Sales Final Report

Indian Institute Of Planning & Management

PROJECT REPORT ON

Sales Organization Structure&

Distribution Channels

Compiled By:-

Dipesh Solanki Karna Mehta Ronak Salecha

Vishal Changela Muzammil PoonawalaGurpreet Singh Chhabra

SS/2007-2009Group No.-14

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CONTENTS

Acknowledgement 03

Project Description 04

Product and services offered by the company 05

Need for sales organizational structure 06

Sales Organization structure of the specified company 08

Compare and analyze – sales organization structure 10

My understanding of distribution management 11

Distribution structure of the specified companies/product 13

Compare and analyze – distribution structure 15

Conclusion 16

Article 17

Sample questionnaire 19

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ACKNOWLEDGEMENT

I take this opportunity to express my gratitude to Mr. Satyabrata.D.Gupta, Dean of

‘Indian Institute of Planning and Management’ for giving us the opportunity to do our

research on “ HPCL (LUBES) and IOCL (LUBES) ” and for providing us with all the

assistance and guidance without which this project would not have been accomplished.

We are grateful to our institute “IIPM”, for giving us this opportunity to learn about

hardcore sales concepts such as the sales organization structure and distribution

channels. All the experiences of working in a group as well as data collection have

taught each one of us the importance of sincerity and hard work.

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PROJECT DESCRIPTION

This project aims to study the sales organization structure and the distribution channels

of INDIAN OIL CORPORATION LTD (LUBRICANTS) and HINDUSTAN PETROLEUM

CORPORATION LTD (LUBRICANTS). We did a comparative analysis on both the companies

in light of their sales organization structure and the various distribution channels. At the

onset of this project, we made the sales structure as well as the distribution channel

structure as per our understanding of the food industry. This project entails how close we

got to the actual organizational structures. We designed a questionnaire for data

collection which was administered to the Dy. Manager (IOCL Institutional lube sales) .This

was followed by an analysis of the data provided by them.

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PRODUCT AND SERVICES OFFERED

HPCL LUBES

IOCL LUBES

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NEED FOR SALES ORGANIZATIONAL STRUCTURE

The sales organisation bridges the gap between the market and the productive capacity of the firm. As the market changes, the sales function accommodates through adjusting its organisation and manner of operation. Shifts in size of market operation, market trends, competitive position and other environmental factors may necessitate changes in existing sales organisations. An effective sales organisation usually provides for growth and adaptability to such changes.

You can compare the role of an organisation to that of the skeleton in the human body-it provides a framework within which normal functions can take place. However while the skeletal system is uniform for all human, sales organisations vary widely over firms. This is because every enterprise has its own objectives and resources, and corporate plans to achieve those objectives. The structure of the sales organisation reflects this diversity. Apart from providing a basic structure to facilitate working, sales organisation has the following basic purposes.

A.] Defining the objectives

For any organisation to design their sales structure it’s very important to define objectives. The objectives has to be set not only to survive but to achieve industry leadership, develop a reputation for outstanding technical research, diversify its product lines, continuing flow of sales revenue, so on. These objectives can be achieved with efficient sales structure. Thus sales organisation structure objective may be summed up in three words: sales, profits and growth.

B.] Defines lines of authority

Any sound sales organisation defines the relationships between people in the organisation in terms of authority responsibility and accountability. It is important to define and identify the flow of authority, indicate where responsibility lies, specify who is to be held accountable and to whom.

The organisation of the sales department should enable the sales personnel to identify whether their authority is line, staff or functional.

C.] Ensures that all necessary activities are assigned and -formed

The process of organising presupposes identification of necessary activities which have to be performed to achieve the sales objectives. As companies grow, the tasks and performed within the organisation also multiply. One of the basic purposes of the sales organisation is to ensure that all necessary activities are specifically assigned to personnel, and that procedures are devised to supervise the performance of all these activities.

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D.] Establishes lines of communication

Today, with growing complexity in business, access to much greater volume of information; increasing emphasis on staff assistance, the lines of communication may be more flexible and varied. The flow of information may be both horizontal and vertical. The organisation structure becomes a good aid in identifying the sources of information and recipients of data, and may also tell as who is responsible for generation of information.

E.] Provides for coordination and balance

By clearly delineating formal relation between different positions in the sales department; the sales organisation reduces confusion about the individual’s role and responsibilities. The answers to the questions, which are responsible for what and when, provide vital inputs in developing the coordination programmes for sales effort.

