatives*
Initiative 1
Initiative 2
Sales Initiatives*
Initiative 1
Initiative 2
Total Forecast
* For Year 1 the launch itself will be your primary marketing & sales initiative. Use this for Years
2-5

Annexure 2 – Distribution Structure

Assume that the P&G Central DC is in Karachi and you replenish to your distributor
locations from the DC. Get a map of Pakistan and mark the locations which you
propose as your replenishment points.
 Replenishment Transit Replenishment Inventory Cover
Points Times Frequency
City 1

City 2
City 3, 4, 5, etc

Based on the above, the national inventory cover at the distributor would be
Days.

Annexure 3 – Supply Chain Operating Strategy

Service Level and Inventory

To support 100% availability there has to be infinite inventory in the supply chain. One
can simply not cater for the demand of every single unit hence there has to be a
tolerance in terms of availability. The challenge is to maintain a service level of
99.5%. How many days of cover should you keep at your Central DC (assuming a
forecast error of 20%)?

Watch out! Forecasting error can change based on the number of variants/flavors
you choose to launch.

Number of Variants Forecast

Launched Error %
Less than or equal to 2 20

3 25
More than or equal to 4 30

Warehousing
 Products are stored on individual pallets within the warehouse. Each pallet holds a
finite number of cases (containing a set number of units of product). The rent of each
pallet is PKR 150 per week. This is the only cost element attached to
warehousing. Based on your forecasts, determine the per annum Warehousing Cost.

Pallet Occupation
Product Line/Size Cases per Pallet

Mr. Clean Liquid 90

Mr. Clean Spray 90

Transportation

As mentioned earlier, you will have two transport options available to you. These are:

1) Dedicated Fleet: You fix the number of trucks, with specific transporters, on a
monthly basis and use the same fleet for all replenishments (monthly fixed rates
+ variable charges for each trip)
2) Non Dedicated Fleet: You contract with multiple transporters and fix the rate
of trucks for
future hires. There are no vehicles dedicated to you, hence the contract is
applicable based on the availability of trucks when you require them.

Fixed Cost Variable Rent Capacity

p/Month p/trip (Cases per
(per container) (per container) container)

Dedicated Fleet PKR 100,000 PKR 80,000 4,000

Non Dedicated 0 PKR 105,000 4,000

Fleet

Product Import Cost

The assumption here is that each size and variant of your brand is being supplied from a
P&G plant based in a foreign country. There are three types of cost attached in bringing
this product to Pakistan; the manufacturing cost (i.e. the cost of production incurred
by the P&G plant), taxes and import duties levied by the Pakistani government, and the
freight cost of shipping the product from the P&G plant to your warehouse.

Determine the overall import cost of your product using the forecasts calculated
earlier, and the keeping in consideration the cost elements below.

Watch out! Import costs are given in terms of one case of product. Refer to the second
table to find out how many units of product one case contains.

Manufacturing Taxes & Duties

Freight Cost
Product Sizes Cost (as a function of import (per Container)
(per Case) cost)
Mr. Clean Liquid PKR 600 25% USD 3,000

Mr. Clean Spray PKR 560 25% USD 3,000

* One container carries 4000 cases of product

Case Count
Product Size Units per Case

Mr. Clean Liquid 8

Mr. Clean Spray 8

Finished Product Logistics Cost (FPLC)

Once you have determined each cost element of supplying the product (i.e. import cost,
warehousing cost and transportation cost), you should be able to determine the total
logistics cost AKA the FPLC. This cost should be reflected in your financials as the
sourcing cost/Cost of Goods Sold.

FPLC = Import Cost + Warehousing Cost + Transportation Cost