F.] Provides insight into avenues of advancement

The personnel in the sales department look at the organisational structures as one of the indications of the direction in which their future careers may grow. A good use of the organisation chart may be made by the management, in communicating to the subordinates, the possible avenues of advancement. As the organisation grows, or as the personnel become more experienced in their present assignments, you may sometimes feel the necessity of moving personnel horizontally or even giving lower level sales employees a vertical jump in the organisation depending upon their merit.

G.] Economises on executive time

As operations and activities in the sales department increase in number and complexity, delegation of authority becomes imperative. A sound organisation design allows effective use of specialisation so that executives may spend less time in operations and more on planning. In growing organisations, the need for effective coordination often results in limiting the number of subordinates who report directly to a certain executive. This span of control, however may vary widely over organisation depending upon the management orientation towards delegation, superiors abilities of-coordination, qualities of the subordinates etc. Improvements in the efficiency and reliability of communication systems also encourage wider spans.of control. One of the main purposes of all delegation is achieving economies in the use of executive time.

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SALES ORGANIZATIONAL STRUCTURE OF IOCL

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CEO/CMD

VP OPEARTIONS VP SALES

GM SALES

GM SALES

GM SALES

REGIONAL HEAD

REGIONAL HEAD

REGIONAL HEAD

REGIONAL HEAD

AREA HEAD

DIVISIONAL

SALES REP

SALES REP

SALES REP

SALES REP

DIVISIONAL

DIVISIONAL

DIVISIONAL

AREA HEAD

AREA HEAD

AREA

VP FINANCE VP REFINERY


SALES ORGANIZATIONAL STRUCTURE OF HPCL

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CEO/CMD

VP OPEARTIONS VP SALES

GM SALES

GM SALES

GM SALES

REGIONAL HEAD

REGIONAL HEAD

REGIONAL HEAD

REGIONAL HEAD

AREA HEAD

DIVISIONAL

SALES REP

SALES REP

SALES REP

SALES REP

DIVISIONAL

DIVISIONAL

DIVISIONAL

AREA HEAD

AREA HEAD

AREA

VP FINANCE VP REFINERY


COMPARE/ANALYZE-SALES ORGANIZATIONAL

STRUCTURE

As we have discussed earlier that sales organization bridges the gap between the

market and the productive capacity of firm , which shows that how important this

structure is to the organization and which is developed with great efforts and

intelligence .

Analyzing the same structure used by both HPCL and IOCL. The sales organization of

the above companies are developed by the expectations in respect of the sales function

and the place, of the sales department in the total organisational structure.The structure

is the combination various models which comprises of functions , line and staff authority.

As lube market is a very intense one , this companies cater to different segment’s like

industrial , automotive , speciality lubricants which are on order specific . Based on

this they have made a differentiation based on product basis i.e (three general

managers for the three respective segments) . This is also due to the competitive

market in the lube industry . Further on , the structure is divided into different

regions , which have their regional heads and then each region is divided into different

areas , which have their particular divisions in it , this divisions have many sales

representative to support it .

As these companies were the only companies earlier in the market pre - liberalisation

era , it was easy to achieve their objective , but after the de- licensing policy many

players like Castrol, Shell etc entered in this highly fragmented market giving rise to

intense competition . In order to achieve their objective of gaining maximum market

share and wider coverage in this competitive market , these companies have gone

ahead with this sales organisational structure ,which falls in line with the current market

conditions and serves their purpose.

UNDERSTANDING OF DISTRIBUTION MANAGEMENT

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A distribution system is often referred by numerous distribution centers which are

spread geographically, and are connected to one or more plants. These plants house

equipment or machinery, produce products, and serve as a central site. The system is

further characterized by the use of intermediate points, such as warehouses or

distribution centers, to handle all demands from customers more efficiently. Products

are shipped from plants via distribution centers to customers. The decision made in

this problem are number and location of distribution centers and the assignment of

distribution centers to retail outlets (or customers). Due to the strong economies of

scale exhibited by transportation tariffs, using distribution centers generally results in

huge cost savings over the case of separate individual shipments from each plant to

each customer.

The distribution system is based on the end customer needs and it is changing

dynamically as the needs of the end customers are changing rapidly. All departments

are responsible for different set of work and according to my understanding sales &

distribution department plays major role, because there are 3 primary objective of any

distribution system.

All the products are available at all outlets.

All the products are reaching on time.

And accomplish above with minimum cost.

We have to design our distribution system with great care to achieve these 3 main

objectives. We have to take several steps for that. Distribution system also depends on

the type and kind of the services offered by the company. To increase bottom line, we

have to ensure that our distribution system is effective.

We have to design the distribution system with following factors taking into consideration.

Demand by the end users.

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Type of the product.Number of channel partners.Mode of transport available.Production capacity.Availability of stock.

Benefits of a good distribution system

- Enterprises can give fast service to their customer at their place

- They can have accurate accounting with accurately collected data in the sales environment

- Their sales and market shares will improve by the effect of fast service

- Significant time and personnel savings in end of day accounting processes

- Every sales representative will be able to spend more time on his customer because field sales processes’ speed increases.

- Warehouse and truck stocks will be tracked by real data, and there will be no missing goods.

- Customer number of a sales representative in a single route will increase, and this will increase sales revenues in a route

- Revenue-payment risks will decrease, because sales representatives can track every customer’s current account status by their hand-held terminals

- Enterprises can conduct market analysis and track their rivals in the competition

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DISTRIBUTION STRUCTURE OF IOCL

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CRUDE OIL

BASE OIL

LUBE BLENDING PLANT

C&F C&FDISTRIBUTOR

DISTRIBUTOR

DISTRIBUTOR

WHOLE SELLER

WHOLE SELLER

WHOLESELLER

COMPANIES

RETAILERS

C&F C&F

LPG


DISTRIBUTION STRUCTURE OF HPCL

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CRUDE OIL

BASE OIL

LUBE BLENDING PLANT

C&F C&FDISTRIBUTOR

DISTRIBUTOR

DISTRIBUTOR

WHOLE SALER

WHOLESALER

WHOLESALER

COMPANIES

RETAILERS

C&F C&F

LPG

COMPARE/ANALYZE DISTRIBUTION STRUCTURE

A distribution channel links the manufacturer of a product with the end users i.e.

the consumers. Decisions regarding distribution channels are of great significance to the

manufacturers. Organizations can have strategic distribution systems that help them to

examine the current distribution system and decide on the distribution system that can

be useful in the future.

Analyzing the distribution structure used by both HPCL and IOCL. The structures

used by these companies have various levels due to intensive distribution. the process

of distribution start’s from base oil which is extracted from crude oil and further this

base oil with necessary ingredients are transformed from semi- finished products to

finished products and then are packed in various forms like sachets, barrels , bottles

etc.

This are then transferred from the refining plant through the C&F agents to the

Stockiest. The C&F agents are responsible for holding stock for 15 days in order for

various clearances , they then transfer it to the stockiest , whose major role in this

distribution system is to stocks and hold the consignment . Further on the stockiest

sends it to the various distributors in the region . The distributors again distribute it to

the wholesalers in their area, from where it finally goes to the companies and the

retailers.

CONCLUSION


After detailed analysis of Indian oil Corporation and Hindustan Petroleum

Corporation India ltd two companies in the Lubricant sector we have found that the Sales

force size, workload allocation, and territory alignment are efficient as per the market

potential. The balanced Sales force size, workload allocation, and territory alignment are

improving the performance of sales organization year after year. Proper organization

structure and distribution chart of these two companies are increasing its market share

and ultimately increasing revenues year after year. If you will see the organization

structure and distribution chart of these two companies than you will find that companies

are covering nearly the full market. We met with Mr. Sumit. Nimkar (Dy. Manager – Pune

Sales) of IOC and we came to know that the company are still working on its organization

structure and distribution chart so that they can further improve the performance of sales

organization and give tough competition to its competitors.

Also with the intense competition in this sector with MNC’s like Shell, Castrol, Gulf

Oil entering into the Indian Market it is vitally important for these companies to ensure

that they continuously revamp and look into their distribution structure in order to reduce

their cost and compete with others.

ARTICLE

Introduction

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The Indian automotive lubricant market is the sixth largest market in the world with revenues of approximately $1.30 billion in 2002. It is also one of the fastest growing retail markets in India. Until 1993, it was a highly regulated market with a clear dominance of the public sector. Companies like Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL), and Indian Oil Corporation (IOC) held more than 75 percent of the market share. In recent years, with the advent of the increasing number of multinationals in the Indian market there is a growing presence of private companies. Companies like Castrol, Elf Total-Fina, Gulf, and Shell Oil have made their presence felt in the market.

Total production of automotive lubricants in India is approximately 8 to 10 percent of global lube production. The Indian market has been growing at approximately 7 percent per annum for the past 2 years. The public sector contributes to over 60 percent of the revenues for this market. MNC’s have 5 percent market share and the remaining share is held by the unorganized sector. Automotive lubricants are further divided into diesel lubes and petrol lubes

Market Structure

There are two key markets for lubricants in India. Given high levels of competition original equipment, linkages are gaining importance. The original equipment market contributes almost 70 percent and 30 percent of the market is comprised by the retail sales segment. The channel for replacement market or the retail segment is petrol pumps or retail stores. Almost 70 percent of the lubricants in India are sold through petrol pumps. Most of the MNC’s have tied up with oil majors for marketing their lubricants like Castrol with Escorts and Tata BP with Telco. After the deregulation of the petrol pumps companies are watching the developments in the lubes market.

Distribution Structure

Currently the public sector companies HPCL & IOC are working on multi level distribution networks. Given the amount of competition in this sector from private players they have revamped their distribution network from selling through their petrol pumps to their new system of multi level distribution i.e through C&F agents , Distributors , Stockist & Retailers.

IOC & HPCL control the major share in the lubricant market which is strongly seen through their distribution network. Both the companies work on a similar network wherein they first transmit their products to their C&F agent, who hold the stock for 15 – 20 days and then transport it to the companies approved stockists. From here on the goods are further distributed to the distributors and retailers.

The companies with their main sales objective of achieving maximum market share have aligned their distribution network with this. They reach out to their customers through the company owned petrol pumps as well as through retail outlets.

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Future Prospects

Though companies like HPCL & IOC, selling their products through their petrol pumps are able deeper penetrate the market but with the new players like Shell, Reliance, Gulf Oil, coming in the market, success of the companies will largely depend on how well the product is distributed and branded.

The companies could look at a more important role for their channel partners wherein the distributors could have closer ties with the Small Scale Industrial Manufacturers in and around the Industrial Belts. This would make them more as strategic partners and they would have a greater role in the company’s marketing strategy.

The company could look at setting up exclusive lubricant stores which would concentrate only on selling Lubes to customers. These stores could help in bringing down the distribution cost which will help the companies in their pricing strategy.

Also in their existing system they could reduce the holding time at the C&F agent as this would help in reducing cost. Also they could use the stockist for value addition in terms of packaging for various quantities required by their customers.

Also they could come up with a concept of outlets where the customer after getting his vehicle serviced can choose the kind of lubricant he wants. Also tie ups with convenient stores and garages can help in the long run. They could also look at the replacement market for deeper penetration.

Conclusion

With increasing number of players in the market, it is vital for the companies to reach a wider segment of customers. The lubricants market in India is very highly fragmented and complex.

Sample Questionnaire

Q-1 what is the flow of communication in the organization?

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As a part of our academic course, we are conducting a study to find out the Sales organization structure and the distribution network of your esteemed organization. The data provided by you shall be kept confidential and used for academic purposes only.


Top Down ( ) Bottom Up ( ) Both ( )

` Q-2 How are the lubricants basically classified into? __________________________________________________________________________________________________________________________________________________________

Q-3 Do you have a different sales force for different lube products?

Yes ( ) No ( )

Q-4 How are they classified ?__________________________________________________________________

Q-5 Is your organization structure also based on functions?

Yes ( ) No ( )

Q-6 For one product line you cater to

Single Market ( ) Multiple Market ( )

Q-7 Which are the markets you cater too?________________________________________________________________________________________________________________________________________

Q-8 What is the companies organization structure?________________________________________________________________________________________________________________________________________

Q-9 What is the sales organization structure?____________________________________________________________________________________________________________________________________________________________________________________________________________

Q-10 What is the line of command?____________________________________________________________________

Q-11 How are the markets divided?

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Product wise ( ) Territory wise ( )

Q-12 Which of the following networks are there in your sales organization?

a. Regional network b. State network c. City/town network d. District network e. Others, if any………………………………………………………………………

Q-13 What is the present sales force size? __________________________________

Q-14 What factors influence you to decide a particular sales force size?__________________________________________________________________________________________________________________________________________

Q-15 For effective sales force deployment, which of these components have been considered

a. Optimal sizing of a sales forceb. Optimal allocation of sales call effort(workload allocation)c. Optimal alignment of sales territoriesd. All of the above

Q-16 Which departments provide support services to the sales department? __________________________________________________________________________________________________________________________________________

Q-17 How do the other departments support the sales function?_____________________________________________________________________

Q-18 Does your territory alignment criteria have the following objectives?

□ Balanced workload□ Compact□ Minimize travel time□ All of the above

Q-19 Can you please identify the channel members in your distribution system?

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Wholesalers ( )Retailers ( )C&F Agent ( )Distributers ( )Super stockiest ( )Stockiest ( )Dealers ( )Agents ( )Others ___________________________________________________

Q-20 What Transportation does your company uses for delivering the order?____________________________________________________________________________________________________________________________________________

PERSONAL INFORMATION

Name :________________________________________________________

E-Mail Add :-_______________________________________________________

Contact No :-_______________________________________________________

Thank You ! ! !

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